Investec Plc · LSE:INVP
Investec — FY2023 Earnings Presentation
49 slides from Investec's earnings presentation, May 18, 2023
Slide 1: Year-end results presentation
Year-end results presentation 18 MAY 2023 Month Year
Slide 2: Agenda
Agenda 01 02 03 Overview Financial review Closing and Q&A Fani Titi Nishlan Samujh Fani Titi Group Chief Executive Group Finance Director Group Chief Executive 2
Slide 3: Proviso
Proviso • Please note that matters discussed in today's presentation may contain forward looking statements which are subject to various risks and uncertainties and other factors including, but not limited to: – changes in the political and/or economic environment that would materially affect the In
Slide 4: Steve Jobs quote on focus and simplicity
“That’s been one of my mantras - focus and simplicity. Simple can be harder than complex; you have to work hard to get your thinking clean to make it simple.” Steve Jobs 4
Slide 5: Key takeaways
Key takeaways Capital generation and Returns to support Strong financial Deep client franchises, management investment and performance diversified earnings dividends +103% £'bn 510 68.9 61.0 414 Target range: 12 - 16% 45.0 39.6 33.9 32.2 30.2 24.9 13.7% 8.3% Mar-20 Mar-21 Mar-22 Mar-23 Mar-20 Mar-23
Slide 6: Key takeaways
Key takeaways Resilient underlying performance, delivered in a challenging macro backdrop Strong business with deep client franchises Capital management and optimisation Strategic execution to position for growth • Focused business with integrated • Returned c.£780 million pounds to • Announced the
Slide 7: Results highlights
Results highlights Adjusted earnings per share Adjusted operating profit Cost to income 68.9p £835.9mn 59.6% (MAR-22: 55.1P) (MAR-22: £687.4MN) (MAR-22: 63.3%) 25.0% AHEAD of prior period 21.6% AHEAD of prior period Credit loss ratio Return on equity Net asset value per share 23bps 13.7% 510.0p (MAR
Slide 8: Geographic highlights
Geographic highlights Investec Limited Investec plc Loan book ▼ 5.8% to £14.6bn (▲ 7.5% in Rands) ▲ 7.9% to £15.6bn Deposits ▼ 6.4% to £20.4bn (▲ 6.8% in Rands) ▲4.5% to £19.1bn FUM ▼ 3.2% to £19.8bn (▲ 10.4% in Rands) ▼ 5.0% to £40.7bn Adjusted operating profit ▲ 14.6% to £440.9mn ▲ 30.5% to £395.0
Slide 9: Sustainability highlights
Sustainability highlights Operate responsibly, finance and invest for a sustainable future, and maintain our competitive ESG position PROGRESS MADE ON OUR IMPACT SDGs SUSTAINABLE FINANCE Net-zero commitments • Continued inflows into Investec Global Sustainable Equity Fund • Committed to zero thermal
Slide 10: Agenda
Agenda 01 02 03 Overview Financial review Closing and Q&A Fani Titi Nishlan Samujh Fani Titi Group Chief Executive Group Finance Director Group Chief Executive 10
Slide 11: Subdued growth momentum...
Subdued growth momentum... • SA economy expanded by 2.0% y/y in calendar year 2022, continuing its recovery from the effects of the COVID-19 lockdown restrictions of 2020 2010-2019 or pre-pandemic Mean: 1.7% South • Q4 2022 saw a contraction of -1.3% quarter on quarter seasonally adjusted, primarily
Slide 12: ...volatile financial markets...
…volatile financial markets... Markets Closing rates Average rates Market indices Mar-23 Mar-22 % change Mar-23 Mar-22 % change JSE All Share 76 100 75 497 (0.8%) 71 483 69 393 3.0% FTSE All Share 4 158 4 188 (0.7%) 4 087 4 091 (0.1%) Dow Jones 33 274 34 678 (4.0%) 32 549 34 816 (6.5%) 12
Slide 13: ...and a weakening GBP / ZAR exchange rate
…and a weakening GBP / ZAR exchange rate Exchange rate GBP / ZAR Closing rates Average rates Currency £1.00 Mar-23 Mar-22 % change Mar-23 Mar-22 % change South African Rand 21.94 19.24 14.0% 20.45 20.28 0.8% 13
Slide 14: Global interest rates
Global interest rates • Global interest rates reduced in response to the COVID-19 pandemic and monetary easing • As economies recovered and inflationary pressures proved more persistent than initially expected, central banks have tightened policy substantially • Looking forward, markets are expectin
Slide 15: UK and SA interest rate history
UK and SA interest rate history Closing rates Average rates Interest rates Mar-23 Mar-22 Mar-23 Mar-22 SA prime overdraft rate 11.25% 7.75% 9.40% 7.14% UK Base rate 4.25% 0.75% 2.31% 0.19% 15
Slide 16: Strong earnings generation
Strong earnings generation Adjusted EPS significantly ahead of the prior period Pence 68.9 70 2.4 60 55.1 5.6 50 40 33.9 66.5 4.4 28.9 30 4.1 49.5 20 29.5 24.8 10 0 Mar-20 Mar-21 Mar-22 Mar-23 Adjusted EPS excluding Ninety One contribution Earnings from Ninety One / WANOS^ MOMENTUM FROM CORE CLIENT
Slide 17: Divisional highlights
Divisional highlights UK & Other | Wealth & Investment SA | Wealth & Investment • FUM during the period of £40.7bn (Mar-22: £42.9bn) • Expanded global investment offerings providing access to a range of investment opportunities • Net inflows of £608mn • Discretionary and annuity net inflows of R5.9b
Slide 18: Diversified, quality revenue mix across geographies and businesses
Diversified, quality revenue mix across geographies and businesses Geography Division Mar-23 Mar-23 1% 21% Operating 43% income up 14.6% to 57% £2 280.4mn 78% Southern Africa UK and Other Wealth & Investment Specialist Banking Group Investments 2% 14% Adjusted operating 48% 52% profit* up 21.1% to £
Slide 19: Wealth & Investment SA
Wealth & Investment SA Respectable financial performance in a challenging operating environment SA funds under management Adjusted operating profit Operating margin R’bn R’mn 500 750 30% 28.2% 672 27.3% 435.1 660 394.0 400 200 197 500 20% 300 200 235 197 250 10% 100 0 0% Mar-18 Mar-19 Mar-20 Mar-21
Slide 20: Wealth & Investment UK & Other
Wealth & Investment UK & Other Performance better than expected given volatile markets Funds under management Adjusted operating profit Operating margin £'bn £'mn 30% 50 100 27.0% 90.6 91.8 25.8% 42.9 40.7 40 6.2 5.5 75 20% 30 50 20 36.7 35.3 10% 25 10 0 0 0% Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-2
Slide 21: Specialist Banking SA
Specialist Banking SA Loan growth supported by increased corporate lending Net core loans R'bn 400 321 298 300 • Net core loans up 7.5% to R320.7bn • Strong growth in corporate lending portfolios driven by increased 200 corporate credit demand • Subdued growth in advances to private clients 100 • Re
Slide 22: Specialist Banking SA
Specialist Banking SA Continued operational momentum from our client franchises Operating income Cost to income R'mn 18 17.3 20 55% 14.6 15 17.3 12 16 14.6 51.1% 50% 9 48.2% 12 6 8.3 45% 8 7.5 3 0 4 40% Mar-22 Mar-23 Mar-22 Mar-23 Net Interest Income Annuity fees and commissions Operating Income Ope
Slide 23: Specialist Banking UK & Other
Specialist Banking UK & Other Loan growth largely underpinned by client activity across lending books Net core loans £'bn 20 15.6 14.4 15 • Net core loans grew by 7.9% to £15.6bn 10 • HNW mortgage lending is up 12.7% driven by continued client acquisition 5 • Lending activity increased across corpor
Slide 24: Specialist Banking UK and Other
Specialist Banking UK and Other Delivered a strong set of results Operating income Cost to income £'mn 1000 933.7 1 000.0 933.7 90% 800 720.4 720.4 80% 600 563.6 70% 69.6% 501.6 500.0 400 60.4% 60% 200 50% 0 — 40% Mar-22 Mar-23 Mar-22 Mar-23 Net Interest Income Annuity fees and commissions Operating
Slide 25: Group Investments
Group Investments Group Investments pillar consists of equity investments held outside the group’s banking activities Carrying Income £’mn % Holding Adjusted operating profit decreased by 65.8% to £17.8mn value yield (Mar-22: £52.1mn) driven by: Ninety One 172 8.1% 10.0% • Lower share of associate e
Slide 26: Solid underlying performance
Solid underlying performance Adjusted operating profit* largely driven by strong performance from our specialist banking operations £’mn SA^▲ 15% (15% in ZAR) UK^ ▲ 30% ▲ 22% 900 110 1 -15 -3 800 74 0.3 -19 700 600 835.9 500 687.4 400 ▲ 21% ▲ 1% ▼ >100% ▲ 57% ▲ 1% ▼ 46% 300 Mar-22 Specialist Banking
Slide 27: Solid revenue growth
Solid revenue growth Revenue performance supported by strong and diversified client franchises Operating income £'mn Operating income increased 14.6% to £2 280.4mn 2 500 350 82 2 280 1 990 (39) (8) • NII benefitted from higher global interest rates and loan growth 2 000 (96) • Fee and commission inc
Slide 28: Operating cost analysis
Operating cost analysis Cost growth reflecting inflationary pressures and investment in people and technology £'mn 2 500 2 280 70% 1 990 2 000 65% 63.3% 1 500 1 351 1 234 Cost to income ratio improved to 59.6% (2022: 63.3%) Cost to 1 000 59.6% 60% income 55% • Operating income increased 14.6% 500 •
Slide 29: Earnings drivers
Earnings drivers Funds under management £'bn 63.8 61.0 • FUM decreased 4.5% to £61.0bn 60 • Net inflows of £377mn, 40 – Net inflows of £810min discretionary and annuity FUM was offset by 20 – Outflows of £433mn in non-discretionary FUM 0 • Decline in FUM reflect unfavourable market movements Mar-18
Slide 30: SA net core loan growth
SA net core loan growth Underpinned by strong growth in corporate client lending R'bn HNW & Other private Property Corporate & Other Lending client lending Mar-22 Mar-23 100 90 85 80 74 72 70 SA net core loans increased 7.5% 60 59 60 58 • Increased corporate credit demand • Reasonable growth in mort
Slide 31: Strong growth in UK loan book
Strong growth in UK loan book Continued growth in HNW mortgages and broad based increase in corporate lending activity £'mn HNW & Other private Property Corporate & Other Lending client lending Mar-22 Mar-23 5 000 4 688 4 500 4 158 4 000 3 500 UK net core loans up 7.9% 3 000 • Sustained growth in HN
Slide 32: Group expected credit loss
Group expected credit loss Credit loss ratio (core loans) bps 60 52 40 35 • CLR increased to 23 bps (2022: 8 bps), approaching 23 the lower end of the through-the-cycle range (TTC) 20 range of 25-35bps 8 • Total ECL charges of £81.1mn (2022: £28.8mn) mainly driven by: 0 – Deterioration in forward-lo
Slide 33: Unpacking the credit loss ratio - SA
Unpacking the credit loss ratio - SA Investec Ltd credit loss ratio (core loans) bps 40 36 30 20 18 ECL impairment charges on loans subject to ECL increased resulting in a CLR of 8 bps, driven primarily by: 10 8 • Stage 3 ECL charges on certain exposures 0 • Reversals and recoveries on previously im
Slide 34: Unpacking the credit loss ratio - UK
Unpacking the credit loss ratio - UK Investec plc credit loss ratio (core loans) bps 80 69 60 56 40 37 CLR increased to 37bps (2022: 17bps), within the through-the-cycle range (TTC) range of 30-40bps: 20 17 • Total ECL charges of £67mn (2022: £25mn) mainly driven by: – Increase in modelled ECLs due
Slide 35: Balance sheet provisions
Balance sheet provisions £'mn R'mn 150 3000 56.1% 11.9% 75 1 883 100 67 2000 1 206 Investec plc Investec Ltd balance sheet balance sheet 620 ECL provision 50 35 8.6% 32 ECL provision 1000 0.3% 618 21.9% 39 869 14.6% 742 32 0 0 Mar-22 Mar-23 Mar-22 Mar-23 Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage
Slide 36: ROE and ROTE
ROE and ROTE ROE ROTE Group 13.7% 14.7% Geographic 14.8% 14.9% 14.5% 12.7% Investec Ltd. Investec plc. Investec Ltd. Investec plc. Average allocated equity Average allocated tangible equity 47.3% 52.7% 50.5% 49.5% £2 119mn £2 362mn £2 109mn £2 069mn 36
Slide 37: Capital and liquidity
Capital and liquidity Group cash and near cash Group liquidity summary £’bn • Strong liquidity positions to support growth 18 16.4 Min • Loans to customers as % of customer deposits of 75.6% (Mar 22: 73.7%) 16 11.1bn Capital summary 14 Max • CET1^ ratio above 10% target for Investec plc , and 11.5%
Slide 38: Net Asset Value per share
Net Asset Value per share Strong earnings generation and excess capital underpinned the historical returns to shareholders Pence 600 Returns to shareholders 69 550 -13 -24 31 500 -28 -36 450 400 350 300 510.0 510.0 250 200 150 100 Mar-22 Adjusted EPS Ninety-One SBB* / repurchase Ordinary shareholder
Slide 39: Financial outlook – FY2024
Financial outlook – FY2024 Based on current economic forecast and business activity levels We will continue to support our clients notwithstanding the uncertain macro outlook • We have strong capital and robust liquidity levels to navigate the current environment and pursue our identified growth ini
Slide 40: Agenda
Agenda 01 02 03 Overview Financial review Closing and Q&A Fani Titi Nishlan Samujh Fani Titi Group Chief Executive Group Finance Director Group Chief Executive 40
Slide 41: Journey to simplify, focus and grow the business
Journey to simplify, focus and grow the business • Cumulatively distributed 70% of the Group's shareholding in Ninety One since March 2020 Simplify • Exited businesses which were subscale, non-core businesses or fall outside our refined risk appetite • Internalisation of the Investec Property Fund's
Slide 42: In closing
In closing WE ARE A FOCUSED BUSINESS WITH DEEP CLIENT FRANCHISES WE ARE DEDICATED TO OUR PURPOSE OF CREATING ENDURING WORTH OUR CLIENT FRANCHISES HAVE SCALE AND RELEVANCE IN CHOSEN MARKETS STRONG CAPITAL GENERATION TO SUPPORT GROWTH AND RETURNS TO SHAREHOLDERS CLEAR SET OF SCALABLE OPPORTUNITIES TO
Slide 43: Thank you
& Investec S O > ws = 3 oc Ee AYYNIGHO JHL JO LNO
Slide 44: Appendix
Appendix
Slide 45: Macro-economic scenarios – March 2023
Macro-economic scenarios – 31 March 2023 At 31 March 2023 Base case average 2023 – 2028 Downside 1 Downside 2 Macro-economic scenarios % 2023/2024 2024/2025 2025/2026 2026/2027 2027/2028 Upside Base case inflation global shock GDP growth (0.3) 1.4 1.8 1.6 1.6 1.9 1.2 (0.2) 0.2 Unemployment rate 4.7
Slide 46: Taking stock
Taking stock Consistent execution of our strategy underpinned the achievement of all our medium-term targets in FY2023 £’mn FY2019 FY2020 FY2021 FY2022 FY2023 Adjusted EPS - pence per Sustained earnings growth supports highest dividends 48.7 33.9 28.9 55.1 68.9 share per share Total operating income
Slide 47: Investec
Investec We seek to create Investec is a distinctive We are a people backed enduring worth – living bank and wealth manager, business, our distinction is in, not off, society operating in two core embodied in our entrepreneurial geographies culture Partner for the long term, guided Rich heritage in
Slide 48: Our strategic objectives
Our strategic objectives Growth Objectives Continued execution with Accelerate and scale new Further develop connected discipline to drive growth initiatives client eco-systems across optimisation of returns business units & geographies Underpinned by Deepening our entrepreneurial culture (Out of th
Slide 49: A distinctive banking and wealth management business creating sustainable, long-term value
A distinctive banking and wealth management business creating sustainable, long-term value for our stakeholders 2 c.8 700+ £30.2bn £39.6bn £61.0bn Principal geographies Total Employees Core loans Customer deposits Funds under management Key client groups and our offering Corporate / Institutional /