Investec plc · LSE:INVP
Investec — H1 2022 Earnings Presentation
48 slides from Investec's earnings presentation, Nov 18, 2021
Slide 1: Interim results presentation
Interim results presentation 18 NOVEMBER 2021 Month Year
Slide 2: 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: o changes in the political and/or economic environment that would materially affect the In
Slide 3: 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 Investec 3
Slide 4: Antifragility is beyond resilience or robustness
“Antifragility is beyond resilience or robustness. The resilient resists shocks and stays the same; the antifragile gets better.” Nassim Nicholas Taleb Antifragile: Things That Gain from Disorder Investec
Slide 5: Thanking our clients and our people
Thanking our clients for their continued support and our people for their extraordinary dedication Investec
Slide 6: Overview
Overview 1. 2. 3. 4. 5. Simplified business Resilient client Strong financial Positive progress Well-positioned to with focus franchises performance towards medium-term pursue growth targets Investec 6
Slide 7: Journey to simplify, focus and grow the business
Journey to simplify, focus and grow the business • Demerged Investec Asset Management (now separately listed as Ninety One) in March 2020 • Exited businesses which were subscale, non-core businesses or fall outside our refined risk appetite Simplify • The Board has approved the distribution of 15% h
Slide 8: Improved macro environment
Improved macro environment…. 20 10 2010-2019 or pre-pandemic Mean: 1.7% South 1 • South Africa GDP contracted by -6.4% y/y in calendar year Africa 2020, due to the severe COVID-19 lockdown restrictions. (2) GDP • The economy is expected to see a 5.0% y/y GDP rebound in (5) growth calendar year 2021,
Slide 9: …and supportive financial markets
…and supportive financial markets 1H2021 JSE - LHS FTSE - RHS 1H2022 75,000 7,500 7,000 65,000 6,500 55,000 Markets 6,000 45,000 5,500 35,000 5,000 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 25 1H2021 1H2022 23 Exchange 21 rate ZAR / GBP 19 17 15 Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-2
Slide 10: Global interest rates
Global interest rates USA 10-year treasury bonds (%) 3.5 • Global interest rates reduced markedly in response to the 3.0 COVID-19 pandemic, but have stabilised and risen over the last 12 months as economies have recovered. 2.5 December 2019 • Most recently, a rapid rebound in demand combined with 2.
Slide 11: Results highlights
Results highlights Adjusted operating profit Adjusted earnings per share Net asset value per share £325.7mn 26.3p 479.2p (SEP-20: £142.5MN) (SEP-20: 11.2P) (MAR-21: 458.0P) 128.6% AHEAD OF PRIOR PERIOD 134.8% AHEAD OF PRIOR PERIOD UP 9.3%* SINCE MAR-21 Return on equity (ROE) Cost to income ratio Cre
Slide 12: Strong earnings recovery above pre-pandemic levels
Strong earnings recovery above pre-pandemic levels Adjusted EPS* significantly ahead of the prior period, and comparable to pre-pandemic levels Pence 30 26.3 24.4 25 2.8 2.0 20 17.7 2.2 15 13.4 2.4 11.2 23.5 22.4 10 1.9 15.5 5 11.0 9.3 0 1H2020 2H2020 1H2021 2H2021 1H2022 Adjusted EPS* Pro-forma Nin
Slide 13: Solid underlying performance
Solid underlying performance Adjusted operating profit* increased across the group £’mn SA^ ▲ 94% (76% in ZAR) UK^ ▲ 209% ▲ 128.6% 350 5 0 13 72 300 250 4 9 81 200 325.7 150 100 142.5 ▲ 87% in GBP ▲ 30% in GBP ▲ 648% in GBP ▲ 555% ▲ 46% ▲ 40% ▲ 69% in ZAR ▲ 18% in ZAR ▲ 635% in ZAR 50 Sep-20 Special
Slide 14: Divisional highlights
Divisional highlights UK & Other | Wealth & Investment SA | Wealth & Investment • Achieved record FUM during the period (Sep-21: £44.7bn) • Breadth and depth of product offering suitable for wealth • Net inflows of £627mn globalisation trend • Adjusted operating profit up 46.1% to £42.2mn • Discreti
Slide 15: Sustainability highlights
Sustainability highlights Ensuring that we do no harm, contribute positively, lend and invest responsibly and maintain our competitive ESG position PROGRESS MADE ON OUR CORE SDGS Net-Zero commitments Equality commitments . Shareholders Scope Joined UN-Convened 99.9% 3 financed emissions resolution N
Slide 16: 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 Investec 16
Slide 17: Diversified, quality revenue mix across geographies and businesses
Diversified, quality revenue mix across geographies and businesses Geography Division Sep-21 Sep-21 5% 23% Operating 45% income 55% up 30.5% to £951.1mn 72% Wealth & Investment Specialist Bank Group Investments UK and Other Southern Africa Adjusted 8% 17% operating 41% profit* 59% up 128.6% to £325.
Slide 18: Wealth & Investment SA
Wealth & Investment SA Net inflows and favourable market movements supported revenue growth Funds under management Adjusted operating profit* Operating margin R’mn R’bn 40% 372 350 311 400 333 300 264 350 30% 300 250 181 250 158 200 20% 200 150 150 100 10% 100 175 191 50 50 0 0% 0 Mar-17 Mar-18 Mar-
Slide 19: Wealth & Investment UK & Other
Wealth & Investment UK & Other Record performance in FUM seen in 1H2022 Funds under management Adjusted operating profit* Operating margin £’bn £’mn 50 44.7 41.7 50 30% 40 7.0 42.2 6.5 40 30 28.9 20% 30 20 37.7 35.2 20 10 10% 10 0 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Sep-21 0 0% Sep-20 Sep-21 Discreti
Slide 20: Specialist Banking SA
Specialist Banking SA Modest loan growth impacted by an increase in private client lending and higher corporate repayments Net core loans R’bn 297.1 300 287.3 • Net core loans increased 3.4% since Mar-21 to R297.1bn 250 • Private Banking loan book was supported by the low interest rate environment 2
Slide 21: Specialist Banking SA
Specialist Banking SA Solid performance from our client franchises Operating income Cost to income R’bn R’bn 8 7.1 8 60% 7.1 5.8 6 55.4% 5.8 55% 6 49.7% 4 50% 4 3.5 2 3.2 45% 0 2 40% Sep-20 Sep-21 Sep-20 Sep-21 Net interest income Annuity fees and commissions Operating income Operating costs Cost to
Slide 22: Specialist Banking UK & Other
Specialist Banking UK & Other Strong growth in client acquisition and lending activity across the business Net core loans £’bn 14 13.7 • Net core loans grew by 11.0% (12.4% excluding Australia) to £13.7bn 12.3 (Mar-21: £12.3bn) 12 • Private client lending is up 19.6% driven by continued client acqui
Slide 23: Specialist Banking UK and Other
Specialist Banking UK and Other Delivered a strong set of results back to pre-COVID levels of profitability Operating income Cost to income £’mn £’mn 400 328.7 400 80.7% 85% 273.8 328.7 72.8% 80% 273.8 239.4 75% 221.5 200 70% 200 65% 60% 55% 0 0 50% Sep-20 Sep-21 Sep-20 Sep-21 Net interest income An
Slide 24: Group Investments
Group Investments Group Investments pillar consists of equity investments held outside the group’s banking activities Carrying Income % £’mn value yield Holding Adjusted operating profit increased by 105.5% to £27.2mn (SEP-20: £13.2mn) Ninety One 369 13.9% 25.0% driven by: IPF 161 4.9% 24.3% • Impro
Slide 25: Solid revenue growth
Solid revenue growth Supported by continued recovery in client activity, lower cost of funding, and sustained market improvements Operating income Operating income increased 30.5% to £951.1mn £'mn • Net interest income increased due to lower cost of funding and higher 1,000 47 951 average lending bo
Slide 26: Operating cost analysis
Operating cost analysis Fixed operating costs were well contained reflecting continued cost discipline £’mn 1,200 75% 72.0% 1,000 951 70% 800 729 64.0% 65% 598 Cost to income ratio improved to 64.0% (Sep-20: 72.0%) Cost to 600 536 60% • Operating income increased 30.5% income 400 55% • Operating cos
Slide 27: Earnings drivers
Earnings drivers Funds under management £’bn 63.4 58.4 60 • FUM up 8.5% to £63.4bn 40 • Net inflows of £1.5bn • Favourable market movements and investment performance in both 20 geographies 0 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Sep-21 Wealth & Investment UK Wealth & Investment SA Other Customer accou
Slide 28: SA net core loan growth
SA net core loan growth Reflecting growth in HNW & Other private client lending and increased activity in corporate lending R'bn Mar-21 Sep-21 100 HNW & Other Property Corporate & Other lending Private client lending ▲3% 84 80 ▲6% 71 ▲ 1% 59 ▲7% 59 60 SA net core loans increased 3.4%: • Good recover
Slide 29: Strong growth in UK net core loans
Strong growth in UK net core loans Continued growth in HNW & Other Private client lending and increased activity across corporate lending portfolios £‘mn Mar-21 Sep-21 4,500 HNW & Other Property Corporate & Other lending Private client lending 4,000 ▲17% 3,725 3,500 3,000 UK net core loans up 11.0%,
Slide 30: Significant reduction in ECL impairment charges & CLR
Significant reduction in ECL impairment charges & CLR Total ECL impairment charges £'mn 120 102 100 80 66 • ECL impairment charges down 84.5% to £10.2mn (Sep-20: 60 £66.0mn) 40 31 33 • Annualised CLR reduced to 7 bps from 47 bps at Sep-20 (Mar- 20 10 21: 35 bps) 0 • Driven primarily by: 1H2020 2H202
Slide 31: Unpacking the credit loss ratio - SA
Unpacking the credit loss ratio - SA Investec Ltd total ECL impairment charges R‘mn 1000 837 800 573 600 400 272 200 108 48 • Annualised CLR reduced to 4 bps from 35 bps at Sep-20 (Mar- 0 21: 18 bps) 1H2020 2H2020 1H2021 2H2021 1H2022 • Driven primarily by lower specific impairments including the re
Slide 32: Unpacking the credit loss ratio - UK
Unpacking the credit loss ratio - UK Investec plc total ECL impairment charges £'mn 60 60 40 40 31 20 16 • Annualised CLR reduced to 9 bps from 60 bps at Sep-20 5 (Mar-21: 56bps) 0 1H2020 2H2020 1H2021 2H2021 1H2022 • Total ECL charges of £4.9mn (Sep-20: £39.9mn) mainly driven by: • Lower specific i
Slide 33: Balance sheet provisions
Balance sheet provisions £’mn R’mn 150 3,000 101 73 1,348 Investec plc 100 ▼27.7% Investec Ltd 2,000 1,328 ▲1.5% balance sheet balance sheet 416 ▲24.5% 518 50 42 33 1,000 ECL provision ▼ 21.4% ECL provision 985 ▼ 0.3% 982 27 ▲ 22.2% 33 0 - Mar-21 Sep-21 Mar-21 Sep-21 Stage 1 Stage 2 Stage 3 Stage 1
Slide 34: ROE and ROTE
ROE and ROTE ROE ROTE 11.2% 12.1% Group 12.0% 12.0% 12.2% 10.5% Geographic Investec Ltd Investec plc Investec Ltd Investec plc Average allocated equity Average allocated tangible equity 50.1% 49.9% 53.7% 46.3% £2 163mn £2 151mn £2 148mn £1 851mn Investec 34
Slide 35: Robust capital and liquidity position
Robust capital and liquidity position Leverage ratio as 7.8% ** reported 7.9% Capital summary • CET 1 ratio above 10% target, total capital ratios within target range of 14%-17% 11.1% CET 1 ratio^ • Leverage ratios above group target of 6% 11.2% • Investec Limited obtained approval to adopt AIRB app
Slide 36: Committed to medium-term targets
Committed to medium-term targets 1H2022 performance against medium-term targets Medium-term targets 1H2022 performance Long-term value UK South Africa Group UK South Africa Group outcomes ROE 11% to 15 % 15% to 18% 12% to 16% 10.5% 12.0% 11.2% Cost to Income <67% 50% to 55% <63% 73.3% 52.5% 64.0% -
Slide 37: Financial outlook
Financial outlook THERE CONTINUES TO BE A LEVEL OF UNCERTAINTY AS WE NAVIGATE UNCHARTERED TERRITORY • The macro-economic environment is improving, however global recovery remains uneven • Our core markets will continue to be tested by the remaining presence of COVID-19, Brexit in the UK and ongoing
Slide 38: 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 Investec 38
Slide 39: Investec
Investec We seek to Investec is a distinctive We are a people backed business, our create enduring worth- bank and wealth manager, operating distinction is embodied in our living in, not off society in two core geographies entrepreneurial culture Rich heritage in Private Banking, Supported by a high
Slide 40: A distinctive banking and wealth management business
A distinctive banking and wealth management business creating sustainable, long-term value for our stakeholders 2 8200 £28.3bn £36.4bn £63.4bn Principal geographies Total Employees Core loans Customer deposits Funds under management Key client groups and our offering Corporate / Institutional / Gove
Slide 41: Framework to drive improved business performance
Framework to drive improved business performance Growth initiatives Cost management Clear set of opportunities to deliver revenue growth Improved management of the cost base through operational leverage Underpinned by Capital discipline Growth initiatives and cost containment are supported by a disc
Slide 42: Taking stock
Taking stock We have simplified and focused our business to deliver improved shareholder returns Guidance £’mn FY2019 FY2020 FY2021 1H2022 FY2022 Adjusted EPS - pence per share 48.7 33.9 28.9 26.3 48 to 53 1H2022 and guided FY2022 adjusted EPS showing continued recovery in performance Total operatin
Slide 43: Capturing opportunity
Capturing opportunity Growth philosophy Clear set of scalable opportunities to deliver revenue growth Grow with discipline - in our approach to capital Organic growth Leveraging client ecosystem allocation and risk management Focused on increasing proportion of revenue from capital-light business Sh
Slide 44: Thank you
o Investec S © > =< = o __ re AYYNIGHO JHL JO LNO
Slide 45: Appendix
o Investec Appendix Investec
Slide 46: Macro-economic scenarios – September 2021
Macro-economic scenarios – 30 September 2021 Base case Average 2021-2026 Downside 1 Downside 2 Financial year ending (%) 2021/2022 2022/2023 2023/2024 2024/2025 2025/2026 Upside Base case L-shape Inflation GDP growth 11.7 3.6 2.0 1.6 1.6 5.2 4.1 2.2 2.2 UK Unemployment rate 5.1 4.5 4.2 4.2 4.2 3.7 4
Slide 47: Sustainability highlights: Supporting SDGs
Sustainability highlights Ensuring that we do no harm, contribute positively, lend and invest responsibly and maintain our competitive ESG position Sustainability principles Do no harm through Providing profitable, Maximising impact Creating enduring worth Committed to net-zero 1. for all our stakeh
Slide 48: Thank you
o Investec S © > =< = o __ re AYYNIGHO JHL JO LNO