Investec plc · LSE:INVP
Investec — FY2013 Earnings Presentation
33 slides from Investec's earnings presentation, May 2013
Slide 1: Results Presentation for the year ended 31 March 2013
Results Presentation For the year ended 31 03 2013 1
Slide 2: The year in review
Out of the Ordinary® & Investec The year in review —.
Slide 3: Mixed operating environment
Mixed operating p g environment Strong equity markets but a weak Rand Equity markets Interest rates 6 130 +18.8% 5 120 +12.7% 4 110 Rebased tto 100 +12.6% 3 % 100 2 90 1 80 0 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 JSE FTSE ASX R £ A$ U$ Exch
Slide 4: Continued growth in key earnings drivers
Continued g growth in key y earnings g drivers Third party assets under management Customer accounts (deposits) and loans FUM up 14.4% Customer accounts down 3.2% (up 3.7% on (20.6% on stable currency) stable currency) Core loans and advances up 1.0% (up 8.1% on stable currency) £’bn £’bn 120 30 120
Slide 5: Supporting growth in revenue
Supporting pp gggrowth in revenue Total operating income £’mn Up 3.9% 2500 (10.2% on stable currency) 2000 1500 1000 500 0 2008 2009 2010 2011 2012 2013 5
Slide 6: Lower impairments
Lower impairments p UK moderate decrease in impairments Australian credit loss ratio substantially down SA marginal increase in impairments in Rands South Africa UK & Europe (ex Kensington) Australia R’bn £’bn A$’bn 6% 6% 7 12% 4 140 5% 5% 6 10% 120 3 5 4% 100 4% 8% 4 80 3% 3% 6% 2 3 60 2% 2%
Slide 7: Moderate increase in costs
Moderate increase in costs Expenses and headcount impacted by acquisitions Jaws ratio Headcount* relatively stable Cost to income: 65.5% from 64.7% Total permanent employees of 7 575 2,500 £’mn 8000 10-yr CAGR of 2 000 2,000 15 2% 15.2% 6000 1,500 4000 1 000 1,000 2000 500 10-yr CAGR of 13.9% - 0 Ma
Slide 8: Resulting in an improved group performance
Resulting in an improved group performance Negati el impacted b Negatively by the Rand % % change on stable Mar-13 Mar-12 change currency basis** Operating profit* before tax (£’000) 433 170 358 625 20.8% 32.5% Operating profit* before tax and impairment 684 182 683 743 0.1% 9.0% losses on loans and
Slide 9: Strong Rand performance
Strong g Rand p performance Mar-13 Mar-12 % change Operating profit* before tax (R’mn) 5 823 4 251 37.0% Adjusted earnings*^ (R’mn) 4 257 3 053 39.4% Adjusted EPS* (cents) 497 377 31.9% DPS (cents) 256 224 14.3% Net asset value per share (cents) 5 465 4 811 13.6% *Before goodwill, acquired intangibl
Slide 10: Progress made on our financial targets
Progress g made on our financial targets g Target Mar-13 Mar-12 ROE 12-16% over a rolling 5-yr period 9.5% 7.8% Tangible ROE 11.7% 9.6% Adjusted* EPS growth Target: 10% > UKRPI 16.4% (26.4%) Cost to income Target: < 65% 65.5% 64.7% Dividend cover (times) Target: 1.7-3.5 times 2.1x 1.9x Capital adequ
Slide 11: Divisional highlights
Di i i Divisional l hi highlights hli ht 11
Slide 12: Growth from all three businesses
Growth from all three businesses Operating profit* by business Asset Management Wealth & Investment Specialist Banking 140 405 134 127 51 323 40 307 39 267 83 242 77 66 27 26 24 186 2008 2009 2010 2011 2012 2013 2008 2009 2010 2011 2012 2013 2008 2009 2010 2011 2012 2013 Operating profit* before tax
Slide 13: Asset management
Asset management g Overview of performance Financial summary % Competitive long term investment (£) Mar-13 Mar-12 change performance across investment Operating profit* (mn) 140.2 133.7 4.8% capabilities Operating margin 34.5% 35.7% Assets under management at £69.8bn ROE (pre-tax)** 95.1% 84.0%
Slide 14: Asset Management key drivers
Asset Management Key drivers (besides market levels) Operating margin Net inflows as a % of opening AUM Average income as a % of AUM % % % 40 20 1.0 16 0.8 30 12 0.6 20 8 0.4 10 4 0.2 0 0 0.0 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-08 Mar-09 Mar-10 Mar
Slide 15: Wealth & Investment
Wealth & Investment Overview of performance Financial summary Benefited from higher average funds under % management (£) Mar-13 Mar-12 change Net inflows of £0.8bn Operating profit* (mn) 50.7 38.7 30.9% Williams de Broë migrated onto group platform in August g 2012 and rebranded Investec Wealt
Slide 16: Wealth & Investment key drivers
Wealth & Investment Key drivers Operating margin Net organic growth in FUM Average income as a % of FUM (as a % of opening FUM) % % % 30 0.8 7 5 0.6 20 3 0.4 1 10 Mar-11 Mar-12 Mar-13 1 -1 0.2 -3 0 -5 0.0 Mar-11 Mar-12 Mar-13 Mar-11 Mar-12 Mar-13 Note: Prior to Mar-11 Rensburg Sheppards plc was an a
Slide 17: Specialist Banking
Specialist p Banking g Overview of performance Financial summary Good progress from the One Bank process % SA experienced solid performances from the private (£) Mar-13 Mar-12 change equity and investment property portfolios but lower activity in corporate and institutional banking business Oper
Slide 18: Specialist Banking – Income flat in Sterling but up in local currency
Specialist p Banking g – Income flat in Sterling g but up p in local currency y Investment and trading Net interest income Net fees and commissions income £’mn £’mn £’mn Debt 800 400 500 repurchases 400 600 300 300 400 200 200 200 100 100 0 0 0 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-08 Mar-09
Slide 19: Specialist Banking – Costs stable but impairments down
Specialist p Banking g – Costs stable but impairments p down Costs Impairments £’mn £’mn 1000 400 800 300 600 200 400 100 200 0 0 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 19
Slide 20: Specialist Banking key drivers
Specialist p Banking g Key drivers % Cost to income ratio % ROE post tax % Growth in net core loans 80 30 (Stable currency) 35 60 20 25 40 10 15 20 5 0 0 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 -5 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 % Growth in risk-
Slide 21: Strategy and positioning
St t Strategy and d positioning iti i 21
Slide 22: In 2008 our business model was more capital intensive
In 2008 when the financial crisis hit,, our business model was more capital intensive 2008 BUSINESS MODEL £’mn Third party assets and 1,000 Net interest income and advisory principal transactions 800 £574mn £860mn 600 Net fees and commissions of 400 £552mn Net interest income £583mn (38% of total) 2
Slide 23: We took a decision to balance our business model
We took a decision to balance our business model … Capital light businesses Capital intensive businesses Focusing on: Focusing on: • Building non-lending revenue • Managed loan growth • Taking advantage of opportunities • Pricing risk appropriately • Building customer deposits And managing costs acr
Slide 24: Focusing on three areas of specialisation
Focusingg on three areas of specialisation p … with well defined target markets Asset Specialist Wealth & Management Banking Investment Corporate / Institutional / Government Private Client (High Net Worth / High Income) Providing g investment Providing g a broad range g of services: Providing g inv
Slide 25: Today, we have a balanced business model
Today, y, we have a balanced business model … 2013 BUSINESS MODEL £’mn Third party assets and Net interest, investment 1,400 advisory and trading income £972mn 1,200 £1,018mn 1,000 N t annuity Net it fees f and d 800 Net interest income of £703mn commissions of £673mn (35% of total) (34% of total) 6
Slide 26: Asset and wealth management contributing 44% to group
… with the asset and wealth management g businesses contributing 44% to group % contribution of operating profit* to total group 100 90 80 70 Specialist Banking 79.6 77.2 74.7 61.4 51.9 55.9 60 50 40 48.1 30 38.6 44.1 20 Wealth & Investment 22.8 25.3 10 20.4 Asset Management 0 2004 2005 2006 2007 20
Slide 27: Solid base of recurring income
Solid base of recurring g income Average recurring annuity income since 2008 of 66% Since 2008 } £’mn 2500 72% Trading income 70% 17% to 2000 68% £289mn Investment income 66% 1500 64% Other fees and other 102% to 62% operating income £342mn } 1000 60% Annuity fees and 58% commissions 500 42% to 56%
Slide 28: Stable capital position
Stable capital p p position Capital adequacy target: 14-17% Tier 1 target: 10.5% Basel I Basel II Basel III Basel I Basel II Basel III % in SA & % in SA & 30 Australia 30 Australia 25 25 20 20 15 15 10 10 5 5 0 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2004 2005 2006 2007 2008 2009 2010 20
Slide 29: We have invested in our Brand, Communities, People and the Planet
We have invested in our Brand … our Communities …our our People …our … and the Planet Pl t 29
Slide 30: The current strategic focus is to …
The current strategic g focus is to … Maintain momentum in Asset Management Internationalise the Wealth & Investment business Simplify the Specialist Banking business model Leverage L extensive t i client li t b base th through h greater t utilisation tili ti off products d t and d services
Slide 31: Closing
Out of the Ordinary® Investec gS Closing 31
Slide 32: In summary …
In summary y… Significant realignment of the business model has taken place since the financial crisis We now have a scaleable platform from which we are growing our Asset Management and Wealth & Investment businesses After substantial effort through the One Bank process, we also have a bankin
Slide 33: Closing
Closing g The broader economic environment continues to be volatile and the recent rally in global equity markets is yet to be reflected in the real economy economy. Nevertheless, the cost of funding is coming down, impairments are normalising and we expect to see an improvement in activity leve