Investec plc · LSE:INVP

Investec — FY2020 Earnings Presentation

41 slides from Investec's earnings presentation, May 21, 2020

  1. Slide 1: Year End Results Presentation

    Year End Results Presentation 21 May 2020

  2. 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:  changes in the political and/or economic environment that would materially affect the In

  3. Slide 3: Agenda

    Agenda 1. Overview Overview ––Fani FaniTiti, Titi,Joint Chief Executive Group Chief Executive Officer 2. Financial Review – Nishlan Samujh, Group Finance Director 3. Investec post demerger – Fani Titi 4. Closing and Q&A 3

  4. Slide 4: Quote from Nassim Nicholas Taleb on Coronavirus

    “The system delivers these events with regularity. The problem we have today is that these events are delivered so much faster.” Nassim Nicholas Taleb, “Black Swan” author, on the advent and spread of Coronavirus. 4

  5. Slide 5: COVID-19 Response

    COVID-19 Response Our people Our clients Our communities  Increased health and safety across all  Priority is business continuity and we remain  Global Executive Team and board members buildings including appropriate PPE and fully operational at all times donated from salaries with a portion goin

  6. Slide 6: Overview

    Overview 0 Difficult trading environment throughout 1 Client franchises have shown resilience 2 Strong balance sheet with robust capital and liquidity the year, exacerbated levels by COVID-19 in Q4 3 Increased provisioning levels, continue to monitor 4 Progress made on strategic initiatives, demerge

  7. Slide 7: Difficult trading environment throughout the year exacerbated by COVID-19

    Difficult trading environment throughout the year exacerbated by COVID-19 % (yoy)  UK economic activity has faced both 3.0 domestic (Brexit) and global headwinds (trade, industrial slowdown) 2.5 Mean: 1.9%  However COVID-19 will completely change UK GDP growth 2.0 the landscape 1.5  As at 31 Marc

  8. Slide 8: Group results highlights

    Group results highlights  Group adjusted operating profit: £609mn, 16.8% behind prior year (2019: £732mn)  Adjusted earnings per share: 46.5p, 23.6% behind prior year (2019: 60.9p)  Net asset value per share: 414.3p, 4.6% behind prior year (2019: 434.1p)  Group return on equity (ROE): 11.0% (201

  9. Slide 9: Results reflect macro backdrop, offsetting good performance from lending franchises

    Results reflect macro backdrop, offsetting good performance from lending franchises £’mn Continuing operations Total group ▼24.1% ▼16.8% 700 Ninety One Specialist Bank 600 10  Sound performance from lending franchises  Lower investment and 500 85 179 trading income Divisional 34  Higher expected

  10. Slide 10: Progress made on strategic initiatives

    Progress made on strategic initiatives Continued to simplify Delivered cost savings in FY2020 and focus the business with further opportunities identified  Successfully demerged Investec Asset Management business,  Total operating costs from continuing operations reduced by resulting in capital up

  11. Slide 11: Agenda

    Agenda 1. Overview – Fani Titi 2. Financial Review––Nishlan Financial Review NishlanSamujh, Samujh, Group Group Finance Finance Director Director 3. Investec post demerger – Fani Titi 4. Closing and Q&A 11

  12. Slide 12: Continuing Operations results highlights

    Continuing Operations results highlights Adjusted operating profit Adjusted Earnings per share Net Asset Value per share £419mn 33.9p 414.3p (2019: £552 mn) (2019: 48.7p) (2019: 434.1p) 24.1% behind prior year 30.4% behind prior year 4.6% behind prior year Return on Equity (ROE) Cost to Income ratio

  13. Slide 13: Diversified, quality revenue mix across geographies

    Diversified, quality revenue mix across geographies Geography Division Mar-20 Mar-20 22%  Operating income down 7.5% to 47% £1806.8mn Operating 53% income 78% UK and Other Southern Africa Wealth & Investment Specialist Bank 19%  Adjusted 32% operating profit* Adjusted down 24.1% to £419.2mn operat

  14. Slide 14: Specialist Banking SA

    Specialist Banking SA Satisfactory performance from lending franchises with costs well contained  Private client R’bn  Core loans up 6.5% interest and fee R’bn to R288.9bn income growth 288.9 16 290 14.3 14.3 271.2 14  Non-repeat of a 270  Private client book 12 prior year large Net core 250 gro

  15. Slide 15: Specialist Banking UK and Other

    Specialist Banking UK and Other Resilient performance from lending franchises was offset by subdued equity capital markets fees and COVID-19 related fair value adjustments and hedging losses £’bn £’mn  Core loans up  Lower equity capital 759.5 11.9 12.9% to £11.9bn 800 markets fees from 12 634.9 p

  16. Slide 16: Wealth & Investment SA

    Wealth & Investment SA Net inflows, higher average AUM supported revenue growth Assets Adjusted operating profit* Operating margin under management 350 R'mn 40% 301 300 600 31.1% 252 501 30.4% 250 474 30% 227 212 203 169 500 200 120 150 400 20% 100 300 50 104 110 115 132 132 200 -0 10% Mar - 16 Mar

  17. Slide 17: Wealth & Investment UK & other

    Wealth & Investment UK & other Net organic growth in AUM in the prior and current year supported stable revenue Assets Adjusted operating profit* Operating margin under management £’bn £’mn 40 36.7 80 30% 35 33.1 6.7 30 6.8 5.5 70.6 22.3% 7.6 19.8% 25 6.6 20% 63.0 20 60 15 27.9 30.0 27.6 25.8 10% 10

  18. Slide 18: Increased NII and annuity fees, offset by lower investment and trading income

    Increased NII and annuity fees, offset by lower investment and trading income £'mn 2,200  Total operating income down 7.5% 1,954 36 9  Overall annuity income up 3.4% 1,900 15 1,807  Investment and associate income Operating 109 68 – Impacted by lower valuations and non-repeat income 1,600 prior r

  19. Slide 19: Earnings driven by growing client base across the business

    Earnings driven by growing client base across the business £’bn 60 55.8  Third party AUM down 19.3% to £45bn 50 45.0 Third party 40  Net inflows of £599mn assets 30  Market levels declined materially due to 20 under 10 COVID-19 and weakening of the Rand at year end management 0 Mar-14 Mar-15 Mar-

  20. Slide 20: UK net core loan growth largely driven by traction in our Private Bank franchise

    UK net core loan growth largely driven by traction in our Private Bank franchise £'mn FY 2019 FY 2020 3,000 HNW & Other Property Corporate & Other lending Private client lending ▲36% 2,482 2,500  UK net core loans and advances up 12.9%, ▲4% 1,949 driven by: 2,000 ▲6% 1,758 ▲12% 1,716  High net wor

  21. Slide 21: South Africa net core loan growth driven by the Private Bank franchise

    South Africa net core loan growth driven by the Private Bank franchise R'bn FY 2019 FY 2020 100 HNW & Other Property Corporate & Other lending Private client lending ▲9% 80 80  SA net core loans and ▲3% 67 advances up 6.5%, driven by: ▲6% 59 60  Mortgages and HNW and specialised lending in SA Net

  22. Slide 22: £86 mn after tax impact in Specialist Bank from COVID-19

    £86 mn after tax impact in Specialist Bank from COVID-19 £’mn UK South Africa Specialist Bank Investment and trading income (61) (36) (97)  Listed and unlisted mark-to-market Increase in ECL (38) (20) (58) write downs (£68mn) COVID-19 impact on  Hedging losses from structured Operating costs 44 6

  23. Slide 23: Cost to income ratio supported by cost containment

    Cost to income ratio supported by cost containment £’mn 2,100 1,954 70% 1,807 Cost to income ratio of 68.2% 68.2% (2019^: 67.3%) 67.3% 1,600 Cost to 1,275 1,185 65%  Operating income down 7.5% income 1,100  Operating costs down 7.0%  Cost efficiency remains a priority for the 600 60% group Mar-19

  24. Slide 24: ECL impairment charges increased year on year

    ECL impairment charges increased year on year £’mn 160 140 133  ECL impairment charges of £133.3mn (2019: £66.5mn) 120  Credit loss ratio within long-term 85 average at 0.52% (2019: 0.31%) 57 100 Total ECL 54  Excluding the effect of COVID, the charge by 80 68 credit loss ratio on core loans and

  25. Slide 25: Unpacking the credit loss ratios

    Unpacking the credit loss ratios 1.2% CLR: 0.97% COVID-19 1.0% provisions across portfolios 0.8% 0.41% CLR: 0.69% UK credit COVID-19 Stage 3  Higher credit loss ratios in the 0.6% 0.20% ECL provisions loss ratio 0.15% second half in both the UK and 0.4% 0.15% South Africa predominantly due to Norma

  26. Slide 26: Balance sheet provisions

    Balance sheet provisions £’mn R’mn 200 4,000 150 3,000 UK balance 107 SA balance ▲ 9.2% 1,880 sheet ECL 100 108 sheet ECL 2,000 1,722 provision provision ▼ 4.1% 423 50 ▲ 14.8% 31 1,000 441 27 ▲ 96.5% 1,057 ▲ >100% 37 538 -0 14 0- FY 2019 FY 2020 FY 2019 FY 2020 Stage 1 Stage 2 Stage 3 Stage 1 Stage

  27. Slide 27: Stage 2 and 3 loans and advances subject to ECL

    Stage 2 and 3 loans and advances subject to ECL £’mn 5.8% 5.1% as % of core loans 3.2% 3.3% 800 576 576 600 UK core 379 loans by 400 319  The increase in UK Stage 3 exposures was driven by a small number of Stage 200 exposures which migrated due to idiosyncratic reasons -0 Stage 2 Stage 3  The inc

  28. Slide 28: Sectors particularly affected by COVID-19

    Sectors particularly affected by COVID-19 31 March 2020 £483 mn (4.0%) Aviation UK £206 mn (1.7%) Transport (excl. Aviation) exposures to Total gross £186 mn (1.5%) Retail, Hotel & Leisure properties^ vulnerable core loans £12,045mn £103 mn (0.9%) £109 mn (0.9%) Leisure, Entertainment & Tourism Reta

  29. Slide 29: Divisional ROE

    Divisional ROE Wealth & Group Continuing SA Specialist Bank UK Specialist Bank Investment Costs operations 8.3% Excl. 7.7% Banking proposition 91.1 ROE 8.4% % 12.0% 10.7 6.2% % 6.0% 2.9% 20.4 % n.m. SA Bank excl. SA Group UK & Other excl. UK & Other SA Total UK Total Group Investments Group Group UK

  30. Slide 30: Divisional ROTE

    Divisional ROTE Wealth & Group Continuing SA Specialist Bank UK Specialist Bank Investment* Costs operations 9.2% Excl. 7.8% Banking proposition ROTE 8.4% 98 12.1% .9 10.8 6.5% % % 60 .1 7.4% % 2.9% n.m. SA Bank excl. SA Group UK & Other excl. UK & Other UK & SA SA Total UK Total Group Investments G

  31. Slide 31: Robust capital and liquidity position

    Robust capital and liquidity position Capital summary Leverage ratio as 7.8% reported 7.9%  CET 1 ratio above 10% target, total capital ratios within target range of 14%-17%  Leverage ratios above group target of 6% Investec plc CET 1 ratio^ 10.7% 10.8%  FIRB* approach adopted in SA effective 1 A

  32. Slide 32: Agenda

    Agenda 1. Overview – Fani Titi 2. Financial Review – Nishlan Samujh 3. Investec post–demerger Sustainability Fani Titi – Fani Titi 4. Closing and Q&A 32

  33. Slide 33: Investec post demerger

    Investec post demerger Strong heritage in Private Banking, Corporate and Institutional Banking and Wealth & Investment We are a distinctive banking and wealth management business, Serve select niches where we can compete effectively through market-leading specialist client franchises defined by our

  34. Slide 34: We are domestically relevant, internationally connected

    We are domestically relevant, internationally connected We are not all things to all people: we serve select niches where we can compete effectively. Our distinction lies in our ability to be nimble, flexible and innovative, and to give clients a high level of service. Corporate / Institutional / Go

  35. Slide 35: Our approach to sustainability – "living in society, not off it"

    Our approach to sustainability – “living in society, not off it” Integrating sustainability throughout our Value created – highlights from this year business Achieved net-zero carbon emissions Delivering Ethical conduct and do no harm through exceptional responsible lending, investing and risk servi

  36. Slide 36: We measure up, but plan to do more

    We measure up, but plan to do more  Top 15% in the global diversified  Top 6% scoring AAA in the financial financial services sector services sector  Score B against an  Top 30 in the investment index FTSE/JSE Responsible Investment index industry average of C  Included in the FTSE UK 100 ESG 

  37. Slide 37: Strategising for the new normal

    Strategising for the new normal We are focusing on supporting our staff and clients through this crisis Current focus Near term focus Future focus  Management of liquidity, capital and  Re-integration of staff into the  Building for the long term balance sheet risk workplace  Given the unprecede

  38. Slide 38: Outlook remains fluid and difficult to forecast

    Outlook remains fluid and difficult to forecast  We expect the year ahead to be challenging as we anticipate a protracted economic recovery from the effects of COVID-19  Macro economic outlook very challenging  Client activity likely to be muted  Interest income to be impacted by lower interest

  39. Slide 39: Navigating rough seas

    Navigating rough seas 39

  40. Slide 40: Appendix

    Appendix

  41. Slide 41: Continued focus on our strategic objectives

    Continued focus on our strategic objectives Capital Discipline Growth Initiatives Cost Management Connectivity Digitalisation • Reducing SA and UK • Launched iX digital • Reviewed subscale • One Place TM in SA • Digitalised retail deposits equity investment portfolio: platform and Investec operation

Investec — FY2020 Earnings Presentation on 6ix