Investec plc · LSE:INVP
Investec — Investec Bank — Debt Investor Presentation (May 2023)
46 slides from Investec's debt investor presentation, May 2023
Slide 1: Investec Bank plc Investor generic presentation May 2023
Investec Bank plc Investor generic presentation May 2023 The information in this presentation relates to the year ended 31 March 2023, unless otherwise indicated.
Slide 2: Agenda
Agenda Contents 1. 2. 3. 4. 5. Investec Group Overview of Investec Bank plc Further Appendix at a glance Investec Bank plc operating information and fundamentals peer analysis 2
Slide 3: Overview of Investec Group
o Investec Overview of Investec Group OUT OF THE ORDINARY
Slide 4: Investec Dual Listed Company structure
Investec Dual Listed Company structure Non-Southern African operations Southern African operations • Investec plc and Investec Limited are Investec plc Investec Ltd separate legal entities and listings, but are bound together by contractual agreements Sharing and mechanisms Agreement • Investec oper
Slide 5: Investec Group at a glance
Investec Group at a glance A domestically relevant, internationally connected banking and wealth & investment Group • Established in 1974 Since • Today, an efficient integrated 1992 international business platform employing approximately 8 700+ people Assets £28.4bn • Listed on the JSE and LSE (a FT
Slide 6: One Investec
One Investec Our purpose is to create enduring worth. Our values* 45+ years of Deep client partnerships, built on trust and out-of-the-ordinary service, are the bedrock of our business heritage. We are dedicated to building meaningful relationships with all our stakeholders Two core We uphold cast-i
Slide 7: Investment proposition
Investment proposition Well positioned to pursue long-term growth 1 Well capitalised and highly liquid balance sheet 2 Improved capital allocation - returning excess capital to shareholders 33 Diversified mix of earnings by geography and business, with significant annuity income underpin from leadin
Slide 8: Fuelling a robust growth agenda
Fuelling a robust growth agenda 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 (Ou
Slide 9: Group sustainability highlights
Group sustainability highlights Operate responsibly, finance and invest for a sustainable future and maintain our competitive ESG position PROGRESS MADE ON OUR IMPACT SDGs Net-zero commitments Equality commitments Zero thermal coal by Participated in Joined the Group Board Cost of living crisis Tran
Slide 10: Focused on doing well and doing good
Focused on doing well and doing good Other highlights Consistently strong ESG ratings and rankings • Investec Group included as one of the top 100 most sustainable companies in the world (Corporate Knights) • Investec Group joined the African Natural Capital Alliance • Investec Group joined the Part
Slide 11: Overview of Investec Bank plc (IBP)
Overview of Investec Bank plc (IBP)
Slide 12: Investec Bank plc
Investec Bank plc A distinctive bank and investment manager with primary business in the UK Customer deposits Funds under Total assets Net core loans Employees management £28.2bn £15.6bn £19.3bn 3 500+ £42.4bn Key highlights Diversified revenue streams with high annuity base Sound balance sheet • Ba
Slide 13: Overview of Investec Bank plc
Overview of Investec Bank plc We provide our clients with a diversified, combined and integrated banking and wealth management offering with extensive depth and breadth of product and services Corporate / Institutional / Private Equity / Intermediary / Government Private clients (high net worth) / c
Slide 14: Balanced business model
Balanced business model Focused on growing capital light businesses • We have significantly increased our funds under management, a key capital light annuity income driver, over the last 10 years by growing our Wealth & Investment business. Wealth & Investment FUM have grown from £14.2bn at 31 March
Slide 15: Specialist Banking
Specialist Banking Winning in under-serviced parts of the market through dynamic, full service offering Private equity and sponsor- Private clients Private companies Publically listed companies Specialist sectors backed companies For high net worth clients that For UK mid-market founder and For UK m
Slide 16: Wealth & Investment
Wealth & Investment A leading private client wealth manager in the UK with £42.4bn funds under management • Financial planning advice Total FUM £42.4bn1 Our service offering • Investment management, including bespoke portfolio management % UK Discretionary 87% • Private clients, including HNW and In
Slide 17: IBP ranks 9th for UK banks by revenue
th IBP ranks 9 for UK banks by revenue • IBP is a substantial business generating revenues of £1.3bn during the year to 31 March 2023. • The wealth business contributes £362mn of those revenues or 28% of IBP’s total revenues. The chart below shows the relative revenue generation compared to the rest
Slide 18: IBP's operating fundamentals
IBP’s operating fundamentals
Slide 19: Profitability supported by diversified revenue streams
Profitability supported by diversified revenue streams Annuity income(£'mn) Costs and cost to income ratio(£'mn) £'mn 900 100% 800 700 80% 70.8% 600 63.7% 60% 500 400 40% 300 200 20% 100 Mar-18 Mar-23 0 0% 2019 2020 2021 2022 2023 Net interest income Annuity fees and commissions Other fees and other
Slide 20: Profitability supported by diversified revenue streams
Profitability supported by diversified revenue streams Business mix percentage contribution to adjusted operating Adjusted operating profit1 profit1 500 400 300 22% 30% 200 Mar 2023 Specialist Banking Mar 2022 Wealth & Investment 100 70% 78% 0 2019 2020 2021 2022 2023 Adjusted operating profit befor
Slide 21: Consistent asset growth, gearing ratios remain low
Consistent asset growth, gearing ratios remain low Total assets composition Gearing1 remains low £'bn 30 12 10.8 10.2 10.3 10.1 4.1 10 25 4.3 10 6.8 5.2 20 4.8 8.6 8 8.9 15 6.9 6 5.7 5.6 6.0 5.2 6.8 5.1 4.8 10 4 14.4 15.6 11.8 12.3 5 10.5 2 0 0 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 Net c
Slide 22: Exposures in a select target market
Exposures in a select target market • Credit and counterparty exposures are to a select target market: – High net worth clients – Mid to large sized corporates – Public sector bodies and institutions • The majority of exposures reside within the UK • Our portfolios have performed well to date with l
Slide 23: Strong growth in loan book
Strong growth in loan book Continued growth in HNW mortgages and broad based increase in corporate Net core loans up 7.9% since Mar-22 lending activity • This was driven by growth in residential mortgages, continued client acquisition and strong demand for corporate credit across multiple portfolios
Slide 24: Sound asset quality
Sound asset quality Credit loss ratio trend bps 75 69 • Credit loss ratio increased to 56 37bps from 17bps at Mar 2022, within the through-the-cycle 50 range of 30 - 40 bps 38 37 • Total income statement ECL impairment charges amounted to 25 £67mn (Mar 2022: 25mn), mainly 17 driven by: – Increase in
Slide 25: Asset quality metrics
Asset quality metrics Asset quality metrics reflect the solid performance of core loans to date Balance sheet ECL provisions (£’mn) Gross core loans by Stage (£’mn) 200 1500 107 101 100 67 75 1000 108 31 42 35 32 14 1321 27 1242 37 27 32 39 500 992 0 2019 2020 2021 2022 2023 576 576 319 379 332 343
Slide 26: Diversified funding strategy
Diversified funding strategy • Investec Bank plc's funding consists primarily of customer deposits • The bank adopts a conservative and prudent funding strategy • Investec Bank plc is not subject to the Banking Reform Act ring-fencing requirements which are applicable to all large UK deposit takers,
Slide 27: Primarily customer deposit funded with low loan to deposit ratio
Primarily customer deposit funded with low loan to deposit ratio • Loans as a percentage of customer deposits remains conservative at Fully self funded: conservative loan to deposit ratio 80.9% £'bn 19.3 • Customer deposits have grown by 65% (12%% CAGR) since 2019 to 20 100% £19.3bn at 31 March 2023
Slide 28: Maintaining robust surplus liquidity
Maintaining robust surplus liquidity • We maintain a high level of readily available, high-quality liquid assets – Cash and near cash composition targeting a minimum cash to customer deposit ratio of 25%. These balances have increased since Mar-13 (£4.5bn) to £8.6bn at 31 March 2023 (representing 44
Slide 29: Sound capital ratios in excess of internal and regulatory minimums
Sound capital ratios in excess of internal and regulatory minimums Robust headroom of 3.8% above the MDA threshold (Investec plc4) Capital ratios: Investec Bank plc Minimum CET 1 requirement % 3 15% Investec plc: lowest min 31 Mar 2023 31 Mar 20221 Target CET 1 requirement 12.2% 12.2% 11.4% 11.1% Co
Slide 30: We inherently hold more capital per unit of risk
We inherently hold more capital per unit of risk As we use the standardised approach for RWA calculations, our capital ratios are not directly comparable with peers RWA density – Total RWA/Total Assets CET 1/Total Assets (%) 4 Total capital (£'bn) 75.0% 10% 3 8% 50.0% 2 6% 25.0% 4% 1 2% 0 —% 2019 20
Slide 31: Further information and peer analysis
Further information and peer analysis
Slide 32: UK high net worth (HNW) banking: journey to scale
Private Clients UK high net worth (HNW) banking: journey to scale Journey to profitability Growth 6 £’mn Mar-21 Mar-22 Mar-23 5 4.9 Revenue 36.5 75.3 135.50 4 Loan book (£’bn) 4.3 3 ECL impairments (1.5) (2.4) (6.30) 2 Costs (38.0) (42.0) (59.0) 1 0 Profit (3.0) 30.8 70.2 2019 2020 2021 2022 2023 Ba
Slide 33: Investec Bank plc: peer group comparisons
Investec Bank plc: peer group comparisons Funding: Loans and advances to customers as a % Credit loss ratio: ECL impairment charges as a % of average core loans of customer deposits (smaller number is better) and advances (smaller number is better) 150% 4 3.6 131% 112% 116% 100% 80.9% 70% 71% 2 59%
Slide 34: Appendix
Appendix
Slide 35: IFRS 9 macro-economic scenario forecasts
IFRS 9 macro-economic scenario forecasts For IBP, four macro economic scenarios are used in the measurement of ECL. These scenarios incorporate a base case, an upside case and two downside cases. The table below shows the key factors that form part of the macro economic scenarios and their relative
Slide 36: IBP: salient financial features
IBP: salient financial features Key financial statistics 31 Mar 2023 31 Mar 2022 % Change Total operating income before expected credit loss impairment charges (£'000) 1 308 577 1 073 332 21.9% Operating costs (£'000) 833 061 760 286 9.6% Adjusted operating profit (£'000) 408 776 287 683 42.1% Earni
Slide 37: IBP: income statement
IBP: income statement £'000 31 Mar 2023 31 Mar 2022 % Change Interest income 1 445 322 719 538 >100% Interest expense (696 297) (223 230) >100% Net interest income 749 025 496 308 50.9 % Fee and commission income 456 215 508 929 (10.4)% Fee and commission expense (15 372) (14 697) 4.6 % Investment i
Slide 38: IBP: balance sheet
IBP: balance sheet £'000 31 Mar 2023 31 Mar 2022 Assets Cash and balances at central banks 5 400 401 5 379 994 Loans and advances to banks 892 791 1 467 039 Reverse repurchase agreements and cash collateral on securities borrowed 1 338 699 1 447 473 Sovereign debt securities 1 221 744 1 165 777 Bank
Slide 39: IBP: balance sheet (continued)
IBP: balance sheet (continued) £'000 31 Mar 2023 31 Mar 2022 Liabilities Deposits by banks 2 172 170 2 026 573 Derivative financial instruments 704 816 863 295 Other trading liabilities 28 184 42 944 Repurchase agreements and cash collateral on securities lent 139 529 154 828 Customer accounts (depo
Slide 40: IBP: segmental analysis of operating profit
IBP: segmental analysis of operating profit Specialist Banking Corporate, For the financial year ended 31 March 2023 Wealth & Private Investment Total £'000 Investment Banking Banking & Other Group Net interest income 28 150 128 945 591 930 749 025 Fee and commission income 333 192 2 120 120 903 456
Slide 41: IBP: segmental analysis of operating profit
IBP: segmental analysis of operating profit Specialist Banking Corporate, For the financial year ended 31 March 2022 Wealth & Private Investment Total £'000 Investment Banking Banking & Other Group Net interest income 2 268 70 692 423 348 496 308 Fee and commission income 344 685 1 579 162 665 508 9
Slide 42: IBP: asset quality under IFRS 9
IBP: asset quality under IFRS 9 £‘mn 31 March 2023 31 Mar 2022 Gross core loans 15 709 14 557 Gross core loans at FVPL 551 609 Gross core loans subject to ECL1 15 158 13 948 Stage 1 13 494 12 665 Stage 2 1 321 992 of which past due greater than 30 days 35 28 Stage 3 343 291 ECL (146) (134) Stage 1 (
Slide 43: IBP: capital adequacy
IBP: capital adequacy £‘mn 31 Mar 2023 31 Mar 2022 Tier 1 capital Shareholders’ equity 2 486 2 215 Non-controlling interests – – Regulatory adjustments to the accounting basis 15 71 Deductions (306) (304) Common equity tier 1 capital 2 195 1 982 Additional Tier 1 instruments 250 250 Tier 1 capital2
Slide 44: UK sustainability highlights
UK sustainability highlights Operate responsibly, finance and invest for a sustainable future and maintain our competitive ESG position PROGRESS MADE ON OUR IMPACT SDGs Net-zero commitments Equality commitments Zero coal by Participated in Group Board Cost of living crisis Transformation 31 March 20
Slide 45: Focused on doing well and doing good
Focused on doing well and doing good Other highlights Specialist banking Wealth & Investment • Rolled out a sustainability awareness programme aimed at identifying • Continued inflows into the Investec Global Sustainable Equity Fund - sustainability business opportunities $46.2mn (since launch in Ma
Slide 46: Top of UK peers across the most credible international ESG ratings
Top of UK peers across the most credible international ESG ratings 1 MSCI ESG Ratings 2 Sustainalytics Ratings 3 S&P Corporate Sustainability Assessment TOP 2% in the financial services sector in the TOP 14% of globally assessed companies in TOP 2% of diversified financials in the S&P MSCI Global Su
Investec Bank — Debt Investor Presentation (May 2023) on 6ix