Investec Plc · LSE:INVP
Investec — FY2014 Earnings Presentation
38 slides from Investec's earnings presentation, May 2014
Slide 1: Results presentation
Results presentation For the year ended 31 March 2014
Slide 2: The year in review
Out of the Ordinary® S Investec The year in review
Slide 3: Improving operating environment
Improving operating environment Results impacted by strength of sterling against other operating currencies Equity markets Interest rates 130 6 SA JSE +19.8% 19.8% 5 120 Rebased to 100 ASX +8.5% 4 110 3 AUS FTSE +5.2% % 100 2 R 90 1 UK 80 0 US Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 Mar-13
Slide 4: Diversified business model
Diversified business model Geographic diversity Revenue diversity Operating profit* % contribution to group by geography Operating profit* % contribution to group by business 100 100 90 90 80 UK, 80 Australia & 70 Oth Other 70 60 Specialist 60 Banking Southern 50 Africa 50 40 40 Wealth & Investment
Slide 5: Continued growth in key earnings drivers
Continued growth in key earnings drivers Third party assets under management Customer accounts (deposits) and loans Customer accounts Up 6.2% Up 8 8.9% 9% C Core lloans and d advances d U 7 Up 7.9% 9% £’bn £’bn 140 30 120% Customer accounts Down 7.6% Down 0.7% Core loans and advances Down 6.8% 120 2
Slide 6: Supporting continued growth in revenue
Supporting continued growth in revenue Total operating income £’mn 3000 Up 5.6% 2500 Down 2.9% 2000 1500 1000 500 0 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-14 Currency neutral 6
Slide 7: Impairments down
Impairments down South Africa UK & Europe (ex Kensington) Australia • SA impairments down 23.6% in • UK impairments down 17.1% • Australian impairments Rands (Including Kensington down increased 38.8%) R’bn £’bn A$’bn 6% 6% 7 12% 4 160 6 5% 140 5% 10% 3 120 5 4% 4% 8% 100 4 3% 3% 6% 2 80 3 60 2% 2%
Slide 8: Fixed costs marginally up
Fixed costs marginally up Narrowing jaws ratio Cost to income / Operating margin Asset Management Operating costs Operating income £’mn % Mar-13 Mar-14 1.3% 1.7% 2 500 2,500 40 34 5 34.5 34 7 34.7 30 Operating income down o Headcount up 200 people to 2.9% to £1,941mn 20 support growth 10-yr CAGR
Slide 9: Resulting in an improved group performance
Resulting in an improved group performance Negatively g y impacted p by y the Rand % change on currency Mar-14 Mar-13 % change neutral basis^^ Operating profit* before tax (£’000) 451 817 426 278 6.0% 20.3% Attributable earnings** ^(£’000) 327 824 309 310 6.0% 20.5% Adjusted EPS**^ (pence) 38.0 36.1
Slide 10: Strong Rand performance – up 28%
Strong Rand performance – up 28% Mar-14 Mar-13 % change Operating profit* profit before taxation (R (R’mn) mn) 7 328 5 725 28 0% 28.0% Adjusted attributable earnings**^ (R’mn) 5 313 4 227 25.7% Adjusted EPS* EPS (cents) 616 494 24 7% 24.7% DPS (cents) 327 256 27.7% Net asset value per share (cents)
Slide 11: Progress made on our financial targets
Progress made on our financial targets Target Mar-14 Mar-13 ROE 12 16% over a rolling 5 12-16% 5-yr yr period 10 1% 10.1% 9 4% 9.4% Tangible ROE 12.3% 11.7% j Adjusted* EPS growth g Target: g 10% > UKRPI 19.7% 5.3% 16.4% C Currency neutral t l Cost to income Target: < 65% 67.5% 65.7% Dividend cover
Slide 12: Stable capital position
Stable capital position Capital adequacy Tier 1 Investec Bank Investec Bank 15.3% 10.8% Limited Limited Investec Limited 14.9% Investec Limited 11.0% As As reported reported Investec Bank plc 16.0% Investec Bank plc 11.0% Investec plc 15.3% Investec plc 10.5% 0% 4% 8% 12% 16% 0% 4% 8% 12% 16% Levera
Slide 13: Divisional highlights
Di i i Divisional l highlights hi hli ht 13
Slide 14: Asset management - overview
Asset management - overview Overview of performance Financial summary • Sale of 15% stake in the business to management % was successfully completed in July 2013 Mar-14 Mar-13 change g • Benefited from higher average assets under Operating profit* (£’mn) 143.8 140.4 2.4% management and net inflows o
Slide 15: Asset Management – key drivers
Asset Management – key drivers Key drivers (besides market levels) Operating margin Net inflows Average income as a % of AUM % £’bn % 40 8 1.0 0.8 30 6 0.6 20 4 0.4 10 2 0.2 0 - 0.0 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13
Slide 16: Wealth & Investment - overview
Wealth & Investment - overview Overview of performance Financial summary • Benefited from higher average funds under % management Mar-14 Mar-13 change g • Net inflows of £1.4bn and improved operating Operating profit* (£’mn) 66.1 50.7 30.5% margins Operating margin 22.9% 20.3% • UK business has succ
Slide 17: Wealth & Investment – key drivers
Wealth & Investment – key drivers Key drivers Operating margin Net inflows Average income as a % of AUM % £’bn % 30 3 0.8 2 0.6 20 1 0.4 0 10 0.2 -1 0 -2 0.0 Mar-11 Mar-12 Mar-13 Mar-14 Mar-11 Mar-12 Mar-13 Mar-14 Mar-11 Mar-12 Mar-13 Mar-14 Note: Prior to Mar-11 Rensburg Sheppards plc was an associ
Slide 18: Specialist Banking - overview
Specialist Banking - overview Overview of performance Financial summary • SA grew 29.2% benefitting from an increase in corporate fees and increased income from customer Mar-14 Mar-13 % change flow. Unlisted private equity performed well and we continue to grow our private banking businesses. The Op
Slide 19: Specialist Banking – mix of income
Specialist Banking – mix of income Net interest income Net fees and commissions Investment and trading income £’mn £’mn £’mn 800 400 500 Debt repurchases 400 600 300 300 400 200 200 200 100 100 0 0 0 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-14 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-14 Mar-10 Mar-11 Ma
Slide 20: Specialist Banking – costs and impairments
Specialist Banking – costs and impairments Costs Impairments £’mn £’mn 1000 400 800 300 600 200 400 100 200 0 0 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-14 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-14 Currency Currency neutral neutral 20
Slide 21: Specialist Banking – key drivers
Specialist Banking – key drivers Key drivers % Cost to income ratio % ROE post tax % Growth in net core loans 80 20 15 (Currency neutral) 60 15 10 40 10 5 20 5 0 0 0 -5 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 % Growth in risk-weighted
Slide 22: Specialist Banking: Dealing with the UK Legacy Business
Specialist Banking Dealing g with the UK Legacy g y Business Total net assets: Investec originated Total net assets: Kensington originated £’mn £ mn £’mn £ mn 5000 4 856 5000 4000 4000 3 209 3000 3000 2 615 2 185 2 185 2 036 2000 1 402 387 2000 559 136 1261 1 361 1 242 1 242 62 504 1000 1798 1000 47
Slide 23: Specialist Banking: UK Legacy vs Ongoing
Specialist Banking UK Legacy g y Business – Legacy g y vs Ongoing g g 31 Mar 2014 31 Mar 2014 £'mn Ongoing Legacy Total Total income 560.3 35.7 596.0 Total impairments (11.2) (93.6) (104.8) Total expenses (389.0) (44.3) (433.3) D Depreciation i ti on operating ti lleased d assets t (5 4) (5.4) (0 6)
Slide 24: Specialist Banking: UK Legacy expected run off rate
Specialist Banking UK Legacy g y Business – Expected p run off rate Total net loans: Investec originated Total net loans: Kensington originated £’mn £’mn 5000 4 856 2500 4500 2 036 4000 2000 Expected run off Expected run off 3500 3000 1500 1 361 2 615 1 242 2500 2 185 1 111 995 2000 1000 893 1 762 7
Slide 25: Strategy and positioning
St t Strategy and d positioning iti i 25
Slide 26: Reflecting on our strategic priorities from a year ago
Reflecting on our strategic priorities from a year ago From the Year End Results Presentation May 2013 26
Slide 27: Simplifying Specialist Banking
Simplifying Specialist Banking We have done a lot to simplify p y and de-clutter UK • Reduced or closed non-core businesses • Sold the Trust businesses • Sold Lease Direct Finance • Integrated Investment Banking and Securities into ICIB • Commenced process for sale of Kensington business Australia •
Slide 28: Driving future performance in Specialist Banking: UK Private Banking
Driving future performance in Specialist Banking Growing g the UK Private Banking g capability p y • Developed a transactional capability: • Private Bank Account launched Feb-2014 • Voyage Account launched focused focused on professionals earning £50k plus on HNW and d HNI and SA clients • Continue
Slide 29: Driving future performance: growing UK CIB franchise businesses
Driving future performance in Specialist Banking Growing g the franchise businesses in UK CIB For example: Small ticket asset finance Treasury Products and SED • Portfolio has grown from about £20mn in 2006 • Total FX Active Clients have grown from 0 in to some £665mn in 2014 2008 to 1,362 in Mar-20
Slide 30: Driving future performance: growing the business organically
Driving future performance in Specialist Banking By y growing g g the business organically g y • The SA Specialist Banking businesses will continue to build the franchise in core client segments • Focusing on cross-selling across different client bases • Continuing to provide services between Privat
Slide 31: Driving future performance in Asset Management
Driving future performance in Asset Management By y continuing g to build organically g y • Market cycles and price movements can affect this business in the short-term • We are continually investing and building for the next phase of growth in line with a clear long-term strategy gy • Our stable an
Slide 32: Driving future performance in Wealth & Investment
Driving future performance in Wealth & Investment By y continuing g to build critical mass in future g growth areas • Servicing our clients is fundamental to this business • Developing our offshore offering and Private Office service to higher net worth clients • Continue to leverage the group’s gro
Slide 33: Integrated solution for our private clients
Integrated solution for our private clients Through g a strong g digital g p platform • Providing a full service offering aimed at maximising the creation and preservation of our clients’ wealth by: • Integrating our Private Banking and Wealth & Investment offerings to ensure clients have a consiste
Slide 34: Closing
Out of the Ordinary® S Investec Closing 34
Slide 35: We continue to maintain a balanced business model
We continue to maintain a balanced business model BUSINESS MODEL £’mn Third party assets and Net interest, investment 1,400 advisory and trading income £1 008mn 1,200 £933mn 1,000 N t annuity Net it fees f and d 800 Net interest income of £652mn commissions of £720mn (34% of total) (37% of total) 60
Slide 36: Building a client franchise business
Building a CLIENT franchise business CLIENT FRANCHISE SPECIALIST ACTIVITIES BUSINESSES + • Aircraft Finance • Private Banking • Asset Finance • Corporate Banking and Advisory • Project Finance • Wealth & Investment • Resource Finance • Asset Management • Private Equity • Property • Supporting our en
Slide 37: In summary …
In summary … • We are building Investec into a high quality client driven organisation that is relevant in its core markets • We have navigated very troubled waters that have reminded us about who we are and what we stand for • Our focus over the next year will be to execute our key strategic initia
Slide 38: Outlook
Outlook • Economic conditions in the developed world have continued to improve • The UK economy has gained momentum which is evident in the increased activity levels experienced by our businesses • The South African economy is going through a period of weakness. • However, we are still seeing encour