Investec plc · LSE:INVP
Investec — FY2022 Earnings Presentation
47 slides from Investec's earnings presentation, May 19, 2022
Slide 1: Year End Results presentation
Year End Results presentation 19 MAY 2022 Month Year
Slide 2: 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 2
Slide 3: 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 4: Winston Churchill quote
“A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.” Winston S. Churchill 4
Slide 5: Key takeaways
Key takeaways Highly relevant Strong earnings Capital generation Positive progress recovery above client franchises to support growth in our core towards medium- pre-pandemic and create term targets levels geographies optionality ▲ 5% 63.8 Target Range: 12-16% 55.8 510 52.5 55.1 29.9 434 24.9 12.0%
Slide 6: Results highlights
Results highlights Adjusted earnings per share Adjusted operating profit Cost to income 55.1p £687.4mn 63.3% (MAR-21: 28.9P) (MAR-21: £377.6MN) (MAR-21: 70.9%) 90.7% AHEAD OF PRIOR PERIOD 82.1% AHEAD OF PRIOR PERIOD Credit loss ratio Return on equity Net asset value per share 8 bps 11.4% 510.0p (MAR
Slide 7: Sustainability highlights
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 Joined UN- W&I joined Board Transformation Sustainable finance Implemented a focused project
Slide 8: 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 8
Slide 9: Improved macro environment
Improved macro environment…. 20 • The South African economy expanded 10 4.9% y/y in calendar year 2021, rebounding South 1 2010-2019 or pre-pandemic Mean: 1.7% from the effects of severe COVID-19 lockdown restrictions in 2020 Africa (2) • At the end of calendar year 2021, the SA economy was only 1.8
Slide 10: …and supportive financial markets
…and supportive financial markets JSE - LHS FTSE - RHS FY2021 FY2022 85000 8000 75000 7500 7000 65000 Markets 6500 55000 6000 45000 5500 35000 5000 Apr-20 Jun-20 Aug-20 Oct-20 Dec-20 Feb-21 Apr-21 Jun-21 Aug-21 Oct-21 Dec-21 Feb-22 Mar-22 25 FY2021 FY2022 23 Exchange 21 rate ZAR / GBP 19 17 15 Mar-2
Slide 11: Global interest rates
Global interest rates USA 10-year treasury bonds (%) 3.5 3.0 • Global interest rates reduced markedly in response to the COVID-19 pandemic 2.5 December 2019 • Since then economies have recovered and many nations are experiencing an intense surge in inflationary pressures 2.0 • Looking forward, marke
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 60 55.1 52.5 5.6 50 3.8 37.8 40 4.4 28.9 30 4.1 48.7 49.5 20 33.4 24.8 10 0 Mar-19 Mar-20 Mar-21 Mar-22 Adjusted EPS* Pro-forma Ninety One @25% / WANO
Slide 13: Solid underlying performance
Solid underlying performance Adjusted operating profit* increased across the group £’mn SA^ ▲ 54% (48% in ZAR) UK^ ▲ 138% ▲ 82% 750 13 8 3 149 650 550 118 9 9 450 687.4 350 250 377.6 150 ▲ 51% in GBP ▲ 36% in GBP ▲ 102% in GBP ▲ 332% ▲ 18% ▲ 33% ▲ 45% in ZAR ▲ 30% in ZAR ▲ 93% in ZAR 50 Mar-21 Speci
Slide 14: Divisional highlights
Divisional highlights UK & Other | Wealth & Investment SA | Wealth & Investment • Achieved record FUM during the period (Mar-21: £41.7bn) • Breadth and depth of product offering suitable for wealth • Net inflows of £1.2bn globalisation trend • Adjusted operating profit up 17.9% to £87.7mn • Discreti
Slide 15: Diversified, quality revenue mix across geographies and businesses
Diversified, quality revenue mix across geographies and businesses Geography Division Mar-22 Mar-22 5% 23% Operating 45% income 55% up 21.3% to £1 990.4mn 72% Wealth & Investment Specialist Bank Group Investments UK and Other Southern Africa Adjusted 7% 17% operating profit* 44% 56% up 82.1% to £687
Slide 16: Wealth & Investment SA
Wealth & Investment SA Another strong financial performance Funds under management Adjusted operating profit* Operating margin R’mn R’bn 40% 800 720 400 365 333 700 350 554 30% 600 300 177 500 250 158 20% 200 400 150 300 10% 100 188 200 175 50 100 0 0% 0 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar
Slide 17: Wealth & Investment UK & Other
Wealth & Investment UK & Other Record performance in FUM during the year Funds under management Adjusted operating profit* Operating margin £’bn £’mn 50 44.4 41.7 100 30% 40 7.2 74.3 87.7 6.5 80 30 20% 60 20 37.2 35.2 40 10 10% 20 0 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 0 0% Mar-21 Mar-22 Discre
Slide 18: 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 298.4 300 287.3 • Net core loans increased 3.9% since Mar-21 to R298.4bn 250 • Private clients’ loan book up 4.2% driven by resi-mortgages 200 • Growth in co
Slide 19: Specialist Banking SA
Specialist Banking SA Solid performance from our client franchises Operating income Cost to income R’bn R’bn 16 14.6 16 14.6 60% 14 12.3 14 12 12.3 12 55% 10 55.7% 10 51.1% 8 50% 6.9 7.5 6 8 4 6 45% 2 4 0 2 40% Mar-21 Mar-22 Mar-21 Mar-22 Net interest income Annuity fees and commissions Operating in
Slide 20: Specialist Banking UK & Other
Specialist Banking UK & Other Strong growth in client acquisition and lending activity across the business Net core loans £’bn 14.4 • Net core loans grew by 17.0% (18.5% excluding Australia) to 14 £14.4bn (Mar-21: £12.3bn) 12.3 12 • Private client lending is up 35.1% driven by continued client acqui
Slide 21: Specialist Banking UK and Other
Specialist Banking UK and Other Delivered a strong set of results ahead of pre-COVID levels of profitability Operating income Cost to income £’mn £’mn 800 720.4 800 720.4 90% 618.0 618.0 600 80% 600 81.3% 502.9 501.6 70% 400 400 69.6% 60% 200 200 50% 0 0 40% Mar-21 Mar-22 Mar-21 Mar-22 Net interest
Slide 22: Group Investments
Group Investments Group Investments pillar consists of equity investments held outside the group’s banking activities Carrying Income % £’mn value yield Holding Ninety One 356 14.3% 25.0% Adjusted operating profit increased by 51.4% to £52.1mn (MAR-21: £34.4mn) driven by: IPF 171 5.9% 24.3% • Improv
Slide 23: 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 21.3% to £1 990.4mn £'mn 69 91 1,990 2,000 167 33 • Net interest income benefitted from lower cost of funding and higher 1,641
Slide 24: Operating cost analysis
Operating cost analysis Fixed operating costs were well contained reflecting ongoing cost discipline £’mn 1,990 2,000 75% 1,641 70% 1,500 70.9% 1,234 1,165 65% Cost to 1,000 63.3% Cost to income ratio improved to 63.3% (Mar-21: 70.9%) income 60% • Operating income increased 21.3% 500 55% • Operating
Slide 25: Earnings drivers
Earnings drivers Funds under management £’bn 58.4 63.8 • FUM up 9.2% to £63.8bn 60 • Net inflows of £1.9bn 40 • Improved market levels and positive net organic growth in both geographies 20 • Market volatility in the last quarter negatively impacted closing FUM 0 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 W
Slide 26: SA net core loan growth
SA net core loan growth Reflecting growth in HNW & Other private client lending HNW & Other Property Corporate & Other lending Private client lending R'bn 100 Mar-21 Mar-22 85 80 72 60 59 SA net core loans increased 3.9%: 60 • Improved lending turnover across the business 40 • Elevated repayment rat
Slide 27: 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 HNW & Other Corporate & Other lending £‘mn Property Private client lending 4,500 Mar-21 Mar-22 4,159 4,000 3,500 3,000 UK net core loans up 17.0%, or 1
Slide 28: Significant reduction in ECL impairment charges & CLR
Significant reduction in ECL impairment charges & CLR Total ECL impairment charges £'mn 140 133 120 99 100 80 66 • ECL charges down 71.0% to £28.8mn (Mar-21: 60 £99.4mn) 40 29 • CLR reduced to 8 bps from 35 bps at Mar-21, below 20 the through-the-cycle (TTC) range of 25-35 bps 0 Mar-19 Mar-20 Mar-21
Slide 29: Unpacking the credit loss ratio - SA
Unpacking the credit loss ratio - SA Investec Ltd total ECL impairment charges R‘mn 1200 1,109 1000 800 761 621 600 400 200 • CLR reduced to 0 bps from 18 bps at Mar-21, below 63 the TTC range of 20-30 bps, driven primarily by: 0 Mar-19 Mar-20 Mar-21 Mar-22 • Limited default experience, • Good recov
Slide 30: Unpacking the credit loss ratio - UK
Unpacking the credit loss ratio - UK Investec plc total ECL impairment charges £'mn 80 76 71 60 40 25 25 • CLR reduced to 17 bps from 56 bps at Mar-21, below 20 the TTC range of 30-40 bps 0 • Total ECL charges of £25 mn (Mar-21: £71 mn) mainly Mar-19 Mar-20 Mar-21 Mar-22 driven by: • Lower specific
Slide 31: Balance sheet provisions
Balance sheet provisions £’mn R’mn 150 3,000 101 Investec plc 100 ▼33.7% 67 Investec Ltd 2,000 1,328 ▼9.2% 1,206 balance sheet balance sheet 416 ▲49.0% 620 50 35 1,000 ECL provision 42 ▼ 16.7% ECL provision 985 ▼ 11.8% 869 27 ▲ 18.5% 32 0 0 Mar-21 Mar-22 Mar-21 Mar-22 Stage 1 Stage 2 Stage 3 Stage 1
Slide 32: ROE and ROTE
ROE and ROTE ROE ROTE Group 11.4% 12.3% 12.9% Geographic 11.7% 11.2% 11.7% Investec Ltd Investec plc Investec Ltd Investec plc Average allocated equity Average allocated tangible equity 50.4% 49.6% 53.9% 46.1% £2 232mn £2 194mn £2 218mn £1 897mn 32
Slide 33: Robust capital and liquidity position
Robust capital and liquidity position Group cash and near cash £‘bn 17.2 Group liquidity summary 18 17.2 • High level of readily available, highly liquid assets • Loans to customers as % of customer deposits of 73.7% (Mar-21: 75.6%) 14 Capital summary Average • CET1^ ratio above 10% target, total ca
Slide 34: Committed to medium-term targets
Committed to medium-term targets FY22 performance against medium-term targets Medium-term targets FY22 performance Long-term value UK South Africa Group UK South Africa Group outcomes ROE 11% to 15% 15% to 18% 12% to 16% 11.2% 11.7% 11.4% Cost to Income <67% 50% to 55% <63% 70.5% 53.9% 63.3% - CET1
Slide 35: Financial outlook
Financial outlook FY23 – based on current economic forecast and business momentum MINDFUL OF THE UNCERTAIN EXTERNAL ENVIRONMENT • Expected slowdown in global growth poses downside risks to current economic forecasts • We are well placed to continue our strategic execution – focusing on competitive s
Slide 36: 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 36
Slide 37: 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 • Shareholders approved the distribution of 15% ho
Slide 38: Taking stock
Taking stock We have simplified and focused our business to deliver improved shareholder returns £’mn FY2019 FY2020 FY2021 FY2022 Adjusted EPS - pence per share 48.7 33.9 28.9 55.1 FY2022 adjusted EPS showing continued recovery in performance Total operating income 1 896 1 807 1 641 1 990 Total cost
Slide 39: Investec
Investec We seek to Investec is a distinctive We are a people backed business, create enduring bank and wealth manager, our distinction is embodied in our worth – living in, operating in two core entrepreneurial culture not off, society geographies Partner for the long term, guided by Rich heritage
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 c.8,300 £29.9bn £40.1bn £63.8bn Principal geographies Total Employees Core loans Customer deposits Funds under management Key client groups and our offering Corporate / Institutional / G
Slide 41: Framework to drive improved business performance
Framework to drive improved business performance Growth initiatives Cost management Clear set of opportunities to deliver disciplined revenue growth Enhanced management of the cost base through operational leverage Underpinned by Capital discipline A more disciplined approach to capital allocation a
Slide 42: In closing
In closing WE HAVE A 45+ YEAR HERITAGE IN SPECIALIST BANKING AND WEALTH MANAGEMENT WE ARE DEDICATED TO OUR PURPOSE OF CREATING ENDURING WORTH - LIVING IN, NOT OFF, SOCIETY OUR CLIENT FRANCHISES HAVE SCALE AND RELEVANCE IN CHOSEN MARKETS STRONG CAPITAL GENERATION AND OPTIONALITY TO SUPPORT OUR GROWTH
Slide 43: Thank you
o Investec = S > = o = FH AYWNIGYO 3HL JO 1NO
Slide 44: Appendix
Appendix
Slide 45: Macro-economic scenarios – March 2022
Macro-economic scenarios – 31 March 2022 Base case Average 2022-2027 Downside 1 Downside 2 Financial year ending (%) 2022/2023 2023/2024 2024/2025 2025/2026 2026/2027 Upside Base case inflation global shock GDP growth 2.4 2.1 1.6 1.6 1.6 2.6 1.9 0.8 0.3 UK Unemployment rate 3.8 3.7 3.7 3.7 3.7 3.3 3
Slide 46: Sustainability highlights: Supporting SDGs
Sustainability highlights Aligns with our broader aspiration to positively address inequality and climate change by focusing on doing well and doing good Our approach is aligned to our purpose to create enduring worth, living in, not off, society Positively contribute to Operate responsibly and Part
Slide 47: Thank you
o Investec = S > = o = FH AYWNIGYO 3HL JO 1NO