Investec Plc · LSE:INVP
Investec — Investec Bank — Debt Investor Presentation (July 2018)
42 slides from Investec's debt investor presentation, July 2018
Slide 1: Investec Bank plc Tier 2 Investor Presentation
Investec Bank plc Tier 2 Investor Presentation July 2018 The information in this presentation relates to the year ending 31 March 2018, unless otherwise indicated.
Slide 2: Legal disclaimer
Legal disclaimer THIS DOCUMENT AND ITS CONTENTS ARE CONFIDENTIAL AND IS BEING PROVIDED TO YOU SOLELY FOR YOUR INFORMATION AND FOR USE AT A PRESENTATION TO BE HELD IN CONNECTION WITH THE PROPOSED OFFER OF SECURITIES REFERRED TO HEREIN AND MAY NOT BE REPRODUCED IN ANY FORM OR FURTHER DISTRIBUTED TO AN
Slide 3: Legal disclaimer (continued)
Legal disclaimer (continued) This presentation and its contents are confidential and should not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other person. The distribution of this presentation and/or any other documents related to the proposed offer
Slide 4: Overview
Overview Tier 2 issuance from a well-established profitable business • Operating in the UK since 1992 • Wholly owned subsidiary of Investec plc (UK FTSE 250 listed entity since 2002 with current market cap of c.£5.5bn^) – Investec Bank plc is the main banking subsidiary of Investec plc – Structured
Slide 5: Investec Bank plc
Investec Bank plc Investec Bank plc is an established specialist bank and private client wealth manager with its primary business in the UK Total Net core Total Customer Third Party Employees assets loans equity deposits FUM (approx.) £20.1bn £9.7bn £2.2bn £12.0bn £37.3bn 3,700 • Balanced business m
Slide 6: Agenda
Agenda 1 Overview of Investec Bank plc 2 Investec Bank plc Operating Fundamentals 3 Transaction Summary 4 Further information 5 Appendix – summary financials 6
Slide 7: An overview of Investec Bank plc (IBP)
An overview of Investec Bank plc (IBP)
Slide 8: Investec and IBP: structure and main operating subsidiaries
Investec and IBP: structure and main operating subsidiaries Baa1 Features of Investec’s structure Positive • Investec plc is the holding company of the Investec plc DLC Sharing Investec Limited Listed on LSE Listed on JSE Investec group’s UK & Other operations Agreement Non-SA operations SA operatio
Slide 9: Value Proposition: balanced business model
IBP: balanced business model supporting our long-term strategy Three distinct business activities focused on well defined target clients and regions Client Corporate / Institutional / Government Private client (high net worth / high income) / charities / trusts Specialist Banking Specialist Banking
Slide 10: IBP: strategic objectives
IBP: strategic objectives Maintain healthy capital ratios Maintain robust liquidity management philosophy • Always held capital in excess of regulatory requirements • Appropriately manage our levels of surplus liquidity and • Targets: cost of funding • Common Equity Tier 1 ratio >10% (11.8% at 31 Ma
Slide 11: IBP: focusing on capital light activities
IBP: focusing on capital light activities • We have realigned our business model over the past few years and focused on growing our capital light businesses • We have significantly increased our third party funds under management - a key capital light annuity income driver - in the Wealth & Investme
Slide 12: IBP: key strategic developments over the past year
IBP: key strategic developments over the past year FY 2018 developments • The banking business benefited from sound levels of corporate and private client activity driving strong loan book growth and net interest income over the year • The private banking business continued to focus on the build-out
Slide 13: IBP's operating fundamentals
IBP’s operating fundamentals
Slide 14: IBP: profitability supported by diversified revenue streams
IBP: profitability supported by diversified revenue streams Annuity income Revenue versus expenses £’mn £’mn 1,200 80% 1,200 100% 1,040 983 90% 70% 1,000 1,000 875 859 80% 839 853 60% 812 70% 800 800 728 190 50% 797 60% 192 227 745 600 176 176 40% 600 542 50% 224 662 644 459 467 628 629 240 312 573
Slide 15: IBP: profitability supported by diversified revenue streams
IBP: profitability supported by diversified revenue streams Operating profit before tax* Business mix percentage contribution to operating profit* £’mn 300 250 200 150 40.5% 43.1% 49.2% Mar Mar Mar 50.8% 2018 2017 56.9% 2016 100 59.5% Three-year CAGR: 10% 50 - 2008 2009 2010 2011 2012 2013 2014 2015
Slide 16: IBP: consistent asset growth, gearing ratios remain low
IBP: consistent asset growth, gearing ratios remain low Total assets composition Gearing* remains low £’bn Loans and deposits in FY15 times impacted by the sale of group assets, largely in 25 Australia. 16 14.0 14.4 14 13.3 20 11.7 11.4 12 11.2 4.8 10.5 8.6 10.0 9.9 8.1 7.6 4.9 10 9.3 9.1 15 6.6 5.9
Slide 17: IBP: exposures in a select target market
IBP: exposures in a select target market • Credit and counterparty exposures are to a select target Gross core loans by country of exposure at 31 March 2018 market: • High net worth and high income clients 3.0% 3.4% • Mid to large sized corporates 3.6% 6.7% UK • Public sector bodies and institutions
Slide 18: IBP: sound and improving asset quality
IBP: sound and improving asset quality Core loans and asset quality £’bn Statutory 9.7 • Statutory asset quality has improved as the legacy 10 8% portfolio* has been managed down 9 8.6 8.2 8.2 7% 7.7 7.8 8 7.3 7.3 7.6 5.68% 7.0 6% • Impairments on loans and advances amounted 7 6.5 4.70% 4.96% to £10
Slide 19: IBP: UK legacy portfolio continues to reduce
IBP: UK legacy portfolio continues to reduce • Our UK legacy portfolio is pre-2008 business with very low/negative margins, and assets relating to discontinued business • We have actively managed a reduction in the legacy portfolio to £313mn (3.2% of total net core loan exposures) at 31 March 2018 (
Slide 20: IBP: diversified funding strategy and credit ratings
IBP: diversified funding strategy and credit ratings • Investec’s funding consists primarily of customer deposits • Investec adopts a conservative and prudent funding strategy • Positive rating trajectory: over the past few years both IBP and Investec plc have received ratings upgrades Conservative
Slide 21: IBP: primarily customer deposit funded with low loan to deposit ratio
IBP: primarily customer deposit funded with low loan to deposit ratio Fully self-funded: healthy loan to deposit ratio Total deposits: growing customer deposits £’bn FY15 impacted by the sale of group assets, largely in Australia £’bn 14 140% 14 12.0 12.0 12 11.1 11.4 11.1 11.0 11.3 120% 11.4 11.3 1
Slide 22: IBP: maintaining robust surplus liquidity
IBP: maintaining robust surplus liquidity • We maintain a high level of readily available, high-quality Cash and near cash composition liquid assets – targeting a minimum cash to customer deposit ratio of 25%. These balances have increased significantly since 2008 to £5.6bn at 31 March 2018 4.3% (re
Slide 23: IBP: sound capital base and capital ratios
IBP: sound capital base and capital ratios Total capital Total risk-weighted assets: high RWA density £’bn £’bn 3.0 2.8 25 80% 2.6 2.6 2.6 21.3 2.4 2.4 20.2 20.0 20.1 70% 2.5 2.4 2.3 20 18.5 18.3 18.4 2.2 17.9 60% 17.0 2.0 1.9 1.9 2.0 1.7 1.7 1.8 1.8 50% 1.7 15 13.8 13.7 1.6 1.6 12.6 12.7 12.7 12.2
Slide 24: IBP: sound capital base and capital ratios (continued)
IBP: sound capital base and capital ratios (continued) • Investec has always held capital in excess of regulatory requirements and intends to perpetuate this philosophy and ensure that it remains well capitalised • The bank has never required shareholder or government support • In December 2016, the
Slide 25: Transaction summary
Transaction summary
Slide 26: Transaction Summary: Tender Offer and New Issue
Transaction Summary: Tender Offer and New Issue Transaction Summary Outstanding Tier 2 Notes • Tender Offer for outstanding IBP Tier 2 notes due 2022, capped at Issuer Investec Bank plc GBP287.5mn nominal amount Issue Date 11/02/2011 • IBP issuance of CRD IV compliant Tier 2 capital, denominated in
Slide 27: Tier 2 new issue indicative summary terms
Tier 2 new issue indicative summary terms* Issuer Investec Bank plc Notes GBP [●] Fixed Rate Reset Callable Subordinated Notes (the “Notes”) Issuer Ratings A2 (positive) (Moody‘s) / BBB+ (stable) (Fitch) Expected Issue Ratings BBB (Fitch) / Baa3 (Moody‘s) Size [Benchmark] Maturity [●] July 2028 (10
Slide 28: Further information
Further information
Slide 29: IBP: two core areas of activity
IBP: two core areas of activity Wealth & Investment: Key income drivers and performance statistics Key income drivers Operating margin Average income^ as a % of FUM % % (besides market levels) 30 1 • Investment management fees earned on FUM (largely equity 0.8 mandates) 20 0.6 • Commissions earned f
Slide 30: IBP: two core areas of activity (continued)
IBP: two core areas of activity (continued) Specialist Banking (ongoing): Key income drivers and performance statistics Key income drivers Revenue Costs (besides market, economic and £’mn £’mn rate levels) 800 70% 800 100% • Net interest: levels of loans; 700 58% 57% 700 90% 57% 60% 74% 75% surplus
Slide 31: Overview of the IFRS 9 transition impact on IBP
Overview of the IFRS 9 transition impact on IBP Balance sheet impairment allowance and provisions • Total balance sheet impairment allowance and provisions increased by £105mn from £158mn at 31 March 2018 to £263mn at 1 April 2018. This was driven by an increase in legacy impairments of £58mn and an
Slide 32: Overview of the IFRS 9 transition impact on IBP
Overview of the IFRS 9 transition impact on IBP IAS 39 to IFRS 9 impairment allowance • The following chart highlights the key drivers of the overall increase in the bank’s impairment provision under IFRS 9 relative to IAS 39 £68mn £58mn Largely Balance Stage 1&2 £263mn (£21mn) Largely sheet £158mn
Slide 33: Appendix – summary financials
Appendix – summary financials
Slide 34: IBP: salient financial features
IBP: salient financial features Year to Year to 31 March 2018 31 March 2017 % change Total operating income before impairment losses on loans and advances (£'000) 1,040,147 982,690 5.8% Operating costs (£'000) 797,049 744,716 7.0% Operating profit before goodwill, acquired intangibles, non-operating
Slide 35: IBP: income statement
IBP: income statement Year to Year to £'000 31 March 2018 31 March 2017 Interest income 598,494 562,092 Interest expense (248,876) (263,340) Net interest income 349,618 298,752 Fee and commission income 504,606 502,106 Fee and commission expense (10,094) (13,260) Investment income 68,943 55,900 Shar
Slide 36: IBP: balance sheet
IBP: balance sheet £'000 31 March 2018 31 March 2017 Assets Cash and balances at central banks 3,487,768 2,853,567 Loans and advances to banks 772,984 922,764 Reverse repurchase agreements and cash collateral on securities borrowed 750,428 536,173 Sovereign debt securities 1,155,472 952,902 Bank deb
Slide 37: IBP: balance sheet (continued)
IBP: balance sheet (continued) £'000 31 March 2018 31 March 2017 Liabilities Deposits by banks 1,295,847 673,586 Derivative financial instruments 533,319 583,562 Other trading liabilities 103,496 136,041 Repurchase agreements and cash collateral on securities lent 168,640 223,997 Customer accounts (
Slide 38: IBP: segmental analysis of operating profit
IBP: segmental analysis of operating profit For the year to 31 March 2018 Wealth & Specialist £'000 Investment Banking Total group Net interest income 5,181 344,437 349,618 Fee and commission income 297,629 206,977 504,606 Fee and commission expense (722) (9,372) (10,094) Investment income 10,446 58
Slide 39: IBP: segmental analysis of operating profit
IBP: segmental analysis of operating profit For the year to 31 March 2017 Wealth & Specialist £'000 Investment Banking Total group Net interest income 4,368 294,384 298,752 Fee and commission income 268,429 233,677 502,106 Fee and commission expense (582) (12,678) (13,260) Investment income 2,169 53
Slide 40: IBP: asset quality under IAS 39
IBP: asset quality under IAS 39 £'000 31 March 2018 31 March 2017 Gross core loans and advances to customers 9,815,012 8,725,515 Total impairments (151,840) (126,876) Specific impairments (89,863) (83,488) Portfolio impairments (61,977) (43,388) Net core loans and advances to customers 9,663,172 8,5
Slide 41: IBP: capital adequacy
IBP: capital adequacy £'mn* 31 March 2018 31 March 2017 Common equity tier 1 capital 1,621 1,552 Additional tier 1 issuance 200 Total tier 1 capital 1,821 1,552 Tier 2 capital 445 560 Total regulatory capital 2,266 2,112 Risk-weighted assets 13,744 12,716 Capital requirements 1,099 1,017 A summary o
Slide 42: Contact details
Contact details David van der Walt CEO of Investec Bank plc • Phone: +44 (0) 20 7597 4543 • Email: david.vanderwalt@investec.co.uk Ruth Leas CRO of Investec Bank plc • Phone: +44 (0) 20 7597 4379 • Email: ruth.leas@investec.co.uk Carly Newton Investor Relations • Phone: +44 (0) 20 7597 4493 • Email:
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