Investec Plc · LSE:INVP
Investec — H1 FY2012 Earnings Presentation
32 slides from Investec's earnings presentation, Nov 17, 2011
Slide 1: Interim results presentation
Interim results presentation For the six months ended 30 I 09 I 2011 1
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: the further development of standards and interpretations under IFRS applicable to past,
Slide 3: Review of the interim period
Review of the interim period 3
Slide 4: Very difficult operating environment
Very difficult operating environment 120 Equity markets Since Since 120 Exchange rates Since Since Mar-11 Sep-10 Mar-11 Sep-10 115 115 +15.6% +14.0% 110 110 105 105 ebased to 100 +2.8% +0.6% ebased to 100 100 -7.9% +0.7% 100 -2.7% -0.5% 95 95 +2.4% -2.7% -13.5% -7.4% 90 90 + depreciation Re Re 85 -1
Slide 5: Continued to steer a steady course
Continued to steer a steady course Continued to invest in key growth areas which had an impact on costs Continued to benefit from a diversified business model with solid recurring income: Net interest income increased 13.6% to £364.7mn Net fee and commission income increased 30.7% to £445.2m
Slide 6: Building a diversified revenue stream
Building a diversified revenue stream … with a solid base of recurring income Recurring income – avg since 2002 of 65% Operating profit before tax* £'mn £‘mn 1,200 300 Investment income Beginning of financial crisis 1,000 250 Client flow trading 800 income 200 Other fees 600 150 Specialist S i li t
Slide 7: Driven by core earnings drivers
Driven by core earnings drivers Impacted by sharp depreciation of the Rand towards the end of the trading period Third party assets under management Customer accounts (deposits) and loans FUM down 3.4%3 4%* Customer accounts up 8.1% 8.1%* £'bn Net inflows of c£3bn £'bn Core loans and advances up 2
Slide 8: Good growth in operating profit before tax and impairments
Good growth in operating profit before tax* and impairments Operating profit before tax* Impairments analysis £'mn £‘mn 400 250 200 300 150 200 100 100 50 - 0 S 02 Sep-02 S 04 Sep-04 S 06 Sep-06 S 08 Sep-08 S 10 Sep-10 1H08 2H08 1H09 2H09 1H10 2H10 1H11 2H11 1H12 Operating profit before tax and impa
Slide 9: Supported by strong capital and liquidity
Supported by strong capital and liquidity Capital adequacy Cash and near cash reserves Capital adequacy ratio £'mn 12,000 12 000 Investec Bank 17.6% (Australia) Limited 16.3% 16.8% 10,000 Investec plc 17.1% 15.9% Investec Limited 8,000 15.7% 0% 5% 10% 15% 20% 31-Mar-11 30-Sep-11 6,000 Tier 1 ratio I
Slide 10: Costs grew slightly faster than revenue
Costs grew slightly faster than revenue … as we continued to invest in growth areas Jaws ratio Headcount analysis £'mn 1 200 1,200 8 000 8,000 Group p Services and Other Activities 7,000 Property Activities 1,000 6,000 Investment Banking 5,000 800 4,000 C it l M Capital Markets k t 3,000 Asset Manag
Slide 11: Resulting in a stable performance
Resulting in a stable performance % S 11 Sep-11 S 10 Sep-10 change h M 11 Mar-11 Operating profit* before tax (£’000) 223,629 228,157 (2.0%) 434,406 Attributable earnings* (£’000) 162,867 163,202 (0.2%) 327,897 Adjusted EPS* (pence) 20.6 22.1 (6.8%) 43.2 DPS (pence) 8.0 8.0 0% 17.0 Net tangible asse
Slide 12: Financial Targets
Financial Targets ROE and EPS targets difficult to achieve in this environment ROE target needs to be adjusted to align with revised regulatory expectations Sep-11 Mar-11 Sep-10 ROE Target: under revision 10.1% 11.2% 11.5% Tangible ROE 12.3% 13.2% 13.7% Adjusted* EPS growth Target: 10% > UKRPI (
Slide 13: Operational review
Operational review Out of the Ordinary® o Investec Specialist Bank and Asset Manager 13
Slide 14: Mixed divisional performances
Mixed divisional performances Operating profit* by business for 30 Sep-11 Asset Management g 34 1% 34.1% Wealth & Investment 33.3% Specialist Banking: Capital Markets 16.6% Property Activities (28.8%) Private Banking (26 4%) (26.4%) Investment Banking (91.4%) *Before goodwill, non-operating items, t
Slide 15: Asset Management
Asset Management Overview of performance % Solid investment performance (£) Sep-11 Sep-10 change Operating profit* (mn) 65.6 48.9 34.1% Broadened geographic spread Cost to income 64.7% 65.9% - Benefiting from focus on institutional accounts ROE O (pre-tax)** (p e a ) 81.7% 8 % 59.7% 59 % - A
Slide 16: Wealth & Investment
Wealth & Investment Overview of performance % SA business benefited from higher g average g (£) Sep-11 Sep-10 change funds under management Operating profit* (mn) 21.8 16.3 33.3% UK positively impacted by integration of Cost to income 75.7% 73.1% - Rensburg Sheppards plc into the business ROE (p
Slide 17: Specialist Banking – Property Activities
Specialist Banking – Property Activities Overview of performance % Performance down largely g y as a result of the ((£)) Sep-11 p Sep-10 p change g sale of R1.7bn of its property portfolio at the end of FY11 Operating profit* (mn) 11.7 16.4 (28.8%) Investec Property fund of R1.7bn successfully l
Slide 18: Specialist Banking - Private Banking
Specialist Banking - Private Banking Overview of performance Sep- % SA benefited from g growth in its loan portfolio (£) 11 Sep-10 change and improved margins Operating income (mn) 205.2 194.4 5.6% UK performance significantly improved as a Operating profit* (mn) (4.9) (3.9) (26.4%) result of lo
Slide 19: Specialist Banking - Investment Banking
Specialist Banking - Investment Banking Overview of performance % The listed principal investment portfolio was (£) Sep-11 Sep-10 change adversely affected by a sharp fall in equity Operating profit* post markets towards the end of the period consolidated investments 3.7 42.5 (91.4%) (mn) Weaker
Slide 20: Specialist Banking - Capital Markets
Specialist Banking - Capital Markets Overview of performance % Strong g deal p pipeline p and improved p margins g in (£) Sep-11 Sep-10 change South Africa Operating profit* (mn) 155.6 133.5 16.6% Solid performance from the UK business Cost to income 45.6% 45.7% - Reasonable levels of activity
Slide 21: Group Services and Other Activities
Group Services and Other Activities Overview Operating profit* % Central Funding g was impacted p by y lower (£) Sep-11 Sep-10 change margins but benefited from a lower level of International Trade provisions held 4.9 3.7 32.8% Finance (mn) Central Services incurred an increase in Central Fundin
Slide 22: General
General Operational effective tax rate* down from 20.2% to 19.2% Weighted shares from 739.7mn to 792.1mn Losses attributable to non-controlling interests of £4.6mn relating to Euro denominated preferred securities issued by a subsidiary of Investec plc 22
Slide 23: Strategy
Out of the Ordinary® o Investec Specialist Bank and Asset Manager Strategy 23
Slide 24: Distinctive specialist bank and asset manager
Distinctive specialist bank and asset manager Focused on well defined target clients Corporate / Institutional / Government Private Client (High Net Worth / High Income) Asset Specialist Banking Wealth & M Management t I Investment t t Investment Capital Private Banking Markets Banking Activities Ac
Slide 25: With a solid international platform
With a solid international platform Distribution channels Origination channels Core infrastructure Since 1992 Assets: £19bln Since 1997 Assets: £3bln Since 1974 Assets: £27bln 25
Slide 26: Asset Management
Asset Management Global specialist investment manager Performance Clients Innovation Insight Investec Asset Management has organically built an independent global 20--year growth story 20 platform Third party assets under management grown from £41.8mn Created successful investment in 1991 to £53
Slide 27: Wealth & Investment
Wealth & Investment Building an international platform Well established platforms in the UK and SA Largest private client wealth and investment manager in SA Funds under management* The acquisition of The Evolution Group £'mn 35 will create a significant player in this 30 industry within the U
Slide 28: Specialist Banking
Specialist Banking Building a global platform with synergies across the group Focusing the mindset around client demand Investment Banking Integrated business, local client delivery and international access Leading position in UK mid market Strong position in SA Building platforms in Austr
Slide 29: Specialist Banking held back by elevated impairments
Specialist Banking held back by elevated impairments p Specialist Banking Wealth & Investment Asset Management Operating profit before tax* Operating profit before tax* Operating profit before tax* £'mn £'mn £'mn 350 25 70 300 60 20 250 50 200 15 40 150 10 30 100 20 5 50 10 - - - Sep-06 Sep-07 Sep-0
Slide 30: Resulting in a decline in ROE in Specialist Banking
Resulting in a decline in ROE in Specialist Banking Specialist Banking Wealth & Investment Asset Management ROE and NAV ROE and NAV ROE and NAV £’mn £’mn £’mn 3,000 30% 70 80% 45 500% 40 450% 2,500 Basel II 25% 60 Basel II 70% Basel II 35 400% 60% 50 350% 2,000 20% 30 50% 300% 40 25 1,500 15% 40% 25
Slide 31: The overall strategy is to focus on:
The overall strategy is to focus on: Building low capital revenue Tightly managing costs while still investing for the future Building a well established brand to support a sustainable long term gy strategy Leveraging off our platforms Remaining opportunistic to capture deal flow … resulti
Slide 32: Outlook
Outlook The Eurozone crisis continues to affect confidence and activity levels around the world. world Markets remain volatile and the future regulatory landscape is still uncertain. Progress has been made in building further scale in our wealth and asset management businesses, which together