Investec plc · LSE:INVP
Investec — Debt Investor Presentation (May 2022)
44 slides from Investec's debt investor presentation, May 2022
Slide 1: Investec plc Overview: Investor generic presentation May 2022
Investec plc Overview Investor generic presentation May 2022 The information in this presentation relates to the financial year ended 31 March 2022 (FY2022), unless otherw ise indicated.
Slide 2: Agenda Contents
Agenda Contents 1. 2. 3. 4. 5. Investec Group Overview of Investec plc Further information Appendix at a glance Investec plc operating and peer analysis fundamentals 2
Slide 3: Overview of Investec Group
o Investec Overview of Investec Group
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 separate legal entities and listings, but Investec plc Sharing Investec Ltd are bound together by contractual agreements 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 1992 ▪ Today, an efficient integrated Assets international business platform £27.8bn employing approximately 8 300+* FUM people £44.4bn ▪ Listed on the JSE
Slide 6: One Investec: our values
One Investec Our values Our purpose is expressed in four key values that shape the way that we work and live within society. 45+ years of 1 2 3 4 heritage. Cast-iron Integrity Distinctive Performance Client focus Dedicated partnership We demand cast-iron integrity in all internal and external We emp
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 – anticipate excess capital Diversified mix of earnings by geography and business, with significant annuity income underpin from leading wealth 3 busines
Slide 8: 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 9: Sustainability highlights
Sustainability highlights Operate responsibly, finance and invest for a sustainable future and maintain our competitive ESG position Sustainability principles Do no harm through ethical Providing profitable, Maximising impact Creating long-term value Committed to a clean carbon 1. for all our stakeh
Slide 10: Overview of Investec plc
Overview of Investec plc The information in this presentation relates to the year ended 31 March 2022, unless otherw ise indicated. 10
Slide 11: Investec plc
Investec plc A distinctive bank and investment manager with primary business in the UK Total Net core Customer Funds under Employees assets loans deposits management £27.9bn £14.4bn £18.3bn £44.4bn 3,400+ Key highlights Diversified revenue streams Sound balance sheet with high annuity base ▪ Balance
Slide 12: Overview of Investec plc
Overview of Investec 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) / charit
Slide 13: 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 – by growing our Wealth & Investment business. Wealth & Investment FUM have grown from £14.2bn at 31 Mar 2012 to £44.4bn at 31 Ma
Slide 14: Specialist Banking
Specialist Banking Winning in under-serviced parts of the market through dynamic, full-service offering Private equity and Private clients Private companies sponsor-backed Publically listed companies Specialist sectors companies For UK mid-market founder For UK mid-market Private International speci
Slide 15: Wealth & Investment
Wealth & Investment A leading private client wealth manager in the UK with £44.4bn funds under management • Financial planning advice Total FUM £44.4bn1 Our service offering • Investment management, including bespoke portfolio management % UK Discretionary 86% • Private clients, including HNW and In
Slide 16: Domestically relevant, internationally connected
Domestically relevant, internationally connected • Investec plc is a substantial business generating revenues of £1,088mn during the year to 31 March 2022 • The wealth business contributes £347mn of those revenues or 32% of Investec plc’s total revenues. The chart below shows the relative revenue ge
Slide 17: Investec plc's operating fundamentals
Investec plc’s operating fundamentals
Slide 18: Profitability supported by diversified revenue streams
Profitability supported by diversified revenue streams Annuity income 1 (£'mn) Costs and cost to income ratio (£'mn) £'mn Annuity incom e 2011: Annuity incom e 2022: 900 100% 51% 74% 800 4% 15% 5% 80% 78% 81% 80% 700 76% 17% 71% 12% 600 60% 22% 500 29% 400 14% 40% 300 44% 200 20% 37% 100 - 0% Mar 20
Slide 19: Profitability supported by diversified revenue streams
Profitability supported by diversified revenue streams Business mix percentage contribution to adjusted Adjusted operating profit1 (£'mn) operating profit1 £350 £312 £300 £287 £250 £200 29% 35% 38% £150 Mar Mar Mar 64% 2022 2021 58% 2020 62% £100 7% 7% £50 £0 2018 2019 2020 2021 2022 Specialist Bank
Slide 20: Consistent asset growth, gearing ratios remain low
Consistent asset growth, gearing ratios remain low Total assets composition Gearing1 remains low £'bn times 30 27.9 12 10.4 4.6 25 10 5.6 6.9 20 5.1 8 8.9 5.1 6.9 15 6.0 6 7.0 5.4 5.8 10 4 14.4 11.9 12.3 5 9.7 10.5 2 0 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022 Net core loans Cash and near ca
Slide 21: Exposures in a select target market
Exposures in a select target market ▪ Credit and counterparty exposures are to a select target m arket: ▪ High net w orth clients ▪ Mid to large sized corporates ▪ Public sector bodies and institutions ▪ The majority of exposures reside w ithin the UK ▪ In December 2020, w e announced the w ind dow
Slide 22: Strong growth in loan book
Strong growth in loan book Continued growth in HNW & Other Private client lending and increased Net core loans up 17.0%, or 18.5% excluding Australia activity across corporate lending portfolios ▪ Strong growth in mortgages driven by continued client acquisition Net Core Loans £'mn FY2021 FY2022 ▪ H
Slide 23: Sound asset quality
Sound asset quality Credit loss ratio trend 0.8% 0.7% 0.6% 1.14% 0.5% ▪ Credit loss ratio reduced to 17bps from 0.4% 0.69% 56bps at Mar 2021, below the through-the- 0.3% 0.56% cycle range of 30 - 40 bps 0.2% 0.38% ▪ Total income statement ECL impairment 0.1% 0.17% charges amounted to £25.2mn 0.0% (M
Slide 24: 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) as % of 200 5.8% 5.1% 10.4% 7.1% gross 3.2% 3.3% 2.8% 2.1% core loans 1.5% 2.2% 1.9% 1.7% Of which 150 1400 Ongoing subject to 107 101
Slide 25: Diversified funding strategy
Diversified funding strategy ▪ Investec plc's funding consists primarily of customer deposits ▪ The bank adopts a conservative and prudent funding strategy ▪ Investec plc is not subject to the Banking Reform Act ring-fencing requirements which are applicable to all large UK deposit tak ers, as it fa
Slide 26: 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 78.9% Fully self funded: conservative loan to deposit ratio ▪ Customer deposits have grown by 57.2% (12.0% CAGR) since 2018 to £'bn £18.3bn at 31 March 2022 20 18.3 1
Slide 27: 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 4% have increased since FY2013 (£4.6bn) to £8.9bn at 31 March 2022 (representing
Slide 28: Sound capital ratios in excess of internal and regulatory minimums
Sound capital ratios in excess of internal and regulatory minimums Robust headroom of 4.1% above the MDA threshold based on the latest regulatory requirements Capital ratios : Investec plc Minimum CET 1 requirement % 5 31 Mar 20221 31 Mar 2021 Target Inv estec plc: 12% 11.0% 11.0% 10.7% low est min
Slide 29: 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 (%) 80% 9.0% 70% 8.0% 60% 7.0% 6.0% 50% 5.0% 40% 4.0% 30% 3.0% 20% 2.0% 10%
Slide 30: Strong internal capital generation
Strong internal capital generation Total capital (£'bn) Common equity tier 1 – rebased to 100 3.0 140 2.5 130 2.0 120 1.5 110 1.0 100 0.5 0.0 90 2017 2018 2019 2020 2021 2022 2017 2018 2019 2020 2021 2022 CET 1 Total capital Investec plc UK 'big 5' Total UK sector • Investec has strong organic capit
Slide 31: Further information and peer analysis
Further information and peer analysis May 2022
Slide 32: UK high net worth banking: journey to scale
Private Clients UK high net worth (HNW) banking: journey to scale We are proud to have beaten our targets for HNW banking to breakeven by March 2022 Journey to profitability Growth £’million FY20 FY21 FY22 Revenue 25.2 36.5 75.3 Loan book (£’bn) ECL impairments (0.6) (1.5) (2.4) Costs (43.5) (38.0)
Slide 33: Spotlight on our Private Equity franchise
Spotlight on our Private Equity franchise Low capital, low cost intensity model for growth Growth Spotlight on our Private Equity franchise £’million FY20 FY21 FY22 • We have a fully integrated proposition spanning advisory (M&A and IPO), capital solutions (leverage finance and fund level finance) a
Slide 34: Investec Bank plc: peer group comparisons
Investec Bank plc: peer group comparisons Funding: Loans and advances to customers as a % of customer deposits Credit loss ratio: ECL impairment charges as a % of average core loans and (smaller number is better) advances (smaller number is better) 0.8% 140% 127% 0.6% 120% 107% 111% 0.5% 0.4% 100% 7
Slide 35: Appendix
Appendix 35
Slide 36: IFRS 9 macro-economic scenario forecasts
IFRS 9 macro-economic scenario forecasts • For Investec plc, 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 thei
Slide 37: Investec plc: salient financial features
Investec plc: salient financial features Key financial statistics 31 March 2022 31 March 2021 % Change Total operating income before expected credit loss impairment charges (£'000) 1 087 969 946 400 15.0% Operating costs (£'000) 775 866 766 367 1.2% Adjusted operating profit (£'000) 286 944 109 698
Slide 38: Investec plc: income statement
Investec plc: income statement £'000 31 March 2022 31 March 2021 % Change Interest income 718 446 701 220 2.5% Interest expense (235 727) (301 506) (21.8%) Net interest incom e 482 719 399 714 20.8% Fee and commission income 510 228 501 794 1.7% Fee and commission expense (14 913) (13 271) 12.4% Inv
Slide 39: Investec plc: balance sheet
Investec plc: balance sheet £'000 31 March 2022 31 March 2021 Assets Cash and balances at central banks 5 379 994 3 043 034 Loans and advances to banks 1 467 770 1 385 471 Reverse repurchase agreements and cash collateral on securities borrowed 1 447 473 2 065 232 Sovereign debt securities 1 165 777
Slide 40: Investec plc: balance sheet (continued)
Investec plc: balance sheet (continued) £'000 31 March 2022 31 March 2021 Liabilities Deposits by banks 2 026 601 1 352 581 Derivative financial instruments 863 295 914 863 Other trading liabilities 42 944 49 055 Repurchase agreements and cash collateral on securities lent 154 828 157 357 Customer a
Slide 41: Investec plc: segmental analysis of operating profit
Investec plc: segmental analysis of operating profit Specialist Banking For the year ended 31 March 2022 Wealth & Private Group £'000 Investment Banking CIB & Other Investments Group Costs Total Group Net interest income 2 268 70 692 409 759 - 482 719 Fee and commission income 344 685 1 579 163 964
Slide 42: Investec plc: segmental analysis of operating profit (continued)
Investec plc: segmental analysis of operating profit (continued) Specialist Banking For the year ended 31 March 2021 Wealth & Private Group £'000 Investment Banking CIB & Other Investments Group Costs Total Group Net interest income 2 296 34 664 362 754 399 714 - - Fee and commission income 316 813
Slide 43: Investec plc: asset quality under IFRS 9
Investec plc: asset quality under IFRS 9 £‘million 31 March 2022 31 March 2021 Gross core loans 14 557 12 501 Gross core loans at FVPL 609 512 Gross core loans subject to ECL 1 13 948 11 989 Stage 1 12 665 10 415 Stage 2 992 1 242 of which past due greater than 30 days 28 90 Stage 3 291 332 of which
Slide 44: Investec plc: capital adequacy
Investec plc: capital adequacy £‘million 31 March 20221 31 March 2021 Shareholders’ equity 2 340 2 198 Non-controlling interests - - Regulatory adjustments to the accounting basis 71 98 Deductions (480) (500) Common equity tier 1 capital 1 931 1 796 Additional Tier 1 instruments 250 274 Tier 1 capit