Investec plc · LSE:INVP
Investec — Investec Bank — Debt Investor Presentation (November 2023)
46 slides from Investec's debt investor presentation, November 2023
Slide 1: Investec Bank plc Investor generic presentation
Investec Bank plc Investor generic presentation November 2023 The information in this presentation relates to the six months ended 30 September 2023, unless otherwise indicated.
Slide 2: Contents
Contents 01 Investec Group 02 03 04 05 Overview Investec Bank plc Further Appendix at a glance of Investec operating information and Bank plc fundamentals peer analysis 22
Slide 3: Overview of Investec Group
a 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 Investec plc Investec Ltd separate legal entities and listings, but are bound together by contractual agreements Sharing 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 • Today, an efficient integrated 1992 international business platform employing approximately 7 400+ Assets people £29.5bn • Listed on the JSE and LSE (a FT
Slide 6: One Investec
One Investec Our purpose is to create enduring worth. Our values* 45+ years of Deep client relationships, built on trust and Out of the Ordinary service, are the bedrock of our business heritage. We uphold cast-iron integrity in all our dealings, consistently displaying moral strength We seek creati
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 - returning excess capital to shareholders 3 Diversified mix of earnings by geography and business, with significant annuity income underpin from leading
Slide 8: Fuelling a robust growth agenda
Fuelling a robust growth agenda Growth Objectives Continued execution with Accelerate and scale new Further develop connected discipline to drive growth initiatives client eco-systems across optimisation of returns business units & geographies Underpinned by Deepening our entrepreneurial culture (Ou
Slide 9: Group sustainability highlights
Group sustainability highlights Operate responsibly, finance and invest for a sustainable future, and maintain our competitive ESG position PROGRESS MADE ON OUR IMPACT SDGs SUSTAINABLE FINANCE Net-zero commitments • Continued inflows into Investec Global Sustainable Equity Fund of $50mn (since launc
Slide 10: Overview of Investec Bank plc
Overview of Investec Bank plc 10
Slide 11: Investec Bank plc
Investec Bank plc A Specialist Bank with access to a diversified wealth management offering to deliver an extensive range of products and services. Total assets Net core loans Customer deposits Funds under management Employees £29.3bn £16.3bn £20.0bn Rathbones Group Plc FUMA: £100.7bn 2 200+ Key hig
Slide 12: Strategic positioning
Strategic positioning Building scale & relevance with the client at the centre – creating enduring worth DELIVERING A UNIQUE BREADTH OF CAPABILITIES IN THE UK MID-MARKET “Hi-tech & Hi-touch” Private Private Private Client Companies Equity Enhanced by the strategic partnership with Rathbones Group Li
Slide 13: Wealth & Investment UK: Combination with Rathbones
Wealth & Investment UK Combination with Rathbones 2 1 3 4 Created the UK’s leading The strategic partnership will Focused on continuing Fully committed to the discretionary wealth manager enhance the client proposition connectivity through the attractive wealth management delivering the scale that w
Slide 14: Specialist Banking
Specialist Banking Winning in under-serviced parts of the market through dynamic, full service offering Private equity and sponsor- Private clients Private companies Publically listed companies Specialist sectors backed companies For high net worth clients that For UK mid-market founder and For UK m
Slide 15: Investec plc ranks 7th for UK banks by revenue
Investec plc ranks 7th for UK banks by revenue • Investec plc is a substantial business generating revenues of £611mn (on a pro-forma basis^) during the 6 months to September 2023 (£1.2bn annualised). • The chart below shows the relative revenue generation compared to the rest of the UK banking mark
Slide 16: Investec Bank plc operating fundamentals
Investec Bank plc operating fundamentals 16
Slide 17: Profitability supported by diversified revenue streams
Profitability supported by diversified revenue streams Revenue mix (£'mn)^ 611 600 373 365 400 Other operating income Trading income 200 Investment and associate income Wealth & Investment UK equity accounted income Net fee and commisssion income 0 Net interest income Sept 19 Sept 21 Sept 23 • Solid
Slide 18: Cost to income ratio decreasing overtime
Cost to income ratio decreasing overtime Costs and cost to income ratio^ (£'mn) 400 67.6% 65.5% 311 300 252 239 200 50.9% 100 Operating costs (LHS) Cost to income ratio (RHS) 0 Sept 19 Sept 21 Sept 23 • Focused on managing costs while building for the future – Continue to leverage technology and exi
Slide 19: Profitability supported by diversified revenue streams
Profitability supported by diversified revenue streams Adjusted operating profit1^ (£'mn) Business mix percentage contribution to adjusted £'mn operating profit1^ 300 14% 19% 19% 200 Sept 2023 Sept 2022 Mar 2023 100 81% 0 86% 81% Sept 19 Sept 20 Sept 21 Sept 22 Sept 23 Specialist Banking Wealth & In
Slide 20: Consistent asset growth, gearing ratios remain low
Consistent asset growth, gearing ratios remain low Total assets composition Gearing1 remains low £'bn 35 12 10.8 10.3 10.1 30 10 10 4.3 8.8 4.3 4.1 25 8 6.8 5.2 20 8.7 8.6 8.9 5.7 6 5.6 5.1 5.2 15 6.9 4.9 6.0 4 10 15.6 16.3 14.4 11.8 12.3 2 5 0 0 2020 2021 2022 2023 Sept 23 2020 2021 2022 2023 Sept
Slide 21: Exposures in a select target market
Exposures in a select target market • Credit and counterparty exposures are to a select target market: – High net worth clients – Mid to large sized corporates – Public sector bodies and institutions • The majority of exposures reside within the UK • Our portfolios have performed well to date with l
Slide 22: Strong growth in UK loan book
Strong growth in UK loan book Mar-23 Sept-23 £'mn HNW & Other private client lending Property Corporate & Other Lending 5 000 4 726 4 500 4 000 Continued client acquisition and strong demand for 3 500 corporate lending across multiple asset classes 3 000 2 623 UK net core loans 2 462 up 2 500 2 335
Slide 23: Unpacking the credit loss ratio
Unpacking the credit loss ratio Credit loss ratio (core loans) bps 120 111 100 Annualised CLR increased to 80 60 60 52 55 55bps 41 41 (1H2023: 32bps), above the through-the-cycle 40 34 32 range (TTC) range of 30-40bps 28 24 20 9 0 1H2019 2H2019 1H2020 2H2020 1H2021 2H2021 1H2022 2H2022 1H2023 2H2023
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) 200 1500 107 101 104 100 67 75 1000 Stage 1 31 35 32 34 42 2020 Stage 2 37 32 39 42 1321 1317 27 1242 0 2021 Stage 3 500 992 2020 2021
Slide 25: Diversified funding strategy
Diversified funding strategy • Investec Bank plc's funding consists primarily of customer deposits • The bank adopts a conservative and prudent funding strategy • Investec Bank plc is not subject to the Banking Reform Act ring-fencing requirements which are applicable to all large UK deposit takers,
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 Fully self funded: conservative loan to deposit ratio remains conservative at 81.4% • Customer deposits have grown by 46% (9% £'bn 19.3 20.0 CAGR) since 2019 to £20.0bn at 30 September 20 10
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 have increased since Mar 13 (£4.5bn) to £8.7bn at 30 September 2023 7.9% (repres
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 3.8% above the MDA threshold (Investec plc) Capital ratios: Investec Bank plc Minimum CET 1 requirement % ^ 30 September 15% Investec plc: lowest min 31 Mar 2023* Target 2023* 13.2% CET 1 requirement 12.0% 11.8% 11
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 (%) Total capital (£'bn) 4.0 75.0% 10% 3.0 8% 50.0% 2.0 6% 25.0% 4% 1.0 —% 2% 0
Slide 30: Further information and peer analysis
Further information and peer analysis 30
Slide 31: UK high net worth banking: journey to scale
Private Clients UK high net worth (HNW) banking: journey to scale Journey to profitability Growth 6 £’mn Sept 23 Sept 22 Mar 23 0.3 0.3 5 4.9 4.9 Revenue 73.90 58.2 135.5 4 Loan book (£’bn) 3 ECL impairments (4.7) (2.4) (6.3) 2 Costs (28.8) (26.5) (59.0) 1 0 Profit 40.4 29.4 70.2 2019 2020 2021 2022
Slide 32: Investec Bank plc: peer group comparisons
Investec Bank plc: peer group comparisons Funding: Loans and advances to customers as a % Credit loss ratio: ECL impairment charges as a % of average core loans of customer deposits (smaller number is better) and advances (smaller number is better) 200% 3 2.2 119% 112% 108% 95.9% 2 100% 89% 81% 72%
Slide 33: Appendix
Appendix 05 33
Slide 34: IFRS 9 macro-economic scenario forecasts
IFRS 9 macro-economic scenario forecasts For Investec Bank 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 UK and Other macro-economic sc
Slide 35: IBP: salient financial features
IBP: salient financial features Key financial statistics 30 Sept 2023 30 Sept 2022 % Change Total operating income before expected credit loss impairment charges (£’000) 574 942 448 861 28.1% Operating costs (£’000) 310 656 286 460 8.4% Adjusted operating profit (£’000) 225 215 134 511 67.4% Earning
Slide 36: IBP: Statutory Income Statement
IBP: Statutory Income Statement Six months to Six months to £'000 30 Sept 2023 30 Sept 2022^ % Change Interest income 1 111 312 522 021 >100% Interest expense (695 943) (193 067) >100% Net interest income 415 369 328 954 26.3 % Fee and commission income 82 509 72 892 13.2 % Fee and commission expens
Slide 37: IBP: Pro-forma Income Statement
IBP: Pro-forma Income Statement Given the nature of the IW&I UK all-share combination with Rathbones, the Group essentially retains similar economic interest to this investment before and after the transaction. In order to provide information that will be more comparable to the future presentation o
Slide 38: IBP: Balance Sheet
IBP: Balance Sheet £'000 30 September 2023 31 March 2023 Assets Cash and balances at central banks 4 750 689 5 400 401 Loans and advances to banks 1 004 395 892 791 Reverse repurchase agreements and cash collateral on securities borrowed 1 122 420 1 338 699 Sovereign debt securities 1 958 303 1 221
Slide 39: IBP: Balance Sheet (continued)
IBP: Balance Sheet (continued) £'000 30 September 2023 31 March 2023 Liabilities Deposits by banks 2 388 974 2 172 170 Derivative financial instruments 740 017 704 816 Other trading liabilities 21 038 28 184 Repurchase agreements and cash collateral on securities lent 99 736 139 529 Customer account
Slide 40: IBP: Statutory segmental analysis of operating profit
IBP: Statutory segmental analysis of operating profit Specialist Banking For the six months to 30 September 2023 Wealth & Private Corporate, Investment Total £'000 Investment Banking Banking & Other Group Net interest income 4 122 71 182 340 065 415 369 Fee and commission income 4 486 364 77 659 82
Slide 41: IBP: Statutory segmental analysis of operating profit
IBP: Statutory segmental analysis of operating profit Specialist Banking For the six months ended 30 September 2022^ Wealth & Private Corporate, Investment Total £'000 Investment Banking Banking & Other Group Net interest income 1 685 54 618 272 651 328 954 Fee and commission income 3 761 1 310 67 8
Slide 42: IBP: asset quality under IFRS 9
IBP: asset quality under IFRS 9 £‘mn 30 September 2023 31 March 2023 Gross core loans 16 451 15 709 Gross core loans at FVPL 622 551 Gross core loans subject to ECL1 15 829 15 158 Stage 1 14 067 13 494 Stage 2 1 317 1 321 of which past due greater than 30 days 74 35 Stage 3 445 343 ECL (180) (146) S
Slide 43: IBP: capital adequacy
IBP: capital adequacy £‘mn 30 September 2023 31 Mar 2023 Tier 1 capital Shareholders’ equity 3 007 2 486 Non-controlling interests – – Regulatory adjustments to the accounting basis (3) 15 Deductions (733) (306) Common equity tier 1 capital 2 271 2 195 Additional Tier 1 instruments 250 250 Tier 1 ca
Slide 44: Group sustainability highlights
Group sustainability highlights Other highlights Consistently strong ESG ratings and rankings • Investec Group included as one of the top 100 most sustainable companies in the world (Corporate Knights) • Investec Bank Limited and Proparco have partnered to implement the Transforming Financial System
Slide 45: UK sustainability highlights
UK 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 Became a proud Thermal coal as a % 1mn meals Commitment to have zero coal exposures in ou
Slide 46: Focused on doing well and doing good - UK
Focused on doing well and doing good - UK Other highlights Specialist banking Wealth & Investment • Implemented an ESG linked loan for a portfolio client linked to 3 ESG KPIs, • Remain signatories to the Financial Reporting Council's (FRC) revised leading to a 5bps reduction in funding costs for eac
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