Investec plc · LSE:INVP
Investec — FY2012 Earnings Presentation
40 slides from Investec's earnings presentation, May 2012
Slide 1: Results presentation for the year ended 31 March 2012
Results presentation For the year ended 31 I 03 I 2012
Slide 2: Long term strategy
Out of the Ordinary® © Investec Specialist Bank and Asset Manager ~ Long term strategy
Slide 3: Our long term strategy
Our long term strategy Since inception we have expanded through a combination of organic growth and strategic acquisitions The internationalisation of Investec is based on the following strategy:: Following our customer base Gaining domestic competence and critical mass in the chosen geograp
Slide 4: We remain steadfast with this strategy
We remain steadfast with this strategy UK Australia South Africa Extremely tough and competitive Struggled to gain a foothold initially We are not a high street bank and environment instead have carefully niched Have now built a foundation to activities in asset management management, Esta
Slide 5: The year in review
—_~ Out of the Ordinary® AN a ‘ Specialist Bank and Asset Manager ~ The year in review
Slide 6: Very difficult operating environment
Very difficult operating environment … Equity markets Interest rates 110 6 +4.2% 5 100 ‐2.1% 4 Rebased to 100 90 ‐10.3% 3 % 2 80 1 70 0 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 JSE FTSE ASX SAJIB3M BBGBP3M BBAUD3M BBUSD3M E change rates Exchan
Slide 7: Masking significant realignment that has taken place
… masking significant realignment that has taken place Financial performance for the year 2012 has echoed the difficulties of the broader environment We have realigned our business model We have maintained revenues despite difficult markets with the quality of earnings improving substantially
Slide 8: Integration a core focus across the group
Integration a core focus across the group Wealth & Investment in the UK Integration of Rensburg Sheppards business was completed during the year We have made substantial pprogress g in integrating g g Williams de Broë businesses Investment Banking in the UK The integration of Evolution Securit
Slide 9: We have realigned our business model
We have realigned our business model ... …by building capital light revenues Sustainable business model Capital light £’mn Capital intensive £949mn 1,500 £983mn 49% of total 1,200 51% of total Net fees and commissions 900 Net interest income of of £884mn £699mn (46% of total) 600 (36% of total) 300
Slide 10: Into three distinct business areas
… into three distinct business areas Asset management and wealth management now account for 48.1% of group % contribution of operating profit* to total group 100% % 90% 80% 51.9% 70% 61 4% 61.4% 74.7% 60% Specialist Banking 50% 40% 48.1% 30% 38.6% 20% 25.3% Wealth & Investment 10% Asset Management 0
Slide 11: Impairments down in two key geographies
Impairments down in two key geographies SA and UK & Europe impairments much improved Australian credit loss ratio substantially up as a result of additional impairments required in light of the weak residential property market South Africa UK & Europe (ex Kensington) Australia R'bn R bn £'bn £ b
Slide 12: Costs relative to revenue deteriorated slightly
Costs relative to revenue deteriorated slightly … but cost to income ratios still within our target range Jaws ratio Headcount* relatively stable excluding acquisitions Including £'mn Excluding Cost to income: 64.7% from 61.7% Evolution Group Evolution 2,200 , 8000 G Group 2,000 7000 CAGR since 2003
Slide 13: Resulting in a weak group performance
Resulting in a weak group performance % Mar-12 Mar-11 Change Operating profit* before tax (£’000) 358 625 434 406 (17.4%) Operating profit* before tax and impairment losses on 683 743 752 636 (9.2%) loans and advances (£’000) (£ 000) Attributable earnings* (£’000) 257 579 327 897 (21.4%) Adjusted j
Slide 14: Financial targets adjusted for changing landscape
Financial targets adjusted for changing landscape ROE and capital adequacy targets revised given changing financial, regulatory and economic landscape Capital ratios remain strong Target (Previous target) Mar‐12 Mar‐11 12%-16% over a rolling 5-yr period ROE 7.8% 11.2% (>20% over the medium to lo
Slide 15: Divisional highlights
/—™\ C4 ~ Out of the Ordinary® @ Investec Specialist Bank and Asset Manager Divisional highlights 15
Slide 16: Specialist Banking held back by elevated impairments
Specialist Banking held back by elevated impairments and weaker performance from investment portfolios Operating profit* by business for 31 March A Asset tMManagementt W lth & Investment Wealth I t t S Specialist i li t Banking B ki 40 610 134 39 585 127 563 519 511 27 405 26 83 24 77 323 306 66 267
Slide 17: Asset Management
Asset Management Overview of performance Financial summary Competitive investment performance % (£) Mar-12 Mar-11 change g Assets under management in excess of £61.5bn against only £28.8bn five years ago Operating profit* (mn) 133.7 127.3 5% Continued strong net inflows of £5.2bn Cost to incom
Slide 18: Wealth & Investment
Wealth & Investment Overview of performance Financial summary SA business benefited from higher average % funds under management (£) Mar-12 Mar 12 Mar-11 Mar 11 change UK positively impacted by full contribution Operating profit* (mn) 38.7 40.4 (4.2%) from the acquisition of Rensburg Sheppards p
Slide 19: Specialist Banking
Specialist Banking (Comprising Investment Banking, Private Banking, Capital Markets and Property) Overview of performance Financial summary Performance down largely as a result of % Debt buy buy-backs backs not repeated in current year (£) Mar-12 12 Mar-11 11 change Weaker performance from the
Slide 20: Strategy and positioning
/—™\ G4 \ Out of the Ordinary® & Investec Specialist Bank and Asset Manager Strategy and positioning 20
Slide 21: Specialist bank and asset manager
Specialist bank and asset manager Three distinct business activities focused on well defined target clients Corporate / Institutional / Government Private Client (High Net Worth / High Income) Asset Specialist Banking* Wealth & Management Investment Provides investment Provides a broad range of serv
Slide 22: Asset Management
Asset Management Strategy Value proposition Long term sustainability Organically built an independent global platform from an The emphasis is on quality and depth across the emerging market base business Competitive investment performance in chosen Maintain cost discipline specialties In
Slide 23: Wealth & Investment
Wealth & Investment Creating gag global p platform with strong g regional g capability p y Strategy Value proposition Focus on internationalising the business Business has been built via consolidation of smaller businesses over a long period of time Deliver the successful integration g of Will
Slide 24: Specialist Banking
Specialist Banking Corporate / Institutional / Government Private Client (High Net Worth / High Income) Asset Corporate Advisory Corporate Corporateandand Management Private Banking andd Investment I t t IInstitutional Institutional I tit tit titi ll Banking B Banking B ki ki • Advisory • Treasury a
Slide 25: Specialist Banking: Corporate Advisory and Investment
Specialist Banking: Corporate Advisory and Investment Strategy Value proposition Building strong domestic businesses with Strong brand and positioning international access Provide a credible offering g to clients operating p g Develop key global sector specialisations, Eg between the develop
Slide 26: Specialist Banking: Corporate and Institutional Banking
Specialist Banking: Corporate and Institutional Banking Strategy Value proposition Go deeper into core markets Strong international platform based on traditional Focus on growing capital light business bank customer flow C ti Continuedd ffocus on llengthening th i d it b deposit base Succe
Slide 27: Specialist Banking: Private Clients
Specialist Banking: Private Clients Strategy Value proposition Key focus is on: HIGH TOUCH service to facilitate the creation of Back to Basics wealth and management of wealth for our clients Growing the client base Ensuring the product offering is delivered to our global Provide transac
Slide 28: Australia
Australia Strategy Value proposition Private Banking refocused on building Professional Three distinct business areas to support local and Finance and High Income channel diversifying away global clients under single bank platform f from property t lending l di Corporate and Institutional Bank
Slide 29: Conclusion
—~™ cA S & Investec Specialist Bank and Asset Manager Conclusion 29
Slide 30: Our brand is well developed
Our brand is well developed … 30
Slide 31: We have invested in people and a sustainable future
… and we have invested in people and a sustainable future €50mn to Renewable Energy Funding Facility Entrepreneurship ProMaths awards Skills@work Investing for a sustainable future g programme, JASA South Africa Award in SA “Promaths made me! I learnt beyond the spheres of mathematics and science. T
Slide 32: Since UK listing: building recurring income
Since UK listing: building recurring income Average recurring income since 2003 of 63% £’mn 2500 80% 70% 2000 33.3% to £109 60% 31 6% to £174 31.6% 50% 1500 40% 12.3% to £884 1000 30% 20% 500 2.6% to £699 10% 0 0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Net interest income Annuity fees and
Slide 33: Since UK listing: strong growth in core earnings drivers
Since UK listing: strong growth in core earnings drivers Third party assets under management Core loans and advances and deposits CAGR since 2003 of 17% CAGR since 2003 - customer deposits 17% CAGR since 2003 - loans 19% £'bn £'bn 120 30 120% 100 25 100% 80 20 80% 60 15 60% 40 10 40% 20 5 20% - - 0%
Slide 34: Since UK listing: solid growth (excl. dividends)
Since UK listing: solid growth (excl. dividends) CAGR of NTAV: 23% CAGR of NATV per share: 17% pence £'mn 700 3,000 600 2,500 500 2,000 400 1,500 300 1 000 1,000 200 500 100 0 - 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Net tangible asset value (excluding goodwill) (£'mn) (RHS) Net tangible
Slide 35: Since UK listing: returns (incl. dividends)
Since UK listing: returns (incl. dividends) Investing g at 31 March 2003 IRR at the respective year end date on share price and dividends 86.3% 75.5% 67.1% 59.2% 31.9% 31.4% 26.8% 25.3% 22.5% Mar 2004 Mar 2005 Mar 2006 Mar 2007 Mar 2008 Mar 2009 Mar 2010 Mar 2011 Mar 2012 IRR at the respective year
Slide 36: Since UK listing: Strong capital growth
Since UK listing: Strong capital growth CAGR since 2003: 21% £'mn £ mn 6,000 5,000 4,000 3,000 2,000 1,000 - 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Total shareholders’ equity (including preference shares and non-controlling interests) Total capital resources (including subordinated liabil
Slide 37: In summary
In summary … The current strategic focus is to … Build low capital intensive revenue Tightly manage costs while still investing for the future Maintain appropriate levels of capital and liquidity Continue the path of implementing the single bank strategy to create additional operational effi
Slide 38: Outlook and closing
Out of the Ordinary® & Investec Specialist Bank and Asset Manager Outlook and closing 38
Slide 39: Outlook
Outlook In the face of challenging global market conditions, we continued to pursue our strategy of realigning the business model towards less capital intensive activities and concentrating on reducing legacy issues issues. Our competitive position is strong with all platforms in place and our c
Slide 40: Closing
Closing “ Over many years we have developed a unique culture which encourages our people to be transparent through open and honest dialogue. This results in the organisation receiving significant feedback feedback, which is often very robust. The last few years have taught us many new lessons and re