Investec Plc · LSE:INVP
Investec — Investec Bank — Investor Presentation (June 2024)
43 slides from Investec's investor presentation, June 2024
Slide 1: Investec Bank Limited Investor generic presentation June 2024
Investec Bank Limited Investor generic presentation June 2024 The information in this presentation relates to the year end period dated 31 March 2024, unless otherwise indicated.
Slide 2: Contents
Contents 01 Investec 02 03 04 05 Investec Bank IBL IBL peer IBL Group at a Limited (IBL) operating analysis Appendices glance overview fundamentals 22
Slide 3: Investec Group at a glance
Investec Group at a glance 3
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: Our international footprint
Our international footprint Wealth & Investment Activities Since inception, we have Private Client Banking Activities expanded through a combination of substantial organic growth and Corporate and Investment Banking Activities a series of strategic acquisitions. Corporate Advisory and Investment Act
Slide 6: One Investec
One Investec Our purpose is to create enduring worth. Our values 50 years of Deep client partnerships, 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 Two core We seek
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 – including ongoing strategies to optimise the capital base 3 Diversified mix of earnings by geography and business, with significant annuity income unde
Slide 8: Fuelling a robust growth agenda
Fuelling a robust growth agenda Growth Objectives Continued execution with Accelerate and scale Further develop connected discipline to drive growth initiatives client eco-systems across optimisation of returns business units & geographies Underpinned by Deepening our entrepreneurial culture (Out of
Slide 9: SA sustainability highlights
SA 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 Commitment to Completed a pro- 4th in the 2022 Thermal coal as a Fossil fuels (as a 75% e
Slide 10: Focused on doing well and doing good – SA
Focused on doing well and doing good – SA Other highlights Specialist banking Wealth & Investment • We have introduced a comprehensive Sustainable and Transition Finance • The Investec Global Sustainable Equity fund has continued to grow. The fund Classification Framework to serve as a guiding princ
Slide 11: Investec Bank Limited (IBL) overview
Investec Bank Limited (IBL) overview 11
Slide 12: Overview of Investec Bank Limited
Overview of Investec Bank Limited IBL is a specialist bank with a strong franchise in niche market segments operating primarily in Southern Africa. Total assets Net core loans Total equity Customer deposits Employees R611.7bn R341.6bn R49.4bn R448.6bn 4 000+ Key highlights Well established franchise
Slide 13: Specialist Banking
Specialist Banking We have a specialised niche offering to a select target market • Invested in our • Strong technology • Deepening our • Our growth initiatives • Maintaining cost • Maintaining sound business, and digital platforms existing client and strong franchise efficiency with capital ratios
Slide 14: Specialist Banking
Specialist Banking High-quality specialist banking solutions with leading positions in selected areas Corporate and Investment Banking and Private Banking Investec for Business Institutional banking Principal Investments For high net worth clients, For corporates (mid to large professionals and emer
Slide 15: Specialist Banking: Private Banking
Specialist Banking: Private Banking A full-service Private Banking offering integrated into One Place™ Ambition • To be a leading domestic and international Private Bank • High net worth individuals, high-income professionals, sophisticated investors, emerging and established entrepreneurs, and Clea
Slide 16: Specialist Banking: Corporate and Institutional Banking
Specialist Banking: Corporate and Institutional Banking Strong franchise value and leading market position in our niche markets Ambition • To be a top tier corporate and institutional bank • Mid to large size corporates (listed and unlisted), financial advisers and intermediaries, government and pub
Slide 17: Specialist Banking: Investec for Business
Specialist Banking: Investec for Business Bespoke lending offerings for working capital optimisation and business growth Ambition • Develop an integrated niche offering to our target clients Clear target market • Smaller and mid-tier corporates • Combining bespoke lending with Investec’s other trans
Slide 18: Specialist Banking: Investment Banking and Principal Investments
Specialist Banking: Investment Banking and Principal Investments Delivering holistic investment solutions to clients Investment banking Principal investment activities • Using our collective skill set to optimise capital allocation in principal Ambition • To be the leading investment bank with an in
Slide 19: IBL operating fundamentals
IBL operating fundamentals 19
Slide 20: Revenue supported by resilient franchises
Revenue supported by resilient franchises R’mn Revenue mix Revenue versus expenses R’bn R’bn 100% 100% 18 18 16 16 14 14 75% 75% 12 12 10 10 50% 8 8 6 50% 6 25% 4 4 2 2 0 25% 0 0% 2020 2021 2022 2023 2024 2020 2021 2022 2023 2024 Net interest income Annuity fees and commissions Operating income Trad
Slide 21: Operating Profit
Operating Profit • IBL reported an increase in profit before goodwill and acquired intangibles of 12.6%. Our client engagement has been proactive, resulting in good client acquisition across both private and corporate clients in the period under review. Profits increased primarily due to: – Higher n
Slide 22: Sound capital base
Sound capital base Total capital resources (R'bn) Total risk-weighted assets: lower RWA intensity (R'bn) 80 700 80% 600 60 60% 500 400 40 40% 300 200 20 20% 100 0 0 —% 2020 2021 2022 2023 2024 2020 2021 2022 2023 2024 Shareholders equity Perpetual preference shares Subordinated liabilities Total ass
Slide 23: Strong capital ratios
Strong capital ratios Capital development Basel capital ratios# AIRB Scope * 24% 20.5% 31 March 2024 31 March 2023 20% 16.5% Common equity Tier 1 ^ 16.5% 17.1% 16% 12% Tier 1 ratio 17.8% 18.2% 8% 7.1% Total capital ratio 20.5% 21.2% 4% Leverage ratio 7.1% 7.2% —% * Investec Limited adopts the Intern
Slide 24: Consistent asset growth, gearing ratios remain low
Consistent asset growth, gearing ratios remain low Total assets composition Gearing remains low1 R’bn 14 800 12 11.7 597 614 10 600 103 112 8 7.4 400 171 161 6 4 200 342 2 323 0 2019 2020 2021 2022 2023 2024 0 Net core loans Cash and Near Cash Balances Other Assets Total Gearing Ratio Core Loans to
Slide 25: Substantial surplus liquidity
Substantial surplus liquidity • We maintain a high level of readily available, high quality liquid assets, targeting a minimum cash to customer deposit ratio of 25%. Cash and near cash balances Cash and near cash balances have increased significantly since 31 March 2014 (9% CAGR) to R160.7bn at 31 M
Slide 26: Healthy loan to deposit ratio, stable customer deposit base
Healthy loan to deposit ratio, stable customer deposit base Fully self funded from customer deposits: healthy loan to deposit ratio R’mn 500 100% 400 80% • Customer deposits have grown by 119.0% (c.8.2% CAGR p.a.) since 2014 to R448.6bn at 31 March 2024 300 60% • Loans and advances as a percentage o
Slide 27: Diversified funding strategy
Diversified funding strategy • Investec’s funding consists primarily of customer deposits • Investec adopts a conservative and prudent funding strategy Conservative and prudent funding strategy 1 Maintaining a high base of high-quality liquid assets 5 Low reliance on wholesale funding 2 Diversifying
Slide 28: 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 and high-income clients – mid to large sized corporates – government, public sector bodies and institutions • We typically originate loans with the intent of holding these assets t
Slide 29: Asset quality
Asset quality Core loans and asset quality 400 4% 300 3% 200 2% 100 1% 0 0% 2020 2021 2022 2023 2024 Net core loans (LHS) Credit loss ratio (RHS) Stage 3 as a % of gross core loans subject to ECL (RHS) • Credit quality metrics on core loans and advances for the year ending 31 March 2024 are as follo
Slide 30: Asset quality metrics
Asset quality metrics Provision build Gross core loans subject to ECL by stage R’mn R’mn 4 000 as % of 5.3% 5.2% 5.9% 5.0% 2.4% gross core 1.5% 2.5% 1.8% 2.7% 3.6% 20 000 loans 3 000 17 589 1 880 1 893 16 328 2 000 1 328 1 206 15 111 14 969 1 879 423 15 000 416 620 1 000 623 250 12 203 1 057 984 868
Slide 31: Credit ratings
Credit ratings Current credit ratings Historical credit ratings Moody’s Rating Outlook Long-Term Foreign Currency Current Nov 20* May 20* Apr 20* National scale long-term deposit rating Aa1.za Stable Deposit Rating National scale short-term deposit rating P-1.za Moody’s Ba2 Ba2 Ba1 Ba1 Global long-t
Slide 32: Peer analysis
Peer analysis 32
Slide 33: Peer group companies
Peer group companies Long-Term Deposit Rating S&P Fitch Moody's Global Credit Ratings Foreign National Foreign National Viability National Baseline credit Global International National currency* scale currency* scale ratings scale assessment Absa Bank Limited n/a za.AA BB- AA+(zaf) bb- Ba2 Aa1.za ba
Slide 34: Peer group companies (cont.)
Peer group companies* (cont.) Investec is one of the more proportionately liquid of the Big 5 banks and is a net provider of funds to the interbank market in South Africa Liquidity: regulatory liquidity coverage ratio Asset quality ratios 6.67% 7.00% 180.0 6.00% 159.4 6.00% 5.45% 160.0 127.4 135.0 5
Slide 35: Peer group companies (cont.)
Peer group companies (cont.) Definitions and/or explanations of certain ratios: • A capital ratio is a measure of a bank's available capital expressed as a percentage of a bank's risk-weighted assets. It is based on regulatory qualifying capital (including common equity tier 1, additional tier 1 and
Slide 36: IBL Appendices
IBL Appendices 36
Slide 37: Macroeconomic scenarios – 31 March 2024
Macroeconomic scenarios – 31 March 2024 Key judgements at 31 March 2024 R'bn South Africa GDP forecast The measurement of ECL requires the use of multiple economic scenarios to calculate a 6 000 probability weighted forward-looking estimate. These scenarios are updated at least twice a year, or more
Slide 38: IBL: salient financial features
IBL: salient financial features Key financial statistics 31 March 2024 31 March 2023^ % change Total operating income before expected credit loss impairment charges (R’million) 18 347 16 908 8.5% Operating costs (R’million) 8 783 7 980 10.1% Operating profit before goodwill and acquired intangibles
Slide 39: IBL: income statement
IBL: income statement R’million 31 March 2024 31 March 2023^ % change Interest income 53 546 38 738 38.2% Interest expense (39 475) (26 524) 48.8% Net interest income 14 071 12 214 15.2% Fee and commission income 4 593 4 106 11.8% Fee and commission expense (984) (874) 12.5% Investment income 700 27
Slide 40: IBL: balance sheet
IBL: balance sheet R’million 31 March 2024 31 March 2023^ Assets Cash and balances at central banks 14 795 22 761 Loans and advances to banks 7 751 10 502 Non-sovereign and non-bank cash placements 10 818 9 705 Reverse repurchase agreements and cash collateral on securities borrowed 77 352 57 916 So
Slide 41: IBL: balance sheet (cont.)
IBL: balance sheet (cont.) R’million 31 March 2024 31 March 2023^ Liabilities Deposits by banks 31 065 26 420 Derivative financial instruments 14 172 18 531 Other trading liabilities 20 410 15 379 Repurchase agreements and cash collateral on securities lent 19 706 17 933 Customer accounts (deposits)
Slide 42: IBL: asset quality
IBL: asset quality R’million 31 March 2024 31 March 2023* Gross core loans 344 339 325 856 of which FVPL (excluding fixed rate loans) 1 137 1 296 Gross core loans subject to ECL* 343 202 324 560 Stage 1 322 779 299 615 Stage 2 8 220 16 328 of which past due greater than 30 days 671 747 Stage 3 12 20
Slide 43: IBL: analysis of core loans by risk category
IBL: analysis of core loans by risk category Gross core loans at Gross core loans at amortised cost and FVPL (subject to ECL) FVPL (not subject to Gross core loans ECL) Stage 1 Stage 2 Stage 3 Total Gross Gross Gross Gross ECL ECL ECL ECL At March 31, 2024 Exposure Exposure Exposure Exposure Lending