An overview of Investec About Investec Summary We strive to be a - PowerPoint PPT Presentation

An overview of Investec

About Investec Summary “We strive to be a DISTINCTIVE SPECIALIST BANK AND ASSET Mission Established in 1974  MANAGER driven by commitment to our core philosophies and values” Today, efficient integrated  international business platform employing over 9 700 people Three principal regions:  To facilitate the CREATION of wealth and the MANAGEMENT of wealth Purpose  Southern Africa  UK and Europe  Asia-Pacific Government, Institutions, Corporates, Charities and Trusts, Private Three core areas of activity  Target Market Clients both High Net Worth and High Income Listed on the JSE and LSE (a FTSE  250 company) Total assets £53.5bn  To build DIVERSIFIED REVENUE STREAMS by providing appropriate asset management , wealth management , specialist banking and advisory Total equity £4.8bn  Strategy services to our target client base in our core domestic markets and across Total FUM £150.7bn  geographies Market Cap £5.3bn  Note: Data as at end of March 2017 unless otherwise indicated 3

Three distinct businesses focused on well defined target clients Operating profit before tax* Corporate / Institutional / Government ASSET MANAGEMENT 100% (Operating completely independently) • Investment management services to 90% external clients 80% 70% SPECIALIST BANKING • Advisory 60% • Transactional banking Specialist • Lending 50% Banking • Treasury and trading (High Net Worth / High Income / 40% • Investment activities Wealth & Investment 30% charities / trusts) Private Client WEALTH & INVESTMENT Asset 20% Management • Investment management services 10% • Independent financial planning advice 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 At 31 March *Before goodwill, acquired intangibles, non-operating items, group costs and after other non-controlling interests. 4

Key earnings drivers £’ bn 175 150 Asset Management 125 Third party 100 assets under Wealth & Investment 75 management^ 50 Other 25 - Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 £’bn 30 120% Customer accounts 25 100% Customer 20 80% accounts Core loans and advances to (deposits) and 15 60% customers loans^ 10 40% 5 20% Loans and advances to customer deposits 0 0% Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 5

Stable capital and low leverage For the six months to 30 September 2017 for both Investec plc and Investec Limited:  Capital ratios are expected to be within the group’s target total capital adequacy range  The common equity tier 1 ratio is expected to remain slightly below the group’s target of 10% for Investec Limited; Investec plc is expected to be ahead of this target  Leverage ratios are sound and remain comfortably ahead of the group’s target of 6% on an estimated Basel 3 fully loaded basis Capital Gearing ratios 30 June 31 Mar 30 Sep 31 Mar times 2017 2017 2016 2016 16 13.8 13.0 14 12.5 Investec plc 11.6 11.3 11.3 12 10.3 Total 14.8% 15.1% 15.0% 15.1% 10.2 9.5 9.4 10 Tier 1 11.5% 11.5% 11.1% 10.7% 8 6.2 5.8 5.4 6 4.7 4.7 4.7 4.7 4.5 4.3 4.3 Investec Ltd 4 Total 14.4% 14.1% 14.4% 14.0% 2 Tier 1 10.7% 10.7% 10.8% 10.7% 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Gearing ratio (assets excluding assurance assets to total equity) Core loans to equity ratio 6

Resulting in a balanced business model Balanced between capital light and capital intensive activities £’mn Net interest, investment Third party assets and 1 400 advisory and trading income 1 200 £ 1,002 mn £ 1,284 mn 1 000 800 600 Net annuity fees and 400 Net interest income of £ 681 mn commissions of £ 965 mn 200 (30% of total) (42% of total) - Business Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Other fees and other income of Investment, associate and trading model £ 319 mn income of £ 321 mn Third party assets and advisory Net interest income, investment income and trading income (14% of total) (14% of total) Capital light activities Capital intensive activities  Asset management  Lending portfolios Contribute 56% Contribute 44% to  Wealth management  Investment portfolios to group income group income  Advisory services  Trading income  Transactional banking services ‒ Client flows  Property and other funds ‒ Balance sheet management < > Net interest, investment, Fee and commission Types of income associate and trading income income 7

Investec DLC: Salient features POUND EARNINGS Mar-17 Mar-16 % change Operating profit* before tax (£’ mn) 599 505 18.5% Core loans to customer deposits 78.0% 73.6% 6.0% Credit loss ratio 0.54% 0.62% 13.0% Adjusted EPS**^ (pence) 48.3 41.3 16.9% Total shareholders’ equity (£’ mn) 4 809 3 859 24.6% Cost to income ratio 66.3% 66.4% - Return on average adjusted shareholders equity (post-tax) 12.5% 11.5% 8.7% *Before goodwill, acquired intangibles, non-operating items and after other non-controlling interests; **Before goodwill, acquired intangibles, non-operating items and after non-controlling interests; ^After deducting preference dividends; ^^Amounts represented on a currency neutral basis assume that the closing and average exchange rates of the group ’s relevant exchange rates relative to Pounds Sterling remain the same as at 31 March 2017 when compared to 31 March 2016 8

Update given to the market on 15 September 2017  The geopolitical environment has been challenging with much uncertainty prevailing in our two core geographies. The uncertainties arising from the complexity of Brexit continue, while the South African political environment remains unsteady in the run up to the December ruling party leadership elections  This has been somewhat offset by supportive global markets and an improved outlook for the global economy  Activity levels have remained reasonable and our client base has demonstrated resilience under mixed economic backdrops  We have continued to see positive overall performance supported by diverse revenue streams and strong franchise businesses  We continue to focus on execution of our strategic initiatives, mindful of the tough macro environment and uncertainty expected to continue into H2 9

An overview of the South African (SA) economy

Overview of SA economy Snapshot of SA Rating agency and market views Contribution to SA’s GDP  Population: 55.7 mn  Real GDP: US$ 300.0 bn (R3,071.7bn) Long-term Foreign Long-term Foreign Long-term Foreign Contribution to SA’s GDP Currency Debt Currency Debt Currency Debt Agricultures, Baa3 BB+ BB+ forestry & fishing Negative Negative Stable 2% Mining & General Long-term Domestic Long-term Domestic Long-term Domestic quarrying 8% government Currency Debt Currency Debt Currency Debt services 17% Baa3 BBB- BB+ Manufacturing Negative Negative Stable 14% Personal services 6%  Upper middle income economy Electricity & water  38 th largest economy in the world 2%  2 nd largest economy in Africa* Construction 4%  21 st in Protecting Investors Finance, insurance, real  74 th in Ease of Doing Business (out of 190 Wholesale & retail estate & business countries in the World Bank’s Survey) trade, catering & services 22% accommodation  61 st of 137 countries in WEF 15% Transport, storage & communication competitiveness index 9% *In real terms in US$ Source: SA Reserve Bank, Economic and Financial data, August 2017 11

Overview of SA economy Low economic growth  The agricultural sector has benefited from favourable weather conditions in maize producing regions of the country compared to last year  But perceived heightened political and policy uncertainty has weighed on consumer and business confidence, entrenching the low growth environment SA’s GDP growth Contributions to growth by expenditure component (%) change year/year 8% 6.0% Private Consumption 5.0% 6% 4.0% Public Consumption 4% 3.0% Investment 2% 2.0% Net Exports 1.0% 0% Inventories 0.0% -2% -1.0% GDP -2.0% -4% 2005 2007 2009 2011 2013 2015 2017 Q1 2007 2009 2011 2013 2015 Source: SA Reserve Bank, Stats SA 12

Overview of SA economy Inflation has moderated and declined to within the target range in Q2 2017  A key influencing factor has been food price disinflation, as favourable weather conditions have improved the maize supply prospects  Weak domestic demand and the lagged effects of past rand appreciation also dampen inflationary pressures CPI inflation % change year/year 20 18 16 14 Actual 12 10 CPI forecast 8 6 4 2 Inflation target range 0 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Source: Stats SA, SA Reserve Bank 13

Overview of SA economy Moderate decrease in interest rates  After raising interest rates by a cumulative 200bp since 2014, the SA Reserve Bank reduced rates in July 2017 by 25bp  The SA Reserve Bank is proceeding with caution owing to upside risks (that include the rand) to the inflation outlook  The easing cycle is likely to be shallow as SA needs to maintain a positive real interest rate differential versus developed economies in order to avert substantial rand depreciation Central bank rates % 25 SA UK 20 US 15 EU 10 Japan 5 0 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Source: IRESS, SA Reserve Bank 14