Investec Bank Limited Investor Presentation Investor Presentation May 2013
Contents 1. Introduction 2. South Africa – Macroeconomic environment and banking sector overview 3. Investec overview 4. Investec financial overview 2
Key investment highlights Operates within a 5 th largest South resilient South African bank – African banking ZAR279bln in sector - no bank sector no bank assets t bail outs Sound balance sheet with low Started in 1974 - leverage leverage – 11.4x 11 4x founders include Strong capital CEO, MD, FD adequacy – Tier 1 ratio of 10.9% Investec Bank Limited Investec Limited, Stable the holding management - company - a top 40 company a top 40 senior management senior management JSE listed team average tenor company; market of circa 15 – 20 cap ZAR62bln years Moody’s senior Fitch long-term unsecured MTN senior unsecured rating – Baa1 rating – BBB- *All financial information for IBL is presented for the year ended 31 March 2013, unless otherwise indicated 3
The Investec Group - a distinctive specialist bank and asset manager …facilitating the creation of wealth and the management of wealth History Strategy and what we do • • Established in 1974 Client focused approach • • Today, efficient integrated international business platform Not “all things to all people” employing approximately 8 000 people l i i t l 8 000 l • Choose markets where we can compete effectively • Listed on the JSE and LSE (a FTSE 350 company) – Specialist Banking: contributes 56% to operating profit • Total assets of GBP 51bln* and total third party FUM of before tax GBP 101bln* – Asset Management and Wealth Management: contributes • • Material employee ownership Material employee ownership 44% to operating profit before tax 44% to operating profit before tax Distribution channels Core infrastructure Origination channels Since 1992 Assets: £20.2bn Since Since 1997 1974 Assets: £3.2bn Assets: £27.6bn … and geographic diversity *As at 31 March 2013, our year-end. 4
Contents 1. Introduction 2. South Africa – Macroeconomic environment and banking sector overview 3. Investec overview 4. Investec financial overview 5
Economic landscape • Republic of South Africa issuer / long-term rating - Baa1(M) neg / BBB(F) stable / BBB(S&P) neg • The economy will continue to expand at a moderate pace in 2013 – Consumer spending has been a key driver of growth but a high level of unemployment, slower growth in real Co su e spe d g as bee a ey d e o g o t but a g e e o u e p oy e t, s o e g o t ea disposable income, and unsecured lending pressures will prevent an acceleration – Fixed investment by state owned enterprises (upgrading and expanding of infrastructure) will continue to be supportive of growth, but the private sector‘s fixed investment could be slower on account of weak demand and domestic (and global) uncertainties – External demand expected to improve in 2013H2 External demand expected to improve in 2013H2 • Monetary policy will remain accommodative for a protracted period in order to underpin domestic demand, specifically in view of external constraints on growth – Cost-push pressures and ZAR depreciation could temporarily cause a breach of the upper end of the inflation target band of 3% to 6% in 2013Q3 target band of 3% to 6% in 2013Q3 – Flexible mandate of the South African Reserve Bank allows it to maintain a growth bias reflected in a negative real policy rate • Fiscal consolidation has been implemented gradually in order to sustain government’s debt level at below 41% of GDP by FY2015 / 2016 while simultaneously not undermining growth by FY2015 / 2016, while simultaneously not undermining growth • The ZAR has become more sensitive to local factors in view of the large deficit on the current account of the balance of payments • The banking system remains healthy and unsecured lending does not pose a systemic risk • Challenges – Labour relations and pending wage negotiations in the mining sector – Electricity supply Electricity supply – Satisfactory solution to land reform still to be negotiated – Risk of social instability in view of lack of delivery of promised services 6
South Africa macroeconomic dynamics Macro Economic Forecasts GDP growth (%) g ( ) 6 % change 2011 2012 2013F 2014F Growth (real, annual % change) 5 GDP 3.5 2.5 2.6 3.4 4 Household consumption Household consumption expenditure 4.8 3.5 3.0 3.6 3 Gross fixed capital formation 4.5 5.7 5.2 6.0 2 Balance of payments Current account (% of 1 GDP) GDP) -3.4 3 4 -6.3 6 3 -6.0 6 0 -5.8 5 8 0 -1 Consumer price inflation 5.0 5.6 5.9 5.8 Fiscal policy -2 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014 Budget deficit (% of GDP) B d t d fi it (% f GDP) -4.6 4 6 -5.1 5 1 -4.8 4 8 -4.4 4 4 Source: SARB, National Treasury, StatsSA, Investec Bank Limited Corporate and Institutional Source: SARB, ICIB Banking (“ICIB”) Consumer spending CPI inflation (%) 10 10 % change 12 % change 8 10 6 8 4 6 2 4 0 2 -2 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: SARB, ICIB Source: StatsSA, ICIB 7
South Africa macroeconomic dynamics Current account balance (% of GDP) Current account balance (% of GDP) ZAR vs PPP ZAR vs PPP 13 0 12 -1 11 -2 10 10 -3 9 -4 8 -5 7 6 6 -6 6 5 -7 -8 PPP USDZAR 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: SARB, ICIB Source: SARB, ICIB Source: Bloomberg, ICIB Source: Bloomberg, ICIB Net government debt (foreign and domestic) as % of GDP Government debt as % of GDP - BRICS countries 50 90 45 45 80 80 40 70 35 60 30 50 25 40 40 20 20 30 15 10 20 5 10 0 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 South Africa Brazil China India Russia Domestic Foreign Source: National Treasury Source: SARB, National Treasury 8
South African Banking sector Total assets and gross loans and advances Total assets and gross loans and advances Bank funding composition (% of total) Bank funding composition (% of total) 3,500 Rbn 5.7 11.9 3,000 3 7 3.7 2,500 Institutional funds 24.5 2,000 Retail deposits Interbank funding 1,500 Commercial deposits 1,000 Foreign deposits Other 3.0 500 0 51.2 008 008 008 008 009 009 009 009 010 010 010 010 011 011 011 011 012 012 012 012 013 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 Gross loans and advances Total assets Source: SARB Source: SARB Impaired advances to gross loans and Liquid assets* held to total assets (%) Capital adequacy Advances 150 7 16% Rbn 10 % 6 15% 130 9 14% 5 8 110 13% 4 7 12% 90 3 3 6 11% 70 2 10% 5 50 9% 1 4 8% 30 0 3 7% 2008 2009 2010 2011 2012 2013 2 6% 08 08 08 09 09 09 10 10 10 11 11 11 12 12 12 13 1 200 200 200 200 200 200 201 201 201 201 201 201 201 201 201 201 Impaired advances (lhs) I i d d (lh ) 0 Impaired advances as a percentage of gross loans and 2008 2009 2010 2011 2012 Capital adequacy ratio (CAR) Tier 1 CAR advances (rhs) Source: SARB Source: SARB Source: SARB * ”Liquid assets” consist of SA Government and SARB issued 9 debt securities
Investec Bank Limited – South African peer group comparisons Funding: Loans: customer deposits ratio (smaller number is better) Asset quality: (smaller number is better) 1.2 7.0% 6.0% 1 5.0% 0.8 0 8 4.0% 0.6 3.0% 0.4 2.0% 1.0% 0.2 0.0% Investec Bank ABSA Firstrand Nedbank Standard Bank 0 Limited Investec Bank ABSA Firstrand Nedbank Standard Bank Limited Credit loss ratio (PnL impairment charge) ( p g ) Gross defaults as a % of loans Capital ratios %: (larger number is better) Leverage ratio: Assets: equity (smaller number is better) 20.0% 14 18.0% 16.0% 12 14.0% 10 12.0% 8 10.0% 8.0% 6 6.0% 4 4.0% 2 2.0% 0 0% 0.0% 0 Investec Bank ABSA Firstrand Nedbank Standard Bank Investec Bank ABSA Firstrand Nedbank Standard Bank Limited Limited Capital adequacy ratio Tier 1 ratio Permanent equity ratio Source: Latest company interim / year-end results as reported by 31 March 2013 10
Contents 1. Introduction 2. South Africa – Macroeconomic environment and banking sector overview 3. Investec overview 4. Investec financial overview 11
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