YEAR END RESULTS PRESENTATION 16 May 2019 Proviso Please note - PowerPoint PPT Presentation

YEAR END RESULTS PRESENTATION 16 May 2019

Proviso  Please note that matters discussed in today's presentation may contain forward looking statements which are subject to various risks and uncertainties and other factors including, but not limited to:  changes in the political and/or economic environment that would materially affect the Investec group  changes in legislation or regulation impacting on the Investec group’s operations or its accounting policies  changes in business conditions that will have a significant impact on the Investec group’s operations  changes in exchange rates and/or tax rates from the prevailing rates outlined in this announcement  changes in the structure of the markets, client demand or the competitive environment  A number of these factors are beyond the Investec group’s control  These factors may cause the Investec group’s actual future results, performance or achievements in markets in which it operates to differ from those expressed or implied  Any forward looking statements made are based on knowledge of the group at 15 May 2019 2

Agenda 1. Overview – Fani Titi, Joint Group Chief Executive Officer 1. Overview – Fani Titi, Joint Group Chief Executive Officer 2. Financial review – Nishlan Samujh, Group Finance Director 3. Business review  Bank and Wealth – Fani Titi, Joint Group Chief Executive Officer  Asset Management – Hendrik du Toit, Joint Group Chief Executive Officer 4. Closing and Q&A 3

OVERVIEW

Year under review Sound operating performance  9.4% increase in operating profit to £664.5mn  3.6% increase in adjusted EPS to 55.1p  2.1% dividend growth to 24.5p  Improved Group ROE to 12.9% Supported by strong client franchises  Substantial net inflows in Asset Management  Good loan book growth  Strong performance in UK Bank  Positive discretionary inflows in Wealth & Investment Performance is offset by  Weaker investment income in banking  Non-recurrence of investment gains in Wealth & Investment in the prior year, and the current year write down of Click & Invest capitalised software Resilient Asset Management and Bank and Wealth businesses against challenging backdrop 5

Year under review (cont.) Simplify, focus and grow with discipline  Smooth leadership transition  Good progress on the proposed demerger of Asset Management  Identified growth initiatives on track  Actions taken to simplify business: - Disposal of the Irish Wealth business - Discontinued Click & Invest - Winding down the Hong Kong non-core investment portfolio  Cost discipline  Focus on capital allocation and shareholder returns Positioning the business to serve clients and generate shareholder returns 6

Agenda 1. Overview – Fani Titi, Joint Group Chief Executive Officer 2. 2. Financial review – Nishlan Samujh, Group Finance Director Financial review – Nishlan Samujh, Group Finance Director 3. Business review  Bank and Wealth – Fani Titi, Joint Group Chief Executive Officer  Asset Management – Hendrik du Toit, Joint Group Chief Executive Officer 4. Closing and Q&A 7

FINANCIAL REVIEW

Backdrop of persistent economic uncertainty 130 Half Year  Policy uncertainty and 120 Rebased to 100 weak economy in SA has 110 impacted activity levels Exchange 100  Brexit and political rates 90 uncertainty has impacted 80 corporate and consumer Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 confidence in the UK Rand : £ EURO : £ AUS$ : £ US$ : £ 120 Half Year 110  Trade wars, reduced Rebased to 100 100 monetary stimulus and Equity 90 global growth concerns markets have resulted in market 80 volatility 70 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 JSE FTSE 100 Euro Stoxx 50 S&P 500 Denominated in USD Source: Thomson Reuters Datastream 9

Snapshot of group financial performance Growth in operating profit* and adjusted EPS ** of 9.4% and 3.6% respectively  Key metric Cost to Income Dividend ROE CET1 Ratio Ratio^ Cover Target 12% to 16% < 65% > 10% 1.75x to 3.5x Limited: Mar-19 Standardised – 10.5% 12.9% 69.9% 2.2x Pro-forma FIRB – 11.6% plc: 10.8% *Before goodwill, acquired intangibles, non-operating items, taxation and after other non-controlling interests. **Before goodwill, acquired intangibles and non-operating items and after non-controlling interests and 10 the deduction of preference dividends. ^The group has changed its cost to income ratio definition to exclude operating profits or losses attributable to other non-controlling interests. As such, the cost to income ratio is calculated as: operating costs divided by operating income (net of depreciation on operating leased assets and net of operating profits or losses attributable to other non-controlling interests).

Divisional operating profit* performance Strong performance from the UK Specialist Bank Specialist Bank Asset Management (AM) Wealth & Investment  Good loan book growth  Substantial net inflows  Positive net inflows  Significant impairment reduction  Growth in AUM and annuity fees  Impacted by non-recurring  Lower investment income  Market volatility and lower performance fees £’mn items  Investment spend 720 Bank and Wealth ▲ 13% Asset Management ▲ 1% Total group 700 ▲ 9% (10.2) 78.6 (12.9) 680 (2.6) 3.9 (3.0) 664.5 3.2 660 640 620 607.5 600 580 Mar-18 Specialist Banking Specialist Banking Wealth Wealth SA Group Costs AM AM SA Mar-19 UK & Other SA UK & Other UK & Other ▼ 10% in GBP ▼ 4% in GBP ▼ 3% in GBP ▼ 7% ▲ 4% ▲ 2% in ZAR ▲ 2% in ZAR ▼ 19% ▼ 6% in ZAR ▲ >100% *Operating profit before goodwill, acquired intangibles, non-operating items, taxation and after other non-controlling interests. 11

Growth in key earnings drivers Core income drivers impacted by the closing Rand depreciation of 13.1% £’bn 167.2 175 160.6 150  Third party assets under 125 Third party management up 4.1% to 100 assets £167.2bn 75 under 50 management 25 0 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Asset Management Wealth & Investment Other* £’bn  Customer accounts 35 120% 31.3 31.0 30 increased 1.0% to £31.3bn 100% 25.1 24.9 25 up 8.7% on a currency neutral basis Customer 80% 20 78.4% 79.6% accounts 60% 15  Core loans and advances (deposits) 40% 10 decreased 0.8% to £24.9bn 20% and loans 5 up 6.8% on a currency neutral basis 0 0% Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Customer accounts (LHS) Core loans and advances to customers (LHS) Loans and advances to customer deposits (RHS) *Other includes private equity and property assets under management 12

Supporting growth in operating income £'mn 3,000 80% 2,486.3  Annuity revenue continues 2,443.5 2,500 to support earnings 75% 2,000 Operating 1,500 70%  Total operating income income 1,000 65% increased by 1.8% to trend 500 £2,486.3mn 0 60% Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Net interest income Net fees and commission income Investment and associate income Trading income Other operating income Annuity Income % (RHS) £'mn 2,550  Interest income driven by (58.5) 12.3 good book growth 55.0 2,500 5.3 2,486.3 Operating 28.7  Offset by weak income 2,443.5 2,450 performance from Bank analysis equity and investment ▲ 7% ▲ 1% ▼ 33% ▲ 21% ▲ 48% 2,400 property portfolios Trading Other Mar-19 Mar-18 Net interest Net fee Investment income income and associate income operating income income 13

Costs up ahead of revenue and an area of focus for management £’mn 2,600 2,486.3 2,400 Cost to income^ of 69.9% 2,200 (Mar-18: 68.3%) 2,000 1,800  Operating income up 1.8% 1,695.0 Jaws ratio 1,600  Operating costs up 3.8% 1,400 1,200  Revenue growth and cost 1,000 containment remain priorities Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Operating income Operating costs £'mn  Premises costs up due to prior 1,750 year rental provision release in 1,695.0 (6.5) 12.3 15.2 1,700 21.1 South Africa and new Asset 1.5 18.7 1,632.7 1,650 Management premises Cost 1,600 analysis  Personnel costs up due to 1,550 increase in headcount to support 1,500 business activity, increased 1,450 ▲ 47% ▲ 31% ▲ 2% ▲ 2% ▲ 8% ▼ 9% regulation and IT development 1,400 Mar-18 Premises Equipment Personnel Business Marketing Depreciation Mar-19 ^The group has changed its cost to income ratio definition to exclude operating profits or losses attributable to other non-controlling interests. As such, the cost to income ratio is calculated as: operating costs 14 divided by operating income (net of depreciation on operating leased assets and net of operating profits or losses attributable to other non-controlling interests).

Reduction in ECL charges ^ £’mn  ECL charges amounted to 160 148.6 £66.5mn 140 (Mar-18: £148.6mn) 120  No repeat of substantial legacy impairments 100 Total ECL charge by 80  Credit loss ratio within long- 66.5 geography term average range at 60 0.31% 40 (Mar-18: 0.61%) 20 0 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 UK and Other South Africa Legacy and sales* ^Expected credit loss impairment charges. *Refers to the remaining UK legacy business and group assets that were sold in the 2015 financial year. From 2019 financial year the UK legacy business is no longer 15 reported separately.