Investec Plc · LSE:INVP
Investec — IMF 2011
34 slides from Investec's conference presentation, 2011
Slide 1: Stephen Koseff CEO of Investec group IMF 2011
Stephen Koseff CEO of Investec group IMF 2011 1
Slide 2: Overview of Investec
Overview of Investec 2
Slide 3: Mission statement
Mission statement We strive to be a distinctive specialist bank and asset managerg driven by commitment to our core philosophies and values 3
Slide 4: Specialist bank and asset manager
Specialist bank and asset manager Broad range g of services: To: Government Advisory Structuring Institutional Lending Corporates Securities Trading High Net Worth Clients Market Making Principal Transactions High Income Clients Provides Provides investment investment To: Private clients management
Slide 5: International platform
International platform Distribution channels Origination channels Core infrastructure Since 1992 Since 1997 Since 1974 5
Slide 6: Building non-banking revenue streams
Building non-banking revenue streams Contribution to group earnings 31 Mar-11 Contribution to group earnings 31 Mar-10 Asset Management Asset and wealth Asset 19.3% Management management Asset and wealth 29.3% businesses management 25.3% Wealth businesses 38 6% 38.6% Management g 6.0% Specialist Spe
Slide 7: Solid base of recurring income
Solid base of recurring income Recurring income 2500 2000 Operating income from associates 1500 Principal transactions £'mn 1000 Net fees and commissions income 500 Net interest income 0 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 57% 59% 65% 70% 60% 62% Recurring income as % of total income 7
Slide 8: Strong growth in funds under management and customer deposits
Strong growth in funds under management and customer deposits Third party assets under management Customer accounts (deposits) and loans 100 Up 20% 30 88.9 Up 11% 24.4 25 80 20 60 £'bn £’bn 15 40 10 20 5 0 0 2005 2006 2007 2008 2009 2010 2011 2005 2006 2007 2008 2009 2010 2011 Other Wealth and Inves
Slide 9: 10 year track record
10 year track record EPS before goodwill and non-operating Attributable earnings before goodwill and items* non-operating items pence pence 60 400 350 50 300 40 250 30 200 150 20 100 10 50 0 0 2002 2005 2008 2011 2002 2005 2008 2011 Results are shown for the yyear-ended 31 March,, unless otherwise i
Slide 10: Investec DLC: Salient features
Investec DLC: Salient features Mar-11 Mar-10 % Change Operating profit* before tax (£’000) 434 406 432 258 0.5% Operating profit* before tax and impairment losses on 752 636 718 839 4.7% loans and advances (£’000) Core loans to customer deposits 72.4% 76.2% (5.0%) Credit loss ratio 1.27% 1.16% 9.5%
Slide 11: Investec DLC: Summarised balance sheet
Investec DLC: Summarised balance sheet £'000 Mar-11 Mar-10 Assets Cash and near cash 9,319,000 9,117,000 Derivative assets 1,799,204 1,591,841 Securities, including repo's 5,365,472 3,713,131 Loans and advances to customers 20,370,705 19,191,216 Securitised assets 4,924,293 5,334,453 Investment prop
Slide 12: Investec DLC: Capital and leverage
Investec DLC: Capital and leverage Capital position Gearing 16 Expected 31 Mar 30 Sep 13.8 30 Sep 2011 2010 12.9 2011 12.5 11.9 11.8 11.7 11.3 11 10 2 10.2 Investec plc Total 16.4% 16.8% 16.7% Tier 1 11.1% 11.6% 12.1% 6.6 6.2 6 5.4 4.7 Investec Ltd Total 15.4% 15.9% 16.2% Tier 1 11.7% 11.9% 12.1% 1
Slide 13: Positioned for long term growth
Positioned for long term growth Update given to the market on 15 September 2011 • Operating conditions are difficult as the global geopolitical landscape remains uncertain • The group’s group s operational performance remains stable underpinned by a solid recurring income base 13
Slide 14: An overview of the South African (SA) economy
An overview of the South African (SA) economy 14
Slide 15: SA's current growth rate of 3.4% is above most advanced economies
SA’s current growth rate of 3.4% is above most advanced economies. • SA is a small, open economy and the slower than expected global recovery means 2011 is now likely to see growth of only 3.2% (previously 3.7% was expected). • This Thi is i still till above b llastt year’s ’ outcome t off 2 2.8%, 8
Slide 16: SA's sound balance sheet is due in part to its very low debt levels
SA’s sound balance sheet is due in part to its very low debt levels ... Net government debt as % of GDP 160 140 120 100 80 60 40 20 0 2010 Forecast 2012 Source: Standard and Poor’s 16
Slide 17: Sound banking sector recently ranked 2nd in the world
… sound banking sector which was recently ranked 2nd in the world* world … Canada South Africa Australia Singapore Chile Finland Czech Republic Malaysia India Turkey Thailand Philippines Taiwan Poland Hungary Uganda Mozambique United States Korea United Kingdom Zimbabwe Nigeria 0 1 2 3 4 5 6 7 8 (1
Slide 18: Persistent economic growth
… persistent economic growth ... GDP growth %, 1994-2010 Japan Italy Germany France Portugal Russia United States G Greece Spain South Africa Brazil Ireland India China 0 2 4 6 8 10 12 Source: IMF 18
Slide 19: Sharp rise in foreign exchange reserves
… and sharp rise in foreign exchange reserves. $/bn 50000 45000 40000 35000 30000 25000 20000 15000 10000 5000 0 1998 1999 2001 2002 2004 2005 2007 2008 2010 2011 Source: SARB and Standard and Poor’s 19
Slide 20: Current account deficit financing reliant on portfolio inflows
The financing of the current account deficit is still reliant on portfolio inflows … R'ms Rm's 20000 15,000,000 15000 10,000,000 10000 5,000,000 0 5000 -5,000,000 0 -10,000,000 , , -5000 -15,000,000 -10000 -20,000,000 -15000 15000 -25,000,000 -20000 -30,000,000 1994 1996 1998 2000 2002 2004 2006 200
Slide 21: When portfolio flows reverse, the deficit automatically reduces
… but when portfolio flows reverse, the deficit automatically reduces as the trade account tends to run a surplus. % GDP 6 4 2 0 -2 -4 -6 6 -8 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Current account of which: dividend and interest payments Trade account Source: SARB 21
Slide 22: Inflation expected to only temporarily breach target range
Inflation is expected to only temporarily breach the upper limit of the target range … % change year/year 14 12 10 8 Inflation target range 6 4 2 1998 2000 2002 2004 2006 2008 2010 2012 Actual CPI forecast Source: Stats SA, Investec 22
Slide 23: Interest rates are unlikely to rise significantly
... meaning interest rates are unlikely to rise significantly. % 30 25 20 15 10 5 0 1998 2000 2002 2004 2006 2008 2010 Repo rate Prime Long rate Source: I-net 23
Slide 24: Debt servicing costs are falling
Debt servicing costs are falling, due to moderation in private sector debt levels and low interest rates. R’mn % disposable income 180,000 15 160,000 13 140,000 11 120,000 100 000 100,000 9 80,000 7 60,000 40,000 5 1998 1999 2000 2001 2002 2003 2004 2006 2007 2008 2009 2011 Debt Servicing cost of Ho
Slide 25: Private sector spending up but credit demand sluggish
Growth in private sector spending has picked up but demand for credit is sluggish although improving. Demand for credit %, y/y Household consumption expenditure %, y/y 40 12 35 10 30 8 25 20 6 15 4 10 5 2 0 0 -5 -2 -10 -15 -4 2000 2002 2004 2006 2008 2010 2001 2003 2005 2007 2009 2011 Source: SARB,
Slide 26: Confidence declining due to lethargic global growth
Confidence, however, is declining as a consequence of lethargic global growth. ((%)) 100 80 60 40 20 0 -20 2004 2005 2005 2006 2007 2008 2009 2010 2010 2011 FNB/BER Consumer C Confidence C fid RMB/BER B Business i C Confidence fid Source: BER 26
Slide 27: Investment in infrastructure is weak
Investment in infrastructure is weak … % change y/y 10 8 6 4 2 0 -2 -4 1947 1957 1967 1977 1987 1997 2007 Fi d capital Fixed it l stock t k growth th GDP growth th E l Employment t Source: SARB 27
Slide 28: Government and private enterprise under invest
… as government and private business enterprise under invest. Fixed investment by institutional sector (2006 = 100) 320 280 240 200 160 120 80 2006 2007 2008 2009 2010 2011 General Government Private businesses enterprises Public corporations Real g gross fixed capital p formation % change at season
Slide 29: Restrictive labour practices and weak global conditions impact job creation
Restrictive labour practices and weak global conditions impact on job creation in the private sector … Index: 2006 = 100 130 125 120 115 110 105 100 95 2006 2007 2008 2009 2010 2011 General go government ernment B siness enterprises Business Total Source: SARB 29
Slide 30: Unemployment at a very high level of 25.7%
… leaving unemployment at a very high level of 25.7%. Million 14,0 , 13,8 13,6 13,4 13,2 Total employment 13,0 12,8 Million 4,8 3,6 Total employment 4,4 2,7 4,0 Discouraged work seekers 1,8 3,6 (right-hand scale) 3,2 0,9 % 26 25 24 Unemployment rate 23 22 21 2008 2009 2010 2011 Source: : Statistics
Slide 31: SA well positioned to take advantage of Africa's growth potential
SA is well positioned to take advantage of Africa’s growth potential … (p (particularly y in services and tourism)) • Growth in Africa has been above the world average of 3.3% over the past decade. • The IMF forecasts that it will grow by 5.5% in 2011 and 5.9% in 2012. GDP growth, th % y/y / Ethiopi
Slide 32: Strong private and financial sector, public sector capacity lacking
… with a strong private and financial sector, although disadvantaged by lack of capacity in the public sector. South Africa's ranking: top sectors (blue) vs bottom (green) Strength of auditing and reporting standards 1 Regulation of securities exchanges 1 Soundness of banks 2 Efficacy of corporate b
Slide 33: Conclusion
Conclusion • SA fortunes are tied to the global economy. • The growing middle class and counter-cyclical government spending (including rapidly increasing job creation and salary levels in the public sector), provide support to growth. • The private sector has become financially healthier over the l
Slide 34: Thank you
Thank you Out of the Ordinary™ o Investec 34