Wrap Text
Reviewed Interim Condensed Consolidated Financial Results for the six months to 30 September 2014
Investec Bank Limited
Registration number: 1969/004763/06
Share code: INLP
ISIN: ZAE000048393
Reviewed interim condensed consolidated financial results for the six months to 30 September 2014
Consolidated income statement
Reviewed Reviewed Audited
Six months to Six months to Year to
30 September 30 September 31 March
R'million 2014 2013 2014
Interest income 9 536 8 294 17 063
Interest expense (6 777) (5 906) (12 147)
Net interest income 2 759 2 388 4 916
Fee and commission income 791 748 1 567
Fee and commission expense (101) (115) (174)
Investment income 703 308 334
Trading income arising from
– customer flow 91 162 343
– balance sheet management and other trading activities 107 210 235
Other operating loss – (5) (5)
Total operating income before impairment losses on loans
and advances 4 350 3 696 7 216
Impairment losses on loans and advances (219) (299) (638)
Operating income 4 131 3 397 6 578
Operating costs (2 195) (1 929) (4 113)
Profit before taxation 1 936 1 468 2 465
Taxation (242) (146) (315)
Profit after taxation 1 694 1 322 2 150
Headline earnings
Profit after taxation 1 694 1 322 2 150
Preference dividends paid (56) (53) (108)
Earnings attributable to ordinary shareholders 1 638 1 269 2 042
Headline adjustments, net of taxation:
Revaluation of investment properties^ – – 46
Loss/(gain) on realisation of available-for-sale financial assets^ 6 – (2)
Headline earnings attributable to ordinary shareholders 1 644 1 269 2 086
^Net of taxation of (R2.5 million) [Six months to 30 September 2013: Rnil; Year to 31 March 2014: R18.2 million].
Condensed consolidated statement of comprehensive income
Reviewed Reviewed Audited
Six months to Six months to Year to
30 September 30 September 31 March
R'million 2014 2013 2014
Profit after taxation 1 694 1 322 2 150
Other comprehensive income*:
Fair value movements on cash flow hedges taken directly to
other comprehensive income (103) (115) (75)
Fair value movements on available-for-sale assets taken
directly to other comprehensive income 173 (331) (212)
Loss/(gain) on realisation of available-for-sale assets recycled
to the income statement 6 – (2)
Foreign currency adjustments on translating foreign
operations 291 270 414
Total comprehensive income 2 061 1 146 2 275
Total comprehensive income attributable to ordinary
shareholders 2 005 1 093 2 167
Total comprehensive income attributable to perpetual
preference shareholders 56 53 108
Total comprehensive income 2 061 1 146 2 275
*All items in other comprehensive income are or may subsequently reclassified to the income statement.
**Net of taxation of R7.9 million (Six months to 30 September 2013: (R13.8 million); Year to 31 March 2014: R119 million).
Condensed consolidated statement of changes in equity
Reviewed Reviewed Audited
Six months to Six months to Year to
30 September 30 September 31 March
R'million 2014 2013 2014
Balance at the beginning of the period 25 601 23 509 23 509
Total comprehensive income 2 061 1 146 2 275
Dividends paid to ordinary shareholders (20) (75) (75)
Dividends paid to perpetual preference shareholders (56) (53) (108)
Balance at the end of the period 27 586 24 527 25 601
Condensed consolidated cash flow statement
Reviewed Reviewed Audited
Six months to Six months to Year to
30 September 30 September 31 March
R'million 2014 2013 2014
Net cash inflow from operating activities 3 118 5 194 7 417
Net cash outflow from investing activities (49) (97) (159)
Net cash inflow/(outflow) from financing activities 72 (2 219) (2 181)
Effects of exchange rate changes on cash and cash
equivalents 231 244 410
Net increase in cash and cash equivalents 3 372 3 122 5 487
Cash and cash equivalents at the beginning of the period 20 460 14 973 14 973
Cash and cash equivalents at the end of the period 23 832 18 095 20 460
Cash and cash equivalents is defined as including: cash and balances at central banks, on demand loans and advances
to banks and non-sovereign and non-bank cash placements (all of which have a maturity profile of
less than three months).
Consolidated balance sheet
Reviewed Audited Reviewed
30 September 31 March 30 September
R'million 2014 2014 2013
Assets
Cash and balances at central banks 5 946 5 927 7 270
Loans and advances to banks 27 944 32 672 20 336
Non-sovereign and non-bank cash placements 10 403 9 045 7 722
Reverse repurchase agreements and cash collateral on
securities borrowed 6 764 6 442 6 067
Sovereign debt securities 32 929 34 815 31 811
Bank debt securities 22 585 21 538 22 247
Other debt securities 11 836 11 933 10 673
Derivative financial instruments 12 917 12 299 11 622
Securities arising from trading activities 2 100 1 316 2 398
Investment portfolio 8 969 8 834 9 386
Loans and advances to customers 162 307 148 562 144 276
Own originated loans and advances to customers securitised 3 055 2 822 2 347
Other loans and advances 508 552 638
Other securitised assets 804 1 503 1 629
Interest in associated undertakings 56 52 49
Deferred taxation assets 84 75 60
Other assets 1 118 1 771 1 328
Property and equipment 201 219 236
Investment properties 85 84 1
Intangible assets 102 102 95
Loans to group companies 2 231 1 924 4 612
Non-current assets classified as held for sale 731 731 -
313 675 303 218 284 803
Liabilities
Deposits by banks 23 644 22 407 11 591
Derivative financial instruments 9 534 9 259 8 919
Other trading liabilities 1 714 1 431 705
Repurchase agreements and cash collateral on securities lent 12 511 17 686 15 581
Customer accounts (deposits) 217 550 204 903 200 512
Debt securities in issue 5 401 5 366 5 079
Liabilities arising on securitisation of own originated loans and
advances 970 1 369 2 659
Liabilities arising on securitisation of other assets 154 156 572
Current taxation liabilities 1 093 1 288 1 143
Deferred taxation liabilities 141 61 246
Other liabilities 2 732 3 193 2 865
275 444 267 119 249 872
Subordinated liabilities 10 645 10 498 10 404
286 089 277 617 260 276
Equity
Ordinary share capital 32 32 32
Share premium 14 885 14 885 14 885
Other reserves 802 364 44
Retained income 11 867 10 320 9 566
27 586 25 601 24 527
Total liabilities and equity 313 675 303 218 284 803
Commentary
These reviewed interim condensed consolidated financial results are published to provide information to holders of
Investec Bank Limited's listed non-redeemable, non-cumulative, non-participating preference shares.
Overview of results
Investec Bank Limited, a subsidiary of Investec Limited, posted an increase in headline earnings attributable to ordinary
shareholders of 29.6% to R1,644 million (2013: R1,269 million). The balance sheet remains strong with a capital
adequacy ratio of 15.6% (31 March 2014: 15.3%). For full information on the Investec Group results, refer to the
combined results of Investec plc and Investec Limited or the group's website http://www.investec.com.
Financial review
Unless the context indicates otherwise, all comparatives referred to in the financial review relate to the six months ended
30 September 2013.
Salient operational features for the six months under review include:
Total operating income before impairment losses on loans and advances increased by 17.7% to R4,350 million (2013:R3,696 million).
The components of operating income are analysed further below:
- Net interest income increased by 15.5% to R2,759 million (2013: R2,388 million) with the bank benefiting from an
increase in its loan portfolio and a positive endowment impact.
- Net fee and commission income increased 9.0% to R690 million (2013: R633 million) as a result of a good
performance from the private banking professional finance business, with corporate fees remaining largely in line with
the prior period.
- Investment income increased to R703 million (2013: R308 million) with the bank's unlisted investments portfolio
continuing to perform well.
- Trading income arising from customer flow and other trading activities decreased to R198 million (2013: R372 million)
reflecting lower client activity in foreign exchange transactions and less activity in respect of balance sheet
management.
Impairments on loans and advances decreased from R299 million to R219 million. The credit loss charge as a
percentage of average gross core loans and advances has improved from 0.44% at 31 March 2014 to 0.30%.
The percentage of default loans (net of impairments but before taking collateral into account) to core loans and advances
amounts to 1.30% (31 March 2014: 1.50%). The ratio of collateral to default loans (net of impairments) remains
satisfactory at 1.48 times (31 March 2014: 1.55 times).
The ratio of total operating costs to total operating income amounts to 50.5% (2013: 52.2%). Total operating expenses
at R2,195 million were 13.8% higher than the prior year (2013: R1,929 million) largely as a result of increased variable
remuneration given improved profitability.
As a result of the foregoing factors profit before taxation increased by 31.9% to R1,936 million (2013: R1,468 million).
Accounting policies and disclosures
These interim condensed consolidated financial results have been prepared in terms of the recognition and
measurement criteria of International Financial Reporting Standards, the presentation and disclosure requirements
of IAS 34, Interim Financial Reporting, the SAICA Financial Reporting Guide as issued by the Accounting Practices
Committee and the Companies Act 71, of 2008.
The accounting policies applied in the preparation of the results for the six months ended 30 September 2014 are
consistent with those adopted in the financial statements for the year ended 31 March 2014.
The financial results have been prepared under the supervision of Glynn Burger, the Group Risk and Finance Director.
The summary financial statements for the six months ended 30 September 2014 will be posted to stakeholders on
28 November 2014. These interim financial statements will be available on the group's website at the same date.
On behalf of the Board of Investec Bank Limited
Fani Titi Stephen Koseff Bernard Kantor
Chairman Chief Executive Officer Managing Director
19 November 2014
Review conclusion
KPMG Inc. and Ernst & Young Inc., the Group's independent auditors, have reviewed the interim condensed
consolidated financial results and have expressed an unmodified review conclusion on the interim condensed
consolidated financial results, which is available for inspection at the company's registered office.
Non-redeemable non-cumulative non-participating preference shares ("preference shares")
Declaration of dividend number 23
Notice is hereby given that preference dividend number 23 has been declared by the board from income reserves
for the period 01 April 2014 to 30 September 2014 amounting to 380.29301 cents per share payable to holders of the
non-redeemable non-cumulative non-participating preference shares as recorded in the books of the company at
the close of business on Friday, 05 December 2014.
The relevant dates for the payment of dividend number 23 are as follows:
Last day to trade cum-dividend Friday, 28 November 2014
Shares commence trading ex-dividend Monday, 01 December 2014
Record date Friday, 05 December 2014
Payment date Monday, 15 December 2014
Share certificates may not be dematerialised or rematerialised between Monday, 01 December 2014 and Friday,
05 December 2014, both dates inclusive.
Additional information to take note of:
- The Investec Bank Limited company tax reference number: 9675/053/71/5
- The issued preference share capital of Investec Bank Limited is 15 447 630 preference shares in this specific class.
- The dividend paid by Investec Bank Limited is subject to South African Dividend Tax (Dividend Tax) of 15% (subject to
any available exemptions as legislated).
- No Secondary Tax on Companies ("STC") credits has been utilised in respect of this preference share dividend
declaration.
- The net dividend amounts to 323.24906 cents per preference share for shareholders liable to pay the Dividend Tax
and 380.29301 cents per preference share for preference shareholders exempt from paying the dividend tax.
By order of the board
N van Wyk
Company Secretary
19 November 2014
Registered office Transfer secretaries
100 Grayston Drive Computershare Investor Services (Pty) Ltd
Sandown, Sandton, 2196 70 Marshall Street, Johannesburg, 2001
Investec Bank Limited Sponsor
(Registration number 1969/004763/06) Investec Bank Limited
Share code: INLP
ISIN: ZAE000048393
Directors Company Secretary
F Titi (Chairman), D M Lawrence ^ (Deputy Chairman), N van Wyk
S Koseff ^ (Chief Executive), B Kantor ^ (Managing Director),
S E Abrahams, Z B M Bassa*, G R Burger ^,
D Friedland, K L Shuenyane†, K X T Socikwa,
B Tapnack ^, P R S Thomas
^Executive
*Appointed 01 November 2014
†Appointed 08 August 2014
Analysis of assets and liabilities at fair value and amortised cost
Financial
instruments
Financial at Non-
At 30 September 2014 instruments amortised financial
R'million at fair value cost instruments Total
Assets
Cash and balances at central banks – 5 946 – 5 946
Loans and advances to banks – 27 944 – 27 944
Non-sovereign and non-bank cash placements 24 10 379 – 10 403
Reverse repurchase agreements and cash collateral on
securities borrowed 6 764 – – 6 764
Sovereign debt securities 29 407 3 522 – 32 929
Bank debt securities 10 219 12 366 – 22 585
Other debt securities 4 849 6 987 – 11 836
Derivative financial instruments 12 917 – – 12 917
Securities arising from trading activities 2 100 – – 2 100
Investment portfolio 8 969 – – 8 969
Loans and advances to customers 12 596 149 711 – 162 307
Own originated loans and advances to customers securitised – 3 055 – 3 055
Other loans and advances – 508 – 508
Other securitised assets – 804 – 804
Interests in associated undertakings – – 56 56
Deferred taxation assets – – 84 84
Other assets 13 525 580 1 118
Property and equipment – – 201 201
Investment properties – – 85 85
Intangible assets – – 102 102
Loans to group companies – 2 231 – 2 231
Non-current assets classified as held for sale – – 731 731
87 858 223 978 1 839 313 675
Liabilities
Deposits by banks – 23 644 – 23 644
Derivative financial instruments 9 534 – – 9 534
Other trading liabilities 1 714 – – 1 714
Repurchase agreements and cash collateral on securities lent 1 676 10 835 – 12 511
Customer accounts (deposits) 17 338 200 212 – 217 550
Debt securities in issue 3 123 2 278 – 5 401
Liabilities arising on securitisation of own originated loans and
advances – 970 – 970
Liabilities arising on securitisation of other assets – 154 – 154
Current taxation liabilities – – 1 093 1 093
Deferred taxation liabilities – – 141 141
Other liabilities 710 564 1 458 2 732
Subordinated liabilities – 10 645 – 10 645
34 095 249 302 2 692 286 089
Financial assets and liabilities carried at fair value
The table below analyses recurring fair value measurements for financial assets and financial liabilities. These fair value
measurements are categorised into different levels in the fair value hierarchy based on the inputs to the valuation
technique used. The different levels are identified as follows:
Level 1 – quoted (unadjusted) prices in active markets for identical assets or liabilities that the entity can access at
measurement date
Level 2 – inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly
(ie as prices) or indirectly (ie derived from prices)
Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs)
Financial Level within the
At 30 September 2014 instruments fair value hierarchy
R'million at fair value Level 1 Level 2 Level 3
Assets
Non-sovereign and non-bank cash placements 24 – 24 –
Reverse repurchase agreements and cash collateral on
securities borrowed 6 764 – 6 764 –
Sovereign debt securities 29 407 29 407 – –
Bank debt securities 10 219 2 146 8 073 –
Other debt securities 4 849 4 485 319 45
Derivative financial instruments 12 917 – 13 196 (279)
Securities arising from trading activities 2 100 2 100 – –
Investment portfolio 8 969 1 754 734 6 481
Loans and advances to customers 12 596 – 12 596 –
Other assets 13 13 – –
87 858 39 905 41 706 6 247
Liabilities
Derivative financial instruments 9 534 – 9 534 –
Other trading liabilities 1 714 1 246 468 –
Repurchase agreements and cash collateral on securities lent 1 676 – 1 676 –
Customer accounts (deposits) 17 338 – 17 338 –
Debt securities in issue 3 123 – 3 123 –
Other liabilities 710 132 578 –
34 095 1 378 32 717 –
Net assets 53 763 38 527 8 989 6 247
The following table shows a reconciliation from the opening balances to the closing balances for net level 3 instruments
measured at fair value through the income statement:
For the period to 30 September 2014 R'million
Net opening balance at 1 April 2014 5 928
Total gains or (losses) recognised in the current period 456
Purchases 110
Sales (179)
Issues (36)
Transfers out of level 3 (35)
Foreign exchange adjustments 3
Net closing balance at 30 September 2014 6 247
R35 million of level 3 instruments have been transferred out of level 3 into level 2 due to observable market inputs
becoming available.
The group transfers between levels within the fair value hierarchy when the observability of inputs change or if the
valuation methods change.
The following table quantifies the gains or (losses) included in the income statement recognised on level 3 financial
instruments:
For the period to 30 September 2014
R'million Total Realised Unrealised
Total gains or (losses) included in the income statement for the period
Investment income 453 13 440
Trading income arising from customer flow 2 (1) 3
Other operating income 1 – 1
456 12 444
Sensitivity of fair values to reasonably possible alternative assumptions by level 3 instrument type
The fair value of financial instruments in level 3 are measured using valuation techniques that incorporate assumptions
that are not evidenced by prices from observable market data. The following table shows the sensitivity of these fair
values to reasonably possible alternative assumptions, determined at a transactional level:
Reflected in the income
Balance Range which statement
sheet Significant unobservable Favourable Unfavourable
At 30 September value unobservable input has been changes changes
2014 R'million Valuation method input changed stressed R'million R'million
Assets
Other debt securities 45 Discounted cash flows Discount rates (30%)/2% 3 (3)
Derivative financial
instruments (279) 170 (80)
Black Scholes Volatilities (25%)/40% 31 (19)
Discounted cash flows Credit spreads (50bps)/50bps 9 (8)
Other*** Various*** *** 130 (53)
Investment portfolio 6 481 Other*** Various*** *** 1 455 (783)
Total 6 247 1 628 (866)
***Other – The valuation sensitivity for the private equity and embedded derivatives (profit share) portfolios has been
assessed on an adjustment to various inputs such as expected cash flows, discount rates, PE ratios. It is deemed
appropriate to reflect the outcome in totality for the purposes of this analysis.
In determining the value of level 3 financial instruments, the following are the principal inputs that can require judgement:
Credit spreads
Credit spreads reflect the additional yield that a market participant would demand for taking exposure to the credit risk
of an instrument. The credit spread for an instrument forms part of the yield used in a discounted cash flow calculation.
In general a significant increase in a credit spread in isolation will result in a movement in fair value that is unfavourable
for the holder of a financial instrument.
Discount rates
Discount rates are the interest rates used to discount future cash flows in the discounted cash flow valuation method.
The discount rate takes into account time value of money and uncertainty of cash flows.
Volatilities
Volatility is a key input in the valuation of derivative products containing optionality. Volatility is a measure of the
variability or uncertainty in returns for a given derivative underlying. It represents an estimate of how much a
particular underlying instrument, parameter or index will change in value over time.
Cash flows
Cash flows relate to the future cash flows which can be expected from the instrument and requires judgement.
Measurement of financial assets and liabilities at level 2
The table below sets out information about the valuation techniques used at the end of the reporting period in
measuring financial instruments categorised as level 2 in the fair value hierarchy:
Valuation basis/
techniques Main inputs
Assets
Non-sovereign and non-bank cash placements Discounted cash flows Discount rates
Reverse repurchase agreements and cash collateral on Discounted cash flows Yield curve
securities borrowed Black-Scholes Volatilities
Bank debt securities Discounted cash flows Swap curves and
NCD curves
Other debt securities Discounted cash flows Swap curves and
NCD curves
Derivative financial instruments Discounted cash flows Yield curve
Black-Scholes Volatilities
Investment portfolio Comparable quoted Net assets
inputs
Loans and advances to customers Discounted cash flows Swap curves and
discount rates
Liabilities
Derivative financial instruments Discounted cash flows Yield curve
Black-Scholes Volatilities
Other trading liabilities Discounted cash flows Discount rates
Repurchase agreements and cash collateral on securities lent Discounted cash flows Discount rates
Customer accounts (deposits) Discounted cash flows Swap curves
Debt securities in issue Discounted cash flows Swap curves
Other liabilities Discounted cash flows Discount rates
Fair value of financial assets and liabilities measured at amortised cost
At 30 September 2014 Carrying Fair
R'million value value
Assets
Cash and balances at central banks 5 946 5 946
Loans and advances to banks 27 944 27 942
Non-sovereign and non-bank cash placements 10 379 10 379
Sovereign debt securities 3 522 3 623
Bank debt securities 12 366 12 731
Other debt securities 6 987 7 271
Loans and advances to customers 149 711 150 005
Own originated loans and advances to customers securitised 3 055 3 055
Other loans and advances 508 508
Other securitised assets 804 804
Other assets 525 525
Loans to group companies 2 231 2 231
223 978 225 020
Liabilities
Deposits by banks 23 644 23 942
Repurchase agreements and cash collateral on securities lent 10 835 10 844
Customer accounts (deposits) 200 212 200 658
Debt securities in issue 2 278 2 540
Liabilities arising on securitisation of own originated loans and advances 970 970
Liabilities arising on securitisation of other assets 154 154
Other liabilities 564 564
Subordinated liabilities 10 645 11 629
249 302 251 301
Date: 20/11/2014 08:59:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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