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Investec (comprising Investec plc and Investec Limited) – Interim Management Statement
Investec Limited Investec plc
Incorporated in the Republic of South Africa Incorporated in England and Wales
Registration number 1925/002833/06 Registration number 3633621
JSE ordinary share code: INL LSE share code: INVP
NSX ordinary share code: INL JSE share code: INP
BSE ordinary share code: INVESTEC ISIN: GB00B17BBQ50
ISIN: ZAE000081949
Investec (comprising Investec plc and Investec Limited) – Interim Management Statement released
on 6 February 2014
This Interim Management Statement is issued by Investec in accordance with the UK Listing Authority's
Disclosure and Transparency Rules. Unless stated otherwise, key trends and figures highlighted below refer
to the nine months ended 31 December 2013 and the corresponding period in the previous year.
Performance overview
Overall group results have been negatively impacted by the depreciation of the Rand: Pounds Sterling
exchange rate over the period.
Asset Management reported results moderately ahead of the prior year and Wealth & Investment’s results
increased substantially with both divisions benefiting from higher levels of average funds under management
and net inflows of GBP2 billion and GBP1.1 billion, respectively. Operating profit in the Specialist Banking
business increased, largely due to a strong performance from the South African banking business and an
improved performance in the UK banking business.
Salient features of the nine month period to 31 December 2013:
- Total operating income (excluding depreciation on operating leased assets) is 1% ahead of the prior
year.
- Impairment losses on loans and advances decreased by 26%.
- Operating costs increased by 2% compared to the prior year.
- Operating profit before goodwill, acquired intangibles, non-operating items and taxation and after
other non-controlling interests is 12% ahead of the prior year. An increase of 25% on a currency
neutral basis.
- Recurring income as a percentage of total operating income amounted to approximately 74% (2012:
71%), supported by higher average funds under management.
- The group had approximately GBP8.1 billion of cash and near cash available to support its activities
(Investec Limited:R68 billion; Investec plc: GBP4.2 billion).
- Since 31 March 2013 (the end of the group’s financial year):
o Third party assets under management decreased by 2% to GBP108.0 billion – an increase
of 6% on a currency neutral basis.
o Customer accounts (deposits) decreased by 10% to GBP22.1 billion – an increase of 3% on
a currency neutral basis.
o Core loans and advances decreased by 9% to GBP16.8 billion - an increase of 6% on a
currency neutral basis.
- Loans and advances as a percentage of customer deposits were 72.0% (31 March 2013:71.3%).
Strategic review
Investec Bank (Australia) Limited
Investec intends to transform its Australian banking business into a boutique operation focusing on
Corporate Advisory, Property Funds, Aviation, Commodity and Resource Finance, Project Finance,
Corporate and Acquisition Finance, and Financial Markets. The group’s priority is to improve returns and
maximise value while maintaining strong relationships with our client base. Independent advisers have been
appointed to identify alternatives for the bank’s Professional Finance and Asset Finance & Leasing divisions.
These alternatives for the Professional Finance and Asset Finance & Leasing divisions include a possible
sale, a joint venture with an appropriate supportive partner, or continuing with current operations. The group
expects to be in a position to communicate the outcome of this process by 31 March 2014. In the meantime,
these divisions will continue servicing clients as usual.
Kensington
Investec is exploring a potential sale of Kensington, the group's intermediary mortgage business in the UK,
having received certain expressions of interest. Investec has appointed Fenchurch Advisory as its adviser to
conduct this process. There can be no certainty any sale will take place. A further announcement will be
made, if and when appropriate. In the mean time, we continue to service Kensington clients as usual.
The group will hold a pre-close briefing on 20 March 2014.
On behalf of the board
Fani Titi (Joint Chairman), Sir David Prosser (Joint Chairman), Stephen Koseff (Chief Executive Officer) and
Bernard Kantor (Managing Director)
Notes:
1. The financial information on which this statement is based has not been reviewed and reported on by the
group’s auditors.
2. Please note that matters highlighted above may contain forward looking statements which are subject to
various risks and uncertainties and other factors, including, but not limited to:
– the further development of standards and interpretations under International Financial Reporting
Standards (IFRS) applicable to past, current and future periods, evolving practices with regard to
the interpretation and application of standards under IFRS.
– domestic and global economic and business conditions.
– market related risks.
• A number of these factors are beyond the group’s control.
• These factors may cause the group’s actual future results, performance or achievements in the
markets in which it operates to differ from those expressed or implied.
• Any forward looking statements made are based on the knowledge of the group at 6 February 2014.
3. The neutral currency calculation for the core earnings drivers assumes the Rand:Pound and Australian
Dollar:Pound closing exchange rates remain the same as at 31 December 2013 when compared to 31
March 2013. The neutral currency calculation for operating profit assumes the Rand:Pound and
Australian Dollar:Pound average exchange rates for the 9 month period to 31 December 2013 remain
the same as when compared to the 9 month period to 31 December 2012.
4. The group’s reporting currency is Pounds Sterling. Certain of the group’s operations are conducted by
entities outside the UK. The results of operations and the financial condition of the group’s individual
companies are reported in the local currencies in which they are domiciled, including Rands, Australian
Dollars, Euros and Dollars. These results are then translated into Pounds Sterling at the applicable
foreign currency exchange rates for inclusion in our combined consolidated financial statements. In the
case of the income statement, the weighted average rate for the relevant period is applied and, in the
case of the balance sheet, the relevant closing rate is used. The following table sets out the movements
in certain relevant exchange rates against Pounds Sterling over the period:
Nine months to Year to Nine months to
31-Dec-13 31-Mar-13 31-Dec-12
Currency Period Average Period Average Period Average
end end end
per GBP1.00
South African Rand 17.37 15.50 13.96 13.44 13.77 13.29
Australian Dollar 1.85 1.67 1.46 1.53 1.56 1.54
Euro 1.20 1.18 1.18 1.23 1.23 1.24
US Dollar 1.65 1.57 1.52 1.58 1.62 1.59
5. The following disclosures are made with respect to Basel quarterly disclosure requirements:
The group holds capital in excess of regulatory requirements targeting a minimum core/common equity
tier one capital ratio above 10% by March 2016 and a total capital adequacy ratio range of 14% to 17%
on a consolidated basis for each of Investec plc and Investec Limited respectively.
Investec Investec
plc^ IBP^ IBAL^ Limited^ IBL^
As at 31 Dec 2013 GBP 'mn GBP 'mn A$'mn ZAR 'mn ZAR 'mn
Core tier 1/common equity tier 1 capital before
deductions 1,267 1,452 573 22,586 23,515
Deductions (2) (6) (157) (313) (450)
Core tier 1/common equity tier 1 capital 1,265 1,446 416 22,899 23,965
Additional tier 1 capital before deductions 296 - - 4,231 1,381
Deductions (6) - - -
Total tier 1 capital 1,555 1,446 416 4,231 1,381
Tier 2 capital before deductions 828 676 133 10,120 10,602
Deductions (8) (6) - - -
Total tier 2 capital 820 670 133 10,120 10,602
Total capital deductions (49) (50) - - -
Total regulatory capital 2,326 2,066 549 37,250 35,948
Risk-weighted assets 13,404 12,331 3,343 247,347 237,771
Total capital requirements 1,072 986 434 23,498 22,588
Capital ratios
Core tier 1/common equity tier 1 ratio 9.4% 11.7% 12.4% 9.3% 10.1%
Tier 1 ratio 11.6% 11.7% 12.4% 11.0% 10.7%
Total capital ratio 17.4% 16.8% 16.4% 15.1% 15.1%
^ Where: IBP is Investec Bank plc consolidated. IBAL is Investec Bank (Australia) Limited and IBL is Investec Bank Limited. The
information for IBP includes IBAL on a Basel II basis. The information for Investec plc includes the information for IBP. The information
for Investec Limited includes the information for IBL. The Dec 2013 capital information for Investec plc and IBP are based on Basel II
capital requirements as applicable in the UK at that date. The Dec 2013 capital information for Investec Limited, IBL and IBAL are based
on Basel III capital requirements as currently applicable in South Africa and Australia, respectively.
Timetable:
Pre-close briefing: 20 March 2014
Year-end results: 31 March 2014
Release of year-end results: 22 May 2014
For further information please contact:
Investec Investor Relations
UK: +44 (0) 207 597 5546
South Africa: +27 (0) 11 286 7070
investorrelations@investec.com
Newgate Communications (UK PR advisers)
Jason Nisse / Alistair Kellie
+44 (0) 20 7680 6559
+44 (0) 7769 688 618
Brunswick (SA PR advisers)
Cecilia de Almeida
+27 (0) 11 502 7300
About Investec
Investec is an international specialist bank and asset manager that provides a diverse range of financial
products and services to a niche client base in three principal markets, the United Kingdom, South Africa and
Australia as well as certain other countries. The group was established in 1974 and currently has
approximately 8 200 employees.
Investec focuses on delivering distinctive profitable solutions for its clients in three core areas of activity
namely, Asset Management, Wealth & Investment and Specialist Banking.
In July 2002 the Investec group implemented a dual listed company structure with listings on the London and
Johannesburg Stock Exchanges. The combined group’s current market capitalisation is approximately
GBP3.4 billion.
6 February 2014
Date: 06/02/2014 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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