Wrap Text
Reviewed preliminary condensed consolidated financial results for the year ended 31 March 2015
Investec Bank Limited
Incorporated in the Republic of South Africa
Registration number: 1969/004763/06
Share code: INLP
ISIN: ZAE000048393
Reviewed preliminary condensed consolidated financial results
for the year ended 31 March 2015
Consolidated income statement
For the year to 31 March Reviewed Audited
R'million 2015 2014
Interest income 19 587 17 063
Interest expense (14 066) (12 147)
Net interest income 5 521 4 916
Fee and commission income 1 661 1 567
Fee and commission expense (207) (174)
Investment income 1 420 334
Trading income arising from
– customer flow 290 343
– balance sheet management and other trading activities 260 235
Other operating income/(loss) 1 (5)
Total operating income before impairment losses on loans and advances 8 946 7 216
Impairment losses on loans and advances (455) (638)
Operating income 8 491 6 578
Operating costs (4 818) (4 113)
Profit before taxation 3 673 2 465
Taxation (545) (315)
Profit after taxation 3 128 2 150
Calculation of headline earnings
For the year to 31 March Reviewed Audited
R'million 2015 2014
Profit after taxation 3 128 2 150
Preference dividends paid (114) (108)
Earnings attributable to ordinary shareholders 3 014 2 042
Headline adjustments, net of taxation: – 44
Revaluation of investment properties^ – 46
Gain on realisation of available-for-sale assets recycled through the income statement^ – (2)
Headline earnings attributable to ordinary shareholders 3 014 2 086
^ Net of taxation Rnil (2014: R18.2 million).
Consolidated statement of total comprehensive income
For the year to 31 March Reviewed Audited
R'million 2015 2014
Profit after taxation 3 128 2 150
Other comprehensive income:
Items that may be reclassified to the income statement:
Fair value movements on cash flow hedges taken directly to other comprehensive income* (619) (75)
Fair value movements on available-for-sale assets taken directly to other
comprehensive income* 322 (212)
Gain on realisation of available-for-sale assets recycled to the income statement* – (2)
Foreign currency adjustments on translating foreign operations 602 414
Total comprehensive income 3 433 2 275
Total comprehensive income attributable to ordinary shareholders 3 319 2 167
Total comprehensive income attributable to perpetual preference shareholders 114 108
Total comprehensive income 3 433 2 275
*Net of taxation of R101.6 million (2014: R120.0 million).
Condensed consolidated statement of changes in equity
For the year to 31 March Reviewed Audited
R'million 2015 2014
Balance at beginning of the year 25 601 23 509
Total comprehensive income for the year 3 433 2 275
Dividends paid to ordinary shareholders (21) (75)
Dividends paid to perpetual preference shareholders (114) (108)
Balance at the end of the year 28 899 25 601
Condensed consolidated cash flow statement
For the year to 31 March Reviewed Audited
R'million 2015 2014
Net cash inflow from operating activities 3 266 7 417
Net cash outflow from investing activities (198) (159)
Net cash outflow from financing activities (184) (2 181)
Effects of exchange rate changes on cash and cash equivalents 439 410
Net increase in cash and cash equivalents 3 323 5 487
Cash and cash equivalents at the beginning of the year 20 460 14 973
Cash and cash equivalents at the end of the year 23 783 20 460
Cash and cash equivalents are 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
At 31 March Reviewed Audited
R'million 2015 2014
Assets
Cash and balances at central banks 6 261 5 927
Loans and advances to banks 33 422 32 672
Non-sovereign and non-bank cash placements 10 540 9 045
Reverse repurchase agreements and cash collateral on securities borrowed 10 095 6 442
Sovereign debt securities 31 378 34 815
Bank debt securities 17 332 21 538
Other debt securities 12 749 11 933
Derivative financial instruments 15 178 12 299
Securities arising from trading activities 1 289 1 316
Investment portfolio 9 972 8 834
Loans and advances to customers 172 993 148 562
Own originated loans and advances to customers securitised 4 535 2 822
Other loans and advances 472 552
Other securitised assets 618 1 503
Interests in associated undertakings 60 52
Deferred taxation assets 88 75
Other assets 1 262 1 771
Property and equipment 192 219
Investment properties 80 84
Intangible assets 190 102
Loans to group companies 3 268 1 924
Non-current assets classified as held for sale 732 731
332 706 303 218
Liabilities
Deposits by banks 29 792 22 407
Derivative financial instruments 12 401 9 259
Other trading liabilities 1 623 1 431
Repurchase agreements and cash collateral on securities lent 16 556 17 686
Customer accounts (deposits) 221 377 204 903
Debt securities in issue 5 517 5 366
Liabilities arising on securitisation of own originated loans and advances 1 089 1 369
Liabilities arising on securitisation of other assets – 156
Current taxation liabilities 1 186 1 288
Deferred taxation liabilities 76 61
Other liabilities 3 741 3 193
293 358 267 119
Subordinated liabilities 10 449 10 498
303 807 277 617
Equity
Ordinary share capital 32 32
Share premium 14 885 14 885
Other reserves 764 364
Retained income 13 218 10 320
28 899 25 601
Total liabilities and equity 332 706 303 218
Liquidity coverage ratio disclosure
National and supranational regulators have set standards designed to promote resiliency and harmonize liquidity risk supervision, to ensure a strong financial sector within the global economy.
Two key liquidity measures were defined:
Liquidity coverage ratio (LCR)
This ratio is designed to promote short-term resilience of the 1 month liquidity profile, by ensuring that banks have sufficient high quality liquid assets to meet potential outflows in a stressed environment.
Net stable funding ratio (NSFR)
This ratio is designed to capture structural issues over a longer time horizon by requiring banks to have a sustainable maturity structure of assets and liabilities.
In terms of South African Reserve Bank Regulations, banks are expected to commence reporting on the LCR in 2015 and the NSFR in 2018.
Investec Bank Limited Investec Bank Limited
Solo – Consolidated Group –
R'million Total weighted value Total weighted value
High quality liquid assets (HQLA) 41 206 41 318
Net cash outflows 41 402 42 507
Actual LCR (%) 100.3 98.7
Required LCR (%) 60.0 60.0
The values in the table are calculated as the simple average of daily observations over the period 1 January 2015 to 31 March 2015.
60 business day observations were used.
Commentary
These reviewed year-end 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 44.5% to R3,014 million (2014: R2,086 million).
The balance sheet remains strong with a capital adequacy ratio
of 15.4% (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 year ended 31 March 2014.
Salient operational features for the year under review include:
Total operating income before impairment losses on loans
and advances increased by 24.0% to R8,946 million
(2014: R7,216 million). The components of operating income are
analysed further below:
- Net interest income increased by 12.3% to R5,521 million
(2014: R4,916 million) with the bank benefiting from an
increase in its loan portfolio and a positive endowment
impact.
- Net fee and commission income increased 4.4% to
R1,454 million (2014: R1,393 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 year.
- Investment income increased to R1,420 million (2014:
R334 million) with the bank's unlisted investments portfolio
continuing to perform well.
- Trading income arising from customer flow and other trading
activities decreased to R550 million (2014: R578 million)
largely reflecting less activity in respect of balance sheet
management.
Impairments on loans and advances decreased from
R638 million to R455 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 0.29%.
The percentage of default loans (net of impairments but before
taking collateral into account) to core loans and advances
amounts to 1.46% (2014: 1.50%). The ratio of collateral to
default loans (net of impairments) remains satisfactory at
1.44 times (2014: 1.55 times).
The ratio of total operating costs to total operating income
amounts to 53.9% (2014: 57.0%). Total operating expenses
at R4,818 million were 17.1% higher than the prior year
(2014: R4,113 million) largely as a result of increased variable
remuneration given improved profitability.
As a result of the foregoing factors profit before taxation
increased by 49.0% to R3,673 million (2014: R2,465 million).
Accounting policies and disclosures
These 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 year ended 31 March 2015 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
annual financial statements for the year ended 31 March 2015
will be posted to stakeholders on 30 June 2015. These annual
financial statements will be available on the group's website on
the same date.
On behalf of the Board of Investec Bank Limited
Fani Titi Stephen Koseff Bernard Kantor
Chairman Chief Executive Officer Managing Director
20 May 2015
Review conclusion
KPMG Inc. and Ernst & Young Inc., the Group's independent
auditors, have reviewed the preliminary condensed consolidated
financial results and have expressed an unmodified review
conclusion on the preliminary condensed consolidated financial
results, which is available for inspection at the company's
registered office.
Investec Bank Limited
Incorporated in the Republic of South Africa
Registration number: 1969/004763/06
Share code: INLP
ISIN: ZAE000048393
Preference share dividend announcement
Non-redeemable non-cumulative non-participating preference
shares (preference shares)
Declaration of dividend number 24
Notice is hereby given that preference dividend number 24
has been declared by the Board from income reserves for
the period 01 October 2014 to 31 March 2015 amounting
to a gross preference dividend of 384.34536 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, 12 June 2015.
The relevant dates for the payment of dividend number 24 are
as follows:
Last day to trade cum-dividend Friday, 05 June 2015
Shares commence trading ex-dividend Monday, 08 June 2015
Record date Friday, 12 June 2015
Payment date Monday, 22 June 2015
Share certificates may not be dematerialised or rematerialised
between Monday, 08 June 2015 and Friday, 12 June 2015, both
dates inclusive.
Additional information to take note of:
- 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)
- The net dividend amounts to 326.69356 cents per preference
share for shareholders liable to pay the Dividend Tax and
384.34536 cents per preference share for preference
shareholders exempt from paying the dividend tax.
By order of the board
N van Wyk
Company secretary
20 May 2015
Registered office Transfer secretaries
100 Grayston Drive Computershare Investor
Sandown Services (Pty) Ltd
Sandton 70 Marshall Street
2196 Johannesburg, 2001
Investec Bank Limited
(Registration number: 1969/004763/06)
Share code: INLP
ISIN: ZAE000048393
Directors Company secretary
F Titi (Chairman) N van Wyk
D M Lawrence^ (Deputy Chairman)
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
Analysis of assets and liabilities at fair value and amortised cost
Financial
instruments
Financial at Non-
At 31 March 2015 instruments amortised financial
R'million at fair value cost instruments Total
Assets
Cash and balances at central banks – 6 261 – 6 261
Loans and advances to banks – 33 422 – 33 422
Non-sovereign and non-bank cash placements 3 10 537 – 10 540
Reverse repurchase agreements and cash collateral on securities borrowed 10 095 – – 10 095
Sovereign debt securities 27 824 3 554 – 31 378
Bank debt securities 7 617 9 715 – 17 332
Other debt securities 6 823 5 926 – 12 749
Derivative financial instruments 15 178 – – 15 178
Securities arising from trading activities 1 289 – – 1 289
Investment portfolio 9 972 – – 9 972
Loans and advances to customers 12 034 160 959 – 172 993
Own originated loans and advances to customers securitised – 4 535 – 4 535
Other loans and advances – 472 – 472
Other securitised assets – 618 – 618
Interests in associated undertakings – – 60 60
Deferred taxation assets – – 88 88
Other assets 2 875 385 1 262
Property and equipment – – 192 192
Investment properties – – 80 80
Intangible assets – – 190 190
Loans to group companies – 3 268 – 3 268
Non-current assets classified as held for sale – – 732 732
90 837 240 142 1 727 332 706
Liabilities
Deposits by banks – 29 792 – 29 792
Derivative financial instruments 12 401 – – 12 401
Other trading liabilities 1 623 – – 1 623
Repurchase agreements and cash collateral on securities lent 1 148 15 408 – 16 556
Customer accounts (deposits) 16 609 204 768 – 221 377
Debt securities in issue 3 366 2 151 – 5 517
Liabilities arising on securitisation of own originated loans and advances – 1 089 – 1 089
Current taxation liabilities – – 1 186 1 186
Deferred taxation liabilities – – 76 76
Other liabilities 690 835 2 216 3 741
Subordinated liabilities – 10 449 – 10 449
35 837 264 492 3 478 303 807
Financial instruments 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 the 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 31 March 2015 instruments fair value hierarchy
R'million at fair value Level 1 Level 2 Level 3
Financial assets
Non-sovereign and non-bank cash placements 3 – 3 –
Reverse repurchase agreements and cash collateral on securities borrowed 10 095 – 10 095 –
Sovereign debt securities 27 824 27 804 20 –
Bank debt securities 7 617 3 233 4 384 –
Other debt securities 6 823 6 787 – 36
Derivative financial instruments 15 178 – 15 423 (245)
Securities arising from trading activities 1 289 1 289 – –
Investment portfolio 9 972 2 640 614 6 718
Loans and advances to customers 12 034 – 12 034 –
Other assets 2 2 – –
90 837 41 755 42 573 6 509
Financial liabilities
Derivative financial instruments 12 401 – 12 401 –
Other trading liabilities 1 623 826 797 –
Repurchase agreements and cash collateral on securities lent 1 148 – 1 148 –
Customer accounts (deposits) 16 609 – 16 609 –
Debt securities in issue 3 366 – 3 366 –
Other liabilities 690 – 690 –
35 837 826 35 011 –
Net assets 55 000 40 929 7 562 6 509
The following table shows a reconciliation of the opening balances to the closing balances for the net level 3 instruments measured at
fair value through the income statement:
For the year to 31 March
R'million 2015
Balance as at 1 April 2014 5 928
Total gains or losses included in the income statement 693
Purchases 677
Sales (532)
Issues (110)
Settlements (161)
Transfers into level 3 15
Transfers out of level 3 (32)
Foreign exchange adjustments 31
Balance as at 31 March 2015 6 509
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 year ended 31 March 2015
R'million Total Realised Unrealised
Investment income 614 267 347
Trading income arising from customer flow 97 – 97
Trading loss arising from balance sheet management and
other trading activities (18) – (18)
Total gains included in the income statement 693 267 426
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:
Range Reflected in the income
Balance over which statement
sheet Significant unobservable Favourable Unfavourable
value unobservable input has been changes changes
At 31 March 2015 R'million Valuation method input changed stressed R'million R'million
Assets
Other debt securities 36 5 (4)
Discounted cash flows Discount rates (3%)/3% 5 (4)
Derivative financial instruments (245) 195 (118)
Black Scholes Volatilities (25%)/40% 58 (25)
Discounted cash flows Credit spreads (50bps)/ 23 (12)
50bps
Price earnings Change in PE * 69 (73)
multiple
Other Various ** 45 (8)
Investment portfolio 6 718 1 639 (1 111)
Price earnings Change in PE * 1 357 (893)
multiple
Other Various ** 282 (218)
Total 6 509 1 839 (1 233)
*The price-earnings multiple has been stressed on an investment by investment basis in order to obtain aggressive and conservative valuations.
**These valuation sensitivities have been stressed individually using varying scenario based techniques to obtain the aggressive and conservative valuations.
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 a counter party.
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.
Price-earnings multiple
The price-to-earnings ratio is an equity valuation multiple. It is a key driver in the valuation of unlisted investments.
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
securities borrowed Discounted cash flows Yield curve
Black-Scholes Volatilities
Sovereign debt securities Discounted cash flows Discount rates
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 inputs Net assets
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 at amortised cost
At 31 March 2015 Carrying Fair
R'million value value
Financial assets
Cash and balances at central banks 6 261 6 261
Loans and advances to banks 33 422 33 422
Non-sovereign and non-bank cash placements 10 537 10 543
Sovereign debt securities 3 554 3 648
Bank debt securities 9 715 9 993
Other debt securities 5 926 6 020
Loans and advances to customers 160 959 161 072
Own originated loans and advances to customers securitised 4 535 4 535
Other loans and advances 472 472
Other securitised assets 618 618
Other assets 875 875
Loans to group companies 3 268 3 268
240 142 240 727
Financial liabilities
Deposits by banks 29 792 30 005
Repurchase agreements and cash collateral on securities lent 15 408 15 395
Customer accounts (deposits) 204 768 206 029
Debt securities in issue 2 151 2 166
Liabilities arising on securitisation of own originated loans and advances 1 089 1 089
Other liabilities 835 835
Subordinated liabilities 10 449 10 593
264 492 266 112
www.investec.com
Sponsor
Investec Bank Limited
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