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Reviewed interim condensed consolidated financial results for the six months ended 30 September 2015
Investec Bank Limited
Incorporated in the Republic of South Africa
Registration number: 1969/004763/06
Share code: INLP
ISIN: ZAE000048393
Reviewed interim condensed consolidated financial results
for the six months ended 30 September 2015
Consolidated income statement
Reviewed Reviewed Audited
Six months to Six months to Year to
30 September 30 September 31 March
R'million 2015 2014 2015
Interest income 10 908 9 536 19 587
Interest expense (7 847) (6 777) (14 066)
Net interest income 3 061 2 759 5 521
Fee and commission income 950 791 1 661
Fee and commission expense (71) (101) (207)
Investment income 1 002 703 1 420
Trading income arising from
– customer flow 166 91 290
– balance sheet management and other trading activities 100 107 260
Other operating (loss)/income (9) – 1
Total operating income before impairment losses on loans and advances 5 199 4 350 8 946
Impairment losses on loans and advances (287) (219) (455)
Operating income 4 912 4 131 8 491
Operating costs (2 811) (2 195) (4 818)
Operating profit before acquired intangibles 2 101 1 936 3 673
Amortisation of acquired intangibles (13) – –
Profit before taxation 2 088 1 936 3 673
Taxation on operating profit before acquired intangibles (307) (242) (545)
Taxation on acquired intangibles 4 – –
Profit after taxation 1 785 1 694 3 128
Calculation of headline earnings
Reviewed Reviewed Audited
Six months to Six months to Year to
30 September 30 September 31 March
R'million 2015 2014 2015
Profit after taxation 1 785 1 694 3 128
Preference dividends paid (59) (56) (114)
Earnings attributable to ordinary shareholders 1 726 1 638 3 014
Headline adjustments, net of taxation 81 6 –
(Gain)/loss on realisation of available-for-sale assets recycled through
the income statement^ (13) 6 –
Write down of non-current assets classified as held for sale^ 94 – –
Headline earnings attributable to ordinary shareholders 1 807 1 644 3 014
^Net of taxation of (R31.5 million) [six months to 30 September 2014: (R2.5 million); year to 31 March 2015: Rnil].
Consolidated statement of total comprehensive income
Reviewed Reviewed Audited
Six months to Six months to Year to
30 September 30 September 31 March
R'million 2015 2014 2015
Profit after taxation 1 785 1 694 3 128
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* (343) (103) (619)
Fair value movements on available-for-sale assets taken directly to other
comprehensive income* (348) 173 322
(Gain)/loss on realisation of available-for-sale assets recycled
through the income statement* (13) 6 –
Foreign currency adjustments on translating foreign operations 694 291 602
Total comprehensive income 1 775 2 061 3 433
Total comprehensive income attributable to ordinary shareholders 1 716 2 005 3 319
Total comprehensive income attributable to perpetual preference
shareholders 59 56 114
Total comprehensive income 1 775 2 061 3 433
* Net of taxation of (R312.2 million) [six months to 30 September 2014: R7.9 million; year to 31 March 2015: (R101.0 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 2015 2014 2015
Balance at the beginning of the period 28 899 25 601 25 601
Total comprehensive income 1 775 2 061 3 433
Dividends paid to ordinary shareholders – (20) (21)
Dividends paid to perpetual preference shareholders (59) (56) (114)
Balance at the end of the period 30 615 27 586 28 899
Condensed consolidated cash flow statement
Reviewed Reviewed Audited
Six months to Six months to Year to
30 September 30 September 31 March
R'million 2015 2014 2015
Net cash inflow from operating activities 32 3 118 3 467
Net cash outflow from investing activities (418) (49) (198)
Net cash (outflow)/inflow from financing activities (100) 72 (385)
Effects of exchange rate changes on cash and cash equivalents 482 231 439
Net (decrease)/increase in cash and cash equivalents (4) 3 372 3 323
Cash and cash equivalents at the beginning of the period 23 783 20 460 20 460
Cash and cash equivalents at the end of the period 23 779 23 832 23 783
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
Reviewed Audited Reviewed
At 30 September 31 March 30 September
R'million 2015 2015 2014
Assets
Cash and balances at central banks 6 698 6 261 5 946
Loans and advances to banks 24 913 33 422 27 944
Non-sovereign and non-bank cash placements 11 435 10 540 10 403
Reverse repurchase agreements and cash collateral on securities
borrowed 23 267 10 095 6 764
Sovereign debt securities 34 850 31 378 32 929
Bank debt securities 15 829 17 332 22 585
Other debt securities 14 024 12 749 11 836
Derivative financial instruments 14 491 15 178 12 917
Securities arising from trading activities 3 354 1 289 2 100
Investment portfolio 10 625 9 972 8 969
Loans and advances to customers 188 532 172 993 162 307
Own originated loans and advances to customers securitised 7 310 4 535 3 055
Other loans and advances 403 472 508
Other securitised assets 503 618 804
Interest in associated undertakings 53 60 56
Deferred taxation assets 98 88 84
Other assets 4 879 1 262 1 118
Property and equipment 236 192 201
Investment properties 1 80 85
Goodwill 172 – –
Intangible assets 557 190 102
Loans to group companies 2 806 3 268 2 231
Non-current assets classified as held for sale 601 732 731
365 637 332 706 313 675
Liabilities
Deposits by banks 32 539 29 792 23 644
Derivative financial instruments 13 088 12 401 9 534
Other trading liabilities 1 949 1 623 1 714
Repurchase agreements and cash collateral on securities lent 14 368 16 556 12 511
Customer accounts (deposits) 250 099 221 377 217 550
Debt securities in issue 6 452 5 517 5 401
Liabilities arising on securitisation of own originated loans and advances 957 1 089 970
Liabilities arising on securitisation of other assets – – 154
Current taxation liabilities 746 1 186 1 093
Deferred taxation liabilities 221 76 141
Other liabilities 4 195 3 741 2 732
324 614 293 358 275 444
Subordinated liabilities 10 408 10 449 10 645
335 022 303 807 286 089
Equity
Ordinary share capital 32 32 32
Share premium 14 885 14 885 14 885
Other reserves 848 764 802
Retained income 14 850 13 218 11 867
Total equity 30 615 28 899 27 586
Total liabilities and equity 365 637 332 706 313 675
Liquidity coverage ratio disclosure
The objective of the Liquidity Coverage ratio (LCR) is to promote the short-term resilience of the liquidity risk profile of banks by
ensuring that they have sufficient high quality liquid assets to survive a significant stress scenario lasting 30 calendar days. The LCR
requirement was phased in at 60% on 1 January 2015, and will increase by 10% each year to 100% on 1 January 2019.
In accordance with the provisions of section 6(6) of the South African Banks Act 1990 (Act No. 94 of 1990), banks are directed to
comply with the relevant LCR disclosure requirements, as set out in Directive 6/2014 and Directive 11/2014. This disclosure is in
accordance with Pillar 3 of the Basel III liquidity accord.
Investec Bank Limited Investec Bank Limited
Solo – Consolidated Group –
R'million Total weighted value Total weighted value
High quality liquid assets (HQLA) 50 651 50 802
Net cash outflows 43 452 41 250
Actual LCR (%) 118.3 125.0
Required LCR (%) 60.0 60.0
The values in the table are calculated as the simple average of daily observations over the period 1 July 2015 to 30 September 2015.
57 business day observations were used.
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 9.9% to R1,807 million (2014: R1,644 million).
The balance sheet remains strong with a capital adequacy
ratio of 14.5% (31 March 2015:15.4%). 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 2014.
Salient operational features for the period under review include:
Total operating income before impairment losses on loans
and advances increased by 19.5% to R5,199million (2014:
R4,350 million). The components of operating income are
analysed further below:
- Net interest income increased 10.9% to R3,061 million
(2014: R2,759 million) with the bank benefiting from a solid
increase in its loan portfolio.
- Net fee and commission income increased 27.4% to
R879 million (2014: R690 million) as a result of a good
performance from the private banking professional
finance business and the corporate lending and treasury
businesses. In addition, the acquisition of the Blue Strata
group (refer below) had a positive impact on net fee and
commission income.
- Investment income increased 42.5% to R1,002 million (2014:
R703 million) with the bank's unlisted investments portfolio
continuing to perform well.
- Trading income arising from customer flow and other
trading activities increased 34.3% to R266 million (2014:
R198 million) largely reflecting increased activity levels and
foreign currency gains.
Impairments on loans and advances increased from R219 million
to R287 million. The credit loss charge as a percentage of
average gross core loans and advances has remained in line
with 31 March 2015 at 0.28%. The percentage of default loans
(net of impairments but before taking collateral into account)
to core loans and advances amounts to 1.13% (31 March
2015: 1.46%). The ratio of collateral to default loans (net of
impairments) remains satisfactory at 1.68 times (31 March 2015:
1.44 times).
The ratio of total operating costs to total operating income
amounts to 54.1% (2014: 50.5%). Total operating expenses at
R2,811 million were 28.1% higher than the prior period (2014:
R2,195 million) largely as a result of: an increase in headcount
and system infrastructure costs to support growth initiatives;
the acquisition of the Blue Strata group (refer below); and an
increase in variable remuneration given improved profitability.
As a result of the foregoing factors profit before taxation and
acquired intangibles increased by 8.5% to R2,101 million
(2014: R1,936 million).
Additional information
Acquisition of Blue Strata
On 1 July 2015, Investec Bank Limited acquired the remaining
51.5% of the Blue Strata group and in doing so obtained control.
Investec Bank Limited paid R367 million for the additional
51.5% interest. For the post acquisition period 1 July 2015 to
30 September 2015, the operating income of the Blue Strata
group was R61.9 million and the profit before taxation amounted
to R28.1 million. Blue Strata group's business is import logistics
and trade finance. Their main source of revenue is commission
earned from services and is reflected in ‘fee and commission
income'.
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 six months ended 30 September 2015 are consistent
with those adopted in the financial statements for the year ended
31 March 2015.
The financial results have been prepared under the supervision
of Glynn Burger, the Group Risk and Finance Director.
The interim financial statements for the six months ended
30 September 2015 will be posted to stakeholders on
30 November 2015. These interim 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
18 November 2015
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 reviewed interim condensed consolidated financial
results, which is available for inspection at the company's
registered office.
Analysis of assets and liabilities by measurement basis
Total
instruments
Total at Non-
At 30 September 2015 instruments amortised financial
R'million at fair value cost instruments Total
Assets
Cash and balances at central banks – 6 698 – 6 698
Loans and advances to banks – 24 913 – 24 913
Non-sovereign and non-bank cash placements 3 11 432 – 11 435
Reverse repurchase agreements and cash collateral on securities borrowed 16 354 6 913 – 23 267
Sovereign debt securities 31 183 3 667 – 34 850
Bank debt securities 7 056 8 773 – 15 829
Other debt securities 8 961 5 063 – 14 024
Derivative financial instruments 14 491 – – 14 491
Securities arising from trading activities 3 354 – – 3 354
Investment portfolio 10 625 – – 10 625
Loans and advances to customers 11 583 176 949 – 188 532
Own originated loans and advances to customers securitised – 7 310 – 7 310
Other loans and advances – 403 – 403
Other securitised assets – 503 – 503
Interests in associated undertakings – – 53 53
Deferred taxation assets – – 98 98
Other assets 324 1 699 2 856 4 879
Property and equipment – – 236 236
Investment properties – – 1 1
Goodwill – – 172 172
Intangible assets – – 557 557
Loans to group companies – 2 806 – 2 806
Non-current assets classified as held for sale – – 601 601
103 934 257 129 4 574 365 637
Liabilities
Deposits by banks – 32 539 – 32 539
Derivative financial instruments 13 088 – – 13 088
Other trading liabilities 1 949 – – 1 949
Repurchase agreements and cash collateral on securities lent 2 613 11 755 – 14 368
Customer accounts (deposits) 15 641 234 458 – 250 099
Debt securities in issue 3 859 2 593 – 6 452
Liabilities arising on securitisation of own originated loans and advances – 957 – 957
Current taxation liabilities – – 746 746
Deferred taxation liabilities – – 221 221
Other liabilities 759 391 3 045 4 195
Subordinated liabilities – 10 408 – 10 408
37 909 293 101 4 012 335 022
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
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
At 30 September 2015 instruments Fair value category
R'million at fair value Level 1 Level 2 Level 3
Assets
Non-sovereign and non-bank cash placements 3 – 3 –
Reverse repurchase agreements and cash collateral on securities borrowed 16 354 – 16 354 –
Sovereign debt securities 31 183 31 183 – –
Bank debt securities 7 056 4 933 2 123 –
Other debt securities 8 961 8 961 – –
Derivative financial instruments 14 491 – 14 752 (261)
Securities arising from trading activities 3 354 2 942 412 –
Investment portfolio 10 625 2 098 901 7 626
Loans and advances to customers 11 583 – 11 583 –
Other assets 324 – 324 –
103 934 50 117 46 452 7 365
Liabilities
Derivative financial instruments 13 088 – 13 088 –
Other trading liabilities 1 949 740 1 209 –
Repurchase agreements and cash collateral on securities lent 2 613 – 2 613 –
Customer accounts (deposits) 15 641 – 15 641 –
Debt securities in issue 3 859 – 3 859 –
Other liabilities 759 – 759 –
37 909 740 37 169 –
Net assets 66 025 49 377 9 283 7 365
Transfers between level 1 and level 2
There were no transfers between level 1 and level 2 in the current period.
Level 3 instruments
The following table shows a reconciliation of the opening balances to the closing balances for financial instruments in level 3 at fair
value category. All instruments are at fair value through profit and loss.
R'million 2015
Balance as at 1 April 2015 6 509
Total gains or losses included in the current period 797
Purchases 574
Sales (444)
Issues (40)
Settlements (80)
Transfers into level 3 90
Transfers out of level 3 (44)
Foreign exchange adjustments 3
Balance at 30 September 2015 7 365
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 included in the income statement recognised on level 3 financial instruments:
For the six months to 30 September 2015
R'million Total Realised Unrealised
Total gains included in the income statement for the period
Investment income 698 125 573
Trading income arising from customer flow 53 – 53
Trading income arising from balance sheet management and other trading
activities 46 – 46
797 125 672
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
value unobservable input has been changes changes
At 30 September 2015 R'million Valuation method input changed stressed R'million R'million
Assets
Derivative financial instruments (261) 140 (55)
Black Scholes Volatilities (25%)/40% 48 (29)
Discounted cash flows Credit spreads (50bps)/ 11 (9)
50bps
Price earnings Change in PE * 41 –
multiple
Other Various ** 40 (17)
Investment portfolio 7 626 850 (1 154)
Price earnings Change in PE * 680 (919)
multiple
Other Various ** 170 (235)
Total 7 365 990 (1 209)
*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 of a counterparty.
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 asset.
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 exposure. 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 flow model Discount rates
Reverse repurchase agreements and cash collateral on Discounted cash flow model Discount rates
securities borrowed Black-Scholes Volatilities
Bank debt securities Discounted cash flow model Swap curves and NCD curves
Derivative financial instruments Discounted cash flow model Yield curve
Black-Scholes Volatilities
Securities arising from trading activities Discounted cash flow model Discount rates
Investment portfolio Comparable quoted inputs Net assets
Loans and advances to customers Discounted cash flow model Swap curves and discount rates
Other assets Discounted cash flow model Discount rates
Liabilities
Derivative financial instruments Discounted cash flow model Yield curve
Black-Scholes Volatilities
Other trading liabilities Discounted cash flow model Discount rates
Repurchase agreements and cash collateral on securities lent Discounted cash flow model Discount rates
Customer accounts (deposits) Discounted cash flow model Swap curves
Debt securities in issue Discounted cash flow model Swap curves
Other liabilities Discounted cash flow model Discount rates
Fair value of financial assets and liabilities at amortised cost
At 30 September 2015 Carrying Fair
R'million value value
Assets
Cash and balances at central banks 6 698 6 698
Loans and advances to banks 24 913 24 913
Non-sovereign and non-bank cash placements 11 432 11 432
Reverse repurchase agreements and cash collateral on securities borrowed 6 913 6 913
Sovereign debt securities 3 667 3 738
Bank debt securities 8 773 9 030
Other debt securities 5 063 5 046
Loans and advances to customers 176 949 177 249
Own originated loans and advances to customers securitised 7 310 7 310
Other loans and advances 403 403
Other securitised assets 503 503
Other assets 1 699 1 699
Loan to group companies 2 806 2 806
257 129 257 740
Liabilities
Deposits by banks 32 539 31 195
Repurchase agreements and cash collateral on securities lent 11 755 11 700
Customer accounts (deposits) 234 458 234 162
Debt securities in issue 2 593 2 591
Liabilities arising on securitisation of own originated loans and advances 957 957
Other liabilities 391 391
Subordinated liabilities 10 408 10 408
293 101 291 404
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 25
Notice is hereby given that preference dividend number 25 has
been declared by the Board from income reserves for the period
01 April 2015 to 30 September 2015 amounting to a gross
preference dividend of 390.39534 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, 04 December 2015.
The relevant dates for the payment of dividend number 25 are
as follows:
Last day to trade cum-dividend Friday, 27 November 2015
Shares commence trading
ex-dividend Monday, 30 November 2015
Record date Friday, 04 December 2015
Payment date Monday, 14 December 2015
Share certificates may not be dematerialised or rematerialised
between Monday, 30 November 2015 and Friday, 04 December
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 331.83604 cents per preference
share for shareholders liable to pay the Dividend Tax and
390.39534 cents per preference share for preference
shareholders exempt from paying the dividend tax.
By order of the board
N van Wyk
Company Secretary
18 November 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
* Did not seek re-election at the annual general meeting on
06 August 2015
Sponsor:
Investec Bank Limited
www.investec.com
Date: 19/11/2015 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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