Wrap Text
Reviewed Preliminary Condensed Consolidated Financial Results for the year ended 31 March 2016
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 2016
Consolidated income statement
For the year to 31 March Reviewed Audited
R'million 2016 2015
Interest income 23 515 19 587
Interest expense (16 803) (14 066)
Net interest income 6 712 5 521
Fee and commission income 1 945 1 661
Fee and commission expense (207) (207)
Investment income 1 356 1 420
Trading income arising from
– customer flow 293 290
– balance sheet management and other trading activities 298 260
Other operating (loss)/income (9) 1
Total operating income before impairment losses on loans and advances 10 388 8 946
Impairment losses on loans and advances (517) (455)
Operating income 9 871 8 491
Operating costs (5 537) (4 818)
Operating profit before acquired intangibles 4 334 3 673
Amortisation of acquired intangibles (39) –
Profit before taxation 4 295 3 673
Taxation on operating profit before acquired intangibles (831) (545)
Taxation on acquired intangibles 11 –
Profit after taxation 3 475 3 128
Calculation of headline earnings
For the year to 31 March Reviewed Audited
R'million 2016 2015
Profit after taxation 3 475 3 128
Preference dividends paid (120) (114)
Earnings attributable to ordinary shareholders 3 355 3 014
Headline adjustments, net of taxation* 94 –
Gain on available-for-sale assets recycled to the income statement (13) –
Write down of non-current assets classified as held for sale 107 –
Headline earnings attributable to ordinary shareholders 3 449 3 014
* These amounts are net of taxation of R19.3 million (2015: Rnil).
Consolidated statement of total comprehensive income
For the year to 31 March Reviewed Audited
R'million 2016 2015
Profit after taxation 3 475 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** (699) (619)
Fair value movements on available-for-sale assets taken directly to other comprehensive income** (717) 322
Gain on realisation of available-for-sale assets recycled through the income statement** (13) –
Foreign currency adjustments on translating foreign operations 1 040 602
Total comprehensive income 3 086 3 433
Total comprehensive income attributable to ordinary shareholders 2 966 3 319
Total comprehensive income attributable to perpetual preference shareholders 120 114
Total comprehensive income 3 086 3 433
** These amounts are net of taxation of R515.3 million (2015: R101.6 million).
Condensed consolidated statement of changes in equity
For the year to 31 March Reviewed Audited
R'million 2016 2015
Balance at the beginning of the year 28 899 25 601
Total comprehensive income 3 086 3 433
Dividends paid to ordinary shareholders – (21)
Dividends paid to perpetual preference shareholders (120) (114)
Balance at the end of the year 31 865 28 899
Condensed consolidated cash flow statement
For the year to 31 March Reviewed Audited
R'million 2016 2015
Net cash inflow from operating activities 2 469 3 467
Net cash outflow from investing activities (499) (198)
Net cash outflow from financing activities (43) (385)
Effects of exchange rate changes on cash and cash equivalents 773 439
Net increase in cash and cash equivalents 2 700 3 323
Cash and cash equivalents at the beginning of the year 23 783 20 460
Cash and cash equivalents at the end of the year 26 483 23 783
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
At 31 March Reviewed Audited
R'million 2016 2015
Assets
Cash and balances at central banks 7 801 6 261
Loans and advances to banks 26 779 33 422
Non-sovereign and non-bank cash placements 9 858 10 540
Reverse repurchase agreements and cash collateral on securities borrowed 38 912 10 095
Sovereign debt securities 41 325 31 378
Bank debt securities 13 968 17 332
Other debt securities 12 761 12 749
Derivative financial instruments 15 843 15 178
Securities arising from trading activities 992 1 289
Investment portfolio 6 360 9 972
Loans and advances to customers 207 272 172 993
Own originated loans and advances to customers securitised 7 967 4 535
Other loans and advances 367 472
Other securitised assets 115 618
Interests in associated undertakings 5 145 60
Deferred taxation assets 116 88
Other assets 3 656 1 262
Property and equipment 236 192
Investment properties 1 80
Goodwill 171 –
Intangible assets 524 190
Loans to group companies 5 460 3 268
Non-current assets classified as held for sale – 732
405 629 332 706
Liabilities
Deposits by banks 37 242 29 792
Derivative financial instruments 13 424 12 401
Other trading liabilities 1 405 1 623
Repurchase agreements and cash collateral on securities lent 16 916 16 556
Customer accounts (deposits) 279 736 221 377
Debt securities in issue 7 665 5 517
Liabilities arising on securitisation of own originated loans and advances 809 1 089
Current taxation liabilities 671 1 186
Deferred taxation liabilities 122 76
Other liabilities 5 042 3 741
363 032 293 358
Subordinated liabilities 10 732 10 449
373 764 303 807
Equity
Ordinary share capital 32 32
Share premium 14 885 14 885
Other reserves 566 764
Retained income 16 382 13 218
Total equity 31 865 28 899
Total liabilities and equity 405 629 332 706
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 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 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.
The following table sets out the LCR for the group and bank:
Investec Bank Limited Investec Bank Limited
Solo – Consolidated Group –
R'millions Total weighted value Total weighted value
High quality liquid assets (HQLA) 62 049 62 095
Net cash outflows 53 594 48 682
Actual LCR (%) 117.3 130.1
Required LCR (%) 70.0 70.0
The values in the table are calculated as the simple average of daily observations over the period 1 January 2016 to 31 March 2016 for Investec Bank Limited
(IBL) bank solo. 60 business day observations were used. Investec Bank Limited consolidated group values use daily values for IBL bank solo, while those for
other group entities use the average of January, February, March 2016 month-end values.
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 14.4% to
R3,449 million (2015: R3,014 million). Notwithstanding strong growth in
credit risk-weighted assets, the balance sheet remains sound with a capital
adequacy ratio of 14.6% (2015: 15.4%). For full information on the Investec
Group results, refer to the combined results of Investec plc and Investec
Limited on 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 2015.
Salient operational features for the year under review include:
Total operating income before impairment losses on loans and advances
increased by 16.1% to R10,388 million (2015: R8,946 million). The
components of operating income are analysed further below:
- Net interest income increased 21.6% to R6,712 million (2015:
R5,521 million) with the bank benefiting from a solid increase in its
loan portfolio.
- Net fee and commission income increased 19.5% to R1,738 million
(2015: R1,454 million) as a result of a good performance from the
private banking, corporate lending and corporate treasury businesses.
In addition, the acquisition of the Blue Strata group (refer to note under
additional information) had a positive impact on net fee and commission
income.
- Investment income decreased 4.5% to R1,356 million (2015:
R1,420 million). The bank's unlisted investments portfolio continued to
perform well. Following the creation of Investec Equity Partners (refer to
note under additional information) the bank will equity account its 45%
interest in the new vehicle which has a 31 December financial year-end.
- Trading income arising from customer flow and other trading activities
increased 7.5% to R591 million (2015: R550 million) reflecting higher
activity levels and foreign currency gains.
Impairments on loans and advances increased from R455 million to
R517 million. However, the credit loss charge as a percentage of average
gross core loans and advances has improved from 0.29% at 31 March 2015
to 0.26%. The percentage of default loans (net of impairments but before
taking collateral into account) to core loans and advances amounts to 1.06%
(2015: 1.46%).
The ratio of total operating costs to total operating income amounts to
53.3% (2015: 53.9%). Total operating expenses at R5,537 million were
14.9% higher than the prior year (2015: R4,818 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; and an increase in variable
remuneration given improved profitability.
As a result of the foregoing factors, profit before taxation and acquired
intangibles increased by 18.0% to R4,334 million (2015: R3,673 million).
ADDITIONAL INFORMATION
ACQUISITION OF BLUE STRATA
(REBRANDED INVESTEC IMPORT SOLUTIONS)
On 1 July 2015, Investec Bank Limited acquired the remaining 51.5% of
the Blue Strata group (since rebranded Investec Import Solutions) 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
31 March 2016, the operating income of Investec Import Solutions was
R204.9 million and the profit before taxation amounted to R68.2 million.
Investec Import Solutions provides import logistics and trade finance.
Their main source of revenue is commission earned from services and is
reflected in ‘fee and commission income'.
INVESTEC EQUITY PARTNERS
A new investment vehicle, Investec Equity Partners (IEP), was created on
11 January 2016 in which Investec holds a 45% stake alongside other
strategic investors who hold the remaining 55%. The bank transferred certain
portfolio investments to the value of R5.8 billion to IEP. In exchange the bank
received R0.7 billion in cash and 45% of the shares in IEP (R5.1 billion),
reflected as an associate on the balance sheet.
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, the Financial
Pronouncements as issued by the Financial Reporting Standards Council,
the JSE Limited Listings Requirements and the Companies Act 71, of 2008.
The accounting policies applied in the preparation of the results for the year
ended 31 March 2016 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 annual financial statements
for the year ended 31 March 2016 will be posted to stakeholders on
30 June 2016. These annual 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 Richard Wainwright
Chairman Chief Executive Officer
18 May 2016
REVIEW CONCLUSION
These preliminary condensed consolidated financial statements for the year
ended 31 March 2016 have been reviewed by KPMG Inc. and Ernst & Young
Inc., who expressed an unmodified review conclusion. A copy of the auditor's
review report is available for inspection at the company's registered office.
Analysis of assets and liabilities by measurement basis
Total
Total instruments
At 31 March 2016 instruments at amortised Non-financial
R'million at fair value cost instruments Total
Assets
Cash and balances at central banks – 7 801 – 7 801
Loans and advances to banks – 26 779 – 26 779
Non-sovereign and non-bank cash placements 3 9 855 – 9 858
Reverse repurchase agreements and cash collateral on securities borrowed 24 155 14 757 – 38 912
Sovereign debt securities 37 607 3 718 – 41 325
Bank debt securities 6 104 7 864 – 13 968
Other debt securities 10 532 2 229 – 12 761
Derivative financial instruments 15 843 – – 15 843
Securities arising from trading activities 992 – – 992
Investment portfolio 6 360 – – 6 360
Loans and advances to customers 12 241 195 031 – 207 272
Own originated loans and advances to customers securitised – 7 967 – 7 967
Other loans and advances – 367 – 367
Other securitised assets – 115 – 115
Interests in associated undertakings – – 5 145 5 145
Deferred taxation assets – – 116 116
Other assets 324 2 500 832 3 656
Property and equipment – – 236 236
Investment properties – – 1 1
Goodwill – – 171 171
Intangible assets – – 524 524
Loans to group companies – 5 460 – 5 460
114 161 284 443 7 025 405 629
Liabilities
Deposits by banks – 37 242 – 37 242
Derivative financial instruments 13 424 – – 13 424
Other trading liabilities 1 405 – – 1 405
Repurchase agreements and cash collateral on securities lent 2 509 14 407 – 16 916
Customer accounts (deposits) 12 059 267 677 – 279 736
Debt securities in issue 5 080 2 585 – 7 665
Liabilities arising on securitisation of own originated loans and advances – 809 – 809
Current taxation liabilities – – 671 671
Deferred taxation liabilities – – 122 122
Other liabilities 680 1 233 3 129 5 042
Subordinated liabilities – 10 732 – 10 732
35 157 334 685 3 922 373 764
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 (i.e. as prices) or indirectly
(i.e. derived from prices)
Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs)
Fair value category
Total
At 31 March 2016 instruments
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 24 155 – 24 155 –
Sovereign debt securities 37 607 37 607 – –
Bank debt securities 6 104 4 429 1 675 –
Other debt securities 10 532 10 532 – –
Derivative financial instruments 15 843 – 15 833 10
Securities arising from trading activities 992 992 – –
Investment portfolio 6 360 3 287 503 2 570
Loans and advances to customers 12 241 – 12 241 –
Other assets 324 324 – –
114 161 57 171 54 410 2 580
Liabilities
Derivative financial instruments 13 424 – 13 424 –
Other trading liabilities 1 405 576 829 –
Repurchase agreements and cash collateral on securities lent 2 509 – 2 509 –
Customer accounts (deposits) 12 059 – 12 059 –
Debt securities in issue 5 080 – 5 080 –
Other liabilities 680 – 680 –
35 157 576 34 581 –
Net assets 79 004 56 595 19 829 2 580
Transfers between level 1 and level 2
There were no transfers between level 1 and level 2 in the current year.
Level 3 instruments
The following table shows a reconciliation of the opening balances to the closing balances for level 3 financial instruments. All instruments are at fair value
through profit or loss.
R'million 2016
Balance at 1 April 2015 6 509
Total gains or losses included in the income statement 761
Purchases 483
Sales (5 379)
Issues 70
Settlements (397)
Transfers into level 3 103
Transfers out of level 3 332
Foreign exchange adjustments 98
Balance at 31 March 2016 2 580
For the year ended 31 March 2016, R103.3 million has been transferred into level 3 from level 2 as a result of the inputs to the valuation methods becoming
unobservable in the market. R331.9 million related to instruments transferred from level 3 to level 2 as a result of inputs to the valuation methods becoming
more observable.
The following table quantifies the gains or (losses) included in the income statement recognised on level 3 financial instruments:
For the year to 31 March 2016
R'million Total Realised Unrealised
Total gains or (losses) included in the income statement for the year
Investment income 739 3 450 (2 711)
Trading income arising from customer flow 22 22 –
761 3 472 (2 711)
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
statement
Range which
Significant unobservable
Level 3 unobservable input Favourable Unfavourable
balance Valuation input has been changes changes
At 31 March 2016 sheet value method changed changed R'million R'million
Assets
Derivative financial instruments 10 1 (1)
Price multiple Net asset value (10%) – 10% 1 (1)
Investment portfolio 2 570 399 (327)
Price Change in
earnings PE multiple * 102 (79)
Other Various ** 297 (248)
Total 2 580 400 (328)
*The price-earnings multiple has been stressed on an investment-by-investment basis in order to obtain favourable and unfavourable valuations.
**These valuation sensitivities have been determined individually using varying scenario-based techniques to obtain the favourable and unfavourable valuations.
In determining the value of level 3 financial instruments, the following is a principal input that can require judgement:
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 year in measuring financial instruments categorised
as level 2 in the fair value hierarchy:
Valuation basis/techniques Main assumptions
Assets
Non-sovereign and non-bank cash placements Discounted cash flow model Yield curve
Discounted cash flow model Yield curve
Reverse repurchase agreements and cash collateral on securities borrowed Black-Scholes Volatilities
Bank debt securities Discounted cash flow model Yield curve
Discounted cash flow model Yield curve
Derivative financial instruments Black-Scholes Volatilities
Investment portfolio Adjusted quoted price Liquidity adjustment
Loans and advances to customers Discounted cash flow model Yield curve
Liabilities
Discounted cash flow model Yield curve
Derivative financial instruments Black-Scholes Volatilities
Other trading liabilities Discounted cash flow model Yield curve
Repurchase agreements and cash collateral on securities lent Discounted cash flow model Yield curve
Customer accounts (deposits) Discounted cash flow model Yield curve
Debt securities in issue Discounted cash flow model Yield curve
Other liabilities Discounted cash flow model Yield curve
Fair value of financial assets and liabilities at amortised cost
At 31 March 2016 Carrying
R'million amount Fair value
Assets
Cash and balances at central banks 7 801 7 801
Loans and advances to banks 26 779 26 779
Non-sovereign and non-bank cash placements 9 855 9 855
Reverse repurchase agreements and cash collateral on securities borrowed 14 757 14 757
Sovereign debt securities 3 718 3 798
Bank debt securities 7 864 8 778
Other debt securities 2 229 2 247
Loans and advances to customers 195 031 195 157
Own originated loans and advances to customers securitised 7 967 7 967
Other loans and advances 367 367
Other securitised assets 115 115
Other assets 2 500 2 500
Loans to group companies 5 460 5 460
284 443 285 581
Liabilities
Deposits by banks 37 242 37 399
Repurchase agreements and cash collateral on securities lent 14 407 14 452
Customer accounts (deposits) 267 677 268 191
Debt securities in issue 2 585 2 587
Liabilities arising on securitisation of own originated loans and advances 809 809
Other liabilities 1 233 1 233
Subordinated liabilities 10 732 11 692
334 685 336 363
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 26
Notice is hereby given that preference dividend number 26 has been declared
by the board from income reserves for the period 01 October 2015 to
31 March 2016 amounting to a gross preference dividend of 412.48350 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, 10 June 2016.
The relevant dates for the payment of dividend number 26 are as
follows:
Last day to trade cum-dividend Friday, 03 June 2016
Shares commence trading ex-dividend Monday, 06 June 2016
Record date Friday, 10 June 2016
Payment date Monday, 20 June 2016
Share certificates may not be dematerialised or rematerialised between
Monday, 06 June 2016 and Friday, 10 June 2016, both dates inclusive.
Additional information to take note of:
- Investec Bank Limited 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 350.61098 cents per preference share for
shareholders liable to pay the Dividend Tax and 412.48350 cents per
preference share for preference shareholders exempt from paying the
Dividend Tax.
By order of the board
N van Wyk
Company secretary
18 May 2016
Investec Bank Limited
(Registration number 1969/004763/06)
Share code: INLP ISIN: ZAE000048393
Registered office
100 Grayston Drive
Sandown, Sandton, 2196
Transfer secretaries
Computershare Investor Services (Pty) Ltd
70 Marshall Street, Johannesburg, 2001
Company Secretary:
N van Wyk
Sponsor: Investec Bank Limited
Directors:
F Titi (Chairman)
DM Lawrence^ (Deputy Chairman)
S Koseff^ (Group Chief Executive)
B Kantor^ (Group Managing Director)
RJ Wainwright^** (Chief Executive Officer)
SE Abrahams, ZBM Bassa
GR Burger^, D Friedland
KL Shuenyane, KXT Socikwa*
B Tapnack^, PRS Thomas
^ Executive.
* Did not seek re-election at the annual general
meeting on 06 August 2015.
** Appointed on 01 February 2016.
www.investec.com
Date: 19/05/2016 07:59:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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