REG - Investec PLC - Half-year Report
16/11/2023 07:00
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RNS Number : 6771T Investec PLC 16 November 2023
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 share code: INL
LSE share code: INVP
NSX share code: IVD JSE share code: INP
ISIN: GB00B17BBQ50
BSE share code: INVESTEC
LEI: 2138007Z3U5GWDN3MY22
ISIN: ZAE000081949
LEI: 213800CU7SM6O4UWOZ70
Investec (comprising Investec plc and Investec Limited) - Reviewed combined
consolidated financial results for the six months ended 30 September 2023
Fani Titi, Group Chief Executive commented:
"The Group has delivered strong results against a difficult macroeconomic
backdrop which was characterised by high inflation, elevated global interest
rates and persistent market volatility. This performance was underpinned by
continued success in our client acquisition strategies, loan book growth and
the rising interest rate environment. Our client franchises reported solid
performance while the aggregate Group financial results also reflect the
impact of the conclusions of the strategic actions executed over the past 18
months. Our balance sheet remains strong and highly liquid, positioning us
well to support our clients in navigating the uncertain macroeconomic backdrop
and achieve our financial targets."
Basis of presentation
The average Rand / Pound Sterling exchange rate depreciated by approximately
18.6% in the 1H2024 relative to 1H2023, resulting in a significant difference
between reported and neutral currency performance. The comparability of the
Group's total period on period performance is affected by the financial
effects of previously announced strategic actions, some of which will result
in the Group performance being presented on a continuing and discontinued
basis in line with applicable accounting standards. We provide further details
on the structural strategic actions on page 22 below.
Significant strategic actions taken include:
• Combination of Investec Wealth & Investment UK (IW&I UK) with
the Rathbones Group, reflected as a discontinued operation in line with
applicable accounting principles, notwithstanding the strategic shareholding
in Rathbones which will be equity accounted for as an associate going forward
• An approximately R6.8 billion or c.£300 million share buy-back and
share repurchase programme, in line with the Group's strategy to optimise
capital in South Africa
• Disposal of the property management companies to Burstone Group
Limited (formerly known as Investec Property Fund (IPF)) and consequent
deconsolidation of IPF and reflection of IPF as a discontinued operation.
Going forward, IPF will be accounted for at fair value through profit and loss
• The restructure of The Bud Group Holdings (formerly known as IEP) in
the prior year to facilitate Investec's orderly exit
• The distribution of a 15% shareholding in Ninety One in the prior
year.
Key financial metrics
Given the nature of the IW&I UK and IPF transactions, the Group
essentially retains similar economic interest to these investments before and
after the transactions. In order to provide information that will be more
comparable to the future presentation of returns from these investments and
given their new holding structures, proforma information has been prepared as
if the transactions had been in effect from the beginning of the period, i.e.
IW&I UK has been presented as an equity accounted investment and IPF as an
investment at fair value through profit or loss. The measurement of the total
contribution to profit remains based on the accounting prior to loss of
control, and has not been adjusted for the change in holding structure.
£'millions Revenue Cost to income CLR Adjusted operating profit Adjusted EPS HEPS ROE ROTE DPS (pence) NAV per share (pence) TNAV per share (pence)
1H2024 1 043.8 53.3% 0.32% 441.4 38.7 36.9 14.6% 16.4% 15.5p 556.7 470.4
1H2023 960.7 55.6% 0.16% 397.1 32.9 32.0 12.9% 13.8% 13.5p 509.5 476.9
% change in £ 8.6% 11.2% 17.6% 15.3% 14.8% 9.3% (1.4%)
% change in Rands 28.8% 31.7 % 39.3% 29.6% 26.6% 25.3% 13.1%
Totals and variance determined in £'000 which may result in rounding
differences.
Group financial summary:
• Revenue benefitted from a double-digit growth in net interest income
driven by strong corporate loan growth and rising global interest rates.
Non-interest revenue from our banking and SA wealth and investment businesses
increased despite the significant economic headwinds that continued to prevail
in our core geographies, supported by increased client activity. This was
partially offset by the effects of the strategic actions, comprising the
cessation of equity accounting of Ninety One post distribution and The Bud
Group following the restructure in 2022 and the deconsolidation of IPF
• The cost to income ratio* improved to 53.3% (1H2023: 55.6%) as revenue
grew well ahead of costs. Total operating costs grew by 4.1% and increased by
12.3% in neutral currency. Continued investment in our people and technology
to support growth and inflationary pressures drove an increase in fixed costs.
Variable remuneration increased in line with business performance
• Pre-provision adjusted operating profit increased 14.3% to £487.7
million (1H2023: £426.5 million), benefitting from the strength and diversity
of our client franchises
• Asset quality remained solid with exposures well covered by
collateral. Expected credit loss (ECL) impairment charges increased to £46.3
million (1H2023: £29.4 million), resulting in a credit loss ratio (CLR) of
32bps (1H2023: 16bps), towards the upper end of the Group's through-the-cycle
(TTC) range of 25bps to 35bps. We have seen idiosyncratic client stresses with
no evidence of trend deterioration in the overall credit quality of the book
• Return on equity (ROE) of 14.6% (1H2023: 12.9%) is within the Group's
12% to 16% target range, return on tangible equity (ROTE) for the period under
review was 16.4% (1H2023: 13.8%)
• Net asset value (NAV) per share increased to 556.7p (31 March 2023:
510.3p), reflecting the strong earnings generation in the period under review
and the net gain recognised on completion of the IW&I UK combination with
Rathbones. Tangible net asset
value (TNAV) per share declined to 470.4p (31 March 2023: 474.6p). This
is due to our decision to adjust the carrying value of our strategic
investment in the Rathbones Group to reflect our proportionate share of
tangible equity in Rathbones, resulting in an intangible net asset value of
c.77p per share.
Key drivers
• Net core loans increased 4.0% annualised to £31.0 billion (31 March
2023: £30.4 billion) and grew by 8.7% annualised on a neutral currency basis;
largely driven by corporate lending in both core geographies and private
clients lending in South Africa
• Customer deposits increased 1.9% annualised to £39.9 billion (31
March 2023: £39.6 billion), an increase of 6.8% annualised in neutral
currency
• Funds under management (FUM) in Southern Africa increased by 2.0% to
£20.2 billion (31 March 2023: £19.8 billion), mainly driven by discretionary
net inflows of R7.3 billion and FX translation gains on dollar denominated
portfolios, partly offset by non-discretionary net outflows of R2.6 billion
• Investec Wealth & Investment UK FUM is now reported as part of the
Rathbones Group following the completion of the combination in September 2023.
Rathbones FUMA totalled £100.7 billion at 30 September 2023.
Balance sheet strength and strategic execution:
• The Group maintained strong capital and liquidity allowing us to
navigate the current volatile and uncertain environment, support our clients
and build to scale our identified growth initiatives
• The completion of the all-share combination of Investec Wealth &
Investment UK (IW&I UK) with Rathbones plc created a scalable platform
that will power future growth for the Group in the attractive UK wealth
segment
• The implementation of various capital optimisation strategies remain a
priority for the Group, with further progress made on the share repurchase
programme, as well as the disposal of the property management companies to
Burstone Group (formerly known as IPF). To date, Investec has repurchased
approximately 64.7 million shares or c.6.4% of shares in issue when the
programme was announced, deploying c.R6.8 billion or c.£300 million of excess
capital
• The Board has proposed an interim dividend of 15.5p per share (1H2023:
13.5p), an increase of 14.8% from prior period.
* Group cost-to-income ratio reduced by 2.0% in 1H2023 and 2.4%
in 1H2023 due to change in accounting treatment for IW&I UK and IPF.
Cost-to-income ratio excluding contribution from IW&I UK and IPF in 1H2024
and 1H2023 is 55.3% and 58.0% respectively.
Outlook
The Group is well positioned to continue supporting its clients
notwithstanding the uncertain macroeconomic outlook. We have strong capital
and liquidity to navigate the current environment and pursue our identified
growth initiatives in our chosen markets.
FY2024 guidance
Based on the macroeconomic outlook for our two core geographies, the Group
currently expects:
• The revenue momentum to be underpinned by moderate book growth,
elevated interest rates, continued client acquisition and activity levels
• The cost-to-income ratio to be below 55%
• The credit loss ratio to remain within the through-the-cycle (TTC)
range of 25bps to 35bps
- South Africa to normalise towards the lower-end of the TTC range of
20bps to 30bps
- The UK to report a credit loss ratio between 50bps and 60bps
• ROE to be above the mid-point of the Group's target range of 12% to
16%.
Key financial data
This announcement covers the results of Investec plc and Investec Limited
(together "the Investec Group" or "Investec" or "the Group") for the interim
period ending 30 September 2023 (1H2024). Unless stated otherwise,
comparatives relate to the Group's operations for the interim period ending 30
September 2022 (1H2023).
Basic earnings per share includes a gain of £361.8 million on the combination
of Investec Wealth & Investment UK with Rathbones plc, partly offset by
the net loss on deconsolidation of IPF totalling £93.8 million.
Performance 1H2024 1H2023 Variance % Neutral currency
change % change
Total operating income before expected credit losses (£'m) 1 043.8 960.7 83.0 8.6 % 17.3%
Operating costs (£'m) (556.1) (534.3) (21.8) 4.1 % 12.3%
Adjusted operating profit (£'m) 441.4 397.1 44.3 11.1 % 20.8%
Adjusted earnings attributable to shareholders (£'m) 329.8 298.2 31.6 10.6 % 19.8%
Adjusted basic earnings per share (pence) 38.7 32.9 5.8 17.6 % 27.4%
Basic earnings per share (pence) 69.6 50.6 19.0 37.5% 42.5%
Headline earnings per share (pence) 36.9 32.0 5.0 15.3% 24.1%
Dividend per share (pence) 15.5 13.5
Dividend payout ratio 40.1% 41.0%
CLR (credit loss ratio) 0.32% 0.16%
Cost to income ratio 53.3% 55.6%
ROE (return on equity) 14.6% 12.9%
ROTE (return on tangible equity) 16.4% 13.8%
Balance sheet 30 Sept 2023 31 March 2023 Variance % change Neutral currency % change
Funds under management (£'bn)
IW&I Southern Africa 20.2 19.8 0.4 2.0 % 6.4 %
Rathbones/ IW&I UK^ 100.7 40.7
Customer accounts (deposits) (£'bn) 39.9 39.6 0.4 1.0% 3.4%
Net core loans and advances (£'bn) 31.0 30.4 0.6 2.0% 4.3%
Cash and near cash (£'bn) 16.4 16.4 0.1 0.5% 2.7%
NAV per share (pence) 556.7 510.3 46.4 9.1% 9.3%
TNAV per share (pence) 470.4 474.6 (4.2) (0.9%) (0.7%)
Totals and variance determined in £'000 which may result in rounding
differences.
^ Following the all-share combination of IW&I UK and
Rathbones, IW&I UK now forms part of the Rathbones Group. As at 30
September 2023, Rathbones Group, of which Investec holds a 41.25% economic
interest, had funds under management of £100.7 billion.
Salient features by geography 1H2024 1H2023 Variance % change % change in Rands
Investec Limited (Southern Africa)
Adjusted operating profit (£'m) 205.9 230.6 -24.7 (10.7%) 5.6%
Cost to income ratio 52.5% 51.7%
ROE 16.0% 14.6%
ROTE 16.1% 14.8%
CET1 13.2% 14.1%
Leverage ratio 5.9% 7.1%
Customer accounts (deposits) (£'bn) 20.0 21.7 (1.7) (7.8%) 5.9 %
Net core loans and advances (£'bn) 14.7 15.9 (1.2) (7.5%) 6.3 %
Investec plc (UK & Other)
Adjusted operating profit (£'m) 235.4 166.5 68.9 41.4%
Cost to income ratio 53.9% 59.5%
ROE 13.6% 11.1%
ROTE 16.7% 12.6%
CET1 11.7% 11.1%
Leverage ratio 8.7% 8.1%
Customer accounts (deposits) (£'bn) 19.9 18.9 1.0 5.3 %
Net core loans and advances (£'bn) 16.3 15.3 1.0 6.5 %
Totals and variance determined in £'000 which may result in rounding
differences.
Enquiries
Investec Investor Relations
Results: Qaqambile Dwayi
Tel: +27 (0) 11 291 0129
General enquiries:
Tel: +27 (0) 11 286 7070 or investorrelations@investec.com
Brunswick (SA PR advisers)
Graeme Coetzee
Tel: +27 (0) 63 685 6053
Lansons (UK PR advisers)
Tom Baldock
Tel: +44 (0) 78 6010 1715
Presentation/conference call details
Investec management will host its annual results presentation live from London
on Thursday 16 November at 11h00 (SA)/9h00 (UK) time.
Please register for the presentation at: www.investec.com/investorrelations
A live video webcast of the presentation will be available on www.investec.com
About Investec
Investec partners with private, institutional, and corporate clients, offering
international banking, investments, and wealth management services in two
principal markets, South Africa, and the UK, as well as certain other
countries. The Group was established in 1974 and currently has 7,400+
employees.
Investec has a dual listed company structure with primary listings on the
London and Johannesburg Stock Exchanges.
Johannesburg and London
JSE Debt and Equity Sponsor: Investec Bank Limited
Group financial performance
Overview
Pre-provision adjusted operating profit increased 14.3% to £487.7 million
(1H2023: £426.5 million).
Revenue increased 8.6% to £1 043.8 million (1H2023: £960.7 million) and up
17.3% in neutral currency
Net interest income increased 12.3% to £682.6 million (1H2023: £607.8
million) driven by higher average interest earning assets and higher global
interest rates.
Non-interest revenue (NIR) increased 2.3% to £361.1 million (1H2023: £352.9
million).
• Net fee and commission income decreased 5.1% to £196.1 million
(1H2023: £206.7 million). Banking and wealth and investment businesses net
fees increased on a neutral currency basis relative to the prior period
despite significant economic headwinds that continue to prevail in our core
geographies; underpinned by increased client activity
• Investment income of £25.4 million (1H2023: £36.6 million) reflects
dividends received and realised gains on disposal of investments, partly
offset by fair value adjustments
• Share of post-taxation profit of associates and joint venture holdings
decreased to £39.1 million (1H2023: £60.4 million), largely driven by:
- Cessation of equity accounting following the distribution of Ninety One
in May 2022
- Cessation of equity accounting for IEP following a restructure in
November 2022
• Trading income arising from customer flow increased by 19.7% to £79.3
million from £66.2 million in the prior period, driven by increased
facilitation of hedging for clients by our Treasury Risk Solutions area,
higher client flow trading income in our Equity Capital Markets (ECM)
activities, as well as positive risk management gains from the hedging of the
remaining financial products run down book in the UK
• Net trading gains arising from balance sheet management and other
trading activities of £21.5 million compared to a loss of £10.3 million in
the prior period. These gains are as a result of unwinding certain existing
interest rate swap hedges when initiating the implementation of the structural
interest rate hedging programme in the UK; and gains arising from MTM
movements in the value of interest rate hedges on the balance sheet in South
Africa
• Other operating loss decreased significantly, largely due to the
non-repeat of the MTM losses reported in the prior period related to the MTM
on off balance sheet (Ninety One) shares held to meet non-equity settled share
schemes, this was before the final vestings were accelerated during 1H2023.
Expected credit loss (ECL) impairment charges increased 57.7% to £46.3
million (1H2023: £29.4 million) resulting in a credit loss ratio of 32bps
(1H2023: 16bps)
Asset quality remains solid, with exposures to a carefully defined target
market well covered by collateral. The increase in the ECL impairment charges
was primarily driven by specific impairments on exposures that migrated into
Stage 3 in both geographies. Recoveries from previously written off exposures
remained high in South Africa.
Operating costs increased 4.1% to £556.1 million (1H2023: £534.3 million)
and 12.3% in neutral currency
The cost to income ratio improved to 53.3% from 55.6% in 1H2023. Fixed
operating expenditure decreased 0.7%. Fixed operating costs increased by 7.5%
in neutral currency due to inflationary pressures and continued investment in
technology and people. Higher expenses primarily on personnel was due to
annual salary increases and growth in headcount as well as higher business
expenses due to increased business activity.
Taxation
The taxation charge on adjusted operating profit was £89.1 million (1H2023:
£79.7 million), resulting in an effective tax rate of 22.3% (1H2023: 24.2%).
In the UK, the effective tax rate is 22.3% (1H2023: 23.8%), reflecting the
weighted effective tax rate from multiple jurisdictions where Investec plc has
operations.
SA's effective tax rate is 22.3% (1H2023: 26.9%).
Funding and liquidity
Customer deposits increased 1.9% annualised to £39.9 billion (31 March 2023:
£39.6 billion) and increased by 6.8% annualised in neutral currency. Customer
deposits increased by 8.4% annualised to £19.9 billion for Investec plc and
increased by 5.3% annualised to R460.4 billion for Investec Limited since
March 2023. Cash and near cash of £16.4 billion (£8.7 billion in Investec
plc and R177.7 billion in Investec Limited) at 30 September 2023 represent
approximately 41.2% of customer deposits. Loans and advances to customers as a
percentage of customer deposits was 76.9% (1H2023: 76.4%, FY2023: 76.1%).
The Group comfortably exceeds Board-approved internal targets and Basel
liquidity requirements for the Liquidity Coverage Ratio (LCR) and Net Stable
Funding Ratio (NSFR
• Investec Bank Limited (consolidated Group) ended the six month period
to 30 September 2023 with the three-month average of its LCR at 183% and an
NSFR of 113%
• Investec plc reported a LCR of 393% and a NSFR of 146% at 30 September
2023.
Capital adequacy and leverage ratios
Capital and leverage ratios remain sound, ahead of regulatory requirements.
The CET1 and leverage ratio were 13.2% and 5.9% for Investec Limited (Advanced
Internal Ratings Based scope) and 11.7% and 8.7% for Investec plc
(Standardised approach) respectively.
Segmental performance
Wealth & Investment
Adjusted operating profit from the Wealth & Investment businesses
increased 12.1% to £53.3 million (1H2023: £47.6 million), positively
impacted by the net inflows in discretionary FUM in the Southern African
business and higher global interest rates, partly offset by the effects of
unfavourable market levels at key billing dates for fees.
Wealth & Investment Southern Africa UK & Other Total
1H2024 1H2023 Variance 1H2024 1H2023 Variance 1H2024 1H2023
£'m £'m £'m % % in Rands £'m £'m £'m % £'m £'m
Operating income 59.2 56.0 3.2 5.7% 25.4% 35.9 32.4 3.5 10.8% 95.1 88.4
Operating costs (41.7) (40.8) (0.9) 2.2% 21.1% - - - -% (41.7) (40.8)
Adjusted operating profit 17.5 15.2 2.3 15.1% 36.5% 35.9 32.4 3.5 10.8% 53.3 47.6
Totals and variance determined in £'000 which may result in rounding
differences.
Southern Africa Wealth & Investment (in Rands)
• Adjusted operating profit increased by 36.5% to R411 million (1H2023:
R301 million)
• Total FUM increased by 6.9% to R465.1 billion (31 March 2023: R435.1
billion) driven by discretionary and annuity net inflows of R7.3 billion,
reallocation of FUM previously reported by IW&I UK and positive foreign
currency translation gains on dollar denominated portfolios. Non-discretionary
FUM reported net outflows of R2.6 billion in the current period
• Revenue grew by 25.4% underpinned by inflows into local investment
products in the current and prior period as well as offshore investment
products in the prior years in discretionary and annuity portfolios.
Non-discretionary brokerage decreased in the current period due to lower
trading volumes. Revenue in Switzerland grew by 61.3% in Pounds mainly driven
by elevated interest rates
• Operating costs increased 21.1%, driven by investment in people for
growth, including higher technology spend, FX related increases in foreign
currency denominated expenses, and higher variable remuneration in line with
performance. Fixed operating expenditure increased by 19.5%. Operating margins
increased to 29.5% (1H2023: 27.1%)
• The translation of the Swiss operations results in Rand resulted in FX
translation gains in the current period.
UK & Other Wealth & Investment
• The all-share combination of IW&I UK and Rathbones Group Plc was
successfully completed in the period under review to create the UK's leading
discretionary wealth manager with c.£100bn in FUMA
• The IW&I business generated post tax earnings of £35.9 million,
10.8% above the prior period in an uncertain economic and operating
environment
• Operating income was driven by higher net interest income from rising
global interest rates. Net fee and commission income decreased by £0.3
million (0.2%) notwithstanding the lower average market levels at the key
quarterly billing dates in the period under review (MSCI PIMFA Balanced Index
down 2.4% from prior period)
• Operating costs were well contained, despite the inflationary
backdrop, demonstrating a continued cost discipline. Overall costs increased
by 1.1%, largely driven by non-recurring costs related to the business
combination with Rathbones and the integration of the Murray Asset Management
(MAM) business acquired in the prior period. Excluding these non-recurring
costs, operating costs decreased by 0.7% reflecting lower FSCS costs in the
current period which were partly offset by inflationary cost increases.
Specialist Banking
Adjusted operating profit from Specialist Banking increased 21.9% to £404.2
million (1H2023: £331.6 million). Pre-provision adjusted operating profit
increased 24.8% to £450.5 million (1H2023: £360.9 million).
Specialist Banking Southern Africa UK & Other Total
1H2024 1H2023 Variance 1H2024 1H2023 Variance 1H2024 1H2023
£'m £'m £'m % Rands % £'m £'m £'m % £'m £'m
Operating income (before ECL) 390.2 404.5 (14.2) (3.5%) 18.2% 553.4 435.7 117.6 27.0% 943.6 840.2
ECL impairment charges (7.0) (1.4) (5.5) >100.0% >100.0% (39.3) (27.9) (11.4) >100.0% (46.3) (29.3)
Operating costs (186.2) (200.1) 13.9 (6.9%) 11.4% (306.9) (279.2) (27.7) 9.9% (493.1) (479.2)
(Profit)/loss attributable to NCI (0.2) - (0.2) >100.0% >100.0% - - - -% (0.2) -
Adjusted operating profit 196.8 202.9 (6.1) (3.0%) 14.7% 207.4 128.6 78.7 61.2% 404.2 331.6
Totals and variance determined in £'000 which may result in rounding
differences.
Southern Africa Specialist Banking (in Rands)
• Adjusted operating profit increased 14.7% to R4 621 million (1H2023:
R4 026 million), driven by increased focus on successful execution of our
various growth initiatives and market share gains in our core client
franchises. Pre-provision adjusted operating profit increased by 18.2% to R4
784 million
• Net core loans grew by 8.2% annualised to R338.4 billion (31 March
2023: R325.1 billion). Corporate lending portfolios grew by 15.8% annualised
since 31 March 2023, driven by increased corporate credit demand across
several lending specialisations. Private Bank's loan book grew by 5.3%
annualised since 31 March 2023 with strong growth in mortgages and auto
finance books partially offset by the effect of muted growth in the income
producing real estate book
• Revenue increased 14.4%, benefitting from higher average interest
earning assets, positive endowment effect from higher interest rates,
increased client activity and continued client acquisition in line with our
growth strategy
◦ The 14.6% growth in net interest income was driven by higher average
interest earning assets and higher interest rates. This growth was achieved in
the context of foregone interest (approximately R240 million) on funds
utilised in the execution of the Group's c.R6.8 billion share buy-back and
share repurchase programme. Noteworthy, the buy-back programme has a had a
positive impact on the bank's ROE.
◦ Non-interest revenue increased 14.0% driven by:
- Net fee income increased marginally, benefitting from the growth in
activity levels in the corporate and institutional banking business and
Investec for Business from increased demand for trade finance. Notably, these
were partly offset by muted lending based fees from the income producing real
estate book, lower investment banking fees as well as higher costs associated
with fee generation given the increased transactional activity within Private
Bank
- Trading income from balance sheet management increased, largely driven
by the non-repeat of the prior period's MTM losses associated with certain
hedges in place to manage the interest rate risk in the banking book. These
are timing differences that arose where hedge accounting could not be applied
to an economic hedge in terms of IFRS accounting
- Positive contribution from investment income, driven by higher realised
gains on disposals and dividend income from investment portfolios in our
client franchises
- Other operating income benefitted from the non-repeat of MTM losses
associated with Ninety One Limited shares held as assets in the Group's
balance sheet to fulfil employee share scheme obligations
Partially offset by:
- The decrease in trading from customer flow which reflects lower
liquidity levels in the bonds market given some foreign disinvestment out of
South Africa.
• ECL impairment charges increased to R167 million from R22 million in
the prior period. The credit loss ratio on core loans subject to ECL was 8bps
(1H2023: 1bps), driven by Stage 3 ECL charges which was partially offset by
the recoveries on previously impaired loans and model driven releases on Stage
1 and Stage 2 as a result of model recalibration
• The cost to income ratio was 47.7% (1H2023: 49.5%). Operating costs
increased 10.4% driven by higher personnel expenses due to annual salary
increases, increased headcount as we invest for growth and higher variable
remuneration in line with performance. Discretionary costs also increased in
line with increased business activity. Fixed costs increased 9.4%.
UK & Other Specialist Banking
• Adjusted operating profit increased by 61.2% to £207.2 million
(1H2023: £128.6 million); driven by strong revenue growth across our key
client franchises as we continued to successfully execute our client
acquisition strategies to build scale and relevance in the UK market.
Pre-provision adjusted operating profit increased by 57.6% to £246.7million
• Net core loans grew by 9.1% annualised to £16.3 billion since 31
March 2023 driven by continued client growth, strong demand for Corporate
lending across multiple portfolios, which grew by 13.0% year to date
annualised. The residential mortgage lending book reported muted growth of
1.6% annualised as interest rate rises adversely affected demand for mortgages
in the market and increased redemptions
• Revenue growth of 27.0% was underpinned by growth in average book,
increased client activity and positive endowment effect from higher interest
rates. Trading income from customer flow and balance sheet management
contributed positively
◦ Net interest income increased by 25% benefitting from a larger book
built over the past four years as we focused our client franchises to provide
optimal client solutions and the successful execution of a targeted high net
worth private client strategy. Higher global interest rates also supported the
net interest income growth
◦ Non-interest revenue increased by 32.7% driven by:
- Higher arrangement fees from transactions in Power and Infrastructure
Finance, Aviation and Real Estate. Listed companies' advisory fees increased
relative to prior period. Activity levels in equity capital markets remain
muted given the challenging macroeconomic environment
- Trading income from customer flow increased by 66.2% over the period
driven by increased facilitation of hedging for clients by our Treasury Risk
Solutions area, increased client flow trading income in our ECM activities, as
well as positive risk management gains from hedging the reduced financial
products run down book
- Trading income from balance sheet management and other trading
activities increased significantly as a result of unwinding certain interest
rate swap hedges as part of the implementation of the structural interest rate
hedging programme
Partly offset by
- Lower investment income due to fair value adjustments on investments and
lower dividend income
• ECL impairment charges totalled £39.3 million, resulting in a credit
loss ratio of 55bps (1H2023: 32bps), above TTC range of 30bps to 40bps. The
increase in ECL charges was largely driven by Stage 3 ECL charges on certain
exposures. We have seen idiosyncratic client stresses with no evidence of
trend deterioration in the overall credit quality of our books. The updated
forward-looking macroeconomic scenario weightings resulted in an in-model
release of £3.6 million of ECL charges
• The cost to income ratio improved to 55.4% (1H2023: 64.1%). Operating
costs increased by 9.9%, primarily driven by an increase in variable
remuneration in line with business performance, inflationary pressures and
investment in people and technology. Fixed operating costs growth was well
contained at 2.3% growth, well below the UK inflation rate and in line with
Group's focus on cost efficiency.
Group Investments
Group Investments includes the holding in Ninety One, The Bud Group Holdings,
Burstone Group (formerly known as IPF) and other equity investments
Group Investments Southern Africa UK & Other Total
1H2024 1H2023 Variance 1H2024 1H2023 Variance 1H2024 1H2023
£'m £'m £'m % % in Rands £'m £'m £'m % £'m £'m
Operating income (net of ECL charges) (1.1) 20.1 (21.2) (>100%) (>100%) 6.2 12.1 (5.8) 5.1 32.2
(48.3%)
Operating costs (0.3) - (0.3) (>100%) (>100%) - - - - (0.2) -
Adjusted operating profit (1.4) 20.1 (21.5) (>100%) (>100%) 6.2 12.1 (5.8) (48.3%) 4.9 32.2
Totals and variance determined in £'000 which may result in rounding
differences.
Adjusted operating profit from Group Investments decreased by 84.8% to £4.9
million (1H2023: £32.2 million) driven by:
• The cessation of equity accounting for The Bud Group Holdings
following its restructure and Ninety One post the distribution of 15%
shareholding in May 2022 and lower investment income on fair value measurement
of our shareholding in Burstone Group
• Lower dividend income from Ninety One.
Further information
Additional information on each of the business units is provided in the Group
year-end results analyst book published on the Group's website:
http://www.investec.com.
On behalf of the Boards of Investec plc and Investec Limited
Philip Hourquebie Fani Titi
Chair Group Chief Executive
16 November 2023
Notes to the commentary section above
Presentation of financial information
Investec operates under a Dual Listed Companies (DLC) structure with primary
listings of Investec plc on the London Stock Exchange and Investec Limited on
the JSE Limited.
In terms of the contracts constituting the DLC structure, Investec plc and
Investec Limited effectively form a single economic enterprise from a
shareholder perspective, in which the economic and voting rights of ordinary
shareholders of the companies are maintained in equilibrium relative to each
other. Creditors, however, are ring-fenced to either Investec plc or Investec
Limited as there are no cross-guarantees between the companies. The directors
of the two companies consider that for financial reporting purposes, the
fairest presentation is achieved by combining the results and financial
position of both companies.
Accordingly, these year end results reflect the results and financial position
of the combined DLC Group under UK adopted International Financial Reporting
Standards (IFRS) which comply with IFRS as issued by the International
Accounting Standards Board (IASB) and the (EC) No. 1606/2022 as it applies in
the European Union, denominated in Pounds Sterling. In the commentary above,
all references to Investec or the Group relate to the combined DLC Group
comprising Investec plc and Investec Limited.
Following a review of the liquidity, capital position, profitability, the
business model and operational risks facing the business, the directors have a
reasonable expectation that the Investec Group will be a going concern for a
period of at least 12 months. The results for the six months ended 30
September 2023 have accordingly been prepared on the going concern basis.
Unless the context indicates otherwise, all comparatives included in the
commentary above relate to the six months ended 30 September 2022.
Amounts represented on a neutral currency basis for income statement items
assume that the relevant average exchange rates for the six months ended 30
September 2023 remain the same as those in the prior year. Amounts represented
on a neutral currency basis for balance sheet items assume that the relevant
closing exchange rates at 30 September 2023 remain the same as those at 31
March 2023.
Neutral currency information is considered as pro-forma financial information
as per the JSE Listings Requirements and is therefore the responsibility of
the Group's Board of Directors. Pro-forma financial information was prepared
for illustrative purposes and because of its nature may not fairly present the
issuer's financial position, changes in equity, or results of operations. The
external auditors of Investec Limited performed a review of the pro-forma
financial information and the opinion is available for inspection at the
registered offices of Investec Limited and Investec plc upon request.
Foreign currency impact
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 these individual companies are reported in the
local currencies in which they are domiciled, including Rands, Australian
Dollars, Euros, US Dollars and Indian Rupee. These results are then translated
into Pounds Sterling at the applicable foreign currency exchange rates for
inclusion in the Group's 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:
Six months ended Six months ended Year ended
30 September 2023 30 September 2022 31
Ma
rc
h
20
23
Currency Closing Average Closing Average Closing Average
per GBP1.00
South African Rand 22.99 23.48 20.05 19.80 21.94 20.45
Euro 1.15 1.16 1.14 1.17 1.14 1.16
US Dollar 1.22 1.26 1.11 1.22 1.24 1.21
Profit Forecast
The following matters highlighted in this announcement contain forward-looking
statements:
• Revenue outlook to be underpinned by moderate book growth, continued
elevated interest rates and client activity levels
• Overall costs to be managed in the context of inflationary pressures
and continued investment in the business, with cost to income ratio to be
below 55%
• The credit loss ratio to remain within the through-the-cycle (TTC)
range of 25bps to 35bps
◦ South Africa to normalise towards the TTC range of 20bps to 30bps
◦ The UK to report a credit loss ratio between 50bps and 60bps.
• Capital optimisation strategies to continue
• ROE to be above the mid-point of the Group's current target range of
12% to 16%.
The basis of preparation of this statement and the assumptions upon which it
was based are set out below. This statement is subject to various risks and
uncertainties and other factors - 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 in this Profit Forecast.
Any forward-looking statements made are based on the knowledge of the Group at
16 November 2023.
This forward-looking statement represents a profit forecast under the Listing
Rules. The Profit Forecast relates to the year ending 31 March 2024.
The financial information on which the Profit Forecast was based is the
responsibility of the Directors of the Group and has not been reviewed and
reported on by the Group's auditors.
Basis of preparation
The Profit Forecast has been properly compiled using the assumptions stated
below, and on a basis consistent with the accounting policies adopted in the
Group's 31 March 2023 audited annual financial statements, which are in
accordance with IFRS.
Assumptions
The Profit Forecast has been prepared on the basis of the following
assumptions during the forecast period:
Factors outside the influence or control of the Investec Board:
• There will be no material change in the political and/or economic
environment that would materially affect the Investec Group
• There will be no material change in legislation or regulation
impacting on the Investec Group's operations or its accounting policies
• There will be no business disruption that will have a significant
impact on the Investec Group's operations, whether for the economic effects of
increased geopolitical tensions or otherwise
• The Rand/Pound Sterling, Euro/Pound, INR/Pound and US Dollar/Pound
Sterling exchange rates and the tax rates remain materially unchanged from the
prevailing rates detailed above
• There will be no material changes in the structure of the markets,
client demand or the competitive environment
• There will be no material change to the facts and circumstances
relating to legal proceedings and uncertain tax matters.
Estimates and judgements
In preparation of the Profit Forecast, the Group makes estimations and applies
judgement that could affect the reported amount of assets and liabilities
within the reporting period. Key areas in which judgement is applied include:
• Valuation of unlisted investments primarily in private equity, direct
investments portfolios and embedded derivatives. Key valuation inputs are
based on the most relevant observable market inputs, adjusted where necessary
for factors that specifically apply to the individual investments and
recognising market volatility
• The determination of ECL against assets that are carried at amortised
cost and ECL relating to debt instruments at fair value through other
comprehensive income (FVOCI) involves the assessment of future cash flows
which is judgmental in nature
• Valuation of investment properties is performed by capitalising the
budgeted net income of the property at the market related yield applicable at
the time.
• The Group's income tax charge and balance sheet provision are
judgmental in nature. This arises from certain transactions for which the
ultimate tax treatment can only be determined by final resolution with the
relevant local tax authorities. The Group recognises in its tax provision
certain amounts in respect of taxation that involve a degree of estimation and
uncertainty where the tax treatment cannot finally be determined until a
resolution has been reached by the relevant tax authority. The carrying amount
of this provision is often dependent on the timetable and progress of
discussions and negotiations with the relevant tax authorities, arbitration
processes and legal proceedings in the relevant tax jurisdictions in which the
Group operates. Issues can take many years to resolve and assumptions on the
likely outcome would therefore have to be made by the Group
• Where appropriate, the Group has utilised expert external advice as
well as experience of similar situations elsewhere in making any such
provisions
• Determination of interest income and interest expense using the
effective interest rate method involves judgement in determining the timing
and extent of future cash flows.
Accounting policies, significant judgements and disclosures
These reviewed condensed combined consolidated financial results have been
prepared in terms of the recognition and measurement criteria of International
Financial Reporting Standards (IFRS) and the presentation and disclosure
requirements of IAS 34, "Interim Financial Reporting" and IFRS as adopted by
the UK which comply with IFRS as issued by the IASB. At 30 September 2023, UK
adopted IFRS are identical in all material respects to current IFRS applicable
to the Group, with differences only in the effective dates of certain
standards.
The accounting policies applied in the preparation of the results for the year
ended 30 September 2023 are consistent with those adopted in the audited
financial statements for year ended 31 March 2023.
The financial results have been prepared under the supervision of Nishlan
Samujh, the Group Finance Director. The interim financial statements for the
six months ended 30 September 2023 are available on the Group's website:
www.investec.com
Proviso
• Please note that matters discussed in this announcement may contain
forward-looking statements which are subject to various risks and
uncertainties and other factors, including, but not limited to:
- changes in the political and/or economic environment that would
materially affect the Investec Group
- changes in legislation or regulation impacting the Investec Group's
operations or its accounting policies
- changes in business conditions that will have a significant impact on
the Investec Group's operations
- changes in exchange rates and/or tax rates from the prevailing rates
outlined in this announcement
- changes in the structure of the markets, client demand or the
competitive environment
• A number of these factors are beyond the Group's control
• These factors may cause the Group's 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 16 November 2023.
• The information in the Group's announcement for the six months ended
30 September 2023, which was approved by the Board of Directors on 15 November
2023, does not constitute statutory accounts as defined in Section 435 of the
UK Companies Act 2006. The 31 March 2022 financial statements were filed with
the registrar and were unqualified with the audit report containing no
statements in respect of sections 498(2) or 498(3) of the UK Companies Act
• The financial information on which forward-looking statements are
based is the responsibility of the Directors of the Group and has not been
reviewed and reported on by the Group's auditors.
This announcement is available on the Group's website:
www.investec.com
Definitions
• Adjusted operating profit refers to operating profit before goodwill,
acquired intangibles and strategic actions and after adjusting for earnings
attributable to other non-controlling interests. Non-IFRS measures such as
adjusted operating profit are considered as pro-forma financial information as
per the JSE Listing Requirements. The pro-forma financial information is the
responsibility of the Group's Board of Directors. Pro-forma financial
information was prepared for illustrative purposes and because of its nature
may not fairly present the issuer's financial position, changes in equity or
results of operations
• Adjusted earnings is calculated by adjusting basic earnings
attributable to shareholders for the amortisation of acquired intangible
assets, non-operating items including strategic actions, and earnings
attributable to perpetual preference shareholders and other additional tier 1
security holders
• Adjusted basic earnings per share is calculated as adjusted earnings
attributable to shareholders divided by the weighted average number of
ordinary shares in issue during the year
• Headline earnings is adjusted earnings plus the after tax financial
effect of strategic actions (£169.6 million) and the amortisation of acquired
intangible assets (£16.7 million). Headline earnings is an earnings measure
required to be calculated and disclosed by the JSE and is calculated in
accordance with the guidance provided in Circular 1/2021
• Headline earnings per share (HEPS) is calculated as headline earnings
divided by the weighted average number of ordinary shares in issue during the
year
• Basic earnings is earnings attributable to ordinary shareholders as
defined by IAS33 Earnings Per Share
• Dividend payout ratio is calculated as the dividend per share divided
by adjusted earnings per share
• Pre-provision adjusted operating profit is calculated as total
operating income before expected credit loss impairment charges, net of
operating costs and net of operating profits or losses attributable to other
non-controlling interests
• The credit loss ratio is calculated as expected credit loss (ECL)
impairment charges on gross core loans as a percentage of average gross core
loans subject to ECL
• The cost to income ratio is calculated as operating costs divided by
operating income before expected credit loss impairment charges (net of
operating profits or losses attributable to other non-controlling interests)
• Return on average ordinary shareholders' equity (ROE) is calculated as
adjusted earnings attributable to ordinary shareholders divided by average
ordinary shareholders' equity
• Return on average tangible ordinary shareholders' equity (ROTE) is
calculated as adjusted earnings attributable to ordinary shareholders divided
by average tangible ordinary shareholders' equity
• Core loans is defined as net loans to customers plus net own
originated securitised assets
• NCI is non-controlling interests.
Financial assistance
Shareholders are referred to Special Resolution number 30, which was approved
at the annual general meeting held on 3 August 2023, relating to the
provision of direct or indirect financial assistance in terms of Section 45 of
the South African Companies Act, No 71 of 2008 to related or inter-related
companies. Shareholders are hereby notified that in terms of S45(5)(a) of the
South African Companies Act, the Boards of Directors of Investec Limited and
Investec Bank Limited provided such financial assistance during the period
1 April 2022 to 31 March 2023 to various Group subsidiaries.
Johannesburg and London
Exchange rates between local currencies and Pounds Sterling have fluctuated
over the period. The most significant impact arises from the volatility of the
Rand. The average Rand: Pound Sterling exchange rate over the period has
depreciated by 18.6% against the comparative six month period ended 30
September 2022, and the closing rate has depreciated by 4.8% since 31 March
2023. The following tables provide an analysis of the impact of the Rand on
our reported numbers.
Results in Pounds Sterling Results in Rands
Total Group Six months to 30 Sept 2023 Six months to 30 Sept 2022 % Neutral currency^ Six months to 30 Sept 2023 Neutral Six months to 30 Sept 2023 Six months to 30 Sept 2022 %
change currency change
%
change
Adjusted operating profit before taxation (million) £453 £405 11.9% £491 21.2% R10 640 R8 024 32.6%
Earnings attributable to shareholders (million) £615 £478 28.7% £638 33.5% R14 435 R9 470 52.4%
Adjusted earnings attributable to shareholders (million) £330 £298 10.6% £357 19.8% R7 737 R5 911 30.9%
Adjusted earnings per share 38.7p 32.9p 17.6% 41.9p 27.4% 908c 652c 39.3%
Basic earnings per share 69.6p 50.6p 37.5% 72.1p 42.5% 1635c 1003c 63.0%
Headline earnings per share 36.9p 32.0p 15.3% 39.7p 24.1% 859c 663c 29.6%
Results in Pounds Sterling Results in Rands
At 30 Sept 2023 At 31 March 2023^ % Neutral currency^^ At 30 Sept 2023 Neutral At 30 Sept 2023 At 31 March 2023^ %
change currency change
%
change
Net asset value per share 556.7p 510.3p 9.1% 557.7p 9.3% 12 801c 11 196c 14.3%
Tangible net asset value per share 470.4p 474.6p (0.9%) 471.3p (0.7%) 10 816c 10 414c 3.9%
Total equity (million) £5 237 £5 334 (1.8%) £5 333 -% R120 417 R117 043 2.9%
Total assets (million)* £57 254 £57 297 (0.1%) £58 583 2.2% R1 316 475 R1 257 255 4.7%
Core loans (million) £30 991 £30 381 2.0% £31 695 4.3% R712 564 R666 633 6.9%
Cash and near cash balances (million) £16 436 £16 361 0.5% £16 806 2.7% R377 928 R359 006 5.3%
Customer accounts (deposits) (million) £39 936 £39 556 1.0% £40 895 3.4% R918 272 R867 968 5.8%
^ For income statement items we have used the average Rand: Pound
Sterling exchange rate that was applied in the prior period, i.e. 19.80
^^ For balance sheet items we have assumed that the Rand: Pound
Sterling closing exchange rate has remained neutral since 31 March 2023.
• Restated as detailed below.
Condensed combined consolidated income statement
£'000 Six months to Six months to Year to
30 Sept 2023
30 Sept 2022^ 31 March 2023^
Interest income 2 157 746 1 332 538 3 369 422
Interest expense (1 475 108) (724 705) (2 075 215)
Net interest income 682 638 607 833 1 294 207
Fee and commission income 225 672 233 442 453 670
Fee and commission expense (29 611) (26 789) (56 315)
Investment income 22 436 29 792 29 303
Share of post-taxation profit of associates and joint venture holdings 3 241 28 012 30 034
Trading income/(loss) arising from
- customer flow 79 296 66 236 142 199
- balance sheet management and other trading activities 21 454 (10 339) 14 235
Other operating (loss)/income (230) (6 651) 4 386
Total operating income before expected credit loss impairment charges 1 004 896 921 536 1 911 719
Expected credit loss impairment charges (46 291) (29 351) (80 846)
Operating income 958 605 892 185 1 830 873
Operating costs (556 108) (534 282) (1 085 999)
Operating profit before goodwill and acquired intangibles 402 497 357 903 744 874
Impairment of goodwill - (805) (890)
Amortisation of acquired intangibles (543) (1 316) (2 535)
Amortisation of acquired intangibles of associates - (1 542) (1 542)
Closure and rundown of the Hong Kong direct investments business 2 304 (280) (450)
Operating profit 404 258 353 960 739 457
Net gain on distribution of associate to shareholders - 154 407 154 438
Financial impact of strategic actions - - (30)
Profit before taxation from continuing operations 404 258 508 367 893 865
Taxation on operating profit before goodwill and acquired intangibles (89 123) (79 721) (163 522)
Taxation on acquired intangibles and net gain on distribution of associate to 152 14 853 15 182
shareholders
Profit after taxation from continuing operations 315 287 443 499 745 525
Profit after taxation and financial impact of strategic actions from 311 367 63 297 71 906
discontinued operations*
Operating profit before non-controlling interests from discontinued 45 824 63 297 76 844
operations*
Financial impact of strategic actions net of taxation from discontinued 265 543 - (4 938)
operations*
Profit after taxation from total Group 626 654 506 796 817 431
Profit attributable to non-controlling interests (4) - (752)
Profit attributable to non-controlling interests of discontinued operations (11 766) (28 673) (11 814)
Earnings of total Group attributable to shareholders 614 884 478 123 804 865
Earnings attributable to ordinary shareholders 593 230 458 521 764 446
Earnings attributable to perpetual preferred securities and other Additional 21 654 19 602 40 419
Tier 1 security holders
^ Restated as detailed below.
* Refer to discontinued operations disclosure.
Earnings per share
Six months to Six months to Year to
30 Sept 2023
30 Sept 2022 31 March 2023
Basic earnings for total Group per share - pence 69.6 50.6 85.8
Diluted basic earnings for total Group per share - pence 67.0 48.9 82.5
Basic earnings for continuing operations per share - pence 34.5 46.8 79.1
Diluted basic earnings for continuing operations per share - pence 33.2 45.2 76.0
Combined consolidated statement of total comprehensive income
£'000 Six months to Six months to Year to
30 Sept 2023
30 Sept 2022^ 31 March 2023^
Profit after taxation from continuing operations 315 287 443 499 745 525
Other comprehensive income:
Items that may be reclassified to the income statement
Fair value movements on cash flow hedges taken directly to other comprehensive (17 759) 27 378 43 158
income*
Fair value movements on debt instruments at FVOCI taken directly to other (13 313) (70 679) (48 515)
comprehensive income*
Gain on realisation of debt instruments at FVOCI recycled through the income (2 873) (1 208) (2 960)
statement*
Foreign currency adjustments on translating foreign operations (108 485) (25 873) (306 053)
Items that will not be reclassified to the income statement
Effect of rate change on deferred taxation relating to adjustment for IFRS 9 - - (7)
Fair value movements on equity instruments at FVOCI taken directly to other (338) 1 373 (657)
comprehensive income*
Remeasurement of net defined benefit pension liability - - 75
Net gain attributable to own credit risk* 866 85 104
Total comprehensive income from continuing operations 173 385 374 575 430 670
Total comprehensive income attributable to ordinary shareholders from 178 530 348 473 456 867
continuing operations
Total comprehensive (loss)/income attributable to non-controlling interests (26 799) 6 500 (66 616)
from continuing operations
Total comprehensive income attributable to perpetual preferred securities from 21 654 19 602 40 419
continuing operations
Total comprehensive income from continuing operations 173 385 374 575 430 670
Profit after taxation from discontinued operations 311 367 63 297 71 906
Other comprehensive income from discontinued operations:
Items that may be reclassified to the income statement
Foreign currency adjustments on translating foreign operations 55 377 - -
Total comprehensive income from discontinued operations 366 744 63 297 71 906
Total comprehensive income attributable to ordinary shareholders from 354 978 34 624 60 092
discontinued operations
Total comprehensive income attributable to non-controlling interests from 11 766 28 673 11 814
discontinued operations
Total comprehensive income from discontinued operations 366 744 63 297 71 906
Profit after taxation from total Group 626 654 506 796 817 431
Other comprehensive income total Group:
Items that may be reclassified to the income statement
Fair value movements on cash flow hedges taken directly to other comprehensive (17 759) 27 378 30 030
income*
Fair value movements on debt instruments at FVOCI taken directly to other (13 313) (70 679) (48 515)
comprehensive income*
Gain on realisation of debt instruments at FVOCI recycled through the income (2 873) (1 208) (2 960)
statement*
Foreign currency adjustments on translating foreign operations (53 108) (25 873) (310 917)
Items that will never be reclassified to the income statement
Effect of rate change on deferred taxation relating to adjustment for IFRS 9 - - (7)
Fair value movements on equity instruments at FVOCI taken directly to other (338) 1 373
(657)
comprehensive income
Re-measurement of net defined benefit pension asset - - 75
Net gain attributable to own credit risk* 866 85 104
Total comprehensive income from total Group 540 129 437 872 484 584
Total comprehensive income attributable to ordinary shareholders 545 274 411 770 498 967
Total comprehensive (loss)/income attributable to non-controlling interests (26 799) 6 500 (54 802)
Total comprehensive income attributable to perpetual preferred securities 21 654 19 602 40 419
Total comprehensive income from total Group 540 129 437 872 484 584
^ Restated as detailed below.
* These amounts are net of taxation of £14.2 million (30
September 2022: £13.7 million tax credit; 31 March 2023: £7.6 million).
Combined consolidated balance sheet
At 30 Sept 2023 31 March 2023^ 30 Sept 2022^
£'000
Assets
Cash and balances at central banks 5 335 622 6 437 709 5 167 277
Loans and advances to banks 1 441 768 1 450 627 2 412 298
Non-sovereign and non-bank cash placements 396 311 442 254 427 208
Reverse repurchase agreements and cash collateral on securities borrowed 4 422 876 3 632 658 4 424 813
Sovereign debt securities 5 428 112 4 751 646 4 736 838
Bank debt securities 807 066 949 984 1 103 301
Other debt securities 1 273 232 1 244 231 1 281 527
Derivative financial instruments 1 329 833 1 386 134 1 770 133
Securities arising from trading activities 1 576 610 1 632 391 1 401 320
Investment portfolio 838 350 1 330 907 1 119 352
Loans and advances to customers 30 719 600 30 112 969 30 961 458
Own originated loans and advances to customers securitised 281 543 272 879 270 700
Other loans and advances 134 310 142 726 191 420
Other securitised assets 96 296 103 151 158 120
Interests in associated undertakings and joint venture holdings 828 093 53 703 347 723
Current taxation assets 70 415 69 322 59 221
Deferred taxation assets 202 392 235 171 245 055
Other assets 1 515 533 1 581 693 1 906 278
Property and equipment 222 133 278 561 296 896
Investment properties 111 157 722 481 807 313
Goodwill 76 085 262 632 257 228
Software 10 063 15 401 12 420
Other acquired intangible assets - 41 136 37 527
Non-current assets classified as held for sale 3 262 35 761 38 430
57 120 662 57 186 127 59 433 856
Other financial instruments at fair value through profit or loss in respect 133 233 110 891 87 023
of liabilities to customers
57 253 895 57 297 018 59 520 879
Liabilities
Deposits by banks 3 886 578 3 617 524 3 402 916
Derivative financial instruments 2 471 973 2 424 036 2 947 457
Other trading liabilities 285 463 202 256 250 774
Repurchase agreements and cash collateral on securities lent 890 512 936 564 1 022 070
Customer accounts (deposits) 39 935 727 39 555 669 40 544 710
Debt securities in issue 1 504 991 1 802 586 1 691 297
Liabilities arising on securitisation of own originated loans and advances 170 095 163 787 176 287
Liabilities arising on securitisation of other assets 76 084 81 609 90 025
Current taxation liabilities 64 899 83 183 55 709
Deferred taxation liabilities 20 295 26 545 18 991
Other liabilities 1 563 748 1 873 714 2 349 474
50 870 365 50 767 473 52 549 710
Liabilities to customers under investment contracts 119 328 108 370 84 202
Insurance liabilities, including unit-linked liabilities 13 905 2 521 2 841
51 003 598 50 878 364 52 636 753
Subordinated liabilities 1 013 237 1 084 630 1 191 100
52 016 835 51 962 994 53 827 853
Equity
Ordinary share capital 247 247 247
Ordinary share premium 1 190 753 1 208 161 1 264 700
Treasury shares (586 285) (564 678) (344 893)
Other reserves (822 404) (785 866) (644 206)
Retained income 4 932 706 4 490 494 4 331 820
Ordinary shareholders' equity 4 715 017 4 348 358 4 607 668
Perpetual preference share capital and premium 131 437 136 259 153 539
Shareholders' equity excluding non-controlling interests 4 846 454 4 484 617 4 761 207
Other Additional Tier 1 securities in issue 391 779 398 568 405 093
Non-controlling interests (1 173) 450 839 526 726
Total equity 5 237 060 5 334 024 5 693 026
Total liabilities and equity 57 253 895 57 297 018 59 520 879
^ Restated as detailed below.
Condensed consolidated statement of changes in equity
£'000 Six months to Six months to Year to
30 Sept 2023
30 Sept 2022^ 31 March 2023^
Balance at the beginning of the period as previously reported 5 334 024 5 739 756 5 739 756
Restatement - 16 910 16 910
Balance at the beginning of the period restated 5 334 024 5 756 666 5 756 666
Total comprehensive income 540 129 437 872 484 584
Share-based payments adjustments 8 909 2 350 25 904
Dividends paid to ordinary shareholders (161 086) (134 797) (260 673)
Dividends paid to perpetual preference shareholders included in (21 654) (19 602) (40 419)
non-controlling interests and Other Additional Tier 1 security holders
Dividends paid to non-controlling interests (12 599) (16 146) (30 849)
Share buyback of ordinary share capital (17 408) (6 682) (56 863)
Repurchase of perpetual preference shares 257 (14 771) (19 379)
Issue of Other Additional Tier 1 security instruments - - 22 787
Repayment of Other Additional Tier 1 security instruments - - (15 951)
Net equity impact of non-controlling interest movements 360 - 118
Employee benefit liability recognised - (9 224)
(9 377)
Movement of treasury shares (20 898) (240 008)
(19 818)
Derecognition of non-controlling interests on deconsolidation of subsidiary (412 974) - -
company
Distribution to ordinary shareholders - (282 669) (282 669)
Balance at the end of the period 5 237 060 5 693 026 5 334 024
^ Restated as detailed below.
Condensed consolidated cash flow statement
£'000 Six months to Six months to Year to
30 Sept 2023
30 Sept 2022^ 31 March 2023^
Net cash (outflow)/ inflow from operating activities (512 272) (708 884) 422 407
Net cash (outflow)/inflow from investing activities (199 932) 10 364 (13 993)
Net cash outflow from financing activities (357 111) (346 039) (914 684)
Effects of exchange rates on cash and cash equivalents (58 769) 28 694 (109 104)
Net decrease in cash and cash equivalents (1 128 084) (1 015 865) (615 374)
Cash and cash equivalents at the beginning of the period 7 797 650 8 413 024 8 413 024
Cash and cash equivalents at the end of the period 6 669 566 7 397 159 7 797 650
^ Restated as detailed below.
Headline earnings per share
£'000 Six months to Six months to Year to
30 Sept 2023
30 Sept 2022 31 March 2023
Headline earnings from total Group
Earnings attributable to shareholders 614 884 478 123 804 865
Impairment of goodwill - 805 890
Financial impact of strategic actions of discontinued operations excluding (280 737) - -
implementation costs
Gain on distribution of associate to shareholders - (155 146) (155 146)
Taxation on strategic actions 2 359 (14 501) (14 501)
Dividends payable to perpetual preference shareholders and Other Additional (21 654) (19 602) (40 419)
Tier 1 security holders (other equity holders)
Property revaluation, net of taxation and non-controlling interests** (311) 261 (1 355)
Headline adjustments of associates - (662) 561
(Loss)/gain on repurchase of perpetual preference shares (14) 443 717
Headline earnings attributable to ordinary shareholders 314 527 289 721 595 612
Weighted average number of shares in issue during the year 851 765 254 906 282 877 891 940 412
Headline earnings per share - pence 36.9 32.0 66.8
Diluted headline earnings per share - pence*** 35.5 30.8 64.2
Prior to becoming a subsidiary, the investment in Capitalmind associates met
the definition of a venture capital investment as defined in the Headline
Earnings Circular 1/2023. During the period a gain of £4mn was recognised as
a result of a stepped acquisition that required a revaluation of the
previously held 30%. This amount was included in headline earning.
** Taxation on property revaluation headline earnings adjustments
amounted to £0.1 million (2022: £0.1 million) with an impact of £nil (2022:
£0.3 million) on earnings attributable to non-controlling interests. The
amount includes property revaluations included in equity accounted earnings.
*** Headline earnings per share and diluted headline earnings per
share have been calculated and is disclosed in accordance with the JSE listing
requirements, and in terms of circular 1/2023 issued by the South African
Institute of Chartered Accountants.
Combined consolidated segmental analysis
Segmental geographical and business analysis of adjusted operating profit
before goodwill, acquired intangibles, non-operating items, taxation and after
non-controlling interests.
Private Client
Specialist Banking
For the six months to 30 September 2023 Wealth & Investment Private Banking Corporate, Investment Banking and Other Group Investments Group Costs Total Group % change % of total
£'000
UK and Other - 40 391 166 992 6 233 (14 052) 199 564 48.8% 44.0%
Southern Africa 17 475 71 684 125 149 (4 389) (6 990) 202 929 (9.3%) 44.8%
Continuing operations adjusted operating profit 17 475 112 075 292 141 1 844 (21 042) 402 493 12.5% 88.8%
Discontinued operations* 47 828 - - 3 012 - 50 840 8.0% 11.2%
Total Group adjusted operating profit 65 303 112 075 292 141 4 856 (21 042) 453 333 11.9% 100.0%
Non-controlling interest 4
Non-controlling interests of discontinued operations 11 766
Operating profit before non-controlling interests 465 103
Operating profit before non-controlling interests from continuing operations 402 497
Operating profit before non-controlling interests of discontinued operations 62 606
% change 17.8% (5.9) % 37.5% (84.9) % 47.9% 11.9%
% of total 14.4% 24.7% 64.4% 1.1% (4.6) % 100.0%
Total assets £'mn 443 15 489 40 869 453 - 57 254
Private Client
Specialist Banking
For the six months to 30 September 2022 Wealth & Investment^ Private Banking Corporate, Investment Banking and Other Group Investments^ Group Costs Total Group % of total
£'000
UK and Other - 29 370 99 275 12 056 (6 568) 134 133 33.1%
Southern Africa 15 184 89 679 113 260 13 310 (7 663) 223 770 55.3%
Continuing operations adjusted operating profit 15 184 119 049 212 535 25 366 (14 231) 357 903 88.4%
Discontinued operations* 40 254 - - 6 838 - 47 092 11.6%
Total Group adjusted operating profit 55 438 119 049 212 535 32 204 (14 231) 404 995 100.0%
Non-controlling interest -
Non-controlling interests of discontinued operations 28 673
Operating profit before non-controlling interests 433 668
Operating profit before non-controlling interests from continuing operations 357 903
Operating profit before non-controlling interests of discontinued operations 75 765
% of total 13.7% 29.4% 52.5% 8.0% (3.5) % 100.0%
Total assets^ £'mn 1 238 16 470 40 153 1 660 - 59 521
^ Restated as detailed below.
* Refer to discontinued operations disclosure.
Pro-forma income statement
Given the nature of the IW&I UK and IPF transactions, the Group
essentially retains similar economic interest to these investments before and
after the transactions. In order to provide information that will be more
comparable to the future presentation of returns from these investments and
given their new holding structures, proforma information has been prepared as
if the transactions had been in effect from the beginning of the period, i.e.
IW&I UK has been presented as an equity accounted investment and IPF as an
investment at fair value through profit or loss. The measurement of the total
contribution to profit remains based on the accounting prior to loss of
control, and has not been adjusted for the change in holding structure.
£'000 Six months to Re-presentation of discontinued operation - IPF Re-presentation of discontinued operation - Investec Wealth & Investment Six months to
UK
30 September 2023 30 Sept 2023 Pro-forma
Net interest income 682 638 - - 682 638
Net fee and commission income 196 061 - - 196 061
Investment income 22 436 3 012 - 25 448
Share of post taxation profit of associates and joint venture holdings 3 241 - 35 855 39 096
Trading income arising from
- customer flow 79 296 - - 79 296
- balance sheet management and other trading activities 21 454 - - 21 454
Other operating income (230) - - (230)
Total operating income before expected credit loss impairment charges 1 004 896 3 012 35 855 1 043 763
Expected credit loss impairment charges (46 291) - - (46 291)
Operating income 958 605 3 012 35 855 997 472
Operating costs (556 108) - - (556 108)
Operating profit before goodwill and acquired intangibles 402 497 3 012 35 855 441 364
Operating profit before strategic actions and non-controlling interests of 62 606 (14 778) (47 828) -
discontinued operations*
Taxation on operating profit before goodwill and acquired intangibles (89 123) - - (89 123)
Taxation on operating profit before goodwill and acquired intangibles of (11 973) - 11 973 -
discontinued operations*
364 007 (11 766) - 352 241
Profit attributable to non-controlling interests (4) - - (4)
Profit attributable to non-controlling interests of discontinued operations* (11 766) 11 766 - -
352 237 - - 352 237
Earnings attributable perpetual preference shareholders and Other Additional (22 408) - - (22 408)
Tier 1 security holders (other equity holders)
Adjusted earnings attributable to ordinary shareholders before goodwill, 329 829 - - 329 829
acquired intangibles and non-operating items
* Refer to discontinued operations disclosure.
£'000 Six months to Re-presentation of discontinued operation - IPF Re-presentation of discontinued operation - Investec Wealth & Investment Six months to
UK
30 September 2022 30 Sept 2022 Pro-forma
Net interest income 607 833 - - 607 833
Net fee and commission income 206 653 - - 206 653
Investment income 29 792 6 838 - 36 630
Share of post taxation profit of associates and joint venture holdings 28 012 - 32 365 60 377
Trading income/(loss) arising from
- customer flow 66 236 - - 66 236
- balance sheet management and other trading activities (10 339) - - (10 339)
Other operating income (6 651) - - (6 651)
Total operating income before expected credit loss impairment charges 921 536 6 838 32 365 960 739
Expected credit loss impairment charges (29 351) - - (29 351)
Operating income 892 185 6 838 32 365 931 388
Operating costs (534 282) - - (534 282)
Operating profit before goodwill and acquired intangibles 357 903 6 838 32 365 397 106
Operating profit before strategic actions and non-controlling interests of 75 765 (35 511) (40 254) -
discontinued operations*
Taxation on operating profit before goodwill and acquired intangibles (79 721) - - (79 721)
Taxation on operating profit before goodwill and acquired intangibles of (6 909) - 7 889 980
discontinued operations*
347 038 (28 673) - 318 365
Profit attributable to non-controlling interests of discontinued operations* (28 673) 28 673 - -
318 365 - - 318 365
Earnings attributable perpetual preference shareholders and Other Additional (20 130) - - (20 130)
Tier 1 security holders (other equity holders)
Adjusted earnings attributable to ordinary shareholders before goodwill, 298 235 - - 298 235
acquired intangibles and non-operating items
£'000 Year to Re-presentation of discontinued operation - IPF Re-presentation of discontinued operation - Investec Wealth & Investment Year to
UK
31 March 2023 31 March 2023 Pro-forma
Net interest income 1 294 207 - - 1 294 207
Net fee and commission income 397 355 - - 397 355
Investment income 29 303 50 - 29 353
Share of post taxation profit of associates and joint venture holdings 30 034 - 74 555 104 589
Trading income arising from
- customer flow 142 199 - - 142 199
- balance sheet management and other trading activities 14 235 - - 14 235
Other operating income 4 386 - - 4 386
Total operating income before expected credit loss impairment charges 1 911 719 50 74 555 1 986 324
Expected credit loss impairment charges (80 846) - - (80 846)
Operating income 1 830 873 50 74 555 1 905 478
Operating costs (1 085 999) - - (1 085 999)
Operating profit before goodwill and acquired intangibles 744 874 50 74 555 819 479
Operating profit before strategic actions and non-controlling interests of 103 620 (11 864) (91 756) -
discontinued operations*
Taxation on operating profit before goodwill and acquired intangibles (163 522) - - (163 522)
Taxation on operating profit before goodwill and acquired intangibles of (16 182) - 17 201 1 019
discontinued operations*
668 790 (11 814) - 656 976
Profit attributable to non-controlling interests (752) - - (752)
Profit attributable to non-controlling interests of discontinued operations* (11 814) 11 814 - -
656 224 - - 656 224
Earnings attributable perpetual preference shareholders and Other Additional (41 872) - - (41 872)
Tier 1 security holders (other equity holders)
Adjusted earnings attributable to ordinary shareholders before goodwill, 614 352 - - 614 352
acquired intangibles and non-operating items
* Refer to discontinued operations disclosure.
Discontinued operations
The effective date of the combination of Investec Wealth & Investment
Limited and Rathbones Group Plc was 21 September 2023, at which point the
Group deconsolidated its 100% holding in Investec Wealth & Investment
Limited. The completion date of the sale of the Investec Property Fund (IPF)
management companies was 6 July 2023 at which point the Group deconsolidated
its existing c.24.3% investment in IPF. The Investec Wealth & Investment
business and IPF have been disclosed as discontinued operations. The Wealth
& Investment business was disclosed in the Wealth & Investment segment
in the UK and other geography and the IPF business was disclosed in the Group
Investments segment in the Southern Africa geography.
Reconciliation of profit after taxation and financial impact of strategic
actions from discontinued operations as disclosed in the income statement to
earnings from discontinued operations attributable to shareholders provided in
the tables below
For the six months to 30 September Six months to Six months to Year to 31 March 2023
30 September 2023
30 September 2022
£'000
Operating profit before strategic actions and non-controlling interests 62 606 75 765 103 620
Amortisation of acquired intangibles (6 424) (6 662) (12 625)
Taxation on operating profit (11 973) (6 909) (16 182)
Taxation on amortisation of acquired intangibles 1 615 1 103 2 031
Operating profit before strategic actions and non-controlling interests from 45 824 63 297 76 844
discontinued operations
Financial impact of strategic actions 267 902 - (4 938)
Taxation on strategic actions (2 359) - -
Profit after taxation and financial impact of strategic actions from 311 367 63 297 71 906
discontinued operations
Profit attributable to non-controlling interests of discontinued operations (11 766) (28 673) (11 814)
Earnings from discontinued operations attributable to shareholders 299 601 34 624 60 092
The table below presents the income statement from discontinued operations
included in the total group income statement for the period to 30 September
2023.
For the six months to 30 September 2023
£'000 UK and Southern Total
Other Africa
Net interest income 17 324 (6 194) 11 130
Net fee and commission income 161 610 13 088 174 698
Investment income - 3 390 3 390
Trading income/(loss) arising from
- customer flow - (9 749) (9 749)
- balance sheet management and other trading activities - 17 181 17 181
Total operating income before expected credit loss impairment charges 178 934 17 716 196 650
Expected credit loss impairment charges - (267) (267)
Operating income 178 934 17 449 196 383
Operating costs (131 106) (2 671) (133 777)
Operating profit before strategic actions and non-controlling interests 47 828 14 778 62 606
Profit attributable to non-controlling interests from discontinued operations - (11 766) (11 766)
Operating profit before strategic actions 47 828 3 012 50 840
Amortisation of acquired intangibles (6 424) - (6 424)
Financial impact of strategic actions 361 684 (93 782) 267 902
Profit before taxation 403 088 (90 770) 312 318
Taxation on operating profit before strategic actions (11 973) - (11 973)
Taxation on financial impact of strategic actions and acquired intangibles 781 (1 525) (744)
Earnings/(loss) from discontinued operations attributable to shareholders 391 896 (92 295) 299 601
The table below presents the income statement from discontinued operations
included in the total group income statement for the year to 30 September
2022.
For the six months to 30 September 2022
£'000 UK and Southern Total
Other Africa
Net interest income 8 029 (11 079) (3 050)
Net fee and commission income 161 902 27 175 189 077
Investment income/(loss) 1 (1 175) (1 174)
Share of post-taxation loss of associates and joint venture holdings - (558) (558)
Trading income arising from
- customer flow - 3 137 3 137
- balance sheet management and other trading activities 1 19 746 19 747
Total operating income before expected credit loss impairment charges 169 933 37 246 207 179
Expected credit loss impairment (release)/charges 2 (852) (850)
Operating income 169 935 36 394 206 329
Operating costs (129 681) (883) (130 564)
Operating profit before non-controlling interests 40 254 35 511 75 765
Profit attributable to non-controlling interests from discontinued operations - (28 673) (28 673)
Operating profit 40 254 6 838 47 092
Amortisation of acquired intangibles (6 662) - (6 662)
Profit before taxation 33 592 6 838 40 430
Taxation on operating profit (7 889) 980 (6 909)
Taxation on acquired intangibles 1 103 - 1 103
Earnings from discontinued operations attributable to shareholders 26 806 7 818 34 624
The table below presents the income statement from discontinued operations
included in the total group income statement for the year to 31 March 2023.
For the year to 31 March 2023
£'000 UK and Southern Total
Other Africa
Net interest income 22 763 (21 213) 1 550
Net fee and commission income 324 907 50 001 374 908
Investment loss - (46 448) (46 448)
Share of post-taxation loss of associates and joint venture holdings - (885) (885)
Trading income/(loss) arising from
- customer flow - (10 995) (10 995)
- balance sheet management and other trading activities - 43 479 43 479
Total operating income before expected credit loss impairment charges 347 670 13 939 361 609
Expected credit loss impairment release - (243) (243)
Operating income 347 670 13 696 361 366
Operating costs (255 914) (1 832) (257 746)
Operating profit before strategic actions and non-controlling interests 91 756 11 864 103 620
Profit attributable to non-controlling interests from discontinued operations - (11 814) (11 814)
Operating profit before strategic actions 91 756 50 91 806
Amortisation of acquired intangibles (12 625) - (12 625)
Financial impact of strategic actions (4 938) - (4 938)
Profit before taxation 74 193 50 74 243
Taxation on operating profit before strategic actions (17 201) 1 019 (16 182)
Taxation on acquired intangibles 2 031 - 2 031
Earnings from discontinued operations attributable to shareholders 59 023 1 069 60 092
Financial impact of strategic actions of discontinued operations
For the six months to 30 September 2023
£'000
Remeasurement on deconsolidation of IPF, net of gain on sale of IPF management (93 782)
business
Gain on the loss of control on the combination with Rathbones group 361 684
Financial impact of strategic actions before taxation 267 902
Taxation on financial impact of strategic actions (2 359)
Net financial impact of strategic actions 265 543
Investec Wealth & Investment Limited
On 21 September 2023, the Investec Group successfully completed the all-share
combination of Investec Wealth & Investment Limited and Rathbones Group
Plc. On completion Rathbones issued new Rathbones shares in exchange for 100%
of Investec Wealth & Investment Limited share capital. Investec Group now
owns 41.25% of the economic interest in the enlarged Rathbones Group's share
capital, with Investec Group's voting rights limited to 29.9%.The Group's
holding in Rathbones Group Plc is equity accounted for as an interest in
associated undertakings and joint venture holdings in accordance with IAS 28.
Gain on loss of control of Investec Wealth & Investment Limited
£'000 2023
The gain is calculated as follows:
Fair value of % received in Rathbones Group 779 421
Net asset value of Investec Wealth & Investment previously consolidated (405 755)
(including goodwill)
Gain on the combination of Rathbones Group before taxation 373 666
Implementation costs (11 982)
Gain on combination of Rathbones Group before taxation 361 684
Taxation on gain (834)
Gain on combination of Rathbones Group 360 850
Major classes of assets and liabilities
£'000 2023
Loans and advances to banks 172 595
Goodwill 242 354
Other assets 360 379
Other liabilities (369 573)
Net asset value of Investec Wealth & Investment previously consolidated 405 755
(including goodwill)
Remeasurement on deconsolidation of IPF, net of gain on sale of IPF management
business
The completion date of the sale of the IPF management companies was 6 July
2023 at which point the Group deconsolidated its current c.24.3% investment in
IPF. Historically, IPF has been controlled by the Group because of the power
over relevant activities held by the IPF management function which were, until
the current period, wholly owned by the Group and that the majority of
directors of IPF were associated with the Group. In the current period, the
management companies were sold into the fund, and as a result the Group lost
control of both these functions and the executive directors transferred
employment from Investec to IPF reducing the number of directors associated
with Investec to less than majority. The investment in IPF is now held as an
associate company. In accordance with the Group's accounting policies,
associates that are held with no strategic intention should be accounted for
at fair value through profit or loss by applying the venture capital exemption
as provided in IAS 28. The investment is disclosed in the investment portfolio
line on the balance sheet. Investec Limited, through its ordinary course of
business has been classified as a venture capital entity and this exemption
provided in IAS 28 has been applied.
Loss on sale of IPF asset management function and deconsolidation
£'000 2023
The loss is calculated as follows:
Fair value of the consideration 34 330
Fair value of investment at 6 July 2023 61 035
Net asset value of IPF previously consolidated (including non-controlling (545 891)
interests)
Non-controlling interest derecognised previously included in the consolidation 412 974
of IPF at 6 July 2023
Foreign currency translation reserve recycled to the income statement on (55 377)
distribution
Loss before taxation and costs (92 929)
Implementation costs (853)
Loss before taxation (93 782)
Taxation benefit (release of deferred taxation) (1 525)
Loss on sale of IPF management function and deconsolidation net of taxation (95 307)
and implementation costs
Major classes of assets and liabilities
£'000 2023
Investment properties 568 568
Investment portfolio 425 863
Other assets 88 056
Deposits by banks (258 403)
Debt securities in issue (208 464)
Other liabilities (69 729)
Net asset value of IPF previously consolidated (including non-controlling 545 891
interests)
Balance sheet and cash flow statement restatements
Derivative financial instruments
Resulting from the restatement made at 31 March 2023, certain derivative
financial assets and liabilities that are managed by the Group's trading desks
were previously presented on a gross basis, while the IAS 32 on-balance sheet
netting requirements were met. Due to an upgrade of the internal reporting
processes, the intent to net settle was evidenced. The derivative
transactions, totalling £41.1 million, at 30 September 2022, satisfied the
legally enforceable right of set off in terms of IAS 32. These positions are
also operationally net settled through the use of the Continuous Linked
Settlement (CLS) system. The comparative balance sheet has been restated for
the reclassification. This change has no impact on the comparative income
statement or cash flow statement.
Non-sovereign and non-bank cash placements and loans and advances to customers
Change in classification from non-sovereign and non-bank cash placements to
loans and advances to customers
During the period to 30 September 2023, following a revision of management's
internal policies defining the instruments to be included as non-sovereign and
non-bank cash placements and loans and advances, management concluded that
£197.4 million (September 2022: £232.9 million; March 2023: £201.8 million)
previously classified in non-sovereign and non-bank cash placements should
be disclosed within loans and advances to customers (based on the revised
policies). The change in classification is considered more relevant on the
basis that certain short term facilities to small and medium enterprises are
better reflected as loans and advances to customers as it forms part of the
funding strategy of these clients. The comparative balance sheets have been
restated for the reclassification. This change has no impact on the
comparative income statements.
Restatement of non-sovereign and non-bank cash placements in the cash flow
statement
£396.3 million (September 2022: £660.1 million; March 2023: £644.1 million)
net of ECL of £0.7 million (September 2022: £3.3 million; March 2023: £2.3
million) of non-sovereign and non-bank cash placements were previously
classified as cash and cash equivalents for the purposes of the cash flow
statement. Management concluded that whilst these balances are available on
demand, the nature of these products and the underlying credit risk more
closely aligns with operating cash flow rather than cash and cash equivalents.
The comparative cash flow statements have been restated to more appropriately
reflect the nature of these balances. This change has no impact on the
comparative income statements or balance sheets.
Cash flow hedge reserve
During the period to 30 September 2023, it was identified that the fair value
of instruments designated as fair value hedges were incorrectly booked in
equity to the cash flow hedge reserve. Accordingly, the cash flow hedging
reserve was reclassified to the underlying hedged items that are disclosed in
bank debt securities and other debt securities on the balance sheet. The
adjustment was made to the hedged item line item as the hedged item was
accounted for at amortised cost. The associated deferred taxation was
reversed. The hedges were effective and accordingly did not have any impact on
the income statement. This change has no impact on the cash flow statement. It
was further identified that amounts previously recognised within the cash flow
hedging reserve were not correctly released to the income statement within the
respective periods in which the hedged risk impacted earnings. These amounts
have been restated retrospectively against retained earnings.
The impact of these changes on the 30 September 2022 and 31 March 2023 balance
sheet are:
Relates to cash flow hedge reserve restatement
At 30 Sept 2022 Restatement At 30 Sept 2022
as previously reported restated
£'000
Assets
Non-sovereign and non-bank cash placements 660 133 (232 925) 427 208
Bank debt securities* 1 096 296 7 005 1 103 301
Other debt securities* 1 263 504 18 023 1 281 527
Derivative financial instruments 1 811 234 (41 101) 1 770 133
Loans and advances to customers 30 728 533 232 925 30 961 458
Deferred taxation* 255 300 (10 245) 245 055
Total assets 59 547 197 (26 318) 59 520 879
Liabilities
Derivative financial instruments 2 988 558 (41 101) 2 947 457
Total liabilities 53 868 954 (41 101) 53 827 853
Equity
Other reserves* (673 607) 29 401 (644 206)
Retained income* 4 346 438 (14 618) 4 331 820
Total Equity 5 678 243 14 783 5 693 026
At 31 March 2023 Restatement At 31 March 2023
as previously reported restated
£'000
Assets
Non-sovereign and non-bank cash placements 644 065 (201 811) 442 254
Bank debt securities* 939 509 10 475 949 984
Other debt securities* 1 229 392 14 839 1 244 231
Loans and advances to customers 29 911 158 201 811 30 112 969
Deferred taxation* 258 126 (22 955) 235 171
Total assets 57 294 659 2 359 57 297 018
Equity
Other reserves* (850 742) 64 876 (785 866)
Retained income* 4 553 011 (62 517) 4 490 494
Total Equity 5 331 665 2 359 5 334 024
*
The impact of the above changes on the 30 September 2022 and 31 March 2023
cash flow statements are:
At 30 Sept 2022 Restatement At 30 Sept 2022
as previously reported restated
£'000
Net cash outflow from operating activities (710 149) 1 265 (708 884)
Effects of exchange rate changes on cash and cash equivalents 6 655 22 039 28 694
Cash and cash equivalents at the beginning of the period 9 099 740 (686 716) 8 413 024
Cash and cash equivalents at the end of the period 8 060 571 (663 412) 7 397 159
At 31 March 2023 Restatement At 31 March 2023
as previously reported restated
£'000
Net cash inflow from operating activities 469 757 (47 350) 422 407
Effects of exchange rate changes on cash and cash equivalents (196 806) 87 702 (109 104)
Cash and cash equivalents at the beginning of the period 9 099 740 (686 716) 8 413 024
Cash and cash equivalents at the end of the period 8 444 014 (646 364) 7 797 650
The impact of the above changes on the 30 September 2022 and 31 March 2023
statement of total comprehensive income is:
At 30 Sept 2022 Restatement At 30 Sept 2022
as previously reported restated
£'000
Fair value movements on cash flow hedges taken directly to other comprehensive 38 843 (11 465) 27 378
income
Foreign currency adjustments on translating foreign operations (35 211) 9 338 (25 873)
Total comprehensive income 439 999 (2 127) 437 872
At 31 March 2023 Restatement At 31 March 2023
as previously reported restated
£'000
Fair value movements on cash flow hedges taken directly to other comprehensive 39 717 (9 687) 30 030
income
Foreign currency adjustments on translating foreign operations (306 053) (4 864) (310 917)
Total comprehensive income 499 135 (14 551) 484 584
Income statement restatements
Discontinued operations
The effective date of the combination of Investec Wealth & Investment
Limited and Rathbones Group Plc was 21 September 2023, at which point the
Group deconsolidated its 100% holding in Investec Wealth & Investment
Limited. The completion date of the sale of the Investec Property Fund (IPF)
management companies was 6 July 2023 at which point the Group deconsolidated
its existing c.24.3% investment in IPF. The Investec Wealth & Investment
business and IPF have been disclosed as discontinued operations and the
income statement for the prior periods have been appropriately re-presented.
Refer to discontinued operations on page
Fee and commission expense and operating costs
During the period to 30 September 2023 management concluded that £3.8 million
(September 2022: £2.6 million; March 2023: £7.1 million) of costs relating
to fee and commission income would be more appropriately disclosed within fee
and commission expense, due to the nature of these costs. As a result, fee and
commission expense and operating costs for the prior periods have been
voluntarily restated. The restatement has no impact on operating profit in the
income statement, headline earnings, the cash flow statement and balance
sheet.
These reclassifications in the income statements for the prior periods are
shown in the tables below:
£'000 Six months to Re-presentation as a discontinued operation Restatement Six months to
30 September 2022 30 Sept 2022
as previously reported restated
Interest income 1 342 691 (10 153) - 1 332 538
Interest expense (737 908) 13 203 - (724 705)
Net interest income 604 783 3 050 - 607 833
Fee and commission income 424 451 (191 009) - 233 442
Fee and commission expense (26 168) 1 932 (2 553) (26 789)
Investment income 28 618 1 174 - 29 792
Share of post taxation profit of associates and joint venture holdings 27 454 558 - 28 012
Trading income/(loss) arising from
- customer flow 69 373 (3 137) - 66 236
- balance sheet management and other trading activities 9 408 (19 747) - (10 339)
Other operating income (6 651) - - (6 651)
Total operating income before expected credit loss impairment charges 1 131 268 (207 179) (2 553) 921 536
Expected credit loss impairment charges (30 201) 850 - (29 351)
Operating income 1 101 067 (206 329) (2 553) 892 185
Operating costs (667 399) 130 564 2 553 (534 282)
Operating profit before goodwill and acquired intangibles 433 668 (75 765) - 357 903
Impairment of goodwill (805) - - (805)
Amortisation of acquired intangibles (7 978) 6 662 - (1 316)
Amortisation of acquired intangibles of associates (1 542) - - (1 542)
Closure and rundown of the Hong Kong direct investments business (280) - - (280)
Operating profit 423 063 (69 103) - 353 960
Net gain on distribution of associate to shareholders 154 407 - - 154 407
Profit before taxation 577 470 (69 103) - 508 367
Taxation on operating profit before goodwill and acquired intangibles (86 630) 6 909 - (79 721)
Taxation on acquired intangibles and net gain on distribution of associate to 15 956 (1 103) - 14 853
shareholders
Profit after taxation from continuing operations 506 796 (63 297) - 443 499
Profit after taxation from discontinued operations - 63 297 - 63 297
Profit after taxation 506 796 - - 506 796
Profit attributable to non-controlling interests (28 673) 28 673 - -
Profit attributable to non-controlling interests of discontinued operations - (28 673) - (28 673)
Earnings attributable to shareholders 478 123 - - 478 123
Earnings per share (pence)
- Basic 50.6 50.6
- Diluted 48.9 48.9
- Basic for continuing operations n/a 46.8
- Diluted for continuing operations n/a 45.2
Adjusted earnings per share (pence)
- Basic 32.9 32.9
- Diluted 31.8 31.8
- Basic for continuing operations n/a 28.5
- Diluted for continuing operations n/a 27.5
Headline earnings per share (pence)
- Basic 32.0 32.0
- Diluted 30.8 30.8
- Basic for continuing operations n/a 28.1
- Diluted for continuing operations n/a 27.1
£'000 Year to Re-presentation as a discontinued operation Restatement Year to
31 March 2023 31 March 2023
as previously reported restated
Interest income 3 397 341 (27 919) - 3 369 422
Interest expense (2 101 584) 26 369 - (2 075 215)
Net interest income 1 295 757 (1 550) - 1 294 207
Fee and commission income 832 213 (378 543) - 453 670
Fee and commission expense (52 860) 3 635 (7 090) (56 315)
Investment income (17 145) 46 448 - 29 303
Share of post taxation profit of associates and joint venture holdings 29 149 885 - 30 034
Trading income/(loss) arising from
- customer flow 131 204 10 995 - 142 199
- balance sheet management and other trading activities 57 714 (43 479) - 14 235
Other operating income 4 386 - - 4 386
Total operating income before expected credit loss impairment charges 2 280 418 (361 609) (7 090) 1 911 719
Expected credit loss impairment charges (81 089) 243 - (80 846)
Operating income 2 199 329 (361 366) (7 090) 1 830 873
Operating costs (1 350 835) 257 746 7 090 (1 085 999)
Operating profit before goodwill and acquired intangibles 848 494 (103 620) - 744 874
Impairment of goodwill (890) - - (890)
Amortisation of acquired intangibles (15 160) 12 625 - (2 535)
Amortisation of acquired intangibles of associates (1 542) - - (1 542)
Closure and rundown of the Hong Kong direct investments business (450) - - (450)
Operating profit 830 452 (90 995) - 739 457
Net gain on distribution of associate to shareholders 154 438 - - 154 438
Financial impact of group restructures (4 968) 4 938 - (30)
Profit before taxation 979 922 (86 057) - 893 865
Taxation on operating profit before goodwill and acquired intangibles (179 704) 16 182 - (163 522)
Taxation on acquired intangibles and net gain on distribution of associate to 17 213 (2 031) - 15 182
shareholders
Profit after taxation from continuing operations 817 431 (71 906) - 745 525
Profit after taxation from discontinued operations - 71 906 - 71 906
Profit after taxation 817 431 - - 817 431
Profit attributable to non-controlling interests (12 566) 11 814 - (752)
Profit attributable to non-controlling interests of discontinued operations - (11 814) - (11 814)
Earnings attributable to shareholders 804 865 - - 804 865
Earnings per share (pence)
- Basic 85.8 85.8
- Diluted 82.5 82.5
- Basic for continuing operations n/a 79.1
- Diluted for continuing operations n/a 76.0
Adjusted earnings per share (pence)
- Basic 68.9 68.9
- Diluted 66.3 66.3
- Basic for continuing operations n/a 60.4
- Diluted for continuing operations n/a 58.1
Headline earnings per share (pence)
- Basic 66.8 66.8
- Diluted 64.2 64.2
- Basic for continuing operations n/a 59.9
- Diluted for continuing operations n/a 57.6
Contingent liabilities and legal matters
Historical German dividend tax arbitrage transactions
Investec Bank plc has previously been notified by the Office of the Public
Prosecutor in Cologne, Germany, that it and certain of its current and former
employees may be involved in possible charges relating to historical
involvement in German dividend tax arbitrage transactions (known as cum-ex
transactions). Investigations are ongoing and no formal proceedings have been
issued against Investec Bank plc by the Office of the Public Prosecutor. In
addition, Investec Bank plc received certain enquiries in respect of client
tax reclaims for the periods 2010-2011 relating to the historical German
dividend arbitrage transactions from the German Federal Tax Office (FTO) in
Bonn. The FTO has provided more information in relation to their claims and
Investec Bank plc has sought further information and clarification.
Investec Bank plc is co-operating with the German authorities and continues to
conduct its own internal investigation into the matters in question. A
provision is held to reflect the estimate of financial outflows that could
arise as a result of this matter. There are factual issues to be resolved
which may have legal consequences, including financial penalties.
In relation to potential civil claims; whilst Investec Bank plc is not a
claimant nor a defendant to any civil claims in respect of cum-ex
transactions, Investec Bank plc has received third party notices in relation
to two civil proceedings in Germany and may elect to join the proceedings as a
third party participant. Investec Bank plc has itself served third party
notices on various participants to these historic transactions in order to
preserve the statute of limitation on any potential future claims that
Investec Bank plc may seek to bring against those parties, should Investec
Bank plc incur any liability in the future. Investec Bank plc has also entered
into standstill agreements with some third parties in order to suspend the
limitation period in respect of the potential civil claims. While Investec
Bank plc is not a claimant nor a defendant to any civil claims at this stage,
it cannot rule out the possibility of civil claims by or against Investec Bank
plc in future in relation to the relevant transactions.
The Group has not provided further disclosure with respect to these historical
dividend arbitrage transactions because it has concluded that such disclosure
may be expected to seriously prejudice its outcome.
Acquisitions
During the reporting period we completed a stepped acquisition increasing our
shareholding in our Capitalmind associates from 30% to 60% for a consideration
of £43.6 million and therefore as at 30 September 2023 have consolidated
these entities as subsidiaries. We have measured the non-controlling interest
as the proportionate share of the identifiable net assets. Goodwill of £56
million has been recognised as a consequence of this increased shareholding.
We are utilising the 12 month window post acquisition to finalise the purchase
price allocation which may lead to adjustments to goodwill and intangible
asset figures.
The goodwill recognised of £56 million is in relation to the purchase price
for the additional 30% acquired, the fair value of the previously held 30% and
the non-controlling interest measured at its proportionate share of 40% of net
asset value compared to the fair value of the identifiable assets on
transaction date.
Net fee and commission income
For the six months to 30 September 2023 UK and Southern Total
£'000 Other Africa
Wealth & Investment net fee and commission income - 52 250 52 250
Fund management fees/fees for funds under management - 32 383 32 383
Private client transactional fees* - 21 361 21 361
Fee and commission expense - (1 494)
(1 494)
Specialist Banking net fee and commission income 65 103 78 711 143 814
Specialist Banking fee and commission income** 72 245 99 686 171 931
Specialist Banking fee and commission expense (7 142) (20 975)
(28 117)
Group Investments net fee and commission income - (3) (3)
Group Investments fee and commission income -
(3) (3)
Group Investments fee and commission expense - - -
Net fee and commission income 65 103 130 958 196 061
Annuity fees (net of fees payable) 4 593 93 159 97 752
Deal fees 60 510 37 799 98 309
For the six months to 30 September 2022^ UK and Southern Total
£'000 Other Africa
Wealth & Investment net fee and commission income - 51 900 51 900
Fund management fees/fees for funds under management - 33 379 33 379
Private client transactional fees* - 19 747 19 747
Fee and commission expense - (1 226) (1 226)
Specialist Banking net fee and commission income 61 671 93 082 154 753
Specialist Banking fee and commission income** 69 374 110 942 180 316
Specialist Banking fee and commission expense (7 703) (17 860) (25 563)
Group Investments net fee and commission income - - -
Group Investments fee and commission income - - -
Group Investments fee and commission expense - - -
Net fee and commission income 61 671 144 982 206 653
Annuity fees (net of fees payable) 8 131 98 299 106 430
Deal fees 53 540 46 683 100 223
^ Restated as detailed below.
* Trust and fiduciary fees amounted to £0.2 million and are
included in Private client transactional fees.
** Included in Specialist Banking is fee and commission income of
£4.3 million for operating lease income which is out of the scope of IFRS 15
- Revenue from contracts with customers.
Analysis of assets and liabilities by measurement category
At 30 September 2023 Total Amortised Non-financial Total
instruments at cost instruments or
fair value scoped out of
IFRS 9
£'000
Assets
Cash and balances at central banks - 5 335 622 - 5 335 622
Loans and advances to banks - 1 441 768 - 1 441 768
Non-sovereign and non-bank cash placements 20 206 376 105 - 396 311
Reverse repurchase agreements and cash collateral on securities borrowed 1 461 784 2 961 092 - 4 422 876
Sovereign debt securities 3 115 738 2 312 374 - 5 428 112
Bank debt securities 525 649 281 417 - 807 066
Other debt securities 318 738 954 494 - 1 273 232
Derivative financial instruments 1 329 833 - - 1 329 833
Securities arising from trading activities 1 576 610 - - 1 576 610
Investment portfolio 838 350 - - 838 350
Loans and advances to customers 2 452 020 28 267 580 - 30 719 600
Own originated loans and advances to customers securitised - 281 543 - 281 543
Other loans and advances - 134 310 - 134 310
Other securitised assets 72 443 23 853 - 96 296
Interests in associated undertakings and joint venture holdings - - 828 093 828 093
Current taxation assets - - 70 415 70 415
Deferred taxation assets - - 202 392 202 392
Other assets 203 132 774 345 538 056 1 515 533
Property and equipment - - 222 133 222 133
Investment properties - - 111 157 111 157
Goodwill - - 76 085 76 085
Software - - 10 063 10 063
Non-current assets classified as held for sale - - 3 262 3 262
11 914 503 43 144 503 2 061 656 57 120 662
Other financial instruments at fair value through profit or loss in respect of 133 233 - - 133 233
liabilities to customers
12 047 736 43 144 503 2 061 656 57 253 895
Liabilities
Deposits by banks - 3 886 578 - 3 886 578
Derivative financial instruments 2 471 973 - - 2 471 973
Other trading liabilities 285 463 - - 285 463
Repurchase agreements and cash collateral on securities lent 212 817 677 695 - 890 512
Customer accounts (deposits) 3 286 844 36 648 883 - 39 935 727
Debt securities in issue 17 525 1 487 466 - 1 504 991
Liabilities arising on securitisation of own originated loans - 170 095 - 170 095
and advances
Liabilities arising on securitisation of other assets 76 084 - - 76 084
Current taxation liabilities - - 64 899 64 899
Deferred taxation liabilities - - 20 295 20 295
Other liabilities 34 621 884 523 644 604 1 563 748
6 385 327 43 755 240 729 798 50 870 365
Liabilities to customers under investment contracts 119 328 - - 119 328
Insurance liabilities, including unit-linked liabilities 13 905 - - 13 905
6 518 560 43 755 240 729 798 51 003 598
Subordinated liabilities - 1 013 237 - 1 013 237
6 518 560 44 768 477 729 798 52 016 835
Financial instruments 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
At 30 September 2023 Total instruments at fair value Level 1 Level 2 Level 3
£'000
Assets
Non-sovereign and non-bank cash placements 20 206 - 20 206 -
Reverse repurchase agreements and cash collateral on securities borrowed 1 461 784 - 1 461 784 -
Sovereign debt securities 3 115 738 3 115 738 - -
Bank debt securities 525 649 350 685 174 964 -
Other debt securities 318 738 80 472 157 728 80 538
Derivative financial instruments 1 329 833 - 1 276 911 52 922
Securities arising from trading activities 1 576 610 1 560 872 11 811 3 927
Investment portfolio 838 350 248 347 2 325 587 678
Loans and advances to customers 2 452 020 - 665 133 1 786 887
Other securitised assets 72 443 - - 72 443
Other assets 203 132 194 920 8 212 -
Other financial instruments at fair value through profit or loss in respect of 133 233 133 233 - -
liabilities to customers
12 047 736 5 684 267 3 779 074 2 584 395
Liabilities
Derivative financial instruments 2 471 973 - 2 408 479 63 494
Other trading liabilities 285 463 139 703 145 760 -
Repurchase agreements and cash collateral on securities lent 212 817 - 212 817 -
Customer accounts (deposits) 3 286 844 - 3 286 844 -
Debt securities in issue 17 525 - 17 525 -
Liabilities arising on securitisation of other assets 76 084 - - 76 084
Other liabilities 34 621 - 34 621 -
Liabilities to customers under investment contracts 119 328 - 119 328 -
Insurance liabilities, including unit-linked liabilities 13 905 - 13 905 -
6 518 560 139 703 6 239 279 139 578
Net financial assets/(liabilities) at fair value 5 529 176 5 544 564 (2 460 205) 2 444 817
Transfers between level 1 and level 2
There were no transfers between level 1 and level 2 in the current period.
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 Yield curves
Reverse repurchase agreements and cash collateral on securities borrowed Discounted cash flow model, Hermite interpolation, Black-Scholes Yield curves, discount rates, volatilities
Bank debt securities Discounted cash flow model Yield curves
Other debt securities Discounted cash flow model Yield curves, NCD curves and swap curves, discount rates, external prices,
broker quotes
Derivative financial instruments Discounted cash flow model, Hermite interpolation, industry standard Discount rate, risk-free rate, volatilities, forex forward points and spot
derivative pricing models including Black-Scholes and Local Volatility rates, interest rate swap curves and credit curves
Securities arising from trading activities Standard industry derivative pricing model, Discounted cash flow model Interest rate curves, implied bond spreads, equity volatilities, yield curves
Investment portfolio Discounted cash flow model, relative valuation model comparable quoted inputs Discount rate and fund unit price, net assets
Loans and advances to customers Discounted cash flow model Yield curves
Other assets Discounted cash flow model Yield curves
Liabilities
Derivative financial instruments Discounted cash flow model, Hermite interpolation, industry standard Discount rate, risk-free rate, volatilities, forex forward points and spot
derivative pricing models including Black-Scholes and Local Volatility rates, interest rate swap curves and credit curves
Other trading liabilities Discounted cash flow model, Hermite interpolation, industry standard Discount rate, risk-free rate, volatilities, forex forward points and spot
derivative pricing models including Local Volatility rates, interest rate swap curves and credit curves
Repurchase agreements and cash collateral on securities lent Discounted cash flow model, Hermite interpolation Yield curves, discount rates
Customer accounts (deposits) Discounted cash flow model Yield curves, discount rates
Debt securities in issue Discounted cash flow model, Hermite interpolation, industry standard Discount rate, risk-free rate, volatilities, forex forward points and spot
derivative pricing models including Local Volatility rates, interest rate swap curves and credit curves
Other liabilities Discounted cash flow model Yield curves
Liabilities to customers under investment contracts Current price of underlying unitised assets Listed prices
Insurance liabilities, including unit-linked liabilities Current price of underlying unitised assets Listed prices
Level 3 financial instruments
The following tables show 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.
£'000 Investment Loans and Other securitised Other balance Total
portfolio advances to assets sheet assets
customers
Assets
Balance at 1 April 2023 1 127 964 1 336 871 78 231 151 118 2 694 184
Total (losses) or gains (10 229) 83 499 (12) 3 076 76 334
In the income statement (10 229) 80 189 (12) 3 076 73 024
In the statement of comprehensive income - 3 310 - - 3 310
Purchases 14 142 1 268 109 - 39 259 1 321 510
Sales (66 110) (466 173) - (14 131) (546 414)
Issues - 3 229 - - 3 229
Settlements (41 984) (448 598) (5 776) (43 104) (539 462)
Discontinued operations (425 844) - - - (425 844)
Foreign exchange adjustments (10 261) 9 950 - 1 169 858
Balance at 30 September 2023 587 678 1 786 887 72 443 137 387 2 584 395
£'000 Liabilities arising Other balance Total
on securitisation sheet liabilities
of other assets
Liabilities
Balance at 1 April 2023 81 609 111 858 193 467
Total losses in the income statement 309 3 170 3 479
Disposal of subsidiaries - (3 933) (3 933)
Settlements (5 834) (3 567) (9 401)
Discontinued operations - (45 387) (45 387)
Foreign exchange adjustments - 1 353 1 353
Balance at 30 September 2023 76 084 63 494 139 578
The Group transfers between levels within the fair value hierarchy when the
significance of the unobservable inputs change or if the valuation methods
change. Transfers are deemed to occur at the end of each semi-annual reporting
period.
The following table quantifies the gains or (losses) included in the income
statement and statement of other comprehensive income recognised on level 3
financial instruments:
For the year to 30 September 2023 Total Realised Unrealised
£'000
Total gains included in the income statement for the period
Net interest income 80 843 65 250 15 593
Investment (loss)/income (8 270) 64 019 (72 289)
Trading income arising from customer flow (3 028) - (3 028)
69 545 129 269 (59 724)
Total gains included in other comprehensive income for the period
Gain on realisation on debt instruments at FVOCI recycled through the income 89 89 -
statement
Fair value movements on debt instruments at FVOCI taken directly to other 3 310 - 3 310
comprehensive income
3 399 89 3 310
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:
At 30 September 2023 Balance sheet Significant unobservable input changed Range which unobservable input has been changed Favourable Unfavourable
value changes changes
£'000 £'000 £'000
Assets
Other debt securities 80 538 Potential impact on income statement 2 308 (4 727)
Credit spreads 0.42%-0.88% 116 (235)
Cash flow adjustments CPR 15.95% 9
(9)
Other^ ^ 2 183 (4 483)
Derivative financial instruments 52 922 Potential impact on income statement 5 015 (5 359)
Volatilities 7.5%-22.3% 7
(14)
Underlying asset value^^ ^^ 4 320 (4 322)
Cash flow adjustment CPR 15.95% 4 (3)
Other^ ^ 684 (1 020)
Securities arising from trading activities 3 927 Potential impact on income statement
Cash flow adjustments CPR 11.88% 104 (112)
Investment portfolio 587 678 Potential impact on income statement 64 626 (94 443)
Price earnings multiple 3.7x-14.2x 7 713 (12 635)
Underlying asset value^^ ^^ 8 794 (19 800)
EBITDA ** 9 534 (9 796)
EBITDA (10%)-10% 19 569 (19 569)
Cash flows ** 2 209 (2 610)
Underlying asset value^^ ^^ 849 (1 696)
Precious and industrial metal prices (5%)-5% 1 192 (1 192)
Other^ ^ 14 766 (27 145)
Loans and advances to customers 1 786 887 Potential impact on income statement 35 101 (62 053)
Credit spreads 0.19%-37.8% 10 085 (39 456)
Property value # 15 277 (7 999)
Price earnings multiple 3.7x-11.1x 3 709 (6 998)
Underlying asset value^^ ^^ 1 543 (1 822)
Other^ ^ 4 487 (5 778)
Potential impact on other comprehensive income 13 787 (24 441)
Credit spreads 0.19%-6.6% 13 787 (24 441)
Other securitised assets* 72 443 Potential impact on income statement
Cash flow adjustments CPR 15.95% 708 (631)
Total level 3 assets 2 584 395 121 649 (191 766)
Liabilities
Derivative financial instruments 63 494 Potential impact on income statement (4 366) 4 274
Volatilities 9%-23.6% 1
(1)
Underlying asset value^^ ^^ (4 365) 4 273
Liabilities arising on securitisation of other assets* 76 084 Potential impact on income statement
Cash flow adjustments CPR 15.95% (306) 369
Total level 3 liabilities 139 578 (4 672) 4 643
Net level 3 assets 2 444 817 116 977 (187 123)
* The sensitivity of the fair value of liabilities arising on
securitisation of other assets has been considered together with other
securitised assets.
^ Other - The valuation sensitivity has been
assessed by adjusting various inputs such as expected cash flows, discount
rates, earnings multiples rather than a single input. It is deemed appropriate
to reflect the outcome on a portfolio basis for the purposes of this analysis
as the sensitivity of the assets cannot be determined through the adjustment
of a single input.
^^ Underlying asset values are calculated by reference
to a tangible asset, for example property, aircraft or shares.
∗∗ The EBITDA, cash flows and property values have
been stressed on an investment-by-investment and loan-by-loan basis in order
to obtain favourable and unfavourable valuations.
# Property values are the underlying input for the
valuations where the capitalisation rate when valuing these properties has
been stressed by 0.25bps.
In determining the value of level 3 financial instruments, the following are
the principal input 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 (including WACC) are used to adjust for the time value of money
when using a discounted cash flow valuation method. Where relevant, the
discount rate also accounts for illiquidity, market conditions and uncertainty
of future 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.
EBITDA
The Company being valued earnings before interest, taxes, depreciation and
amortisation. This is the main input into a price-earnings multiple valuation
method.
Price-earnings multiple
The price-to-earnings ratio is an equity valuation multiple. It is a key
driver in the valuation of unlisted investments.
Property value and precious and industrial metals
The property value and precious and industrial metals is a key driver of
future cash flows on these investments.
Underlying asset value
In instances where cash flows have links to referenced assets, the underlying
asset value is used to determine the fair value. The underlying asset
valuation is derived using observable market prices sourced from broker
quotes, specialist valuers or other reliable pricing sources.
Fair value of financial assets and liabilities at amortised cost
At 30 September 2023 Carrying amount Fair value approximates carrying amount Balances where fair values do not approximate carrying amounts Fair value of balances that do not approximate carrying amounts
£'000
Assets
Cash and balances at central banks 5 335 622 5 335 622 - -
Loans and advances to banks 1 441 768 1 441 768 - -
Non-sovereign and non-bank cash placements 376 105 376 105 - -
Reverse repurchase agreements and cash collateral on securities borrowed 2 961 092 1 111 004 1 850 088 1 830 554
Sovereign debt securities 2 312 374 10 872 2 301 502 2 291 405
Bank debt securities 281 417 18 299 263 118 238 700
Other debt securities 954 494 157 866 796 628 791 764
Loans and advances to customers 28 267 580 13 485 233 14 782 347 14 422 265
Own originated loans and advances to customers securitised 281 543 281 543 - -
Other loans and advances 134 310 77 462 56 848 56 756
Other securitised assets 23 853 23 853 - -
Other assets 774 345 774 345 - -
43 144 503 23 093 972 20 050 531 19 631 444
Liabilities
Deposits by banks 3 886 578 637 231 3 249 347 3 257 379
Repurchase agreements and cash collateral on securities lent 677 695 114 723 562 972 587 360
Customer accounts (deposits) 36 648 883 20 170 535 16 478 348 16 579 546
Debt securities in issue 1 487 466 127 604 1 359 862 1 336 367
Liabilities arising on securitisation of own originated loans and advances 170 095 170 095 - -
Other liabilities 884 523 882 339 2 184 957
Subordinated liabilities 1 013 237 282 645 730 592 748 375
44 768 477 22 385 172 22 383 305 22 509 984
Investec plc
Incorporated in England and Wales
Registration number: 3633621
LSE ordinary share code: INVP
JSE ordinary share code: INP
ISIN: GB00B17BBQ50
LEI: 2138007Z3U5GWDN3MY22
Ordinary share dividend announcement
In terms of the DLC structure, Investec plc shareholders registered on the
United Kingdom share register may receive all or part of their dividend
entitlements through dividends declared and paid by Investec plc on their
ordinary shares and/or through dividends declared and paid on the SA DAN share
issued by Investec Limited.
Investec plc shareholders registered on the South African branch register may
receive all or part of their dividend entitlements through dividends declared
and paid by Investec plc on their ordinary shares and/or through dividends
declared and paid on the SA DAS share issued by Investec Limited.
Declaration of dividend number 42
Notice is hereby given that interim dividend number 42, being a gross dividend
of 15.50000 pence (2022: 13.50000 pence) per ordinary share has been declared
by the Board from income reserves in respect of the six months ended
30 September 2023, payable to shareholders recorded in the shareholders'
register of the Company at the close of business on Friday 8 December 2023.
• For Investec plc shareholders, registered on the United Kingdom share
register, through a dividend payment by Investec plc from income reserves of
15.50000 pence per ordinary share
• For Investec plc shareholders, registered on the South African branch
register, through a dividend payment by
Investec Limited, on the SA DAS share, payable from income reserves,
equivalent to 15.50000 pence per ordinary share.
The relevant dates relating to the payment of dividend number 42 are as
follows:
Last day to trade cum-dividend
On the Johannesburg Stock Exchange (JSE) Tuesday 5 December 2023
On the London Stock Exchange (LSE) Wednesday 6 December 2023
Shares commence trading ex-dividend
On the Johannesburg Stock Exchange (JSE) Wednesday 6 December 2023
On the London Stock Exchange (LSE) Thursday 7 December 2023
Record date (on the JSE and LSE) Friday 8 December 2023
Payment date (on the JSE and LSE) Friday 22 December 2023
Share certificates on the South African branch register may not be
dematerialised or rematerialised between Wednesday 6 December 2023 and Friday
8 December 2023, both dates inclusive, nor may transfers between the United
Kingdom share register and the South African branch register take place
between Wednesday 6 December 2023 and Friday 8 December 2023, both dates
inclusive.
Additional information for South African resident shareholders of Investec plc
• Shareholders registered on the South African branch register are
advised that the distribution of 15.50000 pence, equivalent to an gross
dividend of 351.78180 cents per share (rounded to 352.00000 cents per share),
has been arrived at using the Rand/Pound Sterling average buy/sell forward
rate of 22.6956, as determined at 11h00 (SA time) on Wednesday 15 November
2023
• Investec plc United Kingdom tax reference number: 2683967322360
• The issued ordinary share capital of Investec plc is 696 082 618
ordinary shares
• The dividend paid by Investec plc to South African resident
shareholders registered on the South African branch register and the dividend
paid by Investec Limited to Investec plc shareholders on the SA DAS share are
subject to South African Dividend Tax (Dividend Tax) of 20% (subject to any
available exemptions as legislated)
• Shareholders registered on the South African branch register who are
exempt from paying the Dividend Tax will receive a net dividend of 352.00000
cents per share paid by Investec Limited on the SA DAS share
• Shareholders registered on the South African branch register who are
not exempt from paying the Dividend Tax will receive a net dividend of
281.60000 cents per share (gross dividend of 352.00000 cents per share less
Dividend Tax of 70.40000 cents per share) per share paid by Investec Limited
on the SA DAS share.
By order of the Board
David Miller
Company Secretary
15 November 2023
Investec Limited
Incorporated in the Republic of South Africa
Registration number: 1925/002833/06
JSE share code: INL
JSE hybrid code: INPR
JSE debt code: INLV
NSX ordinary share code: IVD
BSE ordinary share code: INVESTEC
ISIN: ZAE000081949
LEI: 213800CU7SM6O4UWOZ70
Ordinary share dividend announcement
Declaration of dividend number 135
Notice is hereby given that interim dividend number 135, being a gross
dividend of 352.00000 cents (2022: 278.00000 cents) per ordinary share has
been declared by the Board from income reserves in respect of the six months
ended 30 September 2023 payable to shareholders recorded in the shareholders'
register of the Company at the close of business on Friday 8 December 2023.
The relevant dates relating to the payment of dividend number 135 are as
follows:
Last day to trade cum-dividend Tuesday 5 December 2023
Shares commence trading ex-dividend Wednesday 6 December 2023
Record date Friday 8 December 2023
Payment date Friday 22 December 2023
The interim gross dividend of 351.78180 cents per share (rounded to 352.00000
cents per ordinary share) has been determined by converting the Investec plc
distribution of 15.50000 pence per ordinary share into Rands using the
Rand/Pound Sterling average buy/sell forward rate of 22.6956 at 11h00 (SA
time) on Wednesday 15 November 2023.
Share certificates may not be dematerialised or rematerialised between
Wednesday 6 December 2023 and Friday 8 December 2023 both dates inclusive.
Additional information to take note of
• Investec Limited South African tax reference number: 9800/181/71/2
• The issued ordinary share capital of Investec Limited is 295 278 453
ordinary shares
• The dividend paid by Investec Limited is subject to South African
Dividend Tax (Dividend Tax) of 20% (subject to any available exemptions as
legislated)
• Shareholders who are exempt from paying the Dividend Tax will receive
a net dividend of 352.00000 cents per ordinary share
• Shareholders who are not exempt from paying the Dividend Tax will
receive a net dividend of 281.60000 cents per ordinary share (gross dividend
of 352.00000 cents per ordinary share less Dividend Tax of 70.40000 cents per
ordinary share).
By order of the Board
Niki van Wyk
Company Secretary
15 November 2023
Investec plc
Incorporated in England and Wales
Registration number 3633621
JSE ordinary share code: INP
LSE ordinary share code: INVP
ISIN: GB00B17BBQ50
LEI: 2138007Z3U5GWDN3MY22
Registered office
30 Gresham Street, London
EC2V 7QP, United Kingdom
Registrars in the United Kingdom
Computershare Investor Services PLC
The Pavilions, Bridgwater Road, Bristol
BS99 6ZZ, United Kingdom
Company Secretary
David Miller
Investec Limited
Incorporated in the Republic of South Africa
Registration number 1925/002833/06
JSE ordinary share code: INL
JSE hybrid code: INPR
JSE debt code: INLV
NSX ordinary share code: IVD
BSE ordinary share code: INVESTEC
ISIN: ZAE000081949
LEI: 213800CU7SM6O4UWOZ70
Registered office
100 Grayston Drive
Sandown, Sandton
2196 South Africa
Transfer secretaries in South Africa
Computershare Investor Services (Pty) Ltd
Rosebank Towers, 15 Biermann Avenue, Rosebank
2196 South Africa
Company Secretary
Niki van Wyk
Directors
Philip Hourquebie(1) (Chair)
Fani Titi(2) (Chief Executive)
Nishlan Samujh(2) (Finance Director)
Henrietta Baldock(1)
Zarina Bassa(2) (Senior Independent Director)
Stephen Koseff(2)
Nicky Newton-King(2)
Jasandra Nyker(2
) Vanessa Olver(2)
Philisiwe Sibiya(2
) Brian Stevenson(1)
1 British
2 South African
Richard Wainwright, Ciaran Whelan and Khumo Shuenyane stepped down from the
Board on 3 August 2023
Sponsor
Investec Bank Limited
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