Client Roadshow MayJune2012 - Investec...May 03 May 06 May 09 May 12 Investec Bank of America Barclays HSBC RBS 0 50 May 03 May 06 May 09 May 12 Investec Goldman Sachs Morgan Stanley

May 2012InvestecMay 2012

Review of the environment

2

Economic landscape

Slower global growth in 2012

IMF growth forecasts 3.5% for 2012 and 4.1% for 2013

World Bank global growth forecasts 2 5% for 2012 and 3 1% for 2013 World Bank global growth forecasts 2.5% for 2012 and 3.1% for 2013

Euro zone uncertainty

Greece has restructured its debt, with Italy and Spain adopting tough fiscal measures

Funding Markets

Euro-zone leaders have agreed to enlarge their bailout fund

Global inflationary pressures are subsidingGlobal inflationary pressures are subsiding

Interest rates to remain lower for longer

Debt and funding markets remain a big concern

Further policy delays to address the sovereign debt crisis will negatively affect market sentiment

Income disparity and economic sustainability

3

Key banking themes for 2012

Regulatory restrictions and global banking rules

Further downgrades for banks globally - New S&P ratings for global banksg g y g g

Continued de-leveraging pressures

Higher capital requirements

Pressure on top-line growth

Remuneration structures and levels of pay

Those banks with strong funding and emerging market exposure should benefit most

4

The banking industry is at a crossroads…

““European banking really is at a crossroads European banking really is at a crossroads ––

the likes of which we have not seen in modern the likes of which we have not seen in modern timestimes,” ,” Michael Lafferty, CoMichael Lafferty, Co--Chairman of OMFIF and Lafferty Chairman of OMFIF and Lafferty Group, 21 October 2011. Group, 21 October 2011.

5

Banks are considering their strategic alternatives

6

The not-for-profit sector

““”

7 7

Source: The Economist

Long term share performance9-year price performance (Closing prices rebased)

Investment BankingInvestment BankingGeneral BankingGeneral Banking Specialty BankingSpecialty Banking

400

450

500

550

400

450

500

550

400

450

500

550

100

150

200

250

300

350

100

150

200

250

300

350

100

150

200

250

300

350

SA BanksSA Banks Wealth & InvestmentWealth & InvestmentAsset ManagementAsset Management

0

50

May 03 May 06 May 09 May 12Investec Bank of America Barclays

HSBC RBS

0

50

May 03 May 06 May 09 May 12Investec Goldman Sachs Morgan StanleyJPMorgan Deutsche

0

50

May 03 May 06 May 09 May 12

Investec Macquarie UBS Close Brothers

350

400

450

500

550

600

300

350

400

450

500

550

350

400

450

500

550

600

0

50

100

150

200

250

300

50

100

150

200

250

300

0

50

100

150

200

250

300

Source: Reuters

8

0May 03 May 06 May 09 May 12

Investec plc Brewin Dolphin Rathbone Brothers

Julius Baer Hargreaves Lansdown


Investec Macquarie UBS Close Brothers


Investec ABSA FirstRand Nedbank Standard Bank

Review of Investec’s financial year

9

Past year we experienced a difficult operating environment …

Equity marketsEquity markets Interest ratesInterest rates

environment …

100

110

5

6 Interest rates flat JSE UP 4.2%‐2.1%

‐10.3%

80

90

100

Reb

ased

to 1

00

1

2

3

4

%

E change ratesE change rates

70

Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12

JSE FTSE ASX

0

1


SAJIB3M BBGBP3M BBAUD3M BBUSD3M

Exchange ratesExchange rates

13.0

14.0

1.20

1.24

1.70

1.80

Rand/£Rand/£ Euro/£Euro/£ A$/£A$/£

Rand deteriorated

11.0

12.0

1.12

1.16

1.50

1.60

Source: Reuters

10

10.0


1.08


1.40


10

Performance reflects the difficult environment

Financial performance for the year 2012 has echoed the difficulties of the broader environment

We have realigned our business model, including South Africa

With substantial integration taking place across the group

We have maintained revenues despite difficult markets with the quality of earnings improving substantially

Many of our businesses have continued to deliver Many of our businesses have continued to deliver

Underperforming businesses are turning the corner with gross defaults down

11

…by building capital light revenuesWe have realigned our business model ...

Capital intensive R5 296mn

55%

Capital intensive R5 296mn

55%

Capital lightR4 288mn

45%

Capital lightR4 288mn

45%

Sustainable business model – Investec LimitedSustainable business model – Investec Limited

7,000

R'mn

Net fees and commissions of R4 234mn(44% f t t l)

Net interest income of R4 085mn

(42% f l)

55% of SA(51% of group)55% of SA

(51% of group)45% of SA

(49% of group)45% of SA

(49% of group)

3,000

4,000

5,000

6,000

(44% of total)

Other of R54mn(1% of total)

(42% of total)

Investment income of R758mn

(8% of total)

‐

1,000

2,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

N t i t t i i t t i d t di i

Third party asset management Net interest income,

Trading income of R453mn

(5% of total)

Net interest income, investment income and trading income

Third party assets under management

Containing costsMaintaining credit quality

Strictly managing risk and liquidity

Asset management

Wealth management

Advisory services

l b k

Third party asset management and advisory revenue

Lending portfolios

Investment portfolios

Trading income from client flows

Trading income from balance

Net interest income, investment income and trading income

y g g q y Transactional banking services

Property funds

gsheet management

Other trading income

12Trends reflected in graph are for the year‐ended 31 March, unless otherwise indicated.

… into three distinct business areasAsset management and wealth management now account for 32% of SA

% contribution of operating profit* of Investec Limited Investec Limited(Investec group)

80%

90%

100%

68%69% (52%)

50%

60%

70%

Specialist Banking

76%69% (52%)

(75%)(61%)

20%

30%

40%

Wealth & Investment 24%32%31% (48%)

(39%)

0%

10%

20%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Asset Management

24% ( )(25%) (39%)

13*Before goodwill, acquired intangibles, non-operating items, taxation and after non-controlling interests

Impairments have improved

1 0%6 0%

Investec LimitedInvestec Limited South AfricaSouth Africa

100125 150

3%

4%

5%R'bn

0.7%

0.8%

0.9%

1.0%

4.0%

5.0%

6.0%

UK & Europe (ex Kensington)UK & Europe (ex Kensington)

-25 50 75 100

0%

1%

2%

3%

2008 2009 2010 2011 2012

0.3%

0.4%

0.5%

0.6%

2.0%

3.0%

UK & Europe (ex Kensington)UK & Europe (ex Kensington)

4

6

8

2%

3%

4%

5%£'bn

0.0%

0.1%

0.2%

0.0%

1.0%

Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12

AustraliaAustralia

45%A$'bn

-

2

0%

1%

2008 2009 2010 2011 2012

Net defaults (before collateral) as a % of core advances

Gross defaults as a % of gorss core loans and advances

Credit loss ratio -

1

2

3

4

0%

1%

2%

3%

4%

5%

14

Credit loss ratio 0%2008 2009 2010 2011 2012

Net core loans (RHS)Credit loss ratio (LHS)

Weak group performance

Investec DLC Mar-12 Mar-11%

Change

Operating profit* before tax (£’000) 358 625 434 406 (17.4%)

Operating profit* before tax and impairment losses on loans and advances (£’000) 683 743 752 636 (9.2%)loans and advances (£ 000)

Attributable earnings* (£’000) 257 579 327 897 (21.4%)

Adjusted EPS* (pence) 31.8 43.2 (26.4%)j (p ) ( )

DPS (pence) 17.0 17.0 -

Net tangible asset value per share (pence) 315.1 343.8 (8.3%)Net tangible asset value per share (pence) 315.1 343.8 (8.3%)

Total shareholders’ equity (£’mn) 4 013 3 961 1.3%

Core loans and advances to customers (£’bn) 18 2 18 8 (2 8%)Core loans and advances to customers (£ bn) 18.2 18.8 (2.8%)


Flat performance in South Africa

Investec Limited (excluding results of Investec plc) Mar-12 Mar-11%

Change

Operating profit* before tax and headline adjustments (R’mn) 3 328 3 305 0.7%

Operating income before impairment losses on loans and advances (R’mn) 9 584 9 416 1.8%and advances (R mn)

Earnings attributable to shareholders (R’mn) 2 714 2 688 1.0%

Operating costs (R’mn) 5 432 5 251 3.4%Operating costs (R mn) 5 432 5 251 3.4%

Cost to income ratio 56.7% 55.8% -

ROE (post tax) 14 9% 17 5%ROE (post tax) 14.9% 17.5% -

Customer deposits (R’mn) 176 094 154 504 14.0%

N t l d d (R’ ) 128 747 120 784 6 6%Net core loans and advances (R’mn) 128 747 120 784 6.6%


Capital remains strong

Investec Limited: Capital adequacy ratiosInvestec Limited: Capital adequacy ratios Capital comparison to peers Capital comparison to peers

18%

16.1%

11.6%Mar-12

12%

14%

16%

15.9%

11.9%Mar-11

8%

10%

15.5%

12.1%Mar-10

2%

4%

6%

0% 5% 10% 15% 20%

Tier 1 ratio Capital adequacy ratio

0%Investec Limited

ABSA FirstRand Nedbank Standard Bank

Capital adequacy ratio Tier 1 ratio Permanent equity ratio

Source: Company reports and Investec calculations

17

p q y

Strategy and positioning

18

Our long term strategy

Since inception we have expanded through a combination of organic growth and strategic acquisitions

The internationalisation of Investec is based on the following strategy:: Following our customer base

Gaining domestic competence and critical mass in the chosen geographies

Facilitating cross-border transactions and flow

Our strategy for the past 20 years has been to build a diversified portfolio of businesses and geographies to support clients (institutional, corporate g g p pp ( pand private individuals) through varying markets and economic cycles

In order to create a meaningful and balanced portfolio we need proper foundations in place which gain traction over time

1919

Specialist bank and asset manager

Three distinct business activities focused on well defined target clients

Corporate / Institutional / Government

Specialist Banking* Wealth &Asset

Private Client(High Net Worth / High Income)

Specialist Banking*

Provides a broad range of services:• Advisory

Provides investment management services

Provides investment management services

Wealth & Investment

AssetManagement

• Advisory • Transactional Banking• Lending• Treasury and Trading• Investment Activities

management services management services and independent financial planning advice

*Includes Capital Markets, Investment Banking, Private Banking and Property Activities

20

Asset Management

Long term sustainability The emphasis is on quality and depth across the

Organically built an independent global platform from an emerging market base

StrategyStrategy Value propositionValue proposition

business Maintain cost discipline

Competitive investment performance in chosen specialties

Institutional focus and global client base Strong culture with stable and experienced leadership

Global funds under managementGlobal funds under management

120

140

160

50

60

70 £'mn£'bn

AUM (LHS) Operating profit (RHS)

20

40

60

80

100

10

20

30

40

00 Mar-92 Mar-94 Mar-96 Mar-98 Mar-00 Mar-02 Mar-04 Mar-06 Mar-08 Mar-10 Mar-12

21

Wealth & InvestmentCreating a global platform with strong regional capability

Focus on internationalising the business

Deliver the successful integration of Williams de

StrategyStrategy Value propositionValue proposition Business has been built via consolidation of smaller

businesses over a long period of time

g g p g g p y

gBroë with strong leadership already in place

Development of international and UK resident non-domiciled market via Guernsey and Swiss offshore offering

Well established platforms in the UK and SA

Better systems leading to better and lower cost product

Superior offering that can be leveraged with group distribution capabilitiesdistribution capabilities

1st :Stockbroker awards for sophisticated investors

Ranked # 1 in the 2011 PWC Banking

survey Wealth Management

Ranked # 1 in the 2011 PWC Banking

survey Wealth Management

160

200

R'bn

Non-discretionary

Discretionary30

40

£'bn

Non-discretionary

Discretionary

Global funds under management South African funds under management

Funds under managementFunds under management

40

80

120

10

20

30

22*Note: Total third party assets held under management excluding the Rensburg Fund Management business which was sold in Jan 2011

0Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12

0Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12

Specialist Banking

1stLeading Pan-European Brokerage

Firm – UK Small- & Mid-CapUK Survey 2011

1stCorporate Broking, Sales and

Trading Execution

UK Survey 2011

2011 Service Quality Performance Award

Leading M&A advisorLeading Corporate Finance advisor

Loans and depositsLoans and deposits Global networkGlobal network

120%30

£'bn

Developed world

40%

60%

80%

100%

10

15

20

25

Emerging

world

0%

20%

-

5

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Customer accounts

Core loans and advances to customers (including own originated iti d t ) Emerging

worldsecuritised assets) Core loans (excluding own originated securitised assets) to customer deposits

23

Conclusion

24

Our brand is well developed …

25

… and we have invested in people and a sustainable futurefuture

€50mn to Renewable Energy Funding Facility

Entrepreneurship programme, JASA

ProMaths awardsSouth Africa

Investing for a sustainable futureSkills@work Award in SA

Funding renewable energy

g

Climate change award

“Promaths made me! I learnt beyond the spheres of mathematics and science. Through many programmes which they offered, I realised that life offers infinite possibilities.”Top performer ProMaths 2011

Funding renewable energy research on local SA birdlife

Climate change award in UK

S ti l l iti i UKSupporting local communities in UKWinner 2012

26

Since UK listing: building recurring income

80%2500

£’mn

Average recurring income since 2003 of 63%Average recurring income since 2003 of 63%

60%

70%

80%

2000

2500

31 6% to £174

33.3% to £109

40%

50%

1000

1500

12.3% to £884

31.6% to £174

10%

20%

30%

500

1000

2.6% to £699

0%02003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Net interest income Annuity fees and commissionsOther fees and other operating income Investment income

*Where annuity income is net interest income and annuity fees.

Other fees and other operating income Investment income Trading income Annuity income %

27

Since UK listing: strong growth in core earnings drivers

Third party assets under managementThird party assets under managementCAGR since 2003 of 17%

Core loans and advances and depositsCore loans and advances and deposits

CAGR since 2003 - loans 19%

CAGR since 2003 - customer deposits 17%

100%

120%

25

30 £'bn

100

120 £'bn

60%

80%

15

20

60

80

0%

20%

40%

-

5

10

-

20

40

0%2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Customer accounts

Core loans and advances to customers (including own originated securitised assets)

Core loans (excluding own originated securitised assets) to customer deposits

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Asset Management

Wealth & Investment

Other Co e oa s (e c ud g o o g ated secu t sed assets) to custo e depos ts

28

Since UK listing: solid growth (excl. dividends)

£'mnpence

CAGR of NTAV: 23%CAGR of NTAV: 23% CAGR of NATV per share: 17%CAGR of NATV per share: 17%

2,500

3,000

500

600

700

1 000

1,500

2,000

300

400

500

-

500

1,000

0

100

200

02003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Net tangible asset value (excluding goodwill) (£'mn) (RHS)

Net tangible asset value per share (excluding goodwill) (pence) (LHS)

Share price (pence) (LHS)

29

Since UK listing: returns (incl. dividends)Investing at 31 March 2003 g

IRR at the respective year end date on share price and dividendsIRR at the respective year end date on share price and dividends86.3%

67.1%75.5%

59.2%

31.9% 25.3% 31.4% 26.8% 22.5%

Mar 2004 Mar 2005 Mar 2006 Mar 2007 Mar 2008 Mar 2009 Mar 2010 Mar 2011 Mar 2012

9.1%12.3%

22.2% 24.1% 25.4% 25.2% 24.9% 24.3%21.9%

IRR at the respective year end date on NAV and dividendsIRR at the respective year end date on NAV and dividends


IRR at the respective year end date on TNAV and dividendsIRR at the respective year end date on TNAV and dividends

26.1%30.5%

40.7% 39.5% 38.7% 37.6% 36.6% 34.2% 31.0%

30


Since UK listing: Strong capital growth

CAGR since 2003: 21%CAGR since 2003: 21%

£'mn

5,000

6,000

£ mn

3,000

4,000

-

1,000

2,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Total shareholders’ equity (including preference shares and non-controlling interests)

Total capital resources (including subordinated liabilities)

31

THANK YOUTHANK YOU

32

Documents

Client Roadshow MayJune2012 - Investec...May 03 May 06 May 09 May 12 Investec Bank of America Barclays HSBC RBS 0 50 May 03 May 06 May 09 May 12 Investec Goldman Sachs Morgan Stanley