Investec plc silo financial information (excluding the results of Investec Limited)

Transcription

1 Investec plc silo financial information (excluding the results of Investec Limited) Unaudited consolidated financial information for the six months ended 30 September 2008 IFRS - Pounds Sterling

2 Overview of results 30 Sept Sept 2007 % Change 31 March 2008 Operating profit before goodwill, taxation and after minorities () (8.1%) Earnings attributable to ordinary shareholders () (2.9%) Cost to income ratio 66.9% 65.5% 64.1% Total capital resources (including subordinated liabilities) () % Total shareholders' equity () % Total assets () (1.8%) Capital adequacy ratio * 16.1% 17.7% 15.3% Tier 1 ratio * 9.7% 11.9% 9.2% * Capital adequacy figures for 2008 are presented in terms of Basel II and for 2007 in terms of Basel I. 2

3 Consolidated income statement 6 months to 6 months to Year to 30 Sept Sept March 2008 Interest income Interest expense ( ) ( ) ( ) Net interest income Fee and commission income Fee and commission expense ( ) ( ) ( ) Principal transactions Operating income from associates Other operating income ( ) Other income Total operating income Impairment losses on loans and advances ( ) ( ) ( ) Operating income Administrative expenses Depreciation, amortisation and impairment of property, equipment and intangible ( ) ( ) ( ) assets ( ) ( 7 088) ( ) Operating profit before goodwill Goodwill - - ( ) Profit before taxation Taxation ( ) ( ) ( ) Profit after taxation Earnings attributable to minority shareholders ( ) Profit attributable to shareholders

4 Balance sheet 30 Sept March Sept 2007 Assets Cash and balances at central banks Loans and advances to banks Cash equivalent advances g to customers borrowed Trading securities Derivative financial instruments Investment securities Loans and advances to customers Loans and advances to customers - Kensington warehouse assets Securitised assets Interests in associated undertakings Deferred taxation assets Other assets Property and equipment Goodwill Intangible assets Total assets Liabilities Deposits by banks Deposits by banks - Kensington warehouse funding Derivative financial instruments Other trading liabilities Repurchase agreements and cash collateral on securities lent Customer accounts Debt securities in issue Liabilities arising on securitisation Current taxation liabilities Deferred taxation liabilities Other liabilities Pension fund liabilities Subordinated liabilities Total liabilities Equity Called up share capital Share premium Treasury shares ( ) ( ) ( ) Perpetual preference shares Other reserves Profit and loss account Shareholders' equity excluding minority interest Minority interests Perpetual preferred securities issued by subsidiaries Minority interests in partially held subsidiaries Total equity Total liabilities and shareholders' equity

5 Consolidated statement of total recognised income and expenses 6 months to Year to 6 months to 30 Sept March Sept 2007 Earnings attributable to shareholders Total gains and losses recognised directly in equity ( ) Fair value movements on available for sale assets ( ) ( ) Foreign currency movements Pension fund actuarial gains Total recognised income and expenses Total recognised income and expenses attributable to minority shareholders ( ) Total recognised income and expenses attributable to ordinary shareholders Total recognised income and expenses attributable to preferred securities and perpetual preference shareholders

6 Consolidated statement of changes in equity (summarised) 6 months to Year to 6 months to 30 Sept March Sept 2007 Balance at the beginning of the period Foreign currency adjustments Retained profit for the period attributable to ordinary shareholders Retained profit for the period attributable to minority interests ( ) Share based payments adjustments Fair value movements on available for sale assets ( ) ( ) Movements on cash flow hedges ( 4 477) - - Pension fund actuarial gains (net of tax) Dividends paid to ordinary shareholders ( ) ( ) ( ) Dividends paid to perpetual preference shareholders ( 4 927) ( 8 170) ( 3 204) Dividends paid on preferred securities ( ) ( 9 528) ( 9 528) Dividends paid to minority shareholders - ( 2 912) - Issue of ordinary shares Share issue expenses - ( 65) ( 65) Movement of treasury shares ( 962) Issue of equity instruments by subsidiaries Movement of minorities on disposals and acquisitions Balance at the end of the period

7 Segmental information - business analysis For the six months to 30 September 2008 Private Client Activities Capital Markets Investment Banking Asset Management Property Activities Group Services and Other Activities Total group Net interest income ( 225) Fee and commission income Fee and commission expense ( 928) ( 850) ( 1 867) ( ) ( 247) - ( ) Principal transactions Operating income from associates Other operating income ( ) ( ) Other income Total operating income Impairment losses on loans and advances ( ) ( ) ( ) Net operating income Administrative expenses ( ) ( ) ( ) ( ) ( 1 294) ( ) ( ) Depreciation and impairment of property, equipment and intangible assets ( 680) ( 4 088) ( 5 469) ( 57) - ( 1 386) ( ) Operating profit before goodwill ( ) ( 28) ( ) Earnings attributable to minority interests Operating profit before goodwill and after minorities ( 846) ( 28) ( ) Goodwill Operating profit after minorities ( 846) ( 28) ( ) Cost to income ratio 44.5% 53.2% 159.0% 79.6% 102.2% 516.8% 66.9% For the six months to 30 September 2007 Private Client Activities Capital Markets Investment Banking Asset Management Property Activities Group Services and Other Activities Total group Net interest income ( 3 842) ( 56) Fee and commission income Fee and commission expense ( 1 147) ( 307) ( 1 299) ( ) - ( 101) ( ) Principal transactions ( 600) Operating income from associates ( 44) Other operating income Other income Total operating income Impairment losses on loans and advances ( 4 356) ( 9 009) ( ) Net operating income Administrative expenses ( ) ( ) ( ) ( ) ( 818) ( ) ( ) Depreciation and impairment of property, equipment and intangible assets ( 598) ( 2 081) ( 3 341) ( 53) - ( 1 015) ( 7 088) Operating profit before goodwill ( 473) ( 5 449) Earnings attributable to minority interests ( 6 815) ( 3 555) ( ) Operating profit before goodwill and after minorities ( 473) ( 9 004) Goodwill Operating profit after minorities ( 473) ( 9 004) Cost to income ratio 43.1% 73.8% 74.9% 75.5% 237.1% 135.0% 65.5% 7

8 Segmental information - geographical analysis For the six months to 30 September 2008 UK and Europe Australia Other geographies Total group Net interest income Fee and commission income Fee and commission expense ( ) ( 191) ( ) Principal transactions Operating income from associates Other operating income ( 7 650) ( 3 552) ( ) Other income Total operating income Impairment losses on loans and advances ( ) ( 5 934) ( ) Net operating income Administrative expenses ( ) ( ) ( ) Depreciation and impairment of property, equipment and intangible assets ( ) ( 382) ( ) Operating profit before goodwill Earnings attributable to minority interests Operating profit before goodwill and after minorities Goodwill Operating profit after minorities Taxation ( ) ( 4 368) ( ) Earnings attributable to shareholders Cost to income ratio 66.8% 68.3% 66.9% For the six months to 30 September 2007 UK and Europe Australia Other geographies Total group Net interest income Fee and commission income Fee and commission expense ( ) ( 230) - ( ) Principal transactions Operating income from associates Other operating income Other income Total operating income Impairment losses on loans and advances ( 8 519) ( 4 846) - ( ) Net operating income Administrative expenses ( ) ( ) ( 226) ( ) Depreciation and impairment of property, equipment and intangible assets ( 6 789) ( 299) - ( 7 088) Operating profit before goodwill Earnings attributable to minority interests ( 9 409) ( 961) - ( ) Operating profit before goodwill and after minorities Goodwill Operating profit after minorities Taxation ( ) ( 3 441) ( 93) ( ) Earnings attributable to shareholders ( 57) Cost to income ratio 68.3% 50.9% 86.3% 65.5% 8

9 Segmental analysis of operating profit before goodwill, non-operating items, taxation and after minorities 6 months to 6 months to % change 30 Sept Sept 2007 Private Client Activities Private Banking (35.3%) Private Client Portfolio Management and Stockbroking % (31.4%) Capital Markets >100.0% Investment Banking Corporate Finance and Securities % Direct Investments ( 3 655) (>100.0%) Private Equity ( 6 947) ( 1 144) (>100.0%) ( 846) (>100.0%) Asset Management (5.8%) Property Activities ( 28) ( 473) 94.1% Group Services and Other Activities International Trade Finance (2.4%) Central Funding (65.4%) Central Services Costs ( ) ( ) (10.0%) ( ) ( 9 004) (59.0%) Total group (8.1%) 9

10 As per Basel II regulations, the following risk management and capital section will provide detail on the quantitative risk disclosures required on a semi-annual basis. For any additional qualitative disclosures, definitions and descriptions, please refer to our Annual Financial Statements for the year ended 31 March Credit and counterparty risk management Credit and counterparty risk is defined as the current and prospective risk to earnings or capital arising from an obligor's (typically a client's or counterparty's) failure to meet the terms of any obligation to us or otherwise to perform as agreed. Credit and counterparty risk arises when our funds are extended, committed, invested, or otherwise exposed through actual or implied contractual agreements, whether reflected on or off balance sheet. Credit and counterparty risk arises primarily from three types of transactions: Lending transactions, giving rise to a direct exposure.the risk is created that an obligor will be unable or unwilling to repay capital and/or interest on advances and loans granted to it.this category includes bank placements, where we have placed funds with other financial institutions; Issuer risk on financial instruments where payments due from the issuer of a financial instrument will not be received; Trading transactions, giving rise to settlement and replacement risk (collectively counterparty risk). Settlements as they fall due but not receiving settlements to which they are entitled. Replacement risk is the risk following default by the original counterparty resulting in the contract holder having to enter into a replacement contract with a second counterparty in order to finalise the transaction. Credit and counterparty risk can manifest as country risk as a result of the geopolitical and transfer risk associated with exposures arising from transactions with borrowers who are resident in a particular foreign country, or dependent on that country's economy. Credit and counterparty risk may also arise in other ways and it is the role of the various independent credit committees, assisted by Credit Risk Management, to identify situations falling outside these definitions where credit risk may also be present. The tables that follow provide an analysis of our credit and counterparty risk exposures. An analysis of gross credit and counterparty exposures 30 Sept March 2008 % change since 31 March 2008 Average* On-balance sheet exposures % Securitisation exposures arising from securitisation/principal finance activities % Rated instruments % Unrated instruments (14.2%) Other % Debt instruments (NCDs, bonds held, debentures) (30.0%) Bank placements % Sovereign, government placements (69.5%) Call facilities (non-bank entities) Trading exposures (positive fair value excluding potential future exposures) % Other credit exposures (53.2%) Gross core loans and advances to customers % Off-balance sheet exposures (16.0%) Guarantees (7.0%) Contingent liabilities,committed facilities and other (16.8%) Total gross credit and counterparty exposures pre collateral or other credit enhancements (0.5%) *Where the average is based on a straight line average for the period 31 March 2008 to 30 September Sept % 6.8% 30 March % 6.5% 5.8% 8.4% 11.3% 8.3% 1.5% 4.9% 10.9% 54.8% 51.1% 9.2% 1.0% 2.1% Securitisation exposures Bank placements Call facilities (non-bank entities) Other credit exposures Off balance sheet exposures Debt instruments Sovereign, government placements Trading exposures Gross core loans and advances to customers 10

11 An analysis of gross credit and counterparty exposures by geography UK and Europe Australia Total plc 30 Sept March Sept March Sept March 2008 On - balance sheet exposures Securitisation exposures arising from securitisation/principal finance activities Rated instruments Unrated instruments Other Debt instruments (NCDs, bonds held, debentures) Bank placements Sovereign, government placements Call facilities (non-bank entities) Trading exposures (positive fair value excluding potential future exposures) Other credit exposures Gross core loans and advances to customers Off - balance sheet exposures Guarantees Contingent liabilities, committed facilities and other Total gross credit and counterparty exposures pre collateral or other credit enhancements

12 A further analysis of our on-balance sheet credit and counterparty exposures The table below indicates in which class of asset (on the face of the consolidated balance sheet) our on-balance sheet credit and counterparty exposures are reflected. Not all assets included in the balance sheet bear credit and counterparty risk. As at 30 Sept 2008 Securitisation exposures arising from securitisation/principal finance activities Total Rated instruments Unrated instruments Other Debt instruments (NCDs, bonds held, debentures) Bank placements Sovereign, government placements Trading exposures (positive fair value excluding potential future exposures) Other credit exposures Gross core loans and advances to customers Total credit and counterparty exposure Assets that we deem to have no credit exposure * Total balance sheet Cash and balances at central banks Loans and advances to banks Cash equivalent advances to customers Reverse repurchase agreements and cash collateral on securities borrowed Trading securities Derivative financial instruments Investment securities Loans and advances to customers Securitised assets Deferred taxation assets Other assets Interests in associated undertakings Property and equipment Investment property Goodwill Intangible assets Total As at 31 March 2008 Cash and balances at central banks Loans and advances to banks Cash equivalent advances to customers Reverse repurchase agreements and cash collateral on securities borrowed Trading securities Derivative financial instruments Investment securities Loans and advances to customers Securitised assets Deferred taxation assets Other assets Interests in associated undertakings Property and equipment Investment property Goodwill Intangible assets Total * These exposures largely relate to assets which are required to be consolidated but to which the group has no credit exposure; and assets which bear equity risk. 12

13 An analysis of gross credit and counterparty exposure by industry Gross core loans and advances Other credit and counterparty exposures 30 Sept March Sept March Sept March 2008 HNW and professional individuals Agriculture Electricity, gas and water (utility services) Public and non-business services Business service Finance and insurance (including central banks) Retailers and wholesalers Manufacturing and commerce Real estate Mining and resources Leisure, entertainment and tourism Transport and communication Other* Total Total As at 30 Sept 2008 HNW and professional individuals Agriculture Electricity, gas and water (utility services) Public and nonbusiness Business service services Finance and insurance (including central banks) Retailers and wholesalers Manufacturing and commerce Real estate Mining and resources Leisure, entertainment and tourism Transport and communication Other* Total On-balance sheet exposures Securitisation exposures arising from securitisation/principal finance activities Rated instruments Unrated instruments Other Debt instruments (NCDs, bonds held, debentures) Bank placements Sovereign, government placements Trading exposures (positive fair value excluding potential future exposures) Other credit exposures Gross core loans and advances to customers Off-balance sheet exposures Guarantees Contingent liabilities, committed facilities and other Total gross credit and counterparty exposures pre collateral or other credit enhancements As at 31 March 2008 On-balance sheet exposures Securitisation exposures arising from securitisation/principal finance activities Rated instruments Unrated instruments Other Debt instruments (NCDs, bonds held, debentures) Bank placements Sovereign, government placements Trading exposures (positive fair value excluding potential future exposures) Other credit exposures Gross core loans and advances to customers Off-balance sheet exposures Guarantees Contingent liabilities, committed facilities and other Total gross credit and counterparty exposures pre collateral or other credit enhancements * Includes securitised exposures where the industry is not clearly defined. 13

14 Asset quality and impairments Core loans and advances to customers In order to assess and analyse the credit risk associated with loans and advances we believe that certain adjustments should be made to the category loans and advances to customers as reflected on the IFRS consolidated balance sheet. We believe that these adjustments are necessary in order to derive a value that reflects actual core lending activities. In this regard the following methodology has been applied: Loans and advances which have been originated by us and securitised primarily to provide an alternative source of funding are added to loans and gadvances. g p p deducted. Calculation of core loans and advances to customers 30 Sept March 2008 Loans and advances to customers per balance sheet (after impairments and excluding intercompany loans) Less: warehouse facilities and warehouse assets arising out of our Securitisation and Principal Finance activities ( ) ( ) Add: own-originated securitised assets Core loans and advances to customers (after impairments) The tables that follow provide information with respect to the asset quality of our core loans and advances to customers. Overall asset quality 30 Sept March 2008 Gross core loans and advances to customers Total impairments ( ) ( ) Portfolio impairments ( 2 460) ( 2 236) Specific impairments ( ) ( ) Net core loans and advances to customers Current loans and advances to customers Total gross non-current loans and advances to customers Past due loans and advances to customers (1-60 days and management not concerned) Special mention loans and advances to customers Default loans and advances to customers Gross core loans and advances to customers as at end of the month Total gross non-current core loans and advances to customers (actual capital exposure) Watchlist loans neither past due nor impaired Gross core loans and advances to customers that are past due but not impaired Gross core loans and advances to customers that are impaired Total gross non-current core loans and advances to customers (actual amount in arrears) Bad debts written off during the period ( ) ( 168) Gross default loans and advances to customers Collateral and other credit enhancements Specific impairments ( ) ( ) Net default loans and advances to customers (limited to zero) Ratios: Specific impairments as a % of gross core loans and advances to customers 0.35% 0.43% Portfolio impairments as a % of gross core loans and advances to customers 0.04% 0.03% Total impairments as a % of gross core loans and advances to customers 0.38% 0.47% Specific impairments as a % of gross default loans 9.65% 18.09% Gross defaults as a % of gross core loans and advances to customers 3.58% 2.39% Net defaults as a % of gross core loans and advances to customers 0.00% 0.05% 14

15 An age analysis of gross non-current core loans and advances to customers 30 Sept March 2008 Watchlist loans days days days days >365 days Total gross non-current loans and advances to customers (actual capital exposure) days days days days >365 days Total gross non-current loans and advances to customers (actual amount in arrears) A further age analysis of non-current loans and advances to customers Watchlist loans 1-60 days days days days >365days Total As at 30 Sept 2008 Watchlist loans neither past due nor impaired Total capital exposure Amount in arrears Gross core loans and advances to customers that are past due but not impaired Total capital exposure Amount in arrears Gross core loans and advances to customers that are impaired Total capital exposure Amount in arrears As at 31 March 2008 Gross core loans and advances to customers that are past due but not impaired Total capital exposure Amount in arrears Gross core loans and advances to customers that are impaired Total capital exposure Amount in arrears

16 A further age analysis based of gross non-current core loans and advances to customers as at 30 September 2008 (based on total capital exposure) Watchlist loans 1-60 days days days days >365days Total Past due (1-60 days and management not concerned) Special mention Special mention (1-60 days in arrears and management concerned) Special mention (61-90 days and item well secured) Special mention - watchlist Default Sub-standard Doubtful Loss Total A further age analysis based of gross non-current core loans and advances to customers as at 30 September 2008 (based on actual amount in arrears) Watchlist loans 1-60 days days days days >365days Total Past due (1-60 days and management not concerned) Special mention Special mention (1-60 days in arrears and management concerned) Special mention (61-90 days and item well secured) Special mention - watchlist Default Sub-standard Doubtful Loss Total A further age analysis based of gross non-current core loans and advances to customers as at 31 March 2008 (based on total capital exposure) Watchlist loans 1-60 days days days days >365days Total Past due (1-60 days and management not concerned) Special mention Special mention (1-60 days in arrears and management concerned) Special mention (61-90 days and item well secured) Special mention - watchlist Default Sub-standard Doubtful Loss Total A further age analysis based of gross non-current core loans and advances to customers as at 31 March 2008 (based on actual amount in arrears) Watchlist loans 1-60 days days days days >365days Total Past due (1-60 days and management not concerned) Special mention Special mention (1-60 days in arrears and management concerned) Special mention (61-90 days and item well secured) Special mention - watchlist Default Sub-standard Doubtful Loss Total

17 An analysis of core loans and advances to customers Gross core loans and advances that are neither past due nor impaired Watchlist loans neither past due nor impaired Gross core loans and advances that are past due but not impaired Gross core loans and advances that are impaired Total gross core loans and advances (actual capital exposure) Specific impairments Portfolio impairments Total net core loans and advances (actual capital exposure) Actual amount in arrears Bad debts written off or recovered during the period As at 30 Sept 2008 Current core loans and advances ( 346) Past due (1-60 days and management not concerned) ( 2 114) Special mention Special mention (1-60 days in arrears and management concerned) Special mention (61-90 days and item well secured) Special mention - watchlist Default ( ) ( ) Sub-standard ( 7 138) ( 240) Doubtful ( ) Loss ( 3 214) ( ) Total ( ) ( 2 460) ( ) As at 31 March 2008 Current core loans and advances Past due (1-60 days and management not concerned) ( 2 236) Special mention Special mention (1-60 days in arrears and management concerned) Special mention (61-90 days and item well secured) Special mention - watchlist Default ( ) ( 168) Sub-standard ( ) Doubtful ( 3 904) Loss ( 8 265) ( 168) Total ( ) ( 2 236) ( 168) 17

18 An analysis of core loans and advances to customers and impairments by counterparty type As at 30 Sept 2008 Current core loans and advances Past due (1-60 days and management not concerned) Special mention (1-60 days in arrears and management concerned) Special mention (61-90 days and item well secured) Special mention - watchlist Sub-standard Doubtful Loss Total gross core loans and advances to customers Portfolio impairments Specific impairments Total impairments Bad debts written off or recovered during the period Private Banking professional and HNW individuals ( 2 114) ( ) ( ) ( ) Corporate sector ( 346) ( 6 174) ( 6 520) ( 341) Banking, insurance, financial services (excluding sovereign) Public and government sector (including central banks) Trade finance Total gross core loans and advances to customers ( 2 460) ( ) ( ) ( ) As at 31 March 2008 Private Banking professional and HNW individuals ( 2 236) ( ) ( ) ( 120) Corporate sector ( 3 083) ( 3 083) ( 48) Banking, insurance, financial services (excluding sovereign) Public and government sector (including central banks) Trade finance Other Total gross core loans and advances to customers ( 2 236) ( ) ( ) ( 168) An analysis of gross core loans and advances to customers by counterparty type 30 Sept March 2008 Private Banking professional and HNW individuals Corporate sector Banking, insurance, financial services (excluding sovereign) Public and government sector (including central banks) Trade finance Other Total gross core loans and advances to customers

19 AQ by Geog An analysis of core loans and advances to customers and asset quality by geography UK and Europe Australia Total 30 Sept March Sept March Sept March 2008 Gross core loans and advances to customers Total impairments ( ) ( ) ( 7 174) ( 8 790) ( ) ( ) Portfolio impairments ( 2 460) ( 2 236) - - ( 2 460) ( 2 236) Specific impairments ( ) ( ) ( 7 174) ( 8 790) ( ) ( ) Net core loans and advances to customers % of total 82.2% 72.2% 17.8% 17.8% 100.0% 100.0% % change since 31 March % 5.4% 5.7% Current loans and advances to customers Total gross non-current loans and advances to customers (actual capital exposure) Past due loans and advances to customers (1-60 days and management not concerned) Special mention loans and advances to customers Default loans and advances to customers Gross core loans and advances to customers Total gross non-current loans and advances to customers (actual capital exposure) Watchlist loans neither past due nor impaired Gross core loans and advances to customers that are past due but not impaired Gross core loans and advances to customers that are impaired Total gross non-current loans and advances to customers (actual amount in arrears) Bad debts written off during the period ( ) - ( 7 000) ( 168) ( ) ( 168) Gross default loans and advances to customers Collateral and other credit enhancements Specific impairments ( ) ( ) ( 7 174) ( 8 790) ( ) ( ) Net default loans and advances to customers Gross defaults as a % of gross core loans and advances to customers 3.5% 2.6% 3.8% 1.6% 3.6% 2.4% 19

20 Collateral Collateral held against Gross core loans and advances Other credit and counterparty exposures * Total As at 30 Sept 2008 Eligible financial collateral Listed shares Cash Debt securities issued by sovereigns Mortgage bonds Residential mortgages Residential development Commercial property investments Other collateral Unlisted shares Bonds other than mortgage bonds Asset backed lending Guarantees Credit derivatives Other Total collateral As at 31 March 2008 Eligible financial collateral Listed shares Cash Debt securities issued by sovereigns Mortgage bonds Residential mortgages Residential development Commercial property investments Other collateral Unlisted shares Bonds other than mortgage bonds Asset backed lending Guarantees Credit derivatives Other Total collateral * A large percentage of these exposures (for example bank placements) are to highly rated financial institutions where limited collateral would be required due to the nature of the exposure. 20

21 Securitisation/principal finance activities and exposures UK and Europe p p y of our assets, predominantly residential and commercial mortgages. We also undertake trading and investment in structured credit investments where we have invested in rated and unrated debt instruments largely within the UK and Europe and to a lesser extent in the US. During the previous financial year Investec plc acquired Kensington. We retain residual exposures amounting to 259 million to the assets originated, warehoused and securitised by Kensington. Australia Investec Bank (Australia) Limited acquired Experien in October These amount to A$869 million and include leases and instalment debtors (A$447 million), residential mortgages (A$19 million), commercial mortgages (A$210 million) and other loans, for example overdrafts (A$193 million).these securitisation structures have all been rated by Standard and Poor's. Summary of securitisation/principal finance exposures and activity over the course of the year In terms of our analysis of our credit and counterparty risk, exposures arising from securitisation/principal finance activities reflect only those exposures to which we consider ourselves to be at risk notwithstanding accounting conventions. In addition, assets that have been securitised by our Private Banking division are reflected as part of our core lending exposures and not our securitisation/principal finance exposures as we believe this reflects the true nature and intent of these exposures and activities. Nature of exposure/activity Exposure as at 30 Sept 'mn Exposure as at 31 March Credit analysis internal risk 'mn classification Asset quality - relevant comments for the period Structured credit investments Rated Unrated Other On-balance sheet securitisation/principal finance exposure During the period we wrote off 8.3 million against US exposures. Kensington - mortgage assets On-balance sheet securitisation/principal finance exposure. We are required to fully consolidate all assets acquired from Kensington. However, only those assets to which we are at risk are Net exposures to the securitised book (i.e. those assets that have been securitised) 113 reflected in this analysis with the balance reflected under "no credit 102 exposures". Refer to following page. On-balance sheet securitisation/principal finance exposure. We are required to fully consolidate all assets acquired from Net exposures to the warehouse book (i.e. those assets that have been originated and placed in special purpose vehicles awaiting securitisation) 146 Kensington. However, only those assets to which we are at risk are reflected in this analysis with the balance reflected under "no credit 128 exposures". Direct warehouse funding facility (i.e. where we are the funding provider to the assets) Refer to following page. Average loan to value of the assets to which these funding lines support is 68% On-balance sheet securitisation/principal finance exposure. We are required to fully consolidate these assets. However, only those assets to which we are at risk are reflected in this analysis with Residual investments in other assets the balance reflected under "no credit which have been securitised exposures". On-balance sheet exposure - reclassified from "accounting securitsed assets" to core loans and Private Banking division assets which have been securitised 385 advances for credit analysis 346 purposes. Analysed as part of the company's overall asset quality on core loans and advances. 21

22 Kensington key statistics As at 30 September 2008 Warehouse book Securitised portfolio Total % of total Assets and business activity statistics Mortgage assets under management ( 'million) IFRS adjustments 95 ( 71) 24 Mortgage assets under management ( 'million) First charge % of total mortgage assets under management 92.1% 94.2% 93.5% Second charge % of total mortgage assets under management 7.9% 5.8% 6.5% Fixed rate loans % of total mortgage assets under management 62.4% 37.0% 45.7% Number of accounts Average loan balance (first charge) Largest loan balance Weighted average loan mature margin % 3.5% 3.8% 3.7% Product mix (pre-ifrs adjustments) ( 'million) % Prime % Near prime % Prime Buy to Let % Adverse % Adverse Buy to Let and Right to Buy % Start - Irish operations % Geographic distribution ( 'million) % UK - North % UK - South West % UK - South East % Outer London % Inner London % Midlands % Ireland % Spread of value of properties (%) 100.0% 100.0% 100.0% > 500, % 1.3% 1.8% > 250,000 <= 500, % 11.5% 14.6% > 200,000 <= 250, % 11.8% 13.3% > 150,000 <= 200, % 19.8% 20.1% > 100,000 <= 150, % 29.2% 27.8% > 70,000 <= 100, % 19.8% 17.4% > 50,000 <= 70, % 5.3% 4.1% < 50, % 1.3% 0.9% Asset quality statistics Weighted average current LTV of active portfolio (adjusted for house price deflation) 77.0% 69.9% 72.4% LTV spread - % of book 100.0% 100.0% 100.0% <= 65% 24.7% 32.2% 29.5% >65% - <70% 5.8% 9.0% 7.8% >70% - <75% 6.7% 10.9% 9.4% >75% - <80% 8.2% 13.7% 11.7% >80% - <85% 10.8% 14.9% 13.4% >85% - <90% 14.4% 11.4% 12.5% >90% - <95% 16.4% 5.7% 9.5% >95% - <100% 10.2% 1.6% 4.7% > 100% 2.8% 0.6% 1.5% % of accounts > 90 days in arrears 10.3% 16.0% 14.2% number of accounts > 90 in arrears 1,841 6,241 8,082 Total capital lent in arrears ( 'million) 390 1,191 1, % Arrears 0-60 days % Arrears days % Arrears >90 days % Possession % Debt to income ratio of clients % 24.1% 26.4% 25.6% Investec investment/exposure to assets reflected above On balance sheet provision Investec net investment/exposure to assets reflected above ( 'million) Additional direct funding provided to Kensington ( 'million)

23 Equity and investment risk in the banking book Equity and investment risk in the banking book arises primarily from the following activities conducted within the group: Investment Banking Principal Investments (Private Equity and Direct Investments): We actively seek and select expansion and buy-out investments as principal in unlisted companies. Investments are selected based on the track record of management, the attractiveness of the industry and the ability to build value for the existing business by implementing an agreed strategy. In addition, as a result of our local market knowledge and investment banking expertise, we are well positioned to take direct positions in listed shares where we believe that the market is mispricing the value of the underlying portfolio of assets. These investment positions are carefully researched with the intent to stimulate corporate activity. Lending transactions (within the Private Banking and Capital Markets divisions): The manner in which we structure certain transactions results in equity, warrant and profit shares being held, predominantly within unlisted companies. Property Activities: We source development, investment and trading opportunities to create value and trade for profit within agreed risk parameters. The table below provides an analysis of income and revaluations recorded with respect to these investments. Income (pre funding costs) - for the six months ended 30 September 2008 Unrealised Realised Dividends, net interest and other Total Fair value directly to equity Unlisted investments ( 595) ( 475) UK and Europe ( 1) Australia (2 321) (2 220) ( 474) Listed equities (4 869) ( 581) (4 078) (6 378) UK and Europe (4 861) ( 573) (4 067) (5 756) Australia ( 8) ( 8) 5 ( 11) ( 622) Warrants, profit shares and other embedded derivatives UK and Europe Total (3 782) (6 853) The balance sheet value of investments is indicated in the table below. Balance sheet value of investments Valuation change stress test* Balance sheet value of investments Valuation change stress test* 30 Sept Sept March March 2008 Unlisted investments UK and Europe Australia Listed equities UK and Europe Australia Investment and trading properties UK and Europe Warrants, profit shares and other embedded derivatives UK and Europe Total *In order to assess our earnings sensitivity to a movement in the valuation of these investments the following stress testing parameters are applied. Stress test values applied Unlisted investments 15% Listed equities 25% Trading properties 15% Investment properties 5% Warrants, profit shares and other embedded derivatives 35% Based on the information above we could have a 57 million reversal in revenue (which assumes a year in which there is a worst case scenario ).This would not cause the comapny to report a loss but could have a significantly negative impact on earnings for that period. 23

24 Traded market risk management Traded market risk is a measure of potential change in the value of a portfolio of instruments as a result of changes in the financial environment (resulting in changes in underlying market risk factors such as interest rates, equity markets, bond markets, commodity markets, exchange rates and volatilities) between now and a future point in time. The Market Risk Management team identifies, quantifies and manages the effects of these potential changes in accordance with Basel ll and policies determined by the board. Within our trading activities, we act as principal with clients or the market. Market risk, therefore, exists where we have taken on principal positions, resulting from proprietary trading, market making, arbitrage, underwriting and investments in the commodity, foreign exchange, equity, capital and money markets. The focus of these businesses is primarily on supporting client activity. Our philosophy is that proprietary trading should be limited and that trading should be conducted largely to facilitate clients in deal execution. Measurement techniques used to quantify market risk arising from our trading activities include sensitivity analysis, Value at Risk (VaR) and Expected Tail Loss (ETL). Stress testing and scenario analysis are also used to simulate extreme conditions to supplement these core measures. VaR numbers are monitored at the 95%, 99% and 100% (maximum loss) confidence intervals. ETLs are monitored at the 95% and 99% levels. Scenario analysis considers the impact of a significant market event on our current trading portfolios. We consider the impact for the 10 days after the event, not merely the instantaneous shock to the markets. Included in our scenario analysis are for example the following; October 1987 (Black Monday), 11 September 2001 and the December Rand crisis in All VaR models, while forward-looking, are based on past events and depend on the quality of available market data. The accuracy of the VaR model as a predictor of potential loss is continuously monitored through back testing. This involves comparing the actual trading revenues arising from the previous day's closing positions with the one-day VaR calculated for the previous day on these same positions. If the revenue is negative and exceeds the one-day VaR, a back testing breach is considered to have occurred. VaR 30 Sept March 2008 IBUK^ IBAL^ IBUK^ IBAL^ 95% (one-day) 99% (one-day) 95% (one-day) 99% (one-day) AUD'000 AUD'000 Commodities Equity derivatives Foreign exchange Interest rates Consolidated* High Low Average *The consolidated VaR for each desk and each entity is lower than the sum of the individual VaRs. This arises from the correlation offset between various asset classes. ^ Where: IBUK is Investec Bank (UK) Limited and IBAL is Investec Bank (Australia) Limited 24

25 Traded market risk management The graphs below shows total daily VaR and profit and loss (pnl) figures for our trading activities over the six-month reporting period. The values are for the 99% one-day VaR i.e. 99% of the time, the total trading activities will not lose more than the values depicted below. Based on these graphs, we can gauge the accuracy of the VaR figures. Investec Bank (UK) Limited There have been three exceptions i.e. where the loss is greater than the VaR. The model would expect around one to two exceptions per six month period. All exceptions were due predominantly to the Fixed Income desk. These exceptions arose due to the increased volatility in the markets with extreme moves across most asset classes and in particular interest rates. Investec Bank (Australia) Limited There has been one exception over the period. This was due to the increased volatility in the market, in particular the USD interest rate curve moving up sharply. 25

26 ETL 30 Sept 31 March 95% (one-day) Commodities Equity derivatives Foreign exchange Interest rates Consolidated* *The consolidated ETL for each desk is lower than the sum of the individual VaRs. This arises from the correlation offset between various asset classes. Stress testing The table below indicates the potential losses that could arise if the portfolio is stress tested under extreme market conditions (15 standard deviations). 30 Sept March 2008 IBUK^ IBAL^ IBUK^ IBAL^ Method Using VaR Using VaR Using VaR Using VaR AUD'000 AUD'000 Commodities Equity derivatives Foreign exchange Interest rates ,995 Consolidated ^ Where: IBUK is Investec Bank (UK) Limited and IBAL is Investec Bank (Australia) Limited 26

27 Balance sheet risk management Balance sheet risk management encompasses the financial risks relating to our asset and liability portfolios, comprising market liquidity, funding, concentration and non-trading interest rate risks on balance sheet. Non-trading interest rate risk description Non-trading interest rate risk is the impact on net interest earnings and sensitivity to economic value, as a result of increases or decreases in interest rates arising from the execution of our core business strategies and the delivery of products and services to our customers. Sources of banking-related risk exposures include potential adverse effect of volatility and changes in interest rate levels, yield curves and spreads. These affect the interest rate margin realised between lending income and borrowing costs, when applied to our rate sensitive asset and liability portfolios, which has a direct effect on future net interest income and the economic value of equity. The mix of interest rate repricing characteristics is influenced by the underlying financial needs of customers. The table that follows show our non-trading interest rate mismatch. These exposures affect the interest rate margin realised between lending income and borrowing costs. 27