Results Presentation For the year ended 31 3 213 1
The year in review 2
Mixed operating environment Strong equity markets but a weak Rand Equity markets Interest rates 13 12 11 1 9 +18.8% +12.7% +12.6% 6 5 4 3 2 1 Rebased to 1 % 8 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 JSE FTSE ASX R A$ U$ Exchange rates 14.5 Rand/ A$/ Euro/ 1.65 1.3 13.5 13 12.5 12 11.5 14 1.6 1.55 1.5 1.45 1.4 125 1.25 1.2 1.15 1.1 11 1.35 1.5 Source: Datastream 3 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13
Continued growth in key earnings drivers Third party assets under management FUM up 14.4% (2.6% on stable currency) Customer accounts (deposits) and loans Customer accounts down 3.2% (up 3.7% on stable currency) Core loans and advances up 1.% (up 8.1% on stable currency) 12 bn 3 bn 12% 1 25 1% 8 2 8% 6 15 6% 4 1 4% 2 5 2% - 28 29 21 211 212 213-28 29 21 211 212 213 % Asset Management Wealth & Investment Other Customer accounts Core loans and advances to customers (including own originated securitised assets) Core loans (excluding own originated securitised assets) to customer deposits 4
Supporting growth in revenue Total operating income mn Up 3.9% 25 (1.2% on stable currency) 2 15 1 5 28 29 21 211 212 213 5
Lower impairments UK moderate decrease in impairments Australian credit loss ratio substantially down SA marginal increase in impairments in Rands South Africa UK & Europe (ex Kensington) Australia 6% R bn 14 6% bn 7 12% A$ bn 4 5% 4% 12 1 5% 4% 6 5 1% 8% 3 3% 8 3% 4 6% 2 6 3 2% 4 2% 2 4% 1 1% 2 1% 1 2% % 28 29 21 211 212 213 - % 28 29 21 211 212 213 % 28 29 21 211 212 213 Credit loss ratio (LHS) Net core loans (RHS) Net defaults as a % of core advances (LHS) 6
Moderate increase in costs Expenses and headcount impacted by acquisitions Jaws ratio Cost to income: 65.5% from 64.7% Headcount* relatively stable Total permanent employees of 7 575 2,5 mn 8 1-yr CAGR of 2, 15.2% 6 1,5 4 1, 5 1-yr CAGR of 13.9% 2 - Mar-4Mar-5Mar-6Mar-7Mar-8Mar-9Mar-1Mar-11Mar-12Mar-13 Mar-8 Mar-9 Mar-1 Mar-11 Mar-12 Mar-13 Expenses (excluding depreciation) Operating income SA and Other UK and Europe Australia *Permanent headcount and includes acquisitions 7
Resulting in an improved group performance Negatively el impacted by the Rand Mar-13 Mar-12 % change % change on stable currency basis** Operating profit* before tax ( ) 433 17 358 625 2.8% 32.5% Operating profit* before tax and impairment losses on loans and advances ( ) 684 182 683 743.1% 9.% Attributable earnings* ^( ) 316 79 257 579 23.% 34.8% Adjusted EPS*^ (pence) 37. 31.8 16.4% 27.7% DPS (pence) 18. 17. 5.9% Net asset value per share (pence) 391.5 392. (.1%) 4.1% Total shareholders equity ( mn) 4 5 4 13 (.2%) 4.5% Core loans and advances to customers ( bn) 18.4 18.2 1.% 8.1% *Before goodwill, acquired intangibles, non-operating items and after non-controlling interests **Amounts represented on a stable currency basis assume that the closing and average exchange rates of the group s relevant exchange rates relative to Pounds Sterling remain the same as at 31 March 213 when compared to 31 March 212 ^ After deducting preference dividends 8
Strong Rand performance Mar-13 Mar-12 % change Operating profit* before tax (R mn) 5 823 4 251 37.% Adjusted earnings*^ (R mn) 4 257 3 53 39.4% Adjusted EPS* (cents) 497 377 31.9% DPS (cents) 256 224 14.3% Net asset value per share (cents) 5 465 4 811 13.6% *Before goodwill, acquired intangibles, non-operating items and after non-controlling interests ^After deducting preference dividends 9
Progress made on our financial targets Target Mar-13 Mar-12 ROE 12-16% over a rolling 5-yr period 9.5% 7.8% Tangible ROE 11.7% 9.6% Adjusted* EPS growth Target: 1% > UKRPI 16.4% (26.4%) Cost to income Target: < 65% 65.5% 64.7% Dividend cover (times) Target: 1.7-3.5 times 2.1x 1.9x Capital adequacy Target: 14-17% Limited 15.5% 16.1% plc 16.9% 17.5% Tier 1 ratio Target: 1.5% Limited 1.8% 11.6% plc 11.% 11.6% Note: These are medium to long-term targets which we aim to achieve through varying market conditions *Adjusted EPS is before goodwill, acquired intangibles and non-operating items and after non-controlling interests and after deducting preference dividends 1
Divisional i i highlightshli ht 11
Growth from all three businesses Operating profit* by business Asset Management Wealth & Investment Specialist Banking 127 134 14 51 45 77 66 83 27 24 323 4 37 39 267 26 186 242 28 29 21 211 212 213 Operating profit* before tax ( 'mn) 28 29 21 211 212 213 Operating profit* before tax ( 'mn) 28 29 21 211 212 213 Operating profit* before tax ( 'mn) *Before goodwill, acquired intangibles, non-operating items, taxation and after non-controlling interests 12
Asset management Overview of performance Competitive long term investment performance across investment capabilities Assets under management at 69.8bn Net inflows of 4.1bn Financial summary ( ) Mar-13 Mar-12 % change Operating profit* (mn) 14.2 133.7 4.8% Operating margin 34.5% 35.7% ROE (pre-tax)** 95.1% 84.% ROE tangible (pre-tax) 336.1% 288.6% Assets under management (bn) 69.8 61.66 13.4% Outlook Assets under management by asset class Positive business momentum supported by sustained performance Subject to risks posed by market conditions *Before goodwill, acquired intangibles, non-operating items, taxation and after noncontrolling interests **Return on adjusted shareholders equity (including goodwill) (%) 17.1 6.3 6.1 Mar-13 31.4 39.1 8.4 6. 38.4 17.8 Mar-12 Equities Fixed income 29.4 Multi-asset Alternatives Third party funds on advisory platform 13
Asset Management Key drivers (besides market levels) Operating margin Net inflows as a % of opening AUM Average income as a % of AUM 4 % 2 % 1. % 3 16.8 2 12.6 8.4 1 4.2 Mar-8 Mar-9 Mar-1 Mar-11 Mar-12 Mar-13 Mar-8 Mar-9 Mar-1 Mar-11 Mar-12 Mar-13. Mar-8 Mar-9 Mar-1 Mar-11 Mar-12 Mar-13 Recognition Raging Bull Award for Offshore Management Company of the Year Best Asset Manager in Africa 14
Wealth & Investment Overview of performance Financial summary Benefited from higher average funds under management ( ) Mar-13 Mar-12 Net inflows of.8bn Williams de Broë migrated onto group platform Operating profit* (mn) 5.7 38.7 3.9% in August 212 and rebranded Investec Wealth Operating margin 2.3% 19.7% & Investment. Integration costs are reflected in the 213 results The SA business experienced solid discretionary net inflows with FUM up 28.7% to R218bn ROE (pre-tax)** 15.8% 13.1% ROE tangible (pre-tax) 14.9% 46.9% % change Total FUM (bn) 4.4 34.8 16.% Outlook Breakdown of funds under management With well established investment management businesses all operating under a single Investec brand, we are well placed to enhance and expand our offering to international and higher net worth 5 bn 4 3 UK - Non-discretionary UK - Discretionary clients 2 *Before goodwill, acquired intangibles, non-operating items, taxation and after noncontrolling interests **Return on adjusted shareholders equity (including goodwill) 1 Mar-12 Mar-13 SA - Non-discretionary SA - Discretionary 15
Wealth & Investment Key drivers Operating margin Net organic growth in FUM (as a % of opening FUM) Average income as a % of FUM 3 % 7 %.8 % 2 5 3.6 1.4 1-1 Mar-11 Mar-12 Mar-13-3.2 Mar-11 Mar-12 Mar-13 Note: Prior to Mar-11 Rensburg Sheppards plc was an associate of Investec and not a 1% owned subsidiary Recognition -5. Mar-11 Mar-12 Mar-13 16
Specialist Banking Overview of performance Good progress from the One Bank process SA experienced solid performances from the private equity and investment property portfolios but lower activity in corporate and institutional banking business The UK benefited from improved performance in the corporate advisory business and the principal investment portfolios but transactional activity in private banking and corporate and institutional banking were mixed There was a significant decrease in impairments in Australia where the corporate advisory, corporate and specialised lending and professional finance businesses performed well Outlook Financial summary ( ) Mar-13 Mar-12 % change Operating profit* (mn) 242.3 186.2 3.1% Cost to income 62.8% 62.4% ROE (pre-tax)** 8.% 6.2% ROE tangible (pre-tax) 8.4% 6.5% Key earnings drivers Macro environment remains volatile Well positioned to grow market share and deepen client base *Before goodwill, acquired intangibles, non-operating items, taxation and after noncontrolling interests **Return on adjusted shareholders equity (including goodwill) Net core loans and advances ( bn) 4 3 18.2 18.4 2 AU 1 SA UK Mar-12 Mar-13 Total deposits 4 ( bn) 3 25.3 24.5 AU 2 SA 1 UK Mar-12 Mar-13 17
Specialist Banking Income flat in Sterling but up in local currency Net interest income Net fees and commissions Investment and trading income mn 8 mn 4 mn 5 Debt repurchases 6 3 4 3 4 2 2 2 1 1 Mar-8 Mar-9 Mar-1 Mar-11 Mar-12 Mar-13 Mar-8 Mar-9 Mar-1 Mar-11 Mar-12 Mar-13 Mar-8 Mar-9 Mar-1 Mar-11 Mar-12 Mar-13 18
Specialist Banking Costs stable but impairments down Costs Impairments mn 1 mn 4 8 3 6 2 4 2 1 Mar-8 Mar-9 Mar-1 Mar-11 Mar-12 Mar-13 Mar-8 Mar-9 Mar-1 Mar-11 Mar-12 Mar-13 19
Specialist Banking Key drivers 8 6 4 2 % Cost to income ratio 3 % ROE post tax % Growth in net core loans (Stable currency) 35 2 25 1 15 5 Mar-8 Mar-9 Mar-1 Mar-11 Mar-12 Mar-13 Mar-8 Mar-9 Mar-1 Mar-11 Mar-12 Mar-13-5 Mar-8 Mar-9 Mar-1 Mar-11 Mar-12 Mar-13 2 % Growth in risk-weighted assets (Stable currency) 1.5 % Credit loss ratio on core loans 15 1 1. 1 5 n/a Mar-8 Mar-9 Mar-1 Mar-11 Mar-12 Mar-13.5. Mar-8 Mar-9 Mar-1 Mar-11 Mar-12 Mar-13 Recognition African and Middle Eastern Business Jet Financier 213 Awarded 5 stars for Overall best Value Term Deposits in 212, Australia 2
Strategy t and positioning i 21
In 28 when the financial crisis hit, our business model was more capital intensive 28 BUSINESS MODEL Third party assets and advisory 574mn Net fees and commissions of 552mn (38% of total) mn 1, 8 6 4 2 Net interest income and principal transactions 86mn Net interest income 583mn (41% of total) Other of 22mn (2% of total) Capital Light - 23 24 25 26 27 28 Third party assets and advisory Net interest income, investment income and trading income Investment and trading income of 277mn (19% of total) Capital intensive 4% 6% 22
We took a decision to balance our business model Capital light businesses Focusing on: Building non-lending revenue Taking advantage of opportunities Capital intensive businesses Focusing on: Managed loan growth Pricing risk appropriately Building customer deposits And managing costs across all areas of the group and in 21 we revised our mission statement Investec strives to be a distinctive specialist bank and asset manager driven by commitment to our core philosophies and values. 23
Focusing on three areas of specialisation with well defined target markets Asset Management Specialist Banking Wealth & Investment Corporate / Institutional / Government Private Client (High Net Worth / High Income) Providing investment management services Providing a broad range of services: Advisory Transactional banking Lending Treasury and trading Investment activities Providing investment management services and independent financial planning advice 24
Today, we have a balanced business model Third party assets and advisory 972mn mn 1,4 1,2 1, 213 BUSINESS MODEL Net interest, investment and trading income 1,18mn Net annuity fees and 8 Net interest income of 73mn commissions of 673mn (35% of total) (34% of total) 6 4 Investment income of 183mn Other fees and other income (9% of total) 2 of 299mn (15% of total) - Trading income of 16mn 23 24 25 26 27 28 29 21 211 212 213 (6% of total) Capital Light 49% Third party assets and advisory Net interest income, investment income and trading income Net other operating income of 26mn (1% of total) 51% Capital intensive (28: 4%) (28: 6%) 25
with the asset and wealth management businesses contributing 44% to group % contribution of operating profit* to total group 1 9 8 7 6 Specialist Banking 79.6 77.2 74.7 61.4 51.9 55.9 5 4 3 2 1 48.1 38.6 44.1 Wealth & Investment 2.4 22.8 25.3 Asset Management 24 25 26 27 28 29 21 211 212 213 *Before goodwill, acquired intangibles, non-operating items, taxation and after non-controlling interests 26
Solid base of recurring income Average recurring annuity income since 28 of 66% mn 25 2 15 1 5 28 29 21 211 212 213 72% 7% 68% 66% 64% 62% 6% 58% 56% 54% }Since 28 } Trading income 17% to 289mn Investment income Other fees and other operating income Annuity fees and commissions Net interest income} Annuity* income % 12% to 342mn 42% to 1,376mn *Where annuity income is net interest income and annuity fees 27
Stable capital position Capital adequacy target: 14-17% Tier 1 target: 1.5% % 3 Basel I Basel II Basel III in SA & Australia 3 % Basel I Basel II Basel III in SA & Australia 25 25 2 2 15 15 1 1 5 5 24 25 26 27 28 29 21 211 212 213 24 25 26 27 28 29 21 211 212 213 Investec Limited capital adequacy ratio Investec Limited Tier 1 ratio Investec plc capital adequacy ratio Investec plc Tier 1 ratio 28
We have invested in our Brand our our Communities our our People and the Planet Pl t 29
The current strategic focus is to Maintain momentum in Asset Management Internationalise the Wealth & Investment business Simplify the Specialist Banking business model Leverage extensive client base through h greater utilisation of products and services across the group Continue to attract new clients, extending the depth and breadth of the franchise 3
Closing 31
In summary Significant realignment of the business model has taken place since the financial crisis We now have a scaleable platform from which we are growing our Asset Management and Wealth & Investment businesses After substantial effort through the One Bank process, we also have a banking franchise which h is well placed to broaden and develop its offering 32
Closing The broader economic environment continues to be volatile and the recent rally in global equity markets is yet to be reflected in the real economy. Nevertheless, the cost of funding is coming down, impairments are normalising and we expect to see an improvement in activity levels if the economic upturn continues. The repositioning of the group as a specialist bank and asset manager and shift to a less capital intensive businesses has left us well placed for a sustained turnaround in the operating environment. We have a strong franchise which is recognised in all our markets and we continue to build business depth in our core areas of focus. 33