Investec The Investment Case UBS Conference October 2011 Stephen Koseff 1
Strategic positioning 2
Mission statement We strive to be a distinctive specialist bank and asset manager driven by commitment to our core philosophies and values 3
Specialist bank and asset manager with three distinct business activities Broad range of services: Advisory Structuring Lending Securities Trading Market Making Principal Transactions To: Government Institutional Corporates High Net Worth Clients High Income Clients Provides Provides investment investment management management services services and and independent independent financial financial planning planning advice advice To: Private clients Charities Trusts Provides investment management services To its predominantly global institutional client base 4
Focused on well defined target clients Not all things to all people Corporate / Institutional / Government Private Client Asset Management Investment Banking Activities Specialist Banking Capital Markets Activities Private Banking Activities Wealth & Investment 5
With a solid international platform Distribution channels Origination channels Core infrastructure Since 1992 Assets: 19bln Since 1974 Assets: 29bln Since 1997 Assets: 3bln 6
And a diversified revenue stream Contribution to group earnings 31 Mar-11 Contribution to group earnings 31 Mar-10 Asset Management 29.3% Asset Management 19.3% Specialist Banking 61.4% Wealth & Investment 9.3% Specialist Banking 74.7% Wealth & Investment 6.0% 7
Specialist Banking The Investment Case 8
Operating as a Single Specialist Bank Focusing the Mindset around Client demand Creating the appropriate business structure to maximise the product offering to the client Sharing competencies to achieve greater operational efficiency Ensuring synergies and connectivity across the group Leveraging off global capabilities 9
Investment Banking: Investment case Integrated business with local client delivery and international access UK and Europe Brand well established With Evolution would position us as a leading mid-market investment bank in the UK Agreement with Lloyds as their chosen partner for M&A and ECM Hong Kong Benefiting from a well diversified portfolio Acquired Access Capital in Jun-11 to facilitate the link between China, UK and SA Activities Advisory Institutional, Research, Sales & Trading Direct Investments and Private Equity Property Fund Property Investments South Africa Strong brand and positioning in advisory Restructured activities in securities around specialisations India Established a presence in 2010 Facilitates the link between India, UK and SA Australia Business is in a reinvestment phase Team has been rebuilt Focus is on top end of mid-market 10
Capital Markets: Investment case Primarily focused on traditional bank customer flow/related activities Client focused business concentrating on three areas of customer related activities: Lending and leasing activities Treasury and trading activities Structured credit Structured and asset finance Project and infrastructure finance Commodities and resource finance Corporate loans Residential mortgages origination Money markets and forex Interest rate solutions Equity derivatives and scrip lending Securitisation Credit investments and trading Financial Markets and Structuring Support South Africa UK & Europe Canada Australia India Clients and counterparties: Government Financial institutions Corporates IFAs Funds SMEs Private Banking, Investment Banking and Wealth Management clients 11
Capital Markets: Investment case Strong international platform Value proposition Successfully built sustainable businesses on the back of client driven transactional flow Balanced business model with good business depth and breadth Well positioned in the primary and secondary markets Ready to capitalise on market opportunities 12
Private Banking: Investment case Strong client relationships Value proposition Provide HIGH TOUCH transactional banking, credit, deposit and investment services to two distinct client bases: High Income c.135,000 clients HNW c.6, 000 clients Also offer trust and fiduciary services, advice and tailored credit and investment solutions to HNW s Key focus is on: Back to Basics Growing the client base Ensuring the product offering is delivered to our global client base Australia South Africa Number of clients 2006 2011 UK and Europe 21,500 51,776 1,290 47,560 16,722 72,969 70,350 141,517 13
Wealth & Investment The investment case 14
Wealth & Investment: Investment case Building an international platform Value proposition Business has been built via consolidation of smaller businesses over a long period of time Well established platforms in the UK and SA which could cope with significant additional bolt-ons Focus is on globalising the business and currently have 29bn funds under management Largest private client wealth and investment manager in SA Building scale in the UK business which, with Evolution, would create a major UK player in the private client investment management industry and add 7.6bn to total FUM 'bn 30 20 10 Funds under management* c.100,000 clients 0 2003 2005 2007 2009 2011 Discretionary Non-discretionary *Note: Total third party assets held under management excluding the Rensburg Fund Management business which was sold in January 2011 15
Asset Management The investment case 16
Asset Management: Investment case Global specialist investment manager An independently managed subsidiary of Investec Group Investec Asset Management s origins are African but we are global in our approach Worldwide, top 100 asset manager* Third party assets under management grown from 41.8mn in 1991 to 58.8bn in 20 years** 20-year growth story bn 70 60 50 40 30 20 10 0 mn 140 120 100 80 60 40 20 0 Mar-92 Mar-93 Mar-94 Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 * Global Investor 2008 Survey ** As at 31 March 2011 AUM Operating profit (RHS) 17
Asset Management: Value proposition Developed business from scratch out of a domestic position in an emerging market Create successful investment capabilities organically Strong investment performance Truly global in our approach with broader distribution than ever before Unique and clearly understood culture Stable and experienced leadership: Executive committee, average tenure of 17 years Top 30 leaders, average tenure of 13 years Performance Clients Innovation Insight 18
Asset Management: Drivers of future performance The economic power shift from West to East Continued development of funded savings pools around the globe The rise of international investing in the markets with large mobilised savings pools Convergence between traditional and alternative managers: growth opportunity in private markets 19
Investment case: demystifying the numbers 20
Solid base of recurring income Average since 2002 of 65% 2,000 'mn 1,800 1,600 1,400 1,200 1,000 800 c 600 400 200-2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Net interest income Annuity fees and commissions Other fees Client flow trading income Investment income 21
Driven by strong growth in funds under management CAGR since 2002 of 15% 'mn 100,000 90,000 80,000 70,000 60,000 50,000 40,000 c 30,000 20,000 10,000-2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Asset Management Wealth & Investment Other 22
And loans and deposits CAGR since 2002 - loans 21% CAGR since 2002 - customer deposits 15% 30,000 'mn 120% 25,000 100% 20,000 80% 15,000 60% 10,000 40% 5,000 20% - 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Customer accounts Core loans and advances to customers (including own originated securitised assets) Core loans (excluding own originated securitised assets) to customer deposits 0% 23
Revenue continued to grow faster than costs CAGR since 2002 - Revenue 14% CAGR since 2002 - Expenses 12% 'mn 2,500 2,000 1,500 1,000 500-2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Total revenue Expenses 24
Good growth in operating profit before tax* and impairments CAGR since 2002 - NIBTBI 21% CAGR since 2002 - NIBT15% 800 'mn 700 600 500 400 300 200 100-2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Operating profit before tax and impairments* (NIBTBI) Operating profit before taxation* (NIBT) *before goodwill, acquired intangibles and non-operating items 25
But Specialist Banking held back by elevated impairments Specialist Banking Wealth & Investment Asset Management mn 700 600 500 400 300 200 100-2006 2007 2008 2009 2010 2011 Operating profit before tax * Operating profit before tax * and impairments mn 45 40 35 30 25 20 15 10 5 - mn 140 120 100 80 60 40 20-2006 2007 2008 2009 2010 2011 2006 2007 2008 2009 2010 2011 Operating profit before tax * Operating profit before tax* *before goodwill, acquired intangibles and non-operating items 26
Strong growth in capital and a reduction in leverage CAGR since 2002 of 20% Average 10-year leverage ratio of 14x 'mn times 6,000 20 18 5,000 16 4,000 14 12 3,000 10 8 2,000 6 1,000 4 2-2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Total shareholders equity (including preference shares and non-controlling interests) Total capital resources (including subordinated liabilities) Gearing/leverage ratio (assets excluding assurance assets to total equity) Core loans to equity ratio 27
Resulting in a decline in ROE in Specialist Banking Specialist Banking Wealth & Investment Asset Management bn mn mn 3.0 35% 70 120% 45 600% 2.5 30% 60 40 100% 500% 25% 35 2.0 50 80% 30 400% 20% 40 1.5 25 60% 300% 15% 30 20 1.0 10% 20 40% 15 200% 0.5 20% 10 5% 10 5 100% 0.0 0% - 0% - 0% 2006 2007 2008 2009 2010 2011 Net tangible shareholders' equity Tangible ROE post tax Tangible ROE post tax, pre impairments 2006 2007 2008 2009 2010 2011 Net tangible shareholders' equity Tangible ROE post tax 2006 2007 2008 2009 2010 2011 Net tangible shareholders' equity Tangible ROE post tax 28
Overall CAGR since 2002: NTAV 24% NTNAV per share 19% Share price 13% (10%)* 700 pence 'mn 3,000 600 500 400 300 200 100 2,500 2,000 1,500 1,000 500 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 - Net tangible asset value (excluding goodwill) ( 'mn) (RHS) Net tangible asset value per share (excluding goodwill) (pence) (LHS) Share price (pence) (LHS) *To 26 October 2011 29
Conclusion 30
We have a distinctive investment offering with a balanced business model and an entrepreneurial culture dedicated employees that are focused on clients and building the business a well established brand that supports a sustainable long term strategy Resulting in a quality scalable global business 31
Thank you 32