Interim Management Statement

RNS Number : 8520M

Investec PLC

05 February 2009

 



Investec Limited Incorporated in the Republic of South Africa Registration number 1925/002833/06 JSE share code: INL ISIN: ZAE000081949

Investec plc Incorporated in England and Wales Registration number 3633621 JSE share code: INP ISIN: GB00B17BBQ50

As part of the dual listed company structure, Investec plc and Investec Limited notify both the London Stock Exchange and the JSE Limited of matters which are required to be disclosed under the Disclosure and Transparency Rules and Listing Rules of the United Kingdom Listing Authority (the 'UKLA') and/or the JSE Listing Requirements.

Accordingly, we advise of the following:

Investec plc - Interim Management Statement

5 February 2009

Balanced business model and recurring revenue base support profitability in challenging market environment 

This Interim Management Statement is issued by Investec in accordance with the UK Listing Authority's Disclosure and Transparency rules. Unless stated otherwise, key trends and figures highlighted below refer to the nine months ended 31 December 2008 and the corresponding period in the previous year.

Overview of operating fundamentals

Operating fundamentals and activity levels across the group's core geographies continue to be negatively impacted by the global financial market crisis and volatile equity markets. The group's strategy of maintaining a recurring revenue base; geographical and operational diversity; and strict management of liquidity and risk has however, enabled it to navigate through the present challenging operating environment. 

Salient features of the period under review are:

• Higher average advances have resulted in strong growth in net interest income. The group has recorded marginal growth in net fees and commissions receivable and revenue from principal transaction income. 

• Expenses continued to be tightly managed with moderate growth of 4.5%.

• Net operating income (after expenses and minorities but before impairments on loans and advances) increased by 9.2%.

• As a result of the weaker credit cycle the group has seen a decline in the performance of its core loan portfolio with the credit loss ratio (excluding Kensington which continues to be profitable) increasing from 0.71% at 30 September 2008 to 0.92%. 

• The above mentioned factors have resulted in a decline in normalised operating profit* of approximately 16.6%.

• The group's three core geographies remain profitable with recurring income as a percentage of total operating income amounting to approximately 70%. 

Since 30 September 2008 (the end of the group's interim reporting period) core loans and advances grew by 12.9% to GBP16.4 billion, customer deposits increased by 6.2% to GBP13.7 billion and third party assets under management increased by 1.1% to GBP52.6 billion. The increase reflected in these key indicators is largely attributable to a weakening in the Pound Sterling against the group's other major reporting currencies. 

The group continues to focus on the strict management of liquidity and capital. As at 31 December 2008 the capital adequacy ratio of Investec plc (applying UK Financial Services Authority rules to its capital base) was 15.6% and the capital adequacy ratio of Investec Limited (applying South African Reserve Bank rules to its capital base) was 13.5%. Furthermore, the group currently has approximately GBP4.7 billion of cash and near cash available to support its activities. The group continues to diversify its funding sources and has been successful in increasing its funding from private client and related deposits, notably towards the end of the quarter. 

Outlook 

The global environment remains extremely challenging and uncertain. A further deterioration in operating fundamentals and activity levels could impact on the group's results for the last quarter of the financial year.  A high level of recurring income will however, continue to support operating profits, albeit at a lower level. 

As in prior years the group will be holding a pre-close briefing on 19 March 2009 at which it will provide further detail on the performance of its businesses. 

On behalf of the board

Hugh Herman (Chairman), Stephen Koseff (Chief Executive Officer) and Bernard Kantor (Managing Director)

Notes:

1.       The financial information on which this statement is based has not been reviewed and reported on by the group’s auditors.

2.       *Normalised operating profit refers to net profit before tax, goodwill and non-operating items but after adjusting for earnings attributable to minorities.

3.       Please note that matters highlighted above may contain forward looking statements which are subject to various risks and uncertainties and other factors, including, but not limited to:

–         the further development of standards and interpretations under International Financial Reporting Standards (IFRS) applicable to past, current and future periods, evolving practices with regard to the interpretation and application of standards under IFRS.

–         domestic and global economic and business conditions.

–         market related risks.

•          A number of these factors are beyond the group’s control.

•          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 or implied.

•          Any forward looking statements made are based on the knowledge of the group at 5 February 2009.

4.       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 the group’s individual companies are reported in the local currencies in which they are domiciled, including Rands, Australian Dollars and Euros. These results are then translated into Pounds Sterling at the applicable foreign currency exchange rates for inclusion in our 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:

 

	31 Dec 2008		31 Mar 2008		31 Dec 2007
Currency per GBP1.00	Period end	Average	Period end	Average	Period end	Average
South African Rand	13.59	15.04	16.17	14.31	13.61	14.06
Australian Dollar	2.09	2.18	2.18	2.32	2.28	2.36
Euro	1.03	1.24	1.25	1.42	1.36	1.45
US Dollar	1.45	1.82	1.99	2.01	2.01	2.02

 

 

 

 

 

 

 

5.       The following disclosures are made with respect to Basel II quarterly disclosure requirements:

Investec has always held capital well in excess of regulatory requirements and the group intends to perpetuate this philosophy and ensure that it remains well capitalised in a vastly changed banking world. The group targets a minimum tier one capital ratio of 11% and a total capital adequacy ratio of 14% to 17% on a consolidated basis for Investec Limited and Investec plc.

	Investec plc	IBP*	IBAL*	Investec Limited	IBL*
As at 31 Dec 2008	GBP 'mn	GBP 'mn	A$'mn	ZAR 'mn	ZAR 'mn
Primary capital (Tier 1)	1,083	896	622	14,961	13,639
Other capital (Tier 2 and 3)	804	614	126	5,290	5,103
	1,887	1,510	748	20,251	18,742
Less: impairments	-191	-142	-231	-783	-544
Net qualifying capital	1,696	1,368	517	19,468	18,198
Risk-weighted assets (banking and trading)	10,856	9,086	3,084	144,187	132,067
Capital requirements	869	727	411	13,698	12,546
Credit risk	736	626	355	11,707	11,037
Equity risk	17	17	11	491	476
Market risk	19	19	2	156	91
Operational risk	97	65	43	1,344	941
Capital adequacy ratio	15.6%	15.1%	16.7%	13.5%	13.8%
Tier 1 ratio	9.5%	9.7%	13.4%	10.0%	10.1%
Capital adequacy ratio - pre operational risk	17.6%	16.5%	18.7%	15.0%	15.0%
Tier 1 ratio - pre operational risk	10.6%	10.7%	15.0%	11.1%	10.9%

*IBP is Investec Bank plc; IBAL is Investec Bank (Australia) Limited and IBL is Investec Bank Limited.

Timetable:

Pre-close briefing: 19 March 2009

Year end: 31 March 2009

Release of year end results: 21 May 2009

For further information please contact:

Investec Investor Relations                        

UK: [phone]                    

South Africa: [phone]

[e-mail]

About Investec

Investec is an international specialist banking group that provides a diverse range of financial products and services to a niche client base in three principal markets, the United Kingdom, South Africa and Australia as well as certain other countries. The group was established in 1974 and currently has approximately 5 600 permanent employees.

Investec focuses on delivering distinctive profitable solutions for its clients in five core areas of activity namely, Private Client Activities, Capital Markets, Investment Banking, Asset Management and Property Activities.

In July 2002 the Investec group implemented a dual listed company structure with listings on the London and Johannesburg Stock Exchanges. The combined group's current market capitalisation is approximately GBP1.7 billion.

 

END

 

 

IMSTAMBTMMBMBTL