Interim Management Statement

RNS Number : 5774A

Investec PLC

03 February 2011

 



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

Investec (comprising Investec plc and Investec Limited) - Interim Management Statement

released on 3 February 2011

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 2010 and the corresponding period in the previous year.

Performance overview

Operating fundamentals across the group have continued the trends seen in the first half and as reported at the interim results announcement on 18 November 2010.The group's operational performance is underpinned by a solid recurring income base and the majority of the group's six core businesses areas have recorded increased earnings. The asset and wealth management businesses have benefitted from substantial inflows and a good investment performance. Operating conditions within the group's banking and advisory businesses, however, are mixed and although improving, the demand for credit and levels of transactional activity remain subdued.

Salient features of the nine month period to 31 December 2010 compared to the nine month period to 31 December 2009:

·      Operating profit before goodwill, acquired intangibles, non-operating items and taxation and after minorities ("operating profit") increased marginally. However, if the GPB47 million profit earned on the repurchase of the group's debt in the prior period is excluded operating profit increased by 23%.

·      The credit loss charge as a percentage of average gross loans and advances annualised for the period amounted to 1.04%, in line with guidance provided previously (31 March 2010: 1.16%).

·      The effective tax rate decreased from 21.9% to 20.0%. 

·      The above mentioned factors have resulted in attributable earnings (see note 2) increasing by 4%.

·      Recurring income as a percentage of total operating income amounted to approximately 66%.

·      As at 31 December 2010 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 15.9%.

·      The group had approximately GBP10.0 billion of cash and near cash available to support its activities. 

·      Since 31 March 2010 (the end of the group's financial year) core loans and advances increased by 8% to GBP19.4 billion, customer deposits increased by 14% to GBP25.0 billion and third party assets under management increased by 19% to GBP88.0 billion.

·      Core advances (excluding own originated securitised assets) as a percentage of customer deposits were 73.0% (31 March 2010:76.2%).

Outlook

The pace of economic recovery varies across the geographies in which the group operates and the regulatory environment remains challenging. The group's non-capital intensive asset and wealth management businesses have gained significant momentum and the platform is in place for these businesses to continue to increase their contribution to group earnings. Whilst some of the group's banking businesses are performing well, notably the Capital Markets division, overall group results will remain constrained by the slow recovery of non-performing loans and transactional activity levels. The group's geographical and operational diversity will, however, continue to support a sound operational performance.

The group will be holding a pre-close briefing on 17 March 2011 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.   Attributable earnings refer to net profit before goodwill, acquired intangibles and non-operating items but after taxation and adjusting for earnings attributable to minorities and preference shareholders.

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 3 February 2011.

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, Euros and Dollars. 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:

	Nine months to 31 Dec 2010		Year to 31 Mar 2010		Nine months to 31 Dec 2009
Currency per GBP1.00	Period end	Average	Period end	Average	Period end	Average
South African Rand	10.30	11.18	11.11	12.38	11.89	12.60
Australian Dollar	1.53	1.67	1.66	1.88	1.80	1.93
Euro	1.16	1.18	1.12	1.13	1.12	1.13
US Dollar	1.55	1.54	1.52	1.59	1.62	1.61

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

The group holds capital in excess of regulatory requirements targeting a minimum tier one capital ratio of 11% and a total capital adequacy ratio range of 14% to 17% on a consolidated basis for each of Investec plc and Investec Limited. As per the table below, all regulated entities met these targets at the reporting date.  

	Investec plc^	IBP*^	IBAL*	Investec Limited^	IBL*
As at 31 Dec 2010	GBP 'mn	GBP 'mn	A$'mn	ZAR 'mn	ZAR 'mn
Primary capital (Tier 1)	1,428	1,243	565	20,028	18,142
Other capital (Tier 2)	624	534	105	7,132	7,132
	2,052	1,777	670	27,160	25,274
Less: deductions	-122	-111	-78	-576	-576
Net qualifying capital	1,930	1,666	592	26,584	24,698
Risk-weighted assets (banking and trading)	12,402	10,285	3,353	167,422	159,598
Capital requirements	992	823	436	15,904	15,162
Credit risk	792	672	378	11,891	11,795
Securitisation exposures	32	32	-	270	270
Equity risk	21	20	7	1,747	1,711
Market risk	29	28	5	229	135
Operational risk	118	71	46	1,767	1,251
Capital adequacy ratio	15.6%	16.2%	17.6%	15.9%	15.5%
Tier 1 ratio	11.3%	11.9%	14.6%	11.8%	11.2%

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

Timetable:

Pre-close briefing: 17 March 2011

Year-end: 31 March 2011

Release of year-end results: 19 May 2011

For further information please contact:

Investec Investor Relations                                                                     

UK: [phone]                                                          

South Africa: [phone]

[e-mail]

 

About Investec

Investec is an international specialist bank and asset manager 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 6 600 permanent employees.

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

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 GBP4 billion.

 

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