the investment case - investec | north america · 2019-12-17 · the investment case ubs conference...
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InvestecThe Investment Case
UBS Conference October 2011
Stephen Koseff
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Strategic positioning
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Mission statement
We strive to be adistinctive specialist bank and
asset managerdriven by commitment to
our core philosophies and values
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Specialist bank and asset manager… with three distinct business activities
Provides investment management services and independent financial planning advice
Broad range of services:Advisory StructuringLendingSecurities TradingMarket MakingPrincipal Transactions
Provides investment management services
To its predominantly global institutional client base
Provides investment management services and independent financial planning advice
To: Private clientsCharitiesTrusts
To: Government InstitutionalCorporatesHigh Net Worth ClientsHigh Income Clients
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Private Client
Focused on well defined target clients
Wealth & Investment
Investment BankingActivities
Capital MarketsActivities
Private BankingActivities
Corporate / Institutional / Government
Specialist BankingAsset
Management
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Not “all things to all people”
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With a solid international platform
Core infrastructureDistribution channels Origination channels
Since 1974
Since1992
Since1997
Assets: £19bln
Assets: £29bln
Assets: £3bln
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And a diversified revenue stream
Asset Management
29.3%
Wealth & Investment
9.3%
Specialist Banking 61.4%
Asset Management
19.3%
Wealth & Investment
6.0%Specialist Banking74.7%
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Contribution to group earnings 31 Mar-11 Contribution to group earnings 31 Mar-10
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Specialist BankingThe Investment Case
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Operating as a Single Specialist Bank
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
Focusing the Mindset around Client demand
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Investment Banking: Investment caseIntegrated business with local client delivery and international access
• 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
UK and Europe
• Business is in a re-investment phase
• Team has been rebuilt • Focus is on top end of
mid-market
Australia
• Benefiting from a well diversified portfolio
• Acquired Access Capital in Jun-11 to facilitate the link between China, UK and SA
Hong Kong
• Established a presence in 2010 • Facilitates the link between India,
UK and SA
India
• Strong brand and positioning in advisory
• Restructured activities in securities around specialisations
South Africa• Property Fund• Property Investments
• Advisory• Institutional, Research,
Sales & Trading• Direct Investments and
Private Equity
Activities
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Capital Markets: Investment casePrimarily focused on traditional bank customer flow/related activities
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• 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
Client focused business concentrating on three areas of customer related activities:
Lending and leasing activities Treasury and trading activities Structured credit
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
Financial Markets and Structuring Support
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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
Capital Markets: Investment caseStrong international platform
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2006 2011
Strong client relationshipsPrivate Banking: Investment case
Value proposition• Provide HIGH TOUCH transactional banking, credit,
deposit and investment services to two distinctclient 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
16,722
72,969
Australia
South Africa
UK and Europe 51,77621,500
1,290
47,560
70,350 141,517
Number of clients
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Wealth & InvestmentThe investment case
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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
Wealth & Investment: Investment case
*Note: Total third party assets held under management excluding the Rensburg Fund Management business which was sold in January 2011
Building an international platform
0
10
20
30
2003 2005 2007 2009 2011
£'bn
Discretionary Non-discretionary
c.100,000clients
Funds under management*
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Asset ManagementThe investment case
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• 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**
Global specialist investment manager
* Global Investor 2008 Survey** As at 31 March 2011
Asset Management: Investment case
20-year growth story
0
20
40
60
80
100
120
140
0
10
20
30
40
50
60
70
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
AUM Operating profit (RHS)
£’bn £’mn
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• 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
Asset Management: Value proposition
Performance Clients Innovation Insight
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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
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Investment case: demystifying the
numbers
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c
Solid base of recurring income
21
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
£'mn
Net interest income Annuity fees and commissions Other fees Client flow trading income Investment income
Average since 2002 of 65%
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c
Driven by strong growth in funds under management
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CAGR since 2002 of 15%
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
£'mn
Asset Management Wealth & Investment Other
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0%
20%
40%
60%
80%
100%
120%
-
5,000
10,000
15,000
20,000
25,000
30,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
£'mn
Customer accounts
Core loans and advances to customers (including own originated securitised assets)
Core loans (excluding own originated securitised assets) to customer deposits
CAGR since 2002 - loans 21%
And loans and depositsCAGR since 2002 - customer deposits 15%
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Revenue continued to grow faster than costs
24
-
500
1,000
1,500
2,000
2,500
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
£'mn
Total revenue Expenses
CAGR since 2002 - Revenue 14% CAGR since 2002 - Expenses 12%
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Good growth in operating profit before tax* and impairments
25
-
100
200
300
400
500
600
700
800
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
£'mn
Operating profit before tax and impairments* (NIBTBI) Operating profit before taxation* (NIBT)
CAGR since 2002 - NIBTBI 21% CAGR since 2002 - NIBT15%
*before goodwill, acquired intangibles and non-operating items
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But Specialist Banking held back by elevated impairments
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*before goodwill, acquired intangibles and non-operating items
-
20
40
60
80
100
120
140
2006 2007 2008 2009 2010 2011
£‘mn
Operating profit before tax
-5
10 15 20 25 30 35 40 45
2006 2007 2008 2009 2010 2011
£‘mn
Operating profit before tax
-
100
200
300
400
500
600
700
2006 2007 2008 2009 2010 2011
£‘mn
Operating profit before tax
Operating profit before tax and impairments
Specialist Banking Wealth & Investment Asset Management
*
** *
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Strong growth in capital and a reduction in leverage
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-
1,000
2,000
3,000
4,000
5,000
6,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
£'mn
Total shareholders’ equity (including preference shares and non-controlling interests)
Total capital resources (including subordinated liabilities)
0
2
4
6
8
10
12
14
16
18
20
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
times
Gearing/leverage ratio (assets excluding assurance assets to total equity)
Core loans to equity ratio
CAGR since 2002 of 20% Average 10-year leverage ratio of 14x
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Resulting in a decline in ROE in Specialist Banking
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0%
100%
200%
300%
400%
500%
600%
-5
10 15 20 25 30 35 40 45
2006 2007 2008 2009 2010 2011
Net tangible shareholders' equity
Tangible ROE post tax
0%
20%
40%
60%
80%
100%
120%
-
10
20
30
40
50
60
70
2006 2007 2008 2009 2010 2011
Net tangible shareholders' equity
Tangible ROE post tax
0%
5%
10%
15%
20%
25%
30%
35%
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2006 2007 2008 2009 2010 2011
Net tangible shareholders' equity
Tangible ROE post tax
Tangible ROE post tax, pre impairments
Specialist Banking Wealth & Investment Asset Management£’bn £’mn £’mn
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Share price 13% (10%)*
Overall CAGR since 2002:
29
NTNAV per share 19%
-
500
1,000
1,500
2,000
2,500
3,000
0
100
200
300
400
500
600
700
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
£'mnpence
Net tangible asset value (excluding goodwill) (£'mn) (RHS)
Net tangible asset value per share (excluding goodwill) (pence) (LHS)
Share price (pence) (LHS)
NTAV 24%
*To 26 October 2011
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Conclusion
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We have a distinctive investment offering …
… a quality scalable global business
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… dedicated employees that are focused on clients and building the business
… with a balanced business model and an entrepreneurial culture
… a well established brand that supports a sustainable long term strategy
Resulting in …
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Thank you
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