Investec (comprising Investec plc and Investec Limited) – Interim Management Statement
24 July 2009
Diversified business model, sound balance sheet and recurring revenue base continue to support
profitability in challenging economic conditions
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 three months ended 30 June 2009 and the corresponding period in the previous year.
Overview of operating fundamentals
Investec’s recurring revenue base and operational diversity have continued to support profitability across its
core geographies. The group has maintained its disciplined focus on managing risk, building capital and
preserving liquidity. Operating fundamentals and activity levels within the group’s businesses, however,
continue to be negatively impacted by weak global economic conditions.
Salient features of the quarter to 30 June 2009 compared to the quarter to 30 June 2008 are:
• Expenses continued to be tightly managed and have declined by 7%.
• Net operating income (after expenses and minorities but before impairments on loans and advances)
decreased by 12%.
• Defaults have continued to increase in line with expectations, with the credit loss ratio on core loans
and advances amounting to 0.8% annualised for the quarter (2008: 0.3%).
• The above mentioned factors have resulted in a decline in attributable earnings (see note 2) of 26%.
The group is, however, trading well ahead of the last quarter of the 2009 financial year.
• The group’s three core geographies remain profitable with recurring income as a percentage of total
operating income amounting to approximately 65%.
• As at 30 June 2009 the capital adequacy ratio of Investec plc (applying UK Financial Services
Authority rules to its capital base) was 16.0% and the capital adequacy ratio of Investec Limited
(applying South African Reserve Bank rules to its capital base) was 14.6%.
• The group has a strong liquidity position and currently has approximately GBP5.5 billion of cash and
near cash available to support its activities.
• Since 31 March 2009 (the end of the group’s financial year) core loans and advances grew by 1.0%
to GBP16.3 billion, customer deposits increased by 6.4% to GBP15.5 billion and third party assets
under management increased by 9.7% to GBP53.6 billion.
• The group’s gearing ratio remains low at approximately 12 times and the advances to customer
deposits ratio is approximately 1 times.
Since 30 June 2009 the group has via a tender offer acquired GBP36.7 million in aggregate principal amount
of its GBP350 million Fixed/Floating Undated Subordinated Callable Step-Up Notes issued under its Euro
Medium Term Note Programme (RNS announcement made on 7 July 2009) plus a further GBP12.5 million in
the open market. In addition, the group has acquired GBP18.4 million principal amount of the 9.00 per cent.
Kensington Group plc Callable Subordinated Notes due 2015 (RNS announcement made on 13 July 2009).
Notwithstanding the improvement in some financial markets since the group’s year-end the global
environment remains uncertain. Investec’s geographical and operational diversity continues to enable it to
navigate a steady course. Investec has a sound balance sheet and the group will continue to leverage off its
existing platforms, seeking to create additional operational efficiencies and organic growth opportunities
across all geographies.
The group will be holding a pre-close briefing on 17 September 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)
1. The financial information on which this statement is based has not been reviewed and reported on by the
2. Attributable earnings refer to net profit before goodwill 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 24 July 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:
3 months to Year to 31 Mar 2009 3 months to
30 Jun 2009 30 Jun 2008
Currency Period end Average Period end Average Period end Average
South African Rand 12.74 12.83 13.58 14.83 15.62 15.26
Australian Dollar 2.04 2.03 2.07 2.19 2.07 2.10
Euro 1.17 1.13 1.08 1.21 1.26 1.27
US Dollar 1.65 1.54 1.43 1.73 1.99 1.98
5. The following disclosures are made with respect to Basel II quarterly disclosure requirements:
The group holds capital well in excess of regulatory requirements and intends to perpetuate this
philosophy and ensure that it remains well capitalised in a vastly changed banking world. Accordingly, as
announced in November 2008, the group has adjusted its capital adequacy targets and is focusing on
increasing its capital base, targeting a minimum tier one capital ratio of 11% and a total capital adequacy
ratio of 14% to 17% on a consolidated basis for Investec plc and Investec Limited, respectively. Investec
has made good progress in this regard and intends to meet these targets by the end of calendar year
plc IBP*^ IBAL* Limited IBL*
As at 30 June 2009 GBP 'mn GBP 'mn A$'mn ZAR 'mn ZAR 'mn
Primary capital (Tier 1) 1,107 936 543 16,717 14,747
Other capital (Tier 2 and 3) 742 613 152 5,123 5,123
1,849 1,549 695 21,840 19,870
Less: deductions -172 -161 -122 -232 -332
Net qualifying capital 1,677 1,388 573 21,608 19,538
Risk-weighted assets (banking
and trading) 10,511 8,643 2,912 147,604 134,105
Capital requirements 841 691 379 14,022 12,739
Credit risk 654 545 325 11,530 10,884
Securitisation exposures 15 14 0 135 135
Equity risk 18 18 10 601 577
Market risk 44 44 2 201 122
Operational risk 110 70 42 1,555 1021
Capital adequacy ratio 16.0% 16.1% 19.7% 14.6% 14.6%
Tier 1 ratio 10.0% 10.5% 15.3% 11.2% 10.8%
Capital adequacy ratio - pre
operational risk 18.4% 17.9% 22.1% 16.5% 15.8%
Tier 1 ratio - pre operational risk 11.5% 11.6% 17.2% 12.6% 11.8%
*IBP is Investec Bank plc; IBAL is Investec Bank (Australia) Limited and IBL is Investec Bank Limited. ^IBP includes IBAL.
Pre-close briefing: 17 September 2009
Interim period: 30 September 2009
Release of interim results: 19 November 2009
For further information please contact:
Investec Investor Relations
UK: +44 (0) 207 597 5546
South Africa: +27 (0) 11 286 7070
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 5 900
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
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