TIDMIM88
RNS Number : 2813V
Investec Bank PLC
30 November 2023
Investec Bank plc
Incorporated in England and Wales
Registration number 489604
LEI: 84S0VF8TSMH0T6D4K848
Unaudited condensed Financial Statements for the six months
ended 30 September 2023
Investec Bank plc
(Incorporated in England and Wales)
(Company Registration Number: 489604)
Interim Management Report
This Interim Management Report is issued by Investec Bank plc
(the Bank), a subsidiary of the listed entity Investec plc, in
accordance with the UK Listing Authority's Disclosure and
Transparency Rules and has been prepared in accordance with IAS 34
"Interim Financial Reporting". Unless stated otherwise,
comparatives relate to the six month period ended 30 September 2022
(1H2023). Further information is contained in the Investec Bank plc
unaudited consolidated interim financial report for the six months
ended 30 September 2023 (1H2024). Adjusted operating profit refers
to operating profit before amortisation of acquired intangibles,
strategic actions and taxation and after non-controlling
interests.
Basis of presentation
The comparability of the Bank's total period on period
performance is affected by the financial effects of the combination
of Investec Wealth & Investment UK (IW&I UK) with the
Rathbones Group. IW&I UK is reflected as a discontinued
operation in line with applicable accounting principles,
notwithstanding the strategic shareholding in Rathbones which will
be equity accounted for as an associate going forward.
Performance overview
The business delivered a strong set of results, with total Bank
adjusted operating profit up 56.1% against the prior period.
Pre-provision adjusted operating profit increased due to continued
client acquisition resulting in higher average advances, rising
interest rates and increased client activity. Fee income growth
benefitted from increased advisory and lending activity.
The cost to income ratio improved to 54.0% (1H2023: 63.8%) as
revenue grew well ahead of costs. Total operating costs grew by
8.4% period-on-period primarily driven by an increase in variable
remuneration in line with business performance. Fixed operating
costs growth was well contained at 0.5%, notwithstanding the
inflationary pressures and continued investment in people and
technology.
Expected credit loss (ECL) impairment charges totalled GBP39.3
million, resulting in an annualised credit loss ratio of 55bps
(1H2023: 32bps) above the through-the-cycle (TTC) range of 30bps to
40bps. Impairments were driven predominantly by Stage 3 ECL charges
on certain exposures. We have seen idiosyncratic client stresses
with no evidence of trend deterioration in the overall credit
quality of our books.
The Bank reported adjusted operating profit of GBP273.0 million
for the six months ended 30 September 2023 (1H2023: GBP174.9
million).
The balance sheet remains strong, supported by sound capital and
liquidity ratios.
Key features of the period under review:
-- Net core loans increased by 9.1% annualised to GBP16.3
billion (31 March 2023: GBP15.6 billion)
-- Rathbones Group Plc, of which Investec owns a 41.25% economic
interest, had Funds under management and Administration (FUMA) of
GBP100.7bn on 30 September 2023
-- Customer accounts (deposits) increased 3.9% to GBP20.0
billion (31 March 2023: GBP19.3 billion)
-- Cash and near cash balances increased 1.8% to GBP8.7 billion
(31 March 2023: GBP8.6 billion)
-- Capital ratios* remained sound with the Bank reporting a
total capital ratio of 18.0% (31 March 2023: 18.5%), a common
equity tier 1 ratio of 12.6% (31 March 2023: 12.7%) and a leverage
ratio of 9.3% (31 March 2023: 9.8%)
-- The annualised credit loss ratio on average gross core loans
subject to ECL was 55bps (31 March 2023: 37bps; 1H2023: 32bps).
*Including the deduction of foreseeable charges and dividends as
required under the Capital Requirements Regulation.
Business unit review
Specialist Banking
Adjusted operating profit increased by 65.0% to GBP223.4 million
(1H2023: GBP135.4 million) driven by strong revenue growth across
our key client franchises as we continued to successfully execute
our client acquisition strategies to build scale and relevance in
the UK market.
Continued client acquisition supported the annualised loan book
growth of 9.1% since 31 March 2023.
Operating income growth was underpinned by higher average book,
rising interest rates and sustained client activity.
Net interest income increased by 25.7% benefitting from a larger
book built over the past four years as we focused our client
franchises to provide optimal client solutions and the successful
execution of a targeted high net worth private client strategy.
Higher global interest rates also supported the net interest income
growth.
Non-interest revenue increased 33.5% due to:
-- Higher arrangement fees from transactions in Power and
Infrastructure Finance, Aviation and Real Estate. Listed companies'
advisory fees increased relative to prior period. Activity levels
in equity capital markets remain muted given the challenging
macroeconomic environment
-- Trading income from customer flow increased by 61.9% over the
period driven by increased facilitation of hedging for clients by
our Treasury Risk Solutions area, increased client flow trading
income in our ECM activities, as well as positive risk management
gains from hedging the reduced financial products run down book
-- Trading income from balance sheet management and other
trading activities increased significantly as a result of unwinding
certain interest rate swap hedges as part of the implementation of
the structural interest rate hedging programme
- Partly offset by:
-- Lower investment income due to fair value adjustments on
investments and lower dividend income.
ECL impairment charges totalled GBP39.3 million, resulting in an
annualised credit loss ratio of 55bps (1H2023: 32bps) above TTC
range of 30bps to 40bps. The increase in ECL charges was largely
driven by Stage 3 ECL charges on certain exposures. We have seen
idiosyncratic client stresses with no evidence of trend
deterioration in the overall credit quality of our books. The
updated forward-looking macroeconomic scenario weightings resulted
in an in-model release of GBP3.6million of ECL charges.
The cost to income ratio improved to 53.6% (1H2023: 63.2%).
Operating costs increased by 8.4% period-on-period primarily driven
by an increase in variable remuneration in line with business
performance. Fixed operating costs growth was well contained at
0.4%, well below the UK inflation rate and in line with Bank's
focus on cost efficiency.
Net core loans grew by 9.1% annualised to GBP16.3 billion since
31 March 2023 driven by continued client growth, strong demand for
Corporate credit across multiple portfolios. The residential
mortgage lending book reported muted growth of 1.6% annualised as
interest rate rises adversely affected demand for mortgages in the
market and resulted in increased redemptions.
Further information on key developments within each of the
business units is provided in the Investec group's interim report
published on the Investec group's website: http://www.investec.com
.
Wealth & Investment UK - presented as discontinued
operations
The all-share combination of IW&I UK and Rathbones Group Plc
was successfully completed in the period under review to create the
UK's leading discretionary wealth manager with c.GBP100bn in Funds
under management and administration (FUMA).
The IW&I UK business generated adjusted operating profit of
GBP47.8million, 18.3% above the prior period in an uncertain
economic and operating environment.
Operating income was driven by higher net interest income from
rising global interest rates. Net fee and commission income
decreased by GBP0.1 million (0.1%) notwithstanding the lower
average market levels at the key quarterly billing dates in the
period under review (MSCI PIMFA Balanced Index down 2.4% from prior
period).
Operating costs were well contained, despite the inflationary
backdrop, demonstrating a continued cost discipline. Overall costs
increased by 1.4%, largely driven by non-recurring costs related to
the business combination with Rathbones and the integration of the
Murray Asset Management (MAM) business acquired in the prior
period. Excluding these non-recurring costs, operating costs
decreased by 0.7% reflecting lower FSCS costs in the current period
which were partly offset by inflationary cost increases.
Operational review
Funding and liquidity
As at 30 September 2023, the Bank had GBP8.7 billion in cash and
near cash balances (31 March 2023: GBP8.6 billion), representing
43.5% of customer deposits. The Bank continues to maintain a
conservative liquidity and funding profile. Loans and advances to
customers as a percentage of customer deposits amounted to 81.4%
(31 March 2023: 80.9%). The Bank comfortably exceeds Basel
liquidity requirements for the Liquidity Coverage Ratio (LCR) and
Net Stable Funding Ratio (NSFR). As at 30 September 2023 IBP (solo
basis) LCR was 407% and the NSFR was 141%.
Capital adequacy*
Capital remained comfortably in excess of regulatory
requirements and the Bank continued to meet the Investec group's
internal board-approved capital targets. As at 30 September 2023,
the Common Equity Tier 1 ratio of the Bank was 12.6%, the total
capital ratio was 18.0% and the leverage ratio was 9.3%.
*Including the deduction of foreseeable dividends as required
under the Capital Requirements Regulation.
Credit quality and counterparty exposures
The Bank lends mainly to high net worth and high income
individuals, mid to large sized corporates, public sector bodies
and institutions. The majority of the bank's credit and
counterparty exposures reside within its principal operating
geography, namely the UK.
ECL Impairment charges amounted to GBP39.3 million (1H2023:
GBP27.9 million). The bank's annualised credit loss ratio for the
period was 55bps (31 March 2023: 37bps; 1H2023: 32bps). Stage 3
exposures total GBP445 million at 30 September 2023 (31 March 2023:
GBP343 million). Stage 3 assets (net of ECL) as a percentage of net
core loans subject to ECL was 2.2% (31 March 2023: 1.8%).
Taxation
The tax charge on adjusted operating profit from continuing
operations was GBP51.9 million (1H2023: GBP32.8 million), resulting
in an effective tax rate of 22.8% (1H2023: 24.6%).
Outlook
We are well positioned to continue supporting our clients,
notwithstanding the uncertain macroeconomic outlook. The completion
of the all-share combination of IW&I UK with Rathbones has
created a scalable platform that will power future growth for the
Group in the attractive UK wealth segment. We have strong capital
and robust liquidity levels, are firmly committed to our
medium-term targets and are well positioned to pursue identified
growth initiatives in our chosen markets.
On behalf of the Board of Investec Bank plc
Ruth Leas
Chief Executive Officer
Date: 30 November 2023
Note to the commentary section
This interim management report includes an unaudited
consolidated condensed set of financial statements produced by the
Bank for the six months ended 30 September 2023, which can be
accessed via the following link
http://www.rns-pdf.londonstockexchange.com/rns/2813V_1-2023-11-30.pdf.
This document is also available on Investec's website at
https://www.investec.com/content/dam/investor-relations/financial-information/interim-results/2023/Investec-Bank-plc-Web-Booklet-Sep-2023.pdf
, and via the National Document Storage Mechanism at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
These unaudited consolidated financial results have been
prepared in terms of the recognition and measurement criteria of
International Financial Reporting Standards, and the presentation
and disclosure requirements of IAS 34, (Interim Financial
Reporting).
The accounting policies applied in the preparation of the
results for the period to 30 September 2023 are consistent with
those adopted in the financial statements for the year ended 31
March 2023.
Contingent liabilities
The group assessed its exposure to legal proceedings and the
appropriateness of related provisions recognised on the balance
sheet as at 30 September 2023. It was concluded that the provisions
held as at 30 September 2023 reflect our best estimate of the
potential financial outflows that may arise. Refer to page 26 of
the Investec Bank plc unaudited condensed financial information for
the six months ended 30 September 2023 for further detail.
Enquires and further information:
Investor Relations
Investec Bank plc
Telephone: 020 7597 5546 / 020 7597 3593
30 Gresham Street, London, EC2V 7QP
United Kingdom
Date: 30 November 2023
Investec Bank plc
directors' responsibilitY STATEMENT
The directors (the names of whom are set out below) are required
to prepare the financial statements on a going concern basis unless
it is not appropriate to do so. In making this assessment, the
directors have considered information relating to present and
future conditions. Each of the directors (the names of whom are set
out below) confirm that to the best of their knowledge these
condensed consolidated interim financial statements have been
prepared in accordance with International Accounting Standard (IAS)
34 "Interim Financial Reporting", as adopted by the UK, and that
the interim management report herein includes a fair review of the
information required by the Financial Conduct Authority's (FCA's)
Disclosure Guidance and Transparency Rule (DTR) 4.7.2R and DTR
4.2.8R, namely:
-- An indication of important events that have occurred during
the six months ended 30 September 2023 and their impact on the
condensed consolidated interim financial statements, and a
description of the principal risks and uncertainties for the
remaining six months of the financial year; and
-- Material related party transactions in the six months ended
30 September 2023 and any material changes in the related party
transactions described in the last annual report
Signed on behalf of the board
Ruth Leas
Chief Executive Officer
30 November 2023
Investec Bank plc board of directors:
Executive directors
Ruth Leas (Chief Executive Officer)
Kevin McKenna (Chief Risk Officer)
Marlé van der Walt (Finance Director)
Fani Titi
Non-executive directors
Brian Stevenson (Chair)
Henrietta Baldock
Zarina Bassa
David Germain
Paul Seward
Lesley Watkins
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