Integrated Annual Report 2015

Financial review

Taxation

The effective tax rate amounts to 19.6% (2014: 17.1%).

  Effective tax rates      
2015  2014  31 March 
2015 
£’000 
31 March 
2014*
£’000 
% change 
UK and Other 23.0% 18.8% (28 362) (30 770) (7.8%)
Southern Africa 18.7% 15.5% (70 661) (48 294) 46.3%
Australia –  1.1% –  154  > 100%
Tax 19.6% 17.1% (99 023) (78 910) 25.5%
* Restated as per note 59.

Profit attributable to non-controlling interests

Profit attributable to non-controlling interests mainly comprises:

Earnings attributable to shareholders

As a result of the foregoing factors, earnings attributable to shareholders decreased from £330.8 million to £245.5 million.

Dividends and earnings per share

Information with respect to dividends and earnings per share is provided on here, and here.

Statutory balance sheet analysis

Since 31 March 2014:


Statutory net tangible asset value per share

The group’s net tangible asset value per share is reflected in the table below.

£’000  31 March 
2015 
31 March 
2014*
Shareholders’ equity 3 500 837  3 572 296 
Less: perpetual preference shares issued by holding companies (326 693) (330 890)
Less: goodwill and intangible assets (excluding software) (494 111) (577 816)
Net tangible asset value 2 680 033  2 663 590 
     
Number of shares in issue (million) 899.4  891.7 
Treasury shares (million) (29.5) (29.7)
Number of shares in issue in this calculation (million) 869.9  862.0 
     
Net tangible asset value per share (pence) 308.1  309.0 
     
Net asset value per share (pence) 364.9  376.0 
* Restated as per note 59.

Statutory return on risk-weighted assets

The group’s return on risk-weighted assets is reflected in the table below.

  31 March 
2015 
31 March 
2014*
Average  31 March 
2013 
Average 
Adjusted earnings attributable to ordinary shareholders before goodwill, acquired intangibles and non-operating items (£’000) 339 523  326 923  333 223  309 310  318 117 
           
Investec plc risk-weighted assets (£’million) 11 608  13 711* 12 660  13 705* 12 936 
Investec Limited risk-weighted assets^ (£’million) 14 992  14 125  14 559  16 036  15 360 
Total risk-weighted assets (£’million) 26 601  27 836  27 219  29 744  28 296 
           
Return on average risk-weighted assets 1.25% 1.14%   1.06%  
           
^Investec Limited risk-weighted assets (R’million) 269 466  248 040  258 753  223 865  235 953 
* Restated as per note 59.

Capital management and allocation

We held capital in excess of regulatory requirements targeting a minimum tier 1 capital ratio of 10.5% (11.0% by March 2016) and a total capital adequacy ratio range of 14% to 17% on a consolidated basis for each of Investec plc and Investec Limited.

Further information is provided here.


A summary of capital adequacy and leverage ratios

As at 31 March 2015  Investec 
plc^*
IBP^* Investec 
Limited*
IBL*
Common equity tier 1 (as reported) 10.2%   12.2%   9.6%  11.0%  
Common equity tier 1 (‘fully loaded’)^^ 10.2%   12.2%   9.5%  10.9%  
Tier 1 (as reported) 11.9%   12.2%   11.3%  11.4%  
Total capital adequacy ratio (as reported) 16.7%   17.6%   14.7%  15.4%  
Leverage ratio** – permanent capital 8.1%   7.6%   8.5%# 8.5%#
Leverage ratio** – current 7.7%   7.6%   8.1%# 8.3%#
Leverage ratio** – ‘fully loaded’^^ 6.6%   7.6%   7.2%# 8.0%#

As at 31 March 2014## Investec 
plc^*
IBP^* Investec 
Limited*
IBL*
Common equity tier 1 (as reported) 8.8%   11.0%   9.4%  10.3% 
Common equity tier 1 (‘fully loaded’)^^ 8.9%   11.0%   9.3%  10.2% 
Tier 1 (as reported) 10.5%   11.0%   11.0%  10.8% 
Total capital adequacy ratio (as reported) 15.3%   16.0%   14.9%  15.3% 
Leverage ratio** – permanent capital 7.7%   7.4%   8.1%# 7.9%#
Leverage ratio** – current 7.4%   7.4%   7.8%# 7.9%#
Leverage ratio** – ‘fully loaded’^^ 6.2%   7.4%   6.7%# 7.5%#
* Where: IBP is Investec Bank plc consolidated and IBL is Investec Bank Limited. The information for Investec plc includes the information for IBP. The information for Investec Limited includes the information for IBL.
^ The capital adequacy disclosures follow Investec’s normal basis of presentation so as to show a consistent basis of calculation across the jurisdictions in which the group operates. For Investec plc and Investec Bank plc this does not include the deduction of foreseeable dividends when calculating common equity tier 1 as now required under the Capital Requirements Regulation and European Banking Authority technical standards. The impact of the final proposed ordinary and preference dividends totalling £57 million for Investec plc and £15 million for Investec Bank plc would be around 50bps and 10bps, respectively. At 31 March 2014 the impact of the final proposed ordinary and preference dividends totalling £61 million for Investec plc and £32 million for IBP would be around 40bps and 30bps, respectively.
^^ Based on the group’s understanding of current and draft regulations. ‘Fully loaded’ is based on Basel III capital requirements as fully phased in by 2022.
** The leverage ratios are calculated on an end-quarter basis.
# Based on revised BIS rules.
## The 31 March 2014 capital information has been restated to reflect the implementation of IFRIC 21.

Return on equity by country and business – statutory

£’000  31 March 
2015 
31 March 
2014*
Average  31 March 
 2013*
Average 
Calculation of average shareholders’ equity          
Ordinary shareholders’ equity 3 174 144  3 241 406  3 207 775  3 287 551  3 264 479 
Goodwill and intangible assets (excluding software) (494 111) (577 816) (535 964) (626 870) (602 343)
Adjusted tangible shareholders’ equity 2 680 033  2 663 590  2 671 811  2 660 681  2 662 136 

 

£’000  31 March 
2015 
31 March 
2014*
Operating profit before goodwill impairment and non-operational items 504 858  461 525 
Minority interests (29 885) (21 880)
Accrued preference dividends, adjusted for currency hedge (36 427) (33 812)
Revised operating profit 438 546  405 833 
Tax on ordinary activities (99 023) (78 910)
Revised operating profit after tax 339 523  326 923 
     
Pre-tax return on average adjusted shareholders’ equity 13.7% 12.4%
Post-tax return on average adjusted shareholders’ equity 10.6% 10.0%
Pre-tax return on average adjusted tangible shareholders’ equity 16.4% 15.2%
Post-tax return on average adjusted tangible shareholders’ equity 12.7% 12.3%
* Restated as per note 59 in volume three.

Return on equity on an ongoing basis is provided here.

Return on equity by geography

£’000  UK and 
Other 
statutory 
Southern 
Africa 
Total 
group 
UK and 
Other 
ongoing 
Total operating profit 127 253  377 605  504 858  214 799 
Tax on profit on ordinary activities (28 362) (70 661) (99 023) (45 521)
Non-controlling interests 6 803  (36 688) (29 885) 6 803 
Preference dividends paid (14 884) (21 543) (36 427) (14 884)
Profit on ordinary activities after taxation – 31 March 2015  90 810  248 713  339 523  161 197 
Profit on ordinary activities after taxation – 31 March 2014* 103 448  223 475  326 923  148 392 
         
Ordinary shareholders’ equity – 31 March 2015  1 764 017  1 410 127  3 174 144  1 675 247 
Goodwill and intangible assets (excluding software) (488 674) (5 437) (494 111) (488 674)
Tangible ordinary shareholders’ equity – 31 March 2015  1 275 343  1 404 690  2 680 033  1 186 573 
         
Ordinary shareholders’ equity – 31 March 2014* 1 942 284  1 299 122  3 241 406  1 562 284 
Goodwill and intangible assets (excluding software) (571 257) (6 559) (577 816) (571 257)
Tangible ordinary shareholders’ equity – 31 March 2014* 1 371 027  1 292 563  2 663 590  991 027 
         
Ordinary shareholders’ equity – 31 March 2013  1 885 819  1 401 732  3 287 551  1 405 819 
Goodwill and intangible assets (excluding software) (616 610) (10 260) (626 870) (616 610)
Tangible ordinary shareholders’ equity – 31 March 2013  1 269 209  1 391 472  2 660 681  789 209 
         
Average ordinary shareholders’ equity – 31 March 2015  1 853 150  1 354 625  3 207 775  1 618 765 
Average ordinary shareholders’ equity – 31 March 2014* 1 914 052  1 350 427  3 264 479  1 484 052 
         
Average tangible shareholders’ equity – 31 March 2015  1 323 184  1 348 627  2 671 811  1 088 799 
Average tangible shareholders’ equity – 31 March 2014* 1 320 118  1 342 018  2 662 136  890 118 
         
Post-tax return on average ordinary shareholders’ equity– 31 March 2015  4.9%  18.4%  10.6%  10.0%
Post-tax return on average ordinary shareholders’ equity – 31 March 2014* 5.4%  16.5%  10.0%  10.0%
         
Post-tax return on average tangible shareholders’ equity– 31 March 2015  6.9%  18.4%  12.7%  14.8%
Post-tax return on adjusted tangible shareholders’ equity – 31 March 2014* 7.8%  16.7%  12.3%  16.7%
         
Pre-tax return on adjusted average ordinary shareholders’ equity– 31 March 2015  6.4%  23.6% 13.7%  12.8%
Pre-tax return on adjusted average ordinary shareholders’ equity – 31 March 2014* 7.0%  20.1% 12.4%  12.1%
         
Pre-tax return on average tangible ordinary shareholders’ equity– 31 March 2015  9.0%  23.7%  16.4%  19.0%
Pre-tax return on average tangible ordinary shareholders’ equity – 31 March 2014* 10.2%  20.2%  15.2%  20.1%
* Restated as per note 59.

Return on equity by business°

£’000  Asset 
Management 
Wealth & 
Investment^
Specialist 
Banking 
statutory 
Specialist 
Banking 
ongoing 
Total operating profit after other non-controlling interests 148 975  78 781  304 713  392 259 
Notional return on regulatory capital 2 906  1 306  (4 212) (4 212)
Notional cost of statutory capital (3 570) (9 152) 12 722  12 722 
Cost of subordinated debt (1 165) (735) 1 900  1 900 
Cost of preference shares (642) (328) (35 456) (35 456)
         
Adjusted earnings – 31 March 2015  146 504  69 872  279 667  367 213 
Adjusted earnings – 31 March 2014* 143 227  54 586  255 495  309 710 
         
Ordinary shareholders’ equity – 31 March 2015  160 648  255 318  2 599 130  2 510 360 
Goodwill and intangible assets (excluding software) (91 365) (216 017) (27 679) (27 679)
Tangible ordinary shareholders’ equity – 31 March 2015  69 283  39 301  2 571 451  2 482 681 
         
Ordinary shareholders’ equity – 31 March 2014* 147 123  292 650  2 642 583  2 098 875 
Goodwill and intangible assets (excluding software) (92 391) (229 279) (97 096) (97 096)
Tangible ordinary shareholders’ equity – 31 March 2014* 54 732  63 371  2 545 487  2 001 779 
         
Ordinary shareholders’ equity – 31 March 2013  127 955  256 747  2 743 799  2 237 318 
Goodwill and intangible assets (excluding software) (95 495) (243 313) (129 012) (129 012)
Tangible ordinary shareholders’ equity – 31 March 2013  32 460  13 434  2 614 787  2 108 306 
         
Average ordinary shareholders’ equity – 31 March 2015  153 886  273 984  2 620 856  2 304 617 
Average ordinary shareholders’ equity – 31 March 2014* 137 539  274 699  2 693 191  2 168 097 
         
Average tangible shareholders’ equity – 31 March 2015  62 008  51 336  2 558 469  2 242 229 
Average tangible shareholders’ equity – 31 March 2014* 43 596  38 403  2 580 137  2 055 043 
         
Pre-tax return on adjusted average ordinary shareholders’ equity – 31 March 2015  95.2% 25.5% 10.7% 15.9%
Pre-tax return on adjusted average ordinary shareholders’ equity – 31 March 2014* 104.1% 19.9% 9.5% 14.3%
         
Pre-tax return on average tangible ordinary shareholders’ equity – 31 March 2015  236.3% 136.1% 10.9% 16.4%
Pre-tax return on average tangible ordinary shareholders’ equity – 31 March 2014* 328.5% 142.1% 9.9% 15.1%
° The return on equity by business is based on the level of internal capital required by each business, inclusive of an allocation of any surplus capital held by the group. The operating profit is adjusted to reflect a capital structure that includes common equity, additional tier 1 capital instruments and subordinated debt.
^ The Wealth & Investment is consistent with the group computation, except for an adjustment of £159.1 million between ordinary shareholders’ funds and goodwill, which represents historical accounting gains with a corresponding effective increase in goodwill. These gains were excluded from group.
* Restated as per note 59.

Statutory operating profit (before goodwill, acquired intangibles, non-operating items, taxation and after other non-controlling interests) per employee

By division Asset 
Management   
Wealth & 
Investment 
Specialist 
Banking 
Total 
group 
Number of employees – 31 March 2015  1 508    1 533  5 213  8 254 
Number of employees – 31 March 2014  1 468    1 383  5 407  8 258 
Number of employees – 31 March 2013  1 268    1 332  5 551  8 151 
         
Average employees – year to 31 March 2015  1 488    1 458  5 310  8 256 
Average employees – year to 31 March 2014  1 368    1 358  5 479  8 205 
         
Operating profit* – year to 31 March 2015 (£’000) 148 975    78 781  304 713  532 469 
Operating profit* – year to 31 March 2014° (£’000) 143 819    66 099  277 202  487 120 
         
Operating profit per employee^ – 31 March 2015 (£’000) 100.1^^ 54.0  57.4  59.7 
Operating profit per employee^ – 31 March 2014° (£’000) 105.1^^ 48.7  50.6  54.9 

 

By geography UK and 
Other#
Southern 
Africa 
Total 
group 
Number of employees – 31 March 2015  3 729  4 525  8 254 
Number of employees – 31 March 2014  3 854  4 404  8 258 
Number of employees – 31 March 2013  3 983  4 168  8 151 
       
Average employees – year to 31 March 2015  3 791  4 465  8 256 
Average employees – year to 31 March 2014  3 919  4 286  8 205 
       
Operating profit – year to 31 March 2015 (£’000) 144 109  349 048  493 157 
Operating profit – year to 31 March 2014° (£’000) 153 255  297 421  450 676 
       
Operating profit per employee^ – 31 March 2015 (£’000) 38.0  78.2  59.7 
Operating profit per employee^ – 31 March 2014° (£’000) 39.1  69.4  54.9 
* Operating profit excludes group costs.
^ Based on average number of employees over the year.
^^ For Investec Asset Management, operating profit per employee includes Silica, its third party administration business.
# Includes Australia, which was previously reported separately. Refer here.
° Restated as per note 59 in volume three.

Total third party assets under management

£’million 31 March 
2015 
31 March 
2014 
Asset Management 77 510  68 017 
UK and Other 50 622  42 006 
Southern Africa 26 888  26 011 
     
Wealth & Investment* 46 076  40 772 
UK and Other 29 562  26 574 
Southern Africa 16 514  14 198 
     
Property activities 412  272 
Southern Africa 244  144 
Australia 168  128 
     
Australia other funds 108  128 
Total 124 106  109 189 


A further analysis of third party assets under management

At 31 March 2015
£’million
UK and 
Other 
Southern 
Africa 
Australia  Total 
Asset Management 50 622  26 888  –  77 510 
Mutual funds 19 398  11 179  –  30 577 
Segregated mandates 31 224  15 709  –  46 933 
         
Wealth & Investment* 29 562  16 514  –  46 076 
Discretionary and annuity assets 21 602  4 974  –  26 576 
Non-discretionary 7 740  11 540  –  19 280 
Other 220  –  –  220 
         
Property activities –  244  168  412 
Australia other funds –  –  108  108 
Total third party assets under management 80 184  43 646  276  124 106 

 

At 31 March 2014
£’million
UK and 
Other 
Southern 
Africa 
Australia  Total 
Asset Management 42 006  26 011  –  68 017 
Mutual funds 15 386  11 180  –  26 566 
Segregated mandates 26 620  14 831  –  41 451 
         
Wealth & Investment* 26 574  14 198  –  40 772 
Discretionary and annuity assets 18 513  4 189  –  22 702 
Non-discretionary 7 823  10 009  –  17 832 
Other 238  –  –  238 
         
Property activities –  144  128  272 
Australia other funds –  –  128  128 
Total third party assets under management 68 580  40 353  256  109 189 
* Restated to reflect internal adjustments to the jurisdiction in which funds under management are recognised.

Ongoing information

The tables that follow provide information on our ongoing results as explained here.

  Results in Pounds Sterling Results in Rand
  Year to 
31 March 
2015 
Year to 
31 March 
2014 
% change  Year to 
31 March 
2015 
Year to 
31 March 
2014 
% change 
Operating profit before taxation* (million) £581  £505  15.0% R10 377  R8 186  26.8%
Adjusted earnings attributable to shareholders** (million) £410  £372  10.2% R7 330  R6 020  21.8%
Adjusted earnings per share** 47.5p 43.1p 10.2% 849.7c 697.9c 21.8%
* Before goodwill, acquired intangibles, non-operating items and after other non-controlling interests.
** Before goodwill, acquired intangibles, non-operating items and after non-controlling interests.

Consolidated summarised ongoing income statement

For the year to
£’000 
31 March 
2015 
31 March 
2014 
Variance  % change 
Net interest income 539 041  495 043  43 998  8.9% 
Net fee and commission income 1 090 435  969 517  120 918  12.5% 
Investment income 151 848  188 366  (36 518) (19.4%)
Trading income arising from        
– customer flow 106 588  103 514  3 074  3.0% 
– balance sheet management and other trading activities (13 041) 14 158  (27 199) (192.1%)
Other operating income 12 188  18 464  (6 276) (34.0%)
Total operating income before impairment losses on loans and advances 1 887 059  1 789 062  97 997  5.5% 
Impairment losses on loans and advances (39 352) (64 326) 24 974  (38.8%)
Operating income 1 847 707  1 724 736  122 971  7.1% 
Operating costs (1 254 009) (1 203 551) (50 458) 4.2% 
Depreciation on operating leased assets (1 294) (5 446) 4 152  (76.2%)
Operating profit before goodwill and acquired intangibles 592 404  515 739  76 665  14.9% 
Profit attributable to other non-controlling interests (11 701) (10 849) (852) 7.9% 
Profit attributable to Asset Management non-controlling interests (18 184) (11 031) (7 153) (64.8%)
Operating profit before taxation 562 519  493 859  68 660  13.9% 
Taxation (116 182) (88 181) (28 001) (31.8%)
Preference dividends accrued (36 427) (33 812) (2 615) (7.7%)
Adjusted attributable earnings to ordinary shareholders 409 910  371 866  38 044  10.2% 
         
Number of weighted average shares (million) 862.7  862.6     
Adjusted earnings per share (pence) 47.5  43.1    10.2%
Cost to income ratio 66.5% 67.5%    


Reconciliation from statutory summarised income statement to ongoing summarised income statement

    Removal of:**  
For the year to 31 March 2015
£’000 
Statutory as 
disclosed^
UK legacy 
business 
excluding 
sale assets 
Sale assets 
UK 
Sale assets 
Australia 
Ongoing 
business 
Net interest income 634 977  12 526  71 143  12 267  539 041 
Net fee and commission income 1 089 043  756  (4 876) 2 728  1 090 435 
Investment income 128 334  (16 204) (5 443) (1 867) 151 848 
Trading income arising from          
– customer flow 106 313  350  (415) (210) 106 588 
– balance sheet management and other trading activities (13 424) 19  (248) (154) (13 041)
Other operating income 12 236  –  –  48  12 188 
Total operating income before impairment losses on loans and advances 1 957 479  (2 553) 60 161  12 812  1 887 059 
Impairment losses on loans and advances (128 381) (83 468) (4 085) (1 476) (39 352)
Operating income 1 829 098  (86 021) 56 076  11 336  1 847 707 
Operating costs (1 322 705) (21 648) (34 245) (12 803) (1 254 009)
Depreciation on operating leased assets (1 535) –  (241) –  (1 294)
Operating profit before goodwill and acquired intangibles 504 858  (107 669) 21 590  (1 467) 592 404 
Profit attributable to Asset Management non-controlling interests (18 184) –  –  –  (18 184)
Profit attributable to other non-controlling interests (11 701) –  –  –  (11 701)
Operating profit before taxation 474 973  (107 669) 21 590  (1 467) 562 519 
Taxation* (99 023) 21 103  (4 232) 288  (116 182)
Preference dividends accrued (36 427) –  –  –  (36 427)
Adjusted attributable earnings to ordinary shareholders 339 523  (86 566) 17 358  (1 179) 409 910 
           
Number of weighted average shares (million) 862.7        862.7 
Adjusted earnings per share (pence) 39.4        47.5 
Cost to income ratio 67.6%       66.5%
* Applying the group’s effective taxation rate of 19.6%.
^ Refer here.
** Where:
 
  • The UK legacy business is as described here.
  • Sale assets UK refer to the sale of Kensington and Start as discussed here.
  • Sale assets Australia refer to the sale of Investec Bank (Australia) Limited as discussed here.

  Removal of:**  
For the year to 31 March 2014
£’000 
Statutory as 
disclosed^
UK legacy 
business 
excluding 
sale assets 
Sale assets 
UK 
Sale assets 
Australia 
Ongoing 
business 
Net interest income 651 679  19 355  94 715  42 566  495 043 
Net fee and commission income 989 421  8 981  749  10 174  969 517 
Investment income 166 809  (11 793) (9 764) –  188 366 
Trading income arising from          
– customer flow 103 914  695  (625) 330  103 514 
– balance sheet management and other trading activities 10 587  (1 762) (875) (934) 14 158 
Other operating income 18 554  –  –  90  18 464 
Total operating income before impairment losses on loans and advances 1 940 964  15 476  84 200  52 226  1 789 062 
Impairment losses on loans and advances (166 152) (59 157) (38 898) (3 771) (64 326)
Operating income 1 774 812  (43 681) 45 302  48 455  1 724 736 
Operating costs (1 307 243) (25 370) (41 136) (37 186) (1 203 551)
Depreciation on operating leased assets (6 044) –  (598) –  (5 446)
Operating profit before goodwill and acquired intangibles 461 525  (69 051) 3 568  11 269  515 739 
Profit attributable to Asset Management non-controlling interests (11 031) –  –  –  (11 031)
Profit attributable to other non-controlling interests (10 849) –  –  –  (10 849)
Operating profit before taxation 439 645  (69 051) 3 568  11 269  493 859 
Taxation* (78 910) 11 808  (610) (1 927) (88 181)
Preference dividends accrued (33 812) –  –  –  (33 812)
Adjusted attributable earnings to ordinary shareholders 326 923  (57 243) 2 958  9 342  371 866 
           
Number of weighted average shares (million) 862.6        862.6 
Adjusted earnings per share (pence) 37.9        43.1 
Cost to income ratio 67.6%       67.5%
* Applying the group’s effective taxation rate of 17.1%.
^ Refer here.
** Where:
 
  • The UK legacy business is as described here.
  • Sale assets UK refer to the sale of Kensington and Start as discussed here.
  • Sale assets Australia refer to the sale of Investec Bank (Australia) Limited as discussed here.

Reconciliation from statutory summarised income statement to ongoing summarised income statement for the UK and Other Specialist Banking business

    Removal of:**  
For the year to 31 March 2015
£’000 
UK and 
Other 
Specialist 
Banking 
statutory as 
disclosed^
UK legacy 
business 
excluding 
sale assets 
Sale assets 
UK 
Sales assets 
Australia 
UK and 
Other 
Specialist 
Banking 
ongoing 
business 
Net interest income 320 973  12 526  71 143  12 267  225 037 
Net fee and commission income 225 325  756  (4 876) 2 728  226 717 
Investment income (5 696) (16 204) (5 443) (1 867) 17 818 
Trading income arising from          
– customer flow 87 364  350  (415) (210) 87 639 
– balance sheet management and other trading activities (30 043) 19  (248) (154) (29 660)
Other operating income 9 227  –  –  48  9 179 
Total operating income before impairment losses on loans and advances 607 150  (2 553) 60 161  12 812  536 730 
Impairment losses on loans and advances (102 707) (83 468) (4 085) (1 476) (13 678)
Operating income 504 443  (86 021) 56 076  11 336  523 052 
Operating costs (477 969) (21 648) (34 245) (12 803) (409 273)
Depreciation on operating leased assets (1 535) –  (241) –  (1 294)
Operating profit before goodwill and acquired intangibles 24 939  (107 669) 21 590  (1 467) 112 485 
Profit attributable to other non-controlling interests 16 856  –  –  –  16 856 
Operating profit before taxation 41 795  (107 669) 21 590  (1 467) 129 341 

    Removal of:**  
For the year to 31 March 2014
£’000 
UK and 
Other 
Specialist 
Banking 
statutory as 
disclosed^
UK legacy 
business 
excluding 
sale assets 
Sale assets 
UK 
Sales assets 
Australia 
UK and 
Other 
Specialist 
Banking 
ongoing 
business 
Net interest income 348 470  19 355  94 715  42 566  191 834 
Net fee and commission income 172 195  8 981  749  10 174  152 291 
Investment income 97 224  (11 793) (9 764) –  118 781 
Trading income arising from          
– customer flow 76 655  695  (625) 330  76 255 
– balance sheet management and other trading activities (6 922) (1 762) (875) (934) (3 351)
Other operating income 14 910  –  –  90  14 820 
Total operating income before impairment losses on loans and advances 702 532  15 476  84 200  52 226  550 630 
Impairment losses on loans and advances (126 911) (59 157) (38 898) (3 771) (25 085)
Operating income 575 621  (43 681) 45 302  48 455  525 545 
Operating costs (505 020) (25 370) (41 136) (37 186) (401 328)
Depreciation on operating leased assets (6 044) –  (598) –  (5 446)
Operating profit before goodwill and acquired intangibles 64 557  (69 051) 3 568  11 269  118 771 
Profit attributable to other non-controlling interests 2 720  –  –  –  2 720 
Operating profit before taxation 67 277  (69 051) 3 568  11 269  121 491 
^ Refer here.
** Where:
 
  • The UK legacy business is as described here.
  • Sale assets UK refer to the sale of Kensington and Start as discussed here.
  • Sale assets Australia refer to the sale of Investec Bank (Australia) Limited as discussed here.


Segmental geographical and business analysis of operating profit before goodwill, acquired intangibles, non-operating items, taxation and after other non-controlling interests – ongoing business

For the year to 31 March 2015
£’000 
UK and 
Other 
Southern 
Africa 
Total 
group 

change 
% of total
Asset Management 75 491  73 484  148 975  3.6% 25.7% 
Wealth & Investment 56 871  21 910  78 781  19.2% 13.6% 
Specialist Banking 129 341  262 918  392 259  18.4% 67.5% 
  261 703  358 312  620 015  14.5% 106.8% 
Group costs (30 048) (9 264) (39 312) 7.9% (6.8%)
Total group 231 655  349 048  580 703  15.0% 100.0% 
Other non-controlling interest – equity     11 701     
Operating profit     592 404     
% change 11.7% 17.4% 15.0%    
% of total 39.9% 60.1% 100.0%    
           
For the year to 31 March 2014
£’000 
UK and 
Other 
Southern 
Africa 
Total 
group 

of total 
Asset Management 67 585  76 234  143 819  28.5% 
Wealth & Investment 46 065  20 034  66 099  13.1% 
Specialist Banking 121 491  209 925  331 416  65.6% 
  235 141  306 193  541 334  107.2% 
Group costs (27 672) (8 772) (36 444) (7.2%)
Total group 207 469  297 421  504 890  100% 
Other non-controlling interest – equity     10 849   
Operating profit     515 739   
% of total 41.1% 58.9% 100.0%  


A reconciliation of the UK and Other Specialist Banking’s operating profit: ongoing vs statutory basis

£’000  31 March 
2015 
31 March 
2014 

change 
Total ongoing UK and Other Specialist Banking per above 129 341  121 491  6.5% 
UK legacy remaining (107 669) (69 051) 55.9% 
UK sale assets 21 590  3 568  > 100.0% 
Australian sale assets (1 467) 11 269  > 100.0% 
Total UK and Other Specialist Banking per statutory accounts 41 795  67 277  (37.9%)


Ongoing segmental business and geographic analysis – summarised income statement

  Asset Management Wealth & Investment Specialist Banking Group costs  
For the year to 31 March 2015
£’000 
UK and 
Other 
Southern 
Africa 
Total  UK and 
Other 
Southern 
Africa 
Total  UK and 
Other 
Southern 
Africa 
Total  UK and 
Other 
Southern 
Africa 
Total  Total 
group 
Net interest income 300  4 007  4 307  6 209  347  6 556  225 037  303 141  528 178  –  –  –  539 041 
Net fee and commission income 267 111  161 444  428 555  238 661  61 002  299 663  226 717  135 500  362 217  –  –  –  1 090 435 
Investment income –  22  22  3 486  637  4 123  17 818  129 885  147 703  –  –  –  151 848 
Trading income arising from                          
– customer flow –  –  –  895  129  1 024  87 639  17 925  105 564  –  –  –  106 588 
– balance sheet management and other trading activities 1 501  (16) 1 485  356  218  574  (29 660) 14 560  (15 100) –  –  –  (13 041)
Other operating income 136  1 554  1 690  1 276  1 277  9 179  42  9 221  –  –  –  12 188 
Total operating income before impairment losses on loans and advances 269 048  167 011  436 059  250 883  62 334  313 217  536 730  601 053  1 137 783  –  –  –  1 887 059 
Impairment losses on loans and advances –  –  –  –  –  –  (13 678) (25 674) (39 352) –  –  –  (39 352)
Operating income 269 048  167 011  436 059  250 883  62 334  313 217  523 052  575 379  1 098 431  –  –  –  1 847 707 
Operating costs (193 557) (93 527) (287 084) (194 012) (40 424) (234 436) (409 273) (283 904) (693 177) (30 048) (9 264) (39 312) (1 254 009)
Depreciation on operating leased assets –  –  –  –  –  –  (1 294) –  (1 294) –  –  –  (1 294)
Operating profit before goodwill and acquired intangibles 75 491  73 484  148 975  56 871  21 910  78 781  112 485  291 475  403 960  (30 048) (9 264) (39 312) 592 404 
Profit attributable to other non-controlling interests –  –  –  –  –  –  16 856  (28 557) (11 701) –  –  –  (11 701)
Operating profit before goodwill, acquired intangibles and after other non-controlling interests 75 491  73 484  148 975  56 871  21 910  78 781  129 341  262 918  392 259  (30 048) (9 264) (39 312) 580 703 
Profit attributable to Asset Management non-controlling interests (10 053) (8 131) (18 184) –  –  –  –  –  –  –  –  –  (18 184)
Operating profit before goodwill, acquired intangibles and after non-controlling interests 65 438  65 353  130 791  56 871  21 910  78 781  129 341  262 918  392 259  (30 048) (9 264) (39 312) 562 519 
                           
Selected returns and key statistic                          
Cost to income ratio 71.9% 56.0% 65.8% 77.3% 64.9% 74.8% 76.4% 47.2% 60.9% n/a n/a n/a 66.5%

 

  Asset Management Wealth & Investment Specialist Banking Group costs  
For the year to 31 March 2014
£’000 
UK and 
Other 
Southern 
Africa 
Total  UK and 
Other 
Southern 
Africa 
Total  UK and 
Other 
Southern 
Africa 
Total  UK and 
Other 
Southern 
Africa 
Total  Total 
group 
Net interest income 277  3 641  3 918  7 987  (130) 7 857  191 834  291 434  483 268  –  –  –  495 043 
Net fee and commission income 244 962  164 379  409 341  217 413  57 964  275 377  152 291  132 508  284 799  –  –  –  969 517 
Investment income –  28  28  1 875  308  2 183  118 781  67 374  186 155  –  –  –  188 366 
Trading income arising from                          
– customer flow –  –  –  389  935  1 324  76 255  25 935  102 190  –  –  –  103 514 
– balance sheet management and other trading activities (2 314) 332  (1 982) (72) 130  58  (3 351) 19 433  16 082  –  –  –  14 158 
Other operating income (129) 3 004  2 875  1 232  1 234  14 820  (465) 14 355  –  –  –  18 464 
Total operating income before impairment losses on loans and advances 242 796  171 384  414 180  228 824  59 209  288 033  550 630  536 219  1 086 849  –  –  –  1 789 062 
Impairment losses on loans and advances –  –  –  –  –  –  (25 085) (39 241) (64 326) –  –  –  (64 326)
Operating income 242 796  171 384  414 180  228 824  59 209  288 033  525 545  496 978  1 022 523  –  –  –  1 724 736 
Operating costs (175 211) (95 150) (270 361) (182 759) (39 175) (221 934) (401 328) (273 484) (674 812) (27 672) (8 772) (36 444) (1 203 551)
Depreciation on operating leased assets –  –  –  –  –  –  (5 446) –  (5 446) –  –  –  (5 446)
Operating profit before goodwill and acquired intangibles 67 585  76 234  143 819  46 065  20 034  66 099  118 771  223 494  342 265  (27 672) (8 772) (36 444) 515 739 
Profit attributable to other non-controlling interests –  –  –  –  –  –  2 720  (13 569) (10 849) –  –  –  (10 849)
Operating profit before goodwill, acquired intangibles and after other non-controlling interests 67 585  76 234  143 819  46 065  20 034  66 099  121 491  209 925  331 416  (27 672) (8 772) (36 444) 504 890 
Profit attributable to Asset Management non-controlling interests (5 535) (5 496) (11 031) –  –  –  –  –  –  –  –  –  (11 031)
Operating profit before goodwill, acquired intangibles and after non-controlling interests 62 050  70 738  132 788  46 065  20 034  66 099  121 491  209 925  331 416  (27 672) (8 772) (36 444) 493 859 
Selected returns and key statistic                          
Cost to income ratio 72.2% 55.5% 65.3% 79.9% 66.2% 77.1% 73.6% 51.0% 62.4% n/a n/a n/a 67.5%

Ongoing segmental geographic analysis – summarised income statement

  31 March 2015  31 March 2014 
For the year to £’000  UK and 
Other 
Southern 
Africa 
Total  UK and 
Other 
Southern 
Africa 
Total 
Net interest income 231 546  307 495  539 041  200 098  294 945  495 043 
Net fee and commission income 732 489  357 946  1 090 435  614 666  354 851  969 517 
Investment income 21 304  130 544  151 848  120 656  67 710  188 366 
Trading income arising from            
– customer flow 88 534  18 054  106 588  76 644  26 870  103 514 
– balance sheet management and other trading activities (27 803) 14 762  (13 041) (5 737) 19 895  14 158 
Other operating income 10 591  1 597  12 188  15 923  2 541  18 464 
Total operating income before impairment losses on loans and advances 1 056 661  830 398  1 887 059  1 022 250  766 812  1 789 062 
Impairment losses on loans and advances (13 678) (25 674) (39 352) (25 085) (39 241) (64 326)
Operating income 1 042 983  804 724  1 847 707  997 165  727 571  1 724 736 
Operating costs (826 890) (427 119) (1 254 009) (786 970) (416 581) (1 203 551)
Depreciation on operating leased assets (1 294) –  (1 294) (5 446) –  (5 446)
Operating profit before goodwill and acquired intangibles 214 799  377 605  592 404  204 749  310 990  515 739 
Profit attributable to other non-controlling interests 16 856  (28 557) (11 701) 2 720  (13 569) (10 849)
Operating profit before goodwill, acquired intangibles and after other non-controlling interests 231 655  349 048  580 703  207 469  297 421  504 890 
Profit attributable to Asset Management non-controlling interests (10 053) (8 131) (18 184) (5 535) (5 496) (11 031)
Operating profit before goodwill, acquired intangibles and after
non-controlling interests
221 602  340 917  562 519  201 934  291 925  493 859 


A reconciliation of core loans and advances: statutory basis and ongoing basis

    Removal of:**  
  Statutory as 
disclosed^
UK legacy 
business 
excluding 
sale assets 
Sale assets 
UK 
Sale assets 
Australia 
Ongoing 
business 
31 March 2015 (£’000)          
Gross core loans and advances to customers 17 440 985  871 491  –  –  16 569 494 
Total impairments (252 075) (142 871) –  –  (109 204)
Portfolio impairments (43 727) –  –  –  (43 727)
Specific impairments (208 348) (142 871) –  –  (65 477)
Net core loans and advances to customers 17 188 910  728 620  –  –  16 460 290 
           
31 March 2014 (£’000)          
Gross core loans and advances to customers 17 421 930  1 257 077  427 690  1 363 146  14 374 017 
Total impairments (264 563) (150 636) (54) (2 086) (111 787)
Portfolio impairments (26 337) –  –  –  (26 337)
Specific impairments (238 226) (150 636) (54) (2 086) (85 450)
Net core loans and advances to customers 17 157 367  1 106 440  427 636  1 361 060  14 262 230 
^ Refer here.
** Where:
 
  • The UK legacy business is as described here, adjusted for the transfer of assets to the ongoing business.
  • Sale assets UK refer to the sale of Kensington and Start as discussed here.
  • Sale assets Australia refer to the sale of Investec Bank (Australia) Limited as discussed here.

An analysis of ongoing core loans and advances to customers and asset quality by geography – ongoing business

  UK and Other Southern Africa Total group
£’000  31 March 
2015 
31 March 
2014 
31 March 
2015 
31 March 
2014 
31 March 
2015 
31 March 
2014 
             
Gross core loans and advances to customers 6 378 070  5 367 654  10 191 424  9 006 363  16 569 494  14 374 017 
Total impairments (45 573) (40 527) (63 631) (71 260) (109 204) (111 787)
Portfolio impairments (34 182) (16 437) (9 545) (9 900) (43 727) (26 337)
Specific impairments (11 391) (24 090) (54 086) (61 360) (65 477) (85 450)
Net core loans and advances to customers 6 332 497  5 327 127  10 127 793  8 935 103  16 460 290  14 262 230 
             
             
Average gross core loans and advances to customers 5 872 862  5 055 817  9 598 894  9 634 116  15 471 756  14 689 933 
Current loans and advances to customers 6 237 545  5 153 666  9 916 754  8 724 114  16 154 299  13 877 780 
Past due loans and advances to customers (1-60 days) 71 669  92 662  29 343  42 504  101 012  135 166 
Special mention loans and advances to customers 30 013  66 595  37 080  38 042  67 093  104 637 
Default loans and advances to customers 38 843  54 731  208 247  201 703  247 090  256 434 
Gross core loans and advances to customers 6 378 070  5 367 654  10 191 424  9 006 363  16 569 494  14 374 017 
             
Total income statement charge for impairments on core loans and advances (11 993) (25 085) (27 359) (39 241) (39 352) (64 326)
Gross default loans and advances to customers 38 843  54 731  208 247  201 703  247 090  256 434 
Portfolio impairments (34 182) (16 437) (9 545) (9 900) (43 727) (26 337)
Specific impairments (11 391) (24 090) (54 086) (61 360) (65 477) (85 450)
Defaults net of impairments before collateral held (6 730) 14 204  144 616  130 443  137 886  144 647 
Collateral and other credit enhancements 12 297  31 401  207 561  202 153  219 858  233 554 
Net default loans and advances to customers (limited to zero) –  –  –  –  –  – 
Ratios:            
Total impairments as a % of gross core loans and advances to customers 0.71% 0.76% 0.62% 0.79% 0.66% 0.78%
Total impairments as a % of gross default loans 117.33% 74.05% 30.56% 35.33% 44.20% 43.59%
Gross defaults as a % of gross core loans and advances to customers 0.61% 1.02% 2.04% 2.24% 1.49% 1.78%
Defaults (net of impairments) as a % of net core loans and advances to customers –  0.27% 1.43% 1.46% 0.84% 1.01%
Net defaults as a % of net core loans and advances to customers –  –  –  –  –  – 
Credit loss ratio (i.e. income statement impairment charge on core loans as a % of average gross core loans and advances) 0.20% 0.50% 0.28% 0.42% 0.25% 0.44%


Return on equity by country and business – ongoing basis

£’000  31 March 
2015 
31 March 
2014 
Average  31 March 
2013 
Average 
Calculation of average shareholders’ equity          
Ordinary shareholders’ equity 3 085 374  2 861 406  2 973 390  2 807 551  2 834 479 
Goodwill and intangible assets (excluding software) (494 111) (577 816) (535 964) (626 870) (602 343)
Adjusted tangible shareholders’ equity 2 591 263  2 283 590  2 437 426  2 180 681  2 232 136 

 

£’000  31 March 
2015 
31 March 
2014 
Operating profit before goodwill impairment and non-operational items 592 404  515 739 
Minority interests (29 885) (21 880)
Accrued preference dividends, adjusted for currency hedge (36 427) (33 812)
Revised operating profit 526 092  460 047 
Tax on ordinary activities (116 182) (88 181)
Revised operating profit after tax 409 910  371 866 
     
Pre-tax return on average adjusted shareholders’ equity 17.7% 16.2%
Post-tax return on average adjusted shareholders’ equity 13.8% 13.1%
Pre-tax return on average adjusted tangible shareholders’ equity 21.6% 20.6%
Post-tax return on average adjusted tangible shareholders’ equity 16.8% 16.7%

 

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