Integrated Annual Report 2015

Specialist Banking

Specialist expertise delivered with dedication and energy

The specialist teams are well positioned to provide services for both personal and business needs right across Private Banking, Property activities, Corporate and Institutional Banking and Corporate Advisory and Investment Banking.

Global heads  
Andy Leith
Sam Hackner
David van der Walt
Ciaran Whelan
Corporate Advisory and Investment activities
Property activities
Corporate and Institutional Banking activities
Private Banking activities

 

Further information on the Specialist Banking management structure is available on our website: www.investec.com

Our value proposition


Annual highlights

Annual highlights

What we do

  
 Corporates/government/institutional clients

High income and high net worth private clients

Private Banking activities

Transactional banking and foreign exchange
Lending
Deposits
Investments

Southern Africa
UK and Europe

Corporate Advisory and
Investment activities

Advisory
Principal investments
Property investment fund management

Australia
Hong Kong
India
Southern Africa
UK and Europe

Corporate and Institutional
Banking activities

Treasury and trading services
Specialised lending, funds and debt capital markets
Institutional research sales and trading

Australia
Hong Kong
India
Southern Africa
UK and Europe
USA

 

Integrated systems and infrastructure

 

Where we operate

Where we operate


Financial analysis

Financial analysis

Operating profit^ — track record

Operating profitˆ — track record

Income statement analysis

£’000 31 March 
2015 
31 March   
2014*
Variance  % change 
Net interest income 624 114  639 904   (15 790) (2.5%)
Net fee and commission income 360 825  304 703   56 122  18.4% 
Investment income 124 189  164 598   (40 409) (24.6%)
Trading income arising from        
– customer flow 105 289  102 590   2 699  2.6% 
– balance sheet management and other trading activities (15 483) 12 511   (27 994) (> 100.0%)
Other operating income 9 269  14 445   (5 176) (35.8%)
Total operating income before impairment on loans and advances 1 208 203  1 238 751   (30 548) (2.5%)
Impairment losses on loans and advances (128 381) (166 152)  (37 771) (22.7%)
Operating income 1 079 822  1 072 599   7 223  0.7% 
Operating costs (761 873) (778 504)  (16 631) (2.1%)
Depreciation on operating leased assets (1 535) (6 044)  4 509  74.6% 
Operating profit before goodwill, acquired intangibles and non-operating items and taxation 316 414  288 051   28 363  9.8% 
Operating losses attributable to non-controlling interests (11 701) (10 849)  (852) (7.9%)
Operating profit before goodwill, acquired intangibles, non-operating items, taxation and after other non-controlling interests 304 713  277 202   27 511  9.9% 
         
UK and Other 41 795  67 277   (25 482) (37.9%)
Ongoing^ 129 341  121 491   7 850  6.5% 
Legacy remaining^ (107 669) (69 051)  (38 618) 55.9% 
Sale assets^ 20 123  14 837   5 286  35.6% 
Southern Africa 262 918  209 925   52 993  25.2% 
Operating profit before goodwill, acquired intangibles, non-operating items, taxation and after other non-controlling interests 304 713  277 202   27 511  9.9% 
         
Selected returns and key statistics        
Ordinary shareholders’ equity** 2 599 130  2 642 583   (43 453) (1.6%)
Southern Africa 1 369 078  1 226 089   142 989  11.7% 
Ongoing UK and Other 1 141 282  872 786   268 496  30.8% 
Remaining Legacy 88 770  231 000   (142 230) (61.6%)
Sale assets –  312 708   (312 708) (< 100.0%)
Statutory ROE (pre-tax)** 10.7%  9.5%      
Ongoing ROE (pre-tax)** 15.9%  14.3%      
Southern Africa 18.7%  14.8%      
Ongoing UK and Other 12.3%  13.7%      
Cost to income ratio 63.1%  63.2%      
Operating profit per employee (£’000)** 57.4  50.6   6.8  13.4% 

The variance in the operating profit in the UK ongoing business over the year can be explained as follows:
The variance in the operating profit in Southern Africa over the year can be explained as follows:

Analysis of key earnings drivers

Net core loans and advances

  £’million Home currency ‘million
  31 March 
2015  
31 March 
2014 
% change  31 March
 2015 
31 March 
2014 
% change 
UK 7 061^ 6 064* 16.4%  £7 061  £6 064* 16.4% 
Southern Africa 10 128^ 8 935  13.4%  R182 058  R156 899  16.0% 
Total 17 189   14 999  14.6%       

Net core loans and advances

Net core loans and advances

Total deposits

  £’million Home currency ‘million
  31 March 
2015 
31 March 
2014 
% change  31 March  2015  31 March 
2014 
% change 
UK 10 298  9 407  9.4%  £10 298  £9 407  9.4% 
Southern Africa 12 317  11 671  5.5%  R221 377  R204 943  8.0% 
Total 22 615  21 078  7.3%       

Total deposits

Total deposits

Legacy business in the UK Specialist Bank

The legacy business in the UK Specialist Bank comprises:

During the year management performed a comprehensive review of the group’s legacy portfolio on the back of improved market performance. As a result, assets of £0.9 billion were transferred to the ongoing book (core loans and other assets) where assets generate yields that support targeted return on equity, are performing and no longer meet the definition of the legacy business.

Legacy business – overview of results

The group’s legacy portfolio in the UK has been actively managed down from £3.4 billion at 31 March 2014 to £0.7 billion largely through strategic sales (mentioned here), redemptions, write-offs and transfers (at the end of the period) to the ongoing book on the back of improved performance in these loans. The total legacy business over the period reported a loss before taxation of £107.7 million (2014: £69.1 million) as the group accelerated the clearance of the portfolio, which resulted in an increase in impairments on these assets. The remaining legacy portfolio will continue to be managed down as the group sees opportunities to clear the portfolio. Management believes that the remaining legacy book will still take three to five years to wind down. Total net defaults in the legacy book amount to £218 million.

An analysis of assets within the legacy business

£’million 31 March 
2015 
Total net 
assets 
(after 
impairments) 
31 March 
2015 
Total 
balance 
sheet 
impairment 
31 March 
2014 
Total net 
assets 
(after 
impairments)
31 March 
2014 
Total 
balance 
sheet 
impairment 
Kensington – UK warehouse assets –  –  768 4
Kensington – Ireland –  –  474 138
Total Kensington warehouse assets* –  –  1 242 142
Performing –  –  813 1
Non-performing –  –  429 141
         
Other corporate assets and securitisation activities –  –  864 51
Private Bank Irish planning and development assets 47 50 60 59
Other Private Bank assets 682 93 1 261 82
Total other legacy assets 729 143 2 185 192
Performing 511 –  1 798 4
Non-performing 218 143 387 188

Expected run-off of legacy assets

Expected run-off of legacy assets

 


Questions and answers

Questions and answers

David van der Walt

Geographical business leader

United Kingdom

Questions and answers

Questions and answers

Stephen Koseff

Bernard Kantor

Glynn Burger

Geographical business leaders

South Africa

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