Investec Bank
plc
Incorporated in England and Wales
Registration number 489604
LEI:
84S0VF8TSMH0T6D4K848
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Unaudited condensed Financial
Statements for the six months ended 30 September
2024
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 together with the Investec
Bank plc unaudited consolidated interim financial report for the
six months ended 30 September 2024 (1H2025) has been prepared in
accordance with IAS 34 "Interim Financial Reporting". Unless stated
otherwise, comparatives relate to the six month period 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 (Rathbones) which took place at the
end of the prior period. IW&I UK was reflected as a
discontinued operation in line with applicable accounting
principles in the prior period. The current period (i.e. post
combination) recognises the Bank's 41.25% economic interest in the
combined Rathbones Group as post taxation operating income from
associates in continuing operations.
Performance
overview
· Adjusted operating profit increased by 7.2% to £241.5 million
(1H2024: £225.2 million)
· Revenue benefitted from balance sheet growth, the breadth and
depth of our client franchises, as well as the elevated interest
rate environment
· The
cost to income ratio improved to 49.7% (1H2024: 54.0%)
· The
annualised credit loss ratio on average gross core loans subject to
ECL was 67bps (31 March 2024: 58bps; 1H2024: 55bps) in line with
September 2024 Investec Group pre-close guidance. The overall
credit quality of the book remained stable, with no evidence of
trend deterioration.
· Net
core loans increased by 2.3% annualised to £16.7 billion (31 March
2024: £16.6 billion)
· Customer accounts (deposits) increased 8.8% annualised to
£21.8 billion (31 March 2024: £20.9 billion)
· Cash
and near cash balances increased 1.2% to £9.8 billion (31 March
2024: £9.7 billion)
· Capital ratios* remained sound with the Bank reporting a total
capital ratio of 19.9% (31 March 2024: 19.8%), a common equity tier
1 ratio of 13.5% (31 March 2024: 13.3%) and a leverage ratio of
10.4% (31 March 2024: 10.7%)
· Rathbones Group Plc, of which Investec owns a 41.25% economic
interest, had Funds Under Management and Administration (FUMA) of
£108.8 billion on 30 September 2024 (£107.6 billion at 31 March
2024)
*Including the deduction of foreseeable charges and dividends
as required under the Capital Requirements
Regulation.
Business unit
review
Specialist Banking
Pre-provision adjusted operating
profit decreased by 1.0% to £260.0 million (1H2024: £262.7
million). Adjusted operating profit decreased by 7.3% to £207.2
million (1H2024: £223.4 million); our diversified client franchises
in the UK mid-market and selected geographies performed well within
the context of a challenging macroeconomic environment. The
two-year (i.e. post COVID-19) adjusted operating profit compound
annual growth rate (CAGR) is 23.7%. We have continued to
successfully execute our client acquisition strategies to build
scale and relevance in the UK and other markets in which we
operate. Our value proposition is underpinned by our 'One Investec'
integrated approach, taking our clients along both the personal and
business journey.
Net core loans grew by 2.3%
annualised to £16.7 billion since 31 March 2024 driven by 6.9%
annualised growth in the UK residential mortgage lending book,
alongside a flat corporate lending portfolio within a constrained
market environment. Moderate growth across the corporate loan book
was offset by higher levels of repayments, particularly in the real
estate lending portfolio, as well as the translation impact of US
Dollar and Euro denominated loans. Our diversified lending
franchises allowed us to navigate the uncertain operating
environment which prevailed over the period.
Operating income decreased by 3.9%;
strong growth in net fee and commission income generated from our
M&A advisory business in line with our strategy to grow capital
light earnings was offset by lower net interest income and lower
trading income from customer flow. Investment income also
contributed positively given the improving global markets
backdrop.
Net interest income decreased by
5.2%, the benefit of a larger average loan book and higher average
interest rates was offset by higher cost of funding as deposits
repriced.
Non-interest revenue remained broadly
flat due to:
· Higher
M&A advisory fees primarily from the consolidation of
Capitalmind as it became a subsidiary in June 2023. We have also
seen higher arrangement fees in certain lending areas
· Higher
investment income was largely driven by net fair value gains from
equity investments
- Offset
by:
· Lower
trading income from customer flow, primarily as a result of lower
risk management gains from hedging the significantly reduced
financial products run down book and lower interest rate and FX
hedging volumes in our Treasury Risk Solutions business. This was
partially offset by strong equity trading income from customer flow
on the back of positive market sentiment.
ECL impairment charges totalled £52.8
million, resulting in an annualised credit loss ratio of 67bps
(1H2024: 55bps) in line with the Group's September 2024 pre-close
guidance. The increase in ECL charges was largely driven by Stage 3
ECL charges on certain exposures. Overall asset quality of the book
remained stable; Stage 3 and Stage 2 exposures decreased to 3.2%
(31 March 2024: 3.3%) and 6.9% (31 March 2024: 8.6%) of gross core
loans subject to ECL at 30 September 2024 respectively. We have
seen a reduction in exposures migrating into Stage 3.
The cost to income ratio improved to
52.2% (1H2024: 53.6%). Operating costs decreased by 6.6%
period-on-period. The increase in fixed operating costs reflects
continued investment in people and technology for growth and
inflationary pressures. Variable remuneration decreased in line
with business performance.
The Group notes the recent Court of
Appeal decisions on the Wrench, Johnson and Hopcraft cases relating
to motor commission arrangements. The Group has assessed the
potential impact of these decisions, as well as any broader
implications, pending the outcome of the intended appeal
applications and concluded the provision of £30 million at 31 March
2024 still remains appropriate based on the information currently
available. The ultimate financial impact of the Court of Appeal
decision and ongoing FCA investigation into motor commission could
materially vary, pending further guidance from the FCA or the
outcome of the intended appeal to the UK Supreme Court.
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 in the prior period
The all-share combination of
IW&I UK and Rathbones successfully completed at the end of the
prior period, creating the UK's leading discretionary wealth
manager with £108.8 billion FUMA at 30 September 2024.
In the prior period (pre the
combination) the IW&I UK business generated adjusted operating
profit (post -tax) of £35.9 million and an operating margin of
25.2%. In line with the applicable accounting standards this has
been presented as a discontinued operation in the prior
period.
The current period (post the
combination) includes the Bank's 41.25% share of the combined
Rathbones Group operating earnings recognised as post taxation
income from associates of £32.3 million within continuing
operations. As disclosed by Rathbones on 17 October 2024, going
forward the Bank will be incorporating Rathbones' latest published
interim results i.e. post taxation earnings for the six months
ended 30 June 2024 in our interim results for the six months to 30
September 2024. Rathbones reported underlying operating margin of
25.1% for the six months to 30 June 2024, showing progress towards
the target of a 30%+ margin.
The Rathbones Group reported
increased synergy delivery of £25.5 million per annum on a cash
run-rate basis at 30 September 2024, significantly ahead of the
first-year post-combination objective of £15 million.
We remain confident that the
combination will deliver scale and efficiency to power future
long-term growth.
Capital and
Liquidity
Funding and liquidity
As at 30 September 2024, the Bank
had £9.8 billion in cash and near cash balances (31 March 2024:
£9.7 billion), representing 44.9% 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 77.0% (31 March 2024: 79.5%). The Bank
comfortably exceeds Basel liquidity requirements for the Liquidity
Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR). As at 30
September 2024 IBP (solo basis) LCR was 456% and the NSFR was
147%.
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 2024, the
Common Equity Tier 1 ratio of the Bank was 13.5%, the total capital
ratio was 19.9% and the leverage ratio was 10.4%.
*Including the deduction of foreseeable charges and 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.
Taxation
Taxation on operating profit before
acquired intangibles and strategic actions from continuing
operations was £45.7 million (1H2024: £51.9 million), resulting in
an effective operational tax rate of 21.8% (1H2024:
22.8%).
Outlook
Revenue momentum in the second half
of the 2025 financial year is expected to be underpinned by average
book growth, stronger client activity levels and continued success
in our client acquisition strategies, partly offset by the effects
of reducing global interest rates.
The Bank has maintained strong
capital and liquidity levels and is well positioned to continue
supporting our clients and pursue disciplined growth as the
economic environment improves. We remain committed to our purpose
of creating enduring worth for all our stakeholders.
On behalf of the Board of Investec Bank plc
Ruth Leas
Chief Executive Officer
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 2024, which can be accessed via the following
link http://www.rns-pdf.londonstockexchange.com/rns/2470O_1-2024-11-29.pdf.
This document is also available on Investec's website at
https://www.investec.com/content/dam/investor-relations/financial-information/interim-results/2024/Investec-Bank-plc-Website-Booklet-Sep-2024.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 2024
are consistent with those adopted in the financial statements for
the year ended 31 March 2024.
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 2024. It was concluded that the provisions held as at 30
September 2024 reflect our best estimate of the potential financial
outflows that may arise. Refer to page 25 of the Investec Bank plc
unaudited condensed financial information for the six months ended
30 September 2024 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
