Half-year Report to 30 September 2020
Investec Limited NSX share code: IVD BSE share code: INVESTEC ISIN: ZAE000081949 | Investec plc JSE share code: INP | Ā | Ā |
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Investec plc and Investec Limited - Reviewed combined consolidated financial results for the six months ended 30 September 2020
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Basis of presentation
This announcement covers the results of Investec plc and Investec Limited (together "the Investec group" or "Investec" or "the group") for the six months ended 30 September 2020 (1H2021). Following the group's demerger of Investec Asset Management (now Ninety One) in March 2020, the group's results for the six months ended 30 September 2019 have been restated to reflect the asset management business as a discontinued operation. Unless stated otherwise, comparatives relate to the group's continuing operations for the six-month period ended 30 September 2019 (1H2020). The comparability of 1H2021 to the prior period is impacted by the economic effects of COVID-19 which prevailed over the period under review.
Fani Titi, Chief Executive commented:
"The first half of the financial year has been characterised by difficult and volatile market and economic conditions attributed primarily to COVID-19. As a result, group adjusted operating profit of Ā£142.5 million was 48.4% behind the prior period and adjusted basic earnings per share of 11.2p was 50.0% behind the prior period, albeit ahead of pre-close guidance. We are encouraged by the resilience of our loan book, the performance of our core franchises against a tough backdrop and progress made on our strategic objectives. Tangible net asset value per share increased by an annualised 10.4% and a dividend of 5.5p has been declared.
I would like to thank my Investec colleagues for their commitment through the first half of an unprecedented year - all have risen to the challenge, shown resilience, and continued to deliver the same high level of client engagement and service for which Investec is well known. We also thank our clients for their continued support as well the members of our communities on the frontlines for their efforts in curtailing the impact of the pandemic.
We entered this crisis from a position of strength and continue to have a strong capital, funding and liquidity position, leaving us well placed, both operationally and financially, to navigate this evolving environment for the benefit of our clients and other stakeholders."
Financial performance
Over the period, we operated within a challenging economic backdrop, impacted by COVID-19 and associated lockdowns particularly in the first three months. This resulted in reduced economic activity and increased market volatility. Interest rates were sharply lower, client activity declined, and the average Rand against the Pound Sterling depreciated 20.6% compared to the prior period.
ā¢Ā Ā Ā Resilient client franchises: Wealth & Investment reported net inflows of Ā£336 million and growth in funds under management (FUM) of 14.9% since 31 March 2020 to Ā£51.1 billion. The Specialist Banking business saw good client acquisition in both geographies. Net core loans grew 1.0% since 31 March 2020 to Ā£25.2 billion, with strong loan book growth in the UK Private Banking business offset by subdued corporate lending activity in both geographies and higher repayments. Our client engagement has been consistent and proactive, leveraging off the various digital platforms at our disposal.
ā¢Ā Ā Ā Operating income: Total revenue declined by 24.0% (17.8% in neutral currency) compared to 1H2020. Net interest income decreased by 15.6% impacted primarily by lower interest rates. Non-interest revenue declined by 30.7% impacted by lower lending fees, subdued client transactional activity, and lower investment and associate income. Risk management and risk reduction costs related to hedging our structured products book resulted in trading income declining by 100.6%. We have and will continue to take active steps to de-risk the profile of this book.
ā¢Ā Ā Ā Costs: Operating costs decreased by 14.0% (8.1% in neutral currency) driven by headcount containment, lower variable remuneration and a reduction in discretionary expenditure. Notwithstanding this reduction in costs, we continued to invest in growth initiatives and in technology.
ā¢Ā Ā Ā Asset quality: The group's annualised credit loss ratio (CLR) increased from 0.23% (1H2020) to 0.47% (1H2021), below the annualised 2H2020 CLR of 0.74%. Increased CLRs were largely model-driven with an absolute expected credit loss (ECL) impairment charge of Ā£66.0 million (1H2020: Ā£31.0 million).
ā¢Ā Ā Ā Operating profit: Adjusted operating profit was down 48.4% to Ā£142.5 million (1H2020: Ā£276.3 million).
ā¢Ā Ā Ā Earnings per share: Adjusted basic earnings per share decreased by 50.0% to 11.2p (1H2020: 22.4p) and basic earnings per share declined by 49.5% to 9.6p (1H2020: 19.0p).
ā¢Ā Ā Ā Return on Equity (ROE): The group generated an ROE of 5.3% (1H2020: 10.7%) and a return on tangible equity (ROTE) of 5.8% (1H2020: 11.8%).
ā¢Ā Ā Ā Robust capital and liquidity: At 30 September 2020, the common equity tier 1 (CET1) capital and leverage ratios were 11.6% and 7.0% respectively for Investec Limited (FIRB approach) and 10.7% and 7.8% respectively for Investec plc (standardised approach). Cash and near cash was Ā£12.9 billion at 30 September 2020, representing 39.5% of customer deposits. Capital, leverage and liquidity ratios remain ahead of both internal board-approved minimum targets and regulatory requirements.
ā¢Ā Ā Ā Growth in net asset value: At 30 September 2020, net asset value (NAV) per share increased by 4.6% to 433.5p (31 March 2020: 414.3p) and tangible NAV (TNAV) per share increased by 5.2% to 397.4p (31 March 2020: 377.6p).
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Supporting our people, clients and communities
As a group, we have taken decisive action in supporting our stakeholders through the economic and social impact of the pandemic.
With a large proportion of staff continuing to work from home, we are prioritising staff wellbeing and encouraging a flexible approach to working.
We have provided various forms of relief to our clients. Currently 6.3% of UK and 2.2% of South Africa's loans are under some form of relief. At the peak, this was 13.7% and 23.0% respectively. In addition, through the income generated in our Private Client Charitable Trusts, we have facilitated over R20 million in donations on behalf of clients.
For our communities, we have committed Ā£3.6 million (64% allocated to date) to support the communities we live in with food security, economic continuity, healthcare, education and anti-gender-based violence-related assistance.
Dividend
The group endorses the objectives of guidance note G4/2020 from the Prudential Authority (PA) in South Africa and the recommendations of the UK Prudential Regulation Authority (PRA) in relation to the preservation of capital. The group did not declare a final divided in relation to the March 2020 financial year. Having considered the objectives of guidance note G4/2020 and ensuring prudence in terms of capital retention in our banking businesses, the group has declared an interim dividend of 5.5p (49.1% payout ratio).
Outlook and guidance
We expect the overall performance in 2H2021 to be ahead of the first half; underpinned by improving revenue trends relative to 1H2021 as client activity levels improve and liability repricing aids net interest income. Trading income from client flow will continue to be negatively impacted by risk management and risk reduction costs on hedging our structured products book. Costs are expected to decline by mid to high single digits for the full 2021 financial year compared to the prior year. Assuming no further deterioration in the macro-economic variables applied, we expect to report lower ECL provisions for the remaining six months of the year.
This guidance is subject to assumptions, which if altered, may result in a different financial performance compared to management expectations.
While the impact of COVID-19 has been felt across our business and the outlook is still uncertain, we remain confident in the fundamentals of our business and in our long-established client relationships. We have continued to make progress against our strategic objectives, positioning the business for growth in the long term, and expect to substantially complete our simplification process by the end of the financial year. As previously communicated, FY2022 targets remain under review.
Financial highlights - continuing operations1 | 1H2021 | 1H2020 | Variance | % | Neutral currency % change | |||||
Total operating income before expected credit losses | 729.0Ā | Ā | 959.3Ā | Ā | (230.3) | Ā | (24.0%) | (17.8%) | ||
Operating costs | 535.8Ā | Ā | 623.1Ā | Ā | (87.3) | Ā | (14.0%) | (8.1%) | ||
Adjusted operating profit (Ā£'m) | 142.5Ā | Ā | 276.3Ā | Ā | (133.8) | Ā | (48.4%) | (40.9%) | ||
Adjusted earnings attributable to shareholders (Ā£'m) | 104.4Ā | Ā | 212.3Ā | Ā | (107.9) | Ā | (50.8Ā | %) | (43.4Ā | %) |
Adjusted basic earnings per share (pence) | 11.2Ā | Ā | 22.4Ā | Ā | (11.2) | Ā | (50.0Ā | %) | (42.4Ā | %) |
Basic earnings per share (pence) | 9.6Ā | Ā | 19.0Ā | Ā | (9.4) | Ā | (49.5Ā | %) | (41.1Ā | %) |
Dividend per share (pence)2 | 5.5Ā | Ā | 11.0Ā | Ā | Ā | Ā | Ā | |||
Dividend payout ratio2 | 49.1Ā | % | 38.1Ā | % | Ā | Ā | Ā | |||
Annualised CLR (credit loss ratio) | 0.47Ā | % | 0.23Ā | % | Ā | Ā | Ā | |||
Cost to income ratio | 72.0Ā | % | 67.0Ā | % | Ā | Ā | Ā | |||
ROE (return on equity) | 5.3Ā | % | 10.7Ā | % | Ā | Ā | Ā | |||
ROTE (return on tangible equity) | 5.8Ā | % | 11.8Ā | % | Ā | Ā | Ā |
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Ā | 30 September | 31 March 2020 | Variance | % change | Neutral currency % change | |||||
Third party funds under management (Ā£'bn) | 52.0Ā | Ā | 45.0Ā | Ā | 7.0Ā | Ā | 15.5Ā | % | 14.6Ā | % |
Customer accounts (deposits) (Ā£'bn) | 32.6Ā | Ā | 32.2Ā | Ā | 0.4Ā | Ā | 1.0Ā | % | (0.3Ā | %) |
Core loans and advances (Ā£'bn) | 25.2Ā | Ā | 24.9Ā | Ā | 0.3Ā | Ā | 1.0Ā | % | (0.4Ā | %) |
Cash and near cash (Ā£'bn) | 12.9Ā | Ā | 12.7Ā | Ā | 0.2Ā | Ā | 1.4Ā | % | -Ā | % |
CET1 ratio - Investec Limited | 11.6Ā | % | 10.9Ā | % | Ā | Ā | Ā | |||
Leverage ratio3 - Investec Limited | 7.0Ā | % | 6.4Ā | % | Ā | Ā | Ā | |||
CET1 ratio - Investec plc | 10.7Ā | % | 10.7Ā | % | Ā | Ā | Ā | |||
Leverage ratio3 - Investec plc | 7.8Ā | % | 7.8Ā | % | Ā | Ā | Ā | |||
NAV per share (pence) | 433.5Ā | Ā | 414.3Ā | Ā | 19.2Ā | Ā | 4.6Ā | % | 4.7Ā | % |
TNAV per share (pence) | 397.4Ā | Ā | 377.6Ā | Ā | 19.8Ā | Ā | 5.2Ā | % | 5.3Ā | % |
1.Ā Ā Ā Ā Ā Refer to the Notes for definitions. Continuing operations excludes the results of the asset management business (which was demerged in March 2020) from the comparative period, but includes the equity accounted earnings of the group's 25% retained stake in 1H2021.
2.Ā Ā Ā Ā Ā The 1H2020 dividend per share and dividend payout ratio reflected above were prior to the demerger of the asset management business (Ninety One).
3.Ā Ā Ā Ā Ā Current Leverage ratios calculated on an end quarter basis.
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Enquiries
Investec Investor Relations
Results: Carly Newton: +44 (0) 20 7597 4493
General enquiries: +27 (0) 11 286 7070 or +44 (0) 20 7597 5546
Brunswick (SA PR advisers)
Graeme Coetzee
Tel: +27 11 502 7419 / +27 63 685 6053 (mobile)
Lansons (UK PR advisers)
Tom Baldock
Tel: +44 (0) 20 7566 9716 / +44 (0) 78 6010 1715 (mobile)
Presentation/conference call details
A presentation on the results will commence at 9:00 UK time/11:00 SA time on 19 November 2020. Viewing and telephone conference options as below:
ā¢Ā Ā Ā Ā A live and delayed video webcast at www.investec.com
ā¢Ā Ā Ā Ā Telephone conference:
ā¢Ā Ā Ā Ā SA participants: 010 201 6700/011 535 3500/0 800 203 599
ā¢Ā Ā Ā Ā UK participants: 0 333 300 1417
ā¢Ā Ā Ā Ā Rest of Europe and other participants: +27 11 535 3500/+27 10 201 6700
ā¢Ā Ā Ā Ā Australian participants: 02 8015 2168
ā¢Ā Ā Ā Ā North American participants: 1 508 924 4325
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Alternatively, participants can pre-register for the conference call using the following link: www.investec.com/call
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About Investec
Investec partners with private, institutional, and corporate clients, offering international banking, investments, and wealth management services in two principal markets, South Africa, and the UK, as well as certain other countries. The group was established in 1974 and currently has approximately 8,500 employees.
In 2002, Investec implemented a dual listed company structure with listings on the London and Johannesburg Stock Exchanges. In March 2020, the group successfully completed the demerger of Ninety One (formerly known as Investec Asset Management), which became separately listed on 16 March 2020. Investec's current market capitalisation is approximately Ā£2.0 billion.
Johannesburg and London
Sponsor: Investec Bank Limited
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Business overview
The commentary and trends that follow relate to Investec's continuing operations for the six months ended 30 September 2020 (1H2021). Unless stated otherwise, comparatives relate to the group's continuing operations for the six-month period ended 30 September 2019 (1H2020). The comparability of 1H2021 to the prior period is impacted by the economic effects of COVID-19 which prevailed over the period under review.
Giving consideration to the group's investment in Ninety One and other significant investments (previously included as a subset of the Specialist Bank) and in an effort to provide enhanced disclosure, the group's business segments have been revised to reflect each of the following as reportable segments across the UK & Other and Southern African geographies: Specialist Banking, Wealth & Investment, Group Investments and Group Costs.
Operating environment
At the onset of the COVID-19 crisis, we witnessed a proactive response from the South African government including the decision to implement one of the strictest lockdowns globally. This, coupled with decades-low interest rates (300bps rate cuts since January 2020), had a considerable impact on the South African business' financial performance. The South African economy also saw little equity capital market activity relative to its developed counterparts. In addition, rising debt to GDP, lack of structural reform, policy uncertainty, and resultant depressed business confidence continue to be headwinds, making for a challenging operating environment.
In the UK, at the group's financial year end we reported that Brexit, heightened UK political uncertainty and geopolitical tensions sparked by US trade wars had adversely impacted activity levels, making the operating environment very challenging. In addition, at that time, the UK was in the grips of a national lockdown imposed because of the COVID-19 global pandemic. Over the past six months, these difficulties have persisted; exacerbated by the economic crisis resulting from COVID-19 containment measures.
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Segmental performance
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Specialist Banking
Adjusted operating profit from the Specialist Banking business decreased by 52.9% to Ā£105.8 million (1H2020: Ā£224.8 million).
Specialist Banking | Southern Africa | UK & Other | ||||||||||||||||
Ā | 1H2021 | 1H2020 | Variance | 1H2021 | 1H2020 | Variance | ||||||||||||
Ā | Ā£'m | Ā£'m | Ā£'m | % | % in Rands | Ā£'m | Ā£'m | Ā£'m | % | |||||||||
Operating income | 262.8Ā | Ā | 346.8Ā | Ā | (84.1) | Ā | (24.2Ā | %) | (8.7Ā | %) | 273.8Ā | Ā | 347.1Ā | Ā | (73.3) | Ā | (21.1Ā | %) |
ECL impairment charges | (24.2) | Ā | (14.9) | Ā | (9.3) | Ā | 62.3Ā | % | 95.8Ā | % | (39.9) | Ā | (16.1) | Ā | (23.8) | Ā | >100.0% | |
Operating costs | (145.6) | Ā | (186.6) | Ā | 40.9Ā | Ā | (21.9Ā | %) | (6.0Ā | %) | (221.5) | Ā | (251.6) | Ā | 30.1Ā | Ā | (12.0Ā | %) |
(Profit)/loss attributable to NCI | -Ā | Ā | -Ā | Ā | -Ā | Ā | -Ā | Ā | -Ā | Ā | 0.5Ā | Ā | 0.1Ā | Ā | 0.5Ā | Ā | >100.0% | |
Adjusted operating profit | 92.9Ā | Ā | 145.3Ā | Ā | (52.5) | Ā | (36.1Ā | %) | (22.9Ā | %) | 12.9Ā | Ā | 79.4Ā | Ā | (66.5) | Ā | (83.8Ā | %) |
Totals and variance determined in Ā£'000.
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Southern Africa Specialist Banking
The South African business reported a decrease in adjusted operating profit of 22.9% in Rands. Client engagement has been proactive, resulting in good client acquisition across both our private and corporate client business over the period. While client activity was significantly impacted in the first quarter during the hard lockdown, in the second quarter, as lockdown measures eased, we saw increased point of sale and stockbroking activity along with a marked pick-up in demand for residential mortgages.
Notwithstanding this, net interest income decreased by 6.9% in Rands driven by the 300bps rate cut since January 2020 and assets repricing at a faster rate than liabilities. Non-interest revenue declined 13.7% in Rands. An increase in trading income was offset by subdued lending and transactional activity compared to the prior period and lower investment income as a result of lower realisations, dividend income and negative fair value adjustments given the prevailing economic backdrop.
ECL impairment charges increased, resulting in an annualised CLR of 0.35% (1H2020: 0.18%), below the annualised 2H2020 CLR of 0.55%. The increase since 31 March 2020 was driven primarily by updated assumptions applied in our models to capture the deterioration in macro-economic variables since year end.
Operating costs reduced by 6.0% in Rands period on period reflecting lower variable remuneration and cost containment across the business. However, a decline in revenues resulted in a cost to income ratio of 55.4% (1H2020: 53.8%).
Net core loans decreased by 1.6% since year end to R284.4 billion (31 March 2020: R288.9 billion). Private client lending held steady compared to 31 March 2020 while the corporate client lending book declined due to higher repayments and lower net new originations as corporates remained cautious.
Against this challenging backdrop, the business achieved an ROE and ROTE of 9.1% and 9.2% respectively relative to 13.5% and 13.6% at 30 September 2019.
UK & Other Specialist Banking
Adjusted operating profit for the overall UK & Other Specialist Bank declined by 83.8% to Ā£12.9 million (1H2020: Ā£79.4 million). Increased equity capital markets activity and good levels of lending turnover across private client and certain corporate client lending areas was offset by hedging costs related to our structured products book. These hedging costs contributed Ā£53 million to the profit reduction of Ā£66.5 million.
Our client franchises have shown resilience notwithstanding the two months of hard lockdown at the start of the reporting period. The private client banking business saw good origination and client acquisition. The mortgage book ended the half year on Ā£2.8 billion, an increase of 10.8% since 31 March 2020. Net new client origination was c.8%, moving us closer to our target of at least 6,500 high net worth clients by March 2022 (c.5,400 clients at 30 September 2020).
Net interest income declined by 2.1% with growth in average core loans offset by lower interest rates. Non-interest revenue decreased by 43.5% as the recovery in equity capital market fees and an improvement in investment income was offset by lower lending fees and risk management and risk reduction costs associated with hedging our structured products book following market dislocation and dividend cancellations. We anticipate a similar level of risk management and risk reduction costs in the second half of the 2021 financial year in particular, as we continue to reduce the risk on the book. Risk reduction costs include the purchase of protection against a repeat of the severe market moves experienced in March and April 2020. For the 2022 financial year we expect risk management and risk reduction costs to be less than half of that anticipated in the current financial year, and progressively reducing in the 2023 financial year. This guidance is subject to assumptions, which if altered, may result in a different outcome to management expectations.
ECL impairment charges increased, resulting in an annualised CLR of 0.60% (1H2020: 0.28%), below the annualised 2H2020 CLR of 0.97%. The increase since 31 March 2020 was driven primarily by updated assumptions applied in our models to capture the deterioration in macro-economic variables since year end.
Operating costs decreased by 12.0% period on period primarily reflecting lower variable remuneration and a strong focus on cost discipline. As indicated in our pre-close trading announcement, we are enhancing efficiencies by more closely integrating business-enabling functions, resulting in a proposed headcount reduction in the UK banks' London office by approximately 210 roles or 13%.
Net core loans grew by 0.9% to Ā£12.0 billion (31 March 2020: Ā£11.9 billion) with strong growth in mortgages and other high net worth lending offset by a net book reduction in corporate and other lending. While there was good activity in some parts of the corporate space, particularly in fund finance, redemptions largely offset this.
The cost to income ratio of 80.7% (1H2020: 72.5%), ROE of 0.7% (1H2020: 9.0%) and ROTE of 0.8% (1H2020: 9.1%) were impacted by the foregoing factors.
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Wealth & Investment
Adjusted operating profit from the Wealth & Investment business decreased by 8.2% to Ā£40.8 million (1H2020: Ā£44.5 million).
Wealth & Investment | Southern Africa | UK & Other | ||||||||||||||||
Ā | 1H2021 | 1H2020 | Variance | 1H2021 | 1H2020 | Variance | ||||||||||||
Ā | Ā£'m | Ā£'m | Ā£'m | % | % in Rands | Ā£'m | Ā£'m | Ā£'m | % | |||||||||
Operating income | 36.5Ā | Ā | 43.4Ā | Ā | (7.0) | Ā | (16.1Ā | %) | 1.0Ā | % | 155.1Ā | Ā | 162.3Ā | Ā | (7.2) | Ā | (4.4Ā | %) |
Operating costs | (24.5) | Ā | (29.4) | Ā | 4.9Ā | Ā | (16.6Ā | %) | 0.4Ā | % | (126.2) | Ā | (131.8) | Ā | 5.6Ā | Ā | (4.3Ā | %) |
Adjusted operating profit | 12.0Ā | Ā | 14.1Ā | Ā | (2.1) | Ā | (14.9Ā | %) | 2.3Ā | % | 28.9Ā | Ā | 30.5Ā | Ā | (1.6) | Ā | (5.2Ā | %) |
Totals and variance determined in Ā£'000.
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Southern Africa Wealth & Investment
Adjusted operating profit increased by 2.3% in Rands.
The South African business achieved net inflows of R478 million (R3.0 billion of discretionary and annuity inflows and non-discretionary custody asset outflows of R2.5 billion), which, together with favourable market movements, contributed to a 16.2% growth (in Rands) in FUM since year end. Revenue was supported by higher average discretionary and annuity FUM and increased levels of trading activity in the first quarter. Operating costs remained flat period on period translating to a lower cost to income ratio of 67.2% (1H2020: 67.7%).
UK & Other Wealth & Investment
Adjusted operating profit declined 5.2% to Ā£28.9 million (1H2020: Ā£30.5 million).
The UK Wealth & Investment business continued to report positive net organic growth in FUM over the period, with an annualised rate of growth of 1.9% - in line with the first half of the prior period. Net inflows of Ā£315 million, along with favourable market movements and investment performance, contributed to FUM increasing by 13.4% since the start of the financial year. Operating income, down 4.4% on the prior period, was impacted by lower FUM at key billing dates relative to the prior period, the sale of the Irish wealth business in 2H2020 as well as lower interest rates; partly offset by an increase in transaction volumes.
Operating costs reduced by 4.3% or Ā£5.6 million to Ā£126.2 million, despite incurring once-off headcount reduction related costs and a Ā£2.3 million increase in the Financial Services Compensation Scheme (FSCS) levy (1H2020: Ā£3.8 million). The cost to income ratio was 81.4% (1H2020: 81.2%).
Group Investments
Group Investments represents assets held by Investec to create value over the medium term as opposed to trading assets. We have separated these assets from our core banking activities in order to make a more meaningful assessment of the underlying performance and value of the franchise businesses, and at the same time providing transparency of the standalone values of the assets classified as Group Investments.
They include the group's 25% holding in Ninety One, 47.4% stake in the IEP Group, 24.31% held in the Investec Property Fund (IPF), 9.1% holding in the Investec Australia Property Fund (IAPF) and some historical unlisted equity investments.
Adjusted operating profit from Group Investments decreased 56.3% to Ā£13.2 million (1H2020: Ā£30.3 million).
Group Investments | Southern Africa | UK & Other | ||||||||||||||||
Ā | 1H2021 | 1H2020 | Variance | 1H2021 | 1H2020 | Variance | ||||||||||||
Ā | Ā£'m | Ā£'m | Ā£'m | % | % in Rands | Ā£'m | Ā£'m | Ā£'m | % | |||||||||
Operating income (net of ECL charges) | (12.7) | Ā | 59.6Ā | Ā | (72.4) | Ā | (>100.0%) | (>100.0%) | 11.8Ā | Ā | -Ā | Ā | 11.8Ā | Ā | 100.0Ā | % | ||
Operating costs | (0.6) | Ā | (0.4) | Ā | (0.2) | Ā | 34.9Ā | % | 62.5Ā | % | -Ā | Ā | -Ā | Ā | -Ā | Ā | -Ā | Ā |
(Profit)/loss attributable to NCI | 14.7Ā | Ā | (28.9) | Ā | 43.7Ā | Ā | (>100.0%) | (>100.0%) | -Ā | Ā | -Ā | Ā | -Ā | Ā | -Ā | Ā | ||
Adjusted operating profit | 1.4Ā | Ā | 30.3Ā | Ā | (28.8) | Ā | (95.3Ā | %) | (94.5Ā | %) | 11.8Ā | Ā | -Ā | Ā | 11.8Ā | Ā | 100.0Ā | % |
Totals and variance determined in Ā£'000.
The positive impact from the inclusion of the equity accounted earnings from the group's 25% stake in Ninety One and the mark-to-market on the group's holding in IAPF was offset by:
ā¢Ā Ā Ā Ā muted rental collections and a decline in investment property valuations (particularly in the South African portfolio) experienced by IPF
ā¢Ā Ā Ā Ā a reduction in the share of post taxation profit from IEP as some of its subsidiaries were unable to trade during the COVID-19 hard lockdown and a realisation in the prior period was not repeated
ā¢Ā Ā Ā Ā negative mark-to-market adjustments on interest rate hedge positions in IPF and currency hedges related to the group's investment in IAPF.
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Group Investments reported an ROE of 5.6% (1H2020: 13.5%).
Group Costs
Group costs decreased by 25.5% to Ā£17.3 million (1H2020: Ā£23.3 million). As indicated at year end, we expect group costs in FY2021 to be below Ā£35 million.
Further information on key developments within each of the business units is provided in the group interim report published on the group's website: http://www.investec.com.
Performance by geography
Ā | 1H2021 | 1H2020 | % change | Neutral currency % change | ||||
Investec Limited (Southern Africa) | Ā | Ā | Ā | Ā | ||||
Adjusted operating profit (Ā£'m) | 99.1 | 182.2 | (45.6Ā | %) | (34.3Ā | %) | ||
Cost to income ratio | 58.7Ā | % | 53.2Ā | % | Ā | Ā | ||
ROE | 8.1Ā | % | 13.5Ā | % | Ā | Ā | ||
ROTE | 8.1Ā | % | 13.7Ā | % | Ā | Ā | ||
Ā | Ā | Ā | Ā | Ā | ||||
Investec plc (UK & Other) | Ā | Ā | Ā | Ā | ||||
Adjusted operating profit (Ā£'m) | 43.4 | 94.1 | (53.9Ā | %) | n/a | |||
Cost to income ratio | 81.1Ā | % | 78.3Ā | % | Ā | Ā | ||
ROE | 2.8Ā | % | 7.5Ā | % | Ā | Ā | ||
ROTE | 3.3Ā | % | 9.2Ā | % | Ā | Ā |
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Overview of financial performance
Total operating income before expected credit loss impairment charges
Total operating income before expected credit losses decreased 24.0% to Ā£729.0 million (1H2020: Ā£959.3 million) pointing to the impact of the economic challenges driven by COVID-19.
ā¢Ā Ā Ā Ā Net interest income decreased 15.6% to Ā£359.4 million (1H2020: Ā£425.6 million) impacted by the endowment effect from interest rate cuts, assets repricing ahead of liabilities and limited loan book growth which remains below pre-COVID-19 levels. This resulted in a reduction in net interest margin of 41bps to 1.60% for the South African business and 25bps to 1.77% for the UK business.
ā¢Ā Ā Ā Ā Net fee and commission income declined 17.9% to Ā£324.8 million (1H2020: Ā£395.7 million). Fees in the Wealth & Investment business declined moderately by 3.5% impacted by the sale of the Irish wealth business in 2H2020, lower UK FUM at key billing dates and Rand weakness (fees in the South African business were up in Rands but down in Pounds Sterling on the prior period). Fees in the Specialist Banking business were impacted primarily by lower lending and transactional activity, while Group Investment fees reflected lower rental income from IPF.
ā¢Ā Ā Ā Ā Investment income decreased 70.5% to Ā£16.9 million (1H2020: Ā£57.1 million) primarily reflecting the negative impact of COVID-19 on investment property valuations in IPF.
ā¢Ā Ā Ā Ā Share of post taxation profit of associates and joint venture holdings of Ā£16.3 million (1H2020: Ā£17.8 million) was positively impacted by the inclusion of associate earnings from the group's 25% holding in Ninety One, offset by lower earnings from the IEP Group due to lockdown and the non-repeat of a realisation in the prior period, as well as negative fair value adjustments in IPF's UK associate investment.
ā¢Ā Ā Ā Ā Trading income arising from customer flow netted a loss of Ā£8.5 million relative to a profit in the prior period of Ā£62.8 million. Risk management and risk reduction costs on hedging our structured products book following the market dislocation and dividend cancellations was the major driver of the loss.
ā¢Ā Ā Ā Ā Trading income arising from balance sheet management and other trading activities increased from a loss of Ā£2.3 million in 1H2020 to a profit of Ā£8.1 million for the period under review. The gain was driven primarily by the UK Specialist Bank where asset values improved following the extreme COVID-19 related volatility in the last quarter of FY2020.
ā¢Ā Ā Ā Ā Other operating income of Ā£12.0 million (1H2020: Ā£2.6 million) primarily reflects the fair value movements of the Ninety One shares held in the group's staff share scheme as a result of the demerger and separate listing of Ninety One, whereby shareholders received one Ninety One share for every two Investec shares held. These shares are reflected on the group's balance sheet in Other assets. The equal and corresponding liability is reflected in Other liabilities with changes in the value of the liability expensed through staff costs in operating costs.
Ā
Expected credit loss (ECL) impairment charges
Impairments increased to Ā£66.0 million (1H2020: Ā£31.0 million) and the annualised CLR was up from 0.23% for 1H2020 to 0.47% in the current period. The increase was primarily driven by updated macro-economic scenarios applied in our models. The group revised its macro-economic assumptions during the period with material downward revisions to key forecasted economic variables.
As mentioned earlier in the announcement, we have provided various forms of relief on request from some of our clients. At 30 September 2020, 9.0% of UK and 3.3% of South Africa's loan book was under some form of relief.
In South Africa, the Stage 1 coverage ratio increased to 0.5% (31 March 2020: 0.4%) driven by a higher forward-looking IFRS 9 provision build. Stage 2 and Stage 3 coverage ratios declined to 2.4% (31 March 2020: 2.8%) and 33.0% (31 March 2020: 42.1%) respectively. The decrease in Stage 2 coverage was driven primarily by certain counterparties with a high coverage ratio which migrated to Stage 3, while the decrease in Stage 3 coverage relates to the mix impact of some deals written off and some highly secured counters moving into Stage 3.
In the UK, the Stage 1 coverage ratio reduced to 0.3% (31 March 2020: 0.4%). The Stage 2 coverage ratio reduced to 3.4% (31 March 2020: 5.4%) as a significant proportion of the exposures that migrated into Stage 2 were from lower risk exposures, transferred into Stage 2 based on the deteriorating forward-looking view on their credit performance under current macro-economic expectations rather than specific credit concerns. The Stage 3 coverage ratio also declined to 26.7% (31 March 2020: 28.2%), and similarly to South Africa, related to the mix impact of deals written off relative to a few new highly collateralised deals migrating from Stage 2.
Operating costs
In line with our strategic objective to contain costs, management reduced the cost base for the six months ended 30 September 2020 by 14.0% to Ā£535.8 million (1H2020: Ā£623.1 million), driven by headcount containment, lower variable remuneration and a reduction in discretionary expenditure. However, due to lower revenues the cost to income ratio increased to 72.0% (1H2020: 67.0%).
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Taxation
The taxation charge on adjusted operating profit from continuing operations was Ā£20.9 million (1H2020: Ā£41.5 million), resulting in an effective tax rate of 18.8% (1H2020: 14.4%). The increase was due to normalisation of the effective tax rate in South Africa.
Profit or loss attributable to other non-controlling interests
The loss attributable to other non-controlling interests of Ā£15.3 million (1H2020: profit of Ā£28.9 million) relates to the loss attributable to non-controlling interests in IPF.
Discontinued operations
There were no discontinued operations in the first half of the 2021 financial year. Discontinued operations in the comparative period reflect the asset management business which was demerged and separately listed as Ninety One in March 2020.
Basic EPS from continuing and discontinued operations was 9.6p, down 61.1% on the prior period (1H2020: 24.7p).
Earnings from the group's 25% holding in Ninety One in the current period have been equity accounted and included in share of post taxation profit of associates and joint venture holdings within continuing operations.
Ā
Balance sheet analysis
Since 31 March 2020:
ā¢Ā Ā Ā Ā Ordinary shareholders' equity increased by 4.7% to Ā£4.0 billion, mainly due to an increase in retained earnings.
ā¢Ā Ā Ā Ā NAV per share increased 4.6% to 433.5 pence and TNAV per share (which excludes goodwill, software, and other intangible assets) increased 5.2% to 397.4 pence.
ā¢Ā Ā Ā Ā The group's ROE decreased from 10.7% in 1H2020 to 5.3% and ROTE from 11.8% in 1H2020 to 5.8%.
ā¢Ā Ā Ā Ā Net core loans and advances growth was muted, up 1.0% to Ā£25.2 billion since year end. The South African book declined 1.6% in Rands to R284.4 billion, while in the UK, net core loans grew 0.9% to Ā£12.0 billion.
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Funding and liquidity
Customer deposits grew 1.0% to Ā£32.6 billion (31 March 2020: Ā£32.2 billion). Cash and near cash of Ā£12.9 billion (Ā£6.2 billion in Investec plc and R143.2 billion in Investec Limited) at 30 September 2020 represents 39.5% of customer deposits. Loans and advances to customers as a percentage of customer deposits remained at 76.4%.
The group comfortably exceeds Basel liquidity requirements for the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR). Investec Bank Limited (consolidated group) ended the period to 30 September 2020 with the three-month average of its LCR at 164.1% and an NSFR of 113.9%. For Investec plc the LCR and NSFR are calculated using the relevant EU regulation, applying our own interpretations where required. The LCR reported to the PRA at 30 September 2020 was 335% and the internally calculated NSFR was 126% at 30 September 2020.
Capital adequacy and leverage ratios
The group maintained capital and leverage ratios ahead of both internal board-approved minimum targets and regulatory requirements. Capital ratios for Investec plc and Investec Limited are summarised in the table below.
The group targets a minimum CET1 ratio above 10%, a tier 1 ratio above 11% and a total capital adequacy ratio range of 14% to 17% on a consolidated basis for each of Investec plc and Investec Limited, respectively.
Investec Limited's application for conversion to the Advanced Internal Ratings Based (AIRB) approach remains under review by the South African Prudential Authority. Approval has been granted for Investec Limited to commence with its six month parallel run for certain AIRB models. Full conversion to AIRB is expected to result in a circa 2% uplift to the CET1 ratio.
Ā
Ā | 30 September 2020 | 31 March 2020 | |
Investec plc1 | Standardised approach | Standardised approach | |
Total capital ratio | 14.8% | 14.9% | |
Tier 1 ratio | 12.4% | 12.4% | |
Common equity tier 1 ratio | 10.7% | 10.7% | |
Common equity tier 1 ratio ('fully loaded'3) | 10.2% | 10.3% | |
Ā | Ā | Ā | |
Leverage ratio (current) | 7.8% | 7.8% | |
Leverage ratio ('fully loaded'3) | 7.3% | 7.4% | |
Leverage ratio - current UK leverage ratio framework4 | 8.7% | 8.9% | |
Ā | Ā | Ā | |
Investec Limited2 | FIRB approach | FIRB approach | |
Total capital adequacy ratio | 15.5Ā | % | 15.0% |
Tier 1 ratio | 12.2% | 11.5% | |
Common equity tier 1 ratio | 11.6Ā | % | 10.9% |
Common equity tier 1 ratio ('fully loaded'3) | 11.6Ā | % | 10.9% |
Ā | Ā | Ā | |
Leverage ratio (current) | 7.0% | 6.4% | |
Leverage ratio ('fully loaded'3) | 6.9% | 6.3% |
1Ā Ā Ā Ā Ā Ā The capital adequacy disclosures follow Investec's normal basis of presentation to show a consistent basis of calculation across the jurisdictions in which the group operates. For Investec plc this does not include the deduction of foreseeable charges and dividends when calculating CET1 capital as required under the Capital Requirements Regulation and European Banking Authority technical standards. The impact of this deduction totalling Ā£18 million for Investec plc (31 March 2020: Ā£0) would lower the CET1 ratio by 12bps (31 March 2020: 0bps).
2Ā Ā Ā Ā Ā Ā Investec Limited's capital information includes unappropriated profits. If unappropriated profits are excluded from the capital information, Investec Limited's CET1 ratio would be 36bps (31 March 2020: 24bps) lower.
3Ā Ā Ā Ā Ā Ā The CET 1 fully loaded ratio and the fully loaded leverage ratio assume full adoption of IFRS 9 and full adoption of all CRD IV rules or South African Prudential Authority regulations, as applicable in the relevant jurisdictions. As a result of the adoption of IFRS 9 Investec plc and IBP elected to designate its subordinated fixed rate medium-term notes due in 2022 at fair value. By the time of full adoption of IFRS 9 in 2023, these subordinated liabilities will have reached final maturity and will be redeemed at par value. The remaining interest rate portion of the fair value adjustment at 30 September 2020 of Ā£6 million (post-taxation), has therefore been excluded from the fully loaded ratios as it will be released into profit and loss over the remaining life of the instrument.
4Ā Ā Ā Ā Ā Ā Investec plc is not subject to the UK leverage ratio framework, however for comparative purposes this ratio has been disclosed. This framework excludes qualifying central bank balances from the calculation of the leverage exposure measure.
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Remuneration targetsĀ
Investec remains committed to setting stretching yet attainable targets, particularly in the current economic environment. In the group's 2020 integrated annual report it was noted that the group intended publishing the remuneration targets for the 2020 Long-Term Incentive award and the 2021 Short-Term Incentive ahead of the group's 2020 annual general meeting (AGM).
However, given the continuing uncertainty at that time, and in line with the guidance from the Investment Association, on 24 July 2020 the group announced its intention to delay the setting and disclosing of remuneration incentive targets until its interim results announcement for the six months ending 30 September 2020. The group consulted with shareholders on this matter.
Whilst there is still a high level of uncertainty relating to the full impact of COVID-19, the Committee has set what it believes are stretching yet attainable targets as outlined in the group's 2020 interim report.
On behalf of the boards of Investec plc and Investec Limited
Perry Crosthwaite | Ā | Fani Titi |
Chairman | Ā | Chief Executive |
18 November 2020 | Ā | Ā |
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Notes to the commentary section above
Presentation of financial information
Investec operates under a Dual Listed Companies (DLC) structure with primary listings of Investec plc on the London Stock Exchange and Investec Limited on the JSE Limited.
In terms of the contracts constituting the DLC structure, Investec plc and Investec Limited effectively form a single economic enterprise in which the economic and voting rights of ordinary shareholders of the companies are maintained in equilibrium relative to each other. The directors of the two companies consider that for financial reporting purposes, the fairest presentation is achieved by combining the results and financial position of both companies.
Accordingly, these interim results reflect the results and financial position of the combined DLC group under International Financial Reporting Standards (IFRS), denominated in Pounds Sterling. In the commentary above, all references to Investec or the group relate to the combined DLC group comprising Investec plc and Investec Limited.
Unless the context indicates otherwise, all comparatives included in the commentary above relate to the six months ended 30 September 2019.
Amounts represented on a neutral currency basis for income statement items assume that the relevant average exchange rates for the six months to 30 September 2020 remain the same as those in the prior period. Amounts represented on a neutral currency basis for balance sheet items assume that the relevant closing exchange rates at 30 September 2020 remain the same as those at 31 March 2020.
Neutral currency information is considered as pro-forma financial information as per the JSE Listings Requirements and is therefore the responsibility of the group's board of directors. Pro-forma financial information was prepared for illustrative purposes and because of its nature may not fairly present the issuer's financial position, changes in equity, or results of operations. The external auditors issued a limited assurance report in respect of the neutral currency information. The report is available for inspection at the registered office of Investec upon request.
Foreign currency impact
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 position of the individual companies are reported in the local currencies in which they are domiciled, including Rands, Australian Dollars, Euros and US Dollars. These results are then translated into Pounds Sterling at the applicable foreign currency exchange rates for inclusion in the group's 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:
Ā | Six months to | Year to | Six months to | |||
30 Sept 2020 | 31 Mar 2020 | 30 Sept 2019 | ||||
Currency | Period end | Average | Period end | Average | Period end | Average |
per GBP1.00 | ||||||
South African Rand | 21.58 | 22.05 | 22.15 | 18.78 | 18.69 | 18.28 |
Australian Dollar | 1.80 | 1.85 | 2.03 | 1.87 | 1.82 | 1.82 |
Euro | 1.10 | 1.12 | 1.13 | 1.15 | 1.13 | 1.13 |
US Dollar | 1.29 | 1.27 | 1.24 | 1.27 | 1.23 | 1.26 |
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Accounting policies, significant judgements and disclosures
These reviewed condensed combined 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 six months to 30 September 2020 are consistent with those adopted in the financial statements for year ended 31 March 2020.
The effective date of the demerger of the asset management business was 13 March 2020 and admission of the Ninety One Limited shares and the Ninety One plc shares to the Johannesburg Stock Exchange and London Stock Exchange was effected on 16 March 2020. The global asset management business has been disclosed as a discontinued operation and the income statement for the prior period has been appropriately re-presented. Refer to the discontinued operations note for further detail.
Interest Rate Benchmark Reform (IBOR reform) Phase 2 amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Phase 2 of the IASB's IBOR project addresses the wider accounting issues arising from the IBOR reform. This was published in August 2020 and is awaiting endorsement. The amendments are effective for annual reporting periods beginning on or after 1 January 2021 with early application permitted. Conversion from LIBOR to alternative risk-free rates (RFRs) is expected to increase as RFR-based products become more widely available and key market-driven conversion events occur.
The combined consolidated financial results for the period ended 30 September 2020 have been reviewed by Ernst & Young LLP &
Ernst & Young Inc., who expressed an unmodified review conclusion. A copy of the auditors' review opinion is available for inspection at the company's registered office together with the financial statements identified in the auditors' report or on our website at www.investec.com
Ā
The financial results have been prepared under the supervision of Nishlan Samujh, the Group Finance Director. The financial statements for the six months ended 30 September 2020 are available on the group's website: http://www.investec.com
Proviso
ā¢Ā Ā Ā Ā Please note that matters discussed in this announcement may contain forward-looking statements which are subject to various risks and uncertainties and other factors, including, but not limited to:
-Ā Ā Ā changes in the political and/or economic environment that would materially affect the Investec group
-Ā Ā Ā changes in the economic environment caused by the resulting lockdowns and government programmes aimed to stimulate the economy
-Ā Ā Ā changes in legislation or regulation impacting the Investec group's operations or its accounting policies
-Ā Ā Ā changes in business conditions that will have a significant impact on the Investec group's operations
-Ā Ā Ā changes in exchange rates and/or tax rates from the prevailing rates outlined in this announcement.
-Ā Ā Ā changes in the structure of the markets, client demand or the competitive environment.
ā¢Ā Ā Ā Ā A number of these factors are beyond the group's control.
ā¢Ā Ā Ā Ā 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.
ā¢Ā Ā Ā Ā Any forward-looking statements made are based on the knowledge of the group at 18 November 2020.
ā¢Ā Ā Ā Ā The information in the group's announcement for the six months ended 30 September 2020, which was approved by the board of directors on 18 November 2020, does not constitute statutory accounts as defined in Section 435 of the UK Companies Act 2006. The 31 March 2020 financial statements were filed with the registrar and were unqualified with the audit report containing no statements in respect of sections 498(2) or 498(3) of the UK Companies Act.
ā¢Ā Ā Ā Ā The financial information on which forward-looking statements are based is the responsibility of the directors of the group and has not been reviewed and reported on by the group's auditors.
Ā
This announcement is available on the group's website:
http://www.investec.com
Definitions
ā¢Ā Ā Ā Ā Total group represents the group's results including the results of discontinued operations in the prior period.
ā¢Ā Ā Ā Ā Adjusted operating profit refers to operating profit before goodwill, acquired intangibles and strategic actions and after adjusting for earnings attributable to other non-controlling interests. Trends within the divisional sections relate to adjusted operating profit before group costs. Adjusted operating profit is considered an important measure by Investec of the profit realised by the group in the ordinary course of operations. In addition, it forms the basis of the dividend payout policy. Non-IFRS measures such as adjusted operating profit are considered as pro-forma financial information as per the JSE Listings Requirements. The pro-forma financial information is the responsibility of the group's Board of Directors. Pro-forma financial information was prepared for illustrative purposes and because of its nature may not fairly present the issuer's financial position, changes in equity or results of operations. The external auditors issued a limited assurance report in respect of the pro-forma financial information. The report is available for inspection at the registered office of Investec upon request.
ā¢Ā Ā Ā Ā Adjusted earnings attributable to shareholders is defined as earnings attributable to shareholders before goodwill, acquired intangibles and strategic actions and after the deduction of earnings attributable to perpetual preference shareholders and Other Additional Tier 1 security holders.
ā¢Ā Ā Ā Ā Adjusted basic earnings per share is calculated as adjusted earnings attributable to shareholders divided by the weighted average number of ordinary shares in issue during the year.
ā¢Ā Ā Ā Ā Dividend payout ratio is calculated as the dividend per share divided by adjusted earnings per share.
ā¢Ā Ā Ā Ā The credit loss ratio is calculated as expected credit loss (ECL) impairment charges on gross core loans and advances as a percentage of average gross core loans and advances subject to ECL.
ā¢Ā Ā Ā Ā The cost to income ratio is calculated as: operating costs divided by operating income before expected credit loss impairment charges (net of operating profits or losses attributable to other non-controlling interests).
ā¢Ā Ā Ā Ā Return on average ordinary shareholders' equity (ROE) is calculated as adjusted earnings attributable to ordinary shareholders divided by average ordinary shareholders' equity.
ā¢Ā Ā Ā Ā Return on average tangible ordinary shareholders' equity (ROTE) is calculated as adjusted earnings attributable to ordinary shareholders divided by average tangible ordinary shareholders' equity.
ā¢Ā Ā Ā Ā Core loans and advances is defined as net loans and advances to customers plus net own originated securitised assets.
ā¢Ā Ā Ā Ā NCI is non-controlling interests.
Ā
Financial assistance
Shareholders are referred to Special Resolution number 3, which was approved at the annual general meeting held on 6 August 2020, relating to the provision of direct or indirect financial assistance in terms of Section 45 of the South African Companies Act, No 71 of 2008 to related or inter-related companies. Shareholders are hereby notified that in terms of S45(5)(a) of the South African Companies Act, the boards of directors of Investec Limited and Investec Bank Limited provided such financial assistance during the period 1 April 2020 to 30 September 2020 to various group subsidiaries.
Johannesburg and London
Sponsor: Investec Bank Limited
Exchange rates between local currencies and Pounds Sterling have fluctuated over the period. The most significant impact arises from the volatility of the Rand. The average Rand: Pound Sterling exchange rate over the period has depreciated by 20.6% against the comparative six month period ended 30 September 2019, and the closing rate has appreciated by 2.6% since 31 March 2020. The following tables provide an analysis of the impact of the Rand on our reported numbers.
Ā | Results in Pounds Sterling | Results in Rands | ||||||||||
Continuing operations | Six months to 30 Sept 2020 | Six months to 30 Sept 2019* | % | Neutral currency^ Six months to 30 Sept 2020 | Neutral | Six months to 30 Sept 2020 | Six months to 30 Sept 2019* | % | ||||
Adjusted operating profit before taxation (million) | Ā£142Ā | Ā£276Ā | (48.4Ā | %) | Ā£163Ā | (40.9Ā | %) | R3 143Ā | R5 045 | (37.7Ā | %) | |
Earnings attributable to shareholders (million) | Ā£109Ā | Ā£202Ā | (46.2Ā | %) | Ā£126Ā | (40.0Ā | %) | R2 405Ā | R3 692 | (34.9Ā | %) | |
Adjusted earnings attributable to shareholders (million) | Ā£104Ā | Ā£212Ā | (50.8Ā | %) | Ā£120Ā | (43.4Ā | %) | R2 309Ā | R3 877 | (40.4Ā | %) | |
Adjusted earnings per share | 11.2pĀ Ā | 22.4 | pĀ | (50.0Ā | %) | 12.9pĀ | (42.4Ā | %) | 248cĀ | 409c | (39.4Ā | %) |
Basic earnings per share | 9.6pĀ Ā | 19.0 | pĀ | (49.5Ā | %) | 11.2pĀ | (41.1Ā | %) | 212cĀ | 346c | (38.7Ā | %) |
Diluted basic earnings per share | 9.5pĀ Ā | 18.3 | pĀ | (48.1Ā | %) | 11.1pĀ | (41.1Ā | %) | 211cĀ | 333c | (36.3Ā | %) |
Ā
Ā | Results in Pounds Sterling | Results in Rands | |||||||||
Total group | Six months to 30 Sept 2020 | Six months to 30 Sept 2019* | % | Neutral currency^ Six months to 30 Sept 2020 | Neutral | Six months to 30 Sept 2020 | Six months to 30 Sept 2019* | % | |||
Adjusted operating profit before taxation (million) | Ā£142Ā | Ā£374 | (61.9Ā | %) | Ā£163Ā | (56.4Ā | %) | R3 143Ā | R6 823 | (53.9Ā | %) |
Earnings attributable to shareholders (million) | Ā£109Ā | Ā£256 | (57.4Ā | %) | Ā£126Ā | (50.8Ā | %) | R2 405Ā | R4 678 | (48.6Ā | %) |
Adjusted earnings attributable to shareholders (million) | Ā£104Ā | Ā£274 | (62.0Ā | %) | Ā£120Ā | (56.2Ā | %) | R2 309Ā | R4 997 | (53.8Ā | %) |
Adjusted earnings per share | 11.2pĀ Ā | 28.9p | (61.2Ā | %) | 12.9pĀ | (55.4Ā | %) | 248cĀ | 527c | (52.9Ā | %) |
Basic earnings per share | 9.6pĀ | 24.7p | (61.1Ā | %) | 11.2pĀ | (54.7Ā | %) | 212cĀ | 450c | (52.9Ā | %) |
Diluted basic earnings per share | 9.5pĀ Ā | 23.8p | (60.1Ā | %) | 11.1pĀ | (53.4Ā | %) | 211cĀ | 434c | (51.4% | |
Interim dividend per share | 5.5pĀ Ā | 11.0p | (50.0Ā | %) | n/aĀ | n/a | 112cĀ | 211c | (46.9Ā | %) |
Ā
Ā | Results in Pounds Sterling | Results in Rands | |||||||||||
Ā | At 30 Sept 2020 | At 31 March 2020 | % | Neutral currency^^ At 30 Sept 2020 | Neutral | At 30 Sept 2020 | At 31 March 2020 | % | |||||
Net asset value per share | 433.5 | pĀ | 414.3 | pĀ | 4.6Ā | % | 433.7pĀ | 4.7Ā | % | 9 355cĀ | 9 178c | 1.9Ā | % |
Net tangible asset value per share | 397.4 | pĀ | 377.6 | pĀ | 5.2Ā | % | 397.6pĀ | 5.3Ā | % | 8 575cĀ | 8 365c | 2.5Ā | % |
Total equity (million) | Ā£5Ā 075Ā | Ā£4Ā 898Ā | 3.6Ā | % | Ā£5 007Ā | 2.2Ā | % | R109 509Ā | R108 495 | 0.9Ā | % | ||
Total assets (million) | Ā£50Ā 665Ā | Ā£50Ā 656Ā | -Ā | % | Ā£49 982Ā | (1.3Ā | %) | R1 093 199Ā | R1 122 162 | (2.6Ā | %) | ||
Core loans (million) | Ā£25Ā 160Ā | Ā£24Ā 911Ā | 1.0Ā | % | Ā£24 817Ā | (0.4Ā | %) | R542 955Ā | R551 878 | (1.6Ā | %) | ||
Cash and near cash balances (million) | Ā£12Ā 861Ā | Ā£12Ā 683Ā | 1.4Ā | % | Ā£12 688Ā | -Ā | % | R277 504Ā | R280 960 | (1.2Ā | %) | ||
Customer deposits (million) | Ā£32Ā 552Ā | Ā£32Ā 221Ā | 1.0Ā | % | Ā£32 112Ā | (0.3Ā | %) | R702 373Ā | R713 774 | (1.6Ā | %) | ||
Third party funds under management (million) | Ā£51Ā 988Ā | Ā£45Ā 018Ā | 15.5Ā | % | Ā£51 573Ā | 14.6Ā | % | R1 121 753Ā | R1 043 735 | 7.5Ā | % |
* Ā Ā Ā Ā Ā Ā Restated to reflect continuing operations.
^ Ā Ā Ā Ā Ā For income statement items we have used the average Rand: Pound Sterling exchange rate that was applied in the prior period, i.e. 18.28.
^^ Ā Ā Ā For balance sheet items we have assumed that the Rand: Pound Sterling closing exchange rate has remained neutral since 31 March 2020.
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ĀĀ
Condensed combined consolidated income statement
Ā | Six months to | Six months to | Year to 31 March 2020 | |||
Ā£'000 | 30 Sept 2020 | 30 Sept 2019* | ||||
Interest income | 1Ā 014Ā 392Ā | Ā | 1Ā 379Ā 676Ā | Ā | 2Ā 698Ā 420Ā | Ā |
Interest expense | (654Ā 971) | Ā | (954Ā 027) | Ā | (1Ā 845Ā 416) | Ā |
Net interest income | 359Ā 421Ā | Ā | 425Ā 649Ā | Ā | 853Ā 004Ā | Ā |
Fee and commission income | 344Ā 650Ā | Ā | 422Ā 133Ā | Ā | 837Ā 590Ā | Ā |
Fee and commission expense | (19Ā 842) | Ā | (26Ā 408) | Ā | (47Ā 118) | Ā |
Investment income | 16Ā 859Ā | Ā | 57Ā 079Ā | Ā | 39Ā 268Ā | Ā |
Share of post taxation profit of associates and joint venture holdings | 16Ā 272Ā | Ā | 17Ā 754Ā | Ā | 27Ā 244Ā | Ā |
Trading income/(loss) arising from | Ā | Ā | Ā | |||
- customer flow | (8Ā 527) | Ā | 62Ā 771Ā | Ā | 63Ā 254Ā | Ā |
- balance sheet management and other trading activities | 8Ā 144Ā | Ā | (2Ā 318) | Ā | 26Ā 720Ā | Ā |
Other operating income | 11Ā 983Ā | Ā | 2Ā 609Ā | Ā | 6Ā 877Ā | Ā |
Total operating income before expected credit loss impairment charges | 728Ā 960Ā | Ā | 959Ā 269Ā | Ā | 1Ā 806Ā 839Ā | Ā |
Expected credit loss impairment charges | (65Ā 974) | Ā | (31Ā 021) | Ā | (133Ā 301) | Ā |
Operating income | 662Ā 986Ā | Ā | 928Ā 248Ā | Ā | 1Ā 673Ā 538Ā | Ā |
Operating costs^ | (535Ā 755) | Ā | (623Ā 092) | Ā | (1Ā 186Ā 427) | Ā |
Operating profit before goodwill, acquired intangibles and strategic actions | 127Ā 231Ā | Ā | 305Ā 156Ā | Ā | 487Ā 111Ā | Ā |
Impairment of goodwill | -Ā | Ā | -Ā | Ā | (145) | Ā |
Impairment of associates and joint venture holdings | -Ā | Ā | -Ā | Ā | (45Ā 400) | Ā |
Amortisation of acquired intangibles | (7Ā 603) | Ā | (7Ā 954) | Ā | (16Ā 104) | Ā |
Amortisation of acquired intangibles of associates | (4Ā 625) | Ā | -Ā | Ā | -Ā | Ā |
Closure and rundown of the Hong Kong direct investments business | (2Ā 158) | Ā | (49Ā 469) | Ā | (89Ā 257) | Ā |
Operating profit | 112Ā 845Ā | Ā | 247Ā 733Ā | Ā | 336Ā 205Ā | Ā |
Financial impact of group restructures | -Ā | Ā | 12Ā 757Ā | Ā | (25Ā 725) | Ā |
Profit before taxation from continuing operations | 112Ā 845Ā | Ā | 260Ā 490Ā | Ā | 310Ā 480Ā | Ā |
Taxation on operating profit before goodwill, acquired intangibles and strategic actions | (20Ā 892) | Ā | (41Ā 482) | Ā | (54Ā 690) | Ā |
Taxation on acquired intangibles and strategic actions | 1Ā 558Ā | Ā | 12Ā 101Ā | Ā | 21Ā 693Ā | Ā |
Profit after taxation from continuing operations | 93Ā 511Ā | Ā | 231Ā 109Ā | Ā | 277Ā 483Ā | Ā |
Profit after taxation from discontinued operations | -Ā | Ā | 69Ā 085Ā | Ā | 954Ā 979Ā | Ā |
Profit after taxation | 93Ā 511Ā | Ā | 300Ā 194Ā | Ā | 1Ā 232Ā 462Ā | Ā |
Loss/(profit) attributable to other non-controlling interests | 15Ā 255Ā | Ā | (28Ā 863) | Ā | (67Ā 952) | Ā |
Profit attributable to non-controlling interests of discontinued operations | -Ā | Ā | (15Ā 172) | Ā | (29Ā 347) | Ā |
Earnings attributable to shareholders | 108Ā 766Ā | Ā | 256Ā 159Ā | Ā | 1Ā 135Ā 163Ā | Ā |
*Ā Ā Ā Ā Ā Ā Ā Restated to reflect continuing operations.
^Ā Ā Ā Ā Ā Ā Depreciation on operating leased assets of Ā£0.4 million (30 September 2019: Ā£0.8 million; 31 March 2020: Ā£1.4 million) which was previously reported as a separate line item, has been included in operating costs. The prior period has been restated to reflect the same basis.
Ā
Ā | Ā | Ā | Ā |
Ā
ĀĀ
Consolidated statement of total comprehensive income
Ā
Ā | Six months to | Six months to | Year to 31 March 2020 | |||
Ā£'000 | 30 Sept 2020 | 30 Sept 2019* | ||||
Profit after taxation from continuing operations | 93Ā 511Ā | Ā | 231Ā 109Ā | Ā | 277Ā 483Ā | Ā |
Other comprehensive income/(loss) from continuing operations: | Ā | Ā | Ā | |||
Items that may be reclassified to the income statement | Ā | Ā | Ā | |||
Fair value movements on cash flow hedges taken directly to other comprehensive income^ | (4Ā 427) | Ā | (22Ā 259) | Ā | (40Ā 304) | Ā |
Fair value movements on debt instruments at FVOCI taken directly to other comprehensive income^ | 84Ā 566Ā | Ā | (1Ā 901) | Ā | (139Ā 977) | Ā |
(Gain)/loss on realisation of debt instruments at FVOCI recycled through the income statement^ | (1Ā 446) | Ā | 9Ā 502Ā | Ā | (5Ā 503) | Ā |
Foreign currency adjustments on translating foreign operations | 17Ā 837Ā | Ā | 39Ā 948Ā | Ā | (314Ā 078) | Ā |
Items that will never be reclassified to the income statement | Ā | Ā | Ā | |||
Effect of rate change on deferred taxation relating to adjustment for IFRS 9 | 828Ā | Ā | (503) | Ā | (1Ā 761) | Ā |
Fair value movements on equity instruments at FVOCI taken directly to other comprehensive income | 736Ā | Ā | -Ā | Ā | (3Ā 931) | Ā |
Remeasurement of net defined benefit pension liability | (32) | Ā | 20Ā | Ā | (1Ā 217) | Ā |
Movement in post retirement benefit liabilities | -Ā | Ā | -Ā | Ā | 51Ā | Ā |
Net (loss)/gain attributable to own credit risk | (1Ā 725) | Ā | 1Ā 451Ā | Ā | 9Ā 515Ā | Ā |
Total comprehensive income/(loss) from continuing operations | 189Ā 848Ā | Ā | 257Ā 367Ā | Ā | (219Ā 722) | Ā |
Total comprehensive income/(loss) attributable to ordinary shareholders from continuing operations | 177Ā 381Ā | Ā | 203Ā 112Ā | Ā | (235Ā 960) | Ā |
Total comprehensive (loss)/income attributable to non-controlling interests from continuing operations | (1Ā 159) | Ā | 31Ā 902Ā | Ā | (28Ā 022) | Ā |
Total comprehensive income attributable to perpetual preferred securities from continuing operations | 13Ā 626Ā | Ā | 22Ā 353Ā | Ā | 44Ā 260Ā | Ā |
Total comprehensive income/(loss) from continuing operations | 189Ā 848Ā | Ā | 257Ā 367Ā | Ā | (219Ā 722) | Ā |
Ā | Ā | Ā | Ā | |||
Profit after taxation from discontinued operations | -Ā | Ā | 69Ā 085Ā | Ā | 954Ā 979Ā | Ā |
Other comprehensive income from discontinued operations: | Ā | Ā | Ā | |||
Items that will never be reclassified to the income statement | Ā | Ā | Ā | |||
Foreign currency adjustments on translating foreign operations | -Ā | Ā | 337Ā | Ā | (13Ā 980) | Ā |
Remeasurement of net defined benefit pension liability | -Ā | Ā | (1Ā 217) | Ā | -Ā | Ā |
Total comprehensive income from discontinued operations | -Ā | Ā | 68Ā 205Ā | Ā | 940Ā 999Ā | Ā |
Total comprehensive income attributable to ordinary shareholders from discontinued operations | -Ā | Ā | 53Ā 033Ā | Ā | 914Ā 448Ā | Ā |
Total comprehensive income attributable to non-controlling interests from discontinued operations | -Ā | Ā | 15Ā 172Ā | Ā | 26Ā 551Ā | Ā |
Total comprehensive income from discontinued operations | -Ā | Ā | 68Ā 205Ā | Ā | 940Ā 999Ā | Ā |
Ā | Ā | Ā | Ā | |||
Profit after taxation | 93Ā 511Ā | Ā | 300Ā 194Ā | Ā | 1Ā 232Ā 462Ā | Ā |
Other comprehensive income: | Ā | Ā | Ā | |||
Items that may be reclassified to the income statement | Ā | Ā | Ā | |||
Fair value movements on cash flow hedges taken directly to other comprehensive income^ | (4Ā 427) | Ā | (22Ā 259) | Ā | (40Ā 304) | Ā |
Fair value movements on debt instruments at FVOCI taken directly to other comprehensive income^ | 84Ā 566Ā | Ā | (1Ā 901) | Ā | (139Ā 977) | Ā |
(Gain)/loss on realisation of debt instruments at FVOCI recycled through the income statement^ | (1Ā 446) | Ā | 9Ā 502Ā | Ā | (5Ā 503) | Ā |
Foreign currency adjustments on translating foreign operations | 17Ā 837Ā | Ā | 40Ā 285Ā | Ā | (328Ā 058) | Ā |
Items that will never be reclassified to the income statement | Ā | Ā | Ā | |||
Effect of rate change on deferred taxation relating to adjustment for IFRS 9 | 828Ā | Ā | (503) | Ā | (1Ā 761) | Ā |
Fair value movements on equity instruments at FVOCI taken directly to other comprehensive income | 736Ā | Ā | -Ā | Ā | (3Ā 931) | Ā |
Re-measurement of net defined benefit pension asset | (32) | Ā | (1Ā 197) | Ā | (1Ā 217) | Ā |
Movement in post retirement benefit liabilities | -Ā | Ā | -Ā | Ā | 51Ā | Ā |
Net (loss)/gain attributable to own credit risk | (1Ā 725) | Ā | 1Ā 451Ā | Ā | 9Ā 515Ā | Ā |
Total comprehensive income | 189Ā 848Ā | Ā | 325Ā 572Ā | Ā | 721Ā 277Ā | Ā |
Total comprehensive income attributable to ordinary shareholders | 171Ā 379Ā | Ā | 256Ā 145Ā | Ā | 678Ā 488Ā | Ā |
Total comprehensive income attributable to non-controlling interests | (1Ā 159) | Ā | 47Ā 074Ā | Ā | (1Ā 471) | Ā |
Total comprehensive income attributable to perpetual preferred securities | 19Ā 628Ā | Ā | 22Ā 353Ā | Ā | 44Ā 260Ā | Ā |
Total comprehensive income | 189Ā 848Ā | Ā | 325Ā 572Ā | Ā | 721Ā 277Ā | Ā |
* Ā Ā Ā Ā Ā Ā Restated to reflect continuing operations.
^ Ā Ā Ā Ā Ā These amounts are net of taxation expense/(credit) of Ā£22.3 million Six months to 30 September 2019: (Ā£1.5 million); year to 31 March 2020: (Ā£55.8 million).
Ā
Condensed combined consolidated balance sheet
At | 30 Sept 2020 | 31 March 2020 | 30 Sept 2019 | |||
Ā£'000 | ||||||
Assets | Ā | Ā | Ā | |||
Cash and balances at central banks | 2Ā 477Ā 636Ā | Ā | 3Ā 932Ā 048Ā | Ā | 3Ā 988Ā 832Ā | Ā |
Loans and advances to banks | 3Ā 079Ā 807Ā | Ā | 2Ā 666Ā 851Ā | Ā | 2Ā 242Ā 874Ā | Ā |
Non-sovereign and non-bank cash placements | 363Ā 350Ā | Ā | 632Ā 610Ā | Ā | 678Ā 717Ā | Ā |
Reverse repurchase agreements and cash collateral on securities borrowed | 4Ā 124Ā 591Ā | Ā | 2Ā 964Ā 603Ā | Ā | 1Ā 621Ā 424Ā | Ā |
Sovereign debt securities | 4Ā 898Ā 936Ā | Ā | 4Ā 593Ā 893Ā | Ā | 5Ā 987Ā 916Ā | Ā |
Bank debt securities | 590Ā 173Ā | Ā | 604Ā 921Ā | Ā | 619Ā 328Ā | Ā |
Other debt securities | 1Ā 427Ā 174Ā | Ā | 1Ā 430Ā 419Ā | Ā | 1Ā 234Ā 781Ā | Ā |
Derivative financial instruments | 1Ā 885Ā 922Ā | Ā | 2Ā 034Ā 399Ā | Ā | 1Ā 256Ā 794Ā | Ā |
Securities arising from trading activities | 929Ā 143Ā | Ā | 1Ā 044Ā 445Ā | Ā | 1Ā 762Ā 831Ā | Ā |
Investment portfolio | 994Ā 543Ā | Ā | 998Ā 935Ā | Ā | 946Ā 499Ā | Ā |
Loans and advances to customers | 24Ā 855Ā 877Ā | Ā | 24Ā 588Ā 074Ā | Ā | 25Ā 065Ā 947Ā | Ā |
Own originated loans and advances to customers securitised | 307Ā 532Ā | Ā | 324Ā 638Ā | Ā | 378Ā 171Ā | Ā |
Other loans and advances | 100Ā 659Ā | Ā | 132Ā 486Ā | Ā | 145Ā 034Ā | Ā |
Other securitised assets | 122Ā 892Ā | Ā | 134Ā 865Ā | Ā | 133Ā 523Ā | Ā |
Interests in associated undertakings and joint venture holdings | 722Ā 227Ā | Ā | 701Ā 311Ā | Ā | 407Ā 743Ā | Ā |
Deferred taxation assets | 256Ā 581Ā | Ā | 265Ā 896Ā | Ā | 260Ā 766Ā | Ā |
Other assets | 1Ā 912Ā 025Ā | Ā | 1Ā 934Ā 428Ā | Ā | 2Ā 393Ā 348Ā | Ā |
Property and equipment | 341Ā 343Ā | Ā | 356Ā 573Ā | Ā | 484Ā 359Ā | Ā |
Investment properties | 799Ā 588Ā | Ā | 863Ā 864Ā | Ā | 1Ā 000Ā 603Ā | Ā |
Goodwill | 270Ā 991Ā | Ā | 270Ā 625Ā | Ā | 360Ā 128Ā | Ā |
Software* | 13Ā 045Ā | Ā | 14Ā 643Ā | Ā | 18Ā 467Ā | Ā |
Other acquired intangible assets* | 66Ā 224Ā | Ā | 71Ā 657Ā | Ā | 80Ā 799Ā | Ā |
Non-current assets classified as held for sale | 87Ā 248Ā | Ā | 58Ā 905Ā | Ā | -Ā | Ā |
Ā | 50Ā 627Ā 507Ā | Ā | 50Ā 621Ā 089Ā | Ā | 51Ā 068Ā 884Ā | Ā |
Other financial instruments at fair value through profit or loss in respect of liabilities to customers | 37Ā 178Ā | Ā | 35Ā 227Ā | Ā | 8Ā 657Ā 879Ā | Ā |
Ā | 50Ā 664Ā 685Ā | Ā | 50Ā 656Ā 316Ā | Ā | 59Ā 726Ā 763Ā | Ā |
Liabilities | Ā | Ā | Ā | |||
Deposits by banks | 3Ā 319Ā 727Ā | Ā | 3Ā 498Ā 254Ā | Ā | 2Ā 929Ā 180Ā | Ā |
Derivative financial instruments | 1Ā 793Ā 033Ā | Ā | 2Ā 248Ā 849Ā | Ā | 1Ā 729Ā 053Ā | Ā |
Other trading liabilities | 577Ā 821Ā | Ā | 509Ā 522Ā | Ā | 700Ā 611Ā | Ā |
Repurchase agreements and cash collateral on securities lent | 1Ā 692Ā 050Ā | Ā | 1Ā 577Ā 346Ā | Ā | 983Ā 895Ā | Ā |
Customer accounts (deposits) | 32Ā 551Ā 697Ā | Ā | 32Ā 220Ā 976Ā | Ā | 32Ā 039Ā 291Ā | Ā |
Debt securities in issue | 1Ā 815Ā 257Ā | Ā | 1Ā 737Ā 191Ā | Ā | 2Ā 936Ā 491Ā | Ā |
Liabilities arising on securitisation of own originated loans and advances | 73Ā 042Ā | Ā | 76Ā 696Ā | Ā | 79Ā 667Ā | Ā |
Liabilities arising on securitisation of other assets | 109Ā 107Ā | Ā | 110Ā 679Ā | Ā | 116Ā 544Ā | Ā |
Current taxation liabilities | 95Ā 940Ā | Ā | 51Ā 308Ā | Ā | 166Ā 482Ā | Ā |
Deferred taxation liabilities | 50Ā 727Ā | Ā | 44Ā 788Ā | Ā | 23Ā 194Ā | Ā |
Other liabilities | 2Ā 025Ā 931Ā | Ā | 2Ā 211Ā 487Ā | Ā | 2Ā 399Ā 113Ā | Ā |
Ā | 44Ā 104Ā 332Ā | Ā | 44Ā 287Ā 096Ā | Ā | 44Ā 103Ā 521Ā | Ā |
Liabilities to customers under investment contracts | 34Ā 494Ā | Ā | 32Ā 845Ā | Ā | 8Ā 650Ā 085Ā | Ā |
Insurance liabilities, including unit-linked liabilities | 2Ā 684Ā | Ā | 2Ā 382Ā | Ā | 7Ā 794Ā | Ā |
Ā | 44Ā 141Ā 510Ā | Ā | 44Ā 322Ā 323Ā | Ā | 52Ā 761Ā 400Ā | Ā |
Subordinated liabilities | 1Ā 447Ā 948Ā | Ā | 1Ā 436Ā 361Ā | Ā | 1Ā 594Ā 961Ā | Ā |
Ā | 45Ā 589Ā 458Ā | Ā | 45Ā 758Ā 684Ā | Ā | 54Ā 356Ā 361Ā | Ā |
Equity | Ā | Ā | Ā | |||
Ordinary share capital | 247Ā | Ā | 247Ā | Ā | 247Ā | Ā |
Ordinary share premium | 1Ā 517Ā 852Ā | Ā | 1Ā 517Ā 852Ā | Ā | 2Ā 336Ā 194Ā | Ā |
Treasury shares | (261Ā 729) | Ā | (272Ā 881) | Ā | (284Ā 430) | Ā |
Other reserves | (910Ā 668) | Ā | (976Ā 297) | Ā | (557Ā 009) | Ā |
Retained income | 3Ā 699Ā 652Ā | Ā | 3Ā 593Ā 384Ā | Ā | 2Ā 730Ā 044Ā | Ā |
Ordinary shareholders' equity | 4Ā 045Ā 354Ā | Ā | 3Ā 862Ā 305Ā | Ā | 4Ā 225Ā 046Ā | Ā |
Perpetual preference share capital* | 172Ā 349Ā | Ā | 168Ā 518Ā | Ā | 195Ā 161Ā | Ā |
Shareholders' equity excluding non-controlling interests | 4Ā 217Ā 703Ā | Ā | 4Ā 030Ā 823Ā | Ā | 4Ā 420Ā 207Ā | Ā |
Other Additional Tier 1 securities in issue | 296Ā 809Ā | Ā | 295Ā 593Ā | Ā | 304Ā 047Ā | Ā |
Non-controlling interests | 560Ā 715Ā | Ā | 571Ā 216Ā | Ā | 646Ā 148Ā | Ā |
- Perpetual preferred securities issued by subsidiaries | 71Ā 106Ā | Ā | 69Ā 259Ā | Ā | 82Ā 101Ā | Ā |
- Non-controlling interests in partially held subsidiaries | 489Ā 609Ā | Ā | 501Ā 957Ā | Ā | 564Ā 047Ā | Ā |
Total equity | 5Ā 075Ā 227Ā | Ā | 4Ā 897Ā 632Ā | Ā | 5Ā 370Ā 402Ā | Ā |
Total liabilities and equity | 50Ā 664Ā 685Ā | Ā | 50Ā 656Ā 316Ā | Ā | 59Ā 726Ā 763Ā | Ā |
*Ā Ā Ā Ā Ā Ā Ā Software of Ā£13.0 million (31 March 2020: Ā£14.6 million; 30 September 2019: Ā£18.5 million), which was previously reported within intangible assets, is now reported as a separate line item. The prior periods have been re-presented to reflect the same basis. Perpetual preference share premium of Ā£172.3 million (31 March 2020: Ā£168.5 million; 30 September 2019: Ā£195.1 million), which was previously reported within share premium, is now reported within perpetual preference share capital and premium. The prior periods have been re-presented to reflect the same basis.
Ā
Condensed consolidated statement of changes in equity
Ā | Six months to | Six months to | Year to | |||
Ā£'000 | 30 Sept 2020 | 30 Sept 2019 | 31 March 2020 | |||
Balance at the beginning of the period | 4Ā 897Ā 632Ā | Ā | 5Ā 251Ā 014Ā | Ā | 5Ā 251Ā 014Ā | Ā |
Total comprehensive income | 189Ā 848Ā | Ā | 325Ā 572Ā | Ā | 721Ā 277Ā | Ā |
Share-based payments adjustments | 18Ā 353Ā | Ā | 29Ā 770Ā | Ā | 39Ā 336Ā | Ā |
Dividends paid to ordinary shareholders | -Ā | Ā | (134Ā 778) | Ā | (244Ā 323) | Ā |
Dividends paid to perpetual preference shareholders and Other Additional Tier 1 security holders | -Ā | Ā | (7Ā 511) | Ā | (14Ā 857) | Ā |
Dividends paid to perpetual preference shareholders included in non-controlling interests and Other Additional Tier 1 security holders | (19Ā 628) | Ā | (14Ā 842) | Ā | (29Ā 403) | Ā |
Dividends paid to non-controlling interests | (11Ā 028) | Ā | (34Ā 003) | Ā | (79Ā 106) | Ā |
Issue of ordinary shares | -Ā | Ā | 64Ā 647Ā | Ā | 64Ā 647Ā | Ā |
Issue of equity by subsidiaries | -Ā | Ā | -Ā | Ā | 45Ā 256Ā | Ā |
Net equity impact of non-controlling interest movements | 1Ā 687Ā | Ā | 1Ā 966Ā | Ā | (27Ā 100) | Ā |
Employee benefit liability recognised | -Ā | Ā | -Ā | Ā | (7Ā 570) | Ā |
Movement of treasury shares | (1Ā 861) | Ā | (109Ā 046) | Ā | (121Ā 298) | Ā |
Net equity movements of interests in associated undertakings | 225Ā | Ā | (2Ā 387) | Ā | (2Ā 387) | Ā |
Distribution to shareholders | -Ā | Ā | -Ā | Ā | (697Ā 854) | Ā |
Balance at the end of the period | 5Ā 075Ā 228Ā | Ā | 5Ā 370Ā 402Ā | Ā | 4Ā 897Ā 632Ā | Ā |
Ā
Condensed consolidated cash flow statement
Ā | Six months to | Six months to | Year to | |||
Ā£'000 | 30 Sept 2020 | 30 Sept 2019 | 31 March 2020 | |||
Cash inflow from operating activities | 178Ā 552Ā | Ā | 376Ā 031Ā | Ā | 547Ā 812Ā | Ā |
Increase in operating assets | (2Ā 457Ā 502) | Ā | (2Ā 328Ā 228) | Ā | (5Ā 795Ā 856) | Ā |
(Decrease)/increase in operating liabilities | (759Ā 756) | Ā | 1Ā 553Ā 483Ā | Ā | 5Ā 715Ā 897Ā | Ā |
Net cash (outflow)/inflow from operating activities | (3Ā 038Ā 706) | Ā | (398Ā 714) | Ā | 467Ā 853Ā | Ā |
Net cash outflow from investing activities | (6Ā 967) | Ā | (20Ā 885) | Ā | (350Ā 855) | Ā |
Net cash outflow from financing activities | (59Ā 855) | Ā | (367Ā 773) | Ā | (603Ā 247) | Ā |
Effects of exchange rates on cash and cash equivalents | 41Ā 935Ā | Ā | 22Ā 834Ā | Ā | (435Ā 149) | Ā |
Net decrease in cash and cash equivalents | (3Ā 063Ā 593) | Ā | (764Ā 538) | Ā | (921Ā 398) | Ā |
Cash and cash equivalents at the beginning of the period | 6Ā 193Ā 708Ā | Ā | 7Ā 115Ā 106Ā | Ā | 7Ā 115Ā 106Ā | Ā |
Cash and cash equivalents at the end of the period | 3Ā 130Ā 115Ā | Ā | 6Ā 350Ā 568Ā | Ā | 6Ā 193Ā 708Ā | Ā |
Cash and cash equivalents is defined as including: cash and balances at central banks, on demand loans and advances to banks and non-sovereign and non-bank cash placements (all of which have a maturity profile of less than three months).
Ā
ĀĀ
Combined consolidated segmental analysis
Segmental geographical and business analysis of adjusted operating profit before goodwill, acquired intangibles, non-operating items, taxation and after other non-controlling interests.
For the six months to 30 September Ā£'000 | UK and Other | Southern Africa | Total | |||
2020 | Ā | Ā | Ā | |||
Wealth & Investment | 28Ā 877Ā | Ā | 11Ā 960Ā | Ā | 40Ā 837Ā | Ā |
Specialist Banking | 12Ā 903Ā | Ā | 92Ā 870Ā | Ā | 105Ā 773Ā | Ā |
Group Investments^ | 11Ā 791Ā | Ā | 1Ā 428Ā | Ā | 13Ā 219Ā | Ā |
Group costs | (10Ā 208) | Ā | (7Ā 135) | Ā | (17Ā 343) | Ā |
Continuing operations adjusted operating profit | 43Ā 363Ā | Ā | 99Ā 123Ā | Ā | 142Ā 486Ā | Ā |
Discontinued operations | -Ā | Ā | -Ā | Ā | -Ā | Ā |
Total group adjusted operating profit | 43Ā 363Ā | Ā | 99Ā 123Ā | Ā | 142Ā 486Ā | Ā |
Other non-controlling interests^ | Ā | Ā | (15Ā 255) | Ā | ||
Operating profit before non-controlling interests | Ā | Ā | 127Ā 231Ā | Ā | ||
Ā | Ā | Ā | Ā | |||
2019* | Ā | Ā | Ā | |||
Wealth & Investment | 30Ā 455Ā | Ā | 14Ā 053Ā | Ā | 44Ā 508Ā | Ā |
Specialist Banking | 79Ā 448Ā | Ā | 145Ā 339Ā | Ā | 224Ā 787Ā | Ā |
Group Investments | -Ā | Ā | 30Ā 270Ā | Ā | 30Ā 270Ā | Ā |
Group costs | (15Ā 839) | Ā | (7Ā 433) | Ā | (23Ā 272) | Ā |
Continuing operations adjusted operating profit | 94Ā 064Ā | Ā | 182Ā 229Ā | Ā | 276Ā 293Ā | Ā |
Discontinued operations | 58Ā 974Ā | Ā | 38Ā 355Ā | Ā | 97Ā 329Ā | Ā |
Total group adjusted operating profit | 153Ā 038Ā | Ā | 220Ā 584Ā | Ā | 373Ā 622Ā | Ā |
Other non-controlling interests** | 28Ā 863Ā | Ā | ||||
Operating profit before non-controlling interests | Ā | Ā | 402Ā 485Ā | Ā |
* Ā Ā Ā Ā Ā Ā Restated to reflect continuing operations.
**Ā Ā Ā Ā Ā Ā (Profit)/loss attributable to other non-controlling interests predominantly relates to the Investec Property Fund Limited.
^Ā Ā Ā Ā Ā Ā In terms of IFRS 8 Operating segments, management concluded that key operating decision makers of Investec currently reviewed the operating results of the following operating segments:
ā¢Ā Ā Ā Ā Ā Ā Ā Investec Specialist Bank
ā¢Ā Ā Ā Ā Ā Ā Ā Investec Wealth & Investment
ā¢Ā Ā Ā Ā Ā Ā Ā Group Investments
ā¢Ā Ā Ā Ā Ā Ā Ā Group costs
Ā Ā Ā Ā Ā Ā Ā Ā Ā Accordingly, the results of Group Investments have been disclosed as a separate segment for the first time in the 30 September 2020 half year results. Group Investments was previously presented as a subset component of the Investec Specialist Bank.
Ā
Net fee and commission income
For the six months to 30 September 2020 Ā£'000 | UK and Other | Southern Africa | Total | |||
Wealth & Investment net fee and commission income | 153Ā 004Ā | Ā | 36Ā 236Ā | Ā | 189Ā 240Ā | Ā |
Fund management fees/fees for funds under management | 129Ā 086Ā | Ā | 20Ā 484Ā | Ā | 149Ā 570Ā | Ā |
Private client transactional fees | 24Ā 303Ā | Ā | 16Ā 384Ā | Ā | 40Ā 687Ā | Ā |
Fee and commission expense | (385) | Ā | (632) | Ā | (1Ā 017) | Ā |
Specialist Banking net fee and commission income | 66Ā 883Ā | Ā | 45Ā 655Ā | Ā | 112Ā 538Ā | Ā |
Corporate and institutional transactional and advisory services | 66Ā 785Ā | Ā | 33Ā 749Ā | Ā | 100Ā 534Ā | Ā |
Private client transactional fees | 6Ā 226Ā | Ā | 24Ā 603Ā | Ā | 30Ā 829Ā | Ā |
Fee and commission expense | (6Ā 128) | Ā | (12Ā 697) | Ā | (18Ā 825) | Ā |
Group Investments net fee and commission income | -Ā | Ā | 23Ā 030Ā | Ā | 23Ā 030Ā | Ā |
Net fee and commission income | 219Ā 887Ā | Ā | 104Ā 921Ā | Ā | 324Ā 808Ā | Ā |
Annuity fees (net of fees payable) | 137Ā 486Ā | Ā | 94Ā 011Ā | Ā | 231Ā 497Ā | Ā |
Deal fees | 82Ā 401Ā | Ā | 10Ā 910Ā | Ā | 93Ā 311Ā | Ā |
Included in Specialist Banking corporate and institutional and advisory services is net fee income of Ā£32.7 million (2019: Ā£36.2 million) for operating lease income which is out of the scope of IFRS 15 - Revenue from contracts with customers.
Discontinued operations
Asset Management business
During the prior financial year on 13 March 2020, the group successfully completed the demerger of Ninety One (formerly known as Investec Asset Management), which became separately listed on 16 March 2020. The loss of control of Investec Asset Management was effected through the distribution of Ninety One shares to shareholders.
The table below presents the income statement from discontinued operations included in the total group income statement for the six months to 30 September 2019 and the year to 31 March 2020.
Combined consolidated income statement of discontinued operations
Ā | Six months to 30 September 2019 | Year to 31 March 2020 | ||||||||||
Ā£'000 | UK and Other | Southern Africa | Total | UK and Other | Southern Africa | Total | ||||||
Net interest income | (1Ā 207) | Ā | 2Ā 202Ā | Ā | 995Ā | Ā | (2Ā 235) | Ā | 3Ā 962Ā | Ā | 1Ā 727Ā | Ā |
Net fee and commission income | 204Ā 392Ā | Ā | 94Ā 983Ā | Ā | 299Ā 375Ā | Ā | 392Ā 591Ā | Ā | 191Ā 388Ā | Ā | 583Ā 979Ā | Ā |
Investment income | (158) | Ā | 8Ā | Ā | (150) | Ā | (2Ā 042) | Ā | 35Ā | Ā | (2Ā 007) | Ā |
Trading income/(loss) arising from - balance sheet management and other trading activities | 4Ā 054Ā | Ā | (95) | Ā | 3Ā 959Ā | Ā | 1Ā 634Ā | Ā | (76) | Ā | 1Ā 558Ā | Ā |
Other operating income | 3Ā 822Ā | Ā | 584Ā | Ā | 4Ā 406Ā | Ā | 4Ā 697Ā | Ā | 745Ā | Ā | 5Ā 442Ā | Ā |
Total operating income before expected credit loss impairment charges | 210Ā 903Ā | Ā | 97Ā 682Ā | Ā | 308Ā 585Ā | Ā | 394Ā 645Ā | Ā | 196Ā 054Ā | Ā | 590Ā 699Ā | Ā |
Expected credit loss impairment charges | -Ā | Ā | -Ā | Ā | -Ā | Ā | -Ā | Ā | -Ā | Ā | -Ā | Ā |
Operating income | 210Ā 903Ā | Ā | 97Ā 682Ā | Ā | 308Ā 585Ā | Ā | 394Ā 645Ā | Ā | 196Ā 054Ā | Ā | 590Ā 699Ā | Ā |
Operating costs | (151Ā 929) | Ā | (59Ā 327) | Ā | (211Ā 256) | Ā | (285Ā 542) | Ā | (115Ā 398) | Ā | (400Ā 940) | Ā |
Operating profit before strategic actions and non-controlling interests | 58Ā 974Ā | Ā | 38Ā 355Ā | Ā | 97Ā 329Ā | Ā | 109Ā 103Ā | Ā | 80Ā 656Ā | Ā | 189Ā 759Ā | Ā |
Profit attributable to non-controlling interests from discontinued operations | (9Ā 743) | Ā | (5Ā 429) | Ā | (15Ā 172) | Ā | (18Ā 106) | Ā | (11Ā 241) | Ā | (29Ā 347) | Ā |
Operating profit | 49Ā 231Ā | Ā | 32Ā 926Ā | Ā | 82Ā 157Ā | Ā | 90Ā 997Ā | Ā | 69Ā 415Ā | Ā | 160Ā 412Ā | Ā |
Gain on distribution net of implementation costs | (4Ā 125) | Ā | (4Ā 454) | Ā | (8Ā 579) | Ā | 549Ā 263Ā | Ā | 270Ā 970Ā | Ā | 820Ā 233Ā | Ā |
Profit before taxation | 45Ā 106Ā | Ā | 28Ā 472Ā | Ā | 73Ā 578Ā | Ā | 640Ā 260Ā | Ā | 340Ā 385Ā | Ā | 980Ā 645Ā | Ā |
Taxation on operating profit before strategic actions | (9Ā 961) | Ā | (10Ā 931) | Ā | (20Ā 892) | Ā | (19Ā 112) | Ā | (22Ā 088) | Ā | (41Ā 200) | Ā |
Taxation on strategic actions | 645Ā | Ā | 582Ā | Ā | 1Ā 227Ā | Ā | 1Ā 253Ā | Ā | (15Ā 066) | Ā | (13Ā 813) | Ā |
Earnings attributable to shareholders from discontinued operations | 35Ā 790Ā | Ā | 18Ā 123Ā | Ā | 53Ā 913Ā | Ā | 622Ā 401Ā | Ā | 303Ā 231Ā | Ā | 925Ā 632Ā | Ā |
Ā
ĀĀ
Restatements
The group remains committed to its objective to simplify and focus the business in pursuit of disciplined growth over the long-term.
In this regard the following strategic actions were effected in the prior financial year ended 31 March 2020:
ā¢Ā Ā Ā Ā Demerger of the asset management business
ā¢Ā Ā Ā Ā Closure of Click & Invest which formed part of the UK wealth management business
ā¢Ā Ā Ā Ā Sale of the Irish Wealth & Investment business
ā¢Ā Ā Ā Ā Restructure of the Irish branch
ā¢Ā Ā Ā Ā Sale of UK Property Fund
ā¢Ā Ā Ā Ā Closure and rundown of the Hong Kong direct investments business.
Ā
We elected to separately disclose the financial impact of these strategic actions as the financial impact from group restructures and the rundown of portfolios where operations have ceased.
The effective date of the Asset Management business demerger was 13 March 2020 and admission of the Ninety One Limited shares and the Ninety One plc shares to the Johannesburg Stock Exchange and London Stock Exchange was effected on 16 March 2020. The global asset management business has been disclosed as a discontinued operation and the income statement for the prior period has been appropriately re-presented.
Depreciation on operating leased assets of Ā£0.4 million (30 September 2019: Ā£0.8 million; 31 March 2020: Ā£1.4 million), which was previously reported as a separate line item on the income statement, has been included in operating costs. The prior period has been restated to reflect the same basis.Ā
Software of Ā£13.0 million (31 March 2020: Ā£14.6 million; 30 September 2019: Ā£18.5 million), which was previously reported within Intangible assets, is now reported as a separate line item. The prior periods have been re-presented to reflect the same basis.
Perpetual preference share premium of Ā£172.3 million (31 March 2020: Ā£168.5 million; 30 September 2019: Ā£195.1 million), which was previously reported within share premium, is now reported within Perpetual preference share capital and premium. The prior periods have been re-presented to reflect the same basis.
The re-presentation of software and the perpetual preference share premium was done to provide users enhanced clarity on the values used to calculate net asset values and the various ROE ratios.
Financial impact of strategic actions
Ā£'000 | Six months to 30 Sept 2020 | Six months to 30 Sept 2019 | Year to 31 March 2020 | |||
Closure and rundown of the Hong Kong direct investments business* | (2Ā 158) | Ā | (49Ā 469) | Ā | (89Ā 257) | Ā |
Financial impact of group restructures | -Ā | Ā | 12Ā 757Ā | Ā | (25Ā 725) | Ā |
Closure of Click & Invest | -Ā | Ā | (4Ā 020) | Ā | (4Ā 309) | Ā |
Sale of the Irish Wealth & Investment business | -Ā | Ā | 18Ā 959Ā | Ā | 19Ā 741Ā | Ā |
Restructure of the Irish branch | -Ā | Ā | (1Ā 265) | Ā | (41Ā 110) | Ā |
Other | -Ā | Ā | (917) | Ā | (47) | Ā |
Financial impact of strategic actions - continuing operations | (2Ā 158) | Ā | (36Ā 712) | Ā | (114Ā 982) | Ā |
Taxation on financial impact of strategic actions from continuing operations | 381Ā | Ā | 10Ā 497Ā | Ā | 19Ā 856Ā | Ā |
Net financial impact of strategic actions - continuing operations | (1Ā 777) | Ā | (26Ā 215) | Ā | (95Ā 126) | Ā |
Gain on distribution of Ninety One shares net of taxation and implementation costs | -Ā | Ā | (8Ā 579) | Ā | 806Ā 420Ā | Ā |
Net financial impact of strategic actions - Total group | (1Ā 777) | Ā | (34Ā 794) | Ā | 711Ā 294Ā | Ā |
*Ā Ā Ā Ā Ā Ā Ā Included within the balance are fair value losses of Ā£0.1 million (September 2019: Ā£44.6 million, March 2020: Ā£83.2 million).
Ā
ĀĀ
Restatements continued
Ā£'000 | Six months to 30 Sept 2019 as previously reported | Representation as a Ā discontinued Ā operation | Six months to 30 Sept 2019 restated | |||
Interest income | 1Ā 382Ā 062Ā | Ā | (2Ā 386) | Ā | 1Ā 379Ā 676Ā | Ā |
Interest expense | (955Ā 418) | Ā | 1Ā 391Ā | Ā | (954Ā 027) | Ā |
Net interest income | 426Ā 644Ā | Ā | (995) | Ā | 425Ā 649Ā | Ā |
Fee and commission income | 818Ā 827Ā | Ā | (396Ā 694) | Ā | 422Ā 133Ā | Ā |
Fee and commission expense | (123Ā 727) | Ā | 97Ā 319Ā | Ā | (26Ā 408) | Ā |
Investment income | 56Ā 929Ā | Ā | 150Ā | Ā | 57Ā 079Ā | Ā |
Share of post taxation profit of associates and joint venture holdings | 17Ā 754Ā | Ā | -Ā | Ā | 17Ā 754Ā | Ā |
Trading income arising from | Ā | Ā | Ā | |||
- customer flow | 62Ā 771Ā | Ā | -Ā | Ā | 62Ā 771Ā | Ā |
- balance sheet management and other trading activities | 1Ā 641Ā | Ā | (3Ā 959) | Ā | (2Ā 318) | Ā |
Other operating income | 7Ā 015Ā | Ā | (4Ā 406) | Ā | 2Ā 609Ā | Ā |
Total operating income before expected credit loss impairment charges | 1Ā 267Ā 854Ā | Ā | (308Ā 585) | Ā | 959Ā 269Ā | Ā |
Expected credit loss impairment charges | (31Ā 021) | Ā | -Ā | Ā | (31Ā 021) | Ā |
Operating income | 1Ā 236Ā 833Ā | Ā | (308Ā 585) | Ā | 928Ā 248Ā | Ā |
Operating costs | (834Ā 348) | Ā | 211Ā 256Ā | Ā | (623Ā 092) | Ā |
Operating profit before goodwill, acquired intangibles and strategic actions | 402Ā 485Ā | Ā | (97Ā 329) | Ā | 305Ā 156Ā | Ā |
Amortisation of acquired intangibles | (7Ā 954) | Ā | -Ā | Ā | (7Ā 954) | Ā |
Closure and rundown of the Hong Kong direct investments business | (49Ā 469) | Ā | -Ā | Ā | (49Ā 469) | Ā |
Operating profit | 345Ā 062Ā | Ā | (97Ā 329) | Ā | 247Ā 733Ā | Ā |
Financial impact of group restructures | 4Ā 178Ā | Ā | 8Ā 579Ā | Ā | 12Ā 757Ā | Ā |
Profit before taxation | 349Ā 240Ā | Ā | (88Ā 750) | Ā | 260Ā 490Ā | Ā |
Taxation on operating profit before goodwill, acquired intangibles and strategic actions | (62Ā 374) | Ā | 20Ā 892Ā | Ā | (41Ā 482) | Ā |
Taxation on acquired intangibles and strategic actions | 13Ā 328Ā | Ā | (1Ā 227) | Ā | 12Ā 101Ā | Ā |
Profit after taxation from continuing operations | 300Ā 194Ā | Ā | (69Ā 085) | Ā | 231Ā 109Ā | Ā |
Profit after taxation from discontinued operations | -Ā | Ā | 69Ā 085Ā | Ā | 69Ā 085Ā | Ā |
Profit after taxation | 300Ā 194Ā | Ā | -Ā | Ā | 300Ā 194Ā | Ā |
Profit attributable to other non-controlling interests | (28Ā 863) | Ā | -Ā | Ā | (28Ā 863) | Ā |
Profit attributable to non-controlling interests of discontinued operations | (15Ā 172) | Ā | -Ā | Ā | (15Ā 172) | Ā |
Earnings attributable to shareholders | 256Ā 159Ā | Ā | -Ā | Ā | 256Ā 159Ā | Ā |
Earnings per share (pence) | Ā | Ā | Ā | |||
- Basic | 24.7Ā | Ā | Ā | 24.7Ā | Ā | |
- Diluted | 23.8Ā | Ā | Ā | 23.8Ā | Ā | |
- Basic for continuing operations | Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā n/a | Ā | 19.0Ā | Ā | ||
- Diluted for continuing operations | Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā n/a | Ā | 18.3Ā | Ā | ||
Adjusted earnings per share (pence) | Ā | Ā | Ā | |||
- Basic | 28.9Ā | Ā | Ā | 28.9Ā | Ā | |
- Diluted | 27.8Ā | Ā | Ā | 27.8Ā | Ā | |
- Basic for continuing operations | Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā n/a | Ā | 22.4Ā | Ā | ||
- Diluted for continuing operations | Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā Ā n/a | Ā | 21.6Ā | Ā |
Ā
ĀĀ
Analysis of assets and liabilities by measurement category
At 30 September 2020 | Total instruments at fair value | Amortised cost | Non-financial instruments or scoped out of IFRS 9 | Total | ||||
Ā£'000 | ||||||||
Assets | Ā | Ā | Ā | Ā | ||||
Cash and balances at central banks | -Ā | Ā | 2Ā 477Ā 636Ā | Ā | -Ā | Ā | 2Ā 477Ā 636Ā | Ā |
Loans and advances to banks | -Ā | Ā | 3Ā 079Ā 807Ā | Ā | -Ā | Ā | 3Ā 079Ā 807Ā | Ā |
Non-sovereign and non-bank cash placements | 11Ā 159Ā | Ā | 352Ā 191Ā | Ā | -Ā | Ā | 363Ā 350Ā | Ā |
Reverse repurchase agreements and cash collateral on securities borrowed | 991Ā 402Ā | Ā | 3Ā 133Ā 189Ā | Ā | -Ā | Ā | 4Ā 124Ā 591Ā | Ā |
Sovereign debt securities | 4Ā 573Ā 107Ā | Ā | 325Ā 829Ā | Ā | -Ā | Ā | 4Ā 898Ā 936Ā | Ā |
Bank debt securities | 402Ā 812Ā | Ā | 187Ā 361Ā | Ā | -Ā | Ā | 590Ā 173Ā | Ā |
Other debt securities | 578Ā 762Ā | Ā | 848Ā 412Ā | Ā | -Ā | Ā | 1Ā 427Ā 174Ā | Ā |
Derivative financial instruments | 1Ā 885Ā 922Ā | Ā | -Ā | Ā | -Ā | Ā | 1Ā 885Ā 922Ā | Ā |
Securities arising from trading activities | 929Ā 143Ā | Ā | -Ā | Ā | -Ā | Ā | 929Ā 143Ā | Ā |
Investment portfolio | 994Ā 543Ā | Ā | -Ā | Ā | -Ā | Ā | 994Ā 543Ā | Ā |
Loans and advances to customers | 2Ā 112Ā 911Ā | Ā | 22Ā 742Ā 966Ā | Ā | -Ā | Ā | 24Ā 855Ā 877Ā | Ā |
Own originated loans and advances to customers securitised | -Ā | Ā | 307Ā 532Ā | Ā | -Ā | Ā | 307Ā 532Ā | Ā |
Other loans and advances | -Ā | Ā | 100Ā 659Ā | Ā | -Ā | Ā | 100Ā 659Ā | Ā |
Other securitised assets | 110Ā 370Ā | Ā | 12Ā 522Ā | Ā | -Ā | Ā | 122Ā 892Ā | Ā |
Interests in associated undertakings | -Ā | Ā | -Ā | Ā | 722Ā 227Ā | Ā | 722Ā 227Ā | Ā |
Deferred taxation assets | -Ā | Ā | -Ā | Ā | 256Ā 581Ā | Ā | 256Ā 581Ā | Ā |
Other assets | 177Ā 037Ā | Ā | 1Ā 008Ā 152Ā | Ā | 726Ā 836Ā | Ā | 1Ā 912Ā 025Ā | Ā |
Property and equipment | -Ā | Ā | -Ā | Ā | 341Ā 343Ā | Ā | 341Ā 343Ā | Ā |
Investment properties | -Ā | Ā | -Ā | Ā | 799Ā 588Ā | Ā | 799Ā 588Ā | Ā |
Goodwill | -Ā | Ā | -Ā | Ā | 270Ā 991Ā | Ā | 270Ā 991Ā | Ā |
Software | -Ā | Ā | -Ā | Ā | 13Ā 045Ā | Ā | 13Ā 045Ā | Ā |
Other acquired intangible assets | -Ā | Ā | -Ā | Ā | 66Ā 224Ā | Ā | 66Ā 224Ā | Ā |
Non-current assets classified as held for sale | -Ā | Ā | -Ā | Ā | 87Ā 248Ā | Ā | 87Ā 248Ā | Ā |
Ā | 12Ā 767Ā 168Ā | Ā | 34Ā 576Ā 256Ā | Ā | 3Ā 284Ā 083Ā | Ā | 50Ā 627Ā 507Ā | Ā |
Other financial instruments at fair value through profit or loss in respect of liabilities to customers | 37Ā 178Ā | Ā | -Ā | Ā | -Ā | Ā | 37Ā 178Ā | Ā |
Ā | 12Ā 804Ā 346Ā | Ā | 34Ā 576Ā 256Ā | Ā | 3Ā 284Ā 083Ā | Ā | 50Ā 664Ā 685Ā | Ā |
Ā | Ā | Ā | Ā | Ā | ||||
Liabilities | Ā | Ā | Ā | Ā | ||||
Deposits by banks | 313Ā | Ā | 3Ā 319Ā 414Ā | Ā | -Ā | Ā | 3Ā 319Ā 727Ā | Ā |
Derivative financial instruments | 1Ā 793Ā 033Ā | Ā | -Ā | Ā | -Ā | Ā | 1Ā 793Ā 033Ā | Ā |
Other trading liabilities | 577Ā 821Ā | Ā | -Ā | Ā | -Ā | Ā | 577Ā 821Ā | Ā |
Repurchase agreements and cash collateral on securities lent | 437Ā 204Ā | Ā | 1Ā 254Ā 846Ā | Ā | -Ā | Ā | 1Ā 692Ā 050Ā | Ā |
Customer accounts (deposits) | 1Ā 596Ā 301Ā | Ā | 30Ā 955Ā 396Ā | Ā | -Ā | Ā | 32Ā 551Ā 697Ā | Ā |
Debt securities in issue | 241Ā 175Ā | Ā | 1Ā 574Ā 082Ā | Ā | -Ā | Ā | 1Ā 815Ā 257Ā | Ā |
Liabilities arising on securitisation of own originated loans and advances | -Ā | Ā | 73Ā 042Ā | Ā | -Ā | Ā | 73Ā 042Ā | Ā |
Liabilities arising on securitisation of other assets | 109Ā 107Ā | Ā | -Ā | Ā | -Ā | Ā | 109Ā 107Ā | Ā |
Current taxation liabilities | -Ā | Ā | -Ā | Ā | 95Ā 940Ā | Ā | 95Ā 940Ā | Ā |
Deferred taxation liabilities | -Ā | Ā | -Ā | Ā | 50Ā 727Ā | Ā | 50Ā 727Ā | Ā |
Other liabilities | 97Ā 581Ā | Ā | 1Ā 153Ā 822Ā | Ā | 774Ā 528Ā | Ā | 2Ā 025Ā 931Ā | Ā |
Ā | 4Ā 852Ā 535Ā | Ā | 38Ā 330Ā 602Ā | Ā | 921Ā 195Ā | Ā | 44Ā 104Ā 332Ā | Ā |
Liabilities to customers under investment contracts | 34Ā 494Ā | Ā | -Ā | Ā | -Ā | Ā | 34Ā 494Ā | Ā |
Insurance liabilities, including unit-linked liabilities | 2Ā 684Ā | Ā | -Ā | Ā | -Ā | Ā | 2Ā 684Ā | Ā |
Ā | 4Ā 889Ā 713Ā | Ā | 38Ā 330Ā 602Ā | Ā | 921Ā 195Ā | Ā | 44Ā 141Ā 510Ā | Ā |
Subordinated liabilities | 355Ā 364Ā | Ā | 1Ā 092Ā 584Ā | Ā | -Ā | Ā | 1Ā 447Ā 948Ā | Ā |
Ā | 5Ā 245Ā 077Ā | Ā | 39Ā 423Ā 186Ā | Ā | 921Ā 195Ā | Ā | 45Ā 589Ā 458Ā | Ā |
Ā
ĀĀ
Financial instruments at fair value
The table below analyses recurring fair value measurements for financial assets and financial liabilities. These fair value measurements are categorised into different levels in the fair value hierarchy based on the inputs to the valuation technique used.
The different levels are identified as follows:
Level 1Ā - quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2Ā - inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e.Ā asĀ prices) or indirectly (i.e. derived from prices).
Level 3Ā - inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Ā | Fair value category | |||||||
At 30 September 2020 | Total instruments at fair value | Level 1 | Level 2 | Level 3 | ||||
Ā£'000 | ||||||||
Assets | Ā | Ā | Ā | Ā | ||||
Non-sovereign and non-bank cash placements | 11Ā 159Ā | Ā | -Ā | Ā | 11Ā 159Ā | Ā | -Ā | Ā |
Reverse repurchase agreements and cash collateral on securities borrowed | 991Ā 402Ā | Ā | 7Ā | Ā | 991Ā 395Ā | Ā | -Ā | Ā |
Sovereign debt securities | 4Ā 573Ā 107Ā | Ā | 4Ā 573Ā 107Ā | Ā | -Ā | Ā | -Ā | Ā |
Bank debt securities | 402Ā 812Ā | Ā | 241Ā 995Ā | Ā | 160Ā 817Ā | Ā | -Ā | Ā |
Other debt securities | 578Ā 762Ā | Ā | 140Ā 226Ā | Ā | 304Ā 201Ā | Ā | 134Ā 335Ā | Ā |
Derivative financial instruments | 1Ā 885Ā 922Ā | Ā | 3Ā 037Ā | Ā | 1Ā 852Ā 971Ā | Ā | 29Ā 914Ā | Ā |
Securities arising from trading activities | 929Ā 143Ā | Ā | 904Ā 633Ā | Ā | 19Ā 203Ā | Ā | 5Ā 307Ā | Ā |
Investment portfolio | 994Ā 543Ā | Ā | 95Ā 624Ā | Ā | 8Ā 961Ā | Ā | 889Ā 958Ā | Ā |
Loans and advances to customers | 2Ā 112Ā 911Ā | Ā | -Ā | Ā | 1Ā 076Ā 157Ā | Ā | 1Ā 036Ā 754Ā | Ā |
Other securitised assets | 110Ā 370Ā | Ā | -Ā | Ā | 3Ā 017Ā | Ā | 107Ā 353Ā | Ā |
Other assets | 177Ā 037Ā | Ā | 177Ā 037Ā | Ā | -Ā | Ā | -Ā | Ā |
Other financial instruments at fair value through profit or loss in respect of liabilities to customers | 37Ā 178Ā | Ā | 37Ā 178Ā | Ā | -Ā | Ā | -Ā | Ā |
Ā | 12Ā 804Ā 346Ā | Ā | 6Ā 172Ā 844Ā | Ā | 4Ā 427Ā 881Ā | Ā | 2Ā 203Ā 621Ā | Ā |
Liabilities | Ā | Ā | Ā | Ā | ||||
Deposits by banks | 313Ā | Ā | -Ā | Ā | -Ā | Ā | 313Ā | Ā |
Derivative financial instruments | 1Ā 793Ā 033Ā | Ā | 1Ā 482Ā | Ā | 1Ā 760Ā 034Ā | Ā | 31Ā 517Ā | Ā |
Other trading liabilities | 577Ā 821Ā | Ā | 324Ā 851Ā | Ā | 252Ā 970Ā | Ā | -Ā | Ā |
Repurchase agreements and cash collateral on securities lent | 437Ā 204Ā | Ā | 3Ā | Ā | 437Ā 201Ā | Ā | -Ā | Ā |
Customer accounts (deposits) | 1Ā 596Ā 301Ā | Ā | 11Ā | Ā | 1Ā 596Ā 290Ā | Ā | -Ā | Ā |
Debt securities in issue | 241Ā 175Ā | Ā | -Ā | Ā | 241Ā 175Ā | Ā | -Ā | Ā |
Liabilities arising on securitisation of other assets | 109Ā 107Ā | Ā | -Ā | Ā | -Ā | Ā | 109Ā 107Ā | Ā |
Other liabilities | 97Ā 581Ā | Ā | -Ā | Ā | 56Ā 257Ā | Ā | 41Ā 324Ā | Ā |
Liabilities to customers under investment contracts | 34Ā 494Ā | Ā | -Ā | Ā | 34Ā 494Ā | Ā | -Ā | Ā |
Insurance liabilities, including unit-linked liabilities | 2Ā 684Ā | Ā | -Ā | Ā | 2Ā 684Ā | Ā | -Ā | Ā |
Subordinated liabilities | 355Ā 364Ā | Ā | 355Ā 364Ā | Ā | -Ā | Ā | -Ā | Ā |
Ā | 5Ā 245Ā 077Ā | Ā | 681Ā 711Ā | Ā | 4Ā 381Ā 105Ā | Ā | 182Ā 261Ā | Ā |
Net financial assets at fair value | 7Ā 559Ā 269Ā | Ā | 5Ā 491Ā 133Ā | Ā | 46Ā 776Ā | Ā | 2Ā 021Ā 360Ā | Ā |
Ā
Transfers between level 1 and level 2
There were no transfers between level 1 and level 2 in the current and prior year.
Measurement of financial assets and liabilities at level 2
The table below sets out information about the valuation techniques used at the end of the reporting period in measuring financial instruments categorised as level 2 in the fair value hierarchy:
Ā | Valuation basis/techniques | Main inputs |
Assets | ||
Non-sovereign and non-bank cash placements | Discounted cash flow model | Yield curves |
Reverse repurchase agreements and cash collateral on securities borrowed | Discounted cash flow model, Hermite interpolation, Black-Scholes | Yield curves, discount rates, volatilities |
Bank debt securities | Discounted cash flow model | Yield curves |
Other debt securities | Discounted cash flow model | Yield curves, NCD curves and swap curves, discount rates, external prices, broker quotes |
Derivative financial instruments | Discounted cash flow model, Hermite interpolation, industry standard derivative pricing models including Black-Scholes | Yield curves, risk free rate, volatilities, forex forward points and spot rates, interest rate swap curves and credit curves, discount rates |
Securities arising from trading activities | Standard industry derivative pricing model Discounted cash flow model | Interest rate curves, implied bond spreads, equity volatilities, yield curves |
Investment portfolio | Discounted cash flow model, relative valuation model Comparable quoted inputs | Discount rate and fund unit price, net assets |
Loans and advances to customers | Discounted cash flow model | Yield curves |
Other securitised assets | Discounted cash flow model | Yield curves |
Liabilities | ||
Derivative financial instruments | Discounted cash flow model, Hermite interpolation, industry standard derivative pricing models including Black-Scholes | Yield curves, discount rates, risk free rate, volatilities, forex forward points and spot rates, interest rate swap curves and credit curves |
Other trading liabilities | Discounted cash flow model | Yield curves |
Repurchase agreements and cash collateral on securities lent | Discounted cash flow model, Hermite interpolation | Yield curves, discount rates |
Customer accounts (deposits) | Discounted cash flow model | Yield curves, discount rates |
Debt securities in issue | Discounted cash flow model | Yield curves |
Other liabilities | Discounted cash flow model | Yield curves |
Liabilities to customers under investment contracts | Current price of underlying unitised assets | Listed prices |
Insurance liabilities, including unit-linked liabilities | Current price of underlying unitised assets | Listed prices |
Ā
Level 3 instruments
The following tables show a reconciliation of the opening balances to the closing balances for level 3 financial instruments. All instruments are at fair value through profit or loss.
Ā£'000 | Investment portfolio | Loans and Ā advances to Ā customers | Other securitised assets | Other balance Ā sheet assets | Total | |||||
Assets | Ā | Ā | Ā | Ā | Ā | |||||
Balance at 1 April 2020 | 848Ā 670Ā | Ā | 1Ā 101Ā 666Ā | Ā | 106Ā 218Ā | Ā | 178Ā 840Ā | Ā | 2Ā 235Ā 394Ā | Ā |
Total gains or losses in the income statement | (6Ā 431) | Ā | 19Ā 257Ā | Ā | 4Ā 401Ā | Ā | 6Ā 954Ā | Ā | 24Ā 181Ā | Ā |
In the income statement | (6Ā 431) | Ā | 18Ā 834Ā | Ā | 4Ā 401Ā | Ā | 6Ā 954Ā | Ā | 23Ā 758Ā | Ā |
In the statement of comprehensive income | -Ā | Ā | 423Ā | Ā | -Ā | Ā | -Ā | Ā | 423Ā | Ā |
Purchases | 47Ā 125Ā | Ā | 364Ā 392Ā | Ā | -Ā | Ā | 265Ā | Ā | 411Ā 782Ā | Ā |
Sales | (13Ā 387) | Ā | (216Ā 725) | Ā | -Ā | Ā | (1Ā 424) | Ā | (231Ā 536) | Ā |
Settlements | (1Ā 363) | Ā | (231Ā 773) | Ā | (3Ā 266) | Ā | (10Ā 680) | Ā | (247Ā 082) | Ā |
Transfers into level 3 | -Ā | Ā | 7Ā 802Ā | Ā | -Ā | Ā | 141Ā | Ā | 7Ā 943Ā | Ā |
Transfers out of level 3 | -Ā | Ā | -Ā | Ā | -Ā | Ā | (156) | Ā | (156) | Ā |
Foreign exchange adjustments | 15Ā 344Ā | Ā | (7Ā 865) | Ā | -Ā | Ā | (4Ā 384) | Ā | 3Ā 095Ā | Ā |
Balance at 30 September 2020 | 889Ā 958Ā | Ā | 1Ā 036Ā 754Ā | Ā | 107Ā 353Ā | Ā | 169Ā 556Ā | Ā | 2Ā 203Ā 621Ā | Ā |
For the six months to 30 September 2020, following a review of the valuation methodology of a number of financial instruments, the following reclassifications were made during the period: loans and advances to customers of Ā£7.8 million from level 2 to level 3; other assets of Ā£0.1 million from level 2 to level 3; and derivative assets of Ā£0.1 million and derivative liabilities of Ā£0.1 million from level 3 to level 2.
Ā£'000 | Liabilities arising on securitisation Ā of other assets | Other balance Ā sheet liabilities | Total | |||
Liabilities | Ā | Ā | Ā | |||
Balance at 1 April 2020 | 110Ā 679Ā | Ā | 27Ā 602Ā | Ā | 138Ā 281Ā | Ā |
Total gains or losses in the income statement | 3Ā 191Ā | Ā | 6Ā 867Ā | Ā | 10Ā 058Ā | Ā |
In the income statement | 3Ā 191Ā | Ā | 6Ā 867Ā | Ā | 10Ā 058Ā | Ā |
In the statement of comprehensive income | -Ā | Ā | -Ā | Ā | -Ā | Ā |
Purchases | -Ā | Ā | 39Ā 893Ā | Ā | 39Ā 893Ā | Ā |
Settlements | (4Ā 763) | Ā | (937) | Ā | (5Ā 700) | Ā |
Transfers into level 3 | -Ā | Ā | -Ā | Ā | -Ā | Ā |
Transfers out of level 3 | -Ā | Ā | (153) | Ā | (153) | Ā |
Foreign exchange adjustments | -Ā | Ā | (118) | Ā | (118) | Ā |
Balance as at 30 September 2020 | 109Ā 107Ā | Ā | 73Ā 154Ā | Ā | 182Ā 261Ā | Ā |
The group transfers between levels within the fair value hierarchy when the significance of the unobservable inputs change or if the valuation methods change.
The following table quantifies the gains or (losses) included in the income statement recognised on level 3 financial instruments:
For the six months to 30 September 2020 | Total | Realised | Unrealised | |||
Ā£'000 | ||||||
Total gains or (losses) included in the income statement for the year | Ā | Ā | Ā | |||
Net interest income/(expense) | 31Ā 652Ā | Ā | 20Ā 435Ā | Ā | 11Ā 217Ā | Ā |
Fee and commission (expense) | -Ā | Ā | -Ā | Ā | -Ā | Ā |
Investment income | (13Ā 390) | Ā | 14Ā 006Ā | Ā | (27Ā 396) | Ā |
Trading income arising from customer flow | (4Ā 562) | Ā | -Ā | Ā | (4Ā 562) | Ā |
Ā | 13Ā 700Ā | Ā | 34Ā 441Ā | Ā | (20Ā 741) | Ā |
Total gains or (losses) included in other comprehensive income for the year | Ā | Ā | Ā | |||
Gains on realisation on debt instruments at FVOCI recycled through the income statement | (1Ā 031) | Ā | (1Ā 031) | Ā | -Ā | Ā |
Fair value movements on debt instruments at FVOCI taken directly to other comprehensive income | 423Ā | Ā | -Ā | Ā | 423Ā | Ā |
Ā | (608) | Ā | (1Ā 031) | Ā | 423Ā | Ā |
Ā
Sensitivity of fair values to reasonably possible alternative assumptions by level 3 instrument type
The fair value of financial instruments in level 3 are measured using valuation techniques that incorporate assumptions that are not evidenced by prices from observable market data. The below valuations have been considered taking the global pandemic of COVID-19 into consideration. The following table shows the sensitivity of these fair values to reasonably possible alternative assumptions, determined at a transactional level:
Ā | Ā | Ā | Ā | Potential impact on the | ||||
At 30 September 2020 | Balance sheet Ā value | Significant unobservable input changed | Range which unobservable input has been changed | Favourable Ā changes | Unfavourable changes | |||
Ā£'000 | Ā£'000 | Ā£'000 | ||||||
Assets | Ā | Ā | Ā | Ā | Ā | |||
Other debt securities | 134Ā 335Ā | Ā | Potential impact on income statement | Ā | 4Ā 971Ā | Ā | (11Ā 884) | Ā |
Ā | Ā | Credit spreads | 0.29%-0.89% | 15Ā | Ā | (97) | Ā | |
Ā | Ā | Cash flow adjustments | CPR 5.3% | 984Ā | Ā | (984) | Ā | |
Ā | Ā | Discount rate | 0.0605 | 1Ā | Ā | (7) | Ā | |
Ā | Ā | Underlying asset value^^ | ^^ | 437Ā | Ā | (194) | Ā | |
Ā | Ā | Other^ | ^ | 3Ā 534Ā | Ā | (10Ā 602) | Ā | |
Ā | Ā | Ā | Ā | Ā | Ā | |||
Derivative financial instruments | 29Ā 914Ā | Ā | Potential impact on income statement | Ā | 5Ā 053Ā | Ā | (5Ā 929) | Ā |
Ā | Ā | Volatilities | 3.6% - 21.6% | 236Ā | Ā | (708) | Ā | |
Ā | Ā | Underlying asset value^^ | ^^ | 4Ā 661Ā | Ā | (4Ā 753) | Ā | |
Ā | Ā | Other^ | ^ | 156Ā | Ā | (468) | Ā | |
Ā | Ā | Ā | Ā | Ā | Ā | |||
Securities arising from trading activities | 5Ā 307Ā | Ā | Potential impact on income statement | Ā | Ā | Ā | ||
Ā | Ā | Cash flow adjustments | CPR 9.8% | 891Ā | Ā | (1Ā 514) | Ā | |
Investment portfolio | 889Ā 958Ā | Ā | Potential impact on income statement | Ā | 108Ā 106Ā | Ā | (176Ā 998) | Ā |
Ā | Ā | Price earnings multiple | 4.2x -11.92x | 6Ā 045Ā | Ā | (12Ā 564) | Ā | |
Ā | Ā | Underlying asset value^^ | ^^ | 8Ā 053Ā | Ā | (9Ā 814) | Ā | |
Ā | Ā | EBITDA | ** | 25Ā 874Ā | Ā | (22Ā 648) | Ā | |
Ā | Ā | Discount rate | (0.6%)/1.4% | 985Ā | Ā | (1Ā 044) | Ā | |
Ā | Ā | Cash flows | ** | 1Ā 920Ā | Ā | (1Ā 426) | Ā | |
Ā | Ā | Property values | (10%)/10% | 32Ā 812Ā | Ā | (32Ā 812) | Ā | |
Ā | Ā | Precious and industrial metal prices | (6%)/6% | 762Ā | Ā | (1Ā 270) | Ā | |
Ā | Ā | Underlying asset value | # | 2Ā 013Ā | Ā | (5Ā 145) | Ā | |
Ā | Ā | Other^ | ^ | 29Ā 642Ā | Ā | (90Ā 275) | Ā | |
Ā | Ā | Ā | Ā | Ā | Ā | |||
Loans and advances to customers | 1Ā 036Ā 754Ā | Ā | Potential impact on income statement | Ā | 32Ā 496Ā | Ā | (61Ā 423) | Ā |
Ā | Ā | Credit spreads | 0.04% -5.3% | 10Ā 288Ā | Ā | (16Ā 908) | Ā | |
Ā | Ā | Price earnings multiple | 3.5x-7x | 3Ā 955Ā | Ā | (502) | Ā | |
Ā | Ā | Discount rate | 0.05 | 75Ā | Ā | (220) | Ā | |
Ā | Ā | Underlying asset value^^ | ^^ | 1Ā 211Ā | Ā | (2Ā 945) | Ā | |
Ā | Ā | Property values | (5%)/5% | 232Ā | Ā | (232) | Ā | |
Ā | Ā | Cash flows | * | 1Ā 954Ā | Ā | (3Ā 229) | Ā | |
Ā | Ā | Underlying asset value | # | 249Ā | Ā | (249) | Ā | |
Ā | Ā | Other^ | ^ | 14Ā 532Ā | Ā | (37Ā 138) | Ā | |
Ā | Ā | Potential impact on other comprehensive income | Ā | Ā | Ā | |||
Ā | Ā | Credit spreads | 0.082% -37.86% | 9Ā 387Ā | Ā | (18Ā 622) | Ā | |
Ā | Ā | Ā | Ā | Ā | Ā | |||
Other securitised assets | 107Ā 353Ā | Ā | Potential impact on income statement | Ā | Ā | Ā | ||
Ā | Ā | Cash flow adjustments | CPR 5.3% | 53Ā | Ā | (78) | Ā | |
Ā | Ā | Ā | Ā | Ā | Ā | |||
Total level 3 assets | 2Ā 203Ā 621Ā | Ā | Ā | Ā | 160Ā 957Ā | Ā | (276Ā 448) | Ā |
Liabilities | Ā | Ā | Ā | Ā | Ā | |||
Deposits by banks | 313Ā | Ā | Potential impact on income statement | Ā | Ā | Ā | ||
Ā | Ā | Underlying asset value^^ | ^^ | (31) | Ā | 94Ā | Ā | |
Derivative financial instruments | 31Ā 517Ā | Ā | Potential impact on income statement | Ā | (4Ā 837) | Ā | 5Ā 278Ā | Ā |
Ā | Ā | Volatilities | 3.6% -21.6% | (221) | Ā | 662Ā | Ā | |
Ā | Ā | Underlying asset value^^ | ^^ | (4Ā 616) | Ā | 4Ā 616Ā | Ā | |
Liabilities arising on securitisation of other assets | 109Ā 107Ā | Ā | Potential impact on income statement | Ā | Ā | Ā | ||
Ā | Ā | Cash flow adjustments | CPR 5.3% | (435) | Ā | 380Ā | Ā | |
Other liabilities | 41Ā 324Ā | Ā | Potential impact on income statement | Ā | Ā | Ā | ||
Ā | Ā | Property values | (10%)/10% | (4Ā 681) | Ā | 4Ā 681Ā | Ā | |
Total level 3 liabilities | 182Ā 261Ā | Ā | Ā | Ā | (9Ā 984) | Ā | 10Ā 433Ā | Ā |
Net level 3 assets | 2Ā 021Ā 360Ā | Ā | Ā | Ā | Ā | Ā |
Ā
*āĀ Ā Ā Ā Ā The sensitivity of the fair value of liabilities arising on securitisation of other assets has been considered together with other securitised assets.
Ė Ā Ā Ā Ā Ā Other - The valuation sensitivity has been assessed by adjusting various inputs such as expected cash flows, discount rates, earnings multiples rather than a single input. It is deemed appropriate to reflect the outcome on a portfolio basis for the purposes of this analysis as the sensitivity of the assets cannot be determined through the adjustment of a single input.
Ė^Ā Ā Ā Ā Underlying asset values are calculated by reference to a tangible asset, for example property, aircraft or shares.
āā Ā Ā Ā The EBITDA and cash flows have been stressed on an investment-by-investment basis in order to obtain favourable and unfavourable valuations.
#Ā Ā Ā Ā Ā Ā Net asset asset values are calculated by reference to the fair value of the assets and liabilities within the entity.
Ā
In determining the value of level 3 financial instruments, the following are the principal input that can require judgement:
Credit spreads
Credit spreads reflect the additional yield that a market participant would demand for taking exposure to the credit risk of an instrument. The credit spread for an instrument forms part of the yield used in a discounted cash flow calculation. In general a significant increase in a credit spread in isolation will result in a movement in fair value that is unfavourable for the holder of a financial instrument.
Discount rates
Discount rates (including WACC) are used to adjust for the time value of money when using a discounted cash flow valuation method. Where relevant, the discount rate also accounts for illiquidity, market conditions and uncertainty of future cash flows.
Volatilities
Volatility is a key input in the valuation of derivative products containing optionality. Volatility is a measure of the variability or uncertainty in returns for a given derivative underlying. It represents an estimate of how much a particular underlying instrument, parameter or index will change in value over time.
Cash flows
Cash flows relate to the future cash flows which can be expected from the instrument and requires judgement.
EBITDA
The company's earnings before interest, taxes, depreciation and amortisation. This is the main input into a price earnings multiple valuation method.
Price-earnings multiple
The price earnings ratio is an equity valuation multiple. It is a key driver in the valuation of unlisted investments.
Property values and precious and industrial metals
The property value and precious and industrial metals is a key driver of future cash flows on these investments.
Underlying asset value
In instances where cash flows have links to referenced assets, the underlying asset value is used to determine the fair value. The underlying asset valuation is derived using observable market prices sourced from broker quotes, specialist valuers or other reliable pricing sources
The following table sets out the fair value of financial instruments held at amortised cost when the carrying value is not a reasonable approximation of fair value.
At 30 September 2020 | Carrying amount | Fair value | ||
Ā£'000 | ||||
Assets | Ā | Ā | ||
Cash and balances at central banks | 2Ā 477Ā 636Ā | Ā | 2Ā 477Ā 632Ā | Ā |
Loans and advances to banks | 3Ā 079Ā 807Ā | Ā | 3Ā 078Ā 702Ā | Ā |
Non-sovereign and non-bank cash placements | 352Ā 191Ā | Ā | 352Ā 188Ā | Ā |
Reverse repurchase agreements and cash collateral on securities borrowed | 3Ā 133Ā 189Ā | Ā | 3Ā 133Ā 275Ā | Ā |
Sovereign debt securities | 325Ā 829Ā | Ā | 331Ā 453Ā | Ā |
Bank debt securities | 187Ā 361Ā | Ā | 194Ā 421Ā | Ā |
Other debt securities | 848Ā 412Ā | Ā | 842Ā 159Ā | Ā |
Loans and advances to customers | 22Ā 742Ā 966Ā | Ā | 22Ā 750Ā 272Ā | Ā |
Own originated loans and advances to customers securitised | 307Ā 532Ā | Ā | 307Ā 530Ā | Ā |
Other loans and advances | 100Ā 659Ā | Ā | 98Ā 422Ā | Ā |
Other assets | 1Ā 008Ā 152Ā | Ā | 1Ā 007Ā 996Ā | Ā |
Liabilities | Ā | Ā | ||
Deposits by banks | 3Ā 319Ā 414Ā | Ā | 3Ā 336Ā 577Ā | Ā |
Repurchase agreements and cash collateral on securities lent | 1Ā 254Ā 846Ā | Ā | 1Ā 259Ā 412Ā | Ā |
Customer accounts (deposits) | 30Ā 955Ā 396Ā | Ā | 31Ā 012Ā 834Ā | Ā |
Debt securities in issue | 1Ā 574Ā 082Ā | Ā | 1Ā 600Ā 818Ā | Ā |
Liabilities arising on securitisation of own originated loans and advances | 73Ā 042Ā | Ā | 73Ā 042Ā | Ā |
Other liabilities | 1Ā 153Ā 821Ā | Ā | 1Ā 152Ā 726Ā | Ā |
Subordinated liabilities | 1Ā 092Ā 585Ā | Ā | 1Ā 172Ā 099Ā | Ā |
Ā
Events after the reporting date
The significant judgements and estimates applied to prepare the interim financial statements as at 30 September 2020 reflected the impact of COVID-19 and the resulting impact on the economy as at the balance sheet date. These judgements, specifically those relating to the impairment of loans and advances and valuation of fair value instruments, were determined by considering a range of economic scenarios including the adverse impact of COVID-19 and by applying the guidance issued by various international regulators and standard setting bodies.
The action of various governments and central banks, in particular in the United Kingdom and South Africa, provides an indication of the potential severity of the downturn and that the recovery environment could be significantly different from past crises with a duration which is also difficult to predict. Subsequent to the balance sheet date, it was announced that various vaccine trials proved to be more than 90% effective and resultingly had a very positive impact on global markets. It still remains very difficult to predict when a full scale role out of the vaccine will take place. In South Africa various government and social programmes were launched, aimed at reducing the impact of COVID-19 and to stimulate the economy and in the UK previously launched schemes have been extended in an attempt to mitigate the economic impact of COVID-19.
The group believes that the significant judgements and estimates made at the balance sheet date took account of the impact of COVID-19 and the results of subsequent event procedures performed by management up to 18 November 2020 did not identify additional information that requires these judgements and estimates to be updated. Management is satisfied that there were no such items of sufficient significance to warrant additional disclosure. However, should the COVID-19 crisis cause disruption to global economic activity for a longer period than forecasted, this could put additional upward pressure on the group ECLs and downward pressure on other valuations.
Investec Bank plc owns the appointed asset manager of Investec Australia Property Fund (IAPF). On 18 November 2020, the IAPF shareholders voted to purchase the asset management company for an amount of AUD$40m subject to certain conditions.
The group is further not aware of any other events after the reporting date as defined by IAS 10 Events after the Reporting Period, that would require the financial statements to be adjusted or which would require additional disclosures.
Ā
ĀĀ
Investec plc
Incorporated in England and Wales
Registration number: 3633621
LSE ordinary share code: INVP
JSE share code: INP
ISIN: GB00B17BBQ50
LEI: 2138007Z3U5GWDN3MY22
Ordinary share dividend announcement
In terms of the DLC structure, Investec plc shareholders registered on the United Kingdom share register may receive all or part of their dividend entitlements through dividends declared and paid by Investec plc on their ordinary shares and/or through dividends declared and paid on the SA DAN share issued by Investec Limited.
Investec plc shareholders registered on the South African branch register may receive all or part of their dividend entitlements through dividends declared and paid by Investec plc on their ordinary shares and/or through dividends declared and paid on the SA DAS share issued by Investec Limited.
Declaration of dividend number 36
Notice is hereby given that an interim dividend number 36, being a gross dividend of 5.5 pence (2019: 11 pence) per ordinary share has been declared by the Board from income reserves in respect of the six months ended 30 September 2020 payable to shareholders recorded in the shareholders' register of the company at the close of business on Friday, 11 December 2020.
ā¢Ā Ā Ā Ā For Investec plc shareholders, registered on the United Kingdom share register, through a dividend payment by Investec plc from income reserves of 5.5 pence per ordinary share
ā¢Ā Ā Ā Ā For Investec plc shareholders, registered on the South African branch register, through a dividend payment by Investec Limited, on the SA DAS share, payable from income reserves, equivalent to 5.5 pence per ordinary share.
Ā
The relevant dates relating to the payment of dividend number 36 are as follows: | |
Last day to trade cum-dividend On the Johannesburg Stock Exchange (JSE) On the London Stock Exchange Shares commence trading ex-dividend On the Johannesburg Stock Exchange On the London Stock Exchange Record date (on the JSE and LSE) Payment date (on the JSE and LSE) |
|
Share certificates on the South African branch register may not be dematerialised or rematerialised between Wednesday, 09 December 2020 and Friday, 11 December 2020, both dates inclusive, nor may transfers between the United Kingdom share register and the South African branch register take place between Wednesday, 09 December 2020 and Friday, 11 December 2020, both dates inclusive. |
Ā
Additional information for South African resident shareholders of Investec plc
ā¢Ā Ā Ā Ā Shareholders registered on the South African branch register are advised that the distribution of 5.5 pence, equivalent to a gross dividend of 112 cents per share, has been arrived at using the Rand/Pound Sterling average buy/sell forward rate, as determined at 11h00 (SA time) on Wednesday, 18 November 2020
ā¢Ā Ā Ā Ā Investec plc United Kingdom tax reference number: 2683967322360
ā¢Ā Ā Ā Ā The issued ordinary share capital of Investec plc is 696Ā 082Ā 618 ordinary shares
ā¢Ā Ā Ā Ā The dividend paid by Investec plc to South African resident shareholders registered on the South African branch register and the dividend paid by Investec Limited to Investec plc shareholders on the SA DAS share are subject to South African Dividend Tax (Dividend Tax) of 20% (subject to any available exemptions as legislated)
ā¢Ā Ā Ā Ā Shareholders registered on the South African branch register who are exempt from paying the Dividend Tax will receive a net dividend of 112 cents per share paid by Investec Limited on the SA DAS share
ā¢Ā Ā Ā Ā Shareholders registered on the South African branch register who are not exempt from paying the Dividend Tax will receive a net dividend of 89.6 cents per share (gross dividend of 112 cents per share less Dividend Tax of 22.4 cents per share) paid by Investec Limited on the SA DAS share.
By order of the board
D Miller
Company Secretary
18Ā November 2020
Ā
Investec plc
Incorporated in England and Wales
Registration number: 3633621
Share code: INPP
ISIN: GB00B19RX541
LEI: 2138007Z3U5GWDN3MY22
Preference share dividend announcement
Non-redeemable non-cumulative non-participating preference shares ("preference shares")
Declaration of dividend number 29
Notice is hereby given that preference dividend number 29 has been declared by the board from income reserves for the period 01 April 2020 to 30 September 2020 amounting to a gross preference dividend of 5.51508 pence per preference share payable to holders of the non-redeemable non-cumulative non-participating preference shares as recorded in the books of the company at the close of business on Friday, 11 December 2020.
For shares trading on the Johannesburg Stock Exchange (JSE), the dividend of 5.51508 pence per preference share is equivalent to a gross dividend of 112.42435 cents per share, which has been determined using the Rand/Pound Sterling average buy/sell forward rate as at 11h00 (SA time) on Wednesday, 18 November 2020.
The relevant dates for the payment of dividend number 29 are as follows: | ||
Last day to trade cum-dividend On the Johannesburg Stock Exchange (JSE) On the International Stock Exchange (TISE) |
| |
Ā | Ā | |
Shares commence trading ex-dividend On the Johannesburg Stock Exchange (JSE) On the International Stock Exchange (TISE) |
| |
Ā | Ā | |
Record date (on the JSE and TISE) Payment date (on the JSE and TISE) | Friday,11 December 2020 | |
Ā | Ā | |
Share certificates may not be dematerialised or rematerialised between Wednesday,09 December 2020 and Friday, 11 December 2020, both dates inclusive, nor may transfers between the United Kingdom share register and the South African branch register take place between Wednesday, 09 December 2020 and Friday, 11 December 2020, both dates inclusive. | ||
Ā | Ā | Ā |
Additional information for South African resident shareholders of Investec plc
ā¢Ā Ā Ā Ā Investec plc United Kingdom tax reference number: 2683967322360
ā¢Ā Ā Ā Ā The issued preference share capital of Investec plc is 2Ā 754Ā 587 preference shares
ā¢Ā Ā Ā Ā The dividend paid by Investec plc to shareholders recorded on the South African branch register is subject to South African Dividend Tax (Dividend Tax) of 20% (subject to any available exemptions as legislated)
ā¢Ā Ā Ā Ā The net dividend amounts to 89.93948 cents per preference share for preference shareholders liable to pay the Dividend Tax and 112.42435 cents per preference share for preference shareholders exempt from paying the Dividend Tax.
Ā
By order of the board
D Miller
Company Secretary
18Ā November 2020
Investec plc
Incorporated in England and Wales
Registration number: 3633621
JSE share code: INPPR
ISIN: GB00B4B0Q974
LEI: 2138007Z3U5GWDN3MY22
Rand-denominated preference share dividend announcement
Rand-denominated non-redeemable non-cumulative non-participating perpetual preference shares ("preference shares")
Declaration of dividend number 19
Notice is hereby given that preference dividend number 19 has been declared by the board from income reserves for the period 01 April 2020 to 30 September 2020 amounting to a gross preference dividend of 350.65412 cents per preference share payable to holders of the Rand-denominated non-redeemable non-cumulative non-participating perpetual preference shares as recorded in the books of the company at the close of business on Friday,11 December 2020.
The relevant dates relating to the payment of dividend number 18 are as follows: | ||
Last day to trade cum-dividend | Tuesday, 08 December 2020 | |
Ā | Ā | |
Share certificates may not be dematerialised or rematerialised between Wednesday, 09 December 2020 and Friday, 11 December 2020, both dates inclusive. | ||
Ā | Ā | Ā |
Additional information for South African resident shareholders of Investec plc
ā¢Ā Ā Ā Ā Investec plc United Kingdom tax reference number: 2683967322360
ā¢Ā Ā Ā Ā The issued Rand-denominated preference share capital of Investec plc is 131Ā 447 preference shares
ā¢Ā Ā Ā Ā The dividend paid by Investec plc to shareholders recorded on the South African branch register is subject to South African Dividend Tax (Dividend Tax) of 20% (subject to any available exemptions as legislated)
ā¢Ā Ā Ā Ā The net dividend amounts to 280.52330 cents per preference share for preference shareholders liable to pay the Dividend Tax and 350.65412 cents per preference share for preference shareholders exempt from paying the Dividend Tax.
Ā
By order of the board
Ā
D Miller
Company Secretary
18Ā November 2020
Ā
Ā
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