INVESTEC PLC Investec plc and Investec Limited (combined results)
Unaudited combined consolidated financial results for the six months ended 30 September 2017
This announcement covers the results of the Investec group for the six months ended 30 September 2017. |
Basis of presentation Statutory basis Statutory information is set out in a separate section in this announcement. In order to present a more meaningful view of the group's performance the results continue to be presented on an ongoing basis as explained further below. Ongoing basis The results presented on an ongoing basis exclude items that in management's view could distort the comparison of performance between periods. Based on this principle, the remaining legacy business in the UK continues to be excluded from underlying profit. This basis of presentation is consistent with the approach adopted for the year ended 31 March 2017. A reconciliation between the statutory and ongoing income statement is provided. Unless the context indicates otherwise, all comparatives included in the commentary relate to the six months ended 30 September 2016. Group results have benefited from a 14.7% appreciation of the average Rand: Pounds Sterling exchange rate over the period. Amounts represented on a currency neutral basis for income statement items assume that the relevant average exchange rates for the six month period to30 September 2017 remain the sameas those in the prior period. Balance sheet items have beennegatively impacted by a 7.9% depreciation of the closing Rand:PoundsSterling exchange rate since 31 March 2017. Amounts represented on a currency neutral basis for balance sheet items assume that the relevant closing exchange rates at 30 September 2017 remain the same as those at 31 March 2017. Overview of results Sound growth in key earnings drivers · The Asset Management and Wealth & Investment businesses have benefited from higher funds under management supported by favourable equity markets and combined net inflows of GBP3.6 billion. · The Specialist Banking businesses have continued to see good growth in loan portfolios and client activity, notwithstanding the persistent macro uncertainty in both geographies. · The group has continued to invest for growth with the increase in costs largely reflecting planned spend in growing the client franchise businesses. · Digital and online innovation and enhancements across the group, coupled with a high touch client centric service model has further entrenched the strength of our franchises particularly in the private banking and wealth management businesses. · Geographical and operational diversity continues to support a sustainable recurring income base and earnings through varying market conditions. Statutory operating profit salient features · Statutory operating profit before goodwill, acquired intangibles, non-operating items and taxation and after other non-controlling interests ('operating profit') increased 11.8% to GBP314.6 million (2016: GBP281.4 million) - an increase of 1.1% on a currency neutral basis. · Statutory adjusted earnings per share (EPS) before goodwill, acquired intangibles and non-operating items increased 17.2% from 22.7 pence to 26.6 pence - an increase of 5.7% on a currency neutral basis. Satisfactory performance from the ongoing business · Ongoing operating profit increased 10.5% to GBP347.5 million (2016: GBP314.5 million) - an increase of 0.9% on a currency neutral basis. · Ongoing adjusted EPS before goodwill, acquired intangibles and non-operating items increased 14.8% from 25.7 pence to 29.5 pence - an increase of 4.7% on a currency neutral basis. · Recurring income as a percentage of total operating income amounted to 76.4% (2016: 72.4%). · The annualised credit loss charge as a percentage of average gross core loans and advances amounted to 0.28% (2016: 0.19%), remaining at the lower end of the group's long term range despite an increase in impairments. · Third party assets under management increased 2.4% to GBP154.3 billion (31 March 2017: GBP150.7 billion) - an increase of 5.1% on a currency neutral basis. · Customer accounts (deposits) decreased 3.9% to GBP28.0 billion (31 March 2017: GBP29.1 billion) - an increase of 0.7% on a currency neutral basis. · Core loans and advances increased 0.6% to GBP22.4 billion (31 March 2017: GBP22.2billion) - an increase of 5.6% on a currency neutral basis. The UK legacy portfolio continues to be actively managed down · The legacy portfolio reduced from GBP476 million at 31 March 2017 to GBP425 million largely through asset sales, redemptionsand write-offs. · The legacy business reported a loss before taxation of GBP32.9 million (2016: GBP33.0 million). Maintained a sound balance sheet · Capital remained comfortably in excess of current regulatory requirements. Investec Limited ended the period in line with the group's common equity tier 1 ratio target, while Investec plc continued to report a ratio ahead of this target. The group is comfortable with its common equity tier 1 ratio target at a 10% level, as its current leverage ratios for both Investec Limited and Investec plc are above 7%. · Liquidity remained strong with cash and near cash balances amounting to GBP10.7billion. Dividend increase of 5.0% · The board declared a dividend of 10.5 pence per ordinary share (2016: 10.0 pence) resulting in a dividend cover based on the group's adjusted EPS before goodwill and non-operating items of 2.5times (2016: 2.3 times), consistent with the group's dividend policy. |
Stephen Koseff, Chief Executive Officer of Investec said: 'We have continued to invest to grow our client franchise businesses. We have improved and enhanced our digital and online services to complement our strong client centric service model. This spending has further strengthened our franchises in private banking and wealth management. Our geographical and operational diversity supports a strong recurring income base and earnings which will help us weather an uncertain world.' Bernard Kantor, Managing Director of Investec said: 'Investec achieved a satisfactory operating performance in all its businesses despite macro-economic and political uncertainty in both South Africa and the UK. In particular, Asset Management and Wealth & Investment benefited from higher funds under management and favourable equity markets while the Specialist Banking businesses continued to see good growth in loan portfolios and client activity.' |
For further information please contact: Investec +27 (0) 11 286 7070 or +44 (0) 20 7597 5546 Stephen Koseff, Chief Executive Officer Bernard Kantor, Managing Director Ursula Nobrega, Investor Relations (mobile: +27 (0) 82 552 8808) Carly Newton, Investor Relations (+44 (0) 20 7597 4493) Brunswick (SA PR advisers) Marina Bidoli Tel: +27 (0)11 502 7405 / +2783 253 0478 Newgate (UK PR advisers) Jonathan Clare/Alistair Kellie/Zoe Pocock/Charlotte Coulson Tel: +44 (0)20 7680 6550 Presentation/conference call details A presentation on the results will commence at 9:00 UK time/11:00 SA time. Viewing options as below: · Live on South African TV (Business day TV channel 412 DSTV) · A live and delayed video webcast at www.investec.com· Toll free numbers for the telephone conference facilities ‒ SA participants: 0800 200 648 ‒ UK participants: 0808 162 4061 ‒ rest of Europe and other participants: +800 246 78 700 ‒ Australian participants: 1800 350 100 ‒ USA participants: 1855 481 6362 About Investec Investec is an international specialist bank and asset manager that provides a diverse range of financial products and services to a select client base in three principal markets - the UK and Europe, South Africa and Asia/Australia as well as certain other countries. The group was established in 1974 and currently has approximately 9 900 employees. Investec focuses on delivering distinctive profitable solutions for its clients in three core areas of activity namely, Asset Management, Wealth & Investment and Specialist Banking. In July 2002 the Investec group implemented a dual listed company structure with listings on the London and Johannesburg Stock Exchanges. The combined group's current market capitalisation is approximately GBP5.0 billion. |
Investec plc and Investec Limited (combined results)
Unaudited combined consolidated financial results for the six months ended 30 September 2016
The commentary below largely focuses on the results of the ongoing business.
Overall group performance - ongoing basis
Operating profit before goodwill, acquired intangibles, non-operating items and taxation and after other non-controlling interests ('operating profit') increased 10.5% to GBP347.5 million (2016: GBP314.5 million) - an increase of 0.9% on a currency neutral basis.
The combined South African businesses reported operating profit 7.9% ahead of the prior period (in Rands), whilst the combined UK and Other businesses posted a 5.0% decrease in operating profit in Pounds Sterling.
Business unit review - ongoing basis
Asset Management
Asset Management operating profit increased 1.2% to GBP83.2 million (2016: GBP82.3 million). The business benefited from higher average funds under management supported by positive market movements and solid net inflows of GBP2.1 billion. Earnings were negatively impacted by lower performance fees in South Africa. Total funds under management amount to GBP98.2 billion (31 March 2017: GBP95.3 billion).
Wealth & Investment
Wealth & Investment operating profit increased by 14.7% to GBP49.5 million (2016: GBP43.2 million) supported by higher average funds under management and net inflows of GBP1.5 billion. The UK business had a strong performance while earnings in South Africa have been impacted by lower brokerage volumes. Total funds under management amount to GBP55.5 billion (31 March 2017: GBP54.8 billion).
Specialist Banking
Specialist Banking operating profit increased by 12.5% to GBP239.4 million (2016: GBP212.8million).
The South African business reported an increase in operating profit in Rands of 21.6%. Earnings were supported by a strong performance from the investment portfolio. Growth in the private banking franchise as well as a good performance from the corporate treasury and corporate advisory businesses resulted in an increase in fees. Core loans and advances increased 6.5% to R251.5 billion (31 March 2017: R236.2 billion). The credit loss ratio on average core loans and advances amounted to 0.30% (2016: 0.29%), remaining at the lower end of its long term average, despite the business reporting an increase in impairments.
The UK and Other businesses reported a 22.1% decrease in operating profit. Strong growth in net interest income was supported by loan book growth of 4.1% to GBP8.5 billion (31 March 2017: GBP8.1 billion) and a reduction in the cost of funding. This was offset by a decrease in non interest revenue following particularly strong investment banking and client flow trading activity levels in the prior period. In line with the division's current investment strategy to support franchise growth, IT infrastructure costs and headcount increased, notably for the continued build out of the private client banking offering. Costs are also impacted by the additional premises expenses relating to the London office move scheduled for the end of the 2018 calendar year. The credit loss ratio amounted to 0.22% (2016: 0.04%) as impairments increased off a particularly low base.
Further information on key developments within each of the business units is provided in a detailed report published on the group's website: http://www.investec.com
Group costs
These largely relate to group brand and marketing costs and a portion of executive and support functions which are associated with group level activities. These costs are not incurred by the operating divisions and are necessary to support the operational functioning of the group. These costs amounted to GBP24.7 million (2016: GBP23.8 million).
Financial statement analysis - ongoing basis
Total operating income
Total operating income before impairment losses on loans and advances increased by 13.2% to GBP1,190.9 million (2016: GBP1,052.3 million).
Net interest income increased by 16.0% to GBP364.4 million (2016: GBP314.2 million) driven by sound levels of lending activity across the banking businesses and a reduction in the UK's cost of funding.
Net fee and commission income increased by 9.4% to GBP666.0 million (2016: GBP608.6 million) as a result of higher average funds under management over the period and net inflows in the Asset Management and Wealth Management businesses. In addition, the Specialist Banking business in South Africa benefited from growth in the private banking franchise and a good performance from the corporate treasury and corporate advisory businesses.
Investment income increased significantly to GBP61.9 million (2016: GBP28.8 million) driven by a strong performance from the South African investment portfolio partially offset by less realisations in the UK investment portfolios.
Share of post taxation operating profit of associates of GBP23.7 million (2016: GBP9.6 million) primarily reflects earnings in relation to the group's investment in the IEP Group.
Trading income arising from customer flow decreased by 12.7% to GBP64.2 million (2016: GBP73.5 million) as a consequence of lower volatility relative to the elevated levels experienced in the prior period following the Brexit vote.Trading income from other trading activities reflected a profit of GBP5.1 million (2016: GBP12.4 million).
Impairment losses on loans and advances
Impairments on loans and advances increased from GBP18.0 million to GBP31.1 million; however the group's annualised credit loss ratio remains at the lower end of its long term average at 0.28% (2016: 0.19%). Since 31 March 2017 gross defaults have reduced from GBP249.8 million to GBP218.9 million. The percentage of default loans (net of impairments but before taking collateral into account) to core loans and advances amounted to 0.56% (31 March 2017: 0.69%).
Operating costs
The ratio of total operating costs to total operating income improved marginally amounting to 66.5% (2016: 66.7%). Total operating costs grew by 12.9% to GBP792.5 million (2016: GBP701.8 million) reflecting continued planned spend on IT infrastructure and higher headcount across divisions to support increased activity and growth initiatives; notably the build out of the UK private client offering. Costs are also impacted by additional premises expenses relating to the London office's future premises move.
Taxation
The effective tax rate amounts to 14.5% (2016: 19.4%) mainly impacted by the lower rate in South Africa following the release of provisions no longer required.
Profit attributable to non-controlling interests
Profit attributable to non-controlling interests mainly comprises:
· GBP10.7 million profit attributable to non-controlling interests in the Asset Management business.
· GBP19.9 million profit attributable to non-controlling interests in the Investec Property Fund Limited.
Balance sheet analysis
Since 31 March 2017:
· Total shareholders' equity (including non-controlling interests) remained in line at GBP4.8 billion- an increase of 3.7% on a currency neutral basis. The weakening of the closing Rand exchange rate relative to Pounds Sterling has resulted in a reduction in total equity of GBP221 million.
· Net asset value per share decreased 2.1% to 421.8 pence and net tangible asset value per share (which excludes goodwill and intangible assets) decreased 1.8% to 370.2 pencelargely as a result of the depreciation of the Rand as described above. On a currency neutral basis net asset value per share and net tangible asset value per share increased by 1.8% and 2.5%, respectively.
· The annualised return on adjusted average shareholders' equity remained at 12.5%.
· The annualised return on adjusted average shareholders' equity of the ongoing business reduced marginally from 14.2% to 14.1%.
Liquidity and funding
As at 30 September 2017 the group held GBP10.7 billion in cash and near cash balances (GBP5.0 billion in Investec plc and R102.6 billion in Investec Limited) which amounted to 38.2% of customer deposits. Loans and advances to customers as a percentage of customer deposits amounted to 79.9% (31 March 2017: 76.2%). The cost of funding in the UK has continued to be managed down. The group will continue to focus on maintaining an optimal overall liquidity and funding profile. Based on the group's own interpretations of the EU Delegated Act and in line with the BCBS' final recommendations, Investec plc and Investec Bank plc (solo basis) comfortably exceed the relevant regulatory liquidity requirements for the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR). The LCR reported to the Prudential Regulatory Authority at 30 September 2017 was 610% for Investec plc and 520% for Investec Bank plc (solo basis). Investec Bank Limited (solo basis) ended the period to 30 September 2017 with the three-month average of its LCR at 127.0%, which is well ahead of the minimum levels required. Further detail with respect to the bank's LCR ratio in the UK and South Africa is provided on the website.
Capital adequacy and leverage ratios
The groupis targeting a minimum common equity tier 1 capital ratio above 10% and a total capital adequacy ratio range of 14% to 17% on a consolidated basis for each of Investec plc and Investec Limited. The group's anticipated fully loaded Basel III common equity tier 1 capital adequacy ratios in both Investec plc and Investec Limited are reflected in the table below.
30 Sep 2017 | 31 March 2017 | |
Investec plc^ | ||
Capital adequacy ratio | 14.5% | 15.1% |
Tier 1 ratio | 11.4% | 11.5% |
Common equity tier 1 ratio | 11.2% | 11.3% |
Common equity tier 1 ratio (anticipated Basel III 'fully loaded'*) | 11.2% | 11.3% |
Leverage ratio (current) | 8.0% | 7.8% |
Leverage ratio (anticipated Basel III 'fully loaded'*) | 7.9% | 7.7% |
Investec Limited** | ||
Capital adequacy ratio | 14.3% | 14.1% |
Tier 1 ratio | 10.8% | 10.7% |
Common equity tier 1 ratio | 10.0% | 9.9% |
Common equity tier 1 ratio (anticipated Basel III 'fully loaded'*) | 10.0% | 9.9% |
Leverage ratio (current) | 7.6% | 7.3% |
Leverage ratio (anticipated Basel III 'fully loaded'*) | 7.2% | 6.8% |
*Based on the group's understanding of current and draft regulations, 'fully loaded' is based on Basel III capital requirements as fully phased in by 2022.
^The capital adequacy disclosures follow Investec's normal basis of presentation so as to show a consistent basis of calculation across the jurisdictions in which the group operates. For Investec plc this does not include the deduction of foreseeable dividends when calculating CET1 capital as now required under the CRR and EBA technical standards. The impact of the final proposed ordinary and preference dividends totalling GBP43 million for Investec plc would be 31bps (31 March 2017: 45bps) lower on this basis.
**Investec Limited's capital information includes unappropriated profits. If unappropriated profits are excluded from the capital information, Investec Limited's common equity tier 1 ratio would be 15bps (31 March 2017: 24bps) lower.
Legacy business - overview of results
Since 31 March 2017 the group's legacy portfolio in the UK has continued to be actively managed down from GBP476 million to GBP425 million largely through asset sales, redemptions and write-offs. The total legacy business over the period reported a loss before taxation of GBP32.9 million (2016: GBP33.0 million). The remaining legacy portfolio will continue to be managed down. Total net defaults in the legacy book amount to GBP106 million (31 March 2017: GBP125 million).
Outlook
Whilst the global economy has improved our two key geographies suffer from continued political uncertainty.
Notwithstanding this, the group has continued to improve in shape and capability. Further progress has been made in dealing with the UK legacy book and the development of the private bank in the UK is gaining traction, as are the various digital initiatives. The continued investment in infrastructure and people across the group is indicative of the group's confidence in the franchise and will position the businesses appropriately for future growth and development.
On behalf of the boards of Investec plc and Investec Limited
Fani Titi | Stephen Koseff | Bernard Kantor |
Chairman | Chief Executive Officer | Managing Director |
15 November 2017
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, the interim results for Investec plc and Investec Limited present 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.
· 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:
Six months to 30 Sep 2017 | Year to 31 Mar 2017 | Six months to 30 Sep 2016 | ||||
Currency per GBP1.00 | Period end | Average | Period end | Average | Period end | Average |
South African Rand | 18.10 | 17.06 | 16.77 | 18.42 | 17.88 | 19.99 |
Australian Dollar | 1.71 | 1.69 | 1.64 | 1.75 | 1.70 | 1.83 |
Euro | 1.13 | 1.14 | 1.17 | 1.19 | 1.16 | 1.23 |
US Dollar | 1.34 | 1.30 | 1.25 | 1.31 | 1.30 | 1.38 |
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 exchange rate over the period has appreciated by 14.7% and the closing rate has depreciated by 7.9% since 31 March 2017.
· Accounting policies and disclosures
These unaudited summarised 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 period to 30 September 2017 are consistent with those adopted in the financial statements for the year ended 31 March 2017.
Standards and interpretations issued but not yet effective
The following significant standards and interpretations, which have been issued but are not yet effective, are applicable to the group.
IFRS 9 Financial Instruments
The group will adopt IFRS 9 Financial Instruments on 1 April 2018.
The group expects that the recognition and measurement basis of the majority of the group's financial assets will be largely unchanged on application of IFRS 9, based on the analysis performed to date.
The impairment requirements will lead to significant changes in the accounting treatment for certain financial instruments as a result of a shift from an incurred loss to an expected loss impairment methodology. Credit risk methodologies have been defined and model build has significantly been completed. Approval, testing and validation of the models is ongoing.
IFRS 9 includes an accounting policy choice to remain with IAS 39 hedge accounting. The group intends to continue applying IAS 39's hedge accounting.
The classification and measurement and impairment requirements are applied retrospectively by adjusting the opening balance sheet at the date of initial application, with no requirement to restate comparative periods. The group does not intend to restate comparatives.
The regulatory capital impact of IFRS 9 has been proposed by regulatory bodies with transitional capital arrangements being announced for 1 January 2018 which would allow a phase in of the Day 1 capital impact over a number of years.
It will not be practical to disclose reliable financial impact estimates until the implementation programme and validation and testing is further advanced.
IFRS 15 Revenue from contracts with customers
The group's current measurement and recognition principles are aligned to the standard and the group does not expect an impact to measurement principles currently applied. The impact of the disclosure requirements of the standard is currently being assessed.
The financial results have been prepared under the supervision of Glynn Burger, the Group Risk and Finance Director. The financial statements for the six months to 30 September 2017 will be posted to stakeholders on 30 November 2017. These accounts will be available on the group's website on the same date.
· Proviso
§ 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:
─ the further development of standards and interpretations under IFRS applicable to past, current and future periods, evolving practices with regard to the interpretation and application of standards under IFRS.
─ domestic and global economic and business conditions.
─ market related risks.
§ A number of these factors are beyond the group's control.
§ 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.
§ Any forward looking statements made are based on the knowledge of the group at 15 November 2017.
§ The information in the announcement for the six months ended 30 September 2017, which was approved by the board of directors on 15 November 2017, does not constitute statutory accounts as defined in Section 435 of the UK Companies Act 2006. The 31 March 2017 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.
§ This announcement is available on the group's website:www.investec.com
Financial assistance
Shareholders are referred to the Special Resolution number 3, which was approved at the annual general meeting held on 10 August 2017, 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 board of directors of Investec Limited provided such financial assistance during the period 1 April 2017 to 30 September 2017.
Ongoing financial information | |||
Ongoing summarised income statement | |||
GBP'000 | Six months to 30 September 2017 | Six months to 30 September 2016 | Year to 31 March 2017 |
Net interest income | 364 374 | 314 151 | 680 539 |
Net fee and commission income | 666 010 | 608 564 | 1 271 591 |
Investment income | 61 899 | 28 800 | 135 631 |
Share of post taxation operating profit of associates | 23 677 | 9 639 | 18 890 |
Trading income arising from | |||
- customer flow | 64 163 | 73 479 | 158 006 |
- balance sheet management and other trading activities | 5 143 | 12 370 | 8 078 |
Other operating income | 5 671 | 5 298 | 13 158 |
Total operating income before impairment losses on loans and advances | 1 190 937 | 1 052 301 | 2 285 893 |
Impairment losses on loans and advances | (31 101) | (18 004) | (57 149) |
Operating income | 1 159 836 | 1 034 297 | 2 228 744 |
Operating costs | (791 330) | (701 801) | (1 502 623) |
Depreciation on operating leased assets | (1 177) | - | (2 169) |
Operating profit before goodwill, acquired intangibles and non-operating items | 367 329 | 332 496 | 723 952 |
Profit attributable to other non-controlling interests | (19 800) | (18 033) | (60 239) |
Profit attributable to Asset Management non-controlling interests | (10 663) | (9 924) | (20 291) |
Operating profit before taxation | 336 866 | 304 539 | 643 422 |
Taxation on operating profit before goodwill and acquired intangibles | (50 960) | (62 696) | (130 438) |
Preference dividends accrued | (13 665) | (11 925) | (25 838) |
Adjusted attributable earnings to ordinary shareholders | 272 241 | 229 918 | 487 146 |
Adjusted earnings per share (pence) | 29.5 | 25.7 | 54.1 |
Number of weighted average shares (million) | 922.9 | 895.7 | 900.4 |
Cost to income ratio | 66.5% | 66.7% | 65.8% |
Segmental geographical and business analysis of operating profit before goodwill, acquired intangibles, non-operating items, taxation and after other non-controlling interests - ongoing business | |||
For the six months to 30 September GBP'000 | UK and Other | Southern Africa | Total group |
2017 | |||
Asset Management | 49 949 | 33 284 | 83 233 |
Wealth & Investment | 35 441 | 14 087 | 49 528 |
Specialist Banking | 74 133 | 165 291 | 239 424 |
159 523 | 212 662 | 372 185 | |
Group costs | (17 295) | (7 361) | (24 656) |
Total group | 142 228 | 205 301 | 347 529 |
Other non-controlling interest - equity | 19 800 | ||
Operating profit | 367 329 | ||
2016 | |||
Asset Management | 43 116 | 39 138 | 82 254 |
Wealth & Investment | 29 192 | 14 005 | 43 197 |
Specialist Banking | 95 211 | 117 623 | 212 834 |
167 519 | 170 766 | 338 285 | |
Group costs | (17 758) | (6 064) | (23 822) |
Total group | 149 761 | 164 702 | 314 463 |
Other non-controlling interest - equity | 18 033 | ||
Operating profit | 332 496 | ||
Reconciliation from statutory summarised income statement to | |||
For the six months to 30 September 2017 | Statutory as disclosed | UK legacy business | Ongoing business |
Net interest income | 364 321 | (53) | 364 374 |
Net fee and commission income | 666 010 | - | 666 010 |
Investment income | 62 074 | 175 | 61 899 |
Share of post taxation operating profit of associates | 23 677 | - | 23 677 |
Trading income arising from | |||
- customer flow | 64 160 | (3) | 64 163 |
- balance sheet management and other trading activities | 5 146 | 3 | 5 143 |
Other operating income | 5 669 | (2) | 5 671 |
Total operating income before impairment losses on loans and advances | 1 191 057 | 120 | 1 190 937 |
Impairment losses on loans and advances | (59 593) | (28 492) | (31 101) |
Operating income/(loss) | 1 131 464 | (28 372) | 1 159 836 |
Operating costs | (795 883) | (4 553) | (791 330) |
Depreciation on operating leased assets | (1 177) | - | (1 177) |
Operating profit/(loss) before goodwill, acquired intangibles | 334 404 | (32 925) | 367 329 |
Profit attributable to other non-controlling interests | (19 800) | - | (19 800) |
Profit attributable to Asset Management non-controlling interests | (10 663) | - | (10 663) |
Operating profit/(loss) before taxation | 303 941 | (32 925) | 336 866 |
Taxation on operating profit before goodwill and acquired intangibles | (44 996) | 5 964^ | (50 960) |
Preference dividends accrued | (13 665) | - | (13 665) |
Adjusted attributable earnings to ordinary shareholders | 245 280 | (26 961) | 272 241 |
Adjusted earnings per share (pence) | 26.6 | 29.5 | |
Number of weighted average shares (million) | 922.9 | 922.9 | |
Cost to income ratio | 66.9% | 66.5% | |
Applying the UK's effective statutory taxation rate of 18.1%. | |||
For the six months to 30 September 2016 GBP'000 | Statutory as disclosed | UK legacy business | Ongoing business |
Net interest income | 313 465 | (686) | 314 151 |
Net fee and commission income | 608 488 | (76) | 608 564 |
Investment income | 29 024 | 224 | 28 800 |
Share of post taxation operating profit of associates | 9 639 | - | 9 639 |
Trading income arising from | |||
- customer flow | 73 438 | (41) | 73 479 |
- balance sheet management and other trading activities | 12 370 | - | 12 370 |
Other operating income | 5 298 | - | 5 298 |
Total operating income/(loss) before impairment losses on loans and advances | 1 051 722 | (579) | 1 052 301 |
Impairment losses on loans and advances | (46 591) | (28 587) | (18 004) |
Operating income/(loss) | 1 005 131 | (29 166) | 1 034 297 |
Operating costs | (705 680) | (3 879) | (701 801) |
Operating profit/(loss) before goodwill, acquired intangibles and non-operating items | 299 451 | (33 045) | 332 496 |
Profit attributable to other non-controlling interests | (18 033) | - | (18 033) |
Profit attributable to Asset Management non-controlling interests | (9 924) | - | (9 924) |
Operating profit/(loss) before taxation | 271 494 | (33 045) | 304 539 |
Taxation on operating profit before goodwill and acquired intangibles | (56 279) | 6 417* | (62 696) |
Preference dividends accrued | (11 925) | - | (11 925) |
Adjusted attributable earnings to ordinary shareholders | 203 290 | (26 628) | 229 918 |
Adjusted earnings per share (pence) | 22.7 | 25.7 | |
Number of weighted average shares (million) | 895.7 | 895.7 | |
Cost to income ratio | 67.1% | 66.7% | |
* Applying the group's effective statutory taxation rate of 19.4%. | |||
Statutory financial information
Salient financial features
Results in Pounds Sterling | Results in Rand | |||||||
Six months to 30 September 2017 | Six months to 30 September 2016 | % change | Neutral currency^ Six months to 30 September 2017 | Neutral currency % change | Six months to 30 September 2017 | Six months to 30 September 2016 | % change | |
Operating profit before taxation* (million) | 314.6 | 281.4 | 11.8% | 284.5 | 1.1% | 5 378 | 5 592 | (3.8%) |
Earnings attributable to shareholders (million) | 252.4 | 208.6 | 21.0% | 227.1 | 8.8% | 4 321 | 4 132 | 4.6% |
Adjusted earnings attributable to shareholders** (million) | 245.3 | 203.3 | 20.7% | 221.7 | 9.1% | 4 199 | 4 027 | 4.3% |
Adjusted earnings per share** | 26.6p | 22.7p | 17.2% | 24.0p | 5.7% | 455c | 450c | 1.1% |
Basic earnings per share | 25.8p | 26.5p | (2.6%) | 23.3p | (12.1%) | 443c | 524c | (15.5%) |
Dividends per share | 10.5p | 10.0p | 5.0% | n/a | n/a | 200c | 178c | 12.4% |
* Before goodwill, acquired intangibles, non-operating items and after other non-controlling interests
** Before goodwill, acquired intangibles, non-operating items and after non-controlling interests.
^For income statement items we have used the average Rand:Pound Sterling exchange rate that was applied in the prior year, i.e. 19.99.
Results in Pounds Sterling | Results in Rand | |||||||
Actual as reported At 30 September 2017 | Actual as reported At 31 March 2017 | Actual as reported % change | Neutral currency At 30 September 2017 | Neutral currency % change | At 30 September 2017 | At 31 March 2017 | % change | |
Net asset value per share | 421.8p | 431.0p | (2.1%) | 438.6p | 1.8% | 7 635c | 7 228c | 5.6% |
Net tangible asset value per share | 370.2p | 377.0p | (1.8%) | 386.6p | 2.5% | 6 701c | 6 322c | 6.0% |
Total equity (million) | 4 766 | 4 809 | (0.9%) | 4 987 | 3.7% | 86 271 | 80 638 | 7.0% |
Total assets (million) | 51 818 | 53 535 | (3.2%) | 54 442 | 1.7% | 937 939 | 897 749 | 4.5% |
Core loans and advances (million) | 22 797 | 22 707 | 0.4% | 23 900 | 5.3% | 412 624 | 380 786 | 8.4% |
Cash and near cash balances (million) | 10 683 | 12 038 | (11.3%) | 11 133 | (7.5%) | 193 360 | 201 877 | (4.2%) |
Customer deposits (million) | 27 966 | 29 109 | (3.9%) | 29 325 | 0.7% | 506 201 | 488 149 | 3.7% |
Third party assets under management (million) | 154 338 | 150 735 | 2.4% | 158 475 | 5.1% | 2 793 517 | 2 527 826 | 10.5% |
Return on average adjusted shareholders' equity | 12.5% | 12.5% | ||||||
Return on average risk-weighted assets | 1.50% | 1.45% | ||||||
Defaults (net of impairments and before collateral) as a percentage of net core loans | 1.01% | 1.22% | ||||||
Loans and advances to customers as a percentage of customer deposits | 79.9% | 76.2% | ||||||
Credit loss ratio (income statement impairment charge as a % of average gross core loans and advances) | 0.52% | 0.54% | ||||||
For balance sheet items we have assumed that the Rand:Pound Sterling exchange rate has remained neutral since March 2017.
Combined consolidated income statement | |||
GBP'000 | Six months to 30 September 2017 | Six months to 30 September 2016 | Year to 31 March 2017 |
Interest income | 1 225 130 | 1 037 756 | 2 230 765 |
Interest expense | (860 809) | (724 291) | (1 550 870) |
Net interest income | 364 321 | 313 465 | 679 895 |
Fee and commission income | 753 835 | 670 816 | 1 429 588 |
Fee and commission expense | (87 825) | (62 328) | (158 064) |
Investment income | 62 074 | 29 024 | 136 203 |
Share of post taxation operating profit of associates | 23 677 | 9 639 | 18 890 |
Trading income arising from | |||
- customer flow | 64 160 | 73 438 | 158 001 |
- balance sheet management and other trading activities | 5 146 | 12 370 | 8 218 |
Other operating income | 5 669 | 5 298 | 13 483 |
Total operating income before impairment losses on loans and advances | 1 191 057 | 1 051 722 | 2 286 214 |
Impairment losses on loans and advances | (59 593) | (46 591) | (111 454) |
Operating income | 1 131 464 | 1 005 131 | 2 174 760 |
Operating costs | (795 883) | (705 680) | (1 513 231) |
Depreciation on operating leased assets | (1 177) | - | (2 169) |
Operating profit before goodwill and acquired intangibles | 334 404 | 299 451 | 659 360 |
Impairment of goodwill | - | (270) | (4 749) |
Amortisation of acquired intangibles | (8 142) | (8 469) | (17 197) |
Profit before taxation | 326 262 | 290 712 | 637 414 |
Taxation on operating profit before goodwill and acquired intangibles | (44 996) | (56 279) | (118 488) |
Taxation on acquired intangibles and acquisition/disposal/integration of subsidiaries | 1 631 | 2 122 | 4 070 |
Profit after taxation | 282 897 | 236 555 | 522 996 |
Profit attributable to other non-controlling interests | (19 800) | (18 033) | (60 239) |
Profit attributable to Asset Management non-controlling interests | (10 663) | (9 924) | (20 291) |
Earnings attributable to shareholders | 252 434 | 208 598 | 442 466 |
Impairment of goodwill | - | 270 | 4 749 |
Amortisation of acquired intangibles | 8 142 | 8 469 | 17 197 |
Taxation on acquired intangibles and acquisition/disposal/integration of subsidiaries | (1 631) | (2 122) | (4 070) |
Preference dividends paid | (14 101) | (11 979) | (25 658) |
Accrual adjustment on earnings attributable to other equity holders | 436 | 54 | (180) |
Adjusted earnings | 245 280 | 203 290 | 434 504 |
Earnings per share (pence) | |||
- Basic | 25.8 | 26.5 | 50.8 |
- Diluted | 24.9 | 25.4 | 48.8 |
Adjusted earnings per share (pence) | |||
- Basic | 26.6 | 22.7 | 48.3 |
- Diluted | 25.7 | 21.8 | 46.4 |
Dividends per share (pence) | |||
- Interim | 10.5 | 10.0 | 10.0 |
- Final | n/a | n/a | 13.0 |
Number of weighted average shares (million) | 922.9 | 895.7 | 900.4 |
Summarised combined consolidated statement of comprehensive income | |||
GBP'000 | Six months to 30 September 2017 | Six months to 30 September 2016 | Year to 31 March 2017 |
Profit after taxation | 282 897 | 236 555 | 522 996 |
Other comprehensive income: | |||
Items that may be reclassified to the income statement | |||
Fair value movements on cash flow hedges taken directly to other comprehensive income* | (1 824) | 19 912 | 53 324 |
Gains on realisation of available-for-sale assets recycled to the income statement* | (4 760) | (8 132) | (7 781) |
Fair value movements on available-for-sale assets taken directly to other comprehensive income* | 13 816 | 52 980 | 54 863 |
Foreign currency adjustments on translating foreign operations | (220 844) | 375 148 | 540 534 |
Items that will never be reclassified to the income statement | |||
Remeasurement of net defined pension liability | - | - | (43 580) |
Total comprehensive income | 69 285 | 676 463 | 1 120 356 |
Total comprehensive income attributable to ordinary shareholders | 72 485 | 551 216 | 892 201 |
Total comprehensive (loss)/income attributable to non-controlling interests | (17 301) | 113 268 | 202 497 |
Total comprehensive income attributable to perpetual preferred securities | 14 101 | 11 979 | 25 658 |
Total comprehensive income | 69 285 | 676 463 | 1 120 356 |
* Net of taxation of GBP3.0 million [Six months to 30 September 2016: GBP19.5 million, year to 31 March 2017: GBP16.8 million]. | |||
Summarised combined consolidated cash flow statement
GBP'000 | Six months to 30 September 2017 | Six months to 30 September 2016 | Year to 31 March 2017 |
Cash inflows from operations | 357 998 | 370 866 | 708 810 |
Increase in operating assets | (1 009 683) | (652 118) | (445 528) |
Increase in operating liabilities | 705 103 | 1 829 100 | 498 146 |
Net cash inflow from operating activities | 53 418 | 1 547 848 | 761 428 |
Net cash inflow/(outflow) from investing activities | 5 292 | (30 229) | (59 615) |
Net cash (outflow)/inflow from financing activities | (121 852) | (32 265) | 37 523 |
Effects of exchange rates on cash and cash equivalents | (144 595) | 234 127 | 332 092 |
Net (decrease)/increase in cash and cash equivalents | (207 737) | 1 719 481 | 1 071 428 |
Cash and cash equivalents at the beginning of the period | 5 721 728 | 4 650 300 | 4 650 300 |
Cash and cash equivalents at the end of the period | 5 513 991 | 6 369 781 | 5 721 728 |
Cash and cash equivalents is defined as including; cash and balances at central banks, on demand loans and advances to banks and cash equivalent loans and advances to customers (all of which have a maturity profile of less than three months).
Combined consolidated balance sheet | |||
At GBP'000 | 30 September 2017 | 31 March 2017 | 30 September 2016 |
Assets | |||
Cash and balances at central banks | 3 356 259 | 3 351 702 | 4 233 278 |
Loans and advances to banks | 2 308 618 | 3 191 041 | 3 154 517 |
Non-sovereign and non-bank cash placements | 574 521 | 536 259 | 571 405 |
Reverse repurchase agreements and cash collateral on securities borrowed | 1 690 036 | 2 358 970 | 2 424 849 |
Sovereign debt securities | 3 608 316 | 3 804 627 | 3 639 215 |
Bank debt securities | 604 511 | 639 189 | 641 542 |
Other debt securities | 968 597 | 1 115 558 | 1 079 256 |
Derivative financial instruments | 1 201 602 | 1 185 848 | 1 636 619 |
Securities arising from trading activities | 1 395 766 | 1 376 668 | 1 215 293 |
Investment portfolio | 911 480 | 835 899 | 806 696 |
Loans and advances to customers | 22 351 228 | 22 189 975 | 20 376 991 |
Own originated loans and advances to customers securitised | 445 672 | 517 162 | 521 063 |
Other loans and advances | 367 401 | 355 248 | 371 111 |
Other securitised assets | 153 786 | 148 964 | 153 133 |
Interests in associated undertakings | 371 294 | 392 213 | 331 294 |
Deferred taxation assets | 123 435 | 133 972 | 98 641 |
Other assets | 2 016 057 | 1 900 480 | 2 306 954 |
Property and equipment | 100 910 | 105 939 | 98 632 |
Investment properties | 1 063 771 | 1 128 930 | 1 013 204 |
Goodwill | 366 969 | 367 579 | 370 969 |
Intangible assets | 132 692 | 143 261 | 146 845 |
Non-current assets held for sale | - | 27 218 | 27 818 |
44 112 921 | 45 806 702 | 45 219 325 | |
Other financial instruments at fair value through profit or loss in respect of liabilities to customers | 7 705 206 | 7 728 130 | 7 259 638 |
51 818 127 | 53 534 832 | 52 478 963 | |
Liabilities | |||
Deposits by banks | 2 246 115 | 2 736 066 | 2 536 285 |
Derivative financial instruments | 1 169 314 | 1 296 206 | 1 757 081 |
Other trading liabilities | 968 917 | 978 911 | 983 407 |
Repurchase agreements and cash collateral on securities lent | 730 170 | 690 615 | 1 048 993 |
Customer accounts (deposits) | 27 966 006 | 29 109 428 | 28 304 921 |
Debt securities in issue | 2 549 264 | 2 386 180 | 2 354 568 |
Liabilities arising on securitisation of own originated loans and advances | 133 307 | 90 125 | 91 611 |
Liabilities arising on securitisation of other assets | 131 740 | 128 838 | 112 754 |
Current taxation liabilities | 197 244 | 227 828 | 200 390 |
Deferred taxation liabilities | 38 304 | 40 408 | 63 586 |
Other liabilities | 1 827 251 | 1 910 830 | 1 926 943 |
37 957 632 | 39 595 435 | 39 380 539 | |
Liabilities to customers under investment contracts | 7 702 724 | 7 725 604 | 7 257 222 |
Insurance liabilities, including unit-linked liabilities | 2 482 | 2 526 | 2 416 |
45 662 838 | 47 323 565 | 46 640 177 | |
Subordinated liabilities | 1 389 091 | 1 402 638 | 1 353 958 |
47 051 929 | 48 726 203 | 47 994 135 | |
Equity | |||
Ordinary share capital | 240 | 237 | 237 |
Perpetual preference share capital | 31 | 31 | 38 |
Share premium | 2 404 171 | 2 341 228 | 2 327 189 |
Treasury shares | (196 198) | (126 879) | (138 609) |
Other reserves | (460 907) | (310 275) | (465 030) |
Retained income | 2 385 707 | 2 226 751 | 2 162 199 |
Shareholders' equity excluding non-controlling interests | 4 133 044 | 4 131 093 | 3 886 024 |
Other Additional Tier 1 securities in issue | 30 386 | 32 798 | 30 757 |
Non-controlling interests | 602 768 | 644 738 | 568 047 |
- Perpetual preferred securities issued by subsidiaries | 84 763 | 91 492 | 85 798 |
- Non controlling interests in partially held subsidiaries | 518 005 | 553 246 | 482 249 |
Total equity | 4 766 198 | 4 808 629 | 4 484 828 |
Total liabilities and equity | 51 818 127 | 53 534 832 | 52 478 963 |
Summarised combined consolidated statement of changes in equity | |||
GBP'000 | Six months to 30 September 2017 | Year to 31 March 2017 | Six months to 30 September 2016 |
Balance at the beginning of the period | 4 808 629 | 3 859 307 | 3 859 307 |
Total comprehensive income for the period | 69 285 | 1 120 356 | 676 463 |
Share-based payments adjustments | 34 688 | 55 961 | 24 954 |
Dividends paid to ordinary shareholders | (123 230) | (216 602) | (123 344) |
Dividends declared to perpetual preference shareholders | (8 160) | (15 279) | (7 425) |
Dividends paid to perpetual preference shareholders included in non-controlling interests | (5 941) | (10 379) | (4 554) |
Dividends paid to non-controlling interests | (29 272) | (48 195) | (18 189) |
Issue of ordinary shares | 105 206 | 228 086 | 211 063 |
Redemption of perpetual preference shares | - | (81 743) | (81 736) |
Net equity impact of non-controlling interest movements | 4 518 | 29 542 | 27 |
Other equity movements | - | (80) | - |
Movement of treasury shares | (89 525) | (112 345) | (51 738) |
Balance at the end of the period | 4 766 198 | 4 808 629 | 4 484 828 |
Combined consolidated segmental analysis | |||
For the six months to 30 September GBP'000 | UK and Other | Southern Africa | Total group |
Segmental geographical and business analysis of operating profit before goodwill, acquired intangibles, non-operating items, taxation and after other non-controlling interests | |||
2017 | |||
Asset Management | 49 949 | 33 284 | 83 233 |
Wealth & Investment | 35 441 | 14 087 | 49 528 |
Specialist Banking | 41 208 | 165 291 | 206 499 |
126 598 | 212 662 | 339 260 | |
Group costs | (17 295) | (7 361) | (24 656) |
Total group | 109 303 | 205 301 | 314 604 |
Other non-controlling interest - equity | 19 800 | ||
Operating profit | 334 404 | ||
2016 | |||
Asset Management | 43 116 | 39 138 | 82 254 |
Wealth & Investment | 29 192 | 14 005 | 43 197 |
Specialist Banking | 62 166 | 117 623 | 179 789 |
134 474 | 170 766 | 305 240 | |
Group costs | (17 758) | (6 064) | (23 822) |
Total group | 116 716 | 164 702 | 281 418 |
Other non-controlling interest - equity | 18 033 | ||
Operating profit | 299 451 |
Analysis of financial assets and liabilities by category of financial instrument
At 30 September 2017 GBP'000 | Total instruments at fair value | Total instruments at amortised cost | Insurance related linked instruments at fair value | Non-financial instruments or scoped out of IAS 39 | Total |
Assets | |||||
Cash and balances at central banks | 1 325 | 3 354 934 | - | - | 3 356 259 |
Loans and advances to banks | 121 318 | 2 187 300 | - | - | 2 308 618 |
Non-sovereign and non-bank cash placements | 2 842 | 571 679 | - | - | 574 521 |
Reverse repurchase agreements and cash collateral on securities borrowed | 698 118 | 991 918 | - | - | 1 690 036 |
Sovereign debt securities | 3 419 214 | 189 102 | - | - | 3 608 316 |
Bank debt securities | 334 722 | 269 789 | - | - | 604 511 |
Other debt securities | 674 651 | 293 946 | - | - | 968 597 |
Derivative financial instruments | 1 201 602 | - | - | - | 1 201 602 |
Securities arising from trading activities | 1 395 766 | - | - | - | 1 395 766 |
Investment portfolio | 911 480 | - | - | - | 911 480 |
Loans and advances to customers | 1 057 465 | 21 293 763 | - | - | 22 351 228 |
Own originated loans and advances to customers securitised | - | 445 672 | - | - | 445 672 |
Other loans and advances | - | 367 401 | - | - | 367 401 |
Other securitised assets | 135 580 | 18 206 | - | - | 153 786 |
Interests in associated undertakings | - | - | - | 371 294 | 371 294 |
Deferred taxation assets | - | - | - | 123 435 | 123 435 |
Other assets | 266 935 | 1 256 123 | - | 492 999 | 2 016 057 |
Property and equipment | - | - | - | 100 910 | 100 910 |
Investment properties | - | - | - | 1 063 771 | 1 063 771 |
Goodwill | - | - | - | 366 969 | 366 969 |
Intangible assets | - | - | - | 132 692 | 132 692 |
10 221 018 | 31 239 833 | - | 2 652 070 | 44 112 921 | |
Other financial instruments at fair value through profit or loss in respect of liabilities to customers | - | - | 7 705 206 | - | 7 705 206 |
10 221 018 | 31 239 833 | 7 705 206 | 2 652 070 | 51 818 127 | |
Liabilities | |||||
Deposits by banks | - | 2 246 115 | - | - | 2 246 115 |
Derivative financial instruments | 1 169 314 | - | - | - | 1 169 314 |
Other trading liabilities | 968 917 | - | - | - | 968 917 |
Repurchase agreements and cash collateral on securities lent | 69 117 | 661 053 | - | - | 730 170 |
Customer accounts (deposits) | 1 704 590 | 26 261 416 | - | - | 27 966 006 |
Debt securities in issue | 494 137 | 2 055 127 | - | - | 2 549 264 |
Liabilities arising on securitisation of own originated loans and advances | - | 133 307 | - | - | 133 307 |
Liabilities arising on securitisation of other assets | 131 740 | - | - | - | 131 740 |
Current taxation liabilities | - | - | - | 197 244 | 197 244 |
Deferred taxation liabilities | - | - | - | 38 304 | 38 304 |
Other liabilities | 22 309 | 1 185 869 | - | 619 073 | 1 827 251 |
4 560 124 | 32 542 887 | - | 854 621 | 37 957 632 | |
Liabilities to customers under investment contracts | - | - | 7 702 724 | - | 7 702 724 |
Insurance liabilities, including unit-linked liabilities | - | - | 2 482 | - | 2 482 |
4 560 124 | 32 542 887 | 7 705 206 | 854 621 | 45 662 838 | |
Subordinated liabilities | - | 1 389 091 | - | - | 1 389 091 |
4 560 124 | 33 931 978 | 7 705 206 | 854 621 | 47 051 929 |
Financial instruments carried 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 1 - quoted (unadjusted) prices in active markets for identical assets or liabilities
Level 2 - inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)
Level 3 - inputs for the asset or liability that are not based on observable market data (unobservable inputs)
Assets and liabilities related to the long-term assurance business attributable to policyholders have been excluded from the analysis as the change in fair value of related assets is attributable to policyholders. These are all classified as level 1.
Fair value category | ||||
At 30 September 2017 GBP'000 | Total instruments at fair value | Level 1 | Level 2 | Level 3 |
Assets | ||||
Cash and balances at central banks | 1 325 | 1 325 | - | - |
Loans and advances to banks | 121 318 | 121 318 | - | - |
Non-sovereign and non-bank cash placements | 2 842 | - | 2 842 | - |
Reverse repurchase agreements and cash collateral on securities borrowed | 698 118 | - | 698 118 | - |
Sovereign debt securities | 3 419 214 | 3 419 214 | - | - |
Bank debt securities | 334 722 | 263 275 | 71 447 | - |
Other debt securities | 674 651 | 370 063 | 295 093 | 9 495 |
Derivative financial instruments | 1 201 602 | - | 1 146 705 | 54 897 |
Securities arising from trading activities | 1 395 766 | 1 357 063 | 38 703 | - |
Investment portfolio | 911 480 | 226 617 | 42 254 | 642 609 |
Loans and advances to customers | 1 057 465 | - | 960 785 | 96 680 |
Other securitised assets | 135 580 | - | - | 135 580 |
Other assets | 266 935 | 266 935 | - | - |
10 221 018 | 6 025 810 | 3 255 947 | 939 261 | |
Liabilities | ||||
Derivative financial instruments | 1 169 314 | - | 1 168 031 | 1 283 |
Other trading liabilities | 968 917 | 887 834 | 81 083 | - |
Repurchase agreements and cash collateral on securities lent | 69 117 | - | 69 117 | - |
Customer accounts (deposits) | 1 704 590 | - | 1 704 590 | - |
Debt securities in issue | 494 137 | - | 479 361 | 14 776 |
Liabilities arising on securitisation of other assets | 131 740 | - | - | 131 740 |
Other liabilities | 22 309 | - | 22 309 | - |
4 560 124 | 887 834 | 3 524 491 | 147 799 | |
Net financial assets/(liabilities) at fair value | 5 660 894 | 5 137 976 | (268 544) | 791 462 |
Transfers between level 1 and level 2
There were no transfers between level 1 and level 2 in the current period.
The group transfers between levels within the fair value hierarchy when the significance of the unobservable inputs change or if the valuation methods change.
Level 2 financial assets and financial liabilities
The following table sets out the group's principal valuation techniques as at 30 September 2017 used in determining the fair value of its financial as sets and financial liabilities that are classified within level 2 of the fair value hierarchy.
Valuation basis/techniques | Main assumptions | |
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 Volatilities |
Bank debt securities | Discounted cash flow model | Yield curves NCD curves |
Other debt securities | Discounted cash flow model | Yield curves and NCD curves, 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 |
Securities arising from trading activities | Standard industry derivative pricing model Adjusted quoted price | Interest rate curves, implied bond spreads, equity volatilities Liquidity adjustments |
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 |
Liabilities | ||
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 |
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 |
Customer accounts (deposits) | Discounted cash flow model | Yield curves |
Debt securities in issue | Discounted cash flow model | Yield curves |
Other liabilities | Discounted cash flow model | Yield curves |
For the six months to 30 September 2017 GBP'000 | Net level 3 financial instruments |
The following table is a reconciliation of the opening balances to the closing balances for fair value measurements in level 3 of the fair value hierarchy: | |
Balance as at 1 April 2017 | 770 686 |
Total gains or losses | 25 458 |
In the income statement | 23 350 |
In the statement of comprehensive income | 2 108 |
Purchases | 82 881 |
Sales | (41 381) |
Settlements | (14 865) |
Transfers out of level 3 | (6 189) |
Foreign exchange adjustments | (25 127) |
Balance as at 30 September 2017 | 791 462 |
For the period ended 30 September 2017, GBP6.2 million has been transferred out of level 3 into level 2 as a result of the inputs to the valuation method becoming observable in the market as a selling price became available.
For the six months to 30 September 2017 GBP'000 | Total gains or losses | Realised | Unrealised |
Total gains/(losses) included in the income statement for the period | |||
Net interest income | 60 | 60 | - |
Fee and commission income | 1 000 | - | 1 000 |
Investment income | 24 188 | 4 574 | 19 614 |
Trading loss arising from customer flow | (1 898) | 919 | (2 817) |
23 350 | 5 553 | 17 797 | |
Total gains/(losses) recognised in other comprehensive income for the period | |||
Gains on realisation of available-for-sale assets recycled through the income statement | 2 418 | 2 418 | - |
Fair value movements on available-for-sale assets taken directly to other comprehensive income | 2 108 | - | 2 108 |
4 526 | 2 418 | 2 018 |
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 following table shows the sensitivity of these fair values to reasonably possible alternative assumptions, determined at a transactional level:
Balance sheet value GBP'000 |
Significant |
Range of unobservable | Favourable changes GBP'000 | Unfavourable changes GBP'000 | |
30 September 2017 | |||||
Assets | |||||
Other debt securities | 9 495 | Potential impact on income statement | 1 316 | (460) | |
Price earnings multiple | (10%)/10% | 925 | (123) | ||
Cash flow adjustments | CPR 7.5% - 8.5% | 391 | (337) | ||
Derivative financial instruments | 54 897 | Potential impact on income statement | 4 844 | (5 889) | |
Volatilities | 4% - 10.5% | 1 180 | (2 483) | ||
Property value | (10%)/10% | 55 | (55) | ||
Cash flow adjustments | CPR 7.5% - 8.5% | 614 | (1 347) | ||
Other | ^ | 2 995 | (2 004) | ||
Investment portfolio | 642 609 | Potential impact on income statement | 108 474 | (120 628) | |
EBITDA | 3% | 437 | (437) | ||
EBITDA | ^^ | 51 361 | (48 770) | ||
Precious and industrial metal prices | (10%)/6% | 7 050 | (18 763) | ||
Price earnings multiple | 4x - 10.3x | 5 133 | (5 254) | ||
Other | ^ | 44 493 | (47 404) | ||
Potential impact on other comprehensive income | 5 003 | (1 576) | |||
Price earnings multiple | 4x | 79 | (167) | ||
Other | ^ | 4 924 | (1 409) | ||
Loans and advances to customers | 96 680 | Potential impact on income statement | |||
Other | ^ | 10 292 | (10 187) | ||
Other securitised assets* | 135 580 | Potential impact on income statement | |||
Cash flow adjustments | CPR 7.5% | 493 | (649) | ||
Total level 3 assets | 939 261 | 130 422 | (139 389) | ||
Liabilities | |||||
Derivative financial instruments | 1 283 | Potential impact on income statement | (1 325) | 591 | |
Cash flow adjustments | CPR 7.5% - 8.5% | (1 321) | 587 | ||
Volatilities | 8.5% | (4) | 4 | ||
Debt securities in issue | 14 776 | Potential impact on income statement | |||
Volatilities | 7% | (617) | 229 | ||
Liabilities arising on securitisation of other assets* | 131 740 | Potential impact on income statement | |||
Cash flow adjustments | CPR 6.25% | (350) | 325 | ||
Total level 3 liabilities | 147 799 | (2 292) | 1 145 | ||
Net level 3 assets | 791 462 |
* The sensitivity of the fair value of liabilities arising on securitisation of other assets has been considered together with other securitised assets.
^ Other - The valuation sensitivity for the private equity and embedded derivatives (profit share) portfolios 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 investments cannot be determined through the adjustment of a single input.
^^ The EBITDA has been stressed on an investment by investment basis to obtain a favourable and unfavourable valuation.
Fair value of financial assets and liabilities at amortised cost
The following table sets out the fair value of financial instruments held at amortised cost where the carrying value is not a reasonable approximation of fair value. | ||
At 30 September 2017 GBP'000 | Carrying amount | Fair value |
Assets | ||
Reverse repurchase agreements and cash collateral on securities borrowed | 991 918 | 991 804 |
Sovereign debt securities | 189 102 | 184 518 |
Bank debt securities | 269 789 | 289 694 |
Other debt securities | 293 946 | 293 586 |
Loans and advances to customers | 21 293 763 | 21 290 251 |
Other loans and advances | 367 401 | 361 021 |
Liabilities | ||
Deposits by banks | 2 246 115 | 2 250 180 |
Repurchase agreements and cash collateral on securities lent | 661 053 | 683 669 |
Customer accounts (deposits) | 26 261 416 | 26 267 846 |
Debt securities in issue | 2 055 127 | 2 102 130 |
Other liabilities | 1 185 869 | 1 185 559 |
Subordinated liabilities | 1 389 091 | 1 561 706 |
Incorporated in England and Wales
Registration number 3633621
LSE ordinary share code: INVP
JSE ordinary share code: INP
ISIN: GB00B17BBQ50
Investec plc 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 31
Notice is hereby given that an interim dividend number 31, being a gross dividend of 10.5 pence (2016: 10 pence) per ordinary share has been declared by the Board from income reserves in respect of the six months ended 30 September 2017 payable to shareholders recorded in the shareholders' register of the company at the close of business on Friday, 08 December 2017.
· for Investec plc shareholders, registered on the United Kingdom share register, through a dividend payment by Investec plc from income reserves of 10.5 pence per ordinary share · for Investec plc shareholders, registered on the South African branch register, through a dividend payment by Investec plc from income reserves of 2.5 pence per ordinary share and through a dividend paid by Investec Limited, on the SA DAS share, payable from income reserves, equivalent to 8 pence per ordinary shareThe relevant dates for the payment of dividend number 31 are as follows:
Last day to trade cum-dividend
On the Johannesburg Stock Exchange (JSE) Tuesday, 05 December 2017
On the London Stock Exchange (LSE) Wednesday, 06 December 2017
Shares commence trading ex-dividend
On the Johannesburg Stock Exchange (JSE) Wednesday, 06 December 2017
On the London Stock Exchange (LSE) Thursday, 07 December 2017
Record date (on the JSE and LSE)Friday, 08 December 2017
Payment date (on the JSE and LSE)Wednesday, 20 December 2017
Share certificates on the South African branch register may not be dematerialised or rematerialised between Wednesday, 06 December 2017 and Friday, 08 December 2017, both dates inclusive, nor may transfers between the United Kingdom share register and the South African branch register take place between Wednesday, 06 December 2017and Friday, 08 December 2017, both dates inclusive.
Additional information for South African resident shareholders of Investec plc
· Shareholders registered on the South African branch register are advised that the distribution of 10.5 pence, equivalent to a gross dividend of 200.00000 centsper share, has been arrived at using the Rand/Pound Sterling average buy/sell forward rate, as determined at 11h00 (SA time) on Wednesday, 15 November 2017
· Investec plc United Kingdom tax reference number: 2683967322360
· The issued ordinary share capital of Investec plc is 668 441 206 ordinary shares
· 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)
· Shareholders registered on the South African branch register who are exempt from paying the Dividend Tax will receive a net dividend of 200.00000 cents per share, comprising 152.38095 cents per share paid by Investec Limited on the SA DAS share and 47.61905 cents per ordinary share paid by Investec plc
· Shareholders registered on the South African branch register who are not exempt from paying the Dividend Tax will receive a net dividend of 160.00000 cents per share (gross dividend of 200.00000 cents per share less Dividend Tax of 40.00000 cents per share) comprising 121.90476 cents per share paid by Investec Limited on the SA DAS share and 38.09524 cents per ordinary share paid by Investec plc.
By order of the board
D Miller
Company Secretary
15 November 2017
Investec plc
Incorporated in England and Wales
Registration number: 3633621
Share code: INPP
ISIN: GB00B19RX541
Preference share dividend announcement
Non-redeemable non-cumulative non-participating preference shares ('preference shares')
Declaration of dividend number 23
Notice is hereby given that preference dividend number 23 has been declared from income reserves for the period 01 April 2017 to 30 September 2017 amounting to a gross preference dividend of 6.26712 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, 01 December 2017.For shares trading on the Johannesburg Stock Exchange (JSE), the dividend of 6.26712 pence per preference share is equivalent to a gross dividend of 119.21629 cents per share, which has been determined using the Rand/Pound Sterling average buy/sell forward rate as at 11h00 (SA Time) on Wednesday, 15 November 2017.The relevant dates relating to the payment of dividend number 23 are as follows:
Last day to trade cum-dividend
On the Johannesburg Stock Exchange (JSE) Tuesday, 28 November 2017
On The International Stock Exchange (TISE) Wednesday, 29 November 2017
Shares commence trading ex-dividend
On the Johannesburg Stock Exchange (JSE) Wednesday, 29 November 2017
On The International Stock Exchange (TISE) Thursday, 30 November 2017
Record date (on the JSE and TISE)Friday, 01 December 2017
Payment date (on the JSE and TISE)Monday, 11 December 2017
Share certificates may not be dematerialised or rematerialised between Wednesday, 29 November 2017 and Friday, 01 December 2017, both dates inclusive, nor may transfers between the United Kingdom share register and the South African branch register take place between Wednesday, 29 November 2017 and Friday, 01 December 2017, both dates inclusive.Additional information for South African resident shareholders of Investec plc
· Investec plc United Kingdom tax reference number: 2683967322360
· The issued preference share capital of Investec plc is 2 754 587 preference shares
· 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)
· The net dividend amounts to 95.37303 cents per preference share for preference shareholders liable to pay the Dividend Tax and 119.21629 cents per preference share for preference shareholders exempt from paying the Dividend Tax.
By order of the board
D Miller
Company Secretary
15 November 2017
Investec plc
Incorporated in England and Wales
Registration number: 3633621
JSE share code: INPPR
ISIN: GB00B4B0Q974
Rand-denominated preference share dividend announcement
Rand-denominated non-redeemable non-cumulative non-participating perpetual preference shares ('preference shares')
Declaration of dividend number 13
Notice is hereby given that preference dividend number 13 has been declared from income reserves for the period 01 April 2017 to 30 September 2017 amounting to a gross preference dividend of 495.43151 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, 01 December 2017.
The relevant dates relating to the payment of dividend number 13 are as follows:
Last day to trade cum-dividend | Tuesday, 28 November 2017 |
Shares commence trading ex-dividend | Wednesday, 29 November 2017 |
Record date | Friday, 01 December 2017 |
Payment date | Monday, 11 December 2017 |
Share certificates may not be dematerialised or rematerialised between Wednesday, 29 November 2017 and Friday, 01 December 2017, both dates inclusive.
Additional information for South African resident shareholders of Investec plc
· Investec plc United Kingdom tax reference number: 2683967322360
· The issued rand denominated preference share capital of Investec plc is 131 447 preference shares
· The dividend paid by Investec plc to shareholders recorded on the South African register is subject to South African Dividend Tax (Dividend Tax) of 20% (subject to any available exemptions as legislated)
· The net dividend amounts to 396.34521 cents per preference share for preference shareholders liable to pay the Dividend Tax and 495.43151 cents per preference share for preference shareholders exempt from paying the Dividend Tax.
By order of the board
D Miller
Company Secretary
15 November 2017
Investec plc published this content on 16 November 2017 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 16 November 2017 07:15:32 UTC.
Original documenthttps://otp.tools.investis.com/clients/uk/investec/rns/regulatory-story.aspx?cid=78&newsid=950465
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