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INVESTEC BANK LIMITED - Preliminary condensed consolidated financial results for the year ended 31 March 2020 and preference share dividend

Release Date: 21/05/2020 07:59
Code(s): INLP     PDF:  
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Preliminary condensed consolidated financial results
for the year ended 31 March 2020 and preference share dividend

Investec Bank Limited
Incorporated in the Republic of South Africa
Registration number 1969/004763/06
Share code: INLP  
ISIN: ZAE000048393
LEI No: 549300RH5FFHO48FXT69

Preliminary condensed consolidated financial results
for the year ended 31 March 2020

Salient features
                                                                                             31 March   31 March
Key financial statistics                                                                         2020       2019   % change 
Total operating income before expected credit loss impairment charges (R'million)              12 603     12 650     (0.4%)   
Operating costs (R'million)                                                                     6 632      6 547       1.3%   
Operating profit before goodwill and acquired intangibles (R'million)                           4 883      5 381     (9.3%)   
Headline earnings attributable to ordinary shareholders (R'million)                             3 844      4 784    (19.6%)   
Cost to income ratio                                                                            52.6%      51.7%              
Total capital resources (including subordinated liabilities) (R'million)                       53 785     55 678     (3.4%)   
Total equity (R'million)                                                                       41 748     41 760       0.0%   
Total assets (R'million)                                                                      535 970    475 603      12.7%   
Net core loans and advances (R'million)                                                       283 946    269 404       5.4%   
Customer accounts (deposits) (R'million)                                                      375 948    341 710      10.0%   
Loans and advances to customers as a % of customer accounts (deposits)                          73.6%      76.6%              
Cash and near cash balances (R'million)                                                       147 169    118 365      24.3%   
Total gearing ratio (i.e. total assets excluding assurance assets to equity)                    12.4x      11.0x              
Total capital adequacy ratio                                                                    16.4%      17.7%              
Tier 1 ratio                                                                                    12.3%      12.8%              
Common equity tier 1 ratio                                                                      12.1%      12.5%              
Leverage ratio - current                                                                         6.9%       7.6%              
Leverage ratio - 'fully loaded'                                                                  6.8%       7.5%              
Stage 3 as a % of gross core loans and advances subject to ECL                                   1.5%       1.3%              
Stage 3 net of ECL as a % of net core loans and advances subject to ECL                          0.9%       0.7%              
Credit loss ratio                                                                               0.37%      0.27%              


These reviewed year-end condensed consolidated financial results are published to provide information to holders of Investec Bank
Limited's listed non-redeemable, non-cumulative, non-participating preference shares.

Overview of results

The tough operating environment in the first six months of the financial year continued through the second half, exacerbated in quick succession
by a technical recession, South African sovereign credit rating downgrades by Moody's and Fitch, a rising public sector debt trajectory
and the sudden and extreme COVID-19 related dislocation in global markets during the last quarter of the financial year.

Against this backdrop, Investec Bank Limited, a subsidiary of Investec Limited, posted a decrease in headline earnings attributable to ordinary
shareholders of 19.6% to R3 844 million (2019: R4 784 million).

The balance sheet remains sound with a total capital adequacy ratio of 16.4% (31 March 2019: 15.8% standardised, 17.7% pro-forma FIRB^),
a common equity tier one ratio of 12.1% (31 March 2019: 11.2% standardised, 12.5% pro-forma FIRB) and a leverage ratio of 6.9%
(31 March 2019: 7.7% standardised, 7.6% pro-forma FIRB) at 31 March 2020.
^ Investec Bank Limited received regulatory permission to adopt the Foundation 
  Internal Ratings Based (FIRB) approach, effective 1 April 2019. The pro-forma FIRB
  comparatives demonstrate the uplift in the capital ratios had the FIRB approach
  been applied as of 31 March 2019.

For full information on the Investec group results, refer to the combined results of Investec plc and Investec Limited on the group's

Financial review

Unless the context indicates otherwise, all comparatives referred to in the financial review relate to the year ended 31 March 2019.

Salient operational features for the year under review include:

Total operating income before expected credit loss impairment charges remained broadly flat year on year at R12 603 million 
(2019: R12 650 million). The components of operating income are analysed further below:

-  Net interest income increased 7.9% to R8 943 million (2019: R8 287 million) and net fee and commission income increased 3.8% to R2
   346 million (2019: R2 261 million), primarily supported by private client lending and transactional activity
-  Investment income increased to R601 million (2019: R360 million). The non-repeat of certain investment write downs in the prior year was
   partially offset by higher negative fair value adjustments on the listed equity portfolio and lower realisations given the prevailing economic
   backdrop during the year under review
-  Share of post taxation profit of associates reflects earnings in relation to the group's investment in the IEP Group. The decrease year on year
   is as a result of a large realisation in the prior year
-  Total trading income declined 32.1% year on year. Reasonable activity levels were offset by COVID-19 related losses on certain trading
   portfolios and translation gains on foreign currency assets in the prior year which did not repeat in the current year.

Expected credit loss (ECL) impairment charges for the year increased to R1 088 million (2019: R722 million) driven primarily by a deterioration of
the macroeconomic scenarios applied. As a result, the credit loss ratio increased to 0.37% (2019: 0.27%). Pre COVID-19, the credit loss ratio
was calculated at 0.21% for 31 March 2020. Since 31 March 2019 gross core loan Stage 3 assets increased by R768 million to R4 353 million.
Net Stage 3 exposures as a percentage of net core loans subject to ECL was 0.9% (31 March 2019: 0.7%).

Operating costs increased by 1.3% year on year. Taken together with broadly flat revenue as described above, the cost to income ratio
increased to 52.6% (2019: 51.7%).

As a result of the foregoing factors, operating profit before goodwill and acquired intangibles decreased by 9.3% to R4 883 million (2019: R5 381 million).

Management critically evaluated the equity accounted value of the group's investment in the IEP Group (IEP) and resultantly recognised an
impairment of R937 million in the current year.

The taxation charge increased year on year due to the prior year release of provisions associated with tax settlements.

This resulted in overall profit after taxation decreasing by 37.7% to R3 090 million (2019: R4 960 million).

The preliminary condensed consolidated financial statements for the year ended 31 March 2020 have been reviewed by KPMG Inc. and Ernst &
Young Inc., who expressed an unmodified review conclusion. A copy of the auditors' review report is available for inspection at the company's
registered office together with the financial statements identified in the auditors' report.

The auditors' report does not necessarily report on all of the information contained in these financial results. Shareholders are therefore advised
that in order to obtain a full understanding of the nature of the auditors' engagement, they should obtain a copy of the auditors' report
together with the accompanying financial information from the issuer's registered office.

Preference share dividend announcement

  Investec Bank Limited
  Incorporated in the Republic of South Africa
  Registration number: 1969/004763/06
  Share code: INLP
  ISIN: ZAE000048393

  LEI No.: 549300RH5FFHO48FXT69

  Preference share dividend announcement

  Non-redeemable non-cumulative non-participating preference shares ("preference shares")

  Declaration of dividend number 34

  Notice is hereby given that preference dividend number 34 has been declared by the Board from income reserves for the period
  01 October 2019 to 31 March 2020 amounting to a gross preference dividend of 409.64891 cents 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, 05 June 2020.

  The relevant dates for the payment of dividend number 34 are as follows:

  Last day to trade cum-dividend                                    Tuesday, 02 June 2020
  Shares commence trading ex-dividend                               Wednesday, 03 June 2020
  Record date                                                       Friday, 05 June 2020
  Payment date                                                      Monday, 15 June 2020

  Share certificates may not be dematerialised or rematerialised between Wednesday, 03 June 2020 and Friday, 05 June 2020, both
  dates inclusive.

  Additional information to take note of
  -  Investec Bank Limited tax reference number: 9675/053/71/5
  -  The issued preference share capital of Investec Bank Limited is 15 447 630  preference shares
  -  The dividend paid by Investec Bank Limited is subject to South African Dividend Tax (Dividend Tax) of 20% (subject to any available
     exemptions as legislated)
  -  The net dividend amounts to 327.71913 cents per preference share for shareholders liable to pay the Dividend Tax and 409.64891
     cents per preference share for preference shareholders exempt from paying the Dividend Tax.

  By order of the board

  N van Wyk
  Company Secretary
  20 May 2020

For further information

Registered office
100 Grayston Drive
Sandown, Sandton, 2196

Transfer secretaries
Computershare Investor Services (Pty) Ltd
Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196

Company Secretary
N van Wyk

Investec Bank Limited

KL Shuenyane (Chairman)
DM Lawrence (Deputy Chairman)
RJ Wainwright^ (Chief Executive Officer)
SC Spencer (Finance Director)^
ZBM Bassa, D Friedland, PA Hourquebie
M Mthombeni*, MG Qhena*
PRS Thomas, F Titi^
^ Executive
* M Mthombeni was appointed 02 March 2020
* MG Qhena was appointed 02 March 2020

This short-form announcement is the responsibility of the directors. It is only a summary of the information
contained in the full announcement and does not contain full or complete details. Any investment
decision should be based on the full viewed announcement which can be accessed from
Thursday 21 May 2020, using the following JSE link:

Alternatively the full announcement is also available at our registered offices for inspection at no charge,
during office hours.

Copies of the full announcement may be requested by contacting Investor Relations on:
Telephone: (+27 11) 286 7000

Date: 21-05-2020 07:59:00
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