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INVESTEC BANK LIMITED - Interim condensed consolidated financial results for the six months ended 30 September 2020

Release Date: 19/11/2020 08:59
Code(s): INLP     PDF:  
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Interim condensed consolidated financial results for the six months ended 30 September 2020

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

Interim condensed consolidated financial results for the six months ended 30 September 2020

Salient features

Key financial statistics                                                                              30 Sept 2020      30 Sept 2019       % change     31 March 2020
Total operating income before expected credit loss impairment charges (R'million)                            5 629             6 442         (12.6%)           12 603
Operating costs (R'million)                                                                                  3 098             3 267          (5.2%)            6 632
Operating profit before goodwill and acquired intangibles (R'million)                                        1 999             2 904         (31.2%)            4 883
Headline earnings attributable to ordinary shareholders (R'million)                                          1 621             2 418         (33.0%)            3 844
Cost to income ratio                                                                                         55.0%             50.7%                            52.6%
Total capital resources (including subordinated liabilities) (R'million)                                    56 272            56 539          (0.5%)           53 785
Total equity (R'million)                                                                                    44 365            43 944           1.0%            41 748
Total assets (R'million)                                                                                   529 576           482 801           9.7%           535 970
Net core loans and advances (R'million)                                                                    279 308           271 836           2.7%           283 946
Customer accounts (deposits) (R'million)                                                                   365 066           349 216           4.5%           375 948
Loans and advances to customers as a % of customer accounts (deposits)                                       74.7%             75.8%                            73.6%
Cash and near cash balances (R'million)                                                                    143 248           119 979          19.4%           147 169
Total gearing ratio (i.e. total assets excluding intergroup loans to equity)                                 11.6x             10.5x                            12.4x
Total capital adequacy ratio                                                                                 17.1%             17.8%                            16.4%
Tier 1 ratio                                                                                                 13.1%             13.3%                            12.3%
Common equity tier 1 ratio                                                                                   12.9%             13.0%                            12.1%
Leverage ratio - current                                                                                      7.5%              7.8%                             6.9%
Leverage ratio - 'fully loaded'                                                                               7.4%              7.7%                             6.8%
Stage 3 as a % of gross core loans and advances subject to ECL                                                2.4%              1.3%                             1.5%
Stage 3 net of ECL as a % of net core loans and advances subject to ECL                                       1.6%              0.8%                             0.9%
Credit loss ratio                                                                                            0.36%*            0.18%*                           0.37%

* Annualised.


These reviewed interim 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

During the past six months, the acute impact of the COVID-19 pandemic has been felt across local and international markets and in our business. At the onset
of the 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 our 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.

Against this backdrop, Investec Bank Limited, a subsidiary of Investec Limited, posted a decrease in headline earnings attributable to ordinary shareholders of
33.0% to R1 621 million (1H2020: R2 418 million).

The balance sheet remains sound with robust capital and liquidity ratios. At 30 September 2020 Investec Bank Limited had a total capital adequacy ratio of 17.1%
(31 March 2020: 16.4%), a common equity tier one (CET1) ratio of 12.9% (31 March 2020: 12.1%) and a leverage ratio of 7.5% (31 March 2020: 6.9%) The
Liquidity coverage ratio was 151.0% for Investec Bank Limited (solo) and 164.1% for Investec Bank Limited (consolidated group), and the Net stable funding ratio
was 112.9% and 113.9%, respectively.

For full information on the Investec Group results, refer to the combined results of Investec plc and Investec Limited on the group's website http://www.investec.

Financial review

Unless the context indicates otherwise, all comparatives referred to in the financial review relate to the six months ended 30 September 2019 (1H2020). The
comparability of 1H2021 to 1H2020 is impacted by the economic effects of COVID-19 which prevailed over the period under review.

Salient operational features for the period under review include:

Total operating income before expected credit loss (ECL) impairment charges decreased by 12.6% to R5 629 million (1H2020: R6 442 million). The components of
operating income are analysed further below:

- Net interest income decreased by 3.3% to R4 238 million (1H2020: R4 382 million) driven primarily by the significant drop in interest rates impacting endowment
  income and assets repricing ahead of liabilities. Private client lending held steady compared to 31 March 2020 while the corporate client lending book declined
  due to higher repayments and lower new originations as corporates remained cautious. Net core loans declined 1.6% to R279.3 billion
- Net fee and commission income reduced by 20.5% to R859 million (1H2020: R1 081 million) reflecting lower lending and transactional activity across
  the business
- Investment income decreased by 37.8% to R313 million (1H2020: R503 million) driven by lower realisations, dividend flows and negative fair value adjustments
  on certain investments given the prevailing economic backdrop
- Share of post taxation profit of associates reflects earnings in relation to the group's investment in the IEP Group (IEP). The 95.0% reduction period on period
  reflects the negative impact of COVID-19 as some IEP subsidiaries were unable to trade during the hard lockdown and a realisation in the prior period was
  not repeated
- Total trading income declined 4.2% to R205 million (1H2020: R214 million). An improvement in client flow trading income due to increased commodity trading
  activity and positive fair value adjustments on certain trading portfolios was offset by negative movements on currency hedges related to our investment in IAPF

ECL impairment charges increased to R532 million (1H2020: R271 million) resulting in an annualised credit loss ratio (CLR) of 0.36% (1H2020: 0.18%) below
the annualised 2H2020 CLR of 0.57%. 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. Since 31 March 2020, gross core loan stage 3 assets increased to R6 882 million (31 March 2020: R4
353 million) driven by the migration of a few deals across various sectors. Net stage 3 exposures as a percentage of net core loans subject to ECL was 1.6% (31
March 2020: 0.9%).The stage 3 coverage ratio was 33.8% at 30 September 2020 with the remaining net exposure considered well covered by collateral.

In line with our strategic objective to contain costs, operating costs decreased by 5.2% to R3 098 million (1H2020: R3 267 million) driven by headcount
containment, lower variable remuneration and a reduction in discretionary expenditure. However, a decline in revenues resulted in a cost to income ratio of 55.0%
(1H2020: 50.7%).

As a result of the foregoing factors, profit before taxation decreased by 31.4% to R1 973 million (1H2020: R2 878 million). The taxation charge decreased to R266
million (1H2020: R367 million) driven by lower profitability. Overall, profit after taxation declined 32.0% to R1 707 million (1H2020: R2 511 million).

The condensed consolidated interim financial statements for the six months ended 30 September 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.

On behalf of the Board of Investec Bank Limited

Khumo Shuenyane                   Richard Wainwright
Chairman                          Chief Executive Officer

18 November 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 19 November 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

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 35

Notice is hereby given that preference dividend number 35 has been declared by the Board from income reserves for the period 1 April 2020 to 30 September
2020 amounting to a gross preference dividend of 307.97855 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, 11 December 2020.

The relevant dates for the payment of dividend number 35 are as follows:

Last day to trade cum-dividend                       Tuesday, 08 December 2020
Shares commence trading ex-dividend                Wednesday, 09 December 2020
Record date                                           Friday, 11 December 2020
Payment date                                          Monday, 14 December 2020

Share certificates may not be dematerialised or rematerialised between Wednesday, 09 December 2020 and Friday, 11 December 2020, both dates inclusive.

Additional information to take note of:

- Investec Bank Limited tax reference number: 9675/053/71/5
- The issued share preference share capital of Investec Bank Limited as at 13 November 2020 is 15 322 563 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 246.38284 cents per preference share for shareholders liable to pay the Dividend Tax and 307.97855 cents per preference shareholders exempt from paying the Dividend Tax.

By order of the board

N van Wyk
Company Secretary

18 November 2020

For further information

Investec Bank Limited

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

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, F Titi^
^ Executive

PRS Thomas resigned effective 06 August 2020

Date: 19-11-2020 08:59:00
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