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RNS
Investec PLC  -  INVP   

Results for the six months ended 30 September 2018

Released 07:00 15-Nov-2018

RNS Number : 4051H
Investec PLC
15 November 2018
 

 

Investec plc and Investec Limited (combined results)

Unaudited combined consolidated financial results for the six months ended 30 September 2018

This announcement covers the statutory results of the Investec group for the six months ended 30 September 2018.

 

Overview of results

 

·      The group has delivered a sound operational performance.

·      This is notwithstanding a challenging operating environment. Rising US interest rates, the threat of trade wars, concerns over global growth prospects,weak economic growth in South Africa and Brexit-related uncertainty in the UK have contributed to this.

·      The Asset Management and Wealth & Investment businesses have grown funds under management supported by strong net flows of GBP4.8 billion.

·      The Specialist Banking business saw a substantial reduction in impairments as well as revenue growth supported by reasonable levels of client activity.

·      The cost to income ratio improved marginally. Revenue growth and cost containment remain priorities.

·      A solid base of annuity revenue has continued to support earnings through varying market conditions.

 

Overall group performance

 

Operating profit before goodwill, acquired intangibles, non-operating items and taxation and after other non-controlling interests (operating profit) increased 14.2% to GBP359.3 million (2017: GBP314.6 million) - an increase of 17.6% on a currency neutral basis. Overall group results have been negatively impacted by the depreciation of the average Rand: Pounds Sterling exchange rate of approximately 4.1% over the period. The combined South African businesses reported operating profit 5.0% ahead of the prior period (in Rands), whilst the combined UK and Other businesses posted a 40.2% increase in operating profit in Pounds Sterling.

Salient features of the period under review are:

·      Adjusted earnings attributable to shareholders before goodwill, acquired intangibles and non-operating items increased 8.2% to GBP265.3 million (2017: GBP245.3 million) - an increase of 11.1% on a currency neutral basis.

·      Adjusted earnings per share (EPS) before goodwill, acquired intangibles and non-operating items increased 6.4% from 26.6 pence to 28.3 pence - an increase of 9.4% on a currency neutral basis.

·      Annuity income as a percentage of total operating income amounted to 75.5% (2017: 76.4%).

·      The total income statement impairment charge reduced materially to GBP31.0 million (2017: GBP59.6 million). The annualised credit loss charge as a percentage of average gross core loans and advances subject to expected credit losses has improved to 0.34% (2017: 0.52%).

·      The annualised return on adjusted average shareholders' equity increased to 13.4% from 12.1% at 31 March 2018.

·      Third party assets under management increased 3.7% to GBP166.5 billion (31 March 2018: GBP160.6 billion) - an increase of 7.2% on a currency neutral basis.

·      Customer accounts (deposits) decreased 2.1% to GBP30.3 billion (31 March 2018: GBP31.0 billion) - an increase of 4.3% on a currency neutral basis.

·      Core loans and advances decreased 3.7% to GBP24.2 billion (31 March 2018: GBP25.1 billion) - an increase of 2.4% on a currency neutral basis.

·      The group maintained a sound capital position with common equity tier one (CET1) ratios of 10.4% for Investec plc and 10.3% for Investec Limited, ahead of the group's CET1 ratio target. The group is comfortable with its CET1 ratio target at a 10% level, as its leverage ratios for both Investec Limited and Investec plc are above 7%.   

·      Liquidity remains strong with cash and near cash balances amounting to GBP12.5 billion.

·      The board declared a dividend of 11.0 pence per ordinary share (2017: 10.5 pence) resulting in a dividend cover based on the group's adjusted EPS before goodwill and non-operating items of 2.6 times (2017: 2.5 times), consistent with the group's dividend policy.

·      The proposed demerger and separate listing of Investec Asset Management (still subject to regulatory and shareholder approvals) is progressing well.

 

Fani Titi and Hendrik du Toit, Joint Chief Executive Officers of Investec said:

"The outgoing executives have handed over a resilient business with positive momentum and good growth potential. It is now up to us to implement our strategy of simplification and greater focus, involving the demerger and separate listing of the Asset Management business and the positioning of the Specialist Bank and Wealth & Investment businesses for sustainable long-term growth. Revenue growth, capital allocation and cost discipline remain high on our agenda."

 

For further information please contact:

Investec +27 (0) 11 286 7070 or +44 (0) 20 7597 5546

Fani Titi, Joint Chief Executive Officer

Hendrik du Toit, Joint Chief Executive Officer

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

 

Lansons (UK PR advisers)

Tom Baldock

Tel: +44 (0)20 7566 9716

 

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 10 300 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 2018

Business unit review

Asset Management

Asset Management operating profit increased by 10.0% to GBP91.5 million (2017: GBP83.2 million). Strong net inflows of GBP4.1 billion supported the growth in total funds under management to GBP109.2 billion (31 March 2018: GBP103.9 billion). Flows were well spread across client regions.

Wealth & Investment

Wealth & Investment operating profit decreased by 6.3% to GBP46.4 million (2017: GBP49.5 million). Earnings have been impacted by growth in headcount for IT initiatives, compliance requirements, and continued recruitment of experienced portfolio managers and financial planners to support future revenue growth. The business generated net inflows of GBP650 million. Total funds under management amounted to GBP56.7 billion (31 March 2018: GBP56.0 billion).

Specialist Banking

Specialist Banking operating profit increased by 18.8% to GBP245.4 million (2017: GBP206.5 million).

The South African business reported an increase in operating profit in Rands of 4.2%. A combination of a weak domestic economy and political policy uncertainty has resulted in subdued activity; reflecting in softer loan book growth, client flow trading levels and a weaker performance from the equity and investment property portfolios. We did however, report growth in net interest income supported by higher net margins and continued activity from our private client base. The annualised credit loss ratio on average core loans and advances subject to expected credit losses amounted to 0.30% (2017: 0.30% under the IAS 39 incurred impairment loss model), remaining at the lower end of its long term average trend.

The UK and Other businesses reported a 96.0% increase in operating profit, reflecting a material decrease in impairment charges due to no longer incurring substantial losses on the legacy portfolio. In addition, earnings were supported by strong growth in net interest income and fee income largely driven by the corporate business. With the investment phase in the private bank largely complete, the business has strengthened its focus on client acquisition and has seen sound growth in mortgage lending activity. The bank's overall cost to income ratio improved, notwithstanding an increase in costs driven largely by headcount growth in relation to increased business activity and regulatory requirements. The annualised credit loss ratio on average core loans and advances subject to expected credit losses amounted to 0.41% (2017: 0.84% under the IAS 39 incurred impairment loss model).

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 GBP24.0 million (2017: GBP24.7 million).

Financial statement analysis

 

Total operating income

Total operating income before expected credit loss impairment charges increased by 7.6% to GBP1,281.3 million (2017: GBP1,191.1 million).  

 

Net interest income increased by 11.2% to GBP405.0 million (2017: GBP364.3 million) driven by lending activity and endowment impact from rate rises in the UK.

 

Net fee and commission income increased by 5.7% to GBP703.7 million (2017: GBP666.0 million) as a result of higher average funds under management and net inflows in the Asset Management and Wealth Management businesses as well as a good performance from the corporate advisory business in the UK.

 

Investment income amounted to GBP41.5 million (2017: GBP62.1 million) reflecting a weaker performance from the group's listed and unlisted investment portfolio, as well as from the investment property portfolio in South Africa.

 

Share of post taxation profit of associates of GBP20.8 million (2017: GBP23.7 million) reflects earnings in relation to the group's investment in the IEP Group.

 

Trading income arising from customer flow increased by 1.4% to GBP65.1 million (2017: GBP64.2 million) reflecting subdued client flow trading levels given the uncertainty in both geographies.

 

Trading income from balance sheet management and other trading activities increased significantly to GBP39.0 million (2017: GBP5.1 million). The increase is largely reflective of translation gains on foreign currency equity investments in South Africa (partially offsetting the related weaker investment income performance) as well as the unwind of the UK subordinated debt fair value adjustment (recognised on the adoption of IFRS 9) as the instrument pulls to par over its remaining term.

 

Expected credit loss (ECL) impairment charges

The total ECL impairment charges amounted to GBP31.0 million, a substantial reduction from GBP59.6 million (under the IAS 39 incurred loss model) in the prior period, primarily reflecting a reduction in legacy impairments. The group's annualised credit loss ratio is now within its long term average range at 0.34% (2017: 0.52%). Since 1 April 2018 gross core loan Stage 3 assets have reduced by GBP141 million to GBP595.0 million largely driven by a reduction of legacy exposures. Stage 3 assets (net of ECL impairment charges) as a percentage of net core loans subject to ECL was 1.7% (1 April 2018: 2.0%).

 

Operating costs

The cost to income ratio improved marginally, amounting to 66.6% (2017: 66.9%). Total operating costs grew by 7.2% to GBP854.2 million (2017: GBP797.1 million) largely driven by growth in headcount to support both activity levels and increased regulatory requirements.

 

Taxation

The effective tax rate amounted to 16.1% (2017: 14.5%), which remains below the group's historical effective tax rate mainly impacted by the utilisation of tax losses. 

                                                                                                                                                                                                                                                                                                                                                                                          

Profit attributable to non-controlling interests

Profit attributable to non-controlling interests mainly comprises:

·      GBP12.8 million profit attributable to non-controlling interests in the Asset Management business.

·      GBP36.4 million profit attributable to non-controlling interests in the Investec Property Fund.

 

Balance sheet analysis

Since 31 March 2018:

·      Shareholders equity decreased by 5.9% to GBP4.2 billion primarily as a result of the adoption of IFRS 9 on 1 April 2018 as well as from the depreciation of the closing Rand: Pounds Sterling exchange rate.

·      Net asset value per share decreased 6.7% to 422.0 pence and net tangible asset value per share (which excludes goodwill and intangible assets) decreased 7.2% to 372.7 pence, primarily as a result of the adoption of IFRS 9 as well as from the depreciation of the closing Rand: Pounds Sterling exchange rate.

·      The annualised return on adjusted average shareholders' equity increased from 12.1% to 13.4%.

 

Liquidity and funding

As at 30 September 2018 the group held GBP12.5 billion in cash and near cash balances (GBP6.5 billion in Investec plc and R110.8 billion in Investec Limited) which amounted to 41.1% of customer deposits. The group continues to focus on maintaining an optimal overall liquidity and funding profile. Loans and advances to customers as a percentage of customer deposits amounted to 78.2% (31 March 2018: 79.6%). The group comfortably exceeds Basel liquidity requirements for the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR). Investec Bank Limited (solo basis) ended the period to 30 September 2018 with the three-month average of its LCR at 137.4% and an NSFR of 111.3%. Further detail with respect to the bank's LCR and NSFR in South Africa is provided on the website. For Investec plc and Investec Bank plc (solo basis) the LCR is calculated using our own interpretations of the EU Delegated Act. The LCR reported to the PRA at 30 September 2018 was 332% for Investec plc and 339% for Investec Bank plc (solo basis). Ahead of the implementation of the final NSFR rules, the group has applied its own interpretations of regulatory guidance and definitions from the BCBS final guidelines to calculate the NSFR which was 140% for Investec plc and 134% for Investec Bank plc (solo basis). The reported NSFR and LCR may change over time with regulatory developments and guidance.

 

Capital adequacy and leverage ratios

The group is 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 (CET1) ratios in both Investec plc and Investec Limited are reflected in the table below. The group expects to implement the Foundation Internal Ratings-Based (FIRB) approach in South Africa by the end of the 2019 financial year, subject to final regulatory approval.

 

30 Sep 2018

1 April 2018

31 March 2018

Investec plc^

 

 

 

Capital adequacy ratio

15.4%

15.0%

15.4%

Tier 1 ratio

12.2%

12.4%

12.9%

Common equity tier 1 ratio

10.4%

10.5%

11.0%

Common equity tier 1 ratio ('fully loaded'*)

10.0%

10.3%

11.0%

 

 

 

 

Leverage ratio (current)

7.7%

8.3%

8.5%

Leverage ratio ('fully loaded'*)

7.3%

8.0%

8.4%

 

 

 

 

Investec Limited**

 

 

 

Capital adequacy ratio

14.7%

14.5%

14.6%

Tier 1 ratio

11.1%

10.8%

11.0%

Common equity tier 1 ratio

10.3%

10.0%

10.2%

Common equity tier 1 ratio ('fully loaded'*)

10.2%

9.8%

10.2%

 

 

 

 

Leverage ratio (current)

7.5%

7.4%

7.5%

Leverage ratio ('fully loaded'*)

7.1%

6.9%

7.1%

 

^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 charges and dividends when calculating CET1 capital as required under the Capital Requirements Regulation and European Banking Authority technical standards. The impact of this deduction totalling GBP45 million for Investec plc would lower the CET1 ratio by 30bps (31 March 2018: 45bps).

**Investec Limited's capital information includes unappropriated profits. If unappropriated profits are excluded from the capital information, Investec Limited's CET1 ratio would be 27bps (31 March 2018: 25bps) lower.

* The CET 1 fully loaded ratio and the fully loaded leverage ratio assume full adoption of IFRS 9 and full adoption of all CRD IV rules or South African Prudential Authority regulations, as applicable in the relevant jurisdictions. As a result of the adoption of IFRS 9 Investec plc elected to designate its subordinated fixed rate medium-term notes due in 2022 at fair value. By the time of full adoption of IFRS 9 in 2023, these subordinated liabilities will have reached final maturity and will be redeemed at par value. The remaining interest rate portion of the fair value adjustment at 30 September 2018 of GBP18 million (post-taxation), has therefore been excluded from the fully loaded ratios as it will be released into profit and loss over the remaining life of the instrument.

Additional information - proposed demerger and listing of Investec Asset Management business

On 14 September 2018, the board of directors of Investec plc and Investec Limited announced that the Investec Asset Management business would become a separately listed entity. The demerger and the listing of Investec Asset Management is subject to regulatory, shareholder and other approvals, and is expected to be completed during the second half of 2019.

Outlook

Notwithstanding macro challenges, we believe that our current business momentum and our drive to simplify and focus the business, together with our commitment to cost discipline, will support our long-term growth aspirations.

On behalf of the boards of Investec plc and Investec Limited

 

Perry Crosthwaite

Fani Titi

Hendrik du Toit

Chairman

Joint Chief Executive Officer

Joint Chief Executive Officer

 

14 November 2018

 

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.

Unless the context indicates otherwise, all comparatives included in the commentary above relate to the six months ended 30 September 2017.

 

Amounts represented on a currency neutral basis for income statement items assume that the relevant average exchange rates for the six months to 30 September 2018 remain the same as those in the prior period. Amounts represented on a currency neutral basis for balance sheet items assume that the relevant closing exchange rates at 30 September 2018 remain the same as those at 31 March 2018.

 

·      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 2018

Year to

31 Mar 2018

Six months to

30 Sep 2017

Currency per

GBP1.00

Period end

Average

Period end

Average

Period end

Average

South African Rand

18.44

17.76

16.62

17.21

18.10

17.06

Australian Dollar

1.80

1.79

1.83

1.72

1.71

1.69

Euro

1.12

1.13

1.14

1.14

1.13

1.14

US Dollar

1.30

1.33

1.40

1.33

1.34

1.30

 

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 depreciated by 4.1% and the closing rate has depreciated by 11.0% since 31 March 2018.

 

·      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 2018 are consistent with those adopted in the financial statements for the year ended 31 March 2018 except as noted below.

On 1 April 2018 the group adopted IFRS 9 'Financial Instruments' which replaced IAS 39 and sets out the new requirements for the recognition and measurement of financial instruments. These requirements focus primarily on the classification and measurement of financial instruments and measurement of impairment losses based on an expected credit loss (ECL) model as opposed to an incurred loss methodology under IAS 39. Disclosure related to the initial application and the impact of the transition from IAS 39 to IFRS 9 were included in the group's transition disclosures published on 15 June 2018 which can be accessed via the Investec website at www.investec.com.

Additionally, on 1 April 2018 the group adopted IFRS 15 'Revenue from contracts with customers' which replaced IAS 18 'Revenue'. IFRS 15 provides a principles-based approach for revenue recognition and introduces the concept of recognising revenue for obligations as they are satisfied. It applies to all contracts with customers except leases, financial instruments and insurance contracts. The group's measurement and recognition principles were aligned to the new standard and hence there has been no material impact on measurement and recognition principles or on disclosure requirements from the adoption of IFRS 15.

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 2018 will be posted to stakeholders on 30 November 2018. 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 14 November 2018.

§ The information in the announcement for the six months ended 30 September 2018, which was approved by the board of directors on 14 November 2018, does not constitute statutory accounts as defined in Section 435 of the UK Companies Act 2006. The 31 March 2018 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 Special Resolution number 3, which was approved at the annual general meeting held on 8 August 2018, relating to the provision of direct or indirect financial assistance in terms of Section 45 of the South African Companies Act, No 71 of 2008 to related or inter-related companies. Shareholders are hereby notified that in terms of S45(5)(a) of the South African Companies Act, the boards of directors of Investec Limited and Investec Bank Limited provided such financial assistance during the period 1 April 2018 to 30 September 2018 to various group subsidiaries.

 

Financial information

Salient financial features

 

 

Results in Pounds Sterling

Results in Rand

 

Six months to

30 September

2018

Six months to

30 September

2017

%

change

Neutral

 currency^

Six months to

30 September

2018

Neutral

currency

%

change

Six months to

 30 September

2018

Six months to

 30 September

2017

%

change

Operating profit before taxation* (million)

359.3

314.6

14.2%

370.1

17.6%

6 415

5 378

19.3%

Earnings attributable to shareholders (million)

279.9

252.4

10.9%

287.5

13.9%

4 983

4 321

15.3%

Adjusted earnings attributable to shareholders** (million)

265.3

245.3

8.2%

272.5

11.1%

4 725

4 199

12.5%

Adjusted earnings per share**

28.3p

26.6p

6.4%

29.1p

9.4%

504c

455c

10.8%

Basic earnings per share

27.6p

25.8p

7.0%

28.4p

10.1%

492c

443c

11.1%

Dividends per share

11.0p

10.5p

4.8%

n/a

n/a

206c

200c

3.0%

 

*

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. 17.06.

 

 

 

 

Results in Pounds Sterling

Net asset value per share

422.0p

452.5p

(6.7%)

440.9p

(2.6%)

Net tangible asset value per share

372.7p

401.5p

(7.2%)

391.2p

(2.6%)

Total equity (million)

5 118

5 428

(5.7%)

5 429

0.0%

Total assets (million)

56 137

57 617

(2.6%)

59 918

4.0%

Core loans and advances (million)

24 190

25 132

(3.7%)

25 740

2.4%

Cash and near cash balances (million)

12 467

12 825

(2.8%)

13 125

2.3%

Customer deposits (million)

30 349

30 987

(2.1%)

32 317

4.3%

Third party assets under management (million)

166 512

160 576

3.7%

172 180

7.2%

Return on average adjusted shareholders' equity

13.4%

12.1%

 

 

 

Return on average risk-weighted assets

1.54%

1.45%

 

 

 

Loans and advances to customers as a % of customer deposits

78.2%

79.6%

 

 

 

Credit loss ratio (expected credit loss impairment charges on gross core loans and advances as a % of average gross core loans and advances)

0.34%

0.61%

 

 

 

 

For balance sheet items we have assumed that the Rand:Pound Sterling exchange rate has remained neutral since March 2018.

Condensed combined consolidated income statement

 

GBP'000

Six months to

 30 September

2018

Six months to

 30 September

2017

Year to

31 March

2018

Interest income

1 285 916

1 225 130

2 491 009

Interest expense

(880 902)

(860 809)

(1 730 611)

Net interest income

405 014

364 321

760 398

Fee and commission income

804 249

753 835

1 543 447

Fee and commission expense

(100 540)

(87 825)

(182 240)

Investment income

41 472

62 074

130 048

Share of post taxation profit of associates

20 782

23 677

46 823

Trading income/(loss) arising from

 

 

 

- customer flow

65 078

64 160

138 226

- balance sheet management and other trading activities

39 031

5 146

(4 307)

Other operating income

6 238

5 669

11 115

Total operating income before expected credit losses/impairment losses

1 281 324

1 191 057

2 443 510

Expected credit loss impairment charges*

(31 022)

-

-

Impairment losses on loans and advances*

-

(59 593)

(148 556)

Operating income

1 250 302

1 131 464

2 294 954

Operating costs

(852 982)

(795 883)

(1 632 740)

Depreciation on operating leased assets

(1 207)

(1 177)

(2 421)

Operating profit before goodwill and acquired intangibles

396 113

334 404

659 793

Amortisation of acquired intangibles

(7 861)

(8 142)

(16 255)

Operating profit

388 252

326 262

643 538

Additional costs on acquisition of subsidiary

-

-

(6 039)

Profit before taxation

388 252

326 262

637 499

Taxation on operating profit before goodwill and acquired intangibles

(60 301)

(44 996)

(59 099)

Taxation on acquired intangibles and acquisition/disposal/integration of subsidiaries

1 577

1 631

3 253

Profit after taxation

329 528

282 897

581 653

Profit attributable to other non-controlling interests

(36 846)

(19 800)

(52 288)

Profit attributable to Asset Management non-controlling interests

(12 828)

(10 663)

(23 817)

Earnings attributable to shareholders

279 854

252 434

505 548

Amortisation of acquired intangibles

7 861

8 142

16 255

Additional costs on acquisition of subsidiary

-

-

6 039

Taxation on acquired intangibles and acquisition/disposal/integration of subsidiaries

(1 577)

(1 631)

(3 253)

Preference dividends paid

(21 086)

(14 101)

(32 980)

Accrual adjustment on earnings attributable to other equity holders

271

436

(547)

Adjusted earnings

265 323

245 280

491 062

Earnings per share (pence)

 

 

 

- Basic

27.6

 25.8

51.2

- Diluted

26.8

 24.9

49.8

Adjusted earnings per share (pence)

 

 

 

- Basic

28.3

 26.6

53.2

- Diluted

27.5

 25.7

51.7

Dividends per share (pence)

 

 

 

- Interim

11.0

10.5

10.5

- Final

n/a

 n/a

13.5

Number of weighted average shares (million)

937.2

922.9

923.5

 

*

On adoption of IFRS 9, there is a move from an incurred loss model to an expected credit loss methodology.

 

  

Summarised combined consolidated statement of comprehensive income

 

GBP'000

Six months to

30 September

2018

Six months to

30 September

2017

Year to

31 March

2018

Profit after taxation

 329 528

 282 897

581 653

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*

 (788)

 (1 824)

(5 746)

Gains on debt instruments at FVOCI recycled to the income statement*^

(1 999)

-

-

Fair value movements on debt instruments at FVOCI taken directly to other comprehensive income*^

(12 023)

-

-

Gains on realisation of available-for-sale assets recycled to the income statement*^

-

 (4 760)

(6 676)

Fair value movements on available-for-sale assets taken directly to other comprehensive income*^

-

 13 816

20 051

Foreign currency adjustments on translating foreign operations

(249 312)

 (220 844)

(25 300)

Items that will never be reclassified to the income statement

 

 

 

Remeasurement of net defined pension liability

 69

-

3 938

Gains and losses attributable to own credit risk

 10 318

-

-

Total comprehensive income

75 793

 69 285

567 920

Total comprehensive income attributable to ordinary shareholders

70 757

 72 485

451 913

Total comprehensive (loss)/income attributable to non-controlling interests

 (16 050)

 (17 301)

83 027

Total comprehensive income attributable to perpetual preferred securities

 21 086

 14 101

32 980

Total comprehensive income

75 793

 69 285

567 920

 

*

Net of taxation of (GBP2.1 million) [six months to 30 September 2017: GBP3.0 million, year to 31 March 2018: GBP11.7 million].

^

On adoption of IFRS 9 on 1 April 2018, the fair value reserve was introduced, replacing the available-for-sale reserve.

 

  

Summarised combined consolidated cash flow statement

 

GBP'000

Six months to

30 September

2018

Six months to

30 September

2017

Year to

31 March

2018

Cash inflows from operations

404 278

357 998

732 242

Increase in operating assets

(1 926 505)

(1 009 683)

(3 352 869)

Increase in operating liabilities

1 845 075

705 103

3 075 779

Net cash inflow from operating activities

322 848

53 418

455 152

Net cash inflow/(outflow) from investing activities

58 190

5 292

(37 799)

Net cash (outflow)/inflow from financing activities

(203 047)

(121 852)

45 383

Effects of exchange rates on cash and cash equivalents

(106 538)

(144 595)

(54 085)

Net increase/(decrease) in cash and cash equivalents

71 453

(207 737)

408 651

Cash and cash equivalents at the beginning of the period

6 130 379

5 721 728

5 721 728

Cash and cash equivalents at the end of the period

6 201 832

5 513 991

6 130 379

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).

 

Condensed combined consolidated balance sheet

At

GBP'000

30 September

2018

1 April

2018*

31 March

2018*

30 September

2017

Assets

 

 

 

 

Cash and balances at central banks

4 402 571

4 040 010

4 040 512

3 356 259

Loans and advances to banks

2 194 184

2 164 598

2 165 533

2 308 618

Non-sovereign and non-bank cash placements

566 221

599 982

601 243

574 521

Reverse repurchase agreements and cash collateral on securities borrowed

1 641 435

2 207 137

2 207 477

1 690 036

Sovereign debt securities

4 483 385

4 907 624

4 910 027

3 608 316

Bank debt securities

609 522

591 428

587 164

604 511

Other debt securities

1 109 942

898 122

903 603

968 597

Derivative financial instruments

1 098 812

1 345 744

1 352 408

1 201 602

Securities arising from trading activities

1 921 010

1 434 391

1 434 391

1 395 766

Investment portfolio

950 455

956 560

885 499

911 480

Loans and advances to customers

23 739 734

24 410 334

24 673 009

22 351 228

Own originated loans and advances to customers securitised

452 341

458 814

459 088

445 672

Other loans and advances

207 251

345 742

347 809

367 401

Other securitised assets

142 884

148 387

148 387

153 786

Interests in associated undertakings

421 139

467 852

467 852

371 294

Deferred taxation assets

215 388

242 239

157 321

123 435

Other assets

2 006 480

1 875 357

1 876 116

2 016 057

Property and equipment

269 174

233 340

233 340

100 910

Investment properties

1 041 323

1 184 097

1 184 097

1 063 771

Goodwill

367 480

368 803

368 803

366 969

Intangible assets

120 333

125 389

125 389

132 692

 

47 961 064

49 005 950

49 129 068

44 112 921

Other financial instruments at fair value through profit or loss in respect of liabilities to customers

8 176 040

8 487 776

8 487 776

7 705 206

 

56 137 104

57 493 726

57 616 844

51 818 127

Liabilities

 

 

 

 

Deposits by banks

3 011 094

2 931 267

2 931 267

2 246 115

Derivative financial instruments

1 402 260

1 471 563

1 471 563

1 169 314

Other trading liabilities

1 006 572

960 166

960 166

968 917

Repurchase agreements and cash collateral on securities lent

488 271

655 840

655 840

730 170

Customer accounts (deposits)

30 348 761

30 985 251

30 987 173

27 966 006

Debt securities in issue

2 734 128

2 717 187

2 717 187

2 549 264

Liabilities arising on securitisation of own originated loans and advances

120 161

136 812

136 812

133 307

Liabilities arising on securitisation of other assets

121 161

127 853

127 853

131 740

Current taxation liabilities

170 794

185 486

185 486

197 244

Deferred taxation liabilities

30 507

32 158

32 158

38 304

Other liabilities

1 812 573

2 019 906

2 012 268

1 827 251

 

41 246 282

42 223 489

42 217 773

37 957 632

Liabilities to customers under investment contracts

8 172 496

8 484 296

8 484 296

7 702 724

Insurance liabilities, including unit-linked liabilities

3 544

3 480

3 480

2 482

 

49 422 322

50 711 265

50 705 549

45 662 838

Subordinated liabilities

1 596 958

1 619 878

1 482 987

1 389 091

 

51 019 280

52 331 143

52 188 536

47 051 929

Equity

 

 

 

 

Ordinary share capital

245

240

240

240

Perpetual preference share capital

31

31

31

31

Share premium

2 490 403

2 416 736

2 416 736

2 404 171

Treasury shares

(210 912)

(160 132)

(160 132)

(196 198)

Other reserves

(530 880)

(406 718)

(345 606)

(460 907)

Retained income

2 430 803

2 326 212

2 530 825

2 385 707

Shareholders' equity excluding non-controlling interests

4 179 690

4 176 369

4 442 094

4 133 044

Other Additional Tier 1 securities in issue

298 808

304 150

304 150

30 386

Non-controlling interests

639 326

682 064

682 064

602 768

- Perpetual preferred securities issued by subsidiaries

83 204

92 312

92 312

84 763

- Non-controlling interests in partially held subsidiaries

556 122

589 752

589 752

518 005

Total equity

5 117 824

5 162 583

5 428 308

4 766 198

Total liabilities and equity

56 137 104

57 493 726

57 616 844

51 818 127

 

 

*

The 1 April 2018 balance sheet has been presented on an IFRS 9 basis and the comparative as at 31 March 2018 on an IAS 39 basis.

 

Summarised combined consolidated statement of changes in equity

GBP'000

Six months to

 30 September

2018

Year to

31 March

2018

Six months to

 30 September

2017

Balance at the beginning of the period

5 428 308

4 808 629

4 808 629

Adoption of IFRS 9

(265 725)

-

-

Total comprehensive income for the period

75 793

567 920

69 285

Share-based payments adjustments

33 084

69 218

34 688

Dividends paid to ordinary shareholders

(127 943)

(227 908)

(123 230)

Dividends declared to perpetual preference shareholders

(7 528)

(15 736)

(8 160)

Dividends paid to perpetual preference shareholders included in non-controlling interests

(13 558)

(17 244)

(5 941)

Dividends paid to non-controlling interests

(27 378)

(63 688)

(29 272)

Issue of ordinary shares

103 141

125 240

105 206

Issue of Other Additional Tier 1 security instruments

-

271 058

-

Issue of equity by subsidiaries

-

12 695

-

Net equity impact of non-controlling interest movements

-

20 057

4 518

Net equity movement of interest in associate undertakings

(5 671)

-

-

Movement of treasury shares

(74 699)

(121 933)

(89 525)

Balance at the end of the period

5 117 824

5 428 308

4 766 198

 

 

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

 

 

 

2018

 

 

 

Asset Management

56 840

34 686

91 526

Wealth & Investment

32 864

13 544

46 408

Specialist Banking

80 756

164 625

245 381

 

170 460

212 855

383 315

Group costs

(17 227)

(6 821)

(24 048)

Total group

153 233

206 034

359 267

Other non-controlling interest - equity

 

 

36 846

Operating profit

 

 

396 113

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

 

Analysis of financial assets and liabilities by category of financial instrument

 

At 30 September 2018

GBP'000

Total

financial

instruments

at fair value

Total

financial

instruments

at amortised

cost

Non-financial

 instruments

or scoped

out of IFRS 9

Total

Assets

 

 

 

 

Cash and balances at central banks

695

4 401 876

-

4 402 571

Loans and advances to banks

-

2 194 184

-

2 194 184

Non-sovereign and non-bank cash placements

47 613

518 608

-

566 221

Reverse repurchase agreements and cash collateral on securities borrowed

527 934

1 113 501

-

1 641 435

Sovereign debt securities

4 200 240

283 145

-

4 483 385

Bank debt securities

274 025

335 497

-

609 522

Other debt securities

698 726

411 216

-

1 109 942

Derivative financial instruments

1 098 812

-

-

1 098 812

Securities arising from trading activities

1 921 010

-

-

1 921 010

Investment portfolio

950 455

-

-

950 455

Loans and advances to customers

2 443 852

21 295 882

-

23 739 734

Own originated loans and advances to customers securitised

-

452 341

-

452 341

Other loans and advances

-

207 251

-

207 251

Other securitised assets

125 814

17 070

-

142 884

Interests in associated undertakings

-

-

421 139

421 139

Deferred taxation assets

-

-

215 388

215 388

Other assets

228 394

1 160 686

617 400

2 006 480

Property and equipment

-

-

269 174

269 174

Investment properties

-

-

1 041 323

1 041 323

Goodwill

-

-

367 480

367 480

Intangible assets

-

-

120 333

120 333

 

12 517 570

32 391 257

3 052 237

47 961 064

Other financial instruments at fair value through profit or loss in respect
of liabilities to customers

8 176 040

-

-

8 176 040

 

20 693 610

32 391 257

3 052 237

56 137 104

 

 

 

 

 

Liabilities

 

 

 

 

Deposits by banks

 -  

 3 011 094

-

3 011 094

Derivative financial instruments

 1 402 260

 -  

-

1 402 260

Other trading liabilities

1 006 572

-

-

1 006 572

Repurchase agreements and cash collateral on securities lent

175 187

313 084

-

488 271

Customer accounts (deposits)

2 300 787

28 047 974

-

30 348 761

Debt securities in issue

390 098

2 344 030

-

2 734 128

Liabilities arising on securitisation of own originated loans and advances

 -  

120 161

-

120 161

Liabilities arising on securitisation of other assets

121 161

-

-

121 161

Current taxation liabilities

-

-

170 794

170 794

Deferred taxation liabilities

-

-

30 507

30 507

Other liabilities

37 059

1 167 966

607 548

1 812 573

 

5 433 124

35 004 309

808 849

41 246 282

Liabilities to customers under investment contracts

8 172 496

-

-

8 172 496

Insurance liabilities, including unit-linked liabilities

3 544

-

-

3 544

 

13 609 164

35 004 309

808 849

49 422 322

Subordinated liabilities

385 060

1 211 898

-

1 596 958

 

13 994 224

36 216 207

808 849

51 019 280

 

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)

 

 

Fair value category

At 30 September 2018

GBP'000

Total financial

instruments

at fair value

Level 1

Level 2

Level 3

Assets

 

 

 

 

Cash and balances at central banks

 695

 695

 -

 -

Non-sovereign and non-bank cash placements

 47 613

 4 495

 43 118

 -

Reverse repurchase agreements and cash collateral on securities borrowed

 527 934

-

 527 934

 -

Sovereign debt securities

 4 200 240

 4 200 240

-

 -

Bank debt securities

 274 025

 266 206

 7 819

 -

Other debt securities

 698 726

 194 776

 411 716

 92 234

Derivative financial instruments

 1 098 812

-

 1 060 819

 37 993

Securities arising from trading activities

 1 921 010

 1 917 605

 3 405

-

Investment portfolio

 950 455

 182 062

 31 590

 736 803

Loans and advances to customers

 2 443 852

 -

970 182

 1 473 670

Other securitised assets

 125 814

 -

 -

 125 814

Other assets

 228 394

 228 394

-

-

Other financial instruments at fair value through profit or loss in respect of liabilities to customers

8 176 040

8 176 040

-

-

 

20 693 610

15 170 513

 3 056 583

 2 466 514

Liabilities

 

 

 

 

Derivative financial instruments

1 402 260

-

1 382 215

 20 045

Other trading liabilities

1 006 572

883 181

123 391

 -

Repurchase agreements and cash collateral on securities lent

 175 187

 -

 175 187

 -

Customer accounts (deposits)

2 300 787

 -

 2 300 787

 -

Debt securities in issue

390 098

 -

 390 098

 -

Liabilities arising on securitisation of other assets

 121 161

 -

 -

 121 161

Other liabilities

 37 059

 -

 37 059

 -

Subordinated liabilities

 385 060

 385 060

-

 -

Liabilities to customers under investment contracts

8 172 496

8 172 496

-

-

Insurance liabilities, including unit-linked liabilities

3 544

3 544

-

-

 

13 994 224

9 444 281

4 408 737

 141 206

Net financial assets at fair value

6 699 386

 5 726 232

 (1 352 154)

 2 325 308

 

Transfers between level 1 and level 2
There were no significant 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 2018 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

Yield curves

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 2018

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 31 March 2018    

776 176

Adoption of IFRS 9

1 341 810

Balance as at 1 April 2018

2 117 986

Total gains or losses

73 464

In the income statement

73 206

In the statement of comprehensive income

258

Purchases

800 061

Sales

(348 240)

Issues

16 616

Settlements

(391 874)

Transfers into level 3

12 123

Foreign exchange adjustments

45 172

Balance as at 30 September 2018

2 325 308

 

For the period ended 30 September 2018, GBP12.1 million has been transferred out of level 2 into level 3 as a result of the inputs to the valuation method becoming unobservable in the market.

 

For the six months to 30 September 2018

GBP'000

Total

Realised

Unrealised

Total gains/(losses) included in the income statement for the period

 

 

 

Net interest income

51 731

40 662

11 069

Fee and commission income

9 600

11 512

(1 912)

Investment income

7 071

1 334

5 737

Trading income arising from customer flow

4 804

3 734

1 070

 

73 206

57 242

15 964

Total gains/(losses) included in other comprehensive income for the period

 

 

 

Gains on realisation on debt instruments at FVOCI recycled through the income statement

19 757

19 757

-

Fair value movements on debt instruments at FVOCI taken directly to other comprehensive income

258

-

258

 

20 015

19 757

258

 

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
unobservable 
input

Range of unobservable
input used

Favourable

changes

GBP'000

Unfavourable

changes

GBP'000

30 September 2018

 

 

 

 

 

Assets

 

 

 

 

 

Other debt securities

 92 234

Potential impact on income statement

 

 7 975

 (7 887)

 

 

Cash flow adjustments

CPR 8.6%

-

 (68)

 

 

Credit spreads

5.1%

 140

 (136)

 

 

EBITDA

(5%)/5%

 348

 (348)

 

 

Other^

^

 7 487

 (7 335)

Derivative financial instruments

 37 993

Potential impact on income statement

 

 6 964

 (9 205)

 

 

Volatilities

4.0% - 9.0%

 212

 (212)

 

 

Cash flow adjustments

CPR 7.6% - 11.2%

 110

 (101)

 

 

Underlying asset value

 5 684

 (8 029)

 

 

EBIDTA

(5%)/20%

 128

 (32)

 

 

Other^

^

 830

 (831)

Investment portfolio

 736 803

Potential impact on income statement

 

122 097

 (124 731)

 

 

Price earnings multiple

4.0 x - 10.3 x

6 117

 (5 828)

 

 

WACC

20.0%

29 594

 (35 004)

 

 

Underlying asset value

 9 472

 (3 029)

 

 

EBITDA

^^

 23 602

 (19 226)

 

 

Cash flow adjustments

(15%)/25%

 3 151

 (2 638)

 

 

Precious and industrial metals prices

(10%)/6%

 1 139

 (1 898)

 

 

Property values

(5%)/5%

 9 339

 (9 339)

 

 

Other^

^

39 683

 (47 769)

Loans and advances to customers

 1 473 670

Potential impact on income statement

 

41 750

 (54 993)

 

 

Credit spreads

0.2% - 29.0%

 4 202

 (6 048)

 

 

Cash flow adjustments

(15%)/5%

 1 637

 (4 910)

 

 

Underlying asset value

 2 130

 (1 715)

 

 

Other^

^

33 781

 (42 320)

 

 

Potential impact on other comprehensive income

 

 

 

 

 

Credit spreads

0.1% - 5.1%

 1 135

 (1 615)

Other securitised assets*

 125 814

Potential impact on income statement

 

 

 

 

 

Cash flow adjustments

CPR 7.7%

 723

 (728)

Total level 3 assets

 2 466 514

 

 

180 644

 (199 159)

Liabilities

 

 

 

 

 

Derivative financial instruments

20 045

Potential impact on income statement

 

 (9 085)

 7 268

 

 

Cash flow adjustments

CPR 7.6% - 11.2%

 (81)

 89

 

 

Volatilities

8.5%

 (2)

 2

 

 

Underlying asset value

 (9 002)

 7 177

Liabilities arising on securitisation of other assets*

 121 161

Potential impact on income statement

 

 

 

 

Cash flow adjustments

CPR 8.0%

 (244)

 205

Total level 3 liabilities

 141 206

 

 

 (9 329)

 7 473

Net level 3 assets

 2 325 308

 

 

 

 

 

*

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 has been assessed by adjusting various inputs such as expected cash flows, discount rates, earnings multiples rather than a single input. It is deemed appropriate to reflect the outcome on a portfolio basis for the purposes of this analysis as the sensitivity of the assets cannot be determined through the adjustment of a single input.

^^

The EBITDA has been stressed on an investment by investment basis to obtain a favourable and unfavourable valuation.

Underlying asset values calculated by reference to a tangible asset, for example property, aircraft or shares.

 

In determining the value of level 3 financial instruments, the following are the principal inputs that do require judgement:

 

Credit spreads

Credit spreads reflect the additional yield that a market participant would demand for taking exposure to the credit risk of an instrument. The credit spread for an instrument forms part of the yield used in a discounted cash flow calculation. In general a significant increase in a credit spread in isolation will result in a movement in fair value that is unfavourable for the holder of a financial instrument.

 

Discount rates (including WACC)

Discount rates are used to adjust for the time value of money when using a discounted cash flow valuation method. Where relevant, the discount rate also accounts for illiquidity, market conditions and uncertainty for future cash flows.

 

Volatilities

Volatility is a key input in the valuation of derivative products containing optionality. Volatility is a measure of the variability or uncertainty in returns for a given derivative underlying. It represents an estimate of how much a particular underlying instrument, parameter or index will change in value over time.

 

Cash flows

Cash flows relate to the future cash flows which can be expected from the instrument and requires judgement.

 

EBITDA

The group's earnings before interest, taxes, depreciation and amortisation. This is the main input into a price earnings multiple valuation method.

 

Price earnings multiple

The price-to-earnings ratio is an equity valuation multiple. It is a key driver in the valuation of unlisted investments.

 

Precious and industrial metals and property value

The price of precious and industrial metals and property value is a key driver of future cash flows on certain investments.

 

Underlying asset value

In instances where cash flows have links to referenced assets, the underlying asset value is used to determine the fair value. The underlying asset valuation is derived using observable market prices sourced from broker quotes, specialist valuers or other reliable pricing sources.

 

 

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 2018

GBP'000

Carrying

amount

Fair

value

Assets

 

 

Loans and advances to banks

 2 194 184

 2 194 749

Reverse repurchase agreements and cash collateral on securities borrowed

 1 113 501

 1 113 413

Sovereign debt securities

 283 145

 274 120

Bank debt securities

 335 497

 334 171

Other debt securities

 411 216

 406 266

Loans and advances to customers

 21 295 882

 21 275 003

Other loans and advances

 207 251

 240 619

Other assets

 1 160 686

 1 159 535

Liabilities

 

 

Deposits by banks

 3 011 094

 3 039 929

Repurchase agreements and cash collateral on securities lent

 313 084

 309 554

Customer accounts (deposits)

 28 047 974

 28 035 101

Debt securities in issue

 2 344 030

 2 372 763

Other liabilities

 1 167 966

 1 169 085

Subordinated liabilities

 1 211 898

 1 282 250

 

 

Investec plc

Incorporated in England and Wales
Registration number 3633621
LSE ordinary share code: INVP

JSE ordinary share code: INP
ISIN: GB00B17BBQ50

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 33

Notice is hereby given that an interim dividend number 33, being a gross dividend of 11 pence (2017: 10.5 pence) per ordinary share has been declared by the Board from income reserves in respect of the six months ended 30 September 2018 payable to shareholders recorded in the shareholders' register of the company at the close of business on Friday, 07 December 2018.

·      for Investec plc shareholders, registered on the United Kingdom share register, through a dividend payment by Investec plc from income reserves of 11 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 3 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 share

 

The relevant dates for the payment of dividend number 33 are as follows:

Last day to trade cum-dividend

On the Johannesburg Stock Exchange (JSE)                                             Tuesday, 04 December 2018 

On the London Stock Exchange (LSE)                                                 Wednesday, 05 December 2018 

Shares commence trading ex-dividend                                                                   

On the Johannesburg Stock Exchange (JSE)                                       Wednesday, 05 December 2018

On the London Stock Exchange (LSE)                                                     Thursday, 06 December 2018

Record date (on the JSE and LSE)                                                            Friday, 07 December 2018

Payment date (on the JSE and LSE)                                                 Wednesday, 19 December 2018

Share certificates on the South African branch register may not be dematerialised or rematerialised between Wednesday, 05 December 2018 and Friday, 07 December 2018, both dates inclusive, nor may transfers between the United Kingdom share register and the South African branch register take place between Wednesday, 05 December 2018 and Friday, 07 December 2018, 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 11 pence, equivalent to a gross dividend of 206 cents per share, has been arrived at using the Rand/Pound Sterling average buy/sell forward rate, as determined at 11h00 (SA time) on Wednesday, 14 November 2018

·       Investec plc United Kingdom tax reference number: 2683967322360

·       The issued ordinary share capital of Investec plc is 681 051 512 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 206 cents per share, comprising 149.81818  cents per share paid by Investec Limited on the SA DAS share and 56.18182 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 164.8 cents per share (gross dividend of 206 cents per share less Dividend Tax of 41.2 cents per share) comprising 119.85455 cents per share paid by Investec Limited on the SA DAS share and 44.94545 cents per ordinary share paid by Investec plc.

 

By order of the board

 

D Miller                                                                  

Company Secretary

                        

14 November 2018

 

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 25

Notice is hereby given that preference dividend number 25 has been declared by the Board from income reserves for the period 01 April 2018 to 30 September 2018 amounting to a gross preference dividend of 7.93150 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, 07 December 2018.

For shares trading on the Johannesburg Stock Exchange (JSE), the dividend of 7.93150 pence per preference share is equivalent to a gross dividend of 148.73149 cents per share, which has been determined using the Rand/Pound Sterling average buy/sell forward rate as at 11h00 (SA Time) on Wednesday, 14 November 2018.

The relevant dates relating to the payment of dividend number 25 are as follows:

Last day to trade cum-dividend   

On the Johannesburg Stock Exchange (JSE)                                      Tuesday, 04 December 2018

On The International Stock Exchange (TISE)                                 Wednesday, 05 December 2018

Shares commence trading ex-dividend

On the Johannesburg Stock Exchange (JSE)                                  Wednesday, 05 December 2018

On The International Stock Exchange (TISE)                                       Thursday, 06 December 2018

 

Record date (on the JSE and TISE)                                                          Friday, 07 December 2018

Payment date (on the JSE and TISE)                                                    Tuesday, 18 December 2018

 

Share certificates may not be dematerialised or rematerialised between Wednesday,  05 December 2018 and Friday, 07 December 2018, both dates inclusive, nor may transfers between the United Kingdom share register and the South African branch register take place between Wednesday, 05 December 2018 and Friday, 07 December2018, 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 118.98519 cents per preference share for preference shareholders liable to pay the Dividend Tax and 148.73149 cents per preference share for preference shareholders exempt from paying the Dividend Tax.

By order of the board

 

D Miller

Company Secretary

14 November 2018

 

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 15

Notice is hereby given that preference dividend number 15 has been declared by the Board from income reserves for the period 01 April 2018 to 30 September 2018 amounting to a gross preference dividend of 476.30137 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, 07 December 2018.

The relevant dates relating to the payment of dividend number 15 are as follows:

Last day to trade cum-dividend   

Tuesday, 04 December 2018 

Shares commence trading ex-dividend     Wednesday, 05 December 2018

Record date       Friday, 07 December 2018 

Payment date    Tuesday, 18 December 2018

Share certificates may not be dematerialised or rematerialised between Wednesday, 05 December 2018 and Friday, 07 December 2018, 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 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 381.04110 cents per preference share for preference shareholders liable to pay the Dividend Tax and 476.30137 cents per preference share for preference shareholders exempt from paying the Dividend Tax.

By order of the board

 

D Miller

Company Secretary

 

14 November 2018


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Results for the six months ended 30 September 2018 - RNS