Investec Bank PLC 42QT Half Yearly Report

  Investec Bank PLC (42QT) - Half Yearly Report

RNS Number : 2554S
Investec Bank PLC
28 November 2012




Investec Bank plc

Incorporated in England and Wales

Registration number 489604





Unaudited condensed Financial Statements for the six months ended 30 September
                                     2012

                         Investec Bank plc - the bank

                     (Incorporated in England and Wales)

                    (Company Registration Number: 489604)

                                      

                          Interim Management Report

This Interim Management Report is issued by Investec Bank plc, a subsidiary of
the listed entity Investec plc, in accordance with the UK Listing  Authority's 
Disclosure and Transparency Rules and has been prepared in accordance with IAS
34 "Interim  Financial Reporting".  Unless otherwise  stated, key  trends  and 
figures highlighted below refer to the six months ended 30 September 2012  and 
the corresponding  period in  the previous  year. Operating  profit refers  to 
operating profit before  amortisation of  acquired intangibles,  non-operating 
items and taxation and after non-controlling interests.

Performance overview

The bank reported a 11.7% decrease in operating profit to GBP43.4 million  for 
the six months ended 30 September 2012 (2011: GBP49.1 million). The Australian
business returned to  profitability as a  result of a  significant decline  in 
impairments and the UK business  reported results marginally behind the  prior 
period largely due to lower investment income.

The balance sheet  remains strong,  supported by sound  capital and  liquidity 
ratios.



The main features of the period under review are:

· Third party assets under management increased 60.5% to GBP22.8  billion 
(31 March 2012:  GBP14.2 billion), mainly  as a result  of the acquisition  of 
Williams de Broë

· Customer  accounts (deposits)  increased 3.0%  to GBP11.4  billion  (31 
March 2012: GBP11.1 billion)

· Core loans  and advances remained  at GBP7.7 billion,  in line with  31 
March 2012

· Capital adequacy ratios have remained  sound with the bank reporting  a 
capital adequacy ratio of 16.7% (31 March  2012: 16.8%) and a tier 1 ratio  of 
11.4% (31 March 2012: 11.5%)

· Low gearing ratios represented by total assets to equity at 10.9  times 
(31 March 2012: 11.7 times)

· The credit loss charge as a percentage of average gross core loans  and 
advances has improved from 1.66% at 31 March 2012 to 1.16%



Business unit review



The successful strategic alignment of  the bank towards low capital  intensive 
businesses over the past few years  has resulted in a scaleable platform  from 
which the  bank's  wealth  management  business can  continue  to  grow.  This 
business has a sound franchise and is  well placed to broaden its client  base 
and maintain net inflows.The Wealth & Investment business accounts for  30.3% 
of the  bank's  operating profit  (2011:  26.9%). Substantial  effort  through 
the"One-Bank" process has been made to align infrastructure and processes and
to create the appropriate platforms  for future growth and developmentof  the 
Specialist Bank. The focus of the bank remains on efficiency and balance sheet
optimisation within  the  banking  businesses,  whilst  growing  the  business 
organically and running down the legacy portfolios. The bank has a strong core
banking franchise which it will continue to broaden and develop.







Wealth & Investment

Wealth & Investment reported an operating  profit of GBP13.2 million, in  line 
with the prior period.



The division  benefited from  higher average  funds under  management and  net 
inflows, with  market indices  remaining broadly  flat relative  to the  prior 
period at the key fee billing points  during the period. Williams de Broë  was 
acquired by  the bank  in August  2012  and the  business has  been  rebranded 
Investec  Wealth  &  Investment.  The  integration  of  Williams  de  Broë  is 
progressing well.  Non-operating  costs  relating  to  the  integration  will, 
however, still reflect in the bank's financial results for the second half  of 
the financial year. Overall results  have continued to be negatively  impacted 
by the restructuring of the Wealth Management operation in Switzerland.



Specialist Banking

Operating profit in  the Specialist  Bank decreased 15.8%  to GBP30.2  million 
(2011: GBP35.9 million).



In the UK the division benefited from improved margins and an increase in  net 
fees  and  commissions   in  the  corporate   advisory  business.  Levels   of 
transactional  activity  within  the   corporate  and  institutional   banking 
businesses  however,  remain  mixed.   The  Australian  division  reported   a 
significant decrease in impairments, with revenue and costs remaining  largely 
in line with the prior year.



Further information on key developments within  each of the business units  is 
provided in  a detailed  report  published on  the Investec  group's  website: 
http://www.investec.com



Operational review

Liquidity and funding

Diversifying the bank's funding  sources has been a  key element in  improving 
the quality of the bank's balance sheet and reducing its reliance on wholesale
funding. At 30 September 2012,  the bank had GBP4.6  billion in cash and  near 
cash balances, representing 31.5% of its liability base. Loans and advances to
customers as a  percentage of customer  deposits amounted to  63.7% (31  March 
2012: 64.6%). 

Capital adequacy

The bank met its capital adequacy targets of a minimum tier one capital  ratio 
range of 11% to 12% and a total capital adequacy ratio range of 15% to 18%  on 
a consolidated basis.

Credit quality and counterparty exposures

The bank lends mainly to  high net worth and  high income individuals, mid  to 
large sized corporate, public sector bodies and institutions. The majority  of 
IBP's credit and counterparty exposures reside within its principal  operating 
geographies, namely the UK and Australia.



Impairments in  the UK  increased  from GBP43.3  million to  GBP52.2  million, 
whilst impairments  in  Australia decreased  from  GBP32.9 million  to  GBP6.4 
million, resulting in a  total decrease in impairments  on loans and  advances 
from GBP76.2 million to GBP58.6 million.

Since 31 March 2012 the level of defaults has improved with the percentage  of 
default loans (net of impairments  but before taking collateral into  account) 
to core loans  and advances  amounting to 3.91%  (31 March  2012: 4.11%).  The 
ratio of collateral to default loans (net of impairments) remains satisfactory
at 1.06  times (31  March  2012: 1.09  times). The  credit  loss charge  as  a 
percentage of average gross core loans and advances has improved from 1.66% at
31 March 2012 to 1.16%.



Outlook

The global financial system has started to show signs of increased  stability, 
as the  process of  deleveraging  slows down  and  the capital  and  liquidity 
structures of  the  major  global  banks continue  to  improve.  However,  the 
volatile global economic environment and some unresolved macro risks remain  a 
significant  feature.  Investec's  business   model  has  been   substantially 
realigned and the focus  going forward is to  broaden the distribution of  the 
wealth management  offering  and improve  returns  in the  specialist  banking 
business. Overall, the balanced business model positions the bank to adapt  to 
an uncertain and changing environment and ensures it is well placed to benefit
from an improvement in market conditions.



On behalf of the board of Investec Bank plc



David van der Walt

Chief Executive Officer

28 November 2012



Financial and additional information:

Acquisitions

On 30 July 2012, the bank acquired 100% of Neonatar Limited (parent of the NCB
group) and on 23 August 2012, the bank acquired 100% of Williams de  Broë 
Limited. Both acquisitions were completed as part of group reorganisations and
the consideration was largely satisfied by the issue of shares. The assets and
liabilities at the date of acquisition, goodwill arising on these transactions
and total consideration are disclosed in the table below:



£'000                              Book value at date of Fair value at date of
                                   acquisition           acquisition
Loans and advances to banks                       21,869                21,869
Trading securities                                   789                   789
Investment securities                              7,835                 7,835
Deferred taxation assets                           9,246                 9,856
Property and equipment                             1,165                 1,165
Other assets                                      64,266                63,386
Intangible assets                                 13,530                72,014
Goodwill                                           3,629                50,742
                                                 122,329               227,656
Current taxation liabilities                          74                    74
Deferred tax liabilities                           2,698                16,142
Other trading liabilities                            278                   278
Subordinated liabilities                           5,000                 5,000
Other liabilities                                 60,687                66,116
                                                  68,737                87,610
Net  assets/fair   value  of   net                53,592               140,046
assets acquired





The goodwill  arising from  the  above acquisitions  consists largely  of  the 
benefits expected  to  arise  from  the enhancement  of  Investec's  wealth  & 
investment offering in the UK and Ireland.



This interim management report includes an unaudited consolidated condensed
set of financial statements produced by the bank for the six months ended 30
September 2012, which can be accessed via the following link
http://www.rns-pdf.londonstockexchange.com/rns/2554S_-2012-11-28.pdf. This
document will also be available on Investec's website at
www.investec.com/about-investec/investor-relations/investor-relations-interim.html
and via the National Document Storage Mechanism at: www.hemscott.com/nsm/do



Enquires and further information:

Investor Relations

Investec Bank plc

Telephone:020 7597 5546

2 Gresham Street, London, EC2V 7QP

United Kingdom

Investec Bank plc



directors' responsibilitY STATEMENT



The  directors  are  responsible  for  preparing  the  unaudited  consolidated 
condensed  financial  statements  in   accordance  with  applicable  law   and 
regulations.



FSA Disclosure Rules and Transparency  Rules require the directors to  prepare 
un-audited condensed financial  statements for the  half-year. The  directors 
have  elected  to   prepare  the  consolidated   financial  statements   under 
International Financial Reporting Standards (IFRS) as adopted by the EU.



The directors are responsible for  the preparation, integrity and  objectivity 
of the  consolidated financial  statements that  fairly present  the state  of 
affairs of the  group at  the end of  the period  and the net  income for  the 
period, and other information contained in this report.



To enable the directors to meet these responsibilities:

· The  board  and  management set  standards  and  management  implements 
systems of internal controls and  accounting and information systems aimed  at 
providing reasonable assurance  that assets  are safeguarded and  the risk  of 
fraud, error or loss  is reduced in a  cost effective manner. These  controls, 
contained  in  established  policies   and  procedures,  include  the   proper 
delegation of  responsibilities  and  authorities  within  a  clearly  defined 
framework, effective accounting procedures and adequate segregation of duties

· The  Investec  plc  group's Internal  Audit  function,  which  operates 
unimpeded and independently from operational management, and has  unrestricted 
access to the group Audit Committee, appraises and, when necessary, recommends
improvements in  the system  of internal  controls and  accounting  practices, 
based on audit plans that take cognisance  of the relative degrees of risk  of 
each function or aspect of the business

· The  Investec plc  group Audit  Committee, together  with the  Internal 
Audit department, plays an integral role in matters relating to financial  and 
internal control, accounting policies, reporting and disclosure.



To the best of our knowledge and belief, based on the above, the directors are
satisfied that  no  material breakdown  in  the  operation of  the  system  of 
internal control and procedures has occurred during the period under review.



The group consistently adopts  appropriate and recognised accounting  policies 
and these are supported by reasonable judgements and estimates on a consistent
basis and provides  additional disclosures when  compliance with the  specific 
requirements in International Financial  Reporting Standards are  insufficient 
to enable users  to understand  the impact of  particular transactions,  other 
events  and  conditions  on  the  group's  financial  position  and  financial 
performance.



The financial statements of  the group have been  prepared in accordance  with 
the Companies Act 2006 and comply with IFRS as adopted by the EU and Article 4
of the IAS regulation.



The directors are of the opinion, based  on their knowledge of the group,  key 
processes in operation and specific enquiries that adequate resources exist to
support the  company  on a  going  concern basis  over  the next  year.  These 
financial statements have been prepared on that basis.



The unaudited  consolidated  condensed  financial  statements  have  not  been 
audited or  reviewed  by  the  company's auditors  pursuant  to  the  Auditing 
Practices Board guidance on Review of Interim Financial Information.



Signed on behalf of the board











David van der Walt

Chief Executive Officer

28 November 2012

                     This information is provided by RNS
           The company news service from the London Stock Exchange

END


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