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 IR QVLFLLFFXFBD -0- Nov/28/2012 16:52 GMT
Investec Bank PLC 42QT Half Yearly Report
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