Investec The turning point for Investec Stephen Koseff Chief Executive Officer UBS financial services conference Thursday, 20 th October 2005 Contents Group operating environment - South Africa - UK and Europe - Australia The turning point for Investec A clear strategy for sustainable growth Conclusion
Group operating environment Overall operating environment Geopolitical uncertainties Regulatory and compliance requirements Basel II IFRS Competitive pressures The war for talent Transformation pressures in South Africa
South Africa The economic fundamentals are now in place Business confidence is high JSE has experienced a significant bull market with strong volumes Trading conditions are favourable Property sector remains bullish buoyed by low inflation and stable interest rates Lack of investment by the corporate and public sectors UK and Europe Growth flat and expected to remain so CPI in July reached a high of 2.3% since start of official CPI series in Jan 1997 Wage growth remains modest Inflation expectations remain contained Consumer activity strengthened, although off a low base Capital markets active
Australia Interest rates are stable Markets have seen a recent resurgence Strong activity in the property sector Corporate activity strong The turning point for Investec
The turning point for Investec Build up... Breakthrough! Level 5 Leadership First who then what Confront the brutal facts Hedgehog concept Culture of discipline Technology Accelerators Disciplined people Disciplined thought Disciplined action FLYWHEEL Source: Good to Great, Jim Collins, 2001 We ve built a sustainable business model Pools of third party assets Balance operational risk businesses with financial risk businesses to build a sustainable business model Pools of proprietary risk capital Core advisory businesses Core banking businesses Asset Management - Private Client - Retail - Institutional Specialist opportunity funds Property funds Securitised assets Private equity funds Talent management Origination and distribution Securitisation Lending portfolios Principal transactions - Property trading - Direct investments - Private equity Structured transactions Market making - Forex - Equities - Fixed income - Cash - Derivatives
Resulting in a balanced portfolio of businesses % contribution to operating profit* 100 90 80 70 60 50 40 30 20 10 0 2000 2001 2002 2003 2004 2005 Property Investment Banking Treasury and Specialised Finance Asset Management Private Client Activities *Excluding Assurance and Group Services and Other Activities Private Banking Opportunities for growth Establish scale in each of the existing specialisations Invest in new specialisations Strategic differentiation and strong brand Increased distribution platform New banking product developments Leverage off infrastructure for non-bank partners
Private Client Securities Opportunities for growth Extracting maximum value from the HSBC acquisition by introducing the client base to the broader Investec product offering Leverage off infrastructure Successful and controlled integration of Rensburg Sheppards plc Increase client focus Treasury and Specialised Finance Opportunities for growth Various business initiatives in debt capital markets Establish funds, e.g. Viridis Clean Energy Fund Continue to build scale in existing activities Leverage off strong product capability and infrastructure: - Asset Finance business - Acquisition Finance - Securitisation and platforms
Investment Banking Opportunities for growth Leverage opportunities created by integrated global securities model Leverage the SA and UK product to the US market Cross-border initiatives Expand selected platforms in Private Equity and Direct Investments Asset Management Opportunities for growth Maintain strong UK retail momentum and build offshore capacity Create the conditions for meaningful UK institutional inflows Maintain brand visibility in institutional market Expand the presence in Taiwan Formulate and implement a European growth strategy Leverage the unique Africa link
Property Activities Opportunities for growth Build funds under management Select development and trading opportunities Consolidate opportunities in the listed property sector Role out model into other geographies A clear strategy for sustainable growth
Our strategic focus remains the same We strive to be distinctive through: - Maintaining an entrepreneurial culture - Remaining nimble, flexible and innovative - Adopting a client-centric approach - Not being all things to all people Balanced by: - Disciplined people who operate in a framework of strong risk management and financial control With a clear strategy for growth: - Building our businesses organically; and - Making bolt-on acquisitions that increase scale and meet our required return on investment criteria at all times The foundations for success 20 Focused strategy Quality earnings Capital management Building appropriate infrastructure Financial discipline Strong culture Niched and focused approach, serve select market niches, expand selectively, client-centric, distinctive offering Recurring client businesses, remain competitive, maintain entrepreneurial flair Tightly controlled capital, good returns on capital through the cycle from operating business, excess capital allows flexibility Efficient systems, talented people, strong brand, business discipline, flat structure, leverage resources, investing for growth, eliminate inefficiencies from duplication Highest standard of financial reporting, strong balance sheet, accountability, sound risk management Passionate employees, entrepreneurial spirit, high ethical standards and corporate governance, strong collaboration, integrity, embrace diversity, self-disciplined people who go to extreme lengths to fulfill their responsibilities
Balancing entrepreneurship and discipline High Hierarchical Organisation Great Organisation Culture of Discipline Bureaucratic Organisation Start-up Organisation Low Ethic of Entrepreneurship High Low Source: Good to Great, Jim Collins, 2001 We are committed to achieving our financial targets ROE: Cost to income ratio: EPS* growth: Dividend cover: Capital adequacy ratio**: Target >20% <65% 10% >UK RPI 1.7 2.3 times 13% - 16% March 2005 20.2% 66.7% 35.6% 2.06 Plc: 15.5% Ltd: 20.1% *pre goodwill impairments and non-operating items ** for Investec plc and Investec Limited Targets as disclosed at May 2004. These are medium to long-term targets.
Our foreign shareholding is steadily increasing Foreign shareholding 15.8% 21.9% 27.5% 36.5% 45.2% 49.4% shares 40 35 30 25 20 15 10 5 0 Jul- 02 Dec- 02 Jul- 03 Dec- 03 Jul- 04 Dec- 04 Feb- 05 Mar- 05 May- 05 Jun- 05 Jul- 05 Aug- 05 20 18 16 14 12 10 8 6 4 2 0 Number of shares Share price Conclusion When you combine a culture of discipline with an ethic of entrepreneurship, you get a magical alchemy of superior performance and sustained results Source: Good to Great, Jim Collins, 2001
Questions Contact details For further information please refer to the investor relations website: www.investec.com/grouplinks/investorrelations Or contact the investor relations team: - Telephone UK: +44 207 597 5546 SA: +27 11 286 7070 - Fax: +27 11 291 1597 - E-mail: investorrelations@investec.com