Investec Group (INL) Earnings Call Transcript & Summary

Ladies and gentlemen, good morning. I always love the Zebras galloping along. It really is my pleasure to welcome you to this presentation of our interim results. I will be joined by what I call the A team. Nishlan will follow me and he will go through the unpacking of the group performance and we will then have Ruth Leas, the Chief Executive of the business in the U.K., giving us a bit more of a feel of why the business has done as well as it has. And of course, Richard Wainwright, who will give us a feel of our South African business. That is the A team. So let me start. It is always pleasing to present a good set of results. Obviously, we have alerted the market to the fact that our performance will be good. And as you know, the backdrop has been particularly challenging with high inflation, high interest rates, volatility within markets, given some of the problems, particularly geopolitically. So it hasn't been an easy environment to deliver the results. So on behalf of 7,400 of us, it is my absolute pleasure to present these results. And obviously, we will be joined by my colleagues. So if you look at the graphic that we have on the screen, we try to manage the business over the long term. It may be a 6 months result presentation, but our focus is always on the long term. And you can see that over the last 3 or 4 years, we have delivered consistent results that have continued to deliver into the promises that we made to the market in February 2019, and we are now at a point where we are comfortably meeting the targets that we set at that time. I mean, clearly, we've continued to entrench and grow our client franchises. And in these numbers, in the graphic -- the second graphic, you can see that we continue to see good growth in funds under management, good growth in our loan books and importantly, also good growth in our deposit books. These are the drivers of long-term performance. The performance you see today is actually a consequence of the growth that we saw last year in our client numbers and in the books that we were able to grow from last year. In this period, we also have concluded a pretty strategic transaction for us in that we combined our wealth business in the U.K. with Rathbones, consequently creating the U.K.'s largest and leading discretionary fund manager, very, very proud about the transaction and very hopeful about the benefits that, that transaction will create for us. We're also nearing the completion of our share buyback program. We announced that we would be buying back shares worth about GBP 350 million. We are close to it. In rand terms, we are now just under ZAR 7 billion in terms of the buyback. Nishlan will talk a little more about other strategic actions that we undertook over the last 18 months or so and their impact on the numbers. So if I may just look at the snapshot of the numbers, we have reported adjusted earnings per share, it's a bit difficult to see that far. Adjusted operating -- adjusted earnings per share of 38.7p which represents a growth of just under 18% in pound terms and in rand terms, 39%, a pretty creditable performance. Our adjusted operating profit at GBP 441 million represents an 11% increase over the prior year in pounds and a 32% increase in rands. Clearly, you can see the impact of a depreciating rent on our numbers and for our South African shareholders we thought we will try to get a few metrics reported also in rands. Our cost-to-income ratio has improved to 53.3%, reflecting the fact that our revenues continue to grow faster than our costs and Nishlan will unpack that a little later. Our credit loss ratio at 32 bps remains within through the cycle target range. So we're quite comfortable with the asset quality of our book, and in fact, our exposures are well covered by collateral. We also did signal that in the U.K., we will have a slightly elevated credit loss ratio, and Ruth is here to unpack that a little later. I have indicated that our return on equity is now inside of the target range, helped this time by strong operational performance, but also the impact of the share buyback in reducing the number of shares Richard will tell you that because we used cash from the South African balance sheet that we have foregone interest earnings in South Africa. I'll leave that to Richard to unpack a little later. Lastly, on this slide, if you look at net asset value, which grew in pound terms, just under 10%, in rand terms about 27% -- 26%. We have specifically 2 particular contributions, one being operational earnings. We're generating a lot of our capital. The second is obviously the impact of the combination of Rathbones and Investec wealth and investment. We were very pleased that the Board declared a dividend of 15.5p which is an increase of 15% over the prior period, in line with the increase in adjusted EPS. So we're quite pleased with the performance. If we look at the geographic performance of the business, you can see that the important metrics are going in the right way. And we have shown you the performance in home currency, so that you can see the impact of the rand on our numbers. The loan book in each geography grew quite nicely, higher single digits, deposits equally have grown pleasingly, funds under management have grown. And clearly, within the U.K. contract, we are now reporting IWI funds under management inside of Rathbones indicated the cost-to-income ratio in South Africa, fairly flat, a good improvement within the U.K. business and Ruth will unpack the credit loss ratio of 55 basis points. In South Africa, we continue to see our credit experience being much stronger than where we have guided in terms of our through-the-cycle range of 20 to 30 basis points. Our return on equity and return on tangible equity, very pleasingly within the ranges that we have indicated. The numbers are obviously quite good in terms of financial performance, but we manage the business for the interest of all our stakeholders. Sustainability for us remains a key priority. As you know, we did indicate that we will be going down the route of more granular disclosures. We disclosed our Scope 3 emissions last year, and we will continue down the route of making sure that we continue to sharpen our disclosures as the standards become better understood across the world. We also have published the commitments, both short term, medium term and long term that we will live by over the next period. As our purpose indicates, we exist to create enduring worth. So we manage the business for the long term and for all our shareholders. Nish, I think it's your time to unpack the numbers. Ruth, I'll make sure that your people are still here.

Yes, Fani. That's perfectly on time. Now the pressure is on. Good morning to everyone, and it's an absolute privilege to be in front of you. I think just as I unpack the results, let's just set the context because we talk about a tough macroeconomic environment. And let's just take a look at some of that. I think if you look at GDP growth in both markets that we operate in and in several markets has obviously been constraints applying. And we did see some of the pulse recovery from the COVID period, and that's pretty much coming through the system. But the constraint and the inflationary impact on the battle to bring inflation under control is underway. I think we still hear some conflicting views in terms of how long that will take, but that battle is in play. Looking at markets, markets have been volatile. I think since September last year, we've seen an improvement in market since our March year-end, they actually have pulled back a little bit in certain jurisdictions and have moved forward in certain jurisdictions. But the volatility remains. In terms of the rand, we've said that we have around about 18.6% depreciation in the rand sterling. And since the year-end, the South African rand has weakened by about 4.5%. So not that material on the balance sheet overall. In terms of global interest rates, I think we have seen global interest rates climb sharply. And in certain jurisdictions, they are having a longer impact but I think what's important for us as we unpack the Investec results is really to look at interest rates in our 2 markets. I think whilst we have seen interest rates climb sharply, I think the time that where we experienced 0 rates, particularly in the U.K. bank since the financial crisis, that time is over. And whilst we anticipate rates to normalize at some point or to come back at some point, it's definitely not to that low level that is reflected on that chart. From a South African perspective, rates have climbed. It's a little higher than where we would desire it to be. And we will expect some normalization of rates, but again, just cognizant of the long-term positioning. When we go through these results, we're mindful of short-term measurements. So to some extent, some of these strategic actions might have had a negative impact on revenue, a positive impact on earnings per share because of the way accounting works. But I think all of these really positioning the group well for the future. The Rathbones transaction, which completed on the 21st of September, really created the business with a strong platform and Investec's commitment to that particular market being part of the DNA of our client pool. With Investec holding 41.25% interest in the business, we now effectively will report it as an associate. So you will see revenue recognized as a single line as profitability and that's an after-tax return. So it has created a 2% improvement in our cost-to-income ratio. And overall, when Fani quotes the improvement to 53.3% that's an improvement on a comparative of 55.5% having adjusted for this effect. I think from a Burnstone perspective, Investec Property Fund, that is now pretty much independent from Investec. We continue to hold just over 24% interest in the underlying fund. And we're excited about the business. We're excited about how it is positioned and with the sale of the property management company into the fund itself, it really positions it for the future. Last year, we distributed 15% of our holding in Ninety One, and we hold just over 10% on our U.K. balance sheet. And then the buyback, we have executed around about ZAR 6.8 billion, and that's reduced revenue by about ZAR 300 million. But you see operating profit increasing by 10% and adjusted earnings increasing by 17%. And that's really where the positive impact of these actions are reflected in these results. And then with regard to our investment in the Gud Group or formerly known as IEP, we continue to realize the underlying portfolio in a responsible and positive manner. Funds under management, I think last year, you would have seen us report funds under management of just over ZAR 60 billion or part of that GBP 60 billion, GBP 40 billion of those funds under management are now part of the Rathbones group. And with the combination, we now have a business that manages just over GBP 100 billion of AUM in this market. The South African business, and I think when Richard unpacks it, you will see that, that business generated net inflows in this type of market of just over ZAR 7.3 billion in the period, something that we are really proud of for the business. And that continues to be a well-placed business in the South African context, managing international clients. Loans and advances growing by 8.7% on an annualized neutral currency basis and customer accounts growing by 3.4%, again, underpins the growth in the business that will support the future. In terms of revenue, revenue has now grown by 14.6% to just over GBP 1 billion, while in fact, close to GBP 1.044 billion for the half year. And if we look at the line items, again, just noting that currency does have an impact. So some of the stronger returns from South Africa are reflected in a subdued manner in a sterling set of accounts, but we will go through some of the detail. Net interest income growing by GBP 75 million in this period is really a function of the growth in the book and sustained growth over the last few years as well as higher interest rates benefiting the endowment capital that we have in the group. Net fees and commissions actually grew positively in both geographies. And to some extent, the constraints in the market is really reflected in this slide because you have lower turnover, particularly in our private clients lending spaces and mortgage origination just given where rates are at this point in time. In terms of income from investments and associate income, there's about GBP 28 million that we have foregone, and that's really the distribution of Ninety One and not equity accounting IEP. So the negative is really the representation of that. And for all intents and purposes, not real growth in terms of overall investment income in these markets. Trading income reflects continued strong customer flow activity across our balance sheet as well as some of our structural hedging activity coming through that line. Other operating income will really marginal improvement over here. Cost-to-income ratio improving to 53.3% from 55.6%. And again, I reiterate these are completely rebased for the business as we look forward. With operating income increasing by 8.6% and operating costs increasing by 4.1%. Now we've provided forward guidance that we anticipate the cost-to-income ratio to be in the range of 55% for the full year. So there is a rebase in our target of less than 63% and we'll communicate that rebase when we get to the full year results. If we look to unpack costs, now to some extent, again, the rand is underplaying the growth in cost because we've continued to invest in our businesses. We've continued to add skills and systems that will really underpin the business as we look forward. And overall, however, us growing on a fairly muted basis with personnel costs growing by just over 5% in a high inflation environment. Our group investments portfolio, there will come a time when we don't track this in this level of detail, but we have about GBP 272 million of capital deployed and against Ninety One, which continues to produce an ROE in our books of just over 20%. The Burnstone Group, relatively muted contribution in this current period. And the Bud Group, we've changed the measurement basis to that of fair value. So we're not representing the equity accounted income from the underlying business any longer. And with the ROE of around about 3.9%, there is an element of drag on the overall ROE. Now if we look at the overall performance, bringing the picture together, you see that operating profit has grown by 11% from GBP 397.1 million to GBP 441.4 million, with South Africa growing by 6% over the period, again, I just reiterate that there are certain elements that have been foregone because of the strategic actions with a strong contribution on the very, very bottom line. The ROE in South Africa now at 16% with ROTE at 16.%. From a U.K. perspective, we see the bank in the U.K. growing by 61% and the wealth business contributing just over 11%. And again, heading into South Africa, I think I forgot to mention the wealth business growing by 37% in rand terms, a very strong contribution, given the underpin of the continued growth in AUM over the period and prior periods. Group investments. These lines are expected to be read because that's really where we've had the execution with regard to some of the actions that I've mentioned before. But again, with the U.K. printing and ROE improvement from 11.1% to 13.6% and return on tangible equity at 16.7% overall. I think adjusted operating profit growing by 14.3%. If we just look at credit loss, what we attempted to do on this chart is just to give you some history, starting at pretty much pre-pandemic, and this is a 6-monthly view because you can see that we have had some degree of normalization of impairments as we've come out of COVID and the sort of release of some of those provisions held at that stage. But we continue to maintain robust provisions on our balance sheet for the overall exposures taking into consideration the level of collateral that is supported. So if we look at our absolute impairment charge of a credit loss ratio of 32 basis points, we've indicated that in the U.K., that credit loss ratio is around about 55 basis points. And to some degree, that represents some individual higher provisioning in certain exposures, but nothing that we call out from an overall asset quality perspective because we've really seen robustness in our overall book. The South African business continues to benefit from some recoveries and that credit loss ratio of 8 basis points. We guide the market to the fact that we will anticipate that over time, it will tend towards the 20 to 30 basis points. And from an absolute number perspective, as you look on the left-hand side and the right-hand side of the chart, we do end up with a higher level at this stage, but we've also have higher books. So that's really anticipated. Unpacking ROE and capital deployed across the group. I think from a U.K. perspective, you see that the capital base is now an average of GBP 2.7 billion. There is some increase in the capital base because of the Rathbones transaction on which we recognized a gain as we mark the associate to its transaction value. And from a South African perspective, with capital at about GBP 1.8 billion a few years ago, that was closer to GBP 2.2 billion. So we have pulled in capital given the strategic actions that have been taken. But that business continues to generate capital and we'll continue to build. And again, unpacking ROE. In the U.K., the differential between ROE and ROTE really represents the nature of being invested significantly in a capital-light business that being Rathbones. Just to give you some detail around the growth in net asset value really underpinned by growth in profitability in the period, with a fair amount of distribution to shareholders, the gain from the Rathbones transaction and some negativity because of the weakening of the rand. And then from a tangible net asset value perspective, we have actually separated the investment in our associate identifying a portion that is intangible, and that is really what's represented in the GBP 77 million. Now we would have previously had some intangibles in our carrying value of Walton investment in the U.K. Our capital and liquidity positions remain robust and strong. You see that our cash and year cash position of GBP 16.4 billion and at loans and advances to customers as a percentage of our customer deposits at GBP 76.9 billion. In South Africa, we report under advanced -- under the advanced methodology and sorry, Fani, I used the wrong quote -- percent not pounds. In South Africa, we report under the advanced methodology, and you see that the capital ratio has reduced from 14.7% to 13.2%. Again, that's intentional, and it was really execution of some of the strategic actions on that particular balance sheet. In the U.K., we report under standardized with a capital ratio of 11.7% and a leverage ratio of 8.7%. Overall capital ratios, again, remaining well ahead of in total. So that's the summary of the group. I'm now going to hand over to Ruth. Thank you.

Thank you, Fani. I see my papers are here. Thank you, Nishlan. Good morning, everybody, and it's a real pleasure to host the interim results here at our offices in London. Warm welcome to Stephen Koseff, one of our founders, who is here with us today, a real honor and a pleasure to have you with us in London. I'm going to begin with providing a short overview of our strategic positioning, the strategic positioning of Investec in the U.K. I will then move on to provide some highlights around the Investec plc figures and provide some details on that. And lastly, have a look at where we see growth opportunities going forward. Next year, Investec Group will celebrate its 50th anniversary and we in the U.K. have been here for 30 years. We recently celebrated that anniversary. So a long time for us in terms of history, not a long time from the British history point of view. But certainly, for us, as Investec, arriving in the U.K. 30 years ago, we have been building a fundamentally scalable platform, which has reached a strong level of scale at this point in time. This is an exceptionally competitive market, as you all know. We are competing with the very best British banks, U.S. banks, European banks as well as private credit funds, fintech and everybody else who is here in London, which after everything everybody has said, is still a very, very attractive place to do business, and we consider it continue to be a financial center in the world but a very competitive space. So we had to carve out for ourselves a niche or target market areas where we could actually compete. We have to differentiate ourselves from others. So we have found a space in the mid-market in the U.K. And we see ourselves as unique in this space in that we deliver a breadth of capabilities, really a diversity of what we offer in this space. Our strong competitors typically do 1 or 2 or 3 things or the things that we do, for example, strong competitors in equity capital markets or strong competitors in mortgages or strong competitors in asset finance or in real estate finance, but in terms of bringing this all together in terms of corporate and investment banking activities as well as private banking activities, taking our clients on both their personal journeys and their business journeys here in the small and mid cap space in the U.K. is something unique. And actually, we don't have a competitor similar to us of the order of size and scale that we are at and actually providing a seamless experience to clients. These are clients that we have dealt with for many, many years. We have built deep client relationships, and we continue to acquire new clients, even in this challenging macroeconomic environment, hiring new clients as well as doing more business with our existing clients. So today, we have a net core loan book of GBP 16.3 billion, customer deposits of GBP 19.9 billion. For the 6 months to September '23, Investec plc has delivered GBP 235.4 million of adjusted operating profit and a return on tangible equity 16.7%. We see this business as high tech and high touch. We're not apologizing for being high touch. The mid-market space is a place where relationship banking is still alive and well. It is a place where banking is not monetized where our pricing is not necessarily the cheapest, but where we can actually differentiate ourselves in terms of relationship, in terms of service, in terms of our ability to execute a transaction to say we'll do something, commit to doing that and do that and be very agile in our approach. We're always focused on providing exceptional service. In what we've been driving over the last few years since COVID in a connected client ecosystem. We structured the bank as one single bank, one leadership team, we've arranged our sales with the client truly at the center of what we do. Investec has always been around putting the client truly at the center of what we do, arranged around client groupings, private clients, private companies, private equity, listed companies and then, of course, interacting from a wealth management perspective, servicing these business needs and the personal needs. And this is really resonating with our clients. In fact, our greatest client acquisition comes from referral from existing plants, which means that they are really enjoying the client experience with us, and it is consistent across different areas of our business, whether you're interacting with us on the private client side or in terms of corporate and investment banking. On the private client side, we have grown our franchise very strongly. We have found a niche where we can compete even in a market like this, where mortgage demand has been subdued. We have acquired new clients each and every month and we continue to build the franchise. So a strong momentum here across all our activities, lending, advisory, hedging, contractional banking and deposits. From a deposit perspective, we are substantially retail funded across the retail market of the United Kingdom. Our wealth business interacts with thousands of clients on the wealth management side. And then, of course, we have the clients that we interact with on the corporate and investment banking. So what I'm trying to -- what we're trying to is that we really touch and interact with a large portion of the community in London and in the broader U.K. and then very much internationally connected to our other businesses in the United States, in Europe, based in Ireland, in the Channel Islands and, of course, in India. Each of these businesses connecting to the global franchises that we have and growing strongly together with us. These COGS and the momentum in the business really driving together and moving forward strongly. A snapshot of the results. Nishlan has covered quite a lot of this already, so I will just draw out a few highlights to tell you where we stand here. Revenue for Investec plc, I'm talking to both banking and wealth management here GBP 595.4 million of revenue, which is 24% up on the prior period. If you look at our adjusted operating profit, which I mentioned earlier, this is 41.4% up on the prior period. I mentioned our return on tangible equity on the previous slide by looking at return on equity still strong at 13.6%. And the cost-to-income ratio improving significantly down to 53.9% is some detail for you to really unpack how the numbers come together, which you can look at later. We saw 9.1% growth in our net core loans to the GBP 16.3 billion book. This is diversified across different areas of activity. It is that diversity that enables us to grow in spite of challenging market conditions. There are always pockets of growth in areas where -- certain areas where there's muted growth, for example, in mortgages, of course, mortgage demand is significantly down in the U.K., given the spike in interest rates that we've seen and also given that we deal only with high net worth individuals when doing mortgages, and these individuals have sought to reduce their mortgages, paying down their debt using excess liquidity in order to do so, and therefore, redemptions have actually also been high in the mortgage space. But our corporate and other lending has actually grown at a much faster pace. We have not changed our lending standards. We are cautious as always, in terms of lending in these types of environments, particularly where interest rates have increased so much. What you are seeing in our loan growth is that we are gaining market share in each of the areas where we are doing business. In many of our businesses, we are only 1% or 2% or single-digit figures in terms of market share. Therefore, in order to grow and take advantage of that across 10 or 15 different lines of business, each one is doing a net increase of approximately GBP 30 million to GBP 50 million, you can reach these loan growth figures quite easily. Deposit raising there comfortably at 8.4% annualized increase. We are well seasoned to compete in the deposit space. We've always had to pay more than the High Street banks in terms of deposit raising. It is competitive now for the High Street banks in the deposit raising space. Our brand, our rating very good at A1 by Moody's, BBB by Fitch, and the general brand recognition around Investec and the way and the service experience we provide in raising deposits has led to a comfortable experience in terms of being able to stay ahead, increase deposits and actually reduce our overall cost of funds at the same time. Our revenue has increased by 27%. This is a combination of both strong increase in net interest income as well as noninterest revenue. I explained that we've had strong book growth, we are always cautious from a liquidity and cash perspective, not being a nonsystemic bank in the U.K., running long cash balances. And of course, this has also served us well in terms of the benefits coming through from higher interest rates. On noninterest revenue, we are pleased to see that our fee income has remained resilient and actually increased slightly through this period. And again, there are pockets of activity, for example, equity capital markets and world of IPOs and M&A where things might be a little bit slower than other areas and our lending fees coming through strongly, naturally in the corporate advisory listed space, we have had certain fees come through strongly during this particular period. Trading income from customer flow is also delivered during this particular period. From a cost perspective, we remain disciplined. We implemented a number of changes when COVID hit back in 2020, we focused on simplifying the business and then put our minds towards focus and fixed operating costs even in this period have increased only 2.3%, well below the prevailing U.K. inflation rate. Overall, operating costs have increased 9.9%. This is reflecting more of an increase in variable remuneration, which is reflective of the overall increase in profits that we've seen. Getting to the credit loss ratio. We indicated to the market at the trading update that our credit loss ratio would be above through the cycle range of 30 to 40 basis points, and it has come through at 55 basis points. You can see that back in 2019, this was around 41 basis points. To put this in context, you saw the chart that Nishlan put up earlier today of the spike in interest rates. It looks like my [indiscernible] slightly being pushed to the side and again a sharp line upwards, but 14 rate rises in 12 months is something that is not experienced as normal cyclical activity. Clearly, that is an unusual impact that we've had to deal with through this last year or so. And that type of unusual and strong spike in interest rates would, of course, affect certain counterparties, and that is what we have seen. Small number of idiosyncratic impacts on counterparties. We look at the overall book in spite of these rate increases, strong asset quality and strongly performing book, put it in context, you can see below the total ECL charges of GBP 39.3 million. This has increased GBP 11 million on a total net loan book of GBP 16.3 million just to put to that overall in context. So we're very comfortable with the overall asset quality of the book. And we saw inflation yesterday print down at 4.6%. We have seen interest rates already pause. So we are guiding to a credit loss ratio for the full year, around 50 to 60 basis points. That would be on the basis that current conditions continue as they are, but of course if rates turn, will start to come down, you will have a different picture as we go forward. And I think Fani pointed out earlier that our total coverage at 1.1% over the overall book. We're comfortable from a coverage perspective and as a lender, we're always focused on loss in default, and we take great care in making sure we are well covered in our lending. Looking at Wealth and Investment, we retain a 41.25% shareholding in Rathbones. We are very excited for this combination, we just bought together GBP 100 billion, putting us as the leading private client, wealth manager in the United Kingdom. We have already enacted a strategic path partnership with Rathbones in terms of our high net worth clients and how we service them going forward, and we expect this to be a strong fruit as we go forward in time. Opportunities for us to create funds under management or Rathbones through our high net worth client capability. And actually, in the last couple of years, we'd actually created approximately GBP 0.5 billion of funds under management in each of the years through to March '22 and March '23 for the wealth business, and we expect that to increase in time as we develop this partnership further. And of course, referrals also coming from Rathbones to us and a greater opportunity also to expand our broader deposit and other product offering to the broader Rathbones client base. And now to just round off. Growth opportunities. I was just standing here reflecting back to 2020 and the last few years. I don't think there has been a time -- I think we had an afternoon off maybe from uncertainty. Other than that, every so often, there has been just another shock and another type of uncertainty, each of which I don't think any of us would ever have imagined before we have amazing teams who do a lot of stress testing, but each time, I don't think that we've actually included the stresses that we faced. So overall, I think we've adapted ourselves as has the rest of the market to be able to deal with uncertainty, not to be flippant about it each time the shops come, you learn something new every single day. But what I'm trying to say is that in spite of all of this, we are on the front foot as the U.K. bank in terms of our positioning, U.K. bank and other in terms of where we're placed in the international markets. And we are now focused on increasing what already is good scale, but increasing that further, increasing the scale and relevance of our established client franchises. Both client franchises span, corporate lending fund solutions, which includes fund finance, real estate lending, aviation finance, power and infrastructure finance, asset finance, high net worth lending. In each of these, we have strong capabilities, where we are able to originate very, very strongly, we're able to portfolio manage. We have many people that I see sitting in the room here who have long tenure with us. They have developed seasoned experience in terms of dealing with clients and dealing with this experience and leading these businesses, and we have very good track records in each of the lending activities that we've done. The same can be said for our advisory activities and also in terms of the other activities we do, treasury, risk management and solutions and all the other things that we do. So I said earlier, we have a very small market share. We have a great runway to grow and just scaling that up and increasing that scale and relevance will deliver great performance. We also want to grow further in Continental Europe. We've been operating in Continental Europe for many, many years, over 20 years really. We do lending in Europe. We do Treasury Risk Solutions and also advisory. Recently, we increased our stake in Capitalmind, which is M&A advisory in Europe, giving us an immediate footprint across countries, selected countries that we choose to operate in, we only lend in selected countries. And of course, Brexit has caused some issues in terms of the flexibility with which you can go into Europe and we are working on a more flexible solution now to take forward our growth opportunities in Europe. Most of our clients who are operating in the U.K. or many of them also have interest in the U.K. This is a giant market on the doorstep of the U.K. We want to be able to access and this gives us a real strong opportunity for growth, which we are already experienced and have lending books and experience in hedging and advisory in that space already. The third thing, which we haven't spoken much about externally, but have been busy working on internally for a very long time is advancing our alternative investment fund strategy. In terms of our overall balance sheet, we are limited in terms of what we can take on to balance sheet because we run a very disciplined risk management approach, trying to keep our exposures granular. And also the clients that we bank in the mid-market easily outgrow us over time and now needing larger and larger facilities to take forward. So we can originate far more risk than we can actually hold on our own balance sheet. And if we look over the last couple of years, we will have distributed approximately GBP 6 billion of risk, which you don't see on our balance sheet just through our general activity. That is a very large flow of activity coming through our businesses each and every week. And we want to take -- monetize that in terms of looking at the opportunity for earning capital-light revenues by bringing in external capital to participate alongside us. Over the last decade or so, we probably raised off the order of approximately GBP 2.5 billion at different times for different funds. Right now, we have about GBP 1 billion of committed capital or funds activity that would be in aviation, for example, in private credit or in direct lending. These are funds that we have in the U.K. as well as in India and expand these activities that we do in the funds and bringing in external capital enables us to augment our balance sheet activity and our lending activity and actually meet our clients' needs, our clients who are growing stronger and stronger. So this is in the early stages of development. In the past, we have done this in a more ad hoc approach, making space for ourselves to do bigger transactions and to facilitate our clients' needs, but we are now looking at this far more deliberately strategically in taking this forward really also in relation to reverse enquiry coming to us with a great interest from external capital looking at these alternative assets, which we are actually well experienced and have track record in many of these things. So it's early stages but we are looking to take this forward as we go forward as a growth area. And then both Fani, Nishlan and myself have spoken about the scale benefits that can be achieved through a combination of Investec Wealth and investment with Rathbones. They are exciting prospects to come through there. Clearly, it's early days, but we will be looking with interest to see those benefits realized as we go forward. Thank you very much. I'll now hand over to Richard Wainwright.

Thank you, Ruth. I'm going to go on to the next -- I've got to hit it here. Okay. So good morning, ladies and gentlemen. It's an absolute honor and a privilege for me to represent these very pleasing results on behalf of 5,000 colleagues that I have in South Africa that managed to do this. And as Fani and Nishlan have said, in a very tough not only macro environment, macroeconomic environment, but also very difficult sociopolitical environment in South Africa and a geo-vertical environment around the world. So to represent those 5,000 colleagues with results like this is very pleasing. I know it's -- one shouldn't do it, but Fani led the way yesterday and he you pointed out some unsung heroes. So let me -- just very quickly, thank some unsung heroes in South Africa. These are people that largely go unrecognized but they make a big difference in the life of our staff and, in particular, our clients because very often, this is the first touch that our clients will have with Investec. And that is our security staff, our frontline reception staff. If you ever walk into any one of our restaurants, in our various offices in South Africa, the people that work in our restaurants. And the people that work 24/7 in our client service center. It's tough to single out people. These people make a big difference in the lives of our people and of our staff. So a special thank you to you. I know we often speak about our bankers, our support staff, our professional staff and our IT stack. But these people do make a difference. So our strategic positioning in South Africa is pretty well known. We are not all things to all people. We are a specialist bank and private client wealth manager, that services a very select group of clients. We have been very razor-focused on what we want to achieve since we set our objectives in February 2019. And we have proven now that we can achieve these kind of results with the focus, the dedication, the diversification that we have in our business model and the resilience that we've proven. And apologies to my international colleagues, [indiscernible] reminds me of our Springboks winning Rugby team, diversified, focused on what you want to achieve and able to produce a resilient performance. Kind of reminds me of that. So I'm extremely proud of these results, and as I said, it's a great privilege. So for the half year, I think produced adjusted operating profits of ZAR 4.8 billion, growth of 8% in our core loans now at close to ZAR 340 billion. Customer deposits of ZAR 460 billion and quite proud of the fact that we now have funds under management in our wealth -- private client wealth business of ZAR 465 billion. What we often don't talk about is we have additional funds under management in the Specialist Bank adjusting for double counting of about a further ZAR 20 billion. So almost reaching ZAR 0.5 billion or ZAR 0.5 trillion mark. So a very, very good, well-positioned business in South Africa. I think at a cultural level, one of the things that we always remind ourselves whilst we think we are large and we have to thank our founders for the brand and the positioning that we have in South Africa. What we do culturally is that we continue to remind our people, we're actually small. Think small, think entrepreneurial and deliver an out of the ordinary service level to our clients. That's what enables us to deliver these kind of results. So our revenue up at ZAR 10.5 billion, up over 10% for the year. Operating costs up at 12.2%, which has resulted in a slight deterioration in our cost-to-income ratio, but well within our target ranges. Our credit loss ratio well below, in fact, half of what our guidance is of 20 to 30 basis points through the economic cycles at 8%, sorry, 8 basis points. And again, A lot of our stakeholders, rating agency and analysts often ask me, why is that? And again, this goes to Springbok analogy. We have as a society in South Africa, very, very, very resilient. And in particular, in our corporate market, and it's been confirmed to me by our various rating agencies -- international rating agencies that they often surprised that we -- notwithstanding the economic environment that we're in and the higher interest rates, that corporate South Africa has continued to be very resilient in the face of very tough circumstances. So we are partly a beneficiary of that as well. So adjusted operating profit up at ZAR 4.8 billion. And as Nishlan said, return on equity, which we've had a very big laser focus on for the last 4 years, now above our cost of capital. It's taken a lot of work and a lot of strategic actions to do that. So hopefully, the market at some point will give us some benefits for that. Just unpacking the numbers a little bit. The Wealth and Investment business showing an incredible performance, increasing its earnings by 36%. You heard Nishlan speak about new flows, ZAR 7.4 billion of new flows for the half year into that business. And this is largely as a result of the One Investec strategy and that doesn't happen overnight. This is a large number of people across the private bank and the wealth business working together ended up like mesh, [indiscernible] driving this integrated approach where we service clients holistically similar to what Ruth was talking about in the U.K. The Specialist Banking operations showing an increased performance. So growing earnings 14.7%, very, very pleasing. And you can see the impact of some of the strategic actions that Fani and Nishlan spoke about under group investments where you've had the Ninety One performance, the deconsolidation of Investec Property Fund and the different accounting treatment now for IEP. And we will have time with our stakeholders and analysts and shareholders to unpack the impacts of that. If you adjust for that, just look at what our client franchise businesses have done, it's about a 17% to 18% improvement in earnings. And I'll talk about the opportunities that we foresee in that space. So as we've said, continuing growth in our all loans and advances over 8%. And really, if you unpack this a little bit, you'll see it in the analyst booklet, where does that growth comes from? It really has come from our corporate presence across the various segments and specializations that we have in the corporate market. So around about an 18% growth in corporate. Our private client mortgages and pure private clients advances has also grown at around 8.9%. And our real estate residential income-producing real estate portfolio is relatively flat, and that is a consequence of what's happening in that market, how our clients have responded and how we've supported that. And actually, we're very pleased with that. So very strong growth overall from a core loans perspective. Revenue up 14.4% and our cost-to-income ratio in the bank itself in the Specialist Bank well below 50%. This is a leading market position and you compare it to our peers. We're below the best of the rest, I would say, a very good performance on costs. Credit loss ratio, I think we've said that we're at 8 basis points, very much less than half of our guidance. Like Ruth, if we do a forward looking, we don't see an overall deterioration in our portfolios, our lending portfolios overall. These are largely one-offs. But given the macroeconomic environment and with interest rates probably going to be a little bit higher for longer, there's speculation of this cut is going to start in March or they're going to start in June, well March is our year-end, no cuts probably before our year-end. So we may get some slight deterioration in a move more towards the 20 basis points. But where we are right now, similar to Ruth, we don't see any stresses in the portfolio, and there's nothing specifically that we're worried about. So we continue to be well provisioned. Just moving on to our wealth and investment just to unpack that a little bit, as I said, funds under management increasing 6.9% to ZAR 465 billion with inflows on the discretionary funds under management of ZAR 7.3 billion, adjusted operating profits up almost 37% and the margin actually improving to 29.5%. And as some of our wealth colleagues pointed out to us yesterday, again, this kind of performance doesn't happen over time. This has been a journey and an investment in this business over a long period of time, a track record that's been built, a culture of service and a growing international presence. I think it is worthwhile talking about our Swiss platform that we've built which does sit underneath the U.K. bank, but it is an opportunity for us to offer a Swiss platform for our South African clients, which we think is very strategic for us in the medium to long term. So just moving on to our growth opportunities. Again, given the macro and sociopolitical environment in South Africa, very low business confidence, almost 0 growth in the economy. Various stakeholders ask me very often. How do you expect to get growth? And as I said earlier, if you think that you're small and we are the smallest of the big 5 banks, we think there are pockets of environments where we can gain market share. The first one, and Fani and I have spoken about this for a number of years is in the private client space. So we've had consistent client acquisition growth in our private client space now. We're about 12 years, I'm looking at Nish, probably average around 7% to 8% per year. We would like to accelerate that to 10% to 12%. How do we get this growth? Where do we see it? We look at how the world has changed and how professionals have changed, new opportunities to service various professional categories, like in the IT world, like in the financial services world, these would be markets that historically Investec brand was unknown when we didn't target those markets. So whilst we have ambitions to double our client base, it is difficult in this kind of environment but we are very focused on client acquisitions. So all the metrics that we measure around our private clients, whether it be growth in our client numbers or in growth in what we service to these clients, whether it be our life offering, our investment offering, all of those are growing fairly strongly and at rates that we're very pleased with. So that's going to give us a lot of sustainability in both our private bank and our wealth business. Then the mid-market, and Ruth spoke a lot about her positioning in the bank here in the U.K. is positioning in the corporate mid-market. In South Africa, we often refer to it as business banking. So Investec has not traditionally been known as a business bank, but we have quietly been working on building this kind of capability. We've invested from an IT perspective in our transactional banking capability. It's largely complete. We are growing our client base here. We think we have a distinctive service offering that is very additive and compelling for these clients. So we are growing our client base. We have more clients taking on our transactional banking capability, and we can complement that IT approach with our well-known service levels that Investec is well known for. So we think over the medium term, are gaining market share in this, and it is a very competitive environment. We know that. But we think given our approach and our people, combined with the tech capability that we have that we can compete there over the next 3 to 5 years. The opportunities on the African continent, whether it be trade finance or social infrastructure, we're doing this in a very disciplined, focused way. I do look at our founder down here, who warns us every day. But the role that we're playing together with some of our colleagues in the U.K., we have a very distinctive offering around our export credit agency capability in our London office, in our Johannesburg office. And some of the transactions we've been able to do really is making a social difference on the continent. And we do it in a very risk-conscious way using export credit agencies from around the world. And as the continent grows and many of these countries are growing faster than us in South Africa, there is a lot of infrastructure need and in particular, social infrastructure. And what I mean by that is roads, schools, clinics, hospitals and the like. So there is opportunity for us there. And then in South Africa, finally, is just the transition, both the transition to more renewable clean energy but also the impact of what's happened with the state-owned enterprise of Eskom. I think I've been on public record in saying, in 10 years' time, I don't think Eskom will be producing much electricity in South Africa. It won't attract the capital and certainly doesn't have the people. But what you've seen happening in South Africa is many of our clients, whether they be domestic or international, raising funds, coming in and building very large-scale power plants. I think that's going to accelerate. We're well positioned to capture that opportunity, not just in the power plants themselves, but the downstream impact. We've recently, for example, just launched a -- under a different brand, a solar residential business called Recharge. It's now launched. We're going to roll that out. We have numerous clients that are very active in the downstream power sector, whether it be importing solar panels or batteries or manufacturing new types of batteries. That's a very large sector of the economy that's going to grow as Eskom slowly moves out of generation, will end up just probably running the grid. So we think, given our culture, our market positioning, our relative size, notwithstanding the macro, there are growth opportunities for us. So we're very focused on that, and hopefully, we can continue to deliver for you. Thank you very much.

Thanks, Richard. I'm going to bring it home. I'm really glad that we could present both Ruth and Richard. Most of you will know that in the next 18 months, 24 months, Richard will be retiring. So this is really an important opportunity for him to present. We have [indiscernible], who alongside Ruth will present in May next year on this podium. And as you can see, the boots are quite big that Richard has. Richard, thanks for your service to this business. You'll be around with us for quite a long time. Richard is one of the best bankers you can work with. I'm really pleased that we've had the opportunity to work with him and the results are quite fantastic. Just in closing, because we've taken more than we had thought we would take. So I am going to take 2 minutes to wrap it up. We remain hopeful that we can see the momentum that we have seen into the first half continue. As we said, there's a lot of opportunity on the corporate side, there's a lot of opportunity on the private banking side in terms of lending. When you look at the Private Banking assay and you look at the overall both a big portion of commercial book being specialized property, we really haven't seen much activity there. But in the banking piece, we have seen quite some good opportunity there. Ruth has indicated that on the corporate side, there has been quite a lot of opportunity in the areas that we are operating. We expect interest rates to remain high over this period, but the expectation that in the second half next year, we may start to see rates coming down as inflation continues to moderate, that expectation may bring confidence into markets, and we may see a bit more activity than we have seen. So we hope there will be confidence going into that. So our expectation is for moderate book growth, and therefore, the level of growth that we have seen in our profitability, we would expect to continue. Ruth has talked about where we see impairments in the U.K. business on a book of ZAR 16.3 billion comfortable with where we are. We've seen a growth of 60%, Ruth, I won't promise that you will repeat that promise in the second half, but we're quite excited about where we are positioned. You saw in Richard's business, a very pleasing level of growth. So expectation is that we will maintain ROE performance on the upper side of our midpoint, which we obviously would be very pleased with if we are able to achieve that. As Richard indicated, and I think Ruth indicated as well, we are fairly agile as a business. We have small market shares, and we are able to be nimble in servicing our clients. You know that we've asked our colleagues here to come into the office for 4 days a week because we want to keep the energy going. We want to be close to our clients, and we want to make sure that our younger colleagues get to learn from the other colleagues. So excited about the environment we're in, tough, but we have the agility to navigate this environment. I'm going to rest it there and we can then go into questions. I think we're going to start in this room. Stephen, Philip is standing at the back there. I know you asked about where the Chairman is. I think the Chairman came maybe a minute late and is just standing [indiscernible].

Questions from this room. Okay. While we think about questions, shall we go to Johannesburg? Anything from Johannesburg.

Fani, I don't think there's any questions here and there's nothing on the webcast. We're going to try Chorus Call now.

Over the COVID period, we renovated our building in Jo'burg and it's a beautiful building for our colleagues to work in. Last week, I was in Cape Town and even there, we have renovated our building and the environment at Investec characterizes the energy that every one of us brings into this business. We don't have any questions in Jo'burg on the webcast. Any last question in Johannesburg. Stephen warns against me offering an opportunity for a question but I'm offering it. Okay.

No questions Fani. You guys have clearly done an amazing job.

Thank you very much for your attendance. And again, for my colleagues around the world, thank you so much for looking after our clients, looking after our other colleagues, it was fantastic, Richard, that you recognized those people that we take for granted. I always say to outside is that if you walk into an Investec building, we don't quite own this one. In Johannesburg, we own the whole building. From the time you see somebody who lets you into the building or somebody who takes you to a room or somebody who offers you coffee or offers your food in the restaurants, you know there's something different about this business because there's that personal touch, that degree of ownership, that sense of interest in our clients in our colleagues. So thank you very much. It's time to get back to work, Richard, Ruth and Nishlan. Thank you so much for your attendance.