Investec Group

Good day, ladies and gentlemen, and welcome to the Investec pre-closed conference call. All participants will be in listen-only mode. There will be an opportunity to ask questions later during the conference. If you should need assistance during the call, please send a message in the Q&A chat. Please also note that this call is being recorded. I would now like to turn the conference over to Investec Group Chief Executive, Mr. Fani Titi. Please go ahead, sir.

Thank you, Donald, and good morning, Mark. Thank you for joining us for our pre-closed trading update. This update reflects the financial performance for the 11 months ended 28th February 2026 and the expected results for the year ending 31st March 2026. I'm joined this morning by Nitin Samuj, our Group Finance Director, Ruth Lees, the CEO of our UK business in Kibush Mudlia, the CEO of our South African business. The group is expected to deliver a resilient performance reflecting the strength of our client franchises and diversified revenue streams. We are making progress on the strategic growth agenda outlined in May 2025. The investment in our corporate mid-market, private client segments and the ongoing modernization of our operating and digital platforms is on track. As part of our capital management, We have now completed the £2.5 billion rent or £110 million share buyback programme announced in May last year. Turning to the performance for the 11 months ended 28 February 2026. Revenue was supported by increased land activity levels, higher average advances as well as net inflows in our wealth business. This was counterbalanced by the negative impact of lower average interest rates. Fixed operating costs growth reflected continued investment in people and technology, particularly in building and modernizing transactional banking capabilities, as well as driving strategic and regulatory projects to enhance business resilience and support growth. Looking at the underlying drivers for our court-line franchises, Net core loans from our banking businesses increased by 7.4% annualized in mutual currency and by 13.3% annualized in reported currency to £36.3 billion, benefiting from the 9.5% appreciation of the rent to pound sterling compared to 31st March 2025. Growth was driven across our private line lending and corporate lending books in both geographies. Customer deposits increased by 5.7% annualized in neutral currency and by 11.5% in reported currency to £45.5 billion. Funds under management in our South African wealth and investment business increased by 26.7% since 31st March 2025 to £29.6 billion at 28th February 2026. We saw strong inflows in discretionary funds which were partly offset by outflows in non-discretionary funds. So for the year ending 31st March 2026, we expect to report the following. Adjusted earnings pressure to be between 3 and 6% ahead of the prior year. Cost to income ratio to be between 52 and 54%. Pre-provision adjusted operating profit to be between 3 and 5% ahead of prior year. Trade loss ratio to be within the through the cycle range of 25 to 45 basis points. Group ROE to be between 13.3 and 13.7%. This being within the group's medium term target range of 13 to 17%. Group ROT to be between 15 and 16% within the 14 to 18% medium term range. The group has robust capital and liquidity levels to deliver on our clear strategy to enhance long-term shareholder returns. We are focused on growing market share, deepening client relationships and driving incremental returns while maintaining cost discipline and capital efficiency. I will now turn the call over to questions.

Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please use your hand. Once you have been identified, please unmute yourself and ask your question. You may also type your question in the Q&A chat. If you decide to withdraw your question, please lower your raised hand. Again, if you would like to ask a question, please use the Teams functionality to raise your hand or type your question in the Q&A chat. Our first question is from Harry Bota of Bank of America. Please go ahead.

Good morning, Fanny and team. Thanks very much for the update. Is it possible to give us some insights into the UK NIM, how it's progressing, and if you still see a stabilisation in that NIM as we move into 2027 and 2028? And could you possibly also provide us more insights into the slightly lower RAE guidance for both South Africa and the UK?

Okay, let me ask Griff to talk to the NIM situation in in the UK, and then I will tackle the ROE question.

Good morning, Harry. Thanks for the question. We continue to see good levels of client activity and increased loan growth against a very uncertain macroeconomic backdrop, particularly in the United Kingdom. As expected, interest rates on average are lower across the period, and therefore this has affected NIM to some extent, and as other banks have mentioned, there is credit margin compression in the market. Nevertheless, we have been able to deliver or guide to performance, as we have indicated today, really making up for reductions in NIM through increased fee income. We've seen very good activity through the fee line. There is strong market demand for attractive transactions and for good credits and good deals, and we've been able to benefit from some of that through the period.

Okay, thanks Ruth. And a comment just on the ROE guidance. We have guided trially for circa 13.7%. We have given you a range whose midpoint is at 13.5%, so a 20 basis point moderation of the previous guidance if you work on the basis of the midpoint. As Ruth indicated, from a UK perspective there has been a level of margin compression given the kind of competition that is in the market and obviously a reduction in the average interest rates out in the market and given that our book is different to the other books from a UK perspective in terms of the size of our structural hedge, we obviously have seen that level of reduction. As Ruth correctly indicates, we have seen significant uptick in non-interest revenue. We have also guided from a UK perspective that our impairments will be towards the upper end of the 50 to 60 basis points guidance that we provided priorly. So as we go forward, the interplay between lower interest rates and higher activity and lower impairments will come to the fore. In this period, we have not seen enough of that interplay and obviously as we go forward we had expected that we would see further rate cuts and support for higher activity and as a consequence of the lower rates, lower impairments but we all know we are in a very different environment, we do not know yet the extent of the war in Iran, its impact on oil prices and how long that may last and therefore the inflation outlook and the interest rate outlook is quite uncertain as you go forward. So that largely accounts for the UKROE guidance. On the SA side we've indicated that we're looking at approximately 18%, around 18%, which is pound denominated, given the fact that the pound has, the rand has appreciated by about 10% versus the rand, and on an average basis it is flat. So our revenue will have been fairly neutral in terms of impact, but our capital would obviously have been impacted when you average your capital. So it really is a party that, so in rent you will have a higher ROE for our SA bank, which would generally be where we would have expected it, but the currency impact on capital would account for what looks like a lower ROE guidance for our South African business. I hope that helps, Harry.

Our next question is from Steve. Please go ahead.

Hi there. Hopefully you can hear me. Yeah, we can hear you, Stephen.

Thank you.

Thank you. Just on the credit trends, it looks like it's picked up quite a bit, but if you could just unpack the UK versus South Africa, it's obviously due to the currency impact as well. Did the UK also accelerate towards the end of the period?

Stefan, I think the credit trends have remained in a, I would say, pretty similar territory, if we look at it. South Africa is quite a low ratio, so there is influence on levels of recoveries and so forth, but I would say gross impairments are fairly similar, if not slightly better. And from a UK perspective, we stayed at the upper end of our guidance of 50 to 60 basis points. I wouldn't say that there's any particular trend to call out over the period.

Sorry, maybe I haven't been clear. I'm talking about credit growth, so in terms of loan growth.

Oh, sorry.

Yeah, so I mean, yeah, pick up in loan growth that you're reporting there. So there's a lot of that coming from South Africa.

I think it's actually across the book, so I'll let both Ruth and Kumej give you some indication.

Sure. Morning, Stefan. So from a UK perspective, on the mortgage side, post the budget, Late last year, we did see demand for mortgages pick up, and the pipeline has grown very well. And so that book growth has been running strongly at around 9% to 10%, which we're very pleased with. But, of course, things were slow in the run-up to the budget. And then in terms of corporate and other lending, we've seen very diversified book growth. in different pockets of the business. So very pleased with that outcome. Strong velocity of transactions and good demand for good credits. I think this is a market where there's definitely strong demand for attractive credits and at the same time a market where weaker credits will not be able to be funded.

Stefan, just to maybe add from a South African perspective, we saw actually good growth across Two of the core client franchises are private client franchise, both in mortgage activity. We've seen relatively good growth come through that and actually very good growth coming through our corporate and investment banking franchise in South Africa where we saw double-digit loan growth.

Thank you. That's very helpful. Maybe I can ask one more question unrelated to this. Just on the motor finance redress situation, obviously the FCA proposed scheme to be announced soon towards the end of the month. In your full year results, have you made no further provisions?

Stefan, that's correct. You know, I think we remain comfortable with our levels of provisioning. I think we look forward to seeing the sort of finality of the redress scheme itself being announced. But until then, there's no reason to adjust anything.

As you point out, Stefan, we were expecting the outcome very soon, the final outcome. We are operationally ready. to be able to meet that given what we know from the earlier consultation papers. And as you know, we really started in this business, you know, quite late, around 2015, even by 2016, only had around 11 million on the books and by 21, about 555 million. So a very small percentage of our overall book, very small market share, and as Michelin points out, the provision remains where it was.

Thank you.

Ladies and gentlemen, just a reminder, if you would like to ask a question, please use the Teams functionality to raise your hand or send your question in the Q&A chat function. At this stage, as there are no further questions, I will now hand back to Mr. Fani-Titi for closing remarks.

Thank you again, Donald. I'm sure that There will be a lot more questions that our investors and analysts would like to ask. So as usual, please reach out to our team. Just reverting to the two questions asked, or the three, I won't cover the FCA redress scheme. We're quite pleased with the expansion of our balance sheet, both in terms of the The loan growth that we have seen over this period in the UK has indicated strong growth in mortgages on the private line side. For those who are in South Africa, you will know that the macro economy had turned somewhat upwards given some of the reforms that have been implemented. So the credit growth is skewed towards a CIB business as a consequence of that. and generally while the environment is quite choppy and the outlook is quite difficult given the war, our business remains resilient. We've gone through a number of these crises over time. The clients that we have in South Africa at the top end of the market, the corporates we serve there are large corporates. In the UK equally we have private clients and we have the corporates we have served over time. So generally, we've had a higher level of resilience relative to the other players that are exposed to the broader economy as such. We've continued to hold high levels of capital and of liquidity, in particular from a South African perspective. So we feel that we are ready to navigate rather this particular crisis from a South African economic perspective. The economy is in a much better place than it was when COVID hit about five years ago. The fiscal outlook is much stable and government finances are much more stable. very competent monetary policy management. Of course, that will be complicated by the outlook of the war in the UK, as Ruth said. Post the budget, we have seen better activity. Again, the outlook is complicated by the war. Too early to say what the impact will be, and it's dependent on how long it will be. If you want to dig deeper into any of these questions, we will be happy to engage with you one-on-one. Please contact our teams. Thank you again for dialing into this conference, and do have a good day further.

Ladies and gentlemen, that concludes today's conference call. Thank you for joining us. You may now disconnect.