Investec plc

It's always a pleasure, Nicheline and I, to represent our people in presenting another wonderful set of results. So I'm pleased that we can report very strong financial results against the backdrop macroeconomically and from a market perspective, that has been particularly challenging. we are reporting that we have adjusted earnings per share going up 25% to 68.9p. Dividends up 24% to 31p. And in rents, and Rudy wanted to know this rent number earlier today, up 38% to 701 cents. So Rudy, I hope you're happy with that. in this period we returned circa 780 million pounds to shareholders through dividends share repurchases oh sorry nichelin tells me that the slides are not my slide is not can you see the slide thank you sorry i started going because i've got my own presentation on my on my ipad apologies for that so in this period as i say Oh my goodness me, the slide is different on this one. Let's just make sure that we've got this right. Okay, I have to look on the left initially, that's what I have to do. Apologies, so let me start. As I said, adjusted earnings per share up 25% to 68.9, dividends up 24% to 31p, and in rands up 38% to 701 cents. And in this period, we returned 780 million pounds. I think it's just about over 18 billion rand to our shareholders through a combination of dividends, The share repurchase that we announced, we have purchased 5.5 billion rand to date and a distribution of 15% of 91%. I'd like to take just a step back and go back to March 2020, as you see on our graphs. That is the reference period. At that time, we demerged 91 from Investec, and we've navigated over the three years a particularly difficult environment, a once-in-a-hundred-year global pandemic. There's an ongoing war that is occasioned by the invasion of Ukraine by Russia. We've had resurging inflation, and consequently, we've had very high rates of interest across the world. And in fact, at the moment, we are concerned about a small banks crisis in the US market. And latterly, of course, we're worried about the debt ceiling. That's the backdrop that we have had to navigate over the last three years or so. But the performance of the business, in my view, has been phenomenal. As the graph shows, we have increased our adjusted earnings per share over that period by a whopping 82%. It really has been pleasing to be part of the story over this period. We also have refined our purpose over the last three years and really committed ourselves to this idea of creating enduring worth. And that's for our clients, that's for our colleagues inside of the business, and that is for the society in which we live. And obviously, we want to make sure that we do well by the environment as well. As you can imagine, this is a results presentation, so you're going to have lots of numbers. So before we go into the numbers themselves, and Nislin will do most of the analysis, I would like you to keep some fundamentals in your mind before we go through into the numbers. The first fundamental is that over the last three, four years, we have had a discipline of to allocate capital appropriately and also to manage risk appropriately as well. So discipline in capital allocation and in risk. And that has led to the second point I would like you to keep in mind. And that is that our firm is very focused on very deep client franchises in specialist banking and wealth management and in two anchor geographies and we have a culture that is deeply entrenched and it is driven by impassioned people who are entrepreneurial. That is what the focus has led to, a clear strategic path for us going forward, guided by the need to allocate capital appropriately. And thirdly, we are committed to generating returns above our cost of capital. That was the mantra in February 2019. Because as we do so, we can reinvest in the business for growth in the long term, we can support our colleagues, we can support our clients, and importantly, we can pay the distributions that we have been able to pay to reward our capital providers. So please keep those in mind. And I will repeat myself so that as we go through the presentation, we anchor on these. Discipline in capital allocation and risk management, a sharp focus on building deep-client franchises, specialist banking wealth, north-south, And impassioned people who are entrepreneurial in the way we look at it, a focus deeply to generate returns that allow us to reinvest in the business and to distribute dividends to our shareholders. So as we go through, please just keep those in mind. I'm going to go to the second slide. Tell me that this is the right slide. So I'll keep looking back to make sure we are on the same slide. So as we look at the left side of that slide, and I'm not going to go back to the focus that we have strategically in terms of our business and the clients that we have, you see a growth in loan books in each geography that is quite pleasing given the backdrop. you also see a growth in deposits in each geography. And this is really important because what you have seen within the U.S. market, particularly given the regional small banks crisis, a crisis around deposits that has been obviously occasioned by interest rate risk mismanagement, but it manifests. in a flight of deposits. So we are particularly pleased to see that in each geography we have seen a growth in deposits. In our wealth businesses, we have seen a significant level of net inflow in a tough market. If you look at the results of a number of wealth managers, a number of asset managers, you will see that flow has been particularly difficult. our overall funds and the management are down but that is not surprising because the relevant indices that we measure ourselves against would have come down as a consequence of the markets but here's the key takeaway i want you to just consider the diversity of our business by virtue of geography by virtue of business line and by virtue of the intensity, capital intensity of our revenues, gives us the ability to navigate different environments over time. Of course, it does help that we have very clearly chosen, carefully chosen client bases that are very resilient. It really is an important point to understand this idea of a diversity of earnings, a diversity of geographies, a diversity of business lines, capital light, capital heavy. And we also have capital light revenues within the banks as well. So if we go to the middle section of that slide and we talk about capital management, I would like to point out that despite having addressed the excess capital in the SA Bank, and as I said, we have executed 5.5 billion of the 7 billion rent program, our CET1 ratio remains at a pleasing, if not elevated, 14.7%. Obviously, we have completed our migration to ARB and that has helped, but we continue to look at optimizing our capital. The board has revised capital ratios in terms of South Africa CET1 11.5% to 12.5% on an advanced basis. And in the UK, we also have seen an increase in capital to 12%. And our target there, CET1 target, is to be in excess of 10%. And we have started the process of looking to migrate to... um advanced that work is underway and obviously we will benefit from the fact that we've undertaken the same work here in south africa on the right hand side of the slide i would just like to point out that as we look for growth over the next number of years, we are particularly excited that we have announced a combination of our UK wealth and investment business with Rathbones to form the largest DFM business, wealth business in the UK with $100 billion sterling of assets under management, 100 billion. Just think about it because I'm sitting in Johannesburg. Multiply that by 24. 2.4 trillion of funds under management. That scale gives us the belief that we will be able to invest much more substantially in growth, in terms of the capabilities that we offer our clients, the client proposition that we can make available to our clients, investment in technology, but also importantly, we will be a home for talent because there will be so much more we can do for our people. And over the last three years or so, we've talked about a strategy to bring the best of investing in every client interaction across bank and wealth in constructing the combination transaction with Rathbones, we have made sure that we can continue to service our wealth clients in a manner that is as good as we have at the moment. And that in fact, they can access the wealth clients the best of banking from investing. So we have undertaken, we have concluded some MOUs to make sure that across the two businesses, In a strategic alliance, we can continue to offer banking services and wealth services. So we are particularly excited about that. Lastly, on that slide, as I said earlier on, we have an ROE now. that has improved to within the target range. Again, why is that important? It allows us to reinvest in the business, it allows us to support our different stakeholders, and it allows us to be ambitious about the business and about the future. It increases our ability to be relevant in the markets that we play in. On this slide, I'm going to just touch on two of the ratios because Nicheline will go into a lot more. Pleased to see the cost-to-income ratio drop from 63.3% to 59.6%, supported by revenue growth of 14.6% and this is against an increase in costs of 9.5% in an environment that is difficult. Nishlin will unpack that for us. Over the last three, four years or so, cost discipline has been a focus of our business. And while in this one year costs have grown by nine and a half percent, you look at costs over the last four years or so, you will see that we have entrenched a culture of cost discipline and efficiency as we move forward. The next An item that I would like just to touch briefly is the credit loss ratio. We are in a difficult environment economically. Growth rates are low. You have high interest rates. In some cases, there is a fear that some economies could go into a recession. In South Africa, we have low shedding and our own goals that we score. There has been a concern around whether we've exposed ourselves to sanctions from the US and maybe even from Europe, given some of the unsavory alliances we have been exhibiting towards Russia at the moment. So it's a tough macro environment and there is pressure on our clients. It is pleasing. in that background to see that our credit loss ratio is at 23 basis points against a through the cycle target of at 25 to 35. we are creeping in there you will expect it in in this environment that we're in initially we'll talk about how we look at it going forward and how we've dealt with the models that drive some of our provisioning i don't i don't want to steal his thunder it is always interesting to look at the business through a geographic lens What you see is a business in both geographies that is impressive scale. Look at those loan books. About 15 billion pounds each. How interesting is that? A little more in the UK, but that is impressive. And in fact, each would have grown in the period that we are reporting it. Look at the deposit basis. As I said, we have very strong deposit franchises in each area. About 20 million pounds each. Interesting, isn't it? I'm just rounding them up or down just to try and make a point. And as you look at farm, obviously our business in the UK is about twice the size of our business in South Africa in pound terms. And as I said, in the UK, we are now delivering in the combination with Rathbones, the leading DFM player in that market. And as I indicated, while we have it flows, which is fantastic, our total funds and the management are down because of the markets. If you look at the credit loss ratio, obviously quite minimal in South Africa, and this will go into that. And in the UK market, again, while there has been an increase, we are still within the through the cycle range. Look at the ROE of our business, South Africa 14.8%, but obviously the benefits of our capital management activities will come through in 24 and beyond. So you will see, I hope, a significant improvement in that ROE in South Africa. In the UK, we measure generally in that market on ROTE, the average ROTE of the banking industry in the UK is 12%. As you can see, we printed in terms of ROTE for the UK business, 14.5%. My eyesight is not as good as it used to be, Rich. um so particularly pleasing to see the scale uh i know a few years ago people are worried about our business in the uk you can see the growth that we are seeing in that business in terms of its profitability you can see the scale of it as you can see on this picture uh operating adjusted operating profit in south africa is about 441 million pounds In the UK business, that's about 400 million pounds. So we've made significant progress in continuing to build our business in the UK. The last slide that I will go into before Nicheline digs deep into the numbers is a slide on sustainability. As I said, our purpose is to create enduring wealth. that we look at the business through the lens of all our stakeholders obviously committed to making sure that we can reward our shareholders but also quite insistent that we have to deliver to our clients through a set of colleagues that are well looked after empowered and entrepreneurial. And we want to do so in the context of making sure that we leave a net positive impact on society and on the environment. So over this period, we have made substantial progress across all areas of sustainability. We have robust standard reporting inside of both our businesses, and we are ranked quite favorably by Sustainalytics, by MSCI, and by SMP. We have signed up to the Net Zero Banking Alliance, and we have done some work that we reported on in scope three. We were the first bank to do so in South Africa, and then we're quite leading across the world. We took the risk. to say this is what we understand, this is the work we're doing, and we will put it out there. So this year, we will improve on that work that we have done. Obviously, we had a March 2022 TCFD report, which was published, and you can look at that. Obviously, this year, we will go a little further in this area. So while progress has been very pleasing and quite substantial, This area is challenging. We have a lot more work to do as we go forward. But we are excited about the opportunity to live out our purpose and create enduring worth. I'm going to ask Nishlin to now unpack the numbers in greater detail. Hopefully I've given you a high level view of how we look at the business. Nish?

Thanks, Vani. Not sure if this is on. We are now. Good morning to everyone. And it's always a privilege to stand up here and present the deep dive to you. So I think just unpacking a bit of the background and some of the data in terms of the context that Fania has spoken about. I think if you look at this reporting period, we saw a weak economic environment in both South Africa and the UK, albeit that it was an environment recovering from obviously the negative COVID cycle that we had over 2020 and 2021. The issue I think that we are all looking at is in the immediate term is that the economic environment continues to be weak. In South Africa, constraints such as load shedding has seen, for example, the outlook deteriorate just from December to March from around about a 1% calendar GDP growth to around about a 0.2% GDP growth for the next calendar year. So I think that's the context that we're in. Similarly, from a UK perspective, I think we have seen weakness in the economy, albeit that there have been signs of also improvements as you've seen the world becoming more engaged and some of the constraints that existed from a global perspective starting to relieve. I think if any of you have been on a plane or any of you have been into the city of London, you'll see a lot of people around. So compared to the COVID environment that we've had in the past, there's definitely a re-engagement of the engines around the world. And that to some extent is cushioning the difficulties that we face, which is with high inflation and persistent inflation, we are seeing the need for interest rates to continue to remain high as we look forward. From a financial market perspective, I think to some extent markets have improved, but there's been a lot of volatility in markets and certain reporting dates have been weak. And I think if we look across both the JSC and the FTSE, it's easy to pull out the stats at the end of March and the end of March, but the level of volatility that has existed over the period should be noted. From an exchange rate perspective, I think South Africa continues to you know, be burdened by factors, whether that is how we position ourselves as a country, whether it is some of the constraints that apply from a global supply of money, and how we partake in that environment. Right now, we sit with a significantly weak currency, but again, there are underpins that support our, you know, overall, if you look through time. I think from an interest rate differential perspective, with interest rates having increased and we've continued to see some of that pressure, as global inflation rates start to ease, we should see this picture change as we head into the 2024 financial year. So our expectation is for interest rates to probably increase to some extent over the period. Thanks, Rich. It's for interest rates to continue to increase in the shorter term, but to moderate as we look forward. Now, to some extent that might be stubborn through to the 2023 year with moderation coming in the 2024 year. The one thing I'd like to call out is if you look at the long drawn out period of low interest rates, right from the global financial crisis dates in March 2010, right through to March 22 of low interest rates. And as we see the profitability of the banking business in the UK, just note that context of low interest rates. So whilst we expect rates to reduce, we don't necessarily expect those rates to reduce to the levels that existed over the last decade or so. And I think the other point to call out is that the average interest rates, given the sharpness of the curves, to some extent we've absorbed a much lower average increase in interest rates, and that momentum will continue into the new financial year. From an earnings perspective, I think, you know, over the period, there has been still strategic execution. So we distributed 15% of 91 back in May, and that results in a reduction in associated income. To an extent, we continue to have a 10% holding, so we do have some dividend flows. We effectively switched IEP, which is a 5.2% 5 billion Rand investment on our balance sheet to a position in which we seek to realize the assets over time. And we have realized a couple of the assets in this period, reducing the net investment from about 5.5 billion to 4.7 billion at the end of March and at the end of April to around about 4.4 billion. And that will continue over time, but subject to obviously the environment out there, because we continue to seek to realize assets on the basis of value. Yesterday, IPF announced to the market that the shareholders have approved the internalization of the management company. And we think that that really positions IPF as a business well for the period going forward. We continue to hold a 24% interest in IPF. And for those of you that analyze the data, you'll see that it has created some noise on our revenue lines, just given the fact that we consolidate 100% of the platform. but at the end of the day have only 24% of the economic rights to the platform itself. But in that environment and in that context, adjusted operating profit increasing to 68.9p, which is a 25% growth. If we start unpacking our divisions, just some highlights on each of them. I think if we look at the wealth investment in the UK, operating profit increased by 1.3%. to just under 92 million pounds in the period. And we experienced net inflows of about 608 million pounds in the current period. Some of those flows have come through from our banking business and our high net worth client base that we continue to build in the UK. And I think those flows were about 370 odd million pounds in this period. Some obviously decreasing based on markets. And we had a small acquisition in the period that accounted for some increase in the underlying fund. The South African business, I think, continues to expand its global investment offering, and I think is well positioned in South Africa for the current market and for the future. Discretionary and annuity funds, we had inflows of about 5.9 billion rand in the period. We did have some outflows from our non-discretionary portfolio, but that was clients managing their positions. Operating profit increased by 1.8% in the period to 672 million rand. And you'll see from our disclosure, we have now incorporated the Switzerland wealth platform into our reporting platform for the South African business, because that forms part of the South African international strategy. If we turn to the specialist banking businesses in the UK, adjusted operating profit increased by 56.7% to 303 million pounds. And that was really underpinned by growth in our client base, underpinned by growth in our loan book in the prior year and the current period, experience growth of about 7.9%, and increased levels of activity from our clients, particularly in some of the products that we offer in our trading platforms. From a South African perspective, adjusted operating profit increased by 22% in the current period to just under 8.7 billion rand. And we did see strong growth, particularly from our associated with corporate credit demand. I think both geographies, you have experienced some levels of higher redemptions from clients as they manage and navigate higher interest rates. But at the same time, fundamentally, seeing a growth in the client base itself. And looking at ROE, I think well represented in the geographies that we operate in. As Fani has indicated, the balancing of the contribution of revenue and profitability from the geographies are now starting to reflect in the group, with South Africa contributing 52% of operating profit against a backdrop of 43% of operating income and the UK contributing 48%. From a divisional perspective, our wealth businesses contributed 21% to our revenue base and 14% to our operating profit. And you'll continue to see the group investments portfolio starting to have a lower level of contribution as we reduce that portfolio. Just pausing on each of our businesses, the next few slides will just give you a few elements of a snapshot on those businesses, of the wealth business in South Africa. I think a thing to call out is that the operating margin for our South African business is around about 31%. And as we incorporate the Switzerland wealth platform, that operating margin is reflected at about 27.3%. In the current period, operating income grew by 4.1%. To an extent, there have been negatives from the fact that clients have remained probably in South Africa a lot more cautious. So we haven't necessarily seen the same level of trading flows as we saw in prior periods. But again, given the fact that there's a high degree of the portfolio also managed on an international basis for the clients, you continue to benefit from those flows. The operating costs increased by 5.3%, and that really does reflect continued investment, albeit that it is below inflation, but at the end of the day, continued investment in the platform and to some degree normalization of costs as those have come through. Our UK business operating income grew by 2.8%. Now, to some extent, the lower fees generated in the period have been masked by higher interest income in the period, but all of those positively positioned from what we've seen from a market perspective. Funds under management, as I've indicated, net inflows of £608 million over the period, really being offset by market movement. Net organic growth achieved in the period on funds of around about 1.4%. The operating margin at 25.8% is slightly lower than the prior year. And that's really as cost increased by 3.3% against operating income increasing by 2.8%. The banking business in South Africa, the specialist banking business, obviously has a diversified revenue base. But let's just look at some of the drivers. Core loans and advances increasing by 7.5%. I think as you look at the detail, the corporate loan book has grown by just over 20 odd percent in the current period. So strong growth in the corporate platform. Our mortgage book, I think, has grown by about 2.6% or private client lending at about 2.6% over the period. Our deposit base is up by 6.8% to £448 billion. Again, if you look at revenue, yes, net interest is up, and that's on the base of higher book and higher interest rates in the period. But we've also seen good momentum in fee generation in the period as client transactional activity in our private banking business has significantly picked up year on year. We also saw an increase in trading flows from client activity, utilizing our skills and ability within the trading platforms as well. Cost to income ratio improving from 51.1% to 48.2%. The banking business in the UK, core loans and advances grew by 7.9% in the period, high net worth Mortgage lending was up around about 12.7% during this period. In fact, at the end of, I think, January, that was running at about 40-odd percent. So to some extent, there is some pressure as we look forward, but we continue to acquire clients and we continue to drive penetration in that market, which will really create an underpin. We look at operating profit, and here we've seen a marked improvement in cost-to-income ratio from 69.6% to 60.4% off the back of strong growth in revenue. The strong growth in revenue driven by net interest income growing by about 47% in the period, as well as flows from trading activities that clients undertake, growing by about 45% over this period. Costs, as we saw in the South African bank as well, costs have grown above inflation and growing at about 12.4%. But again, if you look at our cost base, given some of the strategic actions taken back in 2020, it's actually slightly below the levels that we had really departed from back in 2020. Our group investments portfolio, 91. We continue to hold 10% on our UK balance sheet. Investec property fund, 24.3%. And our investment in IEP, as I quoted, at about 4.4 billion Rand to date. We hold around about a 47% interest in the overall vehicle. The average required capital for the vehicles at about 432 million pounds. And that has decreased from around about 500 million to a closing average required capital of about 300 million, given the reduction in the portfolio itself. This portfolio returned an ROE of 3.9% this year. And that's really a consequence of strategic actions and distributions that have taken place. Now bringing the picture together, The South African business, including group costs, operating profit grew by 15% and our UK business by 30%. Strong growth in our banking businesses, our wealth businesses holding up strongly in the market that we face. Group investments, really strategic execution coming through over the period and the consolidation of the investment of IPF. But I think focusing on the fact that All of both geographies have generated strong growth in return on equity. In South Africa, we have also instituted some capital management, so the buyback has come through, but a fair amount of that buyback took place over the last quarter of this financial year. So you will continue to see a positive impact on ROE as we look forward in time. So overall adjusted operating profit increasing by 28% to 917 million pounds. And if we look at a consolidated picture in terms of revenue, strong growth in net interest income, net fees really impacted by current markets, but underpinned by client growth and investment in associate income really driven by distributions that have taken place over the period. And to some extent, these revenue lines are influenced by consolidation. So our net non-interest revenue has grown strongly in our underlying businesses overall. The operating income increasing by 14.6% to 2.28 billion. Now, to some extent, if we hadn't consolidated and treated IPF as a single line, that operating income has actually grown by 16.4% in the period. Looking at operating costs, I think obviously with operating costs increasing by 9.5%, we will all want to see that normalize as we look forward in time. In this period, a fair amount driven by personnel costs, and that's really driven by inflationary pressures as well as increased investment in people, and more broadly speaking, increased costs. Just to give you an example, in South Africa, we've seen an increase in our costs associated with running backup systems from about 3 million Rand to about 23 million Rand this year. So there are some absorption that is taking place in the cost base itself. I think we've touched on our earnings drivers. I'm not going to over labor the point. And I think looking at our core loans across the geographies in South Africa, Our mortgage book grew by about 6% in the period with other high net worth lending growing by 3%. But you've seen strong growth in our corporate and acquisition finance books, as well as our fund finance books in this period. We are quite happy with the asset quality and the spread and the diversity of the book itself. Looking at the UK book, again underpinned by client acquisition, we've seen our mortgage book grow by 13% in the period. High net worth lending reducing by 7% in the period as clients become more defensive and we've seen a higher degree of redemptions in the period. And again, through the corporate base experiencing growth on a diversified basis across our book. I think the important thing with the lending books is if you look at the credit loss ratio, these credit loss ratios are underpinned by a highly collateralized book. And that's why I expected credit loss ratios through the cycle is about 30 to 40 basis points. Obviously, as we move through time, it's not a perfect science to predict that number, but that's where we expect to operate as a group. Overall, the credit loss ratio at 23 basis points And I think we, you know, looking at the environment in front of us, we do expect ourselves to be in the 25 to 35 basis points levels as we look forward into the next financial year. Over this period, our impairments raised in the model context has increased as our forward looking macroeconomic scenarios are a bit weaker than what our outlook was six months or 12 months ago. We have released some of our overlays, but that's on the basis that those overlays have now been absorbed into the models and therefore the need for an external layer of overlays no longer exists. And whilst we've seen an increase in some specific impairments, we continue to see higher recoveries for previously impaired assets. And just looking at the geographies in South Africa, the credit loss ratio remains low at about eight basis points. Now there are recoveries in that number that is at elevated levels. So adjusting for that, it's probably closer to 20 basis points. And we expect that to continue to run on that basis. From a UK perspective, our credit loss ratio increased from 17 to 37 basis points. Again, from this perspective, we've seen some increase in specific impairments, but really associated with a handful of exposures. We've increased our modelled impairment requirements and Off the Backroom have released some of our overlays that we've held. We do anticipate and we guide to the market that our credit loss ratio in the UK is expected to operate at 30 to 40 basis points towards the higher end of that particular level, given the nature of the book and the mix that we have. Our balance sheet provisions remain robust and our overall coverage ratios remain robust. There have been some movement between the stages, but nothing really to call out. And I think if we look at the return on equity and the return on tangible equity, a really positive story. You see that capital is almost equally split between the two geographies. To some extent, the South African capital will continue to reduce. as we have implemented capital action. So next year, that capital level is expected to be at around about 1.9 billion, whereas the UK will continue to grow as we position ourselves for growth. And from a capital and liquidity perspective, I think we've held around about 16.4 billion of cash and near cash. Our balance sheet remains defensive in a period like this. I think some of the risks that we saw in the U.S., particularly around interest rate risk management in the banking book, we have been very conscious and whilst we hold positions, we ensure that we effectively close out interest rate risk, particularly interest rate lists that is more than a year is fully hedged in the group. From a leverage ratio perspective, at 9.4% in the PLC, supporting a capital level of 12% that is measured on a standardized basis. From a South African perspective, we did move one of our final portfolios, which resulted in a 242 basis point increase in our CET1 ratio, and the buybacks has reduced the CET1 ratio by about 200 basis points. Both South Africa and the UK have also absorbed the distribution of 91 in these capital ratios. So capital ratios remaining quite strong over the period. I think just to contextualize, we had to look at this number a few times because we thought it was a fudged outcome, but net asset value remained at 510 pence from the opening balance to the closing balance. And really what that represents is 69 pence of growth as a result of profitability, holistically offset by the levels of distributions that took place in the period, which is the buybacks and the distribution of 91 and coupled with dividends that we've had. The South African contribution to net asset value in this period, a little bit weaker because of the weakening of the RAND by about 14% over the period. And that really leaves us with the net asset value at a strong level of 510 pence. Now from an outlook perspective, I think We can't overemphasize the macroeconomic backdrop. We can't overemphasize the impact of load shedding. We can't overemphasize the difficulties that we face in the South African market. I think from a UK market perspective, the high inflation cost of living impact, which we are living through right now, will continue to play out and some risk to economic recovery. I think in both geographies, there's still an underpin as the economies continue to drive forward out of the pandemic cycles itself. And in that backdrop, we expect revenue to be growth to be underpinned by moderate book growth, continued elevated interest rates, which is net positive from a revenue perspective. And we'll continue to seek to grow our business and our client bases. Overall costs, we expect our cost to income ratio to remain in the region of 60%. And we also expect our expected credit loss ratios to be in the 25 to 35 basis points guidance. I think from a capital optimization perspective, we have executed a fair amount, but there's an element that is left and we'll continue to realize IEP. With regard to a one year outlook, we expect our return on equity to be in the mid range of 12 to 16%. So Fani, I can see you ready to rock and roll. So I think it's up to you to take us home.

Thank you, Nish. I gave you the more laborious part to do. And thank you for delivering it with that clarity that you have delivered it. So where are we? I'm going to try just to take it home because Nish gave you a sense of how we look at the next year, a difficult environment, and yet a positioning from a market perspective that is competitive, strong capital and liquidity, and the people in a culture that allows us to navigate an environment. That's why we would hope to see an improvement in ROE, as we said, from the 13.7 to circa the midpoint of the 12 to 16% range. So that's the attitude that we take. Richard often says that while the South African environment is tough, we have to continue to have a mindset of progress and growth as we support our clients. So taking it home, on this slide, I'm going to focus just on the grow part of it. I want to pick out four specific things I wanted to take away with you as we go home. The first is obviously that we are extremely excited about the Rathbones combination. for the scale it produces, the underpin to growth that I talked about a little earlier, and the fact that we can continue to service in the UK our clients from a banking and a wealth perspective. It really is important to understand that that transaction gives us greater relevance within that particular market. The second point I want you to take away is that We will continue within the UK context to increase the scale of that business. You saw the income participation versus the profit conversion. So as we increase scale, we will do well there. And my confidence in that business is driven probably by three simple ideas. The first is that we have a very clear vision strategic positioning. We have client segments that we have chosen where we can be competitive. The second is that over the last three, four years or so, we have shown that we have showed that we can deliver profitable growth. You have seen a growth of 30% in our profits there to just under 400 million sterling operating assets. operating profit, and you also have seen that our banking business has increased its profitability by about 57%. The last area of competitiveness is that we remain entrepreneurial, we are nimble, we are close to our clients, and we can work with them through the difficult times. So continuing to increase scale and relevance in that business. The third thing I want you to take away is that we have an opportunity in both geographies to deepen our penetration in the corporate pin market. In South Africa, you will know about IFB, you will know about our business banking proposition, so on and so forth. And in the UK, this is the space that we have really occupied in a competitive manner in that we have become a full service player against specialists you saw new news was taken out a peel hunt who will compete with us in the investment banking space particularly advisory you will have the likes of show brooke and others competing with us in certain aspects of lending we have an asset finance book so on and so forth so for that big market in the uk we have a special position, and that position has been translated into the numbers that you see. So the mid-market opportunity in both geographies is something that we will pursue with vigor, focus, and discipline in terms of execution. The fourth point is that we will pursue further growth at the high net level income segment of our private clients business, both private banking and wealth, with collaboration between bank and wealth within the South African environment. We will pursue greater penetration in the high net worth end of our market, both in South Africa and the UK, both across bank and wealth. And at that high net worth end, we will also pursue private land opportunities in between the geographies. Those are the four very distinct growth elements that I would like you to keep in mind as we move over into the next two, three, four years or so. In closing, um i just want to reiterate our strong uh position uh strategically uh capital and liquidity as i said and the scale and relevance in the markets that that we have chosen and as indicated in the previous slide we think we have executable growth initiatives and we will continue despite the environment to be led by entrepreneurial-minded people that are very client-centric, and we will stay close to our clients in an environment that is tough. So the word I leave you with is the ability to navigate complexity and difficulty in the kind of markets that we are in. Thank you for attending and for listening. We're happy to take questions. Where do we start with respect to questions? The UK. Sorry, the presentation has been a bit long, Nishlin. Was it me or was it you? I'm not sure. Maybe both of us. Nish, you're probably going to have to come through here so that we can bet. Hey, Ruth.

Hi, Fani. We have a question coming through now.

Good morning, everyone. Alex Bowers from Barenburg. I have three questions for me. Number one, looking forward, can you talk a bit about your expectations for the economic environment in both the UK and South Africa? And what sort of underlying assumptions or base case you have used for your guidance? So that was the first one. Second one, on cost and investment, what areas of the business are you looking to focus your investment? And where are you looking at potentially control or cutback spending? And lastly, on Rathbones, how significant is the opportunity for client referrals between the two businesses? And sort of secondly, how will you look to manage integration risk?

Okay, let me take the last question and I'll leave the first two to Nishlin. We think the opportunity in Rathbones is pretty significant. You will know that over the last 18 months or so, from my existing activities within Investec, we have referred about 750 or so million of funds under management from the bank into wealth. With the enlarged breath bones, we obviously will be able to ramp up the work that we're doing. Ruth has been in touch already with Paul Stockton, and they've been working on ways to really ramp up our ability to do both. You will know that from their site, they've had Saunders and House, which focuses on the high net worth end of the market. And between those units and the bank, we have our teams working to make sure that we can realize that opportunity. So very excited about it. At the high net worth end, obviously, the bank will be able to service an enlarged client base. And we're quite confident that given our flexibility, given our entrepreneurial flair, given our closeness to clients, we will be able to offer banking services to the existing high net worth Rathbone clients. a client, so we're quite excited about the revenue opportunity. As we indicated at the time of the announcement, there will be other opportunities on the revenue side, but on the cost and integration side, We did a lot of work before we came to agreement with Rathbones on the combination. And we have indicated to you that we think there is 60 million pounds of identifiable synergy benefits. So we will be pursuing that. These identified benefits over the next little while, our degree of confidence in delivery of these benefits is particularly high. As you know, on the technology side, we were on our side going down the route of re-platforming with ObjectWay, and they have already gone down significantly on that path. So that is an area where you not only decrease risk and contain it, But you increase speed of execution as you take clients onto that particular platform. Regulation is a big issue within the financial services sector, in particular the wealth sector. Having this scale allows us to handle those issues with much ease. more capability. And I talked about many other benefits. I can refer you back to where we were. We see significant opportunity in the combination.

Nish? Yeah, I think on the economics, there's actually a slide that gives you the forward look, Alex. I'll refer you back to that slide. But broadly speaking, for the 2023 calendar year, we expect very subdued economic growth in South Africa. I think that's 0.2%. And from a UK perspective, around about I think in both geographies, we expect the GDP to improve as we look forward into 2024 and beyond. And that is, in a South African context, some of the constraints that we're quite deeply in right now should start relieving as we get into the 2024 financial year. And similarly, I think we have a projection of about 0.9% for economic growth in the UK for the 2024 financial year. With regard to costs, I think I've guided to the fact that we expect to remain at or around a cost to income ratio of 60%. We definitely expect some moderation to come through in costs as the inflation elements that have been absorbed you know, there's still elements that we've got to absorb, but that should start relieving itself. We'll continue to positively invest across our platforms because it's not an area that you can let up on. And I think as businesses grow, we will continue to grow with those businesses. But all of that is in the context of managing the platform to deliver an outcome of a cost to income ratio that is while within the 60% level.

Thanks, Nash. Again, as Karen Whelan, my colleague, will say, a tough economic environment affects everyone. Our responsibility is to out-compete the others because they face the same headwinds. So while the outlook for the economy is tough, we would hope that we can compete as effectively as possible. Alex, you had a go at three questions. Let's get the next one.

All from the UK, Fani. Thank you.

Thank you. Alex and Berenberg have been very helpful in helping us to try penetrate both certain aspects of the UK market, shareholder market, and Europe. So thank you for your support. Tash, where... Else do we go? Here. Oh, we're in the room. Really? I thought you were so happy with the dividend you were not going to ask a question. But let's go.

Thanks, Mr. Teething. The table on page 25 shows that the income yield on the property fund is a dash. In other words, nothing. On page 41, on your last remarks, you mentioned the internalization of the Investec property fund management company. Now, given the difficulties in the property market, what can you be doing in the future to improve the return on the income yield that currently is not being obtained? What are your plans specifically?

Thank you for the question. The property neighborhood is obviously very difficult, as you know. When you look across a number of these sectors, industrial, commercial, so on and so forth, and in particular in South Africa, given the problems around load shedding, costs have increased quite significantly. So going forward, We will be a shareholder. We won't be owning the management company. That is what the internalization achieves. So we will back That management team within IPF, as they roll out their strategy and they look, as you know, at the moment they have exposures in a number of interesting sectors in Europe, particularly in the logistics area. They do a lot of that work here. So we will support as a shareholder, not as people that... are responsible for management, we will support their activities. We have a high degree of confidence that they can navigate this current environment as other property companies, property funds, fund companies have had to do. It's been a difficult space, but I don't want to steal their thunder. I think they are in this room in the afternoon to answer these questions, but we'll be a supportive shareholder. But your observations are spot on.

Mr. Titi, I still fail to see how your support is going to enhance an income yield.

As I say, we are no longer going forward not responsible for that management. I think it would be inappropriate for me to say what Andrew Willer should be doing. I can arrange a meeting for him with you, but I can't talk for another listed company given that they are separate. I have to respect those boundaries. I know I'm sounding defensive. I don't intend to be, but I think it's a protocol we have to respect.

Are you off, Nish?

Can we get Nish back on?

Are we back on? All right. I think just to note that over time, we have had good dividend yield from the platform and continue to experience good dividend yield in the underlying numbers. The problem with the way we represent it in our accounts is it's consolidated. So what you also have is a fair amount of movement in valuations that offsets this flow. And that's particularly elevated in this current period. But that's accounting.

Andrew will be happy to take you a bit further into it. Thank you. Any more questions from Johannesburg? You can always count on Rudy for a bouncer, right? Any more questions? Shall we go to the chorus call? I'm sure we'll get a question from Chris Stewart. Is he on the call? He's not, okay. Okay.

There are no questions on the conference call at this moment.

No questions. Sounds like you've got off on the easy side, Micheline. Cool. Let me thank you all for your interest in this business.

Sorry, funny, we've got some on the webcast.

Okay. My predecessor, Stephen Kosev, says to me, Don't invite a question when you get to the end of the presentation. Just close and move on. I'm sure Stephen will laugh that I was just about to close it off.

We've got four questions, Bonnie.

Thank you.

So Chris Stewart has got two. Given that policy rates in FY24 could easily be 11.5% in SA versus 9.4% in FY23, and 4.5% in the UK versus 2.3% in FY23, would it be fair to say that the group is likely to experience significant NII run rate tailwinds once again in FY24?

You're honest to answer that. We've given a sense of sensitivity around interest rates. Obviously, we've given an outlook of how we see interest rates. For every 25 BIPs in the UK, there's about 13.7 million or so million pounds of interest income. And for every 25 BIPs movement in SA, the equivalent number, I think, is 107 million rand. So that we were happy to disclose, but we won't guess where those rates will be other than what we have forecast in terms of our economic outlook.

Given the very volatile environment for asset markets, what gives you the confidence to grow fund finance advances by mid-teens in both geographies?

We are specialists in what we do, very close to our clients, and we continue to work very closely with our clients. The numbers that you are talking to are obviously historical. They may well be if the level of of economic activity continues to constrain a moderation of growth. I think we have indicated that whether you talk about mortgage growth in the UK, that there has been a level of moderation. Despite that moderation, we are comfortable that we could give you the kind of outlook that we have given because we are well positioned in fund finance in the UK and here. In fact, while I was sitting here listening to this, Rich was whispering in my ear that we should be able to do more in this space.

Okay, Stefan Fortkipper from UBS. Having largely executed the announced buyback and the set one ratio in SA is still high at 14.7%, are you considering an extension of the buyback?

Look, we have very difficult market environments. We have been very decisive in dealing with... the current buyback program of 7 billion. We still have some way to go, but we don't want to rush the gully. Both with respect to buybacks and performance targets, we want to give ourselves time to see how this volatile environment settles. And at the right time, we'll talk to the market again. But we're very comfortable with where we are and pleased, actually, that having spent 5.5 billion rand on buybacks, we still have that elevated level of CET1 ratio. In these times, liquidity, capital, and a people that can navigate an environment and a proximity to clients, really, really, really important.

Final question, Connie.

Nisha, you have to work. Nisha's sitting and letting me bet through. Final question here.

Final question from Risk Insights. It's great to see an increased level of commitments made on the sustainability side. Currently, of Scope 3 emissions for 2022, around 15% of total emissions. Is there a plan to competitively position Investec by measuring Scope 3 more effectively?

As I said in the presentation, we took a leap of faith because we believe in this issue of sustainability and climate change. And we went out with a baseline. We are learning a lot more and doing a lot more across the organization. And when we report at the end of the year, you will see what progress we have made. But we are quite committed. to this space. And as we said in the presentation, there's a lot more to do in this space. There are significant opportunities, but there are risks as well, because we don't ever want to be accused as either greenwashing or not being accurate in the measurements that we put out. So lots more work in this space. Pleased with progress, but definitely understanding that there's lots more work. You said that was the last question, right? Okay, let's go back to the script then. Let me thank you again for your interest in the business and for your participation in this year-end results presentation. We are in tough markets, but we love the position that we have. And our people are excited about the opportunity to compete in the market, to stay close to clients and to continue to create enduring worth. Thank you very much.