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Investec Plc LSE:INVP London Ordinary Share GB00B17BBQ50 ORD GBP0.0002
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Investec PLC Half-year Report to 30 September 2020

19/11/2020 7:00am

UK Regulatory (RNS & others)


TIDMINVP

RNS Number : 7986F

Investec PLC

19 November 2020

 
 Investec Limited                         Investec plc 
  Incorporated in the Republic of South    Incorporated in England and Wales 
  Africa                                   Registration number 3633621 
  Registration number 1925/002833/06       LSE share code: INVP 
  JSE share code: INL                      JSE share code: INP 
  NSX share code: IVD                      ISIN: GB00B17BBQ50 
  BSE share code: INVESTEC 
  ISIN: ZAE000081949 
 

Investec plc and Investec Limited - Reviewed combined consolidated financial results for the six months ended 30 September 2020

Basis of presentation

This announcement covers the results of Investec plc and Investec Limited (together "the Investec group" or "Investec" or "the group") for the six months ended 30 September 2020 (1H2021). Following the group's demerger of Investec Asset Management (now Ninety One) in March 2020, the group's results for the six months ended 30 September 2019 have been restated to reflect the asset management business as a discontinued operation. Unless stated otherwise, comparatives relate to the group's continuing operations for the six-month period ended 30 September 2019 (1H2020). The comparability of 1H2021 to the prior period is impacted by the economic effects of COVID-19 which prevailed over the period under review.

Fani Titi, Chief Executive commented:

"The first half of the financial year has been characterised by difficult and volatile market and economic conditions attributed primarily to COVID-19. As a result, group adjusted operating profit of GBP142.5 million was 48.4% behind the prior period and adjusted basic earnings per share of 11.2p was 50.0% behind the prior period, albeit ahead of pre-close guidance. We are encouraged by the resilience of our loan book, the performance of our core franchises against a tough backdrop and progress made on our strategic objectives. Tangible net asset value per share increased by an annualised 10.4% and a dividend of 5.5p has been declared .

I would like to thank my Investec colleagues for their commitment through the first half of an unprecedented year - all have risen to the challenge, shown resilience, and continued to deliver the same high level of client engagement and service for which Investec is well known. We also thank our clients for their continued support as well the members of our communities on the frontlines for their efforts in curtailing the impact of the pandemic.

We entered this crisis from a position of strength and continue to have a strong capital, funding and liquidity position, leaving us well placed, both operationally and financially, to navigate this evolving environment for the benefit of our clients and other stakeholders."

Financial performance

Over the period, we operated within a challenging economic backdrop, impacted by COVID-19 and associated lockdowns particularly in the first three months. This resulted in reduced economic activity and increased market volatility. Interest rates were sharply lower, client activity declined, and the average Rand against the Pound Sterling depreciated 20.6% compared to the prior period.

-- Resilient client franchises: Wealth & Investment reported net inflows of GBP336 million and growth in funds under management (FUM) of 14.9% since 31 March 2020 to GBP51.1 billion. The Specialist Banking business saw good client acquisition in both geographies. Net core loans grew 1.0% since 31 March 2020 to GBP25.2 billion, with strong loan book growth in the UK Private Banking business offset by subdued corporate lending activity in both geographies and higher repayments. Our client engagement has been consistent and proactive, leveraging off the various digital platforms at our disposal.

-- Operating income: Total revenue declined by 24.0% (17.8% in neutral currency) compared to 1H2020. Net interest income decreased by 15.6% impacted primarily by lower interest rates. Non-interest revenue declined by 30.7% impacted by lower lending fees, subdued client transactional activity, and lower investment and associate income. Risk management and risk reduction costs related to hedging our structured products book resulted in trading income declining by 100.6%. We have and will continue to take active steps to de-risk the profile of this book.

-- Costs: Operating costs decreased by 14.0% (8.1% in neutral currency) driven by headcount containment, lower variable remuneration and a reduction in discretionary expenditure. Notwithstanding this reduction in costs, we continued to invest in growth initiatives and in technology.

-- Asset quality: The group's annualised credit loss ratio (CLR) increased from 0.23% (1H2020) to 0.47% (1H2021), below the annualised 2H2020 CLR of 0.74%. Increased CLRs were largely model-driven with an absolute expected credit loss (ECL) impairment charge of GBP66.0 million (1H2020: GBP31.0 million).

-- Operating profit: Adjusted operating profit was down 48.4% to GBP142.5 million (1H2020: GBP276.3 million).

-- Earnings per share: Adjusted basic earnings per share decreased by 50.0% to 11.2p (1H2020: 22.4p) and basic earnings per share declined by 49.5% to 9.6p (1H2020: 19.0p).

-- Return on Equity (ROE): The group generated an ROE of 5.3% (1H2020: 10.7%) and a return on tangible equity (ROTE) of 5.8% (1H2020: 11.8%).

-- Robust capital and liquidity: At 30 September 2020, the common equity tier 1 (CET1) capital and leverage ratios were 11.6% and 7.0% respectively for Investec Limited (FIRB approach) and 10.7% and 7.8% respectively for Investec plc (standardised approach). Cash and near cash was GBP12.9 billion at 30 September 2020, representing 39.5% of customer deposits. Capital, leverage and liquidity ratios remain ahead of both internal board-approved minimum targets and regulatory requirements.

-- Growth in net asset value: At 30 September 2020, net asset value (NAV) per share increased by 4.6% to 433.5p (31 March 2020: 414.3p) and tangible NAV (TNAV) per share increased by 5.2% to 397.4p (31 March 2020: 377.6p).

Supporting our people, clients and communities

As a group, we have taken decisive action in supporting our stakeholders through the economic and social impact of the pandemic.

With a large proportion of staff continuing to work from home, we are prioritising staff wellbeing and encouraging a flexible approach to working.

We have provided various forms of relief to our clients. Currently 6.3% of UK and 2.2% of South Africa's loans are under some form of relief. At the peak, this was 13.7% and 23.0% respectively. In addition, through the income generated in our Private Client Charitable Trusts, we have facilitated over R20 million in donations on behalf of clients.

For our communities, we have committed GBP3.6 million (64% allocated to date) to support the communities we live in with food security, economic continuity, healthcare, education and anti-gender-based violence-related assistance.

Dividend

The group endorses the objectives of guidance note G4/2020 from the Prudential Authority (PA) in South Africa and the recommendations of the UK Prudential Regulation Authority (PRA) in relation to the preservation of capital. The group did not declare a final divided in relation to the March 2020 financial year. Having considered the objectives of guidance note G4/2020 and ensuring prudence in terms of capital retention in our banking businesses, the group has declared an interim dividend of 5.5p (49.1% payout ratio).

Outlook and guidance

We expect the overall performance in 2H2021 to be ahead of the first half; underpinned by improving revenue trends relative to 1H2021 as client activity levels improve and liability repricing aids net interest income. Trading income from client flow will continue to be negatively impacted by risk management and risk reduction costs on hedging our structured products book. Costs are expected to decline by mid to high single digits for the full 2021 financial year compared to the prior year. Assuming no further deterioration in the macro-economic variables applied, we expect to report lower ECL provisions for the remaining six months of the year.

This guidance is subject to assumptions, which if altered, may result in a different financial performance compared to management expectations.

While the impact of COVID-19 has been felt across our business and the outlook is still uncertain, we remain confident in the fundamentals of our business and in our long-established client relationships. We have continued to make progress against our strategic objectives, positioning the business for growth in the long term, and expect to substantially complete our simplification process by the end of the financial year. As previously communicated, FY2022 targets remain under review.

 
                                                                                Neutral 
Financial highlights -                                                   %     currency 
 continuing operations(1)           1H2021     1H2020  Variance     change     % change 
-------------------------------  ---------  ---------  --------  ---------  ----------- 
Total operating income 
 before expected credit 
 losses                          729.0      959.3       (230.3)    (24.0%)      (17.8%) 
Operating costs                  535.8      623.1        (87.3)    (14.0%)       (8.1%) 
Adjusted operating profit 
 (GBP'm)                         142.5      276.3       (133.8)    (48.4%)      (40.9%) 
Adjusted earnings attributable 
 to shareholders (GBP'm)         104.4      212.3       (107.9)  (50.8%)      (43.4%) 
Adjusted basic earnings 
 per share (pence)                11.2       22.4        (11.2)  (50.0%)      (42.4%) 
Basic earnings per share 
 (pence)                           9.6       19.0         (9.4)  (49.5%)      (41.1%) 
Dividend per share (pence)(2)      5.5       11.0 
Dividend payout ratio(2)          49.1%      38.1% 
Annualised CLR (credit 
 loss ratio)                      0.47%      0.23% 
Cost to income ratio              72.0%      67.0% 
ROE (return on equity)             5.3%      10.7% 
ROTE (return on tangible 
 equity)                           5.8%      11.8% 
-------------------------------  -----      -----      --------  ---------  ----------- 
 
 
                                                                                      Neutral 
                                  30 September    31 March                           currency 
                                          2020        2020  Variance    % change     % change 
------------------------------  --------------  ----------  --------  ----------  ----------- 
Third party funds under 
 management (GBP'bn)                 52.0         45.0           7.0    15.5%       14.6% 
Customer accounts (deposits) 
 (GBP'bn)                            32.6         32.2           0.4     1.0%       (0.3%) 
Core loans and advances 
 (GBP'bn)                            25.2         24.9           0.3     1.0%       (0.4%) 
Cash and near cash (GBP'bn)          12.9         12.7           0.2     1.4%          -% 
CET1 ratio - Investec Limited        11.6%        10.9% 
Leverage ratio(3) - Investec 
 Limited                              7.0%         6.4% 
CET1 ratio - Investec plc            10.7%        10.7% 
Leverage ratio(3) - Investec 
 plc                                  7.8%         7.8% 
NAV per share (pence)               433.5        414.3          19.2     4.6%        4.7% 
TNAV per share (pence)              397.4        377.6          19.8     5.2%        5.3% 
------------------------------  ---------  ---  ------      --------  ------      ------ 
 

1. Refer to the Notes for definitions. Continuing operations excludes the results of the asset management business (which was demerged in March 2020) from the comparative period, but includes the equity accounted earnings of the group's 25% retained stake in 1H2021.

2. The 1H2020 dividend per share and dividend payout ratio reflected above were prior to the demerger of the asset management business (Ninety One).

   3.      Current Leverage ratios calculated on an end quarter basis. 

Enquiries

Investec Investor Relations

Results: Carly Newton: +44 (0) 20 7597 4493

General enquiries: +27 (0) 11 286 7070 or +44 (0) 20 7597 5546

Brunswick (SA PR advisers)

Graeme Coetzee

Tel: +27 11 502 7419 / +27 63 685 6053 (mobile)

Lansons (UK PR advisers)

Tom Baldock

Tel: +44 (0) 20 7566 9716 / +44 (0) 78 6010 1715 (mobile)

Presentation/conference call details

A presentation on the results will commence at 9:00 UK time/11:00 SA time on 19 November 2020. Viewing and telephone conference options as below:

   --     A live and delayed video webcast at www.investec.com 
   --     Telephone conference: 
   --     SA participants: 010 201 6700/011 535 3500/0 800 203 599 
   --     UK participants: 0 333 300 1417 
   --     Rest of Europe and other participants: +27 11 535 3500/+27 10 201 6700 
   --     Australian participants: 02 8015 2168 
   --     North American participants: 1 508 924 4325 

Alternatively, participants can pre-register for the conference call using the following link: www.investec.com/call

About Investec

Investec partners with private, institutional, and corporate clients, offering international banking, investments, and wealth management services in two principal markets, South Africa, and the UK, as well as certain other countries. The group was established in 1974 and currently has approximately 8,500 employees.

In 2002, Investec implemented a dual listed company structure with listings on the London and Johannesburg Stock Exchanges. In March 2020, the group successfully completed the demerger of Ninety One (formerly known as Investec Asset Management), which became separately listed on 16 March 2020. Investec's current market capitalisation is approximately GBP2.0 billion.

Johannesburg and London

Sponsor: Investec Bank Limited

Business overview

The commentary and trends that follow relate to Investec's continuing operations for the six months ended 30 September 2020 (1H2021). Unless stated otherwise, comparatives relate to the group's continuing operations for the six-month period ended 30 September 2019 (1H2020). The comparability of 1H2021 to the prior period is impacted by the economic effects of COVID-19 which prevailed over the period under review.

Giving consideration to the group's investment in Ninety One and other significant investments (previously included as a subset of the Specialist Bank) and in an effort to provide enhanced disclosure, the group's business segments have been revised to reflect each of the following as reportable segments across the UK & Other and Southern African geographies: Specialist Banking, Wealth & Investment, Group Investments and Group Costs.

Operating environment

At the onset of the COVID-19 crisis, we witnessed a proactive response from the South African government including the decision to implement one of the strictest lockdowns globally. This, coupled with decades-low interest rates (300bps rate cuts since January 2020), had a considerable impact on the South African business' financial performance. The South African economy also saw little equity capital market activity relative to its developed counterparts. In addition, rising debt to GDP, lack of structural reform, policy uncertainty, and resultant depressed business confidence continue to be headwinds, making for a challenging operating environment.

In the UK, at the group's financial year end we reported that Brexit, heightened UK political uncertainty and geopolitical tensions sparked by US trade wars had adversely impacted activity levels, making the operating environment very challenging. In addition, at that time, the UK was in the grips of a national lockdown imposed because of the COVID-19 global pandemic. Over the past six months, these difficulties have persisted; exacerbated by the economic crisis resulting from COVID-19 containment measures.

Segmental performance

Specialist Banking

Adjusted operating profit from the Specialist Banking business decreased by 52.9% to GBP105.8 million (1H2020: GBP224.8 million).

 
Specialist Banking                  Southern Africa                              UK & Other 
                     ---------------------------------------------- 
                      1H2021   1H2020            Variance             1H2021   1H2020      Variance 
                                       ----------------------------                    ----------------- 
                                                               % in 
                       GBP'm    GBP'm   GBP'm          %      Rands    GBP'm    GBP'm   GBP'm          % 
-------------------  -------  -------  ------  ---------  ---------  -------  -------  ------ 
Operating income       262.8    346.8  (84.1)  (24.2%)     (8.7%)      273.8    347.1  (73.3)  (21.1%) 
ECL impairment 
 charges              (24.2)   (14.9)   (9.3)   62.3%      95.8%      (39.9)   (16.1)  (23.8)    >100.0% 
Operating costs      (145.6)  (186.6)    40.9  (21.9%)     (6.0%)    (221.5)  (251.6)    30.1  (12.0%) 
(Profit)/loss 
 attributable 
 to NCI                    -        -       -      -          -          0.5      0.1     0.5    >100.0% 
Adjusted operating 
 profit                 92.9    145.3  (52.5)  (36.1%)    (22.9%)       12.9     79.4  (66.5)  (83.8%) 
-------------------  -------  -------  ------  -----      -----      -------  -------  ------  ----- 
 

Totals and variance determined in GBP'000.

Southern Africa Specialist Banking

The South African business reported a decrease in adjusted operating profit of 22.9% in Rands. Client engagement has been proactive, resulting in good client acquisition across both our private and corporate client business over the period. While client activity was significantly impacted in the first quarter during the hard lockdown, in the second quarter, as lockdown measures eased, we saw increased point of sale and stockbroking activity along with a marked pick-up in demand for residential mortgages.

Notwithstanding this, net interest income decreased by 6.9% in Rands driven by the 300bps rate cut since January 2020 and assets repricing at a faster rate than liabilities. Non-interest revenue declined 13.7% in Rands. An increase in trading income was offset by subdued lending and transactional activity compared to the prior period and lower investment income as a result of lower realisations, dividend income and negative fair value adjustments given the prevailing economic backdrop.

ECL impairment charges increased, resulting in an annualised CLR of 0.35% (1H2020: 0.18%), below the annualised 2H2020 CLR of 0.55%. The increase since 31 March 2020 was driven primarily by updated assumptions applied in our models to capture the deterioration in macro-economic variables since year end.

Operating costs reduced by 6.0% in Rands period on period reflecting lower variable remuneration and cost containment across the business. However, a decline in revenues resulted in a cost to income ratio of 55.4% (1H2020: 53.8%).

Net core loans decreased by 1.6% since year end to R284.4 billion (31 March 2020: R288.9 billion). Private client lending held steady compared to 31 March 2020 while the corporate client lending book declined due to higher repayments and lower net new originations as corporates remained cautious.

Against this challenging backdrop, the business achieved an ROE and ROTE of 9.1% and 9.2% respectively relative to 13.5% and 13.6% at 30 September 2019.

UK & Other Specialist Banking

Adjusted operating profit for the overall UK & Other Specialist Bank declined by 83.8% to GBP12.9 million (1H2020: GBP79.4 million). Increased equity capital markets activity and good levels of lending turnover across private client and certain corporate client lending areas was offset by hedging costs related to our structured products book. These hedging costs contributed GBP53 million to the profit reduction of GBP66.5 million.

Our client franchises have shown resilience notwithstanding the two months of hard lockdown at the start of the reporting period. The private client banking business saw good origination and client acquisition. The mortgage book ended the half year on GBP2.8 billion, an increase of 10.8% since 31 March 2020. Net new client origination was c.8%, moving us closer to our target of at least 6,500 high net worth clients by March 2022 (c.5,400 clients at 30 September 2020).

Net interest income declined by 2.1% with growth in average core loans offset by lower interest rates. Non-interest revenue decreased by 43.5% as the recovery in equity capital market fees and an improvement in investment income was offset by lower lending fees and risk management and risk reduction costs associated with hedging our structured products book following market dislocation and dividend cancellations. We anticipate a similar level of risk management and risk reduction costs in the second half of the 2021 financial year in particular, as we continue to reduce the risk on the book. Risk reduction costs include the purchase of protection against a repeat of the severe market moves experienced in March and April 2020. For the 2022 financial year we expect risk management and risk reduction costs to be less than half of that anticipated in the current financial year, and progressively reducing in the 2023 financial year. This guidance is subject to assumptions, which if altered, may result in a different outcome to management expectations.

ECL impairment charges increased, resulting in an annualised CLR of 0.60% (1H2020: 0.28%), below the annualised 2H2020 CLR of 0.97%. The increase since 31 March 2020 was driven primarily by updated assumptions applied in our models to capture the deterioration in macro-economic variables since year end.

Operating costs decreased by 12.0% period on period primarily reflecting lower variable remuneration and a strong focus on cost discipline. As indicated in our pre-close trading announcement, we are enhancing efficiencies by more closely integrating business-enabling functions, resulting in a proposed headcount reduction in the UK banks' London office by approximately 210 roles or 13%.

Net core loans grew by 0.9% to GBP12.0 billion (31 March 2020: GBP11.9 billion) with strong growth in mortgages and other high net worth lending offset by a net book reduction in corporate and other lending. While there was good activity in some parts of the corporate space, particularly in fund finance, redemptions largely offset this.

The cost to income ratio of 80.7% (1H2020: 72.5%), ROE of 0.7% (1H2020: 9.0%) and ROTE of 0.8% (1H2020: 9.1%) were impacted by the foregoing factors.

Wealth & Investment

Adjusted operating profit from the Wealth & Investment business decreased by 8.2% to GBP40.8 million (1H2020: GBP44.5 million).

 
Wealth & Investment                Southern Africa                           UK & Other 
                      1H2021  1H2020           Variance            1H2021   1H2020     Variance 
                                                            % in 
                       GBP'm   GBP'm  GBP'm          %     Rands    GBP'm    GBP'm  GBP'm         % 
--------------------  ------  ------  -----  ---------  --------  -------  -------  ----- 
Operating income        36.5    43.4  (7.0)  (16.1%)     1.0%       155.1    162.3  (7.2)  (4.4%) 
Operating costs       (24.5)  (29.4)    4.9  (16.6%)     0.4%     (126.2)  (131.8)    5.6  (4.3%) 
Adjusted operating 
 profit                 12.0    14.1  (2.1)  (14.9%)     2.3%        28.9     30.5  (1.6)  (5.2%) 
--------------------  ------  ------  -----  -----      ----      -------  -------  -----  ---- 
 

Totals and variance determined in GBP'000.

Southern Africa Wealth & Investment

Adjusted operating profit increased by 2.3% in Rands.

The South African business achieved net inflows of R478 million (R3.0 billion of discretionary and annuity inflows and non-discretionary custody asset outflows of R2.5 billion), which, together with favourable market movements, contributed to a 16.2% growth (in Rands) in FUM since year end. Revenue was supported by higher average discretionary and annuity FUM and increased levels of trading activity in the first quarter. Operating costs remained flat period on period translating to a lower cost to income ratio of 67.2% (1H2020: 67.7%).

UK & Other Wealth & Investment

Adjusted operating profit declined 5.2% to GBP28.9 million (1H2020: GBP30.5 million).

The UK Wealth & Investment business continued to report positive net organic growth in FUM over the period, with an annualised rate of growth of 1.9% - in line with the first half of the prior period. Net inflows of GBP315 million, along with favourable market movements and investment performance, contributed to FUM increasing by 13.4% since the start of the financial year. Operating income, down 4.4% on the prior period, was impacted by lower FUM at key billing dates relative to the prior period, the sale of the Irish wealth business in 2H2020 as well as lower interest rates; partly offset by an increase in transaction volumes.

Operating costs reduced by 4.3% or GBP5.6 million to GBP126.2 million, despite incurring once-off headcount reduction related costs and a GBP2.3 million increase in the Financial Services Compensation Scheme (FSCS) levy (1H2020: GBP3.8 million). The cost to income ratio was 81.4% (1H2020: 81.2%).

Group Investments

Group Investments represents assets held by Investec to create value over the medium term as opposed to trading assets. We have separated these assets from our core banking activities in order to make a more meaningful assessment of the underlying performance and value of the franchise businesses, and at the same time providing transparency of the standalone values of the assets classified as Group Investments.

They include the group's 25% holding in Ninety One, 47.4% stake in the IEP Group, 24.31% held in the Investec Property Fund (IPF), 9.1% holding in the Investec Australia Property Fund (IAPF) and some historical unlisted equity investments.

Adjusted operating profit from Group Investments decreased 56.3% to GBP13.2 million (1H2020: GBP30.3 million).

 
Group Investments                       Southern Africa                              UK & Other 
                       1H2021  1H2020              Variance               1H2021  1H2020      Variance 
                        GBP'm   GBP'm   GBP'm            %    % in Rands   GBP'm   GBP'm  GBP'm          % 
---------------------  ------  ------  ------  -----------  ------------  ------  ------  ----- 
Operating income 
 (net of ECL charges)  (12.7)    59.6  (72.4)    (>100.0%)     (>100.0%)    11.8       -   11.8  100.0% 
Operating costs         (0.6)   (0.4)   (0.2)     34.9%         62.5%          -       -      -      - 
(Profit)/loss 
 attributable 
 to NCI                  14.7  (28.9)    43.7    (>100.0%)     (>100.0%)       -       -      -      - 
Adjusted operating 
 profit                   1.4    30.3  (28.8)    (95.3%)       (94.5%)      11.8       -   11.8  100.0% 
---------------------  ------  ------  ------  -------      --------      ------  ------  -----  ----- 
 

Totals and variance determined in GBP'000.

The positive impact from the inclusion of the equity accounted earnings from the group's 25% stake in Ninety One and the mark-to-market on the group's holding in IAPF was offset by:

-- muted rental collections and a decline in investment property valuations (particularly in the South African portfolio) experienced by IPF

-- a reduction in the share of post taxation profit from IEP as some of its subsidiaries were unable to trade during the COVID-19 hard lockdown and a realisation in the prior period was not repeated

-- negative mark-to-market adjustments on interest rate hedge positions in IPF and currency hedges related to the group's investment in IAPF.

Group Investments reported an ROE of 5.6% (1H2020: 13.5%).

Group Costs

Group costs decreased by 25.5% to GBP17.3 million (1H2020: GBP23.3 million). As indicated at year end, we expect group costs in FY2021 to be below GBP35 million.

Further information on key developments within each of the business units is provided in the group interim report published on the group's website: http://www.investec.com.

Performance by geography

 
                                                                         Neutral 
                                                                        currency 
                                       1H2021    1H2020    % change     % change 
                                     --------  --------  ----------  ----------- 
Investec Limited (Southern Africa) 
Adjusted operating profit (GBP'm)        99.1     182.2   (45.6%)      (34.3%) 
Cost to income ratio                 58.7%     53.2% 
ROE                                   8.1%     13.5% 
ROTE                                  8.1%     13.7% 
 
Investec plc (UK & Other) 
Adjusted operating profit (GBP'm)        43.4      94.1   (53.9%)            n/a 
Cost to income ratio                 81.1%     78.3% 
ROE                                   2.8%      7.5% 
ROTE                                  3.3%      9.2% 
-----------------------------------  ----      ----      ----------  ----------- 
 

Overview of financial performance

Total operating income before expected credit loss impairment charges

Total operating income before expected credit losses decreased 24.0% to GBP729.0 million (1H2020: GBP959.3 million) pointing to the impact of the economic challenges driven by COVID-19.

-- Net interest income decreased 15.6% to GBP359.4 million (1H2020: GBP425.6 million) impacted by the endowment effect from interest rate cuts, assets repricing ahead of liabilities and limited loan book growth which remains below pre-COVID-19 levels. This resulted in a reduction in net interest margin of 41bps to 1.60% for the South African business and 25bps to 1.77% for the UK business.

-- Net fee and commission income declined 17.9% to GBP324.8 million (1H2020: GBP395.7 million). Fees in the Wealth & Investment business declined moderately by 3.5% impacted by the sale of the Irish wealth business in 2H2020, lower UK FUM at key billing dates and Rand weakness (fees in the South African business were up in Rands but down in Pounds Sterling on the prior period). Fees in the Specialist Banking business were impacted primarily by lower lending and transactional activity, while Group Investment fees reflected lower rental income from IPF.

-- Investment income decreased 70.5% to GBP16.9 million (1H2020: GBP57.1 million) primarily reflecting the negative impact of COVID-19 on investment property valuations in IPF.

-- Share of post taxation profit of associates and joint venture holdings of GBP16.3 million (1H2020: GBP17.8 million) was positively impacted by the inclusion of associate earnings from the group's 25% holding in Ninety One, offset by lower earnings from the IEP Group due to lockdown and the non-repeat of a realisation in the prior period, as well as negative fair value adjustments in IPF's UK associate investment.

-- Trading income arising from customer flow netted a loss of GBP8.5 million relative to a profit in the prior period of GBP62.8 million. Risk management and risk reduction costs on hedging our structured products book following the market dislocation and dividend cancellations was the major driver of the loss.

-- Trading income arising from balance sheet management and other trading activities increased from a loss of GBP2.3 million in 1H2020 to a profit of GBP8.1 million for the period under review. The gain was driven primarily by the UK Specialist Bank where asset values improved following the extreme COVID-19 related volatility in the last quarter of FY2020.

-- Other operating income of GBP12.0 million (1H2020: GBP2.6 million) primarily reflects the fair value movements of the Ninety One shares held in the group's staff share scheme as a result of the demerger and separate listing of Ninety One, whereby shareholders received one Ninety One share for every two Investec shares held. These shares are reflected on the group's balance sheet in Other assets. The equal and corresponding liability is reflected in Other liabilities with changes in the value of the liability expensed through staff costs in operating costs.

Expected credit loss (ECL) impairment charges

Impairments increased to GBP66.0 million (1H2020: GBP31.0 million) and the annualised CLR was up from 0.23% for 1H2020 to 0.47% in the current period. The increase was primarily driven by updated macro-economic scenarios applied in our models. The group revised its macro-economic assumptions during the period with material downward revisions to key forecasted economic variables.

As mentioned earlier in the announcement, we have provided various forms of relief on request from some of our clients. At 30 September 2020, 9.0% of UK and 3.3% of South Africa's loan book was under some form of relief.

In South Africa, the Stage 1 coverage ratio increased to 0.5% (31 March 2020: 0.4%) driven by a higher forward-looking IFRS 9 provision build. Stage 2 and Stage 3 coverage ratios declined to 2.4% (31 March 2020: 2.8%) and 33.0% (31 March 2020: 42.1%) respectively. The decrease in Stage 2 coverage was driven primarily by certain counterparties with a high coverage ratio which migrated to Stage 3, while the decrease in Stage 3 coverage relates to the mix impact of some deals written off and some highly secured counters moving into Stage 3.

In the UK, the Stage 1 coverage ratio reduced to 0.3% (31 March 2020: 0.4%). The Stage 2 coverage ratio reduced to 3.4% (31 March 2020: 5.4%) as a significant proportion of the exposures that migrated into Stage 2 were from lower risk exposures, transferred into Stage 2 based on the deteriorating forward-looking view on their credit performance under current macro-economic expectations rather than specific credit concerns. The Stage 3 coverage ratio also declined to 26.7% (31 March 2020: 28.2%), and similarly to South Africa, related to the mix impact of deals written off relative to a few new highly collateralised deals migrating from Stage 2.

Operating costs

In line with our strategic objective to contain costs, management reduced the cost base for the six months ended 30 September 2020 by 14.0% to GBP535.8 million (1H2020: GBP623.1 million), driven by headcount containment, lower variable remuneration and a reduction in discretionary expenditure. However, due to lower revenues the cost to income ratio increased to 72.0% (1H2020: 67.0%).

Taxation

The taxation charge on adjusted operating profit from continuing operations was GBP20.9 million (1H2020: GBP41.5 million), resulting in an effective tax rate of 18.8% (1H2020: 14.4%). The increase was due to normalisation of the effective tax rate in South Africa.

Profit or loss attributable to other non-controlling interests

The loss attributable to other non-controlling interests of GBP15.3 million (1H2020: profit of GBP28.9 million) relates to the loss attributable to non-controlling interests in IPF.

Discontinued operations

There were no discontinued operations in the first half of the 2021 financial year. Discontinued operations in the comparative period reflect the asset management business which was demerged and separately listed as Ninety One in March 2020.

Basic EPS from continuing and discontinued operations was 9.6p, down 61.1% on the prior period (1H2020: 24.7p).

Earnings from the group's 25% holding in Ninety One in the current period have been equity accounted and included in share of post taxation profit of associates and joint venture holdings within continuing operations.

Balance sheet analysis

Since 31 March 2020:

-- Ordinary shareholders' equity increased by 4.7% to GBP4.0 billion, mainly due to an increase in retained earnings.

-- NAV per share increased 4.6% to 433.5 pence and TNAV per share (which excludes goodwill, software, and other intangible assets) increased 5.2% to 397.4 pence.

-- The group's ROE decreased from 10.7% in 1H2020 to 5.3% and ROTE from 11.8% in 1H2020 to 5.8%.

-- Net core loans and advances growth was muted, up 1.0% to GBP25.2 billion since year end. The South African book declined 1.6% in Rands to R284.4 billion, while in the UK, net core loans grew 0.9% to GBP12.0 billion.

Funding and liquidity

Customer deposits grew 1.0% to GBP32.6 billion (31 March 2020: GBP32.2 billion). Cash and near cash of GBP12.9 billion (GBP6.2 billion in Investec plc and R143.2 billion in Investec Limited) at 30 September 2020 represents 39.5% of customer deposits. Loans and advances to customers as a percentage of customer deposits remained at 76.4%.

The group comfortably exceeds Basel liquidity requirements for the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR). Investec Bank Limited (consolidated group) ended the period to 30 September 2020 with the three-month average of its LCR at 164.1% and an NSFR of 113.9%. For Investec plc the LCR and NSFR are calculated using the relevant EU regulation, applying our own interpretations where required. The LCR reported to the PRA at 30 September 2020 was 335% and the internally calculated NSFR was 126% at 30 September 2020.

Capital adequacy and leverage ratios

The group maintained capital and leverage ratios ahead of both internal board-approved minimum targets and regulatory requirements. Capital ratios for Investec plc and Investec Limited are summarised in the table below.

The group targets a minimum CET1 ratio above 10%, a tier 1 ratio above 11% and a total capital adequacy ratio range of 14% to 17% on a consolidated basis for each of Investec plc and Investec Limited, respectively.

Investec Limited's application for conversion to the Advanced Internal Ratings Based (AIRB) approach remains under review by the South African Prudential Authority. Approval has been granted for Investec Limited to commence with its six month parallel run for certain AIRB models. Full conversion to AIRB is expected to result in a circa 2% uplift to the CET1 ratio.

 
                                          30 September 2020     31 March 2020 
                                       ----------------------- 
Investec plc(1)                         Standardised approach   Standardised 
                                                                   approach 
-------------------------------------  ----------------------- 
Total capital ratio                                      14.8%          14.9% 
Tier 1 ratio                                             12.4%          12.4% 
Common equity tier 1 ratio                               10.7%          10.7% 
Common equity tier 1 ratio ('fully 
 loaded'(3) )                                            10.2%          10.3% 
 
Leverage ratio (current)                                  7.8%           7.8% 
Leverage ratio ('fully loaded'(3) 
 )                                                        7.3%           7.4% 
Leverage ratio - current UK leverage 
 ratio framework(4)                                       8.7%           8.9% 
 
Investec Limited(2)                         FIRB approach       FIRB approach 
                                       ----------------------- 
Total capital adequacy ratio                     15.5%                  15.0% 
Tier 1 ratio                                             12.2%          11.5% 
Common equity tier 1 ratio                       11.6%                  10.9% 
Common equity tier 1 ratio ('fully 
 loaded'(3) )                                    11.6%                  10.9% 
 
Leverage ratio (current)                                  7.0%           6.4% 
Leverage ratio ('fully loaded'(3) 
 )                                                        6.9%           6.3% 
-------------------------------------  -----------------------  ------------- 
 

1 The capital adequacy disclosures follow Investec's normal basis of presentation to show a consistent basis of calculation across the jurisdictions in which the group operates. For Investec plc this does not include the deduction of foreseeable charges and dividends when calculating CET1 capital as required under the Capital Requirements Regulation and European Banking Authority technical standards. The impact of this deduction totalling GBP18 million for Investec plc (31 March 2020: GBP0) would lower the CET1 ratio by 12bps (31 March 2020: 0bps).

2 Investec Limited's capital information includes unappropriated profits. If unappropriated profits are excluded from the capital information, Investec Limited's CET1 ratio would be 36bps (31 March 2020: 24bps) lower.

3 The CET 1 fully loaded ratio and the fully loaded leverage ratio assume full adoption of IFRS 9 and full adoption of all CRD IV rules or South African Prudential Authority regulations, as applicable in the relevant jurisdictions. As a result of the adoption of IFRS 9 Investec plc and IBP elected to designate its subordinated fixed rate medium-term notes due in 2022 at fair value. By the time of full adoption of IFRS 9 in 2023, these subordinated liabilities will have reached final maturity and will be redeemed at par value. The remaining interest rate portion of the fair value adjustment at 30 September 2020 of GBP6 million (post-taxation), has therefore been excluded from the fully loaded ratios as it will be released into profit and loss over the remaining life of the instrument.

4 Investec plc is not subject to the UK leverage ratio framework, however for comparative purposes this ratio has been disclosed. This framework excludes qualifying central bank balances from the calculation of the leverage exposure measure.

Remuneration targets

Investec remains committed to setting stretching yet attainable targets, particularly in the current economic environment. In the group's 2020 integrated annual report it was noted that the group intended publishing the remuneration targets for the 2020 Long-Term Incentive award and the 2021 Short-Term Incentive ahead of the group's 2020 annual general meeting (AGM).

However, given the continuing uncertainty at that time, and in line with the guidance from the Investment Association, on 24 July 2020 the group announced its intention to delay the setting and disclosing of remuneration incentive targets until its interim results announcement for the six months ending 30 September 2020. The group consulted with shareholders on this matter.

Whilst there is still a high level of uncertainty relating to the full impact of COVID-19, the Committee has set what it believes are stretching yet attainable targets as outlined in the group's 2020 interim report.

On behalf of the boards of Investec plc and Investec Limited

 
Perry Crosthwaite    Fani Titi 
Chairman             Chief Executive 
18 November 2020 
 

Notes to the commentary section above

Presentation of financial information

Investec operates under a Dual Listed Companies (DLC) structure with primary listings of Investec plc on the London Stock Exchange and Investec Limited on the JSE Limited.

In terms of the contracts constituting the DLC structure, Investec plc and Investec Limited effectively form a single economic enterprise in which the economic and voting rights of ordinary shareholders of the companies are maintained in equilibrium relative to each other. The directors of the two companies consider that for financial reporting purposes, the fairest presentation is achieved by combining the results and financial position of both companies.

Accordingly, these interim results reflect the results and financial position of the combined DLC group under International Financial Reporting Standards (IFRS), denominated in Pounds Sterling. In the commentary above, all references to Investec or the group relate to the combined DLC group comprising Investec plc and Investec Limited.

Unless the context indicates otherwise, all comparatives included in the commentary above relate to the six months ended 30 September 2019.

Amounts represented on a neutral currency basis for income statement items assume that the relevant average exchange rates for the six months to 30 September 2020 remain the same as those in the prior period. Amounts represented on a neutral currency basis for balance sheet items assume that the relevant closing exchange rates at 30 September 2020 remain the same as those at 31 March 2020.

Neutral currency information is considered as pro-forma financial information as per the JSE Listings Requirements and is therefore the responsibility of the group's board of directors. Pro-forma financial information was prepared for illustrative purposes and because of its nature may not fairly present the issuer's financial position, changes in equity, or results of operations. The external auditors issued a limited assurance report in respect of the neutral currency information. The report is available for inspection at the registered office of Investec upon request.

Foreign currency impact

The group's reporting currency is Pounds Sterling. Certain of the group's operations are conducted by entities outside the UK. The results of operations and the financial position of the individual companies are reported in the local currencies in which they are domiciled, including Rands, Australian Dollars, Euros and US Dollars. These results are then translated into Pounds Sterling at the applicable foreign currency exchange rates for inclusion in the group's combined consolidated financial statements. In the case of the income statement, the weighted average rate for the relevant period is applied and, in the case of the balance sheet, the relevant closing rate is used.

The following table sets out the movements in certain relevant exchange rates against Pounds Sterling over the period:

 
                      Six months to       Year to       Six months to 
                      30 Sept 2020      31 Mar 2020     30 Sept 2019 
Currency 
                                      ------ 
per GBP1.00          Period           Period           Period 
                        end  Average     end  Average     end  Average 
-------------------                   ------ 
South African Rand    21.58    22.05   22.15    18.78   18.69    18.28 
Australian Dollar      1.80     1.85    2.03     1.87    1.82     1.82 
Euro                   1.10     1.12    1.13     1.15    1.13     1.13 
US Dollar              1.29     1.27    1.24     1.27    1.23     1.26 
-------------------  ------  -------  ------  -------  ------  ------- 
 

Accounting policies, significant judgements and disclosures

These reviewed condensed combined consolidated financial results have been prepared in terms of the recognition and measurement criteria of International Financial Reporting Standards, and the presentation and disclosure requirements of IAS 34, "Interim Financial Reporting".

The accounting policies applied in the preparation of the results for the six months to 30 September 2020 are consistent with those adopted in the financial statements for year ended 31 March 2020.

The effective date of the demerger of the asset management business was 13 March 2020 and admission of the Ninety One Limited shares and the Ninety One plc shares to the Johannesburg Stock Exchange and London Stock Exchange was effected on 16 March 2020. The global asset management business has been disclosed as a discontinued operation and the income statement for the prior period has been appropriately re-presented. Refer to the discontinued operations note for further detail.

Interest Rate Benchmark Reform (IBOR reform) Phase 2 amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Phase 2 of the IASB's IBOR project addresses the wider accounting issues arising from the IBOR reform. This was published in August 2020 and is awaiting endorsement. The amendments are effective for annual reporting periods beginning on or after 1 January 2021 with early application permitted. Conversion from LIBOR to alternative risk-free rates (RFRs) is expected to increase as RFR-based products become more widely available and key market-driven conversion events occur.

The combined consolidated financial results for the period ended 30 September 2020 have been reviewed by Ernst & Young LLP &

Ernst & Young Inc., who expressed an unmodified review conclusion. A copy of the auditors' review opinion is available for inspection at the company's registered office together with the financial statements identified in the auditors' report or on our website at www.investec.com

The financial results have been prepared under the supervision of Nishlan Samujh, the Group Finance Director. The financial statements for the six months ended 30 September 2020 are available on the group's website: http://www.investec.com

Proviso

-- Please note that matters discussed in this announcement may contain forward-looking statements which are subject to various risks and uncertainties and other factors, including, but not limited to:

- changes in the political and/or economic environment that would materially affect the Investec group

- changes in the economic environment caused by the resulting lockdowns and government programmes aimed to stimulate the economy

- changes in legislation or regulation impacting the Investec group's operations or its accounting policies

- changes in business conditions that will have a significant impact on the Investec group's operations

- changes in exchange rates and/or tax rates from the prevailing rates outlined in this announcement.

   -    changes in the structure of the markets, client demand or the competitive environment. 
   --     A number of these factors are beyond the group's control. 

-- These factors may cause the group's actual future results, performance or achievements in the markets in which it operates to differ from those expressed or implied.

-- Any forward-looking statements made are based on the knowledge of the group at 18 November 2020.

-- The information in the group's announcement for the six months ended 30 September 2020, which was approved by the board of directors on 18 November 2020, does not constitute statutory accounts as defined in Section 435 of the UK Companies Act 2006. The 31 March 2020 financial statements were filed with the registrar and were unqualified with the audit report containing no statements in respect of sections 498(2) or 498(3) of the UK Companies Act.

-- The financial information on which forward-looking statements are based is the responsibility of the directors of the group and has not been reviewed and reported on by the group's auditors.

This announcement is available on the group's website:

http://www.investec.com

Definitions

-- Total group represents the group's results including the results of discontinued operations in the prior period.

-- Adjusted operating profit refers to operating profit before goodwill, acquired intangibles and strategic actions and after adjusting for earnings attributable to other non-controlling interests. Trends within the divisional sections relate to adjusted operating profit before group costs. Adjusted operating profit is considered an important measure by Investec of the profit realised by the group in the ordinary course of operations. In addition, it forms the basis of the dividend payout policy. Non-IFRS measures such as adjusted operating profit are considered as pro-forma financial information as per the JSE Listings Requirements. The pro-forma financial information is the responsibility of the group's Board of Directors. Pro-forma financial information was prepared for illustrative purposes and because of its nature may not fairly present the issuer's financial position, changes in equity or results of operations. The external auditors issued a limited assurance report in respect of the pro-forma financial information. The report is available for inspection at the registered office of Investec upon request.

-- Adjusted earnings attributable to shareholders is defined as earnings attributable to shareholders before goodwill, acquired intangibles and strategic actions and after the deduction of earnings attributable to perpetual preference shareholders and Other Additional Tier 1 security holders.

-- Adjusted basic earnings per share is calculated as adjusted earnings attributable to shareholders divided by the weighted average number of ordinary shares in issue during the year.

-- Dividend payout ratio is calculated as the dividend per share divided by adjusted earnings per share.

-- The credit loss ratio is calculated as expected credit loss (ECL) impairment charges on gross core loans and advances as a percentage of average gross core loans and advances subject to ECL.

-- The cost to income ratio is calculated as: operating costs divided by operating income before expected credit loss impairment charges (net of operating profits or losses attributable to other non-controlling interests).

-- Return on average ordinary shareholders' equity (ROE) is calculated as adjusted earnings attributable to ordinary shareholders divided by average ordinary shareholders' equity.

-- Return on average tangible ordinary shareholders' equity (ROTE) is calculated as adjusted earnings attributable to ordinary shareholders divided by average tangible ordinary shareholders' equity.

-- Core loans and advances is defined as net loans and advances to customers plus net own originated securitised assets.

   --     NCI is non-controlling interests. 

Financial assistance

Shareholders are referred to Special Resolution number 3, which was approved at the annual general meeting held on 6 August 2020, relating to the provision of direct or indirect financial assistance in terms of Section 45 of the South African Companies Act, No 71 of 2008 to related or inter-related companies. Shareholders are hereby notified that in terms of S45(5)(a) of the South African Companies Act, the boards of directors of Investec Limited and Investec Bank Limited provided such financial assistance during the period 1 April 2020 to 30 September 2020 to various group subsidiaries.

Johannesburg and London

Sponsor: Investec Bank Limited

Exchange rates between local currencies and Pounds Sterling have fluctuated over the period. The most significant impact arises from the volatility of the Rand. The average Rand: Pound Sterling exchange rate over the period has depreciated by 20.6% against the comparative six month period ended 30 September 2019, and the closing rate has appreciated by 2.6% since 31 March 2020. The following tables provide an analysis of the impact of the Rand on our reported numbers.

 
                                       Results in Pounds Sterling                            Results in Rands 
                                                               Neutral 
                                                             currency^ 
                                    Six months              Six months      Neutral              Six months 
                      Six months         to 30                   to 30     currency  Six months       to 30 
Continuing                 to 30          Sept          %         Sept            %       to 30        Sept          % 
operations             Sept 2020         2019*     change         2020       change   Sept 2020       2019*     change 
--------------------              ------------  ---------               -----------              ---------- 
Adjusted operating 
 profit before 
 taxation (million)       GBP142        GBP276  (48.4%)         GBP163    (40.9%)        R3 143      R5 045  (37.7%) 
Earnings 
 attributable 
 to shareholders 
 (million)                GBP109        GBP202  (46.2%)         GBP126    (40.0%)        R2 405      R3 692  (34.9%) 
Adjusted earnings 
 attributable to 
 shareholders 
 (million)                GBP104        GBP212  (50.8%)         GBP120    (43.4%)        R2 309      R3 877  (40.4%) 
Adjusted earnings 
 per share                 11.2p      22.4   p  (50.0%)          12.9p    (42.4%)          248c        409c  (39.4%) 
Basic earnings 
 per share                  9.6p      19.0   p  (49.5%)          11.2p    (41.1%)          212c        346c  (38.7%) 
Diluted basic 
 earnings per share         9.5p      18.3   p  (48.1%)          11.1p    (41.1%)          211c        333c  (36.3%) 
--------------------  ----------  --------      -----      -----------  -------      ----------  ----------  ----- 
 
 
                                        Results in Pounds Sterling                           Results in Rands 
                                                               Neutral 
                                                             currency^ 
                                    Six months              Six months      Neutral              Six months 
                        Six months       to 30                   to 30     currency  Six months       to 30 
                             to 30        Sept          %         Sept            %       to 30        Sept          % 
Total group              Sept 2020       2019*     change         2020       change   Sept 2020       2019*     change 
----------------------              ----------  ---------               -----------              ---------- 
Adjusted operating 
 profit before 
 taxation (million)         GBP142      GBP374  (61.9%)         GBP163    (56.4%)        R3 143      R6 823  (53.9%) 
Earnings attributable 
 to shareholders 
 (million)                  GBP109      GBP256  (57.4%)         GBP126    (50.8%)        R2 405      R4 678  (48.6%) 
Adjusted earnings 
 attributable to 
 shareholders 
 (million)                  GBP104      GBP274  (62.0%)         GBP120    (56.2%)        R2 309      R4 997  (53.8%) 
Adjusted earnings 
 per share                   11.2p       28.9p  (61.2%)          12.9p    (55.4%)          248c        527c  (52.9%) 
Basic earnings 
 per share                    9.6p       24.7p  (61.1%)          11.2p    (54.7%)          212c        450c  (52.9%) 
Diluted basic 
 earnings per share           9.5p       23.8p  (60.1%)          11.1p    (53.4%)          211c        434c     (51.4% 
Interim dividend 
 per share                    5.5p       11.0p  (50.0%)            n/a          n/a        112c        211c  (46.9%) 
----------------------  ----------  ----------  -----      -----------  -----------  ----------  ----------  ----- 
 
 
                                       Results in Pounds Sterling                        Results in Rands 
                                                            Neutral 
                                                         currency^^      Neutral 
                                      At 31                   At 30     currency                 At 31 
                              At 30   March          %         Sept            %       At 30     March          % 
                          Sept 2020    2020     change         2020       change   Sept 2020      2020     change 
-----------------------              ------  ---------               -----------              -------- 
Net asset value 
 per share                   433.5  p414.3  p  4.6%          433.7p     4.7%          9 355c    9 178c    1.9% 
Net tangible asset 
 value per share             397.4  p377.6  p  5.2%          397.6p     5.3%          8 575c    8 365c    2.5% 
                                       GBP4                    GBP5 
Total equity (million)     GBP5 075     898    3.6%             007     2.2%        R109 509  R108 495    0.9% 
                              GBP50   GBP50                   GBP49                   R1 093    R1 122 
Total assets (million)          665     656      -%             982    (1.3%)            199       162   (2.6%) 
                              GBP25   GBP24                   GBP24 
Core loans (million)            160     911    1.0%             817    (0.4%)       R542 955  R551 878   (1.6%) 
Cash and near 
 cash balances                GBP12   GBP12                   GBP12 
 (million)                      861     683    1.4%             688       -%        R277 504  R280 960   (1.2%) 
Customer deposits             GBP32   GBP32                   GBP32 
 (million)                      552     221    1.0%             112    (0.3%)       R702 373  R713 774   (1.6%) 
Third party funds 
 under management             GBP51   GBP45                   GBP51                   R1 121    R1 043 
 (million)                      988     018   15.5%             573    14.6%             753       735    7.5% 
-----------------------  ----------  ------  -----      -----------  ------       ----------  --------  ----- 
 
   *        Restated to reflect continuing operations. 

^ For income statement items we have used the average Rand: Pound Sterling exchange rate that was applied in the prior period, i.e. 18.28.

^^ For balance sheet items we have assumed that the Rand: Pound Sterling closing exchange rate has remained neutral since 31 March 2020.

Condensed combined consolidated income statement

 
                                                      Six months  Six months 
                                                              to          to 
                                                                                  Year to 
                                                         30 Sept     30 Sept     31 March 
GBP'000                                                     2020       2019*         2020 
----------------------------------------------------  ----------  ---------- 
Interest income                                        1 014 392   1 379 676  2 698 420 
                                                                                 (1 845 
Interest expense                                       (654 971)   (954 027)       416) 
                                                      ----------  ----------  --------- 
Net interest income                                      359 421     425 649    853 004 
Fee and commission income                                344 650     422 133    837 590 
Fee and commission expense                              (19 842)    (26 408)   (47 118) 
Investment income                                         16 859      57 079     39 268 
Share of post taxation profit of associates 
 and joint venture holdings                               16 272      17 754     27 244 
Trading income/(loss) arising from 
- customer flow                                          (8 527)      62 771     63 254 
- balance sheet management and other trading 
 activities                                                8 144     (2 318)     26 720 
Other operating income                                    11 983       2 609      6 877 
                                                      ----------  ----------  --------- 
Total operating income before expected 
 credit loss impairment charges                          728 960     959 269  1 806 839 
Expected credit loss impairment charges                 (65 974)    (31 021)  (133 301) 
                                                      ----------  ----------  --------- 
Operating income                                         662 986     928 248  1 673 538 
                                                                                 (1 186 
Operating costs^                                       (535 755)   (623 092)       427) 
Operating profit before goodwill, acquired 
 intangibles and strategic actions                       127 231     305 156    487 111 
Impairment of goodwill                                         -           -      (145) 
Impairment of associates and joint venture 
 holdings                                                      -           -   (45 400) 
Amortisation of acquired intangibles                     (7 603)     (7 954)   (16 104) 
Amortisation of acquired intangibles of 
 associates                                              (4 625)           -          - 
Closure and rundown of the Hong Kong direct 
 investments business                                    (2 158)    (49 469)   (89 257) 
                                                      ----------  ----------  --------- 
Operating profit                                         112 845     247 733    336 205 
Financial impact of group restructures                         -      12 757   (25 725) 
                                                      ----------  ----------  --------- 
Profit before taxation from continuing 
 operations                                              112 845     260 490    310 480 
Taxation on operating profit before goodwill, 
 acquired intangibles and strategic actions             (20 892)    (41 482)   (54 690) 
Taxation on acquired intangibles and strategic 
 actions                                                   1 558      12 101     21 693 
                                                      ----------  ----------  --------- 
Profit after taxation from continuing operations          93 511     231 109    277 483 
Profit after taxation from discontinued 
 operations                                                    -      69 085    954 979 
                                                      ----------  ----------  --------- 
Profit after taxation                                     93 511     300 194  1 232 462 
Loss/(profit) attributable to other non-controlling 
 interests                                                15 255    (28 863)   (67 952) 
Profit attributable to non-controlling 
 interests of discontinued operations                          -    (15 172)   (29 347) 
Earnings attributable to shareholders                    108 766     256 159  1 135 163 
----------------------------------------------------  ----------  ----------  --------- 
 
   *        Restated to reflect continuing operations. 

^ Depreciation on operating leased assets of GBP0.4 million (30 September 2019: GBP0.8 million; 31 March 2020: GBP1.4 million) which was previously reported as a separate line item, has been included in operating costs. The prior period has been restated to reflect the same basis.

 
 
 

Consolidated statement of total comprehensive income

 
                                                       Six months  Six months 
                                                               to          to 
                                                                                     Year 
                                                                                    to 31 
                                                          30 Sept     30 Sept       March 
GBP'000                                                      2020       2019*        2020 
-----------------------------------------------------  ----------  ---------- 
Profit after taxation from continuing operations           93 511     231 109   277 483 
Other comprehensive income/(loss) from continuing 
 operations: 
Items that may be reclassified to the income 
 statement 
Fair value movements on cash flow hedges taken 
 directly to other comprehensive income^                  (4 427)    (22 259)  (40 304) 
Fair value movements on debt instruments at 
 FVOCI taken directly to other comprehensive                                       (139 
 income^                                                   84 566     (1 901)      977) 
(Gain)/loss on realisation of debt instruments 
 at FVOCI recycled through the income statement^          (1 446)       9 502   (5 503) 
Foreign currency adjustments on translating                                        (314 
 foreign operations                                        17 837      39 948      078) 
Items that will never be reclassified to the 
 income statement 
Effect of rate change on deferred taxation 
 relating to adjustment for IFRS 9                            828       (503)   (1 761) 
Fair value movements on equity instruments 
 at FVOCI taken directly to other comprehensive 
 income                                                       736           -   (3 931) 
Remeasurement of net defined benefit pension 
 liability                                                   (32)          20   (1 217) 
Movement in post retirement benefit liabilities                 -           -        51 
Net (loss)/gain attributable to own credit 
 risk                                                     (1 725)       1 451     9 515 
Total comprehensive income/(loss) from continuing                                  (219 
 operations                                               189 848     257 367      722) 
Total comprehensive income/(loss) attributable                                     (235 
 to ordinary shareholders from continuing operations      177 381     203 112      960) 
Total comprehensive (loss)/income attributable 
 to non-controlling interests from continuing 
 operations                                               (1 159)      31 902  (28 022) 
Total comprehensive income attributable to 
 perpetual preferred securities from continuing 
 operations                                                13 626      22 353    44 260 
Total comprehensive income/(loss) from continuing                                  (219 
 operations                                               189 848     257 367      722) 
 
Profit after taxation from discontinued operations              -      69 085   954 979 
Other comprehensive income from discontinued 
 operations: 
Items that will never be reclassified to the 
 income statement 
Foreign currency adjustments on translating 
 foreign operations                                             -         337  (13 980) 
Remeasurement of net defined benefit pension 
 liability                                                      -     (1 217)         - 
Total comprehensive income from discontinued 
 operations                                                     -      68 205   940 999 
Total comprehensive income attributable to 
 ordinary shareholders from discontinued operations             -      53 033   914 448 
Total comprehensive income attributable to 
 non-controlling interests from discontinued 
 operations                                                     -      15 172    26 551 
Total comprehensive income from discontinued 
 operations                                                     -      68 205   940 999 
 
                                                                                  1 232 
Profit after taxation                                      93 511     300 194       462 
Other comprehensive income: 
Items that may be reclassified to the income 
 statement 
Fair value movements on cash flow hedges taken 
 directly to other comprehensive income^                  (4 427)    (22 259)  (40 304) 
Fair value movements on debt instruments at 
 FVOCI taken directly to other comprehensive                                       (139 
 income^                                                   84 566     (1 901)      977) 
(Gain)/loss on realisation of debt instruments 
 at FVOCI recycled through the income statement^          (1 446)       9 502   (5 503) 
Foreign currency adjustments on translating                                        (328 
 foreign operations                                        17 837      40 285      058) 
Items that will never be reclassified to the 
 income statement 
Effect of rate change on deferred taxation 
 relating to adjustment for IFRS 9                            828       (503)   (1 761) 
Fair value movements on equity instruments 
 at FVOCI taken directly to other comprehensive 
 income                                                       736           -   (3 931) 
Re-measurement of net defined benefit pension 
 asset                                                       (32)     (1 197)   (1 217) 
Movement in post retirement benefit liabilities                 -           -        51 
Net (loss)/gain attributable to own credit 
 risk                                                     (1 725)       1 451     9 515 
Total comprehensive income                                189 848     325 572   721 277 
Total comprehensive income attributable to 
 ordinary shareholders                                    171 379     256 145   678 488 
Total comprehensive income attributable to 
 non-controlling interests                                (1 159)      47 074   (1 471) 
Total comprehensive income attributable to 
 perpetual preferred securities                            19 628      22 353    44 260 
Total comprehensive income                                189 848     325 572   721 277 
-----------------------------------------------------  ----------  ----------  -------- 
 
   *        Restated to reflect continuing operations. 

^ These amounts are net of taxation expense/(credit) of GBP22.3 million Six months to 30 September 2019: (GBP1.5 million); year to 31 March 2020: (GBP55.8 million).

Condensed combined consolidated balance sheet

 
At 
GBP'000                                               30 Sept  31 March       30 Sept 
                                                         2020   2020             2019 
-------------------------------------------------- 
Assets 
                                                        2 477      3 932      3 988 
Cash and balances at central banks                        636        048        832 
                                                        3 079      2 666      2 242 
Loans and advances to banks                               807        851        874 
Non-sovereign and non-bank cash placements            363 350    632 610    678 717 
Reverse repurchase agreements and cash collateral       4 124      2 964      1 621 
 on securities borrowed                                   591        603        424 
                                                        4 898      4 593      5 987 
Sovereign debt securities                                 936        893        916 
Bank debt securities                                  590 173    604 921    619 328 
                                                        1 427      1 430      1 234 
Other debt securities                                     174        419        781 
                                                        1 885      2 034      1 256 
Derivative financial instruments                          922        399        794 
                                                                   1 044      1 762 
Securities arising from trading activities            929 143        445        831 
Investment portfolio                                  994 543    998 935    946 499 
                                                       24 855     24 588     25 065 
Loans and advances to customers                           877        074        947 
Own originated loans and advances to customers 
 securitised                                          307 532    324 638    378 171 
Other loans and advances                              100 659    132 486    145 034 
Other securitised assets                              122 892    134 865    133 523 
Interests in associated undertakings and 
 joint venture holdings                               722 227    701 311    407 743 
Deferred taxation assets                              256 581    265 896    260 766 
                                                        1 912      1 934      2 393 
Other assets                                              025        428        348 
Property and equipment                                341 343    356 573    484 359 
                                                                              1 000 
Investment properties                                 799 588    863 864        603 
Goodwill                                              270 991    270 625    360 128 
Software*                                              13 045     14 643     18 467 
Other acquired intangible assets*                      66 224     71 657     80 799 
Non-current assets classified as held for 
 sale                                                  87 248     58 905          - 
                                                    ---------  ---------  --------- 
                                                       50 627     50 621     51 068 
                                                          507        089        884 
Other financial instruments at fair value 
 through profit or loss in respect of liabilities                             8 657 
 to customers                                          37 178     35 227        879 
                                                       50 664     50 656     59 726 
                                                          685        316        763 
Liabilities 
                                                        3 319      3 498      2 929 
Deposits by banks                                         727        254        180 
                                                        1 793      2 248      1 729 
Derivative financial instruments                          033        849        053 
Other trading liabilities                             577 821    509 522    700 611 
Repurchase agreements and cash collateral               1 692      1 577 
 on securities lent                                       050        346    983 895 
                                                       32 551     32 220     32 039 
Customer accounts (deposits)                              697        976        291 
                                                        1 815      1 737      2 936 
Debt securities in issue                                  257        191        491 
Liabilities arising on securitisation of 
 own originated loans and advances                     73 042     76 696     79 667 
Liabilities arising on securitisation of 
 other assets                                         109 107    110 679    116 544 
Current taxation liabilities                           95 940     51 308    166 482 
Deferred taxation liabilities                          50 727     44 788     23 194 
                                                        2 025      2 211      2 399 
Other liabilities                                         931        487        113 
                                                    ---------  ---------  --------- 
                                                       44 104     44 287     44 103 
                                                          332        096        521 
Liabilities to customers under investment                                     8 650 
 contracts                                             34 494     32 845        085 
Insurance liabilities, including unit-linked 
 liabilities                                            2 684      2 382      7 794 
                                                    ---------  ---------  --------- 
                                                       44 141     44 322     52 761 
                                                          510        323        400 
                                                        1 447      1 436      1 594 
Subordinated liabilities                                  948        361        961 
                                                       45 589     45 758     54 356 
                                                          458        684        361 
Equity 
Ordinary share capital                                    247        247        247 
                                                        1 517      1 517      2 336 
Ordinary share premium                                    852        852        194 
Treasury shares                                     (261 729)  (272 881)  (284 430) 
Other reserves                                      (910 668)  (976 297)  (557 009) 
                                                        3 699      3 593      2 730 
Retained income                                           652        384        044 
                                                    ---------  ---------  --------- 
                                                        4 045      3 862      4 225 
Ordinary shareholders' equity                             354        305        046 
Perpetual preference share capital*                   172 349    168 518    195 161 
                                                    ---------  ---------  --------- 
Shareholders' equity excluding non-controlling          4 217      4 030      4 420 
 interests                                                703        823        207 
Other Additional Tier 1 securities in issue           296 809    295 593    304 047 
Non-controlling interests                             560 715    571 216    646 148 
                                                    ---------  ---------  --------- 
- Perpetual preferred securities issued by 
 subsidiaries                                          71 106     69 259     82 101 
- Non-controlling interests in partially 
 held subsidiaries                                    489 609    501 957    564 047 
                                                    ---------  ---------  --------- 
                                                        5 075      4 897      5 370 
Total equity                                              227        632        402 
                                                       50 664     50 656     59 726 
Total liabilities and equity                              685        316        763 
--------------------------------------------------  ---------  ---------  --------- 
 

* Software of GBP13.0 million (31 March 2020: GBP14.6 million; 30 September 2019: GBP18.5 million), which was previously reported within intangible assets, is now reported as a separate line item. The prior periods have been re-presented to reflect the same basis. Perpetual preference share premium of GBP172.3 million (31 March 2020: GBP168.5 million; 30 September 2019: GBP195.1 million), which was previously reported within share premium, is now reported within perpetual preference share capital and premium. The prior periods have been re-presented to reflect the same basis.

Condensed consolidated statement of changes in equity

 
                                                  Six months  Six months 
                                                          to          to      Year to 
                                                     30 Sept     30 Sept     31 March 
GBP'000                                                 2020        2019         2020 
------------------------------------------------  ----------  ----------  ----------- 
Balance at the beginning of the period             4 897 632   5 251 014  5 251 014 
Total comprehensive income                           189 848     325 572    721 277 
Share-based payments adjustments                      18 353      29 770     39 336 
Dividends paid to ordinary shareholders                    -   (134 778)  (244 323) 
Dividends paid to perpetual preference 
 shareholders and Other Additional Tier 
 1 security holders                                        -     (7 511)   (14 857) 
Dividends paid to perpetual preference 
 shareholders included in non-controlling 
 interests and Other Additional Tier 1 security 
 holders                                            (19 628)    (14 842)   (29 403) 
Dividends paid to non-controlling interests         (11 028)    (34 003)   (79 106) 
Issue of ordinary shares                                   -      64 647     64 647 
Issue of equity by subsidiaries                            -           -     45 256 
Net equity impact of non-controlling interest 
 movements                                             1 687       1 966   (27 100) 
Employee benefit liability recognised                      -           -    (7 570) 
Movement of treasury shares                          (1 861)   (109 046)  (121 298) 
Net equity movements of interests in associated 
 undertakings                                            225     (2 387)    (2 387) 
Distribution to shareholders                               -           -  (697 854) 
Balance at the end of the period                   5 075 228   5 370 402  4 897 632 
------------------------------------------------  ----------  ----------  --------- 
 

Condensed consolidated cash flow statement

 
                                               Six months  Six months 
                                                       to          to      Year to 
                                                  30 Sept     30 Sept     31 March 
GBP'000                                              2020        2019         2020 
---------------------------------------------  ----------  ----------  ----------- 
Cash inflow from operating activities             178 552     376 031    547 812 
                                                   (2 457      (2 328     (5 795 
Increase in operating assets                         502)        228)       856) 
(Decrease)/increase in operating liabilities    (759 756)   1 553 483  5 715 897 
                                               ----------  ----------  --------- 
Net cash (outflow)/inflow from operating           (3 038 
 activities                                          706)   (398 714)    467 853 
Net cash outflow from investing activities        (6 967)    (20 885)  (350 855) 
Net cash outflow from financing activities       (59 855)   (367 773)  (603 247) 
Effects of exchange rates on cash and cash 
 equivalents                                       41 935      22 834  (435 149) 
                                                   (3 063 
Net decrease in cash and cash equivalents            593)   (764 538)  (921 398) 
Cash and cash equivalents at the beginning 
 of the period                                  6 193 708   7 115 106  7 115 106 
Cash and cash equivalents at the end of 
 the period                                     3 130 115   6 350 568  6 193 708 
---------------------------------------------  ----------  ----------  --------- 
 

Cash and cash equivalents is defined as including: cash and balances at central banks, on demand loans and advances to banks and non-sovereign and non-bank cash placements (all of which have a maturity profile of less than three months).

Combined consolidated segmental analysis

Segmental geographical and business analysis of adjusted operating profit before goodwill, acquired intangibles, non-operating items, taxation and after other non-controlling interests.

 
For the six months to 30 September                    UK and  Southern       Total 
 GBP'000                                               Other    Africa       group 
--------------------------------------------------  --------  -------- 
2020 
Wealth & Investment                                   28 877    11 960    40 837 
Specialist Banking                                    12 903    92 870   105 773 
Group Investments^                                    11 791     1 428    13 219 
Group costs                                         (10 208)   (7 135)  (17 343) 
Continuing operations adjusted operating profit       43 363    99 123   142 486 
Discontinued operations                                    -         -         - 
Total group adjusted operating profit                 43 363    99 123   142 486 
Other non-controlling interests^                                        (15 255) 
Operating profit before non-controlling interests                        127 231 
 
2019* 
Wealth & Investment                                   30 455    14 053    44 508 
Specialist Banking                                    79 448   145 339   224 787 
Group Investments                                          -    30 270    30 270 
Group costs                                         (15 839)   (7 433)  (23 272) 
Continuing operations adjusted operating profit       94 064   182 229   276 293 
Discontinued operations                               58 974    38 355    97 329 
Total group adjusted operating profit                153 038   220 584   373 622 
Other non-controlling interests**                                         28 863 
Operating profit before non-controlling interests                        402 485 
--------------------------------------------------  --------  --------  -------- 
 
   *        Restated to reflect continuing operations. 

** (Profit)/loss attributable to other non-controlling interests predominantly relates to the Investec Property Fund Limited.

^ In terms of IFRS 8 Operating segments, management concluded that key operating decision makers of Investec currently reviewed the operating results of the following operating segments:

   --        Investec Specialist Bank 
   --        Investec Wealth & Investment 
   --        Group Investments 
   --        Group costs 

Accordingly, the results of Group Investments have been disclosed as a separate segment for the first time in the 30 September 2020 half year results. Group Investments was previously presented as a subset component of the Investec Specialist Bank.

Net fee and commission income

 
For the six months to 30 September 2020                     UK and  Southern 
 GBP'000                                                     Other    Africa       Total 
---------------------------------------------------------  -------  -------- 
Wealth & Investment net fee and commission 
 income                                                    153 004    36 236   189 240 
                                                           -------  --------  -------- 
    Fund management fees/fees for funds under management   129 086    20 484   149 570 
    Private client transactional fees                       24 303    16 384    40 687 
    Fee and commission expense                               (385)     (632)   (1 017) 
                                                           -------  --------  -------- 
Specialist Banking net fee and commission income            66 883    45 655   112 538 
                                                           -------  --------  -------- 
    Corporate and institutional transactional and 
     advisory services                                      66 785    33 749   100 534 
    Private client transactional fees                        6 226    24 603    30 829 
    Fee and commission expense                             (6 128)  (12 697)  (18 825) 
                                                           -------  --------  -------- 
Group Investments net fee and commission income                  -    23 030    23 030 
Net fee and commission income                              219 887   104 921   324 808 
                                                           -------  --------  -------- 
    Annuity fees (net of fees payable)                     137 486    94 011   231 497 
    Deal fees                                               82 401    10 910    93 311 
---------------------------------------------------------  -------  --------  -------- 
 

Included in Specialist Banking corporate and institutional and advisory services is net fee income of GBP32.7 million (2019: GBP36.2 million) for operating lease income which is out of the scope of IFRS 15 - Revenue from contracts with customers.

Discontinued operations

Asset Management business

During the prior financial year on 13 March 2020, the group successfully completed the demerger of Ninety One (formerly known as Investec Asset Management), which became separately listed on 16 March 2020. The loss of control of Investec Asset Management was effected through the distribution of Ninety One shares to shareholders.

The table below presents the income statement from discontinued operations included in the total group income statement for the six months to 30 September 2019 and the year to 31 March 2020.

Combined consolidated income statement of discontinued operations

 
                                           Six months to 30 September 
                                                      2019                   Year to 31 March 2020 
                                           UK and   Southern               UK and  Southern 
GBP'000                                     Other     Africa      Total     Other    Africa       Total 
---------------------------------------  --------  ---------             --------  -------- 
Net interest income                       (1 207)      2 202        995   (2 235)     3 962     1 727 
Net fee and commission 
 income                                   204 392     94 983    299 375   392 591   191 388   583 979 
Investment income                           (158)          8      (150)   (2 042)        35   (2 007) 
    Trading income/(loss) arising 
     from 
     - balance sheet management 
     and other 
     trading activities                     4 054       (95)      3 959     1 634      (76)     1 558 
Other operating income                      3 822        584      4 406     4 697       745     5 442 
                                         --------  ---------  ---------  --------  --------  -------- 
Total operating income 
 before expected credit 
 loss impairment charges                  210 903     97 682    308 585   394 645   196 054   590 699 
Expected credit loss impairment 
 charges                                        -          -          -         -         -         - 
                                         --------  ---------  ---------  --------  --------  -------- 
Operating income                          210 903     97 682    308 585   394 645   196 054   590 699 
                                             (151                  (211      (285      (115      (400 
Operating costs                              929)   (59 327)       256)      542)      398)      940) 
                                         --------  ---------  ---------  --------  --------  -------- 
Operating profit before 
 strategic actions and non-controlling 
 interests                                 58 974     38 355     97 329   109 103    80 656   189 759 
Profit attributable to 
 non-controlling interests 
 from discontinued operations             (9 743)    (5 429)   (15 172)  (18 106)  (11 241)  (29 347) 
                                         --------  ---------  ---------  --------  --------  -------- 
Operating profit                           49 231     32 926     82 157    90 997    69 415   160 412 
Gain on distribution net 
 of implementation costs                  (4 125)    (4 454)    (8 579)   549 263   270 970   820 233 
                                         --------  ---------  ---------  --------  --------  -------- 
Profit before taxation                     45 106     28 472     73 578   640 260   340 385   980 645 
Taxation on operating profit 
 before strategic actions                 (9 961)   (10 931)   (20 892)  (19 112)  (22 088)  (41 200) 
Taxation on strategic actions                 645        582      1 227     1 253  (15 066)  (13 813) 
Earnings attributable to 
 shareholders from discontinued 
 operations                                35 790     18 123     53 913   622 401   303 231   925 632 
---------------------------------------  --------  ---------  ---------  --------  --------  -------- 
 

Restatements

The group remains committed to its objective to simplify and focus the business in pursuit of disciplined growth over the long-term.

In this regard the following strategic actions were effected in the prior financial year ended 31 March 2020:

   --     Demerger of the asset management business 
   --     Closure of Click & Invest which formed part of the UK wealth management business 
   --     Sale of the Irish Wealth & Investment business 
   --     Restructure of the Irish branch 
   --     Sale of UK Property Fund 
   --     Closure and rundown of the Hong Kong direct investments business. 

We elected to separately disclose the financial impact of these strategic actions as the financial impact from group restructures and the rundown of portfolios where operations have ceased.

The effective date of the Asset Management business demerger was 13 March 2020 and admission of the Ninety One Limited shares and the Ninety One plc shares to the Johannesburg Stock Exchange and London Stock Exchange was effected on 16 March 2020. The global asset management business has been disclosed as a discontinued operation and the income statement for the prior period has been appropriately re-presented.

Depreciation on operating leased assets of GBP0.4 million (30 September 2019: GBP0.8 million; 31 March 2020: GBP1.4 million), which was previously reported as a separate line item on the income statement, has been included in operating costs. The prior period has been restated to reflect the same basis.

Software of GBP13.0 million (31 March 2020: GBP14.6 million; 30 September 2019: GBP18.5 million), which was previously reported within Intangible assets, is now reported as a separate line item. The prior periods have been re-presented to reflect the same basis.

Perpetual preference share premium of GBP172.3 million (31 March 2020: GBP168.5 million; 30 September 2019: GBP195.1 million), which was previously reported within share premium, is now reported within Perpetual preference share capital and premium. The prior periods have been re-presented to reflect the same basis.

The re-presentation of software and the perpetual preference share premium was done to provide users enhanced clarity on the values used to calculate net asset values and the various ROE ratios .

Financial impact of strategic actions

 
                                                     Six months  Six months      Year to 
                                                          to 30       to 30     31 March 
GBP'000                                               Sept 2020   Sept 2019         2020 
---------------------------------------------------  ----------  ----------  ----------- 
Closure and rundown of the Hong Kong direct 
 investments business*                                  (2 158)    (49 469)   (89 257) 
Financial impact of group restructures                        -      12 757   (25 725) 
                                                     ----------  ----------  --------- 
    Closure of Click & Invest                                 -     (4 020)    (4 309) 
    Sale of the Irish Wealth & Investment business            -      18 959     19 741 
    Restructure of the Irish branch                           -     (1 265)   (41 110) 
    Other                                                     -       (917)       (47) 
                                                     ----------  ----------  --------- 
Financial impact of strategic actions - continuing                                (114 
 operations                                             (2 158)    (36 712)       982) 
Taxation on financial impact of strategic 
 actions from continuing operations                         381      10 497     19 856 
                                                     ----------  ----------  --------- 
Net financial impact of strategic actions 
 - continuing operations                                (1 777)    (26 215)   (95 126) 
Gain on distribution of Ninety One shares 
 net of taxation and implementation costs                     -     (8 579)    806 420 
Net financial impact of strategic actions 
 - Total group                                          (1 777)    (34 794)    711 294 
---------------------------------------------------  ----------  ----------  --------- 
 

* Included within the balance are fair value losses of GBP0.1 million (September 2019: GBP44.6 million, March 2020: GBP83.2 million).

Restatements continued

 
                                                                 Six months 
                                                                         to 
                                                                    30 Sept  Representation    Six months 
                                                                       2019            as a         to 30 
                                                              as previously    discontinued     Sept 2019 
GBP'000                                                            reported       operation      restated 
---------------------------------------------------  ----------------------  -------------- 
                                                                                                  1 379 
Interest income                                                   1 382 062         (2 386)         676 
Interest expense                                                  (955 418)           1 391   (954 027) 
                                                     ----------------------  --------------  ---------- 
Net interest income                                                 426 644           (995)     425 649 
Fee and commission income                                           818 827       (396 694)     422 133 
Fee and commission expense                                        (123 727)          97 319    (26 408) 
Investment income                                                    56 929             150      57 079 
Share of post taxation profit of associates 
 and joint venture holdings                                          17 754               -      17 754 
Trading income arising from 
- customer flow                                                      62 771               -      62 771 
- balance sheet management and other trading 
 activities                                                           1 641         (3 959)     (2 318) 
Other operating income                                                7 015         (4 406)       2 609 
                                                     ----------------------  --------------  ---------- 
Total operating income before expected credit 
 loss impairment charges                                          1 267 854       (308 585)     959 269 
Expected credit loss impairment charges                            (31 021)               -    (31 021) 
                                                     ----------------------  --------------  ---------- 
Operating income                                                  1 236 833       (308 585)     928 248 
Operating costs                                                   (834 348)         211 256   (623 092) 
Operating profit before goodwill, acquired 
 intangibles and strategic actions                                  402 485        (97 329)     305 156 
Amortisation of acquired intangibles                                (7 954)               -     (7 954) 
Closure and rundown of the Hong Kong direct 
 investments business                                              (49 469)               -    (49 469) 
                                                     ----------------------  --------------  ---------- 
Operating profit                                                    345 062        (97 329)     247 733 
Financial impact of group restructures                                4 178           8 579      12 757 
                                                     ----------------------  --------------  ---------- 
Profit before taxation                                              349 240        (88 750)     260 490 
Taxation on operating profit before goodwill, 
 acquired intangibles and strategic actions                        (62 374)          20 892    (41 482) 
Taxation on acquired intangibles and strategic 
 actions                                                             13 328         (1 227)      12 101 
                                                     ----------------------  --------------  ---------- 
Profit after taxation from continuing operations                    300 194        (69 085)     231 109 
Profit after taxation from discontinued operations                        -          69 085      69 085 
                                                     ----------------------  --------------  ---------- 
Profit after taxation                                               300 194               -     300 194 
Profit attributable to other non-controlling 
 interests                                                         (28 863)               -    (28 863) 
Profit attributable to non-controlling interests 
 of discontinued operations                                        (15 172)               -    (15 172) 
Earnings attributable to shareholders                               256 159               -     256 159 
Earnings per share (pence) 
- Basic                                                                24.7                        24.7 
- Diluted                                                              23.8                        23.8 
- Basic for continuing operations                                      n/a                         19.0 
- Diluted for continuing operations                                     n/a                        18.3 
Adjusted earnings per share (pence) 
- Basic                                                                28.9                        28.9 
- Diluted                                                              27.8                        27.8 
- Basic for continuing operations                                      n/a                         22.4 
- Diluted for continuing operations                                    n/a                         21.6 
---------------------------------------------------  ----------------------  --------------  ---------- 
 

Analysis of assets and liabilities by measurement category

 
At 30 September 2020 
                                                                   Non-financial 
                                                                     instruments 
                                                 Total                        or 
                                           instruments                    scoped 
                                                    at  Amortised         out of 
GBP'000                                     fair value       cost         IFRS 9        Total 
---------------------------------------- 
Assets 
Cash and balances at central banks                   -  2 477 636              -  2 477 636 
Loans and advances to banks                          -  3 079 807              -  3 079 807 
Non-sovereign and non-bank cash 
 placements                                     11 159    352 191              -    363 350 
Reverse repurchase agreements and 
 cash collateral on securities borrowed        991 402  3 133 189              -  4 124 591 
Sovereign debt securities                    4 573 107    325 829              -  4 898 936 
Bank debt securities                           402 812    187 361              -    590 173 
Other debt securities                          578 762    848 412              -  1 427 174 
Derivative financial instruments             1 885 922          -              -  1 885 922 
Securities arising from trading 
 activities                                    929 143          -              -    929 143 
Investment portfolio                           994 543          -              -    994 543 
                                                           22 742                    24 855 
Loans and advances to customers              2 112 911        966              -        877 
Own originated loans and advances 
 to customers securitised                            -    307 532              -    307 532 
Other loans and advances                             -    100 659              -    100 659 
Other securitised assets                       110 370     12 522              -    122 892 
Interests in associated undertakings                 -          -        722 227    722 227 
Deferred taxation assets                             -          -        256 581    256 581 
Other assets                                   177 037  1 008 152        726 836  1 912 025 
Property and equipment                               -          -        341 343    341 343 
Investment properties                                -          -        799 588    799 588 
Goodwill                                             -          -        270 991    270 991 
Software                                             -          -         13 045     13 045 
Other acquired intangible assets                     -          -         66 224     66 224 
Non-current assets classified as 
 held for sale                                       -          -         87 248     87 248 
                                          ------------  ---------  -------------  --------- 
                                                12 767     34 576                    50 627 
                                                   168        256      3 284 083        507 
Other financial instruments at 
 fair value through profit or loss 
 in respect of liabilities to customers         37 178          -              -     37 178 
                                                12 804     34 576                    50 664 
                                                   346        256      3 284 083        685 
 
Liabilities 
Deposits by banks                                  313  3 319 414              -  3 319 727 
Derivative financial instruments             1 793 033          -              -  1 793 033 
Other trading liabilities                      577 821          -              -    577 821 
Repurchase agreements and cash 
 collateral on securities lent                 437 204  1 254 846              -  1 692 050 
                                                           30 955                    32 551 
Customer accounts (deposits)                 1 596 301        396              -        697 
Debt securities in issue                       241 175  1 574 082              -  1 815 257 
Liabilities arising on securitisation 
 of own originated loans and advances                -     73 042              -     73 042 
Liabilities arising on securitisation 
 of other assets                               109 107          -              -    109 107 
Current taxation liabilities                         -          -         95 940     95 940 
Deferred taxation liabilities                        -          -         50 727     50 727 
Other liabilities                               97 581  1 153 822        774 528  2 025 931 
                                          ------------  ---------  -------------  --------- 
                                                           38 330                    44 104 
                                             4 852 535        602        921 195        332 
Liabilities to customers under 
 investment contracts                           34 494          -              -     34 494 
Insurance liabilities, including 
 unit-linked liabilities                         2 684          -              -      2 684 
                                          ------------  ---------  -------------  --------- 
                                                           38 330                    44 141 
                                             4 889 713        602        921 195        510 
Subordinated liabilities                       355 364  1 092 584              -  1 447 948 
                                                           39 423                    45 589 
                                             5 245 077        186        921 195        458 
----------------------------------------  ------------  ---------  -------------  --------- 
 

Financial instruments at fair value

The table below analyses recurring fair value measurements for financial assets and financial liabilities. These fair value measurements are categorised into different levels in the fair value hierarchy based on the inputs to the valuation technique used.

The different levels are identified as follows:

   Level 1   - quoted (unadjusted) prices in active markets for identical assets or liabilities. 

Level 2 - inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3 - inputs for the asset or liability that are not based on observable market data (unobservable inputs).

 
                                                                    Fair value category 
At 30 September 2020 
                                          Total instruments 
                                                    at fair 
GBP'000                                               value    Level 1    Level 2      Level 3 
---------------------------------------- 
Assets 
Non-sovereign and non-bank cash 
 placements                                          11 159          -     11 159          - 
Reverse repurchase agreements and 
 cash collateral on securities borrowed             991 402          7    991 395          - 
Sovereign debt securities                         4 573 107  4 573 107          -          - 
Bank debt securities                                402 812    241 995    160 817          - 
Other debt securities                               578 762    140 226    304 201    134 335 
Derivative financial instruments                  1 885 922      3 037  1 852 971     29 914 
Securities arising from trading 
 activities                                         929 143    904 633     19 203      5 307 
Investment portfolio                                994 543     95 624      8 961    889 958 
Loans and advances to customers                   2 112 911          -  1 076 157  1 036 754 
Other securitised assets                            110 370          -      3 017    107 353 
Other assets                                        177 037    177 037          -          - 
Other financial instruments at 
 fair value through profit or loss 
 in respect of liabilities to customers              37 178     37 178          -          - 
                                                     12 804 
                                                        346  6 172 844  4 427 881  2 203 621 
Liabilities 
Deposits by banks                                       313          -          -        313 
Derivative financial instruments                  1 793 033      1 482  1 760 034     31 517 
Other trading liabilities                           577 821    324 851    252 970          - 
Repurchase agreements and cash 
 collateral on securities lent                      437 204          3    437 201          - 
Customer accounts (deposits)                      1 596 301         11  1 596 290          - 
Debt securities in issue                            241 175          -    241 175          - 
Liabilities arising on securitisation 
 of other assets                                    109 107          -          -    109 107 
Other liabilities                                    97 581          -     56 257     41 324 
Liabilities to customers under 
 investment contracts                                34 494          -     34 494          - 
Insurance liabilities, including 
 unit-linked liabilities                              2 684          -      2 684          - 
Subordinated liabilities                            355 364    355 364          -          - 
                                                  5 245 077    681 711  4 381 105    182 261 
Net financial assets at fair value                7 559 269  5 491 133     46 776  2 021 360 
----------------------------------------  -----------------  ---------  ---------  --------- 
 

Transfers between level 1 and level 2

There were no transfers between level 1 and level 2 in the current and prior year.

Measurement of financial assets and liabilities at level 2

The table below sets out information about the valuation techniques used at the end of the reporting period in measuring financial instruments categorised as level 2 in the fair value hierarchy:

 
                               Valuation basis/techniques      Main inputs 
                               ------------------------------  -------------------------- 
Assets 
----------------------------------------------------------------------------------------- 
Non-sovereign and non-bank     Discounted cash flow            Yield curves 
 cash placements                model 
-----------------------------  ------------------------------  -------------------------- 
Reverse repurchase agreements  Discounted cash flow            Yield curves, discount 
 and cash collateral            model, Hermite interpolation,   rates, volatilities 
 on securities borrowed         Black-Scholes 
-----------------------------  ------------------------------  -------------------------- 
Bank debt securities           Discounted cash flow            Yield curves 
                                model 
-----------------------------  ------------------------------  -------------------------- 
Other debt securities          Discounted cash flow            Yield curves, NCD curves 
                                model                           and swap curves, discount 
                                                                rates, external prices, 
                                                                broker quotes 
-----------------------------  ------------------------------  -------------------------- 
Derivative financial           Discounted cash flow            Yield curves, risk free 
 instruments                    model, Hermite interpolation,   rate, volatilities, 
                                industry standard derivative    forex forward points 
                                pricing models including        and spot rates, interest 
                                Black-Scholes                   rate swap curves and 
                                                                credit curves, discount 
                                                                rates 
-----------------------------  ------------------------------  -------------------------- 
Securities arising from        Standard industry derivative    Interest rate curves, 
 trading activities             pricing model Discounted        implied bond spreads, 
                                cash flow model                 equity volatilities, 
                                                                yield curves 
-----------------------------  ------------------------------  -------------------------- 
Investment portfolio           Discounted cash flow            Discount rate and fund 
                                model, relative valuation       unit price, net assets 
                                model Comparable quoted 
                                inputs 
-----------------------------  ------------------------------  -------------------------- 
Loans and advances to          Discounted cash flow            Yield curves 
 customers                      model 
-----------------------------  ------------------------------  -------------------------- 
Other securitised assets       Discounted cash flow            Yield curves 
                                model 
-----------------------------  ------------------------------  -------------------------- 
Liabilities 
----------------------------------------------------------------------------------------- 
Derivative financial           Discounted cash flow            Yield curves, discount 
 instruments                    model, Hermite interpolation,   rates, risk free rate, 
                                industry standard derivative    volatilities, forex 
                                pricing models including        forward points and spot 
                                Black-Scholes                   rates, interest rate 
                                                                swap curves and credit 
                                                                curves 
-----------------------------  ------------------------------  -------------------------- 
Other trading liabilities      Discounted cash flow            Yield curves 
                                model 
-----------------------------  ------------------------------  -------------------------- 
Repurchase agreements          Discounted cash flow            Yield curves, discount 
 and cash collateral            model, Hermite interpolation    rates 
 on securities lent 
-----------------------------  ------------------------------  -------------------------- 
Customer accounts (deposits)   Discounted cash flow            Yield curves, discount 
                                model                           rates 
-----------------------------  ------------------------------  -------------------------- 
Debt securities in issue       Discounted cash flow            Yield curves 
                                model 
-----------------------------  ------------------------------  -------------------------- 
Other liabilities              Discounted cash flow            Yield curves 
                                model 
-----------------------------  ------------------------------  -------------------------- 
Liabilities to customers       Current price of underlying     Listed prices 
 under investment contracts     unitised assets 
-----------------------------  ------------------------------  -------------------------- 
Insurance liabilities,         Current price of underlying     Listed prices 
 including unit-linked          unitised assets 
 liabilities 
-----------------------------  ------------------------------  -------------------------- 
 

Level 3 instruments

The following tables show a reconciliation of the opening balances to the closing balances for level 3 financial instruments. All instruments are at fair value through profit or loss.

 
                                                     Loans and 
                                                      advances                     Other balance 
                                        Investment          to  Other securitised          sheet 
GBP'000                                  portfolio   customers             assets         assets        Total 
--------------------------------------  ----------  ----------  -----------------  ------------- 
Assets 
Balance at 1 April 2020                    848 670   1 101 666            106 218        178 840  2 235 394 
Total gains or losses in 
 the income statement                      (6 431)      19 257              4 401          6 954     24 181 
                                        ----------  ----------  -----------------  -------------  --------- 
    In the income statement                (6 431)      18 834              4 401          6 954     23 758 
    In the statement of comprehensive 
     income                                      -         423                  -              -        423 
                                        ----------  ----------  -----------------  -------------  --------- 
Purchases                                   47 125     364 392                  -            265    411 782 
Sales                                     (13 387)   (216 725)                  -        (1 424)  (231 536) 
Settlements                                (1 363)   (231 773)            (3 266)       (10 680)  (247 082) 
Transfers into level 3                           -       7 802                  -            141      7 943 
Transfers out of level 
 3                                               -           -                  -          (156)      (156) 
Foreign exchange adjustments                15 344     (7 865)                  -        (4 384)      3 095 
Balance at 30 September 
 2020                                      889 958   1 036 754            107 353        169 556  2 203 621 
--------------------------------------  ----------  ----------  -----------------  -------------  --------- 
 

For the six months to 30 September 2020, following a review of the valuation methodology of a number of financial instruments, the following reclassifications were made during the period: loans and advances to customers of GBP7.8 million from level 2 to level 3; other assets of GBP0.1 million from level 2 to level 3; and derivative assets of GBP0.1 million and derivative liabilities of GBP0.1 million from level 3 to level 2.

 
                                                       Liabilities 
                                                           arising 
                                                 on securitisation  Other balance 
                                                          of other          sheet 
GBP'000                                                     assets    liabilities      Total 
----------------------------------------------  ------------------  ------------- 
Liabilities 
Balance at 1 April 2020                                    110 679         27 602  138 281 
Total gains or losses in the income statement                3 191          6 867   10 058 
                                                ------------------  -------------  ------- 
    In the income statement                                  3 191          6 867   10 058 
    In the statement of comprehensive income                     -              -        - 
                                                ------------------  -------------  ------- 
Purchases                                                        -         39 893   39 893 
Settlements                                                (4 763)          (937)  (5 700) 
Transfers into level 3                                           -              -        - 
Transfers out of level 3                                         -          (153)    (153) 
Foreign exchange adjustments                                     -          (118)    (118) 
Balance as at 30 September 2020                            109 107         73 154  182 261 
----------------------------------------------  ------------------  -------------  ------- 
 

The group transfers between levels within the fair value hierarchy when the significance of the unobservable inputs change or if the valuation methods change.

The following table quantifies the gains or (losses) included in the income statement recognised on level 3 financial instruments:

 
For the six months to 30 September 2020 
GBP'000                                              Total  Realised    Unrealised 
------------------------------------------------ 
Total gains or (losses) included in the 
 income statement for the year 
Net interest income/(expense)                       31 652    20 435      11 217 
Fee and commission (expense)                             -         -           - 
Investment income                                 (13 390)    14 006    (27 396) 
Trading income arising from customer flow          (4 562)         -     (4 562) 
                                                    13 700    34 441    (20 741) 
Total gains or (losses) included in other 
 comprehensive income for the year 
Gains on realisation on debt instruments 
 at FVOCI recycled through the income statement    (1 031)   (1 031)           - 
Fair value movements on debt instruments 
 at FVOCI taken directly to other comprehensive 
 income                                                423         -         423 
                                                     (608)   (1 031)         423 
------------------------------------------------  --------  --------  ---------- 
 

Sensitivity of fair values to reasonably possible alternative assumptions by level 3 instrument type

The fair value of financial instruments in level 3 are measured using valuation techniques that incorporate assumptions that are not evidenced by prices from observable market data. The below valuations have been considered taking the global pandemic of COVID-19 into consideration. The following table shows the sensitivity of these fair values to reasonably possible alternative assumptions, determined at a transactional level:

 
                                                                                     Potential impact 
                                                                                          on the 
                                                                                     income statement 
                              Balance 
                                sheet                                           Favourable    Unfavourable 
                                value                                              changes         changes 
                                                                 Range 
                                                                  which 
                                                                  unobservable 
                                                                  input 
At 30 September                        Significant unobservable   has been 
 2020                         GBP'000   input changed             changed          GBP'000         GBP'000 
                            ---------                                           ---------- 
Assets 
                                       Potential impact 
Other debt securities         134 335   on income statement                          4 971      (11 884) 
                                                                                ----------  ------------ 
                                       Credit spreads            0.29%-0.89%            15          (97) 
                                       Cash flow adjustments     CPR 5.3%              984         (984) 
                                       Discount rate             0.0605                  1           (7) 
                                       Underlying asset 
                                        value^^                  ^^                    437         (194) 
                                       Other^                    ^                   3 534      (10 602) 
                                                                                ----------  ------------ 
 
Derivative financial                   Potential impact 
 instruments                   29 914   on income statement                          5 053       (5 929) 
                                                                                ----------  ------------ 
                                                                 3.6% - 
                                       Volatilities               21.6%                236         (708) 
                                       Underlying asset 
                                        value^^                  ^^                  4 661       (4 753) 
                                       Other^                    ^                     156         (468) 
                                                                                ----------  ------------ 
 
Securities arising                     Potential impact 
 from trading activities        5 307   on income statement 
                                       Cash flow adjustments     CPR 9.8%              891       (1 514) 
                                       Potential impact 
Investment portfolio          889 958   on income statement                        108 106     (176 998) 
                                                                                ----------  ------------ 
                                       Price earnings multiple   4.2x -11.92x        6 045      (12 564) 
                                       Underlying asset 
                                        value^^                  ^^                  8 053       (9 814) 
                                       EBITDA                    **                 25 874      (22 648) 
                                       Discount rate             (0.6%)/1.4%           985       (1 044) 
                                       Cash flows                **                  1 920       (1 426) 
                                       Property values           (10%)/10%          32 812      (32 812) 
                                       Precious and industrial 
                                        metal prices             (6%)/6%               762       (1 270) 
                                       Underlying asset 
                                        value                    #                   2 013       (5 145) 
                                       Other^                    ^                  29 642      (90 275) 
                                                                                ----------  ------------ 
 
Loans and advances                     Potential impact 
 to customers               1 036 754   on income statement                         32 496      (61 423) 
                                                                                ----------  ------------ 
                                                                 0.04% 
                                       Credit spreads             -5.3%             10 288      (16 908) 
                                       Price earnings multiple   3.5x-7x             3 955         (502) 
                                       Discount rate             0.05                   75         (220) 
                                       Underlying asset 
                                        value^^                  ^^                  1 211       (2 945) 
                                       Property values           (5%)/5%               232         (232) 
                                       Cash flows                *                   1 954       (3 229) 
                                       Underlying asset 
                                        value                    #                     249         (249) 
                                       Other^                    ^                  14 532      (37 138) 
                                                                                ----------  ------------ 
                                       Potential impact 
                                        on other comprehensive 
                                        income 
                                                                 0.082% 
                                       Credit spreads             -37.86%            9 387      (18 622) 
 
Other securitised                      Potential impact 
 assets                       107 353   on income statement 
                                       Cash flow adjustments     CPR 5.3%               53          (78) 
 
Total level 3 assets        2 203 621                                              160 957     (276 448) 
--------------------------  ---------  ------------------------  -------------  ----------  ------------ 
Liabilities 
Deposits by banks                      Potential impact 
                                  313   on income statement 
                                       Underlying asset 
                                        value^^                  ^^                   (31)            94 
Derivative financial                   Potential impact 
 instruments                   31 517   on income statement                        (4 837)         5 278 
                                       Volatilities              3.6% -21.6%         (221)           662 
                                       Underlying asset 
                                        value^^                  ^^                (4 616)         4 616 
Liabilities arising 
 on securitisation                     Potential impact 
 of other assets              109 107   on income statement 
                                       Cash flow adjustments     CPR 5.3%            (435)           380 
                                       Potential impact 
Other liabilities              41 324   on income statement 
                                       Property values           (10%)/10%         (4 681)         4 681 
Total level 3 liabilities     182 261                                              (9 984)        10 433 
                                                                                ----------  ------------ 
Net level 3 assets          2 021 360 
--------------------------  ---------  ------------------------  -------------  ---------- 
 

* The sensitivity of the fair value of liabilities arising on securitisation of other assets has been considered together with other securitised assets.

Other - The valuation sensitivity has been assessed by adjusting various inputs such as expected cash flows, discount rates, earnings multiples rather than a single input. It is deemed appropriate to reflect the outcome on a portfolio basis for the purposes of this analysis as the sensitivity of the assets cannot be determined through the adjustment of a single input.

^ Underlying asset values are calculated by reference to a tangible asset, for example property, aircraft or shares.

The EBITDA and cash flows have been stressed on an investment-by-investment basis in order to obtain favourable and unfavourable valuations.

# Net asset asset values are calculated by reference to the fair value of the assets and liabilities within the entity.

In determining the value of level 3 financial instruments, the following are the principal input that can require judgement:

Credit spreads

Credit spreads reflect the additional yield that a market participant would demand for taking exposure to the credit risk of an instrument. The credit spread for an instrument forms part of the yield used in a discounted cash flow calculation. In general a significant increase in a credit spread in isolation will result in a movement in fair value that is unfavourable for the holder of a financial instrument.

Discount rates

Discount rates (including WACC) are used to adjust for the time value of money when using a discounted cash flow valuation method. Where relevant, the discount rate also accounts for illiquidity, market conditions and uncertainty of future cash flows.

Volatilities

Volatility is a key input in the valuation of derivative products containing optionality. Volatility is a measure of the variability or uncertainty in returns for a given derivative underlying. It represents an estimate of how much a particular underlying instrument, parameter or index will change in value over time.

Cash flows

Cash flows relate to the future cash flows which can be expected from the instrument and requires judgement.

EBITDA

The company's earnings before interest, taxes, depreciation and amortisation. This is the main input into a price earnings multiple valuation method.

Price-earnings multiple

The price earnings ratio is an equity valuation multiple. It is a key driver in the valuation of unlisted investments.

Property values and precious and industrial metals

The property value and precious and industrial metals is a key driver of future cash flows on these investments.

Underlying asset value

In instances where cash flows have links to referenced assets, the underlying asset value is used to determine the fair value. The underlying asset valuation is derived using observable market prices sourced from broker quotes, specialist valuers or other reliable pricing sources

The following table sets out the fair value of financial instruments held at amortised cost when the carrying value is not a reasonable approximation of fair value.

 
At 30 September 2020 
                                                           Carrying 
GBP'000                                                      amount    Fair value 
-------------------------------------------------------- 
Assets 
Cash and balances at central banks                        2 477 636   2 477 632 
Loans and advances to banks                               3 079 807   3 078 702 
Non-sovereign and non-bank cash placements                  352 191     352 188 
Reverse repurchase agreements and cash collateral 
 on securities borrowed                                   3 133 189   3 133 275 
Sovereign debt securities                                   325 829     331 453 
Bank debt securities                                        187 361     194 421 
Other debt securities                                       848 412     842 159 
                                                             22 742      22 750 
Loans and advances to customers                                 966         272 
Own originated loans and advances to customers 
 securitised                                                307 532     307 530 
Other loans and advances                                    100 659      98 422 
Other assets                                              1 008 152   1 007 996 
Liabilities 
Deposits by banks                                         3 319 414   3 336 577 
Repurchase agreements and cash collateral on securities 
 lent                                                     1 254 846   1 259 412 
                                                             30 955      31 012 
Customer accounts (deposits)                                    396         834 
Debt securities in issue                                  1 574 082   1 600 818 
Liabilities arising on securitisation of own originated 
 loans and advances                                          73 042      73 042 
Other liabilities                                         1 153 821   1 152 726 
Subordinated liabilities                                  1 092 585   1 172 099 
--------------------------------------------------------  ---------  ---------- 
 

Events after the reporting date

The significant judgements and estimates applied to prepare the interim financial statements as at 30 September 2020 reflected the impact of COVID-19 and the resulting impact on the economy as at the balance sheet date. These judgements, specifically those relating to the impairment of loans and advances and valuation of fair value instruments, were determined by considering a range of economic scenarios including the adverse impact of COVID-19 and by applying the guidance issued by various international regulators and standard setting bodies.

The action of various governments and central banks, in particular in the United Kingdom and South Africa, provides an indication of the potential severity of the downturn and that the recovery environment could be significantly different from past crises with a duration which is also difficult to predict. Subsequent to the balance sheet date, it was announced that various vaccine trials proved to be more than 90% effective and resultingly had a very positive impact on global markets. It still remains very difficult to predict when a full scale role out of the vaccine will take place. In South Africa various government and social programmes were launched, aimed at reducing the impact of COVID-19 and to stimulate the economy and in the UK previously launched schemes have been extended in an attempt to mitigate the economic impact of COVID-19.

The group believes that the significant judgements and estimates made at the balance sheet date took account of the impact of COVID-19 and the results of subsequent event procedures performed by management up to 18 November 2020 did not identify additional information that requires these judgements and estimates to be updated. Management is satisfied that there were no such items of sufficient significance to warrant additional disclosure. However, should the COVID-19 crisis cause disruption to global economic activity for a longer period than forecasted, this could put additional upward pressure on the group ECLs and downward pressure on other valuations.

Investec Bank plc owns the appointed asset manager of Investec Australia Property Fund (IAPF). On 18 November 2020, the IAPF shareholders voted to purchase the asset management company for an amount of AUD$40m subject to certain conditions.

The group is further not aware of any other events after the reporting date as defined by IAS 10 Events after the Reporting Period, that would require the financial statements to be adjusted or which would require additional disclosures.

Investec plc

Incorporated in England and Wales

Registration number: 3633621

LSE ordinary share code: INVP

JSE share code: INP

ISIN: GB00B17BBQ50

LEI: 2138007Z3U5GWDN3MY22

Ordinary share dividend announcement

In terms of the DLC structure, Investec plc shareholders registered on the United Kingdom share register may receive all or part of their dividend entitlements through dividends declared and paid by Investec plc on their ordinary shares and/or through dividends declared and paid on the SA DAN share issued by Investec Limited.

Investec plc shareholders registered on the South African branch register may receive all or part of their dividend entitlements through dividends declared and paid by Investec plc on their ordinary shares and/or through dividends declared and paid on the SA DAS share issued by Investec Limited.

Declaration of dividend number 36

Notice is hereby given that an interim dividend number 36, being a gross dividend of 5.5 pence (2019: 11 pence) per ordinary share has been declared by the Board from income reserves in respect of the six months ended 30 September 2020 payable to shareholders recorded in the shareholders' register of the company at the close of business on Friday, 11 December 2020.

-- For Investec plc shareholders, registered on the United Kingdom share register, through a dividend payment by Investec plc from income reserves of 5.5 pence per ordinary share

-- For Investec plc shareholders, registered on the South African branch register, through a dividend payment by Investec Limited, on the SA DAS share, payable from income reserves, equivalent to 5.5 pence per ordinary share.

 
The relevant dates relating to the payment of dividend number 36 
 are as follows: 
--------------------------------------------------------------------- 
Last day to trade cum-dividend 
 On the Johannesburg Stock                  Tuesday, 08 December 2020 
 Exchange (JSE)                           Wednesday, 09 December 2020 
 On the London Stock Exchange 
 Shares commence trading ex-dividend      Wednesday, 09 December 2020 
 On the Johannesburg Stock                 Thursday, 10 December 2020 
 Exchange                                    Friday, 11 December 2020 
 On the London Stock Exchange                 Monday, 04 January 2021 
 Record date (on the JSE and 
 LSE) 
 Payment date (on the JSE 
 and LSE) 
Share certificates on the South African branch register may not 
 be dematerialised or rematerialised between Wednesday, 09 December 
 2020 and Friday, 11 December 2020, both dates inclusive, nor may 
 transfers between the United Kingdom share register and the South 
 African branch register take place between Wednesday, 09 December 
 2020 and Friday, 11 December 2020, both dates inclusive. 
--------------------------------------------------------------------- 
 

Additional information for South African resident shareholders of Investec plc

-- Shareholders registered on the South African branch register are advised that the distribution of 5.5 pence, equivalent to a gross dividend of 112 cents per share, has been arrived at using the Rand/Pound Sterling average buy/sell forward rate, as determined at 11h00 (SA time) on Wednesday, 18 November 2020

   --     Investec plc United Kingdom tax reference number: 2683967322360 
   --     The issued ordinary share capital of Investec plc is 696 082 618 ordinary shares 

-- The dividend paid by Investec plc to South African resident shareholders registered on the South African branch register and the dividend paid by Investec Limited to Investec plc shareholders on the SA DAS share are subject to South African Dividend Tax (Dividend Tax) of 20% (subject to any available exemptions as legislated)

-- Shareholders registered on the South African branch register who are exempt from paying the Dividend Tax will receive a net dividend of 112 cents per share paid by Investec Limited on the SA DAS share

-- Shareholders registered on the South African branch register who are not exempt from paying the Dividend Tax will receive a net dividend of 89.6 cents per share (gross dividend of 112 cents per share less Dividend Tax of 22.4 cents per share) paid by Investec Limited on the SA DAS share.

By order of the board

D Miller

Company Secretary

18 November 2020

Investec plc

Incorporated in England and Wales

Registration number: 3633621

Share code: INPP

ISIN: GB00B19RX541

LEI: 2138007Z3U5GWDN3MY22

Preference share dividend announcement

Non-redeemable non-cumulative non-participating preference shares ("preference shares")

Declaration of dividend number 29

Notice is hereby given that preference dividend number 29 has been declared by the board from income reserves for the period 01 April 2020 to 30 September 2020 amounting to a gross preference dividend of 5.51508 pence per preference share payable to holders of the non-redeemable non-cumulative non-participating preference shares as recorded in the books of the company at the close of business on Friday, 11 December 2020.

For shares trading on the Johannesburg Stock Exchange (JSE), the dividend of 5.51508 pence per preference share is equivalent to a gross dividend of 112.42435 cents per share, which has been determined using the Rand/Pound Sterling average buy/sell forward rate as at 11h00 (SA time) on Wednesday, 18 November 2020.

 
The relevant dates for the payment of dividend number 29 are as 
 follows: 
--------------------------------------------------------------------------- 
Last day to trade cum-dividend 
On the Johannesburg Stock Exchange                Tuesday, 08 December 2020 
(JSE)                                            Wednesday, 09 December2020 
On the International Stock Exchange 
(TISE) 
 
Shares commence trading ex-dividend 
On the Johannesburg Stock Exchange              Wednesday, 09 December 2020 
(JSE)                                            Thursday, 10 December 2020 
On the International Stock Exchange 
(TISE) 
 
Record date (on the JSE and TISE)                   Friday,11 December 2020 
 Payment date (on the JSE and TISE)             Wednesday, 23 December 2020 
 
Share certificates may not be dematerialised or rematerialised between 
 Wednesday,09 December 2020 and Friday, 11 December 2020, both dates 
 inclusive, nor may transfers between the United Kingdom share register 
 and the South African branch register take place between Wednesday, 
 09 December 2020 and Friday, 11 December 2020, both dates inclusive. 
--------------------------------------------------------------------------- 
 
 

Additional information for South African resident shareholders of Investec plc

   --     Investec plc United Kingdom tax reference number: 2683967322360 
   --     The issued preference share capital of Investec plc is 2 754 587 preference shares 

-- The dividend paid by Investec plc to shareholders recorded on the South African branch register is subject to South African Dividend Tax (Dividend Tax) of 20% (subject to any available exemptions as legislated)

-- The net dividend amounts to 89.93948 cents per preference share for preference shareholders liable to pay the Dividend Tax and 112.42435 cents per preference share for preference shareholders exempt from paying the Dividend Tax.

By order of the board

D Miller

Company Secretary

18 November 2020

Investec plc

Incorporated in England and Wales

Registration number: 3633621

JSE share code: INPPR

ISIN: GB00B4B0Q974

LEI: 2138007Z3U5GWDN3MY22

Rand-denominated preference share dividend announcement

Rand-denominated non-redeemable non-cumulative non-participating perpetual preference shares ("preference shares")

Declaration of dividend number 19

Notice is hereby given that preference dividend number 19 has been declared by the board from income reserves for the period 01 April 2020 to 30 September 2020 amounting to a gross preference dividend of 350.65412 cents per preference share payable to holders of the Rand-denominated non-redeemable non-cumulative non-participating perpetual preference shares as recorded in the books of the company at the close of business on Friday,11 December 2020.

 
The relevant dates relating to the payment of dividend number 18 
 are as follows: 
---------------------------------------------------------------------- 
Last day to trade cum-dividend               Tuesday, 08 December 2020 
Shares commence trading ex-dividend        Wednesday, 09 December 2020 
Record date                                   Friday, 11 December 2020 
Payment date                               Wednesday, 23 December 2020 
 
Share certificates may not be dematerialised or rematerialised 
 between Wednesday, 09 December 2020 and Friday, 11 December 2020, 
 both dates inclusive. 
---------------------------------------------------------------------- 
 
 

Additional information for South African resident shareholders of Investec plc

   --     Investec plc United Kingdom tax reference number: 2683967322360 

-- The issued Rand-denominated preference share capital of Investec plc is 131 447 preference shares

-- The dividend paid by Investec plc to shareholders recorded on the South African branch register is subject to South African Dividend Tax (Dividend Tax) of 20% (subject to any available exemptions as legislated)

-- The net dividend amounts to 280.52330 cents per preference share for preference shareholders liable to pay the Dividend Tax and 350.65412 cents per preference share for preference shareholders exempt from paying the Dividend Tax.

By order of the board

D Miller

Company Secretary

18 November 2020

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