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Investec Bank Limited - Unaudited Financial Results
Investec Bank Limited
(Registration number 1969/004763/06)
JSE Code: INLP ISIN: ZAE000048393
Unaudited consolidated SA GAAP financial results in Rands for the six months
ended 30 September 2003
Consolidated income statement
6 months to 6 months to Year to
30 Sept. 30 Sept. 31 March
2003 2002 2003
(R millions) Unaudited Unaudited Audited
Interest received 3,889 2,373 7,226
Interest paid (3,056) (1,749) (5,970)
Net interest income 833 624 1,256
Provision for bad and (23) (79) (281)
doubtful debts
810 545 975
Other income 426 557 976
Total income 1,236 1,102 1,951
Operating expenses (513) (615) (1,247)
Income before headline 723 487 704
adjustments
Headline adjustments - (7) (256)
Income before taxation 723 480 448
Taxation (14) (16) (42)
Income after taxation 709 464 406
Earnings attributable to - - (2)
minority shareholders
709 464 404
Compulsorily convertible (134) (134) (267)
debenture interest
Earnings attributable to 575 330 137
ordinary shareholders
Headline earnings
attributable to shareholders
Calculation of headline 575 330 137
earnings
Earnings attributable to
ordinary shareholders
Headline adjustments - 7 256
Goodwill amortised - 7 10
Loss on disposal of - - (17)
subsidiaries and fixed assets
Losses on the impairment of - - 263
non-trading loans
Headline earnings 575 337 393
attributable to shareholders
Less preference dividends (22) - -
payable
Headline earnings 553 337 393
attributable to ordinary
shareholders
Statement of changes in shareholders" funds
6 months to 6 months to Year to
30 Sept. 30 Sept. 31 March
2003 2002 2003
(R millions) Unaudited Unaudited Audited
Balance at the beginning of 7,974 8,649 8,649
the period
Adjustments to opening 160 - -
reserves as a result of AC133
Net issue of perpetual 1,492 - -
preference shares
Earnings attributable to 575 330 137
shareholders
Preference dividends payable (22) - -
Dividends paid - (800) (800)
Movement in foreign currency 27 (12) (53)
translation reserves
Movement in investment (67) 9 41
revaluation reserves
Balance at the end of the 10,139 8,176 7,974
period
Abridged cash flow statement
6 months to 6 months to Year to
30 Sept. 30 Sept. 31 March
2003 2002 2003
(R millions) Unaudited Unaudited Audited
Cash inflow/(outflow) from 605 (376) (72)
operating activities
Cash outflow from banking (1,023) (1,144) (166)
operations
Cash (utilised)/generated in (12) (18) 18
investing activities
Cash inflows from financing 397 2,198 1,533
activities
Net (decrease)/increase in (33) 660 1,313
cash and short-term funds
Cash and short-term funds at 10,429 9,116 9,116
beginning of period
Cash and short-term funds at 10,396 9,776 10,429
end of period
Consolidated balance sheet
30 Sept. 30 Sept. 31 March
2003 2002 2003
(R millions) Unaudited Unaudited Audited
Assets
Cash and short-term funds 10,396 9,776 10,429
Short-term negotiable securities 9,514 5,841 8,199
Investment and trading securities 14,001 10,958 10,183
Other assets 1,370 4,615 5,675
Advances 33,354 27,458 28,158
Intergroup 11,513 9,325 10,274
Associated companies - 16 -
Fixed assets 150 199 164
Intangible assets 1 3 1
80,299 68,191 73,083
Equity and liabilities
Capital and reserves
Ordinary share capital 16 16 16
Perpetual preference shares 1,492 - -
Compulsorily convertible 1,938 1,938 1,938
debentures
Reserves 6,693 6,222 6,020
10,139 8,176 7,974
Interest of minority shareholders 33 31 33
in subsidiaries
Total shareholders" funds 10,172 8,207 8,007
Subordinated debt 2,945 2,245 2,801
Redeemable preference shares 1,608 1,812 1,820
Total capital resources 14,725 12,264 12,628
Liabilities
Deposits and other accounts 65,514 55,886 60,398
Taxation 60 41 57
80,299 68,191 73,083
Segmental information
For the 6 months ended 30 September 2003
Private Treasury &
Client Specialised Investment
Activities Finance Banking Other Total
Total income 311 317 208 400 1,236
Operating (208) (176) (27) (102) (513)
expenses
Operating 103 141 181 298 723
profits
before
headline
adjustments
and taxation
Cost to 61.9 56.0 12.9 25.5 40.7
income ratio
(%)
For the 6 months
ended 30 September 2002
Private Treasury &
Client Specialised Investment
Activities Finance Banking Other Total
Total income 249 541 53 259 1,102
Operating (164) (175) (29) (247) (615)
expenses
Operating 85 366 24 12 487
profits
before
headline
adjustments
and taxation
Cost to 64.0 37.7 66.6 63.5 51.5
income ratio
(%)
Commentary
Investec Bank Limited, a wholly owned subsidiary of Investec Limited, is pleased
to announce that headline earnings increased by 70.6% from R337 million to R575
million. Excluding the impact of AC133, would have resulted in an increase of
43.6%.
Income before taxation and headline adjustments (NIBT) increased by 48.5% to
R723 million, with solid performances from the Investment Banking, Private
Banking and Group Services and
Other Activities divisions.
The banking capital adequacy ratio for Investec Bank Limited was 21.1%.
Accounting policies
Basis of preparation
The interim report has been prepared in conformity with South African Statements
of Generally Accepted Accounting Practice and in the manner required by the
South African Companies Act of 1973.
Changes to accounting policies
Accounting policies applied are consistent with those applied in the
31 March 2003 annual report, except for the changes as a result of the adoption
of the accounting statement on recognition and measurement of financial
instruments (AC133).
In terms of AC133, all financial assets and financial liabilities are required
to be classified into prescribed categories which determine their recognition
and measurement criteria. Further, the statement has introduced principles in
relation to impairments of financial instruments carried at amortised cost which
replaces previous methodologies of determining specific and general provisions.
The major changes to Investec Bank Limited Group (Bank) as a result of adopting
the standard are detailed below:
Fair value adjustments
- The statement requires all derivatives to be recorded on balance sheet at
fair value, with changes in fair value being recognised in the income statement
(except for fair value adjustments relating to the successful application of
cash flow hedging principles, which result in fair value adjustments being
recognised directly in equity until the occurrence of the cash flow being
hedged). In prior years, non trading derivatives within the banking book were
accounted for on the same basis as the underlying asset, liability or cash flow
being hedged. On adoption of AC133, all of these derivatives have been
recognised on balance sheet at fair value. Except for the application of cash
flow hedging, all changes in fair value are recognised in income. To the extent
that hedge accounting principles have been successfully applied, changes in fair
value relating to the hedged risk of the underlying hedged item have also been
recognised in income.
- In certain instances where hedge accounting is impractical to apply, and
the Bank deems it appropriate, related financial assets and financial
liabilities are designated as held at fair value. This designation is made at
inception of the financial asset or financial liability (or on adoption of
AC 133) and cannot be changed.
- To the extent that derivatives have been identified as embedded in a host
contract that is not carried at fair value and the economic characteristics of
the embedded derivative are not closely related to that of the host contract,
the embedded derivative has been separated from the host contract and accounted
for as a stand alone derivative.
Impairments
- Specific impairments are determined for non performing loans and advances
based on a discounted cash flow methodology. This has resulted in specific
impairments greater than the previous specific provisions due to the
introduction of a discount factor in determining the present value of the
expected cash flows.
- In prior years, the Bank"s general provision had been determined taking
into account the structure and risk characteristics of the Bank loan portfolio
and ensuring that the minimum requirements of the banking regulations in the
jurisdictions in which the Bank operated were maintained. Portfolio impairments
are determined for loans that are not specifically identified as impaired or non
performing based on a discounted cash flow methodology, taking into account
historical loss given defaults, probabilities of default and changes in the
credit quality of loans and advances since inception. This has resulted in
significantly lower portfolio impairments when compared to general provisions
raised previously. The difference between impairments and regulatory minimum
provisions per regulatory asset category has been met by transferring sufficient
distributable reserves to a non-distributable regulatory reserve.
Opening transitional adjustments
AC133 provides that changes resulting from the adoption of the standard be
applied prospectively and therefore adjustments at 1 April 2003 have been
accounted for as an adjustment to opening retaining income. Based on the Bank"s
interpretation of ED168 issued by The South African Institute of Chartered
Accountants, the release of previous provisions has been treated consistently
with the above mentioned transitional adjustments.
The impact of adopting AC133 on the opening shareholders funds is detailed in
the table below:
At 1 April 2003
Equity
Retained revaluation
R million income reserve
Adjustments:
- Fair value adjustments to derivatives and (123) -
other financial instruments
- Reclassification of equity revaluations 20 (20)
- Present value adjustments to specific (36) -
impairments
- Reversal of general debt provision 354 -
- Creation of portfolio impairment (35) -
180 (20)
- Transfer to non distributable regulatory (333) -
reserve
Change in total shareholders funds (153) (20)
Non Total
distributable
regulatory shareholders"
reserve funds
Adjustments:
- Fair value adjustments to derivatives and - (123)
other financial instruments
- Reclassification of equity revaluations - -
- Present value adjustments to specific - (36)
impairments
- Reversal of general debt provision - 354
- Creation of portfolio impairment - (35)
- 160
- Transfer to non distributable regulatory 333 -
reserve
Change in total shareholders funds 333 160
The impact of AC133 was to increase earnings for the six months ended 30
September 2003 as follows:
R million
Net interest income 110
Impairments 29
Non interest income (48)
Income before taxation 91
Taxation -
Income after taxation 91
At 30 September 2003 a further transfer of R94 million was made from retained
income to the non distributable regulatory reserve.
Interpretations relating to accounting, regulatory and taxation effects on
adoption of AC133 are currently subject to debate within the South African
context. The resolution of the above may impact on the opening adjustments
presented. The Bank"s financial reporting will be affected by further amendments
to the international accounting standard (IAS39) when incorporated into AC133.
Non-redeemable non-cumulative non-participating preference shares
Declaration of dividend number 1
Notice is hereby given that preference dividend number 1 amounting to 143,74
cents per share has been declared for the period 13 August 2003 to 30 September
2003. The dividend is 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 5 December 2003.
The relevant dates relating to the payment of dividend number 1 are as follows:
Last day to trade cum dividend Friday, 28 November 2003
Shares trade ex dividend Monday, 1 December 2003
Record date Friday, 5 December 2003
Payment date Monday, 8 December 2003
Share certificates may not be dematerialised or rematerialised between Monday, 1
December 2003 and Friday, 5 December 2003 both days inclusive.
By order of the board
S. Noik Sandton
Company secretary 14 November 2003
Registered office Transfer secretaries
100 Grayston Drive Computershare Limited
Sandown 70 Marshall Street
Sandton 2196 Johannesburg 2001
Directors: H S Herman (Chairman), D M Lawrence* (Deputy Chairman). S Koseff*
(Chief Executive). B Kantor* (Managing). S E Abrahams. G R Burger*. D E Jowell.
M P Malungani. D R Motsepe. Dr M Z Nkosi. B Tapnack*. P R S Thomas. F Titi. R A
P Upton. *Executive
Company secretary: S Noik
Date: 27/11/2003 09:00:13 AM Produced by the JSE SENS Department
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