2138007Z3U5GWDN3MY22-2022-03-31-T01

Investec plc, which houses our non-Southern African businesses, has been listed on the

London Stock Exchange since 2002.

During July 2002, Investec Group Limited (since renamed Investec Limited) implemented a dual-listed companies (DLC)

structure and listed its offshore business on the London Stock Exchange (LSE).

In terms of our DLC structure, Investec Limited is the holding company of our businesses in Southern Africa, and Investec plc is

the holding company of our non-Southern African businesses. Investec Limited is listed on the Johannesburg Stock Exchange

Limited (JSE) South Africa (since 1986) and Investec plc on the LSE (since 2002).

All references in this report to the Group relate to Investec plc, whereas references to Investec, Investec Group or DLC relate

to the combined DLC Group comprising Investec plc and Investec Limited.

A circular on the establishment of our DLC structure was issued on 20 June 2002 and is available on our website.

How we are structured

Non-Southern African operations

Southern African operations

Investec plc

Investec Limited

LSE primary listing

JSE primary listing

JSE secondary listing

NSX secondary listing

BSE secondary listing

Investec

Bank

Limited

Investec

Wealth and

Investment

International

(Pty) Ltd

Investec Bank plc

Investec Wealth & Investment Limited

All shareholdings in the ordinary share capital of the subsidiaries shown are 100%.

Salient features of the DLC structure

•Investec plc and Investec Limited are separate legal entities and listings, but are bound together by contractual agreements

and mechanisms

•Investec operates as if it is a single unified economic enterprise

•Shareholders have common economic and voting interests as if Investec plc and Investec Limited were a single company

•Creditors, however, are ring-fenced to either Investec plc or Investec Limited as there are no cross-guarantees between

the companies.

Operational and

strategic overview

Investec plc Annual Financial Statements 2022

OVERVIEW OF THE INVESTEC GROUP'S AND INVESTEC PLC'S ORGANISATIONAL STRUCTURE

We provide our clients with a diversified, combined and integrated banking and wealth management

offering with extensive depth and breadth of product and services

Specialist Banking

Our teams are well positioned to provide solutions to meet

private, corporate and institutional clients' needs. Each

business provides specialised products and services to

defined target markets.

What makes us distinct?

•Provision of high-touch personalised service, with the ability

to execute quickly

•Ability to leverage international, cross-border platforms

•Well positioned to capture opportunities between the

developed and the emerging world

•Strong ability to originate, manufacture and distribute

•Balanced business model with good business depth

and breadth

•Provision of high-quality solutions to corporate and private

clients, with leading positions in select areas.

Focus on helping our clients create and preserve wealth

A highly valued partner and adviser to our clients

High net worth (HNW) private clients

Corporate, private, intermediary, government and

institutional clients

Private client

banking activities

Corporate and investment

banking activities

•Lending

•Private capital

•Transactional banking

•Savings

•Foreign exchange.

•Lending

•Treasury and risk management solutions

•Advisory

•Institutional research, sales and trading.

Channel Islands

UK and Europe

Channel Islands

USA

India

Our high-tech and high-touch private client offering

provides transactional banking, lending, private capital,

savings and foreign exchange tailored to suit our

clients’ needs.

Our target market includes HNW active wealth creators

(with >£300k annual income and >£3mn net asset value).

Our savings offering targets primarily UK retail savers.

Our client-centric, solution-driven offering provides

Corporate Banking and Investment Banking services to

private companies, private equity and sponsor-backed

companies and publicly listed companies.

Natural linkages between the private client and corporate business

Operational and

strategic overview

Investec plc Annual Financial Statements 2022

OVERVIEW OF THE ACTIVITIES OF INVESTEC PLC

Wealth & Investment

A leading private client investment manager in the UK

We are one of the largest investment management firms in

the UK and are committed to providing bespoke personal

service to private clients, trusts, charities, intermediaries

and pension schemes.

With 14 offices across the UK, together with

offices in the Channel Islands and Switzerland,

combined we employ over 1 300 people with

funds under management (FUM) of £44.4bn.

What makes us distinct?

We put our clients first, providing a service suited to their

individual requirements. We aim to build long-term

relationships with our clients so they can live their lives

confident in the knowledge that their finances are being

expertly looked after.

Our client groups

•Private clients – domestic and international

•Clients of professional advisors

•Charities

•Trusts.

Distribution channels

•Direct

•Intermediaries

•Investec Private Bank

•Investec internationally.

We exist to free our clients from the burden of having to look after their financial affairs on their own. We strive

to do this every day, via the quality of our professional advice, the excellence of the service we deliver and through

the preservation and growth of our clients' wealth.

Our offering

UK and Europe

Investment

and savings

Financial

planning

Pensions

and retirement

•Discretionary and advisory

portfolio management services

for private clients

•Specialist investment

management services for

charities, pension schemes

and trusts

•Financial planning advice

for private clients

•Specialist portfolio management

services for international clients

•Platform-based managed

portfolio service (MPS)

for advisers

•Range of specialist funds for

direct clients and advisers.

•Retirement planning

•Succession planning

•Bespoke advice and financial

reviews.

•Discretionary investment

management for company

pension and Self Invested

Personal Pensions (SIPPs)

•Advice and guidance on

pension schemes.

Operational and

strategic overview

Investec plc Annual Financial Statements 2022

OVERVIEW OF THE ACTIVITIES OF INVESTEC PLC

CONTINUED

Risk management

and governance

IN THIS SECTION

Risk management

Year in review from a risk perspective

Salient features

Principal risks

Risk management approach and framework

Credit and counterparty risk and asset quality

Additional policy information

Macro-economics

ESG (including climate) risk

Investment risk

Securitisation/structured credit

Market risk

Balance sheet risk and liquidity

Operational risk

Reputational, strategic, legal risk and compliance

Recovery and resolution plan

Capital management and allocation

Corporate Governance

Overview of disclosure

requirements

The risk disclosures provided are in line

with the requirements of International

Financial Reporting Standard 7 Financial

Instruments: Disclosures (IFRS 7) and

disclosures on capital required by

International Accounting Standard 1

Presentation of Financial Statements

(IAS 1) are included within this section of

the integrated annual report on pages

27 to 71 with further disclosures

provided within the annual financial

statements section on pages 94 to 187.

All sections, paragraphs, tables and

graphs on which an audit opinion is

expressed are marked as audited.

We supplement our IFRS figures with

alternative performance measures used

by management internally and which

provide valuable, relevant information to

readers of the financial statements.

Where applicable, definitions can be

found in the definitions section of this

report.

Information provided in this section of

the annual report is prepared on an

Investec plc consolidated basis unless

otherwise stated.

Investec plc also publishes a

separate Pillar III disclosure report

as required under Part 8 of the

Capital Requirements Regulation

pertaining to banks in the United

Kingdom (UK). This can be found

on the Investec Group’s website.

A summary of the year in review from a

risk perspective

The executive management is integrally

involved in ensuring stringent

management of risk, liquidity, capital and

conduct through our risk appetite

framework which is assessed with

consideration of prevailing market

conditions and overall Investec Group

strategy. The primary aim is to achieve a

suitable balance between risk and

reward in our business.

We are comfortable that we have a

strong balance sheet with high levels of

liquidity, strong capital and low leverage

as well as established risk management

processes and systems in place to

navigate through the continued

uncertainty emanating from ongoing

inflationary pressures and the economic

effects of the invasion of Ukraine. The

Group is well positioned for growth and

to serve its carefully chosen client base.

IBP’s long-term Moody’s deposit rating is

A1 (stable outlook) and Investec plc’s

rating is Baa1 (stable outlook). IBP’s

long-term Fitch rating is BBB+ with the

outlook now improved to stable from

negative, following review by Fitch.

Activity levels increased further during

the financial year as clients were in a

position to make investment decisions

given the greater macro-economic

certainty that existed and with the

backdrop of an increased forward-

looking rate environment. Increased

client activity and higher lending

turnover resulted in an increase in the

Bank's net core loan book by 17.0% to

£14.4 billion. Growth in net core loans

was driven by the private client

residential mortgage portfolio as well as

corporate client lending portfolios across

multiple asset classes.

Credit exposures are focused on

secured lending to a select target

market, comprising high-income and

high net worth individuals, established

corporates, and medium-sized

enterprises. Our risk appetite continued

to favour lower risk, income-based

lending, with exposures well

collateralised and with credit risk taken

over a short to medium term. We remain

focused on our target market,

supporting clients with significant wealth

and experience in their chosen sectors,

as indicated by our continued growth in

the private banking space as we

execute on our strategy to target this

sector of the market. Over the past few

years we have realigned and rebalanced

our portfolios in line with our risk

appetite framework and this is reflected

in the movements in asset classes on

our balance sheet; showing an increase

in private client, mortgages and

corporate and other lending, and

maintaining lending collateralised by

property as a proportion of net core

loans.The Group’s net core loan

exposures remain well diversified with

commercial rent producing property

loans comprising approximately 9.2% of

net core loans, other lending

collateralised by property 7.0%, high net

worth and other private client lending

35.6% and corporate and other lending

48.2% (with most industry

concentrations well below 5%).

We remain confident that we have a

well-diversified portfolio across sectors

and have no direct exposure to Russia or

Ukraine.

Although the current macro-environment

remains uncertain, the Group was able

to improve asset performance and risk

metrics throughout the year in review.

The credit loss ratio is well below

‘through-the cycle’ levels at 0.17% at 31

March 2022 down from 0.56% reported

at 31 March 2021, which is below

normalised levels due to limited Stage 3

impairments.

Stage 3 exposures reduced to £291

million at 31 March 2022 or 2.1% of

gross core loans subject to ECL (31

March 2021: 2.8%) due to a number of

successful exits from existing Stage 3

positions offset by limited new defaults.

These exposures are adequately

provisioned. Stage 3 coverage reduced

due to certain exits (and requisite write-

offs) of previously provided for

exposures.

Stage 2 exposures reduced to £992

million or or 7.1% as a proportion of

gross core loans subject to ECL at 31

March 2022 (31 March 2021: 10.4%), but

still remain elevated relative to pre-

pandemic levels reflecting the continued

uncertainty in the macro-economic

environment, particularly with respect to

inflation.

The measurement of ECL under IFRS 9

has increased complexity and reliance

on expert credit judgements. Key

judgemental areas under IFRS 9 are

highlighted in this document and are

subject to robust governance processes.

Investec plc applies the IFRS 9

transitional arrangements (including

COVID-19 ECL add-backs) to regulatory

capital calculations to absorb the impact

permissible of IFRS 9 over time.

The management ECL overlay totals

£16.8 million and seeks to capture the

significant level of judgement required in

the application of macro-economic

scenarios as well as the ongoing

uncertainty in the UK and global

operating environment that is not

currently captured completely by

modelled outputs. In line with our

previous approach Stage 3 ECLs

continued to be assessed using expert

credit judgement.

Further detail on key judgements

can be found on page 44.

Risk management

and governance

Investec plc Annual Financial Statements 2022

RISK MANAGEMENT

There has been significant progress

globally with respect to ESG

considerations over the period,

providing momentum to partner with our

clients and stakeholders to accelerate a

cleaner, more resilient and inclusive

world. We are committed to respecting

human rights and support internationally

recognised principles, guidelines and

voluntary standards dealing with ESG.

These considerations are integrated as

part of our credit decision-making and

we have taken steps to calculate a

baseline with respect to the Group’s

Scope 3 emissions.

Risk management and risk reduction

costs associated with the structured

products book were immaterial at c.£5.9

million, compared to a £93 million loss

incurred in the prior year underpinned by

risk mitigation strategies implemented

on the book, improving markets and a

reduction in the size of the remaining

book. The macro hedge implemented in

the prior year remains in place and has

provided downside protection in the

event of another extreme market

dislocation. At 31 March 2022, the 95%

one-day Value at Risk (VaR) measure

was £0.4 million, reduced from £0.5

million at 31 March 2021.

We have reduced our investment

portfolio exposure in line with our

objective of optimising capital allocation,

reducing income volatility, and aligning

the business with our client franchises.

The investment portfolio on the balance

sheet reduced by 2.8% over the year

under review to £694 million at 31 March

2022.

Following the distribution that took place

on 31 May 2022, Investec plc retains a

c.10% shareholding in Ninety One

(previously known as Investec Asset

Management) as an investment (31

March 2022: c.15%).

The Group continued to maintain a

sound balance sheet with a low gearing

ratio of 10.4 times and a core loans

to equity ratio of 5.4 times at

31 March 2022. The Group’s leverage

ratio was 9.0% ahead of the minimum

6% target level. The increase in Investec

plc’s leverage ratio was driven by the

regulatory change implemented in the

UK from 1 January 2022 to exclude

qualifying Central Bank balances from

the calculation of the leverage exposure

measure.

We maintain an Investec Group target

Common Equity Tier 1 (CET1) ratio in

excess of 10% which is currently

considered appropriate for our business,

given our sound leverage ratios and

significant capital light revenues. The

Group is on the standardised approach

for capital. The CET1 ratio was 11.4%

at 31 March 2022 in excess of regulatory

minimums and ahead of our Investec

Group target and well in excess of

regulatory minimums.

In March 2021, the Bank of England

(BoE) re-confirmed the preferred

resolution strategy for the Bank as

‘modified insolvency’. As the resolution

strategy is ‘modified insolvency’, the BoE

has set IBP's minimum requirement for

own funds and eligible liabilities (MREL)

requirement as equal to its total

regulatory capital requirements.

Investec plc is in the early stages of a

process to migrate from the

Standardised approach to the Internal

Ratings Based (IRB) approach.

Holding a high level of readily available,

high quality liquid assets remains

paramount in the management of our

balance sheet. We continued to maintain

a low reliance on interbank wholesale

funding to fund core lending asset

growth. A strong liquidity position

continued to be maintained throughout

the year primarily supported by growth

in retail customer deposits. Cash and

near cash balances amounted to

£8.9 billion at 31 March 2022

(31 March 2021:£6.9 billion). Average

cash balances remained high as we

maintained a conservative position

holding higher levels of Group cash

balances due to ongoing market

volatility as well as to support the

ongoing digital transition.

Customer accounts (deposits)

totalled £18.3 billion at 31 March 2022

(31 March 2021: £16.1 billion). The digital

offerings continued to be rolled out

during the year with strong uptake from

retail clients, which substantially

reduces the operational cost of deposit

raising for these products.

Loans and advances to customers as

a percentage of customer deposits

remained conservative at 78.9%. The

Group comfortably exceeds Basel

liquidity requirements for the Liquidity

Coverage Ratio (LCR) and Net Stable

Funding Ratio (NSFR). Investec plc

reported a LCR of 457% and a NSFR of

145% at 31 March 2022.

Looking forward, the focus remains

on having an optimised funding mix

through the retail market, in line with

the Group’s strategic objectives as well

as selectively using wholesale funding

to lengthen the book. We have access

to the BoE Term Funding Scheme with

additional incentives for Small and

Medium Enterprises (TFSME).

Countering financial and cyber crime are

high priorities, particularly given the

heightened cyber risk at present due to

the Russian invasion of Ukraine. The

Group continually aims to strengthen

and test systems and controls in order

to manage cyber risk as well as meet

regulatory obligations to combat money

laundering, fraud and corruption.

The Group recognises potential

challenges faced in ensuring successful

delivery of digitalisation strategies and

embedding of change. This includes the

technology investments, resourcing

levels, and skills needed to operate a

digital business. Concentration risk

related to big tech and cloud platforms

is increasing. Growing reliance on

technology service providers heightens

the potential impact of third party

disruption, cyber threats, and data

breaches. Developments in the

technology landscape are closely

monitored to ensure appropriate

response and management of disruptive

effects on the Group. The impact of

digitalisation initiatives and cloud

adoption on the Group’s risk profile is

continually tracked, with consideration

given to key controls related to cyber

risk, technology integration, data

privacy, and vendor resiliency.

Risk management

and governance

Investec plc Annual Financial Statements 2022

RISK MANAGEMENT

CONTINUED

The Group focuses on building a strong,

diverse and capable workforce. The risk

associated with staff recruitment and

retention in an extremely competitive

market, with shortage of certain skills is

continuously considered and reviewed.

We are constantly considering the future

world of work, how we prioritise a safe

working environment for employees,

remain relevant and forward thinking,

with a focus on adaptability and agility in

response to a changing environment.

We are closely monitoring the

implications of flexible working

arrangements on the Group's culture

and performance as well as

consequential impacts on talent

retention.

The Group operates in a legal and

regulatory environment that exposes it

to litigation risks. As a result, the Group

is involved in disputes and legal

proceedings which arise in the ordinary

course of business. The Group evaluates

all facts, the probability of the outcome

of legal proceedings and advice from

internal and external legal counsel when

considering the accounting implications.

The Group’s stress testing framework is

well embedded in its operations and is

designed to identify and regularly test

the Group’s key vulnerabilities under

stress. A fundamental part of the stress

testing process is a full and

comprehensive analysis of the Group’s

material business activities,

incorporating views from risk, the

business units and the executive – a

process called the ‘bottom-up’ analysis.

Resulting from the ‘bottom-up’ analysis,

the Investec-specific stress scenarios

are designed to specifically test the

unique attributes of the Group’s

portfolio. The key is to understand the

potential threats to our sustainability and

profitability and thus a number of risk

scenarios are developed and assessed.

These Investec-specific stress scenarios

form an integral part of our capital

planning process and IFRS 9 reporting.

The stress testing process also informs

the risk appetite review process and the

management of risk appetite limits and

is a key risk management tool of the

Group. Reverse stress tests are

conducted to stress the Group’s

business plan to failure and consider a

broad variety of extreme and remote

events. These processes allows the

Group to proactively identify underlying

risks and manage them accordingly.

During the year, a number of stress

scenarios were considered and

incorporated into our processes

including assessing the potential impact

of climate change.

The Board, through its respective risk

and capital committees, continued to

assess the impact of its principal risks

and the above mentioned stress

scenarios on its business. The Board has

concluded that the Group has robust

systems and processes in place to

manage these risks and that, while

under a severe stress scenario business

activity would be very subdued, the

Group would continue to maintain

adequate liquidity and capital balances

to support the continued operation of

the Group.

The fundamental risk performance

during the period has been strong and

management is focused on maintaining

the sound underlying balance sheet.

The risk outlook remains uncertain given

the latest market volatility, rising

inflation as well as supply chain

pressures. However, subject to market

conditions, we are comfortable that we

are well placed for growth in the next

financial year given the management

actions taken to reduce risks across the

Group, supported by a strong capital

base and high levels of liquidity.

Risk management

and governance

Investec plc Annual Financial Statements 2022

RISK MANAGEMENT

CONTINUED

Salient features

A summary of the key risk indicators are provided in the table below:

31 March 2022

31 March 2021

Net core loans (£’million)

14 423

12 331

Total assets (£’million)

27 946

24 802

Total risk-weighted assets (£’million)

16 980

16 332

Total equity (£’million)

2 680

2 506

Funds under management (£’million)

44 419

41 708

Cash and near cash (£’million)

8 871

6 857

Customer accounts (deposits) (£’million)

18 294

16 078

Loans and advances to customers as a % of customer deposits

78.9%

76.7%

Structured credit as a % of total assets

1.5%

2.3%

Banking book investment and equity risk exposures as a % of total assets

2.5%

3.0%

Traded market risk: 95% one-day value at risk (£’million)

0.4

0.5

Core loans to equity ratio

5.4x

4.9x

Total gearing ratio*

10.4x

9.9x

Return on average assets#

0.88%

0.28%

Return on average risk-weighted assets#

1.40%

0.42%

Stage 3 exposures as a % of gross core loans subject to ECL

2.1%

2.8%

of which Ongoing (excluding Legacy) Stage 3##

1.7%

1.9%

Stage 3 exposure net of ECL as a % of net core loans subject to ECL

1.6%

2.0%

Credit loss ratio

0.17%

0.56%

Level 3 (fair value assets) as a % of total assets

6.4%

6.6%

Total capital ratio

16.5%

14.9%

Tier 1 ratio

12.8%

12.7%

Common Equity Tier 1 ratio

11.4%

11.0%

Leverage ratio

9.0%

7.8%

Leverage ratio (fully loaded)

8.7%

7.4%

*Total assets to total equity..

# Average balances are calculated on a straight-line average.

## Refer to definitions of page 189.

Risk management

and governance

Investec plc Annual Financial Statements 2022

SALIENT FEATURES

An overview of the principal risks relating

to our operations

The most material and significant risks

we face, which the Board and senior

management believe could have an

impact on our operations, financial

performance, viability and prospects are

summarised below with further

information pertaining to the

management and monitoring of these

principal risks shown in the references

provided.

The Board, through its various sub-

committees, has performed a robust

assessment of these principal risks and

regular reporting of these risks is made

to the Board.

The Board recognises that, even with

sound appetite and judgement, extreme

events can happen which are

completely outside of the Board’s

control. It is, however, necessary to

assess these events and their impact

and how they may be mitigated by

considering the risk appetite framework.

It is the Group's policy to regularly carry

out multiple stress testing scenarios

(including reverse stress testing) which,

in theory, test extreme but plausible

events and from that, assess and plan

what can be done to mitigate the

potential outcome.

The Group has a strong and embedded

risk and capital management culture and

policies and processes in place to

address these principal risks. Risk

awareness, controls and compliance are

embedded in all our day-to-day

activities through a levels of defence

model.

The levels of defence model is applied

as follows:

•Level 1 – Business line management:

responsible for identifying and

managing risks inherent in the

products, activities, processes and

systems for which it is accountable

and escalating risk events where

necessary

•Level 2 – Independent risk and

compliance functions: responsible for

building and embedding risk

frameworks, challenging the business

lines’ inputs to, and outputs from, the

Group’s risk management, risk

measurement and reporting activities

•Level 3 – Independent internal audit:

responsible for reviewing and testing

the application and effectiveness of

risk management procedures and

practices.

Overall Group risk appetite

The Group has a number of Board-

approved risk appetite statements and

policy documents covering our risk

tolerance and approach to our principal

aspects of risk. The risk appetite

statements and frameworks for Investec

plc and Investec Limited set out the

Board’s mandated risk appetite. The risk

appetite frameworks act as a guide to

determine the acceptable risk profile of

the Group. The risk appetite statements

ensure that limits/targets are applied

and monitored across all key operating

jurisdictions and legal entities.

The risk appetite frameworks are a

function of business strategy, budget

and capital processes, our stress testing

reviews and the regulatory and

economic environment in which the

Group is operating. The risk appetite

frameworks are reviewed (in light of the

above aspects) and approved by the

Board at least annually or as business

needs dictate.

A documented process exists where our

risk profile is measured against our risk

appetite and this positioning is

presented to the Board. In the section

that follows, the Group's high-level

summary of overall risk tolerance and

positioning has been detailed against

the respective principal risks.

Risk management

and governance

Investec plc Annual Financial Statements 2022

PRINCIPAL RISKS

Credit and

counterparty

risk

Credit and counterparty risk is defined as the risk arising from an

obligor’s (typically a client or counterparty) failure to meet the terms

of any agreement thereby resulting in a loss to the Group, arising

when funds are extended, committed, invested, or otherwise

exposed through contractual agreements, whether reflected on- or

off-balance sheet

Link to strategy

Monitoring and mitigation activities

•Independent credit committees exist in the

UK which also have oversight of regions

where we assume credit risk. These

committees operate under Board-

approved delegated limits, policies and

procedures

•There is a high level of executive

involvement in decision-making with non-

executive review and oversight

•Our credit exposures are to a select target

market comprising high-income and high

net worth individuals, established

corporates, small and medium-sized

enterprises, financial institutions and

sovereigns

•Our risk appetite continues to favour lower

risk, income-based lending, with

exposures well collateralised and credit

risk taken over a short to medium term

•Investec has a limited appetite for

unsecured debt, thus the credit risk

mitigation technique most commonly used

is the taking of collateral, with a strong

preference for tangible assets

•Portfolio reviews (including stress testing

analyses) are undertaken on all material

businesses, where the portfolios are

analysed to assess any migration in

portfolio quality, highlight any

vulnerabilities, identify portfolio

concentrations and make appropriate

recommendations, such as a reduction in

risk appetite limits or specific exposures.

Further information

Read more on pages

27 to 44

Risk appetite and tolerance metric

Positioning at 31 March 2022

We target a diversified loan portfolio, lending

to clients we know and understand. We limit

our exposure to a single/connected individual

or company to £120 million. We also have a

number of risk tolerance limits and targets for

specific asset classes.

We maintained this risk tolerance level

throughout the year.

We target a credit loss ratio of less than 0.5%

(less than 1.5% under a weak economic

environment/stressed scenario). We target

Stage 3 net of ECL as a % of net core loans

subject to ECL to be less than 2% (excluding

the legacy portfolio; less than 4% under a

weak economic environment/stressed

scenario). We target Stage 3 net of ECL as a

% of CET1 less than 25%.

We currently remain within all tolerance

levels given the current weakened economic

environment. The Group credit loss ratio was

calculated at 0.17% for 31 March 2022

(31 March 2021: 0.56%). Stage 3 net of ECL

as a % of net core loans subject to ECL was

1.4% (excluding the Legacy portfolio). Stage

3 net of ECL as a % of CET1 is 11.6%.

Growth initiatives

Cost management

Capital discipline

Digitalisation

Connectivity

Risk management

and governance

Investec plc Annual Financial Statements 2022

PRINCIPAL RISKS

CONTINUED

Country risk

Country risk refers to the risk of lending to a counterparty

operating in a particular country or the risk inherent in a sovereign

exposure, i.e. the risk of exposure to loss caused by events in

that country. Country risk covers all forms of lending or

investment activity whether to/with individuals, corporates, banks

or governments

Link to strategy

Monitoring and mitigation activities

•Exposures are only to politically stable

jurisdictions that we understand and have

preferably operated in before

•The legal environment should be tested, have

legal precedent in line with the Organisation

for Economic Co-operation and Development

(OECD) standards and have good corporate

governance

•In certain cases, we may make use of

political risk insurance to mitigate

exposure where deemed necessary.

Further information

Read more on page 28

Risk appetite and tolerance metric

Positioning at 31 March 2022

We have a preference for primary exposure in

the Group’s main operating geography (i.e. the

UK). We will accept exposures where we have a

branch or local banking subsidiary and tolerate

exposures to other countries where we have

developed a local understanding and capability

or we are facilitating a transaction for a client.

We maintained this risk tolerance level in

place throughout the year.

ESG (including

climate) risk

The risk that our lending and investment activities give rise to

unintended environmental (including climate change), social and

economic consequences

Link to strategy

Monitoring and mitigation activities

•Investec has a holistic approach to

sustainability, which runs beyond recognising

our own footprint on the environment,

includes our many community activities and

is based on a broader responsibility to our

environment and society

•Accordingly, sustainability and climate-

related (including ESG) risk considerations

are considered by the relevant credit

committee or investment committee when

making lending or investment decisions

•There is also oversight by the Group

ESG Executive Committee and the

Social and Ethics Committee on general

ESG issues, including climate-related

matters

•The Group ESG Executive Committee

coordinates general sustainability and

climate-related (including ESG) risks

and opportunities across geographies

and businesses from both a strategy

and policy perspective.

Further information

Read more on page 28 and

page 47, pages 94 to 105 of

the Investec Group's 2022

integrated and strategic

annual report and the

Investec Group’s 2022

sustainability report which

will be available on our

website at the end of June

2022

Risk appetite and tolerance metric

Positioning at 31 March 2022

We take a cautious approach with respect to

industries that are known to have negative

consequences to climate change or that cause

environmental damage. Financial risk from

climate change is a highly important topic which

helps to inform decisions. We acknowledge that

our approach is still work in progress and will

continue to develop this over time.

We maintained this risk tolerance level in

place throughout the year.

Growth initiatives

Cost management

Capital discipline

Digitalisation

Connectivity

Risk management

and governance

Investec plc Annual Financial Statements 2022

PRINCIPAL RISKS

CONTINUED

Investment risk

Investment risk in the banking book arises primarily from the

Group’s investment (private equity) and property investment

activities, where the Group invests in largely unlisted companies

and select property investments, with risk taken directly on the

Group’s balance sheet

Link to strategy

Monitoring and mitigation activities

•Independent credit and investment

committees in the UK provide oversight of

regions where we assume investment risk

•Risk appetite limits and targets are set to

limit our exposure to equity and investment

risk

•As a matter of course, concentration risk is

avoided and investments are well spread

across geographies and industries.

Further information

Read more on page 48

Risk appetite and tolerance metric

Positioning at 31 March 2022

We have moderate appetite for investment

risk, and set a risk tolerance of less than 30%

of CET1 capital for our unlisted principal

investment portfolio.

Our unlisted investment portfolio amounted to

£336 million, representing 17.4% of CET1.

Market risk in the

trading book

Traded market risk is the risk of potential value changes in the

trading book as a result of changes in market factors such as

interest rates, equity prices, commodity prices, exchange rates,

credit spreads and the underlying volatilities where derivatives are

traded. The trading book is defined as positions in financial

instruments and commodities, including derivative products and

other off-balance sheet instruments that are held within the trading

businesses

Link to strategy

Monitoring and mitigation activities

•To identify, measure, monitor and manage

market risk, we have independent market

risk management teams

•The focus of our trading activities is

primarily on supporting our clients. Our

strategic intent is that proprietary trading

should be limited and that trading should be

conducted largely to facilitate client flow

•Within our trading activities, we act as

principal with clients or the market. Market

risk exists where we have taken on principal

positions resulting from market making,

underwriting and facilitation of client

business in the foreign exchange, interest

rate, equity, credit and commodity markets

•Measurement techniques used to quantify

market risk arising from our trading activities

include sensitivity analysis, Value at Risk

(VaR), stressed VaR (sVaR), expected

shortfall (ES) and extreme value theory

(EVT). Stress and scenario analyses are

used to add insight to possible outcomes

under severe market disruptions.

Further information

Read more on pages 50

to 53

Risk appetite and tolerance metric

Positioning at 31 March 2022

Market risk arises through our trading

activities which are primarily focused on

supporting client activity. Appetite for

proprietary trading is limited. We set an overall

tolerance level of a one-day 95% VaR of less

than £4 million.

We met these internal limits; one-day 95% VaR

was £0.4 million at 31 March 2022.

Growth initiatives

Cost management

Capital discipline

Digitalisation

Connectivity

Risk management

and governance

Investec plc Annual Financial Statements 2022

PRINCIPAL RISKS

CONTINUED

Liquidity risk

Liquidity risk refers to the possibility that, despite being solvent,

we have insufficient capacity to fund increases in assets or are

unable to meet our payment obligations as they fall due, in

normal and stressed conditions. This includes repaying

depositors or maturing wholesale debt. This risk arises from

mismatches in the timing of cash flows, and is inherent in all

banking operations and can be impacted by a range of

institution-specific and market-wide events

Link to strategy

Monitoring and mitigation activities

•Our banking entity in the UK is ring-fenced

from the Investec Group's banking entity in

South Africa and is required to meet the UK

regulatory liquidity requirements

•Each geographic entity must be self-

sufficient from a funding and liquidity

standpoint

•Investec plc undertakes an annual Internal

Liquidity Adequacy Assessment Process

(ILAAP) which documents the approach to

liquidity management across the firm,

including IBP (solo basis). This document is

reviewed and approved by IBP BRCC, DLC

BRCC and by the IBP and DLC Boards

•We maintain a liquidity buffer in the form of

unencumbered cash, government or rated

securities (typically eligible for repurchase

with the central bank), and near cash well

in excess of the statutory requirements as

protection against unexpected disruptions

in cash flows

•The Group maintains contingency funding

plans designed to protect depositors,

creditors and shareholders and maintain

market confidence during adverse liquidity

conditions

•The maintenance of sustainable prudent

liquidity resources takes precedence over

profitability

•We target a diversified funding base,

avoiding undue concentrations by

investor type, maturity, market source,

instrument and currency

•Our core loans must be fully funded by

stable funding

•The Group does not rely on committed

funding lines for protection against

unforeseen interruptions to cash flow

•The balance sheet risk management

teams independently monitor key daily

funding metrics and liquidity ratios to

assess potential risks to the liquidity

position, which further act as early

warning indicators of potential normal

market disruptions

•Daily liquidity stress tests are carried

out in order to help accurately

measure the liquidity profile and

ensure that in the absence of market

or funding liquidity during periods of

stress, we would continue to meet our

obligations.

Further information

Read more on pages 54 to

Risk appetite and tolerance metric

Positioning at 31 March 2022

We carry a high level of liquidity in all our

banking subsidiaries in order to be able to

cope with shocks to the system, targeting a

minimum cash to customer deposit ratio of

25%.

Total cash and near cash balances

amounted to £8.9 billion at year end

representing 48.5% of customer

deposits.

Growth initiatives

Cost management

Capital discipline

Digitalisation

Connectivity

Risk management

and governance

Investec plc Annual Financial Statements 2022

PRINCIPAL RISKS

CONTINUED

Non-trading

interest rate risk

Non-trading interest rate risk, otherwise known as interest rate

risk in the banking book, arises from the impact of adverse

movements in interest rates on both net interest earnings and

economic value of equity.

Non-trading interest rate risk in the banking book is an inherent

consequence of conducting banking activities, and arises from

the provision of retail and wholesale (non-trading) banking

products and services

Link to strategy

Monitoring and mitigation activities

•The daily management of interest rate risk

in the banking book is centralised within the

Treasury of each banking entity and is

subject to local independent risk and Asset

and Liability Committee (ALCO) review

•Together with the business, the treasurer

develops strategies regarding changes in

the volume, composition, pricing and

interest rate characteristics of assets and

liabilities to mitigate the interest rate risk

and ensure a high degree of net interest

margin stability over an interest rate cycle.

These are presented, debated and

challenged in the Liability Product and

Pricing Forum and the ALCO

•Each banking entity has its own Board-

approved non-trading interest rate risk

policy and risk appetite, which is clearly

defined in relation to both income risk and

economic value risk

•The policy dictates that long-term

(>one year) non-trading interest rate

risk is materially eliminated. Where

natural hedges between banking

book items do not suffice to reduce

the exposure within defined limits,

interest rate swaps are used to

transform fixed rate assets and

liabilities into variable rate items

•Non-trading interest rate risk is

measured and analysed by utilising

standard tools of traditional interest

rate repricing mismatch and NPV

sensitivity to changes in interest rate

risk factors.

Further information

Read more on pages 58 to

Risk appetite and tolerance metric

Positioning at 31 March 2022

A movement in rates can result in a negative

impact on revenues across the banking

industry. This risk is managed within the

Group's risk appetite framework as a

proportion of capital in order to limit volatility.

Investec plc is within these tolerance

metrics. The UK regulatory framework

requires banks to assess their Pillar II

requirements, including those related

to non-trading interest rate risk, as part

of systems and processes concluded

their ICAAP.

Growth initiatives

Cost management

Capital discipline

Digitalisation

Connectivity

Risk management

and governance

Investec plc Annual Financial Statements 2022

PRINCIPAL RISKS

CONTINUED

Capital risk

The risk that we do not have sufficient capital to meet regulatory

requirements or that capital is inefficiently deployed across the

Group

Link to strategy

Monitoring and mitigation activities

•Investec plc's approach to capital

management utilises both regulatory

capital as appropriate to the jurisdiction in

which it operates and internal capital,

which is an internal risk-based assessment

of capital requirements

•A detailed assessment of the regulatory

and internal capital position is undertaken

on an annual basis and is documented in

the Internal Capital Adequacy Assessment

Process (ICAAP). The ICAAP is reviewed

and approved by Investec plc and DLC

Capital Committees, DLC BRCC and the

Board

•The determination of target capital is

driven by our risk profile, strategy and risk

appetite, taking into account the regulatory

and market factors applicable to the Group

•At the most fundamental level, we seek

to balance our capital consumption

between prudent capitalisation in the

context of the Group’s risk profile and

optimisation of shareholder returns

•Our internal capital framework is

designed to manage and achieve this

balance

•The framework has been approved by

the Board. The Investec plc Capital

Committee is responsible for assisting

the DLC Capital Committee (mandated

by DLC BRCC) for the oversight and

management of capital and leverage.

Further information

Read more on page 64

Risk appetite and tolerance metric

Positioning at 31 March 2022

We have a number of policies and practices

in place to mitigate and/or manage

reputational risks.

We have continued to mitigate and/or

manage these risks where possible

throughout the year.

Growth initiatives

Cost management

Capital discipline

Digitalisation

Connectivity

Risk management

and governance

Investec plc Annual Financial Statements 2022

PRINCIPAL RISKS

CONTINUED

Business risk

Business risk relates to external market factors that can create

income volatility

Link to strategy

Monitoring and mitigation activities

•The risk of loss caused by income

volatility in the Specialist Bank and/or

Wealth & Investment is mitigated

through diversification of income

sources, reducing concentration of

income from any one type of business

or geography and maintaining a flexible

cost base

•Group strategy is directed towards

generating and sustaining a diversified

income base for the Group

•In the instance where income falls, we

retain the flexibility to reduce costs

(particularly variable remuneration),

thereby maintaining a competitive cost

to income ratio.

Further information

on pages 5 to 72 of the

Investec Group’s 2022

integrated and strategic

annual report

Risk appetite and tolerance metric

Positioning at 31 March 2022

We seek to maintain an appropriate

balance between revenue earned from

capital light and balance sheet driven

activities. Ideally capital light revenue

should exceed 50% of total operating

income, dependent on prevailing market

conditions.

We have a solid annuity income base

supported by diversified revenue streams,

and target an annuity income ratio in

excess of 65%.

We seek to maintain strict control over

fixed costs. The Group has a cost to

income ratio target of below 67%.

Capital light activities contributed 46.6% to

total operating income and balance sheet

driven activities contributed 53.4%.

Annuity income amounted to 73.6% of

total operating income.

The cost to income ratio amounted to

71.3%.

Legal risks

Legal risk is the risk of loss resulting from any of our rights not being fully

enforceable or from our obligations not being properly performed. This

includes our rights and obligations under contracts entered into with

counterparties. Such risk is especially applicable where the counterparty

defaults and the relevant documentation may not support the anticipated

rights and remedies in the transaction

Link strategy

Monitoring and mitigation activities

•A Legal Risk Forum ensures we keep abreast

of developments and changes in the nature

and extent of our activities, and to benchmark

our processes against best practice

•There is a central independent in-house legal

team with embedded business unit legal

officers where business volumes or needs

dictate

•The Bank maintains adequate insurance to

cover key insurable risks

•This is supplemented by a pre-approved

panel of third party legal firms to be utilised

where necessary.

More information

on page 64

Risk appetite and tolerance metric

Positioning as of 31 March 2022

The key principles of the legal risk policy

describe the overall responsibility of the legal

risk function, outline how legal risks are to be

assessed and how material legal risks should be

reported and escalated where necessary.

Legal matters were appropriately escalated,

dealt with and accounted for in the annual

financial statements where necessary.

Growth initiatives

Cost management

Capital discipline

Digitalisation

Connectivity

Risk management

and governance

Investec plc Annual Financial Statements 2022

PRINCIPAL RISKS

CONTINUED

Operational risk

Operational risk is defined as the potential or actual impact to

the Group as a result of failures relating to internal processes,

people, systems or from external events. The impacts can be

financial as well as non-financial such as customer detriment,

reputational or regulatory consequences

Link to strategy

Monitoring and mitigation activities

•Investec manages operational risk

through an embedded operational risk

management framework

•Operational risk sub-types which are

significant in nature are managed by

dedicated specialist teams within the

Group. These operational risk sub-types

are addressed in specific, detailed risk

policies and procedures, but are

included within the operational risk

management framework and are

reported and monitored within the

operational risk appetite. These sub-

types include:

–Business disruption and operational

resilience risk

–Conduct risk

–Data management risk

–Financial crime risk

–Fraud risk

–Information security and cyber risk

–Model risk

–People risk

–Processing and execution risk

–Regulatory compliance risk

–Tax risk

–Technology risk

–Third party risk.

Further information

Read more on pages 62

to 63

Risk appetite and tolerance metric

Positioning at 31 March 2022

We maintain sound operational risk

practices to identify and manage

operational risk. We monitor the level of

acceptable operational risk exposure/loss

through qualitative and quantitative

measures.

We maintained operational risk losses

within risk tolerance levels throughout

the year.

Operational risk –

Business disruption

and operational

resilience risk

Risk associated with disruptive incidents which can impact

premises, staff, equipment, systems, and key business processes

Link to strategy

Monitoring and mitigation activities

•The Group maintains continuity through

appropriate resilience strategies that cater

for disruptions, irrespective of the cause

•These strategies include, but are not

limited to, relocating the impacted

business to alternate processing sites,

enabling staff to work from home, the

application of high availability technology

solutions and ensuring readiness of

physical solutions for critical infrastructure

components

•Resilience testing is conducted on a

periodic basis to validate continuity

strategies and ensure they remain

effective and appropriate. This includes

annual recovery testing for all key

systems that support critical business

processes.

Further information

Read more on pages

62 to 65

Operational risk –

Data management

risk

The risk associated with poor governance in acquiring, processing,

storing, and protecting data. Issues with data quality, reliability, or

corruption can adversely impact business decisions, client services

and financial reporting

Link to strategy

Monitoring and mitigation activities

•The Group drives robust data governance

principles across the business, including data

ownership, management, quality control and

defined data architecture

•Consistent mechanisms are in place for data

consolidation, storage and reporting

•Data flows and reconciliations are automated,

and integration between systems is

streamlined to reduce the need for manual

tasks, minimise data processing delays and

eliminate single points of failure

•Data quality and aggregation are

monitored, reported and enhanced in

line with business needs and regulatory

principles

•Predictive intelligence is obtained

through data analytics to support

proactive risk management

•Data retention and destruction

processes are designed to meet

business needs and comply with

applicable legal obligations.

Further information

Read more on pages

62 and 63

Growth initiatives

Cost management

Capital discipline

Digitalisation

Connectivity

Risk management

and governance

Investec plc Annual Financial Statements 2022

PRINCIPAL RISKS

CONTINUED

Operational risk

– Financial

crime risk

Financial crime involves handling the proceeds of crime, financing

of terrorism, proliferation financing, sanctions breaches and bribery

or corruption, as well as any related regulatory breaches. Examples

include bribery, fraud, tax evasion, embezzlement, forgery,

counterfeiting and identity theft

Link to strategy

Monitoring and mitigation activities

•Established policies and procedures are in

place to promote business with clients in

such a manner that minimises the risk of the

Group’s products being used for money

laundering and terrorist or proliferation

financing

•A risk-based approach supports these

objectives, while complying with the

Group’s regulatory compliance obligations.

At a high level the control framework

ensures that:

–Sufficient information about clients is

obtained

–All clients and prospective clients are risk

rated and verification commensurate with

their risk profile is conducted

–All prospective and existing clients and

relevant related parties are screened

against relevant lists (including

applicable sanctions list) to identify

increased financial crime risk

–Staff are appropriately trained

–Suspicious transactions and terrorist

financing are recognised and reported

–Existing and prospective clients that

are not within the Group’s financial

crime risk appetite are exited or

declined.

Further information

Read more on pages

62, 63 and 65

Operational risk –

Fraud risk

The risk associated with any kind of criminal conduct arising

from fraud, corruption, theft, forgery and misconduct by staff,

clients, suppliers or any other internal or external stakeholder

Link to strategy

Monitoring and mitigation activities

•The Group manages fraud risk through an

integrated framework which includes

global policies, standards and

methodologies

•Detection and prevention systems are

utilised to help identify potential fraud,

reaching out to clients where appropriate

to validate or discuss concerns

•An independent integrity (whistleblowing)

line is in place to ensure that staff can

report regulatory breaches, allegations of

fraud, bribery and corruption, and non-

compliance with policies

•Fraud risk assessments are conducted to

proactively identify and map existing

preventative and detective controls to the

relevant fraud risks to ensure effective

mitigation

•Fraud prevention and detection controls

are enhanced on an ongoing basis in

response to increased fraud losses

across the industry and new fraud

modus operandi

•Industry collaboration assists with fraud

prevention efforts and the recovery of

funds that have been paid away

•Adherence to fraud prevention policies

is proactively monitored

•Practices which comply with updated

regulations, industry guidance and best

practice are embedded within the Group

•Awareness of existing and horizon fraud

threats is created through internal

training and education of clients and

intermediaries on fraud prevention and

detection.

Further information

Read more on pages 62

and 63

Growth initiatives

Cost management

Capital discipline

Digitalisation

Connectivity

Risk management

and governance

Investec plc Annual Financial Statements 2022

PRINCIPAL RISKS

CONTINUED

Operational risk –

Information

security and cyber

risk

The risk associated with unauthorised access, use, disclosure,

modification or destruction of data, impacting confidentiality,

integrity or availability. These can result in data compromise,

financial loss, interruption to client services and reputational

harm

Link to strategy

Monitoring and mitigation activities

•In light of the broad range of risks to

which information resources are exposed,

this risk is managed by addressing both

internal and external threat exposures

•Internal threats relate to data theft,

improper access or confidentiality

breaches by staff

–These are mitigated by implementing

risk-appropriate data protection

controls to safeguard information

assets in line with data sensitivity and

business criticality

–Role-based access to systems and

data is closely controlled and privileged

IT access is restricted and actively

monitored

•External threats relate to cyberattacks

such as ransomware, denial of service

and cyber fraud

–This is mitigated by an adaptive cyber

strategy that integrates prediction,

prevention, detection, and response

capabilities

–A robust security architecture

leverages defence-in-depth and

advanced technologies to protect

against evolving, sophisticated

attacks

–Threats are monitored 24/7 by a

global cyber team and the security

incident response plan is continuously

improved

–Cyber controls are stress-tested

through security assessments, red

team exercises and attack

simulations, run both internally and in

conjunction with independent

specialists

–Regular security training to all staff

ensures high levels of awareness and

vigilance.

Further information

Read more on pages 62

and 63

Operational risk –

Model risk

The risk associated with the adverse consequences that arise

from decisions based on incorrect or misused model outputs

(including reports). Material sources of model risk include: credit

model risk, liquidity model risk and trading book model risk

Link to strategy

Monitoring and mitigation activities

•The Group manages model risk through

embedded, risk specific frameworks and

policies

•The frameworks address roles and

responsibilities, governance processes

and committees and approaches to

managing and monitoring model risk

•Models are subject to regular,

independent validation by specialist risk

teams

•The relevant committees are mandated

to oversee model risk and have

delegated further oversight and approval

to appropriate sub-committees.

Further information

Read more on pages 62

and 63

Growth initiatives

Cost management

Capital discipline

Digitalisation

Connectivity

Risk management

and governance

Investec plc Annual Financial Statements 2022

PRINCIPAL RISKS

CONTINUED

Operational risk –

People risk

The risk that we may be unable to recruit, retain and engage

diverse talent across the organisation

Link to strategy

Monitoring and mitigation activities

•We focus on building a strong, diverse

and capable workforce by providing a

workplace that stimulates and rewards

distinctive performance

•Investec invests significantly in

opportunities for the development of all

employees, and in leadership

programmes to enable current and future

leaders of the Group

•There are a number of graduate

programmes operating across our

organisation sourcing and developing our

talent pipeline

•Internal mobility is a valued mechanism

for the development and retention of

people

•Our people and organisation team plays

a critical role in assisting the business to

achieve its strategic objectives, which

are matched to learning strategies and

market trends

•The people and organisation team is

mandated to enable the attraction,

development and retention of talent

who can perform in a manner consistent

with our culture and values

•The people and organisation team also

works with leadership to strengthen the

culture of the business, ensure its values

are lived, build capability and contribute

to the long-term sustainability of the

organisation.

Further information

Read more on pages 62

and 63

Growth initiatives

Cost management

Capital discipline

Digitalisation

Connectivity

Risk management

and governance

Investec plc Annual Financial Statements 2022

PRINCIPAL RISKS

CONTINUED

Operational risk –

Regulatory

compliance risk

The risks of changing legislation, regulation, policies, voluntary

codes of practice and their interpretation in the markets in which

we operate can have a significant impact on the Group’s

operations, business prospects, costs, liquidity and capital

requirements

Link to strategy

Monitoring and mitigation activities

•The Group remains focused on achieving

the highest levels of compliance with

professional standards and integrity in

each of our jurisdictions

•Our culture is a major component of our

compliance framework and is supported

by robust policies, processes and

talented professionals who ensure that

the interests of our stakeholders remain

at the forefront of everything we do

•There are independent compliance, legal

and risk management functions in each

of our core operating jurisdictions, which

ensure that the Group implements the

required processes, practices and

policies to adhere to applicable

regulations and legislation.

Further information

Read more on pages 62

and 63

Growth initiatives

Cost management

Capital discipline

Digitalisation

Connectivity

Emerging and other risks

In addition to the principal risks outlined above, the risks below may have the potential to impact and/or influence our principal

risks and consequently the operations, financial performance, viability and prospects of the Group. A number of these risks are

beyond the Group’s control and are considered in our capital plans, stress testing analyses and budget processes, where

applicable.

These emerging risks are briefly highlighted on page 22 of the

Investec Group's 2022 risk and governance report and should

be read in the context of our approach to risk management and

our overall Group risk appetite framework

Additional risks and uncertainties not presently known to us or

that we currently deem immaterial may in the future also

negatively impact our business operations. Emerging and other

risks as factored into the Board’s viability assessment. Read

more on page 144 of the Investec Group’s 2022 integrated and

strategic report

Risk management

and governance

Investec plc Annual Financial Statements 2022

PRINCIPAL RISKS

CONTINUED

Investec's philosophy and

approach to risk management

The Group's comprehensive risk

management process involves

identifying, quantifying, managing,

monitoring, mitigating and reporting the

risks associated with each of the

businesses to ensure the risks remain

within the stated risk appetite.

The Board ensures that there are

appropriate resources to manage the

risks arising from running our

businesses.

The DLC Board Risk and Capital

Committee (DLC BRCC) (comprising

both executive and non-executive

directors) is the Board mandated

committee to monitor and oversee risk.

DLC BRCC meets at least five times per

annum and recommends the overall risk

appetite for the Investec Group to the

Board for approval.

We monitor and control risk exposure

through independent credit, market,

liquidity, operational, legal, internal audit,

capital and compliance teams. This

approach is core to assuming a tolerable

risk and reward profile, helping us to

pursue controlled growth across our

business.

Group risk management operates within

an integrated geographical and

divisional structure, in line with our

management approach, ensuring that

the appropriate processes are used to

address all risks across the Group. There

are specialist divisions in the UK and

smaller risk divisions in other regions

tasked with promoting sound risk

management practices.

Risk management units are locally

responsive yet globally aware. This

helps to ensure that all initiatives and

businesses operate within our defined

risk parameters and objectives. We

continually seek new ways to enhance

risk management techniques.

We believe that the risk management

systems and processes we have in place

are adequate to support the Group’s

strategy and allow the Group to operate

within its risk appetite tolerance.

Group risk management

objectives are to:

•Ensure adherence to our risk

management culture

•Ensure the business operates within

the Board-approved risk appetite

•Support the long-term sustainability

of the Group by providing an

established, independent framework

for identifying, evaluating, monitoring

and mitigating risk with good

customer outcomes

•Set, approve and monitor adherence

to risk parameters and limits

across the Group and ensure they

are implemented and adhered

to consistently

•Aggregate and monitor our exposure

across risk classes

•Coordinate risk management activities

across the organisation, covering

all legal entities and jurisdictions

•Give the Board reasonable assurance

that the risks we are exposed to are

identified and appropriately managed

and controlled

•Resource risk teams suitably and with

appropriate expertise and facilitate

operating independence

•Run appropriate risk committees, as

mandated by the Board

•Maintain compliance in relation

to regulatory requirements.

Risk management framework,

committees and forums

A number of committees and forums

identify and manage risk at Group level,

as shown in the diagram below. These

committees and forums, mandated by

the Board, operate together with Group

risk management, the IBP Board and sub

committees within respective operating

jurisdictions. The Board of IBP, our

regulated banking subsidiary, and the

Board of IW&I, our regulated wealth

subsidiary, are responsible for the

statutory matters and corporate

governance for the respective entities,

and ensure compliance with the

applicable legislation and governance

requirements of the jurisdictions within

which they operate. The Boards and

Board committees of IBP and IW&I report

to the Board and the Board committees

of the Group, with the interconnection

between the respective Board

committees, supported by the

membership or attendance of the

chairman of the Group Board committee

at the respective subsidiary Board

committee.

Investec plc Board

DLC Audit

Committee

DLC Remuneration

Committee

DLC Nominations

and Directors’

Affairs Committee

(DLC Nomdac)

DLC Board Risk and

Capital Committee

(DLC BRCC)

DLC Social and

Ethics Committee

(DLC SEC)

Investec plc Asset

and Liability

Committee

DLC IT Risk and

Governance

Committee

DLC Capital

Committee

Group Executive Risk

Committee

(Group ERC)

Group ESG

Executive

Committee

Investec plc Capital

Committee

Risk management

and governance

Investec plc Annual Financial Statements 2022

RISK MANAGEMENT APPROACH AND FRAMEWORK

Credit and counterparty risk

management

Credit and counterparty risk arises

primarily from three types of

transactions:

•Lending transactions, through loans

and advances to clients and

counterparties, creating the risk that

an obligor will be unable or unwilling

to repay capital and/or interest on

loans and advances granted to them.

This category includes bank

placements, where we have placed

funds with other financial institutions

•Financial instrument transactions,

producing issuer risk where payments

due from the issuer of a financial

instrument may not be received

•Trading transactions, giving rise to

settlement and replacement risk

(collectively counterparty risk):

–Settlement risk is the risk that the

settlement of a transaction does not

take place as expected, with one

party making required settlements

as they fall due but not receiving

the performance to which they are

entitled

–Replacement risk is the risk

following default by the original

counterparty resulting in the

contract holder having to enter into

a replacement contract with a

second counterparty in order to

fulfil the transaction.

The relevant credit committees will also

consider wrong-way risk at the time of

granting credit limits to each

counterparty. In the banking book

environment, wrong-way risk occurs

where the value of collateral to secure a

transaction decreases as the probability

of default of the borrower or

counterparty increases. For

counterparty credit risk resulting from

transactions in traded products (such as

OTC derivatives), wrong-way risk is

defined as exposure to a counterparty

that is adversely correlated with the

credit quality of that counterparty. It

arises when default risk and credit

exposure increase together.

Credit and counterparty risk may also

arise in other ways and it is the role of

the risk management functions and the

various independent credit committees

to identify risks falling outside these

definitions.

Credit and counterparty risk

governance structure

To manage, measure, monitor and

mitigate credit and counterparty risk,

independent credit committees exist in

the UK. These committees also have

oversight of regions where we assume

credit risk and operate under Board-

approved delegated limits, policies and

procedures. There is a high level of

executive involvement and oversight in

the credit decision-making forums

depending on the size and complexity of

the deal. It is our policy that all credit

committees include voting members

who are independent of the originating

business unit. All decisions to enter into

a transaction are based on unanimous

consent.

In addition to the credit committees, the

following processes assist in managing,

measuring and monitoring credit and

counterparty risk:

•Day-to-day arrears management and

regular arrears reporting ensure that

individual positions and any potential

adverse trends are dealt with in a

timely manner

•Watchlist Forums review the

management of distressed loans,

potential problem loans and

exposures in arrears that require

additional attention and supervision.

These committees review ECL

impairments and staging at an asset

level as well as potential fair value

adjustments to loans and advances to

customers. They provide

recommendations for the appropriate

staging and level of ECL impairment

where required

•The Forbearance Forum reviews and

monitors counterparties who have

been granted forbearance measures

•The Impairment Decision Committee

reviews recommendations from

underlying Watchlist Forums and ADR

Forums respectively and consider and

approve the appropriate level of ECL

impairments and staging

•The Models Forum provides an

internal screening and validation

process for credit models. We have

established independent model

validation teams who review the

models and provide feedback on the

accuracy and operation of the models

and note items for further

development through the forum.

Credit committees and the processes

above have incorporated considerations

and decisions with respect to the

COVID-19 pandemic and resulting relief

measures, staging and ECL in line with

the Group's existing governance.

Credit and counterparty risk appetite

The Board has set risk appetite limit

frameworks which regulate the

maximum exposures we would be

comfortable to tolerate in order to

diversify and mitigate risk. These limit

frameworks, approved at least annually,

are monitored on an ongoing basis by

IBP BRCC, DLC BRCC and the

respective Boards. Should there be any

breaches to limits, or where exposures

are nearing limits, these exceptions are

specifically highlighted for attention,

with remedial actions agreed.

Our assessment of our clients and

counterparties includes consideration of

their character, integrity, core

competencies, track record and financial

strength. A strong emphasis is placed on

the historic and ongoing stability of

income and cash flow streams

generated by the clients. Our primary

assessment method is therefore the

ability of the client to meet their

payment obligations.

Target clients include high net worth

individuals, active wealth creators, high-

income professionals, self-employed

entrepreneurs, owner managers in small

to mid-cap corporates, sophisticated

investors, established corporates, small

and medium-sized enterprises, financial

institutions and sovereigns. Corporates

should demonstrate scale and relevance

in their market, an experienced

management team, able Board

members, strong earnings and cash

flow.

We are client-centric in our approach

and originate loans mainly with the

intent of holding these assets to

maturity, thereby developing a ‘hands-

on’ and long-standing relationship.

Interbank lending is largely reserved for

those banks and institutions in the

Group’s core geographies of activity,

which are systemic and highly rated.

Risk management

and governance

Investec plc Annual Financial Statements 2022

CREDIT AND COUNTERPARTY RISK

Concentration risk

Concentration risk is when large

exposures exist to a single client or

counterparty, group of connected

counterparties, or to a particular

geography, asset class or industry. An

example of this would be where a

number of counterparties are affected

by similar economic, legal, regulatory or

other factors that could mean their

ability to meet contractual obligations

are correlated.

Credit and counterparty risk is always

assessed with reference to the

aggregate exposure to a single

counterparty or group of related parties

to manage concentration risk. In order to

manage concentration, we will consider

a sell-down of exposures to market

participants.

Concentration risk can also exist where

portfolio loan maturities are clustered to

single periods in time. Loan maturities

are monitored on a portfolio and a

transaction level by Group risk

management, Group lending operations

as well as the originating business units.

Country risk

Country risk refers to the risk of lending

to a counterparty operating in a

particular country or the risk inherent in

a sovereign exposure, i.e. the risk of

exposure to loss caused by events in

that country. Country risk covers all

forms of lending or investment activity

whether to/with individuals, corporates,

banks or governments. This can include

geopolitical risks, transfer and

convertibility risks, and the impact on

the borrower’s credit profile due to local

economic and political conditions.

To mitigate country risk, there is a

preference for primary exposure in the

Group’s main operating geography. The

Group will accept exposures where we

have a branch or local banking

subsidiary, and tolerate exposures to

other countries where we are facilitating

a transaction for a client who requires

facilities in a foreign geography and

where we have developed a local

understanding and capability.

The Group’s credit risk appetite with

regard to country risk is characterised

by the following principles:

•Preference is to have exposure only to

politically stable jurisdictions that we

understand and have preferably

operated in before

•There is little specific appetite for

exposures outside of the Group’s pre-

existing core geographies or target

markets

•The legal environment should be

tested, have legal precedent in line

with OECD standards and have good

corporate governance

•In certain cases, country risk can be

mitigated by taking out political risk

insurance with suitable counterparties

where deemed necessary and where

considered economic.

While we do not have a separate

country risk committee, the relevant

credit committees as well as investment

committees, IBP ERC and where

necessary, Group ERC will consider,

analyse and assess the appropriate

foreign jurisdiction limits.

In the UK, following the official exit from

the European Union, it remains

necessary to avoid exposures to certain

European countries due to the resulting

legal implications. This relates

specifically to countries in which

borrowers are legally incorporated and

any deal will be thoroughly assessed on

a case by case basis to ensure

compliance with current regulations.

ESG (including climate) risk

We integrate ESG considerations into

our day-to-day operations and credit

decision-making. The greatest socio-

economic and environmental impact we

can have is to partner with our clients

and stakeholders to accelerate a

cleaner, more resilient and inclusive

world.

We are committed to respecting human

rights and support internationally

recognised principles, guidelines and

voluntary standards dealing with ESG.

We support the key provisions of the

Equator Principles (EP). All transactions

in non-designated countries are EP

monitored and compliant. We report on

these in our sustainability report on our

website. We have a number of Group

policies that also guide credit decision-

making from an ESG perspective. ESG

(including climate) risk matters are

considered by the credit committee or

investment committee when making

lending or investment decisions. Higher

risk transactions are escalated for

assessment by the Group's ESG team.

In particular, the following ESG

(including climate) risk matters are taken

into account when assessing high-risk

transactions:

•Environmental considerations

(including animal welfare and climate-

related impacts)

•Social considerations (including

human rights)

•Macro-economic considerations

(including poverty, growth and

unemployment).

Refer to page 47 for further

detail

Stress testing and portfolio

management

The Investec Group’s stress testing

framework is designed to identify and

assess vulnerabilities under stress. The

process comprises a bottom-up analysis

of the Group’s material business

activities, incorporating views from risk

management teams, business and the

executive. Stress scenarios are

designed based on findings from the

bottom-up process, taking into

consideration the broader macro-

economic and political risk backdrop.

These Investec-specific stress scenarios

form an integral part of our capital

planning process and IFRS 9 reporting.

The stress testing process also informs

the risk appetite review process, and the

management of risk appetite limits and

is a key risk management tool of the

Group. This process allows the Group to

identify underlying risks and manage

them accordingly.

The Group also performs ad hoc stress

tests and reverse stress testing. Ad hoc

stress tests are conducted in response

to any type of material and/or emerging

risks, with reviews undertaken of

impacted portfolios to assess any

migration in quality and highlight any

vulnerabilities, identify portfolio

concentrations and make appropriate

recommendations such as a reduction in

risk appetite limits. Reverse stress tests

are conducted to stress the Group’s

business plan to failure and consider a

broad variety of extreme and remote

events.

Reviews are also undertaken of all

material businesses, where the

portfolios are analysed to assess any

migration in portfolio quality, highlight

any vulnerabilities, identify portfolio

concentrations and make appropriate

recommendations, such as a reduction

in risk appetite limits or specific

exposures.

Risk management

and governance

Investec plc Annual Financial Statements 2022

CREDIT AND COUNTERPARTY RISK

CONTINUED

Management and measurement

of credit and counterparty risk

Fundamental principles employed in the

management of credit and counterparty

risk include:

•A clear definition of our target market

•A quantitative and qualitative

assessment of the creditworthiness of

our counterparties

•Analysis of risks, including

concentration risk (concentration risk

considerations include asset class,

industry, counterparty and

geographical concentration)

•Decisions being made with reference

to risk appetite limits

•Prudential limits

•Regular monitoring and review of

existing and potential exposures once

facilities have been approved

•A high level of executive involvement

in decision-making with non-

executive review and oversight

•Portfolio reviews and stress testing.

Within the credit approval process,

internal and external ratings are included

in the assessment of client quality.

A large proportion of the Group’s

portfolio is not rated by external rating

agencies. We place reliance upon

internal consideration of counterparties

and borrowers and use ratings prepared

externally where available to support our

decision-making process.

Regular reporting of credit and

counterparty risk exposures within our

operating units are made to

management, the executives and the

Board through the DLC BRCC and IBP

BRCC. The Board reviews and approves

the appetite for credit and counterparty

risk, which is documented in risk

appetite statements and policy

documents. This is implemented and

reviewed by the credit risk management

teams in each jurisdiction.

Portfolio reviews and stress testing are

undertaken on all material businesses,

where the exposures are analysed to

assess any migration in portfolio quality,

highlight any vulnerabilities, identify

portfolio concentrations and make

appropriate recommendations, such as a

reduction in risk appetite limits or

specific exposures.

Credit and counterparty risk – nature of

activities

Credit and counterparty risk is assumed

through a range of client-driven lending

activities to private and corporate clients

as well as other counterparties, such as

financial institutions and sovereigns.

These activities are diversified across a

number of business activities.

•Core loans and advances: the

majority of credit and counterparty

risk is through core loans and

advances, which account for almost

all ECL allowances across our

portfolio, which are detailed on pages

31 to 37

•Treasury function: there are also

certain exposures, outside of core

loans and advances, where we

assume credit and counterparty risk.

These arise primarily from treasury

placements where the treasury

function, as part of the daily

management of the Group’s liquidity,

places funds with central banks and

other commercial banks and financial

institutions. These transactions are

typically short-term (less than one

month) money market placements or

secured repurchase agreements.

These market counterparties are

mainly investment grade rated entities

that occupy dominant and systemic

positions in their domestic banking

markets and internationally. These

counterparties are located mainly in

the UK, Western Europe, Asia, North

America, Southern Africa and

Australia.

In addition, credit and counterparty risk

arises through the following exposures:

•Customer trading activities to

facilitate hedging of client risk

positions: our customer trading

portfolios consist of derivative

contracts in interest rates, foreign

exchange, commodities, credit

derivatives and equities that are

entered into, to facilitate a client’s

hedging requirements. The

counterparties to such transactions

are typically corporates, in particular

where they have an exposure to

interest rates or foreign exchange due

to operating in sectors that include

imports and exports of goods and

services. These positions are marked-

to-market, typically with daily margin

calls to mitigate credit exposure in the

event of counterparty default

•Structured credit: these are bonds

secured against a pool of assets,

mainly UK residential mortgages or

European or US corporate leverage

loans. The bonds are typically highly

rated (single ‘A’ and above), which

benefit from a high level of credit

subordination and can withstand a

significant level of portfolio default

•Debt securities: from time to time we

take on exposures by means of

corporate debt securities rather than

loan exposures. These transactions

arise on the back of client

relationships or knowledge of the

corporate market and are based on

our analysis of the credit

fundamentals

•Corporate advisory and investment

banking activities: counterparty risk

in this area is modest. The business

also trades shares on an approved

basis and makes markets in shares

where we are appointed corporate

broker under pre-agreed market risk

limits. Settlement trades are largely on

a delivery versus payment basis,

through major stock exchanges.

Credit risk only occurs in the event of

counterparty failure and would be

linked to any fair value losses on the

underlying security

•Wealth & Investment: primarily an

agency business with a limited

amount of principal risk. Its core

business is discretionary investment

management services. Settlement risk

can arise due to undertaking

transactions in an agency capacity on

behalf of clients. However, the risk is

not considered to be material as most

transactions are undertaken on

recognised exchanges, with large

institutional clients, monitored daily,

with trades usually settled within two

to three days.

Risk management

and governance

Investec plc Annual Financial Statements 2022

CREDIT AND COUNTERPARTY RISK

CONTINUED

Credit risk mitigation

Credit risk mitigation techniques can be

defined as all methods by which the

Group seeks to decrease the credit risk

associated with an exposure. The

Investec Group considers credit risk

mitigation techniques as part of the

credit assessment of a potential client or

business proposal and not as a separate

consideration of mitigation of risk. Credit

risk mitigants can include any collateral

item over which the Group has a charge

over assets, netting and margining

agreements, covenants, or terms and

conditions imposed on a borrower with

the aim of reducing the credit risk

inherent to that transaction.

As the Group has limited appetite for

unsecured debt, the credit risk

mitigation technique most commonly

used is the taking of collateral, with a

strong preference for tangible assets.

Collateral is assessed with reference to

the sustainability of value and the

likelihood of realisation.

Acceptable collateral generally exhibits

characteristics that allow for it to be

easily identified and appropriately

valued and assists the Group to recover

outstanding exposures.

Where a transaction is supported by a

mortgage or charge over property, the

primary credit risk is still taken on the

borrower. In addition, the relevant credit

committee normally requires a

suretyship or guarantee in support of a

transaction in our private client

business.

For property-backed lending we also

consider the client’s overall balance

sheet. The following characteristics of

the property are also considered: the

type of property; its location; and the

ease with which the property could be

relet and/or resold. Where the property

is secured by lease agreement, the

credit committee prefers not to lend for

a term beyond the maximum term of the

lease. Commercial real estate generally

takes the form of good quality property

often underpinned by strong third party

leases. Residential property is also

generally of a high quality and based in

desirable locations. Residential and

commercial property valuations will

continue to form part of our ongoing

focus on collateral assessment. It is our

policy to obtain a formal valuation of

every commercial property offered as

collateral for a lending facility before

advancing funds. Residential properties

are valued by desktop valuation and/or

approved valuers, where appropriate.

Other common forms of collateral in the

retail asset class are motor vehicles,

cash and share portfolios. Primary

collateral in private client lending

transactions can also include a high net

worth individual’s share/investment

portfolio. This is typically in the form of a

diversified pool of equity, fixed income,

managed funds and cash. Often these

portfolios are managed by Investec

Wealth & Investment. Lending against

investment portfolios is typically geared

at conservative loan-to-value (LTV)

ratios, after considering the quality,

diversification, risk profile and liquidity of

the portfolio.

Our corporate, government and

institutional clients provide a range of

collateral including cash, corporate

assets, debtors (accounts receivable),

trading stock, debt securities (bonds),

listed and unlisted shares and

guarantees.

The majority of credit mitigation

techniques linked to trading activity is in

the form of netting agreements and daily

margining. Primarily, the market

standard legal documents that govern

this include the International Swaps and

Derivatives Association (ISDA) Master

Agreements, Global Master Securities

Lending Agreement (GMSLA) and Global

Master Repurchase Agreement (GMRA).

In addition to having ISDA

documentation in place with market and

trading counterparties in over-the-

counter (OTC) derivatives, the credit

committee may require a Credit Support

Annex (CSA) to ensure that mark-to-

market credit exposure is mitigated daily

through the calculation and placement/

receiving of cash collateral. Where

netting agreements have been signed,

the enforceability is supported by an

external legal opinion within the legal

jurisdiction of the agreement.

Set-off is applied between assets,

subject to credit risk and related

liabilities in the annual financial

statements, where:

•A legally enforceable right to set-off

exists

•There is the intention to settle the

asset and liability on a net basis, or to

realise the asset and settle the liability

simultaneously.

In addition to the above accounting set-

off criteria, banking regulators impose

the following additional criteria:

•Debit and credit balances relate to the

same obligor/counterparty

•Debit and credit balances are

denominated in the same currency

and have identical maturities

•Exposures subject to set-off are risk-

managed on a net basis

•Market practice considerations.

For this reason, there will be instances

where credit and counterparty

exposures are displayed on a net basis

in these annual financial statements but

reported on a gross basis to regulators.

The Group places minimal reliance on

credit derivatives in its credit risk

mitigation techniques. Periodically the

Group will enter into Credit Default

Swaps (CDS) in order to hedge a

specific asset held or to create a more

general or macro hedge against a group

of exposures in one industry or

geography. In these instances, the

Group is deemed to be ‘buying

protection’ against the assets.

Depending on the perceived risk, or

‘spread’, of the underlying exposure, the

CDS will fluctuate in value; increasing in

value when the asset has become more

risky and decreasing when risk has

reduced. Occasionally, the Group will

enter into trading/investment CDS

positions where we buy protection or

sell protection without owning the

underlying asset. The total amount of

net credit derivatives outstanding at 31

March 2022 amounts to £0.5 million, of

which all is used for credit mitigation

purposes. Total protection bought

amounts to -£0.03 million and total

protection sold amounts to £0.53 million

relating to credit derivatives used in

credit mitigation.

Further information on credit

derivatives is provided on

page 148

The Group implements robust processes

to minimise the possibility of legal and/or

operational risk through good quality

tangible collateral. The legal risk function

ensures the enforceability of credit risk

mitigants within the laws applicable to

the jurisdictions in which the Group

operates. When assessing the potential

concentration risk in its credit portfolio,

consideration is given to the types of

collateral and credit protection that form

part of the portfolio.

Risk management

and governance

Investec plc Annual Financial Statements 2022

CREDIT AND COUNTERPARTY RISK

CONTINUED

An analysis of gross core loans, asset quality and ECL

The tables that follow provide

information with respect to the asset

quality of our gross core loans on a

statutory basis.

The overall asset quality improved as

Stage 3 gross core loan exposure

decreased from £332 million at 31

March 2021 to £291 million or 2.1% of

gross core loans subject to ECL at 31

March 2022.

Notwithstanding the partial release in

management ECL overlay during the

second half of the year, the overall

coverage for Stage 1 and Stage 2

remains elevated at 31 March 2022

compared to pre-COVID levels,

reflecting the ongoing uncertainty and

deterioration of forward-looking macro-

economic scenarios, particularly with

respect to inflation.

Stage 2 exposures decreased to 7.1% of

gross core loans subject to ECL at 31

March 2022 from 10.4% at 31 March

2021. The Stage 2 ratio remains above

pre COVID-19 levels (5.8% at 31 March

2019) reflecting the ongoing uncertainty

in the macro-economic environment.

£’million

31 March 2022

31 March 2021

Gross core loans

14 557

12 501

Gross core loans at FVPL

609

512

Gross core loans subject to ECL*

13 948

11 989

Stage 1

12 665

10 415

Stage 2

992

1 242

of which past due greater than 30 days

Stage 3

291

332

of which Ongoing (excluding Legacy) Stage 3*

240

231

ECL

(134)

(170)

Stage 1

(32)

(27)

Stage 2

(35)

(42)

Stage 3

(67)

(101)

of which Ongoing (excluding Legacy) Stage 3*

(40)

(62)

Coverage ratio

Stage 1

0.25%

0.26%

Stage 2

3.5%

3.4%

Stage 3

23.0%

30.4%

of which Ongoing (excluding Legacy) Stage 3*

16.7%

26.8%

Credit loss ratio

0.17%

0.56%

ECL impairment charges on core loans

(22)

(65)

Average gross core loans subject to ECL

12 969

11 691

An analysis of Stage 3 gross core loans subject to ECL

Stage 3 net of ECL

224

231

of which Ongoing (excluding Legacy) Stage 3*

200

169

Aggregate collateral and other credit enhancements on Stage 3

230

235

Stage 3 as a % of gross core loans subject to ECL

2.1%

2.8%

of which Ongoing (excluding Legacy) Stage 3*

1.7%

1.9%

Stage 3 net of ECL as a % of net core loans subject to ECL

1.6%

2.0%

of which Ongoing (excluding Legacy) Stage 3*

1.4%

*Refer to definitions on page 189. Our exposure (net of ECL) to the UK Legacy portfolio has reduced from £84 million at 31 March 2021 to £43 million at

31 March 2022. These assets are predominately reported in Stage 3 and make up 17.5% of Stage 3 gross core loans. These assets have been significantly

provided for and coverage remains high at 52.9%.

Risk management

and governance

Investec plc Annual Financial Statements 2022

ASSET QUALITY

An analysis of staging and ECL movements for core loans subject to ECL

The table below indicates underlying movements in gross core loans subject to ECL from 31 March 2021 to 31 March 2022. The

transfers between stages of gross core loans indicate the impact of stage transfers upon the gross exposure and associated

opening ECL. The transfers into Stage 1 were almost all driven by the weighted economic outlook and underlying macro-

economic factors. There was a normalisation of transfers into Stage 3 as a proportion of the opening book, following very limited

defaults during the period to 31 March 2021, supported in part by the UK Government measures in place.

The net remeasurement of ECL arising from stage transfers represents the (increase)/decrease in ECL due to these transfers.

New lending net of repayments comprises new originations, further drawdowns, repayments and sell-downs as well as ECLs in

Stage 3 that have been written off, typically when an asset has been sold.

The ECL impact of changes to risk parameters and models during the year largely relates to the changes in the macro-economic

scenarios. The foreign exchange and other category largely comprises the impact on the closing balance as a result of

movements and translations in foreign exchange rates since 31 March 2021.

Stage 1

Stage 2

Stage 3

Total

£’million

Gross

exposure

ECL

Gross

exposure

ECL

Gross

exposure

ECL

Gross

exposure

ECL

At 31 March 2020

10 437

(37)

576

(31)

379

(107)

11 392

(175)

Transfer from Stage 1

(1 019)

991

(4)

—

Transfer from Stage 2

120

(2)

(220)

100

(4)

—

Transfer from Stage 3

—

(8)

—

ECL remeasurement arising from transfer

of stage

—

(10)

—

(18)

—

(26)

New lending net of repayments

(includes assets written off)

944

(9)

(86)

(162)

696

Changes to risk parameters and models

—

(6)

—

Foreign exchange and other

(67)

—

(27)

—

(5)

(99)

At 31 March 2021

10 415

(27)

1 242

(42)

332

(101)

11 989

(170)

Transfer from Stage 1

(433)

379

(1)

—

Transfer from Stage 2

397

(6)

(473)

(2)

—

Transfer from Stage 3

—

(4)

—

ECL remeasurement arising from transfer

of stage

—

(3)

—

(9)

—

(9)

New lending net of repayments

(includes assets written off)

2 253

(3)

(163)

(167)

1 923

Changes to risk parameters and models

—

(2)

—

(2)

Foreign exchange and other

—

At 31 March 2022

12 665

(32)

992

(35)

291

(67)

13 948

(134)

An analysis of gross core loans by country of exposure

31 March 2022

31 March 2021

£14 557 million

£12 501 million

United Kingdom

83.3%

United Kingdom

81.6%

Europe (excluding UK)

8.2%

Europe (excluding UK)

8.6%

North America

5.4%

North America

5.3%

Asia

1.5%

Asia

1.8%

Australia

0.9%

Australia

1.8%

Other

0.7%

Other

0.9%

Risk management

and governance

Investec plc Annual Financial Statements 2022

ASSET QUALITY

CONTINUED

An analysis of credit quality by internal rating grade

The Group uses a 25-grade internal rating scale which measures the risk of default to an exposure without taking into account

any credit mitigation, such as collateral. This internal rating scale allows the Group to measure credit risk consistently across

portfolios. The internal rating scale is derived from a mapping to PDs and can also be mapped to external rating agency scales.

PD range

Investec internal rating scale

Indicative external rating scale

less than 0.538%

IB01 – IB12

AAA to BBB-

0.538% - 6.089%

IB13 – IB19

BB+ to B-

greater than 6.089%

IB20 – IB25

B- and below

Stage 3

The internal credit rating distribution below is based on the 12-month PD at 31 March 2022 for gross core loans subject to ECL

by stage. The staging classifications are not only driven by the absolute PD, but on factors that determine a significant increase

in credit risk, including relative movement in PD since origination. There is therefore no direct correlation between the credit

quality of an exposure and its stage classification as shown in the table below:

At 31 March 2022

IB01-IB12

IB13-IB19

IB20-IB25

Stage 3

Total

£’million

Gross core loans subject to ECL

7 925

5 542

190

291

13 948

Stage 1

7 643

4 934

—

12 665

Stage 2

282

608

102

—

992

Stage 3

—

291

ECL

(9)

(46)

(12)

(67)

(134)

Stage 1

(6)

(25)

(1)

—

(32)

Stage 2

(3)

(21)

(11)

—

(35)

Stage 3

—

(67)

Coverage ratio

0.1%

0.8%

6.3%

23.0%

1.0%

At 31 March 2021

IB01-IB12

IB13-IB19

IB20-IB25

Stage 3

Total

£’million

Gross core loans subject to ECL

6 607

4 871

179

332

11 989

Stage 1

6 447

3 907

—

10 415

Stage 2

160

964

118

—

1 242

Stage 3

—

332

ECL

(4)

(53)

(12)

(101)

(170)

Stage 1

(3)

(23)

(1)

—

(27)

Stage 2

(1)

(30)

(11)

—

(42)

Stage 3

—

(101)

Coverage ratio

0.1%

1.1%

6.7%

30.4%

1.4%

Risk management

and governance

Investec plc Annual Financial Statements 2022

ASSET QUALITY

CONTINUED

An analysis of core loans by

risk category – Lending

collateralised by property

Client quality and expertise are at the

core of our credit philosophy. We

provide senior debt and other funding

for property transactions, with a

preference for income-producing assets,

supported by an experienced sponsor

providing a material level of cash equity

investment into the asset. Our exposure

to the property market is well diversified

with strong bias towards prime locations

for residential exposure and focus on

property fundamentals, tenant quality

and income diversity for commercial

assets. Debt service cover ratios are a

key consideration in the lending process

supported by reasonable loan-to-

security value ratios.

Lending collateralised by property

totalled £2.3 billion or 16.2% of net core

loans at 31 March 2022, which remains

in line with the Group’s risk appetite to

maintain a reduced proportion of net

core loan exposures in property-related

lending. New lending is largely against

income-producing commercial

properties at conservative LTVs. The

bulk of property collateralised assets are

located in the UK.

The portfolio has diverse underlying

assets, experienced sponsors behind

the exposures and limited direct

exposure to sectors more vulnerable to

cyclicality. Underwriting criteria remains

conservative and we are committed to

following a client-centric approach to

lending, only supporting counterparties

with strong balance sheets and requisite

expertise.

Gross core loans at

amortised cost and FVOCI

Gross

core

loans at

FVPL

Gross

core

loans

Stage 1

Stage 2

Stage 3

Total

£’million

Gross

exposure

ECL

Gross

exposure

ECL

Gross

exposure

ECL

Gross

exposure

ECL

At 31 March 2022

Commercial real estate

1 334

(3)

152

(6)

105

(21)

1 591

(30)

1 637

Commercial real estate –

investment

1 104

(2)

108

(4)

(18)

1 311

(24)

1 353

Commercial real estate –

development

222

(1)

—

260

(2)

264

Commercial vacant land

and planning

—

(1)

(3)

(4)

—

Residential real estate

676

(2)

—

(16)

713

(18)

742

Residential real estate –

investment

394

(1)

—

(1)

401

(2)

428

Residential real estate –

development

276

(1)

—

(3)

282

(4)

—

282

Residential vacant land

and planning

—

(12)

Total lending collateralised

by property

2 010

(5)

155

(6)

139

(37)

2 304

(48)

2 379

Coverage ratio

0.25%

3.9%

26.6%

2.1%

At 31 March 2021

Commercial real estate

1 126

—

134

(4)

137

(25)

1 397

(29)

1 416

Commercial real estate –

investment

910

—

118

(3)

130

(21)

1 158

(24)

1 173

Commercial real estate –

development

211

—

(1)

222

(1)

226

Commercial vacant land

and planning

—

(1)

(3)

(4)

—

Residential real estate

614

—

(29)

699

(29)

710

Residential real estate –

investment

315

—

(6)

337

(6)

346

Residential real estate –

development

287

—

(5)

319

(5)

—

319

Residential vacant land

and planning

—

(18)

Total lending collateralised

by property

1 740

—

146

(4)

210

(54)

2 096

(58)

2 126

Coverage ratio

0.00%

2.7%

25.7%

2.8%

Risk management

and governance

Investec plc Annual Financial Statements 2022

ASSET QUALITY

CONTINUED

An analysis of core loans by risk

category – High net worth and

other private client lending

Our Private Banking activities target high

net worth individuals, active wealth

creators, high-income professionals,

self-employed entrepreneurs, owner

managers in small to mid-cap corporates

and sophisticated investors.

Lending products are tailored to meet

the requirements of our clients and

deliver solutions to enable target clients

to create and manage their wealth.

Central to our credit philosophy is

ensuring the sustainability of cash flow

and income throughout the cycle. As

such, the client base has been defined

to include high net worth clients (who,

through diversification of income

streams, should reduce income volatility)

and individuals in defined professions

which have historically supported a

sustainable income base, irrespective of

the stage in the economic cycle.

Credit risk arises from the following

activities:

•Mortgages: provides residential

mortgage loan facilities to target

market clients

•High net worth and specialised

lending: provides credit facilities to

high net worth individuals and their

controlled entities as well as portfolio

loans to high net worth clients against

their investment portfolios typically

managed by Investec Wealth &

Investment.

Year in review

High net worth and other private client

lending totalled £5.1 billion and

increased by 26.7% year-on-year, driven

by strong targeted growth in mortgages

for the Group’s high net worth target

market clients as we further leverage

our Private Banking platform and

franchise.

Growth in this area has been achieved

with strong adherence to our lending

criteria. Weighted average LTVs on

mortgages remain conservative at 68%.

Gross core loans at

amortised cost and FVOCI

Gross

core

loans at

FVPL

Gross

core

loans

Stage 1

Stage 2

Stage 3

Total

£’million

Gross

exposure

ECL

Gross

exposure

ECL

Gross

exposure

ECL

Gross

exposure

ECL

At 31 March 2022

Mortgages

3 995

(1)

—

(4)

4 138

(5)

4 163

High net worth and

specialised lending

938

(2)

(1)

(2)

986

(5)

989

Total high net worth

and other private client

lending

4 933

(3)

128

(1)

(6)

5 124

(10)

5 152

Coverage ratio

0.06%

0.8%

9.5%

0.2%

At 31 March 2021

Mortgages

3 103

(1)

—

(2)

3 193

(3)

—

3 193

High net worth and

specialised lending

832

(1)

865

(3)

872

Total high net worth

and other private client

lending

3 935

(2)

105

(1)

(3)

4 058

(6)

4 065

Coverage ratio

0.05%

1.0%

16.7%

0.1%

Risk management

and governance

Investec plc Annual Financial Statements 2022

ASSET QUALITY

CONTINUED

An analysis of core loans by

risk category – Corporate and

other lending

We focus on traditional client-driven

corporate lending activities. The credit

risk management functions approve

specific credit and counterparty limits

that govern the maximum credit

exposure to each individual

counterparty. In addition, further risk

management limits exist through

industry and country limits to manage

concentration risk. The credit appetite

for each counterparty is based on the

financial strength of the principal

borrower, its business model and market

positioning, the underlying cash flow to

the transaction, the substance and track

record of management, and the security

package. Political risk insurance, and

other insurance is taken where deemed

appropriate.

The Group has limited appetite for

unsecured credit risk and facilities are

typically secured by the assets of the

underlying borrower as well as shares in

the borrower.

A summary of the nature of the lending

and/or credit risk assumed within some

of the key areas in our corporate lending

business is provided below:

•Corporate and acquisition finance:

provides senior secured loans to

proven management teams and

sponsors running mid-cap, as well as

some large-cap companies. Credit risk

is assessed against debt serviceability

based upon robust cash generation of

the business demonstrated by both

historical and forecast information. We

typically act as a transaction lead

arranger or on a club or bi-lateral

basis, and have a close relationship

with management and sponsors

•Asset-based lending: provides

working capital and secured corporate

loans to mid-caps. These loans are

secured by the assets of the business,

for example, the accounts receivable,

inventory and plant and machinery. In

common with our corporate lending

activities, strong emphasis is placed

on supporting companies with scale

and relevance in their industry,

stability of cash flow, and experienced

management

•Fund finance: provides debt facilities

to asset managers and fund vehicles,

principally in private equity. The

geographical focus is the UK, Western

Europe and North America where the

Group can support experienced asset

managers and their funds which show

strong, long-term value creation and

good custodianship of investors’

money. Debt facilities are typically to

a fund entity and secured against

undrawn limited partner commitments

and/or the funds underlying assets

•Other corporate and financial

institutions and governments:

provides senior secured loans to mid-

large cap companies where credit risk

is typically considered with regard to

robust cash generation from an

underlying asset and supported by

performance of the overall business

based on both historical and forecast

information

•Small ticket asset finance: provides

funding to small- and medium-sized

corporates to support asset

purchases and other business

requirements. The portfolio is highly

diversified by industry and number of

clients and is secured against the

asset being financed

•Motor finance: provides specialised

motor vehicle financing originated

through Mann Island Finance Limited

(MIVF). The portfolio is composed

predominantly of private motor

vehicles to individuals attributing to a

granular book with low concentration

risk

•Aviation finance: structures, arranges

and provides financing for airlines,

leasing companies, operators and

corporates secured by aircraft at

conservative LTVs. Counterparties

include flag and commercial airline

carriers, leading aircraft lessors and

corporates/operators with strong

contracted cash flows.

•Power and infrastructure finance:

arranges and provides typically long-

term financing for power and

infrastructure assets, in particular

renewable and traditional power

projects as well as transportation

assets, typically against contracted

future cash flows of the project(s)

from well-established and financially

sound off-take counterparties. There

is a requirement for a strong upfront

equity contribution from an

experienced sponsor.

Year in review

Corporate and other lending increased

by 12.4% from £6.2 billion at 31 March

2021 to £7.0 billion at 31 March 2022.

Activity increased across nearly all asset

classes and industries including motor

finance, corporate and acquisition

finance, asset-based lending as well as

fund finance and power and

infrastructure finance. In certain areas,

new lending has been offset by

redemptions as well as strong

distribution of exposures. We continue

to remain client-focused in our

approach, with good quality corporates

exhibiting strong cash flows and balance

sheets.

As at 31 March 2022 we have exposure

to loans totalling £215 million (31 March

2021: £127 million) under the various

support schemes introduced by the UK

Government, predominantly reported

under Corporate and other lending.

Gross Stage 3 exposures total 1.3% of

total corporate and other lending,

reduced from 1.6% in the prior year

reflecting the solid asset quality of the

portfolio to date. Stage 2 exposures

have also reduced predominantly due to

the transfer of loans back to Stage 1

resulting from the updated forward-

looking macro-economic scenarios in

the first half of the year. In certain asset

classes, such as small ticket asset

finance, Stage 2 exposures remain

elevated due to the forward-looking

view on their credit performance under

current macro-economic scenarios,

particularly with respect to inflation,

rather than specific credit concerns.

Risk management

and governance

Investec plc Annual Financial Statements 2022

ASSET QUALITY

CONTINUED

Gross core loans at

amortised cost and FVOCI

Gross

core

loans at

FVPL

Gross

core

loans

Stage 1

Stage 2

Stage 3

Total

£’million

Gross

exposure

ECL

Gross

exposure

ECL

Gross

exposure

ECL

Gross

exposure

ECL

At 31 March 2022

Corporate and acquisition

finance

1 528

(7)

207

(13)

(1)

1 745

(21)

125

1 870

Asset-based lending

352

(1)

—

379

(1)

391

Fund finance

1 194

(1)

—

1 212

(1)

1 256

Other corporate and financial

institutions and governments

379

(2)

(1)

419

(5)

430

Small ticket asset finance

1 183

(8)

242

(7)

(18)

1 454

(33)

—

1 454

Motor finance

628

(2)

121

(3)

(2)

755

(7)

—

755

Other large ticket asset finance

—

Aviation finance

(1)

—

106

(2)

244

350

Power and infrastructure

finance

362

(2)

450

(6)

520

Resource finance

—

Total corporate

and other lending

5 722

(24)

709

(28)

(24)

6 520

(76)

506

7 026

Coverage ratio

0.42%

3.9%

27.0%

1.2%

At 31 March 2021

Corporate and acquisition

finance

1 000

(7)

336

(17)

(4)

1 348

(28)

1 435

Asset-based lending

206

(2)

119

(3)

—

325

(5)

339

Fund finance

1 176

(2)

—

1 233

(2)

1 281

Other corporate and financial

institutions and governments

422

(2)

—

(1)

443

(3)

460

Small ticket asset finance

1 060

(9)

202

(10)

(16)

1 291

(35)

—

1 291

Motor finance

467

(1)

(2)

555

(4)

—

555

Other large ticket asset finance

—

(18)

—

Aviation finance

—

(2)

131

(4)

262

393

Power and infrastructure

finance

351

(2)

(4)

(1)

458

(7)

505

Resource finance

—

Total corporate

and other lending

4 740

(25)

991

(37)

104

(44)

5 835

(106)

475

6 310

Coverage ratio

0.53%

3.7%

42.3%

1.8%

Risk management

and governance

Investec plc Annual Financial Statements 2022

ASSET QUALITY

CONTINUED

The tables that follow provide further analysis of the Group’s gross credit and counterparty exposures.

An analysis of gross credit and counterparty exposures

Gross credit and counterparty exposure totalled £27.9 billion at 31 March 2022. Cash and near cash balances amounted to

£8.9 billion and are largely reflected in the following line items in the table below: cash and balances at central banks, loans and

advances to banks and sovereign debt securities. These exposures are all Stage 1. There are immaterial Stage 2 and Stage 3

exposures outside of loans and advances to customers which are small relative to the balance sheet, where loans and advances

to customers (including committed facilities) account for greater than 95% of overall ECLs.

An analysis of gross credit and counterparty exposures

£’million

31 March 2022

31 March 2021

Cash and balances at central banks

5 380

3 043

Loans and advances to banks

1 468

1 385

Reverse repurchase agreements and cash collateral on securities borrowed

1 447

2 065

Sovereign debt securities

1 166

1 108

Bank debt securities

Other debt securities

433

672

Derivative financial instruments

645

730

Securities arising from trading activities

Loans and advances to customers

14 557

12 501

Other loans and advances

123

Other securitised assets

Other assets

116

451

Total on-balance sheet exposures

25 429

22 130

Guarantees

138

145

Committed facilities related to loans and advances to customers

1 957

1 805

Contingent liabilities, letters of credit and other

326

253

Total off-balance sheet exposures

2 421

2 203

Total gross credit and counterparty exposures

27 850

24 333

Risk management

and governance

Investec plc Annual Financial Statements 2022

CREDIT AND COUNTERPARTY RISK

A further analysis of gross credit and counterparty exposures

The table below indicates in which class of asset (on the face of the consolidated balance sheet) credit and counterparty

exposures are reflected. Not all assets included in the balance sheet bear credit and counterparty risk.

At 31 March 2022

Total gross

credit and

counterparty

exposure

of which

FVPL

of which

amortised

cost and

FVOCI

ECL#

Assets that

we deem to

have no legal

credit

exposure

Total

assets

£’million

Cash and balances at central banks

5 380

—

5 380

—

5 380

Loans and advances to banks

1 468

—

1 468

—

1 468

Reverse repurchase agreements and cash

collateral on securities borrowed

1 447

669

778

—

1 447

Sovereign debt securities

1 166

1 132

—

1 166

Bank debt securities

—

Other debt securities

433

144

289

(5)

—

428

Derivative financial instruments

645

—

693

Securities arising from trading activities

—

137

163

Investment portfolio

—

694*

694

Loans and advances to customers

14 557

609

13 948

(134)

—

14 423

Other loans and advances

123

—

123

—

123

Other securitised assets

—

87ˆ

Interest in associated undertakings

and joint venture holdings

—

Deferred taxation assets

—

110

Current taxation assets

—

Other assets

116

—

116

—

1 023**

1 139

Property and equipment

—

155

Goodwill

—

250

Software

—

Other acquired intangible assets

—

Total on-balance sheet exposures

25 429

2 133

23 296

(139)

2 652

27 942

Guarantees

138

—

138

—

138

Committed facilities related to loans and

advances to customers

1 957

1 904

(7)

—

1 950

Contingent liabilities, letters of credit and other

326

—

326

(1)

181

506

Total off-balance sheet exposures

2 421

2 368

(8)

181

2 594

Total exposures

27 850

2 186

25 664

(147)

2 833

30 536

#Includes £3.3 million of ECL held against financial assets held at FVOCI, which is reported on the balance sheet within the fair value reserve. This will

result in minor differences between certain balance sheet lines reported above (largely loans and advances to customers) and the statutory balance

sheet.

*Relates to exposures that are classified as investment risk in the banking book.

^While the Group manages all risks (including credit risk) from a day-to-day operational perspective, certain assets are within special purpose vehicles that

ring-fence the assets to specific credit providers and limit security to the assets in the vehicle. This balance reflects the credit exposure to credit

providers external to the Group. The net credit exposure that the Group has in the vehicles is reflected in the ‘total credit and counterparty exposure’.

**Other assets include settlement debtors which we deem to have no credit risk exposure as they are settled on a delivery against payment basis.

Risk management

and governance

Investec plc Annual Financial Statements 2022

CREDIT AND COUNTERPARTY RISK

CONTINUED

A further analysis of gross credit and counterparty exposures (continued)

At 31 March 2021

Total gross

credit and

counterparty

exposure

of which

FVPL

of which

amortised

cost and

FVOCI

ECL#

Assets that

we deem to

have no legal

credit

exposure

Total

assets

£’million

Cash and balances at central banks

3 043

—

3 043

—

3 043

Loans and advances to banks

1 385

—

1 385

—

1 385

Reverse repurchase agreements and cash

collateral on securities borrowed

2 065

675

1 390

—

2 065

Sovereign debt securities

1 108

1 071

—

1 108

Bank debt securities

—

Other debt securities

672

205

467

(1)

699

Derivative financial instruments

730

—

773

Securities arising from trading activities

—

254

282

Investment portfolio

—

714*

714

Loans and advances to customers

12 501

512

11 989

(170)

—

12 331

Other loans and advances

—

124

Other securitised assets

—

101ˆ

107

Interest in associated undertakings

and joint venture holdings

—

Deferred taxation assets

—

111

Current taxation assets

—

Other assets

451

—

451

—

942**

1 393

Property and equipment

—

186

Goodwill

—

250

Software

—

Other acquired intangible assets

—

Total on-balance sheet exposures

22 130

2 193

19 937

(171)

2 838

24 797

Guarantees

145

—

145

—

145

Committed facilities related to loans and

advances to customers

1 805

1 722

(9)

—

1 796

Contingent liabilities, letters of credit and other

253

—

253

—

213

466

Total off-balance sheet exposures

2 203

2 120

(9)

213

2 407

Total exposures

24 333

2 276

22 057

(180)

3 051

27 204

#Includes £5.2 million of ECL held against financial assets held at FVOCI, which is reported on the balance sheet within the fair value reserve. This will

result in minor differences between certain balance sheet lines reported above (largely loans and advances to customers and sovereign debt securities)

and the statutory balance sheet.

*Relates to exposures that are classified as investment risk in the banking book.

^While the Group manages all risks (including credit risk) from a day-to-day operational perspective, certain assets are within special purpose vehicles

that ring-fence the assets to specific credit providers and limit security to the assets in the vehicle. This balance reflects the credit exposure to credit

providers external to the Group. The net credit exposure that the Group has in the vehicles is reflected in the ‘total credit and counterparty exposure’.

**Other assets include settlement debtors which we deem to have no credit risk exposure as they are settled on a delivery against payment basis.

Risk management

and governance

Investec plc Annual Financial Statements 2022

CREDIT AND COUNTERPARTY RISK

CONTINUED

Gross credit and counterparty exposures by residual contractual maturity

At 31 March 2022

Up to three

months

Three to six

months

Six months

to one year

One to five

years

Five to 10

years

>10 years

Total

£’million

Cash and balances at central banks

5 380

—

5 380

Loans and advances to banks

1 462

—

1 468

Reverse repurchase agreements and cash

collateral on securities borrowed

674

113

570

1 447

Sovereign debt securities

528

162

172

226

1 166

Bank debt securities

—

Other debt securities

—

180

183

433

Derivative financial instruments

108

216

188

645

Securities arising from trading activities

—

Loans and advances to customers

1 289

1 093

1 445

7 548

1 803

1 379

14 557

Other loans and advances

—

123

Other securitised assets

—

Other assets

116

—

116

Total on-balance sheet exposures

9 557

1 406

1 872

8 232

2 164

2 198

25 429

Guarantees

—

138

Committed facilities related to loans and

advances to customers

130

106

201

1 152

310

1 957

Contingent liabilities, letters of credit and

other

168

—

326

Total off-balance sheet exposures

291

107

278

1 342

345

2 421

Total gross credit and counterparty

exposures

9 848

1 513

2 150

9 574

2 509

2 256

27 850

Risk management

and governance

Investec plc Annual Financial Statements 2022

CREDIT AND COUNTERPARTY RISK

CONTINUED

Gross credit and counterparty exposures by industry

High net

worth and

other

professional

individuals

Lending

collateralised

by property

Agriculture

Electricity,

gas and

water (utility

services)

Public and

non-business

services

Business

services

Finance and

insurance

£’million

At 31 March 2022

Cash and balances at central

banks

—

5 380

—

Loans and advances to banks

—

1 468

Reverse repurchase agreements

and cash collateral on securities

borrowed

—

485

—

962

Sovereign debt securities

—

1 166

—

Bank debt securities

—

Other debt securities

—

239

Derivative financial instruments

—

469

Securities arising from

trading activities

—

Loans and advances to customers

5 152

2 379

619

233

1 333

1 661

Other loans and advances

—

112

Other securitised assets

—

Other assets

—

Total on-balance sheet

exposures

5 152

2 379

660

7 277

1 350

5 028

Guarantees

—

Committed facilities related to

loans and advances to customers

131

436

—

262

205

596

Contingent liabilities, letters of

credit and other

—

191

—

104

Total off-balance sheet

exposures

156

436

—

464

213

797

Total gross credit and

counterparty exposures

5 308

2 815

1 124

7 343

1 563

5 825

At 31 March 2021

Cash and balances at central

banks

—

3 043

—

Loans and advances to banks

—

1 385

Reverse repurchase agreements

and cash collateral on securities

borrowed

—

634

—

1 431

Sovereign debt securities

—

1 062

—

Bank debt securities

—

Other debt securities

—

312

Derivative financial instruments

—

458

Securities arising from

trading activities

—

Loans and advances to customers

4 065

2 126

648

272

1 048

1 306

Other loans and advances

—

Other securitised assets

—

Other assets

—

441

Total on-balance sheet

exposures

4 065

2 131

767

5 038

1 089

5 511

Guarantees

—

118

Committed facilities related to

loans and advances to customers

147

351

—

290

160

474

Contingent liabilities, letters of

credit and other

—

124

—

103

Total off-balance sheet

exposures

173

351

—

424

160

695

Total gross credit and

counterparty exposures

4 238

2 482

1 191

5 075

1 249

6 206

Risk management

and governance

Investec plc Annual Financial Statements 2022

CREDIT AND COUNTERPARTY RISK

CONTINUED

Retailers

and

wholesalers

Manufacturing

and

commerce

Construction

Other

residential

mortgages

Corporate

commercial

real estate

Mining and

resources

Leisure,

entertainment

and tourism

Transport

Motor

finance

Com-

munication

Total

—

5 380

—

1 468

—

1 447

—

1 166

—

433

—

111

—

645

—

285

797

110

—

123

656

755

259

14 557

—

123

—

116

311

809

110

121

123

207

777

755

270

25 429

—

138

104

—

1 957

—

326

104

—

2 421

320

913

117

121

166

243

805

755

330

27 850

—

3 043

—

1 385

—

2 065

—

1 108

—

238

—

672

—

730

—

233

769

—

156

754

555

268

12 501

—

451

267

796

264

101

179

879

555

278

22 130

—

145

114

—

118

1 805

—

253

115

—

118

2 203

284

911

264

106

260

906

555

396

24 333

Risk management

and governance

Investec plc Annual Financial Statements 2022

CREDIT AND COUNTERPARTY RISK

CONTINUED

Additional credit and

counterparty risk information

Credit risk classification and

provisioning policy

IFRS 9 requirements have been

embedded into our Group credit risk

classification and provisioning policy. A

framework has been established to

incorporate both quantitative and

qualitative measures.

For further detail on our credit

risk classification and provision

policy please refer to pages 108

and 109

Internal credit rating models

and ECL methodology

Internal credit rating models cover all

material asset classes. These internal

credit rating models are also used for

IFRS 9 modelling after adjusting for key

differences. Internal credit models

calculate through the economic cycle

losses whereas IFRS 9 requires 12-

month or lifetime point-in-time losses

based on conditions at the reporting

date and multiple economic scenario

forecasts of the future conditions over

the expected lives.

Further information on internal

credit ratings is provided on

page 33

Key judgements

The measurement of ECL has reliance

on expert credit judgement. Key

judgemental areas are highlighted below

and are subject to robust governance

processes. Key drivers of measurement

uncertainty include:

•The assessment of a significant

increase in credit risk

•A range of forward-looking probability

weighted macro-economic scenarios

•Estimations of probabilities of default,

loss given default and exposures at

default using models.

For further detail on our process

for determining ECL please refer

to page 109

Key judgements at 31 March 2022

At 31 March 2022, the revised macro-

economic scenarios result in an increase

of ECL on the performing book as a

result of increased weightings to

worsened downside scenarios as well as

the increased risk of inflation within all

scenarios. There remains a significant

amount of economic uncertainty and,

given the events currently taking place

that have not taken place over the

models’ history, significant model

performance uncertainty. To ensure that

the overall level of ECL was reasonable

and that the judgements applied had

been suitably tested, management

reviewed the overall output of ECLs and

considered a number of alternative

assumptions. As a result, despite the

decreasing concerns with respect to the

COVID-19 pandemic (relative to 31

March 2021), an ECL overlay is still

considered appropriate.

The management ECL overlay totals

£16.8 million at 31 March 2022 (£16

million at 31 March 2021; £21 million at

30 September 2021). This is a £4.2

million release since 30 September 2021

to reflect the increased modelled ECL

given greater downside weighting as

well as the reducing impact that the

COVID-19 pandemic has on

management’s underlying assumptions

offset by the increasing impact of

greater global uncertainty with respect

to the Russian invasion of Ukraine, as

well as wider supply chain issues. The

management ECL overlay seeks to

capture the significant level of

judgement required in the application of

the macro-economic scenarios as well

as the ongoing uncertainty in the UK and

global operating environment that is not

currently captured completely by

modelled outputs.

The combined result of the changes to

macro-economic scenarios, in-model

adjustments and management ECL

overlays over the year equate to a

neutral effect of ECL impairment charge

across Stage 1 and 2. Taken together

with specific impairments in the period

and run-rate ECL charges on the

performing books results in the UK Bank

reporting a £25 million ECL impairment

charge.

Macro-economic sensitivities

IFRS 9 may result in an increase in the

volatility of provisions going forward,

particularly for Stage 1 and Stage 2

assets as a result of macro-economic

scenario changes. Sensitivities to

macro-economic scenarios and factors

form part of our overall risk monitoring,

in particular the Group’s potential ECLs if

each scenario were given a 100%

weighting. In these instances all non-

modelled ECLs, including credit

assessed ECLs and other management

judgements remain unchanged.

The UK Bank’s most severe 100%

scenario sensitivity was to the downside

2 global shock scenario, which would

have resulted in an increase in ECLs,

excluding credit assessed ECL and other

management judgements, of

approximately £13 million. The base

case scenario, if 100% weighted, would

result in a decrease in ECLs, holding all

else equal, of approximately £6 million

reflecting the current view of the overall

weighted average scenarios, skewed to

the downside.

Risk management

and governance

Investec plc Annual Financial Statements 2022

ADDITIONAL POLICY INFORMATION

Forward-looking macro-economic scenarios

The measurement of ECL also requires the use of multiple

economic scenarios to calculate a probability weighted

forward-looking estimate. These scenarios are updated at

least twice a year, or more frequently if there is a macro-

economic shock or significant shift in expectations. The

weighting of these scenarios for IFRS 9 as well as the

scenarios themselves are discussed and presented at the

relevant BRCCs as well as the relevant capital committees for

approval, which form part of the principal governance

framework for macro-economic scenarios.

A number of forecast economic scenarios are considered for

capital planning, stress testing (including Investec-specific

stress scenarios) and IFRS 9 ECL measurement.

For Investec plc, four macro-economic scenarios were used in

the measurement of ECL. These scenarios incorporate a base

case, an upside case and two downside cases.

Taking into account the current macro-economic environment,

adjustments have been made to the composition of the

downside scenarios. In the first half of the financial year, an

inflation scenario was introduced to capture the emergence of

risks related to rising prices which anticipates UK CPI inflation

peaking at 11.1% in the fourth quarter of 2022. This scenario

replaced the fiscal crisis scenario which was used at 31 March

2021. Additionally, since 30 September 2021 the L-shape has

been replaced with a global shock scenario encapsulating a

synchronised worldwide economic downturn.

In addition to a reassessment of the macro-economic

scenarios, a review of the weightings also took place to take

into account the latest economic developments and the

changes to the scenarios. On this basis, the weightings stood

at 10% upside, 45% base case, 30% downside 1 - inflation and

15% downside 2 - global shock. On balance, the risks were

clearly skewed to the downside. These weights have been

calibrated to take into account the risks to the outlook as a

result of developments in the Russian invasion of Ukraine,

considering the potential impact on key economic variables

such as inflation and growth.

Underlying the base case scenario is the assumption that the

Russian invasion of Ukraine does not widen beyond Ukraine

and that ultimately a ceasefire is agreed during the second

quarter of 2022. Soaring commodity prices are a key

consequence of the current crisis and add to inflationary

pressure in the UK and elsewhere. However, such price

pressures remain temporary in nature and are expected to

dissipate over time, also helped by faster labour productivity

growth, returning inflation to the 2% target in the medium

term. Although in the interim inflation weighs on GDP growth,

the buildup of cash buffers by the household and corporate

sector helps to absorb some of the impact and prevents a

recession from taking hold. This pattern is reinforced in the UK

by distortions from the additional bank holiday for the Queen’s

Platinum Jubilee, which will be a drag on output in the second

quarter of 2022 but be followed by a rebound in the third

quarter. Where COVID-19 remains a risk, vaccination

programmes prove effective in preventing the need for

renewed social restrictions in future. This helps sustain an

economic rebound across advanced markets, with supply

chain problems resolved over time and pent-up demand

supporting spending. Monetary and fiscal tightening takes

place but is moderate – bank rate rising to 2% in the medium

term. Unemployment rates remain historically low over this

horizon, and UK economic activity returns to trend growth

levels, estimated to correspond to annual GDP growth rates of

around 1.6%. Globally, the situation is assumed to be similar to

that of the UK with economies expanding in the 2022 calendar

year and a relatively gradual removal of monetary stimulus.

Downside 1 - inflation scenario assumes that the rise in

inflation proves more sustained and protracted as wages rise

to compensate for higher prices, in turn adding to costs price

pressures for firms. Central banks respond by raising interest

rates faster and further and also reducing asset holdings at

the same time. This sharp tightening of financial conditions to

slow the economy is ultimately effective, but not without

triggering a downturn, including a period of contraction in

GDP, rising unemployment and a correction in equity and bond

markets. In time, this then leads to rate cuts. As the economy

recovers, a gradual tightening in monetary policy ensues.

Downside 2 - global shock scenario is a hypothetical scenario

designed to encapsulate a variety of tail risks. It models a

severe synchronised global economic downturn and a sharp

repricing of all asset classes, particularly the ones whose

valuations are most elevated. Although the shock is assumed

to take place early on in the forecasting horizon, lasting

headwinds mean the economic and asset price recovery that

follows is a slow one. Partly this also reflects the assumption

that fiscal support is not as substantial as it was during the

initial phase of the COVID-19 pandemic. Faced by a

deflationary shock, central banks loosen policy. The BoE does

so via asset purchases and a cut in bank rate, to a low of

-0.50%. Over time, economic recovery prompts a renewed but

slow rise in policy rates

The down case scenarios are severe but plausible scenarios

created based on Investec specific bottom-up stress tests,

whilst also considering IFRS 9 specific sensitivities and non-

linearity.

In the upside case, economic activity expands more briskly, as

renewed business confidence coupled with an easing of

COVID-19 related supply disruptions boosts business

investment. In turn that triggers an acceleration in labour

productivity, which sustains faster growth for longer as

medium-term GDP growth averages 2% per annum. Inflation

subsides because higher wages merely reflect faster labour

productivity growth rather than adding to cost pressures. Amid

a positive environment for corporates, unemployment falls

even further. This stronger than expected rebound is seen

globally, and monetary policy normalises gradually enough so

as not to subdue growth.

The graph below shows the forecasted UK GDP under each

macro-economic scenario applied at 31 March 2022.

£’billion

Risk management

and governance

Investec plc Annual Financial Statements 2022

MACRO-ECONOMICS

The table that follows shows the key factors that form part of the UK and Other macro-economic scenarios and their relative

applied weightings.

At 31 March 2022

average 2022 – 2027

At 31 March 2021

average 2021 – 2026

Macro-economic scenarios

Upside

Base

case

Downside 1

inflation

Downside 2

global shock

Upside

Base

case

Downside 1

L-shape

Downside 2

fiscal crisis

GDP growth

2.6

1.9

0.8

0.3

5.4

4.2

1.3

0.9

Unemployment rate

3.3

3.7

5.4

6.4

4.3

4.7

6.9

7.8

CPI inflation

2.4

3.1

3.2

1.6

2.0

1.9

1.1

1.0

House price growth

3.5

2.9

1.5

(3.6)

3.7

1.6

0.7

(0.9)

BoE – Bank rate (end year)

1.8

1.9

2.0

(0.2)

1.0

0.6

(0.4)

(0.7)

Euro area

GDP growth

2.8

2.1

1.1

0.1

4.4

3.1

1.0

0.9

GDP growth

3.1

2.1

1.4

0.6

6.5

3.4

1.4

1.2

Scenario weightings

The following table shows annual averages of economic factors for the base case over a five-year period based on the

economic forecasts in place as at 31 March 2022.

Base case %

Financial years

2022/2023

2023/2024

2024/2025

2025/2026

2026/2027

GDP growth

2.4

2.1

1.6

Unemployment rate

3.8

3.7

CPI inflation

7.9

2.2

1.6

2.0

House price growth

5.9

1.6

2.3

2.4

BoE – Bank rate (end year)

1.5

2.0

Euro area

GDP growth

3.0

2.7

1.8

1.6

GDP growth

3.0

2.1

1.8

The following table outlines the extreme point forecast for each economic factor across the scenarios as at 31 March 2022.

Baseline represents the five-year base case average. Upside scenario values represent the best outcomes, namely the highest

quarterly level of GDP, house price growth (year-on-year), lowest level of unemployment and Bank rate. Upside scenario value

for CPI inflation is represented by the five-year average. Downside scenario values represent the worst outcomes being lowest

quarterly level of GDP, house price growth (year-on-year). For Bank rate and CPI inflation the most extreme point is listed, the

highest level reflective in downside 1 inflation scenario and the lowest level in downside 2 global shock scenario.

Five-year extreme points

At 31 March 2022

Upside

Baseline: Base

case five-year

average

Downside 1

inflation

Downside 2

global shock

GDP growth

4.5

1.9

(4.2)

(4.3)

Unemployment rate

3.2

3.7

7.0

7.4

CPI inflation

2.4

3.1

11.1

0.5

House price growth

9.0

2.9

(16.8)

(21.9)

BoE – Bank rate (end year)

0.8

1.9

4.0

(0.5)

Euro area

GDP growth

5.1

2.1

(3.5)

(4.2)

GDP growth

5.2

2.1

(3.9)

Risk management

and governance

Investec plc Annual Financial Statements 2022

MACRO-ECONOMICS

CONTINUED

Climate risk and opportunities

Our position on climate change

We recognise the complexity and

urgency of climate change, and the

consequences this has on social well-

being. The Investec Group

environmental policy and climate change

statement considers the risks and

opportunities that climate change

presents to the global economy. We

believe that as a specialised financial

services organisation and given our

positioning in the developed and

emerging worlds, we can make a

meaningful impact in addressing climate

change. We support the Paris

Agreement aims of holding the increase

in global average temperature to well

below 2°C above pre-industrial levels

and continue to pursue efforts towards

limiting it to 1.5°C. We also recognise the

urgency and need to accelerate action

which has been incorporated into our

approach.

Our approach to net-zero

We embrace our responsibility to

understand and manage our own carbon

footprint. We upheld our commitment

and maintained carbon neutrality in our

direct operational carbon emissions

status for the fourth financial year by

sourcing almost 99% of our electricity

consumption from renewable energy

through the purchase of Renewable

Energy Certificates and offsetting the

remaining unavoidable emissions of 17%

through the purchase of verified and

high quality carbon credits. We

acknowledge that the widest and most

impactful influence we can have is to

manage and reduce our carbon

emissions in the business we conduct

and more specifically in our lending and

investing portfolios (Scope 3 financed

activities). As such, we are members of

the Net-Zero Banking Alliance (NZBA)

and we are working together with the

Partnership for Carbon Accounting

Financials (PCAF) to measure our

financed emissions and have

established a base line towards a net-

zero path.

We continue to build capacity within our

specialist skills in advisory, lending and

investing to support our clients and

stakeholders to move as quickly and

smoothly as possible towards a zero-

carbon economy.

Climate-related financial disclosures

(TCFD)

We publish a separate TCFD report that

aligns with the Financial Stability Board

Taskforce recommendations. The table

below illustrates a summary of progress

in terms of the TCFDs.

Refer to detailed information in

our 2022 TCFD report which will

be available on the Investec

Group’s website at the end of

June 2022.

Governance

Strategy

Risk management

Metrics

Achievements in prior years

•Established an ESG Executive

Committee to align and monitor

the Group’s climate action

•Assigned Board responsibility

and oversight for climate-

related risks and opportunities

•Assigned senior management

responsibility for climate-

related risks and opportunities

•Deepened the ESG skills of the

Group DLC SEC.

•Acknowledged the Paris

Agreement’s aim of holding the

increase in the global average

temperature to well below 2°C

compared to pre-industrial

levels and of pursuing efforts

towards limiting it to 1.5°C

•Created a sustainable finance

framework

•Launched a number of ESG and

climate specific products and

services.

•Evaluated our lending and

investment portfolios for climate-

related risks and opportunities

•Automated ESG screening

incorporated into the risk

management process.

•Achieved carbon neutral

status across our global

operations for direct

emissions and committed

to ongoing carbon neutral

emissions across all

operations

•Joined PCAF to

collaborate with peers

measuring Scope 3

financed emissions.

Achievements for the financial year ended

March 2022

•Became members of the Net-

Zero Banking Alliance (NZBA)

•W&I submitted their first UN

PRI report

•W&I joined Climate Action 100+

•Implemented a more holistic

ESG framework linked to

executive remuneration

•Tabled a voluntary climate

resolution at the August 2021

AGM, receiving 99.9% support.

•Assessed financed emissions in

material asset classes within

our lending and investment

portfolios

•Assessed impact of climate-

related risks and opportunities

in our businesses

•Collaborated on climate-related

disclosures with stakeholders,

for example, through PCAF

•Increased engagement within

W&I with existing companies

•W&I increased engagement on

climate-related matters with

the boards of companies.

•Followed the BoE stress test

guidelines

•Assessed climate-related risks

within our operations

•Strengthened our climate focus in

the Investec plc and IBP risk

appetite

•Reviewed and approved Investec

plc and IBP’s ‘no coal’ ambition in

the next three to five years.

•Measured the carbon

intensity within material

asset classes for our

Scope 3 lending and

investment portfolios

using the PCAF and

PACTA methodologies

•Assessed net-zero

pathways according to the

SBTi and evaluated the

viability of the suggested

pathways within our

investment and lending

portfolios.

Looking forward

•Provide targeted development

to the Board, executives,

management and staff where

skills are required or where skill

gaps are identified

•Engage with stakeholders on

our disclosures to get

feedback on how we can

improve our governance and

oversight

•Stronger focus on climate-

related and sustainability

(including ESG) matters in the

DLC BRCC.

•Further engagement with our

clients to assist them in their

net-zero carbon ambitions

•Continue providing innovative

climate-related product

offerings

•Review and assess the

integration of climate-related

matters into business strategy

•Monitor the progress in terms

of the Group’s net-zero carbon

ambition

•Continue to strengthen the

Group’s climate-related and

sustainability disclosures.

•Continue to increase our focus on

climate-related and sustainability

(including ESG) risks

•Review developments with

regards to climate-related

disclosure guidance in specific

recommendations by the

International Sustainability

Standards Board (ISSB) and the

Financial Reporting Council (FRC)

•Enhanced focus on reporting on

climate-related risks.

•Engage with stakeholders

to get feedback on how

we can improve our

measurement and

methodologies used

•Continue to monitor

progress on the Group’s

net-zero carbon ambitions

•Continue to assess

climate scenarios in line

with industry

recommendations.

Risk management

and governance

Investec plc Annual Financial Statements 2022

ESG (INCLUDING CLIMATE) RISK

Investment risk in the banking

book

Investment risk in the banking book

comprises 2.5% of total assets at 31

March 2022. We have refocused our

principal investment activities on clients

where we have and can build a broader

relationship through other areas of

activity in the Group.

We partner with management and other

co-investors by bringing capital raising

expertise, working capital management,

merger and acquisition and investment

experience into client-driven private

equity transactions as well as leveraging

third party capital into the Group’s funds

that are relevant to the Group’s client

base. Investments are selected based

on:

•The track record and credibility of

management

•Attractiveness of the industry and the

positioning therein

•Valuation/pricing fundamentals

•Sustainability analyses

•Exit possibilities and timing thereof

•The ability to build value by

implementing an agreed strategy.

Investments in listed shares may arise

on an IPO, or sale of an investment to a

listed company. There is limited appetite

for listed investments.

Additionally, from time to time, the

manner in which certain lending

transactions are structured results

in equity, warrants or profit shares

being held, predominantly in unlisted

companies. We also source

development, investment and trading

opportunities to create value within

agreed risk parameters.

Following the distribution that took place

on 31 May 2022, Investec plc retains a

c.10% shareholding in Ninety One

(previously known as Investec Asset

Management) as an investment (31

March 2022: c.15%).

Management of investment risk

As investment risk arises from a variety

of activities conducted by the Group,

the monitoring and measurement

thereof varies across transactions and/

or type of activity. Independent

investment committees exist in the UK

and provide oversight of the regions

where we assume investment risk.

Risk appetite limits and targets are set to

manage our exposure to equity and

investment risk. An assessment of

exposures against limits and targets is

reported to IBP and DLC BRCCs.

As a matter of course, concentration risk

is avoided and investments are spread

across geographies and industries.

Valuation and sensitivity assumptions

and accounting methodologies

For a description of our valuation

principles and methodologies

refer to pages 107 to 113 and

pages 134 to 141 for factors and

sensitivities taken into

consideration in determining fair

value.

An analysis of income and

revaluations of these investments

can be found in the investment

income note on page 119

Summary of investments

£’million

On-balance

sheet value of

investments

31 March 2022

On-balance

sheet value of

investments

31 March 2021

Category

Unlisted investments

336

346

Listed equities

Ninety One

356

358

Total investment portfolio

694

714

Trading properties

Warrants and profit shares

Total

704

744

An analysis of the investment portfolio (excluding Ninety One), warrants and profit shares

31 March 2022

£344 million

Finance and insurance

46.3%

Real estate

14.0%

Manufacturing and commerce

11.0%

Retailers and wholesalers

9.3%

Transport

9.3%

Other

4.5%

Communication

2.9%

Leisure, entertainment and tourism

1.4%

Construction

1.3%

Risk management

and governance

Investec plc Annual Financial Statements 2022

INVESTMENT RISK

Securitisation/structured credit

activities exposures

Overview

The Group’s definition of securitisation/

structured credit activities is wider than

the definition applied for regulatory

capital purposes. The regulatory capital

definition focuses largely on positions

we hold in an investor capacity and

includes securitisation positions we have

retained in transactions in which the

Group has achieved significant risk

transfer. We believe, however, that the

information provided below is

meaningful in that it groups all these

related activities in order for a reviewer

to obtain a full picture of the activities

that we have conducted in this space.

Some of the information provided below

overlaps with the Group’s credit and

counterparty exposure information.

Since 1 January 2020, the UK has

applied the new securitisation

framework. Given risk-weightings under

this new framework are generally not

reliant on external ratings, a breakdown

by risk-weight has also been provided in

the analysis below.

Securitisation transactions provide the

bank with a cost-effective, alternative

source of financing either through sale

to the market or through use of the

notes issued as collateral for other

funding mechanisms.

We hold rated structured credit

instruments. These are UK and US

exposures and amounted to £381 million

at 31 March 2022 (31 March 2021: £557

million) with 96% being AAA and AA

rated. Of the total exposures structured

credit exposures, 99% have a risk

weighting of less than 40%.

Accounting policies

Refer to page 110

Risk management

All existing or proposed exposures to a

securitisation are analysed on a case-

by-case basis, with approval required

from credit. The analysis looks through

to the historical and expected future

performance of the underlying assets,

the position of the relevant tranche in

the capital structure as well as analysis

of the cash flow waterfall under a variety

of stress scenarios. External ratings and

risk-weightings are presented, but only

for information purposes since the

Group principally relies on its own

internal risk assessment. Overarching

these transaction level principles is the

Board-approved risk appetite policy,

which details the Group’s appetite for

such exposures, and each exposure is

considered relative to the Group’s

overall risk appetite. We can use explicit

credit risk mitigation techniques where

required; however, the Group prefers to

address and manage these risks by

approving exposures to which the Group

has explicit appetite through the

consistent application of the risk

appetite policy.

In addition, securitisations of

Investec own originated assets

are assessed in terms of the

credit risk management

philosophies and principles as

set out above.

Credit analysis

In terms of our analysis of our credit and

counterparty risk, exposures arising from

securitisation/structured credit activities

reflect only those exposures to which

we consider ourselves to be at risk.

Nature of exposure/activity

31 March

2022

£’million

31 March

2021

£’million

Balance sheet and credit risk

classification

Structured credit (gross exposure)

429

575

Other debt securities and

other loans and advances

<40% RWA

423

554

>40% RWA

Analysis of gross structured credit exposure

£’million

AAA

BBB

B and

below

Total

rated

Total

unrated

Total

US corporate loans

205

—

264

307

UK RMBS

—

117

122

Total at 31 March 2022

282

—

381

429

<40% RWA

282

—

380

423

>40% RWA

—

Total at 31 March 2021

376

173

—

557

575

Risk management

and governance

Investec plc Annual Financial Statements 2022

SECURITISATION/STRUCTURED CREDIT

Market risk in the trading book

Traded market risk profile

The focus of our trading activities is

primarily on supporting our clients. Our

strategic intent is that proprietary

trading should be limited and that

trading should be conducted largely to

facilitate client flow. Within our trading

activities, we act as principal with clients

or the market. Market risk exists where

we have taken on principal positions

resulting from market making,

underwriting and facilitation of client

business in the foreign exchange,

interest rate, equity, credit and

commodity markets.

Traded market risk year in review

The financial year in review has been

characterised by two distinct market

regimes – a period of relative stability

and benign conditions, followed by a

period of increased volatility as a result

of strong inflation prints, commodity

price extremes, rapidly repricing yield

curves and more recently, geo-political

risks.

Market risk across the ongoing trading

desks remains limited, with the primary

focus continuing to be on managing and

hedging the market risk arising from

client-related activity. The UK Bank

continues to wind down its structured

products book with IBP executive

management, risk management and the

business closely monitoring the risk in

the substantially reduced remaining

book. The macro hedge implemented in

the prior year remains in place and has

provided downside protection in the

event of another extreme market

dislocation. The risk management

processes related to this book continue

to be reviewed and refined, and the

remaining risk on the book is regularly

reported to IBP and DLC BRCCs and the

respective Boards.

Utilisation of risk limits have remained

moderate and the desks have remained

prudent during the year.

Traded market risk governance

structure

Traded market risk is governed by

policies that cover the management,

identification, measurement and

monitoring of market risk. We have

independent market risk teams to

identify, measure, monitor and manage

market risk.

The market risk teams have reporting

lines that are separate from the trading

function, thereby ensuring independent

oversight. The Market Risk Forum,

mandated by the IBP ERC, manages

market risk in accordance with approved

principles, policies and risk appetite.

Trading desk risk limits are reviewed by

the Market Risk Forum and approved by

IBP ERC in accordance with the risk

appetite defined by the Board. Any

significant changes in risk limits are then

taken to Group ERC for review and

approval. The appropriateness of limits

is continually reassessed, with limits

reviewed at least annually, in the event

of a significant market event or at the

discretion of senior management.

Measurement of traded market

risk

A number of quantitative measures are

used to monitor and limit exposure to

traded market risk. These measures

include:

•Value at Risk (VaR) and Expected

Shortfall (ES) as portfolio measures of

market risk exposure

•Scenario analysis, stress tests and

tools based on extreme value theory

(EVT) that measure the potential

impact on portfolio values of extreme

moves in markets

•Sensitivity analysis that measures the

impact of individual market risk factor

movements on specific instruments or

portfolios, including interest rates,

foreign exchange rates, equity prices,

credit spreads and commodity prices.

We use sensitivity measures to

monitor and limit exposure across

portfolios, products and risk types.

Stress and scenario analyses are used

to add insight into the possible

outcomes under severe market

disruptions. The stress‑testing

methodology assumes that all market

factors move adversely at the same time

and that no actions are taken during the

stress events to mitigate risk. Stress

scenarios based on historical experience

as well as hypothetical scenarios are

considered and are reviewed regularly

for relevance in the ever-changing

market environment. Stress scenarios

are run daily with analysis presented to

IBP Review Executive Risk Review Forum

(IBP Review ERRF) weekly and IBP BRCC

when the committees meet or more

often should market conditions require

this.

Traded market risk management,

monitoring and control

Market risk limits are set according to

our risk appetite policy. Limits are set at

trading desk level with aggregate risk

across all desks also monitored against

overall market risk appetite limits.

Current market conditions as well as

stressed market conditions are taken

into account when setting and reviewing

these limits.

Market risk teams review the market

risks in the trading book with detailed

risk reports produced daily for each

trading desk and for the aggregate risk

of the trading book. The material risks

identified are summarised in daily

reports that are distributed to, and

discussed with senior management

when required. The production of risk

reports allows for the monitoring of all

positions in the trading book against

prescribed limits. Documented policies

and procedures are in place to ensure

there is a formal process for recognition

and authorisation for risk excesses

incurred.

The risk management software is fully

integrated with source trading systems,

allowing valuation in risk and trading

systems to be fully aligned. All valuation

models are subject to independent

validation by market risk ensuring

models used for valuation and risk are

validated independently of the front

office.

Risk management

and governance

Investec plc Annual Financial Statements 2022

MARKET RISK

Value at Risk

VaR is a technique that estimates the

potential losses as a result of

movements in market rates and prices

over a specified time horizon at a given

level of confidence. The VaR model

derives future scenarios from a historic

time series of market rates and prices,

taking into account inter-relationships

between the different markets such as

interest rates and foreign exchange

rates. The VaR model is based on a full

revaluation historical simulation and

incorporates the following features:

•Two-year historical period based on

an unweighted time series

•Daily movements in each risk factor

e.g. foreign exchange rates, interest

rates, equity prices, credit spreads

and associated volatilities are

simulated with reference to historical

market rates and prices, with proxies

only used when no or limited historical

market data is available

•Risk factor movements are based on

both absolute and relative returns as

appropriate for the different types of

risk factors.

VaR numbers using a one-day holding

period are monitored daily at the 95%

and 99% confidence intervals, with limits

set at the 95% confidence interval.

Expected shortfalls are also monitored

daily at the 95% and 99% levels, being

the average of the losses in the tail of

the VaR distribution.

The table below contains the 95% one-day VaR figures for the trading businesses.

31 March 2022

31 March 2021

95% one-day VaR

Year end

Average

High

Low

Year end

Average

High

Low

£’000

Equities

381

479

742

335

435

828

2 021

302

Foreign exchange

Interest rates

172

Credit

213

455

Consolidated*

370

469

699

340

456

896

2 155

289

*The consolidated VaR for each entity is lower than the sum of the individual VaRs. This arises from the correlation offset between various asset classes

(diversification).

Expected shortfall

The ES measure overcomes some of VaR’s shortcomings. ES seeks to quantify losses encountered in the tail beyond the VaR

level. The 95% one-day ES is the average loss given that the 95% one-day VaR level has been exceeded. The table below

contains the 95% one-day ES figures.

95% one-day ES

31 March 2022

31 March 2021

£’000

Equities

530

901

Foreign exchange

Interest rates

Credit

102

Consolidated*

525

941

*The consolidated ES for each entity is lower than the sum of the individual ESs. This arises from the correlation offset between various asset classes.

Stressed VaR

Stressed VaR (sVaR) is calculated using the VaR model but is based on a one-year period through which the relevant market

factors experienced stress. The information in the table below contains the 99% one-day sVaR.

£’000

31 March 2022

31 March 2021

99% one-day sVaR

858

722

Risk management

and governance

Investec plc Annual Financial Statements 2022

MARKET RISK

CONTINUED

Backtesting

The performance of the VaR model is regularly monitored through backtesting. This is done by comparing daily clean profit and

loss against one-day VaR based on a 99% confidence level. Clean profit and loss excludes items such as intra-day transactions,

valuation adjustments, provisions, recoveries, commission, fees and hedge costs included in the new trade revenue. If a loss

exceeds the one-day VaR, a backtesting exception is considered to have occurred. Over time we expect the average rate of

observed backtesting exceptions to be consistent with the percentile of the VaR statistic being tested. This is conducted at an

aggregate and desk level on a daily basis.

The graph that follows shows the result of backtesting the total daily 99% one-day VaR against the clean profit and loss data for

our trading activities over the reporting period. Based on these graphs, we can gauge the accuracy of the VaR figures i.e. 99% of

the time, losses are not expected to exceed the 99% one-day VaR.

The average VaR for the year ended 31 March 2022 was lower than for the year ended 31 March 2021. Using clean profit and

loss data for backtesting resulted in no exceptions over the period at the 99% confidence level, i.e. where the loss was greater

than the 99% one-day VaR. Two to three exceptions are expected over a one year period. The absence of exceptions is

attributable to the reduced risk in the structured products book, the volatile 2020 COVID-19 data still being in the historic period

of the VaR model for much of the reporting period and the more stable equity markets experienced over much of the year.

99% one-day VaR backtesting (£)

Stress testing

The table below indicates the potential losses that could arise in the trading book portfolio per EVT at the 99% confidence level.

EVT is a methodology widely used to estimate tail-event losses beyond the 95% one-day VaR. These numbers do not assume

normality but rather rely on fitting a distribution to the tails of the VaR distribution.

99% EVT

31 March 2022

31 March 2021

£’000

Equities

1 503

5 315

Foreign exchange

Interest rates

182

134

Credit

366

Consolidated#

1 420

5 335

# The consolidated stress testing for each entity is lower than the sum of the individual stress test numbers. This arises from the correlation offset

between various asset classes.

Risk management

and governance

Investec plc Annual Financial Statements 2022

MARKET RISK

CONTINUED

Clean profit and loss histogram

The histogram below illustrates the distribution of clean profit and loss during the financial year for our trading businesses. The

graph shows that a clean profit was realised on 162 days out of a total of 253 days in the trading business. The average daily

clean profit and loss generated for the year to 31 March 2022 was £55 676 (year to 31 March 2021: £446).

Clean profit and loss

Frequency: Days in the year

Market risk – derivatives

The Group enters into various derivatives contracts, largely on the back of customer flow. These are used for hedging foreign

exchange, interest rates, commodity, equity and credit exposures and to a small extent as principal for trading purposes. Traded

instruments include financial futures, options, swaps and forward rate agreements.

Information showing our derivative trading portfolio over the reporting period on the basis of the notional principal and the

fair value of all derivatives can be found on page 148

The notional principal indicates our activity in the derivatives market and represents the aggregate size of total outstanding

contracts at year end. The fair value of a derivative financial instrument represents the present value of the positive or negative

cash flows which would have occurred had we closed out the rights and obligations arising from that instrument in an orderly

market transaction at year end. Both these amounts reflect only derivatives exposure and exclude the value of the physical

financial instruments used to hedge these positions.

Risk management

and governance

Investec plc Annual Financial Statements 2022

MARKET RISK

CONTINUED

Balance sheet risk management

Balance sheet risk encompasses the

financial risks relating to our asset and

liability portfolios, comprising liquidity,

funding, concentration, encumbrance

and non-trading interest rate risk.

Balance sheet risk governance

structure and risk mitigation

Investec plc (and its subsidiaries,

including IBP) are ring-fenced from

Investec Limited (and its subsidiaries),

and vice versa. Both legal entities (and

their subsidiaries) are therefore required

to be self-funded, and manage their

funding and liquidity as separate

entities.

Risk appetite limits are set at the

relevant Board level and reviewed at

least on an annual basis. The size,

materiality, complexity, maturity and

depth of the market as well as access to

stable funds are all inputs considered

when establishing the liquidity and non-

trading interest rate risk appetite for

each relevant region. Specific regulatory

requirements may further dictate

additional restrictions to be adopted in a

region.

Under delegated authority of the

respective Boards, the Group has

established ALCOs within each banking

entity, using regional expertise and local

market access as appropriate. The

ALCOs are mandated to ensure

independent supervision of liquidity risk

and non-trading interest rate risk within

the risk appetite.

ALCOs meet on at least a monthly basis

to review the exposures within the

balance sheet together with market

conditions, and decide on strategies to

mitigate any undesirable liquidity and

interest rate risk. The Treasury function

within each banking entity is mandated

to holistically manage the liquidity

mismatch and non-trading interest rate

risk arising from our asset and liability

portfolios on a day-to-day basis.

The Treasury function, by banking

entity, is required to exercise tight

control of liquidity, funding,

concentration, encumbrance and non-

trading interest rate risk within the

Board-approved risk appetite limits.

Non-trading interest rate risk and asset

funding requirements are transferred

from the originating business to the

Treasury function.

The Treasury function, by banking

entity, directs pricing for all deposit

products, establishes and maintains

access to stable funds with the

appropriate tenor and pricing

characteristics, and manages liquid

securities and collateral, thus providing

prudential management and a flexible

response to volatile market conditions.

We maintain an internal funds transfer

pricing system based on prevailing

market rates. Our funds transfer pricing

system charges the businesses the price

of liquidity taking into account the

behavioural duration of the asset. The

costs and risks of liquidity are clearly

and transparently attributed to business

lines thereby ensuring that price of

liquidity is integrated into business level

decision-making and drives the

appropriate mix of sources and uses of

funds.

Balance sheet risk management is based

within Group risk management and is

responsible for identifying, quantifying

and monitoring risks; providing daily

independent governance and oversight

of the treasury activities and the

execution of the Group’s policies.

There is a regular internal audit of the

balance sheet risk management

function, the frequency of which is

determined by internal audit.

Daily, weekly and monthly reports are

independently produced highlighting

Group activity, exposures and key

measures against thresholds and limits

and are distributed to management,

ALCO, Treasury, IBP Review ERRF, IBP

ERC, IBP BRCC, and DLC BRCC as well

as summarised reports for Board

meetings.

Liquidity risk

Liquidity risk is further broken down into:

•Funding liquidity risk: this relates to

the risk that the Group will be unable

to meet current and/or future cash

flows or collateral requirements in the

normal course of business, without

adversely affecting its solvency,

financial position or its reputation

•Market liquidity risk: this relates to

the risk that the Group may be unable

to trade in specific markets or that it

may only be able to do so with

difficulty due to market disruptions or

a lack of market liquidity.

Management and measurement of

liquidity risk

Cohesive liquidity management is vital

for protecting our depositors, preserving

market confidence, safeguarding our

reputation and ensuring sustainable

growth with established funding

sources. Through active liquidity

management, we seek to preserve

stable, reliable and cost-effective

sources of funding. As such, the Group

considers ongoing access to appropriate

liquidity for all its operations to be of

paramount importance, and our core

liquidity philosophy is reflected in day-

to-day practices which encompass the

following robust and comprehensive set

of policies and procedures for assessing,

measuring and controlling liquidity risk:

•Our liquidity management processes

encompass requirements set out

within Basel Committee on Banking

Supervision (BCBS) guidelines and by

the regulatory authorities in each

jurisdiction, namely the PRA,

EBA,GFSC and FINMA

•The risk appetite is clearly defined by

the Board and each geographic entity

must have its own Board-approved

policies with respect to liquidity risk

management

•We maintain a liquidity buffer in the

form of unencumbered cash,

government or rated securities

(typically eligible for repurchase with

the central bank), and near cash well

in excess of the regulatory

requirements as protection against

unexpected disruptions in cash flows

•Funding is diversified with respect to

currency, term, product, client type

and counterparty to ensure a varied

overall funding mix

•We monitor and evaluate each

banking entity’s maturity ladder and

funding gap (cash flow maturity

mismatch) on a ‘liquidation’, ‘going

concern’ and ‘stress’ basis

•The balance sheet risk management

team independently monitors key daily

funding metrics and liquidity ratios to

assess potential risks to the liquidity

position, which further act as early

warning indicators of potential market

disruptions

•The maintenance of sustainable

prudent liquidity resources takes

precedence over profitability

•The Group maintains contingency

funding plans designed to protect

depositors, creditors and shareholders

and maintain market confidence

during adverse liquidity conditions.

We measure liquidity risk by quantifying

and calculating various liquidity risk

metrics and ratios to assess potential

risks to the liquidity position. These

include:

•An internal ‘survival horizon’ metric

which models the number of days it

takes before the Group’s cash position

is depleted under an internally defined

worst-case liquidity stress

•Regulatory metrics for liquidity

measurement:

–Liquidity Coverage Ratio (LCR)

–Net Stable Funding Ratio (NSFR)

•An array of liquidity stress tests,

based on a range of scenarios and

using historical analysis, documented

experience and prudent judgement to

model the impact on the Group’s

balance sheet

•Contractual run-off based actual cash

flows with no modelling adjustments

Risk management

and governance

Investec plc Annual Financial Statements 2022

BALANCE SHEET RISK AND LIQUIDITY

•Additional internally defined funding

and balance sheet ratios

•Any other local regulatory

requirements.

This suite of metrics ensures the smooth

management of the day-to-day liquidity

position within conservative parameters

and further validates that we are able to

generate sufficient liquidity to withstand

a range of liquidity stresses or market

disruptions.

The parameters used in stress scenarios

are reviewed at least annually, taking

into account changes in the business

environments and input from business

units. The objective is to analyse the

possible impact of an economic event

on the Group’s balance sheet, so as to

maintain sufficient liquidity and to

continue to operate for a minimum

period as detailed in the Board-

approved risk appetite.

We further carry out reverse stress tests

to identify business model vulnerabilities

which tests ‘tail risks’ that can be missed

in normal stress tests. The Group has

calculated the severity of stress required

to breach the liquidity requirements.

This scenario is considered highly

unlikely given the Group’s strong

liquidity position, as it requires an

extreme withdrawal of deposits

combined with the inability to take any

management actions to breach liquidity

minima that threatens the Group’s

liquidity position.

The Group operates an industry-

recognised third party risk modelling

system in addition to custom-built

management information systems

designed to measure and monitor

liquidity risk on both a current and

forward-looking basis.

Funding strategy

We maintain a funding structure of

stable customer deposits and long-term

wholesale funding well in excess of

funded assets. We target a diversified

funding base, avoiding undue

concentrations by investor type,

maturity, market source, instrument and

currency. As a result, we are able to

generate funding from a broad range of

sources in each geographic location,

which ensures a varied overall funding

mix to support loan growth.

We acknowledge the importance of our

retail deposit client base as the principal

source of stable and well diversified

funding. We continue to develop

products to attract and service the

investment needs of our client base in

line with our risk appetite.

Entities within the Group actively

participate in global financial markets

and our relationship is continuously

enhanced through regular investor

presentations internationally. Entities are

only allowed to have funding exposure

to wholesale markets where they can

demonstrate that the market is

sufficiently deep and liquid, and then

only relative to the size and complexity

of their business as part of a diversified

funding mix.

The Group’s ability to access funding at

cost-effective levels is influenced by

maintaining or improving the entity’s

credit rating. A reduction in these ratings

could have an adverse effect on the

Group’s funding costs, and access to

wholesale term funding. Credit ratings

are dependent on multiple factors,

including operating environment,

business model, strategy, capital

adequacy levels, quality of earnings, risk

appetite and exposure and control

framework.

We remain confident in our ability to

raise funding appropriate to our needs.

Liquidity buffer

To protect against potential shocks, we

hold a liquidity buffer in the form of

cash, unencumbered high quality liquid

assets (typically in the form of

government or rated securities eligible

for repurchase with the central bank),

and near cash, well in excess of the

regulatory requirements as protection

against disruptions in cash flows. These

portfolios are managed within Board-

approved targets, and as well as

providing a buffer under going concern

conditions, also form an integral part of

the broader liquidity generation strategy.

The Group remains a net liquidity

provider to the interbank market, placing

significantly more funds with other

banks than our short-term interbank

borrowings. We do not rely on overnight

interbank deposits to fund term lending.

From 1 April 2020 to 31 March 2022

average cash and near cash balances

over the period amounted to £7.5 billion.

Cash and near cash trend

£’million

Risk management

and governance

Investec plc Annual Financial Statements 2022

BALANCE SHEET RISK AND LIQUIDITY

CONTINUED

An analysis of cash and near cash at

31 March 2022

Bank and non-bank depositor concentration by type at

31 March 2022

£8 871 million

£20 321 million

Central Bank cash placements and guaranteed liquidity

76.4%

Individuals

56.9%

Cash

20.0%

Other financial institutions and corporates

28.6%

Near cash (other ‘monetisable’ assets)

3.6%

Banks

10.0%

Small business

4.5%

Contingency planning

We maintain a contingency funding plan which details the

course of actions that can be taken in the event of a liquidity

stress. The plan helps to ensure that cash flow estimates and

commitments can be met in the event of general market

disruption or adverse bank-specific events, while minimising

detrimental long-term implications for the business. The plan

includes:

•Details on the required daily monitoring of the liquidity

position

•Description of the early warning indicators to be monitored,

and process of escalation if required

•Liquidity stress scenarios to be modelled for Contingency

Funding Plan (CFP) purposes (over and above daily stress

testing scenarios)

•Funding and management actions available for use in a

stress situation

•Roles and responsibilities

•Details of specific escalation bodies and key contacts

•Internal and external communication plans.

The plan have been tested within our core jurisdictions via an

externally facilitated liquidity crisis simulation exercise which

assess the Group's sustainability and ability to adequately

contain a liquidity stress.

The PRA strongly encourages firms to combine their CFP and

recovery plan into one integrated document. The integration of

the CFP into the Investec plc recovery plan was approved by

the Board during the financial year.

Further information on recovery and resolution

planning can be found on page 66

Asset encumbrance

An asset is defined as encumbered if it has been pledged as

collateral against an existing liability and, as a result, is no

longer available to the Group to secure funding, satisfy

collateral needs or be sold to reduce the funding requirement.

Risk management monitors and manages total balance sheet

encumbrance within a Board-approved risk appetite limit.

Asset encumbrance is one of the factors considered in the

discussion of new products or new funding structures, and the

impact on risk appetite is assessed.

The Group uses secured transactions to manage short-term

cash and collateral needs, and utilises securitisations in order

to raise external term funding as part of its diversified liability

base. Securitisation notes issued are also retained by the

Group which are eligible for the Bank of England’s Single

Collateral Pool to support Central Bank liquidity facilities.

Encumbered assets are identified in accordance with the

definitions under European Capital Requirements Regulation

(CRR), and regular reporting is provided to the EBA and PRA.

Further disclosures on encumbered and unencumbered assets

can be found within the Investec plc Pillar III document.

On page 146 we disclose further details of assets that

have been received as collateral under reverse

repurchase agreements and securities borrowing

transactions where the assets are allowed to be resold

or pledged

Risk management

and governance

Investec plc Annual Financial Statements 2022

BALANCE SHEET RISK AND LIQUIDITY

CONTINUED

Liquidity mismatch

The tables that follow show the

contractual and behavioural liquidity

mismatch.

With respect to the contractual liquidity

table that follows, we record all assets

and liabilities with the underlying

contractual maturity as determined by

the cash flow profile for each deal.

With respect to the behavioural liquidity

gap, we adjust the contractual profile of

certain assets and liabilities:

•Liquidity buffer: the actual contractual

profile of the assets in the liquidity

buffer is of little consequence, as

practically the Group would meet any

unexpected net cash outflows by

repo’ing or selling these highly liquid

securities. Consequently, for the

liquidity buffer:

–The time horizon to monetise our

regulatory liquid assets which are

guaranteed by the central bank has

been adjusted to ‘on demand’

–The time horizon for the cash and

near cash portfolio of discretionary

treasury assets has been set to one

month where there are deep

secondary markets for this elective

asset class

•Customer deposits: the contractual

repayments of many deposits are on

demand, or at notice, but in reality

withdrawals vary significantly from

this. Historical observations of the

products are used to model the

behavioural lives, and this analysis has

identified significant additional

sources of structural liquidity in the

form of core deposits that exhibit

stable behaviour.

Contractual liquidity at 31 March 2022

£’million

Demand

Up to one

month

One to

three

months

Three to six

months

Six

months to

one year

One

to five

years

>Five years

Total

Cash and short-term funds –

banks

6 764

—

6 848

Investment/trading assets

550

707

352

314

522

694

1 581

4 720

Securitised assets

—

Advances

691

527

1 093

1 445

7 569

3 216

14 549

Other assets

102

774

389

354

1 736

Assets

7 424

2 226

961

1 451

1 985

8 684

5 215

27 946

Deposits – banks

(278)

(92)

—

(1 657)

—

(2 027)

Deposits – non-banks

(7 886)

(637)

(3 368)

(2 951)

(2 078)

(1 286)

(88)

(18 294)

Negotiable paper

(1)

(5)

(205)

(31)

(41)

(1 023)

(342)

(1 648)

Securitised liabilities

—

(3)

(5)

(27)

(58)

—

(96)

Investment/trading liabilities

(115)

(166)

(93)

(65)

(233)

(312)

(77)

(1 061)

Subordinated liabilities

—

(759)

Other liabilities

(102)

(781)

(51)

(69)

(28)

(297)

(53)

(1 381)

Liabilities

(8 382)

(1 684)

(3 720)

(3 121)

(2 407)

(4 633)

(1 319)

(25 266)

Total equity

—

(2 680)

Contractual liquidity gap

(958)

542

(2 759)

(1 670)

(422)

4 051

1 216

—

Cumulative liquidity gap

(958)

(416)

(3 175)

(4 845)

(5 267)

(1 216)

—

Behavioural liquidity at 31 March 2022

As discussed above.

£’million

Demand

Up to one

month

One to

three

months

Three to six

months

Six

months to

one year

One

to five

years

>Five years

Total

Behavioural liquidity gap

5 679

165

(2 524)

(1 305)

(594)

(2 590)

1 169

—

Cumulative

5 679

5 844

3 320

2 015

1 421

(1 169)

—

Risk management

and governance

Investec plc Annual Financial Statements 2022

BALANCE SHEET RISK AND LIQUIDITY

CONTINUED

Non-trading interest rate risk

Sources of interest rate risk in the

banking book include:

•Repricing risk: arises from the timing

differences in the fixed rate maturity

and floating rate repricing of Group

assets, liabilities and off-balance

sheet derivative positions. This affects

the interest rate margin realised

between lending income and

borrowing costs when applied to our

rate sensitive portfolios

•Yield curve risk: repricing

mismatches also expose the Group to

changes in the slope and shape of the

yield curve

•Basis risk: arises from imperfect

correlation in the adjustments of the

rates earned and paid on different

instruments with otherwise similar

repricing characteristics

•Embedded option risk: arises from

optional elements embedded in items

where the Group or its customers can

alter the level and timing of their cash

flows

•Endowment risk: refers to the

interest rate risk exposure arising from

the net differential between interest

rate insensitive assets, interest rate

insensitive liabilities and capital.

The above sources of interest rate risk

affect the interest rate margin realised

between lending income and borrowing

costs when applied to our rate sensitive

asset and liability portfolios, which has a

direct effect on future net interest

earnings and the economic value of

equity.

Measurement and management of non-

trading interest rate risk

Non-trading interest rate risk is an

inherent consequence of conducting

banking activities, and arises from the

provision of non-trading banking

products and services. The Group

considers the management of banking

margin of vital importance, and our non-

trading interest rate risk philosophy is

reflected in our day-to-day practices.

The aim of non-trading interest rate risk

management is to protect and enhance

net interest income and economic value

of equity in accordance with the Board-

approved risk appetite and to ensure a

high degree of stability of the net

interest margin over an interest rate

cycle. Non-trading interest rate risk is

measured and analysed by utilising

standard tools of traditional interest rate

repricing mismatch and net present

value (NPV) sensitivity to changes in

interest rate risk factors:

•Income metrics capture the change in

accruals expected over a specified

time horizon in response to a change

in interest rates

•Economic value metrics capture all

future cash flows in order to calculate

the Group’s net worth and therefore

can highlight risks beyond the short-

term earnings time horizon.

These metrics are used to assess and to

communicate to senior management the

financial impact of possible future

interest rate scenarios, covering:

•Interest rate expectations and

perceived risks to the central view

•Standard shocks to levels and shapes

of interest rates and yield curves

•Historically-based yield curve

changes.

The repricing gap provides a simple

representation of the balance sheet,

with the sensitivity of fair values and

earnings to changes to interest rates

calculated off the repricing gap. This

also allows for the detection of interest

rate risk concentration in specific

repricing buckets. Net interest income

sensitivity measures the change in

accruals expected over the specified

horizon in response to a shift in the yield

curve, while economic value sensitivity

and stress testing to macro-economic

movement or changes to the yield curve

measures the interest risk implicit

change in net worth as a result of a

change in interest rates on the current

values of financial assets and liabilities.

Economic value measures have the

advantage that all future cash flows are

considered and therefore assess the risk

beyond the earnings horizon.

Each banking entity has its own Board-

approved non-trading interest rate risk

appetite, which is clearly defined in

relation to both income risk and

economic value risk. The Group has

limited appetite for non-trading interest

rate risk.

Operationally, daily management of

interest rate risk is centralised within the

Treasury of each banking entity and is

subject to local independent risk and

ALCO review. Treasury mitigates any

residual undesirable risk where possible,

by changing the duration of the banking

book’s discretionary liquid asset

portfolio, or through derivative

transactions. The Treasury mandate

allows for a tactical response to market

volatility which may arise during

changing interest rate cycles, in order to

hedge residual exposures. Any resultant

interest rate position is managed under

the market risk limits. Balance sheet risk

management independently monitors a

broad range of interest rate risk metrics

to changes in interest rate risk factors,

detailing the sources of interest rate

exposure.

Automatic optionality arising from

variable rate products with an

embedded minimum lending rate serves

as an income protection mechanism for

the Group against falling interest rates,

while behavioural optionality risk from

customers of fixed rate products is

mitigated by early repayment charges.

Risk management

and governance

Investec plc Annual Financial Statements 2022

BALANCE SHEET RISK AND LIQUIDITY

CONTINUED

Interest rate sensitivity gap at 31 March 2022

The table below shows our non-trading interest rate mismatch assuming no management intervention.

£’million

Not

> three

months

> Three

months

but < six

months

> Six

months

but < one

year

> One year

but < five

years

> Five years

Non-rate

Total non-

trading

Cash and short-term funds – banks

6 813

—

6 813

Investment/trading assets

2 537

169

152

162

333

3 385

Securitised assets

—

Advances

9 581

651

656

3 304

357

—

14 549

Other assets

—

1 370

Assets

19 024

820

808

3 466

389

1 703

26 210

Deposits – banks

(1 984)

(10)

(4)

(27)

—

(2 025)

Deposits – non-banks

(15 106)

(1 107)

(1 743)

(280)

—

(18 236)

Negotiable paper

(294)

—

(857)

(350)

—

(1 501)

Securitised liabilities

(96)

—

(96)

Investment/trading liabilities

(129)

—

(129)

Subordinated liabilities

—

(759)

—

(759)

Other liabilities

—

(874)

Liabilities

(17 609)

(1 117)

(1 747)

(1 923)

(350)

(874)

(23 620)

Total equity

—

(2 590)

Balance sheet

1 415

(297)

(939)

1 543

(1 761)

—

Off-balance sheet

1 008

(7)

221

(1 244)

—

Repricing gap

2 423

(304)

(718)

299

(1 761)

—

Cumulative repricing gap

2 423

2 119

1 401

1 700

1 761

—

Economic value sensitivity at 31 March 2022

As outlined, non-trading interest rate risk is measured and monitored using an economic value sensitivity approach. The table

below reflects our economic value sensitivity to a 2% parallel shift in interest rates assuming no management intervention. This

sensitivity effect would only have a negligible direct impact on our equity.

Sensitivity to the following interest rates

(expressed in original currencies)

million

GBP

USD

EUR

AUD

ZAR

Other (GBP)

All (GBP)

200bps down

(13.0)

7.7

3.0

1.8

—

0.1

(3.5)

200bps up

15.7

(5.5)

(2.2)

(1.8)

—

8.6

Risk management

and governance

Investec plc Annual Financial Statements 2022

BALANCE SHEET RISK AND LIQUIDITY

CONTINUED

Interest rate risk - IBOR reform

During the financial year, the Group has successfully

transitioned almost all of the GBP assets away from

referencing IBOR to referencing alternative rates. A small

number of remaining GBP loans are expected to reference

Synthetic LIBOR. Furthermore, as from 1 January 2022, all new

USD lending is non-LIBOR based. The project will still continue

to monitor the transition of existing USD LIBOR linked products

to alternative rates, ahead of USD LIBOR cessation on 30 June

2023. For other benchmark interest rates such as EURIBOR

that have been reformed and can therefore continue, financial

instruments referencing those rates will not need to transition.

Given progress to date, the Group has limited remaining risk

with respect to ongoing IBOR reform.

The project was led by senior representatives from functions

across the Group including the client facing teams, Treasury,

legal, finance, operations, risk and technology and provided

regular progress updates to the Board, DLC BRCC and IBP

BRCC.

IBOR reform exposes the Group to various risks, which the

project is managing and monitoring closely.

These risks include but are not limited to the following:

•Conduct risk arising from discussions with clients and

market counterparties due to the amendments required to

existing contracts necessary to effect IBOR reform

•Business risk to the Group and its clients that markets are

disrupted due to IBOR reform giving rise to financial losses

•Pricing risk from the potential lack of market information if

liquidity in IBORs reduces and risk-free rates are illiquid and

unobservable

•Operational risk arising from changes to the Group’s IT

systems and processes, also the risk of payments being

disrupted if an IBOR ceases to be available

•Accounting risk if the Group’s hedging relationships fail and

from unrepresentative income statement volatility as

financial instrument

The tables that follow summarise the exposures impacted by interest rate benchmark reform.

At 31 March 2022

GBP

IBOR - no. of trades

GBP - Notional value

(£’million)

Other

IBOR - no. of trades

Other - Notional value

(£’million)

Derivatives

729

19 946

Other debt securities

208

Reverse repurchase agreements and cash

collateral on securities borrowed

—

114

Loans and advances to customers

185

174

1 345

Of which undrawn

—

193

Customer accounts (deposits)

—

456

Debt securities in issue

—

At 31 March 2021

GBP

IBOR - no. of trades

GBP - Notional value

(£’million)

Other

IBOR - no. of trades

Other - Notional value

(£’million)

Pre-2022 dated instruments

Derivatives

126

2 663

113

3 746

Sovereign debt securities

—

Other debt securities

—

Reverse repurchase agreements and cash

collateral on securities borrowed

—

Loans and advances to customers

491

982

104

196

Of which undrawn

—

178

—

Customer accounts (deposits)

Post-2022 dated instruments

Derivatives

613

11 054

769

20 681

Other debt securities

256

306

Reverse repurchase agreements and cash

collateral on securities borrowed

—

Loans and advances to customers

897

3 363

257

1 694

Of which undrawn

—

590

—

295

Other loans and advances

103

Customer accounts (deposits)

449

Risk management

and governance

Investec plc Annual Financial Statements 2022

BALANCE SHEET RISK AND LIQUIDITY

CONTINUED

Regulatory requirements

Liquidity risk

In response to the 2008/09 global

financial crisis, the BCBS introduced a

series of reforms designed to both

strengthen and harmonise global

liquidity standards to ensure strong

financial risk management and a safer

global economy.

Two minimum standards for funding

liquidity were introduced:

•The liquidity coverage ratio (LCR) is

designed to ensure that banks have

sufficient high quality liquid assets to

meet their liquidity needs throughout

a 30-calendar day severe stress

•The net stable funding ratio (NSFR) is

designed to capture structural issues

over a longer time horizon by requiring

banks to have a sustainable maturity

structure of assets and liabilities.

Following the UK’s departure from the

EU, the PRA have exercised temporary

transitional powers (TTP), meaning that

EU regulation in place prior to the end of

the transition period largely remained

valid in the UK until 31 March 2022.

As such, the Investec plc and IBP (solo

basis) LCRs are calculated following the

EU Delegated Act and our own

interpretations where the regulation

calls for it. Banks are required to

maintain a minimum LCR of 100%. As at

31 March 2022 the LCR was 457% for

Investec plc and 476% for IBP (solo

basis).

Within the UK, the NSFR has become a

binding requirement for banks since

January 2022. Banks are now required

to maintain a minimum NSFR of 100%.

Our calculation of the NSFR is based on

the reporting requirements set out in

Implementation of Basel standards July

2021 Annexes XII and XVIII of the CRR

Regulatory Reporting Part of the PRA

rulebook. The NSFR at 31 March 2022

was 145% for Investec plc and 136% for

IBP (solo basis).

Investec plc undertakes an annual ILAAP

which documents the approach to

liquidity management across the firm,

including IBP (solo basis). This document

is reviewed and approved by IBP BRCC,

DLC BRCC and by the IBP and DLC

Boards before being provided to the

PRA for use, alongside the Liquidity

Supervisory Review and Evaluation

Process, to determine the bank’s

Individual Liquidity Guidance, also

known as a Pillar II requirement.

Non-trading interest rate risk

In 2016, the BCBS finalised their

standards for non-trading interest rate

risk which recommended the risk is

assessed as part of the Bank’s capital

requirements, outlined six prescribed

shock scenarios, and recommended

enhanced disclosure requirements for

supervisors to implement.

Within the UK, the PRA have published

the PS 22/21 Implementation of the

Basel standards, which are new binding

rules on the interest rate risk arising

from non-trading activities, effective

since 1 January 2022.

The regulatory framework requires

banks to assess their Pillar II

requirements, including those related to

non-trading interest rate risk, as part of

their ICAAP. This is reviewed on at least

an annual basis and reviewed and

approved by IBP BRCC, DLC BRCC and

by the IBP and DLC Boards.

Balance sheet risk year in review

The Group maintained its strong liquidity

position and continues to hold high

levels of surplus liquid assets. Our

liquidity risk management process

remains robust and comprehensive.

Funding continues to be dynamically

raised through a mix of customer

liabilities diversified by customer type,

currency, channel and tenor, avoiding

reliance on any particular channel and

ensuring continued access to a wide

range of depositors. Those diversified

funding channels have proven to be

capable of raising funding throughout

the year supporting both strong asset

growth and our strategy to transition

retail deposits from a non-digital

process to the new lower cost digital

platform. The new digital retail deposit

products have demonstrated strong

growth in the market with the launch of

our Fixed Rate Saver product in July

2021, complementing the continued

growth of our Online Flexi Saver book

following its launch in 2020/2021.

We have limited reliance on wholesale

funding but we maintain access and

presence, using such issuance to

strategically diversify our funding base

and complement the other liability

channels by focusing, where

appropriate, on tenor and currency.

Wholesale issuance in the year took

advantage of strong market conditions

in 2021 to focus on both additional

opportunities and refinance maturities at

attractive spreads, with the added

benefit of continuing to diversify the

debt capital markets investor base.

As at 31 March 2022, IBP had £1.2 billion

of drawings under the BoE Term

Funding Scheme with additional

incentives for Small and Medium

Enterprises (TFSME) maturing in late

2025.

This overall approach has enabled the

Group to maintain a strong liquidity

position at the year end across a range

of metrics in line with our conservative

approach to balance sheet risk

management.

Cash and near cash balances at 31

March 2022 amounted to £8.9 billion

(31 March 2021: £6.9 billion). Total

customer deposits were £18.3 billion

at 31 March 2022 (31 March 2021:

£16.1 billion).

Looking forward, the focus remains on

maintaining a strong liquidity position in

light of both market volatility as a result

of inflationary concerns and

exacerbated by the Russian invasion of

Ukraine, as well as the support of the

ongoing digital retail transition strategy.

Funding continues to be actively raised,

particularly in the retail market through

the digital channels, in line with a

medium- to long-term strategy to

reduce the overall cost of the liability

base supported by stable credit ratings.

Refer to page 7 for further detail

on credit ratings

Risk management

and governance

Investec plc Annual Financial Statements 2022

BALANCE SHEET RISK AND LIQUIDITY

CONTINUED

Operational risk

Operational risk is an inherent risk in the ordinary course of business activity. The impact could be financial as well as non-

financial. Possible non-financial impacts could include customer detriment, reputational or regulatory consequences.

Management and measurement of operational risk

The Group manages operational risk through an operational risk management framework that is embedded across all levels of

the organisation and is supported by a strong risk management culture. The key purpose of the operational risk management

framework is to define the policies and practices that provide the foundation for a structured and integrated approach to

identify, assess, mitigate/manage, monitor and report on operational risks.

The key operational risk practices are as follows:

Identify and assess

Risk and control

assessments

•Risk and control assessments are forward-looking, qualitative assessments of inherent and

residual risk that are performed on key business processes using a centrally defined risk

framework

•These assessments enable business to identify, manage and monitor operational risks,

incorporating other elements of the operational risk management framework such as risk

events and key indicators

•Detailed control evaluations are performed, and action plans developed and implemented

where necessary to ensure that risk exposure is managed within acceptable levels.

Internal risk

events

•Internal risk events provide an objective source of information relating to failures in the

control environment

•The tracking of internal risk event data provides an opportunity to improve the control

environment and to minimise the occurrence of future risk events

•In addition, internal risk event data is used as a direct input into the Pillar II capital modelling

process.

External risk

events

•External risk events are operational risk related events experienced by external financial

institutions

•The Group is an active member of a global external data service used to benchmark our

internal risk event data against other local and international financial service organisations

•The external data is analysed to enhance the control environment, inform scenario analysis

and provide insight into emerging operational risks.

Mitigate/

manage

Risk exposures

•Risk exposures are identified through the operational risk management processes, including

but not limited to risk assessments, internal risk events, key indicators and audit findings

•Residual risk exposure is evaluated in terms of the Group’s risk appetite and mitigated where

necessary by improving the control environment, transferring through insurance, terminating

the relevant business activity or accepting the risk exposure for a period of time subject to

formal approval and monitoring.

Monitor

Key risk indicators

•Indicators are metrics used to monitor risk exposures against identified thresholds

•The output provides predictive capability in assessing the risk profile of the business.

Operational risk governance framework

The operational risk governance structures form an integral

part of the operational risk management framework. Key

components of the governance structures are:

Roles and responsibilities

The Group, in keeping with sound governance practices, has

defined roles and responsibilities for the management of

operational risk in accordance with the three lines of defence

model, i.e. business line management, an independent

operational risk function and an independent internal audit

function.

Specialist control functions are responsible for the

management of key operational risks. These include, but are

not limited to: compliance (including financial crime

compliance), cyber, finance, fraud, legal and information

security risks.

Committees

Operational risk is managed and monitored through various

governance forums and committees that are integrated with

the Group’s risk management governance structure and report

to Board level committees.

The Group’s operational risk profile is reported to the

governance forums and committees on a regular basis, which

contributes to sound risk management and decision-making

by the Board and management.

•Operational risk:

Management forums and committees are in place at each

entity level. Key responsibilities include the monitoring of

operational risk and oversight of the operational risk

management framework, including approval of the operational

risk management policies.

•Technology and information security risk:

The DLC IT Risk and Governance Committee is responsible for

the monitoring of current and emerging technology and

information security risk. In addition, the committee considers

the strategic alignment of technology and business.

Risk management

and governance

Investec plc Annual Financial Statements 2022

OPERATIONAL RISK

Risk appetite

Operational risk appetite is defined as

the level of risk exposure that is

acceptable to the Board in order to

achieve its business and strategic

objectives. The Board is responsible for

setting and regularly reviewing the risk

appetite. The operational risk appetite

policy defines the amount of operational

risk exposure, or potential adverse

impact of a risk event, that the Group is

willing to accept.

Operational risks are managed in

accordance with the approved risk

appetite. Any breaches of limits are

escalated in accordance with the

appropriate governance structures.

Operational risk year in review

Key operational risk themes

During the year the Group remained

focused on the management of the

following key operational risk themes:

Business disruption and operational

resilience risk

•Resilience capabilities continued to be

tested by the ongoing pandemic

•The growing regulatory requirements

for operational resilience increased

the compliance expectations and

delivery of stakeholder value.

Information security and cyber risk

•Accelerated digitalisation of the

business and client services, and

remote/hybrid working, increased the

inherent cyber risk

•The sophistication of threat actors

continued to represent a growing

threat, with both frequency and

intensity of attacks increasing on a

global scale

•Security monitoring was stepped up in

light of the Russian invasion of

Ukraine and associated escalation in

cyber risk to the financial services

sector

•The Group’s cyber risk was well

managed, and no material impact or

losses attributed to cyber events were

experienced.

People risk

•The COVID-19 pandemic continued to

impact on the physical, financial and

emotional wellbeing of staff

•Reduced infection rates and easing of

global and regional restrictions saw

the reintroduction of staff back to the

office

•An increasingly competitive skills

market necessitated targeted

strategies to source, retain and

advance talent/human capital

Regulatory compliance risk

•Increasingly stringent regulatory

compliance obligations continued to

be a focus for the Group

•There has been a sustained focus by

regulators on resilience in the financial

services sector and emphasis placed

on working towards ensuring a

financial system that is fair, efficient

and resilient.

Third party risk

•The Group’s strategic intent towards

digitalisation placed increased

reliance on third party services and

cloud providers

•Enhanced third party review, due

diligence and risk management

practices were a key focus area

•Monitoring of financial health, adverse

media, and cyber posture of key third

parties was implemented.

Operational risk events

The Group continued to manage internal

risk events within the agreed Board-

approved operational risk appetite.

Causal analysis is performed on risk

events to determine the reason for the

failure and to assist with the effective

identification of actions required to

mitigate the reoccurrence of events.

The following analysis details the

Group’s operational risk net losses

spread across key Basel risk event

categories for the financial year.

The evaluation of the top three

categories by net loss value are as

follows:

Execution, Delivery and Process

Management:

•The cause of events in this category

are primarily driven by human error

when executing transactions

•Process improvements and staff

training remain areas of focus to

mitigate risk events in this category.

External Fraud:

•Fraud threats continue to evolve and

become more sophisticated

•Continuous improvements are made

to fraud control measures and rules

enhanced to manage the threat within

acceptable loss levels.

Insurance

The Group maintains adequate

insurance to cover key insurable risks.

The insurance process and requirements

are managed by the Group insurance

risk manager. Regular interaction

between operational risk management

and insurance risk management ensures

that there is an exchange of information

in order to enhance the mitigation of

operational risk.

Risk management

and governance

Investec plc Annual Financial Statements 2022

OPERATIONAL RISK

CONTINUED

Reputational and strategic risk

The Group aspires to maintain an

excellent reputation for

entrepreneurship, strong risk

management discipline, a client-centric

approach and an ability to be flexible

and innovative. The Group recognises

the serious consequences of any

adverse publicity or damage to

reputation, whatever the underlying

cause.

We have various policies and practices

to mitigate reputational risk, including

strong values that are regularly and

proactively reinforced. We also

subscribe to sound corporate

governance practices, which require that

activities, processes and decisions are

based on carefully considered principles.

We are aware of the impact of practices

that may result in a breakdown of trust

and confidence in the organisation. The

Group’s policies and practices are

regularly reinforced through transparent

communication, accurate reporting,

continuous Group culture and values

assessment, internal audit and

regulatory compliance review, and risk

management practices. As one of our

core values and philosophies, we

demand cast iron integrity in all internal

and external dealings, consistently and

uncompromisingly displaying moral

strength and behaviour which promotes

trust. Strategic and reputational risk is

mitigated as much as possible through

these detailed processes and

governance/escalation procedures from

business units to the Board, and from

regular, clear communication with

shareholders, customers and all

stakeholders. In line with regulatory

requirements, the Group has a

disclosure and market communications

policy which is reviewed and approved

annually by Group ERC and DLC BRCC.

This policy is distributed and readily

accessible to all staff. In addition, it is

the Group’s policy to avoid any

transaction, service or association which

may bring with it the risk of potential

damage to our reputation. Transaction

approval governance structures such as

credit and new product committees

have therefore been tasked with this

responsibility in relation to all new

business undertaken.

Legal risk

Our objective is to identify, manage,

monitor and mitigate legal risks

throughout the Group. We seek to

actively mitigate these risks by

identifying them, setting minimum

standards for their management and

allocating clear responsibility for such

management to legal risk managers, as

well as ensuring compliance through

proactive monitoring.

The scope of our activities is

continuously reviewed and includes,

among other things, the following areas:

•Commercial contracts with service

providers

•Legislation/governance

•Litigation

•Corporate events

•Incident or crisis management

•Ongoing quality control.

Overall responsibility for the legal risk

policy rests with the IBP Board. The IBP

Board delegates responsibility for

implementation of the policy to the

global head of IBP legal risk.

The legal risk policy is implemented

through:

•Identification and ongoing review of

areas where legal risk is found to be

present

•Allocation of responsibility for the

development of procedures for

management and mitigation of these

risks

•Installation of appropriate segregation

of duties, so that legal documentation

is reviewed and executed with the

appropriate level of independence

from the persons involved in

proposing or promoting the

transaction

•Ongoing examination of the inter-

relationship between legal risk and

other areas of risk management, so as

to ensure that there are no ‘gaps’ in

the risk management process

•Establishing procedures to ensure the

legal function is consulted at all

appropriate times to manage and

mitigate legal risks

•Establishing procedures to monitor

compliance, taking into account the

required minimum standards

•Establishing Legal Risk Forums

(bringing together the various legal

risk managers) to ensure we keep

abreast of developments and changes

in the nature and extent of our

activities, and to benchmark our

processes against best practice.

Further information on specific

legal matters, including the

investigation into historical

German dividend tax arbitrage

transactions, can be found on

page 165

Compliance

Regulatory change continues to be a key

feature in the financial sector with

ongoing global political events adding

uncertainty as to the shape of financial

services regulation going forward.

Technological risk and social concerns,

including environmental sustainability,

are increasingly being addressed

through regulation.

Global regulators expect financial

services institutions to implement robust

governance arrangements to enhance

stability and ensure financial services

are delivered in an appropriate manner.

Regulators continue to focus on

promoting resilience in financial markets,

with sustained emphasis on recovery

and resolution plans and structural

enhancements to the banking sector as

well as customer and market conduct

related reforms.

Non-financial risks such as cyber

security breaches and employee

misconduct are a focus for regulators to

ensure that consumers are appropriately

protected and that stakeholders are

treated appropriately. The maintenance

of data quality and security remains a

high priority for the banking industry and

its regulators, in order to increase the

efficiency of delivery and strengthen

oversight.

The Group remains focused on

maintaining the highest levels of

compliance in relation to regulatory

requirements and integrity in all of our

jurisdictions. Our culture is central to our

compliance framework and is supported

by robust policies, processes and

talented professionals who ensure that

the interests of our customers and

shareholders remain at the forefront of

everything we do.

Conduct risk and consumer protection

The Financial Conduct Authority (FCA)

has maintained its focus and approach

to managing conduct risk across the

financial services industry. During the

period the FCA has continued to focus

on advancing its three operational

objectives: securing an appropriate

degree of protection for consumers;

protecting and enhancing the integrity of

the UK financial system; and promoting

effective competition in the interest of

consumers. The FCA remains committed

to identifying and tackling instances of

consumer harm, rooting out systemic

risk within the industry and securing

remediation where things go wrong. The

FCA intends to set higher standards for

the industry and to see greater levels of

consumer protection in place. To further

that aim, the FCA is consulting on the

new Consumer Duty, which aims to

ensure that firms put customers at the

heart of what they do. The new duty will

consist of a new Consumer Principle and

a suite of rules and guidance setting

more detailed expectations for firms.

The new duty will apply to Investec’s

business areas involved in the

manufacturing, distribution or sale of

products to retail consumers. The

implementation is scheduled for April

2023, although it might be extended.

Risk management

and governance

Investec plc Annual Financial Statements 2022

REPUTATIONAL AND STRATEGIC RISK, LEGAL RISK AND COMPLIANCE

Since the beginning of the pandemic,

the FCA’s main priority was to protect

vulnerable customers by raising

awareness of the increased risk of

financial scams, ensuring that customers

maintain access to financial services,

and continue to be treated fairly. The

FCA has issued a range of forbearance

measures such as mortgage repayment

holiday, capital payment and interest

freezes on certain type of lending

facilities, and a temporary ban on

repossessions to support customers

through the pandemic.

The FCA expects all institutions to have

a robust conduct risk management

framework in place to facilitate culture

that delivers good outcomes for clients,

counterparties and the markets and

holds their staff and senior management

to appropriate standards of competence,

integrity and ethical behaviour.

Specifically, UK institutions are expected

to be able to demonstrate that their

culture, governance and approach to

rewarding and managing staff, are at all

times aligned to the interests of

customers and other stakeholders.

As a result, firms are expected to look

across their business models and

strategies and assess how to balance

the pursuit of profits with good

outcomes for clients and proper

standards of market conduct. Firms are

also required to have appropriate

policies and frameworks in place to

manage non-financial misconduct such

as discrimination, bullying, harassment,

sexual misconduct or victimisation. Firms

are required to create an environment in

which it is safe to speak up, the best

talent is retained and the best risk

decisions are taken.

The FCA and PRA are proposing a

number of changes to improve Diversity

and Inclusion (D&I) in regulated firms.

These proposals, if implemented, will

require firms to demonstrate steps that

are being taken to embed D&I into every

aspect of their business, including Board

and senior management composition

and succession planning, remuneration

and product governance. The regulators

will also require firms to gather D&I

related data, measure their performance

against key D&I metrics and report on

them to the regulators. The Group has

participated in the consultation process

and is committed to building a diverse

and inclusive workplace that reflects the

diversity of our employees, client base

and the society within which we operate.

Culture, conduct and good governance

are ongoing themes which underline

much of the FCA’s approach with focus

on the role of the individual as well as

the institution. The FCA has considered

the role of leaders, incentives and

capabilities and governance of decision-

making.

The Board, along with senior

management, are ultimately responsible

for Investec’s culture and conduct risk

frameworks. Investec has continued

over the period to focus on

enhancements to our conduct risk

management framework to ensure

consistent delivery of good customer

outcomes and effective management of

conduct risk throughout our business.

This has included strengthening

business-led identification and

management of conduct risk,

improvements to the product review and

approval process, robust processes for

dealing with regulatory and conduct

breaches and a sustained focus on

maintaining the highest levels of

regulatory compliance throughout our

business. Investec’s conduct risk

management in the UK is underpinned

by the Senior Manager and Certification

Regime which strengthens individual

accountability and sets minimum

standards of individual behaviour in

financial services.

Financial crime

Financial crime continues to be an

increasing regulatory focus, with

regulators globally encouraging firms to

adopt a dynamic approach to the

management of risk and to increase

efforts around systems and controls to

combat money laundering, tax evasion

and bribery and corruption. The FCA

also highlights financial crime (frauds

and scams) and anti-money laundering

(AML) as one of their key cross-sector

priorities. The Group maintains and

continues to enhance the robust risk

based approach to the ever-evolving

criminal typologies. Policies, procedures

and training are in place, in order to

guard against the risks of financial crime.

Brexit

As of 1 January 2021, UK firms lost their

passporting rights to provide banking

and investment services to clients based

in the EU. Investec Europe Limited (IEL),

a fully licensed Irish MiFID firm, provides

a range of MiFID services to new and

existing EU clients that can no longer be

serviced by IBP. IBP is currently able to

provide corporate lending and

designated investment services to

professional clients in select EU

countries, based on local exemptions.

However, the EU has proposed new

harmonised rules for non-EU firms

carrying on banking and investment

business in the EU. The new rules, which

will form part of the CRR3/CRD6

package, would prohibit third-country

firms like IBP from carrying out banking

and MiFID activities with EU clients

without establishing a branch or a

subsidiary (except on a reverse

solicitation basis). These proposals are

subject to consultation and, once

approved, are likely to come into force at

the end of 2024. Investec is monitoring

these developments and assessing their

impact on its ability to conduct business

with EU clients in the long term.

Tax reporting (FATCA, CRS, MDR and

DAC6)

The Foreign Account Tax Compliance

Act (FATCA) aims to promote cross-

border tax compliance by implementing

an international standard for the

automatic exchange of tax information

relating to US investors. The provisions

call on tax authorities worldwide, to

obtain on an annual basis, detailed

account information from financial

institutions relating to US investors and

exchange that information automatically,

with the United States Internal Revenue

Service.

The OECD took further steps to improve

global cross-border tax compliance by

releasing the Common Reporting

Standard (CRS). The CRS is a set of

global standards for the annual

exchange of financial information by

financial institutions pertaining to

customers, ultimately to the tax

authorities of the jurisdictions in which

those customers are resident for tax

purposes. Investec plc is compliant with

obligations under FATCA and CRS in all

relevant jurisdictions.

The OECD published Mandatory

Disclosure Rules that aim to provide tax

administrations with information on CRS

avoidance arrangements and opaque

offshore structures, including the users

of those arrangements and structures

and those involved with facilitation.

Many CRS jurisdictions such as the

Channel Islands have now incorporated

this into domestic law. Following suit,

the EU introduced its own Mandatory

Disclosure Regime in relation to cross-

border tax arrangements, commonly

known as DAC6. This regime applies to

cross-border tax arrangements, which

meet one or more specified

characteristics (Hallmarks) and which

concern either more than one EU

country, or an EU country and a non-EU

country.

On 4 January 2021, the UK Tax

Authorities (HMRC) confirmed that the

UK will no longer apply DAC6 reporting

in its entirety following the conclusion of

the Free Trade Agreement with the EU.

Only arrangements that would be within

the scope of CRS will now need to be

reported which is in line with the OECD’s

Mandatory Disclosure Rules. The UK is

yet to finalise its regulations on

Mandatory Disclosure Rules. The draft

regulation named International Tax

Enforcement (Disclosable Arrangements)

Regulations was issued in October 2021.

Risk management

and governance

Investec plc Annual Financial Statements 2022

REPUTATIONAL AND STRATEGIC RISK, LEGAL RISK AND COMPLIANCE

CONTINUED

Recovery and resolution

planning

The purpose of the recovery plans are to

document how the Board and

management will plan for Investec plc to

recover from extreme financial stress to

avoid liquidity and capital difficulties.

The plans are reviewed and approved by

the Board on an annual basis.

The recovery plan:

•Integrates with existing contingency

planning

•Identifies roles and responsibilities

•Identifies early warning indicators and

trigger levels

•Analyses how the Group could be

affected by the stresses under various

scenarios

•Includes potential recovery actions

available to the Board and

management to respond to the

situation, including immediate,

intermediate and strategic actions

•Identify the recovery capacity

available to avoid resolution actions.

The Bank Recovery and Resolution

Directive (BRRD) was implemented in

the UK via the UK Banking Act 2009. It

was recently amended by the BRRD

(Amendment) (EU Exit) Regulation 2020,

which implemented into UK law certain

amendments to the BRRD which were

required to be implemented prior to the

UK leaving the EU.

The BoE, the UK resolution authority has

the power to intervene in and resolve a

financial institution that is no longer

viable. This is achieved through the use

of various resolution tools, including the

transfer of business and creditor

financed recapitalisation (bail-in within

resolution) that allocates losses to

shareholders and unsecured and

uninsured creditors in their order of

seniority, at a regulator determined point

of non-viability that may precede

insolvency.

The PRA has made rules that require

authorised institutions to draw up

recovery plans and resolution packs.

Recovery plans are designed to outline

credible recovery options that

authorised institutions could implement

in the event of severe stress in order to

restore their business to a stable and

sustainable condition. The resolution

pack contains detailed information on

the services provided, as well as the

structure and operation of the

authorised institution in question which

will be used by the BoE to develop

resolution strategies for that specific

institution, assess its current level of

resolvability against the strategy, and to

inform work on identifying barriers to the

implementation of operational resolution

plans.

In line with PRA and onshored EU

requirements, Investec plc maintains a

resolution pack and a recovery plan.

Even though the recovery plan is framed

at Investec plc level, given that IBP

constitutes over 74% of Investec plc’s

balance sheet, the focus of this

document is the recovery of IBP and the

protection of its depositors and other

clients.

Similarly, the resolution pack is drafted

for Investec plc. As Investec plc is a

financial holding company and IBP is its

most significant entity, the Investec plc

resolution strategy is expected to be

driven and determined by the resolution

strategy for IBP.

The BoE confirmed in March 2021 the

preferred resolution strategy for IBP

remains Modified Insolvency and the

Minimum Requirement for own funds

and Eligible Liabilities (MREL)

requirement is set as equal to IBP’s Total

Capital Requirement (Pillar 1 plus Pillar

2A).

The BoE clarified in August 2021 that

firms subject to Modified Insolvency will

no longer receive regular letters

confirming their preferred resolution

strategy. An updated letter will only be

issued when the BoE considers it likely

the preferred resolution strategy will

change.

Risk management

and governance

Investec plc Annual Financial Statements 2022

RECOVERY AND RESOLUTION PLANNING

Capital management and allocation

Current regulatory framework

Investec plc is an approved UK Financial

Holding Company (FHC). In line with

Capital Requirements Directive (CRD) V

requirements and Capital Requirements

Regulation (CRR) II amendments

requiring FHC and Mixed FHC of PRA-

regulated subsidiaries to become

approved holding companies, Investec

plc applied in June 2021 for approval in

accordance with Part 12B of the

Financial Services and Markets Act

2000. The approval was granted with

effect from 14 October 2021. Investec

plc is now responsible for ensuring

compliance with consolidated prudential

requirements on a consolidated basis.

Investec Bank plc, the main banking

subsidiary of the Investec plc Group

continues to be authorised by the PRA

and regulated by the FCA and the PRA.

Investec plc calculates capital resources

and requirements using the Basel III

framework, as implemented in the

European Union through the CRD IV, as

amended by CRR II and CRD V.

Following the end of the Brexit

transitional period, the EU rules

(including binding technical standards)

have been onshored and now form part

of domestic law in the UK by virtue of

the European Union (Withdrawal) Act

2018. The PRA confirmed it would make

use of temporary transitional powers at

the end of the Brexit transitional period,

which allows UK regulators to phase-in

changes to UK regulatory requirements,

enabling firms to adjust to the UK’s post-

transition period regime in an orderly

way. The relief was available for a period

of 15 months from the end of the

transitional period until 31 March 2022.

A summary of capital adequacy and leverage ratios

Investec plc º*

IBP º*

Investec plc º*

IBP º*

31 March 2022

31 March 2021

Common Equity Tier 1 ratio**

11.4%

12.0%

11.0%

11.8%

Common Equity Tier 1 ratio (fully loaded)***

11.0%

11.6%

10.5%

11.3%

Tier 1 ratio**

12.8%

13.6%

12.7%

13.4%

Total capital ratio**

16.5%

18.2%

14.9%

16.4%

Risk-weighted assets (£'million)**

16 980

16 462

16 332

15 789

Leverage exposure measure (£'million)^

24 181

23 874

26 672

26 351

Leverage ratio^

9.0%

9.3%

7.8%

8.0%

Leverage ratio (fully loaded)^ ***

8.7%

9.1%

7.4%

7.7%

ºWhere: IBP is Investec Bank plc consolidated. The information for Investec plc includes the information for IBP.

*The capital adequacy disclosures for Investec plc and IBP include the deduction of foreseeable charges and dividends when calculating CET1 capital.

These disclosures differ from the capital adequacy disclosures included in Investec Group’s 2022 integrated and strategic annual report, which follow our

normal basis of presentation and do not include this deduction when calculating CET1 capital. Investec plc and IBP’s CET1 ratios would be 28bps

(31 March 2021: 17bps) and 37bps (31 March 2021: 16bps) higher, respectively on this basis.

**The CET1, Tier 1, total capital ratios and RWAs are calculated applying the IFRS 9 transitional arrangements (including the CRR II changes introduced

by the 'quick fix' regulation adopted in June 2020).

***The CET1 ratio (fully loaded) and the leverage ratio (fully loaded) assumes full adoption of IFRS 9 (including the ‘quick fix’ regulation in the UK).

^The leverage ratios are calculated on an end-quarter basis. In the UK, the 31 March 2022 leverage ratio is calculated applying the UK leverage ratio

framework which applies to all UK firms from 1 January 2022. The 31 March 2021 comparative is calculated on a CRD IV basis.

Investec plc applies the Standardised

Approach to calculate credit risk and

counterparty credit risk, securitisation

risk, operational risk and market risk

capital requirements. Effective 1 January

2022, Investec plc has implemented the

outstanding CRR II changes to be

implemented in the UK, most notably the

new Standardised Approach for

measuring Counterparty Credit Risk (SA-

CCR) and changes to the large exposure

regime.

In October 2021, the Financial Policy

Committee and the PRA confirmed the

new UK leverage ratio framework will

apply from 1 January 2022 and the

existing leverage ratio parts of the UK

CRR would be revoked. Investec plc is

not subject to the minimum leverage

ratio requirement of 3.25%, but is

subject to a “supervisory expectation” to

manage excessive leverage by ensuring

the leverage ratio does not fall below

3.25%. For simplicity the same leverage

ratio exposure measure and capital

measure will now apply to all UK banks

(including the exemption of central bank

reserves and will reflect updated

international standards). These changes

are reflected in our disclosures.

Subsidiaries of Investec plc may be

subject to additional regulations as

implemented by local regulators in their

respective jurisdictions. Where capital is

a relevant consideration, management

within each regulated entity pays close

attention to prevailing local regulatory

rules as determined by their respective

regulators.

Year under review

During the year under review, Investec

plc complied with the capital adequacy

requirements imposed on it by the PRA.

Investec plc continues to hold capital in

excess of all the capital and buffer

requirements. At 31 March 2022, the

CET1 ratio increased to 11.4% from 11.0%

at 31 March 2021. CET1 capital

increased by £135 million to £1.9 billion,

mainly as a result of:

•CET1 capital generation of

£236 million through profit after

taxation

•An increase in other comprehensive

income of £37 million (including the

fair value uplift on our investment in

Ninety One)

•A decrease of £15 million in the

deduction applied to financial sector

entities which exceed the 10%

threshold due to the sale of 1.13% of

our Ninety One shareholding in March

2022.

The increases were partially offset by:

•Dividends paid to ordinary

shareholders and Additional Tier

security holders of £81 million

•An increase in treasury shares of £23

million

•An increase in foreseeable charges

and dividends of £19 million

•A decrease of £12 million in our own

credit reserves

•A decrease of £16 million in the IFRS 9

transitional add-back adjustment.

Risk weighted assets (RWAs) increased

by 4% or £648 million to £17 billion over

the period, predominantly within credit

risk RWAs.

Credit risk RWAs, which include equity

risk, increased by a net £850 million

after the settlement of our Australian

loan portfolio sale in April 2021, which

reduced RWAs by £590 million. The

Risk management

and governance

Investec plc Annual Financial Statements 2022

CAPITAL ADEQUACY

remaining increase is mainly driven by

growth in private client and Asset

Finance Group lending, predominantly

within HNW mortgages, other HNW

lending and automobile loans.

On 1 January 2022, Investec plc

implemented the new counterparty

credit risk standardised approach (SA-

CCR). Even with the adoption of the new

counterparty credit risk methodology,

RWAs (including credit valuation

adjustment risk) decreased by £92

million compared to 31 March 2021,

primarily driven by a reduction in the

volume of commodity swaps, equity

options and interest rate swaps traded

during the year.

Market risk RWAs decreased by £170

million, mainly due to the run down of

the financial products and equity

derivative exposure book compared with

31 March 2021.

Operational risk RWAs increased by £60

million, due to an increase in the three-

year average operating income used to

determine the capital requirement.

The Group's leverage ratio increased to

9.0% from 7.8.% at 31 March 2021 and

reflects the change in the leverage

exposure measure implemented in the

UK from 1 January 2022. The revised

framework reflects the changes in SA-

CRR and excludes qualifying central

bank balances from the calculation of

the leverage exposure measure.

Minimum capital requirement

Investec plc’s minimum CET1

requirement at 31 March 2022 is 7.5%

comprising a 4.5% Pillar 1 minimum

requirement, a 2.5% CCB, a 0.45% Pillar

2A requirement and a 0.03% CCyB. The

Group’s institution-specific CCyB

requirement is calculated based on the

relevant exposures held in jurisdictions

in which a buffer rate has been set. On

11 March 2020, the Financial Policy

Committee (FPC) announced that with

immediate effect the UK CCyB rate be

reduced to 0% in response to the

economic shock arising from COVID-19.

As at 31 March 2022 the UK CCyB rate

has remained at 0%.

In response to the economic shock from

COVID-19, the PRA announced in May

2020 that firms subject to a Supervisory

Review and Evaluation Process (SREP) in

2020 and 2021 would have their Pillar

2A capital requirements set as a nominal

amount, instead of a percentage of risk-

weighted assets (RWAs). Firms not

subject to a SREP in 2020 may apply for

a conversion of their current Pillar 2A

requirement into a nominal amount using

RWAs as of end-December 2019. This

change would apply until the next

regulatory-scheduled SREP.

The PRA announced on 8 December

2021 that this regulatory measure is no

longer necessary and therefore in 2022

all firms will be set Pillar 2A as a variable

amount (with the exception of some

fixed add-ons, such as pension risk).

Significant regulatory developments in

the period

At the December 2021 FPC meeting, the

committee indicated that vulnerabilities

that can amplify economic shocks are at

a standard level, as was the case just

before the COVID-19 pandemic, and

therefore it would be appropriate for the

UK CCyB rate to return to the region of

2%. The FPC is therefore increasing the

UK CCyB rate from 0% to 1% effective

13 December 2022 in line with the usual

12-month implementation period. If the

UK economic recovery proceeds broadly

in line with the Monetary Policy

Committee’s projections and absent a

material change in the outlook for UK

financial stability, the FPC would expect

to increase the rate further to 2% in Q2

2022. This subsequent increase would

be expected to take effect after the

usual 12-month implementation period.

On 1 November 2021, the Financial

Services Regulatory Initiatives Forum

published the fourth edition of the

regulatory initiatives grid. The grid aims

to provide firms with a clear idea of

upcoming regulatory changes. The grid

confirms a delay to the consultation on

Basel 3.1. The consultation has been

pushed out from Q4 2021 to the second

half of 2022, with implementation not

expected until after March 2023. In a

subsequent statement issued by the

PRA on 21 March 2022, the PRA

confirmed the consultation paper will be

published in the fourth quarter of 2022

and the current intention is to consult on

a proposal that these changes will

become effective on 1 January 2025,

aligning with other major jurisdiction,

including the EU.

On 22 June 2021, HM Treasury

confirmed the Fundamental Review of

the Trading Book (FRTB) reporting

requirements would be delayed and

implemented alongside the FRTB

revisions to the Pillar 1 capital

requirements, which form part of

Basel 3.1.

Pillar 3 disclosure requirement

The 31 March 2022 Pillar 3

disclosures for the Investec plc

Group are published in a

standalone disclosure report and

can be found on the Investec

Group’s website.

Philosophy and approach

The Investec plc Group’s approach to

capital management utilises both

regulatory capital as appropriate to that

jurisdiction and internal capital, which is

an internal risk-based assessment of

capital requirements. Capital

management primarily relates to

management of the interaction of both,

with the emphasis on regulatory capital

for managing portfolio level capital

sufficiency and on internal capital for

ensuring that returns are appropriate

given the level of risk taken at an

individual transaction or business unit

level.

We intend to maintain a sufficient level

of capital to satisfy regulatory

requirements and our internal target

ratios. We target a total capital

adequacy ratio range of between 14%

and 17% on a consolidated basis, and we

target a minimum Tier 1 ratio of 11% and

a CET 1 ratio above 10%. The

determination of target capital is driven

by our risk profile, strategy and risk

appetite, taking into account the

regulatory and market factors applicable

to the Group. At the most fundamental

level, we seek to balance our capital

consumption between prudent

capitalisation in the context of the

Group’s risk profile and optimisation of

shareholder returns. Our internal capital

framework is designed to manage and

achieve this balance.

The internal capital framework is based

on the Group’s risk identification, review

and assessment processes and is used

to provide a risk-based approach to

capital allocation, performance and

structuring of our balance sheet. The

objectives of the internal capital

framework are to quantify the minimum

capital required to:

•Maintain sufficient capital to satisfy

the DLC board’s risk appetite across

all risks faced by the Group

•Provide protection to depositors

against losses arising from risks

inherent in the business

•Provide sufficient capital surplus to

ensure that the Group is able to retain

its going concern basis under

relatively severe operating conditions

•Inform the setting of minimum

regulatory capital through the ICAAP

and subsequent SREP review. The

ICAAP documents the approach to

capital management, including the

assessment of the regulatory and

internal capital position of the Group.

The ICAAP is reviewed and approved

by DLC BRCC and the Investec plc

board.

Risk management

and governance

Investec plc Annual Financial Statements 2022

CAPITAL ADEQUACY

CONTINUED

The framework has been approved by

the DLC board and is managed by the

DLC Capital Committee, which is

responsible for oversight of the

management of capital on a regulatory

and an internal capital basis.

Capital planning and stress/scenario

testing

A capital plan is prepared for Investec

plc and is maintained to facilitate

discussion of the impact of business

strategy and market conditions on

capital adequacy. This plan is designed

to assess capital adequacy under a

range of economic and internal

conditions over the medium term (three

years), with the impact on earnings,

asset growth, risk appetite and liquidity

considered. The plan provides the

Investec plc board with an input into

strategy and the setting of risk appetite

by considering business risks and

potential vulnerabilities, capital usage

and funding requirements given

constraints where these exist.

12-month capital plans are prepared

monthly, with regulatory capital being

the key driver of decision-making.

The goal of capital planning is to provide

insight into potential sources of

vulnerability of capital adequacy by way

of market, economic or internal events.

As such, the three-year capital plans are

stressed based on conditions most likely

to cause Investec plc duress. The

conditions are agreed by the Investec

plc Capital Committee after the key

vulnerabilities have been determined

through the stress testing workshops.

Such plans are used by management to

formulate balance sheet strategy and

agree management actions, trigger

points and influence the determination

of our risk appetite. At a minimum level,

each capital plan assesses the impact

on our capital adequacy in an expected

case and in downturn scenarios. On the

basis of the results of this analysis, the

PLC Capital Committee, DLC Capital

Committee and DLC BRCC are

presented with the potential variability

in capital adequacy and are responsible,

in consultation with the Investec plc

board, for considering the appropriate

response.

Reverse stressing testing is performed

annually as part of the ICAAP process.

Capital structure and capital adequacy

Investec plc º*

IBP º*

Investec plc º*

IBP º*

£'million

31 March 2022

31 March 2021

Shareholders' Equity

2 340

2 215

2 198

2 081

Shareholders’ equity excluding non-controlling interests

2 429

2 296

2 256

2 114

Foreseeable charges and dividends

(44)

(61)

(25)

Perpetual preference share capital and share premium

(25)

—

(25)

—

Deconsolidation of special purpose entities

(20)

(8)

Non-controlling interests

—

Non-controlling interests per balance sheet

—

Non-controlling interests excluded for regulatory purposes

(1)

—

Regulatory adjustments to the accounting basis

Additional value adjustments

(6)

(7)

(6)

Gains or losses on liabilities at fair value resulting from changes in our

credit standing

—

Adjustment under IFRS 9 transitional arrangements

Deductions

(480)

(304)

(500)

(312)

Goodwill and intangible assets net of deferred taxation

(303)

(291)

(307)

(298)

Investment in capital of financial entities above 10% threshold

(164)

(179)

—

Deferred taxation assets that rely on future profitability excluding those

arising from temporary difference

(8)

(12)

Securitisation positions which can alternatively be subject to a 1 250% risk

weight

(5)

(2)

Common Equity Tier 1 capital**

1 931

1 982

1796

1 868

Additional Tier 1 instruments

250

274

250

Tier 1 capital **

2 181

2 232

2 070

2 118

Tier 2 capital**

628

766

370

473

Tier 2 instruments

766

473

Non-qualifying surplus capital attributable to non-controlling interests

(138)

—

(103)

—

Total regulatory capital**

2 809

2 998

2 440

2 591

Risk-weighted assets**

16 980

16 462

16 332

15 789

ºWhere: IBP is Investec Bank plc consolidated. The information for Investec plc includes the information for IBP.

*The capital adequacy disclosures for Investec plc and IBP include the deduction of foreseeable charges and dividends when calculating CET1 capital.

These disclosures are different to the capital adequacy disclosures included in Investec Group’s 2022 and 2021 integrated and strategic annual report,

which follow our normal basis of presentation and do not include this deduction when calculating CET1 capital. Investec plc and IBP’s CET1 ratios would

be 28bps (31 March 2021: 17bps) and 37bps (31 March 2021: 16bps) higher, respectively on this basis.

** The CET1, Tier 1, total capital ratios and RWAs are calculated applying the IFRS 9 transitional arrangements (including the CRR II changes introduced

by the 'quick fix' regulation adopted in June 2020).

Risk management

and governance

Investec plc Annual Financial Statements 2022

CAPITAL ADEQUACY

CONTINUED

Risk-weighted assets and capital requirements

Investec plc º

IBP º

Investec plc º*

IBP º*

£’million

31 March 2022

31 March 2021

Risk-weighted assets

16 980

16 462

16 332

15 789

Credit risk

13 366

13 332

12 497

12 413

Equity risk

562

581

117

Counterparty credit risk

555

591

691

Credit valuation adjustment risk

103

Market risk

608

778

Operational risk

1 786

1 771

1 726

1 731

Capital requirements

1 358

1 317

1 307

1 263

Credit risk

1 069

1 066

1 000

992

Equity risk

Counterparty credit risk

Credit valuation adjustment risk

Market risk

Operational risk

143

142

138

Leverage

£’million

Investec plc º

IBP º

Investec plc º*

IBP º*

31 March 2022

31 March 2021

Total exposure measure^

24 181

23 874

26 672

26 351

Tier 1 capital * **

2 181

2 232

2 070

2 118

Leverage ratio ^

9.0%

9.3%

7.8%

8.0%

Total exposure measure (fully loaded)

24 104

23 797

26 579

26 258

Tier 1 capital (fully loaded)***

2 104

2 155

1 956

2 029

Leverage ratio (fully loaded)*** ^

8.7%

9.1%

7.4%

7.7%

ºWhere: IBP is Investec Bank plc consolidated. The information for Investec plc includes the information for IBP.

*The capital adequacy disclosures for Investec plc and IBP include the deduction of foreseeable charges and dividends when calculating CET1 capital.

These disclosures are different to the capital adequacy disclosures included in Investec Group’s 2022 integrated and strategic annual report, which follow

our normal basis of presentation and do not include this deduction when calculating CET1 capital. Investec plc and IBP’s CET1 ratios would be 28bps

(31 March 2021: 17bps) and 37bps (31 March 2021: 16bps) higher, respectively on this basis.

**The CET1, Tier 1, total capital ratios and RWAs are calculated applying the IFRS 9 transitional arrangements (including the CRR II changes introduced by

the 'quick fix' regulation adopted in June 2020).

***The CET1 and Tier 1 ratio (fully loaded) and the leverage ratio (fully loaded) assumes full adoption of IFRS 9 (including the ‘quick fix’ regulation in the UK).

^The leverage ratios are calculated on an end-quarter basis. In the UK, the 31 March 2022 leverage ratio is calculated applying the UK leverage ratio

framework which applies to all UK firms from 1 January 2022. The 31 March 2021 comparative is calculated on a CRD IV basis.

Risk management

and governance

Investec plc Annual Financial Statements 2022

CAPITAL ADEQUACY

CONTINUED

Total regulatory capital flow statement

Investec plc º

IBP º

Investec plc º*

IBP º*

£'million

31 March 2022

31 March 2021

Opening Common Equity Tier 1 capital

1 796

1 868

1 745

1 819

Dividends paid to ordinary shareholders and Additional Tier 1 security

holders

(81)

(73)

(35)

(28)

Profit after taxation

236

233

Foreseeable charges and dividends

(19)

(36)

(25)

Treasury shares

(23)

—

(8)

—

Distribution to shareholders

—

Share-based payment adjustments

—

(1)

—

Movement in other comprehensive income

(3)

Investment in capital of financial entities above 10% threshold

—

(87)

—

Goodwill and intangible assets (deduction net of related taxation liability)

Deferred tax that relies on future profitability (excluding those arising from

temporary differences)

Deconsolidation of special purpose entities

(12)

Gains or losses on liabilities at fair value resulting from changes in own

credit standing

(12)

—

IFRS 9 transitional arrangements

(16)

Other, including regulatory adjustments and other transitional arrangements

(1)

—

(3)

Closing Common Equity Tier 1 capital

1 931

1 982

1 796

1 868

Opening Additional Tier 1 capital

274

250

274

250

Grandfathered Additional Tier 1 capital instrument

(24)

—

Closing Additional Tier 1 capital

250

274

250

Closing Tier 1 capital

2 181

2 232

2 070

2 118

Opening Tier 2 capital

370

472

414

533

Issued capital

348

Other, including regulatory adjustments and other transitional arrangements

(90)

(54)

(44)

(60)

Closing Tier 2 capital

628

766

370

473

Closing total regulatory capital

2 809

2 998

2 440

2 591

ºWhere: IBP is Investec Bank plc consolidated. The information for Investec plc includes the information for IBP.

Risk management

and governance

Investec plc Annual Financial Statements 2022

CAPITAL ADEQUACY

CONTINUED

IN THIS SECTION

Corporate Governance

Investec plc Audit Committee report

Directors’ report

Schedule A: To the directors’ report

Zarina Bassa

Chair of the Investec plc

Audit Committee

Members

Member since

Meetings

attended

Eligible to

attend2

Zarina Bassa (Chair)

1 Nov 2014

Philip Hourquebie1

14 Aug 2017

Philisiwe Sibiya

9 Aug 2019

David Friedland

5 Aug 2021

1.Philip Hourquebie stepped down as member of the Committee on 5 August 2021.

2.Four DLC Audit Committee meetings and three combined Investec Limited and Investec plc Audit Committee meetings were held during the year. Two

audit quality meetings were held in April 2022, in respect of Ernst & Young and internal audit. Formal meetings were held to consider, discuss and

conclude on internal and external audit quality.

Introduction

I am pleased to present the Investec plc

Audit Committee report for the financial

year ended 31 March 2022 which

provides details on how we

accomplished our various statutory

obligations, as well as on the Key Audit

Matters (KAMs) we considered during

the period. The Committee has further

discharged its responsibilities and

provided assurance on the integrity of

the 2021/22 annual report and financial

statements.

This report has been compiled in

accordance with the requirements of the

UK Companies Act (UK Companies Act),

the UK Corporate Governance Code

2018 (the Code), the UK Listing Rules

and any other applicable regulatory

requirements.

Role of the Committee

We provide independent challenge and

oversight across the Group’s financial

reporting and internal control

procedures. The Board has delegated

the following key functions to the

Committee:

•Overseeing the Group’s financial

reporting process, ensuring the

integrity thereof and satisfying itself

that any significant judgements made

by management are sound

•Reviewing the Group’s internal

controls and assurance processes

•Managing and overseeing the

performance, conduct, quality and

effectiveness of the Group’s internal

audit functions

•Reviewing of the annual work plan,

capacity, scope and staffing of

internal audit

•Overseeing Group compliance

functions which are lead by Investec

Bank plc and Investec Wealth &

Investments BRCC’s

•Overseeing the Group’s subsidiary

audit committees, including in remote

locations

•Appointing, managing and overseeing

the relationship with the Group’s

external auditors, including scope,

fees, quality control, effectiveness

and independence of the External

Audit function

•Managing the policy, fees and the

nature of non-audit services provided

by the external auditors

•Dealing with concerns, if any, from

outside Investec regarding the

application of accounting principles

and external reporting.

Further detailed responsibilities

are in the terms of reference of

the Committee as available on

the website www.investec.com.

Committee composition, skills,

experience and operation

The Committee is comprised entirely of

independent non-executive directors

who meet predetermined skill,

competency and experience

requirements as determined by the

DLC Nominations and Directors’ Affairs

Committee (Nomdac).

The members' continuing independence,

as well as their required skill,

competency and experience is assessed

annually.

Philip Hourquebie stepped down as a

member of the Committee in August

2022, following his appointment as Chair

of the Group. The DLC Nomdac and the

Board reviewed and confirmed that it is

satisfied that David Friedland possesses

recent and relevant financial experience

and is independent and subsequently

appointed him as a member of the

Board. In May 2022 Vanessa Olver was

appointed to the Investec Limited Audit

Committee on her appointment as a

Non-Executive Director of Investec

Limited. The DLC Nomdac assessed the

independence, skill, competency and

experience of the Committee and

concluded that it had the appropriate

balance of knowledge and skills to

discharge its duties.

Further details of the experience

of the members can be found in

their biographies on pages 109

to 111 of the Investec Group’s

2022 integrated and strategic

report.

The Group Chief Executive (Group CEO),

the Group Finance Director (Group FD),

the Group Chief Operating Officer

(Group COO), the Group Chief Risk

Officer (Group CRO), Heads of Internal

Audit, the Chief Compliance Officers and

representatives from the joint External

Auditors are invited to attend all

meetings. Other members of

management, including business unit

heads, are invited to attend meetings to

provide the Committee with greater

insights into specific issues or areas of

the Group.

The Chair has regular contact with the

Group Executive Team to discuss and

get broader insight on relevant matters

directly.

The internal and external auditors have

direct access to the Chair, including

closed sessions without management

with the Committee during the year, on

any matter that they regard as relevant

to the fulfilment of the Committee’s

responsibilities.

Risk management

and governance

CORPORATE GOVERNANCE

Investec plc Annual Financial Statements 2022

INVESTEC PLC AUDIT COMMITTEE REPORT

Structure of the Investec Group

Audit Committees

In terms of the DLC structure, the DLC

Board has mandated authority to the

DLC Audit Committee to be the Audit

Committee of the Group. The DLC Audit

Committee oversees and considers

Group audit-related matters and has

responsibility for audit-related matters

that are common to Investec plc and

Investec Limited and works in

conjunction with these two Committees

to address all Group reporting.

The Investec plc Board and the Investec

Limited Board have mandated authority

to their respective Audit Committees to

be the Audit Committees for the

respective companies and their

subsidiaries.

The Committee receives regular reports

from the Group’s subsidiary audit

committees as part of the oversight of

subsidiary audit committees.

The Investec plc Audit Committee Chair

is also the Chair of the following Audit

Committees:

•Investec DLC

•Investec Limited

•Investec Bank Limited

•Investec Bank Mauritius (IBM).

The Chair is also a member of the

following Audit Committees:

•Investec Bank plc

•Investec Life

•Investec Wealth and Investment UK

•Investec Wealth and Investment South

Africa.

DLC IT Risk and Governance

Committee

The DLC IT Risk and Governance

Committee is responsible for ensuring

that technology risk management

processes, investments, operations and

governance support the mission, values

and strategic goals of the Group. The

DLC IT Risk and Governance Committee

reports to both the DLC BRCC and the

DLC Audit Committee and is attended

by the DLC Audit Committee and DLC

BRCC Chairs.

DLC Audit Committee

Investec plc

Audit Committee

Investec Limited Audit Committee

Investec Bank plc

Audit Committee

Investec Bank

Limited Audit

Committee

Investec Wealth

and Investment

Audit Committee

Investec

Markets Limited

Investec Life

Audit & Risk

Committee

Investec

Property Fund

Investec Wealth

& Investment

Audit Committee

(UK)

Investec Bank

Mauritius Audit

Committee

Risk management

and governance

CORPORATE GOVERNANCE

Investec plc Annual Financial Statements 2022

INVESTEC PLC AUDIT COMMITTEE REPORT

CONTINUED

Areas covered by the Investec plc Audit

Committee

Key audit matters

Key audit matters are those matters that in the view of the Committee:

•Required significant focus from the Committee

•Were considered to be significant or material in nature, requiring exercise of judgement; or

•Matters which were otherwise considered to be subjective or complex from an accounting or auditing perspective.

Common membership of the DLC, Investec plc and Investec Limited Audit Committees ensures that key audit matters and

matters of mutual interest are communicated and addressed, where applicable. The members of the Committee may also attend

other Audit Committee meetings, as appropriate.

The following key audit matters were deliberated by the Committee during the year:

Impact of COVID-19 and the

indirect impact of the Russian

invasion of Ukraine

•COVID-19 impacted the global economy and

businesses across all industries.

•Considered the known accounting and operational impact of COVID-19

and the Russian invasion of Ukraine on the economy and business,

mitigating actions by management together with the resulting impact

on the macro-economic scenarios and the judgements and estimates

used by management to prepare the annual financial statements.

•The areas most impacted by COVID-19 include:

–Going concern and the Viability Statement, including liquidity

–Expected Credit Losses (ECL) assessment (International Financial

Reporting Standards (IFRS) 9 macro-economic scenarios,

probabilities and staging, impact on specific sectors such as

aviation, hospitality and retail)

–Quality of earnings

–Impact of work from home on the overall control environment and

operational risk and resilience

–The financial control environment.

Expected Credit Losses (ECL)

assessment

•The appropriateness of the allowance for

ECL is highly subjective and judgemental.

The impact of COVID-19 and the resultant

economic impacts have resulted in

additional key judgements and assumptions

being made during the current year.

•Challenged the level of ECL, model methodology and assumptions

applied to calculate the ECL provisions held by the Group

•Evaluated the impact of ECL on the interim results and annual results

•Reviewed and monitored the Group’s calculation of ECLs, trends in

staging changes, model changes, scenario updates, post-model

adjustments, Significant Increase in Credit Risk (SICR), and volatility

•Assessed the appropriateness of the ECL model overlays raised for

emerging risks for which there was not sufficient data available to

model the existing credit risk. Specific consideration was given to the

methodology and assumptions applied to calculate the overlay. We

further evaluated the appropriateness of the releases of the ECL

model overlays

•Assessed ECL experienced against forecasts and considered whether

the level of ECL was appropriate

•Evaluated the IFRS 9 disclosures for relevance and compliance with

IFRS

•Assessed the appropriateness of the ECL provision raised by the

Group for large exposures in entities publicly perceived to be in

financial distress

•Reviewed the appropriateness of the ECL models and the forward-

looking macro-economic scenarios applied in the UK

•Reviewed for reasonableness the benchmarking of macro-economic

scenarios, ECLs, Credit Loss Ratio (CLR) and coverage ratios against

relevant UK peers

•Considered the impact of restrictions and levels of lockdown on

impacted sectors and the consequent impact on ECL and overlays.

Key audit matters

What we did

Risk management

and governance

CORPORATE GOVERNANCE

Investec plc Annual Financial Statements 2022

INVESTEC PLC AUDIT COMMITTEE REPORT

CONTINUED

Fair value of level 3

instruments and the resulting

IFRS 13 Fair Value

Measurement (IFRS 13)

disclosure

•For level 3 instruments such as unlisted

investments in private equity businesses,

investment properties, fair value loans and

large bespoke derivative structures, there is

a large degree of subjectivity surrounding

the inputs to the valuations. With the lack of

observable liquid market inputs, determining

appropriate valuations continues to be

highly judgemental.

•Received presentations on the material investments across the Group,

including an analysis of the key judgements and assumptions applied,

and approved the valuation adjustments proposed by management for

the year ended 31 March 2022

•Challenged and debated significant subjective exposures and

assumptions including:

–The valuation principles applied for the valuation of level 3

investments (unlisted and private equity investments) and fair value

loans. Particular focus was given to the impact of COVID-19 on

these valuation principles

–Fair value of instruments with higher characteristics and associated

income

–The appropriateness of the IFRS 13 disclosures regarding fair value.

Uncertain tax and other

legal matters

•Considered potential legal and uncertain tax

matters with a view to ensuring appropriate

accounting treatment in the financial

statements, including in respect of historical

German dividend tax arbitrage transactions.

•Received regular updates from the Group Executive, Group Tax, Group

Finance and Group Legal on uncertain tax and legal matters to enable

the Audit Committee to probe and consider the matters and evaluate

the basis and appropriateness of the accounting treatment

•Analysed the judgements and estimates made and discussed the

potential range of outcomes that might arise to determine the liability,

if any, for uncertain tax positions as required by the International

Financial Reporting Interpretations Committee (IFRIC) 23

•Concluded on the appropriateness of the International Accounting

Standards (IAS) 37 accounting treatment, the scenarios and

sensitivities, and any overall disclosure in the financial statements

•Considered Post Balance Sheet Events (PBSE) considerations,

including external developments on the accounting and disclosures of

historical German dividend arbitrage transactions taking note of

correspondence received from the Federal Tax Office in Germany.

Refer to note 49 Contingent Liabilities and legal matters for further

information.

Investments in associates

•Evaluated the appropriateness of the

carrying amount of investments in

associates

•Evaluated the appropriateness of the

valuation and the accounting treatment of

the investment in Ninety One at an Investec

plc level.

•Reviewed the technical accounting memorandum prepared by Group

Finance regarding the accounting treatment of material investments of

the Group. The memorandum addressed the carrying value of the

investments and management's impairment assessment. This included

an analysis of the key judgements and assumptions applied

•Evaluated the appropriateness of the accounting and disclosure

relating to significant judgements and estimates, valuation methods

and assumptions applied

•Evaluated the appropriateness of the valuation and the accounting

treatment of the investment in Ninety One at an Investec plc level.

Going concern and the

Viability Statement

•Considered reports on the Group’s budgets, forecasts, profitability,

capital, liquidity and solvency and the impact of legal proceedings,

if any on both going concern and the three-year Viability Statement

•Considered the results of various stress testing analyses based on

different economic scenarios and the possible impact on the ability of

Investec plc to continue as a going concern

•Recommended the approval of the going concern and the Group

Viability Statement assumption underlying the annual financial

statements to the DLC Board for approval

•Noted the Investec Bank plc Viability Statement as recommended for

approval by the IBP Audit Committee to the IBP Board.

Cyber, IT Security, IT systems

and controls impacting

financial reporting

•Received and reviewed reports in respect of IT security, cyber

security, IT systems and controls impacting financial reporting

•Received regular reports from internal audit on the effectiveness of IT

controls tested as part of the internal audit process

•Considered broader IT and Governance matters, including security, IT

strategy and operations through the Audit Committee Chair’s

attendance of the DLC IT Risk and Governance Committee.

Key audit matters

What we did

Risk management

and governance

CORPORATE GOVERNANCE

Investec plc Annual Financial Statements 2022

INVESTEC PLC AUDIT COMMITTEE REPORT

CONTINUED

Key audit matters

What we did

External Audit, audit quality

and audit firm rotation

•Managed the relationship with the external auditors, Ernst & Young

LLP., including their re-appointment

•Monitored the rotation in lead Ernst & Young audit partners at an

Investec Bank plc

•Approved the External Audit plan, audit fee and the main areas of

focus

•Considered the external auditors report on the progress of the review

engagement being performed on the interim results. Reviewed the

results announcements for both interim and final results

•Met with key members of Ernst & Young LLP prior to every Audit

Committee meeting to discuss the 2021/22 audit plan, key areas of

focus, findings, scope and conclusions

•Pre-approved all non-audit services provided by External Audit and

confirmed the services to be within the approved non-audit services

policy

•Met separately with the leadership of Ernst & Young LLP to discuss

independence, firm quality control, results of internal and external

regulator inspections of the firm and individual partners

•Discussed external audit feedback on the Group’s critical accounting

estimates and judgements

•Assessed the independence and objectivity of the external auditors

•Noted the unqualified independent auditor’s report in relation to the

Group

•Received updates from the External Auditors on the audit of the Annual

Financial Statements (AFS) of the Group including the Summary of

Audit Differences for the year ended 31 March 2022

•Recommended to the Board the re-appointment of Ernst & Young LLP

as the external auditors of Investec plc, Investec Wealth & Investment

(UK) and Investec Bank plc for the year ending 31 March 2023.

Other matters considered by the

Committee

The Committee also considered the following matters during the year:

Key audit matters

What we did

Regulatory compliance and

reporting

•Through the Investec Limited Audit Committee, supplemented by the

Investec Bank plc and Investec Wealth & Investment Audit

Committees, received regular reports from the Group Regulatory

Compliance function and reviewed the adequacy of the scope and the

effectiveness of the regulatory compliance processes applied. This

included the evaluation of the quality of regulatory reporting, the

regulatory compliance universe, the scope and the integrity of the

regulatory compliance process, the adequacy of internal regulatory

compliance systems and processes, and the consideration and

remediation of any findings of the internal and external Auditors or

regulators.

Post balance sheet disclosure

•Considered any post balance sheet disclosures that may require the

AFS to be adjusted or require additional disclosure including in respect

of the distribution of Ninety One shares and external developments

and correspondence on accounting and disclosures of dividend

arbitrage transactions

•Reviewed and approved the publication of a no-change statement.

Environmental, Social and

Governance (ESG)

•Reviewed ESG reporting and disclosures

•Considered the level of external assurance obtained on ESG reporting

and disclosures

•Considered the Task Force for Climate Related Disclosures (TFCD)

reporting requirements.

Risk management

and governance

CORPORATE GOVERNANCE

Investec plc Annual Financial Statements 2022

INVESTEC PLC AUDIT COMMITTEE REPORT

CONTINUED

Key audit matters

What we did

Internal controls

•The effectiveness of the overall control

environment, the status of any material

control issues with emphasis on the

progress of specific remediation plans.

•Attended regular meetings of the DLC BRCC. Based on reports

presented at the DLC BRCC, evaluated the impact of an evolving risk

environment, including operational risk, on the internal control

environment

•Evaluated and tracked the status of the most material control issues

identified by Internal and External Audit and tracked the progress of

the associated remediation plans against agreed time frames

•Reviewed reports from the independent audit committees of the

Group’s subsidiaries

•Evaluated the impact of work from home on the overall control

environment and operational risk

•Evaluated reports on the internal control environment from the internal

and external auditors with specific emphasis on culture and conduct

elements in the internal audit reports. Noted internal audit report and

conclusions on internal controls, internal financial controls and the risk

management framework for the year end review

•Attended and received regular reports from the DLC IT Risk and

Governance Committee regarding the monitoring and effectiveness of

the Group’s IT controls. Considered updates on key internal and

External Audit findings with respect to the IT control environment

•Reviewed and approved the combined assurance model, ensuring

completeness of risks and adequacy and effectiveness of assurance

coverage

•Evaluated reports on cyber security within the Group.

Fair, balanced and

understandable reporting

•The Group is required by the UK Corporate

Governance Code to assess and confirm

that its external reporting is fair, balanced

and understandable, and consider whether

it provides the information necessary for

stakeholders to assess the Group’s position

and performance, business model and

strategy

•Undertook an assessment on behalf of the Board, to provide the Board

with assurance that it can make the statement

•Met with senior management to gain assurance that the processes

underlying the compilation of the annual financial statements were

appropriate

•Conducted an in-depth critical review of the annual financial

statements and, where necessary, requested amendments to

disclosure

•Reviewed the accounting treatment of key judgements and the quality

of earnings assessment

•Assessed disclosure controls and procedures

•Confirmed that management had reported on and evidenced the basis

on which representations to the external auditors were made

•Obtained input and assurance from the external auditors and

considered the level of and conclusion on the summary of audit

differences

•Considered feedback from Group Finance in respect of a project

launched to amend the annual integrated report in order to improve

disclosures, improve financial control and reporting processes

•Concluded that the processes underlying the preparation of the annual

report and financial statements for the financial year ended 31 March

2022 were appropriate in ensuring that those statements were fair,

balanced and understandable

•Reviewed feedback received from analysts in respect of the annual

report as provided by Investor Relations and incorporated the

feedback into the annual report

•Reviewed the outcomes of the combined assurance coverage model

as discussed below

•Reviewed the process put in place to provide assurance on the Chief

Executive and Chief Financial Officer attestation.

Risk management

and governance

CORPORATE GOVERNANCE

Investec plc Annual Financial Statements 2022

INVESTEC PLC AUDIT COMMITTEE REPORT

CONTINUED

Key audit matters

What we did

Combined assurance matrix

•Confirmed our satisfaction with the appropriateness of the design and

effectiveness of the combined assurance model applied which

incorporates the various disciplines of Risk Management, Operational

Risk, Legal, Regulatory Compliance, Internal Audit, External Audit and

other assurance providers

•Confirmed our satisfaction with the levels of assurance and mitigants

so that, taken as a whole, there is sufficient and appropriate assurance

regarding mitigants for the key risks

•Reviewed the results of the Combined Assurance Matrix (CAM)

coverage plan at the year end to assess the results of actual coverage

and conclusions relative to planned coverage for the year. Concluded

that the CAM formed an appropriate basis for assurance coverage and

outcomes

•Reviewed the year-end conclusions from Internal Audit on internal

controls, the risk management framework and internal financial

controls based on their planned and actual audit coverage for the year.

Business control environment

•The effectiveness of the control

environment in each individual business,

including the status of any material control

issues and the progress of specific

remediation plans.

•Received regular reports from the subsidiary audit committees

•Attended the audit committees of all significant subsidiaries

•Assessed reports on individual businesses and their control

environments, scrutinised any identified control failures and closely

monitored the status of remediation plans

•Received updates from senior management and scrutinised action

plans following Internal Audit findings

•Reviewed the process for reporting to the Investec plc Audit

Committee by key subsidiaries and associates and considered regular

reports from such entities.

Finance function

•Considered a report from Group Finance on the interim results for the

period ended 30 September 2021 and final results for the 31 March

2022 year end

•In a closed session, discussed and concluded that the finance

functions of both Investec plc and its subsidiaries and Investec Limited

and its subsidiaries were adequately skilled, resourced and

experienced to perform the financial reporting for the Group and that

appropriate succession was in place for key roles

•Concluded that the Group FD, Nishlan Samujh, had the appropriate

expertise and experience to meet the responsibilities of the position.

IFRS

•Reviewed various accounting papers prepared by Group Finance

addressing subjective accounting treatment and significant accounting

judgements

•The Audit Committee chair discussed the key judgements and complex

accounting treatments with both external audit and management in the

weekly meetings leading up to the year-end sign off

•Concluded on the reasonableness of the significant accounting

judgements.

Related party disclosures

•Considered and reviewed related party disclosures for the Group

•DLC Nomdac reviewed key related party transactions during the year

and ensured Investec related party policies are being complied with.

This was supported by a governance audit carried out by internal

audit.

Risk management

and governance

CORPORATE GOVERNANCE

Investec plc Annual Financial Statements 2022

INVESTEC PLC AUDIT COMMITTEE REPORT

CONTINUED

Key audit matters

What we did

Internal audit

•The performance of Internal Audit and

delivery of the Internal Audit plan, including

scope of work performed, the level of

resources, the risk assessment

methodology and coverage of the Internal

Audit plan

•The Committee is responsible for assessing

audit quality and the effectiveness of the

Internal Audit function.

•Scrutinised and reviewed Internal Audit plans, risk assessments,

methodology and staffing, and approved the annual plan

•Deliberated on and approved the revised Group Internal Audit charter

•Monitored delivery of the agreed audit plans, including assessing

Internal Audit resources, Continued Professional Development (CPD),

succession, core skills development and automation of audit processes

•Monitored and followed up Internal Audit control findings, including IT,

and ensured appropriate mitigation and timeous close-out by

management

•Tracked high and moderate risk findings, and monitored related

remediation plans

•Met with the heads of Internal Audit prior to each Audit Committee

meeting, without management being present, to discuss the remit of

and reports of Internal Audit and any issues arising from the internal

audits conducted

•Monitored audit quality in relation to Internal Audit. The methodology,

process and skills were presented to a separately convened Audit

Committee to consider audit quality

•Confirmed our satisfaction with the performance of the Internal Audit

function

•Reviewed the Investec plc written assessment of the overall

effectiveness of the organisation’s governance, risk, and control

framework, including an assessment of internal financial controls, the

risk management framework, adherence to the risk appetite and the

effectiveness of the overall assurance achieved relative to that

planned for the year through the CAM

•Discussed and considered the Internal Audit quality assurance

programme. The Internal Audit quality assurance programme is

designed in line with the Institute of Internal Auditors (IIA) International

Professional Practices Framework (which includes the International

Standards for the Professional Practice of Internal Auditing and

the Code of Professional Conduct, including the Code of Ethics)

•Discussed and considered the engagement quality assurance

programme. The quality assurance programme is multi-faceted, and

includes the attraction, development and retention of adequately

skilled staff that exercise proficiency and due professional care,

adherence to the Global Internal Audit governance framework and

audit methodology, oversight and detailed review of every audit

engagement and a quarterly post-engagement quality assurance

programme

•Reviewed the results of the post-engagement quality assurance

programme which inform any training interventions required within

the team. The results are consolidated and presented to the Audit

Committee on an annual basis

•Internal Audit developed automated test scripts, allowing for more

frequent testing of controls covering the full population. This full

population testing will provide greater coverage than the current

traditional audit methodology which calls for a sample testing

approach. Reviewed and considered the implications of this approach

on the audit for the Group

•Held a closed session with Internal Audit where the capacity,

appropriate skill, independence and quality of the internal audit

function was assessed

•Considered succession and the skills matrix for Internal Audit.

Risk management

and governance

CORPORATE GOVERNANCE

Investec plc Annual Financial Statements 2022

INVESTEC PLC AUDIT COMMITTEE REPORT

CONTINUED

External Audit

Non-audit services

Our policy regarding the engagement of

the external auditors to provide non-

audit services was developed by the

Committee to safeguard auditor

objectivity and independence. The

policy includes guidelines on permitted

and non-permitted services and the

approval process required by the

Committee.

Total audit fees paid for the year ended

31 March 2022 amounted to £7 million

(2021: £6.5 million), of which £0.3 million

(2021: £0.3 million) related to the

provision of non-audit services.

The non-audit services related to

services required to be provided by the

external auditor, for example, regulatory

audits. Non-audit fees were pre-

approved by the Chair of the Committee

prior to every assignment.

Based on the above-mentioned policy

and reviews, the Committee was

satisfied that the level and type of

non-audit work undertaken throughout

the year did not impair the

independence of Ernst & Young LLP.

Audit quality, interdependencies and

partner accreditation

The Committee held a closed meeting

with the external auditors to discuss

auditor accreditation, independence,

firm quality control and results of

internal and external regulator

inspections of the firms and individual

partners.

The closed meeting in respect of audit

quality took place between the

Committee and Ernst & Young LLP for

the current year.

The following matters were covered

during these discussions:

•Transparency reports and reviews

covering their client base, client

acceptance and continuance

processes, and the approach to

clients, if any, that did not meet the

client continuance criteria

•Any reputational, legal or impending

legal issues impacting the firm,

including the implications of publicly

observable information from

regulatory investigations or the media

•The independence processes of the

firm, including partner reward and

remuneration criteria

•Interrogation of international and local

firm audit quality control processes

•Detailed profiles of the partners,

managers and technical support staff,

including their relevant audit

experience and specific Investec

experience, especially where partner

rotations were envisaged

•Details in relation to succession plans

in order to provide assurance as to

the partner rotation, transition and

continuity process

•The results of the last firm-wide

reviews carried out by the regulatory

body, Financial Reporting Council

(FRC) in the UK

•The results of the latest individual

partner quality reviews carried out by

the regulator and internal firm-wide

quality control reviews carried out in

respect of each partner.

Auditor independence and objectivity

•The Committee considers the

independence of the external auditors

on an ongoing basis

•The external auditors have confirmed

their independence and were

requested to review and confirm the

level of staff transactions with

Investec, if any, to ensure that all

auditors on the Group audit meet the

independence criteria

•The key audit partners are required to

rotate every five years. The tenure of

each of the partners was reviewed

and concluded to be aligned with this

policy

•Manprit Dosangh was appointed as

lead engagement partner for Ernst &

Young LLP and the Group on

1 April 2019

The following is a summary of the key

audit partner changes for the Group:

•Chris Brouard from Ernst & Young LLP

replaced Ken Eglinton as audit partner

of Investec Bank plc.

Following due consideration, the

Committee believes the safeguards as

implemented by the Committee are

adequate to ensure the objectivity and

effectiveness of the audit process,

based on the following:

•The cross-reviews by the Investec

plc auditors across the Group

supported by partner rotation

•Limitations on delivering non-audit

services, including pre-approval on

non-audit work

•The confirmation of the independence

of the firms and auditors involved

•Formal audit quality process

undertaken by the Committee.

Audit quality and independence

The Committee treated audit quality and

independence as a Key Audit Matter

(KAM) and accordingly critically

evaluated audit quality, effectiveness,

independence and audit rotation

requirements. Regulator reviews were

considered at a firm and individual

partner level. Continuity, quality control

on assignment as well as the

independence of staff on the

assignment were considered. The

Committee was satisfied that in

reviewing audit quality and

independence, it had followed a

comprehensive process during which

detailed reports were received and

evaluated.

Audit firm rotation

The Company has complied with the

requirements of the Statutory Audit

Services for Large Companies Market

Investigation (Mandatory Use of

Competitive Tender Processes and

Audit Committee Responsibilities) Order

2014 (the Order), which relates to the

frequency and governance of tenders

for the appointment of the external

auditors. The external auditors of

Investec plc are Ernst & Young LLP.

Ernst & Young LLP have been Investec

plc’s auditors since 2000 and are

subject to a mandatory rotation by the

end of March 2024 at the latest. A

competitive tender process will

commence during 2022 with the

incoming audit firm to perform the first

audit for the financial year starting

1 April 2024.

Re-election of auditors

The Committee has considered the

following in proposing the appointment

of external auditors:

•The level of specialisation, footprint,

capacity and experience required by a

firm in performing a joint audit of

aBank or financial services group

which is of systemic importance

•The level of quality control within the

audit firms as evidenced by the

results of internal and external

regulatory reviews performed on audit

firms and engagement partners

•The level of inherent risk in auditing a

financial services group and the

consequent audit risks

•The independence of the external

auditor

•The fundamental demands on audit

quality, the level of audit risk given the

turmoil in the audit profession,

balanced against shareholder views

on firm rotation.

Risk management

and governance

CORPORATE GOVERNANCE

Investec plc Annual Financial Statements 2022

INVESTEC PLC AUDIT COMMITTEE REPORT

CONTINUED

The Investec plc audit committee

confirms its satisfaction with the

performance and quality of External

Audit, the external auditors and lead

partners.

The Board and the Committee is

recommending the re-election of Ernst &

Young LLP as auditors of Investec plc at

its AGM in August 2022 for the financial

year ending 31 March 2023.

Looking ahead

The role of the Committee will remain

focused on:

•Ensuring the effective functioning of

the Group’s financial systems and

processes, financial control

environment, monitored by an

effective combined assurance model

•Audit quality and independence

•Management’s response in respect of

future changes to IFRS, legislation and

other regulations impacting disclosure

requirements

•The appointment of an external audit

firm in the UK as part of the audit

rotation cycle

•The implications of ESG risk in

measuring the sustainability and

societal impact of an investment in a

company or business together with

ESG accounting disclosures and

assurance processes

•Monitoring the impact of COVID-19

and the Russian invasion of Ukraine

on the economy and the consequent

impact on financial systems and

reporting, including viability, results of

operations and financial position of

the Group

•Continuing to exercise oversight over

subsidiary audit committees, including

in remote locations

•Consider the implications of BEIS and

other regulatory reforms on the audit

profession and the audit.

Zarina Bassa

Chair, Investec plc Audit Committee

22 June 2022

Risk management

and governance

CORPORATE GOVERNANCE

Investec plc Annual Financial Statements 2022

INVESTEC PLC AUDIT COMMITTEE REPORT

CONTINUED

The directors' report for the year ended

31 March 2022 comprises pages 83 to

91 of this report, together with the

sections of the annual report

incorporated by reference.

The directors’ report deals with the

requirements of Investec plc.

As permitted by Section 414C(11) of the

UK Companies Act, some of the matters

required to be included in the directors'

report have instead been included in the

strategic report on pages 1 to 105 of the

Investec Group’s 2022 integrated and

strategic report, as the Board considers

them to be of strategic importance.

Specifically, these are:

•Future business developments

(throughout the strategic report)

•Risk management on page 26

•Information on how the directors have

had regard to the Group's

stakeholders, and the effect of that

regard, on pages 28 to 35 of the

Investec Group’s 2022 integrated and

strategic report.

The strategic report (as contained in the

Investec Group’s 2022 integrated and

strategic report) and the directors’

report together form the management

report for the purposes of Disclosure

Guidance and Transparency Rules

(DTR) 4.1.8R.

For information on the corporate

governance of the Investec Group, refer

to the corporate governance sections of

the Investec Group’s 2022 integrated

and strategic report and the Investec

Group’s 2022 risk and governance

report.

Information relating to the use of

financial instruments by the Company

can be found on pages 108 to 110 and is

incorporated by reference.

Additional information for shareholders

of Investec plc is detailed in schedule A

to the directors’ report on pages 90 and

91.

Other information to be disclosed in the

directors' report is given in this section.

The directors' report fulfils the

requirements of the corporate

governance statement for the purposes

of DTR 7.2.3R.

Directors

The membership of the Board

and biographical details of the

directors are provided on

pages 119 to 121 of the

Investec Group’s 2022

integrated and strategic report

Changes to the composition of the

Board during the year and up to the date

of this report are shown in the table

below:

Role

Effective

date of

departure/

appointment

Departures

Charles

Jacobs

Non-Executive

Director

30 June 2021

Lord Malloch-

Brown

Non-Executive

Director

5 August

2021

Perry

Crosthwaite

Chair

5 August

2021

Appointments

Nicky Newton-

King

Non-Executive

Director

21 May 2021

Jasandra

Nyker

Non-Executive

Director

21 May 2021

Brian

Stevenson

Non-Executive

Director

22 June 2021

Vanessa Olver

Non-Executive

Director

18 May 2022

In accordance with the UK Corporate

Governance Code, all of the directors

will retire and those willing to serve

again will submit themselves for re-

election at the AGM.

Company secretary

The Company Secretary of Investec plc

is David Miller.

The company secretary is professionally

qualified and has gained experience

over many years. His performance is

evaluated by Board members during the

annual Board evaluation process. He is

responsible for the flow of information to

the Board and its committees and for

ensuring compliance with Board

procedures. All directors have access to

the advice and services of the Company

Secretary, whose appointment and

removal is a Board matter.

In compliance with the UK Corporate

Governance Code and the UK

Companies Act, the Board has

considered and is satisfied that the

Company Secretary is competent, and

has the relevant qualifications and

experience.

Induction, training and

development

The Chair leads the training and

development of directors and the

Board generally.

A comprehensive development

programme operates throughout the

year, and comprises both formal and

informal training and information

sessions.

On appointment to the Board, all

directors benefit from a comprehensive

induction, which is tailored to the new

director’s individual requirements. The

induction schedule is designed to

provide the new director with an

understanding of how the Group works

and the key issues that it faces. The

Company Secretary consult the Chair

when designing an induction schedule,

giving consideration to the particular

needs of the new director. When a

director joins a Board committee, the

schedule includes an induction to the

operations of that committee.

Directors and their interests

Details of the directors’

shareholdings and options to

acquire shares are detailed in

the Investec Group’s 2022

remuneration report

Directors' conflicts of interest

The Group has procedures in place for

managing conflicts of interest. Should a

director become aware that they, or any

of their connected parties, have an

interest or a potential interest in an

existing or proposed transaction with

the Group, they are required to notify

the Board in writing or at the next

Board meeting. Internal controls are in

place to ensure that any related party

transactions involving directors, or their

connected parties, are conducted on an

arm's length basis. Directors have a

continuing duty to update any changes

to their declarations.

Directors' and officers’ liability

insurance

The Group maintains directors' and

officers' liability insurance which

provides appropriate cover for legal

action brought against its directors.

Risk management

and governance

CORPORATE GOVERNANCE

Investec plc Annual Financial Statements 2022

DIRECTORS’ REPORT

Change of control

The Articles of Association of

Investec plc and the Memorandum of

Incorporation of Investec Limited ensure

that a person cannot make an offer for

one company without having made an

equivalent offer to the shareholders of

both companies on equivalent terms.

Pursuant to the terms of the agreements

establishing the DLC structure, if either

Investec plc or Investec Limited serves

written notice on the other at any time

after either party becomes a subsidiary

of the other party, or after both Investec

plc and Investec Limited become

subsidiaries of a third party, the

agreements establishing the DLC

structure will terminate.

All of the Investec Group's share plans

contain provisions relating to a change

of control. Outstanding awards and

options would normally vest and

become exercisable on a change of

control and, where applicable, subject to

the satisfaction of any performance

conditions at that time.

Powers of directors

The Board manages the business of the

Group under the powers set out in the

Articles of Association of Investec plc,

which include the ability of directors to

issue or buy back shares. Directors were

granted authority to issue and allot

shares and to buy back shares at the

2021 AGM. Shareholders will be asked to

renew this authority at the 2022 AGM.

Contracts

Details of contracts with

directors can be found on

pages 18 and 19 of the

Investec Group's 2022

remuneration report.

Authorised and issued share

capital

Details of the share capital are set out

on pages 158 and 159 in note 40 to the

annual financial statements.

Investec plc did not issue any ordinary

shares during the financial year ended

31 March 2022.

Investec plc did not repurchase any of

its ordinary shares during the financial

year ended 31 March 2022.

At 31 March 2022, Investec plc held

48 997 877 shares in treasury

2021: 41 576 257). The maximum

number of shares held in treasury by

Investec plc during the period under

review was 49 677 266 shares.

Ordinary dividends

An interim dividend of 11.0p per ordinary

share (2020: 5.5p) was paid on

22 December 2021, as follows:

•11.0p per ordinary share to non-South

African resident shareholders

registered on 10 December 2021

•To South African resident

shareholders registered on

10 December 2021, through a

dividend paid by Investec plc of 1.0p

and through Investec Limited on the

SA DAS share, equivalent to 10.0p per

ordinary share.

The directors have proposed a final

dividend to shareholders registered on

22 July 2022, of 14.0p (2021: 7.5p) per

ordinary share, subject to the approval

of the members of Investec plc at the

AGM which is scheduled to take place

on 4 August 2022. If approved, this will

be paid on 08 August 2022, as follows:

•14.0p per ordinary share to non-South

African resident shareholders

registered on 22 July 2022

•To South African resident

shareholders registered on

22 July 2022, through a dividend paid

by Investec Limited on the SA DAS

share, equivalent 14.0p per

ordinary share.

Preference dividends

Non-redeemable, non-cumulative,

non-participating preference shares

Preference dividend number 31 for the

period 1 April 2021 to 30 September

2021, amounting to 5.51508p per share,

was declared to members holding

preference shares registered on

03 December 2021 and was paid on

13 December 2021.

Preference dividend number 32 for the

period 1 October 2021 to 31 March

2022, amounting to 6.41369p per share,

was declared to members holding

preference shares registered on 10 June

2022 and was paid on 20 June 2022.

Rand-denominated non-redeemable,

non-cumulative, non-participating

preference shares

Preference dividend number 21 for the

period 1 April 2021 to 30 September

2021, amounting to 333.41097 cents per

share, was declared to members holding

Rand-denominated non-redeemable,

non-cumulative, non-participating

preference shares registered on

10 December 2021 and was paid on

13 December 2021.

Preference dividend number 22 for the

period 1 October 2021 to 31 March

2022, amounting to 344.99315 cents

per share, was declared to members

holding preference shares registered on

10 June 2022 and was paid on

13 June 2022.

Going concern

In adopting the going concern basis for

preparing the consolidated financial

statements, the directors have

considered the Group’s business

activities, objectives and strategy,

principal risks and uncertainties in

achieving its objectives, and

performance that are set out on pages

5 to 14, pages 17 to 21, pages 24 to 42

and pages 79 to 91 of the Investec

Group’s 2022 integrated and strategic

annual report. The directors have

performed a robust assessment of the

Group’s financial forecasts across a

range of scenarios over a 12 month

period from the date the financial

statements are authorised for issue.

Based on these, the directors confirm

that they have a reasonable expectation

that the Company and the Group, as a

whole, have adequate resources to

continue in operational existence for the

12 months from the date the financial

statements are authorised for issue.

Therefore, the directors consider it

appropriate to adopt the going concern

basis of accounting in preparing the

accompanying consolidated financial

statements.

Viability statement

In accordance with the UK Corporate

Governance Code, in addition to

providing a going concern statement,

the Board is required to make a

statement with respect to the Group’s

viability (i.e. its ability to continue in

operation and meet its liabilities), taking

into account the current position of the

Group, the Board’s assessment of the

Group’s prospects and the principal risks

it faces. Following confirmation by the

DLC BRCC (comprising a majority of

Non-Executive Directors, which includes

certain members of the Audit

Committees), the Audit Committees

recommended the viability statement for

Board approval.

The Board has identified the principal

and emerging risks facing the Group and

these are highlighted on pages 11 to 25.

Through its various sub-committees,

notably the Audit Committees, the DLC

BRCC and the capital committees, the

Board regularly carries out a robust

assessment of these risks and their

potential impact on the performance,

liquidity, solvency and operational

resilience of the Group. The activities of

these Board sub-committees and the

issues considered by them are

described in the Investec Group’s 2022

risk and governance report.

Risk management

and governance

CORPORATE GOVERNANCE

Investec plc Annual Financial Statements 2022

DIRECTORS’ REPORT

CONTINUED

Taking these risks into account, together

with the Group’s strategic objectives and

the prevailing market environment, the

Board approved the overall mandated

risk appetite framework for Investec plc.

The risk appetite framework sets broad

parameters relating to the Board’s

expectations around performance,

business stability and risk management.

The Board considers that prudential risk

management is paramount in all it does.

Protection of depositors, customers’

interests, capital adequacy and

shareholder returns are key drivers. To

manage the Group’s risk appetite, there

are a number of detailed policy

statements and governance structures

in place. The Board ensures that there

are appropriate resources in place to

manage the risks arising from running

the business by having independent Risk

Management, Compliance, and Financial

Control functions. These are

supplemented by an Internal Audit

function that reports independently to a

non-executive Audit Committee Chair.

The Board believes that the risk

management systems and processes,

supported by the conclusions of the

Internal Audit function, are adequate to

support the Group’s strategy and allow

the Group to operate within its risk

appetite framework. A review of the

Group’s performance/measurement

against its risk appetite framework is

provided at each DLC BRCC meeting

and at the main Board meetings.

In terms of the FCA and PRA

requirements, the Group is also required

to meet regulatory standards with

respect to capital and liquidity. In terms

of these requirements, the Group is

required to stress its capital and liquidity

positions under a number of severe

stress conditions. Investec’s stress

testing framework is well embedded in

its operations and is designed to identify

and regularly test the Group’s key

‘vulnerabilities under stress’.

In order to manage liquidity risk, liquidity

stress testing is performed for a range of

scenarios, each representing a different

set of assumptions. These include

market-wide, firm specific, and

combined scenarios (combination of the

market-wide and firm specific stresses).

The Group manages its liquidity risk

appetite in relation to combined stress

parameters which represent extreme but

plausible circumstances. The objective

is to have sufficient liquidity under a

combined stress scenario to continue to

operate for a minimum period as

detailed in the Board-approved risk

appetite. In addition to these stress

scenarios, the Group’s risk appetite also

requires it to maintain specified

minimum levels for both the liquidity

coverage ratio and net stable funding

ratio, greater than those required by the

regulators; a minimum cash and near

cash to customer deposit ratio of 25%;

and to maintain low reliance on

wholesale funding to fund core asset

growth. Each banking entity within the

Group is required to be fully self-funded.

The Group currently has £8.9 billion in

cash and near cash assets, representing

48.5% of customer deposits.

The Group develops annual capital plans

(refreshed after six months), that look

forward over a three-year period. The

capital plans are refreshed on an adhoc

basis if a material event occurs or is

likely to occur. These plans are designed

to assess the capital adequacy of the

Group’s respective banking entities

under a range of economic and internal

conditions, with the impact on earnings,

asset growth, risk appetite and liquidity

considered. The output of capital

planning allows senior management and

the Board to make decisions to ensure

that the Group continues to hold

sufficient capital to meet internal and

regulatory capital targets over the

medium term (i.e. three years). The

Group targets a CET1 ratio in excess of

10%, a tier 1 ratio greater than 11%, a

minimum capital adequacy ratio of 14%

to 17%, and a leverage ratio in excess of

6% for each of its banking entities.

The parameters used in the capital and

liquidity stresses are reviewed regularly,

taking into account the principal and

emerging risks facing the Group,

changes in the business environments

and inputs from business units.

Scenarios are designed considering

macro-economic downside risks,

portfolio-specific risk factors and

business model vulnerabilities.

•Base case: The base case narrative

envisages that UK economic activity

continues to recover in line with other

advanced markets, as social

restrictions are lifted and pent-up

demand fuels a rebound in consumer

spending. Inflation is expected to rise

sharply over the near-term, but begins

to come down as upward influences

dissipate over time. In light of this,

major central banks tighten monetary

policy gradually, with the Bank of

England (BoE) raising the Bank rate to

1.5% in Q1 2023 and reducing its

Quantitative Easing holdings.

COVID-19 remains a risk, but

vaccination programs prove effective

in preventing the need for further

restrictions.

•Inflation: In the inflation scenario, the

current rise in inflation proves to be

more sustained and at elevated levels.

Principally this is driven by

developments in the labour market. As

such, central banks respond by raising

interest rates more aggressively, with

the UK Bank rate rising to a peak of

4% from the current setting of 1.25%.

Markets correct sharply on the

restrictive central bank policy,

tightening financial conditions and

weak economic activity. The resultant

shock to UK GDP is 4.2% (peak-to-

trough), with a recession across

advanced markets in 2023.

•Synchronised global economic

downturn: This is a hypothetical

scenario, designed to encapsulate a

variety of tail risks. It involves a severe

global economic downturn and a

sharp repricing of all asset classes,

particularly those witnessing the most

elevated valuations. Major equity

indices see falls of between 30-40%

and higher yield bond markets witness

a sell off, with corporate credit

spreads widening. Residential and

commercial real estate are also

severely affected. Whilst the start of

the shock occurs in year one, there

are lasting headwinds resulting in slow

economic and asset price recoveries.

Monetary policy is loosened, with the

BoE cutting the Bank rate and

conducting Quantitative Easing

(although on a more limited scale than

during the pandemic given the already

large holdings of bonds). Inflation falls

below 1% as the economy contracts

and energy prices fall. UK GDP

experiences a shock of around 5%

(peak to trough).

Risk management

and governance

CORPORATE GOVERNANCE

Investec plc Annual Financial Statements 2022

DIRECTORS’ REPORT

CONTINUED

The Group also typically incorporates

the BoE regulatory scenario into its

capital processes. The BoE will return to

its annual cyclical scenario (ACS) stress

testing framework in 2022, following two

years of Covid pandemic crisis-related

stress testing. However, in light of

uncertainty related to the Russian

invasion of Ukraine, and in order to help

lenders focus on managing the ongoing

financial markets disruption associated

with the invasion, there is a delay to the

launch of the 2022 ACS, with revised

timelines to be communicated by BoE in

2Q22.

The Board has assessed the Group’s

viability in its ‘base case’ and stress

scenarios. In assessing the Group’s

viability, a number of assumptions are

built into its capital and liquidity plans. In

the stress scenarios these include, for

example, foregoing or reducing dividend

payments and asset growth being

curtailed.

We also carry out ‘reverse stress tests’,

i.e. scenarios that would cause the

Group business model to fail. Reverse

stress scenarios are developed

thematically and their impact is

assessed in qualitative and quantitative

terms with respect to regulatory capital

and liquidity threshold conditions, taking

into account the loss absorbing effects

of the bank’s capital stack. Escalating

losses may expose the business model

to unacceptable levels of risk well

before regulatory threshold conditions

are breached, and mitigation actions are

identified with the aim to prevent the

failure of the Group. Reverse scenarios

are extreme tail events and are

considered remote, and mainly serve the

purpose of identifying and addressing

potential weaknesses that may not be

identified through the ongoing risk

management and stress testing

processes.

In addition, Investec plc performs

climate scenario analysis in line with the

requirements stipulated by Supervisory

Statement SS3/19 ‘Enhancing banks’ and

insurers’ approaches to managing the

financials risks from climate change’, on

a proportionate basis for the size and

complexity of the firm. The BoE’s ‘2021

Climate Biennial Exploratory Scenario’

has been used as the framework for

scenario analysis, with initial focus on

climate transition risk, and physical risks

prioritised for the second half of 2022.

To date, findings indicate that short-

term transition risk is low and Investec

plc has sufficient capital and liquidity to

continue as a going concern and meet

regulatory capital and liquidity

requirements.

Furthermore, the Group is required to

have a recovery plan as well as a

resolution pack. The purpose of the

recovery plan is to document how the

Board and senior management will

ensure that the Group recovers from

extreme financial stress to avoid liquidity

and capital difficulties.

The Group also maintains an operational

resilience framework for building

organisational resilience to respond

effectively to operationally disruptive

events. This not only ensures continuity

of business but also safeguards the

interests of key stakeholders, as well as

our reputation, brand and value‐creating

activities.

The capital and liquidity plans, stress

scenarios, recovery plan, resolution pack

and the risk appetite statement are

reviewed at least annually. In times of

severe economic distress and if

applicable, stress scenarios are

reviewed more regularly; for example, as

was the case with the COVID‐19

pandemic. In addition, senior

management hosts an annual risk

appetite process at which the Group’s

risk appetite frameworks are reviewed

and modified to take into account risk

experience and changes in the

environment. Furthermore, strategic

budget processes take place within

each business division at least annually.

These focus on, amongst other things:

the business and competitive landscape;

opportunities and challenges; and

financial projections. A summary of

these divisional budgets, together with a

consolidated Group budget, is presented

to the Board during its strategic review

process early in the year.

In assessing the Group’s viability, the

Board has taken all of the above-

mentioned factors, documents and

processes into consideration. The

directors can confirm that they have a

reasonable expectation that Investec will

continue to operate and meet its

liabilities as they fall due over the next

three years. The Board has used a three‐

year assessment period as this is

aligned to the Group’s medium-term

capital plans which incorporate

profitability, liquidity, leverage and

capital adequacy projections and include

impact assessments from a number of

stress scenarios. Detailed management

information therefore exists to provide

senior management and the Board

sufficient and realistic visibility of the

Group’s viability over the three years to

31 March 2025.

The viability statement should be read in

conjunction with the following sections

in the annual report, all of which have

informed the Board’s assessment of the

Group’s viability:

•Pages 3 to 5, which give an overview

of the business

•Pages 11 to 25, which provide detail

on the principal and emerging risks

the Group faces

•Page 11, which highlights information

on the overall Group’s risk appetite

•Pages 7 to 9, which provide an

overview of the Group’s approach to

risk management, and the processes

in place to assist the Group in

mitigating its principal risks

•Pages 9, 26, 48, 52, and 69, which

highlight information on the Group’s

various stress testing processes

•Pages 54 to 61, which specifically

focus on the Group’s philosophy and

approach to liquidity management

•Page 67, which provide detail on the

recovery plan

•Pages 67 to 71, which explain the

Group’s capital management

framework.

This forward‐looking viability statement

made by the Board is based on

information and knowledge of the Group

at 22 June 2022. There could be a

number of risks and uncertainties arising

from (but not limited to) domestic and

global economic and business

conditions beyond the Group’s control

that could cause the Group’s actual

results, performance or achievements in

the markets in which it operates to differ

from those anticipated.

Social and Ethics Committee

(SEC)

The Board of Investec plc has delegated

the duties of the Social and Ethics

Committee to the DLC SEC.

Further details of the role,

responsibilities, membership

and activities of the DLC SEC

are set out on pages 97 and 98

of the Investec Group’s 2022

risk and governance report.

Sustainability report

For information on our

approach to social,

environmental and ethical

matters, please refer to the

Investec Group’s 2022

sustainability report.

Risk management

and governance

CORPORATE GOVERNANCE

Investec plc Annual Financial Statements 2022

DIRECTORS’ REPORT

CONTINUED

Group carbon footprint

The Group reports its greenhouse gas emissions and

environmental performance, in line with the UK

Companies Act and its applicable regulations, and the

Large and Medium Sized Companies and Groups

(Accounts and Reports) Regulations 20022 (as amended).

Our carbon footprint has been calculated according to the

international Greenhouse Gas (GHG) Protocol’s Corporate

Accounting and Reporting Standard (revised edition), with

reasonable assurance provided by KPMG. Our

environmental data collection system allows us to track

and manage our direct operational impact. This tool

imports data from various sources, consolidates the

information and calculates our carbon footprint. The

implementation of this tool allows us to produce reliable

emissions data and accurately build a history of our

carbon footprint, and assists in setting targets for future

emissions. Every year we endeavour to improve the

thoroughness of our data collection processes. Within

each geography, the environmental manager is

responsible for monitoring the GHG emissions. The

Investec plc Streamlined Energy and Carbon Report

(SECR) may be found on the Investec website.

Assessment parameters

Consolidation approach

•Operational control

Emission factor data source

•DEFRA (2021), IEA, eGRID (for New York electricity) and Eskom

(for South Africa electricity)

Intensity ratio

•Emissions per average headcount

•Emissions per office space m2

Independent assurance

•Reasonable assurance provided by KPMG for the years ended:

31 March 2021 and 31 March 2022

Coverage

•Coverage of environmental information covers >95% of our

business operations. Materiality set at 5%

31 March 2022

31 March 2021

Units

Consumption in

unit of measure

Tonnes of CO2

equivalent

Consumption in

unit of measure

Tonnes of CO2

equivalent

Scope 1

Energy

Natural gas

kWh

237 093

291 400

Scope 2

1 051

1 172

Energy

Electrical energy consumption

kWh

4 342 643

1 051

4 153 372

1 172

Scope 3

1 168

572

Paper

Paper consumption

Waste

General waste1

Employee travel

Rail travel1

439 260

84 164

Road business travel1

387 168

158 789

Taxi1

33 973

17 042

Commercial airlines1

2 177 562

645

69 942

Work-from-home emissions

Electrical energy consumption

kWh

566 767

120

665 762

155

Natural gas

kWh

1 428 402

262

1 626 111

299

Total emissions before

carbon mitigation2

2 263

1 798

No scope

Water

Water consumption

915

754

Recycled waste

174

Intensity

Emissions per average

headcount

0.65

0.48

Emissions per m2 office space

0.06

0.04

Water consumption per

average headcount

0.26

0.20

Intensity excl Scope 2

Emissions per average

headcount

0.40

0.25

Emissions per m2 office space

0.02

Climate change mitigation

Scope 2 REGOs in the UK

MWh

3 936

853

3 650

851

Carbon credits

1 410

947

Total emissions after

mitigation

–

1.Increase as business activities resumes, in particular business travel.

2.While we have seen an increase in emissions year-on-year, we are 68% down on emissions against 31 March 2020 (7 021 tonnes of CO2 equivalent).

Please refer to the Investec Group’s 2022 sustainability report for further information.

Risk management

and governance

CORPORATE GOVERNANCE

Investec plc Annual Financial Statements 2022

DIRECTORS’ REPORT

CONTINUED

Climate-related financial

disclosures report

Refer to the Investec Group’s

2022 climate-related financial

disclosures report for our

progress on the Task Force on

Climate-related Financial

Disclosures (TFCD)

recommendations.

Nominations and Directors’

Affairs Committee (Nomdac)

The Board of Investec plc has delegated

the duties of the Directors’ Affairs

Committee to the DLC Nomdac.

Further details of the role,

responsibilities, membership

and activities of the DLC

Nomdac are set out on pages

95 and 96 of the Investec

Group’s 2022 risk and

governance report.

Remuneration Committee

The Board of Investec plc has delegated

the duties of the Remuneration

Committee to the DLC Remuneration

Committee.

Further details of the role,

responsibilities, membership

and activities of the DLC

Remuneration Committee are

set out on pages 4 to 6 of the

Investec Group’s 2022

remuneration report.

Audit Committee

The Audit Committee comprising

independent Non-Executive Directors

meets regularly with senior

management, the external auditors,

operational risk, internal audit,

compliance and the finance division to

consider the nature and scope of the

internal and external audit reviews and

the effectiveness of our risk and control

systems, taking note of the key

deliberations of the subsidiary Audit

Committees as part of the process.

Further details on the role and

responsibility of the Audit

Committee are set out on

pages 73 to 82.

Independent auditor and

audit information

Each director, at the date of approval of

this report, confirms that, so far as the

director is aware, there is no relevant

audit information of which the

Company’s auditor is unaware and that

each director has taken all steps that he

or she ought to have taken as a director

to make himself or herself aware of any

relevant audit information and to

establish that the Company’s auditor is

aware of that information. This

confirmation is given pursuant to

Section 418 of the UK Companies Act

and should be interpreted in accordance

with and subject to those provisions.

Ernst & Young LLP have indicated their

willingness to continue in office as

auditors of Investec plc.

The Board having satisfied itself as to

their independence and effectiveness,

has proposed a resolution to re-appoint

them as auditors at the AGM scheduled

to take place on 4 August 2022.

Major shareholders

The largest shareholders of

Investec plc are shown on

page 143 of the Investec

Group’s 2022 integrated and

strategic annual report.

Special resolutions

At the AGM held on 5 August 2021,

special resolutions were passed in terms

of which:

•A renewable authority was granted to

Investec plc to acquire its own

ordinary shares in accordance with

the terms of Section 701 of the

UK Companies Act

•A renewable authority was granted to

Investec plc to acquire its own

preference shares in accordance with

the terms of Section 701 of the

UK Companies Act

AGM update statement

At the AGM on 5 August 2021, resolution

15 (approval of the DLC directors’

remuneration report for the year ended

31 March 2021), resolution 23 (re-

appointment of Ernst & Young (EY) Inc.

as joint auditors of Investec Limited),

resolution 24 (re-appointment of KPMG

Inc. as joint auditors of Investec Limited)

and resolution 38 (political donations),

passed with a less than 80% majority.

The Board recognises that effective

communication is integral to building

stakeholder value and is committed to

providing meaningful, transparent,

timely and accurate financial and

non-financial information to our

stakeholders. In addition to formal,

written communication, executive

management and Non-Executive Board

members continue to engage with our

shareholders on a regular basis.

Commenting on the less than 80% vote

received for the Group’s remuneration

report

We consulted with shareholders in early

2021 to obtain their input on our new

three-year remuneration policy. We

further engaged with shareholders

during July 2021 to discuss the Investec

Group’s final remuneration policy and

the 2021 remuneration outcomes. The

Board was pleased to receive strong

support for the new Investec Group’s

remuneration policy, at 86.17%. We

anticipate that the material increase in

support for our new remuneration policy

at the AGM will translate into an

increased level of votes in favour of our

future remuneration reports.

We will continue with the annual

programme of engagement with our

shareholders with a view to ensuring

that future remuneration policies and

resultant outcomes are reflective of

business performance and the

experience of our stakeholders while

balancing this with an increasingly

competitive labour market.

Refer to pages 12 to 20 of the Investec

Group’s 2022 remuneration report for a

summary of the revised remuneration

policy.

Commenting on the less than 80% vote

received for the re-appointments of EY

Inc. and KPMG Inc. as joint auditors of

Investec Limited

As required by the South African

Prudential Authority, Investec Limited

has to appoint joint external auditors.

EY Inc. and KPMG Inc. are the current

joint auditors of Investec Limited.

The DLC Audit Committee considered

the implications of the Mandatory Audit

Firm Rotation (MAFR) rule as issued by

the Independent Regulatory Board for

Auditors (IRBA), the requirements of the

South African Companies Act No. 71 of

2008, as amended, and the state of the

audit profession in South Africa including

reputational or apparent audit failure

perceptions. The views expressed by

shareholders have been a key

consideration balanced with the

implications of having joint auditors and

the risks inherent to an audit transition.

Risk management

and governance

CORPORATE GOVERNANCE

Investec plc Annual Financial Statements 2022

DIRECTORS’ REPORT

CONTINUED

Based on this assessment, following a

comprehensive tender process,

PricewaterhouseCoopers Inc. (PwC Inc.)

was nominated as one of the new joint

external auditors of Investec Limited for

the financial year starting 1 April 2023.

It is intended that PwC Inc. will replace

KPMG Inc. as one of the joint external

auditors of Investec Limited.

The appointment of PwC Inc. in a

shadow capacity, for the 2022 financial

year, will be recommended to

shareholders at the AGM to be held in

August 2022. A formal transition process

will commence during 2022, whereby

PwC Inc. will shadow the full audit cycle

performed by the incumbent joint

external auditors.

A competitive tender process for the

second rotation will commence during

the 2023 financial year, to appoint the

second incoming audit firm to perform

the audit for the financial year starting 1

April 2025, in accordance with the MAFR

rules as published by the IRBA. It is

intended that the second incoming joint

audit firm will replace Ernst & Young Inc.

as one of the joint external auditors of

Investec Limited.

Refer to pages 108 and 109 of the

Investec Group’s 2022 risk and

governance report for further details

with regard to the DLC Audit

Committee’s review of the external

auditors, and the MAFR process.

Commenting on the less than 80% vote

received for authority to make political

donations and to incur political

expenditure

As stated in the notices to the AGMs,

Investec plc does not give any money

for political purposes in the UK nor does

it make any donations to UK political

organisations or incur UK political

expenditure. However, the definitions of

political donations and political

expenditure used in the UK Companies

Act are very wide. In line with UK market

practice, the authority is therefore

requested only as a precautionary

measure to ensure that Investec plc and

any company which is or becomes a

subsidiary of Investec plc does not

inadvertently breach the relevant

provisions of the UK Companies Act.

Diversity and employees

We have various processes to

encourage debate and dialogue around

valuing diversity and difference.

Emerging and established leaders are

invited to participate in discussions with

the executive leadership around all

issues related to talent management and

diversity. The Investec Group policy is to

adopt an open management style,

thereby encouraging informal

consultation at all levels about aspects

of the Group’s operations, and to

incentivise employees to take an

interest in the Group’s performance by

means of employee share schemes.

Further information is provided

in the Investec Group’s 2022

sustainability report.

Empowerment and

transformation

The Group endeavours to prevent and/

or eliminate any form of discrimination

based on gender, race, ethnicity,

religion, age, disability, nationality or

sexual preferences. People with

disabilities are an essential part of a

diverse talent pool and are always

considered, with every effort made to

accommodate and facilitate an

accessible environment. In the event of

employees becoming disabled while in

our employ, we are committed to

ensuring their continued employment to

the extent that this is possible. We have

various processes to encourage debate

and dialogue around valuing diversity

and differences. Emerging and

established leaders are invited to

participate in discussions with the

executive leadership around all issues

related to talent management and

diversity.

Research and development

In the ordinary course of business, the

Group develops new products and

services in each of its business

divisions.

Political donations and

expenditure

The Group did not make any political

donations in the financial year ended

31 March 2022 (2021: Nil).

Subsidiary and associated

companies

Details of principal subsidiary

and associated companies are

reflected on pages 172 to 174.

Uncertain tax and other legal

matters

The Board considered legal and

uncertain tax matters with a view to

ensuring appropriate accounting

treatment in the financial statements.

Refer to note 49 on page 165.

Events after the reporting date

On 31 May 2022, Investec plc

distributed 46.6 million Ninety One

shares. The total value of the

distribution was £106.5 million. Investec

plc maintained a shareholding of 93.0

million Ninety One plc shares (14.94%)

post the distribution. The remaining

shareholding in Ninety One plc will be

accounted for at fair value through other

comprehensive income as before the

distribution.

The distribution was classified as a non-

adjusting event after the reporting date

as defined by IAS 10 Events after the

Reporting Period.

Signed on behalf of the Board of

Investec plc

Philip Hourquebie

Chair

22 June 2022

Fani Titi

Chief Executive

22 June 2022

Risk management

and governance

CORPORATE GOVERNANCE

Investec plc Annual Financial Statements 2022

DIRECTORS’ REPORT

CONTINUED

Additional information for

shareholders

Set out below is a summary of certain

provisions of Investec plc’s current

Articles of Association (the Articles) and

applicable English law concerning

companies (the UK Companies Act). This

is a summary only and the relevant

provisions of the Articles or the UK

Companies Act should be consulted if

further information is required.

Share capital

The issued share capital of Investec plc

at 31 March 2022 consists of

696 082 618 ordinary shares of £0.0002

each, 2 754 587 non-redeemable, non-

cumulative, non-participating preference

shares of £0.01 each, 131 447 ZAR non-

redeemable, non-cumulative, non-

participating preference shares of

R0.001 each, 318 904 709 special

converting shares of £0.0002 each, the

special voting share of £0.001, the UK

DAN share of £0.001 and the UK DAS

share of £0.001 (each class as defined in

the Articles).

Purchase of own shares

Subject to the provisions of the Articles,

the UK Companies Act, the UK

Uncertificated Securities Regulations

2001 and every other statute for the

time being in force concerning

companies and affecting Investec plc,

the approval of shareholders as

provided in the Articles, and without

prejudice to any relevant special rights

attached to any class of shares,

Investec plc may purchase, or may enter

into a contract under which it will or may

purchase any of its own shares of any

class, including without limitation any

redeemable shares, in any way and at

any price (whether at par or above or

below par).

Dividends and distributions

Subject to the provisions of the UK

Companies Act, Investec plc may by

ordinary resolution from time-to-time

declare dividends not exceeding the

amount recommended by the Board.

The Board may pay interim dividends

whenever the financial position of

Investec plc, in the opinion of the Board,

justifies such payment.

The Board may withhold payment of all

or any part of any dividends or other

monies payable in respect of Investec

plc’s shares from a person with a 0.25%

or more interest in the nominal value of

the issued shares if such a person has

been served with a notice after failure to

provide Investec plc with information

concerning interests in those shares

required to be provided under the

UK Companies Act.

Voting rights

Subject to any special rights or

restrictions attaching to any class of

shares, at a general meeting, every

member present in person has, upon a

show of hands, one vote and, on a poll,

every member who is present in person

or by proxy has one vote for each share.

In the case of joint holders of a share,

the vote of the senior who tenders a

vote, whether in person or by proxy,

shall be accepted to the exclusion of the

votes of the other joint holders and for

this purpose seniority shall be

determined by the order in which the

names stand in the register of members

in respect of the share. Under the UK

Companies Act, members are entitled to

appoint a proxy, who need not be a

member of Investec plc, to exercise all

or any of their rights to attend and vote

on their behalf at a general meeting or

class meeting. A member may appoint

more than one proxy in relation to a

general meeting or class meeting,

provided that each proxy is appointed to

exercise the rights attached to a

different share or shares held by that

member. A member that is a corporation

may appoint an individual to act on its

behalf at a general meeting or class

meeting as a corporate representative.

The person so authorised shall be

entitled to exercise the same powers on

behalf of such corporation as the

corporation could exercise if it were an

individual member of Investec plc.

Restrictions on voting

No member shall be entitled to vote

either in person or by proxy at any

general meeting or class meeting in

respect of any shares held by them if

any call or other sum then payable by

them in respect of that share remains

unpaid. In addition, no member shall be

entitled to vote if they have been served

with a notice after failure to provide

Investec plc with information concerning

interests in those shares required to be

provided under the UK Companies Act.

Deadlines for exercising

voting rights

Votes are exercisable at a general

meeting of Investec plc in respect of

which the business being voted upon is

being heard. Votes may be exercised in

person, by proxy, or in relation to

corporate members, by corporate

representatives. The Articles provide a

deadline for submission of proxy forms

of not less than 48 hours before the time

appointed for the holding of the meeting

or adjourned meeting.

Variation of rights

Subject to the UK Companies Act, the

Articles specify that rights attached to

any class of shares may be varied with

the written consent of the holders of not

less than three-fourths in nominal value

of the issued shares of that class, or

with the sanction of an extraordinary

resolution passed at a separate general

meeting of the holders of those shares.

The rights conferred upon the holders of

any shares shall not, unless otherwise

expressly provided in the rights

attaching to those shares, be deemed to

be varied by the creation or issue of

further shares ranking pari passu with

them. Where, under the Company’s

share incentive plan, participants are the

beneficial owners of the shares, but not

the registered owners, the participants

are not entitled to exercise any voting

rights until the shares are released to

the participants. Under the Company’s

employee trust, the trustee does not

vote in respect of unallocated shares.

Transfer of shares

All transfers of shares may be effected

by transfer in writing in any usual or

common form or in any other form

acceptable to the directors. The

instrument of transfer shall be signed by

or on behalf of the transferor and

(except in the case of fully paid shares)

by or on behalf of the transferee.

Transfers of shares which are in

uncertificated form are effected by

means of the CREST system. The

directors may, in the case of shares in

certificated form, in their absolute

discretion and without assigning any

reason, refuse to register any transfer of

shares (not being fully paid shares),

provided that such discretion may not

be exercised in such a way as to prevent

dealings in the shares of that class from

taking place on an open and proper

basis. The directors may also refuse to

shares (whether fully paid or not) in

favour of more than four persons jointly.

The directors may decline to recognise

any instrument of transfer unless the

instrument of transfer is in respect of

only one class of share and, when

submitted for registration, is

accompanied by the relevant share

certificates and such other evidence as

the directors may reasonably require.

Subject to the UK Companies Act and

regulations and applicable CREST rules,

the directors may determine that any

class of shares may be held in

uncertificated form and that title to such

shares may be transferred by means of

the CREST system or that shares of any

class should cease to be so held and

transferred.

Risk management

and governance

CORPORATE GOVERNANCE

Investec plc Annual Financial Statements 2022

SCHEDULE A TO THE DIRECTORS’ REPORT

A number of the Company’s employee

share plans include restrictions on

transfer of shares while the shares are

subject to the plans, in particular, the

share incentive plan.

Plc preference shares

The following are the rights and

privileges which attach to the plc

preference shares:

•On a return of capital, whether or not

on a winding up (but not on a

redemption or purchase of any shares

by Investec plc) or otherwise, the plc

preference shares will rank, pari passu

inter se and with the most senior

ranking preference shares of Investec

plc in issue (if any) from time-to-time

and with any other shares of Investec

plc that are expressed to rank pari

passu herewith as regards to

participation in the capital, and

otherwise in priority to any other class

of shares of Investec plc

•Investec plc may, at its option,

redeem all or any of the plc

preference shares for the time being

issued and outstanding on the first

call date or any dividend payment

date thereafter

•Holders of plc preference shares will

not be entitled to attend and vote at

general meetings of Investec plc.

Holders will be entitled to attend and

vote at a class meeting of holders of

plc preference shares.

Non-redeemable, non-

cumulative, non-participating

preference shares

The following are the rights and

privileges which attach to the perpetual

preference shares:

•Each perpetual preference share will

rank as regards to dividends and a

repayment of capital on the winding

up of Investec plc prior to the ordinary

shares, the plc special converting

shares, the UK DAN share, the UK

DAS share, but pari passu with the plc

preference shares. The perpetual

preference shares shall confer on the

holders, on a per perpetual preference

share and equal basis, the right to a

return of capital on the winding up of

Investec plc of an amount equal to the

aggregate of the nominal value and

premiums in respect of perpetual

preference shares issued, divided by

the number of perpetual preference

shares in issue

•Each perpetual preference share may

confer upon the holder thereof the

right to receive out of the profits of

Investec plc which it shall determine

to distribute, in priority to the ordinary

shares, the plc special converting

shares, the UK DAN share and the UK

DAS share, but pari passu with the plc

preference shares, the preference

dividend calculated in accordance

with the Articles

•The holders of the perpetual

preference shares shall be entitled to

receive notice of and be present but

not to vote, either in person or by

proxy, at any meeting of Investec plc,

by virtue of or in respect of the

perpetual preference shares, unless

either or both of the following

circumstances prevail at the date of

the meeting:

–The preference dividend or any part

thereof remains in arrears and

unpaid as determined in

accordance with the Articles after

six months from the due date

thereof; and/or

–A resolution of Investec plc is

proposed which directly affects the

rights attached to the perpetual

preference shares or the interests

of the holders thereof, or a

resolution of Investec plc is

proposed to wind up or in relation to

the winding up of Investec plc or for

the reduction of its capital;

in which event the preference

shareholders shall be entitled to vote

only on such resolution.

Rand-denominated non-

redeemable, non-cumulative,

non-participating perpetual

preference shares (the ZAR

perpetual preference shares)

The ZAR perpetual preference shares

are subject to substantially similar terms

and conditions as the existing Pounds

Sterling non-redeemable, non-

cumulative, non-participating preference

shares, as outlined above, save that

they are denominated in South African

Rands.

Shares required for the

DLC structure

Investec SSC (UK) Limited, a UK trust

company, specially formed for the

purpose of the DLC structure, holds the

plc special voting share, the plc special

converting shares, the UK DAN share

and the UK DAS share. These shares

can only be transferred to another UK

trust company, in limited circumstances.

The plc special voting shares are

specially created shares so that

shareholders of both Investec plc and

Investec Limited effectively vote

together as a single decision-making

body on matters affecting shareholders

of both companies in similar ways, as set

out in the Articles.

Prior to a change of control, approval of

termination of the sharing agreement

(which regulates the DLC), liquidation or

insolvency of Investec plc, the plc

special converting shares have no voting

rights, except in relation to a resolution

proposing the:

i.Variation of the rights attaching to the

shares or

ii.Winding up, and they have no rights to

dividends. The special converting

shares are held on trust for the

Investec Limited ordinary

shareholders. Investec plc and

Investec Limited have established

dividend access trust arrangements

as part of the DLC.

Investec plc has issued two dividend

access shares, the UK DAS share and

UK DAN share which enables Investec

plc to pay dividends to the shareholders

of Investec Limited. This facility may be

used by the Board to address

imbalances in the distributable reserves

of Investec plc and Investec Limited

and/or to address the effects of South

African exchange controls and/or if they

otherwise consider it necessary

or desirable.

Risk management

and governance

CORPORATE GOVERNANCE

Investec plc Annual Financial Statements 2022

SCHEDULE A TO THE DIRECTORS’ REPORT

CONTINUED

Annual

financial

statements

IN THIS SECTION

Directors’ responsibilities

Independent auditor’s report

to the members of Investec plc

Consolidated income statement

Consolidated statement

of comprehensive income

Consolidated balance sheet

100

Consolidated statement

of changes in equity

102

Accounting policies

104

Notes to the financial statements

116

Parent company annual

financial statements

179

Directors’ responsibilities

The following statement, which should

be read in conjunction with the auditor’s

report set out on pages 95 to 97, is

made with a view to distinguishing for

shareholders the respective

responsibilities of the directors and of

the auditors in relation to the accounts.

The directors are responsible for

preparing the annual report and

the Group financial statements in

accordance with applicable UK law and

regulations.

The directors are required by the UK

Companies Act and South African

Companies Act to prepare financial

statements for each financial year.

Under that law the directors have

elected to prepare the Group financial

statements in accordance with UK

adopted international accounting

standards which comply with the

International Financial Reporting

Standards (IFRS) as issued by the

International Accounting Standards

Board (IASB) and with IFRS adopted

pursuant to Regulation (EC) No.

1606/2002 as it applies in the EU. At

31 March 2022, UK adopted IAS are

identical in all material respects to

current IFRS applicable to the Group,

with differences only in the effective

dates of certain standards. The parent

company financial statements have

been prepared in accordance with

section 408 of the UK Companies Act

2006. Under company law the directors

must not approve the Group financial

statements unless they are satisfied that

they give a true and fair view of the

state of affairs of the Group and the

Company and of the profit or loss of the

Group and the Company for that period.

Under the FCA’s Disclosure Guidance

and Transparency Rules (DTR), Group

financial statements are required to be

prepared in accordance with UK

adopted international accounting

standards which comply with IFRS as

issued by the IASB and with IFRS

adopted pursuant to Regulation (EC) No.

1606/2002 as it applies in the EU.

In preparing the financial statements the

directors are required to:

•Select suitable accounting policies

in accordance with IAS 8 Accounting

Policies, Changes in Accounting

Estimates and Errors and then apply

them consistently;

•Make judgements and accounting

estimates that are reasonable and

prudent;

•Present information, including

accounting policies, in a manner that

provides relevant, reliable,

comparable and understandable

information;

•Provide additional disclosures when

compliance with the specific

requirements in IFRSs or in respect of

the parent company financial

statements, FRS 101, is insufficient to

enable users to understand the impact

of particular transactions, other

events and conditions on the Group’s

financial position and financial

performance;

•In respect of the Group financial

statements, state whether the

accounting standards have been

followed, subject to any material

departures disclosed and explained in

the financial statements;

•In respect of the parent company

financial statements, state whether

applicable UK Accounting Standards,

including FRS 101, have been

followed, subject to any material

departures disclosed and explained in

the financial statements; and

•Prepare the financial statements on

the going concern basis unless it is

appropriate to presume that the

Company and/or the group will not

continue in business.

The directors are responsible for

keeping adequate accounting records

that are sufficient to show and explain

the Company’s and group’s transactions

and disclose with reasonable accuracy

at any time the financial position of the

Company and the group and enable

them to ensure that the Company and

the group financial statements comply

with the UK Companies Act. They are

also responsible for safeguarding the

assets of the parent company and Group

and hence for taking reasonable steps

for the prevention and detection of fraud

and other irregularities.

Under applicable law and regulations,

the directors are also responsible for

preparing a strategic report, directors’

report, directors’ remuneration report

and corporate governance statement

that comply with that law and those

regulations. The directors are

responsible for the maintenance and

integrity of the corporate and financial

information included on the Investec

website.

Directors’ responsibility

statement

The directors, whose names and

functions are set out on pages 109 to 111

of Investec Group’s 2022 integrated and

strategic annual report, confirm to the

best of their knowledge:

•That the consolidated financial

statements, prepared in accordance

with UK adopted international

accounting standards which comply

with the IFRS as issued by the IASB,

and with IFRS adopted pursuant to

Regulation (EC) No 1606/2002 as it

applies in the EU, give a true and fair

view of the assets, liabilities, financial

position and profit or loss of the

Company and the undertakings

included in the consolidation taken as

a whole;

•That the annual report, including the

strategic report (as contained in the

Investec Group’s 2022 integrated and

strategic report), includes a fair review

of the development and performance

of the business and the position of the

Company and undertakings included

in the consolidation taken as a whole,

together with a description of the

principal risks and uncertainties that

they face; and

•That they consider the annual report,

taken as a whole, is fair, balanced and

understandable and provides the

information necessary for

shareholders to assess the Company’s

position, performance, business model

and strategy.

Financial results

The financial results of Investec plc

are set out in the annual financial

statements and accompanying notes

for the year ended 31 March 2022.

The preparation of these results was

supervised by the Investec group

finance director, Nishlan Samujh.

Approval of annual financial

statements

The directors’ report and the annual

financial statements of the Group, which

appear on pages 83 to 91 and pages 98

to 187, were approved by the Board of

directors on 22 June 2022.

The directors are responsible for the

maintenance and integrity of the

corporate and financial information

included on the company’s website.

Legislation in the UK governing the

preparation and dissemination of the

annual financial statements may differ

from legislation in other jurisdictions.

Signed on behalf of the Board

Philip Hourquebie

Chair

22 June 2022

Fani Titi

Chief Executive

22 June 2022

Annual Financial Statements

Investec plc Annual Financial Statements 2022

DIRECTORS’ RESPONSIBILITIES

Opinion

We have audited the special purpose financial statements of

Investec Plc (the Group) for the year ended 31 March 2022,

which comprise consolidated balance sheet, the consolidated

income statement, the consolidated statement of total

comprehensive income, consolidated statement of changes in

equity, consolidated cash flow statements and the related

notes 1 to 57, including a summary of significant accounting

policies and information in sections ‘‘Risk management and

governance’’ identified as ‘‘audited’’ on pages 8 to 91. The

financial reporting framework that has been applied in their

preparation is a special purpose framework comprising the

accounting policies set out on pages 104 to 115.

These annual financial statements have been prepared to

present the financial position and results of Investec plc and

its subsidiaries as if the contractual arrangements which

create the dual listed company (DLC) structure did not exist

and, with this exception and the exclusion of certain other

remuneration and related party disclosures, are prepared in

accordance with UK adopted international accounting

standards. For an understanding of the financial position,

results and cash flows of the Investec DLC group, the user is

referred to the Investec annual report 2022 – Investec annual

financial statements.

Investec DLC group consists of two separate legal entities,

being Investec plc and Investec Limited, that operate under a

DLC structure. The effect of the DLC structure is that Investec

plc and its subsidiaries and Investec Limited and its

subsidiaries operate together as a single economic entity, with

neither assuming a dominant role, and accordingly are

reported as a single reporting entity under International

Financial Reporting Standards (IFRS). These group annual

financial statements are prepared in in accordance UK

adopted international accounting standards which comply with

International Financial Reporting Standards (IFRS) as issued by

the International Accounting Standards Board (IASB) and with

IFRS adopted pursuant to Regulation (EC) No 1606/2002 as it

applies in the European Union.

As explained in the accounting policies set out on pages 104

to 115, these special purpose financial statements have been

prepared to present the financial position, results and cash

flows of Investec plc and its subsidiaries. For the avoidance of

doubt, they exclude Investec Limited and its subsidiaries.

In our opinion, the accompanying financial statements of the

Group for the year ended 31 March 2022 are prepared, in all

material respects, in accordance with the accounting policies

set out on 104 to 115.

Basis for Opinion

We conducted our audit in accordance with International

Standards on Auditing (UK) (ISAs (UK)) including ‘ISA (UK) 800

(Revised) Special Considerations – Audits of Financial

Statements Prepared in Accordance with Special Purpose

Frameworks’. Our responsibilities under those standards are

further described in the Auditor’s Responsibilities for the Audit

of the Financial Statements section of our report. We are

independent of the company in accordance with the ethical

requirements that are relevant to our audit of the financial

statements in the UK, including the Financial Reporting Council

(FRC) Ethical Standard, and we have fulfilled our other ethical

responsibilities in accordance with these requirements.

We believe that the audit evidence we have obtained is

sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

In auditing the financial statements, we have concluded that

the directors’ use of the going concern basis of accounting in

the preparation of the financial statements is appropriate. Our

evaluation of the directors’ assessment of the Group’s ability

to continue to adopt the going concern basis of accounting

has included:

•understanding management’s going concern assessment

process, including the impact of the COVID-19 pandemic

(‘‘COVID-19’’) and current macro-economic environment in

which both silos and the Group operates;

•assessing the board approved budgets, including the

reasonableness and completeness of assumptions. In

assessing these assumptions, we considered the impact of

COVID-19 and the current macro-economic environment,

the trading environment, current operating performance,

principal risks and appropriate mitigating factors;

•assessing the information used in the going concern

assessment for consistency with the information obtained

through auditing other areas of the business, obtaining an

understanding of the business planning process and

challenging the central assumptions;

•involving specialists to assess the results of management’s

stress testing, including consideration of principal and

emerging risks on funding, liquidity and regulatory capital.

We performed independent stress testing of capital and

liquidity ratios and evaluated the plausibility of the outcome

under which regulatory minimum requirements would be

breached. In addition, we evaluated the viability of

management actions available to mitigate erosion of capital

and liquidity;

•assessed the Group’s compliance with external debt

covenants;

•inspecting correspondence with the Prudential Regulatory

Authority (PRA) and Financial Conduct Authority (FCA) for

matters that may impact the going concern assessment; and

•evaluating the appropriateness and conformity of the going

concern disclosure included in the annual report with the

reporting standards and management’s going concern

assessment.

Based on the work we have performed, we have not identified

any material uncertainties relating to events or conditions that,

individually or collectively, may cast significant doubt on the

Group and parent company’s ability to continue as a going

concern for a 12 month period from the date the financial

statements are authorised for issue.

Our responsibilities and the responsibilities of the directors

with respect to going concern are described in the relevant

sections of this report. However, because not all future

events or conditions can be predicted, this statement is not a

guarantee as to the group’s ability to continue as a going

concern.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF INVESTEC PLC

Emphasis of Matter - Basis of Accounting and

Restriction on Distribution and Use

We draw attention to the accounting policies set out on pages

104 to 115 of the financial statements, which describes the

basis of accounting. The financial statements are prepared to

assist the board of Investec plc in complying with the financial

reporting provisions of the contractual agreements referred to

above. As a result, the financial statements may not be

suitable for another purpose. Our report is intended solely for

the members of Investec plc in accordance with our

engagement letter dated 9 April 2021, and should not be

distributed to or used by parties other than the members of

Investec plc. Our opinion is not modified in respect of this

matter.

Other information

The other information comprises the information included in

the annual report in sections 1 (pages 2 to 5), section 2 (pages

6 to 91), and pages marked as unaudited in section 3 (pages

92 to 187), other than the financial statements and our

auditor’s report thereon. The directors are responsible for the

other information contained within the annual report.

Our opinion on the financial statements does not cover the

other information and, except to the extent otherwise explicitly

stated in this report, we do not express any form of assurance

conclusion thereon.

Our responsibility is to read the other information and, in doing

so, consider whether the other information is materially

inconsistent with the financial statements or our knowledge

obtained in the course of the audit or otherwise appears to be

materially misstated. If we identify such material

inconsistencies or apparent material misstatements, we are

required to determine whether there is a material

misstatement in the financial statements themselves. If, based

on the work we have performed, we conclude that there is a

material misstatement of the other information, we are

required to report that fact.

We have nothing to report in this regard.

Responsibilities of directors

Management is responsible for the preparation of the special

purpose financial statements in accordance with the financial

reporting provisions under the contractual arrangements

implementing the dual listed company structure, and for such

internal control as management determines is necessary to

enable the preparation of financial statements that are free

from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is

responsible for assessing the Group’s ability to continue as a

going concern, disclosing, as applicable, matters relating to

going concern and using the going concern basis of

accounting unless management either intends to liquidate the

Group or to cease operations, or has no realistic alternative

but to do so.

Those charged with governance are responsible for

overseeing the Group’s financial reporting process.

Auditor’s Responsibilities for the Audit of the

Financial Statements

Our objectives are to obtain reasonable assurance about

whether the financial statements as a whole are free from

material misstatement, whether due to fraud or error, and to

issue an auditor’s report that includes our opinion. Reasonable

assurance is a high level of assurance but is not a guarantee

that an audit conducted in accordance with ISAs (UK) will

always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are

considered material if, individually or in the aggregate, they

could reasonably be expected to influence the economic

decisions of users taken on the basis of these financial

statements.

Explanation as to what extent the audit was considered

capable of detecting irregularities, including fraud

Irregularities, including fraud, are instances of non-compliance

with laws and regulations. We design procedures in line with

our responsibilities, outlined above, to detect irregularities,

including fraud. The risk of not detecting a material

misstatement due to fraud is higher than the risk of not

detecting one resulting from error, as fraud may involve

deliberate concealment by, for example, forgery or intentional

misrepresentations, or through collusion. The extent to which

our procedures are capable of detecting irregularities,

including fraud is detailed below. However, the primary

responsibility for the prevention and detection of fraud rests

with both those charged with governance of the entity and

management.

•We obtained an understanding of the legal and regulatory

frameworks that are applicable to the Group and determined

that the most significant are those that relate to the

reporting framework (UK-adopted IAS and IFRS), the

Companies Act 2006 and the UK Corporate Governance

Code, the FCA Listing Rules, regulations and supervisory

requirements of the PRA, FRC, FCA and other overseas

regulatory requirements, including but not limited to

regulations in markets such as Switzerland, Ireland,

Guernsey, Australia, India, Singapore, the United States of

America, and the relevant tax compliance regulations in the

jurisdictions in which the Group operates.

•We understood how Group and parent are complying with

these legal and regulatory frameworks by making enquiries

of management, internal audit, and those responsible for

legal and compliance matters. We also reviewed

correspondence between the Group and parent company

and UK regulatory bodies; reviewed minutes of the Board,

Audit Committee and Risk and Capital Committee; and

gained an understanding of the Group and parent

company’s approach to governance, demonstrated by the

Board’s approval of the Group and parent company’s

governance framework and the Board’s review of the

Group’s risk management framework and internal control

processes.

•For laws and regulations, we considered the extent of

compliance with those laws and regulations as part of our

procedures on the related financial statement items.

•Based on this understanding, we designed our audit

procedures to identify non-compliance with such laws and

regulations. Our procedures involved: making enquiry of

those charged with governance and senior management for

their awareness of any non-compliance of laws or

regulations, inquiring about the policies that have been

established to prevent non-compliance with laws and

regulations by officers and employees, inquiring about the

Group and parent company’s methods of enforcing and

monitoring compliance with such policies and inspecting

correspondence with the PRA and FCA.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF INVESTEC PLC

CONTINUED

•The Group and parent company operate in the banking

industry which is a highly regulated environment. As such

the Senior Statutory Auditor considered the experience and

expertise of the engagement team to ensure that the team

had the appropriate competence and capabilities, which

included the use of specialists where appropriate.

•We assessed the susceptibility of the Group’s financial

statements to material misstatement, including how fraud

might occur by considering the controls that the Group and

parent company has established to address risks identified

by the group and parent company, or that otherwise seek to

prevent, deter, or detect fraud. We also considered

performance incentives and their potential to influence

management to manage earnings.

•Based on this understanding we designed our audit

procedures to identify non-compliance with such laws and

regulations identified above. Our procedures involved

inquiries of management, internal audit and those

responsible for legal and compliance matters; as well as

focused testing. In addition, we performed procedures to

identify significant items inappropriately held in suspense

and tested journal entries with a focus on manual journals

and journals indicating large or unusual transactions based

on our understanding of the business.

A further description of our responsibilities for the audit of the

financial statements is located on the Financial Reporting

Council’s website at https://www.frc.org.uk/

auditorsresponsibilities. This description forms part of our

auditor’s report.

Other matter

Investec plc has prepared a separate set of combined

consolidated statutory financial statements for the year ended

31 March 2022 in accordance UK adopted international

accounting standards which comply with International

Financial Reporting Standards (IFRS) as issued by the

International Accounting Standards Board (IASB) and with IFRS

adopted pursuant to Regulation (EC) No 1606/2002 as it

applies in the European Union, on which we issued a separate

auditor’s report to the shareholders of Investec plc dated

22 June 2022.

Manprit Dosanjh

(Senior statutory auditor)

for and on behalf of

Ernst & Young LLP

London

22 June 2022

Annual Financial Statements

Investec plc Annual Financial Statements 2022

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF INVESTEC PLC

CONTINUED

For the year to 31 March

£’000

Notes

2022

2021

Interest income

718 446

701 220

Interest income calculated using effective interest method

618 404

586 769

Other interest income

100 042

114 451

Interest expense

(235 727)

(301 506)

Net interest income

482 719

399 714

Fee and commission income

510 228

501 794

Fee and commission expense

(14 913)

(13 271)

Investment income

31 255

31 266

Share of post-taxation profit of associates and joint venture holdings

13 878

10 829

Trading income/(loss) arising from

–customer flow

60 372

(11 025)

–balance sheet management and other trading activities

(7 103)

11 262

Other operating income

11 533

15 831

Total operating income before expected credit loss impairment charges

1 087 969

946 400

Expected credit loss impairment charges

(25 159)

(71 196)

Operating income

1 062 810

875 204

Operating costs

(775 866)

(766 367)

Operating profit before goodwill, acquired intangibles and strategic actions

286 944

108 837

Impairment of goodwill

—

(11 248)

Amortisation of acquired intangibles

(12 936)

(12 851)

Closure and rundown of the Hong Kong direct investments business

(1 203)

7 387

Operating profit

272 805

92 125

Implementation costs on distribution of investment to shareholders

(1 017)

—

Profit before taxation

271 788

92 125

Taxation on operating profit before goodwill, acquired intangibles and strategic actions

(37 612)

(24 243)

Taxation on goodwill, acquired intangibles and strategic actions

1 678

1 029

Profit after taxation

235 854

68 911

Loss attributable to other non-controlling interests

—

861

Earnings attributable to shareholders

235 854

69 772

Annual Financial Statements

Investec plc Annual Financial Statements 2022

CONSOLIDATED INCOME STATEMENT

For the year to 31 March

£’000

Notes

2022

2021

Profit after taxation

235 854

68 911

Other comprehensive income/(loss):

Items that may be reclassified to the income statement:

(Gains)/losses on realisation of debt instruments at FVOCI recycled through

the income statement*

(307)

817

Fair value movements on debt instruments at FVOCI taken directly to other

comprehensive income*

(2 276)

(228)

Foreign currency adjustments on translating foreign operations

5 450

(4 529)

Effect of rate change on deferred taxation relating to adjustment for IFRS 9

617

380

Items that will not be reclassified to the income statement:

Fair value movements on equity instruments at FVOCI taken directly to other

comprehensive income

22 864

99 287

Gains attributable to own credit risk*

11 059

Movement in post-retirement benefit liabilities

(39)

Total comprehensive income

273 301

164 661

Total comprehensive loss attributable to non-controlling interests

—

(861)

Total comprehensive income attributable to ordinary shareholders

256 421

148 642

Total comprehensive income attributable to perpetual preferred securities and

Other Additional Tier 1 securities

16 880

Total comprehensive income

273 301

164 661

*Net of £4.2 million tax credit (31 March 2021: £0.2 million tax credit), except for the impact of rate changes on deferred tax as shown separately above.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

At 31 March

£’000

Notes

2022

2021

Assets

Cash and balances at central banks

5 379 994

3 043 034

Loans and advances to banks

1 467 770

1 385 471

Reverse repurchase agreements and cash collateral on securities borrowed

1 447 473

2 065 232

Sovereign debt securities

1 165 777

1 108 253

Bank debt securities

61 714

48 044

Other debt securities

427 761

698 961

Derivative financial instruments

693 133

773 333

Securities arising from trading activities

163 165

281 645

Investment portfolio

694 324

714 315

Loans and advances to customers

14 426 475

12 335 837

Other loans and advances

122 717

123 536

Other securitised assets

93 087

107 259

Interests in associated undertakings and joint venture holdings

66 895

58 658

Deferred taxation assets

110 377

110 750

Current taxation assets

33 448

58 174

Other assets

1 139 439

1 392 596

Property and equipment

155 055

185 502

Goodwill

249 836

Software

7 066

7 791

Other acquired intangible assets

40 807

53 281

27 946 313

24 801 508

Liabilities

Deposits by banks

2 026 601

1 352 581

Derivative financial instruments

863 295

914 863

Other trading liabilities

42 944

49 055

Repurchase agreements and cash collateral on securities lent

154 828

157 357

Customer accounts (deposits)

18 293 891

16 077 671

Debt securities in issue

1 648 177

1 602 584

Liabilities arising on securitisation of other assets

95 885

108 281

Current taxation liabilities

2 460

36 862

Deferred taxation liabilities

—

19 984

Other liabilities

1 379 327

1 204 332

24 507 408

21 523 570

Subordinated liabilities

758 739

771 481

25 266 147

22 295 051

Equity

Ordinary share capital

202

Ordinary share premium

806 812

Treasury shares

(161 522)

(134 185)

Other reserves

(23 914)

(65 686)

Retained income

1 782 961

1 624 130

Ordinary shareholders’ equity

2 404 539

2 231 273

Perpetual preference share capital and premium

24 794

Shareholders’ equity excluding non-controlling interests

2 429 333

2 256 067

Other Additional Tier 1 securities in issue

250 000

Non-controlling interests in partially held subsidiaries

833

390

Total equity

2 680 166

2 506 457

Total liabilities and equity

27 946 313

24 801 508

Fani Titi

Chief Executive

22 June 2022

Annual Financial Statements

Investec plc Annual Financial Statements 2022

CONSOLIDATED BALANCE SHEET

100

For the year to 31 March

£’000

Notes

2022

2021

Profit before taxation adjusted for non-cash items

367 615

206 883

Taxation paid

(49 407)

(45 006)

(Increase)/decrease in operating assets

(749 706)

442 348

Increase/(decrease) in operating liabilities

3 035 217

(117 108)

Net cash inflow from operating activities

2 603 719

487 117

Cash flow on disposal of Group operations and subsidiaries

14 274

20 388

Derecognition of cash on disposal of subsidiaries

(4 152)

(7 799)

Cash flow on net disposal of non-controlling interests

443

7 239

Cash flow on net acquisition of associates and joint venture holdings

(8 780)

—

Cash flow on acquisition of property, equipment, software and other intangible assets

(4 931)

(7 285)

Cash flow on disposal of property, equipment, software and other intangible assets

4 273

318

Net cash inflow from investing activities

1 127

12 861

Dividends paid to ordinary shareholders

(63 316)

(18 007)

Dividends paid to other equity holders

(17 227)

(17 317)

Cash flow on acquisition of treasury shares, net of related costs

(47 694)

(31 632)

Proceeds from issue of subordinated debt

347 536

—

Redemption of subordinated debt

(307 962)

—

Lease liabilities paid

(43 253)

(53 454)

Net cash outflow from financing activities

(131 916)

(120 410)

Effects of exchange rates on cash and cash equivalents

(607)

5 872

Net increase in cash and cash equivalents

2 472 323

385 440

Cash and cash equivalents at the beginning of the year

4 369 447

3 984 007

Cash and cash equivalents at the end of the year

6 841 770

4 369 447

Cash and cash equivalents is defined as including:

Cash and balances at central banks

5 379 994

3 043 034

On demand loans and advances to banks

1 461 776

1 326 413

Cash and cash equivalents at the end of the year

6 841 770

4 369 447

Cash and cash equivalents have a maturity profile of less than three months. Loans and advances to banks with a maturity

profile of greater than three months are £6.0 million (31 March 2021: £59.1 million).

The Group is required to maintain reserve deposits with central banks and other regulatory authorities and these amounted to

£43.2 million (31 March 2021: £35.9 million). These deposits are not available to finance the Group's day-to-day operations.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

CONSOLIDATED CASH FLOW STATEMENT

101

At 1 April 2020

202

806 812

(140 559)

Movement in reserves 1 April 2020 – 31 March 2021

Profit after taxation

—

Effect of rate change on deferred taxation relating to adjustment for IFRS 9

—

Losses on realisation of debt instruments at FVOCI recycled through

the income statement

—

Fair value movements on debt instruments at FVOCI taken directly to other

comprehensive income

—

Fair value movements on equity instruments at FVOCI taken directly to other

comprehensive income

—

Foreign currency adjustments on translating foreign operations

—

Gains attributable to own credit risk

—

Movement in post-retirement benefit liabilities

—

Total comprehensive income for the year

—

Share-based payments adjustments

—

Dividends paid to ordinary shareholders

—

Dividends declared to perpetual preference shareholders

—

Dividends paid to perpetual preference shareholders

—

Dividends declared to Other Additional Tier 1 security holders

—

Dividends paid to Other Additional Tier 1 security holders

—

Transfer from foreign currency reserve

—

Net equity impact of non-controlling interest movements

—

Movement of treasury shares

—

6 374

At 31 March 2021

202

806 812

(134 185)

Movement in reserves 1 April 2021 – 31 March 2022

Profit after taxation

—

Effect of rate change on deferred taxation relating to adjustment for IFRS 9

—

Gains on realisation of debt instruments at FVOCI recycled through the income

statement

—

Fair value movements on debt instruments at FVOCI taken directly to other

comprehensive income

—

Fair value movements on equity instruments at FVOCI taken directly to other

comprehensive income

—

Foreign currency adjustments on translating foreign operations

—

Gains attributable to own credit risk

—

Movement in post-retirement benefit liabilities

—

Total comprehensive income for the year

—

Share-based payments adjustments

—

Dividends paid to ordinary shareholders

—

Dividends declared to perpetual preference shareholders

—

Dividends paid to perpetual preference shareholders

—

Dividends declared to Other Additional Tier 1 security holders

—

Dividends paid to Other Additional Tier 1 security holders

—

Net equity impact of non-controlling interest movements

—

Movement of treasury shares

—

(27 337)

At 31 March 2022

202

806 812

(161 522)

£’000

Ordinary

capital

Ordinary

premium

Treasury

Annual Financial Statements

Investec plc Annual Financial Statements 2022

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

102

(180 899)

39 984

5 128

(12 184)

1 592 182

2 110 666

24 794

2 135 460

250 000

3 369

2 388 829

—

69 772

—

69 772

—

(861)

68 911

—

(19)

—

399

—

380

—

380

—

380

—

817

—

817

—

817

—

817

—

(228)

—

(228)

—

(228)

—

(228)

—

99 287

—

99 287

—

99 287

—

99 287

—

(4 529)

—

(4 529)

—

(4 529)

—

(4 529)

—

(39)

—

(39)

—

(39)

—

99 857

(4 529)

461

69 733

165 522

—

165 522

—

(861)

164 661

—

(1 213)

—

(1 213)

—

(1 213)

—

(18 007)

—

(18 007)

—

(18 007)

—

(437)

437

—

(437)

—

(437)

—

(16 880)

—

(16 880)

16 880

—

(16 880)

—

(16 880)

—

980

—

(980)

—

(268)

—

(268)

—

(2 118)

(2 386)

(14 484)

—

(8 110)

—

(8 110)

—

(8 110)

(195 383)

139 841

1 579

(11 723)

1 624 130

2 231 273

24 794

2 256 067

250 000

390

2 506 457

—

235 854

—

235 854

—

235 854

—

(47)

—

664

—

617

—

617

—

617

—

(307)

—

(307)

—

(307)

—

(307)

—

(2 276)

—

(2 276)

—

(2 276)

—

(2 276)

—

22 864

—

22 864

—

22 864

—

22 864

—

5 450

—

5 450

—

5 450

—

5 450

—

11 059

—

11 059

—

11 059

—

11 059

—

20 234

5 450

11 723

235 894

273 301

—

273 301

—

273 301

—

3 480

—

3 480

—

3 480

—

(63 316)

—

(63 316)

—

(63 316)

—

(347)

347

—

(347)

—

(347)

—

(16 880)

—

(16 880)

16 880

—

(16 880)

—

(16 880)

—

443

4 365

—

(22 972)

—

(22 972)

—

(22 972)

(191 018)

160 075

7 029

—

1 782 961

2 404 539

24 794

2 429 333

250 000

833

2 680 166

Other reserves

Capital

reserve

account

Fair value

reserve

Foreign

currency

reserves

Own

credit

reserve

Retained

income

Ordinary

shareholders'

equity

Perpetual

preference

capital and

premium

Shareholders'

equity

excluding

non-

controlling

interests

Other

Additional

Tier 1

securities

in issue

Non-

controlling

interests

Total

equity

Annual Financial Statements

Investec plc Annual Financial Statements 2022

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONTINUED

103

Basis of presentation

These annual financial statements have been prepared to

present the financial position and results of Investec plc and

its subsidiaries as if the contractual arrangements which

create the dual listed company (DLC) structure did not exist

and, with this exception and the exclusion of certain other

remuneration and related party disclosures, are prepared in

accordance with UK adopted international accounting

standards. For an understanding of the financial position,

results and cash flows of the Investec DLC Group, the user is

referred to Investec’s integrated annual report.

Investec DLC Group consists of two separate legal entities,

being Investec plc and Investec Limited, that operate under a

DLC structure. The effect of the DLC structure is that Investec

plc and its subsidiaries and Investec Limited and its

subsidiaries operate together as a single economic entity, with

neither assuming a dominant role, and accordingly are

reported as a single reporting entity under International

Financial Reporting Standards (IFRS).

These Group annual financial statements are prepared in

accordance with UK adopted international accounting

standards and with IFRS adopted pursuant to Regulation (EC)

No. 1606/2002 as it applies in the European Union (EU).

The Group annual financial statements have been prepared on

a historical cost basis, except for debt instruments at FVOCI,

derivative financial instruments, financial assets and financial

liabilities held at fair value through profit or loss or subject to

hedge accounting.

As stated on page 76, the directors consider that it is

appropriate to continue to adopt the going concern basis in

preparing the financial statements.

The accounting policies adopted by the Group are consistent

with the prior year.

Presentation of information

Disclosure under IFRS 7 Financial Instruments: Disclosures and

IAS 1 Presentation of Financial Statements: relating to the

nature and extent of risks have been included in sections

marked as audited in the risk management report on pages 7

to 71.

Certain disclosures required under IAS 24 Related Party

Disclosures have been included in the section marked as

audited in the remuneration report which forms part of the

Investec Group's integrated annual report.

Basis of consolidation

As discussed above, these annual financial statements have

been prepared to present the financial position and results of

Investec plc and its subsidiaries as if the contractual

arrangements which create the DLC structure did not exist.

All subsidiaries or structured entities are consolidated when

the Group controls an investee. The Group controls an

investee if it is exposed to, or has rights to variable returns

from its involvement with the investee and has the ability to

affect those returns through its power over the investee. The

financial results of subsidiaries are included in the

consolidated annual financial statements of the Group from

the date on which control is obtained until the date the Group

can no longer demonstrate control.

The Group performs a reassessment of control whenever

there is a change in the substance of the relationship between

the Group and an investee. A change in the ownership interest

of a subsidiary, without a loss of control, is accounted for as

an equity transaction.

If the Group loses control over a subsidiary, it derecognises

the related assets (including goodwill), liabilities, non-

controlling interest and other components of equity, while any

resultant gain or loss is recognised in profit or loss. Any

investment retained is recognised at fair value.

The Group also holds investments, for example, in private

equity investments, which give rise to significant, but not

majority, voting rights. Assessing these voting rights and

whether the Group controls these entities requires judgement

that affects the date at which subsidiaries are consolidated

or deconsolidated.

Entities, other than subsidiary undertakings, in which the

Group exercises significant influence or joint control over

operating and financial policies, are treated as interests in

associated undertakings and joint venture holdings. Interests

in associated undertakings and joint venture holdings are

accounted for using the equity method from the date that

significant influence commences until the date that significant

influence ceases. In circumstances where interests in

associated undertakings and joint venture holdings arise in

which the Group has no strategic intention, these investments

are classified as ‘venture capital’ holdings and are designated

as held at fair value through profit or loss.

For equity accounted associates and joint venture holdings,

the consolidated annual financial statements include the

attributable share of the results and reserves of associated

undertakings and joint venture holdings. The Group’s interests

in associated undertakings and joint venture holdings are

included in the consolidated balance sheet at cost plus the

post-acquisition changes in the Group’s share of the net

assets of the associated undertakings and joint venture

holdings.

The consolidated balance sheet reflects the associated

undertakings and joint venture holdings net of accumulated

impairment losses.

All intergroup balances, transactions and unrealised gains or

losses within the Group that do not reflect an impairment to

the asset are eliminated in full regarding subsidiaries and to

the extent of the interest in associated undertakings and joint

venture holdings.

Segmental reporting

An operating segment is a component of the Group that

engages in business activities from which it may earn

revenues and incur expenses, including revenues and

expenses that relate to transactions with any of the Group’s

other components, where operating results are reviewed

regularly by chief operating decision-makers who are

considered to be executive members of the Board and for

which discrete financial information is available.

The Group’s segmental reporting is presented in the form of a

business analysis. The business analysis is presented in terms

of the Group’s four principal business divisions namely, Wealth

& Investment, Private Banking, Corporate, Investment Banking,

and Other and Group Investments.

Group costs that are disclosed separately largely relate to

Group brand and marketing costs and a portion of executive

and support functions which are associated with Group-level

activities. These costs are not incurred by the operating

divisions and are necessary to support the operational

functioning of the Group.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

ACCOUNTING POLICIES

104

Business combinations and goodwill

Business combinations are accounted for using the acquisition

method. The cost of an acquisition is measured as the

aggregate of the consideration transferred, at the acquisition

date fair value and the amount of any prior non-controlling

interest in the acquiree. For each business combination, the

Group measures the non-controlling interest in the acquiree

either at fair value or at the proportionate share of the

acquiree’s identifiable net assets. Acquisition costs incurred

are expensed immediately in the income statement.

When the Group acquires a business, it assesses the financial

assets and liabilities assumed for appropriate classification

and the designation in accordance with the contractual terms,

economic circumstances and pertinent conditions at the

acquisition date. This includes the separation of embedded

derivatives in host contracts by the acquiree.

If the business combination is achieved in stages, the

acquisition date fair value of the Group’s previously held equity

interest in the acquiree is remeasured to fair value at each

acquisition date through the income statement.

Any contingent consideration to be transferred by the Group

will be recognised at fair value at the acquisition date.

Subsequent changes to the fair value of the contingent

consideration, which is deemed to be an asset or liability, will

be recognised in accordance with IFRS 9, either in the income

statement or as a change to other comprehensive income. If

the contingent consideration is classified as equity, it will not

be remeasured until it is finally settled within equity.

Goodwill is initially measured at cost, being the excess of the

aggregate of the consideration transferred and the amount

recognised for non-controlling interest over the net identifiable

assets acquired and liabilities assumed. If this consideration

and amount recognised for non-controlling interest is less than

the fair values of the identifiable net assets acquired, the

discount on acquisition is recognised directly in the income

statement as a gain in the year of acquisition.

After initial recognition, goodwill is measured at cost less any

accumulated impairment losses. The Group tests goodwill

acquired in a business combination for impairment annually,

irrespective of whether an indication of impairment exists and

in accordance with IAS 36.

For the purpose of impairment testing, goodwill acquired in a

business combination is, from the acquisition date, allocated

to each of the Group’s cash-generating units that are

expected to benefit from the combination.

Where goodwill forms part of a cash-generating unit, and part

of the operation within that unit is disposed of, the goodwill

associated with the operation disposed of is included in the

carrying amount of the operation when determining the gain or

loss on disposal of the operation.

Goodwill disposed of in these circumstances is measured

based on the relative values of the operation disposed of and

the portion of the cash-generating units retained.

Share-based payments to employees

The Group engages in equity-settled share-based payments in

respect of services received from employees.

The fair value of the services received in respect of equity-

settled share-based payments is determined by reference to

the fair value of the shares or share options on the date of

grant to the employee. The cost of the share-based payment,

together with a corresponding increase in equity, is

recognised in the income statement over the period the

service conditions of the grant are met, with the amount

changing according to the number of awards expected to

vest. The cumulative expense recognised for equity-settled

transactions at each reporting date until the vesting date

reflects the extent to which the vesting period has expired and

the Group’s best estimate of the number of equity instruments

that will ultimately vest.

Fair value measurements are based on option pricing models,

taking into account the risk-free interest rate, volatility of the

underlying equity instrument, expected dividends and share

prices at grant date.

Where the terms of an equity-settled award are modified, the

minimum expense recognised in staff costs is the expense as

if the terms had not been modified. An additional expense is

recognised for any modification which increases the total fair

value of the share-based payment arrangement, or is

otherwise beneficial to the employee as measured at the date

of modification.

The loss of control of an employing subsidiary of the Group

gives rise to an acceleration of the equity-settled share-based

payments charge for the related employees and, on loss of

control, the Group recognises the amount that would have

been recognised for the award if it remained in place on its

original terms.

Employee benefits

The Group operates various defined contribution schemes.

In respect of the defined contribution schemes, all employer

contributions are charged to the income statement as

incurred, in accordance with the rules of the scheme, and

included under staff costs.

Short-term employee benefits are expensed as the related

service is provided. A liability is recognised for the amount

expected to be paid if the Group has a present legal or

constructive obligation to pay this amount as a result of past

service provided by the employee and the obligation can be

estimated reliably.

The long-term employment benefits liability relates to the

obligation of the Investec Group to deliver ordinary shares of

Ninety One plc and Ninety One Limited to employees over a

predetermined vesting period. The fair value of this liability is

calculated by applying the Black-Scholes option pricing model

at each reporting date. The changes in fair value will be

recognised as an employee benefit expense. The liability is

included in other liabilities on the balance sheet.

The Group has no liabilities for other post-retirement benefits.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

ACCOUNTING POLICIES

CONTINUED

105

Foreign currency transactions and foreign

operations

The presentation currency of the Group is Pound Sterling,

being the functional currency of Investec plc.

Foreign operations are subsidiaries, interests in associated

undertakings and joint venture holdings or branches of the

Group, the activities of which are based in a functional

currency other than that of the reporting entity. The functional

currency of Group entities is determined based on the primary

economic environment in which the entity operates.

Foreign currency transactions are translated into the

functional currency of the entity in which the transactions

arise based on rates of exchange ruling at the date of the

transactions.

At each balance sheet date foreign currency items are

translated as follows:

•Monetary items (other than monetary items that form part of

the net investment in a foreign operation) are translated

using closing rates, with gains or losses recognised in the

income statement

•Exchange differences arising on monetary items that form

part of the net investment in a foreign operation are

determined using closing rates and recognised as a

separate component of equity (foreign currency translation

reserve) upon consolidation and is reclassified to the

income statement upon disposal of the net investment

•Non-monetary items that are measured at historical cost are

translated using the exchange rates ruling at the date of the

transaction.

On consolidation, the results and financial position of foreign

operations are translated into the presentation currency of the

Group, as follows:

▪Assets and liabilities for each balance sheet presented are

translated at the closing rate at the date of the balance

sheet

▪Income and expense items are translated at exchange rates

ruling at the date of the transaction

▪All resulting exchange differences are recognised in other

comprehensive income (foreign currency translation

reserve), which is recognised in the income statement on

disposal of the foreign operation

▪Cash flow items are translated at the exchange rates ruling

at the date of the transactions.

On loss of control or disposal of a foreign operation, the

cumulative amount of the exchange differences relating to

that foreign operation recognised in other comprehensive

income is reclassified from equity to profit or loss and included

in the profit on loss of control.

Revenue recognition

Revenue consists of interest income, fee and commission

income, investment income, trading income arising from

customer flow, trading income arising from balance sheet

management and other trading activities, share of post-

taxation profit of associates and joint venture holdings and

other operating income.

Interest income on debt instruments at amortised cost or

FVOCI is recognised in the income statement using the

effective interest method. Calculation of the effective interest

rate takes into account fees payable or receivable that are an

integral part of the instrument's yield, premiums or discounts

on acquisition or issue, early redemption fees and transaction

costs.

The effective interest method is based on the estimated life of

the underlying instrument and, where this estimate is not

readily available, the contractual life. Interest on instruments at

fair value through profit or loss is recognised based on the

contractual rates.

Fee and commission income includes revenue from contracts

with customers earned from providing advisory services as

well as portfolio management.

Revenue from contracts with customers is recognised in

accordance with five steps to: identify the contract; identify

the performance obligations; determine the transaction price;

allocate the transaction price to the performance obligations;

and recognise revenue when the performance obligations are

satisfied.

Investment advisory and management fees are earned over

the period in which the services are provided. Performance

fees can be variable and recognition is constrained until such

time as it is highly probable that a significant reversal in the

amount of cumulative revenue recognised will not occur and

the services related to the transactions have been completed

under the terms of the contract.

Investment income includes income, other than margin from

securities held for the purpose of generating interest yield,

dividends and capital appreciation.

Customer flow trading income includes income from trading

activities arising from making and facilitating client activities.

Trading income arising from balance sheet management and

other trading activities consists of proprietary trading income

and other gains or losses arising from balance sheet

management.

Trading profit includes the unrealised profit on trading

portfolios, which are marked-to-market daily. Equity

investments received in lieu of corporate finance fees are

included in investment portfolio and valued accordingly.

Dividend income is recognised when the Group’s right to

receive payment is established and the cash is received.

Included in other operating income is incidental rental income,

gains on realisation of properties, operating lease income,

income from interests in associated undertakings and revenue

from other investments. Operating costs associated with these

investments are included in operating costs in the income

statement.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

ACCOUNTING POLICIES

CONTINUED

106

Fair value measurement

Fair value is the price that would be received to sell an asset

or paid to transfer a liability in an orderly transaction between

market participants at the measurement date in the principal

or, in its absence, the most advantageous market to which the

Group has access at that date. The fair value of an asset or a

liability reflects its non-performance risk.

When available, the Group measures the fair value of an

instrument using the quoted price in an active market for that

instrument.

A market is regarded as active if transactions for the asset or

liability take place with sufficient frequency and volume to

provide pricing information on an ongoing basis.

If there is no quoted price in an active market, then the Group

uses valuation techniques that maximise the use of relevant

observable inputs and minimise the use of unobservable

inputs. The chosen valuation technique incorporates all of the

factors that market participants would take into account in

pricing a transaction.

If an asset or a liability measured at fair value has a bid price

and an ask price, then the Group measures assets and long

positions at a bid price and liabilities and short positions at an

ask price.

The Group classifies disclosed fair values according to a

hierarchy that reflects the significance of observable market

inputs.

A transfer is made between the hierarchy levels when the

inputs have changed or there has been a change in the

valuation method. Transfers are deemed to occur at the end of

each semi-annual reporting period.

Financial instruments

Financial instruments are initially recognised at their fair value.

For financial assets or financial liabilities not held at fair value

through profit or loss, transaction costs that are directly

attributable to the acquisition or issue of the financial assets or

financial liabilities are included in the initial measurement. All

other transaction costs are recorded in the income statement

immediately. Regular way purchase and sales transactions in

respect of financial assets that require delivery of a financial

instrument within the time-frame established by market

convention are recorded at trade date.

Business model assessment

For financial assets, IFRS 9 requires that a business model

assessment is carried out which reflects how the Group

manages the assets in order to generate cash flows. The

assessment is at a portfolio level, being the level at which the

portfolio is managed. Factors considered by the Group in

determining the business model for a Group of assets include

past experience on how the cash flows for these assets were

collected, how the assets’ performance is evaluated and

reported and how risks are assessed and managed.

The standard sets out different types of business models:

▪Hold to collect: it is intended to hold the asset to maturity

to earn interest, collecting repayments of principal and

interest from the customer. These assets are accounted for

at amortised cost

▪Hold to collect and sell: this model is similar to the hold to

collect model, except that the entity may elect to sell some

or all of the assets before maturity to achieve the objectives

of the business model. These assets are accounted for at

FVOCI

▪Hold to sell/managed on a fair value basis: the entity

originates or purchases an asset with the intention of

disposing of it in the short or medium term to benefit from

capital appreciation or the portfolio is managed on a fair

value basis. These assets are accounted for at FVPL.

However, the Group may make the following irrevocable

election/designation at initial recognition of a financial asset on

an asset-by-asset basis:

▪Elect to present subsequent changes in fair value of an

equity investment that is neither held-for-trading nor

contingent consideration recognised by an acquirer in a

business combination to which IFRS 3 applies, in OCI

▪A debt instrument that meets the amortised cost or FVOCI

criteria as measured at FVPL if doing so eliminates or

significantly reduces an accounting mismatch (referred to as

the fair value option).

The classification into one of these categories is based on the

Group’s business model for managing the assets and the

contractual cash flow characteristics of the assets.

Solely payments of principal and interest (SPPI)

Where the business model is to hold assets to collect

contractual cash flows or to collect contractual cash flows and

sell, the Group assesses whether the assets’ cash flows

represent solely payments of principal and interest (the SPPI

test). In making this assessment, the Group considers whether

the contractual cash flows are consistent with a basic lending

arrangement (i.e. interest includes only consideration for the

time value of money, credit risk, other basic lending risks and a

profit margin that is consistent with a basic lending

arrangement). Where the contractual terms introduce

exposure to risk or volatility that are inconsistent with a basic

lending arrangement, the related asset is classified and

measured at FVPL.

Financial assets with embedded derivatives are considered in

their entirety when determining whether their cash flows are

solely payments of principal and interest.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

ACCOUNTING POLICIES

CONTINUED

107

Financial assets and liabilities measured at amortised cost

Financial assets that are held to collect the contractual cash

flows and that contain contractual terms that give rise to cash

flows that are solely payments of principal and interest, such

as most loans and advances to banks and customers and

some debt securities, are measured at amortised cost. In

addition, most financial liabilities are measured at amortised

cost.

The Group may commit to provide a loan which has not yet

been drawn. When the loan that arises from the lending

commitment is expected to meet the criteria to be measured

at amortised cost, the undrawn commitment is also considered

to be and is included in the impairment calculation.

The carrying value of these financial assets at initial

recognition includes any directly attributable transaction

costs. If the initial fair value is lower than the cash amount

advanced, such as in the case of some leveraged finance and

syndicated lending activities, the difference is deferred and

recognised over the life of the loan through the recognition of

interest income, unless the loan is credit impaired.

Financial assets measured at fair value through other

comprehensive income (FVOCI)

Financial assets held for a business model that is achieved by

both collecting contractual cash flows and selling and that

contain contractual terms that give rise on specified dates to

cash flows that are solely payments of principal and interest

are measured at FVOCI. They are recognised on the trade

date when the Group enters into contractual arrangements to

purchase and are normally derecognised when they are either

sold or redeemed.

They are subsequently remeasured at fair value and changes

therein (except for those relating to impairment, interest

income and foreign currency exchange gains and losses) are

recognised in other comprehensive income until the assets are

sold. Upon disposal, the cumulative gains or losses in other

comprehensive income are recognised in the income

statement as ‘Gains less losses arising from derecognition of

debt instruments measured at fair value through other

comprehensive income’.

Financial assets measured at FVOCI are included in the

impairment calculations set out below and impairment is

recognised in profit or loss.

Equity instruments measured at FVOCI

The Group measures equity instruments at FVOCI when it

considers the investments to be strategic or held for long-term

dividend yield. The equity instruments are not held-for-

trading. Gains or losses on the derecognition of these equity

securities are not transferred to profit or loss.

Otherwise, equity instruments are measured at fair value

through profit or loss (except for dividend income, which is

recognised in profit or loss).

Impairment of financial assets held at amortised cost or

FVOCI

At each balance sheet date, each financial asset or portfolio of

advances categorised at amortised cost or at FVOCI, issued

financial guarantee and loan commitment is measured for ECL

impairment.

The costs of loss allowances on assets held at amortised cost

and at FVOCI are presented as impairments in the income

statement. Allowances in respect of financial guarantees and

loan commitments are presented as other liabilities and

charges recorded within income statement impairments.

Financial assets held at amortised cost are presented net of

allowances, except where the asset has been wholly or

partially written off.

Stage 1

Financial assets that are considered performing and have not

had a significant increase in credit risk are reported as Stage 1

assets. Stage 1 financial assets have loss allowances

measured at an amount equal to 12-month ECL. In line with

regulatory and accounting bodies’ guidance, exposures that

have been granted COVID-19 relief measures such as payment

holidays are not automatically considered to have been

subject to a significant increase in credit risk and therefore do

not alone result in a transfer across stages. Where relief

measures are granted, there is no change in expectation of the

total amount due. Should the expected recoverability of the

loan remain the same, these exposures will remain reported in

Stage 1 for the foreseeable future, and will not be required to

hold a lifetime ECL.

Stage 2

Financial assets are considered to be in Stage 2 when their

credit risk has increased significantly since initial recognition.

A loss allowance equivalent to a lifetime ECL is required to be

held.

The Group’s primary indicator for Stage 2 assets are

distressed loans, potential problem loans and exposures in

arrears that require additional attention and supervision from

watchlist committees and are under management review.

Assets in forbearance are considered to be, at a minimum,

Stage 2. Forbearance measures refer to concessions such as

modification of the terms and conditions or refinancing that

has been granted to a debtor in financial difficulty. These

exposures are assessed on a case-by-case basis to determine

whether the proposed modifications will be considered as

forbearance. Where the Credit Committee considers it likely

that the client will be able to return to perform against the

original contractual obligations within a reasonable time-frame

these assets will be considered performing and in Stage 2.

Forbearance is distinguished from commercial renegotiations

which take place as part of normal business activity and

standard banking practice.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

ACCOUNTING POLICIES

CONTINUED

108

In addition to loans under management review, an asset may

also move from Stage 1 to Stage 2 if the model calculated

probability of default (PD) has significantly increased since

origination. This is tested on both a relative and absolute basis

to assess whether a significant deterioration in lifetime risk of

default has occurred. There is a common definition across the

Bank’s exposures regarding what constitutes a significant PD

movement. The test involves both an absolute and relative

movement threshold. An asset is considered to have been

subjected to a significant increase in credit risk if the

appropriate PD has doubled relative to the value at origination

and on an absolute basis has increased by more than 1%. Any

asset with an original rating that is classified as investment

grade will be judged to have had a significant movement if the

new PD would classify it as sub-investment grade and the

equivalent rating has moved by more than three notches.

The Group adopts the view that all financial assets that are

more than 30 days past due have experienced a significant

increase in credit risk.

Exposures move back to Stage 1 once they no longer meet the

criteria above for a significant increase in credit risk and as

cure periods (specifically relating to forborne exposures)

are met.

Stage 3

Financial assets are included in Stage 3 when there is

objective evidence of credit impairment. The Group assesses

a loan as Stage 3 when contractual payments of either

principal or interest are past due for more than 90 days, the

debtor is assessed as unlikely to pay and credit impaired, or

the loan is otherwise considered to be in default, for example,

due to the appointment of an administrator or the client is in

receivership. Forborne loans that are considered non-

performing, for example, if a loan is not expected to meet the

original contractual obligations in a reasonable time-frame, the

loan will be classified as Stage 3. Loans which are 90 days or

more past due are considered to be in default.

The Group calculates the credit adjusted effective interest

rate on Stage 3 assets, which is calculated based on the

amortised cost of the financial asset (i.e. gross carrying

amount less ECL allowance) instead of its gross carrying

amount and incorporates the impact of the ECLs in estimated

future cash flows.

Definition of default

The Group has aligned the IFRS 9 and regulatory definitions of

default, credit impaired and non-performing exposure. Assets

that are more than 90 days past due, or considered by

management as unlikely to pay their obligations in full without

realisation of collateral are considered as exposures in default.

ECL

The assessment of credit risk and the estimation of ECL are

required to be unbiased, probability-weighted and should

incorporate all available information relevant to the

assessment, including information about past events, current

conditions and reasonable and supportable forecasts of

economic conditions at the reporting date. In addition, the

estimation of ECL should take into account the time value of

money. As a result, the recognition and measurement of

impairment is intended to be forward‑looking and therefore,

potentially volatile.

Write-offs

The Group has developed specific guidelines on write-off

aimed at granting full compliance with IFRS 9 and the

document 'Guidance to banks on non-performing loans' issued

by the European Central Bank.

A loan or advance is normally written off in full against the

related ECL impairment allowance when the proceeds from

realising any available security have been received or there is

a reasonable amount of certainty that the exposure will not be

recovered. This is assessed on a case-by-case basis with

considerations to indicators such as whether the exposure has

been restructured or the given financial position of the

borrower and guarantors. Any recoveries of amounts

previously written off decrease the amount of impairment

losses.

Process to determine ECL

ECLs are calculated using three main components:

•A probability of default (PD)

•A loss given default (LGD)

•The exposure at default (EAD).

The 12-month and lifetime PDs represent the probability of a

default occurring over the next 12 months or the lifetime of the

financial exposures, respectively, based on conditions existing

at the balance sheet date and future forecast macro-

economic conditions that affect credit risk.

The LGD represents losses expected on default, taking into

account the mitigating effect of collateral, its expected value

when realised and the time value of money.The forecast value

for the collateral is also affected by the range of forward-

looking probability-weighted macro-economic scenarios.

The EAD represents the expected balance at default, taking

into account the repayment of principal and interest from the

balance sheet date to the default event together with any

expected drawdown of a committed facility.

The calculation of the 12-month ECL is based on the 12-month

PD and LGD along with the EAD and EIR for the asset. Lifetime

ECL is calculated using the lifetime PD curve, and the

appropriate LGDs and EADs and discount rates derived from

the EIR based on the remaining life of the financial asset.

Expert judgement models are also utilised for certain portfolios

where the ECL is found to be minimal, either due to the

portfolio’s small relative size or the low default nature of these

portfolios, such as cash and balances held at central banks.

Management adjustments are made to modelled output to

account for situations where additional information and known

or expected risk factors have not been captured in the

modelling process.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

ACCOUNTING POLICIES

CONTINUED

109

Financial assets and liabilities held at fair value through

profit or loss (FVPL)

Financial instruments held at fair value through profit or loss

include all instruments classified as held-for-trading, those

instruments designated as held at fair value through profit or

loss and those financial assets which do not meet the criteria

for amortised cost or FVOCI.

Financial instruments classified as FVPL are initially recorded

at fair value on the balance sheet with changes in fair value

subsequently recognised in the income statement. Financial

instruments are classified as held-for-trading when they are

held with the intention of short-term disposal, held with the

intention of generating short-term profit, or are derivatives

which are not designated as part of effective hedges.

Financial instruments designated as held at fair value through

profit or loss are designated as such on initial recognition of

the instrument and remain in this classification until

derecognition.

Financial assets and liabilities are designated as held at fair

value through profit or loss only if:

•They eliminate or significantly reduce a measurement or

recognition inconsistency that would otherwise arise from

measuring assets or liabilities or recognising the gains and

losses on them on different bases; or

•A Group of financial liabilities or both financial assets and

financial liabilities is managed and its performances

evaluated on a fair value basis in accordance with a

documented risk management or investment strategy and

information about the Group is provided internally on that

basis to the Group’s key management personnel; or

•A financial liability contract contains one or more embedded

derivatives (which significantly modifies the cash flows that

would be required by the contract and is not clearly

prohibited from separation from the host contract) and the

Group has designated the entire hybrid contract as a

financial instrument at fair value through profit or loss.

Changes in own credit risk on financial liabilities designated at

fair value are recognised in other comprehensive income. Any

other changes are recognised in the income statement.

Securitisation/credit investment and trading activities

exposures

The Group makes use of securitisation vehicles as a source of

finance, as a means of risk transfer and to leverage returns

through the retention of equity tranches in low default rate

portfolios. The Group predominantly focuses on the

securitisation of residential and commercial mortgages and

lease receivables. The Group also trades in structured credit

investments.

The structured entities are consolidated under IFRS 10

Consolidated Financial Statements when the Group has

exposure to, or rights to, variable returns from its involvement

with the investee and has the ability to affect those returns

through its power over the investee.

Loans and advances that are originated are transferred to

structured entities, and the structured entities issue debt

securities to external investors to fund the purchase of the

securitised assets. When the Group consolidates the

structured entity, the Group recognises the assets and

liabilities on a gross basis. When the Group does not

consolidate the structured entity, the securitised assets are

derecognised and only any position still held by the Group in

the structured entity is reflected.

Day-one profit or loss

When the transaction price differs from the fair value of other

observable current market transactions in the same instrument

or based on the valuation technique whose variables include

only data from observable markets, the difference between

the transaction price and fair value is recognised immediately

in the income statement.

In cases where fair value is determined using data which is not

observable, the difference between the transaction price and

model value is only recognised in the income statement when

the inputs become observable, or when the instrument is

derecognised or over the life of the transaction.

Derecognition of financial assets and liabilities

A financial asset, or a portion thereof, is derecognised when

the Group’s rights to cash flows have expired or when the

Group has transferred its rights to cash flows relating to the

financial assets and either (a) the Group has transferred

substantially all the risks and rewards associated with the

financial assets or (b) the Group has neither transferred nor

retained substantially all the risks and rewards associated with

the financial assets but has transferred control of the assets.

The treatment of a renegotiation or modification of the

contractual cash flows of a financial asset depends upon

whether the modification is done for commercial reasons, in

which case if they are significant the old asset is derecognised

and a new asset recognised, or because of financial difficulties

of the borrower. Where such modifications are solely due to

IBOR reform and result in an interest rate which is

economically equivalent, they are treated as a change to the

floating rate of interest and so do not result in any adjustment

to the carrying value of the asset.

A financial liability is derecognised when it is extinguished,

that is when the obligation is discharged, cancelled or expired.

When an existing financial liability is replaced or modified with

substantially different terms, such a replacement or

modification is treated as a derecognition of the original

liability and the recognition of a new liability. The difference in

the respective carrying amounts is recognised in the income

statement.

Reclassification of financial instruments

Financial assets are only reclassified where there has been a

change in business model. Financial liabilities cannot be

reclassified.

Derivative instruments

All derivative instruments of the Group are recorded on the

balance sheet at fair value positive and negative fair values

are reported as assets and liabilities, respectively.

Derivative positions are entered into either for trading

purposes or as part of the Group’s asset and liability

management activities to manage exposures to interest rate

and foreign currency risks. Both realised and unrealised profit

or losses arising on derivatives are recognised in the income

statement as part of trading income.

Derivative instruments entered into as economic hedges

which do not qualify for hedge accounting and derivatives that

are entered into for trading purposes are treated in the same

way as instruments that are held-for-trading.

Credit derivatives are entered into for trading purposes. Credit

derivatives are initially recognised at their fair values, being

the transaction price of the derivative. Subsequently the

derivatives are carried at fair value, with movements in fair

value through the income statement, based on the current

market price or remeasured price. The counterparty risk from

derivative transactions is taken into account when reporting

the fair value of derivative positions. The adjustment to the fair

value is known as the credit value adjustment (CVA).

Annual Financial Statements

Investec plc Annual Financial Statements 2022

ACCOUNTING POLICIES

CONTINUED

110

Hedge accounting

When the Group first implemented IFRS 9, it made an election

to continue to apply the hedge accounting requirements of

IAS 39 as an accounting policy.

The Group applies either fair value or hedge accounting of net

investments in foreign operations accounting when the

transactions meet the specified hedge accounting criteria.

To qualify for hedge accounting treatment, the Group ensures

that all of the following conditions are met:

•At inception of the hedge, the Group formally documents

the relationship between the hedging instrument(s) and

hedged item(s) including the risk management objectives

and the strategy in undertaking the hedge transaction. Also

at the inception of the hedge relationship, a formal

assessment is undertaken to ensure the hedging instrument

is expected to be highly effective in offsetting the

designated risk in the hedged item. A hedge is expected to

be highly effective if the changes in fair value or cash flows

attributable to the hedged risk during the period for which

the hedge is designated are expected to offset in a range of

80% to 125%

•The effectiveness of the hedge can be reliably measured,

i.e. the fair value or cash flows of the hedged item that are

attributable to the hedged risk and the fair value of the

hedging instrument can be reliably measured

•The hedge effectiveness is assessed on an ongoing basis

and determined actually to have been highly effective

throughout the financial reporting periods for which the

hedge was designated.

For qualifying fair value hedges, the change in fair value of the

hedging instrument is recognised in the income statement.

Changes in fair value of the hedged item that is attributable to

the hedged risk are also recognised in the income statement.

For qualifying hedges of a net investment in a foreign

operation, including a hedge of a monetary item that is

accounted for as part of the net investment, changes in the

fair value of the hedging instrument relating to the effective

portion of the hedge are recognised in other comprehensive

income while any gains or losses relating to the ineffective

portion are recognised in the income statement. On disposal of

the foreign operation, the cumulative value of any such gain or

loss recorded in other comprehensive income is reclassified to

the income statement.

Hedge accounting is discontinued when it is determined that

the instrument ceases to be highly effective as a hedge; when

the derivative expires, or is sold, terminated or exercised;

when the hedged item matures or is sold or repaid; when a

forecasted transaction is no longer deemed highly probable or

when the designation as a hedge is revoked.

Sources of hedge ineffectiveness may arise from basis risk,

including but not limited to the discount rates used for

calculating the fair value of derivatives, hedges using

instruments with a non-fair value, and notional and timing

differences between the zero hedged items and hedging

instruments.

The Group applied the IBOR reform Phase 1 reliefs to hedging

relationships directly affected by IBOR reform during the year

ended 31 March 2020. A hedging relationship is affected if

IBOR reform gives rise to uncertainties about the timing and/or

amount of benchmark-based cash flows of the hedged item or

the hedging instrument. The reliefs require that for the

purpose of determining whether a forecast transaction is

highly probable, it is assumed that the IBOR on which the

hedged cash flows are based is not altered as a result of IBOR

reform.

IBOR reform Phase 1 required that for hedging relationships

affected by IBOR reform, the Group must assume that for the

purpose of assessing expected future hedge effectiveness,

the interest rate is not altered as a result of IBOR reform. Also,

the Group is not required to discontinue the hedging

relationship if the results of the assessment of retrospective

hedge effectiveness fall outside the range of 80% to 125%,

although any hedge ineffectiveness must be recognised in

profit or loss, as normal.

The reliefs cease to apply once certain conditions are met.

These include when the uncertainty arising from IBOR reform

is no longer present with respect to the timing and amount of

the benchmark-based cash flows of the hedged item, if the

hedging relationship is discontinued or once amounts in the

cash flow hedge reserve have been released.

The Group early adopted the IBOR reform Phase 2 in the prior

period. IBOR reform Phase 2 provides temporary reliefs that

allow the Group’s hedging relationships to continue upon the

replacement of an existing interest rate benchmark with an

RFR. The reliefs require the Group to amend the hedge

designations and hedge documentation and are set out above.

Refer to page 60 for more detail on the impact of IBOR reform.

Offsetting of financial assets and liabilities

Financial assets and liabilities are offset when there is both an

intention to settle on a net basis (or simultaneously) and a

currently enforceable legal right to offset exists.

Issued debt and equity financial instruments

Financial instruments issued by the Group are classified as

liabilities if they contain a contractual obligation to deliver cash

or another financial asset.

Financial instruments issued by the Group are classified as

equity where they confer on the holder a residual interest in

the Group, and the Group has no obligation to deliver either

cash or another financial asset to the holder. The components

of compound issued financial instruments are accounted for

separately with the liability component separated first and any

residual amount being allocated to the equity component.

Equity instruments issued by subsidiaries of Investec plc are

recorded as non-controlling interests on the balance sheet.

Equity instruments are initially measured net of directly

attributable issue costs.

Treasury shares represent Investec plc shares repurchased by

the Group which have not been cancelled. Treasury shares are

deducted from shareholders’ equity and represent the

purchase consideration, including directly attributable costs.

Where treasury shares are subsequently sold or reissued, net

proceeds received are included in shareholders’ equity.

Dividends on ordinary shares are recognised as a deduction

from equity at the earlier of payment date or the date that it is

approved by Investec plc shareholders.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

ACCOUNTING POLICIES

CONTINUED

111

Sale and repurchase agreements (including

securities borrowing and lending)

Securities sold subject to a commitment to repurchase, at a

fixed price or a selling price plus a lender’s return, remain

on-balance sheet. Proceeds received are recorded as a

liability on the balance sheet under ‘repurchase agreements

and cash collateral on securities lent’. Securities that are

purchased under a commitment to resell the securities at a

future date are not recognised on the balance sheet. The

consideration paid is recognised as an asset under ‘reverse

repurchase agreements and cash collateral on securities

borrowed’.

Where sovereign debt securities have been purchased at the

same time as derivatives with the same counterparty, such

that the combined position has the economic substance

similar to secured lending, an asset is recognised under

‘reverse repurchase agreements and cash collateral on

securities borrowed’.

The difference between the sale and repurchase prices is

treated as interest expense and is accrued over the life of the

agreement using the effective interest method.

Securities borrowing transactions that are not cash

collateralised are not included on the balance sheet. Securities

lending and borrowing transactions which are cash

collateralised are accounted for in the same manner as

securities sold or purchased subject to repurchase

commitments.

Financial guarantees

Financial guarantee contracts issued by the Group are those

contracts that require a payment to be made to reimburse the

holder for a loss it incurs because the specified debtor fails to

make a payment when due, in accordance with the terms of a

debt instrument. Financial guarantees are initially recognised

at fair value, adjusted for the transaction costs that are

directly attributable to the issuance of the guarantee.

Subsequent to initial recognition, the liability under each

guarantee is measured at the higher of the amount recognised

less cumulative amortisation and the expected credit loss.

Subsequent to initial measurement, all changes in the balance

sheet carrying value are recognised in the income statement.

Property and equipment

Property and equipment are recorded at cost less

accumulated depreciation and impairments.

Cost is the cash equivalent paid or the fair value of the

consideration given to acquire an asset and includes other

expenditures that are directly attributable to the acquisition of

the asset.

Depreciation is provided on the depreciable amount of each

component on a straight-line basis over the expected useful

life of the asset.

The depreciable amount related to each asset is determined

as the difference between the cost and the residual value of

the asset. The residual value is the estimated amount, net of

disposal costs that the Group would currently obtain from the

disposal of an asset in similar age and condition as expected

at the end of its useful life. The current and comparative

annual depreciation rates for each class of property

and equipment are as follows:

•Computer and related equipment20% to 33%

•Motor vehicles20% to 25%

•Furniture and fittings10% to 20%

•Freehold buildings 2%

•Right of use assets*

•Leasehold property and improvements*

*Leasehold improvements depreciation rates are determined by

reference to the appropriate useful life of its separate components,

limited to the period of the lease.

Leasehold property and right of use asset depreciation rates

are determined by reference to the period of the lease.

Routine maintenance and service costs for Group assets are

expensed as incurred. Subsequent expenditure is only

capitalised if it is probable that future economic benefits

associated with the item will flow to the Group.

Leases

At inception of a contract the Group assesses whether a

contract is, or contains, a lease. A contract is, or contains, a

lease if the contract conveys the right to control the use of an

identified asset for a period of time in exchange for

consideration. To assess whether a contract conveys the right

to control the use of an identified asset, the Group assesses

whether:

•The Group has the right to obtain substantially all of the

economic benefits from use of the asset throughout the

period of use, and

•The Group has the right to direct the use of the asset.

As a lessee, the Group recognises a right of use (ROU) asset

and a lease liability at the lease commencement date.

The lease liability is initially measured at the present value of

the lease payments that are not paid at the commencement

date, discounted at the rate implicit in the lease, or, where that

is not available, at the Group’s incremental borrowing rate.

The lease liability will increase for the accrual of interest, and

will result in a constant rate of return throughout the life of the

lease, and reduce when payments are made.

The ROU asset is initially measured at cost, which comprises

the initial amount of the lease liability adjusted for any lease

payments made at or before the commencement date, plus

any indirect costs incurred and an estimate of costs to

dismantle and remove the underlying asset or to restore the

underlying asset or the site on which it is located, less any

lease incentives received.

The ROU asset is subsequently depreciated using the straight-

line method from the commencement date to the end of the

lease term. In addition, the ROU asset is periodically reduced

by impairment losses, if any, and adjusted for certain re-

measurements of the lease liability.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

ACCOUNTING POLICIES

CONTINUED

112

The lease liability is subsequently remeasured when there is a

change in future lease payments arising from a change in

index or rate, if there is a change in the Group’s estimate of

the amount expected to be payable under a residual value

guarantee, or if the Group changes its assessment of whether

it will exercise a purchase, extension or termination option.

Where the lease liability is remeasured, a corresponding

adjustment is made to the carrying amount of the ROU asset,

or is recorded in the income statement if the carrying amount

of the ROU asset has been reduced to zero.

The Group has elected not to recognise ROU assets and lease

liabilities for low value assets and short-term leases that have

a lease term of 12 months or less. The Group recognises the

lease payments associated with these leases as an expense

on a straight-line basis over the lease term.

When the Group is the lessor, the lease must be classified as

either a finance lease or an operating lease. A finance lease is

a lease which confers substantially all the risks and rewards of

the leased assets on the lessee. An operating lease is a lease

where substantially all of the risks and rewards of the leased

asset remain with the lessor.

When the lease is deemed a finance lease, the leased asset

is not held on the balance sheet; instead a finance lease

receivable is recognised representing the minimum lease

payments receivable under the terms of the lease, discounted

at the rate of interest implicit in the lease.

When the lease is deemed an operating lease, the lease

income is recognised on a straight-line basis over the period

of the lease unless another systematic basis is more

appropriate.

For the balance sheet, the ROU assets are included within

property and equipment, finance lease receivables are

included within loans and advances to customers and other

assets and the lease liabilities are included within other

liabilities.

Where the Group has a head lease and sublease arrangement

with external partners, the finance lease receivable is

recognised in other assets on the balance sheet.

Trading properties

Trading properties are carried at the lower of cost and net

realisable value.

Software and intangible assets

Software and intangible assets are recorded at cost less

accumulated amortisation and impairments. Software and

intangible assets with a finite life are amortised over the useful

economic life on a straight-line basis. Amortisation of each

asset starts when it becomes available for use. The

depreciable amount related to each asset is determined as the

difference between the cost and the residual value of the

asset.

The current and comparative annual amortisation rates for

each class of intangible assets are as follows:

•Client relationships12 to 20 years

•Acquired software3 to 7 years

•Internally generated software5 years

Impairment of non-financial assets

At each balance sheet date, the Group reviews the carrying

value of non-financial assets. The recoverable amount, being

the higher of fair value less cost of disposal and value-in-use,

is determined for any assets for which an indication of

impairment is identified. If the recoverable amount of an asset

is less than its carrying value, the carrying value of the asset is

reduced to its recoverable amount.

Impairment losses are recognised as an expense in the income

statement in the period in which they are identified. Reversals

of impairment losses are recognised in income in the period in

which the reversals are identified, to the extent that the

carrying value of the asset does not exceed the amount that

would have been calculated without impairment.

Trust and fiduciary activities

The Group acts as a trustee or in other fiduciary capacities

that result in the holding, placing or managing of assets for the

account of and at the risk of clients. As these are not assets of

the Group, they are not recognised on the balance sheet but

are included at market value as part of third party assets under

management.

Taxation and deferred taxation

Current taxation payable is provided for based on the amount

expected to be payable on taxable profit at rates that are

enacted or substantively enacted and applicable to the

relevant period.

Deferred taxation is provided on temporary differences

between the carrying amount of an asset or liability in the

balance sheet and its tax base, except where such temporary

differences arise from:

•The initial recognition of goodwill

•The initial recognition of an asset or liability in a transaction

which is not a business combination and at the time of the

transaction has no effect on the income statement or

taxable profit

•Temporary differences associated with the investments in

subsidiaries and interests in associated undertakings and

joint venture holdings, where the timing of the reversal of

the temporary differences can be controlled and it is

probable that the temporary differences will not reverse in

the foreseeable future.

Deferred taxation assets or liabilities are measured using the

taxation rates that have been enacted or substantively

enacted at the balance sheet date.

Deferred taxation assets are recognised to the extent that it is

probable that future taxable profit will be available against

which the deferred taxation assets can be utilised.

Items recognised directly in other comprehensive income are

net of related current and deferred taxation.

Borrowing costs

Borrowing costs that are directly attributable to property

developments which take a substantial period of time to

develop are capitalised to qualifying properties.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

ACCOUNTING POLICIES

CONTINUED

113

Provisions, contingent liabilities and contingent

assets

Provisions are recognised when the Group has a present legal

or constructive obligation as a result of a past event; it is

probable that an outflow of resources embodying economic

benefits will be required to settle the obligation and a reliable

estimate can be made of the amount of the obligation. The

expense relating to a provision is presented in the income

statement net of any reimbursement. Contingent assets and

contingent liabilities are not recognised on the balance sheet.

Standards and interpretations issued but not yet

effective

The following significant standards and interpretations, which

have been issued but are not yet effective, are applicable to

the Group. These standards and interpretations have not been

applied in these annual financial statements. The Group

intends to comply with these standards from the effective

dates.

IFRS 17 Insurance Contracts

IFRS 17 Insurance Contracts was issued in May 2017 and sets

out the requirements that an entity should apply in accounting

for insurance contracts it issues and reinsurance contracts it

holds. It applies to all types of insurance contracts, regardless

of the type of entities that issue them, as well as to certain

guarantees and financial instruments with discretionary

participation features. A few scope exceptions will apply.

IFRS 17 is effective from 1 January 2023 and the Group is

considering its impact.

All other standards and interpretations issued but not yet

effective are not expected to have a material impact on the

Group.

Key management assumptions

In preparation of the annual financial statements, the Group

makes estimations and applies judgement that could affect the

reported amount of assets and liabilities within the next

financial year. Key areas in which judgement is applied include:

•The impact of COVID-19 and the Russian invasion of Ukraine

required management to apply significant judgements and

estimates to quantify the impact on the annual financial

statements. The assumptions can specifically be viewed on

pages 44 to 46 in section 3, pages 84 to 86 of section 3 and

throughout section 4, the annual financial statements

•The Group operates in a legal and regulatory environment

that exposes it to litigation risks. As a result, the Group is

involved in disputes and legal proceedings which arise in the

ordinary course of business. The Group evaluates all facts,

the probability of the outcome of legal proceedings and

advice from internal and external legal counsel when

considering the accounting implications

•In accordance with IFRS 13 Fair Value Measurement, the

Group categorises financial instruments carried on the

balance sheet at fair value using a three level hierarchy.

Financial instruments categorised as level 1 are valued using

quoted market prices and therefore there is minimal

judgement applied in determining fair value. However, the

fair value of financial instruments categorised as level 2 and,

in particular, level 3 are determined using valuation

techniques including discounted cash flow analysis and

valuation models. The valuation techniques for level 3

financial instruments involve management judgement and

estimates the extent of which depends on the complexity of

the instrument and the availability of market observable

information. In particular, significant uncertainty exists in the

valuation of unlisted investments and fair value loans in the

private equity and direct investments portfolios. Key

valuation inputs are based on the most relevant observable

market information and can include expected cash flows,

discount rates, earnings multiples and the underlying assets

within a business, adjusted where necessary for factors that

specifically apply to the individual investments and

recognising market volatility. Further details of the Group’s

level 3 financial instruments and the sensitivity of the

valuation including the effect of applying reasonably

possible alternative assumptions in determining their fair

value are also set out in note 15.

Details of unlisted investments can be found in note 26 with

further analysis contained in the risk management section

on page 48.

•The determination of ECL against assets that are carried at

amortised cost and ECL relating to debt instruments at

FVOCI involves a high degree of uncertainty as it involves

using assumptions that are highly subjective and sensitive

to risk factors. The most significant judgements relate to

defining what is considered to be a significant increase in

credit risk; determining the probability of default (PD),

exposure at default (EAD) and loss given default (LGD) and

future cash flows; incorporating information about forecast

economic conditions and the weightings to be applied to

economic scenarios. More detail relating to the

methodology, judgements and estimates and results of the

Group’s assessment of ECLs, including our assessment of

the impact of COVID-19 and the Russian invasion of Ukraine,

can be found on pages 44 to 46

•The measurement of ECL has reliance on expert credit

judgement. Key judgemental areas are highlighted below

and are subject to robust governance processes. Key

drivers of measurement uncertainty include:

–The assessment of a significant increase in credit risk;

–A range of forward-looking probability-weighted macro-

economic scenarios; and

–Estimations of probabilities of default, loss given default

and exposures at default using models.

In addition to these drivers, some initial judgements and

assumptions were required in the design and build of the

Group’s ECL methodology, which are not considered to have

a material impact. These include the use of income

recognition effective interest rates (EIRs), in accordance

with accounting standards, as the discount factor in the ECL

calculation as well as the use of contractual maturity to

assess behavioural lives. In addition, where we have

experienced limitations on the availability of probability of

default origination data for the historic book, a portfolio

average has been used in some instances.

Following a detailed review of the outcome of the ECL

models, management raised an additional overlay provision

in the UK. Detail of the approach followed and

management's assumptions are set out on page 44 of

section 3.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

ACCOUNTING POLICIES

CONTINUED

114

•The Group’s income tax charge and balance sheet provision

are judgemental in nature. This arises from certain

transactions for which the ultimate tax treatment can only

be determined by final resolution with the relevant local tax

authorities. The Group has recognised in its current tax

provision certain amounts in respect of taxation that involve

a degree of estimation and uncertainty where the tax

treatment cannot finally be determined until a resolution has

been reached by the relevant tax authority and whether the

proposed tax treatment will be accepted by the authorities.

The carrying amount of this provision is sensitive to the

resolution of issues, which is often dependent on the

timetable and progress of discussion and negotiations with

the relevant tax authorities, arbitration process and legal

proceedings in the relevant tax jurisdictions in which the

Group operates. Issues can take many years to resolve and

assumptions on the likely outcome would therefore have to

be made by the Group in order to determine if an exposure

should be measured based on the most likely amount or

expected value.

•In making any estimates, management’s judgement has

been based on various factors, including:

–The current status of tax audits and enquiries;

–The current status of discussions and negotiations with

the relevant tax authorities;

–The results of any previous claims; and

–Any changes to the relevant tax environments.

•As explained in the hedge accounting policy, the Group

derecognises financial assets and financial liabilities if there

has been a substantial modification of their terms and

conditions. In the context of IBOR reform, many financial

instruments have already been amended or will be amended

as they transition from IBORs to RFRs. In addition to the

interest rate of a financial instrument changing, there may

be other changes made to the terms of the financial

instrument at the time of transition. For financial instruments

measured at amortised cost, the Group first applies the

practical expedient as described in the hedge accounting

policy, to reflect the change in the referenced interest rate

from an IBOR to a RFR. Secondly, for any changes not

covered by the practical expedient, the Group applies

judgement to assess whether the changes are substantial

and if they are, the financial instrument is derecognised and

a new financial instrument is recognised. If the changes are

not substantial, the Group adjusts the gross carrying amount

of the financial instrument by the present value of the

changes not covered by the practical expedient, discounted

using the revised effective interest rate

•The effective interest method as applied by the Group, as

explained in the hedge accounting policy, recognises

interest income using a rate of return that represents the

best estimate of a constant rate of return over the expected

behavioural life of loans and deposits and recognises the

effect of potentially different interest rates charged at

various stages and other characteristics of the product life

cycle (including prepayments and penalty interest and

charges). This estimation, by nature, requires an element of

judgement regarding the expected behaviour and life cycle

of the instruments, as well as expected changes to the base

rate and other fee income/expense that are integral parts of

the instrument. The Group has early adopted IBOR reform

Phase 2 in the prior period which required as a practical

expedient for changes to the basis for determining

contractual cash flows that are necessary as a direct

consequence of IBOR reform, to be treated as a change to a

floating rate of interest provided the transition from IBOR to

RFR takes place on a basis that is economically equivalent.

For changes that are not required by IBOR reform, the Group

applies judgement to determine whether they result in the

financial instrument being derecognised or adjust its

carrying value as described in the hedge accounting policy.

Therefore, as financial instruments transition from IBOR to

RFRs, the Group applies judgement to assess whether the

transition has taken place on an economically equivalent

basis. In making this assessment, the Group considers the

extent of any changes to the contractual cash flows as a

result of the transition and the factors that have given rise

to the changes, with consideration of both quantitative and

qualitative factors

•The Group has designated micro hedge relationships as fair

value hedges. The Group applies temporary reliefs which

enable its hedge accounting to continue during the period of

uncertainty, before the replacement of an existing interest

rate benchmark with an alternative nearly risk-free interest

rate. The Group has early adopted IBOR reform Phase 2 in

the prior period, which provided temporary reliefs to enable

the Group’s hedge accounting to continue upon the

replacement of an IBOR with a Risk-free rate (RFR). Under

one of the reliefs, the Group may elect for individual RFRs

designated as hedging the fair value of the hedged item for

changes due to a non-contractually specified component of

interest rate risk, to be deemed as meeting the IAS 39

requirement to be separately identifiable. For each RFR to

which the relief has been applied, the Group judges that

both the volume and market liquidity of financial instruments

that reference the RFR and are priced using the RFR will

increase during the 24-month period with the result that the

hedged RFR risk component will become separately

identifiable in the change in fair value of the hedged item.

•The Group operates in a legal and regulatory environment

that exposes it to litigation risks. As a result, the Group is

involved in disputes and legal proceedings which arise in the

ordinary course of business. The Group evaluates all facts,

the probability of the outcome of legal proceedings and

advice from internal and external legal counsel when

considering the accounting implications.

•The Group makes use of reasonable and supportable

information to make accounting judgments and estimates

related to climate change. This includes information about

the observable impact of climate change on the current

credit risk of clients and the valuation of assets. Many of the

effects arising from climate change will be longer term in

nature, with an inherent level of uncertainty and have limited

effect on accounting judgments and estimates for the

current period. The following items represent the most

significant effects:

–The measurement of expected credit loss considers the

ability of borrowers to make contractual payments as and

when they become due. Investec performed an

assessment of specific sectors that could be most

impacted by climate risk in all jurisdictions, specifically

focusing on the ability of the clients in these sectors to

meet their financing needs. The assessment further

included a review of Investec’s appetite to fund clients in

the respective sectors

–The assessment of asset impairment based on value in

use and the ability to recognise deferred tax assets are

based on future expected cash flows The expected cash

flows is based on management’s best estimate of the

operational results including the near-term impact of

climate risk. The Group did not consider any additional

adjustments to the cash flows to account for this risk

given the timeframe of the cashflows that were

considered.

–The use of market indicators as inputs to fair value is

assumed to include current information and knowledge

regarding the effect of climate risk.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

ACCOUNTING POLICIES

CONTINUED

115

1. Segmental business analysis – income statement

Specialist Banking

Private Client

Corporate,

Investment

Banking and

Other

Group

Investments

Group

Costs

For the year to 31 March 2022

Wealth &

Investment

Private Banking

Total

Group

£’000

Net interest income

2 268

70 692

409 759

—

482 719

Fee and commission income

344 685

1 579

163 964

—

510 228

Fee and commission expense

(656)

(23)

(14 234)

—

(14 913)

Investment income

(2)

816

10 033

20 408

—

31 255

Share of post-taxation profit of

associates and joint venture holdings

—

13 878

—

13 878

Trading income/(loss) arising from

–customer flow

1 194

2 228

56 950

—

60 372

–balance sheet management and

other trading activities

(307)

(6 798)

—

(7 103)

Other operating income

—

11 533

—

11 533

Total operating income before

expected credit loss

impairment charges

347 182

75 294

645 085

20 408

—

1 087 969

Expected credit loss impairment

charges

(5)

(2 432)

(22 722)

—

(25 159)

Operating income

347 177

72 862

622 363

20 408

—

1 062 810

Operating costs

(259 496)

(42 034)

(459 517)

—

(14 819)

(775 866)

Operating profit/(loss) before

goodwill, acquired intangibles and

strategic actions

87 681

30 828

162 846

20 408

(14 819)

286 944

Loss attributable to other non-

controlling interests

—

Adjusted operating profit/(loss)

after non-controlling interests

87 681

30 828

162 846

20 408

(14 819)

286 944

Selected returns and key statistics

Cost to income ratio

74.7%

55.8%

71.2%

n/a

71.3%

Total assets (£’mn)

1 137

4 528

22 101

180

n/a

27 946

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

116

1. Segmental business analysis – income statement (continued)

Specialist Banking

Private Client

Group

Investments

Group

Costs

For the year to 31 March 2021

Wealth &

Investment

Private Banking

Corporate,

Investment

Banking and

Other

Total

Group

£’000

Net interest income

2 296

34 664

362 754

—

399 714

Fee and commission income

316 813

705

184 276

—

501 794

Fee and commission expense

(773)

(61)

(12 437)

—

(13 271)

Investment income

272

22 122

8 853

—

31 266

Share of post-taxation profit of

associates and joint venture holdings

—

10 829

—

10 829

Trading income/(loss) arising from

–customer flow

920

1 196

(13 141)

—

(11 025)

–balance sheet management and

other trading activities

(9)

11 258

—

11 262

Other operating income

—

15 831

—

15 831

Total operating income before

expected credit loss

impairment charges

319 519

36 536

581 492

8 853

—

946 400

Expected credit loss impairment

release/(charges)

(4)

(1 515)

(69 677)

—

(71 196)

Operating income

319 515

35 021

511 815

8 853

—

875 204

Operating costs

(245 175)

(38 033)

(464 873)

—

(18 286)

(766 367)

Operating profit/(loss) before

goodwill, acquired intangibles and

strategic actions

74 340

(3 012)

46 942

8 853

(18 286)

108 837

Loss attributable to other non-

controlling interests

—

861

—

861

Adjusted operating profit/(loss) after

non-controlling interests

74 340

(3 012)

47 803

8 853

(18 286)

109 698

Selected returns and key statistics

Cost to income ratio

76.7%

104.1%

79.8%

n/a

80.9%

Total assets (£’mn)

1 016

3 338

20 302

146

n/a

24 802

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

117

2. Net interest income

2022

2021

For the year to 31 March

Notes

Average

balance

sheet

value

Interest

income

Average

yield

Average

balance

sheet

value

Interest

income

Average

yield

£’000

Cash, near cash and bank debt

and sovereign debt securities

8 071 461

24 441

0.30%

7 711 266

27 785

0.36%

Loans and advances

13 435 691

624 516

4.65%

12 170 562

579 809

4.76%

Private client

4 013 304

123 740

3.08%

2 873 101

84 191

2.93%

Corporate, institutional and

other clients

9 422 387

500 776

5.31%

9 297 461

495 618

5.33%

Other debt securities and other

loans and advances

609 114

18 047

2.96%

851 364

34 207

4.02%

Other#

233 801

51 442

n/a

287 831

59 419

n/a

22 350 067

718 446

21 021 023

701 220

2022

2021

For the year to 31 March

Notes

Average

balance

sheet

value

Interest

expense

Average

yield

Average

balance

sheet

value

Interest

expense

Average

yield

£’000

Deposits by banks and other

debt-related securities

3 308 178

32 971

1.00%

3 199 198

44 378

1.39%

Customer accounts (deposits)

16 761 883

93 235

0.56%

16 029 279

131 233

0.82%

Subordinated liabilities

870 954

49 497

5.68%

789 555

48 145

6.10%

Other#

363 193

60 024

n/a

436 350

77 750

n/a

21 304 208

235 727

20 454 382

301 506

Net interest income

482 719

399 714

Net interest margin

2.16%

1.90%

Notes:

1Comprises (as per the balance sheet) cash and balances at central banks; loans and advances to banks; reverse repurchase agreements and cash

collateral on securities borrowed; sovereign debt securities; and bank debt securities.

2Comprises (as per the balance sheet) loans and advances to customers.

3Comprises (as per the balance sheet) lease receivables (housed in other assets on the balance sheet) as well as interest income from derivative financial

instruments and off-balance sheet assets where there is no associated balance sheet value.

4Comprises (as per the balance sheet) deposits by banks; debt securities in issue; repurchase agreements and cash collateral on securities lent.

5Comprises (as per the balance sheet) liabilities arising from lease liabilities (housed in other liabilities on the balance sheet) as well as interest expense

from derivative financial instruments where there is no associated balance sheet value.

# Includes interest income and interest expense on derivative assets and liabilities used for hedging purposes. This results in interest income and interest

expense being recognised with no associated balance sheet value.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

118

3. Net fee and commission income

For the year to 31 March

2022

2021

£’000

Wealth & Investment businesses net fee and commission income

344 029

316 040

Fund management fees/fees for assets under management

301 950

267 381

Private client transactional fees

42 735

49 432

Fee and commission expense

(656)

(773)

Specialist Banking net fee and commission income

151 286

172 483

Specialist Banking fee and commission income

165 543

184 981

Specialist Banking fee and commission expense

(14 257)

(12 498)

Net fee and commission income

495 315

488 523

Annuity fees (net of fees payable)

318 389

284 745

Deal fees

176 926

203 778

4. Investment income

For the year to 31 March

2022

2021

£’000

Realised

28 988

37 881

Unrealised*

(26 726)

(21 699)

Dividend income

27 325

12 781

Funding and other net related income

1 668

2 303

31 255

31 266

For the year to 31 March

Listed

equities

Unlisted

equities

Warrants and

profit shares

Total

investment

portfolio

Debt

securities

(sovereign,

bank and

other)

Investment

and trading

properties

Other

asset

categories

Total

£’000

2022

Realised

2 414

18 028

552

20 994

512

(4 383)

11 865

28 988

Unrealised*

(4 169)

2 350

1 176

(643)

(457)

4 274

(29 900)

(26 726)

Dividend income

20 445

6 667

—

27 112

—

213

27 325

Funding and other net

related income

—

1 668

—

1 668

18 690

27 045

1 728

47 463

1 559

(17 822)

31 255

2021

Realised

9 367

971

10 351

6 121

(1 755)

23 164

37 881

Unrealised*

6 449

7 485

(35)

13 899

(2 967)

(3 141)

(29 490)

(21 699)

Dividend income

8 875

3 906

—

12 781

—

12 781

Funding and other net

related income

—

2 303

—

2 303

24 691

12 362

(22)

37 031

3 154

(2 593)

(6 326)

31 266

*In a year of realisation, any prior period mark-to-market gains/(losses) recognised are reversed in the unrealised line item.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

119

5. Other operating income

For the year to 31 March

2022

2021

£’000

Losses on realisation of properties

—

(73)

Unrealised gains on other investments

2 161

7 441

Income from operating leases

1 539

4 245

Income from government grants*

7 833

4 218

11 533

15 831

*Government grants income includes Research and Development Expenditure Credits and income from the Capability and Innovation Fund from the

Banking Competition Remedies Limited.

6. Expected credit loss impairment charges or (release)

For the year to 31 March

2022

2021

£’000

Expected credit losses have arisen on the following items:

Loans and advances to customers

21 815

65 328

Other loans and advances

(53)

Other balance sheet assets

3 824

581

Off-balance sheet commitments and guarantees

(499)

5 340

25 159

71 196

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

120

7. Operating costs

For the year to 31 March

2022

2021

£’000

Staff compensation costs

551 999

563 114

Salaries and wages (including directors’ remuneration)**

448 874

466 202

Share-based payment expense

23 664

22 309

Social security costs

51 099

45 446

Pensions and provident fund contributions

28 362

29 157

Training and other costs

12 565

4 453

Staff costs

564 564

567 567

Premises expenses

41 071

41 413

Premises expenses (excluding depreciation and impairments)

16 933

18 018

Premises depreciation and impairments

24 138

23 395

Equipment expenses (excluding depreciation)

54 499

49 551

Business expenses*

94 041

88 954

Marketing expenses

13 686

8 854

Depreciation, amortisation and impairment on equipment, software and intangibles

8 005

10 028

775 866

766 367

The following amounts were paid by the Group to the auditors in respect of the audit of the financial

statements and for other services provided to the Group:

Ernst & Young fees

Total fees paid to the audit firm by virtue of being the Group’s auditor

6 643

6 173

Audit of the Group’s accounts

404

392

Audit of the Group’s subsidiaries pursuant to legislation

5 156

5 069

Audit related assurance services

1 083

712

Total fees paid to the audit firm not in the capacity of being the Group’s auditor

362

379

Audit related assurance services

228

244

Tax compliance services

—

Other non-audit services

134

130

Total

7 005

6 552

*Business expenses mainly comprise insurance costs, consulting and professional fees, travel expenses and subscriptions.

**Details of the directors’ emoluments, pensions and their interests are disclosed in the Investec remuneration report 2022.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

121

8. Share-based payments

The Group operates share option and long-term share incentive plans for employees, the majority of which are on an equity-

settled basis. The purpose of the staff share schemes is to promote an esprit de corps within the organisation, create an

awareness of Investec Group’s performance and provide an incentive to maximise individual and Group performance by allowing

all staff to share in the risks and rewards of the Group.

Further information on the Group share options and long-term incentive plans is provided in the remuneration report

included in the Investec Group’s 2022 integrated annual report and on our website.

For the year to 31 March

2022

2021

£’000

Share-based payment expense

Equity-settled

23 664

22 309

For the year to 31 March

2022

2021

£’000

Weighted average fair value of awards granted in the year

UK schemes

42 990

11 696

UK schemes

2022

2021

Details of awards outstanding during the year

Number of

share awards

Weighted

average

exercise

price

Number of

share awards

Weighted

average

exercise

price

Outstanding at the beginning of the year

22 431 650

0.01

20 742 278

0.02

Sale of business

(94 076)

0.00

—

0.00

Granted during the year

14 657 836

0.00

8 455 609

0.00

Exercised during the year^

(5 595 039)

0.00

(5 649 509)

0.00

Awards forfeited during the year

(1 810 130)

0.04

(1 116 728)

0.19

Outstanding at the end of the year

29 590 241

0.00

22 431 650

0.01

Exercisable at the end of the year

487 445

—

401 818

—

^The weighted average share price during the year was £3.40 (2021: £1.73).

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

122

8. Share-based payments (continued)

Additional information relating to awards:

2022

2021

Options with strike prices

Exercise price range

£3.58 - £4.18

Weighted average remaining contractual life

0.22 years

0.71 years

Long-term incentive grants with no strike price

Exercise price range

£nil

Weighted average remaining contractual life

2.26 years

2.07 years

Weighted average fair value of awards and long-term grants at measurement date

£2.93

£1.38

The fair values of awards granted were calculated using a Black-Scholes option pricing model and

shares granted were calculated at market price. For awards granted during the year, the inputs into

the model were as follows:

–Share price at date of grant

£3.06-£3.80

£1.56-£1.93

–Exercise price

£nil

–Expected volatility

n/a

–Award life

3 - 7.01 years

0.50 - 7 years

–Expected dividend yields

n/a

–Risk-free rate

n/a

Expected volatility was determined based on the implied volatility levels quoted by the derivatives trading desk. The expected

volatility is based on the respective share price movement over the last six months, but also includes an element of forward

expectation.

The expected attrition rates used were determined based on historical Group data with an adjustment to actual attrition on final

vesting.

9. Long-term employment benefits

In March 2020, as part of the Investec Asset Management Limited (IAM) demerger, each participant of the Investec Group share

option and long-term share incentive plans for employees received the right to receive one Ninety One plc share award for every

two Investec plc share awards they held. The Ninety One plc share awards were granted on the same terms and vesting period

as the Investec plc awards they related to.

Investec plc has an obligation to deliver Ninety One plc shares to the holders of Investec plc share awards. Accordingly, this

obligation was classified and measured as another long-term liability in terms of IAS 19 Employee Benefits (IAS 19). The initial

liability of £7 263 000 was calculated as the fair value of the liability at the date of demerger for the portion of the awards

already vested. The total value of the liability represented past service cost and as a result was accounted for in retained

income. The liability was subsequently measured at fair value through profit or loss.

IAS 19 long-term employment benefit liability fair value movement recognised in the income statement for the year ended

31 March 2022 was £3.7 million (31 March 2021: £8.2 million).

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

123

9. Long-term employment benefits (continued)

2022

2021

Details of awards outstanding during the year

Number of

Ninety One

awards

Weighted

average

exercise

price

Number of

Ninety One

awards

Weighted

average

exercise

price

Outstanding at the beginning of the year

6 655 601

0.01

9 121 084

0.02

Sale of business

(30 412)

0.00

—

0.00

Granted during the year^

3 961

0.00

—

0.00

Exercised during the year

(2 058 445)

0.00

(2 092 045)

0.00

Lapsed during the year

(258 197)

0.12

(373 438)

0.22

Outstanding at the end of the year

4 312 508

0.01

6 655 601

0.01

Exercisable at the end of the year

237 106

—

201 285

—

^The Ninety One shares granted are due to the Group reaching predetermined performance conditions. These awards are aligned with the uptick in

Investec shares in the ratio of 1 Ninety One share for every 2 Investec shares.

The exercise price range and weighted average remaining contractual life for market strike options and long-term awards

outstanding at 31 March 2022 were as follows:

Additional information relating to awards:

2022

2021

Options with strike price

Exercise price range

£2.90 - £3.39

Weighted average remaining contractual life

0.25 years

0.71 years

Long-term awards with no strike price

Exercise price range

£nil

Weighted average remaining contractual life

1.05 years

1.52 years

For the liability calculated, the inputs into the model were as follows:

Additional information relating to awards:

2022

2021

The fair value of the liability was calculated by using the Black-Scholes option pricing model.

–Listed share price at 31 March

£2.55

£2.39

–Exercise price

Nil, £2.90 - £3.39

–Expected volatility

35.0%

35.4%

–Award life

0 - 4.42 years

0 - 6.44 years

–Expected dividend yields

0% - 7.41%

0% - 4.68%

–Risk-free rate

0.69% - 2.03%

0% - 0.82%

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

124

10. Taxation

For the year to 31 March

£’000

2022

2021

Income statement taxation charge

Current taxation

Current taxation on income for the year

53 932

4 258

Adjustments in respect of prior years

1 170

(836)

Corporation tax before double tax relief

55 102

3 422

Double tax relief

(436)

—

54 666

3 422

Europe

1 505

1 560

Australia

329

Other*

3 056

932

4 890

2 566

Total current taxation

59 556

5 988

Deferred taxation

(21 407)

4 707

Europe

(2 447)

(116)

Australia

1 008

13 722

Other

(776)

(1 087)

Total deferred taxation

(23 622)

17 226

Total taxation charge for the year

35 934

23 214

Total taxation charge for the year comprises:

Taxation on operating profit before goodwill

37 612

24 243

Taxation on acquired intangibles, goodwill and disposal of subsidiaries

(1 678)

(1 029)

35 934

23 214

Deferred taxation comprises:

Origination and reversal of temporary differences

(8 488)

16 216

Changes in taxation rates

(12 823)

154

Adjustment in respect of prior years

(2 311)

856

(23 622)

17 226

The deferred taxation (credit)/charge in the income statement arose from:

Deferred capital allowances

(8 371)

(2 858)

Income and expenditure accruals

(2 644)

15 899

Asset in respect of unexpired options

(12 485)

(2 191)

Unrealised fair value adjustment on financial instruments

(2 987)

621

Movement in deferred tax assets related to assessed losses

4 120

5 925

Asset in respect of pension surplus

(68)

—

Deferred tax on acquired intangibles

(1 317)

(2 380)

Other temporary differences

130

2 210

(23 622)

17 226

The deferred taxation charge in OCI/equity arose from:

Asset in respect of unexpired options

(4 538)

(107)

Unrealised fair value adjustment on financial instruments

8 215

3 243

3 677

3 136

*Where Other largely includes India and North America.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

125

10. Taxation (continued)

For the year to 31 March

2022

2021

£’000

The rates of corporation tax for the relevant years are:

Europe (average)

Australia

Profit before taxation

271 788

92 125

Taxation on profit before taxation

35 934

23 214

Effective tax rate

13.2%

25.2%

The taxation charge on activities for the year is different from the standard rate as detailed below:

Taxation on profit on ordinary activities before taxation at UK rate of 19% (2021: 19%)

51 640

17 503

Taxation adjustments relating to foreign earnings

(1 723)

3 853

Taxation relating to prior years

(1 141)

Impairment of goodwill and non-operating items

(6)

2 162

Share options accounting (expense)/income

(2 658)

214

Non-taxable income

(4 507)

(9 141)

Net other permanent differences

(199)

(1 590)

Bank surcharge

10 481

—

Capital gains – non-taxable/covered by losses

(4 426)

(3 628)

Movement in unrecognised trading losses

1 299

13 667

Change in tax rate

(12 826)

154

Total taxation charge as per income statement

35 934

23 214

Other comprehensive income taxation effects

(Gains)/losses on realisation of debt instruments at FVOCI recycled through the income statement

(307)

817

Pre-taxation

(429)

1 009

Taxation effect

122

(192)

Fair value movements on debt and equity instruments at FVOCI taken directly to other comprehensive

income

20 588

99 059

Pre-taxation

20 207

99 194

Taxation effect

381

(135)

Own credit risk

11 059

Pre-taxation

15 792

417

Taxation effect

(4 733)

(355)

Statement of changes in equity taxation effects

Additional Tier 1 capital

(16 875)

Pre-taxation

(16 875)

Taxation effect

—

Share-based payment adjustment

4 538

107

Pre-taxation

—

Taxation effect

4 538

107

IFRS 9 transitional adjustments

617

380

Pre-taxation

—

Taxation effect

617

380

The UK Government has also announced on 27 October 2021 that the current bank surcharge rate of 8% to be reduced to 3%

and the surcharge allowances available for banking group to be increased to £100 million from £25 million with effect from 1 April

2023. This will increase the combined rate of corporation tax applicable to banking entities from 27% to 28% with effect from 1

April 2023.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

126

11. Dividends

2022

2021

For the year to 31 March

£’000

Pence per

Total

Pence per

Total

Ordinary dividend

Final dividend for prior year

7.5

24 264

—

Interim dividend for current year

11.0

39 052

5.5

18 007

Total dividend attributable to ordinary shareholders

18.5

63 316

5.5

18 007

The directors have proposed a final dividend in respect of the financial year ended 31 March 2022 of 14.0 pence per ordinary

share (31 March 2021: 7.5 pence).

This will be paid as follows:

•For Investec plc non-South African shareholders, through a dividend paid by Investec plc of 14.0 pence per ordinary share

•For Investec plc South African shareholders, through a dividend payment on the SA DAS share of 14.0 pence per ordinary

share.

The final dividend to shareholders on the register at the close of business on 22 July 2022 is subject to the approval of the

members of Investec plc at the annual general meeting which is scheduled to take place on 4 August 2022 and, if approved,will

be paid on 8 August 2022.

2022

2021

For the year to 31 March

£’000

Pence per

Cents per

Total

Pence per

Cents per

Total

Perpetual preference dividend

Final dividend for prior year

5.48

331.59

174

8.43

468.30

262

Interim dividend for current year

5.52

333.41

173

5.52

350.65

175

Total dividend attributable to

perpetual preference shareholders

recognised in current financial year

11.00

665.00

347

13.95

818.95

437

The directors have declared a final dividend in respect of the financial year ended 31 March 2022 of 6.41369 pence (Investec plc

shares traded on the JSE Limited) and 6.41369 pence (Investec plc shares traded on the Channel Island Stock Exchange), and

344.99315 cents per Rand-denominated perpetual preference share. The final Sterling dividend will be payable on 20 June 2022

to shareholders on the register at the close of business on 10 June 2022. The final Rand dividend will be payable on 13 June

2022 to shareholders on the register at the close of business on 10 June 2022.

For the year to 31 March

2022

2021

£’000

Dividend attributable to Other Additional Tier 1 securities

16 880

The £250 000 000 Fixed Rate Reset Perpetual Additional Tier 1 Write Down Capital Securities (AT1 securities), issued

on 5 October 2017, pay a distribution rate of 6.75% per annum quarterly.

12. Financial impact of strategic actions

For the year to 31 March

£’000

2022

2021

Closure and rundown of the Hong Kong direct investments business*

(1 203)

7 387

Implementation costs on distribution of investment to shareholders^

(1 017)

—

Financial impact of strategic actions

(2 220)

7 387

Taxation on financial impact of strategic actions

633

(1 390)

Net financial impact of strategic actions

(1 587)

5 997

*Included within the balance are fair value gains of £0.7 million (31 March 2021: fair value losses of £10.3 million).

^Refer to note 57 for details regarding the distribution.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

127

13. Analysis of income and impairments by category of financial instrument

At fair value through profit or loss

IFRS 9 mandatory

For the year to 31 March

Trading**

Non-trading**

Designated at

inception

£’000

2022

Net interest income

(17 200)

54 104

(26 472)

Fee and commission income

16 822

1 382

—

Fee and commission expense

—

Investment income

1 728

25 950

584

Share of post-taxation profit of associates and joint venture holdings

—

Trading income/(loss) arising from

–customer flow

34 630

30 413

(4 671)

–balance sheet management and other trading activities

(102)

(6 611)

1 576

Other operating income

—

Total operating income/(expense) before expected credit loss

35 878

105 238

(28 983)

Expected credit loss impairments charges*

—

Operating income/(expense)

35 878

105 238

(28 983)

For the year to 31 March

Trading**

Non-trading**

Designated at

inception

£’000

2021

Net interest income

(25 802)

61 871

(29 964)

Fee and commission income

17 766

3 162

—

Fee and commission expense

—

Investment income

(22)

8 023

1 977

Share of post-taxation profit of associates and joint venture holdings

—

Trading income/(loss) arising from

–customer flow

31 165

(7 025)

(35 165)

–balance sheet management and other trading activities

2 097

(3 903)

8 012

Other operating income

—

Total operating income/(expense) before expected credit loss

25 204

62 128

(55 140)

Expected credit loss impairments charges*

—

Operating income/(expense)

25 204

62 128

(55 140)

*Includes off-balance sheet items.

**Fair value through profit and loss income statement items have been split as trading and non-trading, as defined by regulatory rules for the trading book

and banking book requirements respectively. Trading consists of income and expenses from positions held for trading intent or to hedge elements

of the trading book. Non-trading consists of income and expenses from positions that are expected to be held to maturity.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

128

At fair value through

comprehensive income

Debt

instruments

with a dual

business

model

Equity

instruments

Amortised

cost

Non-financial

instruments

Other fee

income and

expenses

Total

36 558

—

432 466

1 538

1 725

482 719

—

69 311

—

422 713

510 228

—

(2 162)

—

(12 751)

(14 913)

1 134

20 408

1 214

(19 763)

—

31 255

—

13 878

—

13 878

—

60 372

—

(1 966)

—

(7 103)

—

1 539

—

9 994

11 533

37 692

20 408

500 402

(4 347)

421 681

1 087 969

—

(25 159)

—

(25 159)

37 692

20 408

475 243

(4 347)

421 681

1 062 810

Debt

instruments

with a dual

business

model

Equity

instruments

Amortised

cost

Non-financial

instruments

Other fee

income and

expenses

Total

28 312

—

364 782

2 169

(1 654)

399 714

—

68 247

—

412 619

501 794

—

(2 034)

—

(11 237)

(13 271)

(1 009)

8 853

2 507

10 937

—

31 266

—

10 829

—

10 829

—

(11 025)

—

5 056

—

11 262

—

4 246

(3)

11 588

15 831

27 303

8 853

442 804

23 932

411 316

946 400

—

(71 196)

—

(71 196)

27 303

8 853

371 608

23 932

411 316

875 204

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

129

14. Analysis of financial assets and liabilities by category of financial instruments

At fair value through profit or loss

IFRS 9 mandatory

At 31 March 2022

Trading*

Non-trading*

Designated at

initial

recognition

£’000

Assets

Cash and balances at central banks

—

Loans and advances to banks

—

Reverse repurchase agreements and cash collateral on securities borrowed

89 889

540 570

38 649

Sovereign debt securities

—

33 658

—

Bank debt securities

—

Other debt securities

—

144 048

—

Derivative financial instruments

693 133

—

Securities arising from trading activities

138 032

4 780

20 353

Investment portfolio

—

338 523

—

Loans and advances to customers

—

609 083

—

Other loans and advances

—

Other securitised assets

—

93 087

Interests in associated undertakings and joint venture holdings

—

Deferred taxation assets

—

Current taxation assets

—

Other assets

9 606

17 478

—

Property and equipment

—

Goodwill

—

Software

—

Other acquired intangible assets

—

930 660

1 688 140

152 089

Liabilities

Deposits by banks

—

Derivative financial instruments

863 295

—

Other trading liabilities

42 944

—

Repurchase agreements and cash collateral on securities lent

—

Customer accounts (deposits)

—

Debt securities in issue

—

46 192

Liabilities arising on securitisation of other assets

—

95 885

Current taxation liabilities

—

Deferred taxation liabilities

—

Other liabilities

—

906 239

—

142 077

Subordinated liabilities

—

906 239

—

142 077

*Fair value through profit and loss balance sheet positions have been split as trading and non-trading, as defined by regulatory rules for the trading book

and banking book requirements respectively. Trading consists of positions held for trading intent or to hedge elements of the trading book. Non-trading

consists of positions that are expected to be held to maturity.

For more information on hedges, please refer to note 51 on pages 168 to 169.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

130

At fair value through

comprehensive income

Debt instrument

with dual

business model

Equity

instruments

Total

instruments at

fair value

Amortised

cost

Non-financial

instruments or

scoped out

of IFRS 9

Total

—

5 379 994

—

5 379 994

—

1 467 770

—

1 467 770

—

669 108

778 365

—

1 447 473

1 132 119

—

1 165 777

—

1 165 777

61 714

—

61 714

—

61 714

—

144 048

283 713

—

427 761

—

693 133

—

693 133

—

163 165

—

163 165

—

355 801

694 324

—

694 324

685 386

—

1 294 469

13 132 006

—

14 426 475

—

122 717

—

122 717

—

93 087

—

93 087

—

66 895

—

110 377

—

33 448

—

27 084

823 227

289 128

1 139 439

—

155 055

—

249 836

—

7 066

—

40 807

1 879 219

355 801

5 005 909

21 987 792

952 612

27 946 313

—

2 026 601

—

2 026 601

—

863 295

—

863 295

—

42 944

—

42 944

—

154 828

—

154 828

—

18 293 891

—

18 293 891

—

46 192

1 601 985

—

1 648 177

—

95 885

—

95 885

—

2 460

—

813 958

565 369

1 379 327

—

1 048 316

22 891 263

567 829

24 507 408

—

758 739

—

758 739

—

1 048 316

23 650 002

567 829

25 266 147

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

131

14. Analysis of financial assets and liabilities by category of financial instruments (continued)

At fair value through profit or loss

IFRS 9 mandatory

At 31 March 2021

Trading*

Non-trading*

Designated at

initial

recognition

£’000

Assets

Cash and balances at central banks

—

Loans and advances to banks

—

Reverse repurchase agreements and cash collateral on securities borrowed

38 690

517 037

119 714

Sovereign debt securities

—

36 675

—

Bank debt securities

—

Other debt securities

—

203 338

—

Derivative financial instruments

773 333

—

Securities arising from trading activities

253 932

5 160

22 553

Investment portfolio

—

355 974

—

Loans and advances to customers

—

511 604

—

Other loans and advances

—

Other securitised assets

—

107 259

Interests in associated undertakings and joint venture holdings

—

Deferred taxation assets

—

Current taxation assets

—

Other assets

6 857

22 145

—

Property and equipment

—

Goodwill

—

Software

—

Other acquired intangible assets

—

1 072 812

1 651 933

249 526

Liabilities

Deposits by banks

—

294

Derivative financial instruments

914 862

—

Other trading liabilities

49 055

—

Repurchase agreements and cash collateral on securities lent

—

Customer accounts (deposits)

—

Debt securities in issue

—

118 690

Liabilities arising on securitisation of other assets

—

108 281

Current taxation liabilities

—

Deferred taxation liabilities

—

Other liabilities

—

963 918

—

227 265

Subordinated liabilities

—

334 804

963 918

—

562 069

*Fair value through profit and loss balance sheet positions have been split as trading and non-trading, as defined by regulatory rules for the trading book

and banking book requirements respectively. Trading consists of positions held for trading intent or to hedge elements of the trading book. Non-trading

consists of positions that are expected to be held to maturity.

For more information on hedges, please refer to note 51 on pages 168 to 169.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

132

At fair value through

comprehensive income

Debt instrument

with dual

business model

Equity

instruments

Total

instruments at

fair value

Amortised

cost

Non-financial

instruments or

scoped out

of IFRS 9

Total

—

3 043 034

—

3 043 034

—

1 385 471

—

1 385 471

—

675 441

1 389 791

—

2 065 232

1 071 578

—

1 108 253

—

1 108 253

43 781

—

43 781

4 263

—

48 044

—

203 338

495 623

—

698 961

—

773 333

—

773 333

—

281 645

—

281 645

—

358 341

714 315

—

714 315

534 059

—

1 045 663

11 290 174

—

12 335 837

—

123 536

—

123 536

—

107 259

—

107 259

—

58 658

—

110 750

—

58 174

—

29 002

953 408

410 186

1 392 596

—

185 502

—

249 836

—

7 791

—

53 281

1 649 418

358 341

4 982 030

18 685 300

1 134 178

24 801 508

—

294

1 352 287

—

1 352 581

—

914 862

—

914 862

—

49 055

—

49 055

—

157 357

—

157 357

—

16 077 671

—

16 077 671

—

118 690

1 483 894

—

1 602 584

—

108 281

—

108 281

—

36 862

—

19 984

—

618 551

585 781

1 204 332

—

1 191 183

19 689 760

642 627

21 523 570

—

334 804

436 677

—

771 481

—

1 525 987

20 126 437

642 627

22 295 051

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

133

15. Fair value hierarchy

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 31 March 2022

Total

instruments at

fair value

Level 1

Level 2

Level 3

£’000

Assets

Reverse repurchase agreements and cash collateral

on securities borrowed

669 108

—

669 108

—

Sovereign debt securities

1 165 777

—

Bank debt securities

61 714

—

Other debt securities

144 048

—

39 017

105 031

Derivative financial instruments

693 133

649 164

43 950

Securities arising from trading activities

163 165

158 213

172

4 780

Investment portfolio

694 324

357 836

6 552

329 936

Loans and advances to customers*

1 294 469

—

82 621

1 211 848

Other securitised assets

93 087

—

93 087

Other assets

27 084

—

5 005 909

1 770 643

1 446 634

1 788 632

Liabilities

Derivative financial instruments

863 295

—

817 526

45 769

Other trading liabilities

42 944

—

Debt securities in issue

46 192

—

46 192

—

Liabilities arising on securitisation of other assets

95 885

—

95 885

1 048 316

42 944

863 718

141 654

Net assets at fair value

3 957 593

1 727 699

582 916

1 646 978

*Loans and advances to customers at fair value include instruments where the business model is either to sell the loan or where the business model is to

hold to collect the contractual cash flows but the loan has failed the SPPI test.

Transfers between level 1 and level 2

During the current and prior year there were no transfers between level 1 and level 2.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

134

15. Fair value hierarchy (continued)

Fair value category

At 31 March 2021

Total

instruments at

fair value

Level 1

Level 2

Level 3

£’000

Assets

Reverse repurchase agreements and cash collateral

on securities borrowed

675 441

—

675 441

—

Sovereign debt securities

1 108 253

—

Bank debt securities

43 781

—

Other debt securities

203 338

—

99 934

103 404

Derivative financial instruments

773 333

746 509

26 805

Securities arising from trading activities

281 645

275 526

959

5 160

Investment portfolio

714 315

367 490

4 841

341 984

Loans and advances to customers*

1 045 663

—

1 045 663

Other securitised assets

107 259

—

107 259

Other assets

29 002

—

4 982 030

1 824 071

1 527 684

1 630 275

Liabilities

Deposits by banks

294

—

294

Derivative financial instruments

914 863

—

887 123

27 740

Other trading liabilities

49 055

38 399

10 656

—

Debt securities in issue

118 690

—

118 690

—

Liabilities arising on securitisation of other assets

108 281

—

108 281

Subordinated liabilities

334 804

—

1 525 987

373 203

1 016 469

136 315

Net assets at fair value

3 456 043

1 450 868

511 215

1 493 960

*Loans and advances to customers at fair value include instruments where the business model is either to sell the loan or where the business model is to

hold to collect the contractual cash flows but the loan has failed the SPPI test.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

135

15. Fair value hierarchy (continued)

Level 3 instruments

The following table is a reconciliation of the opening balances to the closing balances for the fair value measurements in level 3

of the fair value hierarchy:

For the year to

Investment

portfolio

Loans and

advances to

customers

Other

securitised

assets

Other balance

sheet assets1

£’000

Total

Assets

Balance as at 1 April 2020

344 542

1 067 376

106 218

178 840

1 696 976

Total gains or (losses)

1 065

21 988

8 732

11 787

43 572

In the income statement

1 065

24 180

8 732

11 787

45 764

In the statement of comprehensive income

—

(2 192)

—

(2 192)

Purchases

50 023

945 556

—

9 054

1 004 633

Sales

(27 327)

(495 008)

—

(26 367)

(548 702)

Issues

—

Settlements

(17 617)

(447 858)

(7 691)

(29 409)

(502 575)

Transfers into level 3

—

7 802

—

5 033

12 835

Foreign exchange adjustments

(8 702)

(54 193)

—

(13 606)

(76 501)

Balance as at 31 March 2021

341 984

1 045 663

107 259

135 369

1 630 275

Total gains or (losses)

22 945

63 202

(657)

19 577

105 067

In the income statement

22 945

63 768

(657)

19 577

105 633

In the statement of comprehensive income

—

(566)

—

(566)

Purchases

33 602

1 845 044

—

59 165

1 937 811

Sales

(66 682)

(1 079 005)

—

(19 783)

(1 165 470)

Settlements

(8 498)

(695 450)

(13 515)

(49 392)

(766 855)

Transfers into level 3

621

—

621

Foreign exchange adjustments

5 964

32 394

—

8 825

47 183

Balance as at 31 March 2022

329 936

1 211 848

93 087

153 761

1 788 632

1.Comprises of other debt securities, derivative financial instruments and securities arising from trading.

The Group transfers between levels within the fair value hierarchy when the observability of inputs change, or if the valuation

methods change.

For the year to 31 March 2022, investment portfolio of £0.6 million was transferred from level 2 to level 3. In the prior year, loans

and advances to customers of £7.8 million; other debt securities of £4.6 million; and derivative assets of £0.4 million were

transferred from level 2 to level 3. The valuation methodologies were reviewed and unobservable inputs were used to determine

the fair value.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

136

15. Fair value hierarchy (continued)

For the year to

Liabilities

arising on

securitisation

of other

assets

Other balance

sheet

liabilities2

Total

£’000

Liabilities

Balance as at 1 April 2020

110 679

27 017

137 696

Total gains or (losses)

5 460

4 927

10 387

In the income statement

5 460

4 927

10 387

Settlements

(7 858)

(1 188)

(9 046)

Foreign exchange adjustments

—

(2 722)

Balance as at 31 March 2021

108 281

28 034

136 315

Total (gains) or losses

(2 094)

16 148

14 054

In the income statement

(2 094)

16 148

14 054

Settlements

(10 303)

(270)

(10 573)

Foreign exchange adjustments

1 857

1 858

Balance as at 31 March 2022

95 885

45 769

141 654

2.Comprises level 3 deposits by banks and derivative financial instruments.

The following table quantifies the gains or (losses) included in the income statement and other comprehensive income

recognised on level 3 financial instruments:

For the year to 31 March

Total

Realised

Unrealised

£’000

2022

Total gains or (losses) included in the income statement for the year

Net interest income

66 069

58 038

8 031

Investment income*

27 830

52 666

(24 836)

Trading income/(loss) arising from customer flow

(2 320)

(491)

(1 829)

91 579

110 213

(18 634)

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

440

—

Fair value movements on debt instruments at FVOCI taken directly

to other comprehensive income

(566)

—

(566)

(126)

440

(566)

2021

Total gains or (losses) included in the income statement for the year

Net interest income

62 651

52 093

10 558

Investment income*

(24 884)

2 151

(27 035)

Trading income/(loss) arising from customer flow

(2 389)

428

(2 817)

35 378

54 672

(19 294)

Total gains or (losses) included in other comprehensive income for the year

Losses on realisation on debt instruments at FVOCI recycled through

the income statement

(1 031)

—

Fair value movements on debt instruments at FVOCI taken directly

to other comprehensive income

(2 192)

—

(2 192)

(3 223)

(1 031)

(2 192)

*Included within the investment income statement balance are unrealised gains of £0.7 million (31 March 2021: unrealised gains of £10.3 million) presented

within operational items in the income statement.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

137

15. Fair value hierarchy (continued)

Level 2 financial assets and financial liabilities

The following table sets out the Group’s principal valuation techniques as at 31 March 2022 used in determining the fair value of

its financial assets and financial liabilities that are classified within level 2 of the fair value hierarchy:

VALUATION BASIS/TECHNIQUES

MAIN INPUTS

Assets

Reverse repurchase agreements and

cash collateral on securities borrowed

Discounted cash flow model

Discount rates

Other debt securities

Discounted cash flow model

Discount rates, swap curves and NCD

curves, external prices and broker quotes

Derivative financial instruments

Discounted cash flow model, Hermite

interpolation and industry standard

derivative pricing models including

Black-Scholes and Local Volatility

Discount rate, risk-free rate, volatilities,

forex forward points and spot rates,

interest rate swap curves and credit

curves

Securities arising from trading

activities

Discounted cash flow model, Hermite

interpolation and industry standard

derivative pricing models including Local

Volatility

Discount rate, risk-free rate, volatilities,

forex forward points and spot rates,

interest rate swap curves and credit

curves

Investment portfolio

Discounted cash flow model and

net asset value model

Discount rate and fund unit price

Comparable quoted inputs

Discount rate and net assets

Loans and advances to customers

Average broker quotes

Broker quotes

Liabilities

Derivative financial instruments

Discounted cash flow model, Hermite

interpolation and industry standard

derivative pricing models including

Black-Scholes and Local Volatility

Discount rate, risk-free rate, volatilities,

forex forward points and spot rates,

interest rate swap curves and credit

curves

Other trading liabilities

Discounted cash flow model, Hermite

interpolation and industry standard

derivative pricing models including Local

Volatility

Discount rate, risk-free rate, volatilities,

forex forward points and spot rates,

interest rate swap curves and credit

curves

Debt securities in issue

Discounted cash flow model, Hermite

interpolation and industry standard

derivative pricing models including Local

Volatility

Discount rate, risk-free rate, volatilities,

forex forward points and spot rates,

interest rate swap curves and credit

curves

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

138

15. Fair value hierarchy (continued)

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 table below shows the sensitivity of these fair values to reasonably

possible alternative assumptions, determined at a transactional level:

At 31 March 2022

Balance

sheet

value

£’000

Significant unobservable input

Range of

unobservable

input used

Favourable

changes

£’000

Unfavourable

changes

£’000

Assets

Other debt securities

105 031

Potential impact on income statement

3 199

(5 851)

Credit spreads

0.74%-2.75%

141

(286)

Cash flow adjustments

CPR 8.4%

(8)

Other

3 052

(5 557)

Derivative financial instruments

43 950

Potential impact on income statement

4 643

(5 266)

Volatilities

5%-18.9%

(29)

Cash flow adjustments

CPR 8.4%

—

(6)

Underlying asset value

4 026

(4 028)

Other

602

(1 203)

Securities arising from trading

activities

4 780

Potential impact on income statement

Cash flow adjustments

CPR 11%

481

(635)

Investment portfolio

329 936

Potential impact on income statement

34 755

(69 302)

Price earnings multiple

5.5x-15x

9 505

(18 206)

Underlying asset value

9 636

(20 897)

Other

15 614

(30 199)

Loans and advances to

customers

1 211 848

Potential impact on income statement

24 838

(40 047)

Credit spreads

0.15%-34.3%

10 656

(27 586)

Price earnings multiple

3.5x-4.2x

7 824

(1 136)

Underlying asset value

3 528

(5 665)

Other

2 830

(5 660)

Potential impact on other

comprehensive income

Credit spreads

0.14%-6.17%

8 440

(15 725)

Other securitised assets

93 087

Potential impact on income statement

Cash flow adjustments

CPR 8.4%

988

(1 057)

Total level 3 assets

1 788 632

77 344

(137 883)

Liabilities

Derivative financial instruments

45 769

Potential impact on income statement

(4 046)

4 060

Volatilities

5%-18.9%

(21)

Underlying asset value

(4 025)

4 025

Liabilities arising on

securitisation of other assets*

95 885

Potential impact on income statement

Cash flow adjustments

CPR 8.4%

Total level 3 liabilities

141 654

(4 338)

4 359

Net level 3 assets

1 646 978

*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 and 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.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

139

15. Fair value hierarchy (continued)

At 31 March 2021

Balance

sheet

value

£’000

Significant unobservable input

Range of

unobservable input

used

Favourable

changes

£’000

Unfavourable

changes

£’000

Assets

Other debt securities

103 404

Potential impact on income statement

3 789

(10 320)

Credit spreads

0.4%-3.3%

107

(198)

Discount rate

CPR 4.4%

(7)

Other

3 675

(10 115)

Derivative financial instruments

26 805

Potential impact on income statement

5 232

(6 226)

Volatilities

5.4%-21.4%

(148)

Cash flow adjustments

CPR 4.4%

(9)

Underlying asset value

4 724

(4 724)

Other

448

(1 345)

Securities arising from trading

activities

5 160

Potential impact on income statement

Cash flow adjustments

CPR 8.0%

1 310

(1 686)

Investment portfolio

341 984

Potential impact on income statement

36 304

(99 921)

Price earnings multiple

4.2x-9.0x

5 560

(13 330)

Discount rate

17.5%

2 179

(3 959)

Underlying asset value

2 561

(5 967)

Other

26 004

(76 665)

Loans and advances to

customers

1 045 663

Potential impact on income statement

25 430

(43 612)

Credit spreads

0.08%-37.3%

9 439

(14 745)

Price earnings multiple

3.5x-4.1x

4 200

(2)

Underlying asset value

3 094

(8 932)

Other

8 697

(19 933)

Potential impact on other

comprehensive income

Credit spreads

0.12%-4.3%

5 590

(9 711)

Other securitised assets

107 259

Potential impact on income statement

Cash flow adjustments

CPR 4.4%

1 554

(1 653)

Total level 3 assets

1 630 275

79 209

(173 129)

Liabilities

Deposits by banks

294

Potential impact on income statement

Underlying asset value

—

Derivative financial instruments

27 740

Potential impact on income statement

(4 750)

4 800

Volatilities

5.4%-21.1%

(26)

Underlying asset value

(4 724)

4 724

Liabilities arising on

securitisation of other assets*

108 281

Potential impact on income statement

Cash flow adjustments

CPR 4.4%

(213)

240

Total level 3 liabilities

136 315

(4 963)

5 084

Net level 3 assets

1 493 960

*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 and 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.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

140

15. Fair value hierarchy (continued)

In determining the value of level 3 financial instruments, the following are the principal inputs 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. It is an unobservable input into a discounted cash flow valuation.

Discount rates

Discount rates 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 that can be expected from the instrument and requires judgement. Cash flows

are input into a discounted cash flow valuation.

Price earnings multiple

The price-to-earnings ratio is an equity valuation multiple used in the adjustment of underlying market prices. It is a key driver

in the valuation of unlisted 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.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

141

16. Fair value of financial instruments at amortised cost

Level within the fair value hierarchy

At 31 March 2022

Carrying

amount

Fair value

approximates

carrying

amount

Balances

where fair

values do not

approximate

carrying

amounts

Fair value of

balances that

do not

approximate

carrying

amounts

Level 1

Level 2

Level 3

£’000

Assets

Cash and balances

at central banks

5 379 994

—

Loans and advances to banks

1 467 770

—

Reverse repurchase

agreements and cash collateral

on securities borrowed

778 365

662 151

116 214

115 088

—

115 088

—

Other debt securities

283 713

7 601

276 112

275 937

3 058

272 879

—

Loans and advances

to customers

13 132 006

521 321

12 610 685

12 593 362

—

1 022 302

11 571 060

Other loans and advances

122 717

61 473

61 244

61 253

—

61 253

—

Other assets

823 227

—

21 987 792

8 923 537

13 064 255

13 045 640

Liabilities

Deposits by banks

2 026 601

280 414

1 746 187

1 654 635

—

1 654 635

—

Repurchase agreements and

cash collateral on securities lent

154 828

103 729

51 099

49 243

—

49 243

—

Customer accounts (deposits)

18 293 891

11 678 823

6 615 068

6 616 337

—

6 616 337

—

Debt securities in issue

1 601 985

1 183

1 600 802

1 599 831

1 006 663

593 168

—

Other liabilities

813 958

810 824

3 134

2 419

—

2 419

Subordinated liabilities

758 739

—

758 739

767 436

—

23 650 002

12 874 973

10 775 029

10 689 901

For financial assets and financial liabilities that are liquid or have a short-term maturity (less than three months) it is assumed

that the carrying amounts approximate their fair value. These assets and liabilities include demand deposits, savings accounts

without a specific maturity, which are included in customer accounts (deposits), and variable rate instruments.

Financial instruments for which fair value does not approximate carrying value

Differences in amortised cost and fair value occur in fixed rate instruments. The fair value of fixed-rate financial assets and

financial liabilities carried at amortised cost are estimated by comparing spreads earned on the transactions with spreads earned

on similar new transactions entered into by the Group. The estimated fair value of fixed interest-bearing deposits is based on

discounted cash flows, using prevailing money market interest rates for debts with similar credit risk and maturity. For quoted

subordinated debt issued, the fair values are calculated based on quoted market prices. For those notes issued where quoted

market prices are not available, a discounted cash flow model is used based on a current interest rate yield curve appropriate

for the remaining term to maturity.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

142

16. Fair value of financial instruments at amortised cost (continued)

Level within the fair value hierarchy

At 31 March 2021

Carrying

amount

Fair value

approximates

carrying

amount

Balances

where fair

values do not

approximate

carrying

amounts

Fair value of

balances that

do not

approximate

carrying

amounts

Level 1

Level 2

Level 3

£’000

Assets

Cash and balances

at central banks

3 043 034

—

Loans and advances to banks

1 385 471

1 379 951

5 520

5 474

—

5 474

Reverse repurchase

agreements and cash collateral

on securities borrowed

1 389 791

1 118 428

271 363

271 992

—

271 992

—

Bank debt securities

4 263

—

Other debt securities

495 623

62 243

433 380

434 995

7 628

420 432

6 935

Loans and advances

to customers

11 290 174

664 065

10 626 109

10 614 861

—

969 764

9 645 097

Other loans and advances

123 536

61 320

62 216

62 916

—

62 916

—

Other assets

953 408

953 135

273

256

—

256

18 685 300

7 286 439

11 398 861

11 390 494

Liabilities

Deposits by banks

1 352 287

241 347

1 110 940

1 119 997

—

1 117 341

2 656

Repurchase agreements and

cash collateral on securities lent

157 357

109 636

47 721

47 803

—

47 803

—

Customer accounts (deposits)

16 077 671

9 906 828

6 170 843

6 213 235

—

6 213 235

—

Debt securities in issue

1 483 894

273 968

1 209 926

1 235 967

432 052

803 915

—

Other liabilities

618 551

614 289

4 262

3 660

—

3 660

Subordinated liabilities

436 677

—

436 677

455 188

—

20 126 437

11 146 068

8 980 369

9 075 850

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

143

16. Fair value of financial instruments at amortised cost (continued)

Fixed rate financial instruments

The fair value of fixed rate financial assets and financial liabilities carried at amortised cost are estimated by comparing spreads

earned on the transactions with spreads earned on similar new transactions entered into by the Group. The estimated fair value

of fixed interest-bearing deposits is based on discounted cash flows, using prevailing money market interest rates for debts

with similar credit risk and maturity.

For quoted subordinated debt issued, the fair values are calculated based on quoted market prices. For those notes issued

where quoted market prices are not available, a discounted cash flow model is used based on a current interest rate yield curve

appropriate for the remaining term to maturity.

Certain financial instruments that would normally be carried at fair value continue to be recognised at transaction price.

This occurs when the fair value would normally be determined using valuation techniques which cannot be relied on due

to insufficient external inputs. This results in gains or losses which have not been recognised on-balance sheet.

The following table sets out the Group’s principal level 2 and 3 valuation techniques used in determining the fair value of its

financial assets and financial liabilities:

Loans and advances to banks

Calculation of the present value of future cash flows, discounted as appropriate.

Other debt securities

Priced with reference to similar trades in an observable market.

Reverse repurchase agreements and cash

collateral on securities borrowed

Calculation of the present value of future cash flows, discounted as appropriate.

Loans and advances to customers

Calculation of the present value of future cash flows, discounted as appropriate.

Other loans and advances

Calculation of the present value of future cash flows, discounted as appropriate.

Other assets

Calculation of the present value of future cash flows, discounted as appropriate.

Deposits by banks

Calculation of fair value using appropriate funding rates.

Repurchase agreements and cash collateral on

securities lent

Calculation of the present value of future cash flows, discounted as appropriate.

Customer accounts (deposits)

Where the deposits are short-term in nature, carrying amounts are assumed to

approximate fair value. Where deposits are of longer-term maturities, they are

valued using a cash flow model discounted as appropriate.

Debt securities in issue

Where the debt securities are fully collateralised, fair value is equal to the carrying

value. Other debt securities are valued using a cash flow model discounted as

appropriate to the securities for funding and interest rates.

Other liabilities

Where the other liabilities are short term in nature, carrying amounts are assumed

to approximate fair value.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

144

17. Designated at fair value

Fair value adjustment

Change in fair value

attributable to credit risk*

At 31 March

Carrying

value

Current

Cumulative

Current

Cumulative

Maximum

exposure to

credit

risk

£’000

Assets

2022

Reverse repurchase agreements and

cash collateral on securities borrowed

38 649

284

—

Securities arising from trading activities

20 353

379

20 353

Other securitised assets

93 087

(4 106)

(6 382)

(4 106)

(6 382)

93 087

152 089

(3 638)

(6 048)

(4 100)

(6 287)

113 440

2021

Reverse repurchase agreements and

cash collateral on securities borrowed

119 714

(8 498)

4 614

—

Securities arising from trading activities

22 553

2 707

915

(1 128)

(1 380)

22 553

Other securitised assets

107 259

5 462

(3 173)

5 462

(3 173)

107 259

249 526

(328)

2 356

4 334

(4 553)

129 812

Fair value adjustment

Change in fair value

attributable to credit risk*

At 31 March

Carrying

value

Remaining

contractual

amount to be

repaid at

maturity

Current

Cumulative

Current

Cumulative

£’000

Liabilities

2022

Debt securities in issue

46 192

41 266

5 139

9 452

(43)

Liabilities arising on securitisation

of other assets

95 885

102 712

(2 286)

(6 854)

(2 286)

(6 854)

142 077

143 978

2 853

2 598

(2 279)

(6 897)

2021

Deposits by banks

294

1 335

(11)

(649)

—

Debt securities in issue

118 690

107 028

30 559

18 178

(972)

(1 320)

Liabilities arising on securitisation

of other assets

108 281

113 015

6 001

(4 946)

6 001

(4 946)

Subordinated liabilities

334 804

307 962

(8 429)

23 269

(417)

14 257

562 069

529 340

28 120

35 852

4 612

7 991

*Changes in fair value due to credit risk are determined as the change in the fair value of the financial instrument that is not attributable to changes in

other market inputs.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

145

18. Cash and balances at central banks

At 31 March

2022

2021

£’000

Gross cash and balances at central banks

5 379 994

3 043 034

Expected credit loss

—

Net cash and balances at central banks

5 379 994

3 043 034

The country risk of cash and bank balances at central banks lies in the following geographies:

United Kingdom

5 326 540

2 993 129

Europe (excluding UK)

53 454

49 905

5 379 994

3 043 034

19. Loans and advances to banks

At 31 March

2022

2021

£’000

Gross loans and advances to banks

1 467 863

1 385 604

Expected credit loss

(93)

(133)

Net loans and advances to banks

1 467 770

1 385 471

The country risk of loans and advances to banks lies in the following geographies:

South Africa

10 543

13 320

United Kingdom

555 881

567 938

Europe (excluding UK)

706 940

538 916

Australia

41 096

103 335

North America

143 856

138 923

Asia

9 086

22 947

Other

368

1 467 770

1 385 471

20.Reverse repurchase agreements and cash collateral on securities borrowed and repurchase

agreements and cash collateral on securities lent

At 31 March

2022

2021

£’000

Assets

Gross reverse repurchase agreements and cash collateral on securities borrowed

1 447 485

2 065 249

Expected credit loss

(12)

(17)

Net reverse repurchase agreements and cash collateral on securities borrowed

1 447 473

2 065 232

Reverse repurchase agreements

1 408 503

2 039 402

Cash collateral on securities borrowed

38 970

25 830

1 447 473

2 065 232

As part of the reverse repurchase and securities borrowing agreements the Group has received

securities that it is allowed to sell or repledge. £76 million (2021: £545 million) has been resold or

repledged to third parties in connection with financing activities or to comply with commitments under

short sale transactions.

Liabilities

Repurchase agreements

129 092

119 932

Cash collateral on securities lent

25 736

37 425

154 828

157 357

The assets transferred and not derecognised in the above repurchase agreements are fair valued at £13 million (2021:

£25 million). They are pledged as security for the term of the underlying repurchase agreement.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

146

21. Sovereign debt securities

At 31 March

2022

2021

£’000

Gross sovereign debt securities

1 165 777

1 108 253

Expected credit loss

—

Net sovereign debt securities

1 165 777

1 108 253

The country risk of sovereign debt securities lies in the following geographies:

United Kingdom

378 941

359 523

Europe (excluding UK)*

93 004

66 547

North America

693 832

632 265

Australia

—

49 918

1 165 777

1 108 253

*Where Europe (excluding UK) largely includes securities held in Germany.

22. Bank debt securities

At 31 March

2022

2021

£’000

Gross bank debt securities

61 714

48 044

Expected credit loss

—

Net bank debt securities

61 714

48 044

Bonds

57 844

48 044

Floating rate notes

3 870

—

61 714

48 044

The country risk of bank debt securities lies in the following geographies:

United Kingdom

46 622

38 929

Europe (excluding UK)

15 092

9 115

61 714

48 044

23. Other debt securities

At 31 March

2022

2021

£’000

Gross other debt securities

432 980

700 319

Expected credit loss

(5 219)

(1 358)

Net other debt securities

427 761

698 961

Bonds

119 766

190 679

Asset-backed securities

307 995

508 282

427 761

698 961

The country risk of other debt securities lies in the following geographies:

United Kingdom

104 452

259 961

Europe (excluding UK)

67 666

71 891

North America

207 392

326 244

Asia

48 251

40 865

427 761

698 961

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

147

24. Derivative financial instruments

The Group enters into various contracts for derivatives, both as principal for trading purposes and as a customer for hedging

foreign exchange and interest rate exposures. These include financial futures, options, swaps and forward rate agreements. The

risks associated with derivative instruments are monitored in the same manner as for the underlying instruments. Risks are also

measured across the product range in order to take into account possible correlations.

In the tables that follow, notional principal amounts indicate the volume of business outstanding at the balance sheet date and

do not represent amounts at risk. The fair value of a derivative financial instrument represents the positive or negative cash

flows which would have occurred had the rights and obligations arising from that instrument been closed out by the Group in an

orderly market transaction at the balance sheet date.

2022

2021

At 31 March

Notional

principal

amounts

Positive

fair value

Negative

fair value

Notional

principal

amounts

Positive

fair value

Negative

fair value

£’000

Foreign exchange derivatives

Forward foreign exchange contracts

16 862 873

157 697

137 754

17 113 315

299 744

207 446

Currency swaps

1 117 700

12 176

10 113

598 233

13 007

10 084

OTC options bought and sold

2 212 297

11 820

18 665

3 427 247

48 207

44 409

20 192 870

181 693

166 532

21 138 795

360 958

261 939

Interest rate derivatives

Caps and floors

9 424 942

65 094

57 797

8 878 148

19 155

13 058

Swaps

40 601 552

28 534

81 495

37 046 882

180 641

57 799

OTC derivatives

50 026 494

93 628

139 292

45 925 030

199 796

70 857

Exchange traded futures

—

228 292

—

50 026 494

93 628

139 292

46 153 322

199 796

70 857

Equity and stock index derivatives

OTC options bought and sold

2 920 599

101 194

212 995

4 188 105

95 579

252 815

Equity swaps and forwards

392 379

2 875

11 138

695 478

19 689

7 710

OTC derivatives

3 312 978

104 069

224 133

4 883 583

115 268

260 525

Exchange traded futures

169 227

—

201 987

—

Exchange traded options

15 492 162

—

25 831

16 930 831

—

232 642

Warrants

—

412

—

18 974 367

104 088

249 964

22 016 813

115 287

493 167

Commodity derivatives

OTC options bought and sold

235 387

40 978

51 206

224 256

31 209

38 347

Commodity swaps and forwards

1 236 254

255 652

253 713

738 641

52 689

48 316

1 471 641

296 630

304 919

962 897

83 898

86 663

Credit derivatives

218 806

11 065

2 588

333 933

8 911

2 237

Other derivatives

6 029

4 483

Derivatives per balance sheet

693 133

863 295

773 333

914 863

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

148

25. Securities arising from trading activities

At 31 March

2022

2021

£’000

Asset-backed securities

4 780

5 160

Bonds

17 936

22 631

Government securities

2 811

4 101

Listed equities

137 638

249 753

163 165

281 645

26. Investment portfolio

At 31 March

2022

2021

£’000

Listed equities

357 838

368 352

Unlisted equities*

336 486

345 963

694 324

714 315

*Unlisted equities include loan instruments that are convertible into equity.

27. Loans and advances to customers and other loans and advances

At 31 March

2022

2021

£’000

Gross loans and advances to customers at amortised cost

13 262 811

11 454 547

Gross loans and advances to customers at FVOCI^

685 386

534 059

Gross loans and advances to customers subject to expected credit losses

13 948 197

11 988 606

Expected credit losses on loans and advances to customers at amortised cost and FVOCI^

(130 805)

(164 373)

Net loans and advances to customers at amortised cost and FVOCI^

13 817 392

11 824 233

Loans and advances to customers at fair value through profit and loss

609 083

511 604

Net loans and advances to customers

14 426 475

12 335 837

Gross other loans and advances

122 736

123 580

Expected credit losses on other loans and advances

(19)

(44)

Net other loans and advances

122 717

123 536

^Expected credit losses above do not include £3 million (31 March 2021: £5 million) ECL held against financial assets held at FVOCI. This is reported on the

balance sheet within the fair value reserve.

For further analysis on loans and advances for the Group, refer to pages 38 to 43 in the risk management section.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

149

27. Loans and advances to customers and other loans and advances (continued)

At 31 March

2022

£’000

Expected credit losses on loans and advances to customers at amortised cost and FVOCI^

Balance as at 1 April 2020

173 389

Charge to the income statement

61 668

Reversals and recoveries recognised in the income statement

(41)

Write-offs

(71 317)

Exchange adjustments

674

Balance as at 31 March 2021

164 373

Charge to the income statement

24 204

Reversals and recoveries recognised in the income statement

(369)

Write-offs

(58 647)

Exchange adjustments

1 244

Balance as at 31 March 2022

130 805

Expected credit loss of other loans and advances

Balance as at 1 April 2020

Release to the income statement

(53)

Exchange adjustments

Balance as at 31 March 2021

Charge to the income statement

Exchange adjustments

(44)

Balance as at 31 March 2022

^Expected credit losses above do not include £3 million (31 March 2021: £5 million) ECL held against financial assets held at FVOCI. This is reported on the

balance sheet within the fair value reserve.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

150

28. Securitised assets and liabilities arising on securitisation

At 31 March

2022

2021

£’000

Other securitised assets are made up of the following categories of assets:

Loans and advances to customers

88 004

101 485

Other debt securities

5 083

5 774

Total other securitised assets

93 087

107 259

The associated liabilities are recorded on-balance sheet in the following line items:

Liabilities arising on securitisation of other assets

95 885

108 281

29. Interests in associated undertakings and joint venture holdings

At 31 March

2022

2021

£’000

Interests in associated undertakings and joint venture holdings consist of:

Net asset value

61 140

58 519

Goodwill

5 755

139

Investment in associated undertakings and joint venture holdings

66 895

58 658

Associated undertakings and joint venture holdings comprise unlisted investments

Analysis of the movement in our share of net assets:

At the beginning of the year

58 519

54 252

Exchange adjustments

135

635

Acquisitions

3 493

—

Share of post-taxation profits of associates and joint venture holdings^

14 164

11 128

Dividends received

(15 171)

(7 496)

At the end of the year

61 140

58 519

Analysis of the movement in goodwill:

At the beginning of the year

139

Exchange adjustments

(104)

—

Acquisitions

5 720

—

At the end of the year

5 755

139

^Included within the share of post-taxation profit from associates and joint venture holdings is a profit of £286 000 (31 March 2021: £299 000) presented

within operational items in the income statement.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

151

30. Deferred taxation

At 31 March

2022

2021

£’000

Deferred taxation assets

110 377

110 750

Deferred taxation liabilities

—

(19 984)

Net deferred taxation assets

110 377

90 766

The net deferred taxation assets arise from:

Deferred capital allowances

48 634

40 264

Income and expenditure accruals

2 212

Asset in respect of unexpired options

28 342

11 320

Unrealised fair value adjustments on financial instruments

31 033

36 261

Losses carried forward

8 166

12 286

Asset in respect of pension deficit

383

—

Deferred tax on acquired intangibles

(8 393)

(9 710)

Other temporary differences

—

315

Net deferred taxation assets

110 377

90 766

Reconciliation of net deferred taxation assets

At the beginning of the year

90 766

109 219

Release/(charge) to income statement – current year taxation

23 622

(17 227)

Movement directly in other comprehensive income

(3 677)

(3 136)

Arising on acquisitions/disposals

(463)

(300)

Exchange adjustments

129

2 210

At the end of the year

110 377

90 766

Deferred tax assets are recognised to the extent it is likely that profits will arise in future periods. The assessment of the

likelihood of future profits is based on past performance and current projections. Deferred taxation assets are not recognised in

respect of capital losses and excess management expenses as crystallisation of capital gains and the eligibility of potential

losses is uncertain.

There are trading losses carried forward of £90.7 million (2021: £68.9 million), capital losses carried forward of £167.3 million

(2021: £177.2 million) and excess management expenses of £2.5 million (2021: £2.5 million) on which deferred tax assets have

not been recognised due to uncertainty regarding future profits against which these losses can be utilised.

The UK Government announced on 3 March 2021 its intention to increase the UK rate of corporation tax to 25% from 19% from

1 April 2023.

The UK Government has also announced on 27 October 2021 that the current bank surcharge rate of 8% to be reduced to 3%

and the surcharge allowances available for banking group to be increased to £100 million from £25 million with effect from 1 April

2023. This will increase the combined rate of corporation tax applicable to banking entities from 27% to 28% with effect from 1

April 2023.

As these rates have now been substantively enacted at the year end, deferred tax has been calculated based on these rates.

31. Other assets

At 31 March

2022

2021

£’000

Gross other assets

1 139 439

1 392 596

Expected credit loss

—

Net other assets

1 139 439

1 392 596

Settlement debtors

736 688

865 283

Trading properties

4 287

24 758

Prepayments and accruals

55 635

67 566

Trading initial margin

9 606

6 857

Finance lease receivables

223 902

252 797

Other

109 321

175 335

1 139 439

1 392 596

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

152

32. Property and equipment

At 31 March

Freehold

properties

Right of use

assets^

Leasehold

improvements

Furniture and

vehicles

Equipment

Operating

leases*

Total

£’000

2022

Cost

At the beginning

of the year

141 376

81 830

7 421

26 158

5 721

262 542

Exchange adjustments

—

215

632

(1)

—

854

Additions

—

4 653

930

1 434

7 054

Disposals

—

(6 514)

(5 990)

(399)

(4 084)

(2 260)

(19 247)

At the end of the year

139 730

77 402

7 062

23 507

3 466

251 203

Accumulated

depreciation

At the beginning

of the year

(36)

(29 319)

(22 022)

(3 354)

(17 114)

(5 195)

(77 040)

Exchange adjustments

—

(109)

(9)

(8)

(4)

—

(130)

Disposals

—

1 869

2 233

289

3 785

2 178

10 354

Depreciation and

impairment charge for the

year

—

(17 650)

(6 489)

(566)

(4 423)

(204)

(29 332)

At the end of the year

(36)

(45 209)

(26 287)

(3 639)

(17 756)

(3 221)

(96 148)

Net carrying value

—

94 521

51 115

3 423

5 751

245

155 055

2021

Cost

At the beginning

of the year

144 893

92 997

7 534

26 709

7 210

279 379

Exchange adjustments

—

(475)

(2 794)

(28)

(113)

(3 365)

Additions

—

6 691

543

115

2 180

9 585

Disposals

—

(9 733)

(8 916)

(273)

(2 703)

(1 432)

(23 057)

At the end of the year

141 376

81 830

7 421

26 158

5 721

262 542

Accumulated

depreciation

At the beginning

of the year

(36)

(16 946)

(23 310)

(2 875)

(13 252)

(6 005)

(62 424)

Exchange adjustments

—

612

(392)

(84)

(11)

202

Disposals

—

3 866

8 224

207

2 335

1 396

16 028

Depreciation and

impairment charge for the

year

—

(16 851)

(6 544)

(602)

(6 186)

(663)

(30 846)

At the end of the year

(36)

(29 319)

(22 022)

(3 354)

(17 114)

(5 195)

(77 040)

Net carrying value

—

112 057

59 808

4 067

9 044

526

185 502

*These are assets held by the Group, in circumstances where the Group is lessor.

^Right of use assets primarily comprise property leases under IFRS 16.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

153

33. Goodwill

At 31 March

2022

2021

£’000

Cost

At the beginning of the year

289 969

290 117

Disposal of subsidiaries

(9 775)

(148)

At the end of the year

280 194

289 969

Accumulated impairments

At the beginning of the year

(40 133)

(28 934)

Impairments

—

(11 248)

Disposal of subsidiaries

9 775

—

Exchange adjustments

—

At the end of the year

(30 358)

(40 133)

Net carrying value

249 836

Analysis of goodwill by line of business:

Wealth & Investment

236 319

Specialist Banking

13 517

Total Group

249 836

Goodwill is tested annually for impairment, or more frequently if evidence exists that goodwill might be impaired, by comparing

the carrying value to its recoverable amount.

The recoverable amount of goodwill is determined based on expected cash flows within the cash-generating units of the Group

to which the goodwill is allocated. Key assumptions within the calculation include discount rates, growth rates in revenue, and

related expenditure and loan impairment rates.

Discount rates are based on pre-tax rates that reflect current market conditions, adjusted for the specific risks associated with

the cash-generating unit. Growth rates are based on industry growth forecasts. Cash flow forecasts are based on the most

recent financial budgets for the next financial year and are extrapolated for a period of three to five years, adjusted for expected

future events.

The most significant cash-generating unit giving rise to goodwill is Investec Wealth & Investment. For Investec Wealth &

Investment, goodwill of £236.3 million has been tested for impairment on the basis of the cash flow projections for the next

three years discounted at 9.2% (2021: 8.9%) which incorporates an expected revenue growth rate of 2% in perpetuity (2021:

2%). The valuation is based on value in use of the business.

Sensitivity analysis has been carried out and it has been concluded that no reasonably possible change in the key assumptions

would cause an impairment to be recognised.

For Investec Specialist Banking, the goodwill of £13.5 million is made up of a number of individual cash-generating units

within the line of business. These cash-generating units are assessed for impairment considering current performance and

budgets. There are no indications of impairment from the review of these balances except as discussed below in relation

to Investec Ireland.

Movement in goodwill

The write off during the year ended 31 March 2022 relates to goodwill that had been fully impaired in the prior years.

In the prior year, goodwill of £11.2 million in relation to Investec Ireland was written off as a result of the change in business

following the Brexit impact and, as such, there is limited linkage remaining between the business acquisition which gave rise to

the goodwill and the ongoing business in Ireland.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

154

34. Software and other acquired intangible assets

Software

Other acquired intangible assets

At 31 March

Acquired

software

Internally

generated

software

Total

Client

relationships*

Total

£’000

2022

Cost

At the beginning of the year

28 266

1 702

29 968

186 267

216 235

Exchange adjustments

188

—

188

—

188

Additions

669

1 402

2 071

462

2 533

Disposals

(323)

—

(323)

—

(323)

At the end of the year

28 800

3 104

31 904

186 729

218 633

Accumulated amortisation and

impairments

At the beginning of the year

(22 177)

—

(22 177)

(132 986)

(155 163)

Exchange adjustments

(145)

—

(145)

—

(145)

Disposals

298

—

298

—

298

Amortisation

(2 297)

(517)

(2 814)

(12 936)

(15 750)

At the end of the year

(24 321)

(517)

(24 838)

(145 922)

(170 760)

Net carrying value

4 479

2 587

7 066

40 807

47 873

2021

Cost

At the beginning of the year

29 133

—

29 133

187 558

216 691

Exchange adjustments

(221)

—

(221)

(141)

Additions

1 541

1 702

3 243

2 021

5 264

Disposals

(2 187)

—

(2 187)

(3 392)

(5 579)

At the end of the year

28 266

1 702

29 968

186 267

216 235

Accumulated amortisation and

impairments

At the beginning of the year

(21 989)

—

(21 989)

(122 748)

(144 737)

Exchange adjustments

208

—

208

304

Disposals

2 182

—

2 182

2 517

4 699

Amortisation

(2 578)

—

(2 578)

(12 851)

(15 429)

At the end of the year

(22 177)

—

(22 177)

(132 986)

(155 163)

Net carrying value

6 089

1 702

7 791

53 281

61 072

*Client relationships are acquired intangibles.

35. Acquisitions and disposals

There were no significant acquisitions of subsidiaries during the current and prior years. During the year, there were no

significant disposals of subsidiaries.

During the prior year, Investec Bank plc sold the Investec Australia Property Fund (IAPF) management company for proceeds

and a gain of £20.4 million. Additionally, a gain of £13 million was recognised from the formation of a joint venture with the State

Bank of India, now measured at fair value, as a result of loss of control in Investec Capital Services (India) Private Limited.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

155

36. Other trading liabilities

At 31 March

2022

2021

£’000

Short positions

– Equities

42 944

38 399

– Bank debt securities

—

10 656

42 944

49 055

37. Debt securities in issue

At 31 March

2022

2021

£’000

Repayable in:

Less than three months

210 729

45 890

Three months to one year

71 796

25 851

One to five years

1 022 555

1 490 054

Greater than five years

343 097

40 789

1 648 177

1 602 584

38. Other liabilities

At 31 March

2022

2021

£’000

Settlement liabilities

612 767

387 733

Other creditors and accruals

312 053

290 897

Lease liabilities

344 802

387 165

Other non-interest bearing liabilities

101 326

129 716

Expected credit losses on off-balance sheet commitments and guarantees

8 379

8 821

1 379 327

1 204 332

The maturity analysis of the lease liabilities is shown below:

2022

2021

At 31 March

Undiscounted

lease payments

Present value

Undiscounted

lease payments

Present value

£’000

Lease liabilities included in other liabilities

Lease liabilities payable in:

Less than one year

54 032

51 272

57 384

54 681

One to five years

290 977

259 482

318 418

281 513

Later than five years

34 998

34 048

52 826

50 971

380 007

344 802

428 628

387 165

Reconciliation from opening balance to closing balance

At 31 March

2022

£’000

Balance as at 1 April 2020

478 558

Interest on lease liabilities

12 863

New leases

5 230

Disposals

(15 882)

Repayment of lease liabilities

(66 316)

Remeasurement of lease liabilities

630

Exchange adjustments

(27 918)

Balance as at 31 March 2021

387 165

Interest on lease liabilities

11 120

New leases

2 665

Disposals

(11 812)

Repayment of lease liabilities

(54 374)

Remeasurement of lease liabilities

(281)

Exchange adjustments

10 319

Balance as at 31 March 2022

344 802

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

156

39. Subordinated liabilities

At 31 March

2022

2021

£’000

Issued by Investec Bank plc

Subordinated fixed rate medium-term notes – FVPL

—

334 804

Subordinated fixed rate re-set callable medium-term notes – amortised cost

427 019

436 677

Issued by Investec plc

Subordinated fixed rate re-set callable medium-term notes – amortised cost

331 720

—

758 739

771 481

Remaining maturities:

In one year or less, or on demand

—

334 804

In more than one year, but not more than two years

—

In more than two years, but not more than five years

—

In more than five years

758 739

436 677

758 739

771 481

Reconciliation from opening balance to closing balance

At the beginning of the year

771 481

787 030

New issue

347 536

—

Redemption

(307 962)

—

Fair value movement

(23 269)

(8 429)

Accrual of interest

48 505

47 405

Repayment of interest

(49 807)

(47 491)

Hedge accounting/amortisation of discount

(27 745)

(7 034)

At the end of the year

758 739

771 481

The only event of default in relation to the subordinated debt is the non-payment of principal or interest. The only remedy

available to the holders of the subordinated debt in the event of default is to petition for the winding up of the issuing entity. In a

winding up no amount will be paid in respect of the subordinated debt until all other creditors have been paid in full.

Medium-term notes

Subordinated fixed rate medium-term notes (denominated in Pound Sterling) – accounted for as designated

at fair value

On 17 February 2011, Investec Bank plc issued £500 000 000 of 9.625% subordinated notes due in 2022 at a discount (2022

notes). Interest is paid annually. The notes are listed on the London Stock Exchange.

On 29 June 2011, Investec Bank plc issued £75 000 000 of 9.625% subordinated notes due in 2022 at a premium (2022 notes)

(to be consolidated and form a single series, and to be fungible, with the £500 000 000 2022 notes issued on 17 February 2011).

On 17 July 2018, Investec Bank plc completed a tender offer to purchase £267 038 000 aggregate nominal amount of the notes

at a cash purchase price of 121.513 pence plus an accrued interest payment. The total value of the debt redeemed was

£335 541 000.

The remaining notes in issue of £307 962 000 were redeemed at par on 17 February 2022.

Subordinated fixed rate reset callable medium-term notes (denominated in Pound Sterling) – accounted for at amortised cost

On 24 July 2018, Investec Bank plc issued £420 000 000 of 4.25% subordinated notes due 2028 at a discount (2028 notes).

Interest is paid annually. The notes are listed on the London Stock Exchange. The notes will be redeemed at par

on 24 July 2028. The issuer has a one-time redemption option on the early redemption date of 24 July 2023 subject

to conditions.

Subordinated callable fixed rate resettable medium-term notes (denominated in Pound Sterling) – accounted for at amortised

cost

On 4 October 2021, Investec plc issued £350 000 000 of 2.625% subordinated notes due 2032 at a discount (2032 notes).

Interest, after the initial short period distribution paid on 4 January 2022, is paid annually commencing on 4 January 2023 and

ending on the maturity date. The notes are listed on the London Stock Exchange. The notes will be redeemed at par on

4 January 2032. The issuer may redeem the notes at par on any date in the period from 4 October 2026 to (and including)

4 January 2027 subject to conditions.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

157

40. Ordinary share capital

At 31 March

2022

2021

£’000

Issued, allotted and fully paid

Number of ordinary shares

Number

At the beginning of the year

696 082 618

Issued during the year

—

At the end of the year

696 082 618

Nominal value of ordinary shares

£’000

At the beginning of the year

138

Issued during the year

—

At the end of the year

138

Number of special converting shares

Number

At the beginning of the year

318 904 709

Issued during the year

—

At the end of the year

318 904 709

Nominal value of special converting shares

£’000

At the beginning of the year

Issued during the year

—

At the end of the year

Number of UK DAN shares

Number

At the beginning and end of the year

Nominal value of UK DAN share

£’000

At the beginning and end of the year

Number of UK DAS shares

Number

At the beginning and end of the year

Nominal value of UK DAS share

£’000

At the beginning and end of the year

Number of special voting shares

Number

At the beginning and end of the year

Nominal value of special voting shares

£’000

At the beginning and end of the year

*Less than £1 000.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

158

40. Ordinary share capital (continued)

Staff share scheme

The Group operates a share option and a share purchase scheme for employees. The number of ordinary shares conditionally

allocated to employees are disclosed in note 8.

Movements in the number of share options (each option is in respect of one share) issued to employees are as follows:

At 31 March

2022

2021

Number of shares

Opening balance

22 431 650

20 742 278

Sale of business

(94 076)

—

Issued during the year

14 657 836

8 455 609

Exercised

(5 595 039)

(5 649 509)

Lapsed

(1 810 130)

(1 116 728)

Closing balance

29 590 241

22 431 650

The purpose of the staff share scheme is to promote an esprit de corps within the organisation, create an awareness of Investec

Group’s performance and provide an incentive to maximise individual and Group performance by allowing all staff to share in the

risks and rewards of the Group.

The Group makes awards available to staff members via the underlying share trusts. The particular instrument used varies from

time to time, depending on taxation legislation and factors affecting the Group structure. Nevertheless, whatever the instrument

chosen, its underlying value depends solely on the performance of the Group’s share price.

At present, the practice of the Group is to grant all permanent staff members a share allocation, based on their annual package,

after completing six months of employment. In line with the objective of providing a long-term incentive for staff, these share

awards vest over periods varying from three to five years.

After the initial allocation referred to above, additional allocations are made to staff members at the discretion of Group

management and depending on the individual performance and contribution made by the respective staff members.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

159

41. Perpetual preference shares

At 31 March

2022

2021

£’000

Perpetual preference share capital

Perpetual preference share premium

24 765

24 794

Issued by Investec plc

2 754 587 (2021: 2 754 587) non-redeemable, non-cumulative, non-participating preference shares of

£0.01 each, issued at a premium of £8.58 per share.

–Perpetual preference share capital

–Perpetual preference share premium

23 607

Perpetual preference shareholders will receive an annual dividend if declared based on the coupon rate

(being equivalent to the base rate plus 1%) multiplied by the deemed value on a daily basis and payable

in two semi-annual instalments.

An ordinary dividend will not be declared by Investec plc unless the perpetual preference dividend has

been declared.

If declared, perpetual preference dividends are payable semi-annually at least seven business days

prior to the date on which Investec plc pays its ordinary dividends, if any, but shall be payable no later

than 120 business days after 31 March and 30 September respectively.

Issued by Investec plc – Rand-denominated

131 447 (2021: 131 447) non-redeemable, non-cumulative, non-participating perpetual preference

shares of ZAR0.001 each, issued at an average premium of ZAR99.999 per share.

–Perpetual preference share capital

–Perpetual preference share premium

1 158

Rand-denominated perpetual preference shareholders will receive a dividend if declared, based on the

coupon rate (being equivalent to South African prime rate multiplied by 95%), multiplied by the deemed

value on a daily basis and payable in two semi-annual instalments.

An ordinary dividend will not be declared by Investec plc unless the Rand-denominated perpetual

preference dividend has been declared.

If declared, perpetual preference dividends are payable semi-annually at least seven business days

prior to the date on which Investec plc pays its ordinary dividends, if any, but shall be payable no later

than 120 business days after 31 March and 30 September respectively.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

160

42. Ordinary share premium

At 31 March

2022

2021

£’000

Share premium account

806 812

43. Treasury shares

At 31 March

2022

2021

£’000

Treasury shares held by subsidiaries of Investec plc

161 522

134 185

Number

Investec plc ordinary shares held by subsidiaries

48 997 877

41 576 257

Reconciliation of treasury shares

Number

At the beginning of the year

41 576 257

31 744 014

Purchase of own shares by subsidiary companies

15 730 542

17 339 892

Shares disposed of by subsidiaries

(8 308 922)

(7 507 649)

At the end of the year

48 997 877

41 576 257

Market value of treasury shares

£'000

Investec plc

246 753

91 135

246 753

91 135

44. Other Additional Tier 1 securities in issue

At 31 March

2022

2021

£’000

Fixed Rate Reset Perpetual Additional Tier 1 Write Down Capital Securities

250 000

On 5 October 2017, Investec plc issued £250 million Fixed Rate Reset Perpetual Additional Tier 1 Write Down Capital Securities

(AT1 securities) at par. The securities are perpetual and pay a distribution rate on 5 March, June, September and December,

commencing from 5 December 2017. At each distribution payment day, the Company can decide whether to pay the distribution

rate, which is non-cumulative, in whole or in part. The distribution rate is 6.75% per annum until 5 December 2024; thereafter,

the distribution rate resets every five years to a rate of 5.749% per annum plus the benchmark gilts rate. The AT1 securities will

be automatically written down and the investors will lose their entire investment in the securities should the CET1 capital ratio of

the Investec plc Group, as defined in the PRA’s rules, fall below 7%. The AT1 securities are redeemable at the option of the

Company on 5 December 2024 or on each distribution payment date thereafter. No such redemption may be made without the

consent of the PRA.

45. Non-controlling interests

At 31 March

2022

2021

£’000

Non-controlling interests in partially held subsidiaries

833

390

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

161

46. Finance lease disclosures

2022

2021

At 31 March

Total future

minimum

payments

Present value

Total future

minimum

payments

Present value

£’000

Finance lease receivables included in loans and advances

to customers

Lease receivables due in:

Less than one year

230 003

193 281

239 982

199 103

One to five years

341 698

303 438

375 016

334 008

Later than five years

6 349

5 886

5 651

5 229

578 050

502 605

620 649

538 340

Unearned finance income

(75 444)

(82 309)

Net investment in the lease

502 606

538 340

At 31 March 2022, unguaranteed residual values accruing to the benefit of the Group were £8.6 million (2021: £10.7 million).

Finance leases in the Group mainly relate to leases on property, equipment and motor vehicles.

2022

2021

At 31 March

Total future

minimum

payments

Present value

Total future

minimum

payments

Present value

£’000

Finance lease receivables included in other assets

Lease receivables due in:

Less than one year

38 401

37 647

40 448

41 596

One to five years

220 606

185 509

251 377

209 053

Later than five years

748

746

2 184

2 148

259 755

223 902

294 009

252 797

Unearned finance income

(35 853)

(41 212)

Net investment in the lease

223 902

252 797

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

162

47. Notes to the cash flow statement

At 31 March

2022

2021

£’000

Profit before taxation adjusted for non-cash items and other required adjustments is derived as

follows:

Profit before taxation

271 788

92 125

Adjustment for non-cash items included in net income before taxation:

Impairment of goodwill

—

11 248

Amortisation of acquired intangibles

12 936

12 851

Net loss/(gain) on disposal of subsidiaries

632

(32 936)

Depreciation of operating lease assets

204

663

Depreciation and impairment of property, equipment, software and other intangibles

31 939

32 760

Expected credit loss impairment charges

25 159

71 196

Share of post-taxation profit of associates and joint venture holdings

(13 878)

(10 829)

Dividends received from associates and joint venture holdings

15 171

7 496

Share-based payments and employee benefit liability recognised

23 664

22 309

Profit before taxation adjusted for non-cash items

367 615

206 883

(Increase)/decrease in operating assets

Loans and advances to banks

53 095

28 378

Reverse repurchase agreements and cash collateral on securities borrowed

617 764

393 577

Sovereign debt securities

(57 522)

(23 235)

Bank debt securities

(13 675)

3 189

Other debt securities

267 341

(13 633)

Derivative financial instruments

80 312

477 402

Securities arising from trading activities

118 480

(25 000)

Investment portfolio

40 489

36 356

Loans and advances to customers

(2 088 959)

(529 319)

Other loans and advances

800

68 447

Securitised assets

14 172

(1 041)

Other assets

217 997

27 079

Goodwill

—

148

(749 706)

442 348

Increase/(decrease) in operating liabilities

Deposits by banks

674 020

(65 690)

Derivative financial instruments

(51 568)

(231 886)

Other trading liabilities

(6 111)

(69 517)

Repurchase agreements and cash collateral on securities lent

(2 529)

(239 454)

Customer accounts

2 216 220

797 369

Debt securities in issue

45 593

134 714

Securitised liabilities

(12 396)

(2 398)

Other liabilities

171 988

(440 246)

3 035 217

(117 108)

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

163

48. Commitments

At 31 March

2022

2021

£’000

Undrawn facilities

1 956 967

1 804 646

Other commitments

45 528

60 212

2 002 495

1 864 858

The commitments numbers include expected credit losses (ECL) of £8 million (2021: £9 million) reported in other liabilities.

The Group has entered into forward foreign exchange contracts and loan commitments in the normal course of its banking

business for which the fair value is recorded on-balance sheet.

Carrying amount

of pledged assets

Related liability

At 31 March

2022

2021

2022

2021

£’000

Pledged assets

Loans and advances to banks

48 273

70 507

40 589

56 715

Reverse repurchase agreements and cash collateral on securities

borrowed

188 428

159 600

184 548

126 064

Sovereign debt securities

43 138

273 265

41 914

251 603

Bank debt securities

8 168

—

7 937

—

Securities arising from trading activities

47 957

62 464

46 114

59 955

Loans and advances to customers

612 670

261 496

595 290

123 702

Other loans and advances

7 998

4 628

6 724

3 718

956 632

831 960

923 116

621 757

The assets pledged by the Group are strictly for the purpose of providing collateral for the counterparty. To the extent that the

counterparty is permitted to sell and/or repledge the assets, they are classified on the balance sheet as reverse repurchase

agreements and cash collateral on securities borrowed.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

164

49. Contingent liabilities and legal matters

At 31 March

2022

2021

£’000

Guarantees and assets pledged as collateral security:

Guarantees and irrevocable letters of credit

464 110

398 809

464 110

398 809

The amounts shown above are intended only to provide an indication of the volume of business outstanding at the balance

sheet date.

Guarantees are issued by Investec plc and Investec Bank plc and its subsidiaries on behalf of third parties and other Group

companies. The guarantees are issued as part of the banking business.

Support is provided by Investec plc to its subsidiaries where appropriate.

Financial Services Compensation Scheme

The Financial Services Compensation Scheme (FSCS), the UK’s statutory fund of last resort, provides compensation to

customers of UK authorised financial institutions in the event that an institution which is a participating member of the FSCS is

unable, or is likely to be unable, to pay claims against it.

The FSCS raises annual levies from participating members based on their level of participation (in the case of deposits, the

proportion that their protected deposits represent to total protected deposits) as at 31 December of the year preceding the

scheme year. Investec Bank plc and Investec Wealth & Investment Limited are participating members of the FSCS.

At the date of these financial statements, it is not possible to estimate whether there will ultimately be additional levies on the

industry, the level of Investec’s market participation or other factors that may affect the amount or timing of amount that may

ultimately become payable, nor the effect that such levies may have upon operating results in any particular financial period.

Legal matters

The group operates in a legal and regulatory environment that exposes it to litigation risks. As a result, the group is involved in

disputes and legal proceedings which arise in the ordinary course of business. The group evaluates all facts, the probability of

the outcome of legal proceedings and advice from internal and external legal counsel when considering the accounting

implications.

Historical German dividend tax arbitrage transactions

Investec Bank plc has been notified by the Office of the Public Prosecutor in Cologne, Germany, that it and certain of its current

and former employees may be involved in possible charges relating to historical involvement in German dividend tax arbitrage

transactions (known as cum-ex transactions). Investigations are ongoing and no formal proceedings have been issued against

Investec Bank plc by the Office of the Public Prosecutor. Whilst no formal proceedings have been issued against Investec Bank

plc by the Office of the Public Prosecutor, a provision was previously raised to reflect the potential financial outflows that could

arise as a result of this matter. In addition, subsequent to the year-end date, Investec Bank plc received certain enquiries in

respect of client tax reclaims for the periods 2010-2011 relating to the historical German dividend arbitrage transactions from the

German Federal Tax Office (FTO) in Bonn. The FTO has provided limited information and Investec Bank plc has sought further

information and clarification. Given the lack of information, it is not possible for Investec Bank plc to reliably estimate the

potential liability, if any, in relation to this matter.

Investec Bank plc is co-operating with the German authorities and continues to conduct its own internal investigation into the

matters in question. There are factual issues to be resolved which may have legal consequences, including financial penalties.

In relation to potential civil claims; whilst Investec Bank plc is not a claimant nor a defendant to any civil claims in respect of

cum-ex transactions, Investec Bank plc has received third party notices in relation to two civil proceedings in Germany and may

elect to join the proceedings as a third party participant. Investec Bank plc has itself served third party notices on various

participants to these historic transactions in order to preserve statute of limitation on any potential future claims that Investec

Bank plc may seek to bring against those parties, should Investec Bank plc incur any liability in the future. Investec Bank plc has

also entered into standstill agreements with some third parties in order to suspend the limitation period in respect of the

potential civil claims. While Investec Bank plc is not a claimant nor a defendant to any civil claims at this stage, it cannot rule out

the possibility of civil claims by or against Investec Bank plc in future in relation to the relevant transactions.

The Group has not provided further disclosure with respect to these historical dividend arbitrage transactions because it has

concluded that such disclosure may be expected to seriously prejudice its outcome.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

165

50. Related party transactions

At 31 March

2022

2021

£’000

Compensation of key management personnel and directors

Details of directors’ remuneration and interest in shares, including the disclosures required by IAS

Related party transactions for the compensation of key management personnel and directors have

been included in the section marked as audited in the Investec remuneration report 2022.

Transactions, arrangements and agreements involving directors and others:

Transactions, arrangements and agreements involving directors and with directors and connected

persons and companies controlled by them, and with officers of the Company, were as follows:

Directors, key management and connected persons and companies controlled by them

Loans

At the beginning of the year

8 946

7 765

Increase in loans

6 728

3 610

Decrease in loans*

(1 231)

(2 430)

Exchange adjustments

—

At the end of the year

14 443

8 946

Guarantees

At the beginning of the year

1 951

592

Additional guarantees granted

1 545

Decrease in guarantees*

(1 877)

(187)

Exchange adjustments

—

At the end of the year

1 951

Deposits

At the beginning of the year

(14 231)

(11 988)

Increase in deposits

(3 906)

(10 549)

Decrease in deposits*

5 235

8 307

Exchange adjustments

(1)

At the end of the year

(12 902)

(14 231)

*Decrease includes changes in leadership during the current year.

The above transactions were made in the ordinary course of business and on substantially the same terms, including interest

rates and security, as for comparable arm’s length transactions with persons of a similar standing or, where applicable, with

other employees. The transactions did not involve more than the normal risk of repayment. None of these loans have been

impaired.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

166

50. Related party transactions (continued)

Investec Limited and subsidiaries

At 31 March

2022

2021

£’000

Balances with other related parties

Assets

Loans and advances to banks

8 179

11 318

Derivative financial instruments

158

833

Other assets

7 694

4 163

Liabilities

Deposits by banks

3 921

31 906

Derivative financial instruments

3 373

8 862

Customer accounts (deposits)

7 848

7 358

Debt securities in issue

—

29 133

Repurchase agreements and cash collateral on securities lent

16 331

18 342

Other liabilities

10 458

5 047

During the year to 31 March 2022, interest of £0.3 million (2021: £1.5 million) was paid to entities in the Investec Limited Group.

Interest of £110 000 (2021: £90 000) was received from Investec Limited Group.

In the normal course of business, services are rendered between Investec plc and Investec Limited entities. In the

year to 31 March 2022, this resulted in a net payment to Investec Limited Group of £15.2 million (2021: £13.2 million).

During the year to 31 March 2022, Investec Wealth & Investment Limited paid a net amount of £nil for research services

provided by Grovepoint (UK) Limited (2021: paid a net amount of £22 400 for research services provided by Grovepoint (UK)

Limited. Sir Bradley Fried is a former director of Investec Bank plc and Investec plc, and is a current director of Grovepoint (UK)

Limited.

The Group has an investment in Grovepoint (UK) Limited in which a previous Investec director has significant influence.

The Group has made an investment of £55.5 million (2021: £54.4 million) with no further committed funding. The terms and

conditions of the transaction were no more favourable than those available, or which might be expected to be available, on

similar transactions to non-related entities on an arm’s length basis.

During the year to 31 March 2022, the Investec Group received income from the Ninety One Group (an associate of the Investec

DLC Group) of £nil (2021: £342 000) from premises subleases (which ceased during the year) and income of £nil (2021: £8 000)

relating to other business services provided to the Ninety One Group. In addition, £35 000 (2021: £292 000) of customer

accounts (deposits) from the Ninety One Group are held on-balance sheet and a £29 000 debtor (2021: £37 000) for IFRS 2

recharges in relation to the share scheme.

In addition, a lease guarantee of £8 025 000 (2021: £8 025 000) has been provided by Investec plc on behalf of Ninety One,

with income of £531 000 received during the year (2021: £546 000).

Due to nature of the Group’s business, there could be transactions with entities where some of the Group’s directors may be

mutual directors. These transactions are in the ordinary course of business and are on an arm’s length basis.

There are no amounts due from associates and joint venture holdings in the current or prior year.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

167

51. Hedges

The Group uses derivatives for the management of financial risks relating to its asset and liability portfolios, mainly associated

with non-trading interest rate risks and exposures to foreign currency risk. Most non-trading interest rate risk is transferred from

the originating business to the Central Treasury in the Specialist Bank. Once aggregated and netted, Central Treasury, as the

sole interface to the wholesale market for cash and derivative transactions, actively manages the liquidity mismatch and non-

trading interest rate risk from our asset and liability portfolios. In this regard, Treasury is required to exercise tight control of

funding, liquidity, concentration and non-trading interest rate risk within defined parameters.

The accounting treatment of accounting hedges is dependent on the requirement to identify a direct relationship between a

hedged item and hedging instrument. This relationship is established in limited circumstances based on the manner in which the

Group manages its risk exposure. Below is a description of each category of accounting hedges achieved by the Group.

Fair value hedges

Fair value hedges are entered into mainly to hedge the exposure of changes in fair value of fixed rate financial instruments

attributable to interest rates.

At 31 March

Description of financial instrument

designated as hedging instrument

Notional

value of

hedging

instrument

Fair value of

hedging

instrument

Cumulative

fair value

gains or

(losses) on

hedging

instrument

Current year

fair value

gains or

(losses) on

hedging

instrument

Cumulative

fair value

gains or

(losses) on

hedged item*

Current year

fair value

gains or

(losses) on

hedged item

£’000

2022

Assets

Interest rate swap

3 439 311

93 874

99 731

119 195

(97 852)

(118 836)

Liabilities

Interest rate swap

2 455 015

(66 619)

(66 952)

66 460

66 764

5 894 326

27 255

33 112

52 243

(31 392)

(52 072)

2021

Assets

Interest rate swap

2 826 737

(25 225)

(21 545)

26 900

21 895

(26 623)

Liabilities

Interest rate swap

401 899

(445)

(1 582)

469

1 760

3 228 636

(25 670)

(21 990)

25 318

22 364

(24 863)

*Change in fair value used as the basis for recognising hedge effectiveness for the period.

The hedging instruments share the same risk exposures as the hedged items. Hedge effectiveness is determined with reference

to retrospective and prospective testing, but to the extent hedging instruments are exposed to different risks than the hedged

items, this could result in hedge ineffectiveness or hedge accounting failures.

Sources of ineffectiveness include the following:

•Mismatches between the contractual terms of the hedged item and hedging instrument, including basis differences

•If a hedging relationship becomes over-hedged, for example, if the hedged item is partially redeemed but the original hedging

instrument remains in place.

Included within balance sheet management and other trading activities in the income statement is a £0.2 million loss (2021:

£0.1 million gain) arising from hedge ineffectiveness.

There are no accumulated fair value hedge adjustments for hedged items that have ceased to be adjusted for hedging gains

and losses.

Carrying amount of

hedged item

At 31 March

2022

2021

£’000

Hedged items

Assets

Sovereign debt securities

64 816

78 841

Other debt securities

2 977

5 577

Loans and advances to customers

3 250 658

2 600 554

Other assets

116 704

141 426

Liabilities

Debt securities in issue

1 094 388

358 353

Customer accounts (deposits)

951 517

43 077

Subordinated liabilities

331 753

—

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

168

51. Hedges (continued)

At 31 March

Up to one

month

One month

to three

months

Three

months to

six months

Six months

to one year

One to five

years

Greater than

five years

Total

£’000

Maturity analysis of hedged items

2022

Assets – notionals

Sovereign debt securities

—

38 000

32 000

70 000

Other debt securities

—

2 992

—

2 992

Loans and advances to customers

386

31 147

41 597

112 067

2 591 214

474 877

3 251 288

Other assets

2 496

5 001

7 564

15 383

86 260

—

116 704

Liabilities – notionals

Debt securities in issue

—

200 000

—

13 857

585 623

350 000

1 149 480

Customer accounts (deposits)

—

230 000

723 001

2 533

—

955 534

Subordinated liabilities

—

350 000

—

350 000

2021

Assets – notionals

Sovereign debt securities

—

36 285

13 000

40 000

89 285

Other debt securities

—

1 770

22 702

—

24 472

Loans and advances to customers

—

2 254

18 421

73 955

2 125 771

362 140

2 582 541

Other assets

2 277

4 566

6 894

14 000

113 689

—

141 426

Liabilities – notionals

Debt securities in issue

—

353 894

5 292

359 186

Customer accounts (deposits)

—

35 004

2 000

5 710

—

42 714

Hedges of net investments in foreign operations

In the prior year, Investec Bank plc entered into foreign exchange contracts to hedge its balance sheet exposure to its net

investment, in Australian Dollars, in the Australian operations of the Group. These have been terminated during the year following

closure of Australia operations.

At 31 March

2022

2021

£’000

Hedging instrument positive fair value

—

(145)

Hedging instrument negative fair value

—

There was no ineffective portion recognised in the income statement for the prior year.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

169

52. Liquidity analysis of financial liabilities based on undiscounted cash flows

At 31 March

Demand

Up to one

month

One month

to three

months

Three

months to

six months

Six months

to one year

One year to

five years

Greater than

five years

Total

£’000

2022

Liabilities

Deposits by banks

368 416

2 413

—

4 858

16 686

1 734 261

—

2 126 634

Derivative financial

instruments

170 207

37 722

138 148

83 427

203 310

228 740

1 945

863 499

Derivative financial

instruments

– held for trading

129 465

—

129 465

Derivative financial

instruments

– held for hedging risk

40 742

37 722

138 148

83 427

203 310

228 740

1 945

734 034

Other trading liabilities

42 944

—

42 944

Repurchase agreements and

cash collateral on securities

lent

42 092

61 637

—

51 099

—

154 828

Customer accounts

(deposits)

7 940 372

614 090

3 506 209

3 303 112

1 991 948

970 828

18 146

18 344 705

Debt securities in issue

—

9 092

224 871

62 234

61 870

1 062 749

365 229

1 786 045

Liabilities arising on

securitisation of other assets

—

3 459

3 322

6 632

43 125

62 856

119 394

Other liabilities*

88 904

672 175

171 588

33 958

82 254

315 341

50 278

1 414 498

Subordinated liabilities

—

17 850

9 188

108 150

851 638

986 826

Total on-balance sheet

liabilities

8 652 935

1 397 129

4 044 275

3 508 761

2 371 888

4 514 293

1 350 092

25 839 373

Contingent liabilities

928

620

63 985

4 038

78 428

222 312

93 799

464 110

Commitments

170 177

116 393

73 050

108 002

202 980

1 084 019

378 336

2 132 957

Total liabilities

8 824 040

1 514 142

4 181 310

3 620 801

2 653 296

5 820 624

1 822 227

28 436 440

*Included within other liabilities are £565 million of non-financial instruments scoped out of IFRS 9.

The balances in the above table will not agree directly to the balances in the consolidated balance sheet, as the table

incorporates all cash flows on an undiscounted basis relating to both principal and those associated with all future coupon

payments (except for trading liabilities and trading derivatives). Furthermore, loan commitments are generally not recognised on

the balance sheet.

Trading liabilities and trading derivatives have been included in the ‘Demand’ time bucket and not by contractual maturity

because trading liabilities are typically held for short periods of time.

For an unaudited analysis based on discounted cash flows, refer to pages 55 to 57.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

170

52. Liquidity analysis of financial liabilities based on undiscounted cash flows (continued)

At 31 March

Demand

Up to one

month

One month to

three months

Three months

to six months

Six months to

one year

One year to

five years

Greater than

five years

Total

£’000

2021

Liabilities

Deposits by banks

253 926

51 025

1 318

2 439

718 396

366 502

—

1 393 606

Derivative financial

instruments

452 040

56 987

60 624

59 000

96 280

216 676

15 405

957 012

Derivative financial

instruments

– held for trading

195 988

—

195 988

Derivative financial

instruments

– held for hedging risk

256 052

56 987

60 624

59 000

96 280

216 676

15 405

761 024

Other trading liabilities

49 055

—

49 055

Repurchase agreements

and cash collateral on

securities lent

55 767

53 869

—

47 721

—

157 357

Customer accounts

(deposits)

6 200 464

870 372

2 770 063

3 282 642

1 153 109

1 753 692

118 975

16 149 317

Debt securities in issue

30 327

8 448

76 692

58 254

101 089

1 350 309

30 620

1 655 739

Liabilities arising on

securitisation of other

assets

—

2 348

2 178

4 256

31 307

85 503

125 592

Other liabilities*

115 502

465 134

79 004

83 494

112 017

319 449

63 198

1 237 798

Subordinated liabilities

—

17 850

337 603

71 400

473 550

900 403

Total on-balance sheet

liabilities

7 157 081

1 505 835

2 990 049

3 505 857

2 570 471

4 109 335

787 251

22 625 879

Contingent liabilities

1 206

6 644

901

9 090

28 798

249 522

102 651

398 812

Commitments

138 360

145 179

23 633

40 096

145 149

1 061 267

463 860

2 017 544

Total liabilities

7 296 647

1 657 658

3 014 583

3 555 043

2 744 418

5 420 124

1 353 762

25 042 235

*Included within other liabilities are £586 million of non-financial instruments scoped out of IFRS 9.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

171

53. Principal subsidiaries, associated companies and joint venture holdings – Investec plc

Interest

Principal activity

Country of

incorporation

2022

2021

At 31 March

Direct subsidiaries of Investec plc

Investec 1 Limited

Investment holding

England and Wales

100%

Indirect subsidiaries of Investec plc

Investec Asset Finance PLC

Leasing

England and Wales

100%

Investec Bank plc

Investment holding

England and Wales

100%

Investec Bank (Channel Islands) Limited

Banking institution

Guernsey

100%

Investec Bank (Switzerland) AG

Banking institution and

wealth manager

Switzerland

100%

Investec Group Investments (UK) Limited

Investment holding

England and Wales

100%

Investec Holdings Australia Pty Limited

Holding company

Australia

100%

Investec Investments (UK) Limited

Investment holding

England and Wales

100%

Investec Europe Limited

MiFiD Firm

Ireland

100%

Investec Securities (US) LLC

Financial services

USA

100%

Investec Wealth & Investment Limited

Investment

management services

England and Wales

100%

Reichmans Geneva SA

Trading company

Switzerland

100%

All of the above subsidiary undertakings are included in the consolidated accounts.

The subsidiaries listed above are only in relation to subsidiary undertakings whose results or financial position, in the opinion of

the directors, principally affected the financial statements.

For more details on associated companies and joint venture holdings refer to note 29.

A complete list of subsidiary, associated undertakings and joint venture holdings as required by the Companies Act 2006

is included in note j to the Investec plc company accounts on pages 183 to 187.

Consolidated structured entities

Investec plc has no equity interest in the following structured entities, which are consolidated. Typically, a structured entity is an

entity in which voting or similar rights are not the dominant factor in deciding control. The judgements to assess whether the

Group has control over these structures include assessing the purpose and design of the entity and considering whether the

Group or another involved party with power over the relevant activities is acting as a principal in its own right or as an agent on

behalf of others.

Name of principal structured entity

Type of structured entity

Cavern Funding 2020 Plc

Securitised auto receivables

Landmark Mortgage Securities No 2 plc

Securitised residential mortgages

Tamarin Securities Limited

Structured debt and loan portfolios

Temese Funding 2 Plc

Securitised receivables

Yorker Trust

Structured debt and loan portfolios

For additional detail on the assets and liabilities arising on securitisation, refer to note 28.

Details of the risks to which the Group is exposed through all of its securitisations are included in the risk management

report on page 49.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

172

53. Principal subsidiaries, associated companies and joint venture holdings – Investec plc (continued)

The key assumptions for the main types of structured entities which the Group consolidates are summarised below:

Securitised residential mortgages

The Group has securitised residential mortgages in order to provide investors with exposure to residential mortgage risk and to

raise funding. These structured entities are consolidated due to the Group’s holdings of equity notes combined with its control

over servicing activities. The Group is not required to fund any losses above those incurred on the notes it has retained; such

losses are reflected in any impairment of securitised mortgages as those assets have not been derecognised.

Structured debt and loan portfolios

The Group has structured debt and loan portfolios for the purpose of issuing asset-backed securities. These structured entities

are consolidated due to the Group’s retention of equity notes and because it continues to act as the collateral manager. The

Group is not required to fund any losses above those incurred on the notes it has retained.

Securitised receivables

The Group has securitised portfolios of medium-term lease and hire purchase receivables. These structured entities are

consolidated as the Group has retained the equity notes and control over servicing activities. The Group is not required to fund

any losses above those incurred on the notes it has retained.

Other structured entities – commercial operations

The Group also consolidates a number of structured entities where control arises from rights attached to lending facilities and

similar commercial involvement. These arise primarily in the areas of aircraft funds, where the Group has rights which allow it to

maximise the value of the assets held and investments in mining projects due to its exposure to equity like returns and ability to

influence the strategic and financial decision-making.

The Group is not required to fund any losses above those which could be incurred on debt positions held or swaps which exist

with these structured entities. The risks to which the Group is exposed from these structured entities are related to the

underlying assets held in the structures. The total assets held in structured entities arising from commercial operations is

£26 million (2021: £86 million).

Significant restrictions

As is typical for a large group of companies, there are restrictions on the ability of the Group to obtain distributions of capital,

access the assets or repay the liabilities of members of the Group due to the statutory, regulatory and contractual requirements

of its subsidiaries.

These are considered below:

Regulatory requirements

Subsidiary companies are subject to prudential regulation and regulatory capital requirements in the countries in which they are

regulated. These require entities to maintain minimum capital, leverage and exposure ratios restricting the ability of these

entities to make distributions of cash or other assets to the parent company. Regulated subsidiaries of the Group are required to

maintain liquidity pools to meet PRA and local regulatory requirements. The main subsidiaries affected are: Investec Bank plc,

Investec Bank (Channel Islands) Limited and Investec Bank (Switzerland) AG, which must maintain compliance with the

regulatory minimum.

Capital management within the Group is discussed in the risk management report on pages 67 to 69.

Statutory requirements

The Group’s subsidiaries are subject to statutory requirements not to make distributions of capital and unrealised profits, and

generally maintain solvency. These requirements restrict the ability of subsidiaries to remit dividends, except in the case of a

legal capital reduction or liquidation.

Contractual requirements

Asset encumbrance – the Group uses its financial assets to raise finance in the form of securitisations and through the liquidity

schemes of central banks. Once encumbered, the assets are not available for transfer around the Group. The assets typically

affected are disclosed in notes 20 and 56.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

173

53. Principal subsidiaries, associated companies and joint venture holdings – Investec plc (continued)

Structured associates

The Group has investments in a number of structured funds specialising in aircraft financing where the Group acts as adviser or

fund manager in addition to holding units within the fund. As a consequence of these roles and funding, the Group has

significant influence over the fund and therefore the funds are treated as associates.

The Group applies the venture capital exemption to these holdings and, as such, the investments in the funds are accounted for

at fair value and held within the investment portfolio on the balance sheet.

Type of structured entity

Nature and purpose

Interest held by the Group/income earned

Aircraft investment funds

To generate fees from managing assets

on behalf of third party investors

Investments in units issued by the fund

These vehicles are financed through the

issue of units to investors

Management fees

The table below sets out an analysis of the carrying amounts of interests held by the Group in structured associate entities.

At 31 March 2022

Line on the balance

sheet

Carrying

value

£'000

Maximum exposure

to loss

Income earned from

structured entity

£'000

£’000

Aircraft investment funds

Investment portfolio

15 297

Limited to the

carrying value

Investment income

1 782

At 31 March 2021

Line on the balance

sheet

Carrying

value

£'000

Maximum exposure to

loss

Income earned from

structured entity

£'000

£’000

Aircraft investment funds

Investment portfolio

8 550

Limited to the

carrying value

Investment income

204

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

174

54. Unconsolidated structured entities

The table below describes the types of structured entities that the Group does not consolidate, but in which it holds an interest

as originally set up. In making the assessment of whether to consolidate these structured entities, the Group has concluded that

it does not have control after consideration in line with the accounting policies as set out on pages 104 to 115.

Type of structured entity

Nature and purpose

Interest held by the Group/income

earned

Investment funds

To generate fees from managing assets on

behalf of third party investors

Investments in units issued by the fund

These vehicles are financed through the

issue of units to investors

Management fees

Residential mortgage securitisations

To generate a return for investors by

providing exposure to residential mortgage

risk

Investments in notes

These vehicles are financed through the

issue of notes to investors

The table below sets out an analysis of the carrying amounts held by the Group in unconsolidated structured entities.

The maximum exposure to loss is the carrying amount of the assets held.

At 31 March 2022

Line on the balance

sheet

Carrying

value

£'000

Maximum exposure

to loss of the Group

Total assets

of the entity

£'000

Income earned from

structured entity

£’000

Residential mortgage

securitisations

Other loans and

advances

—

Limited to the

carrying value

—

Net interest expense

At 31 March 2021

Line on the balance

sheet

Carrying

value

£'000

Maximum exposure to

loss of the Group

Total assets

of the entity

£'000

Income earned from

structured entity

£’000

Investment funds

Investment

portfolio

193

Limited to the

carrying value

—

Investment loss

(61)

Residential mortgage

securitisations

Other loans and

advances

627

Limited to the

carrying value

1 583

Net interest expense

—

Financial support provided to the unconsolidated structured entities

There are no contractual agreements which require the Group to provide any additional financial or non-financial support

to these structured entities.

During the year, the Group has not provided any such support and does not have any current intentions to do so in the future.

Sponsoring

The Group considers itself a sponsor of a structured entity when it facilitates the establishment of the structured entity.

Interests in structured entities which the Group has not set up

Purchased securitisation positions

The Group buys and sells interests in structured entities that it has not originated as part of its trading activities, for example,

residential mortgage securities, commercial mortgage securities, loans to corporates and resecuritisations. In such cases the

Group typically has no other involvement with the structured entity other than the securities it holds as part of its trading

activities, and its maximum exposure to loss is restricted to the carrying value of the asset.

Details of the value of these interests is included in the risk management report on page 49.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

175

55. Offsetting

Amounts subject to enforceable netting arrangements

Effects of offsetting on-balance sheet

Related amounts not offset*

At 31 March

Gross

amounts

Amounts

offset

Net amounts

reported on

the balance

sheet

Financial

instruments

(including non-

cash collateral)

Cash

collateral

Net amount

£’000

2022

Assets

Cash and balances at central banks

5 379 994

—

5 379 994

—

5 379 994

Loans and advances to banks

1 467 770

—

1 467 770

—

(45 950)

1 421 820

Reverse repurchase agreements and

cash collateral on securities borrowed

1 447 473

—

1 447 473

(89 970)

(15 538)

1 341 965

Sovereign debt securities

1 165 777

—

1 165 777

—

1 165 777

Bank debt securities

61 714

—

61 714

—

61 714

Other debt securities

427 761

—

427 761

—

427 761

Derivative financial instruments

693 133

—

693 133

(272 446)

(209 749)

210 938

Securities arising from trading activities

163 165

—

163 165

(46 114)

—

117 051

Investment portfolio

694 324

—

694 324

—

694 324

Loans and advances to customers

14 426 475

—

14 426 475

—

14 426 475

Other loans and advances

122 717

—

122 717

—

(5 930)

116 787

Other securitised assets

93 087

—

93 087

—

93 087

Other assets

1 139 439

—

1 139 439

—

1 139 439

27 282 829

—

27 282 829

(408 530)

(277 167)

26 597 132

Liabilities

Deposits by banks

2 026 601

—

2 026 601

—

(215 054)

1 811 547

Derivative financial instruments

863 295

—

863 295

(298 340)

(47 482)

517 473

Other trading liabilities

42 944

—

42 944

(38 287)

—

4 657

Repurchase agreements and cash

collateral on securities lent

154 828

—

154 828

(25 761)

(4 348)

124 719

Customer accounts (deposits)

18 293 891

—

18 293 891

—

(10 233)

18 283 658

Debt securities in issue

1 648 177

—

1 648 177

(46 142)

(50)

1 601 985

Liabilities arising on securitisation

of other assets

95 885

—

95 885

—

95 885

Other liabilities

1 379 327

—

1 379 327

—

1 379 327

Subordinated liabilities

758 739

—

758 739

—

758 739

25 263 687

—

25 263 687

(408 530)

(277 167)

24 577 990

*The Group enters into derivatives and repurchase and reverse repurchase agreements with various counterparties which are governed by industry

standard master netting agreements. The Group holds and provides cash and securities collateral in respect of derivatives transactions covered by these

agreements. The right to set off balances under these master netting agreements or to set off cash and securities collateral only arises in the event of

non-payment or default and, as a result, these arrangements do not qualify for offsetting under IAS 32.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

176

55. Offsetting (continued)

Amounts subject to enforceable netting arrangements

Effects of offsetting on-balance sheet

Related amounts not offset*

At 31 March

Gross

amounts

Amounts

offset

Net amounts

reported on

the balance

sheet

Financial

instruments

(including non-

cash collateral)

Cash

collateral

Net amount

£’000

2021

Assets

Cash and balances at central banks

3 043 034

—

3 043 034

—

3 043 034

Loans and advances to banks

1 385 471

—

1 385 471

—

(124 649)

1 260 822

Reverse repurchase agreements and

cash collateral on securities borrowed

2 065 232

—

2 065 232

(121 967)

(43 280)

1 899 985

Sovereign debt securities

1 108 253

—

1 108 253

(232 592)

—

875 661

Bank debt securities

48 044

—

48 044

—

48 044

Other debt securities

698 961

—

698 961

—

698 961

Derivative financial instruments

773 333

—

773 333

(299 446)

(144 900)

328 987

Securities arising from trading activities

281 645

—

281 645

(59 977)

—

221 668

Investment portfolio

714 315

—

714 315

—

714 315

Loans and advances to customers

12 335 837

—

12 335 837

—

12 335 837

Other loans and advances

123 536

—

123 536

—

(4 628)

118 908

Other securitised assets

107 259

—

107 259

—

107 259

Other assets

1 392 596

—

1 392 596

—

1 392 596

24 077 516

—

24 077 516

(713 982)

(317 457)

23 046 077

Liabilities

Deposits by banks

1 352 581

—

1 352 581

—

(219 441)

1 133 140

Derivative financial instruments

914 863

—

914 863

(532 037)

(63 783)

319 043

Other trading liabilities

49 055

—

49 055

(25 830)

—

23 225

Repurchase agreements and cash

collateral on securities lent

157 357

—

157 357

(37 425)

(4 551)

115 381

Customer accounts (deposits)

16 077 671

—

16 077 671

—

(29 335)

16 048 336

Debt securities in issue

1 602 584

—

1 602 584

(118 690)

(347)

1 483 547

Liabilities arising on securitisation

of other assets

108 281

—

108 281

—

108 281

Other liabilities

1 204 332

—

1 204 332

—

1 204 332

Subordinated liabilities

771 481

—

771 481

—

771 481

22 238 205

—

22 238 205

(713 982)

(317 457)

21 206 766

*The Group enters into derivatives and repurchase and reverse repurchase agreements with various counterparties which are governed by industry

standard master netting agreements. The Group holds and provides cash and securities collateral in respect of derivatives transactions covered by these

agreements. The right to set off balances under these master netting agreements or to set off cash and securities collateral only arises in the event of

non-payment or default and, as a result, these arrangements do not qualify for offsetting under IAS 32.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

177

56. Derecognition

Transfer of financial assets that do not result in derecognition

The Group has been party to securitisation transactions whereby assets continue to be recognised on-balance sheet (either fully

or partially) although they have been subject to legal transfer to another entity. Securitisations may, depending on the individual

arrangement, result in continued recognition of the securitised assets and the recognition of the debt securities issued in the

transaction.

2022

2021

No derecognition achieved

Carrying

amount of

assets that

continue to be

recognised

Carrying

amount of

associated

liabilities

Carrying amount

of assets that

continue to be

recognised

Carrying

amount of

associated

liabilities

£’000

Loans and advances to customers

730 310

—

648 612

—

Loans and advances to banks

53 192

—

113 864

—

783 502

—

762 476

—

The transferred assets above in both the current and prior year are held within structured entities which are wholly-owned and

consolidated by the Group. There are no external parties participating on these vehicles and therefore the Group continues to

have full exposure to the risks and rewards associated with the assets and the associated liabilities are eliminated on

consolidation. There are no restrictions or limitations on the Group's recourse to the assets held within the structured entities.

For transfer of assets in relation to repurchase agreements refer to note 20.

57. Subsequent events

On 31 May 2022, Investec plc distributed 46.6 million Ninety One shares. The total value of the distribution was £106.5 million.

Investec plc maintained a shareholding of 93.0 million Ninety One plc shares (14.94%) post the distribution. The remaining

shareholding in Ninety One plc will be accounted for at fair value through other comprehensive income as before the

distribution.

The distribution was classified as a non-adjusting event after the reporting date as defined by IAS 10 Events after the Reporting

Period.

For subsequent events relating to contingent liabilities see note 49.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

NOTES TO THE FINANCIAL STATEMENTS

CONTINUED

178

Balance sheet

At 31 March 2022

Notes

2022

2021

£’000

Assets

Fixed assets

Investments in subsidiary undertakings

1 701 774

Securities and subordinated liabilities issued by subsidiary undertaking

599 967

250 000

2 301 741

1 951 774

Current assets

Investments in listed equities

355 801

358 341

Amounts owed by Group undertakings

523 320

517 696

Taxation

15 006

11 790

Deferred tax assets

—

900

Prepayments and accrued income

1 471

1 035

Cash at bank and in hand

– with subsidiary undertakings

261 089

136 264

– balances with other banks

578

520

1 157 265

1 026 546

Current liabilities

Creditors: amounts falling due within one year

Amounts owed to Group undertakings

—

6 244

Other liabilities

3 748

5 467

Accruals and deferred income

10 533

8 513

Net current assets

1 142 984

1 006 322

Creditors: amounts falling due after one year

Debt securities in issue

537 215

418 980

Subordinated liabilities

349 967

—

Net assets

2 557 543

2 539 116

Capital and reserves

Ordinary share capital

202

Ordinary share premium

806 812

Capital reserve

180 606

Fair value reserve

159 661

136 798

Retained earnings

1 135 468

1 139 904

Ordinary shareholders’ equity

2 282 749

2 264 322

Perpetual preference share capital and premium

24 794

Shareholders’ equity excluding non-controlling interests

2 307 543

2 289 116

Other Additional Tier 1 securities in issue

250 000

Total capital and reserves

2 557 543

2 539 116

The notes on pages 181 and 187 form an integral part of the financial statements.

The Company’s profit for the year, determined in accordance with the Companies Act 2006, was £76 115 356 (2021:

£15 284 317). Approved and authorised for issue by the Board of Directors on 22 June 2022 and signed on its behalf by:

Fani Titi

Chief Executive

22 June 2022

Annual Financial Statements

Investec plc Annual Financial Statements 2022

PARENT COMPANY ANNUAL FINANCIAL STATEMENTS

179

Statement of changes in shareholders’ equity

£’000

Ordinary

capital

Ordinary

premium

Capital

reserve

Fair value

reserve

Retained

earnings

Ordinary

shareholders’

equity

Perpetual

preference

capital and

premium

Shareholders’

equity

excluding non-

controlling

interests

Other

Additional

Tier 1

securities

in issue

Total equity

At 31 March 2020

202

806 812

180 606

37 515

1 159 109

2 184 244

24 794

2 209 038

250 000

2 459 038

Total comprehensive

income

—

99 283

16 119

115 402

—

115 402

—

115 402

Dividends paid to

preference

shareholders

—

(437)

—

(437)

—

(437)

Dividends paid to

ordinary shareholders

—

(18 007)

—

(18 007)

—

(18 007)

Dividends declared to

Other Additional

Tier 1 security holders

—

(16 880)

—

(16 880)

16 880

—

Dividends paid to

Other Additional

Tier 1 security holders

—

(16 880)

At 31 March 2021

202

806 812

180 606

136 798

1 139 904

2 264 322

24 794

2 289 116

250 000

2 539 116

Total comprehensive

income

—

22 863

76 107

98 970

—

98 970

—

98 970

Dividends paid to

preference

shareholders

—

(347)

—

(347)

—

(347)

Dividends paid to

ordinary shareholders

—

(63 316)

—

(63 316)

—

(63 316)

Dividends declared to

Other Additional

Tier 1 security holders

—

(16 880)

—

(16 880)

16 880

—

Dividends paid to

Other Additional

Tier 1 security holders

—

(16 880)

At 31 March 2022

202

806 812

180 606

159 661

1 135 468

2 282 749

24 794

2 307 543

250 000

2 557 543

Annual Financial Statements

Investec plc Annual Financial Statements 2022

PARENT COMPANY ANNUAL FINANCIAL STATEMENTS

CONTINUED

180

a. Basis of preparation

The parent accounts of Investec plc are prepared in

accordance with Financial Reporting Standard 101 Reduced

Disclosure Framework (FRS 101) and in accordance with

applicable accounting standards. The Company is

incorporated and domiciled in England and Wales and the

Company’s accounts are presented in Pound Sterling and all

values are rounded to the nearest thousand (£’000) except

where otherwise indicated.

The accounts have been prepared on the historical cost basis.

The principal accounting policies adopted are set out below.

The Company has taken advantage of the following disclosure

exemptions under FRS 101, where applicable to the Company:

•The requirements of paragraphs 45(b) and 46-52 of IFRS 2

Share-based Payment

•The requirements of paragraphs 62, B64(d), B64(e), B64(g),

B64(h), B64(j) to B64(m), B64(n)(ii), B64(o)(ii), B64(p),

B64(q) (ii), B66 and B67 of IFRS 3 Business Combinations.

Equivalent disclosures are included in the consolidated

financial statements of Investec plc in which the entity is

consolidated

•The requirements of paragraph 33(c) of IFRS 5 Non-current

Assets Held for Sale and Discontinued Operations

•The requirements of IFRS 7 Financial Instruments:

Disclosures

•The requirements of paragraphs 91-99 of IFRS 13 Fair Value

Measurement

•The requirement in paragraph 38 of IAS 1 Presentation of

Financial Statements to present comparative information in

respect of: (i) paragraph 79(a)(iv) of IAS 1, (ii) paragraph

73(e) of IAS 16 Property Plant and Equipment, (iii) paragraph

118(e) of IAS 38 Intangibles Assets, (iv) paragraphs 76 and

79(d) of IAS 40 Investment Property and (v) paragraph 50

of IAS 41 Agriculture

•The requirements of paragraphs 10(d), 10(f), 16, 38A to 38D,

40A to 40D,111 and 134-136 of IAS 1 Presentation of

Financial Statements

•The requirements of IAS 7 Statement of Cash Flows

•The requirements of paragraphs 30 and 31 of IAS 8

Accounting Policies, Changes in Accounting Estimates and

Errors

•The requirements of paragraph 17 and 18A of IAS 24 Related

Party Disclosures

•The requirements in IAS 24 Related Party Disclosures to

disclose related party transactions entered into between

two or more members of a group, provided that any

subsidiary which is a party to the transaction is wholly

owned by such a member

•The requirements of paragraphs 130(f)(ii), 130(f)(iii),

134(d)-134(f) and 135(c)-135(e) of IAS 36 Impairment of

Assets

•The requirements of paragraph 52, the second sentence

of paragraph 89, and paragraphs 90, 91 and 93 of IFRS 16

Leases

•The requirements of paragraph 58 of IFRS 16, provided that

the disclosures of details of indebtedness required by

paragraph 61(1) of Schedule 1 to the Regulations is

presented separated for lease liabilities and other liabilities,

and in total

•The requirements of paragraph 24(b) of IFRS 6 Exploration

for and Evaluation of Mineral Resources to disclose the

operating and investing cash flows arising from the

exploration for and evaluation of mineral resources

•The requirements of paragraph 74A(b) of IAS 16.

As permitted by FRS 101, the Company has taken advantage

of the disclosure exemptions available under that standard in

relation to share-based payments, financial instruments,

capital management, presentation of a cash flow statement,

presentation of comparative information in respect of certain

assets, standards not yet effective, impairment of assets,

business combinations, discontinued operations and related

party transactions.

Where required, equivalent disclosures are given in

consolidated financial statements of the Group.

Foreign currencies

Monetary assets and liabilities in foreign currencies are

translated into Pound Sterling at exchange rates ruling at the

balance sheet date. All foreign currency transactions are

translated into Pound Sterling at the exchange rate ruling at

the time of the transaction. Forward foreign exchange

contracts are revalued at the market rates ruling at the date

applicable to their respective maturities. Any gain or loss

arising from a change in exchange rates subsequent to the

date of the transaction is included as an exchange gain or loss

in the income statement.

Investments

Investments in subsidiaries and interests in associated

undertakings are stated at cost less any accumulated

impairment in value.

Equity instruments measured at FVOCI

The Group measures equity instruments at FVOCI when it

considers the investments to be strategic or held for long-term

dividend yield. The equity instruments are not held for trading.

Gains or losses on the derecognition of these equity securities

are not transferred to profit or loss.

Otherwise, equity instruments are measured at fair value

through profit or loss (except for dividend income, which is

recognised in profit or loss).

Income

Dividends from subsidiaries are recognised when received.

Interest is recognised on an accrual basis.

Taxation

Current tax payable is provided on the amount expected to be

payable on taxable profit at rates that are enacted or

substantively enacted and applicable to the relevant period.

Deferred taxation is provided using the balance sheet method

on temporary differences between the carrying amount of an

asset or liability in the balance sheet and its tax base, except

where such temporary differences arise from:

•The initial recognition of goodwill

•The initial recognition of an asset or liability in a transaction

which is not a business combination and at the time of the

transaction has no effect on the income statement or

taxable profit

•In respect of temporary differences associated with the

investments in subsidiaries and interests in associated

undertakings, where the timing of the reversal of the

temporary differences can be controlled and it is probable

that the temporary differences will not reverse in the

foreseeable future

•Deferred tax assets or liabilities are measured using the tax

rates that have been enacted or substantively enacted at

the balance sheet date

•Deferred tax assets are recognised to the extent that it is

probable that future taxable profit will be available against

which the deferred tax asset can be utilised

•Items recognised directly in other comprehensive income

are net of related current and deferred taxation.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

PARENT COMPANY ANNUAL FINANCIAL STATEMENTS

CONTINUED

181

a. Basis of preparation (continued)

Company’s own profit and loss account

The Company has taken advantage of the exemption in

section 408 of the Companies Act 2006 to not present its own

profit and loss account.

Financial assets

Financial assets are recorded at amortised cost applying the

effective interest rate method where they are classified as

amortised cost or fair value through profit and loss.

Financial liabilities

Financial liabilities are recorded at amortised cost applying the

effective interest rate method.

b. Investments in subsidiary undertakings

At 31 March

2022

2021

£’000

At the beginning of the year

1 701 774

Additions

—

Disposals

—

At the end of the year

1 701 774

c. Securities issued by subsidiary undertaking

On 16 October 2017, the Company acquired £200 million Fixed

Rate Reset Perpetual Additional Tier 1 Write Down Capital

Securities (AT1 securities) issued by Investec Bank plc. The

securities are perpetual and pay a distribution rate on

5 March, June, September and December, commencing from 5

December 2017. At each distribution payment date, Investec

Bank plc can decide whether to pay the distribution rate,

which is non-cumulative, in whole or in part. The distribution

rate is 6.75% per annum until 5 December 2024; thereafter,

the distribution rate resets every five years to a rate 5.749%

per annum plus the benchmark gilts rate. The AT1 securities

will be automatically written down and the Company will lose

their entire investment in the securities should the CET1

capital ratio of the Investec Bank plc Group, as defined in the

PRA’s rules, fall below 7%. The AT1 securities are redeemable

at the option of Investec Bank plc on 5 December 2024 or on

each distribution payment date thereafter. No such

redemption may be made without the consent of the PRA. On

22 January 2019, the Company acquired a further £50 million

of AT1 securities issued by Investec Bank plc.

On 4 October 2021, Investec Bank plc entered into a

£350 000 000 subordinated loan with Investec plc at a fixed

interest rate of 2.625% (2032 Loan). Interest, after the initial

short period distribution paid on 4 January 2022, is paid

annually commencing on 4 January 2023 and ending on the

maturity date. The loan will mature on 4 January 2032. The

borrower may prepay the loan in full on any date in the period

from 4 October 2026 to (and including) 4 January 2027

subject to conditions.

d. Debt securities in issue

On 5 May 2015, the Company issued £300 million 4.50%

Senior Unsecured Notes from its European Medium Term Note

programme (EMTN). The notes mature on 5 May 2022 and pay

interest at a fixed rate annually in arrears. On 7 August 2017,

the Company issued a further £100 million of the 4.5% Senior

Unsecured Notes due 2022, at a premium of 108.479%, which

has been consolidated with and form a single series with the

existing notes.

e. Subordinated liabilities

On 4 October 2021, Investec plc issued £350 000 000 of

2.625% subordinated notes due 2032 at a discount (2032

Notes). Interest, after the initial short period distribution paid

on 4 January 2022, is paid annually commencing on 4 January

2023 and ending on the maturity date. The notes are listed on

the London Stock Exchange. The notes will be redeemed at

par on 4 January 2032. The issuer may redeem the notes at

par on any date in the period from 4 October 2026 to (and

including) 4 January 2027 subject to conditions.

f. Audit fees

Details of the Company’s audit fees are set out in note 7 of the

Group financial statements.

g. Dividends

Details of the Company’s dividends are set out in note 11 of

the Group financial statements.

h. Share capital

Details of the company’s ordinary share capital are set out in

note 40 of the Group financial statements. Details of the

perpetual preference shares are set out in note 41 of the

Group financial statements. Details of the Other Additional

Tier 1 securities are set out in note 44 of the Group financial

statements.

i. Audit opinion

The audit opinion on the financial statements of the Investec

plc parent company is included within the independent

auditor’s report to the members of Investec plc within the

Investec Group's integrated annual report for the year ended

31 March 2022.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

PARENT COMPANY ANNUAL FINANCIAL STATEMENTS

CONTINUED

182

j. Subsidiaries

At 31 March 2022

Principal activity

Interest

held

United Kingdom

Registered office: 30 Gresham Street, London, EC2V 7QP, UK

Investec 1 Limited*

Investment holding company

100%

Investec Holding Company Limited*

Investment holding company

100%

Investec (UK) Limited

Holding company

100%

Guinness Mahon Group Limited

Holding company

100%

Investec Bank plc

Banking institution

100%

PIF Investments Limited

Dormant

100%

Beeson Gregory Index Nominees Limited

Dormant

100%

EVO Nominees Limited

Dormant

100%

Evolution Securities Nominees Limited

Dormant

100%

IEC UK Investment Management Limited

Leasing company

100%

Investec Finance Limited

Debt issuance

100%

Investec Group Investments (UK) Limited

Investment holding company

100%

Investec Capital Solutions Limited

Lending company

100%

Diagonal Nominees Limited

Nominee

100%

F&K SPF Limited

Property company

100%

GFT Holdings Limited

Holding company

100%

Investec Investment Trust plc

Debt issuer

100%

Investec Investments (UK) Limited

Investment holding company

100%

Inv-German Retail Ltd

Property company

100%

Investec Securities Limited

Investment holding company

100%

Technology Nominees Limited

Nominee

100%

Torteval LM Limited

Investment holding company

100%

Torteval Funding LLP

Financing company

100%

Nars Holdings Limited

Holding company

100%

Tudor Tree Properties Limited

Property company

100%

Willbro Nominees Limited

Nominee

100%

Evolution Capital Investment Limited

Investment holding company

100%

Investec Investments Limited

Investment holding company

100%

PSV Marine Limited

Shipping holding company

100%

PSV Anjali Limited

Shipping holding company

100%

PSV Randeep Limited

Shipping holding company

100%

Investec India Holdco Limited

Investment holding company

84%

Investec Alternative Investment Management Limited

Fund management activities

100%

Investec Capitalmind Investment Limited

Non-trading

100%

*Directly owned by Investec plc.

Annual Financial Statements

Investec plc Annual Financial Statements 2022

PARENT COMPANY ANNUAL FINANCIAL STATEMENTS

CONTINUED

183

j. Subsidiaries (continued)

At 31 March 2022

Principal activity

Interest

held

Registered office: 30 Gresham Street, London EC2V 7QN, UK

Investec Wealth & Investment Limited

Investment management services

100%

Anston Trustees Limited

Non-trading

100%

Bell Nominees Limited

Non-trading

100%

Carr Investment Services Nominees Limited

Non-trading

100%

Carr PEP Nominees Limited

Non-trading

100%

Click Nominees Limited

Non-trading

100%

Ferlim Nominees Limited

Nominee

100%

Investec Wealth & Investment Trustees Limited

Trustee services

100%

Investment Administration Nominees Limited

Non-trading

100%

PEP Services (Nominees) Limited

Non-trading

100%

R & R Nominees Limited

Non-trading

100%

Rensburg Client Nominees Limited

Nominee

100%

Scarwood Nominees Limited

Non-trading

100%

Spring Nominees Limited

Non-trading

100%

Tudor Nominees Limited

Non-trading

100%

Registered office: Reading International Business Park, Reading,

RG2 6AA, UK

Mann Island Finance Limited

Leasing company

100%

CF Corporate Finance Limited

Leasing company

100%

MI Vehicle Finance Limited

Leasing company

100%

Quantum Funding Limited

Leasing company

100%

Investec Asset Finance plc

Leasing company

100%

Australia

Registered office: Boardroom Pty Limited, Level 12, 225 George

Street, Sydney NSW 2000, Australia

Investec Holdings Australia Pty Limited

Holding company

100%

Investec Australia Property Investments Pty Limited

Holding company for property investment

100%

Investec Australia Finance Pty Limited

Lending company

100%

Investec Australia Pty Limited

Financial services

100%

Bowden (Lot 32) Direct Pty Limited

Development company

100%

Investec Australia Funds Management Pty Limited

Aviation trustee company

100%

Investec (Australia) Investment Management Pty Limited

Aviation fund company

100%

IWPE Nominees Pty Limited

Custodian

100%

British Virgin Islands

Registered office: Palm Grove House, PO Box 438, Road Town,

Tortola, British Virgin Islands

Finistere Directors Limited

Corporate director

100%

GFT Directors Limited

Corporate director

100%

Registered office: Craigmuir Chambers, Road Town, Tortola,

VG 1110, British Virgin Islands

Fertile Sino Global Development Limited

Holding company

100%

France

Registered office: 27 Rue Maurice Flandin – 69003 Lyon Cedex 03,

France

SCI CAP Philippe

Property company

100%

Annual Financial Statements

Investec plc Annual Financial Statements 2022

PARENT COMPANY ANNUAL FINANCIAL STATEMENTS

CONTINUED

184

j. Subsidiaries (continued)

At 31 March 2022

Principal activity

Interest

held

Guernsey

Registered office: Glategny Court, Glategny Esplanade, St. Peter

Port, GY1 1WR, Guernsey, Channel Islands

Investec Wealth & Investment (Channel Islands) Limited

Investment management services

100%

Torch Nominees Limited

Nominee

100%

Registered office: Glategny Court, Glategny Esplanade, St. Peter

Port, GY1 3LP, Guernsey, Channel Islands

Investec Bank (Channel Islands) Limited

Banking institution

100%

Investec Bank (Channel Islands) Nominees Limited

Nominee

100%

Registered office: PO Box 290, Glategny Court, Glategny Esplanade,

St Peter Port, Guernsey, GY1 3RP, Channel Islands

Hero Nominees Limited

Nominee

100%

Bayeux Limited

Corporate director

100%

Finistere Limited

Corporate nominee

100%

Finistere Secretaries Limited

Corporate secretary

100%

ITG Limited

Corporate director

100%

Registered office: P.O. Box 188, Glategny Court, Glategny

Esplanade, St Peter Port, Guernsey, GY1 3LP, Channel Islands

Investec Asset Finance (Channel Islands) Limited

Leasing company

100%

Registered office: Heritage Hall, Le Marchant Street, St Peter Port,

Guernsey, GY1 4JH, Channel Islands

Investec Captive Insurance Limited

Captive insurance company

100%

Jersey

Registered office: 2nd Floor One The Splanade, St Helier,

Channel Islands, Jersey, JE2 3QA

Appleton Resources (Jersey) Limited

Holding company

100%

Hong Kong

Registered office: Suites 3901-3908, 39/F, Jardine House,

1 Connaught Place, Central, Hong Kong

Investec Capital Markets Limited

Investment banking

100%

India

Registered office: B Wing, 11th floor, Parinee Crescenzo, Bandra

Kurla Complex, Bandra East, Mumbai – 400 051, India

Investec Credit Finance Private Limited

Lending platform

99%

Investec Global Services (India) Private Limited

ITES Outsourcing

100%

Annual Financial Statements

Investec plc Annual Financial Statements 2022

PARENT COMPANY ANNUAL FINANCIAL STATEMENTS

CONTINUED

185

j. Subsidiaries (continued)

At 31 March 2022

Principal activity

Interest

held

Ireland

Registered office: The Harcourt Building, Harcourt Street, Dublin 2,

Ireland

Aksala Limited

Property company

100%

Investec Holdings (Ireland) Limited

Holding company

100%

Investec Ireland Limited

Financial services

100%

Investec International Limited

Aircraft leasing

100%

Neontar Limited

Holding company

100%

Investec Securities Holdings Ireland Limited

Holding company

100%

Investec Private Finance Ireland Limited

Retail credit firm

100%

Investec Ventures Ireland Limited

Investment Management Services

100%

Venture Fund Private Principals Limited

Investment Services

100%

Investec Europe Limited

MiFiD firm

100%

Luxembourg

Registered office: 20 Boulevard de Kockelscheuer, L-1821

Luxembourg, Grand Duchy of Luxembourg

Investec Finance SARL

Dormant

100%

Singapore

Registered office: 8 Wilkie Road, #03-01 Wilkie Edge, Singapore

228095

Investec Singapore Pte Limited

Securities services

100%

Switzerland

Registered office: 23 Avenue de France, CH – 1202, Geneva,

Switzerland

Reichmans Geneva SA

Trading company

100%

Registered offices: Löwenstrasse 29, CH-8001 Zurich, Switzerland

Investec Bank (Switzerland) AG

Banking institution and wealth manager

100%

United States of America

Registered office: 10 E. 53rd St., 22nd floor, New York, NY 10022,

USA

US Multifamily GP LLC

Investment holding company

100%

Investec USA Holdings Corporation Inc

Holding company

100%

Investec Inc

Investment holding company

100%

Fuel Cell IP 1 LLC Investment

Investment holding company

100%

Fuel Cell IP 2 LLC Investment

Investment holding company

100%

Investec Securities (US) LLC

Financial services

100%

Registered office: One Carbon Center-Suite 501,

13905 McCorkle Ave. SE, Chesapeake, WV 25315

Appleton Coal LLC

Investment holding company

100%

Carbon Resources Development Inc

Mining company

100%

Maben Coal LLC

Investment holding company

100%

Annual Financial Statements

Investec plc Annual Financial Statements 2022

PARENT COMPANY ANNUAL FINANCIAL STATEMENTS

CONTINUED

186

j. Subsidiaries (continued)

Associates and joint venture holdings

At 31 March 2022

Principal activity

Interest

held

Australia

Registered office: Point Cook Road, Point Cook, Victoria, Australia

Point Cook (Trust Project No 9)

Property development

50%

British Virgin Islands

Registered office: Vistra Corporate Service Centre, Wickhams

Cay II, Road Town, Tortola VG1110, British Virgin Islands

imarkets (Holdings) Limited

Online trading platform

33%

Luxembourg

Registered office: 19, Rue Eugene Ruppert, L-2453 Luxembourg

Grovepoint S.a.r.l.

Investment and advisory

42%

India

Registered office: 32/1. 14th Cross, 9th Main, 6th Sector H.S.R.

Layout, Bangalore, Karnataka 560102, India

JSM Advisers Private Limited

Fund management

55%

Registered office: B Wing, 11th floor, Parinee Crescenzo, Bandra

Kurla Complex, Bandra East, Mumbai-400051

Investec Capital Services (India) Private Limited

Merchant Banking & Stock Broking

80.3%

France

Registered Office: 151 Boulevard Haussman, 75008 Paris, France

Capitalmind SAS

Advisory services

30%

Germany

Registered Office: Sonnenberger Strabe 16, 65193 Wiesbaden

Capitalmind GmbH

Advisory services

30%

Netherlands

Registered Office: Reitschweg 49, 5232BX's-Hertogenbosch, the

Netherlands

Capitalmind Partner B.V.

Advisory services

30%

Hong Kong

Registered office: Suites 3901-3908, 39/F, Jardine House,

1 Connaught Place, Central, Hong Kong

Templewater Hong Kong Limited

Investment banking

50%

Annual Financial Statements

Investec plc Annual Financial Statements 2022

PARENT COMPANY ANNUAL FINANCIAL STATEMENTS

CONTINUED

187

We supplement our IFRS figures with alternative performance measures used by management internally and which

provide valuable, relevant information to readers. These measures are used to align internal and external reporting,

identify items management believes are not representative of the underlying performance of the business and provide

insight into how management assesses period-on-period performance. A description of the Group’s alternative

performance measures and their calculation, where relevant, is set out below.

Alternative performance measures are not measures within the scope of IFRS and are not a substitute for IFRS financial

measures. Alternative performance measures constitute pro-forma financial information. The pro-forma financial

information is the responsibility of the Board of Directors and is presented for illustrative purposes only and because of

its nature may not fairly present the Group’s financial position, changes in equity, and results in operations or cash flows.

Adjusted operating profit

Refer to the calculation in the table below

£’000

31 March 2022

31 March 2021

Operating profit before goodwill, acquired intangibles and strategic actions

286 944

108 837

Add: Loss attributable to other non-controlling interests

—

861

Adjusted operating profit

286 944

109 698

Annuity income

Net interest income plus net annuity fees and commissions

Refer to pages 118 and 119

Core loans

The table below describes the differences between “loans and advances to

customers” as per the balance sheet and gross core loans

£’million

31 March 2022

31 March 2021

Loans and advances to customers per the balance sheet

14 426

12 336

ECL held against FVOCI loans reported on the balance sheet within reserves

(3)

(5)

Net core loans

14 423

12 331

of which amortised cost and FVOCI (“subject to ECL”)

13 814

11 819

of which FVPL

609

512

Add: ECL

134

170

Gross core loans

14 557

12 501

of which amortised cost and FVOCI (“subject to ECL”)

13 948

11 989

of which FVPL

609

512

Cost to income ratio

Refer to calculation in the table below

£’000

31 March 2022

31 March 2021

Operating costs (A)

775 866

766 367

Total operating income before expected credit loss impairment charges

1 087 969

946 400

Add: Loss attributable to other non-controlling interests

—

861

Total (B)

1 087 969

947 261

Cost to income ratio (A/B)

71.3%

80.9%

Coverage ratio

ECL as a percentage of gross core loans subject to ECL

Credit loss ratio

ECL impairment charges on core loans as a percentage of average gross core

loans subject to ECL

Gearing ratio

Total assets divided by total equity

Loans and advances to customers as a %

of customer deposits

Loans and advances to customers as a percentage of customer accounts

(deposits)

Net interest margin

Interest income net of interest expense, divided by average interest-earning

assets

Refer to calculation on page 118

Return on average assets

Adjusted earnings attributable to ordinary shareholders divided by average total

assets excluding assurance assets

Return on risk-weighted assets

Adjusted earnings attributable to ordinary shareholders divided by average risk-

weighted assets

ALTERNATIVE

PERFORMANCE MEASURES

Investec plc Annual Financial Statements 2022

ALTERNATIVE PERFORMANCE MEASURES

188

Cash and near cash

Includes cash, near cash (other 'monetisable' assets) and

Central Bank cash placements and guaranteed liquidity

ECL

Expected credit loss

Funds under management

Consists of third party funds managed by the Wealth &

Investment business, and by the Property business (which

forms part of the Specialist Bank) in the prior year

FVOCI

Fair value through other comprehensive income

FVPL

Fair value through profit and loss

Legacy business in the UK Specialist Bank ('Legacy')

Legacy, as separately disclosed from 2013 to 2018, comprises

pre-2008 assets held on the UK bank’s balance sheet, that

had very low/negative margins and assets relating to business

we are no longer undertaking

Net-zero

Balancing the amount of emitted greenhouse gases with

equivalent emissions that are either offset or sequestered.

Ninety One and Ninety One group

All references to Ninety One and Ninety One group refer to

Ninety One plc and its subsidiaries plus Ninety One Limited

and its subsidiaries

Ongoing basis

Ongoing information, as separately disclosed from 2013 to

2018, excludes Legacy assets (refer to definition), as well as

the following businesses sold in previous years: Investec Bank

(Australia) Limited, Kensington Group plc and Start Mortgage

Holdings Limited

Strategic actions

Comprises the closure and rundown of the Hong Kong direct

investments business and financial impact of group

restructures

Structured credit

Reflects the gross exposure of rated and unrated structured

credit classified within other debt securities and other loans

and advances on the balance sheet.

Refer to page 49 for detail

Subject to ECL

Includes financial assets held at amortised cost and FVOCI

DEFINITIONS

Investec plc Annual Financial Statements 2022

DEFINITIONS

189

The following abbreviations have been used throughout this report:

ABCAnti-bribery and corruption

ADR ForumArrears, Default and Recovery Forum

AGMAnnual general meeting

AIArtificial Intelligence

ALCOAsset and Liability Committee

AML Anti-money laundering

APRAAustralian Prudential Regulation Authority

AT1Additional Tier 1

BBLSBounce Back Loan Scheme

BCBSBasel Committee of Banking Supervision

BCRBanking Competition Remedies Limited

BIDBelonging, Inclusion and Diversity

BoEBank of England

BRCCBoard Risk and Capital Committee

BRRDBank Recovery and Resolution Directive

BSEBotswana Stock Exchange

CAChartered Accountant

CAMCombined Assurance Matrix

CBILSCoronavirus Business Interruption Loan

Scheme

CCBCapital Conservation Buffer

CCyBCountercyclical Capital Buffer

CDOCollateralised debt obligation

CDSCredit default swap

CEOChief Executive

CET1Common Equity Tier 1

CFPContingency funding plan

CFTCombating the financing of terrorism

CLBILSCoronavirus Large Business Interruption

Loan Scheme

CLOCollateralised loan obligation

CLRCredit Loss Ratio

COFI BillConduct of Financial Institutions Bill

COOChief Operating Officer

COVIDCorona Virus Disease

CRD IVCapital Requirements Directive IV

CROChief Risk Officer

CRRCapital Requirements Regulation

CRSCommon Reporting Standard

CSACredit Support Annex

CVACredit valuation adjustment

DCFDiscounted cash flow

DFMDiscretionary Fund Management

DLCDual listed company

DLC BRCCDLC Board Risk and Capital Committee

DLC NomdacDLC Nominations and Directors

Affairs Committee

DLC RemcoDLC Remuneration Committee

DLC SECDLC Social and Ethics Committee

EADExposure at default

EBAEuropean Banking Authority

ECEuropean Commission

ECLExpected credit loss

EIREffective interest rate

EPEquator Principles

EQAREngagement Quality Assurance Review

ERVExpected rental value

ESExpected shortfall

ESGEnvironmental, social and governance

EUEuropean Union

Euribor rateEuro interbank offered rate

EVTExtreme value theory

FATCAForeign Account Tax Compliance Act

FCAFinancial Conduct Authority

FINMASwiss Financial Market Supervisory

Authority

FPCFinancial Policy Committee

FRCFinancial Reporting Council

FRTBFundamental Review of the Trading Book

FSCSFinancial Services Compensation Scheme

FUMFunds under management

FVOCIFair value through other comprehensive

income

FVPLFair value through profit and loss

GDPGross domestic product

GDPRGeneral Data Protection Regulation

GFSCGuernsey Financial Services Commission

GMGuinness Mahon

GMRAGlobal Master Repurchase Agreement

GMSLAGlobal Master Securities Lending

Agreement

GRRRMFGroup Risk Review and Reserves

Matters Forum

HNWHigh net worth

HRHuman resources

HQLAHigh quality liquid assets

IAMInvestec Asset Management Limited

IAPFInvestec Australia Property Fund

IASsInternational Accounting Standards

IBLInvestec Bank Limited

IBORInterbank offered rate

IBPInvestec Bank plc

IBP BRCCIBP Board Risk and Capital Committee

IBP ERCIBP Executive Risk Committee

IBP Review ERRFIBP Review Executive Risk Review Forum

ICAAPInternal Capital Adequacy

Assessment Process

IFAIndependent Financial Adviser

IFCInternational Finance Corporation

IFRICInternational Financial Reporting

Interpretations Committee

IFRSInternational Financial Reporting Standard

IIAInstitute of Internal Auditors

ILAAP Internal Liquidity Adequacy

Assessment Process

ISDAInternational Swaps and Derivatives

Association

ITInformation technology

IW&IInvestec Wealth & Investment

JSEJohannesburg Stock Exchange

LCRLiquidity coverage ratio

LGDLoss given default

LHSLeft hand side

LSELondon Stock Exchange

LTILong-term incentive

MDRMandatory Disclosure Rules

MLROMoney Laundering Reporting Officer

MRELMinimum Requirements for Own Funds

and Eligible Liabilities

MRTMaterial Risk Taker

NCINon-controlling interests

NSFRNet stable funding ratio

NSXNamibian Stock Exchange

OCIOther comprehensive income

ODOrganisation development

OECDOrganisation for Economic Co-operation

and Development

PCAFPartnership for Carbon Accounting

Financials

GLOSSARY

Investec plc Annual Financial Statements 2022

GLOSSARY

190