Grahamston Offices. And I can't hear you, but I presume everyone is there. My name is Henrik Petoe. And on behalf of myself and Fani Tipi, I welcome you to our interim results presentation for the 2019 financial year. But before we start, I'd like to So a short word of safety.
Thank you, safely, to our predecessors, Stephen Costas, Berla Canton, who are both here, but in spite of having an operation, it made the effort to come and listen to make sure Frannie and I make no mistakes. We will try our best. Thank you for the help in the transition. Thank you for the support you gave us in preparing for today. Our Chairman, Terry Crossroads, many of our Board members and colleagues from senior management.
But most importantly, the 10,000 people who made this result, 10,000 people who serve our clients, who are busy working as we speak to build the Invatec business. Thank you very much for what we've achieved during the transition period and also putting our business on the right footing for growth because that's the story Fani and I want to share with you. I'm going to ask Fani to do most of the presentation, But I'd just like to say very simply, in a nutshell, our business has good momentum in spite of pretty tough macro conditions. We're lifting the return on it, we're concentrating on it. Our Asset and Wealth Management businesses are gathering significant net flows and growing.
And I think what's really important, the people in Investec are also ready for the major we announced mainly the Blue merger, which is all about focus, simplicity and setting up the platform for growth for the long term. But it's my privilege to ask my joint CEO and partner, Pharmaceuticals to do most of the presentation today. I'll take some difficult questions at the end of time. Thank you. Thanks, Edward.
Thank you, Hendrik, and good morning ladies and gentlemen. Thank you, Kintu, we are a tech team. So I'll do a bit of the lifting this morning. I'm going to try work both my iPad and the screen. Just check on me if I don't move the screen over there.
As I indicated, we are quite privileged and honored to be presenting the results and to be leading the business. We believe the results do reflect a very sound financial performance. Henrik has spoken about the fact that the ROE of the group is increasing. At March 2018, our ROE was at 12.1%. We are now at 13.4%.
So we are making progress in the execution of our strategy. And as Hendrik indicated again, we've had solid flows in Asset Management and in the Wealth business, about €4,800,000,000 in total. And the Specialist Bank in the UK has done particularly well, in fact, Just about doubling profits in the period. So if you go forward because I don't want to repeat what Henrik said, as we go forward, Our concentration and our focus will be on revenue growth, on capital allocation and on cost discipline. These results have been achieved despite very tough economic and market conditions.
In South Africa, where we have a potential operation, the South African economy has been particularly weak given the lack of confidence that is occasioned by political uncertainty. So you will generally see that the performance of both the banks in South Africa and the Wealth and Investment Business will be muted, although there was an increase in rent, but it was a very tough market overall. In the U. K, as we all know, Brexit has been the key issue of concern. Looks like there's been some progress, But we don't know whether that is real progress or not, but we shall see as time unfolds.
But the impact of that ongoing uncertainties is that both corporate and consumer confidence is affected. If we look at the equity markets, we all know that we are in a period where Liquidity is being drained out of the global financial system. So U. S. Interest rates are going up.
There is a threat, as you know, of some trade wars. And overall, what has been a very synchronized world economic growth is beginning to stutter. And the effect is that we have significant market volatility and uncertainty. In particular, the effect in emerging markets has been particularly strong. So if we look at the snapshot of the results, growth in operating profit and adjusted EPS is recorded at 14.2% and growth in sorry, in operating profit, 14.2%, growth in adjusted EPS at 6.4%.
We will unpack the difference in growth rates a little later. Again, as you said, Significant flows in Asset Management and Wealth of €4,800,000,000 came to total assets under management to 166 £500,000,000 In the Specialty Bank, one of the key drivers has been a substantial reduction in impairment as a consequence of us having largely dealt with the legacy portfolio. We did want the a significant impact of the reduction in impairment, we do see revenue growth. We also had a reasonable level of activity supporting earnings and revenue. The cost to income ratio has improved slightly.
It is still above our target range of under 65 percent, but we are beginning to see revenue grow faster than cost. Revenue growing at 7.6%, while costs are growing at 7.2%. We have been investing Quite significantly, particularly in the UK, Hendrick and Asset Management team has been over a period of time. Now that is the job of Nimi and John, but there is significant investment in the base. So as we go forward, we should reap the benefit of that investment, but also reap the benefit of scale as our revenues continue to improve.
We have a solid base of annuity income, which supports earnings as we go forward. Annuity income comprises in this regard 70 6 percent of income. So just to show you the results with a waterfall graph, we will see that we started with £714,600,000 and that we've had significant improvement of 14% in Asset Management in the UK and other regions, that we've had a significant increase of 96% in the Specialist Bank in the UK. And that is not only a consequence of the reduction in impairment. There has been improvement in the underlying business as well.
You will know that when markets are this choppy that your investment income, Both in listed equity and unlisted equity will generally be impacted negatively. So the story is not just about the reduction in impairments, there has been fundamental improvement in the underlying performance of the business. The Asset Management business in South Africa is up 9% in rates, so a credible performance given the tough market and economic backdrop. The world's value investment business in the UK is largely flat, down about 7% or so. It really is a cost story there because we've had to make investments In IT people, we've had regulatory costs as well.
We know about MiFID. We know about GDPR. And in essence, there was an improvement in operating income. As I said, there has been a cost issue there. So in general, good performance in the business helped largely by the Asset Management business in the U.
K. And the Specialist Banking business in the U. K. As well, but solid performance and resilient performance, in fact, by the businesses that are affected by the market. We have benefited from consistent contribution across geographies and businesses.
If you look at geographic diversity, The combined UK and other regions business grew up by 40.2% in pounds. That really is quite impressive growth in profits. If you look at South Africa, we have growth of 0.5% in rand. As I said, bad economy has been buffeted by a number of headwinds. So that performance, in my view, is resilient given the environment.
We have also seen an improved geographic balance in that Profit from South Africa versus the North South Africa regions has improved from 25% to 42% of total profit. So there's a better balance in terms of profit contribution from the regions. If you look at business diversity, you will see a consistent contribution over a long period of time and with the contribution from Capital Life Businesses at 36%. If we look at growth in key earning drivers, starting with 3rd party assets under management. I have already indicated that we have assets under management of GBP 156 GBP 500,000,000 in currency neutral on a currency neutral basis, the increase is 7.2% as opposed to the pound increase of 3.7%.
If we look at customer accounts And loans and advances, customer accounts decreased by 2.1%. Again, there is a currency impact there. On a current situation basis, customer accounts would have increased by 4.3%. On a currency neutral basis, an increase of 2.4%. If you look at the loans to deposit ratio, it has been consistent in the high 70s.
In this reporting period, it is at 28.2%. If you look at this movement in key earnings drivers, you can see that the engine room is running in a disciplined manner. Gross income was up 7.50 percent to GBP 1,300,000,000. Again, if you look at where we were in September 2017, you will see that net interest income has increased quite significantly at 11% with net annuity fee income up at 2%. We have 2,000,000 operating income, up 17%.
And I would like to mention that the corporate advisory business in the UK performed particularly Well, you will see that the investment and associated income line was significantly affected. You see a reduction of 27% there. As I indicated earlier, when markets are this difficult and it's choppy. We will always see an impact in or weaker performance in listed in our list of equity. That was the key driver of that particular reduction in performance on that line.
Looking at operating income, I have already indicated that recurring income as a percentage of total income is consistently large at about 7% to 6%. Looking at the balance of in the business model, over the period that Steven and Bernard and Glyn have been done in the business, you will know that previously we wanted to increase the contribution of capital light activities. You can see now that in this reporting period, that comes in at 55%, and we are quite pleased with the trends over the last 5 years. I have mentioned that we are beginning to see Sorry, I'm trying to yes, that's the right one. We are beginning to see the jaws widening.
So the efficiency of the business and the scale that comes the efficiency that comes also with scale is beginning to show results. If you look at costs, just to give you a bit of color around cost, you will see that Premises went up 14%. As you know, both the bank here and the Asset Management business have been in the process of moving premises, so we've had some additional costs there. Business expenses have gone up 18%. Again, that is driven largely by regulatory costs.
I spoke about Nefedalia and I spoke about GDPR. Those costs would have affected other management. It would have affected also the Wealth and Investment business and the bank also. We will see the personnel costs went up 6%. We've added about 180 people between the two periods, And the majority of those 180,000,000 will have gone into regulatory area.
So the regulatory burden, unfortunately, is not lightning up at all. Just to get back to impairments. As you can see in the graph there, the light gray bar has marginally disappeared because we have dealt with the legacy portfolio. There is still a small residual of about GBP 189 £1,000,000 But as we go forward, we take that is the remedy issue has been dealt with. So we are reporting simply on a statutory basis and not looking at ongoing and statutory because we have dealt with the issues of the past.
So in summary, we feel that our operating profit for the period started at 3 €115,000,000 ended at €359,000,000 Strong growth in operating income. As I said, the engine room is ticking on nicely. We've had the benefit of a reduction in impairment of €29,000,000 We've had operating expenses, as I have explained in the previous slides. And we will see there that there was an 86% increase in non controlled usage, driven largely by IPF Invested Property Fund and growth. We consolidated at the top.
Obviously, we've changed minorities up. That partly explains some of the is in the growth in operating profit. When you look at the growth in attributable profit, that is 8.2%. That's When you look at growth in EPS, adjusted EPS, that growth is 6.4%. Obviously, the tax in this period is lower than it was last year, and we also have had an increase in shares issued.
If we go to the next page looking at the performance again, I will just talk about the dividend was correct enough. So you have to give your view to the whole line that we would call the group that's going up. So on this slide, I would just like to highlight the fact that we have a dividend growth of 4.8% in pounds against a growth in adjusted EPS of 6.4%. In rent, that growth in the dividend will be 3% because the rent is stronger now than it was in November last year. Those who live in Tazahvi don't know that in November last year, the outlook, the political and economic outlook was quite significantly concerning.
If we look at performance against financial targets, our ROE is 13.4% as I said against the target of 12% to 16%. What is impressive here is that the ROE in terms has been upwards over a number of years. We have seen the relevant graph in a minute or so. I have talked about the cost to income ratio improving a little bit, still outside of target, but we I hope that we can get into target. The dividend cover at 2.6 times is in the middle of the range.
And as you can see, at September 2017, it was also at about 2 at 2.5. So generally, At insurance, that's where we normally are. We will see what we do at final. If we go to the next slide, you can see there the trends in R and D growth that I referred to a consistent improvement over time given some of the key decisions that have been taken over the last few years and given the adventuation on the strategic decisions taken the last few years. As we go forward, We hope to continue to see improvement based on growing the underlying client franchises, being disciplined around costs and optimizing capital allocation.
So if we look at The balance sheet is sound. The business is well capitalized, lower depressed with strong liquidity. I'm going to go into a quick review of the different divisions starting with Asset Management. As Asset Management, we will just go through quickly over this because we do have a big day coming on Tuesday, the larger Q will go into the detail of the business. We've seen growth we saw a slight compression in the margin.
At Section 17, The AUM over the profit period increased 5.1 percent to 109 billion, we have indicated a substantial net inflows of 4.1 Let me just look briefly at the 2 priorities of the business. The business is managed for the long term. So the focus is better short term and we look towards sustainable growth. With specifically tuned into the institutional and advanced channel that we has been targeted in growth over the years. We will capture the day book shows.
Specifically, the rebalancing in the North American institutional market. We also are lifting ourselves For the future, in that we do believe NGS in the long term is an area of increased productivity. We will obviously continue to do hard work in the remaining market that we have done well in over time. As always, we will continue to deepen and strengthen our investment and client capabilities. This business is about being relevant to clients and the creation of value and shareholder value specifically in the long term.
If we look at the Wealth and Investment Business. As I indicated, we had an interim financial income of 4.4%, but we've had some cost issues that I have talked about already. So increase in income, Significant increase in costs. Again, we've been investing significantly in this business for future growth. Some of you will know about our digital platform in the world's business called Click And in the Parafitin business, in conjunction with the private bank, we have the 1 place.
So investment in building platforms is one of our key strategic focus areas as we go forward. The asset under management grew by 4.5% in neutral currency, representing a net flow of BRL 650,000,000. These performances are consistent with the industry given just how difficult operating conditions are. The business will continue to focus on internationalization. The business will also continue to focus on enhancing their range of services and products to their clients.
I've already spoken about the need to invest in digital capabilities and specifically click in South Africa 1 place with the integration of the South African Wealth Business or the collaboration between the South African Wealth Business and the private bank. We will also focus, in particular in the UK market, on financial planning. If I move to the Specialist Bank, firstly, globally, an increase in profits of 18.8 percent €245,000,000 We've spoken about the increase in the profitability of the special in the UK, we've also indicated the resilient performance of the Perficient Specialist Bank even though Earnings are up by 4.2% only because that market has been particularly tough. The cost to income ratio of the Specialist Banking business globally is now at 50%. Operating income going up at 7.1% and costs up at 5.6%.
You will remember that we have been investing pretty significantly in the private bank in the U. K. That is likely done now. That cost is in the base. So we would expect, as we go forward, to gain some benefit out of that.
I have already indicated growth in core drivers of the business and customer accounts and in loans and advances. With respect to customer accounts, we saw in this period a significant increase in repay deposits and therefore the quality of our liabilities has increased. If we dig a little deeper into the Specialist Banking Business in the U. K. And other regions.
Net interest income up 18.7%, net fees up 14%. What is really important on this particular slide is the history more than just the numbers for the period. If you look over a 5 year period, You can see consistent increase in net interest income. You can see increases in net fees. You can see contribution in investment and associated income.
So this is not just a one reporting season issue. We have been growing the business consistently, the franchise is growing. We were at 3.2% at March, so there has been significant increase in the return that we have. Our I've indicated that it has been affected by tough operating environment. So we see softer loan book growth, client flow trading has been as well as well as investment income.
But this is in senior business. We have a premium condition in the African Banking market, and our clients are very resilient as well. So we have also been investing in new areas of growth in the South African Painting business. We have, at MacDonough, invested in Investing for Life. We Recently, we organized our business offering to the services in that market.
So that business is in imminent and they are making it new and to grow revenue, but more importantly, to serve the client base. Just looking at the return on equity there, the return on equity for this particular period is 12.4%. So it is seen that that Aron is just into well minds that there is a much investment portfolio there. The base and wealth business in South Africa is quite inconvenient as well. We'll not have access to the earnings and cash on asset management.
We will see ROE is still being significantly higher than where you would thought if you could just Thank you. So our concentration as we go forward will be to grow the underlying client franchise. This is what the business is about. Client acquisition and building with existing client relationships. We will be looking to continue the progress that has been made in the U.
K. Private bank. We will also, as I indicated, be divesting in technology platforms, spoke about one place in the market that we can invest here and generally other investment in technology to improve efficiency, to improve client experience and improve client acquisition. We believe technology is important. So we generally will be high-tech, but we will remain high touch as well because we believe personal service is absolutely critical as we go forward.
I've indicated that we've invested a lot that because the investment is in the base, revenues begin to grow and we have a disciplined cost approach that we would look to improve the jaws ratio. We will also look to manage our capital base. Specifically, we would be looking at efficient capital allocation. We would look to address In future, the dilution that has been caused by issues of shares to the share scheme. And the later on.
We intend to have a Capital Markets Day for the Bank and Wealth business on the 26th February. This business is about clients and this business is about the people that work in it. Because if we client, if we create an environment that motivates the people that Hendrik spoke about, the 10,000, we should be able to create value in the long term. Henrik, do you want to conclude with the slide or should I just take it? In conclusion, we are committed to stake on the value over the slide.
Thank you. I'm currently one of the most technologically savvy members of the Board that I'm struggling. In conclusion, we're committed to shareholder value. We have indicated that we are going to look to simplify the business to sharpen our focus as we grow and do so in a disciplined manner. Post demeasure, we will release 2 independent businesses that are posed for lengthen growth and value Any questions?
So we start with Johannesburg. Let's be democratic while the other guys are deciding on Brexit. Are we on? Yes, Kieran. Kieran, are you on?
Kieran,
do you
have any questions here? We have 100. Good morning. My name is Tisser Joao from Reuters. I just have a question for Fani.
Discovery and three New banks are
coming to town. Do you
lose any sleep over that? Thank you.
Do you want me to answer that
First of all, there is
a lot of competition in our market in South Africa. It's not just discovery. The second point, I think that there are many other financial services organizations in South Africa who should be a lot more worried about discovery coming in than ourselves. We are a very niche organization. We provide wealth and investment wealth and banking services, both locally and offshore, that is a key part of our offering to a very select niche target market base.
So Yes, everyone says you welcome competition. Well, I say that with a smile on my face. Competition is good because it's good for the market. But we wish Discovery well and also the other organizations that are coming now to do well because that will maintain the integrity of the financial service system, which is very important.
Thanks, Kieran. Kieran is the Global Head of the Private Bank and you will be the head of risk. So let's see what Discovery has to offer. Contribution is good. Shopping is again We
have another question here. Congratulations on the results. It's Banky from Merrill Lynch. Just one quick question. Your ROE improved to 13.4%.
Could you just please tell us what the impact of IFRS 9 was on your ROE?
Fani will deal with that. Okay. We've done the numbers. Nishlan, do you want to talk about it? In that case,
think the impact of IFRS 9, obviously, opening reserves were adjusted. That was about £265,000,000 That would have added about 0.4% to the underlying ROE number. The income statement effect of IFRS 9 has been fairly muted because we haven't clearly seen any key change from a modeling perspective. I think fundamentally, you see the growth in ROE in the current period really supported by the underlying fundamentals of the business.
Thank you. As we look at the ROE processing, it is an over time metric and it's an overtime consistent metric. So to get too hung up about a particular number at a point in time Detailed because you've got to look at the trend, and I think that's why I want to try to show you the trend. And while we have to be actually, I won't be here. So far, I was explaining to you that the ROE of about 15% in the last 15 more time, but don't give me I don't owe them to any target, but that really is the point.
That's it. Thank
you, Karen. Thank you. In London, The question around post demerger from bankers, will any report around the current We want to be quite and great about it. There is complexity that we did release in the long term. This is the right We've considered the issue, but we're quite clear that it's the structure that we will have going forward.
And I think it will be a problem trying to take the Saharan bills into the retail market, if you wanted to call it this way. Don't think you can get the next approval for that, singularly trying to take the UK bank to be owned by the South African business would not work commercially. So we are quite definitive about a business sector for the foreseeable future. Obviously, it's exactly the opposite for the Asset Management business to the football business. It's another capital market dependent business.
And I think that should be a away from DLP for our BO3, subject, of course, to regulatory approval We have
a question from the line.
I think we can maybe almost in time, I'm fine. Thank you very much for supporting us and we look forward to looking into the capital market sales coming up and then it will be back after what is probably a slightly tougher macro environment in the second 6 months of the year. And the