Investec Regulatory News (INVP)

Investec plc and Investec Limited (unaudited combined results for the six months ended 30 September 2014)

Investec, the international specialist bank and asset manager, announces its results for the six months ended 30 September 2014

Highlights

· Operating profit before goodwill, acquired intangibles, non-operating items and taxation and after other non-controlling interests ("operating profit") increased 8.6% to GBP240.8 million (2013: GBP221.7 million) - an increase of 21.8% on a currency neutral basis

· Recurring income as a percentage of total operating income amounted to 77.1% (2013: 70.9%)

· Wealth & Investment's operating profit increased by 23.3%. Asset Management reported operating profit 6.6% ahead of the prior period. Both divisions benefited from higher levels of average funds under management and combined net inflows of GBP4.2 billion

· The Specialist Banking business reported an increase in operating profit of 6.0% largely due to strong performances from the South African banking business and the UK Corporate and Institutional business, and a lower loss reported by Australia, partially offset by less investment income earned on the Hong Kong investment portfolio.

· The combined South African business reported operating profit 21.5% ahead of the prior year in Rand, whilst the combined UK and Other businesses posted a 17.6% increase in operating profit in Pounds Sterling

· The annualised credit loss charge as a percentage of average gross core loans and advances amounted to 0.70%, with impairments decreasing by 20.1%

· Capital remained well in excess of current regulatory requirements. All our banking subsidiaries meet current internal targets. Investec Limited and Investec plc should comfortably achieve a common equity tier one ratio above 10% by March 2016. Leverage ratios remain in excess of 7%

· Liquidity remains strong with cash and near cash balances amounting to GBP9.0 billion

Financial features

As the group's Pounds Sterling results have been negatively impacted by the depreciation of the average Rand: Pounds Sterling exchange rate of approximately 19% over the period, currency neutral financial features are reflected in the table below

* Before goodwill, acquired intangibles, non-operating items, and after other non-controlling interests

* *Before goodwill, acquired intangibles, non-operating items, and after total non-controlling interests

^Restated.

Business highlights - operating profit

· Asset Management: increase of 6.6% to GBP76.7 million (2013: GBP71.9 million) - an increase of 27.2% on a currency neutral basis

· Wealth & Investment: increase of 23.3% to GBP38.0 million (2013: GBP30.8 million) - an increase of 36.0% on a currency neutral basis

· Specialist Banking: increase of 6.0% to GBP126.1 million (2013:GBP118.9 million) - an increase of 22.8% on a currency neutral basis

Stephen Koseff, Chief Executive Officer of Investec said:

"These results demonstrate that we are delivering on our promises. The results would have been even stronger but for the continued weakness of the Rand. The investments we have made in the Asset Management and Wealth & Investment businesses are supporting solid net inflows. The performances in our South African bank and the corporate and institutional bank in the UK demonstrate the strength of our franchise."

Bernard Kantor, Managing Director of Investec said:

"Whilst we have a good corporate and institutional banking franchise in the UK, our focus remains on developing our high income private banking business and improving structural inefficiencies, which we believe is key to unlocking future value in the UK bank. Leveraging and growing our global private client platform, together with Investec Wealth & Investment presents an exciting opportunity for the group."

For further information please contact:

Investec +27 (0) 11 286 7070 or +44 20 (0) 7597 5546

Stephen Koseff, Chief Executive Officer

Bernard Kantor, Managing Director

Ursula Nobrega, Investor Relations (mobile:+27 (0) 82 552 8808)

Newgate (UK PR advisers)

Jonathan Clare /Jason Nisse/ Alistair Kellie

+44 (0) 207 680 6550

Presentation/conference call details

A presentation on the results will commence at 9:00 UK time/11:00 SA time. Viewing options as below:

· Live on South African TV (Business day TV channel 412 DSTV)

· A live and delayed video webcast at www.investec.com

· Toll free numbers for the telephone conference facilities

‒ SA participants: 0800 200 648

‒ UK participants: 0808 162 4061

‒ rest of Europe and other participants: +800 246 78 700

‒ Australian participants: 1800 350 100

‒ USA participants: 1855 481 6362

About Investec

Investec is an international specialist bank and asset manager that provides a diverse range of financial products and services to a niche client base in two principal markets, the United Kingdom and South Africa as well as certain other countries. The group was established in 1974 and currently has approximately 8 200 employees.

Investec focuses on delivering distinctive profitable solutions for its clients in three core areas of activity namely, Asset Management, Wealth & Investment and Specialist Banking.

In July 2002 the Investec group implemented a dual listed company structure with listings on the London and Johannesburg Stock Exchanges. The combined group's current market capitalisation is approximately GBP4.8 billion.

Investec plc and Investec Limited (combined results)

Unaudited combined consolidated financial results for the six months ended 30 September 2014

Overall group performance

Operating profit before goodwill, acquired intangibles, non-operating items and taxation and after other non-controlling interests ("operating profit") increased 8.6% to GBP240.8 million (2013: GBP221.7 million) - an increase of 21.8% on a currency neutral basis. Group results have been negatively impacted by the depreciation of the average Rand: Pounds Sterling exchange rate of approximately 19% over the period. The combined South African business reported operating profit 21.5% ahead of the prior period in Rand, whilst the combined UK and Other businesses posted a 17.6% increase in operating profit in Pounds Sterling.

Wealth & Investment's operating profit increased by 23.3%. Asset Management reported operating profit 6.6% ahead of the prior period. Both divisions benefited from higher levels of average funds under management and net inflows. Operating profit in the Specialist Banking business increased 6.0% largely due to strong performances from the South African banking business and the UK Corporate and Institutional business, and a lower loss reported by Australia, partially offset by less investment income earned on the Hong Kong investment portfolio.

Salient features of the period under review are:

· Adjusted earnings attributable to shareholders before goodwill, acquired intangibles and non-operating items increased 3.6% to GBP169.1 million (2013: GBP163.2 million) - an increase of 16.4% on a currency neutral basis.

· Adjusted earnings per share (EPS) before goodwill, acquired intangibles and non-operating items increased 3.7% from 19.0 pence to 19.7 pence - an increase of 16.3% on a currency neutral basis.

· Recurring income as a percentage of total operating income amounted to 77.1% (2013: 70.9%).

· The annualised credit loss charge as a percentage of average gross core loans and advances amounted to 0.70%, with impairments decreasing by 20.1% to GBP66.4 million.

· Third party assets under management increased 5.3% to GBP115.7 billion (31 March 2014: GBP109.9 billion).

· Customer accounts (deposits) decreased 1.6% to GBP22.3 billion (31 March 2014: GBP22.6 billion), however, adjusting for the sale of Investec Bank (Australia) Limited (as detailed in the "Notes to the commentary" section below) results in an increase of 5.6%.

· Core loans and advances decreased 6.9% to GBP16.0 billion (31 March 2014: GBP17.2 billion), however, adjusting for the sale of Investec Bank (Australia) Limited and Kensington (as detailed in the "Notes to the commentary" section below) results in an increase of 6.3%.

· The board declared a dividend of 8.5 pence per ordinary share (2013: 8.0 pence) resulting in a dividend cover based on the group's adjusted EPS before goodwill and non-operating items of 2.3 times (2013: 2.4 times), consistent with the group's dividend policy.

Strategic review

Over the past year the group has focused on simplifying and reshaping its Specialist Banking business with a view to improving returns and has successfully restructured and sold certain businesses. These transactions include the sale of Investec Bank (Australia) Limited to the Bank of Queensland Limited (which became effective on 31 July 2014) and the pending sales of the UK Kensington business and the Irish Start mortgage business. Further information is provided in the "Notes to the commentary" section below. Upon completion of these pending transactions the group is expected to bolster its common equity tier one ratio in Investec plc from 9.5% to approximately 11.0%; significantly improve its leverage ratio in Investec plc from 7.6% to approximately 8.7%; reduce legacy assets in the UK by approximately GBP1.5 billion and reduce total loans and securitised assets by approximately GBP4.1 billion.

Business unit review

Asset Management

Asset Management increased operating profit by 6.6% to GBP76.7 million (2013: GBP71.9 million) benefiting from higher average funds under management and net inflows of GBP2.7 billion. Total funds under management amount to GBP71.7 billion (31 March 2014: GBP68.0 billion). Operating margin has improved to 35.7%. The sale of the 15% stake in the business to management was completed on 31 July 2013.

Wealth & Investment

Wealth & Investment operating profit increased by 23.3% to GBP38.0 million (2013: GBP30.8 million) supported by higher average funds under management, net inflows of GBP1.5 billion and improved operating margins. Total funds under management amount to GBP43.7 billion (31 March 2014: GBP41.5 billion). The division in the UK has benefited from the investment in its platforms and the employment of additional professional investment managers. The business in South Africa has continued to successfully leverage off the division's global investment platform and the group's integrated Private Client offering ("One Place").

Specialist Banking

Specialist Banking operating profit increased by 6.0% to GBP126.1 million (2013: GBP118.9 million).

South Africa saw a strong increase in net interest income driven by loan book growth and a positive endowment impact. The unlisted investment portfolio performed well during the period. The group continued to grow its professional finance business and the investment and trading property portfolios delivered a sound performance. Corporate activity remained broadly in line with the prior period. The business reported a decline in impairments with the credit loss ratio on average core loans and advances improving to 0.29% (31 March 2014: 0.42%).

In the UK the ongoing business reported operating profit of GBP70.2 million (2013:GBP75.0 million), whilst the legacy business reported a loss of GBP52.2 million (2013: a loss of GBP49.2 million). The business reported an improvement in its cost of funding and experienced strong growth in corporate fees, notably in the corporate finance and corporate treasury teams. Results were negatively impacted by lower returns earned on the Hong Kong investment portfolio and marginally higher impairments.

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

Financial statement analysis

Total operating income

Total operating income before impairment losses on loans and advances increased by 1.1% to GBP952.5 million (2013: GBP941.8 million).

Net interest income increased by 4.4% to GBP332.4 million (2013: GBP318.4 million) largely due to book growth, lower cost of funding in the UK and a positive endowment impact in South Africa. This was partially offset by a lower return earned on the legacy portfolios which are running down and the sale of Investec Bank (Australia) Limited.

Net fee and commission income increased by 8.7% to GBP527.0 million (2013: GBP484.9 million) as a result of higher average funds under management and net inflows in the asset management and wealth management businesses. The Specialist Banking business benefited from a solid performance from the corporate finance and corporate treasury businesses, notably in the UK, and the professional private banking business in South Africa continued to perform well.

Investment income decreased by 25.6% to GBP46.0 million (2013: GBP61.8 million). The group's unlisted investment portfolio in the UK and South Africa delivered a solid performance. This was offset however, by a weaker performance from the Hong Kong portfolio.

Trading income arising from customer flow decreased by 5.8% to GBP51.3 million (2013:GBP54.4 million) whilst trading income from other trading activities reflected a loss of GBP9.2 million (2013: profit of GBP13.7 million) due to foreign currency losses largely offset in non-controlling interests as discussed below.

Other operating income includes associate income and income earned on an operating lease portfolio.

Impairment losses on loans and advances

Impairments on loans and advances decreased from GBP83.1 million to GBP66.4 million. Since 31 March 2014 gross defaults have improved from GBP658.7 million to GBP612.7 million. The percentage of default loans (net of impairments but before taking collateral into account) to core loans and advances amounted to 2.23% (31 March 2014: 2.30%). The ratio of collateral to default loans (net of impairments) remains satisfactory at 1.29 times (31 March 2014: 1.27 times).

Operating costs

The ratio of total operating costs to total operating income was 67.8% (2013:67.7%). Total operating costs grew by 1.7% to GBP645.2 million (2013: GBP634.7 million) reflecting: an increase in headcount in the asset management and wealth management businesses to support growth initiatives; inflationary increases in fixed costs in the Specialist Bank in home currencies; an increase in variable remuneration given increased profitability in certain businesses; a reduction in costs arising from the sale of certain businesses in Australia.

Impairment of goodwill

The goodwill impairment largely relates to the restructure of the Australian business.

Amortisation of acquired intangibles

Amortisation of acquired intangibles largely relates to the Wealth & Investment business and mainly comprises amortisation of amounts attributable to client relationships.

Net loss after tax on sale of subsidiaries and disposal groups held for sale

Net loss on sale of subsidiaries and disposal groups held for sale comprises a net profit on the sale of Investec Bank (Australia) Limited offset by a net loss on the pending sale of the Kensington UK and Start Irish operations as detailed in the "Notes to the commentary" section below.

The net loss after taxation can be analysed further as follows:

Taxation

The effective tax rate amounts to 18.8% (2013:17.4%).

Profit attributable to non-controlling interests 

Profit attributable to non-controlling interests mainly comprises:

· GBP9.4 million profit attributable to non-controlling interests in the Asset Management business.

· GBP8.3 million profit attributable to non-controlling interests in the Investec Property Fund Limited.

· A reduction of GBP9.6 million relating to Euro denominated preferred securities issued by a subsidiary of Investec plc which are reflected on the balance sheet as part of non-controlling interests. (The transaction is hedged and a forex transaction loss arising on the hedge is reflected in operating profit before goodwill with the equal and opposite impact reflected in earnings attributable to non-controlling interests).

Balance sheet analysis

Since 31 March 2014:

· Total shareholders' equity (including non-controlling interests) decreased by 2.1% to GBP3.9 billion. The weakening of the closing Rand exchange rate relative to Pounds Sterling has resulted in a reduction in total equity of GBP117 million.

· Net asset value per share decreased 4.9% to 357.7 pence and net tangible asset value per share (which excludes goodwill and intangible assets) decreased by 3.1% to 299.4 pence largely as a result of the depreciation of the Rand as described above.

· The return on adjusted average shareholders' equity increased from 10.0% to 10.7%.

Liquidity and funding

As at 30 September 2014 the group held GBP9.0 billion in cash and near cash balances (GBP4.5 billion in Investec plc and R82.3 billion in Investec Limited) which amounted to 32.7% of its liability base. Loans and advances to customers as a percentage of customer deposits amounted to 69.5% (31 March 2014: 72.0%).

Capital adequacy and leverage ratios

The group is targeting a minimum common equity tier one capital ratio above 10% by March 2016 and a total capital adequacy ratio range of 14% to 17% on a consolidated basis for each of Investec plc and Investec Limited respectively. The group's anticipated fully loaded Basel III common equity tier 1 capital adequacy ratios in both Investec plc and Investec Limited are reflected in the table below.

*Based on the group's understanding of current and draft regulations. "Fully loaded" is based on Basel III capital requirements as fully phased in by 2022.

^The capital adequacy disclosures follow Investec's normal basis of presentation so as to show a consistent basis of calculation across the jurisdictions in which the group operates. For Investec plc this does not include the deduction of foreseeable dividends when calculating CET1 as now required under the CRR and EBA technical standards. The impact of the final proposed ordinary and preference dividends totalling GBP54 million for Investec plc would be around 40 bps.

Outlook

The group has reshaped its business model, both through the sales of businesses referred to above and the restructuring that has taken place over the past few years. Whilst economic conditions have improved in the developed world, volatility and uncertainty remain a feature. Additionally, South Africa's economic growth has been weak with a difficult outlook, which could negatively affect growth prospects. Notwithstanding, the group believes that these strategic initiatives place Investec in a favourable position to make progress in its core client- and geographic- markets.

On behalf of the boards of Investec plc and Investec Limited

19 November 2014

Notes to the commentary section above

· Presentation of financial information

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

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

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

Unless the context indicates otherwise, all comparatives included in the commentary above relate to the six months ended 30 September 2013.

Amounts represented on a currency neutral basis for balance sheet items assume that the closing exchange rates of the group's relevant exchange rates, as reflected below, remain the same as at 30 September 2014 when compared to 31 March 2014. Amounts represented on a currency neutral basis for income statement items assume that the average exchange rates of the group's relevant exchange rates, as reflected below, remain the same as at 30 September 2014 when compared to 30 September 2013.

· Foreign currency impact

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

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

Exchange rates between local currencies and Pounds Sterling have fluctuated over the period. The most significant impact arises from the volatility of the Rand. The average exchange rate over the period has depreciated by 18.8% and the closing rate has depreciated by 4.4% since 31 March 2014.

· Sale of Investec Bank (Australia) Limited

The sale of Investec Bank (Australia) Limited's Professional Finance and Asset Finance and Leasing businesses and its deposit book to Bank of Queensland Limited was effective 31 July 2014 for cash proceeds of GBP122 million .This has resulted in the derecognition of approximately GBP2 billion of assets and approximately GBP2.2billion of liabilities associated with the businesses sold.

The group continues to have a presence in Australia, focusing on its core activities of Specialised Finance, Corporate Advisory, Property Fund Management and Asset Management. The remaining business will operate as a non-banking subsidiary of the Investec group. As a result, the group has decided to no longer report the activities of its Australian businesses separately with these activities now reported under the "UK and Other" geographical segment and the "UK and Other" Specialist Banking segment.

· Pending sales of Kensington Group plc and Start Mortgage Holdings Limited

On 9 September 2014 the group announced the sale of its UK intermediated mortgage business Kensington Group plc ("Kensington") together with certain other Investec mortgage assets to funds managed by Blackstone Tactical Opportunities Advisors L.L.C. and TPG Special Situations Partners for GBP180 million in cash based on a tangible net asset value of the business of GBP165 million at 31 March 2014.

On 15 September 2014 the group announced the sale of its Irish intermediated mortgage business Start Mortgage Holdings Limited ("Start") together with certain other Irish mortgage assets to an affiliate of Lone Star Funds.

The Start transaction has been approved by the regulator, whilst the Kensington transaction is still subject to regulatory approval.

As the group views these transactions as highly probable, the group has accounted for these transactions in terms of IFRS 5 and has thus reflected all assets and liabilities associated with the sale as a single asset and liability line on the face of the consolidated balance sheet as described as "non-current assets/liabilities or disposal groups held for sale".

· Accounting policies and disclosures

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

The accounting policies applied in the preparation of the results for the period to 30 September 2014 are consistent with those adopted in the financial statements for the year ended 31 March 2014 except as noted below.

IFRIC 21 'Levies'

The group has adopted IFRIC 21 'Levies' from 1 April 2014. The interpretation clarifies that the obligating event that gives rise to a liability to pay a levy is the activity that triggers the payment of the levy and an entity does not have a constructive obligation to pay a levy that will be triggered in a future period as a result of being economically compelled to continue to operate in that future period. The new interpretation has been applied retrospectively and its application has caused the recognition date for the Financial Services Compensation Scheme levy in the UK to be changed from 31 December prior to the beginning of the relevant levy year to the following 1 April. The group has accordingly restated the prior periods to reflect this change.

The impact of the restatement in the 6 months to 30 September 2013 is an increase in Operating Costs and Other liabilities of GBP1.1 million and a decrease in Taxation on operating profit before goodwill and Deferred taxation liabilities of GBP0.2 million. The impact in the year to 31 March 2013 is a decrease in Operating Costs and Other Liabilities of GBP4.7 million and an increase in Taxation on operating profit before goodwill and Deferred taxation liabilities of GBP1.0 million. The net impact on Retained income at 31 March 2014 is an increase of GBP2.8 million.

The financial results have been prepared under the supervision of Glynn Burger, the Group Risk and Finance Director. The financial statements for the six months to 30 September 2014 will be posted to stakeholders on 28 November 2014. These accounts will be available on the group's website at the same date.

· Proviso

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

§ the further development of standards and interpretations under IFRS applicable to past, current and future periods, evolving practices with regard to the interpretation and application of standards under IFRS.

§ domestic and global economic and business conditions.

§ market related risks.

· A number of these factors are beyond the group's control.

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

· Any forward looking statements made are based on the knowledge of the group at 19 November 2014.

· The information in the announcement for the six months ended 30 September 2014, which was approved by the board of directors on 19 November 2014, does not constitute statutory accounts as defined in Section 435 of the UK Companies Act 2006.The 31 March 2014 financial statements were filed with the registrar and were unqualified with the audit report containing no statements in respect of sections 498(2) or 498(3) of the UK Companies Act.

· This announcement is available on the group's website: www.investec.com

Combined consolidated statement of comprehensive income

*Restated for IFRIC 21 - refer to commentary section of this report.

**Net of taxation GBP(0.9) million (six months for 30 September: GBP3.1 million, year to 31 March 2014: GBP7.1 million).

Summarised combined consolidated cash flow statements

GBP'000

*Restated for IFRIC 21 - refer to commentary section of this report.

^ Includes the cash flow effect on the sale of subsidiaries and disposal groups held for sale. Refer to commentary section of this report.

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

Combined consolidated balance sheet

*Restated for IFRIC 21 - refer to commentary section of this report

Summarised combined consolidated statement of changes in equity

*Restated for IFRIC 21 - refer to commentary section of this report.

Segmental geographic and business analysis of operating profit before goodwill, acquired

intangibles, non-operating items, taxation and after other non-controlling interests

Segmental geographic and business analysis of operating profit before goodwill, acquired

intangibles, non-operating items, taxation and after other non-controlling interests*

*Restated for IFRIC 21 - refer to commentary sec ction of this report.

Additional IAS34 disclosure

Analysis of assets and liabilities at fair value and amortised cost

Financial instruments carried at fair value

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

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

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

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

Assets and liabilities related to the long-term assurance business attributable to policyholders have been excluded from the analysis as the change in fair value of related assets is attributable to policyholders. The linked assets are classified as level 1.

Transfers between level 1 and level 2

There have been no transfers between level 1 and level 2 in the current period.

The following table quantifies the gains or losses included in the income statement and other comprehensive income recognised on level 3 financial instruments:

Six months to 30 September 2014

Six months to 30 September 2014

For the period ended 30 September 2014, instruments to the value of (GBP2.3 million) were transferred from level 3 into level 2 due to the valuation methodologies being reviewed and observable inputs are used to determine the fair value. GBP1.9 million worth of assets have been transferred from level 3 to level 2 due to an observable market input becoming available. In addition GBP43.6 million of instruments previously classified as level 3 were transferred to level 2 as a result of being held as assets and liabilities held for sale at 30 September 2014. This has resulted in a change in valuation technique from their original holding at fair value to fair value less cost to sell which is in accordance with IFRS5 and is measured by reference to the agreed sale documents. The assets and liabilities held for sale also include assets and liabilities which were previously measured at amortised cost which are now held at fair value less costs to sell. There were transfers from level 2 to the level 3 category to the value of GBP60.2 million because the underlying circumstances of the instrument changed and as a result, the significant valuation inputs became unobservable in the market. The group transfers between levels within the fair value hierarchy when the observability of inputs change or if the valuation methods change.

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 following table shows the sensitivity of these fair values to reasonably possible alternative assumptions, determined at a transactional level:

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