a new force in european banking: integration moving ahead alessandro profumo - ceo
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A New Force in European Banking: Integration Moving Ahead Alessandro Profumo - CEO. GS European Financials Conference 2006 Barcelona - June 8 th , 2006. DISCLAIMER. THIS PRESENTATION IS FOR INFORMATION PURPOSES ONLY. - PowerPoint PPT PresentationTRANSCRIPT
A New Force in European Banking: Integration Moving Ahead
Alessandro Profumo - CEO
GS European Financials Conference 2006
Barcelona - June 8th, 2006
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DISCLAIMER
THIS PRESENTATION IS FOR INFORMATION PURPOSES ONLY.
The information contained in this presentation is for background purposes only and is subject to amendment, revision and updating. Certain statements contained in this presentation may be statements of future expectations and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties. In addition to statements which are forward-looking by reason of context, including without limitation, statements referring to risk limitations, operational profitability, financial strength, performance targets, profitable growth opportunities, and risk adequate pricing, as well as the words “may, will, should, expects, plans, intends, anticipates, believes, estimates, predicts, or continue”, “potential, future, or further”, and similar expressions identify forward-looking statements. Actual results, performance or events may differ materially from those in such statements as a result of, among other factors, the satisfaction of the conditions of the offering, changing business or other market conditions and the prospects for growth anticipated by UniCredit’s management. These and other factors could adversely affect the outcome and financial effects of the plans and events described herein. Forward-looking statements contained in this presentation regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. UniCredit does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should not place undue reliance on forward-looking statements, which speak only as of the date of this presentation.
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A new force in European banking
1Q06 results
Integration moving ahead
AGENDA
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2005: THE UCI-HVB DEAL CREATED A NEW FORCE IN EUROPEAN BANKING…
(1) Prices as of June 1, 2006
THE NEW UNICREDIT GROUP:
Source: Company data as of year end 2005
62.2 bn market cap (#3 among Eurozone banks)(1)
More than 29 million customers
Over 7,000 branches
Banking operations in 19 countries
Over 142,000 employees
427 bn customer loans
Powerful franchise
Leader in fast growing CEE markets
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…WITH A POWERFUL FRANCHISE COMBINING LOCAL STRENGTHS AND GLOBAL REACH…
(1) Ranking measured in terms of total assets. For market share calculations UniCredit and HVB may apply different definitions as far as the underlying data is concerned. Market share and ranking in Italy refer to customer loans. Ranking in leasing is by volumes(2) Including Hebros Bank, Eksimbanka, IMB and Yapi. Banca Ion Tiriac not included. For Koc Group and Yapi loans are consolidated pro-quota, while branches and customers are 100% included. For Ukraine and Baltic Countries customer loans, branches, employees and customers data not included
ITALY #2 with 10% market share(1)
GERMANY #2 with 5% market share (1)
AUSTRIA #1 with 18% market share (1)
CEE#1 franchise, much larger than the next largest
competitor (2)
LEASING #2 in Europe (1)
ASSET MANAGEMENT
232 bln AuM: a strong European player
MARKETS & INVESTMENT B.
Leading “European Regional Specialist”
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GLOBAL BANKING SERVICES DIVISION AS GROUP EXECUTION MACHINE
MULTI-LOCAL APPROACH, BUT WITH STRONG GLOBAL BUSINESSES
CLEAR GOVERNANCE FROM THE VERY BEGINNING
POWERFUL INTEGRATION ENGINE COORDINATED BY THE INTEGRATION OFFICE
DIVISIONALISATION BY CLIENT SEGMENT
…AND SUPPORTED BY CLEAR AND SOLID PILLARSG
RO
UP
PIL
LA
RS
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A new force in European banking
1Q06 results
Integration moving ahead
AGENDA
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IMPROVED ASSET QUALITY, WITH REDUCTION OF TOTAL GROSS BAD & PROBLEM LOANS
VERY GOOD PERFORMANCE IN 1Q06 CONFIRMING THE STRENGTH OF THE UCI-HVB COMBINED GROUP
WELL BALANCED PORTFOLIO, WITH IMPROVED OPERATING PERFORMANCE IN ALL COMPONENTS
QUALITY REVENUE GROWTH, WITH EXCELLENT RISE IN FEES
EFFICIENCY GAINS, WITH STAFF RIGHTSIZING ALREADY EVIDENT
SELECTIVE RWA REDUCTION AND INCREASING PROFITABILITY
QUALITY 1Q06 RESULTS WITH THE WHOLE GROUP MOVING IN THE RIGHT DIRECTION
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WELL BALANCED COMPOSITION OF THE NEW GROUP WITH IMPROVED OPERATING PERFORMANCE IN ALL COMPONENTS; OUTSTANDING HVB AND BA-CA RESULTS ALSO DRIVEN BY FAVORABLE FINANCIAL MARKETS
UCI (EX HVB GROUP)
SOLID CONTRIBUTION FROM ALL GROUPS
Operating income up 7.6% y/y Revenues +7.4%
Operating costs +7.3%
Operating income up 57.7% y/y Revenues +23.5%
Operating costs +5.7%
Operating income up 48.7% y/y Revenues +22.8%
Operating costs +8.7%
UCI Old PerimeterHVB Group ex BA-CABA-CA
522(19.6% of total)
806(30.3% of total)
1,333(50.1% of total)
HVB GROUP
BA-CA
1Q06 Operating Income Breakdown, mln
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STRONG REVENUE GROWTH (+10.1% Y/Y AT CONSTANT FX AND PERIMETER) WITH EXCELLENT FEE GROWTH IN ALL THE GROUPS
2,128
UCI GROUP TOTAL REVENUES(mln)
1Q06
+15.0%
Y/Y % ch.
o/w Net interest income (excl. div.)
666
5,955 (1)
+13.7%
+7.7%
o/w Net commissions
o/w Trading income
+21.3%
2,937
UCI (ex HVB Group)(mln)
1Q06
+7.4%
Y/Y % ch.
2,909 (1)
+8.4%
+15.6%
HVB GROUP(mln)
1Q06
+23.5%
Y/Y % ch.
3,029 (1)
+7.0%
+28.7%
-33.6%
1,165
204
1,456
+65.2%
1,464
461
SIGNIFICANT REVENUES PERFORMANCE OF UCI (ex HVB Group), also in terms of quality: Net interest income excl. dividends up 8.4% y/y Net commissions up 15.6% y/y Most dynamic revenues trend in Private & AM (31.6% y/y), New Europe (11.8% y/y) and Retail (7.2% y/y)
OUTSTANDING REVENUE GROWTH FOR HVB GROUP (+23.5% y/y) driven by: Strong commissions (+28.7% y/y) Favorable trend in financial markets (trading income: 461 mln, +65.2% y/y)
963
(1) Balance due to other revenues
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ASSET PROFITABILITY SIGNIFICANTLY INCREASED, ALSO THANKS TO A BETTER MIX OF RWA; STRONG CAPITAL GENERATION DRIVES GOOD IMPROVEMENT OF SOLVENCY RATIOS
TOTAL RWA (EoP) (1)
(bn)
418.7 -0.1%
Q/Q % ch.
418.5
BA-CA
HVB ex BA-CA
UniCredit (ex HVB Group)
418.0
-1.3%
+0.3%
+1.4%
-0.2%
78.5
Mar05
159.6
180.6
79.2
167.0
172.3
Dec05
80.4
Mar06
164.9
172.8
TOTAL REVENUES (annualized)/ AVG. RWA(1)
(%)
FY05 1Q06 (Annualized)
5.02%5.69%
+68 bp
5.01%
1Q05 (Annualized)
SUBSTANTIAL STABILITY OF TOTAL RWA and IMPROVED ASSET MIX:
Further reduced real-estate collateralized exposure for HVB Group
Growth in CEE and Italian Retail
PROFITABILITY OF RWA(2) SIGNIFICANTLY INCREASED: from 5.02% in FY05 to 5.69% in 1Q06
(1) Including RWA for credit, market and other risks and consolidated into UniCredit Group’s accounts; calculated according to KWG criteria; figures may not add up due to rounding differences
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71,470
71,149
-267 FTE VS DEC05: RIGHTSIZING ALREADY EVIDENT, PARTICULARLY AT HVB AND IN ITALY, NEW HIRINGS IN FASTEST GROWING BUSINESSES
FTE TREND - BA-CA Group
- 220 UNITS Q/Q, thanks to a reduction by 330 units in the Corporate Centre, more than compensating 125 units’ increase at IMB (International Moscow Bank)
+ 274 UNITS Q/Q mainly in CEE and for global leasing projects, while small decreases are concentrated in the Corporate Centre
FTE TREND - UCI (ex HVB Group)
Dec05 Mar06Mar05
71,874ch. q/q
1,100 FURTHER EXITS BY END ‘06 through disposals of 2S (Securities service business) and Uniriscossioni
-725 y/y
ch. q/q
Dec05incl. FTC(1)
Mar06
(1) First time consolidations in 1Q06: HVB Immobilien, HVB Bank Latvia, Joint Stock Commercial Bank HVB Ukraine, Bay. Wohnungs. F. Handel und Industrie GmbH, Nova banjalucka banka, CAIB Corporate Finance, CAIB International Markets, CAIB Securities Warsaw.
- 321 UNITS Q/Q (-725 Y/Y), reductions mainly concentrated in the Retail division
28,87628,656
HVB Group excl. BA-CA
-220
ch. q/q
Dec05incl. FTC(1)
Mar06
33,789 34,063
BA-CA Group +274
-321
FTE TREND - HVB Group ex BA-CA
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REDUCTION OF TOTAL NET BAD & PROBLEM LOANS (-3.0% q/q) in both UniCredit (ex HVB Group) and HVB Group, mainly driven by lower doubtful (-4.4% q/q) and past due (-12.7% q/q); NPLs substantially stable
NET BAD & PROBLEM LOANS (mln)
REDUCTION OF TOTAL GROSS BAD & PROBLEM LOANS (-2.4%) AND INCREASED COVERAGE RATIO
LOWER WEIGHT OF NET BAD & PROBLEM LOANS ON TOTAL LOAN PORTFOLIO, with positive contribution from both UniCredit (ex HVB Group) and HVB Group
TOTAL COVERAGE RATIO INCREASED BY ~30 BP, mainly thanks to an higher coverage on NPLs (from 59.9% to 61.3% for the total Group), particularly significant in HVB Group
17,614
12,494
5,120
-3.0%
-3.0%
-2.9%
Tot. net bad & problem loans
o/w HVB Group
o/w UCI (ex HVB Group)
MAR 06 Q/Q ch.
4.15%
49.7%
-11 bp
+0.3 p.p.
% of total net loans
% coverage
-3.2%
RER PORTFOLIO – total credit exposure (bn)
1Q06(1)
9.2
4Q05
9.5
4Q04
15.4
-40.3%
CONTINUED REDUCTION OF RER PORTFOLIO (-0.3 bn in 1Q06), due to ongoing successful workout activities; further reduction of around 2bn (with no negative impact on P&L ), due to additional sale, already agreed and expected to be completed in 2006
After sale(2)
~7.2
(1) 1Q05 based on Feb05 figures; 1Q06 based on Feb06 figures(2) Figure adjusted for the already agreed sale of the “Aphrodite tranche”
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SIGNIFICANT PROFIT GENERATION, +20.3% Y/Y SUPPORTED BY DOUBLE DIGIT GROWTH IN REVENUES; CORE TIER I +21BP IN JUST THREE MONTHS
mln
57 bp
1Q06
Cost of Risk(2), bp
1Q06
% ch. on 1Q05
-3 bp
Ch. on FY05
% ch. on
4Q05
% ch. on 1Q05 at
constant FX and
perimeter
(1) Calculated on 4Q05 net income without integration effects
P&L figures in IFRS according to Bank of Italy rules
Total Revenues 5,955 +15.0%+16.9%
1,357Net Income +20.3%>+100%(1)
Operating Income 2,660 +27.9%+52.3%
55.3%C/I Ratio, % -4.5 pp-10.4 pp
+10.1%
+14.6%
+21.5%
-4.1 pp
Operating costs -3,295 +6.4%-1.5% +2.5%
(2) Profit (loss) and net write downs on loans / Total Period Average RWAs for Credit Risks
5.74% Core Tier 1 ratio, % +21 bp
Core TIER 1 ratio +21 bp in just 3 months, thanks to strong organic earning generation
Further capital generating actions to be finalized by year-end 2006 (disposals of 2S Banca, Splitska Banka)
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A new force in European banking
1Q06 results
Integration moving ahead
AGENDA
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INTEGRATION EFFECTIVELY IMPACTS BUSINESS AND ORGANISATION IN GERMANY
COST MANAGEMENT New processes in place with more stringent guidelines Ongoing optimisation leading to Headquarter reductions
HVB CREDIT PROCESS REDESIGN
Diagnostics and design done Pilot implementation to begin by July 2006
RETAIL
Asset gathering: reviewed offer and pricing; renewed emphasis on insurance products; strong mutual fund sales in 1Q06 Retail mortgages: boost of profitability through cross selling
CORPORATE Cross border clients: ad hoc framework, products and control systems Leasing: Group Global Leasing Factory; new responsible appointed
IT SYSTEM HVB’s two IT systems merged by the summer Pilot Eurosig implementation (in Zivno) in place
INVESTMENT B. Definition of the global structure
ASSET MANAGEMENT
& PRIVATE B.
Private B: division set up with central organisational chart and dedicated branches and client managers AM: product range rationalization, centralization of investment processes and marketing, transfer of AM entities ownership by summer
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CENTRAL EASTERN EUROPE: A NEW SHAPE
MERGER PROJECTS WELL UNDERWAY IN SLOVAKIA, BULGARIA AND CZECH REPUBLIC
SPLITSKA BANKA: Announced sale to Société Générale of BA-CA’s 99.75% shareholding
Price: 1.0 bn, (4.4x 2005 book value and 26.9x 2005 P/E)
Enhanced Group capital position (estimated future impact on Tier 1: +20 bp)
Transaction completion, subject to regulatory approvals, expected by the end of June 2006
POLISH SITUATION SOLVED:
Banking Supervision Commission approves exercise of voting rights in BPH by UniCredit Agreement between UniCredit and the Polish Ministry of State Treasury (MST):
Sale of 200 outlets with support services and infrastructure via a competitive international sale process to be operating under the BPH brand
Sales deadline: 30 months from the signature of the agreement(1)
Remaining BPH activities to be merged into Pekao
(1) On April 19th, 2006.
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CONCLUSION
A NEW FORCE IN EUROPEAN BANKING BORN OF A VALUE CREATING DEAL
STRONG 1Q06 RESULTS SHOW THAT THE ENGINE IS ALREADY RUNNING
A WELL DESIGNED INTEGRATION IS GIVING THE FIRST RESULTS
NEXT EVENT: BOTTOM UP PLAN TO BE PRESENTED ON JULY 5, 2006
A New Force in European Banking: Integration Moving Ahead
Alessandro Profumo - CEO
GS European Financials Conference 2006
Barcelona - June 8th, 2006