unicredito italiano group andrea moneta – deputy ceo & cfo ubs warburg 2003 global financial...
TRANSCRIPT
UNICREDITO ITALIANO GROUP
Andrea Moneta – Deputy CEO & CFO
UBS Warburg 2003 Global Financial Services Conference
New York - April, 28th 2003
2
AGENDA
2002 Group Highlights
“The 2003 opportunity”: managing organic growth through 3 segment banks
2003 Outlook
3
Confirmed high profitability (ROE at 17.2%) even in a tougher than expected environment
Diversification of revenue sources enabled to keep revenues stable vs. 2001 (-0.2%)
S3 one-off costs partially counterbalanced by strict cost-control policies. Efficiency still at excellence levels (Cost/Income at 54.3%)
Strengthened Group financial position: improved coverage ratios and increased Core Tier I ratio (from 6.06% in 2001 to 7.10% in 2002)
2002 KEY HIGHLIGHTS
4
53.7% excl. S3 one-
off costs
DESPITE WORSE THAN EXPECTED ECONOMIC SCENARIO AND INTERNAL RESTRUCTURING UCI CONFIRMS IN 2002 ITS REVENUE GENERATION AND COST CONTROL CAPABILITY …
TOTAL REVENUES (Euro mln)
2001 2002
10,122 10,099
-0.2%
3Q02 4Q02
Quarterly evolution
2,408 2,472
2001 2002
5,353 5,483
+2.4%
3Q02 4Q02
Quarterly evolution
1,372 1,441
+5.0%
COST/INCOME RATIO %
OPERATING EXPENSES(Euro mln)
2002
54.3
2001
52.9
+2.7%
At unchanged FX (1)
+1.6%
+4.2%
+1.9%
+4.6%
(1) Calculated on the FX of all the currencies of New Europe countries where UCI is present with fully consolidated banks.
5
OPERATING INCOME (Euro mln)
2001 2002
4,769 4,616
-3.2%
3Q02 4Q02
Quarterly evolution
1,036 1,031
-0.5%
2001 2002
1,767 1,801
+1.9%
3Q02 4Q02
Quarterly evolution
441 352
ROE (1) %
NET INCOME (Euro mln)
2002
17.2
2001 restated
18.4
… LEADING TO A SATISFYING NET INCOME GROWTH (+1.9% ON 2001) AND GOOD PROFITABILITY LEVELS (ROE AT 17.2% IN 2002)
(1) Calculated on end of period net equity excluding profit for the period.
-20.2%
At unchanged FX
-1.3%
+1.8%
-1.6%
-21.5%
6
POSITIVE VALUE CREATION AND FURTHER STRENGTHENING OF CAPITAL BASE
9
904
6,346Italian banking
Wholesale banking
New Initiatives
CAPITAL ABSORPTION
1,023
-96
129
VALUE CREATION
8,979Group total(3) 654
NOPAT
1,594
-94
315
1,641
RARORAC %
16.1
n.m.
14.3
7.3
(1) Minimum regulatory capital, market risks, credit risks and operational risks (2) The Cost of Equity is related to the capital employed (Net equity for the Group and allocated capital for the business units)(3) Balance due to Corporate Center and Other companies, respectively -311 for NOPAT, 784 for Capital absorption and -448 for
Value Creation
MARGINAL RARORAC %
16.4
n.m.
38.0
11.4
(Euro mln)
NOPAT(a)
Risk taken(1)
(b)
Shareholder’s value added(c) =(a)-COE(2)
Value added per unit of risk taken
(c)/(b)
From 6.06% (Dec 01)to 7.10% (Dec 02)
CORE TIER 1 RATIO(considering all RWA)
From 10.96% (Dec 01)to 11.64% (Dec 02)
TOTAL CAPITAL RATIO(considering all RWA) From Euro 143.4 bn
(Dec 01) to Euro 138.1 bn (Dec 02), -3.7%
TOTAL RWA
936New Europe banking 46136 4.9 13.1
7
AGENDA
2002 Group Highlights
“The 2003 opportunity”: managing organic growth through 3 segment banks
2003 Outlook
8
OUR THREE SEGMENT BANKS REPRESENT THE PILLARS OF UCI’S NEW ORGANISATION
New Europe Banks
New Europe division
Private & AM division
Pioneer
Xelion
Corporate division
UBM
BMC(3)
Locat(4)
Clarima(1)
Adalya(2)
TradingLab
Retail division
(1) Consumer Finance (2) Retail mortgages (3) M/l term corporate financing (4) Leasing
9
OUR RETAIL BANK, WITH THE MISSION OF BEING THE “QUALITY BRAND” IN THE MARKET OF FINANCIAL SERVICES FOR FAMILIES AND SMALL BUSINESSES, ACTING AS THE “LARGEST ITALIAN LOCAL BANK”
OUR CORPORATE BANK, WITH THE MISSION OF BECOMING THE FIRST BANK FOR ITALIAN MID-CORPORATES THANKS TO A SUPERIOR ABILITY IN THE OFFER OF CORPORATE FINANCIAL RISK-MANAGEMENT SOLUTIONS
OUR PRIVATE BANK, WITH THE MISSION OF PROTECTING AND INCREASING WEALTH OF PRIVATE CUSTOMERS
THEY STARTED THEIR OPERATIONS ON JANUARY 1st WITH CLEARLY DEFINED MISSIONS
10
UNICREDIT BANCA IS THE SINGLE LARGEST BANK IN ITALY…
TOTAL LOANS Around 37 bn Euro
CURRENT ACCOUNTS Around 32 bn Euro
6.2 mln CUSTOMERS, of which
3,600 salespeople
2,500 financial consultants
1,300 account managers
4.8 mln MASS MARKET
0.9 mln AFFLUENT
0.5 mln SMALL BUSINESS
INDIRECT DEPOSITS Around 97 bn Euro
11
... WITH AN IMPORTANT PRESENCE IN THE WEALTHIEST REGIONS, WHERE THE FORMER 7 BANKS WERE TRADITIONALLY ROOTED
Italian ProvincesFinancial wealth (€M)
17.000 to 317.000 (35)
11.000 to 17.000 (25)
2.000 to 11.000 (43)
RETAIL PRIVATE CUSTOMERS FINANCIAL WEALTH
UCI BANCA BRANCHES MKT SH.
CENTRAL ITALY
5.5%
NORTH-EAST
16.2%
NORTH-WEST8.5%
SOUTH
4.7%
NATIONWIDE 9.2%
% Of italian GDP
UCI Banca Branches
#Branches mkt share
Lombardia 20.4% 251 4.5%
Piemonte 8.7% 425 17.9%
Veneto 9.1% 605 19.9%
Friuli V. G. 2.3% 152 17.6%
Emilia Romagna 8.8% 422 14.3%
Total 5 Regions 49.3% 1,855 12.6%
12
THE BANKS’ STRATEGIC GOALS AND GUIDELINES HAVE BEEN CLEARLY SET OUT
INCREASE in MARKET SHARES
Maintain COST/INCOME at EXCELLENCE LEVELS
Optimisation of Capital Allocation
Focus on SERVICE QUALITY and CUSTOMER SATISFACTION
Maintain excellence levels in the operating performance
Efficient allocation and motivation of Human Resources
STRATEGIC GOALS
STRATEGIC GUIDELINES
13
THE FIRST THREE MONTHS OF 2003 SHOW GOOD COMMERCIAL RESULTS, ALSO THANKS TO THE POSITIVEEFFECTS OF THE MAIN STRATEGIC PROJECTS
Good sales in first 3 months of 2003 vs. 4Q, traditionally strong in terms of sales:
avg. monthly sales of bancassurance: 496 mln single premiums (+80% vs. 4Q02) and 56 mln recurring premiums (+274% vs. 4Q02)
2,059 avg. monthly IMPRENDO subscriptions by new Small Business clients, +16.2% vs. 4Q02
Customer retention project: monitoring marginal and sleeping customers behaviours to re-activate relationships
Increase either in household’s mortgages or in current accounts volumes
Good pricing ability, resulting in a resilient spread (789 bp in March)
Focus on the 2 riskier customer classes (representing around 5% of the total loans but 29% of the total expected loss), to reduce exposure and drive down cost of risk
Lower than expected extraordinary costs for incentivisation to leave
MAIN PROJECTS UNDERGOING
FIRST 3 MONTHS ACHIEVEMENTS
Brand management: strong marketing efforts in order to enhance brand recognition at local and national level
14
UNICREDIT BANCA D’IMPRESA’s core active customers: represent around 40% of the total Italian market* on those, UBI has an exposure of 10.2% of their outstanding
loans portfolio**
UNICREDIT BANCA D’IMPRESA CAN ENJOY A HUGECRITICAL MASS
Around 3,500 employees
900 account managers210 branches articulated in 4 commercial regions
Around Euro 40 bn of total loans
50 teams of foreign services consultants
Around 92,000 total customers: around 55,000 represent the bank core customers (non
financial enterprises with a turnover of at least 1.5 mln Euro) out of these, 40,000 have outstanding loans
*UBI estimates**Bank of Italy Credit Bureau (Centrale Rischi)
15
STARTING FROM THE CURRENT PENETRATION OF THEEXISTING CUSTOMERS UNICREDIT BANCA D’IMPRESA HAS A BIG GROWTH OPPORTUNITY AT “LOW COST” AND “LOW RISK” THROUGH A REGIONAL DIFFERENTIATED APPROACH
UNICREDIT BANCA D’IMPRESA WILL INCREASE MARKET SHARES THANKS TO A SELECTIVE GEOGRAPHICAL ANALYSIS AND THE OFFER OF QUALITY SERVICES,
WELL AWARE OF THE RISK-REWARD PARADIGM
(1) Calculated dividing the number of core active customers of UniCredit Banca d’Impresa for the total customers of the region
10.2% avg. mkt share on core non-financial
customers
HIGH MKT SHARE
(>11%)
MEDIUM MKT SHARE
(9-11%)
LOW MKT SHARE
(<9%)
LOW COVERAGE (1)
(<30%)
MEDIUM COVERAGE (1)
(30-55%)
HIGH COVERAGE (1)
(>55%)
TRENTINO AA FRIULI VG VENETO
EMILIA R
TOSCANA
PUGLIA
SARDEGNA
PIEMONTE
V. AOSTA
MARCHE
MOLISE
LOMBARDIA
UMBRIA (2)
CAMPANIA
BASILICATA
SICILIA
LIGURIA LAZIO
ABRUZZO
CALABRIA
UNICREDIT BANCA D’IMPRESA WILL INCREASE MARKET SHARES THANKS TO A SELECTIVE GEOGRAPHICAL ANALYSIS AND THE OFFER OF QUALITY SERVICES,
WELL AWARE OF THE RISK-REWARD PARADIGM
(2) Banca dell’Umbria not included in the calculation (data not available)
16
UNICREDIT BANCA D’IMPRESA WILL LEVERAGE ON INFRA-GROUP AND “CROSS” DIVISION SYNERGIES TO DEVELOP ITS SERVICE MODEL
WE IDENTIFIED THREE MAIN AREAS ON WHICH WE WILL FOCUS TO ACHIEVE OUR GOALS:
Take advantage of synergies with our investment bank (UBM) to maintain and further develop leadership in corporate derivatives, with increasing focus on quality of service
Increase the weight of innovative products (Equity risk hedging, Commodity & Energy risk) vs. traditional ones (Interest rate & Forex hedging)
Increase our market shares on foreign payments & collections of our clients through a better coverage of our customer base
Sustain the internationalisation process of Italian companies leveraging on: the presence of our banks in New Europe to satisfy our customers’ needs the activity of our foreign branches (New York, London, etc.)
Develop a service model to answer the request for corporate finance services of our top clients, starting from:
the strong synergies with UBM (investment banking) and Banca Mediocredito (long term and project finance)
a team of specialists fully dedicated to 150/200 “leader” companies selected as pilot to better identify and satisfy their needs
CORPORATE DERIVATIVES
FOREIGN TRANSACTION SERVICES
CORPORATE FINANCE
17
SOUND COMMERCIAL RESULTS IN THE FIRST THREE MONTHS OF 2003 AND NEW PROJECTS WELL ON TRACK
Derivatives: around 13% customer base increase, with good increase in volumes and gross margins up 29% vs. same period in 2002
Improved pricing on loans: mark up at 2.69% in March (+ 14 bp vs January and +2 bp vs February)
Customers loans in line with end 2002 (-0.3%) despite rationalization of lending portfolio
Key clients: new service model to support origination of value added products (corporate finance, derivatives, asset finance etc.)
Foreign transactions services: dedicated team to increase mkt share on foreign payments and collections, also through synergies with UCI New Europe network
MAIN PROJECTS UNDERGOING
FIRST 3 MONTHS ACHIEVEMENTS
18
Around 550 Bankers
Around 95,000 customers, around 40,000 families
UNICREDIT PRIVATE BANKING IS THE BIGGEST PRIVATE BANK IN ITALY...
KEY FIGURES
More than 150 branches
Market Shares*: 1.8% in AM 2.4% in Mutual Funds 2.5% in Securities in Custody
Around Euro 36 bn Direct and Indirect Deposits
Assets under Management Securities in Custody
Liquidity Loans
Breakdown of Total Dir. & Ind. Deposits + Loans
7%
48%
44%
1%
* Source (for Total Italian Market): Internal calculations on Assogestioni and BankIT data
Note: Management accounts figures
ROOM TO INCREASE PENETRATION OF HIGH VALUE-ADDED SERVICES
19
… OPERATING IN AN INTERESTING MARKET, COMPOSEDBY FEW INDIVIDUALS CONTROLLING A HUGE PROPORTIONOF WEALTH
HNWI: liquid assets > Euro 500K; Affluent = € 50K TO € 500K; Mass =< €50KSource: 2000, National Statistics, PwC Analysis
88%
26% 20%
10%
52%55%
22% 25%
2%
Affluent
HNWI
Mass
21 mlnFamilies
€ 2,639bn
€ 11.2bn
Total Banking assets
Families Profits
> Euro 500K
< Euro 500K
WEALTH DISTRIBUTION AND UCI PB PRESENCE IN ITALY
Wealth in Italy*by region
UCI PB AuM** by region
3.5%
2%
4%
5%
9%
6%
9%
9%26%10%
7.6%
2.5%
18.3%18.2% 17,0%
3.3%
2.7%
20.3%
2.5%2%
1.6%
* Weighted Average of income and deposits by region** UCI PB AuMs by regionSource: UCI PB – Strategic Marketing calculations on UCIBANCA – Strategic Marketing data
20
THE BANK WILL LEVERAGE ON ITS STRONG COMPETITIVE POSITION
COMPETITORSTYPICAL TARGET
CUSTOMERPOSITIONING
UCI PB COMPETITIVE ADVANTAGES
LOCAL DOMESTIC PLAYERS
NATIONAL DOMESTIC PLAYERS
FOREIGN PLAYERS
Upper Affluent / Lower Private
(500,000 Euro<Total Financial Wealth<1 bn Euro)
All categories of Private Clients
Upper Private / Large Accounts(Total Financial
Wealth>10 bn Euro)
Strong for brand and tradition, but limited (on-shore)
Wider offer of products/ services
Higher quality of service
Superior skills and competencies
Higher focus and better strategy
Wide-spread presence all-across the country
Deeper knowledge/ understanding of customers
Synergies with other Group companies
Consolidated long-term “trust” with the client
Sub-scaled
Large but weak
21
RESULTS IN THE FIRST THREE MONTHS OF 2003 ARE ENCOURAGING, DESPITE THE ADVERSE MARKET SCENARIO
Around 400 net acquisitions of clients
Around Euro 1.2 bn Total Gross Sales of AM products and Euro 250 mln of structured bonds
Total Direct and Indirect Deposits stable on 31.12.2002 levels despite negative market performance (around –1.7%)
Good start of the second “tax-amnesty” for the repatriation of capitals managed in foreign countries, with the acquisition of 281 mandates
FIRST 3 MONTHS ACHIEVEMENTS
Development of a distinctive offer for highly sophisticated and wealthy customers
MAIN PROJECTS UNDERGOING
Optimisation of the offer for customers with less than Euro 500K; senior Private Bankers focused on the acquisition of new customers
Joint-project with UCI Banca d’Impresa for a combined offer of Corporate and Private services to entrepreneurs
22
AGENDA
2002 Group Highlights
“The 2003 opportunity”: managing organic growth through 3 segment banks
2003 Outlook
23
WE HAVE CONSIDERED TWO DIFFERENT MACROECONOMIC SCENARIOS FOR 2003
Economic scenario
Real GDP growth:
Refi ECB (as at 31.12.2003)
Mutual Funds Perf. (3)
Avg. Loans growth (2)
Avg. Deposits growth (2)
Avg. Sh. Term Spread (2)
BASE SCENARIO(60% likelihood1)
ADVERSE SCENARIO(35% likelihood1)
Gradual improvement of macroeconomic fundamentals
Still weak macroeconomic fundamentals
+1.0% +0.2%
2.50%
+5.5% +4.2%
+5.6% +8.0%
4.29% (-5bp on 2002)
+3.7% (on 31.12.2002) -3.0% (on 31.12.2002)
(2) Data related to the whole Italian Banking System
(1) Balance (5% likelihood) attributed to a more positive scenario
(3) Calculated on the whole stock of Mutual Funds in Italy (“perimetro Assogestioni”)
4.18% (-16bp on 2002)
1.75%
- in Italy
- in Poland +2.1% +1.0%
24
WE ARE ACTIVELY WORKING IN ORDER TO PRESERVE NET INCOME GROWTH EVEN IN THE ADVERSE SCENARIO
UCI 2003 BUDGET(Base Scenario)
IMPACTS OF THE ADVERSE SCENARIO (pre contingency plan)
Net interest IncomeModerate increase on 2002: increased market shares in loans and deposits in Italy offsetting slightly lower spreads
~ -100 Euro mln. vs Base Scenario
Net Non-interest Income
~ -260 Euro mln. vs Base Scenario
Growth related to increased net commissions (due to sales of high value added products, synergies among the segment-banks and growth of foreign- trade services) and income from financial transactions from Corporate Banking
Operating CostsModerate growth mainly due to S3 one-off costs and launch of strategic projects in the 3 segment banks. Tight control on ordinary costs
Savings for ~ 60 Euro mln costs
directly linked to lower revenues
Loan Loss ProvisionsOverall decreasing; moderate growth on 2002 levels net of extraordinary provisions (i.e. Pekao and alignment of provisioning criteria in the 7 banks)
In line with 2002, including 2002 extraordinary
provisions
25
Annex
26
Net extraordinary income
Net interest income (incl. div.)
Net non interest income
Total revenues
Operating income
Net write-down of loans
% ch. on FY01
Administrative costs (incl. depr.)
Net income +1.9
+0.9
-1.3
-0.2
+34.8
+69.3
+2.4
-3.2
Other net provisions* +32.6
Goodwill depr. -11.6
FY02
5,127
4,972
10,099
5,483
4,616
979
359
1,801
472
245
(Euro mln)
Minorities -37.8161
Taxes -17.51,317
(*) Including provisions to reserve for general banking risk
-20.2
+0.3
+5.2
+2.7
+84.5
n.m.
+5.0
-0.5
n.m.
-6.3
4Q02
1,253
1,219
2,472
1,441
1,031
321
218
352
309
59
-38.031
-42.0178
% ch. on 3Q02
FY02 CONSOLIDATED INCOME STATEMENT