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Forward Looking Statements
This presentation may contain certain statements that express the management’s expectations, beliefs and assumptions about future events or results. Such statements are not historical fact, being based on currently available competitive, financial and economic data, and on current projections about the industries BM&FBOVESPA works in. The verbs “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “plan,” “predict,” “project,” “target” and other similar verbs are intended to identify these forward-looking statements, which involve risks and uncertainties that could cause actual results to differ materially from those projected in this presentation and do not guarantee any future BM&FBOVESPA performance. The factors that might affect performance include, but are not limited to: (i) market acceptance of BM&FBOVESPA services; (ii) volatility related to (a) the Brazilian economy and securities markets and (b) the highly-competitive industries BM&FBOVESPA operates in; (iii) changes in (a) domestic and foreign legislation and taxation and (b) government policies related to the financial and securities markets; (iv) increasing competition from new entrants to the Brazilian markets; (v) ability to keep up with rapid changes in technological environment, including the implementation of enhanced functionality demanded by BM&FBOVESPA customers; (vi) ability to maintain an ongoing process for introducing competitive new products and services, while maintaining the competitiveness of existing ones; (vii) ability to attract new customers in domestic and foreign jurisdictions; (viii) ability to expand the offer of BM&FBOVESPA products in foreign jurisdictions. All forward-looking statements in this presentation are based on information and data available as of the date they were made, and BM&FBOVESPA undertakes no obligation to update them in light of new information or future development. This presentation does not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities where such offer or sale would be unlawful prior to registration or qualification under the securities law. No offering shall be made except by means of a prospectus meeting the requirements of the Brazilian Securities Commission CVM Instruction 400 of 2003, as amended.
3
HISTORY, BUSINESS MODEL AND CORPORATE GOVERNANCE
BRAZILIAN MARKET OPPORTUNITIES
MAIN GROWTH INITIATIVES
OPERATIONAL PERFORMANCE
FINANCIAL HIGHLIGHTS
APPENDIX (includes results for 1Q13)
5
1890: Foundation of Bolsa
Livre (BOVESPA's predecessor)
1986: Start of BM&F
activities
Aug 2007: BOVESPA Hld
demutualization
Sep 2007: BM&F demutualization
Oct 2007: BOVESPA Hld IPO (BOVH3)
Nov 2007: BM&F IPO (BMEF3)
May 2008: integration between BM&F and
BOVESPA Hld and creation of BM&FBOVESPA (BVMF3)
1967: BOVESPA’s
Mutualization
MARKET CAPITALIZATION (US$ billion) AND OPERATING MARGIN (%)
•¹12M to Jun. 28, 2013; ²12M to Mar 31, 2013. Source: Bloomberg (June 30,2014).
History of BM&FBOVESPA Important global exchange
6
PRE-TRADING TRADING POST-TRADE
Access Trade Allocation Transfer
Clearing/risk analysis
Position/ Collateral
Depository Auxiliary Services
VALUE CHAIN
Vertically integrated
Trading Platform: equities, derivatives, government and
corporate bonds, funds, spot FX, among others
Post-Trade Platform:
Central Counterparty (CCP) : An entity that interposes itself
between operations or contracts, becoming the guarantor of all
business
Settlement System (SSS): system that allows the transfer of
securities or assets from investors, in which the transfer may be
free or against payment
Central Depository (CSD): performs centralized asset custody and
treatment of corporate actions (dividends, stock splits, etc.)
Services for issuers and brokers
Listing (stocks, funds, corporate bonds, securitization, among other)
Trading access (brokers)
Securities Lending
Custody for clubs and foreign investors (2.689 account)
Market Data (vendors)
Indices Licensing
Software Licensing
OTC (derivatives and fixed income)
Commodities certification
Vertical model as a differential Value gained across most of the chain
Settlement Risk Analysis
(DMA) Risk Analysis
7
DTCC
BRAZIL (Internalization of orders is forbidden)
US (Internalization of orders is allowed)
Post trade CCP SSS CSD
Trading
Brokers
A and B
Investors Investors
Brokers A and B
Investors Investors
Broker
A
Broker
B
Model 100% vertical: clearing, settlement and central depository at the final beneficial
owner level
Brokers settle positions and control their clients’ portfolios through BM&FBOVESPA’s
infrastructure (impact on post-trade fees)
Clearing, settlement and custody occur at the brokerage houses
Each prime broker has its own structure to control its customers’ portfolios and settle
positions (impact on the prime broker’s costs)
Trading Venues
Vertical model as a differential BM&FBOVESPA present at all post-trade stages
8
Brokerage houses & investors
Trading
Post-Trade
Regulations prohibit internalization of orders, dark pools and ATS/MTFs and simultaneous exchange/OTC equities trading
Settlement and clearing of equities trading must be done through a CCP
Settlement and clearing at the final beneficial owner level make the Brazilian market safer and more resilient
Under the prevailing regulations, potential competitors must provide an integrated solution with the same status regarding rules and transparency
In Brazil the final investor pays the exchange: compared to other markets we have a competitive all-in-cost, as BM&FBOVESPA provides more services than other exchanges
Naked access is not allowed
Naked short selling is not possible
Brazilian market regulatory framework Resilience and safety as priorities
9
EXECUTIVE OFFICERS BOARD OF DIRECTORS
COMMITTEES
Edemir Pinto CEO
Luis Furtado CIO
Cícero Vieira COO
Daniel Sonder CFO
Eduardo Guardia Chief Product / IRO
Audit Committee
Risk Committee
Nominations and Corporate Governance Committee
Compensation Committee
Corporate Governance Multidisciplinary knowledge in conducting business
Charles Carey Independent Director, Director of CME Group
José Roberto Mendonça de Barros Independent Director, economist and professor
Pedro Parente (Chairman) Independent Director, CEO of Bunge Brasil
Marcelo Trindade (Vice Chairman) Independent Director, lawyer
Claudio Haddad Independent Director, engineer and professor
André Esteves Non Executive Director, CEO of BTG Pactual
Alfredo Antônio Lima de Menezes Non Executive Director, Executive Officer of Bradesco
Luiz Fernando Figueiredo Independent Director, Co-Founder of Mauá Investments
Luiz Nelson Guedes De Carvalho Independent Director, professor
Daniel Luiz Gleizer Non Executive Director, Director of Itaú Unibanco
José Berenguer Neto Non Executive Director, CEO of JP Morgan Brazil
Advisory Committee For The Securities Intermediation Industry
10
AGM - Mar. 24, 2014
Number of individual shareholders 51,924
Number of institutional shareholders 3,245
Total number of shareholders 55,169
Free float (ON)¹ 1,852,153,920 (97.5%)
Ownership structure Widely-held shareholder base
¹ Updated on March 11, 2014
10.44%
6.84%
5.32%
3.15%
5.02%
69.23%
Funds managed by OppenheimerFunds, Inc.
Funds managed by Vontobel Asset Management Inc.
CMEG Brasil I Participações Ltda.
Funds managed by BlackRock Inc.
Treasury stock
Other
Opportunities in the Brazilian market BM&FBOVESPA is ready to capture future growth
Growth opportunities in the Brazilian equities and derivatives markets
EQUITIES MARKET
Portfolio diversification: diversification of institutional investors’ portfolios with a higher participation of equities
Retail investors: small number of retail investors and growth of the middle class
Listed companies: low number of listed companies, while important sectors are not adequately represented on the exchange
DERIVATIVES MARKET
Growth of credit and fixed-rate government debt: higher demand for hedging from financial institutions and institutional investors
Growth of foreign trade: higher demand for hedging through FX contracts
Equities market development: growth in demand for index-based contracts
OTC derivatives: capital requirements (Basel) should benefit OTC transactions through a CCP
14
Capital Market Great opportunities in the equities and derivatives segments
Funds’ AUM evolution (in BRL billion). Global average of 40% for equities
LISTED COMPANIES
Source : BM&FBOVESPA, ANBIMA , WFE (Dec-13) and ABRAPP. *Updated to Sep/13
INVESTMENT FUNDS¹ NUMBER OF CUSTODY ACCOUNTS (thousand)
PENSION FUNDS¹
Number of retail investors represents only 0.3% of the population (lower than global average)
Lower number of listed companies in comparison with other countries
Participation of equities in the portfolio of pension funds
*
¹ May have a partial overlap between investment funds and pension funds portfolios.
6,973
5,008 4,132 3,886
3,245
2,055 1,813
363
India USA China/HK Canada Spain Australia Korea Brazil
16
Update of strategic projects
*IPN/CORE implementation requires the authorization of the regulators.
PUMA Trading System™ - Multi-Asset Trading Platform A high-performance, high-speed and high-capacity electronic trading platform RTT (Round Trip Time) of less than one millisecond Derivatives and FX module: implemented in Oct/11 Equities module: implemented in Apr/13
Clearinghouses integration The integration of BM&FBOVESPA’s clearinghouses will enhance the Company’s competitive position Development of the new risk architecture (CloseOut Risk Evaluation - CORE)* will increase allocation
efficiency for clients Final tests for derivatives scheduled for Jul/14
iBalcão – OTC Registration Platform Registration of OTC derivatives and fixed income securities (CDB, LCA, LCI, COE)
Initiatives for Small and Medium Enterprises (SMEs) Establishment of the Technical Committee for Smaller Offerings composed of private sector and
government agencies Developing proposals to facilitate capital raising through issuance of shares (incentives to SMEs, investors
and intermediaries) Project was presented to the Ministry of Finance in Jul/13
17
BM&FBOVESPA IT Developments Building a world-class IT platform
Increasing competitive differentiation for derivative and cash equity markets
LATENCY
BM&F Segment (derivatives) BOVESPA Segment (equities)
70
2520
10-15~1 ~1 <1
2007 2008 2009 2010 2011 2012 2013
450
300
20 10-15 10-15 10-15 <1
2007 2008 2009 2010 2011 2012 2013
Core of the system (average latency milliseconds) Core of the system (average latency milliseconds) Latency has been
dramatically reduced
Standard deviation of latency has been
reduced by more than 200
MACRO VIEW: PERFORMANCE OF CO-LOCATION
Co-location
Participant
Infrastructure of PUMA Trading System
Gateway +
LiNe Matching Engines
~300 µs ~500 µs ~200 µs
~1000 µs
Network Infra¹
Networks built for the development and deployment of PUMA platform
Gateway² + LiNe
Pre-trade risk control (LiNe) represents about 60% of Gateway + LiNe latency
Matching Engines³
Meet all auction rules and bands/fluctuation limits set out in regulations (100% of orders)
Network
18
Clearinghouses’ Integration Further differentiation in BM&FBOVESPA post-trade
Equities and corporate debt (BRL 80.3 bn*)
Equities, ETFs and corporate fixed income cash market
Equity and indices derivatives (options and forward)
Securities lending
Derivatives (BRL 127.4 bn*)
Financial and
commodities derivatives (futures, options and forwards)
OTC derivatives
FX (BRL 5.9 bn*)
FX spot market
(US$ vs. BRL )
Securities (BRL 0.8 bn*)
Cash market and
forward market for government bonds
INTEGRATED CLEARINGHOUSE** =
Capital efficiency
* Aggregate of pledged collateral at our clearinghouses totaled BRL 214.4 billion in Dec 31, 2013. **IPN/CORE implementation requires the authorization of the regulators.
19
Product and Market Development Listed products
LISTED PRODUCTS
ETFs (exchange traded funds): Equities, fixed income, international and real estate funds
Market maker: Cash equities, options, commodities, futures
Ibovespa: Methodology review
SMEs (small and medium enterprises): Bovespa Mais
Incentive programs: Retail investors
Selic derivatives: Selic futures (OC1), FX spread (DCO), FX swap (SCS)
Options on single stocks: New fee policy for HFTs/day traders
Futures Contracts: Ethanol
BDRs: Adding new BDRs programs
Securities Lending: BTC platform
20
Product and Market Development iBalcão evolution
CDB (Certificados de Depósito Bancário, or time deposits): recently launched in Mar-14 (“CDB escalonado” under development)
LCI (Letra de Crédito Imobiliário, or Real Estate Credit Bill): deployed for 100% of the market in Mar-14
COE (Certificados de Operações Estruturadas, or Structured Notes ): 53 structures
LCA (Letras de Crédito do Agronegócio, or Agribusiness Credit Bill): registration admitted to 100% of the market
LF (letras financeiras, or financial bills): under development
NDF (Non-Deliverable Forward): deployed in Jul-13
Flexible options on single stocks
Swaps
FIXED INCOME DERIVATIVES
21
Securities Lending Real Estate Funds (FIIs) Options with Market Maker
(Open Interest - average for the period - in BRL billion)
Initiatives to develop and prompt higher volume in certain products
Performance shows that the initiatives are being well received by the market
ETFs Brazilian Treasury Direct - Tesouro Direto Agribusiness Credit Bills
(ADTV in BRL million)
+35.9%
(ADTV in BRL million)
(ADTV in BRL million) (Custody – in BRL billion)
High growth products Growing sophistication of market participants
CAGR(09-14): + 87.9% CAGR (10-14): +13.7%
CAGR (10-14): +33.7% CAGR (10-14): +30.8%
*Updated to June 30,2014. **Updated to June 30, 2014
(AUM – in BRL billion)
*
23
BOVESPA Segment Operational highlights
*Updated to June 30, 2014. **Ratio of cash market trading volume to the market cap of the exchange.
AVERAGE DAILY TRADING VOLUME – ADTV (BRL billion)*
AVERAGE ANNUAL MARKET CAP (BRL trillion) TURNOVER VELOCITY** (12 months average*)
*
24
Trading in ADRs of Brazilian companies Liquidity migration process interrupted
June´14
Source: Bloomberg (in USD traded value of 35 companies with ADRs programs )
Sarbanes-Oxley Act (Jul. 2002)
Novo Mercado Launch
(Dec. 2000)
PUBLIC OFFERINGS IN NUMBER OF COMPANIES
End of IOF Tax (2%) for foreign investors
(Dec. 2011)
End of CPMF (Financial
Transaction Tax)
36.6%
27.6%
9.6%
26.2%
35.8%
64.2%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Total
IPOs - 1 - 7 9 26 64 4 6 11 11 3 10 0 152
Follow ons 14 5 8 8 10 16 12 8 18 11 11 9 7 1 138
Total 14 6 8 15 19 42 76 12 24 22 22 12 17 1 290
Dual Listings - - - 2 1 1 - - 1 - - - - - 5
25
2006 2007 2008 2009 2010 2011 2012 2013 2014* M-13 J-13 J-13 A-13 S-13 O-13 N-13 D-13 J-14 F-14 M-14 A-14 M-14 J-14
Interest rates in BRL 0.906 0.950 1.141 0.979 0.889 0.918 1.004 1.046 1.087 0.843 1.099 1.067 1.112 1.222 1.203 1.115 1.087 1.049 0.980 1.105 1.185 1.211 1.168
FX rates 2.244 1.859 2.065 2.161 1.928 1.894 2.205 2.535 2.606 2.347 2.590 2.691 2.731 2.720 2.624 2.611 2.606 2.629 2.633 2.616 2.555 2.594 2.659
Stock Indices 1.419 1.501 2.145 1.620 1.564 1.614 1.524 1.761 1.761 1.408 1.867 1.590 1.938 1.656 1.816 1.664 1.761 1.695 1.958 1.597 1.834 1.601 2.095
Interest rates in USD 1.094 0.965 1.283 1.357 1.142 0.941 1.015 1.231 1.368 0.928 1.280 1.370 1.309 1.412 1.246 1.359 1.368 1.325 1.414 1.553 1.275 1.300 1.332
Commodities 4.749 3.195 3.587 2.307 2.168 2.029 2.239 2.534 2.528 2.550 2.595 2.632 2.385 2.766 2.613 2.430 2.528 2.401 2.199 2.683 2.587 2.883 2.223
Mini contracts 0.034 0.054 0.162 0.176 0.128 0.129 0.116 0.119 0.120 0.116 0.119 0.114 0.117 0.126 0.120 0.120 0.120 0.122 0.123 0.119 0.118 0.120 0.123
OTC 1.571 2.111 2.355 1.655 1.610 1.635 1.769 1.409 1.377 1.428 1.418 1.839 1.160 1.477 1.118 1.266 1.377 1.077 1.069 1.155 1.501 2.679 3.027
Total RPC 1.247 1.224 1.527 1.365 1.134 1.106 1.191 1.282 1.344 1.020 1.361 1.320 1.397 1.511 1.418 1.367 1.344 1.294 1.261 1.393 1.411 1.406 1.431
BM&F Segment Operational highlights
AVERAGE DAILY TRADED VOLUME – ADV (thousands of contracts)
REVENUE PER CONTRACT - RPC (BRL)
*Updated to June 30, 2014.
26
Investor participation in volumes Equities and derivatives segments
BM&F SEGMENT (DERIVATIVES)
BOVESPA SEGMENT (EQUITIES)
28
Income Statement History
SUMMARY OF INCOME STATEMENT (CONSOLIDATED)
(in BRL thousand) 2009 2010 2011 2012 2013
Net revenue 1,510,569 1,898,742 1,904,684 2,064,750 2,131,795
Expenses (569,832) (633,504) (816,664) (763,080) (797,160)
Adjusted expenses (446,677) (543,881) (584,521) (563,487) (575,764)
Operating income 940,737 1,265,238 1,088,020 1,301,670 1,334,635
Operating margin 62.3% 66.6% 57.1% 63.0% 62.6%
Equity method result - 38,238 219,461 149,270 171,365
Financial result 245,837 289,039 280,729 208,851 181,535
Income before taxation of profit 1,186,574 1,592,515 1,588,210 1,659,791 1,687,535
Income tax and social contribution (304,505) (448,029) (539,681) (585,535) (606,588)
Net income* 881,050 1,144,561 1,047,999 1,074,290 1,081,516
Adjusted net income 1,223,761 1,586,374 1,545,627 1,612,136 1,609,769
Adjusted EPS (BRL ) 0.6104 0.7929 0.7932 0.8351 0.8389
*Attributable to shareholders of BM&FBOVESPA.
29
REVENUE BREAKDOWN (1Q14)
Revenue and Expense breakdowns Diversified revenue sources as a differential, costs under control
EXPENSE BREAKDOWN (1Q14)
46%
15%
16%
5%1%
17%
Personnel
Data processing
Deprec. and Amortization
Third Party Services
Marketing
Others
5.5%
29.8%
3.6%40.6%
20.6%
Cash Equities (Trade)
Cash Equities (Post-Trade)
Equities Derivatives(Trade and post-trade)
Financial and Commodities Derivatives(Trade and post-trade)
Other
30
Adjusted expenses increase below inflation • Focus on expenses control offset most of the inflationary adjustments over the past years
¹ Considers the mid-point of 2014 budget; ² IPCA in 2014 based on market expectations released by the Central Bank in Dec. 13, 2013;
2013e vs 2012: 2.18%¹
IPCA 2013e: 5.91%²
2014e vs. 2013e: 5.08%¹
IPCA 2014e: 5.95%²
CAGR 2010-14e: 2.7%¹
IPCA 2010-14e: 6.0%²
Adjusted Opex* Budget Focus on cost control
* Adjusted to Company´s depreciation, stock options plan, tax on dividends from the CME Group and provisions.
Opex- millions R$
31
Review of the 2014 Capex budget • Impacted by some projects that were revisited and FX rate
Review of 2014 budget: to R$230 – 260 million from R$170 – 200 million
• FX rate exposure of ~25%
• Update of the clearinghouses integration project
• Deepening initiatives (securities lending, market makers, pre-trade risk controls, among others)
Capex is expected to decline from 2015
• 2015e: R$190 – 220 million
Capex Budget Investments phase
Capex- millions R$
32
1,511
941
1,224
1,899
1,265
1,586 1,905
1,088
1,546
2,065
1,302
1,612
2,132
1,335 1,610
Net Revenues Operating Income Adjusted Net Income
2009 2010 2011 2012 2013
(in BRL million)
(in BRL)
GROWTH IN ADJUSTED EARNINGS PER SHARE
GROWTH IN REVENUES AND RESULTS
Growth Path Growth in business and results
0.61
0.79 0.79 0.84 0.84
2009 2010 2011 2012 2013
33
Sound financial position - an important factor for the Company, given its role as CCP, guaranteeing the settlement of trades executed by global
and Brazilian investors
Standard & Poor´s BBB+ (counterparty credit rating) A-2 (issuer) Moody´s A3 (global scale issuer) A3 (Brazilian local currency issuer) Baa1 (global notes)
R$ million Dec/10 Dec/11 Dec/12 Dec/13
Available funds 1,677 1,582 1,964 1,921
Indebtedness 1,043 1,172 1,279 1,469
R$ million
CASH POSITION SOUND FINANCIAL POSITION
*Includes collateral pledged by participants in the form of cash, receivables and rights in securities under custody, as well as payouts still undisbursed. **Includes third party collateral and restricted funds at BM&FBOVESPA Settlement Bank (Banco BM&FBOVESPA).
Financial Soundness High liquidity and low indebtedness
993
1,551
1,191
2,134
496
380
346
359
269
270
350
457
1,677
1,582
1,964
1,921
3,435
3,782
3,851
4,871
4Q10
4Q11
4Q12
4Q13
Market participants´ cash collateral and others*
Restricted funds
Subsidiaries**
Available funds
35
PUBLIC OFFERINGS (BRL billion)
PIPELINE: OFFERINGS ANNOUNCED SO FAR TO THE MARKET
Updated to May 30, 2014
BOVESPA Segment Raising Capital
There are 2 offerings in the pipeline
Follow-ons: JBS and Sanepar.
Additionally, there are 3 Real Estate Funds filed with CVM: estimated value of R$ 2.6 billion
* Excludes the portion acquired by the Brazilian government in the Petrobras offering, via the transfer of rights in barrels (BRL 74.8 billion).
4.3 8.5 15.1 14.5 26.8 22.2
63.2
10.8 9.3 6.1 14.0 4.5 5.4 15.4
55.6 7.5 23.8
11.2
7.2 3.917.3 -
8.8 13.9
30.4
70.1
34.3 46.0
74.4
18.0 13.223.4
14.0
2004 2005 2006 2007 2008 2009 2010* 2011 2012 2013 2014
Follow-On
IPO
36
BOVESPA Segment Foreign investment flow
MONTHLY NET FLOW OF FOREGIN INVESTMENTS (in BRL billons)
Includes public offering (primary market) and regular trades (secondary market).
*Updated to June 30, 2014.
37
CLEARINGHOUSES’ ACTIVITIES
Law 10.214 of Mar. 27, 2001
Clearinghouses considered systemically important by the BCB should ensure settlement (i.e., act as CCPs)
BCB Resolution 2.882 of Aug. 30, 2001
Clearinghouses shall guarantee, at least, settlement of the highest net amount owed
Access criteria must be public and allow wide participation
Circular BCB 3.057 of Aug. 31, 2001
Rules, manuals and safeguard mechanisms must be approved by BCB
Maintenance of a secondary data center and contingency procedures
Supervision by BCB
CVM Instruction 441 of Nov. 10, 2006
Securities lending with guaranteed settlement - final beneficiary model
STOCK EXCHANGE ACTIVITY
CVM Instruction 461 of Oct. 23, 2007
Regulates the security markets and decides on the formation, organization, operation and dissolution of stock exchanges, futures and commodities exchanges and OTC markets
Establishes the organization and minimal corporate governance structure of organized market management bodies
Establishes self-regulation activities of the in the organized market management bodies
Regulatory Framework
38
Audit Market
supervision
Analysis and
strategy Legal dept.
Self –regulation Officer
Supervision Board (12 members*)
Strategic Committee
• Atribuições da BSM estabelecidas na Instrução CVM 461/2007:
Monitor and supervise transactions in the organized markets
Determine deficient compliance with the rules and norms
Monitor the activities of the Stock Exchange
Initiate and prosecute disciplinary administrative legal proceedings
Apply penalities
Main activities of BSM Organizational chart
Monitor 100% of the participants’ transactions
Assess 100% of intermediaries
Enforcement
Education
BSM duties established in CVM Instruction 461/2007
BSM is is a not-for-profit association organized as a self-regulatory and market surveillance organization, responsible for regulatory and oversight activities relative to the markets we operate.
* 9 independent
BM&FBOVESPA Market Supervision (BSM) Self-Regulation Entity
40
Total revenue: R$546.1 MM -5.9%
BM&F seg.: R$226.4 MM, +2.1%
Bovespa seg.: R$219.7 MM, -14.2%
Net revenue: R$489.7 MM, -6.0%
Adjusted expenses¹: R$136.5 MM, +10.1%
Operating income: R$303.4 MM, -12.9%
EBITDA²: R$383.1 MM, -7.1% (EBITDA margin 78.2%)
Financial Income: R$48.0 MM, +29.3%
Adjusted net income³: R$375.3 MM, -4.9%
Adjusted EPS: R$0.203, -0.7%
Payout: R$204.9 MM in 1Q14, R$0.111 per share (80% of GAAP net income)
Share buyback
In 2014: +2.9% of the outstanding shares bought back
Jan´14: 37.0 MM shares: (60 MM program fully concluded)
Feb – Apr´14: 17.3 MM shares (up to 100 MM program until Dec´14)
More than 12.4% of the outstanding shares bought back since 2008
MARKET DEVELOPMENT HIGHLIGHTS
40
1Q14 vs. 1Q13 Highlights Intensive execution of the buyback program drove EPS to stability
FINANCIAL HIGHLIGHTS RETURNING CAPITAL TO SHAREHOLDERS
1 Excludes stock options plan cost, depreciation, provisions and tax on dividends from CME Group. 2 According to CVM Rule 527/12 that does not exclude equity method accounting.
³ Excludes deferred liability recognized in correlation with temporary differences from amortization of goodwill for tax purposes, stock options plan cost, investment in associate (CME Group) accounted under the equity method of accounting, net of taxes related to dividends and taxes paid overseas to be compensated.
New products: ETFs on international indexes (S&P 500)
Securities lending: disclosure of daily prices to increase transparency and attract new players
Ibovespa Index: new methodology implemented in May´14
PRODUCTS HIGHLIGHTS
Tesouro Direto: new records in both assets under custody (R$10.7 billion and +9.0%) and number of investors (107 thousand and +20.1%)
LCA (agribusiness credit bills): R$94.0 billion in financial value registered (+124.4%)
41
1Q14 vs. 1Q13: - 14.1%
10.1% decrease in average market capitalization
Slightly lower turnover velocity year-over-year further contributed to volumes reduction
1Q14 vs. 1Q13: -5.6%
Higher participation of cash market in the overall ADTV
Higher participation of investors that benefit from discounts by volumes (day traders)
Changes in the fee policy: lowered fees for foreign and retail investors (Apr’13); discounts by volumes were extended to day traders (Dec’13)
TRADING MARGINS (in basis point - bps)
Market 1Q14 1Q13
Cash market 5.068 5.352
Derivatives on single stocks 13.737 13.141
Forward 14.121 13.196
Options 12.998 12.999
Total BOVESPA 5.389 5.706
41
AVERAGE DAILY TRADING VALUE (ADTV)
BOVESPA Segment Performance Volumes impacted by weak market performance
AVERAGE MARKET CAP. AND TURNOVER VELOCITY
42
1Q14 vs. 1Q13:
ADV: 2.8 million contracts: -6.6%
-18.0% ADV of Interest Rates in BRL contracts
+7.9% ADV of FX contracts and +46.3% ADV of Interest Rates in USD contracts
RPC: +8.0% (mix effect and FX rate appreciation)
Interest Rates in BRL contracts: lower participation in overall volume
FX and Interest Rates in USD contracts (+13.4% and +28.4%, respectively): FX rate appreciation (USD/R$)
42
AVERAGE DAILY VOLUME (ADV) AND AVERAGE REVENUE PER CONTRACT (RPC)
BM&F Segment Performance Higher RPC offsets volumes fall
INTEREST RATES IN BRL - ADV BY MATURITY
(in millions of contracts)
(in millions of contracts)
REVENUE PER CONTRACT AND FX RATE (in R$)
~45% of derivatives revenue was priced in USD in 1Q14
*Average FX rate (R$/US$) in the quarter, considering the closing price for each month.
Contracts with revenues referred in USD represented ~26% of derivatives ADV 1Q14
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40.6%: Financial/Commodity Derivatives¹
35.3%: Cash Market
5.5%: Trading
29.8%: Post-Trade
3.6%: Stock and Indices Derivatives¹
Total Revenue R$546.1 million
3.8%: Securities Lending
3.4%: Depository, Custody and Back-Office
3.3%: Vendors
2.2%: Listing
1.8%: Trading Access
20.6%: Other Revenue
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1Q14 Revenue Breakdown Diversified revenue sources as a differential
REVENUE BREAKDOWN
CASH MARKET TRADING REVENUE ACCOUNTED FOR 5.5% OF TOTAL
DERIVATIVES REVENUE (BM&F + BOVESPA) ACCOUNTED FOR
44.2% OF THE TOTAL
19.9%: Brazilian Real interest rates contracts
15.2%: FX Contracts
3.1%: USD interest rates contracts
2.4%: Other Financial/Commodity Derivatives
2Trading and Post-trade
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Expenses: R$186.3 million
ADJUSTED EXPENSES (1Q14 vs. 1Q13): +10.1%
Data processing: +20.8%, due to inflationary adjustments of IT maintenance contracts and higher services and maintenance expenses for software and hardware that support recently-deployed IT platforms
Adjusted Personnel: +6.8%, basically due to the effects of annual union bargain in Aug’13
1Q14 within the 2014 adjusted expenses budget (R$595MM – R$615MM), which indicates growth
in line with inflation
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1Q14 Expenses Breakdown Focus on cost control and operational efficiency
ADJUSTED EXPENSES TOTAL EXPENSES BREAKDOWN
(in R$ millions)
*Include expenses with maintenance in general, taxes adjusted by the dividends from CME Group, board and committee members compensation and others.
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In 1Q14, investments amounted R$64.5 million (execution more linearly distributed during last few quarter)
Capex budget ranges:
2014: between R$230 – 260 million
2015: between R$190 – 220 million
Payout
R$204.9 million in dividends (80% of the GAAP net income): payment on May 30, 2014; shareholders’ position of May 19, 2014
Share Buyback
Previous program (60 MM shares – fully concluded)
Jan/14: 37.0 MM shares (R$370.4 million)
Current program (up to 100 MM shares – until Dec/14)
Feb - Apr/14: 17.3 million shares (R$186.9 million)
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Financial Highlights Returning capital to shareholders and solid balance sheet
FINANCIAL RESULTS
CAPEX
RETURNING CAPITAL TO SHAREHOLDERS
Net financial result of R$48.0 million, up 29.3% from 1Q13
Financial income (+29.2%): reflecting higher interest rates
Financial expenses (+29.0%): currency depreciation impacted interest on notes issued overseas
CASH AND FINANCIAL INVESTMENTS
In R$ millions Mar’14 Mar’13
Cash and financial investments 5,078 4,169
(-) Debt (principal + coupon) 1,396 1,241
(-) Third party resources 2,750 1,360
Net cash 931 1,568
CME shares (market value) 2,844 2,100
BVMF market capitalization 21.375 27.007
46 46
Restricted Cash and Safeguard Structure Fully compliant with international rules of capital requirements for QCCP under Basel III
Main goal
Comply with international rules of capital requirements under Basel III for CCPs
BM&FBOVESPA contribution to safeguard funds
Higher amount of resources required from the clearinghouse (increasing the amount of restricted funds³)
BM&FBOVESPA’s capital standing in between the contribution of defaulting market participants and the mutualization of losses
Financial impacts (neutral)
Reclassification of funds from “available” to “restricted”
Does not impact BM&FBOVESPA financial income, since the total amount of cash is still the same
Does not affect the company’s ability to payout or buyback shares
QCCP status and balance sheet robustness are differentiation factors for CCPs under Basel III
Implemented in Mar´14 (approved by Central Bank)
5,078
4,871
4,498
3,933
4,169
(In R$ millions)
CASH AND FINANCIAL INVESTMENTS
¹ Includes earnings and rights on securities in custody. ² Includes third party collaterals at BM&FBOVESPA Settlement Bank (Banco BM&FBOVESPA). ³ 100% deposited in federal government bonds
2,205
ENHANCING STRUCTURES TO COMPLY WITH BASEL III
2,280
2,314
2,352
2,689
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Growth products Increasing revenue diversification
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STRONG REVENUE GROWTH OF SELECTED PRODUCTS
Products well received by clients, with continuous developments to maintain strong growth trend
Securities lending (BTC)
Tesouro Direto
Market maker for options on single stocks
Exchange traded funds (ETF)
Agribusiness credit bills (LCA)
Real estate investment funds (FII)
Non sponsored Brazilian Depositary Receipts (BDRs N1 NP)
CAGR (2010-14):
+24.0%
(In R$ millions)
16.324.2
37.344.5
38.4
3.2%
4.6%
6.7%
7.7%7.0%
1Q10 1Q11 1Q12 1Q13 1Q14
Revenue Share in total revenue (%)
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Financial Statements Summary of Balance Sheet (Consolidated)
(in R$ millions) 3/31/2014 12/31/2013 (in R$ millions) 3/31/2014 12/31/2013
Current assets 4,425.0 4,319.5 Current liabilities 3,142.5 2,710.8
Cash and cash equivalents 1,319.6 1,196.6 Collateral for transactions 2,380.9 2,073.0
Financial investments 2,878.3 2,853.4 Others 761.6 637.9
Others 227.2 269.5 Non-current liabilities 3,986.0 3,886.9
Non-current assets 21,575.2 21,577.2 Foreign debt issues 1,377.8 1,426.2
Long-term receivables 1,195.5 1,135.4 Deferred Inc. Tax and Social Contrib. 2,436.6 2,295.8
Financial investments 880.0 820.8 Others 171.6 165.0
Others 315.5 314.6 Net equity 18,871.7 19,298.9
Investments 3,248.7 3,346.3 Capital stock 2,540.2 2,540.2
Property and equipment 431.9 423.2 Capital reserve 15,202.3 16,056.7
Intangible assets 16,699.1 16,672.3 Others 1,114.5 687.3
Goodwill 16,064.3 16,064.3 Minority shareholdings 14.7 14.7
Total Assets 26,000.2 25,896.7 Liabilities and Net Equity 26,000.2 25,896.7
LIABILITIES AND SH. EQUITY ASSETS
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Financial Statements Profits and adjusted expenses reconciliation
(in R$ millions) 1Q14 1Q13 Change
1Q14/1Q13 4Q13
Change 1Q14/4Q13
Total Expenses 186,3 172,8 7,8% 253,5 -26,5%
Depreciation (29,6) (27,1) 9,1% (31,3) -5,5%
Stock options plan (6,9) (7,9) -12,9% (6,8) 1,2%
Tax on dividends from the CME Group (5,5) (4,6) 19,9% (36,2) -84,7%
Provisions (7,9) (9,3) -14,9% (10,8) -27,0%
Adjusted Expenses 136,5 124,0 10,1% 168,4 -19,0%
(in R$ millions) 1Q14 1Q13 Change
1Q14/1Q13 4Q13
Change 1Q14/4Q13
Net Income* 256.1 267.0 -4.1% 182.1 40.6%
Stock options plan 6.9 7.9 -12.9% 6.8 1.2%
Deferred Liabilities 138.6 138.9 -0.2% 138.9 -0.2%
Equity method investment (net of taxes) (44.6) (32.5) 37.2% 3.3 1,236.3%
Recoverable taxes paid overseas 18.2 13.4 36.6% 17.4 4.8%
Adjusted net income 375.3 394.6 -4.9% 341.9 9.8%
ADJUSTED NET INCOME RECONCILIATION
ADJUSTED EXPENSES RECONCILIATION
* Attributable to BM&FBOVESPA shareholders.
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(in R$ millions) 1Q14 1Q13 Change
1Q14/1Q13 4Q13
Change 1Q14/4Q13
Net revenues 489.7 521.0 -6.0% 475.6 3.0%
Expenses (186.3) (172.8) 7.8% (253.5) -26.5%
Operating income 303.4 348.2 -12.9% 222.1 36.6%
Operating margin 61.9% 66.8% -488 bps 46.7% 1,525 bps
Equity in income of investees 50.2 37.2 35.0% 39.5 26.9%
Financial result 48.0 37.1 29.3% 51.7 -7.2%
Net income* 256.1 267.0 -4.1% 182.1 40.6%
Adjusted net income 375.3 394.6 -4.9% 341.9 9.8%
Adjusted EPS (in R$) 0.203 0.204 -0.7% 0.180 12.9%
Adjusted expenses (136.5) (124.0) 10.1% (168.4) -19.0%
Financial Statements Summary
SUMMARY OF INCOME STATEMENT (CONSOLIDATED)
* Attributable to BM&FBOVESPA shareholders.
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BM&FBOVESPA – INVESTOR RELATIONS
+55 (11) 2565 4729 /4418 / 4207 / 4834 [email protected]
ir.bmfbovespa.com.br