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Juan M. Grumé Head of Finance &
Investor Relations
April 2004
ABN AMRO BANKING CONFERENCE
EXPANDING HORIZONS
www.grupobancosabadell.com
2
STRATEGY FOR PROFITABLE GROWTH
ACQUISITION OF BANCO ATLÁNTICO
1Q04 FINANCIAL RESULTS
CONCLUDING REMARKS
3
STRATEGY FOR PROFITABLE GROWTH
Acquisitions at Banco Sabadell
q Always of key banks in order to increase shareholder value.
q Recent Banco Sabadell acquisitions:
ü In 1996: Natwest España
ü In 2001: Banco Herrero
ü In 2003: Banco Atlántico
Banco Natwest España
1996 2001 2003
4
STRATEGY FOR PROFITABLE GROWTH: RESULTS
Solid Growth Organically and Through Acquisitions.
Excellence in Risk Management
0
5.000
10.000
15.000
20.000
25.000
1995 1996 1997 1998 1999 2000 2001 2002 2003
0
0,5
1
1,5
2
2,5
3
3,5
4
4,5
200,0
CAGR 95–03: 17,8%
222,1
176,2
117,1
105,7
84,4
100,9
114,6 112,0
CustomerLoans
NPL Ratio NPL (€mm)
Acquisition ofNatwest Spain
Acquisitionof Banco Herrero
5
MADRID
VALENCIA
BARCELONA
ZARAGOZA
BALEARICISLANDS
A CORUÑA
ASTURIAS
LEÓN
ANDALUCIA
Online Banking
Public sector services and finance
NETWORK 30/12/02 31/12/03
Banco Sabadell 542 583
Banco Sabadell (SME) 1 5Solbank 60 74B.Herrero + B.Asturias 299 202
Sabadell Banca Privada 6 6Activobank 0 2Banco Atlántico 274
TOTAL 908 1.146
Multi-brand strategy
STRATEGY FOR PROFITABLE GROWTH
6
NEW BRANCH LAY-OUT
Main advantages:
üOpening up of business areas
üAccess barriers reduced
Branch layouts updated andadapted to present dayrequirements
7
Multi-channel strategy
q ATMs installed q Issued Cards
Dec.03
1.111
Companies
AQMETRIX: The corporate portal withthe best browser facilities and design.
AQMETRIX: The best portal for individualcustomers in terms of service availability.
q Internet bankingIndividuals
620.653
469.853
74.946
Dec-03Debit
Credit
Revolving
STRATEGY FOR PROFITABLE GROWTH
360.643327.050
275.715
2001 2002 2003
48.37665.444
83.994
2001 2002 2003
8
Renewal of the Group websites:
üSolbank
üBanco Herrero
üBanco Sabadell
üActivoBank
üSabadell B.Privada
WEBSITE RENEWAL
Best Spanish website amongquoted companies
Analysis carried out by theConsultancy company Look &
Enter for the newspaper El País
The analysis revealed that the BancoSabadell website is the one that bestcomplies with the standards laid down bythe Law of Transparency.
9
Organisation of Business Units
TRANSVERSETRANSVERSE
BancassuranceBancassurance
Asset managementAsset management
IbersecuritiesIbersecurities
Treasury customersTreasury customers
CUSTOMERCUSTOMER
BE B,SabadellBE B,Sabadell
BE B,HerreroBE B,Herrero
BC B,SabadellBC B,Sabadell
BC B,HerreroBC B,Herrero
BC SolbankBC Solbank
SBP PrivadaSBP Privada
Dexia SabadellDexia Sabadell
BC ActivobankBC Activobank
JOINT VENTURESJOINT VENTURESSUBSIDIARIESSUBSIDIARIES
Real estateReal estate
Development capitalDevelopment capital
AmericasAmericas
BS AndorraBS Andorra
ManagerlandManagerland
NetfocusNetfocus
BS FincomBS Fincom
Ø Model of a universal bank with medium/long term growth via
a customer banking model.
Ø Multi-brand and multi-channel with excellent service and risk
quality.
Ø Business plan for 2002-2004ROE
Cost/income ratio
STRATEGY FOR PROFITABLE GROWTH
10
2002 – 2005 EFFICIENCY PLAN
FIT@ PROGRAMME:
ü Improvement in staff costs through greater efficiency in processes.
REMAINING OPERATIONS:
üBanco Herrero integration (non-technological costs).
üActivobank integration (non-technological costs).
ü Remaining non-recurring expenses.
TECHNOLOGY:
ü Accelerated amortization of thenew IT systems platform.
ü Elimination of the redundantplatforms.
ü Integration of IT systems forseveral business units (scaleeconomies): Banco Herrero,Activobank.
380,9 378,4 385,5 398,6
205,4 212,6 223,8286,2
2002 2003 2004e 2005e
-44,7
667,1622,4599,6
€ m
589,5
Personnel expenses General expenses
11
QUALITY PLAN
ACTION PLAN 2002 – 2005:
q 2002: Strengthen our quality culture.
q 2003: Consolidate habits, focus on Customer / business unit.
q 2004: Create a single corporate quality model.
q 2005: Final implementation and global certification throughoutthe bank.
OBJECTIVE:
To bring added value to our business proposaland to reiterate our commitment to qualitythrough obtaining the ISO 9001 certification forthe whole organisation.
12
BASEL II
Min
imum
cap
ital
requ
irem
ents
Rev
iew
of
supe
rvis
ory
proc
ess
BASEL II
Mar
ket
disc
iplin
e
Pillar I Pillar II Pillar III
Excellent Risk Quality:
IRB ADVANCED(Internal ratings based advanced approach)
OBJECTIVE:
q To gain a competitive advantage by relying on internal systemsfor measuring risk.
q To comply with the strictest supervisory rules that will enable usto use our own internal estimates for the alignment of Capital withthe key elements of banking risks.
13
Main advantages of these metrics:
Ø Reflect the operating profit and estimated risk costs.
Ø Use economic capital, not regulatory capital.
Ø Aligned with the creation of shareholder value.
RAROC AND CUSTOMER VALUE
Applications of these metrics
Pricing/ Design of products
Direct marketing
Redesign of processes
Management of distribution network
Segmentation
Inclusion inmanagementinformation
Optimisation of capitaland active managementof portfolio
Planning based on value
Value
14
CRM PROJECT
Transformation of corporate datasystems into valid information fordecision making.
Process management.
Propensity scoring
Behaviour models andpatterns
Campaign management
Channel integration
Back up support for planningcommercial operationsCommercial.
Commercial AgendaParametrical selections
Back up support for sales andCustomer care processes.
Personal fileMarketing encyclopaedia
To provide system feedback onthe look out for improvements.
MONITORING
INTERACTIONWITH CUSTOMER
AUTOMATEDSALES FORCE
AUTOMATEDMARKETING
BUSINESSINTELLIGENCE
Definition, design and implementation of systems and tools which helpbusiness units to manage business relations with their Customers thatare both long-lasting and profitable.
15Copyright © 2003 Mercer Oliver Wyman
VALUE-BASED PLANNING
Implementation of business plan for the next 3 years
Ø The maximisation of growth has to combine suitable positioning withexcellent execution.
Level of growthLevel of growth
PositioningPositioning Quality of executionQuality of execution
Ø Growth record determined by marketsegments.
Ø Market growth can be affected byinnovation.
Ø Volatile if viewed on a granular level, itis normally cyclical.
Ø Above average peformance.
Ø Requires a strong “capitalist”culture.
Ø Wide range observed in anysegment of the market.
Focus on major growthbusiness lines
Above market growth inchosen business+
16Copyright © 2003 Mercer Oliver Wyman
Integrated plan for the Group and the Business UnitsPlanning based on value creation:
VALUE-BASED PLANNING
SBP
BS Corporate Banking
Banco Herrero
Solbank
BS CommercialBankingTransverse
Partly-OwnedCompanies
Diversified
Cost ofCapital
Size of the circle indicatesthe Financial Capital
G
row
th R
ate
RAROC
q Assigning of greater capital to businesses with greater growthprospects (RAROC > Capital Costs).
q Management to correct those businesses with lower returns thanCapital Costs.
Current earningsposition adjusted torisk vs growth
17
STRATEGY FOR PROFITABLE GROWTH
ACQUISITION OF BANCO ATLÁNTICO
1Q04 FINANCIAL RESULTS
CONCLUDING REMARKS
18
Banco Atlántico constitutes anexcellent opportunity fordevelopment and completes the2002-2004 business plan
ACQUISITION OF BANCO ATLÁNTICO
ü Eighth most important banking group inSpain.
üConsolidated franchise and high brandrecognition.
ü National branch network with a strongpresence in the wealthiest regions of Spain.
ü Loyal, under-penetrated customer base.
ü Historical growth below sector average.
ü Limited international presence.
19
Strengthened Position as Fourth Largest Spanish Banking Group30/09/03€ bn
Domestic customer deposits
Domestic mutual funds
Domestic customer loans
Domestic bancassurance (tech, reserves)
Domestic branches (1)
CONTRIBUTION OF BANCO ATLANTICO TO THE GROUP
96,8 96,4
37,4
15,4
BBVA SAN POP SAB BKT
27,1
+23%
BTO
12,322,8
67,2
75,6
SAN BBVA POP SAB BKT
19,9
+28%
BTO
287
2.132
3.347
4.343
SAN BBVA POP SAB BKT
1.146
+31% BTO
6,9
35,3
53,6
6,5
SAN BBVA POP BKT SAB
6,1
+41%
BTO
1,3
13,3
19,1
3,1
BBVA SAN SAB POP BKT
4,2 BTO
+15%
Note: Data of Spanish activities only; Banesto (“BTO”) data for domestic customer loans (€ 28.9 bn), domestic customer deposits (€ 20.9 bn), domestic branches (1,683),domestic mutual funds (€ 10.0 bn) and domestic bancassurance (€ 1.9 bn)(1) Branches of Sabadell and Banco Atlántico as of 31/12/03. Includes approx. 70 branches targeted to be closed (see page 58 for details)Source: Sabadell, interim reports, Inverco, Icea
20
Banco Atlantico's Integration Pillars
Domesticbusiness
InternationalbusinessIT platformRisk
management
• Targeted netclosure of 70branches
• Nation-wideexpansion plan
• Integration ofselectedspecialisedsubsidiaries
• Integration ofselected back-office / headoffice functions
• Roll-out ofBancoSabadell’scontrol /compliancepractices
• Creation ofsupervisorybody for publictender offerinterim period
• Scope toleverage ITplatform andintegrationexpertise
• Strengthenbusinessthrough BancoSabadell’sexpertise
Targeted pre-tax synergies of €114mm by 2006
CONTRIBUTION OF BANCO ATLANTICO TO THE GROUP
21
BANCO ATLANTICO INTEGRATION
Banco Atlantico integration process has 3 phases:
Design and start
FINISHED
First 100 days
Phase 1
Implementation
15 March 24 June DecemberPublic tender offer settlement
Phase 2 Phase 3
22
GOODWILL OF ACQUISITION
1.500
(584)
0
250
500
750
1,000
1,250
1,500
1,750
Acquisition Price Banco AtlanticoBook value
Goodwill
€ m
m
Unrealisedcapital gains
136
(221)
830
Restructuringcosts
€ m
23
41 40
20
7454
(1)
0
20
40
60
80
100
120
Domesticbusiness
Internationalbusiness
Branches / Central services
IT Total
€ m
m
Income synergies(net of business losses)
Cost synergies(net of integration costs)
€ 114 mm
Estimated synergies of 114 M euros before tax in 2006
ANALYSIS OF ESTIMATED SYNERGIES
24
SYNERGIES CALENDAR
40,0
56,9
74,0
11,55,023,5
2004e 2005e 2006e
114
Income synergiesbreakdown
Cost synergies breakdown
25%
60%
100%
68,4
28,5
€ m
25
23,5
56,9
74
2004e 2005e 2006e
COST SYNERGIES BREAKDOWN
7,6
74,034,0
12,1
20,3
Total costsynergies
Othersynergies
ITAmortisation
IT costs Personnelcosts
* 600 redundancies
€ m
26
5
11,5
40
2004e 2005e 2006e
40
23,4
(-12,2)
(-3,3)
28,4
3,7
Fees &commisisions
Client diposits Loans tocustomers
Incomesynergies
NPLprovisons
due to loangrowth
Businesslosses
INCOME SYNERGIES BREAKDOWN
€ m
27
CAPITAL INCREASE
Public recognition of the execution of the operation.
28
15
16
17
18
22/12/03 29/12/03 5/1/04 12/1/04 19/1/04 26/1/04 2/2/04 9/2/04 16/2/04 23/2/04 1/3/04
22-12-2003Announcement Sabadellwon B.Atlántico auction
process
8-1-2004Kick-off for
Capital Increase
26-1-2004Publication of2003 results
Initial Contacts withLa Caixa and BCP
29-1-2004EGM and announcement
of transaction
Analystspresentation
30-1-2004“ComunicaciónPrevia” to CNMV
10-2-2004Folleto
aproval byCNMV 14-2-2004
Printing of IOM
1-3-2004Pricing
Sh
are
Pri
ce
Completed in a very short period of time
CAPITAL INCREASE
Completed in 7 weeks (Rule 144A).
29
Roadshows
ü 69 one–on–ones.ü 94 investors contacted.
ü 23 one–on–ones.ü 38 investors contacted.
Lisbon
Madrid
Barcelona
Dublin
Edinburgh
London
Milan
Amsterdam
ParisZurich
Frankfurt San Francisco
San Diego
Boston
New York
An exhaustive marketing programme2 teams during 2 weeks.
15 financial markets visited in Europe and theUnited States, over 100 investors visited.
CAPITAL INCREASE
30
CAPITAL INCREASE
Resulting in a high demandGeographical breakdown
ü 100% of the rights
ü High demand frominstitutional investors (5,5xsubscribed increase).
ü Practically half of thedemand came from the UK.
Other10%
Germany6%
Netherlands10%
US15%
UK46%
Italy3%France
4%Switzerland
6%
Rights price:a positive performance
1
1,1
1,2
1,3
1,4
16-2 17-2 18-2 19-2 20-2 21-2 22-2 23-2 24-2 25-2 26-2 27-2
No rump placedwith syndicate
31
CAPITAL INCREASE
q 50% more outstanding shares.
q 7 new analysts initiate coverage, bringing the total to 19.
q + 350 new institutional investors.
q Market capitalisation: ≈ € 4,9 bn.
Result of the operation
Change in shareholder situation:31/12/2003
La Caixa 15% BCP
8,5%
Other institutional investors
5,3%
Other shareholders
71,2%
La Caixa14,8% Millenium
BCP7,1%
Other institutional
19,1%
59,1%
investors
Othershareholders
31/3/2004
32
STRATEGY FOR PROFITABLE GROWTH
ACQUISITION OF BANCO ATLÁNTICO
1Q04 FINANCIAL RESULTS
CONCLUDING REMARKS
33
424,6276,4
13.226,312.003,8
814,8497,1
11.522,49.553,9
mar-03 mar-04
22.331,2
25.988,1
GROSS LOANS TO CUSTOMERS BEFORE BANCO ATLANTICO
Mortgages
Others
Other securitised loansSecuritised mortgages
11,2%
+16,4%
+22,7%
€ m
34
€ m
13.785,616.488,3
1.461,44.577,6
143,11.821,9
2.396,1
7,579,6
mar-03 mar-04
+23,0%26.607,1
21.646,6
Repo’sEurodeposits
ON- BALANCE SHEET CUSTOMER FUNDS BEFORE BANCO ATLANTICO
Customer deposits(ex repo’s)
Debt securities
35
4.545,25.496,2
2.212,8
2.066,2
1.744,9
1.507,6
mar-03 mar-04
€ m
8.265,6
+20,9%
-6,6%
+15,7%
+12,6%
Insurance: Same consolidation perimeter (Caifor insurances not included)
AUM (OFF BALANCE SHEET ITEMS) BEFORE BANCO ATLANTICO
Insurance
Pension Funds
Mutual Funds
9.307,3
36
€ m
GROUP NET PROFIT
NET INTEREST INCOME 187,9 200,6 + 6,8% 246,1 + 31,0%
COMMISSIONS 69,4 76,9 + 10,8% 102,0 + 47,0%
FINANCIAL TRANSACTIONS 10,7 16,1 + 49,8% 19,0 + 77,6%
GROSS OPERATING INCOME 268,0 293,5 + 9,5% 367,2 + 37,0%
EXPENSES -145,9 -160,9 + 10,3% -216,9 + 48,7%
NET OPERATING INCOME 122,1 132,6 + 8,6% 150,2 + 23,1%
INCOME BEFORE TAXES 117,8 121,6 + 3,2% 133,0 + 12,8%
GROUP NET PROFIT 68,8 73,3 + 6,5% 81,5 + 18,5%
mar-03 mar-04 mar-04 New
37
237,0
11,5
9,1
191,5182,8184,1180,1 185,9
9,16,11,6
7,7
1Q03 2Q03 3Q03 4Q03 1Q04 1Q04
NET INTEREST INCOME (I)
Adjusted net interest income
Dividends and others
New
+6,8%
+31,0%
187,8197,4
185,7 188,9200,6
246,1
mar-04
Net Int. Inc. 246,1
Net comms 102,0
RFT 19,0Gross Oper.Inc. 367,2
Other op.inc 1,4
Personnel exp. -132,7
Admin. exp. -65,9
Deprec.& amort. -16,9
Other Op.costs -2,9Net Oper. Inc. 150,2
Equity-acc hold. 12,1
Goodwill amort. -3,0
Group transac. 6,9
B&DD's provis. -51,7
Other income 18,4Inc. before tax. 133,0
Corporate tax -47,8
Minority interes. -3,6Group net prof 81,5
€ m
38
19,4 21,7 28,3
28,9 31,4 30,3 30,0 31,042,5
24,4 23,3 23,9 24,1
31,3
20,219,3 22,1
21,1
1T03 2T03 3T03 4T03 1T04 1T04
69,4 75,1
€ m
73,7 76,0
Ass. Mgm1
Services
Lending
COMMISSIONS
1 Includes commissions of mutual funds, pension funds and life insurance commissions
Nuevo
76,9
102,0+10,8%
+47,0%
mar-04
Net Int. Inc. 246,1Net comms 102,0
RFT 19,0Gross Oper.Inc. 367,2
Other op.inc 1,4
Personnel exp. -132,7
Admin. exp. -65,9
Deprec.& amort. -16,9
Other Op.costs -2,9Net Oper. Inc. 150,2
Equity-acc hold. 12,1
Goodwill amort. -3,0
Group transac. 6,9
B&DD's provis. -51,7
Other income 18,4Inc. before tax. 133,0
Corporate tax -47,8
Minority interes. -3,6Group net prof 81,5
39
86,3 92,4 91,591,0 91,5
126,3
5,32,6 3,6
5,8 6,5
6,5
1Q03 2Q03 3Q03 4Q03 1Q04 1Q04
€ m
PERSONNEL EXPENSES
Recurrent
NoN recurrent
Nuevo
mar-04
Net Int. Inc. 246,1
Net comms 102,0
RFT 19,0Gross Oper.Inc. 367,2
Other op.inc 1,4Personnel exp. -132,7
Admin. exp. -65,9
Deprec.& amort. -16,9
Other Op.costs -2,9Net Oper. Inc. 150,2
Equity-acc hold. 12,1
Goodwill amort. -3,0
Group transac. 6,9
B&DD's provis. -51,7
Other income 18,4Inc. before tax. 133,0
Corporate tax -47,8
Minority interes. -3,6Group net prof 81,5
40
65,9
44,941,849,543,037,8
11,910,7
6,88,3
1Q03 1Q03 3Q03 4Q03 1Q04 1Q04
€ m
GENERAL ADMINISTRATIVE COST
Recurrent
Non recurrent
New
mar-04
Net Int. Inc. 246,1
Net comms 102,0
RFT 19,0Gross Oper.Inc. 367,2
Other op.inc 1,4
Personnel exp. -132,7Admin. exp. -65,9
Deprec.& amort. -16,9
Other Op.costs -2,9Net Oper. Inc. 150,2
Equity-acc hold. 12,1
Goodwill amort. -3,0
Group transac. 6,9
B&DD's provis. -51,7
Other income 18,4Inc. before tax. 133,0
Corporate tax -47,8
Minority interes. -3,6Group net prof 81,5
Non recurrent 1Q04
41
COST / INCOME RATIO
1Q03 1Q041Q04
New
Base 49,8% 50,2% 54,1%
Inc. Depreciation 54,5% 54,6% 58,7%
42
0,38%
0
100
200
300
400
500
600
700
1Q03 2Q03 3Q03 4Q03 1Q04 1Q04
15.000
20.000
25.000
30.000
35.000
216,0 227,1237,0 244,4
255,9
314,1
273,4242,5224,2206,3175,8160,6
117,5
74,463,6
54,558,1
52,1
1Q03 2Q03 3Q03 4Q03 1Q04 1Q04
B&DD’s COVERAGE
NPL
Provisions
Gross loans tocustomers
Generic
Specific
FECI
% FECI coverage
0,50%
%NPL ratio
3,5x
5,3x4,4x
59,7%
4,8x3,9x
New
3,8x
64,6%
Other coverages
New
€ m
5,3x
3,8x
43
STRATEGY FOR PROFITABLE GROWTH
ACQUISITION OF BANCO ATLÁNTICO
1Q04 FINANCIAL RESULTS
CONCLUDING REMARKS
2
44
q Banco Sabadell is committed to the combination oforganic growth and acquisitions in order to obtainprofitable growth.
q Our recent past history has shown us that this businessstrategy has helped to increase shareholder value.
q Within the framework of the 2002-04 business plan, asound business organisation was designed, a multi-brand, multi-channel strategy was adopted, differentprojects were defined and are now being implemented,This guarantees a high degree of organic growth for usand makes it viable to complement this organic growthwith acquisitions.
SUMMARY
45
q The acquisition of Banco Atlántico has consolidatedBanco Sabadell’s position as the fourth largest bankinggroup in Spain and represents a platform for greaterfuture growth.
q In order to finance the acquisition of Banco Atlántico acapital increase has been carried out.
q The creation of value will be the basis of our futurebusiness plan and for that, value metrics and RAROC willbe important elements of decision.
SUMMARY
46