Turnaround 2003 Analysts‘ conference call September 26, 2002 · 2018. 10. 4. · (including agency lending) as joint venture with Allianz Rightsizing of investment banking to support

Turnaround 2003Analysts‘ conference callSeptember 26, 2002Bernd Fahrholz Helmut Perlet

© Dresdner Bank AG · Turnaround 2003 · Analyst´s conference call · September 26, 2002 · 2

OverviewOverview

Dresdner Bank currently undergoing massive restructuring:

� From six to two divisions

� Integration into Allianz

� Existing cost cutting programme

Situation

Continuing operating losses due to

� Declining operating income

� High loan loss provisions

� Cost reductions not yet sufficient

Problem

Sustainable profitability and EVA contribution of Dresdner Bank

TurnaroundProgramme

Challenge


New and existing initiatives New and existing initiatives

Strategic repositioning of Dresdner Bank

�Expansion and re-structuring programme(announced at the AGM May 19, 2000)

�New corporate structure / divisionalisation

Phase lMay

– Dec 2000

Phase 2Apr

– Jun 2001

Combination of Allianz Dresdner

� „Agenda 2004“ with 8 Initiatives

� Integration Allianz Dresdner

�Cost reduction programme

„Turnaround 2003“Phase 3from

July 2002

5,000 FTE€ 500mn cost savings300 branches to close

+3,000 FTE+ € 800m cost savings

Turnaround programme complements existing initiatives with target: € 1.3 bn, 8,000 FTE (gross)


Major achievements so farMajor achievements so far

� Closure of 300 domestic branches

� Headcount reduction of 8,000*

� Streamlining of Corporate Center by 400 FTE

� Business model – Corporates & Markets

� Business model – Private & Business Clients

� New credit process (rating, portfoliomanagement)

� Merger mortgage banks / Eurohypo

� Joint venture Cash Payment Services

� Joint venture Securities Services

� Transfer of asset management companies

� Integration of distribution

StatusStatusAction StepsAction Steps

done

achieved (5,600 FTE)

achieved (260 FTE)

implemented

implemented

implemented

done

Letter of Intent signed

MoU signed

done (for DIT/dbi)

done

�

�

�

* Includes FTE (full time equivalent) from Corporate center

70%

65%

75%

80%

75%

�


Existing cost cutting programmes: on track ...Existing cost cutting programmes: on track ...

Projected and achieved cumulative costsavings (gross) 2001 – 2004

2001

€ in mn� Cumulative target for 2002 76% achieved

by end of June 2002

� Monthly run rate end of June 2002 foroperating expenses 13% below prior year’srate

� Personnel costs reduced by 13%; non-personnel costs 14% below previous year

� Time lag of full earnings impact

2002 2003 2004

430

1,013

76%

1,2001,300

YTDJune 2002


... but not sufficient... but not sufficient

€ mn

Operating income

Operating expenses

Loan loss provisions

Operating profit/loss

Other income/expenses

thereof capital gains

Profit before taxes

C/I-ratio*

Loan loss ratio*

Dresdner Bank„stand-alone“ IAS

Q1

2,531

(2,151)

(155)

225

29

87

253

85%

0.31%

Q2

2,355

(2,224)

(403)

(274)

637

644

364

95%

0.67%

Q3

2,569

(1,995)

(804)

(230)

272

716

42

78%

1.10%

Q4

2,277

(2,312)

(530)

(565)

59

654

(505)

102%

1.44%

Q1

2,094

(1,927)

(321)

(154)

1,577

1,683

1,423

92%

0.69%

Q2

1,820

(1,884)

(730)

(794)

(458)

(430)

(1,251)

104%

1.50%* C/I ratio defined as operating expenses / operating income; loan loss ratio = loan loss provision/ RWA

2001 2002

Dresdner Bank is producing operating losses since Q2 2001

YTD June

3,915

(3,812)

(1,051)

(947)

1,120

1,253

171

97%

1.10%


Key objectives „Turnaround 2003“Key objectives „Turnaround 2003“

� Operating profit* > 0 in 2003 by

� stabilising operating income at

2002 level,

� reducing operating expenses to€ 6.5 bn [C/I-ratio < 85%]

� Loan portfolio: expected loss lessthan 65bp

� Reduce RWA to less than €170 bn(average)

� Realigned profit center structure

� Profit participation scheme

� Restore profitability

� Optimise / reallocate capital

� Clearly defined responsibilities andaccountability

� Incentivisation through strictlyperformance-related compensation

* operating Profit = operating income – operating expenses – loan loss provisions


Responsibilities for „Turnaround“ ProjectResponsibilities for „Turnaround“ Project

Fahrholz Achleitner Müller

Perlet

Corporates &Markets

Corporates &Markets

Projectteams

InstitutionalRestructuring

Unit

InstitutionalRestructuring

Unit

Private &BusinessClients

Private &BusinessClients

CorporateCenter/Services

CorporateCenter/Services

ComplexityReduction

ComplexityReduction

Sponsors

Steering committee

Fahrholz N.N. Georgi Müller Rosenfeld

Rosenfeld / Schwarz

321 4 5

Project organisation (steering committee, project office, project teams) ensures tight control ofprojects and realisation of objectives.

Project office


1 Corporates & Markets 1 Corporates & Markets

� Difficult capital markets environment; especially forEquities and M&A/ Advisory

� Quality and size of credit portfolio especially outsideEurope

� Integration of investment / corporate banking

� Perceived uncertainty about strategic direction

� Lack of equity compensation plan leads to high costs

The challenges

Our answers� We remain committed to our business model

� European focussed set up with client centric model

� Further leverage strong corporate franchise withinvestment banking and capital markets product expertise

� Maintain and develop strengths in Advisory, RiskManagement and Specialist Financing

� Introduction of a profit participation scheme based on valuecreation for shareholder


1 Corporates & Markets: Making progress 1 Corporates & Markets: Making progress

� Integration of Global Debt and Global Equity toform Capital Markets (first mover)

� Integrated client relationship management

� Major scale down of business operations inAsia (no future local business)

� Withdrawal from non-strategic credit business

� Investment in securities lending business(including agency lending) as joint venture withAllianz

� Rightsizing of investment banking to supportonly designated sectors and major hubs in UK,Germany and USA

� State of the art credit process to increaseefficiency and enable risk adjusted pricing

Actions takenActions taken StatusStatus

Responsibility:Fahrholz

done�

done�

Work in progress

Work in progress. US portfolio reduced by 30% since 2000

done�

done�

Work in progress


1 Corporates & Markets: Making progress 1 Corporates & Markets: Making progress

- 8%- 7%

- 9%

4.3

Dec01

� Successful reduction of Operating costsin all 3 phases

� Target cost base for 2003 €3.1 bn(thereof DrKW €2,2 bn)

� C&M headcount reduction of 2,040 sinceDec 2001 (-15%), of which DrKW 1,710(-21%)

� Phase 3 („Turnaround 2003“) already 85%implemented

Operating Costs (€ bn)

Phase1 Phase2 Phase3 2003DBLA

3.1

DrKW

3.5

DrKW

2.2

CB CB


2 Institutional Restructuring Unit 2 Institutional Restructuring Unit

� Worsening economic conditions (i.e. increasing number of insolvencies)

� Deteriorating credit quality

� Legacy portfolios outside core markets/ mediocre quality

The challenges

Our answers � Ringfence discontinued / non-performing business of the bank (loanbook / private equity)

� Independent management responsibility with separately reportedresults and clear incentive system

� Attract (external) management with relevant experience

� Enhanced release / re-allocation of capital (target € 2.5-3.0 bn by endof 2004, initial loan volume up to € 30 bn)


2 Institutional Restructuring Unit 2 Institutional Restructuring UnitThe IRU is comprised of the discontinued business of the bank („non-strategic book“ plus PrivateEquity) and non-performing business

strategic

End of June 2002

� Volume of discontinued business approx.€ 23 bn plus Private equity with € 1 bn(commitment)

� Loan Volume of continued / nonperforming business approx. € 5,6 bn

� Allocated risk capital € 2,8 bn

IRU

non-strategic

non-performing

performing

“Discontinued business” (“non-strategic book” plus

Private Equity)

Continued business,

non-performing


3 Private & Business Clients 3 Private & Business Clients

� Stabilising profits despite weak capital markets� Cost reduction in support areas� Optimising distribution channels� Integrating Dresdner and Allianz

The challenges

Our answers� Enhancement of product range (e.g. structured advice modules)

� Optimisation of branch network and upgraded private client portal

� Centralisation of service units

� Focus on leveraging synergies with Allianz on product level

� Development / implementation of integrated business models with Allianz,mutual penetration of customer base and distribution of joint products


3 Private & Business Clients: Making progress 3 Private & Business Clients: Making progress

Actions takenActions taken StatusStatus

ResponsibilityGeorgi

� Optimisation of branch network (300 branches closed by the end of2002; 245.000 registered users in upgraded private client portal)

� Centralisation of service units at 10 locations� Launch of first joint products (Allianz Dresdner Fonds Police, Allianz

Dresdner construction financing) in April/ July 2002� More joint products in the pipeline� Business model with Allianz implemented, c. 900 insurance

specialists in bank branches; Dresdner Bank investment advisors tobe increased from 110 to 200 (by end of 2002)

� Extend business model (i.e. banking infrastructure into Allianz agentnetwork)

� Ongoing cost optimisation

done�

done�

done�

done�Launch: early 2003

Work in progress

Work in progress


∅∅∅∅1-7 Jan

in € m

3 Private & Business Clients: Insurance Sales 3 Private & Business Clients: Insurance Sales

34

*) corresponds roughly to sum of pemiums paid in average life of contract

Life: Premium volume *

x 4,4108 115 107 102

119136

118142 148

0,06

x 35,0

0,60,8 0,7

1,11,3

1,72,1 2,0 2,1

Non-life: Annual premiums

Significant increase in insurance sales following merger Allianz Dresdner

Feb Mar Apr May Jun Jul Aug∅∅∅∅8-12

∅∅∅∅1-7 Jan

2002Feb Mar Apr May Jun Jul Aug∅∅∅∅

8-12200120022001


4 Corporate Center / Corporate Services 4 Corporate Center / Corporate Services

� Bank established new corporate structure in 2000 (CorporateCenter/ Corporate Services / Divisions)

� Move from 6 to 2 operating divisions

� Assure cost efficiency

� Avoid duplication of tasks

� Demanding regulatory environment

The challenges

Our answers � Further streamline Corporate Center / through immediate headcountreduction

� Transfer of tasks and headcounts into divisions / Group Center(subject to regulatory constraints)

� Headcount reduction based on divisional responsibilities throughefficiency gains (top down estimate is reduction by 20-30%)

� Greater accountability in divisions


4 Corporate Center / Corporate Services: Makingprogress 4 Corporate Center / Corporate Services: Makingprogress

� Analysis of status quo (including costallocation, services provided, FTE/ coststructure)

� Top-down design of target structure

� Consultation with German banking regulator

� Bottom-up validation of headcount reductionand migration

� Communication to, and negotiation withWorkers Council

� Set up of implementation process and plan

StatusStatusActions takenActions taken

done

Work in progress

Work in progress

done

Responsibility:Müller

done�

�

�

Work in progress


5 Complexity reduction 5 Complexity reduction

� Highly complex legal structure across multiple jurisdictions

� Legal set-up and divisional management structure are notyet fully aligned

� Increased sophistication of business and corporategovernance needs

The challenges

Our answers � Increase transparency and accountability

� Rationalise and reduce number of legal entities

� Create consistency between Legal and Managementstructures

� Disinvestment of non-core businesses

� Optimise tax structures and capital allocation


� Key principles for target structure of DresdnerBank Group

� Review of legal entity structure in majorlocations (London, New York, Luxembourg,Paris) and high level milestone plans

� Independent project organisation

� Design and approval of restructuring plans(incl. quick wins, cost savings)

� Implementation / execution of plans

StatusStatusActionAction

agreed

done

done

agreed

Work in progress

�

Responsibility:Rosenfeld

5 Complexity reduction : making progress 5 Complexity reduction : making progress

�

�

�


New and existing initiatives New and existing initiatives

Strategic repositioning of Dresdner Bank

Phase lMay

– Dec 2000

Phase 2Apr

– Jun 2001

Combination Allianz Dresdner

„Turnaround 2003“

�Further rationalisation of Corp.Center and Corp. Services;

transfer of tasks/ headcount to divisions and Group Center

�Establish Institutional Restructuring Unit

� Increased accountability of divisions for expense management and profitability

Phase 3from

July 2002

3,000 FTE+ € 700m cost savings

Turnaround programme complements existing initiatives – target: € 1.3 bn, 8,000 FTE (gross) -increasing cost cutting target to € 2 bn (gross) and 11,000 FTE

5,000 FTE€ 500mn cost savings300 branches to close

+3,000 FTE+ € 800m cost savings


Operating expenses target for 2003Operating expenses target for 2003Operating expenses of the bank should not exceed € 6.5 bn in 2003(including new cost cutting initiatives)

* € 0,2 bn already realised in 2001 and €0.1m planned for 2004** € 0,1 bn anticipated for 2004

Decon-solidation(DH / AMGermany)

One-offeffect (non-recurring)

Invest-ments

-0.48.7

6.5

Net Target CostBase 2002/2003

top-downindication

+0.15

-1.0

-0.6

-0.4

in € bn

Cost cuttinginitiatives(Existing)*

Operating expenses.2001 24 months

Cost cuttinginitiatives(new)**

-0,2

-0.1

-1.3

-0.7-0.1

in bn €

Operating expenses.2003

Total € 2.0 bn


Summary of cost reduction initiativesSummary of cost reduction initiatives

„Turnaround 2003“ with target of € 700 mn is comprised of the following initiatives

top-downindication

UB

Initiatives Run-Rates(€ mn)

Headcount reduction

One-off restructuring

costs

CorporateCenter/Backoffice

DrKW*Corp. BankingOther(div.subsidiaries)

C&M

38020

80-100

1,000-1,200150-250

650

150-180

P&B Domestic*

CS/TB**CC/CSVarious InitiativesTotal

300

400200

2,700-3,000

P&B 30

* Including Divisional Business Services **TB = Transaction Banking

40-503090

670-700

150-220

300-400


Summary and conclusionsSummary and conclusions

� Clear commitment to restore profitability in 2003 through increase in efficiency and

reduction of expenses

� Increased accountability and responsibility of divisions on capital utilisation and value

generation

� Turnaround programme with 5 key initiatives launched

� Project organisation ensures tight control of process and realisation of objectives

� Actions taken in line with targets and plans


DisclaimerDisclaimer

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTSAll rights reserved, Copyright 2002 Allianz AGCertain of the statements contained herein may be statements of future expectations and other forward-looking statements that are based on management's current views and assumptions and involve known andunknown risks and uncertainties which could cause actual results, performance or events to differ materiallyfrom those expressed or implied in such statements.In addition to statements which are forward-looking by reason of context, the words “may, will, should,expects, plans, intends, anticipates, believes, estimates, predicts, potential, or continue” and similarexpressions identify forward-looking statements. Actual results, performance or events may differ materiallyfrom those in such statements due to, without limitation, (I) general economic conditions, including in particulareconomic conditions in the Allianz Group's core business and core markets, (II) performance of financialmarkets, including emerging markets, (III) the frequency and severity of insured loss events, (IV) mortality andmorbidity levels and trends, (V) persistency levels, (VI) interest rate levels, (VII) currency exchange ratesincluding the Euro - U.S. Dollar exchange rate, (VIII) changing levels of competition, (IX) changes in laws andregulations, including monetary convergence and the European Monetary Union, (X) changes in the policiesof central banks and/or foreign governments, (XI) the impact of acquisitions (e.g. Dresdner Bank), includingrelated integration issues, and (XII) general competitive factors, in each case on a local, regional, nationaland/or global basis. Many of these factors may be more likely to occur, or more pronounced, as a result of theevent on, and following, September 11th, 2001.The matters discussed in this release may also involve risks and uncertainties described from time to time inAllianz AG’s filings with the U.S. Securities and Exchange Commission. Allianz AG assumes no obligation toupdate any forward-looking information contained in this release.

Documents

Turnaround 2003 Analysts‘ conference call September 26, 2002 · 2018. 10. 4. · (including agency lending) as joint venture with Allianz Rightsizing of investment banking to support