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UNICREDITO ITALIANO GROUP Built to deliver Alessandro Profumo - CEO. Morgan Stanley European Banks Conference London - April 6 th , 2005. UCI AT A GLANCE. ROE 17.9%, Cost/Income Ratio 57.3%. Home markets in Italy and Central Europe. Global player in Asset Management Euro 128 bn AUM. - PowerPoint PPT Presentation
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UNICREDITO ITALIANO GROUPBuilt to deliver
Alessandro Profumo - CEO
Morgan Stanley European Banks Conference
London - April 6th, 2005
2
UCI AT A GLANCE
Current market cap around Euro 29 bn
Home markets in Italy and Central Europe
Global player in Asset Management Euro 128 bn AUM
Main market shares in Italy: customer loans
10.8% household mortgages
17.7% customer deposits
10.1% mutual funds
13.8%
Main market shares in New Europe:Deposits Mutual
funds Poland 12.7% 34.5% Croatia 29.2% 39.8% Turkey 4.7% 12.1%
70,543 employees (29,540 in New Europe)
4,528 branches (1,373 in New Europe)
ROE 17.9%, Cost/Income Ratio 57.3%
Private & AM11%
New Europe18%
Corporate29%
Retail42%
TOTAL 2004 REVENUES: Euro 10.4 bn
2004 data
3
ORGANIZATION BUILT TO LEVERAGE OPPORTUNITIES IN ALL OUR CUSTOMER SEGMENTS AND MARKETS
(1) Consumer Finance(2) Retail residential mortgages(3) Leasing(4) Asset Gathering from affluent clients
New EuropeNew Europe
Pekao (Poland)
Zagrebacka (Croatia)
Bulbank (Bulgaria)
KFS (Turkey)
UniBanka (Slovakia)
UC Romania
Zivnostenska (Czech Rep.)
CorporateCorporate
UBM
Locat(3)
Clarima(1)
UBCasa(2)
RetailRetail Private & AMPrivate & AM
Pioneer
Xelion(4)
Global Banking Global Banking Services divisionServices division
Human Resources
Processes and organization
Central operations (UPA)
IT
Real Estate
Purchasing process
4
A SUCCESSFUL GROWTH PATH
INTERNATIONALIZATION
1998
0%
2004
17.6%
Weight of New Europe on Group Revenues
STATURE
1998
83.5
2004
149.7
Risk weighted assets, Euro bn
CAGR 98-04
+10%
PROFITABILITY
1998
0.193
2004
0.336
EPS, Euro
CAGR 98-04
+10%
PRODUCTIVITY
1998
26.3
2004
31.3
Net Income per employee, Euro x 000
5
VISIBILITY AND SUSTAINABILITY OF EARNINGS BOLSTERED BY DIVERSIFICATION OF REVENUE MIX AND BUSINESS PORTFOLIO
STRONG VOLUME GROWTH
Assets under management up 9.0%
Customer loans up 10.8%
STRENGTHENED COMPETITIVE POSITION
Lending market share in Italy (1) up 37 bp
Mutual funds market share in Italy (2) up 39 bp
ENHANCED REVENUE MIX
Interest income excl. dividends up 3.7%
EFFECTIVE COST MANAGEMENT
Headcount down 677 in 2H04
2004 ACHIEVEMENTS
(1) Pro-forma, including Euro 2.5 bn relative to the Locat securitization and Euro 0.5 bn relative to the District Bonds(1) Calculated according to the “old” classification methodology adopted by Assogestioni
6
Total Revenues
Euro mln
10,375
2,131
0.336EPS(2) (Euro)
0.205
-0.7%
+8.7%
+0.026
+0.034
Operating Income
Net Income
FY04 Y/Y ch.
DPS(3) (Euro)
4,434 -5.8%
17.9%ROE(1) +20 bp
+5.3%
+65.0%
% ch. on 4Q03
+9.6%
2,679
627
4Q04
1,124
(1) Calculated on end of period net equity excluding profit for the period(2) N° of shares in 2004 net of 87 mln treasury shares
(3) To be proposed to the AGM
7.35% +38 bpCore Tier I ratio
2004 - IMPROVING PROFITABILITY QUARTER AFTER QUARTER
7
62(1)
(2) Pro-forma, excluding Parmalat provisions
up-front revenues as % of total
2003
12.5
2007
6.7
Italy, total customer loan mkt share, %
2003
10.74
2007
12.60
2004(1)
Cost Income ratio, %
2003
55
2007
50
Cost of risk, bp
2007
60
2004
57.3
2004
7.8
11.11
2003
76
2004
63
64(2)
Weight of up-front revenues continues to drop
Customer satisfaction drives market share gains
Efficiency
Revenues
Service quality
Process redesign provides key to efficiency improvements
Assets Cost of risk reduction
(1) Pro-forma, including Euro 2.5 bn relative to the Locat securitization and Euro 0.5 bn relative to the District Bonds
2004 PERFORMANCE ON TRACK VS. 2007 STRATEGIC PLAN
8
GROUP RESULTS BENEFITING FROM BUSINESS DIVERSIFICATION
CONTRIBUTION TO GROUP NET INCOME BY DIVISION
y/y % ch.
949Corporate -2.7%
545Retail -6.7%
2,131TOTAL GROUP +8.7%
398New Europe +29.2%
CONTRIBUTION TO GROUP NET INCOME PRE CORPORATE CENTER AND ELISIONS
390Private & AM +58.5%
Euro mln
17.5%
17.1%
41.6%
23.9%
RETAIL CORPORATE
PRIVATE & AM NEW EUROPE
9
CAPITAL ALLOCATION – DIRECTING CAPITAL TO HIGHER-RETURN BUSINESSES
(1) End of period, net of minorities (3) Pay-out ratio: 60%
2004 RORAC(4)
36.9%30.8%
19.8%17.4% 17.7%
Private & AM
NE Retail Corporate Group
Cost of equity 8.58%
ABSORBED CAPITAL(1)
Total Group 9.6 bn
2003
+2.5
y/y % ch.(2)
9.8 bn
2004
Retail
51.3% +0.9
28.9%
NE
27.7% +10.0
12.9%
Corporate
12.4% +9.3
49.1%
Private & AM 8.6% +12.09.1%
Divisional weight
Excess Capital(3) 0.2 bn 0.8 bn
Ma
rgin
al
RA
RO
RA
C
(4) Return on risk adjusted capital = Marginal Rarorac + Cost of Equity(2) On Absorbed Capital
Euro
10
RETAIL DIVISION
GROW MARKET SHARE
Focus on products with longer revenue streams
FOCUS ON SUSTAINABLE REVENUES
IMPROVE EFFICIENCY THROUGH ACTIVE COST MANAGEMENT
Leverage the skills of “Category Killers” (mortgages and consumer credit)
Enhance product innovation/redesign
Implement two brand new “hunter”networks
Increase customer satisfaction
Redesign processes to facilitate headcount reduction
Rationalize branch network
OBJECTIVES MAIN ACTIONS
Focus on small business customers(1)
(1) Turnover < 3 mln Euro
11
630596
557 547563 570 593
612
1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04
Avg. Euribor 2.46%
2.78%
2.14% 2.09%2.16%
2.09% 2.11% 2.15%
FOCUS ON VOLUME/MARKET SHARE GROWTH TO SUSTAIN NET INTEREST INCOME
EXCELLENT LENDING GROWTH (+16.1% Y/Y) …
Mortgages +22.9% y/yConsumer credit +31.2% y/ySmall Business +10.8% y/y
… AND GOOD SPREAD RESILIENCE IN ALL KEY MARKETS…
4Q average spread(3) on:new mortgages at 1.28% for UCB (stable q/q) and
1.43% for UBCasa (-3 bp q/q)small business(4) s/term loans at 8.37% (+5 bp q/q) revolving cards at 10.62% (+6 bp q/q)
… SUSTAINING STEADY NET INTEREST INCOME GROWTH (ex. dividends)
… WITH HIGHER MARKET SHARES…
Market share on:household mortgages(1) at 17.71% (+54 bp)new flows of consumer credit(2) at 4.3% (+395 bp)
(3) Management accounts(4) Management accounts, includes also maximum
overdraft charges
(1) Group market share, related to mortgages to households as of Bank of Italy definition in table TDME0070 of the monthly bulletin
(2) Calculated on ASSOFIN data
12
IMPROVED CUSTOMER ACQUISITION CAPABILITIES & SUSTAINED FOCUS ON PRODUCTS WITH LONGER REVENUE STREAMS
STRONG FOCUS ON WEALTH MANAGEMENT PRODUCTS GENERATING RECURRING REVENUES
2003
0.1
2004
3.5
SALES OF SEGR. ACCOUNTS INVESTING IN FUNDS, Euro bn
IMPROVED CUSTOMER SATISFACTION POSITIVELY IMPACTING CHURN RATE
UniCredit Banca:
Overall acquisition rate increased from 5.4% (2003) to 6.7% (2004)
30,000 net new Small Business customers
13
-610 vs. June 04
COST MANAGEMENT EFFORT ALREADY PRODUCING TANGIBLE RESULTS WITH FURTHER BENEFITS EXPECTED IN 2005
TOTAL STAFF
EFFECTIVE COST MANAGEMENT ALREADY TANGIBLE…
… WITH BENEFITS FROM STAFF REDUCTION EXPECTED IN 2005
OPERATING COSTS, Euro mln
2002(1)
2,956
2003(1)
2,930
2004
2,957
1H04
25,467
2004
25,136
FEB 05
24,857
(1) Pro-forma to make perimeter comparable with 2004
128 more branches to be closed in
2005
UCB BRANCHES
BRANCH NETWORK REORGANIZATION ALREADY UNDERGOING, IN LINE WITH 3 YEAR PLAN TARGETS
2003
2,754
Branches closed
-163
2004
2,591
14
CORPORATE DIVISION
Implement new service model: tighten relationship and improved customer understanding
Focus on share of wallet IMPROVE REVENUE MIX
Rebalance UBM’s revenue stream
Leverage the “service-revenue multiplier”
OBJECTIVES MAIN ACTIONS
BECOME “THE FINANCIAL PARTNER” FOR OUR CUSTOMERS
Increase lending volumes with focus on M/L term lending while maintaining spreads
15
2004 ACHIEVEMENTS
LOAN GROWTH WITH HIGHER SPREADS
UBI share of wallet at 12.4% (vs. 12.3% as at Dec03)
2004 average lending spreads at 2.34% (+8bp vs 2003)
Net interest income: +4.6% y/y
Net commission +5.8% y/y
Commercial focus on most recurring service revenues
- Foreign trade services: Euro 135 mln, +24% y/y
- Transaction services: Euro 71 mln, +7.8% y/y
MORE BALANCED REVENUE COMPOSITION FOR UBM
Higher weight of Institutional Derivatives and Investment Banking
Lower weight of Corporate Derivatives
TOTAL LOANS (ex Repos), Euro bn
23.4
Dec03
62.8
Dec04
65.9 +4.9% y/y
Of which: M/L2 25.6 +9.2% y/y
3
Securitization
GROWTH OF LEAST VOLATILE REVENUE COMPONENTS
16
PRIVATE & ASSET MANAGEMENT DIVISION
GROW ASSET BASE
IMPROVE EFFICIENCY THROUGH ECONOMIES OF SCALE
ACHIEVE PERFORMANCE EXCELLENCE
International: focus on institutional mandates and open architectures
Italy: Provide high-quality wealth
management advice and services to all Italian clients
Streamline Asset Gathering
New Europe: manage the transition from non-managed to managed assets
US: round out product range
OBJECTIVES MAIN ACTIONS
17
2004 ACHIEVEMENTS
STRONG GROWTH IN TOTAL FINANCIAL ASSETS AND REVENUES
All figures at unchanged FX
EXCELLENT PERFORMANCES 32nd percentile rank on avg. worldwide for Pioneer “long funds”
1st quartile rank for mutual funds sold in Italy vs Italian peers
INCREASED MKT. SHARE
Dec04
Italy – Mutual Funds 13.76%
Poland – Invest. Funds 34.46%
Xelion – Net Sales 25.23%
Dec03
13.39%
30.36%
13.66%
IMPROVED EFFICIENCY AND STRONG OPERATING PERFORMANCE
C/I RATIO, %
2003 2004
64.1 63.2 -77bp
2003 2004
390429 +9.8%
OPERATING INCOME, Euro mln
FIN. ASSETS, Euro bn
2003 2004
155172 +12.0%
2003 2004
1,085 1,167 +7.5%
TOTAL REVENUES, Euro mln
18
NEW EUROPE DIVISION
STRENGTHEN ORGANIC GROWTH ON SELECTED CUSTOMER SEGMENTS
EVALUATE POTENTIAL VALUE- CREATING ACQUISITIONS
MAINTAIN STRICT RISK & COST CONTROL
A single strategy fine-tuned to compete successfully in each market/bank
OBJECTIVES MAIN ACTIONS
Leverage existing customer base in larger NE banks
Broaden customer base in smaller NE banks
Develop dedicated service models for Retail & Small Business
Enrich product offering
Bid for Yapi Kredi in Turkey and assess new opportunities in selected countries
Optimize IT systems, purchasing processes & back office
19
2004 ACHIEVEMENTS
STRONG VOLUME GROWTH
Net loans +10.5% y/y (+18.5% at current FX), mainly mortgages(1) +27.8% y/y (+35.1% at current FX)
Mutual Funds(2) +35.6% y/y
(1) Management accounts in LAS
All figures stated at unchanged FX
(2) New Europe Business Area of Pioneer is included at current FX
MARKET SHARE GAINS
Mutual Funds: PPIM(3) +4.1 pp y/y to 34.5%
Stock of mortgages: Pekao(4) +4.5 pp y/y to 16.5%, Zaba holds its leadership position (40.2%)
(4) Only Local Currency
(3) Pioneer Pekao Investment Management
IMPROVED EFFICIENCY
Cost/Income -0.8 pp y/y to 55.2%
BETTER ASSET QUALITY
Cost of risk -33 bp y/y to 89 bp
Coverage ratio of doubtful loans +6.7 pp to 70.8%
2004
1,751
2003
Total Revenues (Euro mln)
1,835 +4.8% (+13.5% at current FX)
20
GLOBAL BANKING SERVICES DIVISION
EFFECTIVE GROUP-WIDE COST MANAGEMENT
Right size Group headcount
Optimize processes and service model
Rationalize corporate structure and Real Estate
Foster synergies in ICT
Create a central operations center in Romania
BECOME BEST-IN-CLASS SERVICE PROVIDER
OBJECTIVES MAIN ACTIONS
21
ACHIEVEMENTS SO FAR
UPA: first steps in Romania (35 people hired in 1Q05 in training process)
ICT synergies (approx. Euro 10 mln cost savings from in-sourcing in 2005)
Real estate rationalization (sale of non-core assets in 2004, 128 UCB branches to be closed in 2005)
Legal entities reduction (C. R. Carpi and Banca dell’Umbria to be merged into UCI banks in 2005)
Headcount reduction (-727 vs 1H04) well on track
2004
39,858 39,368
1H04
ITALY
39,131
Feb05
22
2005 - MAINTAIN TIGHT FOCUS ON ACHIEVING 3-YEAR PLAN TARGETS
Building on 2004 achievements:
Gain market share in lending and financial assets to drive revenue growth:
Increase lending volume in mortgages, consumer credit, small business in Italy and New Europe
Raise corporate share of wallet while enhancing service revenue contribution
Leverage global presence of AM division to increase AuMs
Cross-sell asset-gathering products to existing small business customers
Deliver efficiency improvement in line with 3-year plan
Maintain strict control over cost of risk
Drive value creation and shareholder return through active capital management
UNICREDITO ITALIANO GROUPBuilt to deliver
Alessandro Profumo - CEO
Morgan Stanley European Banks Conference
London - April 6th, 2005
24
Annex
25
CUSTOMER SATISFACTION
PRIVATE CUSTOMERS, TRIM INDEX (1)
2003 4Q04
47
51
2003 4Q04
4340
UNICREDIT BANCA AVG. TOP 4 COMPETITORS
Stability of front-end relationship with customers
Improved waiting time (shorter queues) Improved advisory on investment services,
with room for further improvement
SMALL BUSINESS, TRIM INDEX (1)
2003 4Q04
42
48
2003 4Q04
41
36
UNICREDIT BANCA AVG. TOP 4 COMPETITORS
Dedicated service model
Improved advisory on lending products
Focus on quality of sales
Source: NFO Infratest, Customer satisfaction analyses
(1) On a scale from 0 to 70