Post on 03-Jan-2016
UCI 2001 First Half Results
September 2001
2
1H2001 Group Highlights
Divisional Reporting
Italian Commercial Banking
Wholesale Banking
Investment Banking
Asset Management
New Europe Banking
Conclusions
Agenda
3
UCI MAJOR STRENGTHS
Good revenue generation (Tot. Revenues: +5.5% on 1H00) thanks to a prompt reaction to adverse market conditions
Synergies between production and distribution as a competitive advantage with benefits in all Business Divisions
Efficiency at excellence level despite important investments (C/I: 52.6%)
Capability to improve market shares in high value-added businesses (mutual funds in Italy and US, bancassurance, corporate derivatives)
4
GOOD REVENUE GROWTH, OPERATING AND NET INCOME INCREASING OVER AVERAGE 2000 FIGURES IN LINE WITH FULL YEAR EXPECTATIONS
TOTAL REVENUES OPERATING INCOME
1H00 00 Avg
(Euro mln)
1H01
4,691 4,948 2,413
1H00 00 Avg 1H01
2,2832,345
+5.5%
+6.2%
-2.8%
+2.7%
NET INCOME
918
1H00 1H01
803
00 Avg
754
698*
-12.5%
+6.5%
* Including provisioning of fiscal benefits of the Ciampi Law” related to year 98-99
“Ciampi Law” provisioning for related period:
1H00: Euro 42 mln
2000: Euro 85 mln
1H01: Euro 49 mln
4,659
5
TOTAL REVENUES BREAKDOWN
DIVERSIFIED SOURCES OF REVENUES ALLOWED THE GROUP TO ACHIEVE 5.5% REVENUE GROWTH DESPITE THE DECLINE IN NET COMMISSIONS
1H00
2,303
1,753
342293
4,691
1H01
2,517
1,621
459351
4,948
Net commissions
Net interest income
Trading profitsOther income
+9.3%
-7.5%
+19.8%
+34.2%
+5.5%Good contribution of Italian Banking division (+13.5%) and New Europe Banking (+26.3%) partially reduced by cost of debt and hedging of equity investments
Net non interest income up 1.8% on 1H00 due to positive trend in other income and trading profits that more than compensates the decline in net commissions
(Euro mln)
6
ADVERSE FINANCIAL SCENARIO HAD A LIMITED IMPACT ON TOTAL COMMISSIONS (-7.5%)
NET COMMISSIONS1H00 1H01 % ch.
Asset management
Securities in custody
Other services
Total
Insurance products
Mutual funds +Segregated accounts
826
730
96
176
619
1,621
871
777
94
328
554
1,753
-5.2
-6.0
-46.3
+11.7
+2.1
-7.5
(Euro mln)
Negative impact on securities in custody revenues (-46.3%) due to significant reduction in customer portfolio turnover
Limited impact of financial turmoil on asset management commissions (-5.2%)
Further increase in commissions from insurance products up 2.1% on 1H00
Significant increase of commissions from cash management services and loans granted (+13.5% on 1H00))
7
PROFIT FROM FINANCIAL TRANSACTIONS HAD A BRILLIANT PERFORMANCE (+34.2% ON 1H00) THANKS TO THE CONTRIBUTION OF UBM AND TRADINGLAB
INCOME FROM FINANCIAL TRANSACTIONS(Euro mln)
UBM (excl. TL)
TradingLab
Italian banks
+35.3%
-8.7%New Europe banks
+154.5%
* Balance due to Other Group companies
+34.2% Cautious risk management: average daily VaR of only Euro 3 mln for UBM and Euro 3 mln for TL during 1H01
Increasing impact of CorporateLab, accounting for around 190 Euro mln (89 Euro mln inside UBM and 102 Euro mln inside the Italian Banking division). Corporate derivatives volume up 59.3% on 1H00 to 8.8 Euro bln
1H01
129
151
168
63
459*
8
Total Operating Costs(Euro mln)
Staff Costs
Other costs
% ch.
+13%
+25%Depreciation
+14.5%
+14.3%
Staff costs:
+4,9% Pioneeer acquisition
+2.2% development of Wholesale Banking
+1.6% Zloty appreciation
+4.3% investments in sales effectiveness, incentivisation program
1H01
1,517
906
180
2,603
% ch. Excl. Pioneer in ‘01
+7.9%
+20.8%
+5.3%
+8.1%
OPERATING COSTS UP 7.9% (ON A COMPARABLE BASIS) SUPPORT OUR REVENUE GROWTH
Other costs:
+9.2% Pioneer impact, of which Euro 28 mln for advertising campaign
Staff from 66,897 (1H00) to 65,194
9
1H 2001C/I 52.6%
New Initiatives: Xelion and Clarima projects well on
track Impact of investments higher in 2H01
1.5%
0.7%
4.3%
46.1%
Develop. projects
Acquisitions
New Initiatives
Revenue
targets
confirmed
STRUCTURAL C/I AT EXCELLENCE LEVEL
Italian Banks: Key projects on restructuring the
network well under way with lower investments compared to budget
Pioneer: Turnaround in USA going on faster than
planned Costs lower than budgeted, especially
on advertising
FY01 C/I will be lower than the targeted 55.3% thanks to lower investments needed to stick to our revenue targets (market conditions effect)
Recent Acquisitions:Impact on consolidated C/I confirmed
Structural C/I ratio
10
DIVISIONAL CONTRIBUTION TO GROUP NET INCOME
65.4(1)89.4(1) -25.9
+100.2%N.m.
N.m.
878.2(1)
803+9.7%
1,137.3
Italian banking(2)
Wholesale banking
New Europe
banking(5)
New Initiatives(6)
Corp. Centre & elisions(7)
Group total
Total pre-Corp. Centre
-334(1)
GOODWILL AND HOLDING CHARGES:
- 113 goodwill depr.- 208 holding loss (net of
dividends), of which 80% due to financial costs
(Euro mln)
-12.5%
N.m.130.2(1)
+10.6%+12.2%
Inv. banking(3)
Pioneer Group(4)
(1) Net of infragroup dividends. Goodwill depreciation is fully charged to Corp. Centre(2) Credito Italiano, Rolo Banca 1473, Cariverona, CRT, Cassamarca, Caritro, CRTrieste,
Banca dell’Umbria, CRCarpi, Mediovenezie, BMC, Mediocredito dell’Umbria, Banque Monegasque, Unicredit Suisse, BAC Marino, CRTS Zagabria, RoloPioneer Lux, Rolo Pioneer Sgr, Gestiveneto, Fondinvest, Pioneer inv. Management SA, S+R Investimenti, Fida Sim, FRT Sim, Fid. Cordusio, CRV Ireland, CRTS Ireland, Uniriscossioni
(3) UBM, TradingLab
(4) Pioneer Global Asset Management, Pioneer Investment Management SpA, Pioneer Alternative Investments Sgr, Pioneer Group USA, Pioneer Investment Management LTD, Pioneer Alternative Investments LTD, Pioneer Fonds Marketing GMBH, Gestilux
(5) Group Pekao, Bulbank, Pol’nobanka, Splitska Banka(6) Xelion, Clarima(7) Parent Company, other financial companies and elisions
11
1H2001 Group Highlights
Divisional Reporting
Italian Commercial Banking
Wholesale Banking
Investment Banking
Asset Management
New Europe Banking
Conclusions
Agenda
12
ITALIAN BANKING DIVISION: KEY HIGHLIGHTS
SIGNIFICANT INVESTMENT ON QUALITY OF BANKS’ SERVICE MODELS FOR FUTURE GROWTH
GOOD RESULTS DESPITE A DIFFICULT MARKET SCENARIO
SYNERGIES WITH PRODUCTION CONTINUE TO ADD VALUE
SOUND COST CONTROL STABILISING COST-INCOME DESPITE INVESTMENTS
Started roll-out of new service models for affluent and mass market customers
Ability to promptly react to difficult market conditions, with significant growth in mutual funds, bancassurance and corporate derivatives, more than compensating decrease in AuM due to financial markets turmoil
Significant synergies between production and distribution with new products for retail customers (capital guaranteed and asset management) and new services for corporates (risk management services)
Cost Income ratio at 46.8%, 45.6% without project investments
13
ITALIAN BANKING DIVISION : INCREASED REVENUE GENERATION THANKS TO POSITIVE TREND IN NET INTEREST INCOME AND TIGHT COST CONTROL
1H00 1H01
1,9361,996
3,6083,754
46.3%
1,790
2,032
Operating Income
Total revenues
Cost/Income
Net interest income Net non interest income
+3.1%
+4%
46.8% +50 bp
+13.5%
(Euro mln)
1H00 1H01
1H00 1H01
1H00 1H01
1,818 1,722
-5.3%
1H00 1H01
+
“Ordinary” Cost Income
Impact on Cost Income of project investments
Impact on Cost Incomeof Cost Excellence project
+
46.0%
+1.2%
-0.4%
=
14
BUSINESS DIVERSIFICATION AND SALES EFFECTIVENESS IN THE SEGMENTS ALLOWED US TO MORE THAN OFFSET THE NEGATIVE IMPACT OF AuM MARKET VALUE DECREASE
1H01 OVER 1H00 INCREASE/DECREASE (FIGURES OF 7 COMMERCIAL BANKS+ BMC)
Total revenues 1H00
Total revenues 1H01
Market effect on asset management
Interest income
Commissions on Bancassurance
Income from risk management services
Other*
Commissions on transactional services
3,612
3,424
-187
+242
+11
+48
+48
+26
* including dividends
Effect of financial markets turmoil on asset management commissions
Combined effect of increase in volumes (loans) and higher spreads (deposits)
Good increase in premiums written
Excellent trend in notional amounts of risks covered: + 59% on 1H01
Increased number of transactions
(Euro mln)
15
1H00 1H01
2,2422,226
947988
888
Total Revenues
Mass Market
Affluent & Private Banking
-0.7%
+4.3%
785
1H00 1H01
1H00 1H01
RETAIL SEGMENT: STABLE REVENUES DESPITE ADVERSE MARKET CONDITIONS
-11.6%
Deposits: stable deposits (-1.5% on 1H00) and improving spreads (2.98%, +54 bp on 1H00)
407453
Small Business
+11.2%
1H00 1H01
Limited impact of “bear” markets on AuM (+3.9% on Dec. 00), due to the predominance of bonds in customers’ portfolio
Negative impact of “bear” markets on AuM(-3.7% on 1H00)
Lower turnover of administered portfolios
Increase in commissions, with commissions on deposits & services/total revenues going from 44.9% in 1H00 to 46.9% in 1H01
Loans: good growth of loans (+16% on 1H00) and stable spreads (2.37%, -19 bp on 1H00). Excellent volumes in mortgages, +16% on 1H00
Deposits: good increase of deposits (+4.3% on 1H00) and improving spreads (3.05%, +56 bp on 1H00)
Loans: good growth of loans (+9% on 1H00) and improving spreads (3.95%, -7 bp on 1H00)
(Euro mln)
16
Net inflows UCI(Jan-Aug 2001)
-443
Jan
-01
-315
Feb
-01
231
Mar-
01
378
Ap
r-0
1
344
May-0
1
1,008Ju
n-0
1
-1
Jul-
01
UCI IS THE LEADER IN 2001 MUTUAL FUNDS INFLOWS...
358A
ug
-01
865Industry
1,142Mediolanum
1,053San Paolo - IMI
-3,431IntesaBci
-724Bipop
851MPS
1,559UCI
2001 cumulated inflows (Jan-Aug 2001)
2nd
3rd
6th
5th
4th
st
INCREASE OF MARKET SHARE ON MUTUAL FUNDS STOCK FROM 13.34% (DEC 00) TO 13.64% (AUG 01)
(Euro mln) (Euro mln)
17
... AS WELL AS IN BANCASSURANCE
1H01% ch.
on 1H00
Insurance policy portfolio
Unit linked
Other policies
Premium Written
10,979
7,126
3,852
+25.4
+41.3
+3.8
+18.0
+0.6
+30.0
single annual
Annual/Total premium written, %
(Euro mln)
Jun01 Aug 01
Rank in
Italy*
1st
5th
1st
% ch. on
Dec00GROUP PORTFOLIO
NEW PRODUCTION
Unit linkedof which:
* Bancassurance only
2,073 2,645
1,940
133
2,486
159
6.4 6.0
2,6212,055
Rank in
Italy*
1st
1st
1st
N.s.
1st
Excellent new production of life premiums (+2.3% on 1H00), confirming UCI leadership both in bancassurance and in total market. First two months of 2H01 reinforce the outstanding trend of first half (+13% on Aug 00)
1H01 market share in life premiums:
13.3% on total market18.8% on
bancassurancecompared to a 10.3% market share in deposits
Good growth of annual premiums (+2.1% on 1H00, +2.7 on Aug 00)
18
CORPORATE PROFITABILITY IMPROVED IN A FAST GROWING LENDING MARKET THANKS TO STRONG SALES OF VALUE ADDED SERVICES
(Euro mln)
1H00 1H01
584
700
363402
221
Total revenues
Net interest income
Net non interest income
+19.9%
+10.7%
298
1H00 1H01
+34.9%
1H00 1H01
Derivatives/Risk Management*: + 95% on 1H00
Commissions from transactional services: +17% on 1H00Commissions from foreign trade: +17% on 1H00
Other: +18% on 1H00* Average 55% of Group revenues on derivatives (remaining 45% in Wholesale Banking)
Income from deposits and services/total revenues from 49.0% in 1H00 to 53.1% in 1H01
19
SELECTIVE GROWTH TO MAINTAIN ASSET QUALITY AT EXCELLENCE LEVEL
DEFAULT LIKELIHOOD(1)
WEIGHT ON LOAN PORTFOLIO
% GROWTH (1HO1
ON DEC 00) Gross NPL/Gross Loans from 3.4% (Dec 00) to 2.7% (1H01)
Net NPL/Net Loans from 1.8% (Dec 00) to 1.5% (1H01)
Coverage ratio on gross NPL from 47.5% (Dec 00) to 44.5% (1H01)
LOW(2)
MEDIUM(3)
HIGH(4)
51.1%
37.0%
11.9%
12.8
- 0.3
0.1
Total portfolio 100% 6.0
(1) Based on internal calculations, taking into account historical trends of NPL, doubtful loans and watch-list loans, sector historical trends and expectations
Net Doubtful Loans/Total Net Loans from 3.1% (Dec 00) to 2.8% (1H01)
Note: in 1H01 Cariverona and Mediovenezie carried out a securitisation of Gross NPL for 660 mln Euro, impacting all Asset Quality indicators
(2) Main sectors included: Metal products, Farm & industrial machinery, Other industrial products, Electrical materials & supplies, Energy products, Other sales-oriented services
(3) Main sectors included: Commercial services, Textile leather & clothing, Food beverages & tobacco(4) Sectors included: Construction and public works, TMT, Transport related services
20
1H2001 Group Highlights
Divisional Reporting
Italian Commercial Banking
Wholesale Banking
Investment Banking
Asset Management
New Europe Banking
Conclusions
Agenda
21
INVESTMENT BANKING:KEY HIGHLIGHTS
LEADERSHIP IN THE PRODUCTION OF DERIVATIVES MARKETED TO INSTITUTIONAL AND CORPORATE CUSTOMERS TO SATISFY RISK MANAGEMENT NEEDS (CORPORATELAB)
LEADERSHIP IN THE ITALIAN MARKET OF GOVERNMENT BONDS AND SUCCESSFUL DIVERSIFICATION IN CORPORATE BONDS
®
ABILITY TO INNOVATE AND DIVERSIFY THE PRODUCT RANGE new products launched in order to maintain the leadership in the derivatives
market for retail investors in a context of declining market volatility
PROMPT REACTION TO WORSENED MARKET CONDITIONS: TL CHANGED THE REVENUE MIX BY PUSHING THE ORIGINATION OF STRUCTURED PRODUCTS
Being a domestic leader in Investment Banking
Being a multi-local leader in specialised financial products for retail investors
22
GROUP’S INVESTMENT BANKING SHOWS A GOOD INCREASE IN NET INCOME IN DIFFICULT MARKET CONDITIONS AND WITH A DECREASING RISK
Net Income
Total Revenue
Euro mln
C/I ratio (%)
Net operating income 217.9
314.4
30.7
130.2
1H01
276.8
117.7
24.7
208.5
1H00 % Ch.
+13.3
+10.6
+6 pp
+4.5
Strong revenue increase at CorporateLab (+83%) and Fixed Income Sales & Trading (+78%) more than offsetting declining commissions from Equity desks
C/I ratio still at excellent level, growing by 6 pp because of IT expenses and increasing headcount (507, +122 on Dec 00)
Key figures
UBM AND TRADINGLAB CONFIRM THEIR TRACK RECORD OF STABLE EARNING GENERATION AND EFFICIENT RISK MANAGEMENT
Strong increase in average daily trading revenue....
…with declining risks
1H01
4.63 4.13
1H00
Average daily VaR(2)
-11%
Euro mln
1H01
1.872.31
1H00
Average daily Trading Net Revenues(1)
+24%Euro mln
(1) Figure relates to UBM and TL combined; average daily Trading Net Revenue is defined as: (End of Period Trading Profits + Net Interest Margin)/(# of working days)
(2) Figure relates to UBM and TL combined;
23
LEADERSHIP IN SPECIALISED FINANCIAL PRODUCTS WITH LOW CORRELATION TO EQUITY MARKETS ALLOWED UBM TO ACHIEVE DOUBLE DIGIT REVENUE GROWTH (1H01 VS 1H00)
Derivatives*
Capital Markets & Corporate Finance
Euro mln
Fixed Income*
Equities*
* Sales & Trading
Equity
Fixed Income
Corporate Banking
2.4
4.3
2.2
CorporateLab
Institutional
100.4
22.3
Revenue composition by business area
6.7
42.9
13.4
187.9TotalLeading player in the new STAR segment of the Italian Stock Exchange (specialist for 13 stocks out of 29)
UBM strengthened its absolute leadership on MTS (4.8% mkt share) and reached a significant share (3.3%) in the main EuroMTS markets; rank 1 in fixed income Euro denominated issues of Italian Banks
KEY HIGHLIGHTS
122.7
1H01
25.7
76.2
24.2
25.9
152.0
9.2
-
16.5
54.8
21.4
1H00 % Ch.
-74.1
+61.0
+77.9
-48.1
+23.6
-53.9
n.s.
-85.4
+83.3
+3.9
CORPORATELAB Over 2000 corporate customers served
through the network of Italian commercial banks
Outstanding role in the fast growing market of liability management for public entities: CL has already won 16 mandates
24
Turnover increased from Euro 7bn in 1H00 to 12.1bn 1H01; 32 intermediaries signed (22 active)
Increasing attractiveness: Multi-product (Equities, Fixed Income, Derivatives) and Multi-brand exchange(JPM will start on 4Q01)
From ECN to Regulated Market with a pan-European Strategy
CONSOLIDATION OF REVENUES AND MARKET SHARE THANKS TO INNOVATION AND DIVERSIFICATION OF THE PRODUCT RANGE
42% average 1H01 market share in Italy despite increasing competition from new entrants
KEY HIGHLIGHTS
®
Revenue composition by product type
Net Income
Total Revenue
Euro mln
C/I ratio (%)
Net operating income 89.4
29.3
53.9
1H01
Key figures
126.5
Revenue Mix:
diversification in revenue sources
effort to rebalance the revenue mix increasing Origination/Structured Products component
widening of the product range (market making of Derivatives Linked Notes)
Agency Origination Market Making
24%71%
5%
Euro 126.5 mln
TLXR
25
1H2001 Group Highlights
Divisional Reporting
Italian Commercial Banking
Wholesale Banking
Investment Banking
Asset Management
New Europe Banking
Conclusions
Agenda
26
RATIONALISATION OF THE OPERATIONAL STRUCTURE TO COMPLETE THE INTERNATIONALISATION PROCESS
Unification of global investment process with the integration of Dublin and Boston research activity; expanded distribution on a regional basis including the Far East and Latin America
Improving management control and accountability through the creation of the sub-holding PGAM SpA
ASSET MANAGEMENT – PIONEER:KEY HIGHLIGHTS
SYNERGIES BETWEEN PRODUCTION (PIONEER) AND DISTRIBUTION (ITALIAN BANKING DIVISION) IN ITALY: UCI INCREASED ITS MARKET SHARE THANKS TO
A strong contribution from bancassurance (unit-linked) An effective sales force which recorded net inflows in mutual funds clearly outperforming
competitors
SYNERGIES WITHIN THE WHOLESALE BANKING DIVISION AND PRODUCT INNOVATION Joint product development with UBM and TradingLab (capital protected products linked to
a basket of Pioneer funds) New specialised funds in Luxembourg family of funds and new alternative products
INCREASE IN MARKET SHARE IN THE US AND OTHER INTERNATIONAL MARKETS Successful marketing campaign relaunching the Pioneer brand and strengthening the
sales force
27
Total Revenues
1H01
Operating costs
Gross operating income
Group’s Net Profit (excluding extraordinaries(2))
277.2
214.7
62.5
55.3
(Euro mln)
The successful turnaround of inflows is already paying-off in terms of revenue generation (+22% Vs. 1H00 pro-forma(1))
C/I at 77.5%, turnaround costs and expenses linked to the integration and development of the organisational structure
Gross operating income affected by impact of turnaround costs
Net Profit benefits from the positive effect of lower than expected income taxes
(1) Pro-forma based on UCI estimates (not accounting figures) including Pioneer results in 1H00 Group’s income statement(2) Around 20 mln Euro of extraordinaries arising from the sale of 49% of Pioneer Pekao Investment Management SA from PIM
USA to Pekao and other minor disposals
PIONEER HAD A GOOD INCREASE IN REVENUES (ON A PRO-FORMA BASIS); EFFICIENCY RATIO TEMPORARILY AFFECTED BY THE COSTS OF TURNAROUND
Trend Vs. 1H00
Percentage changes over 1H00 reported figures are not meaningful because of differences in consolidation perimeter
28
Asset under Management, sold by Pioneer through third party distributors
PIONEER OUTPERFORMED COMPETITORS IN ALL THE COUNTRIES WHERE IT OPERATES…
TOTAL
New Europe
International
(Euro mln)
+709
+345
+22
USA
Italy
20,948
2,252
590
-1,383
-88
-50
20,274
2,509
562
31.08.012000Net
salesInv.
Perf.(1)
Institutional+739 5,300
28,645+1815
4,561
28,351 -1,521
-
(2) Market share including institutional and retail customers
Leadership in the institutional segment thanks to a strong contribution from life insurance and pension products marketed to institutional customers (unit-linked +43%; pension funds +37% vs 1H00)
Good increase in market share(2) (from 13.33% in Dec00 to 13.58% in Jun01 and 13.64% in Aug01)
(1) Including FX effect
29
-16.1
238.0
25.151.0 60.5
79.462.0
147.6
50
100
150
200
250
jan
-01
feb
-01
mar-
01
ap
r-0
1
may-0
1
jun
-01
jul-
01
au
g-0
1
36.1
13.2
48.0
17.028.5 29.8
11.7
163.0
-
20
40
60
80
100
120
140
160
USA Net Inflows,USD mln
International Net Inflows,Euro mln
jan
-01
feb
-01
mar-
01
ap
r-0
1
may-0
1
jun
-01
jul-
01
au
g-0
1
…CONSISTENTLY RECORDING NET INFLOWS OF FUNDS NOT ONLY IN THE DOMESTIC MARKET BUT ALSO IN THE US AND OTHER INTERNATIONAL MARKETS
Good increase in AuM at the International division (+11.4 vs Dec 00), leveraging on the long lasting presence of Pioneer in Germany; a new office in Singapore is opening soon to host fund managers and sales people
Mkt share increased in the US (from 1.24% in Oct00 at acquisition to 1.28% in Jun01) thanks to a successful marketing effort, the quality of performance and consistency of investment style
30
1H2001 Group Highlights
Divisional Reporting
Italian Commercial Banking
Wholesale Banking
Investment Banking
Asset Management
New Europe Banking
Conclusions
Agenda
31
BRILLIANT ECONOMIC RESULTS: +42% NET OPERATING PROFIT GROWTH (+17.3% AT FIXED FX), THANKS TO:
Revenue generation (+24% yoy, +2.1% at fixed fx) and diversification (Net commissions/Total Revenues 19.7%,+1.6% yoy)
Strict cost control (C/I Ratio down by 5.9%)
NEW EUROPE BANKING: KEY HIGHLIGHTS
... DESPITE A DETERIORATED MACROECONOMIC ENVIRONMENT IN POLAND (ALTHOUGH THE REGION IS THE LEAST HURTED BY GLOBAL SLOWDOWN):
Relevant macroeconomic slowdown (2.3% real GDP growth in 1Q’01 vs 5.9% in 1Q’00 and 4.3% expected for FY’01 at the beginning of 2001)
Strong reduction of Polish reference interest rates (375 bp in 6 months)
COMPETITIVE ADVANTAGES COMING OUT IN POLAND FOR BANK PEKAO:
Bank PEKAO clearly outperformed all major domestic competitors in 1H’01
INCREASED CONTRIBUTION OF BULBANK, SPLITSKA AND POL’NOBANKA TO THE DIVISION NET PROFIT
As a first result of the ongoing restructuring process, all the other three New Europe Banks have achieved significant net profit improvements in 1H’01
32
Net Interest Margin
1H’00 1H’01
228
324
574
710
60.3%
54.4%
Operating Income
Total Revenues
Cost/Income
1H’00 1H’01
1H’00 1H’01
359452
104141
Net Commission and Fee income
1H’00 1H’01
1H’00 1H’01
+42%
+24%+26%
-5.9+pp
(Euro mln)
IN 1H’01 NEW EUROPE BANKING ACHIEVED A 17.3% NET OPERATING INCOME AND A 50.2% NET PROFIT GROWTH ...
+17.3%
+2.1% +4.8%
+35%
+10.9%
STRICT COST CONTROL: -3,619 headcount over 1H’00; -1,028
in Group PEKAO over 31.12.2000 -8.3% SG&A and other operating
costs
At Unchanged FX
At 30.6 FX
Gross Customer
Loans: +9.5% yoy*
Customer Deposits:
+6.9% yoy*
* Calculated on average daily balances at unchanged FX
33
WE REACTED PROMPTLY THROUGH:
... DESPITE A TOUGH MACROECONOMIC AND COMPETITIVE SCENARIO IN POLAND
1Q’00 2Q’00 3Q’00 4Q’00 1Q’01
5.9%5.0%
3.1%2.4% 2.3%
POLISH REAL GDP GROWTH*
1H’00 3Q’00 4Q’00 1Q’01 1H’01
18.3%
POLISH SHORT TERM INT. RATES*
19.3% 19.2%17.2%
15.9%
Relevant slowdown in GDP growth: +2.3% expected for 2001 vs +4.3% at the beginning of the year
Macroeconomic slowdown reflected by Bank PEKAO Customer Loans (+1.8% on FY00) and Customer Deposits (+2.1% on FY00) growth rates
Reference interest rates cut by 375 bp by the Polish Central Bank in 1H’01
Pressure on Interest Margins, particularly on Deposits: Mark Down for Bank PEKAO: 3.38% in 1H’01 vs 3.99% in 1H’00
Implementation of the Customer Segmentation Approach Higher emphasis on cost control and acceleration in recovery actions New High Value Products (EuroGarantia) Rapid repricing policies Particularly conservative lending policies
* Source: EIU
34
ASSET QUALITY: THE SITUATION IS UNDER CONTROL, DESPITE A SLIGHT DETERIORATION RELATED TO THE POLISH SLOWDOWN
% Ch.
(Fixed FX)FY’00
Coverage ratios
-on Total gross NPL (%) (1)
-on Total gross doubtful loans (%) (2)
-0.4 pp
-0.8 pp
(1) Total specific provisions for NPL/Total gross NPL
(2) Total specific provisions for doubtful loans/ Total gross doubtful loans
86.8%
59.4%
1H’01
86.4%
58.6%
(Euro mln)
WE ARE PROMPTLY REACTING THROUGH: Focused and selective lending policy The full implementation of the new lending procedures, based on the
introduction of the “Rating” (as the main indicator to assess counterparts’ solvency) and active monitoring
Effective recovery actions
Volumes
Total gross loans 9,846 +3.5%11,503
Gross NPL 916 +14.5%1,168
Gross NPL/Tot. gross loans (%)
Net NPL/Tot. net loans (%)
9.3% +0.8 pp
1.4% +0.1 pp
10.1%
1.5%
KEY HIGHLIGHTS
Still very high coverage ratios, thanks to conservative provisioning
Very selective and conservative lending policies
Deterioration of asset quality mainly due to the economic slowdown in Poland in 1H’01
35
BANK PEKAO KEEPS ON GROWING AT A FAST PACE, OUTPERFORMING ALL THE MAJOR DOMESTIC COMPETITORS IN 1H’01
Yoy % growth (1)
Pekao
49.9Net Profit
-17.6
Best perf. Pekao (4)
Banking System (3)
Pekao
24.1
36.6
Net Commissions
10.3
Best perf.Fortis Bank
BankingSystem (3)
(1) Calculated on data based on Polish accounting standards at unchanged FX; all data are unconsolidated (2) Salaries, statutory employment costs, Non-personnel costs, Taxes and charges, Contribution and payment to Bank, Other costs(3) Considered Kredyt Bank, BSK, LG Petro Bank, BZWBK, BRE, BH, BPH, PBK, BOS, BIG BG, Fortis Bank, BWR, Amerbank, Bank Czestochowa, Deutsche 24 (not included Pekao)(4) BZWBK 1H’01 net income growth (+1,080%) thanks to benefits arising from the merge between BZ and WBK
Pekao
4.1 4.1
Net Interest Income
-27.7
Best perf.Pekao
BankingSystem (3)
Pekao
-8.3 -8.3
Overheads costs (2)
16.2
Best perf.Pekao
BankingSystem (3)
49.9
36
NEW EUROPE BANKING NET PROFIT ANTE MINORITIES: EURO 157 mln
SPLITSKA3.2% (+0.2%)
BULBANK9.8% (-0.4%)
THE CONTRIBUTION OF BULBANK, SPLITSKA AND POL’NOBANKA TO THE NET PROFIT OF THE DIVISION IS INCREASING, THANKS TO THE IMPROVEMENTS IN EFFICIENCY AND PROFITABILITY
(1) At Unchanged FX(2) Net of extraordinary FX trading loss related to Kuna/Euro floatation. The C/I Ratio non-adjusted figure is 53.6%(3) Net Profit of Euro 3 mln. vs Net Loss of Euro 13 mln. in 1H’00 partly as results of extraordinary recovery and related release of
provisions
GROUP PEKAO85.4% (-1.4%)
POL’NOBANKA1.6% (n.m.)
Net operating income
Net Profit
SPLITSKA POL’NO BANKA
Group PEKAO
BULBANK
+250.4%
N.m. (3)
+16.3% (2)
+58.5%
+12.1%
+48.2% +23.1%
+17.4%
(Change on 1H’00) (1)
C/I Ratio - 1H’01 69.5%50.8% (2)40.1%54.8%
C/I Ratio - % Ch. over 1H’00 -19.3pp-1.9pp (2)-6.0pp -6.2pp
37
UCI 2H ACTION PLAN
OUR ACTION PLAN FOR THE SECOND HALF WILL ALLOW US TO OFFSET THE EFFECTS OF THE POLISH SLOWDOWN, SECURING HIGH GROWTH RATES FOR THE WHOLE NEW EUROPE BANKING DIVISION
Rapid repricing decisions (especially on Deposits) in case of further Interest rate cuts in Poland
Still strict cost control policies: further improvements in C/I Ratio expected
Focus on the Affluent segment: new financial corner and new account managers
New high added value products (mainly mutual funds and bancassurance) to repeat the success of EuroGarantia
Focus on asset quality monitoring and doubtful loans recovery
38
1H2001 Group Highlights
Divisional Reporting
Italian Commercial Banking
Wholesale Banking
Investment Banking
Asset Management
New Europe Banking
Conclusions
Agenda
39
WE ARE ABLE AND COMMITTED TO CREATE EXTRA VALUE FOR OUR SHAREHOLDERS, OPTIMISING CAPITAL ALLOCATION AND ABSORPTION
13
1,285
461
7,552Italian banking
Wholesale banking
New Europe banking
New Initiatives
Adj ROE
%
25.12
14.3
18.73
CAPITAL ABSORPTION
828
-31
67
103
VALUE CREATION
6,976Group total 20.98 417
RORAC
%
30.9
N.s.
22.0
73.5
24.2
Adj NET INCOME
1,168(3)
-29
142(3)
170(3)
843
RARORAC
%
21.9
N.s.
10.4
44.5
12.0
Net Income + goodwill
depreciation
Shareholder’s profitability
Risk taken(1)
Profitability per unit of risk taken
Shareholder’s value added
Value added per unit of risk taken
(a) (b) (c)/(b)(c) =
(a)-COE(2)(a)/(b)
(1) Minimum regulatory capital, market risks, credit risks and operational risks (see Annex for definition)(2) The Cost of Equity is related to the capital employed (Net equity for the Group and allocated capital for the business units)(3) Includes minorities and elisions
MARGINAL RARORAC
%
22.3
N.s.
15.8
82.6
16.0
N.s.
(Euro mln)
Tier 1 from 6.85% (Dec 00) to 7.12% (1H01)
40
SUMMING UP
Good 1H01 results despite difficult market conditions
Annualised 1H01 bottom line representative of the full year expected performance
Well balanced business portfolio
Significant investments to sustain future growth
41
Annexes
42
1H01 CONSOLIDATED INCOME STATEMENT
Net extraordinary income
Interest margin (incl. dividends)
Net non interest income
Total revenues
Operating income
Cost/Income ratio (excl. goodwill dep.)
Tax rate
Net loan loss provisions
Administrative costs (incl. depr.)
Net income
Other net provisions
Goodwill depr.
ROE
(Euro mln)1H00 % ch.
-12.5
2,388
2,303
4,691
353
108
+9.3
+1.8
+5.5
918
+11.0
-13.0
2,278 +14.3
2,413 -2.8
141 -100.1
48.6%
41.5%
40 +227.5
25.4%
1H01
52.6%
41.0%
2,517
2,431
4,948
2,603
2,345
392
94
803
165
131
20.0%
43
INDIRECT DEPOSITS GREW THANKS TO GOOD CONTRIBUTION FROM SECURITIES IN CUSTODY AND INSURANCE PRODUCTS
INDIRECT DEPOSITS
ASSET MANAGEMENT
SECURITIES IN CUSTODY
TOTAL
30.06.0030.06.01 % ch. Vs. Dec00
USA
International
New Europe
Mutual Funds (1)
Italy
Segregated accounts in funds
Unit-linked
Other segregated accounts
(1) Directly placed
50,141
7,126
49,715
17,155 21,306
5,045
3,852 3,711Other insurance products
10,579 11,007
114,842 115,191 -0.3
+0.9
-19.5
-3.9
+41.2
+3.8
88,854
22,800
2,576
613
90,784
21,384
2,411
612
-2.1
+6.6
-6.8
+0.2
108,145
20,238
+0.9
+30.0
112,037
226,879
10,580
89,843
20,948
2,252
590
113,634
221,779
-0.0
+0.6
-1.1
+8.8
+14.4
+3.9
+3.6
+1.1
+2.3
99,047
214,238
+13.1
+5.9
Of which:
(Euro mln)31.12.00
49,718
5,480
3,828
-15.2
% ch. Vs. Jun00
44
ITALIAN BANKING DIVISION PROFIT & LOSS
Net extraordinary income
Interest margin (incl. dividends)
Net non interest income
Total revenues
Operating income
Cost/Income ratio (excl. goodwill dep.)
Net loan loss provisions
1H00 % ch.
Administrative costs (incl. depr.)
Net income +7.1
1,818
1,790
3,608
223
57
+13.5
+-5.3
+4.0
976
+0.9
+10.5
1,672 +5.1
1,936 +3.1
Other net provisions 75 +12.0
46.3%
1H01
46.8%
2,032
1,722
3,754
1,758
1,996
225
63
1,045
84
(Euro mln)
Tax expenses 724 -1.8711
Net income for the Group +9.8800 878
45
UBM TradingLab
ASSET MANAGEMENT
(PIONEER)
Interest margin (incl. div.) 19.5 -4.4 15.1 -4.9 10.2
Net non interest income 168.4 130.9 299.3 282.1 581.4
Total revenues 187.9 126.5 314.4 277.2 591.6
Administrative costs (incl. depr.)
59.4 37.1 96.5 214.7 311.2
Operating income 128.5 89.4 217.9 62.5 280.4
48.4
- -3.8 21.1 17.3
Net income for The Group 76.3 53.9 130.2 65.3 195.5
of which: Staff 28.9 11.9 40.8 94.9 135.7
Net income 76.3 53.9 130.2 80.5 210.7
Extraordinary Income -3.8
35.5 83.9 3.1 87.0
(Euro mln) TOTALINVEST. B.(UBM+TLB)
TOTALWHOLESALE B.
Tax expenses
C/I Ratio 31.6 29.3 30.7 77.5 52.6
WHOLESALE BANKING DIVISION PROFIT & LOSS
46
NEW EUROPE BANKING: RESULTS BREAKDOWN BY BANK
Interest margin (incl. div.)
Net non interest income
Total revenues
Operating costs (incl. dep.)
Net operating income
Net income
ROECost/income(excl. goodwill dep.)
- Staff costs
- Other costs
TOTAL (1)SPLITSKA BANKA (62.6%)
POL’NO BANKA (72.4%)
Group PEKAO (53.2%)
BULBANK (85.2%)
392 27 23 11 452
258
710
386
324
157
15.8%
54.4%
7
18
12
6
3
13.2%
69.5%
4
27
15
12
5
13.5%
50.8% (2)
8
35
14
21
15
14.3%
40.1%
239
631
346
285
67
16.2%
1,076
54.8%
134
12.4%
201587182
185777164
Net loan loss provisions 8437173
Tax Rate 31.3%n.s.27.3%32.9% n.s.
Capital Absorption
RARORAC
Value Creation
UCI’s portion: 89 mln Euro (3)
(3) The figure is calculated taking into account UCI’s shareholding
(1) Balance due to roundings and elisions
(Euro mln)
(2) Net of extraordinary FX trading loss related to Kuna/Euro floatation. The C/I Ratio non-adjusted figure is 53.6%
47
Minimum regulatory capital
(Tier 1 ratio target * RWA) - Minimum regulatory capital
RARORAC = VALUE CREATION
CAPITAL ABSORPTION
- Ke *Employed capital
Market risk
Credit risk
Operational risk(*)+ + +
Cost of equity = 8,79%
Net income of the year
Adjusted for the yearly amortisation of goodwill
Net equity as of previous year-end
less distributed dividends plus goodwill and share
capital increase
VaR (if available) or 70% of regulatory market risks
4% RWA
Calculated following the guidelines contained in New Basel Capital Accord by adding 20% to the minimum regulatory requirements
THE METHODOLOGY FOR RARORAC CALCULATION
(*) Included in Tier 1 ratio target