Medical Billing & Corporate Risk Management in Germany - A Primer

Transcription

1 UNLEASH THE FULL VALUE OF OUR CORPORATE, MARKETS & INVESTMENT BANKING AND PRIVATE BANKING FRANCHISE Sergio Ermotti, Deputy CEO

2 AGENDA Corporate Division Markets & Investment Banking Division Private Banking Division Exploiting Full Potential through Cooperation Conclusions 2

3 PLAN: FINANCIAL AND ORGANIZATIONAL TARGETS ACHIEVED TASKS (1) TARGETS RESULTS (2) CORPORATE DIVISION Revenue growth >market ~6% CAGR05/08 ~6% CAGR vs. market at 2 3% 3 Excellence in cost discipline ~36% 08 C/I ratio ~33% 07 C/I ratio Improve cost of risk optimization (4) ~56bp 08 CoR ~43bp 07 CoR Value creation and capital absorption optimization (4) ~5% 08 RARORAC ~6.3% 07 RARORAC ~45% CAGR for EVA New Business Model: Segment based coverage Global Business Lines Aligned segment based coverage in IT, DE and AT into Small, Medium & Large Global Transaction Banking and Global Leasing live and full integration of Capitalia 3 (1) Corporate Division + former CREF, not including Capitalia (2) Results not including Capitalia and CAGR05/07 (3) Source: McKinsey Global Corporate Banking Revenue Pool (4) Basel I

4 CORPORATE DIVISION KEY STRATEGIC GUIDELINES CORPORATE DIVISION Improve profitability by fully exploiting the potential of client relationships and network base through full range of Group product capabilities: Grow revenue and improve mix by leveraging Division-wide segment management, risk-adjusted re-pricing and cross-selling Strict management of EVA-negative relationships Full deployment of customer satisfaction to enhance customer centric approach Maintain excellence in cost and risk management Manage sustainable EVA and RARORAC growth 4

5 ENHANCE PROFITABILITY OF RWA THROUGH CROSS-SELLING AND SELECTIVE GROWTH CORPORATE DIVISION REVENUES / AVG. RWAs (%) Achievement of 2008 target one year in advance Equal Equal to to target target of of Plan Plan ~3.1% ~ +0.2% ~ +0.3% ~3.5% Dilution from CAP portfolio, mainly due to unprofitable relations with Large Corporate customers Benefits from shift to BIS2 thanks to high quality of the loan book and adoption of advanced models ~3.0% ~-0.1% Further increase expected by 2010 acting on 3 main gears: Tackling EVA-negative client relationships: turnaround and/or trim strategy CAP Portfolio BIS2 effect Plan walk 2010 Replacement of banking loans with capital market funds (wide room for MIB ECM & DCM particularly in Italy) Higher focus on deposits 5 (1) Bis 2 Capital Optimization effects mainly due to application of Advanced Internal Rating Based Systems in main legal entities

6 COVERAGE GRANULAR CLIENT SEGMENTATION BASE TO SELECT REVENUE GROWTH DRIVERS CORPORATE DIVISION Revenue Share Segment Contrib. ( 07A; % on tot) Segments Key Strategic Objectives Growth Target Revenues (07/10 CAGR %) 59% Small & Mid Caps (<250 mln turnover) Differentiation of service model by segment Focus on deposits & fee based products to improve revenue mix Selective lending growth (e.g. +6.5% CAGR in volumes in IT vs. +7.1% market) ~+5% 30% Large Caps (>250 mln turnover 1 ) Leverage on GTB and MIB product offer to improve Revenue mix and on highly customized service model (GAM) Turnaround of EVA negative relations or selective exit from non profitable ones ~+8% ~+8% for for Large Large Corporate Corporate ex. ex. Real Real Estate, Estate, Public Public Sector Sector & & others others ~+5% 6 (1) Not including large multinationals, included in MIB Division figures; includes Real Estate, Public Sector and others

7 GLOBAL LEASING: A STRONG EUROPEAN PLAYER BASED ON DOMESTIC CHAMPIONS WITH CEE AS MAIN GROWTH DRIVER CORPORATE DIVISION GLOBAL LEASING Revenue Share ( 07A; % on total) 11.0% #1 in Europe by new business, revenues and net profit Presence in more than 20 countries Focus on business origination through Group banking channels Growth Revenues (mln; 07/10 CAGR %) Strong top-line growth in CEE (~ +18% 07/10 CAGR) +10.3% 869 Ready to loose marginal mkt. shares in Western Europe to maintain risk-adjusted pricing 648 ~ +18% Tighten control on costs (C/I at 32.0% in 2010) o/w CEE ~170 ~280 Grow pre-tax profit to ~470 mln (~ +15% 07/10 CAGR)

8 GLOBAL TRANSACTION BANKING: LEVERAGE ON GROUP BROAD GEOGRAPHICAL COVERAGE WHILE EXPLOITING EFFICIENCIES CORPORATE DIVISION Growth 1.0 GTB Revenues (bn; 07/10 CAGR %) NOTE: Product view; revenues already included in clients segments +8.6% 1, IT IT / / DE DE / / AUT AUT only; only; CEE CEE accounting accounting for for additional additional ~400 ~400 mln mln vs 4.8% expected vs 4.8% expected Market Growth Market Growth 1 1 CASH MANAGEMENT & E-BANKING (CM&EB) 2008 Best Bank for Payments and Collections in CEE (Global Finance) Enhance offer through harmonization and integration of platforms (from >40 e-banking platforms to a single one) Focus on non interest related business to offset regulatory impacts (e.g. SEPA and Payment Service Directive) CORRESPONDENT BANKING & TRADE FINANCE 2008 Best Trade Finance Provider in CEE (Global Finance) Centralized Correspondent Banking and management of credit lines to provide the most competitive offering and optimize usage of country limits CEE REGION Exploit increasing trade flows into region and increasing intra regional flows 8 (1) Source: McKinsey Global Corporate Banking Revenue Pool

9 ROLL-OUT OF A STRICT EVA OPTIMIZATION PROGRAMME SAMPLE OF EVA DISTRIBUTION - CORPORATE DIVISION ITALY (Index number) CORPORATE DIVISION Top 40 counterparties Centralized recovery approach, development of ad-hoc action plans ~75% of counterparties Enhance value creation through optimization of product offer & application of risk-adjusted pricing High EVA Negative Medium EVA Negative Low EVA Negative TOT. EVA Negative Low EVA Positive Medium EVA Positive High EVA Positive TOTAL EVA 9 ~1,000 counterparties Decentralized approach, RMs in charge of recovery; if targets are not reached in a defined timeframe relationship is re-allocated ~24% of counterparties Engineered recovery approach, changing RMs behaviour through MBO, focused training and coaching sessions

10 CUSTOMER SATISFACTION AS A KEY LEVER TO ENHANCE CUSTOMER CENTRIC APPROACH AND IMPROVE REVENUES CORPORATE DIVISION CORPORATE DIVISION Avg. Delta in yearly revenues between unsatisfied and satisfied clients Base 2007 Index number Pragmatic approach common to IT/DE/AUT countries (being extended also to CEE) Strong customer coverage (~30,000 interviews on a yearly basis at Bank and Segment level) >+50% 100 >150 Direct involvement of Top/ Mid Management both in interviews and action plan (concrete actions on main reason of dissatisfaction) Quantitative target in the incentive system (MBO) from Top Management to Network Unsatisfied clients Satisfied clients Full info sharing and transparency via intranet portal 10

11 LOAN LOSS PROVISIONS AND COST OF RISK REFLECTING THE EXPECTED WORSENING OF THE MACRO-ECONOMIC SCENARIO CORPORATE DIVISION LLP (bn; 07/10 CAGR) +8.9% Specific action identified to mitigate expected deterioration of credit scenario: Strict monitoring of early warning signals of defaulting customers to decrease exposure, improve collateral structure and earlier handover to restructuring COST OF RISK (bp) Loan Loss Provisions by country/business: Italy (UCCB): +7.5% CAGR07/10, cost of risk growing in line with the market Germany & Austria: approx % CAGR07/10, due to significant one-off write backs in 2007 and higher model-based expected losses Leasing: +5.2% CAGR07/10 reflecting the asset-backed business and selective growth strategy (namely in Italy) 11

12 2010 CORPORATE DIVISION MAIN FINANCIAL TARGETS CORPORATE DIVISION 2007 CAGR (%) Revenues (bn) % Revenues / Avg. RWA, % 3.2% ~3.5% Operating Costs (bn) % 1 Cost/Income, % 33.1% ~31% RWA, eop (bn) % Cost of Risk, bp 53 ~62 EVA, mln ~760 ~1,370 RARORAC, % 6.5% 10.4% Limited cost increase notwithstanding growth of leasing in CEE and expansion in selected regions in Germany Further improvement of an already outstanding C/I ratio 2010 EVA 1.8x 2007 levels; ROE > 2x cost of capital 12 (1) 3% net of extraordinary severance release in 2007 (Euro 34 mln) RWA related KPIs acc. to BIS II

13 AGENDA Corporate Division Markets & Investment Banking Division Private Banking Division Exploiting Full Potential through Cooperation Conclusions 13

14 STRATEGY: BECOMING A EUROPEAN REGIONAL SPECIALIST MIB DIVISION JULY 2006 MIB STARTING POINT Combination of 4 stand-alone Investment Banks with different cultures and a complementary set of product and regional capabilities Building of the platform to create critical mass and synergies Product/Client Coverage Full service/ comprehensive product offer/ client set Focused product/ client coverage FOCUSED STRATEGY ON LEVERAGING CURRENT PRODUCT CAPABILITIES AND GEOGRAPHICAL REACH UBM Domestic Global organization and governance structure HVB BA-CA MIB 'sum of parts' Multi-domestic European Regional Specialist European regional THREE BUILDING BLOCKS TO IMPLEMENT OUR STRATEGY Geography Global Leverage intra-group strengths and selective growth investments + Build common platforms to realize cost savings Selective investments to further develop product capabilities and know-how International platform for UCG client base Capital Markets Day in Munich - June

15 PLAN: ON TRACK WHILE SOME FINANCIAL TARGETS AFFECTED BY THE CREDIT TURMOIL TASKS (1) TARGETS (1) RESULTS (1) MIB DIVISION Bundling of 4 different Investment Banks and setup of a single platform with critical mass ON TRACK + integration of Capitalia Revenue and pre-tax profit growth ~4 bn revenues in 08 >2 bn PBT in 08 Not achievable due to credit market crisis but in line with targets till 1H07 (2.1 bn revenues and 1.3 bn PBT) Efficiency & cost management ~50% C/I ratio ~200 mln cost synergies C/I at 50.4% in FY07 ACHIEVED Capital discipline and RWA optimization 2 ~65 bn Total RWA in 08 ~58 bn Total RWA in 07, down from ~63 bn in (1) Plan perimeter, not including Capitalia (2) Targets in BIS1

16 PLAN: ACCELERATION OF THE SECOND PHASE OF THE TRANSFORMATION PROCESS MIB DIVISION Investment Banking capabilities focused on Group platform & client franchise Integrated part of UniCredit Group Essential to enhance client profitability and/or justify client relationship Centre of competence for Group access to capital markets Regional Specialist with Product Focus Focus on countries where the Group is active Opportunistic approach in the rest of the World Strength in selected geographic-based product capabilities Transformation of business Current crisis only a catalyst of a more aggressive transformation process already in progress Performance-related rightsizing of staff 16 Strengthening of a firm-wide risk management organization and culture Divisional Risk Office established Risk management culture and procedures now aligned to best industry standards Even stronger focus and investments

17 FIT WITH THE GROUP AND KEY DISTINCTIVE ADVANTAGES AS A BASE FOR STRATEGY AND INVESTMENT DECISIONS MIB DIVISION Fit with the Group HIGHEST Non-core product institutional coverage Global Fixed Income products ECM/DCM outside IT/DE/AUT/Em. EU Corporate Treasury Sales Structured products in IT/DE/AUT Structured finance in IT/DE/AUT + Em.EU Local Fixed Income products Local Equity products Global Project & Commodity Finance Principal Investments Client-driven Structured Credit Structured products in Emerging Europe ECM/DCM in IT/DE/AUT + Emerging Europe FX based on IT/DE/AT + Emerging Europe Project Finance in Emerging Europe Local Corporate Fin. Advisory LOWEST Structured Credit carry trading Prop. trading activities SCALE DOWN REFINE BUILD UP Plan Strategy 17

18 MIB PLATFORM: ESTABLISHED INDUSTRY RECOGNITION AND RESULTS NOTWITHSTANDING FIERCE COMPETITIVE LANDSCAPE MIB DIVISION Selected leading market positions and Awards and rankings 2007/2008 DCM: Bookrunner all German Corporate Euro bonds: # 2 by volume 2008 YTD* Best Fixed Income House in Russia in 2008 Best CEE Equity House/ Best EMEA Privatisation (MAV Cargo) Emerging Market M&A Deal of the Year: PPF/Generali Source: Bloomberg Bookrunner of all Italian bond issues: #2 by volume and no. of issues 2007 Source: Bond Radar (31 December 2007) Global Finance 2008 emeafinance (Exporta) 2008 Acquisitions Monthly 2008 ECM Emerging Europe: #1 by no. of issues 2008 YTD* #1 by no. of issues 2007 Source: Dealogic Loan Syndication: Most Improved Market Profile/ Best Arranger of Italian Loans Continental Financial Advisor of the Year Best Custody House in Austria, Bulgaria, Croatia, Czech Republic, Estonia, Romania, Slovakia, Slovenia and Ukraine M&A Emerging Europe (except Russia): #1 by volume 2008 YTD* Euroweek 2007 Acquisitions Monthly 2007 Global Investor 2007 Source: MergerMarket Financing: LBO Sponsor Driven and Acquisition Finance Germany: #1 by volume and #2 by no of deals 2007 Source: Dealogic Infrastructure Deal of the Year 2007 in Europe/Middle East/Africa: Mersin Port, Turkey Project Finance International 2007 Best FX Bank in CEE Global Finance 2007 # 1 Structured Products Overall Risk Magazine *YTD data as of mid June 2008

19 FINANCIALS: LOW-BETA REVENUE GROWTH, CEE CONTRIBUTION EXPECTED TO DOUBLE BY 2010 (Euro bn) (Euro bn) (Euro bn) CAGR: ~ +5.3% CAGR: ~ +18% ~3.1 ~3.6 ~1.3 ~2.2 ~1.8 MIB DIVISION MIB TOTAL MARKETS INVESTMENT BANKING CAGR: ~ -7% ~1.4 CAGR: ~+27% No negative impact from ringfenced activities after Grow Advisory and Capital Markets o/w CEE ~0.3 ~ Grow in client-driven structured credit FICC and Equities in line with 2007 in a less benign scenario Expected lower contribution of Principal Investments and LBO-related Financing from 2007 record levels A COMPARISON VS THE INVESTMENT BANKING INDUSTRY Industry Revenues 1 (Euro bn) MIB 10 revenues keeping 05 mkt share (1.3%) & Plan target (Euro bn) 3,9 3,3 3,6 3,1 3,1 3,1 19 (1) Source: McKinsey Global Capital Markets Revenue Pool; team estimate (2) Including CAP; estimates Late Long tackle Chill Late Plan Long 2010 tackle Chill

20 SIGNIFICANT IMPROVEMENT IN ASSET PROFITABILITY ALSO THROUGH RWA OPTIMIZATION AND REDUCTION MIB DIVISION RWA DEVELOPMENT (BIS2 - bn, eop) ~90 (1) o/w Op. Risk ~6% o/w Market ~16% Risk CAGR:~-5.4% ~-14 ~76 ~8% ~9% Reduction in key risk exposures Return of selected securitization activities Strict credit policies and underwriting standards Rollout of uniform IT platforms, mitigating operational risks Increase share of client driven revenues o/w Credit Risk ~78% 76,10 ~83% REVENUES/AVG. RWA (%) 6% 4.6% 4% 3.2% 2007 Net 2010 reduction 2% 2007 Actual Based on RWA acc. to BIS II (1) Includes former Capitalia and adjustments from shift to BIS2

21 2010 MIB DIVISION MAIN FINANCIAL TARGETS MIB DIVISION 2007 CAGR (%) Revenues (bn) ~ % Revenues/Avg. RWA, % 3.2% ~4.6% Operating Costs (bn) ~ % Cost/Income, % 52% ~48% RWA (BIS II), eop (bn) ~90-5.4% Cost of Risk, bp 0 ~40 VaR, 1-day 99% (mln) ~60 1 ~50 2 EVA, mln ~400 ~725 RARORAC, % ~7% ~15% Significant enhancement of quality of revenues and asset profitability Reinforcement of the outstanding efficiency notwithstanding investments in infrastructure and Risk Management CoR back to normalized levels in a less benign credit environment Continuation of HR performance-related rightsizing coupled with selected quality hirings 21 (1) As of May08 (2) 2010 Average RWA related KPIs acc. to BIS II

22 CORPORATE + MARKET & INVESTMENT BANKING DIVISIONS: LEVERAGING A UNIQUE CUSTOMER AND GEOGRAPHIC FRANCHISE CORPORATE & INVESTMENT BANKING PRODUCTS FACTORIES MARKETS & INVESTMENT BANKING LEASING GLOBAL TRANSACTION BANKING NETWORKS & CLIENT BASE >300,000 corporate clients in IT, DE, AUT Russia Latvia 9 Germany Poland Czech Slovakia Ukraine Austria Hungary Slovenia Romania Croatia Bosnia Italy Serbia Bulgaria Roll out of the model to ~130,000 corporate customers in CEE 22 BASE LENDING + DEPOSITS

23 CORPORATE + MARKET & INVESTMENT BANKING DIVISIONS: COMBINED KEY FINANCIALS CORPORATE & INVESTMENT BANKING REVENUES ~9.0 bn ~10.6 bn REVENUES / AVG. RWA ~3.2% ~3.8% C/I RATIO ~40% ~37% EVA ~1.2 bn ~2.1 bn RARORAC ~6.5% ~11.5% 23

24 AGENDA Corporate Division Markets & Investment Banking Division Private Banking Division Exploiting Full Potential through Cooperation Conclusions 24

25 A LEADING EUROPEAN ON-SHORE PRIVATE BANKING FRANCHISE PRIVATE BANKING PRIVATE BANKING Turin Munich Vienna On-shore centre Off-shore centre Leading positions in Private Banking in Italy and Austria, # 2 in Germany Strong relationships with >160,000 wealthy clients across Europe >Dense advisory and distribution network: ~1,200 relationship managers ~230 branches, largest dedicated on-shore network in Europe Off-shore support in Switzerland, Luxembourg, Austria and San Marino Private Banking Total Financial Assets (Euro bn) ~167 ~1, % +3.9% ~ Private Banking Total Revenues (Euro mln) ~1, CAGR07-10

26 LEVERAGING GROUP NETWORK POTENTIAL, ADVISORY COMPETENCES AND MANUFACTURING CAPABILITIES PRIVATE BANKING DISTRIBUTION OF TFA IN % Focus on HNWI client segment ( mln TFA) Leverage UCG distribution network 58% 11% Improve asset mix and productivity Unified wealth planning platform Joint MIB-PB servicing of UHNWI (>30 mln TFA) 7% < > 30 On-shore Wealth Segment in TFA (Euro mln) Pooling of advisory competences Innovative & tailor-made investment solutions for demanding sophisticated clients Attraction of high-income clients INDUSTRY SOURCE OF NEW BUSINESS FROM HNWI IN EUROPE Other Executives - income / stock options 13% 7% 21% 23% Cross-referrals with Corporate Banking, focus on entrepreneurs Joint referral program Private, Corporate & MIB Entrepreneurs - business ownership / sale Inheritance - family wealth 25% 41% 50% 20% Joint client attraction, servicing and management Joint product development and supply Enhanced investment advisory model Existing Business New Business Wealth succession and protection 26 Source: Oliver Wyman, Europe

27 A LEADING ASSET GATHERING PLAYER IN EUROPE WITH A MODERN DISTRIBUTION PLATFORM ASSET GATHERING ASSET GATHERING KEY FACTS: Leading positions in online wealth business in Italy, Germany and Austria Asset Gathering Total Financial Assets (Euro bn) ~2 mln satisfied clients using innovative and convenient model >26 mln executed orders for active clients ~ % ~90 Munich Salzburg >3,000 tied financial advisors + >1,100 independent financial advisors for DAB > 6 bn net new assets in Milan KEY PERFORMANCE DRIVERS: Enrich DAB s B2C-business model Asset Gathering Total Revenues (Euro mln) Grow Fineco s network productivity Major marketing investments Optimize Target Operating Model: Merging Xelion and Fineco in Italy ~ % ~610 Sharing back-office activities Cross-regional adoption of highmargin products CAGR07-10

28 2010 PRIVATE BANKING DIVISION MAIN FINANCIAL TARGETS PRIVATE BANKING DIVISION 2007 CAGR (%) Revenues (mln) ~1, % ROA 1, bp ~84 ~77 Operating Costs (mln) ~ % Cost/Income, % 61.3% ~56% Total Fin. Assets, eop (bn): o/w: - AUM ~ % ~ % EVA, mln ~260 ~390 Attractive growth in profitability, market leader as for efficiency Strict cost management facing market uncertainty Strong EVA-generation 28 (1) Revenues / Average Total Ordinary Financial Assets (excluding extraordinary transactions meaning those, which, due to their timing, large size and little or no profitability, are not attributable to ordinary company operations)

29 AGENDA Corporate Division Markets & Investment Banking Division Private Banking Division Exploiting Full Potential through Cooperation Conclusions 29

30 OUR GAP AND OPPORTUNITY: IMPROVE PENETRATION OF CORPORATE CLIENTS THROUGH TEAMWORK Company s needs 1 2 Lending and basic commercial banking services + Corporate advisory CB/MIB Division MIB/CB Division FROM My Bank / My Clients + TO 3 Equity + MIB Division GROUP INTEGRATED APPROACH Owners/ Family needs 4 Wealth Management PB/AM Division Leverage on a shared client base: every client is a potential client of all Group Divisions 30

31 NEXT STEP: TRANSFORM AN INFORMAL SUCCESS STORY INTO A STRUCTURED INDUSTRIAL PROCESS 2 Acquisition Financing for Sponsor 1 Corporate Banking Products and relationship with the company Loan Syndication 3 Dragenopharm 8 Cash Management for the Company with new ownership EUR 75,000,000 Senior Facilities Real Estate Financing 4 Sole MLA & Bookrunner Germany, February Private Banking services Loan Agency Services 5 6 Interest Hedging 31

32 AGENDA Corporate Division Markets & Investment Banking Division Private Banking Division Exploiting Full Potential through Cooperation Conclusions 32

33 SUMMING UP: STRATEGIC PILLARS Focus on EVA and RWA profitability, through segment based approach and specialized business lines (GTB, Leasing, MIB) Unmatched proximity to fully support clients growth and internationalization plans Markets & Investment Banking a European Regional Specialist focused on the Group s client base, with CEE as growth driver Leverage on Group network to attract and strengthen Private Banking client relationships with entrepreneurs Focus on efficiency, capital utilization and risk management Enhanced profitability of assets with sustainable EVA growth 33