Corporate Banking / Capital Market Marco Morelli

Transcription

1 Corporate Banking / Capital Market Marco Morelli Siena 3 rd July kLD0237_screenshow_english.ppt

2 Agenda The new MPS Corporate Banking Division - The MPS Corporate Banking Division at a Glance - Our starting point - First signs of recovery Main Commercial initiatives - The new commercial strategy - The SME centers challenge - Opportunities in Leasing - The MPS Finance/Banca per l Impresa integration - The new international unit Business Plan 2

3 The MPS Corporate Banking Division at a Glance New organizational flowchart Main figures (2006) CORPORATE BANKING CAPITAL MARKETS DiVISION 8 units INTERNATIONAL KEY CLIENTS AREA CORPORATE AREA BUSINESS AREA 28 units 40 units 48 units Direct management of Large Corporate clients, PA, Financial institutions and highpotential SMEs Monitors Group commercial effectiveness on the SME clients segment Coordinates Group foreign business to guarantee target achievement and integration with strategic goals R E P O R T S T O NII Fees Revenues Costs Provisions Profit Before Taxes Avg Loans Capital Allocated , ,208 39% % YoY -2.4% -0.45% 3.2% 3.5% 2.2% 3.0% 6.4% Commercial serv. SME Market Serv. Non strategic investiment serv. Foreign Operations Staff Foreign Subsidiaries Credit serv. Loans Breakdown Credit serv. Correspondent Bank serv. Foreign Commercial serv. 66% SMEs Large Corporate Public Sector Currently being integrated MPS Banca per impresa MPS Finance MPS Leasing & Factoring Montepaschi Banque INTERMONTE SIM Montepaschi Belgio 17% 17% 56% 24% 20% 92% 2% Large Corporate 92% GMPS BMPS BT 8% BAM 6% Public Sector 3

4 Our Starting Point (2006) and Opportunities to bridge the Gap Net interest Income YoY trend Net Fees YoY trend Operating costs YoY trend Net Operating Income YoY trend -8.6% 6.2% -7.4% 7.0% 3.5% +1.4% -13.3% 16.3% -2.4% -0.4% 2.1% 3.0% MPS Avg Mkt* MPS Avg Mkt* MPS Avg Mkt* MPS Avg Mkt* Cost/Income (ex trading) YoY loans evolution Revenues/Loans Net Operating Profit/Loans 57% +15% 42% 9.0% -9.7% 18.7% -20 bps 2.6% 2.8% 1.0% -20 bps 1.2% MPS Avg Mkt** MPS Avg Mkt* MPS Avg Mkt** MPS Avg Mkt** Source: Companies presentations 4 * Capitalia, BPVN, Unicredit, Intesa, SPI ** Unicredit (Italia), SPIMI, Capitalia

5 1Q07 Results: First Sign of Recovery Volumes and Spreads 1Q07 Loans Total loans 17.6% 22,897 17, % 26,927 21,913 Loans breakdown; YoY trend 17.6% 23.5% 20.1% 21.0% 14.5% 28.7% mln Total Loans Short Term Loans Long Term Loans Corporate Segments SMEs Corporate Segments SMEs Total Corporate Spread Spread (bps) SMEs Spread PA Spread Mark up Mark down Mark up Mark down Mark up Mark down 5

6 1Q07 Results: First Sign of Recovery Fees and Revenues 1Q07 Net Fees Total Corporate Fees 15.7% 51 Corporate Fees: YoY trend 22.8% 31.1% Key Corporate items: YoY trend 25.1% % 15.3% mln Total Corporate Segments SMEs PA Credit service fees Financial products placement Total Corporate Revenues 5.2% 1Q07 Corporate Revenues SMEs Revenues 6.5% PA Revenues 11.8% mln mln mln

7 Customers and Cross-Selling Trends Cust. Retention - Corporate Area Cust. Acquisition - Corporate Area Total Cust. - Corporate Area ,937 54,419 58,393 58,748 Dec-05 Jun-06 Dec-06 Mar-07 Dec-05 Jun-06 Dec-06 Mar-07 Dec-05 Jun-06 Dec-06 Mar-07 Cross Selling - Corporate Area Cross Selling to Key Clients Jun-06 Dec-06 Mar-07 Jun-06 Dec-06 Mar-07 7

8 Quality of MPS Group Credit Exposure Large Corporate 60.0% 50.0% 40.0% 30.0% 20.0% Investment grade 41.1% December % Speculative grade Watch 100% 90% 80% 70% 60% 50% 40% 30% 60.0% 50.0% 40.0% 30.0% 20.0% Investment grade 50.6% 28.8% March 07 Speculative grade Watch 100% 90% 80% 70% 60% 50% 40% 30% 10.0% 0.0% Highest credit quality (IG) 14.6% 5.9% Good (IG) Fair (SG) Speculative (SG) Ead % Cumulative 0.5% High Default Risk (SG) 20% 10% 0% 10.0% 0.0% Highest credit quality (IG) 12.7% 7.5% Good (IG) Fair (SG) Speculative Ead % Cumulative (SG) 0,5% High Default Risk (SG) 20% 10% 0% SMEs December 06 March % 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Investment grade Speculative grade 20.2% Highest credit quality (IG) 28.1% 27.0% 21.3% Good (IG) Fair (SG) Speculative (SG) Watch 3.3% High Default Risk (SG) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Investment grade Speculative grade 20.1% Highest credit quality (IG) 28.6% 27.1% 20.8% Good (IG) Fair (SG) Speculative (SG) Watch 3.3% High Default Risk (SG) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Ead % Cumulative Ead % Cumulative 8

9 Corporate Banking Capital Markets: Results versus Business Plan targets Corporate banking / Capital Market P&L (Euro/mln) 31/12/05 1Q06 31/12/06 1Q07 Targets 09 Net interest income* ,085.0 Net fees Basic Income 1, , ,558.5 Other revenues Total Revenues 1, , ,680.1 Net financial and insurance income 1, , ,501.1 Operating expenses Net operating income Direct funding (avg) 18,191 18,846 18,375 19,644 20,577 Total funding (end of period)** 42,074 42,087 33,660 ** 40,260 46,241 Total loans (avg) 40,607 42,065 43,208 48,470 51,235 * Net of MPS Finance Net interest income, which is included in Other revenues because related to GMPS cost of funding ** Due to the closing of a relationship with a Large Corporate customer 9

10 Agenda The new MPS Corporate Banking Division - The MPS Corporate Banking Division at a Glance - Our starting point - First signs of recovery Main Commercial initiatives - The new commercial strategy - The SME centers challenge - Opportunities in Leasing - The MPS Finance/Banca per l Impresa integration - The new international unit Business Plan 10

11 Corporate Banking - Strategic Commercial Trends Value proposition optimization BP targets Optimization of headquarters/local branches. New commercial planning and performance monitoring. Significant streamlining of corporate structure and better relationship with networks. Focus on CRM and potentially high added-value customers through dedicated coverage. Shift of business mix towards less capital-intensive, more-differentiated, high profitability products. Reduction of cost-to-serve and response time through better risk assessment and management process. Milestones achieved CORPORATE NETWORK: Reorganization of SME centers finalized. Commercial supply chain and logistic presence of product companies revised. MPSF/MPSBI: Bankit authorization to proposed MPSF/MPSBI spin-off granted. Application for transfer of liabilities to MPSBdI filed with Bankit. Highly skilled resources identified. Implementation of 2007/2009 BP started. KEYCLIENTS: 65 positions out of 82 BMPS key clients migrated. New key client list prepared. New area target defined. Product offering and service model for PA ready for launching. INTERNATIONAL BUSINESS: First commercial campaign for Export Finance products started. Result analysis on commercial stimulation plan completed and network roll-out started. Credit portfolio management guidelines drafted. Foreign network skill assessment completed and preliminary actions for branch closures started. Information document on AAI BP filed with Bankit. New BP for MPS Belgium prepared. Agreements with correspondent banks in Maghreb and North Africa currently being defined, with a view to managing branches being restructured. 11

12 SME Centers: A Significant Gap to Fill..How? SME Centers - Fees/Total revenues Ratio as % of Group total (2006) 1Q07 50 First major signs of improvement 45 80% of SME Centres had a Fees/ Total Revenues ratio below 30% in 2006 in 1Q07 Cross Selling 40 (SMEs only) Average = 25.8% Q07 25 Fees/Total Revenues (SMEs only) SME Centers Q07 12

13 The distribution of GMPS SME Centers The distribution of SME Centers Northern Italy MPS SMEs Centers 21 BAM SMEs Centers 22 BT SMEs Centers 1 MARIANO C. LEGNANO BERGAMO SESTO S.G. MONZA BRESCIA ASSAGO VERONA NOVARA MILANO CESANO B. CASTEL GO FFREDO ABBIATEGR. MANTO VA TORINO SUZZARA PARMA REGGIO E. MODENA CUNEO GENOVA BOLOGNA TREVISO MESTRE RAVENNA UDINE MASSA LUCCA PISA LIVORNO MPS SMEs Centers 13 BAM SMEs Centers // BT SMEs Centers 17 Tuscany PISTOIA PRATO CAMPI B. SCANDICCI FIRENZE S. CROCE EMPOLI S.DONATO MONTEVARCHI AREZZO SIENA CHIUSI Northern Italy: 44 SME Centers Tuscany: 30 SME Centers Central Italy: 19 SME Centers Southern Italy: 18 SME Centers GROSSETO Central Italy MPS SMEs Centers 11 BAM SMEs Centers // FAN O ANCONA Southern Italy M P S S M E s C e n t er s 1 8 B A M S M E s C e n t e r s / / B T S M E s C en te r s / / F O G G IA 11 more SME centers to be opened by 2009 (5 of them in 2007) BT SMEs Centers 8 PERUGIA CIVITANOVA M. C AS ER T A BIS C EG L IE B A R I N A PO LI SA R N O TERNI S.EGIDIO P O M IG L IA N O SA L ER N O P O T E N Z A T A RA N T O VITERBO PESCARA FRANCAVILLA AL MARE L EC C E AVEZZANO ROMA POMEZIA LATINA P A LE R M O M E SS IN A C AN IC A T T I C AT A N IA CAGLIAR I R E G G IO C. 13

14 SME Centers - Performance Monitoring and New Products & Initiatives Monitoring Process KPI Identification Comparison between KPIs and local situation Identification of non-performing centers Cause analysis Organizational reviews Solutions Main Products Main initiatives Non-interest Income/Basic Income (%) Enhancement of our product range. Some examples: - Commodities-based, structured finance products; - Edilcarnet for real estate developers; - New M/LT financing (BEI plafond, Welcome Energy, New Frontier, Unico, etc); Intensive use of new tools for SME Centers performance measurements Increase contribution of Non-int. income/basic income ratio Guaranteed credit under the Confidi scheme Patto incassi Jun-06 Mar Target 14

15 Significant Internal Opportunities in Leasing 47% MPS Group Leasing Contracts Breakdown* 61% of Group branches are dormant MPS* 20% 33% > 1 contract 1 contract 0 contracts 39% 39% 22% BAM* 33% 21% 46% > 1 contract 1 contract 0 contracts > 1 contract 1 contract 0 contracts 52% BT* 23% 25% > 1 contract 1 contract 0 contracts * % of total branches 15

16 MPS Banca per l Impresa / MPS Finance Integration BP targets and trends Integration of MPS Banca Impresa and MPS Finance specialized competences and creation of a single Group platform that focuses on delivering high added value products and services to customers. MPS CAPITAL SERVICES BANCA PER L IMPRESA Business model and commercial policies Re-focusing of former MPS Banca Impresa business on specialty credit products with a higher added value. Development of potentially more profitable business areas. New initiatives for former MPS Finance. Adoption of a new, multi-specialized, integrated Group distribution model. Efficency improvement and risk management strategies Organizational re-design; optimization of systems and processes that can guarantee high efficiency, partially through a reduction of operating costs. Targeted organizational strenghtening through hiring of highly-skilled resources. Migration of IT system to Consorzio Operativo (IT structure). Risk monitoring optimization: credit quality optimization actions and improvement of credit-worthiness assessment processes; focus on optimization of risk/return profiles (market risks). Capital allocation optimization; improvement of capital availability and alignment of indicators to Group policy and market expectations. 16

17 Main Strategic Business Actions (1/2) Banca per l Impresa Current situation main focus... main actions to be taken Ordinary credit Credito Agevolato Accounts for approx. 90% of total loans and contributes approx. 80% of current MPS BI basic income: Agriculture: approx. 30% of total loans, average loan size approx. EUR 300,000 Manufacturing and other sectors: average loan size approx. EUR 500,000 IPRE - vanilla: real estate credit (1) Object: credit aimed at funding the acquisition of tangible assets (ships, airplanes ) A leading industry player: L. 488 (mkt share: 12% of accepted applications); Framework Contracts (mkt share appr. 15%); Agriculture and manufacturing: Strong dependence from Group networks (approx. 40% of disbursements) Group networks do not perceive MPS BI as specialty structure Loan size is mostly smallto-medium High percentage of watchlist loans Poor profitability Gradually shift ordinary credit towards bank networks through a rise in disbursement lower thresholds: Agriculture: (> EUR 0.5 mln.) Manufacturing: (> EUR 5 mln. 07; >8 mln. 08; >10 mln. 09) Improve cooperation with Group networks Gradually reduce share of easy credit on total credit Strongly enhance IPRE, both vanilla (ordinary credit) and structured (Project Financing) Ordinary and easy credit Local Agreements (mkt share appr. 14%) Corporate Finance Acquisition Finance: still in start-up phase (started only 3 years ago). BI acts mainly as Mandate Lead Arranger in the range up to EUR 100 mln Project finance: gradual consolidation of arranging/ underwriting role in medium-size deals Other: mostly focused on providing advisory service to subsidiary MPS Venture Limited decision-making power makes it impossible to smooth credit-granting process Dedicated resources insufficient to fully exploit business potential 5 6 Allocate Object credit type to corporate finance and create a Group single specialty center together with Acquisition Finance and Project Finance Review decision-making power of Project Finance (incl.real Estate) and Acquisition Finance Corporate Finance (1) Reimbursement and recovery from exposure depend on asset -generated financial flows. The crucial element in vanilla IPREs is credit itself, since there are no underlying structured transactions. 17

18 Main strategic business actions (2/2) MPS Finance Current situation main focus main actions to be taken It s divided into two areas, Markets and Commercial, with business in each area grouped by risk category: Equity Fx and Commodities: hedging and investments on major markets on behalf of customers through index and/or stock, exchange rate and raw material derivatives. Fixed Income Derivatives: hedging and investments on major markets on behalf of customers through derivatives with underlying interest rates and inflation. Government & Money Markets: Specialist for the Italian Treasury and Primary Dealer in MTS and EuroMTS. Credit Products (Structured Credit & Cash Trading): market-making (issuers from emerging economies, corporate stock, financial, ABE and Group linear bonds); development and management of complex credit derivatives. Equity & Debt Syndacation: bonds placement on primary market and with the general public; extraordinary risk capital transactions on primary market. A significant volume and margin decline in structured products for Group captive customers has been only partially offset by increased operations with corporate customers, public entities and institutional customers Enhance role as product factory for Group customers, with special emphasis on corporate and institutional customers and public entities. Improve process efficiency and refocus some low-added value business lines (eg. advisory) from product-oriented to processoriented. Improve product innovation (time to market) and develop new products that can maximize added value. Principal Finance: Start acting as a vehicle for the mobilization of credit with high expected profitability or as a strategic partner that can systemically finance customer assets. Securitization: Perform structured finance transactions to rifinance major customer asset positions; meet customers funding needs on capital markets through ad hoc disbursements (rifinancing and/or risk allocation). Current initiatives Intiatives to be developed 18

19 MPS Capital Services Banca per l Impresa Revenues - Trends Cagr ESTIMATES Total revenues E 2008E 2009E Corporate Finance Area Commercial and Ordinary Finance Area Capital Market Area Weight on Main Facts total revenues From 10.1% in 06 to 15.7% in p.p. From 60.2% in 06 to 44.6% in p.p. From 29.7% in 06 to 39.6% in p.p. Expected total revenue growth: approx. +EUR 80 mln (cagr %) with different contributions by the three business areas: Corporate Finance Area: creation of a single Group center specializing in Acquisition, Project and Object Finance, with potential additional revenues of approx. EUR 27 bln in the three-year period. Commercial and Ordinary Finance Area: gradual reallocation of ordinary credit to Group traditional bank networks through a gradual increase in disbursement lower thresholds, reduction of easy credit (not very profitable) and boosting of vanilla IPREs. Impact on revenues: - EUR 4 bln. Capital Market Area: focus on MPS Finance s current business lines, which are more conducive to new initiatives and further business development (Principal Finance and Securitization). Additional revenues: approx. + EUR 58 mln E 2008E 2009E 19

20 Geographical Distribution Model New distribution model New Banca per l Impresa Plain vanilla Finance Corporate Finance Capital Markets Direct Channel Indirect Channel Distribution Channels Key Clients Area Parent Company Local Specialized Centers B. Impresa Centers (nr. 10) Product Specialists Manufacturing Agriculture Credito Agevolato Project, Acquisit., Real Estate, Derivatives, Equity Broker/ Corporate Point Main Facts Banca per l Impresa centers will help SME Center managers originate more customer business and will have the skills required to route all commercial and specialty activities directly to the front-end SMEs Entities & Inst. Customer Key Clients Corporate Clients Public Entities and Financial Institutions Source: Banca per l Impresa Business Plan 20

21 Roadmap and Key Milestones Timing 1H07 2H07 1H08 Company Integration Business Model and Commercial Policies Product Range MPS Capital Services Banca per l Impresa Distribution Model Review & Implementation Corporate Organization Evolution and Efficiency-Improving Strategies Implementation of New Organizational Structure New Structure Sizing & Staffing IT System Migration Risk Management Strategies Credit Portfolio Analysis, Legacy Risks Allocation Process & Tool Improvement 21

22 Foreign Network Target Reorganization Group geographical presence Western Europe 4 Units: Belgium, France, Uk, Spain Frankfurt New York Cairo Central-Eastern Europe 7 Units: Germany, Tzchek Rep., Slovak Rep., Romania, Russia, Turkey, Poland Hong Kong Far East 6 Units: Hong Kong, China (3), India (2) Coordination Hub Group structures Correspondents banks (1) Coverage can be extended through operating partnership agreements with large international players Americas 3 Units: United States, Latin America (2, newly opened) North Africa and Middle East 5 Units: Algeria, Morocco, Egypt, Tunisia and Middle East (newly opened) (1) With c.c. Foreign Network covers 5 continents and over 40 countries 22

23 SME Foreign Operation: high-potential business Proxy of bank ability to influence customers Priority Level MPS Group SME customers 29,549 + Customers with large, lowmargin foreign operations Customers with foreign operations 22,223 Customers with no foreign operation, Customers not financed by Group 20,466 Customers financed by Group 1,757 + Customer with major foreign operations 13,043 Customers with minor foreign operations + + Customers with large share of wallet in loans2,309 Customers with small share of wallet in loans10,734 Customers with large share of wallet in loans2,231 7,423 Customers with small share of wallet in loans 5,191 Priority 1 Priority 3 Priority 2 Priority 4 None 23

24 Foreign Business Volumes and Performance Aspiration Figures include foreign business activities carried out on Italian territory, as set in AAI Business Plan CAGR '05-'09 Objectives Strategic dashboard Aspirations Leadership position in foreign business in terms of offering, quality and disbursement procedures. Reference bank for Italian SMEs (existing customers and prospects) Revamp foreign business by developing a differentiating offering of International Trade Finance (ITF) products Gain market share Maximize foreign business profitability through the implementation of an industrialized sales business model Improve relationships with existing corporate customers Revenues (EUR mln) Market share** Foreign business share*** Cost/ Income Percent RAROC Percent % 153* **** 2009E 7.3% 7.3% 8.4% Delta pp 15.1% 15.0% 17.8% +2.7pp **** 2009E **** 2009E -14 pp +5 pp * BP estimates ** Foreign trade exchange volumes *** Foreign business percentage on total Corporate segment revenues (incl. foreign business) **** Internal recalculation 24