Focused on growth in 2011

Transcription

1 Focused on growth in 2011 Richard Gaskin, Acting President & CEO George Newcomb, Deputy President & CFO Ewa Piwowar, Investor Relations Leader 22 July 2011

2 Disclaimer This presentation does not constitute or form any part of an offer, invitation or inducement to sell or subscribe, or any solicitation of an offer to purchase or subscribe for any securities. This presentation does not purport to contain all information that a prospective investor might require, and neither this presentation nor any part of it nor the fact of its distribution shall form the basis of, or be relied on in connection with, any contract for the purchase or subscription of any securities. The forecasts and forward-looking statements contained in this presentation are necessarily based upon a number of assumptions and estimates that, while considered reasonable by us, are inherently subject to significant business, operational, economic and competitive uncertainties and contingencies, many of which are beyond our control, and upon assumptions with respect to future business decisions that are subject to change. Actual results may differ materially from those projected. Certain items of numerical information and other amounts and percentages set forth in this presentation may not add up to the correct total due to rounding. 22 July

3 General overview 22 July

4 BPH key metrics Sizeable network 4Q 09 4Q 10 1Q 11 Branches Franchise Outlets Agents (K) ATMs SME Mobile Advisors SME Regional Advisory Centers Employees 7,571 6,869 6,850 Robust customer base Private Individuals (MM) SME (K) Corporate (K) ~2 ~2 ~2 IDEO branch grand opening in Lodz July 14, 2011 Separated spaces for different activities Privacy & home-like interior Innovative solutions: Touch & Go system Self-zone Real time video meetings with advisors Repositioning for future growth 22 July

5 Positive macro environment Poland still among EU growth leaders GDP growth to accelerate in (VPY %) '08 '09 '10 '11 '12 '13 '14 Market with expansion potential Demographic trends challenging (change in number of persons (K) by age group) '08 '09 '10 ' Unemployment to decrease further in H2 11 (%, registered rate, eop) '08 '09 '10 '11 '12 '13 '14 Investments to rebound strongly in Investments (VPY %) '08 '09 '10 '11 '12 '13 '14 Per capita income to expand 5.5% CAGR (GDP per capita, 000 PLN) 13.9K 11.3K 12.3K 13.7K 14.4K 15.6K 17.2K '08 '09 '10 '11 '12 '13 '14 Household loan penetration low but rising (households loans, % of GDP) EU 55% '08 '09 '10 '11 '12 '13 ' Consumer confidence Strong underlying fundamentals Sources: EIU, IHS, Bank BPH Economic Research Team 22 July

6 Ownership structure & governance Strategy Update Price/Share (PLN) Profitable business Max 77 PLN 1 April 2011 Current shareholding structure Public Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Jul-10 Nov-10 Jul-11 Min 50 PLN 2 July % 11% BPH WIG Banki WIG20 WIG Current market value: PLN 4.7 B* Included in swig80 index since June 17 Price trend consistent with the market however, the Bank s stock illiquidity makes us more vulnerable Corporate Governance 40% or 4 members of Supervisory Board (SB) independent, including Chairperson 50% of SB members Polish nationals GE s stake ultimately down to 75% */ As of July 15, July

7 Leadership team Richard Gaskin CEO Nationality EN Previous Employers GE Capital Ford Motor Co 3M Lloyds Bank Yrs of financial services exp. 22 No. of industries 2 Yrs of GE exp. 11 No. of countries 6 Yrs of exp. in PL 1 George Newcomb GE Capital CFO Arthur Andersen US Wilfried Mathias Seidel Risk DE GE Capital GE Money Allianz Group Deutsche Bank Grzegorz Dąbrowski Corporate PL PKO SA BPH PBK Grzegorz Jurczyk Retail PL Santander Fiat Bank Polska Bain & Company Ronald James Malak IT, Quality, Services & Security US Citi Group Krzysztof Nowaczewski Operations PL None Grazyna Utrata Legal Lukas Bank, BZ WBK Wielkop. Bank Kredytowy ING PL 20 1 > Driving the business turnaround 22 July

8 2010 return to sustainable profitability Strategy Stem losses Exit loss making portfolios Outpace rev with COF Execute cost out Strengthen leadership 1 Funding/ Growth 2 Risk 3 Cost Deposits up PLN 5.4 B GE funding down PLN 2.8 B CoF down 42 bps PLN 9.4 B Originations C & D segments cut Entry rate PL 37% 30+ PL, 3MOB from 3% to 0.2% Restructuring tools deployed 2H losses down PLN 203 MM vs. 1H Delinquency at pre-crisis level SF & Auto exit Net FTE down 701 Centralization initiatives Branch closures OPEX down 5% y/y 20 (PLN MM) 84 Net income % Net Restructuring Q09 2Q 3Q 4Q 1Q10 2Q 3Q 4Q 1Q11 Share price Shifted emphasis from net revenue to risk adjusted net revenue... but need to grow 22 July

9 Focused lending around growth areas Net rec. PLN B Why it made sense? Does it now? Strategic approach Mortgages FX PLN st Yr Income 2.5% on spread Diverse offering Cost-effective funding FX Risk Low margin Overhead contributor Market credibility Regain market credibility in PLN Maintain outstanding Re-engineer back office Lever distribution Bundle with C/A Cards & Loans 4.93 High demand, market & return Mkt Leading TTY/TTC Yes Develop strong brand Mkt leading SFE Develop Loyalty VP s Strong risk discipline Urban Cards Auto & SF 1.58 Limited regulatory constraints High x-sell possibility SF Cel ROI (6.2%) X-sell too low New regulatory constraints Exit Consider CDF for inventory finance Commercial SME 2.72 Good returns & growth Levered BPH skillset Yes Improve go to market NPI Grow CORP 1.54 High return/high growth Levered BPH skillset Yes High growth Mkt expertise Balanced growth X-Sell to drive return 22 July

10 Profitable source of self-funding Deposits PLN B Why it made sense Does it now? Strategic approach C/A s S/A s T/D s 1.43 Long term customer with salary inflows Yes X-sell opportunity NPI with clear VP Lower risk for lending Cost effective funding Funding source X-sell products for inflows X-sell to lending portfolio Self-funding Competitive pricing (tax benefit) Self-funding Stable funding base Competitive price Yes Stability of portfolio and self-funding Yes Stability of portfolio and self-funding Price to drive volumes required Re-price back-book Switch to investment products Corporate Term Deposits 2.73 Self funding Fund lending growth Yes Stable funding source Develop as hook products X-sell lending relationships Avoid hot money SME/Corp Deposits 3.63 Self funding Fund lending growth Yes Self-funding assets Hot money Self fundings assets X-sell Trx banking 22 July

11 Current market shares Assets PLN B Loans PLB B Deposits PLN B Total net revenues PLN B # # 9 16 # # #3 in credit cards Top 5 in cash loans* Top 10 bank in Poland BPH TFI #9 in terms of assets BPH Brokerage #20 in terms of derivatives BPH IR analysis based on Q results of listed banks; */ data as of end July

12 Growth strategy 22 July

13 Regulatory environment Focus areas New customer credit rules New regulations on Payments within the EU New abusive clauses Timing Mitigation actions Assess IT change requirements Perform documentation requirements analysis Review contract templates Ongoing relationship building focused on Big Idea 6 new recommendations 12 Proactive cooperation with FSA Bank Tax or stabilization fund FX: Fix / lower FX spreads Ban on FX lending Working with business/ industry groups Pricing actions to off-set impact Engaging with regulators to proactively address concerns 22 July

14 Several business opportunities PI Cash Loans 4.8% PI Credit Cards 14.0% Affluent EOP Balance [PLN Bn] ** E11 EOP Balance [PLN Bn] * E12 Total Deposits (PI + SME + Corp) E % ,7 08 EOP Balance [PLN Bn] *** E11 EOP Balance [PLN Bn] * E12 Commercial Loans (SME + Corp) E E14 2.1% 303 Net income per household (PLN ths) # of households > <5 PLN Bn Potentially affluent E14 Potentially upper mass Commercial CAGR (%) Non-lending revenue** E11 E12 E13 E E11 E12 E13 E14 10 E11 E12 E13 E14 ~70% of Commercial Revenue Base % BPH market share May 2011 Estimated future EOP balances Source: National Bank of Poland only PI segment / IFRS standard, 2011 own estimations based on market trends, S/A share estimation based on Rzeczpospolita and Open Finance data, High market liquidity Differentiate to take share * Estimation based on BPH Chief Economist segment dynamics (household segment); ** McKinsey estimations; *** VISA outstandings on all credit cards (active/inactive) in banks/market portfolio, including SF & BC cards 22 July

15 Transforming the portfolio (PLN MM, 2010) Overall Mortgages Focus Areas SF + Auto Originations ~0.4B CV/ANR 1.1% Losses/ANR 0.6% New Business ROI 1.0% Originations ~5.6B New Business ROI 2.3% PLN 11.4 B* Mortgages % Corporate 17% Personal Loans Go forward focus Retail Commercial** PLN FX 87% SME 28% 10% 45% Cards Predominantly Retail moving to Universal Banking model *excl. mortgages, SF, Auto; ** incl. other 22 July

16 Summary: execution imperatives 1. Commercial execution New branches New initiatives 2. Reposition the brand Differentiate from competition Business wide focus 3. Deliver productivity Bullet trains, sourcing, descipline Fund systems simplification 4. Maintain Credit Focus Robust portfolio management Continue diversification 5. Win hearts and minds Compliance mindset Inspired team = better customer experience Communication strategy 22 July

17 Brand growth acceleration Big Idea BPH actuals Regression analysis Loan applications to brand awareness R2= MM generates 46.6MM LT RACV Timeline Project kick off 2Q 11 BA from 61 to 75 Development of Big Idea concept 3Q RTBs implementation 3Q/4Q Internal buy-in 3Q/4Q Launch of external campaign 4Q 85% correlation between brand awareness and applications Breakthrough Reasons to believe identified and tested... Bank BPH Alior PKO Unique 81% 57% 66% Attractive 78% 51% 52% Importance 88% 78% 64% Eager to contact 63% 46% 60% Why now Brand growth proven as a strong driver for business results Unique positioning with strong purchase intent Significant brand strength deterioration due to declining marketing investments Strong RTBs developed by business that will support positioning Benefits Brand development through a communication platform delivering consumer engagement and top of mind Support of business goals & effectiveness Delivering brand power and differentiation to compete effectively Acceleration of Bank BPH growth Increasing of employee cultural alignment with the new BPH brand value proposition 22 July

18 Driving product & process innovation Product excellence Konto Kapitalne Value Proposition Simple pricing structure Auto Product Bundling Value Added Services Process excellence BankConnect Active Key features Automatic On-line Real-time Co-branded Pre-Paid Cards Value Proposition Innovative rebate program Lunch & restaurant cards Close loop & private label solutions Finger vein technology* Key features High speed of authentication Highest possible security Privacy compliant Innovation driving value creation * To be implemented in July

19 Strategic execution Retail Segmentation driving focus Ploan share by segment Develop segmentations based on risk and needs Build differentiated, relevant and profitable value propositions Re-engineer price, volume, term, parameters to each segment Targeted NPI linking brand promise to segments +23% originations in June 11 On Line benchmark Leapfrog the e gap Provide personalized experience Build full online sales processes Engage through social banking Differentiate through Personal Finance Manager Go mobile Class leading transactional First to market with on-line decision e-platforms Broker system, FX system Upgrade brick and mortar Move to IDEO format Embody simply straightforward concept Differentiate vs. competition 6 signed 5 in pipeline Reposition to attract new MM, AFF, SME Brand accredited sales and service staff Class leading technology for customers Real time video links, ID technology Lean sales & centralize back-office branch processes Simplify service processes Restore SFE standards Drive out sales variation at sales person level > 200 new salespeople into branch network Deliver market leading Time to Yes and Time to Cash Six Sigma resources allocated Net new branches per annum Optimize traditional GE strengths 22 July

20 Strategic execution Commercial PLN B 57 Positive market outlook Market Revenues* 66 11% Building scale in Corporate Targeted Big Ticket plays (~PLN 150 MM average) Acquire delegation to aid TTY Re-engineering SME 27% growth YTD Lever GE Commercial Finance platforms optimize technology New Products Re-launch Factoring to acquire new customers and develop existing ones Direct distribution model Mid to high end pricing, TTY and TTC as a competitive edge Leveraging EMEA systems and processes Explore re-entry to leasing Sustain X-Sell Transactional Banking Current accounts Commercial sector = 10% of banking sector by 13 * McKinsey data Cash management Electronic payments Trade finance Treasury products Execute strategic re-engineering of SME go to market Leverage proven capabilities Increase commercial to 50% of portfolio 22 July

21 Strategic execution Funding & WM Ensure PLN self-funding commercial funding Manage deposits base Maintain funding source Improved income 1Q Commercial Deposits PLN MM 6, New customers acquisition program Specialized sales force for C/A acquisition X sell deposit products to lending customers Development of e-banking platforms Diversify products; manage liquidity and pricing & non-ge funding EBRD, KfW, Bond Program Energy efficiency projects SME funding Bond program aggregated principal amount up to PLN 1 B stable long term financing Funding plus fee income Develop wealth management Solid product portfolio Open possibilities for customers Offer investment alternatives BPH Investment funds Review opportunities to achieve exponential growth acquisitions Offer non-lending services Brokerage house IPO Investor Loan Facility (LIG) Universal Trading Platform 22 July

22 Managing the controllables (PLN MM) Opex OPEX Opex/CV 68.8% Credit costs Key initiatives Simplification Core banking system Process rationalization Real estate footprint Rooftop consolidation Branch optimization ( m2, concept) Centralization / EFT rationalization Enabling One DWH, Opex, Sourcing team Relocation to low cost sites Sourcing initiatives Renegotiations (~10% purchase base) Vendor consolidation ( 30%) Technology Finger vein project Integrated tools (PMO, Finance) 87 (57) '10 AGR Loss/AGR % 2.7 Coverage % 9.0 Imp/Gross Rec % 10.6 Comments Higher credit quality originations generating decreasing loss trend Long term stable impaired loans ratio 22 July

23 Winning hearts & minds Intensive training & development programs Delivering Growth, Leadership & Compliance Agenda Ombuds GEOS Focus From 3 to 22 Ombuds people Launched Ombuds Day > 600 trained Plan to cover 100% branches in 11 Employees engagement Environmental & local societies concerns Promoting healthy lifestyle Diversity Five X-Functional teams Over 40 team members CEO Sponsorship regular reviews Focus on energizing the team Open & approachable Reach every employee Quarterly Town Halls Twitter & Facebook Our Bank culture 22 July

24 1Q 11 Financial Performance 22 July

25 Overview Performance Profitability 2010 turnaround agenda complete baseline quality profitability established PLN 100 MM swing Q1 11 vs. Q1 10 Retail Net revenue after losses up 120% Commercial SME Deposits Net revenue flat to Q1 10 Net revenue after losses down 50% re-engineering advanced Up >20% with positive CoF variance to WIBOR Cost Down 6% on prior year Losses Cost of risk half prior year level Capital Adequacy Maintains solid performance 22 July

26 Key financial performance PLN MM 1Q 11 1Q 10 V (%) Net interest income Net F&C Profitable trend... net income PLN 47 MM in 1Q 11 PLN 100 MM y/y improvement Total net revenue* Costs Ex-restructuring & one-offs Impairment charges Pre-tax profit Net income Better cost management base costs 6% in 1Q 11 Portfolio quality continues to show improvement impairment charges 53% Targeted F&C reduction across credit cards and loans First quarter earnings on plan */ Total net revenue = NII + Net F&C + Net trading income 22 July

27 Balance sheet structure improved PLN MM Assets Liabilities & Equity 36.2 B 37.3 B 37.5 B 1,723 1,855 1,438 3,140 3,688 3,480 1,603 1,469 1,458 1,432 2,167 3,319 Other 8,259 7,228 7,526 28,338 28,111 27,794 Cash & balance with Central Bank Intangibles, property and equipment Investments 12,298 15,653 15,896 Equity & Other Deposits GE lines Net loans* 15,679 14,410 14,068 1Q 10 4Q 10 1Q 11 Mix of assets through originating new business at attractive strategic products 1Q 10 4Q 10 1Q 11 PLN 243 MM of net deposits collected in 1Q 11 Local currency self financed business Loans to deposits ratio in PLN 78% */ Net loans and advances to customers 22 July

28 Retail business development PLN MM Receivables Interest+F&C income down 2% down 15% 25,214 24, Interest expenses improved 14% Net revenue down 15% Losses improved 66% Net revenue after losses improved 119% Poor revenue traded off with funding costs and portfolio quality improvements 22 July

29 Corporate business development PLN MM Receivables Interest+F&C income Interest expenses improved 6% 1,543 1,639 flat flat Net revenue flat Losses historically good Net revenue after losses down 64% Poised for growth 22 July

30 SME business development PLN MM Receivables Interest+F&C income Interest expenses down 4% 3,321 3,204 down 15% improved 8% Net revenue down 18% Losses up 22%* Net revenue after losses down 50% Re-engineering business model to pursue quality growth */ PLN 43 MM in Q4 10, PLN 46 MM in Q3 10 and PLN 45 MM in Q July

31 Deposits PLN MM Retail Corporate improved 20% improved 26% 9,626 8,018 6,171 4, Cost of funds (%) PLN 78% L/D ratio providing funds for future growth 22 July

32 Cost of business PLN MM Base costs improved 6% CI ratio (%) flat C/RANR* (%) improved 28% Prior year actions delivering P&L benefit on cost line */ Risk Adjusted Net Revenue 22 July

33 Improved asset quality Impairment charges & cost of risk 1 NPL ratio 3.5% 3.4% 9.1% 9.4% 10.2% 10.6% 10.9% 2.7% % 1.6% Q 3Q 4Q Impairment charges 30+ delinquency of personal loans 3 months on book (%) improved 4.25X Cost of risk 2Q 3Q 4Q Performing loans* (PLN B) Impaired loans* (PLN B) NPL Non-performing loans stable for last three quarters Cost of risk falling to 1.6% 80% of new PI loans with A+/ A rating High quality new originations transforming portfolio performance 1 Cost of risk to avg. loan volumes */ Total loans and guarantees 22 July

34 Capital ratios well above requirements Capital ratios (%) CAR at 13.6% vs. 8% regulatory minimum No capital action necessary to meet proposed Basel 3 requirements 2009 Jun '10 Sep ' Mar '11 CAR Tier 1 Capital (PLN B) Established back-up liquidity lines with parent FX assets largely funded by parent Q 10 3Q Q 11 Tier Tier Total Solid capital base and liquidity position 22 July