BPM /2018: Sound and sustainable growth

Transcription

1 BPM /2018: Sound and sustainable growth /2018 Business Plan 12 March

2 Disclaimer This document has been prepared by Banca Popolare di Milano S.c.a r.l. (the Company and, together with its subsidiaries, the Group ) solely for information purposes and for use in presentations of the Group Industrial Plan /2018.The information contained herein has not been independently verified. No representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or opinions contained herein. Neither the Company nor any member of the Group nor any of its or their respective representatives, directors, officers, employees or advisors accept any liability whatsoever (in negligence or otherwise) in connection with this document or any of its contents or in relation to any loss arising from its use or form any reliance placed upon it. All the prospective information herein contained have been predisposed on the basis of certain assumptions that may not be correct and therefore the results herein reflected may vary. This document includes certain forward looking statements, projections, objectives and estimates reflecting the current views of the management of the Company with respect to future events. Forward looking statements, projections, objectives, estimates and forecasts are generally identifiable by the use of the words may, will, should, plan, expect, anticipate, estimate, believe, intend, project, goal or target or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements include, but are not limited to, all statements other than statements of historical facts, including, without limitation, those regarding the Group s future financial position and results of operations, strategy, plans, objectives, goals and targets and future developments in the markets where the Group participates or is seeking to participate. Due to such uncertainties and risks, readers are cautioned not to place undue reliance on such forward-looking statements as a prediction of actual results. The Group s ability to achieve its projected objectives or results is dependent on many factors which are outside management s control. Actual results may differ materially from (and be more negative than) those projected or implied in the forward-looking statements. Such forward-looking information involves risks and uncertainties that could significantly affect expected results and is based on certain key assumptions. All forward-looking statements included herein are based on information available to the Group as of the date hereof. The Group undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as may be required by applicable law. All the forward looking statements and estimates written and oral that may be referred to Group or to other persons acting on its behalf are expressly qualified, in their integrity, by these precautionary statements. In forming their own opinion the readers have to take into consideration the abovementioned facts. This document and the information contained therein does not constitute an offer of securities for sale or an invitation to purchase or subscribe for any securities in the United States, Australia, Canada or Japan or any other jurisdiction where such an offer or solicitation would require the approval of local authorities or otherwise be unlawful (the Other Countries ).The securities referred to herein have not been registered and will not be registered in the United States under the U.S. Securities Act of 1933, as amended (the Securities Act ), or pursuant to the corresponding regulations in force in the Other Countries. The securities may not be offered or sold in the United States unless such securities are registered under the Securities Act, or an exemption from the registration requirements of the Securities Act is available. The Company has no intention to make any offer in the Unites States. The information herein may not be reproduced or published in whole or in part, for any purpose, or distributed to any other party. By attending the Group Industrial Plan /2018 presentation or otherwise accessing this document you agree to be bound by the foregoing limitations. 2

3 /2018 Business Plan A wealthy customer base rooted in the most industrialized areas of the country Significant results achieved in spite of a worse-than-expected market scenario Forward-looking Governance review ensuring Boards independence The pillars of the /2018 Business Plan Continue the strategic guidelines set in the previous Plan One of the most sound capital bases on the market so the bank can tackle the challenges ahead and exploit the growth opportunities over the next three years Of the most updated business platforms, already set to exploit its full potential from its local territorial presence and its customers Efficiency by way of innovation, training and better use of the Bank s real estate assets The results that were achieved and the actions envisaged in the plan put BPM in the best position to exploit the country's economic recovery. The business plan 2016 targets are: CET1 12% ROTE: 7% Cost-income ratio: 56% The plan was detailed until 2016 through industrial planning while 2018 figures reflect the expected consolidation of the actions started and planned and exclude the introduction of new management actions 3

4 Agenda 1. Sound fundamentals and an unparalleled potential in Italy 2. Forward-looking governance 3. Strategic Guidelines of the Plan: sound and sustainable growth 4. Economic and financial targets: best in class performance and profitability in the Industry; well defined roadmap 4

5 1. Sound fundamentals and an unparalleled potential in Italy 5

6 Sound fundamentals, outstanding territorial presence, way ahead of everyone in the re-launch More sound, competitive and back to profitability Balance-sheet strengthened, now among the most sound in the Industry Renewed team and simplified structures Strong actions on costs adopted P&L improved despite negative economic trend Well rooted in the areas that lead the country s recovery and growth and able to leverage on an optimal combination of distribution and product excellence High-value customer portfolio in the most dynamic and productive areas in the country 5 Review of the business and offering started to relaunch the commercial business 6 Strengthening of territorial coverage initiated as well as high value added products 7 6

7 Strengthened the balance sheet Management actions Results Prudential coverage levels of doubtful loans 1.6 billion in provisions booked in High NPL coverage NPL coverage ratio % In, coverage at 64% including cancellations +9 p.p. Reduced funding gap and liquidity under control Funding gap halved, to less than 5bn Optimization of liquidity generation drivers Return to wholesale placements with medium and long-term maturity 2011 Loan/direct funding 1 ratio % p.p. Goodwill write-off All goodwill written off in the balance sheet (- 700 million)

8 Balance sheet: one of the most sound of the Industry Tangible equity /Total tangible assets % - September Net doubtful loans / Tangible net equity % - September Gross NPLs / Gross loans % - September BPM 7.3% Bank 1 45% Bank 1 3.3% Bank 1 6.1% BPM 91% Bank 2 3.9% Bank 2 6.1% Bank 2 94% Bank 3 5.4% Bank 3 5.9% Bank 3 122% BPM 6.5% Bank 4 5.8% Bank 4 179% Bank 4 7.0% Bank 5 5.7% Bank 5 179% Bank 5 7.2% Bank 6 5.2% Bank 6 180% Bank 6 8.6% Bank 7 4.2% Bank 7 195% Bank 7 8.9% Bank 8 2.8% Bank 8 419% Bank % Dec. BPM 7.3% BPM 93% BPM 7.2% Source: Balance sheets of BaPo, BPER, Carige, Credem, Credito Valtellinese, MPS, Popolare di Sondrio and UBI 8

9 Renewed team and simplified structures Management actions Results Boards and management teams renewed Company and central structure simplified Renewed focus on human capital management Complete renewal of the Boards in BPM and group subsidiaries, ensuring the independence of the Management and Supervisory Boards Significant renewal of first-line managers through internal and external resources and the overall management team in the various levels of the Head Office and Network Structure; average age lowered Merger of BdL and Cassa di Risparmio Alessandria ("CRAL") into BPM BPM Ireland, BPM Fund Management, Akros Alternative Investments closed Reduction in organizational structures at Head Office Strengthening of corporate culture based on performance, meritocracy and equal opportunities New human resource management and IT systems Human resource enhancement through training days based on the new organizational and redevelopment model Staff average age Years Network Head Office org. structures Units Head Office % Over 40,000 training days a year 9

10 Strong action on costs started Management actions Results Control of personnel costs Socially responsible measures established to manage human resources, encouraging employees eligible for retirement and signed up to the Early Retirement Plan (Fondo di Solidarietà) to exit the bank (c.a. 900 people, o/w 60% have left the Bank) Staff cost cutting: Human resources Number of People 8,467 7, % Realignment of salary levels and the number of top managers to the market benchmarks Replacing the exiting staff with hirings in compliance with the new framework agreement 2011 Spending Review Phase I Cost synergies generation by integrating BPM s subsidiaries into BPM. Selective insourcing for specific activities to exploit back-office capabilities (i.e. centralized processing of money transfers, early invoicing..) Streamlining cost and investment operations Renegotiation of group rental contracts started Optimization of IT costs, at the service of business development Other admin exp. and D&A Euro million % Net adj. to property, equip. & intang. assets other adm. expenses

11 Improved financials despite negative economic trend Market trend GDP % change vs. previous year 0.5 Revenues Euro Millions 1,352 1,683 CAGR 11.6% Rates (Euribor 3m) %, average value Operating costs Euro Millions 1, CAGR -2.8% Loan volumes - Italy % change vs. previous year Non performing loans - Italy % on gross loans Source: Istat, Prometeia Cost / Income Net result Euro Millions Net adj. for loan impairment: million % 58.6%

12 Portfolio of high-value customers in the most dynamic and productive areas in the country BPM customers Key figures Private Individuals: wealthy customers, already digitally oriented Avg. direct funding per customer Euro Thousands % Direct channels users Private Indiv. % Pure digital 49% 13% 36% 35% BPM 1 Average Italy BPM Average Italy Corporations: strong roots in the most industrialized areas in the country that lead the economic recovery BPM corporate loans by geographic area % Lombardia 64% Nord-West 72% Added value per capita Euro Thousands ~31 ~28 Expected GDP growth 2014 % BPM network; Source: Unioncamere; Prometeia, ABI Total Italy ~

13 Business model and offering review for the commercial relaunch started Segment Description Results New network and commercial organization: 6 districts; Hub & Spoke model introduced (in January ) Customer satisfaction Individuals, NSI 1 index Increase in number of commercial roles in the network Retail Review of product range and redefinition of commercial policies (quarterly budget, product campaigns "rolling") Re-launch of BPM Retail brand (new brand image, new website, new app) with significant increase in customer satisfaction Corporate New Branch Network organizational : 8 commercial areas Introduction of product specialists/structures (overseas, structured finance, foreign exchange / derivatives) New machine for the commercial tracking of "single name" Income / Loans Corporate, index % 2011 Private Enhancing product range (multi-brand) Enhancement of synergies among retail/private/corporate customers Profitability indirect funding Private, index % 1. Net satisfaction index

14 Strengthening of territorial coverage and of high value added products initiated Optimization through an improved and streamlined Branch network Hub&Spoke model introduced Consolidation/closure of ~ 50 branches Branch evolution Units Fully-operational branches Optimized branch operations One of the most innovative and appealing digital banks with outstanding recognition in the market 2011 Today Specialized expertise in consumer credit Profamily customers Thousands >2x 2011 Today Group's investment bank Market leader in bonds brokerage, OTC transactions on equities and derivatives Centre of excellence for high value-added services to Private and Corporate clients 14

15 2. Forward looking Governance 15

16 Strategic vision A strong, stable and independent bank Ensuring balance between stakeholders that are interested in the banks re-launch and success (i.e. shareholders, investors, customers, employees) Well defined set of rules, adequate representation and visibility on company evolution Performance based corporate culture and merit for those who contribute to achieving the targets 16

17 Main changes: better balance in the continuity SIMPLIFICATION reduction in the number of members on the Supervisory Board (from 17+2 to 13+2) only one Deputy Chairman increase in the number of members on the Management Board (from 5 to 7) increase in the number of independent members on both boards MAINTAIN THE BANK S COOPERATIVE CHARACTERISTICS the majority of the members on the Supervisory Boards (9 out of max 15) appointed through the per capita voting system the majority of the members on the Nomination and Remuneration Committees the Chairman and Deputy Chairman of the Supervisory Board shall be appointed from the list that obtained the highest number of votes (per capita) the Chairman of the Supervisory Board also chairs the Nomination and Remunerations Committees GREATER IMPORTANCE TO INSTITUTIONAL INVESTORS higher representation of institutional investors, UCITS: number of Supervisory Board Members increasing up to 4. Chairman and majority of the members on Internal Control Committee To appoint the Management Board, the vote of the Institutional investors and strategic partners is needed (both in the Nomination Committee and Supervisory Board) increase in the shareholding limit from 0.5% to 1% and up to a maximum of 3% for the bank foundations maintaining the role of the Strategic Partners under the agreements with them 17

18 3. Strategic Guidelines of the Business Plan «sound and sustainable growth» 18

19 The scenario underlying the Plan GDP % change vs. previous year Rates (Euribor 3M) %, average value E 2015E 2018E 2014E 2015E 2018E 2014E 2015E 2018E Source: Prometeia and internal analysis on Oxford Economics data Source: Internal analysis on Prometeia data and Forward rates Total loans - Italy % change vs. previous year Spread BTP-Bund 10 years Bps E 2015E 2018E 2014E 2015E 2018E Source: Prometeia, internal analysis Source: Prometeia, internal analysis 19

20 Main Plan targets P&L (euro million) Balance sheet (euro billion) KPI CAGR -16 Operating income 1,683 1, % Operating expenses 987 1, % Net income n.s. Loans % Total funding % Delta -16 Cost/Income (%) 58.6% 56.3% -2.3 pp Cost of credit (bps) bps ROTE (%) 0.8% 7% 6.2 p.p. CET1 Ratio (%) 7.1% 12% 4.9 p.p. LCR (%) 91.7% >100% > 8% NSFR (%) 92.2% >95% > 3% 20

21 Business plan guidelines Guidelines Drivers Soundness and resilience to tackle the challenges and seize the opportunities Commercial effectiveness and efficiency to support growth Sound capital base Enhanced liquidity Low risk profile Multi-channel A new multi-channel platform, already set for the future Retail Excellence in «core» segments Corporate - Support the economic recovery and value added service offerings Private e Wealth management - Serving our top customers with advanced solutions Expertise and human resources growth Going digital and efficiency Better use of the bank s own spaces/real estate properties 21

22 The Business Plan is based on a Risk Appetite Framework (RAF) to maintain a financially sound business Introduction of a new Risk Appetite Framework (RAF) BPM RAF guidelines Risk Profile (current) Risk Tolerance 1 Risk Target Key input for the drafting of the Budged and Plan Defined and approved group risk appetite Capital adequacy Common Equity Tier1 Ratio 7.1% 8.50% >11% Leverage Ratio 5.9% 3.25% >6% Liquidity LCR 91.7% 70.0% >100% NSFR 92.2% n.a. > 95% Credit Quality NPL coverage 55.5% 53% >55% 1. Risk tolerance will be revised annually based on the evolution of the regulatory and market environment 22

23 Capital increase Add-on removal Business evolution and self-fin. AIRB validation Solidity and resilience Solid capital base One of the most sound capital bases in Italy Management actions Expected impact Common Equity Tier 1 evolution % Potential from RWA alignment with average validated Italian banks (RWA / Total assets :~50% ) Up to 2%+ Capital increase of 500 million Removal of the add-ons thanks to overcoming the Bank of Italy s previous remarks Validation of internal AIRB models 7.1% 1.3% 1.8% 0.3% 1%-2% ~12% 12% 8% min. ECB requirement 5.5% min. ECB requirement under stress scenario Benefits from buffer vs. ECB minimum requirements 1. Effective business support 2. Resilience to possible adverse scenarios 3. Strengthening in view of potential sector consolidation processes Up to 200bps capital benefit observed in recent validations in the Italian market Note: CET1 fully phased; assuming no pay-out; not including AQR outcome 23

24 Solidity and resilience Enhanced liquidity The actions in the plan will strengthen an already strong liquidity position Management actions Balanced Loans/deposits management Control on loans / deposits ratio with a prudential approach funding gap management KPI evolution Evolution of loans and direct funding Euro Billion Loans Deposits Loans Deposits Wholesale bond issues High accessibility to capital markets, at significant lower costs compared to recent issues Expiring wholesale bonds Euro Million 50 1,455 1, E E Sound availability of eligible assets Maintaining a broad base of eligible assets thanks to new securitizations and availability of unencumbered assets Early LTRO repayment without any impact on liquidity and P&L Eligible assets for securitizations Euro Billion Available Repo and other LTRO 1. Excludes 787 MM. of securities already expired 24

25 Solidity and resilience Contained risk profile BPM will keep monitoring credit quality and maintain a low risk profile Initiatives on performing loans KPI evolution Renew of the organizational structure Full implementation of the new organizational structure in the CLO area Qualitative and quantitative strengthening of the credit function Cost of credit evolution Bps % Strengthening the credit granting processes Upgrade of the monitoring process Re-design of credit policies in accordance with the bank s risk appetite and with a view to optimizing risk / return Strengthening of rating models and their full operational use also in view of AIRB validation model Implementation of the new early warning system and supporting tools Team of specialists supporting relationship managers to react quickly to early warnings Asset mix evolution % % 6% 8% 6% 15% % 5% 9% 7% 17% 24% 19% 24% 25% Other (1) Financial activities Trade Service Manufacturing Real Estate Individuals-Mortgages 6% 6% Individuals-other Includes: Agriculture, Transport, Hotels and Public, Energy and Waste Disposal 25

26 Solidity and resilience Contained risk profile Value Extraction from the doubtful loans portfolio through the adoption of best practices approaches Actions on doubtful loans KPI evolution Organizational and tools reinforcement Re-organization of collection structures based on homogeneous segmentations of debt positions Introduction of KPIs with budget/incentive mechanisms Increasing use of third party collection providers using competitive asset category/ segment management Annual recoveries on nonperforming loans % pp Recovery strategies and valorisation Adoption of customized exit strategies based on debtor characteristics Non-performing loans disposal opportunistic evaluation Further enhancement of positions backed by real estate collateral leveraging on partnerships with real estate agents and the commercial network 26

27 Solidity and resilience Contained risk profile BPM is resilient even in one of the worst scenario seen in the last few years Stress scenario High intensity stress 2016 Plan 2016 Stress Test GDP +1.6% -5.66% Spread BTP-Bund 10 years 188bps 295 bps 3M Euribor 0.66% 0.18% Stress-test impact post stress CET1 ratio 12% -0.8% >11% Leverage ratio -0.7% >6% 6.7% Values always above Risk Tolerance 27

28 Business Plan Guidelines Guidelines Drivers Soundness and resilience to tackle the challenges and seize the opportunities Commercial effectiveness and efficiency to support the growth Sound capital base Enhanced liquidity Low risk profile Multichannel A new multi-channel platform, already set for the future Retail Excellence in «core» segments Corporate - Support the economic recovery and value added services Private e Wealth management - Serving our top customers with advanced solutions Expertise and human resources growth Going digital and efficiency Better use of the bank s own spaces/real estate properties 28

29 An outstanding growth strategy which leverages on the group s capital and competitive advantages 1/2 Strategy KPI evolution Multi-channel 2.0 A new multi-channel platform already set for the future Integrated multi-channel model leveraging on WeBank s distinctive competencies Light branch network with differentiated distribution formats, strong commercial focus, enhanced by a network of agents and promoters Commercial roles People ~ 3,200 2,450 Multi-channel Cust.¹ Thousand 553 ~ % % network resour. 45% 57% Retail Excellence in «core» segments Strengthening the savings management platform Develop «specialist» Family Financing: growth and profitability engine Excellent cross-selling machine for individuals Growth as «Proximity bank» for Small Businesses Retail Customers Thousand 1,266 ~1,400 Retail +11% Total Customer loans and fin. assets 2 Euro bn CAGR % 1. Private Clients 2. include direct funding, indirect funding and loans Note: Retail segment includes BPM Group s Individuals and Small Businesses. 29

30 An outstanding growth strategy which leverages on the group s capital and competitive advantages 2/2 Strategy KPI evolution Corporate Support the economic recovery and value added services Capital and liquidity to grow in the most attractive areas in the country Distinctive business model to support Italian Mid-Corporate customers Revenues / Loans indexed Corporate Total Loans Euro bn +15% CAGR 4.4% Private and wealth management at the service of our top customers with state-of-the-art solutions Growth and relationships value enhancement by way of a centre of excellence for entrepreneurs and professionals Revenues from services Euro m Private CAGR 15% Total AuM Euro bn CAGR 15% Note: Private and Wealth Management segment include Private BPM and Akros customers 30

31 Efficacia commerciale Multicanalità 2.0 Multichannel 2.0: a truly multichannel bank based on a digital platform and Webank integration Management actions Drivers to improve performance KPI evolution Significant strengthening of the Group s multichannel via: 1. integration of Webank into BPM in Optimal use of Webank s digital platform for all the group s customers 3. Full integration between traditional and advanced virtual channels, leveraging on promoters, third parties and branch managers BPM clients «Webank» Employees in commercial roles Increase loyalty and crossselling to BPM s existing multichannel customers Increase in customers oriented to the mutli-channel Increase cross-selling to Webank s existing customers, with positive impacts on direct funding, AuM,loans and transactional operations Increase in the number of Webank s customers, through a integrated multi-channel model Better customer management process, freeing-up commercial staff Multi-channel clients 1 Thousand Multi-channel clients as % on total clients % ~690 ~200 ~490 55% CAGR 8% 12% 6% 1. Private Clients 31

32 Commercial Effectiveness Multichannel 2.0 Multichannel 2.0: a flexible and sales oriented traditional network Management action KPI Optimized points of sales with different formats to enable the bank to exploit the local area opportunities Continuous evolution and strengthening of the Hub&Spoke model launched in January Selective closure / consolidation of branches with traditional format Opening of specialized points of sale dedicated to Family Financing and financial advisors Expansion of the cash-light branch format, ~40% in 2016 Branches Number 716 ~ Closure trad. branch ~670 Specialized points of sale Number 24 ~55 ~80 Points of sale openings Of which ~30 re-qualified and ~50 owned by third parties 1 Increase commercial «firepower» Allow cashiers/ customer service representatives to sell banking products Strengthening of third parties networks: financial promoters, agents, brokers Increase in the number of call center operators to manage outbound operations Selective acquisitions on the market of Relationship Managers Commercial roles Number 2, , ~150 ~3,200 ~240 ~2,810 Contact center Third party networks (Promoters & agents) RM 1. ProFamily Agents shops and Promoters financial shops 32

33 Commercial Effectiveness Retail Retail: a new acquisition and cross-selling machine for private clients Management actions KPI Integrated and optimized acquisition machine Strong brand contribution: digital / WeBank and Consumer/Profamily: ~50k customers per year Business partnership enhancement New geo-marketing machine for Small Business and professionals Customer base (Private Individuals) Thousand 1,127 1,259 CAGR 3.8% Extensive development of cross-selling machine to sell products Value maximization of the new network sales platform: product trolley, next product Exploitation of the new remote sales and multi-channel processes (based on electronic signature) and lead management system Introduction of non-banking products as growth driver Development of an offer which target specific segments (i.e. pensioners, «new Italians») 1. BPM network Product penetration (Private Customers) 1 as a % of Total Private Customers 25% +8 p.p. 20% 33% 32% Mortgages and other fin. Insurance p.p. 33

34 Retail: a best practice offering model for private customers savings management Commercial Effectiveness Retail Management actions KPI New and innovative service model for mass affluent customers (between 50k and 100k of financial assets) and super affluent (between 300k and 1M financial assets) Retail - Direct funding Euro Billion CAGR +5.6% Further strengthening of the asset management model for affluent customers Further development of itinerant Relationship Managers and drive to push off-site offers Development af promoter network (around 300) using WeBank brand to seize opportunities outside BPM s local area Strengthening of product offering with high added value products, (i.e. investments and insurance products) Retail - Indirect funding Euro Billion CAGR 5.4% of which CAGR AuM: 11.2% WeBank digital offer as a driver to ensure stable retail funding 34

35 Retail: a credit offering model for families through dedicated channels and offers Commercial Effectiveness Retail Management actions KPI evolution Strengthening of the specialized distribution by integrating Profamily into BPM and with new dedicated and recognized points of sale Branches dedicated to Family Financing and Profamily financial shops, characterized by innovative structure with mostly variable costs Increase in number of ProFamily agents dedicated to consumer credit Enhanced use of third-party quality networks to channel residential loans Individual Loans Euro bn Consumer Loans , ,1 1.3 CAGR 7% 18% 6% Industrialization of the product machine Overall review of the family finance product offering: mortgages, personal and consumer loans, leveraging on ProFamily s competences Mortgages % Launch Casa BPM initiatives to support the purchase of almost finished houses 35

36 Retail: Small Business growth as «Proximity Bank» Commercial Effectiveness Retail Management actions KPI Strengthening roots and proximity to the areas in which the Bank operates Team of managers and developers in each micro-market Excellent machine to increase the value of territorial agreements (i.e. agreements/plafond with Confindustria in Monza and Brianza, Alessandria, upper Milan, etc.) to drive growth Small Business loans Euro Billion CAGR 5.0% of which ST: 6.5% Industrialization of the product and the credit machines Subsidized financing (i.e. guarantee funds, regional, EIB etc.) also through the selected "business introducers" on a regional basis Select "vertical" propositions: food chain, energy efficiency Strong use of scoring processes to approve credit appliance for Small Businesses (on a statistical logic) in order to reduce lead times and gain market share on the best customers Improved pricing capacities with a riskadjusted perspective 100 Revenues on total loans - Small Business Index % 36

37 Commercial effectiveness - Corporate Corporate: capital and liquidity to grow in the Italian midcorporate sector Management action Relevant asset growth exploiting capital base availability Distinctive proposition Increase customer penetration, focusing on the most interesting sectors Growth in the Italian midcorporate sector (c. 2,200 prospective companies with a turnover of million), through dedicated commercial coverage Selective business strengthening in new regions, also through new relationship manager acquisitions Controlled real estate exposure and short-term loans reallocation Relationship and proximity Speed of response and credit excellence KPI Corporate loans Euro Billion MLT Share of wallet %, Core Corporate Customers % ST CAGR 4.4% 6.6% 2.6% 37

38 Commercial effectiveness - Corporate Corporate: distinctive and effective business model to optimize risk-adjusted return Management action Profitability increase over the entire segment Upgrade of the service model Further optimization of the risk / return profile based on the management of pricing and capital absorption Leverage on Banca Akros as platform for corporate finance, advisory and mini-bond issuing Push and strengthening of specialized products with high added value and high growth potential (corporate, foreign and international financial products) Intense relation with highly professional content Product specialists Revenue synergies with the private segment KPI Revenues/ loans - Corporate Index Corporate relationship managers Number % % 38

39 Commercial effectiveness Private e Wealth Management Private: centre of excellence for entrepreneurs and professionals leveraging on Banca Akros and BPM Private Management action KPI Significant increase in scale and financial asset growth Leverage on the two brands: Banca Akros for Ultra High Net Worth clients and BPM Private for Private clients Increase in the number of new private bankers (from 85 to 150 professionals under the Plan horizon) Full realization of revenue synergies with retail and corporate segments Private Banking customers financial assets Euro Billion Direct AuA AuM CAGR 8.1% 6.3% 0.2% 15.0% Profitability increase Enhance the service level through the spread of the active advisory service and the Personal Financial Planner Continuation of actions on selected Private customers (today under the "Retail segment") via higher valueadded products (i.e. RoA increase from ~ 20 to ~ 50 bps in 12 months on ~100 selected Private clients) RoA Private Banking - Indirect funding Bps Indirect Funding bn bps 39

40 Business plan guidelines Guidelines Drivers Soundness and resilience to tackle the challenges and seize the opportunities Commercial effectiveness and efficiency to support the growth Sound capital base Enhanced liquidity Low risk profile Multi-channel A new multi-channel platform, already set for the future Retail Excellence in «core» segments Corporate - Support the economic recovery and value added services Private e Wealth management - Serving our top customers with advanced solutions Expertise and human resources growth Going digital and efficiency Better use of the bank s own spaces/real estate properties 40

41 Efficiency Professionalism and internal growth Significant actions on resources to value efficiency and expertise Management actions KPI Maintain Business Plan commitments despite new growth actions Finalizing the planned headcount reduction 8,467 7, ~7,800 Enhancement of the group s human resources, acquisition of new expertise and new hirings of young talented people Human capital redevelopment to support the commercial business by better using the current staff s skills Enhancing staff performances evaluation system 2011 Headcount reduction Hirings Corporate Welfare development in order to guarantee a better work-life balance for employees bn Assets 1 per employee ~400 new hirings in Plan horizon (young people, commercial roles) ~13 ~15 Personnel costs ~609 ~643 o/w ~ Euro 50 million variable costs 1 Includes direct and indirect funding and net loans to customers 41

42 Going digital and efficiency Efficiency Going digital Management actions Less paper, faster execution KPI Going digital to increase efficiency and productivity Commercial processes going digital on direct channels and in the network by way of Webank s distinctive competences and technical/operating infrastructure NSR full implementation new sales platform -, integrated with credit granting and monitoring Re-design/ improvement of back office processes Investments Euro million 138 Total Total 244 Total Total Spending review Phase II Finalizing the on going IT operations renewal process Insourcing of selected activities to further optimise costs (freeing-up human resources, which cannot be employed in different roles) Integration synergies from shared IT investments, and strong reduction/cut in duplicate operations Other administrative costs Euro million CAGR -3,4% Focus on cost control 42

43 Efficiency Rationalization of spaces / properties A real estate programme to better valuate the Bank s assets Management actions KPI Better use of real estate assets Industrial partnership to maximize the bank s real estate properties in order to finance streamlining actions and reduce the cost base Perimeter of intervention Up to 150m and 30,000 m 2 by 2016 Up to ~ 5m decrease in costs by 2016 Rationalization of network structures Progressive restructuring of main branches (Hub) to support the new model and re-launch the Bank s brand image Increase efficiency and better use of available spaces (e.g. extension of self-service areas, creation of financial shops) to save up to 10% of used space Selective closure of ~50 branches under the Plan horizon Restructured branches Progressive units E Branch network Units E 30 ~ Totale -6.0% Up to ~ 5m decrease in costs by

44 4. Economic and financial targets: best in class performance and profitability in the industry, with a well defined roadmap 44

45 P&L and Balance sheet evolution 2016 CAGR E CAGR Net interest income % Net fee and commission income % Other operating income % Operating income 1,683 1, % 1, % P&L (Euro Million) Personal expenses % Other administrative expenses % Amortization and depreciation % Operating expenses 987 1, % 1, % Net operating income % % Loan impairment charges % % Net income n.s % Balance sheet (Euro Billion) Loans to customers % % Total funding % % Delta E Delta KPI Rote (%) 0.8% 7% 6.2 p.p. ~9% 1 ~2 p.p. 1. Pay-out assumption: 50% from