RETAIL DIVISION. Roberto Nicastro

Transcription

1 RETAIL DIVISION Roberto Nicastro

2 AGENDA Retail Division overview Country-specific plans Italy Germany Austria Conclusions 2

3 RETAIL DIVISION ID CARD Households: with less than 1 mln assets UniCredit R etail D ivision (1) Small Businesses: with less than 3 mln turnover Retail Italy Retail Germany Retail Austria Specialized platforms TOTAL Total volumes (2) bn (3) 16 (1) New perimeter: households with financial assets up to 1 million Euro and enterprises with yearly turnover up to 3 million (2) Direct deposits, indirect deposits and total loans as of December 2005 (3) Not including Austrian small business segment 3

4 THE STARTING POINT RETAIL DIVISION PRO-FORMA ECONOMICS (1), 2005 million, percent Total 7,209 5, Italy Austria Germany Italy 4,397 (61%) 2,756 (52%) Austria (1) Germany 1,059 (15%) 1,753 (24%) 911 (17%) 1,638 (31%) As resulted from transferring high net-worth individuals and small business -264 Revenues Costs Net profit 4 (1) After divisionalization in Germany and Austria, but not yet including Austrian small business segment

5 A 1 BN ANNUAL EVA IMPROVEMENT ACHIEVED WITH DIFFERENT FOCUS SOUTH AND NORTH OF THE ALPS TURNAROUND AT DIFFERENT STAGES Consolidating the current successful growth: Customer base enlargement, focus on attractive segments Further wide cross-selling opportunities More cost efficiency Radical improvement, building on a very encouraging 2006 start: Revenues and cross-selling growth with focus on highly attractive Affluent segment Turnaround of unprofitable Mass Market (especially Germany) and Small Business (especially Austria) segments Cost efficiency addressing high direct and indirect costs 5

6 AGENDA Retail Division overview Country-specific plans Italy Germany Austria Conclusions 6

7 1 Customer growth CUSTOMER GROWTH: ESTABLISHED TRACK RECORD THANKS TO IMPROVED CUSTOMER SATISFACTION ATTRACTIVE CUSTOMER GROWTH GROSS CUSTOMER INFLOWS, 2005 Thousand Golden (1) Other Specialized platforms (Clarima and Banca per la Casa) Partners contribution (e.g., real estate franchisers and federations) UCB strong hunters network in UCB Innovative acquisition products (e.g., Genius One and Start-Up) CLARIMA NON- CAPTIVE BANCA PER LA CASA NON- CAPTIVE Customer satisfaction improvement TRI*M index Total net new customers in 2005: 160,000 (1) Small Business and Affluent Q2006 Top 4 peers 2005

8 1 Customer growth BUT STILL HIGH GROWTH POTENTIAL EXISTS CLEAR OPPORTUNITIES Consumer and mortgage loans markets still very buoyant SPECIFICALLY ADDRESSED Increased focus of Clarima and Banca per la Casa on non-captive channel development Lombardia and Center-South still underpenetrated Around 170 golden branch openings in 2006 and 2007 About 20% of hunters still underperforming Hunters network model refinement and consolidation Demographic trends: e.g. fast growing immigrant (~10% of mortgages requests expected in 2008) and temporary workers segments Autumn 2006: launch of new specialized service line focused on immigrants and near-prime market (Linea Tu) 8

9 2 Cross selling CROSS-SELLING: GOOD RESULTS, WITH LARGE FURTHER OPPORTUNITIES ALSO ON THE RECENTLY ACQUIRED CUSTOMERS PRODUCT PENETRATION PERSONAL BANKING JUNE 2004 (1) MARCH 2006 MASS MARKET JUNE 2004 (1) Main achievement Growth opportunity MARCH 2006 CURRENT ACCOUNT PACKAGES 47% 57% 46% 56% HOUSING FINANCING 4% 4% 12% 13% PERSONAL LOANS 2% 2% 7% 9% CLARIMA CARDS - REVOLVING 3% 12% 4% 12% ASSETS UNDER MANAGEMENT (2) 55% 64% 13% 16% DISTINCTIVE FACTORS High sales orientation Well-tested rewarding system (monetary and non-monetary incentives, contests, etc.) Effective campaign management system (1) Presented at the 4 th Investor Day on October 27, 2004 (2) Bank-assurance not included 9

10 3 Cost efficiency COST REDUCTIONS AHEAD OF PLAN: 60% 2007 C/I TARGET ALMOST DELIVERED NOW VERY GOOD ACHIEVEMENTS FTE reduction: at mid-plan already 60% of 2007 target 24,280 (1) , Q06 First results of migration to low cost channels 56% wire-transfers and 21% tax payments moved out of the branches 335 deposit-atm installed: 27% of cash deposits migrated 1.1 mln online banking customers (+43% 1Q06 vs. 1Q05) Branch closures faster than planned with higher retention rate (95% vs. 90% planned) Incorporation of Banca dell Umbria and CRCarpi Merger of retail businesses of the two Banks generated ~20% synergies of initial cost base in 6 months Q06 Total (1) Pro-forma including Banca dell Umbria and CRCarpi, incorporated on July 1,

11 3 Cost efficiency RESULTS WILL BE ACHIEVED THROUGH FURTHER TRANSFORMATION OF SERVICE MODELS MAIN INITIATIVES Continue migration to automated channels : ~2,000 additional deposit-atm planned OPERATING EXPENSES million CAGR Structural branch costs reduction: Activity centralization Process simplifications Innovative formats for 500 small branches (<4 employees) Optimize support for other Divisions Continue FTE reduction with sustained rate also in Direct costs Infragroup costs , ,990 ~3.1% ~1.7% ~2.8% 11

12 DELIVERING IMPRESSIVE EVA CREATION IN THE NEXT 3-YEARS 2005 CAGR (1) Total revenues, mln 4,397 ~7% Revenues/RWA 10% ~10% (1) Operating costs, mln 2,756 ~3% Revenues/FTE, mln 0.19 ~0.24 Avg. RWA, bn 42.8 ~9% Up-front fees/revenues 14% ~13% Cost/Income 63% ~56% Cost of risk (2) 65 bp ~56 bp EVA, bn 0.4 ~0.7 FTE, # ~23,560 ~22,640 (1) Under Basel I regulations and not including Clarima Deutschland start-up (2) Loan loss provisions over end-of-period total loans 12

13 AGENDA Retail Division overview Country-specific plans Italy Germany Austria Conclusions 13

14 1 Revenue growth OUTSTANDING INCREASE OF ASSET GATHERING, MAINLY DUE TO AFFLUENT SEGMENT ASSET GATHERING VOLUMES IN AFFLUENT SEGMENT billion CAGR REVENUES MIX IN AFFLUENT SEGMENT million, percent CAGR ~8% 100% = ~8% ~14% Up-front fees 25% 24% ~6% AuM 10 Recurring fees 14% 20% ~23% AuC ~9% Interest margin 46% 40% ~3% Other deposits ~2% Other 15% 16% ~10%

15 1 Revenue growth STRONG GROWTH AND LEADERSHIP IN AFFLUENT SEGMENT WHAT WE DO WHY IT IS ACHIEVABLE Foster systematic customer contacts Refine need-based approach and reallocate customer assets between financial needs Optimize asset allocation with more efficient products HVB upmarket customer base in the biggest European affluent assets market (37% of customers with over 3,000 Euro monthly income) HVB network perceived as highly competent vs. competitors Good products-shelf with needoriented sales approach already present 15

16 1 Revenue growth VERY CLEAR POTENTIAL TO INCREASE SALES PRODUCTIVITY Productivity leaders Product sales per advisor per week (1) Upper quartile = 10.7 Average performers Low performers Lower quartile = Number of meetings per advisor per week (1) Meetings per Relationship Manager can be improved by 40-45% through: Introduction of a deterministic rewarding system as of July 1, 2006 Clear targets and advanced sales measurement system Branch traffic generation activities 16 (1) All advisor data is a weighted average for affluent and mass market advisors; small business advisors not included in analysis Source: FINALTA UCB best practice

17 2 MM/SB turnaround STRONG TURNAROUND OF UNPROFITABLE MASS MARKET AND SMALL BUSINESS SEGMENTS WHAT WE DO Focus on attractive subsegments/selected industries Attack largely under-penetrated areas: Mortgages and savings soloists Customers without a current account Asset gathering from small business relationship Be retail : Simplify and standardize product offering Standardize and automate credit processes WHY IT IS ACHIEVABLE Historical over-reliance on mortgages Currently, 40% of mass market customers are soloists and 50% hold a current account with HVB Small business segment profitable at market level (8-12% ROE) and some major German banks successfully over-perform the market Current customer acquisition rate below peers Spin-off of non-strategic assets held by mortgage soloists with limited cross-selling potential 17

18 2 MM/SB turnaround CLEAR POTENTIAL IN MASS MARKET FOR CROSS SELLING IN ALL PRODUCT AREAS COMPARISON OF PRODUCT PENETRATIONS FOR MASS MARKET SEGMENT, HVB AND UCB Current account Personal loans Revolving cards Credit cards Mortgages 4.4% 7.6% 1.0% 7.7% 7.5% 21.3% 11.6% 11.9% 42.9% 75.1% Asset mgmt Securities Bancass. Single premium Bancass. Recurring premium 14.5% 16.0% 21.5% 17.1% 0.2% 5.6% 2.9% 5.2% Increase customer loyalty/deposits thru X-selling of C/A and credit cards Increase market share in hi-margins personal loans and revolving cards Clarima Deutschland start-up (2H 2006) UCB 4.1 mln clients HVB 2.4 mln clients 18 Data as of June 2005

19 3 Cost efficiency COST REDUCTION WILL BE ACHIEVED BY MORE THAN OFFSETTING INERTIAL GROWTH, MAINLY ON INDIRECT COSTS HVB SALES-RELATED AND OVERHEAD COSTS HIGHER THAN GERMAN BENCHMARKS Main initiatives: Improvement of network delivery models Facilities and real estate efficient management GBS projects Realignment of indirect and overhead costs to European standards Streamline credit processes and service models OPERATING EXPENSES (1) million 2005 Direct costs Indirect costs Overhead costs Clarima Deutschlan d , ,602 CAGR ~0.7% ~-3.7% ~-5.6% n.m. ~-0.7% 19 (1) Clarima Deutschland start-up included

20 COST REDUCTION AS THE BASIS FOR BUILDING SUSTAINABLE GROWTH AND TURNAROUND AFTER PLAN HORIZON 2005 CAGR (1) (1) Total revenues, mln 1,753 ~7% Revenues/RWA 5.6% ~7.2% Operating costs, mln 1,638 ~-1% Revenues/FTE, mln 0.20 ~0.26 Avg. RWA, bn 31.1 ~-2% (2) Up-front fees/revenues 14% ~14% Cost/Income 93% ~75% Cost of risk (3) 78 bp ~80 bp EVA, bn -0.4 ~0 FTE ~8,630 ~8,180 We plan to achieve this ambitious results, also by increasing and consolidating customer satisfaction through the introduction of frequent measurements and introduction in the reward system (1) Under Basel I regulations and including Clarima Deutschland start-up (2) Ambitious growth target of new loans production (14% CAGR ) does not compensate expiring mortgages (3) Loan loss provisions over end-of-period total loans 20

21 2006: A VERY ENCOURAGING START The network is reacting very positively, as shown by 1Q 2006 results: Growth of gross sales and positive net sales of AuM Growth of consumer loans volumes Containment of costs Improving customer satisfaction and decreasing drop rate 21

22 AGENDA Retail Division overview Country-specific plans Italy Germany Austria Conclusions 22

23 1 Revenue growth OUTSTANDING INCREASE OF ASSET GATHERING MAINLY DUE TO AFFLUENT SEGMENT ASSET GATHERING VOLUMES IN AFFLUENT SEGMENT billion CAGR REVENUES MIX IN AFFLUENT SEGMENT million, percent CAGR AuM ~6% ~15% 100% = Up-front fees Recurring fees % 14% 14% 17% ~9% ~13% ~17% AuC 4 4 ~1% Interest margin 56% 53% ~7% Other deposits ~3% Other 17% 16% ~5%

24 2 MM/SB turnaround STRONG TURNAROUND OF HIGHLY UNPROFITABLE SMALL BUSINESS AND MASS MARKET SEGMENTS WHAT WE DO Attack under-penetrated customers: Savings soloists in mass market and private-side of small business relationships Increase x-selling on C/A transactional customers Improve network sales effectiveness/success ratio: Coaching programs Focus on few products More effective CRM Standardize and automate small business credit processes Address over-invested youth market segment and focus on profitable sub-segments WHY IT IS ACHIEVABLE Mass market customers with overall low penetration of mutual funds and life insurance ~40% of customers with one single product or just using C/As and payments 80% of small business customers currently unprofitable Very good central campaign generation engine, with improvable sales-funnel management Sales success ratio ~20% below European peers 24

25 3 Cost efficiency COST EFFICIENCY: SIMILAR TO SITUATION IN GERMANY MAIN INITIATIVES Improvement of network delivery models OPERATING EXPENSES (1) million CAGR Facilities and real estate efficient management Realignment of indirect and overhead costs to European standards Streamline credit processes 2005 Direct costs Indirect costs Overhead costs ~-2% -55 ~-5% -33 ~-9% ~-4% (1) Not including Austrian small business segment 25

26 2008 AUSTRIAN TARGETS SET HIGHER AMBITION LEVEL 2005 (1) CAGR (1,2) 2005 (1) 2008 (1,2) Total revenues, mln 1,059 ~6% Revenues/RWA 8.5% ~8.0% Operating costs, mln 911 ~-4% Revenues/FTE, mln 0.27 ~0.38 Avg. RWA, bn 12.5 ~8% Up-front fees/revenues 7% ~9% Cost/Income 86% ~63% Cost of risk (3) 154 bp ~56 bp EVA, bn -0.1 ~0.2 FTE ~3,870 ~3,400 (1) Not including Austrian small business segment (2) Under Basel I regulations (3) Loan loss provisions over end-of-period total loans 26

27 AGENDA Retail Division overview Country-specific plans Italy Germany Austria Conclusions 27

28 RETAIL DIVISION TARGETS: 3 YEARS OF STRONG GROWTH (1) 2005 CAGR 2005 (1) (1,2) 2008 (1,2) Total revenues, mln 7,209 ~7% Revenues/FTE, mln 0.20 ~0.26 Direct costs, mln 3,220 ~2% Up-front fees/revenues 13% ~12% Indirect/Ovhd costs, mln 2,085 ~-2% Risk provisions, mln 1,031 stable Cost/Income 74% ~62% EVA, bn -0.1 ~0.9 Avg. RWA, bn 86.4 ~6% FTE ~36,060 ~34,220 ~1 bn additional annual value creation (EVA from -0.1 to ~0.9 bn) Strong attention to cost efficiency Cost of risk stabilization, despite ~6% RWA growth (1) Not including Austrian small business segment (2) Under Basel I regulations 28

29 IN ESSENCE ~1 bn additional annual EVA creation, based on few simple initiatives on which we have an established track-record Italy: consolidating the growth path Germany and Austria: exporting the turnaround Adoption of Basel II regulations will bring additional significant further value (not included in the plan) 29

30 ANNEX 30

31 RETAIL DIVISION: 2005 P&L (mln) Net Interest income (incl. div.) Net non interest income Total revenues Operating costs (incl. depreciation) - of which: Staff costs - of which: Other admin. expenses Operating income Net provisions - o/w: Net loan-loss provisions ,297 2,912 7,209-5,305-2,453-2,975 1,903-1,087-1,031 Profit/loss & net write-downs on investments +9 Net income Net income for the group Cost/income Ratio % 31