PRIVATE BANKING & ASSET MANAGEMENT DIVISION Dario Frigerio
AGENDA Market scenario The divisional model Results The new perimeter Prospects and Industrial Plan 2005-2008 Unique combination of drivers Main KPIs 2
POSITIVE MARKET SCENARIO FOR GLOBAL INTEGRATED ASSET GATHERING AND ASSET MANAGEMENT PLAYERS ABOVE NOMINAL GDP GROWTH RATES CONSISTENT HIGH RETURN ON RISK-WEIGHTED ASSETS FAVOURABLE ADVISORY-BASED TREND 3
THE ESTABLISHED DIVISIONAL BUSINESS MODEL PRIVATE & ASSET MANAGEMENT DIVISION ASSET MANAGEMENT ASSET GATHERING Investment Process Product Design Advice Platforms Risk Management Group Retail Bank network Third Parties INTEGRATED AND EFFICIENT IN THE VALUE CHAIN, OPEN TO EXTERNAL GROWTH OPTIONS 4
IS PROVING TO BE SUCCESSFUL TOTAL FINANCIAL ASSETS 1 GROWTH (bn) PROFITABILITY 132 154 173 209 CAGR 02-05 ~ 17% PROFIT BEFORE TAXES (Euro mn) 469 355 596 CAGR 03-05 ~ 30% EoP 2002 2003 2 2004 2005 2003 2004 2005 Asset Management: net sales and asset quality Net sales: 23 bn (of which 62% from non-proprietary channels) Asset quality: key role of advisory wraps (67% of captive assets) ROA: from 51 bp to 56 bp RUN RATE 2007 vs. OLD 3YP: ~ 20% Asset Gathering: net sales, advisory and productivity Net sales: 14 bn Xelion: leadership since 03 in Italian FA s market Separate Accounts: ~ 30% of total assets; 60% of total net commissions Assets per Private Banker: UPB up 30% to 90 mn and Xelion +160% to 7.5 mn (1) Calculated at current exchange rates ( /$) (2) 3.4bn out of the total increase related to the acquisition of ING 5
IN THE NEW PERIMETER PRIVATE & AM DIVISION Total Assets* (Euro bn) Market Coverage Asset Management Pioneer Activest Nordinvest Capital Invest Asset Management ~ 273* Global Asset Gathering UPB & Subsidiaries Xelion UCI Luxemburg HVB Wealth Managem. HVB Luxemburg PB DAB Group BankPrivat Schoellerbank ~ 156 European * Of which 30bn AuA, as of May 2006 6
SCALABILITY OF BUSINESS MODEL IS KEY PRIVATE & ASSET MANAGEMENT DIVISION ASSET MANAGEMENT ASSET GATHERING Investment Process Product Design Advice Platforms Risk Management GROWTH IN AUM GROWTH IN CLIENTS Group Retail Bank network Third Parties Group Investment Bank Group Corporate Division Growth in Institutional and HNW 7
ASSET MANAGEMENT: A GLOBAL PRESENCE UNDER A GLOBALLY RECOGNIZED BRAND Omaha Boston New York Bermuda Miami Luxemburg Dublin London Bern Paris Madrid Geneva & Lugano Munich Warsaw Hamburg Vienna Bratislava Budapest Bucharest Sofia Tel Aviv Zagreb Prague Milan Beijing Hong Kong Taiwan Singapore Central Investment HUBS Local Investment HUBS Distribution Centres Buenos Aires Sydney 273 bn financial assets with over 300 investment professionals and distribution across 22 countries Strong presence in markets representing 40% of European financial wealth (Italy, Germany, Austria, Poland) Growing and profitable presence in the USA ($ 64 bn AUM Operational Margin ~30%) Expanding in global open architecture and institutional business (Non-captive AuM: 43%) 8
PRIVATE BANKING: A UNIQUE ONSHORE POSITION TO SET UP A EUROPEAN FRANCHISE PRIVATE BANKING Munich Wien Turin On-shore centre Off-shore centre Above 100 bn pure private banking assets ~ 900 relationship managers ~ 200 dedicated branches spread over Europe s wealthiest regions Optimal off-shore support for the overall group (Switzerland, Luxembourg, S. Marino) Data as of December 2005 9
AN AMBITIOUS PLAN GROWTH IN MANAGED ASSETS (CAGR 05-08): +14% INCREASE IN OPERATING INCOME (CAGR 05-08): +19% EVA (DELTA 05-08): +74% 10
BASED ON A UNIQUE COMBINATION OF 4 DRIVERS GEOGRAPHICAL LEVERAGE INNOVATION MODEL CONSISTENCY SCALABILITY CROSS-FERTILIZATION 11
GEOGRAPHICAL PRESENCE GUARANTEES CLOSER CLIENT RELATIONSHIP Extensive retail and corporate banking networks in highly wealthy regions GEOGRAPHICAL LEVERAGE 7000 branches in 20 countries Combined GDP per capita in Austria, Northern Italy, Bavaria: 117% vs. EU15 average 100%* Off-shore focus UHNWI and Family Offices Eastern Europe opportunities Business diversification Eastern Europe, with expected wealth CAGR 10% over next 3 years Pioneer third party global network LOW ORIGINATION COSTS * Source: Company data, Istat, Eurostat, Bayerisches Landesamt für Statistik und Datenverarbeitung. Data as of year end 2004 Note:Northern Italy includes: Piemonte, Valle d Aosta, Lombardia, Trentino Alto-Adige, Veneto, Friuli Venezia-Giulia, Liguria and Emilia Romagna 12
SCALE DRIVES OPERATIONAL LEVERAGE SCALABILITY Centralization of Investment Process and Advisory Function Product design and marketing Governance IT convergence Support functions Strong rationalization of funds Number of funds to be reduced by 40% Number of Model Portfolios to be reduced by 20% Unified service model 70 households ( 100-120 mn) per Relationship Managers Operating Expenses/Total Financial Assets: from 36bps ( 05) down to 30bps ( 08) 13
KNOW-HOW LEADS TO BEST PRACTICE IN CROSS-FERTILIZATION Consistency in Proprietary Model AuM penetration: in Italy and Austria AuM 50% of Total Assets vs. 30% in Germany AuA profitability: in Germany and Austria 40-50 bp vs 15-20 bp in Italy CROSS-FERTILIZATION Non-Proprietary Growth Targets Institutional (HVB Investment Banking, Vanderbilt, Momentum) and Open Architectures: over 20 bn IMPROVING MARGINS * 2005 Data considering UPB and Xelion 14
KNOW-HOW LEADS TO BEST PRACTICE IN INNOVATION Building scale in diversified alpha Performance consistency and persistency INNOVATION Long Funds 30 percentile* positioning 3 and 5 years vs. peers 47 Pioneer Investments funds with 4-5 Morningstar stars Continue to develop investment process Leverage FoF success, acquire expertise in other strategies /asset classes Adding Quant-based beta-enhanced products and new total-return solutions Segmenting client base on behaviours Xelion leader in advisory services: Net commissions CAGR 05-08 ~ 26% DAB: profitable direct banking option Operating Income CAGR 05-08: ~ 18% * Average of funds as of 31 March 2006 15
FOCUS ON PRIVATE BANKING PRIVATE BANKING MARKET IN GERMANY, ITALY AND AUSTRIA IS LARGE AND ATTRACTIVE CLIENTS WITH FINANCIAL ASSETS > 0.5 M 2005 2,030 1.6 tn Financial Assets in 2005 (1.5 tn in 2004) 2008 1,180 1,620 8% financial asset growth p.a. expected by 2008 High profitability (~30 bp pre-tax margin on Assets 05) 930 690 850 Fragmented: local players still dominating without a clear continental leader Germany Austria Italy Total ~ 8% ~ 7% ~ 8% FA growth CAGR 05-08 16 Source: BCG Wealth Market Sizing Database 2005, MOW, Eurostat, EIU Economist Intelligence Unit, Banca D'Italia, BCG analyses
FOCUS ON PRIVATE BANKING IN GERMANY In a fragmented and profitable market, wealth management division starts among the first 3 players Total Financial Assets: 25-30 bn 200 Relationship Managers 28 dedicated locations covering almost 90% of total domestic wealth Düsseldorf Köln Frankfurt Wiesbaden Mannheim Saarbrücken Flensburg Kiel Hamburg Berlin Hannover Magdeburg Leipzig Dresden Coburg Bayreuth Würzburg Bamberg Weiden Nürnberg GROWTH IN MANAGED ASSETS (CAGR 05 08): +17% Baden-Baden Stuttgart Ingolstadt Regensburg Neustadt/Donau Ulm Augsburg Landshut Passau Kempten München Rosenheim Traunstein Garmisch Rottach-Egern 17 Branch New branch Remote desk
KPI PRIVATE & ASSET MANAGEMENT DIVISION 2005 CAGR 05-08 ASSUMPTION: Market performance (1) ~ 4% Total Financial Assets, bn 377 ~9% AuM, bn 253 ~14% 2005 2008 Total Revenues, mn 2,116 ~10% ROA (2), bp 52 56 Operating Income, mn 855 ~19% PBT/Total Assets (3), bp 23 30 Excellent results thanks to: Geographical leverage Scalability of the model Business mix Execution expertise (1) Net performance on divisional Total Financial Assets (2005-2008 CAGR) 18 (2) Net commissions excl. performance fees/total Average Assets excl. deposits (3) Profit before tax net of extraordinary items/total Assets
ANNEX 19
PRIVATE & ASSET MANAGEMENT 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 2005 (1) 292 1,824 2,116-1,261-633 -527 855-32 -15 Profit/loss & net write-downs on investments -10 Net income Net income for the group Cost/income Ratio 562 540 59.6% 20 (1) Managerial view