An introduction to the UBI Banca Group Ernst Rolf Hartmann
The History of UBI Banca explains strong customer loyalty and stability of funding base Unione di Banche Italiane Scpa ( UBI Banca ) was formed following the merger of the skills and experience of the BPU Banca and Banca Lombarda e Piemontese Groups (1 st April 2007) The history of UBI Banca is marked by a succession of mergers which have led banks with strong roots in local communities to the significant reality of today Birth of the Banca Mutua Popolare della Città e Provincia di Bergamo, subsequently renamed Banca Popolare di Bergamo (BPB) 1869 1883 Birth of the Credito Agrario Bresciano (CAB) Birth of the Società per la Stagionatura e l Assaggio delle Sete ed Affini subsequently renamed Banca Popolare Commercio e Industria (BPCI) 1888 1888 Birth of the Banca San Paolo di Brescia (BSPB) Merger of BPB and Credito Varesino (BPB-CV) 1992 1963 BSPB acquires Banca di Valle Camonica (BVC) Acquisition of Banca Popolare di Ancona (BPA) by BPB-CV. Birth of the BPB-CV Group 1996 1992 CAB acquires Banco di San Giorgio (BSG) Acquisition of Banca Carime by BPCI 2001 1998 Merger of CAB and BSPB with the creation of Banca Lombarda as parent company and contribution of branch network of CAB and BSPB to Banco di Brescia Birth of the BPU Banca Group from the integration of BPB- CV and BPCI 2003 2000 Acquisition of Banca Regionale Europea * by Banca Lombarda. The Group takes the name of Banca Lombarda e Piemontese Group 1 st April 2007 Birth of UBI Banca following the merger of the BPU Banca Group and the Banca Lombarda e Piemontese Group 2 * Banca Regionale Europea was created in 1994 following the merger between Cassa di Risparmio di Cuneo and Banca del Monte di Lombardia
UBI Banca ranks 4 th / 5 th among major Italian banks by key indicators. 8,954 No. of branches as at 31 st December 2013 6,227 846 Total assets as at 31 st December 2013 ( bln) 2,373 1,990 # 5 1,725 1,308 716 626 199 126 # 5 124 62 49 503 Customer loans as at 31 st December 2013 ( bln) 571 Total direct funding as at 31 st December 2013 ( bln) 344 131 # 4 88 86 372 130 # 4 93 90 47 33 47 37 Source: 2013 Press Release. 3
but 3 rd by market cap.. UBI Banca is a popular bank with the legal status of a joint stock co-operative company. It is the only listed bank in the Group Market capitalization as at 31 st March 2014 ( bln) 40.1 38.4 # 3 6.1 5.4* 2.9 2.9 2.3 Source: Il Sole 24 Ore Italian financial newspaper dated 1 st April 2014 As at 31 December 2013, voting shareholders number above 95,000. Total shareholders (voting and non voting) number above 150,000 UBI Banca s governance model is based on a dualistic system. Under this dualistic governance system a shareholders meeting appoints a Supervisory Board (strategic policy-making and supervision), which then appoints a Management Board (day by day management of the company) 4
and 3 rd by rating among the largest Italian commercial banks STANDARD & POOR S Short - term issuer A - 3 credit rating Long - term issuer BBB - credit rating Stand Alone Credit Profile bbb - MOODY S Long - term debt and deposit rating Baa3 Short - term debt and deposit Prime - 3 rating Bank financial strength rating D+ FITCH RATINGS Short - term issuer default rating F2 Long - term issuer default rating BBB+ Viability rating bbb + Support rating 2 Outlook Negative Baseline Credit Assessment ba1 Support rating floor BBB Outlook Negative Outlook for long - term issuer default rating Negative Ratings on issues Ratings on issues Ratings on issues Senior unsecured debt BBB - Senior unsecured LT Baa3 Senior unsecured debt BBB+ Lower Tier 2 subordinated BB+ Lower Tier 2 subordinated Ba2 Lower Tier 2 subordinated BBB French Certificats de Dépôt Programme A - 3 Euro comm. p aper programme Prime 3 Euro comm. paper programme F2 Covered bond A-2 French Certificats de Dépôt Programme F2 Covered bond A+ 5
The Group registered strong Core Tier 1 ratios throughout the crisis, reaching 12.6% in 2013, the highest level in Italy Dividend always paid No State help required 6,9% 7,1% 7,4% 7,0% 8,6% 6-24 June 2011: 1 bln share capital increase 10,3% Proposed Dividend 0.06* 12.6% Common Equity Tier 1 under Basle 3, FULLY LOADED, >10% 2007 2008 2009 2010 2011 2012 Giugno December 2013 2013 Basle 1 Basle 2 Standard Basle 2 Advanced 6 * On 900.049 million shares (net of treasury shares)
The Group structure centralises all cost driven and risk management activities in UBI Banca and decentralises lending and product distribution activities in the Network Banks UBI BANCA provides management, co-ordination, control and supply of centralized services to the network banks (single IT System, centralised risk management, centralised finance and treasury, commercial coordination, credit coordination, logistics, purchasing, on line banking, etc...) 8 DOMESTIC NETWORK BANKS MAIN PRODUCT COMPANIES 357 branches 100.00% 322 branches 100.00% ASSET MANAGEMENT UBI Pramerica (partnership with Prudential US) Northern Italy 219 branches 75.08% (1) FACTORING LEASING UBI Factor UBI Leasing Central Italy 256+3* branches 66 branches 219 branches 74.74% (2) 82.96% (3) 92.99% (4) NON-LIFE BANCASSURANCE UBI Assicurazioni (partnership with BNP Paribas/Ageas) LIFE BANCASSURANCE Aviva Vita (partnership with Aviva) Aviva Assic. Vita (partnership with Aviva) Lombarda Vita (partnership with Cattolica) ON LINE TRADING IW Bank Southern Italy 255 branches 92.84% (5) 25 branches 671 financial advisors 100.00% Information updated as at 31 December 2013 * N. of branches outside Italy 7 1) moreover, 8.69% of capital held by Aviva, 16.23% of capital held by Fondazione Banca del Monte di Lombardia 2) further 24.90% of Banca Regionale Europea capital held by Fondazione Cassa di Risparmio di Cuneo and the rest by minority shareholders 3) moreover, 6.38% of capital held by Cattolica Assicurazioni and the rest by minority shareholders 4) moreover, 6.49% of capital held by Aviva and the rest by minority shareholders 5) moreover, 7.15% of capital held by Aviva and the rest by minority shareholders
Strong presence of the Group in the Italian wealthiest regions: Lombardy represents 21% of Italian GDP and approx. 30% of Italian Exports The network: branch distribution (as at 31 st December 2013) Lombardy (810) Valle d Aosta (1) Piedmont (206) Liguria (50) Sardinia (1) Market share < 2% 2% <= Mkt Share < 5% 5% <= Mkt Share < 15% Mkt Share >= 15% Trentino Alto Adige (1) Tuscany (8) Latium (114) Campania (84) Friuli Venezia Giulia (10) Veneto (36) Emilia Romagna (44) Marche (85) Umbria (19) Abruzzo (17) Molise (6) Apulia (104) Basilicata (31) Calabria (98) in % Contribution to GDP* Branches UBI Banca Market Share** Loans to Customers Current accounts and deposits Northern Italy 55.4% 6.3% 6.5% 5.2% among which: Lombardy 21.3% 13.1% 9.6% 8.8% Piedmont 8.0% 7.9% 6.3% 4.9% Liguria 2.8% 5.4% 7.3% 4.2% Central Italy 21.7% 3.4% 2.6% 2.4% among which: Latium 11.0% 4.3% 2.7% 2.3% Marches 2.6% 7.5% 8.9% 8.2% Southern Italy 22.9% 7.7% 5.5% 6.1% among which: Campania 6.0% 5.4% 4.4% 4.0% Apulia 4.4% 7.7% 5.0% 6.3% ITALY 100.0% 5.4% 5.4% 4.4% 1,725 branches in Italy + 6 branches abroad (as at 31Dec 2013) National market share of 5.4% in terms of branches 2 nd player by branches in Lombardy (which generates 21.2% of Italian GDP) 18,337 employees Approx. 3.7 million clients, mainly retail 8 * Source: Istat Conti Economici Regionali. 2012 figures ** Branches market shares as at 30 Sept 2013; loans and c/a-deposits market shares as at 31 December 2013
Loan book mainly concentrated in Northern Italy, in lower risk areas, as shown by the ratio of Non Performing Loans registered by the Italian System at Regional level UBI Banca Loan book breakdown by region (in %) Northern Italy 82.1% Central Italy 10.0% Southern and Islands 7.9% Italian System: gross NPL (sofferenze) ratio by region* n.m. 6.7% 2.9% n.m. 68.0% n.m. 2.2% 1.6% 0.3% 0.3% 0.7% 4.0% 5.1% 0.7% 75% of Customer Loans granted in Lombardy and Piedmont that show a Gross NPL Ratio well below Italian Average 0.3% 2.5% 2.3% 0.4% 2.1% 5.5% 6.1% 9.0% 8.9% 10.3% 9.5% 10.3% 8.2% 14.7% 12.5% 13.8% 14.9% 12.1% 19.1% 14.2% 14.8% 12.2% 19.8% 15.8% n.m. UBI Group gross NPL ratio 6.38% vs 10.9% Italian system average 14.6% 9 * Source: Bank of Italy. Data as at 31 st December 2013 Gross NPL Ratio = Gross NPLs (families and enterprises) / Loans to Customers (families and enterprises) According to Bank of Italy regulations, deteriorated loans are divided into 4 categories: the most risky, Non-Performing Loans ( Sofferenze ), Impaired Loans ( Incagli ), Restructured Loans ( Crediti Ristrutturati ) and Past Due ( Esposizioni sconfinate/scadute )
B A L A N C E Credit Quality supported by strong positioning in Northern Italy, historically prudent credit management, high level of secured lending and low loan to value Total Deteriorated Loans*/Total Loans (gross values) as at 31 st December 2013 24.5% 20.9% 20.2% 15.4% 15.0% 14.9% 13.7% 77.0% Secured Loans/Total Loans as at 31 st Dec 2012* UBI MORTGAGE STOCKS LOAN TO VALUE ~50% 76.1% 69.1% 67.5% 66.1% 63.2% 58.2% S H E E T Bank A Bank B Bank C Bank F Bank D Source: FY13 Results_Presentations Bank E Bank B Bank A Bank C Bank D Bank E Source: 2012 Annual Reports; Table A.3.2 of the Notes to the Accounts Bank F P R O F I T & Impairment losses on loans/total Loans as at 31 st December 2013 (annualised in bps) 271 210 207 196 177 168 107 L O S S Bank D Bank A Bank F Bank B Bank E Source: FY13 Results _ Press Release Bank C 10 Peers: Unicredit, IntesaSanpaolo, MPS, Banco Popolare, BPM, BPER. * Data not available for 2013, as Full Annual reports have not yet been published. For UBI, 76% as at 31 Dec 2013.
International presence Munich UBI Banca International Branch Krakow UBI Factor Branch Vienna Business Consultant Luxembourg UBI Banca International UBI Trustee SA Antibes, Menton, Nice Banca Regionale Europea Branches Moscow Representative Office Shanghai Representative Office Shanghai Zhong Ou Asset Management Company Co. Ltd* Madrid UBI Banca International Branch Hong Kong Representative Office São Paulo Representative Office Mumbai Representative Office 11 * Joint-venture in which UBI Banca holds 35% of the total share. (Other partners: Guodu Securities Co. Ltd. holds 30% of the total share, Beijing Baijun Investment Co., Ltd holds 30% of the total share and WinnerKey Investment Co. Ltd holds 5% of the total share). At 31 st December 2013, the ex Lombarda China Fund Management Co., actives in the management of retail funds and of IPO, handled an AUM of 14,5 billions of Rmb (about 1,7 billions of euro).
2013 results: the balance sheet is already compliant with Basel 3 requirements PROPOSED DIVIDEND PER SHARE ( ) 0,05 0,06 FY12 FY13 TOTAL CAPITAL RATIO CORE TIER 1 CET 1 (fully loaded) 16,0% 18,9% 10,3% 12,6% > 9% > 10% Dec '12 Dec '13 Dec '12 Dec '13 Mar '13 Dec '13 LOAN TO DEPOSIT RATIO LCR & NSFR LEVERAGE (Basle 3)* > 1 >1 >1 >1 Dec '12 Dec '13 NSFR > 1 also net of LTRO 5,07% 5,16% Sept' 13 Dec '13 94,0% 95,5% Dec '12 Dec '13 < 100% 12 * On the basis of Basel 3 requirements, the minimum financial leverage ratio is set at 3%, in order to contain total banking debt and as a consequence, the tier one capital must be equal to at least 3% of on- and off-balance-sheet assets
2013 results: year on year growth in net profit and progressive quarterly improvement in profitability throughout 2013 ( mln) NET PROFIT 83 251 149 in 4Q13 49 in 3Q13-140 in 4Q12 FY12 FY13 NET INTEREST INCOME NET RESULT FROM FINANCE TOTAL OPERATING INCOME 1.864 1.751 +3% 4Q/3Q +10% 4Q/4Q 257 325 +164% 4Q/3Q +43% 4Q/4Q 3.526 3.437-6.1% +26.1% -2.5% +14% 4Q/3Q +7% 4Q/4Q FY12 FY13 FY12 FY13 FY12 FY13 NET OPERATING EXPENSES NET OPERATING INCOME LLPs FY12 FY13 1.260 1.295 FY12 FY13 +1% 4Q/3Q -6% 4Q/4Q +36% 4Q/3Q +30% 4Q/4Q -5.5% +2.8% +11.3% (847) (2.267) (2.142) FY12 FY13 (943) +90% 4Q/3Q +4% 4Q/4Q 13
The Outlook for 2014 takes into account a slight improvement of the Italian Economy starting from 2H2014 The forecasts of all the major study centres show Italy exiting from recession. However, the growth forecast is very low As concerns the UBI Group, under current market conditions, net interest income is expected to continue to improve, benefiting on the liabilities side from a reduction in the pressure on the cost of funding and on the assets side from the progressive replacement of medium to long-term loans, made in the past at lower spreads than those practised at present Fee and commission income is expected to be resilient A further decrease in sovereign debt risk could allow positive results to be achieved for trading and hedging activity again in 2014, although the magnitude is not easy to predict The downward trend for administrative expenses will continue, while the performance of personnel expense will also depend on the final outcome of the renewal of the national labour contract Even if economic recovery remains rather weak, loss loan provisions should show signs of improvement compared to 2013 14