JV in the credit card business October 1st, 2014
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Setting a JV in the card business with Värde Partners Main highlights and rationale of the transaction 1 Banco Popular has agreed to sell a 51% stake of Banco Popular-e.com to Värde Partners to create a JV in the credit card business in Spain 2 Banco Popular-e.com, including the recently acquired business of Citibank, is a leading institution in the Spanish credit cards market 3 The JV will benefit from Citi s expertise in revolving and direct sales channels and from Popular s customer base and diversified business mix, large branch network, innovative drive and co-branded products which should provide an important source to increase the revenues of the JV 4 The deal allows us to materialize the value of our credit card business (e.com) resulting in a significant capital gain ( 422m) and will allow us to benefit from substantial synergies potential 3
Transaction structure & impacts Transaction structure 51% 49% Cards Cards Cards c.3.4 million cards 1.4 m debit cards 1.9 m credit cards 0.1m revolving 0.5bn receivables Deposits Banco Popular s online platform currently ranks 4th among Spanish e-banking operations c.4.5 m cards 1.9bn receivables Deposits To be obtained through Bancopopular-e online banking platform 2.0 bn deposits (from Citibank) c.1.1m cards 1.4bn receivables Deposits 2 bn of deposits Combined entity highlights The combination of the card business would result in a leading platform with c.4.5 million of cards in force and assets of c. 2bn, with a market share of 7.5%. Potential synergies up to 51.4m from the integration of both businesses (23% of the combined cost base) to be achieved in 3 years obtained from direct savings and IT migration: 45 Citibank s branches to be gradually closed transforming a retail business into an online bank. The JV will hold stable and broaden funding sources, mainly gathering deposits through Banco Popular s online platform and also access to wholesale funding in the future 4
Main financials of the transaction Price of the 51% stake 510m P/E 20x 2013 proforma 14x 2014e Capital gain 422m, of which: 213m in cash (monetizing 51% stake sold to Värde) 209m due to the revaluation of the 49% stake we hold Net of taxes capital gain 383m Capital impact > 55 bp of capital generation that will fully compensate Citibank assets acquisition 5
Final remarks 1 The combination of Popular and Citi s card business results in a leading business with access to new segments through new distribution channels 2 The new company will be the fourth player in the sector, with 7.5% market share. It will create a platform with greater volume and a full range of products 3 Integrates two solid revenues streams in addition to capturing significant operational synergies 4 Alliance with an international partner with significant experience in the financial sector, which will support and foster further growth in the card business 5 With this transaction, we materialize the value of our credit card business which will result in a significant capital gain 6
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