1 / 28

2003-2006 STRATEGIC PLAN Alessandro Profumo - CEO

2003-2006 STRATEGIC PLAN Alessandro Profumo - CEO. Investor Day – Bologna, 13 th June 2003. g. 03-06 plan. 0. 2002. 2006. t. S3 CREATES NEW OPPORTUNITIES FOR GROWTH. PLAN DELIVERING DOUBLE DIGIT EPS GROWTH AND PREPARING PATH FOR ACCELERATED GROWTH.

connor-dawson
Télécharger la présentation

2003-2006 STRATEGIC PLAN Alessandro Profumo - CEO

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. 2003-2006 STRATEGIC PLANAlessandro Profumo - CEO Investor Day – Bologna, 13th June 2003

  2. g 03-06 plan 0 2002 2006 t • S3 CREATES NEW OPPORTUNITIES FOR GROWTH • PLAN DELIVERING DOUBLE DIGIT EPS GROWTH AND PREPARING PATH FOR ACCELERATED GROWTH 2003-2006 PLAN: RENEWED BUSINESS LIFECYCLE AND ACCELERATION OF GROWTH PATH

  3. ASSUMED CONSERVATIVE MACROECONOMIC SCENARIO • CLIENT-FOCUSED ORGANISATION AS A COMPETITIVE ADVANTAGE • PLAN BASED ON ORGANIC GROWTH EXECUTIVE SUMMARY • CONTINUED FOCUS ON CAPITAL ALLOCATION AND RISK MANAGEMENT • SUSTAINED HIGH CASH FLOW AND CAPITAL GENERATION

  4. AGENDA 2003-2006 economic scenario UCI 3 years strategic plan Business model Strategic guidelines and operating targets Risk management and capital allocation Group targets

  5. US GDP, y/y % ch 2.4 1.8 2.3 EU GDP, y/y % ch 0.8 0.8 1.6 EU Inflation rate, % 2.3 2.2 1.9 US Fed Funds rates (eop), % 1.25 1.25 3.25(1) EU ECB rates (eop) % 2.75 1.75 3.00(1) Italy GDP, y/y % ch Stock Mkt MSCI Europe -31.3 0.4 2.0 0.6 4.8 1.5 PLAN BUILT IN A CONSERVATIVE SCENARIO, LEAVING ROOM FOR UPSIDE 2003 03-06 avg 2002 • Macroeconomic scenario affected by uncertainty, with GDP growth in US and EU still lower than its potential • Expansive fiscal policy in US might crowd out private investment spending • High uncertainty even in presence of some positive signals (increasing consumer confidence and improved equity markets) • Conservative rise in policy rates forecasted in the next three years Source: UCI Network forecasts (1) December 2006

  6. ITALIAN BANKING SYSTEM EXPECTED TO IMPROVE PROFITABILITY ONLY FROM 2004 Cagr 02-06 2003 2002 • Profitability forecast for the banking system still negative for this year with the operating profit down 6.2% y/y (expected decrease in net interest income partially offset by slight increase in non-interest income) • Profitability of the Italian banking system expected to recover only from 2004 • Profitability will benefit from the contribution of both net interest income and net non interest income, which will be sustained by the recovery of the equity and AuM markets • Households’ financial assets expected to grow in the period by around 7% per year, in line with US and Euro countries • Pension system reform could fuel pension funds growth in Italy in the next three years y/y % ch 4.2 3.0 6.0 Deposits Loans 6.6 6.9 5.9 Sh. term spread (eop) % 4.09 4.38(1) 4.35 Mutual Funds stock 4.6 6.8 -9.5 P&L Account (2)y/y % ch Revenues -0.2 4.8 -0.4 Costs 3.2 3.1 4.9 Operating profit -6.2 7.7 -8.7 Source: UCI Network forecasts (1) December 2006 (2) Excluding dividends from shares and bank shareholdings

  7. 2007 3.8 B1/positive + BG 2007* 2.3 Baa3/stable HR May 2004 0.6 A1/stable +++ CZ May 2004 0.8 A2/stable ++ PL 2007 17.9 B1/stable + RO May 2004 3.4 A3/stable +++ SK Not defined 29.7 B1/negative - TK EU ACCESSION IS GETTING CLOSER FOR MOST OF OUR NEW EUROPE COUNTRIES IN A CONTEXT OF DECLINING RISKS AND GROWING STABILISATION Moody’s Rating Upgrade April 02-April 03 Inflation 2002 eop Countries with UCI presence EU entry EU accession on track for most of the countries (i.e. results of referendum in Poland) with positive impact on economic environment thanks to: • harmonisation of legal and institutional environment to EU standards • predetermined macroeconomic convergence path (higher GDP growth) with decreasing risks • in the medium term, with EMU convergence, lower inflation and interest rates with currency stability and public deficit control *estimated

  8. HR 3.97 3.6 4.1 BG 4.67 4.3 4.9 2.80 2.9 3.5 CZ 2.10 2.1 3.7 PL 4.00 4.9 4.7 RO SK 3.36 4.0 4.3 2.57 4.0 4.8 TK COMBINED NEW EUROPE GDP GROWTH ANTICIPATED TO OUTPACE EU GROWTH • Bulgaria:economic growth to speed up, sustained by the catching up process. Financial and macro stability persist, supported by effective currency board avg 00-02 GDP growth avg. 03-06 GDP growth* Countries with UCI’s presence 03F GDP growth* • Croatia: stable economic environment sustained growth track, spurred by investment, consumption and export • Czech Rep.: gradual growth acceleration led by continued solid household consumption and recovery in export and investment activities • Poland:gradually back to its long term growth potential, thanks to recovery of both international demand and investments. EMU convergence often seen as major target, leading to int. rate contraction and need to fiscal control • Romania:sustained growth propelled by consumption and investment. Stabilising macro environment, with one digit inflation expected in 2004 and both fiscal and external control achieved • Slovakia:sustained growth driven by investment (2004) and external demand (2004-05), with continued gradual downwards trend in interest rates and strengthening SKK • Turkey:growth expected to consolidate at rate around 5% in 2004-05, still in a highly uncertain environment, with risks of reversal. Commitment to reforms is the most important variable to watch *UCI forecast

  9. AGENDA 2003-2006 economic scenario UCI 3 years strategic plan Business model Strategic guidelines and operating targets Risk management and capital allocation Group targets

  10. UCI ORGANISATIONAL MODEL: CUSTOMER DRIVEN DIVISIONALISATION... Weight on 2002 Group revenues pre Corporate Centre and elisions 45.4% 26.2% 10.3% 18.1% Corporate division Private & AM division New Europe division Retail division Pekao Zagrebacka Clarima(1) UBM Pioneer Bulbank UniCredit Banca per la casa(2) BMC(3) Xelion KFS TradingLab Locat(4) UniBanka UC Romania • Employees(5) (Dec 2002) • o/w Italy • o/w New Europe(5) • 70,992 • 39,986 • 31,006 • Branches(5) (Dec 2002) • o/w Italy • o/w New Europe(5) • 4,607 • 3,275 • 1,332 Zivnostenska (1) Consumer Finance (2) Retail mortgages (3) M/l term corporate financing (4) Leasing (5) KFS at 100%

  11. ... 3 NEW SEGMENT BANKS WITH CLEARLY DEFINED MISSIONS... THE RETAIL BANK: TO BE THE LARGEST LOCAL ITALIAN BANK, COMMITTED TO HELP HOUSEHOLDS AND SMALL BUSINESSES “MAKE THEIR LIFE PROJECTS REAL” THE CORPORATE BANK: TO SET THE STANDARD FOR A NEW BANKING-SMEs RELATIONSHIP THROUGH EXCELLENCE IN DESIGN & DELIVERY OF PRODUCTS & SERVICES AND CUSTOMER SELECTION, BEING RECOGNISED AS THE KEY PARTNER IN MANAGING CLIENTS RISKS THE PRIVATE BANK: THE LEADING ITALIAN WEALTH MANAGEMENT PROVIDER FOCUSED ON PRESERVING AND INCREASING THE WEALTH OF PRIVATE CLIENTS THROUGH A HOLISTIC APPROACH, SUPERIOR SERVICE AND INNOVATIVE SOLUTIONS

  12. ... DETAILED UNDERSTANDING AND MANAGEMENT OF THE DIFFERENT MARKETS AND DEEPER KNOWLEDGE OF THE CUSTOMER BASE... • Detailed understanding of competitive environment • Production closer to customer needs • Deeper knowledge of customers, with analysis of behaviour, needs, age, types, turnover, etc. • Unified strategic decision making at segment level • Increased time to market on 100% of the customer base • Specialised training programs for employees • Integrated risk management process in all segments

  13. Intra-group synergies Pioneer UBI Retail business UCB UPB Corporate business UBM UBI Private Banking business Pioneer UBM TradingLab New Europe ... TAILORED STRATEGIES FOR DIFFERENT CUSTOMER SEGMENTS AND GEOGRAPHIES... High importance Revenue growth Low importance Existing customers New customers Efficiency Risk mgmt

  14. ... AND CRUCIAL ROLE OF THE PARENT COMPANY Corporate division Private & AM division New Europe division Retail division ROLE OF THE PARENT COMPANY • Defining the strategic guidelines for the Group and for all Group companies • Managing the strategicportfolio of businesses and Group key resources • Optimising capital allocation to the different business units • Enforcing integrated risk management and development of internal models to be extended to other Group entities • Leveraging economies of scale through centralised functions (i.e. treasury, cost management, purchases) and specialised companies (USI, UPA)

  15. AGENDA 2003-2006 economic scenario UCI 3 years strategic plan Business model Strategic guidelines and operating targets Risk management and capital allocation Group targets

  16. UCI STRATEGIC BUSINESS PORTFOLIO: CONFIRMED FOCUS ON ACTIVITIES WITH HIGH GROWTH POTENTIAL AND GROUP TRACK RECORD OF VALUE CREATION = Euro 200 mln 2002 revenues • Plan focused on organic growth, with different paths for each specific business UCI CAGR 02-06 11.4% = Euro 200 mln 2006 revenues • ITALIAN BANKING: consolidate UCI leadership and exploit the competitive advantage arising from specialisation Consumer Finance Asset Gathering Asset Management Retail UBM High potential • Retail: organic growth of market shares in the most attractive geographical markets Private Banking New Europe • Corporate: improve customer penetration leveraging on innovative products and services Value creation potential Corporate UCI CAGR 02-06 6.8% • Private Banking: organic growth through customer attraction and improvedpenetration of existing customers Low potential • NEW EUROPE BANKING: maintain the leadership in New Europe for risk-adjusted profitability, exploiting the growth potential arising from EU convergence Cannot add value Can add value • ASSET MANAGEMENT: further strengthening asset management core capability focussing on innovation, ALM and performance Non-natural owner Natural owner Relative capacity to extract value

  17. PLAN’S GROWTH RATES AND EFFICIENCY INDICATORS OUTPERFORMING THE SYSTEM REVENUE GROWTH Euro mln COST/INCOME, % CAGR 02-06 2002 2002 2006 10,284 8.6 54.6 50 GROUP GROUP UCI Italian divisions excl. Pioneer UCI Italian divisions excl. Pioneer 7,999 8.9 52.7 46 n.m. 4.8 64.2 60 Italian system Italian system 4,728 8.0 63.6 56 Retail Division Retail Division 2,734 9.9 32.6 29 Corporate Division Corporate Division 1,072 10.2 61.1 58 Private & AM Division Private & AM Division 1,830 8.8 51.6 45 New Europe Division New Europe Division

  18. AGENDA 2003-2006 economic scenario UCI 3 years strategic plan Business model Strategic guidelines and operating targets Risk management and capital allocation Group targets

  19. GROWTH COUPLED WITH RIGOROUS RISK MANAGEMENT POLICIES... BASEL II COMPLIANCE GENERATING NEW OPPORTUNITIES FOR THE GROUP BIS II is a great opportunity for UCI: achieving a full compliance will represent the fulfilment of the ongoing development process aimed at further improving our Risk Management tools; this will result in: • An effective control of the whole Group real risk profile (integrated control of all the categories of risks) • A more efficient and dynamic capital management aimed at value creation Beside the three BIS II macro-categories of risks, UCI has identified a fourth one: Business risks; UCI is dealing with all of them through the internal development of evaluation models currently under implementation across each Group company BIS II Risk Categories … … the fourth we have identified • Credit risks • Market risks • Operational risks + • Business risks UCI aims at adopting the advanced evaluation models required by BIS II regulations for Credit (IRB advanced) and Operational risks (AMA)

  20. Analysis components Differentiation Qualitative/ Industry data Registry data Financial data Behavioural monitoring By Product By Country Business Segment LARGE CORPORATE XXX XXX X MID CORP. & SMEs X XXX XX XX SMALL BUSINESS XX XX X XXX RETAIL XXX X X XXX BANKS XXX XX X GOVERNEMENTS2 XXX XX A POWERFUL CREDIT RISK MEASUREMENT METHODOLOGY IS ALREADY IN PLACE... CREDIT RISKS: THE CURRENT SITUATION … • Dedicated Credit Risk Management units within the parent company and each separate legal entity, responsible for the development and the implementation of credit risk tools, as well as for monitoring and reporting the overall risk within each portfolio • Internal RATING SYSTEM1 differentiated by business segment and – if necessary - by geographic area and type of product already available and in use in the origination and monitoring processes in Italy; high levels of BIS II compliance … AND PROBABILITY OF DEFAULT ASSOCIATED TO INTERNAL RATING CLASSES UCI’s RATING SYSTEM … UCI median PD: 0.77% UCI avg. PD: 1.61% LEGENDA: XXX= Very important XX= Fairly important X= Useful, but not very important • VaR: Portfolio model calculating VaR for credit risk and determining economic capital absorption both at portfolio and at single borrower level already in place. EL (Expected Loss) and UL (Unexpected Loss) measures used to determine EVA and RARORAC 1 Based on estimated PDs (Propabilities of Default) 2 Including “Government Entities and Public Institutions” 3 Calculated on aggregated loans (including loans to customers and banks) granted by the Parent Company, the 3 Segment Banks and UBM; New Europe Banks not included

  21. 90 bp 69 bp Group total ... AND WILL BE ENHANCED THANKS TO IMPLEMENTATION OF CLEAR PROCEDURES/ PROCESSES AND MORE PERVASIVE CREDIT RISK CULTURE … AND THE NEXT STEPS … … AIMED AT: • Focus on procedures/processes, IT systems and organisational sides: • Full implementation of credit risk tools (RATING, VAR) within processes: loan origination, renewal, and pricing, provisioning policies, bad loan recovery, reporting, budgeting • Upgrading of IT systems up to full BIS compliance in terms of quality and level of provided details • EAD (Exposure at Default) and LGD (Loss Given Default) available within each Group company with an high level of detail (i.e.: cross-breakdowns by sector, geography, type of product, ecc.) • Creating a more pervasive credit risk culture across the Group, consequently increasing value creation • Being eligible to use the Advanced Approach by 2007 • Decreasing cost of risk in New Europe • Improve the risk/reward profile in Italy Net Provisions / Net customer loans 2002 2006 51 bp 54 bp Aggr. 3 Italian banks 1 189 bp 158 bp New Europe Division 1 1 2002 data are obtained deducting from stated figure extraordinary provisions

  22. ALL OTHER RISK CURRENTLY STRICTLY MONITORED; COMMITMENT TO FURTHER DEVELOP RISK MANAGEMENT TOOLS AND ACHIEVE FULL INTEGRATION OF THE DIFFERENT RISKS OTHER RISKS: CURRENT SITUATION … … AND NEXT STEPS • Internal advanced model1 for the evaluation of Market Risks arising from the “Trading book” under implementation across the whole Group • Ongoing validation process by Bank of Italy for UBM (to be completed by the end of 2003) • Full implementation of the model across the whole Group with extension to the “Banking” books • Validation of the model by Central Banks for all the Group companies MARKET RISKS: • Operational Risk Management team set up at a Group level • Ongoing development of an Operational Risk Management framework in line with BIS II advanced models (AMA) • Full implementation by year end 2006 of an Operational Risk Management system in line with BIS II advanced models OPERATIONAL RISKS: • Earning at Risk approach to analyse the volatility of some components (typically Net Commissions) of net non-interest income of some Group companies (i.e. Asset Gatherers) • Extension of the model to all net non-interest income components of all Group companies BUSINESS RISKS: INTEGRATION OF RISKS • Ongoing creation of a risk integration model based on a top-down2 approach • Development of a risk integration model based on a bottom-up approach3 • Evaluation of correlations among the different risk categories in order to exploit the potential benefits of diversification 1 Model developed by UBM Risk Management Department 2 Based, if available, on measurements of economic capital; otherwise based on estimates arising from benchmarking 3 Integration of the different risk measurement arising from the specific risk dedicated advanced models

  23. DIVERSIFICATION OF BUSINESS PORTFOLIO GUARANTEES STRONG GROWTH, LOW EARNINGS VOLATILITY AND ECONOMIC CAPITAL SAVING • The market already implies for UCI a benefit coming from the diversification of the business portfolio, visible in: • A lower Beta 1,1 vs. 1,5 (competitors’ average) • A lower implied volatility 30% vs. 39% (competitors’ average) • A lower cost of equity 9,08% vs. 11,10% (competitors’ average) • Preliminary results of the internal model for integration of risks1 foresee Economic Capital saving in a range from 4,1% to 7,2% 1 Based on the analysis of correlation between Economic Capital needed for credit and market risks taking into account 80% of the Group total consolidated assets

  24. CAPITAL ALLOCATION STRICTLY LINKED TO GROWTH TARGETS AND RISKS OF EACH DIVISIONECONOMIC CAPITAL SAVING THANKS TO BIS II STARTING FROM 2007 14,100 mln(1) CAGR: 11.3% 6.8% 6.0% 10.3% 9,207 mln 2002 Core Tier 1 ratio: 7.2% 2.9% Corporate Centre Private & AM 8.1% 31.0% New Europe 8.6% AVERAGE PAY-OUT RATIO AROUND 65% TO STABILISE CORE TIER 1 RATIO AT 2002 LEVEL Retail 30.6% 45.8% Corporate 49.8% 2002 2006 (1) Capital available for allocation. The capital allocated to New Europe banks is net of the excess capital attributable to minority shareholders, which is transferred to Corporate Centre for allocation to other initiatives

  25. AGENDA 2003-2006 economic scenario UCI 3 years strategic plan Business model Strategic guidelines and operating targets Risk management and capital allocation Group targets

  26. 10,284 8.6 54.6 50 Revenue growth(mln) Cost/Income, % UCI Italian divisions excl. Pioneer UCI Italian divisions excl. Pioneer 52.7 46 7,999 8.9 64.2 60 n.m. 4.8 Italian system Italian system 4,670 11.5 Op. Income growth(mln) UCI Italian divisions excl. Pioneer 3,783 12.4 6.9 12 RARORAC, % n.m. 7.7 Italian system 0.29 14.0 70,992 4,607 70,565 5,241 EPS Employees (1) Branches(1) SUSTAINED EPS GROWTH, SOUND EFFICIENCY RATIOS AND HIGH PROFITABILITY, WITH SIGNIFICANT VALUE CREATION FOR SHAREHOLDERS CAGR 02-06 2006 2002 2002 7.2 6.8-7.2 Core Tier 1 ratio, % 17.2 21 ROE, % DYNAMIC CAPITAL MANAGEMENT, ALLOWING FLEXIBILITY IN EARNINGS DISTRIBUTION AND LEAVING FREEDOM TO PICK POTENTIAL MARKET OPPORTUNITIES (1) KFS at 100%

  27. The plan is built in a conservative scenario... • ... but the current organisational model represents a strong advantage that UCI will leverage to reinforce its competitive positioning • Growth will be pursued through organic growth and with a low volatility, thanks to our well diversified business portfolio • Reduction of cost/income ratio thanks to efficiency improvements in all business divisions and new initiatives reaching break-even • Strong cash flow and capital generation, with significant value creation for shareholders SUMMING UP

  28. g 03-06 plan 0 2002 2006 t • S3 CREATES NEW OPPORTUNITIES FOR GROWTH • PLAN DELIVERING DOUBLE DIGIT EPS GROWTH AND PREPARING PATH FOR ACCELERATED GROWTH 2003-2006 PLAN: RENEWED BUSINESS LIFECYCLE AND ACCELERATION OF GROWTH PATH

More Related