Transcript Strategic Opportunities for Banca CR Firenze Group

Capital Allocation & Strategic Opportunities
for Banca CR Firenze Group
Lino Moscatelli
Managing Director
UBS Italian Financial Services Conference
Milan - February 2 and 3, 2006
Recent Achievements
 The 2000 IPO has produced an evolution process which
led to
 Group perimeter enlargement
 Financial assets growth
 Focus on consumer credit
 New structure for the branches network
 Profitability increase
 Capital allocation optimization
 Value creation
2
Growth Over The Years
ROE (adj.)
EVA
7.2%
2.2%
14.0%
9.6%
-9.5%
2.9%
1994
1999
2004
Net income
1994
1999
Shareholdings
2004
1,250
705
Parent
Company
102
69
317
Group
150
265
20
1994
1999
2004
1994
1999
2004
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Banca CR Firenze Group
 The outward expansion from its traditional business
territory led to the transformation into a multiregional banking group
 Investments in consumer credit increased profitability
and stabilised P&L
CR MIRANDOLA
8
CR
SPEZIA
1
Group network
Market Share
CR ORVIETO
28
51
MAIN FIGURES
334
42
46
Financial
advisors
527
loans
11.0 %
funding 15.8 %
Customers
1,000,000
Total funding
€ 36.8 bn
Customer loans
€ 12.9 bn
9M 2005 ROE (annualised)
13.6%
CR PISTOIA
CR
CIVITAVECCHIA
Italian leader in consumer credit
through FINDOMESTIC Banca
4
2000-2005 Perimeter Enlargement
 Growth provided business diversification
 The Group is present in 6 central Italian regions (3 in 2000)
Umbria
9%
 Tuscany continues to lose ground: it represents 65% of the
branches and 67% of the loan book
Latium
9%
Tuscany
82%
Lombardy
1%
Liguria
10%
Emilia R.
6%
Emilia R.
7%
Umbria
5%
Umbria
8%
2005
branches
Latium
10%
Liguria Other
Lombardy 6%
3%
3%
Tuscany
65%
Latium
9%
2005 loans
Tuscany
67%
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Advanced Market Approach
 Three separate channels, three different networks,
one sales supervision
 313 retail branches focused on mass market, affluent and
small business customers
 A close-knit network coverage thanks to 17 Corporate Centers
and 16 Private Banking Centers
 Synergies between channels: Corporate/Private Bkg. and
Retail/Corporate
Head of Commercial Dept.
RETAIL BRANCHES
CORPORATE CENTERS
PRIVATE BKG. CENTERS
633,000
clients*
11,000
clients*
6,000
clients*
Network figures refer solely to Group’s banks where the model has been implemented.
Clients shown in figures refer to the Parent Company
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Capital Allocation
 With the introduction of the IAS Segment Report and
following the implementation of the Basel II
methods, a business unit capital allocation model has
been perfected*.
 Shareholders’ equity (capital, reserves, minority interests
and net income) is allocated depending on:
 credit risks - Advanced Basel II or Bank of Italy method
 market risks - Bank of Italy method
 transformation risks - Basel II (Pillar II)
 operative risks - Standardized Basel II approach
 business risks - equal to the value of the single-product
companies
* Only indicative figures are reported on the following slides. The definite figures will be published in the first Segment
Report which is scheduled to be released on occasion of the 2005 Annual Report
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Capital Allocation - Business Units
 Retail - Parent company branches, Financial advisors network
 Corporates - Corporate centers, relations with government
services, tax collection
 Private Banking - Private banking centers
 Other Group banks - branches of CRP, CRS, CRO, CRC, CRM
 Wealth Mgmt. - Centrovita (bancassurance), BCRF Gestion
Internationale (mutual fund co.)
 Corporate Center - Finance, Consumer credit, Banking
related companies (leasing, factoring…), Group Management
and Coordination, Instrumental companies
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Business Units - First Findings
OTHER GROUP BANKS
RETAIL
Equity
Nopat
Rorac
12%
29%
30%
C/I
74%
 Good income performance
 Cost/income in line with that of other
bank’s comparable retail units
Retail Units- Cost / Income*
Bank A
Bank B
Bank C
71%
75%
69%
Bank D
Bank E
Bank F
Average
Equity
Nopat
Rorac
20%
20%
12%
 Room for a commercial efficiency
improvement
62%
89%
82%
74%
*Source: companies’ reports
Nopat
49%
71%
 The new market approach has not
been applied yet
Aggregate figures
Equity
32%
C/I
Rorac
19%
C/I
73%
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Business Units - First Findings (2)
WEALTH MANAGEMENT
PRIVATE BANKING
Equity
Nopat
Rorac
1%
4%
90%
C/I
52%
Equity
Nopat
Rorac
5%
14%
21%
C/I
37%
 Good capital returns and good cost/income ratios
 The Private Banking segment needs to have its brand name
acknowledged by a wider public in order to increase its market
share
 Wealth management companies performance (bancassurance
& mutual funds) is tied to the retail unit’s growth
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Individuals Segment
 Generates the greatest value
 Is characterized by high propensity to save but also...
 ...by a sentiment of mistrust in the banking system
Expected business growth
High growth potential
Pension
schemes
Potential for further
investments to exploit
good growth ratios
Consumer
credit
Mortgages
Investments
Personal
insurance
Cash Payments
Only potential for
selective investments
to improve service
quality and maintain
market shares
Bank’s positioning
The dimension of the bubbles shows the current importance of the Business Area in terms of margin
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Individuals: A Structured Approach
 An approach more focused on client’s expectations
means
 Less but more personalized commercial proposals
 Greater effectiveness
 Reinstating a trust relationship
 CRM techniques are the
most important tool to
achieve the combination of the above aspects
 The introduction of the customer satisfaction indices
in the MBO Plans will generate greater worth from
the relationship
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Individuals: What Next ?
In 2005




64 campaigns launched and 92 events managed
450,000 commercial talks
456,000 customers with a next product assigned
only 50% of the portfolio managers regularly used the tool
 The evolution of the Data Mining Platform will furnish
a deeper knowledge of the client clusters facilitating
the construction of a keener relationship
 A propensity score will be assigned to all products
 A full use of the CRM instrument will be achieved also
thanks to the generation turnover which will facilitate
the process
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Business Units - First Findings (3)
CORPORATES
Equity
Nopat
Rorac
18%
9%
7%
C/I
57%
 The overall result is still not satisfactory.
 The unit’s result is affected by the negative
contribution of tax collection
 Thanks to the sale of the two tax collection
companies and by focussing commercial actions on
core corporate clients, the performance is expected
to improve
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SMEs & Corporates Segment
 SMEs are now experiencing a dimensional growth and
international expansion
 Banks’ capacity to exploit Basel II will make certain
banks more competitive
Selective investments
to
follow
market
opportunities
Intl.
services Structured
finance
Ind. & Spec.
credit
Bank
guarantees
Expected business
growth
Investments to exploit
the expected growth of
high margin products
Factoring
Financial risk
coverage
Foreign payables/
receivables
Maintain
market shares
Agriculture financing
Leasing
Currencies
Domestic payables/
receivables
Bank’s positioning
The dimension of the bubbles shows the current importance of the Business Area in terms of margin
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SMEs & Corporates Segment
 The figures below reflect the bank’s low capacity of
attracting core clients
 BCRF is a first choice bank for a small number of its clients (8%)
 In the core clients group, BCRF obtains even lower percentages
 The aim is to grow as the first choice bank for the core
clients
from
125
250
250
500
500
1,000
1,000
2,500
2,500
5,000
1.0
1.2
1.7
2.4
3.2
4.4
6.3
10.3
2.1
Credit needs covered by
clients’ 1st choice bank (Italy)
99%
89%
76%
68%
61%
55%
46%
36%
49%
BCRF clients who recognized
the bank as a 1st choice bank
46%
43%
18%
8%
4%
4%
2%
2%
8%
Granted loans (total*)
Banks per client (Italy, avg.)
75
to 125
5,000 25,000
25,000
Core clients
* Sum of all credit lines granted by the Italian banking system or by BCRF expressed in EUR thousand
(source: Bank of Italy and BCRF)
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AVG.
SMEs & Corporates: How To Compete
 BCRF has been among the first mid-sized groups to
launch the IRB Advanced (Basel II) procedure
 The capacity to correctly assess client risks will enable
to:
 Recuperate market share in the top-client segment
 Obtain a correct profit from risks related to the worst clients
Loans by rating*
Amounts
granted
Amounts
utilized
A1 A2 A3 A4 B1 B2 B3 B4 B5 B6 B7 B8 C1 C2
* Loans by rating refers to the Parent Company’s 65% corporate segment customer base (November 2005) -.-.
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Business Units - First Findings (4)
CORPORATE CENTER
Equity
Nopat
Rorac
44%
24%
7%
C/I
73%
Findomestic (consumer credit)
of which
Equity
Nopat
Rorac
23%
31%
17%
 Striving to attain greater internal efficiency through
the centralization of governance functions, the
shifting of personnel from back-office to sales and
improvement of procedures
 Findomestic’s contribution to Nopat and its capital
return are excellent
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C/I
50%
Conclusion
 For Banca CR Firenze to consolidate its position as
a regional bank, strongly oriented towards value
creation,
the
following
elements
are
indispensable:
 the consolidation of the retail banking vocation
 the improvement of the quality level of the services offered
to corporates
 upkeeping the leadership in consumer credit
 a central control structure operating with a greater
efficiency
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Capital Allocation & Strategic Opportunities
for Banca CR Firenze Group
Lino Moscatelli
Managing Director
UBS Italian Financial Services Conference
Milan - February 2 and 3, 2006