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2 0 0 5 G R O U P R E S U L T S

2 0 0 5 G R O U P R E S U L T S. Milan, Borsa Italiana - 31 March 2006. Results at a glance. . . Contribution to the net income 1. Corporate & Private Bkg. Retail. Net income. 117. 75. +55.0%. 17%. Equity. 468. 435. +7.6%. Finance. 7%.

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2 0 0 5 G R O U P R E S U L T S

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  1. 2 0 0 5 G R O U P R E S U L T S Milan, Borsa Italiana - 31 March 2006

  2. Results at a glance  

  3. Contribution to the net income1 Corporate & Private Bkg. Retail Net income 117 75 +55.0% 17% Equity 468 435 +7.6% Finance 7% RORAC 25.0% 17.3% +7.6 pp Cost/Income 71.1% 72.7% -1.6 pp 58% 15% Retail Wealth Mngt. Corporates & Private Bkg. Net income 34 32 +5.1% 7% Other (HQ) Equity 246 223 +10.4% RORAC 13.7% 14.4% -0.7 pp Cost/Income 57.6% 55.1% +2.5 pp Finance Net income 15 15 --- Equity 109 112 -2.6% RORAC 13.6% 13.0% +0.6 pp Cost/Income 35.9% 37.0% -1.1 pp Results per Segments (Euro million) 1 - Net income + minorities

  4. Interest Margin: +8.2% • Significant interest margin increase which confirms the recovery detected in the previous quarters • Stable average rates • Volume increases 2005 2004 Change Average Average Annualized Annualized Avg. Rates outstandings outstandings average rates average rates Outstandings (Euro mn.) (Euro mn.) Interest bearing assets 17,061 16,247 5.0% 4.12% 4.08% 0.04 pp Interest bearing liabilities 16,308 15,444 5.6% 1.43% 1.42% 0.01 pp Euro million

  5. Gross Total Income: +3.2% • Commissions • stable year-on-year • in 2005 commissions have been penalised by the application of the amortized cost method • commissions pertaining to AUC and AUM benefited from volume increases. • Shareholdings have performed well • The consolidation of Findomestic with the equity method was penalised by the application of the IAS/IFRS: Euro 9 million in P&L • In 2005 the insurance activity was penalised by the fair value option and by consolidation method changes for certain accounting posts. Euro million

  6. Operating Profit: +9.1% • Cost of credit still under control • Curbed operating costs growth (+2,2%) • Administrative expenses up 4,2% due to the: • renewal of the national labour contract • first time posting of the contributions to the parent company’s supplementary pension fund • stamp duties increases • migration of the IT systems of CR Mirandola and CR Spezia Euro million

  7. Group Net Income: +19.8% • Prudent provisions for risks & charges • Other revenues have risen thanks tothe income of the product companies • The tax rate decreased thanks to the fiscal benefit on the re-evaluation of fixed assets Euro million

  8. Other + 8.7% Bonds + 7.6% Customer deposits + 5.8% Insurance + 6.4% Discr. accounts + 15.5% Mutual funds + 0.8% Total Financial Assets: + 5.8%

  9. Customer loans: + 5.1% • Good increase in lending supported again this year by medium/long term loans • Stable overall quality • Rise in the total problem loans under IAS

  10. Capital Ratios 2005 2004 Change Tier 1 capital 1,026.2 943.0 8.8% Tier 2 capital 948.8 943.0 0.6% Deductions -140 -76 84.2% Regulatory Capital 1,835.0 1,810.0 1.4% Risk-Weighted Assets 1,606.8 1487.6 8.0% Tier 1 ratio 5.11% 5.07% 0.04 p.p. Total capital ratio 9.29% 9.89% -0.60 p.p.

  11. Capital Increase

  12. Confronto 30/9 – 31/12

  13. BUSINESS PLAN 2006 – 2008 Milan - 31 March 2006

  14. 2003-2005 Results • Targets announced to the market have been attained: • EPS: + 0.06 Euro more than targets • Cost / Income: at 65% • Management of the evolution phase that accomplished: • expansion of the Group’s perimeter and cost containment • increased investment in consumer credit • update of the distribution model to offer the various customer segments a more qualified service • growth of total financial assets and productivity improvement • optimisation of share capital allocation • profitability performance improvement, value creation and increase in share price Data in Italian GAAP

  15. Agenda • The new business plan target • Business plan actions • Expected results per business unit

  16. 2003 2004 2005 2006 2007 2008 Business Plan 2006-2008 • An increase in profitability, sustainable in time, made possible by an important rise in total financial assets and by a strong support to enhance specialised financial services which are accessory to the traditional banking activity (consumer credit, bankinsurance, pension schemes, leasing and factoring) 2003-2005 Commercial segmentation 2006-2008 Growth and efficiency

  17. Business Plan 2006-2008 • The Business Plan encompasses the company’s Vision and Mission • Vision • A solid, competitive group strongly customer-oriented, tending towards value creation, sustainable in time, and incessantly growing in terms of organic momentum and innovation. All of which made possible thanks to the acknowledged wide network, the firm link with its business territories and the expansion towards the adjacent ones. • Mission • Offering our customers professionalism, multiple solutions and distinct product excellence through the bank’s distribution and operations models which coherently meet customers’ own demands and feature competitive, risk-adequate pricing. • A reference point for the local economy’s growth. • Integrity, transparency and social responsibility accomplished by a sound and prudent business management.

  18. Guidelines 2006-2008 • Commercial network expansion • Customer base widening • Increase in our lending market share • Keeping our funding market share • Cost/Income ratio reduction • Value creation Multi-channel approach Growth Quality of customer relation Cost control

  19. 2008 Targets I valori differiscono da quelli esposti in bilancio perchè includono BCRF Romania

  20. 2008 Targets • Euro 71 million net income growth in 2008 • 6.8% total income growth (CAGR) • Strong cost containment • Cost/Income ratio from 65% to 60% • Credit quality upkeeping • One-off tax benefit in 2005 • Euro 32 million tax exemption on appreciation of real estate

  21. Economic Outlook Source: Prometeia Forward-looking Report - Dec. 2005 Source: IRPET Regional Forecasts - Jan. 2006

  22. Focus Points • Under the apparently calm surface (given by fundamentally solid statements produced in spite of the unfavourable business environment), strong currents do exist and these can influence the future stability of the sector and of the main operators: • small enterprises’ rising debts; • competition from non-banking players in funding and in liquid cash management; • cost-conscious families reducing the number of current banking accounts; • smaller margins from family mortgages, business loans and consumer credit and higher, potential credit risks; • organisation and cultural difficulties in supporting the enterprises’ transformation and development plans; • difficulties in switching from a sales-oriented approach to a more active and flexible management approach which caters to customers’ needs and expectations. Source: Prometeia – June 2005

  23. Findomestic Banca – Development Framework • Targets: • Keeping the current market penetration share in total loans to families • Maintaining the market share in total production by controlling profitability and the risk cost (*Assofin market statistics*) • Maintaining the leadership of Findomestic, in terms of market share, and defending our competitive advantage (Assofin market statistics*) • Strategy: • Supporting the distribution network and developing new markets to ensure the necessary customer base growth. To be present wherever the major transactions take place • Increasing the speed of growth of personal loans • Improving productivity while maintaining a constant quality levels through a review of the procedures and of the cost structure with an eye on competitiveness (*)steady market composition

  24. Commercial Network Re-engineering the activities of the commercial staff to improve relations with retailers and to increase the sales point penetration share. Vehicles – Widening the product (Renting) and services range adding ancillary service packages Black goods and Furniture – This is the most important client source but also the major source of costs.. Findomestic will regain its penetration share in smaller sales points and will increase its revolving card penetration Banks and Insurance Companies New agreements for the management of personal loans and cards on behalf of banks/ insurance companies New Markets and New Channels Growth opportunities for consumer credit in travel and medical services, utilities, clothes and food shops Salary-guaranteed loans under development Strong development of sales on the internet Trademarks and advertising Enhancing Findomestic Banca brand image. Target: 80%, just like Aura card Findomestic Banca – Development Framework

  25. Agenda • The new three-year business plan target • Business plan actions • Growth through internal progress • Service and customer relations quality • Cost control • Multi-channel instruments • Expected results per business unit

  26. Basic Growth CAGR=4.3% CAGR=5.0% EMTN CAGR=4.0% CAGR=6.1% The average figures differ from those stated in the annual report because the current ones include Banca C.R. Firenze Romania and exclude credit to Centro Leasing who in the process of becoming a bank.

  27. Basic Growth • Steady income growth amounting to Euro 34 million (the target was Euro 71 mill.) • The growth of total income (Cagr = 4.4%) includes Euro 104 million deriving from the interest margin (Euro 80 million due to volumes and Euro 24 million due to rates) • Operating expenses grow a little more than inflation (Cagr=2.8%)

  28. Growth – New Openings • Financing growth means responding to human resources needs of about 300 people and to total investments for about Euro 16 million. • Impacts on income consider a break-even within 3 years, therefore real effects will be registered in the years following 2008.

  29. Growth = 43 more branches Territorialattraction + - Growth – Retail Branches • Streamlining today’s networks • Definition of operational areas for each single bank • Branch brand change where needed • Transfer of about 11 branches (for example, from cities with a population under 25,000) • Planned openings • Openings, mainly in areas with the greatest attraction and synergy with the financial advisors’ network to maximise commercial efficiency • Specialised branches • Creation of 4 new sales centres specialised in mortgage loans

  30. Growth = 23 more centres Territorialattraction + - Growth - New Corporate & Private Centres • Corporate Centres • Opening 13 new Corporate Centres, mainly for the banks controlled by BCRF, in line with the geographical expansion of our branches (Milan, Rome, Emilia Romagna, Mantua and Verona) • Strengthening our Corporate Financing unit • Private Centres • Opening 10 Private Centres, mainly for the banks controlled by BCRF, where there are interesting market opportunities

  31. Growth = 21 more branches Current branches Future branch openings in 2006-2008 Growth – International Endeavours • Banca C.R. Firenze Romania SA • The network currently consists of 9 branches (out of which 6 in Bucharest). • Expansion • Strengthening the position in the area thanks to 30 branches • Expanding the retail customer base in Bucharest and in the main cities • Supporting Italian-Romanian enterprises • Hiring roughly 160 people • Target • Steadfast growth, profitability and synergies with the group

  32. Agenda • The new three-year business plan target • Business plan actions • Growth through internal progress • Service and customer relations quality • Cost control • Multi-channel instruments • Expected results per business unit

  33. Customer Relations • Improving the retention rate, share of wallet and cross-selling by: • Implementing the same distribution, organisation and operational models in all the banks of the group • Target • Cross selling • Individuals from 3.8 to 3.95 • Small Business from 4.82 to 4.97 • Retention rate • Individuals from 93.4% to 94.0% • Small Business from 92%.4 to 93.0% • Multi-channel banking from 27.6% a 27.0%

  34. Keener client relationships A customer-satisfaction monitoring Business Intelligence (Retail clients) Expanding CRM to improve the reporting quantity and quality in order to offer the branches an instrument to optimise customer relations and contact opportunities and commercial proposals Extending CRM to the other banks of the group Review of the “credit process” Seizing the commercial opportunities for growth offered by Basel II through: pricing correlated to risk risk mitigation allocation efficiency Service improvement Enhance our communication process by: revision of all customer communication tools definition of a document/ channel/ timing model Tailoring of communications to each segment or customer profile reduction of management costs A new pricing model: shift from a product pricing to a relation-based pricing Strengthening the trust relationship: helping customers in decision-making about financial investments, pension schemes, insurance or borrowing Quality of customer relation

  35. Quality of customer relation - Widening our offer • Focusing on just a few action lines: Mortgages and Personal Loans Pension Schemes Insurance

  36. Mortgages and Personal Loans • Current status: • The market share of lending to privates is lower than the market share of funding; • The use of indirect channels for the sales of mortgages is lower than the Assofin reference; • The penetration percentage of personal loans and revolving cards released by the group banks is lower than that of the banking system • Actions: • Mortgages • Opening new mortgage counters (Spazio Mutui) in the principal cities: - to act as reference points for all indirect channels (real estate agencies, credit brokers, internet customers) - to be portfolio holders for those clients who request the specialised service in the main cities • Developing a data-processing platform • to integrate the brokers into the order gathering process and into the Spazio Mutui for portfolio management • Personal Loans and Aura revolving cards • Development through the implementation of joint-marketing agreements with Findomestic for the launch of continuous sales campaigns directed at the group’s customers, • Implementation of CartaSì revolving cards (revolving credit supplied upon request) specifically for the richest customers.

  37. Pension Schemes • Current status • At the end of 2005, the pension fund CRF Previdenza managed a portfolio of Euro 35.7 million (+150% on an annual basis) • The pension reform is expected to be effective from 2008 (collective schemes will be liberalised) • It is necessary to focus commercial action on • individual underwriting • on those worker categories that do not have their own specific close-end pension scheme • Actions • 2006 and 2007 • Focus on sales; every sales point endowed with one expert who can generate an increase in the number of sales contracts, from an average of four contracts per year to 24 contracts per year (two per month). • Collective schemes underwriting aimed at our corporate customers who operate in sectors not yet covered by close-end schemes: 2,000 companies in the transportation field • 2008 • Increase the group of specialists to 30 employees with skills in the collective schemes underwriting aimed at our corporate customers of all fields of business. Beginning: in the second-half 2007 for sales closing by January 2008

  38. Insurance • Current status • Customers demand products which the bank does not yet offer • Actions • Expansion of the “Insurance Protection” business area • Centrovita is to develop certain types of insurance products • Products to be sold through the group’s bank network • Products • Protezione Salute: health insurance coverage against surgery risk for all family members • Protezione Domani: life insurance benefits for all causes of death (simplified sales terms with less bureaucracy) • Mortgage Loan: insurance coverage in case of death or loss of work • Damages Insurance: in the course of the next three years, BCRF will study the possibility of extending the insurance product range to cover damages

  39. Quality of customer relation - Acquisition of Customers • Analysis of the acquisition ratio: • 2004 • Individuals a 2.4 point negative gap in comparison to the average ABI sample • Small Business - a 4.8 point negative gap in comparison to the average ABI sample • 2005 • ratios improved both for BCRF and for the whole group • Actions • Close follow-up and implementation of agreements with enterprises, public entities, associations & trade unions on customer acquisition and development • Intense use of direct marketing tools • Attractive and tailored offers • Synergies between distribution channels Net growth = 15,000 more clients

  40. 80,0% 70,0% 60,0% Target share 50,0% Real share in 2008 40,0% 30,0% 20,0% Current share 10,0% 0,0% A1 A2 A3 A4 B1 B2 B3 B4 B5 B6 B7 B8 C1 C2 Share of Wallet granted by BCRF per rating class Quality of customer relation - Managing Key Corporate Accs • Increase in our corporate market share • exploiting the opportunities offered by Basel II • improving market positioning of M/L term loans • Identifying and managing “Key Corporate Accounts” • increasing credit lines for best-rated classes • decreasing credit lines for worst-rated classes • improving the mix between profitability and cost of risk

  41. Additional growth Total growth Basic growth CAGR=7.0% CAGR=9.9% EMTN CAGR=9.1% CAGR=5.9%

  42. Agenda • The new three-year business plan target • Business plan actions • Growth through internal progress • Service and customer relations quality • Cost control • Multi-channel instruments • Expected results per business segment

  43. ICT Optimisation • Implementation of the group’s new ICT configuration • Governance model • Structure and operating optimisation • Sourcing flexibility • Reduction of processing costs • Group data-processing system • Revision of the application portfolio • Unification of the services & operative applications • Account identification • Branch • Customer Reports • Reporting • Risk • CRM

  44. Disposal of the Tax Collection Business • Premessa • Legislative Decree n°203 of 30 September 2005: • From 1 October 2006 the national system which established that tax collection services were to be operated on a licence basis shall be abolished; • Actions after 30 September 2006 • CERIT • The company shall be transferred to other shareholders. • SRT • The majority of the capital shares shall be transferred (excluding activities pertaining to local taxes)

  45. Disposal of the Tax Collection Business

  46. Group Integration • Objectives • Strengthening the governance through the unequivocal definition of duties and responsibilities of the Parent Company and of the banks controlled by it, with particular reference to the elements of the governance, production and distribution • Improving efficiency by simplifying the processes and by maximising from the synergies present inside the group. Actions will be undertaken in the current pockets of efficiency recovering, especially with regards to staff population in the head offices and in the distribution network • Actions • Merger of CR Mirandola • Integration of CR Orvieto, CR Spezia, CR Pistoia • Evolution of the organisation model of the distribution network (branches < 8 employees) and a portfolio review • Perfect management of the staff turnover

  47. Organisation Model 3,608 employees CRF 70,5% Current Target CENTRALIZED SERVICES 70,2% CRP CRO CRC CRS 614 employees 178 employees 206 employees 515 employees 84.5% 78.7% 81.0% 76.1% Current Target 90.0% 86.0% 86.3% 88.5%

  48. Group Integration Turn-over Saving

  49. Human Resources 5,934 5,700

  50. Agenda • The new three-year business plan target • Business plan actions • Growth through internal progress • Service and customer relations quality • Cost control • Multi-channel instruments • Expected results per business unit

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