Kempen European High Dividend Fund N.V. N · EURONEXT:KEHDF
Kempen European High Dividend Fund N.V. N — Van Lanschot — Investor Day (December 2010)
77 slides from Kempen European High Dividend Fund N.V. N's investor day presentation, Dec 1, 2010
Slide 1: Analyst Meeting
Analyst Meeting Amsterdam, 1 December 2010
Slide 2: Programme
Programme 2.30 pm Ieko Sevinga Private Banking 3.00 pm Arjan Huisman Operations 3.30 pm – 4.00 pm Break 4.00 pm Constant Korthout Funding and Basel III 4.30 pm Floris Deckers Strategy & Outlook for the sector 5.30 pm Drinks & dinner 1
Slide 3: Analyst Meeting – Ieko Sevinga
Analyst Meeting Ieko Sevinga, member of the Board of Managing Directors
Slide 4: Van Lanschot's strategy
Van Lanschot’s strategy To offer high-quality financial services to wealthy individuals, Mission director-owners and other select client groups Van Lanschot aims to be the best private bank in the Netherlands Vision and Belgium To be able to measure the achievement of its vision, Van Lanschot Target
Slide 5: Strategic priorities
Strategic priorities Focus on Full-service offering Private Acquisition focused on high net-worth individuals and Banking entrepreneurs and their businesses Enhance Growth of client satisfaction commercial Growth in number of clients effectiveness Growth in revenues Invest Customer care
Slide 6: Focused business model
Focused business model FULL SERVICE OFFERING Business Private Banking Banking Entrepreneurs Healthcare Foundations Business Wealthy Professionals & individuals Executives 5
Slide 7: Client segments
Client segments Specialised team based in Private 4 offices Office Client assets € 10 million Served through Private Banking branch offices Client assets € 250,000 Centralised Private Banking Services services 6
Slide 8: Core product is asset management
Core product is asset management Exclusive products, structuring, Private specialities Office A La Carte Private Banking Select VIP Invest Private Banking Services (on-line offering) 7
Slide 9: Exclusive products for top segment
Exclusive products for top segment Working together with private equity specialists Egeria Dutch specialist fund targeting mid-sized companies not listed on the stock exchange Leading expertise with a proven track record Investing in promising Dutch mid-sized family and other businesses 8
Slide 10: Shift to discretionary mandates
Shift to discretionary mandates Clients are increasingly opting for discretionary mandates Driven by success of new asset management proposition – A La Carte and Select Continuing outperformance on investment profiles Transparency – reimbursement of third party fund management fees A la Carte
Slide 11: A La Carte: Outperformance of investment portfolios
A La Carte: Outperformance of investment portfolios Risk profile Income Growth Conservative Neutral Aggressive oriented oriented Performance 2009 12.6% 17.2% 22.9% 27.9% 33.3% Outperformance of reference index 5.8% 5.4% 6.0% 5.9% 6.2% YTD (to September) 2010 4.9% 5.6% 7.1% 8.6% 9.3% Outperformance o
Slide 12: Majority of income and profit derived from core private banking & asset management
Majority of income and profit derived from core private banking & asset management activities 9% Private Banking Income from operating 26% Asset Management activities 58% Business Banking 7% Corporate Finance & Securities 8% 14% Operating profit before tax 8% 70% Breakdown based on the four business
Slide 13: Strategic priorities
Strategic priorities Focus on Full-service offering Private Acquisition focused on high net-worth individuals and Banking entrepreneurs and their businesses Enhance Growth of client satisfaction commercial Growth in number of clients effectiveness Growth in revenues Invest Customer care
Slide 14: Van Lanschot can improve its position in the HNW segment
Van Lanschot can improve its position in the HNW segment 13
Slide 15: Van Lanschot Private Office
Van Lanschot Private Office Offering high-quality (financial) services to high net-worth individuals, director owners, trust funds, family offices and institutions with CA > € 10m Integration of 3 teams (Van Lanschot Kempen, International Wealth Focus Management and Director-Owner Rotterdam) in
Slide 16: Private Banking – more effective organisation
Private Banking – more effective organisation One team – Private Banking and Business Banking Private banking and Business banking operating as one unit, one management team and one set of goals Private bankers and business bankers working closely together to serve the entrepreneur Wealth Busine
Slide 17: Client growth in the top segments
Client growth in the top segments - 13% 0% +14% +32% 7.3 7.0 6.4 31-12-2008 5.3 30-06-2010 4.9 4.9 2.3 2.0 0 - 0.25 m 0.25 m - 1 m 1m-5m 5 m+ Private banking client assets by client segment (€ billion) 16
Slide 18: More efficient organisation
More efficient organisation Centralisation of mid-office Mid-office function centralised in Den Bosch Frees up time for bankers to spend on serving existing clients and acquiring new clients Centralised processes increase efficiency and lead to fewer errors Efficiency translates into faster
Slide 19: Corporate and local marketing
Corporate and local marketing Corporate marketing Centralised Recent campaign highlighting the personal story behind our bankers Local marketing Increasingly decentralised Local offices can decide themselves how to use their marketing budget 18
Slide 20: Any questions?
Any questions?
Slide 21: Analyst Meeting – Arjan Huisman, COO
Analyst Meeting Arjan Huisman, COO
Slide 22: Strategic priorities
Strategic priorities Focus on Full-service offering Private Acquisition focused on high net-worth individuals and Banking entrepreneurs and their businesses Enhance Growth of client satisfaction commercial Growth in number of clients effectiveness Growth in revenues Invest Customer care
Slide 23: Status today
Status today Operations ITM Most IT related activities outsourced Most mid and back office activities have been IBM responsible for infrastructure centralised (no longer at the branches and regional KPN Getronics responsible for telephony and networks service centres) Accenture responsible
Slide 24: Focus areas for operational excellence
Focus areas for operational excellence I. Simplification of organisational structure II. Product and process rationalisation III. Improvement of application architecture based on IT Road Map 23
Slide 25: I. Simplification of organisational structure
I. Simplification of organisational structure Current structure Operations organised based on functional Product Management areas of expertise Process and Information Management In the process of Securities reorganising around product/ Financing process chains Payments and client adminis
Slide 26: II. Product and process rationalisation
II. Product and process rationalisation E.g.: Reduce and A number of C&E products still to be phased out simplify Payment products have too many (unnecessary) features with products separate pricing E.g.: Harmonise products under single frame contract to minimise client hassle Simplify Elect
Slide 27: III. Improvement of application architecture
III. Improvement of application architecture Introduce Execution Only Implement new version of Eximius (portfolio management and Securities reporting tool) services Simplify Order Entry Upgrade back office administration Electronic filing Client Document flow management processes Workf
Slide 28: Clear guidelines for IT development
Clear guidelines for IT development Architecture Projects Developments as much as possible Projects divided into manageable within current architecture sub-projects which can be completed within at most 6-9 months and in that In the case of new applications: period can deliver tangible functio
Slide 29: How will we benefit?
How will we benefit? Quicker client response times and less hassle Significant cost synergies, e.g. 30% reduction of workload in new account opening process Significant potential in securities back office More flexible IT architecture 28
Slide 30: Any questions?
Any questions?
Slide 31: Analyst Meeting – Constant Korthout, CFO / CRO
Analyst Meeting Constant Korthout, CFO / CRO
Slide 32: Van Lanschot's strategy
Van Lanschot’s strategy To offer high-quality financial services to wealthy individuals, Mission director-owners and other select client groups Van Lanschot aims to be the best private bank in the Netherlands Vision and Belgium To be able to measure the achievement of its vision, Van Lanschot Target
Slide 33: Strategic priorities
Strategic priorities Focus on Full-service offering Private Acquisition focused on high net-worth individuals and Banking entrepreneurs and their businesses Enhance Growth of client satisfaction commercial Growth in number of clients effectiveness Growth in revenues Invest Customer care
Slide 34: Capital plan 2010
Capital plan 2010 Core Tier I ratio In 2010 Van Lanschot aimed to … Range pre-crisis Range post-crisis Strengthen its capital base in anticipation of expected higher capital requirements under Basel III 10% Apply a stricter deployment of capital for 9% clients, reinforcing the focus on target 8%
Slide 35: Progress report H1 2010: Core Tier I rose from 6.6% to 8.2%
Progress report H1 2010: Core Tier I rose from 6.6% to 8.2%* Following conversion, the Core Tier I ratio improved by 1.2% Conversion of The BIS total capital ratio and Tier I ratio improved by around preference 0.1% shares The difference between Core Tier I capital and Tier I capital is reduce
Slide 36: Further strong improvement of capital ratios in Q3 2010
Further strong improvement of capital ratios in Q3 2010 Capital ratios at 30 September 2010* Core Tier I ratio 9.3% Tier I ratio 11.6% BIS total capital ratio 13.7% Strong increase of Core Tier I ratio in 9.3% Q3 2010 Main factors: 8.2% Migration of retail loan book from Standardised Approac
Slide 37: Low leverage is inherent in Van Lanschot's business model
Low leverage is inherent in Van Lanschot’s business model Van Lanschot traditionally has a very low leverage: 13.7 at 30 September 2010 Reflects the low risk profile of the bank Balance sheet is for the client Van Lanschot does not invest in complex financial instruments 42.3 36.3 No expos
Slide 38: Liquidity and funding
Liquidity and funding 1. Diversity of funding sources / funding mix Van Lanschot’s focus on 2. Duration of funding funding and liquidity 3. Cost of funding / liquidity 37
Slide 39: 1. Diversity of funding sources / funding mix
1. Diversity of funding sources / funding mix 31/12/2009 30/09/2010 Van Lanschot is active on 68% several markets for its funding 65% needs, including the wholesale market and RMBS market About 68% of total funding consists of customer deposits 11% 11% 8% 9% 8% 6% 4% 2% 4% 4% 2010: substantial reduc
Slide 40: 2. Duration of funding
2. Duration of funding Striking a balance between traditional retail funding and longer term market funding Retail market Substantial part of customer deposits can be considered stable funding Funding ratio: about 80% of Van Lanschot’s loan book is financed by customer deposits Van Lanschot ha
Slide 41: 3. Cost of funding and liquidity
3. Cost of funding and liquidity Factors influencing future interest margins Ï Easing of competition on the savings 1.6% market 1.4% Ï Repricing of the loan book Ï Conversion of preference shares in June 1.2% 2010 1.0% Ð Repayment of Central Bank funding 0.8% H2 2008 H1 2009 H2 2009 H1 2010 Ð Issue
Slide 42: Funding and liquidity plan 2011 and further
Funding and liquidity plan 2011 and further Van Lanschot plans to remain active on the funding markets in the coming years Diversification and term of funding: Regular presence on wholesale markets, e.g. senior unsecured, RMBS Private banking: Continued focus on retention / growth of retail fund
Slide 43: Basel III: the arrival of new solvency and liquidity constraints
Basel III: the arrival of new solvency and liquidity constraints 1. Higher Core Tier I requirement Stricter definition of capital, increased risk weightings, systemic and countercyclical buffers Solvency 2. Introduction of asset leverage Total balance sheet and off-balance sheet items no more than 3
Slide 44: Basel III: Calibration of the capital framework
Basel III: Calibration of the capital framework Higher minimum capital Systemic Risk ? Buffer standards and the introduction of additional buffers + Tier 2 Capital Counter-Cyclical Tier 2 Capital 2% 0-2.5% Buffer Non-core Tier 1 Capital Capital 2.5% Conservation Non-core Tier 1 1.5-4% Buffer Capital
Slide 45: Provisional Basel III capital impact assessment (I)
Van Lanschot: provisional Basel III capital impact assessment (I) Common Equity Capital ratio (CECR) CTI TI Van Lanschot’s Core Tier I ratio was 25.0% 9.3% at 30 September 2010 20.0% Expected limited effect of the Basel III core capital deductions 15.0% CECR will be well above the future minim
Slide 46: Provisional Basel III capital impact assessment (II)
Van Lanschot: provisional Basel III capital impact assessment (II) Tier I and Tier II capital Capital instruments potentially no longer qualifying as Tier I or Tier II capital under Basel III: - perpetual loans € 315 million (Tier I capital) - subordinated debt (Tier II capital) Non-qualifying c
Slide 47: Expects to comply with LCR and NSFR well before introduction date
Van Lanschot expects to comply with LCR and NSFR well before introduction date Liquidity Net Stable Coverage Ratio Funding Ratio (LCR) (NSFR) A longer term (>1Y) structural ratio to Measures a bank’s short-term resilience address liquidity mismatches and providing to potential acute stress scenarios
Slide 48: Any questions?
Any questions?
Slide 49: Analyst Meeting – Floris Deckers, CEO
Analyst Meeting Floris Deckers, CEO
Slide 50: The story so far
The story so far
Slide 51: Surviving the crisis
Surviving the crisis Solid balance sheet without the need for aid Conservative risk management Cost control Recession is being felt The bank has continued to lend to clients Level playing field not yet in place Revenues have been recovering since April 2009 50
Slide 52: Supported by a clear strategy
Supported by a clear strategy To offer high-quality financial services to wealthy individuals, Mission director-owners and other select client groups Van Lanschot aims to be the best private bank in the Netherlands Vision and Belgium To be able to measure the achievement of its vision, Van Lanschot
Slide 53: Targets translated into management agenda for 2010 and 2011
Targets translated into management agenda for 2010 and 2011 Continue to outperform the benchmark in the Client loyalty index satisfaction - Annual survey by Marketresponse Achieve a higher risk-weighted investment Investment performance than the benchmark performance - Transparent and customised com
Slide 54: Solid capital, funding & liquidity position
Solid capital, funding & liquidity position Core Tier I ratio At least 8.0% Tier I ratio At least 10.0% BIS total capital ratio At least 12.5% Capital ratios - Targets consciously defined as minimum levels; in normal years the actual ratios will be above these levels Ratio of total assets / sharehol
Slide 55: Attractive value creation
Attractive value creation Average of 2% higher than cost of equity Return on equity - The definition of a more exact target expected in the medium term - Achievable return expected to lie in the range 9% - 12% After returning to normalised profit levels, at least 5% per annum Earnings per share grow
Slide 56: Strategic priorities still valid in 2011
Strategic priorities still valid in 2011 Focus on Full-service offering Private Acquisition focused on high net-worth individuals and Banking entrepreneurs and their businesses Enhance Growth of client satisfaction commercial Growth in number of clients effectiveness Growth in revenues Inv
Slide 57: Restoring trust in the sector
Restoring trust in the sector What are the lessons of the crisis?
Slide 58: The sector as a whole is working towards restoring trust
The sector as a whole is working towards restoring trust 1 Transparent business model for financial institutions 2 Better risk management 3 Re-evaluation of fair value accounting 4 Separation of commercial and investment banks 5 Higher capital ratios and improved supervision 6 Revision of remunerati
Slide 59: New rules are being imposed from all sides ...
New rules are being imposed from all sides ... 58
Slide 60: Looking at a number of initiatives in depth
Looking at a number of initiatives in depth 1 Transparent business model for financial institutions Asset planning 2 Better risk management Balance sheet is for the client 5 Higher capital ratios and increased supervision Ready for Basel III 59
Slide 61: Transparent business model
1 Transparent business model Banks should meet real needs of real clients Balance sheet should be used solely for the client Who are your clients? Private Banking: wealthy individuals, entrepreneurs and their businesses Key service: asset planning and asset management Evaluation of strat
Slide 62: Better risk management
2 Better risk management The risks that arose during the crisis had not been fully foreseen Maas Committee: CEO has explicit responsibility for the risk culture and risk appetite within the bank Banking Code: particular focus on risk management (prominent role of Supervisory Board, introductio
Slide 63: Higher capital ratios & increased supervision
5 Higher capital ratios & increased supervision Introduction of additional capital and liquidity ratios Higher costs as a result of increased supervision Trade off between additional supervision and regulatory overkill Maintaining a strong capital and liquidity position Low risk profile
Slide 64: Ready for Basel III
Ready for Basel III Basel III Ratios (under Basel II) are comfortably above the minimum capital requirements under Basel III (at 30 September 2010): - Core Tier I ratio: 9.3% Minimum ratios - Tier I ratio: 11.6% CT I: 7.0% - BIS ratio: 13.7% Tier I: 8.5% BIS: 10.5% Capital ratios will be further
Slide 65: Looking ahead
Looking ahead
Slide 66: New rules are putting pressure on returns across the sector
New rules are putting pressure on returns across the sector Profit RoE Shareholders’ equity Interest income Commission income Trading income Shareholders’ equity Operating expenses Taxes 65
Slide 67: Level playing field is not yet in place
Level playing field is not yet in place Interest margins will remain high until the state aid has been repaid by banks Restoring the trust in the bank sector as a whole and in individual banks is crucial It is in the interests of society as a whole that the sector recovers as soon as possible
Slide 68: Credit ratings reconfirmed in 2010 by S&P and Fitch
Van Lanschot’s credit ratings reconfirmed in 2010 by S&P and Fitch AAA*/AA+[1] AA AA- AA- A+ A+ A A A A A- A-* A- A- BBB+ BBB+ BBB* Rabobank ING Bank ABN AMRO Van Lanschot SNS Bank Kas Bank Friesland NIBC Bank Bank Bankiers Bank [1] Development of credit ratings (S&P) pre-crisis and post-crisis * Ne
Slide 69: Current situation also brings commercial opportunities
Current situation also brings commercial opportunities Van Lanschot is using the new rules as an opportunity to distinguish itself from the rest of the sector In many cases, the new rules underpin the existing strategy of Van Lanschot Robust balance sheet and risk management Increased focus
Slide 70: Three pillars of CSR
Three pillars of CSR - Commitment to charters: - Global Compact - International Labour Organisation - Principles for Responsible Investment - Ethical Council - ESG Board Clients Lending Investments - Know your client - Loan acceptance - Engage / exclude policy - Customer due - Sustainable diligence
Slide 71: Good yields on sustainable investments
Good yields on sustainable investments Kempen Sense Fund - Outperformance since inception in October 2002 380 - Annual yield on the Sense 330 Fund since inception : 12.9% 280 - Total yield on the Sense 230 Fund since inception: 155.6% 180 - Total yield of the 130 benchmark: 103.6% 80 No v- Jul- M ar
Slide 72: Further growth in results in third quarter 2010
Van Lanschot: further growth in results in third quarter 2010 Operating result markedly higher than for Q1 and Q2 Higher interest margin driving interest income Conversion preference shares also lowered interest expense Assets under management were up, result of both inflow and favourable ma
Slide 73: Return to normalised profit levels?
Return to normalised profit levels? What is a ‘normal’ level of profit? € 4 to € 5 per share Profit drivers: Inflow of clients and assets Improving interest margin on both customer deposits and the loan book Continuing migration to assets under discretionary management leading to higher and
Slide 74: Interest drivers
Interest drivers Increasing interest margin due to: - Repricing of loan book - Lower market rates for customer deposits 17.1 16.9 16.4 16.0 15.3 1.37% 1.39% 14.6 1.32% 13.4 13.1 2007 2008 2009 2010 H1 2013E 2007 2008 2009 2013E Loan book Customer deposits Expected development in loan book and Expe
Slide 75: Commission drivers
Commission drivers Steep rise in assets under management in the coming years due to: Net new money inflows Average market effect of around 5% per annum 31.6 29.2 29.4 24.6 Trend towards assets under discretionary management Higher earnings potential on discretionary mandates 2007 2008 2009
Slide 76: Loan losses
Loan losses Peak of loan losses in Q4 2009 Continuing reduction in loan losses dependent on pace of economic 35 recovery 30 Coverage ratio (percentage of 25 impaired loans for which a 20 provision has been formed) 31.7% Coverage ratio reflects high level 15 10 of collateral 5 0 Q1-08 Q2-08 Q
Slide 77: Any questions?
Any questions?