Slide 1: Half year results presentation
Half year results presentation 2008 Zurich, 29 July 2008 Practitioners of the craft of private banking 1
Slide 2: Disclaimer
Disclaimer This presentation has been prepared by EFG International solely for use by you for general information only and does not contain and is not to be taken as containing any securities advice, recommendation, offer or invitation to subscribe for or purchase any securities regarding EFG Intern
Slide 3: Introduction
1.0 Introduction Lonnie Howell, CEO 2.0 Performance 3.0 Acquisitions 4.0 Achievements, outlook 5.0 Summary 3
Slide 4: A challenging first half
A challenging first half External factors resulted in a testing period in 1H08 • Weak and volatile equity markets. • Strength of the Swiss franc vs. USD / EUR / GBP / SEK. • Continued high levels of uncertainty. • Clients understandably cautious. 4
Slide 5: Against this backdrop, a satisfactory performance
Against this backdrop, a satisfactory performance Year on year CROs 34% to 629* AUM 16% to CHF 100.9 billion* Net new assets & increase 75% to CHF 14.0 billion in client loans Revenues 18% to CHF 527.6 million Net profit 13% to CHF 178.7 m *Including announced acquisitions 5
Slide 6: And practical achievements on a broad front
And practical achievements on a broad front • Record half year increase in CRO hiring. • Record increase in net new assets (including significant UHNWI component). • Smooth integration & good progress across range of acquisitions. • Developed ambitious plans to build on acquisitions in new, onshore
Slide 7: Performance
1.0 Introduction 2.0 Performance Rudy van den Steen, CFO 3.0 Acquisitions 4.0 Achievements, outlook 5.0 Summary 7
Slide 8: Key performance indicators
Key performance indicators Revenue-generating Net new assets & Operating income RoAUM Net profit attributable AUM (in CHF bn) client loans (in CHF bn) (in CHF m) (in bps) (in CHF m) 163.4 96.8 527.6 14.0 123 8.0 118 143.7 79.8 446.5 1H07 1H08 1H07 1H08 1H07 1H08 1H07 1H08 1H07 1H08 21% increase in R
Slide 9: Assets under Management and Administration
Assets under Management and Administration Assets under Management and Administration Assets under Management – by region (in CHF bn) (incl. announced acquisitions, in CHF bn)* Other 110.7 106.9 Switzerland 9.8 15.6 Marble Bar 23.3 8.6 2.6 (14.3) 1.5 (23.2) 4.3 AM 5.9 (5.3) 11.1 CMA 3.2 (3.5) 11.0 9
Slide 10: Record net new assets in 1H 2008
Record net new assets in 1H 2008 Net new assets (incl. announced acquisitions, in CHF bn) • Growth rate of 14.9% in net new assets & client loans – annualized 14.0 growth rate of 32%, compared to -7.1 98.3 historic norms of 20-25%. 13.5 (NNA) -3.4 0.8 • NNA supported by significant 94.0 8.5 UHNWI co
Slide 11: Breakdown of Assets under Management
Breakdown of Assets under Management Assets under management – by category (in %)* Assets under management – by currency (in %)* Other Other CHF 1.0 Loans Equities 4.8 7.4 8.8 Bonds (9.6) 20.0 7.5 (18.9) EUR (10.0) 22.9 23.8 17.8 Funds of HFs/ USD 46.0 Cash & similar (27.0) (13.1) Hedge Funds 13.3 8
Slide 12: Operating income
Operating income (in CHF million) • Net banking fees & commission income up 1.4% from 1H07 primarily reflecting FX impact and lower transaction volumes, including less 527.6 structured product volumes. 446.5 467.2 94.0 • FX impact (mainly USD) reduced Operating 44.0 income by approx. CHF 40 - 45 m v
Slide 13: Other income
Other income (in CHF million) • Net trading income: majority FX for clients. • In 2007 / 2008 significant demand from 94.0 private banking clients for high yielding life 8.8 settlement related products. • Demand in 2007 satisfied through third party brokered transactions (generated 54.4 commission i
Slide 14: Return on AUM
Return on AUM Return on AUM Average AUM development (in bps) (in CHF bn) 123 89.6 121 117 118 81.2 115 72.5 65.5 48.2 1H06 2H06 1H07 2H07 1H08 1H06 2H06 1H07 2H07 1H08 • Negative impact on RoAUM from continued • Average revenue-generating AUMs are up weak overall market environment during 1H by 24%
Slide 15: Operating expenses
Operating expenses Personnel expenses (in CHF m) Other oper. expenses (in CHF m) Cost-income ratio* (in %) 217.8 94.2 59.1 178.7 71.8 56.1 1H07 1H08 1H07 1H08 1H07 1H08 • Total personnel expenses • Non-compensation ratio at 17.8% up • Reflects strong CRO hiring, increased by 22%. from 16.0% y-o-y. i
Slide 16: Development of amortisation and tax rate
Development of amortisation and tax rate Amortisation of acquisition related Effective tax rate intangibles (in CHF m) (in %) 22.2 13.7 12.9 8.3 8.3 7.9 1H07 2H07 1H08 1H07 2H07 1H08 • Increased mainly through acquisitions • Temporary decrease in tax rate due lower announced at the end of 2007 of wh
Slide 17: Net profit
Net profit (in CHF million) 1H07 1H08 Change Profit before tax 183.1 193.3 5.6% Income tax expense (25.1) (15.3) Tax rate 13.7% 7.9% Consolidated net profit 158.0 178.0 12.7% Minorities - 0.7 Net profit for the period 158.0 178.7 13.1% Estimated preference dividend (14.3) (15.3) 5.6% Net profit attr
Slide 18: Update on Marble Bar Asset Management
Update on Marble Bar Asset Management Increase in clients‘ AUM (USD billion) • Despite a challenging environment MBAM has delivered. 0.4 0.2 0.4 • The MBAM funds are performing well. The returns of 5.8 the main European MBAM funds over the first half of 4.8 2008 ranged between 1.67% and 4.16%. • MBA
Slide 19: Balance sheet highlights
Balance sheet highlights Dec 31, Jun 30, 2007 2008 Change (in CHF million) Loans and advances to customers 7‚920 8,510 7.4% Due to customers 13‚580 15,515 14.2% Acquisition related intangible assets 1,179 2,068 75.0% - of which deducted from BIS Tier 1 875 1,578 80.3% Total shareholders' equity 2,43
Slide 20: Breakdown of selected assets
Breakdown of selected assets Client positions (in CHF billion) Non-client positions (in CHF billion) 8.4 15.5 13.6 8.5 Cash and Net-interbank: incl. certificates of 4.2 deposits of CHF 2.2 bn and net interbank 7.9 Client placements with diversified highly rated banks of deposits CHF 2.0 bn Client lo
Slide 21: Capital developments
Capital developments • BIS Tier 1 ratio at 30 June 2008: 11.3% • BIS Total Capital Ratio: 14.0% • Evolution of Risk Weighted Assets: • Credit risk: RWAs flat • Capital requirement for Operational Risk is key driver of increased RWA • Further opportunities to reduce RWAs and increase Tier 1 Capital (
Slide 22: Acquisitions
1.0 Introduction 2.0 Performance 3.0 Acquisitions Rudy van den Steen, CFO 4.0 Achievements, outlook 5.0 Summary 22
Slide 23: Acquisition progress
Acquisition progress Four acquisitions completed in 2007: Integration according • Quesada Kapitalförvaltning. to plan in each case. • PRS Group. • Ashby London Financial Services. • Bull Wealth Management. Three acquisitions completed 1H08: Total clients’ AUM: • On Finance. CHF 9.9 billion. • A&G Gr
Slide 24: Sycomore Gestion Privée
Sycomore Gestion Privée • In June 2008, announced acquisition of Sycomore Gestion Privée (SGP). Completed on 25 July. • Specialist wealth manager, with focus on discretionary investment management for wealthy individuals. • Total clients' AUM CHF 800 million. Five employees, including 4 CROs. • Stro
Slide 25: Outlook on 2008 M&A activities
Outlook on 2008 M&A activities Outlook Capital status • No shortage of viable opportunities. • Estimated BIS Tier 1 Capital capacity for incremental intangibles is CHF 300- • Capacity and potential dealflow to 400 million. attain target for 2008 without diluting ordinary shareholders. • Potential to
Slide 26: Achievements, outlook
1.0 Introduction 2.0 Performance 3.0 Acquisitions 4.0 Achievements, Lonnie Howell, CEO outlook 5.0 Summary 26
Slide 27: Setting the scene
Setting the scene • Market conditions turbulent. Credit market fall-out. • But no direct impact on EFGI. Not involved in sub-prime sector, no losses from exposure. Indirect impact on one specialist US municipal bond product. • Also not affected by general credit markets. Secured • Low dependence on
Slide 28: Our strategic business levers
Our strategic business levers Strong activity in 1H08 across our strategic business levers Recruiting CROs. Broadening and deepening client relationships. Diversification benefits from geographical spread. Expansion of international presence and capabilities. Growth through acquisition. Building pro
Slide 29: Recruiting CROs
Recruiting CROs Progress Record level of hiring overall during 1H08. The addition of 71 CROs through organic hiring compares to the previous record half of 64 in 1H07, and up from 45 629 +34% in 2H07. 621 Strength across all regions, notably Asia. 469 466 Outlook Remain optimistic. • Growing profile
Slide 30: Broadening & deepening client relationships
Broadening & deepening client relationships CROs continue to make headway in deepening relationships. • Continuity more important than ever. • CROs working hard to help clients navigate this point in the cycle. Increasing traction among UHNWIs • Continuing success among wealthiest clients. • Segment
Slide 31: Benefits of a broad geographical spread
Benefits of a broad geographical spread Strong progress across majority of businesses, particularly in local currency terms UK – grew profits and CROs by 20% +. Luxembourg – continued to grow apace. Income rose by over 50% year-on- Monaco – double year. Now has over digit growth. 30 CROs, up over 70
Slide 32: Moving into new and attractive markets
Moving into new and attractive markets Canada Continued to extend reach; developing new onshore markets - New offices in Vancouver, St. Catherines. Continue to UK expand (e.g. Montreal). Cayman Launched Lebanese - Applying for trust Trust & bank Abu Dhabi JV: LCB Capital license. branch licenses Man
Slide 33: Acquisitions – progress
Acquisitions – progress On Finance Marble Bar Asset Management Continued to perform strongly; integration Lived up to expectations, continued to smooth. perform well. EFGI actively exploring options for See comments elsewhere. extending in Lugano – organic and via further acquisition. StratCap Secur
Slide 34: Building product and service capabilities
Building product and service capabilities Three key initiatives: EFG FP; MBAM (see elsewhere); structured solutions. Developing brain power to simplify complexity for clients. Integral to private banking. Both have made good headway in testing market conditions. EFG Financial Products Structured sol
Slide 35: Infrastructure / functional capabilities
Infrastructure / functional capabilities Tight discipline in relation to all aspects of risk control. • No losses arising specifically in relation to credit markets. • No balance sheet exposure or contingent liabilities in relation to sub prime debt, Alt-A debt, CDO debt, CLO debt or related securit
Slide 36: Ramping up strategic marketing
Ramping up strategic marketing • Good progress in raising profile. • Sponsorships including Le Mans Classic; Monte Carlo Philharmonic; various polo events (40 Goal Challenge; Cartier International). • Diverse and innovative global marketing campaign across broadcast, print and online media. 36
Slide 37: Summary
1.0 Introduction 2.0 Performance 3.0 Acquisitions 4.0 Achievements, outlook 5.0 Summary Lonnie Howell, CEO 37
Slide 38: External factors dampening growth
External factors dampening growth • Market outlook remains fragile. • A sector-wide dampening effect on growth. • Satisfied with performance against backdrop of difficult market conditions. • However, not immune to market & exchange rate effects, and client caution. • Continue to make strong progres
Slide 39: Progress to target as at end 2008
Progress to target as at end 2008 Number of CROs: Clients’ AUM*: • On track to achieve • Given current market conditions, target of 675 CROs low end of target CHF 121-131 by end-2008. billion by end-2008 attainable based on acquisitions and continued strong net new money. Annual AUM growth per CRO:
Slide 40: Progress to target as at end 2008
Progress to target as at end 2008 Acquisitions in year: • Target: CHF 10-15 billion. Revenue margin: • Acquisition to date: CHF 0.8 billion. • Achieved 118bps, • No shortage of potential acquisitions. compared with target 110 But subject to strict discipline. bps. Cost-income ratio1: • At 59.1%, sli
Slide 41: Medium-term targets - 2010
Medium-term targets - 2010 Highly stretching targets for 2010: • 1,000 CROs. • Still generating on average CHF 30-40m in AUM per annum, with revenue margin of 110-120bps. • Ongoing appetite to make acquisitions. • Objective: attributable net profit of CHF 800 – 900m. Optimistic about business fundam
Slide 42: A business in good shape
A business in good shape • A long-term approach to a long-term relationship business. • Given stage of the cycle, calibrating our business as appropriate. Strict controls where necessary. • But will continue to invest, provided factors within control remain strong, and point to continued underlying
Slide 43: Practitioners of the craft of private banking
Practitioners of the craft of private banking www.efginternational.com 43
Slide 44: Appendix
6.0 Appendix 44
Slide 45: Consolidated income statement (unaudited)
Consolidated income statement (unaudited) (in CHF million) 1H07 1H08 Change Net interest income 109.0 127.3 16.8% Net banking fee and commission income 302.0 306.3 1.4% Net other income 35.5 94.0 164.8% Operating income 446.6 527.6 18.1% Operating expenses (263.4) (334.3) 26.9% Impairment losses on
Slide 46: Consolidated income statement (unaudited)
Consolidated income statement (unaudited) Change vs. (in CHF million) 1H07 2H07 1H08 2H07 Net interest income 109.0 135.4 127.3 -6.0% Net banking fee and commission income 302.0 287.8 306.3 6.4% Net other income 35.5 44.1 94.0 113.6% Operating income 446.6 467.3 527.6 12.9% Operating expenses (263.4
Slide 47: Consolidated balance sheet (unaudited)
Consolidated balance sheet (unaudited) (in CHF million) Dec 2007 June 2008 Change Cash and balances with central banks 74 78 5% Treasury bills and other eligible bills 795 1,868 135% Due from other banks 3,501 2,651 -24% Loans and advances to customers 7,920 8,510 7% Derivative financial instruments
Slide 48: Contacts
Contacts Media Investors Strategic Marketing & Communications EFG International Investor Relations • Keith Gapp, Head of SMC • Jens Brueckner, Head of Investor Relations • Telephone: +41 44 226 1217 • Telephone: +41 44 226 1799 • E-mail: keith.gapp@efggroup.com • E-mail: jens.brueckner@efggroup.com