Efg International Ag · SIX:EFGN
Efg International — FY2013 Earnings Presentation
48 slides from Efg International's earnings presentation, Feb 26, 2014
Slide 1: Full-year results presentation 2013
Full-year results presentation 2013 Zurich, 26 February 2014 Practitioners of the craft of private banking 1
Slide 2: Disclaimer
Disclaimer This presentation has been prepared by EFG International AG 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 or redemption of any securities
Slide 3: Introduction – John Williamson, CEO
Introduction John Williamson, CEO Financial performance Current status, outlook 3
Slide 4: Financials summary
Financials summary vs. 2012 restated IFRS net profit CHF 111.8 m 0.5% IFRS net profit attributable to ordinary shareholders CHF 110.9 m 7.6% Underlying recurring net profit to ordinary shareholders* CHF 111.2 m 12.0% Operating income CHF 666.0 m 4.5% Revenue margin 88 bps from 93 bps Net new assets
Slide 5: Performance impacted by industry-wide pressures
Performance impacted by industry-wide pressures Market conditions • Economic and market conditions still fragile. • Client sentiment remains volatile – particular constraint during Q3. • Low interest rates - lower asset and liability management revenues. • Swiss franc remains strong. Regulatory and
Slide 6: Committed to growth & step-change in profits
Committed to growth & step-change in profits • Business review completed. As a result, business simplified and risks lessened. • Strong commitment to regulatory compliance. External assessment confirmed approach in line with leading peers. Ongoing investment. • Quality of earnings improved – mainstr
Slide 7: Financial performance – Giorgio Pradelli, CFO
Introduction Financial performance Giorgio Pradelli, CFO Current status, outlook 7
Slide 8: 2013 Highlights (I)
2013 Highlights (I) Net new assets below target range; Revenue-generating AuM up 5.4% after adjusting for exited businesses and reclassifications; RoAuM at 88 bps above target Revenue-generating AuM Net new assets* RoAuM (in CHF bn) (in CHF bn) (in bps) Other income Commission Net interest 78.7 +4.0
Slide 9: 2013 Highlights (II)
2013 Highlights (II) IFRS net profit to ordinary shareholders up by 8%, including profit on sale of stake in EFG FP Operating income Operating expenses (in CHF m) (in CHF m) Operating income down 4% reflecting lower revenues from ALM, increased Tier 2 interest - 4% costs and absence of structuring
Slide 10: 2013 Highlights (III)
2013 Highlights (III) Continued strengthening of capital base, with BIS Capital ratio in high teens and Common Equity ratio in low teens BIS total capital ratio (in %) Strong capital ratio composition with a CET1 capital ratio of 13.5% Basel III fully applied Adoption of a progressive 18.1 18.0
Slide 11: Underlying recurring net profit vs reported IFRS profit
Underlying recurring net profit vs reported IFRS profit Underlying profit constrained by market conditions. Absence of structuring transactions for large clients and lower revenues from asset and liability management. Quality of earnings continued to improve 2013 2012 (in CHF m) (in CHF m) 11.4 20.1
Slide 12: Quality of earnings improved in 2013 (I)
Quality of earnings improved in 2013 (I) Core private banking revenues from continuing businesses increased by 5% during 2013 Operating income components (in CHF m) Quality of operating income improved vs. last year given absence of structuring transactions to large clients in 697.1 666.0 2013 180
Slide 13: Quality of earnings improved in 2013 (II)
Quality of earnings improved in 2013 (II) Profit contribution from Core Private Banking increased by 33% year-on-year Profit before tax components (in CHF m) Profit before tax from core private banking increases by 33% 120.3 84.2 Contribution of ALM related profit before tax declined by 20% Ab
Slide 14: Operating income
Operating income Improved contribution from recurring revenue streams Operating income Net interest income Net commissions Net other income (in CHF m) (in CHF m) (in CHF m) (in CHF m) 345.6 343.3 224.1 697.1 213.2 666.0 127.4 330.1 335.9 30.5 109.5 2012 2013 1H13 2H13 2012 2013 2012 2013 2012 2013
Slide 15: Operating expenses
Operating expenses Operating expenses - 1% vs. previous year, personnel expenses down 4% despite increase in CRO hiring Operating expenses Cost-income ratio* (in CHF m) (in %) In 2H13 circa CHF 6 m of additional CRO bonus for “one-off” 2013 incentive scheme 554.3 81.5 547.2 78.8 Other operating
Slide 16: Detailed analysis of headcount & personnel expenses
Detailed analysis of headcount & personnel expenses Headcount stable; personnel expenses down by 3% Headcount Breakdown personnel expenses (in CHF m) 1,994 1,989 1,989 406.5 396.2 1,977 4.2 17.3 105.4 199.2 111.8 197.0 27.7 6.7 10.6 3.2 6.0 53.5 2.5 52.3 269.2 263.9 0.7 134.3 129.6 2012 2013 1H13 2H
Slide 17: Underlying cost analysis
Underlying cost analysis Underlying expenses declined by 3% year-on-year 2013 2012 (in CHF m) (in CHF m) 10.3 547.2 554.3 (6.0) 532.7 (6.2) 517.7 (27.7) (4.2) (17.3) IFRS "One-off" 2013 Business New CRO Underlying IFRS Litigation Business New CRO Underlying operating incentive review impact investme
Slide 18: Growth and productivity drivers
Growth and productivity drivers EFG International continues to attract high-quality CROs; business returned to net CRO hiring mode and AuM per CRO increased by 12% since 2011 Number of CROs AuM per CRO (in CHF m) EFGI’s Asia business Incl. Falcon PB in HK 440 + 17% 435 + 7% 183 CROs AuMs 414 416 (in
Slide 19: Capital position (I)
Capital position (I) Capital position remains strong and in target range; RWAs decreased due to EFG FP sale and disciplined RWA management BIS total capital ratio Breakdown of RWAs (in %) (in CHF bn) RWA market risk and operational risk decreased 18.0* 6.0 by CHF 0.4 m, mainly due 5.7 to EFG FP sa
Slide 20: Capital position (II)
Capital position (II) Organic capital generation added 180 bps to capital ratio Evolution of BIS capital ratio (in %) 18.1 1.8 1.2 18.0 Basel III impact: 15.9 (0.1) 4.5 (0.3) 6.2 220 bps (0.5) 4.2 13.5 Common Equity (CET1) Additional Tier 1 & Tier 2 11.9 11.7 Dec Dec 2012 Others Dec P&L RWA Dividend
Slide 21: Adoption of a progressive dividend policy commenced
Adoption of a progressive dividend policy commenced Proposed increased dividend from CHF 0.10 to CHF 0.20, representing payout ratio of 27% of underlying net profit Dividend per share (in CHF) & Payout ratio Dividend proposal for 2014 27% 2013 IFRS underlying net profit (in CHF m) 111.2 12% Total am
Slide 22: Revenue-generating AuM development
Revenue-generating AuM development Net new assets slightly below target range; Revenue-generating AuM up 5.4% after adjusting for exited businesses and reclassifications (CHF bn) CHF 2.5 bn NNA for continuing 2.8 businesses, growth rate of 3.5% (0.1) (1.1) 3.2* (6.0) 0.6 Adjusted for one-off sin
Slide 23: AuM and NNA by business region
AuM and NNA by business region Dec 2013 AuMs 2013 NNA: CHF 2.5 bn / CHF 3.2 bn*** CHF 75.9 bn as % of RoAuM NNA growth total AuM (in bps) (in %) Switzerland 15.6 21% 99 (0.3) -2% Continental 13.9 18% 77 1.6 14% Europe Asia 14.9 20% 80 0.5 4% Americas 11.4 15% 89 (0.2) 0.4*** -2% 3% UK 17.8 23% 97 1.
Slide 24: Regional performance
Regional performance Focus on high-growth markets; good diversification of business Continental Asset*** Switzerland Asia Americas UK Europe Management AuM (in bn) 15.9 14.9 17.8 15.6 14.4 16.4 13.9 12.2 11.4 11.6 8.2 7.4 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 2012 2013 14% 30% Annualized
Slide 25: Balance sheet
Balance sheet Solid, liquid and simplified balance sheet Total assets: CHF 21.7 bn Total liabilities & equity: CHF 21.7 bn Cash & banks 3.0 Due to banks 0.3 Composition reflects Deposits 16.4 deconsolidation of EFG FP and BdP exchange into Tier 2 Treasury bills 0.6 instruments Derivatives 0.6 Avai
Slide 26: Life insurance policies portfolios
Life insurance policies portfolios Impact of life insurance portfolio on current financials Portfolio “Held to Maturity”* - Carrying value CHF 692 million (acquisition cost, premium paid, accrued interest); with actual yield of 4.1% Net revenues in FY 2013 on life portfolios of CHF 28.8 million
Slide 27: Current status, outlook – John Williamson, CEO
Introduction Financial performance Current status, outlook John Williamson, CEO 27
Slide 28: Remain convinced that EFG is highly differentiated
Remain convinced that EFG is highly differentiated • Market – HNWI market recovered strongly post-financial crisis. Cross-border still growing, albeit at a slower pace. Environment remains highly competitive, but consolidation presenting opportunities. • Positioning – Total focus on private banking.
Slide 29: Most private banking businesses performing strongly
Most private banking businesses performing strongly All regional businesses (except Americas) increased their profit contribution during 2013. UK Continental Europe •Robust growth in revenues and •Double-digit growth in operating income and strong double-digit increase in profits. profit before lega
Slide 30: Notable improvement in CRO hiring
Notable improvement in CRO hiring • Total number of CROs (excluding EFG Financial Products): 435 end-2013, up from 414 end-2012 (407 excluding non-continuing businesses). • Focus remains on high quality individuals and, in particular, teams. • All regional businesses up year on year, with exception
Slide 31: Overriding focus on delivering growth
Overriding focus on delivering growth Quickening tempo of growth initiatives Switzerland Asia • New Heads of Private Banking now in place • New Head of Emerging Wealth (with a focus on in Zurich and Geneva - important role in China), based in Hong Kong, joined February attracting new CROs / driving
Slide 32: Overriding focus on delivering growth (cont.)
Overriding focus on delivering growth (cont.) Investment & Wealth Solutions • Comprehensive, integrated solutions platform now in place - wealth structuring, investment solutions and credit. • Re investment solutions, further emphasis on advisory services. Significant enhancements made to internal r
Slide 33: Focus remains on organic growth, but targeted acquisitions
Focus remains on organic growth, but targeted acquisitions • Strong focus on organic growth. Delivering on latent potential clearly offers significant short-term upside to shareholder value. • Open to acquisitions, subject to: shared appreciation of private banking; complementary cultures and capabi
Slide 34: Significant upside profit potential
Significant upside profit potential Aim is for top-line growth to flow through with minimal dilution to productivity and profits. Committed to maintaining strong cost discipline. Non-CRO hiring freeze remains in place. Potential to deliver strong, double digit growth for foreseeable future. Signific
Slide 35: Organising to deliver growth
Organising to deliver growth Executive Committee Chief Executive Officer John Williamson Regional CEOs Head of Investment & Deputy CEO & Head of Strategy & Switzerland Wealth Solutions Chief Financial Officer Marketing James T. H. Lee Giorgio Pradelli Keith Gapp John Williamson Asia Chief Risk Offic
Slide 36: Rebranded - projecting a joined up business
Rebranded - projecting a joined up business Adoption of new circular logo device implemented during H2 2013. An evolution from existing symbol, maintaining many of its strengths. Increasingly projecting a unified approach under the marketing name, “EFG”. In certain regions, also frequently accompani
Slide 37: Committed to delivering medium-term objectives
Committed to delivering medium-term objectives Objective of delivering IFRS net profit of CHF 200 million in 2015 now dependent on NNA growth at top of target range and significantly better market conditions / rising interest rates. But objective retained as a stretch target, as focus in 2014/2015 u
Slide 38: Practitioners of the craft of private banking
Practitioners of the craft of private banking www.efginternational.com 38
Slide 39: Appendix
Appendix EFG@ International
Slide 40: Consolidated income statement (IFRS)
Consolidated income statement (IFRS) (in CHF million) 2012 2013 Net interest income 224.1 213.2 Net banking fee & commission income 345.6 343.3 Net other income 127.4 109.5 Operating income 697.1 666.0 Personnel expenses (406.5) (396.2) Other operating expenses (130.1) (135.4) Amortisation of tangib
Slide 41: Consolidated income statement (IFRS)
Consolidated income statement (IFRS) (in CHF million) 1H 2013 2H 2013 Net interest income 100.3 112.9 Net banking fee & commission income 163.1 180.2 Net other income 66.7 42.8 Operating income 330.1 335.9 Personnel expenses (197.0) (199.2) Other operating expenses (60.7) (74.7) Amortisation of tang
Slide 42: Consolidated income statement incl. EFG FP (Pro forma & unaudited)
Consolidated income statement incl. EFG FP (Pro forma & unaudited) (in CHF million) 2012 2013 Net interest income 224.9 212.9 Net banking fee & commission income 491.7 396.5 Net other income 108.0 107.6 Operating income 824.6 717.0 Personnel expenses (466.8) (418.5) Other operating expenses (164.2)
Slide 43: Consolidated balance sheet (IFRS)
Consolidated balance sheet (IFRS) (in CHF million) Dec 2012* Dec 2013 Cash and balances with central banks 1,364 849 Treasury bills and other eligible bills 817 631 Due from other banks 3,393 2,200 Derivative financial instruments 563 560 Financial instruments 6,113 5,415 Loans and advances to custo
Slide 44: Breakdown of Assets under Management
Breakdown of Assets under Management 31.12.13 By category 31.12.12 31.12.13 (in CHF bn) Cash & Deposits 25% 26% 19.7 Bonds 20% 20% 15.4 Equities 23% 26% 19.8 Structured products 8% 3% 2.3 Loans 14% 16% 11.9 Hedge Funds / Funds of HFs 5% 4% 3.1 Other 5% 5% 3.7 Total 100% 100% 75.9 31.12.13 By currenc
Slide 45: Segmental analysis – FY 2013
Segmental analysis – FY 2013 Performance summary Continental Asset Corporate Switzerland Americas UK Asia Eliminations Total (in CHF m) Europe Management center Segment revenues 161.1 98.9 99.5 164.7 120.1 80.3 10.8 (69.4) 666.0 Segment expenses (123.6) (73.3) (77.5) (107.0) (82.0) (34.9) (48.5) 15.
Slide 46: Segmental analysis – FY 2012
Segmental analysis – FY 2012 Performance summary Continental Asset Corporate Switzerland Americas UK Asia Eliminations Total (in CHF m) Europe Management center Segment revenues 175.5 85.2 122.7 154.1 109.2 58.0 45.0 (52.6) 697.1 Segment expenses (126.3) (64.4) (64.1) (107.8) (73.3) (30.0) (69.4) 15
Slide 47: Overview of sovereign and bank exposure
Overview of sovereign and bank exposure GIIPS exposure further reduced (in CHF m) 31 December 2013 31 December 2012 Bank Bank Country Sovereign Bank bonds placements & Sovereign Bank bonds placements & other other Italy 12.5 - 0.8 12.5 - 1.2 Portugal - - - - 20.0 - Spain 61.6 - 38.7* 64.7 - 39.5* Di
Slide 48: Contacts
Contacts Media Investors Strategy, Marketing & Communications EFG International Investor Relations Keith Gapp, Head of Strategy and Marketing Jens Brueckner, Head of Investor Relations Telephone: +41 44 226 1217 Telephone: +41 44 226 1799 E-mail: keith.gapp@efginternational.com E-mail: jens.brueckne