Banca Generali S.p.a. · MIL:BGN
Banca Generali — Investor Day (December 2018)
117 slides from Banca Generali's investor day presentation, Dec 3, 2018
Slide 1: Banca Generali Investor Day 2018
BANCA GENERALI INVESTOR DAY 2018 DECEMBER 3, 2018 LONDON
Slide 2: Disclaimer
DISCLAIMER Certain of the statements contained herein are statements of future expectations and other forward-looking statements. These expectations are based on management's current views and assumptions and involve known and unknown risks and uncertainties. The user of such information should reco
Slide 3: Agenda
AGENDA MARCO BERNARDI GIAN MARIA MOSSA Deputy General Manager, Commercial Networks, CEO & General Manager Alternative Channels and Support BG ambitions Diversified and unique FAs Network The value of our BARBARA NOVA KIM FOURNAIS profession: FAs Saxo Bank Founder and CEO The value of BG/Saxo Partner
Slide 4: BG Ambitions
BG AMBITIONS To consolidate our leading position in empowering the best Financial Advisors (FAs) in the Italian market To be the Client’s first choice for quality of professionals, protection and value of service as well as state-of-the-art digital presence To create a new long term growth engine by
Slide 5: 2021 Main Targets
2021 MAIN TARGETS READY TO ACHIEVE SUSTAINABLE AND PROFITABLE GROWTH • Cumulated Net Inflows: >14.5 bn/€ • Total Assets: 76-80 bn/€ • Core Net Banking Income1: ≥63 bps • Core Operating Costs: 3%-5% CAGR2 • Dividend: 70%-80% pay-out ratio; 2017 DPS (1.25€) set as a floor; committed to preserve strong
Slide 6: Banca Generali Today
BANCA GENERALI TODAY AMONG THE TOP PLAYERS IN THE ITALIAN MARKET IN GROWTH AND SUSTAINABILITY Data as of 9M18 Commercial Excellence Financial Health 58.5 bn/€ of Total Assets 574.3 m/€ of gross core banking income2 More than 220k Clients1 Ordinary payout ratio stable at ~36% ~2,000 FAs Best-in-class
Slide 7: A Transformational Journey (1/3)
A TRANSFORMATIONAL JOURNEY (1/3) COMMERCIAL EXCELLENCE 2x +3.3 pp 58.5 55.7 13.3% 13.7% 47.5 12.6% 41.6 11.6% 12.1% 36.6 10.4% 29.1 Banca Generali Market share Total Assets on Total Sector bn/€ Assets1 2013 2014 2015 2016 2017 9M2018 2013 2014 2015 2016 2017 9M2018 + ~10 m/€ 28.8 29.5 24.3 25.8 + ~6
Slide 8: A Transformational Journey (2/3)
A TRANSFORMATIONAL JOURNEY (2/3) OPERATING LEVERAGE AMONG BEST IN THE MARKET CAGR 12.4% 706.8 587.9 596.2 574.3 500.2 443.4 645.4 524.8 537.5 530.1 427.7 Gross Core 359.0 Banking Income1 Recurring fees m/€ 84.4 72.5 63.1 58.7 61.4 44.2 Net interest income2 2013 2014 2015 2016 2017 9M18 CAGR 6.0% 182
Slide 9: A Transformational Journey (3/3)
A TRANSFORMATIONAL JOURNEY (3/3) GREAT FLEXIBILITY IN THE BALANCE SHEET Clients’ deposits/total 35% 47% 62% 69% 72% 81% balance sheet 7.5 6.5 5.7 3.8 2.9 Clients’ 2.3 deposits1 bn/€ 2013 2014 2015 2016 2017 9M18 20.2% 19.6% 18.4% 14.8% 15.9% 14.2% Total Capital Ratio 2013 2014 2015 2016 2017 9M18 NO
Slide 10: Clear Strategic Drivers Set in 2013
CLEAR STRATEGIC DRIVERS SET IN 2013 STRATEGIC STEPS TAKEN TO BEAT EXPECTATIONS • Strengthen the management team PEOPLE & ORGANIZATION • Promote a clear and coordinated organization DIGITAL MINDSET • Change the approach to technology • Introduce open platform / ecosystem approach 2013 STRATEGIC • Evo
Slide 11: Italian Household Wealth
ITALIAN HOUSEHOLD WEALTH A PLACE TO INVEST 4.4 4.0 9.7 9.8 1.0 1.5 1.1 1.1 4.0 4.4 Italian Other Real Assets Household Wealth1 Financial Assets Financial Assets 2.9 2.9 5.5 5.3 Breakdown1 2017 Real Estate Managed Assets tn/€ tn/€ Deposits, Securities -0.9 -0.9 Households Debt and stakes in 2013 2017
Slide 12: 2019/2021 Business Plan Guidelines
2019/2021 BUSINESS PLAN GUIDELINES CLEAR STRATEGIC AMBITIONS TO BEAT EXPECTATIONS • Foster a culture of talent, sustainability and PEOPLE & ORGANIZATION diversity & inclusion • Strengthen open banking approach and DIGITAL MINDSET international partnerships WM APPROACH • Focus on protection, lending
Slide 13: The Value of BG/Saxo Partnership
KIM FOURNAIS Saxo Bank Founder and CEO The value of BG/Saxo Partnership 13
Slide 14: Saxo Bank was a fintech before the term was created
Saxo Bank was a fintech before the term was even created 1998 2018 13
Slide 15: Saxo Bank in Short
Saxo Bank in short FINANCIALS 2017 FACILITATION AWARDS • Operating income: EUR 406.5 million • +35,000 tradable products • 100+ industry awards for trading platforms past • Net profit: EUR 53.9 million • 43.3 million trades executed in 2017 few years • AUM: EUR 13,915.9 million • EUR 16 billion dail
Slide 16: Saxo Bank is a global multi-asset facilitator
Saxo Bank is a global multi-asset facilitator 15
Slide 17: Brief History of Saxo Bank
Brief history of Saxo Bank Saxo Bank founded by Kim Fournas and LarsSeier N 1996 @ 1992 1998 SaxoTrader'spredecessor MITSis launched islaunched 2001 Saxo Bank begins development of first online FX trading pl latform @o—__®- 2006 Saxo Bank becomes a regulated bank, regulated by the Danish FSA Journey
Slide 18: Strong ownership structure and board
Strong ownership structure and board 52.0% 19.9% 25.7% 2.4% Chairman Li, founder of Geely, at his visit to Saxo Bank in July 2017 17
Slide 19: The Principles of Saxo Bank's Technology
The principles of Saxo Bank’s technology Half of our more than 1650 employees work with technology and business development and we invest more than EUR 100 million every year in technology and innovation Single Global Platform Cloud Native AI Everywhere Adopted for local markets and Leveraging Big D
Slide 20: Why?
Why ? At Saxo Bank it is our conviction that every great relationship is based on win-win. Whether with clients, partners or employees, we only win when they win. In the end, the value of money and accomplishments depends on how it’s earned. Our Saxo Foundation is built on this. 19
Slide 21: The Future Is Ours
Saxo Bank and Banca Generali Leading player in Financial Leading multi-asset trading and and Wealth Management investment specialist Services, through a Network of Financial Advisors The future is ours 20
Slide 22: Building a Digital Ecosystem for Clients
RICCARDO RENNA COO & Head of Innovation Building a digital ecosystem for Clients 22
Slide 23: Digital Mindset
DIGITAL MINDSET Digital mindset in Banca Generali Innovation in Clients’ journey Client-driven and digital-focused approach thanks to BG digital hub What next? 23
Slide 24: Digital Mindset Waves
DIGITAL MINDSET WAVES THREE PRIMARY AREAS OF FOCUS From 2014 Empower Client-Advisor relationship by enhancing FAs efficiency and effectiveness ADVISOR From Streamline the Bank to offer best-in-class 2016 services to FAs and Clients while managing BANK strong growth From 2017 Be the first choice also
Slide 25: Digital Mindset Waves: Focus on Clients
DIGITAL MINDSET WAVES A CLEAR TARGET: FOCUS ON CLIENTS From Build an 2014 Empower Client-Advisor relationship ADVISOR ECOSYSTEM by enhancing FA efficiency and effectiveness From Accelerate the 2016 Streamline the Bank to offer best-in-class service BANK TRANSFORMATION to advisors and Clients while f
Slide 26: Digital Mindset
DIGITAL MINDSET Digital mindset in Banca Generali Innovation in Clients’ journey Client-driven and digital-focused approach thanks to BG digital hub What next? 26
Slide 27: Digital Strategy and Key Projects
DIGITAL STRATEGY AND KEY PROJECTS REASONS WHY AND PRIORITIES BEING DIGITAL FOR KEY AREAS OF FOCUS Digital Collaboration QUALITY Digital Touchpoints BRAND Digital Onboarding Process Mobile Banking GROWTH Trading 27
Slide 28: Digital Touchpoints
DIGITAL TOUCHPOINTS PRESENTING A PREMIUM BRAND TO CLIENTS BANCAGENERALIPRIVATE.IT NEW COMMERCIAL WEBSITE 28
Slide 29: Onboarding Process
ONBOARDING PROCESS BEING DISRUPTIVE IN RELATION TO THE CLIENTS ACCOUNT OPENED IN FEW STEPS ID ONLINE VERIFICATION LIVE IN 15-20 MINUTES 29
Slide 30: New Mobile Banking App
NEW MOBILE BANKING APP PRIVATE STYLE AND FLUID USER EXPERIENCE Innovative Customer Experience User Friendly Interface Vocal Interaction …+ New Features 30
Slide 31: Saxo Trading
SAXO TRADING SEGMENTED PLATFORM OFFER INVESTOR TRADER GO TRADER PRO SIMPLE FUNCTIONALITY ADVANCED FUNCTIONALITY RICH FUNCTIONALITY FOR CLIENTS WHO WANT AN FOR CLIENTS WHO WANT A FOR CLIENTS WHO WANT A EASY TRADING EXPERIENCE STANDARD TRADING EXPERIENCE TOP TRADING EXPERIENCE 31
Slide 32: Digital Mindset
DIGITAL MINDSET Digital mindset in Banca Generali Innovation in Clients’ journey Client-driven and digital-focused approach thanks to BG digital hub What next? 32
Slide 33: What's Next?
WHAT’S NEXT? FROM IN-HOUSE DEVELOPMENT TO ECOSYSTEM APPROACH JOIN, ACQUIRE OR DIE Leverage mostly on internal culture and resources Access to wider know-how COMPETE WITH TECH SPECIALISTS ALWAYS UPDATED Risk of slow execution and loss of focus on Client’s Speed of execution and more time dedicated to
Slide 34: BG Integration Model
BG INTEGRATION MODEL EXPLOITING THE BEST TECHNOLOGIES… We know how to integrate the best technologies in a short period of time by leveraging on our strong partners to establish «win-win» solutions Certificates Workflow Contact Robo 4 Home/Mobile Trading Advisory Platform Management Center Advisor B
Slide 35: BG Integration Model
BG INTEGRATION MODEL …GLOBALLY 35
Slide 36: To Sum Up
TO SUM UP Strong capabilities to integrate different solutions in the BG-Ecosystem Open approach bringing efficiency and effectiveness Best in B2B2C and closing the gap in B2C world READY FOR THE FUTURE 36
Slide 37: Well Placed to Capture Sizable Growth Opportunities
ANDREA RAGAINI Deputy General Manager, Wealth Management, Marketing & Products Well placed to capture sizable growth opportunities 37
Slide 38: MiFID II Update
MIFID REVIEW MAJOR AREAS OF INTEREST 04. TRANSPARENCY MiFID II update
Slide 39: Update on MiFID II (1/2)
UPDATE ON MIFID II (1/2) OUR EXPECTATIONS ON CHANGES IN REPORTING Assets breakdown Regulation Change Comments in reporting Total Assets 58.5 bn/€ In-House Funds 10% RELEVANT Impact on reporting depending on applicable regulation 3rd Party Funds 14% MiFID II RELEVANT Portfolio Management 12% LIMITED
Slide 40: Update on MiFID II (2/2)
UPDATE ON MIFID II (2/2) TER BREAKDOWN Total Client base Clients >2.5 m/€ Comments 1.73% TER to insurance company: 1.43% 12%-13% of the total TER on Total Portfolio Insurance wrappers: increasing the weight of ETFs vs 3rd party funds TER to insurance company 9M18 9M18 Portfolio management: increasin
Slide 41: WM Approach
WM APPROACH Overview on Clients and Assets under Management Assets under Advisory Pursuing growth and under Custody profitability through three drivers for the Corporate Advisory future Lending 41
Slide 42: Focus on Our Clients
FOCUS ON OUR CLIENTS STRONG GROWTH IN THE PRIVATE SEGMENT N. of Clients 165.3 222.1 1.6 m/€ with assets 5% 10% >500 k/€ 1.5 m/€ 23,228 25% 32% 10,746 N. of Clients (Total Assets 2013 9M2018 >10 k/€) 69% 58% Avg. Assets per private Client Clients >500 k/€ Clients <500 k/€ Clients <100 k/€ 2013 9M18 C
Slide 43: Overview of Our Business
OVERVIEW OF OUR BUSINESS GREATER DIVERSIFICATION OF ASSET MIX Asset mix 2013 Total Assets 9M18 Total Assets 29.1 bn/€ 58.5 bn/€ Traditional Life Insurance 12% 7% In-House 26% Funds 20% 33% 13% 3rd Party Funds Portfolio NEW Management 11% 10% 14% Insurance 18% 11% Wrappers 12% 14% Securities Current
Slide 44: WM Approach
WM APPROACH Overview on Clients and Assets under Management Assets under Advisory Pursuing growth and under Custody profitability through three drivers for the Corporate Advisory future Lending 44
Slide 45: Assets Under Management (1/3)
ASSETS UNDER MANAGEMENT (1/3) FOCUS ON INSURANCE 22.2 23.2 20.2 17.2 7.3 7.9 5.6 13.7 4.3 2.2 Insurance Volumes Wrapper 14.6 14.9 15.3 Trend 11.5 12.9 9.6 Traditional bn/€ Life Insurance 2013 2014 2015 2016 2017 9M18 NEW INITIATIVES GOALS Entering in recurring payment Leveraging on existing Client b
Slide 46: Assets Under Management (2/3)
ASSETS UNDER MANAGEMENT (2/3) FOCUS ON PORTFOLIO MANAGEMENT Financial Wrappers 7.1 6.9 Traditional Discretionary Mandates 4.7 5.0 5.2 1.6 Volumes Trend 3.8 3.7 3.2 3.1 bn/€ 2.1 1.7 BG NEXT 2013 2014 2015 2016 2017 9M18 NEW INITIATIVES GOALS New hedging strategies Individual hedging solutions, levera
Slide 47: Assets Under Management (3/3)
ASSETS UNDER MANAGEMENT (3/3) FOCUS ON IN-HOUSE FUNDS (RETAIL) Volumes Trend Net Inflows Trend bn/€ m/€ 6.6 60 5.7 6.1 6.2 4 5.1 0.4 5.8 20 0.3 0.4 0.8 0.1 1.1 -16 -27 -35 -34 -34 -49 Lux IM 6.1 -72 5.0 5.4 5.7 5.5 4.7 BG Selection Sicav 2013 2014 2015 2016 2017 9M18 Jan. Feb. Mar. Apr. May Jun. Jul
Slide 48: WM Approach
WM APPROACH Overview on Clients and Assets under Management Assets under Advisory Pursuing growth and under Custody profitability through three drivers for the Corporate Advisory future Lending 48
Slide 49: Assets Under Advisory
ASSETS UNDER ADVISORY A MULTIFACETED APPROACH 2.2 2.3 1.6 1.3 Volumes 0.7 Trend 0.3 bn/€ 2Q2017 3Q2017 4Q2017 1Q2018 2Q2018 3Q2018 15% Pure financial advisory (both fee only and fee on top) Classic model Advisory Services % AUA Family Office approach (Assets with 3rd parties) 25% Holistic & Innovati
Slide 50: WM Approach
WM APPROACH Overview on Clients and Assets under Management Assets under Advisory Pursuing growth and under Custody profitability through three drivers for the Corporate Advisory future Lending 50
Slide 51: Assets Under Custody (1/5)
ASSETS UNDER CUSTODY (1/5) GROWTH AND PROFITABILITY Focus on N° Clients Tot AUC GROWTH Increase: ~55k Clients1 7.4 bn/€ • New Clients (19% on the Total Clients) (13% on the Total Assets) • Share of wallet Focus on AUC turnover ratio Primary Market PROFITABILITY Front fees • Increase turnover ~1.0x2
Slide 52: Assets Under Custody (2/5)
ASSETS UNDER CUSTODY (2/5) COMPETITIVE LANDSCAPE – ITALIAN PRIVATE BANKING MARKET Private Banking Specialized Market Banks 9.1% 20.5% 40.0% 47.8% 42.0% 36.0% Insurance Managed 22.5% 32.1% Assets 13.0% Assets Under Custody 14.9% 12.0% Current 11.0% Accounts 6M18 6M18 9M18 SOURCE: AIPB, data as of 6M1
Slide 53: Assets Under Custody (3/5)
ASSETS UNDER CUSTODY (3/5) KEY PILLARS FOR EXECUTION PEOPLE & ORGANIZATION TECHNOLOGY NEW HIRING Cherry picking of the best talents in the market (Head of Financial Advisory & Head of Assets Under Custody) Smart derivatives platform NEW ORGANIZATION New teams dedicated on both primary and secondary
Slide 54: Assets Under Custody (4/5)
ASSETS UNDER CUSTODY (4/5) STRUCTURED CERTIFICATES Activity Trend in Certificates Active Clients (#) Avg. N° Certificates (#) 6,208 More than 180 m/€ issued1 5,026 5,319 4,934 4,188 3,677 Further possibility to increase 2,869 1.7 the penetration in our Client 2,222 1.6 1.6 base (~2%) 1.5 1,212 1.4 1
Slide 55: Assets Under Custody (5/5)
ASSETS UNDER CUSTODY (5/5) ROBO 4 ADVISORY From PULL approach… …to PUSH approach MODEL GOALS Client Portfolio Increase the quality of the service Advisor for our Clients and our FAs (increasing their productivity) Partner Increase the number of trades and the turnover ratio, boosting revenues Rebala
Slide 56: WM Approach
WM APPROACH Overview on Clients and Assets under Management Assets under Advisory Pursuing growth and under Custody profitability through three drivers for the Corporate Advisory future Lending 56
Slide 57: Corporate Advisory (1/2)
CORPORATE ADVISORY (1/2) KEY PILLARS FOR EXECUTION PEOPLE & ORGANIZATION TECHNOLOGY NEW HIRING Cherry picking of the best talents in the market (Head of Corporate Advisory & New New Corporate module inside Venture Capital Team) BG proprietary platform NEW ORGANIZATION A new Corporate Advisory manage
Slide 58: Corporate Advisory (2/2)
CORPORATE ADVISORY (2/2) HIGH EXPOSURE TO CURRENCY AND VOLATILITY IMPORT/EXPORT COMPANIES VOLUMES PRACTICES 44% <20% Total export of import/export extra EMU countries flows are hedged 39% 2.6 bn/€ Total import Cumulated loss extra EMU countries on FX1 “SaxoTraderGO named Best Retail FX Platform at F
Slide 59: WM Approach
WM APPROACH Overview on Clients and Assets under Management Assets under Advisory Pursuing growth and under Custody profitability through three drivers for the Corporate Advisory future Lending 59
Slide 60: Lending (1/2)
LENDING (1/2) STABLE AND HIGH QUALITY VOLUMES Comments 1.8 1.8 High quality and 1.7 1.7 over-collateralized 1.6 (2.8 bn/€ of liquid assets as collateral) 1.3 Lending Still limited lending Volumes portfolio (ancillary to Trend WM business) bn/€ 2013 2014 2015 2016 2017 9M18 60
Slide 61: Lending (2/2)
LENDING (2/2) KEY PILLARS FOR EXECUTION BUSINESS APPROACH TECHNOLOGY COLLATERAL From static to dynamic pledge STRATEGIC FOCUS Network pay-out From manual to automated process RANGE OF PRODUCTS Traditional Lending offer Lombard1 (Volumes issued 422 m/€ from Oct.2017) Mini Lombard1 Export Credit with
Slide 62: To Sum Up
TO SUM UP Assets Key takeaway under Management • Protection & health Ongoing innovation in investment • Recurring payments solutions • Alternative solutions • Wider in-house retail offer Increase quality and range of wealth under Advisory • Family office approach management services • Advisory o
Slide 63: Coffee Break
COFFEE BREAK
Slide 64: Diversified and Unique FAs Network
MARCO BERNARDI Deputy General Manager, Commercial Networks, Alternative Channels and Support Diversified and unique FAs Network 64
Slide 65: Excellence of FAs
EXCELLENCE OF FAs Banca Generali DNA and high quality of FAs FAs’ skills, new organization model and Network organization and Team working model blend of approaches to drive growth Diversity and cross fertilization 65
Slide 66: Banca Generali DNA and High Quality of FAs
BANCA GENERALI DNA AND HIGH QUALITY OF FAS THREE KEY AREAS TO SHOW BG CULTURE Meritocracy1 FAs’ Satisfaction2 Client Satisfaction3 Scores 3.4 3.0 Avg 3.1 Incentives linked to Pay-out linked to "Best Financial Advisory "Best Financial Advisory net inflows management fees network in Italy five years N
Slide 67: Excellence of FAs
EXCELLENCE OF FAs Banca Generali DNA and high quality of FAs FAs’ skills, new organization model and Network organization and Team working model blend of approaches to drive growth Diversity and cross fertilization 67
Slide 68: Network Architecture
NETWORK ARCHITECTURE NETWORK ORGANIZATION DRIVEN BY PORTFOLIO SIZE AND SKILLS Clusters (% of Assets) Numbers of FAs Assets per capita Advisors organized in three main networks by portfolio Wealth 2471 73.1 m/€2 size and needs, with bespoke 28% Managers Financial Advisors supports to each cluster The
Slide 69: Financial Advisors Teams
FINANCIAL ADVISORS TEAMS DEVELOPING A NEW WORKING MODEL TAILORED TO CLIENTS’ NEEDS HORIZONTAL TEAM VERTICAL TEAM • Sharing skills • Succession planning for FA Leader • Team members focused on specific area of expertise • New generation of FAs • Tailor-made services • Management and development of t
Slide 70: Excellence of FAs
EXCELLENCE OF FAs Banca Generali DNA and high quality of FAs FAs’ skills, new organization model and Network organization and Team working model blend of approaches to drive growth Diversity and cross fertilization 70
Slide 71: Banca Generali Financial Advisory Network
BANCA GENERALI FINANCIAL ADVISORY NETWORK A MULTI-YEAR NETWORK REPOSITIONING EFFORT Banca Generali FAs Network (# of Advisors) PHASE 1 PHASE 2 2,006 1,936 1,985 1,862 1,793 1,841 1,645 1,715 1,635 1,564 1,499 1,471 1,453 1,475 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 9M18 Foc
Slide 72: Growth: Recruitment
GROWTH RECRUITMENT: ATTRACTING THE BEST TALENTS ACROSS THE ENTIRE INDUSTRY Recruitment trend Cumulated recruitment from banks and FA Networks, (# of Recruits) 2013-9M18 161 Other Retail & Private Banks 153 Networks 9% Bank 1 Network 5 13% 126 Network 4 2% 70% 4% 492 102 94 Network 3 122 # recruits 4
Slide 73: Financial Advisors (1/2)
FINANCIAL ADVISORS (1/2) HIGH PRODUCTIVITY ACROSS KEY DIVERSITY DIMENSIONS Avg. net inflows 7.9% on assets 5.4% Headcount weight 3.8% 3.9% 5.5% 5.2% Age Gender <45 46-55 56-65 >65 M F 18% 47% 27% 8% 84% 16% 6.4% 5.0% 6.4% 6.1% 4.6% 5.3% Portfolio Size 3.2% Geographic 4.1% location <€15m €15-30m €30-
Slide 74: Financial Advisors (2/2)
FINANCIAL ADVISORS (2/2) PRODUCTIVITY RISING WITH WRAPPERS AND WM APPROACH Pickers FAs Wrapper-ers FAs Holistic FAs 19% Picking (mutual funds FAs 42% 37% and securities) 44% Financial Corporate Advisory Wrappers (financial and insurance) Style Traditional life 44% and liquidity 14% Succession Real P
Slide 75: BG Wealth Advisors
BG WEALTH ADVISORS BARBARA PIETRO NOVA TURRINELLI Portfolio size ~60 m/€ ~90 m/€ Background FA in BG from the start Santander Private Banking Seniority in BG Since 2003 Since 2016 75
Slide 76: P&L and Balance Sheet Sustainability
TOMMASO DI RUSSO CFO & Head of Strategy P&L and balance sheet sustainability 76
Slide 77: Total Assets Growing Rapidly
TOTAL ASSETS GROWING RAPIDLY CORE NET BANKING INCOME BOTTOMING OUT 17.6% CAGR 13-17 58.5 55.7 47.5 41.6 36.6 Total Assets up by 29.1 2x in 5 years Core net banking income1 bottoming Total Assets out at 0.63% bn/€ Guidance 2021 2013 2014 2015 2016 2017 9M18 ≥0.63%2 Core Net Banking Income 0.92% 0.77%
Slide 78: Risks, mitigations and opportunities
Management fees Gross fees Performance fees Other revenues Pay-out to the network Risks, mitigations Net financial margin and opportunities Operating costs Key messages 78
Slide 79: Gross Fees: Management Fees (1/3)
GROSS FEES: MANAGEMENT FEES (1/3) HEALTHY GROWTH AND STEADY MARGINS 18.7% CAGR 13-17 587 492 479 459 359 Management 296 fees up by 2x in 5 years Management Broadly in line Fees with growth in m/€ managed assets 2013 2014 2015 2016 2017 9M18 On 1.49% 1.50% 1.52% 1.47% 1.47% 1.46% AUM On Total Assets
Slide 80: Gross Fees: Management Fees (2/3)
GROSS FEES: MANAGEMENT FEES (2/3) BALANCED CONTRIBUTION ACROSS PRODUCTS Management fees 43% well balanced 58% across key product categories, also thanks to strong growth in wrappers 17% Traditional discretionary 17% mandates 21% Mutual funds Financial wrappers Management 25% Insurance wrappers Fees
Slide 81: Gross Fees: Management Fees (3/3)
GROSS FEES: MANAGEMENT FEES (3/3) MILD PRESSURE EXPECTED Management fees Expected price Illustrative evolution of breakdown1 pressure vs. 2018 Rationale management fee margin2 1.49% 1.42% 1.46% 1.38% HIGH SINGLE-DIGIT Expected potential pressure 43% TO LOW mostly focused on mutual funds DOUBLE-DIGIT
Slide 82: Risks, mitigations and opportunities
Management fees Gross fees Performance fees Other revenues Pay-out to the network Risks, mitigations Net financial margin and opportunities Operating costs Key messages 82
Slide 83: Gross Fees: Performance Fees (1/2)
GROSS FEES: PERFORMANCE FEES (1/2) INTRODUCING THE NEW CALCULATION MODEL New performance fee methodology based on 127 115 12-month rolling high-watermark 37 67 Performance fees Performance 57 11 from Lux IM Methodology designed 46 Fees 26 to grant similar amount m/€ of fees over a market 2013 2014 2
Slide 84: Gross Fees: Performance Fees (2/2)
GROSS FEES: PERFORMANCE FEES (2/2) NEW MODEL BUILT ON DIVERSIFIED AUM BASE Lux-based AUM (BGFML retail + institutional) Lux-based AUM – Asset Mix BG selection / Sicav asset mix Lux IM asset mix Retail & Institutional (2013) Retail & Institutional (9M2018) 13% Fixed income Credit 38% Flexible 70% Equ
Slide 85: Risks, mitigations and opportunities
Management fees Gross fees Performance fees Other revenues Pay-out to the network Risks, mitigations Net financial margin and opportunities Operating costs Key messages 85
Slide 86: Gross Fees: Other Revenues (1/4)
GROSS FEES: OTHER REVENUES (1/4) PAST INFLECTION POINT 68 66 63 Traditional banking and 58 entry fees already 51 discounting significant 29 36 32 45 20 reduction vs. past years 15 16 New revenue streams from Assets under Custody and Assets Banking and 34 34 38 36 under Advisory expected 32 29 Entry
Slide 87: Gross Fees: Other Revenues (2/4)
GROSS FEES: OTHER REVENUES (2/4) ASSETS UNDER CUSTODY: BROKERAGE BG - Turnover Benchmark - Turnover Guidance: Brokerage fees Ratio (cash only)1 Ratio (cash only)2 (cash + derivatives)1 m/€ 5.8x 20-26 1.4x 1.4x ~1.0x 11.2 0.9x 9.0 2017 9M183 2021E Assoreti top 3 Assoreti best player 2017 9M18 2021E e
Slide 88: Gross Fees: Other Revenues (3/4)
GROSS FEES: OTHER REVENUES (3/4) ASSETS UNDER CUSTODY: CERTIFICATES AND PRIVATE PLACEMENTS BG - % Certificates & private Benchmark - % Certificates Guidance: Entry fees on certificates placements stock on AUC stock on AUC & private placements m/€ >10% ~10 5.1 2.5% ~2.5% 2.1% 0.5% 1.4 2017 9M18 2021E
Slide 89: Gross Fees: Other Revenues (4/4)
GROSS FEES: OTHER REVENUES (4/4) ASSETS UNDER ADVISORY: ADVANCED ADVISORY CONTRACT BG - % AUA Benchmark Guidance: Advisory Fees2 on Total Assets % AUA on Total Assets1 m/€ 18% 12% 20-25 7-8% 3.9% 2.5% 6.7 2.3 2017 9M18 2021E Italian Private Italian Assoreti best 2017 9M18 2021E market average player
Slide 90: Greater attention on costs of growth
Management fees Gross fees Performance fees Other revenues Pay-out to the network Greater attention on Net financial margin costs of growth Operating costs Key messages 90
Slide 91: Pay-out to the Network (1/2)
PAY-OUT TO THE NETWORK (1/2) UNDER CONTROL Pay-out to the network as % of recurring gross fees Guidance1 Comments Ordinary pay-out: ≤37% Slight increase vs. past 52.3% 53.1% 53.8% driven by lending and 50.7% 50.9% ≤52% penetration of products with 44.6% higher-than-average pay-out 15.2% 14.9% 16.9%
Slide 92: Extraordinary Pay-out (2/2)
EXTRAORDINARY PAY-OUT (2/2) GREATER ATTENTION TO COST OF GROWTH Cash cost of growth1 Comments Managed Cost of growth on a 40% inflows / 66% 70% 63% 44% 84% 50% structural decline thanks to: total inflows 1) increase in the weight of 2.21% the organic component; 2.14% 2) progressive reduction in 2.03
Slide 93: A new approach to navigate the new rates regime
Management fees Gross fees Performance fees Other revenues Pay-out to the network A new approach to Net financial margin navigate the new rates regime Operating costs Key messages 93
Slide 94: Net Financial Margin (1/5)
NET FINANCIAL MARGIN (1/5) NET INTEREST INCOME BOTTOMING-OUT Net financial income m/€ 161.9 140.8 Material headwinds to 19.0 54.9 earnings growth from net financial margin over the 37.4 95.1 93.4 past few years 34.5 28.9 79.5 34.7 66.3 3.1 18.1 2018E expected to be a 22.1 84.4 trough for net interes
Slide 95: Net Financial Margin (2/5)
NET FINANCIAL MARGIN (2/5) READY TO TAKE ADVANTAGE OF NEW INTEREST RATES ENVIRONMENT Total assets and interest-bearing assets1 (year-end) bn/€ 9.0 9.2 ~8.6 bn/€ of interest- 8.4 bearing asset-base, ready 0.9 0.9 6.6 6.1 0.8 to capture changes in 6.1 1.8 1.8 interest rates environment 1.7 1.3 0.2 0.3
Slide 96: Net Financial Margin (3/5)
NET FINANCIAL MARGIN (3/5) READY TO TAKE ADVANTAGE OF NEW INTEREST RATES ENVIRONMENT Total assets Guidance: Loans to Clients breakdown bn/€ and Financial Assets bn/€ Comments 9.2 2.5 – 3.0 Lending expansion aimed at 0.6 1.8 diversifying Bank’s balance sheet 0.9 Targeting 0.7-1.2 bn/€ volume 9M18 202
Slide 97: Net Financial Margin (4/5)
NET FINANCIAL MARGIN (4/5) BANKING BOOK: FLEXIBLE TO CAPTURE INTEREST RATES REPRICING Maturity Duration Italian Government bond portfolio maturities by IFRS9 classification m/€ HTC HTCS 1,139 1,009 3.7 3.4 30 659 570 672 2.0 613 1.7 450 1,028 129 61 14 339 293 979 299 530 556 611 5 151 274 288 111 2
Slide 98: Net Financial Margin (5/5)
NET FINANCIAL MARGIN (5/5) BANKING BOOK: FLEXIBLE TO PURSUE DIVERSIFICATION Banking book Depending on interest rates environment, Banking Book may potentially be 7% diversified by re-investing over 2019-2021 up to 2.4 bn/€ 36% expiring Italian Government bonds As a result, BG could easily diversify
Slide 99: Continuous operating leverage despite intense growth
Management fees Gross fees Performance fees Other revenues Continuous Pay-out to the network operating leverage despite intense Net financial margin growth and innovation Operating costs Key messages 99
Slide 100: Operating Costs (1/3)
OPERATING COSTS (1/3) CONTINUOUS OPERATING LEVERAGE Operating costs m/€ Operating costs/total assets Core Operating Costs1 Sales Personnel Expenses 0.51% 6.0% CAGR 195-197 0.45% 182.0 187.9 175.6 165.8 16.8 0.42% 14.3 148.6 15.1 10.6 11.3 0.38% 0.34% 0.33% 160.5 167.7 171.1 155.2 137.3 2013 2014 201
Slide 101: Operating Costs (2/3)
OPERATING COSTS (2/3) CONTINUOUS OPERATING LEVERAGE Evolution of operating costs m/€ Growth of core operating costs1 expected in the 3%-5% CAGR range 198-212 237-256 Growth of sales personnel expenses depending on RM 23-26 recruitment opportunities, 214-216 thus linked to additional 16-18 revenue 19
Slide 102: Operating Costs (3/3)
OPERATING COSTS (3/3) STRIKING A BALANCE BETWEEN INNOVATION AND COST-CONTROL Investments Increase in Variable-costs Partner Platform scale 2017-2019E1 recurring opex associated2 • BG Saxo 43.3mln executed orders p.a. • >150 developers dedicated to Revenue sharing agreement continuous innovation of t
Slide 103: P&L and Balance Sheet Sustainability
Management fees Gross fees Performance fees Other revenues Pay-out to the network P&L and balance sheet Net financial margin sustainability Operating costs Key messages 103
Slide 104: Key Messages
KEY MESSAGES TO SUM UP Current perimeter1 Expected evolution Guidance 20211 Management • Modest pressure on Group management fee margin, with Management fee margin: the bulk of impact from mutual funds 1.38%-1.42% fees • New recurring revenue from Assets under Custody New revenue Gross fees from new
Slide 105: Internationalization and Projections
GIAN MARIA MOSSA CEO & General Manager Internationalization and projections 105
Slide 106: Closing remarks & strategic ambitions
International aspiration Closing remarks & strategic ambitions Projections 106
Slide 107: International Aspiration (1/4)
INTERNATIONAL ASPIRATION (1/4) THE REASONS WHY WHY INTERNATIONALIZATION WHY SWITZERLAND Key financial center in the world After years of strong growth in Italy, BG has (~7.3 SFr/bn of financial wealth in Switzerland built solid foundations supporting the as of 20171) launch of a new long term growth
Slide 108: International Aspiration (2/4)
INTERNATIONAL ASPIRATION (2/4) ENTRY INTO THE SWISS MARKET The project aims at building a new long term growth engine, that will achieve profitability in the short term. The Bank will adopt a two-pronged approach: Clients managed from Italy and Clients managed from Switzerland. CLIENTS MANAGED FROM
Slide 109: International Aspiration (3/4)
INTERNATIONAL ASPIRATION (3/4) ACQUISITION OF A SWISS BOUTIQUE COMPANY PROFILE TERMS OF THE DEAL Valeur Fiduciaria, based in Lugano, is a Acquisition of 90.1% of Valeur Fiduciaria with wealth management boutique founded in the possibility to acquire the remaining 9.9% in 2009 by highly qualified pro
Slide 110: International Aspiration (4/4)
INTERNATIONAL ASPIRATION (4/4) PROJECTION ON SWISS EXPANSION 0.8 - 1.2 0.9 - 1.3 1.0 - 1.3 0.6 - 1.1 0.7 - 1.1 Net Inflows bn/€ 2019 2020 2021 2022 2023 Clients managed from Switzerland 5.0 - 7.0 Clients managed 4.0 - 5.7 from Italy 3.1 - 4.4 2.3 - 3.2 1.6 - 2.1 Total Assets bn/€ 2019 1 2020 2021 20
Slide 111: Closing remarks & strategic ambitions
International aspiration Closing remarks & strategic ambitions Projections 111
Slide 112: Projections (1/2)
PROJECTIONS (1/2) EXPECTED CURRENT PERIMETER NET INFLOWS 3.0 3.0 2.8 2.6 2.2 2.2 – 2.4 Organic net 4.2 – 4.8 3.7 - 4.3 BG inflows Saxo bn/€ 2014 2015 2016 2017 2018E 2019-21 avg Recruitment (24 months) Out 3.9 Net inflows 2.7 2.2 bn/€ 1.9 2.1 1.5 – 1.9 from FA 4.2 2019-21 avg 2019-21 avg 3.0 2.7 rec
Slide 113: Projections (2/2)
PROJECTIONS (2/2) GROWTH PROFILE 2019 - 2021 3.1 - 4.4 1 76.0 – 80.0 13.9 - 15.7 12.6 - 14.4 58 - 59 Total Assets Net Inflows bn/€ Valeur1 Nextam1 2018E Current perimeter Swiss initiative Market 2021E 2019E – 2021E NOTE: Not including potential M&A; 1) Consolidation of acquired Assets 113
Slide 114: To Sum Up
TO SUM UP 2021 COMMERCIAL TARGETS CLOSING REMARKS Cumulated Net Inflows: >14.5 bn/€ We have a track record of success in multi- projects management Total Assets: 76-80 bn/€ We have the best talents in the market and 2021 FINANCIAL TARGETS they are the true added value in our field Core Net Banking I
Slide 115: Back-up
BACK-UP 115
Slide 116: Extraordinary Pay-out: A Real-Life Case
EXTRAORDINARY PAY-OUT THE SUSTAINABILITY OF RECRUITMENT: A REAL-LIFE CASE Total Assets from recruited FAs, 2015 cohort bn/€ IRR simulation on 2015 cohort Net margin Base case: assuming no growth in Total Assets and mid-single digit pressure in net commission margin to BG1 - 76 84 88 bps 43% 33% 2.6
Slide 117: Extraordinary Pay-out: A Forward Simulation
EXTRAORDINARY PAY-OUT THE SUSTAINABILITY OF RECRUITMENT: A FORWARD SIMULATION Main hypotheses Stress scenarios • Volumes: the FA portfolio reaches run-rate in three Pricing pressure: -5% to -35% reduction in recurring fee margins over 5 years years (70% in year one, 20% in year two, 10% in year thre