Banca Monte Dei Paschi Di Siena S.p.a. · MIL:BMPS
Banca Monte Dei Paschi Di Siena — Investor Presentation (November 2013)
48 slides from Banca Monte Dei Paschi Di Siena's investor presentation, Nov 28, 2013
Slide 1: 2013-2017 Business Plan
2013-2017 Business Plan Strategic Guidelines of the Restructuring Plan '13-'17 Update for the financial community Siena, 28 November 2013 1
Slide 2: Disclaimer
Disclaimer This document has been prepared by Banca Monte dei Paschi di Siena S.p.A. (the “Company”) solely for information purposes in connection with the presentation of its strategy and financial data. The information contained herein has not been independently verified. No representation or warr
Slide 3: Contents
Contents 2013–17 Business Plan at a glance Key business drivers Financial targets Net Interest Income and Balance Sheet Net Fees and Commissions Operating costs Cost of risk Capital Conclusions 3
Slide 4: 2013–17 Business Plan highlights
2013–17 Business Plan highlights Reposition BMPS as a lean, leading Italian commercial bank with an Strategic attractive risk-reward profile priorities Focus on transforming the earnings power of BMPS based on a significantly strengthened balance sheet Approved by the Board of Directors of BMPS
Slide 5: 2015 and 2017 financial targets
2015 and 2017 financial targets 2012 2015 2017 Revenues / Assets 2.3% 2.4% 2.9% Net Commissions / Revenues 33% 47% 46% CAGR ‘12-17: Revenues +0.8% Cost / Income 66% 56% 50% Operating costs -4.8% Cost of risk1 (bps) 191 106 90 Net income (€bn) -3.2 ~0.2 0.9 ROTE n.m. ~2% ~9% Loan to Deposit2 105% 92%
Slide 6: Motivated management team with strong track record
Motivated management team with strong track record -15% operating costs ('11 – '13) vs. peers -5%1, achieving more than 40% of 2017 objectives2 Highly successful track record in 3,800 employees leaving in 2012 and 2013 (~85% of previous cost optimization plan target) and superior human resources
Slide 7: Contents
Contents Business Plan 2013–17 at a glance Key business drivers Financial targets Net Interest Income and Balance Sheet Net Fees and Commissions Operating costs Cost of risk Capital Conclusions 7
Slide 8: Profound business transformation, the first one in Italy
Profound business transformation, the first one in Italy ` Recent events have required a Target fundamental restructuring 2012 2017 of the bank Headcount ~31,2001 ~23,200 Unique opportunity for a Branches ~2,7502 ~2,200 radical business transformation Cost-to-serve3 (€) ~650 ~500 We are antici
Slide 9: Key pillars of the new business plan
Key pillars of the new business plan Existing plan priorities Key pillars 1 1.1 Target distribution model More accessible and richer for customers, less expensive for the bank 1.2 New Evolution of intermediation customer More intermediated products, for a leaner balance sheet proposition: Business q
Slide 10: New customer proposition: quality of service and satisfaction
1 New customer proposition: quality of service and satisfaction Strategic guidelines Targets Customer satisfaction level1 Enhance service offering focusing on customer 90% quality perception, aligned with best practice in >85% other industries ~70% Listen carefully and continuously to evolving c
Slide 11: Target distribution model guidelines
1.1 Target distribution model guidelines The new on-line bank is moving forward at full speed A bank with fewer branches, more adequate, flexible and cost efficient sales points. More effective and profitable customer interactions A new way Remote Network Review of of looking at channels restructuri
Slide 12: Evolution of intermediation
1.2 Evolution of intermediation More intermediated products, for a leaner balance sheet Strategic guidelines Targets Net commissions/ Develop third party distribution agreements and focus on revenues advisory services New distribution agreements on leasing and consumer credit 46% Multibrand offe
Slide 13: Strengthening of operating efficiency
1.3 Strengthening of operating efficiency More productive, more digital, leaner with less wastage Strategic guidelines Targets Group headcount ('000) Achieve a leaner organization with streamlined processes -23% Leaner organizational structure for both network and central 30.3 23.2 functions Str
Slide 14: Reshaping of human resources profile
1.4 Reshaping of human resources profile More productive and merit-based professional development Strategic guidelines Targets Personnel costs (€bn) Focus on meritocracy and promote a results-oriented -14% culture throughout the organization 2.0 1.7 Incentive system (MBO) evolving from general ban
Slide 15: Enhancement of commercial productivity
2 Enhancement of commercial productivity Strategic guidelines Targets Industrialized model to increase retail productivity “Regata Project” already yielding tangible results Monthly sales plans rolled out to branches with focus on high potential clients More contacts with customers and higher
Slide 16: Improvement of credit portfolio quality
3 Improvement of credit portfolio quality Strategic guidelines Targets Prevent performing loans stock deterioration Credit stock Efficient application of new credit policies ~30% From new Proactive recognition and specific treatment of riskier issuance performing positions ~70% 2017 Reduce defau
Slide 17: Increase of quantity and quality of capital and normalization of funding
4 Increase of quantity and quality of capital and normalization of funding Strategic guidelines Targets Increase of quantity and quality of capital Up to €3bn of capital increase State Aid fully paid back (€4.1bn) by 2017 ~10% CET1 “Phased in” 2017 NFI (€bn) Rigorous risk management and as
Slide 18: Contents
Contents 2013–17 Business Plan at a glance Key business drivers Financial targets Net Interest Income and Balance Sheet Net Fees and Commissions Operating costs Cost of risk Capital Conclusions 18
Slide 19: 2013-17 Business Plan key financial targets
2013-17 Business Plan key financial targets 2012 2017 CAGR ’12–’17 (€bn) Revenues 5.0 5.2 + 1% Net interest income 2.8 2.5 - 3% Net fee and commission income 1.6 2.4 + 8% Operating Costs -3.3 -2.6 -5% Loan Loss Provisions -2.7 -1.0 - 18% Operating income -1.2 1.6 - Net Income - 3.2 0.9 - Customer Lo
Slide 20: Breakdown of the operating income growth '12–'17
Breakdown of the operating income growth '12–'17 Operating income evolution 2012–2017 (€m) 1,653 -12 1,587 713 685 -1,195 82 Δ commercial -340 767 Operating Δ Net Δ Δ Δ Cost Δ Other Operating Income Interest Commissions Operating of financial Income 2012 Income Costs Risk effects1 2017 A B C D Δ (%)
Slide 21: Contents
Contents 2013–17 Business Plan at a glance Key business drivers Financial targets Net Interest Income and Balance Sheet Net Fees and Commissions Operating costs Cost of risk Capital Conclusions 21
Slide 22: Net interest income evolution driven by deleveraging, funding cost reduction and rates
A Net interest income evolution driven by asset deleveraging, funding cost reduction and rates increase Net Interest Income evolution 2012–2017 (€m) ~ -340 2,830 ~ +390 ~ +390 +2,490 ~ +330 ~ +2,100 ~ -875 ~ +545 Asset side effects Liability side effects and Customer loans and AFS deleverage fundi
Slide 23: Deleveraging, customer deposits and capital increase to normalize funding
A Deleveraging, customer deposits and capital increase to drive the normalization of the bank's funding sources Figures from 3Q2013 to 2017 Sources Uses1 5.5 -10.8 7.5 10.8 -4.1 -29.0 20.6 (€bn) Loans Customer Financial Net Institutional NFI LTRO decrease deposits assets equity funding reimbursement
Slide 24: Significantly improved loan to deposit ratio
A Significantly improved loan to deposit ratio due to deleveraging and increased customer deposits Commercial Assets1 deleveraging (€bn) Customer deposits2 increase (€bn) Loan to Deposit ratio -20.6 +10.8 (-15%) (+11%) 133.6 + = ~132% ~101% 113.0 111.9 101.1 9M13 2017 9M13 2017 9M13 2017 Product fac
Slide 25: Currently MPS has a significant funding cost gap to be closed
A Currently MPS has a significant funding cost gap to be closed Total Cost of Funding1/Volumes2 Italian Banks 5Y CDS Gap 1,000 Banco Popolare Unicredit 1.92% ~€800m MPS Intesa ex. NFI 750 1.39% 500 MPS 5Y CDS ~-350bps 250 in the last 3 months 0 3 Average It Banks MPS of which Cost of Corporate Fundi
Slide 26: Contents
Contents Business Plan 2013–17 at a glance Key business drivers Financial targets Net Interest Income and Balance Sheet Net Fees and Commissions Operating costs Cost of risk Capital Conclusions 26
Slide 27: Net commissions increase driven by broadly spread growth areas
B Net commissions increase driven by very specific but broadly spread growth areas Net Commissions evolution 2012–2017 (€m) +767 +47% 108 2,400 99 -25 52 85 148 174 Consumer credit & 126 leasing 1,633 Δ Commercial initiatives: +685 Δ (%) vs. Baseline '12: +37% CAGR '12-'17: ~+7% 2012 Corporate Asset
Slide 28: Addressable commission gap vs. peers in volumes and profitability
B There is an addressable commission gap vs. peers both in terms of volumes and profitability MPS market share Net commissions/volumes2 Volumes gap Profitability gap Net commissions/customer As of December 2012 Public data, 2012 Public data, 2012 +35% +18% 0.54% +32% 8.0% 0.47% 2012 MPS share: 7.5%1
Slide 29: Gap to be closed through network productivity and commercial workforce
Gap to be closed through 2 main levers: increase in network B productivity and increase in commercial workforce Network productivity More contact Commissions / commercial FTEs1 (€k) opportunities per client +29% Commissions (€bn) 252 More contacts per 195 relationship manager Commercial commissi
Slide 30: Significant potential to boost Corporate profitability
B Significant potential to boost Corporate profitability Commissions Gap A new service model for Corporate Corporate Net Commissions / Corporate RWA Become the reference bank for SMEs segment Gap ~€140m Introduce industry-specific competencies +29% Enhance fee-based transaction banking ~1.4% E.g
Slide 31: Contents
Contents Business Plan 2013–17 at a glance Key business drivers Financial targets Net Interest Income and Balance Sheet Net Fees and Commissions Operating costs Cost of risk Capital Conclusions 31
Slide 32: Optimization of operating costs through personnel and administrative expense reduction
C Optimization of operating costs through reduction of personnel costs and review of administrative expenses 2012–2017 Operating costs evolution (€m) -713 (-22%) 3,296 -288 -433 +9 2,583 1,989 Personnel 1,701 costs Administrative 1,108 expenses 674 Depreciation & amortization 199 208 2012 Personnel
Slide 33: Workforce reduction achievable through a solid HR plan
C Workforce reduction achievable through a solid HR plan, based on actionable levers with high probability of success Evolution of number of employees by operational lever 2011–2017 -8,000 (-26%) -2,700 already achieved ~31,200 ~30,300 ~900 ~1,800 ~1,100 ~600 ~23,200 ~2,900 ~700 Net exits in Net exi
Slide 34: Administrative expenses reduction breakdown
C Administrative expenses reduction breakdown Evolution of administrative expenses by operational lever 2012–2017 (€m) -434 (-39%) 83 -41 -16 -42 1,108 -314 Mainly from IT and real estate 63 -53 mgmt initiatives -114 674 Target Operating New distribution efficiency intermediation model -€293m and as
Slide 35: Cost reductions initiatives have limited impact on revenues
Cost reductions initiatives have limited impact on C revenues Impacts due to branch closures—Churn Rate Clients Deposits Loans +3.7% 17.0% 13.3% +2.6% +4.3% 8.6% 6.9% 6.0% 2.6% Other Closed Other Closed Other Closed branches branches branches branches branches branches Note: Churn data 12 months aft
Slide 36: Contents
Contents 2013–17 Business Plan at a glance Key business drivers Financial targets Net Interest Income and Balance Sheet Net Fees and Commissions Operating costs Cost of risk Capital Conclusions 36
Slide 37: Industrial levers and macroeconomic scenario underlying credit quality enhancement
Industrial levers and macroeconomic scenario D underlying credit quality enhancement Component Main drivers Better credit selection in the issuing phase Credit issuing bound to credit policies target ~30% of 2017 portfolio consisting of new credit issues in the 13-17 period Portfolio requali
Slide 38: Improving deterioration and recovery rates in the plan
Improving deterioration and recovery rates in the plan D Focus on NPLs Decreasing deterioration Increasing recovery rates rate of NPLs from net NPLs New NPLs in Recovery from net NPLs in the year/non-NPLs stock the year/net NPLs stock at Reduce default stock at beginning of year beginning of year
Slide 39: MPS more conservative approach vs. peers to continue
D MPS currently more conservative approach vs. peers to continue in the future NPLs coverage Watchlist coverage 7pp higher than peers in line with peers Italian banks have more prudent supervisory standards (e.g. more Peers MPS stringent definition of problematic loans, arose of collaterals, pooli
Slide 40: Cost of risk prudently set above 100bps until 2016
D Cost of risk prudently set above 100bps until 2016 Loan loss provisions evolution 2012–2017 (€m) -1,653 Increase of Retail (-62%) 2,672 component from 40% to 44%, with a cost of risk of ~80 bps (9M13 annualized) Progressive reduction of 1,018 Consum.it, with a cost of risk of ~500 bps (9M13 an
Slide 41: Contents
Contents 2013–17 Business Plan at a glance Key business drivers Financial targets Net Interest Income and Balance Sheet Net Fees and Commissions Operating costs Cost of risk Capital Conclusions 41
Slide 42: Capital increase to allow repayment of the NFI while strengthening Core Tier 1
Capital increase to allow the repayment of the NFI while strengthening the Core Tier 1 ratio Core Tier 1 Evolution1 (%) Several capital buffers including inter alia 3Q13 BIS3 CET1 fully The potential application phased above 8%2 of the Stability Law 3.6% -3.6% inclusion of loan loss provisions in
Slide 43: Capital position to continue benefiting from sovereign spread normalisation
Capital position to continue benefiting from the sovereign spread normalisation Evolution of BTP–Bund spread since 2011 to today BTP–BUND Spread1 (bps) 452.4 600 Market sources report 255 500 and 150 in '13/'142 400 300 Current level: ~ 250 200 164.0 100 0 Jan 11 Jul 11 Jan 12 Jul 12 Jan 13 Jul 13 N
Slide 44: Contents
Contents 2013–17 Business Plan at a glance Key business drivers Financial targets Net Interest Income and Balance Sheet Net Fees and Commissions Operating costs Cost of risk Capital Conclusions 44
Slide 45: The 2013–2017 roadmap
The 2013–2017 roadmap Sep Dec 2013 2014 2015 2016 2017 Restructuring Plan DG Comp Capital increase execution (up to €3bn) €1.1bn €3bn NFI reimbursement Reduction of Italian govies portfolio (-€6bn) LTRO reimbursement Target RoTE ~ 9% The Restructuring Plan is already in motion 45
Slide 46: Conclusions
Conclusions Business Plan to radically transform BMPS operating and financial profile Reposition BMPS as a lean, leading Italian commercial bank with Focus on reduction of an attractive risk- productivity, efficiency and reward profile funding cost gaps underpins the success of delivery Delivery
Slide 47: Thank you for your attention Q&A
Thank you for your attention Q&A 47
Slide 48: fe DEI PASCHI
fe DEI PASCHI I SIENA ==” BANCA DAL 1472 www.mps.it
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