Dovalue S.p.a. · MIL:DOV

Dovalue — doBank — Investor Day (June 2018)

81 slides from Dovalue's investor day presentation, Jun 19, 2018

1. Slide 1: doBank Business Plan 2018-2020

   doBank Business Plan 2018-2020 London June 19, 2018

2. Slide 2: Today speakers

   Today speakers Andrea Mangoni Fabio Balbinot Carlo Vernuccio Group CEO Head of Servicing Head of NPL Management Stathis Andrianakis Andrea Giovanelli Manuela Franchi doBank Hellas Manager Head of UTP & Banking Chief Financial Officer 1

3. Slide 3: Agenda for the day

   Agenda for the day Section Speaker Indicative Timetable Strategic highlights of business plan 2018-2020 Andrea Mangoni 09:30 10:00 Deep dive on market opportunity Fabio Balbinot, Stathis Andrianakis 10:00 10:40 1st Q&A session 10:40 11:00 Coffee break 11:00 11:15 The NPL factory Carlo Vernuccio, And

4. Slide 4: Strategic highlights of business plan 2018-2020

   Strategic highlights of business plan 2018-2020 Andrea Mangoni – Group CEO

5. Slide 5: doBank today

   doBank today  Leader in the largest NPL market in Europe  Servicing €88bn GBV in Italy Key figures 2017  Highest rated by S&P and Fitch  “Pure play” servicer with asset light business model GBV €88bn 1Q 18  Among the few European independent servicers Large portfolio and  Focused on high value

6. Slide 6: Strategic pillars of IPO plan

   Strategic pillars of IPO plan 1 2 3 Efficiency & Grow Ancillary New Servicing Contracts Effectiveness Business Increased Collections on Sold by Outsourced by Existing Portfolios & New Services Banks Banks Work Force Optimization To improve To exit bad loans, Higher collections per unit of Higher pen

7. Slide 7: Track record since IPO

   Track record since IPO Assumptions of IPO plan Execution in 2017 and 1Q18  Add new GBV (ca. €18bn by 2019)  +€3bn in 2017, +€12bn in 1Q18 already  Increase client diversification and Above Grow GBV contract length  All new GBV won from new clients with longer average portfolio maturity expectati

8. Slide 8: Main operational achievements during last 12 months

   Main operational achievements during last 12 months  In 2017 and in 1Q 18, doBank reached important results also in terms of operational target sustaining its financial growth and confirming its capability to manage large and complex transactions Greece set-up FINO on-boarding Branch setup obtainin

9. Slide 9: Distinctive positioning in the NPL value chain

   Distinctive positioning in the NPL value chain One-stop-shop Independent servicer Pure servicer with an with strong relationship asset light business with clients model Profitable and scalable Long term contracts that business model generate stable cash flows Market leadership with unparalleled trac

10. Slide 10: Today's objectives

    Today’s objectives 1 Present the targeted new transformational Group Structure  From a banking Group to a corporate structure with separate banking license unlocking capital potentials for M&A Update on market opportunities ahead of us 2  Extract value from current bad loans scenario in Italy  Si

11. Slide 11: Transformational Project: from a Banking to a Servicing group

    Transformational Project: from a Banking to a Servicing group with separate banking license Today Tomorrow  Heritage “banking Group” status  Simpler regulatory framework limits growth potential  Fully exploit debt capacity to  Most of doBank competitors are grow current platform in Italy, not ba

12. Slide 12: How the Group re-organization will be executed

    How the Group re-organization will be executed upon regulatory clearance  New structure envisages a Servicing Group with a banking subsidiary, in line with new business mix  Regulatory process initiated in May with Bank of Italy/ECB, targeted completion by year-end Today: Banking Group focused on

13. Slide 13: Most relevant economic benefits from transformational project

    Most relevant economic benefits from transformational project  The resulting structure of the Group will include:  The listed company that will operate as a pure Special Servicer ruled under art. 115 and will also act as holding company  Italfondiario specialized in Master Servicing and securitiz

14. Slide 14: New organizational structure

    New organizational structure Rationale of new organizational structure doBank CEO  New organizational structure is part of Business Plan 2018- General Counsel Control Functions 2020 Data Quality and  Reduction of direct reporting lines Communication Governance to CEO, streamlining decision making

15. Slide 15: Contiguous servicing market to offer significant growth potential

    Servicing market to offer significant growth potential Market update doBank Strategy  Servicing market at ca.240bn in M/T  Regulatory framework still supportive, lots  Maintain distinctive positioning of work to do for banks:  Protect premium pricing Bad loans  Total new inflows (including port

16. Slide 16: doBank's unique operating model

    doBank’s unique operating model  Scalable infrastructure will support growth without incurring material costs  Huge local knowledge through the network across all the Italian courts Key elements to successful servicing Local knowledge across Italian courts Present in all 140 Italian courts with ~4

17. Slide 17: People: first pillar of doBank growth

    People: first pillar of doBank growth  Reward mechanisms are crucial for performance results and also for quality of management both internal and external  doBank currently trains both the internal and external network with courses dedicated to legal and out-of-court settlements, courses on the us

18. Slide 18: IT capabilities – Transformation plan post migration

    IT capabilities – Transformation plan post migration Transformation Plan Pillars 1 Company asset development  Development of the new release of the credit management proprietary system (IFAMS 2.0) Application Software Transformation 2  Upgrade of IT systems to grow modern and scalable solutions an

19. Slide 19: Migration of the IT Platforms into One

    Migration of the IT Platforms into One  In parallel with the merger of the Special servicing activities of doBank and Italfondiario once transferred to doBank, the current doBank’s portfolio will be migrated onto Italfondiario’s proprietary platform (IFAMS – Italfondiario Asset Management System) I

20. Slide 20: Ambitious cost efficiency plan

    Ambitious cost efficiency plan Plan Milestones 2020 Targets vs. 2017  Progressively reduce ratio of outsourcing fees on gross revenues Outsourcing  Integration of IT platforms with right sizing of internal Fees and external network  Small loans: increase outsourcing  Medium and large loans: incr

21. Slide 21: Key strategic pillars of doBank business plan

    Key strategic pillars of doBank business plan  Continue exploiting Italian NPL market opportunity  Develop in contiguous products/markets (UTP, Greece) Increase  Extract value with ancillaries (Commercial info, Data Quality, Real revenue per GBV Estate and Judicial services)  Build on Experience

22. Slide 22: doBank in 2020 and beyond

    doBank in 2020 and beyond 2018E 2020E  8%-9% Gross Revenues CAGR in 2017A-2020E:  Gross revenues at more than €230m  New GBV:  New GBV additions at €15-17bn total for the year 2018  +€15bn in Italian bad loans (on top of 1Q18 GBV on- boarded) Gross  Collections above €2bn Revenues  Ramp-up UT

23. Slide 23: Deep dive on market opportunity

    Deep dive on market opportunity Fabio Balbinot – Head of Servicing Stathis Adrianakis – DoBank Hellas manager

24. Slide 24: European NPL servicing: highest potential in Southern Europe

    European NPL servicing: highest potential in Southern Europe  Common attractive features in Italy, NPL exposure and macro highlights Greece and Southern Europe  Significant market size and complexity NPL 13% 3% 5% 45% 2% 2% 2% 15% 10% 39% Ratio1  Opportunity for doBank to leverage on its 240 prov

25. Slide 25: Macroeconomic view – moderate growth, below EU average

    Macroeconomic view – moderate growth, below EU average Macroeconomic environment2  Italian macro indicators point towards a moderate improvement, pre and post new 11.7% 11.3% Government 10.9%  2018E GDP growth +1.5% (EU-28 avg. 10.6% 10.3% +2.3%) 10.1% 9.9% 1.5% 1.5%  2018E unemployment rate 10.8

26. Slide 26: Italian banking sector – asset and profitability trend

    Italian banking sector – asset and profitability trend Italian banks - total loans and loan default rate1  Italian banking system stabilized but still facing challenges:  Capital restored with capital ratio at about >13%  NPL coverage increased to 51%  Loans to both corporates and households sti

27. Slide 27: Top Italian Banks for NPL stock and main transactions

    Top Italian Banks for NPL stock and main transactions  Looking forward, Italian banks have set ambitious asset quality targets and are focused on an accelerated execution  Role of independent servicers key to execution, internal platforms unlikely to be sufficient  doBank took a leading role in t

28. Slide 28: Italian banks NPLs expected to stay above EU average

    Italian banks NPLs expected to stay above EU average in M/T Potential deleveraging to meet European Italian NPL stock trend (Banks only) standards €bn €bn 341 NPL Ratio Total GBV to reduce 110 160 190 327 325 13% 283 264 237 141 125 240 143 240 193 127 99 158 99 99 112 EBA European 133 peers 87 targ

29. Slide 29: Regulatory framework continues to be supportive

    Regulatory framework continues to be supportive  ECB became single supervisory mechanism taking over regulation of Europe’s largest systemic banks  ECB implemented asset quality reviews increasing banks provisioning against NPLs 2014- 2016  GACS scheme  NPL securitizations backed by the Italian

30. Slide 30: A growing Italian NPL Servicing Market

    A growing Italian NPL Servicing Market  Italian system still burdened by a significant stock of NPL in the medium term (over €300bn today)  Portfolio sales by banks and GACS securitizations represent a key tool to meet AQR targets while impact of internal workout units remains slow  Portfolio sal

31. Slide 31: Italy Bad Loans strategy confirmed: profitable growth to continue

    Italy Bad Loans strategy confirmed: profitable growth to continue 1 1. Win servicing mandates to confirm leadership position in Italian NPL Special and Master Servicing 2 2. Increase collections and collections efficiency to extract maximum value from portfolio under management 3. Increase revenue p

32. Slide 32: Italy UTP: significant exposure in need of proactive management

    Italy UTP: significant exposure in need of proactive management  UTP exposures expected to become the next issue for banks’ asset quality 2017YE Italian Banks’ UTP gross size and coverage  Net Book Value exposure higher than bad loans €bn  Significantly lower coverage ratio with higher impact in

33. Slide 33: Italy UTP: increased opportunity in the servicing market

    Italy UTP: increased opportunity in the servicing market  The Regulator, in defining the Guidance to banks on NPLs, expects that Banks implement a proactive management to NPLs, much like Bad Loans management 1. Portfolio segmentation 2. Borrower’s analysis 3. Early warning system 4. NPL operating m

34. Slide 34: Competitive dynamics in the Italian NPL Market

    Competitive dynamics in the Italian NPL Market Product Offer Special Servicing Market1 (€bn) 88 Player 1 Player 2 Player 3 Player 4 Player 5 Player 6 Master Service Special 40 36 Service Bad Loans Servicing Special products Service UTP 9 9 8 8 Administrative services Intrum Phoenix Banca Cerved Gube

35. Slide 35: Highest rating in the sector in Europe and solid reputation

    Highest rating in the sector in Europe and solid reputation Top Italian players by rating1  Key servicer rating mainly driven by Bubble size: #years since current Fitch rating  Management  Organization (e.g. staff, operational structure)  Asset/loans administration (procedures, collection Strong

36. Slide 36: Greek market opportunity

    Greek market opportunity  NPL management is the biggest challenge of the Greek banking system due to the size of NPLs (€94.4bn as of YE 2017) and the impact it could have on the recovery of the real economy  Greece is an early stage market without a real servicing sector and with a new regulatory

37. Slide 37: Greek NPL Landscape

    Greek NPL Landscape New Legal resolution framework Legal Reforms Judicial Reforms Servicing Player Establishment  New classification for Greek debtors  Establishment of special chambers in  New legal framework for experienced with less protective approach Peace Courts NPL management companies to

38. Slide 38: Greek Branch Structure

    Greek Branch Structure  doBank set-up its first foreign branch in 1Q18 through passporting of banking license  Branch operative since April with c.30 FTE by June 2018 specialized in both NPL liquidation and restructuring with Greek talent and additional Italian staff involved in the project  Simp

39. Slide 39: doBank approach to SME common exposures in Greece

    doBank approach to SME common exposures in Greece The Context Main benefits of the approach  The consolidation of the Greek banking  Making un-cooperative borrowers market naturally brought debtors to have cooperate through coordinated legal exposures to the four banks pressure  This affects NPL

40. Slide 40: Greece Additional Potential Development

    Greece Additional Potential Development NPL Stock in the Greek Market 2Q17 -YE191 € bn  Portfolio sales estimated at ca. €12bn by 2019 20.1 (60% unsecured, 40% SME/Corporate secured), system needs collections beyond Greek banks 101.8 current capabilities (21.1) (3.5) (10.6)  doBank accredited with

41. Slide 41: The NPL factory

    The NPL factory Carlo Vernuccio – Head of NPL management Andrea Giovanelli – Head of UTP and Banking

42. Slide 42: Expanding across the value chain

    Expanding across the value chain Company as is doBank 2018-2020 Core Activities Developing activities Bad UTP Loans servicing Bad Loans and Ancillary UTP servicing Products New Services New Products Structured Ancillary Products Finance for NPLs New Countries Banking Co-investment products Co- Data

43. Slide 43: doBank positioning in high value activities as a pure servicer

    doBank positioning in high value activities as a pure servicer Advisory and Credit  NPL management is a non core NPL ownership strategy collection activity for banks & corporates Phases of NPL  doBank is a unique player that can  Purchase of credit  Master servicing  Collection enforcement Mana

44. Slide 44: Focus on NPL: Product and Services offering

    Focus on NPL: Product and Services offering Product / Description Company Revenue Driver Service 1  Base fee: tied to  Includes three main activities: (i) credit management, focused on GBV Credit judicial / extrajudicial credit recovery, (ii) management & disposal management (e.g. REOCO) of assets

45. Slide 45: Loan lifecycle – Management Workflow

    1 Loan lifecycle – Management Workflow Data Acquisition  To develop customer segmentation and assign debtor Onboarding cases to recovery strategies, Storage of files doBank carries out a broad set of activities, from due diligence of the loan portfolio to the implementation Clustering Clustering an

46. Slide 46: Strong capability to on-board loans, clustering as a key factor

    1 Strong capability to on-board loans, clustering as a key factor  doBank has massive, automatized on-boarding processes Data Acquisition  During the last year, doBank could on-board hundred thousands of files in a short time thanks to its capabilities, experience and IT systems (e.g. FINO, MPS) 

47. Slide 47: Strategy definition is pivotal phase for successful management

    1 Strategy definition is pivotal phase for successful management The entire business planning activity is done Data Acquisition with the support of the IT platform Context guided form Detailed forecasts Detailed Legal Expenses Storage of file Assumptions included in information Output document the f

48. Slide 48: Settlement and closing

    1 Settlement and closing Data Acquisition Closing  Discounted payoffs or repayment plan Storage of file information Extra-judicial solution  Credit sale Clustering and  Borrower cooperation agreement allocation  Foreclosure Start of management  Auction and repossess Positive conclusion  Bankru

49. Slide 49: Improvements in recovery performance

    1 Improvements in recovery performance  doBank as independent servicer has proven track record in improving collections after taking over servicing of NPL portfolios from commercial banks and investors UniCredit Case Study Investors portfolios performance1  In UniCredit’s case, recovery results af

50. Slide 50: Reporting

    1 Reporting  In order to support the asset management team, doBank developed specific reporting for asset managers used in daily activities  The new reporting is based on the following criteria:  Synthesis: in just 3 pages the AM can monitors his portfolio having a clear view of collections perfo

51. Slide 51: Master Servicing and structuring of securitizations

    2 Master Servicing and structuring of securitizations  Master servicer performs different activities in a securitization, both regulated and ancillary  doBank provides services to the investors from the structuring of the securitization to the SPV management Accounting and Portfolio and/or Loan Ad

52. Slide 52: Due Diligence capability

    3 Due Diligence capability  Due diligence scope is to define the valuation of a portfolio through the analysis of available documentation  Based on valuation and management strategies applied, the asset manager determines the recovery cash flow expectations in terms of time and volumes (Business P

53. Slide 53: Co-Investment

    4 Co-Investment  Co-investments instrumental to win new servicing mandates and subject to the Group being servicer of overall NPLs portfolio and leading underwriting due diligence  Co-investment strategy focuses on investing across the capital structure, however investment only in mezzanine and ju

54. Slide 54: doBank ancillary services

    doBank ancillary services IPO Plan Target Higher penetration + new contracts Target reached without M&A √ Business area Brand Key services 1  NPL business info Business information  Data quality management  Valuation Real Estate  Auction facilitation management  REOCO To be merged in the listed

55. Slide 55: doBank ancillary services: focus on doData offering

    doBank ancillary services: focus on doData offering  Extensive expertise in managing large sets of complex data enables the creation of data quality products  doData offers a complete solution to improve NPL specific data sets at banks, with a focus on the real estate component  As a result, bank

56. Slide 56: Features of the UTP market and doBank's core capabilities

    Features of the UTP market and doBank's core capabilities GBV already  €1.8bn from UniCredit UTP (residential  Dedicated team already operative both Top class under mortgage) in front and back office activities team management UTP Market Features doBank track record and capabilities  70% of its N

57. Slide 57: Rationale of doBank proposal for UTP

    Rationale of doBank proposal for UTP Objective Success Key Market opportunity and key features  Enhance credit management  The success keys of this efficiency through a best in Servicing structure are: class team, with a thorough  Large volumes  Speeding up of financial understanding of main  D

58. Slide 58: doBank UTP operating model

    doBank UTP operating model  doBank is structured in order to carry out two different, but interconnected core activities: Servicing and Financing activities  A Back-office Team will support both the Restructuring and Financing Team Financing Team Restructuring Team Performing Financing activities,

59. Slide 59: doBank role in the UTP management process

    doBank role in the UTP management process  doBank, already the largest independent servicer of UTP in Italy, will offer restructuring expertise and its active portfolio management process, for an attractive fee structure  When appropriate, doBank will be able to offer co-financing along other inve

60. Slide 60: Business model for the new Bank

    Business model for the new Bank  Other than UTP management, follow up of existing banking activities along same clear principles:  Sustain the existing fee business of doBank, providing a further competitive advantage  Provided that there is a privileged insight and understanding of creditworthin

61. Slide 61: Financial Review

    Financial Review Manuela Franchi, Chief Financial Officer

62. Slide 62: Key financials – Execution of IPO plan

    Key financials – Execution of IPO plan  A resilient business, able to grow revenues and expand margins  Internal levers enabling quality top-line growth and progressively higher profitability and cash flows GBV under management/ EBITDA Net Cash Position Gross Revenues €m €m -5% +3% €81bn €77bn >€6

63. Slide 63: GBV dynamics

    GBV dynamics  GBV trend is a pivotal driver for loan servicers, impacted by several factors  A loan servicer is “good for all seasons”  In a positive macro cycle, the GBV will reduce faster owing to more collections and lower new flows  On the opposite, inflows will increase in a negative macro

64. Slide 64: GBV Evolution and key assumptions

    GBV Evolution and key assumptions  Conservative planning assumptions underlying key variables of GBV evolution in 2018-2020 €bn 85.2 12.1 87.5 80.9 3.0 76.7 0.3 (3.4) 1.7 (0.3) (1.8) (0.4) (0.9) (3.7) YE 2015 YE 2016 Portfolio Collections Write offs Inflows Inflows YE 2017 Portfolio Collections Wri

65. Slide 65: Portfolio features support growing profitability with low risk

    Portfolio features support growing profitability with low risk Key features of doBank portfolio Implications for doBank YE 2016 Q1 2018 Third party Lower risk profile vs debt purchasers: servicing vs Third-party Third-party 1. Servicing third-party portfolios via long-term contracts Owned 100% 100%

66. Slide 66: Collection rate dynamics

    Collection rate dynamics  Large, corporate, secured assets tend to have long recovery curves in need of proactive asset management  Collection amounts linked to collection costs, ensuring high profitability at each stage of the process  doBank’s improvement in collection rates based on internal l

67. Slide 67: Tiered fee structure aligns interests of clients and doBank

    Tiered fee structure aligns interests of clients and doBank  Performance-based and recurring revenues provide downside protection and upside potential to doBank  Client and portfolio mix are key to protect pricing power and stay focused on most profitable sub-segments Gross revenue breakdown Reven

68. Slide 68: Revenue drivers of new business

    Revenue drivers of new business  doBank is focused on developing growth in contiguous markets both by product and by country  Current expertise in Italian NPL and UTP is fundamental in the development of the new activities Business Model and Service Offering 2018-2020 Expectations Servicing + opti

69. Slide 69: Group Revenue outlook in 2018-2020

    Group Revenue outlook in 2018-2020 Consolidated Revenue Targets 2018E 2017A-2020E  Gross Revenues >€230m driven by  Gross Revenues 8%-9% CAGR in 2017A-2020E  Significant new GBV under management  New GBV wins of €15bn over the plan post (+€3-5bn in 2Q-4Q18, +€15-17bn in 2018FY) 1Q18 (Italy bad l

70. Slide 70: Strict cost control to support profitability growth

    Strict cost control to support profitability growth Operating Costs Breakdown Main Efficiency Projects Plan Target 2017A-2020E 100  Centralized purchasing 100  Cost control >15% EBITDA CAGR SG&A 12 12  New territorial footprint Real Estate 7 5  Continuation of initiatives to re- negotiate rental

71. Slide 71: Deployment of New Group structure: financial impacts

    Deployment of New Group structure: financial impacts Lever Description of initiative Nature of impact  Reductions of SG&A and HR costs Yearly recurring Operating cost savings  Upfront redundancies costs related to ca. 7% FTE reduction One-Off  More efficient applicable tax regime,  Cost of DTA r

72. Slide 72: M&A and capital deployment guidelines

    M&A and capital deployment guidelines  New organizational structure provides doBank with significant firepower for M&A  Use leverage up to ~3x net debt/EBITDA  Priority in use of capital is deployment to capture new sources of growth in same/contiguous markets  Alternative use of excess cash to

73. Slide 73: Group 2018-2020E guidance

    Group 2018-2020E guidance €m 8%-9% Revenue CAGR in 17A-20E  New GBV: ca. +€15bn in 2018-2020 in Italy bad loans post 1Q18, plus growth in UTP and Greece GBV Gross  Protect premium pricing, selective deployment of Revenues >230 213 operating machine to GBV with highest returns  Continue improving

74. Slide 74: Closing Remarks

    Closing Remarks Andrea Mangoni – Group CEO

75. Slide 75: Key strategic pillars of doBank business plan

    Key strategic pillars of doBank business plan  Continue exploiting Italian NPL market opportunity  Develop in contiguous products/markets (UTP, Greece) Increase  Extract value with ancillaries (Commercial info, Data Quality, Real revenue per GBV Estate and Judicial services)  Build on Experience

76. Slide 76: Appendix

    ra a] ra o 2 2 <

77. Slide 77: Condensed consolidated income statement

    Condensed consolidated income statement (€/000) Condensed consolidated income statement Year Change First Quarter Change 2017 2016 PF Amount % 2018 2017 Amount % Serv icing rev enues 196,554 191,754 4,800 3% 41,947 41,721 226 1% o/w Banks 159,763 169,305 (9,542) (6)% 27,053 38,454 (11,401) (30)% o/w

78. Slide 78: Consolidated balance sheet

    Consolidated balance sheet (€/000) Main consolidated balance sheet items 3/31/2018 12/31/2017 Financial assets 83,965 76,303 at fair v alue through profit or loss 22,853 22,998 at fair v alue through comprehensiv e income 1,002 1,003 at amortised cost - loans and receiv ables with banks 55,645 49,44

79. Slide 79: Consolidated cash flow

    Consolidated cash flow (€/000) Cash Flow 31/03/2018 31/03/2017 EBITDA 11,001 9,861 Net Capex (439) (722) EBITDA-Capex 10,562 9,139 as % of EBITDA 96% 93% Adjustment for accrual on share-based incentiv e system payments 1,607 - Changes in NWC (4,162) (13,786) Changes in other assets/liabilities 1,842

80. Slide 80: Key Performance Indicators

    Key Performance Indicators (€/000) Key performance indicators 3/31/2018 3/31/2017 12/31/2017 12/31/2016 PF Gross Book Value (Eop) - in millions of Euro - 87,523 82,496 76,703 80,901 Collections for the period - in millions of Euro - 374 394 1,836 1,694 Collections for the Last Twelv e Months (LTM) -

81. Slide 81: Disclaimer

    Disclaimer This presentation contains certain forward-looking statements that reflect the doBank S.p.A.’s (“doBank” and/or the “Company”) management’s current views with respect to future events and financial and operational performance of the Company and its subsidiaries These forward-looking state

doBank — Investor Day (June 2018) on 6ix