Alior Bank Sa · GPW:ALR
Alior Bank Sa — Investor Presentation (March 2017)
65 slides from Alior Bank Sa's investor presentation, March 2017
Slide 1: Alior Bank strategy 2017-2020 "Digital disruptor"
Alior Bank strategy 2017-2020 “Digital disruptor” March 2017
Slide 2: Today's presenters: Management Board of Alior Bank
TODAY’S PRESENTERS: MANAGEMENT BOARD OF ALIOR BANK Małgorzata Krzysztof Joanna Witold Barbara Wojciech Katarzyna Bartler Czuba Krzyżanowska Skrok Smalska Sobieraj Sułkowska HR Business Indirect Sales Finance Development & IT CEO Risk Division Division Division Division Division Division with Alior s
Slide 3: Agenda
AGENDA Market context Strategy ROE growth potential & KPIs
Slide 4: Alior Bank today
ALIOR BANK TODAY Top10 universal bank in Poland Strategically focused to adapt swiftly to new challenges Best-in-class technological platform No wholesale funding, no proprietary trading Balanced loan book Proven M&A track record Strong broad management team Alior Bank well positioned
Slide 5: Rapid client migration to digital channels
RAPID CLIENT MIGRATION TO DIGITAL CHANNELS Share of branches in transactions Share of mobile banking in transactions – retail banking – retail banking 60% 50% 46% 40% 42% 40% 32% 26% 27% 20% 13% 5% Poland world Poland world 2 years ago now in 3 years 2 years ago now in 3 years Source: UBS Evidence L
Slide 6: In Western Europe branch optimization advanced…
IN WESTERN EUROPE BRANCH OPTIMIZATION ADVANCED… Number of bank branches – index Scandinavia and Switzerland Southern Europe Western Europe Eastern Europe 2007 100 2007 100 2007 100 2007 100 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 -31,4 -24,2 -11,5 +13,2 2012 2
Slide 7: … in CEE the process has started with some delay
… IN CEE THE PROCESS HAS STARTED WITH SOME DELAY # branches FTEs Change in banking branch network – nominal change – nominal change in selected CEE countries (%) 2013-2015 2013-2015 -2,1 Bulgaria -6,4 - 80 - 2 100 -3 Croatia -3,6 - 40 - 800 -2,9 Czech Republic 2,3 - 60 + 900 -11,1 Hungary -1,3 - 350
Slide 8: Even more imminent…
FORTHCOMING BANKING BRANCH OPTIMIZATION IN POLAND EVEN MORE IMMINENT… Banking assets per bank employee (2015, € M) 27,8 25,5 20,0 15,3 11,9 2,2 Source: European Central Bank 8
Slide 9: … the only question remaining is the speed of the process
… THE ONLY QUESTION REMAINING IS THE SPEED OF THE PROCESS Population per bank branch (ths / own branches and franchise outlets) 9,6 9,1 5,2 4,8 4,6 3,2 2,8 2,6 2,7 2,4 2,1 2,2 2,0 2,3 1,7 1,6 1,8 1,8 Rapid Evolutionary 2008 2014 2015 Source: European Central Bank 9
Slide 10: FinTech entering into traditional banking territory
FINTECH ENTERING INTO TRADITIONAL BANKING TERRITORY FinTech model rapidly grabs market share in the traditionally bank-only areas Low-cost FinTech business model – idea to be adopted or a threat for regulated entities US$ 180 B – new capital infusion in FinTech with current valuation of US$ 90
Slide 11: Agenda
AGENDA Market context Strategy ROE growth potential & KPIs
Slide 12: Alior Bank strategic proposition
ALIOR BANK STRATEGIC PROPOSITION We reinforce our “digital disruptor” profile and will … lead our clients through technological revolution in banking in a safe and friendly fashion while improving return for our shareholders and ensuring high engagement of our employees throughout the whole pr
Slide 13: From the outset Alior Bank has been both digital and disruptive
FROM THE OUTSET ALIOR BANK HAS BEEN BOTH “DIGITAL” AND “DISRUPTIVE” … Disruptor Digital The largest ever start-up No IT legacy vs traditional banks in CEE in financial services sector Unique core IT architecture (Euro 400 M of initial investment) with middleware as a big competitive Enter th
Slide 14: As a digital disruptor we will embrace change in all elements of our business model
AS A DIGITAL DISRUPTOR WE WILL EMBRACE CHANGE IN ALL ELEMENTS OF OUR BUSINESS MODEL New mobile and internet banking Video-verification for customer applications onboarding Proactive approach to PSD2 - open-API banking Clients Simple end-to-end digital sales processes Partnerships with FinTechs Biome
Slide 15: As strategy is a game of choice… where Alior will not expand
AS STRATEGY IS A GAME OF CHOICE… WE ALSO KNOW WHERE ALIOR WILL NOT EXPAND IN 2017-2020 No corporate banking for very large, international clients No proprietary trading / investment banking / merchant banking International expansion limited to T-Mobile… … supplemented by international opport
Slide 16: Across the board digital disruptor strategy
ACROSS THE BOARD DIGITAL DISRUPTOR STRATEGY Clients Distribution Innovations Risk & financing Operations costs Organization Source: Alior Bank 16
Slide 17: Alior client strategy reinforced by the digital disruptor model
ALIOR CLIENT STRATEGY REINFORCED BY THE DIGITAL DISRUPTOR MODEL A truly behavioural client segmentation enabled by modern technology and extensive client data More decisive entry into daily banking i.e. building relations with clients as primary bank Clients Simplification of product offering
Slide 18: Our key competence… non-collateralized lending remains
NON-COLLATERALIZED LENDING REMAINS CLIENTS OUR KEY COMPETENCE… Market share in new sales of cash loans in Poland in 1H’16 16,4% 9,9% 9,3% 5,9% 5,9% 5,8% 5,6% 4,7% 3,7% 3,6% 3,3% 2,1% Peer 1 Alior Bank Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10 Peer 11 Source: Alior Bank, PwC 18
Slide 19: …but at the same time we enter more decisively into daily-banking segment
… BUT AT THE SAME TIME WE ENTER CLIENTS MORE DECISIVELY INTO DAILY-BANKING SEGMENT Estimated revenue pool in retail banking (PLN B, 2020) Shopping-around type of products – mainly cash loans, mortgage, term deposits ~24.5 Clients looking for the best available offer on the market Opportunistic (
Slide 20: As the first bank in Poland we are introducing a truly behavioral segmentation
AS THE FIRST BANK IN POLAND WE ARE INTRODUCING CLIENTS A TRULY BEHAVIORAL SEGMENTATION Truly behavioural segmentation for private individuals (instead of standard socio- demographic segmentation) is based on multiple data pools’ analyses Based on in-depth analysis we defined 5 priority segments
Slide 21: Behavioral segmentation allows us better to understand and address clients' needs
BEHAVIORAL SEGMENTATION ALLOWS US BETTER TO CLIENTS UNDERSTAND AND ADDRESS CLIENTS’ NEEDS Age 35 35 35 Income PLN 6-7 ths PLN 6-7 ths PLN 6-7 ths Unconventional Tech savvy/early Financial stability focused Enjoys life adopter Self finance management Influenced by trends Swift and effec
Slide 22: Alior Bank extensively simplifies retail offering…
ALIOR BANK EXTENSIVELY SIMPLIFIES RETAIL OFFERING… CLIENTS Current account One main account, customized to priority segments’ expectations Credit card Simplified offering with customer focused discount and loyalty programs Cash loan Simple and swift process – end-to-end via digital channels Mortgage
Slide 23: …and will focus on customer experience
… AND WILL FOCUS ON CUSTOMER EXPERIENCE CLIENTS NPS in the Polish banking sector 2016 27% 24% 17% 15% 14% 11% Market average 7.1% 0% -1% -2% -3% -6% -10% Peer 1 Peer 2 Alior Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10 Peer 11 Bank Our goal is to return to top position (from #3 currently
Slide 24: Thanks to technology smaller firms with product offerings available for large corpo segment
THANKS TO TECHNOLOGY SMALLER FIRMS CLIENTS WITH PRODUCT OFFERINGS AVAILABLE FOR LARGE CORPO SEGMENT MICRO & SMALL MID-CORPO Transaction revenue increase High profitability and selective financing Broader yet simple to use Financing coupled product offering with transaction business Full servic
Slide 25: Unique one-stop-shop platform Zafirmowani.pl to attract micro and small businesses
ALIOR BANK WILL USE UNIQUE ONE-STOP-SHOP PLATFORM “ZAFIRMOWANI.PL” TO ATTRACT CLIENTS MICRO AND SMALL BUSINESSES Registration of Account Accounting Complimentary Financing economic activity opening and invoicing services Registration iKonto Biznes Accounting Integration with Special offers on Alior
Slide 26: We will continue to participate in state and EU underwritten business loan financing programs
WE WILL CONTINUE TO PARTICIPATE IN STATE AND EU UNDERWRITTEN BUSINESS CLIENTS LOAN FINANCING PROGRAMS Currently Alior #3 in distribution “de minimis” state-aid program BGK (State Development Bank) plans to extend the program for 2018-2019 Our goal: keep the leading position in distribution Our
Slide 27: Attractive cash management solutions and other fee-based transaction services for mid-corpo
ATTRACTIVE CASH MANAGEMENT SOLUTIONS AND OTHER FEE-BASED TRANSACTION SERVICES CLIENTS TO BE LAUNCHED FOR MID-CORPO Share of transaction and deposit fee income in business client segment Ex-BPH BusinessNet electronic banking > 40% to be rolled out along with new cash-management offering ~ 32% cash
Slide 28: Our business clients offering supplemented by full scale leasing
OUR BUSINESS CLIENTS OFFERING CLIENTS SUPPLEMENTED BY FULL SCALE LEASING Our goal Alior Leasing to become TOP 3-5 for 2020 PLN 8-10 B leased assets value Simple, transparent and fast service across channels Diversified physical and digital distribution Complete product offering integrated
Slide 29: Alior brand will be refreshed while remaining among top 3 best recognized brands
ALIOR BRAND WILL BE REFRESHED CLIENTS WHILE REMAINING AMONG TOP3 BEST RECOGNIZED BRANDS ON THE MARKET NOW TARGET unaided: ~58% #3 Remaining among TOP 3 banking brands Brand awareness aided: ~95% #2 and keep leading position in effectiveness of marketing budget spend Class, aspiration Engagem
Slide 30: Alior distribution strategy reinforced by the digital disruptor model
ALIOR DISTRIBUTION STRATEGY REINFORCED BY THE DIGITAL DISRUPTOR MODEL Expansion of digital channels – new mobile and internet banking Distribution Optimization of branch network while remaining TOP4 in numeric distribution Digitalization and upgrade of own branches - mobile tools for bankers,
Slide 31: Expansion in digital channels key to profitable growth
EXPANSION IN DIGITAL CHANNELS DISTRIBUTION KEY TO PROFITABLE GROWTH Share of digital channels (mobile / internet) in total sales of Alior Bank 85% 65% 35% 30% 20% 12% 7% 0% Cash loan Term deposit Current account Investments 2016 Initiated in digital channel 2020 target end-to-end sales process in re
Slide 32: Our new mobile and internet banking as a strategy backbone
OUR NEW MOBILE AND INTERNET BANKING DISTRIBUTION AS A STRATEGY BACKBONE Attractive app: user-friendly with useful innovations Attractive, modern UX Simple log-in and authorization: PIN, fingerprint, PUSH “One-click away” design Contactless HCE payments, P2P mobile payments (BLIK) Fully remot
Slide 33: Alior Bank will optimize its distribution network…
ALIOR BANK WILL OPTIMIZE ITS DISTRIBUTION DISTRIBUTION NETWORK … Alior Bank distribution network – size and structure 1110 We will downsize our distribution network and change its structure ~880 own branches will be reduced by over 30% network will be dominated by small franchise outlets Franchi
Slide 34: … and will upgrade its branches
… AND WILL UPGRADE ITS BRANCHES DISTRIBUTION Our branches will be upgraded will have less cash transactions At our own branches we will have well paid bankers – best from the market equipped with top of class mobile tools allowing to launch true full fledged personal banking outside banking
Slide 35: Alior financial aggregator with online focus to be launched by end of 2017
ALIOR FINANCIAL AGGREGATOR WITH ONLINE DISTRIBUTION FOCUS TO BE LAUNCHED BY THE END OF 2017 Alior’s financial broker-aggregator will be #1 financial broker Our goal in online segment for 2020 PLN 2-3 B annual volume (cash loans, mortgage, non-banking) Best offer from the market – wide range of
Slide 36: Alior innovation capabilities at the centre of our digital disruptor strategy
ALIOR INNOVATION CAPABILITIES AT THE CENTRE OF OUR DIGITAL DISRUPTOR STRATEGY Biometrics and artificial intelligence The first bank in Poland to implement cloud-based collaboration tools (subject to regulatory consent) PSD2 as opportunity – open-API based partnerships Innovations Blockchain:
Slide 37: We are introducing biometrics & AI
INNOVATIONS WE ARE INTRODUCING BIOMETRICS & AI Biometrics Artificial intelligence Single biometrics log in to multiple channels First implementation in 2016 – award-winning (i.e. voice recognition) enhance customer Dronn experience and safety level We have already launched works on IBM Watson fing
Slide 38: We are advanced in discussion with regulator on cloud collaboration tools implementation
WE ARE ADVANCED IN DISCUSSION WITH REGULATOR INNOVATIONS ON CLOUD COLLABORATION TOOLS IMPLEMENTATION Alior Bank to benefit from tested and stable solutions from top class vendors – Google and/or Microsoft Constructive dialogue with regulator already advanced First step: e-mail and intranet com
Slide 39: We will leverage open-API banking to enhance our offer and attract new customers
WE WILL LEVERAGE OPEN-API BANKING TO ENHANCE INNOVATIONS OUR OFFER AND ATTRACT NEW CUSTOMERS Open API – must Open API – opportunity to leverage AIS PIS Data access Data analysis Bank as TPP FinTech partnerships account funds availability authentication, data analysis for aggregating data
Slide 40: Alior's unique core IT architecture will continue to be our competitive advantage
ALIOR’S UNIQUE CORE IT ARCHITECTURE INNOVATIONS WILL CONTINUE TO BE OUR COMPETITIVE ADVANTAGE Alior Bank unique core IT system architecture Future systems Middleware platform facilitates flexible integration and deployment of new applications Source: Alior Bank 40
Slide 41: Cyber-security paramount throughout the whole technology transformation process
CYBER-SECURITY PARAMOUNT THROUGHOUT THE INNOVATIONS WHOLE TECHNOLOGY TRANSFORMATION PROCESS Safe transactions in digital channels Secure customer Innovative and secure authentication and authorization methods Continuous customer education on safe banking Continuous refinement of cyber securi
Slide 42: We are investing both in technology and in people to reinforce the digital disruptor
WE ARE INVESTING BOTH IN TECHNOLOGY INNOVATIONS AND IN PEOPLE TO REINFORCE THE DIGITAL DISRUPTOR By 2020 we will invest PLN 400 M in IT and innovation projects on top of current spend in IT systems and infrastructure Almost 700 IT engineers on board – a financial services powerhouse workforce do
Slide 43: Alior operations strategy reinforced by the digital disruptor model
ALIOR OPERATIONS STRATEGY REINFORCED BY THE DIGITAL DISRUPTOR MODEL C/I market leader with important contribution of effective operations Operations processes automation robotics implementation Digitization and further streamlining of processes will also contribute do customers’ satisfaction
Slide 44: We have started streamlining operations and will further enhance and automate our processes
WE HAVE STARTED STREAMLINING OPERATIONS AND WILL FURTHER ENHANCE AND AUTOMATE OPERATIONS OUR PROCESSES C/I – Alior Bank vs market average Actions to be undertaken 55% Alior Bank with C/I below market average, but 49% further costs optimization planned continue automation of back-office functions
Slide 45: Further processes' optimization will contribute to C/I ratio improvement
FURTHER PROCESSES’ OPTIMIZATION WILL OPERATIONS CONTRIBUTE TO C/I RATIO IMPROVEMENT TO BEST IN CLASS LEVELS C/I ratio for Alior Bank 49% Distribution network optimization 39% Strong shift towards digital channels Automation Robotics Logistics / procurement 2016 2020 Our goal is to become t
Slide 46: We have already introduced robotics: our state of the art Dronn
WE HAVE ALREADY INTRODUCED ROBOTICS: OUR STATE OF THE ART DRONN SUCCESSFULLY OPERATIONS USED IN COLLECTION PROCESS… Our Dronn – fully home-made – widely acknowledged as the best robotics solution worldwide based on AI technology currently supports collection processes Currently run project w
Slide 47: …and we are rolling out robotics across the whole bank
… AND WE ARE ROLLING OUT ROBOTICS ACROSS THE WHOLE BANK – STARTING WITH THE HIGHEST OPERATIONS POTENTIAL AREAS AND FUNCTIONS Sales Support Ops Risk & Treasury Admin Branch network Potential for robotics Digital channels • Client motions • Data to multiple • Data to multiple • Treasury • HR admin sys
Slide 48: Alior risk strategy reinforced by the digital disruptor model
ALIOR RISK STRATEGY REINFORCED BY THE DIGITAL DISRUPTOR MODEL Multiple data used in credit underwriting both individual and companies Leaner risk processes with higher accuracy Limited frauds – use of new external data sources and Risk & biometrics financing costs Volume increase of current
Slide 49: Alior's loan book will remain well balanced
ALIOR’S LOAN BOOK WILL REMAIN RISK & FINANCING COSTS WELL BALANCED Alior loan book structure will remain stable Actions to be undertaken further risk diversification „we know the client”, deeper relations retail clients 56% 56% advanced statistical methods applied to risk 18% 20% modelling a
Slide 50: Further digital transformation will support costs of risk optimization
RISK & FINANCING COSTS FURTHER DIGITAL TRANSFORMATION WILL SUPPORT COSTS OF RISK OPTIMIZATION Alior Bank CoR (cost of risk) Actions to be undertaken Better quality assessment ensured by collecting 1.9% and using transactional data from daily banking 1.7% New credit and propensity models will lev
Slide 51: New strategy also enables us to decrease financing costs
NEW STRATEGY ALSO ENABLES US RISK & FINANCING COSTS TO DECREASE FINANCING COSTS Alior Bank financing costs Actions to be undertaken Long term and stable volume increase of current 2,3% accounts through daily banking and best in class < 2,0% mobile/internet banking Investment grade rating Asset
Slide 52: Alior human resource strategy reinforced by the digital disruptor model
ALIOR HUMAN RESOURCE STRATEGY REINFORCED BY THE DIGITAL DISRUPTOR MODEL Smaller but better-paid and highly engaged team Flat and flexible structure Organization IT-driven organization – already now team of almost 700 IT engineers Client centric organization – 70% of staff working for clients
Slide 53: We will keep and invest in our best employees
ORGANIZATION WE WILL KEEP AND INVEST IN OUR BEST EMPLOYEES Monthly profit for Alior from banker (index) We keep the best and reduce voluntary attrition How long Profit for Alior with Alior Bank (index) As a result of technological revolution, we will have fewer, but highly qualified employees 1 year
Slide 54: We have attractive offer for the best people
ORGANIZATION WE HAVE ATTRACTIVE OFFER FOR THE BEST PEOPLE Salaries at TOP 20% of the market Salary 70% of employees will get bonuses Attractive training Development Constant coaching and feedback “on the job” Promotion of collaboration Culture Client centricity – each employee works for
Slide 55: Customer focus – 70% of our employees will work directly for clients
CUSTOMER FOCUS – 70% OF OUR EMPLOYEES ORGANIZATION WILL WORK DIRECTLY FOR CLIENTS BENCHMARKS ALIOR NOW ALIOR 2020 Ratio FO / BO Relation FO / BO Peer 1 68 / 32 Alior Bank 62 / 38 Peer 2 67 / 33 Bank BPH 45 / 55 70 / 30 Peer 3 61 / 39 Alior Bank 56 / 44 + Bank BPH Peer 4 57 / 43 Peer 5 47 / 53 Source
Slide 56: Our unique values perfectly support digital disruptor strategy
OUR UNIQUE VALUES PERFECTLY ORGANIZATION SUPPORT DIGITAL DISRUPTOR STRATEGY to make banking simpler for our customers Simplicity to focus on value adding activities only to ensure fast reaction to changing environment Agility to embrace change as an opportunity to grow to ensure best utili
Slide 57: Agenda
AGENDA Market context Strategy ROE growth potential & KPIs
Slide 58: In 2017 we will continue our priority projects
IN 2017 WE WILL CONTINUE OUR PRIORITY PROJECTS ALL SUPPORTING DIGITAL DISRUPTOR STRATEGY M&A M&A operational merger and synergies realization Business Business Support Support new mobile & internet banking robotics / automation open-API banking / PSD2 new HR perspective blockchain biom
Slide 59: 2020 target non-financial KPIs
2020 TARGET NON-FINANCIAL KPIs Metrics 2020 Target Client NPS 45% Employee engagement 60% For us matters not only “what” but also “how” Source: Alior Bank 59
Slide 60: 2020 ROE of minimum 14%
2020 ROE OF MINIMUM 14% 14% 1% 0.5% 1% 1,5% 8% 2% 2016 Integration New client CoR Processes Financing 2020 Alior Bank of exBPH strategy enhancement automation costs stand-alone Source: Alior Bank 60
Slide 61: Acquisition of BPH core – higher synergies and integration process according to plan
ACQUISITION OF BPH CORE – HIGHER SYNERGIES AND INTEGRATION PROCESS ACCORDING TO PLAN Merger synergies higher than initially planned PLN M 2016 2017 2018 2019 by PLN 70 M Integration costs in line with plan Synergies 167 351 374 – all costs to be incurred within 2 years (2016-2017) Integration co
Slide 62: 2020 target financial KPIs
2020 TARGET FINANCIAL KPIs Metrics 2016 2020 Target Return on equity 8% 14% (Alior Bank stand alone) Net interest margin 4.5% 4.5% (with BPH 4,1%) C/I 49% 39% CoR 1.9% 1.7% Loan net growth (PLN B) 6.9 5–6 (including securitization e.g. leasing) Dividend pay-out capacity reached by 2020 assuming curr
Slide 63: Annex 1: Alior capital position 2017-2020
Annex 1: Alior Capital position 2017-2020 • Alior capital position allows for uninterrupted organic growth in 2017-202 without additional equity raise through out that period, • Each year Alior stays comfortably (~100 bps) above regulatory for CET1 and CAR ratios. 2020 CET 1 target % 2016 2020 CET 1
Slide 64: Annex 2: Macroeconomic assumptions
Annex 2: Macroeconomic assumptions 2016F 2017F 2018F 2019F 2020F GDP 2,7 3,2 3,1 3,2 3,2 Fixed assets investments (%) -4,0 5,1 5,6 7,3 7,0 Private consumption (%) 3,6 3,4 2,9 3,0 3,2 CPI – EOY (%) 0,3 1,6 2,1 2,3 2,5 CPI – avg. in a year (%) -0,6 1,3 1,9 2,2 2,4 Unemployment - EOY (%) 8,4 7,9 7,5 7,
Slide 65: Disclaimer
DISCLAIMER This presentation („Presentation”) has been prepared by Alior Bank S.A. („Bank”) and it does not constitute an offer or solicitation of an offer to purchase or acquire securities or other financial instruments issued by the Bank and it does not constitute any advice or a recommendation wi