Efg International Ag · SIX:EFGN
Efg International — FY2008 Earnings Presentation
64 slides from Efg International's earnings presentation, Feb 25, 2009
Slide 1: Full year results presentation 2008
Full year results presentation 2008 Zurich, 25 February 2009 Practitioners of the craft of private banking 1
Slide 2: Disclaimer
Disclaimer This presentation has been prepared by EFG International solely for use by you for general information only and does not contain and is not to be taken as containing any securities advice, recommendation, offer or invitation to subscribe for or purchase any securities regarding EFG Intern
Slide 3: Introduction
1.0 Introduction Lonnie Howell, CEO 2.0 Performance 3.0 Acquisitions 4.0 Achievements, outlook 5.0 Summary 3
Slide 4: An extremely challenging business environment
An extremely challenging business environment External factors resulting in highly testing conditions • High levels of uncertainty. • Falling and volatile equity markets. • Strength of the Swiss franc vs. major currencies. • Banking failures / financial scandals. • Wider concerns over stability of f
Slide 5: Against this backdrop, a robust performance
Against this backdrop, a robust performance Year on year CROs 31% to 726 AUM 21% to CHF 77.2 billion Net new assets & increase Broadly flat overall, but to CHF 13.2 billion record PB inflows in client loans (PB inflows CHF 18.2 billion) Revenues / revenues to CHF 946 million / 4% / 10% excluding non
Slide 6: An inevitable impact on EFG International
An inevitable impact on EFG International Market and economic conditions had significant impact on: • Value of clients’ Assets under Management. • Inflows and rate of growth. • Specialist product businesses. • Insurance distribution and valuation. In turn, implications for business priorities and wa
Slide 7: Range of achievements in challenging conditions
Range of achievements in challenging conditions • Record CRO hiring, and record pipeline. • Strong, double digit performance in net new assets. • Risks well controlled, and avoided major pitfalls. • Strengthened capital position; benefit from strong liquidity. • Underlying CRO productivity maintaine
Slide 8: Performance
1.0 Introduction 2.0 Performance Rudy van den Steen, CFO 3.0 Acquisitions 4.0 Achievements, outlook 5.0 Summary 8
Slide 9: 2007 vs. 2008
2007 vs. 2008 (in CHF million) 2007 2008 Change Operating income 913.8 946.3 3.6% Operating expenses (520.8) (657.8) 26.3% Provision for operating and credit losses (1.0) (15.4) NM Amortization of acquisition related intangibles (21.2) (51.7) 144% Profit before tax 370.8 221.3 -40.3% Income tax expe
Slide 10: Life Settlement Policies and IFRS impact
Life Settlement Policies and IFRS impact Non Recurring P&L item of CHF 59 mn •1H08 investment gain through P&L of CHF 49 mn related to write up of Life Settlement Policies (“LSP”), net of 2H08 CHF 108 mn write-down through P&L on LSP’s in late 2008 from non-cash, non economic, unrealised valuation c
Slide 11: IFRS vs. Proforma
IFRS vs. Proforma (in CHF million) IFRS Non-recurring Proforma Operating income 946 +59 1,005 Operating expenses (658) (658) 288 +59 347 Provision for operating and (15) (15) credit losses Amortization of acquisition (52) (52) related intangibles Profit before taxes 221 +59 280 Taxes (25) (25) Minor
Slide 12: Proforma Stable Currency P&L
Proforma Stable Currency P&L Reversing Proforma Stable Proforma Stable (in CHF million) IFRS Estimated FX Currency with Non Currency Impact Recurring Operating income 946 +135 1,081 1,140 Operating expenses (658) (64) (722) (722) 418 288 +71 359 Provision for operating and (15) (15) (15) credit loss
Slide 13: 1H vs. 2H adjusted for non-recurring item
1H vs. 2H adjusted for non-recurring item (in CHF million) 1H 2008 2H 2008 Change Operating income 478.6 526.7 10.1% Operating expenses (312.1) (345.7) 10.8% Provision for operating and credit losses - (15.4) NM Amortisation of acquisition related intangibles (22.2) (29.5) 32.9% Profit before tax 14
Slide 14: Operating income
Operating income (in CHF million) • 17.3% increase in net interest income • 3.1% decline in net fee & commission 1,005.3 income due to fee & commission income of 913.8 CHF 159 mn from acquisitions closed in 59.0 946.3 2008 – offset by lower transaction volume on 79.6 88.0 pre-2008 business. 244.4 •
Slide 15: Key performance indicators
Key performance indicators Revenue-generating Net new assets* Operating income RoAUM Net profit AUM (in CHF bn) (in CHF bn) (in CHF mn) (in bps) (in CHF mn) 18.7 1,005.3 94.0 946.3 119 112 332.0 280.9 13.7 11.8 913.8 75.4 221.9 106 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 Net new money of C
Slide 16: Return on AUM
Return on AUM Return on AUM Average AUM development (in bps) (in CHF bn) 89.5 119 119 112* 76.5 106 107 2006 2007 2008 2007 2008 • 107 bps RoAUM on IFRS • Average revenue-generating AUMs are up by 17% y-o-y. • 112 bps on Proforma • Significant decline in AUMs at the end of the year (last 6 weeks) *
Slide 17: AuM: the story behind the numbers
AuM: the story behind the numbers AUM development (incl. announced acquisitions in 2007; in CHF bn) • Annual growth rate of 14% in net new assets & client loans 94.0 • Private Client growth rate in net MBAM & new assets was 19.4% CMA 8.8 -11.3 75.4 • Substantial negative FX impact through strength o
Slide 18: Net new private client assets
Net new private client assets • CHF 18.2 bn net new money for full year from Private Client business 13.5 • Current growth drag - Deleveraging - No liquidity inflows from trade sales and IPOs 6.4 - Negative global wealth 5.4 creation 4.9 4.7 0.2 4.6 3.0 • Current generation trend remains in line wit
Slide 19: Regional breakdown of Assets under Management
Regional breakdown of Assets under Management Assets under Management – by region (in CHF bn)* • UK AUMs up in local currency terms at GBP 8.6 bn despite relatively high UK equity Other Switzerland exposure of Harris Allday business 14.5 • Swedish AUMs impacted by market action 18.7 (14.3) and curre
Slide 20: Breakdown of Assets under Management
Breakdown of Assets under Management Assets under Management – by category (in CHF bn) Other • Negative investment performance: Hedge Funds/ Funds of HFs 2.5 Cash & Deposits Equities: -40% / -45% 16.8 Hedge Funds: -20% 28.9 Structured products: -30% Bonds: flat Loans 10.3 6.7 14.4 • During FY 2008 m
Slide 21: Operating expenses
Operating expenses Personnel expenses (in CHF m) Other operating expenses (in CHF m) Cost-income ratio* (in %) 69.5 447.4 65.4* 191.0 365.8 142.7 57.0 2007 2008 2007 2008 2007 2008 • Total personnel expenses increased by • Non-compensation ratio at 20.2% * CIR = Ratio of operating expenses before 22
Slide 22: Development of provisions, amortisation and tax rate
Development of provisions, amortisation and tax rate Provision for operating and credit Amortisation of acquisition Effective tax rate losses related intangibles (in CHF mn) (in %) (in CHF mn) 51.7 11.5 21.2 10.9 15.4 1.0 2007 2008 2007 2008 2007 2008 • Provisions have been made for • Increase mainl
Slide 23: Net profit IFRS
Net profit IFRS (in CHF million) 2007 2008 Change Profit before tax 370.8 221.3 -40.3% Income tax expense (40.6) (25.5) Tax rate 10.9% 11.5% Consolidated net profit 330.2 195.8 -40.7% Minorities 1.8 26.0 Net profit for period 332.0 221.9 -33.2% Estimated preference dividend (29.8) (30.3) 1.7% Net pr
Slide 24: Balance sheet highlights
Balance sheet highlights y-o-y (in CHF million) Dec 31, 2007 Jun 30, 2008 Dec 31, 2008 variation Loans and advances to customers 7,920 8,510 7,424 -6.3% Due to customers 13,580 15,515 14,213 +4.7% Change vs. Dec 31, 2007 Jun 30, 2008 Dec 31, 2008 Jun 2008 Acquisition related intangible assets 1,179
Slide 25: Capital developments
Capital developments • BIS Tier 1 ratio of 13.2%, up from 11.3% at the 30 June 13.2% Tier 1 Ratio – low leverage • EFG International redeemed EUR 100 million Tier 2 / (in CHF billion) 2007 2008 Subordinated Floating Rate Notes on 17 December 2008 Risk Weighted Assets • BIS Risk weighted assets optim
Slide 26: Dividend proposal
Dividend proposal Proposed ordinary dividend of CHF 35.5 million or CHF 0.25 per share (in CHF million) • Proposing dividend of CHF 0.25 per share to AGM. 2008 • Payout ratio of approx. 19% vs Net profit attributable 191.6 17% previous year. Proposed ordinary dividend 35.5 Payout ratio 19.0% Propose
Slide 27: Breakdown of balance sheet
Breakdown of balance sheet Total assets: CHF 18.9 bn Total liabilities & equity: CHF 18.9 bn Generally AA rated banks & implicitly Due to banks 0.4 Cash & due Gov‘t backed from banks 3.8 Sovereign / AAA Treasury bills 0.1 2.7 highly rated Banks Derivatives 0.4 0.3 highly rated US life Available 0.1
Slide 28: Acquisitions
1.0 Introduction 2.0 Performance 3.0 Acquisitions Rudy van den Steen, CFO 4.0 Achievements, outlook 5.0 Summary 28
Slide 29: Acquisition progress
Acquisition progress Four acquisitions announced in 2007 and completed in 2008 • A&G Group. • On Finance. • Stratcap Securities India. • Marble Bar Asset Management. One acquisition announced and completed in 2008 • Sycomore Gestion Privée. 29
Slide 30: Acquisition progress (cont.)
Acquisition progress (cont.) On Finance Continued to perform satisfactorily; integration smooth. Platform for extending in Lugano when the time is right. StratCap Securities India A&G Group • Entry into Indian wealth management market. Merging existing EFG branch / operations • Mumbai-based provider
Slide 31: Acquisition progress (cont.)
Acquisition progress (cont.) Marble Bar Asset Management • Despite an extremely challenging environment (in CHF million) 2008 MBAM has continued to adhere to its investment Management fees 102 principles and performance guidelines. Incentive fees 34 • During 2008 MBAM's four benchmark funds returned
Slide 32: Sycomore Gestion Privée
Sycomore Gestion Privée • Entered French market in July 2008 - completion of Sycomore Gestion Privée. • Specialist wealth manager. Focus on advice, open architecture and total return. • Total clients' AUM CHF 800 million. Five employees, including 4 CROs at time of acquisition. Seven CROs by year en
Slide 33: Outlook on M&A
Outlook on M&A • Explored various potential opportunities during 2008, but in light of market conditions, important to build up capital. • Looking ahead, sees acquisitions continuing to play a role in development. • However, focus remains on conserving capital. For as long as conditions remain uncer
Slide 34: Achievements, outlook
1.0 Introduction 2.0 Performance 3.0 Acquisitions 4.0 Achievements, Lonnie Howell, CEO outlook 5.0 Summary 34
Slide 35: Setting the scene – have avoided credit pitfalls
Setting the scene – have avoided credit pitfalls In some of the most challenging market conditions in living memory: • Not involved in sub-prime. • Cautious approach to counterparty risk – exposure to organisations that ceased trading minimal. • No impact on profit anticipated from Madoff. • Had to
Slide 36: Our strategic business levers
Our strategic business levers Strong activity in 2008 across our strategic business levers CRO recruitment. Diversification benefits from geographical spread. Broadening and deepening client relationships. Expansion of international presence and capabilities. Growth through acquisition. Strengthenin
Slide 37: CRO recruitment
CRO recruitment Progress Record level of CRO hiring during 2008. Addition of 172 CROs (168 through organic hiring). Strength across all regions. 726 +31% Drawn from wide range of high quality competitors. 554 Outlook 524 Prospects are bright. • Record pipeline, across range of organisations. • Scope
Slide 38: Benefits of a broad geographical spread
Benefits of a broad geographical spread Given exceptional conditions, good progress internationally in local currency terms UK - income* +20%; profit +30%. Luxembourg – AUM +50%; CROs +75%. Canada – good progress; employs c. 20 CROs. Spain – income* +20%; CROs +50%. Americas – continued Middle East
Slide 39: Broadening & deepening client relationships
Broadening & deepening client relationships Retained appeal among wealthy clients. • Continuity more important than ever. • CROs working hard to help clients navigate this point in the cycle. UHNWIs a core strength, but a year of two halves • Strong inflows in H1 2008. • Falling back significantly i
Slide 40: Moving into new and attractive markets
Moving into new and attractive markets Canada Continued to extend reach; developing new onshore markets New offices in St. Sweden China Catherine’s, Vancouver, UK Montreal. Moved to larger Application: rep New presence premises. office in Beijing. Application: federally in Midlands. chartered deposi
Slide 41: Acquisitions – progress
Acquisitions – progress Good progress in integrating acquisitions Integration of acquisitions announced in - A&G Group. 2007 and completed in 2008 progressed - On Finance. smoothly in all cases. - Marble Bar Asset Management. - Stratcap Securities India. EFG Gestion Privée - completed July 2008 – a
Slide 42: Cost and comp calibration / functional strengthening
Cost and comp calibration / functional strengthening Calibrating business to ongoing levels of activity • Mindful of cost base and run rate. • Flex CRO hiring to align with overall business performance. • Maintaining freeze on non-client facing employees. • Salaries generally being held at existing
Slide 43: Building product and service capabilities
Building product and service capabilities Specialist businesses demonstrated capabilities in testing conditions, but impact of broader industry issues Also steps to harness product / service capabilities for the benefit of group C.M.Advisors Marble Bar Asset Management • Outperformed most funds of h
Slide 44: A step change in marketing
A step change in marketing Continued strong, cost-effective progress in raising profile UK Sweden Cartier International Polo, Knytkalaset (dressage) London Scandinavian Polo Open London Jazz Festival Athletics DesignArt London Other Europe USA Le Mans Classic EFG Bank China team – Palm Monaco JLC Po
Slide 45: Summary
1.0 Introduction 2.0 Performance 3.0 Acquisitions 4.0 Achievements, outlook 5.0 Summary Lonnie Howell, CEO 45
Slide 46: General backdrop not helpful
General backdrop not helpful • Confidence in banks substantially undermined. • Financial markets extremely challenging. • Global economy in severe recession. • Questions over length and depth of downturn. • Confidence in wealth management undermined by scandals. • Also heightened pressure on offshor
Slide 47: EFGI not immune to external effects
EFGI not immune to external effects • Market / currency movements significantly reduced AUM. Implications for revenues. • Clients were cautious; “wait and see” attitude. Reluctant to commit to “riskier” asset classes. • Impacted EFGI’s specialist product businesses. Insurance sales did not materiali
Slide 48: Managing the business prudently
Managing the business prudently Environment requires business to be managed appropriately • Freeze on non-CRO hiring. • Flex CRO hiring to align with overall business performance. • Typically no salary increases. • Restricted stock component to bonuses. • Generally looking at ways of making the busi
Slide 49: Better placed than most
Better placed than most Against challenging backdrop, believe EFGI better placed than most • Hopeful will see light at end of tunnel during 2009 – due to concerted, proactive government action. • Clients retain confidence in EFGI – well capitalised, profitable and strong liquidity. • Avoided major m
Slide 50: Fundamentals remain strong
Fundamentals remain strong Fundamentals, based on factors within our control, remain strong • CRO hiring. • CRO productivity. NNA of CHF 30 m per CRO still being achieved. And achieved by 2007 hires in 2008. • Plenty of scope to raise profile further – spend less, but achieve as much in light of fal
Slide 51: Challenges and opportunities for product specialists
Challenges and opportunities for product specialists Particularly challenging times for specialist product businesses. But needs to be seen in context: • C.M. Advisors still profitable, and AUM higher than when acquired. • MBAM has delivered re investment performance. Penalised by virtue of no restr
Slide 52: A business with generic strengths
A business with generic strengths A track record of • Confidence from delivering in past difficult success. markets. • Challenging times bring opportunities – intend to capitalise on them (while being selective). Geographical spread. • Benefits of diversity: in 55 locations in over 30 countries; 19
Slide 53: Medium-term targets - 2010
Medium-term targets - 2010 Highly stretching targets for 2010: Hired 168 CROs in 2008. Confident can achieve Number of CROs: 1,000. target, but will flex hiring to reflect performance. CROs generate on average CROs continue to attain these levels. CHF 30- 40m in AUM p.a. Confident will be sustainabl
Slide 54: Practitioners of the craft of private banking
Practitioners of the craft of private banking www.efginternational.com 54
Slide 55: Appendix
6.0 Appendix 55
Slide 56: Consolidated income statement (unaudited)
Consolidated income statement (unaudited) (in CHF million) 2007 2008 Change Net interest income 244.4 286.6 17.3% Net banking fee & commission income 589.8 571.7 -3.1% Net other income 79.6 88.0 10.6% Operating income 913.8 946.3 3.6% Operating expenses (542.0) (709.5) 30.9% Provisions for operating
Slide 57: Consolidated balance sheet (unaudited)
Consolidated balance sheet (unaudited) (in CHF million) Dec 2007 Dec 2008 Change Cash and balances with central banks 74 115 55% Treasury bills and other eligible bills 795 74 -91% Due from other banks 3,501 3,731 7% Derivatives 223 387 74 Financial instruments 4,141 5,168 NM Loans and advances to c
Slide 58: Life Settlement Policies and IFRS impact
Life Settlement Policies and IFRS impact • Portfolio of US Life Settlement Insurance Policies (“LSP”) acquired Q4 2007 for a cost including subsequent premium payments of USD 610 million • 23 Life Insurers regulated by the U.S. California Department of Insurance • Review of Life Expectancies perform
Slide 59: Assets under Management and Administration
Assets under Management and Administration Assets under Management and Administration (in CHF bn) 106.9 8.6 4.3 86.0 11.1 8.8 1.8 82.9 75.4 FY 2007 FY 2008 Revenue-generating Announced acquisitions EFG International Shares Assets u. Administration XX (XX) 59
Slide 60: Breakdown of Assets under Management
Breakdown of Assets under Management By category 31.12.07 31.12.08 Cash & Deposits 27.0% 28.9% Bonds 10.0% 14.4% Equities 18.9% 20.4% Structured products 8.2% 6.7% Loans 9.6% 10.3% Hedge Funds / Funds of HFs 13.1% 16.8% Other funds* 12.3% - Other 0.9% 2.5% Total 100.0% 100.0% By currency 31.12.07 31
Slide 61: Calculation of Tangible Equity / Leverage Ratio
Calculation of Tangible Equity / Leverage Ratio Calculation of Tangible Equity in % of Total Assets / Leverage Ratio (in CHF million) Core capital 789 Total assets 18,877 Gross goodwill & intangible (1,763) assets Tangible assets 17,114 Core Capital / Total Assets net 4.6% of goodwill and intangible
Slide 62: Changes in Equity
Changes in Equity (in CHF million) Equity 31 Dec 2007 2,439 Ordinary dividend (50) Preferred dividend (30) Purchase of treasury shares (68) Minority interests acquired in Group Companies 93 Employee stock option plan 20 Total Investments available-for-sale Revaluation in 1H08 of LSP‘s 49 Revalutaion
Slide 63: Equity impact of FX translation differences
Equity impact of FX translation differences Long-term exposure Depreciation 2008 to subsidiaries GBP 250 million -32% USD 650 million -6% EUR 200 million -10% SEK 370 million -22% CHF 299 million in FX difference 63
Slide 64: Contacts
Contacts Media Investors Strategic Marketing & Communications EFG International Investor Relations • Keith Gapp, Head of SMC • Jens Brueckner, Head of Investor Relations • Telephone: +41 44 226 1217 • Telephone: +41 44 226 1799 • E-mail: keith.gapp@efggroup.com • E-mail: jens.brueckner@efggroup.com