Leonteq Ag · SIX:LEON
Leonteq — EFG Financial Products Holding — FY2012 Earnings Presentation
50 slides from Leonteq's earnings presentation, Feb 21, 2013
Slide 1: EFG Financial Products Holding AG Results Presentation FY 2012
EFG FINANCIAL PRODUCTS HOLDING AG RESULTS PRESENTATION FY 2012 Zurich, 21 February 2013 EFG FINANCIAL PRODUCTS HOLDING AG: RESULTS PRESENTATION FY 2012 1
Slide 2: Legal Disclaimer
LEGAL DISCLAIMER This presentation of EFG Financial Products Holding AG (the “Company”) serves for information purposes only and does not constitute re- search. This presentation and all materials, documents and information used therein or distributed in the context of this presentation do not const
Slide 3: Agenda
AGENDA MAIN ACHIEVEMENTS 2012 AT A GLANCE FINANCIAL RESULTS 2012 MARKET & BUSINESS UPDATE OUTLOOK & SUMMARY APPENDIX EFG FINANCIAL PRODUCTS HOLDING AG: RESULTS PRESENTATION FY 2012 3
Slide 4: Main Achievements 2012 at a Glance
MAIN ACHIEVEMENTS 2012 AT A GLANCE
Slide 5: Main Achievements 2012 at a Glance
MAIN ACHIEVEMENTS 2012 AT A GLANCE 2012 CHARACTERIZED BY STRONG PERFORMANCE … • Number of clients up 31% to 580 • Client retention rate up from 67% to 74% • Turnover up 16% to CHF 12.1 billion • Operating income up 22% to CHF 127.8 million • Average margin on turnover up from 100 to 106 bps • Cost-i
Slide 6: Financial Results 2012
FINANCIAL RESULTS 2012
Slide 7: Key Performance Indicators
KEY PERFORMANCE INDICATORS EFG FP WITH STRONG BUSINESS PERFORMANCE IN 2012 KEY PERFORMANCE INDICATORS 2012 2011 Change to 2011 Number of clients(1), (2) 580 442 31% Whereof number of clients entering into primary transactions(2) 465 370 26% Recurring primary clients(2), (3) 346 247 40% Retention rat
Slide 8: Group Net Profit Driven by Clients, Turnover and Operating Income
GROUP NET PROFIT DRIVEN BY NUMBER OF CLIENTS, TURNOVER AND OPERATING INCOME Number of clients Turnover (in CHFbn) 1000 15 800 12 Growth: 16% 600 Growth: 31% 9 465 400 370 74% 6 12.1 67% 580 10.4 200 442 346 3 247 0 0 2011 2012 2011 2012 Number of clients Primary clients Recurring primary clien
Slide 9: Income Statement
INCOME STATEMENT EFG FP HAS PERFORMED STRONGLY IN DIFFICULT MARKET ENVIRONMENT OPERATING INCOME CHFm, Y/E 31 DEC 2012 2011 Change to 2011 Net fee income Turnover (CHFbn) 12.1 10.4 16% • Primarily represents the margin earned on structured products from Net fee income 120.9 87.3 38% primary and secon
Slide 10: Fee Income Generation
FEE INCOME GENERATION WELL DIVERSIFIED BY PRODUCT / DOMICILE, WITH RISING CONTRIBUTION FROM WHITE-LABELING • EFG FP continues to focus on structured 2012 fee income investment products (opposed to leverage By domicile of intermediary By product type By type of fee income products) 3% • Broad client
Slide 11: Large Ticket Transactions
LARGE TICKET TRANSACTIONS EXCEPTIONALLY HIGH NUMBER OF LARGE TICKETS, INCL. SPECIAL OPPORTUNITIES, IN 2012 • Number of large ticket transactions in 2012 increased by Number of large ticket transactions(1) 163% compared to 2011 25 • Transactions have primarily been on product types such as 20 Credit
Slide 12: Operating Leverage
OPERATING LEVERAGE COSTS PER ISSUED PRODUCT DECLINING SIGNIFICANTLY THANKS TO SCALABLE PLATFORM • EFG FP has built a competitive advantage over time by build- Development of costs and number of issued products, Structured Solutions division ing a modern and scalable platform from ground up 7´960 • O
Slide 13: Personnel Expenses
PERSONNEL EXPENSES FTE INCREASE REFLECTING BUSINESS BUILD-UP AND INVESTMENTS INTO QUALITY OF THE TEAM FTE BREAKDOWN(1) Personnel expense evolution (CHFm) LOCATION 2012 2011 +/- 80 Switzerland 208 188 +20 60 Growth: 13% Other Europe 40 39 +1 40 Asia 22 16 +6 60.8 20 54.0 Total 270 243 +27 0 Avg. pers
Slide 14: Depreciation & Other Operating Expenses
DEPRECIATION & OTHER OPERATING EXPENSES INCREASED DUE TO ONGOING PLATFORM ENHANCEMENTS DEPRECIATION AND AMORTIZATION CHFm, Y/E 31 DEC 2012 2011 Change to 2011 • Increase in depreciation of intangible assets primarily due to Depreciation tangible assets 3.0 2.4 25% additions in IT Hardware Amortizati
Slide 15: Segmental Results
SEGMENTAL RESULTS STRONG INCREASE IN CONTRIBUTION FROM ASSET MANAGEMENT & PENSION SOLUTIONS (IN CHFm) STRUCTURED SOLUTIONS STRUCTURED ASSET MANAGEMENT CORPORATE CENTER & PENSION SOLUTIONS 2012 2011 Change 2012 2011 Change 2012 2011 Change to 2011 to 2011 to 2011 Total operating income 110.7 96.7 14%
Slide 16: Regional Development
REGIONAL DEVELOPMENT STRONG OPERATING INCOME GROWTH IN ASIA (IN CHFm) CORE REGIONS(1) EUROPEAN UNION ASIA 2012 2011 Change 2012 2011 Change 2012 2011 Change to 2011 to 2011 to 2011 Total operating income 89.0 80.2 11% 12.3 10.0 23% 9.4 6.5 45% Personnel expenses (38.2) (36.7) 4% (5.8) (5.7) 2% (6.6)
Slide 17: Capital Structure
CAPITAL STRUCTURE CAPITAL INCREASE DUE TO IPO IN 2012 Capital development in CHFm BIS Required capital in CHFm Tier 1 capital pre IPO (30 Jun 2012) 50.4 Market risk (incl. derivatives) 32.3 Net IPO proceeds 67.1 Interest rate 12.8 Other capital contributions and other effects 2.5 Equities 16.1 Equit
Slide 18: Balance Sheet Development
BALANCE SHEET DEVELOPMENT THE SIZE OF THE BALANCE SHEET IS SIGNIFICANTLY REDUCED WHILE THE P&L IS NOT IMPACTED Total assets (in CHFm) • In the context of pre IPO restructuring EFG FP (Guernsey) Ltd. was sold to EFG International and subsequently 5´000 4´215 renamed to EFG International Finance (Guer
Slide 19: Market Update
MARKET UPDATE
Slide 20: Development of Structured Products Market Size
DEVELOPMENT OF STRUCTURED PRODUCTS MARKET SIZE EFG FP IS OPERATING IN AN ATTRACTIVE MARKET • EUR 763 bn AuM invested in structured retail investment products(1) in Europe with Italy European AuM (EURbn) (EUR 204 bn) and Germany (EUR 133 bn) being the largest markets CAGR 2010 - 2012: -3.5% 1000 • Eu
Slide 21: Asset Class and Issuance Development
ASSET CLASS AND ISSUANCE DEVELOPMENT EFG FP FOCUS ON YIELD ENHANCEMENT PRODUCTS IN LINE WITH MARKET TREND Distribution of gross sales by underlying asset class in Europe, 2008-2012(1) • Driven by as solid equity market performance, sales of equity-linked products have increased to 100% 64% in 2012 v
Slide 22: EFG FP Market Position in Switzerland
EFG FP MARKET POSITION IN SWITZERLAND STRONG POSITION IN FOCUS SEGMENT Issuer of yield-enhancement exchange-listed Market share of Swiss exchange-listed structured products structured investment products (~25% market share) 25% 20% Issuer of collateralised structured products (~83% market share) 15%
Slide 23: Business Update
BUSINESS UPDATE
Slide 24: IPO of EFG Financial Products Holding AG
IPO OF EFG FINANCIAL PRODUCTS HOLDING AG A MAJOR MILESTONE FOR THE COMPANY • On 19 October 2012 EFG Financial Products Holding AG went public on SIX Swiss Exchange • EFG International reduced its stake from circa 58% to 20.3% • Founding partners and other employee-shareholders committed to long-term
Slide 25: EFG FP Investment Portfolio
EFG FP INVESTMENT PORTFOLIO INCREASED ISSUANCE OF PRODUCTS WITH EFG FP CREDIT RISK • Increased issuance of structured investment products with EFG FP stand-alone Outstanding volume of issued products with EFG FP credit risk* credit risk and build up of a bond portfolio to fund respective hedging • O
Slide 26: Risk Update
RISK UPDATE VALUE AT RISK REMAINED STABLE AT CHF 1.2 MILLION IN 2012 EFG FP runs on a daily basis Value at Risk based on 300 historical days and a 99% Total Var 2012 (in CHFk) confidence level. EFG FP runs VaR for different asset classes on a weekly basis. 2‘500 Full revaluation of the portfolio is
Slide 27: White-Labeling Partnerships
WHITE-LABELING PARTNERSHIPS WHITE-LABELING IS AN ATTRACTIVE BUSINESS CASE • Launch of a new white-labeling cooperation in June and EFG FP White-labeling Total conversion of EFG International into a white-labeling partner Turnover (CHFbn) 9.5 2.6 12.1 in October 2012 Operating Income (CHFm) 97.0 30.8
Slide 28: Our White-Labeling Partners
OUR WHITE-LABELING PARTNERS FOCUS ON BANKING AND INSURANCE PARTNERSHIPS BANKING INSURANCE * * EFG FP acts as Legal Issuer and Migros Bank as Economic Issuer. EFG FINANCIAL PRODUCTS HOLDING AG: RESULTS PRESENTATION FY 2012 28
Slide 29: Outlook & Summary
OUTLOOK & SUMMARY
Slide 30: Mid Term Strategy with a Number of Growth Opportunities
MID TERM STRATEGY WITH A NUMBER OF GROWTH OPPORTUNITIES EXPANDING OUR PRODUCT RANGE AND STRENGTHENING OUR INTERNATIONAL PRESENCE BUSINESS LINE GROWTH OPPORTUNITIES Structured Solutions • Further white-labeling partnerships • Increase operating income from regional offices vs. core regions, either thr
Slide 31: Long-Term Strategy
LONG-TERM STRATEGY CAPITALIZING ON THE STRENGTHS OF OUR PLATFORM Independent and integrated platform for structured investment products • Provide the platform to external partners thus strenghtening EFG FP’s business activities as a service provider • Expand the number of clients through our existin
Slide 32: Outlook and Priorities
OUTLOOK AND PRIORITIES FOCUS ON COST, PROFITABILITY AND RISK • Good start into 2013 and further progress to be expected in this year • Cost containment, profitability and strict risk management will remain key priorities • Currently in discussion with certain potential white-labeling candidates and c
Slide 33: Summary
SUMMARY STRONG BUSINESS PERFORMANCE 2012 Main focus on profitability, client & shareholder value Good prospects for the future, but realistic approach to growth Strong business Committed to performance & further invest in Segments & strategic progress the business, while regions, white- in 2012 keepi
Slide 34: Appendix
APPENDIX
Slide 35: EFG Financial Products Introduction
EFG FINANCIAL PRODUCTS INTRODUCTION WHO ARE WE • A modern, integrated and independent platform for structured investment solutions offering high service standards • Combines a team of experts with longstanding industry experience • Focuses on transparent and comprehensive service offering, covering
Slide 36: EFG Financial Products at a Glance 1/2
EFG FINANCIAL PRODUCTS AT A GLANCE 1/2 A LEADING INTEGRATED STRUCTURED INVESTMENT PRODUCTS PLATFORM FOCUSING ON CLIENT SERVICE… • Specialist in the structured investment products niche • Modern, integrated technology platform • Leading market share in several structured investment product market seg
Slide 37: EFG Financial Products at a Glance 2/2
EFG FINANCIAL PRODUCTS AT A GLANCE 2/2 … SERVICING A BROAD CLIENT BASE: OVER 500 CLIENTS… • Distribution through third-party intermediaries (non-exclusive), including commercial & retail banks, independent financial advisers and insurance brokers, private banks & asset managers, institutional investo
Slide 38: Share Overview
SHARE OVERVIEW EFG FINANCIAL PRODUCTS HOLDING AG Market capitalization CHF 327mn (as per 01.02.2013) Main shareholders (as per 01.02.2013) Outstanding shares 6‘666‘665 registered shares • Founding partners 25.3% Listing SIX Swiss Exchange • EFG International 20.3% Listing date 19.10.2012 • EFG FP Em
Slide 39: Management Team
MANAGEMENT TEAM CEO & Founding partner (since June 2007) • Previously at Lehman Brothers and Goldman Sachs Management team with JAN SCHOCH (35) • 13+ years of experience long term industry back- ground and expertise CFO, Deputy CEO & Founding partner (since June 2007) • Previously at Goldman Sachs a
Slide 40: Group Structure
GROUP STRUCTURE EFG Financial Products Holding AG (Zurich) 100% 100% 100% 99.98% 100% EFG Financial Products EFG Financial Products EFG Financial Products AG EFG Financial Products EFG Financial Products (Hong Kong) Ltd. (Europe) GmbH (Zurich) (Monaco) S.A.M. (Singapore) Pte. Ltd. (Hong Kong) (Frank
Slide 41: EFG FP Is Unique in the Structured Products Market
EFG FP IS UNIQUE IN THE STRUCTURED PRODUCTS MARKET WELL POSITIONED ACROSS THE ENTIRE VALUE CHAIN EFG FP Focus Offering focus Vanilla products Brokerage model for Client driven structured Proprietary trading • Many large, high quality plat- (warrants, structured investment investment products driven
Slide 42: Market Risk (1/2)
MARKET RISK (1/2) ECONOMIC REVENUES HAVE REMAINED STABLE THROUGH VOLATILE MARKETS WEEKLY ECONOMIC REVENUES(1) Economic revenues relatively stable in differ- September 2008 May 2010 March 2011 June 2012 ent market dynamics and Lehman bankruptcy bEUR 110 bailout Fukushima Spain requests bEUR positivel
Slide 43: Market Risk (2/2)
MARKET RISK (2/2) STRESS SCENARIOS TO IDENTIFY RISK CONTRIBUTION EFG FP runs daily about 500 stress tests and scenarios on HISTORICAL STRESS SCENARIOS HYPOTHETICAL STRESS SCENARIOS OTHER CONTROLLING SCENARIOS (Loss Limit of CHF 3.5m each) (Loss Limit of CHF 3.5m each) the basis of a full portfolio r
Slide 44: White-Labeling Structured Solutions
WHITE-LABELING STRUCTURED SOLUTIONS ABILITY TO LEVERAGE PLATFORM THROUGH WHITE-LABELING COOPERATIONS • The banking sector in Europe, Switzerland and Asia is currently facing a lack EFG FP of long term funding alternatives - Banks may be experiencing a funding mismatch as they address long term fundi
Slide 45: White-Labeling Pension Solutions
WHITE-LABELING PENSION SOLUTIONS FLEXIBILITY THROUGHOUT THE ENTIRE LIFECYCLE • EFG FP’s clients are insurance companies who EFG FP COOPERATION BANK - sell regular or one-off premium life insurance policies with a defined (3RD PARTY / EFG FP) benefit, e.g. a guaranteed minimum pay-out at policy maturit
Slide 46: Innovation Leadership
INNOVATION LEADERSHIP HIGH QUALITY OF SERVICES AND INNOVATION RECOGNISED BY MULTIPLE INDUSTRY AWARDS SERVICE The Swiss Derivative Awards gave EFG FP an award in 2011 and 2012 for the best investor service based on the following criteria • Quality of term sheets, brochures and customer magazines • Qu
Slide 47: Attractive Customer Proposition
ATTRACTIVE CUSTOMER PROPOSITION Y ENC SE RV PAR IC E NS A TR Transparency on risk, Service offering differ- return and performance entiated by proactively characteristics for clients supporting clients through- out the whole product life-cycle EFG FP’s value proposi- tion is built on five pil- lars
Slide 48: EFG FP Service Offering
EFG FP SERVICE OFFERING LIFE-CYCLE MANAGEMENT TOOL PRODUCT REPORTS 4 6 1 7 5 2 8 9 3 1 PAYOFF MARKET MAKING INDEX 2 EFG Financial Products Bank Sarasin 3 Commerzbank Bank Vontobel Julius Bär BCV ZKB 4 Sal. Oppenheim JP Morgan Basler Kantonalbank Quote availability Macquarie Capital Credit Suisse
Slide 49: Board of Directors
BOARD OF DIRECTORS Peter Forstmoser (70) • 37+ years of experience in the sector John Williamson (50) • 27+ years of experience in the Chairman • Senior Partner of Niederer Kraft & Frey Ltd Vice-Chairman sector Carefully selected Independent EFGI representative • Former Chairman Board of Swiss Re an
Slide 50: The EFG FP Investment Case
THE EFG FP INVESTMENT CASE 1. FOCUS Focused business 2. E NC in attractive IT PL RIE product niche AT PE FO Experienced Modern and 6. EX RM management team integrated with vested interest structured products and seasoned board platform EFG FP Attractive economics Attractive customer and operational
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