Banco Bpm Spa · MIL:BAMI
Banco Bpm Spa — Investor Day (March 2020)
48 slides from Banco Bpm Spa's investor day presentation, Mar 3, 2020
Slide 1: Banco BPM Strategic Plan 2020-2023
Banco BPM Strategic Plan 2020-2023 UNLOCKING OUR BUILDING A COMMON INVESTING IN OUR Potential Future People Milan, 3 March 2020
Slide 2: Disclaimer
Disclaimer This presentation has been prepared by Banco BPM ("Banco BPM") and includes certain forward looking statements, projections, objectives and estimates reflecting the current views of the management of the Bank with respect to future events. Forward-looking statements are statements that ar
Slide 3: Introduction and methodological premise
Introduction and methodological premise The context… Implications for the ordinary "day-to-day" Banco BPM activities • Immediate set-up of a "Crisis Committee", governing over emergencies to secure ordinary operations and continued support to our clients' needs • Maximum commitment to minimize impac
Slide 4: Agenda
Agenda 1. The foundation of Banco BPM 2020-23 Strategic Plan: built on a strong track record and based on real delivery 2. An ambitious and credible Plan, addressing all stakeholders' expectations 3. Financial forecasts 4. Conclusions 3
Slide 5: Banco BPM: turnaround completed, ready to unlock our full potential
Banco BPM: turnaround completed, ready to unlock our full potential Third bank in Italy, Credible team, Solid financials, built on Deeply involved with 4m clients with robust delivery well-recognized areas in the core served track record of operational excellence communities • Long-standing strategi
Slide 6: Successful completion of a complex integration
Successful completion of a complex integration Integration journey De-risking • 2017 – BPM S.p.A. IT migration to target system in 7 • Strengthened workout activity months • Risk profile improvement achieved without capital • 2018 – Migration of Banca Akros's IT to target system injection from share
Slide 7: An indisputable track record of solid capital generation
An indisputable track record of solid capital generation… Pro-forma CET1 ratio (%) MDA buffer (%) 12.8% Over the last 3 years, 13% the Group absorbed CET1 impact in excess 12% of 11% without new capital injections 11% +2.1pp 2.9% >800 De-risking 10% 1.5% 1.4% bps 0.8% Plan 9% Q4 ’16 Q1 ’17 Q2 ’17 Q3
Slide 8: Over-delivery on operating cost and asset quality targets
… paired with over-delivery on operating cost and asset quality targets Equivalent to 20% cost reduction1 (over €600m) Operating costs taking into account Asset Quality inertial growth Operating costs (€m) Gross NPE ratio (%) Loan loss provisions (€m) -482 €m -177 -305 24.8% 2,187 17.5% 3,086 2,909
Slide 9: Revenue path mostly influenced by exogenous factors
Revenue path mostly influenced by exogenous factors Impact on delta revenues (€m) Revenues (€m) • Euribor (+0.10% target Adverse vs. -0.34% actual) CAGR 2015-2019(%) macro- -160 -90 economic • GDP growth (+1% conditions target vs. 0.1% Estimated impact Market-driven actual) of lower Euribor impact o
Slide 10: Strong 2019YE results paving the way for the new Strategic Plan
Strong 2019YE results paving the way for the new Strategic Plan A solid financial position resulting from continued …enabling the relaunch of commercial activities de-risking and operating model simplification… 4.1% Positive growth Dividend Back to dividend distribution +2.9% in "core" yield1 y/y pe
Slide 11: Progress in the Digital Transformation journey
While completing the integration plan, we progressed in the “Digital Transformation” journey Main "Digital Transformation" achievements Family banking customers Key results achieved SME customers Digital customer1 active on Smart Lending Payments mobile app (%) • Digital Invoice Financing Journey •
Slide 12: Well-recognized areas of excellence in Banco BPM business model
Well-recognized areas of excellence in Banco BPM business model Group specialized organizations Partnerships with leading players 100% 39% One of the leading Private Banks in the Italian market Leading national player in Consumer Credit market, with ~9 m client served 100% 14% Leading Italian broker
Slide 13: Deeply involved in our communities
Deeply involved in our communities €10m 1,000+ 6,000+ ~7,000 h Contributed to Social projects People engaged in Employee working schools, universities, supported financial education hours volunteered to religious Institutions through 60+ workshops organize and support and other non-profit organized
Slide 14: Agenda
Agenda Contents 1. The foundation of Banco BPM 2020-23 Strategic Plan: built on a strong track record and based on real delivery 2. An ambitious and credible Plan, addressing all stakeholders' expectations 3. Financial forecasts 4. Conclusions 13
Slide 15: Comprehensive assumptions, factoring in newly emerged uncertainties and regulatory evolutions
Comprehensive assumptions, factoring in newly emerged uncertainties and regulatory evolutions • Slowdown of global trade Evolving regulatory Global Main assumptions alimented by ongoing trade war landscape economy • Increased uncertainty from US-Iran tensions Euribor 3M (%) • Uncertain 2020 outlook
Slide 16: Strategic priorities addressing key stakeholders' expectations
Strategic priorities addressing key stakeholders' expectations Proactively support the transition towards a sustainable future Employee engagement as a Employees Clients Customer-centric competitive advantage and service model, highly talent attraction specialized by segment Continued de-risking thr
Slide 17: Key targets of the Strategic Plan 2020-2023
Key targets of the Strategic Plan 2020-2023 RoTE1 Total revenues Cost/Income (%) (€bn) (%) +0.4pp +0.6% -2pp 4.3 4.4 61% 59% 6.8% 7.2% 0.5 0.3 o/w core 3.8 +2.1% 4.1 649 ~770 revenues2 2019 2023 2019 2023 2019 2023 Net income (€m) CAGR 2019-2023 (%) Gross NPE ratio Cost of risk (%) (bps) ~250 800+ ≥
Slide 18: Pillar 1: Sustainable development of the core business
BBPM 2020-23 Strategic Plan: 4 key ESG-driven pillars yielding sizable shareholders' remuneration 1 2 3 4 Sustainable Digital-enabled Continued asset Further strengthening development of the operating model quality improvement of the balance sheet core business allowing high cost flexibility as a ke
Slide 19: Further service model specialization through product factories and network reshaping
Deployment of further service model specialization through Group's product factories and network reshaping Wealth Management Corporate and SME segments • Increased specialization of Affluent service model • Set-up of dedicated service models and service unit for Enterprise and Small • Strengthened c
Slide 20: Wealth Management and Family Banking: unlocking the untapped potential
Wealth Management and Family Banking | Unlocking the untapped potential Compelling growth opportunity… … 2023 targets AuM / Direct funding1 (%) 1 AuM / Direct funding1 (%) CAGR 2019-2023 (%) Potential 77% 85% +15pp upside from AuM 54% +32 pp 54% 69% conversion rate BBPM Peer 1 Peer 2 2019 2023 2 Net
Slide 21: Commercial step-up in Wealth Management
Commercial step-up in Wealth Management driven by enhanced advisory and digital up-scaling Key initiatives Focus: service model specialization Selected KPIs • Best-in-class service quality through an Client segmentation by total assets Best-in-class omni-channel experience and the service quality ~€
Slide 22: Bancassurance, Consumer Finance and Family Banking development
Strategic partnership consolidation in Bancassurance & Consumer Finance and Family Banking development through analytics and digitization Key initiatives Selected KPIs • Roll-out of dedicated initiatives to achieve full potential in Consumer Finance, Product factories €1.2bn (+25% vs. '19) Bancassur
Slide 23: Corporate segment: strong positioning to be further consolidated
Corporate segment | Strong positioning to be further consolidated leveraging on Banco BPM key distinctive factors Key distinctive factors… … 2023 targets Leading Market share in Corporate 1 Customer loans4 (€bn) CAGR 2019-2023 (%) 10% position segment1 (+0.4pp vs. '18) +3.8% Customer loans (Excl. Ba
Slide 24: Growth in Corporate segment supported by client margin uplift and new lines
Growth in Corporate segment supported by client margin uplift and expansion into new lines of business Key initiatives Focus: service model specialization Selected KPIs Specialization • Strengthen the integration and collaboration between Strengthened client-centric coverage ~12% boost client covera
Slide 25: SME segment: enlarge SME revenue base
SME segment | Enlarge SME revenue base leveraging on Corporate best practices Compelling growth opportunity… … 2023 targets Average market share1 (%) 1 Customer loans3 (€bn) CAGR 2019-2023 (%) Significant 18% +1.7% room for 29.2 31.3 growth +13pp in high 5% potential areas Underpenetrated Nearest ar
Slide 26: Specialization in SME segment service model
Specialization in SME segment service model enabling expansion in underpenetrated areas and improved cross-selling Key initiatives Focus: service model specialization Selected KPIs Enterprise & Client segmentation by turnover • Specialization of service models with dedicated From ~€60m in 2019 SB de
Slide 27: Expansion of SME customers offer with digital capabilities and open banking partnerships
Expansion of SME customers offer leveraging on digital capabilities and new "open banking" partnerships Key initiatives > 1.3 m potential target customers • Digital integration of ERP1 and Remote ~100 k Common customers Banking to offer seamless experience for invoice management, payments and Strate
Slide 28: Pillar 2: Digital-enabled operating model
BBPM 2020-23 Strategic Plan: 4 key ESG-driven pillars yielding sizable shareholders' remuneration 2 Complete the transition to a fully digital omni-channel Digital-enabled model operating model Invest in Our People, Thinking allowing high cost Forward flexibility as a key lever Technology enabling t
Slide 29: Complete the transition to a fully digital omni-channel model
Complete the transition to a fully digital omni-channel model and to a "paperless" relationship with clients Key initiatives Selected KPIs • Implement a seamless experience across all channels to boost the Digital branch: Strengthening FTE1 and commercial digital adoption focus (FTE) 250-300 • New d
Slide 30: Invest in Our People: inclusive people strategy
Invest in Our People, Thinking Forward | Inclusive people strategy Key initiatives Selected KPIs • Foster an inclusive and adaptive leadership style to promote Up-skilling, engagement and transformation training days trust, respect and a collaborative culture (person/days) Inspirational • Generate v
Slide 31: Skill-set evolution and generational handover
Invest in Our People, Thinking Forward | Skill-set evolution and generational handover Key initiatives Selected KPIs HR cost evolution (€m) • Launch of a strategic recruiting program aimed at attracting talents ~1,800 Generational • Focus on managing and facilitating handover to accelerate change kn
Slide 32: Technology enabling the Strategic Plan
Technology enabling the Strategic Plan | €600+ m IT investments, of which ~40% for digital innovation Key initiatives Selected KPIs • Evolution of the infrastructure, enabling the adoption of cloud solutions to Total IT … o/w accelerate time-to-market for new business initiatives investments… digita
Slide 33: Building an ESG holistic approach with solid governance
Building an ESG holistic approach, managed and controlled through a solid governance ESG Strategy and Governance Deployment based on 4 key areas Oversight allocated to the Risk and Control Committee Dedicated managerial structure to coordinate and control ESG activities Environment Clients People Co
Slide 34: Act Responsible – Think sustainable
Act Responsible – Think sustainable ESG targets Environment Clients People Community Certifications and Ratings Responsible Investing Building Tomorrow’s Talent Social Impact Grants to community Group attainment of ISO +€30 Upskilling, engagement >€20 programs (Social & Occupational Health AuM in ES
Slide 35: Pillar 3: Continued asset quality improvement
BBPM 2020-23 Strategic Plan: 4 key ESG-driven pillars yielding sizable shareholders' remuneration 3 Continued asset quality improvement 34
Slide 36: An impressive de-risking track record in disposals and workout
An impressive de-risking track record, with exceptional performance in both disposals and workout Large disposal deals: proven evidence of value embedded Positive workout impact, with at least €1bn annual NPE net outflow in Banco BPM NPE portfolio (on top of disposals) starting from 2017 % of BoP3 €
Slide 37: Further asset quality improvement without disposals
Further asset quality improvement without disposals: gross NPE ratio at 5.9% in 2023 (3.0% net) Initiatives 2020-23 NPE ratio (%) Cost of Risk (bps) 2019 20231 Continued de-risking anchored -3.2 pp on 4 organic-only initiatives -22 bps 9.1% -2.2 pp 73 Credit risk data warehouse 5.9% 5.2% 51 3.0% Cre
Slide 38: Loan portfolio quality improvement through credit monitoring and NPE specialization
Loan portfolio quality improvement through end-to-end credit monitoring and NPE management specialization Advanced • Higher consistency of managerial and risk data Default rate (%) Credit risk data • Strengthen granularity enabling full data analytics visibility 1.9% warehouse throughout the organiz
Slide 39: Pillar 4: Further strengthening of the balance sheet
BBPM 2020-23 Strategic Plan: 4 key ESG-driven pillars yielding sizable shareholders' remuneration 4 Further strengthening of the balance sheet 38
Slide 40: Optimization of Balance Sheet through active asset and liability management
Optimization of Balance Sheet through more active asset and liability management Securities portfolio mix (%) % Proactive • Enhancement of securities portfolio structure securities ~40% portfolio – Alignment of the share of Italian govies on total securities at management ~40%, in line with peers av
Slide 41: Rebalancing of funding mix
Rebalancing of funding mix building on credit investors' recognition of Group delivery capacity Tightening of BBPM credit spread above market average1 Reduction of reliance on TLTRO financing2 Senior Preferred spread differential vs. BTP (2018-YTD) (bps) TLTRO take-up (€bn) TLTRO III 250 Banco BPM A
Slide 42: Agenda
Agenda Contents 1. The foundation of Banco BPM 2020-23 Strategic Plan: built on a strong track record and based on real delivery 2. An ambitious and credible Plan, addressing all stakeholders' expectations 3. Financial forecasts 4. Conclusions 41
Slide 43: CET1 ratio and MDA buffer well above minimum guidance throughout the plan
CET1 ratio and MDA buffer well above minimum guidance throughout the plan horizon, even taking into account conservative headwinds Key capital targets Fully-phased CET1 ratio (%) Main guidance 12.8% 0.4% 12.5% ~2.5% MDA buffer 1.3% Capital distribution Minimum to be maintained at all times throughou
Slide 44: Capital headwinds measured through very conservative assumptions
Capital headwinds measured through very conservative assumptions, confirming Banco BPM strengths even under stressed scenarios Cumulative Fully-phased CET1 ratio impact (%) 2019 2020 2021 2022 2023 2020-2023 Regulation and internal 0.1 0.1 0.1 0.3 models evolution EBA guidelines1 0.6 0.2 0.8 Regulat
Slide 45: Significant shareholder wealth creation and distribution
Significant shareholder wealth creation and distribution Capital distribution Tangible book value increase Cumulative capital distribution 2020-2023 (€m) Tangible book value of Equity (€bn) +1.2 800+ 10.7 Dividend policy 2.0+ €bn Average 9.5 ≥ 40% payout in 2020-23 Total shareholders wealth created
Slide 46: Key 2023 financial targets
Key 2023 financial targets €m 2019 2023 Δ '19-'23 CAGR '19-'23 (%) Total revenues 4,288 ~4,400 ~110 0.6% o/w Net interest income 1,993 ~1,920 ~(70) (0.9%) Profit o/w Net fees & commissions 1,795 ~2,190 ~400 5.1% & Loss Operating costs (2,599) ~(2,590) ~10 (0.1%) Loan loss provisions (779) ~(590) ~19
Slide 47: Agenda
Agenda Contents 1. The foundation of Banco BPM 2020-23 Strategic Plan: built on a strong track record and based on real delivery 2. An ambitious and credible Plan, addressing all stakeholders' expectations 3. Financial forecasts 4. Conclusions 46
Slide 48: BBPM Strategic Plan 2020-2023 conclusions
BBPM Strategic Plan 2020-2023 Unlocking Our Potential | Building a Common Future | Investing in Our People Demonstrated track record Concrete and direct Attractive shareholder Transformation of the "way of delivery in response to internal and remuneration (€800+m we do business" securing the only si