Alior Bank Sa · GPW:ALR
Alior Bank Sa — Q3 2014 Earnings Presentation
43 slides from Alior Bank Sa's earnings presentation, Nov 6, 2014
Slide 1: Alior Bank S.A. Q3 2014 results presentation
ALIOR BANK S.A. Q3 2014 results presentation November 6, 2014 1
Slide 2: Agenda
AGENDA • Highlights • Operational Performance • Strategic Initiatives • Outlook • Appendix 2
Slide 3: Agenda
AGENDA • Highlights • Operational Performance • Strategic Initiatives • Outlook • Appendix 3
Slide 4: Highlights
HIGHLIGHTS Continuous & profitable growth PLN 100 M net income Q3 normalized (up 48% YTD vs. 2013) Good progress of NIM minus CoR Q3’14: 2,4% vs Q1’14: 2,3% Strict cost discipline maintained Q3’14 C/I YTD below 50% Successful customer acquisition: 2,5 m clients as of today T-Mobile: performance bett
Slide 5: Key financials
KEY FINANCIALS M PLN Q3'14 YTD Q3'13 YTD (A/B)-1 (%) Q3'14 QTD Q3'13 QTD (D/E)-1 (%) A B C D E F Net interest income 896 701 28 321 239 34 Net fee and commission income 253 187 35 85 71 20 Trading result & other 224 204 10 83 58 43 Operating income 1 373 1 092 26 490 368 33 General Administrative Ex
Slide 6: Meritum acquisition
MERITUM ACQUISITION What is Strategic rationale • Strong consumer finance • Consistent with Alior strategy • PLN 198 m total synergies 2015- 2017 • Effective loan distribution • Scale benefit of Alior IT and operations platform • Innovative technology • Market share increase by 0,3 pp 30.06.14 PLN m
Slide 7: Agenda
AGENDA • Highlights • Operational Performance • Strategic Initiatives • Outlook • Appendix 7
Slide 8: Net interest margin
NET INTEREST MARGIN Alior NIM development 4,7% 4,7% 4,7% 4,6% 4,5% Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 NIM formula: NII for Q1’14, Q2’14 and Q3’14 annualized divided by average IEA from Q4’13 and Q1’14, Q2’14 and Q3’14 respectively. NIM in selected Polish banks (Alior, BZWBK, ING, mBank, Millennium, Handl
Slide 9: Loan book development and financing
LOAN BOOK DEVELOPMENT AND FINANCING Loan book split L/D = 101% in PLN m RETAIL L/D=91% Deposits Loans 22 789 61% 55% +24% 207; 1% Other business 14 224 13 878 557; 2% Factoring 12 622 3 888; Investment 12 637 18 310 loans 8 360 7 234 Term, own 17% 6 893 324; 2% banking sec., 608; 3% 45% other Curren
Slide 10: Credit risk overview
CREDIT RISK OVERVIEW NPL total (%) Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 11,8 10,2 10,7 8,8 9,0 8,9 9,4 8,4 6,9 6,5 Market avg.* 10,8 12,7 3,2 1,5 2,0 2,3 2,5 2,5 Corporate Retail Mortgage Coverage ratio (%) Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 60 61 63 63 58 59 58 48 46 50 Market avg.* 48 68 50 17 15 15 18 14 Cor
Slide 11: NPL evolution: follows cost of risk without NPL sales
NPL EVOLUTION: FOLLOWS COST OF RISK WITHOUT NPL SALES Annual NPL growth is approximately equal to Cost of Risk for this segment. NPL retail Q3'14 Q2'14 Q1'14 Q4'13 Q3'13 Q2'13 Q1'13 Q4'12 NPL ratio (%) 11,5* 10,7 10,2 9,4 8,9 8,4 7,5 6,6 Annual NPL growth (p.p.) 2,6 2,3 2,7 2,8 Tax efficient NPL sal
Slide 12: Actions taken to offset the interchange fee reduction
ACTIONS TAKEN TO OFFSET THE INTERCHANGE FEE REDUCTION Fee income split (in PLN m, structure) 141 139 135 18 125 11 116 15 other 11 13 13 14 transfers, payments pay-offs 19 10 12 12 14 accounts servicing 11 15 12 16 8 14 15 loans and advances 9 39 42 34 43 bancassurance 29 29 29 32 payment and credit
Slide 13: Strong capital position allows for continuous profitable growth
STRONG CAPITAL POSITION ALLOWS FOR CONTINUOUS PROFITABLE GROWTH 14,0% 8,0% 7,0% 13,2%* 12,0% 12,1% 6,0% 11,1% 11,2% 10,0% 11,0% 5,0% 8,0% 4,0% 6,0% 3,0% 4,0% 1,0% 1,0% 1,1% 1,2% 1,2%* 2,0% 2,0% 1,0% 0,0% 0,0% Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 ROE ROA 20,0% 14,0% 18,0% 12,0% 13,1% 13,8% 16,0% 10,0% 12,8%
Slide 14: Continued growth of market share
CONTINUED GROWTH OF MARKET SHARE Deposits MARKET SHARE Loans 2,5% 2,7% 2,5% 2,4% 2,5% 2,3% Q3'13 Q4'13 Q3'14 Q3'13 Q4'13 Q3'14 Deposits MONTHLY GROWTH (%) Loans Total Retail Corporate Total Retail Corporate ALIOR Market ALIOR Market ALIOR Market ALIOR Market ALIOR Market ALIOR Market APR -0,6 0,0 -3
Slide 15: Growing consumer base
GROWING CONSUMER BASE Customer acquisition on track Current accounts growth Q2’14 vs. Q2’13 (ths) +143 +96 +116 Alior Bank 343 +191 +188 2 330 2 473 2 234 121 2 119 120 Getin Noble 177 1 928 119 2 352 118 2 209 1 740 117 2 115 2 000 113 1 811 mBank 164 1 627 BZ WBK 158 ING Bank Śląski 154 Q2'13 Q3'1
Slide 16: Wide range and diversified distribution network
WIDE RANGE AND DIVERSIFIED DISTRIBUTION NETWORK 4th largest distribution network in Poland Branches Agencies Alior Express 859 848 816 720 221 218 100 438 411 428 418 292 230 199 97 50 195 208 209 210 213 149 2009 2010 2011 2012 2013 3Q 2014 T-Mobile outlets 16
Slide 17: Strict cost discipline maintained
STRICT COST DISCIPLINE MAINTAINED. Revenue growth considerably outperforms cost. in PLN m Q3’14 YTD C/I = 49,8% Costs Revenues +5,0% +8,8% +0,6% 234 235 215 +11,7% 490 466 417 Q1'14 Q2'14 Q3'14 Q1'14 Q2'14 Q3'14 17
Slide 18: Agenda
AGENDA • Highlights • Operational Performance • Strategic Initiatives • Outlook • Appendix 18
Slide 19: T-Mobile: excellent business development
T-MOBILE: EXCELLENT BUSINESS DEVELOPMENT Client acquisition exceeds expectations • 100 ths. clients acquired since launch in May’14 Substantial increase in loan distribution capacity • 80 store-in-store outlets till the end of December’14 • Additional 100 store-in-store outlets till the end of Q1’15
Slide 20: Consumer finance performance
CONSUMER FINANCE PERFORMANCE Increasing cross-sell volumes form CF customers Instalment loans average monthly volumes (PLN m) 2014-01 2014-02 2014-03 2014-04 2014-05 2014-06 2014-07 2014-08 2014-09 648,4 663,2 679,0 684,9 673,7 675,1 689,6 696,6 709,8 +5,1% cross-sell average monthly volumes (PLN m)
Slide 21: Agenda
AGENDA • Highlights • Operational Performance • Strategic Initiatives • Outlook • Appendix 21
Slide 22: Going forward: 2014 outlook
GOING FORWARD 2014 Outlook Loan growth 2014 > PLN 4,5 billion net (PLN 4.8 billion) NIM ~4,7% C/I below 50% CoR 2,3% 22
Slide 23: Agenda
AGENDA • Highlights • Operational Performance • Strategic Initiatives • Outlook • Appendix 23
Slide 24: Key financials including Polbita write-off
KEY FINANCIALS INCLUDING POLBITA WRITE-OFF M PLN Q3'14 YTD Q3'13 YTD (A/B)-1 (%) Q3'14 QTD Q3'13 QTD (D/E)-1 (%) A B C D E F Net interest income 896 701 28 321 239 34 Net fee and commission income 253 187 35 85 71 20 Trading result & other 224 204 10 83 58 43 Operating income 1 373 1 092 26 490 368
Slide 25: Strategic rationale
STRATEGIC RATIONALE Consistent with Alior strategy and targets PLN 198 m of revenue and cost synergies in 2015- 2017 Scale benefit from increased utilization of current Alior IT and Operation platforms 11% instant market share increase (up to 3%) 10% loan portfolio growth Leverage of Meritum experti
Slide 26: Financial considerations
FINANCIAL CONSIDERATIONS Transaction price : 352,5 M PLN (97,9%) No claw back provisions Transaction to be financed by: 1) Issue of new equity (up to 2,35 m shares) conditional upon regulatory approvals 2) Cash component (cash + equity = 352,5m PLN) Alior Meritum Market P/B 1,8 1,2 1,5 P/E 20,4 6,9
Slide 27: Transaction overview
TRANSACTION OVERVIEW Strong Consumer in PLN m 30.06.14 Finance business (non- collateralized lending) Total loans 2 485 Established and Total deposits 2 718 effective distribution of Total assets 3 150 high margin loan products Equity 261 Innovative technological platform Distribution network (own +
Slide 28: Stand alone Meritum Bank financial plan
STAND ALONE MERITUM BANK FINANCIAL PLAN (RATE CAP IMPACT INCLUDED) m PLN 2014 E 2015 E 2016 E Net Interest Income 320 385 470 Net Fee and Commission 26 24 26 Trading Income -1 3 8 Net banking revenues 345 412 504 Other operating income and 11 3 2 expense Costs 118 126 132 Provisions 171 179 209 Pre-
Slide 29: Estimated merger synergies
ESTIMATED MERGER SYNERGIES M PLN 2015 2016 2017 Total income 5 15 15 Risk cost reduction 6 13 21 Costs 25 49 49 Total synergies 36 77 85 Source: Alior estimates Synergies: Business processes and HQ costs Distribution network optimization Marketing Product offering Integration costs estimated at 50 m
Slide 30: Potential challenges and risk mitigants
POTENTIAL CHALLENGES AND RISK MITIGANTS Migration from PAS (Polish accounting standards) to IAS (international accounting standards) Assessed by Big 4 auditor at ~20 m PLN equity impact Mitigating rate cuts impact Robust plan for new and existing portfolio re-pricing already being implemented Track
Slide 31: Use of sales network
USE OF SALES NETWORK Average number of customer visit in Branches semi-annually 5,2 5,0 4,7 4,5 1,6 1,5 1,4 1,3 2H'12 1H'13 2H'13 1H'14 Non-ARBO customers ARBO customers Technology gives Alior competitive advantage. ARBO – customers who are paying their bills in the bank’s outlets 31
Slide 32: Income statement snapshot
INCOME STATEMENT SNAPSHOT in PLN m Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Interest income 370 357 415 392 429 456 Interest expense -130 -118 -117 -121 -125 -135 Net interest income 240 239 298 271 304 321 Dividend 0 0 0 0 0 0 Fee and commission income 115 116 141 125 139 135 Fee and commission expense
Slide 33: Balance sheet snapshot
BALANCE SHEET SNAPSHOT Q1’13 Q2’13 Q3’13 Q4’13 Q1’14 Q2’14 Q3’14 Cash and balances with Central Bank 729 722 755 1 067 1 078 1 057 1 019 Financial assets held for trading 215 265 234 243 208 285 421 Financial assets available for sale 3 259 3 447 2 929 3 389 3 172 2 784 3 796 Other financial instrum
Slide 34: Shareholding
SHAREHOLDING Free float 18.3m shares - 26,2% Entities controlled by Carlo Tassara Group 5.6m shares - 8,0% 42,2m shares - 60,3% European Bank for Reconstruction Market free float and Development 3.85m shares - 5,5% Genesis Asset Managers LLP Management incentive shares 2012 incentive scheme Option s
Slide 35: Continued strong loan growth in retail & SME
CONTINUED STRONG LOAN GROWTH IN RETAIL & SME Retail loans (new production per quarter) 1 621 1 681 1 489 73 Other retail 125 1 374 1 271 1 314 74 Mortgages for 1 189 54 370 61 546 real estate 1 129 72 423 1 039 74 342 74 260 322 95 229 247 196 1 126 1 062 Cash loans 939 938 971 992 748 826 868 Q3'12
Slide 36: Employees
EMPLOYEES Persons 6 512 6 500 6 413 6 707 6 154 5 720 4 873 5 049 2 325 2 485 2 388 2 253 2 187 2 405 1 745 1 748 3 749 4 027 4 112 4 160 4 382 3 128 3 301 3 533 Q4'12 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Outlets Headquaters FTEs 6 157 6 237 6 240 6 559 5 712 5 185 4 633 2 202 2 254 4 345 2 444
Slide 37: Polish macro outlook
POLISH MACRO OUTLOOK GDP growth (% yoy) Investments and private consumption (% yoy) 10,6 Investments 4,5 Private 3,9 consumption 4,8 3,3 3,2 4,1 3,0 3,1 2,6 2,5 2,1 0,8 1,9 0,2 1,6 1,6 0,9 -2,4 -0,8 -1,8 2009 2010 2011 2012 2013 2014F 2015F 2009 2010 2011 2012 2013 2014F 2015F Inflation (CPI % yoy)
Slide 38: Polish macro outlook
POLISH MACRO OUTLOOK NBP reference rate (%) WIBOR 3M (%) 4,50 4,99 4,25 4,27 4,13 3,95 3,50 3,50 2,71 2,50 2,35 2,25 1,80 1,75 2009 2010 2011 2012 2013 2014F 2015F 2009 2010 2011 2012 2013 2014F 2015F End of period End of period FX rate (EUR/PLN) Fiscal policy (% of GDP) 4,46 30 Public debt 57,2 60
Slide 39: Polish banking sector: growth of main balance sheet figures
POLISH BANKING SECTOR – GROWTH OF THE MAIN BALANCE SHEET FIGURES Assets Loans +9,3% +4,2% 1 538 1 493 +3,9% +8,5% 1 429 1 407 1 444 1 401 1 350 1 374 945 966 993 972 1 002 1 041 1 056 936 Q4'12 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'12 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Equity Deposits
Slide 40: Polish banking sector: main P&L lines performance
POLISH BANKING SECTOR – MAIN P&L LINES PERFORMANCE NII NFC Result on banking activity 14 -2 7 28,4 10,3 44,1 18,7 7,0 29,4 9,3 3,4 14,1 Q1'14 Q2'14 Q3'14 Q1'14 Q2'14 Q3'14 Q1'14 Q2'14 Q3'14 X - CHANGE VS. Q3’14 (%) Expenses Net impairment Net profit 1 17 10 22,6 6,5 13,0 15,1 4,2 8,7 7,5 2,0 4,0 Q1'
Slide 41: AQR and stress test result
AQR AND STRESS TEST RESULT Stress Test Stress Test according to guidelines of European Banking Authority (EBA) confirmed Alior Bank’s strong capital position. Asset Quality Review The result of European Asset Quality Review is satisfactory and will not materially impact Bank’s financial position in
Slide 42: Contact details
CONTACT DETAILS Please direct all inquiries to: relacje.inwestorskie@alior.pl +48 22 417 3860 IR unit head: Piotr Bystrzanowski piotr.bystrzanowski@alior.pl 42
Slide 43: Disclaimer
DISCLAIMER This document has been prepared by Alior Bank S.A. (the “Bank”) solely for use at the Presentation. Any forward looking statements concerning future economic and financial performance of the Company contained in this Presentation are based on Financial Statement of the Bank for Q3 2014. B