Efg International Ag · SIX:EFGN
Efg International — H1 2014 Earnings Presentation
41 slides from Efg International's earnings presentation, Jul 23, 2014
Slide 1: Half-year results presentation 2014
Half-year results presentation 2014 Zurich, 23 July 2014 Practitioners of the craft of private banking 1
Slide 2: Disclaimer
Disclaimer This presentation has been prepared by EFG International AG 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 or redemption of any securities
Slide 3: Introduction – John Williamson, CEO
Introduction John Williamson, CEO Financial performance Current status, outlook 3
Slide 4: Financials summary
Financials summary vs. 1H 13 vs. 2H 13 IFRS net loss CHF (6.0 m) NM NM Operating profit CHF 66.2 m 3% 21% Underlying recurring net profit to ordinary shareholders* CHF 57.6 m - 4% 13% Operating income CHF 342.9 m 4% 2% Revenue margin 88 bps from 87 bps unchanged Net new assets CHF 2.7 bn from CHF 1.
Slide 5: Highlights of the half year
Highlights of the half year • Good progress in relation to net new assets - well within target range. • CRO hiring continues to strengthen. • Operating income and revenue margin resilient notwithstanding challenging conditions. • Reported profit significantly impacted by non-recurring legal and prof
Slide 6: Financial performance – Giorgio Pradelli, Deputy CEO & CFO
Introduction Financial performance Giorgio Pradelli, Deputy CEO & CFO Current status, outlook 6
Slide 7: 1H 2014 Highlights (I)
1H 2014 Highlights (I) Net new assets well within target range. Revenue-generating AuM up 5% year-on-year; RoAuM resilient at 88 bps, above target range Revenue-generating AuM Net new assets* RoAuM (in CHF bn) (in CHF bn) (in bps) Other income Commission Net interest + 5% +5% +2% +7% 80.1 76.0 75.9
Slide 8: 1H 2014 Highlights (II)
1H 2014 Highlights (II) Growing operating profit Operating income Operating profit (in CHF m) (in CHF m) 342.9 335.9 330.1 64.2 66.2 54.6 1H13 2H13 1H14 Operating expenses (in CHF m) 1H13 2H13 1H14 281.3 276.7 265.9 1H13 2H13 1H14 8
Slide 9: Underlying recurring net profit vs reported IFRS profit (I)
Underlying recurring net profit vs reported IFRS profit (I) 1H 2014 underlying recurring net profit reflects cost of growth-related initiatives. IFRS result impacted by US tax programme costs and litigation provisions 1H14 1H13 (in CHF m) (in CHF m) 9.6 84.5 3.7 60.3 30.0 57.6 (36.8) (0.7) (0.1) 33.
Slide 10: Underlying recurring net profit vs reported IFRS profit (II)
Underlying recurring net profit vs reported IFRS profit (II) Underlying recurring net profit increased by 13% versus 2H 2013 1H14 2H13 (in CHF m) (in CHF m) 30.0 57.6 9.3 50.9 (0.1) 15.4 (0.2) 33.7 0.4 27.3 0.3 (1.6) IFRS Business Provision P&L and UK US tax BdP 2H13 profit review UK gain on litigat
Slide 11: Quality of earnings improved in 1H 2014 (I)
Quality of earnings improved in 1H 2014 (I) Growing private banking and asset management contribution Operating income components (in CHF m) Operating income from private banking & asset management at highest level since business 342.9 review and in line with 4Q13 330.1 33.4 ALM revenues up 2% v
Slide 12: Quality of earnings improved in 1H 2014 (II)
Quality of earnings improved in 1H 2014 (II) Profit contribution from Core Private Banking increased by 26% year-on-year Profit before tax components (in CHF m) Contribution of ALM related profit before tax was essentially flat year- on-year; reflects improved treasury contribution more than offse
Slide 13: Operating income
Operating income Operating income up 4% year-on-year Operating income Net interest income Net commissions Net other income (in CHF m) (in CHF m) (in CHF m) (in CHF m) 342.9 180.2 182.3 335.9 330.1 163.1 126.0 112.9 66.7 100.3 42.8 30.5 34.6 1H13 2H13 1H14 1H13 2H13 1H14 1H13 2H13 1H14 1H13 2H13 1H14
Slide 14: Operating expenses
Operating expenses Operating expenses up 4%, reflecting cost of new CRO recruitment, investments in asset management and regulatory infrastructure / initiatives Operating expenses Cost-income ratio* (in CHF m) (in %) Operating expenses exclude US DoJ direct costs (i.e. provision for US tax related
Slide 15: Detailed analysis of headcount & personnel expenses
Detailed analysis of headcount & personnel expenses Front office and compliance headcount increases Headcount Breakdown personnel expenses (in CHF m) 204.6 202.0 197.0 199.2 3.4 13.2 2,058 2.8 6.7 10.6 1,994 5.0 1,989 9.2 2.7 6.0 1,977 9.8 3.0 11.0 10.2 52.2 50.9 49.6 49.3 10.1 2.5 0.6 125.8 124.4 1
Slide 16: Growth and productivity drivers
Growth and productivity drivers Positive continued trends in CRO hiring and AuM per CRO Number of CROs AuM per CRO (in CHF m) + 26% + 12% 456 197 414 416 435 179 176 174 156 407* 2H12 1H13 2H13 1H14 2011 2012 2013 1H14 Excl. CROs Hired in 1H14 * CROs continuing businesses only Note: continuing busin
Slide 17: New CRO performance
New CRO performance High proportion of newly recruited and retained CROs meeting short-term profitability targets notwithstanding challenging market conditions Number of New CROs* Approx. 50% of CROs hired in 2012/13 and 65 61 retained to date are already profitable 46 42 Approx. 20% of CROs hir
Slide 18: Revenue-generating AuM development
Revenue-generating AuM development Annualized growth in net new assets of 7%, well within target range (CHF bn) 2.7 CHF 2.7 bn NNA, annualized 1.2 80.1 growth rate of 7% 0.4 Revenue-generating AuM up 75.9 5.5% since year-end 2013 Increase in revenue-generating AuM through market performance wa
Slide 19: AuM and NNA by business region
AuM and NNA by business region Jun 2014 AuMs 1H 2014 NNA: CHF 2.7 bn CHF 80.1 bn as % of RoAuM NNA growth total AuM (in bps) (in %) Switzerland 15.6 20% 106 (0.2) -2.9% Continental 15.1 19% 83 1.1 16.2% Europe Asia 16.0 20% 68 0.8 10.9% Americas 11.5 14% 92 (0.2) -2.8% Miami 8.7 0.3 8.1% UK 18.9 24%
Slide 20: Capital position (I)
Capital position (I) Continued strong capital position – Basel III fully applied CET1 ratio at 14.1% and BIS total capital ratio at 18.7% BIS total capital ratio Breakdown of RWAs (in %) (in CHF bn) Capital ratios in line with 18.7* target range of BIS Capital 18.0 Ratio in “high teens” and 4.3 5.
Slide 21: Capital position (II)
Capital position (II) Organic capital generation added 120 bps to capital ratio Evolution of BIS capital ratio (in %) 0.4 0.3 1.2 0.2 18.7 18.0 (1.1) (0.3) 4.6 XXX 4.5 XXX Common Equity (CET1) 14.1 Additional Tier 1 & Tier 2 13.5 Dec 2013 Underlying Currency Dividend Jun RWA P&L AFS Basel III P&L tr
Slide 22: Balance sheet
Balance sheet Solid and liquid balance sheet Total assets: CHF 22.6 bn Total liabilities & equity: CHF 22.6 bn Cash & banks 3.2 Due to banks 0.4 Loan increase driven by Deposits 16.6 continued increase in lombard lending Treasury bills 0.5 “Other” includes CHF 0.4 bn Derivatives 0.4 Available 3.
Slide 23: Life insurance policies portfolios
Life insurance policies portfolios Impact of life insurance portfolio on current financials Portfolio “Held to Maturity”* - Carrying value CHF 680.1 million (acquisition cost, premium paid, accrued interest); with actual yield of 3.4% Net revenues in 1H 2014 on life portfolios of CHF 10.9 millio
Slide 24: Share overhang has been reduced by recent transactions
Share overhang has been reduced by recent transactions Free float in EFGN shares has increased to close to 40% EFGN shareholder structure as of Current EFGN shareholder structure 31 Dec 2013 Two ABBs in February and June 2014 for 6.8 m shares EFGN’s last 30-days average trading volume on primary
Slide 25: Current status, outlook – John Williamson, CEO
Introduction Financial performance Current status, outlook John Williamson, CEO 25
Slide 26: Most private banking businesses performing strongly
Most private banking businesses performing strongly UK Continental Europe • Operating income up 9%; profits • Very strong performance. up 19%. • Operating income up 29%; profits up • Double-digit growth in NNA. 44% y-on-y. • Double-digit growth in NNA. Americas Switzerland Asia • Excluding the Carib
Slide 27: CRO hiring continues to strengthen
CRO hiring continues to strengthen • CRO hiring remains strong, continuing improvement seen in H2 2013. • Satisfactory success rate for new CROs in meeting short-term profitability objectives, given challenging conditions. • Total number of CROs: 456 end-June 2014, up from 416 a year earlier and fro
Slide 28: Wide range of initiatives reflecting focus on growth
Wide range of initiatives reflecting focus on growth Switzerland Asia • New Regional Business Head for • New Head of Emerging Wealth (with a focus on Continental Europe and Switzerland. China) in Hong Kong, joined Feb 2014. Recruited 3 senior CROs, with 2 in pipeline. • Strengthening UHNWI capabilit
Slide 29: Wide range of initiatives reflecting focus on growth ii
Wide range of initiatives reflecting focus on growth ii Latin America Investment & Wealth Solutions • In Colombia, recruited former head of private • Continue to enhance solutions platform – banking at Bancolombia to drive growth wealth structuring, investments, credit. including recruitment of CROs
Slide 30: Realigning cost base in relation to revenues
Realigning cost base in relation to revenues • Committed to getting cost-income ratio to below 75%. • Cornerstone of strategy: delivering business growth, flowing through with minimal dilution to productivity and profits. • Costs will be managed to facilitate the operating leverage inherent in the s
Slide 31: Summing up
Summing up • First half results adversely impacted by exceptional legal and regulatory expenses. • Looking forward, prospect of fewer distractions and major source of uncertainty being alleviated. • Redoubling efforts to control operating expenses, while financing growth initiatives. Essential for g
Slide 32: Committed to delivering medium-term objectives
Committed to delivering medium-term objectives Objective of delivering IFRS net profit of CHF 200m in 2015 no longer realistic • Post-resetting, longer than anticipated to get business moving forward again. • Have not seen significantly better market conditions and rising interest rates. However, EF
Slide 33: Practitioners of the craft of private banking
Practitioners of the craft of private banking www.efginternational.com 33
Slide 34: Appendix
Appendix EFG@ International
Slide 35: Consolidated income statement (IFRS)
Consolidated income statement (IFRS) (in CHF million) 1H 2013 2H 2013 1H 2014 Net interest income 100.3 112.9 126.0 Net banking fee & commission income 163.1 180.2 182.3 Net other income 66.7 42.8 34.6 Operating income 330.1 335.9 342.9 Personnel expenses (197.0) (199.2) (204.6) Other operating expe
Slide 36: Consolidated balance sheet (IFRS)
Consolidated balance sheet (IFRS) (in CHF million) Dec 2013 Jun 2014 Cash and balances with central banks 849 1,092 Treasury bills and other eligible bills 631 504 Due from other banks 2,200 2,118 Derivative financial instruments 560 388 Financial instruments 5,415 5,141 Loans and advances to custom
Slide 37: Breakdown of Assets under Management
Breakdown of Assets under Management 30.06.14 By category 31.12.13 30.06.14 (in CHF bn) Cash & Deposits 26% 25% 20.0 Bonds 20% 20% 15.8 Equities 26% 26% 20.9 Structured products 3% 3% 2.5 Loans 16% 16% 12.9 Hedge Funds / Funds of HFs 4% 4% 3.4 Other 5% 6% 4.6 Total 100% 100% 80.1 30.06.14 By currenc
Slide 38: Segmental analysis – 1H 2014
Segmental analysis – 1H 2014 Asset Performance summary Continental Management Corporate Switzerland Americas UK Asia Eliminations Total (in CHF m) Europe and Wealth center Solutions Segment revenues 82.9 60.1 52.3 81.0 52.2 63.6 1.4 (50.6) 342.9 Segment expenses (64.7) (41.8) (39.2) (50.1) (35.0) (2
Slide 39: Segmental analysis – 1H 2013
Segmental analysis – 1H 2013 Asset Performance summary Continental Management Corporate Switzerland Americas UK Asia Eliminations Total (in CHF m) Europe and Wealth center Solutions Segment revenues 81.5 46.6 50.2 74.6 58.2 45.6 6.4 (33.0) 330.1 Segment expenses (61.8) (33.7) (37.6) (46.0) (39.6) (2
Slide 40: Segmental analysis – 2H 2013
Segmental analysis – 2H 2013 Asset Performance summary Continental Management Corporate Switzerland Americas UK Asia Eliminations Total (in CHF m) Europe and Wealth center Solutions Segment revenues 79.6 52.3 48.5 73.5 61.9 52.1 4.4 (36.5) 335.8 Segment expenses (61.8) (39.6) (39.2) (47.2) (42.4) (2
Slide 41: Contacts
Contacts Media Investors Strategy, Marketing & Communications EFG International Investor Relations Keith Gapp, Head of Strategy and Marketing Jens Brueckner, Head of Investor Relations Telephone: +41 44 226 1217 Telephone: +41 44 226 1799 E-mail: keith.gapp@efginternational.com E-mail: jens.brueckne