Banca Monte Dei Paschi Di Siena S.p.a. · MIL:BMPS
Banca Monte Dei Paschi Di Siena — Investor Day (June 2022)
57 slides from Banca Monte Dei Paschi Di Siena's investor day presentation, Jun 23, 2022
Slide 1: A Clear and Simple Commercial Bank - Business Plan 2022-2026
A Clear and Simple Commercial Bank Business Plan 2022-2026 Siena June 23, 2022
Slide 2: Disclaimer
Disclaimer IMPORTANT: You must read the following before continuing. The following applies to this document, the presentation of the information in this document by Banca Monte dei Paschi di Siena (the “Company”, together with its consolidated subsidiaries the "Group"), or any person on behalf of th
Slide 3: Agenda
Agenda Today’s Speaker A Clear and Simple Commercial Bank 10:30 CET Historic Franchise with Potential A New Clear Strategy Luigi Lovaglio Chief Executive Officer, General Manager Effective Business and Commercial Initiatives Sustainable Financial Targets Closing Remarks and Q&A Session 11:45 CET 3
Slide 4: A Clear and Simple Commercial Bank
A Clear and Simple Commercial Bank 4
Slide 5: Our vision and mission
A clear and simple commercial Bank Business Plan 2022-2026: our vision and mission “ A clear and simple commercial Bank ” “ Achieve sustainable profitability on a solid balance sheet and an optimised operating platform, by leveraging our historic strong commercial franchise and talented people ” 5
Slide 6: Selected financial targets
A clear and simple commercial Bank Business Plan 2022-2026: selected financial targets Sustainable Profitability Solid and Resilient Balance Sheet 60% / 57% €705m / €909m 14.2% / 15.4% 1.9% / 1.4% Cost / Income in Earnings(1) CET1 Ratio Fully Loaded Net NPE Ratio 2024 / 2026 in 2024 / 2026 in 2024 /
Slide 7: Historic Franchise with Potential
Historic Franchise with Potential 7
Slide 8: BMPS ready to seize opportunities
BMPS ready to seize opportunities… Scale Franchise Reach Capabilities Historic franchise with #1.4k €175bn Branches covering Total Clients Assets(1,2) 550 years of history all Italian regions Digital platform with ~540 (6.4% m.s. nationwide(4)) financial advisors #1 in Tuscany (18.4% m.s.(4)) Strong
Slide 9: Strong franchise deeply rooted across Italy
…leveraging its strong franchise deeply rooted across Italy… Nationwide branch network (1) Market shares and GDP Coverage(2) Ranked by % Italian Market share by GDP per area % Italian GDP Branches (#) GDP Coverage(2) branches (%) North-West 32.9% 241 3.7% 1.2% Lombardia 22.2% 189 4.5% 1.0% Pi emonte
Slide 10: Best-in-class native digital platform
…and its best-in-class native digital platform Customer and Selected KPIs stakeholder satisfaction Selected Prizes and Awards ~540 4.85/5 Client ratings 14th Grands Prix du Design - Financial advisors(1) 2022 MF Banking Communication & Brand Novum Design Award 97% satisfaction(3) Innovation Awards (
Slide 11: BMPS ESG journey
BMPS has been actively engaged in its own ESG journey for years Strong reduction in direct environmental Focus on the development and wellbeing of impacts (2017) human resources (2017) Specific directive on the Group’s Diversity & Inclusion: Plural EE- sustainability strategy and Management, Women L
Slide 12: A New Clear Strategy
y DISIENA BANCA DAL 1472 MONTE DEI PASCHI DI SIENA BANCA DAL 1472 A New Clear Strategy
Slide 13: Business plan built on solid strategic pillars
Business plan built on solid strategic pillars… Vision A clear and simple commercial Bank 1 2 3 Build a solid Strategic Achieve business model Tackle the and resilient Pillars sustainability legacy issues balance sheet Our historic franchise and brand Enablers Our talented and committed people Our E
Slide 14: Implemented through targeted initiatives
…implemented through targeted initiatives 1 2 3 Build a solid Strategic Achieve business model Tackle the and resilient Pillars sustainability legacy issues balance sheet • Efficient and simplified organisation • Sustained improvement in Targeted • Change in business mix risk profile • Determined an
Slide 15: Achieve business model sustainability
1 Achieve business model sustainability Initiatives Key Actions Selected Highlights • Simplify Group structure ~€270m recurring savings from 2023 onwards through solidarity fund Efficient and simplified • Implement highly rigorous and disciplined G&A cost management (~€0.8bn one-off restr. costs in
Slide 16: Build a solid and resilient balance sheet
2 Build a solid and resilient balance sheet Initiatives Key Actions Selected Highlights • Align underwriting to new business lending priorities 1.9% net NPE ratio by 2024 • Reduce and proactively manage NPE stock also via disposals (1.4% by 2026) Sustained improvement in risk profile • Enhance early
Slide 17: Tackle the legacy issue: gross petitum breakdown
3 Tackle the legacy issue: breakdown and coverage of gross petitum Gross petitum (€bn – latest figures) Key considerations Last available date for new claims in relation to Pjt. Valentine already Reps and &Warranties on NPE sales (Pjt. Valentine) 0.7 expired. Limited portion of petitum deemed ground
Slide 18: Deep dive on extraordinary legal claims
3 Tackle the legacy issue: deep dive on extraordinary legal claims Gross petitum (€bn – latest figures) Key considerations and recent developments Financial information 2014-2015 0.3 Claims • Positive jurisprudential trend, in connection with losses claimed Financial information 2008-2011 0.5 exclud
Slide 19: Incremental contribution to gross operating profit
Incremental contribution to gross operating profit Financial highlights – €m Δ 2021–24E Δ 2021–26E Increase in Commercial Revenues1 424 612 Decrease in TLTRO, Trading and Other Revenues (303) (306) Reduction in Operating Expenses 248 221 Incremental Gross Operating Profit 370 527 Selected P&L KPIs 2
Slide 20: Enhanced internal decision making processes
Newly and enhanced internal decision making processes and set-up… Lean and effective managerial set-up CEO • Owners of specific pillars already identified CCO -> Removed • Greater focus on Business Plan priorities Head of CFO Retail Head of Head of Large SME • Flatter structure closer to Corporate C
Slide 21: Framework to ensure successful execution
…and effective framework in place to ensure successful execution and delivery • Owners identified with clear accountability Business Plan projects • Defined specific initiatives to achieve Business Plan objectives Centralized IT • In charge of prioritising and optimizing IT demand demand structure S
Slide 22: Expected process and timeline
Expected process and timeline Transaction • €2.5bn capital increase via rights issue structure • Issue of new ordinary shares with pre-emptive rights to existing shareholders • Final terms of issue to be agreed at time of launch, subject to market conditions and result of pre -marketing Pricing acti
Slide 23: Effective Business and Commercial Initiatives
Effective Business and Commercial Initiatives 23
Slide 24: Simplify group structure
1.A Simplify group structure Planned simplification actions for BMPS Group Key initiatives and strategic rationale Business • Three separate mergers into BMPS of: Units Planned • MPS Capital Services (“MPSCS”) actions • MPS Leasing & Factoring (“MPSL&F”) Traditional banking Direct and online banking
Slide 25: Rigorous G&A cost management
1.B Implement highly rigorous and disciplined G&A cost management Clearly identified actions • Redefine cost governance end-to-end with centralisation of several cost owners under one single unit with enhanced Centralisation of cost accountability management • Cost management empowered by data analy
Slide 26: Optimise and redeploy workforce
1.C Optimise and redeploy workforce BMPS FTE Evolution (#k) FTE Redeployment / Reskilling • Resizing of workforce through dedicated "Solidarity Fund" Network Central Functions exits: FTE 21.2 1Q22 • One-off restructuring costs of €0.8bn in 2022 Solidarity Fund expected to be activated already 32% ~3
Slide 27: Streamline branch network
1.D Streamline branch network Wind down of 150 branches (of which 100 by 2024) Strategic Rationale and Driving Principles • Branch network streamlining driven by commercial factors (e.g. financial profitability, etc.), operational activity and efficiency Optimisation of improvements, prepared by ded
Slide 28: Change in business mix (1/2)
2 Key actions for change in business mix driven by commercial revenues (1/2) 2.A 2.B Develop an advanced household Enhance wealth management financing offering and protection offering • In-house consumer finance production exploiting new platform focusing on existing customer base • Enhancement of a
Slide 29: Change in business mix (2/2)
2 Key actions for change in business mix driven by commercial revenues (2/2) 2.C 2.D Uplift small business proposition Win-back and retain clients • Redesigned commercial approach based on new cluster definition • Set-up of specific "win-back" programs Key • Deployment of digital platform, to suppor
Slide 30: Focus on Consumer Finance
2.A Focus on Consumer Finance Examples of Untapped Potential1 Strategic Levers Envisaged in the Plan Consumer Finance Loan Volumes (€bn) Consumer Finance Penetration 2 • Significant boost in volumes due to full deployment of proprietary product 10-11% factory • Internal proprietary consumer 5.6% fin
Slide 31: Focus on Asset Management
2.B Focus on Asset Management Examples of Untapped Potential1 Strategic Levers Envisaged in the Plan AuM3 (Excl. Insurance) Evolution (€bn) Premium Examples ofClients / Individuals Untapped Potential CAGR: +4% 2021 17% 13% • Strong and established partnership with Anima CAGR: +4% • Full adoption of
Slide 32: Focus on Bancassurance
2.B Focus on Bancassurance Leading platform with further growth potential1 Strategic Levers Envisaged in the Plan Insurance Business Volumes Evolution Non-Life GWP per Branches (€000) Non-Life GWP (€m) • Market leading positioning achieved CAGR: +7% +66% through the long-term and successful 212 part
Slide 33: Focus on Banca Widiba
Full potential of Banca Widiba’s standalone Business Plan NOT entirely captured in BMPS’ 2022-26E Business Plan for 3 Focus on conservative purposes Banca Widiba Strategy Banca Widiba Standalone Projections Competitors – Market Financial Advisors Scale (Wealth Management Volumes) Benchmark 127 • Rec
Slide 34: Digitalisation to improve commercial capabilities
3 Digitalisation to improve commercial capabilities and efficiency Investments Principles Capex and Investments Composition 2022-2026 (€m) Safeguard mandatory projects / regulatory • Adaptation to fire regulations for large buildings, archives and data A constraints centres • Maintenance for safety
Slide 35: ESG objectives for the next years
ESG objectives defined for the next years will enable the achievement of a market distinctive position… Environmental impact Sustainable Finance Diversity & Inclusion % of Scope 1 emissions % of adoption of digital New investments in Banking Book corporate bonds: % of women in roles of reduction vs.
Slide 36: Supporting customers' sustainable transformation
…supporting customers in their own sustainable transformation process Completed On-going To be launched Development of the Country and ESG Credit and Risk Governance companies’ sustainable transition ESG investment offering • Integration of ESG factors in credit strategies • Definition of selective
Slide 37: Sustainable Financial Targets
Sustainable Financial Targets 37
Slide 38: Macroeconomic scenario: conservative assumptions
Overview of macroeconomic scenario: conservative assumptions Key Macroeconomic Figures 244 249 254 2025E and 233 2026E capped 160 at 66bps in the 130 119 projections 105 66 Euribor 3 0 10 n.a. 66 n.a. 66 months (bps) (12) (43) 2022E 2023E 2024E 2025E 2026E (1) ECB Bloomberg (2) Business Plan Macro S
Slide 39: Key financial targets recap
Key financial targets recap Achieve business model sustainability (Delta vs. 2021) Sustainable Profitability Commercial Revenues TLTRO, Trading & Other Operating Costs €705m / €909m + €424m by 2024 ‒ €303m by 2024 ‒ €248m by 2024 Earnings1 + €612m by 2026 ‒ €306m by 2026 ‒ €221m by 2026 in 2024 / 20
Slide 40: New Business Plan powered by €2.5bn capital increase
New Business Plan powered by deployment of €2.5bn capital increase and translated into targets with low execution risk 2021A 2024E 2026E 21-24E 21-26E Sustainable revenues with improved mix Selected P&L Items (€m) CAGR CAGR Operating Income 2,980 3,102 3,286 1.3% 2.0% Operating Costs (2,106) (1,858)
Slide 41: Net interest income increase
Net interest income increase supported by change in business mix and rates shift Net interest income evolution (€m) Net customer loans mix evolution 1 CAGR 3.8% Customer 70.5 71.3 73.5 CAGR 4.5% Loans (€bn) 1,469 • Steady growth of net interest 1,395 income at 4.5% CAGR 21-24E (3.8% 21-26E) driven b
Slide 42: Commission income: evolution and breakdown
Focus on commission income: evolution and breakdown Net fee & commission composition (€m) Indirect funding growth 1 (€bn) Total 1,484 1,559 1,677 CAGR 21A-26E: +2.4% +3.9% • Growth in net fee & commission 898 +2.6% 97.3 income over the plan, mainly +5.0% 60.6 driven by: 800 778 88.4 759 86.3 740 744
Slide 43: Cost reduction envisaged over the plan
Cost reduction envisaged over the plan Operating cost evolution (€m) • Operating Costs contraction at Personnel G&A D&A a (4.1%) CAGR 2021-2024E and 2,106 (2.2%) CAGR 2021-2026E 1,858 45 1,885 180 2 (220) (30) 182 (10) (8) 174 498 • ~€220m net savings on 468 458 personnel expenses by 2024, mainly su
Slide 44: Focus on NPE (1/2)
Focus on NPE (1/2) Gross NPE1 evolution (€bn) Gross NPE1 Ratio 2% 23% Secured PGS 2 4.9% Secured <> PGS 3.9% 3.3% 4.1 Unsecured 75% 3.2 2.8 2021A 2024E 2026E Net NPE Ratio 2.6% 1.9% 1.4% 2021A 2024E 2026E 2021A 2024E 2026E Reduction of NPE stock (c. €1.3bn) throughout the plan, leveraging on collect
Slide 45: Focus on NPE (2/2)
Focus on NPE (2/2) NPE1 Coverage Default Rate Bad loans 64% 69% 72% UTP 37% 46% 54% 1.0% PD 23% 22% 26% 0.9% 0.7% 59% 53% 48% 2021A 2024E 2026E 2021A 2024E 2026E Increase in cash coverage levels Cost of Risk <50bps throughout the plan Notes: 1. On balance sheet exposures. 45
Slide 46: Clear funding strategy
Clear funding strategy Group ample liquidity buffer and diversified funding strategy Funding mix (€bn) Institutional bond issuances (€bn) MREL Key liquidity ratios targets • Total funding issuance in • Solid MREL position across the plan with • Significant LCR and NSFR • Reduction of exposure to ECB
Slide 47: Italian Govies portfolio
Italian Govies portfolio Italian Govies Portfolio Breakdown1 (1Q-22, €bn) Focus on FVTOCI Portfolio Financial assets FVTPL Financial assets FVTOCI Amortised cost portfolio Mar-21 Dec-21 Mar-22 Steep reduction in total Italian Govies exposure 13.6 (-€4.4bn or (24)% vs. 2016) FVTPL Govies to decrease
Slide 48: Significant value creation from DTA
Significant value creation from DTA Current Stock of DTA (1Q-22) DTA P&L and Stock Evolution 2021A 2024E 2026E Convertible DTAs €0.6bn Income Statement Pre-tax profit €263m €705m €909m Non-convertible losses €0.2bn Net tax impact €49m €300m €(73)m Effective tax rate n.m. n.m. 8.1% Other non-converti
Slide 49: Future capital evolution: CET1 ratio walk
Future capital evolution supported by capital increase and driven by clear strategic initiatives CET1 ratio walk: 1Q22 – 2026E • Solid CET1 ratio throughout the plan, with CET1 a 14.2% and 15.4% CET1 Capital 5.2 2.5 (0.8) - 1.2 8.0 0.0 8.0 - 1.6 (0.2) 9.4 (0.5) 8.9 ratio fully-loaded in 2024 (€bn) a
Slide 50: Closing Remarks and Q&A session
Closing Remarks and Q&A session 50
Slide 51: Making BMPS a clear and simple commercial bank
Making BMPS a clear and simple commercial bank Efficient and simplified organisation on the back of key initiatives such as subsidiary mergers and human capital redeploymen t Change in business mix driven by commercial revenues reflecting efforts in consumer finance and wealth management Sustained i
Slide 52: Q&A
Mm @ MONTE DEI PY BANCA DAL 1472 DI SIENA Q&A
Slide 53: Appendix
DEI PASCHI Appendix > DISIENA BANCA DAL 1472
Slide 54: Overview of Stage 2 evolution
Overview of Stage 2 evolution Stage 2 Evolution Stage 2 Coverage Gross Stage 2 12.7 9.4 7.9 Stock (€bn) 15.1% 3.9% 3.4% 11.8% 9.8% 2.8% 2021A 2024E 2026E 2021A 2024E 2026E Net Stage 2 13.2 Ratio 12.4 15.1%11.3 11.7% 10.3 [•] 9.7% [•] 54
Slide 55: RWA evolution
RWA evolution RWA Evolution (€bn) +€10.2bn / +21.1% • RWA increase of €8.5bn from +€8.5bn / +17.7% 1Q22 to 2024 mainly driven by model change AIRB amounting 1.6 at c. €5.6bn impact 58.1 3.1 0.5 56.5 • 1Q22A-2024E organic business 5.6 growth exceeding €3bn of RWA (0.6) • One-off RWA reduction impact
Slide 56: Regulatory headwinds
Regulatory headwinds Regulatory headwinds (€m) 2022 2023 2024 2025 2026 Cum. FTA IFRS9 (330) (330) CET1 impact Calendar (20) (35) (50) (30) (30) (165) provisioning Total (20) (375) (50) (30) (30) (495) Model Change 5,600 5,600 AIRB One-Off OpRisk RWA (600) (600) (2012 events) Total 5,000 - - - - 5,0
Slide 57: MONTE
MONTE DEI PASCHI DI SIENA BANCA DAL 1472
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