Alior Bank Sa · GPW:ALR
Alior Bank Sa — Q3 2017 Earnings Presentation
46 slides from Alior Bank Sa's earnings presentation, Nov 9, 2017
Slide 1: Alior Bank S.A. Q3'17 Results Presentation
ALIOR BANK S.A. Q3’17 RESULTS PRESENTATION 9 November 2017
Slide 2: Agenda
AGENDA Key Highlights Strategic KPIs BPH Core integration costs and merger synergies Additional information on the strategy implementation plan 2017 outlook Operational performance Appendix 2
Slide 3: Key Highlights (1/2)
KEY HIGHLIGHTS (1/2) • Net profit considerably above market consensus* - PLN 190 M vs. PLN 154 M. • Significant increase of annualized quarterly ROE from 6.3% in Q2’17 to 11.7% in Q3’17. With BPH Core target synergies fully loaded 9m’17 annualized ROE at 11.9% vs. fully loaded 6M’17 of 10.7% (strate
Slide 4: Key Highlights (2/2)
KEY HIGHLIGHTS (2/2) • CoR for 9M’17 at 1.7% and excluding NPL sale at 1.9% vs. 1.8% in 6M’17 driven by a few provisions on large exposures (including PLN 7 M on windfarms). • Strong Tier 1 capital ratio at 12.02% (vs. 10.25% regulatory requirement) prior to inclusion of Q3’17 net profit. Additional
Slide 5: Q3'17 Bottom Line Decomposition (in PLN M)
Q3’17 BOTTOM LINE DECOMPOSITION (IN PLN M) QTD in PLN M Other income 7 Trading result 97 NFC 103 -404 -280 NII 724 69* -51 24 13 -74 Market -21 consensus** PLN 154 M 190 206 Total General Net NPL sales Bank tax Income tax Net profit FV Integration Restructuring Net profit revenues administrative imp
Slide 6: Alior on Track to Achieve Best-in-Class ROE of 14%
ALIOR ON TRACK TO ACHIEVE BEST-IN-CLASS ROE OF 14% ILLUSTRATIVE ANNUALIZED ROE (%) 14.1 11.9 BPH Core merger synergies 7.8 1H’17 banking sector ROE: 7.4% 5.8 6M’17 9M’17 2017* Strategic target *Hypothetic ROE assuming that target synergies (PLN 381 M annually) are included in the 9m’17 profit, avera
Slide 7: Strong Growth of Interest Income by 2.4% QoQ
STRONG GROWTH OF INTEREST INCOME (EXCL. DERIVATIVE HEDGING INSTRUMENTS) BY 2.4% QoQ QTD PLN M Interest income Interest expense -10 10 -11 21 6 893 904 180 173 Q2'17 Higher interest Decrease of Q3'17 Q2'17 Higher deposits Higher cost of Decrease of Q3'17 earning assets by interest income balance 5.8%
Slide 8: Fees and Commissions (in PLN M)
FEES AND COMMISSIONS (IN PLN M) -15 (-15%) 117 118 103 Net F&C -2 (-1%) Slowdown in mortgage loans 209 207 dynamics resulting F&C income 195 from regulatory adjustments of the sales process fees related to C/A, loans, transfers 98 99 (implementation of bancassurance 102 the Mortgage Bill) translates
Slide 9: Increase of LCR Driven by Regulatory Requirements
INCREASE OF LCR DRIVEN BY REGULATORY REQUIREMENTS New 2018 regulatory minimum = 100% LCR (%) Current regulatory minimum = 80% 103 88 30 Jun 2017 30 Sep 2017 OUR STRATEGY ASSUMES LCR TARGET LEVEL AT >116% DEPOSIT GROWTH 55 (PLN B) 52 +5.89% 32 34 Retail Business clients 20 21 30 Jun 2017 30 Sep 2017
Slide 10: Liquidity Position Enhancement Due to Deposit Campaign
ALIOR BANK’S LIQUIDITY POSITON ENHANCEMENT DUE TO SUCCESSFUL DEPOSIT CAMPAIGN OF NEW SAVINGS ACCOUNT „KONTO LOKACYJNE” Attractive pricing (2.5% annual interest) combined with product flexibility allowing to acquire a volume of PLN 1.3 B strongly contributing to LCR increase in Q3’17 10
Slide 11: Normalized Q3'17 General Administrative Expenses
NORMALIZED Q3’17 GENERAL ADMINISTRATIVE EXPENSES (IN PLN M) 55 durable cost reduction (synergies 9 related) and -16 one-offs 8 27 487 432 404 Q3'17 Restructuring Holiday accrual One-offs related Integration costs Q3'17 Q2'17 excluding provision release release to social security Normalized integrati
Slide 12: T-Mobile Partnership in Romania: Alior's First Branch Abroad Goes Live
T-MOBILE PARTNERSHIP IN ROMANIA: ALIOR’S FIRST BRANCH ABROAD GOES LIVE Business Model Key targets • Commercial launch in October 2017 Contributing positively to Alior’s • Products: full-fledged offer for private individuals: deposits & loans strategic 2020 targets incl. cash loan, device financing i
Slide 13: Agenda
AGENDA Key Highlights Strategic KPIs BPH Core integration costs and merger synergies Additional information on the strategy implementation plan 2017 outlook Operational performance Appendix 13
Slide 14: Strategy Implementation - Financial KPIs
STRATEGY IMPLEMENTATION - FINANCIAL KPIs 9m’17 Strategic goals 2020 Completion by ROE 7.8% 14% 2019 NIM net interest margin 4.7%* 5.1% 2019 C/I 51% 39% 2019 costs / income CoR 1.7% 1.6% 2020 cost of risk Gross loan each year in the growth** PLN 5.0 B PLN 5-6 B (9M) (12M) 2017-2020 period *NIM formul
Slide 15: Agenda
AGENDA Key Highlights Strategic KPIs BPH Core integration costs and merger synergies Additional information on the strategy implementation plan 2017 outlook Operational performance Appendix 15
Slide 16: Synergies Above Initial Plan, Integration Costs Below Plan
SYNERGIES ABOVE THE INITIAL PLAN, INTEGRATION COSTS SIGNIFICANTLY BELOW THE INITIAL PLAN SYNERGIES PLN M 14 -7 • HR synergies ahead of plan due to: • Higher average cost savings per FTE (additional reduction of mid-management positions to ensure flat org. chart) • More effective utilization of natur
Slide 17: Agenda
AGENDA Key Highlights Strategic KPIs BPH Core integration costs and merger synergies Additional information on the strategy implementation plan 2017 outlook Operational performance Appendix 17
Slide 18: Gradual and Consistent Decrease of Cost of Risk
GRADUAL AND CONSISTENT DECREASE OF COST OF RISK (CoR) – 60 BPS DOWN SINCE 2014, FURTHER DECREASE OF 20 BPS BY 2020 IS TARGETED ANNUALIZED CoR (%) 2.4 2.3 2.0 1.8 1.6 2017 2020 2014 2015 2016 guidance target 18
Slide 19: Strategic CoR Target Achieved by Changes in Portfolio and Risk Profile
STRATEGIC CoR TARGET TO BE ACHIEVED BY COMPREHENSIVE CHANGES BOTH IN PORTFOLIO STRUCTURE AND RISK PROFILE (E.G. LIMITING SALES THROUGH INTERMEDIARIES) CoR EVOLUTION (%) 0.18 -0.12 -0.10 0.05 1.80 -0.21 1.60 CoR 2017 Increase of MICRO Decrease of cash Increase of IFRS 9 Change in risk profile 2020 ta
Slide 20: PLN 200 M Cost of Risk Savings Translates into 0.21 pp CoR Decrease
PLN 200 M COST OF RISK SAVINGS TRANSLATES INTO 0.21 PP DECREASE OF CoR DUE TO PORTFOLIO SEASONING AND CREDIT POLICY OPTIMIZATION TOTAL IMPACT OF STRATEGIC INITIATIVES: 0.21 PP RETAIL INITIATIVES IMPACT (PP) BUSINESS CLIENT INITIATIVES IMPACT (PP) 0.02 0.13 0.11 0.08 0.03 0.05 Retail credit risk poli
Slide 21: Capital Position Secured for Future Development
CAPITAL POSITION SECURED FOR FUTURE DEVELOPMENT On 8 November 2017 Alior Bank entered into a flexible guarantee line arrangement with PZU allowing a maximum equity release (if and when necessary) of up to PLN 300 M ILLUSTRATIVE TIER 1 RATIO (%) EVOLUTION Maximum potential surplus of Tier 1 ratio sec
Slide 22: Agenda
AGENDA Key Highlights Strategic KPIs BPH Core integration costs and merger synergies Additional information on the strategy implementation plan 2017 outlook Operational performance Appendix 22
Slide 23: 2017 Outlook
2017 OUTLOOK Previous 2017 EoY Current 2017 EoY 9m’17 Guidance Guidance NIM 4.7% 4.6%-4.7% 4.7% CoR 1.7% 1.8% 1.8% (1.9% w/o NPL sale) C/I 51% 54% 51% C/I 49% 49% 49% excl. integration costs 23
Slide 24: Agenda
AGENDA Key Highlights Strategic KPIs BPH Core merger synergies Additional information on the strategy implementation plan 2017 outlook Operational performance Appendix 24
Slide 25: Key Financials - Revenue
KEY FINANCIALS - REVENUE PLN M (quarterly) Q2'17 Q3'17 ch. qoq (%) ch. qoq (PLN M) Total revenue 948 931 -1.9 -17.6 NII 719 724 0.6 4.4 Total interest income 893 904 1.2 10.9 Interest income excluding income from derivatives 859 881 2.4 20.7 interest income from derivatives 33 24 -29.3 - 9.8 Total i
Slide 26: Key Financials - P&L
KEY FINANCIALS – P&L PLN M (quarterly) Q2'17 Q3'17 ch. qoq (%) ch. qoq (PLN M) Total revenue 948 931 -1.9 -17.6 General administrative expenses -503 -404 -19.6 -98.7 Impairment losses & provisions -256 -212 -17.2 44.1 Bank tax -49 -51 2.9 -1.4 Profit before tax 140 264 88.2 123.8 Income tax -40 -74
Slide 27: Key Financials - Volumes and Ratios
KEY FINANCIALS – VOLUMES AND RATIOS PLN B Q2'17 Q3'17 ch. qoq (%) ch. qoq (PLN B) Loans 49.1 50.1 2.1 1.0 Deposits 51.7 54.7 5.9 3.0 Total equity 6.4 6.6 3.4 0.2 Total assets 61.8 65.0 5.2 3.2 % (quarterly) Q2'17 Q3'17 ch. qoq (%) ch. qoq (pp) ROE* 6.3 11.7 85.7 5.4 ROA* 0.7 1.2 83.1 0.5 C/I 53.0 43
Slide 28: Loan Book Split
LOAN BOOK SPLIT LOAN BOOK (PLN B) +3.8 +1.0 (+8%) (+2%) 49.1 50.1 46.3 1.5 1.6 Other business 0.8 1.0 0.8 1.3 Factoring 8.4 8.6 7.5 Investment loans 45% 44% 45% Business 11.5 11.4 Working capital 10.7 Other retail 0.7 0.8 0.7 0.8 0.8 Mortgage other 0.8 9.1 9.4 Mortgage real estate 8.4 56% 55% 55% Re
Slide 29: Deposit Book - Improved Mix of Current Accounts and Term Deposits
DEPOSIT BOOK – IMPROVED MIX OF CURRENT ACCOUNTS AND TERM DEPOSITS (IN PLN B) L/D = 91.6% Retail +10 (+40%) +2 (+6%) L/D = 81.7% 32.2 31.8 33.6 24.0 13.4 14.0 12.8 13.1 18.2 19.0 20.2 10.9 Q3’16 Q1’17 Q2’17 Q3’17 Term, banking securities issued, other +8 +1 Current Corporate (+56%) (+6%) L/D = 107.3%
Slide 30: Key Credit Risk Ratios
KEY CREDIT RISK RATIOS Market avg.* NPL total (%) +2.5 -2.2 13.2 13.8 13.6 13.0 +0.1 11.3 11.6 11.4 8.3 10.9 2.9 2.5 2.4 2.6 Q3'16 Q2'17 Q3'17 Q3'17 excl. OZE Q3'16 Q2'17 Q3'17 Q3'16 Q2'17 Q3'17 CORPORATE RETAIL MORTGAGE COVERAGE RATIO (%) 67 68 67 54 52 42 44 48 62 32 33 33 50 Q3'16 Q2'17 Q3'17 Q3'
Slide 31: Alior NIM Development (%)
ALIOR NIM DEVELOPMENT (%) +0.2 4.5 4.8 4.7 NIM Q3’16 1H’17 9M’17 0.4 CoR -2.1 -1.8 -1.7 +0.7 NIM - CoR 3.0 2.4 3.0 Q3’16 1H’17 9M’17 NIM formula for 9M’17: NII for 9M’17 annualized, divided by average of IEA from 31.12.2016 and 30.09.2017 31
Slide 32: Capital Position Supports Future Loan Origination Objectives
CAPITAL POSITION SUPPORTS FUTURE LOAN ORIGINATION OBJECTIVES 14.4% 14.1%* 13.6% 12.1% 12.0%** 11.5% Q1'17 Q2'17 Q3'17 TCR T1 *prior to inclusion of Q3’17 net profit and PLN 600 M subordinated bonds issue settled in October 2017 **prior to inclusion of Q3’17 net profit 32
Slide 33: Agenda
AGENDA Key Highlights Strategic KPIs BPH Core merger synergies Additional information on the strategy implementation plan 2017 outlook Operational performance Appendix 33
Slide 34: Polish Macro Outlook
POLISH MACRO OUTLOOK GDP growth (% yoy) Inflation (CPI % yoy) Unemployment rate (%) 4.1 2.3 13.4 3.8 3.8 1.9 11.4 3.3 9.7 2.7 8.3 0.9 6.9 6.7 1.4 0.0 -0.6 -0.9 2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018 F F F F F F FX rate (EUR/PLN) NBP reference rate (
Slide 35: Alior Bank Income Statement Snapshot
ALIOR BANK INCOME STATEMENT SNAPSHOT in PLN M Q1'17 Q2'17 Q3'17 Interest income 867 893 904 Interest expense -206 -173 -180 Net interest income 661 719 724 Fee and commission income 195 209 207 Fee and commission expense -78 -91 -104 Net fee and commission income 117 118 103 Trading result 73 99 97
Slide 36: Alior Bank Balance Sheet Snapshot
ALIOR BANK BALANCE SHEET SNAPSHOT in PLN M 31 Dec’16 31 Mar’17 30 Jun’17 30 Sep’17 Cash and balances with Central Bank 1 083 1 781 2 377 1 780 Financial assets held for trading 420 387 421 481 Available for sale financial assets 9 375 6 517 6 469 8 880 Investment securities held to maturity 2 2 0 0
Slide 37: Alior Bank Shareholding
ALIOR BANK SHAREHOLDING LARGEST FREE FLOAT AMONG POLISH FINANCIAL INSTITUTIONS PZU SA, PZU Życie SA 32.22% and TFI PZU SA Free float 53.74% 8.94% AVIVA OFE AVIVA BZ WBK 5.10% Nationale-Nederlanden OFE *based on the number of shares registered on Extraordinary EGM held on 31 October 2017 37
Slide 38: Alior Bank New Loans Sales in Retail & SME
ALIOR BANK NEW LOANS SALES IN RETAIL & SME RETAIL LOANS (NEW PRODUCTION PER QUARTER) 2 850 2 819 2 720 2 705 79 52 37 2 415 78 2 270 2 273 2 253 591 491 331 Other retail 70 550 2 010 44 49 55 481 Mortgages 46 529 459 456 556 Cash loans 2 277 2 353 2 077 2 179 1 697 1 765 1 742 1 865 1 407 Q3'15 Q4'1
Slide 39: Alior Bank Customer Base
ALIOR BANK CUSTOMER BASE (IN PLN T) 156** 4 115 4 132 3 928 3 990 188 209 183 178 3 843 3 213 3 129 133 134 Business clients Retail clients 3 927 3 922 3 745 3 656 3 080 2 996 Q2’16 3Q’16 Q4’16 1Q’17 Q2’17* 3Q’17 *Slight decrease in number of clients in Q2’17 is of technical nature as a result of ne
Slide 40: Alior Bank Headcount
ALIOR BANK HEADCOUNT FTE EVOLUTION -16.48% -9.82% 10 245 10 019 9 488 8 556 4 417 3 792 3 531 3 188 Outlets Headquaters 5 828 6 227 5 957 5 369 2016 Q1’17 Q2’17 Q3’17 40
Slide 41: Alior Bank Branches
ALIOR BANK BRANCHES NUMBER OF BRANCHES 1 010 960 914 Branches 299 284 269 Agencies 711 676 645 Q1’17 Q2’17 Q3’17 41
Slide 42: Ultimate Level of Synergies for Subsequent Years Enhanced
ULTIMATE LEVEL OF SYNERGIES FOR SUBSEQUENT YEARS ENHANCED TARGET SYNERGY LEVEL (PLN M) 2017 (PLN M) Plan 76 Plan 377 374 381 351 Actual/Forecast 67 Forecast 60 52 41 192 36 167 15 11 Q1'17 Q2'17 Q3'17 Q4'17 2017 2018 2019 • Current synergy realization ahead of plan • Target synergy (2019) slightly h
Slide 43: Significantly Lower Integration Costs
SIGNIFICANTLY LOWER INTEGRATION COSTS INTEGRATION COSTS 2017 TOTAL INTEGRATION COSTS 2016-2017 (PLN M) (before tax) (before tax) Target for 31.12: PLN 195 M Plan Forecast: PLN 116 M Actual/Forecast 500 55 54 50 438 46 195 40 116 34 2017 2016 16 16 305 322 Q1'17 Q2'17 Q3'17 Q4'17 Plan Actual/Forecast
Slide 44: 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 44
Slide 45: 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 Bank contained in this Presentation are based on the interim condensed consolidated financial stat
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