Banca Monte Dei Paschi Di Siena S.p.a. · MIL:BMPS
Banca Monte Dei Paschi Di Siena — Investor Presentation (October 2016)
78 slides from Banca Monte Dei Paschi Di Siena's investor presentation, Oct 25, 2016
Slide 1: A new starting point
A new starting point October 25th, 2016 2016-2019 Business Plan: Back to our customers and people, focused on execution CONFIDENTIAL AND PROPRIETARY WORKING DRAFT Any use of this material without specific permission is strictly prohibited Last Modified 31/10/2016 11:31 W. Europe Standard Time Printe
Slide 2: Disclaimer
Disclaimer THIS DOCUMENT IS BEING PROVIDED TO YOU SOLELY FOR YOUR INFORMATION. THE INFORMATION IN THIS DOCUMENT, WHICH HAS BEEN PREPARED BY BANCA MONTE DEI PASCHI DI SIENA S.P.A. (THE “COMPANY” AND TOGETHER WITH ITS CONSOLIDATED SUBSIDIARIES, THE “GROUP”), IS PRELIMINARY IN NATURE AND MAY BE SUBJECT
Slide 3: Opening remarks
Opening remarks o Fully deliverable Business Plan built around a structural and unprecedented solution to BMPS asset quality legacy, based on the following 3 key pillars: – Sale and full de-recognition of up to EUR 28.5 billion GBV Bad Loans – Increased coverage on UTP & PD to ~40% (the highest stan
Slide 4: Agenda
Agenda Transaction at a glance Key highlights of the Business Plan MPS: the new starting point Business Plan guidelines Financial projections and target KPIs Implementation plan 4
Slide 5: Transaction at a glance – Structural and definitive solution to Bad Loans legacy
Transaction at a glance – Structural and definitive solution to Bad Loans legacy Sale and de-recognition of Bad Loans Increased coverage on other NPEs Recapitalization of MPS Up to 28.5 EUR bn of gross Bad Loans 2.1 EUR bn LLPs on other NPEs 5 EUR bn capital plan o Disposal of up to 28.5 EUR bn of g
Slide 6: Sec.Co. Bridge & Take-out Phase
Sec.Co. Bridge & Take-out Phase Sec.Co. Sec.Co. Originator (Bridge Phase) (Take-out Phase) Capital Structure o The Senior Bridge Facility and the Senior Mezzanine Bridge GBV: up to Senior Facility will be refinanced 27.6 EUR bn Bridge Facility Senior Lenders through a term securitization (up to 5 EU
Slide 7: BMPS remaining bad loans and exposure to Sec.Co.
BMPS remaining bad loans and exposure to Sec.Co. EUR bn BMPS bad loans remaining exposure 27.7 1.2 27.6 1.6 0.9 1.2 1Q16 GBV 2Q16 inflows Transfer to Sec.Co. Sale of leasing 3Q16 inflows 3Q16 outstanding pro-forma BMPS gross exposure to Sec.Co. 5% retention rule 1.36 0.46 0.91 0.08 0.25 0.08 0.05 Se
Slide 8: Increased coverage on UTP resulting in top positioning in the Italian market
Increased coverage on UTP resulting in top positioning in the Italian market UTP stock Provision stock1 UTP coverage UTP peer EUR bn EUR bn % average 1H16: 26% 16.0 42% 14.3 29% 6.0 4.6 1H16 2016F 1H16 2016F 1H16 2016F 1 Delta stock of provision combined with the increase in cost of UTP which moves
Slide 9: Recapitalization of MPS
Recapitalization of MPS o Up to 5 EUR bn capital plan in order to restore a solid capital position post additional provisions on non-performing exposures and sale/de-recognition of Bad Loans o Capital plan and Sec.Co. deconsolidation conditional to each other Liability Management Exercise Cornerston
Slide 10: Pro-forma Tangible Book Value
Pro-forma Tangible Book Value EUR bn • Not including ~ 1.7 EUR bn of DTA as they would not be recognized in the balance sheet at the time of the Transaction. However, off-balance sheet DTA may provide potential future capital buffer • Not including upcoming disposals 0.5 9.1 8.4 1.2 1.0 5.0 1.6 TBV
Slide 11: Agenda
Agenda Transaction at a glance Key highlights of the Business Plan MPS: the new starting point Business Plan guidelines Financial projections and target KPIs Implementation plan 11
Slide 12: Back to our customers and people, focused on execution
Back to our customers and people, focused on execution 1 2 3 4 Unlock the value embedded Renew operating model Radically improve Credit Strengthen liquidity and in our existing customer with sustained focus on Risk Management capital position base efficiency 12
Slide 13: Business Plan: solid and realistic targets (1/2)
Business Plan: solid and realistic targets (1/2) Net income DTA contribution1 Return on Tangible Equity (ROTE)2 EUR mln % >950 >1,100 >11 >10 6.23 302 ~800 ~950 1H16 2018E 2019E 1H16 2018E 2019E Operating costs Cost/income4, Cost of risk6 EUR bn % Bps 2.563 2.53 2.46 1343 65-70 ~55 1H16 2018E 2019E
Slide 14: Business Plan: solid and realistic targets (2/2)
Business Plan: solid and realistic targets (2/2) CET11 Gross NPE ratio3 ~8% in case of full disposal of % % bad loans, marked at 29.5% in 2019 (or at ~18% assuming 12.1 12.1 13.5 34.9 usage of capital surplus) ~17 ~16 1H16 2018E 2019E 1H16 2018E 2019E Commercial loan to deposit2 Liquidity Coverage R
Slide 15: Conservative macroeconomic assumptions for the Business Plan
Conservative macroeconomic assumptions for the Business Plan Italian GDP nominal growth Interest rates Consensus1 % EURIBOR 3m, % 1.0 0.9 0.8 0.8 -0.30 -0.30 -0.30 -0.30 2016E 17E 18E 2019E 2016E 17E 18E 2019E -0.29 -0.28 -0.26 -0.10 The Business Plan does not incorporate possible upsides from inter
Slide 16: Agenda
Agenda Transaction at a glance Key highlights of the Business Plan MPS: the new starting point Business Plan guidelines Financial projections and target KPIs Implementation plan 16
Slide 17: A new starting point after the transaction
A new starting point after the transaction Drastically strengthened balance sheet positively affecting cost of risk going forward Significant improvement in credit risk management already started Large and resilient client base despite the challenging years Significant upside from re-rating effect a
Slide 18: Positive impact of the transaction on key indicators…
DRASTICALLY STRENGTHENED BALANCE SHEET POSITIVELY AFFECTING COST OF RISK GOING FORWARD Positive impact of the transaction on key indicators… Gross NPE ratio Gross NPE mix Bad Loans NPE coverage3 Bad loans 1H16, % 1H16, %, EUR bn Unlikely To Pay (UTP) 1H16, % UTP Past due 34.9 45.3 18.5 Past Due (PD)
Slide 19: … positioning MPS in line with Italian peers…
DRASTICALLY STRENGTHENED BALANCE SHEET POSITIVELY AFFECTING COST OF RISK GOING FORWARD … positioning MPS in line with Italian peers… 1H16, pro-forma Bad loans Gross NPE ratio Net NPE Gross NPE mix Bad loans NPE coverage % ratio1 % UTP % UTP Past due Past due 57 17.9 17.6 % UTP + PD 2 42 coverage 59
Slide 20: … with over 60% of UTP portfolio under restructuring
DRASTICALLY STRENGTHENED BALANCE SHEET POSITIVELY AFFECTING COST OF RISK GOING FORWARD … with over 60% of UTP portfolio under restructuring 1H16, pro-forma, EUR bn Unsecured Personal collateral Total Total UTP coverage Secured collateral 16.0 portfolio at 42% Even if covered at 73%, remaining provis
Slide 21: Significant improvement in credit risk management over the last years…
SIGNIFICANT IMPROVEMENT IN CREDIT RISK MANAGEMENT ALREADY STARTED Significant improvement in credit risk management over the last years… Default rate1 Cure rate on UTP and PD4 UTP danger rate % Best practice % Best practice % 4.22 7.4 23.6 19.8 -3.8p.p. 2.9 -1.3pp >2x 3.5 2014 1H163 2014 1H163 2014
Slide 22: … reflected in the positive evolution of key risk parameters
SIGNIFICANT IMPROVEMENT IN CREDIT RISK MANAGEMENT ALREADY STARTED … reflected in the positive evolution of key risk parameters EUR mln 2014 2015 1H20162 10,164 6,929 4,969 New business Average PD1 of new business 1.10% 1.23% 1.16% Maturities 4,916 10,172 11,585 Average PD of maturing 3.05% 2.21% 2.5
Slide 23: Large and resilient client base, despite the recent challenging period
SIGNIFICANT IMPROVEMENT IN CREDIT RISK MANAGEMENT ALREADY STARTED Large and resilient client base, despite the recent challenging period Individuals – All client segments Number of clients1 Number of current accounts Mln Mln stable stable 4.86 4.76 4.74 2.57 2.60 2.59 2012 14 1H2016 2012 14 1H2016 D
Slide 24: Significant upside from re-rating and decreased cost of funding
SIGNIFICANT UPSIDE FROM RE-RATING EFFECT AND DECREASED COST OF FUNDING Significant upside from re-rating and decreased cost of funding FY2015, % Cost of funding 1. ~200 EUR mln Due to banks 0.56 0.38 0.11 potential from alignment of cost of funding due to customers to top 20 Due to 0.68 0.45 0.15 It
Slide 25: Significant upside going forward in Retail…
STRONG POTENTIAL IN COMMERCIAL REVENUE GENERATION Significant upside going forward in Retail… FY2015 Total Revenues/Client – Individuals Mortgages new flows per branch Indirect funding over total funding3 Revenues/Client, EUR EUR mln % >500 2.5 ~66% ~380 ~52% 0.8 MPS1 Best MPS Best MPS Best practice
Slide 26: … as well as in Small Business and SMEs …
STRONG POTENTIAL IN COMMERCIAL REVENUE GENERATION … as well as in Small Business and SMEs … FY2015 Share of Wallet (SoW)1 – Small Business Revenues from services – SMEs2 SME product penetration3 % Revenues/Client, EUR % 18.9 20.8 35 10,000 Credit 7,400 +35% cards 22 +13p.p. 15.0 17.5 CPI4 MPS Best M
Slide 27: … resulting in overall strong upside potential
STRONG POTENTIAL IN COMMERCIAL REVENUE GENERATION … resulting in overall strong upside potential 1H16, annualized Commercial revenues1 / Gross Banking Product2 % 1.72 ~1 EUR bn 1.30 +32% potential of revenue increase by filling the gap with best practice MPS pro-forma Best practice 1 Net Interest In
Slide 28: Solid track record in cost optimization with further potential ahead
STRONG TRACK RECORD IN COST REDUCTION AND FURTHER UPSIDE GOING FORWARD Solid track record in cost optimization with further potential ahead, especially on personnel costs Historical evolution Benchmark on 1H16 results Personnel costs Personnel costs / assets Personnel costs / FTE EUR mln 1H16, %, an
Slide 29: Agenda
Agenda Transaction at a glance Key highlights of the Business Plan MPS: the new starting point Business Plan guidelines Financial projections and target KPIs Implementation plan 29
Slide 30: Back to our customers and people, focused on execution
Back to our customers and people, focused on execution 1 2 3 4 Unlock the value embedded Renew operating model Radically improve Credit Strengthen liquidity and in our existing customer with sustained focus on Risk Management capital position base efficiency 30
Slide 31: Synthesis of impact of key pillars
Synthesis of impact of key pillars EUR bn, % Ordinary revenues Operating costs ex. D&A LLPs CET1 Ratio2 EUR bn EUR bn EUR bn % 4.3 4.5 13.5% +5% >2 >11%3 p.p. 2.4 2.2 -8% 1.51 0.5 -64% 2016F 2019E 2016F 2019E 2016F 2019E 2016F 2019E 1 2 3 4 Unlock the value embedded Renew operating model Radically i
Slide 32: Unlock the value embedded in our existing customer base
Back to our customers and people, focused on execution Relaunch of commercial effectiveness, also through the 1 Unlock the value embedded in our existing customer A migration of low-value/mass customers to digital, online and self-directed channels base B Strong growth on mortgages and consumer fina
Slide 33: 1A Relaunch of commercial effectiveness through digital migration
1A Relaunch of commercial effectiveness, also through the migration of low-value/mass customers to digital, online and self-directed channels % self-banking1 # client visits (SB and SMEs) 70 7.0 +55% 4.5 +49p.p. 21 2016F 2019E 2016F 2019E 1. Migration plan for a low-value/ mass 1. Increase in number
Slide 34: 1B Strong growth in mortgages and consumer finance
1B Strong growth in mortgages and consumer finance Mortgages annual flow Market share (%) Consumer finance annual flow EUR bn EUR bn ~6.0 ~1.1 ~0.9 +22% >2.5x ~2.3 2016F 2019E 2016F 2019E 4.7% 9.4% 1. Re-positioning of the Bank within the top 3 1. Strengthening the relationship with national players
Slide 35: 1C Strong push on Affluent and Private customers
1C Strong push on Affluent and Private customers leveraging Wealth Management, Insurance offering and professional advisory Total Client Assets for Individuals1 Total AuM evolution Market share (%) Number of Affluent clients EUR bn EUR bn Other AuM ‘000 Affluent Bancassurance Private 514 550 95.7 68
Slide 36: 1D Launch of a new way of serving Small Business
1D Launch of a new way of serving Small Business with radical simplification of product offering Loans volumes Commission penetration1 Average SoW EUR bn % % 16.2 48 50 ~26 +2p.p. ~23 +3p.p. 13.2 +23% 2016F 2019E 2016F 2019E 2016F 2019E 1. Introduction of a standardized product offering based on mod
Slide 37: 1E Refocus of corporate activities with consolidation of product factories
1E Refocus of corporate activities with consolidation of product factories Corporate fee income – SME Revenues from Capital Markets activities EUR mln EUR mln ~200 ~200 ~220 ~220 stable stable 2016F 2019E 2016F 2019E 1. New segmentation of SME with higher 1. Complete restructuring of MPS Capital th
Slide 38: 1F Full leverage of Widiba as innovation and digital vehicle for the Group
1F Full leverage of Widiba as innovation and digital vehicle for the Group Wibida today as a key value in the market… …to be extended to the entire Group • 150K clients with ~7 EUR bn AuM (1H16) and ~600 Financial Advisors (FAs) • Extensive import of Widiba tech solutions, with multiple possible app
Slide 39: Renew operating model with sustained focus on efficiency
Back to our customers and people, focused on execution Unlock the value embedded Complete redesign of the network architecture, with full deployment of the modular Hub and 1 in our existing customer base A Spoke approach to significantly reduce the cost to serve Renew operating model with Launch of
Slide 40: 2A Complete redesign of the network architecture, Hub & Spoke
2A Complete redesign of the network architecture, with full deployment of the modular Hub & Spoke approach Number of Areas Number of branches FTEs absorption2 % 8 4/5 ~2,000 100% 100% 2016F 2019E ~1,500 62% Commercial ~500 Hub 71% Number of DTMs1 activities ~1,000 Spoke Other 63 38% 35-40 29% activi
Slide 41: 2B Launch of a Group Digital Program, with a digital factory
2B Launch of a Group Digital Program, with the set-up of a digital factory, to transform processes end-to-end FTEs in network activities FTEs allocation to manual processes1 Top 20 processes # % Other 17,100 34% 15,500 -18% 8,800 -16p.p. 7,200 18% 8,300 8,300 Aug 2016 2019E 2016F 2019E 1. Invest in
Slide 42: 2C Simplification of headquarters and legal entities
2C Simplification of headquarters and legal entities Commercial divisions Foreign branches Foreign banks Number Number 4 2 2 1 1 0 2016F 2019E 2016F 2019E 2016F 2019E 1. Streamlining of the legal entities, with the closure of foreign branches and sale of foreign banks of the Group (subject to market
Slide 43: 2D Further optimization of other administrative expenses
2D Further optimization of other administrative expenses EUR mln Other administrative expenses 742 -9% -4% 711 70 672 39 2016F Further Cost 2019E pre Business Business Plan 2019E optimization Plan initiatives initiatives / change of perimeter1 Reduction following the revision of business and Increas
Slide 44: 2E HR program as key enabler to streamline the operating model…
2E HR program as key enabler to streamline the operating model… Key drivers o Activation of the Evolution of the bank’s FTEs “Fondo di solidarietà”, with ~25,200 ~550 EUR mln HR 2,450 ~22,600 ~-2,600 severance 450 300 o Exit of ~450 FTEs due to natural 2016F Fondo di Natural New hiring1 2019E turnov
Slide 45: 2E … while ensuring the development of current human capital
2E … while ensuring the development of current human capital Variable compensation Training hours per FTE EUR mln Number of hours ~135 ~150 ~160 +4% ~4x ~35 2012-15 2016F-19E 2012-15 2016F-19E 1. Investment on workplace welfare through both strengthening of traditional welfare systems and adoption o
Slide 46: Radically improve Credit Risk Management
Back to our customers and people, focused on execution Unlock the value embedded A Complete segregation of the Credit division from the Business Division 1 in our existing customer base B Strong push on automation and strengthening of credit standards Renew operating model with 2 sustained focus on
Slide 47: 3A Complete segregation of the Credit Division from the Business Divisions
3A Complete segregation of the Credit Division from the Business Divisions X # units From … … To Commercial Commercial Division Credit Division Credit Division Division No local units for performing 4/5 Areas Areas exposures Areas mirroring Credit Areas 8 4/5 commercial Area credit 4/5 office units
Slide 48: 3B Strong push on automated underwriting processes for small tickets
3B Strong push on automated underwriting processes for small tickets Percentage of automatic credit decisions on Percentage of automatic credit decisions – mortgages – Individuals Small Business % % ~70 ~50 >3x ~20 >3x ~15 2016F 2019E 2016F 2019E 1. Strengthening of credit standards and revision of
Slide 49: 3C Strengthening of early detection and proactive management
3C Strengthening of early detection and proactive management Default rate Cure Rate of Past Due % % 4.21 20.9 21.9 17.6 +4.3p.p. 2.9 2.0 1.9 -1.0p.p. 7.3 2014 2016F 2018E 2019E 2014 2016F 2018E 2019E Internalization of early management of overdraft Enforcing proactive management of riskiest / arrear
Slide 50: 3D Overview of the spin-off of the recovery unit
3D Overview of the spin-off of the recovery unit Transaction structure Sec. Co. Credit recovery Bad loans Key benefits BMPS portfolio o Long term exclusive Servicing Agreement for the management of ≥80% Debt ~80% of the Up to 1/3 of of the new inflows in Bad Loans management Partner Bad Loans bad lo
Slide 51: 3E Double down on cure of UTP portfolio
3E Double down on cure of UTP portfolio Cure rate of UTP Danger rate for UTP1 % % 23.6 19.9 18.2 16.9 -3.0p.p. 7.6 8.2 5.6 +2.6p.p. 0.3 2014 2016F 2018E 2019E 2014 2016F 2018E 2019E 1. Significant number of new resources dedicated to UTP management (+100 FTEs) thanks to the release of resources gran
Slide 52: 3F Creation of a centralized center of excellence for recovery of bad loans
3F Creation of a centralized center of excellence for recovery of bad loans Recovery rate on bad loans Gross NPE ratio % % 9.7 31.8 8.5 18.7 17.3 +5.5p.p. 16.2 -2.5p.p. 3.0 2.1 20141 2016F1 2018E2 2019E2 2014 2016F 2018E 2019E 1. Setup of a centralized center of excellence staffed with ~30 top perfo
Slide 53: Strengthen liquidity and capital position
Back to our customers and people, focused on execution Unlock the value embedded 1 in our existing customer base Strengthening the liquidity position to support business plan A growth Renew operating model with 2 sustained focus on efficiency Capture of benefits on cost of funding from expected B re
Slide 54: 4A Strengthening the liquidity position to support Business Plan growth
4A Strengthening the liquidity position to support Business Plan growth Commercial Loan to Deposit LCR NSFR % % % 161 143 -18p.p. 114 111 105 -9p.p. 101 +10p.p. Pro-forma 2019E Pro-forma 2019E Pro-forma 2019E 2016F 2016F 2016F 1. Positive impact of the transaction on key liquidity indicators 2. Reba
Slide 55: 4B Capture of benefits on cost of funding from re-rating
4B Capture of benefits on cost of funding from re-rating Detailed next Direct funding (network) Funding cost – Analysis on EoY stock EUR bn Indexed as of 2016F CAGR 86.6 6.2% 72.4 100 Wholesale 27.3 13.0% 18.9 (corporate) 59 Retail 59.3 53.5 3.5% (individuals) 2016F 2019E 2016F 2019E Institutional 1
Slide 56: 4B Details on funding plan
4B Details on funding plan 2016F Funding cost – analysis on EoY Stock (network & institutional) 2017E Indexed as of 2016F 2018E 2019E 116 110 112 100 99 100 100 100 100 100 100 89 84 72 75 72 74 73 65 63 60 54 50 57 53 59 58 591 Current account Time Time Retail bonds Institutional Subordinated Total
Slide 57: Agenda
Agenda Transaction at a glance Key highlights of the Business Plan MPS: the new starting point Business Plan guidelines Financial projections and target KPIs Implementation plan 57
Slide 58: Financial projections and key ratios
Financial projections and key ratios Financial projections EUR mln 2016F 2018E 2019E CAGR Post 16-19, Key ratios (EUR mln, %) transaction % Net Interest Income 2,000 2,076 2,116 1.9% 2016F 2018E 2019E (Bps, %) Net Fees and Commission 1,843 1.981 2,097 4.4% Other Income -2,177 303 305 n.m. Cost/Incom
Slide 59: Details on Net Interest Income composition
Details on Net Interest Income composition Gross loans evolution1 NII composition EUR bn EUR mln CAGR CAGR % % +2.3 EUR bn 0.8% +116 EUR mln 1.9% 97.6 99.9 2,116 2,000 288 -23.0% Retail 32.0 35.5 Interest Income 3.5% 631 Small from NPEs Business 13.2 16.2 7.2% Corporate 1,828 10.0% 41.7 38.3 -2.8% O
Slide 60: Detail on Net Interest Income evolution
Detail on Net Interest Income evolution EUR mln NII evolution ~2,120 ~100 ~90 ~50 2,000 ~340 ~390 2016F Deterioration Cost of Business Plan De-risking of Other3 2019E into Bad Loans funding1 initiatives2 AFS portfolio 1 Including mix effect on liabilities 2 Including Small Business, mortgages on Ind
Slide 61: Detail on Net Fees and Commission evolution
Detail on Net Fees and Commission evolution Net Commission/Commercial Revenues EUR mln % Net Fees and Commission ~50 ~95 ~2,100 ~80 ~603 ~35 ~60 ~202 ~80 1,843 ~40 2016F One-off Wealth Bancassu- Consumer Small Disposed Other 2019E items1 Management rance Finance Business assets ~48% 43% and SMEs ~50
Slide 62: Details on NPE flows and key ratios
Details on NPE flows and key ratios ~16% Gross NPE ratio or ~8% in Gross NPE mix case of full disposal of bad loans, Default rate Danger rate of NPE EUR mln, % marked at 29.5% in 2019 (or at ~18% % % Coverage assuming usage of capital surplus) Bad Loans 100% = 18.7 EUR bn 17.6 EUR bn 2.9 20.1 UTP 60
Slide 63: Agenda
Agenda Transaction at a glance Key highlights of the Business Plan MPS: the new starting point Business Plan guidelines Financial projections and target KPIs Implementation plan 63
Slide 64: The Business Plan implementation is based on a balanced mix of short-term and transformational initiatives
The Business Plan implementation is based on a balanced mix of short-term and transformational initiatives 2017 2018 2019 Deployment of new service model and new 1 customers segmentation Unlock the value Launch of a renewed and innovative product offering for Individuals and Small 2 embedded in our
Slide 65: Set-up of the New organizational model to support business plan implementation…
Set-up of the New organizational model to support business plan implementation… Board Chief Risk Officer CEO Chief Audit (CRO) Executive Group General Staff Regulatory Counsel Relationship External Compliance Relations Chief Human Chief Financial Chief Lending Chief Commercial Chief Operating Capita
Slide 66: Thank you for your attention
Back to our customers and people, focused on execution Thank you for your attention 66
Slide 67: Annexes
Annexes | @ MONT heel
Slide 68: Cerved analysis – Clustering of the bank portfolio
Cerved analysis – Clustering of the bank portfolio Analytical Type of exposure appraisal • The analyses have been performed on Companies2 Retail Statistical clusters built based on the risk classification appraisal1 of the bank (Past-due, Problematic credit and GBV> 500K GBV< 500K Restructured) and
Slide 69: Cerved analysis – Distribution by risk class on UTP Corporate exposures
Cerved analysis – Distribution by risk class on UTP Corporate exposures Cluster 1,2,3 of CERVED analysis1, EUR mln Definition criteria of risk class1 Positions GBV Operating • Operating companies with low risk 6.636 2.261 companies (safe or • CGS2 ≤ 5 solvent) Vulnerable • Operating companies with h
Slide 70: Cerved analysis - Analysis of risk by type of segment of the whole MPS portfolio
Cerved analysis - Analysis of risk by type of segment of the whole MPS portfolio Total MPS total MPS Market average MPS average Segment companies companies penetration CGS1 CGS 1 - Agriculture 226,931 15,035 6.6% 5.14 5.44 2 - Commerce 901,495 56,729 6.3% 5.90 6.10 3 - Constructions 427,862 24,741 5
Slide 71: Assessment of Unlikely to Pay exposure
Assessment of Unlikely to Pay exposure EUR bn, % Breakdown by type of borrower Focus on personal guarantees and unsecured for corporate Unsecured CERVED CGS ratio Personal guarantees Secured collateral 6.2 1.3 16.0 1.5 0.8 0.7 72% 1.1 13.4 3.4 30% 23% 4% 64% 28% 1-3 4-5 6-7 8 - 10 Total 11% 17% 25%
Slide 72: Details on Unlikely to Pay – 1H16
Details on Unlikely to Pay – 1H16 MPS gross book value breakdown MPS gross book value breakdown MPS gross book value by region by borrower breakdown by segment3 % % Segment Unlikely to Pay (%) Agriculture 4% Commerce 8% Construction 25% Other Other2 Southern Italy1 Northern Italy Manufacturing 20% 1
Slide 73: Cerved analysis - Assessment of restructured exposures
DRASTICALLY STRENGTHENED BALANCE SHEET Cerved analysis - Assessment of restructured exposures 1H16, EUR bn, % MPS gross book value breakdown MPS gross book value breakdown MPS gross book value by region by borrower breakdown by segment3 % % Segment Unlikely to Pay (%) Agriculture 4.5% Commerce 4.5%
Slide 74: Highlights of the current setup for NPL management at MPS
Highlights of the current setup for NPL management at MPS Area Main highlights o The NPL organizational structure is well defined with separate and dedicated NPL workout units (WUs) differentiated from the origination units. After the recent creation of the Direzione Crediti e Asset Problematici and
Slide 75: Possible allocation of resources freed up by the spin-off of the recovery unit
Possible allocation of resources freed up by the spin-off of the recovery unit (Juliet) Detail on FTE composition Description # of FTEs Number of FTEs • Creation of a “bridge unit” to Juliet coordinate the external recovery coordi- unit and manage the new flow ~50 nation allocation •~115 FTEs for Ju
Slide 76: The classification and evaluation of unlikely to pay and bad loans is a standardized process
The classification and evaluation of unlikely to pay and bad loans is a standardized and formal process integrated into a specific procedure, with defined criteria integrated in the IT system - Continuous process update to facilitate cure and recovery rates Positions for which it is considered unlik
Slide 77: Details on NII evolution – Non-Performing Exposures
Details on NII evolution – Non-Performing Exposures EUR mln, % Interest income from NPEs Other NII2 2,259 2,116 2,000 2,076 7841 365 288 631 1,711 1,828 1,475 1,370 2015 2016F 2018E 2019E % of interest income from 35% 32% 18% 14% NPEs on NII PD and UTP 3.6% 3.9% 3.4% 3.3% active interest Gross NPE r
Slide 78: Details on the investment plan
Details on the investment plan EUR mln 2017-19 Investment1 Main initiatives Unlock the value o Self-areas o New Internet Banking embedded in our 160-165 o Advanced ATMs o New CRM customer base o Reinforcement of Widiba o Reinforcement of Call Center o Renewal of product offering o Wealth Management
Banca Monte dei Paschi di Siena — Investor Presentation (October 2016) on 6ix