Efg International Ag · SIX:EFGN
Efg International — FY2007 Earnings Presentation
62 slides from Efg International's earnings presentation, Feb 26, 2008
Slide 1: Annual results presentation 2007
Annual results presentation 2007 Zurich, 26 February 2008 Practitioners of the craft of private banking 1
Slide 2: Disclaimer
Disclaimer This presentation has been prepared by EFG International 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 any securities regarding EFG Intern
Slide 3: Introduction, Performance, Acquisitions, Achievements & outlook
1.0 Introduction Lonnie Howell, CEO 2.0 Performance 3.0 Acquisitions Achievements & 4.0 outlook 3
Slide 4: At the outset..
At the outset.. Founded in 1995. Our founding belief: the private banking industry was not delivering on its potential. We established the business with the aim of providing wealthy clients with a level of service they were entitled to expect. We have come a long way. Thanks to a number of distincti
Slide 5: The principles underpinning our business
The principles underpinning our business A distinctive philosophy, and practical conditions to realise it. • A clear focus on private banking and asset management. • Investment solutions an integral part of private banking. • Open architecture + select internal solutions in competitive juxtaposition
Slide 6: The results speak for themselves: P&L growth
The results speak for themselves Unbroken growth in P&L development Operating revenues and net profit CHF million 650 634.4 600 550 500 450 Operating revenues 400 Net profit 350 338.4 300 235.9 250 230.0 206.3 200 150 120.9 103.7 100 89.0 60.0 48.0 50 40.6 33.2 29.8 23.3 14.8 5.8 10.4 0.1 4.0 0 -3.9
Slide 7: The results speak for themselves: AUM
The results speak for themselves A similar story in relation to AUM Clients’ Assets under Management CHF billion 89.6 90 85 80 73.6 75 70 All impossible to achieve without significant 65 client appeal and satisfaction. 60 55 50 47.3 And achieved in good times and bad. 45 40 Continued to grow during
Slide 8: Maintaining a dynamic pace
Maintaining a dynamic pace Growth has been maintained in the period post-IPO In some areas, has accelerated. Comparison of CAGR 2000-2004 2005-2007 CROs 34% 43% AUMs 43% 46% Revenues 42% 111% Net profit 65% 113% For 2000-2004, Swiss GAAP; for H1 05-07, IFRS. 8
Slide 9: With another record year in 2007
With another record year in 2007 A strong performance across all key metrics CROs 37% to 554* AUM 36% to CHF 94.0 billion* Net new assets & 25% y- to CHF 13.8 billion* increase in client loans on-y Revenues 44% to CHF 913.8 million Net profit 48% to CHF 302.2m attributable Challenging markets inevit
Slide 10: And more to come
And more to come Building upon the performance and accomplishments of 2007: • CRO recruitment continued apace. • All regional businesses progressing strongly. • Entering new onshore • Continued expansion of our international network. markets. • Six acquisitions across three broad categories. • Reinf
Slide 11: Introduction, Performance, Acquisitions
1.0 Introduction 2.0 Performance Rudy van den Steen, CFO 3.0 Acquisitions Achievements & 4.0 outlook 11
Slide 12: Key performance indicators
Key performance indicators Financial results • Revenue-generating AUM increased by 22% to CHF 82.9 bn. • Net new assets & increase in client loans added CHF 13.8* bn in 2007. • Operating income increased by 44% to CHF 913.8 m. • RoAUM at 119 bps for the year. • Cost-income ratio at 55.7%, 57.0% unde
Slide 13: Overview of 2007 financials
Overview of 2007 financials Strong, double-digit growth across all metrics Change 2006 2007 vs. 2006 Operating income 634.4 913.8 44.0% Profit before tax 260.2 370.8 42.5% Net profit for the period 230.0 332.0 44.3% Net profit attributable 204.0 302.2 48.1% Return on AUM (bps) 119 119 Cost-income ra
Slide 14: Assets under management and administration
Assets under management and administration AUMs including announced acquisitions hitting 2007 strategic goal (in CHF billion) 106.9 • Strong AUM growth in established regions such as Asia, Americas and the 8.6 UK. 81.0 4.3 94.0 • Strong AUM growth also in start-up 11.1 7.4 +36% locations like Luxemb
Slide 15: Breakdown of clients' Assets under Management
Breakdown of clients’ Assets under Management (AUM breakdown based on CHF 82.9 bn AUM) Other 0.9% (2.9%) Loans Equities Bonds 9.6% • Direct exposure to equities (9.4%) 18.9% continues to be low. (16.9%) 10.0% (12.2%) • EFG funds still less than half of Fiduciary Funds of hedge externally provided fu
Slide 16: Continued strong net new assets
Continued strong net new assets (in CHF billion, incl. announced acquisitions) • 20.0% increase in net new assets & client loans. 94.0 • 18.8% increase in net new assets 7.9 13.8* 12.5 (excl. client loans). -1.3 11.8 (NNA) • Investment performance of CHF 69.0 2.0 (CL) 1.7 billion. 6.1 • Negative FX
Slide 17: Quarterly net new asset development
Quarterly net new asset development (in CHF billion) • Recovery of strong NNA growth during 4Q07, at an annualized growth rate of 21.6%. 4.3 4.3 3.7 0.4 0.8 0.8 3.9* 3.5 1.5 2.9 1.5 1Q07 2Q07 3Q07 4Q07 Net New Assets Increase in Client Loans * Includes CHF 0.5 bn net new asset growth from MBAM post
Slide 18: Operating income
Operating income (in CHF million) • Net banking fees & commission 913.8 income up 45% in line with the growth 79.5 in average revenue-generating AUM from CHF 53.4 billion to CHF 76.5 634.4 244.4 billion. 56.0 • Net interest income up 42%. 172.1 • Other income increased by 42%. 589.8 • Revenue mix re
Slide 19: Maintaining a healthy return on AUM
Maintaining a healthy return on AUM (in bps) • Despite decline in 2H07 – the full year revenue margin came in at the level 123 indicated at the time of 1H07 results. 119 119 115 • Margin remained very strong in 2H07 due to stable asset breakdown and >110 EFGI’s CRO model. • Development of RoAUM duri
Slide 20: Operating expenses & cost-income ratio
Operating expenses & cost-income ratio 2006 2007 Personnel expenses 258.3 365.7 Non-personnel expenses 93.9 142.9 352.2 508.6 Revenues 634.4 913.8 Cost-income ratio I (%) 55.6 55.7 Depreciation & amortisation expense 10.8 12.3 Cost-income ratio II (%) 57.2 57.0 Amortisation of acquisition related in
Slide 21: Personnel expenses
Personnel expenses Increase in personnel expenses reflects business expansion (in CHF million) • Total personnel expenses increased by 42% to CHF 365.7 million. 913.8 • Headcount increased during the year by +44% 26%, from 1,477 at the end of 2006 to 1,864 at the end of 2007. 634.4 • Compensation ra
Slide 22: Net profit
Net profit 2006 2007 Change Profit before tax 260.2 370.8 42.5% Income tax expense (30.3) (40.6) 34.2% Tax rate 11.6% 10.9% Consolidated net profit 230.0 330.2 43.6% Minorities - 1.8 Net profit for the period 230.0 332.0 44.3% Estimated preference dividend (26.0) (29.8) 14.8% Net profit attributable
Slide 23: Balance sheet highlights
Balance sheet highlights Dec 31, Dec 31, 2006 2007 Change Loans and advances to customers 6'146 7'920 28.9% Intangible assets 910 1'191 30.9% Due to customers 11'994 13'580 13.2% Total shareholders' equity (before dividend) 2'305 2'443 6.0% Risk weighted assets 4'599 6'013 30.8% BIS Tier 1 Capital 1
Slide 24: Reconciliation of movement in intangibles
Reconciliation of movement in intangibles Intangible assets went up from CHF 910 million to CHF 1'191 million at the end of 2007. Main items: • DSAM CHF 75 million • PRS Group CHF 124 million • Quesada CHF 73 million 24
Slide 25: Capital developments
Capital developments • Basel II applied since 1H07. • Tier 1 ratio target at around 10% for Basel II. • BIS Tier I ratio at the end of 2007 was 25.4%. • BIS Tier I ratio at 14.6% after proposed dividend and committed acquisitions. • Tier I excess capacity for acquisition’s intangibles (based on curr
Slide 26: Dividend proposal
Dividend proposal Proposed ordinary dividend of CHF 51.3 million or CHF 0.35 per share (in CHF million) • Proposing increased dividend of CHF 0.35 per share to AGM, 2007 represents increase by approx. 17% vs. last year’s dividend. Net profit attributable 302.2 • Payout ratio of approx. 17%. Proposed
Slide 27: Introduction, Performance, Acquisitions
1.0 Introduction 2.0 Performance 3.0 Acquisitions Rudy van den Steen, CFO Achievements & 4.0 outlook 27
Slide 28: Overview of activity during 2007
Overview of activity during 2007 Six acquisitions, adding in total CHF 12.5 bn in AUM and 43 CROs Entering new onshore private banking markets • Bull Wealth Management, Canada • A&G Group, Spain • Stratcap Securities, India Reinforcing and extending presence in established markets • On Finance, Swit
Slide 29: Entering new onshore private banking markets
Entering new onshore private banking markets Bull Wealth Mgt, Canada A&G Group, Spain Stratcap Securities, India • Completed October 2007. • Agreed* to acquire controlling • Agreed* to acquire controlling interest (72%) December 2007. interest (75%) December 2007. • Toronto-based independent investm
Slide 30: Reinforcing presence in established markets
Reinforcing presence in established markets On Finance, Switzerland Ashby London, UK • Completed January 2008. • Completed October 2007. • Lugano-based financial services boutique. • Wolverhampton-based provider of fee-based, independent advice. Also office in Birmingham. • Origination and distribut
Slide 31: Extending capabilities in alternative investment
Extending capabilities in alternative investment Marble Bar Asset Management Increase in clients‘ AUM (CHF billion) • Acquired 90%; completed January 2008. • Leading UK-based alternative asset manager. +8% 5.3 • Specialises in long/short equity strategies. Serves institutional clients / UHNWIs. 4.9
Slide 32: Outlook on 2008 M&A activities
Outlook on 2008 M&A activities Environment Outlook Capital status • Pricing more realistic. • No shortage of viable • Excess Tier 1 Capital acquisition capacity for incremental • Likelihood of more opportunities. intangibles is at least institutional sellers. • Business owners CHF 500 million. • But
Slide 33: Introduction, Performance, Acquisitions
1.0 Introduction 2.0 Performance 3.0 Acquisitions Achievements & 4.0 Lonnie Howell, CEO outlook 33
Slide 34: A business in good shape
A business in good shape Our business is stronger than it has ever been Based on a wide range of activity in 2007: • CRO recruitment healthy, and strong in Q4. • Strategically significant M&A, albeit concentrated at back end of year (but benefits to flow through). • Entered three new, strategically
Slide 35: Our strategic business levers
Our strategic business levers Active in 2007 and beyond across our strategic business levers Recruiting CROs. Broadening and deepening client relationships. Building our product and service capabilities. Diversification benefits from geographical spread. Expansion of international presence and capab
Slide 36: Recruiting CROs
Recruiting CROs Progress +37% 554 As in 2006, another strong year in recruitment. 524 Despite intense competition for talent. 405 398 Outlook Reasons to be optimistic. • A strong end to the year, and carried 2006 2007 through to 2008. Announced acquisitions • All the time increasing our profile. • I
Slide 37: Broadening & deepening client relationships
Broadening & deepening client relationships CROs continue to make headway in deepening relationships. • Continuity a big plus. • Reflected in productivity. Increasing traction among UHNWIs • Business growing in profile. • Capturing a significant share of business arising from transformational events
Slide 38: Building our product and service capabilities
Building our product and service capabilities Equipped to strike the right balance • Aware of potential pitfalls - focus / relationship vs. product. • But a differentiated & carefully thought through perspective. • Inter-connected areas. • Challenge: doing justice to integrated wealth management. •
Slide 39: Broader wealth management rationale
Broader wealth management rationale Clients: struggle to keep on top Investment universe: changing Key: to be in vanguard of of fast-moving / complex areas rapidly. Rapid shifts in nuance applied investment thinking. (structured products; hedge / technical approach. Issue: finite talent. Often found
Slide 40: Compelling rationale for our specialist businesses
Compelling rationale for our specialist businesses Offering multi-dimensional benefits Rationale Progress • Fund of hedge funds expertise. • Since acquisition of CMA in Capital Feb-06, AUM up 96% in US$ • High quality team of HF analysts. Management terms. • Structured product development. Advisors
Slide 41: Compelling rationale for our specialist businesses
Compelling rationale for our specialist businesses Rationale Progress • Able to issue instruments in own • Business operational Dec-07 as name. planned. EFG Financial • No proprietary trading (positions • Smooth launch of platform. Products hedged). • 428 products already quoted on • Open to market
Slide 42: Benefits of a broad geographical spread
Benefits of a broad geographical spread All regions performed strongly. In most, strong double digit growth Switzerland - continued UK – comfortable double digit growth across double digit growth key metrics. in revenue / AUM. Luxembourg – Launched 2006, b/e ahead of schedule. Step change in revenue
Slide 43: Moving into new and attractive markets
Moving into new and attractive markets Developed three new onshore markets: Spain, India, Canada Looking at various new Outlook onshore opportunities, inc. France and Italy. India – Plans to develop market-leading offering across Canada – Establishing local India: presence across Canada. - Experienc
Slide 44: Also continuing to open new offices
Also continuing to open new offices Extending our international reach; client proximity New licenses – Jersey Cayman Islands Canada License for rep office Abu Dhabi Licenses pending 2007 Singapore 2008 Shanghai New offices– Panama Exploring Bahrain Planned additional Bangkok initiative representatio
Slide 45: Seeking acquisitions
Seeking acquisitions Building on our record as a proven acquirer Continue to seek attractive opportunities, in terms of: • Entering new onshore private banking markets. • Reinforcing and extending presence in established markets. • Extending capabilities in alternative investment. Our attractiveness
Slide 46: Infrastructure / functional capabilities
Infrastructure / functional capabilities Proven ability to flex our business to meet requirements of growth Again, our record speaks for itself: • Always adopted a prudent approach to the management of risk. • From start-up to leading private bank, with no major accidents. • Practically no bad debts
Slide 47: Ramping up strategic marketing
Ramping up strategic marketing Outlook • New position of head of Strategic Marketing & Communications July 2007. • A lot achieved; much more to come. • Business growth to date has been achieved with minimal marketing investment. • Significant commitment to this area = upside potential. 47
Slide 48: A business model which is proven and distinctive
A business model which is proven and distinctive CROs are drawn to us thanks to a number of factors Our approach • Our focus • Fact that leadership knows the industry • Drawn by our track record of success • Fact that we recognise importance of human relationships • Consistency and persistence – hav
Slide 49: Reflections on the present business environment
Reflections on the present business environment The external environment: a year of two halves • Fragile conditions. In some countries, possible recession. • Naturally alert to danger signals. • Working hard to help clients navigate turbulence. • Careful management of costs - ensure investment broug
Slide 50: Reflections on the present business environment
Reflections on the present business environment However, • Less exposed than our peers to equity markets. • Confidence from last bear market - continued to grow. • Challenging times bring opportunities – including to recruit and acquire. • Sorts long-term players from the dabblers! And.. Business in
Slide 51: And some thoughts on some specific questions
And some thoughts on some specific questions Q. Is net new money One quarter (Q3) does not a trend slowing down? make. Q4 improved NNM. Q. Is the pace of CRO Comfortably hit 2007 targets, and hiring slowing? accelerated during year. Many reasons why should continue. Q. Is the business model Performa
Slide 52: And some thoughts on some specific questions
And some thoughts on some specific questions Q. Is pace of acquisitions Acquisitions lumpy. Skewed to end-07. falling off? Four deals in December: not slowing down! Opportunities in fact growing. Q. Are we losing focus? Private banking absolutely central. Making difference to select areas of wealth
Slide 53: Delivering on our targets
Delivering on our targets EFG International has delivered on its promises made at the IPO.. ..and on subsequent stretched targets Number of CROs Clients’ AUM: • IPO target: 500 • IPO target: CHF 60-65bn.* • Revised target: 540 • Revised target**: CHF 93-99 bn. • Actual: 554* • Actual**: CHF 94.0 bil
Slide 54: Delivering on our targets
Delivering on our targets EFG International has delivered on its promises made at the IPO.. ..and on subsequent stretched targets Acquisitions in year: • Revised target: CHF 10 – 15 bn. • Actual: CHF 12.5 billion Revenue margin: • IPO / revised target: 110 bps. Cost-income ratio: • Actual: 119 bps •
Slide 55: Medium-term targets - 2008
Medium-term targets - 2008 Our 2008 targets continue to reflect our ambitions for present year • Number of CROs. Target: 675 by end-2008. • AUM growth per CRO. Target: CHF 30 million for year. • Acquisitions: CHF 10–15 billion for the year. • Clients’ Assets under Management: CHF 121-131 billion. •
Slide 56: Medium-term targets - 2010
Medium-term targets - 2010 Aim by 2010 to reach: • 1,000 CROs. • Still generating on average CHF 30-40m in AUM per annum, with revenue margin of 110-120bps. • Ongoing appetite to make acquisitions. • Objective: attributable net profit of CHF 800 – 900m. 56
Slide 57: Practitioners of the craft of private banking
Practitioners of the craft of private banking www.efginternational.com 57
Slide 58: Appendix
5.0 Appendix 58
Slide 59: Consolidated income statement (unaudited)
Consolidated income statement (unaudited) 2006 2007 Change Net interest income 172.1 244.4 42.0% Net banking fee and commission income 406.3 589.8 45.2% Net other income 56.0 79.5 42.0% Operating income 634.4 913.9 44.0% Operating expenses (374.2) (541.9) 44.8% Impairment losses on loans and advance
Slide 60: Income statement 1H07 vs 2H07
Income statement 1H07 vs 2H07 1H07 2H07 Change Net interest income 109.0 135.4 24.2% Net banking fee and commission income 302.0 287.8 -4.7% Net other income 35.5 44.0 23.7% Operating income 446.6 467.2 4.6% Operating expenses (263.4) (279.5) 6.1% Profit before tax 183.1 187.7 2.5% Income tax expens
Slide 61: Consolidated balance sheet (unaudited)
Consolidated balance sheet (unaudited) Dec 2006 Dec 2007 Change Cash and balances with central banks 44 74 69% Treasury bills and other eligible bills 827 795 -4% Due from other banks 5'343 3'502 -34% Loans and advances to customers 6'146 7'920 29% Derivative financial instruments 118 225 91% Financ
Slide 62: Contacts & calender
Contacts & calender Media Investors Strategic Marketing & Communications EFG International Investor Relations • Keith Gapp, Head of SMC • Jens Brueckner, Head of Investor Relations • Telephone: +41 44 226 1217 • Telephone: +41 44 226 1799 • E-mail: keith.gapp@efggroup.com • E-mail: jens.brueckner@ef