A New Force in European Banking: Integration Moving Ahead Alessandro Profumo - CEO GS European Financials Conference 2006 Barcelona - June 8 th, 2006
DISCLAIMER THIS PRESENTATION IS FOR INFORMATION PURPOSES ONLY. The information contained in this presentation is for background purposes only and is subject to amendment, revision and updating. Certain statements contained in this presentation may be statements of future expectations and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties. In addition to statements which are forward-looking by reason of context, including without limitation, statements referring to risk limitations, operational profitability, financial strength, performance targets, profitable growth opportunities, and risk adequate pricing, as well as the words “may, will, should, expects, plans, intends, anticipates, believes, estimates, predicts, or continue”, “potential, future, or further”, and similar expressions identify forward-looking statements. Actual results, performance or events may differ materially from those in such statements as a result of, among other factors, the satisfaction of the conditions of the offering, changing business or other market conditions and the prospects for growth anticipated by Uni. Credit’s management. These and other factors could adversely affect the outcome and financial effects of the plans and events described herein. Forward-looking statements contained in this presentation regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. Uni. Credit does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should not place undue reliance on forward-looking statements, which speak only as of the date of this presentation. 2
AGENDA A new force in European banking 1 Q 06 results Integration moving ahead 3
2005: THE UCI-HVB DEAL CREATED A NEW FORCE IN EUROPEAN BANKING… THE NEW UNICREDIT GROUP: § 62. 2 bn market cap (#3 among Eurozone banks)(1) § More than 29 million customers § Over 7, 000 branches § Banking operations in 19 countries § Over 142, 000 employees § 427 bn customer loans § Powerful franchise § Leader in fast growing CEE markets Source: Company data as of year end 2005 (1) Prices as of June 1, 2006 4
…WITH A POWERFUL FRANCHISE COMBINING LOCAL STRENGTHS AND GLOBAL REACH… ITALY § #2 with 10% market share(1) GERMANY § #2 with 5% market share (1) AUSTRIA § #1 with 18% market share (1) CEE § #1 franchise, much larger than the next largest competitor (2) MARKETS & INVESTMENT B. § Leading “European Regional Specialist” ASSET MANAGEMENT § 232 bln Au. M: a strong European player LEASING § #2 in Europe (1) 5 (1) Ranking measured in terms of total assets. For market share calculations Uni. Credit and HVB may apply different definitions as far as the underlying data is concerned. Market share and ranking in Italy refer to customer loans. Ranking in leasing is by volumes (2) Including Hebros Bank, Eksimbanka, IMB and Yapi. Banca Ion Tiriac not included. For Koc Group and Yapi loans are consolidated pro-quota, while branches and customers are 100% included. For Ukraine and Baltic Countries customer loans, branches, employees and customers data not included
…AND SUPPORTED BY CLEAR AND SOLID PILLARS GROUP PILLARS DIVISIONALISATION BY CLIENT SEGMENT GLOBAL BANKING SERVICES DIVISION AS GROUP EXECUTION MACHINE MULTI-LOCAL APPROACH, BUT WITH STRONG GLOBAL BUSINESSES CLEAR GOVERNANCE FROM THE VERY BEGINNING POWERFUL INTEGRATION ENGINE COORDINATED BY THE INTEGRATION OFFICE 6
AGENDA A new force in European banking 1 Q 06 results Integration moving ahead 7
VERY GOOD PERFORMANCE IN 1 Q 06 CONFIRMING THE STRENGTH OF THE UCI-HVB COMBINED GROUP QUALITY 1 Q 06 RESULTS WITH THE WHOLE GROUP MOVING IN THE RIGHT DIRECTION n WELL BALANCED PORTFOLIO, WITH IMPROVED OPERATING PERFORMANCE IN ALL COMPONENTS n QUALITY REVENUE GROWTH, WITH EXCELLENT RISE IN FEES n SELECTIVE RWA REDUCTION AND INCREASING PROFITABILITY n EFFICIENCY GAINS, WITH STAFF RIGHTSIZING ALREADY EVIDENT n IMPROVED ASSET QUALITY, WITH REDUCTION OF TOTAL GROSS BAD & PROBLEM LOANS 8
WELL BALANCED COMPOSITION OF THE NEW GROUP WITH IMPROVED OPERATING PERFORMANCE IN ALL COMPONENTS; OUTSTANDING HVB AND BA-CA RESULTS ALSO DRIVEN BY FAVORABLE FINANCIAL MARKETS UCI (EX HVB GROUP) n Operating income up 7. 6% y/y SOLID CONTRIBUTION FROM ALL GROUPS ü Revenues +7. 4% 1 Q 06 Operating Income Breakdown, mln ü Operating costs +7. 3% 522 HVB GROUP (19. 6% of total) 1, 333 n Operating income up 57. 7% y/y (50. 1% of total) ü Revenues +23. 5% 806 (30. 3% of total) UCI Old Perimeter HVB Group ex BA-CA ü Operating costs +5. 7% BA-CA n Operating income up 48. 7% y/y ü Revenues +22. 8% ü Operating costs +8. 7% 9
STRONG REVENUE GROWTH (+10. 1% Y/Y AT CONSTANT FX AND PERIMETER) WITH EXCELLENT FEE GROWTH IN ALL THE GROUPS UCI GROUP TOTAL REVENUES (mln) Y/Y % ch. 5, 955 (1) +15. 0% UCI (ex HVB Group) HVB GROUP (mln) Y/Y % ch. +7. 7% o/w Net interest income (excl. div. ) 2, 937 o/w Net commissions 2, 128 +21. 3% 666 +13. 7% o/w Trading income 2, 909 1, 456 1 Q 06 (1) +7. 4% +8. 4% 1, 165 +15. 6% 204 1 Q 06 -33. 6% Y/Y % ch. 3, 029 1, 464 (1) +23. 5% +7. 0% 963 +28. 7% 461 1 Q 06 +65. 2% n SIGNIFICANT REVENUES PERFORMANCE OF UCI (ex HVB Group), also in terms of quality: ü Net interest income excl. dividends up 8. 4% y/y ü Net commissions up 15. 6% y/y ü Most dynamic revenues trend in Private & AM (31. 6% y/y), New Europe (11. 8% y/y) and Retail (7. 2% y/y) n OUTSTANDING REVENUE GROWTH FOR HVB GROUP (+23. 5% y/y) driven by: ü Strong commissions (+28. 7% y/y) ü Favorable trend in financial markets (trading income: 461 mln, +65. 2% y/y) 10 (1) Balance due to other revenues
ASSET PROFITABILITY SIGNIFICANTLY INCREASED, ALSO THANKS TO A BETTER MIX OF RWA; STRONG CAPITAL GENERATION DRIVES GOOD IMPROVEMENT OF SOLVENCY RATIOS TOTAL RWA (Eo. P) (1) TOTAL REVENUES (annualized)/ AVG. RWA(1) (bn) Q/Q % ch. -0. 2% 418. 7 418. 5 159. 6 172. 3 172. 8 +0. 3% BA-CA 78. 5 79. 2 80. 4 +1. 4% HVB ex BA-CA 180. 6 167. 0 164. 9 -1. 3% Mar 05 Dec 05 +68 bp -0. 1% Uni. Credit (ex HVB Group) 418. 0 (%) Mar 06 5. 01% 1 Q 05 (Annualized) 5. 02% FY 05 5. 69% 1 Q 06 (Annualized) n SUBSTANTIAL STABILITY OF TOTAL RWA and IMPROVED ASSET MIX: ü Further reduced real-estate collateralized exposure for HVB Group ü Growth in CEE and Italian Retail n PROFITABILITY OF RWA(2) SIGNIFICANTLY INCREASED: from 5. 02% in FY 05 to 5. 69% in 1 Q 06 11 Including RWA for credit, market and other risks and consolidated into Uni. Credit Group’s accounts; calculated according to KWG criteria; figures may not add up due to rounding differences (1)
-267 FTE VS DEC 05: RIGHTSIZING ALREADY EVIDENT, PARTICULARLY AT HVB AND IN ITALY, NEW HIRINGS IN FASTEST GROWING BUSINESSES FTE TREND - UCI (ex HVB Group) 71, 874 -725 y/y 71, 470 ch. q/q 71, 149 Mar 05 Dec 05 -321 n - 321 UNITS Q/Q (-725 Y/Y), reductions mainly concentrated in the Retail division n 1, 100 FURTHER EXITS BY END ‘ 06 through disposals of 2 S (Securities service business) and Uniriscossioni Mar 06 FTE TREND - HVB Group ex BA-CA ch. q/q 28, 876 28, 656 HVB Group excl. BA-CA Dec 05 incl. FTC(1) Mar 06 FTE TREND - BA-CA Group 33, 789 -220 34, 063 ch. q/q +274 BA-CA Group Dec 05 incl. FTC(1) n - 220 UNITS Q/Q, thanks to a reduction by 330 units in the Corporate Centre, more than compensating 125 units’ increase at IMB (International Moscow Bank) n + 274 UNITS Q/Q mainly in CEE and for global leasing projects, while small decreases are concentrated in the Corporate Centre Mar 06 12 First time consolidations in 1 Q 06: HVB Immobilien, HVB Bank Latvia, Joint Stock Commercial Bank HVB Ukraine, Bay. Wohnungs. F. Handel und Industrie Gmb. H, Nova banjalucka banka, CAIB Corporate Finance, CAIB International Markets, CAIB Securities Warsaw. (1)
REDUCTION OF TOTAL GROSS BAD & PROBLEM LOANS (-2. 4%) AND INCREASED COVERAGE RATIO NET BAD & PROBLEM LOANS (mln) Tot. net bad & problem loans RER PORTFOLIO – total credit exposure (bn) -40. 3% MAR 06 Q/Q ch. 17, 614 -3. 0% 12, 494 -3. 0% 5, 120 -2. 9% % of total net loans 4. 15% -11 bp % coverage 15. 4 49. 7% +0. 3 p. p. o/w HVB Group o/w UCI (ex HVB Group) 9. 5 -3. 2% 9. 2 ~7. 2 4 Q 04 4 Q 05 1 Q 06(1) After sale(2) n REDUCTION OF TOTAL NET BAD & PROBLEM LOANS (-3. 0% q/q) in both Uni. Credit (ex HVB Group) and HVB Group, mainly driven by lower doubtful (-4. 4% q/q) and past due (-12. 7% q/q); NPLs substantially stable n LOWER WEIGHT OF NET BAD & PROBLEM LOANS ON TOTAL LOAN PORTFOLIO, with positive contribution from both Uni. Credit (ex HVB Group) and HVB Group n TOTAL COVERAGE RATIO INCREASED BY ~30 BP, mainly thanks to an higher coverage on NPLs (from 59. 9% to 61. 3% for the total Group), particularly significant in HVB Group n CONTINUED REDUCTION OF RER PORTFOLIO (-0. 3 bn in 1 Q 06), due to ongoing successful workout activities; further reduction of around 2 bn (with no negative impact on P&L ), due to additional sale, already agreed and expected to be completed in 2006 13 (1) 1 Q 05 based on Feb 05 figures; 1 Q 06 based on Feb 06 figures (2) Figure adjusted for the already agreed sale of the “Aphrodite tranche”
SIGNIFICANT PROFIT GENERATION, +20. 3% Y/Y SUPPORTED BY DOUBLE DIGIT GROWTH IN REVENUES; CORE TIER I +21 BP IN JUST THREE MONTHS 1 Q 06 mln % ch. on 4 Q 05 % ch. on 1 Q 05 at % ch. on constant FX 1 Q 05 and perimeter Total Revenues 5, 955 +16. 9% +15. 0% +10. 1% Operating costs -3, 295 -1. 5% +6. 4% +2. 5% Operating Income 2, 660 +52. 3% +27. 9% +21. 5% Net Income 1, 357 >+100%(1) +20. 3% +14. 6% C/I Ratio, % 55. 3% -10. 4 pp -4. 5 pp -4. 1 pp 1 Q 06 Ch. on FY 05 57 bp -3 bp Core Tier 1 ratio, % 5. 74% +21 bp Cost of Risk(2), bp P&L figures in IFRS according to Bank of Italy rules (1) (2) 14 Calculated on 4 Q 05 net income without integration effects Profit (loss) and net write downs on loans / Total Period Average RWAs for Credit Risks n Core TIER 1 ratio +21 bp in just 3 months, thanks to strong organic earning generation n Further capital generating actions to be finalized by year-end 2006 (disposals of 2 S Banca, Splitska Banka)
AGENDA A new force in European banking 1 Q 06 results Integration moving ahead 15
INTEGRATION EFFECTIVELY IMPACTS BUSINESS AND ORGANISATION IN GERMANY COST MANAGEMENT n New processes in place with more stringent guidelines n Ongoing optimisation leading to Headquarter reductions HVB CREDIT PROCESS REDESIGN n Diagnostics and design done n Pilot implementation to begin by July 2006 IT SYSTEM n HVB’s two IT systems merged by the summer n Pilot Eurosig implementation (in Zivno) in place RETAIL n Asset gathering: reviewed offer and pricing; renewed emphasis on insurance products; strong mutual fund sales in 1 Q 06 n Retail mortgages: boost of profitability through cross selling CORPORATE INVESTMENT B. ASSET MANAGEMENT & PRIVATE B. n Cross border clients: ad hoc framework, products and control systems n Leasing: Group Global Leasing Factory; new responsible appointed n Definition of the global structure n Private B: division set up with central organisational chart and dedicated branches and client managers n AM: product range rationalization, centralization of investment processes and marketing, transfer of AM entities ownership by summer 16
CENTRAL EASTERN EUROPE: A NEW SHAPE POLISH SITUATION SOLVED: n Banking Supervision Commission approves exercise of voting rights in BPH by Uni. Credit n Agreement between Uni. Credit and the Polish Ministry of State Treasury (MST): ü Sale of 200 outlets with support services and infrastructure via a competitive international sale process to be operating under the BPH brand ü Sales deadline: 30 months from the signature of the agreement(1) ü Remaining BPH activities to be merged into Pekao SPLITSKA BANKA: n Announced sale to Société Générale of BA-CA’s 99. 75% shareholding n Price: 1. 0 bn, (4. 4 x 2005 book value and 26. 9 x 2005 P/E) n Enhanced Group capital position (estimated future impact on Tier 1: +20 bp) n Transaction completion, subject to regulatory approvals, expected by the end of June 2006 MERGER PROJECTS WELL UNDERWAY IN SLOVAKIA, BULGARIA AND CZECH REPUBLIC 17 (1) On April 19 th, 2006.
CONCLUSION A NEW FORCE IN EUROPEAN BANKING BORN OF A VALUE CREATING DEAL STRONG 1 Q 06 RESULTS SHOW THAT THE ENGINE IS ALREADY RUNNING A WELL DESIGNED INTEGRATION IS GIVING THE FIRST RESULTS NEXT EVENT: BOTTOM UP PLAN TO BE PRESENTED ON JULY 5, 2006 18
A New Force in European Banking: Integration Moving Ahead Alessandro Profumo - CEO GS European Financials Conference 2006 Barcelona - June 8 th, 2006
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