Download Is Growing in Retail Financial Services a Single Path

IS GROWING IN RETAIL
FINANCIAL SERVICES A SINGLE
PATH STRATEGY ?
Luca Majocchi
UCI Group Deputy CEO
Goldman Sachs European Financials
Conference 2002
Venice, June 10th-12st 2002
Agenda
Growth opportunities of the European retail
business “gameboard”
UCI’s portfolio strategy for retail growth
Conclusions
2
PERFORMANCE FORECAST OF EUROPEAN
BANKS SEES A SLOWDOWN OF RETAIL
EARNINGS GROWTH RATE
Performance forecast for European financial players
Percent
REVENUE Y/Y GROWTH
(2002 on 2001)
GROSS OPERATING PROFIT
Y/Y GROWTH (2002 on 2001)
Retail
5.7
9.7
Wholesale
7.6
12.2
Supra-regionals
7.7
13.8
Investment services
8.8
19.3
Source: UBS Warburg
3
WHILE RETAIL GROWTH AT EUROPEAN LEVEL
MIGHT BE AN ISSUE, SIGNIFICANT DIFFERENCES
EXIST BY COUNTRY
Growth of retail revenue pool by country
Cumulated growth 2000-2005, Percent
UCI Presence
Revenues/Inhabitants
(Euro, 2000)
58%
585
795
765
37%
950
39%
510
42%
35%
31%
25%
France
Germany
Italy
UK
Spain
Average
Core
Europe
New
Europe
4
IN CORE EUROPE SIZE OF RETAIL REVENUE POOL
APPEARS TO BE RELATED TO COUNTRY-SPECIFIC
STAGE OF INDUSTRY EVOLUTION
Financial industry concentration and revenue pool by country
4.00
MATURE
Size of revenue
pool (20 Euro bn)
FINANCIAL SERVICES
REVENUE/GDP (Percent)
IN BETWEEN
UK
Spain
France
Germany
Italy
POTENTIAL
2.75
30
TOP 5 PLAYERS MARKET SHARE
BY ASSETS (Percent)
75
5
IN ITALY, DUE TO WIDESPREAD USE OF FEDERAL
MODELS, LEADING PLAYERS ARE FEWER (AND
SMALLER) THAN WHAT CONSOLIDATED FIGURES
SHOW
GROUP
Branches
mkt share,
%
BANK
GROUP
Branches
mkt share,
%
IntesaBCI Group
11.1
UCI Banca*
UCI
9.7
Sanpaolo IMI Group
(incl. Cardine)
10.4
IntesaBCI SpA
IntesaBCI
7.9
UCI Group
10.1
Sanpaolo IMI SpA
Sanpaolo IMI
4.7
B. di Roma Group
(incl. Bipop)
7.4
Banca di Roma SpA
B. di Roma
4.1
Montepaschi Group
6.2
Banca MPS SpA
MPS
3.3
B. Pop. Verona e
Novara Group
3.9
Banca Antoniana
Pop. Veneta Scrl
Antonveneta
3.1
Antonveneta Group
3.4
Banco di Napoli SpA
Sanpaolo IMI
2.5
Banca Lombarda
Group
2.6
BNL SpA
BNL
2.4
BNL Group
2.5
Banco di Sicilia SpA
B. di Roma
2.0
B. Pop. Lodi
Group
2.1
Banca Pop. di Novara
Scrl
BP Verona e
Novara
1.8
*
Sum of the current 7 banks of UCI Group to be merged July 1st 2002
6
OTHER THAN BY COUNTRY, GROWTH AND
PROFITABILITY PATTERNS VARY SIGNIFICANTLY
ACROSS RETAIL BUSINESS SEGMENTS
Financial services attractiveness in core Europe
= 20 bn revenues
AG= Asset Gathering - Single
most profitable and growing
industry in Europe
REVENUE GROWTH
2001-2005
14%
AM
CF (ex UK
& Ger)
CF= Consumer Finance Heterogeneous growth and
spreads between countries
AG
RE= Retail banking (individuals)
- Growth and profitability
driven by affluent and
private asset gathering
RE
CB= Corporate banking (SMEs) Attractive growth but
negative Rarorac due to
lending
CB
CF
AM= Asset management - Strong
growth and high Rarorac
2%
-8%
RARORAC 2000
46%
7
Agenda
Growth opportunities of the European retail business
“gameboard”
UCI’s portfolio strategy for retail growth
Conclusions
8
UNICREDIT STRATEGY IS TO DEVELOP RETAIL TOP
LINE BY GROWING MARKET SHARE ALONG FOUR
KEY COMPLEMENTARY DIRECTIONS
UCI GROWTH STRATEGY
Upside in
Italian
domestic
market
Grow top
line while
keeping
leading edge
efficiency
Enter new,
highly
attractive
markets
Increase
penetration of
existing customer
base
Improve market
coverage by
selective branch
network expansion/
acquisitions
Strengthen leading
market positions in
new “domestic”
markets (Central
Europe)
Enter core
European countries
selectively
addressing retail
segments
Continue
external/
organic growth
to strengthen
market share
Consolidate
position in new
Europe and
build presence
in core Europe
9
IN ITALY, ORGANIC GROWTH OPPORTUNITIES EXIST
BY BOTH DEVELOPING THE EXISTING CUSTOMER
BASE AND GETTING NEW CLIENTS THROUGH NEW
SPECIALISED BRANCHES
Share of wallet increase
Mass affluent & Private Banking
Branch network expansion
UCI market share in Italy, %
30
25
32
6
24
21
53%
+9 pp
19
7
44%
4
Equal to 16 bn
of incremental
assets
12
21
5
9
20
6
6
Current
Average
2004
Targets
9
2
4
GDP per capita (Euro)
>25,000
20,000<GDP<25,000
<20,000
3
10
ORGANIC GROWTH WILL BE SYSTEMATICALLY
COMPARED WITH EXTERNAL GROWTH
OPPORTUNITIES
ILLUSTRATIVE
Organic vs. external growth benchmarking
NPV Index per branch
199
169
Maximum
Branch
opening
return
range
Minimum
119
85
71
47
Target
Bank
Bank A
Bank B
MAKE
(Open Branch)
Bank C
Bank D
To be
decided
Bank E
Bank F
BUY
(Acquire bank)
11
IN NEW EUROPE AREA, CONSOLIDATION AND
CROSS THE BORDER SYNERGIES WILL FOLLOW
LAST THREE YEARS OF FRANCHISE BUILDING
UCI position in New Europe (2001)
Deposits market share, percent
GDP CAGR
2000-2004, %
3.57
36.0
4.20
2.52
23.3
16.4
3.82
4.35
3.5
0.7
GDP, Euro bn
Inhabitants, mln
Poland
Romania
Croatia
Slovakia
Bulgaria
201.9
41.1
22.9
22.4
15.2
38.6
22.4
4.4
5.4
7.9
12
IN CORE EUROPE, COUNTRY AND PRODUCT
DIFFERENCES LEAD TO A STRATEGIC MAP OF
RETAIL OPPORTUNITIES
Retail strategic map
Percent
"Hot"
UK
GER
F
I
”Warm"
SP
RETAIL & SMES
ASSET GATHERING
CONSUMER FINANCE
CORPORATE BANKING
ASSET MANAGEMENT
13
CROSS THE BORDER AND DOMESTIC
TRANSACTIONS WILL BE ABLE TO LEVERAGE
TRANSFER OF RETAIL SKILLS THAT UCI ALREADY
DEMONSTRATED IN ITALY ...
Performance improvement of UCI Italian Banks
1998-2001
INCOME GROWTH
38.3%
GROSS OPERATING
INCOME GROWTH
95.6%
UCI
saving
banks*
23.3%
UCI
saving
banks*
16.1%
Italian
industry
average
OPERATING COST GROWTH
11.4%
Italian
industry
average
Cost control and
synergies through
centralised
operations (IT, back
offices, logistics)
0.4%
*
Banca CRT, Cariverona, Cassamarca
Transfer of retail
skills (customer
segmentation,
product innovation,
sales management,
service models)
UCI
saving
banks*
Italian
industry
average
14
... AND IN NEW EUROPE
Bank Pekao performance compared with Polish banking system
2000-2001
2001/2000 % GROWTH
NET INTEREST INCOME
NET COMMISSIONS
46
7
Pekao
7
Best perf.
Pekao
Banking
System
-6
OVERHEADS COSTS
20
17
Pekao
65
Best perf. Banking
BH
System
NET INCOME
65
18
Pekao
-4
Banking
System
Best perf.
Pekao
-4
Banking
System
Pekao
Best perf.
Pekao
-29
15
Agenda
Growth opportunities of the European retail business
“gameboard”
UCI’s portfolio strategy for retail growth
Conclusions
16
IN SUMMARY .....
 The European market is very complex, with different
growth perspectives depending on country and
business, and UCI strategy is to selectively focus on
businesses and countries with the highest potential
 Growth will leverage superior retail skills developed
in the highly competitive Italian market and our
track record is there
 Growth will be pursued consistently exploiting all
levers of organic and external growth
17