“Capturing the value of Consumer Credit in growing Retail Banking” Silvio Barzi – Clarima CEO
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Transcript of “Capturing the value of Consumer Credit in growing Retail Banking” Silvio Barzi – Clarima CEO
“Capturing the value of Consumer Credit in growing Retail Banking”
Silvio Barzi – Clarima CEO
Goldman Sachs Consumer Finance ConferenceLondon - October, 16th 2003
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AGENDA
Importance of Consumer Credit for UCI’s strategic goals
Attractive opportunities in Consumer Credit
Results to-date & conclusions
UniCredito’s answer: Clarima
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8.3%
CUSTOMER DRIVEN ORGANISATIONAL MODEL
Pekao
New Europe division
Private & AM division
Pioneer
Xelion
Corporate division
UBM
BMC
Locat
Clarima
TradingLab
RETAIL DIVISION
Zagrebacka
KFS
Bulbank
UniBanka
UC Romania
Zivnostenska
45.7% 30.9% 15.1%
Weight on 1H03 Group revenues
Employees ItalyNew Europe
70,35640,22830,128
Branches ItalyNew Europe
4,5983,2481,350
UniCredit Banca per la casa
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THE RETAIL DIVISION COVERS THE ITALIAN MARKET THROUGH A NUMBER OF PRODUCT & CHANNEL SPECIALISTS
Retail Division
Retail investment
products through
captive and non captive
networks
Consumer credit
products through direct
channels, partners and
captive networks
Banking products for households and small business through
proprietary branch network
Mortgages and home related
products through organised
intermediaries (real estate
agents, insurers…)
per la casa
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TAILORED STRATEGIES FOR DIFFERENT CUSTOMER SEGMENTS, CONSUMER CREDIT KEY FOR RETAIL BUSINESS
High importance
Low importanceSources of revenue growth
Existing customers
New customers
EfficiencyRisk
mgmt
Corporate business
Private Banking business
New Europe
Retail business
High growth / High value businesses
Consumer Credit
Retail mortgages
Small Business
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AGENDA
Importance of Consumer Credit for UCI’s strategic goals
Attractive opportunities in Consumer Credit
Results to-date & conclusions
UniCredito’s answer: Clarima
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CONSUMER CREDIT: LOW PENETRATION IN ITALY …
9.6 8.0
14.310.8
3.6
E F UK D I
As % of GDP
16.5 14.722.5 18.9
6.1
As% of private consumption
15.1 12.420.6 16.4
4.8
As % of disposable income
E F UK D I
E F UK D I
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… BUT A FAST GROWING BUSINESS
20
1996
32
1999
37
2000
41
2001
44
2002
KEY DATATOTAL CONSUMER CREDIT MARKET
(Euro bn)
REVOLVING CREDIT
INSTALLMENTLOANS
Growth: +33%
Revenues: 0.3
Growth: +16%
Revenues: 2.4
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MAJOR SHIFTS AMONG PRODUCTS EXPECTED IN THE LONGER TERM
ITALY – EXPECTED EVOLUTION OF STOCKS (Euro bn and %)
Revolving
Market (100%) =
CAGR 2002-2006E
32.2%
23.3%
13.3%
13.2%
Direct Loans
POS Financing
Automotive
16.5%
Other
60,7%
14,7%
14,4%
5,5%
55,0%
16,1%
17,2%
6.7%
49.0%
14,4%
21,6%
11,1%
2001 2002
82
2006E
44 41
4,7% 5,0% 3,9% 9.5%
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RORAC PER BUSINESS (2001, %, rates and new loans)
ATTRACTIVE PROFITABILITY IN CARDS
Loan growth2001 vs 2000 (%)
RORAC (%)
-10
0
10
20
30
40
50
60
-50 -30 -10 10 30 50 70
Industrial Vehicles
Employer Guaranteed
Motorcycles
Personal
Second-hand cars
Appliances
Credit Cards
New Cars
0
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Lack of product innovation
NON AFFLUENT MARKET PRESENTS UNIQUE OPPORTUNITIES …
Limited customer acquisitionactivity
No tailored operations for masscustomisation
Limited marketing sophistication
No specific segment attention
MARKET CONDITIONS
Clients Margins
Affluent
Non affluent
24 mln 27 bn Euro
15%
85%
75%
25%
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… AND BANKS HAVE BEEN LOSING MARKET SHARE
2000
41%
2002
38%
37
TOTAL CONSUMER CREDIT MARKET (Euro bn)
1996
54%
2044
Banks market share
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NO ACCEPTABLE ANSWER TO A MARKET IN NEED OF FOCUS AND SEGMENTATION
TRADITIONAL BANKS
Brick and mortar legacy
Focus on managed assets
No innovation
No mass service culture
FINANCE COMPANIES
POS financing primary product
Limited customer loyalty
Limited cross selling
BancoPosta, not replicable
Foreign entrants, primarily monoliners
NEW PLAYERS
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FRAGMENTED MARKET WITH TRADITIONAL “STAND ALONE” MODEL …
69,9% 89,5%
Findomestic
DB Prestitempo
Finemiro
Ducato
COMIT
Agos Itafinco
Compass
Citifin
FidItalia
Finconsumo
Others
ITALY – MARKET SHARES BY BUSINESS LINELoans granted in 2001, Euro mln & %
770
408
358
323
276
252
197
186
108
87
287
POS Financing (incl. Automotive) Personal Loans
3,139
1,909
1,571
1,354
1,222
1,007
924
907
898
833
Fiat Fidis
Findomestic
DB Prestitempo
FidItalia
Agos Itafinco
Compass
Finemiro
Citifin
Finconsumo
Ducato
Others 4.961
Cumulative market share first 10 players
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… AND THE MARKET ENVIRONMENT IS QUICKLY CHANGING
Italian Savings Rate over time
0%
5%
10%
15%
20%
25%
1980-1985 1986-1991 1992-1997
DEMAND SIDE SUPPLY SIDE
“The new card by AmEx and Enel. … “
New revolving card from AEM Milano and Compass called AEM Visa, launched at early 2001
Desideria from Banca di Roma launched at the end of 2000 (“first revolving card with flexible payments for Italians”). EGO from Credem launched at mid 2001 (also for clients without an account at Credem)
New revolving co-branded cards (ex. Findomestic-Mediaworld, … )
“Citibank Card will invade Italy. … 500.000 cards issued before 2004”
“Barclaycard is to launch in Italy (early 2002) as part of an aggressive plan to expand in Europe”
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AGENDA
Importance of Consumer Credit for UCI’s strategic goals
Attractive opportunities in Consumer Credit
Results to-date & conclusions
UniCredito’s answer: Clarima
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A MAJOR INNOVATION IN PFS …
Focus on non affluent segment
Customer acquisition and cross selling through variety of channels
Low cost non traditional infrastructure
Simple, innovative, consumer oriented products
Lead with credit cards, cross-sell next
CLARIMA’S CONCEPT
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... CAPTURING A UNIQUE OPPORTUNITY IN CREDIT CARDS …
Majority of card accounts deferred debit/charge
No flexible revolving
No price differentiation based on credit risk
No sophisticated micro marketing
Static products
WHAT THE MARKET OFFERS
No up and cross selling
Limited push by traditional banks
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Real estate agents (2500)
… LEVERAGING SPECIALISATION AND MARKET POWER OF THE LARGEST DISTRIBUTION NETWORK IN ITALY
Retail Division
Partners(25)
Third parties
Stock exchange
Leads Leads
per la casa
Branches(2750)
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STRONG INTEGRATION ACROSS RETAIL CHANNELS FOR COMMERCIAL ACTIONS …
Partnership Direct Pos/ Merchants
Specialized Shops
UCB Branches
Strong focus
Medium focus
Acquisition
Cross selling
COMMERCIAL ACTIONS
CLARIMA CHANNELS BANK
TRADITIONAL FINANCE COMPANY
INNOVATIVE CHANNELS
TRADITIONAL BANK
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… SINCE DIFFERENT PRODUCTS REQUIRE DIFFERENT CHANNELS
Partnership Direct Pos/ Merchants
Specialized Shops
UCB Branches
PRODUCTS
Revolving cards
Pos financing
CLARIMA CHANNELS BANK
Personal loans
Credit insurance
Strong focus
Medium focus
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Lower customer acquisition cost
Better knowledge of the customer, lower risk
Enhanced customer relationship and cross selling
Piggy backing on partner’s brand
Strengthening of customer loyalty
Reducing administrative costs
Adding new revenue stream
Strengthening of core product offering
Lowering joint customer acquisition cost
ACQUIRING CUSTOMERS THROUGH INTIMATE CO-MARKETING PARTNERSHIPS
ADVANTAGE FOR PARTNER ADVANTAGE FOR CLARIMA
Co-MarketingPartnership
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DIRECT IS PROVING PROMISING
REVOLVING CARDS PENETRATION
Market Clarima Non-Direct
Clarima Direct
7%
50%
83%
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5 - 10%
RESULTS ABOVE EXPECTATIONS FROM PARTNERSHIPS AND DIRECT
PR
OF
ITA
BIL
ITY
D
RIV
ER
S
Italian avg. Clarima cards
% Revolving usage
# Year transactions
Avg. spending/Transaction
Avg. balance
> 70 Integrated marketing and risk strategy
25 - 30
90 Euro
900 Euro
81 Euro
1,350 Euro
60%
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UNICREDIT BANCA CAPTIVE MARKET OPPORTUNITIES
With pay later cards
Withoutcards
5 1
4
Total target customer base
Cross sell revolving
Cross sell other products Sell revolving
Cross sell personal loans
(Mln)UCB RETAIL CUSTOMERS
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EXCELLENT RESULTS ON CAPTIVE MARKET
Redemption DIRECT
Public ‘02 Captive ‘02
x 6.6
Captive ‘03
Revolving Penetration (%)
Revolving
Pay later
83%
Public ‘02
100%
71%
Captive ‘02 UCB
DIRECT “CAPTIVE” RESULTS
Higher redemption rates
70% lower acquisition costs
50% to 70% lower credit risk
Increase in competitive pressure
REASONS FOR “CAPTIVE”
5%
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AGENDA
Importance of Consumer Credit for UCI’s strategic goals
Attractive opportunities in Consumer Credit
Results to-date & conclusions
UniCredito’s answer: Clarima
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CLARIMA: RESULTS TO DATE
25 Partnerships
Direct channel fully operational
~150,000 cards/new customers in 18 months
2,750 bank branches fully operational for personal loans
Extensive testing of cross selling/upselling on captive customers
POS financing and specialized stores to start operations in 1H04
Significant investments in credit scoring systems
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STRONG CONTRIBUTION OF CONSUMER LENDING TO THE DIVISION’S GROWTH …
3 MAIN DISTRIBUTION CHANNELSPARTNERSHIPS AND DIRECT MARKETING UCI Banca SPECIALISED
FINANCIAL SHOPS
Key goals:Key goals: Key goals:
~800,000 net acquisitions of customers from 2003 to 2006
Revolving cards / Total cards ratio higher than 50%
Clarima as the “consumer credit specialist” of the Group
Full commercial integration with UCI Banca
Maximisation of UCI Banca customers potential for credit cards and personal loans
Dedicated and alternative distribution traditionally strong in Italy
Market share evolution
2002
2006
~7.5%
> 9%
+ 20%
LEVERAGING ON:
Focus on “credit at point of sale”
Key figures (as of June 2003)
~3.8 bn consumer loans (+10% vs year-end 2002)
~150,000 clients for Clarima
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… THANKS TO TAILORED STRATEGIES FOR EACH DISTRIBUTION CHANNEL
STRATEGIC GUIDELINES
PARTNERSHIPS AND DIRECT MARKETING
UNICREDIT BANCA
SPECIALISED FINANCIAL SHOPS
New selected partners strong for distribution capability, customer base and brand
Low acquisition costs per client thanks to high integration of product/model with the partner
Share of “revolving clients” on total direct channel new clients >80%
Leverage on cross-selling
Increase of penetration of cards on the customer base
Conversion of UCI Banca “optional” cards into revolving cards
Increased share of wallet of clients (from 18% in 2002 to 31% in 2006) for personal loans
Opening of 9 shops in selected high potential cities in January 2004
Other 15-20 openings starting from 2005
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IN SUMMARY: OUR BELIEFS …
UniCredit will leverage its superior organisational model and business focus to gain market share on existing and new clients and become the preferred bank for Italian retail customers
The Italian retail market will see growing competition for market share, key driver of future top line growth
Double digit operating margin growth will be driven by consistent execution of a growth plan, leveraging skills acquired over the last 3-5 years at all levels of the organisation
Clarima is a key contributor of this growth by focusing on consumer credit …
… with a business model difficult to replicate