presentació ABN AMRO 21-4-04 - Banco Sabadell

Juan M. Grumé Head of Finance &

Investor Relations

April 2004

ABN AMRO BANKING CONFERENCE

EXPANDING HORIZONS

www.grupobancosabadell.com

2

STRATEGY FOR PROFITABLE GROWTH

ACQUISITION OF BANCO ATLÁNTICO

1Q04 FINANCIAL RESULTS

CONCLUDING REMARKS

3


Acquisitions at Banco Sabadell

q Always of key banks in order to increase shareholder value.

q Recent Banco Sabadell acquisitions:

ü In 1996: Natwest España

ü In 2001: Banco Herrero

ü In 2003: Banco Atlántico

Banco Natwest España

1996 2001 2003

4

STRATEGY FOR PROFITABLE GROWTH: RESULTS

Solid Growth Organically and Through Acquisitions.

Excellence in Risk Management

0

5.000

10.000

15.000

20.000

25.000

1995 1996 1997 1998 1999 2000 2001 2002 2003

0

0,5

1

1,5

2

2,5

3

3,5

4

4,5

200,0

CAGR 95–03: 17,8%

222,1

176,2

117,1

105,7

84,4

100,9

114,6 112,0

CustomerLoans

NPL Ratio NPL (€mm)

Acquisition ofNatwest Spain

Acquisitionof Banco Herrero

5

MADRID

VALENCIA

BARCELONA

ZARAGOZA

BALEARICISLANDS

A CORUÑA

ASTURIAS

LEÓN

ANDALUCIA

Online Banking

Public sector services and finance

NETWORK 30/12/02 31/12/03

Banco Sabadell 542 583

Banco Sabadell (SME) 1 5Solbank 60 74B.Herrero + B.Asturias 299 202

Sabadell Banca Privada 6 6Activobank 0 2Banco Atlántico 274

TOTAL 908 1.146

Multi-brand strategy


6

NEW BRANCH LAY-OUT

Main advantages:

üOpening up of business areas

üAccess barriers reduced

Branch layouts updated andadapted to present dayrequirements

7

Multi-channel strategy

q ATMs installed q Issued Cards

Dec.03

1.111

Companies

AQMETRIX: The corporate portal withthe best browser facilities and design.

AQMETRIX: The best portal for individualcustomers in terms of service availability.

q Internet bankingIndividuals

620.653

469.853

74.946

Dec-03Debit

Credit

Revolving


360.643327.050

275.715

2001 2002 2003

48.37665.444

83.994

2001 2002 2003

8

Renewal of the Group websites:

üSolbank

üBanco Herrero

üBanco Sabadell

üActivoBank

üSabadell B.Privada

WEBSITE RENEWAL

Best Spanish website amongquoted companies

Analysis carried out by theConsultancy company Look &

Enter for the newspaper El País

The analysis revealed that the BancoSabadell website is the one that bestcomplies with the standards laid down bythe Law of Transparency.

9

Organisation of Business Units

TRANSVERSETRANSVERSE

BancassuranceBancassurance

Asset managementAsset management

IbersecuritiesIbersecurities

Treasury customersTreasury customers

CUSTOMERCUSTOMER

BE B,SabadellBE B,Sabadell

BE B,HerreroBE B,Herrero

BC B,SabadellBC B,Sabadell

BC B,HerreroBC B,Herrero

BC SolbankBC Solbank

SBP PrivadaSBP Privada

Dexia SabadellDexia Sabadell

BC ActivobankBC Activobank

JOINT VENTURESJOINT VENTURESSUBSIDIARIESSUBSIDIARIES

Real estateReal estate

Development capitalDevelopment capital

AmericasAmericas

BS AndorraBS Andorra

ManagerlandManagerland

NetfocusNetfocus

BS FincomBS Fincom

Ø Model of a universal bank with medium/long term growth via

a customer banking model.

Ø Multi-brand and multi-channel with excellent service and risk

quality.

Ø Business plan for 2002-2004ROE

Cost/income ratio


10

2002 – 2005 EFFICIENCY PLAN

FIT@ PROGRAMME:

ü Improvement in staff costs through greater efficiency in processes.

REMAINING OPERATIONS:

üBanco Herrero integration (non-technological costs).

üActivobank integration (non-technological costs).

ü Remaining non-recurring expenses.

TECHNOLOGY:

ü Accelerated amortization of thenew IT systems platform.

ü Elimination of the redundantplatforms.

ü Integration of IT systems forseveral business units (scaleeconomies): Banco Herrero,Activobank.

380,9 378,4 385,5 398,6

205,4 212,6 223,8286,2

2002 2003 2004e 2005e

-44,7

667,1622,4599,6

€ m

589,5

Personnel expenses General expenses

11

QUALITY PLAN

ACTION PLAN 2002 – 2005:

q 2002: Strengthen our quality culture.

q 2003: Consolidate habits, focus on Customer / business unit.

q 2004: Create a single corporate quality model.

q 2005: Final implementation and global certification throughoutthe bank.

OBJECTIVE:

To bring added value to our business proposaland to reiterate our commitment to qualitythrough obtaining the ISO 9001 certification forthe whole organisation.

12

BASEL II

Min

imum

cap

ital

requ

irem

ents

Rev

iew

of

supe

rvis

ory

proc

ess

BASEL II

Mar

ket

disc

iplin

e

Pillar I Pillar II Pillar III

Excellent Risk Quality:

IRB ADVANCED(Internal ratings based advanced approach)

OBJECTIVE:

q To gain a competitive advantage by relying on internal systemsfor measuring risk.

q To comply with the strictest supervisory rules that will enable usto use our own internal estimates for the alignment of Capital withthe key elements of banking risks.

13

Main advantages of these metrics:

Ø Reflect the operating profit and estimated risk costs.

Ø Use economic capital, not regulatory capital.

Ø Aligned with the creation of shareholder value.

RAROC AND CUSTOMER VALUE

Applications of these metrics

Pricing/ Design of products

Direct marketing

Redesign of processes

Management of distribution network

Segmentation

Inclusion inmanagementinformation

Optimisation of capitaland active managementof portfolio

Planning based on value

Value

14

CRM PROJECT

Transformation of corporate datasystems into valid information fordecision making.

Process management.

Propensity scoring

Behaviour models andpatterns

Campaign management

Channel integration

Back up support for planningcommercial operationsCommercial.

Commercial AgendaParametrical selections

Back up support for sales andCustomer care processes.

Personal fileMarketing encyclopaedia

To provide system feedback onthe look out for improvements.

MONITORING

INTERACTIONWITH CUSTOMER

AUTOMATEDSALES FORCE

AUTOMATEDMARKETING

BUSINESSINTELLIGENCE

Definition, design and implementation of systems and tools which helpbusiness units to manage business relations with their Customers thatare both long-lasting and profitable.

15Copyright © 2003 Mercer Oliver Wyman

VALUE-BASED PLANNING

Implementation of business plan for the next 3 years

Ø The maximisation of growth has to combine suitable positioning withexcellent execution.

Level of growthLevel of growth

PositioningPositioning Quality of executionQuality of execution

Ø Growth record determined by marketsegments.

Ø Market growth can be affected byinnovation.

Ø Volatile if viewed on a granular level, itis normally cyclical.

Ø Above average peformance.

Ø Requires a strong “capitalist”culture.

Ø Wide range observed in anysegment of the market.

Focus on major growthbusiness lines

Above market growth inchosen business+

16Copyright © 2003 Mercer Oliver Wyman

Integrated plan for the Group and the Business UnitsPlanning based on value creation:

VALUE-BASED PLANNING

SBP

BS Corporate Banking

Banco Herrero

Solbank

BS CommercialBankingTransverse

Partly-OwnedCompanies

Diversified

Cost ofCapital

Size of the circle indicatesthe Financial Capital

G

row

th R

ate

RAROC

q Assigning of greater capital to businesses with greater growthprospects (RAROC > Capital Costs).

q Management to correct those businesses with lower returns thanCapital Costs.

Current earningsposition adjusted torisk vs growth

17




CONCLUDING REMARKS

18

Banco Atlántico constitutes anexcellent opportunity fordevelopment and completes the2002-2004 business plan


ü Eighth most important banking group inSpain.

üConsolidated franchise and high brandrecognition.

ü National branch network with a strongpresence in the wealthiest regions of Spain.

ü Loyal, under-penetrated customer base.

ü Historical growth below sector average.

ü Limited international presence.

19

Strengthened Position as Fourth Largest Spanish Banking Group30/09/03€ bn

Domestic customer deposits

Domestic mutual funds

Domestic customer loans

Domestic bancassurance (tech, reserves)

Domestic branches (1)

CONTRIBUTION OF BANCO ATLANTICO TO THE GROUP

96,8 96,4

37,4

15,4

BBVA SAN POP SAB BKT

27,1

+23%

BTO

12,322,8

67,2

75,6

SAN BBVA POP SAB BKT

19,9

+28%

BTO

287

2.132

3.347

4.343

SAN BBVA POP SAB BKT

1.146

+31% BTO

6,9

35,3

53,6

6,5

SAN BBVA POP BKT SAB

6,1

+41%

BTO

1,3

13,3

19,1

3,1

BBVA SAN SAB POP BKT

4,2 BTO

+15%

Note: Data of Spanish activities only; Banesto (“BTO”) data for domestic customer loans (€ 28.9 bn), domestic customer deposits (€ 20.9 bn), domestic branches (1,683),domestic mutual funds (€ 10.0 bn) and domestic bancassurance (€ 1.9 bn)(1) Branches of Sabadell and Banco Atlántico as of 31/12/03. Includes approx. 70 branches targeted to be closed (see page 58 for details)Source: Sabadell, interim reports, Inverco, Icea

20

Banco Atlantico's Integration Pillars

Domesticbusiness

InternationalbusinessIT platformRisk

management

• Targeted netclosure of 70branches

• Nation-wideexpansion plan

• Integration ofselectedspecialisedsubsidiaries

• Integration ofselected back-office / headoffice functions

• Roll-out ofBancoSabadell’scontrol /compliancepractices

• Creation ofsupervisorybody for publictender offerinterim period

• Scope toleverage ITplatform andintegrationexpertise

• Strengthenbusinessthrough BancoSabadell’sexpertise

Targeted pre-tax synergies of €114mm by 2006

CONTRIBUTION OF BANCO ATLANTICO TO THE GROUP

21

BANCO ATLANTICO INTEGRATION

Banco Atlantico integration process has 3 phases:

Design and start

FINISHED

First 100 days

Phase 1

Implementation

15 March 24 June DecemberPublic tender offer settlement

Phase 2 Phase 3

22

GOODWILL OF ACQUISITION

1.500

(584)

0

250

500

750

1,000

1,250

1,500

1,750

Acquisition Price Banco AtlanticoBook value

Goodwill

€ m

m

Unrealisedcapital gains

136

(221)

830

Restructuringcosts

€ m

23

41 40

20

7454

(1)

0

20

40

60

80

100

120

Domesticbusiness

Internationalbusiness

Branches / Central services

IT Total

€ m

m

Income synergies(net of business losses)

Cost synergies(net of integration costs)

€ 114 mm

Estimated synergies of 114 M euros before tax in 2006

ANALYSIS OF ESTIMATED SYNERGIES

24

SYNERGIES CALENDAR

40,0

56,9

74,0

11,55,023,5

2004e 2005e 2006e

114

Income synergiesbreakdown

Cost synergies breakdown

25%

60%

100%

68,4

28,5

€ m

25

23,5

56,9

74

2004e 2005e 2006e

COST SYNERGIES BREAKDOWN

7,6

74,034,0

12,1

20,3

Total costsynergies

Othersynergies

ITAmortisation

IT costs Personnelcosts

* 600 redundancies

€ m

26

5

11,5

40

2004e 2005e 2006e

40

23,4

(-12,2)

(-3,3)

28,4

3,7

Fees &commisisions

Client diposits Loans tocustomers

Incomesynergies

NPLprovisons

due to loangrowth

Businesslosses

INCOME SYNERGIES BREAKDOWN

€ m

27

CAPITAL INCREASE

Public recognition of the execution of the operation.

28

15

16

17

18

22/12/03 29/12/03 5/1/04 12/1/04 19/1/04 26/1/04 2/2/04 9/2/04 16/2/04 23/2/04 1/3/04

22-12-2003Announcement Sabadellwon B.Atlántico auction

process

8-1-2004Kick-off for

Capital Increase

26-1-2004Publication of2003 results

Initial Contacts withLa Caixa and BCP

29-1-2004EGM and announcement

of transaction

Analystspresentation

30-1-2004“ComunicaciónPrevia” to CNMV

10-2-2004Folleto

aproval byCNMV 14-2-2004

Printing of IOM

1-3-2004Pricing

Sh

are

Pri

ce

Completed in a very short period of time

CAPITAL INCREASE

Completed in 7 weeks (Rule 144A).

29

Roadshows

ü 69 one–on–ones.ü 94 investors contacted.

ü 23 one–on–ones.ü 38 investors contacted.

Lisbon

Madrid

Barcelona

Dublin

Edinburgh

London

Milan

Amsterdam

ParisZurich

Frankfurt San Francisco

San Diego

Boston

New York

An exhaustive marketing programme2 teams during 2 weeks.

15 financial markets visited in Europe and theUnited States, over 100 investors visited.

CAPITAL INCREASE

30

CAPITAL INCREASE

Resulting in a high demandGeographical breakdown

ü 100% of the rights

ü High demand frominstitutional investors (5,5xsubscribed increase).

ü Practically half of thedemand came from the UK.

Other10%

Germany6%

Netherlands10%

US15%

UK46%

Italy3%France

4%Switzerland

6%

Rights price:a positive performance

1

1,1

1,2

1,3

1,4

16-2 17-2 18-2 19-2 20-2 21-2 22-2 23-2 24-2 25-2 26-2 27-2

No rump placedwith syndicate

31

CAPITAL INCREASE

q 50% more outstanding shares.

q 7 new analysts initiate coverage, bringing the total to 19.

q + 350 new institutional investors.

q Market capitalisation: ≈ € 4,9 bn.

Result of the operation

Change in shareholder situation:31/12/2003

La Caixa 15% BCP

8,5%

Other institutional investors

5,3%

Other shareholders

71,2%

La Caixa14,8% Millenium

BCP7,1%

Other institutional

19,1%

59,1%

investors

Othershareholders

31/3/2004

32




CONCLUDING REMARKS

33

424,6276,4

13.226,312.003,8

814,8497,1

11.522,49.553,9

mar-03 mar-04

22.331,2

25.988,1

GROSS LOANS TO CUSTOMERS BEFORE BANCO ATLANTICO

Mortgages

Others

Other securitised loansSecuritised mortgages

11,2%

+16,4%

+22,7%

€ m

34

€ m

13.785,616.488,3

1.461,44.577,6

143,11.821,9

2.396,1

7,579,6

mar-03 mar-04

+23,0%26.607,1

21.646,6

Repo’sEurodeposits

ON- BALANCE SHEET CUSTOMER FUNDS BEFORE BANCO ATLANTICO

Customer deposits(ex repo’s)

Debt securities

35

4.545,25.496,2

2.212,8

2.066,2

1.744,9

1.507,6

mar-03 mar-04

€ m

8.265,6

+20,9%

-6,6%

+15,7%

+12,6%

Insurance: Same consolidation perimeter (Caifor insurances not included)

AUM (OFF BALANCE SHEET ITEMS) BEFORE BANCO ATLANTICO

Insurance

Pension Funds

Mutual Funds

9.307,3

36

€ m

GROUP NET PROFIT

NET INTEREST INCOME 187,9 200,6 + 6,8% 246,1 + 31,0%

COMMISSIONS 69,4 76,9 + 10,8% 102,0 + 47,0%

FINANCIAL TRANSACTIONS 10,7 16,1 + 49,8% 19,0 + 77,6%

GROSS OPERATING INCOME 268,0 293,5 + 9,5% 367,2 + 37,0%

EXPENSES -145,9 -160,9 + 10,3% -216,9 + 48,7%

NET OPERATING INCOME 122,1 132,6 + 8,6% 150,2 + 23,1%

INCOME BEFORE TAXES 117,8 121,6 + 3,2% 133,0 + 12,8%

GROUP NET PROFIT 68,8 73,3 + 6,5% 81,5 + 18,5%

mar-03 mar-04 mar-04 New

37

237,0

11,5

9,1

191,5182,8184,1180,1 185,9

9,16,11,6

7,7

1Q03 2Q03 3Q03 4Q03 1Q04 1Q04

NET INTEREST INCOME (I)

Adjusted net interest income

Dividends and others

New

+6,8%

+31,0%

187,8197,4

185,7 188,9200,6

246,1

mar-04

Net Int. Inc. 246,1

Net comms 102,0

RFT 19,0Gross Oper.Inc. 367,2

Other op.inc 1,4

Personnel exp. -132,7

Admin. exp. -65,9

Deprec.& amort. -16,9

Other Op.costs -2,9Net Oper. Inc. 150,2

Equity-acc hold. 12,1

Goodwill amort. -3,0

Group transac. 6,9

B&DD's provis. -51,7

Other income 18,4Inc. before tax. 133,0

Corporate tax -47,8

Minority interes. -3,6Group net prof 81,5

€ m

38

19,4 21,7 28,3

28,9 31,4 30,3 30,0 31,042,5

24,4 23,3 23,9 24,1

31,3

20,219,3 22,1

21,1

1T03 2T03 3T03 4T03 1T04 1T04

69,4 75,1

€ m

73,7 76,0

Ass. Mgm1

Services

Lending

COMMISSIONS

1 Includes commissions of mutual funds, pension funds and life insurance commissions

Nuevo

76,9

102,0+10,8%

+47,0%

mar-04

Net Int. Inc. 246,1Net comms 102,0


Other op.inc 1,4

Personnel exp. -132,7

Admin. exp. -65,9





Group transac. 6,9



Corporate tax -47,8


39

86,3 92,4 91,591,0 91,5

126,3

5,32,6 3,6

5,8 6,5

6,5

1Q03 2Q03 3Q03 4Q03 1Q04 1Q04

€ m

PERSONNEL EXPENSES

Recurrent

NoN recurrent

Nuevo

mar-04

Net Int. Inc. 246,1

Net comms 102,0


Other op.inc 1,4Personnel exp. -132,7

Admin. exp. -65,9





Group transac. 6,9



Corporate tax -47,8


40

65,9

44,941,849,543,037,8

11,910,7

6,88,3

1Q03 1Q03 3Q03 4Q03 1Q04 1Q04

€ m

GENERAL ADMINISTRATIVE COST

Recurrent

Non recurrent

New

mar-04

Net Int. Inc. 246,1

Net comms 102,0


Other op.inc 1,4

Personnel exp. -132,7Admin. exp. -65,9





Group transac. 6,9



Corporate tax -47,8


Non recurrent 1Q04

41

COST / INCOME RATIO

1Q03 1Q041Q04

New

Base 49,8% 50,2% 54,1%

Inc. Depreciation 54,5% 54,6% 58,7%

42

0,38%

0

100

200

300

400

500

600

700

1Q03 2Q03 3Q03 4Q03 1Q04 1Q04

15.000

20.000

25.000

30.000

35.000

216,0 227,1237,0 244,4

255,9

314,1

273,4242,5224,2206,3175,8160,6

117,5

74,463,6

54,558,1

52,1

1Q03 2Q03 3Q03 4Q03 1Q04 1Q04

B&DD’s COVERAGE

NPL

Provisions

Gross loans tocustomers

Generic

Specific

FECI

% FECI coverage

0,50%

%NPL ratio

3,5x

5,3x4,4x

59,7%

4,8x3,9x

New

3,8x

64,6%

Other coverages

New

€ m

5,3x

3,8x

43




CONCLUDING REMARKS

2

44

q Banco Sabadell is committed to the combination oforganic growth and acquisitions in order to obtainprofitable growth.

q Our recent past history has shown us that this businessstrategy has helped to increase shareholder value.

q Within the framework of the 2002-04 business plan, asound business organisation was designed, a multi-brand, multi-channel strategy was adopted, differentprojects were defined and are now being implemented,This guarantees a high degree of organic growth for usand makes it viable to complement this organic growthwith acquisitions.

SUMMARY

45

q The acquisition of Banco Atlántico has consolidatedBanco Sabadell’s position as the fourth largest bankinggroup in Spain and represents a platform for greaterfuture growth.

q In order to finance the acquisition of Banco Atlántico acapital increase has been carried out.

q The creation of value will be the basis of our futurebusiness plan and for that, value metrics and RAROC willbe important elements of decision.

SUMMARY

presentació ABN AMRO 21-4-04 - Banco Sabadell

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Transcript of presentació ABN AMRO 21-4-04 - Banco Sabadell