UniCredito Italiano Group
E - Leader E - Leader
International Leadership International Leadership ConferenceConference
June 11 – 15, 2006
Bratislava
Anna PilkovaAnna Pilkova
2
History of the banking sector in brief and main business trends History of the banking sector in brief and main business trends
INDEXINDEX
in the banking sector todayin the banking sector today
IntroductionIntroduction
Macroeconomic context and future expectationsMacroeconomic context and future expectations
Slovak economy and banking sector Slovak economy and banking sector
UniBanka and it´s strategic changes over 15 years of existenceUniBanka and it´s strategic changes over 15 years of existence
3
The main features about SLOVAK REPUBLICThe main features about SLOVAK REPUBLIC
1993 – establisth of Slovak Republic
• inhabitants: 5 million
• neighbouring countries:
Czech Republic, Poland,
Ukraine, Hungary, Austria
2004 - joining European Union
2009 - a part of the European Monetary Union
4
History of the banking sector in brief and main business trends History of the banking sector in brief and main business trends
INDEXINDEX
in the banking sector todayin the banking sector today
IntroductionIntroduction
Macroeconomic context and future expectationsMacroeconomic context and future expectations
Slovak economy and banking sector Slovak economy and banking sector
UniBanka and it´s strategic changes over 15 years of existenceUniBanka and it´s strategic changes over 15 years of existence
5
Sound macroeconomic conditions have been reflected in major Sound macroeconomic conditions have been reflected in major sovereign rating improvementssovereign rating improvements
Source: Rating agencies, UniBanka, UniCredit NE Division
Improvement in rating in the last 2 years
Deterioration in rating in the last 2 years
The best rating among the V4
countries given by 2 out
of 3 main rating
agencies
Moody's S&P Fitch
Poland A2/Stable BBB+/Stable BBB+/Positive
Hungary A1/Negative A-/Negative BBB+/Stable
Czech Republic A1/Positive A-/Positive A/Stable
Slovakia A2/Positive A/Stable A/Stable
Slovenia Aa3/Positive AA-/Stable AA-/Positive
Estonia A1/Positive A/Positive A/Positive
Latvia A2/Positive A-/Stable A-/Stable
Lithuania A3/Positive A/Positive A-/Positive
Bulgaria Baa3/Stable BBB/Positive BBB/Stable
Romania Ba1/Positive BBB-/Stable BBB-/Stable
Croatia Baa3/Stable BBB/Stable BBB-/Stable
Turkey Ba3/Stable BB-/Positive BB-/Positive
6
Performance of the economyPerformance of the economy: : MMacroeconomic scenario for 2004-2008acroeconomic scenario for 2004-2008
Indicator 2004 2005 2006F 2007F 2008F
Real growth in GDP (%) 5.5 6.0 6.3 5.86.3
Growth in investments (%) 5.0 13.8 13.9 3.85.8
3.8 7.2 5.1 4.43.6
2.0 0.5 1.8 1.71.5
5.9 3.7 3.5 2.02.1
15.6 13.1 12.2 12.012.1
40.0 38.6 37.0 36.036.1
4.8 3.0 3.6 3.83.8
-3.4 -8.6 -5.5 -2.8-3.6
-3.0 -2.9 -2.7 -2.7-3.0
41.6 34.5 38.4 37.537.8
Growth in consumption of households (%)
Growth in government´s consumption (%)
Inflation - Dec (%)
Unemployment rate (%)
Average exchange rate €/SKK
1M BRIBOR (average, %)
Current account (%, GDP)
Public deficit (%, GDP)
Public debt (%, GDP)
2.3 4.0 5.7 3.33.5Direct foreign investments
Source: Statistical Office of SR, NBS, Office of Social Affairs and Family, UniBanka
Key indicators for Euro adoption
Growth should remain
robust...
... mainly driven by investment activity...
Public deficit could be
higher after elections
... and gradual dissinflation.
7
Maastricht criteriaMaastricht criteria: Inflation will be the hardest nut to crack: Inflation will be the hardest nut to crack
0,0%
1,0%
2,0%
3,0%
4,0%
5,0%
6,0%
7,0%
8,0%
9,0%
10,0%
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
1.
2.
3.
2004 2005 2006 2007 2008
NBS target HICP (y/y, 12M avg.) Maastricht*
f orecast
-7,7%
-3,7%-3,0% -2,9% -2,7% -3,0% -2,7%
-9,0%
-8,0%
-7,0%
-6,0%
-5,0%
-4,0%
-3,0%
-2,0%
-1,0%
0,0%
2002 2003 2004 2005 2006F 2007F 2008F
forecast
Maastricht criteria – 3%
•Maastricht criteria estimate UniBanka based on IMF forecast
Public finance deficit vs. Maastricht criteria
Inflation vs. Maastricht criteria Slovakia able to fulfill
Maastricht criteria despite difficulties
Slovakia should fulfill inflation criteria in H2 2007, however risk still comes from energy (oil) prices development
Based on 2006-2008 budget proposal, Slovakia should by able to fulfill both public finance criteria (deicit andd debt), even if the pension reform costs will be included
Exchange rate stability – the range is set to 32,687 – 44,223 SKK/€ - no problems expected
Interest rate stability - Slovakia safely fulfill Maastricht criteria – no problems expected also in upcoming years (Maastricht criteria at the level of 5.61% p.a. vs. Slovakia long-term interest rate at the level of 4.01% p.a. in March 2006)
Slovakia fulfills Maastricht criteria
www.hotelset.sk
8
History of the banking sector in brief and main business trends History of the banking sector in brief and main business trends
INDEXINDEX
in the banking sector todayin the banking sector today
IntroductionIntroduction
Macroeconomic context and future expectationsMacroeconomic context and future expectations
Slovak economy and banking sector Slovak economy and banking sector
UniBanka and it´s strategic changes over 15 years of existenceUniBanka and it´s strategic changes over 15 years of existence
9
Restructuring of a quarter of loans portfolio and subsequent privatisation Restructuring of a quarter of loans portfolio and subsequent privatisation lead to the present good resultslead to the present good results
Note: *at the end of 1998Source: NBS, UniBanka
1993- 2006: Evolution of the Slovak banking sector in brief
1993
Slovak republic
established
1997
29 banks present, 61% of capital in local (state)
hands
1999
Restructuring starts: 25
banks, 75% of capital in
local hands
NPL ratio: 31%
NPL ratio: 36%*
2002
Restructuring finalised: 20
banks, 14% of capital in
local hands
NPL ratio: 11%
2006
23 banks present: 4% of capital in local hands, ROE at16%,
no bank in red numbers
NPL ratio: 5%
10
Intermediation of the financial sector – a huge potential for future Intermediation of the financial sector – a huge potential for future growth in the whole regiongrowth in the whole region
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
PL HU CZ SK HR RM BG TK
120% Eurozone (2005) = 115.4
2002*
2005
Source: UniCredit New Europe Research Network and UniCredit Research and Strategy
Total Loans over GDP
Slovak banking sector with a position at the average of the
region
39%39%
11
Data as of 2004
Note: (*) As of end of 2003.
Source: UCI New Europe Research Network Database, based on National Central Banks and Eurostat
Per capita debt
143
210
300
540
663
740
852
1,217
1,587
1,603
1,939
13,286
Romania
Turkey
Bulgaria
NE(10)
Slovakia
Poland
Latvia
Czech R.
Estonia
Hungary
Croatia
Eurozone
Household Debt over Fin. Wealth
13%
21%
22%
23%
24%
27%
28%
29%
31%
36%
46%
83%
Turkey
Czech R.
Slovakia
NE(10)
Poland
Eurozone
Bulgaria
Latvia
Romania
Hungary
Croatia
Estonia
(*)
5%
6%
10%
12%
12%
13%
14%
19%
20%
24%
32%
50%
Romania
Turkey
Slovakia
NE(10)
Bulgaria
Poland
Czech Rep.
Latvia
Hungary
Estonia
Croatia
Eurozone
Household Debt over GDP
Backed by financial assets, the indebtedness of households does not Backed by financial assets, the indebtedness of households does not seem so low anymore seem so low anymore
12
Slovak banking sector in words
23 banks are present on the market, mainly with general licenses
Capital ownership structure dominated by Austria (36%) followed by Luxembourg (32%) and Czech republic (9%). Non EU countries own 4% of local banking capital
Management Boards of TOP10 banks are dominated by foreign members (54%). Share of women remains low, at 8%
Market development was characteristic by lending boom on the retail side while cash-flow improvement and strong investment activity on the corporate side
In terms of P&L impacts, the increased competition and monetary relaxing shifted the P&L structure towards a decreased role of interest income
13
Inspite of an increasing competition and 98% of the banking sector assets Inspite of an increasing competition and 98% of the banking sector assets being in foreign hands – the sector remains highly concentratedbeing in foreign hands – the sector remains highly concentrated
Note: Ranking based on balance sheet values; Source: UniBanka
2005 Ranking of the Slovak banking sector (SKK ths.)** TOP3 holding above 50% of the market
TOP 3 holding above 40% of the market
Balance sheet value
Due from clients
Due to clients
Net profitMajor foreign
owner1 VÚB 227 403 847 83 380 430 162 302 493 3 780 755 Intesa BCI2 SLSP 225 560 305 90 144 890 177 842 851 3 313 679 Erste bank3 ČSOB 185 391 306 30 093 472 59 263 645 374 773 KBC4 Tatrabanka 184 118 202 78 990 399 130 950 069 2 380 135 Reiffesien5 ING bank 105 188 876 15 058 388 38 235 703 407 736 ING6 HVB Slovakia 76 239 458 36 885 045 28 569 417 730 289 UniCredit7 UniBanka 53 623 937 26 389 178 41 011 385 381 730 UniCredit8 Dexia banka 45 787 324 24 896 455 31 256 095 233 991 Dexia9 PSS 45 698 419 34 753 061 36 675 746 653 858 Bausparkassen10 OTP banka 39 332 747 28 447 994 22 415 342 190 839 OTP11 Istrobanka 35 261 591 20 435 294 19 635 740 189 242 Bawag12 Ľudová banka 30 992 534 18 471 933 23 807 562 152 383 Volksbank13 Citibank 29 094 792 13 343 551 20 280 777 308 487 Citigroup14 Poštová banka 23 369 574 7 099 371 20 049 002 226 903 -15 Calyon 16 586 327 6 929 123 3 955 187 15 720 Calyon16 VUB Wüstenrot 9 033 236 5 320 560 7 822 010 73 031 Wüstenrot17 Commerzbank 6 466 336 2 440 139 690 609 3 736 Commerzbank18 Komerční banka 6 295 771 3 083 698 297 430 2 019 Societe Generale19 ČSOBS 6 070 486 2 094 284 5 247 580 1 191 KBC20 Privat banka 5 466 999 1 199 672 4 142 571 42 719 Meinl Bank
Top 3 players holding
70% of the market profit
14
UCI + HVB + BACA BY FAR NO. 1 IN CEUCI + HVB + BACA BY FAR NO. 1 IN CE
Dec. 2004 (1) Net Profit(€ mln)(2)
Assets(€ bln)
N. of branchesRevenues(€ mln)
Citigroup 14.8176 237n.a.
OTP(4) 18.0(3)16.9576(3)557 875(3)7861,715
Erste 33.3418 1,2451,420
SocGen 19.7408 7221,126
KBC 34.8319 1,0171,660
RZB 24.7264 8141,110
Intesa 16.4242 498826(5)
UniCredit + HVB (100% of all banks,
including Yapi)83.71,163 2,8644,982
Source: UCI-FBD Economic Research; numbers calculated using average exchange rate except for Unicredit
1. 100% of total assets and profit after tax for controlled Companies (stake > 50%) and share owned for non controlled companies; 100% of branches and employees; for details please refer to the methodological notes. 2. After tax, before minority interest. 3. Including proforma recently acquired Novabanka; 4. Including OTP’s subsidiaries. 5.Data on total revenues refer to contribution to Intesa’s consolidated results
15
History of the banking sector in brief and main business trends History of the banking sector in brief and main business trends
INDEXINDEX
in the banking sector todayin the banking sector today
IntroductionIntroduction
Macroeconomic context and future expectationsMacroeconomic context and future expectations
Slovak economy and banking sector Slovak economy and banking sector
UniBanka and it´s strategic changes over 15 years of existenceUniBanka and it´s strategic changes over 15 years of existence
16
UniBanka is a member of UniCredit Group one of the best UniBanka is a member of UniCredit Group one of the best banking groups in Europebanking groups in Europe
ItalyGermanyAustria
CEEPolandHungaryCzech Republic SlovakiaBulgariaRomaniaCroatiaBosnia HerzegovinaSerbia Montenegro SloveniaTurkeyUkraineLithuaniaLatviaEstoniaRussia
17
Bank Profile and Strategy EvolutionBank Profile and Strategy Evolution
Established 1990 as a first private bank in Slovakia
Medium-sized bank in comparison with banking sector in
Slovakia
Commercial bank offers full range of retail (including SME)
corporate and investment banking
products and services
Main shareholders UniCredito Italiano S.p.A., Milan 77,21%
EBRD, London 19,90%
The Ministry of Agriculture
1,09%
Others 1,8%
Domestic network 10 branches and 56 sub-branches
connected
on-line reach about 80% of population
18
10 Regional branches
56 Local branches
Total Assets 53,725,903Deposits 42,832,284Loans 26,389,178Total revenues 1,909,371Net Profit 365,228
Registered capital 2,377,062
In thous. SKK, IAS consolidated data as of 31st December 2005
UniBanka, a. s.: UniBanka, a. s.: • has highly developed branch network• holds strong corporate banking position including property development financing • reinforces orientation on services in foreign trade • offers balanced portfolio of competitive products and
services for corporate clients, managers and employees
Branches 66Employees 998Deposits / Loans 1.62Capital adequacy 12.21 %
Results and branch network of UniBanka Results and branch network of UniBanka
19
Bank Profile and Strategy Evolution...Bank Profile and Strategy Evolution...Bank Life Cycle...Bank Life Cycle...
1990 –
1991 - 1996
1997 – 2000
2001 –
2006
START – UP
ENTERPRENEURIAL
GROWTH
STAGNATION-DECLINE
STRATEGIC OWERSHIP
TURNAROUND
NEW STRATEGIC
MGMT PROCESS
NEW CULTURE
MERGER
KEY CHALENGESKEY SEGMENTSIDENTIFICATION
HIGHT GROWTH BUT NOT INHARMONISED WITH OTHER PROCESSES PART.RISKSFRAGMENTED SHAREHOLDER´S STRUCTURE
SURVIVAL SHAKEOUT
REENGINEERING
GROWTH STRATEGY THROUH AQUISITION
20
PERIOD/STRATEGIC EVENTS
26.6.1990 – Establishment under the name Slovenská poľnohospodárska banka
-Idea of bank establishment came from the man who was the first CEO
l.l.1991 – Starting of Banking Activities
1992– Privatisation process has started
1993-Slovak republic was established and EBRD bought stake in the Bank
1993-1994 – Important macroeconomic change occurred(decrease of GDP, significant growth of MM prices, slow down in agrisector
1994 – changing the name –Polnobanka
MAIN SHAREHOLDERS
Slovak insurance company - SP (31,91%)
Ministry of Agric. - MP(7.2%)
Agrobanka Praha-AG (6,7%)
Other (54,19%)
SP – (31,91%)
EBRD – (20,0%)
MP – (8,65%)
AG – (3,75%)
Other –(35,69%)
STRATEGIC FOCUS
. Start-up business focusing on agribusiness sector
. Dynamic growth mainly in loan side while funding was done through financial institutions
. Personal from former State Bank Czechoslovakia and Non banking industries
.Enlargment of business segments towards newly set up start-ups, mainly shops
. Starting cooperation with EBRD through co-financing mainly food processing companies
. Hiring new staffs with „western type of education“and starting trainings in this directions
Bank Profile and Strategy EvolutionBank Profile and Strategy Evolution
21
PERIOD/STRATEGIC EVENT
1995 – new strategy formation and implementation has started
1996 – two Italian financial groups – Unicredito,S.p.A and Finest,S.p.A. joined the bank
MAIN SHAREHOLDERS
SP - (31,91%)
EBRD – (20%)
UcI- (7,5%)
Finest – (7,5%)
MP – (8,32%)
AG – (1,78%)
Other –(22,99%)
STRATEGIC FOCUS
. From agribusiness to universal banking with providing of full range of services and products of commercial and investment banking through concepts of relationship banking and improvement of credit granting process.
The crucial segments were: Corporate,SME´s and Citizens. Within corporate special attention was done to Italian enterpreneurs
Bank Profile and Strategy EvolutionBank Profile and Strategy Evolution
22
PERIOD/STRATEGIC EVENTS
1997 – the first CEO left the bank
- the first signs of bank stagnation appeared
1998 – corporate governance change – instead of external Board of Director System Internal one was introduced.
BoD had two Slovak members and one British guy – EBRD repres.
MAIN SHAREHOLDERS
SP - (31,91%)
EBRD – (20%)
UcI- (7,5%)
Finest – (7,5%)
MP – (8,32%)
AG – (1,78%)
Other –(22,99%)
STRATEGIC FOCUS
. Continuing implementation of strategy defined in 1995 through changing of organizational structure as follows:a/ separating business from risk mgmt and Credit risk was a major priority,
b/ set up two business units focusing on corporate (incl. SME) and citizens.
c/ strategic customer services and products were design – focusing mainly on tailored made system
Bank Profile and Strategy EvolutionBank Profile and Strategy Evolution
23
PERIOD/STRATEGIC EVENTS
1999 – a few failures of commercial bank occured – Priemyselná banka, Agrobanka, Slovensko, Banka Haná – negative impact on Poľnobanka – a few runs on liquidity
2000 – May , SP decided to increase capital and subsequently sold 51% of shares to UniCredito Italiano.....
2002 – April- changing of the name – UniBanka
MAIN SHAREHOLDERS
SP (31,91%)
EBRD (20%)
UcI (7,5%)
Finest (7,5%)
MP (8,32%)
AG (1,78%)
Other (22,99%)
UCI (72,39%)
EBRD (19,9%)
MP (1,59%)
AG (0,34%)
Others (4,35%)
STRATEGIC FOCUS
. To find strategic shareholder and capital.
. Bad loan portfólio solving.
. Strict credit granting process – continuing.
. Turnoround
. New growth strategy formation and implementation
Bank Profile and Strategy EvolutionBank Profile and Strategy Evolution
24
PERIOD/STRATEGIC EVENTS
2005 – June – Aquisition fo HVB Bank by UniCredito Italiano Milan
2006 – Merger of local HVB bank with UniBanka
MAIN SHAREHOLDERS
UCI (77,21%)
EBRD (19,90%)
MAG (1,09%)
Others (1,8%)
STRATEGIC FOCUS
. Focus on improving position in Retail and SME´s sector
. To be the 4th largest bank in Slovakia – challenging the 3rd
one
. To be 2nd largest corporate bank
Bank Profile and Strategy EvolutionBank Profile and Strategy Evolution
25
ITALY:N. 2 with 10% market share1
Customer Loans: 122 bn EuroCustomer Deposits: 72 bn EuroBranches: 3,137Employees: 40 000Customers: 6.3 mn
After merger with HVB group became UniCredit Group leader on After merger with HVB group became UniCredit Group leader on markets of CEE countriesmarkets of CEE countries
GERMANY:N. 2 with 5% market share1
Customer loans: 153 bn EuroCustomer Deposits: 61 bn EuroBranches: 681Employees: 26,000Customers: 4,0 mn
CENTRAL AND EASTERN EUROPE:N. 1 bank2
Countries of presence: 163
Customer Loans: 41 bn EuroCustomer Deposits: 47 bn EuroEmployees: 58,0004
Customers: 16.4 mn
AUSTRIA:N. 1 with 18% market share1
Customer Loans: 51 bn EuroCustomer Deposits: 35 bn EuroBranches: 405Employees: 12,000Clustomers: 1.8 mn
Source: Company data of year end 2004, except Hebros Bank as of 2003
1. Ranking measured in terms of total assets. For market share calculations UniCredit and HVB may apply different definitions as far as the underlying data is concerned. 2. Ranking measured in terms of total assets. Including Hebros Bank, Eksimbanka, IMB and Yapi. Banca Ion Tiriac not included. For Yapi included 50% of loans and deposits and 100% od branches and customers. For customer customer loans, customer deposits, branches, employees and customers data not included for Ukraine and Baltic Countries. 3. Included Poland, Hungary, Czech Republic, Slovakia, Bulgaria, Romania, Croatia, Bosna Herzegovina, Serbia Montenegro, Slovenia, Turkey, Ukraine, Lithuania, Latvia, Estonia and Russia. Excluding representative offices. 4. Including 100% Yapi, excluding Hebros Bank, Eksimbanka, IMB, Ukraine and Baltic Countries.
26
Market capitalisation
Group:1 60 billion EUR
Branches Group: 7,184
Assets Group: 787 billion EUR
KEY RESULTS AS TO 31.12.2005 - solid, profitable and growing company KEY RESULTS AS TO 31.12.2005 - solid, profitable and growing company
Loans and receivables
Group: 426.6 billion EUR
Direct Deposits Group: 462.2 billion EUR
Empoyees Group: 132,914
Total revenues Group: 20,791 mil EUR
1. Group (everywhere): pro forma – considering HVB as part if the UniCredit Group for all the year 2. Without considering the integration cost
Net Income2
Group: 3,308 mil EUR
In terms of market cap: 5th largest European financial group and 2nd in Euro zone
27
BANKING GROUP WITH HIGH INTERNATIONAL RATING:
ST debt T/LT debt OutlookFITCH RATINGS F1 A+ Stable Moody‘s Investor Service P-1 A1 StableStandard and Poor‘s A-1 A+ Negative
Private Banking and
AM Division
Corporate and SME
Div.
Retail Division
Central and Eastern Europe Division
Commercial Real Estate
NEW GROUP BUILT TO LEVERAGE OPPORTUNITIES IN ALL CUSTOMER SEGMENTS AND MARKETS
Multinationals/ Investment
Banking Division
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