Intesa Sanpaolo S.p.A. · MIL:ISP
Intesa Sanpaolo — Q3 2002 Earnings Presentation
42 slides from Intesa Sanpaolo's earnings presentation, Nov 12, 2002
Slide 1: Third Quarter Results 2002
Third Quarter Results 2002 November 12th, 2002
Slide 2: Agenda
Agenda 1 Quarterly Results (3Q 2002) 2 2002 Action Plan 3 Business Plan Update 1
Slide 3: Introduction
Introduction Ø Nine month results are in line with the goals set in the Business Plan ü Value Creation h Net interest income growth (+5.2% QoQ) h Operating costs reduction (-6.0% QoQ) h Further strengthening of the top management team ü Risk Reduction h Large corporate RWA decrease (-12bn vs Dec. 20
Slide 4: Quarterly Analysis
Quarterly Analysis 1Q 2002 2Q 2002 3Q 2002 D% 3Q/2Q (€ m) Official Restated(1) Net Interest Income 1,507 1,350 1,420 5.2 6.9 Dividends & Eq. Profits 52 200 20 (90.0) (90.0) Net Commissions 873 861 793 (7.9) (7.1) Other Non-Interest Income 205 147 25 (83.0) (76.2) Total Income 2,637 2,558 2,258 (11.7
Slide 5: Quarterly Analysis
Quarterly Analysis 3Q 2001 3Q 2002 D% (€ m) Official Restated(1) Net Interest Income 1,404 1,420 1.1 4.6 Dividends & Eq. Profits 41 20 (51.2) (37.5) Net Commissions 913 793 (13.1) (10.2) Other Non-Interest Income 7 25 257.1 227.3 Total Income 2,365 2,258 (4.5) (0.6) Operating Costs (1,702) (1,568) (
Slide 6: Nine-Month Results
Nine-Month Results 30.09.01 30.09.02 D% (€ m) Official Restated(1) Net Interest Income 4,462 4,277 (4.1) (0.5) Dividends & Eq. Profits 319 272 (14.7) 26.5 Net Commissions 2,828 2,527 (10.6) (7.7) Other Non-Interest Income 467 377 (19.3) (13.3) Total Income 8,076 7,453 (7.7)(2) (3.0) Operating Costs
Slide 7: Balance Sheet
Balance Sheet 30.09.01 30.09.02 D% % (€ m) Official Restated(1) Total Assets 317,937 290,123 (8.7) (7.2) Customer Loans 182,091 170,043 (6.6) (5.3) Net Interbank Funds 40,976 19,457 (52.5) (51.3) Customer Direct Funds 180,568 180,367 (0.1) 1.5 Customer Indirect Funds 295,468 308,039 4.3 5.0 of which
Slide 8: Funding and Lending in the Domestic Market
Funding and Lending in the Domestic Market D % 12 Month Customer Deposits(1) D% 12 Month Customer Loans(1) +15.4% +6.7% -7.9% +4.2% Short Term Long Term Short Term Long Term Deposits Deposits Loans Loans Ø Increase in customer deposits market share (13.9% vs. 13.6% as of Dec. 2001) Ø Decrease in cus
Slide 9: Non-Interest Income
Non-Interest Income 30.09.01 Pro forma 30.09.02 D% 1Q2002 2Q2002 3Q2002 D% Q3/Q2 Official Restated(1) Official Restated(1) Net Commissions 2,828 2,527 (10.6) (7.7) 873 861 793 (7.9) (7.1) P/L on Financial Transactions 109 107 (1.8) 18.9 90 61 (44) (172.1) (164.5) Other Operating Income, Net 358 270
Slide 10: Effective Cost Control
Effective Cost Control 30.09.01 Pro forma 30.09.02 D% 1Q2002 2Q2002 3Q2002 D% Q3 vs Q2 (€ m) Official Restated(1) Official Restated(1) Personnel Costs 2,983 2,790 (6.5) (3.6) 999 945 846 (10.5) (9.0) Other Adm. Costs 1,844 1,742 (5.5) 0.7 627 560 555 (0.9) 1.2 Depreciation(2) 510 495 (2.9) 1.9 165 1
Slide 11: Put Warrant Mark to Market
Put Warrant Mark to Market Put Warrant Mark to Market (€ m) 183 (99) (659) (575) (1,157) (1,732) 2001 Q1 02 Q2 02 Q3 02 2002 2001-02 Cumulated Cumulated Cumulated 10
Slide 12: Divisional Analysis
Divisional Analysis as of 30.09.2002(1) Central Italian Product Foreign Functions Retail Banks(2) Co’s Corporate Banks / Other(3) Total Total Income (€m) 3,218 1,115 772 1,063 1,297 106 7,571 Operating Profit (€m) 698 415 375 636 468 (153) 2,440 Cost/Income(4) 78.3% 62.8% 51.4% 40.1% 63.9% n.m. 67.8
Slide 13: Asset Quality
Asset Quality Ratios 2001 30.06.02 30.09.02 Loan Provisions/Op. Profit 69%(1) 60%(1) 56%(1) Loan Provisions/Loans 1.4% 0.6%(2) 0.8%(3) Net NPLs/Loans 3.0% 3.1% 3.2% NPLs Coverage 59% 61% 62% Net NPLs/Core Tier 1 43%(1) 43% 42% Ø Net NPLs stock down 1.5% QoQ (1) Pro forma to be consistent with 2002 y
Slide 14: Agenda
Agenda 1 Quarterly Results (3Q 2002) 2 2002 Action Plan 3 Business Plan Update 13
Slide 15: 2002 Action Plan
2002 Action Plan We are reaching the Targets we set for 2002 ü Further Strengthening of the Management Team ü Reduction in Large Corporate Exposure ü Reduction in Credit Derivatives Exposure ü Sale of Real Estate Assets ü Disposal of our Subsidiary in Argentina ü Strengthening of Capital Base 14
Slide 16: Organisational Structure Further Streamlined
Organisational Structure Further Streamlined Chief Chief Executive Executive Officer Officer Central Functions Head Head Office Office Services Services Departments Departments Companies Companies Italian Italian Foreign Foreign Retail Retail Corporate Corporate Business Banks Banks Banks Banks Divi
Slide 17: Further Strengthening of the Management Team
Further Strengthening of the Management Team Chief Chief Executive Executive Officer Officer Corrado Corrado Passera Passera Retail Retail Corporate Corporate Italian Italian Banks Banks Foreign Foreign Banks Banks Division Division Division Division Division Division Division Division Corrado Corra
Slide 18: Further Strengthening of the Management Team Central Functions
Further Strengthening of the Management Team Central Functions Human Human Real RealEstate Estate Credit Credit External External Finance Financeand and Institutional Institutional Internal Internal Resources Resources&& and and Relations Relations Treasury Treasury Relations Relations Auditing Audi
Slide 19: Further Strengthening of the Management Team Corporate Division
Further Strengthening of the Management Team Corporate Division Corporate Corporate Division Division Corrado Corrado Passera Passera ad ad interim interim Large Large Corporate Corporate && Mid Mid Govt. Govt. and and Financial Financial Merchant Merchant Banking Banking Corporate Corporate Infrast
Slide 20: 2002 Action Plan
2002 Action Plan We are reaching the Targets we set for 2002 ü Further Strengthening of the Management Team ü Reduction in Large Corporate Exposure ü Reduction in Credit Derivatives Exposure ü Sale of Real Estate Assets ü Disposal of our Subsidiary in Argentina ü Strengthening of Capital Base 19
Slide 21: Reduction in Large Corporate Loans (RWA)
Reduction in Large Corporate Loans (RWA) 31.12.2002 (€ bn) 01.01.2002 30.06.2002 30.09.2002 Target Italian Large Corporate RWA 19.7 16.8 15.6 15.8 Foreign Large Corporate RWA 33.7 31.1 26.1 24.9 Total Large Corporate RWA 53.4 47.9 41.7 40.7 RWA Change in the period (5.5) (6.2) (1.0) RWA Cumulated Ch
Slide 22: Reduction in Large Corporate Loans (RWA)
Reduction in Large Corporate Loans (RWA) The actions undertaken have led to an improvement in EVA® Annualised Effect Decrease in Total Income €34m Allocated Capital saved €548m Positive impact on EVA® €45m 21
Slide 23: Reduction in Large Corporates in Favour of Retail
Reduction in Large Corporates in Favour of Retail Retail Risk Weighted Assets 2001 30.06.02 30.09.02 2005 Target Retail 42% 23% 44% 25% 47% 26% 32% 44% 47% ~~60% 60% Italian Banks(1) 9% 9% 10% 12% Product Companies 10% 10% 11% 15% Corporate 33% 33% 31% 28% n Large & Mid Foreign Co’s 15% 15% 13% 7% n
Slide 24: Reduction in Large Intl. Corporate Loans
Reduction in Large Intl. Corporate Loans Intl. Large Corporate Exposure Overview Coverage Considerations 30.09.02 30.06.02 Ø €1.9bn gross NPLs/substandard loans Ø € 1.1bn of provisions for a 56% coverage RWA: €26bn €31bn ratio (84% vs. Enron, Swissair, WorldCom (2002 Target: €25bn) and Marconi UK) A
Slide 25: Net Interbank Borrowing
Net Interbank Borrowing Already achieved decrease in loans and a more focused ALM policy enabled us to reach the target of reduction in net interbank borrowing ahead of schedule Net Interbank Borrowing (€ bn) -52% 41 37 28 19 Sep-01 Dec-01 Jun-02 Sep-02 24
Slide 26: 2002 Action Plan
2002 Action Plan We are reaching the Targets we set for 2002 ü Further Strengthening of the Management Team ü Reduction in Large Corporate Exposure ü Reduction in Credit Derivatives Exposure ü Sale of Real Estate Assets ü Disposal of our Subsidiary in Argentina ü Strengthening of Capital Base 25
Slide 27: Reduction in Credit Derivatives Exposure
Reduction in Credit Derivatives Exposure 30.06.02 30.09.02 D% (€ bn) Super Senior Open Position 3.6 1.8 (50.0) Other Open Positions 8.1 5.3 (34.6) Partially Hedged Super Senior 5.3 5.4 1.9 Fully Hedged 57.1 57.4 0.5 Protection Bought 6.9 7.3 5.8 Total Portfolio 81.0 77.2 (4.7) Open Positions Value a
Slide 28: 2002 Action Plan
2002 Action Plan We are reaching the Targets we set for 2002 ü Further Strengthening of the Management Team ü Reduction in Large Corporate Exposure ü Reduction in Credit Derivatives Exposure ü Sale of Real Estate Assets ü Disposal of our Subsidiary in Argentina ü Strengthening of Capital Base 27
Slide 29: Disposal of Real Estate Assets
Disposal of Real Estate Assets Business Plan Targets As of Today Ø Disposal of real Ø Already sold real estate estate assets for up assets for €250m to €500m by Book Value in 4Q December 2002 Ø €200m capital gain from disposal already realised in 4Q 28
Slide 30: 2002 Action Plan
2002 Action Plan We are reaching the Targets we set for 2002 ü Further Strengthening of the Management Team ü Reduction in Large Corporate Exposure ü Reduction in Credit Derivatives Exposure ü Sale of Real Estate Assets ü Disposal of our Subsidiary in Argentina ü Strengthening of Capital Base 29
Slide 31: Disposal of our Subsidiary in Argentina
Disposal of our Subsidiary in Argentina Business Plan Targets As of Today Ø Disposal of our Ø Signed contract to subsidiary in Argentina merge Sudameris by December 2002 Argentina into Banco Patagonia (IntesaBci will retain a minority Ø Exit costs from stake in the new entity Argentina not of less t
Slide 32: Exit Costs from Latin America
Exit Costs from Latin America Business Plan Targets Today’s Forecasts Ø Provisions for about €150m for Ø Total exit costs from Argentina disengagement from Argentina and Peru confirmed to be around €450m (even though the audit in Ø Provisions for about Peru is not yet concluded) €250/€300m for disen
Slide 33: 2002 Action Plan
2002 Action Plan We are reaching the Targets we set for 2002 ü Further Strengthening of the Management Team ü Reduction in Large Corporate Exposure ü Reduction in Credit Derivatives Exposure ü Sale of Real Estate Assets ü Disposal of our Subsidiary in Argentina ü Strengthening of Capital Base 32
Slide 34: Capital Ratio Targets Achievable
Capital Ratio Targets Achievable 2002 2003 2005 2001 30.06.02 30.09.02 Target (1) Target Target Core Tier 1 5.3% 5.6% 5.8% 5.2% 7.1% 7.7% Tier 1 6.0% 6.4% 6.7% 6.0% 8.0% 8.6% Total Capital 9.3% 10.2% 10.7% 10.0% 11.7% 11.0% Ø €1.7 carrying value of the treasury stock Ø Further effect of Put Warrant
Slide 35: Agenda
Agenda 1 Quarterly Results (3Q 2002) 2 2002 Action Plan 3 Business Plan Update 34
Slide 36: Business Plan Update
Business Plan Update Ø We confirm revenue growth targets even assuming a decreasing interest rates scenario in 2003 Ø We confirm operating costs and loan provisions reduction targets Ø We confirm availability of contingency plans 35
Slide 37: Feasible Revenue Growth
Feasible Revenue Growth Ø All the units of the Group have already started implementing all the actions set up in the Business Plan Ø We have changed our scenario for 2003 to take into account a potential decrease of interest rates of 50 b.p. Ø According to our sensitivity analysis, these changes wou
Slide 38: Feasible Cost Reduction
Feasible Cost Reduction Ø Personnel Costs: confirmed €500m cost reduction target by 2005 (vs 2001). Negotiations with Trade Unions started as planned. Ø Other Administrative Costs: confirmed €300m cost reduction target by 2005 (vs 2001) Ø Loans Provisions: confirmed reduction target for approximatel
Slide 39: We are on track and we confirm our Business Plan targets
Conclusions We are on track and we confirm our Business Plan targets 38
Slide 40: Appendix
Appendix 39
Slide 41: Put Warrant Effect
Put Warrant Effect Ø Total Mark to Market of approximately €1,7bn already P/L provisioned as of September 30th, 2002. Ø €1.7 carrying value of the treasury stock Ø No impact on IntesaBci liquidity due to the Put warrant exercise Ø The €2,6bn maximum cash outlay expected in November due to Financial
Slide 42: Latin America Exposure (September 30th, 2002)
Latin America Exposure (September 30th, 2002) Carrying Value(1) Intra-Group Exposure Country (€m) (€m) Brazil 314 546 Argentina 0 30 Peru 0 247 Other(2) 96 93 TOTAL 410 916 (1) In consolidated accounts, after 3Q 2002 provisions (2) Includes Paraguay, Colombia, Uruguay, Chile and Panama 41