Banco Popular. Francisco Sancha, CFO. Morgan Stanley 10th Annual European Financials Conference. London, March 25 th, 2015

Transcription

1 Banco Popular Morgan Stanley 10th Annual European Financials Conference Francisco Sancha, CFO London, March 25 th, 2015

2 Disclaimer This presentation has been prepared by Banco Popular Español solely for informational purposes. It may contain estimates and forecasts with respect to the future development of the business and to the financial results of the Banco Popular Group, which stem from the expectations of the Banco Popular Group and which, by their very nature, are exposed to factors, risks and circumstances that could affect the financial results in such a way that they might not coincide with such estimates and forecasts. These factors include, but are not restricted to: (i) changes in interest rates, exchange rates or any other financial variables, both on the domestic as well as on the international securities markets, (ii) the economic, political, social or regulatory situation, and (iii) competitive pressures. In the event that such factors or other similar factors were to cause the financial results to differ from the estimates and forecasts contained in this presentation, or were to bring about changes in the strategy of the Banco Popular Group, Banco Popular does not undertake to publicly revise the content of this presentation. The information contained in this presentation refers to the date that appears on it, and it is based on information obtained from reliable sources. This presentation contains summarized information and may contain unaudited information. In no case shall its content constitute an offer, invitation or recommendation to subscribe or acquire any security whatsoever, to make or cancel any kind of investments, nor it is intended to serve as a basis for any contract or commitment whatsoever. Its content shall not be considered as any kind of advice. Banco Popular Group does not assume any responsibility for the losses, direct or indirect, which could derive from the use of this document or its content. This document shall not be reproduced, distributed or published, not whole not partially, without the previous written consent of the Bank. 2

3 Agenda Our path to increase our RoTE Reinforce the most profitable core bank in Spain Continue developing our recent successful NPA strategy 4. Final remarks 3

4 1. Our path to increase our RoTE 4

5 Our path to increase our returns Improving the RoTE of Popular Reinforce the most profitable core bank in Spain Growth on SME banking Leadership in margins Improving our efficiency On track for risk normalization Continue developing our recent successful NPA strategy NPA management is a strategic priority for coming years High quality portfolio & well diversified Proven sales track record in 2013 & 2014, and upside potential for

6 2. Reinforce the most profitable core bank in Spain 6

7 A core bank focused on its traditional strengths to improve its already double-digit RoTE 1 The growth of our market leading SME franchise in Spain Key levers to drive Core Bank s RoTE improvement 2 3 The enhancement our leadership in margins Already announced cost saving initiatives for 2015 (-10% general expenses) 4 A significant decline in cost of risk 7

8 Popular is a pure SME lender and the segment market leader in Spain 1 Grow our already market leading SME franchise in Spain A pure SME Bank market leader in SME lending Commercial Banking split as of 4Q14 SMEs (1) market share in Spain 4Q13 Other Corporates 34% 15% 51% SMEs and Self employed the most desirable business mix Popular Bank 1 Bank 2 Bank 3 Bank 4 Bank 5 7.6% 17.1% 14.9% 13.7% 12.1% 12.1% while gaining market share in SMEs & corporates Bank 6 Bank 7 4.2% 4.2% SMEs & Corporates market share evolution Bank 8 3.8% +121 b.p. Bank 9 2.4% 10.7% 11.0% 11.2% 11.6% 11.5% 11.9% 12.0% Bank 10 Bank 11 Bank % 1.8% 1.6% Average: 6.7% Bank % 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 Bank % Source: internal data & BoS. Latest available data Source: AQR & ST 0% results 5% 10% 15% 20% (1) According to details published by EBA and regarding Spanish institutions taking part in the CA 8

9 focused on the most profitable and loyal segments (the small, micro & professionals) 1 Grow our already market leading SME franchise in Spain A leader within the smallest SMEs 100% (up 50% to 10m turnover) 40% 30% 20% (up to 1m turnover) 10% 0% POP s SME loan book split Medium companies 90% (up 80% to 100m turnover) 70% Small 60% companies Micro and professionals 30% 31% 39% SME split 70% of our SMEs are professionals, micro and small companies High entry barriers to our competitors Source: internal data (1) Retail gross operating income on average total assets (2) Customers with more than six products... the most profitable segments Profitability by segment (1) (average:1) Micro Small Self Employed Medium Segment 1 Segment 2 Average Segment 3 Segment 4 0.4x 0.1x 1.5x 1.3x 1.1x 1.1x 1.0x 2.7x 2.0x due to a high crossselling performance % of engaged customers (2) by segment Medium Small Micro Merchants Self Employed Products & services 67% 67% 63% 66% 55% Business loans Leasing, renting, factoring Credit & debit cards Time deposits, investment & pension funds Life & business insurance POS, payroll & tax services Direct debits & standing orders Mortgage & auto loans Equities 9

10 Our differential SME model will allow us to continue gaining market share both in SMEs & corporates 1 Grow our already market leading SME franchise in Spain A know-how gained through decades of experience in the Spanish SME space A high quality service & operational excellence (i.e. quickest response to customer needs) Principles of Popular s successful SME model A dedicated organization structure for SME focus (IT, risk, HH.RR., commercial) A model based on customers, not on products A specialized distribution (800 corporate managers & 150 specialists in corporate centers) Active spreads & fees management based upon credit quality and focused on profitability 10

11 Reinforce our customer margins due to asset spread resilience 2 Enhance our leadership in margins Higher customer spread on new production (%) +94bps Customer spread on stock Customer spread on new production Asset yield improvement potential (%) Loan profitability (%) +62bps Stock 4Q14 New production 4Q14 POP Bank 1 Bank 2 Bank 3 Bank 4 Peers: Caixabank, Sabadell, Bankinter & Bankia. 11

12 and potential funding cost improvement 2 Enhance our leadership in margins Time deposit costs capacity for further reduction (%) Time deposits improvement potential (%) bps Further capacity to be reduced 1.61 Higher potential than peers to further reduce liability costs Stock 4Q14 New production 2015 YTD POP Average peers Wholesale funding maturities profile ( M) Expected cost of renewals c. 1.2% 3.36% 2.97% 3.27% 2.83% 2.35% 3,787 2,796 3,428 1,400 1,

13 NPL ratio evolution & the high quality of the underwritten new business will contribute to reduce future cost of risk A significant decline in cost of risk 4 Positive development of the non RE NPL ratio Non Real Estate NPL ratio evolution An extremely high quality new business performance New lending to better rated companies (PD<1%) SMEs Total 7.53% -41 b.p. 7.61% 7.59% 7.57% 85% +8p.p 93% +7p.p 81% 88% 7.20% % Expected Loss (1) of the new production % cumulative 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 (1) Internal data

14 3. Continue developing our recent successful NPA strategy 14

15 NPA management has become a strategic objective for the Spanish banking industry in recent times Spanish banking sector Consolidation of the industry Coverage ratios under pressure Several ST & Royal Decree Laws Banks were obliged to increase their provisions linked to RE loans and started to foreclose them Sareb was established in 2012 The AQR has proved that coverage ratios are sufficiently strong Profitability drag of RE assets is the main concern NPL ratio has peaked in 2Q14 Cost of risk has been reduced RE market in Spain Prices dropped by 34% NPL ratio has increased by 40 p.p. Residential dropped in 1Q13 transactions Prices are starting to rebound (+1.8% YoY) NPL ratio has peaked in 2Q14 Residential transactions are recovering (+12% YoY) Institutional investors started to invest in RE 15

16 That s why we ve recently adapted our internal structure, strategy and processes to further enhance NPA management Adapting our internal structure A multi-level perspective strategy Processes, resources & commercial activities Segregation of the business Financial HH.RR. & creation of a specialized Optimizing P&L impact +31% vs in workforce unit Customer New tools Creation of a new company (1) with Värde Partners & Kennedy Wilson (1) Aliseda SGI Individualized strategy for largest developers Boost portfolio sales Process Minimize time & information management Resources Adequate teams Rebalance distribution channels New webpage; call center; new CRM Marketing Brand recognition; communication agency Distribution channels Grow online channel sales; branch support, APIs model Process industrialization 16

17 And the optimization of the sales force and distribution channels will contribute further in the increase of RE disposals Improvement of our human capital base and RE sales force Real Estate worforce evolution Optimizing our distribution channels Sales channels structure Aliseda s workforce Commercial workforce % Branches % Commercial Agents % Internet +31% +13% % 65 40%-60% 10%-30% 30%-50% Potential growth 3% 22% 75% E RE sector sales 2014 Popular sales

18 Sound track record in RE sales to retail investors, maintaining prices around BV whilst increasing institutional investor interest Quarterly RE sales evolution (1) 774m 1,503m In 4Q14, we completed our first institutional property transaction Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 2 Real Estate portfolios 160m (6% discount to NBV) 1,100 units sold at book value Transaction #1 Social housing portfolio in Madrid 2014 sales split By product By region 18% 82% Land Finished building (1) Does not include sales from RE developers 6% 1% - 5% - - 3% 2% 10% 19% 2% 1% 1% 11% 4% 31% 4% By investor 11% 89% Wholesale Retail 557 1st hand residential properties (including garages & storerooms) 83 additional garages 20 commercial properties 7% discount to NBV Transaction #2 3 RE portfolios in Costa del Sol (Andalusia) 433 units sold, of which 195 were residential properties (the rest garages & storerooms) 4% discount to NBV 18

19 The recovery of the Spanish property market is a fact and we believe that it will consolidate in the following quarters Spanish property market Recovery on housing market prices Price index (2007:100) Real Estate market demand # transactions Declining the stock of available properties Housing stock (Thousands) Q-07 3Q-08 1Q-10 3Q-11 1Q-13 4Q-14 3Q Housing prices have rebounded slightly in the last quarters Activity recovery started by early % -20% E Source: INE (Instituto Nacional de Estadística) and Spanish Ministry of Development. Latest available data +1.8% vs. 4Q13 Other additional positive trends Real Estate Market Increasing demand of Spanish real estate from institutional investors Rising lending offer at a lower cost for potential buyers Macro Scenario GDP grew by 1.4% in 2014, above estimates Upward revision to 2015 GDP by all institutions (c. 2.5%) Consumer confidence & industrial capacity are recovering strongly The unemployment rate fell to 23.7% 19

20 Our RE assets are located in higher value areas (Andalusia, Catalonia & Madrid) NPA distribution by region 6% 1% 1% 4% - 32% 8% 2% 1% 1% 5% 51% of our RE assets are located in the three regions with the highest contribution to the GDP (Andalusia, Catalonia & Madrid) 8% 3% 12% GDP contribution by region 11% 2% 3% Source: INE (Instituto Nacional de Estadística). Latest avalailable data > 10% >5% & < 10% <5% 75% of our RE assets are located in higher value regions (More than a 5% contribution to the GDP) Annual Price Index Evolution 4Q14 By region, %. Housing market prices Madrid Valencian Community Murcia Catalonia Cantabria Andalusia National Melilla Ceuta Galicia Castile and Leon Balearic Islands Canarias Castilla la Mancha La Rioja Aragon Basque Contry Asturias Extremadura Navarra Catalonia 2 nd region by tourist inflows 3 rd region with the lowest unemployment rate 4 th region by per capita income Madrid 1 st region by per capita income 2 nd region with the lowest unemployment rate 4 th region by tourist inflows Andalusia 1 st region by RE transactions 3 rd region by tourist inflows 71% of our exposure in the most dynamic regions 26% of our exposure in regions where prices are slightly below average 3% of our exposure in regions where prices go down 20

21 and have a good quality measured by locations and asset class Finished product A high quality portfolio 70% of the NBV, residential 25% of the NBV, commercial New houses stock> Second-hand houses stock c.65% of the NBV located in medium & high value locations High quality entries Quality of asset location (%, as of 3Q) High & medium quality locations Low quality locations 67% 70% 72% 32% 30% 27% out of 4 assets concentrate in a medium or high quality locations Land plots Finalist & under urban planning represent >80% of the total land stock value >70% of the NBV located in medium & high value locations 251m land sold in 2014 (8% above BV) Asset class (%, as of 3Q) New houses 36% 64% Second-hand houses 57% 64% 43% 36% Source: Internal data Hign & medium quality locations >90% country purchasing power parity Low quality locations < 90% country purchasing power parity New houses entries are a 50% higher than 2 nd hand houses entries, with a greater disposal capacity 21

22 We will keep speeding up RE sales with a encouraging upside potential for 2015 RE sales in 2014 Target for 2015 Beating our sales goals 1,200 1,500 2,000 Potential upside Target Accomplished 22

23 4. Final remarks 23

24 Final remarks 1. Clear route in a challenging regulatory and rates environment We All Expanding our SME franchise and other core products/new businesses (ie: consumer loans) will sustain our already double digit RoTE of the core bank are starting to see an improvement of loan demand fuelled by the pickup of the economy (GDP>2%) which will allow us this year to stop deleveraging and grow by next year in a still attractive price environment NPA s management remains a top priority and we have the right strategy and assets to benefit from the recovery of the RE market in all, we are confident that Popular has a solid model based on recurrent revenues, lean cost base and strong solvency with quality ratios (CET1 FL 10.4%, Leverage FL 6%) to improve our dividend policy over the coming years 24

25 Many thanks For further information:

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