THE BOARD OF DIRECTORS OF BANCA POPOLARE DI VICENZA APPROVES THE NEW BUSINESS PLAN

Transcription

1 PRESS RELEASE THE BOARD OF DIRECTORS OF BANCA POPOLARE DI VICENZA APPROVES THE NEW BUSINESS PLAN ENHANCING THE ROLE AS A LOCAL RETAIL BANK, A REFERENCE POINT FOR THE NORTH-EASTERN REGION A FINANCIALLY SOUND BANK (CET1 ABOVE 12% WITHIN THE 5-YEAR PLAN), SIMPLE AND DYNAMIC, FOCUSED ON QUALITY SERVICES TO COMPANIES, ENTREPRENEURS AND FAMILIES MORE THAN EURO 215 MILLION OF NET PROFIT IN 2018 AND EURO 330 MILLION IN 2020 Business Plan targets for 2020: Net profit >Euro 330 million, ROTE Adjusted 1 8.6%, Cost Income Ratio<50%, CET1 2 at 12.4% and Liquidity Coverage Ratio>110%. Guidelines of the Business Plan: Transformation into a listed joint-stock company and renewal of Governance. Financial soundness strengthened also through a capital increase up to Euro 1.5 billion, with capital ratios in line with national top operators, strengthened liquidity and structural improvement of the internal control system. Redesign of customer service models with the creation of 2 sales units: one dedicated to local communities (Community Bank), serving families and small business operators, and the other focused on Corporate, SME and Private customers (Corporate & Private Bank) and dedicated to providing high quality services to companies and entrepreneurs. Transformation and streamlining of the operating model through a simplification of the organisational structure of the bank and the Group, the outsourcing of selected low value-added activities, the rigorous control of costs and the development of staff management and merit-based evaluation processes, together with a continuous development of professional skills and expertise. Active credit management through a more efficient platform for credit management, the disposal of non-performing portfolios and the selective use of outsourcing. Assets requalification, with an exclusive focus on the banking business, and disposal of the assets which are not strategic and functional to the retail banking activities. *** The Board of Directors of Banca Popolare di Vicenza met today and approved the Business Plan of the BPVi Group. The plan envisages a relaunch strategy based on the enhancement of the local Retail Bank business model, focused on Corporate, SME and family customers, and being a point of reference for the North-Eastern region and for other concentrated population areas. 1 Calculated on CET1 2 Potential benefits from AIRB adoption are not included in the capital and income statement estimates 1

2 The Bank will start a process for the streamlining of operations and a major further development of the traditional banking activities, focusing primarily on the activities of distribution and services to customers. The Plan will enable BPVi to reach levels of profitability and capitalisation consistent with its significant market potential, while continuing to play a leading role as major local player in the North-Eastern region and in other regions of reference. The new mission undertaken by the Group is to serve companies and entrepreneurs with a dedicated and comprehensive service model and to serve families and small business operators with an offering of quality, streamlined and convenient banking and financial services, offered through its branches which will combine operational efficiency with an improved consulting and service capacity. The Plan is based on 6 principal guidelines: Transformation The development of the Business Plan will build on the transformation of the Bank into a listed stock-option company to be completed by April In addition, the Governance will be completely renewed by 30 June Financial soundness The improvement of capital ratios will be carried out through a capital strengthening, already approved by the Board of Directors in the meeting of 28 August 2015, which sets forth a capital increase up to Euro 1.5 billion by April 2016, about which the Bank has signed, with UniCredit Group, a preliminary underwriting agreement for the underwriting of the shares. In 2020, CET1 and Total Capital Ratio will stand at 12.4% and 13.2%, respectively. Forward-looking estimates of capital targets include the announced capital increase and the expected positive evolution of profitability and, prudentially, do not take into consideration the potential benefits deriving from the validation of internal rating models and the repayment, even if only partial, of any loan related to the purchase or subscription of the Bank's shares, which are currently not included in regulatory capital calculations. The already sound liquid asset position will be further strengthened through a balanced development of loans and deposits (CAGR 2015 H of net loans standing at +3.1% and CAGR 2015 H of direct funding at +2.3%). Improvements in the internal control system will be achieved through the qualitative-quantitative strengthening of internal control functions with the recruitment of new professionals. Review of customer service models BPVi will implement new business strategies and will review the service and distribution models segmenting between Community Banking (Mass, Affluent and Small Business customers) and Corporate/EMS&Private Banking (SME, Corporate and Private Banking customers). The Community Bank will be dedicated to serving, on the territory, local customers with a clear business model, competitive products and improved advisory services. The distribution model will be more effective, thanks to a higher number of dedicated managers and a simplified and streamlined commercial network. The implementation of the Hub&Spoke branch model, by 2016, will play an important role in improving the service levels and significantly increasing efficiency and competitiveness. The BPViGO! multichannel platform will be further developed in order to integrate the retail customer service model. The Bank will develop an integrated and dedicated platform addressed at Corporate, SME and Private customers and aimed at providing, to companies and entrepreneurs operating in the North-East and in other core regions, comprehensive and high value-added services such as: support in minibonds issuance (BPVi already holds a leadership position, with a 45% market share), internationalisation and foreign trade activities, listing on the Stock Exchange, etc. In addition, the Plan envisages a major relaunch of the Private Banking and Wealth Management platform, with the recruitment of new private bankers and the internal development of advisory and consulting services leveraging on an open-product platform featuring a broad range of international asset managers. 2

3 Transformation of the operating model The Plan aims at a more streamlined bank, with rigorous and constant cost controls (CAGR of operating costs equal to -0.7%), focused on its core activities, following the outsourcing of selected low value-added activities. A structural streamlining of the organisational structures of the Bank and the Group will be carried out. The closure of approximately 150 branches is planned for 2016, with 75 of them to be closed already in The Bank will invest approximately Euro 60 million, over the Plan period, in order to implement its new service model, to improve the efficiency in serving its customers, and to strengthen its own control functions. Over the Plan period, rationalisation initiatives regarding human resources will be carried out, using the most appropriate available instruments, reducing the overall headcount by approximately 600 resources and recruiting 200 new resources. Management and optimisation of human resources through a merit-based evaluation process, implemented also with the support of assessments managed by a primary market operator, external to the Bank. Implementation of training sessions for quality assurance, with the purpose of requalification and increase of management and service skills addressed to sales and credit relationships. In addition, a recruitment programme is envisaged, aimed at adding specialised professionals in line with the new service model. Active credit management BPVi will carry out a general review of its credit management platform, with a prompt and dynamic management of impaired loans, also implementing a dedicated structure for real estate and restructured exposures. More extensive credit policies will be developed and credit functions will be strengthened with a new alert management system, including the adoption of advanced rating models (AIRB). As regards non-performing loans, the Plan provides for selected disposals of portfolios for about Euro 1.5 billion, long term strategic partnerships with specialised operators and the use of experienced internal resources dedicated to high-value loans, in addition to an improved recovery model. Asset requalification The activities will be addressed at refocusing the bank towards its retail banking business, concentrating on distribution while simplifying its corporate structures. Such initiatives include, inter alia, the disposal of nonstrategic equity investments, the disposal of property assets and the development of joint ventures concerning specific products, such as consumer finance. The economic and financial effects of such disposals have not been computed in the plan. The investment in Cattolica Assicurazioni remains strategic for the Bank. KEY FINANCIAL TARGETS The significant increase in profitability during the Plan period is to be attributed to a positive growth in operating income (CAGR standing at +3.7%) and a reduction of operating costs (CAGR standing at -0.7%) which will result in an average 9.4% annual growth in net profit from operating activities. In addition, the expected net profit, at the end of the Plan, of Euro 333 million, benefits from the progressive normalisation in the cost of credit which reaches values consistent with the actions implemented by the management in the area of credit management, within a context of a general improvement in the domestic and international economic scenario (cost of credit estimated at 60 bps in 2020). Comprehensive coverage of impaired loans (including write-offs) with an increase, during the Plan period, from 41.7% in the first half year of 2015 to 44.9% in In detail, the net interest income growth (CAGR standing at +6.1%) is attributable to a strong increase in loan volumes which reflects the growth estimated for the period of the Plan in the main regions where the Group operates, and an improvement in the interest rate spread, within a context of a predicted rate increase. In addition, the positive direction of the interest income benefits from the effects associated with the liquidity deriving from the capital increase. Net fee and commission income shows an average annual increase of 7.3%, driven in particular by an important growth in assets under management (CAGR 15 H1-20 for assets under management standing at 10.8%), a business on which significant investments and development activities are focused, i.e. fees and 3

4 commissions on loans to companies and increased cross selling activities, leveraging on the broad customer-base which has grown significantly in the last few years. The reduction of operating costs (CAGR standing at -0.7%) benefits from the strong spending review actions, partially offset by major investments aimed at supporting the numerous strategic initiatives laid out in the Plan. The cost-income, estimated for the end of 2020, stands at values below 50%. The net income at the end of 2020 is forecast at Euro 333 million and corresponds to an average return on tangible equity (ROTE Adjusted) of 8.6%, a figure that is adequate and consistent with the potential the BPVi Group is able to express under current market conditions. A payout ratio, assumed equal to 80%, starting from the year 2017, subject to regulatory requirements. 4

5 Balance sheet key items ( billion) First halfyear CAGR 15 H1-18 CAGR 15 H1-20 Net loans % 3.1% Direct funding % 2.3% Indirect funding % 6.3% of which, managed % 10.8% Total funding % 3.8% RWA % 2.4% Income Statement key items ( million) CAGR CAGR First halfyear Net interest income % 6.1% Net fee and commission % 7.3% income Operating income 1, ,190 1, % 3.7% Net operating costs % -0.7% Net profit from operating activities % 9.4% Adjustments to loans % -22.4% Net profit (loss) , n.s. n.s First halfyear Delta 15 H1-18 Delta 15 H1-20 CET1 10.4% 6.8% 12.4% 12.4% +5.6 p.p p.p. Total Capital Ratio 11.6% 7.6% 13.3% 13.2% +5.7 p.p p.p. LCR 80.8% 91.8% 113.6% 112.7% p.p p.p. NSFR 102.1% 103.7% 102.3% 104.6% -1.4 p.p p.p. Cost Income 62.1% 60.8% 55.9% 47.9% -4.9 p.p p.p. Cost of credit (bps) 309 n.s n.a. n.a. Coverage of impaired 35.1% 39.6% 40.9% 43.2% +1.3 p.p p.p. loans ROTE Adjusted % n.s. 5.8% 8.6% n.a. n.a and 2020 values take into account the capital strengthening, entailing a capital increase up to Euro 1.5 billion. 4 Net of repurchase agreements with Cassa Compensazione e Garanzia (CCG) 5 Excluding own shares managed by customers 6 Calculated on CET1 5

6 This press release, drawn up pursuant to article 114 of Legislative Decree no. 58 of 24 February 1998, is available on the website and it has also been published on the authorised storage site "1Info" at Vicenza, 30 September