VENETO BANCA, THE BOD APPROVES THE DRAFT BALANCE SHEET AND INCOME STATEMENT AT 31 MARCH AND THE UPDATE OF THE BUSINESS PLAN

Transcription

1 VENETO BANCA, THE BOD APPROVES THE DRAFT BALANCE SHEET AND INCOME STATEMENT AT 31 MARCH AND THE UPDATE OF THE BUSINESS PLAN DRAFT FINANCIAL STATEMENTS FOR Q FIRST IMPORTANT POSITIVE SIGNS IN TERMS OF IMPROVEMENT OF THE MAIN ACCOUNTING ITEMS OF THE FINANCIAL STATEMENT AND THE RISK PROFILE OF THE GROUP, CONFIRMING THE VALIDITY OF THE MANAGEMENT DECISIONS MADE AND THE NEW DIRECTION FOLLOWED BY VENETO BANCA IN THESE LAST QUARTERS: SIGNIFICANT IMPROVEMENT IN THE LIQUIDITY POSITION ADEQUATE VALUE OF LIQUIDITY IS RE-ESTABLISHED: LCR AT 78% (WAS 53% AT THE END OF 2015) STABILIZATION OF STOCK OF NET DETERIORATED LOANS. SIGNIFICANT FALL IN THE FLOW OF NEW DETERIORATED LOANS STABLE STOCK OF NET DETERIORATED LOANS WITH RESPECT TO DECEMBER 2015 FLOWS FROM PERFORMING LOANS TO DETERIORATED LOANS AT A MINIMUM SINCE 2014 AND DOWN BY 63% WITH RESPECT TO Q AND 61% WITH RESPECT TO Q COVERAGE LEVEL OF THE TOTAL LOANS PORTFOLIO AT 11.5% (AMONG THE HIGHEST OF THE SYSTEM AND GROWING BY 90 BPS WITH RESPECT TO THE END OF 2015). COVERAGE OF DETERIORATED LOANS INCREASES FURTHER: +30 BPS VS DEC. 2015, +400 BPS VS DEC THE LEVEL OF COVERAGE OF THE DETERIORATED PORTFOLIO GREW INCLUDING WRITE OFFS TO 38.0% (35.6% EXCLUDING WRITE OFFS). COVERAGE - INCLUDING WRITE OFFS - AT 56.3% FOR BAD POSITIONS (52.8% EXCLUDING WRITE OFFS). THE PERCENTAGE OF GUARANTEED DETERIORATED LOANS REMAINS HIGH (74% OF THE TOTAL) NET RESULT OF - 34 MILLION FOLLOWING SIGNIFICANT NEGATIVE EXTRAORDINARY ELEMENTS (WRITE-DOWN OF THE FINANCIAL AND PROPERTY PORTFOLIO, CHARGES FOR EARLY RETIREMENT INCENTIVES) AND THE DECISION TO SUSTAIN SOME ANNUAL COSTS AND CHARGES IN ADVANCE (ANNUAL CONTRIBUTION TO THE NATIONAL RESOLUTION FUND). THE NORMALIZED NET PROFIT OF THE NON-RECURRENT EXTRAORDINARY ELEMENTS WOULD BE - 11 MILLION REVENUES ( 178 MILLION) REFLECT THE GROUP'S EFFORT AND COMMITMENT TO REINFORCE THE MAIN ACCOUNTING ITEMS OF THE FINANCIAL STATEMENT IN AN OPERATIONAL CONTEXT THAT REMAINS CHALLENGING AND THE PRESENCE OF SOME EXTRAORDINARY NEGATIVE ELEMENTS (WRITE-DOWN OF FINANCIAL ASSETS FOR APPROXIMATELY 11 MILLION). COSTS ( 166 MILLION) INCLUDE SIGNIFICANT EXTRAORDINARY NEGATIVE ELEMENTS (AMONG WHICH ACCOUNTING FOR APPROXIMATELY 9 MILLION RELATED TO EARLY RETIREMENT, THE WHOLE ANNUAL CONTRIBUTION TO THE RESOLUTION FUND OF APPROXIMATELY 10 MILLION, ADJUSTMENT IN THE VALUE OF PROPERTY FOR ABOUT 3 MILLION, CONSULTING COSTS RELATED TO THE CURRENT LISTING/SHARE CAPITAL INCREASE PHASE OF ABOUT 1 MILLION). SIGNIFICANT SAVINGS ARE EXPECTED AS SOON AS THE COMING QUARTERS. IN FEBRUARY A SIGNIFICANT REVISION OF MANAGERS' REMUNERATION AND COMPANY CARS. ON 23 APRIL A NEW IMPORTANT FRAME AGREEMENT WAS SIGNED WITH THE TRADE UNIONS. POSITIVE OPERATING PROFITABILITY OF THE GROUP ( 12 MILLION) NOTWITHSTANDING THE ABOVE MENTIONED EXTRAORDINARY NEGATIVE ELEMENTS. NET OF SUCH ELEMENTS THE OPERATING PROFIT WOULD BE 35 MILLION CREDIT ADJUSTMENTS OF 59 MILLION, WHICH REPRESENTS APPROXIMATELY 112 BPS ANNUALISED OF COST OF CREDIT (COMPARED WITH 332 BPS IN 2015) CONFIRMING THE ABOVE MENTIONED TREND OF ASSET IMPROVEMENT NET CUSTOMER LOANS AT 20.9 BILLION (-8.1% VS THE END OF 2015). TOTAL FUNDING (DIRECT AND INDIRECT) AT 35.9 BILLION (-7.5% VS THE END OF 2015). 1 THE WHOLE REPORT FOR THE QUARTER WILL BE SUBMITTED FOR THE APPROVAL OF THE BOARD OF DIRECTORS OF VENETO BANCA ON 04 MAY 2016 THE COMMENTS REGARDING ECONOMIC RESULTS IN THIS PRESS RELEASE ARE MADE ON THE BASIS OF THE RECLASSIFIED INCOME STATEMENT 1

2 2016/2020 BUSINESS PLAN UPDATE THE BUSINESS PLAN, THE FIRST PHASE OF WHICH IS ALREADY UNDER WAY, HAS BEEN UPDATED MAINTAINING THE TARGETS AND STRATEGIES SUBSTANTIALLY UNCHANGED, TAKING INTO ACCOUNT: 1) DIFFERENT TIMING FOR THE SHARE CAPITAL INCREASE OPERATION (FROM APRIL 2016 TO JUNE 2016) 2) NEW INTEREST RATES SCENARIO BASED ON RECENT MONETARY POLICY MEASURES INTRODUCED BY THE ECB IN MARCH ) INCORPORATION OF TAX BENEFITS DERIVING FROM THE NEW REGULATIONS RELATED TO AID FOR ECONOMIC GROWTH ( ACE ) 4) NEW RECENT AGREEMENT WITH TRADE UNIONS MOREOVER, THE PLAN UPDATE INCLUDES Q DATA. CONSIDERING THE FOREGOING, THE UPDATED OBJECTIVES OF THE PLAN ARE AS FOLLOWS (THE PRE-UPDATE OBJECTIVES ARE ALSO SHOWN FOR COMPARISON) NEW UPDATED OBJECTIVES Net profit of around 150 million in 2018 and approximately 250 million in 2020 ROTE of 5.1% in 2018 and 7.5% in 2020 Cost/Income at 55% in 2018 and at 49% in 2020 Cost of credit at 93 basis points in 2018 and at 76 basis points in 2020; CET1 ratio (fully loaded and after share capital increase) at 12.4% in 2018 and at 14.5% in 2020 LCR at 105% in 2018 and in 2020 CAGR loans: +0.6% CAGR total deposits: +1.5% PREVIOUS OBJECTIVES (OVERTAKEN BY THE CURRENT UPDATE OF THE PLAN) Net profit of around 160 million in 2018 and over 235 million in 2020 ROTE of 5.5% in 2018 and 7.7% in 2020 Cost/Income at 53% in 2018 and at 47% in 2020 Cost of credit at 95 basis points in 2018 and at 77 basis points in 2020; CET1 ratio (fully loaded and after share capital increase) at 13.0% in 2018 and at 14.9% in 2020 LCR at 105% in 2018 and in 2020 CAGR loans: +0.4% CAGR total deposits: +2.8% 2

3 Draft Financial Statements at 31 March 2016 The Board of Directors, which met today under the chairmanship of Pierluigi Bolla, approved the draft Consolidated Financial Statements at 31 March 2016, as well as the update to the Business Plan. At the next meeting to be held on 04 May 2016, the entire Quarterly Financial Report will be approved, and this together with the complete and final figures will be released to the market. MAIN ECONOMIC FIGURES Operating income was recorded as 178 million ( 263 million in the first quarter of 2015 and 360 million in the fourth quarter of 2015). The trend recorded at the start of the year reflected the measures taken by the Group to strengthen the main balance sheet items, especially the liquidity position. This undertaking inevitably had an impact on the ordinary commercial activity and on comprehensive income. The Group is confident that with the upcoming listing/increase in share capital in June and the initiatives detailed in the Business Plan, the Distribution Network may make use of all the leverage available in order to reinstate adequate growth and profitability levels. More specifically, the net interest income at 108 million (125 million in the first quarter of 2015 and 118 million in the fourth quarter of 2015), was mainly affected by the consistent drop in volumes and the market rates that have been negative for some months now. The contribution of net interest income from the financial portfolio remained modest. The customer spread remained stable in relation to both the end of 2015 and March Net fee and commission income recorded 59 million (77 million in the first quarter of 2015 and 67 million in the fourth quarter of 2015), attributable mainly to the drop in volumes intermediated (both loans and indirect deposits), which impacted negatively on the contribution from the traditional core business, as well as the contribution from administered deposits under management. The result of the trading activities stood at 7 million ( 62 million in the first quarter of 2015 and 175 million in the fourth quarter of 2015 following 155 million of capital gains from the sale of the stake in ICBPI), and includes write-downs for approximately 11 million on the financial portfolio. Operating expenses came in at 166 million (143 million in the first quarter of 2015, 210 million in the fourth quarter of 2015). Operating expenses adjusted for the non-recurring extraordinary components totalled 153 million; net of the annual contributions to the Resolution Fund (none in the first quarter of 2015) for about 10 million, these come to 142 million. More specifically, personnel expenses amounted to 95 million (85 million in the first quarter of 2015 and 92 million in the fourth quarter of 2015), and include the expense for early retirement incentives for around 9 million (relating to redundancies expected for the whole of 2016). Other administrative expenses equalled 58 million (48 million in the first quarter of 2015 and 106 million in the fourth quarter of 2015); other expenses include the annual contribution to the Resolution Fund for 10 million, as well as 1 million for costs related to the listing/share capital increase project. Finally, the value adjustments to property, plant and equipment and intangible assets amounted to 13 million (9 million in the first quarter of 2015 and 12 million in the fourth quarter of 2015) and included the one-off adjustments to the property portfolio for around 3 million. Operating profit was therefore 12 million. This amount is equal to 35 million net of negative nonrecurring elements. Write-downs on loans equalled 59 million, corresponding to 112 basis points for the annualised loans loss rate, marking a sharp drop compared to the 332 bps in This reduction reflects the careful and thorough revision carried out on the entire loans portfolio in the 2015 financial statements and also includes an extraordinary write-down on a security classified as L&R for around 8 million. Less this write-down, the annualised cost of credit rate would fall below 100 bps. The coverage of all deteriorated loans went up to 35.6% (38.0% including write offs) marking an increase of around 30 bps compared to the end of 2015 and of 400 basis points compared to December Coverage of bad loans stood at 52.8% (56.3% including settled positions), up by 500 basis points compared to December 2014 and stable compared to the end of December A sharp drop was seen in new flows from performing loans to deteriorated loans, which came down by 63% compared to the first quarter of 2015 and to the minimum levels since

4 The deteriorated portfolio is 74% guaranteed by secured and personal guarantees. Therefore, the net result is negative at 34 million. Net of the above mentioned non-recurring components, net loss for the period would stand at - 11 million. MAIN EQUITY FIGURES Total funding consisting of direct deposits, administered deposits and asset management came to 35.8 billion (38.8 billion at the end of 2015). Assets under management amounted to 15.4 billion (16.3 billion at the end of 2015) responding to the commercial strategy put in place to strengthen the Group's liquidity position. Direct deposits at 20.4 billion (22.5 billion at the end of 2015) reflected also the decrease of the CCG repos (close to 0 in March 2016 from 1.7 bln in December 2015). In March 2016, the LCR indicator stood at 78% (53% in December 2015) thanks to the successful initiatives undertaken by both the Commercial Network and the Finance Area during the quarter. Net loans came to 20.9 billion (22.7 billion at the end of 2015) as a result of the selective deleverage initiatives implemented by the commercial network. Loan to direct deposit ratio at 102%. Gross impaired loans (including the subsidiary BIM) totalled 7.7 billion (7.6 billion at the end of 2015), and net impaired loans amounted to 4.9 billion and are stable in relation to the end of Net shareholders' equity was at 1,840 billion. * * * * * * Stefano Bertolo, Manager charged with preparing the Company's Financial Reports of Veneto Banca s.p.a., declares, in accordance with Art. 154-bis, paragraph 2, of Italian Legislative Decree 58 of 24 February 1998, that the accounting disclosure contained in this document corresponds to documentary evidence, and to the accounting books and records. The Manager charged with preparing the Company's financial reports (Stefano Bertolo) * * * * * * The present press release, prepared under the terms of Art. 114 of Italian Legislative Decree No. 58 of 24 February 1998, is available on the website and is also published on the authorised storage mechanism "1Info" at the address For further information: Veneto Banca Group - Media Relations Tel relazioni.esterne@venetobanca.it Veneto Banca Group Investor Relations Tel investor.relations@venetobanca.it * * * * * * Barabino & Partners Tel e.ascani@barabino.it 4

5 IMPORTANT REGULATORY NOTICE NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM THE UNITED STATES, CANADA, AUSTRALIA, JAPAN OR ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION. This announcement does not contain or constitute an offer of, or the solicitation of an offer to buy, securities. The ordinary shares referred to herein may not be offered or sold in the United States unless registered under the US Securities Act of 1933, as amended (the Securities Act ) or offered in a transaction exempt from, or not subject to, the registration requirements of the Securities Act. The ordinary shares referred to herein have not been and will not be registered under the Securities Act or under the applicable securities laws of Australia, Canada or Japan. There will be no public offer of the ordinary shares in the United States, Australia, Canada or Japan. This announcement is for distribution only to persons who (i) have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the Financial Promotion Order ), (ii) are persons falling within Article 49(2)(a) to (d) ( high net worth companies, unincorporated associations etc. ) of the Financial Promotion Order, (iii) are outside the United Kingdom, or (iv) are persons to whom an invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000) in connection with the issue or sale of any securities may otherwise lawfully be communicated or caused to be communicated (all such persons together being referred to as relevant persons ). This announcement is directed only at relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this announcement relates is available only to relevant persons and will be engaged in only with relevant persons. It may be unlawful to distribute these materials in certain jurisdictions. These materials are not for distribution in Canada, Japan or Australia, or in any other country where the offers or sales of securities would be forbidden under applicable law (the Other Countries ) or to residents thereof. The information in these materials does not constitute an offer of securities for sale in Canada, Japan, Australia, or in the Other Countries. This announcement has been prepared on the basis that any offer of securities in any Member State of the European Economic Area ( EEA ) which has implemented the Prospectus Directive (2003/71/EC) (each, a Relevant Member State ), other than Italy, will be made pursuant to an exemption under the Prospectus Directive, as implemented in that Relevant Member State, from the requirement to publish a prospectus for offers of securities. Accordingly any person making or intending to make any offer in that Relevant Member State of securities which are the subject of the offering mentioned in this announcement may only do so in circumstances in which no obligation arises for the Bank or any of the managers to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive, in each case, in relation to such offer. Neither the Bank nor the managers have authorized, nor do they authorize, the making of any offer of securities in circumstances in which an obligation arises for the Bank or any manager to publish or supplement a prospectus for such offer. This press release contains forward-looking statements, which include all statements that do not relate solely to historical or current facts and which are therefore inherently uncertain. All forward-looking statements rely on a number of assumptions, expectations, projections and provisional data concerning future events and are subject to a number of uncertainties and other factors, many of which are outside the control of the company. There are a variety of factors that may cause actual results and performance to be materially different from the explicit or implicit contents of any forward-looking statements and thus, such forward-looking statements are not a reliable indicator of future performance. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable laws. 5

6 CONSOLIDATED BALANCE SHEET (in thousands) Assets 31/12/ /03/2016 % change 10. Cash and cash equivalents 273, , % 20. Financial assets held for trading 164, , % 30. Financial assets at fair value % 40. Financial assets available for sale (AFS) 3,924,999 2,904, % 60. Loans to banks 1,294,885 1,603, % 70. Loans to customers 22,703,162 20,872, % 80. Hedging derivatives 63,310 43, % 90. Value adjustment of financial assets subject to macrohedging % 100. Equity investments 22,113 22, % 110. Technical reserves held by reinsurers 18,601 19, % 120. Property, plant and equipment 436, , % Intangible assets 101,221 98, % 130. of which: - goodwill - - Tax assets 928, , % 140. a) current 150,778 97, % b) deferred 777, , % - of which convertible into tax credit under Law 214/ , , % 150. Non-current assets and disposal groups held for sale 2,965,626 2,881, % 160. Other assets 451, , % Total assets 33,349,346 30,680, % Liabilities and shareholders equity 31/12/ /03/2016 % change 10. Due to banks 4,855,051 4,074, % 20. Due to customers 16,237,487 13,458, % 30. Securities issued 6,245,419 6,976, % 40. Financial liabilities held for trading 219, , % 50. Financial liabilities at fair value 23,761 21, % 60. Hedging derivatives 243, , % Tax liabilities 33,497 30, % 80. a) current 4,913 4, % b) deferred 28,584 26, % 90. Liabilities associated with assets held for sale 2,251,284 2,384, % 100. Other liabilities 687, , % 110. Employee termination indemnities 46,578 48, % Provisions for risks and charges: 148, , % 120. a) pensions and similar obligations % b) other provisions 147, , % 130. Technical reserves 203, , % 140. Valuation reserves 140, , % 170. Reserves 511, , % 180. Share premium reserve 1,963,234 1,091, % 190. Share capital 373, , % 200. Treasury shares -98,678-98, % 210. Minority interests 145, , % 220. Profit (loss) for the financial year -881,902-34, % Total liabilities and shareholders equity 33,349,346 30,680, % 6

7 CONSOLIDATED INCOME STATEMENT (in thousands) Items Q Q % change 10. Interest and similar income 237, , % 20. Interest and similar expense -104,890-84, % 30. Net interest income 132, , % 40. Fee and commission income 83,141 66, % 50. Fee and commission expense -13,752-12, % 60. Net fee and commission income 69,389 53, % 70. Dividends and similar income 1, % 80. Net profit on trading activities 7, % 90. Net gains (losses) on hedging activities -4,493-3, % Profit (loss) from disposal or repurchase of: 55,010 14, % 100. a) receivables % b) financial assets available for sale 51,444 11, % d) financial liabilities 3,323 1, % 110. Net gains (losses) on financial assets and liabilities at fair value 1,282 3, % 120. Operating income 262, , % Net write-downs/reversals of: -62,402-68, % a) receivables -61,746-58, % 130. b) financial assets available for sale -1,402-10,625 n.a. d) other financial activities % 140. Net income from financial activities 200, , % 150. Net insurance premiums 2,660 3, % 160. Other net insurance income (expense) -3,869-3, % 170. Net income from banking and insurance activities 199, , % Administrative expenses: -145, , % 180. a) personnel expenses -85,453-94, % b) other administrative expenses -59,595-65, % 190. Net provisions for risks and charges -4, n.a Net write-downs/reversals of property, plant and equipment -5,691-8, % 210. Net write-downs/reversals of intangible assets -2,513-4, % 220. Other operating expenses (income) 12,822 14, % 230. Operating expenses -144, , % 240. Profit (loss) on equity investments 492 n.a Goodwill impairment 270. Profit (loss) on disposal of investments 280. Profit (loss) from continuing operations before tax 54,923-45,315 n.a Taxes on income for the period from continuing operations -12,057 8,572 n.a Profit (loss) from continuing operations after tax 42,866-36,743 n.a Profit (loss) from disposal groups held for sale after tax 9, n.a Profit (loss) for the financial year 52,442-36,862 n.a Profit (loss) for the period attributable to minority interests 1,516-2,670 n.a Profit (loss) for the period attributable to the parent company 50,926-34,192 n.a. 7

8 RECLASSIFIED CONSOLIDATED INCOME STATEMENT (in thousands) 1Q15 1Q16 abs. chg % chg Net Interest Income 125, ,268-16, % Net Fees 77,422 59,398-18, % Dividends 1, , % Net Trading Income 61,713 7,020-54, % Other net operating income -3,350 2,556 5,906 n.s. Operating Income 262, ,523-85, % Personnel Expenses -84,944-94,659-9, % Other Administrative Expenses -48,401-57,750-9, % D&A -9,235-13,280-4, % Operating Costs -142, ,689-23, % Operating Profit 120,061 11, , % Loan Loss Provisions -61,746-58,696 3, % Net write-downs on other assets 989 1, % Provisions for risk and charges -4, ,851 n.s. Net income from investments n.s. Impairment on goodwill n.s. Net income from investments n.s. Profit (loss) before tax 55,484-45, ,799 n.s. Income tax for the period -12,138 8,572 20,710 n.s. Profit (loss) on assets held for sale, after tax 9, ,215 n.s. Minorities 1,516-2,670-4,186 n.s. Net profit (loss) 50,926-34,192-85,118 n.s. 8

9 BUSINESS PLAN MAIN OBJECTIVES Data in 2015A 2018E 2020E CAGR CAGR KPIs Balance Sheet (bln) Profit and Loss (mln) Net interest income Net fees Operating costs 1 Net profit (loss) Net loans Direct funding Indirect funding RWA Cost/income 2 Cost of credit (bps) 3 ROTE % +3.4% % +7.6% % -5.6% n.a n.a % 0.6% % -1.0% % +4.6% % -3.0% 69.5% 55.3% 48.6% % 5.1% 7.5% CET 1 ratio (fully loaded) 6.8% 12.4% 14.5% 1. Total operating expenses (personnel expenses, other administrative expenses, write-downs on property, plant and equipment and intangible assets 2. Relationship between total operating expenses and total revenue, net of non-recurring components 3. Relationship between credit adjustments and customer loans. Since 2017, the relationship also includes capital losses on bad loans 9