Banco Popular. Shaping a business fit for the post-crisis era. Francisco Sancha, CFO

Transcription

1 Banco Popular Shaping a business fit for the post-crisis era 20 th Annual Banking, Insurance & Diversified Financials CEO Conference Francisco Sancha, CFO London, September 29 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 Popular s strategy in a post-crisis banking scenario Conclusions 3

4 Shaping a business: maintain current double digit RoTE in the Core Bank & reduction of the Non-Core Shaping a business Maintaining double digit returns in the CORE BANK Reduction of the NON-CORE on track Main drivers Reinforce our SME market-leading position Price and margin management Building high value relationships with individuals Multi-channel distribution strategy Excellent position to take advantage of the RE market recovery From an investee to an industrial servicer Accelerating REO sales Challenging Regulation 4

5 Main accomplishments during first half of 2015 CORE BANK NON-CORE UNIT +21% YoY in SME new lending. Total profitable lending up +2% YTD Leadership in NIM (1) (+28bps vs. peers) & asset yield management Negative NPA entries for second quarter in a row NPL ratio down by 73 bps YoY -8% YTD in lending to RE developers Cost base down by -6% YTD, more than any other Spanish bank One of the best online banks for customers Record REO sales (+83% YoY, +20% QoQ) (1) NIM ex carry trade 5

6 Shaping a business: maintain current double digit RoTE in the Core Bank & reduction of the Non-Core Shaping a business Maintaining double digit returns in the CORE BANK Reduction of the NON-CORE on track Reinforce our SME market-leading position Excellent position to take advantage of the RE market recovery Main drivers Price and margin management Building high value relationships with individuals From an investee to a an industrial servicer Accelerating REO sales Multi-channel distribution strategy Challenging Regulation 6

7 Best-in-class SME lender in Spain & continues to gain market share Reinforce our SME market-leading position Popular is the leading Spanish Bank in SME financing And despite a more competitive environment, Popular continues to grow faster than peers The SME market leader (%) Latest avalailable data Popular Bank 1 Bank 2 Bank 3 Bank 4 Bank 5 / Bank 13 Bank % 1.1% 7.6% 13.7% 12.1% 12.1% 14.9% 17.1% 0% 5% 10% 15% 20% Total loan growth to SMEs & Corporates YTD As of 2Q Bn c. 2x more SME & Corporate financing than our main competitor 0.70Bn Has doubled its market share in the corporate & SME arena over the last 7 years 0.60Bn SME & Corporate market share 0.10Bn Bn Popular Bank 1 Bank 2 Bank 3 Bank 4 % 6.2% c. 2X 6.6% 7.0% 7.4% 10.3% 11.6% 11.9% 12.2% Jun-15 Source: company data, Bank of Spain, ECB Comprehensive Assessment Peers: Sabadell, Bankia, Bankinter & Caixabank 7

8 Popular maintains its leadership in margins, despite asset price competition Price and margin management NIM 2Q15 ex-carry trade Loan yields The most profitable NIM excluding carry trade earnings (%) 2Q % 1.16% Maintaining our leadership in asset yield (%) 2Q15 Popular Bank 1 Bank 2 Bank % 3.20% 2.80% 2.41% Popular Average ex POP Bank % New Corporates & SMEs < 1M lending yields Peers: Sabadell, Caixabank, Bankinter & Bankia especially in the SME arena where entry barriers are high (%) 2Q15. POP vs. industry. Latest available data GAP POP vs. Industry (right axis) 7% POP (left axis) Industry (left axis) 6% 5% 4% 4% 2% 3% 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 0% 8 Source: company data, internal data, Bank of Spain

9 while reductions in funding costs will continue to contribute to margins A Time deposit costs Price and margin management Time deposit pricing (%) 2Q bp 0.47 Main levers for profitability improvement in the short term B C Improving funding mix Stock New production on the liability side Funding mix (time & sight deposits structure) (%) 2Q15 Time deposit Sight deposit 44% 46% 52% 62% 68% 56% 54% 48% 38% 32% Popular Bank 1 Bank 2 Bank 3 Bank 4 Wholesale funding maturities profile and costs and wholesale funding cost (%) 2Q % 2.93% 3.22% 3.35% 2,768 2,821 3,458 1,416 Average cost 2H Source: company data Peers: Bankia, Sabadell, Caixabank & Bankinter Expected cost of renewals c. 1% 9

10 In addition to our SME strength, we ve identified clear upside potential in our activities with individuals Building high value relationships with individuals Total market share (%). As of June 2015 By segment & product (%). As of June % 12.2% 17.1% Upside potential in certain segments under the current environment Credit Market Share Corporates SMEs Total deposits 5.9% 5.4% 5.3% Consumer finance AuM 3.1% 2.9% Direct debits Payrolls Below our natural potential Customised Strategy Service-oriented banking Profitable growth through cross-selling & further penetration in certain products A new strategic plan for individuals (with a positive impact on revenue from Year 1 ) to be launched very soon Source: Bank of Spain, Inverco, FRS Inmark, internal data 10

11 Our online banking is a reference for corporates, SMEs & retail banking Multi-channel distribution strategy Spanish entities with highest quality in their online service carried-out by Aqmetrix (1) # Bank Valuation Corporate & SME banking 1 Bank 1 A2 A1 2 A2 A1 3 Bank 2 A2 A1 4 Bank 3 A3 A3 5 Bank 4 A A2 # Bank Valuation 1 Bank 1 A2 A1 69% of corporates & SMEs undertake regular consultations and transactions through our online banking The number users of Mobile banking is growing at a 40% annual rate Individuals 2 A2 A1 3 Bank 2 A3 A1 4 Bank 3 A4 A1 5 Bank 4 A4 A4 (1) Since 1997 Aqmetrix constantly analyses and research es the on-line service that more than 180 entities from Europe and America provide. Note: Valuation for Popular: Service delivery: A2 (Positive; high level in service delivery); Supply: A1 (Advance use; Supply oriented to those clients which demand the maximum development of the channel) 11

12 Shaping a business: current double digit RoTE in the Core Bank & reduction of Non-Core Shaping a business Building double digit return in the CORE BANK Reduction of the NON-CORE on track Main drivers Reinforce our SME market-leading position Price and margin management Building high value relationships with individuals Multi-channel distribution strategy Excellent position to take advantage of the RE market recovery From an investee to an industrial servicer Accelerating REO sales Challenging Regulation 12

13 We are in an excellent position to play a leading role in the RE market recovery Number of transactions Thousand units % e Housing price index QoQ % 10% 5% 0% -5% 4.20% -10% Mar-07 Jun-10 Sep-13 Jun-15 Purchased by non-residents Recent market statistics have shown that the Real Estate market is showing signs of recovery 9% 4% x3x 13% Q2015 Mortgages evolution YoY 70% 35% Source: Estadistica registral inmobiliaria, INE & Ministry of Public Works. Latest available data 0% -35% 26.9% -70% Jan-07 May-10 Sep-13 Jul-15 Annual Price Index Evolution YoY By region, %. As of 2Q15 Balearic Islands Madrid Ceuta Catalonia Cantabria National Melilla Canary Islands Andalusia Valencian C. Murcia Basque Contry Castilla la Mancha Castile and Leon Aragon La Rioja Asturias Extremadura Galicia Navarra 7.3% 6.4% 6.1% 5.5% 5.1% 4.0% 3.6% 3.6% 3.5% 2.7% 1.9% 1.9% 1.8% 1.4% 1.3% 1.2% 0.9% 0.9% 0.8% 0.2% Excellent position to take advantage of the RE market recovery 67% of our exposure in the most dynamic regions (>2% price evolution) 23% of our exposure in dynamic regions (between 1% & 2% price evolution) 10% of our exposure in less dynamic regions (<1% price evolution) 13

14 while a wide range of improvements in some key processes are being developed Form an investee to an industrial servicer Key strategic decisions Think as a Bank, manage as a RE agent I We ve set up a non-core & brought in specialised partners to co-manage it Created a specialised business unit (January 2013) Segregation of the non-core business to house the Bank s RE related assets We are implementing a number of processes to ensure faster commercialisation & larger REO sales Commercial workforce: increased by 50% Improvement of the human capital base & RE sales force X1, Distribution channel optimisation II Signed a JV with Värde Partners & Kennedy Wilson (December 2013) In order to accelerate the path of RE sales, reduce recovery processes and maximise sale prices due to the extensive knowhow and expertise of both partners Source: Internal data Q15 Industrialisation of processes & new tools Time to market : Reduction in asset takeover and improved management New tools to boost commercialisation (VAR 017, new website, Call center) Stronger Marketing efforts Aliseda s marketing plan multiplied by 5 ( M) 1 X

15 and we continue to lead the pack & post REO record sales well above our internal targets Accelerating REO sales Real Estate Asset sales (1) Real Estate sales evolution by Bank ( Bn, %) Target for 2015 ( Bn, %). 1H15 vs. 1H14 X1.96 2,000 Number of units sold YoY In Bn. YoY 1, % 115% 96% 598 4% -17% -15% -7% 1H14 1H Target Potential POP Bank 1 Bank 2 Bank 3 POP Bank 2 Bank 4 Quality of disposals vs. Stock (2) (%) 19% 18% 14% 50% 46% 50% 25% 32% 31% 6% 4% 5% Sales 1Q15 Sales 2Q15 Stock 15 High Medium Low Other (1) Does not include sales from the RE developers balance sheets (2) Asset location quality: High >110% country purchasing power parity, Medium between 90% & 110% & Low <90% Peers: Bankia, Sabadell, BBVA & Caixabank 15

16 Shaping a business: current double digit RoTE in the Core Bank & reduction of Non-Core Shaping a business Building double digit return in the CORE BANK Reduction of the NON-CORE on track Main drivers Reinforce our SME market-leading position Price and margin management Building high value relationships with individuals Multi-channel distribution strategy Excellent position to take advantage of the RE market recovery From an investee to a an industrial servicer Accelerating REO sales Challenging Regulation 16

17 However, the banking industry should be still aware of pending regulations and supervisory exercises that may arise Major issues to clarify in the short/medium term Regulatory uncertainty Potential impact of the SREP exercise RWA harmonisation (revision to the standardised approach, floors to IRB models) Treatment of sovereign exposures TLAC/MREL Building a capital markets union Consistent implementation of CRDIV across Europe Interest rate risk (risk management, capital treatment and supervision) Financial Transaction Tax Banking Union Accounting harmonisation EU US Free Trade Agreement The SREP is not only about capital, it is much more we have decided to use the SREP exercise to perform an acute forward-looking review and challenge top managers in all aspects of the banks operations. This goes beyond the assessment of traditional risks. The SREP allows supervisors to draw conclusions on the banks internal governance, risk management practices, incentive systems, effective data aggregation, as well as the general risk appetite of the institution and how it matches its business model. This can result in the supervisor potentially requiring the bank to hold additional capital, but this outcome is only one of the supervisory tools available Sabine Lautenschläger, Vice-Chair of the Supervisory Board of the SSM 16 March

18 In this context, Popular has an excellent capital position to face all the regulatory uncertainties Sound capital ratios and high quality capital CET1 fully loaded (as of June 2015) 10.57% No potential impact from changes in insurance companies treatment ( Danish Compromise ) Limited monetisation of DTAs Higher RWA density than the industry Ratio RWAs density %, over Total Assets. As of June 2015 CET1 phased-in (as of June 2015) Leverage ratio fully loaded (as of June 2015) 12.45% Ratio 5.97% Ratio 49% 43% 34% Popular Spanish Peers European Peers RWAs Individual Mortgages %. Latest available data 28% 22% 16% Popular Spanish Peers European Peers Source: company data, KBW European Banks Model & Morgan Stanley Spanish peers: BBVA, Santander, Sabadell, Caixabank, Bankinter & Bankia European peers: 58 Banks, more than 100% of the constituents of the SX7P 18

19 Agenda Popular s strategy in a post-crisis banking scenario Conclusions 19

20 Final remarks 1. Clear route in a challenging regulatory and rate environment 2. Expanding our SME franchise and developing a new strategic plan for individuals (cross-selling & further penetration in certain products that are below are natural market share) will sustain our already double digit RoTE of the core bank 3. We All are starting to see an improvement in loan demand fuelled by the pickup of the economy (GDP>3%). This will allow Popular to stop deleveraging this year and to grow next year NPAs 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, a lean cost base and strong solvency with quality ratios (CET1 FL 10.57%, Leverage FL 5.97%) which will improve our dividend policy over the coming years 20

21 Thank you Further information:

22 22