Intrum Italy Milan September 18, 2018

Transcription

1 Intrum Italy Milan September 18, 2018

2 Market Update

3 Overview of the NPL market in Italy (1/2) After reaching its maximum at YE2015 (c. 341bn), gross NPE volume registered a small reduction in Jun 2017 to 300bn NPL at 190bn (CAGR 19% for the period H2017), representing c. 65% of the total NPE. The split between secured and unsecured is broadly balanced (49% and 51% respectively), while in terms of counterparty type, the majority of exposures are represented by the Corporate sector (71%) Since 2015, other NPE (Unlikely to Pay and Past Due) started to decline suggesting an improvement in the quality of underwriting Gross NPE ( bn) 09% 08% 05% % 04% 42 03% Trend of Gross NPE and NPL volume & coverage Gross NPL concentration (%) % 87 06% 14% % % % 13% 13% 13% , H % 21% 22% 21% 20% Gross NPL UTP / PD Gross NPL ratio (%) Gross NPE ratio (%) Other 41% Creval 1% Carige 1% Sondrio 1% 190bn MPS 3% Intesa 18% UCG 12% Banco BPM 8% UBI REV 5% BPER 5% 4% 1 Top 10 banks and REV representing ~60% of the Italian market Net NPL evolution Gross NPL breakdown by region (%) 42,9% 34,0% 39,7% 43,7% 50,3% 48,7% 54,0% 55,6% 56,5% 62,6% South & Islands 21% H 2017 Net NPL NPL coverage ratio (%) Center 28% North 51% Notes: 1. Referring to Italian only. Source: PwC Dec 17 3

4 Overview of the NPL market in Italy (2/2) Breakdown of Gross NPL Breakdown by counterparty 1 Breakdown by ticket size 2 Households 71% SBL 29% Other 2% Corporate (ex fin.) 71% 23% 47% 91% Retail 27% 29% 7% 2% Retail Corporate (ex fin.) Small (< 125k) Medium ( 125k- 500k) Large (> 500k) Breakdown by collateral 3 Breakdown by macro-sector Other 19% Construction 27% Unsecured 51% Secured 49% Real Estate 16% Notes: 1. Source: ABI monthly outlook (data as of May 2017). 2.Source: Cerved Rapporto PMI 2015 (data as of Dec 2014). 3. Source: PwC Dec Source: BoI Supplement to the Statistical Bulletin, ABI Monthly Outlook, Cerved Rapporto PMI 2015, PwC Wholesale and retail trade 17% Manufacturing products 21% 4

5 UTP coverage ratio (%) Unlikely to Pay (UTP) in the Italian market After reaching its maximum at YE2014 (c. 143bn), gross UTP volume registered a reduction in YE2016 to 108bn (-8% vs. YE2015) primarily driven by lower outflows to bad loans However, UTP in 2016 amounted to 62bn (57% total), showing that the main issue for Italian banks mainly lies in their huge stock and low capacity to target deleveraging solutions The overall UTP exposure is highly concentrated within the top 5 Italian banks (65% of the total UTP exposure) The top 5 Italian banks average coverage ratio was at c. 32%. Banks with high proportion of UTP over total NPE might need to implement a more proactive management However, UTP has as underlying a company which is still operating under some financial distress which has brought to a delayed debt repayment, therefore likely in need of some restructuring or a debt which has already been restructured but is in probation period (e.g. Performing but Forborne) Italian NPLs landscape 1 UTP Outflows and Inflows ( bn) 50,0% 45,0% Bubble size = Gross UTPs volume bn as of 1H17 40,0% 35,0% 64, ,9 56% remain UTP % remain UTP 2014 Outflows Inflows 2015 Outflows Inflows ,0% 25,0% 20,0% Others 22% Gross UTP concentration (%) 1 Intesa 23% Top 5 banks representing ~65% of the Italian market 1 15,0% 10,0% 0% 5% 10% 15% 20% Gross UTP ratio (%) UBI 7% Banco BPM 12% Notes: 1. Panel including: Unicredit, Intesa Sanpaolo, BMPS, Creval, Banco BPM, BPER, BP Sondrio, UBI, BNL, Cariparma, Credem. Data as of FY2017, except for BP Sondrio (3Q 17) Source: Annual reports, presentation and press release BMPS 15% UCG 21% 5

6 Overview of Italian banks asset quality Gross NPE loans ( bn) 1,2 Coverage ratios (%) 4 ISP 34,2 17,9 52,1 ISP hsf 51% PF IFRS9 57% ISP 28% 63% PF IFRS9 NPL: 69% UTP&PD 33% 3 UCI 23,2 16,6 39,8 UCI 56% UCI 43% 64% Banco BPM 15,8 9,7 25,5 Banco BPM 49% PF IFRS9 54% Banco BPM 32% 59% PF IFRS9 NPL: 67% BMPS 6,3 12,0 18,3 BMPS 46% BMPS 39% 58% UBI 9,7 5,3 15,0 UBI 46% UBI 22% 58% BPER 8,0 3,4 11,4 BPER 53% BPER 27% 64% CARIGE 1,9 3,1 5,1 CARIGE 48% CARIGE 35% 68% 5 BPSO CreVal Credem 2,2 2,1 4,3 1,7 4,0 2,3 0,5 1,3 0,8 Gross NPLs Gross UTP & PD BPSO CreVal Credem NPE coverage 49% 45% 45% BPSO CreVal Credem NPL coverage 19% 32% 32% 65% 62% 61% UTP/PD coverage Avg. 49% Avg. 31% Avg. 62% Notes: 1. Gross of write-offs; 2. Data for UniCredit Italy only; 3. UniCredit calculated as sum of Italy Core, Non Core and CIB. 4. Including impacts relating to the acquisition of a perimeter of assets of Veneto Banca and BPVi. Source: Annual reports, presentation and press release. Data as of FY 2017, except for BP Sondrio (3Q17) 6

7 Current status of Italian banks servicing partnerships Good Banks Banks are increasingly focusing on the management of bad loans, either by setting up internal dedicated and accountable departments or by entering into long terms partnerships with specialised players / servicers, and planning structural portfolio disposals Bank Gross NPL FY17 ( bn) Servicer outsourced Servicing Partner Largest Banks Strategy 34.2 X NPL In-house management Target to dispose c. 26bn NPEs by 2021 On-going process to dispose a sizeable NPL portfolio and majority stake of the platform Gone concern Sold NPLs unit to Fortress-Italfondiario in 2015 Recently disposed 17.7bn NPLs portfolio 15.8 X In-house management of NPLs Planned to dispose 8.0bn by 1H18 (o/w 2.5bn sold) Rumoured to currently investigating the to disposal of c. 5bn portfolio through GACS 9.7 X In-house management of NPLs New business plan with focus on internal recovery Set up of an internal NPL specialized unit (c.130 FTE) 8.0 X Outsourcing of retail and SME small tickets Outsourcing of tickets collection and portfolio disposal Set up of a NPL specialized unit (c.180 FTE) 6.3 Gone concern Announced a JV in the credit servicing with Cerved and Questio in July 2017 Recently disposed 26.4bn NPLs portfolio 2.2 X In-house management of NPLs 2 nd Lowest NPL ratio in the Italian market (3Q17, 3.0%) Target is to maintain current NPL ratio in the long term 1.9 NPL portfolio ( 1.2bn) and platform disposed in December 17 to Credito Fondiario 1.7 Gone concern Outsourced NPL management to Cerved in 2017 Planned to dispose 1.4bn NPLs by X In-house management of NPLs Lowest NPL ratio in the Italian market (FY17, 1.3%) Rumoured to disposes 60m NPLs portfolio Notes: 1. Italy only Source: Company reports. Data as of FY2017, except for BP Sondrio (3Q17) 7

8 Recent NPL portfolios transactions in Italy Type of portfolio Date Seller / Project Name GBV ( bn) Price (% of GBV) Buyer Key Comments Mix Portfolios 2017 Carige 1.2bn ~ 22% In the Italian competitive landscape NPLs 2017 unsecured 2017 CR Ferrara Intesa Sanpaolo (Pjt BTC) Good Banks 0.3bn 2.5bn 2.2bn ~ 19% 10% - 15% 20% - 25% Italian Recovery Fund + specialised investors typically focus on specific asset classes, i.e. secured, unsecured or mixed portfolios 2016 UniCredit (Pjt Fino) 17.5bn 10% - 15% Good Banks 9.6bn ~ c % 2016 BPER 0.4bn ~ 15% + Price can change significantly based on: % secured GACS Securitizations Secured portfolios Unsecured corporate / SMEs portfolios Unsecured consumer portfolios 2017 BP Bari 0.3bn ~ 33% 2017 BMPS bn ~ 21% Italian Recovery Fund 2017 Carige (Pjt Brisca) 0.9bn ~ 33% n.a Creval (Pjt Elrond) 1.4bn ~ 38% n.a BP Bari 0.5bn ~ 31% 2017 UniCredit (Sandokan) 1.4bn JV (not on sale) 2017 Banco BPM 0.7bn 37% - 38% 2016 Creval 0.1bn ~ 41% 2016 Deutsche Bank 0.2bn ~ 41% 2016 Creval 0.1bn ~ 44% 2016 UniCredit 0.1bn 40% - 45% 2016 Sparkasse 0.3bn ~ 25% 2016 UniCredit (Pjt Raphael) 0.1bn > 50% 2016 Banco BPM (Pjt Adele II) 0.6bn 3% - 5% 2016 Banco BPM (Pjt Adele I) 0.6bn 5% - 6% 2016 Banco Desio 0.2bn 5% - 6% Low vintage - 8% - 12% - High vintage - 3% - 5% - ticket size (e.g. minor ticket (< 100k and with mortgages or with payment plan) translates into a higher price) vintage (e.g. lower vintage (< 3 years) determines a higher price) Among the investors typically focused on unsecured portfolios there are Hoist Finance, MB Credit Solutions, while Algebris, Cerberus are mostly focused on secured portfolio and Credito Fondiario, CRC and Bayview on mixed portfolios Disposals of portfolios are generally carried out as private transactions with limited disclosure on features (i.e. price / portfolio composition / R&W) Therefore this page gives a brief overview of the recent market transactions, based uniquely on public sources (when available) / market insights / market speculations Notes: 1. Pending closing Source: Company Press Releases, Industry Reports 8

9 Background on Intrum s Local Operations

10 Intrum: Largest and Most Experienced Player in Europe Largest International CMS players in the European market are currently increasing scale and broadening the range of services Usually CMS are interested in "packages" of credit servicing and portfolios (mainly unsecured), also in partnership with leading PE and specialized funds Ranking of largest CMS 9M 2017 EBITDA ( m) Cash EBITDA ( m) Mkt Cap ( m) m of CCM n.a. 174 n.a. n.a n.a n.a. 0.9 Notes: 1. Figure related to global operations; 2. Data adjusted to include the Cash EBITDA contributions of the Tesch Group and IS InkassoGroup; 3. PF for the acquisition of Denmark, Estonia, Finland, Sweden and Norway of Intrum (purchase price 730m); 4. EBITDA; 5. Adjusted EBITDA; 6. Figure represents Encore market capitalization Source: Investor Presentations. Figures converted at 30/09/2017 FX rate 10

11 The Best Possible Partner for European Banks Widest Services Portfolio and Geographical Diversification Key Value Drivers Value Add Services Product Expertise Solutions Informatio n Services Payment Services Debt Purchase Debt Collection 2 Real Estate Services BPO / Carve - out Coinvestmen ts # of countries Economies of Scale Excellence in operational performance to increase margins Financial entities are required to reduce problematic exposure Market is tough throughout Europe- Economies of scale leads to value accretion Revenue diversification Busniess model strength- presence both in servicing as well as in portfolio investments leads to superior knowledge and expertice Geographical diversity- present in 25 countries, secured assets in 8. Intrum can choose where to deploy capital. Contract duration Most significant revenues streams are linked to long-term agreements signed several years ago Contracts duration extensions or signing of new agreements is critical to maintain long-term profitability Notes: 1. Includes countries with portfolios; 2. Criteria: more than 10% of total revenues related to debt collection services Source: Company information 11

12 Key benefits for a potential partnership Fully dedicated unit created for collections performance improvement with developed IT tools and methodologies Leveraging unique opportunity Benefits of carve outs Capital Control Takeover bank recovery/operating unit with a defined perimeter and flexible business framework Potential upfront capital gain and financial ratios improvement Defined service-level agreement and KPIs Potential Structure overview Long term servicing agreements (5-10Y) with/without upfront payment and guaranteed volumes Integrate bank unit within Intrum s best class debt services IT Fully regular investments in IT from the servicer Investment Possibility to regular flow of NPLs or REOs (if any) portfolio divestment Industrial partnership Efficiency Included in carve out / BPO Improvement of the operational ratios with aligned priorities Resources Flexible and scalable structure aligned with volumes Opportunities Release debt collection structure of administrative tasks focusing on core business New products and strategies development adapted to clients needs 12

13 Current Setup of Intrum in Italy

14 Brief update on Intrum Italy history With more than 100 years experience across the European market, Intrum completed its first servicing operations in Italy in 2016 and since then has grown through the acquisition of GEXTRA, Cross Factor and recently CAF Acquisition of Cross Factor S.p.A. an Italybased debt purchasing agency Completion of the merger between Intrum Justitia and Lindorff Acquisition of 100% Gextra, from dobank. A Italian company specialized in small debt collection services 2017 Establishment of Intrum Justitia Italy in Milan Entry into the Italian market with the acquisition from a Deutsche Bank and from a leading Italian financial market firm, of 3 unsecured consumer credit portfolios Acquisition of CAF and a mixed secured and unsecured NPL portfolio ( 200m) Acquisition of Mass Credit Collection ( MCC ) department of PwC TLS Italy ( Intrum Law ) MCC department 14

15 Overview of Intrum Italian entities (Pre-Intesa JV Closing) Company Intrum Justitia MCC Department CAF Gextra Cross Factor Description Present in the Italian market since 1985, Intrum Justitia is specialized in servicing both financial and commercial loans The main strength is the call center set un in Bari which represents the center of excellence for phone collection The MCC Department has been present on the market since 2011 (PwC branded) as a Master Legal, i.e. an entity able to manage - on the legal collection side - significant volumes of NPLs, arising both from commercial and banking/financial agreements/loans (mostly unsecured small/medium tickets), through the use of process methodologies based on efficiency and, more important, on the industrialization of the entire legal phase, adopting homogenous working practises and reporting schemes and ensuring the presence of a single point of contact to the benefit of its clients In doing so, it avails itself of cutting-edge technological tools and of a capillary network of correspondents scattered throughout the Italian territory, who operate as mere material executors of the tasks required by the lawyers seated in the central HUBs of Milan and Rome and working on an exclusive basis for Intrum Law Italy, supported by Paralegals and highly skilled Legal Phone Collectors CAF is a servicer managing residential mortgages, commercial loans, and consumer finance loans, both on performing, unlikely to pay loans and nonperforming loans, on behalf of third parties. CAF also supplies due diligence advisory services to Italian Banks and international investors Authorized to performing servicing activities in compliance with art. 115 TULPS and rated by S&P (above average), managing throughout Italy a total loan portfolio of 7 billion+ made up of residential and commercial mortgage loans, unsecured and deficiency loans granted to small and midsize enterprises or households With main office in Rome and branch office in Milan, CAF has a solid track record in servicing secured and SME loans with a sizeable set of and represents the key Born from the initiative of a team of managers with consolidated know-how in the field, Gextra is a company specializing in consulting for process management and the implementation of outsourcing services related to customer relations and credit management Gextra has developed an organizational model based on efficiency, dynamism, technological innovation With headquarters in Bologna, the key strength of Gextra is represented by the network of field collectors that cover the entire Italian territory Cross Factor has more than 20 years of experience in buying NPL from financial institutions and has been buying NPL from Intesa with forward flow agreement with Banca Intesa since Cross Factor is a financial intermediary authorized by Bank of Italy (art 106) and can serve as master servicer in deals under law 130/99 securitisation scheme 15

16 Intrum: Market Leading Servicer (AuM Including Intesa JV) A Leading Special Servicer with Integrated Portfolio Purchasing Capabilities Ranking of the top 10 Italian Servicers by Special Servicing GBV 1 Main Servicers Shareholders Special Servicing GBV ( bn) Italy (50.1%) Public Market 2 Parent public company 6 8, Master Serv. GBV ( bn) Portfolio Purchasing Capabilities % GBV Special Servicing (Sec. / Unsec. %) 55% 46% 8 81% 7 84% 45% 54% 19% Non captive 8,1-31% 69% Italia 7,8-1% 99% 5,3-69% 31% 5,0-1% 99% Non captive 4,3-100% (55.6%) Public Market 9 4, % 40% Secured (%) Unsecured (%) Notes: 1. Ranking excluding Phoenix, PIMCO master servicer in FINO transactions. 2. Fortress has 50.1% stake, 47.7% is free float, other shareholders (2.3%); 3. PF for Sirio transaction ( 7.9bn GBV portfolio). 4. Includes CAF and Gextra and excludes c. 4.4bn managed by Italfondiario (dobank). 5. PF Pjt. Sirio transaction with BMPS ( 13bn GBV) and the acquisition of BP Bari servicing platform ( 0.9bn GBV). 6. In March 2017 Varde has acquired a 33% stake in Guber S.p.A., the majority stake of the company is still held by its two founding partners, Francesco Guarneri and Gianluigi Bertini. 7. Out of which 49% soft secured (personal guarantees, real guarantees); 8. Breakdown based on 2016 data % free float. Source: Last available data, company reports, rating reports, PwC, MB Securities 16

17 Strategic Partnership with Intesa Sanpaolo

18 Strong Partnership: Scale, Market Access and Operating Excellence Intrum, with presence in 24 countries, is the largest European CMS player by EBITDA while Intesa Sanpaolo represents the largest Italian Banking Group by net customer loans Intrum is the largest player in the European CMS industry with focus on both debt purchase and debt collection activities Presence in 24 countries in Europe In the last years Intrum expanded its presence in Italy through the latest acquisitions of Gextra (May 16), CAF (December 17) and MCC (January 18) Market Cap: 2.9bn 1 EBITDA: 481m (39% EBITDA Margin) Net Income: 134m ERC: 4.5bn European CMS players by market cap ( bn) 1 2,9 1,9 1,4 1,1 0,9 European CMS players by EBITDA ( m) Intesa Sanpaolo is the 1 st Banking Group in Italy by net customer loans as of FY 2017 and the 6 th largest Banking Group in Europe by market capitalization 1 with the following key data as of FY 2017 Market Cap: 52bn 1 Net customer loans: 344bn Tangible Book Value: 48bn Gross NPE: 52bn (12% Gross NPE ratio) Net Income: 4bn (8% ROTE) On February 6th 2018 Intesa Sanpaolo announced the new Business Plan , whose main targets envisage the de-risking and NPE reduction European Banks by market cap ( bn) 1 86,9 76,9 54,8 51,8 42,8 Italian Banks by net customer loans ( bn) 108,2 92,3 86,1 261, ,9 2 Notes: 1. Factset as of 16/04/18; 2. Refer only to Italian customer loans. Source: Data converted at average exchange rate EUR/SEK. 18

19 Intesa Sanpaolo Intrum Creation of the Leading Servicer in the Italian NPLs Market Key comments Current Structure Structure To Be The Transaction envisages the creation of the leading servicer in the Italian NPLs market through the merger of Intesa Sanpaolo s NPLs recovery operations and Intrum s Italian operations1 (the JV Servicer ), as follows: 1. Carve-out of ISP s credit servicing operations into a newly created vehicle ISP to contribute its NPLs servicing activities (including c. 600 employees) into a newly created vehicle ( JV Servicer ) ISP to retain all the early remedial / going concern restructuring operations and the operations dedicated to the monitoring of the JV Servicer performance 2. Acquisition of the JV Servicer shares by Intrum and contribution of Intrum companies Intrum to acquire a 51% stake in the JV Servicer Intrum to contribute all its current Italian operations (apart from Cross Factor S.p.A. and the holding company Lindorff Italy S.r.l.) ( Intrum Italy ) Intrum will appoint the majority of the board members as well as the CEO The JV Servicer to enter into a 10-year exclusive serv. agreement with ISP in relation to its NPLs portfolio and the majority of the new inflows The new company will operate under the Intrum brand and Intrum will consolidate it in the financial reporting 100% Intrum Justitia SpA Debt recovery Intrum Lindorff Italy 100% 100% CAF ISP Group Capital Light Bank 100% 100% ReOCo Intrum Italy Gextra Carve-out Servicing Agreement + Majority of NPLs new inflows ISP Group NPLs portfolio 49% stake ISP credit servicing carve-out JV Servicer Intrum 51% stake Intrum Italy 19

20 Strategic Partnership Combining Scale, Market Access and Operating Excellence A Strong Combination 51% 49% Not Contributed Italian Portfolios Italy NPL Recoveries 20 Intrum Justitia AB (publ) 2018 All rights reserved.

21 SPV Financing Structure Structure provides access to diversified, low cost and non-recourse source of financing. 12bn GBV NPLs portfolio Bank Syndicate Sale of NPLs Debt Intesa Sanpaolo Portfolio SPV Equity 51% JV Co. Consideration ~80% ~20% 49% Intrum Co-Investor 21 Intrum Justitia AB (publ) 2018 All rights reserved.

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