Full-year 07 Financial Results Robert Oudmayer, CEO Rémy Schimmel, CFO Volker Gloe, CRO February 08 Page
Cautionary statement regarding forwardlooking statements This presentation by AG ( the Bank ) includes forward-looking statements that reflect the Bank s intentions, beliefs or current expectations and projections about the Bank s future results of operations, financial condition, liquidity, performance, prospects, strategies, opportunities and the industries in which it operates. Forward-looking statements involve matters that are not historical facts. The Bank has tried to identify those forward-looking statements by using the words may", will", would", should", expect", intend", estimate", anticipate", project", believe", seek", plan", predict", continue" and similar expressions. Such statements are made on the basis of assumptions and expectations which, although the Bank believes them to be reasonable at this time, may prove to be erroneous. These forward-looking statements are subject to risks, uncertainties and assumptions and other factors that could cause the Bank s actual results of operations, financial condition, liquidity, performance, prospects or opportunities, as well as those of the markets it serves or intends to serve, to differ materially from those expressed in, or suggested by, these forward-looking statements. Important factors that could cause those differences include, but are not limited to: changing business or other market conditions; legislative, fiscal and regulatory developments; general economic conditions in Switzerland, the European Union and elsewhere; and the Bank s ability to respond to trends in the financial services industry. Additional factors could cause actual results, performance or achievements to differ materially. In view of these uncertainties, readers are cautioned not to place undue reliance on these forward-looking statements. The Bank, its directors, officers and employees expressly disclaim any obligation or undertaking to release any update of or revisions to any forward-looking statements in this presentation and these materials and any change in the Bank s expectations or any change in events, conditions or circumstances on which these forward-looking statements are based, except as required by applicable laws or regulations. This presentation contains unaudited financial information. While the published numbers are rounded, they have been calculated based on effective values. All figures are derived from US GAAP financial information unless otherwise stated. This information is presented for illustrative purposes only and, because of its nature, may not give a true picture of the financial position or results of operations of the Bank. Furthermore, it is not indicative of the financial position or results of operations of the Bank for any future date or period. By attending this presentation or by accepting any copy of the materials presented, you agree to be bound by the foregoing limitations. Page
Strong results above guidance Environment Managing business Strong results Continued low interest rates inflation turning positive Consumer confidence improving consumer loan market recovering First 8 months with new interest rate caps: 0% for personal loans and % for credit cards Domestic interchange reduced from 70bps to bps as of August 07 Asset growth of % across all business lines acquisitions (8%) and organic growth (%) Successfully closed EFL Autoleasing acquisition funding synergies locked-in New partnerships initiated in auto and cards Stable loss performance: 0+ DPD at.8% / NPL at 0.% loss rate @.0% Maintaining excellent cost discipline with cost/income ratio of.% Net income of CHF.mn or CHF. per share supported by strong H 7 result Offsetting lower interest income in personal loans with growth in cards income Solid return on equity (ROE) of 6.7% Delivering on 07 guidance and on all medium-term targets Strongly capitalised Tier capital ratio of 9.% within target range Ordinary dividend of CHF. per share proposed; up CHF 0.0 vs 07 Includes net income adjusted for expected dividend distribution Page
Consumer finance market update Markets in 07 Personal loan market turned positive in 07 (+%) aggressive competition Cembra s performance Defending market share despite aggressive competition Growing assets in line with the market Balancing online leads with excellent service levels Vast majority of the book repriced by end of 07 Number of credit cards up % to 6.6mn and transaction volumes up 0% NFC volume doubled New car sales (k; -%) and used car (87k; 0%) market stable Number of credit cards up 0% to 80,000 gaining market share (now %) Cembra volumes increased 7% and number of transactions increased % Credit card fees up 8% year-on-year Leading independent player market share increased to approx. % Maintaining price despite captive pressure New partnerships to strengthen market position Payment technology developing slowly: - Market entry of SamsungPay - ApplePay and TWINT have limited share Still too many players and no winners Cembra sticks to smart follower strategy Leader on NFC with 0% NFC transactions in 07 with % of credit cards in circulation Source: SNB Monthly Banking Statistics Sources: auto-schweiz; Eurotax Page
Executing on the Strategy Key strategic objectives Defend the core business Defend the core business Build the future Build the future Gain Gain size size through through external growth and diversify external growth & diversify % organic asset growth Renewed Migros contract for years New partnerships - Hyundai - Harley-Davidson - Interio Executing on digital agenda - CRM investment - Modernizing front-end Cards innovation - Samsung Pay - Garmin / Fitbit Swissbilling acquisition EFL acquisition Eny refinancing model: duplicable Page
Update on 07 growth initiatives Harley Davidson Finance partner (virtual captive) of Harley-Davidson since January 08,000 new registrations p.a. Hyundai Virtual captive since Q 07 through EFL acquisition 9,000 new registrations per year Interio Furniture store belonging to Migros Launch credit card in Q 08 Launch Swissbilling in Q 08 EFL acquisition EFL acquisition Transaction successfully closed in Q 07 Net receivables of CHF 78 million at year-end 07 Funding synergies locked-in issued CHF 00mn bond in November @ 0.% / 6. years Merger scheduled for H 8 on track Operational synergies starting in 08 Swissbilling Transaction closed in Q 07 Net receivables CHF million / Financed 8,000 invoices in 07 Staffing up and building the future Launch invoice finance at POS in Q 08 (offline product) Signed agreement with Interio, combining with cards Healthy pipeline for new customers Page 6
P&L Income statement (in CHF mn) 07 06 V% Comments Interest income Interest expense Net interest income Insurance Credit card fees 08. (.7) 8.6.0 7.0. (6.) 97.7.9 6. () (7) () 8 Lower interest income driven by the reduction in APR following the introduction of the rate caps the vast majority of the lending book has now been repriced Higher APR on Cumulus Mastercard and lower interest expense due to favorable repricing of funding Loans and leases Other Commission and fee income Net revenues Provision for losses Operating expense Income before taxes.8.9.7 96. (.) (67.9) 8. 0.6 0. 96. 9.0 (.6) (67.) 8.9 nm 7 0 Increase in insurance revenue driven by a nonrecurring one-off fee in 07 Credit cards fees performance driven by the increase in the number of cards (+0%) and by the increase in transaction volume (+7%) Interchange (after contributions for loyalty) accounted for c. % of credit card fee income Taxes Net income (8.8). (8.).7 Loss rate of.0% reflecting the continued risk management discipline Basic earnings per share (EPS)..0 Key ratios Net interest income / financing receivables Cost/income Effective tax rate Return on average equity (ROE) Return on average assets (ROA) 6.%.%.% 6.7%.9% 7.%.%.0% 7.%.0% Page 7
Operating expenses Income statement (in CHF mn) 07 06 V% Comments Compensation and benefits Professional services Marketing Collection fees Postage and stationery Rental expenses under operating leases Information technology Depreciation and amortisation Other 6 7 99.9. 6..8 9..7.6 8.7 (.6) 00. 9.0 6.6.7 8.6 6.0. 7.8 (0.7) 0 7 (9) 8 () () 7 Lower pension costs (CHF.mn) offset by higher headcount following the EFL & Swissbilling acquisitions Driven by business development and continued investment in simplification and regulatory requirements Lower marketing cost following large-scale advertising campaign in 06 to promote new rates in personal loans Driven by growth in credit cards and invoice financing (Swissbilling) Lower HQ rental costs and non-recurring costs following branch closures in 06 Total operating expenses Cost/income ratio 67.9.% 67..% 0 6 Lower costs mainly driven by timing of IT investments Full-time equivalent employees Swissbilling EFL Autoleasing 8 7 696 70 70 - - () 7 8 Increase in amortisation following IT investments and Swissbilling acquisition Declining headcount in the Bank offset by the acquisitions of EFL Autoleasing and Swissbilling Page 8
Balance sheet Assets (in CHF mn) --7 --6 V% Comments Cash and equivalents Net financing receivables Personal loans 8,6,78 669,07,70 (7) Growth in receivables partly financed via cash Fewer upcoming debt maturities in 08 Auto leases and loans Credit cards Other (Swissbilling) Other assets Total Assets,9 8 9,099,6 7 -,87 8 7 nm Financing receivables growth across all products organic growth added CHF 6mn (%) and acquisitions contributed CHF 7mn (8%): - EFL: CHF 78mn - eny: CHF mn - Swissbilling: CHF mn Liabilities (in CHF mn) Funding Deposits,08,67,87, Increase in funding driven by EFL acquisition Deposits increased to 6% of total funding driven by institutional Short- & long-term debt Other liabilities Total liabilities Shareholders equity, 66, 88,0,009 88 (6) Equity was up as a result of 07 net income (CHF.mn) and OCI (CHF 8.0mn) partially offset by the dividend payment (CHF.mn) in April 07 Total liabilities and equity,099,87 Page 9
Off-BS Deposits 6% Non-Deposits % Diversified funding Diversified, local funding sources (in CHF mn),660 IPO 700 GE Funding 0 00 60 '6 9 8 00 00 00 00 ' 96 '70 98 9 --0 --06 --07 End of period funding cost Avg. remaining term (yrs) LCR NSFR Leverage ratio Undrawn credit lines.70%.0 98% >00% - 00mn,878 0.66%.7 908% >00%.% 0mn,0 0.%.9 96% >00%.% 0mn Funding programs Senior unsecured ABS Bank loans Institutional term deposits Retail term deposits and saving accounts Committed revolving credit lines Six issuances of between 00mn to 00mn each Avg. remaining term of. yrs / avg. rate of 0.6%* Two AAA-rated issuances of CHF 00mn each Avg. remaining term of.8 yrs / avg. rate of 0.%* Term Loan of 00mn from one Bank Avg. remaining term of 0. yrs / avg. rate of 0.% Diversified portfolio across sectors and maturities Book of circa 0 investors Circa 9,000 depositors Fixed term offerings of 8 years Saving accounts are on-demand deposits Four facilities between CHF 0mn to 00mn each Avg. rate of 0.8% / Avg. remaining term of. yrs Avg. remaining term of. yrs / avg. rate of 0.%* CHF,87mn and CHF,08mn including deferred debt issuance costs on long- & short-term debt (US GAAP) Based on the revised NSFR framework published by the Basel Committee on Banking Supervision in January 0 * Additional charges apply related to fees and debt issuance costs Page 0
Stable loss performance Provision for losses (in CHF mn).6.6. 0+ days past due / NPL % %.8%.8% %.8%.8% % 0+ days past due Non-performing loans (NPL)² 0.% 0.% 0.% 0.% 0% Dec' Dec' Dec'6 Dec'7 Comments 0 06 07.%.8% 0.%.%.8% 0.%.0%.8% 0.% Loss rate 0+ days past due Non-performing loans (NPL) Slight improvement of loss rate to.0% Delinquencies continue prior years trend, reflecting robust asset quality and stable processes Loss performance in 08 expected to be in line with prior years Write-off performance³ % % % % % 0% 0 6 8 60 Credit grades⁴ 00% 80% 60% IPO % % % % % % 9% 8% 9% 009 00 0 0 0 0 0 06 Months ¹ Loss rate is defined as the ratio of provisions for losses on financing receivables to average financing receivables (net of deferred income and before allowance for losses) Non-performing loans (NPL) ratio is defined as the ratio of non-accrual financing receivables (at period-end) divided by the financing receivables ³ Based on Personal Loans and Auto Leases & Loans of the Bank ⁴ Consumer Ratings (CR) reflect associated probabilities of default for material portfolios of the Bank Page 0% 0% 0% % 6% % 0 06 07 CR CR CR CR&
Strong capital position CET capital walk (in CHF mn) 0.0% 9.% CET ratio 7.7 6.9 (00.) (9.) 789.7 9 Excess capital 8% minimum target.% regulatory requirement Comments Excess capital stood at CHF 9mn as of December 07 RWA increased by 9% in-line with financing receivables development Dividend of CHF. proposed to AGM: - CHF.00 paid from remaining capital contribution reserves - CHF 0. from retained earnings There will be no more reserves from capital contributions left, after payment of dividend in April 08 --6 Net income 07 Ordinary dividend Other --7 RWA and capital (in CHF mn) --6 --7 Risk-weighted assets (RWA) Tier capital Tier capital ratio,77.6 7.7 0.0%,.0 789.7 9.% Derived from the Bank s statutory consolidated financial statements which were prepared in accordance with Swiss GAAP Includes full-year net income adjusted for expected dividend distribution Based on weighted-average numbers of common shares outstanding Proposal of the Board of Directors to the AGM on 8 April 08 Per share data 06 07 Basic earnings per share (EPS) Ordinary dividend per share Payout ratio Extraordinary dividend per share Number of shares Treasury shares Shares outstanding Weighted-average numbers of shares outstanding.0. 68%.00 0,000,000,807,67 8,9,7 8,96,8.. 69% 0,000,000 -,8,70 8,8,80 8,88,6 Page
Stable outlook and guidance for 08 Medium-term targets 07 Outlook for 08 Asset growth Net customer loan growth to be moderate and in line with Swiss GDP growth.0% Organic:.0% Revenues Additional revenues from credit cards growth and acquisitions expected to be offset by lower interest income from personal loans following the implementation of the rate cap in July 06 Profitability RoE target of at least % 6.7% Provision for losses Loss performance expected to be in-line with prior years performance Operating expenses Capitalisation Target Tier capital ratio of minimum 8% 9.% Increase in cost following increase in headcount and following investments in digitalization resulting in a healthy but slightly higher cost/income ratio Dividend payout Target payout ratio for ordinary dividend between 60% and 70% of net income 69% Guidance for full-year 08 Earnings per share EPS anticipated to be in the range between CHF.80.0 Proposal to the Annual General Meeting of Shareholders on 8 April 08 Page