Transcript MACROECONOMIC ENVIRONMENT

GROWTH IN CEE COUNTRIES
“Czech Evidence”
Jaromír Sladkovský
FPK Conference, London
14 December 2004
1
LEGAL DISCLAIMER
2
•
THIS PRESENTATION IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY
AND DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF
AN OFFER TO BUY ANY SECURITY.
•
ALTHOUGH THE STATEMENTS OF FACT IN THIS PRESENTATION HAVE BEEN
OBTAINED FROM AND ARE BASED UPON SOURCES THAT KBC BELIEVES TO
BE RELIABLE, KBC DO NOT GUARANTEE THEIR ACCURACY, AND ANY SUCH
INFORMATION MAY BE CONDENSED OR INCOMPLETE.
•
THIS PRESENTATION CONTAINS FORWARD-LOOKING STATEMENTS WITH
RESPECT TO OUR STRATEGIES AND EARNINGS DEVELOPMENT BY THEIR
NATURE, THESE FORWARD-LOOKING STATEMNTS INVOLVE NUMEROUS
ASSUMPTIONS, UNCERTAINTIES AND OPPORTUNITIES. THE RISK EXISTS
THAT THESE STATEMENTS MAY NOT BE FULFILLED AND THAT FUTURE
RESULTS DIFFER MATERIALLY.
•
BY RECEIVING THIS PRESENTATION EACH INVESTOR IS DEEMED TO
REPRESENT THAT IT IS A SOPHISTICATED INVESTOR AND POSSESSES
SUFFICIENT INVESTMENT EXPERTISE TO UNDERSTAND THE RISKS
INVOLVED.
TABLE OF CONTENTS
INTRODUCTION
CURRENT SITUATION IN CR
FUTURE GROWTH POTENTIAL IN CR
KBC POSITIONING IN CR
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COUNTRIES WITH KBC PRESENCE
POLAND
population
GDP*
bank assets**
38.2m
46%
104m
CZECH REPUBLIC
population
10.2m
GDP
73%
bank assets
80m
4
SLOVAKIA
population
GDP
bank assets
5.4m
51%
24m
HUNGARY
population
GDP
bank assets
10.1m
61%
56m
SLOVENIA
population
GDP
bank assets
2.0m
77%
22m
Source: OECD, Statistics of National Banks
*) GDP per capita - EU25=100% (PPP)
**) as of the end of 2003 (EUR)
WHERE WILL THE VALUE CREATION
COME FROM IN CR IN FUTURE ?
M&A Activities
• Limited on the local market (privatization completed; 85% of bank equity and 96% of bank
assets in hands of foreign strategic investors: KBC, ERSTE, SG, HVB, GE etc.)
• Market concentrated enough (top 3 players have 75% market share in total bank deposits
and 50% in bank loans; the concentration in retail banking is even higher as top 4 players
have 85% in retail deposits and 90% in retail outstanding loans)
Cost Management
• Main strategic focus after strategic takeover (centralization of processes such as back-office
activities; headcount rightsizing; close control of central procurement etc.)
• Still not sufficiently exploited
Revenue Based Growth
• Large potential (low penetration of the population and companies with financial products; low
loan to deposit volume ratio compared to EU countries etc.
• Dynamic volume growth in key products
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INTRODUCTION
CURRENT SITUATION IN CR
FUTURE GROWTH POTENTIAL IN CR
KBC POSITIONING IN CR
6
RETAIL LOANS SPEEDED UP COMPARED
TO RETAIL DEPOSITS IN 2001-2003
Percent
30%
Retail Loans to Deposits
27%
Retail Loans to GDP
25%
23%
20%
15%
18%
13%
12%
10%
10%
5%
8%
4%
5%
7%
0%
2000
7
2001
Source: CNB, Czech Statistical Bureau (data without individual entrepreneurs)
2002
2003
F2004
LEVEL OF HOUSEHOLDS’ DEBT IS FAR
BEHIND THE EURO-ZONE AVERAGE
Retail loans as % of GDP (2003)
60%
50%
Other loans**
Consumer lending
Housing loans*
48%
40%
30%
20%
10%
10%
8%
Czech Republic
Slovak Republic
0%
Eurozone
8
Source: ECB, CNB, NBS
*)
**)
Including mortgages and building loans
Including loans provided to individual entrepreneurs, non-residents etc.
CZECH FAMILIES HAVE IMPROVED
THEIR STANDARDS OF LIVING
INCREASING PURCHASING
POWER REDUCES FUTURE
UNCERTAINTY AND
ENHANCES WILLINGNESS
TO BOROW MONEY*
140
130
138
120
111
110
100
1990 BASE LINE = 100
90
Real GDP per capita
Real Wages
80
70
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
9
Source: Czech Statistical Bureau
*) Average Czech Family owes over EUR 3 thousand at the end of 2003
PORTFOLIO OF THE MOST DEMANDED
PRODUCTS HAS CHANGED SINCE 1990
2004
Future
2001-2003
1996-2000
Consumer Lending
Building Savings
Building Loans
Mutual Funds
Life Insurance
Building Savings
Saving Deposits
Car Leasing
Non-bank consumer
credits
1990-1995
SME Loans
Current Accounts
Saving Deposits
Before 1990
10
Saving
Deposits
Social Loans
Mortgages
SME Loans
Consumer Lending
Mutual Funds
Pension Funds
Life Insurance
PENETRATION OF RETAIL CLIENTS
WITH BASIC PRODUCTS IS LOW
71%
61%
34%
15%
C/A
S/A
58%
54%
Debit Cards
5%
9%
Overdraft
Credit Cards
Consumer
Loans
2%
5%
1%
Mutual
Funds
Building
Loans
Mortgage
18%
Construction
Savings
11
Life
Insurance
Source: GfK Research – Czech Republic (Spring 2004)
Pension
Funds
COMPANIES*
PENETRATION OF SME WITH PRODUCTS
IS ALSO FAR BEHIND THE POTENTIAL
96%
38%
INDIVIDUAL
ENTREPRENEURS
C/A
12
S/A
36%
Debit Cards
28%
Commercial
Loans
21%
14%
Overdraft
Credit Cards
14%
10%
Overdraft
Credit Cards
97%
36%
19%
7%
C/A
S/A
Source: GfK Research – Czech Republic (Spring 2004)
Debit Cards
Commercial
Loans
*)
firms with annual turnover up to EUR 10m
INTRODUCTION
CURRENT SITUATION IN CR
FUTURE GROWTH POTENTIAL IN CR
KBC POSITIONING IN CR
13
WHICH CLIENTS WILL BRING
THE HIGHEST REVENUE GROWTH?
RETAIL
SME
CORPORATE
14
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Insufficient penetration with financial products
•
Growing wealth of the population
•
Unexploited marketing instruments (propensity models etc.)
•
Robust risk management techniques (scoring-based)
•
Unsaturated clients’ needs (only 5% of SME have a loan)
•
Interesting margins and fees
•
New business opportunities resulting from EU accession
•
Risk management (new scoring based methods)
•
Gradually reducing fees from FX transaction (accession to
the Euro-zone)
•
Growing profits resulting in higher volume of deposits
•
Limited potential in terms of number of customers
•
Significantly penetrated with loan and leasing products
•
Highly competitive market – squeezing margins



WHAT FACTORS WILL SHAPE FUTURE
RETAIL BANKING IN CR ?
Former antipathy of households against money borrowing originated
from the communist-time has been gradually disappearing
Demographic development
 strong generation in their 30’s has financing and life-time
investment needs (life insurance, pension funds)
 strong generation in their 50’s (becoming retired in 5-10 years)
require mainly short-term investments (mutual funds)
Continuing enhancement of living standards
Interest rates will very likely stay at current low level
…
15
STRONG POPULATION YEARS ARE
BECOMING ACTIVE
Thousand of people
25-35 years old
population now
200
Newly-born children
in a given year
175
150
125
100
75
16
Source: Czech Statistical Bureau
1999
1997
1995
1993
1991
1989
1987
1985
1983
1981
1979
1977
1975
1973
1971
1969
1967
1965
1963
1961
1959
1957
1955
1953
1951
50
MORTGAGE SEEMS TO BE A KEY
DRIVER IN RETAIL LENDING
EUR Billion*
CAGR
2004-2007
180
Mortgages
160
Building loans
140
Consumer lending***
32%
120
100
68
60
20
0
51
38
11
13
14
2001
17
89
90
80
40
167
Source: CNB, ČSOB Forecast
20%
25
17
15
39
20
46
26
8%
20
23
25
32
2002
2003
F2004**
F2007
*)
**)
***)
Fixed exchange rate of 31 CZK/EUR
2004 Forecast based on the actual results in October 2004
Including consumer loans, overdrafts, credit cards and other loans
PENSION FUNDS AND MUTUAL FUNDS
WILL MAINTAIN THEIR HIGH GROWTH
EUR Billion*
Life Insurance**
Pension Funds
Building Savings
Mutual Funds
Bank Deposits*
600
500
400
354
32
300
16
376
38
21
CAGR
2004-2007
543
10%
405
42
435
17%
63
48
47
30
10%
117
25
88
15%
43
19
58
76
33
40
48
244
227
221
222
243
2001
2002
2003
F2004**
F2007
72
3%
200
100
0
18
Source: CNB, ČSOB Forecast
*)
**)
current and saving accounts
technical reserves of life insurance
INTRODUCTION
CURRENT SITUATION IN CR
FUTURE GROWTH POTENTIAL IN CR
KBC POSITIONING IN CR
19
SUMMARY
Revenue growth is the topic for value creation in the future
Imbalance in deposit to loan ratio of the banking industry shows
clear potential
Key segments of growth potential are SME clients and
individuals (specifically the affluent segment)
Housing needs will drive the credit market growth
Improving regulatory framework will play an important role
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ČSOB POTENTIAL
WINNING FORMULA
21
KBC (ČSOB)
Critical mass of customers
Largest financial group in CR
with 5 million retail clients
Ability to retain and attract
clients (mainly affluent clients)
Affluent clients turnover below
1%; growing private banking
Focus on lending growth
(SME loans, mortgages, etc.)
Strengthening in SME business
(35% y-on-y growth)
Robust risk management
techniques (mainly for SME)
New scoring based approach
towards SME
Efficiency in „the back” and in
the internal supply chain
Centralization of card mgmt
within CEE region
GROWTH IN CEE COUNTRIES
“Czech Evidence”
Jaromír Sladkovský
FPK Conference, London
14 December 2004
22
INTRODUCTION
CURRENT SITUATION IN CR
FUTURE GROWTH POTENTIAL IN CR
KBC POSITIONING IN CR
APPENDICES ON THE KBC GROUP
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TOP-20 IN EUROLAND BANKING (*)
Dec 2003
Nov 2004
1 BNP Paribas (35 bn)
2 BSCH (31 bn)
3 BBVA (29 bn)
4 Deutsche Bank (26 bn)
1 BNP Paribas (45 bn)
2 BSCH (45 bn)
1 BSCH (57 bn)
2 BNP Paribas (48 bn)
3 Deutsche Bank (38 bn)
4 BBVA (35 bn)
3 BBVA (42 bn)
4 Deutsche Bank (35 bn)
5 ABN AMRO (25 bn)
6 Société Gén. (24 bn)
5 Société Gén. (31 bn)
5 Crédit Agricole (35 bn)
6 ABN AMRO (30 bn)
6 Société Gén. (34 bn)
7 Crédit Agricole (28 bn)
8 Unicredit (27 bn)
7 ABN AMRO (32 bn)
8 Unicredit (27 bn)
Dec 2002
7
8
9
10
11
9 Fortis (21 bn)
10 Intesa BCI (18 bn)
11 Dexia (16 bn)
9 Fortis (26 bn)
10 Intesa BCI (21 bn)
11 Dexia (18 bn)
12 Allied Irish Banks (12 bn)
12 San Paolo IMI (15 bn)
12
13 Bank of Ireland (10 bn)
13
14
24
Unicredit (24 bn)
Fortis (22 bn)
Crédit Agricole (14 bn)
Dexia (14 bn)
Intesa BCI (12 bn)
KBC (9 bn)
KBC (11 bn)
KBC (18 bn)
13 San Paolo IMI (15 bn)
14 Bco Popular (11 bn)
14 Allied Irish Banks (12 bn)
15 San Paolo IMI (9 bn)
16 Banco Popular (8 bn)
17 HVB (7 bn)
18 Mediobanca (6 bn)
15 Allied Irish Banks (11 bn)
16 Bank of Ireland (11 bn)
17 HVB (10 bn)
15 HVB (12 bn)
16 Bank of Ireland (11 bn)
17 Bco Popular (10 bn)
18 Commerzbank (9 bn)
18 Commerzbank (9 bn)
19 Bca MPS (6 bn)
20 Bco Popular (5 bn)
19 Mediobanca (7 bn)
19 BA-CA (9 bn)
20 Bca MPS (6 bn)
20 Mediobanca (9 bn)
(*) DJ Euro Stoxx Banks Constituents - Ranking by Market Capitalization – Situation as at 16 Nov 2004
PROMINENT PLAYER IN 2 MARKETS
Breakdown of revenue :
Treasury &
other 9%
Financial markets
11%
Belgium
48%
Internaternational
corporate
7%
CEE
25%
•
•
•
•
25
Top financial player in Belgium
Succesfully expanded in 5 most advanced countries in CEE (new EU)
Selected ‘other’ areas: international mid-corporate banking (mostly in
W. Eur.) and financial markets
As investments in CEE have continued to increase, the ‘other’
activities have been progressively scaled down
TOP-3 PLAYER IN THE CEE REGION
International banks in CEE (by total assets, in bn EUR):
29.0
KBC (BE)
28.6
Erste Bank (AT)
24.6
UniCredit (IT)
23.5
HVB / BA-CA (GE/AT)
21.6
RZB (AT)
19.0
Société Générale (FR)
14.3
Intesa BCI (IT)
Citibank (US)
13.5
OTP (HU)
13.2
ING (NL)
8.7
Source: RZB – assets as at 31 Dec 03, ownership structure as at 30 Jun 04
•
•
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KBC is one of the largest international players in the region
In contrast to the other players, KBC limits its presence to the new EU Member
States (the Czech Republic, Slovakia, Hungary, Poland and Slovenia) and is
active in both the banking and insurance fields
CHALLENGING FINANCIAL TARGETS
Core targets:
Minimum
targets for 2005
Cost/income ratio, banking
Combined ratio, non-life insurance
58%
95%
EPS growth (4-y CAGR)
Return on equity, Group
Return on allocated capital *:
- Retail in Belgium
- Central and Eastern Europe
10%
16%
- Corporates
- Financial markets
Tier-1 ratio, banking
Solvency margin, insurance
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* Capital allocated on the basis of risk-weighted assets and non-amortised goodwill
16%
17%
12%
18%
8%
200%
SOLID GROUP PERFORMANCE
Dec 02 Dec 03 Sep 04 Trend
Profitability
Efficiency
Solvency
28
Return on equity
13%
13%
17%
+
Growth in EPS
+1%
+8%
+36%
+
Cost/income, banking
65%
65%
60%
+
Combined ratio, insurance
101%
95%
94%
+
Tier-1, banking
8.8%
9.5%
9.6%
+
Solvency, insurance
320%
316%
341%
+
Combined ratio, insurance excluding reinsurance. Solvency, insurance including unrealized gains.
STRONG EARNINGS MOMENTUM
9M 04 profit : +40% year-on-year
Well on track to deliver on all our targets
3-y CAGR: +15%
Net profit
in m EUR
1 537 Consensus
1 022
2001
1 034
2002
estimate
1 119
1 201
2003
2004e
Consensus estimate as at 7 December 2004
29
STEADILY GROWING DIVIDEND
EPS
DPS
EUR
EUR
3.90
1.64
3.68
2000
3.39
3.42
2001
2002
1.42
2003
2000
36%
2000
30
44%
45%
3.1%
2001
2002
2001
1.52
2002
2003
Dividend yield
Payout ratio
44%
1.48
2003
2000
3.6%
2001
4.2%
2002
4.9%
2003
VALUATION
Valuation relative to peer group :
Key figures:
Share price: 57.3 EUR
Net Asset Value: 38.2 EUR
P/E 05
CEE banks (1)
13.4
Analysts’ estimates:
CEE-exposed banks (2)
12.1
EPS 2004 consensus: 4.97
EPS 2005 consensus: 5.27
P/E 2005: 10.9
Euro-zone banks (3)
11.6
KBC
10.9
BEL banks (4)
9.9
Analysts’ recommendations :
Positive: 41%
Neutral: 23%
Negative: 36%
Unweighted average of IBES data :
(1) OTP, Komercni, Pekao, BPH PBK, BRE
(2) Erste, Unicredit, BA-CA, Soc Gen, Intesa BCI
(3) Top 20 of DJ Euro Stoxx banks
(4) Fortis, Dexia
Situation as at 7 December 2004
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