Transcript Folie 1 - UniCredit Bank Hungary Zrt.

BANKING IN CEE: adequate risk appetite crucial to win the upside
UniCredit Group CEE Strategic Analysis
Vienna, November 9, 2009
Executive Summary 1
 World economic growth is recovering and this boosts prospects in CEE - 2010
will show a positive regional growth, though this will remain below
potential and subject to risks
 Strong regional differentiation is confirmed, with Central Europe better
prepared to catch the international recovery. The performance of different
banks in the same market can widely differ
 Markets are out of a “liquidity-crisis mood” – credit quality and risk appetite
are today’s key constraints for CEE banking
 Medium term: “CEE convergence story” holds, but the banking model
has to be rebalanced
 Financial penetration will continue, but the pace of growth will moderate,
with availability of funding (domestic or external) the main driver
 Changing competition allows for leaner structure of costs
 Cost of risk to stay high, representing a constraint for banking profitability
2
Executive Summary 2
 The changing competitive environment means also opportunities
 All CEE players have been affected by the crisis – access to funding,
credit quality, business/network diversification and strength the
determinants of future success
 New entrants might take opportunities
 Winners – new entrants or consolidated players, with appropriate risk
appetite for CEE, able to leverage on strong funding, capital and network
positioning and sound risk
 UCG ready to take the upside – the Group can leverage on diversification,
a strong regional network and newly raised capital to strengthen and
optimize its positioning in the market
3
AGENDA
4
1.
How the CEE banking landscape has changed in the short term
2.
Banking through the crisis
3.
International players - UniCredit ready to take the upside
Signs of recovery: still 2010 implies growth below potential
and countries confirm to be very different
Real GDP growth (%)
Country
Rank
1
2
3
4
High macro
vulnerability
Russia
Baltics
PL
CZ
SK
SI HU
HR BH
Ukraine
RO
BG
Turkey
5
2010
2011
1.4
1.8
2.6
Hungary
-6.1
-0.6
2.4
Czech Rep.
-4.2
1.4
3.5
Slovakia
-5.4
2.1
3.5
Slovenia
-8.0
0.5
1.4
Lithuania
-17.0
-7.0
4.4
Latvia
-16.3
-5.4
6.0
Estonia
-15.3
-3.8
5.1
Romania
-7.5
0.4
3.5
Bulgaria
-6.3
-2.5
2.0
Croatia
-6.2
-1.5
1.2
Bosnia-H.
-3.0
-1.0
0.8
Serbia
-4.8
-0.7
1.3
Turkey
-5.2
3.2
4.5
Ukraine
-13.5
1.7
3.3
Russia
-7.4
1.3
4.1
Kazakhstan
-1.6
2.5
5.0
CEE-17
-5.8
1.4
3.7
Poland
5
Low macro
vulnerability
2009
KZ
Note: (1) CEE-17: Poland, Hungary, Czech R., Slovakia, Slovenia, Lithuania, Latvia, Estonia, Romania, Bulgaria, Croatia,
Bosnia-H, Serbia, Turkey, Ukraine, Russia and Kazakhstan
Source: UniCredit Group CEE Strategic Analysis, CEE Research
Drivers of growth differ among countries. Recovery comes
from the production sector, but both investment and
consumption remain subdued
Investments
Consumption
(real % growth)
(real % growth)
2011
2011
2010
2010
3.7
2009
2009
-1.7
-6.9
2008
1.9
0.6
0.1
4.1
CE
2008
4.4
2.3
2.2
-0.9
-2.5
SEE
-12.8
SEE
-8.3
5.1
14.1
2.3
2.3
-6.0
-6.0
Baltics
-33.2
Baltics
-19.8
-2.2
-9.2
5.6
3.6
-18.4
6.7
2.7
Other
-8.2
4.1
-40.0
6
-30.0
-20.0
-10.0
CE
0.0
Source: UniCredit Group CEE Research
10.0
Other
8.2
20.0
-30.0
-20.0
-10.0
0.0
10.0
Out of a “liquidity-crisis mood”, but funding availability and
cost remain a constraint for CEE banking
CEE external liabilities(1)
Banking sector external liabilities
(% on total liabilities, June 2009)
€ bn
25%
450
Volumes (l.s.)
% on total liab. (r.s.)
400
Slovakia
Czech Rep.
350
300
15%
250
Turkey
Russia
200
10%
150
100
5%
50
Serbia
Poland
Croatia
0
0%
2005
2006
2007
2008
2009F
Country Risk Premium
5Y CDS (USD, bp)
3,274
Bulgaria
8.5%
10.5%
16.0%
17.4%
18.7%
21.5%
23.8%
Ukraine
26.8%
Romania
27.2%
1,168
Bosnia
Dec 08
October 28, 2009
1,000
3.5%
20%
29.5%
Slovenia
30.3%
Hungary
31.0%
750
500
Kazakhstan
7
(1) CEE-17
Source: UniCredit Group CEE Strategic Analysis
Kazakhstan
Russia
Ukraine
Turkey
Croatia
Bulgaria
Romania
Latvia
Slovakia
Estonia
Czech
Rep.
0
Hungary
Lithuania
Poland
250
Latvia
32.7%
44.6%
52.5%
53.9%
Banks are rebalancing the loans/deposits gap
Loan-to-deposits ratio
Total banking system Loans(1)
Total banking system deposits(1)
(banking system level, %)
(June 09 vs Dec 08 % change FX adj)
(June 09 vs Dec 08 % change FX adj)
Dec-08
CEE
Poland
Hungary
Czech R.
Slovakia
Slovenia
Jun-09
CEE
112
83
141
Estonia
195
Latvia
Lithuania
240
185
Bulgaria
Serbia
Russia
Kazakhstan
8
Estonia
Latvia
Lithuania
Bulgaria
Romania
Croatia
Bosnia-H.
Serbia
125
122
127
124
Romania
Croatia
Bosnia-H.
Turkey
Ukraine
Poland
Hungary
Czech R.
Slovakia
Slovenia
107
132
71
141
80
223
120
166
Turkey
Ukraine
Russia
Kazakhstan
-0.2
CEE
3.1
-2.4
1.4
1.0
1.6
-1.4
-3.5
-5.2
4.8
5.5
7.3
-6.1
11.5
Estonia
Latvia
Lithuania
1.5
-3.0
3.3
-0.4
10.6
0.2
-0.1
-0.8
-1.2
Poland
Hungary
Czech R.
Slovakia
Slovenia
3.7
Bulgaria
Romania
Croatia
Bosnia-H.
Serbia
Turkey
Ukraine
Russia
Kazakhstan
0.6
-0.9
0.4
0.0
1.7
-2.3
-2.2
6.7
2.4
-8.8
5.5
6.8
Notes: (1) Nominal growth rates are corrected for the exchange rate changes weighted by the relevance of FX in loans' volumes in the previous period.
This allows to have an idea of growth of loans and deposit which is independent from the pure effect of depreciation of the currency
Source: UniCredit Group CEE Strategic Analysis
Deterioration in credit quality is today’s challenge
Non-performing loans ratio (total banking system, in % of gross loans)(1)
Q2 2008
Q3 2008
Q4 2008
Q1 2009
Q2 2009
YTD
Poland
4.5
4.1
4.2
5.0
6.0
176bp
Hungary
3.8
4.1
4.5
5.2
6.5
196bp
Czech R.
2.7
3.0
3.3
3.7
4.3
103bp
Slovakia
2.9
2.9
3.2
3.5
4.2
103bp
Slovenia
-
-
2.9
-
-
-
1.5
1.8
2.4
4.0
6.2
379bp
Bulgaria
2.7
2.8
3.2
3.2
4.4
114bp
Romania
4.6
5.1
6.3
9.1
11.3
497bp
Croatia
4.8
4.8
4.8
5.1
-
-
3.0
3.0
3.5
4.1
4.6
113bp
Ukraine
-
-
17.4
-
29.9
1250bp
Russia
9.0
8.9
12.7
13.9
16.0
330bp
Kazakhstan
7.4
7.5
10.8
16.2
26.1
1533bp
Central Europe
Baltics
SEE
Other
Turkey
(1) Incl. loans classified under substandard, doubtful and loss categories; in Ukraine, data refer to problem credits
(overdue and doubtful); in Kazakhstan, data refer to doubtful loans under category 2,4,5 and bad loans; in
Romania, data refer to loans classified under doubtful and loss categories
9
Source: UniCredit Group CEE Strategic Analysis, local CBs
AGENDA
10
1.
How the CEE banking landscape has changed in the short term
2.
Banking through the crisis
3.
International players - UniCredit ready to take the upside
The long term potential of the CEE region is intact
Financial deepening process
Real income convergence in CEE (1)
(% of GDP and PPS in dollar terms)
100%
GDP per capita (PPP) % of Eurozone
Western Europe
800
90%
80%
60%
50%
40%
30%
20%
10%
Bosnia H.
Ukraine
Serbia
Kazakh.
Belarus
Bulgaria
Romania
Turkey
Russia
Croatia
Poland
Latvia
Lithuania
Hungary
Estonia
Slovak R.
Czech R.
Euro area
0%
Total banking assets
70%
600
400
200
CEE
0
5,000
15,000
25,000
35,000
45,000
GDP per capita
The story of economic and income convergence towards the standards of Western countries, as
well as the potential related to the banking sector penetration gap, continue to hold
11
(1) CEE incl. new EU member states, Croatia and Turkey; calculation based on GDP per capita expressed in dollar terms
Source: UniCredit Group CEE Strategic Analysis, IMF, ECB
CEE banking - the medium-term scenario implies new
constraints and new competitive advantages
KEY CONSTRAINTS
KEY COMPETITIVE ADVANTAGES
More balance growth model – still
with external funding
 Lending tied to funding strategies, but external funding still necessary
 Strong advantage for banks with a widespread network and/or strong
and motivated foreign owner
More moderate “convergence”
 Retail network crucial for deposit gathering
 Lending growth to re-start from corporate
 In retail, a structural gap holds for mortgage, while consumer credit already
at international standards
Change in demand – simpler
products / services
In the short term, less retail lending and less investment financing. More
trade financing and in general services
Cost control
The crisis opening the way to leaner structures and deflating “bubbles” in
staff and network costs
Risk appetite and cost of risk
Quality of existing loan portfolio key in determining whether banks will be
forced to concentrate on risk control or might start leveraging on new
opportunities
■ Stronger state role
Substantial change in the
competitive framework
12
■ New entrants profiting from others’ risk aversion
■ Systemic banks with long term approach might benefit, provided
adequate risk appetite
Financial penetration moderating but continuing; credit
expansion more tied to deposits’ growth
After some re-balancing in 2009 and H1 2010 loan-to-deposits ratio in CEE1 to gradually
increase over time
140
EMU Loans (%GDP): 127
EMU Deposits (% GDP): 107
120
100
Our forecast
80
60
40
20
0
2005
2006
2007
CEE Loans (% GDP)
13
2008
2009
2010
CEE Deposits (% GDP)
2011
2012
2013
2014
2015
CEE Loan-to-deposits ratio (%)
(1) CEE aggregate including all EU member states, Bosnia, Serbia, Croatia, Turkey, Russia, Ukraine and Kazakhstan
Source: UniCredit Group CEE Strategic Analysis
A structural change in the cost structure
Cost-to-income ratio (%)(1)
 Cost savings programmes
coming into the spotlight
60
CE
SEE
Baltics
Broader Europe
55
 Branch expansion plans
halted during the crisis by
almost all banking groups
operating in the region
50
 Players who want to catch
the region’s upside need to
restart some investment
activities as soon as
market conditions allow
45
40
2005
15
2007
2009
2011
2013
2015
(1) CE: Czech R., Hungary, Poland, Slovakia, Slovenia; SEE: Bosnia, Bulgaria, Croatia, Romania, Serbia; Other: Kazakhstan, Russia, Ukraine, Turkey
Source: UniCredit Group CEE Strategic Analysis
Non-performing loans to peak in 2010, but cost of risk
already converging
Non performing loans, in % of gross loans (1),(2)
Cost of Risk (provisions(3) in % Ø gross loans)(2)
8%
23%
CE
SEE
20%
Baltics
Other
CE
SEE
7%
18%
Baltics
Other
6%
15%
5%
13%
4%
10%
3%
8%
2%
5%
1%
3%
0%
0%
2005
16
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
(1) Substandard, doubtful and loss on average gross loans; in Ukraine, data refer to problem credits (overdue and doubtful); in Kazakhstan, data refer to doubtful
loans under category 2,4,5 and bad loans; in Romania, only doubtful and loss; (2) CE: Czech R., Hungary, Poland, Slovakia, Slovenia; SEE: Bosnia, Bulgaria,
Croatia, Romania, Serbia; Other: Kazakhstan, Russia, Ukraine, Turkey; (3) Generic + Specific provisions. Source: UniCredit Group CEE Strategic Analysis
Banking profitability subdued in the short term as cost of
risk is the main cause. Single players can perform quite
differently from the market
Return on Assets
Size of banking profits of
each period
3.0%
TK
2.5%
TK
TK
Russia
TK
2.0%
SEE
1.5%
UA and KZ
CE
SEE
CE
1.0%
CE
Russia
SEE
0.5%
Baltics
0.0%
-0.5%
-1.0%
Central Europe
Russia
SEE
UA and KZ
Turkey
Baltics
Russia
Baltics
Baltics
UA and KZ
UA and KZ
-1.5%
avg 2007-'08
-2.0%
18
Source: UniCredit Group CEE Strategic Analysis
2009
avg 2010-'11
avg 2011-'15
AGENDA
19
1.
How the CEE banking landscape has changed in the short term
2.
Banking through the crisis
3.
International players - UniCredit ready to take the upside
UniCredit Group is the largest player in CEE, well diversified,
with 12% of group assets in the region
DATA AS OF
2008
UniCredit
53%
Raiffeisen
2051%
Erste
157%
KBC
112%
Total Assets(1)
EUR bn
Net Profit(2)
EUR mn
121.6
2,577
85.4
79.3
(4)
1,078
Number of
Branches
Countries of
presence(3)
4,005
19
3,231
1,569
2,099
71.6
309
1,940
65.9
1,201
SocGen(5)
41%
IntesaSP
5%
42.5
186
1,781
OTP
n.s.
35.2
958
1,573
CEE, % share in
Group Assets
12
16
54
7
39
12
2,609
20
16
11
9
6
7
100
..% Contribution of CEE in Group Net Profit (After tax, after minority interests)
20
Notes: (1) 100% of total assets, and profit after tax (before minority interests) for controlled companies (stake > 50%) and pro rata for non- controlled companies (stake < 50%). (2) After tax,
before minority interest. (3) Including direct and indirect presence in the 25 CEE countries, excluding representative offices. (4) KBC Group recorded a loss in 2008. (5) SocGen including
ProFin Bank in Ukraine.
Source: UniCredit Group CEE Strategic Analysis
Winners and losers - times of change bring strong
opportunities for those able to catch them
21
Source: UniCredit Group CEE Strategic Analysis
Winners to be those who enjoy an adequate risk appetite and
can leverage on diversification and strong funding and network
base
CEE International players - Key strategic drivers(1)
UCG
Raiffeisen
Erste KBC SoGen
Intl
Profit potential of top players(2), (3)
Intesa
OTP
Assets in CEE, %
of Group Assets
12
54
39
20
6
7
100
Group T1 Ratio(4), %
8.5
8.9
8.1
10.8
9.9
8.1
12
CEE Loans(5)/
Deposits, %
118
127
95
98
96
118
129
CEE GAP(6), %
Group Assets
1.5
10.1
3.8
1.4
0.5
1.1
14.2
Group CDS
(current), bps
81
248
128
157
84
47
-
~ 200
> 300
~ 200
n.a.
n.a.
CEE Cost of Risk,
bps
~ 200(7) > 300
Note: (1) T1 ratio is pro-forma Jun. 2009; CDS as of Oct. 2009, Cost of Risk as of Jun.2009, other data as of Dec. 2008; (2) ROA and CDS for each player
have been calculated as weighted average of each country of presence (CEE17 perimeter, weighted for total assets of the player in each market); (3) The
dimension of the balls is total controlled assets in CEE (2008); (4) It includes private and public T1 injections announced till mid October 2009; (5) Net
loans; (6) CEE gap = sum of various (loans-deposits) only if loans > deposits. Loans are net loans; (7) Calculated for "International Subsidiary Banks",
which include also Bank of Alexandria in Egypt
22
Source: UniCredit Group CEE Strategic Analysis, Bloomberg
Good market potential in 2010: UCG well positioned to catch it
high
Czech R.
Russia Turkey
Poland
~56% of UCG
CEE Revenues
Slovakia
Slovenia
Romania
Serbia
Hungary
Croatia
Kazakhstan
~79% of UCG
CEE Revenues
Bulgaria
Bosnia-H.
Ukraine
Weight in total UCG
CEE Revenues (full
year 2008&H1 2009
quarterly average)
Baltics
low
Economy/banking growth potential vs.
Risk environment
CEE REGION: ASSESSMENT OF COUNTRY AND BANK POTENTIALS(1)
high
low
UCG Banks positioning
23
Note: (1) Ranking on Y axis taking into account countries’ macro and banking growth potential (based on expected GDP growth, level of financial deepening,
relevance of mortgage market etc.) and risk factors (credit quality, funding gap etc.); ranking on X axis taking into account relevance of UCG CEE banks in the
local market, potential for expansion and structure, quality and funding position compared to market average. Source: UniCredit Group CEE Strategic Analysis
Local competition likely to change: network optimization,
some new entrants, state in CIS countries
Top 10 banks by total assets (Rank as of Dec.2008)
24
Source: UniCredit Group CEE Strategic Analysis
Conclusions
 Economic recovery, but risk and volatility remain. Strong regional
differentiation is confirmed
 Credit quality and risk appetite today’s key constraints for CEE
banking
 Medium term: “CEE convergence story” holds, but the banking
model has to be rebalanced
 The changing competitive environment means also opportunities
 Winners – new entrants or consolidated players, with appropriate
risk appetite for CEE, able to leverage on strong funding position
(both through a strong domestic network or through international
channels) and with sound risk
 UCG ready to take the upside – can leverage on diversification,
strong regional network and newly raised capital to strengthen and
optimize its positioning in the market
25