financial results after 1q 2008 record high net profit, finalizing ingegration warsaw, 8 may 2008
DESCRIPTION
Stopka prezentacji 3 AGENDA MACROECONOMIC ENVIRONMENT Q FINANCIAL PERFORMANCE INTEGRATION UPDATETRANSCRIPT
FINANCIAL RESULTS AFTER 1Q 2008
RECORD HIGH NET PROFIT, FINALIZING INGEGRATION
Warsaw, 8 May 2008
Stopka prezentacji2
FINANCIAL RESULTS AFTER 1Q 2008
1Q 2008
Net income (PLN mil.)
ROE (%)
1 138
22.8
1Q 2007
927
22.4
+22.8%
+0.4p.p.
Change
2007 results restated for comparable purpose
Stopka prezentacji3
AGENDA
MACROECONOMIC ENVIRONMENT Q1 2008 FINANCIAL PERFORMANCE INTEGRATION UPDATE
Stopka prezentacji4
POLISH ECONOMY TRENDS
15,918
16,6
26,2
15,5
5,3
18,520,8
19,8
9
6,4
3,9
1,2
8,610,1
3Q 04 4Q 04 1Q 05 2Q 05 3Q 05 4Q 05 1Q 06 2Q 06 3Q 06 4Q 06 1Q 07 2Q 07 3Q 07 4Q 07 1Q08F
GDP (% Y/Y) INVESTMENTS (% Y/Y) CONSUMPTION (% Y/Y)
5,44,4
3,8
5,2
6,9
4,7
5,2
4,4
5,1
5
1,6
2,7
1,4
2,5 2,5
3Q 04 4Q 04 1Q 05 2Q 05 3Q 05 4Q 05 1Q 06 2Q 06 3Q 06 4Q 06 1Q 07 2Q 07 3Q 07 4Q 07 1Q08F
4,8
6,36,2
6,16,66,46,4
6,6
7,2
4,34,0
2,43,2
4,45,4
3Q 04 4Q 04 1Q 05 2Q 05 3Q 05 4Q 05 1Q 06 2Q 06 3Q 06 4Q 06 1Q 07 2Q 07 3Q 07 4Q 07 1Q08F
Stable growth driven mainly by investments Still reasonable export growth Consumption boom is still ahead of the economy
Stopka prezentacji5
POLISH ECONOMY TRENDS
3
4,2 4,144
3,6
2,31,5
2,32,62,3
2,32,5
1,6 1,9
6,155,945,65
5,565,565,215,15,034,814,714,44,44,244,22
4,19
5,755,55,255,0 5,0
4,754,754,754,5
4,54,254,25
4,004,004,0
I07 II07 III07 IV07 V07 VI07 VII07 VIII07 IX07 X07 XI07 XII07 I08 II08 III08
Inflation EOP 3M WIBOR REF. RATE CPI NET
CPI growth expected to pick in mid 2008, allowing for finishing tightening cycle at 6-6,25% level
Stopka prezentacji6
BANKING SECTOR TRENDS
DYNAMIC OF HOUSEHOLDS AND CORPORATE LENDING IN THE POLISH BANKING SECTOR (% Y/Y)
DYNAMIC OF HOUSEHOLDS AND CORPORATE DEPOSITS IN THE POLISH BANKING SECTOR (% Y/Y)
TOTAL SECTOR LENDING (% Y/Y) TOTAL SECTOR DEPOSITS (% Y/Y)
39,637,737,7 37,337,9
33,4
31,125,428,8
26,022,018,4
16,8 25,2
24,424,422,217,5
14,39,8
5,23,9
2,51,10,4
-3,7
-10,0
-5,0
0,05,0
10,0
15,0
20,0
25,0
30,035,0
40,0
45,0
1Q05
2Q05
3Q05
4Q05
1Q06
2Q06
3Q06
4Q06
1Q07
2Q07
3Q07
4Q07
1Q08
Households Corporate
6,1
17,5
8,8
10,7
8,36,4
8,2 10,310,26,65
8,68,8
6,5
19,4
14,4
23,4
29,6
25,9
19,421,8
17,817,1
21,7
14,3
24,5
-2
3
8
13
18
23
28
33
38
1Q 05 2Q 05 3Q 05 4Q 05 1Q 06 2Q 06 3Q 06 4Q 06 1Q 07 2Q 07 3Q 07 4Q 07 1Q 07
Households Corporate
29,526,8
30,031,0
29,2
23,4
8,6
19,216,0
13,6
13,310,9
5,6
147
101316192225283134
1Q 05 2Q 05 3Q 05 4Q 05 1Q 06 2Q 06 3Q 06 4Q 06 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08
15,115,215,4
17,7
11,912,6
14,515,2
12,1
10,3
12,6
14,5
12,2
7
9
11
13
15
17
19
1Q 05 2Q 05 3Q 05 4Q 05 1Q 06 2Q 06 3Q 06 4Q 06 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08
Source: NBP
Stopka prezentacji7
POLISH ECONOMY PRESENTS ATTRACTIVE MIX OF GROWTH AND RESILIENCE
-25
-20
-15
-10
-5
0
5
10
15
Cze
ch R
ep.
Pola
nd
Slov
enia
Hun
gary
Slov
akia
Turk
ey
Kaz
akhs
tan
Lith
uani
a
Rom
ania
Esto
nia
Bul
garia
Latv
ia
Current Account as % GDP Real GDP gr.
Stopka prezentacji8
RELATIVELY LOW SHARE OF EXPORT, SLIGHTLY EXPOSURE TO US ECONOMY
25,8%
6,8%
6,0%
5,9%5,5%4,0%
41,4%
4,6%Germany Italy France GBCzech Rep. Russia Ukraine Other
MAIN DIRECTIONS OF EXPORT
Share of export to US at around 2%, limiting direct impact of US slowdown
Export to GDP at 41%, one of the lowest in CEE
EXPORT/GDP
41%
68%
79%
Poland Hungary Czech Rep.
US about 2%
Stopka prezentacji9
AGENDA
MACROECONOMIC ENVIRONMENT Q1 2008 FINANCIAL PERFORMANCE INTEGRATION UPDATE
Stopka prezentacji10
NET INCOME AND OPERATING INCOMENET INCOME (PLN mil.)
927767
1138
1Q 07 4Q 07 1Q 08
+22.8%+48.4%
OPERATING INCOME (PLN mil.)
1218
932
1412
1Q 07 4Q 07 1Q 08
+15.9%+51.5%
2007 results restated for comparable purpose1Q 07 includes ca 144 mil. net gain on sale of CU PTE1Q 08 includes ca 350 mil. net gain on sale of investment banking part of CDM
Net income up +22.8% y/y Net income adjusted for one-off transactions kept at a very good level of Q1 07, despite adverse capital market conditions Profitability improved further with ROE at 22.8%
ROE (%)
22,822,4
1Q 07 1Q 08
+0,4 p.p.
Stopka prezentacji11
REVENUES AND COSTSTOTAL REVENUES (PLN mil.)
2115 19832341
1Q 07 4Q 07 1Q 08
+10.7%+18.0%
COST / INCOME RATIO (%)
39,742,4
1Q 07 1Q 08
- 2.7 p.p.
Revenues up by 10.7% y/y, at similar level as Q1 07 on adjusted basis Cost/income ratio below 40%
2007 results restated for comparable purpose1Q 07 includes ca 178 mil. revenues on sale of CU PTE1Q 08 includes ca 435 mil. revenues on sale of investment banking part of CDM
+3.6%-11.6%
OPERATING EXPENSES (PLN mil.)
Stopka prezentacji12
STRUCTURE OF REVENUES
REVENUES (PLN mil.)
1012 1159
708669
395
1137
611
593156
1Q 07 4Q 07 1Q 08
Net interest income Net fee & commission income Other
% ch1Q 08/4Q 07
% ch1Q 08/1Q 07
+50.0%
-13.8%
+12.4%
+280.4%
-8.6%
-1.9%
2 115 1 983 2341
+10.7%
+18.0%
Growing of NII allowed offsetting pressure on fees, impacted by adverse capital market
conditions
2007 results restated for comparable purpose1Q 07 includes ca 178 mil. revenues on sale of CU PTE1Q 08 includes ca 435 mil. revenues on sale of investment banking part of CDM
Stopka prezentacji13
NET INTEREST INCOME AND NET INTEREST MARGIN
1 0121 159 1 137
1Q 07 4Q 07 1Q 08
+12.4%
-1.9%
NET INTEREST INCOME (PLN mil.)
3,6%4,0% 4,2%
1Q 07 4Q 07 1Q 08
NET INTEREST MARGIN
NII up by 12.4%y/y, driven by improved net interest margin
2007 results restated for comparable purpose
Stopka prezentacji14
CUSTOMER SAVINGS
CUSTOMERS SAVINGS (PLN mil.)
- savings of retail customers
38 484 39 934
50 007
23 20528 718
45 341
DEC'07 MAR'08
Retail Mutual Funds (*) Corporate
117 208 108 480
-7.4%
-9.3%
-19.2%
+3.8%
-6.0%63 13967 201
* total PPIM mutual funds
Retail deposits up 4,2% YTD, capturing redemptions from mutual funds Corporate deposits reflecting negative market dynamic Zloty strengthening in Q1 affected savings by ca. 1bl. PLN
Stopka prezentacji15
MUTUAL FUNDS
10,6%
31,4%
19,1%48,9%
52,9%19,9%
40,5%
48,7%28,0%
1Q 07 4Q07 1Q 08
Bonds Balanced Equity
22,3% 21,3% 21,2%
1Q 07 4Q 07 1Q 08
45,6%
31,8%
22,6%
MUTUAL FUNDS – VOLUMES (PLN mil.)
MARKET SHARE
1Q 2008 MUTUAL FUNDS ASSETS STRUCTURE
STRUCTURE OF MF SOLD BY PEKAO
Decrease in assets under management, caused by adverse capital markets conditions Market share stabilized, confirming leading position
26 171
28 718
24 394 23 840 23 205
1Q 07 4Q 07 I 08 II 08 III 08
Stopka prezentacji16
LENDING
24 34924 236
49 596 50 349
DEC'07 MAR'08Retail Corporate
73 832 74 698
CUSTOMERS LOANS* (PLN mil.)
+1.2%
+1.5%
+0.5%
* Nominal value
Customers loans up 1.2% YTD
Selective growth in corporate volumes, reflecting focus on return on risk weighted
assets
Policy of zloty denominated mortgages maintained
Stopka prezentacji17
FEE AND COMMISSION INCOME
FEE AND COMMISSION INCOME (PLN mil.)
340 280 315
88102 93
7381 74
208206 129
1Q 07 4Q 07 1Q 08
Accounts & other Cards Lending Mutual Funds
-8.6%
-37.6%
-8.7%
+12.8%
+1.3%
-38.1%
+6.1%
-7.3%
708 669 611
-13.8%-8.6%
% ch1Q 08/4Q 07
% ch1Q 08/1Q 07
Fee income coming from mutual funds and brokerage activity impacted by
adverse
market conditions
2007 results restated for comparable purpose
Stopka prezentacji18
COSTS
COSTS (PLN mil.)
456 499 472
344
96105
100
358448
1Q 07 4Q 07 1Q 08
Personnel costs Non-personnel+BGF Depreciation
-5.2%
-5.4%
-20.1%
+3.5%
+3.4%
+4.1%
897 1051 929% ch
1Q 08/4Q 07% ch
1Q 08/1Q 07
+3.6%
-11.6%
Total costs growth at 3.6%, below inflation
2007 results restated for comparable purpose
Stopka prezentacji19
ASSET QUALITYNPL RATIO
88,5% 84,3% 87,1%
MAR'07 DEC'07 MAR'08
PROVISION COVERAGE RATIO0,50% 0,49%
0,28%
1Q07 2007 1Q 08
COST OF RISK
Further improvement of assets quality thanks to effective risk management and
positive macroeconomic scenario Further increase in coverage ratio to 87.1%
68 574 69 616
5 6045 761
DEC'07 MAR'08
Performing Impaired
7.8% 7.4%
-2.7%
+1.5%
Stopka prezentacji20
AGENDA
MACROECONOMIC ENVIRONMENT Q1 2008 FINANCIAL PERFORMANCE INTEGRATION UPDATE
Stopka prezentacji21
MIGRATION
198 of branches migrated (70%)
80% of retail customers migrated
100% of corporate customers migrated
Migration process in line with timetable, will finish by
the end of May
Stopka prezentacji22
START OF OPERATIONAL INTEGRATION DID NOT CHANGE LOW CUSTOMER CHURN OBSERVED SO FAR
Very limited customer churn
Churn of customer accounts%
Before spin-offannouncement(1)
0.72
After spin-offannouncement(2)
0.77
After DayOne(3)
0.76
(1) Monthly average of period April 2005 – March 2006(2) Monthly average of period April 2006 – November 2007(3) Monthly average of period December 2007 – March 2008
Stopka prezentacji23
NEW PEKAO IS ENTERING SECOND PHASE, EXPLOITING POTENTIAL OF JOINT ORGANIZATION
Phase II action plan following IT migration, finalization of 3 years strategic plan
Enhancement of current account offering to increase acquisition in attractive segments
Competitive savings products to enhance further Bank’s proposition
Expansion of retail on-line presence
Stepping-up SME distribution model – establishing new business centers and dedicated corners in selected branches and new dedicated internet platform for SMEs
Stopka prezentacji24
SUMMARY
Record high net profit crossed 1.1 bl PLN with ROE 22.8% Migration in the last phase with 80% of customers already on Pekao IT platform, allowing focus on business development Three years plan preparation progressing, confirming focus on 3 dimensions; growth, customers and employees satisfaction
Stopka prezentacji25
APPENDIX
Stopka prezentacji26
UNEMPLOYMENT (%) VS. WAGES (gr. y/y)
Source: Central Statistical Office
0
5
10
15
20
25
4Q04
1Q05
2Q05
3Q05
4Q05
1Q06
2Q06
3Q06
4Q06
1Q07
2Q07
3Q07
4Q07
1Q08
0
2
4
6
8
10
12
Unemployment Wages gr.
POLISH ECONOMY TRENDS (3)
Stopka prezentacji27
BANKING SECTOR - MORTGAGE
62,2
56,955,2
5758,6
63,8
66,56765,3
63,562
60,4
56,5 58
4Q 04 1Q 05 2Q 05 3Q 05 4Q 05 1Q 06 2Q 06 3Q 06 4Q 06 1Q 07 2Q 07 3Q 07 4Q 07 1Q 08
MORTGAGE FX/TOTALMORTGAGE / GDP
3,5
10,0
7,3
5,13,92,5
1
3
5
7
9
11
13
2002 2003 2004 2005 2006 2007
Source: NBP
Stopka prezentacji28
BANKING SECTOR TRENDS
DYNAMIC OF HOUSEHOLDS LENDING IN THE POLISH BANKING SECTOR (% YTD)
DYNAMIC OF HOUSEHOLDS DEPOSITS IN THE POLISH BANKING SECTOR (% YTD)
DYNAMIC OF CORPORATE DEPOSITS IN THE POLISH BANKING SECTOR (% YTD)
DYNAMIC OF CORPORATE LENDING IN THE POLISH BANKING SECTOR (% YTD)
-2
3
8
13
18
23
28
33
38
I0 II III IV V VI VII VIII IX X XI XII
2004 2005 2006 2007 2008
-3-2-10123456789
101112
I II III IV V VI VII VIII IX X XI XII
2004 2005 2006 2007 2008
-6-4-202468
10121416182022242628
I II III IV V VI VII VIII IX X XI XII
2004 2005 2006 2007 2008
-5
0
5
10
15
20
25
30
35
40
I II III IV V VI VII VIII IX X XI XII
2004 2005 2006 2007 2008
Source: NBP