merrill lynch banking & insurance conference “managing
TRANSCRIPT
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Merrill Lynch Merrill Lynch BankingBanking & & Insurance ConferenceInsurance Conference
““ManagingManaging ComplexityComplexity””
Giorgio Giorgio SprianoSpriano
Head of Head of CorporateCorporate DevelopmentDevelopment
77thth OctoberOctober 20042004
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DISCLAIMER
This presentation has been prepared by Sanpaolo IMI and provides information on the management’s business plans and strategies. As such, the presentation contains forward-looking information which reflects management’s current views with respect to certain future events and the financial performance of the Group. These views are based upon assumptions of future events which may not prove to be accurate and actual results may differ materially from those projected or implied in the forward-looking statements. Undue reliance should not, therefore, be placed on such forward-looking information and Sanpaolo IMI assumes no responsibility to update any such forward-looking information.
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FROM STRUCTURAL DRIVERS TO CHANGE
0
100000
200000
300000
400000
500000
600000
31/1
2/19
9531
/12/
1996
31/1
2/19
9731
/12/
1998
31/1
2/19
9931
/12/
2000
31/1
2/20
0131
/12/
2002
31/1
2/20
03
0
2
4
6
8
10
12
Italian mutual funds Euribor
FROM STRUCTURAL DRIVERS TO CHANGE
From the lira to the euro
From 15,500 branches (in 1989) to 30,500 (in 2003)From tightly regulated to a deregulated
banking industry
From 75% stake controlled to more than 80% assets in
public companies
From state ownership to public companies
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TO GREATER COMPLEXITY IN THE MACROTO GREATER COMPLEXITY IN THE MACRO--SCENARIO (I)SCENARIO (I)
80.0%
100.0%
120.0%
140.0%
160.0%
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
(1986=100%)
Industrial production in US
Industrial production in Europe
Industrial production in Italy
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TO GREATER COMPLEXITY IN THE MACROTO GREATER COMPLEXITY IN THE MACRO--SCENARIO (II)SCENARIO (II)
80,0%
100,0%
120,0%
140,0%
160,0%
180,0%
200,0%
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
0,0%
5,0%
10,0%
15,0%
20,0%
25,0%
30,0%
35,0%
Ho us eho ld s pending P ublic s pendingDis po s able inco me Savings ra tio (rhs )
(in % o f d ispo sab le inco me)(in 199 5 p rices ; 19 8 0=10 0%)
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TO GREATER COMPLEXITY IN THE SAVINGS MARKET (I) TO GREATER COMPLEXITY IN THE SAVINGS MARKET (I)
Mutual funds (% GDP)
19.6% 20.2%
11.3%
27.7%32.8%
40.0%
22.7%
30.4%
42.5%
17.0%
Italy UK Germany France Spain
1997
2003
0%
20%
40%
60%
80%
100%
Italy UK Germany France Spain
OtherLiquidityBondsBalancedEquity
Mutual funds breakdown as of 31/12/2003
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TO GREATER COMPLEXITY IN THE SAVINGS MARKET (II) TO GREATER COMPLEXITY IN THE SAVINGS MARKET (II)
Breakdown of Italian life insurance stock
6.0%4.9%
3.2%2.4%
8.6%
France Italy Spain Germany UK
2000 2001 2002 2003
Life insurance penetration levels
52%48%
Traditional
Unit linked,index linked
Source: Ania, 2003
Non-life insurance penetration levels
12.5%
12.3%
14.7%
60.5%
Motor Accident & Health Property protection Other
Source: Ania, 2003
Breakdown of main non-life classes in italy (%)
3.2%2.6%
3.2%3.8%
France Italy Spain Germany UK
2000 2001 2002 2003
4.8%
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TO GREATER COMPLEXITY IN REGULATORY ISSUESTO GREATER COMPLEXITY IN REGULATORY ISSUES
! IFRS
! Basel II
! Proposed legislation on savings market
! Pension reform
1992/93
“Amato Reform”
1995
“Dini Reform”
1997
“Prodi Reform”
! Increasing the retirement age ! Introducing contributory pensions ! Incentivising complementary pension schemes
2004
“Maroni Reform”
! Retirement age further increased (starting from 2008) ! Possibility of choice between company pension schemes and individual
schemes! Fiscal benefits increased for lower income workers and those close to
retirement
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ADDRESSING THE CHALLENGE ADDRESSING THE CHALLENGE
! Integration of branch network
! Concentration of marketing strategies
! Extending customer service models
! Building on brand value
Strengthening the core branch banking
business
In established businesses:
! Asset Management
! Life business Specialisation
In new businesses:
! Non-life business
! Consumer credit
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TECHNICAL INTEGRATION OF BRANCH BANKING NETWORK COMPLETEDTECHNICAL INTEGRATION OF BRANCH BANKING NETWORK COMPLETED
IT merger of Banca Popolare dell’Adriatico
(10th October 04)
Merger of Crup and Carigo
Rebranding of all networks banks
Migration of Cassa di Risparmio in Bologna
onto SPIMI IT platform (April 04)
Full acquisition of Banca Popolare dell’Adriatico
20042003
Migration of Cassa di Risparmio di Venezia
onto SPIMI IT platform (March 04)
Integration of Banco di Napoli
Migration of Friulcassa onto SPIMI IT platform
(June 04)
Integration of Cerea Bank in Cariparo
Migration of Cariparo onto SPIMI IT platform
(July 04)
Merger of Cardine Finanziaria
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ONE NETWORK BUT WITH LOCAL BRANDSONE NETWORK BUT WITH LOCAL BRANDS
≥ 5 % - < 12%≥ 2 % - < 5%≥ 1% - < 2%< 1%
≥ 12 % - < 20%≥ 20%
Local brands national coverage
Retail Headquarters
! Single head office on single operating and back office platform
! Divisional model to meet needs of customer segments and ensure necessary co-ordination
Area Management
! Local character maintained through brand and legal entity
! Empowers area management structure to manage and coordinate different local market and customer needs
Branch network
! 3,000 branches with good national foot print and high concentration coverage
! Specialisation through dedicated branches and modular approach to branch business
! Multi-channel approach
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ONE NETWORK TO SERVE ALL CUSTOMER SEGMENTSONE NETWORK TO SERVE ALL CUSTOMER SEGMENTS
BRANCH BANKING INTEGRATION AND SPECIALISATION
Asset management
Wealth Management (life insurance and asset management)
Insurance
Banco di Napoli
SME
Private & RetailSanpaoloNetwork
Cardine
Investment banking
Pre-integration of branch network
Investment banking
Post-integration of branch network
Marketing strategies are developed within product factories
Marketing strategies are developed within the network
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LEVERAGING ON CUSTOMER SERVICE MODELSLEVERAGING ON CUSTOMER SERVICE MODELS
Cultura
Strumenti
!Investment Policy
Objectives
! To develop the relationship with customers
! To offer a higher quality service
! To improveprofitability
Culture
Management Analysis
Instruments
Areas
!Communication events!Training
!CRM Workstation!Market and product information
!Customer portfolio analysis− Reporting− Asset allocation− Model portfolio simulation
!Portfolio benchmarking!Commercial analysis
Portfolio details Risk analysisAnalysis of customer needs and risk profile
Rebalancing using product matrix
Flows management
Business process
Completed projects
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LEVERAGING ON STRONG CORPORATE BANKING COMPETENCESLEVERAGING ON STRONG CORPORATE BANKING COMPETENCES
Interest based revenues from
loans
48%
Interest based revenues from
financial activities
8%
Non interest based
revenues
44%
172
8
130
10
38
753
23
574
Branches
Staff
Branches
Staff
Branches
Staff
Branches
Staff
North-West
North-East (*)
Tuscany-Emilia
South Central Italy
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317
Branches
StaffAT 4
AT 5
AT 2
AT 13
AT 18
49
979
Branches
Staff
Lombardia
AT 14
2
60
Branches
Staff
South
AT 7
Short term loans: Risk adjusted spread
Counterparty rating
Pri
ce
(*) Roll out in progress
The specialised network:
! 151 outlets
! 63 teams
Revenue Breakdown (2003)
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BUILDING ON BRAND VALUEBUILDING ON BRAND VALUE
1. business and customer relationships;
2. national and international recognition;
3. motivation and sense of corporate identity in employees.
Main objectives of Sanpaolo’s Olympic sponsorship aim at increasing:
! Ticketing! Network TOROC! Temporary branches! ATM/POS in Olympics sites
! Meeting on sport values! Torch relay! Olympic Events
! Young project (18-30)! Sanpaolo Roadshow! Ticketing! Small Business offers
! Olympic credit cards! Olympic pre-paied cards! Young project (0-18)! Car loans (billboard)
! Cross selling Retail project! Cross selling Small Business
"Retention
"Acquisition
"Average revenues per product
"Cross selling
Increase in customer base
One-off revenues
Increase of average revenue per customer
Impact on net interest and other banking income
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SPECIFIC CUSTOMERSPECIFIC CUSTOMER--SEGMENT INITIATIVESSEGMENT INITIATIVES
Investment, new business processes, and commercial initiatives aim at increasing the number of customers and strengthening the relationship in high-potential customer segments.
The new Sanpaolo IMI brand dedicated to young people from 18 to 30 years old
For the increasingly important immigrant communities in Italy
The large, heterogeneous small business segment which characterises the Italian economy
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ADDRESSING THE CHALLENGE ADDRESSING THE CHALLENGE
! Integration of branch network
! Concentration of marketing strategies
! Extending customer service models
! Building on brand value
Strengthening the core branch banking
business
! Non-life business
! Consumer credit
Specialisation
! Asset Management
! Life business
In established businesses:
In new businesses:
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INSURANCE & PENSION PRODUCTSINSURANCE & PENSION PRODUCTS
Retail Private Corporate
Property protection(Theft, fire, TPL)
Personal protection(Accidents,
TCM, Dread Disease, LTC)
FIP, Open pension funds, Income products (lump sum, annuity, mixed)
Mixed, Traditional,Unit Linked,Index Linked
Income products (lump sum,
annuity, mixed)
Mixed, Traditional,Unit Linked Private
Property protection(Theft, fire, TPL)
Personal protection(Accidents,
TCM, Dread Disease, LTC)
Asset protection
Financial protection
Employee protection
Open and closed pension funds
Treasury products, other life products, TFR
investment products
P&CProtection
Pension
Investments/ savings
Need
s
Life/Pension
Pro
du
cts
Opportunity areas
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CONSUMER FINANCECONSUMER FINANCE
Mission:
to act as consumer credit specialist for the Group developing business both through its own sales network (27,000 point of sales and 2.8 million customers) and through the branch distribution network of the Group.
Marrying branch distribution capacity with specialist competences:
! in credit cards - revolving credit cards will be issued to SANPAOLO IMI family segment customers exploiting on one hand the customer base of the Group and on the other the specialist competencies of Finemiro notably in credit scoring and the credit recovery;
! in POS financing - Finemiro will look to leverage on contacts with retail distribution channels in order to increase its network of POS dealerships. The objective is to have 10,000 new dealers by 2005.
Target: to increase market share
Finemiro expects through business development projects and increased commercial effectiveness, to be able to increase its market share from 5% to 10%.
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ENCOURAGING RESULTSENCOURAGING RESULTS
Improving performance
Total Revenues (€ MM) Operating income (€ MM) Net income (€ MM)
+12.2%
Pro forma
1,3311,493
H103 H104Pro forma
3,660 3,799
H103 H104
+3.8% +56.7%
Pro forma
441
691
H103 H104
Based on:
! Consistent and coherent business strategy
! Good competitive positioning
! Healthy business mix
! Strong customer service models
! Real organic growth potential