Date post: | 01-Jan-2016 |
Category: |
Documents |
Upload: | ulric-head |
View: | 42 times |
Download: | 1 times |
Playing to our strengths to deliver sustainable disciplined growth
Rijkman GroeninkChairman of the Managing Board
Merrill Lynch Banking & Insurance CEO ConferenceLondon, 6 October 2005
Advancing our mid-market strategy
2
Agenda
Strategic focus on mid-market segments
Ability to deliver organic growth from our positions of market leadership
Acquisition of Banca Antonveneta is fully in line with mid-market strategy
Disciplined approach to capital allocation, costs and funding growth
Strategic focus on mid-market segments
4
Our five-point Group strategy
1. Creating value for our clients by offering high-quality financial solutions which best meet their current needs and long-term goals
2. Focusing on:
– consumer and commercial clients in our mid-market franchises (NL, US Midwest,
Brazil) and selected growth markets around the world
– selected wholesale clients with an emphasis on Europe, and financial institutions
– private clients
3. Leveraging our advantages in products and people to benefit all our clients
4. Sharing expertise and operational excellence across the Group
5. Creating ‘fuel for growth’ by allocating capital and talent according to the principles of Managing for Value, our value-based management model
5
In February, we announced an increased focus, along with new financial targets
Tightening our strategic focus, by...
– focusing on mid-market segments
– the sale of non-core assets
Driving Group advantages through...
– segment focus
– creation of Transaction Banking Group
– Group Shared Services
Setting new goals...
– average RoE of 20%
– top 5 Total Return to Shareholders
6
Strategic focus tightened on mid-market segments
Consumer Commercial
Mass Retail
MNCs
TopPrivateClients
Small Business
Product innovation
Feeder channel Provider of scale
‘SWEET SPOT’
Mid-Market/FIs
PC /Mass Affluent
7
Mid-market segments represent ABN AMRO’s competitive advantage
The mid-market segments require a combination of local and international capabilities
– local relationships
– competitive anchor products suite
– efficient delivery
– sector knowledge (in the case of corporates)
– international network
ABN AMRO is one of the few banks in the world that can deliver on all of these, in many cases uniquely so
8
Driving Group advantage through customer segment focus, Transaction Banking and GSS
Aligning customers and products in mid-market segments
Creating internal and external scale for efficient delivery of trade and payment services
Optimising the delivery of internal support services across the SBUs within ABN AMRO worldwide
9
ABN AMRO’s new goals are a ROE of 20% and top 5 TRS for 2005-2008
On 30 March 2005, ABN AMRO announced a new financial target for the 2005-2008 period: average return on equity (ROE) of 20% over the four-year TRS cycle
The ROE does not replace our top quartile TRS ambition. The new financial target further underpins our commitment to creating shareholder value
The ROE target and the top quartile TRS ambition are linked through growth, and via the allocation of resources to those areas with the highest incremental ROE
Linking management remuneration to growth and capital
Ability to deliver organic growth from our positions of market leadership
11
Strong organic growth driven by mid-market franchises
Operating result (EUR mln)*
* All figures are excl. consolidation effects of Private Equity holdings
2000
2100
2200
2300
2400
2500
2600
2700
2800
H1 04 H1 05
Operating result
+10.5%
Operating result per (S)BU (H1 2005,
EUR mln, year-on-year change)*
-200
-150
-100
-50
0
50
100
150
NL NA BR NGM BF WCS PE PC AM GF
C&CC: +27.3%
12
Network of leading market positions is well positioned for further organic growth
Adding new clients to our mid-market segments in existing markets
Enlarge share of wallet of our existing clients in the mid-market segments
The US Midwest
The Netherlands
Asia
Top ranking US regional franchise
Brazil
Top commercial bank for large SME and affluent clients
Top 3 privately owned bank New Growth Markets
European Private Banking:
# 1 Netherlands# 3 France and Germany
Acquisition of Banca Antonveneta fully in line with mid-market strategy
14
ABN AMRO to acquire controlling stake in Banca Antonveneta
ABN AMRO announced on 26 September that it has signed an agreement with Banca Populare Italiana (BPI) and a number of other shareholders regarding the purchase of 39.37% in Banca Antonveneta. ABN AMRO will pay EUR 26.50 per share, equal to a total cash consideration of EUR 3.2 bln
Combined with our current shareholding in Banca Antonveneta, ABN AMRO will own a total of nearly 70% after the completion of this transaction
ABN AMRO will launch a mandatory cash offer of EUR 26.50 per share for the remaining outstanding share capital of Banca Antonveneta
15
Acquisitions require strict criteria
Acquisitions have to fit with ABN AMRO’s mid-market strategy
Market has to be sizeable
Sustainable market position
Acquisition has to create value
– EPS accretive within 2 years of ownership
– EP positive within 3 years of ownership
– conservative estimates, using cost synergies only
– efficient and effective integration
16
Banca Antonveneta: strong fit with ABN AMRO’s mid-market strategy
Commercial: 0.18mn clients
Over 1.5 mln clients at year-end 2004; strong proportion of Affluent and Mid-Corporate customers
Consumer: 1.33mn clients
Legend: Private Banking (net worth > EUR 2.5 mln), Affluent (net worth within EUR 0.1-2.5 mln), Mass (net worth < EUR 0.1 mln), Corporate (revenues > EUR 75 mln), Mid-corporate (revenues of EUR 2.5-75 mln), Small Business (small business with revenues < EUR 2.5 mln). (1) Comprising 3,000 Interbanca (Antonveneta’s Investment Banking arm) accounts
Source: Company data
Breakdown by deposit and loan volume: Breakdown by deposit and loan volume:
17
CONSUMER LOANS MORTGAGES
Size(1) (EUR bn) 55 56 246 128 119 20 140 263 1,032 296 1,069 389
Penetration (per capita) (EUR) 947 1,390 4,082 2,118 1,444 1,253 2,415 6,524 17,128 4,892 12,966 23,838
Percentage of GDP 4.2% 7.5% 15.5% 8.2% 5.6% 4.5% 11.1% 37.6% 65.2% 19.3% 50.7% 87.2%
Italian mid-market has significant untapped potential
High savings rate
Pension reform
Increased penetration rate in retail segment
Increased demand for more sophisticated products and longer debt maturities in SME segment
Source: Countries Central Banks, brokers research report, and Datamonitor report1. Size of the consumer loans market in 2003 and mortgage market in 2002 respectively
6%5%
4%3%
2%
13%
10%
8%7%
2%
Italy Spain UK France Germany
Consumer Loans CAGR 04 - 07 Mortgages CAGR 04 - 07
CAGR of Consumer loans and mortgages
Consumer loans Mortgages
Key growth drivers
18
0
1,500
3,000
4,500
6,000
Banca Intesa Unicredito BPVN San Paolo IMI BMPS BNL Capitalia Average BancaAntonveneta
0
5,000
10,000
15,000
20,000
25,000
San Paolo IMI Banca Intesa Unicredito BPVN BNL Capitalia BMPS Average BancaAntonveneta
Banca Antonveneta: greater cross selling provides scope for revenue growth
Peer comparison: AuM(1) per client (EUR)
Peer comparison: average mortgage balance(2) per client (EUR) (7)
Source: company data and analyst research
1. As of June 2004
2. As of December 2004; residential mortgages only
3. Based on peers shown in the graph
4. Based on breakdown per sector of domestic loan portfolio as of June 2003
5. Excludes New Europe
6. ABN AMRO estimate based on risk-weighted assets for residential mortgages as of June 2003
(3)
(3)
(4) (5) (6)
+ 83%
+ 28%
7. Total mortgage outstandings / total number of bank clients
19
Value creation supported by estimated cost synergies of EUR 160 mln by 2007
Estimated annual gross cost synergies: EUR 160 mln
Efficiency benefits from leveraging economies of scale (incl. general admin.), GSS (incl. procurement) and IT related costs
Wholesale product suite, risk and credit portfolio management
Transaction Banking Implementation of new servicing model
enhancement of the multi-channel approach
Funding synergies from ABN AMRO’ s superior credit rating
Total estimated restructuring charge: EUR 200 mln
Cost Synergies
Restructuring Charges
Source: ABN AMRO estimate
IT related costs30%
Procurement20%
General administrative
5%
New servicing model10%
Funding5%
Transaction banking
10%
Wholesale20%
20
Conservative estimates: revenue upside not included in EPS calculations
Preliminary estimate of EUR 100 mln (4.5% of target revenues)
Leverage ABN AMRO’s:– servicing model from affluent / private
banking clients
– wholesale product capabilities
– international presence
– expertise in asset management and
derivatives
– global consumer finance capabilities Offer of standard banking services in
Italy to ABN AMRO’s international clients through Antonveneta network
>10% upside of Banca Antonveneta’s Business Plan vs. IBES net profit consensus (EUR 600 mln vs. EUR 510 mln*)
Revenues Synergies
(1) Revenue synergies of 6.4% of target revenues announced in Santander / Abbey takeover; average of 5% of sample of selected European cross-border transactions since 2000
Business Plan Antonveneta
* Dated 21 September 2005Source: Banca Antonveneta analyst presentation,12 September 2003
Disciplined approach to capital allocation, costs and funding growth
22
Disciplined capital management Managing for Value (MfV) strongly embedded in the organisation
– Resource allocation linked to MfV
– Reward structure in place to change and influence behaviour
Capital structure
– Tier 1 ratio target of 8.5% and core tier 1 ratio target of 6.5%
– Selective growth/reduction in RWA
Disciplined approach to funding Antonveneta
– Funding will be such that capital ratio’s after the proposed acquisition will be in line with current credit rating
– ABN AMRO is aiming to reach a core tier 1 ratio of 6% and a tier 1 ratio of 8%, well before the end of 2006
– Resumption of the neutralisation of the scrip dividend will start with the interim stock dividend in 2006
Stable dividend with aim to increase over time
23
Disciplined approach to costs
Top quartile efficiency is key for sustainable competitive positions
– as Group efficiency is affected by business mix, top quartile efficiency is needed
at (S)BU level
– focus is on (S)BUs where we are outside the top quartile – WCS and BU NL
Increase in cost efficiencies is a central tenet of our MfV strategy
– increase in cost efficiencies drives economic profit
– increase in cost efficiencies will allow the release of funds to reinvest in growth
– efficiency ratios are part of Key Performance Contracts for each BU
Group Shared Services (GSS) is a core enabler of our disciplined growth strategy
24
What is GSS committed to deliver?
GSS Savings achieved by 20072 Comments
Savings represent minimum ~ 15%
reduction across the Services cost base
(~ EUR 4 bln assessed)
Bulk of net savings delivered through
the following programmes:
– IT ~ EUR 258 mln1
– Global Real Estate ~ EUR 140 mln
– Offshoring ~ EUR 52 mln
– Other programmes ~ EUR 150 mln
We are applying a range of tools/
techniques to deliver these savingsNote 1: Excludes annualised savings relating to the EDS outsourcing deal (previously announced)Note 2: Savings net of investments and before tax deductions
600
300
100
0
100
200
300
400
500
600
700
2005 2006 2007
€ mln
Concluding remarks
26
What did we discuss last year for 2005?Challenges Opportunities
NL: revenue growth
NA: mortgage business
USD hedge for 2005 lower than for
2004
Inclusion of some incidental items in
2004 results
Disappearance of LeasePlan and Bank
of Asia contribution
NL: cost control
NA: commercial banking pick up
Brazil: well positioned post Sudameris
NGM: underlying market growth
WCS: further growth from a solid base
Disciplined capital management
27
What will we face in 2006?Challenges Opportunities
Expected challenging interest rate
environment
Challenging revenue growth
environment
Expected increase in provisioning
levels
Increased competition in Brazil and
North America
NL – sluggish economic growth
Implement management review of WCS
Further align customers and products in
mid-market segments
Harness operational efficiencies via
Group Shared Services
Pursue potential upside in contribution
of BAPV given initial conservative
assessment
Leverage positive GDP and interest
rate outlook to further drive Brazilian
loan growth
Exploit significant growth potential in
Asia
28
Summary
Strategic focus on mid-market segment
Ability to deliver organic growth from our positions of market leadership
Acquisition Banca Antonveneta is fully in line with mid-market strategy
Disciplined approach to capital allocation, costs and funding growth
Strategic focus and discipline delivering sustainable growth
29
Cautionary Statement regarding Forward-Looking Statements This announcement contains forward-looking statements. Forward-looking statements are statements that are not historical facts, including statements about our beliefs and expectations. Any statement in this document that expresses or implies our intentions, beliefs, expectations, forecasts, estimates or predictions (and the assumptions underlying them) is a forward-looking statement. These statements are based on plans, estimates and projections, as they are currently available to the management of ABN AMRO Holding N.V.. Forward-looking statements therefore speak only as of the date they are made, and we take no obligation to update publicly any of them in light of new information or future events. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could therefore cause actual future results to differ materially from those expressed or implied in any forward-looking statement. Such factors include, without limitation, the conditions in the financial markets in Europe, the United States, Brazil and elsewhere from which we derive a substantial portion of our trading revenues; potential defaults of borrowers or trading counterparties; the implementation of our restructuring including the envisaged reduction in headcount; the reliability of our risk management policies, procedures and methods; changes resulting from the acquisition of Banca Antonveneta, including the risks associated with its business, as well as the difficulties of integrating its systems, operations functions and cultures with ours; and other risks referenced in our filings with the U.S. Securities and Exchange Commission. For more information on these and other factors, please refer to our Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission and to any subsequent reports furnished or filed by us with the U.S. Securities and Exchange Commission. The forward-looking statements contained in this announcement are made as of the date hereof, and we assume no obligation to update any of the forward-looking statements contained in this document.