Focused on growth in 2011
Richard Gaskin, Acting President & CEO
George Newcomb, Deputy President & CFO
Ewa Piwowar, Investor Relations Leader
This presentation does not constitute or form any part of an offer, invitation or
inducement to sell or subscribe, or any solicitation of an offer to purchase or
subscribe for any securities. This presentation does not purport to contain all
information that a prospective investor might require, and neither this
presentation nor any part of it nor the fact of its distribution shall form the basis
of, or be relied on in connection with, any contract for the purchase or
subscription of any securities.
The forecasts and forward-looking statements contained in this presentation
are necessarily based upon a number of assumptions and estimates that, while
considered reasonable by us, are inherently subject to significant business,
operational, economic and competitive uncertainties and contingencies, many
of which are beyond our control, and upon assumptions with respect to future
business decisions that are subject to change. Actual results may differ
materially from those projected. Certain items of numerical information and
other amounts and percentages set forth in this presentation may not add up
to the correct total due to rounding.
22 July 2011 | 3
Sizeable network
4Q’09
4Q’10
1Q’11
Branches
319
285
285
Franchise Outlets
155
157
146
Agents (K)
2.8
1.4
1.4
ATMs
248
240
238
SME Mobile Advisors
238
160
143
SME Regional Advisory
Centers
17
18
18
Employees
7,571
6,869
6,850
Robust customer base
Private Individuals (MM)
1.9
1.5
1.5
SME (K)
91
92
89
Corporate (K)
~2
~2
~2
Repositioning for future growth
BPH key metrics
IDEO branch grand opening in Lodz
July 14, 2011
•
Separated spaces for different activities
•
Privacy & home-like interior
•
Innovative solutions:
•
Touch & Go system
•
Self-zone
22 July 2011 | 5
-115
-144
Positive macro environment
(VPY %)
5.1
1.7
3.8
4.0
3.6
4.0
'08
'09
'10
'11
'12
'13
'14
3.7
Poland still among EU growth leaders
Market with expansion potential
Investments to rebound strongly in ‘11
Unemployment to decrease further in H2’11
(%, registered rate, eop)
Investments (VPY %)
Per capita income to expand 5.5% CAGR
(GDP per capita, ‘000 PLN)
Demographic trends challenging
(change in number of persons (K) by age group)
Household loan penetration low but rising
(households loans, % of GDP) EU avg @ 55%
GDP growth to accelerate in ’11
9.5
12.1
12.3
11.6
11.2 10.6
'08
'09
'10
'11
'12
'13
'14
9.9
9.6
-1.1
-2.0
4.8
4.3
9.2
'08
'09
'10
'11
'12
'13
'14
4.6
13.9K 11.3K 12.3K 13.7K 14.4K 15.6K
'08
'09
'10
'11
'12
'13
'14
17.2K
33.5
35.3
37.1 38.8
41.1
43.4
'08
'09
'10
'11
'12
'13
'14
46.0
28.9
30.7 33.3
34.3
36.0
38.1
'08
'09
'10
'11
'12
'13
'14
40.1
Consumer confidence-191
-1 265
1 140
214
197
191
60+
15-59
0-14
'08
'09
'10
'14
Strong underlying fundamentals
45 55 65 75 85 95 105 115 Ja n -1 0 M a r-1 0 M a y-1 0 Ju l-1 0 Se p -1 0 N o v-1 0 Ja n -1 1 M a r-1 1 M a y-1 1 Ju l-1 1
BPH WIG Banki WIG20 WIG
*/ As of July 15, 2011
Ownership structure & governance
•
40% or 4 members of Supervisory Board (SB)
independent, including Chairperson
•
50% of SB members Polish nationals
89%
Public
11%
Current shareholding structure
Price/Share (PLN)
•
Current market value: PLN 4.7 B*
•
Included in sWIG80 index since June 17
•
Price trend consistent with the market …
however, the Bank’s stock illiquidity makes
us more vulnerable
Corporate Governance
GE’s stake ultimately down to 75%
Profitable business
Strategy Update Ju l-1 0 Ju l-1 1 Min 50 PLN 2 July 2010 N o v-1 0 Max 77 PLN 1 April 201122 July 2011 | 7
Leadership team
Richard Gaskin
CEO
Grzegorz Dąbrowski
Corporate
Grzegorz Jurczyk
Retail
Krzysztof Nowaczewski
Operations
Wilfried Mathias Seidel
Risk
Previous
Employers
No. of
industries
Yrs of
GE exp.
Yrs of
exp. in PL
GE Capital Ford Motor Co 3M Lloyds Bank11
2
1
2
5
3
13
1
3
5
18
1
13
22
11
Yrs of financial
services exp.
21
14
22
22
13
Nationality
EN
PL
PL
PL
DE
No. of
countries
6
8
1
3
6
Ronald James Malak
IT, Quality, Services
& Security
4
4
6
25
US
8
PKO SA BPH PBK Santander Fiat Bank Polska Bain & CompanyGE Capital GE Money Allianz Group Deutsche Bank Citi Group None
George Newcomb
CFO
US
20
2
15
2
1
GE Capital Arthur AndersenGrazyna Utrata
Legal
PL
20
1
>1
1
20
Lukas Bank, BZ WBKWielkop. Bank Kredytowy ING
Strategy
Funding/ Growth
Risk
Cost
•
Stem losses
•
Exit loss making
portfolios
•
Outpace rev with COF
•
Execute cost out
•
Strengthen leadership
•
Deposits up PLN 5.4 B
•
GE funding down PLN
2.8 B
•
CoF down 42 bps
•
PLN 9.4 B Originations
•
C & D segments cut
− Entry rate PL ↓37% − 30+ PL, 3MOB from
3% to 0.2%
•
Restructuring tools deployed
•
2H losses down PLN 203 MM vs. 1H
•
Delinquency at pre-crisis level
•
SF & Auto exit
•
Net FTE
down 701
•
Centralization initiatives
•
Branch closures
•
OPEX down 5% y/y
Net income
(PLN MM)3
2
1
Shifted emphasis from net revenue to
risk adjusted net revenue ... but need to grow
66.0 49.3 56.5 71.0
84.0
Share price 74.6
2010 – return to sustainable profitability
20
-24
84
-27
-54
-170
37
52
1Q09 2Q 3Q 4Q 1Q10 2Q 3Q 4Q+180%
-27 -143 12 25 Net Restructuring 5 1Q1147
10 47 37 29.3 40.0 64.222 July 2011 | 9
Focused lending around growth areas
16.97
• 1
stYr Income 2.5% on
spread
• FX Risk
• Low margin
• Overhead
contributor
• Diverse offering
• Cost-effective funding
• Market credibility
• Regain market
credibility in PLN
• Maintain outstanding
• Re-engineer back office
• Lever distribution
• Bundle with C/A
Net rec.
PLN B
Why it made sense?
Does it now?
Strategic approach
Mortgages
Cards & Loans
• High demand, market &
return
• Mkt Leading TTY/TTC
• Yes
• Develop strong brand
• Mkt leading SFE
• Develop “Loyalty” VP’s
• Strong risk discipline
• Urban Cards
4.93
Auto & SF
• Limited regulatory
constraints
• High x-sell possibility
• Exit
• Consider CDF for
inventory finance
1.58
Commercial
SME
CORP
• Good returns & growth
• Levered BPH skillset
• Yes
• Improve “go to market”
• NPI
• Grow
• High return/high growth
• Levered BPH skillset
• Yes
• High growth
• Mkt expertise
• Balanced growth
• X-Sell to drive return
2.72
1.54
• SF Cel ROI (6.2%)
• X-sell too low
• New regulatory
constraints
FX
C/A’s
S/A’s
Deposits
PLN B
Why it made sense
Does it now?
Strategic approach
Corporate
Term Deposits
SME/Corp
Deposits
T/D’s
1.43
• NPI with clear VP
• X-sell products for inflows
• X-sell to lending portfolio
• Price to drive volumes
required
• Re-price back-book
• Switch to investment
products
2.70
5.19
• Yes
• X-sell opportunity
• Funding source
• Yes
• Stability of
portfolio and
self-funding
• Self-funding
• Stable funding base
• Competitive price
• Yes
• Stability of
portfolio and
self-funding
• Long term customer
with salary inflows
• Lower risk for lending
• Cost effective funding
• Self-funding
• Competitive pricing
(tax benefit)
2.73
• Self funding
• Fund lending growth
• Develop as hook products
• X-sell lending relationships
• Avoid „hot” money
• Yes
• Stable funding
source
3.63
• Self funding
• Fund lending growth
• Self fundings assets
• X-sell Trx banking
• Yes
• Self-funding
assets
• “Hot” money
22 July 2011 | 11
172
133
89
66
65
46
45
37
25
15
18
Assets
PLN B
Loans
PLB B
Total net revenues
PLN B
Deposits
PLN B
BPH IR analysis based on Q1 2011 results of listed banks; */ data as of end-2010
# 10
# 9
# 10
# 8
Current market shares
Top 10 bank in Poland
#3 in credit
cards
Top 5 in cash
loans*
135
97
46
46
42
38
27
36
16
9
7
12
132
84
58
35
33
28
21
13
11
1.8
0.8
0.7
0.9
0.6
0.1
0.2
2.5
35
36
16
29
39
38
84
0.4
0.5
65
45
0.2
0.6
0.4
BPH TFI #9 in terms of assets
BPH Brokerage #20 in terms of
derivatives
22 July 2011 | 13
• New customer credit rules
• New regulations on ‘Payments
within the EU’
Regulatory environment
Focus areas
Timing
Mitigation actions
• 6 new ‘recommendations’
• Proactive cooperation with FSA
• Working with business/
industry groups
• Pricing actions to off-set
impact
• New abusive clauses
• Review contract templates
• Ongoing relationship building
focused on ‘Big Idea’
• Assess IT change requirements
• Perform documentation
requirements analysis
‘11
‘12
‘12
‘11
Engaging with regulators to proactively address concerns
Bank Tax or stabilization
fund
FX:
• Fix / lower FX spreads
22 July 2011 | 14
Several business opportunities
BPH market share – May 2011
Source: National Bank of Poland – only PI segment / IFRS standard, 2011 own estimations based on market trends, S/A share estimation based on „Rzeczpospolita” and Open Finance data,
% Estimated future EOP balances
13.8 13.9 14.2 ‘09 ‘11 ‘E14 49.2 24.8 16.4 9.6 46.9 25.1 17.4 10.6 43.1 25.7 19.3 12.4 5.4 3.8 1.1 -2.2 <5 5-7 7-10 >12 N e t in co m e p e r h o u se h o ld (P LN t h s)
Commercial
PLN Bn
‘10 ’E11 12.1 15.9 ’E12 19.0 ’E13 19.0 ’E14 22.2~70% of Commercial Revenue Base
Non-lending revenue**
# ofhouseholds
* Estimation based on BPH Chief Economist segment dynamics 2010-2014 (household segment); ** McKinsey estimations; *** VISA outstandings on all credit cards (active/inactive) in banks/market
EOP Balance [PLN Bn] ***
PI Credit Cards
14.0% ‘09 ‘10 ’E11 14.6 14.9 14.9 ‘08 12,7 ’E12 15.9 ’E13 17.1 ’E14 18.7EOP Balance [PLN Bn] *
Commercial
Loans
(SME + Corp) ‘09 ‘10 ’E11 247 247 257 ‘08 250 ’E12 282 ’E13 304 ’E14 303EOP Balance [PLN Bn] **
PI Cash Loans
4.8% ‘10 ’E11 82 89 ’E12 95 ’E13 101 ‘09 86 ‘08 73EOP Balance [PLN Bn] *
2.6% ‘09 ‘10 ’E11 596 542 650 ‘08 479 ’E12 713 ’E13 783 ’E14 859Total Deposits
(PI + SME + Corp)
2.1%
High market liquidity … Differentiate to take share
Potentially
upper mass CAGR 2009-2014 (%) Potentially
affluent
22 July 2011 | 15
SF + Auto
Commercial**
*excl. mortgages, SF, Auto; ** incl. other
New Business ROI
2.3%
New Business ROI
Originations
~5.6B
Retail 30 825 5 120 6 386Go
forward
focus
(PLN MM, 2010)
CV/ANR
1.1%
Predominantly Retail … moving to Universal Banking model
Transforming the portfolio
87% 17 358 13% PLN FX PLN 11.4 B* Personal Loans Corporate SME Cards 28% 45% 17% 10%
Overall
Mortgages
Focus Areas
1 959 17 358 Mortgages
Originations
~0.4B
Losses/ANR
0.6%
1.0%
Summary: execution imperatives
1.
Commercial execution
•
New branches
•
New initiatives
2.
Reposition the brand …
•
Differentiate from competition
•
Business wide focus
3.
Deliver productivity
•
Bullet trains, sourcing, descipline
•
Fund systems simplification
4.
Maintain Credit Focus
•
Robust portfolio management
•
Continue diversification
5.
Win hearts and minds
•
Compliance mindset
•
Inspired team = better customer experience
22 July 2011 | 17
Brand growth acceleration … Big Idea
•
Brand development through a communication platform
delivering consumer engagement and top of mind
•
Support of business goals & effectiveness
•
Delivering brand power and differentiation to compete
effectively
•
Acceleration of Bank BPH growth
•
Increasing of employee cultural alignment with the new BPH
brand value proposition
Bank BPH Alior PKO Unique 81% 57% 66% Attractive 78% 51% 52% Importance 88% 78% 64% Eager to contact 63% 46% 60%
Breakthrough „Reasons to believe” identified and tested....
85% correlation between brand awareness and applications
BPH actuals
R2= 0.843
Loan applications to brand awareness
15.5MM generates 46.6MMLT RACV BA from 61 to 75
Benefits
Timeline
Regression analysis
Why now
•
Brand growth proven as a strong driver for business results
•
Unique positioning with strong purchase intent
•
Significant brand strength deterioration due to declining
marketing investments
•
Strong RTBs developed by business that will support
positioning
•
Project kick off
2Q’11
•
Development of Big Idea concept
3Q
•
RTBs implementation
3Q/4Q
•
Internal buy-in
3Q/4Q
Innovation driving value creation
Product excellence
Simple pricing structure
Auto Product Bundling
Value Added Services
Value Proposition
Innovative rebate program
Lunch & restaurant cards
Close loop & private label
solutions
Value Proposition
High speed of
authentication
Highest possible security
Privacy compliant
Key features
Finger vein technology*
BankConnect Active
Automatic
On-line
Real-time
Key features
Co-branded Pre-Paid Cards
Konto Kapitalne
Process excellence
* To be implemented in 2011
22 July 2011 | 19
Ploan share by segment
Net 15-20 new branches per annum Move to IDEO format
• Lean sales & centralize back-office branch processes
• Simplify service processes
• Drive out sales variation at sales person level
• > 200 new salespeople into branch network
• Deliver market leading “Time to Yes” and “Time to Cash”
Restore SFE standards
On Line benchmark
Leapfrog the “e” gap
• Provide personalized experience
• Build full online sales processes
• Engage through social banking
• Differentiate through Personal Finance Manager
• Go mobile
• Class leading transactional e-platforms
… Broker system, FX system
• Embody simply straightforward concept
• Differentiate vs. competition
• Reposition to attract new MM, AFF, SME
• Brand accredited sales and service staff
• Class leading technology for customers…
… Real time video links, ID technology
Strategic execution … Retail
Optimize traditional GE strengths
Segmentation driving focus
Upgrade brick and mortar
6 signed …5 in pipeline First to market with on-line decision Six Sigma resources allocated
• Develop segmentations based on risk and needs
• Build differentiated, relevant and profitable value propositions
• Re-engineer price, volume, term, parameters to each segment
• Targeted NPI linking brand promise to segments
+23% originations in
Strategic execution … Commercial
Building scale in
Corporate
Sustain X-Sell
Re-engineering
SME
New Products
Acquire delegation to aid TTY
Leverage proven capabilities
57 66 75 84 93
Market Revenues*
PLN B
11%
‘12
‘11
‘10
‘13
Commercial sector =
10% of banking sector by ‘13
* McKinsey data•
Re-launch Factoring to acquire new
customers and develop existing ones
… Direct distribution model… Mid to high end pricing, TTY and TTC as a competitive edge
… Leveraging EMEA systems and processes
•
Explore re-entry to leasing
Increase commercial to 50% of portfolio
Execute strategic re-engineering of SME ‘go to market’
Positive market
outlook
27%
growth
YTD
•
Targeted “Big Ticket” plays (~PLN 150
MM average)
•
Lever GE Commercial Finance platforms
… optimize technology
•
Transactional Banking
Current accounts
Cash management
Electronic payments
Trade finance
•
Treasury products
22 July 2011 | 21
•
Energy efficiency projects
•
SME funding
•
Bond program
… aggregated principal amount up to
PLN 1 B
… stable long term financing
Develop wealth management
… Solid product portfolio… Open possibilities for customers
Offer investment alternatives … BPH Investment funds
… Review opportunities to achieve exponential growth … acquisitionsOffer non-lending services … Brokerage house
… IPO… Investor Loan Facility (LIG) … Universal Trading Platform
Funding plus fee income
• New customers acquisition program
• Specialized sales force for C/A acquisition
• X sell deposit products to lending customers
• Development of e-banking platforms
Commercial Deposits
PLN MM
EBRD, KfW, Bond Program
Maintain funding source
Strategic execution … Funding & WM
… commercial funding …
… & non-GE funding
Diversify products; manage liquidity and pricing
Ensure PLN self-funding …
6,356
Improved income 1Q’11
2010
Manage deposits base
’10
1 521
Opex
Opex/CV
68.8%
Key initiatives
•
Simplification
Core banking system … Process rationalization
•
Real estate footprint
Rooftop consolidation … Branch optimization (
↓
m2,
concept)
•
Centralization / EFT rationalization
Enabling … One DWH, Opex, Sourcing team …
Relocation to low cost sites
•
Sourcing initiatives
Renegotiations (~10% purchase base) … Vendor
consolidation (
↓
30%)
•
Technology
Finger vein project … Integrated tools (PMO, Finance)
Managing the controllables
(PLN MM)
'10
(57)
AGR
30 423
Loss/AGR %
2.7
Coverage %
9.0
Imp/Gross Rec %
10.6
823
793
87
Comments
•
Higher credit quality originations generating
decreasing loss trend
•
Long term stable impaired loans ratio
22 July 2011 | 23
Ombuds
GEOS Focus
•
From 3 to 22 Ombuds people
•
Launched ‘Ombuds Day’… > 600 trained
•
Plan to cover 100% branches in ‘11
•
Five X-Functional teams
•
Over 40 team members
•
CEO Sponsorship… regular reviews
Quarterly Town Halls
Open & approachable
Twitter & Facebook
Reach every employee
Focus on energizing the team
‘Our Bank’ culture
Intensive training &
development programs
Employees engagement
•
Environmental & local societies concerns
•
Promoting healthy lifestyle
•
Diversity
Winning hearts & minds
Delivering Growth, Leadership
& Compliance Agenda
22 July 2011 | 25
Overview
Performance
Profitability
Retail
Commercial
SME
Deposits
•
2010 turnaround agenda complete … baseline quality
profitability established
•
PLN 100 MM swing Q1’11 vs. Q1’10
•
Net revenue after losses up 120%
•
Net revenue flat to Q1’10
•
Net revenue after losses down 50% … re-engineering
advanced
•
Up >20% with positive CoF variance to WIBOR
Cost
•
Down 6% on prior year
Losses
Capital Adequacy
•
Cost of risk half prior year level
Key financial performance
First quarter earnings on plan
1Q’11
Net interest income
Net F&C
Total net revenue*
Costs
Ex-restructuring & one-offs
Impairment charges
Pre-tax profit
Net income
•
Profitable trend ... net income PLN
47 MM in 1Q’11 … PLN 100 MM y/y
improvement
•
Better cost management … base
costs
6% in 1Q’11
•
Portfolio quality continues to show
improvement … impairment
charges
53%
•
Targeted F&C reduction across
credit cards and loans
334
344
-2.8
164
186
-11.5
503
547
-8.2
319
336
359
-11.2
-6.4
116
249
-53.2
66
-63
+204.9
47
-54
+187.3
*/ Total net revenue = NII + Net F&C + Net trading income
22 July 2011 | 27
*/ Net loans and advances to customers
Balance sheet structure improved
Liabilities & Equity
Assets
Mix of assets through originating new business
at attractive strategic products
PLN 243 MM of net deposits collected in 1Q’11
Local currency self financed business …
Loans to deposits ratio in PLN 78%
PLN MM
36.2 B 36.2 B 37.3 B37.3 B 37.5 B37.5 B 15,679 14,410 14,068 12,298 15,653 15,896 8,259 7,228 7,526 1Q’10 4Q’10 1Q’11Equity & Other Deposits GE lines 28,338 28,111 27,794 1,432 2,167 3,319 1,603 1,469 1,458 3,140 3,688 3,480 1,723 1,855 1,438 1Q’10 4Q’10 1Q’11 Other
Cash & balance with Central Bank
Intangibles, property and equipment Investments Net loans*
Retail business development
Receivables
down 2%
PLN MM
Interest+F&C income
down 15%
Interest expenses
improved 14%
Net revenue
down 15%
Losses
improved 66%
Net revenue after losses
improved 119%
Poor revenue traded off with funding costs and portfolio
quality improvements
25,214 24,721 1Q'10 1Q'11 516 440 1Q'10 1Q'11 208 179 1Q'10 1Q'11 308 261 1Q'10 1Q'11 224 76 1Q'10 1Q'11 84 185 1Q'10 1Q'1122 July 2011 | 29
Corporate business development
Receivables
improved 6%
PLN MM
Interest+F&C income
flat
Interest expenses
flat
Net revenue
flat
Losses
historically good
Net revenue after losses
down 64%
Poised for growth
1,543 1,639 1Q'10 1Q'11 26 26 1Q'10 1Q'11 14 14 1Q'10 1Q'11 12 12 1Q'10 1Q'11 -2 7 1Q'10 1Q'11 14 5 1Q'10 1Q'11
SME business development
Receivables
down 4%
PLN MM
Interest+F&C income
down 15%
Interest expenses
improved 8%
Net revenue
down 18%
Losses
up 22%*
Net revenue after losses
down 50%
Re-engineering business model to pursue quality growth
3,321 3,204 1Q'10 1Q'11 96 82 1Q'10 1Q'11 36 33 1Q'10 1Q'11 61 50 1Q'10 1Q'11 27 33 1Q'10 1Q'11 34 17 1Q'10 1Q'11 */ PLN 43 MM in Q4’10, PLN 46 MM in Q3’10 and PLN 45 MM in Q2’10
22 July 2011 | 31
Deposits
PLN MM
Retail
improved 20%
Corporate
improved 26%
3.5
3.6
Cost of funds (%)
2.3
2.8
PLN 78% L/D ratio providing funds for future growth
8,018 9,626 1Q'10 1Q'11 4, 891 6,171 1Q'10 1Q'11
Cost of business
PLN MM
Base costs
improved 6%
CI ratio (%)
flat
C/RANR* (%)
improved 28%
*/ Risk Adjusted Net Revenue
Prior year actions delivering P&L benefit on cost line
359 336 1Q'10 1Q'11 66 67 1Q'10 1Q'11 120 87 1Q'10 1Q'11
22 July 2011 | 33
Improved asset quality
High quality new originations transforming portfolio
performance
•
Non-performing loans stable for last
three quarters
•
Cost of risk falling to 1.6%
•
80% of new PI loans with A+/ A rating
1Cost of risk to avg. loan volumes */ Total loans and guarantees
NPL ratio
Impairment charges & cost of risk
1
30+ delinquency of personal loans
3 months on book (%)
improved 4.25X
1.7 0.4 1Q'10 1Q'11 249 264 189 121 116 3.5% 3.4% 2.7% 1.7% 1.6% 1Q'10 2Q 3Q 4Q 1Q'11Impairment charges Cost of risk
27.5 28.9 27.5 27.2 26.4 2.8 3.0 3.1 3.2 3.2 9.1% 9.4% 10.2% 10.6% 10.9% 1Q'10 2Q 3Q 4Q 1Q'11 Performing loans* (PLN B) Impaired loans* (PLN B) NPL
Solid capital base and liquidity position
Capital ratios (%)
•
CAR at
13.6%
vs. 8% regulatory
minimum
•
No capital action necessary to meet
proposed Basel 3 requirements
•
Established back-up liquidity lines with
parent
•
FX assets largely funded by parent
2009
2Q’10
3Q’10
2010
1Q’11
Tier 1
3.2
3.1
3.1
3.2
3.2
Tier 2
0.7
0.7
0.7
0.7
0.7
Total
3.9
3.8
3.8
3.9
3.9
Capital ratios well above requirements
Capital (PLN B)
12.7 12.1 12.9 13.2 13.6
10.5
9.2 10.6 11.0
11.2
2009 Jun '10 Sep '10 2010 Mar '11
