IL SISTEMA BANCARIO BULGARO E UNICREDIT BULBANK

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IL SISTEMA BANCARIO BULGARO E UNICREDIT BULBANK Sofia, 07 June 2010 Aldo Andreoni Head of International Department CIB & PB Forum Economico “Bulgaria-Italia: insieme per uscire della crisi” Panel tecnico. “I protagonisti della ripresa: mezzi e strumenti per il rilancio degli investimenti

description

Aldo AndreoniHead of International Department @Unicredit BulbankItalian Festival in Bulgaria 2010Forum economico “Bulgaria-Italia: insieme per uscire dalla crisi” Sofia, 7 giugno 2010

Transcript of IL SISTEMA BANCARIO BULGARO E UNICREDIT BULBANK

Page 1: IL SISTEMA BANCARIO BULGARO E UNICREDIT BULBANK

IL SISTEMA BANCARIO BULGARO E UNICREDIT BULBANK

Sofia, 07 June 2010

Aldo Andreoni

Head of International Department

CIB & PB

Forum Economico

“Bulgaria-Italia: insieme per uscire della crisi”

Panel tecnico.

“I protagonisti della ripresa: mezzi e strumenti per il rilancio degli investimenti

Page 2: IL SISTEMA BANCARIO BULGARO E UNICREDIT BULBANK

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0%

20%

40%

60%

80%

2007 2008 2009 2010f 2011f 2012f 2013f 2014f 2015f

Retail loans, yoy growth Corporate loans, yoy growth Total loans, yoy growth

+4%

+12%

+..% CAGR

Credit growth has stalled

Bulgarian banking sector: Loans growth (Jun`2006 – Mar`2010, yoy)

Weak credit growth reflects above all sharp contraction in domestic demand

Credit growth will normalize in 2011 and looking forward, starting from mortgage lending and working capital loans to export oriented companies which will pick up in line with solid rate of export expansion and stabilization of housing prices.

-20%

0%

20%

40%

60%

80%

100%

Jun.

06Au

g.06

Oct

.06

Dec

.06

Feb.

07Ap

r.07

Jun.

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g.07

Oct

.07

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g.09

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.09

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Total Loans, yoy growth rateRetail Loans, yoy growth rateCorporate Loans, yoy growth rate

Source: BNB

Bulgarian banking sector: Loans growth forecast (2007- 2015f, yoy)

Source: BNB, UniCredit Bulbank forecast

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-20%

0%

20%

40%

60%

2007 2008 2009 2010f 2011f 2012f 2013f 2014f 2015f

Retail deposits, yoy growth Corporate deposits, yoy growth Total deposits, yoy growth

+5%

+13%

+..% CAGR

-20%

0%

20%

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60%

80%

100%

Jun.

06Au

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.06

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Total Deposits, yoy growth rateRetail Deposits, yoy growth rateCorporate Deposits, yoy growth rate

Deposit growth remains more resilient, despite recession

Deposits growth slowed down significantly in the course of 2009 in response to deepening recession.

Contraction of corporate deposits reflects deteriorated liquidity conditions and pressure on some companies to deleverage.

Bulgarian banking sector: Deposit grwoth (Jun`2006 – Mar`2010, yoy)

Bulgarian banking sector: Deposits growth forecast (2007- 2015f, yoy)

Source: BNB Source: BNB, UniCredit Bulbank forecast

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Although indebtedness remain moderate for the economy as a whole, some deleveraging pressure is likely in the most overheated sectors such as real estate and construction.

Source: NSI, UniCredit Bulbank Economic Research

2008 Indebtedness indicators by sectors64

% 68%

68%

61%

73%

71%

49% 57

%

52%

78%

55%

53%

70% 77

%

58%

59%

52%

53%

38%

59%

59%

48% 54

%

19% 28

%

27%

25%

24%

23%

22%

20%

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19%

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18%

16%

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15%

15%

14%

12%

11%

11%

10%

6% 6%

13%

3%

16%

5% 2%

6% 7% 6% 7% 8% 8% 10%

3% 3% 5% 5% 2% 1% 3% 2% 4%

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Total I ndebtedness Debt to financial institutions Short-term debt to FI

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Reliance on external funding peaked in Sept 2008, when external liabilities to total assets ratio reached 27%.

After 1Q2009 the pressure on local banks to rebalance their external positions eased significantly. In the after-crises period, banking sector will continue to rely on external funding – in the context of

the convergence process – but not in the proportions observed during the years of consumption and investment boom.

In early 2010, free liquidity was used to reduce some of the most expensive sources of foreign funding

Bulgarian banking sector: External position (Dec`07 – Mar`10)

Source: BNB, UniCredit Bulbank forecast

-25 000

-15 000

-5 000

5 000

15 000

25 000

Dec

`07

Mar

`08

Jun`

08

Sep`

08

Dec

`08

Mar

`09

Jun`

09

Sep`

09

Dec

`09

Mar

`10

-25%

-15%

-5%

5%

15%

25%

External assets (LS)External liabilities (LS)Net external assets / Total assets (RS)

Note: Forecasts are draft-projections agreed with Strategic Research Team in Vienna for the 5Y Pan in March 2009

Bulgarian banking sector: Liquidity indicators (Dec`07 – Mar`10)

Liquidity ratio 2007 2008 2009 2010f Mar.09 Mar.10

Loans / Deposits (excl. Non-residential) 101% 123% 124% 123% 125% 120%

Loans / Deposits (incl. Non-residential) 98% 120% 121% 120% 122% 117%

Net External Assets / Total Assets -7.1% -15.6% -12.9% -10.6% -13.6% -10.3%

External Assets / Total Assets 13.3% 11.0% 11.3% 11.1% 10.4% 11.2%

External Liabilities / Total Assets 20.5% 26.6% 24.2% 21.8% 24.0% 21.6%

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6.35.3 5.7

Nov.08

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8.2 8.4

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SpreadAvg. Monthly Corporate Loans Interest RateAvg. Monthly Corporate Deposit Interest Rate

6.15.2 5.5

Nov.08

10.0

Mar.10Dec.09

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3.94.4 4.0

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SpreadAvg. Monthly Loans Interest RateAvg. Monthly Deposit Interest Rate

Despite challenging profitability backdrop banks in Bulgaria continued cutting loan-to-deposit interest rate spread

Loan-to-deposit interest rate spread (Feb 2004 – Mar 2010)

Source: BNB, UniCredit Bulbank Economic Research

6.76.56.7

11.311.6Dec.09

Mar.10

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Nov.08

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SpreadAvg. Monthly Retail Loans Interest RateAvg. Monthly Retail Deposit Interest Rate

Retail loan-to-deposit interest rate spread

Corporate loan-to-deposit interest rate spread

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2.4%

8.2%

9.8%

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RS of Corporate Bad and Restructured loans from Total LoansRS of Retail Bad and Restructured loans from Total LoansRS of Total Bad and Restructured loans from Total Outstanding Loans

Source: BNB

* Bad and restructured loans – the total amount of balance sheet loans exposures, which are classified as “substandard exposures” (the principal or interest arrears payments have been past-due 61 to 90 days), “non-performing exposures” (the principal or interest arrears payments have been past-due over 90 days) and restructured loans (regardless of the group they are classified in) as per Ordinance No. 9 of BNB, is included.

Bulgarian banking sector looks well positioned to deal with the implications of recession

In 1Q2010, quality of loans has not reached the turning point yet. Nevertheless, the sector remains well equipped with provisions and capital to deal with the impact of recession on its lending books.

We forecast NPL’s to peak at between 10% and 11% of total outstanding loans in early 2011. The total recession related credit losses are estimated to reach BGN 3.7bn or circa 6% of 2008 GDP. Losses will be absorbed at the expense of the current profits for a period of three consecutive years starting from 2009.

2.9%

2.8%

2.7%

2.4% 2.6% 2.7%

2.8% 3.2%

3.2% 4.

3% 5.6% 6.1% 7.

3%

5.7%

5.2%

5.0%

4.3% 4.7%

4.3%

4.3% 5.

5% 6.6%

9.2%

11.8

% 13.0

% 15.3

%

0%

5%

10%

15%

20%

1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10

Loans overdue more than 90 days / Total Gross Loans Loans overdue more than 30 days / Total Gross Loans

Bulgarian banking sector: NPL’s (1Q 2007 – 1Q 2010)

Bulgarian banking sector: Bad and restructured loans(Dec 2007 – Mar 2010)

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In early 2010, the profitability of Bulgarian banking sector remains under pressure

In 1Q2010, profit before taxes was down 37% yoy; reflecting above all the combination of falling business volumes and rise in provisions for bad loans.

We forecast FY 2010 profit before taxes and extraordinary items to slide 53% yoy as banks are anticipated to absorb the largest portion of recession related losses this year.

P&L of the banking system (2007 – 2010f*)

Source: BNB, UniCredit Bulbank Economic Research

2007 2008 2009 2010f

YOY growth rate in %Total Operating Income 3 084 3 710 3 792 3 821 921 936

incl. Net Interest Income 2 172 2 788 2 847 2 815 688 711

incl. Net Fee & Commission Income 673 783 735 774 176 175

incl. Other Income 239 140 210 232 57 50

Overhead Expenses 1 461 1 855 1 907 1 910 464 457

Provisions (net) 357 326 1 028 1 504 153 288

Profit Before Taxes & Extraordinary items 1 265 1 529 857 407 304 191Net Profit (after taxation) 1 142 1 387 780 366 271 170

Total Operating Income 31.4% 20.3% 2.2% 0.8% 7.7% 1.7% incl. Net Interest Income 36.1% 28.4% 2.1% -1.1% 5.8% 3.3% incl. Net Fee & Commission Income 17.2% 16.3% -6.2% 5.3% -1.2% -0.2% incl. Other Income 35.3% -41.7% 50.6% 10.6% 113.5% -11.5%Overhead Expenses 13.2% 27.0% 2.8% 0.1% 13.4% -1.4%Provisions (net) 214.5% -8.9% 215.8% 46.3% 227.6% 88.2%Profit Before Taxes & Extraordinary items 34.3% 20.9% -44.0% -52.5% -23.9% -37.0%Net Profit (after taxation) 41.4% 21.5% -43.7% -53.0% -24.4% -37.5%

J an-Mar 2009

Jan-Mar 2010

Page 9: IL SISTEMA BANCARIO BULGARO E UNICREDIT BULBANK

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Despite the crisis Bulgaria will remain an attractive market looking forward…

47% 50% 50% 50% 50% 49% 49% 48% 48%

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2007 2008 2009 2010f 2011f 2012f 2013f 2014f 2015f

23.9% 21.8%

10.0%4.1%

9.0%13.5% 14.4% 15.6% 16.7%

0%

20%

40%

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2007 2008 2009 2010f 2011f 2012f 2013f 2014f 2015f

2.5% 2.4%1.2% 0.6% 1.3% 1.8% 1.8% 1.8% 1.8%

0%

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10%

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2007 2008 2009 2010f 2011f 2012f 2013f 2014f 2015f

Bulgaria: Return on assets (ROA), before tax

Bulgaria: Return on capital (ROE), before tax

Bulgarian: Cost to Income ratio

In the long run profitability of Bulgarian banking sector will have to adapt to:

Structurally higher cost of risk;

More balanced pace of banking penetration (as looking forward growth rates of domestic demand will be less pronounced when compared with the years of investment and consumption boom);

Higher price of capital;

More complex and possible more expensive regulations;

More expensive funding structure, to reduce dependence on external funding;

convergence in interest rates

Convergence in regulatory standards (particularly liquidity and capital adequacy standards).

Source: BNB, UniCredit Bulbank 5Y Plan draft forecast

Page 10: IL SISTEMA BANCARIO BULGARO E UNICREDIT BULBANK

Position of UniCredit Bulbank

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MARKET POSITIONING UniCredit Bulbank is the market leader in the Bulgarian banking system, with 16% market share in assets …

Market share in total assets is stable - at 16.1%.

Market share in revenues at 14.7%, down by 153 bps, mainly in net interest revenues.

Market share in net profit at 22.4%, up by 72 bps.

Market share in loans at 14.9%, down by 27 bps. Adjusting for the effect of re-imported loans the market share is up by 14 bps.

Market share in deposits at 15%, up by 101 bps.

TOTAL ASSETS

16.1% 16.1%

Mar-09 Mar-10

+6 bp

REVENUES

16.2%14.7%

Mar-09 Mar-10

-153 bp

NET PROFIT

21.7% 22.4%

Mar-09 Mar-10

+72 bp

DEPOSITS

14.0%15.1%

13.1%15.0%

12.9%

18.0%

Total bank Corporate Retail

+101 bp +288 bp -18 bp

LOANS

16.8%

11.7%12.4%

16.8%15.2% 14.9%

12.4%

17.0%15.3%

Total bank Corporate Retail

- 27 bp+14 bp adj.

+ 5 bp+ 23 bp adj.

- 73 bp- 1 bp adj.

* Adjusted with the effect of re-imported loans

Mar-09Mar-10Mar-10 adj *

Page 12: IL SISTEMA BANCARIO BULGARO E UNICREDIT BULBANK

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Loans / Deposits

116.6% 117.5%

UNICREDIT BULBANK BANKING SYSTEM

Cost / Income

43.7%48.9%

UNICREDIT BULBANK BANKING SYSTEM

NPL ratio

4.5%

7.8%

UNICREDIT BULBANK BANKING SYSTEM

ROA1.3%

1.0%

UNICREDIT BULBANK BANKING SYSTEM

ROE

9.2%

7.1%

UNICREDIT BULBANK BANKING SYSTEM

* Source: Regulatory financial statements for both the banking system and UniCredit Bulbank as of 31.03.2010.

-0.9pp

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MARKET POSITIONING … with profitability, efficiency, asset quality and balance sheet structure better than banking system levels

The better loan quality of UCB is a major determinant in the maintenance of lower provision levels. This also allows for higher returns on both assets and equity.

UCB overperforms the market in terms of operating efficiency as well.

Page 13: IL SISTEMA BANCARIO BULGARO E UNICREDIT BULBANK

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PROFIT AND LOSS (consolidated*)Strong performance with Net Profit at BGN 39 mln, which is about ¼ of the total banking system net profit

* Consolidated financial statements of UCI Bulbank include HVI and UniCredit Factoring

Revenues amount to BGN 137 Mio, decreasing with 7.2% y/y.

• Net interest revenues decrease by 7.4% y/y to BGN 98 Mio, due to narrowed spread between customer rates on loans and deposits, coming from the external pressure on market interest rates.

• Fees and commissions and FX decrease by 8.7% y/y to BGN 36 Mio.

• Trading result is positive at TBGN 2 590.

Total operating expenses at BGN 59 Mio, down by 4% y/y, due to strict cost contingency measures.

Impairment losses on loans amount to BGN 34 Mio, up by 23.7% (BGN 6 Mio) y/y, due to the economic crisis and related deterioration of the loan portfolio.

Mar-09 Mar-10 Var yoy (%)

TBGN REVENUES 147,216 136,587 -7.2%Thereof: Net interest revenues 105,426 97,645 -7.4% Fees & Commissions & FX 39,434 36,002 -8.7% Trading income 2,348 2,590 10.3%

OPERATING EXPENSES -61,887 -59,427 -4.0%

GROSS OPERATING PROFIT 85,329 77,161 -9.6%

NET PROVISIONS & GAINS ON SALES OF INVESTMENTS -12,440 -34,246 175.3%Thereof: Profit (loss) and net writedowns on loans -27,335 -33,801 23.7%

PRE-TAX PROFIT 72,888 42,915 -41.1%

NET PROFIT 65,549 38,582 -41.1%

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* Consolidated financial statements of UCI Bulbank include HVI and UniCredit Factoring

BALANCE SHEET (consolidated*)Balance sheet re-positioned in line with the strategic focus on customer business; Securities down by 15.5%; Net Loan/Deposits ratio improved by 165 bps

Total assets grow by 2.9% y/y to BGN 11 bn.

Gross loans grow by 1.2% y/y to 7.8 bn.

Customer deposits grow by 14.4% y/y to 7 bn.

Securities Portfolio (Trading and Financial Assets) decrease by 15.5% y/y.

Net Loans/Deposits

126.6%110.2%

Mar-09 Mar-10

-16.5p.p

Mar-09 Mar-10 Var yoy (%)

MBGNASSETS 11,103 11,428 2.9%Thereof: Gross Loans 7,650 7,740 1.2% Securities 1,019 862 -15.5%

LIABILITIES 9,674 9,812 1.4%Thereof: Deposits from clients 5,794 6,627 14.4%

SHAREHOLDERS' EQUITY 1,429 1,615 13.0%

Page 15: IL SISTEMA BANCARIO BULGARO E UNICREDIT BULBANK

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AWARDS OF UNICREDIT BULBANK 2009

Best Bank in BGBest Bank in BG Bank of the year in BGBank of the year in BG Best Bank in BGBest Bank in BG

Best Custodian in BGBest Custodian in BG CSR AwardCSR Award CSR AwardCSR Award