Post on 10-Nov-2014
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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
2
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.
07Au
g.07
Oct
.07
Dec
.07
Feb.
08Ap
r.08
Jun.
08Au
g.08
Oct
.08
Dec
.08
Feb.
09Ap
r.09
Jun.
09Au
g.09
Oct
.09
Dec
.09
Feb.
10
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
3
-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%
40%
60%
80%
100%
Jun.
06Au
g.06
Oct
.06
Dec.
06Fe
b.07
Apr.0
7Ju
n.07
Aug.
07O
ct.0
7De
c.07
Feb.
08Ap
r.08
Jun.
08Au
g.08
Oct
.08
Dec.
08Fe
b.09
Apr.0
9Ju
n.09
Aug.
09O
ct.0
9De
c.09
Feb.
10
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
4
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%
20%
20%
19%
19%
18%
18%
16%
16%
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%
0%
20%
40%
60%
80%
100%
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n.e.
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Total I ndebtedness Debt to financial institutions Short-term debt to FI
5
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%
6
6.35.3 5.7
Nov.08
9.2
Mar.10Dec.09
8.2 8.4
2.9 3.0 2.7
0.00
5.00
10.00
15.00
20.00
Feb`
04M
ay`0
4Au
g`04
Nov
`04
Feb`
05M
ay`0
5Au
g`05
Nov
`05
Feb`
06M
ay`0
6Au
g`06
Nov
`06
Feb`
07M
ay`0
7Au
g`07
Nov
`07
Feb`
08M
ay`0
8Au
g`08
Nov
`08
Feb`
09M
ay`0
9Au
g`09
Nov
`09
Feb`
10
SpreadAvg. Monthly Corporate Loans Interest RateAvg. Monthly Corporate Deposit Interest Rate
6.15.2 5.5
Nov.08
10.0
Mar.10Dec.09
9.5 9.5
3.94.4 4.0
0.00
5.00
10.00
15.00
20.00
Feb`
04M
ay`0
4
Aug`
04
Nov
`04
Feb`
05
May
`05
Aug`
05
Nov
`05
Feb`
06
May
`06
Aug`
06
Nov
`06
Feb`
07M
ay`0
7
Aug`
07N
ov`0
7
Feb`
08M
ay`0
8
Aug`
08N
ov`0
8
Feb`
09
May
`09
Aug`
09
Nov
`09
Feb`
10
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
11.2
Nov.08
4.65.14.5
0.00
5.00
10.00
15.00
20.00
Feb`
04
May
`04
Aug`
04
Nov
`04
Feb`
05
May
`05
Aug`
05N
ov`0
5
Feb`
06M
ay`0
6
Aug`
06N
ov`0
6
Feb`
07
May
`07
Aug`
07
Nov
`07
Feb`
08
May
`08
Aug`
08N
ov`0
8
Feb`
09M
ay`0
9
Aug`
09
Nov
`09
Feb`
10
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
7
2.4%
8.2%
9.8%
0%
5%
10%
15%
Dec
`07
Feb`
08
Apr`0
8
Jun`
08
Aug`
08
Oct
`08
Dec
`08
Feb`
09
Apr'0
9
Jun'
09
Aug`
09
Oct
'09
Dec
'09
Feb`
10
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)
8
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
9
Despite the crisis Bulgaria will remain an attractive market looking forward…
47% 50% 50% 50% 50% 49% 49% 48% 48%
0%
20%
40%
60%
80%
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%
60%
80%
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%
5%
10%
15%
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
Position of UniCredit Bulbank
11
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 *
12
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
-5.2pp -3.3pp
0.3pp
2.1pp
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.
13
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%
14
* 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%
15
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