1. 30th Efma Convention:
Leadership in retail fi
L d hi i t il finance
13 p.m. & 14 March 2008 - Paris
Roberto Nicastro
Deputy Chief Executive Officer
Unicredit Group
2. EFMA: BUILDING THE FIRST TRULY EUROPEAN
FINANCIAL SERVICES GROUP
OVERCOMING THE HURDLES OF EUROPEâS FRAGMENTATION
THROUGH CROSS-BORDER MARKET SEGMENTATION
EFMA 30th Convention
Roberto Nicastro Deputy CEO Unicredit Group
Paris, 14 March 2008
3. Unicredit saw an exceptional growth, pursuing a diversification
p
path that led to a strong internationalization
g
TOTAL
REVENUES
EMPLOYEES BRANCHES
(⏠bn)
1993 PRIVATISATION: Credito Italiano first Italian
State-owned bank to be privatised
2,2 17,158 814
1998 â 2000 UNICREDITO CREATION AND INTEGRATION: 9,3 65,047 3,931
merger and integration of 7 Italian banks
REORGANISATION BY CLIENT SEGMENT: 3
2001 â 2003
segment banks established 10,5 69,062 4,563
HVB GROUP MERGER AND INTEGRATION: new
2005 â 2006 Group full divisionalisation; mergers of Group banks in
23,5 (2) 132,480 (1) 7,269
CEE countries
CAPITALIA MERGER: strengthening position in Italy
2007 29,9
Expected
NEW ACQUISITIONS IN CEE: announcement of two 169,816 (3) 9,633
new deals in Ukraine and Kazakhstan
3 (1) KFS Group consolidated proportionally
(2) IFRS
(3) Full Time Equivalents, with KFS at 100%
4. Unicredit now ranks among world wide top players
Market Cap in Eurozone (Euro bn)1 Market Cap World Wide (Euro bn)1
SCH 70.8 ICBC 181.0
UniCredit 64.7 CCB 119.9
IntesaSP 59.7 HSBC 113.5
BNP Paribas 56.8 BoA 110.3
BBVA 49.5
49 5 Bank f China
B k of Chi 105.1
ING 46.8 JP Morgan Chase 91.8
Deutsche Bank 38.5 Citigroup 84.2
Soc Generale 36.6 SCH 70.8
Fortis 30.7 Mitsubishi UFJ 64.9
Credit Agricole
g 30.8 UniCredit 64.7
1) As of 21 January 2008 - Source: Thomson Financial
4
5. With a unique broad foothold in Europe
0,5-1%
1%-3%
1% 3%
3%-10%
>10%
5
6. This generated some complexity
UNPARALLELED EUROPEAN FRANCHISE
B ki operations i 23 countries(1)
Banking ti in ti
More than ~40 million customers
About 10,000 branches
FOUR CORE MARKETS
Italy: #2, ~16% market share(2)
Germany: #3, ~5% market share(2)
Austria: #1, ~19% market share(2)
SPREAD REVENUE PORTFOLIO CEE: the biggest investor in the region
Total Revenues Other 8%
GLOBAL PRODUCT FACTORIES
CEE 18%
MIB: a strong regional player with leading position in CEE
Italy 47%
(#2 ECM and M&A in 2006)
Austria 10% Pioneer, a global player: AuM(3) ~290 bn
Leasing: European leader as for new production(4)
Credit cards: a strong platform with ~11 mln credit cards issued,
Germany 17% ( f which 6 5 mln i CEE(5)) #5 i E
(of hi h 6.5 l in ), in Europe and #1 i T k
d in Turkey
NOTE: Year-end 2006 data, referred to UniCredit + Capitalia +
ATF +USB Groups (combined pro-forma)
pro forma)
Source: UniCredit, Capitalia, ATF, USB 2006 data
(1) Including
6 ATF
(2) Market shares and rankings calculated on customer loans, considering only loans to domestic customers for Germany
(3) As of March 07, including Pioneer Austria and Capitalia. (4) After merger with Capitalia, almost ex-aequo with Lombard Finance
(5) Cards already activated
7. Cross border financial companies face a common scenario
Different evolution of Wholesale vs Retail (Wholesale with quick
globalization, Retail slower but moving forward)
European banking market split in two blocks
â Private Banks, strongly performance oriented
â Cooperative/State owned banks
Economies of scale and scope driving cross-border M&A frenzy but
complexity and political sensitiveness playing a relevant role
Consumer and Corporate needs are in convergence
â However regulations and taxations (more than culture) still
generating fragmentation
7
8. Similar trends are hitting all Countries
Eurozone banksâ unit margins
Continuing population ageing
Dependency Ratio (over 65/15-64)
80
70 Japan
United States
60 Euro area
Customer dis-trust vs banks 50
40
30
20
10
0
1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050
MIFID directive
Consumer protection focus Consumer Lending
Mortgage
SEPA
8
Banking fees cancellations by regulators
Source: Unicredit Research on ECB Data
9. Similar trends are hitting all Countries
100 Online Banking Users: US
(million)
75 78
80 70
65
58
60
Increasing usage of remote
I i f t 49
40 31 33
28
channels 20 18
11
0
1999 2001 2003 2005 2007 2009E
Average Satisfaction Eu
85
(TRIM Index) 77
66
65
Recent funding cost increase
45
Auto
Health
Travel
nance
tailer
IT
Telco
Meida
T
M
Ret
Fin
110
Euro area, spread banking issuese (A/A+)
Euro Area, spread emissioni bancarie (A+/A)
100 governative, (10 anni)
and government i
d t issues, 10 years
90
Strong pressure on margins 80
( g
(eg mortgage)
g g ) 70
60
50
9
Source: BCG study, 40
2-Jun-07 12-Jul-07 21-Aug-07 30-Sep-07 9-Nov-07 19-Dec-07 28-Jan-08
10. Unicredit Group has taken a clear route
Specialize around customers (Divisional model) across border
Cluster governance by strategic focus area
Exploit global product factories
Build identity across the borders
10
11. UCG model: focus on custome centric âDivisionsâ across
borders empowered by Global Factories
p y
§ CFO
§ CRO
§ STRATEGIC HR
Wealth Polandâs Global Banking
Retail
R t il Corporate CEE
Management Markets
Services
Unicredit Financing
Asset Management
âŠ
Divisional model in place, with focus on customers
Commercial Banking run by Division across Italy, Germany and Austria
Growth markets (Poland and CEE) locally focused to capture high growth opportunities
Global businesses (AM, Unicredit Financing, âŠ) run on a global basis
Divisions fully responsible for definition of strategy, targets and execution guidelines
strategy
Regional Entities contribute to strategy definition, and responsible for execution as well as
11 achievement of targets
12. UCG Retail built common service models for each customer
segment across borders âŠ
g
Affluent
Customers
FIRST: best in class advisory model aimed at
creating mid-term value
Individuals with more 2 customer sub-segments
than 100K ⏠I.A.1
Mass
Market Si lifi d offer, lif cycle based advisory
Simplified ff life l b d d i
Individuals with more
7 customer sub-segments
than 100K ⏠I.A.
Business Class: integrated company-
Small Business
entreprenour advisory model, remote
Companies with less advisory for very small companies
than 3Mn ⏠turnover
4 customer sub-segments
12
13. ⊠thanks to structured exchange of innovations and best
p
practices generated in different Countries
g
Initial Structured
Best Practice Joint
Information Best Practice
Replication Initiatives
Sharing Sharing
âąAd hoc âąLocal projects âąJoint multi- âąBest practice
workshops based on country database
âąDocument recognized projects âąPrioritization of
sharing cross-border âąCommon realignment
âąCross Border
C oss o de best-practices
best p act ces se ce ode s
service models âąContinuous
Co t uous
Competence âąTeams to definition innovation
Center Roles include âąCreation of screening and
experts from products equal sharing
other in all Countries
Countries
E bl
Enabler: common IT platforms, centralized governance
l tf t li d
13
14. Few examples of UGC Retail cross-Country initiatives
Unique âBusiness Classâ service model for Small Business all over
the Countries
Remote advisory model for micro-business
Common CRM models integrating best-of-breed innovations of all
Countries
Cross Border Credit: extension guarantee for daugther companies in
foreign Countries where UCG is present
Mirrored accounts with instant balances updates between Countries
Current accounts benefits package
Joint best of breed cross-border IT platform, by integrating best
practices present in all Countries â expected beginning 2010
14
15. The governance is clustered into strategically differentiated areas:
the Retail example
p
Retail Italy
Integrate quicly and flawlessly Capitalia network:
Become 5,000 branches entity in Italy with more than 20% MS
Continue to pursue customer base enlargement
Realize integration synergies
Complete turnaround and relaunch growth and people motivation:
Complete turnaround of unprofitable Mass Market and Small
Retail
Business segments
Germany&Austria
Grow with selectivity, become the best bank in serving Affluent
segment
Keep cost of risk under tight control
15
16. Global Platforms to Exploit Specialization Excellence: Unicredit
Consumer Financing g
The Ambition: Tier 1 European player by 2011
bn t k t
20 - 25 b ⏠stock vs current 10 bn (market share of 6 8%)
b ( k t h f 6-8%)
~3 bn ⏠revenues, growth pace over 2x market
7 UCG core European markets
N
N° 3 in PBT in the European CF league table
~ 2 bn ⏠discounted EVA value creation for the Group
The St t
Th Strategy: consolidate and grow captive
lid t d ti
business and develop new client acquisition
Leverage existing sizeable UCG Retail distribution
Develop selectively alternative channels to accelerate
new clients acquisition (global partnerships, third party
networks, direct channels, in branch corners)
Develop world wide best in class Credit Risk organization,
processes and tools
Dedicated IT unit to speed up expansion
Build top notch capabilities: global talents recruiting and
dedicated international expamsion teams
p
16
17. Global Platforms to Exploit Specialization Excellence: Pioneer
Investments
Pioneer data as at the end of December 2006, where not specified
Over Euro ~290 bn
AUM(1)
~5 bn in alternative
London AUM
Warsaw
Dublin Prague Beijing ~ 300 investment
Paris Munich
professionals
Boston Madrid
New York Tel Aviv worldwide
Miami Geneva Hong Kong
Milan 2,127 employees
worldwide (as at
Singapore
December 31, 2006)
Distribution across
Buenos Aires Sydney
22 countries
worldwide
(1) Including Pioneer Austria
17
18. The glue is a common identity and a culture based on
customer service
NEW BRAND STATUS
Slovak Rep.
Bulgaria
Czech Rep. Q4/07
Build a recognizable brand in the Ukraine
region Croatia
BIH Q4/07
Differentiate from competitors
Serbia
leveraging on extensive network
g g g
Montenegro
strength Romania
Hungary
Support customer acquisition Baltic area
Russia Q4/07
Focus on business sustainability
and customer satisfaction Slovenia Q3/07
Poland Final decision to be taken
Turkey
Germany
New brand launched Austria
Italy
18
19. Few challenges exist to complete the path to become a truly
European bank
p
Local regulators prove somehow shy at accepting cross-border
governance models, one have to pioneer solutions and strive for
acceptance
MIFID and other Eu regulations aims in principle to protect customers.
But local regulators apply different interpretation and adoption time
â Multi-country players have to deal with an un-needed complexity â
which customers behaviours differences itself wouldnât require
wouldn t
Pressure to reduce / eliminate prices by regulators is often made in
f i ti ith t taking into
ith th Countries without t ki i t account
name of comparison with other C t
differences in customer behaviour and sophistication
19