2. Agenda UniCredito Italiano’s Architecture for the New Economy Multi-channel Banking: enhancing the existing platform Xelion: on-line personal financial services B2B and B2C Initiatives: “web-leveraging” our core competence 1999 Group Results Conclusions
3. Agenda UniCredito Italiano’s Architecture for the New Economy Multi-channel Banking: enhancing the existing platform Xelion: on-line personal financial services B2B and B2C Initiatives: “web-leveraging” our core competence 1999 Group Results Conclusions
4. OUR LONG-STANDING COMMITMENT TO DELIVERING SHAREHOLDER VALUE CREATION... ‘ 94 ‘ 95 ‘ 96 ‘ 97 ‘ 98 ‘ 99 0.008 0.043 0.058 0.100 0.197 0.258 ROE EPS (Euro) 21.1% 15.4% 8.2% 4.7% 3.4% 1.4% CAGR: +100% TRACK RECORD OF DELIVERING AND OUTPERFORMING TARGETS
5. … DRIVES OUR STRATEGIC THINKING IN THE FAST-CHANGING INTERNET BANKING SCENARIO NEW EUROPE AND CONVERGING MARKETS GROWTH OF DOMESTIC MARKET SHARE X-BORDER PARTNERSHIPS OUR 3 POINT STRATEGY ... GAIN KEY POSITIONS IN NEW EUROPE AHEAD OF TAKE-OFF OF INTERNET REVOLUTION INTERNET IS A GREAT OPPORTUNITY TO DEVELOP OUR 12% MARKET SHARE CONTINUE PURSUING ADDED VALUE PARTNERSHIPS ... FITS WELL WITH THE INTERNET WORLD Today we outline our Architecture for the New Economy In May 2000 we will present our 3-year Business plan
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7. INTERNET AND THE NEW ECONOMY: IMPACT ON OUR OPERATING RESULTS OVER 3 - 5 YEARS False alarm Price war New entrants win Price Resistance Low High LOSS OF CUSTOMERS Low High PRICE COMPETITION Impact on existing business 4 possible scenarios Operating income today Margins decrease on existing clients/products Cost cutting Increased cross- selling to existing customers New customers and new initiatives Cross-selling, new customers and new initiatives are crucial Note: foreseen impact
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9. … WITH CLEAR STRATEGIC PRIORITIES Protect and develop existing customer base Attack further the affluent segment Leverage core skills to exploit web-related opportunities Deepen segmentation and multi-channel distribution of existing platform Launch on-line personal financial services platform for affluent segment Several B2B and B2C initiatives and more in the pipeline
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11. Agenda UniCredito Italiano’s Architecture for the New Economy Multi-channel Banking: enhancing the existing platform Xelion: on-line personal financial services B2B and B2C Initiatives: “web-leveraging” our core competence 1999 Group Results Conclusions
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17. Agenda UniCredito Italiano’s Architecture for the New Economy Multi-channel Banking: enhancing the existing platform Xelion: on-line personal financial services B2B and B2C Initiatives: “web-leveraging” our core competence 1999 Group Results Conclusions
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19. Xelion: TARGET NEW CUSTOMERS * Xelion’s target market share: ~15% Euro ~ 100 mln, total investments over a 3 year period On-line trading to be launched in May 2000 Other financial services to be added in 2H2000 NOT AFRAID OF CANNIBALISATION 19 5,200 Affluent customers in Italy Number of customers, Estimate 2005 (‘000) Multi-channel affluent customers New customers UCI group’s cannibalised customers 450 360 90 2,600 50% ~15% ~20% Xelion’s* target
20. Agenda UniCredito Italiano’s Architecture for the New Economy Multi-channel Banking: enhancing the existing platform Xelion: on-line personal financial services B2B and B2C Initiatives: “web-leveraging” our core competence 1999 Group Results Conclusions 20
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23. ...UNDERPINNED BY TWO INNOVATIVE INITIATIVES: TLX ® - THE FIRST ITALIAN ECN AND MY MONEY - AN OUTSTANDING ON-LINE FINANCIAL MAGAZINE My Money: one of the most complete Italian financial websites Unique Italian ECN with after- hours trading Kilovar: user-friendly tool for risk measurement of complex products TradingLab: 700,000 page views per day 23
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32. Agenda UniCredito Italiano’s Architecture for the New Economy Multi-channel Banking: enhancing the existing platform Xelion: on-line personal financial services B2B and B2C Initiatives: “web-leveraging” our core competence 1999 Group Results Conclusions
33. TOTAL REVENUES: +6.3% Interest Income: -3% Net Commissions: +22.7% OPERATING INCOME: +14% Administrative Costs (incl. depreciation): +0.5% COST/INCOME (incl. depreciation.): 52.8% (55.8% in Dec. ‘98) EXCELLENT TREND IN OPERATING INCOME OUTPERFORMING BUDGET TARGETS WITH SIGNIFICANT PROGRESS IN NET INCOME NET INCOME : Euro 1,286 mln (Euro 950* mln in Dec. ‘98) ROE: 21.5% (15.4% in Dec. ‘98*) EARNING PER SHARE: Euro 0.26 (Euro 0.20 in Dec. ‘98*) * Before extraordinary depreciation of goodwill for Rolo Banca 1473 1999 results compared excluding Pekao PROPOSED DIVIDEND: Euro 0.13 (Euro 0.06 in ‘98) 1999 results compared including Pekao
34. FURTHER RISE IN MARKET SHARE: from 10.78% (Dec. ‘98) to 10.90% on lire deposits (excluding bonds and repos) POSITIVE CONTRIBUTION OF CURRENT ACCOUNTS: + 14.8% on Dec. ‘98 CUSTOMER DEPOSITS Euro, mln (excl. repos) … MAINLY DUE TO PACKAGES, 387,000 new accounts in ‘99 (totalling 813,000) Dec. ‘98 Dec. ‘99 83,826 87,093 +3.9% RISE IN MARKET SHARE (from 10.38% in Dec ‘98 to 10.98% in Dec ‘99, excluding repos) SUBSTANTIAL GROWTH IN MORTGAGES (+22.1%, Euro 28 bln in Dec ‘99) GOOD PERFORMANCE OF LEASING (+9.3%, Euro 5,151 mln in Dec ‘99) CUSTOMER LOANS Euro, mln (excl. repos) 74,477 85,167 Dec. ‘98 Dec. ‘99 +14.4% POSITIVE TREND OF CUSTOMER DEPOSITS MAINLY DUE TO THE SIGNIFICANT RISE OF CURRENT ACCOUNTS (+14.8% on Dec. 1998) AND STRONG LOAN GROWTH 1999 results compared excluding Pekao
35. QUALITY OF RESULTS CONTINUES TO IMPROVE: NET COMMISSIONS RISE FURTHER (Euro 2,522 mln, +22.7% on Dec. ‘98) LED BY ASSET MANAGEMENT (40% over Dec. ‘98) AND BANCASSURANCE NET COMMISSIONS/ TOTAL REVENUES 37% 32% 1998 1999 NET COMMISSIONS (Euro, mln) % OF ASSET MANAGEMENT AND BANCASSURANCE ASSET MANAGEMENT COMMISSIONS +40% from Euro 789 to Euro 1,104 mln Strong growth in fees from securities placement (+66%, from Euro 142 mln to Euro 237 mln) 1998 2,056 1999 2,522 45% 6% 37% 4% BANCASSURANCE: +94%, from Euro 75 mln to Euro 145 mln AuM: Euro 96 bln, +34% on 1998
36. STAFF COSTS Euro, mln OTHER COSTS, Euro mln (incl. depreciation) 1998 1999 1999 1998 Costs for new projects, strategic initiatives and integration Strict cost control and productivity improvements 2,159 2,146 263 280 Reduced impact of depreciation EXCLUDING EXPENSES FOR INTEGRATION AND NEW PROJECTS COSTS DECREASE: ADMINISTRATIVE COSTS (excl. Pekao) +0.5% -0.6% 1,202 1,183 +1.7% 26 55 876 884 -6% +0.9% +112% 1999 results compared excluding Pekao
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38. ASSET QUALITY REMAINS VERY SATISFACTORY, WITH IMPROVED COVERAGE. THE RISE IN WRITE-DOWNS IS MAINLY DUE TO FONSPA, PEKAO AND HIGHER COVERAGE ON PERFORMING LOANS Fonspa Pekao’s post privatisation write-downs Generic Reserves on Performing Loans* 100 mln 109 mln 53 mln Euro 263 mln increase in total provisions driven by: NPL COVERAGE RATIO IMPROVING Dec. ‘98 Dec. ‘99 45.3% 53.0% 2.6% 2.1% Dec. ‘98 Dec. ‘99 NPL ON TOTAL LOANS DECREASING DESPITE PEKAO * Total general reserve: Euro 167 mln
39. PEKAO RESTRUCTURING IS WELL ON TRACK AND REINFORCES OUR CONFIDENCE TOWARDS FURTHER EXPANSION IN THE “NEW EUROPE” Share price: +30% since the acquisition 45 joint task-forces already producing operational results MBO program for 900 managers New Head Office and regional overhead organisation New retail scoring system being implemented Implementation of deep budgeting process and reporting system Migration of 1,000 employees to front line
40. Agenda UniCredito Italiano’s Architecture for the New Economy Multi-channel Banking: enhancing the existing platform Xelion: on-line personal financial services B2B and B2C Initiatives: “web-leveraging” our core competence 1999 Group Results Conclusions