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Consolidating a Growth, Segmented andConsolidating a Growth, Segmented andComprehensive StrategyComprehensive Strategy
Mr. Israel Vainboim - December 20, 2000Mr. Israel Vainboim - December 20, 20001
22
The Transaction
Banco Fininvest
Valuation
Strategic Rationale
Continuous Focus on Growth
Contents
33
The Transaction
Unibanco acquired, from Grupo Icatu, 50% of the
total capital of Banco Fininvest S.A.
Unibanco acquired, from Grupo Icatu, 50% of the
total capital of Banco Fininvest S.A.
Unibanco which held 50% of Fininvest´s capital is now
the latter´s sole owner, in a transaction valued at
R$ 480 million
Unibanco which held 50% of Fininvest´s capital is now
the latter´s sole owner, in a transaction valued at
R$ 480 million
44
Organizational StructureOrganizational Structure
UnibancoUnibanco
Banco FininvestEquity R$ 159 MM
LoansR$ 800 MM
AdministradoraEquity
R$ 80 MMLoans
R$ 460 MM
Financeira MatrixEquity
R$ 9 MM
LeasingEquity
R$ 7 MM
DTVMEquity
R$ 5 MM
Corretora de SegurosEquity
R$ 0.3 MM
IcatuIcatu
99.9%99.9% 99.9%99.9% 99.9%99.9% 99.9%99.9% 99.9%99.9%
50%50% 50%50%
Total Credit R$ 1,260 MM
Banco Fininvest
55
• Market leadership (top of mind)Market leadership (top of mind)
- 3.0 million active customers- 3.0 million active customers- 7.3 million customer database (75 % with bank accounts)- 7.3 million customer database (75 % with bank accounts)
- 3.3 million consumer credit operations- 3.3 million consumer credit operations- 1.3 million Private Label cards- 1.3 million Private Label cards- 900 thousand loan cards- 900 thousand loan cards- 600 thousand credit cards- 600 thousand credit cards
- 3,300 employees- 3,300 employees
TOTAL: 6.1 million current operations TOTAL: 6.1 million current operations
2.03 Product per Customer
Banco Fininvest
66
14%
4%2%
20%
10%
32%
0%0%
5%5%
10%10%
15%15%
20%20%
25%25%
30%30%
35%35%
Fininvest Fininvest LosangoLosango PanamericanoPanamericano CaciqueCacique Don´t know/Don´t know/Don´t rememberDon´t remember
NoneNone
Source: Research InternationalSource: Research InternationalNovember/2000November/2000RJ, SP, Brasília, Curitiba, Porto Alegre, Belo HorizonteRJ, SP, Brasília, Curitiba, Porto Alegre, Belo Horizonte
Banco Fininvest
Top of Mind - Brand AwarenessTop of Mind - Brand Awareness
77
• Stand aloneStand alone business case - Developed by Morgan Stanley business case - Developed by Morgan Stanley Dean Witter hired jointly by Unibanco and IcatuDean Witter hired jointly by Unibanco and Icatu
- - Discounted cash flowDiscounted cash flow
• Impact of synergiesImpact of synergies - based on study by Speer & Associates - based on study by Speer & Associates
• Tax impact of goodwill - Tax impact of goodwill - to be amortized by Fininvest itselfto be amortized by Fininvest itself
• Impact of strategic opportunities identified by Fininvest Impact of strategic opportunities identified by Fininvest with the support of McKinsey & Co.with the support of McKinsey & Co. - Not valued - Not valued
Valuation
MethodologyMethodology
88
Valuation
• Spreads net of losses will be 30% lower in 2004Spreads net of losses will be 30% lower in 2004
• Loan annual growth rate of 15% until 2004Loan annual growth rate of 15% until 2004
• Discount rate of 18% p.a. in US$Discount rate of 18% p.a. in US$
• Perpetuity growth rate of 2.0% p.a.Perpetuity growth rate of 2.0% p.a.
• Equity equivalent to 12% of credit portfolio Equity equivalent to 12% of credit portfolio
Basic PremissesBasic Premisses
99
Potential SynergiesPotential Synergies
• 11.5% cost reduction on total expenses of R$760 11.5% cost reduction on total expenses of R$760 million incurred by Fininvest, Cartão Unibanco and million incurred by Fininvest, Cartão Unibanco and Unibanco FinanceiraUnibanco Financeira
• Fundamentals underlying the cost reductions:Fundamentals underlying the cost reductions:
management and brands to remain independent management and brands to remain independent
back office integrationback office integration
• Full cost reduction to be achieved within 3 years Full cost reduction to be achieved within 3 years
Valuation
1010
Synergy Potential - Integration TargetsSynergy Potential - Integration Targets
• Credit Processing• Billing• Customer Service• Centralized Management• Credit Department• Processing Center• Collections • Credit Card Issuance Department• Financial Settlement Department• Fraud Control
• Credit Processing• Billing• Customer Service• Centralized Management• Credit Department• Processing Center• Collections • Credit Card Issuance Department• Financial Settlement Department• Fraud Control
Valuation
1111
Nature of estimatedNature of estimatedsavingssavings Data processingData processing 23% 23%
CollectionCollection 18% 18% Management Management 15% 15% Customer serviceCustomer service 12% 12%
OthersOthers 32% 32% TotalTotal 100% 100%
Synergy PotentialSynergy Potential
Net savingsNet savings (in R$ MM)(in R$ MM) Year 1 Year 2 Year 3 ---> Year 1 Year 2 Year 3 ---> time tabletime table Net savingsNet savings 1111 55 55 86 86
Savings Savings PrioritiesPriorities ScheduleSchedule Integration of management areasIntegration of management areas 15% 15% Back office (includes credit cards)Back office (includes credit cards) 33% 33% Unibanco finance Unibanco finance 14% 14%
Other staff (HR, Legal, etc)Other staff (HR, Legal, etc) 15% 15% Data processing Data processing 23% 23% TotalTotal 100% 100%
Valuation
1212
Recent FinancialsRecent Financials
1998 1999 E2000
Credit PortfolioCredit Portfolio 963963 919919 1,2601,260
Total RevenueTotal Revenue 732732 712712 741741
LossesLosses (387)(387) (425)(425) (413)(413)
Expenses Expenses (333)(333) (274)(274) (293)(293)
TaxesTaxes 22 33 (14)(14)
Net IncomeNet Income 1414 1717 2121
In R$ millionIn R$ million
Valuation
1313
• Increase customer base 18% p.a. Increase customer base 18% p.a.
• Open 52 new branches in 2001Open 52 new branches in 2001
• Increase cross sellingIncrease cross selling
• New products introductionNew products introduction
Fininvest´s 2001 Growth PlanFininvest´s 2001 Growth Plan
Valuation
1414
2001 Budget2001 Budget
Business as Usual
FinanceiraMatrix
New Projects
Total
Total RevenueTotal Revenue 902902 4444 3535 981981
LossesLosses (434)(434) (14)(14) 1818 (430)(430)
ExpensesExpenses (353)(353) (18)(18) (47)(47) (418)(418)
ProvisionsProvisions (9)(9) (1)(1) (1)(1) (11)(11)
TaxesTaxes (38)(38) (4)(4) (2)(2) (44)(44)
Net IncomeNet Income 6868 77 33 7878
In R$ millionIn R$ million
Valuation
Not valuedNot valued
1515
Valuation
Business Stand Alone Business Stand Alone 560560 700 700
Synergies (after tax)Synergies (after tax) 338338 338 338
Tax shield (goodwill)Tax shield (goodwill) 62 62 6262
New StrategiesNew Strategies 0 0 0 0
TOTALTOTAL 960960 1,1001,100
Internal Rate of ReturnInternal Rate of Return 18%18% 22%22%
In R$ millionIn R$ million SummarySummary
More favorablescenario
Conservativescenario
1616
Value at UnibancoValue at Unibanco
1996: acquisition of 50% 1996: acquisition of 50% US$ 10 MMUS$ 10 MM
2000: proportional equity value 2000: proportional equity value R$ 80 MMR$ 80 MM acquisition of 50% acquisition of 50% R$ 480 MMR$ 480 MM
100% => 100% => R$ 560 MMR$ 560 MM
Implied Economic Value: R$ 960 MM (*)
(*)(*) Morgan Stanley: Stand Alone ValuationMorgan Stanley: Stand Alone ValuationSpeers & Associates: Synergies StudiesSpeers & Associates: Synergies StudiesMcKinsey: Strategic Planning of FininvestMcKinsey: Strategic Planning of Fininvest
Valuation
1717
Year 2000: Unibanco Furthers its SegmentationYear 2000: Unibanco Furthers its Segmentation
Strategic Rationale
Wholesale Banking GroupWholesale Banking Group Retail Banking GroupRetail Banking Group
Note: For visual representation.Note: For visual representation.
Corporate BankingCorporate Banking(Annual Sales > R$ 80 MM)(Annual Sales > R$ 80 MM)
Private BankingPrivate Banking
(Financial Investment > R$ 1,000,000)(Financial Investment > R$ 1,000,000)
Exclusive ClientExclusive Client(R$ 1,300 < Monthly income(R$ 1,300 < Monthly income< R$ 4,000)< R$ 4,000)
Upper Middle MarketUpper Middle Market(R$ 25 MM < Annual Sales < R$ 80 MM)(R$ 25 MM < Annual Sales < R$ 80 MM)
Lower Middle MarketLower Middle Market(R$ 10 MM < Annual Sales <R$ 25 MM)(R$ 10 MM < Annual Sales <R$ 25 MM)
R$ 350 < Monthly R$ 350 < Monthly Income > R$1,300Income > R$1,300
Special ClientSpecial Client
Banco 1 (Virtual Bank)Banco 1 (Virtual Bank)
(Monthly Income > R$ 1,000 )(Monthly Income > R$ 1,000 )
Uni ClassUni Class
(Monthly Income > R$ 4,000 )(Monthly Income > R$ 4,000 )
Exclusive ClientExclusive Client
(Annual Sales < R$ 10 MM)(Annual Sales < R$ 10 MM)
Small BusinessesSmall Businesses
INDIVIDUALSINDIVIDUALSCORPORATECORPORATE
1818
Customer Base Distribution - UnibancoCustomer Base Distribution - Unibanco
10,00010,000
7,5007,500
4,4504,450
3,6003,600
2,5002,500
1,5001,500
700700
00
2525 50501818 3030 3535 3737 4040 4545 5555 6060 6565 6565 7070AgeAge
IncomeIncome
Source: Brazil IBGE (PNAD/1996) - All sourcesSource: Brazil IBGE (PNAD/1996) - All sources
Young Affluent Affluent
Successful Beginner
Upper Middle Family Older Up-scale
Middle Family Middle Core
Young Mass Market Mass Market
Younger Lower Older Lower
19.9%
2.1%
Strategic Rationale
Clients: 287,636 Clients: 93,588
Clients: 170,246
Clients: 88,098
Clients: 447,502Clients: 131,665
Clients: 120,140
Clients: 481,478 Clients: 626,354
Clients: 1,412,663 Clients: 330,355
1919
10,00010,000
7,5007,500
4,4504,450
3,6003,600
2,5002,500
1,5001,500
700700
00
2525 50501818 3030 3535 3737 4040 4545 5555 6060 6565 6565 7070AgeAge
IncomeIncome
Source: Brazil IBGE (PNAD/1996) - All sourcesSource: Brazil IBGE (PNAD/1996) - All sources
Young Affluent Affluent
Successful Beginner
Upper Middle Family Older Up-scale
Middle Family Middle Core
Young Mass Market Mass Market
Younger Lower Older Lower
19.9%
10.8%
Customer Base Distribution - Unibanco + FininvestCustomer Base Distribution - Unibanco + Fininvest
Strategic Rationale
2020
Transaction Rationale - Summary
StrategicStrategic• Increase scale by adding 3 million active clientsIncrease scale by adding 3 million active clients• Increase Market Share in Low income segmentIncrease Market Share in Low income segment• High Potential Growth segmentHigh Potential Growth segment• Powerful Brand Name ( top of mind)Powerful Brand Name ( top of mind)• Cross Sell Opportunities (Capitalization, Insurance etc.)Cross Sell Opportunities (Capitalization, Insurance etc.)
FinancialFinancial• IRR of 18% +IRR of 18% +• Premium for controlPremium for control• Low Client Acquisition CostLow Client Acquisition Cost
SynergiesSynergies• Cost savings of 11.5 % incurred on similar activitiesCost savings of 11.5 % incurred on similar activities• Full cost reduction to be achieved in 3 yearsFull cost reduction to be achieved in 3 years
2121
Continuous Focus on Growth
Earnings per Share (R$)
Total Funding (R$ million)
5,41012,075
29,703
41,057
52,654
9090 9393 9696 9999
CAGR = 25.55%
5,90611,546
26,268
35,997
44,437
9090 9393 9696 9999 Sep/00 Pro FormaSep/00 Pro Forma
Total Assets (R$ million)
CAGR = 22.36%
1.43
2.22
2.99
5.57
9090 9393 9696 9999
CAGR = 16.31%
Sep/00Sep/00Pro FormaPro Forma
2222
Total Assets - Relative PositioningTotal Assets - Relative Positioning
Source: Austin Asis, Central Bank of BrazilSource: Austin Asis, Central Bank of Brazil
Banco do Brasil vs. UNIBANCOBanco do Brasil vs. UNIBANCO 13,013,0 3,23,2
Bradesco vs. UNIBANCOBradesco vs. UNIBANCO 2,92,9 1,91,9
Itaú vs. UNIBANCOItaú vs. UNIBANCO 2,32,3 1,31,3
Banespa vs. UNIBANCOBanespa vs. UNIBANCO 2,22,2 0,60,6
1990
Highest Relative Growth in the DecadeHighest Relative Growth in the Decade
2000
Continuous Focus on Growth
2323
Growth ObjectivesGrowth Objectives- New clients - New clients - Increased distribution- Increased distribution- Increase cross selling - Increase cross selling
StrategyStrategyMaintain segmentation focus while maximizing Maintain segmentation focus while maximizing one-to-one sales approachone-to-one sales approach
FocusFocus- Organic Growth Plan- Organic Growth Plan- AcquisitionsAcquisitions
Next 3-year StrategyNext 3-year Strategy
Continuous Focus on Growth
2424
66 new branches66 new branches135 Corporate-site branches135 Corporate-site branches
58 In-store58 In-store
Acquire : 1,857,000 customers
Investments : R$ 181 millionInvestments : R$ 181 millionExpense Growth : R$ 199 millionExpense Growth : R$ 199 million
Incremental Income : R$ 513 millionIncremental Income : R$ 513 million
Organic Growth Plan - 3-year ObjectivesOrganic Growth Plan - 3-year Objectives
Continuous Focus on Growth
2525
Acquisitions
CredibancoCredibanco 108108
BandeirantesBandeirantes 1,0441,044
FininvestFininvest 480480
TOTALTOTAL 1,6321,632
Year 2000 - Strategic InitiativesYear 2000 - Strategic Initiatives
Quatro/AQuatro/A 109109
Zip.netZip.net 6868
Banco1.netBanco1.net 114114
BUSBUS 215215
TOTALTOTAL 506506
Divestitures/Associations
In R$ millionIn R$ million
Continuous Focus on Growth
2626
For more information contact ourFor more information contact our
Investor Relations Area atInvestor Relations Area at
phone : 55-11-3097-1626 / 1313phone : 55-11-3097-1626 / 1313
fax: 55-11-3813-6182fax: 55-11-3813-6182
email: [email protected]: [email protected]
The following presentation contains forward looking statements regarding Banco Fininvest, anticipated The following presentation contains forward looking statements regarding Banco Fininvest, anticipated synergies, Banco Fininvest’s growth plan, Unibanco and its projected results and future strategy. Although synergies, Banco Fininvest’s growth plan, Unibanco and its projected results and future strategy. Although these forward looking statements reflect management’s good faith beliefs, they involve known and unknown these forward looking statements reflect management’s good faith beliefs, they involve known and unknown risks and uncertainties that may cause Unibanco’s actual results or outcomes to be materially different from risks and uncertainties that may cause Unibanco’s actual results or outcomes to be materially different from those anticipated and discussed herein. These risks and uncertainties, include but are not limited to our ability those anticipated and discussed herein. These risks and uncertainties, include but are not limited to our ability to realize the amount of the projected synergies and on the timetable projected, as well as economic, to realize the amount of the projected synergies and on the timetable projected, as well as economic, competitive, governmental and technological factors affecting Fininvest’s and Unibanco’s operations, markets, competitive, governmental and technological factors affecting Fininvest’s and Unibanco’s operations, markets, products and prices, and other factors detailed in Unibanco’s filings with the Securities and Exchange products and prices, and other factors detailed in Unibanco’s filings with the Securities and Exchange Commission which readers are urged to read carefully in assessing the forward-looking statements contained Commission which readers are urged to read carefully in assessing the forward-looking statements contained herein. Unibanco undertakes no duty to update any of the projections contained herein. herein. Unibanco undertakes no duty to update any of the projections contained herein.
