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CARIGE GROUPCARIGE GROUPCARIGE GROUPCARIGE GROUP
20112011 20142014 StrategicStrategic PlanPlan2011 2011 –– 2014 2014 StrategicStrategic PlanPlan
dd hh h hh h llSustainedSustained growthgrowth throughthrough value value creationcreation
Milan, 17 May 2011
Agenda
Our growth processOur Strategic Plan
•Scenario•Strategy•Strategic initiatives•Organisational structures•Targets
The first quarter of 2011Conclusions
2
Agenda
Our growth processOur Strategic Plang
•Scenario•Strategy•Strategic initiatives•Organisational structures•Targets
The first quarter of 2011Conclusions
3
The Carige Group
Fondazione CR Genova e Imperia MarketBPCE SA
~50,000 small shareholders
AssicurazioniGenerali
44.06% 44.06% (1)(1)
Genova e Imperia
37.99% 37.99% (1)(1)14.98% 14.98% (1)(1)
Generali
2.97% 2.97% (1)(1)
BancaBanca CarigeCarige SpASpACassaCassa didi RisparmioRisparmio didi GenovaGenova e Imperiae Imperia
Insurance activitiesBanking activities Financial activities
• Banca Carige
• CR Savona
• Carige Vita Nuova (life
insurance)
• Carige AM SGR
• Creditis (Consumer
Trustee activities
• Trust CentreFederal model
• CR Savona
• CR Carrara
• BM Lucca
• B. Cesare Ponti
insurance)
• Carige Ass.ni (non-life
insurance)
• Creditis (Consumer
credit) Main companies
6,003EMPLOYEES
667 BRANCHES &1.9 M CUSTOMERS
(1 2 M BANK;SHAREHOLDERS' EQUITY
€ 3 5 BILLION
Proprietary product factories
(1) Ownership percentage calculated on the basis of ordinary shares only
EMPLOYEES 432 INSURANCE OUTLETS (1.2 M BANK;
0.7M INSURANCE)€ 3.5 BILLION
Data as at 31 December 2010
4
Equity investments
• Centralised consolidation of IT and management systems• Decentralised network and credit governance with a predetermined delegated powers system• Brand maintenance• Service contracts
FEDERAL MODEL
• Proximity to the territory through local directors and managers
Marginal administrative and organisational costs, largely lower than the benefits in terms of business and knowledge of the local realities
• Production margins complementing distribution margins• Greater control on business activities
Products tailored on the customersPRODUCT
FACTORIES • Products tailored on the customers• Lower organisational complexity due to owning the factory vs
partnerships• Cost, commercial and financial synergies
FACTORIES
5
An increasingly diversified network...
The network todayFormer
Unicredit Former
ISP new
branches
Former MPS
branchesbranches
643 22
branches branches
6672
56/3046/39
28/ 21
1/15 8
73/74
2522
79
643
40
22
1
28/ 21
79/222/9
5/12
16
254/ 14France
1994 2007 2009
204
TODAY
38 29/33
164
63
39/
96% 48%
100% 72%
39%
71%
38%
69%11/24
25
Insurance outlets 432Bank branches 667
% of branchesin the Liguria region
% of branchesin the North
63/48
in the Liguria region
6Data as at 31/12/10
… resulting from internal growth and M&A
GOALS Since 1990(1) 214 branches have been opened (103
in Liguria and 111 in 9 Extra-Liguria regions (Piedmont, Lombardy, Emilia Romagna, Veneto,te
rnal
ro
wth
Territorial diversification
Reduction of Acquisition of 4 banks and 6
business units for a total of 265
(Piedmont, Lombardy, Emilia Romagna, Veneto, Tuscany, Marche, Lazio, Sardinia, Sicily)In
tgr
Reduction of concentration risks (industry risks,
business units for a total of 265 branches and 2 insurance companies
Acquisition premiums in line with As of the date of listing (2):
&A
geographic risks, product risks, etc.)
strategic relevance (location, production characteristics, size, synergies with insurance agents, etc ) and with medium- to long-
of listing (2):
€ 2.6 billion invested in
M& Expansion of
the distribution network among which to
etc.) and with medium to longterm income outlook
Prices paid for insurance companies much lower than comparable
M&A
€ 3.8 billion financing which to
allocate the costs of central structures (scale
transactions (Price/Premiums for Life: 21.4% vs. an average of 60.8%; for non-Life: 63.8% vs. an average of 115 2%) in that they
financing sources
collected(3)
7(1) Primo Piano sportelli; (2) La quotazione è avvenuta il 17/1/1995 ;(3) Aumenti di capitale e prestiti subordinati
(scale economies)
average of 115.2%), in that they reflected the need for thorough restructuring and re-launching
Growth in the results of subsidiary banks...
Year of acquisition
CAGR
Loans and Deposits(€ bln)
P e 2010
Net profit(€ mln)
2010
C/I(%)
2010Pre Pre
Banca del MonteBanca del Monte
11.2%
Pre-acquisition
2010
17.7%
2010
3.6
2010
59 8
86.5
-26.7 p.p.∆ p.p.
Pre-acquisition
Pre-acquisition
1999Banca del MonteBanca del Montedi Luccadi Lucca
(22 (22 branchesbranches))
2.20.7
6.5%
0.6
11 4
59.8
-7.9 p.p.
4.3%
1999Cassa di RisparmioCassa di Risparmiodi Savona di Savona
(50 branches)(50 branches)
6 3%
2.8 4.5
2 1%
5.7
11.471.4
63.5
-1.8 p.p.
2003Cassa di RisparmioCassa di Risparmiodi Carrara di Carrara
(35 branches)(35 branches)
6.3%
3.22.1
2.1%
4.1
4.7 71.873.6
December
2004
BancaBancaCesare Ponti Cesare Ponti (6 branches)(6 branches)
12.7%
1.1 2.3
…
1.7
91.6
-16.5 p.p.
75.1
“Pre-acquisition” data refer to the latest approved financial statements prior to the acquisition.“Pre-acquisition” data of Banca Cesare Ponti refer to the 2004 financial statements.
(6 branches)(6 branches)-0.6
CAGR= compound annual average growth rate 8
…and of the branches acquired
CAGR
2000 2010 2002 2010 2002 2010-10.6 p.p.
∆ p.p.
Year of acquisition
Loans and Deposits(€ bln)
Total revenues(€ m) (1)
C/I (2)
(%)
2000Banco di SiciliaBanco di Sicilia
(21 branches)(21 branches)
6.7%
0.90.5
4.1%
10.1 14
2001 2010 2002 20102 8%
2002 2010
66.4 55.8
10.6 p.p.
2001Banca IntesaBanca Intesa(61 branches)(61 branches)
6.8%
2.0 3.6 43.7 54.7 59.0 51.3
-7.7p.p.2.8%
2003 2010
2002CapitaliaCapitalia(42 b h )(42 b h )
1.8%
2.42.140.1
2002 2010 2003 2010
38.3
2003 2010
59.474.4
-15 p.p.0.7%
2002(42 branches)(42 branches)
MarchIntesa Intesa
2008-1.6%
6 26 4
2010
76 684.8
2008 2010 +15.4 p.p.
70.955.5
2008 2010
-5%
March2008SanpaoloSanpaolo
(79 branches)(79 branches)
6.26.4 76.684.8
DecemberUCBUCB3.5% -16.6 p.p.
73 690 124 1
…2008 2010 2008 2010
2008 2010
(2) includes direct costs only
ece be
2008UCBUCB
(40 branches)(40 branches) 1.61.573.690.124.1
3.0
(1) annualized data
9CAGR= compound annual average growth rate
Qualitative growth
Greater territorialLoans percentage in
Greater territorialdiversification
Liguria dropped from 64% to 38%
Reduction in the concentration of
The share of the top 20 Groups decreased by 8+
p.p. (to 9.7%)major borrowers
p.p. (to 9.7%) and that of the top 50 Groups by 9+ p.p. (to
15 3%)
Significant scale economies
15.3%)
The incidence of Significant scale economies operating costs per
branch dropped by 13%
10
Quantitative growth since listing…
TOTAL ASSETS(€ bln)
4 6x 40 0
FIA(€ bln)
4.4x50.7
EMPLOYEES (number)
4.6x 40.0
25 4
14.6
8.8
4.4x
24.1
11.6
6,0032x
Otherassets
LoansDirect
Indirect deposits
467 insurance
1994
5.6
2010
25.43.2
5.6
26.66.0
1994
3,226
2010
Directdeposits 5,536 banking
1994 2010
SHAREHOLDERS' EQUITY(€ bln)
NET PROFIT (€ mln)
COST INCOME
1.5 (1)
2.3x 3.510x177.2
79.6%
59.9%0.8
-20p.p.
1994
0.7
2.7
20101994
16.9
20101994 2010
0.8
(1) pro-forma figure inclusive of the AFS reserve established against the revaluation of the equity investment in the Bank of Italy
11
…and sustained growth during the crisis
COMPARISON OF PROFITS FOR THE 2005-2007 AND 2008-2010 PERIODS (€ Mln)
AVERAGE BANKS (2)
-51.1%
3,207
CARIGE+24%
AVERAGE PEERS (1)
-48.5%1,568
661474
340588
Italian banks Average peers Carige
Profits 2005 - 2007 Profits 2008 - 2010
12
(1) Source: financial statements of Banca Popolare Emilia Romagna, Banca Popolare di Milano, Banca Popolare di Vicenza, Credito Emiliano, Credito Valtellinese(2) Source: financial statements of Banco Popolare, Banca Popolare Emilia Romagna, Banca Popolare di Milano, Banca Popolare di Sondrio, Banca Popolare di Vicenza, Credito Bergamasco, Credito Emiliano, Credito Valtellinese, Intesa San Paolo, Monte Paschi Siena, Unione di Banche Italiane, Unicredit
Dividends policy
Dividends and share capital (1995-2010) (€ bln)Dividends per ordinary share(€)
1 4
2,4
1.4
2.4
1,41.4
Dividendi distribuiti Aumenti di capitaleDividends distributed
Capital increasesdistributed increases
• ensuring low volatility and improving trends in shareholder returns• creating favourable conditions for the success of
DIVIDENDS POLICY
AIMED AT:
13
• creating favourable conditions for the success of capital strengthening measures.
Agenda
Our growth processOur Strategic Plang
•Scenario•StrategyS a egy•Strategic initiatives•Organisational structuresg•Targets
The first quarter of 2011qConclusions
14
2011 - 2014 Targets
20142010CARIGE GROUPCARIGE GROUP CAGR2010PF-2014
( )
2010PF(1)
Direct deposits (€ bln) 32.9 5.5%26.6
(€ bl ) 31 1 5 2%25 4
26.6
25 4
Indirect deposits (€ bln) 31.2 6.7%24.1 24.1Total deposits (€ bln) 64.1 6.1%50.7 50.7
Net profit (€ mln) 263 10.1%Shareholders' equity (€ bln) 4 0 3 4%
177
3 5
Loans to customers (€ bln) 31.1 5.2%25.4
1793 5
25.4
Shareholders equity (€ bln) 4.0 3.4%
Cost income 50.3%
3.5
59.9% -9.7 pp60.0%
3.5
Cost of risk 0 45% 0 46% 0.50% +4 bps
ROTE (3) 11.5%9.9%ROE adj. (2) 8.1%6.5% +1.5 pp
+1.4 pp10.1%6.6%
Cost of risk 0.45% 0.46% 0.50% +4 bps
Core Tier 1/Common Equity 8.0%6.0%
20142010
Total capital ratio 10.2%9.1%
(1) Pro-forma figures are normalized by annualizing the contribution of former MPS branches acquired on 31/5/2010(2) Shareholders' equity net of the Bank of Italy equity investment revaluation reserve(3) Shareholders' equity net of goodwill 15
CAGR= compound annual average growth rate
Competitive scenario - Italy
• New standards governing the banking industry: Basel III(increased capital requirements and stricter liquiditymanagement requirements) and reputation risk
• Aging society and net population decrease• Integration: 2.4 million new immigrants, numbers growingfast low level of bankarisation
SOCIO-POLITICAL SCENARIO REGULATORY SCENARIO
management requirements) and reputation risk• Constraints and restrictions for consumer protection(maximum overdraft charges, usury interest rate, mortgageportability, Mifid, PSD,…)• Introduction of Solvency II on solvency requirements for theinsurance sector
fast, low level of bankarisation• Job instability and new family life cycles: increasing rates ofdivorces, common-law couples, “extended” and “mixed”• Decreased propensity to save and increased propensity toconsume and borrow
• Globalisation vs nationalistic tensions• Growth of global GDP driven mainly by emerging
t i (A i ll L ti A i d Af i )
ECONOMIC SCENARIO
countries (Asia as well as Latin America and Africa)• Slow recovery of the Italian economy (1% growth ofthe GDP over the plan period)• Progressive raise of interest rates as of 2011
• Widespread digitalisation• Use of technology and inter-channelling in areas where nophysical offices exist
• Possible new wave of M&As driven by the need to optimizecapital and liquidity• Shrinking of unit margins on traditional products and
TECHNOLOGY SCENARIO COMPETITION SCENARIO
physical offices exist• Opportunity to let customers' needs emerge: customersare called on to plan products and services interactively(e.g. “shopping cart style” modular current accounts)• New, technologically advanced payment methods toacquire new young customers
• Shrinking of unit margins on traditional products andsimultaneous search for maximum distribution efficiency andcommercial effectiveness• New competitors: large-scale distribution, telecomproviders, application and network/virtual communityadministrators
16
• Channels addressing the electronic social networks • Easier to compare prices of financial service offerings andcustomers' readiness to switch to a different provider
Economic scenario - Italy
ECONOMIC AND FINANCIAL VARIABLES 2010 2011 2012 2013 2014
Real GDP (Var %) 1.2 0.9 1.0 1.4 1.0
Inflation rate (%) 1.5 2.9 1.7 1.7 2.1
ECB rate (end of period) (%) 1.00 1.75 2.00 2.25 2.50
Average 6-month Euribor (%) 1.1 1.6 2.3 2.5 2.7
Customer deposits (Var %) 1 1 3 7 4 3 4 6 4 0
Source: Research institutes consensus
Customer deposits (Var %) 1.1 3.7 4.3 4.6 4.0
Loans to customers (Var %) 5.0 7.3 6.3 6.0 4.5
Modest GDP growth and interest rates still at historically low levels
17
“New normal” characterized by increasingly strictand lasting regulatory requirements
R l tRegulatory capital and financial leverage
Structural liquidity and
financing
Credit and risk of cost
Compliance and reputational
risk
New normal
What the regulators expect
Core capital (4.5%) + buffer (2.5%)=7%(as at 2019), min leverage TBD (2017)1
l 8
Liquidity coverage ratio and Net stable funding ratio > 100% (TBD) 2015 – 2018 requirements
Anti-cyclicalprovisions
ll
Full procedural compliance and observance of Mifid/ Anti-money laundering/ Transparency/other rules
What the market expects(shareholders and investors)
Wh t t t
Core capital 8%, min. leverage 3%
Sound balance sheet t t
Trade sources/ loans > 100%
Solvency
Provisions structurally < 50 bps
Access to credit
Full compliance with the rules
Simplicity, transparency d dWhat customers expect structure and advice
The challenge for Italian banks: to achieve adequate profitability
18
The challenge for Italian banks: to achieve adequate profitability consistent with the cost of capital
1 During the parallel run period (2013-2017), the Basel Committee will test a 3% minimum leverage ratio threshold.
Agenda
Our growth processOur Strategic Plang
•Scenario•StrategyS a egy•Strategic initiatives•Organisational structuresg•Targets
The first quarter of 2011qConclusions
19
Underlying Strategic Approach
GROWTH FOR INDEPENDENCE
CUSTOMER FOCUS
INNOVATION
MEDIUM- TO LONG-TERM VALUE CREATIONFOR ALL STAKEHOLDERS
WITH A VIEW TO MAINTAINING A KEY INDEPENDENT ROLE IN THE ITALIAN BANKING SYSTEM
PROXIMITY TO THE LOCAL
COMMUNITIESWORK ETHICS SKILLS
COMMUNITIES
Bank accountable to the COMMUNITY
20
Strategic Mission
Financial National Retail
People and Inter-conglomerate
National Retailp
technology channelling
• Full range ofbanking, financial and
• Deeply rooted presence in Liguria,
• Focus on households, handicraft
• Unitarymanagement of“key” group skills
• Branch-baseddistribution witha progressivefinancial and
insuranceproducts and services;
• Control on profitability
Liguria, progressively extending to the national territory on a multi local
handicraft firms, shopkeepers, small and medium enterprices
key group skills• Employees'
professional/ personal development
• ICT as a driver
a progressive development ofinter-channelling
• Specializedservice modelaccording toprofitability
deriving fromproductfactories
multi-local basis
• Aggregating centre for local entities
enterprices, local bodies
• Focus on simple, transparent
• ICT as a driver of innovation
according tocustomer base segment
• Federal model to enhance the benefits of proximity to the local
products
21
o acommunities
Strategy: from definition…
• Higher commercial productivity:
STRATEGIC DIRECTIONS STRATEGIC GOALS
Development of revenues and commercial offering: “discover” business areas (territories,
1 Improvement of cross selling
Product portfolios evolving towards higher-margin, higher-commission products (upselling)
Lower business performance variance business areas (territories, products, customers) that still have untapped value potential
o e bus ess pe o a ce a a ce
• Broader customer base
• Development of inter-channelling
• Service model fine-tuning
Rationalisation of operating costs and processes: constant striving for technical and operating efficiency
2• Review of the pricing policies
• New sales processes to free up resources for commercial activities
• Personnel's proactive commercial attitude and operating efficiency
Optimisation of liquidity, capital and 3
• Efficient cost base and process management
• Focus on retail and institutional deposits
• Closing of the intermediation circuit cost of risk: efficient allocation of short resources
g
• Active capital management in a Basel 3 perspective
• Qualitative selection and management of credit
4 Focus on innovation and skills: not • Widespread use of technology
22
only on processes and products, but also on human resources' behaviours and social skills
• Widespread use of technology
• Recognition of merit
• Optimal use of skills and abilities (knowledge and know-how)
…to implementation
1. Strengthening of the Liguria network
STRATEGIC INITIATIVES
1. Strengthening of the Liguria network
2. Reduction of the productivity gap between Liguria and Extra-Liguria operations
3. Reduction of the productivity variance between branches
4. Optimisation of the Group's local presence
5. Development of integrated inter-channelling
6 P i i ti i ti6. Pricing optimisation
7. Service model refinement for corporates
8. Proactive credit managementg
9. Risk monitoring and management
10. Development of corporate services
11. Private segment enhancement
12. Development of offerings to immigrants
13 Cost & lean management
23
13. Cost & lean management
14. Improved communications
Agenda
Our growth processOur Strategic Plang
•Scenario•StrategyS a egy•Strategic initiatives•Organisational structuresg•Targets
The first quarter of 2011qConclusions
24
1. Strengthening of the Liguria network
CURRENT POSITIONING
•History of strong roots in Liguria with a leading•History of strong roots in Liguria with a leading market share and good performance in terms of commercial productivity
•Areas of improvement in the ownership of products (cross selling) both for households andproducts (cross selling), both for households and for corporates, and in the acquisition of newly bankarized customers (young people, immigrants) Increase in commercial
performance, both in termsperformance, both in terms of loans and deposits per person (from approx. 28 to approx. 33 million; +15%) and of cross-selling (from LINES OF ACTION
•Opportunity to take advantage of the region's infrastructural revamping to play our role in supporting the community
a d o c oss se g ( o4.17 to 4.58; +10%)
•Micro-marketing programmes aimed at boosting cross-selling/upselling for customers, resulting in maintained number of customers and progressively increasing markets shares among young customers
25
Productivity in Liguria
Customer cross-selling Loans and Deposits x LU (Labour Units) (€ Mln)
32,8
4 17
4,58 +10% +15%4.58
4 17 28 5
32.8
2010 2014
28,54,17
2010 2014(1)
4.17 28.5
2010 2014Liguria NetworkLiguria Network
2010 2014
Customer cross-selling by segment
20102014
g y g
5,8
7,5
4 5 4 5
6,3
7,8
4,9 4 75.8 6.3
7.57.8
4 5 4.9 4 5 4.7
3,4 4,5 4,5
3,9 , 4,7
3.4 3.94.5 4.5 4.7
26(1) Estimated number of LUs assuming constant resources and 5 new resources per new branch
Mass Market Affluent Private Small Business Mid Corporate
2. Reduction of the productivity gap between Liguria and Extra-Liguria operations
•Growing proportion of the Extra Liguria network;
CURRENT POSITIONING
•Growing proportion of the Extra-Liguria network; however, gaps in productivity (revenues/ volumes per employee) and market shares are still to be filled
Reduce the gaps compared to the Liguria Network bothLINES OF ACTION
• Improve branch efficiency through the use of new online applications supporting sales activities with employees' schedules and
to the Liguria Network, both in terms of cross-selling (gap from -19% to -13%) and of loans and deposits per employee gap from
LINES OF ACTION
activities, with employees schedules and product catalogues fed by the CRM system
•Alignment of Liguria and Extra-Liguria network performances through the acquisition of new customers, with special focus on corporate
per employee gap from -46% to -40%)
customers, with special focus on corporate customers, and the development of closer relationships with local associations/entities.
27
Realignment of commercial performances between networks
Customer cross-selling
4,58 -13%
-19%P i 4 17
4.584,17
,
3,35 3,96 Progressive
realignment between the two networks through an
4.17
3.353.96
Liguria Non-L Liguria Non-L
through an improvement in commercial productivity in terms of increased
Loans and Deposits x LU (€ mln)
32 8
2010 2014(1)in terms of increased cross-selling (from 3.35 to 3.96, or +18%) and of loans and deposits 32 8
28,5
32,8
15,518,1
-46%-40%
20
of loans and deposits per employee from 15.5 to 20 million (+29%)
28.5
15.5
32.8
,(+29%)
28(1) Estimated number of LUs assuming constant resources and 5 new resources per new branch
Liguria Non-L
2010
Liguria Non-L
2014(1)
3. Reduction of productivity variance between branches
•Strong variance in commercial performance
CURRENT POSITIONING
•Strong variance in commercial performance between the branches, even within the same local markets
•Greater internal variance for the Extra-Liguria network in particular with reference to newly P i fnetwork, in particular with reference to newly opened or recently acquired branches
Progressive recovery of potential revenues for a total of 8 million through multiple measures: acquisition and i d b fLINES OF ACTION
•Full implementation of the new commercial mechanism consisting of the central analytical CRM and sales support tools
increased number of customers, development in breadth and depth (number and average quantity of p od cts) p od ct emi ( p
LINES OF ACTION
• Launch of local micro-marketing actions focused on under-performing branches, accompanied by a turnover of branch managers and local market managers, so as to align the best resources with
products), product remix (up -selling) and repricing
the best commercial potentials.
•Full implementation of service models still only partially in place, and careful assessment of options for reallocation/conversion into lean, l t i ll t d b h
29
electronically operated branches
The new commercial mechanism
The reduction in productivity variance between branches is achieved through the adoption of:
• a business mechanism organized and supported by an innovative central analytical CRM and aided, during the operational phase, by the use of different channels, and within the Branch by easy-to-access and easy-to-use sales support tools
• • a shared commercial method built and maintained “with the network” and “for the network”
Analytical CRM Operational CRM
A l i f t b h i ith
“Grounding” of the commercial opportunities generated by analytical marketing, to reach the customer with the best business
Analysis of customer behaviours, with the support of innovative statistical models for the banking sector (use of the Current and prospective value of the relations, constant monitoring of relation
The new commercial mechanism customer with the best business
proposition using the different interconnected channels.
migrations in the different value statuses in order to identify their needs and define a business strategy to meet these needs in the most appropriate way
mechanism
The new business mechanism supports the Network's development actions, and enables the systematic, widespread adoption of a shared commercial method
30
Analytical CRM
Young high-debt customers generally active on traditional channels
Adult, low-debt customers, very active on direct channels
1.200
1.400
1.600
er'
s valu
e
Sub-segmentation by value
Breakdown of customers i i
• Better knowledge of customers, of their overall “value” and of the
Low-activity customers holding current accounts only
"Dormant" customers without a current accounts
Young, high activity customers with many services but
no investment and lending products
Senior customers low-activity
investorsHigh-debt adults, very active on direct channels
0
200
400
600
800
1.000
1.200
- 0 1 2 3 4 5 6
Cu
sto
me
Services owned
into consistent groups based on their value and purchase behaviours
P it i
of their overall value and of the most appropriate commercial strategies for its sustainable growth over time
Propensity scoring
Forecast of the likelihood that the customer will accept the
• Support to business development through initiatives accurately addressed at customers' specific needs, and
offer and buy
Abandonment scoring
Prior identification of
customers specific needs, and therefore “targeted”
• Preservation of the customer base, by anticipating the signs ofPrior identification of
deteriorating relationshipsand assignment of a score indicating the likelihood that each individual customer
base, by anticipating the signs of dissatisfaction that may lead customers to abandon the Bank
• Implementation of commercial will abandon the Bank
Analysis of inter-segment dynamics
Identification of the main “migrations” of customers
Risparmiatori AttiviValore Alto
Giovani indebitatiValore Alto
Adulti indebitati
p e e tat o o co e c ainitiatives on the basis of budget allocation optimisation methodologies (customer/contact ROI)
High activity investorsHigh Value
Young high-debt customersHigh Value
High-debt, high-activity
31
gbetween different value statuses and analysis of the effectiveness of business initiatives
molto attivi Valore Medio/Alto
Adulti risparmiatori poco attiviValore Medio
Giovani molto attivi senza
finanziamenti/InvestimentiValore Medio/Basso
Clienti poco attivi con c/c
Valore Basso
Clienti dormienti no c/c
Valore Bassissimo
Churn
Valo
re
)g g yactivity adultsMedium-high Value
Low activity adults investors
Medium-high Value
Low-activity customers with current accounts
Low value
Young, high-activity customers
without loans/investmentsMedium-high Value
Dormant customers, no current accounts
Very low value
Val
ue
Operational CRM
I di id l C Sh i di i i ddi i h
Reactive commercial action
Any contact is a sales
Individual Customer Sheet indicating, in addition to the customer's position:
• customer's value• product to be offered/ “best next action”• customer alerts, if any (e.g. customer at risk of !!!!y
opportunity, y ( g
leaving the bank)
Branch alert highlighting the presence of ongoing initiatives on the customer
Proactive commercial action
Contacts on the
Business Form containing lists of customers to be contacted for commercial actions
Documentation in support of branch colleagues with product selling arguments commercial speeches
maximized, optimized branch Network
product selling arguments, commercial speeches
Increasingly simple, integrated tools with operating procedures to close the
32
sale; by becoming part of day-by-day operations, these tools support commercial activities based on a common approach
Productivity(1) by branch clusters
23 19
24 21
16
-40% -33%
-26% -24%
14 16
2010 2014 2010 2014 2010 2014
T i til MTop quintile - Mean Top 4 quintiles - Mean Last quintile - Mean
E pected es lt of
Cluster 1 (2)
19 15
24 19
-53% -46%
-40% -32%
Expected result of branch productivity realignment: higher
revenues for € 8 million 15
913
Top quintile - Mean Top 4 quintiles - Mean Last quintile - Mean2010 2014 2010 2014 2010 2014
p q p q q
14 branch clusters have been identified
Cluster 2 (3)
33
(1) Number of products sold (excluding the Finance area) / LU/ month(2) Cluster 1: large, historical branches, high-value customers, saturated market, focus on deposits(3) Cluster 2: medium-size branches, deeply rooted, medium-saturation market, focus on deposits
4. Optimisation of the Group's local presence
•10 provinces with market shares > 5% and 17 with
CURRENT POSITIONING
market shares > 3%; the remaining 42 provinces have market shares lower than 3% and show areas of operational improvement (management of human resources mobility, costs and investments in the territory, etc.) as well as commercial improvement ( l d ff l b d(scale and scope effects on circularity, brand, pricing, etc.)
•Extra-Liguria Network requiring further rationalisation/strengthening actions
•Selective growth of market shares in the provinces with existing branches to achieve critical mass, and penetration into new
•Opening/ reallocation of branches in particularly attractive locations to improve
provinces considered attractive (48 openings planned in the Branch Plan)
LINES OF ACTIONattractive locations, to improve
• Local coverage and create synergies with the existing bank branches and insurance outlets
•Opening of semi-automated branches as an alternative or replacement of existing branches
•Achievement of the break-even point no later than 3 years after branch start-up
alternative or replacement of existing branches
•Progressive seamless integration of the branches with the other channels
•Development priority in Northern Italy (Veneto
•Total additional net profit at the end of the plan period: € 4.5 million
34
Development priority in Northern Italy (Veneto, Piedmont, Emilia Romagna, Lombardy) and possible implementations in a rationalisation/completion perspective in other regions
Branch market shares by province
35,00%
>20% >5% >3% >2% >1% <1%
35.00%
30,00%30.00%
20,00%
25,00%25.00%
20.00%
10,00%
15,00%15.00%
10.00%
0,00%
5,00%5.00%
0.00%,
SA
VO
NA
GE
NO
VA
MA
SS
A
IMP
ER
IA
LA
SP
EZ
IA
EN
NA
LU
CC
A
PA
LE
RM
O
CO
MO
AL
ES
SA
ND
RIA
FR
OS
INO
NE
OL
BIA
-TE
MP
IO
ME
SS
INA
VE
NE
ZIA
PA
VIA
PIS
TO
IA
AG
RIG
EN
TO
TR
AP
AN
I
SA
SS
AR
I
LA
TIN
A
PA
DO
VA
SIR
AC
US
A
PIA
CE
NZ
A
FIR
EN
ZE
TO
RIN
O
AS
TI
CA
TA
NIA
RA
GU
SA
NU
OR
O
CU
NE
O
ON
ZA
E B
RIA
NZ
A
LIV
OR
NO
PA
RM
A
OR
IST
AN
O
RE
GG
IO E
MIL
IA
RIE
TI
TA
RA
NT
O
O-C
US
IO-O
SS
OL
A
RO
MA
AN
CO
NA
AO
ST
A
CA
GL
IAR
I
NO
VA
RA
BO
LO
GN
A
MIL
AN
O
BA
RI
TA
-AN
DR
IA-T
RA
NI
VE
RC
EL
LI
PR
AT
O
PIS
A
CR
EM
ON
A
BE
RG
AM
O
RIM
INI
VA
RE
SE
MO
DE
NA
GR
OS
SE
TO
TR
EV
ISO
MA
NT
OV
A
AS
OL
I PIC
EN
O
RO
VIG
O
BR
ES
CIA
VIT
ER
BO
VIC
EN
ZA
PE
RU
GIA
FO
GG
IA
AR
EZ
ZO
VE
RO
NA
LE
CC
E
FO
RL
I'-C
ES
EN
A
35
M
VE
RB
AN
O
BA
RL
ET
TData as at 31/12/10
2011-2014 Branch Plan
Lombardy
THE NETWORK IN 2014 (715 BRANCHES; 440 INSURANCE OUTLETS)
RESULTS OF NEW OPENINGS 2014
Valle d'Aosta
1
Lombardy 14
Veneto4
Emilia2
(€ bln)
TOTAL DEPOSITS (FIA)
~1,547.5
Marche 2Piedmont
4
Emilia Romagna
660
2 87
259
50
34
(FIA) ,
GROSS LOANS ~884.8
2
Liguria5
Tuscany
4 791
39
2France 1
NET PROFIT ~4.52y
12
11
9
NET PROFIT 4.5
NUMBER OF 215
2011-2014
11 EMPLOYEES 215
NUMBER OF 482011-2014
48 OPENINGS
Openings 2011-2014
63
Number of branches as at 31/12/2014 36
BRANCHES 48
5. Development of integrated inter-channelling
•Progressive increase of the time dedicated to consulting,
CURRENT POSITIONING
•Highly customized service offerings through 'high-touch' relationships (i.e. managed directly by branch personnel), vital for local presence, but resulting in high industrial production costs
g,relationship management and sale of products
•Achievement of excellence • “Opportunity” cost, relating to the time dedicated by network resources to low-value added activities, which could otherwise be devoted to business and customer relation development
levels in the inter-channel service, leading to increased customer satisfaction and loyaltyy y
•Improved revenues and penetration of new customers linked to LINES OF ACTION
• Local presence through a hub-and-spoke service model, based on hub branches and full-service or cashless lean branches (spokes)
innovative products
•Increased contacts (approx. 6 mln per year)
•Development of technology to support distribution through “integrated inter-channelling”; these applications recognize the customers consistently - allowing them to interact whenever, wherever and any way they
f d ll i diff ti ti
p y )
•Operations on other channels from 39% to 50%
37
prefer – and allow price differentiation
•Reduction of service costs by shifting operations to innovative channels
The inter-channel distribution model
Branch
Call
Internet Banking
Kiosk terminals/
ATMs
Branch counter Consultants
Call CenterMobile
banking
Totem
Customer experience
Improvement of inter-channel customer experience: an “always on” bank with a significant increase (approx. 6 mln per year) of proactive
38
g ( pp p y ) pcontacts generated on the different channels corresponding to future investments for approx. € 30 mln
Use of the operational CRM in an inter-channel perspective
1
The current or The website advertises a new mortgage with the
2Example: Mortgages
potential customer visits the website
new mortgage with the possibility of simulating a repayment plan
3
The current or potential customers perform the
Marketing
initiatives based
on inter-channel
Marketing
initiatives based
on inter-channel
5a
The call centre contacts the potential customer
customers perform the simulation
4strategiesstrategies
potential customer to offer products
4
The current or potential customers provide their personal data for future contact
The current or potential
5b
The manager meets current and/or potential customers
5
contact
customers receive promotional materials via mail/ e-mail
potential customers to provide further information
39
Inter-channelling for higher operational efficiency
400
+1.7% +5.1% +13.6%
Operations by channelCAGR
2010-2014
61%
39% 50%240
662900
715
1100 61% 50%
2010 2014
668
Sportelli ATM e Cash In
2010 2014
Online (1) Branch Other channels
(thousand)
Number of branches
Number of ATMs and cash-ins
Online contracts
40CAGR= compound annual average growth rate
6.1 Pricing optimisation: Loans
S i l i h i f
CURRENT POSITIONING
•Strong variance on loan rates, with margins forimprovement of the correlation between priceand strategic considerations on the level of theoverall business relationship, or between priceand counterparty riskiness •Progressive increase of the
• Increasing legal and reputational constraints(usury rate, transparency, mortgage portability,etc.) limiting the possibility of optimal loanpricing at system level
ROA on loans and increase of the net interest income, the loan volumes/risk undertaken/regulatory capital absorbed being equal
•Progressive loan remix based on risk-return
dLINES OF ACTION
•Use if the new CRM system to assess the overallbusiness relation with the counterparty todetermine the interest rate to be applied
considerations
•Greater use of methodologies for thedetermination and application of the riskadjusted minimum rate
•Greater control on the actual application ofb i d i k b d i i l b th i
41
business and risk-based pricing rules, both inthe sale and post-sale phase
Risk adjusted pricing
Pricing - Risk class
0.0%
-1 4%
-0.4%-0.7%-0.9%
-0.2%-0.8%-0.6%
0.0%-0.7%
-1.4%-1.8%
4 6%% misalignment of -4.6%
-12.6%-12.8%
% misalignment ofthe actual pricingcompared to thetheoretical pricingconsistent with therisk class
Total
-76.9%
1 10 11 12 13 142 3 4 5 6 7 8 9PD Classes
0.0 -0.3 -0.7 -1.5 -2.3 -4.1 -9.50.0 0.0 0.0 -0.1 0.0 -0.1 -0.2 -0.1Value (€ mln)
Excellent/Good Fair/Uncertain Bad/Very bad
42
Analysis performed on a sample of the current Small Business customer base
6.2 Pricing optimisation: new current account offering
•Offering to be reviewed in light of a currentaccount market characterized by growing
CURRENT POSITIONING
y g gdecomposition and dynamism of product andservice offerings (from "package" to modular"shopping cart" current accounts)
•Simplification of the offering and reduction of organisational complexity
•Increased sales and cross-selling volumesLINES OF ACTION
•Development and full implementation of a newcurrent account offering
• Introduction of limits to the use of derogations
•Incremental revenues estimated in approx. 7-10 millionIntroduction of limits to the use of derogations
for accessory services, with the development ofnew sales tools (configurator)
43
The new current account offering: rationales
Development of the range of the current accounts offered to customersDevelopment of the range of the current accounts offered to customers
Greater customisation and modularity of the services offered
Focus on simpler communication aspectsFocus on simpler communication aspects
More advisory approach focused on service contents
Use of commercial leverage (dynamic discount mechanisms) to promote cross sellingUse of commercial leverage (dynamic discount mechanisms) to promote cross-selling
Incentivise inter-channelling with a push approach on products like internet banking and ATMand ATM
44
Estimated financial benefits
LeverageAction Action
+ pricing+ volumes/products
New offerings for new customers Sale of new offering
+ pricing+ volumes/products
+ pricing
Reactivation of old products
P i i
Migration to new offering
Higher standard prices of branch wire transfers
- waivers
Pricing adjustments
wire transfers
Fewer permanent waivers on branch wire transfers
- waiversLimits to waiversIntroduction of a floor for spot
waivers on branch wire transfers
45
Flow of incremental revenues: 7 - 10 million
7. Service model refinement for corporates
•Progressive growth of
CURRENT POSITIONING
•Widely diverse Small Business segment: (independent contractors, Small Economic Operators (SEOs), small corporates); the services currently provided by SB managers are
•Progressive growth of revenues generated by small business. On the Small Business segment: increased percentage of customersunable to take full advantage of the
opportunities
•Some adjustments are also required in the other business segments
percentage of customers managed with a relational approach from 57% to 81%; greater commercial effectiveness: increasedeffectiveness: increased revenues from the 7.5 million segment
•Progressive growth of theLINES OF ACTION
•Refinement of segmentation criteria to identify current small business and to offer more advanced service models and greater use of consultants
•Progressive growth of the revenues (particularly from commissions) generated by high-potential SMEs and higher profitability on
• In the future, possible separate service offerings to professionals and to SEOs (shop owners etc.)
•Refinement of the segmentation criteria and the
higher profitability on capital/financing represented by loans to large corporates
46
related service models for large corporates and high-potential SMEs
The new segmentation of corporates
• Large Corporate focused on TO BEAS IS
Large Corporate Large Corporateno. of customers: ~ 420no. of teams: 3
no. of customers: ~ 600no. of teams: 5
‘key Corporate customers’
• Team with growing operating independence (also for assistants) to stimulate aSales revenues > € 100M Sales revenues > € 100M
f t 9 300no. of customers: ~ 7,500Mid Corporate
Mid Corporate
assistants) to stimulate a greater propensity to conduct development activities, particularly outside Liguria
Bank credit lines > € 10MSa es e e ues € 00Bank credit lines > € 10M“High-potential” customers
no. of customers: ~ 9,300no. of teams: ~ 60
no. of teams: ~ 55 • Strong commission generating offering
• Management of Small Business customers through a dedicated
Sales revenues > € 1.5MShort-term System credit lines
€ 250K
Sales revenues > € 2.5MShort-term System credit lines > € 500K
no. of customers: ~ 31,000no. of employees: ~ 210
Small Business
Small Business
customers through a dedicated in-branch advisor
• Management of the Small Business segment in a retail
> € 250K
no. of customers: ~ 62,200d l
POE (retail)no. of customers: ~ 32,800
logic and modelno. of customers: 62,200no. of employees: ~ 260 System credit lines > € 30K
47
8. Proactive credit management
•Careful and prudent credit management also considering
CURRENT POSITIONING
Careful and prudent credit management, also considering the specific phase of the economic cycle, with areas for improvement in the proactive management of lending policies: from the definition of the target portfolio allocated by area/ segment/ economic sector/ rating class, to the dynamic management of non-performing (NPL) and pre-
•Progressive improvement of the risk/return profile of the total loan portfolio, recovery of the repricing margins and dynamic management of non performing (NPL) and pre
non-performing loans (“grey area”)p g g
reduction of the expected loss associated with new disbursements (containment of the cost of risk within 50
• Active loan management throughout the entire life cycle: from the planning of targets and lending policy restrictions to the dynamic management of both performing and non-performing
b.p.)
•Increase of the net current value recovered from loans
LINES OF ACTION
dynamic management of both performing and non performing loans:
1.. Definition of the target portfolio to improve diversification andcredit quality, and to reduce the cost of risk;2. Strong supervision and constant monitoring also of the “greyareas” relating to pre-non-performing loans;
under restructuring and non-performing loans
•Containment of future losses 3. Strengthening of corporate loan restructuring activities, alsothrough synergies to be developed using the SMEs/LargeCorporate enterprise service model and a new segmentationmodel;4. Review of the level of independence and loan approvalprocesses on the basis of ratings with progressive repricing of the
associated with pre-non-performing loans (so-called "grey area")
48
processes on the basis of ratings with progressive repricing, of theexpected loss and of the price applied;5. Strengthening of the systems, resources and organisation of in-court and out-of-court proceedings for the recovery of non-performing loans
Evolution of active loan management and effects on capital, funding and cost of risk
Loan granting Monitoring of restrictions
Capital Liquidity Profitability
Strategic orientation
Steps
Definition of
Functions in charge
Loans/ Loan G
Actions
Definition of √√ √√ √√lending policies/3-year target portfolio
Rating
Governance, Governance and Control (for impacts on capital/ funding/risk concentration)Risk Management,
target portfolio/ loan allocation by area/segment/rating
Segmentation of
√√√√√√√√
√√√√
√√√√√√√√
√√ √√
√√
√√Rating assignment/ Resolution and indication of risk-based pricing
A t f
g ,Loans and Lending Committee (Sales for overall customer profitability issues)
Risk Management
Segmentation of service/ product offerings and processes provided. Risk-based priceS it l
√√√√√√
√√√√
√√√√
√√√√√√√√
√√Assessment of securities (firstly real estate)
Syndacation (in sales), performing portfolio transfers
Risk Management, Loans (LGD impact, price mitigation)
Risk Mgt, Loan Mgt, Governance and
Security value dynamic analysis
Assessment of profitability trade-off vs RWA/
√√
√√√√√√
√√√√√√√√√√
√√√√√√√√√√portfolio transfers,
including synthetic transfers Management and restructuring of pre-non-
Control, Finance (securitisations)
Loan Management, Loans, Corporate Services, Sales
off vs. RWA/ funding/ concentrationProactive M&A, restructuring actions
√√√√√√√√√√
√√√√
√√√√
√√
√√√√√√performing loans
Credit collection, foreclosure of securities and sale of NPL portfolios
Services, Sales
Credit collection-Litigations, Governance and Control (for impacts on capital and i d /IR)
Bankruptcy proceedings, participation in RE auctions
√√√√√√
√√√√√√
√√
√√√√
49Loan repayment
of NPL portfolios indexes/IR)
Performing portfolio monitoring model
• Detect positions with signs of deterioration on the basis of rating systems and other indicators if applicable (early warnings)
• Calculate synthetic anomaly indicators summarizing potential risks at individual customer level
• Provide a wide ranging in depth view of the causes that have led to the specific
Detection
PROCESS AND • Provide a wide-ranging, in-depth view of the causes that have led to the specific management situation
• Identify macro-objectives and a set of actions to be undertaken for each of the management situations, in line with the manager's decision-making independence
• Determine the process that will give the account managers and the NetworkManagement
PROCESS AND TOOLS
(“Monitora”)
CENTRALISED FUNCTIONS DECENTRALISED FUNCTIONS
• Determine the process that will give the account managers and the Network responsibility for the execution of management plans
• Monitor the adoption of appropriate management actions and the effects thereof
Management
LOANS DEPARTMENT
LOAN MANAGEMENT
DEPARTMENT
LOAN GOVERNANCE
DEPARTMENT
TERRITORIALAREA DEPT.
COCS
ORGANIsationALCHANGES
IMPAIRED LOANS OFFICE
LOAN
MONITORING
OFFICELOAN
MONITORINGOFFICER
COCSCHANGES
Constant monitoring for the early identification and management of any signs g y g y gof deterioration of the positions, assignment of responsibilities and actions to
be implemented according to severity50
Impaired loans portfolio monitoring model
55 1%
AVERAGE RATE OF RECOVERY ON SETTLED POSITIONS
55.1%48%
40%53%
CARIGE Player1 Player2 Player3
Average lifeAverage ticket (K€)mortgage %
2.480
28%
4.496
20%
3.061
16%
7.0136
33% Maintenance of high
•New application•Construction of a
mortgage % 28% 20% 16% 33%
Tool
Maintenance of high recovery
performances also in the near future
Source: Bain analysis
Co st uct o o aportfolio from the non-performing positions under a manager•Concomitant reorganisation of the
MEASURES ADOPTED IN THE
LAST THREE YEARS IN ANTICIPATION
Tool
Organisation gLitigation Department (Redistribution of workloads, segmented by type, use of external credit collectors, etc.)
IN ANTICIPATION OF CREDIT QUALITY
DETERIORATION Process
g
51
•Review of recovery management processes
9. Risk monitoring and management
CURRENT POSITIONING
•Strong credit risk monitoring, related to theGroup's prudence and long-term culture
•Progressive implementation of analysis,monitoring and management models, still to be
•Benefits from a capitalisation increase in the order of 100-200 b.p. at core capital level, in the event of advanced IRBg g ,
improved in a perspective of proactivemanagement and advanced qualification towardsthe Regulators
• "Improvable" integration of the risk views
in the event of advanced IRBadjustment
•Strengthening of the bank's perception as a solid, solvent and risk-advanced bank
assumed at product company leveland risk advanced bank
•Top positioning among medium-sized Italian banks for the internalisation of ratings in commercial proceduresLINES OF ACTION
•Development and full implementation of creditrating and loan portfolio models, and review ofthe lending processes and organisational/ICT
d t bt i d d IRB li
commercial procedures (segmentation criteria, delegations, risk pricing etc.)
•Top positioning for compliance and reputation risk
LINES OF ACTION
procedures to obtain advanced IRB compliance
• Integration of the views of financial, loan andpure risks, consolidated by the Group CRO(including, for market risks, also the insurancecompany portfolio)
and reputation risk management
52
company portfolio)
•Strengthening of the monitoring of fraud andreputation/compliance risk
Level of coverage
The level of coverage of impaired loans is in line with the System coverage level(1), keeping in mind the following:
High portion of the impaired loan portfolio supported by mortgage securities (59% vs. 48% System average)
Less risky composition of the impairment loan portfolio (non-performing loans: 47.7% vs. 54.4% System average; watch list loans: 27.9% vs. 31.5%; past due loans: 18.2% vs. 5.5%)
Intensive write-off policy conducted over time on impairment loans still recorded in the financial statements
Loan portfolio characterized by high granularity of the positions and turnoverLoan portfolio characterized by high granularity of the positions and turnover
High percentage of mortgage loans (47%) taken out in Liguria, where the real estate market maintains steady prices
(1) Peer group used for benchmarking on data as at 30/9/2010: Unicredit Intesa San
53
30/9/2010: Unicredit, Intesa San Paolo, Banco popolare, Monte Paschidi Siena, Unione di Banche Italiane, Banca Popolare di Milano, CreditoEmiliano, Banca Popolare Emilia Romagna
Switching to the IRB Advanced system
ACTIONS
New segmentation
LGD model fo La ge Co po atesEstimated expected benefits in terms ofLGD model for Large Corporates
Development of non-ratedcounterparty models
benefits in terms of core capital:
100-200 b.p. p y
PD recalibration for Privates andSmall businesses, and 10% LGDincreaseincrease
54
10. Development of corporate services
•Increased profitability from support to SME internationalisation, also through industrial alliances
CURRENT POSITIONING
•Creation of a new Business Services departmentto launch systematic initiatives for thedevelopment of commission income (foreignoperations, insurance and financial coverage,corporate portal)
t oug dust a a a ceswith international banks (higher revenues for approx. €12-15 million once fully implemented)
corporate portal)
•Customers on "traditional" managementmethods, based on loans, with modestdevelopment of supplementary services. Limitedoffering of advanced services to large corporates
•Support to the growing complexity of business activities - as a result of globalisation technologyoffering of advanced services to large corporates
and high-potential medium sized corporatesglobalisation, technology innovation and constantly evolving supply and target markets - through electronic solutions (e.g. Corporate Portal
LINES OF ACTION
•Offer competitive international services designedto meet SME needs, in support of theinternationalisation process, through "local"alliances if appropriate
solutions (e.g. Corporate Portal and related service offering) that will generate new customer-side commission income and improve banking
•Take full advantage of CARIGE Group'sexcellence and skills (products and technologies)in the Corporate area, including through thedevelopment of the new corporate portal
and corporate process efficiency
•Increased insurance coverage rate for the corporate
55
•Strengthen synergies with the Group's insurancecompanies for the offering of products tocorporate customers
rate for the corporatesegment, with positive effects on commission income
Service generated revenues: Growth margins
Segmentation of Carige Corporate customers
% of customers with international loans
Percentage of customers with international loans by sales revenues
Esterocon Carige
Estero solocon CarigeIntl loan withCarige only
Intl loans with Carige
% of customers with international loans
40
60%61%
50%
37% System
Estero solocon altre banche
(12%)
e altri(9%)
(2%) & othersIntl loans with
other banks only
0
20 System 23%
Carige 11%
>50 €mln
26%
20-50 €mln
21%
5-20 €mln
16%
< 5 €mln
13%7%
Carige
Senzaestero(77%)
No intl loans
>50 €mln 20 50 €mln 5 20 €mln < 5 €mln
Use of online channels – Carige Corporate
100%
74%
26%
17%9%
43%
5%
74% of Mid Corporate customersoperate with online tools; of
Analysis basemid Corporates
No onlinechannels
Non-operatingonline
banking
Customerswith active
onlinechannels
Passive CBI Active CBI Operatingonline
banking
26%5%these, only 5% has an activeCBI
56
Support to companies' internationalisation
… requirements/ opportunities for CARIGE… emerging Countries…Where it would be interesting to go …
Eastern Europe
• Strengthened ability to assist SME customers in conducting import/export business; distinctive ability to support SMEs in the development and realisation of their competitive globalisation
Russia
Cairo
of their competitive globalisation projects (delocalisation, JV with local partners)Development of international services “at home”D l f i h
China
I di Development of support services that can be offered through correspondent banks, and through cooperation agreements with specialized partners if possible
India
Indonesia
Industrial alliance, if the conditions exist, with an investment bank for globalisation (M&A, JV, obtainment of capital, etc.)Africa
Brazil
57
11. Private segment enhancement
CURRENT POSITIONING
•Banca Cesare Ponti is a commercial bank with its •Development of Banca
for Banca Ponti
own legal personality and brand, dedicated to thePrivate segment
•Central competence structures (Ponti, PrivateDept., Finance, CARIGE SGR, etc.) in network with
Ponti's customer portfolio through the service model
•Opening of new branches p , , , )each other, with differentiated approachesaccording to territory (Banca Ponti dedicated toLombardy, Banca Carige's Private Division providingservice in other regions)
based on private bankers
for Carige
• Differentiation of the service offerings. Consultingservices extended to asset protection, management of
LINES OF ACTION•Development of the Private customer portfolio and of “false mass market customers”p , g
generational passages, portfolio risk governance andmonitoring
• Development of Banca Cesare Ponti as a centre ofexcellence of the Group. In Lombardy, centralisation
d “ l ” it hi f P i t d ti
•Constant interaction with Corporate and Small business consultants
and “seamless” switching of Private and prospectivePrivate customers from Carige to Ponti withdevelopment of strong interactions with the Carigenetwork (branches, Corporate managers, SmallBusiness managers)
•Increase in the average number of products held from 7.2 to 7.5 (+4%)
58
• Extension of the common service model to all of theGroup's Private customers, and development of stronginteractions with the Bank's territorial network.Adoption of a Private branch model
•15% reduction of administrative processing time
Banca Ponti: economic and financial targets
Banca Ponti's Net Profit growth (€ mln)
32.1%CAGR 2010-2014
Banca Ponti's FIA growth (€ mln)
2,907 3,04011.9%
1,935
2,4342,694
,
CAGR= compound annual
59
compound annual average growth rate
Direct Deposits Indirect Deposits
Development of Carige's potential Private customers
There is a 40% potential ofk t lti l b k
61%
mass-market, multiple bankcustomers
39%
39%
Mass Marketcustomers
Multiple bankcustomers
39%
Holding "active" accounts with other
Holding “marginal” accountswith Carige
61%
customers customers accounts with other Banks
with Carige
Customer base expansion: use the broad Mass Market
60
Customer base expansion: use the broad Mass Market customer base to identify potential Affluent/ Private customers
Development of Carige's Private segment
+4%Cross-selling by segment
7,1
6,0
7,4
+11%
6.0
7.17.4
5,4
4,1 4,1
,
4,4 4,4 4.44.1
+19%
+7% +7%5.4
4.44.1
3,1
4,1 3,7
3.13.7
2010 2014 2010 2014 2010 2014 2010 2014 2010 2014
Mass Market Affluent Private Small Business Mid Corporate
61
Mass Market Affluent Private Small Business Mid Corporate
12. Development of offerings to immigrants
•Higher number of newCURRENT POSITIONING
•Growing number of immigrants in Italy (approx. 5million, including 2 million Muslims sensitive to theShariah rules of Islamic finance) only partially addressedby CARIGE
G i b d t f itt t th
Higher number of new immigrant customers acquired through the physical network and h h di i l i i i i•Growing number and amounts of remittances to the
immigrants' families in the countries of origin (transfersthrough companies specialising in remittances)
•Agreement with foreign banks for remittances abroad;some branches with specific layouts dedicated to the
through digital initiatives addressed to ethnic communities
immigrant population •Customers' average age decreasing (focus on younger, more "dynamic"
t )LINES OF ACTION
• Identification of customer potential in relation to thepresence of branches in areas with large ethniccommunities
customers)
•Increase in direct and indirect deposits, also
LINES OF ACTION
• Implementation of ad hoc business partnerships andalliances with companies specializing in immigrants'online remittances to their Countries of origin
• Identification of specific requirements and new offeringof Islamic finance/insurance products
indirect deposits, also through the remittance service
62
p
•Careful monitoring of key risk factors associated withthis customer segment
Financial inclusion as a key integration factor for the "new Italians"
CARIGE has approximately 58,000 foreign customers, over a total population in Italy ofmore than 5 million. CARIGE's target customer base is composed by 30% of LatinAmericans (particularly from Ecuador), with dedicated remittance programmes alreadyl h d h h hi i h di b k i i i
Legal status
launched through partnerships with corresponding banks in Latin America
Life cycle SettlingLegal status acquisition &
definitive settling
Integraton and consolidation
Financial needs
Send money home
Send money home
Manage cashPurchase
Send money homeManage cash
Purchase durable goods
O hneeds homedurable goods
Own a homeGet insured
Products typically owned
Remittances
Current accountATM
Consumer financeCredit cards
Basic saving and insurance
products
Personal loansMortgagesInsurance products
63
ATMPrepaid cards
Credit cards
An increasingly important customer segment
The “non-EU cistizens" market share has grown from 0 73% tofrom 0.73% to 0.80%
9.4% growth of
Increase in traded volumes for non-EU citizens (€ mln) (32,000 customers in 2010)
+9.4%CAGR2010 2014
751,4
1.075,2 Va
traded volumes
Expected revenues: ~ 9
2010-2014
751.4
1,075.2
revenues: 9 million by the end of the plan period
2010 2014
64CAGR – Compound annual growth rateTraded volumes = FIA + loans
13. Cost & lean management
CURRENT POSITIONING
•Good level of operating efficiency compared withaverage industry levels. However, there areareas for improvement, including processsimplification and load disbursement time •Further improvement of
ASA efficiency throughASA efficiency through savings from renegotiations and selection of preferred
liLINES OF ACTION
•Constant monitoring of overhead andadministrative costs, with opportunities for thefurther promotion of marketing programmes andcentralised, competitive supplier management
•Process analysis to identify time/resource saving
suppliers
•Savings on costs and FTE resources related to•Process analysis to identify time/resource saving
opportunities•Strengthening of the parent company'smonitoring on subsidiaries' costs processes(including insurance companies etc.).
•Roll-out and full implementation of the back
FTE resources related to the process efficiency programme and back office centralised
lid ti•Roll-out and full implementation of the backoffice centralisation programme, aimed atreducing costs through scale/scope economies,as well as improving the quality of the servicesprovided (common standards, less reworking,and Six Sigma total quality programmes)
consolidation
65
and Six Sigma total quality programmes).Opportunity to develop non-captive offerings ofsaid services with profit objectives
Cost reduction
0,52%-5 bps
Staff costs/Loans and Deposits(1)
0.52%
0,47%Staff costs+Overhead costs/Loans and Deposits(1)0.47%
2010 2014
0,79%-2 bps-7 bps
0.79%
Overhead costs/Loans and Deposits(1)
0,72%0.72%
0,27%-2 bps-2 bps
2010 20140.27%
0,25%0.25%
66(1) FIA + Gross loans to customers
2010 2014
14. Improved communications
•Areas for improvement in institutional
•Optimized perception by the financial community, resulting in lower stock
CURRENT POSITIONING
communications to the domestic andinternational financial community, particularly interms of structured and proactivecommunication planning
•Communications to other non-financial( l b
resulting in lower stock rating volatility (improved stock performance)
•Optimized communicationsinstitutions (consumer associations, labourunions, printed and online media, TV,Universities etc.) mainly implemented on specificoccasions
•Advertising campaigns and sponsorships in lineith b d t li it ti
•Optimized communications with the different stakeholders, supporting the Group's image of transparency strong sharedwith budget limitations transparency, strong shared values and openness to dialogue
•Optimised costs of customerLINES OF ACTION
•Revamping of communications to the financialcommunity through structured, proactiveplanning of meetings and events aimed atimproving the amount and quality of theinformation provided, as well as "listening"
•Optimised costs of customer contact/new customer acquisition and strengthened commercial “brand equity” of the bank increasingly
opportunities for senior management•Revamping of communications to non-financialinstitutions, with more proactive interventionproposals (in coordination with Investor andMedia Relations)
the bank, increasingly perceived as "multi-territorial"
67
•Revamping and review of advertising andsponsorship campaigns (with a focus oninvestment/event managed on a "localcommunity" basis)
Agenda
Our growth processOur Strategic Plang
•Current scenario•StrategyS a egy•Strategic initiatives•Organisational structuresg•Targets
The first quarter of 2011qConclusions
68
Organisation Chart
ProductionNon-life
InsuranceLife
Insurance Finance Loans Consumer credit
Investment management
Corporate Services
Commercial planning and support
Business segmentsand CRM
Distribution channels and payment services
Insurance Insurance credit management Services
Retail Banking
support and CRM p y
Distribution and Marketing
Bank branches
Private Banking
Corporate Banking Direct channels
Insurance outlets
Bank branches
Administrative services
Human & technological resources
69
Governance and Control
Technology: Management and development
•Intensive investments processTechnological
•Improved production efficiency
•Higher commercial efficiency
g
innovation
•Reduction of back-office processing time and activities,resulting in the freeing up of resources for commercialactivities, thus reducing costs and improving process quality
•Development of new sales software functionalities inter-ICT •Development of new sales software, functionalities, interchannelling and new highly digitalized products/ services,aimed at maximizing effectiveness and business returns oncurrent and new customers (particularly digital natives andyoung people)
C
Development
•Significant increase of the time dedicated by branch employees tocustomer relation and sales activities; improved effectivenesscustomer relation and sales activities; improved effectivenessfrom the use of online sales support software
•Establishment of CARIGE as a “best practice” medium-sizedItalian bank in ICT innovation, using the latter as a lever to
Value
creation
70
differentiate offerings and to increase customers even in areasnot directly managed through the physical network
Technological development projects
Development
CRM Management dashboard Online bank
Accounting information system
Mobile banking
Terms & Conditions system
Payment systems Mortgages and loans
Customer database
CO GE and financial statements Web finance
Product catalogue
New front office
CO.GE. and financial statements
Credit lines, Basel II and III
Branch security
Internet security Totem and communications
a c secu ty
Disaster recovery
Transparency Reports to Security
Paper dematerialisation
Strength-ening
Transparency
71
InnovationOptimisation
Technology investments
Technology expenditures and investments (€ mln)
currentexpenditures
investments
72
152 million69 million
296 million165 million
295 million154 million
Total 4 yearsof which investments:
Human Resources Management: strategic approach and action areas
•Variable management systems depending on strategic choices and on the environmental/economic context
•Consistent use of resources along the entire “life l ” ( d l )
Human Resources
1. Optimisation of human capital as ability to attract, retain and develop human resources,
cycle” (acquisition, integration, development, exit) within the corporate system
•New network dimensioning system•Full implementation of a new HR information system
Management operating systems
p ,and careful management of related and derivative costs
2. People as vital assets for
•Talent selection and retention•Training in support of change•Professional development paths•Ensure a more stringent link between company needs and hiring policies/selection criteria with
the company's life, source of knowledge and innovation capabilities
3. Development of the di ti ti liti f needs and hiring policies/selection criteria, with
training aimed not only at technical specialisation but also at cross-company movement, and development paths inspired by the principle of mobility, both geographically and horizontally (between functions, in terms of on-the-job t i i )
Development systemsdistinctive qualities of CARIGE employees in an entrepreneurial/business perspective and in terms of positive behaviours, both internally and training)
•Remuneration system•Assessment system
both internally and externally towards customers
4. Strengthening of the sense of belonging
•Career system• Careful management of the interdependence levels between the three systems, aimed at optimizing/ realizing the potential of objectively assessed, consistently paid resources, within a career path designed to enhance the long term
Reward systems
sense of belonging (particularly for employees coming from other banking institutions)
73
career path designed to enhance the long-term contribution of individual employees with respect to company strategies
5. Development of relational skills for sales network, account managers and consultants
Human Resources
CAGR
STAFF COSTS EVOLUTION (€ mln)HEADCOUNT EVOLUTION
0 42% CAGR2010 - 2014
CORE GROWTH (1)
1 3%
Turnover~69%
0.31% 0.42%
392 4 397 3452,1
3.3%
1.3%
397 3392 4452.1
392,4 397,3 397.3392.4
2010 2010 PF 2014
5% benefit in terms of number of f ff
2010 2014
(1)= excluding Branch Plan and non-recurring items
74
resources from process efficiency improvement69.2% 73.3%Network
employees
2010 pro-forma figures are normalized by annualizing the contribution of former MPS branches acquired on 31/5/2010
CAGR= compound annual average growth rate
Effects of ICT and Human Resources costs on the grossoperating income
EFFECTS OF ICT AND STAFF COSTS ON THE GROSS OPERATING INCOME
39 0% 38 8%39.0% 38.8% 36.6% 35.1%33.3%
36.8% 36.4% 34.2% 32.9% 31.3%
2.2% 2.4% 2.4% 2.1% 2.0%
2010 p.f. 2011 2012 2013 2014
ICT costs Staff costs
752010 pro-forma figures are normalized by annualizing the contribution of former MPS branches acquired on 31/5/2010
Agenda
Our growth processOur Strategic Plang
•Scenario•StrategyS a egy•Strategic initiatives•Organisational structuresg•Targets
The first quarter of 2011qConclusions
76
“New normal”: regulatory constraints and key indicators
Regulatory capital and financial leverage
Structural liquidity and
financing
Credit and risk of cost
Compliance and reputational
risk
New normal leverage
CARIGE today (YE 2010)
CARIGE target (YE 2014)
Core Capital at 6%Leverage at 4.7%
Core capital 8%, Leverage at 4 9%
Deposits/ imp. 105%, LCR 57%, NSFR 99%
All 3 ratios > 100%
Allocations = 45 bps (last 3 years)
Allocations ≤ 50 bps
Constant risk monitoring and supervisionOrganisational and process actions/
Plan constraint indexes to be monitored
Leverage at 4.9%
“Revenues/ RWA” (4 6% today; target >
“Revenues/ sources” (3 8% today; target >
“Revenues/ Alloc.” (8.9 today; target > 12)
process actions/ CARIGE values approach
“Customer satisfaction” todaybe monitored
(1)(4.6% today; target > 6%)
(3.8% today; target > 5%)
today; target > 12) satisfaction today 68% (2); target > 75%)
Goals: maximisation of revenues and profitability in accordance with the constraintsGoals: maximisation of revenues and profitability in accordance with the constraints
(1) Revenues = gross operating income + net result of insurance management; (2) Source: ABI monitoring; the system percentage is 56%; 77
2014 Results: FIA
DIRECT DEPOSITSCAGR2010 - 2014
€mln
FIA26.584
32.931
5,5%
26,58432,931
5.5%
FIA€mln
6 1%6 1%
INDIRECT DEPOSITS 50.674
64.139
6,1%Ci 2010 2014
€mln50,67464,139
6.1%
24 09131.208
6,7%
31,208
6.7%
2010 2014 24.091 24,091
2010 2014
78CAGR= compound annual average growth rate
2014 Results: direct deposits
SHORT€mln
CAGR2010 - 2014
DIRECT DEPOSITS 17 825
3,3%
€mln
17,825
3.3%
5,5%
DIRECT DEPOSITS15.680
17.825
€mln 15,680
17,825
5.5%
26.584
32.931
MEDIUM LONG
2010 2014
26,58432,931
8,5%
MEDIUM LONG€mln
8.5%
10.904
15.106 2010 2014 10,904
15,106
2010 2014 79CAGR= compound annual average growth rate
2014 Results: AAF
ASSETS UNDER MANAGEMENT
8,3%
€mlnCAGR2010 - 2014
8.3%
10.342 14.242
,
10,34214,242
INDIRECT DEPOSITS
6,7%CUSTOMER ASSETS IN CUSTODY
2010 2014€mln
€mln6.7%
24.091
31.208 9.922 11.198
3,1%
24,091
31,2089,922 11,198
3.1%
2010 2014
INSURANCE COMP. ASSETS IN CUSTODY €mln
2010 2014
5.769
10,8%
INSURANCE COMP. ASSETS IN CUSTODY €mln
5,769
10.8%
3.827
2010 2014 80CAGR= compound annual average growth rate
3,827
2014 Results: assets under management
%7 5%
MUTUAL FUNDS€mlnCAGR
2010 - 2014
5.503 7.348
7,5%7.5%
ASSETS UNDER MANAGEMENT
5,5037,348
2010 2014
ASSETS UNDER MANAGEMENT
8,3%BANCASSURANCE PRODUCTS
€mln
€mln
8.3%
4.134 5.941
9,5%9.5%
10.342
14.242
10,342
14,242
4,1345,941
2010 2014
ASSETS MANAGEMENT
953
7,8%7.8%2010 2014
ASSETS MANAGEMENT€mln
953705
2010 2014 81CAGR= compound annual average growth rate
705
2014 Results: loans
LOANS TO INDIVIDUALS (1) LOANS TO CORPORATES (1)€mln€mln
CAGR2010 - 2014
15.086 18.837
5,7%5.7%
7.877 9.938
6,0%
7,8779,938
15,08618,837
6.0%
2010 2014
LOANS
2010 2014€mln
25 37331.130
5,2%
SHORT (2) MEDIUM LONG
5.2%
25 37331,130
2,3%2.3% 6,0%6.0%
25.373 SHORT (2) MEDIUM LONG€mln€mln
25,373
6.539 7.150 17.724
22.402 2010 2014
6,539 7,15017,724
22,402
2010 2014 2010 2014
(1) Management breakdown; (2) Including currency, excluding non-performing 82CAGR= compound annual average growth rate
2014 Results: credit risk
-18 3%
NET IMPAIRED AND NON-PERFORMING LOANS NET NON-PERFORMING LOANS (%) ON CT1€mln
CAGR2010 2014 18.3%2010 - 2014
CORE TIER 1/CET1 1,304.2 2,198.5
COMPOSITION OF IMPAIRED LOANS AVAILABLE MARGIN AND COST OF RISK
CORE TIER 1/CET1 1,304.2 2,198.5
CAGR 2010 PF - 2014
According to the Strategic Plan,by 2014 the percentage of non-by 2014 the percentage of non-performing loans will bemaintained around 50%
832010 pro-forma figures are normalized by annualizing the contribution of former MPS branches acquired on 31/5/2010CAGR – Compound annual growth rate (1) gross operating income/net loans
2014: Results interest rate scenario
CARIGE RETAIL CUSTOMERS SPREAD
+ 49 b.p.
SYSTEM RATES2,36
2,85
p
2.362.85
2,50 2,55 2,73
+1,50 +1,74 +1,65+1.74
2010 20142.50 2.55 2.73
+1.50 +1.65
1,000,81
1,08
CARIGE RETAIL AND INSTITUTIONALCUSTOMERS SPREAD (1)
2010 2014
1.000.81
1.08
Tasso BCE (fine i d )
Tasso Euribor 3m ( di )
Tasso Euribor 6m ( di )
2,11 2,16
+ 5 b.p.
2.11 2.16ECB rate (end ofi d)
Euribor 3m rate(average)
Euribor 6m rate(average)periodo) (medio) (medio)
2010 2014period) (average) (average)
2010 2014
84
(1) Loans to customers and direct deposits according to the accounting definition: it includes, among the loans, active repos and interest bearing postal bonds, as well as other minor non-commercial entries; among the deposits, loans issued on institutional markets (EMTN, Covered bonds and subordinated loans), as well as other non-commercial entries.
2014 Results: gross operating income
NET INTEREST INCOME€mln
CAGR
CAGR2010 - 2014
GROSS OPERATING INCOME
CAGR 2010 PF - 2014
€mln
REVENUES FROM SERVICES€mln
2010 2010 P.F. 2014
Bank Group 880.7 894.4 1,167.5
852010 pro-forma figures are normalized by annualizing the contribution of former MPS branches acquired on 31/5/2010CAGR – Compound annual growth rate
Insurance Group 186.7 186.7 278.5
2014 Results: revenues from services
NET COMMISSIONS
6,3%5,8%
€mln
CAGR2010 - 2014
5.8%6.3%
297,3 302,2 379,2
,CAGR
2010 PF - 2014297.3 302.2
379.2
REVENUES FROM SERVICESFINANCE (1)
2010 2010 PF 2014
9 9%
€mln €mln
9 9%
362,3 367,2 420,6
3,8%3,5%
62,8 62,8 41,4
-9,9%-9,9%3.5%
3.8%-9.9%
-9.9%
362 3 367.2420.6
62.8 62.841.4
362,3 367,
2010 2010 PF 2014
OTHER REVENUES (2) €mln
362.3
2010 2010 PF 2014 2,2 2,2
( )
(1): dividends, profits/losses on trading, plus/minus from evaluation
€mln
2.2 2.2
-
2010 2010 PF 2014
(items 70, 80, 90, 100 b-c-d and 110).(2): profits/losses from loan sales/repurchases (item 100 a).
862010 pro-forma figures are normalized by annualizing the contribution of former MPS branches acquired on 31/5/2010
CAGR= compound annual average growth rate
Gross operating income evolution
BANK NET INTEREST INCOME€mln
CAGR 2010 PF - 2014
NET BANK COMMISSIONS€mln
872010 pro-forma figures are normalized by annualizing the contribution of former MPS branches acquired on 31/5/2010CAGR – Compound annual growth rate
2014 Results: operating costs
STAFF COSTS
Core growth1.3%
€mln
CAGR
CAGR2010 - 2014
OPERATING COSTS
2010 PF - 2014
OVERHEAD COSTS
1.4% net of new openings
€mln
€mln
openings
OTHER COSTS
COST INCOME
59,9% 50,3%60.0%59.9% 50.3%
2010 20142010 PF
2010 pro-forma figures are normalized by annualizing the contribution of former MPS branches acquired on 31/5/2010CAGR – Compound annual growth rate 88
Operating cost evolution
CAGR
CAGR2010 PF - 2014
CAGR 2010 PF adj. - 2014
89(1) Without the deduction of social security costs not recorded in the income statement for non-recurrent events
2010 pro-forma figures are normalized by annualizing the contribution of former MPS branches acquired on 31/5/2010CAGR – Compound annual growth rate
2014 Results: profits
PROFIT€mln
CAGR
CAGR2010 - 2014
CAGR 2010 PF - 2014
9 9%11,5%11.5%
Adj. ROE . (2)
8,1%
ROTE (1)
17.5% Adj.8.1%9 9%9,9%6,5%
,(2)6.5% 9.9%
2010 20142010 2014
90
(1) ROTE: Return on tangible equity: net profit /Shareholders' equity net of goodwill
2010 pro-forma figures are normalized by annualizing the contribution of former MPS branches acquired on 31/5/2010CAGR – Compound annual growth rate(2) Shareholders' equity net of the Bank of Italy equity investment revaluation reserve
Product company targets
INSURANCE COMPANIES SGR CREDITIS
CAGR 2010 - 2014
9,9%9.9%
0 5%
791
18,6%18.6%
350
8,0%
5.063
6.879 6,879
5,063
8.0%
542 575 893
1.304 1,5%0.5%
, 400
5,063618605
5.063 6.529
-,
6,529
2010 2014Danni Vita
Net premiums Assets Under Management Outstanding
2010 2014Non-lifeinsurance LifeLife
insurance
2010 2014di cui non captiveOf which non-captive
p g Outstanding€mln€mln €mln
91CAGR – Compound annual growth rate
Carige Assicurazioni's turnaround (Non-life company)
Actions envisaged in the Industrial Plan
Distribution
• Turnaround of the Agency Network and Brokers (with critical profitability)
• Divestment of business lines (Lega, healthcare facilities, ...)
• General portfolio restructuring/cleaning
• Bancassurance Auto
St t l i f thi d t li bilit t ( i f t
Rates
• Structural review of third-party liability rates (review of parameters as well as prices)
• Review of Elementary insurance pricing
• Full implementation of the current settlement model (in-sourcing, t k t )
Claimsnetwork, etc.)
• Strengthening of previous generation crash programme
• Innovation of the settlement model (Bancassurance, initiatives for the reduction of the average current cost etc )reduction of the average current cost, etc.)
92
Non-life insurance segment: development of the banking channel
Collection of non-life premiums through the banking channel (€ mln)
CAGRCAGR 2010-2014
+46.4%
93CAGR – Compound annual growth rate
Non-life insurance segment: strengthening of previousgeneration reserves
Balance of previous generation reserves (€ mln)
ty c
arTh
ird
part Total ‘10-‘14:
-99.8 € mln
T Reserves/Premiums(%) 109% 104% 105% 103% 105%
enta
ry
Total ‘10-‘14:45 € mln
Elem
e -45 € mln
Reserves/Premiums(%) 122% 135% 140% 135% 135%
94
Development of Carige Vita Nuova(Life company)
Assumed
• Innovation of the offering range as a key factor to compete in the market, in the face of increased competition and rising rates
market scenario competition and rising rates
• Assumed scenario of evolution of the financial markets in line with the post-crisis trend
• Ability to innovate the offering range:-Strengthening of the roles dedicated to product
Internal key factors
Strengthening of the roles dedicated to product development and competition monitoring
-Optimisation of the IT system in support of business development (e.g. development of more complex p ( g p pproducts)
• Improvement of the operating mechanism's efficiency
95
Life premiums portfolio
Collection of Carige Vita Nuova premiums (€ mln)Collection of Carige Vita Nuova premiums (€ mln)
CAGR 2010-2014 +9.9%
Weight of the banking channel
~ 90%~ 90%
96CAGR – Compound annual growth rate
Insurance Companies' profitability
Carige Assicurazioni's net income according to the statutory financial statements (€ mln)
31 0
CAGR 2010-2014
…
31 0
19,0
27,0 31,0
19.0
27.031.0
2,0 2.0
-6,1
2010 2011 2012 2013 2014
Carige Vita Nuova's net income according to the statutory financial statements (€ mln)
-6.1
(€ mln)
16 5 17,5 18,120,9
22,6CAGR
2010-2014+8.2%
16 5 17.5 18.120.9
22.6
16,516.5
972010 2011 2012 2013 2014
CAGR – Compound annual growth rate
Potential for shared bank/insurance customers
Customer sharing within the Group (100% = 1 9 mln)
New bank customers referred by insurance agents(100% = 1.9 mln) insurance agents
2011E:4 4%
4,00051.9%
4.4%
1,550
5/2011/
43.7%
Strong commitment to making use of the commercial synergies derivingfrom cross offerings to the two customer bases, which is progressively
98
g , p g yproducing significant results. It is estimated that shared customers will
be 7% of the total by 2014.
Capital management
PRIORITYOBJECTIVES
Achievement of the 8% requirement withinthe Plan period, through organic growth
MEASURES THAT CAN BE LEVERAGED ADDITIONAL ELEMENTS
condition created in 2010: 1. issue of the 2010-
2. allocation of future profits 3. optimisation of the
4. Validation of internal rating system5. Recognition (at least partial) of 1. issue of the 2010
2015 soft mandatory loan, convertible on initiative of the
b ib d f
3. optimisation of the balance sheet structure (e.g.: sale of interests of less than 10% in b k d i
g ( p )goodwill6. management of insurance risk in a conglomerate perspective
subscribers and of the Bank from September 2011
banks and insurance companies)
The Group could implement additional capital strengthening measures toi th t iti th t h ld t th l lt f thseize the opportunities that should present themselves as a result of the
possible competitive evolution characterizing the Italian banking system99
Common Equity evolution with the regulations in force from time to time
7.7 – 8.28.3 – 8.8
1.3 – 1.8
(1) Including deduction of savings shares (-0.8), calculation of dividends (+0.7), impacts for the deduction of non-significant equity investments (-
€ Milion
(2) Conversion price ranging from 1.8 to 2.4 euro
1.1), benefits for the deduction of insurance (+0.4), non-calculation of negative reserves on AFS (+0.6) and the effects of the weighting ofdeductibles (-0.5)
(3) Including deduction of the remaining percentage (50%) of equity investments in banks, financial and insurance companies (-0.4) anddeduction of insurance shareholdings (-0.9) 100
Funding policies
PRIORITY OBJECTIVES
• Achievement and maintenance of new liquidity levels and source/loan stability in accordance with BIS III > 100%
OBJECTIVES • Containment of the funding gap on the Extra-Liguria network (from 11.2% to 7.5%)
Obtainment of steady
MEASURES THAT CAN BE LEVERAGED
Additional lending Remix of retail deposit Obtainment of steady medium-term liquidity and funding at the most favourable financial
di i f i l
Additional lending structure balancing initiatives: new covered bond issues,
i i i d
pproducts qualified to improve the liquidity ratio: fixed deposits and repos with durations longer than 1
conditions for capital balancing and early adjustment to the new Basel III standards: structured
securitisations and sales of NPLs; valuation of financial assets that can be
gmonth.In the Extra-Liguria network, closing of the intermediation circuit: “support” to loans III standards: structured
programme of institutional bond issues in 2014
assets that can be placed with the EBC
ppgranted to corporatesthrough deposit flows (e.g.: opening of current accounts by company partners, y p y p ,employees, supplies)
101
Maturities and new medium-long term flows
Medium-long term deposits (€ bln)Medium long term deposits (€ bln)Balance
(new flows –maturities)
1.5 0.9 1.0 1.2
1 7
2.01.7
1.7
1 4
1.7
-1.7-1.3
-1.6
-1.4
102
Closing of the intermediation circuit
Closing of the funding gap (€ bln)
8.5 9.8 8.5 7.69.9 11.3
10.8 10
Closing of the funding gap (€ bln)
-15.9%11.2%
-14 4%7.5%
Imp Racc GAP Imp Racc GAPImp Racc GAP Imp Racc GAP
14.4%
-1.31
-1.40.8
Loans Loans Loans LoansDeposits Deposits Deposits DepositsImp Racc GAP Imp Racc GAPImp Racc GAP Imp Racc GAP
Liguria Extra-Liguria
2010
Liguria
2014
Extra-LiguriaLiguria
2010
Liguria
2014
Loans Loans Loans LoansDeposits Deposits Deposits Deposits
Funding Gap: Percentage of loans not funded through direct customer deposits
103
Profit sensitivity
Net profit sensitivity to variations in Italy's GDP and ECB rates (€ mln)Net profit sensitivity to variations in Italy s GDP and ECB rates (€ mln)
104
Agenda
Our growth processOur Strategic Plang
•Scenario•Strategygy•Strategic initiatives•Organisational structuresg•Targets
The first quarter of 2011qConclusions
105
First quarter 2011: Growing volumes…
FIA LOANS (1)€ bln € bln
DIRECT DEPOSITS LOANS TO INDIVIDUALS (2)€ bln € bln
INDIRECT DEPOSITS LOANS TO CORPORATES (2)€ bln € bln
106(1) excluding repos; (2) management breakdown
…with positive income returns
NET PROFIT GROSS OPERATING INCOME€mln€mln
OPERATING COSTS NET INTEREST INCOME €mln€mln
€mlnLOAN VALUE ADJUSTMENTS NET COMMISSIONS
€mln
107
Retail bond maturities and placement
Total maturities 2011: 1.1 bln
New bdg production 2011: 1.7 bln
January sales € 304 mln: € 297 mln placements € 7 mln price list purchases
February sales € 358 mln: € 344 mln placements € 14 mln price list purchases
304
358 March sales € 263 mln: € 250 mln placements € 13 mln price list purchases
Total sales as at 30 April €1,043 mln VS maturities of €557 mln
249
263
April sales € 118 mln: € 111 mln placements € 7 l i li t h
138187
118
€ 7 mln price list purchases
7942
77
39
80 88
32922
AprilMarch
42May June July September October November DecemberJanuary AugustFebruary
108
Our growth processOur Strategic Plang
•Scenario•Strategygy•Strategic initiatives•Organisational structuresg•Targets
The first quarter of 2011Conclusions
109
Strategic initiatives under the responsibility of the different Organisational Areas
Revenue and offering development
1DISTRIBUTION
• Strengthening of the Liguria network• Reduction of the productivity gap between Liguria and Extra-Liguria
operationsdevelopment
Operating cost optimisation
2
p• Reduction of the productivity variance between branches • Optimisation of the Group's local presence • Development of integrated inter-channelling • Service model refinement for corporates• Private segment enhancementoptimisation
Optimisation3
PRODUCTION• Proactive credit management• Development of corporate services• Pricing optimisationOptimisation
of liquidity capital andcost
Pricing optimisation• Development of offerings to immigrants • Product factory optimisation
RESOURCESof risk • Cost & lean management
• Technology management and development• Human Resources management• Improved communications
Focus on4GOVERNANCE AND CONTROL
• Funding policies • Capital optimisation policies (capital management)• Risk monitoring and management
Focus on innovation and skills
Risk monitoring and management
110
CARIGE in 2014: a new step in the long-term value creation process…
Gl b li i
…
Globalisation
CARIGE in the new digital and
h
…
…
2014
Digitalisation
CARIGE today
Carige Group with 667 b anches 432
new digital and global normal
Carige Group is an independent financial conglomerate, focusing
CARIGE at the end of the plan period
Carige Group with 715 branches, 440 insurance outlets
2010Deregulation
CARIGE post listing
Carige Spa with 204 branches (of
hi h 187 i
branches, 432 insurance outlets, 6,003 employees; €76 bln loans and deposits; SE 3.5 bln; net profit
focusing selectively on product factories; market leader in high concentration
insurance outlets, 6,100 employees; €95 bln loans and deposits; SE 4 bln; net profit 263 mln in 2014
1995
1989 CARIGE before the enforcement of new rules for savings banks, with 137 branches, 2,962 employees; €6.6 blnl d d it
which 187 in Liguria), 3,226 employees; €10.2 blnloans and deposits; Equity 0 7 bln;
bln; net profit 177 mln
Fifth largest capitalisation bank in Italy
Tenth largest
concentration areas; leading ICT inter-channel intermediary; top performer in service and
Among the top 10 groups for branch network size
1989
loans and deposits; SE 0.2 bln; net profit 20.5 mln
Equity 0.7 bln; net profit 36.2 mln
gbranch network in Italy
profitability/creation of economic value
111
Disclaimer
This document has been prepared by Banca Carige S.p.A. solely for information purposes andsolely to present the Group's strategies and key financial data.
The Company, its consultants and representatives shall not be held responsible (for losses arising from negligence or any other
reasons) for any losses arising from the use of this document and of the contents hereof.) y gAll forward-looking information contained in this document have been prepared on the basis of
assumptions that may prove incorrect, and therefore the results may vary.In forming their own opinion, readers should keep in mind the aforesaid factors.
This document does not constitute an offer or solicitation to purchase or subscribe shares, and no part of this document can be regarded as the basis of any contract or agreement.
None of the information contained herein may be reproduced, published or distributed, infull or in part, for whatever purpose.
By accepting this notice you agree to all the limits listed above.
*****
The Officer in charge of preparing the Company’s accounting documents, Daria Bagnasco, Deputy General Manager Governance and Control of Banca CARIGE S.p.A., declares, under subparagraph 2
of art. 154 bis of the Consolidated Financial Act, that the consolidated accounting information l ti t B CARIGE G id d i thi t ti t h th i f ti t drelating to Banca CARIGE Group provided in this presentation matches the information reported on
the Company’s documents, books and accounting records.
112
Contacts
Gi BGiacomo BurroCFO & Wealth Management Head Office Manager
[email protected]: +390105794580
M i i M hi iMaurizio MarchioriHead of Planning & Control
[email protected]: +390105794868
Emilio ChiesiEmilio Chiesi International [email protected]: +390105794568
Roberta FamàRoberta FamàHead ofAnalysis, Planning & IR Dept.
[email protected]: +390105794877
Investor RelationsInvestor [email protected]
Tel: +390105794877
113