9M 2018 RESULTS 6 NOVEMBER 2018
AGENDA Preliminary remarks 9M 2018 results Net Inflows, assets and recruiting Business update 2
EXECUTIVE SUMMARY Growth path confirmed NET NET INFL INFLOWS WS € 4.1bn 4.1bn Solid commercial trend: net inflows at € 4.1bn, despite market headwinds with a strong (-20% 20% yoy) contribution from existing FAs Steady asset expansion and sticky mix: total assets at € 58.5bn (+9%) o/w 76% in TOTAL A AL ASS SSET ETS managed and insurance products. Assets u. Advisory tripled at € 2.3bn (4% of total assets) € 58.5 58.5bn bn Growing network quality : Total FA at 1,985 (+3%YoY), with both portfolios and (+9% +9% yoy) productivity at top industry level Sound earnings delivered REP REP . NET . NET PR PROFIT OFIT Improved profit quality: net profit at € 135.8m, of which € 87.7 million (+38%) are € 135.8m 135.8m (-8%) %) recurring Costs within guidance (+3%) despite higher payments to bank-rescue funds. Cost AD ADJ. . NET NET ratios at best practice level PR PROFIT OFIT Stable and solid capital ratios: CET1 ratio at 18.0% and TCR at 19.6%, both well € 87.7m 87.7m (+38%) +38%) above SREP requirements 3
9M 2018 RESULTS: KEY TAKEAWAYS * (€ m) 9M 17 9M 18 % Chg TOTAL BANKING INCOME (reported -1%, adjusted +15%) Net Interest Income 47.1 44.2 -6.1% Net income (loss) from trading activities and Dividends 14.1 22.1 56.8% Revenues in line with previous year despite Net Financial Income 61.2 66.3 8.4% Gross fees 554.2 566.7 2.2% a 39% drop in variable lines (performance Fee expenses -281.2 -301.1 7.1% fees and trading) Net Fees 273.0 265.5 -2.7% Total Banking Income 334.2 331.8 -0.7% OPERATING COSTS Staff expenses -63.3 -62.8 -0.9% (reported +3.0%, ex- payments to bank Other general and administrative expense -106.5 -113.5 6.6% rescue funds +1.1%) Depreciation and amortisation -5.8 -6.3 7.3% Other net operating income (expense) 36.5 39.2 7.4% Cost within guidance despite a 57% increase Total operating costs -139.2 -143.3 3.0% in payments to bank-rescue funds Cost /Income Ratio 39.9% 41.3% 1.4 p.p. Operating Profit 195.0 188.5 -3.3% Net adjustments for impair.loans and other assets -6.0 -6.1 1.0% PROVISIONS and WRITE-OFFS Net provisions for liabilities and contingencies -13.9 -14.6 5.1% barely changed yoy Gain (loss) from disposal of equity investments -0.1 -0.2 72.9% Profit Before Taxation 175.0 167.7 -4.2% HIGHER TAX-RATE on revenue mix Direct income taxes -27.7 -31.8 14.9% Tax rate 15.8% 19.0% 3.2 p.p. Net Profit 147.4 135.8 -7.8% 4
NET PROFIT SIGNIFICANT INCREASE IN RECURRING PROFITS NET PROFIT DEVELOPMENT 147.4 (38.3) 38.3) (4.2) 4.2) 38.7 38.7 (0.8 0.8) 135.8 (4.1) 2.4 (6.5) (2.9) (2 .9) Ongoing cost No relevant discipline partially 48.2 .2 write-off position offset by higher 84.1 .1 Higher tax-rate payments to bank rescue funds Unfavourable Sharp increase NII steadily financial market in recurring closing the gap partly offset by revenues thanks quarter by higher trading to asset increase quarter gains on de- and new revenue risking strategy stream 87.7 .7 63.3 .3 ( € m) 9M 2017 Variable revenues NII Recurring fees Opex Provisions & write- Tax 9M 2018 (performance fees downs & trading) Variable profits Recurring profits 5
AGENDA Preliminary remarks 9M 2018 results Net Inflows, assets and recruiting Business update 6
REVENUES: NET FINANCIAL INCOME NII GROWTH ACCELERATING NET FINANCIAL INCOME NET INTEREST INCOME (NII) Best NII on quarterly basis since 2Q 2015. Ongoing recovery led by the increase +22% in volumes and the rise in investment yields 66.3 61.2 started in 2Q18 14.1 22.1 Interest-bearing assets at € 8.6bn, +9% (m/ € ) (m/ € ) 16.2 15.7 15.8 15.5 14.9 14.3 13.2 47.1 44.2 YoY. Volumes driven by the increase in retail deposits. Investments as below: 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 9M 2017 9M 2018 Lending activity at € 1.8bn (+2%) growing in a steady way NII Trading income Banking book at € 5.9bn (+2.2%) 99% invested in bonds (duration 2.0 yrs and INTEREST-BEARING ASSETS INTEREST MARGIN maturity 3.4 yrs). Over € 1.6bn are due to expire within 2019 year-end 8.6 8.4 7.9 118 120 120 Banks at € 0.9bn, still at a high level (bps/ € ) 0.9 0.3 0.9 amid growing volatility in financial 1.8 1.8 1.8 71 70 71 markets (bn/ € ) 5.9 5.8 5.7 NII sensitivity to +100bps in interest rates ’ increase equal to € 28.9m 9M 2017 2017 9M 2018 9M 2017 2017 9M 2018 Banking book Loans Banks Investment portfolio lending portfolio 7
REVENUES: NET FEE INCOME HIGHER NET RECURRING FEES (+20%) GROSS FEES Recurring fees (management, entry & +11% NET FEE INCOME banking) up by 12% -56% +26% gross, +20% net 478.7 430.6 273.0 265.5 82.8 40.8 51.4 36.6 Solid management 36.6 fees (+11%) driven by 82.8 higher assets Management fees Entry & banking fees Performance fees 228.9 Entry & banking fees FEES EXPENSES 190.2 (+26%) on new +20% revenue stream -30.9 -31.3 -83.9 -80.9 Lower cost for -166.4 -188.9 ( € m) +1% -4% growth reflecting the 9M 2017 9M 2018 +14% different net inflows Performance fees mix in the quarter Net recurring fees Fee expenses to FAs - Fee expenses to FAs - Fee expenses to Third ordinary extraordinary Parties 9M 2017 9M 2018 8
PAY-OUT RATIO MOVING SHARPLY LOWER PAY-OUT TO FAs PAY-OUT TO THIRD-PARTIES Lower pay-out ratio to FAs (-2.2 p.p.) primarily 53.1% 52.9% thanks to a lower cost of 50.9% growth (less recruitment, more defensive product 16.4 17.8 15.3 mix) 6.3% 6.5% 5.9% 2.3 2.1 Lower pay-out to third- 2.5 parties (-0.6 p.p.) 36.5 35.3 35.6 following an in-depth 4.2 4.2 review of existing 3.4 (%) (%) agreements with third- party AMs 9M16 9M17 9M18 9M 16 9M 17 9M 18 Ordinary pay-out Pay-out to AM Others Cost of growth 9
REVENUES: MANAGEMENT FEES & MARGIN QUARTERLY TREND (M/ € ) MANAGEMENT 159.8 160.8 156.5 158.1 150.6 144.7 116.7 135.3 130.0 125.2 120.4 116.9 118.6 FEES 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 TOTAL AVG. (bn/ € ) 56.9 58.4 56.3 MANAGED 54.8 52.9 51.2 49.0 46.2 43.2 44.8 39.8 40.8 41.7 ASSETS 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 MANAGEMENT 0.30 FEE 0.29 0.29 0.28 0.28 0.28 0.28 0.28 0.28 0.28 0.28 0.28 0.28 MARGIN 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 10
REVENUES: OTHER FEES QUARTERLY TREND 7.6 (M/ € ) 6.5 5.8 5.5 FRONT 5.0 4.7 4.6 4.4 3.9 3.7 3.6 3.6 3.6 FEES 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 BANKING 13.0 11.6 11.6 11.6 (M/ € ) 9.9 9.2 8.8 8.2 7.5 6.2 7.1 6.8 6.1 FEES 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 PERFORMANCE (M/ € ) 42.8 32.3 27.0 31.1 0.9 26.9 24.8 0.9 14.5 14.9 FEES 14.0 8.8 7.6 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 11
BREAKDOWN OF ANNUALISED GROSS FEE-MARGIN MARGIN REBALANCING UNDERWAY MANAGEMENT FEES ENTRY FEES Total recurring margin at 1.23% (-1bps YTD) with 1.16 1.13 1.12 1.11 1.11 new revenue stream 1.07 0.11 0.11 0.08 (+1bps) offsetting 0.04 0.04 0.04 lower management (%) (%) fees (-2bps) 2013 2014 2015 2016 2017 9M18 2013 2014 2015 2016 2017 9M18 Higher banking fee margin (+1bps YTD) PERFORMANCE FEES BANKING FEES thanks to the new advanced advisory contract (BGPA) 0.32 0.12 0.22 0.10 Performance fee 0.18 0.08 0.08 0.16 0.07 0.07 0.15 margin closed to 0.08 record low levels (%) (%) 2013 2014 2015 2016 2017 9M18 2013 2014 2015 2016 2017 9M18 Fee margin based on average assets on an annualised basis 12
OPERATING COSTS BREAKDOWN COST DISCIPLINE CONFIRMED Operating costs up OPERATING COSTS COST BREAKDOWN +3% mostly on higher payments (+57%) to bank rescue funds 67.0 143.3 65.5 139.2 (BRRD and FITD funds) 52.6 Lower total personnel 50.0 +2% costs (-1%) on lower RMs recruiting packages offsetting the higher +5% +3.0% labour costs implied by the new National -23% Banking Contract (M/ € ) +57% +7% 13.3 G&A +2% including 10.2 7.2 6.3 initial impact from higher 5.8 4.6 costs for moving to new premises and other Non-sales Sales personnel BRRD & FITD Depreciation General costs (legal and 9M 2017 9M 2018 personnel costs costs funds expenses (net of consultants) for strategic stamp duties) initiatives 9M 2017 9M 2018 13
COST RATIOS OPERATING LEVERAGE OPERATING COSTS/TOTAL COST/INCOME RATIO ASSETS Operating 59.0% 0.54% costs/Total assets 52.6% 0.51% 53.9% (-1bps YTD) 53.4% 52.3% 51.1% confirms operating 0.45% efficiency 46.5% 0.42% 44.0% Cost/Income ratio 42.5% 0.38% at best practice 40.3% 41.0% 38.1% 0.34% levels both on a 0.33% 41.3% 39.9% reported and adjusted basis (i.e. 2012 2013 2014 2015 2016 2017 9M 2018 2012 2013 2014 2015 2016 2017 9M stripping out volatile 2018 components) Reported Cost/Income Adjusted Cost/Income* * Excluding performance fees and other extraordinary components (LTRO, BRRD payments) 14
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