BES Group Presentation October 2011
Agenda BES Group: a long and successful organic growth story I. Strategic review: successfully deployed domestic strategy complemented II. by selective international expansion Solid track record of profitable growth III. Conclusion IV. 1
BES Today • Largest listed Portuguese Bank by market cap (EUR 2.3bn as of 31 Sep. 2011), and the 2nd largest private financial institution in Portugal by net assets (EUR 80.2 bn at 30 June 11) • Stable shareholder base since its reprivatisation in 1991/1992, with ESFG and Credit Agricole holding 50.8% of the share capital . Other reference shareholders include Portugal Telecom (2.6%) and Banco Bradesco (6.05%) • Strong market position, with an average market share of 20.3% in the Portuguese banking market (24.2% in the corporate business) and 2.1 mn Clients worldwide • Wide international presence in 23 countries and 4 continents, focused on countries with cultural and economic ties to Portugal namely Spain, Angola and Brazil. Deployment of international presence leveraging on BES core competences in the domestic market, namely in corporate banking, private banking, investment banking and trade finance • 1H11 Cost-to-income of 45.7% places BES in the leading position in terms of efficiency among listed Portuguese banks • Despite a strict financial discipline and resilient profitability, BES ratings have been impacted by Sovereign rating actions: S&P: BBB- /Neg; Moody’s: Ba1 /CWN; DBRS: BBB (High)/Neg • Solid solvency ratios, with a Core Tier I of 8.2% and a Tier I of 9.2% 2
The foundations of BES trace back to the XIX century BES makes a After the creation of the BESCL is Espirito Santo EUR 1.38 bn rights name Banco Espírito Santo nationalised within Group regains issue and buys 50% in 1920 the Bank merged the Nationalisation control of BESCL of BES Vida with Banco Comercial de program in Portugal during Re- (Portugal’s life after 1974 Lisboa creating BESCL insurance market privatisation Revolution leader) process 1869 2011 … … 1937 1975 1991 2006 The 142 years of history creating value for shareholders, clients and employees Today Beginning 1973 1999 2009 1986 2005 Largest Creation of Espirito Santo Portuguese BESCL opens BESCL Integration BES makes a Caza de Group returns to Listed Bank in the first branch name is of BIC into EUR 1.2 bn Portugal Portugal with abandoned BES rights issue in Angola in Câmbio 20.3% market establishing BIC to continue and BES partnership share specialised in ( Banco organic with First name is domestically Internacional de national and growth and National City definitively and pursuing a Crédito in strengthen international Bank of New adopted focused partnership with the capital York international securities Credit Agricole) and ratios expansion trading ESSI Lat Am Russia Crisis WW I WW II 9/11 Crisis LTCM bailout Dot.com Subprime Privatization Great Nationalisation Depression bubble 3 3
BES is a unique story of organic growth in the Portuguese market, where the banking sector has been in a consolidation process since the 80s 1985 1986 … 1988 1989 1990 1991 … 1993 … 1995 1996 … 2000 … 2005 … 2011 BES BIC merger BIC into BES CGD CGD Group BNU BCP Champalimaud BCP acquires BPSM Group acquires BPSM BPSM BPA BCP acquires José de Mello Name changed BPA SFP Group Banco BCP acquires to Banco Mello acquires SFP UBP Mello Mello Santander BCI Acquires BCI Banesto Champalimaud Santander BTA Acquires BTA Group acquires Acquires BTA & CPP BTA & CPP CPP BPI Name changed BPI acquires BFN to BFE BBI & BFE BPI acquires BFB BFB 4 4
A stable shareholder base has been key to implement a long term consistent strategy. Core shareholders have always been supportive, allowing the Bank to maintain a strong organic growth path BES shareholding structure BES main shareholders 30 June 2011 30 June 2011 Espírito Santo Financial Group (1) 67.4% Indiv. & Firms Entrepr. 1.80% Crédit 32.6% PT Bespar 8.30% Agricole % 2.6% 8 . 0 1 40.0% Banco Reference Inst-ls * Bradesco Espírito SH 30.40% 6.1% Santo 59.50% % 5 . 2 5.9% ESAF (2) Silchester (1) Direct and indirect stake of ESFG in Bespar * Includes qualified holding of Silchester (5.93%) (2) Through ES Premium mutual fund 5
Consistent long term strategy produced evident benefits: BES share price has been clearly outperforming the sector in Europe 800% 80 0% 700% 70 0% 600% 600% 500% 500% 40 400% 0% BES: +49.0% 300% 300% 200% 200% DJ STOXX 600 100% 100% Banks: +23.7% 0% 0% Jul-91 Jul-91 Jul-95 Jul-95 Jul-99 Jul-99 Jul-03 Jul-03 Jul-07 Jul-07 Jul-11 Jul-11 -100% -100% 15 July 1991 30 September 2011 (listing of BES shares) 6 Source: Bloomberg & NYSE Euronext
Agenda BES Group: a long and successful organic growth story I. Strategic review: successfully deployed domestic strategy complemented II. by selective international expansion Solid track record of profitable growth III. Conclusion IV. 7
Traditional conservative management and long term value creation focus have allowed BES to build a strong domestic franchise, with significant market share on both retail and corporate segments Average domestic market share Domestic market share per selected product (%) # 1 POSs 27.5% Corporate Trade Finance 27.2% # 1 banking: 24.2% Corporate Corporate Lending 25.7% # 2 2.4x # 1 Factoring 20.5% 20.3% # 3 Leasing 18.2% 16.1% On BS Funds 18.3% Pension Plans 24.9% 8.5 % Individuals Asset Mgmt 18.7% Other Loans Indiv. 18.6% Mortgage 14.9% Other Life Insurance 13.3% 1992 2000 2010 Source: APB; BdP; APFIPP; ISP; ASP; APLEASE; APEF; 8 Euronext; SIBS; SWIFT; CMVM; BES
In order to sustain long-term profitability and complement Domestic business, BES has been developing its International activities… Main strategic priorities � BES has a clear and consistent domestic strategy and is focusing on continuously adapting it to current economic and financial context � Intensifying the growth of client funds, with an increased focus on longer-term client Businesses Domestic funds � Sustaining strong levels of client acquisition, leveraging different acquisition channels (particularly Cross-Segment) � Reinforcing the coordination between the commercial activities and risk, capital and liquidity management � Focusing on selected cross-selling opportunities (auto insurance, home insurance, …) in order to increase client loyalty and to sustain banking income growth � International activities are focused in a set of markets where Portugal has strong cultural or International Businesses economic affinities, with significant growth potential and where Portuguese companies are expanding their activity to (these markets typically generate a balanced activity between credit and funds) � In this context, Investment Banking is also increasing the focus of its strategy around fee- generating activities, namely brokerage (where it ranks #1 in Portugal and #4 in Spain) and in M&A Advisory (#1 in Portugal, #2 in the Iberian M&A market, #2 in Brazil) 9
… alongside with a commercial segmented and sub-segmented market approach, which lead to a more tailored value proposition and allows BES to better serve its clients Individuals Executive Professionals Entrepreneurs Retail Banking Private Banking Businesses Traditional family Domestic Sub-segmentation: Top Private Affluents (BES 360º) Corporate Mass Market Medium- Large Small Businesses sized Corporates Companies Investment Banking Corporates / Residents (Portugal, International Spain, Brazil, Private Banking International abroad (emigrants) Businesses Presence in Spain, Angola, Angola, Macao, Poland, France, UK (London) China, India and US (NYC) and UK) ES Bank (US) 10
International expansion complements domestic business and has always been based on a strong rationale, with focused geographic exposure and leveraging on BES core competences BES International Strategy Rationale Focus on countries with cultural and increasingly 1 economic ties with Portugal, namely Angola, Brazil and Spain Exposure to high growth emerging economies, that typically have strong commodity resources, rising importance in 2 international trade, high liquidity pools and big infrastructures programmes Support the internationalisation of BES corporate client 3 base, helping them to expand their activity to key strategic markets where BES has a physical presence Leverage on BES core competences in the domestic market, 4 namely in terms of corporate banking, private banking, investment banking and trade finance 11
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