Group’s Results 9M17
9M17 Highlights � Group’s growth strategy was confirmed by the increase of all aggregates, both Loans and Customers’ Funding. In detail: � Wealth Management’s strong expansion continued, with AUM and Insurance Reserves exceeding €33 billion at the end of 9M17, as a result of the € 2.5 billion increase since the beginning of 2017 (+8.2% ytd) � Loans to Customers were up by €1.5 billion YoY (+6.9%) , accelerating furtherly toward the Industry (overperformance increased by 1.3%) � The above mentioned expansion of the various business aggregates drove Operating Income up by 6% YoY , with Interest Margin up by 5% YoY and «core» Non Interest Income up by 6.7% YoY. Internal capital generation resulting from such growth fostered capital ratios, with Fully Phased CET1 Ratio at 12.8%*, up by 90 bps since the end of 2016 � Annualized Cost of Risk improved furtherly, posting 22 bps in 9M17, with an exceptional performance in the quarter ( ~ €10 million). It is worth to highlight that Gross NPLs average quarterly flows were negative for the fourth quarter in a row. The total decrease in the stock was -€17.2 million YoY, net of NPLs disposal � 9M17 Net Profit was €146.5 million (+42.1% YoY), with 3Q17 figure at €45.2 million (+38.2% QoQ) despite a circa €10 million contribution to the Deposit Guarantee Scheme** Loans to Customers are net of Repos with Institutional sand Loans to Group’s SPVs . (*) Phased-in capital ratio related to the group’s prudential (Credemholding level) 2 (**) gross of fiscal effect
Income Statement % 3Q17 % 9M17 • «Core» revenues grew by 3Q16 2Q17 3Q17 9M16 9M17 €, million vs 3Q16 vs 9M16 almost 6% YoY in 9M17 (the stated aggregate 2.6% 6.3% Operating Income 258.1 297.2 264.8 800.4 850.6 performed +6.3% YoY) thank to both Interest Op. Income net of Margin and Non Interest Income from Fin. 4.6% 5.9% 249.9 263.3 261.3 746.5 790.7 Activities Income positive evolution and Perf. Fees • Operating Costs’ pace of growth decelerated (+1.4% -1.3% 1.4% Operating Costs -171.6 -184.1 -169.3 -531.9 -539.2 YoY in 9M17) 6.0% 6.5% D&A -11.6 -12.3 -12.3 -33.9 -36.1 • Net Adjustments to Loans performed very well with Net Operating 11.1% 17.3% 74.9 100.8 83.2 234.6 275.3 only ~ €10 million in the Profit quarter (-36.9% YoY), while Net Adjustments -36.9% -16.7% -15.7 -18.2 -9.9 -47.2 -39.3 the 9M17 aggregate was to Loans down 16% YoY Provisions for n.s. n.s. -2.0 -2.1 0.2 -7.4 0.8 • 9M17 Net Consolidated Risks and Charges Profit growth was Extraordinary n.s. n.s. confirmed and reached -9.6 -0.8 -8.7 -27.3 -20.9 Income/Expenses €146.5 million (+42.1% 36.1% 41.4% YoY), thank to a quarterly Pre Tax Profit 47.6 79.7 64.8 152.7 215.9 result above €45 million 31.5% 39.9% Taxes -14.9 -27.4 -19.6 -49.6 -69.4 (+38.2% vs 3Q16) Net Profit for the 38.2% 42.1% 103.1 146.5 32.7 52.3 45.2 Period 3
Operating Income Average quarterly Core Operating Income (net of Income for Financial Activities and Performance Fees) 280 €, million 263.6 270 256.5 260 248.8 +25.6% 247.7 250 234.0 240 224.4 224.4 230 220.7 220 209.9 210 200 Avg Avg Avg Avg Avg Avg Avg Avg Avg 2009 2010 2011 2012 2013 2014 2015 2016 2017 • First 9 months of 2017 once again confirmed how a steady volumes’ growth translated into a «core» revenues increase (net of more volatile components, such as Income from Financial Activities and Performance Fees), despite the strong pressure on earnings, driven by interest rates environment and harsh competition on pricing • 2017 quarterly average operating income is, so far, 3% higher compared to 2016 and more than 25% higher since the beginning of the crisis 4
Interest Margin (1/3) Quarterly Interest Margin €, million +5.4% 118.4 � Interest Margin was still on the rise both in 120 the quarter (+5.4% YoY compared to 3Q16) 112.3 117.5118.1118.8 117.0114.9 and in the first nine months (+5% 9M17 vs 110 111.2 111.1 9M16), while was substantially stable QoQ 106.2103.8 100 � Customers’ spread continued to shrink because of the fierce competition on 90 lending 80 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 Quarterly Customers’ Spread Euribor and BTP/Bund spread: evolution (Credem SpA management accounting) 2.92 2.76 187 3.0 180 2.62 164 2.51 180 2.45 0.05% 0.1% 156 2.34 2.5 2.22 0.01%-0.03% 2.15 2.14 2.12 2.13 2.07 2.06 150 2.04 1.97 2.02 0.0% 116 131 126 1.95 -0.09% 2.0 1.88 1.86 1.89 1.87 1.81 120 -0.1% 127 1.5 121 116 90 -0.2% 103 -0.18% 0.78 0.64 1.0 60 -0.3% 0.55 -0.26%-0.30%-0.31%-0.33%-0.33% 0.47 0.42 0.39 3 months Euribor (%) 0.34 0.29 0.5 0.24 0.19 0.16 -0.4% 30 Spread (bps) BTP vs. Bund 10 yrs -0.33% 0.0 -0.5% 0 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 Spread Average loans rate Average deposit rate 5
Interest Margin (2/3) Evolution of Average Loan Rate Evolution of Average Deposit Rate (Credem SpA management accounting) (Credem SpA management accounting) % % 3.42 3.50 1.31 -0.72 3.04 2.90 -0.70 2.85 2.80 2.77 3.00 2.70 -0.75 -0.75 -0.72 -0.74 1.20 1.07 -0.80 1.01 1.00 -0.71 0.95 0.95 2.29 2.50 -0.72 -0.76 2.15 2.13 -0.79 2.06 -0.76 1.97 2.00 0.61 1.50 0.60 0.36 1.00 0.29 0.24 0.19 0.16 0.50 - - 2015 2016 4Q16 1Q17 2Q17 3Q17 2015 2016 4Q16 1Q17 2Q17 3Q17 Credem: average loans rate Industry: average loans rate Credem: average deposit rate Industry: average deposit rate Evolution of Average Customers’ Spread (Credem SpA management accounting) % 2.11 2.09 .20 1.97 � Group Customers’ Spread narrowed 1.93 1.89 1.89 1.87 1.86 1.86 1.85 1.82 1.81 -0.02 because of the strong competition on loans, -0.04 but remained in line with the Industry level -0.03 0.03 0.02 -0.01 (1.81 vs 1.82) .60 .00 2015 2016 4Q16 1Q17 2Q17 3Q17 Credem: Spread Industry: Spread Fonte: ABI Monthly Outlook October 2017 6
Interest Margin (3/3) Securities’ Portfolio Breakdown � Securities’ portfolio has been (Credem SpA management accounting) progressively rebuilt in the quarter, growing by €800 million in comparison 100% with the balance at end of 1H17 . 90% Purchases involved mostly US treasury bonds. Consequently, the incidence of 36% 80% 39% 41% 43% Italian securities declined 48% 56% 70% � Portfolio’s average maturity remains at 7% 60% around 6 years 9% 8% 7% 50% 8% Securities’ Portfolio details 33% 40% (Credem SpA management reporting) 11% 25% 30% 7 38% 25% 30% 6.0 0% 100% 6 18% 20% 5 80% 46% 26% 24% 10% 20% 19% 4 15% 14% 60% Altro 0% 3 14% BBB 40% 2014 2015 2016 1Q17 2Q17 3Q17 2 A 20% 39% AAA/AA 1 Other non-Italy Other Govies / EFSF/ EIB Other Italy Italian Govies 0 0% Banking Group Average maturity Rating Securities’ 6,219 6,420 6,641 7,401 5,781 6,589 (years) distribution Portfolio €, million 7
Non Interest Income Non Interest Income: Quarterly Evolution €, million + 7.2% 210 188.8 11.6 Performance Fees 170.5 178.3 146.4 169.5 146.8 145.8 15.3 Income from 160 33.4 22.1 Financial Activities 38.8 6.4 3.0 7.7 Other 49.4 45.0 43.6 44.2 110 46.6 46.3 46.0 Banking Fees 15.0 12.2 12.0 12.6 12.2 14.6 10.4 Insurance Fees 60 88.2 85.5 85.5 82.5 75.0 72.1 69.1 Asset Management and Brokerage Fees 10 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 Non Interest Income (net of 130.5 140.1 137.6 161.9 148.1 144.4 142.9 Income from Fin. Act. and Perf. Fees) + 6.7% � Non Interest Income grew very healthy, with «core» NII expanding by 6.7% YoY (9M17 vs 9M16) and by 7.2% YoY also considering the contribution of Financial Activities. Such performance was mainly driven by Asset Manangement Fees ( +17.3% YoY ), despite the third quarter was penalized by the usual seasonality 8
Operating Costs Operating Costs: Quarterly Evolution Employees / Networks €, million +1.4% Employees 6,068 6,134 5,899 179 181 172 181 186 184 169 200 5,763 5,740 5,544 5,519 5,604 5,609 59 51 61 57 60 150 56 51 2009 2010 2011 2012 2013 2014 2015 2016 9M17 100 131 127 123 123 121 118 115 Financial Advisors 50 1,006 885 855 837 827 795 770 785 0 750 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 Payroll Administrative Expenses • Costs’ pace of growth continued to slow down, at +1.4% YoY in the first 9M17 (was Creacasa and Salary backed loans Agents +4% considering 9M16 vs 9M15) 353 394 376 361 314 359 • Looking at 3Q17 figure only, Operating Costs 272 217 were down 1.3% YoY compared to 3Q16 158 9
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