The Funding of Sustainable Development
EMN Annual Conference
Milan - 5 June 2009
UBI Banca was formed on 1 April 2007 following the merger of the Banche
Popolari Unite Group and the Banca Lombarda e Piemontese Group
Birth of the
Banca Mutua
Popolare della
Città e Provincia
di Bergamo then
renamed Banca
Popolare di
Bergamo
(BPB)
1869
Birth of the
Società per la
Stagionatura
e l’Assaggio
delle Sete ed
Affini (later
renamed
Banca
Popolare
Commercio e
Industria
BPCI)
Merger of
BPB and
Credito
Varesino
(BPBCV)
Acquisition of
Banca Popolare
di Ancona
(BPA) by BPBCV. Birth of the
BPB-CV Group
Acquisition of
Centrobanca
by BPB-CV,
Birth of Banca
24-7 (BPB-CV
Group)
Acquisition
of Banca
Carime by
BPCI
Birth of the BPU
Banca Group
from the
integration of
BPB-CV and
BPCI
2001
2003
2000
1996
1992
1888
2000
1998
1992
1963
1883
Birth of the
Credito Agrario
Bresciano
(CAB)
1888
Birth of the
Banca San
Paolo di Brescia
(BSPB)
BSPB acquires
Banca di Valle
Camonica
(BVC)
Acquisition of
Banco di San
Giorgio (BSG)
by CAB
Merger of CAB and
BSPB with the
creation of Banca
Lombarda as parent
company and
contribution of
branch network of
CAB and BSPB to
Banco di Brescia
Acquisition of Banca
Regionale Europea*
by Banca Lombarda.
The Group takes the
name of Banca
Lombarda e
Piemontese Group
*Banca Regionale Europea was created in 1994 following the merger between Cassa di Risparmio di Cuneo and Banca del Monte
di Lombardia
1st April 2007
Birth of UBI
Banca following
the merger of the
BPU Banca
Group and the
Banca Lombarda
e Piemontese
Group
2
The UBI Group: Predominant Retail Business and
Strong Northern Italian Franchise
First Italian cooperative banking Group by market capitalization (6,3 bln€*), organized as a federal model, comprising nine
network banks and several highly specialized product companies, offering a wide range of financial services and products.
2
888
1
222
Northern Italy:**
71% deposits
84% loans
65% branches
12
44
56
58
8
As at 31 March 2009:
Total loans : 96,9 bln€ (96,4 as at 31.12.2008)
Total direct funding: 95,7 bln€ (97,2 as at 31.12.2008)
Total indirect funding : 73,4 bln € (74 as at 31.12.2008)
113
22
121 18
6
103
1
Group activity focussed on the Retail segment
4 million clients**, mainly retail; at network bank level approx.
77% of revenues are generated by retail customers, 17% by
corporate customers and 6% by private banking clients
122
43
124
Market share < 2%
2% <= Mkt Share < 5%
5% <= Mkt Share < 15%
Mkt Share >= 15%
Good credit quality:
as at 31st March 09, NPL/total loans: 0,98%, net impaired loans
/total loans: 1,3% - cost of credit 66 bps
Low risk profile:
Funding mainly from customer base (86%) and limited recourse
to international financial markets (14%)
Defensive business mix: focus on commercial customer
business, with a non aggressive commercial policy
No exposure to subprime mortgages and related instruments
1.964 branches in Italy + 9 branches abroad
Number of branches as at 24 March 2009
Market shares as at Sept 2008
* As at 26 May 2009
** As at 30 September 2008
3
Close to 4 Million Clients with a Very Large Retail Component***
* Calculated as Net Interests + Net Commissions by market over Markets Total (Retail + Corporate + Private)
** Includes other Retail clients
*** Commercial segmentation: Private: Assets > 500k Euro, Mass Market: Assets < 50k Euro, Affluent: Assets of 50 – 500k
Euro; Small Business turnover < 5 Euro Million, Corporate Core: Turnover 5 – 150 Euro Million, Large: Turnover > 150
Euro Million
4
The Group structure (1/2): Multi-functional Federal Model, Highly Integrated at Commercial,
Organizational and Financial Level with Centralised Risk Monitoring
Parent Bank:
UBI Banca
Mission
Management, co-ordination and control
Leading business functions
Provision of key support services
Centralised risk monitoring
9 Network
Banks
Product
companies
Mission
Mission
Presence in reference markets
Competitive product and services offering, in
line with market best practice
Distinctive capability to understand
and serve local economies
Drivers
Service model differentiated by customer segment
Sharing of the same organizational structure
Drivers
Continuous product innovation
Ability to listen to distribution network
requirements
Sharing of tools and services provided by parent
company
5
The Group structure (2/2)
(listed cooperative Bank)
provides management, co-ordination, control
and supply of centralized services to the network
9 NETWORK BANKS
MAIN PRODUCT COMPANIES
100.00%
361 branches
358 branches
291 branches
216 branches
259 branches
318 branches
59 branches
52 branches
38 branches
924 financial
advisors (7)
ASSET MANAGEMENT
UBI Pramerica
(partnership with Prudential US)
CONSUMER CREDIT
B@nca 24-7
CORPORATE BANKING
Centrobanca
FACTORING
UBI Factor
LEASING
UBI Leasing
100.00%
59.95%(1)
83.36%(2)
99.29%(3)
85.83%(4)
NON-LIFE BANCASSURANCE UBI Assicurazioni
82.96%(5)
LIFE BANCASSURANCE
Aviva Vita (Partnership with Aviva)
Lombarda Vita (Partnership with
Cattolica)
ON LINE TRADING
IW Bank (listed company)
91.16%(6)
100.00%
Number of branches updated as at 24 March 2009
(1) and 19.98% by Fondazione Cassa di Risparmio di Cuneo and 19.98% by Fondazione Banca del Monte di Lombardia and the
rest by minority shareholders; (2) and 16.64% by Aviva SpA; (3) and the rest by minority shareholders; (4) and 14.15% by Aviva
SpA and the remaining by minority shareholders; (5) and (6) by minority shareholders. Data as at 30 September 2008
(7) Number of financial advisors as at 31 Dec 2008
6
Distribution Model Specialized by Market as Enabling Factor of Commercial
Approach Differentiated by Segment
Distribution Structure
Commercial Area
Parent Bank
Private
Main Characteristics
Commercial Area
Parent Bank
Retail
1
Corporate
2
Network
Bank
Clear separation
lending processes
between
commercial
and
Divisional model (Retail, Private, Corporate) with
customer segmentation (Mass Market, Affluent,
Small Business, Private, Corporate)
General
Management
3
Commercial Area
Private
Retail
Corporate
4
Corporate
Banking Unit
5
Retail Territorial
Area
Private
Banking Unit
Retail
Branch
Linearity of commercial processes by market
between the Parent Company and the Network
Banks
Relationship with the customers focused by
segment with “specialized” account managers
(Mass Market, Affluent and Small Business
Account
Managers,
Corporate
Account
Managers and Private Bankers)
Commercial targets by Market and with
differentiated KPIs according to the segment’s
characteristics
7
Microcredit: Italy in the European context
6,000
4,000
2006
2,000
2007
France
Bulgaria
Germany
Romania
Spain
Finland
United Kingdom
Poland
Hungary
Belgium
Italy
Portugal
Netherlands
Austria
Switzerland
180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
2006
2007
Germany
Finland
Spain
Bulgaria
France
Romania
Hungary
Belgium
United Kingdom
Italy
Poland
Netherlands
Portugal
Austria
Switzerland
Nevertheless services in
microfinance (especially
microcredit) are under
developed.
8,000
0
Thousand Euros
In recent years Italy has
become a high immigration
rate Country and according to
a recent World Bank Study,
the ratio of exclusion from
financial services reaches
25% of the population, one of
the highest the European
Union.
No of microloans
10,000
Source: Overview of the Microcredit Sector in the European Union 2006-2007
EMN Working Paper n. 5
8
The problems of microcredit in Italy
Political/Regulatory Context
Absence of dedicated regulation
Misinterpretation of the meaning: often considered as a social mean of support
(redistribution of wealth – preferential and assistential welfare regime) instead of
creation of new entrepreneurial opportunities.
Microfinance organizations
General Fragmentation (limited size and
geographic distribution)
Difficulty in working with commercial banks
(due to the compulsory regulation which must be
respected)
Reliance especially on donations /
guarantee funds and volunteer activities
Welfare model (very low or no interest rates
and reduced attention to default rates)
Difficulty in raising funds
Low medium/long term
economic sustainability
Limited results (in terms of credit
facilities granted and
beneficiaries reached)
Skill fragmentation and lack of
scoring models
MFIs from Italy
Context of Activity/
Legal Status
International
NonProfit
Profit
Domestic
NonProfit
Profit
Local
NonProfit
Profit
Overall Total
Microcredit
Personal Loans
2
1
1
28
25
3
30
6,7%
3,3%
3,3%
93,3%
83,3%
10,0%
100,0%
Financing
Microfinance activity
6
66,7%
4
44,4%
2
22,2%
1
11,1%
1
2
2
11,1%
22,2%
22,2%
Context of Activity
7%
30
Institutions
93%
9
100,0%
Local
Domestic
Mostly small initiatives promoted on a
local level by Public Administration or
Banking Foundations.
Legal Status
Almost none grants credit directly, the
majority promote Guarantee Funds,
leaving the loan facilities to Banking
Institutions
30
institutions
13%
87%
Non Profit
Profit
Source: www.microfinanza-italia.org
EIF Market Study Microlending (1/3)
Survey Results - Funding
Funding model and terms are the biggest weaknesses of MFIs from both
Eastern and Western Europe.
Not only lack of funding, but also missing strategy
Funding related needs:
• Developing fund raising
•
•
and long term funding
strategies
Funding operational costs
relating to growth and to
increase outreach
Funding of incentives to
scale up operations
Scale from “1“ – weak to “4“ – strong.
Operational Model (1/2)
The organization needs to:
Adopt a professional, not an assistential, approach,
Assume the risk directly by granting credit
Pursue economic sustainability
• Economies of scale (significant volumes and standardized processes)
• Adequate rates to cover financial costs (access to credit vs. rate levels)
• Moderate Default Probability ( “safety net” network + credit scoring)
• Income Statement Integration (complementary revenues + territorial and/or
communitarian funds) for coverage
o Selection and Support costs
o Creation of a Territorial Network
Key findings from the EIF Market Study Microlending: Potential Funding Model
for MFIs in the EU
Different funding needs and sources
•
•
•
•
Financing of start-up costs,
Equity capital,
Temporary and over-time-decreasing subsidies for operational costs,
Budget to co-finance specific capacity building activities (Training, MIS,
Mutual Exchange, etc.)
Guarantee Facility
(e.g. CIP/ERDF/ESF/National
Guarantee Schem es)
MFI
Refinancing Facility
(e.g. ERDF/ESF)
Microloans
Funding for
non-financial services
(e.g. ESF)
non-financial
services
Income subsidies from
national social welfare
Microentrepreneur
Microentrepreneur
Microentrepreneur
Microentrepreneur
Operational Model Proposal
• Funds for structural
investments
• Funds for supporting
activity
• Guarantee Funds
NATIONAL AND
COMMUNITARIAN
INSTITUTIONS
FOUNDATIONS
SPECIALIZED
ASSOCIATIONS
AND
FINANCIAL
AND LOCAL
ASSOCIATIONS
INTERMEDIARY
AUTHORTITIES
FINANCIAL
PARTNER OF
NATIONAL
LEVEL
•Equity
•Territorial Network
•Complementary Products and Services
• Target Individuation
• Communication
• Selection and
Support
• Territorial Network
The Expected Partnership Benefits
Specialized Financial Intermediary
Equity
Support to the development of
the territorial network
 Network Banks (“corner in”
branches)
Collateral Products and
Services for Income Statement
integration
 Product Companies
Cost Control (synergies)
Institutional Recognition
Financial Partner
Positioning in a sector of high
social value
Bespoken products focused on
the defined target (ex. InItaly for
immigrants)
Potential acquisition of new
clientele
 New bankable subjects
 Partners of relevant social
organizations