BANK HANDLOWY W WARSZAWIE S.A. Consolidated … · mln PLN CAGR 32% Increase in ... Issue of a...
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BANK HANDLOWY W WARSZAWIE S.A.Consolidated cumulative results after 4Q 20062007 Plans
Warsaw, 14th February 2007
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Record high net income
163 239 297495
618 657
0100200300400500600700
2001 2002 2003 2004 2005 2006
mln PLN
CAGR32%
� Increase in net income since the merger achieved for 5 years in a row
Source: Bank’s Financial Disclosures,2001 – 2003 results not restated to IFRS
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2006 Highlights
Corporate banking� Business growth supported by targeted marketing campaigns
� Great success of online trading platform (unique on the market) for FX services
Retail banking� Significant growth of distribution of insurance and investment products
� Increased focus on growth via acceleration of new products implementation as well as new distribution channels
� Increase of gross income by 119% as a result of business growth
CitiFinancial expansion� Accelerated investments through branch network – 38 new branches, 12 points of sale and 158 new employees
� Positive operating leverage, gross profit 9 times higher
Focus on expenses � Decrease of expenses and depreciation by 3% i.e. 44 million zl
� Strong expenses discipline in the area of technology and telecommunication costs as well as in non-salary staff related expenses
� Effects of restructuring actions taken in 2005 and 2006
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Significant increase of net income Q4 2006 vs Q4 2005
MM PLN
138
179 142
236
180107
120
0
200
400
600
2005 2006
168618 657
41%4Q
3Q2Q
1Q
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Achievements in Q4 2006
Corporate and Investment Banking� Participation in financing organized for PKN Orlen for the total amount of EUR 1 600 000 000 enabling it to take over
the Lithuanian refinery AB Mazeikiu Nafta.This was the biggest financing organized for the Polish company.� Transaction with Korporacja Ubezpieczeń Kredytów Eksportowych SA (KUKE) and one of the Russian shippowner.
90%-KUKE guaranteed financing of the manufacturing and delivery of four containerships� Financing organized for Ciech S.A. for the acquisition of a chemical company, Organika Sarzyna S.A. The total amount
of the 8-year facility is PLN 216 000 000, the Bank’s participation as the leading co-arranger amounts to PLN 65 000 000
� Issue of a revenue bond II tranche for the water system and sewage maintenance company (Miejskie Wodociągi i Kanalizacja) in Bydgoszcz, totaling PLN 50 000 000. The bonds are due in 2024, thus carrying the longest tenor among debt securities denominated in PLN and issued in Poland
� Record-high quater with respect to FX transactions with non-bank customers
� 130% growth of the transaction volume of market-linked deposits Q4 06 / Q4 05
� Great success of online trading platform for customers using the Bank’s FX services
� 43% increase of prepaid cards issued in Q4 06 / Q4 05� 20% increase of number of business cards issued in
Q4 06 / Q4 05� Strengthening of the leading position in the cash
management services provided to hypermarkets as well as manufacturing and trading companies
c
Sales and TradingTransaction services
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Achievements in Q4 2006
Retail banking� The product offer of the Bank enhanced by home equity� Alternative distribution channels
� BP gas stations – 50� Shopping malls - 7
� Innovative products in credit cards offer � credit card for students� credit card for teenagers as alternative to the pocket money
� Dynamic development of structured bonds offer as well as of mixed offers joining deposits with investment products� 4 new local investment funds offered
CitiFinancial
� The product offer enhanced by credit cards Citibank Visa Silver� 46% increase of portfolio and 27% increase of average loan
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Q4 2006 results
PLN MM 4Q 2006 4Q 2005 I/ (D) I/ (D)%
Net interest income 254.3 259.1 (4.8) (1.9%)Net fee and commission income 170.8 157.2 13.6 8.7%Treasury 67.4 111.9 (44.5) (39.8%)Equity instruments result 84.6 12.7 71.9 568.2%Sale of tangible fixed assets 1.1 3.3 (2.1) n.m.Other operating revenue 27.6 21.5 6.1 28.3%Revenue 605.8 565.7 40.1 7.1%Expenses and depreciation (387.1) (400.9) (13.8) (3.5%)
Movements in provisions (18.0) (5.9) 12.1 n.m.
Share in subs' profits 3.7 2.1 1.6 n.m.
EBIT 204.4 160.9 43.5 27.0%Corporate tax (36.6) (41.8) (5.2) (12.5%)
Net profit 167.8 119.1 48.7 40.9%
*
*
*Interest income adjustemnt by PLN 16 million down as well as cost of credit write-off by PLN 19 million as a result of changes in the system and taking into account additional factors in cash flows forecasts
Source: Bank’s Financial Disclosures, data in MM PLN
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2006 results
PLN MM 2006 2005 I/ (D) I/ (D)%
Net interest income 1,026.4 1,028.3 (1.9) (0.2%)Net fee and commission income 617.9 596.3 21.6 3.6%Dividend income 3.7 2.1 1.6 74.7%Treasury 352.5 596.7 (244.3) (40.9%)Equity instruments result 95.8 15.5 80.3 516.6%Sale of tangible fixed assets 118.3 3.3 115.0 n.m.Other operating revenue 88.8 75.1 13.7 18.2%
Revenue 2,303.3 2,317.4 (14.1) (0.6%)Expenses and depreciation (1,501.4) (1,545.6) (44.2) (2.9%)Movements in provisions 22.5 30.2 7.7 25.3%
Share in subs' profits 7.8 (5.7) 13.5 n.m.
EBIT 832.3 796.3 36.0 4.5%Corporate tax (175.7) (178.2) (2.5) (1.4%)
Net profit 656.6 618.1 38.5 6.2%
Source: Bank’s Financial Disclosures, data in MM PLN
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Increase in efficiency
Net income, MM PLN
Gross income, MM PLN
Return on Assets
Capital Adequacy Ratio
Revenue, MM PLN
Return on Equity
VARIANCE
2,317
4.5%
6.2%
2006
12.4%
2,304
Cost / Income
2005
(0.6%)
796832
618657
11.6%
1.9% 1.8%
66% 68%
14.1% 14.8%
Source: Bank’s Financial Disclosures
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Strong corporate bank with growing momentum of retail
Net interest income and fee and commission income
2006Corporate
CitiFinancial
Retail51%
42%
7%45%
11%
43%
2005
Profit before tax
90%10%
77%21%
Corporate
Retail
2005 20062%
CitiFinancial
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Balance Sheet structure
5.3 5.4
5.2 6.2
17.318.9
3.43.6
1.7 2.9
31.12.05 31.12.06
3.7 3.8
7.2 8.2
6.5 9.4
9.610.1
5.9 4.8
31.12.05 31.12.06
Available for sale
Loans - financial
Trading portfolio
Other assets
Loans – non-financial
Deposits - financial
Other Liabilities
Shareholders’ capital
Deposits – non-financial
Liabilities in trading portfolio
5%
14%
(19%)
10%32,9
36,3
45%
10% 36,3
6%
9%
19%
� Increase of non-financial loans due to retail loans increase� Significant increase of loans to banks and other monetary financial insitutions� Increase of non-financial deposits due to higher corporate deposits
Assets Liabilities
32,9
3% 2%
Source: Bank’s Financial Disclosures, data in MMM PLN
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Loans
Corporates Individuals
Non-financial sector loans
31.12.2005 31.12.2006
Retail and consumer loans
67%74%26% 33%
Source: Estimates, pro-forma data
Market
1000
2000
3000
4Q0 5 1Q0 6 2Q0 6 3Q0 6 4Q0 6
� 49% increase of CitiFinancial loans
� 24% increase of retail loans
Retail CitiFinancial
30%
22%
Market (excl. mortgage)
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Deposits
0
4000
8000
12000
31.12.05 31.12.06
0
2000
4000
31.12.05 31.12.06
Corporates Individuals
14%
26%
Market
6%
Source: Estimates, pro-forma data
Non-financial sectors deposits
Non-Financial Corporate deposits Individuals’ deposits
31.12.2005 31.12.2006
73%27% 23%
77%
20%
(1%) 18%
(18%)
Market Market
Current Term-6%
At the same time mutual funds assets acquired by
the Bank increased by 27%
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Expenses under control
730
578 561
676
13597
-60
140
340
540
740
940
1140
1340
1540
2005 2006
40%
-3%
-8%
1,405 1,371-2%
GCB
CitiFinancial
CIB
� Lower expenses in CIB by 8% despite increase of salaries and higher costs of incentive programs� Positive results of restructuring on the expenses side in GCB despite of the increase in staff number and salaries� Increase of expenses in CitiFinancial due to continued expansion distribution network
Source: Bank’s Financial Disclosures, data in MM PLN
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Cost of Credit
24%
72%
4%
-2000
1000
4000
7000
10000
13000
2005 2006
16%19%
At risk of impairment
Not at risk loans
Impairment split as at 31 Dec 2006
Portfolio approach
Individual Impairment loss
Provisions
IBNR
Loans portfolio quality
85%84%
Provision coverage ratio
31.12.05 31.12.06
Significant decrease of loans at risk of impairment
Source: Bank’s Financial Disclosures, data pro-forma
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2006 results
� Lower expenses and depreciation by 7% despite increase of salaries and higher costs of incentive programs
� Solid Treasury performance but excellent in 2005� Lower fee result mainly as a consequence of a lack of revenues generated
by HanZa/ TFI and a drop in brokerage income� System improvement and taking into account additional factors in cash flows
forecasts led to additional cost of credit write-offs in Q4 06 amounting to PLN 19 MM as well as net interest income adjustment
MM PLN I/(D) I (D)
2006 2005 %
Results on activity 1,346 1,468 (122) (8%)
Expenses and depreciation (770) (830) (60) (7%)
Provisions 61 76 (14) (19%)Gross profit 637 714 (77) (11%)Assets 32,441 29,877 2,564 9%Liabilities 30,104 26,848 3,256 12%
Source: Bank’s Financial Disclosures, data in MM PLN
Interest ResultFee ResultResult on financial oper.Other operating income*
352 298
555
317
96
276
471 447
0
200
400
600
800
1000
1200
1400
2005 2006
3%
-15%
- 5%
Result on activity,MM PLNCorporate and Investment Bank
* Includes result on sale of asset management business and equity instruments
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2006 results
445
236 301
43 52
409
0100200300400500600700800
2005 2006
Result on activity,MM PLN
-8%
21%
28%
Consumer Bank
MM PLN I/(D) I (D)
2006 2005 %
Results on activity 775 723 53 7%
Expenses and depreciation (594) (617) (23) (4%)
Provisions (4) (24) 20 n.m.Gross profit 177 81 96 119%Assets 2,975 2,369 607 26%Liabilities 5,832 5,910 (78) (1%)
� Repricing of credit cards in 2005 partially neutralized by increase of assets� Significant increase of fees especially from insurance and investment
products� Positive results of restructuring actions on the expenses side despite of the
increase in staff number and salaries
Result on financial oper.
Fee Result
Interest Result
Source: Bank’s Financial Disclosures, data in MM PLN
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2006 results
MM PLN I/(D) I (D)
2006 2005 %
Results on activity 190 121 69 57%
Expenses and depreciation (137) (98) 38 39%
Provisions (34) (21) (13) 63%Gross profit 18 2 17 n.m.Assets 854 632 222 35%Liabilities 334 119 215 181%
Source: Bank’s Financial Disclosures, data in MM PLN
113
171
8
18
0255075
100125150175200
2005 2006
Result on activity,MM PLN
57%
158%
CitiFinancial
Fee Result� Significant increase of interest result driven by 47% increase in loan portfolio� Increase of expenses due to continued expansion of CitiFinancial distribution
networkInterest Result
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Shareholders structure / Share price
13th Feb: PLN 89 per share
75%25% COIC
Other below 5% Market cap: $ 3.9 bn
Free float : $ 969 million
34% return over last 4 months
55
60
65
70
75
80
85
90
95
Sep-
06
Sep-
06
Sep-
06
Oct
-06
Oct
-06
Oct
-06
Oct
-06
Nov
-06
Nov
-06
Nov
-06
Dec
-06
Dec
-06
Dec
-06
Jan-
07
Jan-
07
Jan-
07
Feb-
07
Stoc
k Pr
ice
(PLN
)
01002003004005006007008009001,000
Stoc
ks (t
hous
ands
)
V olume
BHW stock price
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Citibank Handlowy – 2007 Plans
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2007 – Key Priorities – Client first
Improve customer satisfaction through…:
� simplification of operational processes and procedures� regular client feedback review� complaints management� anti-attrition program� coverage model review
...leading to further revenue growth supported by:
� segment-focused product initiatives� leverage on synergies between GCG and CIB� development of innovative products � successful cross-sell� better access to clients through broadening and modernization of distribution channels
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2007 Plan – CIB goals
Commercial Bank GTS
� Strengthen the x-sell further – drive the sell of further services and products to existing clients
� New business acquisition – mainly in public sector (cash products for Courts, MOPS, PUP, smaller cities) and Asset Management sector
� Cooperation with chosen financial institutions – white labeling
� Focus on Acquisition, Activation, Assets supported by� innovative CIB product offering – online trading,
revised Credit Program, micro-payments,etc� tailored risk architecture� sales incentive plan for the RM force
� Investment Financing for Middle Market in focus
Platinum and Capital Markets Sales & Trading
� Customer acquisition (private owned names), mid-market coverage
� Corporate Finance / Investment Banking
� Project and acquisition finance� Public sector infrastructure� Private equity relationship
� Continuation of acquisition campaign targeted on SME customers
� Growth of annual FX customer turnover, accompanied by increase of revenues
� Online trading platform for FX as a source of stable transaction volumes
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2007 Plan – GCG goals
GCB
� Development of product offer� Continuous growth of key products on both assets
and liability side� Mortgage Loan Package introduction to complete
retail product set� First on the market mortgage account � New credit card alliance with new co-branded
partners � Saving Account and new debit card launch
� New customer acquisition� Alternative channel development including Internet� Cards acquisition growth - new channels, strategic alliances
and branches� Reinforce CitiGold position by market leading sales advisory
process� Focus on Blue segment with Bank at Work and Young
Professionals
CitiFinancial
� Increase of efficiency and further development of distribution network� Relaunch broker business� Sale of chosen products offered to retail sector clients: Home Equity, mortgage loans, credit cards
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Taking advantages of synergies between corporate and retail banking
One network strategyProduct synergies
39Corporate
88Retail
13Joint
branches
23Retail
servicing
� Citibank at work� Product synergies of corporate banking with retail
banking – citibank@work
� Brokerage� Launching brokerage retail activity in cooperation with
retail banking
� Citibusiness Treasury proposition� Gaining from knowledge and expertise of corporate
banking to prepare a complex product offering designed for Citibusiness customers
� Using Unikasa network for GCG customers� Possibility of using UNIKASA network to make
monthly loan instalment payments
In 2007 all CIB and GCB branches to service all corporate and retail clients
127
111CitiFinancial
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Sławomir SikoraPresident of the Management Board
Lidia Jabłonowska-LubaManagement Board Member, CFO
Katarzyna Otko-DąbrowskaInvestor Relations
Bank Handlowy w Warszawie S.A.Ul. Senatorska 1600-923 WarszawaPolskaTel. +48 (22) 657 72 00