Update of the Business Plan 2022 Resilience and Value - Milan July 3, 2020 - UBI Banca: update Business Plan 2022
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Update of the Business Plan 2022 Resilience and Value Milan July 3, 2020
UBI Banca: a story of sustainable growth and solidity in the interest of all stakeholders
April 2007: merger between two solid banks, BPU Banca and Banca Lombarda.
The first Bank to forecast the economic crisis in Italy:
1 bln € capital increase announced in March 2011, before all other competitors.
Announcement followed in April by ISP.
First Cooperative
Bank to become a
Strong consolidation capabilities with highly performing and scalable
Joint Stock Company
IT system (10 migrations carried out in 15 months, strong execution capabilities). in October 2015
Single Bank project: merger of all 7 Network Banks into UBI Banca approved in October
2016 and completed in February 2017.
Systemic role: Acquisition of Banca Etruria, Banca Marche and Carichieti in April 2017; all
Banks (4 different IT systems) merged into UBI Banca within February 2018.
Throughout the years, Sustainable Dividend Policy allowing continuous internal capital generation and constant
shareholder remuneration.
Only Bank in Italy to have always paid a cash dividend since inception, and this without recourse to
sale of strategic assets.
2UBI Banca: a credible 2022 Business Plan
2017- 2020 Business Plan: all targets in the hands of management exceeded.
Different macroeconomic scenario impacting revenues, as for all Banks.
Business Plan 2022 very well received by the market
UBI share +5.5% in a few hours on 17/02 on top of +11.2%* after presentation of 2019
FY Results.
Full performance of the Bank to be unleashed from 2020: excellent January and
February 2020 performance leading to increased net profit for the 1st quarter notwithstanding
March lockdown.
Covid 19 «stress test» confirming the Bank’s IT Capabilities and the Flexibility of systems and Staff
Capital Strength built over the years,
Impact of Covid19 estimated relatively contained thanks to
full Availability of Group Assets (product factories and other value reserves) and Solid Management of all Risk
Factors.
* Performance from 7 February to 14 February
3UBI 2019: a solid starting point
Growing core revenues1 Decreasing Improving Growing capital ratio and strong
with healthy mix cost baseline credit quality protection for senior bondholders
Core revenue mix, % Operating costs (stated), € mln NPE ratio (gross), % CET1 FL ratio, % Total capital + SNP, %
Net Net interest
Commissions income +1.0 p.p.
12.3 19.1
-2.6 p.p. 11.3 2.6 SNP
3,369 3,387 10.4
2,448 -3% 3.5 Tier 2
2,368 7.8
47% 49% 0.7 AT1 2
12.3 CET1
53% 51%
2018 2019 2018 2019 2018 2019 2018 2019 2019
1. Core revenues include net interest income and net commissions
4 2. AT1 issued in 2020 and included in the calculation of the total ratioThe 2017-2020 Business Plan: over-delivery of all targets in the hands
of the management
FL CET1 ratio, % NPE ratio (gross), % Texas ratio, %
11.4% 12.3% 12.3% 100% 87%
13.0% 11.9% 56%2
7.8%1
2017 2019 BP target 2017 2019 BP target
2017 2019 BP target
2019 2020
2020
Excluding cost of
LLP ratio, bps massive disposals Branches, #
Default rate, % not included in BP
79 61 63 1,838 1,565 1,667
2.0% 1.1% 1.4%
2017 2019 BP target 2017 2019 BP target 2017 2019 BP target
2020 2019 2019
-300 resources
Operating costs, € mln Cost/Income, % Staff, # (cost already
Excluding systemic charges Excluding systemic charges sustained in 2019)
21,412 19,940 19,500
2,3573 2,261 2,445 65.9% 62.1% 58
2017 2019 BP target 2017 2019 BP target 2017 2019 BP target
2019 2019 2020
1 . 12.8% Business Plan Target in 2019
2. 98% Business Plan Target in 2019
5
3. Operating costs include full year for UBI Banca and 9 months for the 3 acquired banksAgenda Covid19: reaction of the Group and new
behaviours
Premises of the Business Plan update
Update of the Business Plan
Closing remarks
6Covid 19: quick reaction of the Group, thanks to Flexibility of staff and systems, allowing
all activities to be fully guaranteed during the crisis with high operating performance (1/2)
Internal organisation
▪ 20,000 remote workstations (vs approx. 19,600 employees) enabled with VPN and VDI access
▪ Over 5,000 new portable PCs purchased and distributed to the workforce in addition to those
already available
▪ 85% of Central Units in smart work (and approx. 50% of all staff)
▪ Strengthened central IT infrastructures to allow remote work and increased cyber-risk monitoring
Quick reaction to
Covid19 challenges ▪ Branches equipped with Covid19 precautions (protective equipment, increased cleaning services,
limited access and only on appointment, etc..)
Personnel, Customers
and IT ▪ At the very peak of the crisis and notwithstanding the concentration in Bergamo and Brescia, 80% of
branches were kept open. All branches are currently open
▪ Insurance policy integration to cover Covid19 emergency
▪ On-line training: from 16/3 to 17/6, 216,000 training courses corresponding to 38,300 hours of
training, involving 16,000 staff
▪ «Back to work» project (~ 2 months) aiming at a better work / life balance, maximum use of
digitalisation, leveraging on Covid19 experience, and cost saving.
7Covid 19: quick reaction of the Group, thanks to Flexibility of staff and systems, allowing
all activities to be fully guaranteed during the crisis with high operating performance (2/2)
Customer service
▪ Progetto Vicinanza: calls to customers to understand their needs under Covid19
▪ Client Support through Contact Center structure, fully working in remote
Quick reaction to
▪ 4,700 Relationship Managers enabled to carry out full remote selling
Covid19
▪ Acceleration of further digitalisation of commercial activity, with priority to
challenges - credit/debit card/current account related services,
Personnel, - financing products, including personal loans and pre-authorised digital lending
Customers and IT - insurance products
- advisory and securities related services
▪ Launch and implementation of «Rilancio Italia», a 10 bln€ project to provide financing to
the economy (anticipating by approx. 2 weeks Government action)
8Covid 19: customer response/behaviour accelerate the way towards digital model
services, confirming all projects in the Business Plan published on February 17th
Use of digital by Retail and Business customers Increased remote sales through digital processes
Transactions 87% 87% Home mortgages
migrated on 80% ▪ As at 31st May, home mortgages granted remotely
digital channels reached 15% of total.
(% of total ▪ Requests for new home mortgages received through the
transactions) 2019 May 20 Target ‘22 Online Channel: 5 months 2020 +43% vs 5 months 2019
BP17/02
37.0 58.7
Mobile channel Car insurance policy renewals
app accesses +58.6% ▪ On-line or through the Contact Center
(# of accesses, +47.7% ▪ Remote renewals:
in mln) 5m 2019 5m 2020 1Q20/1Q19 May 2020: 38% of total renewals
SOURCE: CRM
9Web Tablet Smartphone
UBI customers already have access to best-in class digital capabilities
Main Functionalities* UBI Banca Intesa Sanpaolo BPER
Payment functionality ▪ Bill payments (Blank template / MAV / RAV)
▪ Cash orders
(no basic) and utilities
▪ Bill payments to Public Administration (Pago PA)
Tax payments ▪ Local and national taxes (F24)
▪ Vehicle road tax
Digital payments ▪ Bancomat Pay
▪ Apple/Samsung Pay
▪ Google Pay
Investments and ▪ Securities/funds: portfolio status and history
insurance ▪ Securities/funds: tax position
▪ Insurance: status
Financial assets
▪ Trading of equities and bonds
▪ Funds operations (UCITS, capital accumulation plans)
Advanced account
▪ Inflows vs outflows, movements clustering, budget
management ▪ Movements customization
Loans ▪ Personal loans (status and amortization plan)
and ▪ Mortgages (status and amortization plan)
general settings ▪ Change password, address, e-mail
▪ Security Settings
Average App Rating (as at 03/07/2020) 4.5 4.5 4.0 4.6 3.5 2.1
Rating from 1 to 5: Android Google Play Store1 and IOS Apple Store2
Average App ranking (from 1 - lowest - to 5 – highest -)
*SOURCE: Osservatorio Digital Banking Reply - 31 March 2020 1 Num. of reviews: UBI 61,116, Intesa Sanpaolo 122,294, BPER 11,864
10
2 Num. of reviews: UBI 13,474, Intesa Sanpaolo 238,152, BPER 1,151The Covid experience has led to a further acceleration of Digital, Data and Analytics
to support the transformation of the business model
The COVID emergency Programs Accelerated
▪ Launched UBIConto, first account & debit card that can be
Digital & Data # Mobile app active +32% subscribed via Mobile App
as key elements digital clients May20/May19 ▪ Launched PrestiFatto, fully digital salary backed loans
▪ Launch in Q3 of new digital and data-driven lending process
in managing the dedicated to SMEs
Covid19 # Hybrid & Ricariconto +50%
▪ Launch in Q3 of UBI Banca account aggregator, to extract value
emergency, thus Commercial Self Installment Plan
from third party’s transactions in terms of lending and wealth
5M20/5M19 management opportunities
accelerating our ▪ Data driven customer purchase propensity and pricing model
roadmap to (ongoing releases)
▪ Data Driven omnichannel customer journeys and marketing
Enhanced # Car Insurance 5x automation (ongoing releases)
Digital Self Renewal 5M20/5M19 ▪ Robot4Advisory (early 2021)
capabilities,
Advanced ▪ New app to help employees
in managing social ▪ New data Driven Planning & Control
Analytics, and Non- distancing measures ▪ Automation of compliance and audit controls
Innovation commercial ▪ New predictive remote ▪ Know-Your-Customer & AML
teams controls implemented ▪ Advanced risk early-warning systems
during the emergency
11Organize-to-innovate: A New Way of Working
Results achieved during
the COVID emergency Business Plan Targets
▪ New workplace concept & Real ▪ 20.000 remote Smart work adoption; % (*)
Flexible Estate rightsizing based on workplaces enabled in a ~85%
Exploit workplace unassigned physical desks, remote short time ~30-40%
positive access IT tools and collaboration ▪ 85% of employees of
solutions ~5%
central units working NEW
lessons ▪ Increased adoption of Smart remotely during the peak
learned in Working, with Welfare support of the crisis Pre Covid Covid 2022
managing the ▪ nearly 50% of all loan Agile adoption; %
Bank at a requests under 25K€
Covid ▪ Additional boost in agile adoption, ~30%
new speed with focus on continuous delivery
during the first week
emergency, in coming from UBI Banca. ~5% ~15%
based on minimum viable products NEW
terms of work Fastest bank in managing
these loan requests
productivity, Pre Covid Covid End 2021
agility, time to ▪ Adoption of a new Cyber & ▪ 85% of processes of
Business Resilience Culture central units managed
market and Resilience ▪ All processes to be digitalized for remotely (including Cloud adoption; %
business remote work Contact Center and
>30%
resilience ▪ Boost in Cloud architectures Market Trades)
~5%
adoption, to manage increased ▪ No significant cyber or
volumes during crisis events fraud events intercepted
▪ Continuous crisis simulations during the emergency Pre Covid 2022
(*) In Central Organizational Units
12Agenda Covid19: reaction of the Group and new behaviours
Premises of the Business Plan update
Update of the Business Plan
Closing remarks
13The Update of the Business Plan: a new perimeter, different capital allocation and the
exploitation of some value reserves allow mitigation of Covid 19 impacts and higher
dividend1 over the BP horizon
Drivers of the Update
▪ Confirmation of all strategic actions and drivers set out in the 17/02 Business Plan
▪ Estimate of Covid 19 impact on all BP years, based on crisis reality check and on a new macroeconomic
Update of the scenario
17/02 BP based on ▪ Impact of actions delayed because of the Intesa Public Exchange Offer (redundancies/hirings,
the Resilience of bancassurance agreements, renegotiation of securities services agreement, etc…)
the Bank and ▪ Enlargement of Group perimeter through the internalisation of life insurance business (acquisition of
on the high level of 100% of Aviva Vita) enabling revenue growth (return on invested capital higher than 10%). Merger with
Flexibility allowed BAP
by operating ▪ Re-allocation of capital to implement measures set out in government decrees to guarantee the
systems, staff resilience of businesses and households over the medium term (over 6 billion of state-guaranteed loans
quality, capital and to be granted in 2020, with impact on spreads, RWAs, default rates, etc... ). Impact of different timing of
regulatory measures introduction (Basel IV, CRD V, SME supporting factor, etc..).
balance sheet
indices ▪ Use of some of the Group’s unrealised Value Reserves for approx. 350 mln€ net in 2021 (optimisation
of equity investments and merchant acquiring business)
▪ Renegotiation of securities services agreement
▪ Significant Dividend increase over the BP horizon (the BP also assumes distribution of 2019 dividend)
1. Subject to EBC recommendations
14UBI 2022: a conservative macro-economic scenario, with a deep dive in 2020 and
limited recovery in following years
Real GDP, %, year on year growth
Euribor 3M, %, annual average
-0.31 -0.32 -0.36 1.7 0.7 0.3 4.5 1.5
-0.42 -0.42 -0.42
-8.8
Specific GDP
Unvaried vs 17/02 BP scenario
-10.3% scenario used
in the determination
of impact of Covid19
2017 2018 2019 2020 2021 2022
on credit parameters -10.3
(+2.8% in 2021 and -0.2% in 2022)
17/02 BP scenario 2019 0.1, 2020 0.3, 2021 0.6, 2022 0.7
2017 2018 2019 2020 2021 2022
SOURCE: Servizio Studi UBI
15Italy GDP estimates 2020 and 2021
Italy: Gross Domestic Product (base 100 = 2019)
101
100
99
98
97 96,4
96 96,3
95,5 95,5
95 95,2 95,2
94
93 92,7
92 92,2
91
90
89
88
87
86
2019 2020 2021
Bank of Italy UE Commission Confindustria
Italian Government (DEF) IMF Prometeia
UBI Banca (baseline) UBI Banca (worst)
(scenario used for credit parameters)
Source: Elaborations by UBI Banca Research Department
16UBI 2022: BTP-Bund spread assumptions higher than consensus
Bps Government bonds yields spread : Italy vs Germany, 10 year benchmark
350
325
300
275
250
225 223
200
175
175 193 UBI Banca
150
150
125 146Agenda Covid19: reaction of the Group and new behaviours
Premises of the Business Plan update
Update of the Business Plan
Closing remarks
18Value creation confirmed even including Covid19 impacts
€ millions 2022 targets Vs
Main results after the Covid19 impact assessment Targets 2022 17/02 BP, € mln
-31%
▪ By 2022, higher cost of risk vs 17/02 738 509
Growth in net profit to BP but still contained thanks to the
€562 million (vs 665 in quality of the Bank’s assets and of (122)
17/02 BP) including the risk control processes 20191 2022
impact of Covid19 and 17/02 BP: 387 in 2022
the internalisation of
Aviva ▪ Operating costs (net of systemic -3.0%
2,252 2,130 2,185
charges) very much under control
and decreasing notwithstanding
-5.4%
inclusion of 100% of Aviva. All (49)
investments to “change the Bank” 20191 2022 escl. 2022 incl.
Return on Tangible are confirmed / increased Aviva
17/02 BP: 2,136 in 2022
Aviva
Equity to 7.1% (vs 8.3%
in 17/02 BP) 3,638 3,599 3,716 +2.1%
representing high
▪ Overall resilience of revenues,
growth potential for the -1.0% 41
also benefiting from the inclusion
share
of 100% of Aviva
2019 2022 escl. 2022 incl.
Aviva
17/02 BP:3,675 in 2022
Aviva (130)
1 Restated IAS 40
19Credit quality: a high quality loan portfolio as a starting point
The starting point
High-risk performing loans, % of total
A performing portfolio performing loans, mgmt accounts
mainly focused on low
risk rating classes 8.4
2.9 2.7
2012 2019 March 2020
Secured gross non-performing and Transparency exercise June 2020, on data as
High level of guarantees performing loans, % of total at 31 Dec 2019 - % Collateralised gross NPEs
85% in UBI vs Italian Average
79% 77%
73% 71% 70%
68% 66% 66% 67%
+26 pp
+19 pp
+11 pp
UBI BPER BAMI ISP UCG Households SMEs Other
SECURED GROSS NPEs SECURED GROSS PERF. LOANS Non-financial
Data as at 31 December 2019, Table A.3.2 notes to the financial reports companies
20Credit quality: levels of NPEs, coverage
Current gross NPE ratio Considering the SMEs bad loan disposal UBI Banca LLP ratio in 1Q20 already includes
and LLP ratio announced in 2019, UBI Banca has the second significant additional provisions on UTPs in
9.3% lowest gross NPE incidence,* % of gross total loans sectors impacted by Covid19,* in bps
pro- 69
forma 110 104 incl.Covid
11.1%
recent 8.8% 79 73 provisions
7.5% 7.1% 6.7%
sale 4.9% 40 to risks
and
charges
BPER BAMI UBI ISP UBI proforma UCG BPER UCG BAMI UBI ISP
Source: Annual Reports, reclassified income statements
Coverage of NPEs and (Real estate + Cash coverage) / Total Coverage of Performing Loans*
performing loans Gross NPEs**
81% 79% 78% 0.69%
75% 75%
0.55%
0.41%
0.36%
0.30%
UBI BPER Unicredit Intesa SP BancoBPM Unicredit UBI Intesa SP BancoBPM BPER
*
*As at 31 March 2020, presentations and Company documents
21 **As at 31 December 2019, Table A.3.2 of the consolidated accountFrom 2020 to 2022, more than €700 mln (85 bps) of additional cumulated cost of risk
Macroscenario Default rate, (%)
Use of conservative macroeconomic scenario (GDP -10.3% in
2020, +2.8% in 2021 and -0.2% in 2022) 1.1 1.28
2019 2020 2021 2022
NPE Ratio (gross), (%) Confirmed disposal of SME bad Cost of risk, (bps)
loan portfolio (no other massive Confirmed approx. 100 bps including
disposal over plan horizon) residual cost of SME massive disposal
announced in 2019
7.80
87
7.20 62
2019 2020 2021 2022 2019 2020 2021 2022
22Quick response to new decrees and credit quality control as a means to reduce losses
Organisational measures Moratoria, #
80.000
Dedicated 70.000
Enhancement of ▪ Focused organisation to implement FTE (2020) 60.000
50.000
organisation to new Decrees measures 40.000
deal with new Centralized unit for the management of 60 30.000
20.000
households
Decrees Government Decree Moratoria 10.000 businesses
imprese
0
Intervention on Credit processes to allow early
management and granting of State guaranteed
loans Financing up to €25,000, € mln
▪ Focus on end-to-end NPE management, 1,060 >1,300
Centralised leveraging on an excellent in-house credit
control of NPE recovery platform
management 30 June 2020 Target 2020
confirmed 2008 Centralization of bad loan recovery 160
Other Financing (law 662 and SACE), € mln
2017 Centralization of UTP management 270
2,300* >4,700
2020 Centralization of "high risk" and past-due 50
clients
540 30 June 2020 Target 2020
* Includes financing granted and in the pipeline (approved and to be granted)
23Confirmed IT investments in “Change the Bank”
“Change the Bank” IT spending “Run the Bank” IT spending
€ mln, Other adm exp, D&A and Staff costs € mln, Other adm exp and Staff costs
+24% -15%
259
207 209 206
175 198
169
116
139 162
35 82
2015 2018 2019 2022 incl. Aviva 2015 2018 2019 2022 incl. Aviva
UBI stand-alone UBI stand-alone (including
Other
Innovation and business 3 banks
development acquired 17/02 BP scenario 2022: 165
17/02 BP scenario 2022: 143
in 2017)
Cumulated IT investments
€ mln, Other adm exp and investments
+24%
6451
520 30 Aviva
320
2014-2016 2017-2019 2020-2022
UBI stand-alone incl. Aviva
17/02 BP scenario 2022: 610
1. Of which ~€175 mln Other administrative expenses, ~€440 mln investments and €30 mln relating to BAP-Aviva integration and development. 2020 data include technological investments
24 necessary to run activities in covid 19 framework.Solid cost control confirmed, even including internalisation of Aviva
Cost evolution (excluding non recurring items), € mln Main drivers
Cost
▪ Confirmed approx. 2,000 exits (net of approx. 1,000 hirings) :
New
reduction investments2 Aviva - including 300 already accounted for in 2019, all exiting in 2020
- most exits are expected in 2021, consistently with trade union
2,341 -216 +120 2,245 +55 2,300
2,125 negotiations to be launched.
Expense for the exits, expected to be mostly sustained in 2021,
will be more than offset by use of some value reserves.
Synergies at full regime in 2022 (over 100 mln€ net).
Total Operating Operating
Operating
pre-Transformation Costs 2022
Costs 20191
Plan
Costs 20223
incl Aviva - Benefits from new way of working (e.g.expected 30-40% of FTE
in smart work every year, rationalisation of working space, etcc..)
-4,1%
-5.4%
Net of systemic contributions ▪ In 2020, Covid 19 expenses (approx. €44 mln) will be offset by
further savings.
1. 2019 Restated IAS 40. Net of non-recurring
25 2. Year 2022 P&L impact, Other Administrative expenses and D&A
3. There are no non-recurring items in 2022Focus on Net Interest Income
Net interest margin, Updated BP vs 17/02 BP, € mln Main trends
1,725 1,680 -41.5 +0.6 +11.6 -0.6 1,650
▪ Trends in first months of 2Q2020:
May and April 2020 evidences show resilience of NII, with both
months in line with the respective budget included in the 17/02
Business Plan
▪ Net interest margin 2022 target (-30 mln€ vs 17/02 BP 2022
2019 2022 Lending Funding Securities Interbank 2022 target) influenced by effects of Covid19:
Restated
IAS 40
17/02 BP and IFRS9 and Other Updated
BP
- Lower volumes of S/T lending (expected lower economic
activity) and lower spreads on M/L term State guaranteed
lending (although with a high RoRaC)
- Slightly higher profitability of bond portfolio
26Focus on Net Commission income
Net commission income in April and May 20 vs budget, € mln Main trends
Apr20 vs Apr budget May20 vs May budget ▪ Trends in 2Q2020:
-4.7% Net commission income was mainly affected in April 2020,
due to market performance, lower sales and transactions in
-17.5% lockdown period.
Confirmed strong rebound in May 2020, which was close to
budget included in the 17/02 Business Plan
First June 2020 evidences appear to confirm the positive trend
Net commission income 2022 target, € mln
+3.6% 1,722
1,662
▪ Net Commission 2022 target lower vs 17/02 BP 2022 target
due to sale of merchant acquiring activities in 2021 (approx.
-€25 mln)
2019 2022
27CET1 ratio before 2020-2022 dividends (but net of FY 2019 dividend) to 13.9% in 2022
Of which: Main change vs +110 bps in the 17/02 BP due to the Main change vs -100 bps in the 17/02 BP due to
+38 bps: change in real estate valuation criteria; total additional expected cost of credit for COVID-19 and the postponement of BASEL4 impact from 2022
+26 bps: dividend accrued for 2019 and not due to the representation gross of dividends 2020-2022 to 2023
distributed (but net of FY 2019 dividend)
+10 bps 14.5% -60 bps
+35 bps -45 bps +35 bps 13.9%
+130 bps
12.86%
12.29% +57 bps
Main changes vs -75 bps in the 17/02 BP due
to the positive impact of 662 and SACE
guarantees (2020) partially offset by
Bancassurance internalization capital impact
(2021)
CET1 % Impact CET1 % Retained Deferred Evolution OCI NPE CET1 % Evolution CET1%
December March 2020 March Earnings Tax Assets of volumes Reserve Strategy December of regulation December 2022
2019 vs 2020 (net of taxes (no new DTAs and 2022 and internal including
December and 2019 dividend recognised lending mix (before models regulatory
2019 But before in P&L 20-21-22 Headwinds/Tailwinds
20-21-22 in the Plan) dividends) (before 20-21-22
dividends) dividends)
28Agenda Covid19: reaction of the Group and new behaviours
Premises of the Business Plan update
Update of the Business Plan
Closing remarks
29UBI 2022: clear roadmap following thorough Covid19 impact analysis
A Notwithstanding Covid19 all main strategic drivers are confirmed,
including a strategic choice for the Bancassurance business
B Impact of Covid19 is estimated as:
▪ +85 bps of Cost of Credit over the 3-year BP Horizon
▪ -1% of RoTE in year 2022
No major impact on Costs and Revenues
C Higher dividend thanks to Capital Management and use
of some Value Reserves
30UBI 2022 targets: confirmation of a solid and attractive value creation plan, with
enhanced dividend compared to 17/02 BP expectations
Improved credit quality
notwithstanding Covid impact Increased resilience Optimized operating structure
NPE ratio (gross), % Texas ratio, % Cost/income2, %
7.8 7.2 55.1 61.9 58.8
43,7
2019 2022 20191 2022 20191 2022
Business Plan17/02/2020: 2022 5.2 Business Plan 17/02/2020: 2022 32.6 Business Plan 17/02/2020: 2022 58.1
Improved profitability Stronger capital Growing cash dividend over
Normalised ROTE, % CET1 FL ratio, %
13.9 plan horizon
12.3 12.5
7.1
4.4 Up to full excess capital
compared to 12.5% CET1
ratio floor
20193 2022 2019 2022 CET1 Floor
Before
Business Plan 17/02/2020: 2022 8.3 2020-2021-2022 dividends
but net of 2019 dividend
1. Restated IAS 40.
31 2. Excluding systemic contributions (Deposit Guarantee Scheme and Resolution Fund)
3. Restated IAS 40. LLPs related to wholesale disposals are not normalisedHigh return for investors over three main pillars
2022
13.9%
12.9%
Return on 7.1% CET1 ratio 12.5%
12.3%
tangible 4.4% much higher
equity than target
20191 2022 2019 03/20 2022 CET1
before floor
2020-2021
-2022 dividend2
1. +60% increase in RoTE 2. Approx. € 840 mln of excess
represents High Growth potential capital to be distributed (over 73 cents per
for the share share cumulated in the three
year period)
3. All strategic assets remain as
additional value reserves (product
companies, NPE recovery platform, etc..)
1. Restated IAS 40. 2019 RoTE is net of non-recurring items, 2022 RoTE does not include any non recurring items.
32 2. But net of 2019 dividendAgenda Annexes 33
Significant value creation to shareholders over the next three years
2019 2022 3-years CAGR,
2022 3-years CAGR, %
Restated IAS 40 Revised Revised %
Balanced revenue mix Operating income € mln 3,638 3,675 3,716 +0.3% +0.7%
o/w net commissions % 45.7 47.6 46.3
o/w net interest income % 47.4 45.7 44.4
Total financial assets (TFA1) € bln 196 209 205 +2.2% +1.3%
o/w direct banking funding € bln 95 93 91
o/w Institutional funding € bln 18 20 19
o/w AUM + bancassurance € bln 73 88 85
Net loans to customers2 € bln 83.7 83.7 82.7
o/w net performing loans € bln 79.5 81.0 79.2
Operating costs € mln -2,3416 -2,235 -2,300 -1.5% -0.6%
Continued cost reduction
o/w staff costs € mln -1,428 -1,361 -1,374
o/w other administrative expenses3 € mln -603 -517 -576
Operating costs (net of systemic contributions) € mln -2,252 -2,136 -2,185 -1.7% -1.0%
Cost/income (net of systemic contributions) % 61.9 58.1 58.8
Lower cost of credit Cost of risk bps 87 46 62
LLPs € mln 738 387 509 -19.3% -11.7%
NPE ratio (gross) 4 % 7.8 5.2 7.2
NPE coverage incl. write offs % 50.9 51.5 51.2
Significant value Stated net income (normalised in brackets) € mln 233 (331) 665 (665) 562 (562)
creation for shareholders ROTE normalised % 4.4 8.3 7.1
Stronger capital CET1 ratio % 12.3 12.5 13.9 7
and structural position Texas ratio % 55.1 32.6 43,7
RWA (fully loaded) € bln 58.1 61.5 58.9
Tangible equity5 € bln 7.5 8.0 7.9
1. Includes direct and indirect funding, excludes repos with CCG 2. Excludes repos with CCG 3. Excluding systemic contributions
34 4. Net NPE ratio: 5% in 2019 and 3.1% in 2022, 4.25% in 2022 Revised 5. Net equity excluding profit and AT1– intangible assets 6. net of non-recurring items
7. Net of 2019 dividend but gross of 2020-2021-2022 dividendsDetails on regulatory headwinds/tailwinds following recent regulatory updates
Cumulated
2020-2022 2020 2021 2022
Total Regulatory -0.6 0.3 -0.2 -0.7
Headwinds/Tailwinds impact
Regulation and internal 0.0 0.3 1
-0.2 -0.1
model evolution
EBA guidelines -0.6 - - -0.6 22
Basel IV 3 - - - -
Impacts on the
CET1 Ratio CET1 MDA Buffer
On average > 530 bps
before dividends, bps
CET1 BP target 4
423 bps
MDA Buffer, bps
5
CET1 Ratio MDA trigger, % 8.27%
6
CET1 Ratio, % year-end ~ 13.9%
Notes:
1. Advance application to 2020 of CRR2 (extended supporting factor for SMEs, new
weighting for salary backed loans and new treatment of software – overall 40 bps)
Preliminary SREP + Addendum + Calendar 2. Postponed to 2022
3. Postponed to 2023
-0.3
Pillar 2 impact provisioning 4. CET1 ratio target 12.5%
5. Advance application of CRDV (art 104a) following receipt of ECB decision.
6. Net of 2019 dividend but before 2020-21-22 dividends
MDA: Maximum Distributable Amount
35Structural balance and flexibility
CET1 Ratio – Average buffer on MDA1 Total Capital Ratio – Average buffer on Leverage Ratio – Average buffer on
trigger, bps MDA1 trigger, bps expected minimum requirement, bps
>530 >450
423 >340
>260 >240
>180
2017-2019 2020-2022 Vs CET1 Target 2017-2019 2020-2022 2017-2019 2020-2022
before dividends 12.5% before dividends before dividends
LCR2 – Liquidity Buffer – Average NSFR3 - Available stable funding – MREL5 and minimum subordination
buffer on minimum requirement, € bln Average buffer on minimum requirement
requirement net of TLTRO4 contribution, Binding starting from June 2020
>8 € bln ~8
>5 Well above the two
minimum requirements
Well above the two over the business plan
>3 expected minimum horizon and still
requirements since compliant also excluding
2019 eligible retail funding
2017-2019 2020-2022 2017-2019 2020-2022 2017-2019 2020-2022
1 Maximum Distributable Amount 2 Liquidity Coverage Ratio 3 Net Stable Funding Ratio 4 Targeted
36 long-term refinancing operations 5 Minimum Requirement for own funds and Eligible LiabilitiesA very thorough process to estimate impact of Covid19 on credit quality
Assessment of credit trends
▪ Use of specific macroeconomic scenario (GDP -10.3% in 2020, +2.8% in 2021 and -0.2% in
Macro-economic forecasts and 2022)
estimate of default rates ▪ Estimate of expected default rates through stress models to define correlation with shock on
macroeconomic scenario
▪ Use of CERVED financial forecasts (over 500 micro-sectors)
▪ Estimate of financial impacts:
- single name analysis for Large Corporates (approx. 400 Economic Groups)
Economic sector dynamics and Stress - financial sustainability models for the rest of the portfolio, based on financial forecasts
analysis by counterpart ▪ Correction of sectorial forecasts on the basis of expected dynamics of cash flows for smaller
companies
▪ Estimation of debt/income evolution to assess financial sustainability for private individuals
▪ Single name stress analysis on samples and propagation to those sectors most impacted by
UTP migrations
Covid
Mitigations allowed by measures ▪ Correction of the 2020 risk parameters based on the provisions of the recently issued decrees
included in Decrees (state-guaranteed loans)
37Internalisation of Aviva Vita and merger with BAP in July 2021
Main assumptions AVIVA + BAP, € millions
▪ in 2021 exercise of the call option to purchase 100% of Aviva
Vita (today UBI owns 20% of the joint venture) Technical reserves Premiums
▪ return on invested capital higher than 10% ~ 18,300 ~ 19,100
~ 3,640
3,291
▪ capital absorbed for the internalisation of Aviva: approx. 50
bps in 2021
▪ increase in contribution to Group net profit by 40 mln€ in
2022 (vs contribution of 12.1 mln€ in 2019)
2019 2022 2019 2022
Drivers of the internalisation
Revenues (pro-forma) Operating expenses (pro-
▪ merger between BAP and Aviva Vita forma)
303 324 of which
▪ new production mix with a progressive increase of the 212
241
approx.
incidence of unit linked e index linked products (from 32% to 66 €18 mln of
55 integration
45%) costsv
▪ structure of products in line with the actual situation in terms 157 175
of up-front, management fees, etc…
▪ in 2022 administrative expenses equal to 0.25% of reserves 2019 2022 2019 2022
excluding integration costs o/w contribution to o/w UBI Group, Pramerica
Group’s operating
o/w Operating Expenses
▪ target Solvency ratio >180% revenues
~ €150mln
38Sustainability: targets confirmed and activities already started in the first months of 2020
2022 Targets: confirmed Achievements as of today
Chief Variable 1.5 Lending linked to Setup of Group wide Sustainability
CSO Sustainability >10% remuneration € bln sustainability Program to coordinate and promote
themes across organization, as a
Officer to linked to development in
first step toward the Chief
coordinate sustainability Italy Sustainability Officer
Group-level goals for top in the next 3
sustainability management years Formalization in the manifesto
efforts “Rilanciamo L’Italia per bene” of
UBI strategic view on the role of the
Bank in the post COVID 19 phase
2 New Social and Complete CO2 emissions1 (www.ubibanca.com/manifesto)
€ bln Green bonds O2 "green" product -61%
issued catalogue Signatory of United Nations to the
(current account, Principles for Responsible Banking
mortgage, credit
card, personal Reinforcement of UBI active
loan, investment participation to national and
products) international initiatives related to
sustainability (e.g. EBA voluntary
Beneficiaries of Increase in the Of Pramerica UCI exercise on climate risk)
52,000 financial +20% share of Women 25-30% AUM in ESG
education in managerial strategies Development of internal
programs roles (over total commercial tools focusing on ESG
strategies (e.g. ESG funds rating
delivered to women tool)
external employed)
communities
1. Target 2022 Scope 1 + Scope 2 Market based, unit of measure CO2, with Baseline as at 31/12/2007, date of inception of UBI Banca
39Disclaimer
This document has been prepared by Unione di Banche Italiane S.p.a. (“UBI Banca”) for informational purposes only and for use at the presentation of the Industrial Plan of UBI Banca held on 3th July
2020. It is not permitted to publish, transmit or otherwise reproduce this document, in whole or in part, in any format, to any third party without the express written consent of UBI Banca and it is
not permitted to alter, manipulate, obscure or take out of context any information set out in the document or provided to you in connection with the above mentioned presentation.
The document includes certain informations, opinions, estimates and forecasts which have not been independently verified and are subject to change without notice. They have been obtained from,
or are based upon, sources we believe to be reliable but UBI Banca makes no representation (either expressed or implied) or warranty on their completeness, timeliness or accuracy. Nothing
contained in this document or expressed during the presentation constitutes financial, legal, tax or other advice, nor should any investment or any other decision be solely based on this document.
This document contains statements that are forward-looking: such statements are based upon the current beliefs and expectations of UBI Banca and are subject to significant risks and uncertainties
(e.g. macroeconomics assumptions do not include a second wave of Covid-19 etc..). These risks and uncertainties, many of which are outside the control of UBI Banca, could cause the results of UBI
Banca to differ materially from those set forth in such forward looking statements.
All forward-looking statements included in the document are based on information available to UBI Banca as at 3th July 2020.
This document is for information purposes only. This document (i) is not, nor may it be construed, to constitute, an offer for sale or subscription or of a solicitation of any offer to buy or subscribe for
any securities issued or to be issued by UBI Banca; (ii) should not be regarded as a substitute for the exercise of the recipient’s own judgement; and (iii) should not be considered as an investment
advice and is therefore not falling within the scope of the requirements governing the provision of investment advisory services within the meaning of the Directive no. 2014/65/EU. In addition, the
information included in this document may not be suitable for all recipients. Therefore the recipient should conduct their own investigations and analysis of UBI Banca and securities referred to in
this document, and make their own investment decisions without undue reliance on its contents. Neither UBI Banca, nor any other company belonging to the UBI Banca Group, nor any of its
directors, managers, officers or employees, accepts any direct or indirect liability whatsoever (in negligence or otherwise), and accordingly no direct or indirect liability whatsoever shall be assumed
by, or shall be placed on, UBI Banca, or any other company belonging to the UBI Banca Group, or any of its directors, managers, officers or employees, for any loss, damage, cost, expense, lower
earnings howsoever arising from any use of this document or its contents or otherwise arising in connection with this document. UBI Banca undertakes no obligation to publicly update and / or
revise forecasts and estimates following the availability of new information, future events or other matters, without prejudice to compliance with applicable laws. All the forecasts and subsequent
estimates, written and oral, attributable to UBI Banca or to persons acting on its behalf are expressly qualified, in their entirety, by these cautionary statements.
By receiving this document you agree to be bound by the foregoing limitations.
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