ABN AMRO launches cash offer for Banca Antonveneta Fully aligned with mid-market strategy
Amsterdam, 30 March 2005
Antonveneta: unique opportunity to grow profitably ABN AMRO’s mid-market footprint
Acquisition delivers growth –
Northern Italy: one of the wealthiest areas in Europe with low penetration rate for banking products
–
Antonveneta: profitable franchise with untapped growth potential
–
ABN AMRO: increase European mid-market footprint
Acquisition creates value –
Cost synergies estimate of EUR 160 mln by 2007
–
EPS accretive after twelve months of ownership
Equity funding via an up to 135 mln share issue and the abolishment of the neutralisation of the final FY 2004 scrip dividend
Commitment to return proceeds of the equity funding in a cost effective way if the acquisition does not materialise
All cash offer supported by simultaneous equity raising puts ABN AMRO in best position to secure the acquisition 2
ABN AMRO determined to accelerate the successful development of Antonveneta
ABN AMRO has played a key role in the successful development of Antonveneta –
Shareholder since 1995; member of shareholders’ agreement since 2002
–
4 Board representatives from ABN AMRO
Current ownership: 12.7% (18.7% on a fully diluted basis)
Antonveneta’s restructuring on track, evidenced by strong 2004 results
Filing of OPA documentation this morning to ensure stability
ABN AMRO brings extensive skills to Antonveneta –
Superior credit skills
–
Cost management and efficiency platform
–
Extensive product suite
3
OPA: summary terms Offer structure
OPA price
Minimum acceptance level
Milestones
Voluntary tender offer
Tender for all 251.7 mln shares currently outstanding not already owned by ABN AMRO
Offer subject to conditions precedent such as regulatory approvals, no frustrating actions and no material adverse change to Antonveneta’s business
Tender for all 251.7 mln shares currently outstanding not already owned by ABN AMRO
EUR 25 per Antonveneta share in cash
Total maximum consideration EUR 6.3 bln for 87.3% of total shares
6.9% premium to last price; 30% premium to average official price over last 6 months
ABN AMRO’s stake post OPA at least 50% + 1 share
April 29: end of 30 days review period by Bank of Italy
June: expected date for OPA acceptance period
4
Funding with combination of debt and equity
Funding to ensure core tier 1 ratio of at least 6% and tier 1 ratio of at least 8% by end 2006
Equity funding of approx. EUR 3 bln via an issue of up to 135 mln shares and the abolishment of the neutralisation of the final FY 2004 scrip dividend
Further core tier 1 may be secured by progressively abolishing the neutralisation of scrip dividend for interim 2005 and possibly final 2005 dividend if acceptance levels > 75%
Scrip dividend neutralised from 2006 onwards
Final debt / equity mix to be determined upon closing of the tender offer
No impact on credit ratings expected
Commitment to return EUR 3 bln proceeds of equity funding in a cost effective way and to resume the neutralisation policy of any scrip dividend from 2005 onwards if the acquisition does not materialise
All numbers in presentation refer to a fully diluted basis, assuming 100% acceptance level
5
Update on recent developments
Net profit for Q1 2005 to be approximately in line with Q1 2004 (under IFRS) –
Excluding gain on Bank Austria (EUR 115 mln) and Leaseplan (EUR 46 mln) in Q1 2004
Operating result Q1 2005 to be lower than same period last year (under IFRS) –
Most (S)BU’s doing well, especially the Netherlands, Bouwfonds and Brazil
–
WCS operating result significantly lower year on year, net profit around breakeven primarily driven by lower contribution of loan portfolio and to a lesser extent disappointing proprietary trading results
–
Expectation that WCS first quarter results not indicative of subsequent quarters
–
Additional steps being taken to address geographical spread of WCS and its support for C&CC franchises in key markets, particularly in the US
No further major acquisitions in near future 6
Delivery of ABN AMRO’s existing commitments remains priority
Execute mid-market strategy –
Alignment of WCS product capabilities
–
Integration of WCS and BU NA commercial banking expertise
GSS programme well on track – EUR 600 mln to be achieved by 2007
Ongoing development of franchise –
BU NL revenue growth underpinned by improved client service
–
BU Brazil strong revenue growth after successful integration of Sudameris
–
Expansion of BU NA commercial franchise, develop retail activities and turnaround mortgage banking
–
Growth of BU PC, BU NGM and BU AM
7
ABN AMRO will target an average ROE of 20% over the period 2005 - 2008
Objective of Total Return to Shareholders in top quartile unchanged
Target of 20% average ROE over the period 2005-2008 –
2004 ROE under IFRS is 24 %
8
Transaction rationale
Antonveneta: strong fit with ABN AMRO’s strategy +
Increase ABN AMRO’s mid-market footprint
Profitable franchise with high quality customer base
Value creating opportunity
10
ABN AMRO’s strategic agenda: accelerate growth and build scale in mid-market segments Product innovation
Top Private Clients ‘SWEET SPOT’
PC / Mass Affluent
Mass Retail
MNCs
MidMarket/FIs Small Business
Feeder channel
Provider of scale Consumer
Commercial
11
+
Increase ABN AMRO’s mid-market footprint
Profitable franchise with high quality customer base
Value creating opportunity
12
Antonveneta: sizeable, high quality mid-market customer base Over 1.5 mln clients at year-end 2004; strong proportion of Affluent and Mid-Corporate customers Consumer: 1.33mn clients
Commercial: 0.18mn clients
Breakdown by deposit and loan volume:
Breakdown by deposit and loan volume:
35.0% 45.0%
65.0%
49.0%
6.0% Mass Market
Affluent
Private Banking
Small Business
Mid-Corporate & Corporate (1)
Legend: Private Banking (net worth > EUR 2.5 mln), Affluent (net worth within EUR 0.1-2.5 mln), Mass (net worth < EUR 0.1 mln), Corporate (revenues > EUR 75 mln), Mid-corporate (revenues of EUR 2.5-75 mln), Small Business (small business with revenues < EUR 2.5 mln). (1) Comprising 3,000 Interbanca (Antonveneta’s Investment Banking arm) accounts Source: Company data
13
Strengthening ABN AMRO’s mid-market footprint Breakdown of total 2004 revenues(1) before transaction Bwfds NGM 7% 6%
CC PC 5% 6%
BR 20%
AM 3% C&CC 56%
WCS 30%
NL 32%
Breakdown of total 2004 revenues (1) after transaction NGM Bwfds 5% 6% BR 16%
NA 35%
CC AM PC 5% 3% 5%
BAPV 18%
NA 29%
NL 26%
C&CC 60% WCS 27%
Legend: PC: Private Clients; AM: Asset Management; WCS: Wholesale Clients; C&CC: Consumer & Commercial Clients; BAPV: Banca Antonveneta. (1) Excluding gains from sale and results of Bank of Asia and Leaseplan, excluding results of ABN AMRO’s stake in Banca Antonveneta Source: ABN AMRO company data, Antonveneta press release
14
Italian mid-market has significant untapped potential CAGR of Consumer loans and mortgages 13% 10% 8% 6%
5%
7%
High savings rate
Pension reform
Increased penetration rate in retail segment
Increased demand for more sophisticated products and longer debt maturities in SME segment
4% 3%
Italy
Key growth drivers
Spain
UK
Consumer Loans CAGR 04 - 07
2% 2%
France
Germany
Mortgages CAGR 04 - 07
Mortgages MORTGAGES
Consumer loans CONSUMER LOANS Size(1) (EUR bn) Penetration (per capita) (EUR) Percentage of GDP
55
56
246
128
119
20
140
263
1,032
296
1,069
389
947
1,390
4,082
2,118
1,444
1,253
2,415
6,524
17,128
4,892
12,966
23,838
4.2%
7.5%
15.5%
8.2%
5.6%
4.5%
11.1%
37.6%
65.2%
19.3%
50.7%
87.2%
Source: Countries Central Banks, brokers research report, and Datamonitor report 1. Size of the consumer loans market in 2003 and mortgage market in 2002 respectively
15
+
Increase ABN AMRO’s mid-market footprint
Profitable franchise with high quality customer base
Value creating opportunity
16
Antonveneta: strong presence in one of the wealthiest areas of Europe
9th bank in Italy by total deposits
1 0.1% 1 1.0%
10th bank by number of branches
39 1.5% 12 1.3%
Solid market share for future growth Unified and trusted brand with strong recognition, especially in Antonveneta’s focus areas Area North Center South Total
(1)
Branches 622 153 225 1,000
109 1.8%
66 7.1%
296 9.0% 98 3.1% 20 0.9%
Total: 1,000 branches (1) Focus area: 697 branches
35 3.3% 1 0.2% 89 3.6%
6 1.0% 2 75 1.4% 5.5% 27 1.8% 2 0.8%
% 62% 15% 23% 100%
28 5.5%
93 8.4%
Source: Antonveneta analyst presentation FY 2004 results 1. Domestic branches as of December 2004, taking into account the sale of CIS-Credito Italiano Sanmarinese (3 branches in Republic of San Marino) on 24th February 2005
17
Antonveneta: scope to grow revenue through greater cross selling Source: company data and analyst research
Peer comparison: AuM(1) per client (EUR)
1. As of June 2004
25,000
2. As of December 2004; residential mortgages only
20,000
3. Based on peers shown in the graph
10,000
4. Based on breakdown per sector of domestic loan portfolio as of June 2003
+ 83%
15,000
5,000 0 San Paolo IMI Banca Intesa
Unicredito
BPVN
BNL
Capitalia
BMPS
(3)
Average
Banca Antonveneta
5. Excludes New Europe 6. ABN AMRO estimate based on risk-weighted assets for residential mortgages as of June 2003
Peer comparison: average mortgage balance(2) per client (EUR) (1) 6,000
+ 28%
4,500 3,000 1,500 0
Banca Intesa(4) Unicredito(5)
1. Total mortgage outstandings / total number of bank clients
BPVN
San Paolo IMI
BMPS(6)
BNL
Capitalia
Average(3)
Banca Antonveneta
18
Antonveneta: business plan well under way allowing focus on growth Guidelines Re-focusing commercial strategy (Retail + Corporate)
Action planned / undertaken
Status
Focus on customer segmentation: – specialisation of branch network (retail / 30-40 corporate branches) – specialised account managers ⇒ Development of high value added products
Ongoing Ongoing
Launch of network re-organisation program – staff reductions – administrative cost savings
Done Done
Improving asset quality
Balance sheet restructuring in 2003 Conservative provisioning Improve risk management policies
Done Done Ongoing
Strengthening of capital base
EUR 0.5 bln capital increase at the end of 2003 Reduction of RWA on large exposures (EUR 2 bln) EUR 0.5 bln innovative Tier I capital in H2 2005
Improving operating efficiency
Antonveneta
[check]
Done Done Planned
19
Conservative provisioning and NPL’s coverage will enhance profitability
NPL’s coverage (1)
High coverage ratio now among
(3)
San Paolo IMI Banca Intesa
66.8%
Banca Antonveneta (2)
performing loans 57.7%
BNL
56.5%
MPS(3)
(3)
BP Lodi
Prudent provisioning for
60.2%
Capitalia
(3)
60.8%
Unicredito
BPU
market best practice
74.3%
49.8% 47.2%
Restructuring actions taken in 2003 coupled with strict credit policy and procedures leading to lower cost of risk
42.5%
(3)
BPVN
Average
38.6% 55.4%
1. As of 2004 2. As stated in company reports and analyst presentation 3. As of September 2004
Source: Banca Antonveneta company reports and analyst presentations
20
Antonveneta is well on track to achieve business plan targets Antonveneta key financial data Significant improvement of
(1)
(1)
2002
2003
2004 BP
2004
2006 BP
Revenues
2.3
2.1
---
2.2
2.6 - 2.7
Operating Result
1.2
1.0
---
1.1
1.45 - 1.5
56.4%
61.7%
< 60%
57.6%
50.6%
0.4
1.2
< 0.4
0.4
0.2
NPL Coverage Ratio
50.7%
61.8%
---
60.8%
60%
Net income / Loss (EUR mln)
216.2
(842.6)
> 220
282.7
600
RWA
46.0
43.0
---
39.9
~54
Tier I
5.2%
4.9%
> 5%
5.8%
7.0%
(EUR bln, except for ratios)
profitability in 2004 2004 actual results exceed
Cost-Income Ratio Net Provisions
(2)
(3)
business plan targets 1. Antonveneta Business Plan estimates 2. As stated by the company 3. Adjustments to loans net of write-backs on loans; 2004 provisioning negatively impacted by material oneoff specific provisions of total EUR 140 mln Source: company reports
21
+
Increase ABN AMRO’s mid-market footprint
Profitable franchise with high quality customer base
Value creating opportunity
22
ABN AMRO has successfully integrated and grown mid-market franchises in Brazil and North America Michigan National Corporation (NA)
Sudameris (Brazil)
Announcement date
22 November 2000
16 April 2003
Completion date
02 April 2001
27 October 2003
Transaction size
USD 2.75 bln (100% stake)
BRL 2.19 bln (95% stake) or ~ EUR 600 mln
Announced synergies
USD 100 mln pa; from 3rd year onwards
BRL 300 mln pa; as of 2005
Cost synergies
USD 100 mln pa; 25% target cost base
BRL 300 mln pa; 30% target cost base
Revenue synergies
Not communicated (internal targets)
Not communicated (internal targets)
MNC integrated ahead of schedule
Sudameris integrated ahead of schedule
Cost synergies
Total amount of synergies exceeding forecasts by 30%, with over-delivery in years 1 (+50%) and 2 (+16%)
Synergies ahead of 2004 target, and clearly on course to realise the announced 2005 target of BRL 300mn
Revenue synergies
• Incremental sales in fee-based products • Additional benefits from leveraging LaSalle’s commercial banking coverage model, product suite, credit portfolio and risk management to MNC client base
• Incremental contribution from enhanced portfolio management (credits/investments) • Additional benefits from cross-selling and applying best practice client coverage management across the client bases
Realisation of synergies
23
Value creation supported by estimated cost synergies of EUR 160 mln by 2007 Cost Synergies Estimated annual gross cost synergies: EUR 160 mln
IT related costs 30%
Procurement 20%
Efficiency benefits from leveraging economies of scale (incl. general admin.), GSS (incl. procurement) and IT related costs Wholesale product suite, risk and credit portfolio management Transaction Banking Implementation of new servicing model ⇒ enhancement of the multi-channel approach Funding synergies from ABN AMRO’ s superior credit rating
Funding 5% New servicing model Transaction 10% banking 10%
General administrative 5%
Wholesale 20%
Source: ABN AMRO estimate
Restructuring Charges Total estimated restructuring charge: EUR 200 mln 24
EPS neutral in 2006 and accretive after 12 months of ownership based on cost synergies
EPS calculation assumptions: –
100% cash transaction with 100% acceptance (fully diluted basis)
–
Funding mix based on ABN AMRO’s target core tier 1 ratio of 6% and tier 1 ratio of 8% at year end 2006 (IFRS basis)
–
Target pay-out ratio: 45% - 50% ⇒ scrip dividend of 50% in 2005 (no buy-back) based on 100% acceptance
–
EUR 160 mln gross cost and funding synergies fully realised by 2007
–
ABN AMRO and Antonveneta net income estimates: IBES consensus
Note: assuming equity issuance by ABN AMRO at closing share price on 29 March 2005
25
Conservative estimates: revenue upside not included in EPS calculations Revenues Synergies
( 1
Preliminary estimate of EUR 100 mln (4.5% of target revenues) Leverage ABN AMRO’s: − Servicing model from affluent / private banking clients − Wholesale product capabilities − International presence − Expertise in asset management and derivatives − Global consumer finance capabilities
Business Plan Antonveneta >10% upside of Banca Antonveneta’s Business Plan vs. IBES net profit consensus (EUR 600 mln vs. EUR 536 mln)
Offer of standard banking services in Italy to ABN AMRO’s international clients through Antonveneta network (1) Revenue synergies of 6.4% of target revenues announced in Santander / Abbey takeover; average of 5% of sample of selected European cross-border transactions since 2000
Source: Banca Antonveneta analyst presentation, 12 September 2003
26
Concluding remarks
Concluding remarks
Acquisition is unique opportunity to grow profitably mid-market footprint
Acquisition is EPS accretive after 12 months of ownership
Acquisition creates value
Equity funding of approx. EUR 3 bln via a up to 135 mln share issue and the cancellation of the neutralisation of the final FY 2004 scrip dividend
Commitment to return proceeds of equity funding in a cost effective way and to resume the neutralisation policy of any scrip dividend from 2005 onwards should the acquisition not materialise
All cash offer supported by simultaneous equity raising puts ABN AMRO in best position to secure the acquisition
28
ABN AMRO launches cash offer for Banca Antonveneta Q&A
Amsterdam, 30 March 2005