Compass partnership model: how to tackle a changing landscape Roberto Ferrari Group Director Marketing and Partnership Cannes, 12 october 2012

Index

Compass and Italian market landscape Compass partnership model Serving retail banking

2

Compass I.D. KEY FACTS

100% owned by

Specialist Consumer Finance Company (and Payment Institution) Born in 1960. Oldest in Italy. About 9,3 Bn € outstandings About 5 Bn € new loans granted in 2011/12

Retailing network

158 owned branches Over 1200 employees Over 120 national partnerships Over 25k dealers served No (very small) retail banking parent bank Top Sponsor of National Soccer Team Data updated at June 2012 3

Italian Economic outlook GDP – change%

Employment Rate – change% 2

4

1,8

0,1

0,4

2

0 0 2009

2010

2011

-2 -4

2009

-2,0 2012E -2

-5,5

-0,6

-0,9 2010

2011

2012E

-2,9

-6

-4

Consumption of resident households– change% 2

Overall Consumer Sentiment

1,2 0,2

0 2009

-1,6

2010

2011

2012E -2,5

-2

-4

Consumer sentiment

Current sentiment

Future sentiment

4

Source: Istat

Consumer credit demand in Italy

Direct Personal Loans Consumer’ requests trend

Consumer Credit Penetration % and intention to ask

(Index vs ya) 70 60

10,0% 5,0%

50

0,0%

40

-5,0%

30 -10,0%

20

-15,0% -20,0%

10

2011

var. % aa-1 VF

4

5

6

7

8

9

2012

var. % aa-1 NO

0

Would subscribe in the future

Have subscribed in the past

Jun 12

2 3

Mar 12

8 9 10 11 12 1

Dec 11

7

Sep 11

6

May 11

2010

5

Feb 11

4

Nov 10

3

Jun 10

01 02 03 04 05 06 07 08 09 10 11 12 1 2

Mar 10

-25,0%

Have subscribed in last 12 months

5

Source: Crif, Demoskopea (internal research - 1200 interviews each quarter)

Italy vs Europe - Consumer credit trends (1/2)

Direct personal consumer credit*

Car financing

% yearly change

% yearly change

6%

15%

4%

10%

2%

5%

-4%

-10%

-6%

-15%

-8%

-20%

-10%

-25%

Total

Italy

Source: Eurofinas data * Data comprehensive of personal loans, credit cards, pos financing and salary loans

Total

2Q12

1Q12

4Q11

3Q11

2Q11

1Q11

4Q10

3Q10

2Q10

2Q12

1Q12

4Q11

3Q11

2Q11

1Q11

4Q10

3Q10

2Q10

1Q10

-2%

-5%

1Q10

0%

0%

Italy

6

Italy vs Europe - Consumer credit trends (2/2)

Total consumer credit

The variation of the last

% yearly change – new loans

year shows that Italy

20,0% 15,0%

and France present the

10,0%

biggest contraction in consumer credit trend.

5,0% 0,0%

Trend has not stopped

-5,0%

yet and it is deepening

-10,0%

down

-15,0% Total

Italy

UK 3Q11

Source: Eurofinas data

4Q11

1Q12

France

Spain

2Q12

7

Consumer Finance – Market trend and product mix shift in Italy Product mix trend New loans (bn €), split % by product type

After 10 years of

60,7 52,8

continued growth, 52,4

51,7

47,6

Back to 2005 level

projecting new loans

45,9

volume back at 2005

100% 90%

46%

24%

27%

80% 70% 60% 50%

6%

16% 12%

level 36%

37%

38%

38%

9%

9%

9%

8%

20%

22%

25%

8%

8%

24%

21%

7%

16%

40%

11%

16% 8%

30% 20%

market is now

43%

39%

31%

10%

8% 26%

71%

Direct products (Personal direct loans and credit cards) now represent over 71% of new generated

0% 2005

2006

2008

2010

2011

2012E

Car financing

Credit cards (option and revolving)

Direct personal loans

POS financing

Salary guaranteed personal loans

New loans (in billion)

Source: Assofin

loans

8

Retail banking channelling of personal loans Attention Points

Italy - Personal loans channelling New Personal direct loans split by channel % 11%

11%

6%

7%

36%

34% 41%

Personal loans volume is more and more shifting to retail banking (as also result of tighter regulation on other intermediaries and retailers) Demand is still very sizeable (about 300k requests per month) Banks have a 360° view of their customers finances, yet less credit risk mgmt know how (scoring models, collection)

36%

About 20% of retail banking clients are «shared» with a competitive consumer finance offering

48%

2008

53%

2009

Retail banking and Poste branches

58%

59%

2010

2011

Consumer Finance specialist Agents

* Fonte: Compass analysis from Assofin and Databank data

Basel II-III liquidity and capital requirements and current Euro banks financial situation can represent a strong refrain from meeting consumer demand

da n i f r to an lose e t t «be tner th par ess and n busi mers» o cust

9

Consumer Credit Italian Market Outlook Market shrunk at 2005 levels Car financing volumes strongly reduced Overall consumer confidence at all time low Negative macroeconomic outlook is leading to further credit demand reduction and risk increase Regulatory pressure continues (EU Directive, Bank of Italy, Insurance restrictions, new usury law changes…..)

But….we are still alive…

10

Compass and consumer finance market trend Compass and Italy’s Consumer Finance yearly change by sem. and Compass’ market share trend Compass % new loans yearly change Market % new loans yearly change Compass new granted loans market share%

10,1

19%

18%

9,7

21% 9,6

8,9

12%

7,8

1%

7,1 6,7

6,3

-4% -11%

-26% IISem 2008

-27% ISem2009

-2% -5%

-1%

-6%

-7%

-9%

IISem2009

-11%

ISem2010

IISem2010

ISem2011

IISem2011

ISem2012

11

Source: Assofin; Compass including Futuro

Consumer Finance Italy – Competitive snapshot New granted loans – Top 10 players

Top 5 players – Market concentration

Bn € – Isem 2012

Share % on outstandings Mkt Share 3,4

1,6 1,3 1,2 1,0 0,7

13,2%

2,5

9,7%

2,5

9,7%

2,3

9,1%

2,3

9,0%

June 2012 2007

51% 35%

6,2% 4,9% 4,6%

2000

26%

4,1% 2,7%

12

Source: Assofin – Osservatorio II Trimestre 2012

Compass Partnerships in numbers Channels Retail Banking

Key numbers 50 partnerships with mid sized/local banks,

Key results About 1000 M € new loans/year

Loans, POS financing and cards third parties servicing platform

counting for 4.7 k served branches

Post Office

Partnership with Italian Post office, to

About 500 M € new granted loans per year

distribute Personal Loans, Credit cards and

Over 100k credit cards issued

POS financing. Over 14k branches served.

Over 30 national partnerships with

POS retailing

About 250 M € new loans/year

retailing networks for POS financing offering. About 9k POS served.

Agents and Insurance Co.

Over 40 national partnerships, including

About 200 M € new loans/year

insurance companies networks. Over 3000

Over 40K credit cards in portfolio

agents.

Total

About 120 national partnerships

Nearly 2 MLN € new loans / year 13

Some key partnerships

14

ork w t e n “A y” n a p m co

Compass Partnership overall model Target Partners

Clients

158 own branches to

Struttura operativa di Compass

Compass operating model

Compass commercial organization

locally support in 1to1 fashion partner’s POS/branches

Retail banking

Joint client analysis and

Dedicated central account

Retaling

CRM segmentation

team

Insurance and financial

«Walled» Customer base

agents

Better offering

Partner’s advantages

Clients’ advantages

State of the art risk mgmt know how

Risk control

One stop point at his/her

Risk Based Pricing

Basilea II requirements (banks)

bank;

Data integration with

Up-front commissions, more

Faster request processing

partner for personalized

revenues

and credit assessment;

Clients’ ROI maximization

Higher Avge acceptance

scoring and offering Easy to use front end app Tailored mktg initiatives (also local)

Clients’ fidelization and exit barrier In a word more/better offering..

rates In a word: more/easier access to credit 15

Compass’ Partnerships volume trend Partnerships volume growth by semester New loans trend by product type mln €

CAGR: 15%

127 118

116

143 51 33 31 50

25 37

245

255

Jul-Dec 2008

Jan-Jun 2009

90 93

30 27

215

271

504

494

Pos Fin. Cards Pers. Loans

635 478

490

314

Jul-Dec 2009

Jan-Jun 2010

Jul-Dec 2010

Jan-Jun 2011

Jul-Dec 2011

Jan-Jun 2012

Partnerships volume growth vs owned network New loans -mln € 1.021

1.056

Compass own distribution 1.100 network

922 906 931

326

862

26%

Jul-Dec 2008

317 Jan-Jun 2009

Weight on volume

834

371 Jan-Dec 2009

562

673

905

848

898

45% Partnership

Jan-Jun 2010

Jul-Dec 2010

Jan-Jun 2011

Jul-Dec 2011

Jan-Jun 2012 16

Compass: First banking outsourcer of personal loans in Italy Top 10 Retail banking groups # domestic branches 5.304

Plus over 14k Poste Italian branches 4.700 4.355

2.925

2.017 1.840 1.301

INTESA SAN PAOLO

Compass – Banking channel partnerships

UNICREDIT

MPS

BANCO POPOLARE

UBI BANCA

BANCA POPOLARE DELL’EMILIA ROMAGNA*

907

898

BNL

CARIPARMA FRIULADRIA

776

BPM

Source: Bank of Italy 17

Compass Retail Banking Partnership operating model Compass distinctive operating partnership model features

Stronger Know How exploitation. Joint CRM analisys and personalized scoring

1to1 local support: training, loans/cards request processing/assessment and approval, product updates etc..

High acceptance levels (above mkt avge)

Compass’ local branches support

Risk Based Pricing offering

Competitive service level

Segmentation, Pricing point based on credit scoring. More revenues less risk

Speedy credit assessment/ approval and funds transferring: • Approval av.ge time: 1 day fm request (can be done within 10’) •Funds transfering: avge time within 3 days from request (can be done same day)

About 40% of “share of loans” of retail banking partners We have shown to increase their customer penetration of consumer credit products by > 35% 18

Business case - BancoPosta In 2006 we started a partnership with BancoPosta, banking division of Poste Italiane, offering POS financing for their «Poste shop corners»; BancoPosta is the first “banking” distribution network in Italy with over 14k branches, over 5M current account and 8M prepaid cards holders. Given their particular nature and history they are legally forbidden to take on credit oustandings (not a full bank); Since then the partnership has further developed and now we offer personal loans, credit cards, and POS financing (personal loans and cards are also offered by Deutsche Bank - Prestitempo); In these years we have partnered with BancoPosta for all new, innovative initiatives: “Prontissimo”: the first Personal Direct Loan ready in 48 hrs offered by Poste for the open market (not BP account holder). Launched in mid 2007 “Carta BP+”:the first option no revolving credit card in Italy, (charge+instalment) launched in 2010 “Prontissimo Impresa”: the first loan for small enterprises, ready in 48 hrs too….launched in 2011 Further new initiatives are on the go… Some cumulative results up to date: Over 800 M€ outstanding Over 300k # loans granted Over 150k # credit cards issued 19

Key take aways

Do not wait for market change, move in advance to seize opportunities (partnering, offering performing serving platform) Use your own assets to optimize synergies and performance and create competitive advantages (in our case not only credit scoring and risk mgmt but also local 1to1 network support and CRM capabilities)

Market concentration will leave just a few specialist players and there is further room to combine skills and assets…
more partnering

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