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Investor Presentation
June 2020
2
DISCLAIMER
• This presentation does not constitute or form part of, and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or acquiresecurities of BSPB or any of its subsidiaries in any jurisdiction or an inducement to enter into investment activity in any jurisdiction. Neither this presentation nor anypart thereof, nor the fact of its distribution, shall form the basis of, or be relied on in connection with, any contract or commitment or investment decisionwhatsoever. The sole purpose of this presentation is to provide background information to assist the recipient in obtaining a general understanding of thebusiness of BSPB and its outlook.
• The information contained in this presentation has not been independently verified. The information in this presentation is subject to verification, completion andchange without notice and BSPB is under no obligation to update or keep current the information contained herein. Accordingly, no representation or warranty,express or implied, is made or given by or on behalf of BSPB, or any of its respective members, directors, officers or employees nor any other person accepts anyliability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connectiontherewith.
• This presentation contains "forward-looking statements" which include all statements other than statements of historical fact. Such forward-looking statementscan often be identified by words such as "plans", "expects", "intends", "estimates", "will", "may", "continue", "should" and similar expressions. Such forward-lookingstatements involve known and unknown risks, uncertainties and other important factors beyond BSPB's control that could cause the actual results, performanceor achievements of BSPB to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements.Such forward-looking statements are based on numerous assumptions regarding BSPB's present and future business strategies and the environment in which BSPBwill operate in the future. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstancesthat may or may not occur in the future. These forward-looking statements speak only as at the date as of which they are made, and neither BSPB nor any of itsagents, employees or advisors intends or has any duty or obligation to supplement, amend, update or revise any of the forward-looking statements containedherein to reflect any change in BSPB's expectations with regard thereto or any change in events, conditions or circumstances on which any such statements arebased. The information and opinions contained in this presentation are provided as at the date of this presentation and are subject to change without notice.
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AGENDA
Overview
Strategic developments. Banking sector transformation.
Appendix. Financials
BSPB’s response to current situation
Why Bank Saint Petersburg?
4
IMPLEMENTED ACTIONS
Our Employees ca. 2500 of employees or 60% of headcount are on remote workplaces
70 branch network employees moved to call-center to manage increased amount of
incoming calls; 40 more are handling outgoing calls
CUSTOMER SECURITY AND COMFORT ARE OUR TOP PRIORITY
We are online
We are fully committed to helping our customers and supporting our employees to manage
through the coronavirus pandemic.
March April May
46/66 41/66 9/66
Gradual branch network reopening throughout the pandemicNumber of
branches
temporarily
closed
Digital
payments:
95% => 98-99%
Digital sales:
59% => 67%
Active digital
users share:
63%
Online operations:
80% => 82%
Mobile app
users share:
46%
Automated
decisions:
89% => 91%
June
3/66
5
STRONG POSITION IN CHALLENGING ENVIRONMENT
Strong Liquidity
Position
There is a lot of liquidity on the market; liquidity cushion is significant
One of the most liquid institutions on the market
Preserving Capital
Basel III Core Tier 1 CAR (N1.1) as at June 1, 2020, is 10.7%, which is a comfortable
level at the moment
Continued uncertainty about the full impact of the pandemic obliges the Bank to
curb loan portfolio growth expectations for 2020
AGM took a decision not to pay out dividends on ordinary shares for 2019.
Conditional on the economy stabilization we intend to consider the issue of dividends
in 2H 2020
Risk Management
The Bank takes all measures declared by the Government to support borrowers
Overdue loans ratio in 1Q 2020 is stable
6
SUPPORT MEASURES FOR RETAIL CUSTOMERS
State payment
holidays program
(Federal law #106-FZ)
1’726 applications (incl. mortgages - 940, consumer loans – 627, car loans – 109)
Approval rate is 77%
Restructured loan portfolio amounted to RUB 1.1 bn (incl. mortgages - RUB 1’052 mln,
consumer loans – RUB 47 mln, car loans – RUB 10 mln)
Mortgage Subsidy
State Program
Up to RUB 8 mln in St. Petersburg and Moscow; up to RUB 3 mln – in Kaliningrad and
Novosibirsk
6.0% interest rate/down payment min 20%/up to 20 years
855 loans granted in total amount of RUB 2.4 bn
Other Solutions for
Retail Customers
E-registration of contracts for mortgages and escrow accounts (108 new e-contracts)
Online mortgage processing (475 online applications)
Expired banking card service continuation
Call center capabilities boosted thanks to relocation of branch network staff
BSPB’s own program
6’166 applications (incl. mortgages – 2’116, consumer loans – 3’314, car loans – 623)
Approval rate is 54%
Restructured loan portfolio amounted to RUB 3.8 bn (incl. mortgages - RUB 2.4 bn,
consumer loans – RUB 927 mln, car loans – RUB 295 mln)
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SUPPORT MEASURES FOR SMEs
State payment
holidays program
(Federal law #106-FZ)
6-month tax, fees and debt holidays for SMEs
Total loan portfolio of affected SMEs is rather limited (RUB 2.3 bn or 0.7% of corporate
loan book)
Total amount of the loans for restructuring is less than RUB 300 mln
State program of
Payroll loan at 0%
Starting in May 2020
39 applications received (RUB 200 mln)
Additional support
measures
Reduced price for qualified signature issuance (200+ customers)
E-registration for corporate mortgages
Remote agreement for payroll services (44 new corporate customers)
Special offers for internet-acquiring: fees down to 1% for convenience (grocery,
pharmacy, clothing etc.) stores (applied for 30+ customers)
BSPB’s
restructuring efforts
172 applications
Approval rate is 80%
Total amount of the loans approved for restructuring is RUB 1.9 bn
BSPB’s own program
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SUPPORT MEASURES FOR BANKS
Deposit insurance charges cut from 0.15 % to 0.10% for 2020 – ca. RUB 600 mln
effect on P&L
Reduced provisioning for companies from affected industries
Reduced risk-weights on mortgage loans
Historical securities valuation for capital calculation purposes
Historical FX rate for capital calculation purposes
Applied by BSPB?
Yes
Yes
Yes
No
No
In accordance with CBR recommendations, FY 2019 dividends and share buy-back waived
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FY 2020 GUIDANCE UPDATE
Loan portfolio growth 12-15%
Cost of Risk 170-190 bp
Core Banking Margin flat
Costs growth 10%
C/I ratio 42%
ROAE 11-13%
Growth expectations curbed
Under review
Confirmed
Cost-cutting procedures launched
Cost-cutting procedures launched
Under review
Guidance as of March 12, 2020
PANDEMIC DURATION REMAINS THE CORNERSTONE OF UNPREDICTABILITY, PREVENTING US
FROM LONG-TERM PLANNING AND RELIABLE GUIDANCE
Our view as of June 26, 2020
10
AGENDA
Overview
Strategic developments. Banking sector transformation.
Appendix. Financials
BSPB’s response to current situation
Why Bank Saint Petersburg?
11
BANK SAINT PETERSBURG AT A GLANCE
Regional leader
Focused on
the North-West
Operating and
Financial
Highlights
Note 1: According to InterfaxSource: In accordance with IFRS FS for 1Q 2020
The leading privately-owned universal bank in St. Petersburg and Leningrad region
Top-3 positon in the regional market
Client base: ca. 2,154,000 retail and 50,000 corporate customers 66 branches and outlets (primarily in St. Petersburg), 814 ATMs
15th largest bank by assets and 15th by retail deposits in Russia 1
Ratings: Moody’s Ba3 (Stable), Fitch BB (Negative), ACRA A(RU) (Stable)
As at April 1, 2020: Total assets: RUB 668.7 bn Total capital: RUB 97.1 bn Сapital adequacy ratio (RAS Basel III): Total capital – 14.2%, Tier 1 – 10.7% (as at
01.06.2020)
For 1Q 2020: Net income: RUB 1.6 bn (FY 2019: RUB 7.9 bn) Cost/Income ratio: 49.7% (FY 2019: 44.2%) ROAE: 7.9% (FY 2019: 10.2%) 3,795 employees
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SAINT PETERSBURG: THE DYNAMIC HOME MARKET
Geography
St. Petersburg and the Leningrad region population – 7 000 000
4th largest city in Europe
Economy
GRP growth consistently outperforms national average
Major trade gateway – sea and river ports
Industrial centre for car manufacturing, heavy machinery and shipbuilding
Gazprom HQ moving
Well developed construction sector
Cultural center and a major tourist destination
Host city of the World Cup 2018
Regional business model
Gross domestic/regional product, y-o-y growth Unemployment, % of economically active population
13
SHAREHOLDERS STRUCTURE
Shareholders Equity Structure Key Person
Comments
Alexander Savelyev
Chairman of the Management Board
Key person since 2001
The largest shareholder of the Bank
Public since 2007
First privately-owned Russian bank to complete a successful IPO
Best practice corporate governance (5 independent directorsout of 9 members in the Supervisory Board)
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CORPORATE VS. RETAIL BANKING
Loans, RUB bn Deposits, RUB bn
Corporate banking Retail banking
Key strategic priority
Core activity of the Bank (40-45% of revenues)
Key source of funding
Share of high yield loans (consumer loans + credit cards): 2020 target = 28% of loans to individuals (27% as of now)
• * Customer deposits are calculated as a sum of customer accounts and promissory notes (other debt securities issued)
Loans/Deposits Ratio 91%
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RETAIL BANKING
* Retail loans include mortgages, car and consumer loans.
Overdue loans include the whole principle of loan at least 90 days overdue.
All major retail lending products (mortgages,
car loans, unsecured loans) slowing down
Retail loan portfolio quality remains high
Mortgage loans
• Top-3 in regional mortgage lending market (Top-15 in Russia)
• Best Mortgage Bank Russia 2019 and Best Bank for Escrow Accounts Russia 2019 (by Global Banking and Finance Review Awards)
• The Best Retail Finance Product 2019 for escrow accounts (by RETAIL FINANCE AWARDS)
RUB bn
+1.6%
Retail loan portfolio quality
16
AGENDA
Overview
Strategic developments. Banking sector transformation.
Appendix. Financials
BSPB’s response to current situation
Why Bank Saint Petersburg?
17
STRATEGIC PRIORITIES (1/2)
Growing demand for a reliable privately-owned bank with fast and flexible decision making
Business model in SPB with maximal proximity to the customer is the main competitive
advantage of BSPB
Focus on NPS improvement
20% increase in the number of large corporates highly profitable for the Bank
Metrics
Rationale
Digitalization is the new normal for all banks
BSPB is one of the most efficient banks engaged in digital transformation
Top priority – to be among the digital leaders with moderate investments
90% automated credit decisions
90% online sales
Focus on Time-to-Market
Metrics
Rationale
The Bank aims to be…
…the best privately-owned
bank for corporates in the
regions of operation
…among the leaders in
online sales and
operations
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STRATEGIC PRIORITIES (2/2)
Advanced EXIM operations infrastructure with limited geopolitics impact
Existing high expertise
Significant EXIM customers market penetration (36% in North-West region)
50% of the companies in North-West involved in EXIM activities
10% of EXIM trade in the region
To double EXIM operations revenues by 2022 (from RUB 1.5 bn to RUB 3.0 bn)
Metrics
Rationale
Moscow market allows significant growth potential
Business diversification
Metrics
Rationale
The Bank aims to be…
…among the leaders in
EXIM services
…the Bank of two capitals
40% share in the Bank’s corporate loan portfolio
10 000+ SME customers by 2022
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EXPANSION BEYOND THE HOME REGION
Saint Petersburg
Representative office – August 2016Branch – December 2019
N. Novgorod
Rostov-on-Don
Planned
Moscow
KaliningradNovosibirsk
Opened in 1Q 2020
Ekaterinburg
Headcount: 30 people
As of YE2019: loan portfolio RUB 5 bn; FY2020E – RUB 11 bn
Retail – full range of products for payroll customers; FY2020E – RUB 0.8 bn of retail customer accounts
FOCUS: big and medium enterprises based in Sibir’ and Far East regions FOCUS: big and medium enterprises based in the South region
Headcount: 4 people
Full cycle of online operations; accounts are opened and kept in HQ
Flagship products: loans, EXIM servicesFY2020E: loan portfolio of RUB 3 bn
TBC TBC
Krasnodar
Opened in 1Q 2020
Novosibirsk Branch Rostov-on-Don/Krasnodar Representative offices
20
THE LEAST BRANCH-DEPENDENT CLASSIC BANK
1 – incl. Pochta Bank branches, 2 – number of call-center specialists, couriers, branch network employees per 100 000 customers
Sources: IFRS, annual reports, investor presentations, CBR website, banks’ websites, mass-media
Number of branches per 100 000 customers
~115 employees2
~60 employees2
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OUR CLIENTS ACTIVELY MIGRATE TO DIGITAL CHANNELS
Client activity Digital sales
Branch-assisted client migration from offline to online
Recognized online UX: top 5Internet Bank according to 2019 UsabilityLab ranking
Convenient payment functionality in digital channels
Client payments are already online
Leading among classical banks in online sales
Sales transferred to digital channels by smart product offering, user friendly client experience and stimulating pricing
Ability to increase sales while decreasing branch network
• 1 Based on the report provided by one of the leading research company covering Russian banking market (2017-18)• 2 Share of total number of active customers within last 3 months
Digitally active clients2, % Digital payments, % Consumer loans, % Term deposits, %
Market average1
34%
72%
21%31%
22
UPCOMING CORPORATE AND IR EVENTS
AGM 2020 IR Events
The AGM 2020 decided not to pay FY 2019
dividends on ordinary shares
Fall 2020 – Investor Day 2020 in Moscow (TBC)
Mr. Yury Levin Independent memberCurrent positions: Professor, Stephen J.R. Smith Chair of Analytics
and Director of Analytics and AI Ecosystem; Director of Scotiabank Centre for Customer
Analytics.
Experience: member of BD at St.Petersburg Social Commercial Bank and RosEuroBank, managing director and head of branch at Standard and Poor’s
Information on new members of the Supervisory Board
Mr. Sergey NazarovEBRD nominee Current positions: JSC “Rating Agency “Expert RA”, Member of
the Board of Directors and the Management Board;
PJSC “SAFMAR finansoviye investitsii”, Member of the Board of Directors.
Experience: Senior lecturer, Professor and Distinguished Professor
in Analytics in Smith School of Business, Queen’s University, Founder and Director of Kingston Analytica;
23
AGENDA
Overview
Strategic developments. Banking sector transformation.
Appendix. Financials
BSPB’s response to current situation
Why Bank Saint Petersburg?
24
WHY BANK SAINT PETERSBURG?
We are predictable We keep our promises - our performance reflects our guidance Unlike many Russian privately-owned banks we haven’t been involved in an uncontrolled growth and excessive risk taking
Our financial position is indisputably stable We passed 2014-2017 Russian banking sector shocks with no substantial problems In 2019 our rating was upgraded to BB with Stable outlook (Fitch) and to Ba3 with Stable outlook (Moody’s).
In April 2020, Fitch changed its outlook from Stable to Negative for 15 largest Russian private banks simultaneouslyIn June 2020, ACRA (Russian rating agency) confirmed its rating A(RU) with Stable outlook
We are transparent As one of the fewest Russian public banks we keep up being transparent and extremely responsible in decision-taking Best practice corporate governance
Healthy conservatism is our important feature We are 100% customer funded bank with no dependence on wholesale funding (Loan/Deposit ratio ~ 90%) Our risk appetite is moderate The volatility of financial result is very low Potential geopolitics’ impact on the bank’s business is very limited
and
The price growth potential is high (P/BV 0.23, P/E 3)
25
Resilient to market shocks
INVESTMENT HIGHLIGHTS
Significant upside for the stock
Clear strategy of a focused
regional bank
The leading privately-
owned universal bankin attractive
market
Advanced digital
solutions
The least branch-dependent classic bank in Russia
26
AGENDA
Overview
Strategic developments. Banking sector transformation.
Appendix. Financials
BSPB’s response to current situation
Why Bank Saint Petersburg?
27
1Q 2020 FINANCIAL RESULT
RUB mln, %, YoY
+8.7%
+32.5%+12.2%
+18.9%
+16.4%
+23.4%
CBM
5.5%
20%
of Revenues
CoR
2.5%
CIR
49.7%
ROE
7.9%
28
PROFITABILITY
Net income dynamics, RUB mln ROAE/ROAA, %
+23%
29
REVENUES STRUCTURE
70%
14%
16%
RUB mln
+12.5%
75%
20%
0%
Impressive F&C y-o-y growth of 32.5%
Core banking dominates in the revenue structure
30
INTEREST INCOME STRUCTURE
RUB mln
Average interest rates on the assets side
-12.3%
Y-o-Y growth of core interest income
Less influence from trading
Significant loan portfolio growth in last decade of March affected average
interest rates (-0.4pp), NIM (-0.2pp) and Core Banking Margin (-0.3pp)
31
INTEREST EXPENSES STRUCTURE
RUB mln
Average interest rates on the liabilities side
-29.3%
Interest expenses on Term deposits of individuals = Term deposits of individuals + Contributions to Deposit Insurance System
Cost of funding goes down
32
NET FEE & COMMISION INCOME STRUCTURE 1/2
RUB mln
+32.5%
33
Corporate Net F&C income, RUB mln Retail Net F&C income, RUB mln
Source: Management accounts based on IFRSCash and Settlement transactions category is comprised of Settlement transactions, Cash transactions and Cash collectionsCustomers' FX category is comprised of Foreign exchange transactions adjusted for customer FX’ trading income Trading securities F&C income transferred to aggregate trading income
NET FEE & COMMISION INCOME STRUCTURE 2/2
+41.7%+14.4%
34
CORE BANKING VS TRADING
Core Banking Results, RUB mln
Aggregate trading results, RUB mln
3.5% 3.6% 3.8%3.7%Net Interest Margin
4.1%
5.8% 5.6% 5.7%5.8%Core Banking Margin
5.5%
-0.7% 0.7% 0.7%0.5%Trading Margin
1.0%
35
OPERATING EXPENSES 1/2
RUB mln
+16.4%
Property tax is excluded from other administrative and operating expenses and included in expenses related to premises and equipment
(FY17: RUB 120 mln; FY18: RUB 126 mln; FY19: RUB 89 mln; 1Q19: RUB 22 mln; 1Q20 RUB 25 mln).
Costs reclassified according to IFRS 16 – from other OpEx to OpEx related to premises and equipment
36
OPERATING EXPENSES 2/2
Cost-to-Income, % Cost-to-Assets, %
37
LOAN PORTFOLIO AND QUALITY 1/2
Loan Portfolio Coverage
+8.2%
L/D ratio remains consistently low
Loan portfolio growth +8% YTD (+4% YTD net of FX-revaluation)
RUB 0.8 bn of the loan portfolio written off in 1Q20
Starting from Apr. 1, 2018, problem loans include all lifetime ECL credit-impaired loans (stage 3) and loans impaired at initial recognition (POCI)
Before Apr. 1, 2018, problem loans included impaired not past due loans and 1-day+ overdue loans
38
Provisions, RUB mln Cost of Risk
LOAN PORTFOLIO AND QUALITY 2/2
Significant amount of provisions charged in 1Q20 is due to macro factors
recalculations (ca. RUB 0.9 bn of extra provisions)
Provision charge calculation: Provision for loan impairment + Net result on revaluation of financial assets at fair value + Net result from reflection of financial assets at fair value on initial recognition
Net of revised
macro factors
39
CUSTOMER DEPOSITS
Currency structure
2019 vs 1Q 2020Maturity structureCustomer deposits structure
+4.1%
60%
40%
59%
41%
40
CAPITAL (RAS, BASEL III)
Risk-Weighted Assets
(Tier 1 CAR), RUB bnCapital, RUB bn
+0.3%
+1.8% +11.0%
Basel III Core Tier 1 CAR (N1.1) as at June 1, 2020, is 10.7%, which is a comfortable level at the moment
audited
Capital Adequacy Ratios
non-audited audited non-auditednon-audited* non-audited
* 01.01.2020 Tier 1 CAR does not include 2019 net profit