presentation 6 part2 en

8/3/2019 Presentation 6 PART2 En

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11

Corporate and Investment Banking:

IntroductionCorporate and Investment Banking:

Introduction

G.Chodron de Courcel et P.Blavier4 December 2001

22Investor Day Dec. 2001Cor and Inv.Bankin

Investor Day Dec. 2001Corp and Inv.Banking

Presentation OverviewPresentation Overview

IntroductionIntroduction11

A diversified and efficient business modelA diversified and efficient business model

A strong dynamic of developmentA strong dynamic of development33

ConclusionConclusion44

22


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Investor Day Dec. 2001Cor and Inv.Bankin

The Corporate and Investment Banking

Business Model was Appropriate in 1999...

The Corporate and Investment Banking

Business Model was Appropriate in 1999...

n Comprehensive and well balanced range of business lines

n Intensive cross-selling to further leverage large customer portfolio withinvestment banking products

n Strict risk management

n Tight cost control

n Comprehensive and well balanced range of business lines

n Intensive cross-selling to further leverage large customer portfolio withinvestment banking products

n Strict risk management

nTight cost control



and was Confirmed in a Changing Environmentand was Confirmed in a Changing Environment

n Stock markets slump :

l balanced business mix with strong positions in Fixed Income and

Specialised Financing full benefit from the revival of debt financing

n Sharp slowdown in business volume :

l focus on internal growth as long as acquisitions seemed overpriced

l cost control never released

n Increased credit risk :

l strict risk management

BNP Paribas shows a strong resistance to the economic downturn

n Stock markets slump :

l balanced business mix with strong positions in Fixed Income and

Specialised Financing full benefit from the revival of debt financing

n Sharp slowdown in business volume :

l focus on internal growth as long as acquisitions seemed overpriced

l cost control never released

n Increased credit risk :

l strict risk management

BNP Paribas shows a strong resistance to the economic downturn


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BNP Paribas Shows a Strong Resistance to

the Economic Downturn

BNP Paribas Shows a Strong Resistance to

the Economic Downturn

* Quarters ending February, May, August, November

Loss

-80%

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

Credit

Suisse FB

ABN Amro

WCS

Morgan

Stanley

Securities *

Goldman

Sachs *

Merrill Lynch

GICG

Socit

Gnrale BFI

Lehman

Brothers*

Deutsche

Bank C&IB UBS C&IC

JP Morgan

Chase IB

BNP Paribas

CIB

3Q01 / 3Q00 9M01 / 9M00

21%

27%26%

1999 2000 9M 2001

Decrease of pre tax income of Investment banking units

Pre tax ROE of Corp. & Inv. banking



The Business Model is well Prepared for anEconomic Recovery

The Business Model is well Prepared for anEconomic Recovery

n Through an ongoing internal and external development effort :

l further leverage large customer portfolio

l leverage strong global positions (Equities Derivatives, Fixed IncomeDerivatives, Energy & Commodities,...)

l accelerate development on most profitable products with strong growthexpectations (eg. Credit Derivatives, Securitisation, Asset Optimisation

Financing,)

l use high level of free cash flows to grasp opportunities

n Through an ongoing internal and external development effort :

l further leverage large customer portfolio

l leverage strong global positions (Equities Derivatives, Fixed IncomeDerivatives, Energy & Commodities,...)

l accelerate development on most profitable products with strong growthexpectations (eg. Credit Derivatives, Securitisation, Asset Optimisation

Financing,)

l use high level of free cash flows to grasp opportunities


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2001 Achievements well in line

with 2000 Targets

2001 Achievements well in line

with 2000 Targets

2000 Targets 2001 Achievements

l Strengthen the customer coverage

l Reallocation of Corporate Bankingequity towards other business lines

l Cost control

l Increase wallet share

new client segmentation andcoverage implemented

Corporate Bankings allocatedequity decreased from 3.4 bn(Dec.99) to 2.6 bn (Sep.01)

Cost/income ratio kept at around

60%

Average number of business linesper client increased from 4.7(01/00)to 5.1 (01/01) (300 largestcustomers)








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Breakdown* of Gross Operating Income ( 1 922 m as of Sept 01)by principal activity

Capital Markets

+ Advisory

54%

Corporate

Banking

17%

Specialised

financing

29%

*Excluding others -98 m

A Diversified Business PortfolioA Diversified Business Portfolio



A Diversified Business PortfolioA Diversified Business Portfolio

Gross Operating Income* in millions (Sept. 01)

54%

46%

56%

44%

Energy & Commodities

Structured + Export Financing

Fixed Income

Equity + Corporate Finance

*Excluding others -98 m

579

1101

340

CorporateBanking

SpecialisedFinancing

Capital markets& Advisory


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Steady Process of Equity

Reallocation

Steady Process of Equity

Reallocation

8.7 bn 7.9 bn 7.6 bn

39% 37% 34%

22%26% 31%

37%33% 31%

1999 2000 30/09/2001

Corporate Banking Specialised financing Capital Markets + Advisory Others



A Profitable and well BalancedPortfolio of Products

A Profitable and well BalancedPortfolio of Products

-5 0 5 10 15 20 25

2000-2005 Expected Market growth (%)

Pre-tax ROE

Equity

Fixed Income

Corporate bankingpre tax ROE

10%

Specialised Financingpre tax ROE

23%

CIB Average market growth

10%

Proportional to9M 2001 income

Advisory + Cap MarketsAverage pre tax ROE

62%


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A Diversified Risk Profile (I):

by Economic Sectors

A Diversified Risk Profile (I):

by Economic Sectors

Breakdown of commercial commitments per economic sectoras of 30 June 2001

Breakdown of commercial commitments per economic sectoras of 30 June 2001

Chemicals

5%

Retail8%

Insurance

6%

Others

6%Construction

1%

Energy

5%

Household

appliances

3%

Telecoms

5%

Food processing

4%

Car manufacturing

3%

States, local

governments and

fin. Instit.

16%

Business services

2%

Technology

2%

Manufacturing

2%

Real Estate

2%

Materials

4%

Wholesale trade

10%

Machinery

3%

Utilities

1%

Transportation

5%

Mining

4%

Leisure

3%



Geographical breakdown of total commitments as of 30 June 2001

A Diversified Risk Profile (II):by Geographical BreakdownA Diversified Risk Profile (II):by Geographical Breakdown

Latin America

4%

Europe

48%

America

28%

Asia 17%

Middle East,

Africa

3%


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Despite Current Migration Risk, Share of

Investment Grade Commitments Remained Stable

Despite Current Migration Risk, Share of

Investment Grade Commitments Remained Stable

71%

28%

2%72%

27%

1%

0%

20%

40%

60%

80%

100%

Dec 00 June 01

Default Non investment Grade Investment Grade

Breakdown of total credit risks as of 30 June 2001by equivalent ratings



A Rigorous Risk PolicyA Rigorous Risk Policy

30/09/0131/12/00

61 60

Net provisions / Average Weighted assets (except 1999: end of period)

n Proactive and cautious provisioning policy

l US branches : $ 200 m specific provision in 2000

$ 130 m specific provision for 9 M 2001

still $ 90 m sectorial risk provision since 3Q 1999

n Selective risk policy

l industry specialists within the Group Risk Management (since 1995)

31/12/99

47

Cost of riskIn bp


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A Stable Cost/Income Ratio...A Stable Cost/Income Ratio...

Cost / income Ratio kept at best European levels around 60%

Despite a business mix progressively shifting towards InvestmentBanking

Net Banking Income

Operating expenses

Gross Operating Income

Cost / Income Ratio

Q1 2000 Q2 2000 Q3 2000 Q4 2000 Q1 2001 Q2 2001 Q3 2001

1 815

880

935

48 %

1 540

888

653

58 %

1 303

867

436

67 %

1 436

888

548

62 %

1 695

947

748

56 %

1 463

901

563

62 %

1 510

898

612

60 %



n Breakdown of the Cost / Income Ratio by activity* :n Breakdown of the Cost / Income Ratio by activity* :

0

10

20

30

40

50

60

70

80

90

Q1 2000 Q2 2000 Q3 2000 Q4 2000 Q1 2001 Q2 2001 Q3 2001

Corporate Banking Specialised Financing Capital Markets + Advisory

well Controlled Within eachActivity

well Controlled Within eachActivity


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A Cost/Income Ratio Increasingly

Competitive

A Cost/Income Ratio Increasingly

Competitive

45%

50%

55%

60%

65%

70%

75%

80%

85%

90%

BNP

ParibasCIB

JP Morgan

Chase IB

Lehman

Brothers *

UBS C&IC Soc i t

Gnrale BFI

Deutsche

Bank C&IB

(99: GC&I)

Merrill

Lynch GICG

Goldman

Sachs *

Morgan

Stanley

Securities *

Credit

Suisse FB

ABN Amro

WCS

1999 2000 9 M 2001

* Quarters ending February, May, August, November








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Business lines



Business-lines :key Issues for Growth

Business-lines :key Issues for Growth

n Equity

l Equity Derivatives :

Reinforce and develop client distribution on the three segments: institutions, corporates,retail

Pursue expansion outside Europe (especially United States by organic growth) Better leverage the BNP Paribas distribution channels

l Equity Cash :

Rationalise & leverage our European product to increase brand recognition and marketshare with big clients

Concentration on core businesses to strengthen them in Asia Pacific retail broking units in Asia & Australia have been sold or closed

extend BNP Paribas Peregrine current franchise (Hong Kong) to other Asian countries andAustralia

n Advisory and Equity Capital Markets Leverage strong clientele coverage to develop European positions (eg UK, Germany and

Italy)

Consolidate its leading position in France

Strengthen our equity-linked business

Conduct opportunistic acquisitions

n Equity

l Equity Derivatives :

Reinforce and develop client distribution on the three segments: institutions, corporates,retail

Pursue expansion outside Europe (especially United States by organic growth) Better leverage the BNP Paribas distribution channels

l Equity Cash :

Rationalise & leverage our European product to increase brand recognition and marketshare with big clients

Concentration on core businesses to strengthen them in Asia Pacific retail broking units in Asia & Australia have been sold or closed

extend BNP Paribas Peregrine current franchise (Hong Kong) to other Asian countries andAustralia

n Advisory and Equity Capital Markets Leverage strong clientele coverage to develop European positions (eg UK, Germany and

Italy)

Consolidate its leading position in France

Strengthen our equity-linked business

Conduct opportunistic acquisitions


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Business-lines :

key Issues for Growth

Business-lines :

key Issues for Growthn Fixed income derivatives

l Continue to aggressively broaden our client franchise by leveraging effectively all CIB lendingrelationships

l Capitalise on our superior derivative product platform and risk management tools in order tooffer innovative solutions to clients

l Streamline further our deal processing in order to lower operation cost per transaction

n Forex :l Consolidate industrial organisation + Shift generic business to electronic trading platforms

l Develop added-value services and strategic use of Forex

l Intensify Sales effort

n

Credit market :l Credit Derivatives: move franchise toward major league players. Revenues growth mainly

from Europe and Japan

l Securitisation: diversify and balance the business and develop flow business across Europe

l High Grade: maintain leadership on Corporate Bonds and improve number and diversity ofdeals. Further develop the $ franchise

l High Yield: maintain full lead manager capability in Europe

n Fixed income derivativesl Continue to aggressively broaden our client franchise by leveraging effectively all CIB lending

relationships

l Capitalise on our superior derivative product platform and risk management tools in order tooffer innovative solutions to clients

l Streamline further our deal processing in order to lower operation cost per transaction

n Forex :l Consolidate industrial organisation + Shift generic business to electronic trading platforms

l Develop added-value services and strategic use of Forex

l Intensify Sales effort

n

Credit market :l Credit Derivatives: move franchise toward major league players. Revenues growth mainly

from Europe and Japan

l Securitisation: diversify and balance the business and develop flow business across Europe

l High Grade: maintain leadership on Corporate Bonds and improve number and diversity ofdeals. Further develop the $ franchise

l High Yield: maintain full lead manager capability in Europe



Business-lines :key issues for growth

Business-lines :key issues for growth

n Structured Finance

l Leverage strong global positioning (syndicated loans, project finance, mediatelecom)

l Consolidate leadership position in acquisition finance in Europe and on cross

border transactions

l Develop growing businesses: optimisation and asset finance (Capstar Partners)

n Energy & Commodities : consolidate world-wide leading position whilemaintaining good risk control

l Consolidate our strong franchise in Trade Finance and Corporate Financing

l Develop our structured pre-export activity in key producing countries

l Leverage our strong sectorial expertise by expanding our energy and metalderivatives activities and on cross selling products of other business lines

l Enlarge our product offer : deconsolidation solutions, global price risk solutions,reserve based lending

n Structured Finance

l Leverage strong global positioning (syndicated loans, project finance, mediatelecom)

l Consolidate leadership position in acquisition finance in Europe and on crossborder transactions

l Develop growing businesses: optimisation and asset finance (Capstar Partners)

n Energy & Commodities : consolidate world-wide leading position whilemaintaining good risk control

l Consolidate our strong franchise in Trade Finance and Corporate Financing

l Develop our structured pre-export activity in key producing countries

l Leverage our strong sectorial expertise by expanding our energy and metalderivatives activities and on cross selling products of other business lines

l Enlarge our product offer : deconsolidation solutions, global price risk solutions,reserve based lending


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Business-lines :

key issues for growth

Business-lines :

key issues for growth

n International Trade

l Pursue international development

l Increase industrialisation process (opening of 70 trade centres on the fivecontinents)

n Corporate Banking

l Use large client base to cross-sell all products

l Optimise equity allocation through portfolio management

n International Trade

l Pursue international development

l Increase industrialisation process (opening of 70 trade centres on the fivecontinents)

n Corporate Banking

l Use large client base to cross-sell all products

l Optimise equity allocation through portfolio management



Customer coverage


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A Dynamic of Growth Enhanced

by a Client Focused Set-up

A Dynamic of Growth Enhanced

by a Client Focused Set-up

n Financial Institution Group and Large Corporates : A customer-based

organisation

l Actively develop cross-sales initiatives between the business-lines

Offer multi-business lines complex solutions

l Anticipating customer needs and drawing up tailor-made solutions in closecollaboration with the business lines involved

Be more and more identified as a problem solver

l Defining a systematic marketing policy, in particular with respect to innovativeproducts

Apply systematic cross-selling methodology to detect business opportunities

l Manage the global relationship world-wide by guiding clients abroad

Become a core banker for our clients

l Provide systematic risk analysis

n Financial Institution Group and Large Corporates : A customer-based

organisation

l Actively develop cross-sales initiatives between the business-lines

Offer multi-business lines complex solutions

l Anticipating customer needs and drawing up tailor-made solutions in closecollaboration with the business lines involved

Be more and more identified as a problem solver

l Defining a systematic marketing policy, in particular with respect to innovativeproducts

Apply systematic cross-selling methodology to detect business opportunities

l Manage the global relationship world-wide by guiding clients abroad

Become a core banker for our clients

l Provide systematic risk analysis



A Client Focused Set-upA Client Focused Set-up

Client relationships Coverage

Strategic

140

Core

370

Other

relationships

12 000

27

36

RelationshipManagers

600

SeniorBankers

Global

RelationshipManagers


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The dynamic of developmentThe dynamic of development33


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ConclusionConclusion

Tight costcontrol

Diversified

business mix

Strict risk

management

Recurrentperformance

Continuedleverage ofcustomersportfolio

Strong freecash flow

Ability tobenefit from

any rebound inactivity

Strategy based on value creation

presentation 6 part2 en

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