restructuring of leasing portfolios, keeping up with customer and shareholder demands

P.1

Restructuring of leasing portfolios, Restructuring of leasing portfolios, keeping up with customer andkeeping up with customer and

shareholder demandsshareholder demands

C1

EUROLEASE FORUM MILAN

PATRICK GOUIN

GLOBAL HEAD STRATEGY & BUSINESS OPTIMIZATION

PATRICK GOUIN

GLOBAL HEAD STRATEGY & BUSINESS OPTIMIZATION

P.2

Why ?Why ?

Customer Value vs Shareholder Value Customer Value vs Shareholder Value

Think Added ValueThink Added Value

Portfolio segmentation : Business segmentsPortfolio segmentation : Business segments

Economical Return Value and Strategic ValueEconomical Return Value and Strategic Value

Restructuring Portfolios : the optimization matrixRestructuring Portfolios : the optimization matrix

AGENDA AGENDA

P.3

Why ?Why ?






AGENDA AGENDA

P.4

A DECADE OF TRANSFORMATIONA DECADE OF TRANSFORMATION

P.4

208222

249

281

304 299

204213

223

100

200

300

2003 2004 2005 2006 2007 2008 2009 2010 2011

NBV (b€)

-31.8%

208222

249

281

304 299

204213

223

100

200

300

2003 2004 2005 2006 2007 2008 2009 2010 2011

NBV (b€)

Volumes driven

Money over money

Scarce liquidity

Tightened credit

NBV (b€) 2000 - 2007 2008 - 2012

Sustaining profitability

Serving the customer

The need to innovate

A common ground among stakeholders ……A common ground among stakeholders ……

Strategies for profit are in place

There is real client focus, truly plugged into customer needs

innovation must include operating, business and distribution models

……. However, it is less clear that……. However, it is less clear that

Distressed PortfoliosDistressed Portfolios

P.5

Why ?Why ?






AGENDA AGENDA

P.6

THE BIG GAP ?THE BIG GAP ?

The The

‘Big ‘Big Gap?’Gap?’

High quality products

Good service

Low (“competitive”) price

Secured supply

Good relationships

Customers interestsCustomers interests

High ROE, High Margins, low low costs

Increased cash flows

Earning per share, dividends

Embedded value, goodwill

Market control

Shareholders InterestsShareholders Interests

LONG TERMLONG TERM SHORT TERMSHORT TERM

P.7

BRIDGE THE GAP : SHAREHOLDER VALUE = CUSTOMER SATISFATIONBRIDGE THE GAP : SHAREHOLDER VALUE = CUSTOMER SATISFATION

The relationship between customer satisfaction

and shareholder value

Matzler & Stahl , 2000

The relationship between customer satisfaction

and shareholder value

Matzler & Stahl , 2000

Customer

Satisfaction

Customer

Satisfaction

Cross - sellingCross - selling

RepurchaseRepurchase

First level resultsFirst level results

Lower Price

sensitivity

Lower Price

sensitivity

Positive

Word to Mouth

Positive

Word to Mouth

Second level resultsSecond level results

Lower customers

acquisition costs

Lower customers

acquisition costs

Lower Customer

Relationship costs

Lower Customer

Relationship costs

Sable customer

base

Sable customer

base

Higher PricesHigher Prices

Higher SalesHigher Sales

Faster Market

penetration

Faster Market

penetration

Positive

reputation

Positive

reputation

Acceleration of

Cash Flows

Acceleration of

Cash Flows

Increased Profits

& Cash Flows

Increased Profits

& Cash Flows

Sustainability ofROE & Cash Flows

Sustainability ofROE & Cash Flows

Drivers of

Shareholder Value

Drivers of

Shareholder Value

Higher embedded

Value

Higher embedded

Value

Shareholder

Value

Shareholder

Value

P.8

CUSTOMER SATISFACTION = CUSTOMER VALUECUSTOMER SATISFACTION = CUSTOMER VALUE

CUSTOMER CUSTOMER

SATISFACTION SATISFACTION

CUSTOMER CUSTOMER

SATISFACTION SATISFACTION ====

BENEFITSBENEFITS BENEFITSBENEFITS

PRICE PRICE PRICE PRICE

CUSTOMER

SATISFACTION

CUSTOMER

SATISFACTION

CUSTOMER VALUE = SHAREHOLDER VALUE = ADDED VALUE SERVICES CUSTOMER VALUE = SHAREHOLDER VALUE = ADDED VALUE SERVICES CUSTOMER VALUE = SHAREHOLDER VALUE = ADDED VALUE SERVICES CUSTOMER VALUE = SHAREHOLDER VALUE = ADDED VALUE SERVICES

BENEFITS BENEFITS ORORPRICE PRICE

COMMODITIES

LOWER COSTS

LOWER INVESMENTS

COMMODITIES

LOWER COSTS

LOWER INVESMENTS

LOW PRODUCT DIFFERENTIATION

LOW BARRIERS TO ENTRY

LOW INCREMENTAL VALUE

LOW PRODUCT DIFFERENTIATION

LOW BARRIERS TO ENTRY

LOW INCREMENTAL VALUE

QUID LT SHAREHOLDER VALUE ?QUID LT SHAREHOLDER VALUE ?

COMMODITIES

HIGHER COSTS

HIGHER INVESMENTS

COMMODITIES

HIGHER COSTS

HIGHER INVESMENTS

ADDED VALUE DIFFERENTIATION

HIGH BARRIERS TO ENTRY

INCREASED EMBEDDED VALUE

ADDED VALUE DIFFERENTIATION

HIGH BARRIERS TO ENTRY

INCREASED EMBEDDED VALUE

HIGH EMBEDDED VALUE

LT SUSTAINABILITY

HIGH EMBEDDED VALUE

LT SUSTAINABILITY

P.9

Why ?Why ?

Customer Value vs Shareholder ValueCustomer Value vs Shareholder Value





AGENDA AGENDA

P.10P.10

ADDED VALUEADDED VALUE

Added Value : The extra features of an item of interest (product, service, …)

that go beyond the standard expectations and provide something “more”

Added Value : The extra features of an item of interest (product, service, …)

that go beyond the standard expectations and provide something “more”

+

-

+

-

ADDED VALUEADDED VALUE

INCOMEINCOME

EMBEDDED VALUE EMBEDDED VALUE

SHAREHOLDER VALUE SHAREHOLDER VALUE

CUSTOMER VALUE CUSTOMER VALUE

| P.11

MONEY OVER MONEY AND SALES COMMISSIONS ARE NOT ADDED VALUE

Full Service

Insurance

Branded Documentation

On Line services

Sales Support

Promotion & Marketing

Education

CRM / Pipeline managt

Specialist underwriting

Structuring

Reporting / Portf. managt

Asset Management

………

Traditional Loan

Operating Lease

Financial Lease

EEXXTTRRAA

IINNCCOOMMEE

P.11

THINK ADDED VALUE

CUSTOMER & SHAREHOLDER SATISFACTION CUSTOMER & SHAREHOLDER SATISFACTION

GGOOOODDWWIILLLL

SSAATTIISSFFAACCTTIIOONN

BBAARRRRIIEERRSS

CCUUSSTTOOMMEERR

VVAALLUUEE

SSHHAARREEHHOOLLDDEERR

VVAALLUUEE

| P.12

PP

RR

OO

FF

II

TT

Cost of eggs

ADDED VALUE = INNOVATION ADDED VALUE = INNOVATION

THINK GASTRONOMY

Cost of eggs + ingredients

Selling Price

2 €

7 €

12 €

22 €

16 €

53 €

84 €

P.12

SSAATTIISSFFAACCTTIIOONN

P.13

Why such a question ?Why such a question ?






AGENDA AGENDA

P.14P.14

THINK BUSINESS SEGMENTBUSINESS SEGMENT

PORTFOLIO SEGMENTATIONPORTFOLIO SEGMENTATION

Assed Value Proposition

Financial products

Specific structures

Added Value services

Financial products

Specific structures

Added Value services

Business Sector

Industry sectors

Asset types

Industry sectors

Asset types

DistributionChannel(s)

Direct

Bank

Vendors

Dealers

…..

Direct

Bank

Vendors

Dealers

…..

Loan x AGRI x DEALERLoan x AGRI x DEALER

SW Lease x IT x MANUF SW Lease x IT x MANUF

FL x REAL ESTATE x DIRFL x REAL ESTATE x DIR

OL x CONSTR x DIRECTOL x CONSTR x DIRECT

FMV L x CAR x DEALER FMV L x CAR x DEALER

Full S x TRUCK x DEALERFull S x TRUCK x DEALER

FMV L x IND x BANKFMV L x IND x BANK

……………………

BUSINESS SEGMENTS

P.15





Business segments economical Return Value and Strategic ValueBusiness segments economical Return Value and Strategic Value


AGENDA AGENDA

P.16P.16

STRATEGIC AND ECONOMICAL VALUE STRATEGIC AND ECONOMICAL VALUE

+

-

+

-

STRATEGIC VALUESTRATEGIC VALUE

ECONOMIC VALUE ECONOMIC VALUE

LONG TERMLONG TERM

SUSTAINABILITYSUSTAINABILITY

| P.17Eurolease Forum, Milano May 26th-17th

STRATEGIC VALUE

CORE NON CORE ?

4 KEY QUESTIONS FOR EACH BUSINESS SEGMENT

1. Aligned to asset and customer targets of the company ?

2. Long term sustainable business : solid market position ?

3. Level of added value services delivered and barriers to entry ?

4. Controllable risk (proved) ?

WEIGHTING ACCORDING TO PRIORITIES


P.17

P.18

ECONOMIC VALUEECONOMIC VALUE

CONSISTENT PROFITABILITY OVER 3 YEARS

P&L BY BUSINESS SEGMENT

PROFIT AND COST STRUCTURE DRIVEN BY CHANNEL

KEY RATIOS

INTEREST INCOME

OTHER INCOME

OPEX

COR

NET RESULT

ROE

P.19

BUSINESS SEGMENT PROFITABILITYBUSINESS SEGMENT PROFITABILITY

PPRROOFFIITT

RROOEE

PORTFOLIO VALUESPORTFOLIO VALUESPORTFOLIO VALUESPORTFOLIO VALUES

P.20







AGENDA AGENDA

|

2121

Managing the rubicube ?Managing the rubicube ?

BANK

BROK

SME

MCV

OL

RO

E

LOA

N

RVs

IVP

NEED TO TO MAKE CHOICES

FOCUS FOCUS FOCUS FOCUS FOCUS FOCUS FOCUS

REFOCUS ?REFOCUS ?

?

X Financial products : 5

X Structures : 5

X Clients profiles : 8

X Origination channels : 5

Industry segments : 10

Business Business

Segments !!Segments !!Business Business

Segments !!Segments !!

= 10 000= 10 000

P.21

|

PORTFOLIO OPTIMIZATION MATRIXPORTFOLIO OPTIMIZATION MATRIX

Strategichow to optimize

ROE ?

how to develop / capitalize?

New opportunities ?

Less

Strategic Close or sell ?Cash cow

or dispose ?

Less Profitable Profitable

+

-

+

-


ECONOMIC ECONOMIC

VALUE VALUE

LONG TERMLONG TERM


|

PORTFOLIO OPTIMIZATION MATRIXPORTFOLIO OPTIMIZATION MATRIX

Strategic

Less

Strategic

Less Profitable Profitable

+

-

+

-


ECONOMIC ECONOMIC

VALUE VALUE

LONG TERMLONG TERM


BS 1

BS2 BS 3

BS4 BS 4

BS 5

|

24

Take away … Take away … to avoid having to restructure portfolios to avoid having to restructure portfolios … … ….too often….too often

Think added valueThink added value

Customer satisfaction makes shareholders benefits

Customer satisfaction makes shareholders benefits

Put customer & shareholder value in Corporate objective

Put customer & shareholder value in Corporate objective

FOCUS , SELECT, ADD VALUE, …

Customers are strategic assets

Customers are strategic assets

Proactive strategic thinking

Proactive strategic thinking

Think Long Term Think Long Term

restructuring of leasing portfolios, keeping up with customer and shareholder demands

Documents

economical value

customer valuecustomer

level of added value

prof of eggsadded value

customer satisfactionp

customer targets

valueportfolio segmentation

business segment1