Presentation for Ellen Alemany

Bank Handlowy w Warszawie S.A.
December 2006
Agenda
Strategy and business highlights
Distribution channels
Corporate and Investment Bank
Consumer Bank
Financial snapshot after 3Q 2006
2
3
History of Citibank Handlowy
1870 – Bank Handlowy w Warszawie established as a privatelyowned joint stock company by a group of investors formed by
Leopold Kronenberg
1918-1939 – Bank Handlowy develops into the largest privatelyowned bank in Poland
1939-1945 – the Bank continues its operations despite WW2
1946-1966 – the State Treasury gradually increases its ownership of
the Bank to 100%
1963 – the Bank entrusted with an official monopoly on servicing
Poland’s foreign trade
Historical Head Office of the Bank, Warsaw, 7/9 Traugutta Street
1989 – the Bank diversifies its business towards
corporate lending and investment banking
1991 – Citibank enters the Polish market
1997 – reprivatisation and listing of Bank Handlowy w
Warszawie on the WSE
2000 – Citigroup acquires 85% stake in Bank Handlowy
2001 – Bank Handlowy w Warszawie merges with Citibank
(Poland); Citigroup’s stake in
Bank Handlowy increases to 89%
2003 – Legal name: Bank Handlowy w Warszawie SA, Citibank
Handlowy - single brand
Current Head Office of the Bank, Warsaw, 16 Senatorska Street
4
From past to present
6% (TOP 4 bank)
Merger in March 2001
Revenue Market Share
PLN 21.5 billion
Assets
3% (TOP 12 bank)
PLN 9.6 billion
14,000
Corporate Customers
2,000
240,000
Consumer Customers
45,000
156
Outlets
4,700
Employees
8
800
G
TS
Wealth
Platinum Management
Retail Banking
Commercial
Bank
CitiFinancial
5
6
Tailored branch network
Branch network currently – 230 branches
39
Corporate
22
Retail
Servicing
13
Joint branches
Branches that service CitiBusiness clients
Branch network in 2007
– 314 branches
127 branches servicing both
individual and corporate
customers
187 CitiFinancial branches
OVER 50% INCREASE IN THE NUMBER OF
BRANCHES SERVICING INDIVIDUAL CUSTOMERS!
106
CitiFinancial
85
Retail
Out of 85:
72 Multifunctional
12 CitiGold
1 Investment Center
Słupsk
Gdań
Gdańsk
Olsztyn
Szczecin
Biał
Białystok
Bydg
oszc
Warszawa
Zielona Poznań
Poznańz
Góra
Kalisz Łódź
Wrocł
Wrocław
Kielce
Katowice
Opole
Bielsk
oBiał
Biała
Lublin
Krakó
Kraków Rzeszó
Rzeszów
7
Citiservice
Specialised Citiservice team to handle corporate
clients’ queries and investigations over the phone
High standards of service: 99,48% customer calls
are answered within 10 seconds
Exceeding expectations by offering transaction
banking products based on client knowledge and
daily relationship
Personalised and tailored service for platinum and
global clients
User-friendly Interactive Voice Response option for
instant information and service
Investigations resolved untimely
3,5%
Calls abandoned & calls answered after 10 sec.
Benchmark
3,0%
3,5%
3,0%
2,5%
2,0%
2,5%
2,0%
CitiService
1,5%
1,5%
1,0%
0,5%
0,0%
1,0%
0,5%
0,0%
Apr
May
Jun
Jul
Aug
Sep
Benchmark
Oct
Answered untimely
Abandoned calls
Apr
May
Jun
Jul
Aug
Sep
Oct
8
CitiPhone
High standards in waiting time, waiting time for 80%
phone calls - below 20 seconds
Each day every tenth customer signs up for a new
service or product
Toll free CitiPhone number for customers calling
from abroad
Under CitiPhone – integration of electronic and
phone channels
Number of products and
services purchased via
CitiPhone
400,000
300,000
200,000
100,000
0
2004
2005
2006
2007
9
Strategy – closer to the Client
Alternative channels
Innovative access channels – BP gas stations,
malls
Outlets in companies – mini-branches
2007
100 BP gas stations
10 malls
20 Mini –branches
BP gas stations
1/9
5
6
4
1/9
2/23
8
4
7
4
4
1/6
1/9
10
11
CIB business model
Strong product coverage in all segments
Platinum
Segmentation
Criteria Turnover
($ MM)
>250
Product focus
Tailored / sophisticated
products
Market share
Product focus
20%
PLATINUM
Middle
Market
SME
GOLD
50-250
Tailored
7%
GOLD
SILVER
25-50
Hybrid
9%
SILVER
Standard-off
the shelf
9%
BLUE
BLUE
2-25
S
GT
CBG
Cash Mgmt
& Trade dominated
Revenue structure
Citibank Handlowy #1 on the corporate
market with 9% market share – first or
second position in 5 out of 7 categories
Other
PLATINUM
GTS
CBG
12
Platinum
The best Corporate Bank in Poland
Market
share
20%
Market position
High penetration and 90% satisfaction
PLATINUM
S
GT
GOLD
SILVER
BLUE
Citibank
Handlowy
Tailwinds
Strong economic growth (GDP, export,
foreign investments)
GRB investments
Regional expansion of some TTLC
EU membership (structural funds spending)
Experienced bankers and working London
link
Bank 1 Bank 2 Bank 3 Bank 4
Bank 5
Strategy
GRB – grow with increased flows and
investments protecting our high share of
wallet
TTLC penetration - influence, structure and
support TTLC clients’ long-term strategy
PSG – capture postponed investment in
infrastructure
FI – lead the development of structured
products
13
Platinum – key deals closed in 2006
Deals closed
Club-deal
Club-deal facility
facility
PLN
PLN 100
100 mn
mn
MLA
MLA
Revenue
Revenue bonds
bonds
IIII Tranche
Tranche
PLN
PLN 400
400 mn
mn
MLA
MLA
2006
2006
2006
2006
2006
2006
Acquisition
Acquisition of
of aa listed
listed
company
company
USD
USD 200
200 mn
mn
Financial
Financial Advisor
Advisor to
to the
the Buyer
Buyer
Bonds
Bonds program
program
&& Swap
Swap
USD
USD 250
250 mn
mn
MLA
MLA
Acquisition
Acquisition of
of EMAX
EMAX
PLN
PLN 480
480 mn
mn
Major
Major M&A
M&A transaction
transaction
2006
2006
2006
2006
2006
2006
MTN
MTN program
program
USD
USD 780
780 mn
mn
MLA
MLA (club-deal)
(club-deal)
Syndicated
Syndicated loan
loan
EUR
EUR 604
604 mn
mn
MLA
MLA
2006
2006
14
CBG
The engine of growth
Market
share
Revenue structure by sub-segment*
Gold
33%
PLATINUM
S
GT
GOLD
6.9%
SILVER
8.7%
BLUE
9.4%
Blue**
58%
Silver
9%
* 2006 September YTD
** Including Public Sector Clients
Strategy initiatives
Revenue growth supported by a number of
initiatives
- Sales & Trading
- Leasing
- Trade
Assets build- up
- New Credit Program Implementation – Collateral treatment,
Tenors, Sole Bank – solutions that help u return to the Market
- Further TM expansion
Customer Satisfaction
- Customized product offer for customers
- Faster Credit Approval Process
- Lower portfolio loading as a result of new sales model
implementation
Search for efficiency
- Business Sales Model redesigned
- Product Offer improvements – In GTS area
- New Senior Officer fully dedicated to most sophisticated credit
products ex. Corporate Finance
15
GTS Segment
The best in class for GRB customers
Revenue structure by sub-segment*
Market
share
FI
41%
PLATINUM
S
GT
GOLD
SILVER
GRB
59%
65%
BLUE
* 2006 July YTD
Strategy
Driven by quality and innovation
Revenue growth
-
Operating account strategy (multiproduct & volume
x-sell)
Client acquisition/wallet penetration within
relationship groups
Regional leverage for green field investments /
capturing of new clients & product development
Search for efficiency
RETAILERS
(hypermarkets)
70%
MARKET
SHARE
GRB
CORPORATE
1st or 2nd
bank
In banking
relationship
PENSION
FUNDS
75%
MARKET
SHARE
INSURANCE
- Decrease the average sales time by 15%
- All goals to be achieved with the same HC level
maintained
Customer satisfaction
65%
MARKET
SHARE
- Providing top-class banking service for client
coverage by relationship team (both local &
international)
16
Treasury
Customer business
Revenue structure after 3Q 2006
Customer Acquisition and attrition
management
Conversion of active customers and new
customer acquisition through on-line
trading platform
Platform capacity; Call Manager (IVR)
implementation to manage >10,000
customers
Gain/loss
on AFS
sale
12%
Trading
16%
Customer
72%
Trading
Maintain leading position in flow
business:
- Bond Market Making (market making
desk for Citigroup)
- IR Derivatives Market Making
- Foreign Exchange Market Making
Professional market products
FX
Debt
Derivatives
Risk Treasury
Long-term Euro zone convergence
Significant increase in risk taking due
to lower nominal yields
Management of excess liquidity and
improve yield on placements
Market share*
15-20%
10-15%
25%
Market position*
1
3
1
*estimates
17
18
Consumer Bank – segments
Customer
Segment
Product offer
High income
A
B
Very low
income C3/D
Credit cards, credit products,
insurance products
s
C2
Accounts, credit cards, credit products,
investment and insurance products
s
ine
Low
Income
us
ti B
Low incomeC1
CitiBanking
Ci
Medium
Middle
income
CitiGold Wealth Management, credit cards
A
CitiBlue
Credit products, insurance products
19
Consumer Bank – market position
2006
2006
Distribution of foreign
mutual funds
Wealth Management
2006
17%
The Bank’s share in revenue of
40%
retail banking segment in Poland(Q2, 2006)
83%
60%
4,3
%
2006
Value of credit card
transactions
2006
2006
95,7
%
Internet users
8%
27%
92%
73%
Citibank
Handlowy
Other banks
20
Credit cards
Number of cards issued
Number of transactions
12%
Transaction value
Citibank Handlowy
25%
27%
75%
73%
88%
* NBP data for 2Q 2006
637 thousand credit cards
issued as at Sept 30, 2006
Other banks
Credit cards average net receivables
MM PLN
32%
Differentiated offer!
Safest cards!
The biggest discount program
– 2400 points of sale!
3 Q0 5
4 Q0 5
1Q 0 6
2 Q0 6
3 Q0 6
21
Strategy – cards - even more
innovations
Cash loan on a credit card over the phone – unique
functionality in the market
Record interest in the product
How doest it work?
Product portfolio (in PLN million)
PLN 123 MM and
19 thousand of clients
Increasing the credit card limit on the basis on an
individual credit decision
Money available within 24 hours
Transfer of money to a personal account of the
customer’s choice
Repayment under the “Komfort” Installment Plan
Expansion of the target market to include:
CitiFinancial customers
students
the youth
New co-branded cards
The first in Poland car concierge for Individual customers
Number of clients
Product portfolio
Mar- 06
Oct- 06
22
Investment and Insurance products
Mutual Fund assets acquired
through the Bank
24%
3Q 05
Single Premium Unit
Linked
81%
3Q06
19%
81%
On-shore funds
Off-shore funds
3Q 05
Structured
Products
57%
3Q06
3Q 05
3Q06
Client choice in the best Polish
and foreign mutual funds:
Best return investment funds
Coherent investment management
Highly qualified and transparent
governance
Compliance with Citigroup
standards
23
Strategy – account
Mortgage loans and savings accounts
Online transfers free of charge
Account opening via the Internet – e-account
Multifunctional, transparent debit card (possibility to
perform non-cash transactions via the Internet)
2006
Number of e-statement users
increased by 60% (vs. Q3, 2005)
2007
Other
Other
20%
15%
80%
Transactions
via Internet
85%
1
24
Strategy – Clients – CitiFinancial
Mortgage loan
Credit card for CitiFinancial customers
About 60% increase in the number of
branches by the end of 2007
Number of CitiFinancial branches
120
100
80
60
40
Customer-friendly education program – „Droga
do dobrego kredytu”
[The Road to Good Credit]
20
0
2002
2003
Branches
2004
2005
2006
Authorized outlets
25
26
Almost 80% of the previous year
profit achieved after 3Q 2006
MM PLN
616
600
400
200
0
120
179
180
138
2005
485
142
107
4Q
3Q
2Q
1Q
236
3Q06
Source: Bank’s Financial Disclosures
27
Cumulative 3Q 2006 results
PLN MM
Net interest income
Net fee and commission income
Dividend income
Treasury
Other operating revenue
%
3Q 06
771.9
447.2
3.7
286.3
61.1
3Q 05
769.1
439.2
2.1
481.1
53.5
2.8
8.0
1.6
(194.8)
7.6
0.4%
1.8%
75.5%
(40.5%)
14.1%
1,570.1
(1,114.1)
1,745.0
(1,144.5)
(174.9)
(30.4)
(10.0%)
(2.7%)
117.2
47.6
4.1
0.1
39.3
-7.8
117.1
8.3
11.9
n.m.
21.1%
(152.9%)
625.0
632.2
(7.1)
(1.1%)
Corporate tax
(140.1)
(135.3)
4.8
3.6%
Net profit
484.9
496.9
(12.0)
(2.4%)
Recurring income
Expenses and depreciation
Income on fixed assets sale
Movements in provisions
Share in subs' profits
EBIT
Source: Bank’s Financial Disclosures, data in MM PLN
28
Ratios
3Q 2006
3Q 2005
VARIANCE
1,570
1,745
(10.0%)
Gross income, MM PLN
625
632
(1.1%)
Net income, MM PLN
485
497
(2.4%)
Return on Equity
11.2%
10.1%
Return on Assets
1.8%
1.8%
Cost / Income
66.5%
66.5%
Capital Adequacy Ratio
15.1%
14.6%*
Operating Income, MM PLN
* as at Dec 31, 2005
Source: Bank’s Financial Disclosures
29
Balance Sheet structure
Assets
32,9
Loans – nonfinancial
Loans - financial
Available for sale
Trading portfolio
Other assets
Liabilities
10%
36,4
10.3
9.6
32,9
3.4
(18%)
7%
6.5
(11%)
7.2
69%
5.8
17.3
3.7
3.5
1.7
5.3
31.12.05
30.09.06
31.12.05
(22%)
4%
4.6
36,4
2.8
Liabilities in
trading portfolio
17.9
Deposits – nonfinancial
Deposits - financial
12.2
5.2
5.9
10%
46%
7.6
2.9
5.2
30.09.06
Other Liabilities
Shareholders’ capital
Increase of non-financial loans due to retail loans increase
Significant increase of Available For Sale portfolio as a results of of execution of long-term
strategy of balance sheet interest rate risk management
Increase in both non-financial and financial deposits
Source: Bank’s Financial Disclosures, data in MMM PLN
30
Loans
Non-financial sector loans
26%
31%
74%
31.12.2005
Corporates
Individuals
30.09.2006
Corporate clients loans
Retails loans
-2,5%
8000
69%
24%
Market (excl.
mortgage)
Market
6000
9%
4000
2000
17%
2000
0
0
31.12.05
30.09.06
31.12.05
30.09.06
Source: Estimates, pro-forma data
31
Deposits
Non-financial sectors deposits
27%
25%
73%
31.12.2005
Corporates
75%
Individuals
30.09.2006
Non-Financial Corporate deposits
Individuals’ deposits
Market
Market
4%
6000
12000
12%
8000
2000
0
0
30.09.06
Source: Estimates, pro-forma data
5%
4000
4000
31.12.05
2%
31.12.05
30.09.06
32
Expenses under control
1140
940
740
1,040
-2%
1,015
68
43%
98
437
-4%
419
540
CitiFinancial
GCB
CIB
340
534
-7%
498
140
-60
3Q05
3Q06
Corporate segment costs under control, decrease of technology and telecommunication
costs
Positive effects of restructuring actions in retail, even better visible with 12% decrease
3Q06/3Q05
Further branch network expansion in CitiFinancial
Source: Bank’s Financial Disclosures, data in MM PLN
33
Cost of Credit
Loans portfolio quality
Impairment split as at 30 Sept 2006
19000
26%
17000
15000
Not at risk
loans
13000
11000
9000
7000
At risk of
impairment
5000
Provisions
74%
Individual Impairment loss
Portfolio approach
3000
13%
1000
12%
-1000
-3000
2005
3Q06
Provision coverage
ratio
31.12.2005
30.09.06
81%
80%
Decrease of loans at risk of impairment
Source: Bank’s Financial Disclosures, data pro-forma
34
Cumulative 3Q 2006 results
Corporate and Investment Bank
MM PLN
I/(D)
3Q06
3Q05
Results on activity
887
1,110
One-off events
105
Expenses and depreciation
Provisions
Gross profit
Assets
Liabilities
-
I/(D)
1140
%
(223)
105
(570)
(608)
(38)
73
68
5
495
570
(75)
32,768
29,900
28,750
25,216
4,019
4,684
(20%)
940
449
(6%)
7%
540
Fee income increase on cash products and custody business
along with lack of sold HanZa / TFI commissions (PLN 35 MM
in cumulative 3Q 2005) and worse result on brokerage
operations;
Result on Treasury caused by lower revenues from AFS selloff due to unfavourable market conditions. Additionally, lower
revenues on trading portfolio
258
260
-10%
233
352
- 4%
337
340
140
- 43%
740
(13%)
14%
19%
Result on activity,
MM PLN
-60
3Q05
3Q06
Other operating income
Result on financial oper.
Fee Result
Interest Result
Source: Bank’s Financial Disclosures, data in MM PLN
35
Cumulative 3Q 2006 results
Consumer Bank
MM PLN
Results on activity
I/(D)
3Q06
3Q05
547
546
One-off events
Expenses and depreciation
Provisions
Gross profit
Assets
Liabilities
20
(445)
122
2,765
6,194
-
%
600
1
-
20
-
500
400
(467)
(22)
(5%)
(16)
16
n.m.
300
59
476
(36)
92%
21%
(1%)
200
64
2,289
6,230
Result on activity,
MM PLN
I (D)
33
174
15%
38
16%
201
341
315
-8%
100
0
3Q05
Increase of interst result in 3Q 06 vs 2Q 06 due to assets
volume growth
Increase in fee revenue on investment and insurance
products
Positive results of restructuring actions, even better
visible with 12% decrease 3Q06/3Q05
3Q06
Result on financial oper.
Fee Result
Interest Result
Source: Bank’s Financial Disclosures, data in MM PLN
36
Cumulative 3Q 2006 results
CitiFinancial
MM PLN
I/(D)
I (D)
3Q06
3Q05
Results on activity
132
81
51
63%
Expenses and depreciation
(99)
(69)
30
43%
Provisions
(25)
(13)
(12)
95%
Gross profit
Assets
Liabilities
8
826
265
(1)
529
122
%
9
297
143
n.m.
56%
118%
125
100
75
119
57%
25
0
3Q05
Interest Result
1Q 0 6
5
76
59%
4 Q0 5
2 Q0 6
3 Q0 6
13
158%
50
Significant increase of cash loans receivables
3 Q0 5
Result on activity,
MM PLN
3Q06
Fee Result
57% interest result increase
and 158% fee results
increase due to
significantly larger portfolio
Further expansion of
outlets’ network – 9
branches and 2 points of
sale in 3Q 06
Source: Bank’s Financial Disclosures, data in MM PLN
37
Share price / market ratios
Market ratios
Market capitalization:
PLN 10.3 bn ($ 3.6 bn)
P/E 17.03 (banking sector average: 21.6)
P/BV 2.02 (banking sector average: 3.8)
Volume
Stock Price (PLN)
75
1,000
BHW stock price
800
70
600
65
400
60
200
A
ug
us
t/0
Se
6
pt
em
be
r/0
6
O
ct
ob
er
/0
N
6
ov
em
be
r/0
6
Ju
ly
/0
6
M
ay
/0
6
Ju
ne
/0
6
Fe
br
ua
ry
/0
6
M
ar
ch
/0
6
A
pr
il/
06
ar
y/
06
Ja
nu
be
r/0
5
ec
em
be
r/0
5
D
ov
em
N
ct
ob
O
em
Se
pt
er
/0
5
0
be
r/0
5
55
Stocks (thousands)
1,200
80
38
Shareholders structure changes
Current shareholders structure
23%
COIC
2%
IFA
Pozostali
75%
10.2 pp higher free-float as compared
to the end of 2Q 06
12.7 pp out of 14.33% BHW shares
available for exchange has been
converted
Current total free float: $ 835 MM
As at 8 Dec, 2006
Shareholders changes
2004: Citibank N.A. issued $ 437
MM notes exchangeable to
Citibank Handlowy shares, shares
transfer to IFA, (voting right limited
to 75%)
2006: Notes were exchanged till
December 1 (on Dec 7 notes were
redeemed)
Total potential free float at the year end: $ 890 MM
Citigroup
Other shareholders
25%
75%
39
Investor Relations
Sławomir Sikora
President of the Management Board
Lidia Jabłonowska-Luba
Management Board Member, CFO
Katarzyna Otko-Dąbrowska
Investor Relations
citibank handlowy
Bank Handlowy w Warszawie S.A.
Ul. Senatorska 16
00-923 Warszawa
Polska
Tel. +48 (22) 657 72 00
www.citibankhandlowy.pl
RelacjeInwestorskie@citigroup.com
40