Goldman Sachs QuantumSM European Banks Team

Transcription

Goldman Sachs Quantum
European Banks Team
"
"
February 24, 2005
Coverage view: Attractive
GOLDMAN SACHS
INTERNATIONAL IS ACTING AS
ADVISOR TO ABSA GROUP
LIMITED ("ABSA") IN THE
PROPOSED SALE OF A
MAJORITY STAKE IN ABSA TO
BARCLAYS BANK PLC.
GOLDMAN SACHS
INTERNATIONAL IS ACTING AS
FINANCIAL ADVISOR TO DANSKE
BANK IN THE PROPOSED
ACQUISITION OF NORTHERN
BANK AND NATIONAL IRISH
BANK FROM NATIONAL
AUSTRALIA BANK
James Fotheringham
[email protected]
London: 44-20-7552-1292
William A. Mejia
London: 44-20-7552-9363
Richard Ramsden
London: 44-20-7774-1279
Goldman Sachs
Global Investment Research
SM
Focus on earnings
growth
Apples and pairs. We expect three themes – consolidation, restructuring, and valuation
divergence – to distinguish performance among banks within an outperforming sector. In
this context, we update our long-only model portfolio and highlight our top pair trade ideas.
Our new portfolio comprises RBS, UBS, Credit Agricole, BNP Paribas, SanPaoloIMI,
Capitalia, BPM and Deutsche Postbank (all OP/A).
Industry consolidation seems imminent
Extraordinary share price performance can be inspired by premium bids (for targets) or earnings upgrades from accretive
purchases (for acquirers); recent activity suggests that the sector may be on the cusp of a consolidation wave, and we expect bank
stocks to move accordingly. Among the potential consolidators, we favour BNP Paribas (OP/A) over ABN AMRO (IL/A); among
the potential targets, we favour Deutsche Postbank (OP/A) over Commerzbank (U/A), and small Italian over small Iberian banks.
Not all restructuring stories are the same
We find that some restructuring plans are more credible than others; we prefer Credit Suisse (IL/A) over Deutsche Bank (U/A),
HVB Group (IL/A) over Commerzbank (U/A), Credit Agricole (OP/A) over ABN AMRO (IL/A), and in Italy we prefer
UniCredito, SanPaoloIMI, Capitalia and BPM (all OP/A) over BPVN (U/A) and Intesa, BNL and Antonveneta (all IL/A).
Valuation divergence looks unsustainably high among some bank pairs
Valuation divergence across the sector rebounded to the long-term average during 2H2004; but some bank pairs overshot this trend
and look due to correct (i.e. converge). We favour BNP (OP/A) over SocGen (IL/A) and Santander (IL/A) over BBVA (IL/A).
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contact your investment representative.
Banks
Europe
Name
Analysts
Richard Ramsden
Focus
Investment Banks and Asset Gatherers
+44 20 7774-1279
James Fotheringham
+44 20 7552-1292
James Chappell
[email protected]
[email protected]
Italy, Spain, Portugal
+44 20 7552-9360
Frederik Thomasen
[email protected]
UK Domestic & Global, Ireland
+44 20 7552-9326
Domenico Vinci
[email protected]
Nordic, France
+44 20 7552-3723
Christoffer Adams
[email protected]
Thematic Sector Research
+44 20 7552-9363
Sasu Jarvinen
[email protected]
Germany, Austria
+44 20 7774-6324
William Mejia
[email protected]
UK Domestic & Global, Ireland
+44 20 7552-2838
Jernej Omahen
[email protected]
Investment Banks and Asset Gatherers
+44 20 7051-1990
[email protected]
Marketing Analysts/Specialist Sales
Gregor Lanz
European Financials, Research
+44 20 7552-1754
Robin Wrench
[email protected]
Assistant
+44 20 7774-5201
Team fax:
Team e-mail:
[email protected]
Assistant
+44 20 7774-1736
Holly Wilkes
[email protected]
Business unit administrator
+44 20 7774-1155
Ashleigh Beddy
[email protected]
Global Financials, Equities
+44 20 7774-5278
Assistants
Liz Palmer
June 8-10, 2005
Italy, Spain, Portugal
+44 20 7552-5785
Julian Livingston-Booth
[email protected]
INVITATION
Nordic, France
+44 20 7552-1345
Alessandro Santoni
[email protected]
UK Domestic & Global
+44 20 7552-1359
Christoffer Malmer
[email protected]
Thematic sector Research
[email protected]
+44 20 7552-7277
[email protected]
Goldman Sachs Global Investment Research - February 24, 2005
Goldman Sachs European Financials Conference
Navigating the Sea of Change
Hotel Puente Romano z Puerto Banus z Spain
June 8 - Insurance z June 9, 10 - Banks
Europe
Banks
Table of contents
1 Executive summary: Apples and pairs
3 Part I: What to own?
13 Part II: Reiterating our Attractive coverage view; screening for GARP
22 Part III: Three themes to distinguish performance among banks
39 Part IV: Screening the banks
49 Sector valuation tables
71 Austria
75 Benelux
79 France
87 Germany
99 Ireland
105 Italy
131 Nordic
145 Portugal
149 Spain
159 Switzerland
165 United Kingdom
185 Disclosures
Forecasts shown in this report for AIB, B&B, Danske, Nordea, and SHB were correct as of February 15. However, these have since been adjusted post results.
The prices in this report are based on the market close of February 15, 2005.
Europe
Banks
Europe
Banks
Executive summary: Apples and pairs
We expect three themes – consolidation, restructuring, and valuation divergence – to distinguish performance among
banks within an outperforming sector. In the context of these themes, we update our long-only model portfolio (given 100
units to invest with a greater-than-three-month view), which now comprises RBS, UBS, Credit Agricole, BNP Paribas,
SanPaoloIMI, Capitalia, BP Milano and Deutsche Postbank (all OP/A). We also highlight nine pair trade ideas that were
inspired by each of these three themes.
Reiterating our Attractive coverage view; our portfolio strategists also remain Overweight banks
Our portfolio strategists remain Overweight the banks as GARP screens are back in fashion (in which banks perform well),
high cash yield remains a worthy investment theme (and many banks offer shareholder-friendly capital policies), and investors
seek shelter from two worrying macro-trends (high oil prices and a falling US dollar) to which the banks have limited exposure.
However, there are several potential risks to our bullish sector stance; these include macro risk in Germany (i.e. surprisingly large
corporate provisions), rising price competition on deposits, sudden rate moves in Euroland, a US dollar rally, credit card regulation
(mainly a UK issue), and potential forced consolidation within the industry that could destroy value.
Pan-European banks poised for consolidation?
Cash generation and strong balance sheets have become a hallmark of the European banks; we expect increasing dividends
and share buybacks to drive performance this year. But premium bids (for targets) or earnings upgrades from accretive purchases
(for acquirers) would generate the greatest scope for outperformance. Recent activity – e.g., Santander (IL/A) and Abbey, Danske
Bank (NR) in Ireland – suggests that the sector may be on the verge of a consolidation wave. Among the potential buyers, we
favour BNP Paribas (OP/A) over ABN AMRO (IL/A); among the potential targets, we favour Deutsche Postbank (OP/A) over
Commerzbank (U/A), and small Italian – e.g., Capitalia (OP/A), BPM (OP/A) and Credem (IL/A) – over small Iberian banks –
e.g., Bankinter (U/A), Banco Popular Espanol (IL/A) and BCP (U/A).
Some restructuring plans are more credible than others
Four of the five top performing banks last year were plays on a restructuring theme; while restructuring stories are likely
to remain in vogue this year, we expect the market to be more discerning than it seemed to be in 2004. Some restructuring
plans appear more credible than others, and we believe investors will start to distinguish among them. We prefer Credit Suisse
(IL/A) over Deutsche Bank (U/A), HVB Group (IL/A) over Commerzbank (U/A), Credit Agricole (OP/A) over ABN AMRO
(IL/A). In Italy, we would prefer UniCredito, SanPaoloIMI, Capitalia and BPM (all OP/A) over Intesa, BNL and Antonveneta (all
IL/A) and BPVN (U/A).
1
Europe
Banks
Valuation divergence looks unsustainably high between some bank pairs
Valuation divergence across the sector rebounded in 2H2004, when the coefficient of variation (CoV) of two-year-forward
P/E multiples for the banks rose from 19% to 32% (versus a ten-year average of 28%). However, certain bank pairs overshot this
trend and look due to correct (i.e. converge). Among these, we favour BNP Paribas (OP/A) over Societe Generale (IL/A) and
Santander (IL/A) over BBVA (IL/A).
2
Europe
Banks
Part I: What to own?
We introduced the new Goldman Sachs pan-European banks long-only model portfolio on January 14, 2005 (in PanEuropean Banks: The Weekly Check Book). Here we update our portfolio, and we also highlight preferences between banks
pairs, relative to the three themes – consolidation, restructuring, and valuation divergence – that we believe will
distinguish performance among banks this year.
Given 100 units to invest (long-only) with a greater-than-three-month view…
We highlight the eight names that make up our model portfolio. Given 100 units to invest in a long-only portfolio with a
greater-than-three-month view, we would hold the following stocks in proportion to the following relative weightings: RBS (25
units), UBS (20 units), Credit Agricole (15 units), BNP Paribas (10 units), SanPaoloIMI (10 units), Capitalia (10 units), BPM (5
units) and Deutsche Postbank (5 units), all of which we rate OP/A. These weightings reflect both our relative conviction in each
investment idea, as well as more practical considerations (e.g., liquidity constraints).
Since inception (January 14, 2005), our model portfolio has provided 6.1% in absolute performance, or 1.1% performance relative
to the FTSE banks index.
Exhibit 1:
We update our Goldman Sachs pan-European banks long-only model portfolio, given 100 units to invest with a greater-than-three-month view
Rating
TLE
RBS
UBS
Credit Agricole
BNP Paribas
SanpaoloIMI
Capitalia
BPM
Deutsche Postbank
OP/A
OP/A
OP/A
OP/A
OP/A
OP/A
OP/A
OP/A
Mkt. cap
Price
(EUR mn) (Feb 15)
83,386
75,277
33,582
49,838
16,551
8,317
2,835
5,904
1,823
103.70
22.79
56.30
11.22
3.76
6.83
36.00
Price
Incep.
Weight
(units)
1,732
94.40
22.96
55.00
10.58
3.29
6.55
25
20
15
10
10
10
5
5
Portfolio
Pan-European average (market cap weighted)
GS P/E (x)
2005E 2006E
P/TBV (x) Div Yld
2005E
2005E
Absolute price performance (%)
1M
3M
12M
YTD
9.0
10.8
9.3
9.9
13.4
13.9
11.4
12.3
7.9
9.4
8.2
9.3
11.9
11.6
9.7
10.9
3.5
5.2
2.4
1.9
1.8
1.3
1.4
1.2
3.6%
3.2%
2.4%
4.0%
4.3%
3.4%
2.2%
4.1%
5.3
9.9
-0.7
2.4
8.6
14.4
4.3
8.4
10.7
11.4
9.4
10.2
2.9
2.6
3.4%
3.8%
5.0
11.4
10.4
-3.1
4.3
6.6
26.5
16.0
9.3
12.5
7.1
10.7
9.8
7.0
66.9
31.6
N/A
4.1
8.8
2.7
5.6
5.8
11.6
4.8
10.8
6.1 Since Inception
8.0
14.0
5.2
Relative (FTSE banks) perf. (%)
1M
3M
12M
YTD
0.2
4.6
-5.5
-2.5
3.4
8.9
-0.7
3.2
3.2
2.3
-10.3
-3.4
-1.3
17.1
7.4
1.2
-1.2
-6.0
-2.8
-3.6
-6.1
46.6
15.6
N/A
-1.2
3.3
-2.5
0.3
0.5
6.0
-0.5
5.2
1.1 Since Inception
Source: Datastream, Goldman Sachs Research estimates.
3
Banks
Europe
Selected metrics: RBS vs.
European market-cap weighted avg
T1 ratio
(04)
GS ROAE
(05E)
2.0
1.5
1.0
0.5
0.0
Div.
yield (05E)
GS ROAA
(05E)
RBS (OP/A), fair value 2332p, implied upside 28%
RBS is the most attractively valued stock in our coverage universe (trading at a 23% discount to the sector on
2006E P/E). We forecast strong income growth (despite US dollar weakness), improved efficiency and better credit
trends, and expect ongoing investments (the bears’ current focus) to inspire better cost/income in 2005. On all our
valuation metrics, RBS is the standout among domestic UK banks. In addition to valuation support, RBS incurs less
forecasting risk than the other UK banks given its greater earnings diversity (by business line and geography).
GS P/NAV
(05)
GS P/E (06E)
Source: Datastream, Goldman Sachs Research
estimates.
Selected metrics: UBS vs.
T1 ratio
(04)
GS ROAE
(05E)
2.0
1.5
1.0
0.5
0.0
GS ROAA
(05E)
GS P/NAV
(05)
Div.
yield (05E)
UBS (OP/A), fair value SFr120, implied upside 16%
UBS remains our preferred European broker. We believe that UBS offers the best risk/reward trade-off of our three
European brokerage stocks; our SOTP valuation indicates 16% potential upside at UBS, compared with 8% at Credit
Suisse and 0% at Deutsche Bank. In addition, we do not believe that the market has sufficiently recognised the value of
UBS’ private banking operations; in our view, UBS is better poised than its peers for long-term growth given the
sizeable investment in its onshore private banking network. It trades on 9.4x 2006E earnings (an 8% discount to the
sector) and offers a 9% yield for 2005E (including dividend and share buybacks). Since 1999, UBS has returned more
than 100% of cumulative net income to shareholders via dividends and buybacks, and we do not anticipate any change
to this generous capital policy.
GS P/E (06E)
estimates.
4
Banks
Europe
Selected metrics: Credit Agricole
vs. European mkt-cap wtd avg
GS ROAE
(05E)
1.5
T1 ratio
(04)
1.0
0.5
GS ROAA
(05E)
Credit Agricole (OP/A), fair value EUR31, implied upside 34%
Credit Agricole is a growth story and a restructuring story all in one. While revenue momentum in domestic retail,
consumer finance and asset management (along with further merger- and non-merger related cost improvements) drives
gross operating profit, integration within CIB is running ahead of plan (we expect to see the full impact of 2004E
synergies this year, while consensus estimates currently suggest continued weakness in CIB revenues). Our sum-of-theparts-derived fair value implies a compelling 34% potential upside, and valuation (8.2x 2006E cash earnings) remains
supportive.
0.0
GS P/NAV
(05)
Div.
yield (05E)
GS P/E (06E)
estimates.
Selected metrics: BNP vs.
GS ROAE
(05E)
1.5
T1 ratio
(04)
1.0
0.5
GS ROAA
(05E)
0.0
BNP Paribas (OP/A), fair value EUR65, implied upside 15%
BNP Paribas benefits from a healthy distribution of revenue streams: 30% Corporate and Investment Banking,
28% International Retail Banking, 27% Domestic Retail Banking, and 15% Asset Gathering (all 2004E). We expect that
a benign French macro environment will continue to drive strong domestic Retail Banking revenues, while improving
corporate loan growth will inspire steady development within Corporate and Investment Banking. We favour BNP
Paribas over SocGen (IL/A) due to its greater earnings visibility (from consolidation of US-based acquisitions), lower
CIB volatility (CIB returns are 20% less predictable at SocGen than at BNP Paribas), and valuation (BNP trades at a 4%
discount to SocGen, on 2006E P/E multiples).
GS P/NAV
(05)
Div.
yield (05E)
GS P/E (06E)
estimates.
5
Banks
Europe
Selected metrics: SanPaoloIMI vs.
European mkt-cap weighted avg
Our positive stance on SanPaoloIMI is inspired, in part, by our confidence in the capacity of the new General
Manager (Mr Modiano) to do for SanPaoloIMI what he did for UniCredito (OP/A); that is, we expect Mr Modiano’s
GS ROAE
(05E)
1.5
T1 ratio
(04)
1.0
0.5
GS ROAA
(05E)
0.0
Div.
yield (05E)
SanPaoloIMI (OP/A), fair value EUR11.7, implied upside 4%
GS P/NAV
(05)
arrival to correspond with an increase in SanPaolo’s risk appetite, driving corporate loan growth (up to sector standards)
and higher-margin lending (from structured solutions, add-on services and fees). We estimate the potential impact of this
‘Modiano effect’ at EUR170 mn incremental net earnings (not in our current forecasts) from the commercial banking
division. This opportunity is non-trivial in a group context, adding a potential 10% to 2006E group net income or
EUR1.8 bn to market value (EUR0.96 per share), which increases the implied upside (relative to SOTP-derived fair
value) from 4% to 13%.
GS P/E (06E)
estimates.
Selected metrics: Capitalia vs.
GS ROAE
(05E)
1.5
T1 ratio
(04)
1.0
0.5
GS ROAA
(05E)
0.0
Div.
yield (05E)
Capitalia (OP/A), fair value EUR3.9, implied upside 4%
Capitalia is growing revenues while cutting costs. We estimate that a new lay-off plan could add 8.4% to Capitalia’s
market value; meanwhile, we remain confident in Capitalia management’s ability to drive revenues from current (low)
levels. As management focus has shifted from the balance sheet to the top line, we see opportunities from (1) increased
mortgage sales, assuming that Banca di Roma can improve its sales rate from the current level of one mortgage per
branch per month, (2) improved funding costs at Banco di Sicilia, where it currently pays 66 bp above the sector
average, (3) growth in customer deposits, leading to a 120 bp potential mark-down, and (4) an increased AuM ratio at
Banco di Sicilia.
GS P/NAV
(05)
GS P/E (06E)
estimates.
6
Banks
Europe
Selected metrics: BPM vs.
BPM could benefit from further consolidation speculation, in addition to increasing market confidence in the
new CEO’s (five-point) business plan: (1) improving cost/income to 65% (from the current 79%) by 1H2005; (2)
GS ROAE
(05E)
1.5
T1 ratio
(04)
1.0
0.5
BPM (OP/A), fair value EUR7.6, implied upside 11%
GS ROAA
(05E)
growing net profit to EUR279 mn by 2006; (3) internal restructuring aimed at cutting foreign branches and IT costs; (4)
headcount reduction target of (minimum) 300 employees; and (5) intention to harvest (low-yielding) financial assets to
fund retail lending.
0.0
Div.
yield (05E)
GS P/NAV
(05)
GS P/E (06E)
estimates.
Selected metrics: DPB vs.
GS ROAE
(05E)
1.5
T1 ratio
(04)
1.0
0.5
GS ROAA
(05E)
Deutsche Postbank (OP/A), fair value EUR38, implied upside 6%
Deutsche Postbank is a growth story with good management. Postbank has cheap funding, nationwide distribution,
a pure retail mix, and a cost advantage over its domestic competition; as a result, we believe that Postbank is a
structurally more profitable business than the German operations of its peers, Commerzbank (U/A) and HVB Group
(IL/A). Our SOTP-derived fair value implies 6% upside from current levels, but this upside does not reflect three
positive catalysts (potential re-deployment of surplus liquidity, rate gearing option, and consolidation speculation)
which investors currently get “for free”.
0.0
Div.
yield (05E)
GS P/NAV
(05)
GS P/E (06E)
estimates.
7
Europe
Banks
Three themes – consolidation, restructuring, and valuation divergence – drive our pair preferences
Recent corporate activity suggests that the banks sector may be on the cusp of a consolidation wave; among the potential
consolidators, we favour BNP over ABN; among the potential targets, we favour DPB over Commerzbank, and small Italian over
small Iberian banks. We find that some restructuring plans are more credible than others; we prefer Credit Suisse over Deutsche
Bank, HVB over Commerzbank, Credit Agricole over ABN, and in Italy we prefer UniCredito, SanPaoloIMI, Capitalia and BPM
over BPVN, Intesa, BNL and Antonveneta. Valuation divergence looks unsustainably high for some bank pairs; we favour BNP
over Societe Generale and Santander over BBVA.
Exhibit 2: We introduce our top nine pair trades
Stock preferences, driven by the three themes that we believe will distinguish performance among banks
CONSOLIDATION
RESTRUCTURING
VALUATION DIVERGENCE
BNP
Paribas
over
ABN
Amro
Credit
Suisse
over
Deutsche
Bank
Santander
over
BBVA
Deutsche
Postbank
over
Commerzbank
HVB
Group
over
Commerzbank
BNP
Paribas
over
Societe
Generale
Credit
Agricole
over
ABN
Amro
UniCredito
SanPaolo
Capitalia
BPM
over
Intesa
BPVN
BNL
Antonveneta
Capitalia
BPM
Credem
over
Popular
Bankinter
BCP
Source: Goldman Sachs Research estimates.
8
Europe
Banks
Stock preferences relative to Theme #1: Consolidation
Cash generation and strong balance sheets have become a hallmark of the European banks; we anticipate increasing
dividends and buybacks to drive performance this year. But the greatest hope for performance lies in the prospect for
premium bids (for targets) or earnings upgrades from accretive purchases (for acquirers). Recent activity – e.g.,
Santander (IL/A) and Abbey, Danske Bank (NR) in Ireland – suggests that the sector may be on the verge of a
consolidation wave. In this context, we favour:
•
BNP Paribas (OP/A) over ABN AMRO (IL/A): Both are likely consolidators (as opposed to targets); however, BNP Paribas has
greater purchasing power in the form of surplus capital (we estimate EUR5.3 bn for BNP versus EUR3.0 bn for ABN), a better
track record on valuation discipline (BNP’s last three deals are estimated to be accretive in year one), and a more developed
growth platform on which to build by strategic acquisition (BancWest now accounts for over 10% of forecast group net income at
BNP Paribas).
•
Deutsche Postbank (OP/A) over Commerzbank (U/A): In our view, cross-border consolidation involving German banks is
unlikely because the German banks are expensive, the political resistance to a potential intruder could prove formidable, and
the financial gains for a foreign acquirer would likely be limited (given the paltry retail penetration and massive wholesale
assets held by HVB Group, Deutsche Bank and Commerzbank). We consider domestic consolidation a more likely scenario.
We see the German banks suffering from three key problems: limited retail market share, funding risk from high loan/deposit
ratios, and unfavourable wholesale-dominated business mixes. In this context, an ideal domestic target would offer high retail
penetration, a liquid balance sheet, and a retail-dominated business mix. These are the characteristics of Deutsche Postbank
(along with the regional savings banks, which cannot be bought for legal reasons). While both stocks have benefited from
consolidation speculation, we believe it is Deutsche Postbank (rather than Commerzbank) that characterises a potentially
attractive acquisition target under a (more likely) scenario of domestic consolidation.
•
Capitalia (OP/A), BP Milano (OP/A) and Credem (IL/A) over Bankinter (U/A), Banco Popular Espanol (IL/A) and BCP
(U/A): Small Italian banks, along with small Spanish and Portuguese banks, have been supported by consolidation speculation;
however, we believe consolidation involving the Italian banks is more likely. Small Spanish banks (average 12.4x 2006E cash
earnings) trade at an even greater premium to the sector (10.3x) than do small Italian banks (11.3x). The potential for
significant cost synergies is greater for the less efficient small Italian banks (average cost/income 70%) than it is for the
Iberian targets (average cost/income 52%). In addition, we see greater opportunities for top-line growth at Italian versus
Spanish and Portuguese banks, given their greater scope to increase SME lending as the Italian economy recovers, and to
expand the mortgage and consumer finance businesses, which remain relatively underpenetrated in Italy.
9
Europe
Banks
Stock preferences relative to Theme #2: Restructuring
plans appear more credible than others, and we believe investors will start to distinguish among them. Therefore, we
prefer:
•
Credit Suisse (IL/A) over Deutsche Bank (U/A): We believe that the comparison between Deutsche Bank and Credit Suisse
has become more relevant now that both stocks are viewed as restructuring stories. In our view, Credit Suisse is a more
attractive story than its German peer for four reasons: (1) Credit Suisse still has non-core assets of which it intends to dispose
(e.g., Winterthur), while Deutsche Bank’s strategy of disposing of non-core businesses is almost complete; (2) Credit Suisse is
just beginning to resume its strategy of returning capital to shareholders via increased dividend payments and share buybacks,
while Deutsche Bank has already returned EUR7.9 bn to shareholders over the past three years; (3) there is greater room for
profit improvement at CSFB than there is for a turnaround at Deutsche Bank’s PCAM given the difficult operating
environment in Germany, the lack of acquisition candidates and the challenges associated with turning around Deutsche Asset
Management; and (4) we see greater valuation support for Credit Suisse, which trades at a 12% discount to Deutsche Bank on
our 2006E cash earnings multiples.
•
HVB Group (IL/A) over Commerzbank (U/A): The credibility of HVB Group’s restructuring plan was buttressed by the recent
arrival of two new managers. Christine Licci joined from Citigroup (NC), where she proved that not all German retail banking
operations need lack profitability (Citigroup’s consumer finance operation in Germany, managed by Licci, maintained an ROE of
around 30%); and Johann Berger joined from Hypo Real Estate (IL/A), where he successfully restructured a troubled domestic
business (by the sale of EUR3.6 bn of NPLs, significant cost reductions, etc.). In contrast, Commerzbank’s restructuring efforts,
which are focused on its investment banking operations, are proving rather painful. Commerzbank’s estimate of restructuringinspired revenue attrition (presented with its 3Q results) is looking increasingly conservative as headcount turnover in (profitable)
derivatives and ECM businesses continues to rise. In addition, prior to the recent headcount reductions, investment banking
accounted for 10% of group equity, 20% of revenues, 19% of direct costs and 30% of allocated costs. This final proportion (30%
of allocated costs) is the sticking point. Pre-restructuring, investment banking absorbed almost one-third of total back-office
expenses (flattering the performance of other divisions); post-restructuring, watch for rising costs, possibly in the corporate
centre.
•
Credit Agricole (OP/A) over ABN AMRO (IL/A): Contrary to the widespread post-acquisition skepticism articulated by some
investors who did not believe that tangible cost synergies could result from CIB integration, Credit Agricole management is
delivering ahead of plan (EUR300 mn in synergies were realised by end of September 2004 versus a full-year target of
EUR275 mn). We expect to see the full impact of 2004 integration this year and we believe that the integration-related revenue
trough should be behind us, contrary to consensus estimates which imply continued weakness in CIB revenues. ABN AMRO
10
Europe
Banks
management released a statement (December 16, 2004) indicating that headcount reductions from back-office and investment
banking operations (2,850 FTEs) would be greater than previously announced; however, related savings will not be realised
until 2007, there is still no word on potential revenue impact of these cuts, and the subsequent one-off charge (EUR790 mn)
has proven non-trivial in a year when revenues fell (versus 2003).
•
UniCredito, SanPaoloIMI, Capitalia and BPM (all OP/A) over Intesa, BNL and Antonveneta (all IL/A) and BPVN (U/A):
The Italian banking sector is awash with restructuring stories; but some appear more credible and/or promising to us than
others. For instance, UniCredito management is targeting (realistically, in our view) a 5% efficiency improvement to drive net
profit up to EUR3 bn by 2007; given its discount to the sector (on forward cash earning multiples), we believe that such
restructuring efforts will prove supportive for UniCredito shares. Our positive call on SanPaoloIMI is driven, in part, by our
confidence in the capacity of the new General Manager (Mr Modiano) to do for SanPaoloIMI what he did for UniCredito; that
is, we expect Mr Modiano’s arrival to correspond with an increase in SanPaolo’s risk appetite, driving corporate loan growth
(up to sector standards) and higher-margin lending (from structured solutions, add-on services and fees). For Capitalia, we
anticipate a restructuring announcement that could add more than 8% of incremental market value. We believe that the current
level of staffing is becoming unjustifiable; relative to the sector average, Capitalia (ex-Bipop) employs 35% more employees
per branch, and its staff cost / revenues ratio is 16% higher than its Italian peers. We are confident that BPM’s new CEO (Mr
Viola) will execute on his (five-point) business plan, which includes improving cost/income to 65% (from current 79%, the
highest among the Italian banks we cover) by 1H2005, growing net profit to EUR279 mn by 2006, internal restructuring aimed
at cutting foreign branches and IT costs, headcount reduction target of (minimum) 300 employees, and the intention to harvest
(low-yielding) financial assets to fund retail lending. Meanwhile, the restructuring efforts at Intesa and BPVN have run their
course, and Antonveneta (on 13.3x 2006E cash earnings) and BNL (on 11.6x) shares are trading at a 30% and 14% premium
to the sector (respectively), driven mainly by consolidation speculation.
Stock preferences relative to Theme #3: Valuation divergence
Valuation divergence across the sector rebounded in 2H2004, when the coefficient of variation of two-year-forward P/E
multiples for the banks rose from 19% to 32% (versus a ten-year average of 28%). However, some bank pairs overshot this
trend and look due to correct (i.e. converge). Among these, we favour:
•
BNP Paribas (OP/A) over Societe Generale (IL/A): Societe Generale’s premium to BNP Paribas (on 2005E cash earnings
multiples) has increased from 4% to 7% over the past 15 months; we believe this valuation gap is due to close. In contrast to
recent and relative P/E trends, we favour BNP Paribas over Societe Generale due to its greater earnings visibility (from
consolidation of US-based acquisitions), lower CIB volatility (CIB returns are 20% less predictable at Societe Generale than at
BNP Paribas), as well as valuation. Many investors justify BNP’s valuation discount to Societe Generale by acquisition risk;
however, we believe that the market has overplayed this risk. Over the past few years, BNP management has given us no reason
to doubt their valuation discipline, nor their commitment to bolt-on (accretive) deals, organic growth, dividends and buybacks.
11
Europe
Banks
•
Santander (IL/A) over BBVA (IL/A): BBVA’s premium to Santander (on 2005E cash earnings multiples) has increased from
2% to 17% over the past 15 months; we believe this valuation gap is due to close. Strong growth in LatAm is not enough to
justify BBVA’s elevated multiple, in our view, given concerns about domestic margin compression, increasing funding risk,
stretched capital, rising acquisition risk, balance sheet contraction, and slowing growth in customer loans and deposits. Many
investors justify Santander’s discount by execution risk on Abbey-related synergies; however, we believe that these risks are
more than matched by the valuation disparity between these two global banks.
12
Europe
Banks
Part II: Reiterating our Attractive coverage view; screening for GARP
Our portfolio strategists continue to recommend being Overweight the banks sector. Banks feature prominently in crosssector GARP (growth at a reasonable price) screens, which may be an influential investment decision tool this year,
following the outperformance of high yield stocks over the past few years. In addition, robust balance sheets, low risk of
non-performing loans, high dividend yields and share buybacks should continue to provide support. Meanwhile, banks
have become a defensive play, as investors seek shelter from a macroeconomic backdrop of high oil prices and a falling
US dollar anticipated during 2005.
GARP screens are back in fashion as investors reduce yield exposure
High yield was last year’s story; high yield stocks outperformed (by some 9%) in 2004, despite the market rally in the latter part
of the year (see Exhibit 3). Subsequent valuation compression across the market has provided an opportunity to move out of some
high yield areas.
Exhibit 3: High yield stocks outperformed by 9% last year (and by even more in previous years)
Relative performance: high yield versus low yield stocks across Europe
200
180
160
140
120
100
80
73
75
77
79
81
83
85
87
89
91
93
95
97
99
01
03
High Yield vs Low Yield
Source: Goldman Sachs Strategy Research, from “Portfolio Strategy: How to thrive in 2005” (December 13, 2004).
13
Europe
Banks
This outperformance has reduced the yield spread (Exhibit 4) that high yielding stocks offer (i.e. relative to low yielding stocks);
therefore, investors are reducing yield exposure and, we believe, looking for stocks that can offer GARP in 2005.
Exhibit 4: The yield spread on high yielding stocks has declined over the last year
Relative performance: yield spread (high versus low yield) relative to spread over real bond yields in Europe
8
14
7
12
6
10
8
5
6
4
4
3
2
2
0
1
-2
0
-4
73
77
81
85
89
93
Pan Europe: Yield spread of high and low yield baskets
97
01
Spread over real bond yields
Source: Datastream, Goldman Sachs Strategy Research, from “Portfolio Strategy: How to thrive in 2005” (December 13, 2004).
We are not suggesting that total return is an unworthy investment theme; on the contrary, we reiterate our Attractive coverage
view, in part, due to so many of the pan-European banks in our coverage universe offering shareholder-friendly capital policies
(see Exhibit 5). However, our strategists believe that a combination of value and growth (a GARP approach), will provide the best
returns this year; and the banks also screen well among sectors on this basis.
14
Europe
Banks
Exhibit 5: No fewer than 21 of our 46 banks under coverage offer 2005E total yield in excess of the pan-European (crosssector) average of 4.5%
Mkt. cap
(local mn)
Nordea (OP/A)
UBS (OP/A)
Alliance & Leicester (U/A)
UniCredito (OP/A)
Lloyds TSB (IL/A)
Dexia (IL/A)
HBOS (IL/A)
BNP Paribas (OP/A)
Barclays (NR)
Deutsche Bank (U/A)
RBS (OP/A)
Bradford & Bingley (U/A)
BMPS (IL/A)
ABN Amro (IL/A)
Credit Suisse (IL/A)
SanpaoloIMI (OP/A)
BPU (IL/A)
Intesa (IL/A)
HSBC (IL/A)
BPVN (U/A)
Societe Generale (IL/A)
20,090
108,270
3,941
26,649
27,394
19,527
33,103
48,216
36,867
34,915
55,263
2,056
6,023
35,062
56,581
15,607
5,225
21,060
97,159
5,396
33,581
Dividends paid
2005E
2006E
Buybacks
2005E
2006E
Dividend Yield
2005E
2006E
Total Yield
2005E
2006E
757
3,098
234
1,373
1,914
673
1,405
1,590
1,667
779
2,097
111
260
1,735
2,766
755
248
1,000
4,441
242
1,497
1,415
6,375
85
550
0
690
750
1,375
600
2,400
900
0
40
0
0
0
0
0
0
0
0
4.0%
3.2%
5.6%
4.9%
6.7%
2.6%
4.2%
4.0%
4.3%
4.1%
3.6%
5.1%
4.1%
4.9%
3.9%
4.3%
4.6%
4.4%
4.2%
4.2%
4.3%
10.8%
8.7%
8.1%
7.2%
7.0%
7.0%
6.5%
6.2%
6.2%
5.7%
5.4%
5.4%
5.0%
4.9%
4.9%
4.8%
4.8%
4.7%
4.6%
4.5%
4.5%
768
3,146
254
1,791
1,918
674
1,546
1,805
1,841
711
2,378
114
301
1,909
NA
771
231
1,098
4,972
245
1,604
900
6,175
60
0
0
690
750
0
600
2,400
1,800
0
0
0
0
0
0
0
0
0
0
3.8%
2.9%
6.4%
6.7%
7.0%
3.5%
4.7%
3.7%
5.0%
2.0%
4.3%
5.6%
5.0%
5.4%
NA
4.9%
4.4%
5.2%
5.1%
4.5%
4.8%
8.3%
8.6%
8.0%
6.7%
7.0%
7.0%
6.9%
3.7%
6.6%
5.5%
7.6%
5.6%
5.0%
5.4%
NA
4.9%
4.4%
5.2%
5.1%
4.5%
4.8%
Source: Company data, Goldman Sachs Research estimates.
Searching for companies that offer growth and value
Our strategists believe that a combination of value and growth (a GARP approach) will provide the best returns this year.
On our economic forecasts, 2005 will offer a fairly benign macroeconomic environment; global growth is admittedly slowing but
only back to trend levels, and interest rates remain low. With cash-rich balance sheets, the corporate sector appears positioned to
start increasing investment for growth. We believe there are some companies offering reasonable growth prospects that are not
being recognised by the market (see Exhibit 6). While companies forecasting very strong top-line growth in 2005 already trade at a
15
Europe
Banks
substantial premium, there are some companies which have solid (but not extraordinary) 2005E growth rates (i.e. around 4%-8%)
that appear inexpensive on our strategists’ cross-sector analysis.
Exhibit 6:
Companies growing in the 4%-8% range offer the best combination of growth and value
Growth + Value
70
20
19
60
Number
of companies
18
50
17
40
16
Median P/E
15
30
14
13
20
12
10
11
0
10
-10%
-10%-0%
0%-2%
Sales CAGR 2004 - 2006E
2%-4%
4%-6%
6%-8%
8%-10%
10%+
Median P/E for stocks in each range (RHS)
Source: Goldman Sachs Strategy Research, after “Portfolio Strategy: How to thrive in 2005” (December 13, 2004), Quantum database.
Screening for GARP I: The banks sector fares well
Our strategists have identified attractive GARP opportunities on both a sector and a sub-sector level. Four medium-term
growth estimates and four valuation metrics are incorporated into this process. The results show that banks (along with
construction) exhibit particularly strong growth and value characteristics relative to other sectors. On a sub-sector level, the banks
score well once again; multinational banks, global banks and investment banks all score solidly in GARP territory.
Our strategists assigned a growth score and a value score to each sector (see Exhibit 7). The growth score is based on Goldman
Sachs analysts’ medium-term growth estimates (2006-2007E and 2006-2009E sales CAGR, and 2006-2007E and 2006-2009E
earnings growth CAGR). The value score is based on four valuation metrics (although only the latter two measures could be
applied for the banks sector): EV/EBITDA, EV/capital employed, P/E and dividend yield.
16
Europe
Banks
All metrics were based on 2005 analyst estimates (for more details on the methodology behind this GARP screen, see “Portfolio
Strategy: Cherry picking the best growth and value”, published January 14, 2005).
The banks sector fares very well on this (and other) GARP screens, scoring best among all 28 sectors for value, and fifth (tied) for
growth.
Exhibit 7: GARP screen on a sector level; the banks score well
Blue frame highlights GARP territory
Key GARP sectors
Banks
100%
90%
Value
Score
80%
Telecoms
Insurance
Autos
Oil & Gas
Capital Goods
Leisure
Paper
70%
Construction
Utilities
60%
Business Services
Chemicals
Commtech
50%
Retail
Semi
Beverages
40%
Transport
Consumer
Products
30%
Aerospace
Pharma
20%
IT Services
Real Estate
Media
Biotech
Luxury Goods
10%
Medtech
Software
Personal Care
0%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Growth Score
Source: Goldman Sachs Strategy Research, from “Portfolio Strategy: Cherry picking the best growth and value” (January 14, 2005), Goldman Sachs Research
estimates.
17
Europe
Banks
Screening for GARP II: The multinational, global and investment banks sub-sectors all score well
The same exercise, when carried out at a sub-sector level, shows that three of the four banking sub-sectors screen well
for GARP (see Exhibit 8); multinational, global and investment banks all landed within GARP territory, while domestic banks
scored highly on value but poorly in terms of growth.
Multinational banks tied for first (among 65 sub-sectors) on value and fifth on growth; investment banks ranked second (tied) on
value and seventh (tied) on growth; global banks ranked fifth (tied) for value and tied for first on growth; and domestic banks
ranked fifth (tied with global banks) on value but 16th (tied) on growth.
Banks as a defensive play: Limited exposure to high oil prices and falling US dollar
Banks have become a defensive play, in our view, as investors seek shelter from a macroeconomic backdrop of high oil
prices and a falling US dollar anticipated during 2005. Apart from the relatively tiny exposure to commodities trading from
which particular European banks are currently benefiting, the impact of high oil prices on the sector is intuitively limited.
The impact of a weakening US dollar, conversely, is less dismissible. Our strategists estimate that one quarter of all European
firms generate at least 25% of their profits from US operations.
Within the European banking sector, however, the exposure to US$ weakness is more concentrated in a handful of banks, and we
have found that most internationally-minded European banks are active in managing currency exposures, albeit in very different
ways:
•
France: BNP Paribas and Societe Generale hedge their currency exposure from a capital standpoint, but not net income.
•
Spain: The two global Spanish banks hedge 70%-80% of investments/capital and a portion of their income budgets.
•
UK: HSBC only hedges structural foreign currency exposures in limited circumstances, where it aims to protect the Tier 1
capital or the US$ value of capital invested. RBS fully hedges its balance sheet but is exposed to translation on the US$
earnings of its US operations, Citizens (although US$ preference shares provide a partial hedge).
•
Switzerland: Credit Suisse does not hedge but UBS hedges its capital in a similar manner to HSBC and partially hedges its
US$ earnings.
Despite the recent US$ rally (6% appreciation versus the EUR since the start of December), our economists expect further dollar
weakness, reflected in EUR/US$ at 1.35, 1.35 and 1.40 in 3, 6 and 12 months time respectively.
18
Europe
Banks
Exhibit 8: GARP screen on a sub-sector level; the multinational, global and investment banks sub-sectors all score well
Blue frame highlights GARP territory
Key GARP sub-sectors
100%
Non-Life Assurance
Multinational Banks
Financial
Conglomerates
Oil & Gas Majors
90%
80%
Value
Score
Composite
Insurers
Autos
Global Banks
Oil & Gas European Regionals
Facility Services
70%
Bulk Chemicals
Telecom - Mobile
Life Assurance
Engineering
& Machinery
Utilities Unregulated
Broadcasting
Food Retail
Hotels
Hybrid Chemicals
Gaming
Speciality Chemicals
(diverse)
50%
Construction
Catering
Paper
Reinsurance
60%
Investment Banks
Telecom - Incumbents
Utilities Hybrid
Domestic
Banks
Agro Chemicals
Ports
Utilities Regulated
Bus & Rail
Tobacco
Hardline Retail
Pubs
Security
Distributors
Equipment Manufacturers
40%
Consumer Publishers
Semiconductor Devices
Commtech Equipment
30%
Transport - Logistics
Airports
Pharmaceuticals
Spirits
Food
Airlines
Industrial Gas
Biotechnology
Brewers
Aerospace & Defense
Motorway
Speciality Chemicals (focused)
20%
Staffing
Apparel
Real Estate
Luxury Goods
IT Services
Business Publishers
10%
Household Products
& Personal Care
Pay TV
Medical Technology
BPO / Other
0%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Software
90%
100%
Growth Score
*Capital Goods includes only engineering and machinery
Source: Goldman Sachs Strategy Research, from “Portfolio Strategy: Cherry picking the best growth and value” (January 14, 2005), Goldman Sachs Research estimates.
19
Europe
Banks
Exhibit 9: Despite the recent US dollar rally, our economists forecast continued weakness
EUR/US$ spot rate measured daily since December 2003, and Goldman Sachs economic forecasts from February 2005
1.45
1.40
1.40
1.29
1.25
1.20
12-Month
3-Month Horizon
1.30
1.35
6-Month Horizon
1.35
1.35
1.15
GS forecas t
05
-0
5
ec
D
O
ct
5
g0
5
Au
n0
Ju
r-0
5
Ap
Fe
b-
05
04
ec
-
-0
4
D
ct
4
O
g0
Au
Ju
n04
r-0
4
Ap
04
bFe
D
ec
-
03
1.10
USD/EUR
Source: Reuters, Goldman Sachs Economics Research estimates.
The negative impact of a 10% move in the US$ (versus the reporting currency of each bank under our coverage), based on
2004E pre-goodwill EPS, is only 2.6%, 40 bp below the European (cross-sector) market average (see Exhibit 10). This
analysis takes into account all the various offsets (e.g., hedging or debt-denominated in foreign currencies), which would tend to
soften the impact on the bottom line.
Our Attractive coverage view is not without risks
There are several potential risks to our bullish sector stance:
•
Macro risk in Germany (in particular, the potential for surprisingly large corporate provisions) fuelling the return of credit
concerns across the continent.
20
Europe
Banks
•
Rising price competition on deposits.
•
Sudden rate moves in Euroland to drive top-line uncertainty.
•
US dollar rally to detract from the perception of banks as a defensive sector.
•
Severe credit card regulation (mainly a UK issue) taking the steam out of hopes for robust growth in pan-European consumer
finance.
•
Value destruction by imprudent deals.
Exhibit 10: Banks sector has below-average sensitivity to US$ weakness
% negative impact on EPS given a 10% fall in the US$ versus the reporting currency
10
8
6
4
Market average = 3%
2
Transportation
Real Estate
Retail
Utilities
Medical Technology
Telecom
Business Services
Hospitality and Leisure
Insurance
Consumer Products
Beverages
Banks
Aerospace & Defense
Chemicals
Forestry &Paper Products
Household Products
Media
Pharmaceuticals
Oil & Gas
Luxury Goods
Commtech
Capital Goods
-4
Semiconductors
-2
Autos
0
Source: Goldman Sachs Strategy Research, from “Portfolio Strategy: How to thrive in 2005” (December 13, 2004), Goldman Sachs Research estimates.
21
Europe
Banks
Part III: Three themes to distinguish performance among banks
We expect three themes – consolidation, restructuring, and valuation divergence – to distinguish performance among
banks within an outperforming sector. In the context of these themes, we highlight our nine top pair trades: Credit Suisse
over Deutsche Bank, BNP Paribas over ABN AMRO, Deutsche Postbank over Commerzbank, Santander over BBVA,
Credit Agricole over ABN AMRO, HVB Group over Commerzbank, BNP Paribas over Societe Generale, small Italian over
small Iberian banks, and UniCredito, SanPaoloIMI, Capitalia and BPM over Intesa, BPVN, BNL and Antonveneta.
Consolidation: A probability-weighted investment stance
Cash generation and strong balance sheets are common characteristics among the European banks; we anticipate increasing
dividends and buy-backs to continue to drive performance this year. However, recent announcements (e.g., Santander’s acquisition
of Abbey, and Danske Bank’s purchase of National Australia Bank’s Irish assets) suggest that the banks may use their surplus
capital to fund growth by acquisition, and not just within country borders (see Exhibit 11). Cross-border industry consolidation
seems imminent in Europe, offering more potential banking combinations than previously envisaged by investors. Therefore, we
believe that share price performance of the banks may well reflect consolidation speculation, both real and imagined, over the
coming months.
Exhibit 11: 2004 was a busy year for cross-border transactions among European banks; is there more to come in 2005?
Large cross-border banking deals announced over the past 12 months
Target
Acquirer
Abbey National
Charter One
Korea First Bank
NIB / Northern Bank
Community First
Union Safe Deposit Bank
Permata
ABSA
Santander
RBS
Standard Chartered
Danske Bank
BNP Paribas
BNP Paribas
Standard Chartered
Barclays
Value
(US$ mn)
Date
Announced
15,787
10,530
3,278
1,864
1,213
245
71
N/A
23/07/2004
04/05/2004
10/01/2005
14/12/2004
15/03/2004
27/04/2004
07/12/2004
24/09/2004
Synergies (mn)
Revenue
Cost
€ 232
$ 380
N/A
Dkr 350
N/A
N/A
N/A
€ 338
$ 185
N/A
$ 100
$ 30
N/A
22
Europe
Banks
Investors benefit from premium deals, not mergers of equals. We believe that the greatest hope for performance lies in the
prospect for premium bids (for targets), along with earnings upgrades from accretive purchases (for acquirers), as opposed to the
non-premium share-swapping that usually characterizes a merger of equals.
Still, it is next to impossible to predict how (specifically) consolidation will play out in Europe. Although it is reasonable for
the imaginations of European investors (inspired by last year’s cross-border banking deals) to be encouraged further by significant
excess capital in the banking sector, market fragmentation, and a strong (EUR) currency, we believe that it is unreasonable for
those same investors to assume that, in any attempts to use capital to drive growth, the management teams of European (and
global) banks will show a collective lack of valuation discipline.
While we consider the European banking sector to be poised for consolidation, the probability of any one deal going
ahead is relatively low , considering the numerous uncertainties surrounding any transaction, not to mention the seemingly
countless number of combinations and permutations. This (low) probability of any one consolidation event should be weighed
against the potential upside implied by an imagined premium transaction; in our view, this essential calculation (expectation of
gain) appears to be disregarded by some investors and the market impact of acquisition speculation is subsequently exaggerated
(see Exhibit 12).
We propose a framework to help investors gain exposure to this problematic consolidation theme, by highlighting areas of
the market where transactions look more probable. This framework has two premises:
•
Given that hostile deals are a non-starter among banks (due, in part, to the typical lack of transparency of banks’ loan books),
the prospect for sector consolidation is a direct function of the (often limited) number of willing sellers; and,
•
History shows that the total value of premium acquisitions rarely exceeds 40% of a buyer’s market capitalization (and when a
deal approaches this limit, it is, generally, received poorly by investors).
Rule #1: A deal cannot happen without a willing seller
Over the past few years, deals in the banking sector have been driven more by the target’s willingness to sell than by the
buyer’s strategic ambition. For instance, Household International, Charter One Financial, ABSA, Abbey, Korea First Bank and
National Australia Bank (their Irish operations) were all willing sellers targeted opportunistically by HSBC, RBS, Barclays,
Santander, Standard Chartered and Danske Bank (respectively). So the relevant question becomes: who are the next willing
sellers? We look for banks that are:
•
Increasing their business focus (e.g., perhaps by selling non-core insurance, capital markets, or peripheral markets operations).
23
Europe
Banks
•
Struggling to remain competitive under market pressures (e.g., small UK or Spanish mortgage banks constrained by housing
trends, small US banks suffering from lack of scale, equity brokers as victims of contracting margins).
•
Experiencing management change (e.g., where the incoming team may be more shareholder friendly and less brand-loyal),
and/or
•
Suffering threats imposed by other banks (e.g., reluctant sellers seeking a white knight).
After a qualitative screen of our coverage universe in the context of the criteria listed above, our banks analysts would consider 24
of our 46 banks under coverage (51% of our universe) to be potential willing sellers (see Exhibit 13); these banks include ABN
AMRO, Alliance & Leicester, Antonveneta, Bankinter, BCP, BMPS, BNL, BPM, BPU, Bradford & Bingley, Capitalia,
Commerzbank, Credem, Credit Suisse, Deutsche Bank, Deutsche Postbank, Dexia, Intesa, Lloyds TSB, Northern Rock, Popular,
SanPaoloIMI, SEB and Societe Generale.
24
Europe
Banks
Exhibit 12: Consolidation is emerging as a salient investment theme this year
Relative performance since January 2004: potential targets versus potential acquirors (non-weighted indices)
120
115
110
Potential Targets
Potential Acquirors
Dexia
SocGen
Commerzbank
HVB
Antonveneta
BNL
BPM
Capitalia
Credem
Bankinter
Alliance & Leicester
Bradford & Bingley
Standard Chartered
ABN Amro
BNP Paribas
Credit Agricole
Deutsche Bank
BMPS
BPVN
Unicredito
Swedbank
SEB
BBVA
Santander
Barclays
HBOS
HSBC
RBS
105
100
95
90
Jan-04
Feb-04
Mar-04
Apr-04
May-04
Jun-04
Jul-04
Targets
Aug-04
Sep-04
Oct-04
Nov-04
Dec-04
Jan-05
Acquirors
Source: Datastream.
25
Europe
Banks
Exhibit 13 shows which banks may be willing sellers (by the criteria set out in Rule #1), as well as those which we would consider
to be capable buyers (as determined by market capitalisation, as well as surplus capital).
Exhibit 13: The Banks Sector Consolidation Matrix; in search of potential willing sellers and capable buyers
INCAPABLE BUYERS
CAPABLE BUYERS
WILLING SELLERS
ABN Amro
BMPS
BPU
Capitalia
Commerzbank
Credit Suisse
Deutsche Bank
Deutsche Postbank
Dexia
Intesa
Lloyds
Northern Rock
Popular
Sanpaolo IMI
SEB
SocGen
Antonveneta
Bankinter
BCP
BNL
BPM
Bradford & Bingley
Credem
UNWILLING SELLERS
Allied Irish Bank
Bank of Ireland
Barclays
BBVA
BNP Paribas
BPVN
Credit Agricole
Danske Bank
DNB NOR
Handelsbanken
HBOS
HSBC
Nordea
RBS
Santander
Standard Chartered
Swedbank
UBS
Unicredito
Banca Lombarda
Bank Austria
HVB Group
Hypo Real Estate
26
Europe
Banks
Rule #2: Buyers are limited by the size of their target
History shows that acquisitions within the industry have averaged a premium of about 33%, and that such premium
acquisitions are rarely greater than 40% of a buyer’s market capitalization (when they approach this limit, they are poorly
received by investors). If we assume that this second rule of thumb holds true in most cases (that the size of an acquisition cannot
exceed 40% of a buyer’s market value), then the potential number of premium deals among major European banks becomes a
straightforward equation. Exhibit 14 shows the number of theoretical buyers per bank within our European bank coverage
universe.
This theoretical analysis provides some potential guidelines for investors. Among the banks that we would consider as
potential willing sellers (see Exhibit 13), all have benefited by consolidation speculation over the past six months (i.e. share prices
have appreciated markedly during times of intense market speculation). However, we believe a reality check is needed. Given the
paltry number of potential premium acquirors for some of these banks (according to the rule that premium acquisitions should not
exceed 40% of a buyer’s market capitalisation), the probability of a premium deal and the expectation of gain on investment may
be much lower than investors perceive. For instance:
•
Despite share price appreciation inspired by take-out speculation surrounding ABN AMRO, Credit Suisse, Deutsche Bank,
Lloyds TSB and Societe Generale over the last six months, there is only one (HSBC) potential premium acquirer in Europe of
each of these banks, according to our 40% rule (or four global banks, if Citigroup, JP Morgan and Bank of America are
included);
•
similarly, according to our 40% rule, there are only five European potential premium bidders for Dexia (they are HSBC, RBS,
UBS, Santander and Barclays),
•
and only nine European potential premium bidders for SanPaoloIMI (they are HSBC, RBS, UBS, Santander, Barclays, BNP
Paribas, HBoS, BBVA and Lloyds TSB).
Conversely, there are over 20 European potential premium bidders for each of the following potential willing sellers in our
coverage universe: Credem, BPM, Bankinter, Bradford & Bingley, Northern Rock, BPU, Deutsche Postbank, Antonveneta,
Alliance & Leicester, BMPS, BNL, BCP and Capitalia. For investors interested in playing this consolidation theme, expectation of
gain (i.e. probability-weighted potential upside) would be greater for investments in these smaller potential willing sellers, rather
than for the larger potential willing sellers for whom there are few possible premium bidders, in our view.
In the context of this consolidation theme, and as outlined in “Part I: What to own?”, we favour BNP Paribas over ABN AMRO
(among the potential consolidators), and among potential targets we favour Deutsche Postbank over Commerzbank, and small
Italian over small Iberian banks.
27
Europe
Banks
Exhibit 14: We see limited opportunity for premium-priced acquisitions above EUR15 bn (US$20 bn) market capitalisation
Number of possible theoretical European bank buyers per potential target
Credem
40
= 1 / 2005E GS P/E
BP M ilano
35
B&B
Bankinter
# of potential acquirors
Credem
BPM
Bankinter
Bradford & Bingley
Banca Lombarda
Hypo Real Estate
Northern Rock
BPU
BPVN
Deutsche Postbank
Antonveneta
BMPS
BNL
BCP
Capitalia
30
25
20
15
B Lombarda
40
37
35
35
33
31
29
26
26
25
25
25
24
23
22
20
Hypo Real Estate
BPU
Northern Rock
BP Verona
Antonveneta
A&L
BNL
BM PS
BCP
Capitalia
Bank Austria
Commerzbank
HVB
BOI
SEB
DnB NOR
Swedbank
Svenska Handelsbanken
POP
Sanpaolo
AIB
Danske Bank
10
Standard Chartered
Dexia
Intesa
Nordea
UniCredito
5
Deutsche Bank
SocGen
Lloyds TSB
BNP Paribas
ABN-AM RO
Barclays
HBOS
0
70,000
BBVA
60,000
Credit Agricole
Credit Suisse
50,000
40,000
30,000
20,000
10,000
-
M arke t Capitalization (US$ mn)
Note: Possible number of buyers is calculated mathematically, assuming that premium acquisitions are limited to 40% of buyer’s market capitalisation.
28
Europe
Banks
Although both are likely consolidators (as opposed to targets), we favour BNP Paribas over ABN AMRO because BNP has
greater purchasing power in the form of surplus capital, a better track record with respect to valuation discipline, and a more
developed growth platform (in BancWest) on which to build by strategic acquisition.
We favour Deutsche Postbank over Commerzbank because (1) we consider domestic consolidation a more likely scenario for
the German banks than cross-border activity, and (2) Deutsche Postbank offers any domestic acquirer the three attributes they
covet most: high retail penetration, a liquid balance sheet, and a retail-dominated business mix.
We favour small Italian banks (Capitalia, BPM and Credem) over small Iberian banks (Bankinter, Popular and BCP) because
the potential for cost synergies looks greater for the less efficient small Italian banks, we see greater opportunities for Italian
(rather than Iberian) top-line growth (by SME lending, mortgage and consumer finance businesses), and the Iberian names have
already enjoyed their run (these small Iberian banks are trading at a 10% premium to the Italians, on our estimates).
29
Europe
Banks
Exhibit 15: Would-be acquirors of German banks (black bars) are discouraged by the intimidating size of their (wholesale-dominated) assets; Deutsche
Postbank is the exception, offering a smaller and more retail-oriented loan book than HVB Group, Deutsche Bank and Commerzbank
Risk-weighted assets by pan-European bank in US$ mn
700,000
600,000
500,000
400,000
300,000
Pan-European average: US$181bn
200,000
Credem
Bankinter
B Lombarda
Italy
Bradford & Bingley
Northern Rock
UK
BP Verona
Antonveneta
Hypo Real Estate
BPU
Deutsche Postbank
Portugal
Swedbank
Banco Popular Espanol
BNL
Standard Chartered
SEB
Bank of Ireland
DnB NOR
Bank Austria
BMPS
Ireland
Capitalia
Dexia
Nordic
Switzerland
Nordea
SANPAOLO IMI
Commerzbank
UBS
UniCredito Italiano
Spain
Lloyds TSB
Banca Intesa
Deutsche Bank
Societe Generale
SCH
Credit Agricole
ABN-AMRO
HVB Group
Barclays
HBOS
BNP Paribas
HSBC
0
Royal Bank of Scotland
100,000
30
Europe
Banks
Restructuring: Some plans look more credible than others
plans appear more credible than others, and we believe investors will start to distinguish among them.
We favour Credit Suisse (IL/A) over Deutsche Bank (U/A): We believe that the comparison between Deutsche Bank and Credit
Suisse has become more relevant now that both stocks are viewed by investors principally as restructuring stories. In our view,
Credit Suisse is a more attractive story than its German peer for four reasons:
•
Credit Suisse still has non-core assets of which it intends to dispose (e.g., Winterthur), while Deutsche Bank’s strategy of
disposing of non-core businesses is largely complete. As a result, we believe that Credit Suisse has greater potential to
optimise capital allocation than Deutsche Bank.
•
Credit Suisse is only just beginning to resume its strategy of returning capital to shareholders through increased dividend
payments and share buybacks. Deutsche Bank has already returned EUR7.9 bn (EUR2.2 bn in dividends plus EUR5.7 bn in
share buybacks) of capital to shareholders over the last three years compared with EUR1.55 bn at Credit Suisse. We estimate
that, on an ongoing basis, Credit Suisse will generate SFr2.7 of surplus cash per share (offering a 6% cash flow yield post
dividends), while Deutsche Bank will generate EUR3.7 per share (yielding a 5% cash flow yield post dividends).
•
There is greater room for profit improvement at CSFB (Exhibit 16) than there is for a turnaround at Deutsche Bank’s PCAM,
in our view, given the difficult operating environment in Germany, the lack of acquisition candidates as well as the challenges
associated with turning around Deutsche Asset Management.
•
We see greater valuation support for Credit Suisse than Deutsche Bank. Based on our EPS estimates, Deutsche Bank is trading
at 10.9x 2006 cash earnings and 1.3x BV for an 11% 2006 ROE. Credit Suisse is trading at 9.6x our 2006 cash earnings
forecasts and 1.4x BV for a 14% 2006 ROE.
31
Europe
Banks
Exhibit 16: We see room to improve productivity at CSFB
Revenue per employee at UBS IB and CSFB IS (SFr ‘000)
2001
2002
2003
2004E
UBS Investment Bank
CS Institutional Securities
938
1066
786
894
916
775
951
803
Gap
14%
14%
-15%
-16%
We favour HVB Group (IL/A) over Commerzbank (U/A): The credibility of HVB Group’s restructuring plan was buttressed by
the recent arrival of two new managers with proven track records.
In contrast, Commerzbank’s restructuring efforts (focused on its investment banking operations) are proving painful.
Commerzbank’s estimate of restructuring-inspired revenue attrition (presented with its 3Q results) is looking increasingly
conservative as headcount turnover in (profitable) derivatives and ECM businesses continues to rise. Prior to the recent
redundancies, investment banking accounted for 10% of group equity, 20% of revenues, 19% of direct costs and 30% of allocated
costs. This final proportion (30% of allocated costs) is the sticking point. Pre-restructuring, investment banking absorbed almost
one-third of total back-office expenses (flattering the performance of other divisions); post-restructuring, watch for rising costs,
possibly in the corporate centre.
Also, we see significant valuation support for HVB’s German business; stripping away Bank Austria and the industrial portfolio
(i.e. Munich Re), HVB’s German operations trade at 7.1x 2006E cash earnings, versus 12.7x for Commerzbank.
We favour Credit Agricole (OP/A) over ABN AMRO (IL/A): Contrary to the widespread post-acquisition skepticism articulated by
some investors who did not believe that tangible cost synergies could result from CIB integration, Credit Agricole management is
delivering ahead of plan (EUR300 mn in synergies were realised by end of September 2004 versus full-year target of EUR275 mn;
see Exhibit 17). We expect to see the full impact of 2004 integration this year and we believe that the integration-related revenue
trough should be behind us; meanwhile, consensus estimates imply continued weakness in CIB revenues.
32
Europe
Banks
Exhibit 17: Synergy realisation is progressing ahead of target for Credit Agricole
Synergy impact on P&L (EUR mn)
350
300
FY2004 company synergy target
114
250
Synergies
end Dec
Synergies
end Sept
200
150
110
110
100
58
58
58
29
29
29
29
1Q04
2Q04
3Q04
4Q04E
50
0
Synergies
end June
Synergies
end March
On the other hand, ABN AMRO management released a statement (December 16, 2004) indicating that headcount reductions from
back-office and investment banking operations (2,850 FTEs) would be greater than previously announced; however:
•
Related savings will not be realized until 2007.
•
There is still no word on potential revenue impact of these cuts.
•
The subsequent one-off charge (EUR790 mn) has proven non-trivial in a year when revenues fell (versus 2003).
We favour UniCredito, SanPaoloIMI, Capitalia and BPM (all OP/A) over Intesa, BNL and Antonveneta (all IL/A) and BPVN
(U/A): The Italian banking sector is awash with restructuring stories; but some appear more credible and/or promising to us than
others.
For instance, UniCredito management is targeting (realistically, in our view) a 5% efficiency improvement to drive net
profit up to EUR3 bn by 2007; given its 9% discount to the sector (UniCredito trades on 9.6x 2006E cash earnings), we believe
that such restructuring efforts will prove supportive for UniCredito shares.
33
Europe
Banks
Our positive call on SanPaoloIMI is driven, in part, by our confidence in the capacity of the new General Manager (Mr
Modiano) to do for SanPaoloIMI what he did for UniCredito; that is, we anticipate Mr Modiano’s arrival to correspond with an
increase in SanPaolo’s risk appetite, driving corporate loan growth (up to sector standards) and higher-margin lending (from
structured solutions, add-on services and fees). We estimate the potential impact of this “Modiano effect” at EUR170 mn
incremental net earnings (not in our forecasts) from the commercial banking division. This opportunity is non-trivial in a group
context, adding a potential 10% to 2006E group net income or EUR1.8 bn to market value (EUR0.96 per share).
For Capitalia, we anticipate a restructuring announcement that could add more than 8% of incremental market value (see
our note: “Time for a second round of cost reduction”, published December 13, 2004). Meanwhile, we remain confident in
Capitalia management’s ability to drive revenues from current (low) levels. As management’s focus has shifted from the balance
sheet to the top line, we see opportunities arising from:
•
Increased mortgage sales, assuming that Banca di Roma can improve sales rate from the current level of one mortgage per
branch per month.
•
Improved funding costs at Banco di Sicilia, where it currently pays 66 bp above the sector average.
•
Growth in customer deposits, leading to a 120 bp potential mark-down.
•
Increased AuM ratio at Banco di Sicilia.
And for BP Milano, in addition to the support shares may continue to receive from ongoing consolidation speculation (see
above), we believe that the new CEO (Mr Viola) will execute on his (five-point) business plan, which includes:
•
Improving cost/income to 65% (from current 79%) by 1H2005.
•
Growing net profit to EUR279 mn by 2006.
•
Internal restructuring aimed at cutting foreign branches and IT costs.
•
Headcount reduction target of (minimum) 300 employees.
•
Intention to harvest (low-yielding) financial assets to fund retail lending.
34
Europe
Banks
Exhibit 18: Restructuring characteristics of Italian banks; we favour UniCredito, SanPaoloIMI, Capitalia and BPM over Intesa,
BPVN, BNL and Antonveneta
EUR mn unless otherwise noted
Restructuring BUYS
Restructuring SELLS
Capitalia
Unicredito
BPM
SanPaolo
Revenue 2004E
Revenue 2006E
Revenue growth CAGR 04-06
cost / income 2004E
cost / income 2006E
current employees / branch
4,782
5,305
5.3%
69%
62%
14.9
10,347
11,745
6.5%
60%
52%
15.1
1,416
1,602
6.3%
79%
71%
13.5
7,824
8,610
4.9%
66%
62%
13.2
GS EPS 2004E
GS EPS 2006E
EPS growth CAGR 04-06
P/E GS EPS 2006E
0.11
0.31
70%
11.6 x
0.34
0.47
18%
9.6 x
0.47
0.70
23%
9.6 x
0.70
0.94
16%
11.9 x
Average
Intesa
BPVN
BNL
Antonveneta Average
5.8%
68%
62%
14.2
9,802
10,803
5.0%
61%
56%
16.2
2,333
2,593
5.4%
62%
58%
10.8
2,855
3,157
5.2%
66%
60%
22.1
2,235
2,511
6.0%
63%
57%
9.9
5.4%
63%
58%
14.8
32%
10.6 x
0.26
0.34
14%
11.4 x
1.13
1.35
9%
11.2 x
0.00
0.18
NM
11.6 x
0.83
1.57
38%
13.3 x
20%
11.9 x
Meanwhile, the restructuring efforts at Intesa and BPVN have run their course, and Antonveneta (on 13.3x 2006E cash
earnings) and BNL (on 11.6x) shares are trading at a 30% and 13% premium to the sector (respectively), driven mainly by
consolidation speculation, in our view.
Valuation divergence: After the rebound, we see that some bank pairs have overshot
Valuation divergence across the sector rebounded in 2H2004, when the coefficient of variation (CoV) of two-year-forward
P/E multiples for the banks rose from 19% to 32% (versus a ten-year average of 28%); that is, the standard deviation of P/E
multiples, measured monthly and relative to the average P/E across our coverage universe, has rebounded (since last September) to
around long-term average levels (see Exhibit 19).
35
Europe
Banks
Exhibit 19: Valuation divergence across the banks sector rebounded in 2H2004 to around long-term average levels
Coefficient of variation (CoV) of two-year-forward P/E multiples = Standard deviation of two-year-forward P/E's / Sector average P/E
60%
50%
10-year average CoV
40%
30%
20%
10%
Jan-95
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Source: Datastream.
However, some bank pairs overshot this trend and look due to correct (i.e. converge). Among these, we favour BNP
Paribas (OP/A) over Societe Generale (IL/A) and Santander (IL/A) over BBVA (IL/A):
BNP Paribas (OP/A) over Societe Generale (IL/A): Societe Generale’s premium to BNP Paribas (on 2005E cash earnings
multiples) has increased from 4% to 7% over the past 15 months; we believe this valuation gap is due to close (Exhibit 20).
We favour BNP Paribas over Societe Generale due to its:
•
Greater earnings visibility (from consolidation of US-based acquisitions).
•
Lower CIB volatility (CIB returns are 20% less predictable at Societe Generale than at BNP Paribas).
•
Valuation (BNP Paribas trades at a 7% discount to Societe Generale on a 2005E cash earnings price multiple).
36
Europe
Banks
Many investors justify BNP’s valuation discount to Societe Generale by acquisition risk; however, we believe that the market has
overplayed this risk. Over the last few years, BNP management has given us no reason to doubt their valuation discipline, nor their
commitment to bolt-on (accretive) deals, organic growth, dividends and share buybacks.
Exhibit 20: Increasing valuation divergence between BNP Paribas and Societe Generale is due for a correction, in our view
P/E multiple on Goldman Sachs 2005E cash earnings, measured monthly since December 2003
11.0
BNP Paribas
Societe Generale
10.5
10.0
9.5
9.0
8.5
8.0
Dec-03
Jan-04
Feb-04
Mar-04
Apr-04
May-04
Jun-04
Jul-04
Aug-04
Sep-04
Oct-04
Nov-04
Dec-04
Jan-04
Feb-04
Santander (IL/A) over BBVA (IL/A): BBVA’s premium to Santander (on 2005E cash earnings multiples) has increased from 2% to
17% over the past 15 months; we believe this valuation gap will continue to close (Exhibit 21). Strong growth in LatAm is not
enough to justify BBVA’s elevated multiple, in our view, given concerns surrounding:
•
Domestic margin compression.
•
Increasing funding risk.
37
Europe
Banks
•
Stretched capital.
•
Rising acquisition risk.
•
Balance sheet contraction.
•
Slowing growth in customer loans and deposits.
Exhibit 21: Increasing valuation divergence between Santander and BBVA is due for a correction, in our view
P/E multiple on Goldman Sachs 2005E cash earnings, measured monthly since December 2003
14.0
BBVA
Santander
13.0
12.0
11.0
10.0
9.0
Dec-03
Jan-04
Feb-04
Mar-04
Apr-04
May-04
Jun-04
Jul-04
Aug-04
Sep-04
Oct-04
Nov-04
Dec-04
Jan-04
Feb-04
Many investors justify Santander’s discount by execution risk on Abbey-related synergies; however, we believe that these risks are
more than offset by the valuation disparity that exists between these two global banks.
38
Europe
Banks
Part IV: Screening the banks
We have screened our coverage universe on 11 criteria – “The everything screen” – in order to assess which panEuropean banks offer the most compelling investment opportunities on the basis of value, growth, income, efficiency,
asset quality, capital strength, upside and momentum.
11 factors in our everything screen
Across 46 banks, we look for stocks offering:
•
lowest cash P/E multiple
•
lowest P/B multiple
•
highest ROE
•
highest cash EPS growth forecast for next year
•
highest dividend yield
•
lowest cost/income
•
lowest provisions/loans ratio
•
highest Tier 1 ratio
•
highest RoRWA
•
highest implied upside relative to SOTP-derived fair value
•
best absolute price performance (over the past week, month, quarter, year and year-to-date)
Our model weights each of these 11 factors equally, but it is flexible. Please contact our team if you would like a copy of the
model, which allows you to input your own weightings.
39
Europe
Banks
Exhibit 22: The everything screen
Rank of pan-European banks offering the most compelling investment opportunities on the basis of value, growth, income, efficiency,
asset quality, capital strength, upside and momentum
Inde x Score
0%
UBS
Credit Suisse
Capitalia
Northern Rock
Sw edbank
Lloyds TSB
Nordea
SEB
Bank of Ireland
HBOS
Danske Bank
Societe Generale
BNP Paribas
DnB NOR
Credit A gricole
Dexia
UniCredito Italiano
BNL
Barclays
Bradf ord & Bingley
HVB Group
A llied Irish Bank
Banca Intesa
SANPAOLO IMI
Deutsche Postbank
Credem
Bankinter
SCH
A BN-AMRO
BP Milano
BPU
Bank Austria
BP Verona
Standard Chartered
Deutsche Bank
Commerzbank
BMPS
BBVA
Antonveneta
HSBC
B Lombarda
BCP
2%
4%
6%
8%
10%
12%
14%
13%
11%
11%
10%
10%
10%
10%
10%
9%
9%
9%
9%
8%
8%
8%
8%
8%
8%
8%
8%
7%
7%
7%
7%
7%
6%
6%
6%
6%
5%
5%
5%
5%
4%
4%
4%
4%
4%
4%
4%
3%
3%
Factor
Weighting
Implied upside relative to
SOTP-derived fair value
100%
Absolute price performance
(%) past week
20%
(%) past month
20%
(%) past quarter
20%
(%) past year
20%
(%) year-to-date
20%
cash EPS growth (06E/05E)
100%
cash P/E '06E
100%
GS P/TBV 05E
100%
GS ROTE 05E
100%
Dividend yield 05E
100%
cost/income ratio 04E
100%
provisions/loans 04E
100%
Tier 1 04E
100%
RoRWA 04E
100%
2%
2%
0%
0%
Source: Goldman Sachs Research estimates, Quantum database, Datastream.
40
Europe
Banks
Exhibit 23: Screening for value across pan-European banks – ROTE versus P/TBV
45%
Royal B ank o f Sco t land
40%
Re lative ly che ap
35%
Llo yds TSB
30%
ROTE 05E
Cred it Suisse
25%
20%
15%
10%
B ank o f Ireland
SCH
HB OS
No rt hern Rock Dexia
B NP Paribas UniCred it o It aliano
Swed bank
SCH
A lliance & Leicest er
SEB
So ciet e Generale
A B N-A M RO
Danske B ank
Svenska Hand elsbanken
SA NPA OLO IM I
DnB NOR
B CP
B rad f ord & B ing ley
B ankint er
HV B Gro up B P M ilano
B ank A ust ria
B P V erona Deut sche B ank
Deut sche Post bank B M PS
B NL B anca Int esa
A nt o nvenet a
BBVA
B arclays
B anco Pop ular Esp anol
HSB C
St and ard Chart ered
A llied Irish B ank
Re lative ly e xpe ns ive
Capit alia
Commerzb ank
5%
0%
1.0
1.5
2.0
2.5
3.0
3.5
4.0
P/TBV 05E
Source: Goldman Sachs Research estimates, Quantum database.
41
Europe
Banks
Exhibit 24: Screening for GARP across pan-European banks – P/E versus EPS growth
18.0
Avg. 12%
17.0
A nt onvenet a
16.0
B CP
15.0
St andard Chart ered
B ankint er
14.0
BBVA
P/E 05E
HSB C
Credem
SA NPA OLO IM I
Commerzb ank
13.0
Cap it alia
B NL
B anco Po pular Espanol
Deut sche B ank
B P V erona
B anca Int esa
Deut sche Post b ank
B ank A ust ria
HV B Group
SCH
A llied Irish B ank
A B N-A M RO
B M PS
B P M ilano
Dexia
SEB
UniCred it o It aliano
Credit Suisse
Danske B ank
Swed bank
Lloyds TSB
UB S
DnB NOR
Societ e Generale
SCH
B ank of Ireland
B rad f ord & B ingley
B arclays
B NP Parib as
Nort hern Rock
HB OS
Ro yal B ank of Scot land
12.0
11.0
10.0
9.0
Avg. 11.9
Top GARP s tock s
8.0
0%
5%
10%
15%
20%
25%
30%
35%
EPS grow th 06E/05E
42
Europe
Banks
Exhibit 25: Screening for stock price momentum across pan-European banks – 1-week versus 3-month performance
30
Avg. 1.8
25
Re ce nt dow nw ard
re ve rs als
20
3M performance (%)
Cap it alia
B NL
Credem
B rad f o rd & B ing ley
B P M ilano
15
A nt onvenet a
Llo yd s TSB
B CP
Credit Suisse
B ank A ust ria
Deut sche Po st bank
HV B Gro up
Dexia
Co mmerzb ank
Deut sche B ank
5
B anco Pop ular Espano l
No rt hern Ro ck B anca Int esa
A B N-A M RO
A llied Irish B ank
B ank o f Ireland Swedb ank
Royal B ank of Sco t land
UB S
BBVA
SEB
DnB NOR
Svenska Hand elsbanken
SCH
So ciet e Generale
B M PS
B arclays A lliance & Leicest er
SA NPA OLO IM I
Avg. 10.8
B ankint er
10
Sus taine d m om e ntum
HB OS
B P V erona
B NP Paribas
Danske B ank
0
-5
HSB C
Laggards
Re ce nt upw ard re ve rs als
-10
-4
-2
0
2
4
6
1W performance (%)
43
Europe
Banks
Exhibit 26: Screening for consolidation candidates across pan-European banks – P/E versus market capitalization
13.5
A nt onvenet a
B ankint er
BBVA
Commerzbank
12.5
Credem
B CP
SA NPA OLO IM I
B NL
P/E 06E
11.5
Cap it alia
B anco Popular Esp ano l
B P V ero na
Deut sche Po st b ank
10.5
B M PS
B radf o rd & B ing ley
9.5
B P M ilano
B anca Int esa
A B N-A M RO
Deut sche B ank
B ank A ust ria
A llied Irish B ank
Dexia
Svenska Hand elsb anken
HV B Gro up
Danske B ank
Swed bank
SEB
DnB NOR
B ank of Ireland
Credit Suisse
SCH
So ciet e Generale
Llo yds TSB
B NP Parib as
SCH
B arclays
HB OS
No rt hern Rock
8.5
Cons olidation
candidate s
7.5
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
Market Cap ($US)
44
Banks
Europe
GS coverage universe summaries
Total revenue growth
Revenues: We expect lower growth
15%
12.1%
9.1%
10%
7.4%
7.0%
5.7%
5%
6.7%
6.3% 6.3%
3.0%
3.9%
05E/04E
06E/05E
0%
-5%
Domestic
International
Investment Banks
Global
Total cost growth (ex goodwill)
6%
5.3%
5%
4%
3.7%
3.5%
3.7%
3.4%
2.9%
3%
15%
7.2% 7.3%
are currently engaged in productivity
improvement measures. We reflect
this through low cost growth and
through income growth exceeding
cost growth both in 2005E and
2006E. We expect all sector subgroups to see a meaningful
improvement in the cost/income ratio
over the coming two years.
2.5%
9.4%
6.6%
3.9%
0%
05E/04E
-5%
06E/05E
Domestic
Investment Banks
Pan-Europe average
-10%
80%
75%
76.5%
74.8%
74.2%
70%
60%
55%
0%
05E/04E
Domestic
Investment Banks
Pan-Europe average
57.3%
58.5%
56.6%
06E/05E
International
Global
50%
Note: Summaries are weighted average by
market capitalisation.
51.1%
48.9%
45%
2004E
Investment Banks
Pan-Europe
average
International
65%
0.7%
International
Global
Cost / income ratio trend
59.4%
1.0%
6.5%
6.0% 5.7%
5%
2%
1%
9.7%
10%
Costs: Several banks in the sector
Pan-Europe average
-10%
in net interest income in 2006E than
in 2005E, driven by a slight
deterioration in the net interest
margin as a consequence of
intensified competition and a more
challenging economic environment.
The revenue growth outlook for
investment banking is relatively poor,
in our view.
Net interest income growth
2005E
55.8%
Domestic
55.0%
55.3%
Global
47.2%
2006E
45
Banks
Europe
Net provision charge growth
180%
160%
140%
120%
100%
80%
60%
40%
20%
0%
Provisions: After a steep decline in
164.2%
55.8%
30.9%
25.8%
10.0%
19.8%
12.6% 13.7%
05E/04E
18.6%
12.0%
06E/05E
Domestic
International
Investment Banks
Pan-Europe average
Global
Loan book mix (2004E)
100%
90%
12%
3%
23%
13%
12%
80%
70%
50%
43%
60%
33%
41%
37%
Corp.
50%
Personal
40%
30%
20%
Other
46%
39%
47%
54%
47%
loan-loss provisions in 2004E as a
result of a high level of recoveries
and releases of provisions, we
expect provisions to rise in 2005E to
reflect a ‘normalised’ provision cost
in most cases. Loan loss provisions
are expected to show a 23%
reduction in 2004E, before
increasing in 2005E.
Loan book: We expect loan growth to
be supported by strong commercial
lending in 2005E. We expect
commercial banking trends to be
positive in 2005, adding diversity to
good growth in household lending.
Overall we expect average loan
growth to be over 2x our economists’
GDP growth forecasts, above the
long-term banking trend.
Provisions / net loans
1.0%
Pan-Europe
average
Global
Investment
Banks
International
Domestic
0%
1.00%
0.8%
0.6%
0.4%
Domestic
0.51%
0.53%
International
0.44%
0.45%
Investment Banks
0.40%
0.41%
Global
0.48%
0.45%
0.37%
0.20%
Pan-Europe
average
0.16%
0.2%
0.02%
0.0%
2004E
2005E
2006E
Gross loans growth
12%
Domestic
International
Investment Banks
Pan-Europe average
Global
10%
8%
6%
4%
10%
0.97%
0.94%
7.7%
7.2%
6.8%
6.8%
6.1%
5.1%
5.0%
2.8%
2.8%
05E/04E
06E/05E
2%
0%
46
Banks
Europe
Loan / deposit ratio
Credit quality: We expect the
170.0%
150.0%
130.0%
147%
147%
144%
127%
127%
126%
Domestic
International
110.0%
90.0%
70.0%
115%
102%
117%
118%
Pan-Europe average
103%
106%
Global
Investment Banks
58%
58%
58%
2004E
2005E
2006E
50.0%
Total asset growth
provision coverage ratios for
impaired assets to increase to over
100%, with NPL/loans of 2.5%.
Global banks stand out in this regard
with a coverage ratio of 179% and
NPL/loans of 1.4%.
Balance sheet: Deposit funding will
be under greater demand as
commercial loan volumes are
expected to pick up for the first time
in several years. Even so, we
forecast that retail banks will likely
show a deterioration in their
loan/deposit ratios.
Credit quality ratios
10%
9%
8%
7%
Domestic
200%
International
Investment Banks
Pan-Europe average
Global
160%
6%
140%
5%
120%
4%
3%
179%
180%
112%
110%
100%
3.1%
2.5% 2.5% 2.4%
2%
80%
75%
66%
1.4%
60%
1%
40%
0%
NPLs / gross loans (04E)
Reserves / NPLs (04E)
Capital ratios
Capital ratios: The vast majority of
Domestic
Investment Banks
Pan-Europe average
12%
10%
International
Global
9.1%
8%
7.4%
6.8%
6.5%
5.7%
6%
5.4%
4.4%
4%
3.6%
the banks under our coverage have
comfortable capital ratios with a Tier
1 ratio of 8.4%, on average. We
argue that excess capital
redeployment will likely add to
earnings growth (versus the previous
cycle where dilutive capital raisings
hindered EPS growth).
Domestic
International
Investment Banks
Global
Pan-Europe average
16%
14%
12%
14.0%
11.2%
10.4%
11.5%11.4%
10%
10.8%
8.5% 8.4%
7.8% 7.8%
8%
6%
4%
2%
0.7%
0.4%
05E/04E
06E/05E
2%
0%
0%
BIS ratio
Tier 1
47
Banks
Europe
GS net income growth
25%
Consensus: We are significantly
Domestic
International
Investment Banks
Global
Pan-Europe average
20%
15%
15.0%
13.6%
12.2%
12.1%
10.1%
10%
9.7%
8.1%
5%
11.1%
8.8%
3.4%
0%
05E/04E
06E/05E
GS ROA
1.4%
1.22%
1.2%
1.15%
7%
Domestic
4.7%
5%
Global
0.8%
0.74%
0.80%
0.73%
0.84%
0.77%
0.76%
1%
0.9%
0.7%
Returns and profitability: We expect
-3%
a steady increase in profitability for
domestic banks and a marked
improvement in investment banks’
ROE mainly due to UBS expected
solid performance. Global banks are
forecast to see a moderation of ROE
levels.
-5%
1.4%
0.5%
0.50%
0.49%
0.53%
2005E
-2.9%
21.0%
18.0%
Domestic
15.0%
Investment Banks
14.0%
2006E
Pan-Europe
average
GS ROE
16.0%
12.0%
2005E
-1.4%
-6.2%
19.7%
18.6%
Investment Banks
17.5%
17.0%
15.7%
15.8%
16.6%
15.8%
15.0%
16.9%
16.1%
15.1%
14.3%
International
Pan-Europe
average
Global
Domestic
13.9%
13.0%
2004E
2006E
-2.7%
-7%
17.0%
0.2%
Investment
Banks
Global
-1%
Pan-Europe
average
International
0.72%
0.66%
International
3.5%
3%
19.0%
0.79%
0.4%
9%
20.0%
1.15%
1.0%
0.6%
below 2005E and 2006E consensus
for global banks as we expect a
more challenging global economic
environment in 2005E and we are
more cautious than the market
regarding expected cost synergies
and emerging markets growth
assumptions.
Difference to consensus mean EPS
12.7%
2004E
2005E
2006E
48
Europe
Banks
50 Performance
52 Valuation
54 Revenues
56 Expenses
58 Provisions
60 Balance sheet
62 Balance sheet ratios
64 Profitability
66 Asset quality
68 GS versus consensus
Sector valuation tables
49
Banks
Europe
Performance
Stock performance and ratings
ITLE
Abs perf. 1m - high
Rating/ Mkt. cap Mkt. cap Price
Fair Implied
c. view (local mn) (US$ mn) (Feb 15) value upside
12M
low
12M % 12M
high
high
1M
3M
12M
YTD
1M
3M
12M
YTD
Austria
Bank Austria
IL/A
9,628
12,486
65.5
64.7
-1%
-1%
41.5
69.0
95%
95%
0.1
0.1
10.0
10.0
45.5
45.5
-1.5
-1.5
-4.7
-4.7
1.9
1.9
27.8
27.8
-6.5
-6.5
Benelux
Dexia
ABN-AMRO
IL/A
IL/A
20,786
36,442
26,955
47,257
18.2
21.4
17.7
20.1
-5%
-2%
-6%
12.8
16.5
18.2
21.4
100%
100%
100%
4.9
4.9
6.4
11.1
14.5
12.8
18.6
26.0
14.0
8.1
7.3
9.8
-0.2
-0.1
1.3
2.9
6.1
4.5
4.2
10.7
0.1
2.7
1.8
4.2
France
BNP Paribas
Societe Generale
Credit Agricole
OP/A
IL/A
OP/A
49,838
36,093
33,582
64,628
46,804
43,548
56.3
81.2
22.8
64.5
91.0
30.5
19%
15%
12%
34%
46.2
65.0
19.2
56.3
81.6
23.8
99%
100%
100%
96%
2.4
2.4
5.3
-0.7
3.4
4.3
8.1
-3.1
10.7
9.8
11.9
10.7
5.8
5.6
9.1
2.7
-2.5
-2.5
0.3
-5.5
-4.3
-3.4
0.2
-10.3
-2.8
-3.6
-1.7
-2.8
0.5
0.3
3.6
-2.5
Germany
Commerzbank
Deutsche Bank
HVB Group
Hypo Real Estate
Deutsche Postbank
U/A
U/A
IL/A
IL/A
OP/A
10,236
37,009
12,330
4,187
5,904
13,274
47,993
15,990
5,429
7,656
17.1
68.1
16.8
32.1
36.0
15.7
68.0
19.7
33.2
38.0
2%
-8%
0%
17%
3%
6%
12.8
52.7
12.8
20.3
28.0
17.1
77.1
18.3
32.8
36.3
92%
100%
88%
91%
98%
99%
1.8
4.7
2.1
-6.6
6.9
8.4
8.3
12.1
7.1
6.3
14.9
9.3
3.5
8.9
1.7
-7.8
38.6
NA
5.4
12.7
4.2
0.1
5.2
10.8
-3.1
-0.3
-2.8
-11.1
1.7
3.2
0.3
3.9
-0.8
-1.6
6.4
1.2
-9.1
-4.3
-10.7
-19.0
21.7
NA
0.0
7.0
-1.1
-5.0
-0.2
5.2
Ireland
Allied Irish Bank
Bank of Ireland
IL/A
OP/A
13,943
12,528
18,081
16,246
16.1
13.0
14.6
13.6
-3%
-9%
5%
11.6
9.7
16.1
13.0
100%
100%
100%
5.5
4.2
6.8
11.0
11.4
10.5
21.0
23.9
17.9
5.3
4.9
5.8
0.4
-0.8
1.7
2.8
3.2
2.3
6.3
8.8
3.6
0.0
-0.4
0.4
Italy
Antonveneta
B Lombarda
BMPS
BNL
BPU
BP Milano
BP Verona
Capitalia
Credem
Banca Intesa
SANPAOLO IMI
UniCredito Italiano
IL/A
U/A
IL/A
IL/A
IL/A
OP/A
U/A
OP/A
IL/A
IL/A
OP/A
OP/A
6,033
3,404
6,293
6,409
5,380
2,835
5,626
8,317
2,207
22,716
16,551
28,291
7,824
4,414
8,160
8,311
6,977
3,676
7,295
10,786
2,863
29,458
21,463
36,687
20.93
10.61
2.57
2.13
15.97
6.83
15.19
3.76
8.02
3.84
11.22
4.48
17.4
8.8
2.8
2.0
15.9
7.6
14.3
3.9
7.8
3.7
11.7
5.1
2%
-17% 14.09 20.98
-17% 9.63 10.70
9% 2.30 2.73
-6% 1.56 2.25
0% 12.86 15.97
11% 4.67 6.87
-6% 12.60 15.26
4% 1.97 3.76
-3% 5.50 8.10
-4% 2.69 3.84
4% 8.79 11.23
14% 3.82 4.48
99%
100%
99%
94%
95%
100%
99%
100%
100%
99%
100%
100%
100%
7.0
3.7
7.3
2.6
-0.2
5.9
4.3
2.4
14.4
2.0
7.3
8.6
8.7
11.6
18.7
6.8
7.5
27.0
11.4
16.0
6.2
26.5
20.7
12.3
6.6
6.2
17.7
34.6
-1.3
-1.7
8.4
13.7
31.6
8.8
66.9
39.4
25.5
7.0
8.0
5.9
7.9
8.0
-2.1
-3.0
6.8
4.8
1.5
11.6
9.6
8.5
5.8
5.9
1.9
-1.3
2.1
-2.3
-5.0
0.8
-0.7
-2.5
8.9
-2.9
2.1
3.4
3.5
3.4
9.9
-1.0
-0.4
17.6
3.2
7.4
-1.7
17.1
11.8
4.0
-1.3
-1.7
3.4
18.2
-13.3
-13.7
-4.8
-0.2
15.6
-4.4
46.6
22.4
10.2
-6.1
-5.2
0.6
2.4
2.6
-7.1
-7.9
1.3
-0.5
-3.6
6.0
4.1
3.0
0.5
0.6
U/A
6,938
8,997
2.13
1.50
-30%
-30%
98%
98%
7.6
7.6
16.4
16.4
11.5
11.5
12.7
12.7
2.4
2.4
7.8
7.8
-2.1
-2.1
7.0
7.0
Portugal
BCP
1.7
2.2
Capitalia
UBS
Credit Suisse
Lloyds TSB
UniCredito Italiano
SANPAOLO IMI
Deutsche Postbank
BCP
Standard Chartered
B Lombarda
Banca Intesa
Northern Rock
SCH
Hypo Real Estate
14.4%
10.5%
9.9%
9.0%
8.8%
8.7%
8.6%
8.4%
7.6%
7.4%
7.3%
7.3%
7.0%
6.9%
6.9%
Abs perf. 1m – low
Barclays
BMPS
BP Verona
BNP Paribas
Deutsche Bank
Credem
Nordea
DnB NOR
Bradford & Bingley
Bank Austria
BNL
Credit Agricole
HVB Group
3.0%
2.9%
2.6%
2.4%
2.4%
2.1%
2.0%
1.9%
1.7%
1.6%
1.5%
0.1%
-0.2%
-0.7%
-6.6%
50
Europe
Banks
Stock performance and ratings (cont.)
ITLE
Rating/ Mkt. cap Mkt. cap Price
Fair Implied
c. view (local mn) (US$ mn) (Feb 15) value upside
12M
low
12M % 12M
high
high
1M
3M
12M
YTD
1M
3M
12M
YTD
Nordic
Danske Bank
DnB NOR
Swedbank
Nordea
SEB
NR/A
IL/A
IL/A
OP/A
OP/A
U/A
116,806
79,960
91,575
21,575
89,950
111,791
20,351
12,364
13,092
27,977
12,860
15,982
173.8
60.3
173.5
68.8
133.5
172.0
186.0
64.0
196.0
78.0
155.0
169.0
9%
7%
6%
13%
13%
16%
-2%
137.0
42.4
133.5
48.8
101.0
137.5
173.8
61.0
174.0
69.0
133.5
175.0
99%
100%
99%
100%
100%
100%
98%
2.9
3.1
1.7
5.8
1.9
5.1
1.5
7.9
3.1
8.6
11.2
8.7
9.9
7.8
28.6
22.4
38.5
23.1
36.1
26.5
22.0
2.5
3.6
0.8
4.8
2.6
3.9
-0.6
-2.0
-1.8
-3.2
0.7
-3.0
0.1
-3.4
-0.1
-4.5
0.6
3.0
0.7
1.8
-0.1
13.0
7.5
21.7
8.1
19.6
11.2
7.2
-2.7
-1.7
-4.3
-0.5
-2.6
-1.4
-5.6
Spain
BBVA
SCH
Bankinter
IL/A
IL/A
U/A
IL/A
45,268
60,792
3,110
11,983
58,702
78,833
4,033
15,540
13.4
9.7
40.2
52.7
12.5
10.4
33.0
44.0
-1%
-6%
7%
-18%
-17%
10.2
7.8
28.7
43.0
13.4
9.8
40.3
52.7
100%
100%
100%
100%
100%
6.3
4.5
6.9
3.3
10.5
9.6
9.4
8.1
11.8
16.9
11.6
22.1
4.4
19.9
6.6
5.0
2.3
6.5
2.6
8.7
1.2
-0.5
1.8
-1.7
5.2
1.5
1.4
0.1
3.5
8.2
-1.9
7.3
-8.3
5.3
-6.4
-0.3
-2.9
1.1
-2.6
3.2
Switzerland
Credit Suisse
UBS
IL/A
OP/A
61,191
116,712
51,180
97,617
51.1
103.7
55.3
120.1
13%
8%
16%
37.4 51.1
81.6 104.6
99%
100%
99%
9.5
9.0
9.9
11.4
13.2
10.4
9.2
13.4
7.1
8.1
6.9
8.8
4.3
3.7
4.6
3.2
4.8
2.3
-4.0
-0.4
-6.0
2.6
1.5
3.3
UK
Barclays
Bradford & Bingley
HBOS
HSBC
Lloyds TSB
Northern Rock
Standard Chartered
U/A
NR/A
U/A
IL/A
IL/A
IL/A
IL/A
OP/A
U/A
4,208
39,466
2,156
34,553
101,410
28,416
3,485
57,307
13,041
7,941
74,468
4,068
65,198
191,351
53,618
6,577
108,132
24,607
943
612
340
882
907
508
828
1823
1007
805
642
321
976
915
527
905
2,332
913
8%
-15% 796 943
5% 443 611.5
-6% 252 349.8
11% 663 886
1% 784 953.5
4% 392 508.8
9% 687 827.5
28% 1464 1833
-9% 834 1036
98%
100%
100%
97%
100%
95%
100%
100%
99%
97%
4.7
3.0
2.9
1.6
5.1
3.4
8.8
7.0
5.3
7.4
5.9
8.2
6.9
18.9
19.7
-4.9
17.2
12.4
11.4
-2.8
12.1
6.7
23.5
5.3
20.9
5.4
11.5
7.5
12.5
10.4
4.1
3.4
4.4
1.3
4.0
3.1
7.4
5.9
4.1
3.9
-0.4
-1.9
-2.1
-3.3
0.0
-1.5
3.6
1.9
0.2
2.3
-1.9
0.2
-1.0
10.1
10.8
-11.9
8.6
4.1
3.2
-10.0
-1.5
-6.3
8.5
-7.5
6.2
-7.4
-2.1
-5.6
-1.2
-3.1
-1.2
-1.8
-0.9
-3.9
-1.3
-2.1
1.9
0.5
-1.2
-1.3
26%
37%
13%
24%
387,544
541,974
196,789
353,493
3%
12%
10%
0%
99%
100%
97%
97%
4.7
4.6
7.7
4.7
10.5
10.4
10.3
0.5
16.4
18.0
7.4
8.3
5.1
5.3
7.2
3.8
-0.3
-0.4
2.6
-0.4
2.3
2.3
2.2
-6.9
2.3
3.6
-5.7
-4.9
-0.2
0.0
1.7
-1.5
100% 1,479,800
7%
98%
5.0
8.0
14.0
5.2
0.0
0.0
0.1
-0.1
Domestic
International
Investment Banks
Global
Pan-Europe average
51
Europe
Banks
Valuation
Valuation metrics
ITLE2
ITLE
Rating/
c. view
GS P/E (x) 2005E - high
Price
GS EPS
(Feb 15) 2004E 2005E 2006E
06E/05E
GS EPS/ GS EPS/
GS P/E (X)
growth Std. EPS 05 Cons. 05 2004E 2005E 2006E
Std. BV
2005E
TBV
2005E
P/BV P/TBV
05E 05E
ROE ROTE
2005E 2005E
DPS Dividend
2005E Yld 05E
Austria
Bank Austria
IL/A
65.49
4.36
5.24
5.97
13.9%
110%
110%
101%
101%
15.0
15.0
12.5
12.5
11.0
11.0
45.8
NA
1.4
1.4
NA
NA
10.8%
NA
1.30
2.0%
2.0%
Benelux
Dexia
ABN-AMRO
IL/A
IL/A
18.15
21.4
1.51
2.22
1.62
1.87
1.75
1.97
6.4%
8.2%
5.4%
101%
102%
100%
96%
103%
91%
10.5
12.0
9.6
11.4
11.2
11.5
10.7
10.4
10.9
10.2
10.1
8.9
10.1
2.0
1.8
2.1
2.1
2.0
2.1
16.4%
19.6%
18.4%
19.6%
0.48
1.05
4.3%
2.6%
4.9%
France
BNP Paribas
Societe Generale
Credit Agricole
OP/A
IL/A
OP/A
56.3
81.2
22.8
5.24
7.32
2.15
5.68
7.63
2.44
6.09
8.33
2.76
9.5%
7.2%
9.3%
13.0%
109%
101%
102%
128%
109%
102%
100%
129%
10.8
10.7
11.1
10.6
10.0
9.9
10.6
9.3
9.1
9.3
9.7
8.2
37.1
47.5
18.0
29.9
40.9
9.5
1.5
1.5
1.7
1.3
2.1
1.9
2.0
2.4
15.6%
16.5%
10.8%
20.5%
19.8%
27.7%
2.25
3.50
0.55
3.6%
4.0%
4.3%
2.4%
Germany
Commerzbank
Deutsche Bank
HVB Group
Hypo Real Estate
Deutsche Postbank
U/A
U/A
IL/A
IL/A
OP/A
17.1
68.05
16.75
32.1
36
0.92
5.05
0.39
1.39
2.46
1.31
5.41
1.39
2.63
2.93
1.34
6.24
1.70
3.38
3.30
15.2%
2.4%
15.4%
22.0%
28.4%
12.8%
112%
99%
125%
93%
101%
100%
95%
96%
86%
111%
107%
106%
15.2
18.6
13.5
NM
23.1
14.7
12.5
13.1
12.6
12.0
12.2
12.3
10.9
12.7
10.9
9.9
9.5
10.9
18.6
51.3
17.4
34.7
30.0
15.6
35.3
12.6
NA
29.0
1.2
0.9
1.3
1.0
0.9
1.2
1.8
1.1
1.9
1.3
NA
1.2
8.1%
8.6%
9.7%
7.7%
10.0%
8.6%
15.7%
11.8%
NA
10.4%
0.29
1.70
0.00
1.31
1.46
2.2%
1.7%
2.5%
0.0%
4.1%
4.1%
Ireland
Allied Irish Bank
Bank of Ireland
IL/A
OP/A
16.1
12.96
1.21
1.14
1.36
1.27
1.52
1.42
11.6%
11.6%
11.5%
104%
108%
100%
108%
103%
113%
12.4
13.4
11.4
11.0
11.8
10.2
9.9
10.6
9.1
6.1
5.8
5.7
5.7
2.4
2.6
2.2
2.6
2.8
2.3
19.8%
23.5%
22.9%
24.0%
0.65
0.54
4.1%
4.1%
4.2%
Italy
Antonveneta
B Lombarda
BMPS
BNL
BPU
BP Milano
BP Verona
Capitalia
Credem
Banca Intesa
SANPAOLO IMI
UniCredito Italiano
IL/A
U/A
IL/A
IL/A
IL/A
OP/A
U/A
OP/A
IL/A
IL/A
OP/A
OP/A
20.93
10.61
2.57
2.13
15.97
6.83
15.19
3.762
8.015
3.84
11.22
4.48
0.83
0.61
0.19
0.00
1.06
0.47
1.13
0.11
0.50
0.26
0.70
0.34
1.19
0.67
0.22
0.16
1.27
0.60
1.22
0.27
0.57
0.31
0.84
0.40
1.57
0.75
0.25
0.18
1.47
0.70
1.35
0.32
0.64
0.34
0.94
0.47
15.1%
32.3%
12.9%
12.5%
15.5%
15.7%
17.5%
11.1%
19.3%
12.1%
8.0%
12.7%
18.5%
110%
107%
129%
118%
100%
124%
158%
104%
106%
99%
106%
109%
110%
109%
94%
123%
112%
114%
119%
161%
101%
113%
106%
103%
106%
110%
15.1
25.2
17.4
13.2
NM
15.0
14.7
13.4
NM
16.1
14.9
15.9
13.2
12.8
17.6
15.9
11.4
13.4
12.5
11.4
12.5
13.9
14.0
12.4
13.4
11.3
11.1
13.3
14.1
10.2
11.6
10.8
9.7
11.2
11.6
12.5
11.4
11.9
9.5
11.7
6.5
2.2
1.6
12.1
6.3
10.8
3.2
4.0
2.6
6.6
2.4
9.3
3.9
2.0
1.5
8.9
4.9
9.9
2.9
3.8
2.4
6.1
2.1
1.6
1.8
1.6
1.2
1.3
1.3
1.1
1.4
1.2
2.0
1.5
1.7
1.9
1.8
2.3
2.7
1.3
1.4
1.8
1.4
1.5
1.3
2.1
1.6
1.8
2.2
9.7%
8.1%
8.8%
10.2%
8.6%
6.1%
11.3%
8.4%
15.2%
11.8%
11.9%
15.9%
13.4%
18.5%
12.0%
11.1%
15.0%
12.9%
13.0%
9.7%
16.1%
13.3%
14.4%
20.2%
0.55
0.34
0.11
0.05
0.74
0.15
0.64
0.13
0.30
0.17
0.48
0.22
4.1%
2.6%
3.2%
4.1%
2.4%
4.6%
2.2%
4.2%
3.4%
3.8%
4.4%
4.3%
4.9%
U/A
2.13
0.12
0.14
0.17
22.3%
22.3%
100%
100%
87%
87%
17.1
17.1
15.3
15.3
12.5
12.5
0.9
0.8
2.4
2.4
2.5
2.5
15.8%
16.5%
0.07
3.3%
3.3%
Portugal
BCP
Antonveneta
B Lombarda
BCP
Standard Chartered
Bankinter
Credem
BBVA
Capitalia
HSBC
SANPAOLO IMI
BNL
Commerzbank
Deutsche Bank
BPU
17.6
15.9
15.3
14.4
14.0
14.0
13.9
13.9
13.5
13.4
13.4
13.1
12.9
12.6
12.5
GS P/E (x) 2005E - low
UBS
Swedbank
Societe Generale
Credit Suisse
DnB NOR
Lloyds TSB
Nordea
Bradford & Bingley
Bank of Ireland
Barclays
BNP Paribas
HBOS
Northern Rock
Credit Agricole
10.8
10.7
10.6
10.6
10.6
10.5
10.4
10.4
10.2
10.0
9.9
9.7
9.7
9.3
9.0
Note: GS EPS is the Goldman Sachs European Banks Team adjusted earnings per share to reflect the recurrent pre-goodwill, pre-extraordinary net income of the group, or GS
Net Income. We add back goodwill amortisation and we deduct after-tax extraordinary gains and losses, short-term fluctuations of investment returns on the life fund and oneoff restructuring costs. Stated EPS is the reported EPS. Note, HSBC and Standard Chartered are in US dollars.
52
Europe
Banks
Valuation metrics (cont.)
ITLE2
ITLE
Rating/
c. view
GS P/BV (x) 2005E - high
Price
GS EPS
(Feb 15) 2004E 2005E 2006E
06E/05E
GS EPS/ GS EPS/
GS P/E (X)
Std. BV
growth Std. EPS 05 Cons. 05 2004E 2005E 2006E
2005E
TBV
2005E
P/BV P/TBV
05E 05E
ROE ROTE
2005E 2005E
DPS Dividend
2005E Yld 05E
Nordic
Danske Bank
DnB NOR
Swedbank
Nordea
SEB
NR/A
IL/A
IL/A
OP/A
OP/A
U/A
173.75
60.25
173.5
7.6
133.5
172
13.43
5.41
15.85
0.64
10.83
14.26
15.61
5.71
16.19
0.73
12.26
14.87
17.54
6.48
17.74
0.83
13.82
16.39
12.3%
12.4%
13.5%
9.6%
14.0%
12.8%
10.2%
107%
109%
107%
100%
109%
111%
106%
107%
109%
102%
113%
107%
111%
101%
11.9
12.9
11.1
10.9
11.8
12.3
12.1
10.9
11.1
10.6
10.7
10.4
10.9
11.6
9.7
9.9
9.3
9.8
9.1
9.7
10.5
106.8
37.4
91.0
4.8
81.2
97.0
106.5
33.4
84.9
4.1
66.9
89.1
1.7
1.6
1.6
1.9
1.6
1.6
1.8
1.9
1.6
1.8
2.0
1.9
2.0
1.9
14.3%
14.8%
18.4%
14.3%
14.1%
14.9%
15.6%
17.9%
19.4%
18.5%
19.2%
17.3%
7.00
2.60
7.00
0.30
5.00
6.25
3.9%
4.0%
4.3%
4.0%
4.0%
3.7%
3.6%
Spain
BBVA
SCH
Bankinter
IL/A
IL/A
U/A
IL/A
13.35
9.72
40.19
52.7
1.05
0.67
2.13
3.74
0.96
0.82
2.86
4.07
1.04
0.97
3.06
4.52
13.9%
7.9%
19.2%
7.0%
11.0%
112%
108%
117%
105%
102%
106%
102%
109%
117%
104%
13.9
12.7
14.4
18.9
14.1
12.8
13.9
11.9
14.0
12.9
11.3
12.9
10.0
13.1
11.7
4.9
6.0
16.5
17.7
3.5
5.0
16.4
16.3
2.2
2.7
1.6
2.4
3.0
2.8
3.8
1.9
2.5
3.2
18.7%
15.1%
17.8%
24.6%
29.4%
23.3%
18.9%
27.6%
0.46
0.28
1.22
1.79
3.1%
3.5%
2.9%
3.0%
3.4%
Switzerland
Credit Suisse
UBS
IL/A
OP/A
51.1
103.7
4.6
8.5
4.8
9.6
5.3
11.0
13.3%
10.3%
14.9%
110%
93%
119%
114%
106%
118%
11.8
11.1
12.2
10.7
10.6
10.8
9.5
9.6
9.4
36.9
31.9
22.8
19.9
2.6
1.4
3.3
4.2
2.2
5.2
14.9% 24.9%
25.4% 50.9%
2.00
3.30
3.4%
3.9%
3.2%
UK
Barclays
Bradford & Bingley
HBOS
HSBC
Lloyds TSB
Northern Rock
Standard Chartered
U/A
NR/A
U/A
IL/A
IL/A
IL/A
IL/A
OP/A
U/A
943
611.5
340
882
17.1
507.75
827.5
1823
19.0
83.0
85.3
85.9
57.0
60.9
67.2
31.4
32.8
34.5
83.4
90.8 100.6
1.20
1.26
1.41
43.5
48.2
52.8
74.2
85.3
95.3
175.1 201.5 230.7
1.29
1.32
1.49
11.8%
0.6%
10.4%
5.1%
10.8%
12.2%
9.5%
11.8%
14.5%
12.6%
111%
94%
111%
104%
103%
112%
102%
102%
121%
116%
111%
95%
111%
105%
106%
106%
110%
105%
124%
111%
12.2
11.4
10.7
10.8
10.6
14.3
11.7
11.2
10.4
14.8
11.3
11.1
10.0
10.4
9.7
13.5
10.5
9.7
9.0
14.4
10.1
11.0
9.1
9.9
8.8
12.1
9.6
8.7
7.9
12.8
427
291
207
479
7.56
193
425
1,038
8.04
426
228
207
441
5.34
150
425
526
5.68
2.1
2.2
2.1
1.6
1.8
2.3
2.6
1.9
1.8
2.4
3.0
2.2
2.7
1.6
2.0
3.2
3.4
1.9
3.5
3.3
22.1%
19.4%
15.6%
19.3%
15.3%
25.5%
21.0%
16.6%
16.2%
20.8%
27.9%
16.2%
21.7%
25.2%
33.8%
21.4%
42.6%
25.8%
53.12
26.50
17.50
36.71
0.71
34.20
30.48
66.52
0.63
4.3%
5.6%
4.3%
5.1%
4.2%
4.2%
6.7%
3.7%
3.6%
3.3%
Domestic
International
Investment Banks
Global
20.6%
11.3%
13.8%
13.1%
108%
108%
114%
113%
115%
108%
107%
106%
13.2
11.1
12.2
14.1
11.5
10.2
11.2
13.3
10.5
9.2
9.8
11.8
1.8
1.8
2.3
2.2
2.1
2.3
3.6
3.0
15.3%
17.0%
18.6%
15.9%
19.6%
25.0%
35.5%
25.5%
3.9%
4.0%
3.2%
3.7%
Pan-Europe average
14.5%
110%
109%
12.5
11.4
10.2
2.0
2.6
16.5% 24.6%
3.8%
Note: GS NAV is our adjusted shareholders’ equity to reflect the ‘true’ book. We add back goodwill amortised and written off in prior years, after-tax unrealised holding gains (or
losses) in equity portfolios and any pension fund surplus. GS ROE is our profitability measure using GS Net Income and GS NAV. The dividend yield has not been grossed up
for local tax credits (if available). Note: Forecasts shown here for AIB, B&B, Danske, Nordea, and SHB were correct as of February 15. However, these have since been
adjusted post results.
UBS
Bankinter
Standard Chartered
Allied Irish Bank
HSBC
Bank of Ireland
Credem
Northern Rock
Barclays
HBOS
BBVA
Lloyds TSB
Swedbank
2.9
2.6
2.4
2.4
2.2
2.2
2.1
2.0
1.9
1.9
1.9
1.9
1.8
1.8
1.7
GS P/BV (x) 2005E - low
Bank Austria
BCP
BNL
Deutsche Postbank
Deutsche Bank
BPU
Credit Agricole
SCH
Dexia
BMPS
Capitalia
BP Milano
Hypo Real Estate
HVB Group
Commerzbank
1.3
1.3
1.3
1.2
1.2
1.2
1.1
1.1
1.1
1.1
1.0
0.9
0.9
0.9
0.9
53
Europe
Banks
Revenues
Revenue indicators
ITLE2
ITLE
Austria
Bank Austria
Revenues 05E/04E – high
Total revenues
2004E 05E/04E 06E/05E
Revenue m ix 2004E
NII
Fees Trading Other
N et interest incom e
2004E 05E/04E 06E/05E
Net fees & com m issions
2004E 05E/04E 06E/05E
NIM (on RW A)
2004E
2005E
2006E
3,822
6.3%
5.3%
63%
33%
4%
0%
2,402
5.8%
6.6%
1,252
4.7%
3.8%
3.58%
3.63%
3.67%
Benelux
Dexia
ABN-AMRO
5,406
17,289
3.4%
3.4%
3.1%
2.8%
59%
55%
20%
27%
6%
13%
16%
4%
3,171
9,547
3.2%
2.2%
2.6%
3.9%
1,058
4,750
4.4%
-1.1%
3.2%
3.7%
2.90%
4.16%
2.85%
4.09%
2.74%
4.09%
France
BN P Paribas
Societe Generale
Credit Agricole
18,823
16,416
12,437
4.9%
5.1%
4.0%
4.2%
5.4%
5.1%
33%
41%
NA
25%
33%
NA
27%
19%
NA
15%
7%
NA
6,119
6,749
NA
10.4%
4.9%
NA
5.1%
4.7%
NA
4,687
5,389
NA
4.5%
6.0%
NA
4.5%
7.0%
NA
2.12%
3.40%
NA
2.14%
3.32%
NA
2.08%
3.27%
NA
Germ any
Com m erzbank
Deutsche Bank
HVB Group
Hypo R eal Estate
Deutsche Postbank
6,013
21,295
9,260
804
2,634
2.5%
0.5%
3.5%
11.2%
7.9%
0.6%
1.1%
2.1%
14.8%
6.6%
50%
24%
61%
NA
60%
37%
45%
30%
NA
23%
9%
29%
9%
NA
17%
3%
2%
0%
NA
0%
2,984
5,182
5,652
674
1,575
0.4%
15.3%
3.6%
7.6%
14.6%
-0.9%
1.1%
1.3%
16.4%
11.4%
2,255
9,505
2,809
NA
604
5.2%
0.3%
4.2%
NA
16.0%
3.4%
1.1%
3.8%
NA
6.1%
2.04%
2.34%
2.22%
NA
3.68%
2.10%
2.73%
2.40%
NA
3.94%
2.07%
2.69%
2.45%
NA
4.15%
3,117
3,148
10.6%
8.6%
8.1%
10.1%
63%
59%
28%
31%
4%
2%
5%
8%
1,964
1,874
9.7%
8.6%
8.8%
7.2%
882
1,003
8.9%
6.2%
10.0%
8.6%
2.91%
2.96%
2.88%
2.80%
2.76%
NA
2,234
1,367
4,475
2,835
2,556
1,402
2,333
4,780
834
9,715
7,615
10,337
5.5%
5.2%
4.1%
5.6%
4.5%
6.8%
5.3%
5.2%
8.0%
5.2%
5.0%
6.7%
6.3%
4.6%
3.4%
4.6%
5.5%
5.9%
5.5%
5.4%
5.8%
4.8%
5.0%
6.4%
62%
56%
55%
52%
59%
48%
50%
49%
39%
51%
47%
47%
24%
29%
30%
32%
30%
36%
32%
30%
44%
35%
42%
32%
2%
3%
1%
7%
4%
2%
4%
9%
10%
5%
4%
10%
12%
12%
15%
9%
7%
13%
14%
12%
8%
9%
6%
11%
1,390
761
2,453
1,476
1,519
678
1,159
2,339
323
4,975
3,603
4,869
4.4%
5.9%
4.1%
7.1%
6.7%
7.7%
6.8%
4.5%
10.7%
5.5%
4.5%
8.3%
5.5%
6.0%
3.2%
5.6%
6.0%
7.7%
6.6%
4.9%
6.7%
4.7%
4.9%
8.1%
536
402
1,327
894
764
509
750
1,426
368
3,420
3,229
3,276
9.5%
5.4%
5.3%
5.1%
6.6%
5.5%
4.9%
6.2%
7.2%
5.4%
5.9%
6.7%
9.8%
4.6%
4.8%
5.3%
5.4%
5.3%
5.2%
5.8%
5.5%
5.3%
5.4%
5.8%
3.18%
3.04%
2.87%
2.34%
3.18%
2.73%
3.11%
2.57%
2.91%
2.66%
2.66%
3.32%
3.35%
3.03%
2.93%
2.50%
3.28%
2.68%
3.20%
2.76%
3.02%
2.85%
2.75%
3.36%
3.44%
3.07%
2.92%
2.50%
3.33%
2.65%
3.20%
2.84%
2.98%
2.90%
2.82%
3.40%
2,771
3.5%
5.7%
51%
23%
7%
19%
1,420
5.9%
7.4%
625
5.2%
4.2%
2.67%
2.70%
2.74%
Ireland
Allied Irish Bank
Bank of Ireland
Italy
Antonveneta
B Lom barda
BM PS
BN L
BPU
BP Milano
BP Verona
Capitalia
Credem
Banca Intesa
SANPAO LO IMI
UniCredito Italiano
Portugal
BC P
SCH
Standard Chartered
Bankinter
Northern Rock
Danske Bank
Hypo Real Estate
Allied Irish Bank
Barclays
Bank of Ireland
Credem
Deutsche Postbank
HBOS
BP Milano
30.7%
18.3%
15.7%
14.8%
12.3%
11.2%
10.6%
10.5%
9.8%
8.6%
8.0%
7.9%
7.9%
6.8%
6.8%
Revenues 05E/04E – low
BMPS
Credit Agricole
BBVA
BCP
HVB Group
ABN-AMRO
Dexia
DnB NOR
Commerzbank
Credit Suisse
Deutsche Bank
Swedbank
Bradford & Bingley
4.1%
4.0%
3.9%
3.8%
3.5%
3.5%
3.4%
3.4%
2.7%
2.5%
1.1%
1.1%
0.5%
-0.4%
-19.7%
54
Europe
Banks
Revenue indicators (cont.)
ITLE2
ITLE
NII/revenues 2004E – high
Total revenues
2004E 05E/04E 06E/05E
Revenue mix 2004E
NII
Fees Trading Other
Net interest income
2004E 05E/04E 06E/05E
Net fees & commissions
2004E 05E/04E 06E/05E
NIM (on RWA)
2004E 2005E 2006E
Nordic
Danske Bank
DnB NOR
Swedbank
Nordea
SEB
26,316
21,728
25,178
5,826
28,374
23,618
12.3%
2.7%
-0.4%
5.6%
5.1%
3.8%
7.3%
4.7%
5.4%
4.7%
5.6%
10.6%
58%
61%
65%
60%
48%
62%
23%
21%
26%
28%
40%
26%
11%
7%
4%
8%
8%
10%
8%
10%
5%
5%
5%
3%
15,262
13,227
16,273
3,486
13,521
14,572
14.7%
4.6%
-1.4%
5.8%
3.4%
3.7%
7.7%
4.6%
5.5%
4.6%
5.4%
3.9%
6,025
4,627
6,658
1,611
11,299
6,039
10.3%
5.5%
5.6%
6.0%
6.6%
7.8%
7.7%
5.7%
6.1%
5.1%
6.7%
30.3%
1.95%
2.33%
2.87%
2.55%
2.52%
2.25%
2.11%
2.30%
2.93%
2.58%
2.44%
2.27%
2.10%
2.28%
3.02%
2.54%
2.40%
2.23%
Spain
BBVA
SCH
Bankinter
11,053
14,099
605
2,653
3.9%
30.7%
15.7%
6.8%
6.5%
12.3%
5.7%
10.8%
58%
55%
67%
71%
31%
33%
29%
25%
5%
6%
5%
1%
6%
6%
2%
6,365
7,739
403
1,894
4.7%
44.9%
15.9%
11.0%
7.9%
13.4%
8.6%
12.7%
3,379
4,622
175
669
0.4%
-100.0%
12.5%
4.8%
4.1%
NA
5.5%
5.4%
3.72%
3.76%
2.86%
3.87%
3.64%
4.99%
2.94%
3.62%
3.63%
5.30%
2.93%
3.64%
Switzerland
Credit Suisse
UBS
53,871
37,213
1.1%
5.2%
3.7%
5.3%
22%
33%
25%
52%
10%
12%
42%
3%
11,969
12,431
1.1%
5.2%
3.7%
5.3%
13,577
19,265
1.1%
5.2%
3.7%
5.3%
4.94%
6.12%
4.96%
6.23%
5.03%
UK
Barclays
Bradford & Bingley
HBOS
HSBC
Lloyds TSB
Northern Rock
Standard Chartered
1,397
13,945
748
10,044
50,191
9,586
731
22,738
5,367
1.1%
9.8%
-19.7%
7.9%
6.2%
6.0%
14.8%
10.5%
18.3%
2.2%
9.5%
2.8%
6.9%
8.0%
6.4%
12.9%
8.0%
13.8%
50%
49%
60%
58%
61%
52%
64%
40%
59%
37%
36%
34%
18%
26%
24%
32%
21%
25%
0%
11%
0%
2%
5%
3%
0%
9%
12%
13%
5%
6%
21%
8%
21%
4%
30%
4%
700
6,842
445
5,835
30,637
4,987
467
9,102
3,168
0.7%
7.3%
3.1%
7.3%
7.5%
6.6%
11.2%
11.8%
25.4%
0.5%
6.4%
4.2%
6.0%
7.7%
5.7%
11.0%
7.2%
13.9%
521
4,966
256
1,844
12,920
2,277
233
4,823
1,334
9.3%
10.1%
-64.1%
9.9%
9.0%
7.0%
23.6%
15.0%
10.0%
8.0%
9.9%
2.2%
9.5%
9.3%
7.0%
17.1%
9.2%
10.0%
3.10%
3.56%
2.68%
2.73%
5.14%
4.12%
2.34%
3.38%
3.92%
2.82%
3.39%
2.37%
2.66%
4.69%
4.21%
2.22%
3.29%
4.06%
2.62%
3.25%
2.21%
2.59%
4.65%
4.18%
2.09%
3.16%
3.70%
5.7%
7.0%
3.0%
12.1%
6.3%
6.3%
3.9%
9.1%
58%
48%
28%
59%
27%
26%
43%
28%
5%
12%
16%
6%
10%
14%
13%
7%
7.2%
7.3%
6.6%
16.6%
6.0%
5.7%
3.9%
9.4%
6.5%
8.1%
2.9%
-16.7%
8.4%
7.2%
3.9%
8.3%
3.01%
3.13%
4.08%
4.51%
3.03%
3.07%
4.72%
4.54%
3.02%
2.99%
4.77%
4.56%
7.4%
6.7%
50%
29%
9%
11%
9.7%
6.5%
0.2%
7.1%
3.61%
3.71%
3.71%
Domestic
International
Investment Banks
Global
Pan-Europe average
Bankinter
Swedbank
Northern Rock
Allied Irish Bank
Bank Austria
Antonveneta
HSBC
HVB Group
DnB NOR
Nordea
Deutsche Postbank
Bradford & Bingley
BPU
71%
67%
65%
64%
63%
63%
62%
62%
61%
61%
61%
60%
60%
60%
59%
NII/revenues 2004E – low
BP Verona
Commerzbank
Barclays
Capitalia
BP Milano
SEB
SANPAOLO IMI
UniCredito Italiano
Societe Generale
Credem
UBS
BNP Paribas
Deutsche Bank
Credit Suisse
50%
50%
49%
49%
48%
48%
47%
47%
41%
40%
39%
33%
33%
24%
22%
Note: All revenue figures in local currency. Reported revenues may differ due to the life insurance and general insurance business sometimes reported net of claims and
expenses. NIM is net interest income as percentage of average risk-weighted assets.
55
Europe
Banks
Expenses
Expense indicators
ITLE2
ITLE
Austria
Bank Austria
Expenses 05E/04E- high
Total expenses (ex goodwill)
2004E 05E/04E 06E/05E
Expense mix (2004E)
Staff
Admin
Depr.
Other
2004E
GS operating profit
2005E
2006E 05E/04E 06E/05E
Cost / income ratio
Total Staff Comp. /
2004E
2005E
2006E
2003 Rev 04
2,461
2.7%
2.4%
NA
NA
NA
NA
1,370
1,546
1,700
12.8%
10.0%
64.4%
62.2%
60.5%
NA
0%
Benelux
Dexia
ABN-AMRO
3,029
12,741
1.5%
-4.2%
1.7%
1.5%
47%
61%
30%
32%
10%
8%
13%
0%
2,347
6,470
2,472
5,832
2,592
6,228
5.3%
-9.9%
4.8%
6.8%
56.0%
73.7%
55.1%
68.3%
54.3%
67.4%
19,850
107,416
26%
45%
France
BNP Paribas
Societe Generale
Credit Agricole
11,592
10,967
8,575
3.4%
2.4%
-1.1%
2.5%
3.2%
0.2%
59%
60%
NA
34%
34%
NA
7%
6%
NA
0%
0%
NA
6,877
5,014
4,521
7,392
5,485
5,350
7,911
6,017
6,090
7.5%
9.4%
18.3%
7.0%
9.7%
13.8%
61.6%
66.8%
68.9%
60.7%
65.1%
65.6%
59.7%
63.8%
62.5%
89,071
90,040
64,191
37%
40%
NA
Germany
Commerzbank
Deutsche Bank
HVB Group
Hypo Real Estate
Deutsche Postbank
4,414
17,083
6,229
311
1,860
-3.4%
-5.7%
0.0%
-0.5%
4.3%
1.4%
1.0%
-0.8%
6.9%
4.1%
56%
60%
NA
NA
31%
34%
8%
NA
NA
65%
10%
19%
NA
NA
4%
0%
13%
NA
NA
0%
1,444
4,620
2,604
493
NA
1,723
5,631
2,890
584
NA
1,697
5,682
3,093
695
NA
19.3%
21.9%
11.0%
18.6%
NA
-1.5%
0.9%
7.0%
18.9%
NA
73.4%
80.2%
67.3%
38.7%
70.6%
69.2%
75.3%
65.0%
34.6%
68.3%
69.7%
75.2%
63.2%
32.2%
66.7%
32,898
67,682
60,214
1,543
NA
41%
48%
NA
NA
22%
Ireland
Allied Irish Bank
Bank of Ireland
1,784
1,787
3.3%
3.2%
3.4%
3.7%
55%
58%
38%
31%
7%
10%
0%
1%
1,645
1,386
1,912
1,617
2,170
1,861
16.3%
16.6%
13.5%
15.1%
57.2%
56.8%
53.4%
53.9%
51.1%
50.8%
25,567
17,584
32%
32%
Italy
Antonveneta
B Lombarda
BMPS
BNL
BPU
BP Milano
BP Verona
Capitalia
Credem
Banca Intesa
SANPAOLO IMI
UniCredito Italiano
1,381
855
3,064
1,877
1,633
1,022
1,415
3,172
601
5,863
5,030
5,941
0.9%
2.0%
0.7%
0.5%
0.6%
0.7%
2.5%
0.6%
3.0%
-0.5%
1.4%
0.9%
1.4%
2.0%
1.1%
1.1%
1.7%
1.2%
2.4%
1.7%
3.3%
2.1%
1.8%
-1.7%
51%
52%
56%
57%
61%
58%
59%
56%
54%
54%
56%
57%
32%
35%
35%
33%
27%
32%
30%
34%
36%
35%
35%
35%
17%
13%
9%
11%
12%
9%
11%
10%
10%
10%
9%
8%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
850
454
1,451
958
840
389
888
1,493
227
3,820
2,701
4,149
963
502
1,611
1,122
939
477
970
1,727
273
4,328
2,998
4,739
1,092
549
1,733
1,242
1,053
552
1,068
1,932
304
4,680
3,296
5,486
13.3%
10.7%
11.0%
17.2%
11.8%
22.6%
9.3%
15.7%
20.3%
13.3%
11.0%
14.2%
13.4%
9.3%
7.6%
10.7%
12.3%
15.8%
10.0%
11.9%
11.3%
8.1%
10.0%
15.8%
61.8%
62.5%
68.5%
66.2%
63.9%
72.9%
60.7%
66.4%
72.0%
60.3%
66.0%
57.5%
59.1%
60.6%
66.2%
63.0%
61.5%
68.8%
59.1%
63.5%
68.7%
57.0%
63.8%
54.4%
56.4%
59.1%
64.8%
60.9%
59.3%
65.7%
57.3%
61.3%
67.1%
55.6%
61.8%
50.2%
10,463
7,472
27,869
18,485
13,868
8,016
12,781
28,975
4,956
62,323
44,341
69,062
32%
33%
39%
38%
39%
43%
36%
37%
39%
33%
37%
33%
Portugal
BCP
1,794
2.5%
2.7%
48%
33%
10%
9%
984
1,026
1,119
4.2%
9.0%
64.7%
64.1%
62.3%
22,249
31%
Standard Chartered
SCH
Northern Rock
Barclays
Danske Bank
Bankinter
Deutsche Postbank
HSBC
BNP Paribas
UBS
Allied Irish Bank
Bank of Ireland
Credem
23.3%
14.7%
12.2%
9.3%
8.3%
7.9%
5.7%
4.3%
4.0%
3.8%
3.4%
3.4%
3.3%
3.2%
3.0%
Expenses 05E/04E- low
Capitalia
BPU
BNL
BBVA
HVB Group
Hypo Real Estate
Banca Intesa
Nordea
Credit Agricole
Swedbank
Commerzbank
ABN-AMRO
Deutsche Bank
DnB NOR
Bradford & Bingley
0.6%
0.6%
0.5%
0.3%
0.0%
-0.5%
-0.5%
-0.7%
-1.1%
-1.9%
-3.4%
-4.2%
-5.7%
-6.2%
-36.6%
56
Europe
Banks
Expense indicators (cont.)
ITLE2
ITLE
Cost/income 2005E – high
Total expenses (ex goodwill)
2004E 05E/04E 06E/05E
Expense mix (2004E)
Staff Admin
Depr.
Other
2004E
GS operating profit
2005E 2006E 05E/04E 06E/05E
Cost / income ratio
Total Staff Comp. /
2004E
2005E
2006E
2003 Rev 04
Nordic
Danske Bank
DnB NOR
Swedbank
Nordea
SEB
14,285
11,948
13,193
3,447
17,862
10,127
8.3%
-6.2%
-1.9%
-0.7%
2.0%
2.7%
2.9%
-3.9%
0.7%
0.1%
2.3%
11.4%
63%
52%
51%
57%
61%
63%
33%
32%
42%
43%
35%
35%
3%
5%
4%
0%
4%
3%
0%
11%
3%
0%
0%
0%
11,985
9,780
11,265
2,233
9,982
13,491
14,031
11,108
11,298
2,566
10,624
14,110
15,748
12,602
12,395
2,836
11,748
15,522
17.1%
13.6%
0.3%
14.9%
6.4%
4.6%
12.2%
13.4%
9.7%
10.5%
10.6%
10.0%
54.3%
55.0%
52.4%
59.2%
63.0%
42.9%
52.4%
50.2%
51.6%
55.6%
61.1%
42.4%
50.2%
46.1%
49.3%
53.2%
59.2%
42.8%
16,114
11,073
15,366
33,978
18,067
9,258
34%
29%
27%
33%
38%
27%
Spain
BBVA
SCH
Bankinter
5,613
7,601
321
1,021
0.3%
14.7%
5.7%
3.8%
3.3%
6.6%
2.6%
5.3%
57%
54%
52%
62%
35%
34%
43%
27%
8%
10%
5%
8%
0%
2%
0%
4%
5,294
5,445
296
1,517
5,518
6,537
370
1,640
6,073
8,069
399
1,873
4.2%
20.1%
25.2%
8.1%
10.1%
23.4%
7.8%
14.2%
50.8%
53.9%
53.1%
38.5%
49.0%
47.3%
48.5%
37.4%
47.6%
44.9%
47.1%
35.5%
86,197
92,015
3,065
13,089
29%
29%
28%
24%
Switzerland
Credit Suisse
UBS
45,283
26,322
1.6%
3.4%
3.2%
3.7%
26%
70%
27%
25%
5%
0%
7,461
11,059
7,946
12,097
8,459
13,164
6.5%
9.4%
6.5%
8.8%
84.1%
70.7%
84.5%
69.6%
84.1%
68.5%
60,837
65,929
22%
50%
UK
Barclays
Bradford & Bingley
HBOS
HSBC
Lloyds TSB
Northern Rock
Standard Chartered
775
8,051
459
4,332
24,989
5,214
244
13,086
2,815
0.8%
9.3%
-36.6%
2.4%
4.0%
1.2%
12.2%
7.9%
23.3%
3.3%
8.1%
-1.4%
5.1%
4.4%
3.0%
10.0%
5.6%
13.3%
34%
62%
55%
43%
57%
49%
49%
38%
54%
53%
34%
14%
37%
36%
35%
34%
27%
37%
4%
4%
4%
16%
6%
12%
8%
8%
8%
9%
0%
27%
NA
0%
NA
9%
NA
NA
588
5,580
-502
5,508
25,295
4,272
488
8,970
2,430
595
6,183
-312
6,206
27,461
4,787
567
10,340
2,765
607
1.1%
6,918 10.8%
-298 -37.8%
6,741 12.7%
30,597
8.6%
5,275 12.0%
648 16.3%
11,583 15.3%
3,182 13.8%
2.1%
11.9%
-4.5%
8.6%
11.4%
10.2%
14.2%
12.0%
15.1%
55.4%
57.7%
61.4%
43.1%
49.8%
54.4%
33.4%
57.6%
52.5%
55.3%
57.4%
48.5%
40.9%
48.7%
51.9%
32.6%
56.2%
54.7%
55.9%
56.7%
46.6%
40.2%
47.1%
50.2%
31.8%
54.9%
54.4%
6,077
NA
6,745
NA
222,719
NA
3,924
111,200
30,000
19%
36%
34%
19%
28%
27%
16%
22%
29%
Domestic
International
Investment Banks
Global
1.0%
3.5%
0.7%
7.1%
2.5%
3.7%
2.9%
5.3%
54%
52%
56%
56%
35%
33%
21%
36%
9%
8%
10%
8%
2%
1%
4%
1%
12.9%
9.5%
11.7%
10.8%
10.5%
10.1%
6.3%
14.1%
59.6%
58.5%
76.5%
51.1%
56.9%
56.6%
74.8%
48.9%
55.0%
55.3%
74.2%
47.2%
31%
30%
42%
29%
Pan-Europe average
3.4%
3.7%
54%
33%
8%
2%
11.0%
10.7%
59.4%
57.3%
55.8%
32%
ype
Credit Suisse
Deutsche Bank
UBS
Commerzbank
BP Milano
Credem
ABN-AMRO
Deutsche Postbank
BMPS
Credit Agricole
Societe Generale
HVB Group
BCP
SANPAOLO IMI
Capitalia
84.5%
75.3%
69.6%
69.2%
68.8%
68.7%
68.3%
68.3%
66.2%
65.6%
65.1%
65.0%
64.1%
63.8%
63.5%
Cost/Income 2005E – low
Allied Irish Bank
Danske Bank
Lloyds TSB
Swedbank
DnB NOR
BBVA
HSBC
Bankinter
Bradford & Bingley
SCH
HBOS
Hypo Real Estate
Northern Rock
53.4%
52.4%
51.9%
51.6%
50.2%
49.0%
48.7%
48.5%
48.5%
47.3%
42.4%
40.9%
37.4%
34.6%
32.6%
Note: Total expenses are presented excluding the amortisation of goodwill. GS Operating Profit is operating profit before loan-loss provision adding back goodwill amortisation
and equity-accounted income, and deducting tax-grossed up minorities and preference share dividends. The Cost/Income ratio is calculated inclusive of depreciation but
excluding goodwill amortisation. The Compensation/Revenue ratio is staff expenses over all group revenues.
57
Europe
Banks
Provisions
Provisioning indicators
ITLE2
ITLE
Provisions 05E/04E- high
N et provision charge
2004E 05E/04E 06E/05E
Prov. / net loans
2004E 2005E 2006E
Prov. / GS Op. profit
2004E 2005E 2006E
2004E
Stated PBT
05E/04E 06E/05E
Tax rate
2004E
Stated net incom e
2004E 05E/04E 06E/05E
Austria
Bank Austria
433
-2.2%
3.5%
0.58%
0.53%
0.52%
32%
27%
26%
832
22.2%
14.1%
24%
571
22.8%
15.3%
B enelux
D exia
ABN-AMR O
56
653
99.8%
50.1%
15.8%
4.7%
0.03%
0.27%
0.06%
0.40%
0.07%
0.41%
2%
10%
5%
17%
5%
16%
2,376
5,054
1.7%
-1.7%
4.2%
6.3%
23%
21%
1,754
4,067
-3.0%
-22.3%
4.3%
6.9%
France
BNP Paribas
Societe Generale
C redit Agricole
678
541
565
29.1%
52.1%
35.2%
23.8%
11.2%
10.2%
0.28%
0.24%
0.33%
0.33%
0.35%
0.43%
0.39%
0.37%
0.48%
10%
11%
12%
12%
15%
14%
14%
15%
14%
6,905
4,863
3,554
4.7%
6.6%
17.4%
4.5%
9.3%
17.6%
27%
29%
26%
4,668
3,125
2,310
5.7%
2.7%
21.5%
4.6%
9.5%
19.3%
786
372
1,797
271
166
-8.3%
34.2%
-29.6%
-36.3%
4.6%
-6.9%
33.1%
-2.0%
-10.7%
7.8%
0.59%
0.27%
0.65%
NA
0.38%
0.53%
0.36%
0.46%
NA
0.39%
0.48%
0.46%
0.46%
NA
0.40%
54%
8%
69%
55%
NA
42%
9%
44%
30%
NA
40%
12%
40%
22%
NA
997
4,145
964
236
621
45.5%
6.1%
108.4%
86.5%
19.2%
2.0%
11.7%
19.4%
28.8%
12.8%
44%
36%
35%
29%
35%
463
2,545
375
168
403
70.2%
-14.0%
200.9%
103.2%
19.3%
2.4%
33.1%
20.5%
29.4%
12.8%
100
84
76.4%
65.6%
23.5%
44.0%
0.18%
0.12%
0.27%
0.18%
0.29%
0.23%
6%
6%
9%
9%
10%
11%
1,394
1,344
12.1%
10.1%
12.5%
15.4%
26%
17%
993
1,106
10.8%
9.0%
13.2%
12.0%
335
108
537
495
228
117
157
25
781
1,020
574
910
-14.9%
7.0%
-4.7%
-48.5%
-4.0%
1.7%
2.5%
40.0%
-29.6%
-3.9%
-9.8%
-4.0%
-14.0%
7.0%
-3.0%
4.0%
-4.6%
6.7%
5.5%
6.0%
-2.0%
5.6%
-2.0%
2.5%
0.92%
0.45%
0.76%
0.91%
0.52%
0.63%
0.49%
0.21%
1.05%
0.66%
0.46%
0.69%
0.77%
0.46%
0.70%
0.47%
0.49%
0.57%
0.49%
0.28%
0.74%
0.62%
0.41%
0.62%
0.64%
0.47%
0.65%
0.47%
0.44%
0.57%
0.49%
0.27%
0.70%
0.63%
0.39%
0.60%
39%
24%
37%
52%
27%
30%
18%
11%
52%
27%
21%
22%
30%
23%
32%
23%
23%
25%
17%
13%
32%
23%
17%
18%
22%
23%
29%
21%
20%
23%
16%
12%
28%
22%
15%
16%
507
354
750
74
579
198
700
193
656
2,576
2,061
3,330
24.9%
11.6%
29.6%
N/M
20.2%
29.0%
14.5%
29.4%
83.3%
27.3%
14.6%
17.9%
27.7%
10.9%
15.6%
13.5%
11.7%
25.1%
11.3%
9.9%
21.2%
9.8%
13.7%
20.3%
50%
48%
36%
80%
47%
35%
42%
30%
55%
35%
37%
35%
254
150
468
11
284
123
387
129
243
1,597
1,243
1,998
35.8%
9.0%
23.4%
N/M
21.5%
27.4%
13.7%
23.4%
133.7%
25.3%
14.6%
14.6%
34.7%
16.2%
15.6%
15.5%
11.7%
25.7%
11.5%
10.0%
22.4%
9.8%
13.7%
20.3%
455
-0.6%
-5.8%
0.91%
0.87%
0.78%
46%
44%
38%
562
12.4%
22.3%
8%
442
11.5%
22.3%
Germ any
C om m erzbank
D eutsche Bank
H VB Group
H ypo Real Estate
D eutsche Postbank
Ireland
Allied Irish Bank
Bank of Ireland
Italy
Antonveneta
B Lom barda
BMPS
BNL
BPU
BP Milano
BP Verona
C redem
C apitalia
Banca Intesa
SANPAOLO IMI
U niC redito Italiano
Portugal
BCP
Credit Suisse
Standard Chartered
Dexia
Allied Irish Bank
Bank of Ireland
Societe Generale
ABN-AMRO
Swedbank
Credem
Credit Agricole
SEB
Deutsche Bank
BNP Paribas
Barclays
Northern Rock
286.2%
114.1%
99.8%
76.4%
65.6%
52.1%
50.1%
42.8%
40.0%
35.2%
34.9%
34.2%
29.1%
22.5%
22.3%
Provisions 05E/04E- low Banco Popular Espanol
BCP
Bank Austria
Banca Intesa
UniCredito Italiano
BPU
BMPS
Commerzbank
SANPAOLO IMI
Antonveneta
Bankinter
Capitalia
HVB Group
Hypo Real Estate
BNL
1.4%
-0.6%
-2.2%
-3.9%
-4.0%
-4.0%
-4.7%
-8.3%
-9.8%
-14.9%
-15.4%
-29.6%
-29.6%
-36.3%
-48.5%
58
Europe
Banks
Provisioning indicators (cont.)
ITLE2
ITLE
Nordic
Danske Bank
DnB NOR
Swedbank
Nordea
SEB
Spain
BBVA
SCH
Bankinter
Switzerland
Credit Suisse
UBS
UK
Barclays
Bradford & Bingley
HBOS
HSBC
Lloyds TSB
Northern Rock
Standard Chartered
Domestic
International
Investment Banks
Global
Pan-Europe average
Provs/loans 2005E – high
Net provision charge
2004E 05E/04E 06E/05E
Prov. / net loans
2004E 2005E 2006E
Prov. / GS Op. profit
2004E 2005E 2006E
2004E
Stated PBT
05E/04E 06E/05E
Tax rate
2004E
Stated net income
2004E 05E/04E 06E/05E
488
197
495
59
732
25
N/M
N/M
42.8%
N/M
34.9%
N/M
26.4%
14.9%
49.5%
66.4%
23.3%
49.3%
0.05%
0.03%
0.07%
0.04%
0.10%
0.00%
0.09%
0.14%
0.09%
0.09%
0.12%
0.05%
0.10%
0.15%
0.13%
0.14%
0.14%
0.07%
4%
2%
4%
3%
7%
0%
7%
8%
6%
6%
9%
3%
8%
8%
9%
9%
10%
4%
12,857
9,222
11,912
2,486
9,273
12,968
0.6%
5.9%
-1.2%
0.3%
8.3%
0.7%
16.8%
14.0%
1.2%
7.6%
10.2%
9.1%
29%
27%
22%
25%
29%
29%
9,128
6,738
8,592
1,856
6,590
9,196
0.6%
5.6%
-5.5%
-5.7%
10.5%
0.5%
16.8%
13.9%
-2.2%
7.8%
10.5%
9.2%
931
1,824
51
303
16.8%
15.4%
-15.4%
1.4%
16.6%
10.2%
-0.1%
28.6%
0.58%
1.00%
0.29%
0.64%
0.61%
1.06%
0.22%
0.56%
0.65%
1.10%
0.20%
0.64%
18%
33%
17%
20%
20%
32%
12%
19%
21%
29%
11%
21%
4,149
4,771
267
1,292
13.9%
31.1%
27.5%
13.0%
10.4%
22.4%
10.6%
11.2%
23%
20%
33%
31%
2,802
3,277
163
801
7.6%
33.2%
28.7%
13.1%
10.5%
21.1%
10.6%
11.2%
74
-276
286.2%
N/M
1.8%
95.3%
0.04%
-0.13%
0.15%
0.06%
0.16%
0.10%
1%
-2%
4%
1%
3%
2%
8,424
9,955
-4.4%
7.2%
6.3%
8.9%
20%
21%
5,480
7,370
3.5%
6.7%
7.0%
8.8%
62
1,091
3
1,158
6,279
872
57
1,496
214
12.5%
22.5%
N/M
8.0%
10.5%
12.2%
22.3%
9.6%
114.1%
23.6%
10.4%
43.1%
8.8%
9.7%
12.4%
30.1%
4.5%
24.1%
0.19%
0.45%
0.01%
0.42%
1.10%
0.62%
0.19%
0.54%
0.33%
0.20%
0.50%
0.04%
0.43%
1.10%
0.64%
0.20%
0.51%
0.51%
0.23%
0.50%
0.04%
0.44%
1.12%
0.66%
0.22%
0.49%
0.50%
11%
20%
-1%
21%
25%
20%
12%
17%
9%
12%
22%
-3%
20%
25%
20%
12%
16%
17%
14%
21%
-5%
20%
25%
21%
14%
15%
18%
602
4,603
103
4,545
17,538
3,391
431
7,059
2,158
-6.8%
7.0%
N/M
12.8%
8.8%
12.8%
14.2%
15.4%
1.7%
-2.0%
12.1%
9.0%
8.3%
13.0%
9.7%
12.1%
14.6%
13.1%
28%
28%
28%
29%
26%
29%
29%
30%
30%
433
3,268
64
2,993
11,697
2,348
306
4,434
1,421
-7.1%
6.9%
N/M
13.8%
8.3%
13.1%
13.4%
18.0%
3.7%
-2.0%
12.3%
9.4%
8.8%
14.9%
9.9%
12.1%
16.3%
14.0%
10.0%
25.8%
164.2%
19.8%
12.6%
13.7%
55.8%
12.0%
0.45%
0.37%
0.02%
0.94%
0.44%
0.40%
0.16%
0.97%
0.45%
0.41%
0.20%
1.00%
22%
15%
1%
24%
19%
16%
4%
25%
19%
16%
5%
25%
21.5%
9.4%
3.9%
14.1%
13.3%
10.3%
8.9%
14.7%
33%
28%
25%
24%
28.2%
7.4%
0.8%
13.4%
13.7%
10.8%
14.3%
15.5%
30.9%
18.6%
0.48%
0.51%
0.53%
17%
17%
17%
12.6%
11.7%
28%
12.8%
12.9%
HSBC
SCH
BCP
Antonveneta
Capitalia
BMPS
Lloyds TSB
UniCredito Italiano
Banca Intesa
BBVA
BP Milano
Bank Austria
Commerzbank
1.10%
1.06%
0.87%
0.77%
0.74%
0.70%
0.64%
0.62%
0.62%
0.61%
0.57%
0.56%
0.53%
0.53%
0.51%
Provs/loans 2005E – low
Allied Irish Bank
Bankinter
Northern Rock
Bank of Ireland
Credit Suisse
DnB NOR
SEB
Swedbank
Nordea
Danske Bank
Dexia
UBS
Bradford & Bingley
0.27%
0.22%
0.20%
0.20%
0.18%
0.15%
0.14%
0.12%
0.09%
0.09%
0.09%
0.06%
0.06%
0.05%
0.04%
Note: The net provision charge is for loan-losses only. Provisions/net loans is the actual provision charge or the ‘cost-of-risk’ incurred and forecast on the unprovided portion of
the loan book. Provisions/GS Operating Profit is the credit risk ‘consumption’ of the operating profit. Tax rate is the effective annual tax rate.
59
Europe
Banks
Balance sheet
Balance sheet indicators
ITLE2
ITLE
RWAs 05E/04E- high
Total assets
RW As
2004E 05E/04E 06E/05E
Net loans
Deposits
Shareholders' equity
2004E 05E/04E 06E/05E
2004E 05E/04E 06E/05E
2004E 05E/04E 06E/05E
2004E 05E/04E 06E/05E
Tier 1
2004E
Austria
Bank Austria
141,913
3.1%
2.2%
70,072
5.7%
4.0%
77,434
5.8%
4.0%
64,528
10.4%
4.0%
6,225
8.2%
8.7%
5,533
Benelux
Dexia
ABN-AMRO
382,393
608,623
7.0%
2.5%
6.2%
2.2%
114,856
241,500
7.0%
2.8%
5.2%
2.5%
171,868
239,782
7.0%
2.8%
5.2%
2.5%
96,971
252,896
7.0%
2.8%
7.3%
2.5%
10,004
14,972
7.9%
15.7%
8.0%
14.6%
11,646
20,884
France
BNP Paribas
Societe Generale
Credit Agricole
905,938
601,089
832,447
5.5%
5.2%
-3.7%
4.7%
5.3%
3.1%
323,700
215,000
220,425
5.5%
5.2%
-3.7%
4.7%
5.3%
3.1%
258,080
230,475
180,939
5.5%
5.2%
-3.7%
4.7%
5.3%
3.1%
237,712
213,433
291,965
5.5%
5.2%
-3.7%
4.7%
5.3%
3.1%
30,194
18,576
NA
9.9%
9.5%
NA
9.4%
9.7%
9.3%
24,278
18,361
18,850
Germany
Comm erzbank
Deutsche Bank
HVB Group
Hypo Real Estate
Deutsche Postbank
388,089
833,169
552,126
NA
136,552
0.3%
0.6%
-2.6%
NA
2.8%
0.3%
0.6%
-2.1%
1.6%
2.9%
143,200
217,533
247,006
NA
46,387
0.3%
3.3%
-2.3%
NA
4.3%
0.3%
3.3%
-1.2%
NA
4.5%
135,602
136,194
278,225
NA
44,273
0.5%
3.6%
-2.4%
NA
3.4%
3.9%
3.4%
-1.3%
NA
3.7%
101,982
310,083
143,118
NA
77,051
0.5%
3.6%
2.0%
NA
5.2%
3.9%
3.4%
2.0%
NA
5.3%
9,464
25,561
10,987
NA
4,680
5.6%
-1.3%
10.6%
NA
5.1%
2.9%
5.2%
11.5%
4.9%
5.5%
10,578
19,573
14,381
NA
2,760
Ireland
Allied Irish Bank
Bank of Ireland
99,497
115,091
12.7%
9.8%
10.9%
8.5%
75,759
72,326
12.1%
14.0%
11.0%
9.9%
62,013
74,856
13.6%
11.4%
12.5%
9.8%
46,589
56,657
9.8%
6.1%
131.3%
6.4%
5,359
4,810
7.6%
13.6%
8.8%
13.2%
5,947
4,634
Italy
Antonveneta
B Lombarda
BMPS
BNL
BPU
BP Milano
BP Verona
Capitalia
Credem
Banca Intesa
SANPAOLO IMI
UniCredito Italiano
49,810
32,455
123,706
82,305
65,402
35,181
49,376
128,600
21,680
263,407
206,120
251,257
2.9%
3.1%
2.5%
1.7%
2.8%
2.9%
1.7%
1.7%
4.7%
1.5%
1.8%
3.2%
3.0%
2.9%
2.5%
2.8%
2.9%
3.0%
3.9%
1.7%
4.3%
1.9%
1.8%
2.8%
42,967
26,594
86,818
61,850
49,030
27,754
38,349
87,498
11,825
182,344
135,830
156,592
3.5%
4.7%
4.0%
9.2%
5.0%
6.7%
7.1%
3.0%
9.0%
3.8%
3.0%
7.0%
3.7%
4.5%
3.5%
4.1%
5.0%
6.7%
8.1%
3.3%
6.0%
4.0%
3.2%
6.7%
36,463
24,771
71,813
53,325
43,906
19,973
32,269
73,647
12,154
154,992
123,976
135,579
3.5%
4.7%
4.0%
4.0%
5.0%
6.7%
5.0%
3.0%
9.0%
3.8%
3.0%
7.0%
3.7%
4.5%
3.5%
4.1%
5.0%
6.7%
6.0%
3.3%
6.0%
4.0%
3.2%
6.7%
20,055
15,123
47,042
32,354
28,032
16,993
22,051
46,208
10,319
106,170
81,771
105,814
3.0%
3.0%
3.0%
2.0%
3.0%
3.0%
2.0%
2.0%
5.0%
1.5%
2.0%
4.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
3.0%
2.0%
5.0%
2.0%
2.0%
3.5%
3,436
1,991
6,377
4,531
3,968
2,516
3,734
6,559
1,003
16,344
11,635
13,865
6.4%
3.3%
5.8%
10.7%
3.0%
4.3%
8.3%
6.8%
9.2%
7.8%
6.4%
7.9%
8.0%
4.0%
6.0%
8.1%
3.4%
5.1%
6.1%
5.9%
8.5%
6.8%
7.3%
9.2%
2,997
1,385
6,827
4,277
3,349
1,921
3,305
6,265
862
15,936
10,848
12,436
68,978
5.1%
4.8%
55,288
6.0%
7.4%
50,982
5.2%
4.9%
31,746
2.0%
2.0%
3,113
0.1%
9.7%
4,417
Portugal
BCP
Standard Chartered
Northern Rock
Bank of Ireland
Allied Irish Bank
Bradford & Bingley
Danske Bank
BBVA
Barclays
BNL
Credem
HBOS
Bankinter
39.5%
19.2%
14.0%
12.7%
12.1%
10.9%
10.2%
9.9%
9.8%
9.7%
9.2%
9.0%
9.0%
8.4%
8.0%
RWAs 05E/04E- low
BPU
B Lombarda
Deutsche Postbank
BMPS
Banca Intesa
Antonveneta
UBS
Deutsche Bank
SANPAOLO IMI
Capitalia
ABN-AMRO
Credit Suisse
Commerzbank
HVB Group
Credit Agricole
5.0%
4.7%
4.3%
4.0%
3.8%
3.5%
3.4%
3.3%
3.0%
3.0%
2.8%
1.0%
0.3%
-2.3%
-3.7%
60
Europe
Banks
Balance sheet indicators (cont.)
ITLE2
ITLE
Nordic
Danske Bank
DnB NOR
Swedbank
Nordea
SEB
Loans 05E/04E- high
Total assets
RWAs
2004E 05E/04E 06E/05E
Net loans
2004E 05E/04E 06E/05E
Deposits
2004E 05E/04E 06E/05E
Shareholders' equity
2004E 05E/04E 06E/05E
2004E 05E/04E 06E/05E
Tier 1
2004E
1,893,971
731,767
1,020,459
266,376
1,591,318
1,353,054
2.9%
6.4%
6.7%
4.3%
4.5%
4.3%
2.9%
6.2%
6.5%
4.0%
5.1%
4.3%
821,136
596,390
524,550
142,511
570,000
661,804
10.2%
6.4%
6.1%
6.5%
7.6%
6.1%
5.5%
6.2%
8.4%
6.0%
7.0%
6.6%
1,133,603
573,541
726,701
158,138
783,019
868,270
6.1%
6.7%
7.5%
6.0%
5.9%
6.8%
7.3%
6.7%
7.2%
5.5%
6.7%
6.6%
508,842
353,151
285,540
97,522
517,520
316,817
4.1%
4.1%
2.0%
2.0%
2.4%
3.0%
4.0%
3.5%
2.0%
2.0%
2.0%
2.5%
59,998
46,166
43,624
12,324
50,813
60,971
13.7%
8.5%
2.2%
-1.7%
3.9%
3.7%
3.1%
6.3%
3.4%
1.9%
4.1%
9.5%
62,154
41,991
42,995
10,609
44,266
49,099
311,072
389,078
29,417
62,742
9.9%
5.5%
8.4%
7.3%
7.0%
5.7%
4.9%
8.2%
181,131
227,009
16,093
57,973
9.9%
5.5%
8.4%
12.7%
7.0%
5.7%
4.9%
9.8%
170,248
192,439
18,745
51,844
9.9%
6.3%
12.6%
12.7%
7.0%
6.4%
8.8%
9.8%
147,051
163,277
13,680
33,366
4.9%
6.2%
16.3%
-2.4%
4.3%
4.9%
20.4%
3.1%
15,556
19,984
1,082
3,348
7.4%
88.4%
18.2%
20.1%
7.8%
9.7%
17.1%
17.9%
14,708
18,533
1,260
4,603
Switzerland
Credit Suisse
UBS
1,089,485
1,734,646
0.2%
1.0%
0.2%
0.5%
199,249
264,413
1.0%
3.4%
1.0%
3.5%
184,399
226,274
1.1%
8.1%
1.1%
4.0%
299,341
358,635
1.1%
8.1%
1.1%
4.0%
36,273
31,928
9.7%
-6.2%
8.7%
-1.0%
24,596
28,721
UK
Barclays
Bradford & Bingley
HBOS
HSBC
Lloyds TSB
Northern Rock
Standard Chartered
51,933
522,089
36,888
445,157
1,188,802
275,912
42,790
546,818
141,688
5.8%
10.5%
10.9%
9.0%
6.4%
6.0%
14.0%
9.0%
40.1%
5.4%
10.4%
9.6%
8.0%
8.0%
6.2%
16.4%
9.2%
8.6%
25,126
218,601
19,550
235,242
716,491
126,544
23,099
314,316
92,124
8.0%
9.8%
10.9%
9.0%
5.8%
6.1%
19.2%
9.7%
39.5%
5.4%
9.6%
9.6%
8.0%
7.7%
6.3%
16.7%
9.9%
9.1%
34,479
254,946
29,296
283,366
610,279
148,008
32,869
304,859
71,596
7.0%
10.9%
12.4%
6.3%
6.5%
8.1%
15.2%
9.7%
53.1%
6.3%
10.9%
10.7%
5.8%
8.5%
6.8%
18.4%
9.6%
9.2%
25,694
217,718
17,758
192,589
658,538
122,994
20,342
281,348
84,572
6.0%
8.0%
2.3%
11.0%
5.3%
6.8%
8.5%
9.2%
44.0%
6.0%
8.0%
2.7%
11.0%
5.3%
5.5%
9.1%
9.0%
10.2%
1,773
17,417
1,224
17,065
80,337
10,050
1,542
30,403
7,759
5.5%
6.9%
7.1%
7.3%
5.9%
7.4%
14.3%
0.0%
34.6%
4.3%
7.9%
7.8%
7.7%
6.7%
9.3%
14.0%
6.9%
7.5%
2,050
16,662
1,323
18,881
62,368
11,621
2,015
22,014
7,964
Domestic
International
Investment Banks
Global
3.6%
6.8%
0.7%
9.1%
4.4%
6.5%
0.4%
7.4%
5.4%
7.4%
2.8%
8.8%
5.5%
7.1%
2.8%
7.3%
5.2%
7.2%
5.2%
10.3%
5.8%
6.8%
3.1%
7.8%
3.1%
6.8%
5.2%
8.1%
10.0%
6.4%
3.1%
5.4%
8.4%
6.4%
-0.9%
26.6%
8.4%
8.2%
3.0%
7.6%
Pan-Europe average
5.7%
5.4%
6.6%
6.1%
7.1%
6.3%
5.7%
6.6%
10.9%
7.4%
Spain
BBVA
SCH
Bankinter
Standard Chartered
Northern Rock
Allied Irish Bank
Bankinter
Bradford & Bingley
Bank of Ireland
Barclays
BBVA
Credem
UBS
Lloyds TSB
Swedbank
53.1%
15.2%
13.6%
12.7%
12.6%
12.4%
11.4%
10.9%
9.9%
9.7%
9.0%
8.1%
8.1%
7.5%
7.0%
Loans 05E/04E- low
BPU
B Lombarda
BNL
BMPS
Banca Intesa
Deutsche Bank
Antonveneta
Deutsche Postbank
SANPAOLO IMI
Capitalia
ABN-AMRO
Credit Suisse
Commerzbank
HVB Group
Credit Agricole
5.0%
4.7%
4.0%
4.0%
3.8%
3.6%
3.5%
3.4%
3.0%
3.0%
2.8%
1.1%
0.5%
-2.4%
-3.7%
Note: Shareholders’ equity and Tier 1 ratios are as reported. Net loans are net of loan loss provisions and excludes reverse repos where this data is available.
61
Europe
Banks
Balance sheet ratios
Balance sheet ratios
IT LE2
IT LE
Loans/deposits 2004E-high
RW As / assets
2004E 2005E 2006E
L oans / assets
2004E 2005E 2006E
Loans / RW As
2004E 2005E 2006E
Loans / deposits
2004E 2005E 2006E
Equity / assets
2004E 2005E 2006E
BIS ratio T ier 1
2004E 2004E
Austria
Bank Austria
49%
51%
51%
55%
56%
57%
111%
111%
111%
120%
115%
115%
4.4%
4.6%
4.9%
13.3%
7.9%
Benelux
Dexia
ABN-AMRO
30%
40%
30%
40%
30%
40%
45%
39%
45%
40%
45%
40%
150%
99%
150%
99%
150%
99%
177%
95%
177%
95%
174%
95%
2.6%
2.5%
2.6%
2.8%
2.7%
3.1%
10.8%
8.6%
9.8%
8.6%
France
BNP Paribas
Societe G enerale
Credit Agricole
36%
36%
26%
36%
36%
26%
36%
36%
26%
28%
38%
22%
28%
38%
22%
28%
38%
22%
80%
107%
82%
80%
107%
82%
80%
107%
82%
109%
108%
62%
109%
108%
62%
109%
108%
62%
3.3%
3.1%
3.0%
3.5%
3.2%
3.3%
3.6%
3.4%
3.5%
NA
11.6%
8.6%
7.5%
8.5%
8.6%
Germ any
Com m erzbank
Deutsche Bank
HVB Group
Hypo Real Estate
Deutsche Postbank
37%
26%
45%
NA
34%
37%
27%
45%
NA
34%
37%
28%
45%
NA
35%
35%
16%
50%
NA
32%
35%
17%
50%
NA
33%
36%
17%
51%
NA
33%
95%
63%
113%
NA
95%
95%
63%
113%
NA
95%
98%
63%
112%
NA
94%
133%
44%
194%
NA
57%
133%
44%
186%
NA
56%
133%
44%
180%
NA
56%
2.4%
3.1%
2.0%
2.8%
3.4%
2.6%
3.0%
2.3%
2.9%
3.5%
2.6%
3.1%
2.6%
3.0%
3.6%
26.1%
13.5%
NA
NA
9.8%
7.4%
9.0%
5.8%
NA
5.9%
Ireland
Allied Irish Bank
Bank of Ireland
76%
63%
76%
65%
76%
66%
62%
65%
63%
66%
64%
67%
82%
103%
83%
101%
84%
101%
133%
132%
138%
139%
67%
143%
5.4%
4.2%
5.1%
4.3%
5.0%
4.5%
10.6%
11.2%
7.9%
6.4%
Italy
Antonveneta
B Lom barda
BMPS
BNL
BPU
BP Milano
BP Verona
Capitalia
Credem
Banca Intesa
SANPAO LO IMI
UniCredito Italiano
86%
82%
70%
75%
75%
79%
78%
68%
55%
69%
66%
62%
87%
83%
71%
81%
77%
82%
82%
69%
57%
71%
67%
65%
87%
84%
72%
82%
78%
85%
85%
70%
58%
72%
68%
67%
73%
76%
58%
65%
67%
57%
65%
57%
56%
59%
60%
54%
74%
78%
59%
66%
69%
59%
67%
58%
58%
60%
61%
56%
74%
79%
59%
67%
70%
61%
69%
59%
59%
61%
62%
58%
85%
93%
83%
86%
90%
72%
84%
84%
103%
85%
91%
87%
85%
93%
83%
82%
90%
72%
82%
84%
103%
85%
91%
87%
85%
93%
83%
82%
90%
72%
81%
84%
103%
85%
91%
87%
182%
164%
153%
165%
157%
118%
146%
159%
118%
146%
152%
128%
183%
167%
154%
168%
160%
122%
151%
161%
122%
149%
153%
132%
184%
169%
155%
170%
163%
126%
155%
163%
123%
152%
155%
136%
6.9%
6.1%
5.2%
5.5%
6.1%
7.2%
7.6%
5.1%
4.6%
6.2%
5.6%
5.5%
7.1%
6.2%
5.3%
6.0%
6.1%
7.2%
8.1%
5.4%
4.8%
6.6%
5.9%
5.8%
7.5%
6.2%
5.5%
6.3%
6.1%
7.4%
8.2%
5.6%
5.0%
6.9%
6.2%
6.1%
12.0%
9.0%
11.3%
12.0%
10.0%
9.2%
10.9%
10.1%
8.5%
12.7%
10.9%
11.2%
7.0%
5.2%
7.9%
6.9%
6.8%
6.9%
8.6%
7.2%
7.3%
8.7%
8.0%
7.9%
Portugal
BCP
80%
81%
83%
74%
74%
74%
92%
92%
89%
161%
166%
170%
4.5%
4.3%
4.5%
NA
8.0%
Swedbank
Danske Bank
HVB Group
Antonveneta
Dexia
Bradford & Bingley
BNL
B Lombarda
DnB NOR
Nordea
Northern Rock
BCP
Capitalia
BPU
274%
255%
223%
194%
182%
177%
165%
165%
164%
162%
162%
162%
161%
159%
157%
Loans/deposits 2004E- low
Credem
BP Milano
Barclays
BBVA
BNP Paribas
Societe Generale
ABN-AMRO
HSBC
Standard Chartered
UBS
Credit Agricole
Credit Suisse
Deutsche Postbank
Deutsche Bank
118%
118%
117%
116%
109%
108%
108%
95%
93%
85%
63%
62%
62%
57%
44%
62
Europe
Banks
Balance sheet ratios (cont.)
ITLE2
ITLE
Tier 1 ratio 2004E - high
RWAs / assets
2004E 2005E 2006E
Loans / assets
2004E 2005E 2006E
Loans / RWAs
2004E 2005E 2006E
Loans / deposits
2004E 2005E 2006E
Equity / assets
2004E 2005E 2006E
BIS ratio Tier 1
2004E 2004E
Nordic
Danske Bank
DnB NOR
Swedbank
Nordea
SEB
43%
82%
51%
54%
36%
49%
46%
82%
51%
55%
37%
50%
48%
81%
52%
56%
38%
51%
60%
78%
71%
59%
49%
64%
62%
79%
72%
60%
50%
66%
64%
79%
72%
61%
51%
67%
138%
96%
139%
111%
137%
131%
133%
97%
140%
110%
135%
132%
135%
97%
139%
110%
135%
132%
223%
162%
255%
162%
151%
274%
227%
167%
268%
169%
156%
284%
234%
172%
282%
174%
164%
296%
3.2%
6.3%
4.3%
4.6%
3.2%
4.5%
3.5%
6.4%
4.1%
4.4%
3.2%
4.5%
3.5%
6.4%
4.0%
4.3%
3.1%
4.7%
10.6%
10.1%
11.6%
10.0%
10.3%
9.7%
7.6%
7.0%
8.2%
7.4%
7.8%
7.4%
Spain
BBVA
SCH
Bankinter
58%
58%
55%
92%
58%
58%
55%
97%
58%
58%
55%
99%
55%
49%
64%
83%
55%
50%
66%
87%
55%
50%
69%
88%
94%
85%
116%
89%
94%
85%
121%
89%
94%
86%
126%
89%
116%
118%
137%
155%
121%
118%
133%
179%
124%
120%
120%
191%
5.0%
5.1%
3.7%
5.3%
4.9%
9.2%
4.0%
6.0%
4.9%
9.5%
4.5%
6.5%
12.5%
11.9%
11.8%
10.2%
8.1%
8.2%
7.8%
7.9%
Switzerland
Credit Suisse
UBS
18%
15%
18%
16%
19%
16%
17%
13%
17%
14%
17%
14%
93%
86%
93%
89%
93%
90%
62%
63%
62%
63%
62%
63%
3.3%
1.8%
3.6%
1.7%
4.0%
1.7%
16.6% 12.3%
12.8% 10.9%
UK
Barclays
Bradford & Bingley
HBOS
HSBC
Lloyds TSB
Northern Rock
Standard Chartered
48%
42%
53%
53%
60%
46%
54%
57%
65%
49%
42%
53%
53%
60%
46%
56%
58%
65%
49%
41%
53%
53%
60%
46%
57%
58%
65%
66%
49%
79%
64%
51%
54%
77%
56%
51%
67%
49%
81%
62%
51%
55%
78%
56%
55%
68%
49%
81%
61%
52%
55%
79%
56%
56%
137%
117%
150%
120%
85%
117%
142%
97%
78%
136%
118%
152%
117%
86%
119%
137%
97%
85%
137%
119%
153%
115%
86%
120%
139%
97%
85%
134%
117%
165%
147%
93%
120%
162%
108%
85%
136%
120%
181%
141%
94%
122%
172%
109%
90%
136%
123%
195%
134%
97%
123%
186%
109%
89%
3.4%
3.3%
3.3%
3.8%
6.8%
3.6%
3.6%
5.6%
5.5%
3.4%
3.2%
3.2%
3.8%
6.7%
3.7%
3.6%
5.5%
5.3%
3.4%
3.2%
3.2%
3.8%
6.6%
3.8%
3.5%
5.3%
5.2%
11.6%
7.6%
12.8%
11.9%
11.4%
10.4%
14.0%
11.3%
8.6%
Domestic
International
Investment Banks
Global
57%
47%
19%
60%
58%
47%
19%
60%
59%
47%
20%
60%
56%
49%
15%
51%
57%
49%
15%
52%
58%
50%
16%
52%
101%
107%
82%
86%
101%
106%
84%
87%
101%
106%
84%
87%
144%
126%
58%
102%
147%
127%
58%
103%
147%
127%
58%
106%
4.4%
4.0%
2.5%
6.0%
4.6%
4.0%
2.5%
6.9%
4.8%
4.0%
2.6%
6.9%
11.2% 7.8%
10.4% 7.8%
14.0% 10.8%
11.5% 8.5%
Pan-Europe average
49%
49%
49%
47%
47%
48%
97%
97%
97%
115%
117%
118%
4.4%
4.6%
4.7%
11.4%
8.2%
7.6%
6.8%
8.0%
8.7%
9.2%
8.7%
7.0%
8.6%
8.4%
Credit Suisse
UBS
Dexia
Lloyds TSB
Deutsche Bank
Banca Intesa
Northern Rock
HSBC
ABN-AMRO
Standard Chartered
BP Verona
Credit Agricole
Societe Generale
Swedbank
SCH
12.3%
10.9%
9.8%
9.2%
9.0%
8.7%
8.7%
8.7%
8.6%
8.6%
8.6%
8.6%
8.5%
8.2%
8.2%
Tier 1 ratio 2004E – low
Commerzbank
Credem
Capitalia
DnB NOR
Antonveneta
BP Milano
BNL
BPU
Bradford & Bingley
Bank of Ireland
Deutsche Postbank
HVB Group
B Lombarda
7.4%
7.4%
7.3%
7.2%
7.0%
7.0%
7.0%
6.9%
6.9%
6.8%
6.8%
6.4%
5.9%
5.8%
5.2%
Note: RWAs means risk-weighted assets according to Basle I criteria. Loan/assets shows the customer loan asset intensity on the balance sheet.
63
Europe
Banks
Profitability
Profitability indicators
ITLE2
ITLE
GS ROE 2005E - high
GS RO A
Stated RO E
GS ROE
GS RORW A
GS net incom e
GS NI
GS NI
2004E 2005E 2006E 05E/04E 06E/05E
2004E
2005E
2006E
2004E
2005E
2006E
2004E
2005E
2006E
2004E
2005E
2006E
Austria
Bank Austria
0.46%
0.53%
0.59%
9.5%
10.8%
11.5%
9.8%
10.9%
11.5%
0.94%
1.07%
1.16%
640
771
878
20%
14%
Benelux
Dexia
ABN-AMRO
0.46%
0.63%
0.44%
0.51%
0.43%
0.54%
18.0%
29.0%
16.4%
19.6%
15.8%
18.2%
10.3%
19.2%
10.3%
14.9%
10.2%
14.3%
1.53%
1.58%
1.46%
1.29%
1.44%
1.34%
1,691
3,668
1,740
3,158
1,814
3,377
3%
-14%
4%
7%
France
BNP Paribas
Societe Generale
Credit Agricole
0.55%
0.57%
0.39%
0.53%
0.53%
0.44%
0.53%
0.55%
0.50%
16.0%
17.6%
9.5%
15.6%
16.5%
10.8%
14.9%
16.5%
12.0%
15.3%
17.4%
12.0%
15.0%
16.0%
12.6%
14.5%
15.9%
13.1%
1.57%
1.57%
1.46%
1.49%
1.49%
1.67%
1.49%
1.54%
1.89%
4,685
3,230
3,159
4,965
3,281
3,602
5,201
3,585
4,073
6%
2%
14%
5%
9%
13%
G ermany
Comm erzbank
Deutsche Bank
HVB Group
Hypo Real Estate
Deutsche Postbank
0.14%
0.33%
0.05%
0.12%
0.30%
0.20%
0.33%
0.19%
0.22%
0.35%
0.20%
0.37%
0.24%
0.28%
0.38%
5.0%
9.5%
3.5%
3.9%
8.4%
8.1%
8.6%
9.7%
7.7%
10.0%
8.0%
11.2%
10.6%
9.5%
10.7%
4.9%
8.8%
1.9%
NA
8.4%
6.8%
9.5%
6.4%
NA
10.0%
6.7%
10.5%
7.6%
NA
10.7%
0.38%
1.24%
0.12%
0.34%
0.91%
0.54%
1.24%
0.43%
NA
1.01%
0.55%
1.36%
0.53%
NA
1.10%
545
2,688
296
181
403
778
2,742
1,046
343
480
797
3,102
1,276
441
542
43%
2%
N/M
89%
19%
2%
13%
22%
28%
13%
Ireland
Allied Irish Bank
Bank of Ireland
1.14%
0.97%
1.12%
1.00%
1.13%
1.02%
19.3%
23.9%
19.8%
23.5%
20.7%
23.2%
16.3%
20.5%
17.6%
20.9%
18.5%
20.8%
1.49%
1.59%
1.48%
1.56%
1.49%
1.56%
1,030
1,076
1,186
1,205
1,331
1,347
15%
12%
12%
12%
Italy
Antonveneta
B Lom barda
BMPS
BNL
BPU
BP Milano
BP Verona
Capitalia
Credem
Banca Intesa
SANPAOLO IMI
UniCredito Italiano
0.53%
0.61%
0.48%
0.01%
0.56%
0.57%
0.86%
0.19%
0.65%
0.68%
0.64%
0.88%
0.73%
0.64%
0.54%
0.58%
0.65%
0.69%
0.92%
0.46%
0.71%
0.80%
0.75%
0.98%
0.94%
0.70%
0.60%
0.66%
0.73%
0.79%
0.99%
0.54%
0.76%
0.85%
0.83%
1.13%
8.3%
7.7%
7.5%
0.2%
7.4%
5.1%
10.8%
3.7%
13.4%
10.2%
11.0%
14.9%
9.7%
8.1%
8.8%
10.2%
8.6%
6.1%
11.3%
8.4%
15.2%
11.8%
11.9%
15.9%
12.2%
9.1%
9.6%
10.7%
9.3%
7.3%
11.8%
9.6%
15.4%
12.1%
12.6%
17.6%
7.8%
8.3%
8.9%
0.1%
8.4%
7.2%
11.2%
3.2%
13.7%
10.7%
10.9%
14.5%
9.7%
8.7%
9.6%
9.9%
9.4%
8.5%
11.1%
7.5%
14.5%
11.8%
12.1%
15.6%
11.9%
9.3%
10.1%
10.5%
10.3%
9.3%
11.5%
8.5%
15.0%
11.9%
12.6%
17.0%
0.60%
0.75%
0.69%
0.01%
0.74%
0.75%
1.12%
0.28%
1.20%
0.97%
0.96%
1.42%
0.85%
0.77%
0.77%
0.75%
0.85%
0.86%
1.15%
0.67%
1.27%
1.14%
1.13%
1.55%
1.08%
0.84%
0.83%
0.81%
0.94%
0.95%
1.19%
0.78%
1.33%
1.19%
1.24%
1.72%
259
194
589
5
358
193
422
248
136
1,769
1,311
2,147
371
211
680
485
429
248
456
598
157
2,126
1,559
2,509
491
238
765
561
496
291
507
714
176
2,297
1,758
2,974
43%
9%
15%
N/M
20%
28%
8%
N/M
16%
20%
19%
17%
32%
13%
13%
15%
16%
17%
11%
19%
12%
8%
13%
19%
Portugal
BCP
0.65%
0.70%
0.81%
14.8%
15.8%
18.4%
8.2%
8.5%
10.1%
0.81%
0.86%
0.99%
442
492
602
11%
22%
UBS
Northern Rock
Bank of Ireland
HBOS
Barclays
Standard Chartered
Bankinter
Lloyds TSB
Allied Irish Bank
Swedbank
Societe Generale
HSBC
25.2%
24.6%
21.3%
20.9%
20.4%
20.3%
19.8%
18.8%
18.6%
17.9%
17.6%
17.6%
16.2%
16.0%
16.0%
GS ROE 2005E - low
BP Verona
Bank Austria
Dexia
Deutsche Postbank
BNL
Antonveneta
BMPS
Deutsche Bank
BPU
B Lombarda
BCP
BP Milano
Capitalia
Commerzbank
HVB Group
11.1%
10.9%
10.3%
10.0%
9.9%
9.7%
9.6%
9.5%
9.4%
8.7%
8.5%
8.5%
7.5%
6.8%
6.4%
64
Europe
Banks
Profitability indicators (cont.)
ITLE2
ITLE
GS net inc. 05E/04E- high
GS ROA
Stated ROE
GS ROE
GS RORWA
2004E
2005E
2006E
2004E
2005E
2006E
2004E
2005E
2006E
2004E
2005E
2006E
GS net income
GS NI
GS NI
2004E 2005E 2006E 05E/04E 06E/05E
Nordic
Danske Bank
DnB NOR
Swedbank
Nordea
SEB
0.47%
0.99%
0.82%
0.68%
0.51%
0.74%
0.52%
1.01%
0.75%
0.70%
0.50%
0.71%
0.56%
1.07%
0.76%
0.72%
0.52%
0.74%
15.2%
15.3%
20.1%
15.2%
13.3%
15.6%
14.3%
14.8%
18.4%
14.3%
14.1%
14.9%
15.5%
15.7%
17.5%
15.4%
14.9%
15.2%
12.5%
15.5%
17.6%
13.8%
13.5%
15.7%
13.4%
15.1%
16.2%
14.6%
14.1%
15.0%
13.9%
15.8%
16.8%
15.4%
14.8%
15.2%
1.11%
1.21%
1.49%
1.29%
1.33%
1.49%
1.15%
1.24%
1.47%
1.29%
1.37%
1.44%
1.18%
1.32%
1.47%
1.31%
1.39%
1.47%
8,801
7,142
8,294
1,787
7,362
9,717
9,964 11,013
7,625 8,617
7,929 8,527
1,906 2,042
8,082 8,849
9,824 10,676
13%
7%
-4%
7%
10%
1%
11%
13%
8%
7%
9%
9%
Spain
BBVA
SCH
Bankinter
1.16%
1.01%
0.61%
1.47%
1.00%
1.28%
0.72%
1.42%
0.99%
1.45%
0.73%
1.47%
20.0%
17.0%
15.8%
25.3%
18.7%
15.1%
17.8%
24.6%
19.2%
13.4%
16.7%
23.0%
16.3%
13.1%
15.7%
26.1%
13.7%
12.3%
18.6%
24.6%
13.8%
10.9%
17.0%
23.1%
1.97%
1.72%
1.09%
1.57%
1.71%
2.20%
1.32%
1.50%
1.71%
2.48%
1.34%
1.50%
3,462
3,725
163
851
3,259
5,130
221
926
3,516
6,116
239
1,027
-6%
38%
35%
9%
8%
19%
8%
11%
Switzerland
Credit Suisse
UBS
0.53%
0.56%
0.52%
0.56%
0.56%
0.60%
15.6%
21.9%
14.9%
25.4%
14.6%
28.7%
15.2%
23.0%
14.3%
25.2%
14.1%
27.2%
2.86%
3.59%
2.83%
3.61%
3.00%
3.76%
5,570
9,256
5,669 6,065
9,721 10,453
2%
5%
7%
8%
UK
Barclays
Bradford & Bingley
HBOS
HSBC
Lloyds TSB
Northern Rock
Standard Chartered
0.75%
0.75%
0.57%
0.76%
1.20%
0.92%
0.77%
1.08%
1.15%
0.71%
0.70%
0.53%
0.75%
1.17%
0.95%
0.77%
1.11%
1.01%
0.66%
0.70%
0.50%
0.76%
1.23%
0.98%
0.75%
1.15%
0.94%
25.0%
19.3%
5.1%
18.7%
15.1%
23.9%
21.3%
15.2%
19.4%
22.1%
19.4%
15.6%
19.3%
15.3%
25.5%
21.0%
16.6%
16.2%
20.6%
20.3%
15.9%
19.5%
16.6%
25.8%
20.6%
18.1%
15.5%
21.3%
20.1%
14.5%
20.6%
16.2%
16.8%
21.3%
17.2%
20.6%
20.3%
19.8%
15.0%
20.4%
16.0%
17.9%
21.3%
17.6%
18.8%
19.2%
20.0%
14.8%
20.6%
16.8%
18.5%
20.9%
18.3%
17.9%
1.59%
1.78%
1.07%
1.43%
2.00%
1.99%
1.43%
1.88%
1.77%
1.44%
1.69%
0.99%
1.43%
1.94%
2.07%
1.39%
1.93%
1.55%
1.34%
1.68%
0.95%
1.43%
2.06%
2.14%
1.32%
1.98%
1.44%
379
378
374
3,636 3,867 4,224
196
205
216
3,234 3,510 3,811
13,374 14,316 16,197
2,434 2,699 2,961
306
353
395
5,419 6,354 7,173
1,510 1,710 1,936
0%
6%
5%
9%
7%
11%
15%
17%
13%
-1%
9%
6%
9%
13%
10%
12%
13%
13%
Domestic
International
Investment Banks
Global
0.66%
0.74%
0.50%
1.15%
0.72%
0.73%
0.49%
1.15%
0.77%
0.76%
0.53%
1.22%
13.9%
17.6%
17.2%
16.6%
15.4%
17.0%
18.6%
15.9%
15.9%
17.4%
20.8%
16.2%
12.7%
17.0%
17.5%
15.8%
13.9%
16.6%
18.6%
15.0%
14.3%
16.9%
19.7%
15.1%
1.19%
1.58%
2.82%
1.92%
1.30%
1.56%
2.83%
1.93%
1.37%
1.59%
2.97%
2.05%
15.0%
8.1%
3.4%
12.2%
12.1%
9.7%
8.8%
13.6%
Pan-Europe average
0.79%
0.80%
0.84%
16.4%
16.5%
17.2%
15.7%
15.8%
16.1%
1.73%
1.76%
1.83%
10.1%
11.1%
Hypo Real Estate
Antonveneta
Commerzbank
SCH
Bankinter
BP Milano
Bank Austria
Banca Intesa
BPU
Deutsche Postbank
SANPAOLO IMI
UniCredito Italiano
Credem
BMPS
89.2%
43.3%
42.7%
37.7%
35.4%
28.1%
20.4%
20.2%
19.9%
19.3%
19.0%
17.2%
16.9%
15.6%
15.3%
GS net inc. 05E/04E- low
DnB NOR
Nordea
Barclays
BNP Paribas
UBS
Bradford & Bingley
Dexia
Deutsche Bank
Credit Suisse
Societe Generale
Swedbank
BBVA
ABN-AMRO
6.8%
6.6%
6.3%
6.0%
5.0%
4.8%
2.9%
2.0%
1.8%
1.6%
1.1%
-0.3%
-4.4%
-5.9%
-13.9%
65
Europe
Banks
Asset quality
Asset quality indicators
NPLs/loans 2004E - high
X
ITLE2
ITLE
As % of equity Loan loss
NPLs
Total reserve
2004E
at risk
2004E
2004E
Austria
Bank Austria
81,240
85,884
89,319
6%
4%
NA
NA
NA
2,463
2,463
3.0%
3.0%
40%
40%
NA
Benelux
Dexia
ABN-AMRO
173,109
243,775
185,174
250,895
194,833
257,277
7%
3%
5%
3%
NA
44%
NA
54%
NA
2%
724
9,336
1,725
9,336
0.4%
3.8%
1.0%
3.8%
7%
62%
17%
62%
France
BNP Paribas
Societe Generale
Credit Agricole
266,850
237,179
186,881
281,601
248,857
179,950
294,920
261,307
185,589
6%
5%
-4%
5%
5%
3%
NA
NA
NA
NA
NA
NA
NA
NA
NA
11,045
10,006
9,163
11,045
10,006
9,163
4.1%
4.2%
4.9%
4.1%
4.2%
4.9%
37%
54%
36%
Germany
Commerzbank
Deutsche Bank
HVB Group
Hypo Real Estate
Deutsche Postbank
140,798
149,689
289,390
NA
44,273
141,215
154,636
282,725
NA
45,764
141,666
159,767
279,307
NA
47,468
0%
3%
-2%
NA
3%
0%
3%
-1%
NA
4%
NA
37%
NA
NA
53%
NA
59%
NA
NA
NA
4%
NA
NA
47%
7,198
6,689
NA
NA
NA
7,198
6,689
NA
NA
NA
5.1%
4.5%
NA
NA
NA
5.1%
4.5%
NA
NA
NA
62,922
75,552
71,470
80,510
NA
NA
14%
7%
NA
NA
32%
63%
52%
36%
16%
0%
777
559
777
559
1.2%
0.7%
37,770
24,949
72,991
56,090
44,582
20,286
32,879
79,100
12,228
165,690
126,834
139,133
39,103
26,124
75,924
58,355
46,819
21,661
34,531
81,523
13,329
171,755
130,659
148,904
40,566
27,294
78,594
60,762
49,168
23,133
36,611
84,243
14,130
178,277
134,818
158,914
4%
5%
4%
4%
5%
7%
5%
3%
9%
4%
3%
7%
4%
4%
4%
4%
5%
7%
6%
3%
6%
4%
3%
7%
17%
27%
28%
27%
32%
19%
22%
20%
35%
26%
25%
34%
78%
68%
64%
61%
66%
77%
76%
65%
64%
64%
62%
60%
5%
6%
8%
12%
3%
4%
3%
15%
1%
10%
13%
7%
2,098
595
2,418
4,066
1,460
471
1,523
9,778
182
12,738
3,880
5,907
2,098
595
2,418
4,066
1,460
471
1,523
9,778
182
17,435
3,880
8,915
51,407
54,496
58,550
6%
7%
38%
62%
0%
874
874
Ireland
Allied Irish Bank
Bank of Ireland
Italy
Antonveneta
B Lombarda
BMPS
BNL
BPU
BP Milano
BP Verona
Capitalia
Credem
Banca Intesa
SANPAOLO IMI
UniCredito Italiano
Portugal
BCP
NPLs
2004E
Total As % of gross loans
assets
NPLs
Total
at risk
2004E
at risk
Total gross loans
Loan mix (2004E)
2005E
2006E 05E/04E 06E/05E Personal
Corp.
Other
Loan loss reserve /
gross NPLs Total
loans 2004E at risk
NA
NA
NA
1,240
3,993
0.7% 171%
1.6%
43%
72%
43%
37%
54%
36%
8,770
6,704
5,942
3.3%
2.8%
3.2%
79%
67%
65%
79%
67%
65%
76%
26%
NA
NA
NA
76%
26%
NA
NA
NA
5,196
2,702
NA
NA
NA
3.7%
1.8%
NA
NA
NA
72%
40%
NA
NA
NA
72%
40%
NA
NA
NA
1.2%
0.7%
15%
12%
15%
12%
683
736
1.1%
88%
1.0% 132%
88%
132%
5.6%
2.4%
3.3%
7.2%
3.3%
2.3%
4.6%
12.4%
1.5%
7.7%
3.1%
4.2%
5.6%
2.4%
3.3%
7.2%
3.3%
2.3%
4.6%
12.4%
1.5%
10.5%
3.1%
6.4%
61%
30%
38%
90%
37%
19%
41%
149%
18%
78%
33%
43%
61%
30%
38%
90%
37%
19%
41%
149%
18%
107%
33%
64%
1,307
178
1,178
2,765
676
313
610
5,453
73
8,358
2,858
3,554
3.5%
0.7%
1.6%
4.9%
1.5%
1.5%
1.9%
6.9%
0.6%
5.0%
2.3%
2.6%
62%
30%
49%
68%
46%
67%
40%
56%
40%
66%
74%
60%
62%
30%
49%
68%
46%
67%
40%
56%
40%
48%
74%
40%
1.7%
1.7%
28%
28%
1,561
3.0% 179%
179%
Capitalia
Banca Intesa
BNL
Antonveneta
Commerzbank
Credit Agricole
BP Verona
Deutsche Bank
UniCredito Italiano
Societe Generale
BNP Paribas
ABN-AMRO
BMPS
BPU
SANPAOLO IMI
12.4%
7.7%
7.2%
5.6%
5.1%
4.9%
4.6%
4.5%
4.2%
4.2%
4.1%
3.8%
3.3%
3.3%
3.1%
NPLs/loans 2004E - low
SCH
HSBC
Allied Irish Bank
BBVA
SEB
DnB NOR
Lloyds TSB
Bank of Ireland
Bradford & Bingley
Dexia
Danske Bank
Swedbank
Bankinter
1.5%
1.4%
1.2%
1.0%
1.0%
0.9%
0.9%
0.8%
0.7%
0.6%
0.5%
0.4%
0.4%
0.4%
0.3%
66
Europe
Banks
Asset quality indicators (cont.)
LLR/NPLs 2004E - high
X
ITLE2
ITLE
2004E
Total gross loans
Loan mix (2004E)
2005E
2006E 05E/04E 06E/05E Personal Corp. Other
Nordic
Danske Bank
1,145,846 1,210,581 1,298,433
DnB NOR
581,272 619,911 661,284
Swedbank
730,563 786,765 843,445
Nordea
160,113 169,841 179,137
SEB
789,399 836,929 893,513
Svenska Handelsbanken 870,795 930,122 991,582
NPLs
2004E
Total As % of gross loans
assets
NPLs
Total
at risk
2004E at risk
As % of equity Loan loss
NPLs
Total reserve
2004E at risk
2004E
6%
7%
8%
6%
6%
7%
7%
7%
7%
5%
7%
7%
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
4,534
5,237
2,579
NA
8,086
4,279
4,534
7,557
2,579
NA
8,086
4,354
0.4%
0.9%
0.4%
NA
1.0%
0.5%
0.4%
1.3%
0.4%
NA
1.0%
0.5%
8%
11%
6%
NA
16%
7%
8%
16%
6%
NA
16%
7%
12,243
7,731
3,862
1,976
6,380
2,525
Loan loss reserve /
gross NPLs Total
loans 2004E at risk
1.1% 270% 270%
1.3% 148% 102%
0.5% 150% 150%
1.2%
NA
NA
0.8% 79% 79%
0.3% 59% 58%
Spain
BBVA
SCH
Bankinter
174,615
197,646
19,118
52,382
191,984
209,808
21,570
59,352
205,475
222,857
23,466
65,169
10%
6%
13%
13%
7%
6%
9%
10%
38%
NA
68%
56%
5%
NA
6%
12%
57%
NA
26%
32%
1,820
2,895
53
428
1,820
2,895
53
428
1.0%
1.5%
0.3%
0.8%
1.0%
1.5%
0.3%
0.8%
12%
14%
5%
13%
12%
14%
5%
13%
4,367
5,207
393
835
2.5%
2.6%
2.1%
1.6%
240%
180%
739%
195%
240%
180%
739%
195%
Switzerland
Credit Suisse
UBS
187,321
267,582
189,194
276,805
191,086
286,599
1%
3%
1%
4%
50%
50%
48%
47%
2%
3%
4,672
4,033
4,672
5,348
2.5%
1.5%
2.5%
2.0%
13%
13%
13%
17%
3,038
3,179
1.6%
1.2%
65%
79%
65%
59%
UK
Barclays
Bradford & Bingley
HBOS
HSBC
Lloyds TSB
Northern Rock
Standard Chartered
34,479
257,746
26,385
286,245
608,765
149,870
32,807
308,996
71,596
36,908
285,733
29,566
304,634
661,312
162,029
37,720
338,755
109,647
39,236
316,645
7%
11%
12%
6%
NC
8%
15%
10%
53%
6%
11%
NA
6%
8%
7%
19%
10%
9%
100%
38%
100%
NA
58%
68%
100%
NA
56%
0%
16%
0%
NA
41%
18%
0%
NA
44%
0%
44%
0%
NA
1%
14%
0%
NA
0%
NM
3,985
171
5,439
8,533
1,282
NM
5,275
NA
NM
3,985
171
5,439
25,768
1,282
NM
5,275
NA
NM
1.5%
0.6%
1.9%
1.4%
0.9%
NM
1.7%
NA
NM
1.5%
0.6%
1.9%
4.2%
0.9%
NM
1.7%
NA
NM
23%
14%
32%
11%
13%
NM
17%
NA
NM
23%
14%
32%
32%
13%
NM
17%
NA
217
NA
47
2,701
13,715
1,783
NA
4,137
NA
5%
7%
3%
15%
5%
7%
3%
8%
46%
39%
47%
54%
43%
37%
50%
33%
12%
23%
3%
13%
3.1%
2.5%
2.5%
1.4%
3.4%
2.7%
2.7%
3.0%
34%
32%
16%
12%
37%
34%
18%
24%
2.3% 112% 108%
1.8% 75% 67%
1.5% 66% 56%
2.4% 179% 117%
7%
6%
47%
41%
12%
2.4%
3.0%
25%
30%
2.0% 110%
Domestic
International
Investment Banks
Global
Pan-Europe average
322,798
716,943
173,213
44,701
371,130
119,707
0.6%
NA
NA
NA
NA
NA
0.2% 27% 27%
0.9% 50% 50%
2.3% 161% 53%
1.2% 139% 139%
NA
NA
NA
1.3% 78% 78%
NA
NA
NA
89%
Bankinter
Danske Bank
BBVA
SCH
BCP
Dexia
HSBC
Swedbank
DnB NOR
Lloyds TSB
Bank of Ireland
Allied Irish Bank
BNP Paribas
SEB
739%
270%
240%
195%
180%
179%
171%
161%
150%
148%
139%
132%
88%
79%
79%
LLR/NPLs 2004E - low
Credit Suisse
Credit Agricole
Antonveneta
UniCredito Italiano
Capitalia
HBOS
BMPS
BPU
ABN-AMRO
Deutsche Bank
Credem
BP Verona
B Lombarda
Bradford & Bingley
65%
65%
62%
60%
59%
56%
50%
49%
46%
43%
40%
40%
40%
30%
27%
67
Europe
Banks
GS versus consensus
GS estimates vs. consensus
IT LE2
IT LE
Rating/
c. view
GS vs. cons. 2005E - high
2005E EPS consensus
m ean m edian
high
low
GS stated EPS
2005E
Difference
to m ean
2006E EPS consensus
m ean m edian
high
low
GS stated EPS
2006E
Difference
to m ean
Austria
Bank Austria
IL/A
4.94
5.20
5.40
3.84
4.77
-3.3%
5.35
5.34
6.41
4.30
5.50
2.9%
Benelux
Dexia
ABN-AMRO
IL/A
IL/A
1.57
2.06
1.57
2.04
1.69
2.40
1.29
1.77
1.58
1.87
0.6%
-9.5%
1.72
2.23
1.70
2.25
1.83
2.56
1.66
1.84
1.71
1.97
-0.6%
-11.8%
France
BNP Paribas
Societe Generale
Credit Agricole
OP/A
IL/A
OP/A
5.50
7.45
2.00
5.58
7.60
1.90
6.22
8.27
2.57
4.07
5.80
1.66
5.64
7.46
1.90
2.6%
0.1%
-4.8%
5.95
8.22
2.31
6.02
8.35
2.22
6.85
9.04
2.95
4.86
6.93
1.96
6.04
8.17
2.27
1.5%
-0.7%
-1.7%
Germ any
Com m erzbank
Deutsche Bank
HVB Group
Hypo Real Estate
Deutsche Postbank
U/A
U/A
IL/A
IL/A
OP/A
1.34
6.13
1.28
2.34
2.78
1.37
6.30
1.26
2.46
2.77
1.78
7.24
1.72
2.62
3.18
0.57
4.16
0.85
1.39
2.32
1.33
4.34
1.50
2.62
2.93
-1.0%
-29.2%
17.3%
11.8%
5.3%
1.63
7.07
1.55
2.93
3.13
1.64
7.22
1.56
3.05
3.13
2.07
8.73
2.00
3.27
3.86
1.38
4.50
1.00
1.87
2.64
1.36
5.98
1.81
3.38
3.30
-16.7%
-15.4%
16.7%
15.5%
5.6%
Ireland
Allied Irish Bank
Bank of Ireland
IL/A
OP/A
1.33
1.15
1.32
1.13
1.46
1.25
1.24
1.11
1.26
1.28
-5.0%
10.9%
1.45
1.19
1.47
1.20
1.55
1.28
1.35
1.07
1.42
1.43
-2.0%
19.8%
Italy
Antonveneta
B Lom barda
BMPS
BNL
BPU
BP Milano
BP Verona
Capitalia
Credem
Banca Intesa
SANPAOLO IMI
UniCredito Italiano
IL/A
U/A
IL/A
IL/A
IL/A
OP/A
U/A
OP/A
IL/A
IL/A
OP/A
OP/A
1.25
0.65
0.20
0.14
1.09
0.36
1.25
0.23
0.54
0.30
0.79
0.36
1.26
0.54
0.20
0.14
1.07
0.37
1.21
0.24
0.54
0.30
0.79
0.36
1.44
1.22
0.24
0.18
1.26
0.38
1.40
0.30
0.58
0.38
0.88
0.42
1.11
0.49
0.16
0.10
0.98
0.31
1.17
0.16
0.50
0.24
0.70
0.32
1.11
0.52
0.19
0.16
1.02
0.38
1.17
0.26
0.58
0.29
0.76
0.36
-11.5%
-20.3%
-4.5%
13.8%
-6.1%
4.9%
-6.2%
11.7%
7.7%
-2.6%
-3.2%
0.7%
1.68
1.69
0.25
0.17
1.36
0.48
1.49
0.28
0.66
0.35
0.93
0.42
1.61
1.69
0.25
0.17
1.36
0.48
1.48
0.27
0.66
0.35
0.92
0.42
1.94
1.69
0.29
0.23
1.49
0.50
1.61
0.34
0.67
0.40
1.10
0.48
1.47
1.69
0.20
0.12
1.21
0.46
1.35
0.23
0.64
0.29
0.82
0.38
1.49
0.60
0.22
0.18
1.14
0.47
1.31
0.31
0.64
0.32
0.87
0.44
-11.2%
-64.4%
-11.6%
8.2%
-15.9%
-1.1%
-12.3%
12.3%
-3.0%
-8.4%
-6.5%
3.8%
U/A
0.16
0.16
0.19
0.14
0.14
-13.2%
0.18
0.17
0.24
0.17
0.17
-5.6%
Portugal
BCP
HVB Group
BNL
Credit Suisse
Hypo Real Estate
Capitalia
Swedbank
Bank of Ireland
Bankinter
Lloyds TSB
Credem
Deutsche Postbank
BP Milano
Northern Rock
HBOS
17.3%
13.8%
13.2%
11.8%
11.7%
11.4%
10.9%
10.0%
8.0%
7.7%
5.3%
4.9%
4.8%
3.0%
2.7%
GS vs. cons. 2005E – low
Standard Chartered
BMPS
Credit Agricole
Allied Irish Bank
HSBC
BPU
BP Verona
SCH
BBVA
ABN-AMRO
Antonveneta
BCP
B Lombarda
Deutsche Bank
-3.9%
-4.3%
-4.5%
-4.8%
-5.0%
-5.6%
-6.1%
-6.2%
-7.3%
-7.4%
-9.5%
-11.5%
-13.2%
-20.3%
-29.2%
68
Europe
Banks
GS estimates vs. consensus (cont.)
ITLE2
ITLE
Rating/
c. view
GS vs. cons. 2006E - high
2005E EPS consensus
mean median
high
low
GS stated EPS
2005E
Difference
to mean
2006E EPS consensus
mean median
high
low
GS stated EPS
2006E
Difference
to mean
Nordic
Danske Bank
DnB NOR
Swedbank
Nordea
SEB
NR/A
IL/A
IL/A
OP/A
OP/A
U/A
14.46
5.44
14.53
0.67
11.15
14.57
14.38
5.60
14.32
0.68
11.07
14.66
15.54
5.94
16.08
0.73
12.07
15.16
13.46
4.82
13.30
0.60
9.84
13.67
14.38
5.33
16.19
0.67
11.04
13.99
-0.5%
-2.0%
11.4%
-0.2%
-0.9%
-3.9%
16.30
5.99
15.66
0.74
12.06
15.71
16.41
6.15
15.26
0.74
12.24
15.54
17.76
6.78
17.94
0.82
13.23
17.34
14.89
5.18
13.60
0.65
10.00
14.29
17.09
6.10
16.52
0.77
12.57
15.50
4.8%
1.8%
5.5%
3.6%
4.3%
-1.4%
Spain
BBVA
SCH
Bankinter
IL/A
IL/A
U/A
IL/A
0.96
0.75
2.47
3.93
0.94
0.75
2.45
3.92
1.20
0.90
2.72
4.40
0.83
0.65
2.27
3.69
0.89
0.70
2.72
3.98
-7.4%
-7.3%
10.0%
1.4%
1.10
0.86
2.85
4.50
1.11
0.84
2.87
4.53
1.28
1.02
3.05
5.00
0.94
0.77
2.57
4.17
0.98
0.84
2.98
4.43
-10.6%
-2.1%
4.6%
-1.6%
Switzerland
Credit Suisse
UBS
IL/A
OP/A
4.58
7.89
4.58
8.11
5.25
9.05
3.70
6.59
5.18
8.05
13.2%
2.0%
5.05
8.57
5.03
8.71
5.93
9.27
4.37
7.10
5.72
9.44
13.2%
10.1%
UK
Barclays
Bradford & Bingley
HBOS
HSBC
Lloyds TSB
Northern Rock
Standard Chartered
U/A
NR/A
U/A
IL/A
IL/A
IL/A
IL/A
OP/A
U/A
89.1
55.2
31.5
85.8
1.20
44.0
80.1
161.0
1.19
89.8
54.8
31.3
85.5
1.19
43.8
81.5
162.8
1.19
91.6
58.4
33.4
91.3
1.30
47.4
85.2
166.2
1.30
84.6
50.4
30.1
78.1
1.08
41.8
67.2
151.1
1.04
90.9
55.0
31.6
88.1
1.13
47.4
83.9
165.9
1.14
2.0%
-0.3%
0.6%
2.7%
-5.6%
8.0%
4.8%
3.0%
-4.3%
90.9
58.9
32.3
93.1
1.29
46.5
86.5
177.3
1.38
90.8
59.0
31.1
92.7
1.31
46.1
88.9
178.4
1.35
96.0
64.7
35.2
99.7
1.42
50.4
93.9
186.8
1.51
85.4
51.2
30.8
83.9
1.1
44.2
63.3
161.3
1.3
90.3
62.4
34.5
97.9
1.3
52.0
93.9
195.7
1.3
-0.6%
6.1%
6.6%
5.2%
-0.4%
11.8%
8.6%
10.4%
-6.4%
Domestic
International
Investment Banks
Global
0.9%
0.7%
-2.7%
-6.2%
0.5%
3.5%
4.7%
-2.9%
Pan-Europe average
-1.4%
1.4%
Bank of Ireland
HVB Group
Hypo Real Estate
Credit Suisse
Capitalia
Lloyds TSB
UBS
Northern Rock
BNL
Bradford & Bingley
Barclays
Deutsche Postbank
Swedbank
HBOS
19.8%
16.7%
15.5%
13.2%
12.3%
11.8%
10.4%
10.1%
8.6%
8.2%
6.6%
6.1%
5.6%
5.5%
5.2%
GS vs. cons. 2006E - low
SCH
Credem
BCP
Standard Chartered
SANPAOLO IMI
Banca Intesa
BBVA
Antonveneta
BMPS
ABN-AMRO
BP Verona
Deutsche Bank
BPU
Commerzbank
B Lombarda
-2.1%
-3.0%
-5.6%
-6.4%
-6.5%
-8.4%
-10.6%
-11.2%
-11.6%
-11.8%
-12.3%
-15.4%
-15.9%
-16.7%
-64.4%
Source: Datastream, I/B/E/S, Company data, Goldman Sachs Research estimates.
69
Europe
Banks
70
Europe
Banks
72 Bank Austria (BACA.VI: IL/A)
Austria
71
Europe
Banks
Bank Austria (BACA.VI: IL/A)
Volume (rhs)
140
Bank Austria
Key statistics
FTSE W Europe
800
120
600
100
400
80
200
60
Valuation summary (EUR mn, except per share data)
GS net
GS
Stated
PBT income
EPS
EPS
2002
504
397
3.48
2.71
2003
627
508
3.89
3.23
2004E
832
640
4.36
3.89
2005E
1,016
771
5.24
4.77
2006E
1,159
878
5.97
5.50
9,629
65.5
64.7
IL/A
147.0
22.5%
77.5%
F
J
D
N
O
S
A
J
J
M
A
M
0
F
40
Investment summary: We expect
Market capitalization (EUR mn)
Current price (EUR)
Fair value (EUR)
Rating
Shares outstanding (mn)
Free float
HVB
Performance 1M (abs/rel)
0.1% / -5.3%
26.2% / 3.5%
45.5% / 28.3%
Debt rating: Moodys
A2 / stable
Debt rating: S&P
A- / negative
B'berg / Reuters code
BACA AV / BACA.VI
Next announcement
4Q results
Date
24-Feb-05
Stated
BVPS
40.4
39.5
42.3
45.8
49.8
DPS
1.02
1.02
1.10
1.30
1.50
P/E (X)
GS Stated
18.8
24.2
16.8
20.3
15.0
16.8
12.5
13.7
11.0
11.9
GS EPS
growth
-28.8%
11.8%
11.9%
20.4%
13.9%
Dividend
yield
1.6%
1.6%
1.7%
2.0%
2.3%
P/B (X)
GS Stated
1.49
1.62
1.53
1.66
1.42
1.55
1.31
1.43
1.20
1.31
above-average earnings growth through
to 2005. The bank has a restructuring
programme aimed at achieving an ROE
of at least 13% by 2006. We support the
ROE RORWA
6.5%
0.44%
8.1%
0.63%
9.5%
0.85%
10.8%
0.99%
11.5%
1.10%
the largest of all the CEE markets.
Risks: BACA is majority owned by
HVB, which is experiencing a severe
capital constraint. HVB’s capital
constraint is likely to restrain BACA’s
2006E
ROE (%)
13%
19%
10%
15%
27%
-6%
11.0%
Value
4,885
2,298
2,587
4,708
640
-722
9,510
-1,260
0
11.8
Number of shares (mn) (2006E)
Implied share price (EUR)
Current share price (EUR)
Implied upside / downside
6,736
as %
of group
51%
24%
27%
50%
7%
-8%
100%
1.41
12.0%
9,510
147
ability for external and/or organic
Earnings contribution (2006E)
1,000
growth, in our view. Given the banks’
900
800
FX exposure, a severe depreciation of
700
600
the PLN would substantially alter the
500
risk profile of the bank.
400
300
200
100
0
Total
809
P/B (X)
1.2
1.9
0.9
1.9
2.5
-0.6
1.2
Corporate
Centre
Total
as %
of group
49%
15%
34%
31%
3%
16%
100%
CEE
-69
0
2006E Equity
allocated
3,954
1,208
2,747
2,477
259
1,305
7,995
International
markets
Goodwill
Consolidation
P/E (X)
9.4
10.0
9.0
13.0
9.0
10.0
10.8
Corporate
customers
Austria
2006E
as %
Net income of group
517
59%
230
26%
287
33%
362
41%
71
8%
-72
-8%
878
100%
Private
customers
Austria
GS total
improving Austrian economy to drive
bank’s strategy and its focus on Poland,
GS
BVPS
43.9
42.7
46.0
49.9
54.4
Sum-of-the-parts valuation (EUR mn)
Business unit
Domestic businesses
Private Customers Austria
Corporate Customers Austria
CEE
International markets
Corporate Centre
Bank Austria’s CEE exposure and the
Corporate
Centre
7%
64.7
65.5
-1.2%
CEE
42%
suggests a fair value of EUR64.7 per
share for an 11.8x 2005E cash
Contribution to value (a)
Internationa
l markets
6%
Valuation: Our SOTP valuation
earnings.
Private
customers
Austria
21%
Corporate
customers
Austria
24%
(a) Excluding Corporate Centre
72
Europe
Banks
Returns (EUR mn)
Balance sheet and capital (EUR mn)
702
69
0
0
0
0
809
69
0
0
0
0
GS net income
+ Depreciation
- CAPEX (= Depreciation)
640
0
0
771
0
0
878
0
0
GS gross OpCF
- Working capital charge
640
-317
771
-280
878
-207
GS net income
640
771
878
GS net OpFCF
- Dividends to common
324
-162
491
-191
671
-221
Stated equity
+ Goodwill amortised to date
+ Goodwill written-off
+/- other
6,225
357
176
0
6,736
426
176
0
7,324
495
176
0
GS net FCF
GS equity
6,758
7,338
7,995
GS equity
Tier 1 capital
Total assets
Risk weighted assets
GS return ratios
ROAE
ROAA
ROARWA
Stated return ratios
ROAE
ROAA
ROARWA
141,913
70,072
146,362
74,078
149,598
77,041
11.2%
0.43%
0.85%
10.9%
0.53%
1.07%
11.5%
0.59%
1.16%
10.7%
0.38%
0.76%
10.8%
0.49%
0.97%
11.5%
0.55%
1.07%
2003
2004E
2005E
2006E
Customer
deposits
GS net income
508
-150
113
640
-162
-317
771
-191
-280
878
-221
-207
Other
liabilities
Capital formation
471
162
299
450
5,123
65,550
5,533
70,072
6,044
74,078
6,632
77,041
162
299
450
9.2%
0.7%
2.9%
0.2%
5.0%
0.4%
6.8%
0.6%
50%
28%
39%
27%
33%
27%
6,758
5,533
141,913
70,072
7,338
6,044
146,362
74,078
7,995
6,632
149,598
77,041
Interbank
Cash and
Interbank
19%
29%
80%
Customer
loans
60%
55%
Equity &
debt
securities
45%
Subordinated
debt
40%
11%
20%
Other
assets
4%
Shareholders'
equity
15%
0%
5.6%
0.22%
0.43%
7.0%
0.34%
0.68%
8.7%
0.45%
0.89%
5.9%
2.9%
3.4%
8.1%
5.0%
5.1%
10.1%
6.8%
7.0%
Municipal
loans
14%
Real estate
loans
49%
Other loans
36%
Summary P&L (EUR mn)
Item nam e
3Q04
4Q04E
Net interest income
Net fees & com m is s ions
Trading profits
Other recurring revenues
Net non-interest income
Total recurring revenues
566
296
3
299
865
608
316
52
368
976
613
321
28
349
962
Staff
General adm inis tration
Depreciation
Goodwill am ortis ation
Total operating expenses
Operating income
-20
-622
243
-17
-619
357
-17
-627
335
Loan-los s provis ions
Other incom e / (expens es )
-110
59
-107
-30
y-o-y
q-o-q
2004E
2005E
2006E
05/04E
06/05E
8.4%
0.9%
8.3%
1.5%
N/M -46.2%
NA
NA
16.6%
-5.3%
11.2%
-1.4%
2,402
1,252
168
1,420
3,822
2,541
1,311
212
1,523
4,064
2,709
1,361
208
1,569
4,278
5.8%
4.7%
26.2%
NA
7.2%
6.3%
6.6%
3.8%
-1.9%
NA
3.0%
5.3%
-69
-2,461
1,361
-69
-2,527
1,537
-69
-2,587
1,691
NA
NA
NA
0.0%
2.7%
12.9%
NA
NA
NA
0.0%
2.4%
10.0%
NA
NA
NA
-15.0%
0.8%
37.7%
-108
-2.1%
-29 -149.2%
NA
NA
NA
0.0%
1.3%
-6.3%
0.7%
-3.3%
-433
-96
-423
-97
-438
-94
-2.2%
1.0%
3.5%
-3.3%
PBT
Tax
PAT
Minorities and pref s hare dividends
Net Profit
192
-53
139
-8
131
220
-53
167
-15
152
198
-49
148
-15
133
3.1%
-6.6%
6.8%
87.5%
1.9%
-10.0%
-6.6%
-11.1%
0.0%
-12.2%
832
-200
631
-60
571
1,016
-254
762
-60
702
1,159
-290
869
-60
809
22.2%
26.9%
20.7%
0.0%
22.8%
14.1%
14.0%
14.1%
0.0%
15.3%
EPS (basic)
Cash EPS
GS EPS
0.89
1.03
1.13
1.03
1.15
1.12
0.91
1.02
0.99
1.9%
-0.4%
-11.6%
-12.2%
-11.0%
-11.3%
3.89
4.36
4.36
4.77
5.24
5.24
5.50
5.97
5.97
22.8%
20.4%
20.4%
15.3%
13.9%
13.9%
10.0%
2003
Capital
Reserves
Minority interests (equity)
Preference capital
Less: Goodwill
Other balancing (estimated)
Tier 1 capital
2,318
2,649
0
0
-639
246
4,574
3,223
2,766
0
0
-550
-316
5,123
Fixed asset revaluation reserves
Subordinated liabilities
General allowances for bad debt
Tier 2 capital
0
0
0
0
3,549
0
0
0
0
3,888
Tier 3 capital
Total gross capital resources
Less: Supervisory deductions
Total net capital resources
0
0
-614
7,509
0
0
-424
8,587
67,160
65,550
0.0%
108.6%
7.4%
12.3%
0.0%
116.9%
9.1%
9.7%
Ratios
Prefered shares as % of tier 1
Equity as % of tier 1
Equity as % of RWA
Goodwill as % of (grossed-up) tier 1
8.0%
6.0%
4.0%
2.0%
Tier 1 capital breakdown (2003)
0.0%
-2.0%
2002
Revenue vs. cost growth (y-o-y change)
4Q03
Capital formation / tier 1
Capital formation / RWA
Equity structure
Item name
Loan book split (2004E)
Investments
1%
GS return ratios
GS net OpFCF / GS equity
GS net OpFCF / Total assets
GS net OpFCF / RWA
Other
GS net OpFCF / tier 1
GS net FCF / tier 1
GS net OpFCF / market value
Tier 1 capital
Liab.
Assets
Dividends / GS net OpFCF
Payout ratio
17%
Preferred &
minorities
2001
2002
2003
2004E
2005E
2006E
7,000
-4.0%
6,000
-6.0%
5,000
-8.0%
4,000
-10.0%
3,000
2,000
-12.0%
Revenue growth
Cost growth
1,000
0
Tier 1
capital
571
69
0
0
0
0
100%
Other
2006E
Goodwill
(negative)
2005E
Stated net profit
+ Goodwill amortisation
- Gains on disposals (losses)
+ Other excep. losses (gains)
+ ST fluctuations on life-fund
+ Restructuring costs
Total assets
Capital formation analysis
Item name
Assets & liabilities (2004E)
2004E
Preference
capital
2006E
Minority
interests
(equity)
2005E
Reserves
2004E
Cash
Item name
Capital
Accounting
Item name
73
Europe
Banks
74
Europe
Banks
76
ABN AMRO (AAH.AS: IL/A)
Benelux
75
Europe
Banks
ABN AMRO (AAH.AS: IL/A)
Volume (rhs)
FTSE W Europe
120
110
ABN AMRO HOLDING
30000
25000
100
90
20000
15000
80
70
60
50
10000
5000
Key statistics
Investment summary: ABN
Current price (EUR)
Fair value (EUR)
Rating
Free float
35,468
21.40
20.1
IL/A
1,657.4
95%
GS net
GS
Stated
PBT
income
EPS
EPS
2002
3,534
2,307
1.48
1.39
2003
4,713
2,911
1.81
1.94
2004
5,054
3,668
2.22
2.46
2005E
4,970
3,158
1.87
1.87
2006E
5,283
3,377
1.97
1.97
F
J
D
N
O
S
A
J
J
M
A
M
F
0
6.4%/0.6%
29.0%/5.8%
14.0%/0.4%
Debt rating: Moodys
Aa3 / stable
Debt rating: S&P
AA- / stable
AAB NA/ AAH.AS
Next announcement
1Q05 results
Date
27-Apr-05
Stated
BVPS
7.0
8.0
9.0
10.1
11.6
P/E (X)
GS Stated
14.5
15.4
11.8
11.1
9.6
8.7
11.5
11.5
10.9
10.9
DPS
0.90
0.95
1.00
1.05
1.10
GS EPS
growth
-3.2%
22.2%
22.7%
-15.9%
5.4%
Dividend
yield
4.2%
4.4%
4.7%
4.9%
5.1%
P/B (X)
GS Stated
2.0
3.1
1.9
2.7
1.8
2.4
1.6
2.1
1.5
1.9
Total
ROAE RORWA
20.4%
0.9%
27.7%
1.4%
30.8%
1.7%
20.5%
1.3%
19.0%
1.3%
10.2
16,551
Fair value (EUR)
2.1
20.4%
34,565
business as well as weak mortgage
acquisition risk at ABN AMRO remains
high, with management actively
considering acquisitions in Italy, the US
and Asia.
increase dilution risks.
4,000
3,500
3,000
2,500
Valuation: Our sum-of-the-parts
2,000
1,500
analysis suggests a fair value of
1,000
500
EUR20.1 per share.
Total
0
1,718
20.1
21.4
-6%
considering acquisitions which could
LeasePlan
as %
of group
66%
14%
29%
12%
12%
21%
12%
0%
1%
100%
Corporate centre
-5,838
0
Per share
(EUR)
13.4
2.8
5.8
2.4
2.3
4.2
2.4
0.0
0.1
20.1
WCS
Value
22,979
4,799
9,985
4,192
4,003
7,266
4,121
0
199
34,565
PC & AM
as %
as %
2006E
of group of RWA P/B (X) ROE (%)
56%
8.2%
1.8
18%
21%
8.0%
1.0
10%
20%
8.0%
2.2
20%
5%
10.0%
3.6
36%
10%
8.0%
1.8
18%
28%
8.0%
1.2
13%
3%
8.0%
6.6
55%
4%
8.0%
0.0
0%
9%
55.6%
0.1
1%
100%
8.8%
1.5
15.1%
Other C&CC
2006E Equity
allocated
12,542
4,682
4,470
1,176
2,214
6,186
623
941
2,098
22,389
Brazil C&CC
P/E (X)
10.4
10.0
11.0
10.0
10.0
9.0
12.0
11.0
10.5
10.2
0
0
3,377
US$, the sale of the lease plan
Risks: Management is actively
N'lands C&CC
Goodwill
Exceptional items
that the continued deterioration in the
ABN AMRO. In addition, we believe that
GS
BVPS
10.5
11.0
12.0
13.0
14.5
N America C&CC
GS total
2006E
as %
Net income of group
2,207
65%
480
14%
908
27%
419
12%
400
12%
807
24%
343
10%
0
0%
19
1%
3,377
100%
growing top-line revenues. We believe
origination volumes pose a challenge to
Business unit
Consumer & Commercial Clients
- Netherlands
- North America
- Brazil
- Rest of world
Wholesale Client Services
Private clients & Asset Mgmt
Lease holding
Corporate centre (incl. Pref)
AMRO’s key challenge in 2005 is
N'lands
C&CC
14%
PC & AM
12%
WCS
21%
N America
C&CC
29%
Other
C&CC
12%
Brazil
C&CC
12%
76
Europe
Banks
Item name
Assets & liabilities (2003)
2006E
100%
Cash
10%
Stated net profit
GS net income
4,067
0
0
0
0
-399
3,668
3,158
0
0
0
0
0
3,377
0
0
0
0
0
3,158
3,377
GS net income
+ Depreciation
3,668
961
-961
3,158
951
-951
3,377
942
-942
GS gross OpCF
3,668
-1,239
3,158
-480
3,377
-429
GS net OpFCF
2,429
-1,669
2,678
-1,803
2,948
-1,889
760
875
1,059
69%
41%
67%
57%
64%
56%
20,043
20,884
608,623
241,500
22,389
23,230
623,755
248,354
24,916
25,757
637,271
254,475
Interbank
80%
Customer
loans
60%
Equity &
debt
securities
40%
Other
assets
20%
14,205
0
5,838
0
16,551
0
5,838
0
19,078
0
5,838
0
GS net FCF
43%
GS equity
20,043
22,389
24,916
608,623
241,500
623,755
248,354
637,271
254,475
GS equity
Tier 1 capital
Total assets
Total assets
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
19.2%
0.63%
1.58%
14.9%
0.51%
1.29%
14.3%
0.54%
1.34%
30.8%
0.70%
1.75%
20.5%
0.51%
1.29%
19.0%
0.54%
1.34%
GS return ratios
GS net OpFCF / RWA
Other
GS net FCF / tier 1
Other
liabilities
Capital formation
Subordinate
d debt
26%
20%
0%
32%
Preferred &
minorities
2%
Shareholder
s' equity
12.6%
0.43%
1.09%
12.5%
0.47%
1.17%
11.6%
3.6%
6.8%
11.5%
3.8%
7.6%
11.4%
4.1%
8.3%
Total
Personal
lending
44%
Construc. &
Real Est
8%
Public
authorities
2%
Commercial
37%
Key performance indicators (EUR mn)
Item name
4Q03
3Q04
4Q04
2004
2005E
-6.7%
1.66%
0.2%
-6.4%
0.2%
0.7%
1.53%
-4.6%
-0.3%
-4.6%
0.4%
1.60%
6.3%
-2.6%
6.3%
8.6%
1.67%
-6.6%
-0.6%
-13.3%
2.5%
1.62%
4.5%
2.2%
7.4%
2.2%
1.64%
2.8%
3.9%
1.4%
Total operating expense growth
Cost / income ratio
4.3%
71.8%
-0.6%
71.0%
0.1%
70.1%
1.8%
74.8%
-4.2%
68.5%
1.5%
67.7%
Net P&L provisions to average bkg loans
Net P&L provisions / Operating income
0.53%
24.7%
0.17%
8.3%
0.32%
14.5%
0.27%
15.2%
0.40%
17.5%
0.41%
17.4%
Tax rate
25.6%
29.5%
29.5%
21.2%
30.7%
30.6%
4.0%
NPLs
NPLs / loans
Provisions / NPLs
Tier one capital ratio
BIS capital ratio
254,359
5.9%
245,709
-3.4%
239,782
-0.2%
246,587
2.8%
252,665
2.5%
NA
NA
NA
NA
NA
NA
NA
NA
NA
9,336
3.8%
55.1%
9,149
3.6%
59.7%
8,966
3.5%
64.3%
8.1%
11.8%
8.5%
11.4%
8.3%
11.6%
8.6%
11.6%
9.4%
12.2%
10.1%
12.9%
1,772
760
875
1,059
Tier 1 capital
18,236
223,800
20,884
241,500
23,230
248,354
25,757
254,475
9.7%
0.8%
3.6%
0.3%
3.8%
0.4%
4.1%
0.4%
2003
2004
12,235
1,143
1,184
0
0
3,674
18,236
14,205
1,149
1,184
0
0
4,346
20,884
Tier 2 capital
0
0
0
8,018
8,018
0
0
0
7,117
7,117
Tier 3 capital
0
0
0
26,254
0
0
0
28,000
223,800
241,500
0.0%
79.9%
6.5%
0.0%
0.0%
79.2%
6.8%
0.0%
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
0.0%
2001
240,265
-4.3%
3,377
-1,889
-429
Ratios
Equity as % of RWA
6.0%
2.0%
Customer loans (bkg. bus., net)
Growth (y-o-y)
2006E
3,158
-1,803
-480
2006E
Total asset growth
Net interest margin (bkg. bus)
Non-interest income growth
2005E
Equity structure
Item name
Loan book split (2003)
Financial
9%
12.7%
0.42%
1.04%
2004
3,668
-1,669
-1,239
Liab.
Assets
Payout ratio
Customer
deposits
GS net income
43%
18%
Stated equity
+/- other
2003
2,911
-1,543
404
Interbank
2002
2003
2004
2005E
2006E
25,000
-2.0%
20,000
-4.0%
15,000
-6.0%
10,000
5,000
-8.0%
Revenue growth
Cost growth
0
Tier 1
capital
2005E
Other
2004
Goodwill
(negative)
2006E
Preference
capital
2005E
Minority
interests
(equity)
2004
Cash
Item name
Reserves
Accounting
Item name
Capital
Returns (EUR mn)
77
Europe
Banks
78
Europe
Banks
80 BNP Paribas (BNPP.PA: OP/A)
82 Credit Agricole (CAGR.PA: OP/A)
84 Société Générale (SOGN.PA: IL/A)
France
79
Europe
Banks
BNP Paribas (BNPP.PA: OP/A)
Volume (rhs)
120
110
100
90
80
70
60
50
40
BNP PARIBAS
FTSE W Europe
25000
20000
15000
10000
5000
GS net
GS
Stated
GS
PBT income
EPS
EPS
BVPS
2002
4,813
3,161
3.55
3.70
30.5
2003
5,586
3,781
4.20
4.18
32.7
2004
6,905
4,685
5.24
5.22
36.0
2005E
7,231
4,965
5.68
5.64
39.5
2006E
7,553
5,201
6.09
6.04
44.7
Investment summary: BNPP’s
Market capitalization (EUR mn
Current price (EUR)
Fair value (EUR)
Rating
Free float
Axa
45,474
56.3
64.5
OP/A
884.7
94.0%
6.0%
F
J
D
N
O
S
A
J
J
M
A
M
F
0
Key statistics
2.4% / -3.2%
Performance 6M (abs/rel) 15.7% / -5.1%
Debt rating: Moodys
Aa2 / stable
Debt rating: S&P
AA- / positive
B'berg / Reuters code BNP FP / BNPP.PA
Next announcement
1Q05 results
Date
12-May-05
the surplus capital, via a combination of
organic growth, add-on acquisitions and
share buybacks, is yielding results. It
also serves two important purposes in
P/E (X)
GS Stated
15.9
15.2
13.4
13.5
10.7
10.8
9.9
10.0
9.3
9.3
DPS
1.20
1.45
2.00
2.25
2.40
GS EPS
growth
-10.0%
18.5%
24.6%
8.3%
7.2%
Dividend
yield
2.1%
2.6%
3.6%
4.0%
4.3%
P/B (X)
GS Stated
1.8
1.9
1.7
1.8
1.6
1.6
1.4
1.5
1.3
1.3
ROE RORWA
12.9% 1.13%
13.7% 1.35%
16.0% 1.56%
15.8% 1.57%
15.3% 1.56%
and organic growth in the operating
divisions drive cash earnings and create
value for shareholders; second, and no
less importantly in times of sector
consolidation, putting surplus capital to
work helps alleviate concerns over
100%
10.6
35,229
100%
1.8
1.5
17.4%
14.7%
52,524
2,000
54,524
844.7
64.5
56.3
15%
62.2
2.4
64.5
6,000
acquisition. The drop in the Tier I ratio
5,000
to 7.5%, and the improvement in ROE,
4,000
3,000
highlights the value of the franchise.
2,000
1,000
Advisory
and CM
15%
stick to its strict financial acquisition
guidelines, non-organic growth is
than organic growth. Hence, with
BNPP
Capital
2%
surplus capital re-deployment an
Other
5%
important part of the investment thesis,
we see associated risks.
Insurance
7%
Securities
Services
1%
PB&AM
9%
Risks: Although we expect BNPP to
normally associated with higher risks
Contribution to value
Financing
business
14%
Total
Other
BNPP Capital
Advisory and CM
0
96%
4%
100%
BNPP pursuing a large-scale
Insurance
as %
of group
52%
23%
12%
17%
19%
10%
1%
8%
32%
16%
16%
2%
-9%
Financing business
1.7
2.2
1.7
3.1
1.8
2006E
Value Per share
ROE (%) (EUR mn)
(EUR)
23.9%
28,504
33.7
21.6%
12,654
15.0
32.9%
6,382
7.6
23.1%
9,468
11.2
25.0%
10,353
12.3
44.7%
5,298
6.3
25.0%
768
0.9
17.2%
4,286
5.1
21.9%
17,416
20.6
16.8%
8,522
10.1
31.1%
8,894
10.5
27.3%
1,014
1.2
-4,762
-5.6
Securities Services
P/B (X)
2.6
2.4
3.7
2.4
RFS
101%
-8%
8%
as %
of group
31%
15%
5%
11%
11%
3%
1%
7%
23%
14%
8%
3%
0%
17%
85%
15%
0%
PB&AM
5,201
-438
399
2006E Equity
P/E (X) allocated
10.9
10,927
11.1
5,283
11.1
1,748
10.5
3,896
10.7
3,859
12.0
988
8.0
384
12.0
2,487
10.0
7,940
10.0
5,084
10.0
2,856
3.7
1,014
12.0
0
6,121
10.1
29,861
5,368
FRB
as %
of group
51%
22%
11%
17%
19%
9%
2%
8%
34%
17%
17%
5%
-8%
Intn'l retail banking
2006E
Net income
2,613
1,139
574
899
966
441
96
429
1,742
852
889
277
-397
5,162
management’s remedy for dealing with
our view; first, cash-rich acquisitions
Stated
BVPS
29.5
31.4
34.1
37.1
41.7
Business unit
Retail Banking
Domestic retail banking
International retail banking
Retail financial services
Private Bkg & Asset Mgmt
Securities Services
Insurance
Corporate & Investment Bkg
Financing business
Advisory and Capital Markets
BNP Paribas Capital
Corporate Centre & other
Unallocated capital (tangible)
GS Total
Goodwill
GS exceptional items
Unrealised gains (at book)
Total
Number of shares (mn)
FY2004 results demonstrated that
FRB
20%
RFS
16%
Intn'l retail
banking
11%
Valuation: BNPP is currently trading
at 9.3x 2006E GS earnings and 1.5x
2005E stated book. Our fair value is
EUR64.5, implying 15% upside.
80
Europe
Banks
4,668
384
-590
223
0
0
4,936
438
-350
-60
0
0
5,162
438
-350
-49
0
0
GS net income
+ Depreciation
3,781
-758
GS gross OpCF
GS net income
3,781
4,685
4,965
5,201
GS net OpFCF
29,561 31,818 34,157
GS equity
Total assets
35,229
2,500
0
0
37,729
783,076 905,938 956,016 1,001,233
273,900 323,700 341,593 357,750
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
15.3% 15.0%
0.55% 0.53%
1.57% 1.49%
16.0% 15.8%
0.55% 0.53%
1.56% 1.48%
14.5%
0.53%
1.49%
15.3%
0.53%
1.48%
2006E
4,685
755
-755
4,965
780
-780
5,201
708
-708
3,023
-728
4,685
-3,486
4,965
-1,253
5,201
-1,131
2,295
-1,310
1,199
-1,769
3,712
-1,946
4,070
-2,027
GS net FCF
985
-570
1,766
2,043
Payout ratio
57%
35%
148%
38%
52%
39%
50%
39%
Cash and
Interbank
100%
Interbank
21%
Customer
loans
60%
Equity & 40%
debt
securities
Customer
deposits
28%
29,561
25,747
783,076
273,900
31,818
24,278
905,938
323,700
GS return ratios
GS net OpFCF / RWA
Other
8.9%
GS net FCF / tier 1
3.8%
GS net OpFCF / market valu 5.0%
29%
Other
assets
11.3%
0.40%
1.12%
11.3%
0.42%
1.16%
4.9%
-2.3%
2.6%
13.8%
6.6%
8.2%
13.2%
6.6%
9.0%
Other
liabilities
Subordinated
debt
42%
20%
3%
0%
Liab.
Preferred &
minorities
Shareholders'
equity
Total
Personal
lending
30%
Other
11%
Total
corporate
lending
59%
Item name
4Q03
3Q04
4Q04
4Q/4Q
4Q/3Q
Net interest income
Trading profits
1,674
1,695
1,022
2,717
4,391
1,603
1,853
1,221
3,268
4,870
1,603
1,951
1,221
3,366
4,968
-4%
15%
19%
24%
13%
0%
5%
0%
3%
2%
6,794 6,413 7,081 7,443
6,544 7,244 7,573 7,916
4,597 5,166 5,094 5,224
11,141 12,410 12,667 13,140
17,935 18,823 19,748 20,583
-6%
11%
12%
11%
5%
10%
5%
-1%
2%
5%
5%
5%
3%
4%
4%
-2,765 -2,826 -3,116
1,626 2,044 1,852
NA
NA
NA
13%
14%
NA
NA
NA
10%
-9%
-6,763 -6,872 -7,109 -7,348
-3,764 -3,965 -4,102 -4,240
-758
-755
-780
-708
-11,285 -11,592 -11,991 -12,296
6,650 7,231 7,757 8,287
2%
5%
0%
3%
9%
3%
3%
3%
3%
7%
3%
3%
-9%
3%
7%
50.0%
-1,084 -50%
222 48%
-438
-4%
565
-4%
29%
7%
14%
7%
24%
7%
0%
-3%
20.0%
0.0%
Staff
General administration
Depreciation
Operating income
Loan-loss provisions
Income from associates
Goodwill amortisation
Other income / (expenses)
PBT
Tax
PAT
Minorities and pref share dividends
Net Profit
EPS (basic)
Cash EPS
GS EPS
DPS (net)
2003
2004 2005E 2006E 04/03 05/04E 06/05E
-354
69
-100
24
-116
48
-98
140
-102
42
-105
-170
-71%
-30%
-2%
483%
-12%
-13%
7%
-221%
-1,361
131
-399
565
-678
194
-384
542
-875
208
-438
579
1,265
-253
1,012
-85
927
2,018
-482
1,536
-96
1,440
1,517
-404
1,113
-111
1,002
20%
60%
10%
31%
8%
-25%
-16%
-28%
16%
-30%
5,586
-1,481
4,105
-344
3,761
6,905
-1,830
5,075
-407
4,668
7,231
-1,865
5,365
-429
4,936
7,553
-1,942
5,610
-449
5,162
24%
24%
24%
18%
24%
5%
2%
6%
5%
6%
4%
4%
5%
5%
5%
1.03
1.14
1.14
-
1.25
1.36
1.25
-
1.08
1.19
1.34
-
4%
5%
18%
NA
-14%
-12%
7%
NA
4.18
4.63
4.20
1.45
5.22
5.65
5.24
2.00
5.64
6.14
5.68
2.25
6.04
6.55
6.09
2.40
25%
22%
25%
38%
8%
9%
8%
13%
7%
7%
7%
7%
70.0%
60.0%
Capital formation
Tier 1 capital
2004
2005E
2006E
3,781
-1,310
728
4,685
-1,769
-3,486
4,965
-1,946
-1,253
5,201
-2,027
-1,131
3,199
-570
1,766
2,043
25,747 24,278 26,924 30,775
273,900 323,700 341,593 357,750
12.4%
1.2%
-2.3%
-0.2%
6.6%
0.5%
6.6%
0.6%
2002
2003
Equity
FGBR
Minority interests
Preference capital
Less: Goodwill
Tier 1 capital
26,445
997
4,535
0
-6,547
-2,430
23,000
28,321
843
5,019
0
-5,578
-2,858
25,747
Tier 2 capital
0
14,283
0
-1,283
13,000
0
13,226
0
-1,526
11,700
Tier 3 capital
600
36,600
-5,700
30,900
500
37,947
-2,500
35,447
284,300
273,900
Ratios
Equity as % of RW A
0.0%
139.0%
11.2%
22.2%
0.0%
132.8%
12.5%
17.8%
40.0%
40,000
30.0%
35,000
30,000
25,000
10.0%
-10.0%
GS net income
2003
Equity structure
Item name
34,157
37,729
26,924
30,775
956,016 1,001,233
341,593 357,750
3.9%
0.14%
0.40%
26%
22%
Assets
GS equity
Tier 1 capital
Total assets
27%
80%
Item name
20,000
15,000
2000
2001
2002
2003
2004 2005E 2006E
10,000
5,000
Revenue growth
Cost growth
0
Tier 1
capital
3,761
399
-638
259
0
0
2005E
Other
Stated net profit
Stated equity
28,321 30,194 32,095
+ Goodwill amortised to date 1,240 1,624 2,062
0
0
0
+/- other
0
0
0
2004
2003
Goodwill
(negative)
2006E
Preference
capital
2004 2005E
Minority
interests
(equity)
2003
Cash
Item name
Reserves
Accounting
Item name
Capital
Returns (EUR mn)
81
Europe
Banks
Credit Agricole SA (CAGR.PA: OP/A)
Key statistics
12 month performance
Volume (rhs)
120
CREDIT AGRICOLE
FTSE W Europe
25000
20000
100
15000
80
10000
60
5000
Stated net GS net
GS
Stated
GS
income income
EPS
EPS
BVPS
2002
1,246
2,000
1.51
0.94
21.4
2003
1,140
2,055
1.53
0.85
16.9
2004E
2,310
3,159
2.14
1.57
18.7
2005E
2,805
3,602
2.44
1.90
20.0
2006E
3,346
4,072
2.76
2.27
22.2
31,813
22.8
30.5
OP/A
1,474
44%
52%
3%
Performance 1M (abs/rel) -0.7% / -6.1%
Debt rating: Moodys
Aa2 / stable
Debt rating: S&P
AA- / stable
B'berg / Reuters code ACA FP/CAGR.PA
Next announcement
Q404 results
Date
09-Mar-05
F
J
D
N
O
S
A
J
J
M
A
M
0
F
40
Investment summary: Pursuing a
Current price (EUR)
Fair value (EUR)
Rating
Free float
Caisses Regionales
AGF
P/E (X)
GS Stated
15.1
24.2
14.9
26.8
10.6
14.5
9.3
12.0
8.2
10.0
DPS
0.55
0.55
0.55
0.55
0.60
GS EPS
growth
NA
1.5%
39.7%
14.0%
13.1%
Dividend
yield
2.4%
2.4%
2.4%
2.4%
2.6%
P/B (X)
GS Stated
1.1
1.1
1.3
1.4
1.2
1.3
1.1
1.3
1.0
1.2
Agricole SA (CASA), Retail Banking,
Asset Gathering and Consumer
Finance provides the growth while
Corporate & Investment Banking (CIB)
ROE RORWA
6.2% 1.23%
5.2% 0.73%
9.5% 1.07%
10.8% 1.30%
12.0% 1.55%
believe that growth will continue in 2005
and 2006 while the full effect of
synergies realised to date should offer
restructuring benefits. Our current
estimates assume continued weak
revenues in CIB through 2006, leaving
13.4x
29,031
18%
12%
30%
10%
11%
7%
25%
36%
6%
100%
2.3x
3.0x
2.6x
2.3x
2.4x
4.7x
1.4x
1.3x
NM
2.0x
20.6%
27.0%
23.2%
23.0%
23.9%
39.4%
14.0%
12.7%
NM
19.2%
1.5x
11.5%
8,685
7,777
16,462
4,750
5,674
7,112
7,352
9,605
-8,532
42,423
5.9
5.3
11.2
3.2
3.9
4.8
5.0
6.5
-5.8
28.8
19%
17%
37%
11%
13%
16%
16%
21%
-19%
94%
2,299
194
44,915
1,474
30.5
22.79
34%
1.6
0.1
30.5
5%
0%
100%
rate CASA (OP/A) as one of our top buy
5,000
ideas in Europe.
4,000
3,000
Risks: Revenue losses within CIB and
2,000
1,000
general merger integration risk.
0
Total
3,797
2,596
6,393
2,068
2,379
1,506
5,266
7,566
1,238
21,151
7,880
6,000
CIB
11.1x
11.1x
11.1x
10.0x
10.0x
12.0x
10.0x
10.0x
11.5x
10.4x
potential upside to our estimates. We
Other
19%
17%
36%
12%
14%
15%
18%
24%
-18%
100%
Value Per share
as %
(EUR mn)
(EUR) of group
PB&AM
782
700
1,482
475
567
593
735
961
-742
4,070
-721
-6
3,344
2006E Equity
as %
2006E
allocated of group P/B (X) ROE (%)
Life insurance
P/E (X)
IRB
as %
of group
SFS
2006E
Net income
FRB
Caisses Regionales
Credit Lyonnais
Domestic Retail Banking
International Retail Banking
Special Financial Services
Life insurance
Prop. asset management & other (incl funding)
GS Total
Goodwill
CA's share of CR U/R gains on stake in CA
Unrealised gains
Total
Fair value (EUR)
the same time is challenging. At Credit
offers room for restructuring. We
Stated
BVPS
20.7
15.9
17.2
18.0
19.7
Business unit
strategy of growth and restructuring at
Valuation: CASA is currently trading
at 8.2x 2006E GS earnings and 1.3x
2005E stated book. Our fair value of
CIB
19%
EUR30.5 implies 34% upside from
FRB
33%
current levels.
Life
insurance
14%
PB&AM
14%
IRB
9%
SFS
11%
82
Europe
Banks
3,346
721
0
0
0
6
GS net income
2,055
3,159
3,602
4,072
Stated equity
23,454 25,385 26,569 29,030
+ Goodwill amortised to date 1,522 2,243 2,964 3,685
0
0
0
0
+/- other
0
0
0
0
GS equity
Total assets
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
24,976 27,628 29,533 32,715
786,042 832,447 801,573 826,688
212,507 220,425 212,250 218,901
16.5% 12.0% 12.6% 13.1%
0.52% 0.39% 0.44% 0.50%
0.97% 1.46% 1.66% 1.89%
9.7% 9.5% 10.8% 12.0%
0.29% 0.29% 0.34% 0.41%
0.54% 1.07% 1.30% 1.55%
GS net income
+ Depreciation
2,055
539
-539
3,162
0
0
3,601
0
0
4,070
0
0
GS gross OpCF
2,055
-7,792
3,162
-554
3,601
572
4,070
-466
GS net OpFCF
-5,737
-810
2,608
-810
4,174
-810
3,605
-884
GS net FCF
-6,547
1,797
3,363
2,721
-14%
71%
31%
35%
19%
29%
25%
26%
80%
Customer
loans
60%
Equity & 40%
debt
securities
34%
Customer
deposits
GS equity
Tier 1 capital
Total assets
Subordinated
debt
40%
Preferred &
minorities
28%
Shareholders'
equity
3%
0%
Liab.
Total
Personal
lending
27%
Other
8%
-45.9% 9.9% 14.6% 11.6%
-1.46% 0.32% 0.51% 0.44%
-2.71% 1.20% 1.93% 1.67%
Total
corporate
lending
65%
-34.0% 13.8% 19.9% 14.7%
-38.8% 9.5% 16.1% 11.1%
-18.0% 8.2% 13.1% 11.3%
Item name
Operating income
4Q03 3Q04 4Q04E 4Q/4QE 4Q/3QE
3,431 3,053 3,086
-2,296 -2,115 -2,119
1,135
938
967
-10%
-2%
4%
5%
-8%
-15%
0%
3%
-8,889 -8,575 -8,479 -8,492
3,832 3,862 4,457 5,101
-4%
1%
-1%
15%
0%
14%
-40%
-50%
17%
NA
72%
0%
5%
214%
-1,121 -624 -822 -900
-900 -721 -721 -721
856 1,083 1,308 1,405
-452
-44
-48
22
-44%
-20%
27%
NA
32%
0%
21%
9%
9%
0%
7%
NA
6.0%
PBT
Tax
PAT
Net Profit
274
-167
107
-83
24
915
-189
726
-73
653
892 225%
-235
41%
657 513%
-76
-8%
581 2296%
-3%
24%
-10%
4%
-11%
2,215 3,557 4,173 4,907
-722 -941 -1,076 -1,271
1,493 2,616 3,097 3,636
-353 -306 -292 -290
1,140 2,310 2,805 3,346
61%
30%
75%
-13%
103%
17%
14%
18%
-5%
21%
18%
18%
17%
-1%
19%
0.0%
EPS (basic)
Cash EPS
GS EPS
DPS (net)
0.02
0.27
0.53
-
0.44
0.57
0.62
-
0.39 2296%
0.52
94%
0.53
0%
NM
-11%
-9%
-15%
NM
84%
35%
40%
0%
21%
16%
14%
0%
19%
15%
13%
9%
3,601
-810
572
4,070
-884
-466
Capital formation
-6,547
1,797
3,363
2,721
Tier 1 capital
16,883 18,853 20,923 24,480
212,507 220,425 212,250 218,901
-38.8%
-3.1%
9.5%
0.8%
16.1%
1.6%
11.1%
1.2%
2002
2003
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
20,150
2,078
1,264
1,086
-12,432
2,980
15,126
23,454
1,944
1,672
4,232
-13,671
-748
16,883
101,192
212,507
Ratios
Equity as % of RWA
7.2%
155.3%
23.2%
45.1%
25.1%
160.3%
12.7%
44.7%
35,000
25,000
-190
-187
279
22
2.27
2.76
2.76
0.60
3,162
-810
-554
30,000
-110
-187
267
7
1.90
2.39
2.44
0.55
2,055
-810
-7,792
8.0%
-316
-372
239
-412
1.57
2.06
2.14
0.55
GS net income
10.0%
0.85
1.52
1.53
0.55
2006E
2003 2004E 2005E 2006E 04/03E 05/04E 06/05E
1% 12,721 12,437 12,935 13,593
2005E
Equity structure
Item name
24,976 27,631 29,535 32,716
16,883 18,853 20,923 24,480
786,042 832,447 801,573 826,688
212,507 220,425 212,250 218,901
GS return ratios
GS net OpFCF / RWA
Other
GS net FCF / tier 1
Other
liabilities
18%
Assets
Payout ratio
2004E
38%
21%
20%
Other
assets
2003
20,000
15,000
4.0%
10,000
2.0%
-2.0%
5,000
0
2003
2004E
2005E
2006E
-4.0%
Tier 1
capital
2,805
721
0
0
0
76
16%
Item name
Other
2,310
721
-80
0
0
208
Interbank
Goodwill
(negative)
1,140
900
0
0
0
15
Cash and
Interbank
100%
Preference
capital
Stated net profit
2003 2004E 2005E 2006E
Minority
interests
(equity)
2003 2004E 2005E 2006E
Cash
Item name
Reserves
Accounting
Item name
Capital
Returns (EUR mn)
-6.0%
Revenue growth
Cost growth
83
Europe
Banks
Société Générale (SOGN.PA: IL/A)
GS net
GS
Stated
GS
PBT income
EPS
EPS
BVPS
2002
2,300
1,828
4.26
3.26
37.8
2003
3,916
2,497
5.74
5.73
40.1
2004
4,863
3,230
7.32
7.08
45.5
2005E
5,183
3,281
7.63
7.46
50.0
2006E
5,664
3,585
8.33
8.17
55.0
8000
7000
6000
5000
4000
3000
2000
1000
0
Key statistics
Investment summary: French
Current price (EUR)
Fair value (EUR)
Rating
Free float
31,470
81.2
91.0
IL/A
439.3
89.3%
F
J
D
FTSE W Europe
N
O
S
A
J
SOCIÉTÉ GÉNÉRALE
J
M
A
F
M
Volume (rhs)
120
110
100
90
80
70
60
50
5.3% / -0.4%
Debt rating: Moodys
Aa3 / positive
Debt rating: S&P
AA- / stable
B'berg / Reuters code GLE FP / SOGN.PA
Next announcement
Q105 results
Date
25-May-05
DPS
2.10
2.50
3.30
3.50
3.75
P/E (X)
GS Stated
19.1
24.9
14.1
14.2
11.1
11.5
10.6
10.9
9.7
9.9
GS EPS
growth
-2.2%
34.8%
27.5%
4.2%
9.3%
Dividend
yield
2.6%
3.1%
4.1%
4.3%
4.6%
P/B (X)
GS Stated
2.2
2.2
2.0
2.1
1.8
1.9
1.6
1.7
1.5
1.6
ROE RORWA
8.9% 0.75%
15.3% 1.30%
17.6% 1.52%
16.5% 1.49%
16.5% 1.54%
2006E
as %
net income of group P/E (X)
Equity
as %
2006E GS
allocated of group P/B (X) ROE (%)
Implied Per share
as %
value
(EUR) of group
4,000
1,762
8%
28.6
10.3
12.7
51.7
3.6
8.6
12.2
18.6
13.3
31.8
-5.2
32%
11%
14%
57%
4%
9%
13%
21%
15%
35%
-6%
Adding to this, a recent string of
encouraging macro data and possible
market, consumer credit), we maintain
our overweight stance on French banks.
As highlighted in our research
(Switching preference, April 27, 2004),
CASA (OP/A) remains our top pick in
latter (based on marginal differences,
11.1
21,320
Implied fair value (EUR)
given the similarity of business mix and
2,500
2,000
earnings drivers, and valuation).
1,500
1,000
500
0
2.0
18.3%
38,725
90.5
100%
100%
1.8
16.5%
38,965
428.0
91.0
81.2
12%
Dom.
retail
banking
30%
is often perceived as a possible
Valuation: SocGen is currently
trading at 9.7x 2006E GS earnings and
1.7x 2005E stated book. Our fair value
100%
Asset
Mgmt.
9% Private
Banking
4%
for BNPP over SocGen is that SocGen
explicitly on the acquisition trail.
Equity &
Advisory
14%
CB&FI
19%
91.0
Risks: The main risk to our preference
consolidation candidate, while BNPP is
240
100%
3,000
Total
92%
12,241
4,424
5,452
22,116
1,538
3,675
5,213
7,943
5,681
13,624
-2,228
CC & other
-5%
3%
19,558
2.4
13.1
3.6
19.8%
23.5%
17.6%
19.7%
40.2%
96.8%
68.4%
23.7%
131.3%
36.0%
CB&FI
-172
100
10.8
2.2
2.9
1.9
2.2
Equity & Advisory
102%
26%
7%
14%
47%
1%
1%
3%
16%
2%
18%
0%
Asset Mgmt.
3,585
5,558
1,504
2,944
10,006
318
316
635
3,354
433
3,787
0
5,131
Private Banking
GS earnings
11.1
12.5
10.5
11.2
12.0
12.0
12.0
10.0
10.0
10.0
12.0
Intn'l retail banking
31%
10%
15%
56%
4%
9%
12%
23%
16%
39%
-5%
1,102
354
518
1,973
128
306
434
794
568
1,362
-186
3,513
gathering and consumer finance.
(IL/A) and BNPP (OP/A) we favour the
Dom. retail banking
Domestic retail banking
International retail banking
Retail Banking
Private Banking
Asset Management
Corporate Banking & Fixed Income
Equity & Advisory
Corporate Centre
Unallocated capital
Group
including CEE, equity derivatives, asset
the region, while between SocGen
3,500
Goodwill amortised
Unrealised gains (at book)
combination of attractive themes,
upcoming reforms (pension, mortgage
Stated
BVPS
36.6
38.5
43.4
47.5
52.1
Business unit
banks offer high quality exposure to a
Retail
financial
services
13%
Intn'l retail
banking
11%
of EUR91.0 implies 12% potential
upside from current levels.
84
Europe
Banks
Stated net profit
2,492
217
-318
106
0
0
3,125
186
-95
14
0
0
3,209
172
-100
0
0
0
3,513
172
-100
0
0
0
GS net income
+ Depreciation
2,497
-665
GS gross OpCF
GS net income
2,497
3,230
3,281
3,585
2004
2005E
2006E
3,230
683
-683
3,281
699
-699
3,585
488
-488
1,832
575
3,230
-1,358
3,281
-784
3,585
-834
GS net OpFCF
2,407
-864
1,872
-1,363
2,497
-1,446
2,751
-1,549
Stated equity
16,877 18,576 20,339 22,302
724
910 1,082 1,254
0
0
0
0
+/- other
0
0
0
0
GS net FCF
1,543
509
1,050
1,201
36%
35%
73%
44%
58%
45%
56%
44%
GS equity
GS equity
Tier 1 capital
Total assets
17,601
16,941
539,387
195,600
19,486
18,361
601,089
215,000
21,421
20,445
632,420
226,207
23,556
22,722
665,721
238,118
10.1%
0.33%
0.91%
12.2%
0.40%
1.13%
12.2%
0.42%
1.18%
10.2%
2.8%
5.9%
12.2%
5.1%
7.9%
12.1%
5.3%
8.7%
Total assets
17,601 19,486 21,421 23,556
539,387 601,089 632,420 665,721
195,600 215,000 226,207 238,118
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
17.4%
0.57%
1.57%
16.0%
0.53%
1.49%
15.9%
0.55%
1.54%
17.6%
0.55%
1.52%
16.5%
0.52%
1.45%
16.5%
0.54%
1.51%
Cash and
Interbank
100%
12%
80%
GS return ratios
GS net OpFCF / RWA
Other
14.2%
GS net FCF / tier 1
9.1%
GS net OpFCF / market value 7.6%
23%
Customer
deposits
38%
Customer
loans
60%
Other
liabilities
Equity & 40%
debt
securities
27%
63%
Other
assets
Subordinated
debt
Preferred &
minorities
20%
23%
2%
0%
Liab.
Assets
Payout ratio
10%
Interbank
Shareholders'
equity
Total
Personal
lending
28%
Other
31%
Total
corporate
lending
37%
Governme
nt & public
authorities
4%
4Q03
3Q04
4Q04
4Q/4Q
4Q/3Q
2003
2004
2005E
2006E
3,920
4,077
4,320
10%
6%
15,637
16,416
17,245
18,174
5%
5%
5%
-2,801 -2,737 -2,869
1,119 1,340 1,451
NA
NA
NA
2%
30%
NA
NA
NA
5%
8%
-6,323 -6,566 -6,726 -7,088
-3,580 -3,718 -3,808 -4,013
-665
-683
-699
-488
-10,568 -10,967 -11,233 -11,590
5,069
5,449
6,012
6,585
4%
4%
3%
4%
7%
2%
2%
2%
2%
10%
5%
5%
-30%
3%
10%
25.0%
15.0%
Staff
General adm inistration
Depreciation
Operating incom e
Goodwill am ortisation
Incom e from associates
Other incom e / (expenses)
PBT
Tax
PAT
Net Profit
EPS (basic)
Cash EPS
GS EPS
DPS (net)
04/03 05/04E 06/05E
-181
-72
15
125
-113
-39
10
-33
-104
-43
15
-27
-43%
-40%
0%
NA
-8%
10%
50%
NA
-1,226
-217
43
247
-541
-186
42
99
-823
-172
41
125
-915
-172
41
125
-56%
-14%
NM
-60%
52%
-8%
NM
26%
11%
0%
NM
0%
1,006
-288
718
-74
644
1,165
-345
820
-81
739
1,292
-355
937
-101
836
16%
20%
14%
36%
15%
11%
3%
14%
25%
13%
3,916
-1,161
2,755
-263
2,492
4,863
-1,398
3,465
-340
3,125
5,183
-1,579
3,604
-395
3,209
5,664
-1,728
3,935
-423
3,513
24%
20%
26%
29%
25%
7%
13%
4%
16%
3%
9%
9%
9%
7%
9%
1.47
1.63
1.41
-
1.68
1.77
1.83
-
1.90
1.99
2.04
-
14%
8%
45%
NA
13%
13%
12%
NA
5.73
6.23
5.74
2.50
7.08
7.51
7.32
3.30
7.46
7.86
7.63
3.50
8.17
8.57
8.33
3.75
24%
20%
28%
32%
5%
5%
4%
6%
9%
9%
9%
7%
2003
2004
2005E
2006E
GS net income
2,497
-864
-575
3,230
-1,363
-1,358
3,281
-1,446
-784
3,585
-1,549
-834
Capital formation
1,058
509
1,050
1,201
Tier 1 capital
16,941 18,361 20,445 22,722
195,600 215,000 226,207 238,118
6.2%
0.5%
Equity structure
Item name
Item nam e
Item name
20.0%
2.8%
0.2%
5.1%
0.5%
5.3%
0.5%
2003
2004
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
15,856
312
1,847
2,120
-2,150
-1,044
16,941
17,213
284
2,105
2,049
-2,106
-1,184
18,361
Tier 2 capital
0
10,945
0
-1,879
9,066
0
11,930
0
-1,879
10,051
Tier 3 capital
0
26,007
-3,164
22,843
0
28,412
-3,457
24,955
195,600
215,000
Ratios
Equity as % of RW A
12.5%
106.3%
9.2%
11.3%
11.2%
106.8%
9.1%
10.3%
25,000
10.0%
20,000
15,000
5.0%
10,000
0.0%
2000
2001
2002
Revenue growth
2003
2004 2005E 2006E
Cost growth
5,000
0
Tier 1
capital
2003
Other
2006E
Goodwill
(negative)
2005E
Preference
capital
2004
Minority
interests
(equity)
2003
Cash
Item name
Reserves
Accounting
Item name
Capital
Returns (EUR mn)
85
Europe
Banks
86
Europe
Banks
88 Commerzbank (CBKG.DE: U/A)
90 Deutsche Bank (DBKGn.DE: U/A)
92 HVB Group (HVMG.DE: IL/A)
94 Hypo Real Estate (HRXG.DE: IL/A)
96 Deutsche Postbank (DPBGn.DE: OP/A)
Germany
87
Europe
Banks
Commerzbank (CBKG.DE: U/A)
Volume (rhs)
120
COMMERZBANK
Key statistics
FTSE W Europe
500
F
J
D
O
N
0
S
20
A
100
J
200
40
J
60
M
300
A
80
M
400
F
100
GS net
GS
Stated
GS
PBT income
EPS
EPS
BVPS
2001
43
723
1.35
0.73
23.4
2002
-372
-248
-0.46
-1.65
19.9
2003
-1,980
390
0.72
-3.94
18.5
2004E
997
545
0.92
0.78
18.9
2005E
1,450
778
1.31
1.33
19.9
2006E
1,478
797
1.34
1.36
20.4
Investment summary: With
Current price (EUR)
Fair value (EUR)
Rating
Free float
Munich Re
Generali
10,163
17.1
15.7
U/A
594.3
66.5%
10.4%
9.9%
4.7% / -1.0%
30.7% / 7.2%
Debt rating: Moodys
A2 / stable
Debt rating: S&P
A- / negative
B'berg / Reuters code CBK GR / CBKG.DE
Next announcement
1Q05 results
Date
May-05
DPS
0.40
0.10
0.00
0.15
0.29
0.57
P/E (X)
GS Stated
12.7
23.3
-36.8
-10.4
23.9
-4.3
18.6
22.0
13.1
12.9
12.7
12.6
GS EPS Dividend
growth
yield
nm
2.4%
nm
0.6%
nm
0.0%
28.1%
0.9%
42.7%
1.7%
2.4%
3.3%
P/B (X)
GS Stated
0.7
0.8
0.9
0.9
0.9
1.0
0.9
1.0
0.9
0.9
0.8
0.9
ROE RORWA
3.2% 0.19%
-7.9% -0.48%
-21.0% -1.42%
4.4% 0.33%
7.3% 0.55%
7.2% 0.56%
GS earnings
nearing completion, Commerzbank now
faces its ‘pre-credit risk’ concerns: we
believe its ROE prospects are below its
high-margin platforms for capital
redeployment.
Risks: CBK has a strong capital base
(Tier 1 7.2%), which is unlevered. Were
CBK to decide to return some of its
surplus capital to shareholders, this
2003 revenue mix
Sum of the parts valuation
Retail Banking
Asset Management
Corporate Banking
Mortgage Banking
Treasury
Securities
Corporate Centre
averages and cost base reductions
European peers and we see no obvious
Stated
BVPS
22.7
19.0
17.4
17.7
18.6
19.2
Business unit
provisions approaching long-term
2006E
net income
as %
of group
P/E (X)
Equity
allocated
as %
of group
P/B (X)
2006E
ROE (%)
339
121
391
169
82
57
-362
42%
15%
48%
21%
10%
7%
-45%
11.0
11.0
10.0
10.0
10.0
10.0
10.3
1,907
574
4,679
957
144
1,154
909
17%
5%
41%
8%
1%
10%
8%
2.0
2.3
0.8
1.8
5.7
0.5
-4.1
17.8%
21.1%
8.4%
17.6%
NM
4.9%
-39.9%
3,734
1,335
3,912
1,685
822
568
-3,745
6.3
2.2
6.6
2.8
1.4
1.0
-6.3
40%
14%
42%
18%
9%
6%
-40%
797
99%
10.4
10,323
90%
0.81
7.7%
8,311
14.0
89%
1,035
1.7
11.6
11,421
90%
0.82
7.1%
9,346
15.7
Other
10
1%
Group
807
100%
Implied Per share
value
(EUR)
as %
of group
89%
Trading
profits
9%
market.
Net interest
income
51%
Valuation: Our fair value of EUR15.7
puts the bank on 11.6x 2006E cash
earnings and on 0.8x P/B for a 2006E
Net fees &
coms.
37%
7.7% cash ROE.
2003 cost mix
594.3
Dep
10%
15.7
17.1
-8%
Admin
34%
could be viewed positively by the
Other
3%
Staff
56%
88
Europe
Banks
788
0
-10
0
0
0
778
545
807
0
-10
0
0
0
797
2003
2004E
2005E
2006E
GS net income
+ Depreciation
420
445
-445
545
453
-453
778
454
-454
797
455
-455
GS gross OpCF
420
1,357
545
-168
778
-30
797
-32
GS net OpFCF
1,777
0
377
-89
748
-174
765
-339
100%
Cash and
Interbank
15%
Equity & 40%
debt
securities
35%
26%
GS equity
Total assets
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
9,091
642
0
0
9,733
9,464
726
0
0
10,190
9,990
726
0
0
10,715
10,284
726
0
0
GS net FCF
11,010
GS equity
Tier 1 capital
Total assets
381,585 388,089 389,240 390,483
140,800 143,200 143,625 144,083
3.7%
0.10%
0.23%
5.5%
0.14%
0.38%
7.4%
0.20%
0.54%
7.3%
0.20%
0.55%
-19.6%
-0.50%
-1.17%
5.0%
0.12%
0.33%
8.1%
0.20%
0.55%
8.0%
0.21%
0.56%
Payout ratio
GS return ratios
GS net OpFCF / RWA
Other
GS net FCF / tier 1
1,777
288
575
426
0%
0%
24%
19%
23%
22%
44%
42%
9,733 10,190 10,715
10,257 10,578 11,022
381,585 388,089 389,240
140,800 143,200 143,625
11,010
11,155
390,483
144,083
15.8%
0.42%
0.98%
3.8%
0.10%
0.27%
7.2%
0.19%
0.52%
7.0%
0.20%
0.53%
17.3%
17.3%
18.6%
3.6%
2.7%
3.9%
6.8%
5.2%
7.8%
6.9%
3.8%
8.0%
Other
assets
2003
2004E
2005E
2006E
Customer
deposits
GS net income
-248
-53
3,039
420
0
1,357
545
-89
-168
778
-174
-30
797
-339
-32
Other
liabilities
Capital formation
2,738
1,777
288
575
426
Subordinated
debt
38%
44%
Preferred &
minorities
20%
Stated equity
+/- other
2002
25%
80%
Customer
loans
60%
Item name
Interbank
11%
Shareholders'
equity
2%
0%
Liab.
Assets
Total
corporate
lending
64%
Governme
nt & public
authorities
13%
4Q03
3Q04
4Q04E
2004E
2005E
2006E
-24.6%
1.03%
1.7%
-28.6%
32.4%
-24.4%
1.00%
-29.5%
-17.8%
-40.5%
-0.5%
1.03%
-20.6%
12.1%
-38.3%
-22.6%
2.10%
-20.0%
-16.7%
-23.0%
0.3%
2.09%
2.5%
0.4%
4.7%
0.3%
2.06%
0.6%
-0.9%
2.1%
Cost / income ratio
-26.8%
57.5%
NA
NA
NA
NA
-24.4%
73.4%
-3.4%
69.2%
1.4%
69.7%
0.75%
32.0%
0.60%
15.6%
0.40%
9.0%
0.59%
49.2%
0.53%
37.9%
0.48%
35.7%
-10.0%
Tax rate
28.6%
1.8%
9.1%
44.2%
38.2%
38.0%
-15.0%
132,928
-42.4%
133,408
-38.8%
133,408
0.4%
135,602
-36.9%
136,331
0.5%
141,666
3.9%
-20.0%
NPLs
NPLs / loans
Provisions / NPLs
7,077
5.1%
77.9%
6,639
4.8%
85.0%
6,639
4.8%
85.0%
7,198
5.1%
72.2%
7,219
5.1%
67.7%
NA
NA
NA
BIS capital ratio
7.3%
13.0%
7.2%
12.6%
7.3%
12.7%
7.4%
13.0%
7.7%
13.3%
7.7%
NA
23.4%
1.7%
17.3%
1.3%
2.7%
0.2%
Equity structure
Item name
Total
Personal
lending
23%
Total asset growth
5.2%
0.4%
3.8%
0.3%
2002
2003
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
1,378
9,393
1,031
0
-217
106
11,691
1,545
7,542
1,213
0
-151
108
10,257
Tier 2 capital
0
9,237
231
-1,706
7,762
0
8,381
273
-825
7,829
Tier 3 capital
209
19,662
0
19,662
125
18,211
0
18,211
160,190
140,800
10.0%
Ratios
Equity as % of RWA
0.0%
100.9%
7.4%
1.8%
0.0%
100.4%
7.3%
1.5%
5.0%
0.0%
2001
2002
2003
2004E
2005E
2006E
12,000
10,000
8,000
6,000
4,000
2,000
0
-5.0%
Capital
Growth (y-o-y)
11,691 10,257 10,578 11,022 11,155
160,190 140,800 143,200 143,625 144,083
Item name
Tier 1 capital
-25.0%
Revenue growth
Cost growth
Tier 1 capital
420
463
84
-133
0
132
0
2006E
Other
GS net income
2005E
Goodwill (negative)
-2,114
140
-35
0
104
2,325
2004E
Preference capital
Stated net profit
2003
Cash
Item name
Accounting
Item name
Reserves
Returns (EUR mn)
89
Europe
Banks
Deutsche Bank (DBKGn.DE: U/A)
GS net
GS
Stated
PBT
income
EPS
EPS
2002
3,593
532
0.85
0.64
2003
2,753
1,504
2.55
2.44
2004
4,145
2,688
5.05
5.16
2005E
4,397
2,742
5.41
4.34
2006E
4,911
3,102
6.24
5.96
400
350
300
250
200
150
100
50
0
Key statistics
Current price (EUR)
Fair value (EUR)
Rating
Free float
36,951
68.1
68.0
U/A
543.0
90%
2.1%/-3.4%
29.1%/5.9%
1.7%/-10.4%
Debt rating: Moodys
Aa3 / negative
Debt rating: S&P
AA- / negative
DBK GR / DBKGn.DE
Next announcement
1Q05 results
Date
29-Apr-05
the rate of capital returned to
shareholders will slow at Deutsche
Bank given the resumption of risk
weighted asset growth and the limited
number of assets left to dispose of. We
consider the revenue growth outlook
challenging in the absence of strategic
GS
BVPS
57.2
56.2
56.4
58.6
62.6
Stated
BVPS
51.2
49.9
49.5
51.3
55.1
DPS
1.3
1.5
1.7
1.7
1.9
P/E (X)
GS
Stated
80.2
105.6
26.7
27.9
13.5
13.2
12.6
15.7
10.9
11.4
GS EPS
Dividend
growth
yield
-35.1%
1.9%
200.5%
2.2%
98.1%
2.5%
7.1%
2.5%
15.4%
2.8%
P/B (X)
GS
Stated
1.2
1.3
1.2
1.4
1.2
1.4
1.2
1.3
1.1
1.2
ROAE RORWA
1.1%
0.1%
4.7%
0.6%
9.5%
1.2%
8.6%
1.0%
11.2%
1.3%
asset management and retail business
is likely to take time given the difficult
operating environment in Germany.
are fixed income related, which are at
Pre tax earnings contribution (2006E) (a)
6,000
risk from a downturn in activity in 2005.
5,000
The cost-cutting programme could
4,000
result in lost revenues which are not
3,000
included in our forecasts.
2,000
1,000
Total
Consolid'n
adjust.
Corporate
invest. (ex.
Gains)
Asset &
wealth mgmt
Private
clients
0
CIB
Pretax
2006E
as %
2006E Equity
as %
2006E
Value
as %
2006E Net income of group P/E (X)
allocated of group P/B (X) ROE (%) (EUR mn) of group
3,208
2,021
65%
10.0
14,285
49%
1.4
14%
20,209
63%
1,267
798
26%
11.0
5,767
20%
1.5
14%
8,742
27%
666
420
14%
11.5
5,014
17%
1.0
8%
4,805
15%
-8
-5
0%
10.0
4,322
15%
NM
0%
-50
0%
-214
-132
-4%
11.0
0
0%
NM
NM
-1,452
-5%
4,919
3,102
100%
10.4
29,388
100%
1.1
11%
32,253
100%
-22
-202
0
1,540
770
0
0
-3,601
4
4
0
2,903
11.6
26,557
1.3
11%
33,793
68.0
68.1
0%
acquisitions. The turnaround in the
Risks: Over 50% of operating profits
Business unit
CIB
Private clients
Asset & wealth management
Corporate investments (ex. Gains)
Consolidation Adjustments
GS Total
Net Gains on industrial holdings
Excess capital
Goodwill
Exceptional items
Total
Fair value (EUR)
Investment summary: We believe
F
J
D
N
FTSE W Europe
O
S
A
J
DEUTSCHE BANK
J
M
M
F
A
Volume (rhs)
120
110
100
90
80
70
60
50
40
Asset &
wealth
mgmt
14%
Private
clients
25%
EUR68.0 per share.
Consolid'n
adjust.
4%
CIB
57%
(a) Excluding goodwill and restructuring charges
90
Europe
Banks
3,102
Stated equity
+/- other
25,561
3,601
0
0
25,239
3,601
0
0
26,557
3,601
0
0
GS equity
29,162
28,840
30,158
Total assets
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
854,383
217,533
859,613
224,722
864,780
232,179
8.8%
0.32%
1.24%
9.5%
0.32%
1.24%
10.5%
0.36%
1.36%
9.5%
0.31%
1.18%
8.6%
0.26%
0.99%
11.2%
0.34%
1.27%
2005E
2006E
GS net income
+ Depreciation
2,688
3,161
-3,161
2,742
2,980
-2,980
3,102
3,015
-3,015
GS gross OpCF
2,688
-130
2,742
-503
3,102
-522
GS net OpFCF
2,558
-879
GS net FCF
1,679
Payout ratio
34%
35%
GS equity
Tier 1 capital
Total assets
GS return ratios
GS net OpFCF / RWA
Other
GS net FCF / tier 1
2,239
-836
2,580
-916
1,403
Cash
100%
2%
2003
2004
2005E
2006E
Customer
deposits
GS net income
1,504
-848
1,526
2,688
-879
-130
2,742
-836
-503
3,102
-916
-522
Other
liabilities
Capital formation
2,183
1,679
1,403
1,664
21,618
215,672
19,573
217,533
19,251
224,722
20,569
232,179
10.1%
1.0%
8.6%
0.8%
7.3%
0.6%
8.1%
0.7%
Interbank
80%
25%
Customer
loans
60%
Equity &
debt
securities
40%
Other
assets
46%
28,840
19,251
859,613
224,722
30,158
20,569
864,780
232,179
8.4%
0.31%
1.18%
7.7%
0.26%
1.01%
8.7%
0.30%
1.13%
13.1%
8.6%
7.3%
11.6%
7.3%
6.4%
12.5%
8.1%
7.4%
Subordinate
d debt
57%
20%
Preferred &
minorities
33%
Shareholder
s' equity
4%
0%
35%
32%
29,162
19,573
854,383
217,533
13%
18%
1,664
37%
38%
Interbank
Total asset growth
4Q03
3Q04
4Q04
2004
2005E
Equity structure
Item name
Personal
lending
37%
Commercial
42%
Financial
7%
Construc. &
property
9%
2006E
-0.5%
1.22%
14.3%
-28.2%
14.3%
1.2%
1.24%
5.4%
-6.8%
9.8%
6.3%
1.36%
-1.8%
-11.4%
1.8%
0.6%
1.55%
1.0%
15.3%
-3.6%
0.6%
1.55%
1.1%
1.1%
1.1%
Cost / income ratio
-1.4%
89.0%
-3.7%
81.4%
2.4%
86.3%
-2.4%
80.1%
-5.8%
74.7%
1.2%
74.7%
-5.0%
0.49%
34.8%
0.17%
6.3%
0.07%
3.4%
0.21%
7.2%
0.33%
9.2%
0.43%
12.1%
-10.0%
Tax rate
22.4%
31.9%
35.7%
35.7%
46.9%
37.0%
144,946
-0.4%
137,457
-15.2%
147,409
1.7%
146,806
1.3%
152,036
3.6%
157,203
3.4%
NPLs
NPLs / loans
Provisions / NPLs
6,623
4.5%
49.5%
5,858
3.9%
43.9%
5,858
3.9%
38.9%
6,689
4.5%
40.4%
6,355
4.1%
38.1%
6,037
3.78%
39.5%
BIS capital ratio
10.0%
13.9%
9.2%
13.7%
9.0%
13.5%
9.0%
13.5%
8.6%
12.8%
8.9%
13.3%
5.0%
2003
12,637
16,459
347
3,287
-7,857
-3,255
21,618
Tier 2 capital
0
5,300
687
1,133
7,120
1
6,858
625
770
8,253
Tier 3 capital
0
29,862
0
29,862
0
29,871
0
29,871
237,479
215,672
Ratios
Equity as % of RW A
10.1%
146.3%
14.0%
30.1%
15.2%
136.2%
13.7%
26.7%
0.0%
2001
Growth (y-o-y)
2002
12,791
20,089
401
2,287
-9,783
-3,043
22,742
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
Government
2%
Finance
leases
3%
-7.0%
1.30%
-19.4%
-9.8%
-19.4%
Liab.
Assets
(a) Customer deposits and Interbank are estimates
Item name
Tier 1 capital
2002
2003
2004
2005E
2006E
35,000
30,000
25,000
20,000
15,000
-15.0%
10,000
5,000
-20.0%
0
Revenue growth
Cost growth
Tier 1
capital
2,742
2,903
0
22
179
0
-3
Item name
2004
Other
2,688
2,189
0
22
144
0
387
2006E
Goodwill
(negative)
2,546
19
-234
119
0
238
2005E
Preference
capital
GS net income
2004
Minority
interests
(equity)
Stated net profit
Cash
Item name
Reserves
Accounting
Item name
Capital
Returns (EUR mn)
91
Europe
Banks
HVB Group (HVMG.DE: IL/A)
Volume (rhs)
130
BAYER.HYPO - UND
Key statistics
FTSE W Europe
800
700
600
500
400
300
200
100
0
110
90
70
50
30
12,574
16.8
19.7
IL/A
750.7
82.0%
18.0%
-6.6% / -11.7%
29.1% / 5.9%
-7.8% / -18.7%
Debt rating: Moodys
A3 / stable
Debt rating: S&P
A- / stable
HVM GR / HVMG.DE
Next announcement
4Q results
Date
24-Feb-05
write-off of its real-estate loans, the
provisioning leverage has now fully
played out. The one element of the
story, which we believe is not fully
priced in, is the bank’s cost-cutting
F
J
D
N
O
S
A
J
J
M
A
M
F
10
Investment summary: Post the
Current price (EUR)
Fair value (EUR)
Rating
Free float
Munich RE
ambition. While the capital position
remains uncomfortable, HVB could –
GS net
GS
Stated
PBT
income
EPS
EPS
2003
-2,146
-319
-0.59
-4.92
2004E
964
296
0.39
0.50
2005E
2,009
1,046
1.39
1.50
2006E
2,400
1,276
1.70
1.81
GS
BVPS
22.2
17.0
18.6
20.4
Stated
BVPS
20.9
15.8
17.4
19.2
P/E (X)
GS Stated
nm
nm
nm
nm
12.0
11.1
9.8
9.2
DPS
0.00
0.00
0.00
0.00
GS EPS
growth
nm
nm
nm
22.0%
Dividend
yield
0.0%
0.0%
0.0%
0.0%
P/B (X)
GS Stated
0.75
0.80
0.98
1.06
0.90
0.96
0.82
0.87
ROE RORWA
-22.7%
-0.12%
3.2%
0.12%
9.0%
0.43%
9.9%
0.53%
via NPL sales – be able to rebuild its
capital base over the course of the next
12 months.
Risks: Dilution risk: a potential capital
increase – of, say, EUR1 bn – would
2006E GS
Business unit
result in 8%-9% dilution if carried out at
2003 revenue mix
as %
2006E
Equity
HVB's share in Bank Austria (77.5%)
681
50%
10.7
5,937
- Bank Austria (GS Fair Value)
878
65%
10.7
7,660
as %
2006E
Implied
of group P/B (X) ROE (%)
value
38%
1.23
11.5%
1.23
Per share
as %
Trading
profits
8%
(EUR) of group
7,293
9.7
9,410
64.0
49%
172
0.2
1%
7,335
9.8
50%
19.7
100%
a 10% discount to the current price.
Other
6%
HVB has no capital buffer; in the event
of a worsening in large corporate credit
Industrial portfolio
- unrealised profit / loss
HVB's German business
2006E earnings
NPV additional cost savings in 2007E
GS Fair value
-172
677
50%
677
138
1,357
10.8
6,366
41%
1.15
10.6%
9.0
9.0
100%
10.9
6,091
1,244
15,456
80%
0.96
8.8%
14,800
quality, an unexpected widening of the
Net fees &
coms.
28%
Net interest
income
58%
spreads, the bank might need to resort
to a more extensive capital increase.
750.7
FV assuming no rights issue
19.7
16.8
18%
Valuation: We value HVB as a
2003 cost mix
portfolio of three assets. We include
Dep
10%
BACA in our valuation at its current
market value, as well as the equity
portfolio which we mark to market. We
Admin
33%
Staff
57%
value HVB’s German business on 9x
2006E, boosted by the expected cost
reductions in 2007E.
92
Europe
Banks
1,046
1,276
GS net income
+ Depreciation
296
0
0
1,046
0
0
1,276
0
0
GS gross OpCF
296
-350
1,046
398
1,276
204
GS net OpFCF
-55
0
1,444
0
1,481
0
-55
1,444
1,481
Stated equity
+/- other
11,529
894
0
359
12,655
894
0
394
14,013
894
0
434
GS net FCF
GS equity
12,781
13,944
15,341
552,126
247,006
537,801
241,317
526,597
238,400
GS equity
Tier 1 capital
Total assets
Total assets
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
2.4%
0.05%
0.12%
7.8%
0.19%
0.43%
8.7%
0.24%
0.53%
3.3%
0.07%
0.15%
9.3%
0.21%
0.46%
10.2%
0.26%
0.57%
2006E
Payout ratio
GS return ratios
GS net OpFCF / RWA
Other
GS net FCF / tier 1
0%
0%
0%
0%
0%
0%
12,781
14,381
552,126
247,006
13,944
15,507
537,801
241,317
15,341
16,865
526,597
238,400
100%
Cash and
Interbank
Item name
9%
24%
80%
Customer
loans
Equity &
debt
securities
Customer
deposits
43%
29%
60%
Other
liabilities
Subordinated
debt
40%
32%
41%
Preferred &
minorities
20%
Other
assets
15%
Shareholders'
equity
2%
0%
Assets
Liab.
10.8%
0.26%
0.59%
10.1%
0.28%
0.62%
-0.4%
-0.4%
-0.4%
9.3%
9.3%
11.5%
8.8%
8.8%
11.8%
Real estate
loans
49%
Investments
1%
2004E
2005E
2006E
Total asset growth
-9.4%
2.31%
-1.4%
-4.8%
4.3%
-2.6%
2.40%
3.5%
3.6%
3.3%
-2.1%
2.47%
2.1%
1.3%
3.2%
Cost / income ratio
-9.7%
67.3%
0.0%
65.0%
-0.8%
63.2%
0.65%
59.3%
0.46%
37.7%
0.46%
34.4%
Tax rate
34.6%
30.0%
30.8%
Growth (y-o-y)
BIS capital ratio
278,225
-8.2%
271,560
-2.4%
268,142
-1.3%
5.8%
5.8%
6.4%
6.4%
7.1%
7.1%
2005E
2006E
GS net income
-319
0
296
0
-350
1,046
0
398
1,276
0
204
Capital formation
-319
-55
1,444
1,481
14,365
242,000
14,381
247,006
15,507
241,317
16,865
238,400
-2.2%
-0.1%
-0.4%
0.0%
9.3%
0.6%
8.8%
0.6%
Tier 1 capital
Equity structure
Item name
Other loans
36%
Item name
2004E
2002
2003
1,609
12,024
678
4,164
-3,746
-128
14,601
1,609
9,295
2,476
4,076
-2,721
-370
14,365
Tier 2 capital
9,693
9,979
Tier 3 capital
25,947
25,584
286,000
242,000
28.5%
98.0%
5.0%
20.4%
28.4%
93.1%
5.5%
15.9%
Municipal
loans
14%
-0.4%
-0.01%
-0.02%
2003
Interbank
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
Ratios
Equity as % of RWA
6.0%
4.0%
2.0%
0.0%
2003
2004E
2005E
2006E
-2.0%
-4.0%
-6.0%
-8.0%
-10.0%
Revenue growth
Cost growth
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
Tier 1
capital
296
1,357
0
-81
0
0
0
2005E
Other
GS net income
1,127
0
-81
0
0
0
2004E
Goodwill
(negative)
375
155
-234
0
0
0
2006E
Preference
capital
Stated net profit
2005E
Minority
interests
(equity)
2004E
Cash
Item name
Reserves
Accounting
Item name
Capital
Returns (EUR mn)
93
Europe
Banks
Hypo Real Estate (HRXG.DE: IL/A)
Volume (rhs)
160
140
120
100
80
60
40
20
0
HYPO REAL ESTATE
Key statistics
FTSE W Europe
50
40
30
20
10
Current price (EUR)
Fair value (EUR)
Rating
Free float
4,187
32.1
33.2
IL/A
130.4
100%
V alua tio n su m m ary (E U R m n , ex c ep t p er s h are d ata )
G S n et
GS
S ta te d
PBT
in co m e
EPS
EPS
20 03
15 6
1 85
1 .4 2
0.88
20 04 E
23 6
1 81
1 .3 9
1.29
20 05 E
44 1
3 43
2 .6 3
2.62
20 06 E
56 8
4 41
3 .3 8
3.38
F
J
D
N
O
S
A
J
J
M
A
M
F
0
6.9% / 1.1%
23.0% / 0.8%
38.6% / 22.2%
Debt rating: Moodys
NA
Debt rating: S&P
NA
HRX GR / HRXG.DE
Next announcement
4Q04 Results
Date
16-Mar-05
P /E (X )
GS
S ta ted
2 2 .6
3 6.4
2 3 .1
2 4.9
1 2 .2
1 2.3
9 .5
9.5
DPS
0.00
0.00
1.31
1.69
GS EPS
g ro w th
NM
-1 .9 %
89 .2 %
28 .4 %
D ivide n d
yie ld
0 .0 %
0 .0 %
4 .1 %
5 .3 %
and growing international RWA) to
result in profitability improvements and
an ROE which is in line with the bank’s
cost of capital by 2006E. The bank’s
P /B (X )
S tated
1 .0 0
0 .9 6
0 .9 3
0 .8 8
ROE
2 .8%
4 .0%
7 .7%
9 .5%
RORW A
0 .2 1%
0 .3 1%
0 .5 9%
0 .6 9%
conservative, given the ongoing foreign
interest in collateralised German
distressed debt as well as real-estate in
general.
Risks: The main risk to our forecasts
is a substantial increase in interest rates
2006E
GS net income
283
as %
Equity
as %
of group P/E (X) allocated of group P/B (X)
64%
10.0
2,400
51%
1.18
2006E
ROE (%)
11.8%
Implied Per share
as %
value
(EUR) of group
2,831
21.7
65%
500
(US, UK and Europe), a continued
450
400
weakening of the dollar and a further
350
64
15%
9.5
688
14%
0.89
9.3%
610
4.7
14%
300
122
28%
9.5
1,743
37%
0.67
7.0%
1,160
8.9
27%
250
-28
-6%
9.7
-86
-2%
nm
nm
-270
-2.1
-6%
200
442
100%
9.8
4,744
100%
0.91
9.3%
4,331
33.2
100%
150
deterioration of the German commercial
real-estate market.
100
50
0
number of shares (mn)
Implied fair value per share (EUR)
Implied upside/downside
0.91
9.3%
4,331
33.2
130.4
implies a value of EUR33.2/share, or
Total
Surplus
Corporate
capital
Centre
0%
6%
32.1
Germany
24%
Wurtthyp
13%
Valuation: Our SOTP analysis
10x 2006E.
Contribution to 2006E value (a)
33.2
3%
Surplus
capital
4,744
Corporate
Centre
9.8
Germany
442
Wurtthyp
0
0
International
Goodwill
Other
Hypo Real Estate
(reducing and re-pricing domestic RWA
domestic growth ambitions look
S tated
BVPS
3 2 .1
3 3 .4
3 4 .7
3 6 .4
Business unit
International
Wurtthyp
Germany
Corporate Centre
Hypo Real Estate
HRE’s straightforward strategy
Internationa
l
57%
94
Europe
Banks
Returns (EUR mn)
Accounting
Item name
Stated net profit
GS net income
2004E
2005E
169
0
0
0
0
13
2006E
341
0
0
0
0
2
181
442
0
0
0
0
-1
343
441
2004E
2006E
181
0
0
343
0
0
441
0
0
GS gross OpCF
181
-14
343
-463
441
-391
GS net OpFCF
167
0
-120
-171
50
-221
167
-290
-171
4,353
0
0
0
4,524
0
0
0
4,744
0
0
0
GS net FCF
GS equity
4,353
4,524
4,744
155,477
54,700
157,631
61,315
160,231
66,900
GS equity
Tier 1 capital
Total assets
4.2%
0.12%
0.33%
7.7%
0.22%
0.59%
9.5%
0.28%
0.69%
4.0%
0.11%
0.31%
7.7%
0.22%
0.59%
9.5%
0.28%
0.69%
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
2005E
GS net income
+ Depreciation
Stated equity
+/- other
Total assets
Item name
Cash
Item name
Payout ratio
0%
0%
-142%
50%
445%
50%
4,353
4,540
155,477
54,700
4,524
4,711
157,631
61,315
4,744
4,931
160,231
66,900
3.9%
0.11%
0.31%
-2.7%
-0.08%
-0.21%
1.1%
0.03%
0.08%
3.7%
3.7%
4.3%
-2.5%
-6.2%
-3.1%
1.0%
-3.5%
1.3%
GS return ratios
GS net OpFCF / RWA
Other
GS net FCF / tier 1
100%
Cash and
Interbank
17%
39%
80%
Customer
loans
Equity &
debt
securities
60%
56%
40%
20%
Other
assets
0%
Customer
deposits
Other
liabilities
16%
Subordinated
debt
18%
Preferred &
minorities
24%
4%
Assets
Shareholders'
equity
9%
Liab.
4Q 0 3
4Q 0 3
4Q 0 4E
y-o-y
q-o-q
2004 E
2 005E
2 006 E
05 /04 E
06/05E
Ne t intere st in com e
Ne t fees & com m ission s
Tra din g p rofits
O th er recu rring revenue s
Ne t n on -in te rest in co m e
Tota l recu rring re ve nu es
17 5
31
18
49
22 4
17 5
31
18
49
22 4
169
32
4
-0
36
204
-4 %
2%
NA
NM
-28 %
-9 %
-4%
2%
NA
-101 %
-28%
-9%
6 74
1 16
9
5
1 30
8 04
7 25
1 34
30
5
1 69
8 94
8 44
1 42
35
5
1 81
1,0 25
8%
16%
233%
-5%
3 0%
1 1%
16%
6%
1 7%
0%
8%
15%
Staff
G enera l adm in istration
De preciation
G oodw ill am ortisatio n
O th er o perating co sts
Tota l op erating e xpe nse s
O pera tin g in co m e
-7 3
15 1
-7 3
15 1
-85
120
NA
NA
NA
NA
NM
16 %
-21 %
NA
NA
NA
NA
NM
16%
-21%
-311
4 93
-3 09
5 84
-3 31
6 95
NA
NA
NA
NA
NA
-1%
1 9%
NA
NA
NA
NA
NA
7%
19%
Loan -loss provisions
Inco m e from associates
O th er incom e / (exp enses )
-6 3
-2 2
-6 3
-2 2
-48
4
6
-24%
NM
-1 26%
-24 %
NA
-126 %
-271
27
-13
-1 73
31
-2
-1 54
26
1
-36%
15%
-84%
-1 1%
-1 6%
-15 0%
66
66
66
66
66
66
81
-16
65
65
23 %
NA
-1 %
NA
-1 %
23%
NA
-1%
NA
-1%
2 36
-67
1 69
-1
1 68
4 41
-99
3 41
3 41
5 68
-1 26
4 42
4 42
8 7%
48%
10 2%
-100%
10 3%
29%
2 7%
29%
NA
29%
-
-
-
NM
NM
NM
NM
NM
NM
NM
NM
1.29
1.29
1.39
-
2.62
2.62
2.63
1.31
3.4
3.38
3.38
1.69
10 3%
10 3%
8 9%
NA
29%
29%
28%
29%
PB T
Ta x
PA T
Minorities and pref share divid end s
Ne t P rofit
EP S (b asic)
Ca sh E PS
G S E PS
DP S (n et)
2004E
2005E
2006E
GS net income
185
0
245
181
0
-14
343
-171
-463
441
-221
-391
Capital formation
430
167
-290
-171
4,372
54,500
4,540
54,700
4,711
61,315
4,931
66,900
9.8%
0.8%
3.7%
0.3%
-6.2%
-0.5%
-3.5%
-0.3%
Tier 1 capital
Equity structure
Item name
2002
2003
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
na
na
na
na
na
na
na
na
na
na
na
na
na
na
Tier 2 capital
na
na
na
na
na
na
na
na
na
na
Tier 3 capital
na
na
na
na
na
na
na
na
58,000
54,500
na
na
na
na
na
na
na
na
Other
6%
Government
& public
authorities
33%
Construction
& property
61%
Item na m e
2003
Interbank
Ratios
Equity as % of RWA
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
2003
2004E
2005E
2006E
-5.0%
Revenue growth
Cost growth
95
Europe
Banks
Deutsche Postbank (DPBGn.DE: OP/A)
Volume (rhs)
140
DEUTSCHE POSTBANK
Key statistics
FTSE W Europe
200
5,904
36.0
38.0
OP/A
164.0
33%
8.4% / 2.6%
26.8% / 3.9%
NA
Debt rating: Moodys
A1 / stable
Debt rating: S&P
A / stable
B'berg / Reuters code DPB GR / DPBGn.DE
Next announcement
4Q04 results
Date
21-Mar-05
Stated
BVPS
26.8
29.7
28.5
30.0
31.7
P/E (X)
GS Stated
nm
nm
17.4
16.8
14.7
14.7
12.3
12.3
10.9
10.9
DPS
0.84
0.60
3.59
1.46
1.65
GS EPS
growth
-62.0%
211.0%
18.8%
19.3%
12.8%
Dividend
yield
2.3%
1.7%
10.0%
4.1%
4.6%
P/B (X)
Tang. Stated
1.4
1.3
1.3
1.2
1.3
1.3
1.2
1.2
1.2
1.1
ROE RORWA
2.9%
0.3%
7.6%
0.9%
8.4%
0.9%
10.0%
1.0%
10.7%
1.1%
surplus deposits to mortgages, we see
Risks: Risks to our positive stance
include: a fall in interest rates; potential
alterations to the cooperation contract
with DPWN after 2008; negative
any downturn in the German economy.
200 6E
G S net in com e
47 5
89
71
33
-12 5
54 3
as %
of g roup P /E (X)
8 7%
1 1.0
1 6%
1 0.0
1 3%
1 0.0
6%
2 0.0
-2 3%
1 0.0
9 4%
1 1.5
E q uity
allo cated
2,519
453
1,008
0
1,476
5,456
as %
of grou p
46%
8%
18%
0%
27%
1 00%
P /B (X)
2 .0 7
1 .9 6
0 .7 0
nm
-0 .8 4
1 .1 4
2 006 E
R O E (% )
1 8.9%
1 9.6%
7.0%
nm
-8.4%
1 0.0%
Im p lied
valu e
5,223
890
706
663
-1,246
6,236
P e r sh are
(E U R )
3 1.8
5.4
4.3
4.0
-7.6
3 8.0
as %
of g ro up
84 %
14 %
11 %
11 %
-20 %
100 %
800
Valuation: Our FV puts DPB on
700
600
11.5x 2006E P/E or 1.2x P/B for a
500
10.0% ROE. A 1% rise in interest rates
400
300
would add EUR6.5 to our FV and full
200
-265
deployment of surplus deposits a
16 4
Im plied fair va lue pe r sha re (E U R )
C urren t sha re p rice (E U R )
Im plied up side /do wn side
3 8.0
3 6.0
6%
96
11 5
1 1.0
1 1.0
1,060
1,265
6.5
4 4.5
2 4%
Total
Other
0
6,236
Transaction
banking
1 .2 0
Financial
markets
5,191
Corporate
1 1.5
Retail
-1
54 2
100
nu m b er o f sha re s (m n)
O ptio n 2 : Fully leve ra ged
S urplus d epo sits de ployed into re ta il a sse ts
Im plied fair va lue
increases or the redeployment of
adjustments to the bond portfolio; and
S um -of-the-pa rts va lua tion (E U R m n)
O ptio n 1 : R ate in creas e
+100 b p
Im plied fair va lue
the event of either interest rate
currently “free of charge”.
G oo dw ill
O th er
P os tba nk
our fair value to just 6%. However, in
clear upside. Both of these options are
GS net
GS
Stated Tangible
PBT
income
EPS
EPS
BVPS
2002
399
109
0.66
0.80
26.0
2003
497
339
2.07
2.15
28.6
2004E
621
403
2.46
2.46
27.5
2005E
740
480
2.93
2.93
29.0
2006E
835
542
3.30
3.30
30.6
B us in ess un it
R etail
C orpo rate
Fina ncial m arke ts
Tran saction ba nking
O th er
P os tba nk
performance has reduced upside to
F
J
D
N
O
S
0
A
60
J
50
J
80
M
100
A
100
M
150
F
120
Investment summary: Recent
Current price (EUR)
Fair value (EUR)
Rating
Free float
further EUR7.7.
Transaction
banking
9%
Financial
markets
9%
Corporate
12%
7.7
4 5.7
2 7%
Retail
70%
96
Europe
Banks
Returns (EUR mn)
Accounting
Item name
2004E
2005E
2006E
Cash
Item name
2004E
2005E
2006E
Stated net profit
403
0
0
0
0
0
480
0
0
0
0
0
542
0
0
0
0
0
GS net income
+ Depreciation
403
82
-82
480
86
-86
542
89
-89
GS gross OpCF
403
-293
480
-140
542
-152
GS net income
403
480
542
GS net OpFCF
110
-589
340
-240
390
-271
-479
100
119
Stated equity
+/- other
4,680
0
0
0
4,920
0
0
0
5,191
0
0
0
GS net FCF
GS equity
4,680
4,920
5,191
136,552
46,387
140,376
48,391
144,481
50,563
GS equity
Tier 1 capital
Total assets
Total assets
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
8.7%
0.30%
1.03%
10.0%
0.35%
1.01%
10.7%
0.38%
1.10%
8.7%
0.30%
1.03%
10.0%
0.35%
1.01%
10.7%
0.38%
1.10%
Payout ratio
GS return ratios
GS net OpFCF / RWA
Other
GS net FCF / tier 1
537%
146%
71%
50%
69%
50%
4,680
2,760
136,552
46,387
4,920
2,760
140,376
48,391
5,191
2,760
144,481
50,563
100%
Cash
15%
26%
Interbank
80%
Customer
loans
60%
Equity &
debt
securities
40%
Other
assets
Customer
deposits
32%
56%
41%
20%
7.1%
0.25%
0.72%
7.7%
0.27%
0.79%
4.0%
-17.4%
2.0%
12.3%
3.6%
6.1%
14.1%
4.3%
7.0%
2002
2003
2004E
2005E
Net interest income
Trading profits
1,639
408
56
63
527
2,166
1,852
455
80
36
571
2,423
1,653
467
183
75
725
2,378
1,575
604
245
210
1,059
2,634
1,804
701
204
132
1,037
2,841
Staff
Depreciation
Operating income
-603
-1,121
-87
-1,811
355
-641
-1,160
-82
-1,883
540
-608
-1,121
-80
-1,809
569
-568
-1,210
-82
-1,860
773
-652
-1,202
-86
-1,940
901
2006E
05/04E
06/05E
2,009 -10.7%
-4.7%
744
2.6%
29.3%
164 128.8%
33.9%
112 108.3% 180.0%
1,020
27.0%
46.1%
3,029
11%
8%
14.6%
16.0%
-16.7%
-37.1%
-2.1%
7%
-679
-1,251
-89
-2,019
1,010
04/03E
-7%
8%
3%
3%
36%
15%
-1%
4%
4%
17%
4%
4%
4%
4%
12%
-102
90
-137
-4
-154
82
-166
14
-174
13
-188
13
NA
8%
-83%
NA
5%
-7%
NA
8%
0%
PBT
Tax
PAT
Minorities and pref share divide
Net Profit
343
-152
191
-1
190
399
-259
140
-8
132
497
-144
353
-1
352
621
-217
404
-1
403
740
-259
481
-1
480
835
-292
543
-1
542
25%
51%
14%
0%
14%
19%
19%
19%
0%
19%
13%
13%
13%
0%
13%
123
-479
100
119
2,931
42,200
2,760
46,387
2,760
48,391
2,760
50,563
4.2%
0.3%
-17.4%
-1.0%
3.6%
0.2%
4.3%
0.2%
4%
Equity structure
Item name
2003
2004E
Equity
FGBR
Minority interests
Preference capital
Less: Goodwill
Tier 1 capital
0
0
0
0
0
0
2,931
0
0
0
0
0
0
2,760
Tier 2 capital
0
0
0
0
1,780
0
0
0
0
1,780
Tier 3 capital
0
4,711
0
4,711
0
4,540
0
4,540
42,200
46,387
Total
Personal
lending
42%
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
-2.0%
542
-271
-152
Shareholder
s' equity
2001
2006E
480
-240
-140
Tier 1 capital
Government
& public
authorities
35%
Item name
2005E
403
-589
-293
Subordinate
d debt
Other
23%
2.4%
0.08%
0.28%
2004E
352
-99
-130
Capital formation
Liab.
Assets
2003
GS net income
Other
liabilities
Preferred &
minorities
24%
0%
Item name
Interbank
2001
2002
2003
2004E
2005E
2006E
-4.0%
-6.0%
Revenue growth
Cost growth
97
Europe
Banks
98
Europe
Banks
100 Allied Irish Bank (ALBK.I: IL/A)
102 Bank of Ireland (BKIR.I: OP/A)
Ireland
99
Europe
Banks
Allied Irish Bank (ALBK.I: IL/A)
Volume (rhs)
140
ALLIED IRISH BANKS
Key statistics
FTSE W Europe
10000
120
8000
100
6000
15,148
16.1
14.6
IL/A
940.9
100%
F
J
D
N
O
S
A
J
J
0
M
40
A
2000
M
4000
60
F
80
Current price (EUR)
Fair value (EUR)
Rating
Free float
Performance 6M (abs/rel) 24.3% / 1.9%
Irish banks should benefit from very
Debt rating: Moodys
Debt rating: S&P
Next announcement
Date
market. Demographics, low penetration,
Aa3 / stable
A / positive
ALBK ID / ALBK.I
FY 2004 results
22-Feb-05
2001
2002
2003
2004E
2005E
2006E
PBT
577
1,372
1,011
1,394
1,564
1,759
GS
EPS
1.12
1.13
1.00
1.21
1.36
1.52
Stated
EPS
0.56
1.19
0.79
1.16
1.26
1.42
GS
BVPS
6.7
5.8
6.7
7.0
7.4
7.8
Stated
BVPS
5.8
4.9
5.7
6.0
6.3
6.8
DPS
0.44
0.49
0.54
0.59
0.65
0.72
P/E (X)
GS
Stated
14.4
28.7
14.3
13.5
16.1
20.4
13.4
13.9
11.8
12.7
10.6
11.3
GS EPS
grow th
10.6%
0.6%
-11.4%
20.6%
12.9%
11.6%
Dividend
yield
2.7%
3.0%
3.4%
3.7%
4.1%
4.5%
P/B (X)
GS
Stated
2.4
2.8
2.8
3.3
2.4
2.8
2.3
2.7
2.2
2.5
2.1
2.4
GS
ROE
16.1%
17.6%
15.2%
16.3%
17.6%
18.5%
ROE
9.4%
21.7%
14.2%
18.6%
19.1%
20.1%
RORWA
0.75%
1.50%
1.03%
1.43%
1.37%
1.39%
AIB Bank ROI
AIB Bank GB & NI
Capital Markets
Poland
M&T stake
Group and Central
Divisional net income
2006E
as %
Net income of group
705
55%
250
19%
311
24%
102
8%
124
10%
-202
-16%
1,289
2006E Equity
as %
P/E (x)
allocated of group
10.5
2,791
43%
10.5
1,185
18%
8.5
2,649
41%
14.5
323
5%
16.4
314
5%
9.3
-801
-12%
100%
6,461
100%
P/B (x)
2.7
2.2
1.0
4.6
NM
NM
2006E
ROE (%)
25%
21%
12%
31%
39%
NM
20.0%
Implied Per share
value
(EUR)
7,401
7.8
2,629
2.8
2,646
2.8
1,476
1.6
2,021
2.1
-1,892
-2.0
14,280
15.0
as %
of group
53%
19%
19%
11%
15%
-14%
Net income
1,245
performance should disappear.
However, strategic issues surrounding
the US business and life assurance in
Ireland are ongoing.
100%
Irish banking. Potential rationalisation of
1,200
1,000
stakes and an associated share
800
buyback could prove a positive catalyst.
600
400
Valuation: Our fair value based on
200
6,461
14.6
16.1
-10%
Total
Poland
14.6
952
Group and
Central
13,862
Capital
Markets
-0.4
USA Division
-418
AIB Bank GB
& NI
9.5
AIB Bank ROI
0
-44
business continues to deliver strongly.
include an unexpected slowdown in
0
Exceptional items
Prefs & minority interests
all support such a view. AIB’s banking
Risks: Downside risks to our view
Business unit
market structure and economic growth
The one-off items that have hampered
GS net
income
966
980
859
1,030
1,186
1,331
strong dynamics in the Irish banking
Contribution to value (2006)
our sum-of-the-parts analysis is
EUR14.6 per share.
The forecasts shown here were correct as of
Poland
5%
February 15, 2005. However, we adjusted our
Capital
Markets
19%
forecasts on February 22, post AIB's results.
Please see our note entitled ‘Strong results
USA Division
7%
AIB Bank ROI
51%
highlight the attraction of Ireland'.
AIB Bank GB
& NI
18%
100
Europe
Banks
Returns (EUR mn)
1,186
1,331
GS net income
+ Depreciation
859
149
-149
1,030
124
-124
1,186
137
-137
1,331
151
-151
GS gross OpCF
859
397
1,030
-789
1,186
-552
GS net OpFCF
4,942
104
1,043
0
5,359
114
1,043
0
5,765
124
1,043
0
6,271
133
1,043
0
GS net FCF
GS equity
6,089
6,516
6,931
7,447
GS equity
Tier 1 capital
Total assets
80,960
62,615
99,718 112,218 124,257
75,759 84,964 94,295
15.2%
1.03%
1.30%
16.3%
1.14%
1.49%
17.6%
1.12%
1.48%
18.5%
1.13%
1.49%
14.8%
0.81%
1.03%
19.3%
1.10%
1.43%
19.8%
1.04%
1.37%
20.7%
1.05%
1.39%
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
2006E
100%
Cash
Stated equity
+/- other
Total assets
2005E
1,257
-452
Payout ratio
241
-537
634
-614
80%
1,331
-560
Customer
loans
60%
771
-683
Equity &
debt
securities
805
-296
20
89
223%
54%
97%
56%
88%
55%
6,089
4,430
80,960
62,615
6,516
6,931
7,447
5,947
6,621
7,328
99,718 112,218 124,257
75,759 84,964 94,295
22.3%
1.51%
1.91%
3.8%
0.27%
0.35%
9.4%
0.60%
0.79%
10.7%
0.65%
0.86%
28.4%
18.2%
8.7%
4.1%
-5.0%
1.7%
9.6%
0.3%
4.4%
10.5%
1.2%
5.3%
GS return ratios
GS net OpFCF / RWA
Other
GS net FCF / tier 1
Customer
deposits
62%
Other
liabilities
Other
assets
Subordinated
debt
40%
Preferred &
minorities
23%
20%
13%
11%
6%
Assets
Liab.
0%
Shareholders'
equity
2H03
1H04
2H04E
2H/1H
2H/2H
2003
2004E
2005E
2006E
921
429
67
73
569
1,490
977
423
40
79
542
1,519
987
459
70
81
610
1,598
1.1%
8.4%
75.9%
2.9%
12.6%
5.2%
7.2%
6.9%
5.0%
11.3%
7.3%
7.2%
1,934
913
135
154
1,202
3,136
1,964
882
110
160
1,152
3,117
2,154
960
121
213
1,293
3,448
2,345
1,055
135
190
1,381
3,726
-550
-264
-67
-72
-951
539
-127
-85
-15
66
378
-136
242
-2
-2
238
-546
-273
-61
-878
641
66
-63
-15
72
701
-175
526
-2
-17
507
-437 -19.9% -20.5%
-403
47.8%
52.8%
-63
4.0%
-5.3%
NA -100.0%
-902
2.7%
-5.1%
696
8.5%
29.0%
- -100.0% -100.0%
-53 -15.6% -37.4%
-15
0.0%
0.0%
70
-2.8%
6.1%
697
-0.5%
84.5%
-189
7.9%
38.9%
509
-3.3% 110.1%
-2
0.0%
0.0%
-17
0.0%
NA
490
-3.4% 105.7%
EPS (basic) (EUR)
GS EPS (EUR)
DPS (net) (EUR)
0.26
0.43
0.35
0.56
0.59
0.21
0.53
0.62
0.39
-5.1%
4.6%
84.2%
103.0%
42.2%
10.0%
-1,157
-552
-149
-1,930
1,206
-69
-177
-30
81
1,011
-318
693
-5
-11
677
-983
-676
-124
-1,784
1,333
66
-116
-30
142
1,394
-364
1,031
-4
-34
993
-1,023
-683
-137
-1,842
1,605
-187
-30
175
1,564
-421
1,143
-4
-39
1,100
-1,109
-646
-151
-1,905
1,820
-228
-30
197
1,759
-470
1,289
-4
-40
1,245
0.79
1.00
0.54
1.16
1.21
0.59
1.26
1.36
0.65
1.42
1.52
0.72
2004E
2005E
GS net income
980
-429
-23
859
-452
397
1,030
-537
-789
1,186
-614
-552
528
805
-296
20
Tier 1 capital
4,806
69,239
4,430
62,615
5,947
75,759
6,621
84,964
11.0%
0.8%
18.2%
1.3%
-5.0%
-0.4%
0.3%
0.0%
Capital formation
2003
2004E
4,766
951
1,885
0
-30
-3,142
4,430
6,259
1,014
1,772
0
-30
-3,068
5,947
Tier 2 capital
0
2,130
316
-7
2,439
0
2,257
329
-28
2,557
Tier 3 capital
0
6,869
-389
6,480
0
8,505
-494
8,011
62,615
75,759
0.0%
100.0%
12.1%
0.7%
0.0%
100.0%
11.9%
0.5%
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
Mortgages
27%
Other
personal
11%
04E/03 05E/04E 06E/05E
1.6%
-3.4%
-18.3%
4.1%
-4.1%
-0.6%
9.7%
8.9%
9.5%
32.8%
12.2%
10.6%
8.8%
10.0%
12.0%
-10.7%
6.8%
8.1%
Ratios
Equity as % of RWA
25.0%
20.0%
15.0%
Staff
Depreciation
Other operating costs
Operating income
Gains / losses on disposal
Goodwil amortisation
Other exceptional income / expenses
PBT
Tax
PAT
Pref share dividends
Minorites
Net Profit
2003
Equity structure
Item name
Net interest income
Trading profits
2002
55%
Corporate
62%
Item name
Item name
Interbank
22%
Interbank
36%
67%
3%
-15.0%
22.5%
-16.5%
NA
-7.6%
10.5%
4.0%
1.0%
9.7%
NA
3.3%
20.5%
8.4%
-5.4%
10.3%
NA
3.4%
13.4%
-34.4%
0.0%
75.3%
60.7%
0.0%
23.2%
22.2%
0.0%
12.6%
37.9%
14.4%
48.7%
-20.0%
209.1%
46.6%
12.1%
15.7%
10.9%
0.0%
14.7%
10.8%
12.5%
11.6%
12.8%
0.0%
2.6%
13.2%
47.6%
20.6%
10.0%
8.7%
12.9%
10.0%
12.6%
11.6%
10.0%
10.0%
Tier 1 capital breakdown (2004E)
5.0%
0.0%
-5.0%
2000
2001
2002
2003
2004E
2005E
-10.0%
-15.0%
-20.0%
-25.0%
Revenue growth
Cost growth
2006E
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Tier 1
capital
1,030
1,245
86
0
0
0
0
2004E
Other
859
1,100
86
0
0
0
0
2003
Goodwill
(negative)
GS net income
993
86
-49
0
0
0
2006E
Preference
capital
677
72
47
0
0
63
2005E
Minority
interests
(equity)
Stated net profit
- Gains on disposals
- Other exceptional items
- ST fluctuations on life-fund
- Restructuring costs
2004E
Reserves
2003
Cash
Item name
Capital
Accounting
Item name
101
Europe
Banks
Bank of Ireland (BKIR.I: OP/A)
Volume (rhs)
140
BANK OF IRELAND
FTSE W Europe
7000
6000
5000
4000
3000
2000
1000
0
120
100
80
60
Current price (EUR)
Fair Value (EUR)
Rating
Free float
12,977
13.0
13.6
OP/A
1,001.3
100%
F
J
D
N
O
S
A
J
J
M
A
M
F
40
Investment summary: The Irish
Key statistics
banking market is very attractive over
6.8% / 1.1%
20.6% / -1.2%
17.9% / 3.9%
Aa3 / stable
A+ / stable
BKIR ID / BKIR.I
FY 2005 results
12-May-05
Debt rating: Moodys
Debt rating: S&P
Next announcement
Date
2002
2003
2004
2005E
2006E
2007E
PBT
1,085
1,013
1,170
1,344
1,480
1,707
GS
EPS
0.93
1.01
1.04
1.14
1.27
1.42
Stated
EPS
0.90
0.83
0.97
1.17
1.28
1.43
GS
BVPS
4.6
4.8
5.4
5.8
6.5
7.2
due to positive demographics. We
believe action taken by BOI over the
last four years, particularly in SME
banking and insurance, positions it
particularly well to benefit from such
GS net
income
921
1,005
999
1,076
1,205
1,347
the medium term in our view, primarily
Stated
BVPS
4.2
4.2
4.7
5.1
5.8
6.5
DPS
0.33
0.37
0.41
0.47
0.54
0.61
P/E (X)
GS Stated
13.9
14.3
12.8
15.5
12.5
13.3
11.4
11.0
10.2
10.2
9.1
9.1
GS EPS
growth
20.0%
9.0%
2.5%
9.8%
11.7%
11.5%
Dividend
yield
2.5%
2.9%
3.2%
3.6%
4.2%
4.7%
P/B (X)
GS Stated
2.8
3.1
2.7
3.1
2.4
2.7
2.3
2.5
2.0
2.2
1.8
2.0
GS
ROE
20.4%
21.3%
20.4%
20.5%
20.9%
20.8%
ROE RORWA
22.3%
1.80%
19.8%
1.54%
21.7%
1.58%
23.9%
1.63%
23.5%
1.56%
23.2%
1.56%
trends. Recent results provide some
evidence of this. We believe BOI’s UK
business can positively surprise from
low expectations, with further
restructuring and rationalisation likely in
our view.
Business unit
Retail ROI
BOI Life
Wholesale Financial Services
UK Financial Services
Asset Management Services
Group and Central
Divisional net income
2007E
as %
Net income of group
517
37%
126
9%
434
31%
302
22%
129
9%
-125
-9%
1,383
2007E Equity
as %
P/E (x)
allocated of group
10.5
1,865
30%
1x EV
0
0%
8.5
2,358
38%
9.5
2,110
34%
11.5
16
0%
9.7
-159
-3%
100%
6,189
100%
P/B (x)
2.9
2007E
ROE (%)
27.8%
1.6
1.4
18%
14%
22.3%
Implied Per share
as %
value
(EUR) of group
5,433
5.7
40%
1,222
1.3
9%
3,691
3.9
27%
2,870
3.0
21%
1,483
1.6
11%
-1,221
-1.3
-9%
13,479
14.2
100%
Risks: Risks to our view are that
1,600
1,400
margin erosion is greater than expected
1,200
or that credit deteriorates.
1,000
800
600
Valuation: Our fair value is EUR13.6
400
200
Net income
1,351
6,189
12,929
13.6
949
13.6
13.0
5%
Total
Group and
central costs
-0.6
Asset &
wealth mgmnt
-550
UK Financial
services
9.5
Life &
Pensions
25
-58
Wholesale
Financl. Svcs
Exceptional items
Prefs & minority interests
Retail Banking
0
per share based on our sum-of-theparts analysis; this implies 5% potential
upside.
Contribution to value (2006E)
UK Financial
services
20%
Asset &
wealth
mgmnt
9%
Wholesale
Financl. Svcs
26%
Retail
Banking
39%
Life &
Pensions
6%
(a) Excluding Group and central costs
102
Europe
Banks
1,076
1,205
1,351
24
0
-24
-4
0
1,347
999
164
-164
1,076
169
-169
1,205
177
-177
1,347
186
-186
GS gross OpCF
999
-526
1,076
-538
1,205
-606
GS net OpFCF
4,810
200
422
0
5,465
224
422
0
6,189
248
422
0
GS net FCF
GS equity
5,062
5,432
6,111
6,859
GS equity
Tier 1 capital
Total assets
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
20.4%
1.02%
1.69%
20.5%
0.97%
1.59%
20.9%
1.00%
1.56%
20.8%
1.02%
1.56%
21.7%
0.96%
1.58%
23.9%
1.00%
1.63%
23.5%
1.00%
1.56%
23.2%
1.03%
1.56%
2007E
GS net income
+ Depreciation
4,464
176
422
0
106,431 115,091 126,325 137,097
63,361 72,326 82,424 90,594
2006E
100%
Cash
Stated equity
+/- other
Total assets
2005E
473
-400
Payout ratio
538
-457
599
-523
10%
Interbank
80%
1,347
-490
Customer
loans
60%
857
-599
Equity &
debt
securities
40%
73
81
76
258
85%
43%
85%
41%
87%
43%
70%
44%
Other
assets
14%
Customer
deposits
65%
13%
12%
0%
GS return ratios
GS net OpFCF / RWA
Other
GS net FCF / tier 1
9.7%
0.48%
0.80%
10.3%
0.49%
0.79%
10.4%
0.50%
0.77%
13.2%
0.65%
0.99%
11.0%
1.7%
3.8%
11.6%
1.8%
4.3%
11.3%
1.4%
4.8%
14.3%
4.3%
6.9%
19%
Preferred &
minorities
5%
Shareholders'
equity
Liab.
Assets
5,062
5,432
6,111
6,859
4,288
4,634
5,289
6,013
106,431 115,091 126,325 137,097
63,361 72,326 82,424 90,594
Other
liabilities
59%
Subordinated
debt
20%
Corporate
37%
Mortgages
54%
Other
personal
9%
Item name
2H04
1H05
2H05E
2H/2H
2H/1H
2004
2005E
2006E
2007E
5E/04
6E/5E
7E/6E
Net interest income
Trading profits
892
476
30
117
623
1,515
922
499
33
96
628
1,550
952
504
32
110
646
1,598
6.7%
5.9%
8.0%
-5.8%
3.8%
5.5%
3.3%
1.0%
-1.8%
14.8%
2.9%
3.1%
1,744
934
73
227
1,234
2,978
1,874
1,003
65
206
1,274
3,148
2,035
1,065
70
249
1,385
3,420
2,182
1,157
75
352
1,584
3,766
7.5%
7.4%
-10.4%
-9.2%
3.3%
5.7%
8.6%
6.2%
7.0%
20.9%
8.6%
8.6%
7.2%
8.6%
7.0%
41.3%
14.4%
10.1%
Staff
Depreciation
Operating income
Gains on disposal
PBT
Tax
PAT
Minorites
Net Profit
-491
-270
-89
-863
653
3
-40
-11
10
-115
500
-88
412
-4
-10
398
-498
-289
-76
-868
682
31
-28
-12
29
11
713
-120
593
-4
-5
584
-496
-324
-93
-919
680
-56
-12
19
631
-107
524
-4
3
522
1.1%
19.9%
5.0%
-0.3%
12.0%
22.3%
5%
99.3%
0.0%
-34.5%
26.2%
21.9%
27.1%
-7.0%
nm
31.3%
-11.5%
-10.6%
-11.7%
0.0%
nm
-10.6%
-1,121
3.0%
6.4%
-604
21.1%
-1.0%
-186
3.0%
5.0%
-1,912
8.1%
3.2%
1,854
2.8%
15.8%
-200
-2.5%
65.6%
-24
26.3%
0.0%
77
65.5%
37.5%
- -109.6% -100.0%
1,707
14.9%
10.1%
-299
9.2%
12.0%
1,408
16.1%
9.7%
-8
-3.6%
0.0%
-50 -88.4% 430.0%
1,351
18.4%
9.0%
3.7%
17.6%
39.5%
14.3%
90.0%
-1,058
-606
-177
-1,843
1,577
-139
-24
66
1,480
-255
1,225
-8
-12
1,206
10%
5.9%
4.5%
-994
-613
-169
-1,787
1,362
31
-84
-24
48
11
1,344
-227
1,117
-8
-2
1,106
6.0%
-0.3%
5.0%
6.5%
1.4%
-965
-506
-164
-1,653
1,325
36
-86
-19
29
-115
1,170
-208
962
-8
-19
935
EPS (basic) (EUR)
Cash EPS (EUR)
GS EPS (EUR)
DPS (net) (EUR)
0.42
0.43
0.53
0.27
0.62
0.63
0.58
0.17
0.55
0.57
0.56
0.31
32.6%
32.2%
5.8%
15.0%
-10.7%
-10.4%
-4.3%
84.3%
0.97
0.99
1.04
0.41
1.17
1.20
1.14
0.47
1.28
1.30
1.27
0.54
1.43
1.45
1.42
0.61
20.7%
20.9%
9.8%
14.0%
8.7%
8.5%
11.7%
14.0%
44.0%
0.0%
16.7%
NA
15.4%
17.4%
15.0%
0.0%
328.3%
12.0%
11.7%
11.5%
11.5%
14.0%
Item name
2004
2005E
2006E
2007E
GS net income
999
-400
-526
1,076
-457
-538
1,205
-523
-606
1,347
-599
-490
73
81
76
258
4,288
63,361
4,634
72,326
5,289
82,424
6,013
90,594
1.7%
0.1%
1.8%
0.1%
1.4%
0.1%
4.3%
0.3%
Interbank
20%
Capital formation
Tier 1 capital
Equity structure
Item name
2004
2005E
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
679
3,785
130
0
-147
-159
4,288
681
4,129
129
0
-123
-182
4,634
Tier 2 capital
239
3,682
456
-1,040
3,337
24
3,682
553
-825
3,434
Tier 3 capital
0
7,625
0
7,625
0
8,068
0
8,068
63,361
72,326
0.0%
100.0%
7.3%
3.3%
0.0%
100.0%
6.8%
2.6%
Ratios
Equity as % of RWA
15%
6,000
5,000
0%
2001
2002
2003
2004
2005E
2006E
4,000
3,000
-5%
Revenue growth
Cost growth
2,000
1,000
0
Tier 1
capital
999
1,206
24
0
-23
-4
1
2004
Other
GS net income
1,106
24
-27
-34
-1
8
2007E
Goodwill
(negative)
935
19
-32
101
-39
16
2006E
Preference
capital
Stated net profit
2005E
Minority
interests
(equity)
2004
Cash
Item name
Reserves
Accounting
Item name
Capital
Returns (EUR mn)
103
Europe
Banks
104
Europe
Banks
106 UniCredito (CRDI.MI: OP/A)
108 Banca Intesa (BIN.MI: IL/A)
110 SanPaolo IMI (SPI.MI: OP/A)
112 Monte dei Paschi di Siena (BMPS.MI: IL/A)
114 BNL (BANI.MI: IL/A)
116 Capitalia (CPTA.MI: OP/A)
118 Antonveneta (NTV.MI: IL/A)
120 Banco Popolare di Verona e Novara (BPVN.MI: U/A)
122 Banca Popolare di Milano (PMII.MI: OP/A)
124 Banche Popolari Unite (BPUN.MI: IL/A)
126 Banca Lombarda (BL.MI: U/A)
128 Credem (EMBI.MI: IL/A)
Italy
105
Europe
Banks
UniCredito (CRDI.MI: OP/A)
Key statistics
Volume (rhs)
120
UNICREDITO ITALIANO
FTSE W Europe
200,000
110
150,000
100
90
100,000
80
70
50,000
60
F
J
D
N
O
S
A
J
J
M
A
M
0
F
50
Current price (EUR)
Fair value (EUR)
Rating
Free float
CR Torino
CR Verona
28,297
4.5
5.1
OP/A
6,316
67%
9%
7%
8.7%/2.8%
17.0%/-4.1%
8.0%/-4.9%
Debt rating: Moodys
Aa2 / stable
Debt rating: S&P
AA- / stable
UC IM/ CRDI.MI
Next announcement
2004 FY results
Date
Mar-05
GS
BVPS
2.08
2.24
2.43
2.65
2.91
Stated
BVPS
1.93
2.05
2.20
2.37
2.59
P/E (X)
GS Stated
15.5
15.7
13.5
14.4
13.2
14.2
11.4
12.4
9.6
10.3
DPS
0.16
0.17
0.19
0.22
0.28
GS EPS Dividend
growth
yield
-6.5%
3.5%
14.4%
3.8%
2.5%
4.3%
15.7%
4.9%
18.4%
6.3%
P/B (X)
GS Stated
2.2
2.3
2.0
2.2
1.8
2.0
1.7
1.9
1.5
1.7
ROE
16.6%
15.6%
14.9%
15.9%
17.6%
2006E
as %
net income of group
P/E (X)
2006E
Equity
as %
of group
P/B (X)
2006E
Value Per share
ROE (%) (EUR mn)
(EUR)
as %
of group
Group
3,500
2,942
100%
11.0
18,361
100%
1.8
-266
79
15.1%
19.2%
13.5%
21.1%
8.5%
9,120
10,011
3,845
7,043
1,888
335
32,242
1.4
1.6
0.6
1.1
0.3
0.1
5.1
28%
31%
12%
22%
6%
1%
100%
division contribution. Particularly, we
expect the Polish division to benefit from
rising interest rates (+88 bp in 2H2004).
On the cost side, we expect some
positive news from the redundancy plan
which was announced in 1Q2004. We
expect the market to focus on cost
announced last September.
2,500
2,000
Risks: We highlight possible acquisition
1,500
1,000
risks of further expansion in eastern
500
0
-1,731
-293
11.7
16,337
FD number of shares (mn) (2006E)
Fair value (EUR)
2.0
32,242
to be monitored closely as we see
potential for deterioration on the back of
volume growth.
New
Europe
15%
Corporate
Center
4%
Retail
Banking
18%
Valuation: UniCredito is currently
trading at 9.6x GS 2006E earnings, a
14% discount to the Italian banking
Private
Banking &
Asset
Mgmt
14%
sector. We believe this is not justified
Corporate
&
Investmen
t Banking
49%
Europe. We believe asset quality needs
6,316.3
5.1
4.5
13.9%
Total
1.6
1.9
1.6
2.7
0.8
Corporate Center
31%
28%
13%
14%
13%
New Europe
5,733
5,211
2,376
2,565
2,477
Private Banking & Asset
Mgmt
10.5
10.0
12.0
13.0
9.0
Retail Banking
30%
34%
11%
18%
7%
Corporate & Investment
Banking
869
1,001
320
542
210
2,755
growth and increasing New Europe
management in the business plan
3,000
Goodwill
Other GS adjustments
encouraging NII growth driven by volume
cutting in 2005, as promised by the
Retail Banking
Corporate & Investment Banking
Private Banking & Asset Management
New Europe
Corporate Center
Unrealized gains
Sum of the Parts before Goodwill
encouraging results in 4Q2004 with
zloty revaluation (+9.5% in 2H2004)
GS net
GS
Stated
PBT income
EPS
EPS
2002
3,283
1,831
0.29
0.29
2003
3,471
2,095
0.33
0.31
2004E
3,329
2,147
0.34
0.32
2005E
3,914
2,485
0.39
0.36
2006E
4,667
2,942
0.47
0.44
Business unit
that UniCredito is set to deliver
given that UniCredito is the only Italian
bank in our universe which is delivering
significant growth.
106
Europe
Banks
2004E
2005E
2006E
Stated net profit
1,961
264
-129
1,998
266
-117
2,289
266
-71
2,755
266
-79
GS net income
+ Depreciation
2,095
-486
2,147
487
-487
2,485
487
-487
2,942
487
-487
GS net income
2,095
2,147
2,485
2,942
GS gross OpCF
1,609
496
2,147
-652
2,485
-679
2,942
-691
2,105
-1,076
1,496
-1,199
1,805
-1,374
2,251
-1,791
Stated equity
+ Unrealised gains (after tax)
+/- other
12,943
932
293
0
13,865
1,199
293
0
14,956
1,465
293
0
16,337
1,731
293
0
GS net OpFCF
GS equity
14,169
15,357
16,714
18,361
Payout ratio
Total assets
238,256 251,244 259,315 266,478
146,348 157,207 168,526 180,036
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
14.5%
0.88%
1.41%
15.5%
0.97%
1.53%
16.8%
1.12%
1.69%
14.9%
0.82%
1.32%
15.9%
0.90%
1.41%
17.6%
1.05%
1.58%
Item name
2003
GS net FCF
1,029
297
432
460
51%
55%
80%
60%
76%
60%
80%
65%
Cash
100%
2%
Interbank
80%
Customer
loans
60%
Equity &
debt
securities
Other
assets
Customer
deposits
GS return ratios
GS net OpFCF / RWA
Other
GS net FCF / tier 1
19.0%
9.3%
7.4%
10.1%
0.61%
0.99%
11.3%
0.71%
1.11%
12.8%
0.86%
1.29%
12.0%
2.4%
5.3%
12.9%
3.1%
6.4%
14.2%
2.9%
8.0%
41%
53%
Other
liabilities
Subordinate
d debt
13%
32%
Preferred &
minorities
18%
5%
0%
Liab.
Assets
Shareholder
s' equity
3 Q 0 3 4 Q 0 4 E 4 Q /4 Q 4 Q /3 Q
1 ,1 5 1
858
241
292
1 ,3 9 0
2 ,5 4 1
1 ,1 7 4
839
262
226
1 ,3 2 7
2 ,5 0 1
S ta ff c o s ts
G e n e r a l a d m in is tr a tio n
D e p r e c ia tio n
G o o d w ill a m o r tis a tio n
O th e r o p e r a tin g c o s ts
T o t a l o p e r a t in g e x p e n s e s
O p e r a t in g in c o m e
2003
2004E
2005E
1 ,3 0 0
851
210
300
1 ,3 6 1
2 ,6 6 1
1 3 .0 %
- 0 .9 %
-1 3 %
3%
-2 %
5%
1 0 .7 %
1 .4 %
-2 0 %
33%
3%
6%
4 ,7 9 5
3 ,3 1 6
1 ,2 8 8
1 ,0 6 7
5 ,6 7 0
1 0 ,4 6 5
4 ,9 1 6
5 ,3 4 6
3 ,2 7 1
3 ,4 3 7
1 ,0 3 0
1 ,0 5 1
1 ,1 4 0
1 ,1 8 5
5 ,4 4 1
5 ,6 7 3
1 0 ,3 5 7 1 1 ,0 1 9
Retail and
SMEs
45%
Corporate
51%
3%
-1 %
-2 0 %
7%
-4%
-1%
9%
5%
2%
4%
4%
6%
8%
6%
2%
5%
5%
7%
-83 5
-8 0 7
-87 4
-52 5
-4 4 9
-53 7
-15 0
-1 1 3
-14 5
-6 0
-6 8
-5 1
- 1 ,5 6 9 - 1 ,4 3 7 - 1 ,6 0 6
9 7 1 1 ,0 6 4 1 ,0 5 5
5%
2%
-4%
-1 4 %
NA
2%
9%
8%
20%
28%
-2 5 %
NA
12%
-1 %
- 3 ,2 8 1
- 1 ,9 3 6
-4 8 6
-2 6 4
- 5 ,9 6 6
4 ,4 9 8
- 3 ,4 0 3
- 2 ,0 5 2
-4 8 7
-2 6 6
- 6 ,2 0 7
4 ,1 5 0
- 3 ,4 3 7
- 2 ,0 7 7
-4 8 7
-2 6 6
- 6 ,2 6 6
4 ,7 5 3
- 3 ,4 1 2
- 2 ,0 9 7
-4 8 7
-2 6 6
- 6 ,2 6 2
5 ,5 0 2
4%
6%
0%
1%
NA
4%
-8%
1%
1%
0%
0%
NA
1%
15%
-1 %
1%
0%
0%
NA
0%
16%
L o a n - lo s s p r o v is io n s
In c o m e fr o m a s s o c ia te s
O th e r e x c e p tio n a l in c o m e ( e x p e n s e s )
O th e r in c o m e ( e x p e n s e s )
-40 3
160
-11 8
-2 0 0
-1 5
-2 2
-26 5
23
-1 8
-3 4 %
NA
NA
-8 5 %
33%
NA
NA
-1 8 %
-9 6 8
215
-2 7 4
-9 2 1
180
-8 0
-9 2 1
112
-3 0
-9 3 9
124
-2 0
-5 %
NA
-1 6 %
-7 1 %
0%
NA
-3 8 %
-6 3 %
2%
NA
11%
-3 3 %
PBT
Tax
PAT
M in o r itie s a n d o th e r ite m s
N e t P r o f it
610
-21 6
395
-1 5
380
827
-3 4 5
482
-3 3
449
795
-26 9
526
-3 2
494
30%
25%
33%
112%
30%
-4 %
-2 2 %
9%
-4 %
10%
3 ,4 7 1
- 1 ,3 8 6
2 ,0 8 6
-1 2 5
1 ,9 6 1
3 ,3 2 9
- 1 ,1 6 4
2 ,1 6 5
-1 6 7
1 ,9 9 8
3 ,9 1 4
- 1 ,4 3 3
2 ,4 8 2
-1 9 2
2 ,2 8 9
4 ,6 6 7
- 1 ,6 8 3
2 ,9 8 4
-2 2 9
2 ,7 5 5
-4%
-1 6 %
4%
33%
2%
18%
23%
15%
15%
15%
19%
17%
20%
19%
20%
E P S (E U R )
C a s h E P S (E U R )
G S E P S (E U R )
D P S (E U R )
0 .0 6
0 .0 7
-
0 .0 7
0 .0 8
-
0 .0 8 3 0 .1 %
0 .0 9 2 5 .4 %
NA
NA
1 0 .0 %
1 1 .7 %
NA
NA
0 .3 1
0 .3 5
0 .3 3
0 .1 7
0 .3 2
0 .3 6
0 .3 4
0 .1 9
0 .3 6
0 .4 0
0 .3 9
0 .2 2
0 .4 4
0 .4 8
0 .4 7
0 .2 8
2%
2%
2%
11%
15%
13%
16%
15%
20%
18%
18%
30%
2006E
2,095
-1,076
-496
2,147
-1,199
-652
2,485
-1,374
-679
2,942
-1,791
-691
523
297
432
460
Capital formation
Tier 1 capital
11,081 12,436 13,985 15,861
146,348 157,207 168,526 180,036
4.7%
0.4%
2.4%
0.2%
3.1%
0.3%
Equity structure
Item name
2.9%
0.3%
2002
2003
3,148
9,040
1,172
969
-2,274
-1,278
10,776
3,158
9,785
973
896
-2,399
-1,332
11,081
5,199
4,979
Tier 2 capital
Ratios
Preferred shares as % of tier 1
Equity as % of RWA
2 0 0 6 E 0 4 /0 3 E 0 5 /0 4 E 0 6 /0 5 E
5 ,7 8 9
3 ,6 5 3
1 ,0 7 7
1 ,2 4 6
5 ,9 7 5
1 1 ,7 6 4
GS net income
15,651
146,348
9.0%
91.0%
9.7%
17.4%
8.1%
91.9%
9.5%
17.8%
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
-2.0%
15,469
138,079
16.0%
Capital
4Q03
N e t in t e r e s t in c o m e
N e t c o m m is s io n s
T r a d in g p r o fits
O th e r r e c u r r in g r e v e n u e s
N e t n o n - in t e r e s t in c o m e
T o ta l re v e n u e s
2005E
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
Public
sector
4%
Ite m n a m e
2004E
14,169 15,357 16,714 18,361
11,081 12,436 13,985 15,861
238,256 251,244 259,315 266,478
146,348 157,207 168,526 180,036
GS equity
Tier 1 capital
Total assets
19%
40%
20%
2003
Interbank
14%
2001
2002
Revenue growth
2003
2004E
2005E
Tier 1
capital
2006E
Other
2005E
Goodwill
(negative)
2004E
Preference
capital
2003
Cash
Item name
Minority
interests
(equity)
Accounting
Item name
Reserves
Returns (EUR mn)
2006E
Cost growth
107
Europe
Banks
Banca Intesa (BIN.MI: IL/A)
Key statistics
Volume (rhs)
135
BANCA INTESA
FTSE W Europe
160,000
140,000
115
120,000
100,000
95
80,000
75
60,000
40,000
55
20,000
GS net
GS
Stated
PBT income
EPS
EPS
2002
229
363
0.06
0.03
2003
2,019
1,354
0.20
0.18
2004E
2,576
1,769
0.26
0.23
2005E
3,279
2,126
0.31
0.29
2006E
3,600
2,297
0.34
0.32
F
J
D
N
O
S
A
J
J
M
A
M
0
F
35
Current price (EUR)
Fair value (EUR)
Rating
Shares outstanding (mn). Ord
Free float
Credit Agricole
Cariplo Foundation
25,893
3.8
3.7
IL/A
5,916
46%
18%
9%
7.3%/1.4%
34.5%/10.3%
Performance 12M (abs/rel) 25.5%/10.6%
Debt rating: Moodys
A1 / stable
Debt rating: S&P
A- / positive
BIN IM/ BIN.MI
Next announcement
2004 FY results
Date
Mar-05
Stated
BVPS
2.19
2.20
2.39
2.57
2.75
P/E (X)
GS Stated
67.4
122.3
19.4
21.7
14.9
16.5
12.4
13.1
11.4
12.0
DPS
0.02
0.06
0.12
0.17
0.19
GS EPS Dividend
growth
yield
NM
0.5%
NM
1.5%
30.6%
3.2%
20.2%
4.4%
8.0%
4.8%
P/B (X)
GS Stated
1.7
1.8
1.7
1.7
1.5
1.6
1.4
1.5
1.3
1.4
2006E
Equity
as %
of group
P/B (X)
42%
30%
21%
5%
12%
-11%
10.0
10.5
12.0
10.0
13.0
9.0
5,399
3,544
1,315
1,824
1,646
6,254
27%
18%
7%
9%
8%
31%
1.8
2.1
4.3
0.7
2.2
-0.3
100%
11.1
19,982
100%
1.3
ROE
1.4%
8.4%
10.2%
11.8%
12.1%
-101
0
2,196
The bank is due to present its new
business plan in 1H2005. In its existing
plan (reiterated in September 2004),
14.8% for 2005E. We expect the new
BP to focus on top-line growth
generation and capital redeployment.
We expect some newsflow on the
potential conversion of savings shares
9,772
7,268
5,694
1,209
3,703
-2,186
-25
25,436
18,888
Fair value (EUR)
38%
29%
22%
5%
15%
-9%
0%
100%
3,000
interest in this area.
2,500
2,000
Risks: Concerns could be raised
1,500
about management’s capacity to deliver
1,000
top-line growth. We see potential
500
acquisition risk given the good capital
0
-1,118
25
11.6
1.4
1.1
0.8
0.2
0.5
-0.3
0.0
3.7
based on management expressing an
1.3
25,436
6,848.2
3.7
3.8
-3.3%
Total
2,297
18.0%
19.5%
36.0%
6.6%
17.3%
NM
as %
of group
Corporate
Center
973
690
473
120
285
-244
2006E
Value Per share
ROE (%) (EUR mn)
(EUR)
Investment
Bkg
as %
of group
Asset Mgmt
Group
P/E (X)
2006E
net income
Retail
Goodwill
in NII and good commissions growth.
or an acquisition in eastern Europe,
Corporate
Wholesale banking
Retail Banking
Asset Management
Investment Banking
Eastern Europe
Corporate Center
Unrealized gains
results in 4Q, driven by positive trends
management set an ROE target of
GS
BVPS
2.30
2.32
2.52
2.73
2.92
Business unit
Intesa to deliver a good set of top-line
Investment
Bkg
4%
Asset
Mgmt
20%
base, with excess capital of EUR1.4 bn
on our estimates.
Valuation: The stock is currently
Corporate
Center
8%
trading at 11.4x 2006E GS earnings
Corporate
34%
and 1.4x GSBV 2005E, fully pricing in
the restructuring story and the current
revenue visibility, in our view. The stock
appears fairly valued based on our
Retail
34%
estimates, which are 9.2% and 4.4%
below consensus for 2004E and 2005E.
108
Europe
Banks
1,769
2,000
126
0
2,126
2006E
2,196
101
0
2,297
2003
GS net income
+ Depreciation
2004E
1,354
-691
GS gross OpCF
2005E
1,769
610
-610
2,126
583
-583
2006E
2,297
602
-602
663
-1,042
1,769
0
2,126
-420
2,297
-452
-379
-346
1,769
-719
1,707
-1,000
1,845
-1,098
Stated equity
+/- other
15,093
816
0
0
16,344
942
-9
0
17,626
1,068
-9
0
18,822
1,169
-9
0
GS net OpFCF
GS net FCF
-725
1,050
707
747
GS equity
15,909
17,278
18,685
19,982
Payout ratio
-91%
28%
41%
45%
59%
50%
60%
50%
15,909
14,292
260,215
182,344
17,278
15,936
263,407
182,344
18,685
17,484
267,335
189,337
19,982
18,956
272,524
196,863
10.7%
0.68%
0.97%
9.5%
0.64%
0.92%
9.5%
0.68%
0.96%
11.1%
6.6%
6.8%
9.8%
4.0%
6.6%
9.7%
3.9%
7.1%
Total assets
260,215 263,407 267,335 272,524
182,344 182,344 189,337 196,863
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
10.7%
0.68%
0.97%
11.9%
0.80%
1.14%
11.9%
0.85%
1.19%
10.2%
0.61%
0.88%
11.8%
0.75%
1.08%
12.1%
0.81%
1.14%
GS equity
Tier 1 capital
Total assets
GS return ratios
GS net OpFCF / RWA
Other
GS net FCF / tier 1
-2.7%
-5.1%
-1.5%
Cash
100%
Interbank
80%
Customer
loans
60%
2%
11%
Other
assets
Customer
deposits
Other
liabilities
60%
40%
Subordinate
d debt
37%
20%
11%
Preferred &
minorities
16%
6%
0%
Shareholder
s' equity
Liab.
Assets
3 Q 0 4 4 Q 0 4 E 4 Q /4 Q 4 Q /3 Q
1 ,2 1 7
881
147
129
1 ,1 5 7
2 ,3 7 4
1 ,2 5 9
848
202
83
1 ,1 3 3
2 ,3 9 2
S ta ff c o s ts
G e n e r a l a d m in is tra tio n
G o o d w ill a m o rt is a tio n
T o t a l o p e ra tin g e x p e n s e s
O p e ra tin g in c o m e
O th e r e xc e p t io n a l in c o m e ( e x p e n s e s )
O th e r in c o m e ( e xp e n s e s )
PBT
Tax
PAT
M in o r it ie s a n d o th e r ite m s
N e t P ro fit
E P S (E U R )
G S E P S (E U R )
D P S (E U R )
2003
2004E
2005E
1 ,2 6 6
896
258
124
1 ,2 7 8
2 ,5 4 4
4%
2%
75%
-4 %
10%
7%
1%
6%
28%
49%
13%
6%
4 ,8 5 1
3 ,3 3 1
483
1 ,0 4 6
4 ,8 6 0
9 ,7 1 1
-8 2 6
-7 7 1
-8 1 0
-5 6 9
-4 8 3
-5 5 9
-2 4 0
-1 7 0
-2 3 1
- 1 ,6 3 5 -1 ,4 2 4 -1 ,6 0 1
739
968
943
-2 %
-2 %
-4 %
NA
NA
-2 %
28%
5%
16%
36%
NA
NA
12%
-3 %
- 3 ,3 2 4
- 2 ,1 1 0
-6 9 1
-1 4 0
- 6 ,2 6 5
3 ,4 4 6
- 3 ,1 7 4
- 2 ,0 7 8
-6 1 0
-1 2 6
- 5 ,9 8 9
3 ,8 1 3
- 3 ,1 9 0
- 2 ,0 5 8
-5 8 3
-1 2 6
- 5 ,9 5 7
4 ,3 5 6
-1 8 %
NA
NA
-8 2 %
140%
NA
NA
275%
- 1 ,4 2 5
206
-2 0 8
- 1 ,0 2 0
-7 0
-1 4 7
-9 8 0
-9 7
-4 7 8
103
-2 2 8
-1 6 3
-6 1
-1 1
-3 9 1
-4 1
3%
3%
-3 %
-1 0 %
-1 %
1%
6%
5%
5%
3%
5%
5%
5%
5%
5%
3%
5%
5%
-3 ,2 5 4
-2 ,0 9 9
-6 0 2
-1 0 1
-6 ,0 5 5
4 ,7 4 8
-4 %
-2 %
-1 2 %
-1 0 %
NA
-4 %
11%
0%
-1 %
-4 %
0%
NA
-1 %
14%
2%
2%
3%
-2 0 %
NA
2%
9%
-1 ,0 3 5
-1 1 3
-2 8 %
NA
-1 3 4 %
-2 9 %
-4 %
NA
-1 0 0 %
-3 4 %
6%
NA
NA
17%
136
39
175
1
176
733
-2 5 1
482
-1 7
465
511
-2 2 1
290
-3 4
256
275%
NA
66%
NA
45%
-3 0 %
NA
-4 0 %
NA
-4 5 %
2 ,0 1 9
-7 4 1
1 ,2 7 8
-6 4
1 ,2 1 4
2 ,5 7 6
-9 0 2
1 ,6 7 4
-7 7
1 ,5 9 7
3 ,2 7 9
- 1 ,1 8 1
2 ,0 9 9
-9 8
2 ,0 0 0
3 ,6 0 0
-1 ,2 9 6
2 ,3 0 4
-1 0 8
2 ,1 9 6
28%
22%
31%
21%
32%
27%
31%
25%
27%
25%
10%
10%
10%
10%
10%
-
-
-
NA
NA
NA
NA
NA
NA
NA
NA
0 .1 8
0 .2 0
0 .2 0
0 .0 6
0 .2 3
0 .2 5
0 .2 6
0 .1 2
0 .2 9
0 .3 1
0 .3 1
0 .1 7
0 .3 2
0 .3 4
0 .3 4
0 .1 9
32%
27%
31%
108%
25%
23%
20%
39%
10%
8%
8%
10%
2006E
GS net income
1,354
-346
1,042
1,769
-719
0
2,126
-1,000
-420
2,297
-1,098
-452
Capital formation
2,050
1,050
707
747
Tier 1 capital
14,292 15,936 17,484 18,956
182,344 182,344 189,337 196,863
14.3%
1.1%
6.6%
0.6%
4.0%
0.4%
Equity structure
Item name
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
Public
sector
4%
Retail and
SMEs
45%
Corporate
51%
3.9%
0.4%
2002
2003
3,561
10,390
776
1,775
-1,505
-1,503
13,494
3,561
11,532
706
1,775
-1,453
-1,829
14,292
8,192
7,585
Tier 2 capital
Ratios
Equity as % of RWA
2 0 0 6 E 0 4 /0 3 E 0 5 /0 4 E 0 6 /0 5 E
4 ,9 7 5
5 ,2 4 9
5 ,4 9 7
3 ,4 2 0
3 ,6 0 5
3 ,7 9 6
469
492
517
939
966
995
4 ,8 2 7
5 ,0 6 3
5 ,3 0 7
9 ,8 0 2 1 0 ,3 1 3 1 0 ,8 0 3
2005E
4.0%
2.0%
0.0%
-2.0%
2001
2002
2003
2004E
2005E
-4.0%
-6.0%
-8.0%
-10.0%
21,056
20,644
199,714
182,344
13.2%
86.8%
7.4%
10.0%
12.4%
87.6%
8.7%
9.2%
6.0%
2006E
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
Capital
4Q 03
N e t in te re s t in c o m e
T r a d in g p ro f its
O th e r re c u r r in g re v e n u e s
N e t n o n -i n t e re s t in c o m e
T o t a l re v e n u e s
2004E
It e m n a m e
2003
Interbank
12%
40%
Equity &
debt
securities
Item name
Tier 1
capital
1,354
1,597
126
46
2005E
Other
1,214
140
0
2004E
Goodwill
(negative)
GS net income
2003
Preference
capital
Stated net profit
Cash
Item name
Minority
interests
(equity)
Accounting
Item name
Reserves
Returns (EUR mn)
-12.0%
Revenue growth
Cost growth
109
Europe
Banks
SanPaolo IMI (SPI.MI: OP/A)
Key statistics
Volume (rhs)
120
SAN PAOLO IMI
FTSE W Europe
110
50,000
100
40,000
90
80
30,000
70
20,000
60
10,000
50
GS net
GS Stated
EPS
EPS
PBT income
2002
1,018
890
0.48
0.48
2003
1,668
1,141
0.62
0.53
2004E
2,061
1,311
0.70
0.67
2005E
0.84
0.76
2,362
1,559
2006E
1,758
0.94
0.87
2,686
20,908
11.2
11.7
OP/A
1,863.5
56%
11%
7%
8.6%/2.7%
27.6%/4.6%
7.0%/-5.7%
Debt rating: Moodys
Aa3 / stable
Debt rating: S&P
A+ / positive
SPI IM/ SPI.MI
Next announcement
2004 FY results
Date
Mar-05
F
J
D
N
O
S
A
J
J
M
A
M
0
F
40
Current price (EUR)
Fair value (EUR)
Rating
Free float
SCH
Compagnia di San Paolo
60,000
Stated
BVPS
5.71
5.96
6.24
6.64
7.13
P/E (X)
GS Stated
23.2
23.2
18.1
21.2
15.9
16.8
13.4
14.7
11.9
12.9
DPS
0.30
0.39
0.46
0.48
0.51
GS EPS Dividend
growth
yield
-57.2%
2.7%
28.3%
3.5%
13.2%
4.1%
19.0%
4.3%
12.7%
4.5%
P/B (X)
GS Stated
1.9
2.0
1.8
1.9
1.7
1.8
1.6
1.7
1.4
1.6
ROE RORWA
8.1% 0.42%
9.1% 0.50%
11.0% 0.70%
11.9% 0.82%
12.6% 0.93%
Goodwill
Group
Potential Modiano impact
Total (inc. Modiano impact)
1,758
100.0%
12.5
-150
13
1,620
170
1,790
divisions in particular, this could act as
a catalyst for a rerating. We estimate
EUR170 mn potential synergies in the
14,502
100%
1.5
12,299
7,427
2,862
1,600
410
476
3,128
2,168
648
878
3,352
-1,150
91
21,891
-1,127
-91
13.5
10.5
13.2
56%
34%
13%
7%
2%
2%
14%
10%
3%
4%
15%
-5%
0%
100.0%
1.6
13,284
1.8
21,891
1,784
23,675
1,863.5
Fair value (ex. Modiano impact)
11.7
11.2
5%
Fair value (inc. Modiano impact)
12.7
11.2
13%
been cut by 5% in recent weeks
(currently 18% below management
2005E targets) leaving limited room for
potential negative surprises in our view.
shareholders such as Agnelli & C and
1,400
CRFirenze Foundation; the new
1,200
1,000
president of the Foundation stated that
800
600
its 1.9% stake in SPIMI is no longer
400
200
0
strategic.
Valuation: Our SOTP valuation gives
a fair value of EUR11.7, implying c.5%
Public
Entities
4%
13,284
6.6
4.0
1.5
0.9
0.2
0.3
1.7
1.2
0.3
0.5
1.8
-0.6
0.0
11.7
Total
13.3%
14.5%
12.2%
10.4%
15.3%
19.9%
26.9%
76.9%
10.3%
10.5%
17.0%
NM
1,600
Public
Entities
1.4
1.5
1.3
1.1
1.6
2.8
4.9
10.4
1.0
1.1
2.8
-0.6
1,800
Investment
banking
61%
33%
15%
10%
2%
1%
4%
1%
4%
5%
8%
14%
Consensus earnings estimates have
potential stake disposals by some major
2,000
Asset
Management
8,806
4,858
2,236
1,458
255
171
637
208
631
793
1,187
2,069
2006E
Value Per share
as %
P/B (X) ROE (%) (EUR mn)
(EUR) of group
PFS (Banca
Fideuram)
10.5
10.5
10.5
10.5
10.5
14.0
18.3
13.5
10.0
10.5
16.6
9.0
2006E
as %
Equity of group
Commercial
banking
2006E
as %
67%
40%
15%
9%
2%
2%
10%
9%
4%
5%
11%
-7%
volume growth, in the corporate
Risks: We see downside risks from
1,170
707
272
152
39
34
171
160
65
84
201
-128
Modiano, is successful in accelerating
commercial business for 2006.
GS
BVPS
6.05
6.38
6.74
7.21
7.78
Commercial banking
Sanpaolo IMI
Cardine
San Paolo Banco di Napoli
Others
Consumer Finance (Finemiro)
PFS (Banca Fideuram)
Asset Management
Investment banking (Banca IMI)
Public Entities (Banca OPI)
Insurance pole (P/EV val.)
Corporate center
Unrealized gains
that if the new General Manager, Mr
potential upside (13% if we include
Insurance
pole
15%
EUR170 mn potential synergies from
the restructuring of the corporate
Investment
banking
3%
Asset
Management
10%
PFS (Banca
Fideuram)
14%
division). SPIMI is trading (ex Fideuram)
Commercial
banking
54%
at 11.1x 06E GS EPS, in line with the
Italian banks. We believe the dividend
yield of 4.3% for 2005E offers downside
protection.
110
Europe
Banks
1,620
150
-13
GS net income
+ Depreciation
1,141
1,311
1,559
1,758
2006E
1,141
-492
1,311
460
-460
1,559
464
-464
1,758
469
-469
GS gross OpCF
649
168
1,311
41
1,559
-244
1,758
-266
817
-565
1,352
-684
1,315
-713
1,492
-745
Stated equity
+/- other
10,957 11,635 12,376 13,284
677
827
977 1,127
91
91
91
91
0
0
0
0
GS net OpFCF
GS net FCF
252
668
602
746
GS equity
11,725 12,553 13,445 14,502
Payout ratio
69%
58%
51%
55%
54%
50%
50%
46%
11,725
10,038
202,546
136,513
12,553
10,848
206,120
135,830
13,445
11,814
209,851
139,905
14,502
12,957
213,560
144,337
Total assets
202,546 206,120 209,851 213,560
136,513 135,830 139,905 144,337
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
10.8% 12.0% 12.6%
0.64% 0.75% 0.83%
0.96% 1.13% 1.24%
11.0% 11.9% 12.6%
0.61% 0.69% 0.77%
0.91% 1.03% 1.14%
GS equity
Tier 1 capital
Total assets
GS return ratios
GS net OpFCF / RWA
Other
GS net FCF / tier 1
8.1%
2.5%
3.9%
11.1%
0.66%
0.99%
10.1%
0.63%
0.95%
10.7%
0.70%
1.05%
12.5%
6.2%
6.5%
11.1%
5.1%
6.3%
11.5%
5.8%
7.1%
Cash
100%
Interbank
80%
Customer
loans
60%
Equity &
debt
securities
Other
assets
3%
11%
Customer
deposits
Other
liabilities
62%
40%
Subordinate
d debt
38%
Preferred &
minorities
13%
12%
5%
0%
Shareholder
s' equity
Liab.
Assets
3 Q 0 4 4 Q 0 4 E 4 Q /4 Q 4 Q /3 Q
921
864
112
137
1 ,1 1 3
2 ,0 3 4
891
794
62
156
1 ,0 1 2
1 ,9 0 3
S ta ff
G e n e ra l a d m in is tra tio n
D e p re c ia tio n
G o o d w ill a m o rtisa tio n
T o ta l o p e ra ting e x p e n s e s
O p e ra tin g inc o m e
901
833
60
170
1 ,0 6 2
1 ,9 6 3
-2 %
-4 %
-4 7 %
24%
-5 %
-3 %
1%
5%
-4 %
9%
5%
3%
-7 3 5
-6 8 6
-7 2 5
-4 7 5
-4 2 9
-4 7 2
-1 9 0
-1 4 8
-1 8 3
-1 ,4 0 0 -1 ,2 6 3 -1 ,3 8 0
634
640
584
-1 %
-1 %
-4 %
NA
-1 %
-8 %
6%
10%
23%
NA
9%
-9 %
3 ,6 0 3
3 ,2 2 9
317
676
4 ,2 2 1
7 ,8 2 4
3 ,7 6 6
3 ,4 2 0
325
695
4 ,4 3 9
8 ,2 0 5
3 ,9 5 0
3 ,6 0 5
341
714
4 ,6 6 0
8 ,6 1 0
-4 %
6%
60%
-1 9 %
4%
0%
5%
6%
2%
3%
5%
5%
5%
5%
5%
3%
5%
5%
-2 ,8 4 1 -2 ,7 9 9 -2 ,8 3 8 -2 ,8 9 0
-1 ,7 6 9 -1 ,7 7 1 -1 ,7 9 7 -1 ,8 3 3
-4 9 2
-4 6 0
-4 6 4
-4 6 9
-1 5 0
-1 5 0
-1 5 0
-1 5 0
-5 ,2 5 2 -5 ,1 8 0 -5 ,2 5 0 -5 ,3 4 1
2 ,5 5 9 2 ,6 4 5 2 ,9 5 5 3 ,2 6 9
-1 %
0%
-7 %
0%
-1 %
3%
1%
1%
1%
0%
1%
12%
2%
2%
1%
0%
2%
11%
Retail and
SMEs
42%
GS net income
1,141
-565
-168
1,311
-684
41
1,559
-713
-244
1,758
-745
-266
408
668
602
746
Capital formation
10,038 10,848 11,814 12,957
136,513 135,830 139,905 144,337
Tier 1 capital
4.1%
0.3%
6.2%
0.5%
5.1%
0.4%
Equity structure
Item name
5.8%
0.5%
2002
2003
5,144
5,348
334
1,087
-1,436
-712
9,765
5,144
5,813
271
1,087
-1,302
-975
10,038
4,406
4,470
Tier 2 capital
Corporate
47%
Ratios
Equity as % of RWA
13,701
13,671
133,713
136,513
11.1%
88.9%
8.1%
12.8%
10.8%
89.2%
8.2%
11.5%
60.0%
14,000
12,000
50.0%
10,000
40.0%
8,000
6,000
30.0%
4,000
2,000
20.0%
L o a n -lo ss p ro vis io n s
O th e r e xc e p tio n a l in c o m e (e xp e n s e s)
O th e r in c o m e (e xp e n s e s)
-4 3 5
168
-3 4
-1 4 7
-3 1
-1 4 0
58
-3 1
NA
NA
-9 %
-5 %
NA
0%
-6 4 9
-3 2
-2 1 0
-5 7 4
130
-1 4 0
-5 1 8
25
-1 0 0
-5 0 8
20
-9 5
-1 2 %
NA
-3 3 %
-1 0 %
-8 1 %
-2 9 %
-2 %
-2 0 %
-5 %
10.0%
PBT
Tax
PAT
M in o ritie s a n d o th e r ite m s
N e t P ro fit
333
-1 3 7
196
-1 3
183
462
-1 8 1
281
-1 5
266
471
-1 7 5
295
-9
286
41%
28%
51%
-2 8 %
56%
2%
-3 %
5%
-3 8 %
8%
1 ,6 6 8
-6 5 7
1 ,0 1 1
-3 9
972
2 ,0 6 1
-7 5 8
1 ,3 0 2
-5 9
1 ,2 4 3
2 ,3 6 2
-8 6 9
1 ,4 9 3
-6 8
1 ,4 2 5
2 ,6 8 6
-9 8 8
1 ,6 9 8
-7 7
1 ,6 2 0
24%
15%
29%
52%
28%
15%
15%
15%
15%
15%
14%
14%
14%
14%
14%
-10.0%
E P S (E U R )
G S E P S (E U R )
D P S (E U R )
0 .1 0
0 .1 3
-
0 .1 4
0 .1 7
-
0 .1 5
0 .1 8
-
54%
41%
NA
NA
6%
8%
NA
NA
0 .5 3
0 .6 1
0 .6 2
0 .3 9
0 .6 7
0 .7 5
0 .7 0
0 .4 6
0 .7 6
0 .8 5
0 .8 4
0 .4 8
0 .8 7
0 .9 5
0 .9 4
0 .5 1
26%
22%
13%
19%
15%
13%
19%
4%
14%
12%
13%
5%
2006E
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
Public
sector
11%
2 0 0 3 2 0 0 4 E 2 0 0 5 E 2 0 0 6 E 0 4 /0 3 E 0 5 /0 4 E 0 6 /0 5 E
3 ,7 4 2
3 ,0 3 7
198
834
4 ,0 6 9
7 ,8 1 1
2005E
0
Capital
4Q 03
N e t fe e s & co m m is s io n s
T ra d in g p ro fits
O th e r re c u rrin g re ve n u e s
N e t n on -inte re s t inc o m e
T o ta l re c u rrin g re v e n u e s
2004E
Ite m n a m e
2003
Interbank
14%
40%
20%
Item name
0.0%
2001
2002
2003
Revenue growth
2004E
2005E
2006E
Tier 1
capital
1,425
150
-16
2005E
Other
1,243
150
-82
2004E
Goodwill
(negative)
2003
972
150
19
Stated net profit
GS net income
2004E 2005E 2006E
Preference
capital
2003
Cash
Item name
Minority
interests
(equity)
Accounting
Item name
Reserves
Returns (EUR mn)
Cost growth
111
Europe
Banks
Monte dei Paschi di Siena (BMPS.MI: IL/A)
Key statistics
Volume (rhs)
120
BANCA MONTE DEI PASCHI
FTSE W Europe
110
30,000
100
25,000
90
20,000
80
15,000
70
F
J
D
N
O
S
A
J
0
J
40
M
5,000
A
50
M
10,000
F
60
Investment summary: Cost
Current price (EUR)
Fair value (EUR)
Rating
Free float
Monte dei Paschi Foundation
Caltagirone
35,000
7,771
2.6
2.8
IL/A
3,023.9
45%
49%
4%
2.6%/-3.0%
Performance 6M (abs/rel) 9.6%/-10.1%
Performance 12M (abs/rel) -1.7%/-13.4%
Debt rating: Moodys
A1 / stable
Debt rating: S&P
A / stable
B'berg / Reuters codeBMPS IM/ BMPS.MI
Next announcement
2004 FY results
Date
Mar-05
BMPS equity story in the first nine
months of 2004. Management is
delivering better than expected cost
control, and it is possible that it may
beat its own targets. We believe that the
optimisation of the tax collection units
GS net
GS
Stated
PBT income
EPS
EPS
2002
803
670
0.26
0.22
2003
418
540
0.18
0.15
2004E
750
589
0.19
0.15
2005E
971
680
0.22
0.19
2006E
1,123
765
0.25
0.22
GS
BVPS
2.03
2.14
2.27
2.43
2.59
Stated
BVPS
1.98
2.01
2.11
2.23
2.37
P/E (X)
GS Stated
10.0
11.6
14.4
17.6
13.2
16.6
11.4
13.5
10.2
11.6
DPS
0.08
0.07
0.09
0.11
0.12
GS EPS Dividend
growth
yield
-2.7%
3.2%
-30.3%
2.7%
9.2%
3.3%
15.3%
4.1%
12.5%
4.8%
P/B (X)
GS Stated
1.3
1.3
1.2
1.3
1.1
1.2
1.1
1.2
1.0
1.1
ROE
11.1%
7.9%
7.5%
8.8%
9.6%
(90% cost income ratio with 3,000
employees) could represent a positive
catalyst.
Risks: There is a risk of a
deterioration in asset quality given the
2006E
net income
as %
of group
P/E (X)
2006E
Equity
as %
of group
P/B (X)
Wholesale banking
Retail Banking
Asset Management
Investment Banking
Corporate Center
Unrealized gains
228
434
151
33
-81
30%
57%
20%
4%
-11%
10.0
10.5
12.0
9.5
9.0
2,270
2,324
527
522
1,306
33%
33%
8%
8%
19%
1.0
2.0
3.4
0.6
-0.6
765
100%
10.9
6,948
100%
1.2
Goodwill
-97
0
Group
668
2006E
Value Per share
ROE (%) (EUR mn)
(EUR)
10.1%
18.7%
28.6%
6.3%
NM
2,284
4,560
1,807
311
-730
108
8,340
800
with an overall improvement among our
700
600
Italian banking coverage. Exposure to a
500
400
large textile industry (which is suffering
300
from foreign competition) in Tuscany (a
200
3,023.9
2.8
2.6
7.3%
Total
8,340
Corporate
Center
1.3
Investment
Bkg
0
Asset Mgmt
Fair value (EUR)
the first nine months of 2004, compared
900
Retail
6,314
27%
55%
22%
4%
-9%
1%
100%
increase in NPLs and doubtful loans in
100
-526
-108
12.5
0.8
1.5
0.6
0.1
-0.2
0.0
2.8
as %
of group
Corporate
Business unit
control represents the best part of the
Corporate
Center
7%
major market for BMPS) could pose
some structural problems.
Unrealised
gains
1%
trading at 10.2x 2006E GS EPS
(broadly in line with Pan European
Investment
Bkg
3%
Corporate
23%
Asset
Mgmt
18%
banks) and 1.1x GSBV 2005E
(expected ROE of 8.8% in 2005). We
retain our IL/A rating on the stock as we
see limited downside relative to the
Retail
48%
sector.
112
Europe
Banks
589
GS net income
+ Depreciation
668
97
0
680
765
680
-208
765
-190
191
-168
487
-211
471
-260
575
-301
6,744
477
113
0
7,152
574
113
0
GS net OpFCF
GS equity
6,463
6,865
7,334
7,839
Payout ratio
GS net FCF
GS equity
Tier 1 capital
Total assets
8.8% 9.6% 10.1%
0.48% 0.54% 0.60%
0.69% 0.77% 0.83%
23
277
211
275
88%
38%
43%
45%
55%
45%
52%
45%
Cash
100%
Interbank
80%
Customer
loans
60%
Equity &
debt
securities
40%
Other
assets
1%
7%
Customer
deposits
38%
57%
Other
liabilities
Subordinated
debt
41%
17%
20%
Preferred &
minorities
18%
5%
0%
Shareholders'
equity
Liab.
Assets
3.4%
0.4%
2.5%
6.6%
0.38%
0.53%
7.6%
0.45%
0.63%
7.1%
4.1%
6.3%
7.0%
3.2%
6.1%
7.9%
3.8%
7.4%
Public
sector
6%
4 Q 0 3 3 Q 0 4 4 Q 0 4 E 4 Q /4 Q
N e t in t e re s t in c o m e
N e t fe e s & c o m m is s io n s
O th e r r e c u r rin g r e v e n u e s
N e t n o n - in t e re s t in c o m e
610
606
358
311
-1 9
-2 9
193
161
532
443
1 ,1 4 2 1 ,0 4 9
4 Q /3 Q
618
344
32
185
562
1 ,1 8 0
1%
-4 %
NA
-4 %
6%
3%
2%
11%
NA
15%
27%
12%
2 ,4 5 3
1 ,3 2 7
34
718
2 ,0 7 9
4 ,5 3 3
2 ,5 5 5
1 ,3 9 8
36
732
2 ,1 6 6
4 ,7 2 1
2 ,6 3 8
1 ,4 6 4
37
742
2 ,2 4 3
4 ,8 8 1
0%
1%
58%
-2 2 %
-8 %
-4 %
4%
5%
5%
2%
4%
4%
3%
5%
2%
1%
4%
3%
- 1 ,7 9 5 -1 ,7 2 6 - 1 ,7 3 5 - 1 ,7 3 5
- 1 ,0 6 8 -1 ,0 5 7 - 1 ,0 6 8 - 1 ,0 9 5
-3 3 6
-2 8 0
-2 8 3
-2 8 9
-1 0 2
-1 0 2
-1 0 2
-9 7
- 3 ,3 0 0 -3 ,1 6 6 - 3 ,1 8 8 - 3 ,2 1 6
1 ,4 0 3 1 ,3 6 7 1 ,5 3 3 1 ,6 6 5
-4 %
-1 %
-1 7 %
0%
NA
-4 %
-3 %
0%
1%
1%
0%
NA
1%
12%
0%
2%
2%
-5 %
NA
1%
9%
S ta ff
T o ta l o p e ra t in g e x p e n s e s
O p e ra t in g in c o m e
-4 5 9
-2 3 5
-1 0 9
-8 0 3
339
-4 2 4
-2 6 5
-9 3
-7 8 3
266
-4 3 4
-2 6 8
-9 8
-8 0 1
379
-5 %
14%
-1 0 %
NA
NA
0%
12%
2%
1%
6%
NA
NA
2%
42%
L o a n -lo s s p r o v is io n s
In c o m e fro m a s s o c ia te s
O th e r e x c e p tio n a l in c o m e (e x p e n s e s )
O th e r in c o m e (e xp e n s e s )
-3 6 3
26
-1 3 0
-1 0 5
-5
-4
-1 3 0
4
-1 7
-6 4 %
NA
-8 4 %
-8 7 %
25%
NA
NA
NA
-7 7 9
14
-2 2 0
-5 3 7
-3 0
-5 0
-5 1 2
-5 0
-4 9 7
-4 5
-3 1 %
NA
NA
-7 7 %
-5 %
NA
NA
-1 %
-3 %
NA
NA
-1 0 %
PBT
Tax
PAT
N e t P ro f it
-1 2 7
2
-1 2 5
319
194
153
-5 7
96
-2
94
236
-9 0
146
-3
144
NA
NA
NA
NA
-2 6 %
54%
58%
52%
33%
52%
418
-2 6 8
151
292
443
750
-2 7 0
480
-1 2
468
971
-3 7 9
593
-1 5
578
1 ,1 2 3
-4 3 8
685
-1 7
668
79%
1%
NA
NA
6%
30%
40%
24%
30%
23%
16%
16%
16%
16%
16%
-
-
-
NA
NA
NA
NA
NA
NA
NA
NA
0 .1 5
0 .1 8
0 .1 8
0 .0 7
0 .1 5
0 .1 9
0 .1 9
0 .0 9
0 .1 9
0 .2 2
0 .2 2
0 .1 1
0 .2 2
0 .2 5
0 .2 5
0 .1 2
5 .8 %
5%
9%
25%
2 3 .4 %
19%
15%
23%
1 5 .6 %
13%
13%
16%
E P S (E U R )
G S E P S (E U R )
D P S (E U R )
540
-168
13
589
-211
-102
680
-260
-208
765
-301
-190
384
277
211
275
Capital formation
5,532 6,827 6,686 7,289
85,116 86,818 90,291 93,451
Tier 1 capital
Capital formation / RW A
6.9%
0.5%
4.1%
0.3%
Equity structure
Item name
3.2%
0.2%
3.8%
0.3%
2002
2003
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
1,675
3,504
808
368
-1,305
110
5,160
1,935
4,142
35
368
-1,286
338
5,532
2,530
3,102
2 0 0 3 2 0 0 4 E 2 0 0 5 E 2 0 0 6 E 0 4 /0 3 E 0 5 /0 4 E 0 6 /0 5 E
2 ,4 4 3
1 ,3 1 6
22
923
2 ,2 6 1
4 ,7 0 4
GS net income
- W orking capital charge
Tier 2 capital
Retail and
SMEs
55%
Ite m n a m e
2003 2004E 2005E 2006E
Corporate
39%
7.3%
0.40%
0.57%
Item name
Interbank
12%
6,463 6,865 7,334 7,839
5,532 6,827 6,686 7,289
122,973 123,706 126,795 129,994
85,116 86,818 90,291 93,451
GS return ratios
GS net OpFCF / RWA
Other
GS net FCF / tier 1
7.5% 8.8% 9.6%
0.38% 0.46% 0.52%
0.54% 0.65% 0.73%
765
289
-289
589
-102
6,377
375
113
0
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
680
283
-283
204
-13
6,077
273
113
0
122,973 123,706 126,795 129,994
85,116 86,818 90,291 93,451
589
280
-280
GS gross OpCF
Stated equity
+/- other
Total assets
540
-336
2006E
6,900
7,813
85,333
85,116
Ratios
Equity as % of RWA
7.1%
92.9%
7.0%
20.2%
6.7%
93.3%
7.2%
18.9%
12.0%
7,000
10.0%
6,000
8.0%
5,000
6.0%
4,000
4.0%
3,000
2,000
2.0%
1,000
0.0%
-2.0%
2001
2002
2003
2004E
2005E
-4.0%
-6.0%
2006E
0
Tier 1
capital
540
578
102
0
2005E
Other
GS net income
468
102
19
2004E
Goodwill
(negative)
443
102
-5
2003
Preference
capital
Stated net profit
2004E 2005E 2006E
Minority
interests
(equity)
2003
Cash
Item name
Reserves
Accounting
Item name
Capital
Returns (EUR mn)
-8.0%
Revenue growth
Cost growth
113
Europe
Banks
BNL (BANI.MI: IL/A)
Key statistics
Volume (rhs)
125
BANCA NAZIONALE LAVORO
FTSE W Europe
120,000
105
100,000
85
80,000
65
60,000
40,000
45
20,000
F
J
D
N
O
S
A
J
J
M
A
M
0
F
25
Investment summary: BNL’s
Current price (EUR)
Fair value (EUR)
Rating
Free float
BBVA
Generali
140,000
6,441
2.1
2.0
IL/A
3,024.1
36%
15%
9%
-0.2%/-5.6%
21.8%/-0.1%
8.4%/-4.5%
Debt rating: Moodys
A2 / stable
Debt rating: S&P
BBB+ / stable
B'berg / Reuters code BANI IM/ BANI.MI
Next announcement
2004 FY results
Date
Mar-05
GS
BVPS
1.71
1.92
1.53
1.69
1.82
Stated
BVPS
1.65
1.86
1.49
1.65
1.78
P/E (X)
GS Stated
59.3
51.1
75.6
33.5
NM
NM
13.4
13.4
11.6
11.6
DPS
0.00
0.04
0.00
0.05
0.07
GS EPS Dividend
growth
yield
-221%
0.0%
-21.5%
1.9%
NM
0.0%
NM
2.4%
15.5%
3.5%
P/B (X)
GS Stated
1.2
1.3
1.1
1.1
1.4
1.4
1.3
1.3
1.2
1.2
ROE
2.5%
3.7%
0.2%
10.2%
10.7%
Group
focused on the expiration of the Board
mandate in April 2005. In addition, with
the expiration of the BBVA-Generali
renewal of potential consolidation
discussions.
Risks: We believe that the ongoing
uncertainty surrounding the control of
62%
41%
13%
9%
-24%
10.0
10.5
12.5
9.5
9.0
1,707
1,374
293
569
1,274
33%
26%
6%
11%
24%
2.0
1.7
3.0
0.9
-0.9
561
100%
10.7
5,217
100%
1.2
0
0
561
20.2%
16.6%
24.0%
9.1%
NM
3,449
2,393
879
490
-1,208
0
6,004
0
0
10.7
5,217
Fair value (EUR)
1.1
0.8
0.3
0.2
-0.4
0.0
2.0
57%
40%
15%
8%
-20%
0%
100%
commercial banking. We believe that
800
700
recent Bank of Italy inspections and
600
remarks on the asset quality of the bank
500
400
could be a risk.
300
200
100
Valuation: The stock is trading at
0
1.2
6,004
3,047.3
2.0
2.1
-7.5%
Investment
Bkg
6%
11.6x GS 2006E earnings and 1.3x
2005E BV. This represents a premium
of 13% versus the Pan European
Corporate
Center
14%
Total
345
228
70
52
-134
weigh on the performance of
Corporate
Center
2006E
Value Per share
as %
(EUR) of group
Investment
Bkg
2006E
as %
Equity of group
Asset Mgmt
P/E (X)
Retail
2006E
as %
net income of group
Corporate
Goodwill
believe that the market will be more
the bank could damage morale and
Wholesale banking
Retail Banking
Asset Management
Investment Banking
Corporate Center
Unrealized gains
business plan in 2Q2005. However, we
shareholder pact, we could see a
GS net
GS
Stated
PBT income
EPS
EPS
2002
-74
78
0.04
0.04
2003
212
62
0.03
0.06
2004E
74
5
0.00
0.00
2005E
844
485
0.16
0.16
2006E
958
561
0.18
0.18
Business unit
management is due to deliver a new
banks, justified, in our view, by reports
Corporate
42%
of potential consolidation activity (Il sole
24 ore, September 4, 2004).
Asset
Mgmt
10%
Retail
28%
114
Europe
Banks
485
0
0
561
0
0
GS net income
+ Depreciation
62
-196
5
200
-200
485
198
-198
561
201
-201
62
5
485
561
GS gross OpCF
-133
-346
5
-14
485
-341
561
-166
-479
-91
-10
-3
144
-155
395
-224
Stated equity
+/- other
4,112 4,531 5,014 5,420
0
0
0
0
128
128
128
128
0
0
0
0
GS net OpFCF
GS net FCF
-570
GS equity
4,239 4,659 5,142 5,547
Payout ratio
-19%
65%
Total assets
80,931 82,305 83,707 86,038
61,610 61,850 67,540 70,301
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
-11
171
-26% 108%
24% 32%
57%
40%
GS return ratios
-0.2% 2.9% 7.4%
-0.01% 0.17% 0.47%
-0.02% 0.22% 0.57%
GS net OpFCF / RWA
Other
-12.5% -0.2% 3.0% 7.6%
GS net FCF / tier 1
-14.9% -0.3% -0.2% 3.3%
GS net OpFCF / market value -7.4% -0.2% 2.2% 6.1%
0.2% 10.2% 10.7%
0.01% 0.58% 0.66%
0.02% 0.75% 0.81%
80%
Customer
loans
60%
Equity &
debt
securities
Other
assets
Customer
deposits
39%
Other
liabilities
69%
40%
Subordinate
d debt
36%
20%
Preferred &
minorities
5%
11%
5%
0%
Shareholder
s' equity
Liab.
Assets
Public
sector
8%
Retail and
SMEs
40%
Corporate
52%
2 0 0 3 2 0 0 4 E 2 0 0 5 E 2 0 0 6 E 0 4 /0 3 E 0 5 /0 4 E 0 6 /0 5 E
435
216
-6 7
52
201
636
372
221
20
73
314
686
378
235
26
76
336
715
-1 3 %
9%
NA
45%
67%
12%
2%
6%
30%
4%
7%
4%
S t a ff
G e n e r a l a d m in is tr a t io n
D e p re c ia tio n
O t h e r o p e r a t in g c o s ts
-2 9 0
-1 4 8
-5 3
-4 9 1
145
-2 7 3
-1 5 6
-5 2
-4 8 1
205
-2 7 6
-1 5 7
-5 1
-4 8 4
231
-5 %
6%
-3 %
NA
NA
-1 %
59%
1%
1%
-2 %
NA
NA
1%
13%
O t h e r e xc e p tio n a l in c o m e ( e x p e n s e s )
O t h e r in c o m e (e xp e n s e s )
-3 9 2
261
-1 3 7
-9 3
-1 7
-9
-1 9 4
-3 7 6
-5 0 %
NA
NA
NA
109%
NA
NA
NA
-7 7 1
217
-2 2 3
-4 9 5
31
-4 4 0
-2 5 5
-3 0
PBT
Tax
PAT
M in o ritie s a n d o th e r it e m s
N e t P r o fit
-1 2 3
8
-1 1 5
106
-9
86
-5 1
35
35
-3 3 9
153
-1 8 6
-3
-1 8 9
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
212
-1 3 5
77
64
141
74
-5 9
15
-4
11
-
-
-
NA
NA
NA
NA
NA
NA
NA
NA
0 .0 6
0 .0 6
0 .0 3
0 .0 4
0 .0 0
0 .0 0
0 .0 0
0 .0 0
E P S (E U R )
G S E P S (E U R )
D P S (E U R )
1 ,6 8 1
916
40
289
1 ,2 4 4
2 ,9 2 5
1 ,6 7 0
989
203
296
1 ,4 8 7
3 ,1 5 7
-1 2 %
-2 %
NA
-1 %
11%
-2 %
7%
5%
0%
3%
4%
6%
6%
5%
1%
1%
4%
5%
-1 ,1 1 4 - 1 , 0 6 5 - 1 ,0 8 3 -1 ,0 8 8
-6 2 6
-6 1 2
-6 0 6
-6 1 8
-1 9 6
-2 0 0
-1 9 8
-2 0 1
-1 ,9 3 6 - 1 , 8 7 7 - 1 ,8 8 7 -1 ,9 0 7
989
9 7 8 1 ,1 2 9 1 ,2 5 0
-4 %
-2 %
2%
NA
NA
-3 %
-1 %
2%
-1 %
-1 %
NA
NA
0%
15%
1%
2%
2%
NA
NA
1%
11%
-2 6 5
-2 7
-3 6 %
NA
-8 6 %
97%
-4 8 %
NA
NA
-9 3 %
4%
NA
NA
-1 0 %
844
-3 5 4
489
-4
485
958
-3 9 3
565
-5
561
-6 5 %
-5 6 %
-8 1 %
-1 0 6 %
-9 2 %
NA
NA
NA
NA
NA
14%
11%
15%
14%
15%
0 .1 6
0 .1 6
0 .1 6
0 .0 5
0 .1 8
0 .1 8
0 .1 8
0 .0 7
-9 4 % 4 4 2 5 %
-9 4 %
NA
-9 5 %
NA
-9 8 %
NA
15%
15%
15%
44%
1 ,4 7 6
894
200
285
1 ,3 7 8
2 ,8 5 5
1 ,5 8 2
939
200
295
1 ,4 3 4
3 ,0 1 5
62
-91
346
5
-3
-14
485
-155
-341
561
-224
-166
Capital formation
317
-12
-11
171
3,827 4,277 4,764 5,203
61,610 61,850 67,540 70,301
Tier 1 capital
8.3%
0.5%
10.0%
5.0%
0.0%
2001
2002
2003
2004E
2005E
-10.0%
-0.2%
0.0%
3.3%
0.2%
2002
2003
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
1,088
2,493
115
0
-401
84
3,379
1,106
3,006
116
0
-416
15
3,827
Tier 2 capital
2,409
2,729
5,859
6,627
67,370
61,610
0.0%
100.0%
5.5%
10.6%
0.0%
100.0%
6.9%
9.8%
-5.0%
-0.3%
0.0%
Equity structure
Item name
2006E
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Capital
4 Q 0 3 3 Q 0 4 4 Q 0 4 E 4 Q /4 Q 4 Q /3 Q
T r a d in g p ro fits
O t h e r r e c u r r in g r e v e n u e s
N e t n o n -i n t e re s t i n c o m e
T o ta l re c u rri n g r e v e n u e s
GS net income
Ratios
Equity as % of RWA
It e m n a m e
2003 2004E 2005E 2006E
Interbank
16%
4,239 4,659 5,142 5,547
3,827 4,277 4,764 5,203
80,931 82,305 83,707 86,038
61,610 61,850 67,540 70,301
GS equity
Tier 1 capital
Total assets
0.1% 9.9% 10.5%
0.01% 0.58% 0.66%
0.01% 0.75% 0.81%
-12
Interbank
1%
13%
Tier 1
capital
11
0
-6
100%
Other
GS net income
141
0
-78
Cash
Goodwill
(negative)
Stated net profit
2003 2004E 2005E 2006E
Preference
capital
2003 2004E 2005E 2006E
Item name
Cash
Item name
Minority
interests
(equity)
Accounting
Item name
Reserves
Returns (EUR mn)
-15.0%
Revenue growth
Cost growth
115
Europe
Banks
Capitalia (CPTA.MI: OP/A)
Key statistics
Volume (rhs)
180
CAPITALIA
FTSE W Europe
120,000
160
100,000
140
80,000
120
100
60,000
80
40,000
60
20,000
40
GS net
GS
Stated
PBT income
EPS
EPS
2002
-131
-3,270
-1.48
-0.13
2003
136
61
0.03
0.01
2004E
656
248
0.11
0.11
2005E
1,203
598
0.27
0.26
2006E
1,458
714
0.32
0.31
8,302
3.8
3.9
OP/A
2,207
9%
6%
47%
14.4%/8.2%
Debt rating: Moodys
A2 / stable
Debt rating: S&P
B'berg / Reuters code CPTA IM/ CPTA.MI
Next announcement
2004 FY results
Date
Feb-05
F
J
D
N
O
S
A
J
J
M
A
M
0
F
20
Investment summary: While we
Current price (EUR)
Fair value (EUR)
Rating
ABN Amro
CR Roma Foundation
Free float
Stated
BVPS
3.04
2.98
2.97
3.17
3.36
DPS
0.00
0.02
0.05
0.13
0.16
P/E (X)
GS Stated
NM
NM
NM
NM
33.5
34.2
13.9
14.6
11.6
12.0
GS EPS Dividend
growth
yield
NM
0.0%
NM
0.5%
NM
1.5%
142%
3.4%
19.3%
4.2%
2005, we believe the current level of
staffing is becoming unjustifiable.
Capitalia (ex Bipop) has on average
35% more employees per branch
P/B (X)
GS Stated
1.1
1.2
1.1
1.3
1.1
1.3
1.0
1.2
1.0
1.1
ROE
NM
0.5%
3.7%
8.4%
9.6%
cost to revenues ratio that is 16% above
its major peers. We believe that it will
be hard for management to justify the
current situation. We estimate that the
potential value creation of a new layoff
plan could be some 8.4% of Capitalia's
Capitalia
group
748
876
7,079
8,704
2,207
3.9
3.8
5%
#REF!
12.2 x
1.01 x
current market capitalisation.
900
800
Risks: The market is keen to see an
700
600
improvement in the BdR network and
500
400
may react negatively to a
300
disappointment. According to
200
100
0
Total
Fair price/
%
market cap owned
985
76%
1,992
44%
7,079
Corporate
Center
1.1 x
3.1 x
2006E
P/E
GS Net inc.
82 12.0 x
73 27.2 x
672 10.5 x
Investment
Bkg
P/BV
Asset Mgmt
2006E
GS ROE
9.5%
11.5%
Retail
2006E
GS BV
860
637
Corporate
Mediocredito Centrale
Fineco (implied market value)
Banking business (clean book)
Capitalia fair value
Estimated fair value per share (EUR)
Current price (EUR)
Potential upside
Value destroyed by the market
Implied valuation
2006E GS P/E
2006E GS P/BV
than average revenue momentum in
compared with the sector and a staff
GS
BVPS
3.47
3.47
3.51
3.73
3.92
SOTP after total clean up
forecast that Capitalia will have higher
management, there have been clear
signs of recovery in recent months. The
BdR network (1,121 branches) is
delivering less than half the volume of
mortgages sales vs. Banco di Sicilia
Corporate
Center
21%
(509 branches).
Corporate
9%
Valuation: The stock currently trades
Investmen
t Bkg
7%
Asset
Mgmt
15%
at a 2006E P/E of 11.6x, 1.2x 05E BV
Retail
48%
with an expected ROE of 8.4%. Our fair
value is EUR3.9, 5% above the current
price.
116
Europe
Banks
2005E
2006E
31
113
-83
243
113
-108
567
35
-4
694
20
0
GS net income
+ Depreciation
61
-337
248
317
-317
598
317
-317
714
315
-315
61
248
598
714
GS gross OpCF
-276
-549
248
113
598
-157
714
-177
-825
-44
360
-121
441
-283
537
-347
Stated equity
+/- other
6,585
583
487
0
6,559
696
487
0
7,005
731
487
0
7,415
751
487
0
GS net OpFCF
GS equity
7,656
7,742
8,223
8,654
Payout ratio
Total assets
2004E
128,351 128,600 130,800 132,984
89,375 87,498 90,123 93,072
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
3.3%
0.19%
0.28%
7.7%
0.46%
0.67%
8.6%
0.54%
0.78%
3.7%
0.19%
0.27%
8.4%
0.44%
0.64%
9.6%
0.53%
0.76%
-869
239
157
190
-5%
143%
34%
50%
64%
50%
65%
50%
GS net FCF
Cash
100%
80%
Customer
loans
60%
Equity &
debt
securities
Other
assets
21%
Customer
deposits
36%
59%
40%
20%
GS return ratios
GS net OpFCF / RWA
Other
GS net FCF / tier 1
Other
liabilities
Subordinate
d debt
35%
11%
Preferred &
minorities
15%
5%
0%
Liab.
Assets
Shareholder
s' equity
Public
sector
9%
Retail and
SMEs
39%
-13.5%
-14.2%
-9.9%
4.7%
0.28%
0.41%
5.5%
0.34%
0.50%
6.4%
0.41%
0.59%
5.7%
3.8%
4.3%
6.5%
2.3%
5.3%
7.4%
2.6%
6.5%
4 Q 0 3 3 Q 0 4 4 Q 0 4 E 4 Q /4 Q 4 Q /3 Q
T r a d in g p ro f its
O th e r re c u r r in g re v e n u e s
N e t n o n -i n t e re s t in c o m e
T o t a l re c u rrin g re v e n u e s
597
573
376
342
196
93
153
141
725
576
1 ,3 2 2 1 , 1 4 9
575
375
135
159
670
1 ,2 4 5
-4 %
0%
-3 1 %
4%
-8 %
-6 %
1%
10%
45%
13%
16%
8%
2 ,3 3 9
1 ,4 2 6
421
597
2 ,4 4 3
4 ,7 8 2
2 ,4 4 5
1 ,5 1 4
436
638
2 ,5 8 8
5 ,0 3 3
2 ,5 6 6
1 ,6 0 2
457
679
2 ,7 3 9
5 ,3 0 5
-4 %
4%
-8 %
13%
4%
0%
5%
6%
3%
7%
6%
5%
5%
6%
5%
7%
6%
5%
0%
-4 %
-6 %
0%
NA
-2 %
3%
1%
1%
0%
-6 9 %
NA
-2 %
21%
2%
2%
-1 %
-4 3 %
NA
1%
13%
S ta ff
G e n e r a l a d m in is tra tio n
T o t a l o p e ra tin g e x p e n s e s
-4 4 1
-3 0 7
-1 3 6
-8 8 4
438
-4 3 8
-2 6 8
-1 0 4
-8 1 0
339
-4 4 4
-2 8 1
-1 1 3
-8 3 8
407
1%
-8 %
-1 7 %
NA
NA
-5 %
-7 %
1%
5%
9%
NA
NA
3%
20%
- 1 ,7 7 1 - 1 ,7 7 9 -1 ,7 8 9 -1 ,8 2 5
- 1 ,1 2 1 - 1 ,0 7 6 -1 ,0 8 6 -1 ,1 0 8
-3 3 7
-3 1 7
-3 1 7
-3 1 5
-1 1 3
-1 1 3
-3 5
-2 0
- 3 ,3 4 2 - 3 ,2 8 5 -3 ,2 2 8 -3 ,2 6 8
1 ,4 5 9 1 ,4 9 7 1 ,8 0 5 2 ,0 3 7
O th e r e xc e p t io n a l in c o m e ( e x p e n s e s )
O th e r in c o m e ( e xp e n s e s )
-6 3 2
119
-1 2 1
-1 7 6
41
-4 5
-2 3 7
137
-9 3
-6 3 %
NA
15%
-2 3 %
35%
NA
NM
NM
- 1 ,2 6 7
239
-2 9 5
-7 8 1
240
-3 0 0
-5 5 0
7
-6 0
-5 3 9
-4 0
-3 8 %
NA
1%
2%
-3 0 %
NA
-9 7 %
-8 0 %
-2 %
NA
-1 0 0 %
-3 3 %
PBT
Tax
PAT
M in o r it ie s a n d o th e r ite m s
N e t P ro fit
-1 9 6
-1 6 9
-3 6 5
10
-3 5 5
160
-8 8
72
-1 5
57
2 1 4 -2 0 9 %
-8 6
NA
1 2 8 -1 3 5 %
-9 - 1 9 0 %
1 1 9 -1 3 4 %
34%
-3 %
78%
-4 0 %
109%
136
-8 9
47
-1 6
31
656
-3 6 1
295
-5 3
243
1 ,2 0 3
-5 7 7
626
-5 9
567
1 ,4 5 8
-6 9 9
759
-6 5
694
NA
NA
NA
NA
NA
83%
60%
112%
12%
134%
21%
21%
21%
10%
22%
-
-
NA
NA
NA
NA
0 .0 1
0 .0 3
0 .0 2
0 .1 1
0 .1 6
0 .1 1
0 .0 5
0 .2 6
0 .2 7
0 .2 7
0 .1 3
0 .3 1
0 .3 2
0 .3 2
0 .1 6
687%
NA
NA
NA
134%
69%
142%
134%
22%
19%
19%
22%
E P S (E U R )
G S E P S (E U R )
D P S (E U R )
-
NA
NA
NA
NA
248
-121
113
598
-283
-157
714
-347
-177
Capital formation
566
239
157
190
6,126 6,265 6,805 7,300
89,375 87,498 90,123 93,072
Tier 1 capital
9.2%
0.6%
3.8%
0.3%
2.3%
0.2%
2.6%
0.2%
Equity structure
Item name
2002
2003
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
2,207
4,501
450
0
-744
-329
6,084
2,207
4,378
485
0
-751
-194
6,126
Tier 2 capital
3,269
2,938
Ratios
Equity as % of RWA
2 0 0 3 2 0 0 4 E 2 0 0 5 E 2 0 0 6 E 0 4 /0 3 E 0 5 /0 4 E 0 6 /0 5 E
2 ,4 4 4
1 ,3 7 4
457
526
2 ,3 5 7
4 ,8 0 1
61
-44
549
Corporate
52%
It e m n a m e
GS net income
7,656 7,742 8,223 8,654
6,126 6,265 6,805 7,300
128,351 128,600 130,800 132,984
89,375 87,498 90,123 93,072
GS equity
Tier 1 capital
Total assets
2003 2004E 2005E 2006E
Interbank
13%
Interbank
Item name
2%
8,633
89,375
0.0%
100.0%
7.3%
10.9%
0.0%
100.0%
7.9%
10.9%
40.0%
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
-5.0%
9,058
98,525
2001
2002
2003
2004E
2005E
-10.0%
2006E
Tier 1
capital
2003
Other
2006E
Goodwill
(negative)
GS net income
2005E
Preference
capital
Stated net profit
2004E
Minority
interests
(equity)
2003
Cash
Item name
Reserves
Accounting
Item name
Capital
Returns (EUR mn)
-15.0%
Revenue growth
Cost growth
117
Europe
Banks
Antonveneta (NTV.MI: IL/A)
Key statistics
Volume (rhs)
140
130
120
110
100
90
80
70
60
50
BANCA ANTONVENETA
FTSE W Europe
12000
10000
8000
6000
4000
2000
F
J
D
N
O
S
A
J
J
M
A
M
0
F
Investment summary: The market
Current price (EUR)
Fair value (EUR)
Rating
Free float
Abn Amro
Delta Erre
14000
6,536
20.9
17.4
IL/A
312
31%
13%
10%
3.7%/-2.0%
27.9%/4.8%
Debt rating: Moodys
A3 / stable
Debt rating: S&P
NA
NTV IM/ NTV.MI
Next announcement
2004 FY results
Date
Mar-05
GS
BVPS
12.58
10.26
11.88
12.66
13.68
Stated
BVPS
11.67
9.40
11.01
11.70
12.64
P/E (X)
GS Stated
17.1
24.4
NM
NM
25.2
25.7
17.6
18.9
13.3
14.0
DPS
0.60
0.00
0.41
0.55
0.75
GS EPS Dividend
growth
yield
-24.6%
2.9%
NM
0.0%
NM
1.9%
43.3%
2.6%
32.3%
3.6%
P/B (X)
GS Stated
1.7
1.8
2.0
2.2
1.8
1.9
1.7
1.8
1.5
1.7
ROE
7.6%
NM
8.3%
9.7%
12.2%
penetration. We see the bank
potentially benefiting from an increase
in interest rates, due to the ALM
structure. A possible positive could
portfolio. Asset quality and high
provisions charges (82 bp annualised)
remain concerns.
Risks: A potential risk is the weak
capital structure (Tier 1 at 5.5%). We
10%
93%
16%
2%
-22%
10.0
10.5
13.0
10.0
9.5
1,132
1,296
94
181
1,099
30%
34%
2%
5%
29%
0.4
3.7
10.9
0.6
-0.9
491
100%
11.0
3,801
100%
1.4
Goodwill
-27
1
Group
466
4.4%
35.3%
84.1%
6.0%
-9.7%
500
4,804
1,028
109
-1,011
-11
5,419
-321
11
11.6
3,491
Fair value (EUR)
1.6
15.4
3.3
0.3
-3.2
0.0
17.4
9%
89%
19%
2%
-19%
0%
100%
next few months on corporate
700
600
governance issues, since the
500
shareholder pact that currently controls
400
the bank (29%, of which 13% is ABN)
300
200
will expire in March 2005. However, we
100
0
1.6
5,419
Corporate
Center
14%
17.4
20.9
-17.1%
believe that reports of potential
consolidation (Ansa, September 16,
2004) are already incorporated in the
312.3
Total
50
458
79
11
-106
expect significant news flow over the
Corporate
Center
2006E
Value Per share
as %
(EUR) of group
Investment
Bkg
2006E
as %
Equity of group
Asset Mgmt
P/E (X)
Retail
2006E
as %
net income of group
Corporate
Wholesale banking
Retail Banking
Asset Management
Investment Banking
Corporate Center
Unrealized gains
revenue growth from increasing AuM
come from the repricing of the securities
GS net
GS
Stated
PBT income
EPS
EPS
2002
485
309
1.22
0.86
2003
-1,154
-701
-2.46
-2.95
2004E
507
259
0.83
0.81
2005E
632
371
1.19
1.11
2006E
808
491
1.57
1.49
Business unit
is keen to see potential incremental
current valuation.
Corporate
7%
Investmen
t Bkg
1%
Valuation: We retain an IL/A rating on
the stock given its unappealing valuation.
It is trading on 13.3x GS 2006E, a 20%
premium to the Italian banks average,
Asset
Mgmt
14%
Retail
64%
pricing in the restructuring story and
consolidation speculation of recent
months, in our view.
118
Europe
Banks
466
27
-1
GS net income
-701
259
371
491
GS net income
+ Depreciation
-701
-248
259
230
-230
371
231
-231
491
233
-233
Interbank
GS gross OpCF
-948
-181
259
0
371
-90
491
-99
-1,129
0
259
-127
281
-173
392
-233
Stated equity
+/- other
2,682
254
-9
0
3,436 3,655 3,948
281
307
334
-9
-9
-9
0
0
0
GS net OpFCF
GS equity
2,928
3,709 3,954 4,273
Payout ratio
Total assets
GS net FCF
47,604 49,810 51,231 52,757
42,967 42,967 44,470 46,122
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
132
108
159
0%
0%
49%
50%
62%
50%
59%
50%
GS return ratios
7.8% 7.3% 9.5%
0.53% 0.56% 0.75%
0.60% 0.64% 0.87%
GS net OpFCF / RWA
Other
-54.1% 8.6% 8.7% 11.0%
GS net FCF / tier 1
-54.1% 4.4% 3.3% 4.5%
GS net OpFCF / market value -17.3% 4.0% 4.3% 6.0%
8.3% 9.7% 12.2%
0.52% 0.68% 0.90%
0.59% 0.79% 1.03%
Equity &
debt
securities
Other
assets
Interbank
41%
Customer
deposits
80%
60%
Other
liabilities
77%
40%
Subordinate
d debt
41%
20%
0%
Preferred &
minorities
5%
10%
6%
Assets
Liab.
Shareholder
s' equity
Public
sector
1%
Corporate
48%
Retail and
SMEs
51%
T r a d in g p ro fits
O t h e r r e c u r r in g r e v e n u e s
N e t n o n -i n t e re s t i n c o m e
T o ta l re v e n u e s
S t a ff c o s ts
G e n e r a l a d m in is tr a t io n
D e p re c ia tio n
O t h e r o p e r a t in g c o s ts
4 Q 0 3 3 Q 0 4 4 Q 0 4 E 4 Q /4 Q 4 Q /3 Q
334
150
-2 1
71
200
534
349
124
6
59
189
538
356
139
15
65
219
575
7%
-7 %
NM
-9 %
9%
8%
2%
12%
NM
10%
16%
7%
-1 7 8
-1 3 9
-8 0
-3 9 7
138
-1 7 4
-1 0 2
-6 1
-3 3 7
201
-1 7 7
-1 3 0
-7 7
-3 8 4
191
-1 %
-7 %
-4 %
NM
NM
-3 %
39%
2%
27%
26%
NM
NM
14%
-5 %
2 0 0 3 2 0 0 4 E 2 0 0 5 E 2 0 0 6 E 0 4 /0 3 E 0 5 /0 4 E 0 6 /0 5 E
1 ,3 5 0
520
17
261
797
2 ,1 4 7
1 ,3 9 0
536
40
269
845
2 ,2 3 5
1 ,4 5 1
587
44
278
909
2 ,3 6 0
1 ,5 3 0
644
48
288
980
2 ,5 1 1
3%
3%
NM
3%
6%
4%
4%
9%
10%
3%
8%
6%
5%
10%
10%
3%
8%
6%
-6 9 3
-7 1 1
-7 1 8
-7 2 9
-4 6 6
-4 4 0
-4 4 4
-4 5 1
-2 4 8
-2 3 0
-2 3 1
-2 3 3
-2 7
-2 7
-2 7
-2 7
-1 ,4 3 3 - 1 , 4 0 8 - 1 ,4 2 0 -1 ,4 4 0
713
827
9 4 0 1 ,0 7 1
3%
-5 %
-7 %
0%
NM
-2 %
16%
1%
1%
0%
0%
NM
1%
14%
1%
1%
1%
0%
NM
1%
14%
O t h e r in c o m e (e xp e n s e s )
-7 1 8
-1 4 4
-1 2 0
-8 6
14
-4
-9 0
6
-1 4
-8 7 %
NM
NM
-8 8 %
5%
NM
-5 5 %
NM
-1 ,4 8 1
-1 5 8
-2 2 8
-3 3 5
44
-3 0
-2 8 5
2
-2 5
-2 4 5
2
-2 0
-7 7 %
NM
NM
-8 7 %
-1 5 %
NM
NM
-1 7 %
-1 4 %
NM
0%
-2 0 %
PBT
Tax
PAT
M in o ritie s a n d o th e r it e m s
N e t P r o fit
-8 4 4
216
-6 2 9
1
-6 2 7
126
-6 2
64
-0
64
93
-4 3
50
-1
50
NM
NM
NM
NM
NM
-2 6 %
-3 1 %
-2 1 %
85%
-2 2 %
-1 ,1 5 4
309
-8 4 5
2
-8 4 3
507
-2 5 3
253
1
254
632
-2 8 5
348
-2
346
808
-3 3 9
469
-3
466
NM
NM
NM
NM
NM
25%
12%
37%
NM
36%
28%
19%
35%
28%
35%
-
-
-
NM
NM
NM
NM
NM
NM
NM
NM
- 2 .9 5
- 2 .8 6
- 2 .4 6
-
0 .8 1
0 .9 0
0 .8 3
0 .4 1
1 .1 1
1 .1 9
1 .1 9
0 .5 5
1 .4 9
1 .5 8
1 .5 7
0 .7 5
-1 2 8 %
NM
NM
NM
36%
32%
43%
36%
35%
32%
32%
35%
E P S (E U R )
G S E P S (E U R )
D P S (E U R )
2004E
2005E
2006E
GS net income
-701
0
181
259
-127
0
371
-173
-90
491
-233
-99
Capital formation
-520
132
108
159
Tier 1 capital
2,086
42,967
2,997
42,967
3,246
44,470
3,572
46,122
-24.9%
-1.2%
4.4%
0.3%
3.3%
0.2%
4.5%
0.3%
Equity structure
Item name
2002
2003
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
709
2,238
245
300
-891
-201
2,401
865
1,817
37
300
-948
15
2,086
Tier 2 capital
1,472
1,499
It e m n a m e
2003
2,928 3,709 3,954 4,273
2,086 2,997 3,246 3,572
47,604 49,810 51,231 52,757
42,967 42,967 44,470 46,122
GS equity
Tier 1 capital
Total assets
7.8% 9.7% 11.9%
0.53% 0.73% 0.94%
0.60% 0.85% 1.08%
-1,129
Customer
loans
7%
Item name
3,578
45,979
42,967
Ratios
Equity as % of RWA
12.5%
87.5%
6.9%
27.1%
14.4%
85.6%
6.3%
31.3%
30.0%
3,500
3,000
25.0%
2,500
20.0%
2,000
1,500
15.0%
1,000
10.0%
500
0
5.0%
0.0%
-5.0%
3,865
2001
2002
2003
2004E
2005E
2006E
Tier 1
capital
346
27
-1
1%
8%
Other
254
27
-22
100%
Goodwill
(negative)
-843
27
115
Cash
Preference
capital
Stated net profit
2003 2004E 2005E 2006E
Minority
interests
(equity)
2003 2004E 2005E 2006E
Cash
Item name
Reserves
Accounting
Item name
Capital
Returns (EUR mn)
-10.0%
Revenue growth
Cost growth
119
Europe
Banks
Banco Popolare di Verona e Novara (BPVN.MI: U/A)
Key statistics
Volume (rhs)
120
BCA.PPO.DI VERONA NOVARA
FTSE W Europe
10,000
110
8,000
100
90
6,000
80
4,000
70
2,000
60
5,661
15.2
14.3
U/A
372.7
100%
F
J
D
N
O
S
A
J
J
M
A
M
0
F
50
Current price (EUR)
Fair value (EUR)
Rating
Free float
2.4%/-3.1%
Debt rating: Moodys
A2 / stable
Debt rating: S&P
A / stable
B'berg / Reuters code BPVN IM/ BPVN.MI
Next announcement
2004 FY results
Date
Mar-05
recovery, due to its market positioning.
The positive trend in 4Q2004 for the
Italian banks seems to confirm signs of
recovery in corporate lending which are
mainly driven by SMEs. The recently
presented business plan was mainly
GS net
GS
Stated
PBT income
EPS
EPS
2002
676
305
0.83
0.93
2003
569
426
1.15
0.87
2004E
700
422
1.13
1.04
2005E
801
456
1.22
1.17
2006E
892
507
1.35
1.31
GS
BVPS
9.06
9.70
10.58
11.38
12.09
Stated
BVPS
8.73
9.22
10.02
10.78
11.44
P/E (X)
GS Stated
18.4
16.3
13.2
17.4
13.4
14.6
12.5
13.0
11.2
11.6
DPS
0.39
0.40
0.57
0.64
0.65
GS EPS Dividend
growth
yield
-15.6%
2.6%
39.4%
2.6%
-1.7%
3.8%
7.6%
4.2%
11.1%
4.3%
P/B (X)
GS Stated
1.7
1.7
1.6
1.6
1.4
1.5
1.3
1.4
1.3
1.3
ROE
10.4%
9.7%
10.8%
11.3%
11.8%
focused on possible changes in longterm growth prospects for the Italian
economy and the new focus on highgrowth business segments.
Risks: We see potential acquisition
145
265
96
47
-45
29%
52%
19%
9%
-9%
9.5
10.5
12.0
9.5
9.0
985
1,183
434
470
1,096
24%
28%
10%
11%
26%
1.4
2.3
2.6
0.9
-0.4
507
100%
10.5
4,168
100%
1.3
Goodwill
-17
0
Group
490
14.7%
22.4%
22.1%
9.9%
NM
1,377
2,777
1,151
442
-401
0
5,345
-235
0
10.9
3,933
3.7
7.4
3.1
1.2
-1.1
0.0
14.3
26%
52%
22%
8%
-8%
0%
100%
600
distribute its excess capital because
500
management highlighted that it is
400
keener to use it in order to finance
300
growth. Low coverage of NPL (39%
200
2004E) could represent a risk.
100
0
Corporate
Wholesale banking
Retail Banking
Asset Management
Investment Banking
Corporate Center
Unrealized gains
1.4
5,345
375.1
Fair value (EUR)
14.3
15.2
-6.2%
risk. We do not believe that BPVN will
Total
2006E
Value Per share
as %
(EUR) of group
Corporate
Center
2006E
as %
Equity of group
Investment
Bkg
P/E (X)
Asset Mgmt
2006E
as %
net income of group
Retail
Business unit
the bank to benefit from loan growth
2006E GS P/E, broadly in line with the
Italian banking sector. BPVN is
Investmen
t Bkg
7%
Valuation: BPVN is trading at 11.2x
perceived as a growth stock but we do
Corporate
Center
7%
not expect the bank to benefit from
Corporate
22%
Asset
Mgmt
19%
outstanding growth opportunities versus
its main competitors.
Retail
45%
120
Europe
Banks
422
456
GS net income
+ Depreciation
490
17
0
507
426
-145
422
153
-153
456
158
-158
507
160
-160
GS gross OpCF
281
65
422
-67
456
-163
507
-200
Stated equity
+/- other
3,413 3,734 4,044 4,292
177
210
227
243
0
0
0
0
0
0
0
0
GS net OpFCF
346
-148
354
-213
293
-242
307
-245
GS net FCF
198
141
51
62
GS equity
3,590 3,944 4,270 4,535
Payout ratio
43%
46%
60%
55%
83%
55%
80%
50%
Total assets
48,606 49,376 50,205 52,151
37,225 38,349 41,072 44,407
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
GS return ratios
GS net OpFCF / RWA
Other
GS net FCF / tier 1
10.8% 11.3% 11.8%
0.79% 0.88% 0.96%
1.02% 1.11% 1.15%
7%
Interbank
44%
Customer
deposits
12%
Interbank
80%
Customer
loans
60%
Equity &
debt
securities
Other
assets
Other
liabilities
66%
40%
Subordinate
d debt
39%
20%
Preferred &
minorities
9%
0%
10%
7%
Assets
Liab.
Shareholder
s' equity
Public
sector
1%
Corporate
46%
9.4% 7.1% 7.0%
0.72% 0.59% 0.60%
0.94% 0.74% 0.72%
11.9% 10.7%
6.8% 4.3%
6.1% 6.3%
7.9%
1.4%
5.2%
Retail and
SMEs
53%
288
180
29
49
259
547
298
196
30
132
358
657
3%
-2 %
19%
1%
0%
2%
3%
9%
4%
166%
38%
20%
S t a ff
G e n e ra l a d m in is tr a tio n
D e p re c ia tio n
O t h e r o p e ra tin g c o s ts
T o t a l o p e ra t in g e x p e n s e s
O p e ra t in g i n c o m e
-2 1 2
-1 3 8
-5 5
-4 0 6
240
-2 0 7
-9 5
-3 8
-3 4 0
208
-2 1 5
-1 3 5
-6 0
-4 1 1
246
1%
-2 %
9%
NA
NA
1%
3%
4%
42%
60%
NA
NA
21%
18%
O t h e r in c o m e ( e x p e n s e s )
-6 7
-1 5
-8
-3 5
-3
1
-6 3
-0
-1 0
-7 %
NA
NA
NA
78%
NA
NA
NA
-1 5 7
-8 0
-2 6
-1 5 7
-3
-2 5
-1 6 1
-0
-2 6
PBT
Tax
PAT
M in o r itie s a n d o t h e r ite m s
N e t P ro f it
150
-6 0
90
-4
86
170
-6 6
105
-3
102
173
-8 0
93
-5
87
15%
32%
NA
41%
NA
1%
22%
-1 1 %
102%
-1 4 %
569
-2 2 8
340
-1 7
323
700
-2 9 5
405
-1 8
387
-
-
-
NA
NA
NA
NA
NA
NA
NA
NA
0 .8 7
1 .0 2
1 .1 5
0 .4 0
1 .0 4
1 .1 3
1 .1 3
0 .5 7
E P S (E U R )
G S E P S (E U R )
D P S (E U R )
1 ,1 9 5
695
129
291
1 ,1 1 5
2 ,3 1 1
1 ,3 2 1
828
105
339
1 ,2 7 2
2 ,5 9 3
-3 %
8%
-1 9 %
9%
5%
1%
7%
5%
0%
2%
4%
5%
7%
5%
0%
4%
4%
6%
-8 3 2
-8 3 6
-8 5 4
-8 7 4
-4 4 8
-4 2 6
-4 3 9
-4 5 2
-1 4 5
-1 5 3
-1 5 8
-1 6 0
-5 5
-3 3
-1 7
-1 7
- 1 ,4 7 9 -1 ,4 4 8 -1 ,4 6 7 - 1 ,5 0 2
831
885
9 8 9 1 ,0 9 0
1%
-5 %
6%
-4 0 %
NA
-2 %
7%
2%
3%
3%
-5 0 %
NA
1%
12%
2%
3%
1%
1%
NA
2%
10%
-1 7 0
-0
-2 8
0%
NA
NA
-2 %
3%
NA
NA
5%
6%
NA
NA
6%
801
-3 4 1
460
-2 0
440
892
-3 7 9
513
-2 3
490
23%
29%
19%
3%
20%
14%
16%
14%
14%
14%
11%
11%
12%
11%
12%
1 .1 7
1 .2 2
1 .2 2
0 .6 4
1 .3 1
1 .3 5
1 .3 5
0 .6 5
19%
10%
-2 %
43%
13%
8%
8%
13%
12%
11%
11%
1%
1 ,1 5 9
750
105
319
1 ,1 7 4
2 ,3 3 3
1 ,2 3 9
787
105
326
1 ,2 1 8
2 ,4 5 6
2005E
2006E
GS net income
426
-148
-65
422
-213
-67
456
-242
-163
507
-245
-200
213
141
51
62
2,922
37,225
3,305
38,349
3,724
41,072
4,065
44,407
7.3%
0.6%
4.3%
0.4%
1.4%
0.1%
1.5%
0.1%
Capital formation
Tier 1 capital
Equity structure
Item name
2002
2003
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
1,332
1,898
147
0
-552
-203
2,623
1,333
2,080
148
0
-453
-186
2,922
916
1,013
7.6%
1.5%
5.4%
Ratios
Equity as % of RWA
2 0 0 3 2 0 0 4 E 2 0 0 5 E 2 0 0 6 E 0 4 / 0 3 E 0 5 /0 4 E 0 6 /0 5 E
290
200
26
131
357
646
2004E
3,664
37,225
0.0%
100.0%
9.3%
17.4%
0.0%
100.0%
9.6%
13.4%
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
90.0%
80.0%
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
-10.0%
3,200
36,141
100.0%
Capital
4 Q 0 3 3 Q 0 4 4 Q 0 4 E 4 Q /4 Q 4 Q /3 Q
O t h e r r e c u r rin g r e v e n u e s
N e t n o n - in t e re s t in c o m e
T o t a l r e c u r rin g re v e n u e s
2003
Tier 2 capital
It e m n a m e
Item name
3,590 3,944 4,270 4,535
2,922 3,305 3,724 4,065
48,606 49,376 50,205 52,151
37,225 38,349 41,072 44,407
GS equity
Tier 1 capital
Total assets
11.2% 11.1% 11.5%
0.86% 0.92% 0.99%
1.12% 1.15% 1.19%
4%
2001
2002
Revenue growth
2003
2004E
2005E
Tier 1
capital
426
440
17
0
100%
Other
GS net income
387
33
2
Cash
Goodwill
(negative)
323
55
48
2003 2004E 2005E 2006E
Preference
capital
2003 2004E 2005E 2006E
Stated net profit
Cash
Item name
Minority
interests
(equity)
Accounting
Item name
Reserves
Returns (EUR mn)
2006E
Cost growth
121
Europe
Banks
Banca Popolare di Milano (PMII.MI: OP/A)
Key statistics
Volume (rhs)
140
130
120
110
100
90
80
70
60
50
BANCA POPOLARE MILANO
FTSE W Europe
35,000
Investment summary: We
Current price (EUR)
Fair value (EUR)
Rating
Free float
30,000
25,000
20,000
15,000
10,000
2,835
6.8
7.6
OP/A
415
100%
5,000
F
J
D
N
O
S
A
J
J
M
A
M
F
0
4.3%/-1.4%
Debt rating: Moodys
A3 / stable
Debt rating: S&P
A- / negative
B'berg / Reuters code BPM IM/ PMII.MI
Next announcement
2004 FY results
Date
Mar-05
after the recent rally. We believe that
BPM has significant scope for
restructuring and that it has greater
growth potential from better market
positioning vs. its main peers. We see
potential for higher growth and
GS net
GS
Stated
PBT income
EPS
EPS
2002
125
205
0.53
0.33
2003
114
136
0.35
0.18
2004E
198
193
0.47
0.30
2005E
255
248
0.60
0.38
2006E
319
291
0.70
0.47
GS
BVPS
6.40
6.62
6.79
7.27
7.82
Stated
BVPS
6.06
6.08
6.06
6.32
6.64
P/E (X)
GS Stated
12.8
20.6
19.4
38.7
14.7
23.0
11.4
18.1
9.7
14.4
DPS
0.12
0.12
0.12
0.15
0.19
GS EPS Dividend
growth
yield
189.4%
1.8%
-34.3%
1.8%
32.7%
1.7%
28.1%
2.2%
17.5%
2.8%
P/B (X)
GS Stated
1.1
1.1
1.0
1.1
1.0
1.1
0.9
1.1
0.9
1.0
ROE
5.6%
2.9%
5.1%
6.1%
7.3%
profitability. GROA (gross return on
assets) of BPM is relatively low (1.47%)
but we believe there is room for
significant repricing. We see large
scope for cost cutting given the plan
which is already in place and a cost
53
201
65
40
-67
18%
69%
22%
14%
-23%
9.0
10.5
12.5
9.5
9.0
922
497
179
301
791
34%
18%
7%
11%
29%
0.5
4.3
4.5
1.3
-0.8
291
100%
10.9
2,690
100%
1.2
Goodwill
-95
1
Group
197
5.7%
40.5%
36.2%
13.2%
NM
477
2,112
810
377
-607
0
3,169
-443
0
16.1
2,246
Fair value (EUR)
1.1
5.1
2.0
0.9
-1.5
0.0
7.6
15%
67%
26%
12%
-19%
0%
100%
400
350
Risks: There is potential execution
300
risk on the delivery of the business plan.
250
200
The bank presents the highest fixed
150
100
income exposure (24% of total assets)
50
0
Corporate
Wholesale banking
Retail Banking
Asset Management
Investment Banking
Corporate Center
Unrealized gains
1.4
3,169
Corporate
Center
14%
Investmen
t Bkg
9%
among the Italian banks under our
coverage, exposing it to the risk of
possible movements in ECB interest
415.0
7.6
6.8
11.8%
income ratio which is currently at 80%.
Total
2006E
Value Per share
as %
(EUR) of group
Corporate
Center
2006E
as %
Equity of group
Investment
Bkg
P/E (X)
Asset Mgmt
2006E
as %
net income of group
Retail
Business unit
continue to remain positive on BPM,
rates.
Corporate
11%
Valuation: Our estimates reflect the
full consolidation of CRA from 2H2004.
On a tangible book basis, BPM is
Asset
Mgmt
18%
trading at 1.1x 05E BV, with a tangible
Retail
48%
ROE of 11.3% vs. an average of 1.7x
for the Italian banks (av. tang. ROE of
15%).
122
Europe
Banks
68
78
-11
123
95
-25
157
95
-4
197
95
-1
GS net income
+ Depreciation
136
-89
193
93
-93
248
93
-93
291
95
-95
GS net income
136
193
248
291
GS gross OpCF
46
-17
193
-241
248
-112
291
-120
Stated equity
+/- other
2,349
206
0
0
2,516 2,623 2,757
301
396
491
0
0
0
0
0
0
GS net OpFCF
29
-46
-48
-49
136
-63
171
-80
GS net FCF
-17
-97
72
91
GS equity
2,555
2,816 3,019 3,248
Payout ratio
161% -103%
68% 40%
47%
40%
47%
41%
Total assets
32,442 35,181 36,208 37,281
23,730 27,754 29,621 31,617
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
GS return ratios
GS net OpFCF / RWA
Other
GS net FCF / tier 1
5.1% 6.1% 7.3%
0.36% 0.44% 0.54%
0.48% 0.55% 0.64%
Interbank
80%
Customer
loans
60%
Equity &
debt
securities
Other
assets
Item name
3%
11%
Customer
deposits
53%
48%
40%
20%
0%
Other
liabilities
Subordinate
d debt
24%
20%
10%
7%
Assets
Liab.
Preferred &
minorities
Shareholder
s' equity
Public
sector
2%
-1.8% 4.7% 5.5%
-0.14% 0.38% 0.47%
-0.19% 0.47% 0.56%
6.4%
3.4%
4.8%
Corporate
60%
4 Q /3 Q
2 0 0 3 2 0 0 4 E 2 0 0 5 E 2 0 0 6 E 0 4 /0 3 E 0 5 /0 4 E 0 6 /0 5 E
131
123
14
64
201
332
174
123
9
31
162
337
181
126
20
43
190
370
38%
2%
47%
-3 2 %
-6 %
12%
4%
3%
137%
39%
17%
10%
S ta f f
G e n e ra l a d m in is tr a tio n
T o t a l o p e ra t in g e x p e n s e s
-1 3 7
-8 7
-4 0
-2 6 5
67
-1 4 2
-7 7
-4 9
-2 6 8
69
-1 5 0
-8 8
-4 9
-2 8 8
82
10%
1%
23%
NA
NA
9%
22%
6%
14%
2%
NA
NA
7%
20%
L o a n -lo s s p ro v is io n s
O th e r e xc e p tio n a l in c o m e ( e x p e n s e s )
O th e r in c o m e (e x p e n s e s )
-5 8
8
-2 8
-2 6
12
-3
-3 1
0
-6
-4 6 %
NA
-9 4 %
-7 8 %
20%
NA
-9 6 %
122%
-1 3 7
18
-4 2
-1 1 7
38
-2 3
-1 1 9
6
-2 1
PBT
Tax
PAT
N e t P ro f it
-1 1
-2
-1 3
-0
-1 3
52
-1 7
34
-1
33
45
-1 8
27
-3
25
NA
NA
NA
NA
NA
-1 2 %
4%
-2 0 %
134%
-2 6 %
114
-4 5
69
-1
68
198
-7 0
127
-4
123
-
-
-
NA
NA
NA
NA
NA
NA
NA
NA
0 .1 8
0 .3 8
0 .3 5
0 .1 2
0 .3 0
0 .5 3
0 .4 7
0 .1 2
E P S (E U R )
G S E P S (E U R )
D P S (E U R )
587
473
27
222
721
1 ,3 0 8
787
566
34
215
815
1 ,6 0 2
16%
8%
NA
-1 1 %
2%
8%
8%
6%
5%
7%
6%
7%
8%
5%
4%
2%
4%
6%
-5 5 0
-5 9 7
-6 0 4
-6 1 0
-3 1 4
-3 3 2
-3 3 2
-3 3 7
-8 9
-9 3
-9 3
-9 5
-7 8
-9 5
-9 5
-9 5
- 1 ,0 3 2 -1 ,1 1 7 - 1 ,1 2 4 -1 ,1 3 7
276
299
388
465
9%
6%
4%
22%
NA
8%
8%
1%
0%
1%
0%
NA
1%
30%
1%
1%
2%
0%
NA
1%
20%
-1 2 7
1
-2 1
-1 5 %
NA
NA
-4 5 %
2%
NA
-8 4 %
-9 %
7%
NA
-7 9 %
0%
255
-9 4
161
-4
157
319
-1 1 7
202
-5
197
73%
55%
85%
NA
81%
29%
34%
26%
-9 %
27%
25%
24%
26%
NA
26%
0 .3 8
0 .6 1
0 .6 0
0 .1 5
0 .4 7
0 .7 0
0 .7 0
0 .1 9
68%
39%
33%
-1 %
27%
15%
28%
29%
26%
16%
17%
27%
678
509
31
198
738
1 ,4 1 6
731
537
33
212
782
1 ,5 1 2
193
-49
-241
248
-63
-112
291
-80
-120
Capital formation
107
-97
72
91
1,660 1,921 2,121 2,351
23,730 27,754 29,621 31,617
Tier 1 capital
6.4%
0.4%
-5.1%
-0.4%
3.4%
0.2%
3.9%
0.3%
Equity structure
Item name
2002
2003
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
1,153
1,177
2
160
-745
-57
1,690
1,158
1,191
2
160
-789
-62
1,660
903
640
Tier 2 capital
2,198
24,018
23,730
Ratios
Equity as % of RWA
9.5%
90.5%
9.7%
30.6%
9.6%
90.4%
9.9%
32.2%
18.0%
3,000
16.0%
2,500
14.0%
2,000
12.0%
1,500
10.0%
1,000
8.0%
500
6.0%
0
4.0%
2.0%
0.0%
-2.0%
2,554
Capital
4 Q 0 3 3 Q 0 4 4 Q 0 4 E 4 Q /4 Q
O th e r r e c u r rin g r e v e n u e s
N e t n o n -in t e re s t in c o m e
T o t a l re c u rrin g re v e n u e s
136
-46
17
7.3%
3.9%
6.0%
It e m n a m e
GS net income
Retail and
SMEs
38%
1.7% -2.5%
-1.1% -5.1%
1.0% -1.7%
2003 2004E 2005E 2006E
Interbank
22%
2,555 2,816 3,019 3,248
1,660 1,921 2,121 2,351
32,442 35,181 36,208 37,281
23,730 27,754 29,621 31,617
GS equity
Tier 1 capital
Total assets
7.2% 8.5% 9.3%
0.57% 0.69% 0.79%
0.75% 0.86% 0.95%
100%
2001
2002
2003
Revenue growth
2004E
2005E
Tier 1
capital
Stated net profit
Cash
Other
2003 2004E 2005E 2006E
Goodwill
(negative)
2003 2004E 2005E 2006E
Preference
capital
Cash
Item name
Minority
interests
(equity)
Accounting
Item name
Reserves
Returns (EUR mn)
2006E
Cost growth
123
Europe
Banks
Banche Popolari Unite (BPUN.MI: IL/A)
Key statistics
12 m onth perform ance
Volume (rhs)
150
BANCHE POPO LARI UNITE
FTSE W Europe
3,500
130
3,000
2,500
110
2,000
90
1,500
1,000
70
Investment summary: BPU could
Current price (EUR)
Fair value (EUR)
Rating
Free float
4,000
5,380
16.0
15.9
IL/A
336.9
100%
500
F
J
D
N
O
S
A
J
J
M
A
M
0
F
50
5.9%/0.2%
24.2%/1.8%
13.7%/0.2%
Debt rating: Moodys
A2 / stable
Debt rating: S&P
A- / stable
B'berg / Reuters code BPU IM/ BPUN.MI
Next announcement
2004 FY results
Date
Mar-05
become the new restructuring story
among the Popolari banks, but in the
short term we do not see significant
upside. Management has confirmed
integration plan targets and dividend
distribution in 2004 (yield 5%). The
possible sale of its investment bank
GS net
GS
Stated
PBT income
EPS
EPS
2002
445
262
1.65
1.25
2003
226
264
0.83
0.63
2004E
579
358
1.06
0.84
2005E
696
429
1.27
1.02
2006E
778
496
1.47
1.14
GS
BVPS
23.65
12.78
13.20
13.88
14.62
Stated
BVPS
22.04
11.63
11.78
12.13
12.54
P/E (X)
GS Stated
9.7
12.8
19.3
25.4
15.0
19.0
12.5
15.6
10.8
14.0
DPS
0.48
0.67
0.67
0.74
0.69
GS EPS Dividend
growth
yield
NM
3.0%
NM
4.2%
28.0%
4.2%
19.9%
4.6%
15.7%
4.3%
P/B (X)
GS Stated
0.7
0.7
1.2
1.4
1.2
1.4
1.2
1.3
1.1
1.3
ROE
6.0%
5.6%
7.4%
8.6%
9.3%
(Centrobanca – see our note of
December 13, 2004) could represent a
positive catalyst for the stock
considering the high capital consumed
in an unprofitable business.
Business unit
Wholesale banking
Retail Banking
Asset Management
Investment Banking
Corporate Center
Unrealized gains
2006E
as %
Equity of group
2006E
net income
as %
of group
P/E (X)
96
425
41
43
-109
19%
86%
8%
9%
-22%
10.0
10.5
12.5
9.0
9.0
1,063
1,658
446
525
462
26%
40%
11%
13%
11%
0.9
2.7
1.2
0.7
-2.1
496
100%
10.8
4,154
100%
1.3
P/B (X)
2006E
Value Per share
ROE (%) (EUR mn)
(EUR)
9.0%
25.7%
9.2%
8.2%
NM
961
4,467
514
390
-985
0
5,346
2.9
13.3
1.5
1.2
-2.9
0.0
15.9
as %
of group
18%
84%
10%
7%
-18%
0%
100%
Risks: There could be a further delay
700
in the delivery of integration synergies.
600
We believe that BPU’s IT system,
500
based on a local host, limits the full
400
300
delivery of the promised synergies.
200
100
3,509
1.5
5,346
336.9
Fair value (EUR)
15.9
16.0
-0.6%
Total
Retail
Corporate
Center
13.9
0
Investment
Bkg
385
-645
0
Asset Mgmt
Group
-111
0
Corporate
Goodwill
Valuation: The stock is trading at
10.8x 2006E earnings vs. 11.1x for
Italian banking sector, and 1.1x 2006E
GSBV.
Corporate
Center
13%
Investmen
t Bkg
Asset
5%
Mgmt
7%
Corporate
13%
Retail
62%
124
Europe
Banks
284
111
-37
345
111
-27
385
111
0
GS net income
+ Depreciation
264
-193
358
192
-192
429
192
-192
496
195
-195
GS net income
264
358
429
496
GS gross OpCF
72
149
358
-58
429
-147
496
-154
Stated equity
+/- other
3,709
367
0
0
3,968
478
0
0
4,086
589
0
0
4,223
701
0
0
GS equity
4,076
4,446
4,675
4,923
Total assets
62,994 65,402 67,246 69,207
48,068 49,030 51,481 54,055
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
8.4% 9.4% 10.3%
0.56% 0.65% 0.73%
0.74% 0.85% 0.94%
7.4% 8.6% 9.3%
0.44% 0.52% 0.56%
0.58% 0.69% 0.73%
GS net OpFCF
221
-214
GS net FCF
300
-227
7
Payout ratio
GS equity
Tier 1 capital
Total assets
97%
107%
282
-248
73
76%
80%
342
-231
34
111
88%
72%
80%
Customer
loans
60%
Equity &
debt
securities
Other
assets
8%
Interbank
43%
Customer
deposits
Other
liabilities
68%
40%
39%
20%
0%
68%
60%
4,076 4,446 4,675 4,923
2,935 3,349 3,635 3,973
62,994 65,402 67,246 69,207
48,068 49,030 51,481 54,055
GS return ratios
GS net OpFCF / RWA
Other
GS net FCF / tier 1
Interbank
4%
5%
Subordinate
d debt
Preferred &
minorities
13%
10%
6%
Liab.
Assets
Shareholder
s' equity
9.0%
2.2%
5.6%
7.8%
0.9%
5.2%
4 Q /3 Q
Public
sector
1%
Corporate
35%
380
184
9
27
220
600
385
203
15
43
261
646
0%
-1 %
NA
17%
8%
3%
1%
10%
76%
62%
19%
8%
S ta ff
G e n e ra l a d m in istra tio n
D e p re c ia tio n
G o o d w ill a m o rtis a tio n
O th e r o p e ra tin g c o sts
T o ta l o p e ra tin g e x p e n s e s
-2 6 2
-1 2 7
-8 8
-4 7 7
151
-2 4 6
-1 0 3
-7 6
-4 2 5
175
-2 5 5
-1 1 6
-8 4
-4 5 5
191
-3 %
-8 %
-4 %
NA
NA
-4 %
27%
3%
13%
11%
NA
NA
7%
9%
L o a n -lo s s p ro visio n s
O th e r e xc e p tio n a l in c o m e (e xp e n s e s)
O th e r in c o m e (e xp e n se s )
-3 1 8
26
-2 6
-4 9
52
-5
-7 2
0
-1 6
-7 7 %
NA
NA
-3 8 %
47%
NA
NA
NA
-4 9 5
124
-7 5
-2 2 8
70
-4 0
-2 1 9
50
-2 0
PBT
Tax
P AT
M in o ritie s a n d o th e r ite m s
N e t P ro fit
-1 6 8
37
-1 3 1
123
-8
172
-6 6
106
-5
101
102
-4 6
56
-5
50
-1 6 1 %
-2 2 6 %
-1 4 3 %
NA
-6 9 4 %
-4 1 %
-3 0 %
-4 7 %
4%
-5 0 %
226
-1 4 1
86
115
200
579
-2 6 9
310
-2 6
284
-
-
-
NA
NA
NA
NA
NA
NA
NA
NA
0 .6 3
0 .9 8
0 .8 3
0 .6 7
0 .8 4
1 .1 7
1 .0 6
0 .6 7
E P S (E U R )
G S E P S (E U R )
D P S (E U R )
1 ,4 8 6
748
57
204
1 ,0 0 9
2 ,4 9 5
1 ,5 1 9
764
103
135
1 ,0 0 2
2 ,5 2 1
1 ,7 1 8
858
64
149
1 ,0 7 1
2 ,7 8 9
2%
2%
79%
-3 4 %
-1 %
1%
7%
7%
-4 0 %
5%
2%
5%
6%
5%
3%
5%
5%
6%
-9 9 1 -1 ,0 0 3 -1 ,0 1 2 -1 ,0 3 1
-5 2 8
-4 3 8
-4 3 8
-4 4 5
-1 9 3
-1 9 2
-1 9 2
-1 9 5
-1 1 1
-1 1 1
-1 1 1
-1 1 1
-1 ,8 2 3 -1 ,7 4 4 -1 ,7 5 3 -1 ,7 8 2
672
777
8 8 5 1 ,0 0 7
1%
-1 7 %
0%
0%
NA
-4 %
16%
1%
0%
0%
0%
NA
1%
14%
2%
1%
2%
0%
NA
2%
14%
-2 0 9
-2 0
-5 4 %
NA
-4 4 %
-4 6 %
-4 %
NA
-2 9 %
-5 0 %
-5 %
NA
-1 0 0 %
0%
696
-3 2 0
376
-3 1
345
778
-3 5 8
420
-3 5
385
156%
92%
NA
NA
42%
20%
19%
21%
20%
21%
12%
12%
12%
12%
12%
1 .0 2
1 .3 5
1 .2 7
0 .7 4
1 .1 4
1 .4 7
1 .4 7
0 .6 9
3 4 .2 %
20%
28%
1%
2 1 .5 %
15%
20%
9%
1 1 .7 %
9%
16%
-7 %
1 ,6 2 0
814
62
142
1 ,0 1 8
2 ,6 3 8
358
-227
-58
429
-248
-147
496
-231
-154
-99
73
34
111
Capital formation
Tier 1 capital
2,935 3,349 3,635 3,973
48,068 49,030 51,481 54,055
-3.4%
-0.2%
2.2%
0.1%
Equity structure
Item name
0.9%
0.1%
2.8%
0.2%
2002
2003
630
2,869
298
300
-1,250
43
2,891
638
3,071
537
415
-1,355
-370
2,935
1,387
1,409
Tier 2 capital
8.6%
2.8%
6.4%
Retail and
SMEs
64%
2 0 0 3 2 0 0 4 E 2 0 0 5 E 2 0 0 6 E 0 4 /0 3 E 0 5 /0 4 E 0 6 /0 5 E
385
205
0
37
243
627
264
-214
-149
4,215
4,281
45,579
48,068
Ratios
Equity as % of RWA
10.4%
89.6%
8.3%
30.2%
14.1%
85.9%
8.8%
31.6%
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
12.0%
10.0%
8.0%
6.0%
4.0%
Capital
4 Q 0 3 3 Q 0 4 4 Q 0 4 E 4 Q /4 Q
O th e r re cu rrin g re ve n u e s
N e t n o n -in te re s t in c o m e
GS net income
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
Ite m n a m e
2003 2004E 2005E 2006E
7.0% 6.2% 7.1%
0.47% 0.43% 0.50%
0.62% 0.56% 0.65%
7.5%
0.3%
4.1%
Item name
2.0%
0.0%
-2.0%
2001
2002
2003
2004E
2005E
2006E
Tier 1
capital
200
111
-47
100%
Other
Stated net profit
Cash
Goodwill
(negative)
2003 2004E 2005E 2006E
Preference
capital
2003 2004E 2005E 2006E
Cash
Item name
Minority
interests
(equity)
Accounting
Item name
Reserves
Returns (EUR mn)
-4.0%
-6.0%
Revenue growth
Cost growth
125
Europe
Banks
Banca Lombarda (BL.MI: U/A)
Key statistics
Volum e (rhs)
120
BANCA LO MBARD A
FTSE W Europe
110
1,500
100
90
1,000
80
70
500
60
F
J
D
N
O
S
A
J
J
M
A
M
0
F
50
Investment summary: Banca
Current price (EUR)
Fair value (EUR)
Rating
Free float
CRC Foundation
Cattolica
2,000
3,360
10.6
8.8
U/A
316.6
56%
4%
3%
7.3%/1.5%
Performance 12M (abs/rel) -1.3%/-13.0%
Debt rating: Moodys
A2 / stable
Debt rating: S&P
A- / stable
BL IM/ BL.MI
Next announcement
2004 FY results
Date
Mar-05
rate changes considering its high
leverage to any ECB rate increase. The
bank is not in a restructuring phase
(efficiency is already high: c.9
employees per branch vs. the Italian
average of 12). Asset quality, among
GS net
GS
Stated
PBT income
EPS
EPS
2002
348
157
0.50
0.41
2003
307
153
0.48
0.35
2004E
354
194
0.61
0.48
2005E
395
211
0.67
0.52
2006E
438
238
0.75
0.60
GS
BVPS
6.32
7.24
7.57
7.93
8.35
Stated
BVPS
5.34
6.11
6.29
6.50
6.76
P/E (X)
GS Stated
21.3
25.8
22.0
30.0
17.4
22.3
15.9
20.5
14.1
17.6
DPS
0.33
0.30
0.31
0.34
0.41
GS EPS Dividend
growth
yield
-13.0%
3.1%
-3.1%
2.8%
26.6%
2.9%
8.9%
3.2%
12.9%
3.8%
P/B (X)
GS Stated
1.7
2.0
1.5
1.7
1.4
1.7
1.3
1.6
1.3
1.6
ROE
8.5%
6.2%
7.7%
8.1%
9.1%
the best of the sector, remains a key
positive.
Risks: The capital strength of the
bank was slightly improved, with the
Core Tier 1 ratio up 20 bp at 5.6% (as
46
149
86
10
-54
19%
63%
36%
4%
-23%
10.0
10.5
12.0
10.0
9.0
838
806
262
191
1
40%
38%
12%
9%
0%
0.5
1.9
4.0
0.5
-511.2
238
100%
11.7
2,099
100%
1.3
Goodwill
-50
2
Group
191
5.5%
18.5%
33.0%
5.3%
NM
460
1,563
1,038
102
-483
106
2,787
-351
-106
14.6
1,642
1.5
4.9
3.3
0.3
-1.5
0.3
8.8
17%
56%
37%
4%
-17%
4%
100%
however, that its capital position
350
300
remains stretched and could be
250
negatively impacted by the exercise of
200
put options by Foundations of BRE for
150
100
EUR820 mn against Banca Lombarda.
50
0
Corporate
Wholesale banking
Retail Banking
Asset Management
Investment Banking
Corporate Center
Unrealized gains
1.7
2,787
316.6
Fair value (EUR)
8.8
10.6
-17%
Corporate
Center
13%
Valuation: Banca Lombarda is
currently trading at 14.1x GS EPS
2006E, a 27% premium to the Italian
Unrealised
gains
3%
banks, currently at 11.1x. We believe
Corporate
12%
Investmen
t Bkg
3%
Asset
Mgmt
28%
of September 2004). We believe,
Total
2006E
Value Per share
as %
(EUR) of group
Corporate
Center
2006E
as %
Equity of group
Investment
Bkg
P/E (X)
Asset Mgmt
2006E
as %
net income of group
Retail
Business unit
Lombarda remains a pure player on
that any premium due to the low risk
profile of the stock or the possibility of
consolidation in the Italian banking
system is already reflected in the share
Retail
41%
price.
126
Europe
Banks
194
211
191
50
-2
238
Stated equity
+/- other
1,936
229
128
0
1,991 2,058 2,139
277
326
376
128
128
128
0
0
0
GS equity
2,293
2,396 2,512 2,643
Total assets
31,499 32,455 33,448 34,433
25,320 26,594 27,844 29,087
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
8.3% 8.6% 9.2%
0.61% 0.64% 0.70%
0.75% 0.77% 0.84%
7.7% 8.1% 9.1%
0.47% 0.50% 0.56%
0.58% 0.60% 0.67%
GS net income
+ Depreciation
153
-108
194
110
-110
211
111
-111
238
113
-113
GS gross OpCF
44
142
194
-76
211
-75
238
-75
GS net OpFCF
186
-95
117
-98
136
-109
163
-129
91
19
27
35
51%
85%
84%
65%
80%
66%
79%
68%
GS net FCF
Payout ratio
Interbank
80%
Customer
loans
60%
Other
assets
40%
33%
20%
GS return ratios
GS net OpFCF / RWA
Other
GS net FCF / tier 1
Subordinate
d debt
Preferred &
minorities
5%
10%
6%
Assets
Liab.
Shareholder
s' equity
Public
sector
5%
Corporate
42%
5.0% 5.5% 6.3%
0.37% 0.41% 0.48%
0.45% 0.50% 0.57%
13.6%
6.7%
5.6%
8.5%
1.4%
3.5%
8.5%
1.7%
4.0%
Retail and
SMEs
53%
4 Q 0 3 3 Q 0 4 4 Q 0 4 E 4 Q /4 Q 4 Q / 3 Q
2 0 0 3 2 0 0 4 E 2 0 0 5 E 2 0 0 6 E 0 4 /0 3 E 0 5 /0 4 E 0 6 / 0 5 E
N e t in t e r e s t in c o m e
T r a d in g p r o f it s
O th e r r e c u r r in g re v e n u e s
N e t n o n - in t e r e s t in c o m e
T o t a l re c u r rin g re v e n u e s
187
100
21
36
157
344
196
95
7
36
138
334
188
110
11
36
157
345
0%
10%
-4 5 %
-1 %
0%
0%
-4 %
16%
54%
0%
14%
3%
746
373
46
158
577
1 ,3 2 3
761
402
40
170
612
1 ,3 7 3
806
424
42
176
642
1 ,4 4 7
854
443
42
178
663
1 ,5 1 6
2%
8%
-1 3 %
7%
6%
4%
6%
5%
4%
4%
5%
5%
6%
5%
0%
1%
3%
5%
S ta f f
G o o d w ill a m o r tis a t io n
O th e r o p e ra tin g c o s ts
T o t a l o p e ra ti n g e x p e n s e s
O p e r a t in g in c o m e
-1 1 2
-8 4
-5 6
-2 5 1
93
-1 1 2
-7 7
-4 2
-2 3 1
103
-1 0 9
-7 1
-4 1
-2 2 1
124
-3 %
-1 5 %
-2 7 %
NA
NA
-1 2 %
34%
-2 %
-8 %
-4 %
NA
NA
-4 %
20%
-4 3 0
-2 9 5
-1 0 8
-4 8
-8 8 1
442
-4 4 7
-2 9 8
-1 1 0
-4 8
-9 0 3
470
-4 5 9
-3 0 1
-1 1 1
-4 9
-9 2 1
526
-4 7 2
-3 0 4
-1 1 3
-5 0
-9 3 9
577
4%
1%
1%
1%
NA
2%
6%
3%
1%
1%
1%
NA
2%
12%
3%
1%
1%
1%
NA
2%
10%
-5 9
-6
-7
-2 0
-2
-3
-3 8
2
-3
-3 6 %
NA
NA
-5 6 %
93%
NA
NA
17%
-1 2 9
14
-1 9
-1 0 8
10
-1 8
-1 1 6
4
-2 0
-1 2 4
4
-2 0
-1 7 %
NA
-2 9 %
-5 %
7%
NA
-6 0 %
11%
7%
NA
1%
1%
O th e r e xc e p t io n a l in c o m e (e x p e n s e s )
PBT
Tax
PAT
M in o r itie s a n d o th e r it e m s
N e t P r o f it
E P S (E U R )
G S E P S (E U R )
D P S (E U R )
21
-1 1
10
-4
7
79
-4 2
37
-8
29
85
-4 4
41
-9
31
303%
304%
300%
160%
376%
7%
4%
11%
13%
10%
307
-1 5 9
149
-3 6
112
354
-1 7 0
184
-3 3
150
395
-1 9 3
201
-3 7
164
438
-2 0 6
232
-4 1
191
15%
7%
24%
-8 %
34%
12%
14%
9%
12%
9%
11%
6%
15%
11%
16%
-
-
-
NA
NA
NA
NA
NA
NA
NA
NA
0 .3 5
0 .5 0
0 .4 8
0 .3 0
0 .4 8
0 .6 3
0 .6 1
0 .3 1
0 .5 2
0 .6 7
0 .6 7
0 .3 4
0 .6 0
0 .7 6
0 .7 5
0 .4 1
34%
24%
27%
3%
9%
7%
9%
11%
16%
13%
13%
19%
2005E
2006E
GS net income
153
-95
-142
194
-98
-76
211
-109
-75
238
-129
-75
-84
19
27
35
1,366
25,320
1,385
26,594
1,593
27,844
1,822
29,087
-6.2%
-0.3%
1.4%
0.1%
1.7%
0.1%
1.9%
0.1%
Capital formation
Tier 1 capital
Equity structure
Item name
2002
2003
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
316
1,370
467
155
-864
-93
1,351
317
1,619
460
155
-864
-320
1,366
Tier 2 capital
1,220
1,233
9.0%
1.9%
4.9%
It e m n a m e
2004E
2,293 2,396 2,512 2,643
1,366 1,385 1,593 1,822
31,499 32,455 33,448 34,433
25,320 26,594 27,844 29,087
GS equity
Tier 1 capital
Total assets
Customer
deposits
Other
liabilities
75%
0%
2003
Interbank
9%
47%
Equity &
debt
securities
Item name
2,341
2,369
22,953
25,320
Ratios
Equity as % of RWA
11.5%
88.5%
9.4%
39.0%
11.3%
88.7%
9.5%
38.7%
6.0%
3,000
5.0%
2,500
4.0%
2,000
3.0%
1,500
2.0%
1,000
500
1.0%
0
0.0%
-1.0%
2001
2002
2003
2004E
2005E
-2.0%
2006E
Tier 1
capital
153
164
49
-2
2%
8%
Other
GS net income
150
48
-5
100%
Goodwill
(negative)
112
48
-7
Cash
Preference
capital
Stated net profit
2003 2004E 2005E 2006E
Minority
interests
(equity)
2003 2004E 2005E 2006E
Cash
Item name
Reserves
Accounting
Item name
Capital
Returns (EUR mn)
-3.0%
Revenue growth
Cost growth
127
Europe
Banks
Credem (EMBI.MI: IL/A)
Key statistics
Volume (rhs)
150
CREDITO EMILIANO
FTSE W Europe
6,000
5,000
130
4,000
110
3,000
90
2,000
F
J
D
N
O
S
A
J
J
M
0
A
50
M
1,000
F
70
Current price (EUR)
Fair value (EUR)
Rating
Free float
Credito Emiliano Holding
-
2,199
8.0
7.8
IL/A
274.4
26%
74%
2.0%/-3.6%
Debt rating: Moodys
NA
Debt rating: S&P
NA
CE IM/ EMBI.MI
Next announcement
2004 FY results
Date
Mar-05
GS
BVPS
3.32
3.48
3.77
4.12
4.48
Stated
BVPS
3.24
3.38
3.65
3.99
4.33
P/E (X)
GS Stated
18.9
20.0
24.1
22.9
16.2
17.1
13.9
13.8
12.5
12.5
DPS
0.20
0.20
0.24
0.30
0.33
GS EPS Dividend
growth
yield
11.8%
2.5%
-21.7%
2.5%
48.8%
3.0%
16.3%
3.8%
11.9%
4.2%
P/B (X)
GS Stated
2.4
2.5
2.3
2.4
2.1
2.2
1.9
2.0
1.8
1.9
ROE
12.8%
10.6%
13.3%
15.2%
15.4%
Group
efficient financial advisor network
(c.1,000 FAs). In 9M2004, costs were
management’s commitment to
containing cost growth. The bank has a
low risk profile with an NPL of 0.3%.
Risks: Recent trends in loan growth
100%
0.8
1.8
5.0
0.7
1.5
1.9
7.8%
17.4%
36.9%
6.9%
NM
253
863
1,120
235
-341
3
2,133
-35
-3
12.1
1,104
0.9
3.1
4.1
0.9
-1.2
0.0
7.8
12%
40%
52%
11%
-16%
0%
100%
deceleration versus the company’s
200
growth rate over the last four years.
150
100
trading at 12.5x 2006E GS EPS, a 13%
50
premium to the Italian banks. We rate
0
1.9
2,133
274.4
Fair value (EUR)
7.8
8.0
-3.0%
upside, even though the stock
Corporate
9%
over last 12 months.
Invest.
Bank.
8%
Asset
Mgmt
40%
the stock IL/A, as we see limited
outperformed the Italian banks by 18%
Corporate
Center
12%
Total
1,142
28%
42%
20%
30%
-20%
250
Corporate
Center
-4
3
176
in the Emilia Romagna region and an
(+4.9% in 9M2004) show some
Investment
Bkg
12.1
324
475
225
343
-225
2006E
Value Per share
as %
(EUR) of group
Asset Mgmt
100%
10.0
10.5
13.5
10.0
9.0
2006E
as %
Equity of group
Retail
176
14%
47%
47%
13%
-21%
P/E (X)
Corporate
Goodwill
2006E
as %
net income of group
25
82
83
24
-38
The bank has an excellent positioning
(+3.3% in 9M2004) and deposits growth
Wholesale banking
Retail Banking
Asset Management
Investment Banking
Corporate Center
Unrealized gains
small caps in the Italian banking sector.
better than expected, reflecting
GS net
GS
Stated
PBT income
EPS
EPS
2002
196
116
0.42
0.40
2003
146
91
0.33
0.35
2004E
192
136
0.49
0.47
2005E
251
158
0.57
0.58
2006E
276
176
0.64
0.64
Business unit
Credem is among the most interesting
Retail
31%
128
Europe
Banks
160
5
-7
176
4
-3
GS net income
+ Depreciation
91
-63
136
58
-58
157
59
-59
176
60
-60
GS net income
91
136
157
176
GS gross OpCF
28
0
136
-59
157
-64
176
-46
929
24
3
0
1,003 1,095 1,188
29
33
37
3
3
3
0
0
0
GS equity
956
1,035 1,132 1,228
Total assets
20,383 21,680 22,692 23,674
10,848 11,825 12,889 13,662
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
13.7% 14.5% 15.0%
0.65% 0.71% 0.76%
1.20% 1.27% 1.33%
13.4% 15.2% 15.4%
0.61% 0.72% 0.76%
1.14% 1.29% 1.32%
GS net OpFCF
28
-55
78
-67
94
-83
130
-91
GS net FCF
-26
10
11
39
Payout ratio
193%
57%
87%
52%
89%
52%
GS return ratios
GS net OpFCF / RWA
Other
GS net FCF / tier 1
80%
Customer
loans
60%
Customer
deposits
47%
Other
liabilities
55%
Equity &
debt
securities
Other
assets
40%
20%
0%
Subordinate
d debt
31%
Preferred &
minorities
13%
9%
5%
Assets
Liab.
Shareholder
s' equity
Public
sector
0%
7.8% 8.6% 11.0%
0.37% 0.42% 0.56%
0.68% 0.76% 0.98%
9.0%
1.2%
3.5%
9.6% 11.9%
1.1% 3.5%
4.3% 5.9%
83
86
13
10
108
191
84
94
20
28
142
226
8%
-4 %
42%
37%
7%
8%
1%
9%
58%
188%
31%
18%
305
320
3
191
514
819
323
368
80
65
513
836
358
394
83
68
546
904
382
416
87
71
575
956
6%
15%
NA
-6 6 %
0%
2%
11%
7%
4%
5%
6%
8%
7%
6%
4%
5%
5%
6%
S ta ff
D e p re c ia tio n
O th e r o p e r a tin g c o s t s
-7 7
-5 3
-1 5
-1 4 6
64
-7 8
-5 4
-1 6
-1 4 8
43
-8 3
-5 2
-1 8
-1 5 4
72
8%
-2 %
21%
NA
NA
6%
12%
6%
-3 %
19%
NA
NA
4%
65%
-3 1 3
-2 0 8
-6 3
-5
-5 8 9
230
-3 2 4
-2 1 9
-5 8
-5
-6 0 5
231
-3 3 5
-2 2 5
-5 9
-5
-6 2 3
281
-3 4 5
-2 3 4
-6 0
-4
-6 4 3
314
3%
5%
-7 %
1%
NA
3%
0%
3%
3%
1%
-6 %
NA
3%
22%
3%
4%
3%
-2 0 %
NA
3%
12%
O th e r e x c e p t io n a l in c o m e ( e x p e n s e s )
PBT
Tax
PAT
M in o r it ie s a n d o t h e r ite m s
N e t P ro f i t
E P S (E U R )
G S E P S (E U R )
D P S (E U R )
-5 6
7
-2 2
-1
-1
-
-2 1
-1
-6 3 %
NA
NA
NA
NA
NA
NA
NA
-7 5
14
-2 3
-2 5
-3
-1 0
-3 5
10
-5
-3 7
4
-5
-6 7 %
NA
NA
NA
40%
NA
-4 3 3 %
-5 2 %
6%
NA
NA
-4 %
-8
2
-5
-2
-8
41
-1 1
30
-2
28
49
-2 1
28
-1
27
NA
NA
NA
NA
NA
21%
98%
-6 %
-4 2 %
-4 %
146
-4 4
101
-6
96
192
-5 8
135
-6
129
251
-8 3
168
-8
160
276
-9 1
185
-9
176
32%
31%
33%
7%
34%
30%
44%
24%
30%
24%
10%
10%
10%
10%
10%
-
-
-
NA
NA
NA
NA
NA
NA
NA
NA
0 .3 5
0 .3 7
0 .3 3
0 .2 0
0 .4 7
0 .4 9
0 .4 9
0 .2 4
0 .5 8
0 .6 0
0 .5 7
0 .3 0
0 .6 4
0 .6 6
0 .6 4
0 .3 3
34%
33%
49%
22%
24%
23%
16%
24%
10%
9%
12%
10%
91
-55
0
136
-67
-59
157
-83
-64
176
-91
-46
36
10
11
39
781
10,848
862
11,825
979
12,889
1,097
13,662
4.6%
0.3%
1.2%
0.1%
1.1%
0.1%
3.5%
0.3%
Capital formation
Tier 1 capital
Equity structure
Item name
2002
2003
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
273
612
44
0
-102
-46
781
274
654
34
0
-83
-98
781
135
135
Ratios
Equity as % of RWA
2 0 0 3 2 0 0 4 E 2 0 0 5 E 2 0 0 6 E 0 4 /0 3 E 0 5 /0 4 E 0 6 /0 5 E
77
98
14
20
133
210
2006E
GS net income
910
910
10,848
10,848
0.0%
100.0%
8.6%
11.5%
0.0%
100.0%
8.9%
9.6%
10.0%
1,200
1,000
8.0%
800
6.0%
600
400
4.0%
200
0
2.0%
Capital
4 Q 0 3 3 Q 0 4 4 Q 0 4 E 4 Q / 4 Q 4 Q /3 Q
T ra d in g p r o fit s
O th e r re c u r rin g r e v e n u e s
N e t n o n -i n t e r e s t i n c o m e
T o t a l re c u r rin g re v e n u e s
2005E
Tier 2 capital
Retail and
SMEs
61%
It e m n a m e
2004E
Corporate
39%
3.6%
-3.4%
1.3%
2003
Interbank
15%
22%
Interbank
70%
52%
956 1,035 1,132 1,228
781
862
979 1,097
20,383 21,680 22,692 23,674
10,848 11,825 12,889 13,662
GS equity
Tier 1 capital
Total assets
1%
0.0%
2001
2002
2003
2004E
2005E
2006E
Tier 1
capital
129
5
2
100%
Other
96
5
-10
Cash
Goodwill
(negative)
Stated net profit
Stated equity
+/- other
Item name
2003 2004E 2005E 2006E
Preference
capital
2003 2004E 2005E 2006E
Cash
Item name
Minority
interests
(equity)
Accounting
Item name
Reserves
Returns (EUR mn)
-2.0%
Revenue growth
Cost growth
129
Europe
Banks
130
Europe
Banks
132 SEB (SEBA.ST: OP/A)
134 Nordea (NDAE.ST: OP/A)
136 Danske Bank (DDBC.CO: NR)
138 DnB NOR (DNBNOR.OL: IL/A)
140 Handelsbanken (SHBA.ST: U/A)
142 Swedbank (FSPA.ST: IL/A)
Nordic
131
Europe
Banks
SEB (SEBA.ST: OP/A)
Key statistics
Valuation summary (Skr mn, except per share data)
GS net
GS
Stated
PBT income
EPS
EPS
2002
7,412
6,004
8.58
7.60
2003
7,963
6,320
9.10
8.21
2004
9,273
7,362
10.83
9.69
2005E
10,040
8,082
12.26
11.04
2006E
11,066
8,849
13.82
12.57
14000
12000
10000
8000
6000
4000
2000
0
Market capitalization (Skr mn)
Current price (Skr)
Fair value (Skr)
Rating
Free float
89,239
133.5
155
OP/A
668.5
71%
F
J
D
N
FTSE W Europe
O
S
A
J
SEB A
J
M
M
F
A
Volume (rhs)
130
120
110
100
90
80
70
60
50
5.1% / -0.7%
31.5% / 9.7%
Debt rating: Moodys
Aa3 / stable
Debt rating: S&P
A / stable
SEBA SS / SEBA.ST
Next announcement
Q105 results
Date
03-May-05
Stated
BVPS
65.5
70.1
76.0
81.2
87.2
P/E (X)
GS Stated
15.6
17.6
14.7
16.3
12.3
13.8
10.9
12.1
9.7
10.6
DPS
4.00
4.00
4.35
5.00
5.75
GS EPS
growth
8.5%
6.1%
19.0%
13.2%
12.8%
Dividend
yield
3.0%
3.0%
3.3%
3.7%
4.3%
P/B (X)
GS Stated
1.9
2.0
1.7
1.9
1.6
1.8
1.5
1.6
1.4
1.5
ROAE RORWA
11.8%
1.06%
12.1%
1.10%
13.3%
1.19%
14.1%
1.23%
14.9%
1.27%
12,360
NA
NA
NA
17,528
NA
NA
2,367
10,030
4,828
-6,161
27%
NA
NA
NA
38%
NA
NA
5%
22%
10%
-13%
SEB Trygg Liv
1,155
13%
NM
5,519
Total
improving domestic retail banking
franchise; 3) Sweden’s largest unit-link
life insurance business; 4) strong
banking market; 5) a foothold in the
German market. We see scope for
further growth in the Baltic region, share
gains in the domestic retail market and
continued restructuring in Germany. We
8,849
100%
11.0x
-801
0
8,048
46,470
2.1x
20.7%
NA
NA
NA
NA
NA
NA
1.7x
19.3%
NA
NA
NA
NA
3.2x
27.0%
0.8x
7.1%
3.2x
22.9%
NM
NM
1.26x embedded value
12%
NM
NM
100%
2.1x
19.0%
25,525
14,136
4,348
7,040
30,327
28,841
1,486
7,675
8,024
15,469
-7,621
40.5
22.4
6.9
11.2
48.1
45.8
2.4
12.2
12.7
24.6
-12.1
26%
15%
4%
7%
31%
30%
2%
8%
8%
16%
-8%
18,009
28.6
18%
97,407
155
100%
12,000
the Nordic banks over the next two
10,000
years. In addition, the bank’s strong
8,000
6,000
capital position provides scope for
4,000
further buybacks or cash-rich add-on
2,000
0
SEB Trygg Liv
12%
12.1x
54,956
Number of shares 2006E (mn)
Implied current share price (Skr)
Fair value (Skr)
Current share price (Skr)
Implied upside/(downside)
100%
1.8x
14.6%
97,407
The Baltic &
Poland
12%
Nordic Retail
and Private
Banking
27%
Valuation: Based on our current
forecasts, SEB trades on 9.7x 2006E
GS EPS and 1.6x 2005E stated book.
SEB Germany
7%
SEB Asset
Management
7%
(a) Excluding Other and eliminations
Risks: Weakening equity markets
capital markets related revenues.
630.1
155
155
133.5
16%
acquisitions.
would have an adverse effect on SEB’s
8,486
100%
achieve the largest ROE expansion of
Total
10.0x
10.0x
10.0x
10.0x
9.0x
9.0x
9.0x
12.0x
11.3x
14.0x
11.0x
as %
of group
SEB Trygg Liv
29%
16%
5%
8%
38%
36%
2%
7%
8%
12%
-8%
Value Per share
(Skr mn)
(Skr)
Corporate Centre
2,552
1,414
435
704
3,380
3,215
165
640
709
1,105
-693
2006E
ROE (%)
SEB Germany
Nordic Retail and Private Banking
Retail Banking
Private Banking
SEB Kort
Corporate & Institutions
Merchant banking
Enskilda Securities
SEB Asset Management
SEB Germany
The Baltic & Poland
Corporate Centre
P/B (X)
The Baltic & Poland
as %
of group
2006E Equity
allocated
SEB Asset Management
P/E (X)
Nordic Retail and Private
Banking
as %
of group
Goodwill
Exceptional items
the rapidly growing Baltic region; 2) an
estimate that, after Nordea, SEB should
2006E
Net income
GS total
mix of assets via 1) a solid platform in
standing across the Nordic corporate
GS
BVPS
71.1
76.6
83.6
89.9
97.2
Sum-of-the-parts valuation (Skr mn)
Business unit
SEB offers an attractive and diversified
Our fair value calculation of Skr155, in
which the value of life insurance
Corporate &
Institutions
35%
business equals 1.25x embedded
value, implies 16% potential upside.
132
Europe
Banks
Balance sheet and capital (Skr mn)
5,704
616
0
0
0
0
6,590
597
0
0
0
-163
7,281
591
0
0
0
0
8,048
591
0
0
0
0
GS net income
6,320
7,362
8,082
8,849
7,362
753
-753
8,082
719
-719
8,849
719
-719
GS gross OpCF
6,320
-2,240
7,362
-2,450
8,082
-3,043
8,849
-3,014
GS net OpFCF
4,080
-2,818
4,912
-2,908
5,039
-3,250
5,834
-3,623
1,262
2,004
1,788
2,211
69%
49%
59%
44%
65%
45%
62%
45%
50,813
5,085
0
0
52,779
5,676
0
0
54,956
6,267
0
0
GS net FCF
GS equity
52,952
55,898
58,455
61,223
GS equity
Tier 1 capital
Total assets
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
Payout ratio
13.0%
0.53%
1.23%
13.5%
0.51%
1.33%
14.1%
0.50%
1.37%
14.8%
0.52%
1.39%
12.7%
0.47%
1.11%
13.3%
0.46%
1.19%
14.1%
0.45%
1.23%
14.9%
0.47%
1.27%
2006E
6,320
829
-829
48,464
4,488
0
0
1,279,393 1,591,318 1,663,489 1,748,600
535,000 570,000 613,475 656,539
2005E
GS net income
+ Depreciation
Stated equity
+/- other
Total assets
2004
52,952
55,898
58,455
61,223
42,640
44,266
48,180
50,285
1,279,393 1,591,318 1,663,489 1,748,600
535,000 570,000 613,475 656,539
GS return ratios
GS net OpFCF / RWA
Other
GS net FCF / tier 1
100%
Cash
1%
13%
80%
Customer
loans
60%
Equity &
debt
securities
40%
Other
assets
49%
33%
9.0%
0.34%
0.89%
8.8%
0.31%
0.85%
9.7%
0.34%
0.92%
9.6%
3.0%
4.6%
11.1%
4.5%
5.5%
10.5%
3.7%
5.6%
11.6%
4.4%
6.5%
Other liabilities
Capital formation
Subordinated
debt
9%
Preferred &
minorities
40%
20%
28%
Shareholders'
equity
3%
0%
Liab.
Assets
Mortgages
18%
Other persona
6%
Finance leases
/ hire purchases
4%
Corporate
39%
Ite m n a m e
4Q 03
3Q 04
4Q 04
4 Q /4 Q
4 Q /3 Q
2003
2004
2005E
2006E
0 4 /0 3 0 5 /0 4 E 0 6 /0 5 E
O th e r re c u rrin g re v e n u e s
T o ta l re c u rrin g r e v e n u e s
3 ,4 9 8
2 ,7 1 8
640
257
3 ,6 1 5
7 ,1 1 3
3 ,3 4 6
2 ,6 2 0
384
205
3 ,2 0 9
6 ,5 5 5
3 ,3 8 1
2 ,9 5 6
532
245
3 ,7 3 3
7 ,1 1 4
-3 %
9%
-1 7 %
-5 %
3%
0%
1%
13%
39%
20%
16%
9%
1 3 ,7 8 2
1 0 ,2 1 8
2 ,0 8 4
987
1 3 ,2 8 9
2 7 ,0 7 1
1 3 ,5 2 1
1 1 ,2 9 9
2 ,1 7 6
818
1 4 ,2 9 3
2 7 ,8 1 4
1 3 ,9 7 5
1 2 ,0 4 6
2 ,0 6 2
833
1 4 ,9 4 1
2 8 ,9 1 6
1 4 ,7 2 4
1 2 ,8 5 0
2 ,0 5 7
841
1 5 ,7 4 8
3 0 ,4 7 2
-2 %
11%
4%
-1 7 %
8%
3%
3%
7%
-5 %
2%
5%
4%
5%
7%
0%
1%
5%
5%
80.0%
70.0%
60.0%
S ta ff
D e p re cia tio n
G o o d w ill a m o rtis a tio n
O th e r o p e ra tin g c o s ts
L o a n -lo s s p ro v isio n s
P e n s io n c o m p e n s a tio n
O th e r in c o m e / (e xp e n s e s )
PB T
Tax
PA T
M in o ritie s a n d p re f s h a re d ivid e n d s
N e t P ro fit
E P S (b a s ic )
C ash EP S
GS EPS
D P S (n e t)
-2 ,6 2 4
-1 ,6 6 1
-2 1 0
-1 5 3
-4 ,6 4 8
2 ,4 6 5
-2 ,6 8 3
-1 ,4 5 9
-1 7 0
-1 5 1
-3 9
-4 ,5 0 2
2 ,0 5 3
-2 ,7 5 1
-1 ,6 2 5
-2 1 2
-1 4 3
-4 ,7 3 1
2 ,3 8 3
5%
-2 %
1%
-7 %
NA
2%
-3 %
3%
11%
25%
-5 %
-1 0 0 %
5%
16%
-1 0 ,5 0 1 -1 0 ,9 1 2
-6 ,1 9 1
-6 ,1 9 7
-8 2 9
-7 5 3
-6 1 6
-5 9 7
-1 6 3
-1 8 ,1 3 7 -1 8 ,6 2 2
8 ,9 3 4
9 ,1 9 2
-1 1 ,1 3 7
-6 ,3 6 5
-7 1 9
-5 9 1
-1 8 ,8 1 2
1 0 ,1 0 4
-1 1 ,4 0 1
-6 ,5 1 6
-7 1 9
-5 9 1
-1 9 ,2 2 7
1 1 ,2 4 5
4%
0%
-9 %
-3 %
NA
3%
3%
2%
3%
-5 %
-1 %
-1 0 0 %
1%
10%
2%
2%
0%
0%
NA
2%
11%
-3 7 3
1
32
69
-1 7 0
5
200
-2 1 6
8
347
-4 2 %
-1 0 0 %
-7 5 %
NA
27%
NA
NA
74%
-1 ,0 7 0
2
19
78
-7 3 2
21
792
-9 8 8
18
906
-1 ,2 1 7
18
1 ,0 2 0
-3 2 %
-1 0 0 %
11%
915%
35%
NA
-1 4 %
14%
23%
NA
0%
13%
2 ,1 9 4
-5 2 8
1 ,6 6 6
-2
1 ,6 6 4
2 ,0 8 8
-5 2 9
1 ,5 5 9
-6
1 ,5 5 3
2 ,5 2 2
-7 7 2
1 ,7 5 0
1 ,7 5 0
15%
46%
5%
NA
5%
21%
46%
12%
NA
13%
7 ,9 6 3
-2 ,2 4 7
5 ,7 1 6
-1 2
5 ,7 0 4
9 ,2 7 3
-2 ,6 6 6
6 ,6 0 7
-1 7
6 ,5 9 0
1 0 ,0 4 0
-2 ,7 3 4
7 ,3 0 6
-2 5
7 ,2 8 1
1 1 ,0 6 6
-2 ,9 8 8
8 ,0 7 8
-3 0
8 ,0 4 8
16%
19%
16%
42%
16%
8%
3%
11%
47%
10%
10%
9%
11%
20%
11%
2 .4 1
2 .6 3
2 .6 3
-
2 .3 0
2 .5 3
2 .5 7
-
2 .6 1
2 .8 3
2 .8 3
-
9%
8%
8%
NA
14%
12%
10%
NA
8 .2 1
9 .1 0
9 .1 0
4 .0 0
9 .6 9
1 0 .5 7
1 0 .8 3
4 .3 5
1 1 .0 4
1 1 .9 4
1 2 .2 6
5 .0 0
1 2 .5 7
1 3 .5 0
1 3 .8 2
5 .7 5
18%
16%
19%
9%
14%
13%
13%
15%
14%
13%
13%
15%
50.0%
2005E
2006E
8,082
-3,250
-3,043
8,849
-3,623
-3,014
1,262
2,004
1,788
2,211
Tier 1 capital
42,640 44,266 48,180 50,285
535,000 570,000 613,475 656,539
NM
NM
4.5%
0.4%
3.7%
0.3%
4.4%
0.3%
2003
2004
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
44,441
0
1,630
0
-5,246
1,815
42,640
46,938
0
869
0
-5,106
1,565
44,266
Tier 2 capital
0
20,990
0
0
20,990
0
26,273
0
0
26,273
Tier 3 capital
0
63,630
-8,881
54,749
0
70,539
-11,860
58,679
535,000
570,000
Ratios
Equity as % of RWA
0.0%
108.0%
8.6%
11.0%
0.0%
108.0%
8.4%
10.3%
40.0%
30.0%
60,000
20.0%
50,000
10.0%
40,000
0.0%
-10.0%
2004
7,362
-2,908
-2,450
Equity structure
Item name
Other
33%
8.4%
0.34%
0.79%
Customer
deposits
GS net income
22%
Interbank
2003
6,320
-2,818
-2,240
Interbank
1999
2000
2001
2002
2003
2004
2005E 2006E
30,000
20,000
-20.0%
Revenue growth
Cost growth
10,000
0
Tier 1
capital
Stated net profit
+ ST fluctuations on life-fund (ga
Item name
2003
Other
2006E
Goodwill
(negative)
2005E
Preference
capital
2004
Minority
interests
(equity)
2003
Cash
Item name
Reserves
Accounting
Item name
Capital
Returns (Skr mn)
133
Europe
Banks
Nordea (NDAE.ST: OP/A)
Volume (rhs)
150
NORDEA
Key statistics
FTSE W Europe
50000
21,095
68.8
78.0
OP/A
2,783.0
82%
18%
F
J
D
N
O
0
S
50
A
10000
J
20000
70
J
90
M
30000
A
110
M
40000
F
130
Investment summary: We see two
Market cap (EUR mn)
Current price (Skr)
Fair value (Skr)
Rating
Free float
Swedish government
1.9% / -3.8%
29.7% / 8.2%
36.1% / 20.9%
Debt rating: Moodys
Aa3 / stable
Debt rating: S&P
A+ / stable
NDA SS / NDAE.ST
Next announcement
Q404 results
Date
23-Feb-05
strong reasons to own Nordea: (1) its
committed move towards a leaner
capital structure, through leveraging up
to 15% hybrid capital and repurchasing
shares, provides high visibility on total
shareholder returns for the next 12
months; and (2) in the absence of a
Valuation summary (EUR mn, except
GS net
PBT
income
2002
1,292
1,225
2003
1,698
1,380
2004E
2,486
1,787
2005E
2,493
1,906
2006E
2,682
2,042
per share data)
GS
Stated
EPS
EPS
0.41
0.30
0.47
0.51
0.64
0.67
0.73
0.67
0.83
0.77
GS
BVPS
4.22
4.49
4.83
5.17
5.59
Stated
BVPS
4.06
4.28
4.54
4.80
5.14
DPS
0.23
0.25
0.28
0.30
0.32
P/E (X)
GS Stated
18.3
25.2
16.0
14.9
11.8
11.4
10.4
11.3
9.1
9.9
GS EPS
growth
-28.1%
13.9%
36.1%
13.2%
14.0%
Dividend
yield
3.0%
3.3%
3.7%
4.0%
4.2%
P/B (X)
GS Stated
1.8
1.9
1.7
1.8
1.6
1.7
1.5
1.6
1.4
1.5
marked revenue pick-up, Nordea should
ROAE RORWA
7.5%
0.66%
12.4%
1.11%
15.2%
1.30%
14.3%
1.15%
15.4%
1.17%
Retail banking
Asset Management & Life
Treasury
Corporate centre
GS total
2006E
Net income
(EUR mn)
1,639
342
280
62
-280
2,042
as % of
group
80%
17%
14%
3%
-14%
100%
P/E (X)
10.0
9.0
12.0
9.0
10.0
10.1
2006E Equity
allocated
(EUR mn)
4,611
2,466
965
643
2,037
10,722
as % of
group
43%
23%
9%
6%
19%
100%
P/B (X)
3.6x
1.2x
3.5x
0.9x
-1.4x
1.92x
2006E
ROE (%)
35.5%
13.9%
29.0%
9.6%
-13.8%
19.0%
Value Per share
(EUR mn)
(EUR)
16,386
5.9
3,076
1.1
3,358
1.2
557
0.2
-2,804
-1.0
20,574
7.39
as % of
group
Total
80%
15%
16%
3%
-14%
2,500
However, we remain confident that
2,000
management will continue with sound
1,500
execution of restructuring plans that
1,000
focus more on scalability of operations
500
rather than on direct cost cutting in the
100%
10.9
12,344
1.67x
15.3%
Total
Treasury
Corporate
centre
Asset
Management &
Life
1,622
Corporate &
Institutions
Retail banking
-155
0
1,887
Risks: As with any restructuring story,
gains via diminishing revenues.
0
Goodwill
Exceptional items
through continued cost improvements.
risks include losing some efficiency
Business unit
be able to improve profitability ratios
20,574
Implied share price (Skr)
2,401
multiple within our Nordic banks
Corporate
centre
11%
78.0
68.8
13%
coverage. This is equivalent to an 11%
Treasury
2%
discount to the European banks sector.
Asset
Management &
Life
11%
Corporate &
Institutions
13%
Valuation: Nordea trades on 9.1x
2006E GS EPS, which is the lowest
front-office operations.
Retail banking
63%
forecasts on February 24, post Nordea’s
results. Please see our note entitled ‘Value
(a) Excluding Other and eliminations
creation made simple.’
134
Europe
Banks
2005E
2006E
1,490
167
0
-278
0
0
1,856
160
0
-229
0
0
1,751
155
0
0
0
0
1,887
155
0
0
0
0
GS net income
+ Depreciation
1,380
0
0
1,787
0
0
1,906
0
0
2,042
0
0
GS gross OpCF
1,380
19
1,787
-568
1,906
-652
2,042
-642
GS net income
1,380
1,787
1,906
2,042
GS net OpFCF
1,399
-712
1,219
-760
1,254
-757
1,400
-768
Stated equity
+ Goodwill amortized to date
+/- other
12,177
614
0
0
12,324
774
0
0
12,114
929
0
0
12,344
1,084
0
0
GS net FCF
687
459
497
632
Payout ratio
51%
48%
62%
41%
60%
43%
55%
41%
GS equity
12,791
13,098
13,043
13,428
GS equity
Tier 1 capital
Total assets
262,190 266,376 277,815 289,040
134,396 142,511 151,826 160,995
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
11.0%
0.54%
1.03%
13.8%
0.68%
1.29%
14.6%
0.70%
1.29%
15.4%
0.72%
1.31%
12.4%
0.58%
1.11%
15.2%
0.70%
1.34%
14.3%
0.64%
1.19%
15.4%
0.67%
1.21%
100%
Cash
12,791 13,098 13,043 13,428
9,754 10,609 11,054 11,639
262,190 266,376 277,815 289,040
134,396 142,511 151,826 160,995
GS return ratios
GS net OpFCF / RWA
Other
GS net FCF / tier 1
11.6%
0.58%
1.05%
9.4%
0.46%
0.88%
9.6%
0.46%
0.85%
10.6%
0.49%
0.90%
14.3%
7.0%
6.6%
11.5%
4.3%
5.8%
11.3%
4.5%
5.9%
12.0%
5.4%
6.6%
1%
2003
2004E
2005E
2006E
Customer
deposits
GS net income
1,380
-712
19
1,787
-760
-568
1,906
-757
-652
11%
11%
Interbank
80%
2,042
-768
-642
Customer
loans
60%
Other liabilities
Capital formation
687
459
497
632
Equity &
debt
securities
40%
Interbank
36%
Other
assets
56%
Subordinated
debt
46%
12%
Preferred &
minorities
20%
19%
Shareholders'
equity
5%
0%
Liab.
Assets
Other
8%
Mortgages
33%
Corporate
42%
Other
personal
11%
Item name
4Q03
3Q04
2003
2004E
2005E
Net interest income
Trading profits
850
388
125
26
539
1,389
884
403
86
18
507
1,391
888
406
106
20
532
1,420
4%
5%
-15%
-22%
-1%
2%
0%
1%
23%
13%
5%
2%
3,366
1,486
567
100
2,153
5,519
3,486
1,611
452
87
2,150
5,636
3,688
1,708
445
100
2,253
5,941
3,857
1,795
459
100
2,354
6,211
4%
8%
-20%
-13%
0%
2%
6%
6%
-1%
15%
5%
5%
5%
5%
3%
0%
4%
5%
Staff
Operating income
-511
-386
-46
-989
400
-463
-359
-39
-876
515
-461
-392
-40
-928
492
-10%
1%
-13%
-6%
23%
0%
9%
3%
6%
-4%
-2,101
-1,496
-167
-3,810
1,709
-1,868
-1,499
-160
-3,607
2,029
-1,833
-1,509
-155
-3,576
2,365
-1,848
-1,496
-155
-3,579
2,632
-11%
0%
-4%
-5%
19%
-2%
1%
-3%
-1%
17%
1%
-1%
0%
0%
11%
Pension compensation
-84
14
-62
2
15
16
-23
13
55
-73%
NA
7%
-126%
NA
NA
-13%
242%
-363
57
294
-59
46
470
-150
48
230
-249
50
250
-84%
NA
-19%
60%
152%
NA
4%
-51%
66%
NA
4%
8%
PBT
Tax
PAT
Net Profit
268
-66
202
-0
201
548
-149
399
-1
398
537
-162
375
375
101%
145%
86%
-100%
86%
-2%
8%
-6%
-100%
-6%
1,698
-205
1,493
-2
1,490
2,486
-628
1,858
-2
1,856
2,493
-741
1,752
-1
1,751
2,682
-794
1,888
-1
1,887
46%
206%
24%
-9%
25%
0%
18%
-6%
-50%
-6%
8%
7%
8%
0%
8%
0.07
0.12
0.14
0.16
0.14
0.15
96%
NA
NA
-4%
-4%
NA
0.51
0.47
0.25
0.67
0.64
0.28
0.67
0.73
0.30
0.77
0.83
0.32
31%
36%
12%
0%
13%
7%
15%
14%
7%
EPS (basic)
GS EPS
DPS (net)
4Q04E 4Q/4QE 4Q/3QE
9,754
10,609
11,054
11,639
134,396 142,511 151,826 160,995
NM
NM
4.3%
0.3%
Equity structure
Item name
Finance
leases / hire
purchases
6%
Tier 1 capital
2002
2003
1,183
6,430
10
0
-2,359
4,348
9,612
1,160
6,733
8
0
-2,028
3,881
9,754
Tier 2 capital
0
6,128
0
-2,376
3,752
0
5,115
0
-2,340
2,775
Tier 3 capital
0
13,364
0
13,364
0
12,529
0
12,529
134,670
134,396
0.0%
79.3%
5.7%
19.7%
0.0%
81.0%
5.9%
17.2%
Ratios
Equity as % of RWA
25.0%
20.0%
5.4%
0.4%
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
2006E 04/03E 05/04E 06/05E
4.5%
0.3%
15.0%
12,000
10.0%
10,000
5.0%
8,000
6,000
0.0%
2001
2002
2003
2004E
2005E
-5.0%
2006E
4,000
2,000
0
-10.0%
Revenue growth
Cost growth
Tier 1 capital
2004E
Stated net profit
Total assets
Item name
2003
Other
2006E
Goodwill
(negative)
2005E
Preference
capital
2004E
Minority
interests
(equity)
2003
Cash
Item name
Reserves
Accounting
Item name
Capital
Returns (EUR mn)
135
Europe
Banks
Danske Bank (DANSKE.CO: NR)
Volume (rhs)
130
DANSKE BANK
Key statistics
FTSE W Europe
12000
10000
110
8000
90
6000
4000
70
2000
112,187
173.8
186
NR/A
645.7
80%
Valuation summary (Dkr mn, except per share data)
GS net
GS
Stated
PBT
income
EPS
EPS
2001
11,390
8,528
11.7
11.9
2002
11,164
8,242
11.5
11.5
2003
13,036
9,286
13.3
13.3
2004E
12,857
8,801
13.4
13.9
2005E
12,933
9,964
15.6
14.4
2006E
15,111
11,013
17.5
17.1
F
J
D
N
O
S
A
J
J
M
A
M
0
F
50
Investment summary: Danske
Market capitalization (Dkr mn)
Current price (Dkr)
Fair value (Dkr)
Rating
Free float
3.1% / -2.5%
21.5% / -0.5%
22.4% / 8.0%
Debt rating: Moodys
Aa1 / positive
Debt rating: S&P
AA- / stable
B'berg / Reuters code DANSKE DC/ DDBC.CO
Next announcement
4Q04 results
Date
10-Feb-05
2006E
Net income
Stated
BVPS
78.0
84.8
89.9
94.0
106.8
113.9
DPS
4.8
4.8
6.6
6.9
7.0
8.3
P/E (X)
GS Stated
14.9
14.6
15.2
15.2
13.0
13.0
12.9
12.5
11.1
12.1
9.9
10.2
GS EPS
growth
119.3%
-1.7%
16.4%
0.7%
16.2%
12.4%
Dividend
yield
2.7%
2.7%
3.8%
4.0%
4.0%
4.8%
P/B (X)
GS Stated
1.9
2.2
1.8
2.0
1.7
1.9
1.6
1.8
1.4
1.6
1.3
1.5
ROAE RORWA
16.1%
1.16%
14.0%
1.07%
15.4%
1.21%
15.2%
1.15%
14.3%
1.06%
15.5%
1.15%
7,056
1,787
792
246
959
173
as %
of group
P/E (X)
2006E Equity
allocated
as %
of group
P/B (X)
2006E
ROE (%)
Value
as % Per share
(Dkr mn) of group
(Dkr)
64%
16%
7%
2%
9%
2%
10.0
10.0
9.0
12.0
14.7
11.1
30,872
17,853
3,833
4
8,741
9,015
44%
25%
5%
0%
12%
13%
2.3x
1.0x
1.9x
NM
1.6x
0.2x
22.9%
10.0%
20.7%
NM
11.0%
1.9%
70,561
17,870
7,129
2,956
14,073
1,925
62%
16%
6%
3%
12%
2%
107.8
27.3
10.9
4.5
21.5
2.9
franchise into an attractive region.
Danske Bank management is renowned
for providing conservative guidance and
managing expectations. However,
evidence of progress is likely required
believe this risk to be limited due to
management’s proven execution skills
4,000
in consolidating Danske Bank’s
2,000
114,513
100%
175.0
0
0
10.7
70,318
1.6x
15.3%
Implied share price (Dkr)
Current share price (Dkr)
Implied upside / (downside)
186
173.8
7%
2006E GS EPS and 1.6x 2005E stated
Danske
Capital
2%
book.
Danske
Markets
7%
Mortgage
Finance
16%
its scalable retail banking platform.
forecasts, Danske Bank trades on 9.9x
114,513
617.2
Swedish and Norwegian operations into
Life & Pension
9%
Total
15.7%
Other
1.6x
Life & Pension
100%
Danske
Markets
70,318
Banking
Activities
10.4
Mortgage
Finance
100%
0
-284
10,729
potential move is a sensible extension
6,000
Total
in December 2004. In our view, the
involves an execution risk, although we
8,000
Danske Capital
Goodwill
11,013
Northern Bank and National Irish Bank
Risks: The restructuring of NIB & NB
12,000
0
GS total
following the proposed acquisitions of
to propel the share price higher.
10,000
Banking Activities
Mortgage Finance
Danske Markets
Danske Capital
Life & Pension
Other
recovered some of the ground lost
of what is a well-proven retail banking
GS
BVPS
91.7
98.8
104.8
109.7
122.5
130.1
Sum-of-the-parts valuation (Dkr mn)
Group divisions
Bank’s share price has gradually
Banking
Activities
66%
forecasts on February 22, post Danske
Bank's results and announced effects from
IFRS. Please see our note entitled
(a) Excluding negative items.
‘Introducing IFRS-based estimates’.
136
Europe
Banks
Balance sheet and capital (Dkr mn)
2005E
2006E
9,286
0
0
0
-2,569
0
9,128
0
0
-327
-901
1
9,183
0
0
781
-1,020
1
10,729
0
0
284
-1,050
1
GS net income
+ Depreciation
9,286
489
-489
8,801
475
-475
9,964
494
-494
11,013
504
-504
GS gross OpCF
9,286
9
8,801
-38
9,964
-28
11,013
-25
GS net income
9,286
8,801
9,964
11,013
GS net OpFCF
9,295
-4,661
8,763
-4,405
9,936
-4,469
10,988
-5,123
4,634
4,358
5,467
5,865
Stated equity
+/- other
60,451
0
10,004
0
59,998
0
10,004
0
68,212
0
10,004
0
70,318
0
10,004
0
GS net FCF
GS equity
70,455
70,002
78,216
80,322
GS equity
Tier 1 capital
Total assets
1,826,134 1,893,971 1,948,913 2,005,448
766,985 821,136 905,087 954,807
Payout ratio
50%
50%
50%
48%
45%
49%
100%
Cash
Interbank
16%
26%
Customer
loans
60%
Equity &
debt
securities
40%
Other
assets
56%
Customer
deposits
GS net income
Other liabilities
Capital formation
Subordinated
debt
52%
20%
0%
26%
Preferred &
minorities
8%
Shareholders'
equity
3%
Liab.
Assets
14.2%
0.56%
1.23%
12.5%
0.47%
1.11%
13.4%
0.52%
1.15%
13.9%
0.56%
1.18%
16.7%
0.56%
1.23%
15.2%
0.49%
1.15%
14.3%
0.48%
1.06%
15.5%
0.54%
1.15%
GS return ratios
GS net OpFCF / RWA
Other
GS net FCF / tier 1
14.2%
0.56%
1.23%
12.5%
0.47%
1.10%
13.4%
0.52%
1.15%
13.9%
0.56%
1.18%
15.8%
7.9%
8.3%
14.1%
7.0%
7.8%
14.7%
8.1%
8.9%
15.1%
8.1%
9.8%
Mortgages
49%
Finance leases
/ hire purchases
2%
Overseas
19%
Summary P&L (Dkr mn)
Item name
4Q03
3Q04
2003
2004E
2005E
2006E
04/03E
05/04E
06/05E
Net interest income
Trading profits
3,876
1,456
815
410
2,681
6,557
3,861
1,419
735
564
2,718
6,579
3,932
1,507
715
507
2,729
6,661
1%
3%
-12%
24%
2%
2%
2%
6%
-3%
-10%
0%
1%
15,593
5,910
3,315
2,131
11,356
26,949
15,262
6,025
2,951
2,078
11,054
26,316
17,506
6,643
3,134
2,273
12,049
29,555
18,851
7,156
3,277
2,433
12,866
31,717
-2%
2%
-11%
-2%
-3%
-2%
15%
10%
6%
9%
9%
12%
8%
8%
5%
7%
7%
7%
Staff
Depreciation
Operating income
-2,137
-1,354
-163
-176
-3,830
2,727
-1,958
-1,114
-104
-204
-3,380
3,199
-2,073
-1,350
-163
-264
-3,850
2,811
-3%
0%
0%
50%
1%
3%
6%
21%
57%
29%
14%
-12%
-8,235
-4,825
-489
-1,271
-14,820
12,129
-7,953
-4,778
-475
-1,126
-14,332
11,984
-8,717
-5,121
-494
-1,192
-15,525
14,030
-8,989
-5,295
-504
-1,182
-15,970
15,747
-3%
-1%
-3%
-11%
-3%
-1%
10%
7%
4%
6%
8%
17%
3%
3%
2%
-1%
3%
12%
8.0%
-400
1,110
47
125
-83
485
-79% -276%
-89% 288%
-1,662
2,569
-488
1,361
-1,017
-80
-1,286
650
-71%
-47%
108%
-106%
26%
-912%
0.0%
PBT
Tax
PAT
Net Profit
3,437
-985
2,452
2,452
3,371
-915
2,456
2,456
3,213
-964
2,249
2,249
-7%
-2%
-8%
NA
-8%
-5%
5%
-8%
NA
-8%
13,036
-3,750
9,286
9,286
12,857
-3,729
9,128
9,128
12,933
-3,751
9,183
9,183
15,111
-4,382
10,729
10,729
-1%
-1%
-2%
NA
-2%
1%
1%
1%
NA
1%
17%
17%
17%
NA
17%
3.61
3.61
3.61
3.78
3.78
3.78
3.50
3.50
3.16
-3%
-3%
-12%
-7%
-7%
-16%
13.33
13.58
13.33
6.55
13.93
14.21
13.43
6.90
14.38
14.71
15.61
7.00
17.09
17.44
17.54
8.30
4%
5%
1%
5%
3%
4%
16%
1%
19%
19%
12%
19%
EPS (basic)
Cash EPS
GS EPS
DPS (net)
4Q04E 4Q/4Q 4Q/3Q
14.0%
12.0%
10.0%
Tier 1 capital
2005E
2006E
8,801
-4,405
-38
9,964
-4,469
-28
11,013
-5,123
-25
4,634
4,358
5,467
5,865
58,699
766,985
62,154
821,136
67,748
905,087
72,854
954,807
7.9%
0.6%
7.0%
0.5%
8.1%
0.6%
8.1%
0.6%
2002
2003
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
7,320
52,229
9
0
0
-904
58,654
7,117
52,311
9
0
0
-738
58,699
Tier 2 capital
38
0
0
22,608
22,646
37
0
0
25,314
25,351
Tier 3 capital
0
81,300
0
81,300
0
84,050
0
84,050
774,150
766,985
Ratios
Equity as % of RWA
0.0%
101.5%
7.7%
0.0%
0.0%
101.3%
7.7%
0.0%
6.0%
70,000
4.0%
60,000
50,000
2.0%
-2.0%
2004E
Equity structure
Item name
Other
30%
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
2003
9,286
-4,661
9
Interbank
80%
47%
48%
70,455
70,002
78,216
80,322
58,699
62,154
67,748
72,854
1,826,134 1,893,971 1,948,913 2,005,448
766,985 821,136 905,087 954,807
1%
9%
40,000
2000
2001
2002
2003
2004E
2005E
2006E
30,000
20,000
10,000
-4.0%
0
-6.0%
Revenue growth
Cost growth
Tier 1
capital
2004E
Stated net profit
Total assets
Item name
2003
Other
2006E
Goodwill
(negative)
2005E
Preference
capital
2004E
Minority
interests
(equity)
2003
Cash
Item name
Reserves
Accounting
Item name
Capital
Returns (Dkr mn)
137
Europe
Banks
DnB NOR (DNBNOR.OL: IL/A)
Volume (rhs)
150
DNB HOLDING
Key statistics
FTSE W Europe
20000
130
15000
110
10000
90
5000
70
79,648
60.3
64.0
IL/A
1,322.0
56%
DnB NOR; Pro form a 2002-2003
GS net
GS
PBT incom e
EPS
2002
5,274
4,473
3.42
2003
7,014
5,790
4.42
2004E
9,222
7,140
5.41
2005E
9,764
7,625
5.71
2006E
11,134
8,617
6.48
F
J
D
N
O
S
A
J
J
M
A
M
0
F
50
Investment summary: This year
Market capitalization (Nkr mn)
Current price (Nkr)
Fair value (Nkr)
Rating
Free float
1.7% / -6.0%
18.1% / -4.3%
Debt rating: Moodys
Aa3 / negative
Debt rating: S&P
A / positive
DNBNOR NO/DNBNOR.OL
B'berg/Reuters code
Next announcement
Q404 results
Date
24-Feb-05
GS
BVPS
31.2
33.5
36.5
39.5
42.8
Stated
BVPS
30.3
32.2
34.7
37.4
40.3
P/E (X)
GS Stated
17.6
21.7
13.6
14.7
11.1
11.8
10.6
11.3
9.3
9.9
DPS
2.14
2.20
2.50
2.60
3.00
GS EPS Dividend
grow th
yield
-41.9%
3.6%
29.5%
3.7%
22.4%
4.1%
5.5%
4.3%
13.5%
5.0%
2006E
as %
Net income of group
P/E (X)
2006E Equity
as %
allocated of group
2006E
Value Per share
as %
P/B (X) ROE (%) (Nkr mn)
(Nkr) of group
P/B (X)
GS Stated
1.9
2.0
1.8
1.9
1.7
1.7
1.5
1.6
1.4
1.5
ROAE
11.1%
13.1%
15.3%
14.8%
15.7%
RORW A
0.88%
0.98%
1.15%
1.16%
1.24%
earnings estimates - our cost forecasts
for 2005 stand around Nkr300 mn
However, with interest rate hikes
seemingly unlikely before the summer,
net interest margins may remain under
pressure as asset margins (particularly
mortgage margins) become subject to
10,000
9,000
26.9
23.4
7.3
3.3
7.6
-4.4
42%
37%
11%
5%
12%
-7%
Risks: Although the merger seems to
GS total
8,617
100%
9.8
52,573
100%
1.6
16.4%
84,491
64.0
100%
-509
0
666
10.4
53,239
Implied share price (Nkr)
Current share price (Nkr)
Implied upside (downside)
7,000
be on track so far, some of the most
6,000
5,000
challenging parts of the integration
4,000
3,000
process, including the merger of the IT
2,000
1,000
0
1.6
15.2%
1,320.7
64.0
60.3
6%
most of its Nordic peers whose
operations are more diversified
Insurance
9%
DnB NOR
Markets
11%
NOR’s operations are concentrated in
higher country specific risk compared to
Corporate
centre
-7%
84,491
platforms, lie ahead. In addition, DnB
Norway, leaving the stock exposed to a
Retail Banking
37%
geographically.
Corporate
Banking
36%
Total
35,460
30,852
9,581
4,384
10,025
-5,811
Insurance
39%
17%
53%
30%
7%
NM
Corporate
centre
3.9
1.5
4.8
3.6
0.8
-0.8
Asset
management
18%
39%
4%
2%
23%
15%
DnB NOR
Markets
9,207
20,389
2,000
1,217
12,125
7,635
Corporate
Banking
10.0
9.0
9.0
12.0
12.0
9.3
Retail Banking
41%
40%
12%
4%
10%
-7%
8,108
implementation, as reflected in our
and Nordic players.
8,000
3,546
3,428
1,065
365
835
-623
Total
We expect a successful
intensified competition from domestic
Retail Banking
Corporate Banking
DnB NOR Markets
Asset management
Insurance
Corporate centre
Goodwill
Exceptional items
implementation process at DnB NOR.
below management guidance.
Stated
EPS
2.77
4.11
5.11
5.33
6.10
Sum-of-the-parts valuation (Nkr mn)
Division
will likely prove crucial for the synergy
forecasts, DnB NOR trades at 9.3x
book.
138
Europe
Banks
Returns (Nkr mn)
Balance sheet and capital (Nkr mn)
Accounting
Item name
2003
2004E
2005E
2006E
2003
2004E
2005E
2006E
Stated net profit
5,378
550
3
-141
0
0
6,738
509
-741
634
0
0
7,116
509
0
0
0
0
8,108
509
0
0
0
0
GS net income
+ Depreciation
5,790
650
-650
7,140
552
-552
7,625
552
-552
8,617
552
-552
GS gross OpCF
5,790
-4,395
7,140
-1,186
7,625
-2,653
8,617
-2,773
GS net income
5,790
7,140
7,625
8,617
GS net OpFCF
1,395
-2,919
5,954
-3,322
4,973
-3,478
5,844
-3,962
-1,524
2,631
1,495
1,882
Stated equity
+/- other
42,115
1,752
13
0
46,166
2,261
13
0
50,093
2,770
13
0
53,239
3,279
13
0
GS net FCF
GS equity
43,880
48,440
52,876
56,531
GS equity
Tier 1 capital
Total assets
Total assets
700,076 726,429 773,559 822,672
579,445 596,390 634,286 673,898
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
13.7%
0.87%
1.06%
15.5%
1.00%
1.21%
15.1%
1.02%
1.24%
15.8%
1.08%
1.32%
13.1%
0.81%
0.98%
15.3%
0.94%
1.15%
14.8%
0.95%
1.16%
15.7%
1.02%
1.24%
Item name
Cash
Item name
Payout ratio
209%
54%
56%
49%
70%
49%
GS return ratios
GS net OpFCF / RWA
Other
GS net FCF / tier 1
Interbank
80%
Customer
loans
60%
Equity &
debt
securities
40%
Other
assets
4.1%
0.27%
0.32%
12.9%
0.83%
1.01%
9.8%
0.66%
0.81%
10.7%
0.73%
0.89%
3.6%
-3.9%
1.8%
14.2%
6.3%
7.5%
10.7%
3.2%
6.2%
11.7%
3.8%
7.3%
1%
4%
2003
2004E
2005E
2006E
Customer
deposits
GS net income
5,790
-2,919
-4,395
7,140
-3,322
-1,186
7,625
-3,478
-2,653
8,617
-3,962
-2,773
Other liabilities
Capital formation
-1,524
2,631
1,495
1,882
39,270
579,445
41,991
596,390
46,418
634,286
50,064
673,898
-3.9%
-0.3%
6.3%
0.4%
3.2%
0.2%
3.8%
0.3%
Interbank
11%
48%
80%
Subordinated
debt
Preferred &
minorities
32%
20%
8%
0%
68%
49%
43,880 48,440 52,876 56,531
39,270 41,991 46,418 50,064
700,076 726,429 773,559 822,672
579,445 596,390 634,286 673,898
100%
Cash
7%
6%
Assets
Liab.
Shareholders'
equity
4Q03
3Q04
2003
2004E
2005E
2006E 04/03E 05/04E 06/05E
Net interest income
Trading profits
3,298
1,156
491
713
2,360
5,658
3,308
1,142
344
509
1,995
5,303
4Q04E 4Q/4QE 4Q/3QE
3,328
1,182
415
496
2,093
5,421
1%
2%
-15%
-30%
-11%
-4%
1%
4%
21%
-3%
5%
2%
13,789
4,279
1,847
2,153
8,279
22,068
13,227
4,627
1,607
2,267
8,501
21,728
13,840
4,881
1,505
2,091
8,477
22,317
14,473
5,157
1,520
2,219
8,896
23,369
-4%
8%
-13%
5%
3%
-2%
5%
5%
-6%
-8%
0%
3%
5%
6%
1%
6%
5%
5%
Staff
Depreciation
Operating income
-1,762
-1,012
-164
-140
-388
-3,466
2,192
-1,519
-905
-132
-123
-298
-2,977
2,326
-1,513
-979
-132
-123
-325
-3,072
2,349
-14%
-3%
-20%
-12%
-16%
-11%
7%
0%
8%
0%
0%
9%
3%
1%
-6,577
-3,982
-650
-550
-1,546
-13,305
8,763
-6,212
-3,869
-552
-509
-1,315
-12,457
9,271
-5,828
-3,713
-552
-509
-1,116
-11,718
10,599
-5,733
-3,431
-552
-509
-1,052
-11,276
12,093
-6%
-3%
-15%
-7%
-15%
-6%
6%
-6%
-4%
0%
0%
-15%
-6%
14%
-2%
-8%
0%
0%
-6%
-4%
14%
-276
166
121
51
-101
7
NA
-96%
NA
NA
-1,891
141
-197
148
-835
0
-960
-0
-90% 324%
5% -100%
15%
NA
Other
1%
Corporate
46%
Mortgages
53%
2,082
-513
1,569
2,498
-675
1,823
2,255
-604
1,652
8%
18%
5%
-10%
-11%
-9%
7,014
-1,636
5,378
9,222
-2,485
6,740
9,764
-2,648
7,116
11,134
-3,026
8,108
31%
52%
25%
6%
7%
6%
14%
14%
14%
1.20
1.31
1.20
-
1.38
1.47
1.44
-
1.24
1.34
1.33
-
4%
2%
11%
NA
-10%
-9%
-8%
NA
4.11
4.53
4.42
2.20
5.11
5.49
5.41
2.50
5.33
5.71
5.71
2.60
6.10
6.48
6.48
3.00
24%
21%
22%
14%
4%
4%
5%
4%
14%
14%
14%
15%
2002
2003
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
13,090
15,242
0
0
-1,424
9,894
36,802
13,090
17,672
0
0
-883
9,391
39,270
Tier 2 capital
0
18,811
0
-4,323
14,488
0
23,709
0
-6,416
17,293
Tier 3 capital
0
51,290
0
51,290
0
56,563
0
56,563
516,664
579,445
0.0%
77.0%
5.5%
3.7%
0.0%
78.3%
5.3%
2.2%
60.0%
Ratios
Equity as % of RWA
50.0%
40.0%
30.0%
45,000
20.0%
40,000
35,000
10.0%
30,000
25,000
0.0%
2000
PBT
Tax
Net Profit
Equity structure
Item name
Summary P&L (Nkr mn)
Item name
Tier 1 capital
2001
2002
2003
2004E
2005E
2006E
20,000
15,000
-10.0%
10,000
Revenue growth
Cost growth
5,000
Tier 1
capital
Other
Goodwill
(negative)
Preference
capital
Minority
interests
(equity)
Reserves
Capital
0
EPS (basic)
Cash EPS
GS EPS
DPS (net)
139
Europe
Banks
Handelsbanken (SHBA.ST: U/A)
Volume (rhs)
130
120
110
100
90
80
70
60
50
SHB A
Key statistics
FTSE W Europe
10000
8000
6000
4000
2000
Investment summary: Recent
Current price (Skr)
Fair value (Skr)
Rating
Free float
115,178
172.0
169
U/A
669.6
69%
F
J
D
N
O
S
A
J
J
M
A
M
F
0
1.5% / -4.2%
23.7% / 3.3%
22.0% / 8.3%
Debt rating: Moodys
Aa1 / stable
Debt rating: S&P
A+ / positive
B'berg / Reuters code SHBa SS / SHBa.ST
Next announcement
Q404 results
Date
22-Feb-05
GS
BVPS
78.4
85.7
95.8
102.8
112.9
Stated
BVPS
75.3
82.0
91.1
97.0
106.3
DPS
4.75
5.25
6.00
6.25
7.25
P/E (X)
GS Stated
15.4
16.4
13.9
14.7
12.1
12.7
11.6
12.3
10.5
11.1
GS EPS
growth
-10.8%
10.9%
15.4%
4.3%
10.2%
Dividend
yield
2.8%
3.1%
3.5%
3.6%
4.2%
P/B (X)
GS Stated
2.2
2.3
2.0
2.1
1.8
1.9
1.7
1.8
1.5
1.6
ROAE RORWA
14.5%
1.14%
14.9%
1.26%
15.6%
1.39%
14.9%
1.32%
15.2%
1.35%
2006E
Net income
as %
of group
P/E
2006E Equity
allocated
as %
of group
P/B
ROE (%)
Value
(SKr mn)
Per share
(SKr)
as a %
of group
Total
8,294
717
452
358
301
554
78%
7%
4%
3%
3%
5%
10.0x
9.0x
12.0x
18.0x
8.0x
11.4x
51,947
4,193
1,908
1,484
5,128
0
80%
6%
3%
2%
8%
0%
1.6x
1.5x
2.8x
4.3x
0.5x
NM
16.0%
17.1%
23.7%
24.1%
5.9%
NM
82,936
6,452
5,426
6,450
2,408
6,322
127.3
9.9
8.3
9.9
3.7
9.7
75%
6%
5%
6%
2%
6%
10,676
100%
10.3x
64,660
100%
1.7x
16.5%
109,995
169
100%
efficiency and minimal provisioning
the bottom line, in our view. We see
SHB’s international organic expansion,
in which it has prioritised profitability
over growth, as an important growth
driver. That said, we expect the impact
Risks: SHB’s return to more aggressive
10,000
8,000
capital management could boost the
6,000
share price; over the last few years, SHB’s
4,000
Tier 1 ratio has expanded by almost 100
10.9x
69,222
Implied fair value (Skr)
Implied upside/(downside)
1.6x
14.6%
109,995
Total
Treasury
Corporate
centre
bp. That said, we expect capital needs for
a demutualised SPP and potential add-on
acquisitions to limit scope for buybacks.
651.5
169
172
-2%
SHB Life &
SPP
0
Markets
4,562
0
Asset
management
-580
0
10,096
expense of margins. Its high operational
12,000
Branch office
operations
Goodwill
increasingly have to defend at the
through over a relatively long period.
2,000
GS total
market share gains which it may
on group profits to gradually shine
Sum-of-the-parts-valuation (Skr mn)
Branch office operations
Markets
Asset management
SHB Liv & SPP
Treasury
Corporate centre
sustainability of SHB’s long-running
levels offer limited opportunities to boost
Valuation summary (Skr mn, except per share data)
GS net
GS
Stated
PBT
income
EPS
EPS
2002
10,110
7,722
11.14
10.50
2003
11,461
8,567
12.36
11.70
2004E
12,968
9,717
14.26
13.49
2005E
13,065
9,824
14.87
13.99
2006E
14,248
10,676
16.39
15.50
Group division
trends have raised concerns over the
SHB Life &
SPP
3%
Asset
management
4%
Treasury
3%
Corporate
centre
5%
Valuation: SHB trades on 10.5x 06E
GS EPS and 1.8x 05E stated book, the
highest in our Nordic banks coverage.
Markets
7%
Branch office
operations
78%
forecasts on February 23, post SHB's results.
Please see our note entitled ‘The incumbents
strike back’.
140
Europe
Banks
2004E
2005E
2006E
Stated net profit
+ ST fluctuations on life-fund (gai
8,116
429
0
22
0
0
9,196
580
0
-59
0
0
9,244
580
0
0
0
0
10,096
580
0
0
0
0
GS net income
+ Depreciation
8,567
378
-378
9,717
258
-258
9,824
258
-258
10,676
258
-258
GS gross OpCF
8,567
-52
9,717
-1,396
9,824
-2,831
10,676
-3,248
GS net income
8,567
9,717
9,824
10,676
GS net OpFCF
8,515
-3,640
8,321
-4,018
6,993
-4,072
7,428
-4,723
4,874
4,303
2,922
2,705
Stated equity
+/- other
56,835
2,605
0
0
60,971
3,185
0
0
63,198
3,765
0
0
69,222
4,345
0
0
GS net FCF
GS equity
59,440
64,156
66,963
73,567
GS equity
Tier 1 capital
Total assets
Total assets
1,260,454 1,353,054 1,411,536 1,472,231
641,855 661,804 702,242 748,644
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
15.1%
0.68%
1.34%
14.9%
0.64%
1.27%
15.7%
0.74%
1.49%
15.0%
0.71%
1.44%
15.6%
0.70%
1.41%
15.2%
0.74%
1.47%
14.9%
0.67%
1.36%
15.2%
0.70%
1.39%
Payout ratio
43%
45%
48%
44%
58%
44%
GS return ratios
GS net OpFCF / RWA
Other
GS net FCF / tier 1
Interbank
Item name
1%
9%
16%
80%
Customer
loans
60%
Equity &
debt
securities
40%
Other
assets
Customer
deposits
Other
liabilities
65%
Subordinate
d debt
53%
Preferred &
minorities
9%
20%
16%
Shareholder
s' equity
5%
0%
Assets
Liab.
13.5%
0.64%
1.28%
18.6%
10.6%
7.4%
16.9%
8.8%
7.2%
10.7%
0.51%
1.03%
13.6%
5.7%
6.1%
10.6%
0.52%
1.02%
Corporate
59%
14.1%
5.1%
6.4%
Other personal
11%
Summary P&L (Skr mn)
Item name
4Q03
3Q04
2003
2004E
2005E
2006E 04/03E 05/04E 06/05E
Net interest income
Net fees & comm issions
Trading profits
3,585
1,430
621
65
2,116
5,701
3,598
1,456
495
166
2,117
5,715
4Q04E 4Q/4QE 4Q/3QE
3,688
1,536
567
136
2,239
5,927
3%
7%
-9%
NA
6%
4%
3%
5%
15%
NA
6%
4%
14,642
5,224
2,222
433
7,879
22,521
14,572
6,039
2,364
643
9,046
23,618
15,106
6,509
2,276
623
9,408
24,513
15,691
8,480
2,305
638
11,423
27,115
0%
16%
6%
48%
15%
5%
4%
8%
-4%
-3%
4%
4%
4%
30%
1%
2%
21%
11%
Staff
Depreciation
Operating income
-1,588
-896
-23
-145
-2,652
3,049
-1,569
-859
-65
-145
-2,638
3,077
-1,576
-935
-65
-145
-2,720
3,207
-1%
4%
183%
0%
3%
5%
0%
9%
0%
0%
3%
4%
-6,356
-3,286
-378
-429
-10,449
12,072
-6,369
-3,501
-258
-580
-10,707
12,911
-6,525
-3,621
-258
-580
-10,984
13,530
-6,735
-4,600
-258
-580
-12,173
14,942
0%
7%
-32%
35%
2%
7%
2%
3%
0%
0%
3%
5%
3%
27%
0%
0%
11%
10%
Pension compensation
Other incom e / (expenses)
-195
-7
-30
26
82
-33
-0
-83%
-100%
NA
-226%
NA
-100%
-492
-89
-30
-25
82
-465
0
-694
0
-95%
-100%
NA
1786%
NA
NA
49%
NA
0%
2,817
-843
1,974
1,974
3,185
-931
2,254
2,254
3,174
-962
2,211
2,211
13%
14%
12%
NA
12%
0%
3%
-2%
NA
-2%
11,461
-3,345
8,116
8,116
12,968
-3,771
9,196
9,196
13,065
-3,820
9,244
9,244
14,248
-4,152
10,096
10,096
13%
13%
13%
NA
13%
1%
1%
1%
NA
1%
9%
9%
9%
NA
9%
2.85
3.06
3.09
-
3.37
3.58
3.49
-
3.30
3.52
3.52
-
16%
15%
14%
NA
-2%
-2%
1%
NA
11.70
12.32
12.36
5.25
13.49
14.35
14.26
6.00
13.99
14.87
14.87
6.25
15.50
16.39
16.39
7.25
15%
16%
15%
14%
4%
4%
4%
4%
11%
10%
10%
16%
EPS (basic)
Cash EPS
GS EPS
DPS (net)
2004E
2005E
2006E
9,717
-4,018
-1,396
9,824
-4,072
-2,831
10,676
-4,723
-3,248
4,874
4,303
2,922
2,705
Capital formation
Tier 1 capital
45,846
49,099
51,325
52,550
641,855 661,804 702,242 748,644
10.6%
0.8%
2,859
28,079
0
0
-6,444
16,514
41,008
2,859
31,597
0
0
-5,867
17,257
45,846
Tier 2 capital
0
26,801
0
-8,380
18,421
0
26,732
0
-8,560
18,172
Tier 3 capital
0
59,429
0
59,429
0
64,018
0
64,018
641,106
641,855
0.0%
75.4%
4.8%
13.6%
0.0%
75.2%
5.4%
11.3%
10.0%
5.0%
0.0%
2002
2003
2004E
2005E
-10.0%
Revenue growth
Cost growth
2006E
5.1%
0.4%
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
15.0%
20.0%
2001
5.7%
0.4%
2003
Ratios
Equity as % of RWA
25.0%
2000
8.8%
0.7%
2002
-5.0%
PBT
Tax
PAT
Net Profit
GS net income
Equity structure
Item name
Mortgages
30%
16.5%
0.75%
1.44%
2003
8,567
-3,640
-52
Interbank
24%
64%
47%
59,440
64,156
66,963
73,567
45,846
49,099
51,325
52,550
1,260,454 1,353,054 1,411,536 1,472,231
641,855 661,804 702,242 748,644
100%
Cash
50,000
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
Tier 1
capital
2003
Other
2006E
Goodwill
(negative)
2005E
Preference
capital
2004E
Minority
interests
(equity)
2003
Cash
Item name
Reserves
Accounting
Item name
Capital
Returns (Skr mn)
141
Europe
Banks
Swedbank (FSPAa.ST: IL/A)
Volume (rhs)
130
120
110
100
90
80
70
60
50
FNSPK. A
FTSE W Europe
Key statistics
12000
10000
8000
6000
4000
2000
Valuation summary (Skr mn, except for per share data)
GS net
GS
Stated
PBT income
EPS
EPS
2002
6,772
5,014
9.50
7.87
2003
9,545
6,549
12.41
12.02
2004
11,912
8,294
15.85
16.42
2005E
11,767
8,120
16.20
16.19
2006E
11,907
8,527
17.74
16.52
F
J
D
N
O
S
A
J
J
M
A
M
F
0
Investment summary: Despite
Current price (Skr)
Fair value (Skr)
Rating
Free float
Saving banks foundations
Independent saving banks
89,291
173.5
196
IL/A
514.6
70.9%
21.3%
7.8%
5.8% / -0.1%
24.8% / 4.2%
23.1% / 9.3%
Debt rating: Moodys
Aa3 / positive
Debt rating: S&P
A / stable
FSPA SS / FSPA.ST
Next announcement
Q105 results
Date
28-Apr-05
Stated
BVPS
73.1
79.4
85.1
91.0
97.8
P/E (X)
GS Stated
18.3
22.1
14.0
14.4
10.9
10.6
10.7
10.7
9.8
10.5
DPS
5.5
5.8
6.5
7.0
7.5
GS EPS
growth
-16.8%
30.6%
27.8%
2.2%
9.5%
Dividend
yield
3.2%
3.3%
3.7%
4.0%
4.3%
P/B (X)
GS Stated
2.2
2.4
2.0
2.2
1.8
2.0
1.7
1.9
1.6
1.8
ROAE RORWA
10.9%
0.75%
15.8%
1.10%
20.1%
1.55%
18.4%
1.50%
17.5%
1.37%
2006E
as %
Net income of group
6,049
543
587
1,116
232
P/E (X)
2006E Equity
allocated
as %
of group
P/B (X)
2006E
ROE (%)
Value Per share
as %
(Skr mn)
(Skr) of group
9,000
71%
6%
7%
13%
3%
10.0
9.0
12.0
15.4
11.6
28,465
1,860
1,553
11,068
768
65%
4%
4%
25%
2%
2.1
2.6
4.5
1.6
NM
21.3%
29.2%
37.8%
10.1%
NM
60,489
4,891
7,046
17,190
2,695
128.3
10.4
14.9
36.5
5.7
66%
5%
8%
19%
3%
mainly due to the removal of uncertainty
regarding the bank’s surplus capitaI. In
the longer term, the bank’s high Baltic
exposure should continue to contribute
positively to revenue growth. In the
5,000
Risks: The proposal to acquire the
4,000
3,000
40% minority stake in Hansabank could
2,000
19.5%
92,310
2,376
196
100%
be much more expensive than implied
11.6
46,091
2.0
17.2%
471.5
Implied share price (Skr)
Implied upside (downside)
196
173.5
13%
a continued margin pressure in Sweden
and non-organic expansion ambitions in
Asset
management
7%
the other Nordic countries.
Swedbank
Markets
6%
Swedish
branch
operations
71%
share. This could weigh on the share
long-term, potential areas of risk include
International
operations
13%
(a) Excluding Other
by the initial cash offer of EUR11 per
price over the coming weeks. Over the
92,310
Total
2.1
Other &
Eliminations
100%
International
operations
43,715
Asset
management
10.8
0
Swedbank
Markets
100%
-492
-97
7,938
rose sharply on the news. We believe
in our view.
6,000
Total
with buybacks, Swedbank's share price
SME sector, is increasingly challenged,
7,000
Swedish
branch
operations
Goodwill
Exceptional items
8,527
only marginal EPS accretion compared
market position, in mortgages and in the
1,000
GS total
bank's Baltic subsidiary Hansabank with
Swedish market, Swedbank’s dominant
8,000
Swedish branch operations
Swedbank Markets
Asset management
International operations
Other & Eliminations
proposing a minority buyout at the
the positive share price reaction was
GS
BVPS
79.5
86.9
93.9
101.3
109.5
Sum-of-the-parts valuation (Skr mn)
Business unit
posting largely in-line 4Q results and
Valuation: Swedbank trades on 9.8x
book.
142
Europe
Banks
Returns (Skr mn)
2004
2005E
2006E
Stated net profit
6,343
614
0
-408
0
0
8,592
582
0
-880
0
0
8,115
492
0
-488
0
0
7,938
492
0
97
0
0
GS net income
+ Depreciation
6,549
664
-664
8,294
555
-555
8,120
667
-667
8,527
669
-669
GS gross OpCF
6,549
-1,573
8,294
4,408
8,120
-2,230
8,527
-3,271
GS net income
6,549
8,294
8,120
8,527
GS net OpFCF
4,976
-3,035
12,702
-3,334
5,890
-3,428
5,256
-3,536
1,941
9,368
2,462
1,720
43,624
4,551
0
0
44,580
5,043
0
0
46,091
5,535
0
0
GS net FCF
GS equity
45,888
48,175
49,623
51,626
GS equity
Tier 1 capital
Total assets
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
1,002,334 1,020,459 1,088,739 1,159,014
587,520 524,550 556,401 603,132
14.9%
0.67%
1.14%
17.6%
0.82%
1.49%
16.6%
0.77%
1.50%
16.8%
0.76%
1.47%
15.8%
0.65%
1.10%
20.1%
0.85%
1.55%
18.4%
0.77%
1.50%
17.5%
0.71%
1.37%
Interbank
80%
Customer
loans
60%
Equity &
debt
securities
40%
Other
assets
1%
11%
61%
48%
26%
39%
58%
42%
GS return ratios
GS net OpFCF / RWA
Other
GS net FCF / tier 1
Customer
deposits
GS net income
Other liabilities
Capital formation
Subordinated
debt
55%
Preferred &
minorities
20%
8%
Shareholders'
equity
4%
0%
67%
45%
45,888
48,175
49,623
51,626
42,158
42,995
44,308
46,210
1,002,334 1,020,459 1,088,739 1,159,014
587,520 524,550 556,401 603,132
28%
Liab.
Assets
27.0%
1.26%
2.28%
12.0%
0.56%
1.09%
10.4%
0.47%
0.91%
11.8%
4.6%
5.6%
29.5%
21.8%
14.2%
13.3%
5.6%
6.6%
11.4%
3.7%
5.9%
4Q 03
3Q 04
4Q 04
4 Q /4 Q
4 Q /3 Q
2003
2004
2005E
2006E
N et fee s & com m issions
Trading pro fits
O ther recu rring reven ues
T o ta l re c u rrin g r e v e n u e s
4 ,0 9 6
1,56 2
25 7
26 8
2 ,0 8 7
6 ,1 8 3
4 ,1 0 1
1,66 0
12 4
29 5
2 ,0 7 9
6 ,1 8 0
3 ,9 2 3
1,68 5
4 21
2 85
2 ,3 9 1
6 ,3 1 4
-4 %
8%
6 4%
6%
15%
2%
-4 %
2%
24 0%
-3%
15%
2%
1 6 ,2 0 1
5,739
801
1,223
7 ,7 6 3
2 3 ,9 6 4
1 6 ,2 7 3
6,65 8
1,04 7
1,20 0
8 ,9 0 5
2 5 ,1 7 8
1 6 ,0 4 3
7,03 3
86 7
1,13 9
9 ,0 3 9
2 5 ,0 8 2
1 6 ,9 2 0
7,46 6
86 5
1,17 6
9 ,5 0 7
2 6 ,4 2 7
0%
16%
31%
-2%
15%
5%
-1 %
6%
-1 7%
-5%
2%
0%
5%
6%
0%
3%
5%
5%
Staff
G en eral a dm in istratio n
D epre ciation
G oo dwill a m ortisa tion
O ther ope ratin g costs
-1,78 2
-1,53 0
-15 8
-15 3
-4 5
-3 ,6 6 8
2 ,5 1 5
-1,60 9
-1,29 9
-13 2
-14 7
-9 0
-3 ,2 7 7
2 ,9 0 3
-1,62 1
-1,45 9
-12 5
-12 5
-13 2
-3 ,4 6 2
2 ,8 5 2
-9%
-5%
-2 1%
-1 8%
19 3%
-6 %
13%
1%
1 2%
-5%
-1 5%
4 7%
6%
-2 %
-6,830
-5,585
-664
-614
-148
-1 3 ,8 4 1
1 0 ,1 2 3
-6,699
-5,537
-55 5
-58 2
-40 2
-1 3 ,7 7 5
1 1 ,4 0 3
-6,63 4
-5,22 2
-66 7
-49 2
-41 5
-1 3 ,4 2 9
1 1 ,6 5 3
-6,66 6
-5,26 8
-66 9
-49 2
-43 0
-1 3 ,5 2 5
1 2 ,9 0 1
-2%
-1%
-16%
-5%
1 72%
0%
13%
-1%
-6%
2 0%
-1 5%
3%
-3 %
2%
0%
1%
0%
0%
4%
1%
11%
-15 5
28
75
32
-11 3
56
1,02 1
-9 9
20
-1 4
-3 6%
-10 0%
NA
NA
-1 2%
NA
-6 4%
-10 1%
-987
-19
-116
544
-49 5
243
761
-70 7
18 1
64 0
-1,05 7
19 3
-13 0
-50%
-1 00%
NA
40%
4 3%
NA
-2 6%
NA
49 %
NA
NA
-120 %
2 ,4 9 5
-71 2
1 ,7 8 3
-15 9
1 ,6 2 4
3 ,8 6 7
-60 0
3 ,2 6 7
-18 5
3 ,0 8 2
2 ,7 5 9
-69 3
2 ,0 6 6
-18 2
1 ,8 8 4
11%
-3%
16%
1 4%
16%
-2 9 %
1 6%
-3 7 %
-2%
-3 9 %
9 ,5 4 5
-2,567
6 ,9 7 8
-635
6 ,3 4 3
1 1 ,9 1 2
-2,564
9 ,3 4 8
-75 6
8 ,5 9 2
1 1 ,7 6 7
-2,87 5
8 ,8 9 2
-77 7
8 ,1 1 5
1 1 ,9 0 7
-3,08 7
8 ,8 2 1
-88 2
7 ,9 3 8
25%
0%
34%
19%
35%
-1 %
1 2%
-5 %
3%
-6 %
1%
7%
-1 %
14 %
-2 %
3 .0 8
3 .6 6
3 .3 2
-
5 .9 2
6 .3 7
4 .5 4
-
3 .6 7
4 .0 4
3 .9 3
-
19%
10%
18%
NA
-3 8 %
-3 7 %
-1 3 %
NA
1 2 .0 2
1 3 .1 8
1 2 .4 1
5 .7 5
1 6 .4 2
1 8 .4 3
1 5 .8 5
6 .5 0
1 6 .1 9
1 7 .5 6
1 6 .2 0
7 .0 0
1 6 .5 2
1 7 .2 3
1 7 .7 4
7 .5 0
37%
40%
28%
13%
-1 %
-5 %
2%
8%
2%
-2 %
10%
7%
Loa n-lo ss provision s
Pe nsion co m pen satio n
In com e from asso cia te s
O ther in com e / (e xpen ses)
PBT
Tax
PA T
M ino rities a nd pre f sha re dividen ds
N e t P ro fit
E P S (b a s ic )
C ash EP S
GS EPS
D P S (n e t)
2005E
2006E
6,549
-3,035
-1,573
8,294
-3,334
4,408
8,120
-3,428
-2,230
8,527
-3,536
-3,271
1,941
9,368
2,462
1,720
Tier 1 capital
42,158 42,995 44,308 46,210
587,520 524,550 556,401 603,132
4.6%
0.3%
21.8%
1.8%
5.6%
0.4%
3.7%
0.3%
2003
2004
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
10,556
31,363
5,198
0
-5,978
1,019
42,158
10,556
33,068
3,145
0
-3,487
-287
42,995
Tier 2 capital
0
26,826
0
-5,289
21,537
0
26,430
0
-8,685
17,745
Tier 3 capital
0
63,695
0
63,695
1
60,741
0
60,741
587,520
524,550
20.0%
Ratios
Equity as % of RWA
0.0%
111.8%
8.0%
12.4%
0.0%
108.8%
8.9%
7.5%
15.0%
Mortgages
40%
Corporate
22%
Other personal
9%
Summary P&L (Skr mn)
Ite m n a m e
2004
Equity structure
Item name
Other
29%
12.0%
0.52%
0.91%
2003
71%
10%
Payout ratio
10%
Interbank
0 4 /0 3 0 5 /0 4 E 0 6 /0 5 E
30.0%
25.0%
10.0%
5.0%
0.0%
2000
-5.0%
2001
2002
Revenues
2003
2004
2005E
Costs
2006E
50,000
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
Tier 1
capital
41,919
3,969
0
0
100%
Cash
Other
Stated equity
+/- other
Total assets
Item name
2003
Goodwill
(negative)
2006E
Preference
capital
2005E
Minority
interests
(equity)
2004
Reserves
2003
Cash
Item name
Capital
Accounting
Item name
143
Europe
Banks
144
Europe
Banks
146 BCP (BCPN.IN: U/A)
Portugal
145
Europe
Banks
BCP (BCPN.IN: U/A)
Key statistics
Volume
130
BCP
FTSE W Europe
50000
110
40000
90
30000
70
20000
GS net
GS Stated
GS
PBT income
EPS
EPS
BVPS
2002
399
325
0.14
0.12
1.9
2003
536
394
0.11
0.12
1.4
2004
661
481
0.14
0.14
1.8
2005E
641
492
0.14
0.14
1.8
2006E
779
602
0.17
0.17
1.9
6,938
2.13
1.50
U/A
3,257.4
75%
8%
7%
7.6%/1.7%
24.6%/2.1%
11.5%/-1.7%
Debt rating: Moodys
A1 / stable
Debt rating: S&P
A- / stable
BCP PL / BCPN.IN
Next announcement
1Q05
Date
Apr-05
F
J
D
N
O
S
A
J
J
M
0
A
30
M
10000
F
50
Investment summary: BCP’s
Current price (EUR)
Fair value (EUR)
Rating
Free float
CGD
Banca Intesa
60000
Net interest income
Trading profits
Staff
Depreciation
Operating income
Gains on industrial portfolio
Other provisions
PBT
Tax
PAT
Minorites
Net Profit
EPS (basic) (EUR)
Cash EPS (EUR)
GS EPS (EUR)
DPS (net) (EUR)
due to strong commission growth and
excellent delivery in cost control. On the
negative side, NII suffered significantly
from ongoing margin pressure,
particularly on mortgages, and a
negative balance sheet mix.
Stated
BVPS
0.9
0.8
1.0
1.0
1.1
P/E (X)
GS Stated
15.3
18.2
19.1
17.2
15.7
14.7
15.3
15.3
12.5
12.5
DPS
0.10
0.06
0.07
0.07
0.08
GS EPS
growth
-48.5%
-20.2%
21.9%
2.4%
22.2%
Dividend
yield
4.7%
2.8%
3.1%
3.3%
4.0%
P/B (X)
GS Stated
1.1
2.3
1.5
2.6
1.2
2.1
1.2
2.1
1.1
1.9
GS
ROE
NA
8.4%
8.5%
7.7%
9.2%
ROE
12.5%
17.4%
15.9%
13.6%
16.0%
Risks: Due to some extraordinary
operations (e.g., a EUR266 mn capital
gain from the sale of the insurance
business) management has been able
to rebalance the weak capital position of
Item name
2004 results were better than expected
4Q03
3Q04
368
163
21
187
372
739
-212
-156
-49
-39
-457
282
-97
-29
157
-11
147
-24
122
0.03
0.03
0.03
4Q/3Q
2003
2004
2005E
354
152
50
139
341
695
357 -2.9%
0.8%
183 12.0% 20.0%
63
NA 26.7%
113 -39.5% -18.3%
359 -3.4%
5.4%
716 -3.2%
3.0%
1,466
590
129
627
1,347
2,813
1,416
646
219
585
1,450
2,866
1,486
682
180
586
1,448
2,934
-216
-144
-46
-34
-439
255
-112
-11
133
-11
123
-15
107
-213 0.6% -1.2%
-148 -4.9%
3.3%
-45 -8.0% -1.3%
NA
NA
-407 -10.9% -7.4%
309 9.3% 21.0%
-94 -2.6% -15.6%
-25 -10.7% 142.8%
35
225 42.7% 68.6%
-28
NA
NA
197 34.2% 60.6%
-30 25.1% 99.5%
167 35.9% 55.1%
-864
-601
-203
-149
-1,817
995
-473
-34
47
536
-38
498
-60
438
-852
-584
-185
-124
-1,745
1,121
-430
-65
35
661
-60
601
-88
513
-876
-595
-185
-128
-1,785
1,150
-441
-68
641
-61
580
-88
492
0.03
0.03
0.03
4Q04 4Q/4Q
0.05
0.05
0.05
35.9%
35.9%
35.9%
55.1%
55.1%
55.1%
0.12
0.12
0.11
0.06
0.14
0.14
0.14
0.07
0.14
0.14
0.14
0.07
2006E
04/03
1,584 -3.4%
710 9.5%
180 69.4%
598 -6.8%
1,488 7.7%
3,072 1.9%
-902
-605
-192
-128
-1,826
1,245
-428
-38
779
-74
705
-104
602
0.17
0.17
0.17
0.08
-1.3%
-3.0%
-8.7%
-16.8%
-4.0%
12.6%
NA
-9.0%
93.2%
-24.0%
23.5%
59.5%
20.7%
46.4%
17.2%
17.2%
17.2%
21.9%
8.3%
05E/04 06E/05E
4.9%
5.5%
-17.8%
0.3%
-0.1%
2.4%
6.6%
4.1%
0.0%
2.1%
2.8%
4.7%
2.8%
2.0%
0.0%
3.4%
2.3%
2.5%
NA
2.4%
4.8%
NA
-3.1%
0.7%
-3.5%
-0.1%
-4.0%
2.9%
1.6%
3.6%
0.0%
2.3%
8.3%
NA
-2.9%
-44.1%
NA
21.6%
21.6%
21.6%
18.2%
22.2%
-4.0%
-4.0%
2.4%
6.9%
22.2%
22.2%
22.2%
22.2%
the bank. However, with core Tier 1
2004 revenue mix
having just reached 5.8% from 5% in
1H2004, management is already
Other
20%
focusing on business expansion in
Trading
profits
8%
Net interest
income
49%
Poland and Greece. This raises
significant concerns over the risk profile
of the bank and its capital position; for
Net fees &
coms.
23%
example, the announced acquisition of
a 50% stake in Nova Bank for EUR330
2004 cost mix
mn, to be completed in 1Q2005, would
impact the Tier 1 ratio by c.60 bp.
Other
7%
Valuation: On our current forecasts,
Depreciation
11%
BCP trades on 12.5x 2006E GS EPS.
Staff
49%
General admin
33%
This compares to the European banks
sector at 10.2x.
146
Europe
Banks
2006E
Stated net profit
513
0
-32
0
0
0
492
0
0
0
0
0
602
0
0
0
0
0
GS net income
+ Depreciation
481
185
-185
492
185
-185
602
192
-192
GS gross OpCF
481
55
492
-190
602
-249
GS net income
481
492
602
GS net OpFCF
536
-212
302
-246
352
0
324
56
352
40%
41%
81%
50%
0%
0%
6,354
4,245
71,678
52,711
6,358
5,032
74,601
55,878
6,629
5,407
78,002
60,034
10.9%
0.80%
1.06%
4.8%
0.41%
0.56%
5.4%
0.46%
0.61%
12.6%
7.6%
7.7%
6.0%
1.1%
4.4%
6.5%
6.5%
5.1%
100%
Cash
Interbank
80%
Customer
loans
60%
Equity &
debt
securities
Other
assets
2%
8%
14%
Customer
deposits
47%
3,605
0
2,883
-134
3,609
0
2,883
-134
3,880
0
2,883
-134
GS net FCF
GS equity
6,354
6,358
6,629
71,678
52,711
74,601
55,878
78,002
60,034
GS equity
Tier 1 capital
Total assets
8.5%
0.69%
0.90%
7.7%
0.67%
0.91%
9.3%
0.79%
1.04%
15.9%
0.74%
0.96%
13.6%
0.67%
0.91%
16.1%
0.79%
1.04%
Total assets
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
Payout ratio
GS return ratios
GS net OpFCF / RWA
Other
GS net FCF / tier 1
Other
liabilities
71%
Subordinated
debt
40%
28%
Preferred &
minorities
20%
10%
Stated equity
+/- other
8%
4%
5%
Assets
Liab.
0%
Shareholders'
equity
2Q03
1Q04
2Q04
2003
2004
2005E
2006E
Total asset growth
7.8%
2.46%
11.6%
10.9%
12.3%
-0.1%
2.32%
6.9%
-1.2%
17.3%
2.0%
2.23%
4.3%
-5.9%
14.6%
9.2%
2.47%
8.3%
17.0%
0.1%
5.9%
2.22%
1.9%
-3.4%
7.7%
4.1%
2.22%
2.4%
4.9%
-0.1%
4.6%
2.27%
4.7%
6.6%
2.8%
Cost / income ratio
17.1%
62.2%
-1.6%
64.4%
-0.6%
59.3%
26.0%
64.6%
-4.0%
60.9%
2.3%
60.8%
2.3%
59.5%
NA
48.4%
NA
41.8%
NA
39.2%
NA
47.5%
NA
38.4%
NA
38.3%
0.73%
34.4%
Mortgages
31%
Corporate
62%
8.2%
5.2%
8.7%
7.1%
9.1%
9.5%
9.5%
Growth (y-o-y)
48,526
9.7%
49,843
3.2%
49,900
2.8%
49,177
19.6%
50,793
3.3%
52,960
4.3%
55,548
4.9%
NPLs
NPLs / loans
Provisions / NPLs
NA
NA
NA
NA
NA
NA
NA
NA
NA
920
1.84%
-128.8%
874
1.70%
-176.3%
926
1.70%
-205.7%
995
1.70%
-227.1%
BIS capital ratio
NA
NA
NA
NA
NA
NA
7.1%
NA
8.1%
NA
9.0%
NA
9.0%
0.0%
2004
2005E
2006E
GS net income
394
-195
-225
481
-212
55
492
-246
-190
602
0
-249
-26
324
56
352
3,816
53,630
4,245
52,711
5,032
55,878
5,407
60,034
-0.7%
0.0%
7.6%
0.6%
1.1%
0.1%
6.5%
0.6%
Capital formation
Tier 1 capital
Equity structure
Item name
2003
2004
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
2,851
496
334
1,159
-154
-870
3,816
3,605
645
393
1,192
-113
-1,478
4,245
0
0
0
0
0
0
0
0
0
0
0
3,816
0
3,816
0
4,245
0
4,245
53,630
52,711
Ratios
Equity as % of RWA
30.4%
96.5%
6.9%
3.9%
28.1%
109.4%
8.8%
2.6%
Tier 2 capital
Other
personal
7%
Tier 3 capital
80.0%
70.0%
60.0%
50.0%
40.0%
Tax rate
2003
Item name
Item name
Interbank
7,000
30.0%
6,000
20.0%
5,000
4,000
10.0%
3,000
0.0%
-10.0%
2000
2001
2002
2003
2004
2005E
2006E
2,000
1,000
Revenue growth
Cost growth
0
Tier 1
capital
2005E
Other
2004
Goodwill
(negative)
2006E
Preference
capital
2005E
Minority
interests
(equity)
2004
Cash
Item name
Reserves
Accounting
Item name
Capital
Returns (EUR mn)
147
Europe
Banks
148
Europe
Banks
150 Grupo Santander (SAN.MC: IL/A)
152 BBVA (BBVA.MC: IL/A)
154 Bankinter (BKT.MC: U/A)
156 Banco Popular Español (POP.MC: IL/A)
Spain
149
Europe
Banks
Grupo Santander (SAN.MC: IL/A)
Volume
120
110
100
90
80
70
60
50
SCH
Key statistics
FTSE W Europe
250000
Investment summary: We have
Market capitalization
Current price (EUR)
Fair value (EUR)
Rating
Free float
200000
150000
100000
50000
61,032
9.7
10.4
IL/A
6,279
92%
2.83%
GS net
PBT
income
2002
3,509
3,056
2003
4,102
3,450
2004E
4,771
3,725
2005E
6,254
5,058
2006E
7,584
6,116
per share data)
GS
Stated
EPS
EPS
0.65
0.48
0.72
0.55
0.67
0.59
0.82
0.70
0.97
0.84
6.9% / 1.1%
25.3% / 2.7%
4.4% / -8.0%
A1 / positive
A / positive
SAN SM / SAN.MC
FY 2004 Results
Feb-05
updated our estimates for the Latam
division (26% 2006E profits) on the
back of our economists’ more bullish
assumptions on some Latam currencies
and more hawkish assumptions on
F
J
D
N
O
S
A
J
J
M
A
M
F
0
Performance 1M
Performance 6M
Performance 12M
Debt rating: Moodys
Debt rating: S&P
Next announcement
Date
rates for Brazil. We believe that it could
GS
BVPS
5.69
6.36
7.45
8.09
8.83
Stated
BVPS
3.69
3.90
5.51
6.00
6.58
P/E (x)
GS Stated
15.0
20.4
13.4
17.8
14.4
16.4
11.9
14.0
10.0
11.5
DPS
0.29
0.26
0.27
0.28
0.34
GS EPS
growth
-11.7%
11.6%
-6.8%
21.1%
19.2%
Dividend
yield
3.0%
2.6%
2.8%
2.9%
3.5%
make strategic sense for the bank to
P/B (x)
GS Stated
1.7
2.6
1.5
2.5
1.3
1.8
1.2
1.6
1.1
1.5
ROE
12.2%
14.4%
12.3%
12.1%
13.4%
look at divestments in non-core areas.
However, in addition to capital
constraints, we believe that SCH would
not consider any acquisitions in the
short term, focusing instead on organic
growth in Brazil and Mexico
2006E (EUR mn)
GS
earnings
as % of
group
Equity
as % of
group
ROE
P/B (x)
P/E (x)
Value
as % of
value
Per share
(EUR)
2,622
1,890
1,382
508
332
401
1,448
741
445
296
734
-27
420
406
948
5,845
43%
31%
23%
8%
5%
7%
24%
12%
7%
5%
12%
0%
7%
7%
16%
96%
16,798
12,694
8,430
4,264
1,795
2,309
10,354
3,527
1,401
2,126
5,300
1,527
942
1,710
7,046
36,850
58%
44%
29%
15%
6%
8%
36%
12%
5%
7%
18%
5%
3%
6%
25%
128%
16%
15%
16%
12%
18%
17%
14%
21%
32%
14%
14%
-2%
45%
24%
13%
16%
1.79
1.70
1.88
1.36
1.93
2.16
1.41
2.56
4.11
1.53
1.11
NM
4.69
2.26
1.07
1.64
11.5
11.5
11.5
11.5
10.5
12.5
10.1
12.2
13.0
11.0
8.0
9.0
10.5
9.5
8.0
10.4
30,094
21,636
15,823
5,813
3,470
4,989
14,643
9,015
5,757
3,259
5,873
-245
4,418
3,864
7,540
60,560
46%
33%
24%
9%
5%
8%
22%
14%
9%
5%
9%
0%
7%
6%
11%
92%
4.79
3.45
2.52
0.93
0.55
0.79
2.33
1.44
0.92
0.52
0.94
-0.04
0.70
0.62
1.20
9.6
-1.2% -
8,128
-28%
NM
9.0
8.5
-666
3,356
-604
2,933
-1%
5%
-1%
4%
-0.11
0.53
-0.10
0.47
10.7
65,579
100%
10.4
6,279
9.7
7%
Risks: We believe that the largest risk
8,000
7,000
Corporate centre expenses
Unrealised gain in portfolio
Less capital gains tax
Other GS items
Group (pre-goodwill, pre-exceptional)
Year end share number 2006E (mn)
Implied upside/downside
-74
345
5.6%
-
6,116
100%
28,722
0%
NM
100%
21%
NM
NM
2.28
could be the potential impact of the
6,000
5,000
4,000
USD direction, US interest rates
3,000
2,000
(expected increase of 125 bp in 2005)
1,000
Total
Corporate Centre
AM & PB
Wholesale
Abbey
Retail Bkg Latam
Portugal Retail
Cons. Fin. Europe
0
Spanish Retail banking
European Retail Banking
Spanish Retail Banking
SCH Retail Banking
Banesto
Portugal
Consumer Finance
Retail Banking Latin America
Latin America investment grade
Mexico
Chile
Brazil
Other Latam
Asset Management & Private Banking
Global Wholesale banking
Abbey
Banking businesses
and the commodity price trend.
Valuation: We retain our IL/A rating
on SCH due to our negative view on the
Spanish retail business as we expect
margin pressure to come from the
AM & PB Wholesale
7%
6%
Spanish
Retail
banking
37%
Retail Bkg
Latam
24%
funding side. However, we see more
room for upside relative to BBVA; we
believe that the current lack of visibility
on Abbey is likely to continue until
Abbey
12%
Portugal
Retail
Cons. Fin.
6%
Europe
8%
2Q2005, partially offsetting good news
from Latam.
(a) Excluding Banesto, Other and eliminations
150
Europe
Banks
2003
2004E
2005E
2006E
100%
Cash
Stated net profit
2,611
-2,242
-1,402
0
0
0
3,277
-469
-21
0
0
0
4,366
-944
-252
0
0
0
5,289
-944
-117
0
0
0
GS net income
+ Depreciation
3,450
-763
3,725
733
-733
5,058
744
-744
6,116
816
-816
GS gross OpCF
2,687
1,397
3,725
-1,523
5,058
-6,185
6,116
-1,113
Customer 60%
loans
3,450
3,725
5,058
6,116
GS net OpFCF
4,085
-1,228
2,202
-1,695
-1,127
-1,746
5,003
-2,116
Equity &
debt
securities
Stated equity
+ Goodwill amortized to date
+/- other
18,580
9,002
0
2,752
34,577
9,471
1
2,752
37,655
10,415
0
2,752
41,324
11,360
0
2,752
2,857
507
-2,873
2,888
30%
47%
77%
52%
-155%
40%
42%
40%
GS equity
30,335
46,801
50,822
55,436
347,159
205,253
384,268
227,009
621,773
315,369
649,522
331,265
30,335
16,951
347,159
205,253
46,801
18,533
384,268
227,009
50,822
25,655
621,773
315,369
55,436
29,324
649,522
331,265
5.7%
0.6%
-2.3%
-0.2%
9.4%
0.8%
11.9%
2.7%
-4.4%
-11.2%
17.1%
9.8%
GS net income
Total assets
GS return ratios
ROAE
9.7%
10.4%
11.5%
ROAA
1.0%
1.0%
1.0%
ROAE
12.3%
12.1%
13.4%
ROAA
0.9%
0.9%
0.8%
*2005E and 2006E estimates are pro-forma, including Abbey's figures
GS net FCF
Payout ratio
GS equity
Tier 1 capital
Total assets
GS return ratios
Other
GS net FCF / tier 1
24.1%
16.9%
Item name
Interbank
Other
assets
3%
11%
22%
80%
Customer
deposits
50%
46%
40%
20%
Capital formation
Subordinate
d debt
Tier 1 capital
22%
Preferred &
minorities
11%
3%
2%
5%
Shareholder
s' equity
Assets
Liab.
26%
0%
4Q03
3Q04
4Q04E
2003
2004E
2005E*
2006E*
04/03E
05/04E
06/05E
1,984
1,107
271
1,377
3,361
2,326
1,174
165
1,339
3,665
4Q/4QE 4Q/3QE
14.6%
12.1%
-47.8%
NA
-1.8%
8.0%
17.2%
6.1%
-39.0%
NA
-2.8%
9.0%
7,958
4,171
999
5,169
13,128
8,586
4,622
890
5,512
14,099
11,216
4,907
724
7,209
18,425
12,703
5,469
765
7,957
20,660
7.9%
10.8%
-10.9%
NA
6.6%
7.4%
30.6%
6.2%
-18.7%
NA
30.8%
30.7%
13.3%
11.4%
5.7%
NA
10.4%
12.1%
Staff
Depreciation
Operating income
-1,020
-611
-188
-167
-43
-2,029
1,363
-1,003
-637
-178
-118
-36
-1,972
1,389
-1,022
-646
-182
-117
-54
-2,021
1,644
0.2%
5.6%
-3.0%
-29.8%
23.8%
-0.4%
20.6%
1.9%
1.3%
2.5%
-0.3%
47.4%
2.5%
18.3%
-4,049
-2,428
-763
-2,242
-167
-9,649
3,479
-4,078
-2,608
-733
-469
-182
-8,070
6,029
-4,113
-2,506
-744
-944
-161
-10,605
7,820
-4,447
-2,774
-816
-944
-184
-11,208
9,452
0.7%
7.4%
-3.9%
-79.1%
9.6%
-16.4%
73.3%
0.9%
-3.9%
1.6%
101.4%
-11.7%
31.4%
29.7%
8.1%
10.7%
9.7%
0.0%
14.0%
5.7%
20.9%
Domestic
public
authorities
3%
Other
international
28%
Domestic
secured
27%
40.0%
30.0%
20.0%
PBT
Tax
PAT
Net Profit
EPS (basic)
Cash EPS
GS EPS
DPS (net)
-481
28
-15
180
-324
-2
229
-155
-430
-26
6
332
-10.6%
NA
NA
84.1%
33.0%
NA
-97%
NA
-1,496
956
408
755
-1,824
-575
541
601
-2,105
300
334
-94
-2,321
103
310
40
22.0%
NA
32.5%
-20.4%
15.4%
NA
-38.3%
-115.7%
10.2%
-65.7%
-7.2%
-142.6%
1,075
-230
845
-165
680
1,138
-240
898
-155
743
1,525
-230
1,295
-127
1,168
41.9%
0.0%
53.3%
-22.8%
71.8%
34.1%
-4.0%
44.2%
-18.2%
57.3%
4,102
-870
3,232
-621
2,611
4,771
-972
3,799
-522
3,277
6,254
-1,198
5,056
-690
4,366
7,584
-1,572
6,012
-723
5,289
16.3%
11.7%
17.5%
-16.0%
25.5%
31.1%
23.3%
33.1%
32.3%
33.2%
21.3%
31.2%
18.9%
4.7%
21.2%
0.14
0.18
0.14
0.07
0.16
0.18
0.21
0.07
0.24
0.27
0.22
0.07
71.8%
51.7%
53.0%
7.1%
57.3%
49.4%
4.7%
0.0%
0.55
1.02
0.72
0.26
0.59
0.68
0.67
0.27
0.70
0.85
0.82
0.28
0.84
0.99
0.97
0.34
8.4%
-33.4%
-6.8%
5.0%
17.2%
24.7%
21.1%
2.9%
21.2%
17.4%
19.2%
21.2%
6,116
-2,116
-1,113
825
507
-2,873
2,888
16,951
205,253
18,533
227,009
25,655
315,369
29,324
331,265
4.9%
0.4%
2.7%
0.2%
-11.2%
-0.9%
9.8%
0.9%
2002
2003
Capital and reserves
Preference capital
Less: Goodwill
Tier 1 capital
17,595
1,001
5,036
-9,955
1,158
14,834
18,580
390
5,050
-7,385
316
16,951
Tier 2 capital
0
12,450
1,418
0
8,583
0
11,221
0
0
8,570
Tier 3 capital
0
23,417
0
23,417
0
25,521
0
25,521
185,290
205,253
Ratios
Equity as % of RWA
33.9%
125.4%
10.0%
29.8%
111.9%
9.2%
30,000
10.0%
25,000
20,000
0.0%
Realised capital gains
2006E
5,058
-1,746
-6,185
2,029
1,047
316
1,363
3,392
2005E
3,725
-1,695
-1,523
Equity structure
Item name
Other
domestic
31%
Net interest income
Trading profits
2004E
GS net income
Other
liabilities
International
secured
11%
Item name
2003
3,450
-1,228
-1,397
Interbank
2001
2002
2003
2004E
2005E
2006E
15,000
10,000
-10.0%
5,000
0
-20.0%
Revenue growth
Cost growth
Tier 1
capital
2006E
Other
2005E
Goodwill
(negative)
2004E
Preference
capital
2003
Cash
Item name
Minority
interests
(equity)
Accounting
Item name
Capital
and
reserves
Returns (EUR mn)
*2005E and 2006E estimates are pro-forma, including Abbey's numbers and potential synergies.
151
Europe
Banks
BBVA (BBVA.MC: IL/A)
Volume
130
120
110
100
90
80
70
60
50
BBVA
Key statistics
FTSE W Europe
100000
80000
60000
40000
20000
Investment summary: 2004
Current price (EUR)
Fair value (EUR)
Rating
Free float
45,268
13.4
12.5
IL/A
3,390.9
100%
F
J
D
N
O
S
A
J
J
M
A
M
F
0
4.5% / -1.2%
26.5% / 3.7%
22.1% / 7.7%
Debt rating: Moodys
Aa2 / stable
Debt rating: S&P
AA- / stable
BBVA SM / BBVA.MC
Next announcement
1Q05 Results
Date
Apr-05
Banking businesses
Equity portfolio unrealised gains
Less capital gains tax
Group (a)
an only slightly disappointing cost trend.
The most positive news was the margin
expansion in Mexico. However, we
believe expansion in 2005 could be
GS
BVPS
5.95
6.17
6.91
7.35
7.84
Stated
BVPS
3.86
3.88
4.72
4.93
5.31
P/E (X)
GS Stated
17.5
24.9
17.1
19.2
12.7
16.2
13.9
15.0
12.9
13.6
DPS
0.35
0.38
0.44
0.46
0.51
GS EPS
growth
-13.0%
2.0%
34.9%
-8.6%
7.9%
Dividend
yield
2.6%
2.9%
3.3%
3.5%
3.8%
P/B (X)
GS Stated
2.2
3.5
2.2
3.4
1.9
2.8
1.8
2.7
1.7
2.5
ROE RORWA
13.4%
1.01%
18.0%
1.34%
20.0%
1.60%
18.7%
1.59%
19.2%
1.62%
in interest rates of around 60 bp.
Risks: Hedging costs are likely to
increase as the bank intends to
increase the hedging of net profits
budgeted for the Latam division. We
P/B(x)
P/E (x)
Value
as % of
value
Per share
(EUR)
1,729
1,520
135
74
1,561
1,113
233
117
357
199
77
81
-105
49%
43%
4%
2%
44%
32%
7%
3%
10%
6%
2%
2%
-3%
6,969
5,891
509
569
4,550
7,300
1,513
305
2,155
1,252
463
440
3,074
42%
35%
3%
3%
27%
44%
9%
2%
13%
7%
3%
3%
18%
16%
16%
23%
9%
34%
41%
21%
36%
12%
10%
12%
22%
-3%
2.85
2.95
3.30
1.37
3.91
1.97
1.39
4.21
1.66
1.59
1.67
1.85
-0.31
11.5
11.5
12.5
10.5
11.4
13.0
9.0
11.0
10.0
10.0
10.0
10.0
9.0
19,864
17,403
1,682
779
17,793
14,408
2,101
1,284
3,569
1,985
772
813
-949
47%
41%
4%
2%
42%
34%
5%
3%
8%
5%
2%
2%
-2%
5.9
5.1
0.5
0.2
5.2
4.2
0.6
0.4
1.1
0.6
0.2
0.2
-0.3
3,542
101%
16,748
100%
21%
2.40
-26
3,516
100%
16,748
YE Share numbers (mn) (2006E)
100%
21%
2.54
11.4
40,278
95%
11.9
9.0
3,011
-554
-232
7%
-1%
-1%
0.9
-0.2
-0.1
12.1
42,503
100%
12.5
3,391
13.4
-6.1%
estimate the hedging increased in 4Q to
Earnings contribution (2006E )
40% of the net income budget for Latam
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
vs. 20% in 1H2004. As such, the cost of
carrying such hedging would weigh on
Total
ROE
Wholesale & Investment
Banking
as % of
group
Americas
Equity
International Priv. Banking,
Pensions and Insurance
as % of
group
Mexico
GS
earnings
Retail Banking in Spain &
Portugal
Retail Banking in Spain & Portugal
- Retail & SME Banking in Spain
- Asset Management and Private Banking
- Portugal, Finanzia y Uno-e
America
- Mexico
- Retail Banking in America
- International Priv. Banking, Pensions and Insurance
Wholesale & Investment Banking
- Wholesale
- Investment Banking
- Business & Real State projects
Corporate activties
expected, with a good revenue mix and
limited as our economists expect a cut
GS net
GS
Stated
PBT
income
EPS
EPS
2002
3,115
2,441
0.76
0.54
2003
3,811
2,490
0.78
0.70
2004
4,149
3,462
1.05
0.83
2005E
4,725
3,259
0.96
0.89
2006E
5,215
3,516
1.04
0.98
2006E
(EUR mn)
results came in slightly better than
Americas
5%
Mexico
34%
expect greater volatility in trading profits
in 2005.
Valuation: On our 2006 EPS
Banking, Wholesale
&
Pensions
Investment
and
Banking
Insurance
8%
3%
the NII of the corporate division. We
Corporate
centre
2%
estimate, the shares are currently
trading at a 25% premium to the
European average. We do not see any
Retail
Banking in
Spain &
Portugal
48%
significant potential upside from current
levels, despite a 2006E P/E multiple of
13x for the Mexican division.
(a) GS earnings, Argentina consolidated by the equity method
152
Europe
Banks
2006E
100%
Cash
S ta te d n e t p ro fit
+ G o o d w ill a m o rtis a tio n
- G a in s o n d is p o s a ls (lo s se s )
+ O th e r e xc e p . lo ss e s (g a in s)
+ S T flu ctu a tio n s o n life -fu n d (g a
+ R e stru c tu rin g co sts
2 ,8 0 2
582
-4 8 5
562
1
1
3 ,0 1 5
339
-2 3 2
135
1
1
3 ,3 3 3
339
-2 2 8
70
1
1
G S n e t in c o m e
3 ,4 6 2
3 ,2 5 9
3 ,5 1 6
GS net income
+ Depreciation
3,462
453
-453
3,259
431
-431
3,516
456
-456
GS gross OpCF
3,462
-666
3,259
-1,081
3,516
-840
2,796
-1,499
2,178
-1,568
2,676
-1,733
GS net OpFCF
S ta te d e q u ity
+ G o o d w ill a m o rtis e d to d a te
+ G o o d w ill w ritte n -o ff
+ /- o th e r
G S e q u ity
T o ta l a ss e ts
R isk w e ig h te d a s se ts
G S re tu rn ra tio s
ROAE
ROAA
ROARW A
S ta te d re tu rn ra tio s
ROAE
ROAA
ROARW A
1 5 ,5 5 6
5 ,4 3 2
1
2 ,4 5 8
1 6 ,7 0 3
5 ,7 7 1
1
2 ,4 5 8
1 8 ,0 0 3
6 ,1 1 0
1
2 ,4 5 8
2 3 ,4 4 6
2 4 ,9 3 3
2 6 ,5 7 1
3 0 7 ,2 3 3
1 8 1 ,1 3 1
3 4 2 ,0 1 4
1 9 9 ,1 4 8
3 6 6 ,0 4 8
2 1 3 ,1 4 2
1 6 .3 %
1 .1 9 %
2 .0 1 %
1 3 .5 %
1 .0 0 %
1 .7 1 %
1 3 .7 %
0 .9 9 %
1 .7 1 %
2 0 .1 %
0 .9 6 %
1 .6 3 %
1 8 .7 %
0 .9 3 %
1 .5 9 %
1 9 .2 %
0 .9 4 %
1 .6 2 %
GS net FCF
Payout ratio
GS equity
Tier 1 capital
Total assets
GS return ratios
GS net OpFCF / RW A
Other
GS net FCF / tier 1
1,297
610
943
54%
53%
72%
52%
65%
52%
23,446
14,708
307,233
181,131
24,933
18,275
342,014
199,148
26,571
20,214
366,048
213,142
13.2%
0.96%
1.62%
9.0%
0.67%
1.15%
10.4%
0.76%
1.30%
19.0%
8.8%
6.2%
11.9%
3.3%
4.8%
13.2%
4.7%
5.9%
Interbank
80%
Customer
loans
60%
Equity &
debt
securities
Other
assets
Item name
3%
5%
21%
Customer
deposits
55%
Other
liabilities
48%
Subordinated
debt
40%
20%
27%
22%
Preferred &
minorities
9%
5%
Assets
Liab.
Shareholders'
equity
0%
Total
international
24%
Mortgages
37%
Other
32%
Other
personal
1%
Corporate
5%
4Q03
3Q04
4Q04
4Q/4Q
4Q/3Q
2003
2004
2005E
2006E
04/03
05/04E
06/05E
Net interest income
Trading profits
1,719
815
148
962
2,682
1,741
873
96
969
2,710
1,808
856
236
1,092
2,900
5.1%
5.1%
59.5%
13.4%
8.1%
3.8%
-1.9%
145.5%
12.7%
7.0%
6,741
3,263
651
3,915
10,656
7,069
3,379
605
3,984
11,053
7,367
3,393
725
4,118
11,485
7,892
3,532
804
4,336
12,227
4.9%
3.5%
-7.1%
1.8%
3.7%
4.2%
0.4%
19.8%
3.4%
3.9%
7.1%
4.1%
10.9%
5.3%
6.5%
Staff
Depreciation
Operating income
-836
-471
-122
-207
-45
-1,681
1,001
-780
-428
-115
-183
-41
-1,547
1,163
-826
-505
-112
-85
-53
-1,582
1,318
-1.2%
7.3%
-7.9%
-58.8%
16.6%
-5.9%
31.6%
5.9%
18.0%
-2.4%
-53.4%
29.3%
2.2%
13.3%
-3,263
-1,768
-511
-639
-219
-6,400
4,255
-3,184
-1,779
-453
-582
-197
-6,195
4,858
-3,225
-1,815
-431
-339
-159
-5,970
5,516
-3,323
-1,867
-456
-339
-171
-6,155
6,072
-2.4%
0.6%
-11.4%
-9.0%
-10.0%
-3.2%
14.2%
1.3%
2.1%
-4.9%
-41.8%
-19.2%
-3.6%
13.5%
3.0%
2.8%
5.8%
0.0%
7.3%
3.1%
10.1%
-224
159
97
-197
-200
51
153
-52
-216
234
51
-490
-3.2%
47.2%
-47.6%
NA
8.2%
NA
-66.6%
NA
-1,277
553
383
-103
-931
592
360
-730
-1,087
282
201
-187
-1,267
278
230
-98
-27.1%
7.1%
-6.0%
NA
16.8%
-52.3%
-44.2%
-74.4%
16.6%
-1.4%
14.5%
-47.7%
PBT
Tax
PAT
Net Profit
837
-185
652
-164
488
1,115
-313
802
-98
704
896
-74
822
-100
723
7.1%
-60%
26.2%
-39.2%
48.1%
-19.6%
-76.3%
2.5%
1.6%
2.6%
3,811
-915
2,896
-670
2,226
4,149
-957
3,192
-390
2,802
4,725
-1,322
3,403
-388
3,015
5,215
-1,474
3,741
-408
3,333
8.9%
4.6%
10.2%
-41.8%
25.9%
13.9%
38.1%
6.6%
-0.6%
7.6%
10.4%
11.5%
9.9%
5.3%
10.5%
EPS (basic)
Cash EPS
GS EPS
DPS (net)
0.09
0.22
0.23
0.11
0.21
0.26
0.26
0.11
0.21
0.24
0.31
0.13
127.0%
9.6%
36.9%
17.6%
2.6%
-8.9%
19.8%
24.2%
0.70
0.90
0.78
0.38
0.83
1.03
1.05
0.44
0.89
0.99
0.96
0.46
0.98
1.08
1.04
0.51
18.6%
14.6%
34.9%
15.1%
7.6%
-3.7%
-8.6%
4.6%
10.5%
9.5%
7.9%
10.5%
25.0%
2005E
2006E
3,259
-1,568
-1,081
3,516
-1,733
-840
851
1,297
610
943
14,392
170,024
14,708
181,131
18,275
199,148
20,214
213,142
5.9%
0.5%
8.8%
0.7%
3.3%
0.3%
4.7%
0.4%
Capital formation
Tier 1 capital
2003
2004
1,566
10,734
1,946
3,891
-3,618
-458
14,061
1,662
13,735
788
3,798
-3,036
-458
16,489
Tier 2 capital
1,590
6,328
0
-726
7,192
1,713
7,077
0
-851
7,939
Tier 3 capital
0
21,253
0
21,253
1
24,429
0
24,429
170,024
181,131
27.7%
72.3%
8.4%
20.5%
23.0%
77.0%
8.9%
15.5%
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
Ratios
Equity as % of RWA
20.0%
15.0%
10.0%
5.0%
25,000
0.0%
-5.0%
2004
3,462
-1,499
-666
GS net income
Equity structure
Item name
Finance
leases
1%
Item name
2003
2,490
-1,224
-415
Interbank
2000
2001
2002
2003
2004
2005E 2006E
20,000
15,000
-10.0%
10,000
-15.0%
Revenue growth
Cost growth
5,000
0
Tier 1
capital
2005E
Other
2004
Goodwill
(negative)
2006E
Preference
capital
2005E
Minority
interests
(equity)
2004
Cash
Item name
Reserves
A c c o u n tin g
Ite m n a m e
Capital
Returns (EUR mn)
153
Europe
Banks
Bankinter (BKT.MC: U/A)
Volume
130
120
110
100
90
80
70
60
Bankinter
Bankinter
FTSE W Europe
FTSE
Europe
1000
800
600
400
200
Key statistics
Investment summary: Bankinter’s
Market capitalization(EURmn)
Current price (EUR)
Fair value (EUR)
Rating
Free float
3,089
40.2
33.0
U/A
76.9
83%
GS net
GS
Stated
PBT
income
EPS
EPS
2002
186
119
1.57
1.46
2003
214
105
1.38
1.75
2004
267
163
2.13
2.13
2005E
340
221
2.86
2.72
2006E
376
238
3.06
2.98
FF
JJ
D
D
N
O
O
SS
A
A
JJ
JJ
M
A
A
M
FF
0
3.3% / -2.3%
40.0% / 14.8%
19.9% / 5.6%
Debt rating: Moodys
Aa3 / stable
Debt rating: S&P
A / stable
BKT SM / BKT.MC
Next announcement
1Q05 Results
Date
Apr-05
Stated
BVPS
11.4
12.8
14.1
16.5
19.1
DPS
0.89
0.94
1.05
1.22
1.33
P/E (X)
GS Stated
25.5
27.6
29.1
22.9
18.9
18.9
14.0
14.8
13.1
13.5
GS EPS
growth
10.2%
-12.2%
54.1%
34.4%
7.0%
Dividend
yield
2.2%
2.3%
2.6%
3.0%
3.3%
4Q03
3Q04
4Q04
4Q/4Q
4Q/3Q
2003
2004
2005E
2006E
03/02
04/03E
05/04E
98
42
13
3
58
155
99
40
-1
-4
36
135
101
3.4%
50 21.0%
17 34.3%
0 -91.8%
68 17.5%
169
8.7%
1.5%
24.3%
NA
NA
90.6%
25.1%
411
152
29
8
190
601
403
175
27
-0
202
605
467
197
30
6
233
700
507
208
20
5
233
740
-2.0%
14.9%
-7.3%
NA
6.6%
0.7%
15.9%
12.5%
9.7%
NA
15.3%
15.7%
8.6%
5.5%
-33.3%
-16.7%
-0.1%
5.7%
Staff
Depreciation
Operating income
-42
-40
-4
-0
-86
69
-40
-31
-4
-0
-75
60
-48
-46
-4
-0
-99
70
20.8%
49.2%
4.7%
NA
NA
31.5%
17.0%
-160
-131
-17
-2
-311
290
-168
-137
-16
-1
-323
282
-178
-145
-16
-1
-341
359
-184
-148
-16
-1
-350
390
5.2%
4.3%
-6.1%
-37.3%
NA
3.9%
-2.7%
6.1%
6.0%
0.0%
0.0%
NA
5.7%
27.0%
3.3%
2.0%
0.0%
0.0%
NA
2.6%
8.7%
PBT
Tax
PAT
Net Profit
the ongoing pressure on margins, only
partially offset by strong volume growth,
and the upward trend in costs due to
the expansion of the consumer finance
P/B (X)
GS Stated
3.5
3.5
3.1
3.1
2.8
2.9
2.4
2.4
2.1
2.1
ROE RORWA
13.0%
0.89%
14.5%
1.01%
15.8%
1.09%
17.8%
1.25%
16.7%
1.30%
Risks: According to management, the
bank is strongly focused on switching
from mortgage business to SMEs and
consumer finance in order to mitigate
the margin contraction on mortgages.
We believe it will be challenging for
Net interest income
Trading profits
expectations. The main highlights were
and SMEs business.
GS
BVPS
11.5
12.9
14.2
16.6
19.3
Item name
2004 results were in line with our
-13
10
-6
60
-21
39
-4
35
-10
11
-2
59
-20
39
-4
35
-19
11
13
13.1%
15.4%
8.9%
NA
NA
14.4%
1.6%
41.5%
NA
NA
NA
76 27.2%
-26 24.8%
50 28.5%
-3 -23.0%
47 34.5%
83.7%
NA
1.3%
NA
28.6%
30.4%
27.7%
-18.7%
32.7%
-131
25
31
214
-65
149
-16
134
-51
34
1
267
-89
178
-15
163
-43
34
-10
340
-114
226
-16
210
-43
34
-5
376
-126
250
-18
232
-60.9%
NA
38.1%
-95.7%
24.4%
36.4%
19.1%
-5.9%
22.1%
-15.4%
NA
-0.5%
NA
27.4%
28.4%
26.9%
8.0%
28.6%
Trading
profits Other
5%
0%
short term because the bank is new to
the market and will face high costs in
Net fees &
coms.
29%
setting up an adequate network.
Valuation: We reiterate our U/A
Net interest
income
66%
rating on the stock which is currently
trading at 13.1x GSEPS 2006E, a 16%
premium to the Spanish banks.
2004 cost mix
Although this valuation looks
Depr
5%
-0.1%
NA
0.0%
-48.5%
10.6%
10.6%
10.6%
10.6%
10.6%
Bankinter to achieve breakeven in the
2004 revenue mix
Amort
0%
demanding, we believe the stock will be
supported in the short term by some
stake building as the two main
Admin
42%
Staff
53%
shareholders have asked Bank of Spain
for authorisation to increase their stake
up to 14.9% from c10% (Expansion,
January 21, 2005).
154
Europe
Banks
Returns (EUR mn)
Accounting
Item name
2003
2004
2005E
2006E
Cash
Item name
2003
2004
2005E
2006E
Stated net profit
134
2
0
-31
0
0
163
1
0
-1
0
0
210
1
0
10
0
0
232
1
0
5
0
0
GS net income
+ Depreciation
105
-17
163
16
-16
221
16
-16
238
16
-16
GS gross OpCF
88
74
163
-160
221
-95
238
-59
GS net income
105
163
221
238
GS net OpFCF
163
-72
3
-81
126
-94
179
-104
91
-78
32
75
Stated equity
+/- other
978
8
0
0
1,082
10
0
0
1,279
11
0
0
1,498
12
0
0
GS net FCF
GS equity
986
1,092
1,290
1,511
23,940
13,804
29,417
16,093
31,887
17,445
33,434
18,291
GS equity
Tier 1 capital
Total assets
Total assets
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
15.7%
0.6%
1.1%
18.5%
0.7%
1.3%
17.0%
0.7%
1.3%
15.8%
0.6%
1.1%
17.8%
0.7%
1.3%
16.7%
0.7%
1.3%
100%
Cash
6%
24%
Interbank
80%
Customer
loans
60%
Equity &
debt
securities
40%
Subordinate
d debt
20%
Other
assets
Customer
deposits
64%
44% 2775%
54%
49%
986
1,105
23,940
13,804
GS return ratios
GS net OpFCF / RWA
Other
GS net FCF / tier 1
Net Profit
Dividends to common
1,092
1,260
29,417
16,093
75%
45%
58%
45%
1,290
1,422
31,887
17,445
1,511
1,642
33,434
18,291
0.3%
0.0%
0.0%
10.6%
0.4%
0.8%
12.8%
0.5%
1.0%
14.7%
8.2%
5.3%
0.2%
-6.2%
0.1%
8.9%
2.2%
4.1%
10.9%
4.6%
5.8%
134
-72
163
-81
210
-94
232
-104
Other
liabilities
47%
26%
23%
Preferred &
minorities
3%
4%
Shareholder
s' equity
Assets
Liab.
0%
Payout ratio
Item name
Other
20%
Finance
leases / hire
purchases
3%
Overseas
2%
Corporate
6%
Mortgages
69%
4Q03
3Q04
Total asset growth
8.4%
1.66%
12.3%
0.6%
39.5%
Cost / income ratio
4Q04
y-o-y
2004
2005E
2006E
GS net income
105
-72
-74
163
-81
-160
221
-94
-95
238
-104
-59
Capital formation
-41
-78
32
75
1,105
13,804
1,260
16,093
1,422
17,445
1,642
18,291
-3.7%
-0.3%
-6.2%
-0.5%
2.2%
0.2%
4.6%
0.4%
Tier 1 capital
Equity structure
Item name
2003
2004
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
114
788
3
270
-11
-59
1,105
115
883
4
343
-11
-75
1,260
22
298
287
-17
591
22
348
271
-1
640
0
1,696
0
1,696
0
1,900
0
1,900
13,804
16,093
Ratios
Equity as % of RWA
24.4%
75.6%
6.6%
1.0%
27.2%
72.8%
6.2%
0.9%
Tier 2 capital
Tier 3 capital
Item name
2003
Interbank
q-o-q
2003
2004
2005E
2006E
16.2%
1.59%
-3.0%
-1.3%
-7.5%
22.9%
1.49% -10.8% -6.35%
8.7%
3.4%
17.5%
11.7%
1.84%
7.9%
11.8%
0.4%
22.9%
1.57%
0.7%
-2.0%
6.6%
8.4%
1.57%
15.7%
15.9%
15.3%
4.9%
1.60%
5.7%
8.6%
-0.1%
9.9%
55.5%
9.9%
55.5%
14.4%
58.4%
5.3%
5.2%
-5.8%
51.7%
3.9%
53.3%
5.7%
48.7%
2.6%
47.3%
0.33%
19.1%
0.24%
16.9%
0.41% 25.2%
26.6%
73.3%
0.84%
45.3%
0.29%
18.2%
0.22%
12.1%
0.20%
11.1%
5.0%
25.0%
20.0%
15.0%
10.0%
1,600
1,400
1,200
33.5%
33.5%
Growth (y-o-y)
16,467
3.5%
17,473
13.7%
18,745 13.8%
13.8%
7.3%
16,467
12.1%
18,745
13.8%
21,110
12.6%
22,977
8.8%
-5.0%
2000
2001
2002
2003
2004
2005E 2006E
BIS capital ratio
62
0.37%
559.1%
59
0.33%
646.5%
53 -14.2% -9.4%
0.28% -24.6% -15.58%
739.0% 32.2% 14.3%
62
0.37%
559.1%
53
0.28%
739.0%
60
0.28%
730.3%
70
0.30%
697.5%
8.0%
12.3%
7.9%
12.1%
7.8% -2.22% -0.80%
11.8% -3.92% -2.48%
8.0%
12.3%
7.8%
11.8%
8.2%
12.1%
9.0%
13.1%
800
600
400
-10.0%
NPLs
NPLs / loans
Provisions / NPLs
1,000
200
Revenue growth
Cost growth
0
Tier 1
capital
33.3%
Other
30.3%
Goodwill
(negative)
1.40%
Preference
capital
34.0% -1.89%
Minority
interests
(equity)
33.5%
Reserves
34.7%
Capital
Tax rate
0.0%
155
Europe
Banks
Banco Popular Español (POP.MC: IL/A)
Volume
120
Popular
FTSE W Europe
Investment summary: Following
Current price (EUR)
Fair value (EUR)
Rating
Free float
Sindicatura de accionistas
Allianz
F
J
D
0
N
2000
60
O
70
S
4000
A
80
J
6000
J
90
M
8000
A
100
M
10000
F
110
GS net
PBT
income
2001
852
687
2002
1,055
647
2003
1,205
692
2004
1,292
851
2005E
1,461
926
2006E
1,624
1,027
Key statistics
12000
11,983
52.7
44.0
IL/A
227.4
79.1%
10.8%
9.9%
10.5% / 4.5%
21.7% / -0.2%
6.6% / -6.1%
Debt rating: Moody's
Aa1 / stable
Debt rating: S&P
AA / stable
POP SM / POP.MC
Next announcement
1Q05 Results
Date
Apr-05
GS
BVPS
10.9
12.3
13.5
15.2
18.2
21.5
Stated
BVPS
10.8
11.9
13.1
14.7
17.7
20.9
P/E (X)
GS Stated
16.7
20.2
17.7
18.1
16.9
16.4
14.1
15.0
12.9
13.2
11.7
11.9
DPS
1.4
1.5
1.6
1.8
1.8
2.0
GS EPS
growth
30.9%
-5.9%
4.5%
20.2%
8.8%
11.0%
Dividend
yield
2.6%
2.8%
3.1%
3.3%
3.4%
3.8%
2H2004. The key positive aspect is the
stabilisation of margin pressure on
loans to customers and the positive
volume trend. We expect a slowdown of
P/B (X)
GS Stated
4.8
4.9
4.3
4.4
3.9
4.0
3.5
3.6
2.9
3.0
2.5
2.5
ROE RORWA
25.5%
2.05%
25.7%
1.90%
25.7%
1.64%
25.3%
1.47%
24.6%
1.47%
23.0%
1.47%
2004 vs. 12.7% and 9.8% for 2005E
and 2006E) that should help it maintain
its Tier 1 ratio at around 6.5% (6.2% at
the end of 2004).
Risks: A potential risk is the high
exposure of the bank's profitability to a
2004 revenue mix
4Q03
3Q04
4Q04
4Q/4Q
4Q/3Q
2003
2004
2005E
2006E 04E/03
465
159
14
0
174
639
488
164
14
-0
178
666
495
176
10
0
186
681
6.5%
10.3%
NA
NA
7.0%
6.6%
1.5%
7.4%
NA
NA
4.6%
2.3%
1,800
608
32
2
642
2,442
1,944
669
39
1
710
2,653
2,101
701
32
733
2,834
2,368
739
32
771
3,139
8.0%
8.1%
10.1%
4.8%
22.9% -17.9%
-48.9% -100.0%
10.6%
3.3%
8.7%
6.8%
12.7%
5.4%
0.0%
NA
5.2%
10.8%
Staff
Depreciation
Operating income
-160
-68
-20
-5
-10
-263
376
-157
-70
-20
-5
-10
-262
404
-164
-69
-21
-5
-9
-268
413
2.3%
2.2%
1.0%
-8.5%
-0.4%
1.8%
10.0%
4.2%
-0.3%
1.5%
0.0%
-3.2%
2.4%
2.2%
-597
-245
-76
-12
-37
-967
1,474
-629
-272
-81
-19
-39
-1,040
1,613
-651
-284
-84
-19
-40
-1,078
1,756
-688
-299
-88
-19
-41
-1,134
2,005
5.3%
11.0%
6.8%
64.6%
4.5%
7.6%
9.4%
3.5%
4.5%
4.1%
-4.2%
2.4%
3.6%
8.9%
5.8%
5.0%
3.6%
2.0%
2.5%
5.2%
14.2%
-75
5
9
-71
4
7
-59
5
-42
-22.2% -17.4%
-0.6%
3.7%
NA
NA
-316
12
34
-303
11
0
-307
12
0
-395
12
0
-4.1%
-4.8%
NA
1.4%
7.3%
NA
28.6%
0.0%
NA
314
-106
208
-17
191
344
-103
241
-24
217
318
-78
240
-24
215
1.1% -7.6%
-26.2% -23.8%
14.9% -0.8%
39.3% -1.0%
12.7% -0.7%
1,205
-427
778
-64
714
1,292
-404
888
-87
801
1,461
-453
1,008
-102
906
1,624
-503
1,121
-113
1,007
7.2%
-5.4%
14.2%
37.5%
12.1%
13.0%
12.0%
13.5%
16.8%
13.1%
11.2%
11.2%
11.2%
11.2%
11.2%
falling interest rate scenario, given its
Trading
profits
1%
05/04E 06/05E
Net interest income
Trading profits
PBT
Tax
PAT
Net Profit
have solved two main issues in
RWA growth (+19% ex securitisation in
per share data)
GS
Stated
EPS
EPS
3.16
2.60
2.98
2.92
3.11
3.21
3.74
3.52
4.07
3.98
4.52
4.43
Item name
4Q2004 results, the bank seems to
mature balance sheet, and the negative
Net fees &
coms.
25%
trend in cost of funding (up 10 bp in
4Q2004) since the bank has had to rely
increasingly on wholesale funding.
Net interest
income
74%
Valuation: The stock has
underperformed the European banks by
7% over the last 12 months, partially
2004 cost mix
Dep
8%
losing the 10% historical premium vs
Amort
2%
the Spanish banks. On our estimates,
Popular is currently trading at 11.7x
2006E GS EPS, broadly in line with the
Admin
27%
Spanish banks (11.3x).
Staff
63%
156
Europe
Banks
2004
2005E
2006E
Stated net profit
714
12
0
-34
0
0
801
19
1
29
0
0
906
19
1
0
0
0
1,007
19
1
0
0
0
GS net income
+ Depreciation
692
-76
76
851
81
-81
926
84
-84
1,027
88
-88
GS gross OpCF
616
992
851
-508
926
-516
1,027
-448
GS net income
692
851
926
1,027
GS net OpFCF
1,608
-366
342
-400
410
-408
579
-453
1,242
-58
2
126
Stated equity
+/- other
2,982
89
0
0
3,348
108
0
0
4,020
127
0
0
4,741
146
0
0
GS net FCF
GS equity
3,071
3,457
4,147
4,887
GS equity
Tier 1 capital
Total assets
Total assets
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
52,611 62,742 67,293 72,835
50,712 57,973 65,343 71,748
22.5%
1.3%
1.4%
26.1%
1.5%
1.6%
24.3%
1.4%
1.5%
22.7%
1.5%
1.5%
24.0%
1.4%
1.4%
25.3%
1.4%
1.5%
24.6%
1.4%
1.5%
23.0%
1.4%
1.5%
Payout ratio
23%
51%
117%
50%
99%
45%
GS return ratios
GS net OpFCF / RWA
Other
GS net FCF / tier 1
Net Profit
Dividends to common
Interbank
80%
Customer
loans
60%
10.5%
0.6%
0.6%
10.8%
0.6%
0.7%
12.8%
0.8%
0.8%
41.3%
31.9%
13.4%
7.4%
-1.3%
2.9%
8.8%
0.0%
3.4%
10.8%
2.3%
4.8%
714
-366
801
-400
906
-408
1,007
-453
1%
7%
14%
Customer
deposits
Other
liabilities
53%
Equity &
debt
securities
Other
assets
40%
Subordinate
d debt
20%
0%
25%
Preferred &
minorities
4%
5%
5%
Shareholder
s' equity
Assets
Liab.
Other
27%
Mortgages
52%
Finance
leases / hire
purchases
6%
Corporate
12%
Other
personal
3%
Item name
Total asset growth
4Q03
3Q04
4Q04
2004
2005E
2006E
32.5%
3.82%
16.3%
16.5%
15.8%
38.3%
3.45%
13.6%
13.1%
15.0%
19.3%
3.38%
6.6%
6.5%
7.0%
49.4%
3.53%
20.9%
22.1%
17.6%
7.3%
3.37%
6.8%
8.1%
3.3%
8.2%
3.51%
10.8%
12.7%
5.2%
20.0%
18.0%
16.0%
14.0%
Cost / income ratio
18.8%
41.2%
14.9%
39.3%
1.8%
39.3%
9.5%
39.2%
3.6%
38.0%
5.2%
36.1%
0.71%
20.0%
0.57%
17.5%
0.46%
14.2%
0.64%
18.8%
0.56%
17.5%
0.64%
19.7%
8.0%
Tax rate
33.7%
29.8%
24.6%
31.3%
31.0%
31.0%
4.0%
Growth (y-o-y)
43,467
43.0%
50,614
43.5%
51,844
19.3%
51,844
53.8%
58,434
12.7%
64,162
9.8%
406
0.92%
229.2%
437
0.85%
250.5%
440
0.83%
247.1%
440
0.83%
238.6%
623
1.04%
247.1%
684
1.04%
247.1%
8.4%
11.0%
8.3%
11.0%
7.9%
10.2%
7.9%
10.2%
7.1%
8.6%
7.5%
8.8%
12.0%
10.0%
BIS capital ratio
2003
2004
2005E
2006E
GS net income
692
-366
-992
851
-400
-508
926
-408
-516
1,027
-453
-448
Capital formation
-667
-58
2
126
Tier 1 capital
3,897
50,712
4,603
57,973
4,637
65,343
5,358
71,748
-17.1%
-1.3%
-1.3%
-0.1%
0.0%
0.0%
2.3%
0.2%
Equity structure
Item name
2003
2004
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
114
2,868
241
738
-342
279
3,897
114
3,234
265
988
-323
325
4,603
Tier 2 capital
0
454
760
-6
1,208
1
548
905
-173
1,281
Tier 3 capital
0
5,105
0
5,105
1
5,885
0
5,885
50,712
57,973
Ratios
Equity as % of RWA
18.9%
82.7%
6.4%
8.1%
21.5%
78.5%
6.2%
6.6%
6.0%
2.0%
0.0%
2001
NPLs
NPLs / loans
Provisions / NPLs
Item name
Interbank
83%
78%
45%
3,071 3,457 4,147 4,887
3,897 4,603 4,637 5,358
52,611 62,742 67,293 72,835
50,712 57,973 65,343 71,748
100%
Cash
2002
2003
Revenue growth
2004
2005E
Cost growth
2006E
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Tier 1
capital
2003
Other
2006E
Goodwill
(negative)
2005E
Preference
capital
2004
Minority
interests
(equity)
2003
Cash
Item name
Reserves
Accounting
Item name
Capital
Returns (EUR mn)
157
Europe
Banks
158
Europe
Banks
160 Credit Suisse (CSGN.VX: IL/A)
162 UBS (UBSN.VX: OP/A)
Switzerland
159
Europe
Banks
Credit Suisse (CSGN.VX: IL/A)
Volume (rhs)
130
Key statistics
CREDIT SUISSE 'R'
25000
FTSE W Europe
110
20000
Valuation summary (SFr mn, except per share data)
GS net
GS
Stated
PBT
income
EPS
EPS
2002
-4,617
-4,434
-3.84
-3.85
2003
859
2,411
2.01
0.66
2004
8,308
5,570
4.61
4.82
2005E
7,990
5,669
4.83
5.18
2006E
8,496
6,065
5.33
5.72
56,540
51.10
55.3
IL/A
1,106
100%
9.0%/2.9%
36.8%/10.8%
13.4%/1.8%
Debt rating: Moodys
Aa3 / negative
Debt rating: S&P
A / stable
CSGN VX / CSGN.Z
Next announcement
1Q05 results
Date
04-May-05
Investment summary: The
restructuring of CSFB is now dependent
on revenue growth rather than costcutting. Increasing productivity, in turn,
requires higher market shares in
investment banking or equities or an
F
J
D
N
O
S
A
0
J
30
J
5000
M
10000
50
A
70
M
15000
F
90
Market capitalization (SFr mn)
Current price (SFr)
Fair value (SFr)
Rating
Free float
increase in capital committed to trading.
However, both of these measures could
GS
BVPS
30.6
31.4
34.0
38.3
42.8
Stated
BVPS
30.6
30.1
32.7
36.9
41.4
P/E (X)
GS Stated
-13.3
-13.3
25.4
77.6
11.1
10.6
10.6
9.9
9.6
8.9
DPS
0.1
0.5
1.5
2.0
2.5
GS EPS
growth
-235.7%
-152.3%
129.3%
4.9%
10.3%
Dividend
yield
0.2%
1.0%
2.9%
3.9%
4.9%
P/B (X)
GS Stated
1.7
1.7
1.6
1.7
1.5
1.6
1.3
1.4
1.2
1.2
ROE RORWA
-13.0%
-2.1%
2.3%
0.4%
15.6%
2.8%
14.9%
2.8%
14.6%
3.0%
damage near term profitability and/or
increase earnings volatility. An IPO of
Winterthur would require additional
capital strengthening and is unlikely to
take place until 2006, in our view.
Sum-of-the-parts valuation (SFr mn)
Business unit
CSFB
- Investment Banking
- FS
CS Financial Services
- Corporate & Retail
- Private banking
- Winterthur
Corporate centre (incl. Min.)
2006E
Cash net income
1,860
1,272
589
4,477
552
2,823
1,102
-272
as %
of group
31%
21%
10%
74%
9%
47%
18%
-4%
6,065
100%
2006E Equity
P/E (X)
allocated
9.2
18,644
9.0
16,048
9.5
2,596
10.9
26,105
10.0
6,723
12.0
8,226
8.5
11,156
10.5
0
as %
of group
42%
36%
6%
58%
15%
18%
25%
0%
P/B (X)
0.9
0.7
2.2
1.9
0.8
4.1
0.8
NM
2006E
ROE (%)
10%
7.9%
23%
17%
8%
34%
10%
NM
Value
17,038
11,444
5,594
48,763
5,523
33,875
9,365
-2,856
Per share
(SFr)
15.0
10.1
4.9
42.9
4.9
29.8
8.2
-2.5
as %
of group
27%
18%
9%
77%
9%
54%
15%
-5%
100%
1.4
13.6%
62,945
55.3
100%
Risks: Revenues in CSFB may
7,000
disappoint versus its peers as
6,000
5,000
management continues to remain risk
4,000
averse and fixed income activity
3,000
continues to soften.
2,000
1,000
Total
0
2
6,067
0
-1,506
10.4
43,243
Fair value (SFr)
Current share price (SFr)
Total
Corporate
centre
Winterthur
Private
banking
CSFB FS
44,749
Corporate &
Retail
Exceptionals (post-tax)
Goodwill
10.4
CSFB IB
0
GS total
1.5
14.0%
SFr55.3 per share.
62,945
1,137.9
Winterthur
14%
CSFB IB
17%
CSFB FS
9%
55.3
51.1
8%
Private
banking
52%
Corporate
& Retail
8%
160
Europe
Banks
Balance sheet and capital (SFr mn)
5,480
0
0
2
0
66
5,671
-2
0
0
0
0
6,067
-2
0
0
0
0
GS net income
+ Depreciation
5,570
0
0
5,669
0
0
6,065
0
0
GS gross OpCF
5,570
-594
5,669
-139
6,065
-141
GS net income
5,570
5,669
6,065
GS net OpFCF
4,976
-1,666
5,529
-2,155
5,924
-2,613
3,310
3,374
3,312
Stated equity
+/- other
36,273
1,510
0
0
39,789
1,508
0
0
43,243
1,506
0
0
GS net FCF
GS equity
37,783
41,297
44,749
GS equity
Tier 1 capital
Total assets
1,089,485 1,091,574 1,093,686
199,249
201,241
203,254
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
15.2%
0.53%
2.86%
14.3%
0.52%
2.83%
14.1%
0.56%
3.00%
15.6%
0.52%
2.81%
14.9%
0.52%
2.83%
14.6%
0.56%
3.00%
Payout ratio
33%
30%
39%
38%
100%
Interbank
80%
Customer
loans
60%
Equity &
debt
securities
40%
Other
assets
44%
43%
37,783
41,297
44,749
24,596
28,112
31,566
1,089,485 1,091,574 1,093,686
199,249
201,241
203,254
GS return ratios
GS net OpFCF / RWA
Other
GS net FCF / tier 1
Cash
4%
2003
2004
2005E
2006E
GS net income
2,411
-565
749
5,570
-1,666
-594
5,669
-2,155
-139
6,065
-2,613
-141
Other
liabilities
Capital formation
2,595
3,310
3,374
3,312
Subordinate
d debt
Tier 1 capital
22,287
190,761
24,596
199,249
28,112
201,241
31,566
203,254
11.6%
1.4%
13.5%
1.7%
12.0%
1.7%
10.5%
1.6%
Interbank
25%
Customer
deposits
69%
60%
16%
Preferred &
minorities
11%
9%
Shareholder
s' equity
Assets
Liab.
20%
0%
14.0%
0.51%
2.76%
13.8%
0.54%
2.93%
20.2%
13.5%
8.8%
19.7%
12.0%
9.8%
18.8%
10.5%
10.5%
Equity structure
Item name
Financial
30%
Construct'n
& property
20%
Key performance indicators (SFr mn)
Item name
Total asset growth
Cost / income ratio
4Q03
3Q04
4Q04
2004
2005E
2006E
N/A
N/A
-27.0%
-1.3%
-27.0%
N/A
5.03%
-9.8%
-17.4%
-9.8%
N/A
5.05%
-3.7%
-9.3%
-3.7%
N/A
5.70%
37.6%
77.3%
29.3%
0.2%
5.60%
1.1%
1.1%
1.1%
0.2%
5.75%
3.7%
3.7%
3.7%
0.8%
49.4%
-5.1%
50.5%
-8.5%
47.5%
-28.5%
45.2%
0.6%
44.9%
3.9%
45.1%
15.0%
N/A
2.9%
0.08%
0.7%
-0.27%
-2.0%
0.04%
0.3%
0.22%
1.4%
0.22%
1.3%
5.0%
30.0%
25.0%
20.0%
N/M
19.3%
20.8%
20.5%
22.6%
22.5%
177,179
N/A
188,164
N/A
184,399
N/A
184,399
80.5%
186,281
1.0%
188,173
1.0%
NPLs
NPLs / loans
Provisions / NPLs
4,746
N/A
97.9%
3,375
1.8%
99.6%
3,052
1.6%
99.5%
3,052
1.6%
99.5%
2,991
1.6%
90.4%
2,931
1.53%
84.7%
BIS capital ratio
11.7%
17.4%
11.8%
16.2%
12.3%
16.6%
12.3%
16.6%
14.0%
18.2%
15.5%
19.7%
Growth (y-o-y)
2004
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
24,781
9,210
743
2,167
12,325
-2,289
22,287
24,042
12,231
6,178
2,118
11,564
-8,409
24,596
Tier 2 capital
0
19,018
-4,646
-253
14,119
0
19,018
-3,038
-398
15,582
Tier 3 capital
0
36,406
-3,199
33,207
0
40,178
-7,057
33,121
190,761
199,249
Ratios
Equity as % of RWA
9.7%
155.8%
18.2%
-123.7%
8.6%
172.6%
21.3%
-88.7%
10.0%
60,000
50,000
0.0%
Tax rate
2003
Commercial
50%
13.6%
0.48%
2.55%
-5.0%
2001
2002
2003
2004
2005E
2006E
40,000
30,000
-10.0%
20,000
-15.0%
10,000
Revenue growth
Cost growth
0
Tier 1
capital
2006E
Other
2005E
Stated net profit
Total assets
Item name
2004
Goodwill
(negative)
2006E
Preference
capital
2005E
Minority
interests
(equity)
2004
Cash
Item name
Reserves
Accounting
Item name
Capital
Returns (SFr mn)
161
Europe
Banks
UBS (UBSN.VX: OP/A)
Volume (rhs)
120
110
UBS 'R'
FTSE W Europe
10000
8000
100
90
6000
80
70
60
50
4000
2000
Key statistics
Investment summary: UBS has
Market capitalization (SFr mn)
Current price (SFr)
Fair value (SFr)
Rating
Free float
107,055
103.7
120.1
OP/A
1,032.4
100%
Valuation summary (SFr mn, except per share data)
GS net
GS
Stated
PBT
income
EPS
EPS
2002
4,537
5,798
4.74
2.92
2003
8,177
6,772
5.95
5.59
2004
10,674
9,256
8.52
7.76
2005E
11,431
9,721
9.61
8.83
2006E
12,418
10,453
11.04
10.32
invested heavily in its European Wealth
Management franchise, which looks set
to break even towards the end of 2005.
We believe this business will add a
substantial and stable revenue stream
F
J
D
N
O
S
A
J
J
M
A
F
M
0
9.9%/3.8%
25.5%/1.7%
7.1%/-3.9%
Debt rating: Moodys
Aa2 / stable
Debt rating: S&P
AA+ / stable
UBSN VX / UBSZn.S
Next announcement
1Q05 results
Date
03-May-05
in future years which the market is not
factoring into current prices. Despite
GS
BVPS
38.1
38.6
38.4
40.6
44.5
Stated
BVPS
33.6
32.9
31.5
31.9
33.9
DPS
2.00
2.60
3.00
3.30
3.60
2006E Equity
allocated
14,991
10,901
4,416
6,485
4,817
1,178
7,010
38,897
as %
of group
39%
28%
11%
17%
12%
3%
18%
100%
P/E (X)
GS Stated
21.9
35.5
17.4
18.6
12.2
13.4
10.8
11.7
9.4
10.1
GS EPS
growth
-3.0%
25.5%
43.2%
12.8%
14.9%
Dividend
yield
1.9%
2.5%
2.9%
3.2%
3.5%
P/B (X)
GS Stated
2.7
3.1
2.7
3.1
2.7
3.3
2.6
3.3
2.3
3.1
ROAE ROARWA
8.6%
1.4%
16.8%
2.5%
24.1%
3.1%
27.9%
3.2%
31.4%
3.4%
accelerating commission pressure in
the global cash equities business, UBS
is likely to be one of the few
beneficiaries through increased market
share and scale benefits.
Sum-of-the-parts valuation (SFr mn)
0
-1,104
Total
9,349
0
-9,247
12.2
Fair value (SFr)
Current share price (SFr)
29,650
0
0
3.8
31.5%
113,718
947
as %
of group
32%
55%
43%
12%
6%
7%
-1%
100%
Risks: Risks include weaker than
12,000
10,000
expected economic conditions in the
8,000
6,000
Swiss economy, lower capital markets
4,000
2,000
revenues and tax amnesties which may
0
Total
Value
36,920
63,080
49,397
13,683
6,737
7,704
-723
113,718
UBS Global AM
2006E
ROE (%)
26%
49%
86%
23%
13%
59%
-1%
26.9%
Bus. Bank. Switz.
P/B (X)
2.5
5.8
11.2
2.1
1.4
6.5
-0.1
2.9
Wealth mgmt. USA
P/E (X)
9.5
11.9
13.0
9.0
11.0
11.0
10.9
10.9
Corporate Center (incl. Min)
Exceptionals (post-tax)
Goodwill
as %
of group
37%
51%
36%
15%
6%
7%
-1%
100%
Wealth mgmt.
2006E
Cash net income
3,886
5,320
3,800
1,520
612
700
-66
10,453
I Banking & Securities
Business unit
UBS Investment Bank
UBS Wealth Mgmt & Business Bkg
- Wealth Management
- Business Banking Switzerland
Wealth Management USA
Global Asset Management
Corporate Center (incl. Min)
GS total
Wealth
mgmt. USA
6%
Bus. Bank.
Switz.
13%
damage inflows into the private banking
business.
Valuation: Our SOTP analysis
suggests a fair value of SFr120.1 per
share, which implies 16% upside from
I Banking &
Securities
35%
current levels.
120.1
103.7
16%
Wealth
mgmt.
46%
162
Europe
Banks
Balance sheet and capital (SFr mn)
8,089
964
0
203
0
0
8,617
1,104
0
0
0
0
9,349
1,104
0
0
0
0
GS net income
9,256
9,721
10,453
9,256
1,352
-1,352
9,721
1,453
-1,453
10,453
1,458
-1,458
GS gross OpCF
9,256
-876
9,721
-638
10,453
-677
8,380
-3,041
9,083
-3,098
9,775
-3,146
5,338
5,985
6,630
GS net OpFCF
32,002
7,039
0
0
30,021
8,143
0
0
29,724
9,247
0
0
GS net FCF
GS equity
39,041
38,164
38,971
GS equity
Tier 1 capital
Total assets
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
1,734,646 1,751,890 1,760,580
264,413
273,527
283,206
23.0%
0.56%
3.59%
25.2%
0.56%
3.61%
27.1%
0.60%
3.76%
24.0%
0.49%
3.13%
27.8%
0.49%
3.20%
31.3%
0.53%
3.36%
2006E
GS net income
+ Depreciation
Stated equity
+/- other
Total assets
2005E
Payout ratio
36%
38%
34%
36%
20.8%
0.51%
3.25%
23.5%
0.52%
3.38%
25.3%
0.56%
3.51%
29.1%
18.5%
8.4%
33.9%
22.3%
9.1%
36.9%
25.0%
9.8%
Item name
2%
Interbank
22%
80%
Customer
deposits
30%
Customer
loans
60%
Equity &
debt
securities
40%
Other
assets
Other
liabilities
Subordinate
d debt
66%
54%
20%
Preferred &
minorities
0%
Shareholder
s' equity
2%
3Q04
4Q04
Total asset growth
-7.2%
2.13%
-21.2%
-6.6%
-21.2%
4.2%
1.81%
-7.3%
-3.0%
-7.3%
11.9%
1.89%
14.1%
6.2%
14.1%
Cost / income ratio
-12.5%
73.4%
-1.3%
74.5%
9.2%
72.0%
0.09%
2.0%
-0.02%
-0.6%
-0.22%
-4.8%
y-o-y
-11.16%
q-o-q
4.30%
2004
2005E
2006E
11.9%
2.01%
11.5%
1.1%
17.6%
1.0%
1.92%
5.2%
5.2%
5.2%
0.5%
1.98%
5.3%
5.3%
5.3%
6.5%
73.3%
3.8%
72.4%
3.6%
71.2%
-3.3%
-358.9%
814.9%
-0.13%
-2.8%
0.06%
1.2%
0.10%
2.2%
14.6%
21.0%
20.3%
38.99%
-3.00%
20.0%
20.6%
235,380
3.9%
226,274
6.4%
6.4%
NPLs
NPLs / loans
Provisions / NPLs
4,901
2.3%
80.7%
4,078
1.5%
79.3%
4,013
1.5%
80.6%
-18.1%
-33.9%
-0.1%
BIS capital ratio
11.8%
13.3%
11.5%
13.3%
10.9%
12.8%
-7.84%
-3.90%
-3.9%
244,622
8.1%
254,416
4.0%
-1.6%
1.5%
1.6%
4,033
1.5%
78.8%
4,078
1.5%
71.7%
4,128
1.44%
68.7%
-5.13%
-3.97%
10.9%
12.8%
9.8%
11.7%
9.4%
11.2%
5,338
5,985
6,630
29,765
251,901
28,795
264,413
26,814
273,527
26,517
283,206
10.3%
1.2%
18.5%
2.0%
22.3%
2.2%
25.0%
2.3%
2004
Other balancing (estim ated)
Tier 2 capital
0
9,301
4,191
-9,676
3,816
0
10,575
3,179
-8,674
5,080
Tier 3 capital
0
33,581
0
33,581
0
33,875
0
33,875
Risk w eighted assets
251,901
264,413
20.0%
Ratios
Equity as % of RW A
13.7%
118.6%
14.0%
27.9%
25.0%
141.6%
15.4%
30.1%
15.0%
Tier 1 capital breakdow n (2004)
Commercial
30%
Personal
lending
49%
Construct'n
& property
6%
Capital
Reserves
Preference capital
Less: Goodwill
Other balancing (estim ated)
Tier 1 capital
60,000
50,000
5.0%
40,000
30,000
0.0%
2001
2002
2003
2004
2005E
2006E
20,000
10,000
20.7%
226,274
6.4%
Tier 1 capital
0
Capital
212,679
-4.4%
3,068
Capital formation
8,074
32,705
0
7,187
-12,386
-6,785
28,795
-10.0%
Growth (y-o-y)
10,453
-3,146
-677
2003
Other
1%
-5.0%
Tax rate
2006E
9,721
-3,098
-638
7,881
27,429
0
4,073
-11,529
1,911
29,765
Government
& public
authorities
3%
10.0%
-1.9%
2005E
Equity structure
Item nam e
Key performance indicators (SFr mn)
4Q03
2004
9,256
-3,041
-876
GS net income
Liab.
Assets
Financial
11%
Item name
2003
6,772
-2,786
-918
Interbank
8%
14%
32%
34%
39,041
38,164
38,971
28,795
26,814
26,517
1,734,646 1,751,890 1,760,580
264,413
273,527
283,206
GS return ratios
GS net OpFCF / RWA
Other
GS net FCF / tier 1
100%
Cash
-15.0%
Revenue growth
Cost growth
Tier 1
capital
Stated net profit
2004
Other
2006E
Goodwill
(negative)
2005E
Preference
capital
2004
Cash
Item name
Minority
interests
(equity)
Accounting
Item name
Reserves
Returns (SFr mn)
163
Europe
Banks
164
Europe
Banks
166 Alliance & Leicester (AL.L: U/A)
168 Barclays (BARC.L: NR)
170 Bradford & Bingley (BB.L: U/A)
172 HBOS (HBOS.L: IL/A)
174 HSBC (HSBA.L: IL/A)
176 Lloyds TSB (LLOY.L: IL/A)
178 Northern Rock (NRK.L: IL/A)
180 RBS (RBS.L: OP/A)
182 Standard Chartered (STAN.L: U/A)
United Kingdom
165
Europe
Banks
Alliance & Leicester (AL.L: U/A)
Volume (rhs)
1100
ALLIANCE & LEICESTER
FTSE W Europe
Key statistics
14,000
1000
10,000
900
8,000
800
6,000
700
4,000
4,300
943
805
U/A
456
86%
14%
F
J
D
N
O
S
A
J
J
M
0
A
500
F
2,000
M
600
Market capitalization (UK£ mn)
Current price (p)
Fair value (p)
Rating
Free float
A&L Sharesafe Ltd
12,000
3.0% / -0.7%
10.2% / -11.9%
6.7% / -7.3%
Debt rating: Moodys
Aa3 / stable
Debt rating: S&P
A+ / stable
AL/ LN / AL.L
Next announcement
FY 2004 results
Date
25-Feb-05
A&L’s pre-close statement highlighted
the challenge it faces in converting a
growing business franchise into
revenue growth. Some of A&L’s
competitors have taken a risk in
pursuing a strategy of rapid growth in
order to achieve a position where scale
Valuation summary (£ mn, except per share data)
2001
2002
2003
2004E
2005E
2006E
PBT
396
468
525
602
561
550
GS net
income
336
347
351
379
378
374
GS
EPS (p)
66.6
69.4
73.2
83.0
85.3
85.9
Stated
EPS (p)
56.3
68.0
78.9
94.9
90.9
90.3
GS
BVPS (p)
348.3
355.4
366.8
397.9
427.2
450.8
Stated
BVPS (p)
348.3
355.3
366.7
397.8
427.1
450.7
P/E (X)
GS Stated
14.1
16.8
13.6
13.9
12.9
11.9
11.4
9.9
11.1
10.4
11.0
10.4
DPS (p)
36.3
39.9
43.9
48.3
53.1
58.4
GS EPS
growth
0.2%
4.2%
5.4%
13.4%
2.7%
0.6%
Dividend
yield
3.8%
4.2%
4.7%
5.1%
5.6%
6.2%
P/B (X)
GS Stated
2.7
2.7
2.7
2.7
2.6
2.6
2.4
2.4
2.2
2.2
2.1
2.1
benefits provide an advantage. In
ROAE RORWA
16.4%
1.55%
18.8%
1.72%
21.5%
1.78%
24.5%
1.80%
21.7%
1.52%
20.3%
1.41%
2006E GS
Net income
as %
of group
P/E (X)
2006E Equity
allocated
as %
of group
P/B (X)
2006E
ROE (%)
Value
(£mn)
per share
(p)
as %
of group
- MLI
- Personal banking
Retail Banking
Commercial
Treasury
155
147
303
66
6
41%
39%
81%
18%
2%
9.5
9.5
9.5
8.5
8.5
1,387
425
1,812
313
-188
72%
22%
94%
16%
-10%
1.1
3.3
1.6
1.8
-0.3
11.2%
34.7%
16.7%
21.2%
-3.0%
1,475
1,400
2,875
563
48
340
323
664
130
11
42%
40%
82%
16%
1%
GS total
374
100%
9.3
1,936
100%
1.80
19.3%
3,486
805
100%
8.8
1,936
1.80
20.3%
3,486
805
100%
Exceptional items
Total
have left it without such an advantage,
in our view. With the potential for further
efficiency gains declining (given savings
already achieved) and provisions at
cyclical lows, leveraging the balance
Sum-of-the-parts (£ mn)
Business unit
contrast, A&L’s risk aversion appears to
19
394
Implied fair value (p)
Current share price (p)
sheet (primarily via ongoing share
2006E revenue mix
buybacks) appears the best opportunity
Other
8%
for meeting its c.20% ROE target.
Net interest
income
49%
Net fees &
coms.
43%
disappointing new strategic targets may
increase the debate about its need to
increase scale and whether that can
433
805
943
-15%
Risks: Overall we believe A&L’s
happen without being part of a bigger
2006E cost mix
group. We estimate a fair value for A&L
including synergy benefits from any
Dep
5%
potential in-market deal of c.1,375p
Staff
39%
(see our report, ABC – Acquisition
Benefit Check, July 6, 2004.).
Admin
56%
Valuation: We see a standalone
valuation of 805p, 15% below the
current price.
166
Europe
Banks
Balance sheet and capital (£ mn)
402
0
0
-24
0
0
394
0
0
-19
0
0
GS net income
+ Depreciation
351
35
-35
379
33
-33
378
34
-34
374
35
-35
GS gross OpCF
351
-156
379
-150
378
-121
374
-88
GS net income
351
379
378
374
GS net OpFCF
195
-206
229
-215
256
-234
287
-254
Interbank
80%
Customer
deposits
50%
Customer
60%
loans
Equity &
debt
securities
Other
assets
Other
liabilities
71%
40%
Subordinate
d debt
20%
34%
Preferred &
minorities
2%
3%
Shareholder
s' equity
Assets
Liab.
21%
Stated equity
+/- other
1,694
0
42
0
1,773
0
42
0
1,871
0
42
0
1,952
0
42
0
GS net FCF
GS equity
1,736
1,815
1,913
1,994
GS equity
Tier 1 capital
Total assets
Total assets
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
48,424 51,933 54,971 57,931
22,629 25,126 27,145 28,607
19.8% 21.3% 20.3% 19.2%
0.80% 0.75% 0.71% 0.66%
1.67% 1.59% 1.44% 1.34%
21.9% 25.0% 22.1% 20.6%
0.86% 0.86% 0.75% 0.70%
1.80% 1.81% 1.54% 1.41%
Payout ratio
-11
14
23
33
106%
55%
94%
50%
91%
58%
88%
64%
0%
1,736 1,815 1,913 1,994
1,675 2,050 2,148 2,229
48,424 51,933 54,971 57,931
22,629 25,126 27,145 28,607
GS return ratios
GS net OpFCF / RWA
Other
GS net FCF / tier 1
Other
personal
14%
11.0% 12.9% 13.8% 14.7%
0.44% 0.46% 0.48% 0.51%
0.93% 0.96% 0.98% 1.03%
2H03
1H04 2H04E
11.6% 11.2% 11.9% 12.9%
-0.7% 0.7% 1.1% 1.5%
4.8% 5.7% 6.4% 7.1%
2H/2HE
2H/1HE
2003
2004E
2005E
2006E
04/03E
05/04E
06/05E
Net interest income
Trading profits
Non interest income
365
236
89
325
689
343
263
88
351
693
357
258
88
347
704
-2.0%
9.5%
NA
-0.5%
6.8%
2.1%
4.3%
-1.5%
NA
0.0%
-1.2%
1.6%
738
451
185
635
1,373
700
521
176
697
1,397
705
569
139
708
1,413
708
615
120
735
1,443
-5.1%
15.6%
NA
-4.5%
9.8%
1.8%
0.7%
9.3%
NA
-21.3%
1.5%
1.1%
0.5%
8.0%
NA
-13.3%
3.8%
2.2%
Operating income
-395
294
-382
311
-393
311
-0.7%
5.9%
2.8%
0.1%
-788
585
-775
623
-781
632
-807
637
-1.6%
6.3%
0.8%
1.4%
3.3%
0.8%
-31
-
-34
42
-29
-
-5.7%
NA
NA
-14.1%
NA
-100.0%
-61
-
-62
42
-70
-
-87
-
2.9%
12.5%
NA
NA
NA -100.0%
23.6%
NA
NA
PBT
Tax
PAT
Net Profit
263
-73
190
-0.9
189
320
-91
229
-0.9
228
283
-78
205
205
7.3%
6.2%
7.7%
-100.0%
8.2%
-11.6%
-13.8%
-10.7%
-100.0%
-10.4%
525
-146
379
-1.2
378
602
-168
434
-0.9
433
561
-157
404
-2.0
402
550
-154
396
-2
394
14.8%
15.8%
14.4%
-25.0%
14.5%
-6.8%
-6.7%
-6.8%
122.2%
-7.1%
-2.0%
-2.0%
-2.0%
0.0%
-2.0%
EPS (basic) (p)
GS EPS (p)
DPS (net) (p)
39.9
37.3
29.6
49.5
41.2
15.9
45.4
41.8
32.4
13.7%
12.2%
9.3%
-8.3%
1.4%
103.0%
78.9
73.2
43.9
94.9
83.0
48.3
90.9
85.3
53.1
90.3
85.9
58.4
20.2%
13.4%
10.0%
-4.3%
2.7%
10.0%
-0.6%
0.6%
10.0%
2004E
2005E
2006E
GS net income
351
-206
-156
379
-215
-150
378
-234
-121
374
-254
-88
-11
14
23
33
1,675
22,629
2,050
25,126
2,148
27,145
2,229
28,607
-0.7%
0.0%
0.7%
0.1%
1.1%
0.1%
1.5%
0.1%
Capital formation
Tier 1 capital
Equity structure
Item name
2003
2004E
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
231
1,463
0
3
-3
-19
1,675
223
1,550
0
300
-3
-20
2,050
0
812
0
-24
788
0
893
0
0
893
0
2,463
-30
2,433
0
2,943
-40
2,903
22,629
25,126
Ratios
Equity as % of RWA
0.2%
99.8%
7.5%
0.2%
14.6%
85.4%
7.1%
0.1%
Tier 2 capital
Mortgages
86%
Summary P&L (£ mn)
Item name
2003
25%
20%
15%
Tier 3 capital
10%
5%
2,500
0%
-5%
2000
2001
2002
2003
2004E
2005E 2006E
2,000
-10%
1,500
-15%
1,000
-20%
500
Revenue growth
Cost growth
0
Tier 1
capital
433
0
-30
-30
0
6
10%
Item name
Other
378
0
0
-40
0
13
5%
Interbank
Goodwill
(negative)
Stated net profit
100%
Cash
Preference
capital
2003 2004E 2005E 2006E
Minority
interests
(equity)
2003 2004E 2005E 2006E
Cash
Item name
Reserves
Accounting
Item name
Capital
Returns (£ mn)
167
Europe
Banks
Barclays (BARC.L: NR)
Volume (rhs)
650
BARCLAYS
FTSE W Europe
250,000
600
200,000
550
500
150,000
450
100,000
400
50,000
350
Investment summary: Barclays
Market capitalization (£ mn)
Current price (p)
Fair value (p)
Rating
Free float
39,448
612
642
NR/A
6,451
100%
F
J
D
N
O
S
A
J
J
M
A
M
0
F
300
Key statistics
2.9% / -0.8%
19.1% / -4.8%
23.5% / 7.3%
Debt rating: Moodys
Aa1 / stable
Debt rating: S&P
AA / stable
BARC LN / BARC.L
Next announcement
Interim results
Date
05-Aug-05
GS net
GS
Stated
GS
Stated
PBT
incom e
EPS (p)
EPS (p)
BVPS
BVPS
DPS (p)
GS
Stated
growth
yield
GS
Stated
ROAE
ROE
RORW A
3,425
3,205
3,845
4,603
4,926
5,521
2,774
2,709
3,180
3,636
3,867
4,224
41.7
40.9
49.1
57.0
60.9
67.2
36.8
33.7
42.3
51.2
55.0
62.4
226
244
266
291
317
348
218
229
253
273
293
320
16.6
18.4
20.5
24.0
26.5
29.3
14.7
15.0
12.5
10.7
10.0
9.1
16.6
18.2
14.4
11.9
11.1
9.8
12.1%
-2.0%
20.0%
16.2%
6.9%
10.4%
2.7%
3.0%
3.4%
3.9%
4.3%
4.8%
2.7
2.5
2.3
2.1
1.9
1.8
2.8
2.7
2.4
2.2
2.1
1.9
19.4%
17.5%
19.0%
20.1%
19.8%
20.0%
17.7%
15.0%
17.4%
19.3%
19.4%
20.3%
1.60%
1.34%
1.52%
1.60%
1.52%
1.56%
P/E (X)
GS EPS
Dividend
P/B (X)
GS
Goodwill
Exceptional items
Total
Per
share (p)
134
98
34
266
17
74
90
174
124
-13
as %
of group
21%
15%
5%
41%
3%
11%
14%
27%
19%
-2%
4,224
100%
9.6
20,077
100%
2.0
21.0%
40,657
642
100%
Barclays Capital, Barclaycard and BGI.
The remainder of the group is primarily
banking. We believe the macro
environment is generally helpful for
Barclays, especially in UK commercial
banking. We see further potential
positives from management delivering
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
expansion in its capital markets
businesses.
Risks: Given management’s aim of
increasing the proportion of
international earnings, there is a risk of
further announcements of acquisitions.
There is a risk to earnings if fixed
-302
1
3,923
potentially global business lines:
banking and capitalising on the rapid
Total
Value
(£ mn)
8,485
6,237
2,137
16,859
1,059
4,671
5,730
11,000
7,862
-795
Central items
2006E
ROE (%)
36.3%
20.5%
21.3%
26.2%
33.4%
239.5%
94.9%
44.6%
33.2%
-1.2%
Barclays Capital
P/B (X)
3.6
2.0
1.7
2.5
3.0
31.1
11.4
4.0
3.0
-0.1
Business banking
as %
of group
12%
15%
6%
33%
2%
1%
3%
14%
13%
38%
Barclays private clients
2006E Equity
allocated
2,337
3,046
1,254
6,637
353
150
503
2,741
2,634
7,563
Barclaycard
P/E (X)
10.0
10.0
8.0
9.7
9.0
13.0
12.0
9.0
9.0
9.0
International
as %
of group
20%
15%
6%
41%
3%
9%
11%
29%
21%
-2%
UK Retail Banking
2006E GS
Net income
848
624
267
1,739
118
359
477
1,222
874
-88
Barclays Global Investors
GS total
believe Barclays has three attractive
the promised efficiency gains from retail
Sum-of-the-parts valuation (£ mn)
Business unit
UK Retail Banking
Barclaycard
International
Total Retail
Barclays private clients
Barclays Global Investors
Total PB & AM
Business banking
Barclays Capital
Central items
clear investment case, in our view. We
a play on UK retail and commercial
Valuation summ ary (£ m n, except per share data)
2001
2002
2003
2004
2005E
2006E
benefits from providing investors with a
NM
93%
10.4
20,077
100%
2.0
19.5%
40,657
6,337
Implied share price (p)
642
612
4.9%
642
Barclays
Capital
19%
100%
income revenues fall sharply, though
UK Retail
Banking
20%
current expectations are low.
Barclaycard
15%
Business
banking
27%
Valuation: Our SOTP fair value is
642p.
International
3%
Barclays
Barclays Global
private clients
Investors
3%
11%
(a) Excluding Central items
168
Europe
Banks
2004 2005E 2006E
Stated net profit
2,744
265
0
-3
24
151
3,268
299
0
-32
-42
143
3,493
302
0
0
0
72
3,922
302
0
0
0
0
GS net income
+ Depreciation
3,180
289
-289
GS gross OpCF
3,180 3,636 3,867 4,224
-975 -1,776 -1,291 -1,387
GS net income
3,180
3,636
3,867
4,224
GS net OpFCF
2,205 1,860 2,576 2,837
-1,340 -1,538 -1,699 -1,857
Stated equity
16,374 17,417 18,611 20,077
849 1,148 1,450 1,752
215
215
215
215
+/- other
0
0
0
0
GS net FCF
GS equity
GS equity
Tier 1 capital
Total assets
Total assets
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
Payout ratio
17,438 18,780 20,276 22,044
443,262 522,089 576,764 636,827
188,997 218,601 240,110 263,232
20.6% 20.1%
0.84% 0.75%
1.89% 1.78%
19.8%
0.70%
1.69%
20.0%
0.70%
1.68%
18.6% 19.3%
0.72% 0.68%
1.63% 1.60%
19.4%
0.64%
1.52%
20.3%
0.65%
1.56%
3,636
295
-295
3,867
295
-295
4,224
295
-295
865
322
877
980
61%
49%
83%
47%
66%
49%
65%
47%
2%
Interbank
14%
Interbank
80%
Customer
loans
60%
Equity &
debt
securities
40%
Subordinate
d debt
20%
Preferred &
minorities
Other
assets
Customer
deposits
Other
liabilities
51%
24%
9%
0%
Shareholder
s' equity
0%
Liab.
Assets
Other
16%
Overseas
4%
13.6% 10.3% 13.2% 13.4%
0.55% 0.39% 0.47% 0.47%
1.27% 0.91% 1.12% 1.13%
Mortgages
43%
Corporate
23%
14.7% 11.2% 14.2% 14.2%
5.8% 1.9% 4.8% 4.9%
5.6% 4.7% 6.5% 7.2%
Other
personal
14%
Summary P&L (£ mn)
Item name
2H03
1H04
2H04 2H/2HE 2H/1HE
Net interest income
Trading profits
3,368
2,233
524
293
3,050
6,418
3,341
2,378
806
327
3,511
6,852
3,501
2,588
687
317
3,592
7,093
4%
16%
31%
8%
18%
11%
-3,726
2,552
-694
-140
19
5
1,882
-509
1,373
NA
-12
1,361
-3,763
2,941
-589
-148
14
45
2,411
-675
1,736
NA
-20
1,716
-4,288
2,654
-504
-151
42
2,192
-614
1,578
NA
-26
1,552
20.75
23.94
13.45
26.72
29.28
8.25
24.35
27.56
15.75
Operating income
Goowil amortisation
PBT
Tax
PAT
Minorites
Net Profit
EPS (basic) (p)
GS EPS (p)
DPS (net) (p)
2003
2004
2005E
2006E 04/03E 05/04E 06/05E
5%
9%
-15%
-3%
2%
4%
6,604
4,263
1,054
490
5,807
12,411
6,842
4,966
1,493
644
7,103
13,945
7,341
5,467
1,872
639
7,977
15,318
7,814
6,009
2,250
694
8,952
16,766
15%
4%
-27%
8%
121%
NM
16%
21%
15%
NA
117%
14%
14%
-10%
-14%
2%
200%
NM
-9%
-9%
-9%
NA
30%
-10%
-6,988
5,158
-1,346
-265
29
4
3,845
-1,076
2,769
NA
-25
2,744
-8,051
5,595
-1,093
-299
56
45
4,603
-1,289
3,314
NA
-46
3,268
-8,797
6,219
-1,337
-302
44
4,926
-1,380
3,546
-52
3,493
-9,510
6,954
-1,476
-302
44
5,521
-1,547
3,975
-52
3,922
17%
15%
17%
-9%
-6%
91%
42.33
49.06
20.50
51.21
56.98
24.00
55.03
60.92
26.50
62.42
67.22
29.25
4%
16%
42%
31%
22%
12%
7%
10%
25%
-1%
12%
10%
6%
10%
20%
9%
12%
9%
15%
9%
8%
11%
-19%
22%
13%
1%
93% -21%
NM -100%
20%
7%
20%
7%
20%
7%
NA
NA
84%
13%
19%
7%
8%
12%
10%
0%
0%
NA
12%
12%
12%
NA
0%
12%
21%
16%
17%
7%
7%
10%
13%
10%
10%
Item name
GS net income
2003
2004
2005E
2006E
3,180
-1,340
-975
3,636
-1,538
-1,776
3,867
-1,699
-1,291
4,224
-1,857
-1,387
865
322
877
980
Capital formation
Tier 1 capital
14,994 16,662 18,158 19,926
188,997 218,601 240,110 263,232
5.8%
0.5%
1.9%
0.1%
Equity structure
Item name
17,438 18,780 20,276 22,044
14,994 16,662 18,158 19,926
443,262 522,089 576,764 636,827
188,997 218,601 240,110 263,232
GS return ratios
GS net OpFCF / RWA
Other
GS net FCF / tier 1
100%
Cash
25%
20%
4.8%
0.4%
4.9%
0.4%
2003
2004
Capital
Reserves
Preference capital
Less: Goodwill
RCIs and TONs
Tier 1 capital
1,642
14,657
0
960
-4,607
2,342
14,994
1,614
15,670
688
920
-4,432
2,202
16,662
Tier 2 capital
25
9,288
795
2
10,110
25
9,220
564
2
9,811
Tier 3 capital
280
25,384
-1,161
24,223
286
26,759
-1,543
25,216
188,997
218,601
Ratios
Equity as % of RWA
6.4%
108.7%
8.6%
23.5%
5.5%
107.9%
8.2%
21.0%
15%
Tier 1 capital breakdown 2004
10%
5%
0%
2000
2001
2002
2003
2004
2005E
-5%
Revenue growth
Cost growth
2006E
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
Tier 1
capital
2003
RCIs and
TONs
2006E
Goodwill
(negative)
2005E
Preference
capital
2004
Minority
interests
(equity)
2003
Cash
Item name
Reserves
Accounting
Item name
Capital
Returns (£ mn)
169
Europe
Banks
Bradford & Bingley (BB.L: U/A)
Volume (rhs)
380
360
340
320
300
280
260
240
220
200
BRADFORD & BINGLEY
FTSE W Europe
Key statistics
30,000
25,000
20,000
15,000
10,000
5,000
2,156
340
321
U/A
634.1
64%
36%
F
J
D
N
O
S
A
J
J
M
A
M
0
F
Investment summary: The
Current price (p)
Fair value (p)
Rating
Free float
B&B Share Trust
1.6% / -2.0%
23.1% / -1.6%
5.3% / -8.6%
Debt rating: Moodys
A1 / negative
Debt rating: S&P
Not Rated
BB/ LN / BB.L
Next announcement
FY 2004 results
Date
22-Feb-05
2001
2002
2003
2004E
2005E
2006E
PBT
234
241
264
103
288
314
GS
EPS (p)
28.7
30.3
30.2
31.4
32.8
34.5
Stated
GS
Stated
EPS (p) BVPS (p) BVPS (p)
24.1
195.3
187.8
25.9
203.2
193.0
32.4
218.1
205.3
10.3
208.0
193.0
31.6
222.0
206.7
34.5
238.1
222.8
P/E (X)
GS Stated
11.8
14.1
11.2
13.1
11.2
10.5
10.8
33.0
10.4
10.7
9.9
9.9
DPS (p)
13.0
14.8
16.5
17.0
17.5
18.0
GS EPS
growth
2.5%
5.5%
-0.2%
3.8%
4.5%
5.1%
Dividend
yield
3.8%
4.4%
4.9%
5.0%
5.1%
5.3%
P/B (X)
GS Stated
1.7
1.8
1.7
1.8
1.6
1.7
1.6
1.8
1.5
1.6
1.4
1.5
ROE
15.6%
15.7%
14.9%
15.0%
16.0%
15.7%
RORWA
1.41%
1.40%
1.36%
0.35%
0.96%
0.95%
2006E GS
Net income
as %
of group
P/E (X)
2006E Equity
allocated
as %
of group
P/B (X)
2006E
ROE (%)
Value
(£mn)
per share
(p)
as %
of group
- Lending
- Savings
Lending & Savings
Distribution
Reserves and Treasury
Central Costs
171.2
22.6
193.8
24.7
42.9
-44.9
90%
11%
20%
-21%
9.5
9.5
9.5
10.5
8.5
9.5
1188
5
220
0
84%
0%
16%
0%
1.55
nm
1.65
nm
16.3%
nm
26.6%
nm
1,626
215
1,841
259
364
-426
290
41
57
-67
90%
13%
18%
-21%
GS net income
216.4
100%
9.4
1,413
100%
1.44
15.3%
2,038
321
100%
reshaped business. We believe
management should be able to achieve
restructuring the ongoing business.
However, concerns over a sharp
slowdown in volumes in the specialist
mortgage market and further
restructuring steps needed make us
100%
9.4
1,413
100%
1.44
15.3%
prolonged strength to the UK specialist
1,000
mortgage market and increased
500
expectations of consolidation in the UK
0
2,038
321
100%
banks sector.
Valuation: We have a 321p fair value
321
340
-5.5%
Total
0
0
0
634
Risks: Risks to our view include
1,500
Central Costs
216.4
0.0
0.0
2,000
Reserves
and Treasury
0.0
0.0
2,500
Distribution
Total
clarity over the starting point for the
restructuring story too early.
Lending &
Savings
Goodwill
Exceptionals
of disposal costs provide important
cautious about buying into this
Summary P&L (£ mn)
Business unit
programme and disclosure of £140 mn
their 17% gross cost saving target from
Valuation sum mary (£ m n, except per share data)
GS net
income
195
201
191
196
205
216
completion of B&B’s disposal
based on our SOTP analysis, implying
Reserves
and
Treasury
15%
5.5% potential downside.
Distribution
9%
forecasts on February 22, post B&B’s results.
Lending &
Savings
76%
(a) Excluding Central costs
Please see our note entitled ‘Waiting for
stability’.
170
Europe
Banks
Returns (£ mn)
Accounting
Item name
2003 2004E 2005E 2006E
2003 2004E 2005E 2006E
Item name
Stated net profit
205
15
-6
-23
0
0
64
13
-4
22
0
101
198
0
0
7
0
0
216
0
0
0
0
0
GS net income
+ Depreciation
GS gross OpCF
191
-222
196
-159
205
-128
216
-125
GS net income
191
196
205
216
GS net OpFCF
-31
-102
37
-108
77
-111
92
-114
-133
-71
-34
-23
295%
168%
143%
56%
125%
53%
191
19
-19
196
16
-16
205
17
-17
216
18
-18
Stated equity
+/- other
1,302
81
0
0
1,224
95
0
0
1,311
95
0
2
1,413
95
0
2
GS net FCF
Payout ratio
-327%
50%
GS equity
1,383
1,319
1,408
1,510
GS equity
Tier 1 capital
Total assets
1,383 1,319 1,408 1,510
1,252 1,323 1,410 1,512
32,191 36,888 40,899 44,824
16,900 19,550 21,676 23,757
Total assets
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
32,191 36,888 40,899 44,824
16,900 19,550 21,676 23,757
14.1% 14.5% 15.0% 14.8%
0.66% 0.57% 0.53% 0.50%
1.27% 1.07% 0.99% 0.95%
16.0% 5.1% 15.6% 15.9%
0.71% 0.19% 0.51% 0.50%
1.36% 0.35% 0.96% 0.95%
100%
Cash
Interbank
Interbank
9%
80%
Customer
deposits
53%
Customer
60%
loans
Equity &
debt
securities
Other
assets
Other
liabilities
77%
Subordinate
d debt
40%
Preferred &
minorities
33%
20%
12%
Shareholder
s' equity
4%
0%
Liab.
Assets
Other
13%
GS return ratios
-2.3% 2.7% 5.7% 6.3%
GS net OpFCF / Total assets -0.11% 0.11% 0.20% 0.21%
GS net OpFCF / RWA
-0.21% 0.20% 0.38% 0.40%
Other
-2.5% 2.8% 5.5% 6.1%
GS net FCF / tier 1
-10.6% -5.4% -2.4% -1.5%
GS net OpFCF / market value -1.5% 1.8% 3.8% 4.5%
Mortgages
87%
Summary P&L (£ mn)
Item name
2H03
1H04
Net interest income
Trading profits
214
135
31
165
379
221
141
16
157
378
225
136
9
145
370
Operating income
-243
137
-237
141
-265
105
2H04E 2H/2H E 2H/1H E
-5
-
-1
-
-2
-140
PBT
Tax
PAT
Net Profit
131
-14
118
-5
113
140
-39
101
-5
96
-37
10
-27
-5
-32
EPS (basic) (p)
GS EPS (p)
DPS (net) (p)
18.0
19.9
10.9
15.4
17.5
5.7
2003
2004E
2005E
2006E
5.1%
1.7%
0.9%
-3.9%
NA
NA
-70.0% -42.1%
-12.3% -7.8%
-2.5% -2.2%
436
264
39
303
738
445
277
25
302
748
459
114
27
141
600
9.2% 11.8%
-23.4% -25.8%
-468
271
-502
246
-301
299
-61.0% 110.7%
NA
NA
NA
NA
04/03E
05/04E
06/05E
479
118
20
138
617
2.2%
3.1%
5.0% -58.8%
NA
NA
-34.8%
6.0%
-0.1% -53.5%
1.3% -19.7%
4.2%
3.0%
NA
-23.1%
-1.9%
2.8%
-287
330
7.4% -40.0%
-9.2% 21.7%
-4.7%
10.2%
-7
-
-3
-140
-11
-
-16
-
-52.9% 250.6%
NA
NA
NA -100.0%
43.1%
NA
NA
-126.8%
-126.8%
-126.8%
0.0%
-133.1%
264
-50
214
-10
205
103
-29
74
-10
64
288
-81
207
-10
198
314
-88
226
-10
216
-61.2%
-42.1%
-65.6%
-1.0%
-68.6%
181.0%
181.0%
181.0%
0.0%
208.1%
9.0%
9.0%
9.0%
0.0%
9.4%
-5.1 -128.3% -133.1%
20.2
1.9% 15.5%
11.4
4.4% 99.4%
32.4
30.2
16.5
10.3
31.4
17.0
31.6
32.8
17.5
34.5
34.5
18.0
-68.2% 207.1%
3.8%
4.5%
3.0%
3.0%
9.0%
5.1%
3.0%
20%
10%
Item name
2003
2004E
2005E
2006E
GS net income
191
-102
-222
196
-108
-159
205
-111
-128
216
-114
-125
Capital formation
-133
-71
-34
-23
Tier 1 capital
1,252
16,900
1,323
19,550
1,410
21,676
1,512
23,757
-10.6%
-0.8%
-5.4%
-0.4%
-2.4%
-0.2%
-1.5%
-0.1%
Equity structure
Item name
2003
2004E
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
159
1,109
0
149
-114
-50
1,252
159
1,066
0
149
0
-50
1,323
Tier 2 capital
0
1,122
0
44
1,166
0
1,232
0
50
1,282
Tier 3 capital
0
2,419
-104
2,314
0
2,604
-104
2,500
16,900
19,550
Ratios
Equity as % of RWA
11.9%
88.1%
7.5%
8.4%
11.2%
88.8%
6.3%
0.0%
0%
2000
2001
2002
2003
2004E
2005E 2006E
-10%
Tier 1 capital breakdown 2004E
1,600
1,400
1,200
-20%
1,000
800
-30%
600
400
-40%
200
Tier 1
capital
Other
Goodwill
(negative)
Preference
capital
0
Minority
interests
(equity)
Cost growth
Reserves
Revenue growth
Capital
-128.6%
-177.7%
-122.9%
-2.0%
-128.2%
171
Europe
Banks
HBOS (HBOS.L: IL/A)
Volume (rhs)
950
HBOS
FTSE W Europe
Key statistics
80,000
850
60,000
50,000
750
40,000
650
30,000
20,000
550
Current price (p)
Fair value (p)
Rating
Free float
70,000
34,319
882
976
IL/A
3,891
100%
10,000
F
J
D
N
O
S
A
J
J
M
A
M
0
F
450
5.1% / 1.3%
31.3% / 5.0%
20.9% / 5.0%
Debt rating: Moodys
Aa2 / stable
Debt rating: S&P
AA- / stable
B'berg / Reuters code HBOS LN / HBOS.L
Next announcement
FY 2004 results
Date
02-Mar-05
20 01
20 02
20 03
20 04E
20 05E
20 06E
PBT
2,2 92
2,9 09
3,7 66
4,5 45
5,1 28
5,5 51
GS
E P S (p)
50.3
63.2
69.2
83.4
90.8
1 00.6
D P S (p)
28 .0
29 .4
30 .9
33 .4
36 .7
40 .4
P /E (X )
GS
S ta ted
17 .6
21 .8
13 .9
17 .4
12 .7
13 .9
10 .6
11 .4
9 .7
10 .0
8 .8
9 .0
GS EPS
g row th
-6 .3%
25 .8%
9.4%
20 .6%
8.9%
10 .8%
D ivide nd
yie ld
3.2 %
3.3 %
3.5 %
3.8 %
4.2 %
4.6 %
P /B (X )
GS
S ta ted
2 .9
2.9
2 .5
2.5
2 .3
2.3
2 .1
2.0
1 .9
1.8
1 .7
1.7
R O AE
13.5%
15.4%
17.1%
18.7%
19.3%
19.5%
RORW A
0.9 8%
1.0 9%
1.2 0%
1.3 3%
1.3 9%
1.3 9%
2006E GS
as %
2006E Equity
as %
Net income of group P/E (X)
allocated of group P/B (X)
1,623
48%
10.0
7,485
44%
2.2
845
25%
10.3
7,526
45%
1.2
1,239
36%
9.0
4,911
29%
2.3
225
7%
7.0
732
4%
2.1
288
8%
9.0
1,525
9%
1.7
-409
-12%
9.0
-3,811
-23%
NM
3,811
112%
9.6
18,368
109%
2.0
2006E
ROE (%)
21.7%
11.2%
25.2%
32.0%
19.3%
NM
20.7%
Value Per share
as %
(£ mn)
(pence) of group
16,234
424
44%
8,701
227
24%
11,154
292
30%
1,573
41
4%
2,589
68
7%
-3,683
-96
-10%
36,567
956
99%
is a new capital management plan
buyback programme. We believe
underlying returns have been a
significant driver of UK bank share price
performance. We will continue to look
for evidence of less capital intensive
sentiment around the UK housing
4,500
market could hamper performance.
4,000
3,500
3,000
Risks: A sharper slowdown in the
2,500
2,000
mortgage market than we forecast
1,500
1,000
would be particularly significant for
9.9
19,726
107%
1.9
18.8%
36,567
3,748
976
882
10.6%
976
100%
Total
Corporate
centre
Treasury
100%
International
3,707
0
1,358
NM
Corporate
Banking
-3%
0%
Insurance &
Investment
-104
0
Retail Banking
Total
just growth. One of the key by-products
growth. In the meantime, negative
500
Goodwill
Exceptional items
on growth and returns as opposed to
of the life business and a share
S tate d
GS
S ta ted
E P S (p ) B V P S (p ) B V P S (p)
4 0.5
30 5.7
308 .8
5 0.6
34 6.6
351 .8
6 3.6
38 1.1
388 .8
7 7.2
42 7.0
437 .2
8 8.1
46 5.7
478 .8
9 7.9
51 0.2
526 .3
Business unit
Retail Banking
Insurance & Investment
Corporate Banking
Treasury
International
Corporate centre
Group
close statement is the switch to a focus
which involves dividends being paid out
Va lu a tio n su m m a ry (£ m n , ex cep t p er sh are d ata)
G S n et
in com e
1 ,77 7
2 ,35 0
2 ,62 9
3 ,23 4
3 ,51 0
3 ,81 1
the most positive aspect of HBOS pre-
Valuation: We have a fair value of
International
6%
earnings.
976p based on our SOTP analysis,
Corporate
centre
9%
implying 10.6% upside.
Treasury
5%
Retail Banking
35%
Corporate
Banking
27%
Insurance &
Investment
18%
(a) Excluding Other Ops, HO and minorities
172
Europe
Banks
3,707
104
0
0
0
0
GS net income
+ Depreciation
GS gross OpCF
3,256
-1,719
2,521
-1,167
2,832
-1,269
3,093
-1,237
GS net income
2,629
3,234
3,510
3,811
GS net OpFCF
1,537
-1,183
1,354
-1,278
1,563
-1,405
1,856
-1,546
354
76
157
311
GS equity
Total assets
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
19,726
-606
0
2
GS net FCF
14,674
16,667
17,814
19,122
GS equity
Tier 1 capital
Total assets
3,811
791
-1,508
100%
Cash
4%
Interbank
80%
Customer
loans
60%
Equity &
debt
securities
40%
10%
Customer
deposits
42%
Other
assets
65%
Other liabilities
Subordinated
debt
40%
16%
408,413 445,157 485,183 524,192
215,790 235,242 256,394 277,008
18.9%
0.69%
1.31%
20.6%
0.76%
1.43%
20.4%
0.75%
1.43%
20.6%
0.76%
1.43%
17.1%
0.63%
1.20%
18.7%
0.70%
1.33%
19.3%
0.73%
1.39%
19.5%
0.73%
1.39%
77%
49%
94%
43%
90%
41%
83%
42%
8.6%
0.32%
0.60%
9.1%
0.34%
0.64%
10.1%
0.37%
0.70%
9.3%
2.2%
4.7%
7.2%
0.4%
4.1%
7.6%
0.8%
4.8%
8.4%
1.4%
5.6%
Overseas
4%
Mortgages
62%
Other
personal
7%
Key performance indicators (£ mn)
Item name
2H03
1H04 2H04E 1H/1HE 2H/1HE
2003
Net interest income
Trading profits
2,811
910
102
857
1,869
4,680
2,850
899
105
942
1,946
4,796
5,459
5,835
6,260
6,635
1,739
1,844
2,026
2,219
172
220
239
250
1,576
2,144
2,307
2,480
3,487
4,209
4,572
4,948
8,946 10,044 10,832 11,583
Operating income
PBT
Tax
PAT
Net Profit
EPS (basic) (p)
GS EPS (p)
DPS (net) (p)
2004E
2005E
2,985
945
115
1,202
2,263
5,248
6%
4%
12%
40%
21%
12%
5%
5%
9%
28%
16%
9%
-2,130 -2,027 -2,227
2,550 2,769 3,020
5%
18%
10%
9%
-4,087
4,859
-4,254
5,789
-4,301
6,531
2006E 04/03E 05/04E 06/05E
2005E
2006E
3,234
-1,278
-1,167
3,510
-1,405
-1,269
3,811
-1,546
-1,237
Capital formation
-273
790
835
1,028
Tier 1 capital
16,444 18,881 20,434 22,146
215,790 235,242 256,394 277,008
-1.7%
-0.1%
7%
10%
9%
8%
9%
8%
6%
9%
5%
7%
8%
7%
-4,495
7,088
4%
19%
1%
13%
5%
9%
12%
4.2%
0.3%
4.1%
0.3%
4.6%
0.4%
2003
2004E
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
1,363
14,122
454
2,651
-2,146
0
16,444
1,363
16,162
526
2,965
-2,135
0
18,881
Tier 2 capital
0
11,751
773
0
12,524
0
13,765
838
0
14,603
Tier 3 capital
0
28,968
-5,100
23,868
0
33,484
-5,471
28,014
215,790
235,242
16.1%
96.9%
7.4%
11.5%
15.7%
95.6%
7.7%
10.2%
7%
6%
28%
36%
21%
12%
20%
18%
16%
Ratios
Equity as % of RWA
14%
25,000
10%
-526
38
-
-578
40
-
-580
45
-
10%
18%
NA
0%
13%
NA
-1,025
60
-
-1,158
85
-
-1,250
96
-
-1,360
104
-
13%
42%
NA
8%
13%
NA
9%
8%
NA
8%
1,985
-575
1,410
-139
1,271
2,138
-625
1,513
-118
1,395
2,384
-691
1,692
-117
1,575
20%
20%
20%
-16%
24%
11%
11%
12%
-1%
13%
3,766
-1,091
2,675
-260
2,415
4,545
-1,316
3,228
-235
2,993
5,128
-1,487
3,641
-235
3,406
5,551
-1,610
3,942
-235
3,707
21%
21%
21%
-10%
24%
13%
13%
13%
0%
14%
8%
8%
8%
0%
9%
2%
33.2
34.6
20.6
36.9
38.2
10.3
40.4
41.8
23.1
22%
21%
12%
10%
9%
124%
63.6
69.2
30.9
77.2
83.4
33.4
88.1
90.8
36.7
97.9
100.6
40.4
22%
21%
8%
14%
9%
10%
11%
11%
10%
2004E
Equity structure
Item name
Corporate
27%
11.1%
0.40%
0.76%
GS net income
Liab.
Assets
14,674 16,667 17,814 19,122
16,444 18,881 20,434 22,146
408,413 445,157 485,183 524,192
215,790 235,242 256,394 277,008
GS return ratios
GS net OpFCF / RWA
Other
GS net FCF / tier 1
Shareholders'
equity
4%
0%
Payout ratio
Preferred &
minorities
13%
20%
2003
2,629
-1,183
-1,719
Interbank
20,000
6%
15,000
4%
10,000
0%
2001
2002
2003
Revenue growth
2004E
2005E
Cost growth
2006E
5,000
0
Tier 1
capital
3,406
104
0
0
0
0
18,316
-502
0
0
3,510
746
-1,424
2006E
2,993
104
-16
54
0
99
17,065
-398
0
0
3,234
704
-1,417
2005E
2,415
97
0
0
33
85
14,968
-294
0
0
2,629
627
-1,152
2004E
Stated net profit
Stated equity
+/- other
Item name
2003
Other
2006E
Goodwill
(negative)
2005E
Preference
capital
2004E
Minority
interests
(equity)
2003
Cash
Item name
Reserves
Accounting
Item name
Capital
Returns (£ mn)
173
Europe
Banks
HSBC (HSBA.L: IL/A)
Volume (rhs)
1050
HSBC HDG. (ORD $0.50)
FTSE W Europe
140,000
120,000
950
100,000
850
80,000
750
60,000
650
40,000
Investment summary: HSBC has
Current price (p)
Fair value (p)
Rating
Free float
99,951
907
915
IL/A
11,026
100%
3.4% / -0.3%
10.5% / -11.6%
5.4% / -8.4%
Debt rating: Moodys
Aa2 / stable
Debt rating: S&P
AA- / stable
HSBA LN / HSBA.L
Next announcement
FY 2004 results
Date
28-Feb-05
F
J
D
N
O
S
A
J
A
J
0
M
450
F
20,000
M
550
Key statistics
200 1
200 2
200 3
200 4E
200 5E
200 6E
PBT
8,000
9,650
12,816
17,578
19,026
21,562
GS
EPS
0.70
0.75
0.95
1.20
1.26
1.41
S tate d
EPS
0.54
0.67
0.84
1.06
1.13
1.28
high growth regions at the same time as
achieving efficiency gains from
centralising global operations. In the
likely to be offset by some cyclical
GS
BVPS
5.6 6
6.2 6
7.6 5
8.2 3
8.7 0
9.2 5
S ta ted
BVPS
4 .96
5 .46
6 .79
7 .23
7 .56
7 .96
DPS
0.4 8
0.5 3
0.5 9
0.6 5
0.7 1
0.7 9
P /E (X )
GS
S tated
24.3
3 1.6
22.9
2 5.6
18.0
2 0.3
14.3
1 6.1
13.6
1 5.2
12.1
1 3.3
GS EPS
g ro w th
-8 .4%
5 .8%
27 .6%
26 .1%
5 .1%
12 .2%
D ivid en d
yield
2 .8%
3 .1%
3 .4%
3 .8%
4 .2%
4 .6%
P /B (X )
GS
S ta ted
3.0
3 .4
2.7
3 .1
2.2
2 .5
2.1
2 .4
2.0
2 .3
1.8
2 .1
ROE
1 0.9 %
1 2.7 %
1 3.9 %
1 5.1 %
1 5.3 %
1 6.6 %
RORW A
1.2 9%
1.5 2%
1.6 7%
1.7 6%
1.7 1%
1.8 5%
weakness versus expectations,
particularly in US consumer volume
growth and interest rate driven margin
weakness. Investment needs
demanded by HSBC’s growth
opportunities are also likely to be high
Sum-of-the-parts valuation (US$ mn)
Business unit
revenue growth from its exposure to
near term, however, these positives are
V alu atio n s u m m ary (U S$ m n , exc ep t pe r s h are d ata)
G S n et
in co m e
6 ,57 7
7 ,03 6
10 ,02 4
13 ,41 3
14 ,28 9
16 ,23 6
an almost unique opportunity to deliver
2006E GS as %
Net income of group
P/E (X)
2006E Equity
as %
allocated of group
P/B (X)
2006E GS
ROE (%)
Value Per share
(US$ mn)
(US$)
as %
of group
over the near term.
18,000
16,000
49,328
46,773
23,269
26,586
44,289
4,728
-912
4.33
4.10
2.04
2.33
3.88
0.41
-0.08
25%
24%
12%
14%
23%
2%
0%
GS total
16,236
100%
12.0
90,759
100%
2.1
17.9%
194,060
17.02
100%
Goodwill
-1,771
92
Total
14,557
13.3
90,759
Implied share price (US$)
US$ / GBP FX rate
Implied share price, present value (p)
2.1
16.04%
194,060
11,401
17.02
0.54
915
907
1.0%
Risks: HSBC could potentially look to
14,000
12,000
make further acquisitions given the
10,000
8,000
significant amount of surplus capital it
6,000
4,000
generates, which could impact
2,000
0
Household
23%
Latin
America
2%
Europe
25%
Total
16.2%
17.9%
16.2%
17.1%
17.4%
23.8%
NM
Other
1.8
2.5
2.1
2.2
2.2
2.6
NM
Household
29%
21%
12%
13%
22%
2%
0%
Latin America
26,709
18,621
11,157
12,005
20,182
1,842
244
Rest of AsiaPacific
10.0
14.5
13.0
12.0
12.0
10.0
10.0
North America
30%
20%
11%
14%
23%
3%
-1%
Europe
4,933
3,226
1,790
2,216
3,691
473
-91
Hong Kong
Europe
Hong Kong
Rest of Asia-Pacific
North America
Household Int.
Latin America
Corporate centre
investors’ views meaningfully. A
deterioration in US consumer credit
quality appears unlikely, but would have
a material effect.
Valuation: Based on our SOTP
analysis, our fair value is 915p.
North
America
14%
Rest of
Asia-Pacific
12%
Hong Kong
24%
174
Europe
Banks
Balance sheet and capital (US$ mn)
2004E
2005E
2006E
100%
Cash
8,774
1,450
-313
113
0
0
11,720
1,776
-358
274
0
0
12,631
1,771
-164
51
0
0
14,557
1,771
-143
52
0
0
GS net income
+ Depreciation
10,024
-1,397
13,413
1,615
-1,615
14,289
1,645
-1,645
16,236
1,678
-1,678
GS gross OpCF
8,627
-11,197
13,413
-5,870
14,289
-2,500
16,236
-3,519
GS net income
10,024
13,413
14,289
16,236
-2,569
-6,532
Stated equity
+/- other
74,473
4,196
5,139
0
80,376
5,972
5,139
0
85,081
7,743
5,139
0
90,759
9,514
5,139
0
GS net OpFCF
+ Scrip alternative
GS net FCF
7,543
-7,173
1,023
1,393
11,788
-7,995
1,304
5,097
12,717
-8,950
1,507
5,274
83,808
91,487
97,963
105,412
Stated net profit
GS equity
Total assets
1,034,216 1,188,802 1,264,673 1,366,097
618,662 716,491 758,165 816,823
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
14.0%
1.12%
1.91%
15.3%
1.21%
2.01%
15.1%
1.16%
1.94%
16.0%
1.23%
2.06%
13.9%
0.98%
1.67%
15.1%
1.05%
1.76%
15.3%
1.03%
1.71%
16.6%
1.11%
1.85%
-9,101
Payout ratio
-254%
74%
84%
61%
61%
63%
Interbank
80%
Customer
loans
60%
Equity &
debt
securities
40%
Other
assets
Customer
deposits
55%
51%
21%
63%
61%
83,808
91,487
97,963 105,412
54,863
62,422
68,898
76,347
1,034,216 1,188,802 1,264,673 1,366,097
618,662 716,491 758,165 816,823
GS return ratios
GS net OpFCF / RWA
Other
GS net FCF / tier 1
-3.6%
-0.29%
-0.49%
8.6%
0.68%
1.13%
12.4%
0.96%
1.60%
12.5%
0.97%
1.61%
-4.7%
-16.6%
-2.7%
12.1%
2.2%
7.9%
17.1%
7.4%
12.3%
16.7%
6.9%
13.3%
Other
liabilities
Subordinate
d debt
20%
16%
26%
Preferred &
minorities
7%
Shareholder
s' equity
2H 0 3
1H 0 4
2H04E
2 H /2 H E
2H /1 H E
2 00 3
2 00 4 E
2 00 5 E
20 0 6 E
0 4 /03 E
05 /0 4 E
0 6 /05 E
15 ,1 0 6
6 ,3 6 4
1 ,3 8 3
2 ,1 7 5
9 ,9 2 2
25 ,0 2 8
1 5 ,46 6
6 ,55 6
1 ,21 6
1 ,86 0
9 ,63 2
2 5 ,09 7
7 .6 %
14 .8 %
32 .2 %
19 .7 %
1 7 .7 %
1 1 .2 %
2.4 %
3 .0%
-1 2 .1%
-1 4 .5%
-2.9 %
0.3 %
2 5 ,59 8
1 0 ,39 4
2 ,17 8
2 ,90 2
1 5 ,47 4
4 1 ,07 2
3 0 ,57 2
1 2 ,92 0
2 ,59 9
4 ,03 5
1 9 ,55 4
5 0 ,12 5
3 2 ,78 6
1 4 ,08 4
2 ,71 7
3 ,57 6
2 0 ,37 7
5 3 ,16 3
3 5,4 0 7
1 5,3 9 8
2,9 4 1
3,7 9 3
2 2,1 3 2
5 7,5 3 9
1 9 .4 %
2 4.3 %
1 9.3 %
3 9.0 %
2 6 .4 %
2 2 .0 %
7.2 %
9 .0 %
4 .6 %
-1 1 .4 %
4.2 %
6.1 %
8 .0 %
9.3 %
8.2 %
6.1 %
8 .6 %
8 .2 %
S ta ff
G e n eral a dm in is tratio n
D e prec iatio n
G o o dw ill a m o rtisa tion
O th e r op e ra tin g c os ts
T o ta l o p e ra tin g e x p en se s
-6 ,6 1 8
-4 ,2 4 3
-7 3 1
-8 1 8
-12 ,4 1 0
10 ,1 53
-7 ,0 4 4
-4 ,4 9 3
-8 0 6
-8 9 8
-13 ,2 4 1
11 ,7 8 7
-7 ,12 6
-4 ,59 0
-80 9
-87 8
-1 3 ,40 4
1 1 ,69 4
7 .7 %
8 .2 %
10 .7 %
7 .3 %
NA
8 .0 %
1 5 .2 %
1 .2%
2 .2%
0 .4%
-2 .2%
NA
1.2 %
-0.8 %
-1 2 ,11 1
-7 ,57 4
-1 ,39 7
-1 ,45 0
-2 2 ,53 2
1 8 ,54 0
-1 4 ,17 0
-9 ,08 3
-1 ,61 5
-1 ,77 6
-2 6 ,64 5
2 3 ,48 1
-1 4 ,82 9
-9 ,38 7
-1 ,64 5
-1 ,77 1
-2 7 ,63 2
2 5 ,53 1
-1 5,3 6 0
-9,9 7 0
-1,6 7 8
-1,7 7 1
-2 8,7 7 9
2 8,7 6 0
1 7.0 %
1 9.9 %
1 5.6 %
2 2.5 %
NA
1 8 .3 %
2 6 .6 %
4 .6 %
3 .3 %
1 .9 %
-0 .3 %
NA
3.7 %
8.7 %
3.6 %
6.2 %
2.0 %
0.0 %
NA
4 .2 %
1 2 .6 %
L o a n-lo s s prov is ion s
In c o m e from as s o c ia te s
O th e r in c o m e (e x pe n s e s)
O th e r ex c e p tio n al in c o m e (e x pe n s e s)
-3 ,7 3 2
137
119
25
-2 ,9 1 2
123
355
-
-3 ,74 8
0 .4 %
14 0
2 .2 %
13 9
16 .8 %
- -1 00 .0 %
2 8 .7%
1 3 .8%
-6 0 .8%
NA
-6 ,12 8
10 5
30 8
-9
-6 ,66 0
26 3
49 4
-
-6 ,98 7
27 8
20 4
-
-7,6 5 9
286
8.7 %
1 5 0.5 %
4 .9 %
5 .7 %
9.6 %
2.9 %
-
-1 0 0.0 %
NA
NA
PBT
T ax
P AT
M ino ritie s a nd p re f s h are d iv id e n ds
N e t P ro fit
6 ,7 0 2
-1 ,5 6 6
5 ,1 3 6
-4 7 0
4 ,6 6 6
9 ,3 5 3
-2 ,3 6 8
6 ,9 8 5
-6 5 4
6 ,3 3 1
8 ,22 5
-2 ,17 6
6 ,04 8
-65 9
5 ,38 9
2 2 .7 %
39 .0 %
1 7 .8 %
40 .2 %
1 5 .5 %
-1 2.1 %
-8 .1%
-1 3.4 %
0 .8%
-1 4.9 %
1 2 ,81 6
-3 ,12 0
9 ,69 6
-92 2
8 ,77 4
1 7 ,57 8
-4 ,54 4
1 3 ,03 3
-1 ,31 3
1 1 ,72 0
1 9 ,02 6
-5 ,08 5
1 3 ,94 1
-1 ,31 0
1 2 ,63 1
2 1,5 6 2
-5,6 2 8
1 5,9 3 4
-1,3 7 7
1 4,5 5 7
3 7 .2 %
4 5.6 %
3 4 .4 %
4 2.4 %
3 3 .6 %
8.2 %
1 1 .9 %
7.0 %
-0 .2 %
7.8 %
1 3 .3 %
1 0.7 %
1 4 .3 %
5.1 %
1 5 .3 %
0 .4 3
0 .5 1
0 .4 7
0 .3 5
0 .5 8
0 .6 7
0 .6 1
0 .2 6
0 .4 9
0 .5 7
0 .5 3
0 .4 5
1 2 .3 %
1 1 .2 %
1 1 .6 %
3 0 .4 %
-1 6.5 %
-1 5.0 %
-1 3.8 %
7 3.1 %
0.8 4
0.9 8
0.9 5
0.5 9
1.0 6
1.2 2
1.2 0
0.6 5
1 .1 3
1 .2 9
1 .2 6
0 .7 1
1 .2 8
1 .4 4
1 .4 1
0 .7 9
2 6 .1 %
2 4 .6 %
2 6 .1 %
1 0 .3 %
6.3 %
5.3 %
5.1 %
1 0.1 %
1 3 .8 %
1 2 .0 %
1 2 .2 %
1 0 .6 %
11 ,0 85
5 ,1 6 6
12 ,7 0 9
6 ,7 4 8
1 2 ,64 1
5 ,92 9
1 4 .0 %
1 4 .8 %
-0.5 %
-1 2.1 %
1 9 ,87 7
1 0 ,02 4
2 5 ,35 0
1 3 ,41 3
2 7 ,42 3
1 4 ,28 9
3 0,6 5 1
1 6,2 3 6
2 7 .5 %
3 3 .8 %
8.2 %
6.5 %
1 1 .8 %
1 3 .6 %
E P S (b a sic ) (U S $)
C a sh E P S (U S $ )
G S E P S (U S $)
D P S (n e t) (U S $ )
G S o p e ra tin g p ro fit
G S n e t in c o m e
2006E
14,289
-7,995
-2,500
1,304
5,097
16,236
-8,950
-3,519
1,507
5,274
Tier 1 capital
54,863 62,422 68,898 76,347
618,662 716,491 758,165 816,823
-12.5%
-1.1%
2.2%
0.2%
7.4%
0.7%
6.9%
0.6%
2003
2004E
74,473
0
3,711
8,094
-29,920
-1,495
54,863
80,376
0
3,711
8,094
-28,144
-1,615
62,422
Tier 2 capital
1,615
19,403
2,868
523
24,409
1,615
19,403
2,868
523
24,409
Tier 3 capital
0
79,272
-5,230
74,042
0
86,831
-5,230
81,601
618,662
716,491
Ratios
Equity as % of RWA
14.8%
142.5%
12.6%
35.3%
13.0%
134.7%
11.7%
31.1%
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
Financial Other
7%
1%
Mortgages
34%
Corporate
34%
S u m m ary P & L (U S $ m n )
14 ,3 77
5 ,7 1 2
920
1 ,5 5 4
8 ,1 8 6
22 ,5 63
2005E
13,413
-7,173
-5,870
1,023
1,393
Equity structure
Item name
Summary P&L (US$ mn)
Item n a m e
2004E
10,024
-6,532
-11,197
866
-6,838
Liab.
Assets
Other
personal
24%
N e t in te re st in c o m e
N e t fee s & c om m is s io n s
T ra d in g profits
O th e r re c urrin g re ve n ue s
N e t n o n -in tere s t in c o m e
2003
GS net income
+ Scrip alternative
Capital formation
Interbank
9%
12%
0%
GS equity
Tier 1 capital
Total assets
Item name
60%
50%
40%
30%
20%
10%
0%
2001
2002
2003
Revenue growth
2004E
2005E
Cost growth
2006E
100,000
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0
Tier 1
capital
2003
Other
2006E
Goodwill
(negative)
2005E
Preference
capital
2004E
Minority
interests
(equity)
2003
Cash
Item name
Reserves
Accounting
Item name
Capital
Returns (US$ mn)
175
Europe
Banks
Lloyds TSB (LLOY.L: IL/A)
Volume (rhs)
550
LLOYDS TSB GP.
FTSE W Europe
0
A
Investment summary: Lloyds TSB
Current price (p)
Fair value (p)
Rating
Free float
28,378
508
527
IL/A
5,589
100%
8.8% / 4.9%
26.6% / 1.3%
11.5% / -3.2%
Debt rating: Moodys
Aaa / stable
Debt rating: S&P
AA / negative
LLOY LN / LLOY.L
Next announcement
FY 2004 results
Date
04-Mar-05
F
250
J
50,000
D
300
N
100,000
O
350
S
150,000
J
400
J
200,000
M
450
A
250,000
M
500
F
Key statistics
300,000
2001
2002
2003
2004E
2005E
2006E
P BT
3,161
2,618
4,348
3,391
3,825
4,195
GS
E PS (p )
51.7
46.8
46.7
43.5
48.2
52.8
Stated
EP S (p )
40.3
32.1
58.3
42.0
47.4
52.0
Stated
B VP S (p)
186.1
142.2
172.4
179.8
192.7
210.2
D PS (p )
33.8
34.2
34.2
34.2
34.2
34.2
P/E (X )
GS
Stated
9.8
12.6
10.9
15.8
10.9
8.7
11.7
12.1
10.5
10.7
9.6
9.8
G S E PS
grow th
0.2%
-9.5%
-0.3%
-6.7%
10.8%
9.5%
D ividen d
yield
6.7%
6.7%
6.7%
6.7%
6.7%
6.7%
P /B (X)
GS
S tated
2.2
2.7
2.3
3.6
2.0
2.9
1.9
2.8
1.8
2.6
1.7
2.4
RO AE
21.9%
19.6%
37.0%
23.9%
25.5%
25.8%
RO R W A
2.21%
1.55%
2.71%
1.92%
2.04%
2.11%
2006E GS
as %
Net income of group
1,377
52%
586
22%
148
6%
1,134
43%
-284
-11%
2,961
112%
P/E (X)
10.0
11.1
11.0
9.0
9.0
10.0
2006E Equity
allocated
3,908
7,683
585
3,908
204
16,288
as %
of group
36%
71%
5%
36%
2%
151%
P/B (X)
3.52
0.85
2.78
2.61
-12.48
1.82
2006E
ROE (%)
35%
8%
25%
29%
-139%
18%
Value Per share
as %
(£ mn)
(pence) of group
13,772
246
47%
6,531
116
22%
1,624
29
5%
10,202
182
34%
-2,553
-46
-9%
29,575
527
100%
of the three core UK businesses, a
change. We believe the fruits of this can
already be seen, helped by a positive
operating environment in the UK. While
an acceleration of these trends will
ensure no cut in the dividend in our
likely to materialise over the
3,500
medium term.
3,000
2,500
2,000
Risks: The key risk to our view of
1,500
improving returns from 2005 is a lack of
1,000
10.1
11,790
109%
2.51
0%
29,575
5,609
527
508
4%
527
5607%
Total
Central
Group
100%
a slowdown in margin erosion. A re-
0
Wholesale
Mkts
2,917
-2,375
-2,123
General
Insurance
-2%
0%
Retail Bkg
and Mortg
-44
0
Life business
Net attributable profit
businesses, changes in strategy in each
view, difficult strategic questions are
500
Goodwill
GS Exceptionals
including the disposal of non-UK
significant high level management
GS
B VP S (p)
228.3
222.4
254.8
262.9
276.4
294.2
Business unit
UK Retail Banking and Mortgages
Life, pensions and unit trusts
General Insurance
Wholesale Markets
Corporate centre
GS net income
programme over the last 18 months,
reduction in earnings volatility and
Valuatio n sum m ary (£ m n, except per sh are data)
G S n et
inco m e
2,861
2,606
2,604
2,434
2,699
2,961
has undertaken a significant change
emergence of past earnings volatility
would be negative for the shares in our
view.
Valuation: We have a SOTP fair
Wholesale
Mkts
31%
Retail Bkg and
Mortg
45%
value of 527p, implying 4% potential
upside. We believe that the high
dividend yield also provides support.
General
Insurance
5%
Life business
19%
(a) Excluding Central Group items
176
Europe
Banks
3,254
51
-865
212
-88
40
2,348
44
11
78
-48
0
2,655
44
0
0
0
0
2,917
44
0
0
0
0
GS net income
2,604
2,434
2,699
2,961
Stated equity
+/- other
GS equity
Total assets
2,604
646
-898
GS gross OpCF
2,352
282
GS net OpFCF
2,434
601
-1,045
1,989
-531
2005E
2006E
2,699
613
-1,138
2,961
625
-1,211
2,174
-465
2,375
-510
2,634
-1,911
1,459
-1,912
1,709
-1,914
1,864
-1,918
9,624
187
2,271
2,139
10,050
231
2,271
2,139
10,791
275
2,271
2,139
11,790
319
2,271
2,123
GS net FCF
723
-454
-205
-54
Payout ratio
73%
59%
131%
81%
112%
72%
103%
66%
14,221
14,691
15,476
16,503
GS equity
Tier 1 capital
Total assets
252,012 275,912 292,594 310,778
117,700 126,544 134,290 142,798
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
GS net income
+ Depreciation
- CAPEX less life profits
2004E
19.3%
1.07%
2.31%
16.8%
0.92%
1.99%
17.9%
0.95%
2.07%
18.5%
0.98%
2.14%
32.6%
1.33%
2.88%
23.9%
0.89%
1.92%
25.5%
0.93%
2.04%
25.8%
0.97%
2.11%
100%
Cash
Interbank
80%
Customer
loans
60%
Equity &
debt
securities
40%
Other
assets
1%
6%
10%
Customer
deposits
Other
liabilities
Subordinate
d debt
12%
35%
27%
19.6%
1.08%
2.33%
10.1%
0.55%
1.19%
11.3%
0.60%
1.31%
11.7%
0.62%
1.35%
23.5%
6.4%
9.6%
12.6%
-3.9%
5.3%
13.8%
-1.7%
6.2%
13.9%
-0.4%
6.8%
Shareholder
s' equity
4%
Total
internatioal
4%
Mortgages
52%
Corporate
19%
Other
personal
15%
Summary P&L (£ mn)
Item name
2H03
1H04 2H04E 1H/1H E 1H/2H E
2003
2004E
2005E
2006E 04/03E 05/04E 06/05E
Net interest incom e
Net fees & comm issions
Trading profits
2,684
1,214
133
665
2,290
4,974
2,438
1,112
123
621
2,092
4,530
2,549
1,165
140
729
2,507
5,056
-5%
-4%
5%
10%
9%
2%
5%
5%
14%
17%
20%
12%
5,255
2,377
560
1,263
4,653
9,908
4,987
2,277
263
1,350
4,599
9,586
5,317
2,437
276
1,444
4,847
10,164
5,617
2,607
290
1,524
5,195
10,812
-5%
-4%
-53%
7%
-1%
-3%
7%
7%
5%
7%
5%
6%
6%
7%
5%
6%
7%
6%
Operating income
-2,544
2,430
-2,363
2,167
-2,647
2,409
4%
-1%
12%
11%
-5,173
4,735
-5,010
4,576
-5,065
5,099
-5,211
5,602
-3%
-3%
1%
11%
3%
10%
General insurance claims
W rite-down of fixed assets
Business-as-usual profit
-480
-128
-20
-11
1,791
-442
-121
-23
-1
1,580
-430
-127
-23
-1
1,827
-10%
-1%
15%
-91%
2%
-3%
5%
0%
0%
16%
-950
-236
-44
-22
3,483
-872
-248
-46
-2
3,407
-979
-253
-40
-2
3,825
-1,100
-265
-40
-2
4,195
-8%
5%
5%
-91%
-2%
12%
2%
-13%
0%
12%
12%
5%
0%
0%
10%
10%
Short-term fluctuations of inv. portfolio
Statutory profit before tax
83
880
2,671
-72
-16
1,564
140
1,827
69%
-100%
-32%
-294%
-94%
17%
125
865
4,348
68
-16
3,391
3,825
4,195
-46%
-102%
-22%
-100%
-100%
13%
n.a.
n.a.
10%
0%
Tax
PAT
Net Profit
-536
2,135
-36
2,099
-449
1,115
-32
1,083
-525
1,303
-37
1,265
-2%
-39%
3%
-40%
17%
17%
16%
17%
-1,025
3,323
-69
3,254
-974
2,418
-69
2,348
-1,098
2,727
-71
2,655
-1,204
2,991
-74
2,917
-5%
-27%
0%
-28%
13%
13%
3%
13%
10%
10%
3%
10%
37.6
22.6
23.5
19.4
20.9
10.7
22.6
21.2
23.5
-40%
-6%
0%
17%
1%
120%
58.3
46.7
34.2
42.0
43.5
34.2
47.4
48.2
34.2
52.0
52.8
34.2
-28%
-7%
0%
13%
11%
0%
10%
10%
0%
EPS (basic) (p)
GS EPS (p)
DPS (net) (p)
2005E
2006E
2,434
-1,912
-531
2,699
-1,914
-465
2,961
-1,918
-510
975
-9
320
533
Capital formation
Tier 1 capital
11,223 11,621 12,356 13,455
117,700 126,544 134,290 142,798
8.7%
0.8%
-0.1%
0.0%
2.6%
0.2%
Equity structure
Item name
Finance
leases/hire
purchases
8%
2004E
4.0%
0.4%
Liab.
Assets
GS return ratios
GS net OpFCF / RWA
Other
GS net FCF / tier 1
Preferred &
minorities
20%
Other
2%
GS net income
47%
54%
0%
14,221 14,691 15,476 16,503
11,223 11,621 12,356 13,455
252,012 275,912 292,594 310,778
117,700 126,544 134,290 142,798
2003
2,604
-1,911
282
Interbank
2003
2004E
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
1,418
8,206
44
1,934
-2,513
2,134
11,223
1,419
8,631
49
1,934
-2,463
2,051
11,621
Tier 2 capital
0
10,454
382
-1,901
8,935
0
10,115
357
-1,646
8,825
Tier 3 capital
0
20,158
-6,898
13,260
0
20,446
-7,228
13,218
117,700
126,544
17.2%
86.1%
8.2%
18.3%
16.6%
86.9%
8.0%
17.5%
Ratios
Equity as % of RWA
25%
20%
15%
14,000
12,000
10,000
5%
8,000
6,000
2000
2001
2002
2003
2004E
2005E
-5%
2006E
4,000
2,000
Revenue growth
Cost growth
0
Tier 1
capital
Stated net profit
Item name
2003
Other
2006E
Goodwill
(negative)
2005E
Preference
capital
2004E
Minority
interests
(equity)
2003
Cash
Item name
Reserves
Accounting
Item name
Capital
Returns (£ mn)
177
Europe
Banks
Northern Rock (NRK.L: IL/A)
Volume (rhs)
900
NORTHERN ROCK
FTSE W Europe
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
800
700
600
500
Investment summary: With
3,420
828
905
IL/A
413
100%
7.0% / 3.2%
20.4% / -3.7%
7.5% / -6.6%
Debt rating: Moodys
A1 / stable
Debt rating: S&P
A / stable
NRK LN / NRK.L
Next announcement
1Q trading statement
Date
Apr-05
F
J
D
N
O
S
A
J
J
M
A
M
F
400
Key statistics
Current price (p)
Fair value (p)
Rating
Free float
competition set to increase further in the
UK mortgage market, redemption levels
are key. We believe Northern Rock is
well placed to benefit at the expense of
other UK mortgage banks. Northern
Rock continues to execute well on its
uncomplicated strategy of driving
Valuation sum m ary (£ m n, except per share data)
GS net
GS
Stated
PBT
incom e
EPS (p)
EPS (p)
2001
277
192
46.1
46.2
2002
326
235
56.9
55.6
2003
387
278
67.4
66.6
2004
431
306
74.2
74.1
2005E
492
353
85.3
83.9
2006E
552
395
95.3
93.9
GS
B VPS (p)
256.1
293.0
324.2
372.4
426.0
485.3
Stated
B VPS (p)
256.1
293.0
324.2
372.4
426.0
485.3
P/E (X)
GS
Stated
17.9
17.9
14.6
14.9
12.3
12.4
11.2
11.2
9.7
9.9
8.7
8.8
D PS (p)
17.1
20.2
23.3
26.5
30.5
34.5
GS EPS
grow th
7.8%
23.3%
18.5%
10.1%
15.0%
11.8%
Dividend P/B (X)
yield
GS
2.1%
3.2
2.4%
2.8
2.8%
2.6
3.2%
2.2
3.7%
1.9
4.2%
1.7
P/B
(X)
3.2
2.8
2.6
2.2
1.9
1.7
efficiency through strong volume
ROAE
19.0%
19.8%
21.6%
21.2%
20.9%
20.5%
RO RW A
1.43%
1.45%
1.51%
1.47%
1.38%
1.30%
growth, which allows it to be competitive
on pricing. We believe a key factor for
Northern Rock will be evidence of
improving cash returns on total capital
invested.
Key performance indicators (£ mn)
Item name
1H03
2H03
1H04
2H04
2003
2004
2005E
2006E
Total asset growth
20.2%
13.6%
6.1%
15.3%
13.6%
15.3%
14.0%
16.4%
4.72%
4.57%
4.91%
5.52%
4.64%
5.24%
6.22%
6.32%
18.9%
14.0%
9.0%
14.8%
16.3%
12.0%
14.8%
12.9%
22.4%
9.1%
2.9%
4.3%
15.2%
3.6%
11.2%
11.0%
11.3%
25.8%
23.8%
36.8%
18.8%
30.9%
21.1%
15.9%
20.4%
15.8%
8.2%
13.7%
17.9%
11.1%
12.0%
9.9%
Cost / income ratio
34.1%
34.3%
33.8%
34.0%
34.2%
33.9%
33.1%
32.2%
-0.22%
-0.17%
-0.18%
-0.22%
-0.19%
-0.18%
-0.20%
-0.22%
12.9%
9.9%
10.8%
12.5%
11.3%
11.7%
12.3%
14.0%
Tax rate
29.0%
29.0%
29.0%
29.0%
29.0%
29.0%
29.5%
29.5%
23,959
27,356
26,476
32,869
27,356
32,869
37,851
44,832
9.3%
12.3%
10.5%
20.2%
12.3%
20.2%
15.2%
18.4%
193
193
208
254
193
254
271
294
0.71%
0.71%
0.77%
0.77%
0.71%
0.77%
0.72%
0.66%
53%
53%
50%
50%
53%
50%
48%
45%
Growth (y-o-y)
NPLs
NPLs / loans
Provisions / NPLs
BIS capital ratio
9.7%
9.0%
9.5%
8.7%
9.0%
8.7%
8.2%
7.9%
15.4%
14.3%
16.0%
14.0%
14.3%
14.0%
13.3%
12.7%
Risks: Northern Rock is heavily
2006E revenue mix
exposed to the UK mortgage market
Other
4%
and very reliant on wholesale funding,
which could be at risk if there is a
Net fees &
coms.
36%
meaningful deterioration in credit
Net interest
income
60%
quality. A significant slowdown in
margin erosion would be positive for the
shares in our view.
2006E cost mix
Valuation: We have a fair value of
905p, based on a P/E multiple for
Dep
8%
2006E of 9.5x, implying 9.3% upside
from current levels.
Admin
35%
Staff
56%
178
Europe
Banks
2004
278
17
-17
306
19
-19
2005E
353
21
-21
2006E
Stated net profit
274
4
0
-6
0
6
306
4
0
-5
1
0
347
4
0
0
2
0
389
4
0
0
2
0
GS net income
+ Depreciation
395
23
-23
GS gross OpCF
278
-290
306
-205
353
-266
395
-276
GS net income
278
306
353
395
GS net OpFCF
-12
-96
102
-110
87
-126
119
-143
-109
-8
-40
-24
Stated equity
+/- other
1,340
0
0
0
1,542
0
0
0
1,766
0
0
0
2,014
0
0
0
GS net FCF
Payout ratio
-787%
35%
108%
36%
146%
36%
121%
37%
GS equity
1,340
1,542
1,766
2,014
GS equity
Tier 1 capital
Total assets
1,340
1,776
37,111
19,691
1,542
2,015
42,790
23,099
1,766
2,269
48,788
27,535
2,014
2,546
56,787
32,141
-1.0%
-0.04%
-0.07%
7.1%
0.25%
0.48%
5.2%
0.19%
0.34%
6.3%
0.22%
0.40%
-0.7%
-6.1%
-0.4%
5.1%
-0.4%
3.2%
3.8%
-1.7%
2.7%
4.7%
-1.0%
3.7%
Total assets
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
37,111 42,790 48,788 56,787
19,691 23,099 27,535 32,141
23.1%
0.87%
1.61%
21.3%
0.77%
1.43%
21.3%
0.77%
1.39%
20.9%
0.75%
1.32%
22.8%
0.86%
1.59%
21.3%
0.77%
1.43%
21.0%
0.76%
1.37%
20.6%
0.74%
1.30%
GS return ratios
GS net OpFCF / RWA
Other
GS net FCF / tier 1
100%
Cash
Interbank
80%
Customer
loans
60%
Equity &
debt
securities
40%
C ap ital fo rm ation an alysis
Item nam e
4%
10%
Customer
deposits
51%
Other
assets
Other
liabilities
75%
Subordinate
d debt
37%
Preferred &
minorities
20%
13%
0%
Shareholder
s' equity
2%
4%
Assets
Liab.
2H03
1H04
Net interest income
Trading profits
230
89
21
110
340
227
104
9
113
340
240
129
22
151
391
4%
45%
NA
4%
37%
15%
6%
24%
NA
135%
33%
15%
451
174
28
202
652
467
233
32
264
731
519
287
32
320
839
576
337
34
371
947
4%
34%
NA
13%
31%
12%
11%
24%
NA
2%
21%
15%
11%
17%
NA
5%
16%
13%
Operating income
-117
224
-115
225
-133
258
14%
15%
15%
14%
-223
429
-248
483
-278
562
-305
642
11%
13%
12%
16%
10%
14%
-22
-1
-24
-1
-32
5
45%
NA
33%
NA
-49
6
-57
5
-69
-
-90
-
16%
22%
NA
NA
-24% -100%
30%
NA
NA
PBT
Tax
PAT
Net Profit
201
-58
143
143
200
-58
142
142
231
-67
164
164
15%
15%
15%
NA
15%
15%
15%
15%
NA
15%
387
-112
274
274
431
-125
306
306
492
-145
347
347
552
-163
389
389
12%
11%
12%
NA
12%
14%
16%
13%
NA
13%
12%
12%
12%
NA
12%
34.6
37.0
15.8
34.4
35.5
8.5
39.7
39.4
18.0
15%
6%
14%
15%
11%
112%
66.6
67.4
23.3
74.1
74.2
26.5
83.9
85.3
30.5
93.9
95.3
34.5
11%
10%
14%
13%
15%
15%
12%
12%
13%
EPS (basic) (p)
GS EPS (p)
DPS (net) (p)
2H04 2H/2HE 2H/1HE
2003
2004 2005E 2006E 04/03E 05/04E 06/05E
2004
2005E
2006E
GS n et in co m e
- D ividends to com m on
- W o rking capital charge
278
-96
0
306
-110
0
353
-126
0
395
-143
0
C ap ital fo rm ation
181
196
226
252
Tier 1 capital
R isk weighted assets
1,776
2,015
2,269
2,546
19,691 23,099 27,535 3 2,141
C apital form ation / tier 1
C apital form ation / R W A
10.2%
0.9%
9.7%
0.8%
10.0%
0.8%
9.9%
0.8%
Equity structure
Item name
2003
2004
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
124
1,216
0
266
0
169
1,776
124
1,418
0
300
0
173
2,015
Tier 2 capital
7
1,120
75
27
1,229
8
1,516
83
-8
1,599
Tier 3 capital
0
3,004
-191
2,814
0
3,614
-375
3,239
19,691
23,099
14%
Ratios
Equity as % of RWA
15.0%
75.5%
6.8%
0.0%
14.9%
76.5%
6.7%
0.0%
12%
Tier 1 capital breakdown 2004
Other
personal
17%
Mortgages
83%
Summary P&L (£ mn)
Item name
2003
Interbank
20%
18%
16%
2,500
10%
2,000
8%
1,500
6%
2000
2001
2002
Revenue growth
2003
2004
2005E
Cost growth
2006E
1,000
500
0
Tier 1
capital
2003
Other
2006E
Goodwill
(negative)
2005E
Preference
capital
2004
Minority
interests
(equity)
2003
Cash
Item name
Reserves
Accounting
Item name
Capital
Returns (£ mn)
179
Europe
Banks
RBS (RBS.L: OP/A)
Volume (rhs)
1900
RYL.BK.OF SCTL.
FTSE W Europe
180,000
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
1800
1700
1600
1500
1400
1300
1200
54,927
1823
2332
OP/A
3,013
100%
5.3% / 1.5%
24.5% / -0.4%
12.5% / -2.2%
Debt rating (group): Moody's
Aa1 / stable
Debt rating (group): S&P
AA / stable
RBS LN / RBS.L
Next announcement
FY 2004 results
Date
24-Feb-05
F
J
D
N
O
S
A
J
J
M
A
F
M
1100
Key statistics
Current price (p)
Fair value (p)
Rating
Free float
2002
2003
2004E
2005E
2006E
PBT
4,763
6,159
7,059
8,149
9,340
GS
EPS (p)
144.7
160.4
175.1
201.5
230.7
P/E (X)
GS Stated
12.6
26.6
11.4
23.1
10.4
12.7
9.0
11.0
7.9
9.3
DPS (p)
43.7
50.3
57.8
66.5
76.5
GS EPS
growth
13.2%
10.8%
9.2%
15.1%
14.5%
Dividend
yield
2.4%
2.8%
3.2%
3.6%
4.2%
P/B (X)
GS Stated
2.0
2.2
1.9
2.1
1.7
1.9
1.5
1.8
1.4
1.6
ROAE RORWA
8.6%
0.89%
9.5%
0.93%
16.0%
1.53%
16.6%
1.59%
18.1%
1.68%
2006E GS
Net income
as %
of group
P/E (X)
2006E Equity
allocated
as %
of group
P/B (X)
2006E
ROE (%)
Value Per share
(£ mn)
(pence)
as %
of group
Goodwill
Exceptional items and AVS
Total
shares. In 2005, we expect continuing
banking and crystallisation of synergies
from a number of acquisitions over the
last 18 months to be the key drivers of
further improvements. We believe the
market has paid little attention to RBS’s
historically and expect this to continue
9,000
48%
38%
14%
-25%
5%
10%
5%
18%
-10%
to be the case.
7,173
113%
10.0
37,409
193%
1.9
19.2%
71,653
2278
102%
-1,026
-63
6,084
0
nm
11.8
37,409
7,000
6,000
5,000
Risks: Risks to our view include an
4,000
3,000
acquisition at a price that the market
2,000
1,000
deems too great or which lacks a strong
0
3,072
2332
1823
27.9%
to a fair value of 2,332p, which implies a
Central
items
8%
71,653
Citizens
12%
strategic rationale.
Valuation: Our SOTP analysis points
1.9
Total
1062
853
310
-559
102
229
107
406
-232
Citizens
33,410
26,822
9,748
-17,579
3,204
7,215
3,353
12,774
-7,295
Central items
47.0%
80.5%
28.7%
na
35.5%
12.4%
29.4%
34.9%
nm
Direct Line
4.2
8.1
3.2
na
2.8
1.4
2.9
3.8
nm
Ulster Bank
41%
17%
16%
na
6%
27%
6%
17%
63%
Wealth Mgmt
7,901
3,331
3,083
na
1,127
5,280
1,142
3,324
12,221
Retail Direct
9.0
10.0
11.0
9.5
8.0
11.0
10.0
11.0
9.0
Manufacturing
58%
42%
14%
-29%
6%
10%
5%
18%
-13%
CBFM
3,712
2,682
886
-1,850
401
656
335
1,161
-811
Retail Bkg
GS net income
should have positive implications for its
more leveraged capital structure
8,000
Corporate Banking and Financial Markets
Retail Banking
Retail Direct
Manufacturing
Wealth Management
RBS Insurance
Ulster Bank
Citizens
Corporate centre
invested in its 2004 results, which
environment, particularly in commercial
Stated
GS
Stated
EPS (p) BVPS (p) BVPS (p)
68.4
898.6
811.7
79.0
960.5
849.7
143.3
1093.5
961.8
165.9
1202.7
1037.8
195.7
1326.5
1124.3
Business unit
underlying cash returns on gross capital
strength in the UK banking
Valuation summary (£ mn, except per share data)
GS net
income
4,170
4,701
5,419
6,354
7,173
that RBS will demonstrate improving
CBFM
32%
significant 27.9% potential upside.
Ulster Bank
3%
Direct Line
7%
W ealth
Mgmt
3%
Retail Direct
9%
Retail Bkg
26%
(a) Excluding Manufacturing and Central Group items
180
Europe
Banks
2005E
2006E
2,315
763
0
0
1,463
160
4,434
876
0
0
0
110
5,230
1,026
0
0
0
98
6,084
1,026
0
0
0
63
GS net income
+ Depreciation
4,701
919
-919
5,419
1,035
-1,035
6,354
1,107
-1,107
7,173
1,140
-1,140
GS gross OpCF
5,620
-1,782
5,419
-3,037
6,354
-1,825
7,173
-2,047
GS net income
4,701
5,419
6,354
7,173
GS net OpFCF
3,838
-1,490
2,383
-1,790
4,529
-2,097
5,125
-2,378
2,348
592
2,432
2,747
39%
64%
75%
40%
46%
40%
46%
39%
GS equity
Total assets
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
25,176
2,145
1,140
0
30,403
3,021
1,140
0
32,636
4,047
1,140
0
34,542
5,073
1,140
0
GS net FCF
28,461
34,564
37,823
40,755
GS equity
Tier 1 capital
Total assets
455,275 546,818 596,090 651,157
263,700 314,316 344,729 378,852
17.2%
1.08%
1.89%
17.2%
1.08%
1.88%
17.6%
1.11%
1.93%
18.3%
1.15%
1.98%
9.5%
0.53%
0.93%
16.0%
0.88%
1.53%
16.6%
0.92%
1.59%
18.1%
0.98%
1.68%
Payout ratio
14.1%
0.89%
1.54%
7.6%
0.48%
0.82%
12.5%
0.79%
1.37%
13.0%
0.82%
1.42%
19.8%
12.1%
7.2%
10.8%
2.7%
4.5%
17.9%
9.6%
8.6%
18.2%
9.7%
9.7%
2%
Interbank
80%
Customer
loans
60%
Equity &
debt
securities
40%
Other
assets
Customer
deposits
55%
Other
liabilities
55%
Subordinate
d debt
18%
20%
13%
0%
19%
Preferred &
minorities
6%
Shareholder
s' equity
2H03
1H04 2H04E 2H/2HE 2H/1HE
Net interest income
Trading profits
4,276 4,378 4,724
2,253 2,225 2,598
808 1,048
992
2,812 3,289 3,484
5,873 6,562 7,074
10,149 10,940 11,798
10%
15%
23%
24%
20%
16%
8%
17%
-5%
6%
8%
8%
Operating income
-4,728
5,421
-5,028
5,912
-5,476
6,322
16%
17%
9%
7%
General insurance claims
-715
-1,359
-47
-719
-1,723
-57
-777
-1,735
-100
9%
28%
NA
113%
8%
1%
NA
75%
EPS (basic) (p)
GS EPS (p)
DPS (net) (p)
Tier 1 capital
Mortgages
24%
Other
personal
14%
Corporate
55%
0
40,140
-4,668
35,471
263,700
314,316
31.8%
68.2%
5.0%
40.4%
33.8%
66.2%
4.6%
43.8%
-9,152 -10,504 -11,582 -12,217
10,077 12,234 13,550 14,918
15%
21%
10%
11%
5%
10%
12%
10%
40,000
2%
58%
NA
-31%
10%
3%
NA
-11%
4%
4%
NA
-36%
8%
35,000
8,149
-2,445
5,704
-474
5,230
9,340
-2,802
6,538
-454
6,084
15%
13%
15%
-75%
92%
15%
14%
16%
0%
18%
15%
15%
15%
-4%
16%
19.3
83.2
35.7
69.9
84.9
16.8
73.9
90.8
41.1
283%
9%
15%
6%
7%
145%
79.0
160.4
50.3
143.3
175.1
57.8
165.9
201.5
66.5
195.7
230.7
76.5
81%
9%
15%
16%
15%
15%
18%
14%
15%
24.3%
1.8%
0
35,838
-4,618
31,220
7%
9%
15%
6%
9%
8%
7,059
-2,151
4,908
-474
4,434
24.1%
1.8%
Tier 3 capital
12%
15%
11%
6%
10%
11%
6,159
-1,910
4,249
-1,934
2,315
30.3%
2.1%
0
18,698
566
-1,138
18,125
10%
9%
14%
44%
25%
18%
9%
5%
10%
9%
11%
25.7%
1.9%
7
16,998
566
-1,132
16,439
10,908
6,058
2,595
7,574
16,227
27,135
13%
12%
13%
-86%
308%
6,842
Tier 2 capital
10,178
5,545
2,257
7,152
14,954
25,132
3,678
-1,103
2,575
-247
2,328
6,082
813
29,590
0
7,448
-17,126
1,289
22,014
9,102
4,823
2,040
6,773
13,636
22,738
3,381
-1,048
2,333
-227
2,106
6,666
769
24,407
-11
6,164
-13,131
1,201
19,399
8,301
4,418
1,793
4,717
10,928
19,229
3,263
-983
2,280
-1,710
570
4,993
2004E
2006E 04/03E 05/04E 06/05E
-1,712
-3,713
-90
7,173
-2,378
2,047
2003
2005E
-1,639
-3,558
-140
2006E
6,354
-2,097
1,825
19,399 22,014 25,273 28,205
263,700 314,316 344,729 378,852
2004E
-1,496
-3,458
-157
2005E
5,419
-1,790
3,037
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
Other, 1%
20%
18%
16%
Ratios
Equity as % of RWA
14%
30,000
6%
25,000
4%
20,000
2%
PBT
Tax
PAT
Net Profit
Capital formation
2003
-1,461
-2,195
-229
2004E
Equity structure
Item name
Summary P&L (£ mn)
Item name
GS net income
Liab.
Assets
Finance
leases /
hire
purchases
6%
2003
4,701
-1,490
1,782
Interbank
16%
11%
28,461 34,564 37,823 40,755
19,399 22,014 25,273 28,205
455,275 546,818 596,090 651,157
263,700 314,316 344,729 378,852
GS return ratios
GS net OpFCF / RWA
Other
GS net FCF / tier 1
100%
Cash
15,000
0%
10,000
2001
2002
2003
Revenue growth
2004E
2005E
Cost growth
2006E
5,000
0
Tier 1
capital
2004E
Stated net profit
Stated equity
+/- other
Item name
2003
Other
2006E
Goodwill
(negative)
2005E
Preference
capital
2004E
Minority
interests
(equity)
2003
Cash
Item name
Reserves
Accounting
Item name
Capital
Returns (£ mn)
181
Europe
Banks
Standard Chartered (STAN.L: U/A)
Volume (rhs)
1150
STD.CHARTERED
FTSE W Europe
70,000
10,000
450
0
J
N
J
Key statistics
Current price (p)
Fair value (p)
Rating
Free float
TAN, SRI KHOO TECK PUAT
11,857
1007
913
U/A
1,178
86%
14%
F
550
D
20,000
O
650
S
30,000
A
40,000
750
J
850
M
50,000
A
950
M
60,000
F
1050
7.4% / 3.6%
9.0% / -12.8%
10.4% / -4.1%
Debt rating: Moodys
A2 / stable
Debt rating: S&P
A / stable
STAN LN / STAN.L
Next announcement
Interim results
Date
03-Aug-05
DPS
0.47
0.52
0.58
0.63
0.69
0.76
P/E (X )
G S S tate d
24.2
33.0
20.1
23.2
14.8
15.7
14.4
16.7
12.8
14.7
11.7
13.3
G S E P S D iv ide n d
g ro w th
yield
15.0%
2.5%
20.3%
2.7%
36.2%
3.0%
2.7%
3.3%
12.6%
3.6%
9.4%
4.0%
P /B (X)
G S S tated
3.3
3.3
3.2
3.2
2.9
2.9
2.4
2.4
2.2
2.2
2.1
2.1
Total
ROE RORW A
11.4%
0.99%
14.3%
1.24%
19.4%
1.54%
16.2%
1.15%
15.5%
1.20%
16.1%
1.22%
longer term growth opportunities in
operating environment in Hong Kong
and Singapore. The proposed
acquisition of Korean bank, KFB,
significantly changes the risk profile of
the bank, putting Standard Chartered’s
31%
9%
5%
12%
9%
7%
7%
8%
8%
6%
13.0
12.0
12.0
13.0
8.0
12.0
11.0
11.0
7.0
10.0
720
226
129
328
276
224
214
259
208
154
26%
8%
5%
12%
10%
8%
8%
9%
8%
6%
1,826
1,252
415
1,391
284
721
404
457
2,480
1,993
16%
11%
4%
12%
3%
6%
4%
4%
22%
18%
4.2
1.7
2.7
2.1
4.7
2.2
3.5
3.7
0.4
0.6
33%
14%
23%
17%
58%
19%
32%
34%
6%
6%
7,726
2,118
1,129
2,986
1,324
1,615
1,411
1,709
1,020
1,118
5.92
1.62
0.87
2.29
1.01
1.24
1.08
1.31
0.78
0.86
35%
10%
5%
13%
6%
7%
6%
8%
5%
5%
1,936
100%
11.4
2,738
100%
11,223
100%
2.0
17%
22,154
16.98
100%
-256
0
1,680
1,800
1,600
1,400
Risks: The key risk to our rating is
1,200
1,000
speculation around potential
800
600
consolidation. Any news flow in relation
400
200
0
-256
0
13.2
2,482
Implied share price (US$)
US$ / GBP x-ratio
Implied share price, present value (p)
11,223
2.0
15.0%
22,154
1,305
16.98
0.54
913
1007
-9.3%
Africa
7%
to the plans of its largest shareholder is
likely to be particularly sensitive. A
strengthening of economic growth
prospects for key Asian countries would
India ME & SA
9%
9%
Total
594
176
94
230
165
135
128
155
146
112
view.
Group Office
as %
of group
Americas, UK
2006E
Value Per share
ROE (%) (US$ mn)
(US$)
India
P/B (X)
ME & SA
as %
2006E Equity
as %
of group allocation
of group
Africa
2006E
PBT
Malaysia
P/E (X)
Singapore
2006E GS
as %
Net income of group
Other Asia Pacific
Goodwill
needs of capitalising on its exciting
valuation multiple under pressure in our
Hong Kong
GS total
near term given the high investment
put under further pressure from a tough
S tate d
BVPS
5.67
5.86
6.59
8.04
8.60
9.23
Hong Kong
Singapore
Malaysia
Other Asia Pacific
Africa
India
UAE
Other MESA
Korea
Americas, UK & Group Office
significantly improve its returns in the
Asia. We believe that earnings will be
Va lu a tio n su m m a ry (U S$ m n , ex cep t p er s ha re d ata )
G S n et
GS
S ta ted
GS
P B T inc o m e
EPS
E PS
BVPS
2002
1,262
892
0.79
0.58
5.67
2003
1,550
1,103
0.94
0.82
5.86
2004
2,158
1,510
1.29
1.21
6.59
2005 E
2,195
1,710
1.32
1.14
8.04
2006 E
2,482
1,936
1.49
1.29
8.60
2007 E
2,750
2,128
1.63
1.43
9.23
Business unit
it will be hard for Standard Chartered to
Americas,
UK
0%
also be positive.
Hong Kong
42%
Valuation: Our SOTP fair value is
913p, 9% below the current share price.
Other Asia
Pacific
16%
Malaysia
6%
Singapore
11%
(a) Excluding Group Office
182
Europe
Banks
2005E
2006E
2007E
100%
Cash
11%
13%
Stated net profit
1,421
181
-92
0
0
0
1,474
236
0
0
0
0
1,680
256
0
0
0
0
1,872
256
0
0
0
0
GS net income
+ Depreciation
1,510
239
-239
1,710
249
-249
1,936
259
-259
2,128
269
-269
GS gross OpCF
1,749
-838
1,710
-2,185
1,936
-703
2,128
-800
GS net income
1,510
1,710
1,936
2,128
GS net OpFCF
911
-725
-475
-818
1,233
-900
1,328
-996
Stated equity
+/- other
GS equity
Total assets
GS return ratios
ROAE
ROAA
ROARWA
ROAE
ROAA
ROARWA
7,759
0
0
0
10,443
0
0
0
11,223
0
0
0
12,099
0
0
0
GS net FCF
186
-1,293
333
332
Payout ratio
80%
51%
-172%
56%
73%
54%
75%
53%
7,759
10,443
11,223
12,099
GS equity
Tier 1 capital
Total assets
141,688 198,434 215,559 235,387
92,124 128,534 140,243 153,569
21.0%
1.19%
1.81%
18.8%
1.01%
1.55%
17.9%
0.94%
1.44%
18.2%
0.94%
1.45%
19.7%
1.12%
1.71%
16.2%
0.87%
1.34%
15.5%
0.81%
1.25%
16.1%
0.83%
1.27%
Interbank
80%
Customer
loans
60%
Equity &
debt
securities
40%
Other
assets
20%
Customer
deposits
51%
Subordinated
debt
18%
Preferred &
minorities
11%
5%
6%
Shareholders'
equity
Assets
Liab.
0%
12.7% -5.2%
0.72% -0.28%
1.09% -0.43%
11.4%
0.60%
0.92%
11.4%
0.59%
0.90%
11.4% -5.0%
2.3% -13.6%
7.7% -4.0%
11.7%
3.2%
10.4%
11.4%
2.8%
11.2%
Other
0%
Mortgages
32%
Corporate
54%
Other
personal
14%
Summary P&L (£ mn)
Item n am e
2H 03
1H 04
2H 04
2 H /1 H
2004
2005E
2006E
2007E
05/04E
06/05E
N et interest in com e
N et fees & com m issions
T rading profits
O ther recurring revenues
N et n o n-in terest in co m e
T o tal recu rrin g rev en ues
1,510
620
251
19
890
2,400
1,546
665
332
179
1,176
2,722
1,622
7.4%
4.9%
669
7.9%
0.6%
316
25.9%
-4.8%
38 100.0% -78.8%
1,023
14.9% -13.0%
2,645
10.2%
-2.8%
3,168
1,334
648
217
2,199
5,367
3,972
1,467
713
194
2,375
6,347
4,525
1,614
768
318
2,700
7,225
4,848
1,776
828
350
2,953
7,801
25.4%
10.0%
10.1%
-10.6%
8.0%
18.3%
13.9%
10.0%
7.6%
64.2%
13.7%
13.8%
S taff
G eneral adm inistration
D epreciation
G oodw ill am ortisation
O ther operating costs
T o tal o peratin g exp en ses
O p eratin g in co m e
-664
-477
-139
-67
-1,347
1,053
-774
-490
-123
-88
-1,475
1,247
-760
-552
-116
-93
-1,521
1,124
-1.8%
12.7%
-5.7%
5.7%
NA
3.1%
-9.9%
-1,534
-1,042
-239
-181
-2,996
2,371
-1,672
-1,549
-249
-236
-3,706
2,641
-1,823
-1,849
-259
-256
-4,186
3,039
-1,987
-1,909
-269
-256
-4,420
3,380
9.0%
48.7%
4.0%
30.4%
NA
23.7%
11.4%
9.0%
19.3%
4.0%
8.5%
NA
13.0%
15.1%
-233
-
-141
-
-74
2
-
-68.2% -47.5%
NA
NA
NA
NA
-215
2
-
-458
12
-
-569
12
-
-642
12
-
113.1%
500.0%
NA
24.1%
0.0%
NA
Loan-loss provis ions
Incom e from associates
O ther exceptional incom e / expenses
2H /2 H
14.5%
15.7%
-16.5%
38.8%
NA
12.9%
6.7%
60%
50%
E P S (b asic) (U S $)
G S EP S (U S $)
D P S (n et) (U S $)
820
-262
558
-42
516
1,106
-340
766
-49
717
1,052
-297
755
-51
704
28.3%
-4.9%
13.4% -12.6%
35.3%
-1.4%
21.4%
4.1%
36.4%
-1.8%
2,158
-637
1,521
-100
1,421
44.14
49.87
36.49
61.25
68.76
17.06
59.91
67.82
40.44
35.7%
-2.2%
36.0%
-1.4%
10.8% 137.0%
121.15
128.71
57.50
2,195
-620
1,576
-102
1,474
2,482
-701
1,782
-102
1,680
2,750
-776
1,974
-102
1,872
1.7%
-2.7%
3.6%
2.0%
3.7%
13.1%
13.1%
13.1%
0.0%
14.0%
113.89 129.148
132.13 148.83
63.00
69.00
143.3
162.9
76.0
-6.0%
2.7%
9.6%
13.4%
12.6%
9.5%
2005E
2006E
2007E
1,510
-725
-838
1,710
-818
-2,185
1,936
-900
-703
2,128
-996
-800
-53
-1,293
333
332
Capital formation
Tier 1 capital
7,964
9,484 10,520 11,652
92,124 128,534 140,243 153,569
-0.7%
-0.1%
-13.6%
-1.0%
3.2%
0.2%
2.8%
0.2%
2003
2004
939
6,652
83
531
-1,986
539
6,758
967
7,541
111
845
-1,900
400
7,964
Tier 2 capital
0
4,812
387
160
5,359
0
5,486
335
68
5,889
Tier 3 capital
0
12,117
-746
11,371
0
13,853
-67
13,786
78,162
92,124
7.9%
113.6%
9.8%
22.7%
10.6%
108.2%
9.4%
19.3%
Capital
Reserves
Preference capital
Less: Goodwill
Tier 1 capital
Ratios
Equity as % of RWA
40%
30%
20%
10%
0%
2000
2001
2002
2003
2004
2005E 2006E 2007E
-10%
PBT
T ax
P AT
M inorities and pref share dividends
N et P ro fit
2004
GS net income
Equity structure
Item name
7,759 10,443 11,223 12,099
7,964
9,484 10,520 11,652
141,688 198,434 215,559 235,387
92,124 128,534 140,243 153,569
GS return ratios
GS net OpFCF / RWA
Other
GS net FCF / tier 1
Other
liabilities
60%
23%
Item name
Interbank
Revenue growth
Cost growth
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Tier 1
capital
2004
Other
2007E
Goodwill
(negative)
2006E
Preference
capital
2005E
Minority
interests
(equity)
2004
Cash
Item name
Reserves
Accounting
Item name
Capital
Returns (£ mn)
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Each of the analysts named below hereby certifies that, with respect to each subject company and its securities for which the
analyst is responsible in this report, (1) all of the views expressed in this report accurately reflect his or her personal views about
the subject companies and securities, and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to
the specific recommendations or views expressed in this report: James Fotheringham, Richard Ramsden, Christoffer Malmer,
James Chappell, Julian Livingston-Booth, Alessandro Santoni, Jernej Omahen.
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Disclosures
185
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Company-specific regulatory disclosures
The following disclosures relate to relationships between The Goldman Sachs Group, Inc. (with its affiliates, "Goldman Sachs") and companies covered by the Global Investment
Research Division of Goldman Sachs and referred to in this research.
Goldman Sachs is acting as a financial advisor in a pending transaction: Barclays plc and Danske Bank
Goldman Sachs beneficially owned 1% or more of the common equity (including derivatives exercisable or convertible within 60 days but excluding positions managed by Goldman Sachs Asset
Management) as of the month end preceding this report: HBOS, Lloyds TSB, Royal Bank of Scotland and Standard Chartered
Goldman Sachs has a net short position of 1% or more of the share capital: Bradford & Bingley plc
Goldman Sachs has received compensation for investment banking services in the past 12 months: ABN AMRO Holding N.V., Banca Fideuram, Banca Nazionale del Lavoro, Banco Comercial
Portugues, Bank Austria, Barclays plc, BBVA, BNP Paribas, Capitalia, Credit Agricole SA, Credit Suisse, Danske Bank, Deutsche Bank, Deutsche Postbank, Dexia, Grupo Santander, HBOS,
HSBC, HVB Group, Nordea, Royal Bank of Scotland, SAN PAOLO IMI SpA, Societe Generale, Standard Chartered, Swedbank, UBS and Unicredito Italiano
Goldman Sachs expects to receive or intends to seek compensation for investment banking services in the next 3 months: ABN AMRO Holding N.V., Alliance & Leicester plc, Allied Irish Bank,
Banca Antonveneta, Banca Fideuram, Banca Intesa, Banca Lombarda, Banca Monte dei Paschi di Siena, Banca Nazionale del Lavoro, Banca Popolare di Milano, Banche Popolari Unite, Banco
Comercial Portugues, Banco Popolare di Verona e Novara, Banco Popular Espanol, Bank Austria, Bankinter, Barclays plc, BBVA, BNP Paribas, Capitalia, Commerzbank AG, Credit Agricole
SA, Credit Suisse, D. Carnegie & Co, Danske Bank, Deutsche Bank, Deutsche Postbank, Dexia, DnB NOR, Grupo Santander, HBOS, HSBC, HVB Group, Hypo Real Estate Group, Lloyds TSB,
Nordea, Royal Bank of Scotland, SAN PAOLO IMI SpA, SEB, Societe Generale, Standard Chartered, Swedbank, UBS and Unicredito Italiano
Goldman Sachs has received compensation for non-investment banking services in the past 12 months: ABN AMRO Holding N.V., Alleanza, Alliance & Leicester plc, Allied Irish Bank, Banca
Antonveneta, Banca Fideuram, Banca Intesa, Banca Lombarda, Banca Monte dei Paschi di Siena, Banca Nazionale del Lavoro, Banca Popolare di Milano, Banche Popolari Unite, Banco
Comercial Portugues, Banco Popolare di Verona e Novara, Banco Popular Espanol, Bank Austria, Bank of Ireland, Bankinter, Barclays plc, BBVA, BNP Paribas, Bradford & Bingley plc,
Capitalia, Commerzbank AG, Credit Agricole SA, Credit Suisse, Credito Emiliano, D. Carnegie & Co, Danske Bank, Deutsche Bank, Deutsche Postbank, Dexia, DnB NOR, Grupo Santander,
HBOS, HSBC, HVB Group, Hypo Real Estate Group, Lloyds TSB, Nordea, Northern Rock, Royal Bank of Scotland, SAN PAOLO IMI SpA, SEB, Societe Generale, Standard Chartered, Svenska
Handelsbanken, Swedbank, UBS and Unicredito Italiano
Goldman Sachs had an investment banking services client relationship during the past 12 months with: ABN AMRO Holding N.V., Alliance & Leicester plc, Banca Antonveneta, Banca Fideuram,
Banca Intesa, Banca Lombarda, Banca Monte dei Paschi di Siena, Banca Nazionale del Lavoro, Banche Popolari Unite, Banco Comercial Portugues, Banco Popolare di Verona e Novara,
Banco Popular Espanol, Bank Austria, Bankinter, Barclays plc, BBVA, BNP Paribas, Capitalia, Commerzbank AG, Credit Agricole SA, Credit Suisse, D. Carnegie & Co, Danske Bank, Deutsche
Bank, Deutsche Postbank, Dexia, Grupo Santander, HBOS, HSBC, HVB Group, Hypo Real Estate Group, Lloyds TSB, Nordea, Royal Bank of Scotland, SAN PAOLO IMI SpA, SEB, Societe
Generale, Standard Chartered, Swedbank, UBS and Unicredito Italiano
Goldman Sachs had a non-investment banking securities-related services client relationship during the past 12 months with: ABN AMRO Holding N.V., Alleanza, Alliance & Leicester plc, Allied
Irish Bank, Banca Antonveneta, Banca Fideuram, Banca Intesa, Banca Lombarda, Banca Monte dei Paschi di Siena, Banca Nazionale del Lavoro, Banca Popolare di Milano, Banche Popolari
Unite, Banco Comercial Portugues, Banco Popolare di Verona e Novara, Banco Popular Espanol, Bank Austria, Bank of Ireland, Bankinter, Barclays plc, BBVA, BNP Paribas, Bradford &
Bingley plc, Capitalia, Commerzbank AG, Credit Agricole SA, Credit Suisse, Credito Emiliano, D. Carnegie & Co, Danske Bank, Deutsche Bank, Deutsche Postbank, Dexia, DnB NOR, Grupo
Santander, HBOS, HSBC, HVB Group, Hypo Real Estate Group, Lloyds TSB, Nordea, Northern Rock, Royal Bank of Scotland, SAN PAOLO IMI SpA, SEB, Societe Generale, Standard
Chartered, Svenska Handelsbanken, Swedbank, UBS and Unicredito Italiano
Goldman Sachs had a non-securities services client relationship during the past 12 months with: ABN AMRO Holding N.V., Alleanza, Alliance & Leicester plc, Allied Irish Bank, Banca
Antonveneta, Banca Fideuram, Banca Intesa, Banca Lombarda, Banca Monte dei Paschi di Siena, Banca Nazionale del Lavoro, Banca Popolare di Milano, Banche Popolari Unite, Banco
Comercial Portugues, Banco Popolare di Verona e Novara, Banco Popular Espanol, Bank Austria, Bank of Ireland, Bankinter, Barclays plc, BBVA, BNP Paribas, Bradford & Bingley plc,
Capitalia, Commerzbank AG, Credit Agricole SA, Credit Suisse, Credito Emiliano, D. Carnegie & Co, Danske Bank, Deutsche Bank, Deutsche Postbank, Dexia, DnB NOR, Grupo Santander,
HBOS, HSBC, HVB Group, Hypo Real Estate Group, Lloyds TSB, Nordea, Northern Rock, Royal Bank of Scotland, SAN PAOLO IMI SpA, SEB, Societe Generale, Standard Chartered, Svenska
Handelsbanken, Swedbank, UBS and Unicredito Italiano
Goldman Sachs has managed or co-managed a public offering in the past 12 months: Banca Nazionale del Lavoro and Danske Bank
Goldman Sachs has managed or co-managed a public offering in the past 5 years: Banca Lombarda, D. Carnegie & Co, HSBC, Royal Bank of Scotland and Standard Chartered
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Goldman Sachs makes a market in the securities: Commerzbank AG, Danske Bank, HSBC and Societe Generale
Goldman Sachs International acts as corporate broker to: HSBC and Royal Bank of Scotland
Goldman Sachs QuantumSM is a service mark of Goldman, Sachs & Co.
Distribution of ratings/investment banking relationships
Goldman Sachs Investment Research global coverage universe
Investment Banking Relationships
Rating Distribution
Global
OP/Buy
IL/Hold
U/Sell
OP/Buy
IL/Hold
U/Sell
24%
59%
17%
66%
57%
53%
As of January 1, 2005, Goldman Sachs Global Investment Research had investment ratings on 1,716 equity securities.
Goldman Sachs uses three ratings - Outperform, In-Line, and Underperform - reflecting expected stock price performance
relative to each analyst's coverage universe, on an unweighted basis with regard to market capitalization and with a
12-month time horizon. On a global basis, Goldman Sachs seeks to limit Outperform ratings to approximately 25% of ratings
and to have at least 10% of ratings Underperform; however, variations from such percentages in certain analysts' ratings
and in geographic regions may exist from time to time. Each analyst also assigns a coverage view - Attractive, Neutral, or
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were used. Although relative ratings do not correlate to buy, hold, and sell ratings across all rated securities, for purposes of
the NASD/NYSE rules, Goldman Sachs has determined the indicated percentages by assigning buy ratings to securities
rated Outperform, hold ratings to securities rated In-Line, and sell ratings to securities rated Underperform, without regard to
the coverage views of analysts.
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See company-specific disclosures above for any of the following disclosures required as to covered companies referred to in this report: acting as a financial advisor, manager or co-manager in a
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Ratings and other definitions/identifiers
Rating system
Definition of ratings
Outperform (OP). We expect this stock to outperform the median total return for the analyst's coverage universe over the next 12 months.
In-Line (IL). We expect this stock to perform in line with the median total return for the analyst's coverage universe over the next 12 months.
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Other definitions
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any, for this stock, because there is not a sufficient fundamental basis for determining an investment rating or target. The previous investment rating and price target, if any, are no longer in effect for
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Previous rating system definition (prior to November 4, 2002)
RL = Recommended List. Expected to provide price gains of at least 10 percentage points greater than the market over the next 6-18 months. LL = Latin America Recommended List. Expected to
provide price gains at least 10 percentage points greater than the Latin America MSCI Index over the next 6-18 months. TB = Trading Buy. Expected to provide price gains of at least 20 percentage
points sometime in the next 6-9 months. MO = Market Outperformer. Expected to provide price gains of at least 5-10 percentage points greater than the market over the next 6-18 months. MP = Market
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Goldman Sachs
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Goldman Sachs QuantumSM European Banks Team

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The Chester News February 29, 1916