Focus on Germany - Investor Relations - HypoVereinsbank

<strong>Focus</strong> on Germany 

Rolf Friedhofen, CFO 

September 24, 2007 

HypoVereinsbank - Investor Relations 

1

Successful development for HVB Group 

� Solid H1/07 results with operating profit of HVB Group at €2,089 m 

� Ongoing, constant improvement in asset quality and strict control across all risks 

� Group structure significantly reshaped, with no hindrance to business and clear strategic focus 

� <strong>Focus</strong> on the key German market enhanced by the reorganisation and benefiting of clear advantages 


2

Content 

Solid Group Results as of June 30, 2007 

Constant Improvement in Asset Quality and Solid Risk Control 

Re-shaping of Group Structure 


Annex 


3

Solid H1/07 results 

� Group financial results: 

� Revenue up by a remarkable +24% yoy in H1/07 

� Over 50% yoy increase in operating profit 

� Net profit H1/07 of €1,394 m (over 2x that of H1/06); strong yoy growth (+54.3%) also net of one-offs 

�� 

All the divisions managed to increase operating profit yoy, overall improving revenues and efficiency; MIB 

posting significant growth 

�� 

Transfer of investment banking activities of UBM from UniCredit completed, enhancing the role of HVB as 

UniCredit group competence centre for MIB 

�� From integration to growth: integration office closed after the successful completion of its role; divisions fully 

focusing on reinforcing their franchise 


4

H1/07: key financials 

� Over 50% yoy increase of net profit adjusted for one-offs and for FX and consolidation effects in H1/07 

Total Revenues 

Operating Costs 

Operating Profit 

Net-write downs of loans 

Other Non Operating Items 1) 

Net Profit 

Adjusted Net Profit 2) 

Cost-income ratio, % 

H1/ 07 

3,987 

(1,898) 

2,089 

(390) 

355 

1,394 

1,012 

47.6 

1) Provisions for Risks & Charges, Restructuring 

Costs, Net Income from Investments and 

Other Non Operating Expenses. 


5 

%ch. yoy 

+24.1 

+1.5 

+55.5 

-5.3 

>+100 

>+100 

+54.3 

-10.6 p.p. 

% change yoy ex FX 

& consol. effects 

+24.6 

+2.1 

+55.8 

-5.8 

>+100 

>+100 

+55.5 

-10.5 p.p. 

Q2/07 

1,982 

(943) 

1,039 

(181) 

91 

601 

490 

47.6 

2) Adjustments in H1/07 (pre-tax): €219 m disposal gain on Indexchange (Q1); 

€93 m one-off interest component for transferred assets (Q1); €113 m 

disposal gain on Munich Re (Q2); €3 m restructuring costs (Q2). 

Adjustments in H1/06 (pre-tax): €3 m restructuring costs (Q2). 

% ch. on Q2/06 

+32.2 

+4.1 

+75.2 

-10.4 

>+100 

>+100 

+85.6 

-12.8 p.p. 

% ch. on Q2/06 ex 

FX & consol. effects 

+28.6 

+1.9 

+69.5 

-11.4 

>+100 

>+100 

76.9 

-12.6 p.p. 

% ch. on Q1/07 

-1.1 

-1.3 

-1.0 

-13.4 

-65.5 

-24.2 

-6.1 

unch.

H1/07:key performance indicators 

Adjusted RoE before Taxes 1) 

Adjusted RoE after Taxes 1) 

Revenues/ RWA 2) 

Total RWA (bn) 2) 

Core Tier I ratio (%) 2) 

Tier I ratio (%) 2) 

Total Capital ratio (%) 2) 

% 


6 

H1/07 

28.1 

17.5 

5.3 

H1/07 

157.0 

13.0 

14.5 

18.8 

H1/06 

20.0 

12.8 

4.1 

FY/06 

144.9 

13.3 

14.9 

19.9 

Change 

in p.p. 

+8.1 

+4.7 

+1.2 

Change 

in p.p. 

+8.3% 

-0.3 

-0.4 

-1.1 

� Revenues/RWA increases by 1.2 p.p., mainly 

due to significant yoy revenue growth 

1) Calculated on allocated capital (defined as 6.8% of average RWA). Net profit used for calculation adjusted for the interests on excess capital. Further adjustments to numerator in H1/07: 

disposal gain on Indexchange and Munich Re, one-off interest component for transferred assets; Further adjustments to numerator in H1/06: restructuring costs. 

2) RWA figures refer to HVB new (ex discontinued operations), include market risk 

positions and are pro-formed for disposal gains on the asset transfers. 

� Adjusted ROE after taxes, calculated on 

allocated capital, increases by 4.7 p.p. yoy to 

17.5%, driven by strong net profit growth 

� RWA up by 8.3% ytd, resulting in a mild 

decline of capital ratios 

� Growth in RWA partly due to the inclusion of 

the investment banking business of UBM. Net 

of this the trend is a pleasant decline in nonstrategic 

assets, offset by growth in operating 

business






Annex 


7

Net impaired loans significantly down in H1/07 

Net impaired customer loans (€m) % on total net customer loans % coverage ratio 

6,989 

-22.3% ytd 

6,212 

12.6% qoq 


8 

5,431 

Q4/06 Q1/07 Q2/07 

-85 b.p. ytd 

-39 b.p. qoq 

4.11% 3.65% 3.26% 

Q4/06 Q1/07 Q2/07 

� Ongoing reduction of both gross and net impaired loans: so far in 2007 gross impaired loans declined by 

12.3% and net impaired loans dropped by over 20% 

� Reduction mainly achieved through successful day to day workout 

� Impaired loans as percentage of net loans drop by a substantial 85 b.p. ytd to 3.26% 

44.0% 

� The coverage of impaired loans further increase by 3.0 p.p. in just three months to over 50% 

6.4 p.p. ytd 

47.5% 

+3.0 p.p. qoq 

50.4% 

Q4/06 Q1/07 Q2/07

Steady decrease in the weight of rating classes 9- 

10 on total credit exposure 

RC 9/10 as percentage of the Core portfolio 

3.4% 

3.3% 


9 

2.9% 

2.7% 

1) 2) 

3) 4) 

2004 2005 2006 H1/07 

1) €378.6 bn exposure 

2) €390.3 bn exposure 

3) €225.6 bn exposure excluding discontinued operations 

4) €231.8 bn exposure excluding discontinued operations 

� Since 2004 the weight of class 9-10 on 

total exposure of Core portfolio sharply 

declined, reaching 2.7% 

� Over the same period not rated exposure 

declined from 5.4% to 2.1%, confirming the 

strengthening of the monitoring systems 

� Risk Management systems, procedures and 

culture well established, 

� enabling for regular monitoring of the 

development of credit and market 

risks 

� ensuring an adequate risk profile 

given HVB's size and business 

profile.

Non-strategic assets: further decreasing 

RER recent development 

Credit Exposure, €bn 

15.4 

9.5 


10 

4.0 3.3 

FY/04 FY/05 FY/06 H1/07 

� Since creation in FY/04: 79% reduction 

� Reduction in H1/07 achieved through 

successful day- by-day workout 

1) Q3/06 based on Aug06 data. 

2) Consumer Finance. 

-79% 

3) Mainly mortgages to retail customers. 

SCP recent development and breakdown 

Credit Exposure, €bn and % 

20.7 

1) 

-18% 

19.7 

16.9 

Q3/06 FY/06 H1/07 

� SCP created in Q3/06, to facilitate reduction of 

non-strategic assets and allow the divisions to 

focus on strategic business 

� Reduction of 18.4% (€3.8 bn) already achieved 

since creation






Annex 


11

Successful restructuring and refocusing of group 

structure… 

� Redefined and reshaped 

Group Structure: 

� Transfer from segments to 

divisions, to ease 

orientation to business 

and enhance coordination 

within Unicredit Group 

� Shift of approximately 

360,000 customers among 

the new divisions by 

improving the customer 

relationship 

� Transfer of BA-CA and 

other CEE entities to 

Unicredit 

� Acquisition and integration 

of investment banking 

business of UBM 


12 

� Group focus clearly defined… 

FY/05: €245.5 bn RWA H1/07: €157.0 bn RWA 

Total HVB Group 

Other 

C&M 

� Main focus on Germany 

� Centre of competence in MIB for the whole UCI Group 

� Solid increase in efficiency 

� Increased profitability in RWA: Revenue/RWA ratio yoy 

up to 5.3% in H1/07 by 119bp 

RER 

22.1% 

A/CEE 

2.3% 

5..9% 

30.8% 

Germany 

38.9% 

HVB Group new 

Other/Cons. 

MIB 

43.5% 

11.6% 

15.7% 

Retail 

Corporates & 

CREF 

26.9% 

2.3% 

WEM






Annex 


13

Germany: Corporates division well positioned to benefit 

from trends …. 

TREND SOLUTIONS TO COMPETE EFFECTIVELY 

Globalisation 

BASEL II 

Diversification 

of financing 

alternatives 


14 

� Wider international networks 

� Expertise in providing a wide array of services to internationalizing 

companies 

� Advanced IRB-approach and integrated service approach that 

considers the rating of the customer 

� Advisory and support of clients in the achievement of compliance 

with Basel II; Rating simulation, advisory and optimization 

� In-house structuring and capital market products expertise 

� International orientated product factories 

� Wide range of off-balance products 

HVB 

Positioning 

� 

� 

� 

� 

� 

� 

�

…and to ensure profitability in the competitive German 

Retail market 


15 

Intense competition and low focus on profitability of saving banks result in low 

profitability of many plain vanilla products in the German Market 

The key to achieve profitability is thus in the offer of products with a higher service 

content, which HVB is ideally positioned to provide 

- AVERAGE PRODUCT PROFITABILITY 

+ 

PLAIN 

VANILLA 

MORTGAGE 

PAYMENT 

SERVICES 

MORTGAGE 

+ 

INSURANCE 

CURRENT 

ACCOUNT 

FIXED 

INCOME 

MUTUAL 

FUND 

CREDIT 

CARDS 

LIFE 

INSURANCE 

CONSUMER 

CREDIT 

SAVING 

DEPOSITS 

DISPO 

SIGHT 

DEPOSITS 

STRUCTURED 

BONDS 

SEGREGATED 

ACCOUNTS 

EQUITY 

FUNDS

Corporates/CREF: domestic "champion" capable to serve all on 

customers in an operational network in 23 European countries 

Sound and sustainable results 

€m 




Cost-income ratio 


16 

H1/07 

710 

-233 

477 

32.8% 

% ch. on 

yoy 

+3.2% 

-4.1% 

+7.2% 

-2.5 p.p. 

c 

� Business drivers: stable interest income 

and strong fee based services : e.g. 

derivatives, payment fees and corporate 

finance 

� Customer base: about 76,000 customers 

(Small, Medium and Large caps) 

� Employees: about 2,100 in Germany 

� Branch network: about 94 locations in 

Germany

c 

Corporates: German expansion well on track 

� Organic growth: 5 new locations in major cities (Reutlingen, Heilbronn, Ravensburg, Aachen 

und Siegen) 

� Organisational growth: 31 additional relationship manager and staff on board (Top people 

from Dresdner, IKB and other competitors) 

� Customer growth: approx. 5,500 new customers with a net positive result 

� Further growth project " Global Corporates 2010" started to accelerate the expansion process 

� Project with new structures to pay more and more attention on the internationalisation of our 

customers 

� Acceleration of organic growth strategy in Global Shipping 


17

HVB projects in Corporates: clear customer segmentation and focused 

service model to maximise client value and customer satisfaction 

Clear 

customer segmentation 

<strong>Focus</strong>ed service model 

Products 


18 

� Large, Mid and Small Caps as key basic client segments 

� Higher focus on international Mid/Large Caps (GAM clients) as key sub-segments 

to fully exploit the potential on these clients given our broad network coverage 

� Real estate and Public Sector as "vertical segments" to fully exploit our client base 

� Segment Managers to be established at Divisional level and to be 

strengthened/established at Country level 

� Product lines and Regional Heads (commercial areas) to work in strict coordination 

with Segment Managers 

� Relations Managers as contact points of clients and as central & key role of the 

service model 

� Product Specialist support RMs on specific products 

� Becoming leading bank for Cash Management and Trade Finance 

� Offering sophisticated fee based products (derivatives, structured finance, supplychain 

finance), also to mid caps 

Well defined approach/process/tools for RMs throughout the lifecycle of the client, from acquisition to 

development or release for higher revenues and a better revenue mix

Retail business stable, showing first improvements of new segmentation 

and new product and sales initiatives 

Satisfactory 1. Half year development 

€m 




Cost-income ratio 


19 

H1/07 

913 

-701 

212 

76.8% 

% ch. on 

yoy 

-0.4% 

-1.4% 

+2.9% 

-0.7 p.p. 

c 

� Business drivers: continued strict cost 

control results in strong operating profit 

increase; strong commision business 

compensates strategically reduced lending 

business 

� Customer base: about 3 million retail 

customers (mass market, affluent clients and 

small business) 

� Employees: about 8,000 in Germany 

� Branch network: 641 branches

Retail sales benefiting from more specified segmentation adjusted to 

customer potential and needs… 

� Customer satisfaction TRIM-Index increased by 2 points up to 63; mass market improves due to 

new initiatives; affluent better performed in terms of competence and engagement; small 

business improved in particular its active customer and business approach 

� "Deutsches Institut für Servicequalität" awards HVB as "Best Competence in Advisory" 

� Structured customer dialogue ("BasisDialog") clearly indicates that a consequent and regular client 

contact leads to strong increase in revenues, in customer satisfaction and quality, also new 

customer acquisition 

� Introduction of new deterministic bonus system to enhance sales performance 

� New product campaign will be launched in IV. Quarter 2007: Topic "Abgeltungssteuer" (new 

german compensation tax) around very innovative products; e.g. under the topic "Go againstnow": 

HVB AktivRente, HVB Express Bonuszertifikat, NordConcept 


20

Retail: tailored innovative products to specific customer 

needs 

CUSTOMER SEGMENTATION 

Mass Market 

Affluent customers 

Small Business 


21 

� Positive trend in deposit business with € 676m sales volume for bond issue* and € 723m 

respectively for certificates** in H1/07 

� New customer acquisition performing well ("Willkommenskonto": >130,000 new accounts 

since launch in July 06 

� Broader sales structure: Service and Sales with a well-defined product range and a strong 

focus on the specific needs of mass-market subgroups 

� Approx. 120 new hunters ("KNB") for servicing and activating our "product soloists" and 

gaining new customers 

� Strong focus on existing customer base and on new customer acquisition with innovative 

products ("Abgeltungssteuer", "HVB Willkommenskonto") to improve cross-selling 

� Broad and well supported customer approach with successfully tested " Premium Dialog" to 

thoroughly understand customer needs 

� <strong>Focus</strong> on private banking business of entrepreneurs 

� Existing client relationships reviewed for more intensive servicing: one-stop-shopping of 

company financing and entrepreneur investments: "HVB Business Class" 

� New customer acquisition by "GK-Betreuer vor Ort" only 

� New marketing campaign initiated 

* € 413m HVB 6% Zins ASS Anleihe; € 263m HVB 8% Favorit Anleihe. 

** € 500m Alpha Certificate sold in Q2/07; € 223m HVB Express Certificate; € 200m Nord Concept only in Q3/07 

KNB: Kundenbetreuer new business

Leverage on UniCredit Group strengths: some examples 

PRODUCT/ SERVICE OUR COMPETITIVE ADVANTAGE 

Structured products/ 

Derivatives 

Wealth management 

products 

Corporates/CREF 

Retail 


22 

� Well-developed Markets & Investment banking presence, based 

in Munich 

� Possibility to leverage on the substantial expertise of Pioneer 

� Towards more internationalization using the huge network 

� Access to the leading network in CEE 

� Best practice cross border: new product launches tailored by 

group-wide available product factories

Conclusion: steadily pursuing a clear strategic direction 

� Since the combination with UniCredit, HVB Group has managed to deliver solid growth in 

profitability while at the same time decreasing the risk profile 

� The Group has successfully undergone a deep re-organization, which resulted in a significant rise in 

profitability and a clear business re-focus on: 

� Germany, the core competence of HVB Group 

� MIB, as competence centre for UniCredit Group 

� HVB´s focus on Germany benefits of clear advantages: 

� Strong franchise in a large interesting market 

� Solid positioning in the corporate segment, with market knowledge allowing to tailor projects to market trends 

� Unique approach in the difficult retail market, with strategy differentiated by customer segments 

� Leverage on UniCredit Group strengths 


23






Annex 


24

Excurs: Timeframe Squeeze-out of HVB-shares and legal 

proceedings 

26 and 27 June 2007: 

End of July 2007: 

September /October 

2007: 

4 October 2007: 

8 November 2007: 

21 February 2008: 


25 

� HVB´s Annual shareholder´s meeting with Top 8 squeeze-out resolution; accepted by 98.8% of the 

shareholders (95.4% of UCI shareholders); without UCI-voting rights minority shareholders resolved on 

assertion of claims and appointment of special representative in this respect; no experience with this legal 

institute (scope of investigation and access rights are currently under judicial review at Higher Regional Court) 

� More than 100 actions of opposition filed with the Munich District Court after HVB AGM: currently under 

review the materiality and formal aspects for a squeeze-out release proceedings at the Munich District Court 

� Start of release procedure for entering the squeeze-out into the Commercial register: Afterwards delisting 

of HVB-shares on all stock exchanges (timeframe is unpredictable) 

� Action of opposition of UniCredit filed with Munich District Court: First oral hearing on the grounds of the 

claim against resolution taken at AGM June 2007 (assertion of damage claims and appoint a special 

representative (appointment legally justified?) 

� Munich District Court: Second Hearing regarding claims contesting resolutions taken in the EGM as of 

October 2006 regarding various aspects. i.e. formal (a.o.: acoustic irradiation during meeting; insufficient 

disclosure of pro-visions in BACA) and material (adequateness of valuation of transferred entities) issues; 

unlikely that Court will determine the values of transferred entities as this will be reexamined in other 

proceedings 

� An oral proceedings of Munich District Court for all actions of opposition filed by minority shareholders after 

AGM of June 2007 

� An additional oral proceedings with regard to claims of institutional investors on the Financial Statements 

2006 of HVB

HVB Investor Relations Team 

Dr. Regine Angermeyer-Naumann 

Head of Investor Relations 

J +49-89-378 27602 

regine.angermeyer-naumann@hvb.de 

Sabine Keindl 

J +49-89-378 29185 

sabine.keindl@hvb.de 

Ilaria Ranucci 

J +49-89-378 26024 

ilaria.ranucci@hvb.de 


26 

Website: www.hvb.com/ir

Disclaimer 

Statements made in this publication regarding our intentions, expectations, beliefs 

or predictions are forward-looking statements. They are based on informations, 

plans, estimates and projections available to us when we made the publication 

available publicly and therefore we undertake no obligation to update any of our 

statements because of new informations or future events. 

There are many important factors, which could cause actual results to differ 

materially from those contained in any forward-looking statement. Such factors 

include conditions in the financial markets from which we derive a substantial 

portion of our trading revenues, governmental and regulatory trends and 

legislative developments, competitive pressures, potential defaults of borrowers 

or trading counterparties, reliability of our risk management policies, procedures 

and methods, management changes and changes to our business group. 


27 

Disclaimer

Focus on Germany - Investor Relations - HypoVereinsbank

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?