Earnings Presentation 3 rd Quarter, 2015 Disclaimer: This presentation may include references and statements on expectations, planned synergies, growth estimates, projections of results, and future strategies for Banco Votorantim, it’s associated and affiliated companies, and subsidiaries. Although these references and statements reflect the management’s belief, they also involve imprecision and risks that are highly difficult to be foreseen. Consequently, they may conduct to different results from those anticipated and discussed here. These expectations are highly dependent on market conditions, on Brazil’s economic and banking system performances, as well as on international market conditions. Banco Votorantim is not responsible for bringing up to date any estimate in this presentation.
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Earnings Presentation - Banco Votorantim · Earnings Presentation 3rd Quarter, 2015 Disclaimer: This presentation may include references and statements on expectations, planned synergies,
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Earnings Presentation
3rd Quarter, 2015
Disclaimer: This presentation may include references and statements on expectations, planned synergies, growth estimates, projections of results, and future strategies for Banco
Votorantim, it’s associated and affiliated companies, and subsidiaries. Although these references and statements reflect the management’s belief, they also involve imprecision and
risks that are highly difficult to be foreseen. Consequently, they may conduct to different results from those anticipated and discussed here. These expectations are highly dependent on
market conditions, on Brazil’s economic and banking system performances, as well as on international market conditions. Banco Votorantim is not responsible for bringing up to date
any estimate in this presentation.
2
1. Allowance for Loan Losses (ALL), net of revenues from recovery of written-off loans
Consistent
Net Income
Net Income of R$ 137M in 3Q15, compared to R$ 146M in 2Q15 and R$ 135M do 3Q14
Net income totaled R$ 405M in 9M15, compared to R$ 428M in 9M14
Conservative
approach
to credit
Expanded credit portfolio decreased 3.0% in the last 12 months and 0.7% in the last quarter
Income from Services and Insurance rose in 3Q15/2Q15 and 9M15/9M14...
...but the NII decreased, reflecting the conservative approach to credit and the increase of Selic (higher
funding cost). The NII reduction in 3Q15/2Q15 is also explained by the drop in Wholesale income
Delinquency
under control
90-day NPL dropped 0.6 p.p.in the last 12 months, to 5.3% in Sept/15 (Sept/14: 5.9%)
Equity in Income of Associated Companies and Subsidiaries 36 39 39 -0.6% 111 116 4.6%
Other Operating Income/Expenses (171) (162) (162) -0.3% (436) (468) 7.1%
Operating Income (Loss) 187 205 (496) - 429 (70) -
Non-Operating Income (Loss) (27) (15) (9) -35.8% 115 (27) -
Income Tax and Profit Sharing (24) (45) 642 - (116) 502 -
-
Net Income 135 146 137 -6.2% 428 405 -5.3%
9M15Var. 9M15
/9M142Q15 3Q15
Var. 3Q15
/2Q159M143Q14(R$ million)
Highlights of Results Consistent net income, with prudential strengthening of provisions and cost base under control
1. Allowance for Loan Losses (ALL), net of revenues from recovery of written-off loans
Managerial Income Statement (R$M)
Tax credit increase
(Social Contribution Rate of 20%)
Consolidated results
5
Prudential provisions of R$ 681M in the 3Q15 Conservatism given the uncertainties in the macroeconomic scenario
Disregarding prudential provisions, in 3Q15
the Net Margin would have been R$ 618M... ...and the Operating Income R$ 185M
558
618
59
3Q15’ Prudential
Provisions
3Q15
558
2,2221,663
9M15’ Prudential
Provisions
9M15
185
3Q15’ Prudential
Provisions
681
3Q15
(496)
611
9M15’ Prudential
Provisions
681
581
100
9M15
(70)
Restructuring
provisions
Prudential provisions were formed to strengthen the
quality of Banco Votorantim’s balance sheet
Net Financial Margin (R$M) Operating Income (Loss) (R$M)
3Q15
9M15
Consolidated results
6
Consistent revenue generation from services and insurance NII decreased, reflecting the conservative approach to credit and the contraction of Wholesale revenues
1. Sum of reserve requirements, interbank transactions, securities and loan portfolio; 2. Ratio between Net Interest Income and Average interest-Earning Assets; 3. Result of the
stake in Votorantim Corretora de Seguros (insurance brokerage) is recognized using the equity method.
NII decreased in the 3Q15/2Q15, reflection of
volume contraction of Wholesale revenues
Income from Services and Insurance
rose 4.4% in the 3Q15/2Q15
Net Interest Income (NII) (R$M) Income from Services, Fees and Insurance³ (R$M)
Average
interest-earning
assets¹ (R$B) 95.3 95.9
54 54
274
220
+4.4%
3Q15
286
232
2Q15
Insurance
(Commission)
Services and
Fees
-9.0%
3Q15
1,134
2Q15
1,247
NIM² (% p.y.) 5.3% 4.8%
Lower income with
structured operations
+1.5%
9M15
855
695
160
9M14
842
699
143
-7.4%
9M15
3,604
9M14
3,892
Portfolio’s reduction
and increase of Selic
94.5
5.1%
92.8
5.6%
Grew due to the
impact of exchange
rate variation
Net Interest Income
7
Sept/15
66.2
28.1
4.0
28.2
4.7 1.1
Jun/15
66.7
27.3
4.3
28.8
5.1 1.1
Sept/14
68.2
26.2
-3.0% -0.7%
Large Companies
Mid-sized
Companies¹
Auto Finance
Payroll
Credit Cards
6.0
29.3
5.5 0.9
Maintenance of the conservative approach to credit Credit portfolio retraction is a result of the focus on profitability and asset quality
1. Mid-sized companies are those with annual revenues up to R$600M
Wholesale (CIB) 2.8%
-2.0%
∆Sept15
/Jun15
-6.7%
-7.7%
5.4%
7.0%
-3.8%
∆Sept15
/Sept14
-14.8%
-34.3%
23.2%
Credit portfolio by segment
Expanded credit portfolio (R$B) (includes guarantees provided and private securities)
Gradual reduction in
the “lower middle”
Focus on profitability (vs. asset growth)
8
378 358 402
672
3Q15
1,075
R$ 627M
2Q15
448
90
3Q14
451
74
1,941
346
+15.0%
9M15
909
1,031
9M14
1,688
1,342
155%
141%
126%
4,114
2,727
Sept/15
3,843 4,212
Jun/15
2,712 3,273
Sept/14
90-day NPL balance (R$M)
Allowance for Loan Losses balance (R$M)
Prudential strengthening of ALL increased Coverage Ratio Prudential increase in ALL expenses in view of the uncertainties of the macroeconomic scenario
Credit provision expenses in Consumer
Finance reduced 23.2% in the 9M15/9M14 Prudential increase of credit provisions
increased Coverage Ratio² to 155%
Consumer
Finance
∆9M15
/9M14
-23.2%
163.0%
1. Allowance for Loan Losses, net of income from recovery of written-off loans; 2. Ratio between the balance of ALL and the balance of loans past due over 90 days
Wholesale
Prudential
strengthening of ALL
ALL elevation was prudential,
since delinquency is under control
90-day NPL balance
relatively stable
90-day Coverage Ratio² (%)
90-day
Coverage ratio
Credit provision expenses – ALL¹ (R$M)
Credit indicators – ALL and 90-day Coverage
9
Total
90-day NPL dropped 0.6 p.p.in the last 12 months 90-day NPL ratio closed Sept.15 at 5.3%, while Cars’ delinquency remains stable in 5.1%
Wholesale
5.3%
5.2%
6.5%
5.7%
5.9%
Sept/15
5.0%
Jun/15
4.8%
Mar/15
9.0%
Dec/14
6.2%
Sept/14
5.4%
Consumer
Finance
Cars 5.1%
5.4%
5.1%
5.4%
5.1%
5.3%
5.2%
5.5% 5.9%
6.1%
Consumer
Finance
90-day NPL / Managed loan portfolio (%)
Credit indicators – Delinquency
10
Sept/15
0.9
Mar/15 Sept/14
1.2
Mar/14 Sept/13
0.9
Mar/13 Sept/12
0.7
Mar/12 Sept/11 Mar/11 Sept/10
2.0
Mar/10 Sept/09
1.5
Auto finance: maintenance of quality in auto finance
origination over the last 4 years
Inad 30¹ (by vintage)
Used car dealers
New car dealers
3%11%
27%
48%
Sept/15 Dec/14 Dec/13 Dec/12
4 years
June09-
June10
average
Lower quality vintages /
Managed auto finance portfolio² Lower quality vintages
Auto Finance – Origination by channel (R$B) and first payment default by vintage – Inad 30¹ (%)
1. First payment default, or % of each month’s production with first installment past due over 30 days; 2. Includes securitization with substantial risk retention before Res. 3,533
Origination with better quality has contributed
to the favorable trend in delinquency
Consumer Finance – Auto Finance
11
4Q10
7.8
4.1
(52%)
3.7
Used
Cars
Other
Vehicles¹
3Q15
3.0
2.5
(84%)
0.5
2Q15
3.0
2.5
(83%)
0.5
26%41% 42%
444452
3Q15 2Q15 4Q10
Auto finance: greater focus on used cars and maintenance
of tight credit origination standards
Greater focus on used cars Maintenance of conservatism in lending
-9%
9M15
9.3
7.7
(83%)
1.6
9M14
10.2
8.2
(80%)
2.0
Proposals with automatic credit decision (% do total)
Process automation and efficiency gains
Sept/15
82%
Dec/14
78%
Dec/13
65%
Dec/12
45%
Banco Votorantim is one of the leading players
in the auto financing market
Origination of auto loans (R$B) Down payment (%) and Average term (months)
Average term
Down payment
1. New cars, trucks and motorcycles; Note: In Sept/15, the average ticket size was R$ 18,000, and the average vehicle age was 4.7 years (portfolio)
Consumer Finance – Auto Finance
12
814 844
679 690
317 214
1,748
9M14 9M15
1,811
-3.4%
298 282 288
241 233 237
12181
Other
563
661
2Q15
38
596
3Q14
Labor
Claims¹
-5.5%
Administrative
3Q15
Effective cost management Personnel and administrative expenses decreased 5.5% in 3Q15/2Q15 and 3.4% in 9M15/9M14
Note: The IPCA price index reached 9.49% in the last 12 months. Excluding labor claims, personnel and administrative expenses increased 2.7% in 9M15/9M14.
1. Include indemnities and provisions for labor contingencies, mainly linked to the restructuring process ended in 2014; 2. Excludes expenses with labor lawsuits.
3.6%
1.6%
-32.4%
∆ 3Q15/2Q15
2.1%
1.8%
∆ 9M15/9M14
-52.9%
-9.1%
-12.4%
39.6 34.6 38.6
Personnel and administrative expenses
Personnel and administrative expenses (R$M)
Personnel
Efficiency ratio –
last 12 months² (%)
13
137146135
59
618799851
3Q15 2Q15 3Q14
Net Interest Income (NII) Credit provision expenses – ALL
Personnel and Administrative expenses Net Income and Net Margin (post provisions)
Summary: Net Income of R$137M in 2Q15 and R$405M in 9M15 Highlight for the reduction of ALL expenses in Consumer Finance and control of the cost base
1,1341,2471,303
3Q15 2Q15 3Q14
-7.4%
9M15
3,604
9M14
3,892
298 282 288
362 314 275
596
Admin.
563
Personnel
3Q15 2Q15 3Q14
661
814 844
997 905
1,748
9M14
-3.4%
9M15
1,811
405
9M14
2,204
428
9M15
2,222
1,663
378 358 402
672
3Q15
1,075
2Q15
448
74 90
3Q14
451
+15.0%
9M15
1,941
1,342 1,031
909
9M14
1,688
346
-26.4%
182.9%
Net income
Net Margin
Net Margin without prudential provisions
R$ million
Wholesale
Consumer
Finance
Consolidated results
14
Funding profile improved over the last quarters Bills and Credit Assignments accounted for 44% out of the total funding sources
Additionally, Banco Votorantim has a stand-by credit
facility of ~R$7B from BB, which has never been tapped
1. Includes cash and interbank deposits and Structured finance certificates (“COEs”); 2. Funding from loans assigned with recourse under Resolution 3,533
Note: International funding is 100% swapped for BRL
15
Total Capital 11,190 10,967 10,866
Tier I Capital 7,344 7,105 6,828
Common Equity Tier I 7,344 7,105 6,828
Additional Tier I - - -
Tier II Capital 3,847 3,862 4,038
Risk Weighted Assets (RWA) 73,223 73,786 75,457
Credit risk 66,967 66,293 67,384
Market risk 2,067 3,087 3,294
Operational risk 4,188 4,407 4,780
Minimum Capital Requirement 8,055 8,116 8,300
Basel Ratio (Capital/RWA) 15.28% 14.86% 14.40%
Tier I Capital Ratio 10.03% 9.63% 9.05%
Common Equity Tier I Ratio 10.03% 9.63% 9.05%
Additional Tier I Ratio - - -
Tier II Capital Ratio 5.25% 5.23% 5.35%
BASEL RATIO
(R$ Million)Sept.14 Sept.15Jun.15
Basel Ratio of 14.4% in Sept/15 Tier I Capital of 9.05%, entirely composed of Common Equity
Capital structure
16
Appendix
17
103
143
160
178
613867
909
1,119
1,144
1,402
Votorantim Safra
Santander
BTG Pactual
Bradesco
HSBC
BNDES
CEF
Itaú
Banco do Brasil
State-owned
National privately-held
Foreign
30
53
55
69
254357
406
526
642
670
Votorantim Banrisul
Safra
HSBC Santander
Itaú
BNDES
CEF
Bradesco
Banco do Brasil
State-owned
Foreign
National privately-held
Banco Votorantim is one of the leading banks in Brazil “Top 10” in total assets, with strong shareholders and shared governance
Banco Votorantim is one of the largest
privately-held Brazilian banks in total assets...
...and also in terms of loan portfolio
10 largest Banks in Jun/15 – Loan Portfolio¹ (R$B)
10 largest Banks in Jun/15 - Total Assets (R$B)
9th
10th
Shareholder
50% Total
Banco Votorantim - Overview
Equal
representation
of each
shareholder
Board of
Directors
Executive board
Fiscal
Council
Audit
Committee
Compensation
& HR
Committee
Products &
Marketing
Committee
Finance
Committee
Total: 50.00%
Voting: 49.99%
Non-voting: 50.01%
Total: 50.00%
Voting: 50.01%
Non-voting: 49.99%
Votorantim Group Banco do Brasil
Ownership Structure
Corporate Governance Structure
1.On-balance loan portfolio according to Bacen’s Resolution 2,682
18
Banco do Brasil Grupo Votorantim +
R$ 66.2B
Consumer Finance
Auto
Finance
To originate portfolios with quality, scale and profitability
To focus on used auto finance (multi-brand dealers), where BV has a history of leadership and expertise
Other
Businesses
Payroll loans: to focus on
INSS (portfolio refinancing)
and Private (portfolio growth)
Credit cards, insurance,
individual loans and
CrediCasa (home equity): to
leverage the existing client
base
Other synergies with BB: BV
Promotora, mortgage, etc.
R$ 34.2B
R$ 28.2B R$ 5.9B
Wealth
Mgmt. & BVEP
Asset: 9th largest in the market, with innovative products and growing synergies with BB
R$ 46.6B in AuM¹
Private: focus on estate management through taylor-made solutions
BVEP: investment in real estate projects
Wealth Mgmt.
Corporate &
IB (CIB)
To be the best wholesale bank to our target clients, focused on:
• Long-term relationships
• Capturing synergies in the origination and structuring of financial solutions
• Efficient capital management
Wholesale R$ 32.0B
Diversified business portfolio Focus on increasing business profitability, operating efficiency and synergies with BB
Strategy
1. Assets under management 2. Includes guarantees provided by the Bank and private securities Note: In Sept/15, the outstanding volume of loans (off-balance) securitized with recourse prior to Resolution 3,533 totaled R$ 0.4B (versus R$ 0.7B in Jun/15)
Shareholders
Pillars
Expanded² credit portfolio
19
Balance Sheet
Balance Sheet
Sept.15/Jun.15 Sept.15/Sept.14
CURRENT AND LONG-TERM ASSETS 97,606 102,935 109,839 6.7 12.5