2015-2020 BUSINESS PLAN * * * * * * PLAN GUIDELINES 1. Revenue increase 2. Structural improvement of credit risk 3. Increased efficiency of operations 4. Extraordinary actions (sale of Banca Intermobiliare, rationalisation of foreign branches, proactive management of equity investments portfolio) 5. Adjustment to new European Supervisory mechanism * * * * * * MAIN ECONOMIC AND FINANCIAL OBJECTIVES Capital solidity with CET1 levels above 13,5% by 2018, 15.5%% in 2020 Satisfactory and sustainable income, returning to profits in 2016 and a 7% ROTE target in 2020 Cost/Income ratio in reduction of 8 percentage points, below 50% in 2020 Greater asset quality with a strong NPL ratio reduction and high levels of coverage for the loan portfolio * * * * * * 1
2015-2020 Business Plan The Board of Directors of Veneto Banca has approved the 2015-2020 Business Plan, developed with the assumption of a stand-alone scenario that supports a wider project providing for: transformation into a joint-stock company, listing on the stock market, share capital increase. The fundamental objective of the Plan, a sort of "turn around" with respect to the recent past, is to define a path that will allow the Group to play a leading role in the economic recovery, as well as a social and cultural role, in the areas in which it works, while once again generating value for its shareholders. Listing is the prerequisite for strengthening the Group s capital, that represents the foundations of the Plan and an essential condition for its achievement. Aiming to optimise the positioning of the Veneto Banca Group, the Plan can also work with alternative strategic options that the market may offer. There are five main guidelines: 1. revenue increase; 2. structural improvement of credit risk; 3. increased efficiency of operations 4. extraordinary actions (disinvestments and rationalisation of the Group's structure); 5. adjustment to the new European Supervisory mechanism. The return to profits is expected already from 2016, with a net profit for 2020 of 240 million, also achieving a ROTE of 7% and a CET1 ratio of 15.7%. The main economic and financial objectives ROTE attributable to the Group at 7% in 2020; Net profit sustainable at 240 million in 2020; Fully loaded CET1 ratio at 15.5% by the end of the Plan, compared with 8.16% fully loaded at 30 th June 2015. Sustainable growth of revenues and rigorous management of costs: Operating income +12,5%, increasing from 825 million in 2014 to 925.5 million at the end of 2018 (CAGR forecast 2018 +2.6%), till 1.002 in 2020, similar to 2015, with an important cut of the financial component; Net interest income 612,9 million (+3.6% CAGR forecast 2015-2020); Net fee and commission income 390.6 million (+6.9% CAGR forecast 2015-2020); 2
Operating expenses 499.3 million (-4.6% CAGR forecast 2015-2020); Cost/Income ratio down to 49.8% in 2020 compared with 75.2% in 2014. Risk profile managed with rigorous and constant supervision of loan management: Write-downs on loans down to 138.5 million in 2018, 107.3 million in 2020 from 716,9 million at the end of 2014; Cost of credit, including the cost of disposals, down to 75 bps in 2020, -208 bps compared with 274 bps in 2014; Financial stability thanks to liquidity indicators kept constantly above the regulatory limits: LCR over 110%; NSFR over 100%. Qualitative objectives of the Plan The new Business Plan accompanies the quantitative objectives with specific qualitative objectives, that can be summarised with 5 keywords, which underlie all the individual actions provided for. Tradition - Veneto Banca intends to concentrate its resources on traditional core business, serving its local areas, supporting the real local economy, above all households and SMEs, and restating its role as a highly commercial bank with a local focus. Speed - Quick responses to customers, with very fast analysis of requests and disbursement of loans, thanks to a short and efficient decision-making chain. Quality - Utmost attention paid to the provision of highly professional services, in particular in terms of consulting and IT, with integrated multi-channel options. Appeal - A bank able to attract new customers and, at the same time, new energy and young talent to its ranks, supporting growth through training and professional experience, to the advantage of both customers and the bank itself. Reliability - A bank that makes solidity, security and transparency essential conditions for its operations, serving as a foundation for the creation and long-term maintenance of reciprocal relationships of trust with its customers, with a focus on reliability. These objectives are summarised in the new Veneto Banca Group mission: to serve as a retail bank, focusing its traditional core activities on households and entrepreneurs in the areas it serves, with a renewed service model. The strategic initiatives of the Plan 1. Revenue increase Returning to revenue will be achieved by streamlining the distribution structure and improving efficiency in the business model, with particular attention paid to containing relationship costs. Three paths have been identified: 3
review of the commercial network, strengthening integrated multi-channels, creation of a start up that provides services to enhance the value of property assets. The network will move to a Hub & Spoke structure with a new branch concept. A larger branch or a Hub, will head a group of smaller branches or Spokes, with the creation of a single revenue centre and saturation of managers' portfolios, including those without a fixed office, through a range of "at home" products and services. The number of branches will be rationalised, with some closures foreseen over the next three years (30 by the end of 2015, 70 in 2016, 30 in 2017) with the consequent relocation of certain resources, which will be accompanied by a policy offering early-retirement incentives and partial blockage of turnover. Strengthening of integrated multi-channels, based on: - creation of a new Internet Banking service, based on simplicity of use and a distinctive and complete omnichannel customer experience, offering the same levels of performance on PCs, tablets and smartphones; - strengthening the Contact Center to create more opportunities for contact between customers and managers, thanks to proactive actions to inform and engage customers; - evolution of the Customer Relationship Management platform; - improvement of operating efficiency and centralisation of back-office activities within the Hub branches; - the use of managers without a fixed office and restructuring of Hub branches to better welcome customers; - personalisation of the layout and services of Spoke branches based on the region and target customers served. The Veneto Banca Group has also decided to begin a new commercial initiative in the area of property brokerage, that will work in close synergy with the network of branches and new technologies (website and app) and will offer property-brokerage services, as well as services to increase the value of properties and offer support throughout the entire life cycle of a building (purchase, renovation, upgrading, adjustments, appraisal for sale, home staging, certifications, sale). 2. Structural improvement of credit risk The Veneto Banca Group is working hard to increase the efficiency of its loan policies and the management of its credit chain, with a significant overhaul of the methods used to manage impaired loans and the creation of a Non Core Unit. The first step will be the application of a new model to assess creditworthiness and loan strategies for new loans, by simplifying and speeding up the decision-making process. The second step will be dedicated to proactive management of impaired loans through the use of an advanced Early Detection model, the implementation of a new Early Managing process and a new Escalation Process, together with auditing and management reporting. The third step will involve upgrading the portfolio, identifying and characterising the "Core" and "Non Core" categories as the discriminating factor for the business model, while starting new ordinary or 4
extraordinary financial initiatives within the categories in question (improving the value of packages for sale and securitisation of loans or dedicated crash programs). 3. Increased efficiency of operations The Veneto Banca Group intends to continue along the path it has already begun to achieve greater overall efficiency, through systematic and concrete cost reductions, rationalisation of personnel, revision of the organisational structure and investee companies and outsourcing of back-office activities. The creation of synergies with SEC Servizi is currently being researched, with the possible entrance of an industrial partner and shareholder. Cost cutting Activation of targeted actions on already identified expense items and the redefinition of the purchase process and the consumption models for goods and services. Rationalisation of personnel Through the use of tools and actions to optimise the head-office structures. Reduction in branch personnel through the definition of a new distribution model and rationalisation of geographic control (about 430 FTE, in Italian companies, not including Banca Intermobiliare). The revision of the organisational structure and distribution model foreseen over the course of the Plan calls for a restructuring of the initiatives already planned for personnel, through the best disposable policies: - retirement and early retirement plans; - optimization of the turnover; - containment of the number of executives; - extension of the use of part-time personnel. These actions will be accompanied by recruiting of young people with high potential, aimed at accelerating the rejuvenation of the Group, and reinforcing corporate training and professional-growth policies. Revision of the organisational structure and investee companies Simplifying and improving the efficiency of the organisational structure, aimed at effectively meeting the objectives in the plan. Increasing the value of the "product factories" (e.g. leasing, factoring), also through partnerships or distribution agreements (e.g. salary-backed loans). Outsourcing of back office activities and partnership with SEC Servizi Externalisation of back office activities and low-added-value operating processes through the extension of the activities currently carried out by the consortium company SEC Servizi. Increasing the value of synergies with SEC through the potential entry of an industrial partner and shareholder, with the objective of obtaining greater efficiency and significant savings. 4. Extraordinary actions to support the Plan objectives (investments and rationalisation of the Group structure) 5
Share capital increase of up to Euro 1 billion, to be carried out after the transformation into a joint stock company and listing on the stock market. For the increase, a pre-guarantee agreement- as requested by the Regulator - has been signed with a leading partner, Banca IMI, the investment bank of the Intesa Sanpaolo Group, which will allow for the subscription of any unopted portion of the capital up to the total amount. This agreement is doubtless a further important recognition of the total sustainability of the processes that have been launched and the validity of the Capital Plan already presented to the ECB, aimed at achieving the required capital levels. Over the five years of the Plan, all equity investments will be rationalised, with the objective of concentrating available resources in the Bank's core business. - Banca Intermobiliare, after the deadline for the presentation of a new offer by a consortium of investors based in Turin, is once again the subject of interest for other qualified subjects. - The foreign branches will be reviewed to achieve Italian standards of quality, with particular attention paid to efficiency and containing costs. - Finally, the portfolio of equity investments will be managed proactively. Sizeable investments are planned to support the management turn around, totalling about Euro 40 million, and concentrated: - on developing the commercial network; - on IT, focused on commercial development, the new European supervisory mechanism and data governance; - on training aimed at increasing the skills of high potential individuals. 5. Adjustment to new European supervisory structure In full compliance with and in implementation of the regulations, around Euro 12,5 million has been allocated to adjust to the new European structure. Thanks to assessment activities conducted after the issuing of the SREP guidelines, areas of improvement have been identified that have led to the definition of ad hoc initiatives. The actions identified as priorities have been structured into detailed plans which, based on their type, have been classified into three macro-areas: Regulatory, Data and Systems, and Processes. Veneto Banca Group press contacts Gruppo Veneto Banca Comunicazione Istituzionale Tel. +39 0423 28 3398 3378 3394 E-mail: relazioni.esterne@venetobanca.it This press release, prepared pursuant to article 114 of Italian Legislative Decree 58 of 24 February 1998, is available at www.venetobanca.it and is also published through the authorised archiving mechanism "1Info", at www.1info.it. 6