Banco BPM : Strategic Update Presentation (.pdf - 574 KB)

Strategic Update:

- Partnership with Crédit Agricole

- ACE Project

03 December 2018

DISCLAIMER

This presentation has been prepared by Banco BPM ("Banco BPM"); for the purposes of this notice, "presentation" means this document, any oral presentation, any question and answer session and any written or oral material discussed following the distribution of this document.

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The information contained in this presentation is for background purposes only and is subject to amendment, revision and updating. Certain statements in this presentation are forward-looking statements about Banco BPM. Forward-looking statements are statements that are not historical facts. These statements include financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future operations, products and services, and statements regarding future performance. Forward-looking statements are generally identified by the words "expects", "anticipates", "believes", "intends", "estimates" and similar expressions. By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions which could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements.

Banco BPM does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should not place undue reliance on forward-looking statements, which speak only as of the date of this presentation. None of Banco BPM, its subsidiaries or any of their respective members. Directors, officers or employees nor any other person accepts any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this presentation or otherwise arising in connection therewith.

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This presentation includes both accounting data (based on financial accounts) and internal management data (which are also based on estimates).

EXECUTIVE SUMMARY

•  Binding MoU aimed at strengthening the partnership of Banco BPM and Crédit Agricole in the consumer credit sector in Italy:

  • - Generating a significant capital uplift for Banco BPM (c.+80bps), whilst maintaining the existing shareholding in Agos (39%)

  • - Strengthening the partnership with Crédit Agricole, as well as Agos' leading position and market share in the sector

•  Massive derisking via ACE Project for a total nominal amount of Bad Loans up to €7.8bn, in addition to a potential €0.8bn leasing portfolio

• In the event that the optimisation would lead to a range between € 7.0 bn and € 7.8 bn

  • - the gross NPL ratio 30/09/2018 PF down to a range between ~ 11.3% / 10.6%

  • - the net NPL ratio 30/09/2018 PF down to a range between ~ 6.9% / 6.6%

  • - the gross Bad Loan ratio 30/09/2018 PF down to a range between ~ 3.7% / 3.0%

  • - the net Bad Loan ratio 30/09/2018 PF down to a range between ~ 1.6% / 1.2%

•  Healthy preservation of capital ratios: thanks to the benefits of the agreement in consumer credit, the FL CET1 ratio pro-forma is set to remain in the area of 11%-11.5%1, even in case of NPL disposal for an amount at the top of the range

Note:

1. Indicated on a pro-forma basis, with reference to the data as at 30/09/2018, including the estimated impact related to the strengthening of the Consumer Credit Business and to the ACE Project.

REORGANISATION OF THE CONSUMER CREDIT BUSINESS

Signed a binding MoU aimed at strengthening the partnership of Banco BPM and Crédit Agricole in the Consumer Credit sector in Italy

Additional flexibility for both shareholders, while preserving their strong commitment for the future development of the company

•  Agos to acquire ProFamily "captive" business for a total consideration of €310m

•  ProFamily, as part of Agos, will distribute its products through the entire branch network of Banco BPM Group, on an exclusive basis with a 15-year contract

•  BBPM will keep 100% of former ProFamily "non captive"

•  Agos will maintain its current shareholding structure: 61% CA and 39% Banco BPM

•  Definitive agreements will be signed between Banco BPM, CA and CACF including: Shareholders' Agreement, Distribution Agreement and Funding Agreement, which will remain substantially unchanged other than in their duration (15 years)

•  Banco BPM and CA have also agreed to explore the feasibility of an IPO of Agos over the next 2 years

•  As part of the IPO, Banco BPM shall have the option (but no obligation) to reduce its current shareholding in Agos. Banco BPM has obtained from CA a put option on a 10% shareholding in Agos, at a price of €150m, exercisable in June 2021. Such guarantee, due to the implied reduction in the risk related to the capital invested, shall entail a consequent increase in Banco BPM's CET1 ratio. This option is in any case unlikely to be exercised, given the wide gap between its strike price and the intrinsic value of Agos which is set to increase further as a result of the strengthening of the partnership.

•  Generating a significant capital uplift for Banco BPM (c.+80bps1), whilst maintaining the existing shareholding in Agos

•  Strengthening the partnership with CA, as well as Agos' leading position and market share in the sector

Note:

1. Pro-forma impact expected from the completion of the agreement calculated, all other conditions being equal, assuming as reference basis the CET1 ratio fully loaded as at 30 of September 2018 (11.2% PF).

STRUCTURE OF THE TRANSACTION IN CONSUMER CREDIT

KEY STEPS OF THE POTENTIAL STRUCTURE POST TRANSACTION

To be completed

Non-banking business to be demerged in a separate entity (NewCo Non-Captive)

by H1 2019

100%

ProFamily Captive

It is reminded that, as part of a possible IPO of Agos to be explored with CA, Banco BPM would have the option to reduce its stake in Agos by 10%, exercisable in June 2021