福特汽車 (F) 2012 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the FCE Bank PLC's interim financial results conference call. My name is Katina, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. Later, we will facilitate a question-and-answer session. (Operator Instructions).

I would now like to turn the presentation over to your host for today's call, Ms. Molly Tripp, Manager, Ford Fixed Income Investor Relations. Please proceed.

Thank you, Katina, and good day. Welcome to all of you who are joining us either by phone or webcast. On behalf of the entire FCE Bank management team, I would like to thank you for spending time with us today.

With me today are Paul Kiernan, FCE Bank's Executive Director of Finance, and Martin Galdeano, FCE's Treasurer. Martin was appointed to the role of FCE Treasurer in August of 2012, replacing Sam Smith. Previously, Mr. Galdeano was Manager of Ford Credit Funding and Financial Strategy, Ford Motor Credit Company. Mr. Galdeano's career within Ford includes leadership positions in Treasury, Profit Analysis, Business Strategy and Operations in the US, Argentina and Brazil. Sam Smith has returned to Ford's Treasurer's Office in Dearborn to become Director of Long-Term funding and Securitization and is also with us today.

We also have a few other members of management who are joining us for the call, including John Coffey, FCE Chief Risk Officer; Daren Clark, Assistant Treasurer, FCE; Gary McEwan, Manager, European Regulatory and Financial Reporting for FCE.

Before we begin, I would like to review a couple of quick items. A copy of the slides we will be using today have been posted on Ford Motor Company's and FCE's investor websites for your reference. Also on FCE Bank's investor website are the interim report and accounts for the half year ended June 30, 2012, the first-quarter 2012 management statement, the 2011 annual report and account and the Basel II Pillar 3 disclosure document for 2011.

Also, I would like to remind everyone that the slides and discussion today will be on FCE Bank only. Please feel free to contact me after this call if you have any specific questions related to Ford Motor Company or Ford Credit.

With that, I would like to turn the call over to Paul Kiernan. Paul?

Thank you, Molly. The purpose of today's presentation is to brief you on FCE's 2012 interim results. Let's start with a reminder of FCE's business model.

Turning to slide one, although FCE is wholly-owned by Ford Credit, it is incorporated in the UK as a public limited company in its own right. FCE is regulated as a bank by the UK Financial Services Authority and as such is required to meet stringent requirements on liquidity, capital adequacy and large exposure.

FCE is a pan-European bank headquartered in the United Kingdom that operates directly in 15 European countries. In 12 of the countries, FCE operates through a branch structure authorized under the EU's Second Banking Consolidation Directive, and in the further three, Poland, the Czech Republic and Hungary, through subsidiaries.

The Nordic markets are served by Forso, a regulated Swedish company which is jointly controlled and owned by FCE and CA Consumer Finance, an affiliate of Credit Agricole. Forso is included in FCE's accounts on an equity accounting basis. In other words, the entity is not consolidated on FCE's balance sheet.

Slide two describes what FCE does. FCE's aim is to support Ford of Europe's vehicle sales while consistently adding shareholder value. FCE's customers are the Ford national sales companies in each market, the Ford dealerships throughout Europe and of course the retail and corporate customers who are buying Ford vehicles and who need finance or insurance to do so.

On the right hand side of the slide you can see a broad analysis of FCE's portfolio of loans outstanding at June 30, 2012. Wholesale loans reflect lending to dealers to finance the acquisition of new vehicle stocks, whereas retail lending refers to loans and leases made to end customers. I would like to point out that substantially all FCE's lending is secured, typically through the retention of title or right of repossession of the underlying vehicle.

Slide three illustrates FCE's role in Ford's European operations. As a captive finance company, FCE is positioned to support Ford's success whilst benefiting from the synergies the close relationship brings. Ford gains through dedicated and consistent financial services support the skills FCE brings in terms of understanding the financial condition of dealers and enhancing the relationship with end customers. FCE gains through the use of the Ford brand, access to the dealer point of vehicle sale and the support of exclusive Ford marketing programs. And of course, FCE's profits over time contribute to the dividend payments which ultimately support investment in future new vehicles and technology.

Turning to slide four, FCE's strategic priorities reflect its role as a captive bank and have not changed. They include managing risk effectively and consistently, executing a funding strategy that balances liquidity and cost, ensuring a competitive operating cost structure, investing in customer-facing technology and aligning closely with Ford's sales and marketing activities. For example, FCE continues to work to improve customer loyalty by growing its share of Ford sales, and for the remainder of 2012 it will be focused on supporting the launch of the new B-MAX, Kuga and commercial vehicles.

Turning to the 2012 interim report, I would like to start on slide five with a summary of the first six months of 2012. We will go into more detail on all of these items later on.

FCE has delivered an adjusted profit before tax of GPB91 million. Credit losses have remained stable and close to historical lows, providing continued evidence of the strength of FCE's business model.

During the first half, FCE increased its share of Ford Motor Company's European sales to 31.2% compared to 29.8% a year ago, reflecting the continued success of joint marketing programs with Ford.

Total net loans and advances to customers at GBP9.1 billion were GBP0.7 billion lower than year end 2011, primarily due to lower industry volumes as a result of the weakening European economy, the effect of the weaker euro and lower dealer vehicle stocks.

FCE is well on track in delivering its 2012 funding plan and the Tier 1 capital ratio is strong at around 20%.

On the next couple of slides, we will focus on outstanding loans and advances. Firstly, on slide six, you can see outstanding net loans and advances split between Ford and other automotive brands. The chart identifies that much of the historic reduction in balance sheet size relates to Ford's strategic exit from Jaguar Land Rover and Volvo and the separation of activities with Mazda. And, as mentioned on the previous slide, we've seen a reduction in the first half of 2012, primarily due to lower industry volumes, the effects of the weaker euro and lower dealer vehicle stocks.

With the expected continuing decline in vehicle industry volumes in Western Europe through the second half of 2012, FCE's contract volume growth is likely to be constrained despite improving levels of penetration into Ford vehicle sales. Based on present assumptions, FCE expects total net loans and advances to be in the range of GBP9 billion to GBP10 billion at the end of 2012, although this may be subject to revision depending on the European market environment and any adjustments to Ford's dealer inventory levels.

Turning now to slide seven, this shows FCE's relative geographic weightings. The chart highlights the importance of the German and UK markets, which together represent approximately 60% of FCE's total net loans and advances. The mix of FCE's business in these two markets has increased from the prior year, reflecting the decline in industry sales in other European markets and the weakness of the euro. Spain and Italy combined continue to represent about 14% of total net loans and advances. The largest of the other markets on the right-hand side is FCE's Worldwide Trade Finance division, where we finance importers primarily in the Middle East and North Africa. In these markets, the majority of the credit risk is held by third parties.

Now I'll pass you over to Martin, who will cover liquidity, funding and capital.

Thank you, Paul. Now turning to slide eight. As Paul mentioned, FCE is on track to deliver its 2012 funding plan. In the first half on the private side, FCE renewed or added GBP2.6 billion of private securitization capacity. FCE completed GBP250 million of new issuance in the public term debt markets in the first quarter.

While FCE continues to focus on rates in public terms and secured funding in the European market as part of its overall funding strategy, consistent with prior guidance, FCE chose to leverage cost-effective term intercompany funding from its ultimate parent, Ford Credit, totaling approximately GBP800 million in the second quarter. This funding took advantage of strong US capital market conditions, including the favorable effect of swapping US dollar into euros, and was made possible by the funding flexibility available to FCE from being part of a global company.

Slide nine shows the funding mix supporting FCE's balance sheet. Securitization continues to play a key role in FCE's funding strategy given its cost advantage over unsecured long-term funding, although the relevant cost differential continues to decrease with our improved credit ratings.

FCE aims for diversification in its securitization activity with about 25 active transactions providing term funding or committed capacity for each of its primary asset classes across a wide range of European markets. All of FCE's programs provide for matched funding of receivables, with securitization debt having a maturity profile similar to the related receivables. All of FCE's securitizations are on balance sheet.

At June 30, secured debt was 57% of net loans and advances, and we expect to be relatively consistent with this position at year end. Thereafter, we expect that this ratio will decline.

Slide 10 outlines FCE's present public term funding plan. Please note that FCE's full-year plan is flexible in order to take into account the current economic situation in Europe, adjustment to Ford's dealer inventory levels impacting FCE's funding requirements and other opportunities that may be presented through FCE's position as part of a global company.

Currently, FCE's full-year 2012 public term funding is projected to be in the range of GBP900 million to GBP1.4 billion. Unsecured debt issuance is predicted to be in the range of GBP600 million to GBP900 million, and includes a GBP250 million raised in the unsecured debt market in February.

Our public securitization issuance plan is in the range of GBP300 million to GBP500 million and is expected to be completed in the second half of 2012.

Moving now to slide 11, FCE's liquidity sources are identified at the top of the slide and include cash and secured credit facilities and Conduit/Bank ABS. Across these sources at June 30, 2012, FCE had GBP7.2 billion.

The next section shows the utilization of liquidity, with total utilization being GBP3.5 billion at June 30, 2012. After adjusting for GBP1.2 billion of securitization capacity that exceeds eligible assets, FCE had total liquidity of GBP2.5 billion.

Slide 12 provides an overview of FCE's capital. FCE's Tier 1 capital ratio was about 20% at June 30, 2012, which is about equal to prior year. FCE paid a dividend of GBP370 million in 2011 and a dividend of GBP315 million in June 2012. As disclosed previously, FCE's plan is to gradually align its capital base with the current scale and risk profile of its business while taking into account the funding and economic environment. While this remains FCE's plan, no guidance on a 2013 dividend is being provided at the point given the uncertainty in the external environment.

Slide 13 shows FCE's credit ratings. FCE's credit ratings are closely associated with the credit ratings of Ford and Ford Credit. Since May 2012, FCE has been rated at investment grade by Fitch, Moody's and S&P. This was a major milestone, as FCE had been operating at below investment grade since 2005. These ratings will provide access to a wider pool of investors in the capital market and will, over time, have a significant favorable impact on the cost of funding and overall competitiveness. Please note that S&P continues to assign a one-notch positive differential to FCE compared with Ford Credit.

Now I'll turn it back over to Paul, who will discuss first-half performance in more detail.

Thanks, Martin. With slide 14, we turn back to our lending portfolio and now focus on credit loss performance. As I mentioned earlier, credit losses in the first half of 2012 at 0.21 percentage points are consistent with 2011 and close to historical lows. This performance reflects FCE's continued focus on managing credit risk in a deteriorating economic environment.

The next slide provides an analysis of credit losses by market. Both Germany and the UK continue to show strong performance. In addition, there has also been a noticeable improvement in Spain, driven by both a lower level of written-off accounts, as well as strong recoveries from previously written-off accounts. These changes have been offset by increases in France and Italy.

In France, whilst the level of new written-off accounts has remained relatively stable, the historic high levels of recoveries from previously written-off accounts was reduced in comparison to prior periods.

The increase in Italy reflects the economic slowdown they experienced there. FCE continues to adjust underwriting and collections processes in Italy consistent with both portfolio performance and outlook.

Slide 16 shows that FCE has seen delinquency levels generally improve for the first half of 2012 compared to the same period in 2011. Improvements in Spain and Germany more than offset the slight deterioration in other markets, with both France and Italy remaining stable.

Slide 17 shows the key performance data for FCE. Firstly, FCE's margin increased compared to the same period in 2011, primarily reflecting the reduction in borrowing costs. The increase in FCE's cost efficiency ratio in 2012 primarily reflects the reduction in average loans and advances from the prior period. FCE's underlying operating costs remained broadly flat versus the same period last year. FCE remains committed to aligning its cost structure with the size of its business going forward.

Credit losses were covered in previous slides. FCE's return on equity increased from the same period last year, reflecting the reduced average equity level arising from the 2012 dividend, as well as lower effective rate of tax during the period. This was partially offset by the reduction in profit before tax.

Slide 18 shows the trend of pretax profit over the last five years. The green or light bars show the reported profits and the darker blue bars show the adjusted profits. The purpose of showing the adjusted profit is to share what FCE management regards as the underlying profits after taking out exceptional items, fair value adjustments to financial instruments and foreign exchange adjustments. Those adjustments are detailed in page seven of the interim report.

Reviewing this slide, it should be noted that FCE has generated solid profits throughout the recent economic crisis, although broadly speaking, the profit trend has been slightly downward in recent years, reflecting the reduction in loans and advances.

On the next slide, I will cover an explanation of the reduction in adjusted profits in the first half of 2012 compared to the first half of 2011 by main causal factor. However, for guidance on the outlook, in 2012, FCE expects its adjusted profit before tax to be lower than 2011, reflecting reduced revenue from lower average net loans and advances. These effects are expected to be partially offset by reduced borrowing costs due to the improved credit rating of FCE and its parent.

Moving to slide 19, at GBP91 million, adjusted profits for the first half of 2012 were GBP18 million lower than the same period last year. The right-hand side of the chart shows the main variables that explain this change.

Firstly, total income increased by GBP28 million as the effects of lower receivables were more than offset by improved borrowing costs and increased revenues from FCE's short-term leasing operation in Germany. The increased costs associated with the revenue growth in the German leasing operation are included in the GBP18 million increase in depreciation costs shown in the next bar.

Also, relative to last year, residual value performance of the German short-term lease portfolio has been lower than expectations, resulting in a GBP22 million year-over-year reduction in profits.

Moving forward, FCE has amended its short-term leasing business to reduce the volatility created by changes in residual values.

The final two bars show GBP6 million negative impact due to the impairment losses and all other factors.

I will now move to the final slide, slide 20, to recount FCE's performance in the first half of 2012. FCE continued to generate solid profit, earning GBP81 million pretax profit in the first half. Credit losses and delinquencies remained stable despite the economic environment and some markets deteriorating. FCE is growing its financing share, although declines in vehicle sales means that loans and advances have reduced. The funding plan is on track, with a return to investment grade expected to result in improved funding costs over time. Finally, FCE's Tier 1 capital remains strong at about 20%.

Thank you, and now back to Molly.

Thank you, Paul. Ladies and gentlemen, we are going to start the question-and-answer session now. Katina, can we please have the first question?

(Operator Instructions) Stephanie Renegar, JPMorgan.

Thank you very much for taking my question. Just a few. The first one is just on your comments about dividend. Can you point to the uncertainties? I mean, we are well aware what is going on in the papers with the European crisis. But given you are now investment-grade, and you have now rolled off the funding outside of the Ford brand, it is a bit surprising, that comment. I just wanted to know a bit more clarity on that.

And then also about your processes to improve collections in Italy, I didn't know if you had further color about what you're doing there, given how tough the economic environment is at this point.

Thank you, Stephanie. Let me take the question on the dividend capital. We will consider for the dividend the prevailing market conditions and the risk characteristic of our business. Our goal is always to keep and maintain a strong investment-grade balance sheet, so that is what we are going to target. As we said earlier in the presentation, beyond that, we are not in a position to provide any further guidance on a future dividend.

Okay.

This is John Coffey. With regard to Italy, we're thinking of replicating some of the practices we invoked when we went through our issues in Spain. With the benefit of being a European bank, we can take learnings across jurisdictions and we are shoring up some of the actions, consistent with actions taken in the Spanish market.

Okay. Yes, and I can see that delinquencies there have fallen a lot. Is the credit loss performance mainly in the consumer side, or is it in the dealership side in Italy?

It is primarily in the consumer side.

All right. Thank you very much.

(Operator Instructions) I would now like to turn the call back to management for closing remarks.

Thank you, Katina. Ladies and gentlemen, that concludes today's call. Thank you very much for joining us.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.