Transcript Confidence, transparency and growth: the paradigm for UCI retail

NEW EUROPE: UCIs SECOND
HOME MARKET
Paolo Fiorentino
Head of New Europe Division
ING EMEA Financials Conference 2004
London - April, 20th 2004
AGENDA
UCI Group and New Europe Division Highlights
Why New Europe
Strategy and Business Model
Recent Results and 2004 Outlook
2
UCI AT A GLANCE
FY2003 KEY FIGURES
MKT CAP.
Euro 25.4 bn1
NET INCOME
Euro 1,961 mln
REVENUES
Euro 10,465 mln
TOTAL ASSETS
Euro 238 bn
DIRECT DEPOSITS
Euro 135 bn
BRANCH NETWORK
4,6373
1 As
2
of 15 April 2004
Calculated on end of period net equity, excluding 2003 net income
ROE2
17.7%
3
C/I RATIO
54.5%
3
KFS: 100%
TODAY THE NEW EUROPE DIVISION ACCOUNTS FOR 16% OF THE
GROUP’S TOTAL REVENUES
Weight on 2003 Group
revenues pre Corporate
Centre and elisions
44.6%
Retail division
29.6%
Corporate
division
10.1%
15.7%
Private & AM
division
New Europe
division
Pekao
Clarima
UBM
Pioneer
Zagrebacka
Bulbank
UBCasa
Xelion
BMC
Locat
Employees (Dec 2003)
Italy1
o/w
o/w New Europe
1 Including
other countries ex-New Europe
KFS
UniBanka
70,851
Branches (Dec 2003)
4,637
40,982
29,869
o/w Italy
o/w New Europe
o/w other countries
3,275
1,355
7
4
UC Romania
Zivnostenska
UCI ACQUIRED A LEADING ROLE IN NEW EUROPE BEING AMONG THE
TOP PLAYERS IN THE MOST RELEVANT MARKETS
Group Pekao - Poland
UniBanka - Slovakia
77.1%, acquired in October 2000
Total assets (Euro mln)
940
Market share on Loans
6%
Market share on Deposits
4%
53.0%, acquired in May 1999
Net income (Euro mln)
2.7%
40.1%
7
Branches
Warsaw
68
Prague
Zagreb
Bosnia-Herzegovina
81.9%, acquired in March 2002
Total assets (Euro mln)
Bucarest
7,627
Market share on Loans
25%
Market share on Deposits
31%
Net income (Euro mln)
114
Branches
193
26.5%
1.5%
Sofia
Istanbul
6.6%
Zivnostenska Banka
Czech Rep.
3.7%
1,492
Market share both on loans and on dep.
Net income (Euro mln)
End of 2003 data
Other presences: Pekao Ukraina, Koc Azerbaijan
2%
6
Branches
174
2%
1%
3
28
85.2% acquired in October 2000
Total assets (Euro mln)
Market share on Loans
Market share on Deposits
Net income (Euro mln)
Branches
1,444
10%
18%
47
91
Koç Fin. Serv. - Turkey
97.7%, acquired in February 2003
Total assets (Euro mln)
99.9%, acquired in May 2002
Total assets (Euro mln)
Market share on Loans
Market share on Deposits
Net income (Euro mln)
Branches
Bulbank - Bulgaria
Pioneer
Total AuM in New Europe of Euro 2.3 billion
(as at 31.12.03)
12,915
11%
15%
195
801
UniCredit – Romania
Bratislava
Zagrebacka Group-Croatia
Total assets (Euro mln)
Market share on Loans
Market share on Deposits
Net income (Euro mln)
Branches
18.4%
26
5
Weight of the bank Total Revenues on Division Total Revenues – only UCI’s portion; balance due to Demir
Romlease,Demir Securities, ZBT, ZBAM, and Xelion Poland
50%, acquired in October 2002
Total assets (Euro mln)
Market share on Loans
Market share on Deposits
Net income (Euro mln)
Branches
5,226
4%
5%
116
148
AGENDA
UCI Group and New Europe Division Highlights
Why New Europe
Strategy and Business Model
Recent Results and 2004 Outlook
6
NEW EUROPE: A LARGE MARKET WITH HIGH GROWTH POTENTIAL
Year 2003 data
Population, mln
GDP, Euro bn
EU
NE(12)
Total
377
176
552
9,307
728
10,035
Per Capita GDP, Euro
24,686
4,135
18,179
Loans +Deposits, Euro bn
17,919
561
18,480
Loans+Deposits/GDP %
193%
70%
183%
3.9
GDP Growth
3.5
2.8
1.9
0.9
Excl Turkey
 8% of EU
GDP
3.8
2.8
2001
New Europe
 47% of
current EU
population
4.4
1.6
2000
Weight of country’s
GDP on Total NE area
GDP in 2003 (%)
2002
0.4
2003e
EU*
2004-06**
7
Note: NE (12) including all countries which already started a more or less advanced process for EU convergence. In
particular, those set for enlargement in May 2004, plus Bulgaria, Romania, Turkey and Croatia.
*EU only for this figures is referred to EU12; **2004-2006 CAGR
Turkey
28.9
Poland
25.5
Czech Rep.
11.0
Hungary
10.3
Romania
6.9
Slovakia
4.0
Croatia
3.4
Slovenia
3.3
Bulgaria
2.4
Baltics
4.4
NE GDP (bn)
728
 UCI is present in the
most relevant NE
countries (82% of GDP
in the area)
STILL UNDERDEVELOPED RETAIL MARKET
Breakdown of retail
financial assets
BANKING PENETRATION in 2003
(Loans+Deposits)/GDP
Share loans retail
over total loans
193%
50%
New
Europe1
Cards per ths
inhabitants2
34%
Pension
Funds
18%
Mutual
Funds
15%
Retail
Bank
Deposits
33%
33%
70%
EU
Life
Insuran.
EU
New
Europe1
Non Interest
Income/Total
revenues in 2003 (%)
EU3
9%
7%
11%
73%
New
Europe4
1,280
54.3
 Lower weight of Asset
Management, expected to
partially substitute deposits
35.6
349
EU
1
3
New
Europe1
UCI’s
UCI’s
3 Italian NE banks
Banks
Poland, Hungary, Slovenia, Czech Rep., Slovakia, Estonia, Latvia,
Lithuania, Bulgaria, Romania, Croatia, Turkey,
8
2001 data considering France, Germany, Italy, Spain and UK as proxy for EU
2
4
 Mortgages and consumer
credit expected to be the key
retail products
2001 figures
Countries with UCI’s presence
DECREASING RISKS AND GROWING STABILIZATION
Countries
with UCI
presence
SK
EU
entry
date
Moody’s
Rating
Upgrade
Apr 03Mar 04
May
2004
A3/stable
 NE declining risk represented by fast
decreasing country spread compared to
Euro area yield curve
Spread
SUEMI*
31 Mar 04
13.43
1000
May
2004
A1/stable
PL
May
2004
A2/stable
44.09
BG
2007
Ba2/stable
++
131.21
HR
20071
Baa3/stable
107.10
RO
2007
Ba3/stable
+
169.04
TK
Not
defined
yet
B1/stable
248.80
800
*Spread over Euro yield Interest Rates Curve - SUEMI
600
400
200
S uemi Latin
9
S uemi New Euro pe
29/02/04
30/12/03
30/10/03
30/08/03
30/06/03
30/04/03
28/02/03
0
30/12/02
CZ
S uemi General
AGENDA
UCI Group and New Europe Division Highlights
Why New Europe
Strategy and Business Model
Recent Results and 2004 Outlook
10
NEW EUROPE DIVISION: STRATEGIC OBJECTIVES
 Clear N.1 Banking Group in New Europe for profitability, value creation, cost/income and
AUMs
 Different strategic focus with:
 “Leading Banks” in 3-4 countries: N.1 player in the market, focused on constant
improvement of bottom line while maintaining market shares and fulfilling their institutional
role within local communities
 “Emerging Leaders” in 3-4 countries: banks focused on growth through enlargement of
Golden Customer’s base (customer acquisition program) with final goal of being in the “top
5” in the market
 Future growth driven mainly by organic growth (with some potential acquisitions)
 Best risk manager in the New Europe region
 Focus on building a long term sustainable franchise and on assuring higher customer
loyalty, through a superior quality of services
 Possible completion of geographic coverage in New Europe, also leveraging on
“managerial hubs” (eg. Zaba, Pekao)
11
UCI’s COMMERCIAL PRESENCE IS RELEVANT IN THE REGION: 1.355
BRANCHES IN 8 COUNTRIES AND ALMOST 18,300 FRONT OFFICE STAFF
…
Slovakia
Poland
FO staff
PFAs¹
Branches
FO staff
Branches
~11,800
~ 125
801
~600
68
Romania
FO staff
Branches
Czech Republic
~350
28
Pekao
FO staff
Branches
~400
26
Bulgaria
Zivno
UniBanka
FO staff
Branches
UCR
Croatia & Bosnia
Herzegovina
Bulbank
KFS
FO staff
Branches
~2,400
193
12
79 operative PFAs + 45 PFAs on training in Xelion Polska
Turkey
FO staff
Branches
 18,300 Front-office staff
 1,355 Branches
1
~950
91
~1,750
148
… SUPPORTED BY SPECIALISED SERVICE MODELS BY SEGMENT
SERVING AROUND 6,6 MILLION CLIENTS IN THE AREA
 Each Bank has a specific divisionalised organisation:
 Pekao has 4 business divisions (Family, VIP-SME, Private, Corporate)
 KFS and Zivno have 3 business divisions (Retail, Private, Corporate)
 Zaba, Bulbank, UCR and UniBanka have 2 business divisions (Retail, Corporate)
Corporate
N° of Clients
N° of dedicated
Salesforce
Target
Products
~60.000
Private
Golden
clients
SB/Affluent
~1 mln
~5,5 mln
1.100
14.200
 Cash
Management
 Trade finance
 Structured and
Project
Finance
 Leasing
 For Affluent:
AUM, Life
insurance,
Packages,
Credit cards
Mortgages
 For SB:
Packages
Lending
 AUM
 Packages
 Credit cards
13
Family
Banking
 Accumulation
plans
 Pension Funds
 Packages
 Credit cards
 Mortgages
KNOW HOW TRANSFER THROUGH CROSS BORDER PROJECTS AND
UCI MANAGEMENT’S COMMITMENT (PARTNERSHIP COMMITTEE)
Projects
People
 A team of ~45 expatriates covering key
positions in 7 countries (Commercial
and Control functions)
 Around 100 projects launched
during 2003 in NE banks

 A team of ~70 people in NE Division
supporting the banks in their key
strategic projects
 Planning & Development






Retail & Corporate
Credit risk & processes
Organisation & HR
IT Strategy
Legal issues
Cross Border projects
UCI/New Europe
Cross border transfer of
niches of excellence in New
Europe banks
 A variety of areas of intervention





 A group of ~20 people in UCI Holding
dedicated to NE banks
14
Launch of new products
Client acquisition
Network expansion
Sales performance culture
Credit processes and tools
AGENDA
UCI Group and New Europe Division Highlights
Why New Europe
Strategy and Business Model
Recent Results and 2004 Outlook
15
RESULTS SO FAR
Total Revenues
(Euro mln)
1,619
Operating Income
CAGR
+19.8%
(Euro mln)
Net Profit for the Group
CAGR
+30.8%
CAGR
+69.7%
307
715
786
244
1999
(Euro mln)
2003
1999
ROE
37
1999
2003
Cost/Income
Branches
+13.2
pp
17.4%
2003
+635
Branches
-13.1 pp
69.0%
1,355
55.9%
720
4.2%
1999
2003
1999
Perimeter for 1999: Group Pekao only; for 2000 and 2001: Group Pekao, Bulbank, 16
Unibanka and Splitska (sold in Apr. 02); for 2002: Group Pekao, Zagrebacka Banka,
Bulbank, UniBanka, UniCredit Romania; for 2003: Group Pekao, Zagrebacka Banka,
KFS, Zivnostenska, Bulbank, UniBanka, UniCredit Romania
2003
1 Including
1999
KFS 100%
At Current FX
20031
2003 RESULTS SHOW A GOOD GROWTH OF NET INCOME THANKS TO
HIGHER NET COMMISSIONS, COST CONTROL AND LOWER
PROVISIONS NEEDS
At unchanged FX
Total revenues
- o/w net interest income1
- of which commissions
Operating income
Net write-downs of loans
Attr. Net Income
y/y % ch.
 NET INCOME FOR THE GROUP up 45.5% y/y
1,619
-3.2
1,036
-3.6
418
+26.9
715
-10.7
-139
-61.5
307
+45.5
+3.8 pp
Cost of Risk
17.4%
117 bp
Cost/Income
55.9%
+3.7 pp
FY03
y/y % ch.
ROE
At unchanged FX
-72
 Net interest income -3.6% y/y mainly hit by
Pekao results, acceleration in 4Q03 (+3.7%
on 3Q03) primarily thanks to Pekao and Zaba
 Higher growth in net commissions benefiting
from development of AUM3 products (stock:
+54.1% y/y)
 Operating costs +3.6% linked to IT
investments and variable staff compensation
 Decreased cost of risk (117 bp), improved
NPL and Doubtful loans coverage ratios
bp2
 VOLUMES:
(Euro mln)
Loans
11,848
+3.2
Deposits
20,555
+0.5
2,346
+54.1
AUM3
1
FY03
(Euro mln)
Excluding dividends
2 Deducting extraordinary provisions from 2002 stated figure
3 New Europe business area of Pioneer
 Customer loans up 3.2% supported by higher
growth in Croatia, Bulgaria and Turkey
negatively impacted by Poland
 Further switch from deposits to AUM
17
ITAS
NE BANKS POSITIONING IN KEY RETAIL PRODUCTS IS
IMPROVING …
Achievements/Positioning
Key issues
AUM
Mortgages
 Leverage on Pioneer expertise
 Segment-tailored AUM products
 Development of innovative structured
products with TLab and UBM
 Enrichment of product offer (Mortgage +
Life Insurance)
 Cross selling commercial campaigns
(Pekao)
 Development of cooperation agreements
with external partners (real estate agents)
 Sales process optimization: fast and
easy process, highly skilled salesforce
and dedicated location (Pekao, Bulbank,
Unibanka)
 High credit quality, thanks to the
implementation of application processing
system and the adoption of sound credit
policies
 Launch of mortgages in UCR
18
1
Pioneer Market Share in Poland
2 In Romania MFs are going to be launched
 Leaders in MFs: Pekao ~ 30% market
share1, Zaba ~49% and Bulgaria ~40%,
Other NE banks are in top five
competitors list2
 Leading position in Structured Time
Deposits
 Bulbank and Zaba: first movers in
structured products (Bulbank also in
MFs)
 Excellent sales results:
 Zaba: Leader with 40% market share
 Pekao: strong acceleration in LC
mortgages in 1Q04
 Bulbank: 133% volume growth and
+68% in new mortgages
(1Q04/1Q03)
 UniBanka: sales of mortgage loans
started in July 2002 reaching the 5th
position in the market
… THANKS TO A NUMBER OF PRODUCT INNOVATION
PROJECTS RUNNING …
Key issues
Bancassurance
Cards (Debit
and Credit)
Small
Business
1
Achievements/Positioning
 Completion of distribution
agreements (Allianz1, Aviva2) and
product innovation (Unit Linked for
Bulbank and Zaba as first movers in
2004)
 Zaba and Pekao leaders in 2003 new
business (life) to be considered good
starting point
 Implementation of complete
product offer based on client
segmentation across NE Banks
 UCI / NE Banks treated as Key Global
Client by MasterCard
 Launch of revolving cards in all NE
Banks
 Launch of card business in UCR
 Instalment payment option launched
for all KOC Credit Card (400 K – EOP
2003)
 Massive Visa Electron issuing at
ZABA (500 K - in 9 months)
 New distribution channels
 Adequate risk management and
organisation
 Dedicated service model with
Relationship managers with micro/
small business portfolios assigned
 Joint service model (SB + owner) to
cross capture opportunities
Life: Bulgaria, Croatia, Poland (pre JV agreement),
Slovakia,Turkey. Non Life: Romania
2 Life: Czech Republic.
19
 First movers in launch of dedicated
packages
 Specific credit product offer
 Dedicated SB leasing offer in Pekao and
Zaba
 Implementation of CPA tool - Client Profile
Assessment
… ALSO IN CORPORATE BANKING
Key issues
Cash
Management
Achievements
 Specialised cash management units in
all NE banks:
 Focus on upgrading the product shelf
 Introduction of new value added
products (cash pooling, direct debit,
etc.)
 Offer completed and marketed
 Sales started
 KPIs inserted in all RM targets
 Same training to specialists for
supporting sales
Trade finance
Structured
and Project
Finance
 Interfactoring agreement with UCI
Factoring for cross-border
factoring
 Refocusing of sales force for trade
finance products
 Successful completion
 Increasing capabilities in Project
Finance in key markets (Poland,
Croatia, Bulgaria, Turkey)
 Strenghtened teams in Bank Pekao,
Zaba and Koc
20
 Volumes increased in Zivno and Koc
 Sales force refocus already completed
in Pekao
 Prestigious transactions already won in
Poland (KHGM, Simoldes, SSN, others)
and in Croatia
CAREFUL RISK MANAGEMENT
2002-2004 CREDIT EXCELLENCE PROGRAM, GOOD RESULTS IN 2003
Coverage ratios
Cost of risk1
(bp, annualised)
81.3
79.9
62.6
64.1
-38.1%
1892
Net NPL/
At unchanged Loans %
Dec03
FX
ch. on
Dec02
(pp)
Net
Doubtful/
Loans %
Dec03
ch. on
Dec02
(pp)
Total NE
3.3
-0.1
8.6
-0.2
Ow: Pekao
4.7
+0.9
12.9
+1.6
Ow: Zaba
2.2
-0.7
4.6
-0.8
117
2002
On Gross
Doubtful Loans
2003
On Gross NPLs
2002
2003
 Total provisions on Performing Loans
to 168 mln (+82.8% on Dec02) with an
increase in the coverage ratio (+0.6 pp
to 1.5%)
 Learning organisation (3,800 people involved throughout New Europe)
 5 credit modules designed, set-up and implemented (corporate underwriting, management and
workout, individuals and small business underwriting)
 UCI Group credit corporate governance defined and introduced (i.e. large exposure management,
credit tableau de bord, …)
 Skill assessments and training prepared and launched for roles involved in credit activities
 Tactical actions: credit diagnostics and contingency plan actions
21
1
Calculated as Net Loan Loss Provisions on Net customers Loans at period-end
2
Data obtained deducting extraordinary provisions from stated figure
2004 DIVISIONAL OUTLOOK IS VERY POSITIVE WITH SIGNIFICANT
REVENUE GROWTH EXPECTED MAINLY DUE TO AN INCREASE IN
COMMISSIONS
 Further macroeconomic improvement all over the New Europe area
 Reduction of country risk
 Significant revenue growth with strong push on net commissions
 Volumes growth both in loans and in Assets under Management
 Improvement in cost/income ratio and bottom line results
 Implementation of relevant strategic projects to support future growth






Salesforce management program
Client acquisition and development project throughout New Europe
Network expansion in Turkey and Czech Republic
Customer and employee satisfaction project in Poland and Croatia
Reengineering projects to improve operational efficiency
Credit learning program
 Decrease in cost of risk, with improvement of NPL ratio and increase of the
coverage ratio
22
Annex
23
UNICREDITO ITALIANO: FY03 CONSOLIDATED INCOME STATEMENT
(Euro mln)
Net interest income (incl. div.)
y/y %
ch.
FY03
4Q03
% ch. on
3Q03
% ch. on
4Q02
5,088
-3.8
1,235
+3.1
-4.6
293
+35.6
84
n.m.
+68.0
5,377
+7.7
1,306
+0.2
+7.0
10,465
+1.8
2,541
+1.6
+1.0
-5,703
+1.6
-1,510
+10.3
+2.7
Operating income
4,762
+2.0
1,031
-8.9
-1.2
Goodwill depr.
-264
+7.8
-60
-11.8
+1.7
-1,001
-2.5
-440
n.m.
+32.5
-236
-49.0
-76
n.m.
-75.4
215
-41.1
160
n.m.
-27.2
-1,386
+4.0
-216
-37.7
+18.2
-129
-22.3
-19
-44.3
-34.0
1,961
+8.9
380
-15.4
+8.0
- of which Dividends
Net non interest income
Total revenues
Administrative costs (incl. depr.)
Provisions on loans
Other net provisions*
Net extraordinary income
Taxes
Minorities
Net income
24
* Net write-downs of financial investments, provisions for risks and charges
and provisions to reserve for general banking risk
NEW EUROPE DIVISION: RESULTS BREAKDOWN BY BANK
(Euro mln)
(UCI stake)
Group
PEKAO
(53.0%)
BULBANKUNI BANKA Group UniCredit
(77.1%) ZABA (81.9%)Romania
(85.2%)
(99.9%)
KFS2
(50.0%)
Zivno
(97.7%)
TOTAL1
Interest margin (incl. div.)
510
50
27
257
7
162
26
1,042
Net non interest income
344
37
13
108
10
46
16
577
853
87
40
365
17
208
43
1,619
-490
-34
-29
-201
-12
-94
-35
-904
- of which: Staff costs
-243
-14
-13
-112
-6
-40
-15
-446
- of which: Other costs
-182
-15
-13
-65
-5
-40
-13
-336
363
53
11
164
5
114
7
715
-107
+6
-7
-27
-2
-39
-2
-177
-103
+5
-5
-4
-1
-29
-2
-139
Net income
195
47
7
114
3
58
6
427
Net income (UCI’s portion)
104
40
5
93
3
58
6
307
ROE
14.9%
20.2%
10.1%
21.7%
10.5%
28.6%
7.0%
17.4%
Cost/income
57.5%
39.1%
73.4%
55.1%
71.4%
45.1%
82.9%
55.9%
Total revenues
Operating costs (incl. dep.)
Net operating income
Net provisions
- o/w: Net write-down of loans
1 Balance
due to roundings and other small companies
2 Consolidated with proportional method (50%)
25
Banks’ data net of consolidation adjustment
ITAS
PEKAO 2003 KEY HIGHLIGHTS: IMPROVED PROFITABILITY
THANKS TO HIGHER COMMISSIONS AND LOWER PROVISIONS
NEEDS AND DESPITE PRESSURE ON NET INTEREST INCOME
At unchanged FX
FY03
 MACROECONOMIC TREND IN POLAND:
y/y % ch.
(Euro mln)
853
-16.3
- o/w net interest income1
512
-19.0
- of which commissions
234
+30.5
363
-34.5
-103
-67.1
104
+14.8
Total revenues
Operating income
Net write-downs of loans
Attr. Net Income
ROE
Cost of Risk
Cost/Income
14.9% +2.2 pp
-3.3 pp
198 bp
57.5% +11.8 pp
 Economic strenghtening (GDP+4.7% 4Q03/4Q02, +3.7%
FY03/FY02) reverting the upward trend in NPLs ratio, started in
1996
 150 bp cut of interest rate creating pressure on net interest
income
 Recovery in households savings and change in customer
behaviour supported sale of mutual funds
 IMPROVED PROFITABILITY thanks to commissions growth
and reduced Cost of Risk
 Net interest income down 19.0% y/y mainly impacted by
decreased spread on deposits (from 2.6% to 1.7%) and debt
securities (from 2.4% to 1.5%)
 Net commissions up 30.5% y/y benefiting from increased AUM2
(stock +85.5%, mkt share +6.5 pp to 30.4%) and from quality
upgrade of C/A
 Increased coverage ratio on doubtful loans (64.5% in Dec03 from
62.1% in Dec02) and on NPL (82.3% vs. 81.4%)
 SPECIAL PROJECTS:
At unchanged FX
Loans
Deposits
AUM2
1
Excluding dividends
2 PPIM
FY03
y/y % ch.
(Euro mln)
5,192
10,071
-12.6
2,146
+85.5
-5.2
 Development of credit scoring system
 New IT implementation allowing further optimisation of staff level:
headcount -6.4% to 16,641 and -6.3% to 15,826 at bank level
 VOLUMES:
 Customer loans down 12.6% y/y: decreased corporate lending
and FX mortgages partially counterbalanced by a good increase
in local currency retail mortgages flow
26
Data net of consolidation adjustment
ITAS
2004 PRODUCT FOCUS, LEVERAGING ON ECONOMIC GROWTH,
SALESFORCE AND BRANCH MODEL
MACROECONOMIC SCENARIO
Continued economic recovery:
 GDP: +4.2% in 04E (+3.7% in 03)
cagr 04/06 4.8%
 Loans: +10.2% in 04E (+8.1% in
03) cagr 04/06 +9.8%
 Deposits: +5.0% in 04E (+3.7% in
03) cagr 04/06 +6.5%
Evolving households preferences
in terms of saving products
(AUM/Total deposits1 from 10.3% in
2003 to 12.1% in 2004)
2004 PRODUCT FOCUS
 Push on mortgages:
 Strong market growth +29% in 2004e
 Shorter granting process, enriched product offer,
new distribution channels through alliances
 Selective focus on lending to SME and Mid
corporate
 Leader in mutual funds:
 Product enrichment, leveraging on Pioneer expertise
 Increased client penetration and new clients
acquisition
 Accumulation Plans (PAK) offer
Stabilisation of interest rates, still
with pressure on margins
 Focus on commissions generating products:
 Massive charge/credit cards campaign
 Continued upgrade of current accounts
 New cash management offer
Positive impact of economic
recovery on loan portfolio quality
and on cost of risk
 Decreased NPL ratio
 Improvement in NPL portfolio management and
workout activity
1
Including AUM
27
GOOD RESULTS IN 2003 FOR ZABA, KOC AND ZIVNO; PROMISING
FORECAST FOR 2004
2003
RESULTS3
2003 MAIN
ACTIONS
Zagrebacka
KFS
1
Varazdinska Banka
2
Capital Accumulation Plans
2004 STRATEGIC PRODUCTS
AND FORECAST
 Divisionalisation
and segment based
product innovation
 Credit process
optimisation
 Preparation activity
for Integration of
VABA1 in Zaba
 Strong increase in
 Cross selling and retention
operating income
activities
(+28.2% y/y)
 Further efficiency improvement
 Good cost control
after the merger of VABA1 in
(-2.7% y/y)
ZABA and of the two Bosnian
banks
 Higher loans mkt sh.
(to 25.2%, +1.2 pp), mkt
 Market Shares consolidation
sh. in AUM at 49%
 Implementation of
new
organisational
model and
reinforcement of
management team
 Improved service
model and credit
process
 Strong contribution of
net commissions
(+79.2% y/y) driven by
AUM (mkt sh. 13%)
 Significant revenue
growth (+45.8% y/y)
 Costs under control
(-1.2% y/y)
 Strong acquisition of new clients
 Network expansion (+20 branches)
 Launch of new products (C/A
packages, Pioneer funds, PAC2)
 Increase in net commissions with
strong push on AUM, package
products and credit cards
 Repositioning of
local Brand
 Increase in revenues
with flat costs
 Strong improvement
in bottom line
results
 Strong acquisition of new clients
 Network expansion: around
+100% in n° of branches
 Improvements in efficiency
 Increase in market shares
3
at unchanged FX excluding for KFS
28
Data net of consolidation adjustment
ITAS
TREND IN VOLUMES AND COMMERCIAL INDICATORS
VOLUMES (at unchanged FX)
Loans (Euro bn)
Deposits (Euro bn)
Assets under Management1
(Euro bn)
+3.2%
+0.5%
+1.0%
11.5
11.7
11.8
Dec02 Jun03 Dec03
+54.1%
+1.7%
20.4
20.2
20.6
Dec02 Jun03 Dec03
+14.7%
1.5
2.0
2.3
Dec02 Jun02 Dec03
COMMERCIAL INDICATORS
Branches2
Front Office Staff/
Tot. Staff2
Active Customers2 (mln)
6.0
1,347 1,355
59.7% 61.1%
other
15%
Dec02 Dec03
Dec02 Dec03
29
1
New Europe business area of Pioneer
2
KFS is included at 100%
6.6
15%
Dec02 Dec03
ITAS
golden
2003 SUCCESSFUL COMMERCIAL ACHIEVEMENTS SUPPORT THE REVENUE
GENERATION
IMPROVEMENT IN MARKET SHARES
PEKAO
BULBANK
 Corporate Loans +61% on Dec02, mkt share
 Euro 1.7 bn AUM in Mutual Funds1 (+112%
+1.3 pp (to 11.7%)
 Flow of new mortgage +68.5% (to 10.3 mln)
 +66.000 clients (+24.3% on Dec02)
on Dec02)
 Market Share in Mutual Funds2 +6.5 pp (to
30.4%)
 Euro 154 mln AUM in Pension Funds
UNIBANKA
(+39.6% on Dec02)
 Euro 95 mln AUM in Accumulation Plans
 Euro 12.2 mln AUM (from 3.1 mln in 2002)
 +30% Affluent clients (to 19,500)
 +40 bp mkt share on Deposits
ZABA
 Euro 82 mln AUM in Mutual Funds (+36.8%




on Dec02)
Euro 10 mln in Life Insurance (+97.4% y/y)
+110,000 C/A in 2003 (to 1.7 mln)
Flow of new mortgage +33.8% (to 340 mln)
Total loans mkt share +1.2 pp (to 25.2%)
UCROMANIA
 Loans +105% (to Euro 110 mln)
 Deposits +110% (to Euro 99 mln), mkt sh.
+50bp (to 1,1%)
 New retail C/A +90% (to 13,000)
KFS
ZIVNO
 Euro 1,6 bn AUM (+91.8% on Dec02)
 +1,000 new active Private clients (+21.6%)
 1° in leasing, among top 3 in AM
 Credit and Debit Cards +33%
30
1
Mutual funds distributed by Pekao
2
Total PPIM Mutual Funds
PGAM GROUP: QUARTERLY EVOLUTION OF 2003 NET
SALES AND DEC02-FEB04 AUM TREND
(Euro mln)
AuM as of
31.12.2002
2003 Quarterly Net Sales
AuM as of
29.02.20042
1Q03
2Q03
3Q03
4Q03
80,759
632
1,253
-126
372
85,876
90,237
3,741
226
566
253
915
5,878
6,170
US
17,665
962
1,149
703
993
21,884
23,480
US in USD
18.525
1,035
1,299
794
1,177
27,639
29,157
1,522
284
362
331
69
2,347
2,659
103,687
2,104
3,330
1,161
2,349
115,985
122,546
1,517
107
191
256
411
2,449
2,710
Italy
International (ex-Italy)3
New Europe
TOTAL PIONEER
Alternative Investments3
More than 80% through UCI NE Banks
31
Balance due to market and FX effects
2 Provisional figures including ING (not included in 2003 data). ING AUM as of 29.2.2004: 2,867 mln
3 Including Momentum
1
AuM as of
30.12.20031
THE 2002-2004 “REACHING CREDIT EXCELLENCE IN NE” PROGRAM:
DECREASING COST OF RISK IN EACH PHASE OF THE PROCESS FOR
ALL THE CUSTOMER SEGMENTS
Underwriting
1.
Corporate
2.
Electronic
underwriting
tool
Credit rating
system
Management
Workout
4. Credit
management
system
8. Credit corporate
governance
6. Workout
systemt
5. Anomalies
management
system
Small
Businesses
Cross-bank project
3. Application
processing
system
7. Collection
system
Retail
32
9. Credit Tableau de
Bord
10. Learning
organisation (3,800
people involved
throughout New
Europe)
STRUCTURE OF THE REACHING CREDIT EXCELLENCE
DIPLOMA
Module 1: Credit organization,
Module 2: Underwriting
Module 3: Specialized lending
strategy and policies
 Provide a broad
perspective of the entire
credit system, illustrating
the logics behind the
definition of credit
strategies and policies
 Provide a hands-on
experience of UCIs most
advanced credit
underwriting
methodologies and
processes
 Provide an overview of
the main specialized
lending products and
services
Module 4: Credit monitoring
Module 5: Workout and debt
and management
restructuring
 Provide an
understanding of UCIs
most advanced logics,
methodologies and
processes for Corporate
and SB credit monitoring
 Illustrate UCI most
advanced logics and
methodologies for the
workout of Corporate
and Retail not
performing loans
33