Central Eastern Europe everything on track? Gianfranco Bisagni, Deputy Head of UniCredit CEE Division

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1 Central Eastern Europe everything on track? Gianfranco Bisagni, Deputy Head of UniCredit CEE Division London, March 2014

2 Differentiation across countries is the rule of the game (differently from 2000s) Annual real GDP growth, %* F TR RO RS RU HU SK BH BG UA HR CZ SI CEE CEE ex RU, TR Source: National Statistics Offices, UniCredit CEE Strategic Analysis * Official annual data for BG, SK, and RS have not be published yet therefore the annual figures is estimated using the quarterly figures for 1Q13-4Q13, data for HR, BH and SI are the latest UniCredit Research forecasts, data for TR are the latest Yapi Economic Research forecasts

3 A number of CEE countries are feeling some pressure Exchange rates, index Dec 2012 = Turkey, Russia, Ukraine, Hungary Poland, Czech, Romania, Serbia First indications of Fed tapering Fed announces tapering TRY vs EUR HUF vs. EUR RUB vs EUR UAH vs USD CZK vs EUR RSD vs EUR RON vs EUR PLN vs EUR 2 Source: Bloomberg, UniCredit CEE Strategic Analysis

4 Others SEE Central Europe CEE Banking sector Not a fully fledged credit crunch Lending growth in CEE countries, % avg Poland Czech R. Slovakia Hungary Slovenia Croatia Serbia Bosnia-H. Romania Bulgaria Turkey Russia Ukraine CEE Region Positive yoy growth Negative yoy growth 4 CEE is including Russia and Turkey; Source: UniCredit

5 Both credit boom and credit crunch belong to the past Lending and deposit growth in CEE, % avg 40% 30% CRISIS Loans Deposits MORE BALANCED FUNDING MODEL 20% 10% 0% CEE is including Russia and Turkey; Source: UniCredit

6 Local funding and higher capitalization - building a new model Assets (% share on total) Liabilities (% share on total) Other Assets CEE w/o TR, RU (1), CEE w/o TR, RU (1) Other Liabilities Loans MFIs 12% 11% 11% 14% Capital External Assets Securities 10% 13% 8% 18% 22% 3% 19% 14% 4% External Liabilities Debt Issued Loans 58% 58% 57% 63% Deposits* 53% Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Sep-13 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Sep-13 6 * incl. Deposits MFIs (1) Calculated at constant FX=2008; SOURCE: Local Central Banks, UniCredit CEE Strategic Analysis

7 Asset quality still one the major downside risk factor. Improvement to be gradual Impaired loans and CoR in CEE Impaired loans Impaired loans, % CoR, bps (rhs) Country Romania Ukraine Hungary Serbia Croatia Slovenia Bulgaria Bosnia-H Russia Poland Czech R. Slovakia Turkey SOURCE: Central Banks, UniCredit CEE Strategic Analysis

8 Others SEE Central Europe Banking sector - some countries still under pressure Profitability in CEE Banking markets Poland Czech R. Slovakia Hungary Slovenia Croatia Serbia Bosnia-H. Romania Bulgaria Turkey Russia Ukraine CEE Region Profit Loss 8 Source: UniCredit, Central Banks

9 Thank you 9

10 10 Annexes

11 TR RU CZ PL SK BH BG RS HR UA RO HU SI CEE CEE w/o TR, RU Brazil India China Indonesia Italy Germany Austria Despite several challenges, CEE banking sector remains profitable and shows much higher profitability than major WE countries Return on Assets 2013, % (1) 2013 CEE B(R)IIC WE (1) Data for Western Europe and B(R)IIC according to IMF, China as of 2012 SOURCE: UniCredit CEE Strategic Analysis, UniCredit Group Strategic Planning, UniCredit Research

12 Regulatory actions in single CEE country call for better harmonization across the Region Purposes Financial stability Consumer protection Main regulatory initiatives in CEE Estonia Latvia Lithuania Bank Levy FTT Czech Poland Belarus Slovakia FX lending Discussion Ukraine on D-SIBs & Capital Requirement Moldova Limits Romania Over-regulation Bosnia Turkey Lack of harmonization 12 SOURCE: UniCredit CEE Strategic Analysis

13 The competitive landscape is gradually changing What happened so far EUR4.1bn Russia USD 3,5bn Turkey EUR 0,5bn CEE EUR 0.9bn Slovakia EUR4bn Trends Some Western European banks have started to scale back their investments abroad In particular, some international players leaving non-core markets Poland EUR0.5bn Poland EUR 126mn Serbia 100% shares of AstraBank Sale USD 83mn Ukraine Merger Some consolidation in Russia and a growing role of the state banks Turkey remains an attractive market Ukraine: main foreign players are rethinking their strategy 13 Source: Press