BRE Bank Group Results Q The Financial Targets May Be Exceeded

Transcription

1 BRE Bank Group Results Q The Financial Targets May Be Exceeded Management Board, BRE Bank SA Presentation for Investors and Analysts 2 August

2 Agenda Introduction Summary of Q Results New Strategic Initiatives Expansion of the MultiBank Branch Network Bancassurance Project BRE Bank s Results, Q Business Line Results and Highlights Analysis of Financial Results Q Appendix Detailed Results of Business Lines, Q Additional Information: Selected Financial Data Macroeconomics 2

3 Agenda Introduction Summary of Q Results New Strategic Initiatives Expansion of the MultiBank Branch Network Bancassurance Project BRE Bank s Results, Q Business Line Results and Highlights Analysis of Financial Results Q Appendix Detailed Results of Business Lines, Q Additional Information: Selected Financial Data Macroeconomics 3

4 Summary of Q Results Q Targets 2006 PLN 180 M PLN 249 M Net Profit Pre-tax Profit PLN 380 M Pre-tax Profit 18.4% ROE (Net) 23.6% ROE (Pre-tax) 10.4% Solvency Ratio 64.7% C/I 18.0% ROE (Pre-tax) ca % Solvency Ratio 66.0% C/I Unless indicated otherwise, the presented financial figures are for the BRE Bank Group 4

5 Summary of Q Results Dynamic Dynamic growth growth in in balance balance sheet sheet items items Continued Continued very very active active presence presence in in the the financial financial markets markets Ongoing Ongoing improvement improvement of of the the risk risk portfolio portfolio quality quality ROE ROE pre-tax pre-tax much much above above the the target target (23.6% (23.6% v v 18% 18% targeted targeted for for 2006) 2006) In view of the Q results, the Management of BRE Bank believe that the 2006 financial targets may be exceeded C/I C/I at at 64.7% 64.7% below below the the annual annual target target (66%) (66%) 5

6 Agenda Introduction Summary of Q Results New Strategic Initiatives Expansion of the MultiBank Branch Network Bancassurance Project BRE Bank s Results, Q Business Line Results and Highlights Analysis of Financial Results Q Appendix Detailed Results of Business Lines, Q Additional Information: Selected Financial Data Macroeconomics 6

7 New Strategic Projects Expansion of the MultiBank Branch Network (1/5) The MultiBank branch network has proved successful in sales zł Monthly Sales of Mortgage Loans per Branch (PLN 000) Average for Branches in Operation > 4 Years zł zł zł zł No. of customers 7,740 No. of accounts 5,320 Deposits (PLN M) zł 0 zł PKO PEO BPH BZWBK MIL KDB MultiBank Source: ZBP (Polish Banks Association), Bankier Loans (PLN M) 254 7

8 New Strategic Projects Expansion of the MultiBank Branch Network (2/5) Current branch network of MultiBank MultiBank had 83 Branches at the end of June The MultiBank network did not change in Q Q Q 2006 docelowo Financial Services Centres Partner Outlets 8

9 New Strategic Projects Expansion of the MultiBank Branch Network (3/5) Rationale of the Expansion Branches remain the main channel of customer acquisition Most existing branches in large cities will reach the point of saturation by 2009 Technology with the capacity to support many more customers Personalised service will continue while growing the number of MultiBank customers Goals of the Expansion To tap the market potential in large cities (complementary to the existing CUF and PP network in cities with the best potential) To reach out to microenterprises in smaller cities and towns To grow the profitability of MultiBank after 2009 beyond the original targets Customer Acquisition Channels Structure Evryday Service of MultiBank Customers Remote channels: Internet, Telephone 96% Call Center +Internet 10% CUF+PP 74% Independent Advisors 16% CUF 4% Advice provided to customers at the turning points in their personal and professional life PP Partner Outlet CUF Financial Services Centre 9

10 New Strategic Projects Expansion of the MultiBank Branch Network (4/5) MultiBank Branch: On-going innovation The MultiBank Branch of the Future Complements the existing network of CUF and PP in the cities of the largest potential Adjusts to service customers in the strategic segments (mass affluent) Activates the functions of sales and advisory, and undergoes major changes including: -Outsourcing of cash operations -New functionality and layout -Stronger role of the Meeter Greeter Remains the image leader Core functions Auxiliary Functions Goals 2001 Actual Education Sales Sales Advisory Transaction Advisory Branch of the Future Transaction Advisory Education Sales support Education Transaction Communication & image Communication & image Communication & image 10

11 New Strategic Projects Expansion of the MultiBank Branch Network (5/5) Branch of the Future Lower capex (on average per branch, PLN) to reach the breakeven faster (on average, months) Total cost approx. PLN 40 M CUF CUF of the future PP PP of the future 56 new Branches of the Future: 1.5 M CUF M CUF M Branch of the Future Capex per branch down 30% (on average) Operating cost per branch down 25% (on average) Financial Services Centres (CUF) in the largest cities (population over 100 thousand) 26 Partner Outlets (PP) in smaller cities and towns (population thousand) Impact of the Project on MultiBank s pre-tax profit PLN M (6) (21) (4)

12 Agenda Introduction Summary of Q Results New Strategic Initiatives Expansion of the MultiBank Branch Network Bancassurance Project BRE Bank s Results, Q Business Line Results and Highlights Analysis of Financial Results Q Appendix Detailed Results of Business Lines, Q Additional Information: Selected Financial Data Macroeconomics 12

13 New Strategic Projects Bancassurance Project Project Goals and Customer Profile Aware of the potential and profile of mbank and MultiBank customers Insurance Market Premiums 2005 (approximately PLN 30 B) 90% Customer Group Self-directed Profile Want to make independent financial decisions, look for best products and prices Financial Needs Information, price, speed, control Validators Partly interested in finance, expect advice in more complex decisions Information, security, advice in complex transactions Delegators Perceive finance as boring and frustrating; want others to make decisions Advice * As declared by customers in a BRE Bank customer survey (only retail customers) 10% Spending of BRE Bank s Retail Customers* (approx. PLN 3 B) EU 7 Poland Germany Italy France Self-directed 45% 58% 67% 25% 44% Validators 37% 26% 27% 41% 36% Delegators 10% 4% 3% 21% 10% mbank s target customer group Not categorised 8% 11% 4% 13% 10% we want to prove that we can give them an attractive alternative to what insurance agents offer Source: Forrester Research 13

14 New Strategic Projects Bancassurance Project BRE Ubezpieczenia - Business Model Price: significantly lower than in other distribution channels Distribution: sales and service on-line and by phone Aggregated Financial Services: customer service fully integrated with the Bank s service process and IT systems Key Success Factors Products: transparent and easy to understand, easy purchase and service, more flexible than other market products (range of options, modification after purchase) Choice: supermarket offering products from 4-5 insurers Insurance can be sold successfully if the product and the process fit the mbank and Multibank mission Result Projected Impact on Financial Result of mbank + MultiBank PLN M

15 Agenda Introduction Summary of Q Results New Strategic Initiatives Expansion of the MultiBank Branch Network Bancassurance Project BRE Bank s Results, Q Business Line Results and Highlights Analysis of Financial Results Q Appendix Detailed Results of Business Lines, Q Additional Information: Selected Financial Data Macroeconomics 15

16 Business Line Results and Highlights, Q Analysis of Results: Pre-tax Profit by Business Line (PLN M) Pre-trax Profit by Business Line, Q v Q (PLN M) Corporate Banking Investment Banking Retail Banking (+PB) Asset Management -23.9%* +39.8% % / Q Q Net provisions * The results of the Corporate Banking Line in Q include PLN 30 M of released provisions which had a significant impact on the Q results (H net provisions at +PLN 8.5 M v. H net provisions at -PLN 25.3 M) 16

17 Business Line Results and Highlights, Q Corporate Banking: Summary of Q Growing volumes Lending up 13.5% YTD Deposits up 4.3% YTD and up 14.5% QoQ Continued expansion into the SME market - 1,150 new customers* i.e. 20% more than in H % are SME customers Further improvement of profitability of subsidiaries Pre-tax profit up (YoY): -BRE Bank Hipoteczny: up 58% -BRE Leasing: up 86% New corporate branch standard New philosophy and role of the Branch: - comfort, speed, quality of service - Conference & business centre * Total new customers; gross growth 17

18 Business Line Results and Highlights, Q Corporate Banking: Customers Corporate Customers Number and Structure 2005 v Q The Bank had 10,609 corporate customers at the end of June The number of K2 corporate customers up by 126 (net), K3 customers up by 449 year to date 928 K1 937 K K K2 929 K K2 576 new customers acquired year to date, incouding 371 corporate customers in Q2 alone +126 customers 2006 Customer Acquisition Target and Actual (Net Number of New Corporate Customers) K2 50% of the annual target Target K K K customers K3 43% of the annual target

19 Business Line Results and Highlights, Q Corporate Banking: Growth in Loans and Deposits 10,0% 8,0% deposits Lending* up by 13.5% year to date 6,0% 4,0% 2,0% 0,0% Apr % 37% 56% 58% 5% loans Jun-04 Aug-04 5% Oct-04 Dec-04 Feb-05 BRE Bank s share in the corporate loans and deposits market % 39% Source: NBP reports Corporate Loans (PLN B) Corporate Deposits (PLN B) % 60% 5% Apr-05 Jun-05 K1 K2 K3 Aug-05 Oct % Dec-05 Feb-06 49% 41% 10% Apr-06 Jun % 45% 9% Deposits* up 14.5% (QoQ) in Q BRE Bank s corporate loans (PLN 8.3 B at the end of June, up 14% year to date) as a percentage of corporate loans in the sector were 6.3%, compared to 5.8% at the end of 2005 and 6.0% at the end of March 2006 BRE Bank s corporate deposits as a percentage of corporate deposits in the sector were 8.4% in April 2006 * i.e. enterprises including the public sector, synidicated loans and project finance 19

20 Business Line Results and Highlights, Q Analysis: Net Interest Income and Pre-tax Profit of Corporate Banking Pre-tax profit in Q down by PLN 28 M YoY, mainly due to PLN 30 M provisions released in Q following the repayment of NPLs Higher overhead costs of the Bank allocated to the Line (IT and credit risk projects) Net interest income helped by the growing loans portfolio, including the BBH mortgage loans Growing contribution of subsidiaries to the profitability of the Corporate Banking Line: share of over 63% in the pre-tax profit Net Interest Income Line s Pre-tax profit Q1 2005* Q2 2005* Q Q Q Q ** PLN 000 PLN 000 Q1 2005* Q2 2005* Q Q Q Q * Q1 and Q data based on Q1 and Q quarterly reports **PLN 30 M of repaid lost debt 20

21 Business Line Results and Highlights, Q Retail Banking and PB: Summary of the Quarter Profitability Pre-tax profit PLN 23.7 M in Q QoQ growth: Market Expansion -Number of customers up 6.6%, -Deposits up 9.0%, -Loans up 26.4% Leader in Mortgage Loans Fourth largest provider of mortgage loans five months into the year Share in the market of new mortgage loans up from 5.8% at the beginning of February 2006 to 12.5% (ZBP, at May 2006) ebroker s Success Incremental sales at PLN 1.7 B since service launch Total number of accounts over 23.5 thousand ebroker and MultiBank brokerage customers generated 16% of BRE Bank Securities stock market trading in H

22 Business Line Results and Highlights, Q Retail Banking: Summary of the Quarter [thou] [M] Customers mbank Current accounts MultiBank Q M customers customers M accounts accounts PLN PLN B retail retail deposits deposits Change +6.6% +6.6% +6.9% +6.9% +9.0% +9.0% Q M customers customers M accounts accounts PLN PLN B B retail retail deposits deposits 4000 [M] Deposits mbank Assets under Management MultiBank PLN PLN B retail retail loans loans +26.4% +26.4% PLN PLN B B retail retail loans loans Loans mbank incl. mortgage loans MultiBank including: including: PLN PLN B mortgage mortgage loans loans +29.5% +29.5% including including PLN PLN B B mortgage mortgage loans loans 22

23 Business Line Results and Highlights, Q Retail Banking: Summary of the Quarter BRE Bank: fourth largest provider of mortgage loans Fast growing share in the market of new mortgage loans: 12.5% share of BRE Bank s Retail Banking Line at the end of May 2006 (up 5,8 pp since the end of February 2006) BRE s Retail Banking has 167 thousand microenterprise customers In Q2 2006, 10.7 thousand microenterprise customers were acquired (annual target: +30 thou); PLN M loans granted to microenterprises at the end of June 2006, of which 55% were mortgage loans Banks by Value of Retail Mortgage Loans, by 31 May 2006 (PLN B) BRE Bank s Retail Banking Line Microenterprise Customers (thou) 3,5 PKO BP 1,9 1,8 Bank BPH Source: ZBP, own calculations Millennium 1,5 BRE Bank* 1,0 GE Money Bank Mieszkaniowy ,9 74,7 39,0 42,4 46,0 103,7 113,9 121, mbank MultiBank *mbank+multibank 23

24 Business Line Results and Highlights, Q Analysis: Net Interest Income and Pre-tax Profit of Retail Banking (+PB) Pre-tax profit up to PLN 23.7 M in Q (vs. PLN 8.6 M in Q ) Highest growth in total income among all Business Lines Highest growth in the BRE Bank Group: -Net interest income up 33.9% YoY -Net commission income up 57.4% YoY Growth in costs due to further expansion and network development (up 41% YoY), higher than the Group average, but much lower than the growth in income Contribution of the Line to the Group s pre-tax profit up from 4.4% in Q to 10% in Q Net Interest Income Line s Pre-tax Profit Q1 2005* Q2 2005* Q Q Q Q PLN 000 PLN 000 * Q1 and Q data based on Q1 and Q quarterly reports Q1 2005* Q2 2005* Q Q Q Q

25 Business Line Results and Highlights, Q Investment Banking: Summary of the Quarter Continued High Profitability Pre-tax profit high both in Q1 and Q Reduction of Proprietary Investments Trading Profit Still High Proprietary investments portfolio down by 54% YoY Another very good quarter in fx trading, a much higher share of transactions with corporate customers 25

26 Business Line Results and Highlights, Q Investment Banking Fast Growing Share of Recurring Transactions Investment Banking Line s Income Structure H Project finance; 12% Debt securities issues; 3% Transactions with customers; 31% BRE Securities; 15% Other; 4% Financial Markets 65% Treasury; 5% Trading; 30% Growing share of recurring transactions: transactions with customers, debt securities issues, project finance, Treasury, and DI BRE The vast majority of the trading volume realised as a market maker Corporate customers interest in hedging rose due to increased volatility of financial markets 26

27 Business Line Results and Highlights, Q Investment Banking: Market Share and Position BRE Bank s Market Share* in Investment Banking Services (BRE in navy blue) BRE Bank in the Market of Non-Treasury Debt*** at (PLN M) 9.0% 18.8% 38.0% 19.4% #1 14.3% #2 26.8% #1 5.4% #5 BRE Bank s Market Share Treasury bills and bonds IRS/FRA OIS , ,6 Market BRE Bank 9.75% 25.9% 3.5% 5 755, ,6 FX Spot & Forward WIG20 options Syndicated loans** 2 041, , ,2 185,0 Short-term debt Corporate bonds Bank bonds Municipal bonds * At ; own calculations based on NBP and GPW figures ** At *** After Fitch Polska S.A., Rating & Rynek, and own calculations 27

28 Business Line Results and Highlights, Q Investment Banking: BRE Bank Securities (DI BRE) DI BRE pre-tax profit PLN 13.4 M (up 22.6% year on year) DI BRE equities trading PLN 9.4 B in H DI BRE trading up in H much above the market average: DI trading up by a factor of 3 YoY; GPW trading up by a factor of 2.2 DI BRE Equities Trading, H PLN M DI BRE Market Share after Q2 2006, trading volume * Equities 5.8 % #7 Bonds 2.0 % Futures 13.6 % #2 Options 38.6 % #1 * Based on GPW, DI, PBD figures # Q Q Traded via ebroker and MultiBank Brokerage Service Traded directly by DI BRE DI BRE market share in equities trading up from 4.1% in 2005 (3.8% in H1 2005) to 5.8% in H Growth driven by the expanding share of ebroker and Brokerage Service in DI BRE s volume (from 14.8% in Q to 16.7% in Q2 2006) No of accounts with DI BRE emakler (mbank) Brokerage Service (MultiBank) TOTAL 19.7 thou 23.5 thou 1.6 thou 44.8 thou 28

29 Business Line Results and Highlights, Q Investment Banking: Proprietary Investments At the end of Q2 2006, the Bank s proprietary investments portfolio was PLN M at cost The portfolio was down by PLN 97.1 M, or 26%, compared to the 2006 opening balance The major transaction of Q was the renegotiation of agreements with NIFs and an additional payment of PLN 25 M for the shares of Vectra SA Proprietary Investments (PLN M) Major Proprietary Investments at Share in equity -54% -54% Vectra SA* 18.89% PZU SA 0.76% Garbary Sp. z o.o % Novitus SA 10.00% *Share in votes: 11.20% At cost Balance sheet value 29

30 Business Line Results and Highlights, Q Analysis: Net Interest Income and Pre-tax Profit of Investment Banking PLN 000 Line s Pre-tax Profit Q1 2005* Q2 2005* Q Q Q Q Pre-tax profit of PLN 58.5 M close to the Q profit and up 87% year on year Profit growth driven mainly by the Bank s growing trading income** Corporate customers more actively buying hedging instruments, especially in May and June DI BRE s growing contribution and positive impact of released NPL provisions in project finance * Q1 and Q data based on Q1 and Q quarterly reports ** includes trading on financial instruments and sales to corporate customers of the Bank 30

31 Business Line Results and Highlights, Q Results of the Strategic Subsidiaries Strategic investments at PLN M* Up by PLN M, mainly the acquisition of 100% of BRE Bank Hipoteczny (January 2006) and capital increase at BBH (April 2006) The strategic subsidiaries generated PLN M of pre-tax profit (up 84% YoY) Pre-tax Profit of Major Strategic Subsidiaries reported in their individual financial statements (PLN M) *) Balance sheet value at **) BBH H results under PAS BBH** BRE.locum SAMH DI BRE Banku BRE Leasing Intermarket Bank PTE S-E Polfactor Transfinance Magyar Factor BRE Finance France CERI BCF Bank* PLN M 56% Subsidiaries PLN M 44% Magyar Factor Polfactor 1,1% 2,2% Transfinance 2,2% Intermarket Bank 4,4% BRE Leasing 5,2% BRE Bank Hipoteczny 7,6% Investment Banking*** 4,4% SAMH 6,0% PTE Skarbiec- Emerytura 3,5% Other companies** 7,2% * Bank s pre-tax profit less consolidation adjustments (ca. PLN 11.9 M) ** Other companies: BRE.locum, CERI BRE Bank Group Subsidiaries Contribution to the Pre-tax Profit Subsidiaries: Corporate Banking Investment Banking Asset Management *** The Investment Banking Line includes: DI BRE, BRE Corporate Finance, BRE Finance France,Tele-Tech Investment, Garbary 31

32 Business Line Results and Highlights, Q Analysis: Net Interest Income and Pre-tax Profit of Asset Management The Asset Management Line reported a PLN 8.6 M pre-tax profit in Q2 2006, compared to a PLN 9.8 M loss in Q High growth in net commission income Assets under Management PLN 000 crucial to the Line s operating profit YoY growth PTE Skarbiec-Emerytura generated an individual pre-tax profit of PLN 8.6 M in H and Skarbiec Asset Management Holding a pre-tax profit of PLN 15.1 M Line s Pre-tax Profit PLN 000 Q1 2005* Q2 2005* Q Q Q Q * Q1 and Q data based on Q1 and Q quarterly reports 32

33 Business Line Results and Highlights, Q Structure of BRE Bank Group Results Income * Cost 49; 6% 335; 44% 30; 6% 246; 47% 173; 23% 209; 27% Pre-tax Profit % 150; 29% 92; 18% Retail Banking (+PB) Investment Banking Corporate Banking % * Including credit provisions and other operating income and costs All figures in PLN M Other % 7.7% ** Other under Pre-tax Profit includes: PLN M Asset Management PLN 8.76 M Other and Consolidation adjustments 33

34 Agenda Introduction Summary of Q Results New Strategic Initiatives Expansion of the MultiBank Branch Network Bancassurance Project BRE Bank s Results, Q Business Line Results and Highlights Analysis of Financial Results Q Appendix Detailed Results of Business Lines, Q Additional Information: Selected Financial Data Macroeconomics 34

35 Analysis of Financial Results, Q Q (PLN M) Change YoY Change QoQ ** Total income % +12.5% Total cost (638.4) +31.4% Operating profit* % Net provisions (32.8) % Pre-tax profit % Net profit % +12.1% +13.4% -54.8% +27.5% +28.6% * Before provisions ** Against the quarterly results published on 28 April

36 Analysis of Financial Results, Q Loans and Deposits +43% +14% 21,8 19,4 19,2 20,4 21,9 19,0 19,5 14,8 15,2 16,0 15,5 16,9 +3% +5% -3% 25% 13% +14% -1% +8% -4% +12% Loans: Loan portfolio continues to grow fast: up 12.7% QoQ (up 43% YoY including the consolidation of BBH) Loan portfolio growing above the market average (market up 6% QoQ), mainly due to expansion in retail loans and further QoQ growth in corporate loans Deposits: Deposits YoY growth above the market average (BRE Bank: up 14% v. market up 10%) Following the seasonal decline in Q1 2006, corporate deposits picked up (up 10% YoY and 17.5% QoQ) 36

37 Analysis of Financial Results, Q Income (Q v. Q2 2006) Q Net interest income Net commission income Dividend income Trading profit Income from investment securities Net other operating income/cost Q PLN M +5.4%

38 Analysis of Financial Results, Q Net Interest Income, Net Commission Income (Q v. Q2 2006) Net Interest Income Net Interest Income (consolidated figures, PLN M) Down 5.7% QoQ due to the decline in the bonds market As a result, the interest margin down to 2.05% p.a., compared to 2.24% p.a. in Q and 2.19% p.a. at the end of 2005 Positive impact of the growing loans portfolio: interest on loans up 5.2% QoQ Q Q Q Q Other Trading debt securities Credits and loans Investment securities Cash and shortterm deposits Net Commission Income Up 6.1% QoQ and 30.6% YoY Highest growth in: portfolio management fees (up 46.5% QoQ), broker s fees (up 22.4% QoQ) and bank card fees (up 22.7% QoQ) * BRE Bank Group margin as net interest income to net assets Q Q Q Q Net Commission Income (consolidated figures, PLN M) Other Bank cards Guarantees and documentary transactions Portfolio management fees Lending 38

39 Analysis of Financial Results, Q Trading Profit (Q v. Q ) PLN M PLN 89.5 M Trading Profit Q Trading Profit Q Transaction gains less losses 47% Other trading profit 6% Net fx gains/losses from conversion 47% Transaction gains less losses 83% Other trading profit 4% Net fx gains/losses from conversion 13% Other trading profit includes: + PLN 14.0 M on market risk instruments - PLN 5.5 M on equities + PLN 3.2 M on interest rate instruments Other trading profit includes: - PLN 8.8 M on market risk instruments - PLN 5.1 M on equities + PLN 17.8 M on interest rate instruments Positive trend in trading sustained, share of transactions with corporate customers growing considerably 39

40 Analysis of Financial Results, Q Cost BRE Bank Group Overhead Costs (+Amortisation/Depreciation) by Quarter (PLN M) +8.2% Q Q Q Q Q Q Q figures based on the Q report +1.3% C/I down to 64.7% in Q2 2006, below the 2006 financial target (66%) Overhead costs up 1.65% QoQ, to PLN 220 M in Q Stable amortisation/depreciation: down 0.3% QoQ YoY growth in costs due to: - Consolidation of BRE Bank Hipoteczny - Expansion of retail banking and the branch network - Bonus provisions (Bank): PLN 42.5 M in H (PLN 41.5 M in H1 2005) -Amortisation/depreciation up 19.3% YoY due to the implementation of IT systems, both at the Bank and the Group subsidiaries 40

41 Analysis of Financial Results, Q Credit Provisions Provisions Down, Coverage Up Q Net Impairment of Credits and Loans (consolidated figures, PLN M) Q Q Q Q Q Q Q Q Q Net impairment of credits and loans at PLN 10.2 M in Q (including PLN 4.5 M at BRE Bank) Major provisions released (PLN 22 M) for 2 developer projects (project finance loans) Major factors improving credit provisions: -Improving financial standing of Bank customers -Lower probability of default (PD) - Lower loss-given default (LGD) 41

42 Analysis of Financial Results, Q Structure of BRE Bank s Risk Portfolio 12.4% 11.8% 10.8% 9.2% 8.5% 7.2% 6.1% 100% 4,4 4,3 4,4 3,9 3,9 3,5 3 Reduced default portfolio Improved ratio of default 80% 60% 95,6 95,7 95,6 96,1 96,1 96, % provisions 68% 63% 60% 65% 20% 65% 67% 77% 0% Non-default Default PLN M % share % share Default Non-default Total NPLs under NBP rating (NPLs to total loans) Specific provisions to the default portfolio 42

43 Summary Dynamic Dynamic growth growth in in balance balance sheet sheet items items Continued Continued very very active active presence presence in in the the financial financial markets markets Ongoing Ongoing improvement improvement of of the the risk risk portfolio portfolio quality quality ROE ROE pre-tax pre-tax much much above above the the target target The 2006 financial targets may be exceeded C/I C/I below below the the annual annual target target 43

44 Agenda Introduction Summary of Q Results New Strategic Initiatives Expansion of the MultiBank Branch Network Bancassurance Project BRE Bank s Results, Q Business Line Results and Highlights Analysis of Financial Results Q Appendix Detailed Results of Business Lines, Q Additional Information: Selected Financial Data Macroeconomics 44

45 Appendix Detailed Results and Highlights of Business Lines: Corporate Banking Retail Banking and Private Banking 45

46 Appendix Corporate Banking: Business Expansion: New Customers In H1 2006, the Bank acquired nearly 1,150 new corporate customers, including 649 in Q2 alone, Total New Corporate Customers % up 20% year on year More than 81% of new customers are SMEs In H1 2006, the Bank won 737 new customers who bought service packages, up 79% year on year and up 132% compared to H New SME Package Customers (EFFECT Packages) H H % % H H H

47 Appendix Corporate Banking: Loans and Deposits % 37% Corporate Loans (BRE Bank, PLN B) % % % 8.33 K1 K2 8% Corporate Deposits (BRE Bank, PLN B) % 39% 39% 52% % 8.8 K3 56% 58% 56% 59% 60% 39% 41% 40% 40% 45% Corporate 5% 5% 5% 5% 5% 8% 10% 10% 8% 9% 12' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' '2006 Loans (including the public sector, syndicated loans and project finance) were up 13.5% year to date Corporate loans were up 14.1% Following a (seasonal) fall in deposits in Q1 2006, deposits grew significantly since April to PLN 14.9 B (up 14,5% QoQ in Q2 2006) Corporate deposits grew 6% (QoQ) in Q

48 Appendix Corporate Banking: Growing Loans in the EFFECT Plus SME Package Growth in Credit Exposure (PLN) under EFFECT Plus Packaes January June 2006 The number of new contracts was 232 in H1 2006, up 56% compared to H % +211% H H The volume of new credit contracts was up 211% compared to H (and up 375% YoY) H The average volume of an overdraft facility under the EFFECT Plus Packages was up 24% in H compared to the 2005 annual average Jan Feb March Apr May Jun Jul Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun Incremental Monthly 48

49 Appendix Corporate Banking: Foreign Trade Service and Risk Management Products L/C Foreign Trade Products Opened/Advised Collection Profit on Financial Instruments (PLN M) +28.1% +2.4% +2.9% H H H H H H Import L/C Export L/C Import collection Export collection Head Office Branches The leading market position in foreign trade service, in particular close co-operation with exporters the most competitive and innovative market players, helped to grow L/C income by 6.1% and collection income by 9.4% YoY In H1 2006, the profit on financial instruments grew slightly YoY; the growth in Q was 13.8% YoY 49

50 Appendix Corporate Banking: Cash Management Supporting Long-term Customer Relationships Cash Management Strategic Product Line Supporting Long-term Customer Relationships Direct Debit (thou transactions) Identification of Mass Payments (M transactions) Identification of Trade Payments (thou transactions) +69.9% +10.1% +14.3% H H H H H (average)* H The extensive cash management service. including the identification of payments (Identification of Mass Payments, Identification of Trade Payments, Payment Identification System, added value services for mass suppliers) helped to grow the volume of Direct Debits by half YoY * Q4 monthly average 50

51 Appendix Corporate Banking: Markets Continue to Favour the Leasing and Factoring Business BRE BRE Leasing Leasing The largest market player Sales of the Intermarket Group Companies EUR M +18% Value of executed leasing contracts up 15% (YoY) Pre-tax profit up 51% (YoY), net profit up 49.8% (YoY) H H Leasing Contracts Executed by BRE Leasing (PLN M) % Sales of the Intermarket Group companies in H totalled EUR 2.26 B Pre-tax profit of the Intermarket Group companies in H was EUR 6.07 M Polfactor sales were up 21% (including export factoring sales up 30%) Intermarket Group H H

52 Appendix Corporate Banking: BRE Bank Hipoteczny (BBH) Loans Portfolio (PLN M) Balance sheet volume net of provisions and interest Housing loans* Local government loans Pre-tax Profit (PLN M) 12, % 19, Commercial loans 2 0 H H H pre-tax profit up 57.5% year on year H balance-sheet loans up 18.7% year on year BRE Bank Hipoteczny (BBH) is the second largest issuer of mortgage bonds * As of July Bank Hipoteczny stopped grating loans to retail customers. The volume of housing loans represents the portfolio still managed by the Bank 52

53 Appendix Detailed Results and Highlights of Business Lines: Corporate Banking Retail Banking and Private Banking 53

54 XII Appendix BRE Bank s Retail Banking v. the Market: Deposits and Investment Funds Deposits and Investment Funds * (PLN B) 2006: 2.3% , % 1.7% 2.1% BRE Bank s Retail Banking Line continues to grow well ahead 2, of the market 0 0 I VI XII VI XII VI * At 31 May 2006 BRE Bank (LHS) Market (RHS) Market share 54

55 Appendix BRE Bank s Retail Banking: Investment Funds MultiBank Investment Fund sales totalled PLN 22.3 M in Q2 2006, down sharply quarter on quarter MultiBank customers interest in hybrid funds grew sharply in Q Structure of Assets: MultiBank Investment Funds Debt 10% Money 17% Equity 37% Hybrid 36% MultiBank IF Sales by Quarter (PLN M) Q Q Q Q Q Q mbank Investment Fund sales of PLN 53.4 M in Q mbank customers interest in hybrid funds grew sharply in Q (25% of all funds) The share of money funds also grew Money 14% Bonds 13% Structure of Assets: mbank Investment Funds Hybrid 25% Equity 48% 390 mbank IF Supermarket Sales by Quarter (PLN M) Q Q Q Q Q Q

56 Appendix BRE Bank s Retail Banking: mbank ebroker, MultiBank Brokerage Service Dynamic growth of brokerage services for retail customers ebroker trading exceeded PLN 201 M in June 2006, and Brokerage Service trading was PLN 21 M Incremental trading of PLN 1,740 M for ebroker and PLN 56.1 M for the Brokerage Service since the launch There were over 25 thousand mbank and MultiBank investment accounts at the end of June 2006 mbank and MultiBank customers opened 7,936 investment accounts in Q ,9 Opened Investment Accounts 8,4 10,2 11,4 12,4 15,5 14,1 17,3 18,8 0,7 21,4 1,2 23,5 Aug Sep Oct Nov Dec Jan'06 Feb Mar Apr May Jun ebroker and Brokerage Service Sales by Month (PLN M) 46 74,3 89,9 107,4 232, ,7 mbank ,8 1,6 MultiBank ,5 21,1 Sep Oct Nov Dec Jan'06 Feb Mar Apr May Jun 56

57 XII XII Appendix BRE Bank s Retail Banking v. the Market: Loans BRE Bank s Retail Banking is steadily growing its share in the loans sector (especially for housing loans) 10 Loans (PLN B) 2006: 3.9% Housing Loans (PLN M) 2006: 8.2% 80 7, ,5 3% 2.1% 1.2% % 5.1% 2.9% I VI XII VI XII VI VI XII VI XII VI I BRE Bank is the fourth largest player on the mortgage loans market BRE Bank (LHS) Market (RHS) Market share Banks by Value of Retail Mortgage Loans by 31 May 2006 (PLN B) 3.5 PKO BP *mbank+multibank 1.9 Bank BPH 1.8 Millennium 1.5 BRE Bank* 1.0 GE Money Bank Mieszkaniowy Source: ZBP, own calculations 57

58 Appendix BRE Bank s Retail Banking: Mortgage Loans: Portfolio Structure and Quality BRE Bank s Mortgage Loans Portfolio* Volume of loans (PLN B) Average maturity (years) Average volume (PLN 000) Average LTV (%) NPL (%) *Retail loans At Total PLN FX Structure of the Loans Portfolio (Household Loans) at % 2% 3% 89% Mortgage loans Credit cards Credit lines Other 5% 7% 4% mbank MultiBank 84% 58

59 Appendix BRE Bank s Retail Banking: Dynamics of Sales in Q Customers (thou) Deposits (PLN M) Loans (PLN M) +13.7% +16.5% +71.2% mbank Q Q Q MultiBank Customers (thou) +14.5% Deposits (PLN M) % Loans (PLN M) % Q Q Q Volume Increment 59

60 Appendix BRE Bank s Retail Banking: Expansion of the Distribution Network 120 mbank Distribution Network 160 MultiBank Branches Q Q 2006 Target Q Q 2006 Target Financial Centres mkiosks Financial Services Centres Partner Outlets mbank opened 1 Financial Centre and 4 mkiosks in Q mbank s distribution network had 61 units at 30 June 2006 MultiBank had 83 Branches at the end of June 2006 The MultiBank network did not change in Q

61 Appendix Additional Information: Selected Financial Data Consolidated Profit and Loss Account under IFRS Interest Income Structure, Interest Margin Fee and Commission Income Structure Cost Structure Balance Sheet Analysis Structure of Assets and Liabilities Non-performing Loans 61

62 Appendix Additional Information: Selected Financial Data Consolidated Profit and Loss Account under IFRS PLN 000 By quarter * Q Q Q Q Q Net interest income Net commission income Dividend income Trading profit Income from investment securities Other operating income Net impairment of credits and loans (40 468) (27 738) (22 576) (10 216) Overhead costs ( ) ( ) ( ) ( ) ( ) Amortisation/Depreciation (34 013) (30 121) (43 723) (40 710) (40 577) Other operating costs (13 057) (21 254) (98 935) (43 812) (76 851) Operating profit Share in profits (losses) of associated companies (168) (90) (209) (87) (25) Pre-tax profit Net profit * Q and Q data based on quarterly reports, Q data based on the Q quarterly report 62

63 Appendix Additional Information: Selected Financial Data Interest Income Structure Net Interest Income Q (consolidated figures, %) Net Interest Income, Q by Business Line (consolidated figures, PLN M) Credits and loans 72% Trading debt securities 6% Other 1% Investment securities 4% Cash and short-term deposits 17% 68 Retail Banking (+PB) Corporate Banking Investment Banking, Asset Management Other Net interest income, Q Q1 Q2 Q3 Q4 Q1 Q NIM* *Change in the methodology of calculation of the interest margin: In , NIM was calculated as net interest income to net assets As of Q1 2006, NIM is calculated as net interest income to interest-earning assets 63

64 Appendix Additional Information: Selected Financial Data Commission Income Structure Broker's fees 13% Net Commission Income Q (consolidated figures, %) Other 19% Guarantees and documentary transactions 3% Net Commission Income, Q by Business Line (consolidated figures, PLN M) Portfolio management fees 22% Lending 15% Accounts and transfer fees 13% Bank cards 15% 15.7 Retail Banking (+PB) 66.0 Corporate Banking Investment Banking Asset Management Other and exclusions Net commission income, Q

65 Appendix Additional Information: Selected Financial Data Overhead Cost Structure Overhead Costs (+Amortisation/Depreciation) by quarter, PLN M, consolidated figures BRE Bank Group s C/I (based on average balances) -7.2% 71,73% 69,77% 67,86% 69,26% 66,05% 64, , % -2% +2% -3% -2% 30 0 Q Q Q Payroll Maintenance Depreciation Other

66 Appendix Additional Information: Selected Financial Data Balance Sheet Analysis: Assets PLN mld zł B 42 Structure of Assets PLN B Credits and Loans to Customers* and Portfolio by Customer Category % % 18% 9% 22% ,5 46% 5% 8% 21% 19% 4% 15% 14% 48% 47% % 8% 6% 18% 54% % 5% 8% 9% 56% % % 24% 67% % 62% % 30% 61% * * Amounts due from customers Trading securities Other Amounts due from banks Derivative financial instruments Corporate Retail Public sector * Data based on the Q report * Gross credits and loans 66

67 Appendix Additional Information: Selected Financial Data Balance Sheet Analysis: Liabilities PLN B Structure of Liabilities PLN B Structure of Deposits % 2 6% 8% 2.8 9% % % 58% 19 12% 16% % 6% 8% 13% 57% 62% % 6% 11% 14% 55% % 6% 11% 17% 56% % 62% 37% % , % 42% 8.5 1% 60% 39% * * Liabilities to customers Debt securities in issue Other Liabilities to banks Equity (total) Retail Corporate Public sector * Data based on the Q report 67

68 Appendix Additional Information: Selected Financial Data Non-performing Loans: Portfolio Structure* Falling Share of NPLs in the Portfolio Steady improvement of portfolio quality: NPLs down from 7.2% to 6.1% in Q (NBP rating) thanks to the growing loan portfolio, overall portfolio quality improvement and ongoing restructuring of some of the Bank s exposures, including repayment of loans rated loss Exposure PLN B % Provisions % coverage including: including: Exposure PLN B % Provisions % coverage Regular Standard Watch Irregular Substandard Doubtful Loss TOTAL Provisions shown under IFRS the portfolio provision shown under watch BRE Bank s balance-sheet loans portfolio balance-sheet credit debt (excluding credits not drawn) 68

69 Appendix Macroeconomics 69

70 Appendix Macroeconomics: GDP and Labour Market GDP growing fast, labour market continues to improve GDP growth estimated at more than 5% in Q Fast growing private consumption as the main driver of domestic demand Unemployment falling sharply, employment rising fast, professionally active population down 7% 5% 3% 1% -1% -3% Contribution to GDP growth Q1 03 Q3 03 Q1 04 Q3 04 Q1 05 Q3 05 Q1 06 Individual consumption Investment Others Net exports GDP 21% 20% 19% 18% 17% 16% 15% Jan-04 Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 8% 6% 4% 2% 0% Unemployment rate Corporate wages growth (y/y) 70

71 Appendix Macroeconomics: Inflation and NBP Interest Rates Low inflation, NBP interest rates unchanged No inflation pressure: CPI remains much below the NBP target NBP interest rates unchanged since February 2006 Market expectations of interest rate hikes in 2006 not endorsed by analysts and the Monetary Policy Council 10% 8% 6% 4% 2% 0% -2% CPI y/y PPI y/y Net inflation y/y 8% Official and market interest rates 7% 6% 5% 4% 3% NBP Reference Rate 2Y bonds 10Y bonds 71

72 Appendix Macroeconomics: Loans and Deposits in the Banking Sector Fast growing household loans 40% 30% 20% 10% Deposits dynamics (y/y) 0% Household loans up by nearly 30% YoY in June FX housing loans still growing fast while demand for PLN loans picks up Interest in corporate loans continues to rise steadily: up by 5.1% YoY in June -10% Jan-01 30% 20% 10% 0% Jul-01 Households Loans dynamics (y/y) Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Corporate -10% Jan-01 Jul-01 Jan-02 Jul-02 Households Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Corporate Jan-06 72

73 Contact Jakub Korczak Director, Investor Relations BRE Bank s Investor Relations Officers at your service : Direct line: Secretariat: Fax: jakub.korczak@brebank.pl or Agnieszka Solarz Investor Relations Tel.: Fax: agnieszka.solarzjedrych@brebank.pl Joanna Filipkowska Investor Relations Tel.: Fax: joanna.filipkowska@brebank.pl Visit our Investor Relations website: 73