BANKING MARKET IN POLAND 2014-2016, CEE BANKING SERIES

BANKING MARKET IN POLAND 2014-2016, CEE BANKING SERIES by May 2014 Version: 2014/I/5

TABLE OF CONTENTS (1/4) Slide 1: Executive summary 1. Macroeconomic overview Slide 2: Poland - General overview Slide 3: Key macroeconomic indicators, 2007-2013 Slide 4: Foreign trade statistics, C/A balance, FDIs, 2007-2013 Slide 5: Unemployment and salaries, 2007-2013 Slide 6: Disposable income in households, 2007-2013; income distribution 2012 Slide 7: Consumer confidence Index evolution, 2009-1Q/2014 Slide 8: Warsaw Stock Exchange - Turnover, Market cap and indexes, 2007-2013 2.1. Banking market - General trends Slide 9: CEE banking markets: Size vs. growth matrix, 2011-2013 Slide 10: CEE banking penetration benchmarks - International comparison, 2013 Slide 11: Structure of the Polish Banking System, 2013 Slide 12: Polish Banking System ERA analysis, 1989-2013 Slide 13: Evolution of banking assets by groups of owners (domestic/foreign), 2002-2013 Slide 14: Top 10 foreign investors in the Polish banking market, 2013 Slide 15: Banking assets evolution (LCU, EUR), 2007-2013 Slide 16: Banking assets evolution by groups of banks, 2007-2013 Slide 17: Top 12 commercial banks, market shares, ownership, 2013 Slide 18: Evolution of market shares for top 8 commercial banks, 2011-2013 Slide 19: Concentration of the banking market, 2012 /2013 (Assets, Branches, ATMs, HH Index) Slide 20: Deposits by customer segment evolution, 2007-2013 Slide 21: Loans by customer segment evolution, 2007-2013 Slide 22: Foreign funding evolution, 2007-2013 Slide 23: Non-performing loans value and NPL ratios by type of business segment, 2009-Feb.2014 Slide 24: Non-performing retail loans, ratios by type of product, 2005-2013 2.2. Banking market - Regulatory overview Slide 25: Regulatory overview: Regulatory bodies in the Polish banking market Slide 26: BFG - Deposit Insurance Fund Slide 27: BIK - Credit information Bureau Slide 28: BIG - Regulated commercial/consumer information providers Slide 29: Central Bank interest rates and mandatory reserve policy, 2000-2013 Slide 30: Inter-bank yield curves, 2010-2013 (WIBOR 3M, Polonia O/N) Slide 31: Basel II/CRD implementation status, Capital requirement, own funds and CAR ratio for banks, 2009-2013 Slide 32: Consumer and mortgage lending regulatory changes Slide 33: New taxation initiatives affecting banking sector in Poland, 2013 2

TABLE OF CONTENTS (2/4) 2.3. Banking market - Banking Infrastructure Slide 34: Bank outlets by type of bank, 2008-2013 Slide 35: Employment in commercial banks, bank assets per employee evolution, 2008-2013 Slide 36: Direct employee costs evolution, 2009-2013 Slide 37: ATM number and transaction value evolution 2008-2013, ATM players, 2013 Slide 38: POS number and transaction value evolution 2008-2013, POS players, 2012 3. Retail banking Slide 39: Demographic trends determining future number of bank clients, 2007-2020F Slide 40: Demographic and social trends influencing future number of bank accounts Slide 41: Retail banking clients by segment - pyramid (mass market, affluent, personal and private banking), 2013 Slide 42: Households deposits by sub-segments, 2007-2013 Slide 43: Cash in circulation, cash vs. deposits ratio, 2007-2013 Slide 44: Household loans by sub-segments evolution, 2007-2013 Slide 45: TOP banks serving households sector, market shares, 2012 Slide 46: Deposits of private individuals, structure by currency, 2007-2013 Slide 47: Deposits of private individuals, structure by maturity, 2007-2013 Slide 48: Current account penetration in Poland, Bank account holders demography, 2012 Slide 49: Current accounts of individuals (ROR) at major banks, 2011-2013 Slide 50: Internet and PC penetration in Polish households and in corporate sector, shopping online, 2013 Slide 51: Number of accounts with online access and number of online accounts actively used, 2008-2013 Slide 52: Online Banking - mbank case, 2001-2012 (discontinued) Slide 53: Online Banking - new entrants: ING and Citibank and perspectives for standalone internet projects Slide 54: Mobile Banking - availability of mobile account access, overview of top 10 banks Slide 55: Mobile Banking - concepts of the future: Alior Sync (t-mobile usługi bankowe), new mbank Slide 56: Innovation in payments PKO IKO, PeoPay, ikasa, SkyCash, mpay, Orange Cash, T-mobile, MyWallet, Visa V.me Slide 57: Bill payments market structure, 2012 (discontinued) Slide 58: Investment funds assets evolution, domestic and foreign funds, 2007-2013 Slide 59: Investment funds - top 10 players, 2013 Slide 60: Personal Financial Assets (PFA) structure and evolution, 2010-2013 Slide 61: Loans to private individuals by type evolution, 2007-2013 Slide 62: Mortgage to private individuals by currency evolution, 2007-2013 Slide 63: Mortgage to private individuals new sales, outstanding contracts, 2007-2013 Slide 64: Consumer lending market, volumes and values, 2010-2013 Slide 65: Loans penetration in Poland vs. EU, EUROBAROMETER 2008/2009 Slide 66: Dedicated car loans market, 2009-2012 Slide 67: Value and number of loans and investment products sold by major intermediaries, 2012 3

. TABLE OF CONTENTS (3/4) 3.1. Payment cards Slide 68: Cards issued by type, 2008-2013 Slide 69: Card transactions by type (cashless, cash), share of cash transactions, 2008-2013 Slide 70: Credit card transactions, values, volumes, per card evolution, 2008-2013 Slide 71: Top players in credit cards business, co-branding partners, 2013 4. Corporate banking Slide 72: Corporate subjects by size, number, employment, revenues and profits, 2012 Slide 73: Corporate subjects, revenue and profit evolution, 2008-2013 Slide 74: Corporate subjects, regional distribution, 2013 Slide 75: Corporate deposits and loans evolution, 2007-2013 Slide 76: Top players in the corporate banking market, 2013 Slide 77: Brokerage business, top players, shares of investors groups, 2008-2013 Slide 78: Leasing market, structure by industry, top players, 2008-2013 Slide 79: Factoring market, 2008-2013 Slide 80: Non-treasury debt securities market, 2008-2012 5. Banks' profitability Slide 81: Nominal rates on loans and deposits by segment, implied margins, 2010-Feb.2014 Slide 82: Commercial banks - profitability tree, 2010-2013 Slide 83: Commercial banks - revenue, costs and profits composition, 2013 Slide 84: Commercial banks - revenue, costs and profits composition, 2012 Slide 85: Top 5 commercial banks profitability tree peers comparison, 2013 Slide 86: Segment reporting (1/2): volumes, revenues and profit by segment (retail, corporate, other), 2013 Slide 87: Segment reporting (2/2): volumes, revenues and profit by segment (retail, corporate, other), 2013 6. Banks' valuation and M&A activity Slide 88: Share price performance in the stock market for key listed banks in Poland, 2012/2014 Slide 89: Market multiples for major listed banks in Poland, 3/2014 Slide 90: Strategic control map for major listed banks in Poland, 3/2014 Slide 91: Efficiency of top banks in Poland - cost to income, Assets/Personnel/Branches benchmarks, 12/2013 Slide 92: Acquisition transactions in the Polish banking market (1/3), 2005-2008 Slide 93: Acquisition transactions in the Polish banking market (2/3), 2009-2011 Slide 94: Acquisition transactions in the Polish banking market (3/3), 2011-2013 Slide 95: New entrants, 2013/2014 Slide 96: Mergers in the Polish banking market, 2009-2013 4

TABLE OF CONTENTS (4/4) 7. Top 5 banks - Profiles Slide 97-98: Bank profiles: PKO Bank Polski Slide 99-100: Bank profiles: Bank Pekao Slide 101-102: Bank profiles: mbank Slide 103-104 Bank profiles: ING Bank Śląski Slide 105-106: Bank profiles: BZ WBK 8. Mid-term forecasts Slide 107: Banking assets forecast, 2014-2016 Slide 108: Key retail volumes forecast, 2014-2016 Slide 109: Key corporate volumes forecast, 2014-2016 9. Notes on methodology 5

ASSET PENETRATION IN POLAND IS STILL LOW IF COMPARED TO OTHER CEE COUNTRIES Banking assets/capita, 2013 EUR `000 Banking assets/gdp, 2013 percent BASED ON PRELIMINARY 2013 DATA Slovenia 20.7 Czech Rep. 132.4 Czech Rep. 17.8 Latvia 127.1 Estonia Latvia Croatia Slovak Rep. Hungary 14.9 14.5 12.4 11.5 10.6 Croatia Slovenia Bulgaria Hungary Estonia 123.2 121.0 109.7 107.0 106.8 Poland 8.8 BiH 97.3 Lithuania 7.6 Albania 95.9 Bulgaria 6.0 FYROM Macedonia 94.5 Romania 4.0 Slovak Rep. 86.5 FYROM Macedonia 3.5 Poland 86.2 Serbia BiH 3.5 3.4 CEE 15 weighted average: 8.7 Serbia Lithuania 80.3 64.8 CEE 15 weighted average: 94 Albania 3.3 Romania 57.6 6 Source: Central banks, IMF, National Statistical Offices

BANKING ASSETS KEEP GROWING ACROSS ALL GROUPS OF BANKS Banking assets by group of banks, 2007-2013 in PLN billion IN PLN Domestic commercial banks** 712 929 940 +10 1,034 CAGR* 1,188 1,236 1,279 +3% % change in the period Total 793 1,042 1,057 +10 1,159 1,295 1,350 +4% 1,407 2007 2008 2009 2010 2011 2012 2013 Foreign bank branches 0 31.7 56.1 55.7 54.7 28.5 28.1 32.0 +14% 2007 2008 2009 2010 2011 2012 2013 2007 2008 2009 2010 2011 2012 2013 Cooperative banks +12 48.9 56.5 61.7 70.4 78.4 85.8 96.5 +12% 2007 2008 2009 2010 2011 2012 2013 * Compound Annual Growth Rate ** Bank registered in Poland Source: NBP, 7

IN 2012, BANKS RECORDED ALMOST 54 BILLION PLN IN TOTAL REVENUES AND EARNED 14.3 BILLION PLN (3.4 BILLION EUR) IN NET PROFITS Commercial banks - Profit and loss accounts, 2012 PLN billion 2012 COMMERCIAL BANKS* Revenues 53.3 0.6 53.8 Costs Profits 31.6 12.9 8.8 13.0 2.3 11.2 9.7 17.7 3.4 14.3 Net interest income Net fees & commiss ions FX, trade & other banking revenue Net banking revenue (NBR) Other op. revenue & costs Operating revenue Personnel costs Depreciation Other operating costs Costs of risk (net reserves) Profit before tax & other items Taxes & other items Net profit In % of NBR 59 24 16 (May not always sum to 100% due to rounding) 100 1 101 24 4 21 18 33 6 27 * Excluding foreign bank branches operating in Poland Source: NBP, KNF, GUS, 8

THE VALUATION PREMIUM OF MAJOR BANKS VERSUS SMALLER PLAYERS HAS DISAPPEARED IN 2013/2014 Strategic control map ( March 27, 2014) Market to book value* 3.00 2.75 10 billion PLN 25 billion PLN 50 billion PLN CONSOLIDATED ACCOUNTS 2.50 2.25 2.00 1.75 1.50 Constant market cap curves Quickly growing banks like Alior or BZ WBK enjoy significantly higher valuation multiples (price-to-book ratio) than their peers. The relative overvaluation of major banks (PKO and Pekao) vs. the other banks has disappeared in 2013/2014. 1.25 1.00 0.75 0.50 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 Equity* (PLN billion) * Based on consolidated results for 2013, ratios as of March 2014 Source: banks, press, 9

BANK PROFILE BZ WBK (2/2) Bank financials, unconsolidated figures PLN billion, percent Total assets Market Share*(%) Net banking revenue Net profit ROAE (%) CAGR** +26 52.0 59.1 59.2 4.8 4.9 4.7 7.9 15.8 17.9 18.1 14.7 UNCONSOLIDATED ACCOUNTS PRIOR TO M&A*** 103.4 2010 2011 2012 2013 +20 3.09 3.47 3.81 5.30 2010 2011 2012 2013 +21 0.92 1.16 1.37 1.61 2010 2011 2012 2013 Market share jumped thanks to M&A Profitability is down Recent facts/events In late 2012, BZ WBK announced a business plan for the merged bank for the years 2012-2014. Among other, bank wanted to retain its number-three position in the market and increase substantially its profitability by 15-20% p.a. over the next four years. Significant synergies both on cost and revenue side were expected. Since 2013, BZ WBK has intensified improvements to its flagship retail account offer including a generous reward scheme. Bank also introduced further functionality improvements to its award-winning mobile banking interfaces and intensified sales of card based products, including prepaid. * Share in term of assets ** Compound Annual Growth Rate *** All financials prior to the merger with Kredyt Bank Source: Bank, NBP, Press, 10

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379 powiatów RECENT PUBLICATIONS BY INTELIACE RESEARCH Recent Reports: BANK OUTLETS DENSITY IN POLAND (1/3) GĘSTOŚĆ SIECI PLACÓWEK BANKOWYCH W POLSCE (1/3) GE MONEY BANK OVERVIEW As of March 2006 History & Background Timeline In 1995, GE group purchased a small regional bank: Solidarność Chase D.T. Bank. Bank was rebranded soon to GE Capital Bank. In 1998, GE group purchased another small bank (PAMBank)and converted it to a mortgage specialist: GE Bank Mieszkaniowy In 2004, GE group acquired POS lending specialist :Chrobry with a network of ~1000 POS. Chrobry was renamed to: Dobry Kredyt In 2004, a used car dealers network was created under the GEpard brand, being the main channel for car loans sales As of Jan. 2005, all GE activities in Poland were consolidated under one roof: GE Capital bank Channels GE money bank - 48 branches GEpard, ~200 used car dealers Dobry Kredyt consumer finance 12 outlets and ~1000 POS Expander - 33 branches - financial products distributor* Shareholders General Electric Company 1 99 Other Number of bank outlets per 1000 sq km, by region, 2011 Liczba placówek na 1000 km2 powierzchni wg. województw, 2011r. Liczba/Number >60 40-60 < 40 37 35 Źródło/Source: Concept Description Target Clients Products 67 Affluent individuals and professionals looking for mortgage. Valuing quick processing and flexibility, sometimes not fulfilling lending criteria set by other banks (for example job contract or own funds level) Mass market clients looking for simple and quick consumer loans Only lending products on offer: mortgage refinancing loan credit cards installment loans cash loans car loans Top notch risk management and collection High performing sales staff Fast loan processing and flexibility High margins Control over distributors (GEpard, Expander, Dobry Kredyt) Advanced cross-selling between segments 59 59 52 56 176 66 88 Results Assets PLN billion Market share (%) Loans PLN billion Net Profit PLN billion ROE (%) * Although Expander is distributing products from various banks, GE offer / for example mortgage/ is reported to be favoured ** Compound Annual Growth Rate Source: Inteliace Analysis 28 44 75 48 Średnia / Average = 58 28 38 The Southern and Central Poland have the largest density of bank outlets Południowa oraz centralna Polska są najgęściej pokryte siecią placówek bankowych na km2 BANK OUTLETS DENSITY IN POLAND (3/3) 1 GĘSTOŚĆ SIECI PLACÓWEK BANKOWYCH W POLSCE (3/3) Number of outlets per 1 million inhabitants, by county powiat, 2011 Liczba placówek bankowych na 1 milion mieszkańców, wg. powiatów, 2011r. 10.9 7.4 8.3 9.1 2003 2004 2005 1.6 CAGR** 1.6 1.7 Źródło/Source : Minimum: 126 Mediana Median (443) BAZA PLACÓWEK BANKOWYCH W POLSCE I STATYSTYKA POWIATÓW, 2011 Number of bank outlets per 1 million inhabitants varies a lot on county level Na poziomie powiatów gęstość placówek jest bardzo zróżnicowana Maximum: 947 7.6 8.6 100 200 300 400 500 600 700 800 900 1000 2003 2004 2005 0.14 14.2 51.2 0.30 0.32 2003 2004 2005 20.4 26.7 22.8 1 BAZA PLACÓWEK BANKOWYCH W POLSCE I STATYSTYKA POWIATÓW, 2011 2013 February - Mortgage Lending in Poland 13 May - Banking Market in Poland 13 May - Bank outlets database 13 June - Insurance Market in Poland 13 September - Top 200 CEE banks 13 December - Investment Funds and Asset Mgmt. 13 2014 February - Mortgage Lending in Poland 14 May - Bank outlets database 14 May - Insurance agent commission survey 14 May - Banking Market in Poland 14 upcoming June - Insurance Market in Poland 14 September - Top 200 CEE banks 14 December - Investment Funds and Asset Mgmt. 14 and many other... Visit http://www.inteliace.com for more details