UniCredit Press Conference 2014 EBRD Annual Meeting Roberto Nicastro, UniCredit, General Manager Gianni Franco Papa, UniCredit, Head of CEE Division Luigi Lovaglio, Bank Pekao, CEO Carmelina Carluzzo, UniCredit Bank Austria, Deputy Head of CEE Strategic Analysis Warsaw, May 14 th 2014
Agenda UniCredit history and future steps Banking study on CEE Households net financial wealth UniCredit retail strategy: in CEE Division in Poland
UniCredit was an early mover in Post-Communist Europe Acquisition of majority stake of Bank Pekao (1) Further acquisitions in Turkey, Bulgaria, Slovakia, Croatia (New Europe division) 1999 2000 2005 UniCredit has already become one of the biggest players in Central and Eastern Europe 2004 8 CEE countries join the European Union When 8 postcommunist countries join the EU, UniCredit had already heavily invested in the region First, lasting investment of the Group outside Italy 3 (1) In partnership with Allianz, which then resold its stake to UniCredit Allianz is today a stable shareholder of UniCredit
UniCredit acts as a consolidator in the wider Europe Acquisition of HVB and Bank Austria 2005 The acquisition marks the next big move in the expansion process, leading to the creation of the biggest international banking group in CEE, with a presence in 22 countries Widening of the presence in several countries Strengthening of position in many markets 4
Even throughout the crisis years, CEE showed a remarkable result (and undisputed resilience) CEE (1) Net Profit for the Group EUR mn 1,636 1,751 1,810 1,601 1,260 2009 2010 2011 2012 2013 5 (1) Including Poland. Figures as of December 2013 @current exchange rates
The private foreign banking presence has proved a great advantage for all stakeholders and a major engine of CEE convergence CUSTOMERS Almost everywhere reduction in total spreads and commission level Major widening of products and services availability/drastic upgrade in technology (eg mobile banking) Strong support in capital market access/structured and trade financing COMMUNITIES Major import of stable capital Strong support to FDI and export generator Very remarkable capital stability in the acute moments of crisis (eg 2009 "Vienna initiative") Sharp fall in banking crisis EMPLOYEES Major know how and development opportunity International career opportunities (ca 200 CEE expats working in other UCG banks) 6
After 5 difficult years for the global economy and for the banking sector, UniCredit maintains undisputed leadership in CEE, with a strong franchise and good profitability Data as of 1H2013 Total Assets (1) EUR bn Net Profit (2) EUR mn Number of Branches Countries of presence (3) CEE, % share in Group revenues UniCredit 136 1,007 3,615 116 1,299 3,927 15 19 28 Erste 83 475 1,865 6 57 (4) RBI 82 511 3,042 19 87 SocGen 73 (5) 444 (6) 2,524 16 (7) 15 (6) (8) KBC 56 315 799 (9) 4 31 ISP 39-28 1,294 11 11 OTP 34 175 1,389 9 n.m. 7 (1) 100% of total assets for controlled companies (stake > 50%) and pro rata for non- controlled companies (stake < 50%), except for OTP; (2) After tax before minority interest; (3) Including direct and indirect presence in the 25 CEE countries, excluding representative offices; (4) Results of RBI exclude group corporate, markets and corporate center segments; (5) Total assets for SI, HR and GG as of YE 2012; (6) Excluding SI, HR and GG; (7) Disposal of HU and TR ongoing; (8) Considering presence in core countries only (i.e. CZ, SK, HU, BG), P&L based on underlying figures; (9) Branches as of 2012
With the new Strategic Plan 2013-2018, UniCredit is ready even further to support the customers and communities in CEE; capital allocation in CEE will grow from 26% in 2013 to 32% in 2018 UCG allocated capital contribution split by business / region 8 DECREASING CONTRIBUTION INCREASING CONTRIBUTION DRIVERS OF FURTHER CEE CONVERGENCE CEE (ex. Poland) INVESTMENTS (1) 4 0 CIB Core Italy Germany AG AM Austria Poland Net Financial wealth growth Further maturing of regulatory/judicia ry environment -4-5 -4-3 -2-1 0 1 2 3 4 5 6 7 2013-18 ALLOCATED CAPITAL CONTRIBUTION Circle size 2018 Post Provisions Operating Profit contribution Banking Union 8 (1) Costs CAGR 13-18. Percentage related to the Core Portfolio Note: Turkey consolidated via equity method; for regulatory purposes capital and RWA are reported based on fully consolidated method
Regulatory Evolution Banking Union will benefit also CEE markets. through better stability of the Eurozone and strengthened home-host regulators' cooperation 9
Takeaways UniCredit was an early mover in CEE well before CEE countries joined the EU Convergence East/West was a key mantra 15 years ago and remains valid today UniCredit has invested in countries of the same Continent but diverse to each other in terms of size, demography and GDP dynamics, building up a balanced portfolio of mature and emerging markets We continue to believe that CEE will outgrow WE in the next five years in terms of GDP We continue to see good space for banking penetration, as CEE remains on average under-banked as opposed to WE 10
Annex: UniCredit has unique competitive advantages 1 Superior Commercial Banking platform 2 Strong presence in fast growing countries and businesses 3 CIB leadership Excellent reach in EU Undisputed leader in CEE Consolidated position Total assets, 1H13 (2), bln 2013, League table loans & bonds (4), ranking 136 1 st 1 st 4 th 8 th #1 digital bank in Italy Mobile banking clients (1), % UC G Peer 1 Leading online trading platform in EU # Transactions (3), mln Peer 2 Peer 3 Ital y Germany Profitability above peers RoAC 2013 (5), % Austria CEE 27.0 27.2 14 13 UC G Peer 1 Peer 2 Peer 3 UC G Peer 1 Peer 2 Peer 3 UC G Peers ( 5) 11 (1) Source: Nielsen 2Q2013 (2) Pro-rata for non- controlled companies; Peers (random order): Erste Bank, Intesa Sanpaolo, KBC, Otpbank, Raiffeisen Bank, Société Générale (3) Source: Financial statements of Top European Brokers (4) All borrowers denominated, Source: Dealogic as of 8 January 2014 (5) Peers including Barclays, BNP Paribas, Commerzbank, Credit Suisse, Deutsche Bank, Societé Générale, UBS
Annex: A new strategic agenda in the normalized environment GDP growth BTP-Bund Spread 3M Euribor ILLUSTRATIVE Cumulative Bp % 20 15 Inflection Acceleration 600 500 2011 Sovereign Crisis 5.0 4.5 4.0 2008 Liquidity Crisis 10 400 3.5 3.0 5 0-5 300 200 100 2014+ Normalization 2.5 2.0 1.5 1.0 0.5 2011 Sovereign Crisis 2016+ Normalization -10 Western Europe o/w Italy CEE 0 2008 2010 2012 2014 2016 2018 0.0 2006 2008 2010 2012 2014 2016 2018 2008-2013 2013-2018 12 Source: UniCredit MYP Scenario
Annex: CEE Banking Outlook 2014 A recovery in economic activity is taking place. Clear indications of economic resurgence in Western Europe are translating into a better economic performance in CEE. Mild signs of credit recovery are visible in CEE. Lending growth has been moderately accelerating since mid 2013, while deposit growth remains at sound level and continues to support the gradual shift towards the new banking model, characterized by strengthened liquidity and higher capital buffers. Looking forward, the gradual improvement in economic activity in the Region will likely be accompanied by an acceleration in lending growth, as also suggested by the strong historical correlation between nominal GDP and loans growth. We expect the corporate segment to be the main driver of the lending pickup in the next years. Despite several business challenges and regulatory requirements, the CEE banking sector continues to show a satisfactory level of profitability, with a RoA more than double that of Western Europe. 13
CEE Households Net Financial Wealth A more comprehensive role for banks ahead 2014 EBRD Annual Meeting Warsaw, May 14 th 2014
Key findings Households net financial wealth in CEE* more than doubled since 2004 and approached around 780 bn in 2013. However, losses in capital markets during the financial crisis in 2008/2009 and, to a lower extent during the Euro debt crisis in 2011, caused a temporary fall in net financial wealth, as well as a change in financial assets composition. In terms of GDP, households net financial wealth in CEE is still roughly one forth of the major developed countries, which highlights a significant scope for further convergence. Cash assets - currency and bank deposits represent the majority of households financial assets in CEE. Considering the bank-based financial system, the relatively less developed financial markets, as well as the lower income level of CEE countries, only a gradual shift towards more sophisticated financial products is expected going forward. In this context, the development of capital markets is to be encouraged. Households would be able to diversify their portfolio allocation choices and banks to better optimize their domestic funding sources. On the liabilities side, despite cross country differentiation, housing loans grew generally faster than consumer loans in the most recent years. We see this trend to continue although, in some CEE countries, households will continue to adjust their debt levels. Overall, households still seem to rely on traditional (core) banking products. Banks will continue to be key financial intermediaries in CEE. Indeed, there is room for banks to enhance their role as financial advisors. This would allow households to find the proper mix between financial investments and debt (and composition of both), thus reinforcing a virtuous cycle for CEE economies. 15 * CEE in this analysis includes PL, CZ, SK, HU, RO, BG, HR, TR, RU
Agenda Net financial wealth - Scope for convergence Financial assets - Bank deposits still dominant Financial liabilities - Banks as advisors UniCredit retail strategy: in CEE Division in Poland
Households net financial wealth in CEE (1) more than doubled since 2004 and approached around 780 bn in 2013 Households Net Financial Wealth in CEE, EUR bn (2) AT, DE, IT in 2013: ~EUR 6,800 bn +110% 372 442 514 582 470 558 683 663 765 782 Bulgaria Romania Croatia Slovakia Hungary Czech R. Turkey Poland Russia 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 17 (1) CEE in this analysis includes PL, CZ, SK, HU, RO, BG, HR, TR, RU (2) Net Financial Wealth defined as Total Financial Assets minus Total Financial Liabilities. Some data based on estimates SOURCE: Pioneer Investments Economic & Market Research, UniCredit CEE Strategic Analysis
Still there is significant scope for further convergence in CEE for both income and wealth. Financial wealth in % of GDP in CEE is on average roughly 1/4 of the major developed countries GDP and Net Financial Wealth per Capita, 2013 (1) Net Financial Wealth in % of GDP, 2013 (1) 130 328 Net Financial Wealth per capita (EUR ths) 60 50 20 10 0 0 RO TR BG 4 JP IT ES PT GR HU PL HR CZ SK RU 8 12 16 28 UK FR DE 32 36 US AT 40 89 74 58 47 39 51 36 36 18 25 17 RO RU TR SK BG HU PL CZ HR GR ES 138 145 132 114 AT DE PT FR 200 185 IT UK 262 JP US GDP per capita (EUR ths) 18 (1) Net Financial Wealth defined as Total Financial Assets minus Total Financial Liabilities. Some data based on estimates SOURCE: UniCredit Research, Pioneer Investments Economic & Market Research, UniCredit CEE Strategic Analysis
A penetration gap vs more developed countries is mainly visible in financial assets Households Total Financial Assets and Liabilities, 2013 (1) 120 Total Financial Liabilities (in % of GDP) 100 80 60 40 20 PL SK HU CZ RO BG RU TR HR GR AT ES DE FR PT IT UK JP US 0 0 60 120 180 240 300 360 420 Total Financial Assets (in % of GDP) 19 (1) Net Financial Wealth defined as Total Financial Assets minus Total Financial Liabilities. Some data based on estimates SOURCE: UniCredit Research, Pioneer Investments Economic & Market Research, UniCredit CEE Strategic Analysis
Going forward, convergence of households net financial wealth towards WE standards will gradually continue, driven by an acceleration of financial assets as well as increase of liabilities more in line with nominal GDP Net Financial Wealth in % of GDP (1), (3) Total Financial Assets (TFA) in % of GDP (3) CEE CEE w/o TR, RU forecasts Private pension funds transfer to social security fund in Poland AT, DE, IT (2) = 148 100 80 forecasts 72 60 62 40 20 AT, DE, IT (2) = 207 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Total Financial Liabilities (TFL) in % of GDP (3) 28 21 33 26 36 27 33 24 25 38 42 39 38 26 26 25 28 40 29 41 31 41 32 42 40 30 20 10 forecasts AT, DE, IT (2) = 59 30 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 20 (1) Net Financial Wealth defined as Total Financial Assets minus Total Financial Liabilities; (2) As of 2013; (3) At constant FX. Some of 2013 data based on estimates SOURCE: UniCredit Research, Pioneer Investments Economic & Market Research, UniCredit CEE Strategic Analysis CEE CEE w/o TR, RU
Agenda Net financial wealth - Scope for convergence Financial assets - Bank deposits still dominant Financial liabilities - Banks as advisors UniCredit retail strategy: in CEE Division in Poland
Looking at households financial assets, cash assets still represent the main component, with market movements affecting however households balance sheet composition over the last years Composition of TFA, 2013 (1) Change in Composition of TFA in CEE (w/o TR, RU) (1) Cash Assets Institutionalized Assets Securities and Shares PL 51% 4% 45% TFA/GDP 82% 40 2 Pre-crisis peak 4 Current level CZ SK 68% 67% 7% 25% 33% HU 51% 15% 33% BG 82% 2% 16% RO HR 68% 69% 11% 5% 21% 26% TR 82% 8% 10% 84% 65% 68% 62% 35% 97% 45% Institutionalized Assets (%) 35 30 25 2007 2013E 2008 3 Global crisis 2004 RU 83% 17% CEE 71% 4% 25% CEE w/o TR, RU 59% 6% 36% AT, DE, IT (2) 37% 25% 38% 34% 48% 72% 207% 1 EU enlargement 20 52 54 56 58 60 62 64 66 68 Cash Assets (%) TFA 22 (1) TFA refers to Total Financial Assets. Cash Assets are defined as currency and retail bank deposits, securities and shares are defined as listed shares and securities other than shares. Institutionalized assets refer to mutual and pension funds and insurance technical reserves. CEE Totals in constant FX. Some of 2013 data based on estimates (2) Split for AT, DE and IT as of 2012 SOURCE: Pioneer Investments Economic & Market Research, UniCredit CEE Strategic Analysis
A moderate shift towards institutionalized assets will continue in the next years, but cash assets will remain dominant, with some differentiation across countries Institutionalized vs. Cash Assets, % Total Households Financial Assets, 2013-2018 (1) Central Europe South Eastern Europe Other CEE 50 50 50 Institutionalized Assets 40 30 20 10 HU-18 PL-13 PL-18 SK-18 SK-13 HU-13 (2) CZ-18 CZ-13 40 30 20 10 HR-18 RO-18 RO-13 HR-13 BG-18 BG-13 40 30 20 10 RU-18 RU-13 TR-13 TR-18 0 30 40 50 60 70 80 90 100 0 30 40 50 60 70 80 90 100 0 30 40 50 60 70 80 90 100 Cash Assets Cash Assets Cash Assets 23 (1) Some of 2013 data based on estimates; (2) Poland excluding the PLN 153bn of T-bills transferred to state-run social security fund SOURCE: UniCredit CEE Strategic Analysis
The development of capital market is to be encouraged. Households would be able to diversify their portfolio allocation choices, and banks to better optimize their domestic funding sources Domestic corporate bonds, % GDP Domestic equity markets, % GDP RO 0.3 SK 6.5 BG 0.7 RO 11.7 HR 1.0 BG 12.2 TR 2.3 HU 13.7 HU 4.1 CZ 16.8 PL 4.1 RU 29.3 RU 6.1 TR 30.2 SK 8.7 HR 34.5 CZ 9.0 PL 39.9 AT, DE, IT 24.7 AT, DE, IT 47.1 11 Notes: Bonds are outstanding amounts as of May 5th, 2014 intraday; Austria, Germany, Italy and Slovakia bonds include also euro zone issued bonds; Equity markets are measured by total market capitalization as of May 4, 2014. Nominal GDP as of 2013. SOURCE: Bloomberg, IMF, UniCredit Research, UniCredit CEE Strategic Analysis
Agenda Net financial wealth - Scope for convergence Financial assets - Bank deposits still dominant Financial liabilities - Banks as advisors UniCredit retail strategy: in CEE Division in Poland
Regarding household liabilities, the picture is more diverse across countries. Housing loans, however, when excluding Turkey and Russia, grew faster over the most recent years than consumer loans, thanks to relatively lower penetration Composition of TFL, 2013 (1) Change in Composition of TFL in CEE (w/o TR, RU) (1) Housing Loans PL Consumer Loans (2) 59% 41% as % of GDP 21% 14% 2013 Housing Loans Consumer Loans (2) CAGR 2008-13, % CZ SK 68% 72% 32% 28% 21% 21% 10% 8% 57% 43% 8.2 HU 42% 58% 12% 16% BG 45% 55% 12% 14% 2008 0.8 RO HR TR 38% 32% 50% 62% 68% 50% 6% 19% 6% 11% 19% 12% 48% 52% CAGR 2004-08, % RU 24% 76% 4% 12% 2004 37.8 31.6 CEE 40% 60% 8% 12% CEE w/o TR, RU 57% 43% 17% 13% 44% 56% AT, DE, IT 59% 41% 34% 24% 26 (1) TFL refers to Total Financial Liabilities. CEE Totals in constant FX; (2) Consumer loans include consumer loans, overdrafts, revolving credit cards, financial leasing and hire purchase agreements and other loans SOURCE: Pioneer Investments Economic & Market Research, UniCredit CEE Strategic Analysis
Going forward, housing loans will continue to outpace consumer loans, when excluding Turkey and Russia. Still households deleveraging needs are visible in some countries Housing loans, yoy growth in % (1) Consumer loans, yoy growth in % (1), (2) 50 CEE CEE w/o TR, RU 50 40 forecasts 40 forecasts 30 30 20 10 9 20 10 14 0 7 0 5 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Housing loans, CAGR 2013-18 in % Consumer loans, CAGR 2013-18 in % (2) 19.6 14.2 13.6 7.6 7.2 7.0 5.9 3.1 1.3 11.2 6.0 4.3 4.0 3.8 2.6 1.6-0.5-0.7 TR RU RO SK PL CZ BG HR HU RU TR SK PL CZ BG HR RO HU 27 (1) At constant FX; (2) Consumer loans include consumer loans, overdrafts, revolving credit cards, financial leasing and hire purchase agreements and other loans SOURCE: UniCredit CEE Strategic Analysis
Finding the proper mix between financial assets and liabilities would require banks support. Banks enhancement of financial advisory services, to better support households needs, can reinforce a virtuous cycle Housholds net financial wealth proper assets/ liabilities mix Economic growth Banks as financial advisors for households financial education Banks balance sheet and P&L 28
Agenda Net financial wealth - Scope for convergence Financial assets - Bank deposits still dominant Financial liabilities - Banks as advisors UniCredit retail strategy: in CEE Division in Poland
UniCredit has an unrivalled network in CEE Czech Republic 6.8% market share 106 branches #4 Poland 11.3% market share 1,001 branches #2 Latvia (Leasing) Slovakia 6.7% market share 78 branches #5 Russia 1.6% market share 108 branches #9 Hungary 6.4% market share 101 branches #6 Ukraine 3.4% market share 403 branches #6 Slovenia 6.1% market share 34 branches #5 Romania 7.6% market share 199 branches #4 Croatia 27.0% market share 139 branches #1 Bulgaria 14.8% market share 206 branches #1 Bosnia and Herzegovina 21.1% market share 128 branches #1 Turkey 9.1% market share 971 branches #5 Serbia 8.9% market share 75 branches #3 Rep. Office in FYR Macedonia and Montenegro Azerbaijan 2% market share 15 branches #15 30 Ranking and market shares in Total Assets as of 4Q 2013 (except CZ as of 3Q 2013, Azerbaijan as of June 30, 2013 ) Number of branches - as of 31.12. 2013 SOURCE: UniCredit
CEE Division is a key contributor to Group results FIRST TERMS OF NETWORK AND EXPERTISE PREFERRED PARTNER FOR LOCAL AND CROSS-BORDER BUSINESS Deep knowledge of CEE markets: through our expertise in local regulations and market practices, we support customers in running their businesses and finding new opportunities, also taking into account the varied commercial and political contexts. Support to customers cross-border operations and business development: we serve more than 19,000 international customers operating in CEE, through our International Centers network. CEE Division contributes to 21% of the Group revenues. Strengthen our relationship with Retail customers, focusing on innovation and multichannel strategy: in 2013 we offered 28 bn loans (1),(2) to customers and collected 25 bn deposits (1),(2). Leader in customer satisfaction: through our consistent and strong service quality, as well as leveraging on new trends in banking, we maintain our leadership position. 31 (1) Data as of Dec 2013 at constant FX. Turkey pro quota. Ukraine includes Ukrsotsbank and UC Ukraine; (2) Loans and deposit volumes refer to Mass, Affluent and Small Business client segment.
CEE Retail Customer service leadership SIMPLICITY AND INNOVATION IN BUILDING SUSTAINABLE BUSINESS WITH OUR PRESENT AND PROSPECTIVE CUSTOMERS Customer centricity Matching customer behaviour changes Leverage on technology and innovation Non traditional offers for targeted client segments Simplicity and transparency for efficient time to market Business model redefinition Channel integration Client advisory for asset allocation and funding needs 32
CEE Retail Increasingly leveraging on Multichannel and CRM SUSTAINABLE RETAIL BANKING DISTRIBUTION MIX ECOSYSTEM MILESTONES INTERNET AND MOBILE BANKING Unique digital customer experience, thanks to increased investments in innovation: "Web Banking of the Future" New Mobile applications CUSTOMER RELATIONSHIP MANAGEMENT Leverage an innovative CRM platform to better identify target client groups and R C M needs Develop a high value propositions and supply tailor-made solutions in terms of channels, products, services and communication Enlarge bank proximity to the clients 33
CEE Retail Innovation, best practice UNICREDIT BULBANK "Branch of the Future", a new full customer experience along the banking journey, through a new branch format featuring a large number of cutting-edge solutions, impacting the customers on a rational as well as on an emotional level. Thanks to the success of the first "Branch of the Future", a second outlet is opening in Sofia (May 21 st ). "Cash M", immediate money transfer via ATMs 24/7, meeting the need of fast and easy bank services. Cash M service was defined as the "Most Innovative Bank Product for 2013" by b2b Magazine and received the "Special Prize for E-banking" by Forbes Magazine Bulgarian edition. 34
Agenda Net financial wealth - Scope for convergence Financial assets - Bank deposits still dominant Financial liabilities - Banks as advisors UniCredit retail strategy: in CEE Division in Poland
Summary Market position EUR 2013 Ranking Retail clients 4.7 mn 2 Corporate & SME clients 278 ths 1 52 65 35 28 30 Assets 38.2 bn 2 20 66 200 Loans 26.4 bn 2 Retail PLN loans 8.9 bn 2 Corporate loans 15.7 bn 1 Deposits 29.6 bn 2 Retail deposits 12.4 bn 2 Position of Pekao 1 2 <=3 50 17 79 24 83 101 76 75 Corporate deposits 17.2 bn 1 1001# of branches Import / Export 24%/23% 1 Mutual funds 4.0 bn 1 Market cap (1) 12.3 bn 2 Share of Pekao in banking sector Total Revenues 12.8% Operating profit 15.2% Net profit 18.2% Notes: All financial data for December 31st, 2013; 1EUR = 4.1472PLN 36 (1) As at March 31st, 2014 SOURCE: Bank Pekao, for the sector: KNF, NBP data or major listed Polish banks
Pekao group s profitability and value creation journey started when UCG acquired it in 1999 Market capitalization, (EUR bn 1 ) +14% p.a. 1.8 2.4 3.1 3.6 4.1 5.3 6.7 8.7 13.7 7.6 9.8 10.8 8.5 10.1 12.3 99 00 01 02 03 04 05 06 07 08 09 10 11 12 03.14 Net Results, (EUR mn 1 ) +22% p.a. 41 190 300 184 220 299 368 428 516 760 577 605 694 708 668 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 37 1 At a fixed rate 2007 Net profit as reported 2008 Net profit adjusted for sale of MiB
Sustainability strengthening structural advantages CORE TIER 1 18.8% 14.2% 12.6% Pekao Poland Euro Zone 88.0% 104.0% 103.0% L/D RATIO Pekao Poland Euro Zone C/I RATIO 44.4% 53.8% 62.0% Pekao Poland Euro Zone OPERATING INCOME/PROVISIONS 11.9x 6.8x 4.4x Pekao Poland Euro Zone 1.9% 1.2% RETURN ON ASSETS 0.3% 38 Pekao Poland Euro Zone Pekao: Pekao non-consolidated data for comparability with the sector Poland: Bank outlook, KNF, NBP Euro zone ECB (data for June 2013), Goldman Sachs research, Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, The Netherlands, Portugal, Slovenia, Slovakia, Spain
Challenges overcome FX (CHF) mortgage Market since 2003 aggressively promoted FX mortgages Pekao, despite the decision not to sell these products, preserved its revenues / profitability market shares Speculative FX options Pekao was not involved in speculative FX options, leading to heavy customers losses in 2008, due to PLN depreciation, affecting significantly banking sector profitability Sector 2008 provisions for FX options 1600 mn PLN Pekao 2008 provisions for FX options 33 mn PLN Anti-tax deposits Market promoted anti-tax deposits, reaching a share of up to 15-20% of household deposits in 2012 (ca. 80-100 bn PLN) Pekao maintained its market position despite restraining from anti-tax product offer 39
Overall outlook for Polish banking market will remain very attractive Total volumes: loans & deposits PLN billion CAGR 2013-20 Implications for Pekao Corporate 1 Retail 2 1,609 371 1,237 2,265 519 1,746 2,602 592 2,010 6.9% 7.2% Redeploy the distribution and acquisition capabilities to capture market share in emerging business opportunities Evolve the operating model to structurally reduce costs and maintain profitability 2013 2018 2020 40 1 Medium and Large Corporations 2 Individuals, Micro Corp. and SMEs
Individual customer evolution trends until 2020 Polish demographic structure evolves towards developed markets Polish population will be stagnant (~0% by 2020) and ageing (from 17% in 2010 to 22% of +65yrs old in 2020), with increasing number of single households (from 31% to 35%) Metropolitan areas with leading contribution to GDP growth (>65%), ongoing suburbanization but keeping population density relatively low (~125 / km2) Individual wealth expected to grow, driven by a stable increase of the middle class as well as in the middle aged group of people (31-50 years old, the salary levels increases by +5-6% vs. 3-4% average) Polish consumers are early adopters of innovative technologies, multichannel client base grows, but traditional clients will remain important Three main groups of banking customers in 2020: Multichannel, with complex banking needs and innovation driven: 16-17M from 11-12M now Traditional, preferring branch-based banking: 4-5M from 5-6M now Customer with lower banking activity (8-9M from 9-10M now), with focus on basic products and on physical channels In addition, unbanked population with relatively low income: 3-4M from 5-6M now 41
Wealth accumulation will still be polarized towards higher income group of customers Assets (1) Billion PLN 1,000 900 800 919 Customer group Private Distribution Percent of total 2012 2020 32% 33% 700 600 500 501 Affluent 35% 37% 400 300 200 Family 33% 30% 100 0 2012 13 14 15 16 17 18 19 2020 100% 100% 42 1 Assets refer to Deposits
Individual customer population dynamic higher in Affluent and Private % CAGR Family Definition Less than 50k ths PLN assets, or less than 7.5 ths PLN monthly inflows Number of customers Thousands 19,000 ~2.0% 22,300 Affluent Between 50 ths and 1 mil PLN assets, or above 7.5 ths PLN monthly inflows 2,200 ~3.1% 2,800 Private Above 1 mn PLN assets 60 ~3.7% 80 2012 2020 43
Bank Pekao 2020 aspiration Increase profit share by sustainably gaining market share in areas with highest value creation potential, with acquisition of ~1 mn customers 44
Breakthrough in client acquisition ~ 450 ths. Number of new customers (ths.) 65 98 +145% 126 160 1Q 13 2Q 13 3Q 13 4Q 13 45
Disclaimer (cont.)
Annex country cards
Bulgaria Financial Indicators 2004 2008 2013 2014 2015 GDP Per Capita ( ) 2,624 4,658 5,514 5,585 5,807 Net financial wealth Per Capita ( ) 601 596 2,007 2,301 2,561 Gross monthly wage ( ) 150 279 413 420 434 Total financial assets (% of GDP) 34.4 43.1 62.4 67.0 69.3 Total financial liabilities (% of GDP) 11.5 30.4 26.0 25.8 25.2 Net financial assets (% of GDP) 22.9 12.8 36.4 41.2 44.1 Households Financial Assets, EUR mn (% of total) Households Financial Liabilities, EUR mn (% of total) 7,001 15,285 24,939 26,951 28,802 0% 1% 1% 1% 1% 3% 3% 3% 3% 3% 6% 8% 12% 13% 13% 9% 5% 2% 2% 2% 2,336 22% 10,755 42% 10,398 45% 10,377 44% 10,469 44% 83% 83% 82% 81% 80% 78% 58% 55% 56% 56% 2004 2008 2013 2014 2015 2004 2008 2013 2014 2015 Mutual funds Insurance technical reserves Securities & Shares Currency & Deposits Housing loans (1) Consumer loans Pension funds assets 48 Note: Some data for 2013 might be estimated; (1) Consumer loans include consumer loans, overdrafts, revolving credit cards, financial leasing and hire purchase agreements and other loans SOURCE: UniCredit CEE Strategic Analysis; UniCredit Research; UniCredit CEE Banking Network
Croatia Financial Indicators 2004 2008 2013 2014 2015 GDP Per Capita ( ) 7,657 11,031 10,192 10,189 10,577 Net financial wealth Per Capita ( ) 2,362 3,744 5,888 6,335 6,774 Gross monthly wage ( ) 798 1,044 1,048 1,050 1,069 Total financial assets (% of GDP) 58.3 72.7 97.5 100.6 101.7 Total financial liabilities (% of GDP) 26.7 38.3 39.2 38.4 37.4 Net financial assets (% of GDP) 31.6 34.4 58.3 62.2 64.3 Households Financial Assets, EUR mn (% of total) Households Financial Liabilities, EUR mn (% of total) 18,801 1% 3% 6% 5% 34,096 5% 4% 9% 8% 41,886 2% 4% 19% 5% 43,527 2% 5% 20% 5% 45,421 2% 5% 21% 5% 8,620 17,962 16,845 16,623 16,718 37% 44% 50% 50% 49% 85% 75% 69% 68% 67% 63% 56% 50% 50% 51% 2004 2008 2013 2014 2015 2004 2008 2013 2014 2015 Mutual funds Insurance technical reserves Securities & Shares Currency & Deposits Housing loans (1) Consumer loans Pension funds assets 49 Note: Some data for 2013 might be estimated; (1) Consumer loans include consumer loans, overdrafts, revolving credit cards, financial leasing and hire purchase agreements and other loans SOURCE: UniCredit CEE Strategic Analysis; UniCredit Research; UniCredit CEE Banking Network
Czech Republic Financial Indicators 2004 2008 2013 2014 2015 GDP Per Capita ( ) 8,981 14,781 14,224 14,187 15,212 Net financial wealth Per Capita ( ) 4,395 5,215 6,898 7,312 7,891 Gross monthly wage ( ) 547 906 967 943 999 Total financial assets (% of GDP) 57.5 64.8 83.6 83.8 83.9 Total financial liabilities (% of GDP) 10.7 26.7 32.4 32.4 32.6 Net financial assets (% of GDP) 46.7 38.1 51.2 51.4 51.3 Households Financial Assets, EUR mn (% of total) Households Financial Liabilities, EUR mn (% of total) 55,152 8% 10% 6% 2% 92,558 7% 10% 7% 3% 118,418 6% 10% 9% 7% 125,441 6% 10% 9% 8% 135,671 6% 10% 10% 8% 10,297 67% 38,165 60% 45,899 68% 48,551 68% 52,701 69% 75% 72% 68% 66% 65% 33% 40% 32% 32% 31% 2004 2008 2013 2014 2015 2004 2008 2013 2014 2015 Mutual funds Insurance technical reserves Securities & Shares Currency & Deposits Housing loans (1) Consumer loans Pension funds assets 50 Note: Some data for 2013 might be estimated; (1) Consumer loans include consumer loans, overdrafts, revolving credit cards, financial leasing and hire purchase agreements and other loans SOURCE: UniCredit CEE Strategic Analysis; UniCredit Research; UniCredit CEE Banking Network
Hungary Financial Indicators 2004 2008 2013 2014 2015 GDP Per Capita ( ) 8,116 10,503 9,802 10,006 10,462 Net financial wealth Per Capita ( ) 2,895 2,945 3,847 4,097 4,366 Gross monthly wage ( ) 578 792 776 771 789 Total financial assets (% of GDP) 54.5 65.9 67.7 66.6 66.4 Total financial liabilities (% of GDP) 19.6 36.4 28.4 25.7 24.0 Net financial assets (% of GDP) 34.9 29.5 39.2 40.8 42.3 Households Financial Assets, EUR mn (% of total) Households Financial Liabilities, EUR mn (% of total) 45,794 66,059 66,347 66,742 68,385 7% 10% 17% 9% 19% 20% 10% 13% 10% 10% 10% 15% 6% 6% 6% 13% 10% 15% 17% 17% 16,510 48% 36,463 43% 27,878 42% 25,790 42% 24,767 42% 57% 55% 51% 48% 47% 52% 57% 58% 58% 58% 2004 2008 2013 2014 2015 2004 2008 2013 2014 2015 Mutual funds Insurance technical reserves Securities & Shares Currency & Deposits Housing loans (1) Consumer loans Pension funds assets 51 Note: Some data for 2013 might be estimated; (1) Consumer loans include consumer loans, overdrafts, revolving credit cards, financial leasing and hire purchase agreements and other loans SOURCE: UniCredit CEE Strategic Analysis; UniCredit Research; UniCredit CEE Banking Network
Poland Financial Indicators 2004 2008 2013 2014 2015 GDP Per Capita ( ) 5,342 9,511 10,103 10,694 11,822 Net financial wealth Per Capita ( ) 2,273 2,647 4,855 4,329 4,811 Gross monthly wage ( ) 501 837 870 919 1,009 Total financial assets (% of GDP) 49.9 62.5 82.3 74.8 75.7 Total financial liabilities (% of GDP) 11.6 29.5 34.8 35.1 35.4 Net financial assets (% of GDP) 38.3 33.0 47.5 39.7 40.4 Households Financial Assets, EUR mn (% of total) Households Financial Liabilities, EUR mn (% of total) 113,100 191,054 7% 9% 11% 11% 14% 18% 10% 6% 323,702 313,610 346,207 14% 16% 16% 8% 9% 8% 23% 14% 13% 4% 4% 4% 26,335 33% 90,111 51% 136,888 59% 147,264 59% 161,595 60% 58% 55% 51% 58% 58% 67% 49% 41% 41% 40% 2004 2008 2013 2014 2015 2004 2008 2013 2014 2015 Mutual funds Insurance technical reserves Securities & Shares Currency & Deposits Housing loans (1) Consumer loans Pension funds assets 52 Note: Some data for 2013 might be estimated; (1) Consumer loans include consumer loans, overdrafts, revolving credit cards, financial leasing and hire purchase agreements and other loans SOURCE: UniCredit CEE Strategic Analysis; UniCredit Research; UniCredit CEE Banking Network
Romania Financial Indicators 2004 2008 2013 2014 2015 GDP Per Capita ( ) 2,811 6,492 6,705 6,960 7,469 Net financial wealth Per Capita ( ) 436 205 1,140 1,358 1,525 Gross monthly wage ( ) 202 473 507 526 563 Total financial assets (% of GDP) 20.0 24.3 34.5 35.6 36.3 Total financial liabilities (% of GDP) 4.9 20.9 17.3 16.1 15.9 Net financial assets (% of GDP) 15.2 3.4 17.3 19.4 20.4 Households Financial Assets, EUR mn (% of total) Households Financial Liabilities, EUR mn (% of total) 12,495 31,402 48,604 52,986 57,815 0% 0% 5% 5% 4% 9% 9% 9% 16% 5% 32% 1% 7% 8% 10% 11% 12% 12% 5% 3,026 29% 26,980 21% 24,319 38% 24,053 39% 25,340 41% 64% 78% 68% 66% 64% 71% 79% 62% 61% 59% 2004 2008 2013 2014 2015 2004 2008 2013 2014 2015 Mutual funds Insurance technical reserves Securities & Shares Currency & Deposits Housing loans Consumer loans (1) Pension funds assets 53 Note: Some data for 2013 might be estimated; (1) Consumer loans include consumer loans, overdrafts, revolving credit cards, financial leasing and hire purchase agreements and other loans SOURCE: UniCredit CEE Strategic Analysis; UniCredit Research; UniCredit CEE Banking Network
Russia Financial Indicators 2004 2008 2013 2014 2015 GDP Per Capita ( ) 3,306 7,935 10,975 9,862 9,854 Net financial wealth Per Capita ( ) 578 842 1,832 1,692 1,904 Gross monthly wage ( ) 188 474 708 638 670 Total financial assets (% of GDP) 21.9 22.4 34.3 37.2 43.0 Total financial liabilities (% of GDP) 3.6 10.2 16.4 19.3 22.8 Net financial assets (% of GDP) 18.3 12.1 17.9 17.9 20.2 Households Financial Assets, EUR mn (% of total) Households Financial Liabilities, EUR mn (% of total) 99,608 7% 3% 7% 221,213 5% 3% 6% 503,862 7% 8% 2% 504,849 7% 9% 2% 583,620 8% 2% 10% 16,552 9% 101,091 25% 240,806 24% 261,759 23% 309,827 23% 83% 87% 83% 82% 80% 91% 75% 76% 77% 77% 2004 2008 2013 2014 2015 2004 2008 2013 2014 2015 Mutual funds Insurance technical reserves Securities & Shares Currency & Deposits Housing loans (1) Consumer loans Pension funds assets 54 Note: Some data for 2013 might be estimated; (1) Consumer loans include consumer loans, overdrafts, revolving credit cards, financial leasing and hire purchase agreements and other loans SOURCE: UniCredit CEE Strategic Analysis; UniCredit Research; UniCredit CEE Banking Network
Slovakia Financial Indicators 2004 2008 2013 2014 2015 GDP Per Capita ( ) 6,312 11,902 13,328 13,727 14,297 Net financial wealth Per Capita ( ) 2,172 3,592 4,794 4,918 5,135 Gross monthly wage ( ) 395 696 824 842 867 Total financial assets (% of GDP) 43.1 48.3 64.7 65.8 66.8 Total financial liabilities (% of GDP) 9.8 19.3 28.7 30.0 30.9 Net financial assets (% of GDP) 33.3 29.1 36.0 35.8 35.9 Households Financial Assets, EUR mn (% of total) Households Financial Liabilities, EUR mn (% of total) 15,122 13% 10% 3% 1% 32,313 46,668 48,939 51,689 8% 7% 8% 8% 12% 10% 10% 10% 10% 15% 16% 1% 0% 0% 16% 0% 3,429 12,891 62% 65% 20,724 22,313 23,892 72% 72% 73% 74% 69% 67% 66% 65% 38% 35% 28% 28% 27% 2004 2008 2013 2014 2015 2004 2008 2013 2014 2015 Mutual funds Insurance technical reserves Securities & Shares Currency & Deposits Housing loans (1) Consumer loans Pension funds assets 55 Note: Some data for 2013 might be estimated; (1) Consumer loans include consumer loans, overdrafts, revolving credit cards, financial leasing and hire purchase agreements and other loans SOURCE: UniCredit CEE Strategic Analysis; UniCredit Research; UniCredit CEE Banking Network
Turkey Financial Indicators 2004 2008 2013 2014 2015 GDP Per Capita ( ) 4,658 7,029 8,074 7,318 8,369 Net financial wealth Per Capita ( ) 1,364 1,689 1,718 2,076 2,294 Gross monthly wage ( ) 646 788 1,016 837 957 Total financial assets (% of GDP) 34.9 39.0 45.1 47.2 47.7 Total financial liabilities (% of GDP) 4.7 12.0 20.4 20.2 20.5 Net financial assets (% of GDP) 30.2 27.0 24.7 27.0 27.1 Households Financial Assets, EUR mn (% of total) Households Financial Liabilities, EUR mn (% of total) 106,804 26% 173,587 239,754 280,787 314,937 3% 6% 4% 3% 3% 0% 8% 3% 8% 3% 7% 3% 7% 3% 2% 4% 4% 4% 14,426 10% 53,534 33% 108,382 32% 120,239 32% 135,681 33% 70% 81% 82% 82% 82% 90% 67% 68% 68% 67% 2004 2008 2013 2014 2015 2004 2008 2013 2014 2015 Mutual funds Insurance technical reserves Securities & Shares Currency & Deposits Housing loans (1) Consumer loans Pension funds assets 56 Note: Some data for 2013 might be estimated; (1) Consumer loans include consumer loans, overdrafts, revolving credit cards, financial leasing and hire purchase agreements and other loans SOURCE: UniCredit CEE Strategic Analysis; UniCredit Research; UniCredit CEE Banking Network
GDP per capita and gross monthly wage per country GDP per capita, EUR Gross monthly wage, EUR 2008 2013 2014 2015 2008 2013 2014 2015 Poland 9,511 10,103 10,694 11,822 837 870 919 1,009 Czech Republic 14,781 14,224 14,187 15,212 906 967 943 999 Central Europe Hungary 10,503 9,802 10,006 10,462 792 776 771 789 Slovakia 11,902 13,328 13,727 14,297 696 824 842 867 Slovenia 18,426 17,236 17,242 17,604 1,391 1,523 1,546 1,554 Croatia 11,031 10,192 10,189 10,577 1,044 1,048 1,050 1,069 South Eastern Europe Bulgaria 4,658 5,514 5,585 5,807 279 413 420 434 Romania 6,492 6,705 6,960 7,469 473 507 526 563 Bosnia-H. 3,325 3,479 3,542 3,717 568 661 675 691 Serbia 4,445 4,335 4,390 4,616 561 532 426 369 Turkey 7,029 8,074 7,318 8,369 788 1,016 837 957 Other CEE Russia 7,935 10,975 9,862 9,854 474 708 638 670 Ukraine 2,671 2,857 2,154 2,171 235 294 293 294 57
Contacts This is a product of UniCredit CEE Strategic Analysis and CEE Banking Network Andrea Lacalamita, Head of Group Strategic Planning and CEE Strategic Analysis Carmelina Carluzzo, Deputy Head of CEE Strategic Analysis Mauro Giorgio Marrano, Milen Kassabov, Kamen Kazankin, Olga Solomatina Lilit Sargsyan Closing date: May 5th, 2014 58
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