DEPFA BANK plc: Presentation to Merrill Lynch s Banking & Insurance Conference 2005

DEPFA BANK plc: Presentation to Merrill Lynch s Banking & Insurance Conference 2005

DEPFA BANK: History 1922... 1991 1993... 1998 1999 2001/02 2003/04 2005 DEPFA is established as a non profit German State Agency with a focus on the financing of small scale residential construction. Establishment of Dublinbased DePfa-Bank Europe plc with responsibility for business development outside Germany. Establishment of the Infrastructure Finance Unit with responsibility for providing off-budget finance for public infrastructure. Opening of Warsaw Office - 2003 Opening of Hong Kong Office - 2004 Opening of Chicago, San Francisco offices; branch conversion Privatisation in 1990 is followed by IPO in 1991. DEPFA AG is created. - Foundation of DEPFA Investment Bank, Nicosia - Opening of Tokyo Branch - Foundation of DEPFA USA Inc, New York Re-organisation of DEPFA Group Spin off of Property Activities to Aareal Bank AG Relocation of Head Office from Germany to Ireland Establishment of DEPFA Assurance Group 2

DEPFA BANK: Competitive Advantage Focused and unique business model: DEPFA BANK is the only bank in the world that has a purely public sector client base Strong client relationships: Tailor made concepts, a broad product range, and a short decision making process make DEPFA BANK a preferred supplier of financial services to the public sector Low cost producing: Low administrative expenditure (cost income ratio of ca. 25%) and low funding costs (sub Euribor) are essential for successful public finance 3

Targets Long Term Strategic Targets Coverage of all financial needs of public authorities worldwide More mature company without losing the entrepreneurial spirit Most profitable public finance institution Excellence in Client Relationship Management 50% locked-in revenues / 50% variable revenues 4

Targets Long Term Strategy Current Status of Execution Diversification of product range Expansion of geographic reach Development of Client Relationship Management Growth Drivers and Value Drivers Growth Drivers: products, geographic expansion, volumes, markets Value Drivers: franchise, funding, client relationship management, cross selling 5

Growth Drivers

Budget Finance Budget financing centres on large volume business with public sector entities at sovereign and sub-sovereign level. Total financing volume stands at 165 bn as at 30 June 2005. CAGR since 2002: 16.2% Syndicated Loans & Facilities Private Placements (Loans & Bonds) Structured Transactions Financings via loans and bonds: In different maturities In domestic and foreign currencies As plain or tailor-made structured products created through the use of derivative instruments such as options and swaps Arranging Underwriting Distribution DEPFA is also actively involved in syndication and distribution activities for both local and international debt issues for clients 7

Budget Financing Market trends: Development of government financial balances (Index based 2000 = 100) 160 150 140 130 120 110 100 2000 2001 2002 2003 2004 2005 F 2006 F EU-25 United States Japan Source: European Commission 8

Infrastructure Financing Product chain Bond Wrap Swaps / Derivatives Advisory Services Senior Debt Mezzanine Debt Equity Participation Securitisation Syndication Fund Business Total Commitments as at 30 June 2005: 2.4 bn 9

Infrastructure Financing SIZE OF NON-US INFRASTRUCTURE PROJECT FINANCE MARKET Global Project Finance Market (Excluding USA & Non-Investment Grade Countries) USD bln 120 103 100 In 2004, debt issuance in the global project finance market was USD145 billion, of which USD103 billion was in non-us investment grade markets In 2004, global project finance volume was up by 45% over 2003, with over 50% growth in Europe 80 60 40 20 54 13 71 23 33 For the U.S., the American Society of Civil Engineers estimates that over US$1.6 trillion will be required to be spent over the next five years to prevent further deterioration of the nation s infrastructure Par amount and % wrapped (penetration) 0 2002 1 2003 2 2004 3 Par amount issued ($bn) Par amount wrapped ($bn) % Wrapped (penetration) 2002 54 13 23.8% 2003 71 23 32.2% 2004 103 33 32.5% 10

New Products Contingent Liabilities bn 10 9 8 7 6 5 4 3 2 1 0 5.4 Of f -balance sheet (liquidit y/ credit support ) 7.0 8.8 2004 Q1 2005 Q2 2005 Through our contingent liabilities products we aim to enhance our clients liquidity DEPFA acts both as lender and agent of facilities Liquidity Facility / Standby Bond Purchase Agreement (US) Standby Facility Revolving Facility Letters of Credit 11

New Products Financial Engineering The opportunity: Derivatives Capture more client side activity for financing arranged by DEPFA Help create structured / more attractive spreads on assets for clients looking to issue structured products Manage client flow through minimal VaR Build first class derivative / reinvestment business via clients, financial advisors, brokers and regional firms in the U.S. Securitization Combine credit with structural appetite to source attractive assets 12

New Products Advisory Services Early in 2004 DEPFA Bank plc established a specialist London-based Advisory Services Group which provides strategic and transaction-related financial advice Prime but not exclusive focus of the ASG is on activities relating to infrastructure and essential public services 2004 Key Mandates Awarded PORTUGAL KAZAKHSTAN BULGARIA LATVIA CHINA RAVE High Speed Train Network: Lisbon-Oporto and Lisbon-Madrid City of Almaty Mass Rapid Transport System Hydroelectric Power Capacity Municipal Bank Advice on corporate strategy Ministry of Environment Privatisation of waste collection, sorting, and disposal Chang Chun Longhua Light Rail Transport Co., Ltd. Expansion of the Mass Rapid Transit Project 13

Products Rating Advisory Our experienced credit team advises municipalities, local authorities and regions on how to conduct their credit rating processes By simplifying the complex and time-consuming rating process, DEPFA s credit team aims to achieve the highest sustainable rating for the issuer Advantages of a credit rating for public issuers Access to capital markets Reduction of financial costs Enlarged investor base Heightened profile / Increased prestige and recognition in the capital markets 14

New Products Securitisation DEPFA BANK plc securitisation capabilities encompass the structuring and management of transactions executed on behalf of governments, local authorities, state-owned enterprises and project specific Special Purpose Vehicles (SPVs) Traditional Securitisation Synthetic Securitisation Arranger / Co-Arranger Underwriter Total Exposure: In excess of 7 bn Average estimated ABS book credit rating of A1 Regional distribution: Italy 45%, Spain 44%, Portugal 1% 15

New Products Financial Guaranty Business DEPFA is currently setting up a financial guarantee company, DEPFA ASSURANCE, which will operate in the US and in Europe Status Update: Executed contract for fully licensed US Financial Guaranty Co. Seasoned professional staff in Europe and US Awaiting Final Regulatory Approvals in Ireland and US Standard & Poor s and Moody s are engaged in an active rating dialogue Building/modifying system and procedures to report and control Financial Guaranty Business Pre-approving credits to jump start business when licence and ratings received 16

Value Drivers

Value Drivers Franchise Head Office: Dublin Branches: Frankfurt, London, New York, Nicosia, Paris, Rome, Tokyo, Representative Offices: Chicago, Copenhagen, Hong Kong, Madrid, San Francisco, Warsaw 18

Value Drivers Funding: Benchmark Asset Covered Securities Euromoney Best Covered Bond Borrower 2005 The core elements of the DEPFA funding programme are: Issuer: Type: Rating: Benchmark statement for 2005 DEPFA ACS BANK Irish Asset Covered Securities Aaa/AAA/AAA A Dealer Group system which fosters strong sponsorship from the counterparties involved Issuance of large, liquid benchmark transactions which position DEPFA as a swap proxy alongside KfW and EIB Continue the development of a footprint in the US market building a US$ curve and on-going investor marketing Enhancing the ACS s position as a structured MTN issuer Explicit marketing of DEPFA s MTN products to counterparties Prog. size: min. EUR 8 billion per annum [EUR or USD] Issue size: min. EUR 3 billion, may be reduced to EUR 2 billion for 6-10-year maturities Taps: Format: Maturity: Preparation: Frequency: Group: Trading: min. USD 1 billion No benchmark transaction will be tapped within 1-year of issue Euro/144A Benchmark maturities Early communication and market-driven book-building Timing, maturity and currency will depend on investor demand Dedicated dealer group lead-manage the benchmark issues On dealers agency desks to achieve similar liquidity On electronic platforms (Tradeweb, EuroMTS, EurexBonds) 19

Building a CRM Framework Value-based client segmentation Assess Customers present and future value to DEPFA Current P&L Relationship status Ability to cross-sell Potential P&L Client segmentation into Tiers by geographical region Public Sector Client Concentration Concentration Ratios Cumulative % of Total Exposure 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Top 10 Clients Top 20 Clients Top 50 Clients Top 100 Clients 33% 45% 62% 75% 1 101 201 301 401 501 601 701 801 901 1001 # of Public Sector Clients 20

DEPFA BANK plc: Presentation to Merrill Lynch s Banking & Insurance Conference 2005