Inside magazine Issue 18 Part 03 - From corporate strategies & people perspectives

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2 Partner Baptiste Guionnet Director ever before. In Europe, this trend is further exacerbated by the to the US. However, M&A in the banking sector has risen group priorities in the coming months.

3 F of cross-border M&A activity in Europe. However, since the start of the crisis in 008, M&A activity in the European Indeed, even if other causes can be fragmented than in the United States, In the current economic context and given that the number of M&A transactions rose these transactions have, to some extent, Trend post-crisis Inward non-eu Inward EU Cross border Outward non-eu Outward EU Domestic out by euro area banks outside the euro area.

4 fragmented than in the United States Trend post-crisis RoW incoming RoW outgoing Across states Within state United States acquiring shares in banks in the United States.

5 in recent years compared to other mature without creating issues in the competitive EU and the US in terms of the volume explained by: compared to the US More heterogeneous markets of each country remains a key consideration preventing certain cross-border transactions of Brexit or announcements addressing been overridden by attractive M&A opportunities. Over the last few quarters, we noted also in Europe. Globally: transactions were announced, which correspond to a 60 percent increase registered in 007. In Europe: compared to the same period in 017. survey 1 showing that: There is now a shift from defensive to an expansionary mindset at the top In 7 out of the 19 countries surveyed, expansion by acquisition or expansion to expansionary strategies outnumber defensive ones in 11 of the 19 countries surveyed.

6 Between 0% and 40% China, Norway Between 40% and 0% Sweden, Denmark, Czech Republic, Russian Federation Between 60% and 70% Canada, USA, Netherlands, Belgium, France, Finland, Poland, Hungary Between 70% and 80% United Kingdom, Portugal, Switzerland, Austria, Italy Between 0% and 60% Mexico, Brasil, Ireland, Spain, Romania, Greece Between 80% and 90% Germany

7 Cost/income ratio DE LU AT UK IT IE FR PL HU SE RO BG SI ES CZ LV BE CY DK PT SK HR FI MT NL LT EE R = 0.6 GR More fragmented Market concentration index More concentrated order to achieve further growth.

8 to design a robust strategy to sustain growth and 01 0 organic growth prospects

9 Nb of banks (left axis) Average B/S per bank in m (right axis), the country is indeed hosting branches or subsidiaries of many of European banks forming part of our management and private banking activities of brick and mortar branches as main the bank secrecy, the enforcement of the costs and investments required to keep pushed some banking groups to consider M&A activity spiked in Luxembourg, with this trend expected to continue in the coming months. Other transactions are about to occur in 018, supporting an for M&A activity in Luxembourg, Banking sector but management and servicing industry.

10 01 Havilland's acquisition of Banque Pasche & Banco Populare Luxembourg Julius Baer's acquisition of Commerzbank's private banking business desiring to strengthen their footprint in certain markets EFG's acquisition of UBI and BSI Luxembourg Legend Holding's acquisition of BIL (Banque Internationale à Luxembourg) form Precision Capital 017 and Q Others are about to occur management and servicing industry. Safra Sarasin's acquisition of Hapoalim Banque Hauck & Aufhaeuser Privatbankiers' acquisition of Sal. Oppenheim jr & Cie Luxembourg and Oppenhein Asset Management Services 018 UBS' acquisition of Nordea's wealth management business BGL BNP Paribas' acquisition of ABN Amro bank's wealth management and insurance businesses Warburg's acquisition of Nord LB

11 According to a recent survey 4 engage in a joint venture with a FinTech in the next two years. 19 % Expanding Customer base in existing markets 0 % Technology acquisition 16 % Expand/diversify products or services 9 % Talent acquisition 1 % Digital Strategy 11 % Enter into new geographic markets

12 On recent M&A transactions, where we showstoppers on certain transactions. expect to engage in a joint venture with a FinTech in the next two years One-third say they expect to acquire. Inadequate IT setups been considered as important showstoppers on certain transactions. Source: MergerMarket

13 Despite the importance of the portion of M&A activity remains driven by size with the objective to reach an adequate cost-income ratio. According to a recent survey, recent Expand the customer base in core Enter into new geographic markets often to re-focus on fewer core The banks in Luxembourg might be countdown has started; if they are not growing enough, private banks forward. The banks in Luxembourg might but the countdown has started; if they are not growing enough, going forward.

14 peak in M&A activity and strong market momentum, timing seems about answer those these strategic questions. Investing or divesting? Low interest rates in Europe together with continue to put pressure on banks revenue ratio of banks remains under pressure, footprint in certain juridictions. bring an answer to the strategic questions BUY strategy: Has the entity reached Is the return on equity adequate given SELL strategy: Is the entity performing a core activity for the group? Is it active in the business? Is the business undersized the future? divesting might be perceived as a sign of weakness. This perception together with a certain resistance to change prevents strong market momentum, timing seems these strategic questions.