The Bank of the Regions in Europe

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1 The Bank of the Regions in Europe For us at the HVB Group, the complete integration of Bank Austria represents another successful step in implementing our Bank of the Regions in Europe strategy. Together with Bank Austria, we are positioning ourselves as the market leader in the economic hub of Germany, Austria, and Central and Eastern Europe. The move builds on the HVB Group s clearly defined strategy to be one of the driving forces in the European consolidation process. Following the integration of Bank Austria, our corporate group has become one of Europe s three biggest banks, with total assets of 7717 billion. 33

2 MARKET LEADER IN THE HEART OF EUROPE CONTINUED FOCUS ON EUROPE After leading the way in the German banking market, with the integration of Bank Austria the HVB Group has now taken another major logical stride in the consolidation process sweeping the European banking industry. Besides opening up new markets, this move considerably strengthens our competitive position in Europe, in terms of our strategic profile, size and financial strength. We will now concentrate on expanding the strong base we enjoy in our core markets. To take full advantage of the huge potential inherent in our Bank of the Regions strategy, we intend to extend our European network one step at a time. 34 Unique market profile REGIONAL PROXIMITY, CENTRALIZED CONTROL Thanks to our Bank of the Regions strategy, the HVB Group enjoys a distinct identity with respect to customers and the capital markets. This clearly formulated strategic position represents a credible alternative to the global investment banking model prevalent in Europe. The strategy combines regional proximity to customers with the competence and performance strength of a focused full-service bank. In one dimension, we pursue a common strategy, achieve synergies through the centralized development of products and services, and conduct integrated risk and capital management on the basis of a uniform platform of computer systems and transactions Group-wide. At the same time, the concept of decentralized, legally independent units retaining their respective brand names and hence their established identities allows for considerable proximity to customers, fast decision paths, extensive local management responsibility and profound knowledge of regional markets. This aspect of our strategy is manifested in the separate brands under which our bank of the regions is active; HypoVereinsbank in Germany, Vereins- und Westbank in northern Germany, and Bank Austria in Austria can be mentioned by way of example. The HVB Group serves as a super-regional umbrella structure, guaranteeing service to the highest international standards. MARKET CAPITALIZATION OF THE HVB GROUP 1 bn MERGERS, ACQUISITIONS AND START-UPS* 1991: 75% Vereins- und Westbank (northern Germany) 1992: 100% Schoellerbank (Austria) 1993: dab formed (Germany) 1994: 100% Bank von Ernst (Switzerland) 1997: fms-bank formed (Germany) 1997: 100% norisbank (Germany) 1998: Merger of hypo-bank and bv to form hvb Group 100% fgh (Netherlands) 1999: 86% bph (Poland) 2000: 100% Banco Inversión (Spain) 100% Bank Austria (Austria) BV HYPO-BANK HVB BA /01 * rounded percentage

3 MILESTONES TO BECOMING EUROPE S LEADING BANK FOR PRIVATE CUSTOMERS Over the years, our Bank of the Regions strategy has steadily assumed concrete form. During this time, the HVB Group has conducted a number of targeted transactions to reinforce its core areas of competence and accommodate the full range of customer needs, considerably bolstering its European presence in the process. Simultaneously, our market capitalization has increased by a factor of more than seven since Europe s leading bank for private customers The integration of Bank Austria is a particularly important milestone on the path to becoming the Bank of the Regions in Europe. Together with Bank Austria, the HVB Group has more than 2,400 branches and more than 70,000 employees, offering a modern, highly effective platform for serving more than eight million customers in the heart of Europe. Consequently, we have advanced considerably closer to our goal of being Europe s leading bank for private customers. Both in terms of our geographical presence and our activities in defined areas of competence, we are well on the way to establishing the necessary critical mass. OUTSTANDING STRATEGIC FIT In pursuing our Bank of the Regions strategy, the HVB Group acts in accordance with strictly defined criteria; and Bank Austria fulfills these criteria in every respect. Bank Austria boasts a strong regional presence, with shares of the Austrian market for private customers and professionals ranging from 20% to 60%. In terms of their business orientation, HypoVereinsbank and Bank Austria are an excellent fit. 35 HVB Group Bank Austria Germany Rest of Western Europe Americas, Asia Austria Central and Eastern Europe

4 With the integration Bank Austria, we have reached another major milestone on the road to becoming the Bank of the Regions in Europe. The move makes us the clear market leader in the heart of Europe and helps us tap additional potential for growth. Dr. Albrecht Schmidt SUCCESSFUL POSITION AS MARKET LEADER IN ONE OF EUROPE S MOST PROMISING REGIONS The HVB Group is very well positioned in the heart of Europe, a region of 160 million potential customers in Germany, Austria, and the countries of Central and Eastern Europe. With its high population density and the above-average education level of its inhabitants, this area harbors substantial potential for growth. We will continue to pursue a multibrand strategy in our regional communication zones, in line with the federalist nature of Europe itself. 36 Focus on Poland The high level of market penetration we enjoy in the emerging markets of Central and Eastern Europe opens up considerable potential for new business. In Poland, the most lucrative market for banking services in this region, the HVB Group is represented by its banks BPH and PBK, which together hold a market share of more than 10%. This makes HVB the thirdranking bank in the Polish market. Within the planned integration period, which extends to the end of 2003, we intend to merge these two banks into a single entity. This step will considerably speed the consolidation of the domestic banking market and also generate substantial synergies that will increase profitability in Poland. Within the HVB Group, Bank Austria will assume the role of competence center for Austria and Central and Eastern Europe, coordinating all of our operating activities in this region. FAR-REACHING SYNERGIES... We project a potential cut in the combined cost basis of HypoVereinsbank and Bank Austria in the region of h500 million yearly. First of all, the integration Bank Austria with the HVB Group will produce yearly cost synergies of h320 million. Realizing these synergies will require one-time restructuring expenses of h350 million. Secondly, we expect a further synergy potential of h175 million per year from the Bank Austria Group.

5 In the regions we serve, HypoVereinsbank and Bank Austria together count more than eight million customers. Within the HVB Group, Bank Austria is responsible for corporate development in Austria and the rapidly-expanding markets of Central and Eastern Europe; we aim to systematically exploit the potential inherent in these important growth regions. Gerhard Randa Bolstering our profile... AND STRONG INCOME POTENTIAL We believe that further optimizing existing business processes will yield additional productivity increases in the medium-term future. In this respect, we are considering a common transactional bank, an integrated platform for all the Group s e-business activities, including direct brokerage, and a single, uniform risk management system as part of the Group controlling function. Additional income potential can be tapped by exploiting economies of scale and cross-selling opportunities. The stronger market presence in Central and Eastern Europe will also enhance our appeal for local and international corporate customers. Furthermore, we can substantially extend the range of services we offer by combining the corporate finance and capital markets expertise of the two banks. By intensifying our real estate finance activities, we will further enhance our performance capability in our core regions, especially Central and Eastern Europe. As a result, we intend to garner additional European market share in our areas of core competence. 37 ALL-SHARE TRANSACTION COMPLETED IN EARLY FEBRUARY 2001 We completed the cross-border, all-share transaction described in detail in the section on the HypoVereinsbank share at the beginning of February The chosen transaction structure is ideally suited for prompt, complete acquisition, thereby laying the groundwork for fast, flexible integration. RIGOROUS INTEGRATION SCHEDULE By the end of September 2000, we had already formed the steering committee responsible for overseeing the merger, consisting of representatives from both banks: Gerhard Randa and Franz Zwickl of Bank Austria, and Dr. Albrecht Schmidt and Dr. Eberhard Rauch of HypoVereinsbank. At the same time, we also clearly defined the project structure. After obtaining the approval of the EU Commission, we began the integration in earnest and have since made significant progress.

6 The merger with Bank Austria is a targeted European cross-border transaction; yet due to the geographical proximity and cultural kinship of the partners, it also has a pronounced in-market character a very important advantage for ensuring speedy integration and exploiting synergies. Furthermore, the integration capability of both banks has been tried and tested. Bank Austria gained this experience in several mergers and acquisitions, most recently the acquisition of Creditanstalt in 1997, while HypoVereinsbank has been involved in numerous such moves, including the merger of Vereinsbank and HYPO-BANK in In most regions, the integration will already be completed by mid-2001, with the exception of Austria and Poland, where by reason of the attendant complexity the integration is slated for completion two years later. By the end of 2003, we intend to eliminate redundancies between HypoVereinsbank and Bank Austria and implement uniform IT standards Group-wide, thus giving sustained support to the HVB Group s value creation process. 38