Unicredit Group Path to Europe The Truly European Bank ERA Annual Meeting 007 Roberto Nicastro, Deputy CEO, UniCredit Group Verona, 3 October 007
KEY DEVELOPMENTS OF THE EUROPEAN BANKING SYSTEMS Different evolution of Wholesale vs Retail Wholesale with quick globalization Retail slower but moving ahead Consumer and Corporate Needs in convergence However different regulations and taxations (more than cultures) still generating fragmentation European banking market split in two blocks Private Banks, strongly performance oriented Cooperative/State owned banks Economies of scale and scope driving cross-border M&A frenzy, but complexity and political sensitiveness playing a relevant role
UNICREDIT REACHED AN EXCELLENT POSITIONING IN EUROPE AND UNIQUE PLATFORM IN CEE UNPARALLELED EUROPEAN FRANCHISE Banking operations in 3 countries (1) More than ~40 million customers About 9,500 branches 180.000 staff FOUR CORE MARKETS WELL BALANCED REVENUE PORTFOLIO Total Revenues Other 8% CEE 18% Italy 47% Austria 10% Germany 17% Italy: #, ~16% market share () Germany: #3, ~5% market share () Austria: #1, ~19% market share () CEE: the biggest investor in the region GLOBAL PRODUCT FACTORIES MIB: a strong regional player with leading position in CEE (# ECM and M&A in 006) Pioneer, a global player: AuM (3) ~90 bn Leasing: European leader as for new production (4) Credit cards: a strong platform with ~11 mln credit cards issued, (of which 6.5 mln in CEE (5) ), #5 in Europe and #1 in Turkey NOTE: Year-end 006 data, referred to UniCredit + Capitalia + ATF +USB Groups (combined pro-forma) Source: UniCredit, Capitalia, ATF, USB 006 data (1) Including ATF 3 () Market shares and rankings calculated on customer loans, considering only loans to domestic customers for Germany (3) As of March 07, including Pioneer Austria and Capitalia. (4) After merger with Capitalia, almost ex-aequo with Lombard Finance (5) Cards already activated
THE STRATEGIC PATH FOLLOWED IN THE LAST DECADE ENCOMPASSED RADICAL CHANGES FOR THE GROUP 1. PARADIGM SHIFT: Moving from state-ownership to market philosophy restructuring the domestic business implementing incentivisation systems throughout the distribution network customer segmentation. CONSOLIDATION: Building a federated Group integration focus on efficiency concentrating production 3. SELECTIVE GROWTH: Growing through specialisation focus on distinctive competence export of technology and managerial skills in New Europe business areas competing for capital allocation ROE 1994 1997 * 1.4% 8.% ROE 1998 * 000 15.4% 0.8% FOCUS ON VALUE CREATION (from ROE to EVA ) * Credito Italiano 4
ITALY: FROM A FEDERAL MODEL TO THREE BANKS SPECIALIZED BY CUSTOMER SEGMENT From a federation by geography Retail 1995 1998 1998 1998 000 1999 Corporate to a federation by segment... (retail) (corporate) (private banking) Unbundling Italian commercial banking and creating new, focussed, business units in all key market segments Retail: private customers with up to 500K of assets, Small companies with turnover < 3Mn Corporate: companies with turnover > 3Mn Private Banking: high net worth individuals with > 500K WITH CRITICAL MASS AND GROWTH OPPORTUNITIES 5
FOLLOWING STEP MERGER WITH HVB GROUP TO BECOME THE FIRST TRULY EUROPEAN BANK Italy+Germany+Austria (1) : 6,100 Branches, 9 Mn Customers, 16. Bn Revenues Germany Total revenues: 4,98 Mn Branches: 730 Customers:.6 Mn Austria Total revenues:,816 Mn Branches: 400 Customers: 1.8 Mn Italy Total revenues: 8,447 Mn Branches: 5,00 Customers: 5.7 Mn 6 (1) Data include Retail, Corporate and Private Banking, revenues as of 006 (CEE and Other revenues excluded) Note: Figures as of March 007
UCG BUILT AN INDISPUTED LEADERSHIP POSITION IN THE CENTRAL EASTERN EUROPE Central & Eastern Europe Top Financial Groups* Total Assets (Eur bn) Total revenues (Eur mn) Net Profit (Eur mn) (7) Branches (no.) (1),() () () () 109 5,386 1,744 3,654 6 (3),733 (3) 805 1,750 56 (8) (8),976 686,848 49,173 573 1,49 41 (4),013 (4) 639 1,579 (5) 30 9 (6) (5) 1,555 1,857 (6) (5) 4 857 998 1,83 *) As at end of 006 (pro forma - incl. acquisitions until 05/007) 100% of total assets and revenues for controlled Companies (stake > 50%) and share owned for non controlled companies. 100% of branches for all banks. Figures for UCI banks are from accounting except for Turkey (from FMC) Source: Unicredit CEE Research. Note: (1) Turkey at 50% for each subsidiaries (YKB at 50%); () Including announced acquisition in Kazakhstan & Ukraine on a pro forma basis; (3) Excluding Bank Prestige for P&L figures; (4) Banka Popullore and Ohridska banka s figures for P&L n.a.; (5) BS and P&L figures for Banca Italo-Albanese as of 005; revenues for American Bank of Albania excluded as n.a.; (6) P&L figures for Investsberbank and CJSC OTP Bank n.a.; (7) After tax and before minority interest; (8) Net of one-off gains from disposal of Group s assets (including unit in Ukraine) 7
THE LATEST CHALLENGE: CAPITALIA MERGER, AN HIGHLY COMPLEMENTARY NETWORK STRONG IN KEY REGIONS UCI Ranking (1) % national GDP <6 <5 MS Post-Merger 3 0.9% Lombardia 9.3% 1 1 1 11.0% 9.3% 8.6% 8.1% Lazio Veneto E. Romagna Piemonte 7.1% 19.8% 18.6% 0.1% 4 6.7% Toscana 6.9% 6.3% Campania 14.9% 1 5.7% Sicilia 9.7% 4 3 1 3 4.6%.8%.6%.3%.3% Puglia Liguria Marche Friuli V.G. Sardegna 1.8% 1.9% 9.3% 18.3% 8.5%.% Calabria 5.1% 1.1% Trentino 9.6% 3 1.8% Abruzzi 8.0% 1.4% Umbria 17.8% 0.7% Basilicata 4.4% 0.4% Molise 3.6% 0.3% Val d'aosta.4% 100% Total 15.5% Combined Network (.4%) 56 (0.1%) 1 (1.9%) 58 (9.3%) 58 (8.5%) 90 90 (9.6%) 681 (19.8%) 633 (18.6%) 163 (6.9%) 169 (18.3%) 108 98 (9.3%) (17.8%) 54 699 (8.0%) (7.1%) 46 (3.6%) 38 (14.9%) 519 (9.7%) Branches: 5,05 Market Share: 15.5% Ranking: # 11 (4.4%) 7 (5.1%) 179 (1.8%) Source: Annual reports 006. Banca d Italia (1) By branches UniCredit Capitalia 8 MS > 15% MS between 10% and 15% MS between 5% and 10% MS < 5%
INTERNATIONAL PRESENCE ENABLES US TO GENERATE TRUE VALUE FOR OUR BUSINESS CUSTOMERS BECOMING A CROSS-COUNTRY NETWORK OF LOCAL CHAMPIONS Cross Border Credit: extension guarantee for daugther companies in foreign Countries where UCG is present Flash Payments: max 1 value day for cross-border payments Zero balance international cash pooling with daily settlement EuropeanGate for placing/receiving on-line payments cross-border through a unique access point Capability to bring sophisticated products to medium sized companies (structured finance, mezzanine, trade finance, ) Product innovation intelligence centralization exporting innovation from one Country to the others 9
0,5-1% 1%-3% 3%-10% >10% 10
UNICREDIT RANKS AMONG WORLD WIDE TOP PLAYERS Eurozone 1 Ranking by Market Cap (Bn ) Worldwide 1 ranking by Market Cap (Bn ) SCH 87,3 ICBC 18,9 UniCredit 84,5 Citigroup 170,4 BNP Paribas 76,8 BoA 165,9 ABN Amro 7,3 HSBC 163,9 IntesaSP 71,7 China Construction B 146,3 ING 71,3 JP Morgan Chase 114, BBVA 65,0 Bank of China 101,7 Soc Generale 60,0 Wells Fargo 88,8 Deutsche Bank 50,5 SCH 87,3 Credit Agricole 46,7 UniCredit 84,5 Source: FT, Corporate info (1) As of 5 October 007 11
MAIN LESSONS WE LEARNED More Focus and Specialization has always paid off While being also in a capital intensive Industry the Scarcest Resource are always the Right people 1