Banking in Serbia Alexander Picker CEO UniCredit Bank Serbia May 2007

Alexander Picker 2 May 2007 Contents: Questions to be answered Who is talking to you? What is the essence of banking? What does a bank sell? What are the trends in the world? Where is Serbia?

Alexander Picker 3 May 2007 Who is talking to you ? Section 1

Alexander Picker 4 May 2007 MAIN STRUCTURAL FIGURES UniCredit is a Truly European Bank … Employees over 134,000 Customers: over 35 mn Branches: over 7,000 Deposits and debt securities in issue: € 475 bn Loans: € 430 bn Banking operations in 20 countries Global player in Asset Management: € 236 bn AuM 14 th bank world-wide in terms of Market Capitalization

Alexander Picker 5 May 2007 Countries where the Group operates via its own branches, representative offices, small banking subsidiaries, or investment centers (Pioneer) Countries where the Group operates via local banks controlled or in which it has a significant equity interest … with an extensive geographical presence in Europe … European branch network and banking subsidiaries Amsterdam Athens Bern Brussels Dublin Oslo Geneva London Luxembourg Madrid Monaco Oslo Paris San Marino Skopje Zurich CZ: HVB Bank Czech Republic Živnostenská Banka HU: HVB Bank Hungary SLO: BA-CA Ljubljana SK: HVB Bank Slovakia UniBanka Baltics: HVB Bank BIH: HVB Central Profit Banka UniCredit Zagrebačka banka Nova Banjalučka Banka CRO: Zagrebačka banka BG: Bulbank HVB Bank Biochim Hebros Bank SE: HVB Bank Serbia AZ: Koçbank Azerbaijan TK: Yapi Kredi RO: HVB Tiriac Bank UniCredit Romania RU: International Moscow Bank PL: Bank BPH Bank Pekao UA: HVB Bank Ukraine UniCredit Bank A: Bank Austria CreditanstaltD: HypoVereinsbankI: UniCredit

Alexander Picker 6 May 2007 Countries where the Group operates via its own branches, representative offices, small banking subsidiaries, or investment centers (Pioneer) Countries where the Group operates via local banks controlled or in which it has a significant equity interest...and worldwide. Mumbai New York Rio de Janeiro São Paulo Seoul Singapore Shanghai Sydney Teheran Tel Aviv Tokyo Abu Dhabi Bahrain Beijing Boston Buenos Aires Cairo Guangzhou Hanoi Hong Kong Johannesburg Mexico City Miami

Alexander Picker 7 May 2007 = Representative Office R PLSKBGROHUCZYU SIHRBAMK RUUA LV LT EE TR AZ Societe Generale R R R R R 8 + 2R RR 5 + 6R RRRRR 5 + 4R RRRR 3 + 3R R R R UniCredit is the largest group with the most extensive coverage throughout the region… = Subsidiary R

Alexander Picker 8 May and is also present in Serbia. 32 cities 46 branches Assets: € m. Market share: 6-7% Corporate clients:  srednja preduzeća  velika i međunarodna 595  biznis Private clients: Employees: 660

Alexander Picker 9 May 2007 What is banking ? Section 2

Alexander Picker 10 May 2007 The origin of banking Italy in medieval times banca & trade

Alexander Picker 11 May 2007 What does a bank sell ? Money? Services? Safety? ?

Alexander Picker 12 May 2007 What are the trends in the world ? Section 3

Alexander Picker 13 May 2007 Globalisation: Trend global growth is higher, as are commodity prices

Alexander Picker 14 May 2007 Higher commodity prices imply bigger demand for financial market assets by EM

Alexander Picker 15 May 2007 Emerging Markets are integrating into the world economy

Alexander Picker 16 May 2007 Big picture conclusions Global growth will slow in 2007, but will remain strong from a historical perspective Commodity prices are hence likely to remain above long-term averages Advanced economies will continue to gradually shrink in terms of importance A “soft” US growth landing and low inflation will prove supportive for risk taking, but at current pricing levels the evolution of inflation expectations should be watched closely

Alexander Picker 17 May 2007 Other key words Private Equity – Blackstone, Kohlberg Kravis Roberts, Permira Banking consolidation: Barclays and ABN Amro – 67 bn merger Hedge Funds – regulatory risk Globalisation has already arrived ….

Alexander Picker 18 May 2007 Serbia SWOT Analysis Section 4

Alexander Picker 19 May 2007 Strengths: Structural reform is catching up

Alexander Picker 20 May 2007 Strengths: Growth Outlook Robust growth in Serbia in 2007 –Credit growth remains strong despite tighter NBS policy –Increases in public sector salaries will support consumption –National Investment Programme activity continues unabated –Monetary policy slightly looser this year (lower 2-week repo rate) Current political situation is the major risk Expected economic growth of 5% this year

Alexander Picker 21 May 2007 Weaknesses: Industrial Production and …

Alexander Picker 22 May 2007 … Unemployment

Alexander Picker 23 May 2007 Opportunities e.g. for banks: Intermediation but number of banks Potential for further increases Total assets as percentage of GDP Source: UniCredit New Europe Research Network

Alexander Picker 24 May 2007 Threats: e.g. Inflation Core inflation came down markedly in 2H 2006 Move from a crawling peg exchange rate regime to a “hard” dinar policy has helped lower inflation This has allowed the National Bank of Serbia to cut interest rates 500 bps since September Increases in electricity prices and other administered prices will increase the headline inflation rate Medium-term the 15% average increase in public sector salaries may generate inflationary pressures National Investment Programme activity also presents an upside risk medium-term to the inflation outlook Lower oil prices and stronger dinar are the main reasons we see inflation stable this year at an average 7% and at 8% in December 2007 (partly due to base effects).

Alexander Picker 25 May 2007 Threats: The currency market’s volatility

Alexander Picker 26 May 2007 Conclusions Banking is a complex service, which will be needed still for some time Following global trends is essential today as the effects are already here Serbia is generally doing well on economic development Banking sector in Serbia remains interesting and competitive

If you cannot convince them – confuse them Thanks for the attention! Alexander Picker May 2007