Banking in SerbiaAlexander Picker

CEOUniCredit Bank Serbia

May 2007

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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?

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Who is talking to you ?Section 1

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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

14th bank world-wide in terms of Market Capitalization

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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 BankaHU: 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 Creditanstalt D: HypoVereinsbank I: UniCredit

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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

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= Representative OfficeR

PL SK BG RO HU CZ YU SI HR BA MK RU UA LV LT EE TR AZ

Societe Generale 10 + 1R

9

5

5

5

17 + 1RR13 + 1RR

8 + 2RRR5 + 6RR R R R R5 + 4RR R R R

3 + 3RR R R

UniCredit is the largest group with the most extensive coverage throughout the region…

= Subsidiary

R

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... and is also present in Serbia.

32 cities

46 branches

Assets: € 1.256 m.

Market share: 6-7%

Corporate clients: 11.000 srednja preduzeća 1.056 velika i međunarodna 595 biznis 9.303

Private clients: 105.000

Employees: 660

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What is banking ?Section 2

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The origin of banking

Italy in medieval times

banca & trade

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What does a bank sell ?

Money?

Services?

Safety?

?

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What are the trends in the world ?Section 3

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Globalisation: Trend global growth is higher, as are commodity prices

0

50

100

150

200

250

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

2.00

2.50

3.00

3.50

4.00

4.50

5.00

5.50

IMF world commodity price index (2000=100), left axis

5-year moving average, global GDP growth, right axis

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Higher commodity prices imply bigger demand for financial market assets by EM

-200

-100

0

100

200

300

400

500

600

700

800

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

150

170

190

210

230

250

270

290

310

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350LatamMiddle EastDeveloping AsiaCISCEE ex RussiaCRB index (RHS)

Current account balances, USD bn, lhs

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Emerging Markets are integrating into the world economy

10

15

20

25

30

35

40

45

50

55

60

1980

1981

1982

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1991

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1997

1998

1999

2000

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2006

2007

US

Advanced economies, excluding US

Developing economies (World minus advancedeconomies)

% of World GDP, market prices

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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

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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 ….

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Serbia SWOT AnalysisSection 4

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Strengths: Structural reform is catching up

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

SerbiaCzech Republic

EBRD transition indicator (average)

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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

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Weaknesses: Industrial Production and …

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… Unemployment

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

labo

ur fo

rce

(mil)

0%

5%

10%

15%

20%

25%

30%

35%

unem

ploy

men

t rat

e

unemployed

employed

unemployment rate

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0%

25%

50%

75%

100%

125%

150%

175%

200%

225%

Eurozo

ne

Polan

d

Hungar

y

Czech

Rep.

Slova

kia

Slove

nia

Croat

ia

Roman

ia

Bulga

ria

Serbia

Bosnia

-H.

Russia

Turkey

Eston

ia

Latvi

a

Lith

uania

Ukraine

CEE-16

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

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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 2006.

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).

0.0

2.0

4.0

6.0

8.0

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2

Mar

-03

Jun-

03

Sep-0

3

Dec-0

3

Mar

-04

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04

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4

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4

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05

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Mar

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06

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Dec-0

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CPI y-o-y Core CPI y-o-y

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18.00

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26.00

03-F

eb-0

5

03-A

pr-0

5

03-J

un-0

5

03-A

ug-0

5

03-O

ct-0

5

03-D

ec-0

5

03-F

eb-0

6

03-A

pr-0

6

03-J

un-0

6

03-A

ug-0

6

03-O

ct-0

6

03-D

ec-0

6

7 Day 14-Day 28-Day 60-Day 182-Day

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Threats: The currency market’s volatility

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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