Analysts Presentation Milan, March 25 th , 2002

Analysts Presentation Milan, March 25th, 2002

“Catching the Embedded Value of the New Europe”

UniCredito Italiano

2

GOALS OF THE PRESENTATION

To highlight macroeconomic

developments in the New

Europe, in order to show the

embedded value of the region,

which relies in sustained

economic and banking growth

and decreasing risk

To provide

basic framework

in order to evaluate

UCI-New Europe (NE)

Division

within a sum of parts

valuation approach

3

Executive Summary

UCI continues to profit from its leadership strategy in the New Europe, an area characterised by high growth

potential, decreasing risk and getting closer to the EU

In two decades market positioning in the New Europe will be comparable to that in other EU member countries. For UCI being a leader in the region means high revenue opportunities now and first mover advantage in the future.

UCI New Europe division is increasing its weight on group performance, while an effective operating and governance structure has been developed

Accelerated and sustainable growth, coupled with decreasing risk, represent the embedded value of the New Europe

Economic growth, supported by both infrastructure development and EU convergence process, and increasing banking penetration guarantee high profitability in the next decade, with two digit CAGR in pre tax profits in all countries

Decreasing risk, supported by EU convergence, leads to growing value added, due to contraction in cost of equity

Despite national differences, a positive growth scenario characterizes all UCI operating countries

4

Agenda

UCI and the New Europe

The embedded value of the New Europe

New Europe countries: opportunities and perspectives

Conclusions

5

24.7

392(271 mln Euro pertaining UCI)

* Considering 100% of total assets only for controlled Companies (stake > 50%) and including foreign branches

UCI IS ALREADY LEADER IN TERMS OF PROFITABILITY AND ASSETS IN THE REGION …

100

202

253

162

11.3

18.8

24.8

9.0

Total Assets controlled*bln Euro, 31/12/2000

Total net profitBln Euro, 31/12/2000

Including Zagrebacka

Banka

6

UniBanka*

… WITH WIDESPREAD PRESENCE…

Romania

Warsaw

Bratislava

Zagreb

Sofia

Group Pekao

PolandSlovakia

Zagrebacka Banka

Croatia

Pioneer

Bulbank

Bulgaria

Demirbanka

Romania

* Formerly Pol’nobanka

7

… AND SIGNIFICANT MARKET SHARE

Deposits Retail

Deposits Corporat

e

12.2%

4.8%

18.2%

2.6%

Deposits

16.4%

3.5%

Pekao

Pol’nobanka

Loans Retail

Loans Corporat

e

15.6%

6.6%

12.6%

n.s.

Loans

14.8%

5.6%

Year 2001

Note: Pekao: December. Bulbank, Pol’nobanka: November. Splitska banka: October. Demirbank Romania: innternal estimate. Zagrebacka : June 2001Source: UCI, TdB.

n.a.n.a.0.7%Demirbank Romania n.a.n.a.0.6%

4.9%8.4%7.6%Splitska Banka 5.9%6.0%5.9%

36%Zagrebacka 22%30%25%34%36%

23.9%22.9%23.3%Bulbank 13.1%1.3%10.8%

8

BRILLIANT ECONOMIC RESULTS …

+43% OPERATING INCOME GROWTH (+31% at fixed FX), THANKS TO:

Revenue generation (+21% y/y, +11% at fixed FX) and diversification (Net non Interest Income/Total Revenues 39%,+2.5 p.p. y/y)

Strict cost control (C/I Ratio down by 8 p.p. to 48.9%)

NEW EUROPE BANKING IN 2001: KEY HIGHLIGHTS

… IN A LESS FAVOURABLE THAN EXPECTED 2001 ENVIRONMENT (TO IMPROVE IN 2002)

Economic slowdown in Poland (1,1% real GDP growth in 2001 vs 4.0% in 2000) while growth in other countries remained strong

Strong reduction of Polish interest rates

STRONG PERFORMANCE OF THE DIVISION ALSO PROVEN BY:

Out-performance of Bank PEKAO vs major competitors

Increased contribution of other banks

MORE AND MORE IMPORTANT GROWTH FACTOR FOR UCI Macroeconomic environment sustains accelerated growth Further restructuring opportunities available New acquisition in the pipeline to fuel further growth

CAPITAL GAIN ON SPLITSKA (over Euro 34 mln gross of tax effect with 60% gross return on 1.5 years) PROVIDES TANGIBLE EVIDENCE OF NE STRATEGY

9

Net Interest Income

2000 2001

552

787

1,2751,541

56.7%

48.9%

Operating Income

Total Revenues

Cost/Income

2000 2001

2000 2001

812943

464599

Non Net InterestIncome

2000 2001

2000 2001

+43%

+21%

+16%

-7.8 pp

Mln €

OPERATING INCOME UP 43% Y/Y AND NET INCOME GROWTH AT +53% Y/Y (+31% AND +42% AT END 2000 FX RESPECTIVELY)

+31%

+11%

+6%

+29%

+18%

-2.400 HEADCOUNT VS 2000: Implementation of outsourcing opportunities Incentives to exits, management of turnovers

STRICT COST CONTROL Tight procurement, centralised purchasing Real estate restructuring Full scope contract renegotiation

At end 2001 FX

At end of period FX**

VOLUMES GROWTH*: Gross Customer Loans:

+17,3% yoy Customer Deposits: +16,6%

yoy COMMERCIAL ACTIONS:

Active and rapid Repricing Increased sales productivity

NEW VALUE ADDED PRODUCTS INTRODUCED

Structured CD Asset Management products Credit Cards and Payment

Services

* Calculated on end of period data.** Exchange ratio at 31 December.

10

NEW EUROPE BANKING NET INCOME – UCI’s PORTION: EURO 227.3 mln (+35% y/y)

SPLITSKA 5% (Euro 10.9 mln)

BULBANK 14%(Euro 30.9 mln)

INCREASED CONTRIBUTION TO DIVISION’S NET INCOME FROM BULBANK, SPLITSKA, AND POL’NOBANKA THANKS TO RESTRUCTURING

* At Unchanged FX.** For 2000 Bulbank Net Profit net of € 79 mln (pre tax) extraordinary income from UBB disposal

GROUP PEKAO 80% (Euro 183.3 mln)

POL’NOBANKA 1% (Euro 2.2 mln)

Total Division

Net Income – % y/y growth*

ROE, %

Splitska Pol’no Banka

Group Pekao

Bulbank

n.s.

9.0

+175

23.8

+80 (2)

14.722.2

+53

C/I Ratio, % 68.248.045.948.7

C/I Ratio – point perc. Change ‘00 -13.7-6.9-5.2-7.9

+81 **

21.1

48.9

-7.8

ROE – point perc. Change ‘00 n.s.+13.5+6.6 (2) +2.6 +5.5 **

RARORAC, % 1.817.929.723.5 17.7

11

OVERALL ASSET QUALITY PRESERVED DESPITE ECONOMIC SLOWDOWN IN POLAND THANKS TO PEKAO’S SELECTIVE LENDING POLICY AND EFFECTIVE RECOVERY ACTIONS

% change

(Fixed FX)2000

(1) Total loan loss provisions /Total gross loans(2) Total specific provisions for doubtful loans/ Total gross doubtful loans(3) Internal estimate based on Pekao’s current portfolio situation(4) Due to restrictive Polish regulation based on financial ratios and risky sectors

2001

WE ARE PROMPTLY REACTING THROUGH:

Conservative lending policy Implementation of new lending rules and procedures and active monitoring Effective recovery actions

KEY HIGHLIGHTS

Coverage ratios

-on total gross loans (%) (1)

-on total gross doubtful loans (%) (2)

+0.7

-3.3

9.7

59.4

10.4

56.1

Good coverage ratios, although negatively impacted by write-offs

Volumes

Total gross loans 9,845 +7.411,552

Gross NPL 916 +25.41,241

Gross NPL/total gross loans (%)

Net NPL/total net loans (%)

9.3 +1.4

1.4 +1.0

10.7

2.4

Selective and conservative lending policies

Deterioration of asset quality mainly due to the economic slowdown in Poland in 2001

Approximately 25%(3) of Doubtful Loans with no payment delays(4)

Mln €

12

NEW EUROPE BANKING: RESULTS BREAKDOWN BY BANK

(1) Balance due to roundings and elisions (2) IAS, calculation based on an estimated share acquired (*) Writeback

New perimeter: excluding Splitska

and including Zagrebacka

Mln €

Interest margin (incl. div.)

Net non interest income

Total revenues

Operating costs (incl. dep.)

Net operating income

Net income

ROE

Cost/income(excl. goodwill dep.)

POL’NO BANKA (72,4%)

Group PEKAO (53,2%)

823 21

13

34

23

11

3

9.0%

68.2%

545

1 368

666

702

22.2%

48.7%

353

Net loan loss provisions 5174

UCI stake

Net income (UCI’s portion) 2.2183.3

BULBANK (85,2%)

51

23

74

34

40

14.7%

45.9%

6*

36

30.9

47

18

65

31

34

18

23,8%

48,0%

12

10,9

SPLITSKA BANKA (62,6%)

TOTAL (1)

942

599

1 541754

787

410

21,1%

48,9%

185

227,3

TOTAL

ZAGRE-BACKA BANKA Group

(85%(2))

206 1 101

740

1 841

972

869

455

52.8%

159

365

249

116

63

13.5%

68.2%

20422

27053.6

19.5%

13

THE NEW EUROPE DIVISION IS INCREASING ITS WEIGHT ON UCI GROUP…

2001

% RARORAC

Revenues (% of UCI)

17.7%**

17.9%*

Net Income (% of UCI) 18.0%*

Amount invested (mln €) 1,570 • New Europe carries a significant

increasing weight on Group

performance

• Weight increasing as result of

restructuring and new investments

• RARORAC above Group level

• A very significant EVA contribution

* Including Zagrebacka, excluding Splitskabanka (at 2001 perimeter: net income = 15.6% , revenues = 15.4%).

** UCI Group RARORAC = 9.97%.

14

... WHILE AN EFFECTIVE ORGANISATION MODEL HAS BEEN ADOPTED

Homogenous region:

• Countries with similar

dynamics (but different life-

cycles)

• Converging regulation (EU

convergence)

Opportunity

• Similar segment strategies (respecting single country differences and single banks position)

• Same business models and target information systems

• Economies of scale (ex. card processing, single purchase center) and product (ex. Pioneer)

• Strong P&C

Strategy and organization model

15

Cars & Pilots Mechanical support

A UNIQUE TECNOLOGY FOR DIFFERENT OUTSTANDING MODELS

16

cars & pilots

with local

pilots and

UCI co-

pilots *

WHAT DO THE BANKS DO

• Keep relationships with local Public Institutions

• Define commercial policies

• Manage daily operativity

• Devise credit policies

• Implement investment policy and credit strategies

approved by the Supervisory Board

LOCAL BANKS: DIRECT MANAGEMENT RESPONSABILITY/ACCOUNTABILITY

* Mainly but not exclusively on controlling functions.

17

Mechanical support

WHAT DOES THE HOLDING DO

Strategy & Control• Strategic guidelines• Performance budgeting & controlling• Risk budgeting & controlling• Audit

Support in development of:

• Products (retail/corporate)

• Operation & Process (credit risk,…)• IT & Systems• HR training• Centralized production (ex. card processing, asset

management,…)

HOLDING: STRATEGIC GUIDANCE AND BUSINESS SUPPORT

18

Agenda



Accelerated and sustainable growth

Decreasing risk


Conclusions

19

WHAT DO WE CONSIDER NEW EUROPE?A REGION INCLUDING 10 EU ACCESSION COUNTRIES PLUS CROATIA

Year 2001New

Europe EU

Population, mln

GDP, bln €

Per Capita GDP, €

108

496

4,595

377

9,006

23,885

Source: Datastream and EIU.

Slovenia

SlovakiaWarsaw

Prague

Bratislava

Budapest

BucharestLubjana Zagreb

Sofia

Tallinn

Riga

Vilnius

Estonia

Czech Rep.

Poland

Hungary

Latvia

Lithuania

Bulgaria

Croatia

Romania

20

WHY NEW EUROPE? PERSPECTIVE ENTRY INTO EU AND EMU GUARANTEES A PREDETERMINED CONVERGENCE PATH

Phase 1: pre-accession

Phase 2: EU membership

No Euro adoption

Phase 3: full EMU

membership

Accession negotiations

Ratification(18 months)

ERM II Upon fulfillment of

Maastricht criteria (min 2 years) – no opting out

Poland, Slovakia, Hungary,3 Baltics, Czech R.,

Slovenia

EU entry

Bulgaria,Romania and

Croatia2007

2004

EMU entry

T Min T+2

21

SUSTAINABLE, HIGH GROWTH AND A DECREASING LEVEL OF RISK REPRESENT THE “EMBEDDED VALUE” OF THE NEW EUROPE


Decreasing level of risk Cost of equity

Bank revenues and

profitability

22



Accelerated and sustainable growthEconomic growth Banking growth

Decreasing risk


Conclusions

Agenda

23

ACCELERATED AND SUSTAINABLE GROWTH DRIVEN BY SIGNIFICANT MACROECONOMIC DEVELOPMENT AND INCREASING BANKING PENETRATION

Existing economic development gap suggests opportunities of high and sustainable growth, with real GDP growth rates well above EU standards for the next two decades

Post convergence experience (Spain, Portugal, Ireland) and structural reasons, support reliability/credibility of accelerated growth expectations in NE

Positive economic scenario and wide scope for increasing banking penetration suggest a dynamic growth scenario for banking revenues, with two digit CAGR for the next decade

24




Decreasing risk


Conclusions

Agenda

25

NE growth rate (past and expected) well above EU and USA

Current gap in per capita income between EU and NECs (New Europe Countries) suggests a continued more dynamic growth

Source. Per capita GDP in PPP: EU Commission estimates, 2000. Real GDP growth: UCI- FBD Research Team and UBM.

CATCHING UP PROCESS TOWARDS THE EU SUGGESTS A LONG PERIOD OF FAST AND SUSTAINABLE GROWTH

Gap in 2000 per capita GDP in PPP

24

72

100

0

20

40

60

80

100

EU 15 Slovenia (highest)

Bulgaria (lowest)

Real GDP growth

0%

2%

4%

6%

2000 2001

NE Eurozone USA

26

PAST EXPERIENCES OF EU ENLARGEMENT ADDRESS TO IRELAND, SPAIN, AND PORTUGAL AS SUCCESS ROLE MODELS

Average Growth 1986/01

EU

IE+SP+POR 4.2%

2.1%

Source: University of Groningen database.

The experience of past EU enlargement processes shows that catching up implies decades of average growth above EU standards

Spain, Portugal, and Ireland experienced for 20 years growth by 2/3% point higher, compared to the EU

Per capita GDP in PPP

5,000

8,000

11,000

14,000

17,000

20,000

1971 1981 1991 2001

27

IN 20 YEARS OPERATING ENVIRONMENT OF NECs WILL BE EQUIPARABLE TO OTHER EU MARKETS

NECs should approach the average of 3 least developed EU countries (Portugal, Greece and Spain) by 2020…

… with two decades of growth rates 2%/3% higher than EU levels

Estimated time for convergence to EU per capita GDP in PPP

Note: Consensus on average years to convergence forecasted by different growth models (Barro model and Levine- Renelt model in Fisher et al (1998) and EU commission convergence model (2001). EU standards are based upon per capita GDP of the three low income EU members, Portugal, Spain and Greece, with convergence income representing 75% of EU’s per capita GDP. Results of different models are similar, with the exception of Slovenia, where the EU Commission forecasts 1 year to convergence.

12 - 13 Y

14 - 15 Y

22 Y

27 - 32 Y

0 10 20 30

CR,SLOVE

EST,SLOVA,

HUN

POL, LAT

BUL,LITH,ROM

28

STRUCTURAL REASONS FOR GROWTH ARE RELATED TO THE NATURE OF NECs AS TRANSITION ECONOMIES, SIGNIFICANTLY DIVERGING FROM EMERGING MARKETS

EXISTING SKILLS AND

INFRASTRUCTURE

EU ACCESSIONPROCESS

• Pre-determined path of convergence and forced structural reform process

• Harmonisation of legal and regulatory framework

• Integration and liberalisation of markets

• EU financial support for convergence

• Existence of industrial assets

• Developed infrastructures

• Skilled labour force and availability of human capital

• Historical linkages with EU countries

29

NEW EUROPE ECONOMIC GROWTH CAN BE ANALIZED BOTH ON PRODUCTION AND DEMAND SIDE

PRODUCTIONPRODUCTION

DEMANDDEMAND ECONOMIC ECONOMIC

GROWTHGROWTH

30

ON THE PRODUCTION SIDE, DRIVERS OF GROWTH ARE MAINLY RELATED TO PRODUCTIVITY GAINS AND CAPITAL (INVESTMENT INFLOW)

PRODUCTION SIDE

Productivity gains- privatisation and restructuring-Foreign Direct Investment -- skilled work force- competitive challenge of EU market

Capital- Foreign direct investment- EU structural funds- availability of domestic invest. /saving

Labour- low cost of labour- limited wage pressures, due to unemployment

Factors leading

to growth

Structural reasons for growth

Relevance*

* Contribution to 2000-2009 growth in 10 CEE candidates for EU enlargement. Source: EU Commission estimates.

47%

38%

15%

31

FDI provide a positive contribution to the catching up process: enhancing structural transformation, thus boosting capital

and labour productivity sustaining productive investment, with consequent positive

impact on export

* Average of single countries’ ratio, weighted with nominal GDP.Source. FDI flows: Transition Report 2001, EBRD. Stock of FDI: UNCTAD, 1999. GDP: EIU forecasts.

SUSTAINED AND INCREASING INFLOW OF FDI SUPPORTS HIGHER CONTRIBUTION OF CAPITAL TO GROWTH AND INCREASES IN PRODUCTIVITY

PRODUCTION SIDE

FDI inflows, mln USD

0

6000

12000

18000

24000

1994 1998 2001

Stock of FDI over GDP *

8%10%

12%14%

16%

NECs LA Asia

32

NECs productivity growing at twice the speed of EU

Gap in productivity levels leading to higher productivity growth in

the future, further enhanced by entry into the EU market (free

movement of resources, transfer of technology, and

homogenisation of market conditions)

* Austria taken as reference country for EU. ** Czech Republic, Hungary, Poland and Slovakia.Source. Productivity gap: WIIW, 1999. Productivity growth: WIIW 1999, average of 4 NECs.

NECs PRODUCTIVITY INCREASING AT DOUBLE THE SPEED OF EU WITH STRONG SCOPE FOR FURTHER GROWTH

PRODUCTION SIDE

Gap in average productivity level between NECs and EU*

100

23

0

20

40

60

80

100

EU* NECs (avg.)

Grow th rate in manufacturing productivity 1993-99

4%

9%

0%

4%

8%

12%

EU NECs**

33

Low labour cost sustains competitive advantages, compared to the EU

Persisting unemployment guarantees low salary pressures, supporting real rather than nominal convergence

Note: NECs cost of labour is a simple average. Source: EIU forecasts, 2001.

UNEMPLOYMENT, DETERMINED BY RESTRUCTURING AND PRODUCTIVITY GAINS, AVOIDS RISK OF STRONG SALARY PRESSURES

PRODUCTION SIDE

Labour cost per hour, USD

11%

100%

0%

50%

100%

Italy

NE

Cs

Unemployment rate

8%

13%

0%

4%

8%

12%

16%

EU NECs

34

ON THE DEMAND SIDE , INTERNAL DEMAND RATHER THAN EXPORT IS DRIVING NE GROWTH, MAKING GROWTH LESS VULNERABLE TO THE INTERNATIONAL ENVIRONMENT

Factors leading

to growth

Key factors for internal

demand growth

Key factors for export

growth

DEMAND SIDE

Gap in life-style

Increase disposable income

Investment and FDI

EU structural funds

Selected comparative advant.

Cost of labour

Full liberalisation of markets

Structural reasons

for growth

Relevance for 2002-04

Inte

rnal led

g

row

th

35

GAP IN LIFE STILE IS EXPECTED TO SHRINK WITH INCREASING MOVEMENT OF LABOUR, FREEDOM OF SETTLEMENT, ETC.

* Income plus transfers, minus taxes.** Households spending in tourism and restaurants. Note: NECs is weighted average of Poland, Slovakia, Romania, Bulgaria.Source: EIU.

Gap in Personal Disposable Income per head USD *

2,442

13,093

Italy NECs

% Food on Household Spending

14.1%

27.2%

Italy NECs

% Leisure on Household Spending

8.3%

14.0%

Italy NECs

Mobile per 100 population

88.8%

21.4%

Italy NECs

Internet users per 100 population

37.5%

10.2%

Italy NECs

Housing stock per 1000 population

339402

Italy NECs

DEMAND SIDE

36




Decreasing risk


Conclusions

Agenda

37

Despite convergence and

increasing competition, high

growth opportunities in terms of pre tax

revenues are expected

SUSTAINED GROWTH SCENARIO IS DETECTED IN TERMS OF PRE TAX BANKING PROFITS, WITH TWO DIGIT CAGR IN THE NEXT DECADE

Note: 10 Year macroeconomic assumption from Oxford Economic Forecasting.Source: UCI - FBD Research Team, simulated model for NECs data.

Potential for Pre tax profit growth(simul. 2001-10 CAGR for NECs)

21%

17%

24%

15%

0%

10%

20%

30%

Poland Slovakia Bulgaria Croatia

38

POSITIVE PERSPECTIVES ARE EVIDENT ALSO COMPARED TO WHAT HAPPENED IN ITALY IN THE LAST 5 YEARS (EMU CONVERGENCE PERIOD)

In the NE volume effect to offset contraction in spread, supporting NIM growth...

… with significant increases in fees generation, although lower than in Italy in 1996-01…

… and decreasing credit risk

Source: UCI - FBD Research Team, simulated model for NECs data. 10 Year macroeconomic assumption for OEF. Data for Italy, Prometeia

Net Interest Margin CAGR

12.6%7.3%

Loans+Deposits, CAGR

17.7%

Non Interest Margin CAGR

ItalyNew

Europe

Italy

0.8% (down from

1.5)

Provisions/Loans

NewEurope

Operating Costs CAGR

3.1%

Italy

2.9%

NewEurope

Total Net Revenues CAGR

NewEuropeItaly

10.0%

0.4%

Italy NewEurope

6.0%

Italy NewEurope

7.9%6.5%

1.0% (down from

2.0)

39

GROWTH OPPORTUNITIES ARE RELATED TO RELATIVELY LOW BANKING PENETRATION, …

Significant banking growth potential driven by: gap towards EU penetration levels, low levels in absolute terms, NECs economic growth

Per capita GDP (‘000 USD)

LATBULITRO

ESTHUPOL

CRSK

SLO

EU

0%

50%

100%

150%

200%

250%

300%

0 5 10 15 20 25

(Loan

s+

Dep

osit

s)/

GD

P

Source: UCI on National Central Banks and FBD Research Team’s projections.

Banking penetration rise -Total Assets / GDP-

53% 63% 69%

0

200

400

600

1995 2000 2003

GDPTA

40

Significant scope for growth in banking penetration and increase in fees generation

Lower cost of labour, but higher cost of risk

… AND TO PERSISTING DIFFERENCES IN DOING BANKING IN NE AND EU COUNTRIE, CREATING SCOPE FOR FURTHER DEVELOPMENTS

Share loans retail over total loans

94%

337%

(Loans+Deposits)/ GDP

862

Cards per ths inhabitants

EUNew

EuropeNew

EuropeEU

248

53%

EU NewEurope

28%

Note: Top line: comparisons between banking sector data in 4 UCI NECs countries and EU aggregate, 2000. Bottom line: comparisons between data for UCI Italian banks and UCI New Europe Banks, 2001.Source: National Central Banks and UCI.

10.7%

Italian Banks

2.6%

UCI’s ‘01 Gross NPL/Gross Loans

NewEurope Banks

UCI’s ‘01 Average Cost per employee (Euro ths)

16.6

Italian Banks

58.5

NewEurope Banks

39%49%

UCI’s ‘01 Non interest income/Total Income

Italian Banks

NewEurope Banks

41

Agenda




Decreasing risk


Conclusions

42

RISK IN THE NEW EUROPE IS THE LOWEST AMONG EMERGING MARKET REGIONS

Commitment to structural reforms guarantees low and decreasing risk, confirmed also in terms of

spread over EU bonds**

* Asia is defined as Indonesia, Malaysia, Thailand, Korea, Philippines. ** Spread over Eurobond is based upon SUEMI: Sole24Ore UBM Emerging Market Index, for Euro-denominated high-yield benchmark (total returns traded sovereign debt instruments in Euro with fixed interest rate, 76 sovereign bonds for 22 countries and a market capitalisation of EUR 36 bln). Source: S&P’s database and UBM Research.

S&P's Country Rating

BBB-

BB-BB

BBB

B

BBB-

ASIA* MERCOSUR NE

1998 2001

Country spread over Eurobond 21st February, 2001

296

480763

0

300

600

900

Global Latin New Europe

43

HIGHER STABILITY EMERGES AT BOTH BANKING SYSTEM AND OVERALL ECONOMY LEVEL, WHEN COMPARED TO OTHER EMERGING MARKETS

Colombia

Poland

Estonia

Chile

Malaysia

Philipp.

Argentina

Korea

Taiw an

Peru

India

BrazilHungary

Thailand

Indonesia

Romania

Venezuela

Slovenia

Mexico

Slovakia

Czech R

44

DECREASING RISK LEADS TO GROWING VALUE ADDED , DUE TO CONTRACTION IN COST OF EQUITY

Decreasing

Risk

Decreasing

Risk

Decreasing

Interest

rates

Decreasing

Interest

rates

Cost of

equity

Cost of

equity

The combined decrease of risk and interest rates will impact significantly on the Cost of Equity for the Group, allowing a steep increase in

value creation

EU convergenceEU convergence

45

IN SUMMARY, THE EMBEDDED VALUE OF THE NEW EUROPE IS RELATED TO ACCELERATED AND SUSTAINABLE GROWTH, WITH LOW AND DECREASING LEVEL OF RISK

The catching up process supports accelerated growth for the next

decade, up to convergence to EU standards

In 2020 being leader in NE will be comparable to equal positioning

in other EU markets

Structural reasons for growth are related to productivity gains and

FDI on the production side, while internal rather than external

demand will be the engine of growth on the demand side

Economic opportunities reflect in banking growth, with two digits

CAGR in terms of pre-tax profits

Decreasing risk leads to growing value added, due to contraction in

cost of equity

46



New Europe countries: opportunities and perspectivesPolandSlovakiaCroatiaBulgariaRomania

Conclusions

Agenda

47

HIGLY ATTRACTIVE INTERNAL MARKET AND STABLE ENVIRONMENT, DESPITE ECONOMIC SLOWDOWN, WITH RECOVERY EXPECTD AFTER MID 2002

• After seven years (1994-2000) of GDP growth exceeding 4%, significant slowdown has been observed and growth in 2001 dropped to 1.1% due to weakening demand abroad and collapse in domestic investment activity

• There is no chance for sharp acceleration of economic growth in 2002 – GDP growth will stay at around 1.5 %

• Reduction in growth rate was accompanied by significant improvement in macroeconomic equilibrium: 12-month inflation dropped to 3.5 % in February 2002 and current account deficit remains below 4% of GDP

• Monetary policy remains relatively tough, with short-term nominal interest rates kept around 10%

ENGINES OF GROWTH

SIGNALS TO MONITOR

• Zloty likely to remain above its long term equilibrium level

• State budget policy faces difficult challenges, but budget deficit remains under control Budget deficit in 2002 shouldn’t exceed 40 bln Zloty (5.2% of GDP) and expenditure cap (inflation +1%) to be observed starting from 2003

Source: Pekao Macroeconomic Research Office and UCI – FBD Research Team

Real GDP growth

1.1% 1.5%

3.2%4.3%4.0%

0.0%

2.0%

4.0%

2000 2001 2002 2003 2004

48 Source: Pekao, Macroeconomic Research Office

The cash current account deficit shrunk to 3.9 % of GDP in 2001 as a whole

Lower prices of imported energy (oil) and a jump in unclassified turnovers accounted for most of the recent improvement

STABILISING CURRENT ACCOUNT DEFICIT,…

-704

0

-739

9

-739

6

-741

2

-769

9

-830

9

-871

5

-862

9

-830

2

-863

3

-922

8

-972

7

-997

8

-107

51

-114

55

-114

49

-120

10

-118

29

-122

06

-124

83

-127

54

-128

41

-123

28

-118

79

-115

69

-16000.0

-14000.0

-12000.0

-10000.0

-8000.0

-6000.0

-4000.0

-2000.0

0.0

XII

-99

I-20

00 II III

IV V VI

VII

VII

I IX X XI

XII

I-20

01 II III

IV V VI

VII

VII

I IX X XI

XII

mln

USD

49

LOMARD RATE, REDISCOUNT RATE, INTERVETION RATEAND CONSUMER INFLATION RATE

Source: Pekao, Macroeconomic Research Office

Lower prices of food and imported energy slowed 12-month consumer inflation to 3,5 % by January 2002

The monetary policy council reacted adequately

…AND LOW INFLATION ALLOWED AN EXPANSIONARY MONETARY POLICY, SUPPORTING ECONOMIC RECOVERY

17.0

18.519.5

21.021.5

23.0

20.5

17.0

13.5

15.5

21.5

17.0

18.0

19.520.0

15.5

19.0

15.5

12.0

14.0

19.0

17.0

15.514.5

17.5

13.0

16.5

14.013.0

10.0

11.5

3.53.6

11.6

8.5

10.3

6.3

6.26.9

6.2

7.4

6.9

5.24.3

10.7

10.29.810.1

6.5

5.6

3.4

8.4

13.4

18.4

23.4

28.4I-

99r. II III

IV V VI

VII

VII

I

IX X XI

XII

I-20

00r II III

IV V VI

VII

VII

I

IX X XI

XII

I-20

01 II III

IV V VI

VII

VII

I

IX X XI

XII

I-20

02

%

Lombard rate Rediscount rate Intervention rate Consumer inflation rate

50 Source: Pekao, Macroeconomic Research Office

GROWTH IN REAL GDP SLOWED DUE TO WEAK DEMAND ABROAD AND DECREASE IN FIXED INVESTMENT

GROSS DOMESTI C PRODUCT(% change, yoy)

4.8

6.0

7.0

4.1 4.0

1.11.5

6.8

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.019

95

1996

1997

1998

1999

2000

2001

*

2002

*

%

51

EXPORTS VOLUME AND DYNAMIC OF EXPORTS


EXPORT VOLUMES REMAINED HIGH BUT DYNAMIC OF EXPORTS DECREASED DUE TO WEAK DEMAND ABROAD

6323

6835

7167

79317436

7508 74597879

90.2

99.3

104.1

109.8

117.6116115.3

108.8

1900

2900

3900

4900

5900

6900

7900

8900

IQ-2000 IIQ IIIQ IVQ IQ-2001 IIQ IIIQ IVQ

mln

US

D

80

85

90

95

100

105

110

115

120

%%

52

REAL GROWTH OF INDIVIDUAL CONSUMPTION AND GROSS FIXED CAPITAL FORMATION

(average yearly prices of previous year ;corresponding quarter of previous year)


LARGE CUTS IN FIXED INVESTMENT BY COMPANIES ACCOUNTED FOR MOST OF THE DECREASE IN DOMESTIC DEMAND

105.6

102.8

102.0 102.1

101.5

91.6

86.4

82,9*

104.8

103.3102.1101.6101.5

101.6101.1

103.0

80

85

90

95

100

105

110

IQ-2000 IIQ IIIQ IVQ IQ-2001 IIQ IIIQ IVQ

%%

53

GROSS DOMESTIC PRODUCT (% change; corresponding quarter of previous year)


THE GDP GROWTH IN THE FIRST HALF OF 2002 IS LIKELY TO REMAIN WEAK, WITH SOME ACCELERATION POSSIBLE IN THE SECOND HALF OF 2002

2.3

0.9 0.80.4 0.3 0.5

1.9

3.2

0

1

2

3

4

5

20

01

QI

20

01

QII

20

01

QII

I

20

01

QIV

20

02

QI

20

02

QII

20

02

QII

I

20

02

QIV

%

54

REDSICOUNT RATE AND PRICE INDICES OF CONSUMER GOODS AND SERVICES

( corresponding month of previous year)


Interest rates are likely to be reduced another 100 - 150 basis points in early 2002

Twelve-month inflation could increase modestly by fall 2002

WITH A FURTHER EXPECTED CUT IN INTEREST RATES

*forecast

4.3

4.0

6.26.6

9.9

6.6

8.5

3.6 3.5

4.3

4.1

3.7

4.0

10.7

4.2

5.34.4

18.019.5

21.5

14.0

12.0

17.0

11.011.0

-10123456789

10111213141516171819202122

VII

I-00 IX X X

I

XII

I-20

01 II III

IV V VI

VII

VII

I

IX X XI

XII

I-20

02 II*

III*

IV*

V*

VI*

VII

*

VII

I*

IX*

X*

XI*

XII

*

%

55

STATE BUDGET DEFICIT (% GDP)


THE STATE BUDGET DEFICIT WILL REMAIN LITTLE CHANGED BETWEEN 2001 - 2003

-2.4-2 -2.2

-4.5-4.1

-5.2-6

-5

-4

-3

-2

-1

0

19

98

19

99

20

00

20

01

20

02

*

20

03

*

%

56

BANKING GROWTH OPPORTUNITIES RELATED TO EXPLOITATION OF NEW SEGMENT OF THE MARKET AND TO DEVELOPMENT OF NON TRADITIONAL BANKING OPERATIONS

Stable and increasingly

sophisticated banking sector

Opportunities related to entry in

new segments (i.e. SMEs and

affluent)

Sustained growth potential in the

non traditional banking market

(AuM, etc.), providing a

considerable contribution to

banking revenues growth, also in

view of bank interest spread

contraction

Forecasts: loans and deposits growth

Source: Pekao Macroeconomic Research Office and UCI – FBD.

Forecasts: banking interest rates and spread

0%

5%

10%

15%

20%

2000 2001 2002 2003 2004

Nominal GDP Deposit Loan

7.0

10.5

14.0

17.5

21.0

1999 2000 2001 2002 2003 2004

6.0

6.5

7.0

7.5

8.0

spread - RH scale wibor 3M

loans deposit

57




Conclusions

Agenda

58

STABLE AND GROWING MARKET, WITH HIGH POTENTIAL IN VIEW OF ECONOMIC AND INCOME CONVERGENCE TOWARDS THE EU

• FDI fuelled by privatisation of utilities, while restructuring leads to increased investment

• High per capita income compared to the other NECs and progressive increase of people in high income groups, with positive impact on private consumption

• Commitment to structural reforms and EU accession in 2004

SIGNALS TO MONITOR

• Potential political instability and outcome of end 2002 elections

• Fiscal sustainability, in view of restructuring expenses

• Restructuring of large companies and utilities

Source: UCI – FBD Research Team and Polnobanka.

ENGINES OF GROWTH

Real GDP growth

2.2%

3.8% 4.0% 3.7%3.3%

0%

2%

4%

2000 2001 2002 2003 2004

59

BANKING POTENTIAL RELATED TO GROWTH OF VOLUMES, DEVELOPMENT OF NON TRADITIONAL BANKING AND EASING OF CREDIT QUALITY PROBLEMS

• We expect a gradual recovery of loan

growth, with pick up after 2003

• Considerable growth in volumes

outpaces negative impact on income

due to reducing spread

• NPL phenomenon (23.2% in 2001) is a

stock rather than a flow problem

• Development of indirect fundraising to

strengthen in view of 2004 pension fund

reform

Note: 2000 and 2001 data are influenced by the recapitalisation intervention on large banks.

Source: UCI – FBD Research Team and Polnobanka.

F o r e c a s t s : b a n k i n g i n t e r e s t r a t e s a n d s p r e a d0.0

4.0

8.0

12.0

2000 2001 2002 2003 2004

2.0

3.0

4.0

5.0

Spread Interbank rate eopLending rate Deposit rate

60

Agenda




Conclusions

61

SPEED UP OF REFORMS AND CONVERGENCE PROCESS IN VIEW OF THE NEW STABILISATION AND ASSOCIATION AGREEMENT WITH THE EU

• Internal led growth with potential for future NX recovery, due to trade liberalisation with the EU

• Following SAA, possible fast track of convergence to the EU, with entry possible after 2007/08

• Full international support (EU SAA signed and IMF stand by agreement)

• Low inflation, decreasing interest rates (still volatile)

ENGINES OF GROWTH

SIGNALS TO MONITOR

• Fiscal sustainability is a key factor for international credibility

• Exchange rate depreciation with potential negative effects on the banking system, in view of high exposure in FX

Source: UCI – FBD Research Team and Splitska

Real GDP growth

4.0%

2.9%

3.5%

4.0%

3.7%

2.0%

3.0%

4.0%

2000 2001 2002 2003 2004

62

0.0

4.0

8.0

12.0

2000 2001 2002 2003 2004


IN BANKING, DECREASING SPREAD IN VIEW OF ENHANCED COMPETITION, WHILE VOLUME EXPANSION CONTINUE TO REMAIN SUSTAINED

• Lending and deposit growth

continues to outpace economic

development

• Lending expansion is related to an

easing operating environment and

development of new segments of the

market

• Gradual contraction in the interest

rate spread, mainly due to decreasing

lending rates



Source: UCI – FBD Research Team and Splitska

63

Agenda




Conclusions

64

DYNAMIC ECONOMIC GROWTH, WITH A STABLE SCENARIO, IN VIEW OF STRONG COMMITMENT TO EU REFORMS

• Growth supported by large gap and speeding up of reforms, through restructuring of enterprise sector

• Commitment to EU guarantees sustainability of the Currency Board and advancement of structural reforms

• Development of small wealthy group

• Inflow of FDI

ENGINES OF GROWTH

SIGNALS TO MONITOR

• Increases in government deficit endangering Currency Board sustainability

• Increase in debt service payment ratio

• Delays in market liberalisation and EU commitment

Source: UCI – FBD Research Team and Bulbank

Real GDP growth

4.9%

3.7%

4.8%4.5%

5.8%

3.0%

4.0%

5.0%

6.0%

2000 2001 2002 2003 2004

65

BANKING POTENTIAL EXPRESSED BY HIGHLY DYNAMIC LENDING AND DEPOSIT GROWTH, COUPLED WITH CONTRACTION IN NPLs, SUSTAINS PROFITABILITY DESPITE SPREAD REDUCTION

• Volume effect partially

counterbalances spread

contraction, in terms of NIM

• Gradual and continues increase in

lending activities as a consequence

of exploitation of market

opportunities, still with strong

control of risk

• Decreasing non performing loans


Source: UCI – FBD Research Team and Bulbank

0.0

4.0

8.0

12.0

16.0

2000 2001 2002 2003 2004


66

Agenda




Conclusions

67

FOR THE FIRST TIME, IMPORTANT SIGNALS OF COMMITMENT TO REFORMS SUPPORT OPTIMISTIC VIEW FOR FUTURE DEVELOPMENTS

• Strong commitment to deeply reform the country, both in financial and real sectors

• Large gap in income standards and productivity levels to match

• Investment growth and productivity development as a consequence of industrial restructuring and privatisation

ENGINES OF GROWTH

SIGNALS TO MONITOR

• A tighter fiscal policy is required to reduce inflation, in pair with a deep reform of the labour market

• Interest rates are still widely above EU levels despite reducing

• The restructuring process will put public debt under pressure, jeopardizing fiscal sustainability

Source: UCI – FBD Research Team and EIU

Real GDP growth

3.5%4.2% 4.3%

1.6%

4.5%

1.0%

2.0%

3.0%

4.0%

5.0%

2000 2001 2002 2003 2004

68

Agenda




Conclusions

69

CONCLUSIONS

In two decades market positioning in the New Europe will be comparable to that in other EU member countries. For UCI being a leader in the region means high revenue opportunities now and first mover advantage in the future

Accelerated and sustainable growth, coupled with decreasing risk, represent the embedded value of the New Europe

Economic growth, supported by both infrastructure development and EU convergence process, and increasing banking penetration guarantee high profitability in the next decade, with two digit CAGR in pre tax profits in all countries

Opportunities are related to sustained volumes growth (on the lending and deposit side), exploitation of new market segments (SMEs, affluent) and development of fee generating activities, all coupled with decreasing incidence of costs and credit quality problems

Decreasing risk, supported by EU convergence, leads to growing value added, due to contraction in cost of equity

70

ANNEX

• EU and EMU enlargement

• Revealed Comparative Advantage (RCA)

• Basic assumptions for banking growth simulation models

• Risk of contagion

• SUEMI description

• Definition of Non Performing Loans in the New Europe

• Macroeconomic and banking sector forecasts for UCI countries of operation

71

ANNEX – ENLARGEMENT PROCESS: EU PROBABLY IN 2004 FOR A LARGE NUMBER OF COUNTRIES, EMU ENTRY NOT BEFORE 2007

Source: UCI – FBD Research Division.

LAST REPORT OF THE EUROPEAN COMMISSION

EXPECTED ENTRY UE

CRITICAL FACTORS IN VIEW OF THE EU

CRITICAL FACTORS IN VIEW OF THE EMU

Hungary functioning market economy 2004Fiscal sustainability in the short-medium term

High inflation rate

Poland functioning market economy 2004Negotiations on agricultural issues

High interest rates Fiscal sustainability Zloty appreciated against €

Czech R. functioning market economy 2004Contrast w ith Austria for Temelin (nuclear) Fiscal policy

Fiscal sustainability

Slovakia functioning market economy 2004Political risk Labour market reform

Fiscal sustainability Exchange rate volatility High inflation rate

Slovenia functioning market economy 2004 Privatisation of f inancial sector no major matters of concern

Bulgaria close to a functioning market economy 2007/2008Structural reforms Privatisations

Reform process f inalization High inflation rate

Romania close to a functioning market economy 2007/2008Macroeconimic stabilization Structural reforms Intellectual piracy

High interest rate High inflation rate Fiscal sustainability

Estonia functioning market economy 2004Environmental issues Patents regulation

no major matters of concern

Latvia functioning market economy 2004Government commitment to privatisations

no major matters of concern

Lithuania functioning market economy 2004 Agricultural reform Reform process f inalization

Croazia* Signed in January the Stabilization and Association Agreement (SAA)

w hich preludes to negotiations

2007/2008*Complying w ith political requirements Economic reforms

Reform process f inalization Fiscal sustainability Exchange rate volatility

72

ANNEX – EXISTING COMPARATIVE ADVANTAGES ARE LIKELY TO STRENGHTEN IN VIEW OF EU ENTRY, WITH POSITIVE EFFECTS IN TERMS OF TRADE RELATIONS AND OVERALL GROWTH

Note: share in sectorial export over share in sectorial import minus 1. Positive value means that NECs have a comparative advantage compared to EU. Negative value means that EU has a comparative advantage compared to NECs.Source: COMEXT – Eurostat, 1999.

NECs advantageEU advantage

DEMAND SIDE NECs Revealed Comparative Advantage with respect to EU

PRIMARY PR.

Food

Raw Mater.

Energy

MANUFAC.

Chemical

Machinery

Other

NOT CLASSIFIED

73

POLAND

• EMU convergence after 2005, with EMU entry in 2009 (full rate convergence). Slow spread contraction, with a first decrease in 2002, full contraction by 2005-06. Lower lending reactivity to interbank rate drops, with widening of the mark up

• Lending and deposits growth above nominal GDP, supporting increasing banking penetration and sustaining NIM, affected by spread contraction after 2005

• Commission generating income shows sustained growth, following pension system reform and continue to perform two digit growth rates, with a pick in 2005, when bank start pushing on this kind of activities to compensate NIR contraction

• Search for efficiency guarantees growth of costs lower than inflation for the next five years, followed by growth in line with inflation

• Loan loss provisions as decreasing share of new loans

SLOVAKIA

• EMU convergence after 2005 and entry in 2009. Interest rates already at low level and spread to contract after 2005 only slightly.

• Lending and deposits growth above nominal GDP. Lending growth to start slowly, following credit quality and restructuring problems and to consolidate after 2005

• Commission generating activities busted by pension system reform, which will probably be implemented in 2006

• Overhead growth lower than inflation, with a first rise in 2001-2002, due to restructuring processes, followed by success of cost savings practices

• Loan loss provisions as share of new loans, decreasing over time as credit quality improves

ANNEX – BASIC ASSUMPTIONS FOR BANKING SIMULATION MODEL

Source. UCI – FBD Research Team. Simulation model based on Bankscope for historical values and OEF long term forecasts

74

ANNEX – BASIC ASSUMPTIONS FOR BANKING SIMULATION MODEL

Source. UCI – FBD Research Team. Simulation model based on Bankscope for historical values and OEF long term forecasts

BULGARIA

• Gradual EU convergence and no EMU entry before 2010.

• Sustained increase in banking penetration, with lending and deposit growth. Shift from FX to local denominated, with positive effects on margins, sustaining net interest revenues growth

• Commission generating income is expected to increase following nominal growth, with slight acceleration following pension system reform

• Costs are increasing slightly less than inflation

• Loan losses provisions are a decreasing share of new loans, relatively higher compared to other NECs, due to the need of creating a base for new loans reserves

CROATIA

• Gradual EU convergence

• Sustained increase in banking penetration, with lending and deposit growth. Shift from FX to local denominated, with positive effects on margins, sustaining net interest revenues growth. Growth potential for Non Interest Margin

• Costs are increasing slightly less than inflation

• Loan losses provisions are a decreasing share of new loans

75

• New Europe countries proved a

good reaction capacity to the

international slowdown, with

internal demand outpacing

negative effect of export

contraction

• Low sensitivity to emerging market

contagion, as proved by limited

impact of substantial (+75%)

increase in emerging risk premium

• Achieved migration from “Russian

influence” to “EU influence” area,

as proved by the fact that EU

represents more than 60% of total

trade of NECs

ANNEX – STABILISATION AND CONVERGENCE REDUCE RISK OF CONTAGION, WHILE INCREASING REACTION CAPACITY TO INTERNATIONAL SLOWDOWN

Simulated impact on GDP growth of an increase in general emerging risk premium

Relative incidence of EU slowdown on growth of New Europe countries

Source. Sensitivity to EU: EBRD estimates (the direct effect is limited to trade impact, the indirect effect accounts for other issues). Sensitivity to risk premium: FBD based on OEF.

0.6

0.4

0.8

0.40.5

0.3

0.5

0.0

0.2

0.4

0.6

0.8

1.0

EU Hungary Czech R Slovakia Poland

Direct + indirect effect Direct effect

2002 2003New Europe 3.46 4.02New Europe (high risk) 3.37 3.84Change in growth -0.09 -0.18

Latin America 0.35 5.05Latin America (high risk) 0.18 4.52Change in growth -0.17 -0.53

76

ANNEX – SUEMI: REAL TIME SOLE24ORE UBM EMERGING MARKETS INDEX

• 76 sovereign bonds are included,

amounting to EUR 36 bln and

representing 22 countries, among which

Poland, Hungary, Bulgaria, Slovakia,

Croatia, Latvia, Lithuania, Estonia and

Romania

• Sole UBM Emerging Market Index monitors total returns across sovereign debt instruments denominated in Euro, with fixed interest rates

• SUEMI is pretty similar to JPMorgan EMBI+, with the advantage to be focalised on CEECs and being Euro-denominated

• The SUEMI family includes two global indices, subdivided into three time-to-maturity groups. Bonds inclusion requires a nominal amount of 250 and 500 mln € respectively

Source: UBM.

SUEMI countries implied yields versus rating class, 01/06/01

rating class

imp

lied

yie

ld

77

ANNEX – NON PERFORMING LOANS DEFINITION

• Definition of risk class in different countries

NPL

Risk class definition in New Europe is generally based on the following parameters:• Borrowers financial situation assessment• Payment delays• Borrower’s economic sector assessment

Note: we have reported payment delays for each risk class and provision required for each risk class.

Standard: borrowers without financial problemsWatch: borrowers with some financial problem

Poland Bulgaria Slovakia Croatia

Loss (>6m)

Provision 100%

Loss (>6m)

Provision 100%

Loss (>12m)

Provision 100%

Loss (>12m)

Provision 100%

Doubtful (>3m)

Provision 50%

Doubtful (>3m)

Provision 50-75%

Doubtful (>6m)

Provision 50%

Doubtful (>6m)

Provision 60-90%

Substandard (>1m)

Provision 20%

Substandard (>2m)

Provision 30-50%

Substandard (>3m)

Provision 20%

Substandard (>4m)

Provision 25-60%

Watch (<1m)

Provision 1.5%

Watch (>1m)

Provision 15-25%

Watch (>1m)

Provision 5%

Watch Provision 10-25%

Standard (<1m)

Provision 1.5% retail

Standard (<1m)

Provision up to 3%

Standard (<1m)

Provision up to 2%

Standard Provision 1%

78

ANNEX – POLAND: MACROECONOMIC AND BANKING SECTOR FORECASTS

M a c r o e c o n o m i c f o r e c a s t s

F o r e c a s t s : b a n k i n g a g g r e g a t e s , b l n Z l o t y

2000 2001 2002 2003 2004

Real GDP growth 4,0% 1,1% 1,5% 3,2% 4,3%Inflation avg. 10,1% 5,5% 4,0% 4,8% 4,3%3M Wibor eop 19,5% 11,9% 8,5% 7,4% 6,3%Exchange rate ? (avg) 4,01 3,67 3,88 4,15 4,30Exchange rate ? (eop) 3,85 3,52 4,01 4,28 4,32

79

ANNEX – SLOVAKIA: MACROECONOMIC AND BANKING SECTOR FORECASTS

2000 2001 2002 2003 2004

Nominal GDP growth 8.8% 11.1% 9.7% 8.9% 8.3%Real GDP growth 2.2% 3.3% 3.8% 4.0% 3.7%Inflation avg. 12.0% 7.3% 6.5% 5.6% 4.8%1M Bribor eop 8.1% 7.7% 7.4% 6.3% 6.0%Exchange rate € avg 42.7 43.3 44.3 48.1 52.3Budget Bal./GDP -4.0% -3.9% -4.5% -4.2% -3.6%Current Acc. /GDP -3.5% -7.5% -5.8% -5.7% -5.4%

80

ANNEX – CROATIA: MACROECONOMIC AND BANKING SECTOR FORECASTS

Macroeconomic forecasts

Forecasts: banking aggregates, bln HRK


2000 2001 2002 2003 2004

Nominal GDP growth 10.4% 8.9% 7.9% 8.1% 8.1%

Real GDP growth 3.7% 4.0% 2.9% 3.5% 4.0%

Inflation AVG. 6.2% 4.9% 4.8% 4.5% 4.1%

Zibor 1M eop 7.9% 5.9% 5.1% 4.8% 4.8%

Exchange rate € avg. 7.70 7.48 7.50 7.69 7.88

Budget Bal./GDP -5.4% -5.3% -4.3% -3.8% n.a.

Current Acc./GDP -2.1% -5.0% -4.4% -6.1% n.a.

81

ANNEX – BULGARIA: MACROECONOMIC AND BANKING SECTOR FORECASTS

Macroeconomic forecasts

Forecasts: banking aggregates, mln BGL


2000 2001 2002 2003 2004


Real GDP growth 5.8% 4.9% 3.7% 4.8% 4.5%

Inflation avg. 10.3% 7.4% 5.0% 4.5% 4.0%

Interbank rate eop 4.7 4.5 4.5 5.0 4.6

Exchange rate € eop 1.96 1.96 1.96 1.96 1.96

Budget Bal./GDP -1.1% -0.9% -1.3% -1.6% -1.6%

Debt service ratio 14.2% 19.2% 13.0% 12.5% 12.5%

82

ANNEX – ROMANIA: MACROECONOMIC FORECASTS

M a c r o e c o n o m ic f o r e c a s t s2000 2001 2002 2003 2004


Real GDP growth 1.6% 4.5% 3.5% 4.2% 4.3%

Inflation avg. 45.6% 34.4% 25.0% 19.0% 16.0%

Money mkt Inter. rate 51.9 44.4 42.7 38.5 34.5

Exchange rate €, eop 24,142 27,817 34,735 40,279 47,290

Budget Bal./GDP -3.7% -3.9% -3.7% -3.5% -3.9%

External Debt/GDP 6.50% 8.30% 5.50% 4.80% 4.50%

Current Acc./GDP -3.7% -5.9% -5.2% -5.3% -5.5%

Analysts Presentation Milan, March 25 th , 2002

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