Roberto Nicastro – Deputy CEOHead of New Europe Division

“The Value of New Europe”

London, December 5th, 2002

2nd UCI INVESTOR DAYFocus on New Europe

2

Value creation in New Europe will be driven by revenues growth, tight control of the level of risk and cost control

New Europe banking is quite homogeneous and can be managed with one Business Model and a Federal Organisation

THE VALUE OF NEW EUROPE

Results are more than satisfactory in absolute and relative terms both in numbers and in qualitative achievements

3

Macroeconomic outlook and UCI presence

Strategic approach

Business model and organisational solutions

Key projects

Main results

Agenda

4

Czech Republic 4.4% 3.1% 13.0%

CAGR 2002-05

GDP Inflation

Source: FBD, Network Studies

In 2001-02 New Europe (excl. Poland) showed good reaction capability to international slowdown, with an increasing trend and a forecast of acceleration in 2003

Positive trend for all UCI’s NE countries, quick recovery from international slowdown

Poland remains characterized by economic slowdown, recovery is expected to start by end 2002

Dep+Loans

NEW ENTRANT COUNTRIES ARE VERY ATTRACTIVE FOR UCI

Romania 4.4% 12.8% 26.6%

Slovakia 4.0% 5.8% 11.9%

Turkey 5.3% 21.8% 30.2%

Bulgaria 4.8% 4.6% 18.8%

Croatia 4.2% 3.0% 10.0%

Poland 3.2% 3.3% 8.7%

USA 3.0% 2.6% n.a.

Euro Area 2.4% 1.9% 5.5%

Italy 2.1% 1.9% 5.4%

New Europe 3.2% n.s. 15.3%

5

THE GENERAL OUTLOOK FOR CENTRAL- EUROPEAN COUNTRIES POINTS TO A VERY STRONG ECONOMIC GROWTH ……

Source: EIU, UCI-FBD Economic Research

GDP – Trends by geographical regionsIndex figures 2001=100

Asia

Central Europe

Latin America

EU 15

60

100

140

2001 2002 2003 2004 2005 2006

6

Comparison between “banking industry risk” and “country risk”

Estonia

Latvia

Hungary

Czech Rep.

Slovakia

Philippines

Indonesia

India

ThailandKorea

Malaysia

Taiwan

Chile

Brazil

Mexico

Venezuela

Colombia

Peru

Ecuador

Uruguay

Slovenia

Argentina

New Europe

Latin America

Asian Region

Ris

k i

n t

he

ba

nk

ing

in

du

str

y,

ba

se

d o

n M

oo

dy

’s B

SO

**

Country risk, Moody’s Country rating*

Source: Moody’s Investors Service Global Credit Research, Nov 1, 2002 - Moody’s Banking System Outlook, June 2002* Rating List Country Ceilings for Foreign Currency, Bank Deposits, Long Term ** Weighted Average Bank Financial Strength Ratings By Country

Low risk High risk

Low risk

High risk

… WITH A HIGHER STABILITY IN BOTH THE BANKING AND GLOBAL SYSTEMS, PARTICULARLY COMPARED TO THE OTHER EMERGING MARKETS

Panama

Poland

7

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

Source: University of Groningen database.

Per capita GDP in PPP

5.000

8.000

11.000

14.000

17.000

20.000

1971 1981 1991 2001

Ireland

Spain

EU

Portugal

1973Ireland in EU

1986Spain and Portugal in EU

Source: University of Groningen database, PPP=Purchasing Power Parity

Ireland+Spain+PortugalEU

4.2%2.1%

AVG. GROWTH 1986/01

Foreign Direct Investments

Structural Funds access

Increased internal confidence and demand

IMPACT OF ENLARGEMENT

8

Price stability and financial deepening (increase in the M2/GDP ratio) - in addition to the level of development and fiscal redistribution – improve income equality

FOR MANY NEW EUROPE COUNTRIES A MORE BALANCED DISTRIBUTION OF WEALTH IS EXPECTED

Distribution of wealth is traditionally assumed to shift from relative equality to inequality and back to greater equality as the country develops (Kuznets hypotheses)

Source: IMF

GINI COEFFICIENTS AND THE AUGMENTED KUZNETS HYPOTHESES

9

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

Lower cost of labour, but higher cost of risk

PERSISTING DIFFERENCES IN DOING BANKING IN NE AND EU COUNTRIES CREATES SCOPE FOR FURTHER DEVELOPMENTS

Share loans retail over total loans

65.8%

203%

(Loans+Deposits)/ GDP

860

Cards per ths inhabitants

EUNew

EuropeNew

EuropeEU

248

52%

EU NewEurope

30.5%

Note: Top line: comparisons between banking sector data in NECs countries and EU aggregate 2002. Bottom line: comparisons between data for UCI Italian banks and UCI New Europe Banks, 2002 sept.Source: National Central Banks and UCI.

14.9%

Italian Banks

3.2%

UCI’s S02 Gross NPL/Gross Loans

NewEurope Banks

UCI’s S02 Average Cost per employee (Euro ths)

15.1

Italian Banks

61.9

NewEurope Banks

37%48%

UCI’s S02 Non interest income/Total Income

Italian Banks

NewEurope Banks

10

OVERALL STRATEGIC OUTLOOK IN THE REGION

Volumes growth (loans, deposits, services)

Decreasing risks

Sound industry structure

Taxation decreases

++

+++

+

+

Some margins pressure

Basel II impact

(Limited) Devaluations

--

-

-

11

New Europe carries a significant weight on UCI Group performance…

…and creates a significant ROI(1) (average = 11.3%) only after 2 average years of activity

WHERE WE START IN NEW EUROPE

Net Income (% NE on UCI) 12.7%**

Revenues (% NE on UCI)

Amount invested (Euro bn) 2.1**

Total Assets (Euro bn) 24.5**

Nr. of clients (mln) 6.5

Branches 1,400

15.4%**

* Pekao, Zaba, Bulbank, Unibanka, Unicredit Romania, Koc, Zivno**Including Pekao, Zaba, UniCredit Romania, Unibanka, Bulbank (1) Based on net income forecast 2002 (including Pekao, Zaba, Unibanka, Unicredit Romania and Bulbank)

Employees 28,000

Marginal RARORAC 17.5%**

Euro 2.6 bn with KFS and Zivno

Sept. 2002*

Euro 28.6 bn with KFS and Zivno

12

WITH A BUSINESS MIX WELL BALANCED BETWEEN CORPORATE AND RETAIL

COMMERCIAL REVENUES 1H02

Corporate Retail*

Unibanka

UCRomania

Bulbank**

Zaba

Pekao

* Retail includes Private Banking and Small Business** In Bulbank Small Business is included in Corporate

21% 79%

32%68%

19% 81%

98% 2%

25%75%

13

Agenda

Macroeconomic outlook and UCI presence

Strategic approach

Business model and organisational solutions

Key projects

Main results

14

COMMON STRATEGY BY SEGMENT WITH A FOCUS ON THE MOST ATTRACTIVE ONES

2005 market revenue pool size = 500 Mln Euro

Source: UCI’s analysis at a constant exchange rate

Segment

Large Corporate

Mass

Mid corporate

Private

Affluent/Small Business

Selective development, fee- driven

Strategy

Cost focusCross selling (bancassurance, mortgage, credit cards)

Specialised service model

Highly differentiated service model

Specialised service modelMass

Affluent

Private

Small Business

Mid

Large

5%

10%

15%

20%

0% 20% 40% 60% 80% 100% 120% 140% 160%

Market revenues growth (CAGR ’01-’05, %)

2005 Net profitability (ROE(1) , %)

15

BANKS ALREADY LEADER IN THEIR OWN COUNTRIES: PROFITABILITY GROWTH AND CONSOLIDATION OF EXISTING POSITION

Pekao

Poland

Zagrebacka

Croatia

Bosnia

Bulbank

Bulgaria

Substantial effort on most profitable segments: Private, Affluent and Small Business

New added value products to existing clients (I.E. asset management)

New customer acquisition

Private and Affluent to close accounts in other bank(s) (“share of wallet”)

Small Business served for both personal and business needs

Very selective approach for Large Corporate (except Bulgaria)

Mass market focus on costs, cross-selling; no significant customer base expansion

CLEAR LEADERS

16

BANKS NOT YET LEADER IN THEIR MARKET: “QUICK AND HEALTHY” MARKET SHARE GROWTH

Zivnostenka

Czech Rep.

Unibanka

Slovakia

Unicredit Romania

Romania

Aggressive new customer acquisition

campaigns for both Retail and Corporate

In Retail: primary focus on most profitable

segments: Affluent/Private and Small Business

Possible small acquisitions

In Corporate: Mid / Small Corporate priority in

Czech and Slovakia (also Large Corporate in

Romania)

RISING LEADERS

Koc

Turkey

17

EXAMPLE OF ADAPTATION: THE TURKISH JOINT VENTURE WITH KOC HOLDING

How we manage with different model to reduce risk/maximize

opportunities

Koç HoldingUCI Group

Koç FS

50% 50%

What is different in Turkey:

Higher risk

Hyperinflation environment

High volatility of GDP growth

More uncertainty on EU

access

Higher credit risk profile

Investment $250m + earn-out in 4 years

18

KEY EXPECTED PERFORMANCE BY SEGMENT AND BY BANK

BY SEGMENT - Revenue growth

Positive evolution of performance on most segments (3)

264 366

14

28

28299

145

134

176

186

310173

232

156

2001A 2005E

Other

Large Corp.

Mid Corp.

Small Bus.

Private

Affluent

Mass Market

1 027 1 539

+7%+10%

+10%

+13%+19%

+14%

+9%

+10.6%

(1) Includes Demirbank , Treasury and Pekao subsidiaries (2) Demirbank 9M€, Pekao subsidiaries 28M€, Treasury 31M€ (3) Ratios not considering UCI share of control(4) Total Division, including Others. Excluding Others: C/I 55%- >46%; ROE 21%->27% Note: Zagrebacka results at bank level for segments representation consistency

Total 50 43

Large Corp.

Mid Corp.

Small Bus.

Private

Affluent

Mass Mkt.

(4)

2001

26

50

61

31

38

77

2005

23

42

47

29

35

67

Cost/Income (%)

UCI SHARE OF CONTROL, CONSTANT EXCHANGE RATE, EURO MLNBY BANK - Double digit Revenue growth driven by smaller banks

Positive evolution of key performance indicators

704964

63

13462

222

32828

51

10

2001A 2005E

UCRomania UnibankaBulbank

Zagrebacka

Pekao

1 027 1 539+54.3%+22.1%+20.8%

+10.2%

+8.1%

+10.6%

Unibanka

Bulbank

Zagrebacka

Pekao

Total

2001

84

63

46

60

47

50

2005

53

51

34

50

41

43

UCRomania

Unibanka

Bulbank

Zagrebacka

Pekao

Total

2001

84

63

46

60

47

50

2005

53

51

34

50

41

43

Note: Zagrebacka results at bank level for consistency with segments representat ion

Cost/Income (%)

19

Overall Leading Financial Institution in the region

#1 for profitability and value creation

Within top 3 in countries presence…

… and when not the first, “FIRST CHOICE” financial institution

Best Risk manager in the Region

OUR GOALS FOR UCI PRESENCE IN NEW EUROPE

20

Agenda

Macroeconomic outlook and UCI presence

Strategic approach

Business model and organisational solutions

Key projects

Main results

21

AN EFFECTIVE ORGANISATION HAS BEEN ADOPTED, BASED ON A FEDERAL MODEL

OPPORTUNITYSTRATEGY AND

ORGANIZATION MODEL

Homogenous region:

Countries with similar economic history and expected dynamics (while on different life-cycles)

Converging regulation (EU convergence)

Very similar strategies region-wide in each segment

Same business models and target IT systems

Homogeneous Strong Planning & Control/MIS

Economies of scale (eg. card processing, purchasing) and product (eg. Pioneer, Leasing)

22

Credit RiskManagement

Sales-Force Effectiveness

Federal Model

KEY SUCCESS FACTOR FOR IMPLEMENTING NEW STRATEGIC VISION

Shared IT Services

Key

Success

Factors

23

THREE POSSIBLE GOVERNANCE MODELS

Holding as pure

financial and risk

controller

Banks fully

independent

Different business

models

FINANCIAL HOLDING FINANCIAL HOLDING MODELMODEL

Holding asControllerSupporter towards

target business model

Banks independent in their operating management

Parallel business models

FEDERAL MODELFEDERAL MODEL DIRECT MANAGEMENT DIRECT MANAGEMENT MODELMODEL

Interface with holding limited to performance and risk control

Bank is heavily run by expatriates

Same business models

Industrial approach

24

Asset Management

Insurance

Consumer credit

Cards

MultilocalExcellence

CentersMultilocal Shared

ServicesIT Platform

Purchases

Banks

Central Functions

Audit HR IT/Org P&C Credit Corp. Retail

Asset Management

Insurance

Consumer credit

Cards

Leasing

Factoring

Brokerage

UCI Group New Europe Division

Leverage scale for cost efficiency

Preserve effectiveness/ responsivness Improve service level/

quality

Support local business

Ensure knowledge transfer

Drive future expansion and cross country initiatives

Cost/Quality leadership

Standardized offer

Ad-hoc flexibility

Commercial flexibility

Customer focus

High quality service level

…

THE THINKING FRAMEWORK

Audit HR …

...

Pekao Zaba Bulbank

Zivno UnibankaUnicredit Romania

25

Corporate

Retail

Credit

THE CHALLENGE AHEAD: MANAGE OUR MATRIX ORGANIZATION AND REACH OUR AMBITIOUS FINANCIAL TARGETS

PEKAO

P&D

UNIBANKA UNICREDITROMANIA

ZIVNO KOÇZABA BULBANK

IT/Org

26

HOW WE WORK: UCI’S INDUSTRIAL APPROACH

Industrial approach

Management transfer

Partnership program

Division fully dedicated (n. 40 employee) with 80% of the time spent in the banks and 20% in the Holding

Support from other UCI’s central functions (nr. 15 people)

Management expats in local Banks

7 COOs

42 Line Managers (Coaches)

Nr 70 active task forces working in the 7 banks

27

Agenda

Macroeconomic outlook and UCI presence

Strategic approach

Business model and organisational solutions

Key projects

Main results

28

SEVERAL KEY PROJECTS ON GOING WITHIN NE BANKS TO ENSURE SUSTAINABLE PROFITABILITY GROWTH AND MARKET LEADERSHIP

ACQUISITIONFIRST

TURNAROUND CONVERGENCE

TYPICAL

PROJECTS

BANKS

PHASES

3-year strategic plan

Cost cutting

Credit risk process redesign

Divisionalisation

Centralized production/service centres (Credit card processing)

Re-pricing

Product development

IT implementation

Sales force effectiveness

Top management appointment

29

Key drivers of above market performance

Lower C/I

Higher share of non-lending revenue

Higher interest spreads

***

*** **

**

*

Source: McKinsey Corp. Project;ZABA; Pekao; Bulbank; team analysis

Year 2001, Percent

1.3

13.7

13.2

Markets RARORAC

6.2

21.0

32.6

Banks RARORAC

Poland

Croatia

Bulgaria Bulbank

Pekao

ZABA

CORPORATE BANKING RARORAC FOR UCI NEW EUROPE BANKS AND MARKETS, 2001

Next priority

Next priority

Next priority

Next priority

30

KEY PRIORITIES FOR UCI NEW EUROPE CORPORATE BANKING

*Pekao, Zagrebacka Banka, BulbankSource: Team analysis

Levers Actions

Maximize ratio of non-lending to lending revenues Focus on customers with low/no loan needs Leverage on loans to generate significant fee-based revenues

Tailor approach to market segment profitability and UCI NE position in the segment

New client acquisition in mid-corporate in Croatia, Bulgaria and Romania Increased share of wallet in large corporates in Bulgaria and Romania Selective revenue growth in Poland focusing on clients with low/no loan

needs, lower credit risk Focus on fee-based products: office banking and cash management, foreign

trade and FX conversions, investment funds, asset finance, corporate finance, derivatives

Manage credit risk Improve credit underwriting, management, workout Focus on low risk sectors Decrease concentration of loan portfolio (syndicate large exposures)

Focus on lowering indirect cost base by Back-office centralization Branch network restructuring

Increase EVA by

133% by 2006*

Revenues

Cost of risk

Operating costs

Objective

31

RETAIL BANKING

PRODUCT DEVELOPMENT

Packages Retail/Small Business

Mortgages, Consumer Loans

Asset Management (Pioneer, TradingLab)

Bancassurance, Pension Funds

Divisionalizations

Private Banking model

Sales support systems/CRM tools

Incentives schemes

Skills assessment

Quick hiring and training plan

SERVICE MODEL

SALES FORCE MANAGEMENT SUPPORT

32

DIVISIONALIZATION PROCESS

Main contactHas client portfolioMain contactHas client portfolioMain contactHas client portfolio

New clients

acquisition

Sell (outside

the branch)

Sell

(in the branch)

Depositor EarnerAffluent/

SME SME

Gestore Depositor

Gestore Earner

Gestore Affluent/

SME

Dedicated “Hunters”

SmallAccount Manager

Teller/Seller

Depositor EarnerAffluent/

SME SME

Manager Depositor

Manager Earners

Manager Affluent/SME

Dedicated “Hunters”

SmallAccount Manager

Pekao almost completed

Bulbank Unspecialised branch

managers – next step 2003

Zaba Unspecialised branch

managers – next step 2003

Unibanka Almost complete

UCRomania Retail will start as

independent division

Divisionalization status Example: Pekao affluent/SME Branch

33

IT PRIORITY AND STRATEGIC GUIDELINES

1. Lower operating risk

Substitute Retail/Corporate platform in Pekao, Bulbank, Zivno

Upgrade TLC infrastructure, unify datacenter in Pekao, Bulbank

Outsourcing of facilities management in Pekao

Implementation/customisation of common applications to impact behaviour and gain productivity:

Credit risk management support MIS/sales support systems Branch system Multichannel

Common standard and technologies (when possible) Gradual convergence toward Group system Centralization of some activities

2. Guarantee a common business model and cost optimisation

34

Agenda

Macroeconomic outlook and UCI presence

Strategic approach

Business model and organisational solutions

Key projects

Main results

35

Total Revenues(Euro mln, ItAS, At Unchanged FX as at the end of 2001 )

+3.3% yoy HEADCOUNT

REDUCTION –1,405 FROM SEPT ‘01

Cost/Incomeratio

Operating Costs

Operating Income

506 611

+15.3%yoy

54%48.4%

ROE*

17.6%

16.2%

-7%yoy

9M01 9M02

593 575

9M01 9M02

9M01 9M02

9M01 9M02

1,0991,187

9M01 9M02

+21% yoy

+8% yoy

-3% yoy

Constant FX

Current FX

GOOD TRACK RECORD OF PERFORMANCE THAT HIGHLIGHTS ALSO THE DEFENSIVE POTENTIAL OF THE DIVISION

FURTHER STRENGTHENING WITH ZAGREBACKA

*Estimated/Restated

36

GROUP PEKAO 51% (Euro 457 mln)

NEW EUROPE BANKING TOT. REVENUES Sept.02 – UCI’s PORTION: EURO 897(1) mln

UCI IS EVEN MORE DIVERSIFIED THANKS TO NEW ACQUISITIONS (KFS, UCROMANIA, ZIVNOSTENKA)

UNIBANKA 2% (Euro 22 mln)

ZAGREBACKA 21% (Euro 187 mln)

BULBANK 6% (Euro 49 mln)

UCROMANIA 1% (Euro 7 mln)

KFS 16% (Euro 144 mln)

ZIVNOSTENKA 3% (Euro 31 mln)

(1) Pekao, Zaba, Bulbank, Unibanka, UCRomania – ItAS, KFS and Zivno IAS sept. 2002.

(1) (1)

(1)

37

COE Equivalent

MARGINAL RARORAC

Capital Absorption (Euro mln)

NE BANKS CAPITAL ABSORPTION, COE EQUIVALENT AND MARGINAL RARORAC

14.4% 23.2%328Zaba

16.5% 43.6%62Bulbank

13.1% 34.1%23Unibanka

13.5% 17.5%913NE Division

12.5% 9.9%491Pekao

20.0% 13.8%10UCRomania

Data as of Sept. 2002

38

ASSET QUALITY OF THE DIVISION NEGATIVELY IMPACTED BY PEKAO’S RESULTS

Net Doubtful Loans

Net NPLs and Doubtful Loans as % of Total Net Loans - ItAS

78.9

2001 9M02

80.5

58.8 63.2

Coverage ratios

On Gross Doubtful Loans

On Gross NPLs

Net NPLs

932 +6.6

+13.3322

Dec. 2001

% ch. on Dec01(Euro mln)

993

364

Net Doubtful/Loans ratio up 0.6% on Dec01 impacted by deteriorated macroeconomic environment and Szczecin exposure in Pekao partially counterbalanced by an improvement in all other NE banks (Zaba –2.3pp, Bulbank –4.4pp, Unibanka –4.3pp on Dec01)

Stable trend in net loans (+0.1% on Dec01)

Increased coverage ratio both on gross doubtful loans and on gross NPLs

9M02*

Net NPL/ Loans %

9M02

Zaba

Unibanka

-2.3

-4.3

3.1

5.7

Total NE +0.63.4

Pekao +2.23.5

Bulbank 0.4 -4.4

ch. on Dec01 (pp)

Net Doubtful/Loans %

9M02

ch. on Dec01 (pp)

5.3

7.3

9.2

11.1

2.8

-1.7

-1.1

+0.6

+1.1

-0.1

Net total Loans +0.110,573 10,735

At unchanged FX

(*) Excluding UniCredit Romania

39

MARKET RISK MANAGEMENT AND CONTROL

*NE total VaR is calculated by UCI R.M. considering the diversification effect (VaR refers to the trading portfolio according to IAS 39 standards)

New Europe Weekly Trading VaR Monitor Nov 4 - 15

VaR limit (1) Max VaR Avg VaR % Usage

PEKAO 1.0141.0143.303.30 0.7010.701 21%21%

BULBANK 0.0330.0331.281.28 0.0160.016 1%1%

ZABA 0.2360.236(1)(1) 0.2050.205 --

KOC 0.1190.1190.2550.255 0.0530.053 21%21%

U.ROMANIA 0.0350.0350.2800.280 0.0340.034 12%12%

UNIBANKA 0.0530.0530.2000.200 0.0510.051 26%26%

TOTAL NE 1.1151.115** 0.8910.891 --

•Total NE Max and Avg VaR are calculated for all the trading portfolios of the NE banks capturing the diversification effect.

•Total NE Max and Avg VaR are calculated for all the trading portfolios of the NE banks capturing the diversification effect.

(1) Currently under review with the Investment Policy.(1) Currently under review with the Investment Policy.

(Euro mln)(Euro mln)

40

NEXT STEPS: 2002-2005 GOALS

Double digit average revenue growth

Cost income ratio down for 7 p.p.

EPS average growth 20% per year