Banking in Serbia

Alexander Picker
CEO
UniCredit Bank Serbia
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
May 2007

Section 1

Alexander Picker
May 2007

Who is talking to you ?

UniCredit is a Truly European Bank

MAIN STRUCTURAL FIGURES

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
Alexander Picker
May 2007

 with an extensive geographical presence in Europe

European branch network and banking subsidiaries

Amsterdam

A: Bank Austria Creditanstalt

D:

HypoVereinsbank

I:

UniCredit

AZ:

Kobank Azerbaijan

Baltics: HVB Bank

Athens

BIH:

Bern
Brussels

BG:

Dublin
Oslo

HVB Central Profit Banka

UniCredit Zagrebaka banka
Nova Banjaluka Banka
Bulbank
HVB Bank Biochim
Hebros Bank

CRO:

Zagrebaka banka

Geneva

CZ:

HVB Bank Czech Republic

London

HU:

ivnostensk
Banka
HVB Bank Hungary

Luxembourg

PL:

Bank BPH
Bank Pekao

Madrid

RO:

HVB Tiriac Bank

UniCredit Romania

RU:

International Moscow Bank

SE:

HVB Bank Serbia

SK:

HVB Bank Slovakia

UniBanka

SLO:

BA-CA Ljubljana

TK:

Yapi Kredi

UA:

HVB Bank Ukraine

UniCredit Bank

Monaco
Oslo
Paris
San Marino
Skopje
Zurich
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

Alexander Picker
May 2007

...and worldwide.
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

Abu Dhabi

Hong Kong

Bahrain

Johannesburg

Seoul

Beijing

Mexico City

Singapore

Boston

Miami

Shanghai

Buenos Aires

Mumbai

Sydney

Cairo

New York

Teheran

Guangzhou

Rio de Janeiro

Tel Aviv

Hanoi

So Paulo

Tokyo

Alexander Picker
May 2007

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

PL

SK BG RO HU CZ

YU

SI

HR BA MK

RU UA

LV

LT

EE TR AZ

17 + 1R

13 + 1R

Societe Generale

10 + 1R
9

R
R

R
R
R

R
R

R
R
R

8 + 2R
5 + 6R
5 + 4R
5
5
5

= Subsidiary

Alexander Picker
May 2007

3 + 3R

= Representative Office

... and is also present in Serbia.

32 cities
46 branches
Assets: 1.256 m.
Market share: 6-7%
Corporate clients: 11.000

srednja preduzea 1.056

velika i meunarodna 595
biznis 9.303

Private clients: 105.000

Employees: 660

Alexander Picker
May 2007

Section 2

Alexander Picker
May 2007

What is banking ?

The origin of banking

Italy in medieval times

banca & trade

Alexander Picker
May 2007

10

What does a bank sell ?

Money?
Services?
Safety?
?

Alexander Picker
May 2007

11

Section 3

Alexander Picker
May 2007

What are the trends in the world ?

12

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

5.50
5-year moving average, global GDP growth, right axis
250
5.00

200

4.50

IMF world commodity price index

(2000=100), left axis

4.00

150

3.50
100
3.00
50
2.50

2.00
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Alexander Picker
May 2007

13

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

Latam
Middle East
Developing Asia
CIS
CEE ex Russia
CRB index (RHS)

800
700
600
500

May 2007

330

Current account
balances, USD bn, lhs

310
290

-200

150
1994
14

2006

170
2004

-100
2002

190

2000

1998

210

1996

100

1992

230

1990

200

1988

250

1986

300

1984

270

1982

400

1980
Alexander Picker

350

Emerging Markets are integrating into the world economy

60
% of World GDP, market prices
55
50
45
US
40
35

Advanced economies, excluding US

Developing economies (World minus advanced
economies)

30
25
20
15
10

Alexander Picker
May 2007

15

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
May 2007

16

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
May 2007

17

Section 4

Alexander Picker
May 2007

Serbia SWOT Analysis

18

Strengths: Structural reform is catching up

4.00

Serbia
Czech Republic

3.50
3.00
2.50
2.00
1.50
1.00
0.50

EBRD transition indicator (average)

Alexander Picker
May 2007

19

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

0.00

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
May 2007

20

Weaknesses: Industrial Production and

Alexander Picker
May 2007

21

 Unemployment

Alexander Picker
May 2007

22

Opportunities e.g. for banks: Intermediation but number of banks

Total assets as percentage of GDP

Potential for
further increases

Source: UniCredit New Europe Research Network

Alexander Picker
May 2007

23

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).

Alexander Picker
May 2007

24

Threats: The currency markets volatility

Alexander Picker
May 2007

25

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

Alexander Picker
May 2007

26

If you cannot convince them

confuse them
Alexander Picker
May 2007

Thanks for the attention!