GLOBAL BANKING SERVICES DIVISION - CEE P. Fiorentino Head of GBS Division

AGENDA

GBS Division: results so far Focus on CEE: value from in-country mergers The new challenge: Capitalia merger Next 2 years challenges

2

GBS MISSION AND RESULTS

STRATEGY AND RESULTS SO FAR MISSION „ Responsible for Group Cost Management across all business and geographical areas

„ Strong FTEs rationalization through Efficiency, Outsourcing & Disposals (~2,600 FTEs or -18%)(1):

9 Outsourcing of: • German payment services (PAS) to Postbank, selected software development activities from HVB IS to IBM and Italian Securities Services (2S Banca) to Societè Generale

9 Disposal of Tax collection activities in Italy (Uniriscossioni) to the State 9 Consolidation and rationalization of BO and IT structures/processes in Germany and Austria

„ Centralization of services in Group Global Service Factories to leverage economies of scale and specialized skills

„ Centralization & Near-shoring:

9UPA Romania branch workforce almost doubled in one year timeframe also thanks to in-sourcing of activities (equivalent to ~280 FTEs) from Commercial Banks

9Strengthening of BA-CA’s Czech Republic back office dedicated Company (BTS) with ~220 FTE transferred from Czech Republic Banks

9Set up of IT Competence Centers in Poland, Czech Republic and Hungary „ Operational excellence:

9Promotion of a cost management and processes redesign culture and continuous search of best practice and operational risk control 3

(1) Not included 2S Project in Germany (disposal of HVB Clearing & Custody Business currently executed by ~460 employees) to be finalized by the end of 2007

IN VERY SHORT TIME GBS HAS ACHIEVED RELEVANT RESULTS IN TERMS OF EFFICIENCY…

DIRECT COSTS (MLN) 2,880 HR

-180

30

2,730

920 - 6.3 %

NHR

1,960

2005

- 150 mln

930

21% of the total Group costs

1,800

Inflation and other effects (1)

Efficiency gain

2006

„ Significant efficiency gain achieved during 2006 (-6.3% on 2005 cost base) more than off-setting increase due to inflation „ Overall reduction of 150 mln (-5.2%) vs previous year mainly concentrated in non-HR costs (-160 mln or 8.2%) (2) 4 (1) (2)

Perimeter changes (on Back Office side) and one-off effects (on Real Estate side due to extraordinary depreciations posted in 2005) Net of extraordinary depreciations effect overall decrease would be ~70 mln (-2.4%) with non HR costs going down by 80 mln (-4.1%)

... THANKS TO GREAT PERFORMANCE OF EACH SERVICE LINE...

ICT: direct costs (mln)

BACK OFFICE: direct costs (mln)

REAL ESTATE: direct costs (mln)

- 51 mln

1,322

1,271

- 15 mln 553

- 3.9 %

778

538 - 9.9 %

- 2.7 %

2005

2006

„ Strong efficiency initiatives (e.g. Local IT Optimization, CEE IT mergers) while supporting Divisional & Group wide project (e.g. Basel II) „ Good positioning vs. external benchmark(1) especially in Italy (IT spend / revenues =7,2% vs. Panel Average = 11,6%)

2005

2006

2005

2006

„ Finalization of outsourcing deals (Payments in Germany, Security Services in Italy, ~800 FTEs)

„ Rationalization of German assets with the sale of 86 non- strategic buildings (2)

„ Boosting of near-shoring process with 440 FTEs in UPA Romania branch by end 2006

„ Space planning initiative in Italy (32 sqm / employee(3) by the end 2006 close to the target of 30 sqm /employee) currently being extended in Germany

5 (1)

- 86 mln

864

Source: McKinsey 2006 European Banking IT Cost Benchmark Survey on 2005 data. Cash out logic related to whole IT spending (inside and outside GBS Division) (2) In preparation another sale of non-strategic RE portfolio (15 buildings) (3) Office spaces only (branches excluded)

… LEVERAGING ALSO ON STAFF RATIONALIZATION AND OPTIMIZATION

FTEs (1) 14,090 CEE(2)

315

AUT

2,833

-431 -2,009

-2,142

(-14%)

2,575 (-18%)

GER

566

5,872 -2

12,081 881 2,744

11,515

4,591 ITA

5,070 3,865 2005

ICT

Other(3)

Back Office

2006 ex near-shoring

Nearshoring

2006(4)

„ On going reduction of domestic FTE with simultaneous leverage on near-shoring ccapabilities in low cost countries (e.g. average domestic Back-Office(5) employee cost of ~64ths Eur vs. 13ths Eur in near-shoring locations) 6 (1)

Figures do not include Holding slice of GBS Division ( ~ 370 FTEs in 2006) Only legal entities, branches and departments under hierarchical responsibility of GBS (3) Mainly Real Estate, Procurement, Organization, Credit collection (4) Including effects of outsourcing deals on PAS and HVB IS although fully effective as of 1/1/2007 (5) Data 2006 (2)

LOOKING AHEAD: MAIN AREAS TO FOCUS ON IN THE NEXT MONTHS

„

1 IT

2

„ „ „ „ „

Deployment of Pan-European IT application platform (“EUROSIG”) for Commercial Banking in CAPITALIA, HVB and BA-CA along with Groupwide Data Center consolidation Implementation of specialized IT platforms to support MIB and AM Global Businesses Groupwide solution for Basel II Groupwide solution for Cards, Leasing and Consumer Credit Completion of Mergers in CEE countries Creation of IT Infrastructure Competence Centers in Western Europe (I, G, A), and Application Management competence centers in CEE

Back Office

„ „ „ „

New integrated governance and management systems for all Group BO Operations Creation of cross-country factories and increasing focus on near-shoring Push on process reengineering through new technologies (intelligent scanning and workflow) Redeployment aimed at optimization of Group resources (“Lifelong Learning Center”)

Work-out

„

Extension of “best practice” work-out Group model (UGC) in Germany

Competence Center and near-shoring

„ „

Economies of scale thanks to near-shoring and creation of Competence Center New Group’s Cards Factory

3

4

7

1 ICT STRATEGY EXECUTION FOR COMMERCIAL BANKING IS

PROCEEDING AT SPEED, WITH A SLIGHTLY ADJUSTED PLAN DUE TO CAPITALIA MERGER 2006

Project objective: Implementation of Common PanEuropean IT platform for Commercial Banking (EUROSIG) enables full

divisionalized business model

2007

EUROSIG in Zivnostenska Banka

2008

EUROSIG in HVB CZ HVB data centers consolidation

3YP initiatives New initiatives Effects of new initiatives

2009

HVB / BA-CA local efficiencies early wins BA-CA Integration Program start up

Completion of CAPITALIA integration

Completion of HVB / BA-CA local efficiencies

EUROSIG in HVB

ƒ Finalization of EUROSIG in Czech Republic to support the merger of HVB Bank and Zivnostenska Banka (November 07)

ƒ HVB Data Centers (IT infrastructure) consolidation anticipated by ~6 months (1H08) ƒ Activation of EUROSIG in HVB re-planned to 3Q09, taking into consideration 2008 Capitalia Integration. No delay of the planned synergies

ƒ Anticipated startup of IT Integration Program in Austria 8

2 BACK OFFICE IS DEVELOPING A NEW STRATEGY, THROUGH CREATION

OF SPECIALIZED CROSS-COUNTRY OPERATIONAL LINES…

From current inhomogeneous scenario per Country…

…to cross Country Competence Centers PAYMENTS

Project objective: Creation of specialized crosscountry Operational lines (e.g. Mortgages, Payments) in order to support

commercial business growth & reorganization

Back Office Companies

AUSTRIA

CZECH REP.

9

9

Specialized Back Office Companies (securities) Specialized Back Office Departments inside Banks Many Back Office activities still processed directly inside Banks/Branches

GERMANY

ITALY

9

TRADE FINANCE

ROMANIA

9

LOANS

9 9

MORTGAGES

9 CARDS

9

9

9

9 CORE BANKING

Current perimeter involves more than 5,800 FTEs, equivalent to over 6,000 People 9

LIFELONG LEARNING CENTER (Massive Redeployment)

2 … TO BETTER SUPPORT BUSINESS DIVISIONS’ INTERNATIONAL

GROWTH PLANS

GLOBAL FINANCIAL SERVICES

PAYMENTS TRADE FINANCE

ALL BUSINESS DIVISIONS

ALL BUSINESS DIVISIONS

LOANS

CORE BANKING

MORTGAGES

MAINLY RETAIL DIVISIONS

CARDS

Back Office strongly linked with Business Divisions TO ENHANCE

Performance / Customer satisfaction „ Specialization, re-engineering and products scope alignment to support Business Divisions’ International Growth Plans

„ Setting up world-class solutions (implementation of best practices, process cross border re-organization) to exploit economies of scale 10

3 EXPORT OF “BEST PRACTICE” WORK OUT MODEL IN GERMANY TO

FURTHER ENHANCE RECOVERY CAPABILITIES AND EFFICIENCY UGC: CREDITS RECOVERED (mln) +7% vs 1Q06

~+14 % ~900

~787

~225

2005

2006

1Q07

HVB: SPECIAL CREDIT PORTFOLIO (bn) ~-9 % ~22 2005

~18

2006

March ‘07

RER PORTFOLIO (bn)

~11(1)

2005

„ UGC’s managed portfolio is ~8.8 bn, number of tickets of ~210.000 (average amount ~42.000 €), managed by ~250 FTEs (~840 tickets per manager); non-captive business on total portfolio rose significantly from 15% in 2005 to 24% in 2006 (2) „ The portfolio managed by the Unit of HVB is currently ~30 bn (including workout, restructuring and Special Credit Portfolio), with ~1,000 FTEs

-10 %

~20

~-35 %

„ UGC (Italy): work out dedicated company, awarded with a “Strong” rating from Standard & Poor’s and “C/RSS2+” from Fitch Ratings

„ At the moment, the HVB workout portfolio comparable with UGC portfolio is ~1 bn €, roughly 10.000 tickets, and 120 FTEs. The average amount is ~100.000€ with ~ 80 tickets per manager

-10 %

~4

3.6

2006

March ‘07

In order to maximize costs transparency and flexibility, the “best practice” Work out Group Model (UGC) is currently being extended in Germany 11

(1)

Including Herakles and Aphrodite; net after transactions 7,5 bn (2) Figures as of 31/12/06

4 CREATION OF NEAR-SHORING CORPORATE CENTERS IN CEE

COUNTRIES PROCEEDING AT FULL SPEED ICT COMPETENCE CENTERS

Total Near-Shoring(2): ~ 160(3)FTEs as of Dec ‘06 vs 320 planned by ‘08

IT Near-shoring site (1)

Location

Main activities

BO Near-shoring site

Czech Rep.

EUROSIG support

IT historic site

Hungary

CEE Core Banking

BO historic site

Poland

B2E, Treasury

Slovakia

CEE Core Banking support

Turkey (4)

Cards

Austria

iSeries, International Network

Germany

Investment Banking, Basel II, Open systems

Ireland

Asset Management

Italy

EUROSIG, Mainframe

Ireland Poland Germany Czech Slovakia Aut

Hungary Romania

Italy

BO COMPETENCE CENTERS

Turkey

„ ~13 mln cost synergies through near-shoring already booked in 2006

12 (1) Main

focus on application development (2) ICT FTEs in CEE Countries are about 2.500 (35% of overall ICT FTEs) (3) Not considering Turkey and additional ~30 FTEs in Slovakia as of April 2007 (4) Set-up ongoing

Total Near-Shoring: ~720 FTEs as of Dec ‘06 vs 1,000 planned by ‘08

Location

Main activities

Czech Rep.

Payments

Germany

Finance & Treasury

Austria

Loans & Mortgages

Turkey (4)

Cards

Italy

Core Banking

Romania

Near-shoring strategic site (mainly) for all Operational Lines

4 TOM PROJECT: ANOTHER EXAMPLE OF UNICREDIT ABILITY TO

CREATE EFFICIENCY „

Initiation of the process to derive the following Target Operating Model for treasury products and Structured Loans within UCI Group independent of origin (MIB and non-MIB initiated): 9 Processing of treasury products in two hubs: Munich and Singapore 9 Processing of Structured Loans in two hubs: London and New York

„

Reduction of staff by approximately 70-90 FTE (~7-9 mln in the steady state)(1) thanks to elimination of duplicated functions and labor cost arbitrage

„

Realization of process and governance related improvements: 9 Increase of quality due to higher degree of automation 9 Increase of flexibility due to possibility to shift volumes between hubs 9 Increased efficiency of governance due to smaller number of processing locations

„

Reduction of risk since hubs serve as mutual contingency locations and therefore are able to cope with deficiency of staff

PROJECT OBJECTIVE

KEY DRIVERS

LOCATIONS / FTES PRODUCT

FROM…

…TO

Treasury Products

Athens, Hong Kong, London, Luxembourg, Milan, Munich, New York, Paris, Singapore, Tokyo, Vienna (295 FTEs)

Munich, Singapore (2) (220-235 FTEs)

Athens, Hong Kong, London, Luxembourg, Milan, Munich, New York, Paris, Singapore, Tokyo, Vienna (71 FTEs)

London, New York (3) (56-61 FTEs)

Structured Loans

13 (1)

Excluding IT system related synergies as well as cost reduction for redundancy of regional contingency locations Average Finance & Treasury employee cost (Base Salary): Singapore 36ths Eur, Munich 55ths Eur (3) Average Structured Loans employee cost (Base Salary): London 68ths Eur, New York 100ths Eur (2)

FTES NET ∆

- 70 / - 90

AGENDA

GBS Division: results so far

Focus on CEE: value from in-country mergers The new challenge: Capitalia merger Next 2 years challenges

14

FAST MERGER OF BANKS IN CEE COUNTRIES IS STRENGHTENING THE BUSINESS POSITIONING AND FACILITATING THE ACHIEVEMENT OF COSTS SYNERGIES

WHY? „ Key success factor to exploit all growth opportunities, shortening the time to market „ Single IT platforms in each country enable:

9 the convergence to a common business and operating model 9 the adoption of a common governance structure 9 the achievement of synergies in IT costs and FTEs optimization & savings for IT, Back-office and Corporate Centers

9 a single deep view of customer information, including credit position, global cash management, etc…, leading to enhanced commercial effectiveness and risk management

15

ALL THE INTEGRATION PROJECTS ARE UP AND RUNNING AND MOST OF THEM HAVE BEEN ALREADY COMPLETED IN JUST ONE YEAR Legenda:

- 2005 -

- 2006 -

- 2007 -

ZIVNOSTENSKA (May 06)

Project objective:

Initiative completed

Initiative ongoing

- 2008 -

HVB – CZ (Nov. 07) TURKEY (Oct. 06) POLAND(1)

BULGARIA (Hebros Apr. 07, Biochim May 07, Bulbank Jul. 07)

Mergers in CEE countries, selecting the best existing local platforms as steps towards the target platform

SLOVAKIA (March 07) ROMANIA (Tiriac Sep. 06)

(UCR: May 07)

BOSNIA (NBB Nov. 06)

Initiatives completed: Turkey

CPB & UniZaba(1)

Initiatives ongoing: Czech Republic: Legal and IT Merger for the combined Bank ongoing;

Bulgaria

completion confirmed in November ‘07

Slovakia

Poland: BPH spin-off preparation on-going

Romania

Bosnia: Nova Banjaluka Banka migrated on target information system in Dec 06. CPB & UniZaba IT & legal merger by autumn ‘07 16

(1)

Timeline to be confirmed

EXAMPLES ON COST SYNERGIES ARISING FROM IN-COUNTRY MERGERS OF ICT SYSTEMS

KEY DRIVERS

„ Since 2006 CEE Countries are benefiting from costs synergies deriving from the merger of IT activities „ Full benefit is expected from 2008 onwards; total amount is ~20mln(1) „ Main contributors: Turkey, Czech Rep and Bulgaria „ Fast mergers of IT activities are a key enabler in achieving costs and FTEs optimization & savings for the Combined Banks # FTEs reduction

% on the total FTEs

Gross synergies (2) (mln)

% on the Baseline (3)

TURKEY

~ 200

~ 30%

~6

~ 7%

CZECH REP

~ 40

~ 40%

~5

~ 18%

BULGARIA

~ 70

~ 30 %

~6

~ 18 %

2008 Plan

17 (1)

Excluding Poland Gross synergies: 2008 expected reductions on ICT HR costs, NHR costs and depreciation due to integration projects (3) Baseline: 2008 expected ICT TCO including HR costs, NHR costs and depreciation (2)

AN EXAMPLE FOR ILLUSTRATIVE PURPOSES: THE ROMANIAN CASE

KEY DRIVERS

# FTES

„ Merger synergies – concentration of activities due to banks merger „ Homogenization of processes and rationalization of Head Offices

FROM…

…TO

(AS OF 31/12/06)

Head Office

Branch Network

985

735

1,690(1)

~1,500(2)

18 (1) (2)

Of which ~500 FTEs engaged in Back-office activities Savings concentrated in the “pure” Back Office activities made in the branch network

Savings for ~430 FTEs (16%), to be potentially re-allocated on commercial activities in branches

AGENDA

GBS Division: results so far Focus on CEE: value from in-country mergers

The new challenge: Capitalia merger Next 2 years challenges

19

HIGH STRATEGICAL AND OPERATIONAL FIT WITH CAPITALIA

Capitalia Holding

BdR BdR BdS BdS Bipop-Carire Bipop

Fineco Fineco Bank Bank Capitalia Capitalia AM Fineco Vita Fineco Vita

„ Synergies arising from the unification of Headquarters structures

HQ structures unification

„ Capitalia distribution network coherent/complementary with UniCredit „ Segments already defined, easy integration with UniCredit divisional structure

Banks’ HQ optimization & diffusion of best practices

„ Integration of product factories „ Strengthening of market position in various business areas (asset gathering, asset management, leasing/factoring)

Integration of product factories and specialized banks

„ Service structures already split in separate legal entities (easier integration) „ Service structures fitting with UniCredit organization in terms of focus and perimeter

Integration of IT and Operations

New MCC Nuova MCC

Capitalia Capitalia solutions Solutions Capitalia CapitaliaInformatica Informatica Capitalia Capitalia Service JV

20

INTEGRATION PROGRAM CLEARLY SHAPED ACCORDING TO UNICREDIT DIVISIONAL MODEL

KEY ASPECTS IN MANAGING INTEGRATION

„ Divisions directly responsible for integration management (product companies, holding, commercial...) „ Strong involvement of GBS in all areas that require definition of perimeters „ GBS directly in charge of Integration Office: 9 projects coordination 9 management of crossdivisional issues 9 internal communication

PROJECT GOVERNANCE GBS Fiorentino / Capitalia Lamanda Internal Consultancy Unit Divisions projects

GBS

Retail

Corporate

Corporate Center projects

PB & AM

MIB

CEE

CFO

Audit

CRO

Communication

„ Day 1 Management „ Holding Co./ Legal Entities’ organizational structures and sizing „ Define application criteria of Divisional Segmentation Rules and Business „ „ „ „ „ „ „ „ „

Perimeters of main legal entities Assessment of Capitalia retail credit processes and convergence Procurement centralization Integration of Capitalia IT in UGIS Merger of Capitalia back office operations in UPA Merger of Capitalia RE assets and activities in URE Integration of Capitalia NPLs management in UGC Banca Cost Management Alignment of Security Service Model Alignment on security procedures: physical, ICT, Data-Privacy-Fraud management, Bc&Cm, special protection programs

21

Strategic HR

WIDE ROOM TO EXTRACT COST SYNERGIES FROM IT AND BACKOFFICE …

KEY ACTIONS AND SYNERGY DRIVERS: „ Capitalia migration by end of 2008 to EUROSIG (the common IT platform for Commercial Banking)

IT

„ Data Centers consolidation into target Group configuration „ Consolidation of Capitalia IT functions into UGIS

~350 mln

„ A fast, already well-defined integration process

(∼45% of total cost synergies)

„ Integrate UPA and Capitalia Informatica, optimizing governance structures

Back-office

„ Achieve economies of scale from volumes / IT consolidation (marginal costs) „ Leverage on competences and structures already set-up in Romania for further cost optimization and economies of scale

22

… AS WELL AS FROM CENTRAL FUNCTIONS RATIONALIZATION, CENTRALIZATION OF PROCUREMENT/REAL ESTATE AND ALIGNEMENT TO BEST PRACTICES FOR BRANCH NETWORKS AND PRODUCT FACTORIES KEY ACTIONS AND SYNERGY DRIVERS: „ Adoption of UniCredit divisional model with light regional HQs

Central Functions

„ No duplicated functions

~160 mln (∼20% of total cost synergies)

Procurement & Real Estate

„ Consolidation of procurement activities within Unicredit Global Procurement Model trough adoption of common sourcing approach leveraging on global market capability and consolidated partnership with external suppliers „ Extensive use of e-auctions (i-Faber) „ Office space reduction to align to best practice occupation standards „ Branch network rationalisation avoiding duplication

Product Factories

~160 mln (∼20% of total cost synergies)

~120 mln Networks

(∼15% of total cost synergies)

„ Single competence centres and alignment to best performer in:

9 9 9 9

Asset management / gathering Consumer credit and mortgages Investment banking Leasing

„ Branch network reorganization in Italy and foreign countries „ Alignment to best practice 23

AGENDA

GBS Division: results so far Focus on CEE: value from in-country mergers The new challenge: Capitalia merger

Next 2 years challenges

24

NEXT 2 YEARS CHALLENGES

IT

„ By 2010, the EUROSIG core banking area will reach a full consolidation in the Western Europe banks „ Implementation of UniCredit IT platform in Capitalia LEs, in order to achieve further synergies

BACK OFFICE

„ Creation of specialized cross country business line within GBS, capturing synergies in terms of FTEs and costs reduction

WORKOUT

„ Extension of “best practice” work-out Group model (UGC) in Germany

REAL ESTATE

„

CEE BANKS MERGERS

Focus on disposal of Non-Strategic buildings and extension of Space Optimization initiatives in Germany

„ Achievement of consolidation on two mid-range platforms for almost all the CEE banks 25