2003-2006 STRATEGIC PLAN Alessandro Profumo - CEO

2003-2006 STRATEGIC PLAN

Alessandro Profumo - CEO

Investor Day – Bologna, 13th June 2003

2

2003-2006 PLAN: RENEWED BUSINESS LIFECYCLE AND ACCELERATION OF GROWTH PATH

g

t0 2002 2006

03-06 plan

S3 CREATES NEW OPPORTUNITIES FOR GROWTH

PLAN DELIVERING DOUBLE DIGIT EPS GROWTH AND PREPARING PATH FOR ACCELERATED GROWTH

3

EXECUTIVE SUMMARY

ASSUMED CONSERVATIVE MACROECONOMIC SCENARIO

CLIENT-FOCUSED ORGANISATION AS A COMPETITIVE ADVANTAGE

PLAN BASED ON ORGANIC GROWTH

CONTINUED FOCUS ON CAPITAL ALLOCATION AND RISK MANAGEMENT

SUSTAINED HIGH CASH FLOW AND CAPITAL GENERATION

4

AGENDA

2003-2006 economic scenario

UCI 3 years strategic plan

Risk management and capital allocation

Group targets

Strategic guidelines and operating targets

Business model

5

PLAN BUILT IN A CONSERVATIVE SCENARIO, LEAVING ROOM FOR UPSIDE

Macroeconomic scenario affected by uncertainty, with GDP growth in US and EU still lower than its potential

Expansive fiscal policy in US might crowd out private investment spending

High uncertainty even in presence of some positive signals (increasing consumer confidence and improved equity markets)

Conservative rise in policy rates forecasted in the next three years

2003 03-06 avg

US GDP, y/y % ch 1.8 2.32.4

2002

EU Inflation rate, % 2.2 1.92.3

EU ECB rates (eop) % 1.75 3.00(1)2.75

Stock Mkt MSCI Europe 2.0 4.8-31.3

US Fed Funds rates (eop), % 1.25 3.25(1)1.25

EU GDP, y/y % ch 0.8 1.60.8

(1) December 2006

Source: UCI Network forecasts

Italy GDP, y/y % ch 0.6 1.50.4

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ITALIAN BANKING SYSTEM EXPECTED TO IMPROVE PROFITABILITY ONLY FROM 2004

Profitability forecast for the banking system still negative for this year with the operating profit down 6.2% y/y (expected decrease in net interest income partially offset by slight increase in non-interest income)

Profitability of the Italian banking system expected to recover only from 2004

Profitability will benefit from the contribution of both net interest income and net non interest income, which will be sustained by the recovery of the equity and AuM markets

Households’ financial assets expected to grow in the period by around 7% per year, in line with US and Euro countries

Pension system reform could fuel pension funds growth in Italy in the next three years

Deposits 4.2 3.0

2003 Cagr 02-06

Loans 6.6 6.9

Sh. term spread (eop) % 4.09 4.38(1)

Revenues -0.2 4.8

Costs 3.2 3.1

Operating profit -6.2 7.7

Mutual Funds stock 4.6 6.8

6.0

2002

5.9

4.35

-0.4

4.9

-8.7

-9.5

P&L Account (2) y/y % ch

y/y % ch

(2) Excluding dividends from shares and bank shareholdings

Source: UCI Network forecasts(1) December 2006

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EU ACCESSION IS GETTING CLOSER FOR MOST OF OUR NEW EUROPE COUNTRIES IN A CONTEXT OF DECLINING RISKS AND GROWING STABILISATION

EU entryInflation 2002 eop

Moody’s Rating Upgrade

April 02-April 03

Countries with UCI presence

2007* 2.3 Baa3/stableHR

Not defined 29.7B1/negative

-TK

EU accession on track for most of the countries (i.e. results of referendum in Poland) with positive impact on economic environment thanks to:

harmonisation of legal and institutional environment to EU standards

predetermined macroeconomic convergence path (higher GDP growth) with decreasing risks

in the medium term, with EMU convergence, lower inflation and interest rates with currency stability and public deficit control

May 2004 0.8A2/stable

++PL


+++CZ

2007 17.9B1/stable

+RO


+++SK

2007 3.8B1/positive

+BG

*estimated

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COMBINED NEW EUROPE GDP GROWTH ANTICIPATED TO OUTPACE EU GROWTH

Turkey: growth expected to consolidate at rate around 5% in 2004-05, still in a highly uncertain environment, with risks of reversal. Commitment to reforms is the most important variable to watch

Slovakia: sustained growth driven by investment (2004) and external demand (2004-05), with continued gradual downwards trend in interest rates and strengthening SKK

Romania: sustained growth propelled by consumption and investment. Stabilising macro environment, with one digit inflation expected in 2004 and both fiscal and external control achieved

Poland: gradually back to its long term growth potential, thanks to recovery of both international demand and investments. EMU convergence often seen as major target, leading to int. rate contraction and need to fiscal control

Czech Rep.: gradual growth acceleration led by continued solid household consumption and recovery in export and investment activities

Croatia: stable economic environment sustained growth track, spurred by investment, consumption and export

Bulgaria: economic growth to speed up, sustained by the catching up process. Financial and macro stability persist, supported by effective currency board

*UCI forecast

03F GDP growth*

avg. 03-06 GDP

growth*

avg 00-02 GDP growth

Countries with UCI’s presence

BG 4.3 4.94.67

HR 3.6 4.13.97

CZ 2.9 3.52.80

PL 2.1 3.72.10

RO 4.9 4.74.00

SK 4.0 4.33.36

TK 4.0 4.82.57

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AGENDA




Business model

Group targets


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UCI ORGANISATIONAL MODEL: CUSTOMER DRIVEN DIVISIONALISATION...

(1) Consumer Finance (2) Retail mortgages (3) M/l term corporate financing (4) Leasing

Pekao

New Europe division

Private & AM division

Pioneer

Xelion

Corporate division

UBM

BMC(3)

Locat(4)

Clarima(1)

TradingLab

Retail division

Zagrebacka

KFS

Bulbank

UniBanka

UC Romania

Zivnostenska

45.4% 26.2% 10.3% 18.1%

Weight on 2002 Group revenues pre Corporate Centre and elisions

Employees(5) (Dec 2002)o/w Italyo/w New Europe(5)

70,99239,98631,006

Branches(5) (Dec 2002)o/w Italyo/w New Europe(5)

4,6073,2751,332

(5) KFS at 100%

UniCredit Banca per la casa(2)

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... 3 NEW SEGMENT BANKS WITH CLEARLY DEFINED MISSIONS...

THE RETAIL BANK:TO BE THE LARGEST LOCAL ITALIAN BANK, COMMITTED TO HELP HOUSEHOLDS AND SMALL BUSINESSES “MAKE THEIR LIFE PROJECTS REAL”

THE PRIVATE BANK:THE LEADING ITALIAN WEALTH MANAGEMENT PROVIDER FOCUSED ON PRESERVING AND INCREASING THE WEALTH OF PRIVATE CLIENTS THROUGH A HOLISTIC APPROACH, SUPERIOR SERVICE AND INNOVATIVE SOLUTIONS

THE CORPORATE BANK:TO SET THE STANDARD FOR A NEW BANKING-SMEs RELATIONSHIP THROUGH EXCELLENCE IN DESIGN & DELIVERY OF PRODUCTS & SERVICES AND CUSTOMER SELECTION, BEING RECOGNISED AS THE KEY PARTNER IN MANAGING CLIENTS RISKS

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... DETAILED UNDERSTANDING AND MANAGEMENT OF THE DIFFERENT MARKETS AND DEEPER KNOWLEDGE OF THE CUSTOMER BASE...

Deeper knowledge of customers, with analysis of behaviour, needs, age, types, turnover, etc.

Unified strategic decision making at segment level

Increased time to market on 100% of the customer base

Integrated risk management process in all segments

Detailed understanding of competitive environment

Specialised training programs for employees

Production closer to customer needs

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Existing customers

New customers

Efficiency Risk mgmtIntra-group synergies

PioneerUBI

UCBUPB

UBMUBI

PioneerUBMTradingLab

Revenue growth

... TAILORED STRATEGIES FOR DIFFERENT CUSTOMER SEGMENTS AND GEOGRAPHIES...

High importance

Low importance

Corporate business

Private Banking business

New Europe

Retail business

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... AND CRUCIAL ROLE OF THE PARENT COMPANY

New Europe division

Private & AM division

Corporate division

Retail division

ROLE OF THE PARENT COMPANY

Defining the strategic guidelines for the Group and for all Group companies

Managing the strategic portfolio of businesses and Group key resources

Optimising capital allocation to the different business units

Enforcing integrated risk management and development of internal models to be extended to other Group entities

Leveraging economies of scale through centralised functions (i.e. treasury, cost management, purchases) and specialised companies (USI, UPA)

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AGENDA




Business model

Group targets


16

UCI STRATEGIC BUSINESS PORTFOLIO: CONFIRMED FOCUS ON ACTIVITIES WITH HIGH GROWTH POTENTIAL AND GROUP TRACK RECORD OF VALUE CREATION

= Euro 200 mln 2006 revenues

Corporate

New Europe

Asset GatheringAsset Management

Private Banking

Consumer Finance

UBM Retail

Natural owner Non-natural owner

Va

lue

cre

ati

on

po

ten

tia

l

Relative capacity to extract value

Hig

h

po

ten

tial

Lo

w

po

ten

tial

Can add value

Cannot add value

Plan focused on organic growth, with different paths for each specific business

ITALIAN BANKING: consolidate UCI leadership and exploit the competitive advantage arising from specialisation

Retail: organic growth of market shares in the most attractive geographical markets

Corporate: improve customer penetration leveraging on innovative products and services

Private Banking: organic growth through customer attraction and improved penetration of existing customers

ASSET MANAGEMENT: further strengthening asset management core capability focussing on innovation, ALM and performance

NEW EUROPE BANKING: maintain the leadership in New Europe for risk-adjusted profitability, exploiting the growth potential arising from EU convergence

= Euro 200 mln 2002 revenues

UCI CAGR 02-06 11.4%

UCI CAGR 02-06 6.8%

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PLAN’S GROWTH RATES AND EFFICIENCY INDICATORS OUTPERFORMING THE SYSTEM

REVENUE GROWTHEuro mln 2002 2002 2006

GROUP 10,284 8.6 GROUP 54.6 50

Retail Division 4,728 8.0 Retail Division 63.6 56

Corporate Division 2,734 9.9 Corporate Division 32.6 29

Private & AM Division 1,072 10.2 Private & AM Division 61.1 58

New Europe Division 1,830 8.8 New Europe Division 51.6 45

COST/INCOME, %

UCI Italian divisions excl. Pioneer

7,999 8.9UCI Italian divisions excl. Pioneer

52.7 46

Italian system n.m. 4.8 Italian system 64.2 60

CAGR 02-06

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AGENDA




Business model

Group targets


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GROWTH COUPLED WITH RIGOROUS RISK MANAGEMENT POLICIES... BASEL II COMPLIANCE GENERATING NEW OPPORTUNITIES FOR THE GROUP

BIS II is a great opportunity for UCI: achieving a full compliance will represent the fulfilment of the ongoing development process aimed at further improving our Risk Management tools; this will result in:

An effective control of the whole Group real risk profile (integrated control of all the categories of risks)

A more efficient and dynamic capital management aimed at value creation

Beside the three BIS II macro-categories of risks, UCI has identified a fourth one: Business risks; UCI is dealing with all of them through the internal development of evaluation models currently under implementation across each Group company

Credit risks Market risks Operational risks

UCI aims at adopting the advanced evaluation models required by BIS II regulations for Credit (IRB advanced) and Operational risks (AMA)

BIS II Risk Categories …

+

… the fourth we have identified

Business risks

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A POWERFUL CREDIT RISK MEASUREMENT METHODOLOGY IS ALREADY IN PLACE...

Internal RATING SYSTEM1 differentiated by business segment and – if necessary - by geographic area and type of product already available and in use in the origination and monitoring processes in Italy; high levels of BIS II compliance

VaR: Portfolio model calculating VaR for credit risk and determining economic capital absorption both at portfolio and at single borrower level already in place. EL (Expected Loss) and UL (Unexpected Loss) measures used to determine EVA and RARORAC

Dedicated Credit Risk Management units within the parent company and each separate legal entity, responsible for the development and the implementation of credit risk tools, as well as for monitoring and reporting the overall risk within each portfolio

CREDIT RISKS: THE CURRENT SITUATION …

1 Based on estimated PDs (Propabilities of Default)

Business Segment Registry data

Qualitative/ Industry

data

Behavioural monitoring

By Product

LARGE CORPORATE XXX XXX

MID CORP. & SMEs X XXX XX XX

SMALL BUSINESS XX XX X XXX

RETAIL XXX X X

BANKS

GOVERNEMENTS2

DifferentiationAnalysis components

Financial data

By Country

X

XXX

XXX XX X

XXX XX

2 Including “Government Entities and Public Institutions”

LEGENDA:XXX= Very important XX= Fairly important X= Useful, but not very important

UCI’s RATING SYSTEM …… AND PROBABILITY OF DEFAULT ASSOCIATED TO INTERNAL RATING CLASSES

3 Calculated on aggregated loans (including loans to customers and banks) granted by the Parent Company, the 3 Segment Banks and UBM; New Europe Banks not included

0%

5%

10%

15%

20%

25%

1 2 3 4 5+ 5 5- 6+ 6 6- 7+ 7 7- 8+ 8 8- 9

UCI avg. PD: 1.61%

UCI median PD: 0.77%

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… AND THE NEXT STEPS …

Focus on procedures/processes, IT systems and organisational sides:

Full implementation of credit risk tools (RATING, VAR) within processes: loan origination, renewal, and pricing, provisioning policies, bad loan recovery, reporting, budgeting

Upgrading of IT systems up to full BIS compliance in terms of quality and level of provided details

EAD (Exposure at Default) and LGD (Loss Given Default) available within each Group company with an high level of detail (i.e.: cross-breakdowns by sector, geography, type of product, ecc.)

... AND WILL BE ENHANCED THANKS TO IMPLEMENTATION OF CLEAR PROCEDURES/ PROCESSES AND MORE PERVASIVE CREDIT RISK CULTURE

… AIMED AT:

Creating a more pervasive credit risk culture across the Group, consequently increasing value creation

Being eligible to use the Advanced Approach by 2007

Decreasing cost of risk in New Europe

1 2002 data are obtained deducting from stated figure extraordinary provisions

2002 2006

Aggr. 3 Italian banks 1 51 bp 54 bp

New Europe Division 1 189 bp 158 bp

Group total 90 bp 69 bp

Net Provisions /Net customer loans

Improve the risk/reward profile in Italy

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Full implementation of the model across the whole Group with extension to the “Banking” books

Validation of the model by Central Banks for all the Group companies

Full implementation by year end 2006 of an Operational Risk Management system in line with BIS II advanced models

Extension of the model to all net non-interest income components of all Group companies

Development of a risk integration model based on a bottom-up approach3

Evaluation of correlations among the different risk categories in order to exploit the potential benefits of diversification

ALL OTHER RISK CURRENTLY STRICTLY MONITORED; COMMITMENT TO FURTHER DEVELOP RISK MANAGEMENT TOOLS AND ACHIEVE FULL INTEGRATION OF THE DIFFERENT RISKS

Internal advanced model1 for the evaluation of Market Risks arising from the “Trading book” under implementation across the whole Group

Ongoing validation process by Bank of Italy for UBM (to be completed by the end of 2003)

MARKET RISKS:

Operational Risk Management team set up at a Group level

Ongoing development of an Operational Risk Management framework in line with BIS II advanced models (AMA)

OPERATIONAL RISKS:

OTHER RISKS: CURRENT SITUATION … … AND NEXT STEPS

1 Model developed by UBM Risk Management Department

BUSINESS RISKS:

Earning at Risk approach to analyse the volatility of some components (typically Net Commissions) of net non-interest income of some Group companies (i.e. Asset Gatherers)

2 Based, if available, on measurements of economic capital; otherwise based on estimates arising from benchmarking

INTEGRATION OF RISKS Ongoing creation of a risk integration

model based on a top-down2 approach

3 Integration of the different risk measurement arising from the specific risk dedicated advanced models

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DIVERSIFICATION OF BUSINESS PORTFOLIO GUARANTEES STRONG GROWTH, LOW EARNINGS VOLATILITY AND ECONOMIC CAPITAL SAVING

The market already implies for UCI a benefit coming from the diversification of

the business portfolio, visible in:

A lower Beta 1,1 vs. 1,5 (competitors’ average)

A lower implied volatility 30% vs. 39% (competitors’ average)

A lower cost of equity 9,08% vs. 11,10% (competitors’

average)

Preliminary results of the internal model for integration of risks1 foresee

Economic Capital saving in a range from 4,1% to 7,2%

1 Based on the analysis of correlation between Economic Capital needed for credit and market risks taking into account 80% of the Group total consolidated assets

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AVERAGE PAY-OUT RATIO

AROUND 65% TO STABILISE CORE TIER 1 RATIO AT

2002 LEVEL

CAPITAL ALLOCATION STRICTLY LINKED TO GROWTH TARGETS AND RISKS OF EACH DIVISIONECONOMIC CAPITAL SAVING THANKS TO BIS II STARTING FROM 2007

CAGR: 11.3

%

2002 Core Tier 1 ratio: 7.2%

Private & AMNew Europe

Corporate Centre

Retail

Corporate

14,100 mln(1)

9,207 mln

31.0%

30.6%

8.6%

8.1%

6.0%

10.3%

20062002

49.8%

2.9%

45.8%

6.8%

(1) Capital available for allocation. The capital allocated to New Europe banks is net of the excess capital attributable to minority shareholders, which is transferred to Corporate Centre for allocation to other initiatives

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AGENDA




Business model

Group targets


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2002 2006

DYNAMIC CAPITAL MANAGEMENT, ALLOWING FLEXIBILITY IN EARNINGS DISTRIBUTION AND LEAVING FREEDOM TO PICK POTENTIAL MARKET OPPORTUNITIES

SUSTAINED EPS GROWTH, SOUND EFFICIENCY RATIOS AND HIGH PROFITABILITY, WITH SIGNIFICANT VALUE CREATION FOR SHAREHOLDERS

2002

Revenue growth (mln) 10,284 8.6 Cost/Income, % 54.6 50

Core Tier 1 ratio, % 7.2 6.8-7.2

ROE, % 17.2 21


7,999 8.9

Italian system n.m. 4.8

CAGR 02-06


52.7 46

Italian system 64.2 60

Op. Income growth (mln)

4,670 11.5

EPS 0.29 14.0


3,783 12.4

Italian system n.m. 7.7 RARORAC, % 6.9 12

Branches(1) 4,607 5,241

Employees (1) 70,992 70,565

(1) KFS at 100%

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SUMMING UP

The plan is built in a conservative scenario...

... but the current organisational model represents a strong advantage that UCI will leverage to reinforce its competitive positioning

Growth will be pursued through organic growth and with a low volatility, thanks to our well diversified business portfolio

Strong cash flow and capital generation, with significant value creation for shareholders

Reduction of cost/income ratio thanks to efficiency improvements in all business divisions and new initiatives reaching break-even

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2003-2006 PLAN: RENEWED BUSINESS LIFECYCLE AND ACCELERATION OF GROWTH PATH

g

t0 2002 2006

03-06 plan

S3 CREATES NEW OPPORTUNITIES FOR GROWTH

PLAN DELIVERING DOUBLE DIGIT EPS GROWTH AND PREPARING PATH FOR ACCELERATED GROWTH

2003-2006 STRATEGIC PLAN Alessandro Profumo - CEO

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