MARKETS

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MARKETS

  1. 1. MARKETS & INVESTMENT BANKING DIVISION S. Ermotti Head of MIB Division
  2. 2. AGENDA MIB - Our First Year Of Business Operation CEE - Capturing And Developing The Opportunity 2
  3. 3. WITH A CLEAR STRUCTURE AND GOVERNANCE,… UniCredit Group Retail Division incl. activities of former Corporate Division Private Banking Asset Management Markets & Investment Banking Division Division Markets & Investment Banking Division Ermotti Ermotti Markets & Investment Banking Markets Markets Investment Banking Investment Banking Division Hemetsberger Hemetsberger Spezzotti, Weimer Spezzotti, Weimer Poland's Markets Division Principal Investments Principal Investments CMRO CMRO Seilheimer Seilheimer Banks Banks Markets & CEE Division COO COO Investment Banking Ermisch Ermisch activities of CEE banks Global Banking Services Division 3
  4. 4. …STRONG GEOGRAPHICAL REACH AND PRODUCT CAPABILITIES,… Structured Derivatives New York Leveraged Finance Moscow Moscow Project Finance London Warsaw Euro / CHF Debt MUNICH Tokyo VIENNA Hong kong CEE Equities MILAN Istanbul Singapore M&A in CEE Research 39 offices and ~ 3,300 employees 4
  5. 5. …AND A CLEAR DEFINED OPERATING MODEL. MIB overlay structure fully implemented. Target Operating Model and IT – implementation phase 2/3 of cost savings already started. achieved by the end of 2007 Integration of international branches to reduce existing eur mn overlaps between legal entities – nearly finalized. 200 Integration of UBM into HVB successfully completed as 140 of 1 April 2007. Bundling of BA-CA’s MIB business activities in one Austrian subsidiary. Strengthen MIB as an organization - brand, people, culture. 2007f 2008 Capital management function harmonized to enhance expected cost savings overall capital efficiency. Extension of MIB’s operating model into CEE. 5
  6. 6. MIB IS FULLY ON TRACK TO ACHIEVE ITS 2008 TARGETS… REVENUES PRE-TAX PROFIT eur mn eur mn >4,000 >2,000 3,192 1,602 MIB contributes strongly to value creation 1 2006 2008t 2006 2008t Revenues 14% COST / INCOME RATIO RWA and ROE Capital 15% % eur mn 50.0% ROE b/t 42.9% in % 49.0% <50.0% EVA 23% 63,058 ~65,000 2006 2008t 2006 2008t 6 (1) MIB Division in % of 2006 UniCredit Group total
  7. 7. …WITH A SOUND RISK PROFILE... In 2006, more than TOTAL EXPOSURE 80% of revenues were Customer BY INVESTMENT CATEGORIES customer driven: driven >80% Defaulted Prop. driven <1% < 20% Non-investment grade Value at Risk (one-day | 99%) 27% eur mn 30 ~ -6 23 Investment grade >72% 20051 Diversification Integrated VAR benefit 2006 (eop) Note: Data based on Total Exposure at default (BIS II logic) as of 31 March 07 7 (1) Based on standalone models (not harmonized internal models) and before diversification
  8. 8. … AND A BALANCED BUSINESS PORTFOLIO. BREAKDOWN OF 2006 REVENUES BY BUSINESS LINES 2006 OPERATING REVENUES (total return view) Financing 61% Investment Banking 32% Origination & Advisory 39% Structured Derivatives 38% Markets Equities 20% 68% Structured FICC 30% Credit 12% 8
  9. 9. KEY STRATEGIC PRIORITIES (1) MARKETS FICC: Achieve above market growth by further enhancing our rates business and special focus on FX cash, plain vanilla and exotics to Markets 68% improve services to corporate and institutional clients. Structured Derivatives: Maintain our strong and well diversified European market position in structured equity products and further develop rates. Equities: Maintain our strong market position in CEE and further build- up our German and Italian business. Structured Credit: Significantly expand our capabilities across all products and leverage on UniCredit’s balance sheet transformation program. 9
  10. 10. KEY STRATEGIC PRIORITIES (2) INVESTMENT BANKING Develop a top-tier Investment Banking position in core markets. IB 32% Financing: Complete footprint in Europe for acquisition and project finance Expand the private equity business Origination & Advisory : Deepen our position in Corporate Finance with key clients Lead in cross-border M&A within core markets Enhance our structuring and securitization capabilities 10
  11. 11. AGENDA MIB - Our First Year Of Business Operation CEE - Capturing And Developing The Opportunity 11
  12. 12. CEE: CAPTURING AND DEVELOPING THE OPPORTUNITY 2006 CEE WHOLESALE REVENUE POOL eur mn 11,200 4,600 Russia an Poland are more than 50% 1,500 of 2006 revenues 1,200 1,000 2,900 Russia ~40% Poland Total CEE Russia Poland Czech Rep. Hungary Rest of CEE(1) ~15% (1) 12 Rest of CEE including Slovakia, Bulgaria, Romania; Croatia, Slovenia, Latvia, Lithuania and Estonia - excluding Turkey and Ukraine with approx. EUR 3-4 bn of additional revenues Source(s): BCG Database and internal analysis.
  13. 13. …WHERE MIB HAS ALREADY A LEADING MARKET POSITION. M&A In CEE By Volume – € 57.4bn M&A In CEE By Number Of Deals – 109 Deals Mergers & Acquisitions 2006 Mergers & Acquisitions 2006 EUR bn No. of deals Rothschild 15.3 Deloitte 20 JP Morgan 9.4 UniCredit Group 18 E&Y Transaction Adv. 7.5 E&Y Transaction Adv. 12 Merrill Lynch 6.8 Rothschild 10 Deloitte 6.8 Dundas Unlu 10 UniCredit Group 4.4 Pricewaterhouse Coopers 9 Raiffeisen Investment AG 3.0 JP Morgan 8 Pricewaterhouse Coopers 2.4 Merrill Lynch 8 Dundas Unlu 0.9 KPMG Corp.Fin. 8 KPMG Corp.Fin. 0.9 Raiffeisen Investment AG 6 Source: MergerMarket; includes Turkey CEE Equities By Volume – € 13.0bn CEE Equities By Number Of Deals – 109 Deals Equity Capital Markets 2006, Bookrunner CEE Equity Capital Markets 2006, Bookrunner CEE EUR bn No. of deals Morgan Stanley 2.9 Bank Millennium SA 23 Deutsche Bank 2.8 UniCredit Group 17 UniCredit Group 2.0 Deutsche Bank 15 Credit Suisse 1.5 ING 9 UBS 1.0 Troika Dialog 8 Merrill Lynch 0.9 Morgan Stanley 8 ING 0.7 InternetowyDom Maklerski SA 8 Troika Dialog 0.7 Credit Suisse 8 Bank Millennium SA 0.4 Merrill Lynch 7 InternetowyDom Maklerski SA 0.1 UBS 6 13 Source: Dealogic
  14. 14. LEVERAGING MIB PRODUCT CAPABILITIES INTO THE CEE NETWORK OBJECTIVES: Exploit the demand of our clients for Investment Banking products Implement MIB’s business model and overlay structure Leverage on the strong local market positions and MIB’s capabilities Ensure effective cross-selling through close cooperation and common goals Ability to keep and attract key people FIRST WAVE COUNTRIES ARE: Poland Poland Russia Russia rest of CEE rest of CEE Implementation phase Implementation phase Starts in Q3 2007 14
  15. 15. CAPTURE THE OPPORTUNITIES IN POLAND… WHOLESALE BANKING REVENUES POLAND POLAND SHOWS A VERY eur mn POSITIVE FUTURE OUTLOOK >2,400 …with expected key areas of CAGR growth: M&A and Corporate 10% Finance, ECM and DCM (origination), Trading & Sales as ~1,500 well as Loan business. 130 340 …which will clearly allow MIB to strengthen its market position 840 as the pre-eminent player in Advisory(1) Trading & Sales Poland. Financing(2) 180 Loans(3) 2006 2011e 15 (1) Includes M&A, ECM and DCM (2) Includes Factoring, Leasing, Structured finance and Working capital (3) Includes commercial and credit facilities, consumer credit, credit cards, mortgages and overdraft Source: BCG database and internal analysis
  16. 16. ...WHERE WE START FROM A POSITION OF LEADERSHIP. POLAND – 2006 LEAGUE TABLES IPO/SPO Trading Volume Number of Turnover on the Market IPO+SPOs transactions share market share 2006 data PLN bn Units 2006 data PLN bn % 1. UniCredit Group 4,570 23 1. UniCredit Group 82.1 25.4 2. ING 1,569 7 2. DM BZ WBK 37.9 11.7 3. DM Millennium 540 5 3. DM BH 35.7 11.0 4. BDM PKO 430 8 4. ING Securities 34.4 10.6 5. DM BZ WBK 356 8 5. PKO BP 22.2 6.8 6. IDM SA 331 13 6. DI BRE Banku 19.8 6.1 7. DM BOŚ 250 7 7. KBC 16.0 4.9 MARKET TOTAL 323.9 Commercial paper debt market Corporate bonds market Volume Market Volume Market outstanding share outstanding share 2006 data PLN bn % 2006 data PLN bn % 1. UniCredit Group 3.2 24.8 1. UniCredit Group(1) 3.8 42.7 2. Bank Handlowy 2.1 16.1 2. Pekao/PKO BP/DB 1.5 16.9 3. BRE Bank 1.7 13.1 3. BRE Bank 1.1 13.0 4. PKO BP 1.5 11.8 4. PKO BP 0.9 10.4 5. ING BS 1.5 11.7 5. Bank Millennium/DB/West LB 0.8 8.6 MARKET TOTAL 12.8 MARKET TOTAL 8.8 16 (1) Includes placements co-led with PKO BP, Deutsche Bank, Bank Handlowy Source: WSE; Rzeczpospolita; Fitch; UniCredit; McKinsey
  17. 17. POLAND: FUTURE OPERATING MODEL IS BASED ON A DUAL PLATFORM UniCredit CA IB CDM Bank BPH Pekao TODAY "Original" Institutional Retail Trading, sales and Trading, sales and UniCredit IB unit custody services, custody services, Brokerage and Brokerage focusing on investment services to retail as well as DCM as well as DCM Investment banking services clients and financing for and financing for Banking business to institutional corporate clients corporate clients and institutional clients equities MIB POLAND New UniCredit CA IB New Pekao MIB Division Regional investment banking FICC trading (corporate finance, M&A, ECM) Custody Sold Institutional and corporate Equities, including retail flow distribution execution Structured credit/DCM Loan syndication MIB-related research Financing 17
  18. 18. RUSSIA WILL CONTINUE TO BE THE MOST ATTRACTIVE GROWTH MARKET INVESTMENT BANKING Russia is a key growth Selective Examples For Russian Growth Potential (eur bn) REVENUES RUSSIA market and MIB should outgrow the market. Corporate loans (outstanding volume) eur mn ~5,300 Corporate clients still 221 ~500 underleveraged. 146 CAGR 115 ~15% Significant upside with 78 +42%p.a. institutionals business. ~1,800 Growth of high margin 2003 2004 2005 2006 products: Euro bonds and domestic bonds Increased M&A activity, new issues 63 2,600 need for equity injection Struct. Finance 200 to fund growth, 28 Advisory 1 500 11 16 +79%p.a. increasing replacement ~3,000 of bank loans by bonds, 2003 2004 2005 2006 Trading & increased infrastructure / 1,900 Global IPOs Sales real estate investments, 16 continued LBO business, 5 >100%p.a. 2006 2011e growing investments in 0 0.4 equity derivatives,… Pure IB product-related view 2003 2004 2005 2006 18 CAGR (1) Market correction assumed for one year Source(s): BCG Global Revenue Pool Model; Economic Intelligence Unit; Expert interviews; BCG analysis
  19. 19. ATON: A RECOGNIZED AND ESTABLISHED MARKET LEADER IN RUSSIA BREAKDOWN OF 2006 REVENUES One of the largest Russian equities broker by traded volumes with 15 years proven track IB & Capital record. Markets 13% With some 180 professionals located in Moscow, London and New York, Consistently ranked within: - Top 3 domestic investment banks FX 16% - Top 5 investment banks worldwide for Russian equities sales, trading and research 70% Equities Developing business with focus on high quality mid-cap and small-cap segment of the market, Expansion of derivatives, equity financing and fixed income business. 19
  20. 20. RUSSIA: FUTURE OPERATING MODEL ACTING ON A DUAL PLATFORM - BASED ON A STRONG COMBINED MARKET POSITION 2006 Aton Int. Ltd IMB 2006 MIB Revenue Ranking pro-forma TODAY Closing expected FX, MM/Repo for Q3 2007. Cash Equities Syndicated lending Competitor I FI, ECM M&A Vanilla Credit Competitor II MIB RUSSIA Competitor III UniCredit ATON UniCredit Bank MIB Division Cash Equities FICC UniCredit Group Custody selective FICC Institutional and corporate distribution ECM DCM, Securitization Competitor IV Loan syndication M&A, Advisory Financing Source(s): McKinsey, pro-forma revenue base includes fees and capital markets, but does not include lending interest income and custody business. 20
  21. 21. SUMMARY A LEADING EUROPEAN REGIONAL SPECIALIST Clear structure and governance, fully integrated in the division-based organizational model of UniCredit Group. Strong financial performance - more than “Sum-of-the-parts“. Balanced business portfolio with a sound risk profile. Focus on Group’s geographical reach and product capabilities in high profitable segments. Growth of revenues by leveraging existing strength and capitalize on the unrivaled reach in CEE. FULLY ON TRACK TO ACHIEVE OUR 2008 TARGETS Targeted revenues of € 4bn. Achieving a pre-tax profit of more than € 2bn. No substantial increase of our risk profile. Further strict cost management. 21
  22. 22. ANNEX (1) SELECTED DEALS 2006/2007 Immoeast Swisscom/Fastweb POLIS Immobilien Yapi Kredi DPR Abengoa Bioenergy Hypo-Alpe-Adria-Bank Republic of Slovenia Finance Company France International 2007-1 EUR 2,835,000,000 EUR 3,700,000,000 EUR 89,800,000 EUR 400,000,000 EUR 158,200,000 EUR 2,000,000,000 EUR 1,000,000,000 Capital Increase Tender Offer IPO Future Flow – Turkish Project Finance 4.375% 4.00% DPR Securitisation Facilities Senior Bonds Government Bond Joint Bookrunner & Joint Arranger & Sole MLA, Bookrunner Joint Global Coordinator Advisor Sole Bookrunner Joint Bookrunner & Administrative Agent Joint Bookrunner Joint Bookrunner 2006 2007 2007 2007 2007 2007 – 2017 2007 – 2018 Alliance Boots Autostrade/Stalexport ACM/ASP/Vesta DaimlerChrysler Endesa Turkish Airlines Oyak STALEXPORT EUR 17.8 bn EUR 54,600,000 EUR 180,000,000 EUR 2,000,000,000 EUR 170,000,000 EUR 2,400,000,000 Lead Financial Capital Increase Merger of ACM and 4.375% SPO Acquisition Advisory Advisor ASP into Vesta Senior Bonds EUR 43.7 bn Advisor to the MLA and Bookrunner MLA and Bookrunner Advisor to Autostrade companies Joint Bookrunner Joint Bookrunner Advisor 2007 2007 2007 2007 – 2010 2007 2006 2006 Breeze II Porsche Rosneftegaz Avio MAN Roland Kion FL Selenia EUR 470,000,000 EUR 1,000,000,000 EUR 8,500,000,000 EUR 2,100,000,000 EUR 830,000,000 EUR 3,300,000,000 EUR 685,000,000 Structured Bond Corporate Benchmark IPO Debt Facilities ALF Transaction LBO Senior and Subordinated Transaction Bond Loans Joint Lead Manager Sole Mandated Lead Sole Bookrunner & Bookrunner Co-lead Manager Mandated Lead Arranger Arranger & Bookrunner Mandated Lead Arranger KKR/MLA & Bookrunner 2006 2006 2006 2006 2006 2006 2006 22
  23. 23. ANNEX (2) SELECTED AWARDS AND RANKINGS 2006/2007 "Best Investment Bank "Best Equity Bank "Best M&A Bank CEE" "Best FX Bank in CEE" # 1 Express Best Conservative ACPM Awarded CEE" CEE" Certificates Strategy Certificate Credit Portfolio Manager of the Year Global Finance Global Finance Global Finance Global Finance Focus Money Focus Money Risk Magazine 2007 2007 2007 2007 2007 2007 2007 Best Custody House Best Custody House Continental Financial # 1 All Jumbo "Best Project # 1 MLA Italian LBOs # 1 Bookrunner and in Bulgaria in Poland Advisor of the Year Covered Bonds 2006 Finance House" MLA German LBOs Global Custodian Global Custodian Acquisitions Monthly Global Finance Finance New Europe Dealogic Dealogic 2007 2007 2007 2006 2006 2006 2006 "Senior Debt Deal "Global Renewable # 1 Certificate # 1 Structured # 1 Cross Asset # 1 MLA Austrian European Mining of the Year" Energy Award" of the Year Products Overall Structures Transactions Deal of the Year Euromoney/ Euromoney/ Deutsches Risk Deutsches Risk Ernst & Young Ernst & Young Certificate Awards Magazine Magazine Dealogic Project Finance 2006 2006 2006 2006 2006 2006 2006 23

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