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L E S S O N S L E A R N E D

F R O M W O R K O F D U T B

I M R E B A L O G H

C E O a n d E x e c u t i v e D i r e c t o r

B a n k A s s e t M a n a g e m e n t C o m p a n y a n y

V I E N N A | 1 5 - 1 6 M A Y 2 0 1 8

C O N T E N T

1. Economic Context of DUTB

2. Corporate Governance and Operations

3. Trends and Basic Figures

4. Key Lessons Learned: Conclusions and Takeaways*

* This presentation is intended for informational purposes only. Conclusions and takeaways reflects the views of the speaker from personal professional experience in various CEE markets and not necessarily of DUTB d.d.. Therefore the information contained herein is not suitable for making well-founded investment or purchasing decision. Due to the stated content no liability is assumed for the data contained herein. All rights and changes reserved. Prepared by: DUTB d.d., Davčna ulica 1, 1000 Ljubljana, Slovenija. Additional information: www.dutb.eu

1 . E C O N O M I C C O N T E X T O F D U T B :

2004 – 2008: Slovenian economy after EU accession

• Fast GDP growth and low unemployment rate

• Joining the Eurozone (2007)

• Excessive credit growth and corporate indebtedness

2009 – 2013: Slovenian economy after outbreak of global financial crisis

• Delayed reaction to global effects and „home-grown“ inbalances

• Sharp drop in GDP and employment

• Hike in budget deficit, public debt and financing risks/costs

• Sharp increase in corporate insolvency, banking sector losses and capital short fall, corporate NPL ratio peaking at 28%

2013 – 2014: Establishment of DUTB and bank rehabilitation

2014 – 2017: Slovenian economy bouncing back

• Recovery of growth, reduction in unemployment and financing cost (CDS spread)

• Return to pre-crisis profitability levels

• Gradual reduction in corporate NPL ratio and leverage, largely creditless recovery until recently

S L O V E N I A N R O L L E R C O A S T E R

B A N K R E H A B I L I TAT I O N I N F I G U R E S

• €5,8 billion contractual (gross) value of transferred / merged assets

• €2,0 billion assets transfer value (REV-based)

• €623 million above market value (documented in EC state aid decisions)

• €179 million above fair value (DUTB valuation)

150

900

750

1.050

450

300

600

0

3339

1.021

2016Factor banka & Probanka

merger

2013NLB & NKBM

550

2014Factor banka & Probanka

market acquisition

€ million

2014-2016Other market acquisitions

380

2014Abanka &

Banka Celje

Equity - transfer values

Real estate - transfer values

Loans - transfer values

1

0

3

2

6

5

4

0,62

Gross value

5,80

1,40

Transfer value (REV)

2,02

DUTB Valuation

2,020,18

1,84

5,80

€ billion

Fair value

Authorised state aid

Day-one losses

Market value

D U T B ‘ S R O L E

E C O N O M I C S I G N I F I C A N C E O F D U T B

• 16% of Slovenian GDP in 2013

• Liabilities of corporates with min. 10-

15% share of GDP and employment

(conservative, rough expert estimate)

• 25% of gross loans to domestic corporates

and sole proprietors (in November 2013,

right before the first tranche of transfer)

• 60% of NPLs of domestic corporates as of

November 2013

T R A N S F E R R E D C O R P O R A T E E X P O S U R E S

• Unlocked more than €1.3 billion worth of frozen or misused assets and recycled them for the more efficient use in the economy.

• Cashed more than 60% of its assets and repaid more than €1.1 billion debt.

• Partially relieved recapitalized banks from the burden of NPLs and took leadership role in a number of high impact restructurings.

• Slovenia advanced farthest in implementation of country-specific recommendations by EC especially in NPL reduction and implementation of DUTB‘s strategy.

• Established credibility with investors regarding efficiency and reliability of sales/investment processes.

• Reduced the guarantee exposure of the Republic of Slovenia from initial €2.6 billion (including Factor banka and Probanka to current €0.9 billion).

• Provided 25% average annual return on equity via profit stream plus paid €91 million in guarantee fees and interest surplus to the budget and public sector entities.

E C O N O M I C S I G N I F I C A N C E O F D U T B

C O N T R I B U T I O N T O T H E S L O V E N I A N E C O N O M I C R E C O V E R Y

S T R AT E G I C K P I s

Min. 8% ROE p.a.min. 8%

average EROE p.a. on cumulative

basis

Cash generation p.a. min 10%

of weighted transferred assets

K E Y A C T I V I T E S :

• Active asset management and key role position in

corporate restructuring.

• Monetizing the asset portfolio taken over from

Slovenian banks as effectively as possible.

• Repaying raised debt and reducing exposure of the

Republic Slovenia as guarantor.

• Adding value through performance and corporate

governance improvements in debtor companies.

S T R AT E G I C TA S K S

2 . D U T B C O R P O R AT E G O V E R N A N C E A N D O P E R AT I O N S

• Corporate governance described as system in evolution, responding to changing circumstances rather than a snapshot.

• Due to 100% state ownership and DUTB‘s economic significance very complex stakeholder structure to manage.

• Sustain autonomous, fast, professional decision making.

• Develop and maintain business-orientedand result-maximising corporate culture against public sector bureaucratic and error minimising requirements.

• Maintain integrity of organization under enormous stress and temptations.

• Develop into self-improving organization despite limited lifetime.

M A I N C H A L L E N G E S

L E G A L A N D C O R P O R AT E G O V E R N A N C E F R A M E W O R K

• „Lex specialis“(ZUKSB) providing special conditions for DUTB‘s establishment and operations.

• All corporate, civil, insolvency, labor, criminal etc. laws applicable unless regulated in ZUKSB otherwise.

• On-going control by Ministry of Finance (but no interference with business decisions), oversight by Court of Audit, Parliamentary committees, special watchdogs (e. g. Securities Market Commission).

• Shareholders rights exercised by the Government as general meeting.

• One-tier board with separated duties to

ensure political non-interference:- 4 non-executive directors, appointed by the

government, with powers of Supervisory

board,

- 3 executive directors running daily

operations, selected and dismissed by the

non-executives.

I N T E R N A L S T R U C T U R E S A N D P R O C E D U R E S

• Organization: segregation of duties and responsibilities of units, built-in process controls, four-eye principle.

• Defence line functions (internal audit, compliance, AML, corporate security) reporting directly to Board of Directors, anti-corruption integrity plan, whistle blowing system.

• All decisions taken in committees, ensuring transparency and traceability, efficient decision-making and impact control (20/80 rule).

• Sales controlling system: aspirational target setting, continuous deal flow management, incentives linked to sales performance.

• Performance management: targets and action plans derived from strategy in balance-scorecard format, bonus rewards linked to overwhelmingly measurable KPIs for all units.

• Cohesive team spirit and HR management: education, best-practice sharing, self-improving organization.

D U T B C O M M E R C I A L S U C C E S S FA C T O R S

Key channel for investments in Slovenia – Commercial imperative

• Attractive mix of different types of assets.

• Equal treatment of every investor in competitive tenders –no favoritism.

• Transparent, ethical and efficient sales processes.

• Supported by deal flow management, marketing and investor relations management.

The highest level of business integrity – No reputational risk

• Ethic Intelligence Certificate 2015. Awarded with the highest level in 2017.

• All employees of DUTB are committed to highly professional code of conduct as a standard on all levels of the company.

• Robust KYC, AML checks.

• Standard in contracts: anti-corruption clause, no primary or secondary resale to debtor-related investors.

Efficient and flexible business partner – No risk of failure for non-commercial reasons

• Fast and commercially driven decision making.

• Knowledgeable and independent approach.

• Maintain sense of urgency for buyers.

• Practically all transactions completed in envisaged timeframe.

• Credible track record in sales.

3 . T R E N D S A N D B A S I C F I G U R E S

€1,3 billion

cash generated

• >60% of asset transfer

value liquidated in 4 years

• through both larger and

smaller transactions

• Steady growth in volume

of granular transactions

→ stable monthly cash

flow

100

150

50

600

1.000

200

0

1.400

1.200

400

0

250

800

200

€ million€ million

182

H1 2017

195

1.294

126

174

8

71

H2 2017

58

239

H2 2016

240

2013 H1 2015H2 2014H1 2014 H1 2016H2 2015

Cumulative cash generated (right axis)

Cash generated from transactions over €10 million

Cash generated from transactions under €10 million

C A S H G E N E R A T I O N

B R E A K D O W N O F C A S H I N F L O W S

€1.294 million

total cash generated

since 2013 until December 2017300

400

100

0

200

81

Claims - inflows from cashed collateral

387 366

Ownership equity portfolio

338

Claims - payments from debtors

121

Ownership real estate portfolio

Claims - sales of claims

€ million

30% of total28% of total

26% of total

9% of total

6% of total

P O R T F O L I O D E V E L O P M E N T

5.000

1.000

2.000

3.000

0

4.000

499(13%)

863(20%)

31.12.2014496 recovery

cases

31.12.2016647 recovery

cases

31.12.2015510 recovery

cases

Recovery portfolio

1.1.2016685 recovery

cases

707(19%)

3.429

361(11%)

763(20%)

513(26%)

31.12.2013509 recovery

cases

3.830

1.941

31.12.2017614 recovery

cases

€ million

4.330

3.8723.748

79 79 72

13481

58

0

150

300

450

600

750

900

31.12.2013 1.1.2016

728

31.12.2014

509(87%)

819

647(89%)

588

31.12.2015

510(88%)

496(86%)

575

Number of casesLoan portfolio

31.12.2017

582

31.12.2016

672

685(84%)

614(91%)

600

200

400

800

1.200

0

1.000

434(58%)

473(65%)

618

384(62%)

1.1.2016134 restructuring

cases

Restructuring portfolio


cases

€ million

746


cases


cases


cases


cases

643(58%)

491

249(51%)

544

289(53%)

731

1.100

300

600

1.500

900

1.200

0

499(53%)

31.12.2017

Loan portfolio

31.12.2016

933

1.1.2016

863(65%)

31.12.2014

1.091

1.407

473

289

643

31.12.2015

384

513(67%)

1.336

762

763(54%)

249650

361(56%)

€ million

434

707(65%)

31.12.2013

400

1.600

1.200

0

800

€ million

1.243

31.12.2017

953

99

31.12.20161.1.2016

1.511

198

194

9760

31.12.2015

1.091(91%)

68

31.12.2014

1.513

1.407(93%)

4957

97

1.354(90%)

36

14

947(99%)

0

961

31.12.2013

948(76%) 660

(69%)

DUTB portfolio

1.196 Real estate

Loans

Equity

Recovery

Restructuring Estimated value

Gross exposure

NOTE: DUTB acquired (2014) and merged (2016) additional assets during its lifetime. Due to the timing of transfers, not all cases were individually valuated at the end of 2013, hence the difference between loan portfolio values. The difference between the total loan portfolio value and estructuring/recovery portfolio sum since 2016 are minor, non-individually valuated claims.

D E B T S T R U C T U R E A N D M A N A G E M E N T

Debt outstanding reducing and changing in structure

• 2013-2015 High-cost fixed-term debt, accumulating intra-year liquidity

• 2016-2017 Mixture of fixed maturity and amortizing/repayable debt, tighter liquidity management

• 2018-2022 Exclusively amortizing low-cost debt with end-balloon, no new borrowing higher liquidity buffer

500

1.000

1.250

250

0

750

1.750

1.500

€ million

Debt outstanding

91

877

4188 122

1.455

30.6.201531.12.2014

30.6.2014

263

1.660

370

1.012

1.256

1.012

31.12.2013

167

1.560

985

231167

1.252

1.560

219

31.12.201730.6.201730.6.2016

1.1.201631.12.2015

31.12.2016

Liquidity positionRefinancings Issued bondsMinistry of Finance loanOther

100%

100%

EOY2014

877

Debt structure

EOY2017

1.560

Fixed term

Amortising/repayableExplicit state guarantee

R E T U R N

More than just net profit provided for the state

-10

0

20

10

30

40

70

60

50

2016 2017

32

-8

23

2014

36

-8

2015

14

22

67

€ million

2013

-6

0

Guarantee fee(paid to the Government)

Interest rate market premium estimate(paid to state-owned banks)

Net profit for the year

E Q U I T Y M O V E M E N T & R E T U R N T O TA X PAY E R S

Equity movements through owner’s decisions and company operations

110

53

36

81

EROE statutory requirement 8,0%

estimated EROE including 2017 24,7%

150

90

210

60

0

30

180

240

120

State guaranteefee

204

€ million

Interest ratemarket premiumestimate

2013-2017additional return to the state

34

53

2014-2015General Meeting decisions

91

EROE calculation

57

2013-2017cumulative

return on equity

86

2016recapita-lisations

2016Factor banka, Probanka and subsidiaries

merger

81

5

2013-2014ZUKSB asset

transfers from four banks (fair value

adjustment)

110

2013invested capital

Net (negative) difference between transfer and fair values

DUTB financial

added value

B E N C H M A R K I N G W I T H S I M I L A R C O M P A N I E S

63%

86%

56%

73%

9%

8%

28%18% 4%

0% 15%9%0%

0%12% 1%

7%9%2%1%

80%

40%

100%

60%

20%

0%

End-of-year t+4asset structure

REVERTABAMC SAREBNAMA

Real estate

Other

Cash

EquityLoans

2,0%

0,4%

1,7%

4,0%

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

Yearly costs as% of average assets

t+4

45%

77%

85%

75%

0

20

40

60

80

100

t+4

Debt outstanding

DUTB SAREB REVERTANAMA

4 . K E Y L E S S O N S L E A R N E D

• DUTB is a unique profile AMC by design.

• Efficiency of initial operations could have been largely enhanced by careful preparation.

• DUTB‘s excellent track record is as much attributable to constant adjustment to evolving circumstances as to initial design.

• Suitable framework and excellence in management systems and practice are equally indispensable factors of success and fulfilment of the mission of an AMC.

* Conclusions especially but not exclusively relevant for centralized, partially or fully publicly supported AMC. References to AMC Blueprint by EC: Conclusion in line with recommendations Conclusion in line with Blueprint with some additional details Addition to Blueprint proposals

C O N C LU S I O N S A N D TA K E AWAY S *

C O N C L U S I O N S A N D TA K E A W AY S

OWNERSHIP & LEGAL FRAMEWORK

Independent legal entity on private investor operations principle (even when publically supported)

Majority private ownership can help avoid/reduce state aid issues and state budget impacts.

Only non-voting shares in AMC to transferor banks, if any.

Special rights for AMC in in-court and out-of-court procedures to counter-balance limitations in armory.

Ensure balance of creditors vs. debtor legal protection and judicial practice.

Ensure effective bail-in rules vis-a-vis shareholders and junior creditors of distressed debtors.

SUPERVISION (of publically supported AMC)

Sufficient public control over usage of funds and overall operational KPIs

Prohibit interference into individual business decisions

Prudential supervision of operations and especially if new lending significant

Allow business/bank secret disclosures in due diligence and marketing/sales processes

OPERATIONS SET-UP

Minimise initial cash-burn period.

Adopt key manuals, procedures, internal regulations before start of handover.

Single IT system, data model and back-office from day 1 after transfers.

Enter/migrate all case relevant information into IT from day 1 to ensure traceability.

Enter all decisions / transactions, according to pre-classified criteria into systems to ensure traceability and central KPIs from day 1.


FUNDING & CAPITAL

Flexible funding which can be adjusted to actual cash-inflows and minimalized open interest rate risk position.

Provide capital buffer to state guaranteed capital back-up for entire lifetime, if equity is equity is secured by the state.

Design waterfall mechanism for senior / mezzanine / non-voting shares repayment / buy-back (transferor banks share upside or realize losses spreading over time – alternative to full upfront haircuts).

Provide fresh cash for (majority privately owned) AMC to bridge the period between debtor rehabilitation (restart of business expansion) and reaching bankability level.

Provide capital cover or pre-defined wind-up mechanism for loss making tail period of AMC but avoid pressure for pre-mature/fire sale.

TRANSFER PROCESS & DOCUMENTATION

Transfer only high impact, high volume, relatively homogenous asset classes (CRE, project finance, large corporations, fragmented SMEs).

Mandatory transfer of all exposures towards debtor groups from all participating banks.

Design the transfers - provide (super) majority among creditors for AMC for the bulk of the exposures to individual debtors/groups.

Effective case handover from transferor banks before legal / physical transfer.

Take over full operational and decision-making responsibility from transferor banks from day 1 after legal and physical transfer.

Set-up documentation management system enter all received documents before or at date of transfer.

ASSET PRICING

Mark-to-market on a non-fire sale level (between actual market value EMV and REV)

Avoid low marketability of transferred assets due to overpricing (containing vast state aid buffer).

Define clearly in advance cumulative management costs and financial discount factor/IRR for expected holding period.

Cover the difference in bank book values and transfer prices by mix of mezzanine debt and non-voting shares of AMC (alternative to full upfront haircuts).


ACCOUNTING & REPORTING

If apply fair value accounting, make fair value of assets the center of reporting, decision-making, incentive system.

Preferably design business model to be defined as „other business model“ to avoid asset tests under IFRS9 (to apply FVTPL).

Design specific features that way to avoid unnecessary consolidation of transferred assets, both under national legislation and IFRS.

Define single asset data model, revenue origination and cost allocation system from day 1 to trace return on assets for individual debtors/assets.

Apply proportional write-off policy in legislation & internal rules to trace net/gross values trends.

CORPORATE GOVERNANCE

Pre-defined professional criteria and selection / dismissal mechanisms for executive and non-executive BoD / Supervisory Board members.

Licensing of by monetary supervisor may be desirable as defence against political interference.

Exclude influence of transferor banks on post-transfer decision making.

Pre-define contractual arrangements and competitive remuneration packages.

Provide immunity for non-criminal decision/actions.

HUMAN RESOURCES & INTEGRITY

Define job requirements, documented selection and competitive remuneration system.

Define measurable KPIs for all departments / individuals in line with norms / operative plan.

Link performance assessment to bonus and promotion system.

Build success culture and cultivate tolerance.

Establish clear outplacement system for employees for period after the operation.

KYC, AML, anti-corruption, personal integrity, whistle-blowing mechanism from day 1 of operations.


BUSINESS CONDUCT & MANAGEMENT

Establish competitive and transparent sales process with equal treatment for investors.

Define in advance preference between recovery maximisation and asset buy-back possibility.

Define burden-sharing rules, super seniority and waterfalls/ upside-sharing structures for restructuring of viable debtors.

Build into restructuring agreements covenants for cash sweep/conditions adjustment options and above market terms to minimise holding period for viable debtors.

Establish internal sales management & controlling system, CRM and marketing to trigger and maintain sales momentum

PUBLIC IMAGE & TRANSPARENCY

Avoid excessive or highly visible expenses and initial cash burn.

Go for quick wins to establish public acceptance.

Transparency on asset transfers, expenses, contracts, overall results.

Prohibit disclosure of on-going transactions (to media, politics, supervisors).

Strictly regulate ex-post transaction disclosures.

Never call it a „bad bank“!

A N N E X

a n y

E C O N O M I C C O N T E X T O F D U T B : S L O V E N I A N R O L L E R C O A S T E R

-15

-10

-5

0

5

10

15

-1,9%

6,6%

20152014

%

5,3%

2018 forecast

2017

5,0%

2016

8,0%

3,1%

9,0%

-2,9%

2,3%

9,7%

2010

-5,6%

-14,7%

-4,0%

10,1%

20132011

-7,7%

-0,1%

2006

-1,2%

2012

4,9%

8,2%

0,6%

-5,5%

-1,1%

7,3%

1,2%

-6,7%

2,9%

-2,6%

8,9%

-5,8%

20092008

3,3%

4,4%

5,9%

0,0%

2007

6,9%6,0%6,5%

5,1%4,0%

-1,4%-1,3%

6,3%

2004

5,7%

-2,0%

4,4%

2005

GDP growth Budget deficit / GDP Unemployment rate

E C O N O M I C C O N T E X T O F D U T B : S L O V E N I A N R O L L E R C O A S T E R

441

364158

-106

-3.439

-537

-101

161306

514

-776

0

10

20

30

40

50

60

70

80

90

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

-3.500

-3.000

-2.500

-2.000

-1.500

-1.000

-500

0

500

1.000

5%

€ million%

27%

47%

26%26%

22%

35%

23%

38%

54%

24%

12%

19%

28%

70%

74%

79%80%

18%15%

8%

83%

Profit before tax in thebanking sector (right axis)

Corporate NPL share inthe banking sector

Public debt / GDP

S L O V E N I A C D S & C R E D I T R AT I N G

0

50

100

150

200

250

300

350

400

450

Dec 2016

Dec 2015

A

A-

Dec 2017

A-

Dec 2013

A-

Dec 2012

A

Dec 2011

Dec 2014

A+

basis points

AA-

Dec 2010

Dec 2006

AA

Dec 2007

Dec 2004

AA-

Dec 2005

Dec 2003

A+

Dec 2002

A

Dec 2009

Dec 2008

AA

Slovenia credit rating by S&PSlovenia CDS

B A N K R E H A B I L I TAT I O N I N F I G U R E S

Ownership composition and NPL structure in the banking system

Banking sector claims(in €m) towards

2012 2013 2014 2017

total claims(gross)

NPL %total claims

(gross)NPL %

total claims (gross)

NPL %total claims

(gross)NPL %

Corporate (domestic)

17.460 22,8% 17.010 28,0% 14.650 17,7% 13.202 6,2%

Private persons 7.081 3,8% 7.306 4,1% 8.617 4,4% 10.035 2,8%

Foreign 4.046 15,8% 4.421 18,7% 5.508 20,6% 3.316 12,1%

Total claims 47.876 14,4% 44.879 17,3% 37.467 11,9% 34.565 4,6%

Source: Bank of Slovenia - selected reports on bank operations, data series.

P R O G R E S S I N P O R T F O L I O S T R U C T U R E

Fully refinanced exposures towards 6 debtors with the total (transferred) gross

exposure of €116 million.

2013 - H1 2017

Number of sales complet

ed

Of these

foreign buyers

Average number

of interested

buyers per case

Average numberof due

diligences performed

Total contract

ual value(in €

million)

Loans 57 18 2,5 2,3 301

Equity & bonds

33 9 4,8 3,8 72

Total 90 27 3,1 2,5 374

S A L E S A N D R E F I N A N C I N G :R E S T R U C T U R I N G C A S E :

3023

19 11 15 13

60

5959

8274

65

1210

17

98

1116

23

35 46

41526

78

0

20

40

60

80

100

120

140138

111107

Jun 2016

104

Dec 2016Dec 2015Jun 2015 Jun 2017 Dec 2017

136134

Negotiation

Transfer and (re)study

Execution

Exit process

Closed

C O R P O R AT E G O V E R N A N C E F R A M E W O R K

GOVERNMENT AS 100% SHAREHOLDER• Tasks and responsibilities of the DUTB AGM exercised

by the Government as the sole shareholder• The Ministry of Finance:

- monitors the work of DUTB (the compliance of DUTB operations with ZUKSB)

- can not be actively involved in DUTB individual business decisions

ONE-TIER BOARD• Board of Directors as strategic decision-making body• Separated tasks of Executive and Non-Executive

Directors• Defend the professional autonomy of executive

management from external / political interference

BOARD OF DIRECTORS• Sub-committees reporting to BoD: Audit, Remuneration

and Accreditation Committee• Recommendations implemented via BoD decisions

EXECUTIVE DIRECTORS• Sub-committees reporting to EDs: Risk Management &

Compliance and Corporate Security Committee• Recommendations implemented via ED decisions

CREDIT AND INVESTMENT COMMITTEES• Effective and fast decision making structure• Layered 3-level system with segregated responsibilities• Empowerment of lower lever for large number of smaller

tickets / simplified decisions• Strong controls for executive level over high impact larger

tickets (80+% of volumes)


E T H I C A L M O D U S O P E R A N D I T H R O U G H O U T T H E E N T I R E O R G A N I Z AT I O N

HIGHEST ETHICAL AND QUALITY STANDARDS

• Ethic Intelligence Certificate:

Anti corruption compliance

certificate since 2015,

awarded with the highest

level of certificate in 2017

making DUTB the only

company with such certificate in Slovenia

• Personal integrity plan for employees

• „Whistleblowing“ system

INTERNAL CONTROLS THROUGHOUT EVERY PROCESS AND ENTIRE COMPANYDefense lines with responsibility / reporting line to the Board of Directors:• Internal audit• Compliance and AML department • Corporate security

CLEAR SEGREGATION OF ROLES COMBINDED WITH TEAM STRUCTURE• Strictly segregated roles of units in organizational structure• Bank-like horizontal process controls and full 4-eye principle• Balanced with teamwork to foster flexible operations and proactive

approach• Clear responsibilities on all decision-making levels• Management of assets in largely homogenous asset classes (efficiency

requirement)


K N O W L E D G E C E N T E R A N D S A L E S V E H I C L E F O R N P L s

WELL DEFINED SALES RULES• Transparent standardized sales process• KYC and The Law on Prevention of Money Laundering and Financing of Terrorism:

prevention of primary and secondary sale to former owners/executives of distressed debtors or to „blacklisted“ investors

EFFICIENT SALES PROCESS• Fast decision making, flexibility and independence• Equal treatment of every investor in tenders (competitive bidding process, sufficient

time for each phase, equal information)• Supported by deal flow management, marketing and investor relations management

RENOWNED KNOWLEDGE CENTER • Expert for NPL management and corporate restructuring• High demand from the market for DUTB employees • Internal and external best practice sharing• Performance and development oriented human resources management

START OF THE PROCESS

Public tender

Non-binding offers collection[3-4 weeks]

Due diligence[min. 1 week + 5-8 days for the answers]

Binding offers[3-4 weeks]

Decision on the selection Compliance check

Alignment of the purchase agreement

Signing of the purchase agreement

CLOSING

C O M M I T T E E D E C I S I O N S

Merger of 2 banks (February 2016):• High number of added cases• Mainly smaller tickets

Change was a must

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500

600

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Number

H1 2017H1 2016H1 2015 H2 2015 H2 2016 H2 2017

Operational level

Board level

Executive levelChanges in the decision-making

system effective in April 2016

M A N A G I N G H R C H A L L E N G E S

• Project type organization with limited life span keep

fluctuation of quality staff at acceptable level

• Tensions between internal perception of mission and

external image („bad bank“)

• Shock of 3-way merger: mix of corporate cultures, extra

operational burden, fundamental organizational and

process changes, portfolio reallocation, internal

competition for jobs redundancy 20+%,

mid-management replacement / renewal in competitive

selection process

• Develop and run a measurable performance oriented

evaluation system

• Preserve accumulated knowledge base

• Maintain cooperative spirit under circumstances of

constant downsizing

• Norms based staffing model is key for managing labour

efficiency, dilemma for the future:

a) Maintain current (stock-type) norms based staffing model

(more even pace of redundancies, slow-down of sales in

favor of managing assets) OR

b) Switch to flow-based norms

(maintain strong momentum, but higher upfront FTEs and

costs with faster decline later, shorten organizational

lifetime)

• Providing hope and perspective

1. for the organization: expansion into new fields

2. for the individuals:

• improved future employment opportunities

• education to strengthen competitiveness in job market

• outplacement with a human face, support in job

search

P E R F O R M A N C E D R I V E N R E W A R D S

BASIC SALARY – MARKET BASED

• Internal and market check and potential „outliers“ salaries

adjustment once a year.

• „Outlier“ is salary which is less than 80% of the median of the

salaries for the comparable positions.

BONUS SYSTEM

• Performance bonus up to 2 month salaries annually –

comprehensive annual target setting and assessment

• Stay bonus up to 2 month salaries annually – to key personnel

in high demand / at risk

• Extraordinary bonus (project based) up to 0.5 month salary

annually

P E R F O R M A N C E - B A S E D R E M U N E R A T I O N S Y S T E M

PROMOTION REFLECTED IN THE SALARY

• Horizontal promotion within the

position up to 15% of the salary

annually – based on performance

grades for previous year

• Vertical promotion to more

demanding and responsible positions

• Deputy head (managerial reserve)

allowance up to 20 % of the salary


KPI‘s in guidelines

Numerical targets in plan

Operative strategies

Board &Committee decisions

COMPANY

LEVEL

KPI‘s in guidelines

Numerical targets for

supervised areas

Action plans & Projects Decision log

Subjective assessment

Measurable targets

EXECUTIVE

DIRECTORS

LEVEL

DIRECT

REPORTS

Pip

elin

e

Central / Staff functionsAnalysts

Subjective targets

Measurable targets

Supportunits

Sub

jeci

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Mea

sura

ble

Pip

elin

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Front - line units

Sub

ject

ive

Mea

sura

ble


• Targets derived from:

- KPI‘s in Operating Guidelines

(Government)

- Numerical targets in annual plan

- Operative strategies in Strategic plan

- Board and Comittees decisions

• Maximize proportion of quantifiable /

measurable targets

P R I N C I P L E S O F T A R G E T S E T T I N G A N D P E R F O R M A N C E A S S E S S M E N T

• Personal targets: breakdown of company level

targets to areas of specific own responsibilities

• Balanced scorecard type alignment of targets

and implementation

- Action plans and projects allocated to

adress implementation and achievement of

all targets

- Executive Directors‘ targets built up from

and aligned with direct report targets

R E TA I N I N G T H E S TA F F

VISION, MISSION AND GOAL COMMUNICATION

• Regular staff meetings (each 3 months, all employees)

• Success celebrations (every 1-2 months, top 3 business

success deals: case team in front of all employees)

PEOPLE DEVELOPMENT

• Trainings and exams

• Internal conferences: hot educational topics and best

practice sharing

• Annual interviews (performance assessment and target

setting)

• Caring outplacement

N O N - F I N A N C I A L A S P E C T S O F R E T A I N I N G T H E S T A F F

SOCIAL CLIMATE SURVEY

• Strengths: Alignment with mission, respect for

professionalism, highly valued cooperation and team

spirit > Cultivate further

• Weaknesses: Objectivity of performance assessment,

linkage to bonus and promotion > Develop new system

SOCIAL EVENTS

• Internal newsletter (electronic version)

• Sports activities (each week)

• Picnic twice per year

• Presents for children for New Year

• Internal charity auctions

S A L E S M A N A G E M E N T

„Easy-to-sell“ assets running out, tail risk grows over time Crucial to maintain

cash-flow generation momentum to slim / shorten tail

METHOD

• New initiatives in 2017:

- package sales

- refinancing drive for restructured / bankable companies

- accelerated repossessions of real-estate suitable for fit-for-sale minor investments or

- for joint-venture developments

• Development of Investor Database (CRM)

• Marketing-supported, focused investor targeted sales initiatives to create sense of urgency

• Linking cash-flow generation performance measurement with bonus system plus pipelinemanagement: internal pull/push for sales drive

S A L E S M A N A G E M E N T

• Quarterly review of target fulfilment in pipeline management concept

(usual lead time for initiation to closing 6 – 9 months).

• Constant feeding of deal flow into pipeline requires:

- Preparatory initiative 6 – 9 months before targeted cash-flow realization

- Replacement of fall-out cases with at least 2 times bigger volume new initiatives

PIPELINE METHOD

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