postbank march 2007

Real Estate FinancingStanding its ground in a challenging environment

St. Peterbourg, 14-15 May 2009

Anna V. IvanovaEurobank EFG Bulgaria

Real Estate FinancingStanding its ground in a challenging environment

Anna V. IvanovaEurobank EFG Bulgaria

St. Petersburg, 14-15 May 2009

Global Markets InstabilityGlobal Markets Instability and Risks and Risks

Significant degree of uncertainty in commercial real estate markets

Increased volatility of prices & values expected whilst the market absorbs various issues and reaches its conclusions

Lack of liquidity in the capital markets

Property Market Structure & Trends in BulgariaProperty Market Structure & Trends in Bulgaria

Privatization process practically completed

Interests turning to RE investment

Bulgaria has recently joined the E.U. as a full member

Stable macroeconomic environment

Bulgarian property market immature

Currency board in place

Increased confidence

Further reinforces demand for prime location property

Opens up new perspectives

FDI inflows

Macroeconomic EnvironmentMacroeconomic Environment

FDI in Real Estate and Construction

216

534

1778

2505

1900

82 172

501797

465

0

1000

2000

3000

2004 2005 2006 2007 2008

mln €

Real Estate Construction

Stable macroeconomic environment

Still decent GDP growth

Inflation slowing down (to 4.9% YoY at the end of Q1 ‘09)

Significant CAD improvement (by 55% YOY in the end of Feb ’09)

Stable public finances (3% planned budget surplus)

Inflow of FDIs(Traditional focus on RE and construction; in 2008 they amounted up to 40% of the total FDIs)

Although the credit crunch undoubtedly affected the banking and RE sectors, its impact tend to be much softer than in other SEE countries due to:

GDP Real Growth

6.6%

6.0%6.2%6.2% 6.3%

4.0%

5.0%

6.0%

7.0%

2004 2005 2006 2007 2008

Latest RE market challenges in BulgariaLatest RE market challenges in Bulgaria

Approximately 15 projects for shopping centers and retail parks have been postponed throughout the country, mainly due to lack of debt financing;

Rental levels on the high street of major Bulgarian cities have decreased by 5-15%;

The vacancy levels of shopping centers in some secondary cities is still relatively high;

Many planned office projects have been put on-hold while others have been frozen during the rough construction process;

The overall vacancy rate for office space continued to increase;

Residential properties market slowed down and prices went down;

The financial crises will have a sobering effect on the RE market reducing The financial crises will have a sobering effect on the RE market reducing the number of projects that are developed, as well as pressuring the market:the number of projects that are developed, as well as pressuring the market:

Banking sector adapting …Banking sector adapting …

Review interest rates

Balanced lending growth

Intensified deposit gathering

Focus on credit riskMore conservative approach

Review of credit criteria (much more selective in terms of ‘fit’ customers)

Lower loan-to-value ratio

Restructuring and renegotiation processes started throughout the banking sector

Strengthen collection activities

Redeployment of resources

… … in an exceptionally challenging operating environmentin an exceptionally challenging operating environment

Residential property loans: Residential property loans: 44 phases phases

Phase 1: Fueling the market (2003-2005)

Increasing loan-to-value ratio

Decreasing interest rates

Easing collateral rules

AVG Interest Rates, New Mortgage Loans to Individuals

9.20%8.85%

9.20%

10.46%10.76%

9.37%

8.00% 8.12%

9.06%

8.27%

6.0%

7.5%

9.0%

10.5%

12.0%

H1 '07 H2 '07 H1 '08 H2 '08 Q1 '09

BGN denominated EUR denominated

+156 bps

Phase 4: Focus on credit risk (2008-2009)

Higher interest rates

Strict requirements for income proof

Lending at lower LTV

Restructuring & Collection activities

Phase 2: Price competition (2005-2006)

0% rates for the first year

Lower introductory fixed rates for the first

1-2-3 years

Financing of properties under construction

Phase 3: Focus on profitability and customer

service (2006-2008)

Promoting floating rates for the entire period

Longer tenors

Cross-selling (credit cards, consumer loans)

Reaching the limits … and back to basicsReaching the limits … and back to basics

SizeSize

No limitNo limit

Int. rateInt. rate

6.4-7.9%6.4-7.9%

TenorTenor

5-35y5-35y

LTVLTV

70-100%70-100%

Debt toDebt to

incomeincome

60-70%60-70%

FeesFees

1-2.5%1-2.5%

Since H2 ’08:Product standardization (lack of promotions)

Going away from risk (higher risk premiums, no prepayment fees)

Upper limit set at EUR 100 000 (with income proof only)

Until H1 ‘08:Until H1 ‘08:Quick response time (2-3 days for initial approval)

Bundling (credit cards, additional consumer loans, internet banking)

No documentary proof of income (for BG citizens only)

SizeSize

LimitedLimited

Int. rateInt. rate

9.8-11.6%9.8-11.6%

TenorTenor

10-25y10-25y

LTVLTV

60-80%60-80%

Debt toDebt to

Income Income

30-40%30-40%

FeesFees

1.5-3%1.5-3%

Banking sector prioritiesBanking sector priorities

Survival of the ‘fittest’Survival of the ‘fittest’

To sustain and improve pre-provision earnings capacity (loan margin, fee business, cross-selling, cost containment)

To further strengthen the Risk management process (underwriting, collection, conservative provisioning policy)

To improve the effectiveness of balance sheet management (further strengthen capital position and liquidity management)

Crisis is an opportunity to strengthen the value of our franchise (Stand by our client – deepen relationship)

EFG Eurobank – a regional banking groupEFG Eurobank – a regional banking group

(London Branch)

Universal Bank

Total assets amounting to €82.2bn and PAT reaching €652 mln

A force of more than 24 000 people in 8 countries throughout CSEE

A distribution network of over 1 700 locations

Postbank – a member of EFG GroupPostbank – a member of EFG Group

Established in 1991

99.7% owned by EFG Eurobank

Eurobank EFG acquired DZI Bank in Sept ’06

Postbank – DZI merger in 2007

Present in more than 220 locations

Workforce in excess of 2 700

Strengths: Local knowledge, good brand recognition, wide range of services

Sister companies – Leasing, Factoring, Investment Banking, Card operations, Business services and Property valuation, advisory and management.

Leading universal bankLeading universal bank

postbank march 2007

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