uci 2001 first half results september 2001. 2 1h2001 group highlights divisional reporting italian...

UCI 2001 First Half Results

September 2001

2

1H2001 Group Highlights

Divisional Reporting

Italian Commercial Banking

Wholesale Banking

Investment Banking

Asset Management

New Europe Banking

Conclusions

Agenda

3

UCI MAJOR STRENGTHS

Good revenue generation (Tot. Revenues: +5.5% on 1H00) thanks to a prompt reaction to adverse market conditions

Synergies between production and distribution as a competitive advantage with benefits in all Business Divisions

Efficiency at excellence level despite important investments (C/I: 52.6%)

Capability to improve market shares in high value-added businesses (mutual funds in Italy and US, bancassurance, corporate derivatives)

4

GOOD REVENUE GROWTH, OPERATING AND NET INCOME INCREASING OVER AVERAGE 2000 FIGURES IN LINE WITH FULL YEAR EXPECTATIONS

TOTAL REVENUES OPERATING INCOME

1H00 00 Avg

(Euro mln)

1H01

4,691 4,948 2,413

1H00 00 Avg 1H01

2,2832,345

+5.5%

+6.2%

-2.8%

+2.7%

NET INCOME

918

1H00 1H01

803

00 Avg

754

698*

-12.5%

+6.5%

* Including provisioning of fiscal benefits of the Ciampi Law” related to year 98-99

“Ciampi Law” provisioning for related period:

1H00: Euro 42 mln

2000: Euro 85 mln

1H01: Euro 49 mln

4,659

5

TOTAL REVENUES BREAKDOWN

DIVERSIFIED SOURCES OF REVENUES ALLOWED THE GROUP TO ACHIEVE 5.5% REVENUE GROWTH DESPITE THE DECLINE IN NET COMMISSIONS

1H00

2,303

1,753

342293

4,691

1H01

2,517

1,621

459351

4,948

Net commissions

Net interest income

Trading profitsOther income

+9.3%

-7.5%

+19.8%

+34.2%

+5.5%Good contribution of Italian Banking division (+13.5%) and New Europe Banking (+26.3%) partially reduced by cost of debt and hedging of equity investments

Net non interest income up 1.8% on 1H00 due to positive trend in other income and trading profits that more than compensates the decline in net commissions

(Euro mln)

6

ADVERSE FINANCIAL SCENARIO HAD A LIMITED IMPACT ON TOTAL COMMISSIONS (-7.5%)

NET COMMISSIONS1H00 1H01 % ch.

Asset management

Securities in custody

Other services

Total

Insurance products

Mutual funds +Segregated accounts

826

730

96

176

619

1,621

871

777

94

328

554

1,753

-5.2

-6.0

-46.3

+11.7

+2.1

-7.5

(Euro mln)

Negative impact on securities in custody revenues (-46.3%) due to significant reduction in customer portfolio turnover

Limited impact of financial turmoil on asset management commissions (-5.2%)

Further increase in commissions from insurance products up 2.1% on 1H00

Significant increase of commissions from cash management services and loans granted (+13.5% on 1H00))

7

PROFIT FROM FINANCIAL TRANSACTIONS HAD A BRILLIANT PERFORMANCE (+34.2% ON 1H00) THANKS TO THE CONTRIBUTION OF UBM AND TRADINGLAB

INCOME FROM FINANCIAL TRANSACTIONS(Euro mln)

UBM (excl. TL)

TradingLab

Italian banks

+35.3%

-8.7%New Europe banks

+154.5%

* Balance due to Other Group companies

+34.2% Cautious risk management: average daily VaR of only Euro 3 mln for UBM and Euro 3 mln for TL during 1H01

Increasing impact of CorporateLab, accounting for around 190 Euro mln (89 Euro mln inside UBM and 102 Euro mln inside the Italian Banking division). Corporate derivatives volume up 59.3% on 1H00 to 8.8 Euro bln

1H01

129

151

168

63

459*

8

Total Operating Costs(Euro mln)

Staff Costs

Other costs

% ch.

+13%

+25%Depreciation

+14.5%

+14.3%

Staff costs:

+4,9% Pioneeer acquisition

+2.2% development of Wholesale Banking

+1.6% Zloty appreciation

+4.3% investments in sales effectiveness, incentivisation program

1H01

1,517

906

180

2,603

% ch. Excl. Pioneer in ‘01

+7.9%

+20.8%

+5.3%

+8.1%

OPERATING COSTS UP 7.9% (ON A COMPARABLE BASIS) SUPPORT OUR REVENUE GROWTH

Other costs:

+9.2% Pioneer impact, of which Euro 28 mln for advertising campaign

Staff from 66,897 (1H00) to 65,194

9

1H 2001C/I 52.6%

New Initiatives: Xelion and Clarima projects well on

track Impact of investments higher in 2H01

1.5%

0.7%

4.3%

46.1%

Develop. projects

Acquisitions

New Initiatives

Revenue

targets

confirmed

STRUCTURAL C/I AT EXCELLENCE LEVEL

Italian Banks: Key projects on restructuring the

network well under way with lower investments compared to budget

Pioneer: Turnaround in USA going on faster than

planned Costs lower than budgeted, especially

on advertising

FY01 C/I will be lower than the targeted 55.3% thanks to lower investments needed to stick to our revenue targets (market conditions effect)

Recent Acquisitions:Impact on consolidated C/I confirmed

Structural C/I ratio

10

DIVISIONAL CONTRIBUTION TO GROUP NET INCOME

65.4(1)89.4(1) -25.9

+100.2%N.m.

N.m.

878.2(1)

803+9.7%

1,137.3

Italian banking(2)

Wholesale banking

New Europe

banking(5)

New Initiatives(6)

Corp. Centre & elisions(7)

Group total

Total pre-Corp. Centre

-334(1)

GOODWILL AND HOLDING CHARGES:

- 113 goodwill depr.- 208 holding loss (net of

dividends), of which 80% due to financial costs

(Euro mln)

-12.5%

N.m.130.2(1)

+10.6%+12.2%

Inv. banking(3)

Pioneer Group(4)

(1) Net of infragroup dividends. Goodwill depreciation is fully charged to Corp. Centre(2) Credito Italiano, Rolo Banca 1473, Cariverona, CRT, Cassamarca, Caritro, CRTrieste,

Banca dell’Umbria, CRCarpi, Mediovenezie, BMC, Mediocredito dell’Umbria, Banque Monegasque, Unicredit Suisse, BAC Marino, CRTS Zagabria, RoloPioneer Lux, Rolo Pioneer Sgr, Gestiveneto, Fondinvest, Pioneer inv. Management SA, S+R Investimenti, Fida Sim, FRT Sim, Fid. Cordusio, CRV Ireland, CRTS Ireland, Uniriscossioni

(3) UBM, TradingLab

(4) Pioneer Global Asset Management, Pioneer Investment Management SpA, Pioneer Alternative Investments Sgr, Pioneer Group USA, Pioneer Investment Management LTD, Pioneer Alternative Investments LTD, Pioneer Fonds Marketing GMBH, Gestilux

(5) Group Pekao, Bulbank, Pol’nobanka, Splitska Banka(6) Xelion, Clarima(7) Parent Company, other financial companies and elisions

11




Wholesale Banking

Investment Banking

Asset Management

New Europe Banking

Conclusions

Agenda

12

ITALIAN BANKING DIVISION: KEY HIGHLIGHTS

SIGNIFICANT INVESTMENT ON QUALITY OF BANKS’ SERVICE MODELS FOR FUTURE GROWTH

GOOD RESULTS DESPITE A DIFFICULT MARKET SCENARIO

SYNERGIES WITH PRODUCTION CONTINUE TO ADD VALUE

SOUND COST CONTROL STABILISING COST-INCOME DESPITE INVESTMENTS

Started roll-out of new service models for affluent and mass market customers

Ability to promptly react to difficult market conditions, with significant growth in mutual funds, bancassurance and corporate derivatives, more than compensating decrease in AuM due to financial markets turmoil

Significant synergies between production and distribution with new products for retail customers (capital guaranteed and asset management) and new services for corporates (risk management services)

Cost Income ratio at 46.8%, 45.6% without project investments

13

ITALIAN BANKING DIVISION : INCREASED REVENUE GENERATION THANKS TO POSITIVE TREND IN NET INTEREST INCOME AND TIGHT COST CONTROL

1H00 1H01

1,9361,996

3,6083,754

46.3%

1,790

2,032

Operating Income

Total revenues

Cost/Income

Net interest income Net non interest income

+3.1%

+4%

46.8% +50 bp

+13.5%

(Euro mln)

1H00 1H01

1H00 1H01

1H00 1H01

1,818 1,722

-5.3%

1H00 1H01

+

“Ordinary” Cost Income

Impact on Cost Income of project investments

Impact on Cost Incomeof Cost Excellence project

+

46.0%

+1.2%

-0.4%

=

14

BUSINESS DIVERSIFICATION AND SALES EFFECTIVENESS IN THE SEGMENTS ALLOWED US TO MORE THAN OFFSET THE NEGATIVE IMPACT OF AuM MARKET VALUE DECREASE

1H01 OVER 1H00 INCREASE/DECREASE (FIGURES OF 7 COMMERCIAL BANKS+ BMC)

Total revenues 1H00

Total revenues 1H01

Market effect on asset management

Interest income

Commissions on Bancassurance

Income from risk management services

Other*

Commissions on transactional services

3,612

3,424

-187

+242

+11

+48

+48

+26

* including dividends

Effect of financial markets turmoil on asset management commissions

Combined effect of increase in volumes (loans) and higher spreads (deposits)

Good increase in premiums written

Excellent trend in notional amounts of risks covered: + 59% on 1H01

Increased number of transactions

(Euro mln)

15

1H00 1H01

2,2422,226

947988

888

Total Revenues

Mass Market

Affluent & Private Banking

-0.7%

+4.3%

785

1H00 1H01

1H00 1H01

RETAIL SEGMENT: STABLE REVENUES DESPITE ADVERSE MARKET CONDITIONS

-11.6%

Deposits: stable deposits (-1.5% on 1H00) and improving spreads (2.98%, +54 bp on 1H00)

407453

Small Business

+11.2%

1H00 1H01

Limited impact of “bear” markets on AuM (+3.9% on Dec. 00), due to the predominance of bonds in customers’ portfolio

Negative impact of “bear” markets on AuM(-3.7% on 1H00)

Lower turnover of administered portfolios

Increase in commissions, with commissions on deposits & services/total revenues going from 44.9% in 1H00 to 46.9% in 1H01

Loans: good growth of loans (+16% on 1H00) and stable spreads (2.37%, -19 bp on 1H00). Excellent volumes in mortgages, +16% on 1H00

Deposits: good increase of deposits (+4.3% on 1H00) and improving spreads (3.05%, +56 bp on 1H00)

Loans: good growth of loans (+9% on 1H00) and improving spreads (3.95%, -7 bp on 1H00)

(Euro mln)

16

Net inflows UCI(Jan-Aug 2001)

-443

Jan

-01

-315

Feb

-01

231

Mar-

01

378

Ap

r-0

1

344

May-0

1

1,008Ju

n-0

1

-1

Jul-

01

UCI IS THE LEADER IN 2001 MUTUAL FUNDS INFLOWS...

358A

ug

-01

865Industry

1,142Mediolanum

1,053San Paolo - IMI

-3,431IntesaBci

-724Bipop

851MPS

1,559UCI

2001 cumulated inflows (Jan-Aug 2001)

2nd

3rd

6th

5th

4th

st

INCREASE OF MARKET SHARE ON MUTUAL FUNDS STOCK FROM 13.34% (DEC 00) TO 13.64% (AUG 01)

(Euro mln) (Euro mln)

17

... AS WELL AS IN BANCASSURANCE

1H01% ch.

on 1H00

Insurance policy portfolio

Unit linked

Other policies

Premium Written

10,979

7,126

3,852

+25.4

+41.3

+3.8

+18.0

+0.6

+30.0

single annual

Annual/Total premium written, %

(Euro mln)

Jun01 Aug 01

Rank in

Italy*

1st

5th

1st

% ch. on

Dec00GROUP PORTFOLIO

NEW PRODUCTION

Unit linkedof which:

* Bancassurance only

2,073 2,645

1,940

133

2,486

159

6.4 6.0

2,6212,055

Rank in

Italy*

1st

1st

1st

N.s.

1st

Excellent new production of life premiums (+2.3% on 1H00), confirming UCI leadership both in bancassurance and in total market. First two months of 2H01 reinforce the outstanding trend of first half (+13% on Aug 00)

1H01 market share in life premiums:

13.3% on total market18.8% on

bancassurancecompared to a 10.3% market share in deposits

Good growth of annual premiums (+2.1% on 1H00, +2.7 on Aug 00)

18

CORPORATE PROFITABILITY IMPROVED IN A FAST GROWING LENDING MARKET THANKS TO STRONG SALES OF VALUE ADDED SERVICES

(Euro mln)

1H00 1H01

584

700

363402

221

Total revenues

Net interest income

Net non interest income

+19.9%

+10.7%

298

1H00 1H01

+34.9%

1H00 1H01

Derivatives/Risk Management*: + 95% on 1H00

Commissions from transactional services: +17% on 1H00Commissions from foreign trade: +17% on 1H00

Other: +18% on 1H00* Average 55% of Group revenues on derivatives (remaining 45% in Wholesale Banking)

Income from deposits and services/total revenues from 49.0% in 1H00 to 53.1% in 1H01

19

SELECTIVE GROWTH TO MAINTAIN ASSET QUALITY AT EXCELLENCE LEVEL

DEFAULT LIKELIHOOD(1)

WEIGHT ON LOAN PORTFOLIO

% GROWTH (1HO1

ON DEC 00) Gross NPL/Gross Loans from 3.4% (Dec 00) to 2.7% (1H01)

Net NPL/Net Loans from 1.8% (Dec 00) to 1.5% (1H01)

Coverage ratio on gross NPL from 47.5% (Dec 00) to 44.5% (1H01)

LOW(2)

MEDIUM(3)

HIGH(4)

51.1%

37.0%

11.9%

12.8

- 0.3

0.1

Total portfolio 100% 6.0

(1) Based on internal calculations, taking into account historical trends of NPL, doubtful loans and watch-list loans, sector historical trends and expectations

Net Doubtful Loans/Total Net Loans from 3.1% (Dec 00) to 2.8% (1H01)

Note: in 1H01 Cariverona and Mediovenezie carried out a securitisation of Gross NPL for 660 mln Euro, impacting all Asset Quality indicators

(2) Main sectors included: Metal products, Farm & industrial machinery, Other industrial products, Electrical materials & supplies, Energy products, Other sales-oriented services

(3) Main sectors included: Commercial services, Textile leather & clothing, Food beverages & tobacco(4) Sectors included: Construction and public works, TMT, Transport related services

20




Wholesale Banking

Investment Banking

Asset Management

New Europe Banking

Conclusions

Agenda

21

INVESTMENT BANKING:KEY HIGHLIGHTS

LEADERSHIP IN THE PRODUCTION OF DERIVATIVES MARKETED TO INSTITUTIONAL AND CORPORATE CUSTOMERS TO SATISFY RISK MANAGEMENT NEEDS (CORPORATELAB)

LEADERSHIP IN THE ITALIAN MARKET OF GOVERNMENT BONDS AND SUCCESSFUL DIVERSIFICATION IN CORPORATE BONDS

®

ABILITY TO INNOVATE AND DIVERSIFY THE PRODUCT RANGE new products launched in order to maintain the leadership in the derivatives

market for retail investors in a context of declining market volatility

PROMPT REACTION TO WORSENED MARKET CONDITIONS: TL CHANGED THE REVENUE MIX BY PUSHING THE ORIGINATION OF STRUCTURED PRODUCTS

Being a domestic leader in Investment Banking

Being a multi-local leader in specialised financial products for retail investors

22

GROUP’S INVESTMENT BANKING SHOWS A GOOD INCREASE IN NET INCOME IN DIFFICULT MARKET CONDITIONS AND WITH A DECREASING RISK

Net Income

Total Revenue

Euro mln

C/I ratio (%)

Net operating income 217.9

314.4

30.7

130.2

1H01

276.8

117.7

24.7

208.5

1H00 % Ch.

+13.3

+10.6

+6 pp

+4.5

Strong revenue increase at CorporateLab (+83%) and Fixed Income Sales & Trading (+78%) more than offsetting declining commissions from Equity desks

C/I ratio still at excellent level, growing by 6 pp because of IT expenses and increasing headcount (507, +122 on Dec 00)

Key figures

UBM AND TRADINGLAB CONFIRM THEIR TRACK RECORD OF STABLE EARNING GENERATION AND EFFICIENT RISK MANAGEMENT

Strong increase in average daily trading revenue....

…with declining risks

1H01

4.63 4.13

1H00

Average daily VaR(2)

-11%

Euro mln

1H01

1.872.31

1H00

Average daily Trading Net Revenues(1)

+24%Euro mln

(1) Figure relates to UBM and TL combined; average daily Trading Net Revenue is defined as: (End of Period Trading Profits + Net Interest Margin)/(# of working days)

(2) Figure relates to UBM and TL combined;

23

LEADERSHIP IN SPECIALISED FINANCIAL PRODUCTS WITH LOW CORRELATION TO EQUITY MARKETS ALLOWED UBM TO ACHIEVE DOUBLE DIGIT REVENUE GROWTH (1H01 VS 1H00)

Derivatives*

Capital Markets & Corporate Finance

Euro mln

Fixed Income*

Equities*

* Sales & Trading

Equity

Fixed Income

Corporate Banking

2.4

4.3

2.2

CorporateLab

Institutional

100.4

22.3

Revenue composition by business area

6.7

42.9

13.4

187.9TotalLeading player in the new STAR segment of the Italian Stock Exchange (specialist for 13 stocks out of 29)

UBM strengthened its absolute leadership on MTS (4.8% mkt share) and reached a significant share (3.3%) in the main EuroMTS markets; rank 1 in fixed income Euro denominated issues of Italian Banks

KEY HIGHLIGHTS

122.7

1H01

25.7

76.2

24.2

25.9

152.0

9.2

-

16.5

54.8

21.4

1H00 % Ch.

-74.1

+61.0

+77.9

-48.1

+23.6

-53.9

n.s.

-85.4

+83.3

+3.9

CORPORATELAB Over 2000 corporate customers served

through the network of Italian commercial banks

Outstanding role in the fast growing market of liability management for public entities: CL has already won 16 mandates

24

Turnover increased from Euro 7bn in 1H00 to 12.1bn 1H01; 32 intermediaries signed (22 active)

Increasing attractiveness: Multi-product (Equities, Fixed Income, Derivatives) and Multi-brand exchange(JPM will start on 4Q01)

From ECN to Regulated Market with a pan-European Strategy

CONSOLIDATION OF REVENUES AND MARKET SHARE THANKS TO INNOVATION AND DIVERSIFICATION OF THE PRODUCT RANGE

42% average 1H01 market share in Italy despite increasing competition from new entrants

KEY HIGHLIGHTS

®

Revenue composition by product type

Net Income

Total Revenue

Euro mln

C/I ratio (%)

Net operating income 89.4

29.3

53.9

1H01

Key figures

126.5

Revenue Mix:

diversification in revenue sources

effort to rebalance the revenue mix increasing Origination/Structured Products component

widening of the product range (market making of Derivatives Linked Notes)

Agency Origination Market Making

24%71%

5%

Euro 126.5 mln

TLXR

25




Wholesale Banking

Investment Banking

Asset Management

New Europe Banking

Conclusions

Agenda

26

RATIONALISATION OF THE OPERATIONAL STRUCTURE TO COMPLETE THE INTERNATIONALISATION PROCESS

Unification of global investment process with the integration of Dublin and Boston research activity; expanded distribution on a regional basis including the Far East and Latin America

Improving management control and accountability through the creation of the sub-holding PGAM SpA

ASSET MANAGEMENT – PIONEER:KEY HIGHLIGHTS

SYNERGIES BETWEEN PRODUCTION (PIONEER) AND DISTRIBUTION (ITALIAN BANKING DIVISION) IN ITALY: UCI INCREASED ITS MARKET SHARE THANKS TO

A strong contribution from bancassurance (unit-linked) An effective sales force which recorded net inflows in mutual funds clearly outperforming

competitors

SYNERGIES WITHIN THE WHOLESALE BANKING DIVISION AND PRODUCT INNOVATION Joint product development with UBM and TradingLab (capital protected products linked to

a basket of Pioneer funds) New specialised funds in Luxembourg family of funds and new alternative products

INCREASE IN MARKET SHARE IN THE US AND OTHER INTERNATIONAL MARKETS Successful marketing campaign relaunching the Pioneer brand and strengthening the

sales force

27

Total Revenues

1H01

Operating costs

Gross operating income

Group’s Net Profit (excluding extraordinaries(2))

277.2

214.7

62.5

55.3

(Euro mln)

The successful turnaround of inflows is already paying-off in terms of revenue generation (+22% Vs. 1H00 pro-forma(1))

C/I at 77.5%, turnaround costs and expenses linked to the integration and development of the organisational structure

Gross operating income affected by impact of turnaround costs

Net Profit benefits from the positive effect of lower than expected income taxes

(1) Pro-forma based on UCI estimates (not accounting figures) including Pioneer results in 1H00 Group’s income statement(2) Around 20 mln Euro of extraordinaries arising from the sale of 49% of Pioneer Pekao Investment Management SA from PIM

USA to Pekao and other minor disposals

PIONEER HAD A GOOD INCREASE IN REVENUES (ON A PRO-FORMA BASIS); EFFICIENCY RATIO TEMPORARILY AFFECTED BY THE COSTS OF TURNAROUND

Trend Vs. 1H00

Percentage changes over 1H00 reported figures are not meaningful because of differences in consolidation perimeter

28

Asset under Management, sold by Pioneer through third party distributors

PIONEER OUTPERFORMED COMPETITORS IN ALL THE COUNTRIES WHERE IT OPERATES…

TOTAL

New Europe

International

(Euro mln)

+709

+345

+22

USA

Italy

20,948

2,252

590

-1,383

-88

-50

20,274

2,509

562

31.08.012000Net

salesInv.

Perf.(1)

Institutional+739 5,300

28,645+1815

4,561

28,351 -1,521

-

(2) Market share including institutional and retail customers

Leadership in the institutional segment thanks to a strong contribution from life insurance and pension products marketed to institutional customers (unit-linked +43%; pension funds +37% vs 1H00)

Good increase in market share(2) (from 13.33% in Dec00 to 13.58% in Jun01 and 13.64% in Aug01)

(1) Including FX effect

29

-16.1

238.0

25.151.0 60.5

79.462.0

147.6

50

100

150

200

250

jan

-01

feb

-01

mar-

01

ap

r-0

1

may-0

1

jun

-01

jul-

01

au

g-0

1

36.1

13.2

48.0

17.028.5 29.8

11.7

163.0

-

20

40

60

80

100

120

140

160

USA Net Inflows,USD mln

International Net Inflows,Euro mln

jan

-01

feb

-01

mar-

01

ap

r-0

1

may-0

1

jun

-01

jul-

01

au

g-0

1

…CONSISTENTLY RECORDING NET INFLOWS OF FUNDS NOT ONLY IN THE DOMESTIC MARKET BUT ALSO IN THE US AND OTHER INTERNATIONAL MARKETS

Good increase in AuM at the International division (+11.4 vs Dec 00), leveraging on the long lasting presence of Pioneer in Germany; a new office in Singapore is opening soon to host fund managers and sales people

Mkt share increased in the US (from 1.24% in Oct00 at acquisition to 1.28% in Jun01) thanks to a successful marketing effort, the quality of performance and consistency of investment style

30




Wholesale Banking

Investment Banking

Asset Management

New Europe Banking

Conclusions

Agenda

31

BRILLIANT ECONOMIC RESULTS: +42% NET OPERATING PROFIT GROWTH (+17.3% AT FIXED FX), THANKS TO:

Revenue generation (+24% yoy, +2.1% at fixed fx) and diversification (Net commissions/Total Revenues 19.7%,+1.6% yoy)

Strict cost control (C/I Ratio down by 5.9%)

NEW EUROPE BANKING: KEY HIGHLIGHTS

... DESPITE A DETERIORATED MACROECONOMIC ENVIRONMENT IN POLAND (ALTHOUGH THE REGION IS THE LEAST HURTED BY GLOBAL SLOWDOWN):

Relevant macroeconomic slowdown (2.3% real GDP growth in 1Q’01 vs 5.9% in 1Q’00 and 4.3% expected for FY’01 at the beginning of 2001)

Strong reduction of Polish reference interest rates (375 bp in 6 months)

COMPETITIVE ADVANTAGES COMING OUT IN POLAND FOR BANK PEKAO:

Bank PEKAO clearly outperformed all major domestic competitors in 1H’01

INCREASED CONTRIBUTION OF BULBANK, SPLITSKA AND POL’NOBANKA TO THE DIVISION NET PROFIT

As a first result of the ongoing restructuring process, all the other three New Europe Banks have achieved significant net profit improvements in 1H’01

32

Net Interest Margin

1H’00 1H’01

228

324

574

710

60.3%

54.4%

Operating Income

Total Revenues

Cost/Income

1H’00 1H’01

1H’00 1H’01

359452

104141

Net Commission and Fee income

1H’00 1H’01

1H’00 1H’01

+42%

+24%+26%

-5.9+pp

(Euro mln)

IN 1H’01 NEW EUROPE BANKING ACHIEVED A 17.3% NET OPERATING INCOME AND A 50.2% NET PROFIT GROWTH ...

+17.3%

+2.1% +4.8%

+35%

+10.9%

STRICT COST CONTROL: -3,619 headcount over 1H’00; -1,028

in Group PEKAO over 31.12.2000 -8.3% SG&A and other operating

costs

At Unchanged FX

At 30.6 FX

Gross Customer

Loans: +9.5% yoy*

Customer Deposits:

+6.9% yoy*

* Calculated on average daily balances at unchanged FX

33

WE REACTED PROMPTLY THROUGH:

... DESPITE A TOUGH MACROECONOMIC AND COMPETITIVE SCENARIO IN POLAND

1Q’00 2Q’00 3Q’00 4Q’00 1Q’01

5.9%5.0%

3.1%2.4% 2.3%

POLISH REAL GDP GROWTH*

1H’00 3Q’00 4Q’00 1Q’01 1H’01

18.3%

POLISH SHORT TERM INT. RATES*

19.3% 19.2%17.2%

15.9%

Relevant slowdown in GDP growth: +2.3% expected for 2001 vs +4.3% at the beginning of the year

Macroeconomic slowdown reflected by Bank PEKAO Customer Loans (+1.8% on FY00) and Customer Deposits (+2.1% on FY00) growth rates

Reference interest rates cut by 375 bp by the Polish Central Bank in 1H’01

Pressure on Interest Margins, particularly on Deposits: Mark Down for Bank PEKAO: 3.38% in 1H’01 vs 3.99% in 1H’00

Implementation of the Customer Segmentation Approach Higher emphasis on cost control and acceleration in recovery actions New High Value Products (EuroGarantia) Rapid repricing policies Particularly conservative lending policies

* Source: EIU

34

ASSET QUALITY: THE SITUATION IS UNDER CONTROL, DESPITE A SLIGHT DETERIORATION RELATED TO THE POLISH SLOWDOWN

% Ch.

(Fixed FX)FY’00

Coverage ratios

-on Total gross NPL (%) (1)

-on Total gross doubtful loans (%) (2)

-0.4 pp

-0.8 pp

(1) Total specific provisions for NPL/Total gross NPL

(2) Total specific provisions for doubtful loans/ Total gross doubtful loans

86.8%

59.4%

1H’01

86.4%

58.6%

(Euro mln)

WE ARE PROMPTLY REACTING THROUGH: Focused and selective lending policy The full implementation of the new lending procedures, based on the

introduction of the “Rating” (as the main indicator to assess counterparts’ solvency) and active monitoring

Effective recovery actions

Volumes

Total gross loans 9,846 +3.5%11,503

Gross NPL 916 +14.5%1,168

Gross NPL/Tot. gross loans (%)

Net NPL/Tot. net loans (%)

9.3% +0.8 pp

1.4% +0.1 pp

10.1%

1.5%

KEY HIGHLIGHTS

Still very high coverage ratios, thanks to conservative provisioning

Very selective and conservative lending policies

Deterioration of asset quality mainly due to the economic slowdown in Poland in 1H’01

35

BANK PEKAO KEEPS ON GROWING AT A FAST PACE, OUTPERFORMING ALL THE MAJOR DOMESTIC COMPETITORS IN 1H’01

Yoy % growth (1)

Pekao

49.9Net Profit

-17.6

Best perf. Pekao (4)

Banking System (3)

Pekao

24.1

36.6

Net Commissions

10.3

Best perf.Fortis Bank

BankingSystem (3)

(1) Calculated on data based on Polish accounting standards at unchanged FX; all data are unconsolidated (2) Salaries, statutory employment costs, Non-personnel costs, Taxes and charges, Contribution and payment to Bank, Other costs(3) Considered Kredyt Bank, BSK, LG Petro Bank, BZWBK, BRE, BH, BPH, PBK, BOS, BIG BG, Fortis Bank, BWR, Amerbank, Bank Czestochowa, Deutsche 24 (not included Pekao)(4) BZWBK 1H’01 net income growth (+1,080%) thanks to benefits arising from the merge between BZ and WBK

Pekao

4.1 4.1

Net Interest Income

-27.7

Best perf.Pekao

BankingSystem (3)

Pekao

-8.3 -8.3

Overheads costs (2)

16.2

Best perf.Pekao

BankingSystem (3)

49.9

36

NEW EUROPE BANKING NET PROFIT ANTE MINORITIES: EURO 157 mln

SPLITSKA3.2% (+0.2%)

BULBANK9.8% (-0.4%)

THE CONTRIBUTION OF BULBANK, SPLITSKA AND POL’NOBANKA TO THE NET PROFIT OF THE DIVISION IS INCREASING, THANKS TO THE IMPROVEMENTS IN EFFICIENCY AND PROFITABILITY

(1) At Unchanged FX(2) Net of extraordinary FX trading loss related to Kuna/Euro floatation. The C/I Ratio non-adjusted figure is 53.6%(3) Net Profit of Euro 3 mln. vs Net Loss of Euro 13 mln. in 1H’00 partly as results of extraordinary recovery and related release of

provisions

GROUP PEKAO85.4% (-1.4%)

POL’NOBANKA1.6% (n.m.)

Net operating income

Net Profit

SPLITSKA POL’NO BANKA

Group PEKAO

BULBANK

+250.4%

N.m. (3)

+16.3% (2)

+58.5%

+12.1%

+48.2% +23.1%

+17.4%

(Change on 1H’00) (1)

C/I Ratio - 1H’01 69.5%50.8% (2)40.1%54.8%

C/I Ratio - % Ch. over 1H’00 -19.3pp-1.9pp (2)-6.0pp -6.2pp

37

UCI 2H ACTION PLAN

OUR ACTION PLAN FOR THE SECOND HALF WILL ALLOW US TO OFFSET THE EFFECTS OF THE POLISH SLOWDOWN, SECURING HIGH GROWTH RATES FOR THE WHOLE NEW EUROPE BANKING DIVISION

Rapid repricing decisions (especially on Deposits) in case of further Interest rate cuts in Poland

Still strict cost control policies: further improvements in C/I Ratio expected

Focus on the Affluent segment: new financial corner and new account managers

New high added value products (mainly mutual funds and bancassurance) to repeat the success of EuroGarantia

Focus on asset quality monitoring and doubtful loans recovery

38




Wholesale Banking

Investment Banking

Asset Management

New Europe Banking

Conclusions

Agenda

39

WE ARE ABLE AND COMMITTED TO CREATE EXTRA VALUE FOR OUR SHAREHOLDERS, OPTIMISING CAPITAL ALLOCATION AND ABSORPTION

13

1,285

461

7,552Italian banking

Wholesale banking

New Europe banking

New Initiatives

Adj ROE

%

25.12

14.3

18.73

CAPITAL ABSORPTION

828

-31

67

103

VALUE CREATION

6,976Group total 20.98 417

RORAC

%

30.9

N.s.

22.0

73.5

24.2

Adj NET INCOME

1,168(3)

-29

142(3)

170(3)

843

RARORAC

%

21.9

N.s.

10.4

44.5

12.0

Net Income + goodwill

depreciation

Shareholder’s profitability

Risk taken(1)

Profitability per unit of risk taken

Shareholder’s value added

Value added per unit of risk taken

(a) (b) (c)/(b)(c) =

(a)-COE(2)(a)/(b)

(1) Minimum regulatory capital, market risks, credit risks and operational risks (see Annex for definition)(2) The Cost of Equity is related to the capital employed (Net equity for the Group and allocated capital for the business units)(3) Includes minorities and elisions

MARGINAL RARORAC

%

22.3

N.s.

15.8

82.6

16.0

N.s.

(Euro mln)

Tier 1 from 6.85% (Dec 00) to 7.12% (1H01)

40

SUMMING UP

Good 1H01 results despite difficult market conditions

Annualised 1H01 bottom line representative of the full year expected performance

Well balanced business portfolio

Significant investments to sustain future growth

41

Annexes

42

1H01 CONSOLIDATED INCOME STATEMENT

Net extraordinary income

Interest margin (incl. dividends)


Total revenues

Operating income

Cost/Income ratio (excl. goodwill dep.)

Tax rate

Net loan loss provisions

Administrative costs (incl. depr.)

Net income

Other net provisions

Goodwill depr.

ROE

(Euro mln)1H00 % ch.

-12.5

2,388

2,303

4,691

353

108

+9.3

+1.8

+5.5

918

+11.0

-13.0

2,278 +14.3

2,413 -2.8

141 -100.1

48.6%

41.5%

40 +227.5

25.4%

1H01

52.6%

41.0%

2,517

2,431

4,948

2,603

2,345

392

94

803

165

131

20.0%

43

INDIRECT DEPOSITS GREW THANKS TO GOOD CONTRIBUTION FROM SECURITIES IN CUSTODY AND INSURANCE PRODUCTS

INDIRECT DEPOSITS

ASSET MANAGEMENT

SECURITIES IN CUSTODY

TOTAL

30.06.0030.06.01 % ch. Vs. Dec00

USA

International

New Europe

Mutual Funds (1)

Italy

Segregated accounts in funds

Unit-linked

Other segregated accounts

(1) Directly placed

50,141

7,126

49,715

17,155 21,306

5,045

3,852 3,711Other insurance products

10,579 11,007

114,842 115,191 -0.3

+0.9

-19.5

-3.9

+41.2

+3.8

88,854

22,800

2,576

613

90,784

21,384

2,411

612

-2.1

+6.6

-6.8

+0.2

108,145

20,238

+0.9

+30.0

112,037

226,879

10,580

89,843

20,948

2,252

590

113,634

221,779

-0.0

+0.6

-1.1

+8.8

+14.4

+3.9

+3.6

+1.1

+2.3

99,047

214,238

+13.1

+5.9

Of which:

(Euro mln)31.12.00

49,718

5,480

3,828

-15.2

% ch. Vs. Jun00

44

ITALIAN BANKING DIVISION PROFIT & LOSS

Net extraordinary income

Interest margin (incl. dividends)


Total revenues

Operating income

Cost/Income ratio (excl. goodwill dep.)

Net loan loss provisions

1H00 % ch.


Net income +7.1

1,818

1,790

3,608

223

57

+13.5

+-5.3

+4.0

976

+0.9

+10.5

1,672 +5.1

1,936 +3.1

Other net provisions 75 +12.0

46.3%

1H01

46.8%

2,032

1,722

3,754

1,758

1,996

225

63

1,045

84

(Euro mln)

Tax expenses 724 -1.8711

Net income for the Group +9.8800 878

45

UBM TradingLab

ASSET MANAGEMENT

(PIONEER)

Interest margin (incl. div.) 19.5 -4.4 15.1 -4.9 10.2

Net non interest income 168.4 130.9 299.3 282.1 581.4

Total revenues 187.9 126.5 314.4 277.2 591.6


59.4 37.1 96.5 214.7 311.2

Operating income 128.5 89.4 217.9 62.5 280.4

48.4

- -3.8 21.1 17.3

Net income for The Group 76.3 53.9 130.2 65.3 195.5

of which: Staff 28.9 11.9 40.8 94.9 135.7

Net income 76.3 53.9 130.2 80.5 210.7

Extraordinary Income -3.8

35.5 83.9 3.1 87.0

(Euro mln) TOTALINVEST. B.(UBM+TLB)

TOTALWHOLESALE B.

Tax expenses

C/I Ratio 31.6 29.3 30.7 77.5 52.6

WHOLESALE BANKING DIVISION PROFIT & LOSS

46

NEW EUROPE BANKING: RESULTS BREAKDOWN BY BANK

Interest margin (incl. div.)


Total revenues

Operating costs (incl. dep.)

Net operating income

Net income

ROECost/income(excl. goodwill dep.)

- Staff costs

- Other costs

TOTAL (1)SPLITSKA BANKA (62.6%)

POL’NO BANKA (72.4%)

Group PEKAO (53.2%)

BULBANK (85.2%)

392 27 23 11 452

258

710

386

324

157

15.8%

54.4%

7

18

12

6

3

13.2%

69.5%

4

27

15

12

5

13.5%

50.8% (2)

8

35

14

21

15

14.3%

40.1%

239

631

346

285

67

16.2%

1,076

54.8%

134

12.4%

201587182

185777164

Net loan loss provisions 8437173

Tax Rate 31.3%n.s.27.3%32.9% n.s.

Capital Absorption

RARORAC

Value Creation

UCI’s portion: 89 mln Euro (3)

(3) The figure is calculated taking into account UCI’s shareholding

(1) Balance due to roundings and elisions

(Euro mln)

(2) Net of extraordinary FX trading loss related to Kuna/Euro floatation. The C/I Ratio non-adjusted figure is 53.6%

47

Minimum regulatory capital

(Tier 1 ratio target * RWA) - Minimum regulatory capital

RARORAC = VALUE CREATION

CAPITAL ABSORPTION

- Ke *Employed capital

Market risk

Credit risk

Operational risk(*)+ + +

Cost of equity = 8,79%

Net income of the year

Adjusted for the yearly amortisation of goodwill

Net equity as of previous year-end

less distributed dividends plus goodwill and share

capital increase

VaR (if available) or 70% of regulatory market risks

4% RWA

Calculated following the guidelines contained in New Basel Capital Accord by adding 20% to the minimum regulatory requirements

THE METHODOLOGY FOR RARORAC CALCULATION

(*) Included in Tier 1 ratio target

uci 2001 first half results september 2001. 2 1h2001 group highlights divisional reporting italian...

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