UniCredit Group
Delivering growth in a riskier world
Alessandro Profumo
Chief Executive Officer
Merrill Lynch Banking and Insurance CEO Conference
London, 3rd October 2007
UNICREDIT POSITIONING AND STRATEGY SUPPORT VALUE CREATION
ALSO IN THE CHANGED MARKET SCENARIO
"IN THE SPOT" TODAY
UNICREDIT OPPORTUNITIES
 WIDE EUROPEAN FRANCHISE
 LIQUIDITY
 Well balanced asset & liability structure
 Banking operations in 23 countries(1) in four core markets
 Sound liquidity position thanks to active management
 More than ~40 million customers, ~9,500 branches
 DIVERSIFICATION BY BUSINESS AND GEOGRAPHY
 CREDIT MARKETS
 All Divisions below 1/3 contribution to operating profit
 Negligible Exposure To Us Sub-Prime & Conduits
 Italy 47% of consolidated revenues, Germany & Austria
27%, CEE 18%, other regions 8%
 High quality LBO portfolios, with no material credit defaults
or loan losses
 Diversified UCI MIB revenue sources, mitigating financial
turmoil impacts
 GROWTH & RESTRUCTURING
 Clear growth pattern in CEE Region
 Solid revenue base in Italy, with significant potential from
Capitalia integration
 Germany and Austria with further restructuring potential
(1) Including
2
ATF
AGENDA
“In the spot today”
Liquidity
Credit market
Growth opportunities
3
WELL BALANCED CONSOLIDATED ASSET & LIABILITY STRUCTURE
Total Liabilities Total Assets
869 bn
869 bn
Other
Trading liabilities
32
130
26
224
Other
Trading assets
708 bn
Regulatory Capital
M/L term liabilities
Due to customers
48
139
618 bn
BANKING BOOK
25
Fixed assets
254
M/L term assets

Customer Loans (454 bn)
Customer Deposits (303 bn)
 Financial Equilibrium ratio(1): from
15.3% in 2003 to 56.4% as of June 07
303
 Former Bank of Italy Rule 2(2)
S/T liabilities
= 150%
339
218
+31.9 bn
S/T assets
30 June 2007
Strong discipline provided by internal rule:
Liquidity ratio limit above 0.90
(1)
4
Medium-long term funding, 139 mln (above 1 year - capital instruments and funds not included) / Medium to long term commercial Banking book assets (254 mln)
(2)
Ex Bank of Italy structural liquidity Rule 2 aimed to ensure a structural equilibrium between assets and liabilities by a specific weighting system
CLEAR FUNDING AND LIQUIDITY MANAGEMENT BASED ON THREE
SOLID PILLARS
 Extensive sharing of liquidity between all regional liquidity centres … cash pooling
CASH POOLING
 Trading with Market Place, UCI’s digitalized trading and accounting platform
 Active since March 07, live in all Italian entities, HVB, BA-CA, Pekao, Capitalia
 Third party funding needs reduced by a further 3.2 bn in 2007
 Diversification of geography and instruments for both S/T and M/L term
FUNDING
DIVERSIFICATION
 Depos, CD’s, CP, Private Placements, Pfandbriefe, Retail
 Leveraging on the historical funding reach of HVB & BA-CA
 Centralised co-ordination of pricing
 Minimise cost of funds
 Avoid internal competition
 Maintaining eligible and marketable collateral
 >56 bn of collateral available within 1 month
COLLATERALISATION
 Increasing access to secured funding with new asset classes
 200 mln of new collateral through the Italian “ABACO” initiative, rising to 2.2 bn by YE
 Projects in place to monetise existing assets through ECB and other Central Bank facilities
5
UNICREDIT STRONG LIQUIDITY POSITION NOT AFFECTED BY AUGUST
AND SEPTEMBER MARKET CRISIS
UniCredit Group 1 month available liquidity(1)
Index
figure
 Strong increase of
intra-group liquidity
flows in August
(+61.2% m/m),
reducing need to
access the market
140
 Money Market prices
in the Internal
liquidity market
always below
Euribor
100
60
2 Apr
16 Apr 30 Apr 14 May
28 May 11 Jun 25 Jun
9 Jul
23 Jul
6 Aug
20 Aug 3 Sep
24 Sep
Sound and comfortable positive liquidity gap, even after August 07 crisis
6
(1) Calculated
as: (sum of net liquidity inflows in the timeframe) + (securities eligible for discount to the ECB, marketable repoable securities)
AGENDA
“In the spot today”
Liquidity
Credit market
Growth opportunities
7
NEGLIGIBLE EXPOSURE TO US SUB-PRIME…
Total
Unicredit Group
Euro mln
On balance
US sub-prime RMBS
127
CDO with partial sub-prime
139
of which equity tranches/income notes
11
Retained interest
11
Total on balance
Off balance (1)
Total
277
77
 Exposure to US sub-primes:
 RMBS collateralized by US subprime mortgages (mainly vintage,
2002-2003), still AAA rated
 CDO with sub-prime collateral:
90% still investment grade, 70%
AA or better at the end of August
 Retained interest held by
Pioneer
354
Exposure equivalent to 0.8% total regulatory capital(2)
8
RMBS: Residential Mortgage Backed Securities
CDO: Collateralized Debt Obligations
(1) Off balance items include conduits with sub-prime exposure and investments in SIVs
(2) On Unicredit reported total regulatory capital as of June 07
… AND TO CONDUIT BUSINESS
Bavaria TRR exposure, Euro bn
Euro bn
HVB
sponsored
conduits
Size as of
26 Sep-07
Type of
Conduit
Arabella
1.8
Customer
Yes
1.77
0.18
Salome
1.3
Customer
Yes
1.31
0.69
Black Forest*
0.7
Customer
Yes
0.63
0.30
Maximillian*
0.3
Arbitrage
Yes
0.30
0.01
BUFCO*
1.1
Arbitrage
Yes
1.08
0.12
Subtotal
5.2
5.09
1.30
-
-
5.09
1.30
Bavarian TRR*
Total
5.8
11.0
TRR
(1)
Liquidity
HVB
line
Liquidity line
No
Letter of
Credit
14.3
8.5
6.2
5.8
0
July 07
Aug 07
5 Sep 07
26 Sep 07
Feb 08E
* US $ denominated; €/$: 1.4124
 Very quick response to market turmoil by reducing Bavaria TRR assets from 14 to 5.8 Euro bn
 Extremely low exposure to 3rd parties conduits: total liquidity lines provided by HVB/BA-CA ~0.55 bn
9
(1)
Total Rate of Return Conduit
HIGH QUALITY LEVERAGE BUY-OUT BUSINESS
 Two high quality LBO portfolios, mainly European deals; no credit concerns
UNDERWRITING PORTFOLIO
 ~5.0 eur bn, 12 deals
 all strong credit stories
 1 jumbo LBO (Alliance Boots, 2 eur bn exposure), high quality
credit story performing very well
Europe
USA: 5%
95%
HOLD PORTFOLIO
 ~5.5 eur bn, 160 deals
 95% senior
 Well performing, highly diversified
USA: 12%
Asia: 5%
10
Europe
83%
MARKETS AND INVESTMENT BANKING DIVISION: A WELL BALANCED
BUSINESS PORTFOLIO
REVENUES BY BUSINESS LINES 2006
BREAKDOWN OF 2006
OPERATING REVENUES
(total return view)
Financing 61%
Investment
Banking
32%
Origination &
Advisory 39%
Structured
Derivatives 38%
Markets
68%
Equities 20%
FICC(1) 30%
Structured
Credit 12%
Strong diversification of revenue sources mitigating the impact of the credit market turmoil
11
(1)
Fixed Income, Currencies, Commodities
AGENDA
“In the spot today”
Liquidity
Credit market
Growth opportunities
12
UNICREDIT BUSINESS PORTFOLIO: DIVERSIFICATION, GROWTH
AND RESTRUCTURING OPPORTUNITIES
OPERATING PROFIT BREAKDOWN
BY DIVISION
MIB 17%
PB&AM 12%
CEE 20%
 CEE: the leading franchise in a high-growth area
 MIB: a strong regional player with significant diversification
 RETAIL: a successful service model and a well-rooted
presence in the core countries
Corporate
27%
Retail 24%
NOTE: Year-end 2006 data, referred to UniCredit + Capitalia + ATF +USB
Groups (combined pro-forma, before Corporate Center and elisions)
Source: UniCredit, Capitalia, ATF, USB 2006 data
 CORPORATE: a network leveraging on group wide
product factories
 CAPITALIA: additional opportunities from integration
13
CEE: UNIQUE COMBINATION OF STRONG GROWTH
POTENTIAL AND IMPROVING RISK PROFILE
Real GDP Growth (%)1
CEE
20%
 Stronger economic growth in CEE
vs EU …
 ∆ avg. real GDP growth 07-09e
~4 pp vs. EU
7.4
6.0
4.0
2.1
 … with improved risk profile
 country rating (weighted for
GDP6) > BBB- ~78% in May
2007(~+40 pp in the last 3 years)
Avg. 07-09e
CEE-16
EU-12
ASIA
LATAM
Banking penetrations
(Loans+Deposits)/ GDP in 2006
Euro bn
214%
77%2
EMU3
CEE
Cagr
06-09
Loans
30%
Deposits
23%
AuM4
28%
Net Profits5
19%
14
CEE-16: BiH, BG, HR, CZ, HU, EE, LV, LT, PL, RO, RU, SK, SI, SRB, TK, UA; Source EIU
(economist intelligence unit) for Asia and Latam
(2) Total loans/deposits include general gov.t, non-financial corporations, households and when available
non-profit institutions serving households (NPISHs) and non-monetary financial institutions (Non-MFIs);
CEE: new EU members, Croatia, Turkey, Bosnia, Serbia, Russia and Ukraine
(3) European Monetary Union
(1)
 Under penetrated banking sector
 High volume growth rates expected
(4)
Calculated for CEE 10, including Poland, Czech Rep., Hungary, Slovakia, Slovenia, Croatia,
Bulgaria, Romania, Turkey and Russia
(5) Net Profits (Before Tax & Extr. Items) are calculated for CEE 16
For May 2007 S&P rates - GDP as year end ‘06; For May 2004 S&P rates - GDP as year end ‘03
Sources: Central Banks and UniCredit Group New Europe Research Network
(6)
UNICREDIT’S EXTENSIVE NETWORK DELIVERED EXCELLENT
PERFORMANCE…
UCI’s Operating profit in CEE Region, mln
+24.1%
1,424
1,143
1H 06
1H 07
UCI’s Operating profit, breakdown by country* (1H07)
CEE
20%
y/y % ch.
44.7
Poland's Markets
637 +21.6
13.5
Turkey
10.0
Russia
8.5
HR & BiH
5.9
Czech R.
84
+2.6
5.5
Bulgaria
78
+29.4
4.9
Romania
70
+25.0
4.4
Hungary
63
+12.6
2.5
Slovakia 35
192
142
121
+27.2
+17.5
+52.3
+64.7
 Strong top line growth delivered across all countries, driven by volume expansion, careful pricing and
high standard services to customers
 Improved efficiency (C/I ratio to 48.2% -3.7 pp y/y) while delivering organic growth
P&L figures at current FX, % change at constant FX
Balance due to Serbia, Slovenia, Baltic Countries & Profit Center Vienna
(*)
15
Weight in % on total
… WITH FURTHER OPPORTUNITIES LEVERAGING ON GROUP
POSITIONING AND MARKET GROWTH POTENTIAL
UNICREDIT STRATEGY
MARKET
POTENTIAL1
KEY ACTIONS
Where n°1…
POLAND
BULGARIA
CROATIA
BOSNIA H.
 Increase product penetration leveraging on
Group’s product factories
+11.4%
 Optimize branch network after merger and
integration activities
…ride the market growth
consolidating market shares
In high-growth markets with
solid presence…
 Significant branch opening plan: ~900 new
branches in 3 years
ROMANIA
TURKEY
UKRAINE
+20.9%
RUSSIA
 Increase Retail customer reach
KAZAKH.
…aggressive organic growth
In other countries of presence…
CZECH R.
SERBIA
SLOVAKIA
SLOVENIA
HUNGARY
BALTICS
 Selective branch opening
+11.3%
 Strengthen retail positioning
…selective organic growth
(1)
Revenues CAGR 2006-2009 (local currency) weighted for UniCredit revenues in the
considered countries in 1H07 – Kazakhstan not included
CEE
20%
16
MIB
17%
MIB: A LEADING REGIONAL PLAYER WITH A CLEAR DIVISIONAL
MODEL OFFERING SIGNIFICANT GROWTH OPPORTUNITIES
Key growth drivers:
COVERAGE
ORIGINATION
& ADVISORY
 Enhancing coverage, origination and advisory capabilities
 Increase share of wallet of existing clients in Austria, Germany and Italy
 Leverage on the ability to provide Group’s products to an enlarged client base in
Austria/Germany, Italy and CEE
 Significant cross selling opportunities on the Group’s international
platform
CROSS
SELLING
 Group’s large lender position and strong CEE M&A advisory as a door-opener to clients
in the core markets
 Cross selling potential of the global platform: FX, structured derivatives, structured and
project finance
 Strong CEE network with optimal positioning in the most attractive
markets
CEE
POSITIONING
 Double digit growth rates in CEE with
Poland: +10% CAGR 2006-2011(1)
Russia: +15% CAGR 2006-2011(2)
50% of CEE revenue pool
 Divisionalisation in CEE allows to roll out the international product platform via the local network
(1)
As for System’s Wholesale Banking revenues
(2)
As for System’s Investment Banking revenues
17
RETAIL ITALY: FULLY IMPLEMENTED DIVISIONAL SERVICE
MODEL SUPPORTING GROWTH
 Customer base enlargement:
Revenues, mln
+7.5%
RETAIL
24%
2,542
2,363
 100,000 new customers in Jan-Sept 07
 131,000 net flow of new C/A in Jan-Sept 07
 Customer satisfaction: continuous improvement
 TRIM Index: UniCredit Banca 61 vs 51 of top 5 peers
 Market share rising in key products/ segments:
 Consumer Financing (new production)
1H 06
1H 07
 Household mortgages (new production)
 Small business short term loans
C/I, %
60
 Cost/income target achieved one year ahead of plan
-5 p.p.
55
 FTE rightsizing
 -369 FTE since Dec05 (to 22,796 in 1H07)(1)
 Strong productivity increases thanks to higher automation/online migration
 Branch transactions -10% in 2006, but total bank transactions increased by 12%
 1,600 deposit-ATM installed by July 07: 38% of cash deposits migrated
FY 06
1H 07
 1.6 mln active online customers at June07 (+33% y/y)
Accelerating the current successful growth
18
(1) Excluding
seasonal workers
CAPITALIA: STRONG OPPORTUNITIES IN BOTH REVENUES
AND COSTS
PRODUCT
PENETRATION
Alignment to UniCredit’s
best practice
Increase productivity:
BRANCH
SERVICE
MODEL(2)
 Externalization of back office
 Wider utilization of direct
channels
UniCredit
Banca
Capitalia
Current Accounts
89%
74%
Revolving Cards
11%
5%
Segregated Accounts (1)
29%
13%
Daily transactions per FTE
100
49-71
Current accounts/Deposits per FTE(2)
100
52-73
100
61-77
(2)
(2)
Direct channels transactions
Integration started at full speed:
 Agreement with Unions on rightsizing signed
INTEGRATION
 New branches plan
 First Retail joint initiatives (e.g. ATMs sharing) and product development
 Common brand strategy defined and announced
Preliminary benchmarking fully supports announced cost and revenue synergies
19
(1)
Referred to Personal Banking
(2) Index
RETAIL
24%
figures, UniCredit Banca=100. For Capitalia, Min and Max between Banca di Roma, Banco di Sicilia and BIPOP
GERMANY AND AUSTRIA: PAVING THE WAY FOR FUTURE
GROWTH
Operating expenses
1,558
RETAIL
24%
C/I, %
91.9 -15 p.p.
76.9%
-8.7%
1,422
711 -1.3%
701
COST MANAGEMENT ACTIONS
 FTE rightsizing
 Network restructuring, through
business model revision and tight
direct costs management
 Strong control on both direct and
indirect costs
FY 05
FY 06
1H 06
1H 07
-14.7%
978
1H 07
C/I, %
Operating expenses
1,147
FY 05
91.5% -17.9 p.p.
538 -12.6%
73.6%
470
FY 05
FY 06
1H 06
1H 07
FY 05
1H 07
 Improvement of cross selling (i.e. 131,000 new “Willkommenskonto” in Germany from Jul-06 launch)
OPPORTUNITIES
TO BOOST
REVENUES
 Focus on Affluent customers long term investments and Small Business entrepreneurs assets
 Set up of UniCredit Consumer Financing Deutschland
 Growth in Mortgage penetration in line with branch share in Austria
20
CORPORATE: BUSINESS EXPANSION IN A SOUND
ENVIROMENT
 Growth of corporate loans (+10.2% 1H07/1H06) and
strong development of leasing (revenues at ~169 mln,
+15% 1H07/1H06)
Revenues, mln
+6.1%
2,530
2,385
 Good increase of deposits (+9.8% 1H07/1H06)
1H 06
 Increased cross selling of fee based products (derivatives,
securities services) as main growth drivers (net fees at 409
mln, +15%)
1H 07
C/I Ratio, %
33.3%
CORPORATE
27%
Cost of risk, bp
-175bp
53
31.5%
-5 bp
48
 Strict cost control
 Improved quality of the loan portfolio
1H 06
1H 07
FY 06
1H 07
21
OPPORTUNITIES ARISING FROM NETWORK STRENGTHENING
AND LEVERAGE ON PRODUCT FACTORIES
CORPORATE
27%
COMMERCIAL NETWORKS
 Stronger positioning (~14% mkt. share(1)) after merger with Capitalia in a market with an
attractive outlook …
 … particularly in very interesting target regions (Lombardy, Tuscany and Lazio)
Aggressive expansion plan in selected regions: 5 new locations already opened
PRODUCT FACTORIES
Leasing – New Business, bn
+33.4%
7.4
5.6
Jan-Aug06
LEASING:
 N. 1 European Leasing Group(2) after integration with Capitalia
 Strong business momentum
Jan-Aug07
GLOBAL FINANCIAL SERVICES: focus on cash management, trade finance and international
payments, exploiting the wide Pan-European network
(1) As for total corporate customer loans
(2) As for total new business, ~12 bn
(3) As for outstanding loans
22
CAPITALIA: FURTHER RELEVANT RESTRUCTURING OPPORTUNITIES
 Union agreement signed well ahead of plan
STAFF COSTS
 Estimated staff rightsizing: 5,000 people
 Capitalia migration by end of 2008 to UniCredit’s EUROSIG(1)
 Consolidation of Capitalia IT functions into UGIS(2)
IT
BACK OFFICE
CENTRAL FUNCTIONS
 Integration of back office functions, also leveraging on “near-shoring” in
Romania
 Consolidation of procurement activities, extensive use of e-auctions
 Adoption of UniCredit divisional model with light regional HQs
 Branch network rationalization in Italy and foreign countries
 Creation of single product factories and alignment to best performers
Clear cost synergies from rationalization and alignment to best practices
23
(1) The
single IT platform for Commercial Banking
(2) UniCredit
Group Information System
CONCLUSIONS
A VALUABLE SET OF STRATEGIC OPTIONS OFFERING BOTH
GROWTH AND RESTRUCTURING OPPORTUNITIES
24