UNICREDITO ITALIANO Alessandro Profumo - CEO UBSW ITALIAN FINANCIALS CONFERENCE Rome, - February 7 th, 2002 “CROSS-SELLING: REALITY OR MIRAGE?”

2 Today in Italy many banking and non-banking players, such as insurance companies and “utilities” (i.e. Poste Italiane, Italgas, AEM), leverage on cross- selling in order to sell financial services This trend creates higher competition and market overshoot, supporting the belief that cross- selling is at the same time the most important factor and measure of success TODAY CROSS-SELLING IS CONSIDERED THE KEY FACTOR FOR SUCCESS IN THE FINANCIAL SERVICES MARKET THIS RAISES TWO QUESTIONS: IS CROSS-SELLING REALLY SO IMPORTANT IN ORDER TO DETERMINE BUSINESS SUCCESS? IS IT SO EASY TO MAKE A SUCCESSFUL CROSS- SELLING?

3 Is it easy to make a successful cross-selling ? Requirements for a successful cross-selling How to manage a successful cross-selling Is cross-selling so important to succeed? Conclusions Agenda

4 WHICH ARE THE REQUIREMENTS FOR A SUCCESSFUL CROSS-SELLING ? WE IDENTIFY AT LEAST THREE PILLAR- REQUIREMENTS FOR AN EFFECTIVE AND SUCCESSFUL CROSS-SELLING: A clear customer segmentation and identification of clients’ needs The development of a single IT platform and of an efficient CRM to support a multi-channel distribution A wide range of tailored products

5 Mass marketAffluentPrivateSmall BusinessCorporate Cash management and transactional services Investment products & services: Simple Sophisticated Financial Advisory Pure Lending Structured Finance and ALM services TODAY OUR CUSTOMER BASE IS FULLY SEGMENTED, WITH A CLEAR IDENTIFICATION OF EACH SEGMENT SPECIFIC FINANCIAL NEEDS (< Euro 75,000 financial assets) (from Euro 75,000 to Euro 500,000 financial assets) (> Euro 500,000 financial assets) (Revenues < Euro mln.) (Revenues > Euro 2.5 mln.)

6 Service platforms BackOffice OUR MULTI-CHANNEL DISTRIBUTION NETWORK CAN LEVERAGE ON A SINGLE IT SYSTEM AND AN EFFICIENT CRM TO IMPROVE CROSS-SELLING AND REDUCE ATTRITION RATES Headquarter CRM IT UCI-Retail A single CRM platform in order to: IT PLATFORM Improve effectiveness of sales through: better identification of targets optimisation of cost / profit rate per contact definition of best media / channel mix CRM Multichannel Network Seven banks moved to the same IT platform in 3 years in order to: Improve customers’ understanding through: monitoring of financial assets / liabilities check of products / services bought / sold control of number and type of transactions, flows, ecc. MULTI-CHANNEL NETWORK 2,939 branches in Italy as at end 2001 (around 2,800 for UCI-Retail after S3) 1,774 PFAs as at Phone Banking: 44,000 active clients in 2001 Internet Banking: 302,500 clients as at In 2001, for instance: 12 campaigns for Credito Italiano More than 1,200,000 contacts resulting in 24,400 sales

7 Innovative commercial banking product packages for families and small businesses THE WIDE RANGE OF HOME-ENGINEERED PRODUCTS ALLOWS UCI TO PROVIDE A 360° OFFER OF FINANCIAL SERVICES TO ITS CUSTOMERS UNICREDIT ASSICURA More than 190 mutual funds distributed all around the world Hedge funds, capital guaranteed products* and segregated accounts Bancassurance More than Euro 3.9 bn new premiums written in 2001 Leasing for corporate clients Revolving credit cards Investment banking, structured finance and derivatives for corporates More than 27,000 transactions in 2001 More than 1,200 CW and derivatives for retailers Capital guaranteed products* * Jointly engineered by Pioneer, UBM and TradingLab

8 Is it easy to make a successful cross-selling ? Requirements for a successful cross-selling How to manage a successful cross-selling Is cross-selling so important to succeed? Conclusions Agenda

9 WHEN CAN CROSS SELLING BE CONSIDERED SUCCESSFUL ? WE THINK THAT CROSS SELLING IS SUCCESFUL WHEN IT MAXIMISES: CUSTOMER SATISFACTION, strictly linked to real value perceived by the client & PROFITABILITY FOR THE PROVIDER OF FINANCIAL SERVICES BOTH VARIABLES CAN BE MAXIMISED THROUGH THE ADOPTION OF DIFFERENT DISTRIBUTION APPROACHES FOR DIFFERENT PRODUCTS: Value perceived by the client Margins for the provider HighLow High Low Single products and packages sold through direct channels Packages Targeted sales of tailored products (i.e. Pension funds, Cap. Guar. Products) Targeted sales of standard products (i.e. in 2001 segregated accounts in Funds)

10 Value for the client GENIUS AND IMPRENDO ARE CLEAR EXAMPLES OF SUCCESSFUL CROSS-SELLING OF LOW MARGIN PRODUCTS WITH HIGH VALUE FOR THE CLIENTS... Value for UCI 6 financial products in 1 package (1) at a fixed monthly rate - Euro (1) (Current account, Custody for securities, Safety box, Debit card, Credit card, Consumer finance) Free access to direct channels (phone and Internet banking) Non-banking benefits (Discount on travels, hotels, restaurants, newspapers, medical services, insurance policies, ecc.) (1) Data referred to Genius Extra 4 financial products in 1 package (2) at a fixed monthly rate - Euro (2) (Corporate current account, Corporate credit card, Easy access to leasing, Additional current account for the enterpreneur) Free access to direct channels (phone and Internet banking) Many non-banking benefits (Easy rates on telephone calls, ticket restaurants, fuel, car- renting. Fiscal and Legal Advisory. Telepass, ecc.) (1) Data referred to Imprendo Gold Lower distribution charges (compared with selling 6 products individually) Higher customer satisfaction and loyalty (lower drop-off rates) Enhanced profitability and NPV per client Lower distribution charges (compared with selling 4 products individually) Enhanced customer satisfaction ( clients since launch) Chance to attracting the enterpreneur as an affluent or private customer More than 685,000 subscribers since launch

11... AS SHOWN BY THE BRILLIANT RESULTS ACHIEVED Clients without Genius MAIN GENIUS PERFORMANCES (1) : Clients with % Ch. Drop-off Ratio Customer Satisfaction (2) Cross-selling Av. Yearly Margin per client Gross NPV per client (in %) (3) % 58.6% Euro % % 65.7% Euro 1, % +98.2% -4.3% 7.1% +26.2% +65.6% (2) Measure of satisfaction towards the Bank (Credito Italiano) resulting from an EURISKO market research (1) Source: MKS (UCI-Strategic Marketing), on 1999 and 2000 data (3) Calculated as sum of revenues generated by each client on a 25 year timeframe, discounted at UCI’s cost of equity (8.95%) and taking into account drop-off ratios of each category. Data re-based in % terms.

12 Being successful in the “pension industry” will require complex products specifically engineered to meet all these customers’ needs PENSION PRODUCTS ARE A TYPICAL HIGH MARGIN FOR THE BANK - HIGH VALUE FOR THE CLIENT SERVICE, FOR WHICH A SUCCESSFUL CROSS-SELLING WILL REQUIRE TAILORED FINANCIAL ENGINEERING... 93% 83% 69% 78% 87% 84% 0%20%40%60%80%100% To warrant against the unforeseen To guarantee son’s education To bequeath financial assets to sons To guarantee medical care in the old age To integrate State-based pension programs To buy one’s own house Reasons to save for “Social Security” purposes Main findings of a IAMA-DOXA market research (Dec.2000) (% of interviewees)

13... AND SPECIFIC SALE EFFORTS... New communication models:communication models currently used in Italy are clearly inefficient PFP approach redesign: new philosophy, new mechanism for performance measurement, new targets NEW PENSION PRODUCT DISTRIBUTION APPROACH New variables (besides wealth and income) becoming more and more important PERSONAL FINANCIAL PLANNING COMMUNICATION CUSTOMER SEGMENTATION

14... BASED ON A COMPLETE REDESIGN OF PERSONAL FINANCIAL PLANNING, IN ORDER TO FULLY MEET CUSTOMERS’ SOCIAL SECURITY NEEDS Fiscal Optimisation Product Selection From pure risk-profile analysis to focus on multiple variables (i.e. level of employment and of contributions paid to State-based pension programs) Fiscal optimisation becoming not only a target, but also a key driver for product selection From simulation based on time series to multi- stage statistical models, taking into account different financial market scenarios Pension funds, Capital Guaranteed and Life Insurance products becoming a key pillar for an efficient asset allocation Individual social security and retirement gaps measurement Deep analysis of customers’ attitude towards “innovative” products (like “defined contribution” or capital guaranteed products) Customer Segmentation Wealth-trend Simulation Customer Understanding NEW PERSONAL FINANCIAL PLANNING:

15 OUR BRILLIANT RESULTS FROM CAPITAL GUARANTEED PRODUCTS CONFIRM THE ABILTY IN ENGINEERING AND DISTRIBUTING SOPHISTICATED PRODUCTS TO SATISFY NEW NEEDS CAPITAL GUARANTEED PRODUCTS: EURO 7.46 bln NET INFLOWS IN 2001* ,000 (Euro mln) MAY 2001 JUNE 2001 JULY 2001 AUG SEPT Segregated Accounts Unit Linked (UNISTAR) MAR Fund & Index Linked Notes 1,200 1,400 OCT , NOV DEC (1) Net of Euro 91 mln. inflow from a joint BANK PEKAO / TRADINGLAB Capital Protected Note issued in October

16 Is it easy to make a successful cross-selling ? Requirements for a successful cross-selling How to manage a successful cross-selling Is cross-selling so important to succeed? Conclusions Agenda

17 CROSS-SELLING IS ONLY ONE OF THE VALUE CREATION DRIVERS... Sale of many different products to the same client in order to increase the profitability related to each customer Customer penetration Customer relationship period Price sensitivity Up selling Shifting customers’ product mix towards products with higher value both for the clients and the bank Cross-selling Share of wallet for private clients Share of total financial services used by Small Business and Corporate clients The higher the appreciation of the value associated to the product, the lower customers’ price sensitivity The longer the customer relationship period, the higher the customer NPV WE IDENTIFY FIVE MAIN VALUE CREATION DRIVERS:

18... AND ITS IMPORTANCE SUBSTANTIALLY DIFFERS FROM SEGMENT TO SEGMENT Mass marketAffluentPrivateSmall BusinessCorporate Cross-selling Customer penetration Price sensitivity Customer relationship period Up-selling Cross-selling is the most important value driver for Mass market and Small Business, while share of wallet, up-selling and customer relationship period are key-factors for affluent and private customers

19 Respectively 95% and 80% of SB and Mass Market clients own less than 5-6 products Internal studies on Credito Italiano data show that the marginal profitability coming from the sale of an additional product decreases with higher levels of cross- selling CROSS-SELLING LEVEL MARGINAL PROFITABILITY RELATED TO CROSS-SELLING UP-SIDE POTENTIAL FROM CROSS SELLING IS MUCH HIGHER FOR MASS MARKET AND SB CUSTOMERS WHO SHOW THE LOWEST AVERAGE NUMBER OF PRODUCTS 0% 25% 50% 75% 100% SBMassAffluentPrivate > 8 pdt 7-8 pdt 5-6 pdt 3-4 pdt 1-2 pdt Marg. Profitability of an additional sale 0% 80% 160% 240% 320% 400% SB Mass Affluent Private

20 150,000250,000500,0001,000, ,000 1,500 2,000 2,500 3,000 < 25, , > 1,000,000 FOR PRIVATE AND AFFLUENT CUSTOMERS SHARE OF WALLET AND UP-SELLING ARE MUCH MORE IMPORTANT VALUE DRIVERS For Private and Affluent customers, already showing high cross- selling levels, a large share of wallet and up-selling are much more important in order to enhance profitability TOTAL MANAGED ASSETS (DEPOSITS, SECURITIES IN CUSTODY AND AUM) AVERAGE MARGIN PER AFFLUENT AND PRIVATE CLIENT THE HIGHER ASSETS MANAGED BY UCI, THE HIGHER PROFITABILITY FOR UCI Source: UCI CRM on Credito Italiano data for affluent and private clients (Euro)

21 Is it easy to make a successful cross-selling ? Requirements for a successful cross-selling How to manage a successful cross-selling Is cross-selling so important to succeed? Conclusions Agenda

22 Cross-selling is an important value driver, but it is not the only one and not always the most important SUMMING UP: WHO WILL BE THE WINNERS OF THE GAME? IN ORDER TO BE SUCCESSFUL IN THE CURRENT COMPETITIVE SCENARIO ALL PLAYERS SHOULD REMEMBER THAT: Specialised players with critical mass will have a strategic advantage vs. competitors, thanks to their deep knowledge of the customer base and their increased focus The success of cross-selling policies should not be measured by the number of products sold to the same client, but by their profitability and their capability to maximise both customers’ satisfaction and relationship period With its strategic and operational tools UCI has made cross- selling a profitable reality and the creation of 3 segment banks will help to fully exploit the potential of this value driver