1. REPUBLIC OF SERBIA BANKING SYSTEM PRESENTATION Nikola Arandjelovic Member of the Executive Board Agrobanka a.d. Belgrade BACEE 15 th Conference Budapest, 15 November 2006

2. BACEE Conference Republic of Serbia – Banking System presentation Data and some comments in the presentation were used from the National Bank of Serbia (Serbian Central Bank) Second Quarter Report 2006 named ``BANKING SECTOR IN SERBIA``available at NBS website address: www.nbs.yu as well as banks balance sheets as of June, 30 2006 published at the same website address. All sums in the presentation are expressed in Serbian national currency – dinar (CSD) As of June, 30 2006 1 EUR = 86,00 CSD

3. BACEE Conference Republic of Serbia – Banking System presentation Banking Sector in 2006 1.Structure of the Banking Sector in Serbia * Central Bank ( National Bank of Serbia-NBS); * commercial banks; * other financial organizations (postal savings banks, saving credit organizations and savings-credit cooperatives), but only until Dec. 2006 when they have to become a bank, merger with another bank or commence the process of liquidation. Serbian banks are of general and universal type, founded as joint-stock companies.

4. As of June 30, 2006, 38 banks with NBS operational licenses were active in Serbia. In the observed period one bank ( MB bank a.d. Nis) had its operating license revoked and one bank ( Greek Alpha Bank Beogradska afilijacija a.d.Beograd) merged with JUbanka.a.d. Beograd under the new name Alpha Bank a.d. Beograd. 12 banks has special license given by NBS and SEC for broker-dealer operations at the capital market and 4 banks are licensed to operate as custodial banks. 1.1. Number of Banks 31.12.03 31.12. 04 31.12. 05 30.06.06. Number of Banks 47 43 40 38 Number of OFOs 1) 14 8 8 8 1) Other financial organizations – saving banks, saving-credit organizations and saving- credit cooperatives BACEE Conference Republic of Serbia – Banking System presentation

5. 1.2. Bank`s Organizational Networks DescriptionDec.31, 2003. Dec.31, 2004. Dec. 31, June 30, 2005. 2006. Number of business units 97 124 111 93 Number of branches 292 300 319 393 Number of branch offices 774 1,010 1,067 1.233 Number of counters 302 275 291 257 Total 1,465 1,709 1,788 1.976

6. BACEE Conference Republic of Serbia – Banking System presentation 1.3. Number of Employees in the Banking Sector During six months of 2006, the total number of employees in commercial banks rose by 1,214 from 25,680 at end of 2005 to 26,894, the number recorded on June 30,2006. 1.4. Ownership Structure of Banks As of June 30, 2006, the ownership structure of 38 banks was as follows: 18 banks in majority ownership of foreign shareholders 9 banks in majority ownership of domestic physical and legal entities, 11 banks in majority ownership of Repub. of Serbia. 2) 2) The banks whose greatest shareholder is the Republic of Serbia, as a major or single shareholder, directly or indirectly.

7. BACEE Conference Republic of Serbia – Banking System presentation 2. Market Share The market share of banks grouped according to balance sum total as of June 30, 2006 was as follows: Balance sum level Number of banks in CSD millionShare (%) Over 45 bn dinars 6 550.191 54,9 20 - 45 bn dinars 7 211.112 21,1 10 - 20 bn dinars 9 150.708 15,1 5 – 10 bn dinars 8 60.345 6,0 below 5 bn dinars 8 29.139 2,9 Total 38 1.001.495 100,0

8. BACEE Conference Republic of Serbia – Banking System presentation The share of the 6 largest banks in balance sum total equaled 55%. The 13 largest banks had a 76% share in the total balance sum. As of June 30, 2006, the overall banking sector balance sum reached CSD 1.001 billion, of which the share of banks in majority ownership of foreign entities was CSD 713 billion or 71,2%. The share of banks in majority ownership of the Republic of Serbia was CSD 213 billion or 21,3%, while banks in majority private ownership accounted for CSD 75 billion or 7,5%.

9. BACEE Conference Republic of Serbia – Banking System presentation 2.1.Share of top 10 banks as of June,30. 2006 in CSD million BankTotal balan. sum Capital Loans Deposits 1.Raiffeisenbank 143 104 15 618 84 198 111 596 2.Banca Intesa 96 186 11 532 56 511 75 554 3.Hypo Alpe Adria 92 660 9 017 55 004 74 481 4.Komercijalna banka 91 254 15 258 51 463 67 434 5. HVB bank 81 123 4 740 35 376 71 189 6. Societe Generale 45 860 4 641 23 674 38 321 7.Vojvodjanska banka 43 935 7 860 * 38 485* 29 680* 8.Alpha bank 38 392 9 481 22 503 24 039 9. ProCredit bank 33 560 2 577 20 868 25 421 10. AIK banka Nis 26 938 13 423 21 861 8 244 19. Agrobanka 15 694 2 199 10 299 8 513 TOTAL * Data for March 2006 1 001 494 154 904 376 942 490 890

10. BACEE Conference Republic of Serbia – Banking System presentation 2.2. Market share and rank of top 10 banks as of June, 30. 2006 for various elements Bank Assets Share Rank Capital Share Rank Loans Share Rank Deposits Share Rank 1.Raiffeisenbank14,3 % 1 17,2 % 115,6 % 1 15,3 % 1 2.Banca Intesa 9,6 % 2 4,4% 6 10,4 % 2 3.Hypo Alpe Adria 9,3 % 3 5,9 % 5 10,2 % 3 4.Komercijalna banka 9,1 % 4 10,2% 2 8,5 % 4 9,3 % 5 5. HVB bank 8,1 % 5 2,7 % 12 6,7 % 5 9,8 % 4 6. Societe Generale 4,6 % 6 3,3 % 10 4,3 % 6 5,3 % 6 7.Vojvodjanska banka 4,4 % 7 3,9 % 7 3,9 % 8 4,2 % 7 8.Alpha bank 3,8 % 8 7,1 % 3 3,3 % 10 3,3 % 9 9. ProCredit bank 3,4 % 9 1,7 % 20 4,1 % 7 3,5 % 8 10. AIK banka Nis 2,7 % 10 8,7 % 3 3,6 % 9 1,1 % 21 19. Agrobanka 1,6 % 19 1,4 % 23 1,9 % 15 1,2 % 20

11. BACEE Conference Republic of Serbia – Banking System presentation 3. Privatization in the Banking Sector during 2006 Name of bankShare capital (in mill.CSD) RS percentage share 3) Note Vojvodjanska banka a.d. Novi Sad 7.86099.43Negotiations with the National Bank of Greece on the takeover of controling stake are under the way Panonska banka a.d. Novi Sad 2.47587.39By the end of July a sales contract was signed with Sao Paolo IMI. Credy banka a.d. Kragujevac 1,08572.36The process of privatization is under way. 3) The Republic of Serbia (RS) is involved either directly or indirectly. Indirect participation implies participation through banks in bankruptcy.

12. BACEE Conference Republic of Serbia – Banking System presentation Risks in the Banking Sector 1. Credit Risk Quality of Assets in the Serbian banking sector in CSD million As of Total balance assets &off- balance sheet items Total classified assets, calculated deductibles Classified assetsShare of bad assets (C<D<E) in total classified assets, calculated deductibles (%) A+BC+D+E 31.12.03746,151256,280198,65457,62622,49 31.12.041,126.832343,117263,14379,96823,31 31.12. 051,642,494472,800363,228109,57223,17 30.06. 062,150,274554,483435,644118,83921,43

13. BACEE Conference Republic of Serbia – Banking System presentation 2. Liquidity Risk Banks Daily Liquidity Indicators as on June 30, 2006 in CSD million BanksGyro- account balance Calculated required reserve Column difference (2-3) Deposited liquid funds surpluses Daily liquidity loans Total in the Republic of Serbia 30,878 33,351 - 2,473 2,321 1,190 Out of the total number of banks, 20 of them used required reserve funds in the total amount of CSD 3,066 million or 9.2% of the total calculated required reserves. Three banks used daily liquidity loans. During the period under review, banks` liquidity indicator ranged between 1.05 and 21.88.

14. BACEE Conference Republic of Serbia – Banking System presentation Capital Adequacy (no less than 12%) The table below shows capital adequacy ratios for 38 banks operating in first six months of 2006 The average value of adequacy ratio equaled 28,9% Capital adequacy ratioNumber of banksShare in total number of banks Up to 12% 2 5,3 % From 12 to 20% 513,1 % From 20 to 30%1026,3 % Over 30%2155,3 % Total38100%

15. BACEE Conference Republic of Serbia – Banking System presentation Profitability Indicators of Banking Sector Banking sector PROFITABILITY INDICATORSFinancial result (in CSD million) Gross revenues/ total assets (%) Net revenues from interest/ total assets (%) Operational expenditu- res/total assets (%) Net extraordina- ry revenues /total assets (%) Operational expenditure/ net revenues from interest and fees (%) Dec. 31,0329.785.067.660.0190.62 (1.055) Dec. 31,0437.724.666.270.0284.50 (4,989) Dec. 31,0533.634.475.55- 0.0080.95 7.271 June 30,0618.362.112.800.0088.80- 3.769

16. BACEE Conference Republic of Serbia – Banking System presentation Main developments in 2006 During the second quarter of 2006, Budapest Based OTP bank RT has become the owner of 89,39% of the share capital of Niska banka a.d. In the second quarter of 2006, Greek Alpha Bank a.d. Beogradska afilijacija Beograd merged with Jubanka a.d. Beograd, changing the name into Alpha Bank a.d.Beograd. In Q1 2006 the banking sector recorded a negative financial result in the amount of CSD 3,770 million,

17. BACEE Conference Republic of Serbia – Banking System presentation During Q1 2006 NBS within its regulatory competence (control and supervision of bank operations) issued numerous secondary legislation in purpose of banking adjustments to the new Banking Law. All banks operating in Serbia had obligation to change their organization, rules and business operations in accordance with new Law&NBS regulation and to obtain NBS`s agreements before 1 st October (the date when Banking Law started)

18. BACEE Conference Republic of Serbia – Banking System presentation THANK YOU FOR YOUR ATTENTION ! PB AGROBANKA a.d. BELGRADE Nikola Arandjelovic Member of the Executive Board E-mail:nikola.arandjelovic@agrobanka.co.yu www.agrobanka.co.yu