1. © Horváth & Partner GmbH Atlanta Barcelona Berlin Bucharest Budapest Dubai Düsseldorf Frankfurt Munich Stuttgart Vienna Zurich www.horvath-partners.com Martin Hammerschmid 09.23.2009 Adjusting Retail Banking Strategy to New Conditions Head of Central and Eastern Europe Business Horváth & Partner GmbH Biberstraße 15 A-1010 Vienna Phone: +43 1 5127508-0 E-Mail: mhammerschmid@horvath- partners.com

2. 2 Horváth & Partners at a Glance (1/2) EmployeesMore than 450 CustomersGlobal corporations, national corpora- tions and medium-sized companies from the industrial, service and retail sectors, as well as public organizations IndustryGlobal management consultingOfficesAtlanta, Barcelona, Berlin, Bucharest, Budapest, Dubai, Düsseldorf, Frank- furt, Munich, Stuttgart, Vienna, Zurich Additional partner offices in Asia, Europe, and North America through the "Highland Worldwide" consulting network Adapting Retail Banking Strategy to New Conditions

3. Horváth & Partners at a Glance (2/2) Adapting Retail Banking Strategy to New Conditions3 Design Realize Anchor Process and Organization Control and Finance Strategy and Innovation IT Strategy, IT Cost Management, IT Realization and IT Project Management Strategy Development Strategy Review Strategy Implementation by Strategy Maps and Balanced Score Card Value Management Design of Strategy- Oriented Bonus Systems Change Management Management Control Systems Planning, Reporting and Forecasting Risk Management Cost and Profit Transparency Sales Controlling Internal and External Accounting (IFRS) Operational Excellence, Industrialization & Performance Management Lean Six Sigma Business Transformation and Process Reengineering in Retail, Private, Business and Corporate Banking Cost Management, Restructuring & Sourcing Sales Performance Management Strategy and Innovation Process and Organization Control and Finance IT Strategy, IT Realization and IT Project Management BMW Financial Services Control and Finance Strategy and Innovation Process and Organization Horváth & Partners – The Performance Architects Strategy. Process. Control. Top Rating by Senior Executives: Horváth & Partners is Clear No 1 in Management Accounting & Controlling Our Core Service Offerings in Banking  Horváth & Partners accompanies well known international customers and conducted more than 50 projects in CEE  Horváth & Partners is part of the world-wide Consulting Network “Highland Worldwide” Horváth & Partners Selected References in Banking

4. Slowed growth and lack of business confidence in market Exchange and interest rate volatility High unemployment Depleted credit availability Low savings rates Margin pressures CEE markets exhibit volatile economic conditions that jeopardize the profitability of residing financial institutions Sources: a) Unemployment from Raiffeisen Research, b) DE unemployment from Bundesministerium für Wirtschaft und Technologie, c) Savings from Global Market Information Database, d) Currency from Yahoo! Finance e) all currency against Euro Adapting Retail Banking Strategy to New Conditions4 Challenges Opportunities Many under-banked customers Backlog demand for financial products Need for secure products Strong request for risk-protection Emerging M&A Opportunities 90,5 Eurozone Savings Rate vs. Currency Value Lost against EUR (in %) † The 2 Year Period covers from September 3, 2007 – September 3, 2009

5. CEE Bank performance has overcome the crisis effects in most countries, but with aid and a higher cost of risk (1) Reported only as Consolidated; (2) Grouped by CEE regions (Central, Southeast, etc.) (3) Reported by Country Adapting Retail Banking Strategy to New Conditions5 #s are Branch Counts ALBABGHRCZHUOSPLRORSSKSLUA State Aid 3 1156361975626127371 1 34482281405721627646580 3 12625120638943172 3 37510040810410090158 2 10096179671081485011547293159M 2 1692631455681 1058 136539514569 1 36132113389270830895814 1 XXXXXXX 1 268815116711 Ukraine’s drastic economy shrinkage dragged banking profits negative Slovakia and Slovenia faced difficulties similar to each other Most banks still capable of driving profit Increased profit now at a higher cost of risk Significant cost cutting measures implemented Government aid rescued many loans and assured depositors across CEE CEE Market Performance

6. Strategic Confusion What growth can we expect and when will it even come? How will customer behavior and customers’ bankability change? Are we striving for the right goals, or have we poorly speculated in the East? How can we prepare for the recovery in times of crisis? Retail Banking in CEE countries faces challenges mandating a renewed strategic model for competing in the new market Adapting Retail Banking Strategy to New Conditions6 Opportunities and hot issues Strategy ReviewRestructuring the business modelM&A Management Strategically-oriented incentive and compensation systems Controlling efficiency & management New rules in a post-Lehman world (Straits Times, 09/07/2009) Recoveries in Eastern Europe slow (Reuters 09/04/2009) Adjustment after a period of vibrant growth will be painful (Economist 10/10/2008) Fitch drops ratings for banks due to Eastern Europe (04/16/09 Reuters) Expect sustained change in customer behavior (PresseEcho.de 26/08/2009)

7. A strategic readjustment in retail banking strategy will aid CEE banks in emerge from the crisis prepared for the new market Adapting Retail Banking Strategy to New Conditions7 From: Reliance on simple asset products Build initial belief in banking system To: Increase Customer Touch Points Trust again in Sector and Brand From: In-house productions & capacity Internal capabilities determine products To: Vendor Management Source complex products and services From: Top line growth focus Easy financing in foreign currency To: Adjusted Cost and Risk Base Increased Hedging Product Use Allocated Resources Across BUs From: Lending and interest-driven focus Web presence and distanced banking To: Customer Segments & Channel Focus Cross-Selling Products & Services From: Processes grew alongside demand External Growth from acquisition To: Industrialize the value chain Find synergies across all group levels From: Labor grew directly with sales growth Compensation followed lending volume To: Performance-based Incentive System Staff Management & Expert Training From: Growth projections and volume drivers Mass market entry and general focus To: Scenario-based Decision Making Niche and innovation management Human CapitalCustomer Interface Value ChainConcepts for the Future Strategic Core Customer Perception Cooperation

8. Cost and Efficiency Pressure Refinancing became extremely expensive and weighs on profits Default rates increasing Shrinking commission yields Income sources deplete as interest- yielding assets face default Interest rate spreads will shrink due to worsening market conditions Synergies remain largely unrealized from growth by acquisitions Management instruments not fully matured to steer organization Cost and efficiency pressure forces a financial institution to search for rash savings possibilities Adapting Retail Banking Strategy to New Conditions8 Opportunities and hot issues Restructuring and cost managementProcess management & optimization Evaluate sourcing strategy (IT & outsourcing) Construct a Shared Service CentersIndustrialized services (credit factory)Product pricing and steering by value East Europe faces capital drought (Dow Jones 05/12/2009) Provisions for bad loans had more than doubled (Economist 09/05/2009) Threats of further credit defaults (The Standard 08/10/2009) Banks have not transferred the entire increase of refinancing costs to clients (Raiffeisen 06/2009)

9. Financial Institutions must evolve from short-term cost cutting to Operational Excellence and Sustainable Cost Management Adapting Retail Banking Strategy to New Conditions9 Reorganizing and Industrializing Processes Clustering Allocation Management Distribution chain Products “Assembly line” Process Modules Optimizing ProcessesRecognizing Benefits from Changes

10. Sales & Regulatory Pressure State pushing banks to increase lending for economic purposes Need for increased sales efforts in crisis as sales opportunities shrink Changing customer behavior requires a new product mix Classical savings products must be increasingly sold (savings accounts, time deposits, etc.) Strong web presence but little customer commitment Increased government influence and regulation Efficiency in sales must increase as pressure mounts and new regulations are passed into law Adapting Retail Banking Strategy to New Conditions10 Opportunities and hot issues Lengthen net sales time & “Sales Up”Increase sales mobility and intensity Enhance customer intelligence segmentation skills Client Retention largely in local banks Meet regulatory demands Crisis in the east feeds on earnings (The Standard 08/12/2009) Foreign exchange loans have been a problem (Financial Times 09/03/2009) Deposits from the state… stricter loan granting criteria (Raiffeisen 06/2009) CEE banks are far more into web banking (Roland Berger, 12/08/2008) Increased demand for lower risk and easy-to-understand products (PresseEcho.de 26/08/2009)

11. Professional Customer Management and innovative ways to manage your sales force can make the necessary difference Adapting Retail Banking Strategy to New Conditions11 Your sales force must be appropriately energized and managed Profit-oriented segmentation must become the basis for Customer Management Relative improvement in the past year (Year 1 vs. Year 0) Best Practice Sharing Potential-Oriented Top-Down Goal Bottom Line Leaders“ = 100% Own Position in Year 1

12. Your Contact at Horváth & Partners We look forward to hearing from you 12Adapting Retail Banking Strategy to New Conditions Martin Hammerschmid Principal Competence Center Financial Services Head of Financial Services Austria and CEE Horváth & Partner GmbH Biberstraße 15 A-1010 Vienna Phone +43 1 5127508-0 Mobile+43 664 3107250 E-Mail mhammerschmid@horvath-partners.com

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