“Capturing the value of Consumer Credit in growing Retail Banking”

Silvio Barzi – Clarima CEO

Goldman Sachs Consumer Finance ConferenceLondon - October, 16th 2003

2

AGENDA

Importance of Consumer Credit for UCI’s strategic goals

Attractive opportunities in Consumer Credit

Results to-date & conclusions

UniCredito’s answer: Clarima

3

8.3%

CUSTOMER DRIVEN ORGANISATIONAL MODEL

Pekao

New Europe division

Private & AM division

Pioneer

Xelion

Corporate division

UBM

BMC

Locat

Clarima

TradingLab

RETAIL DIVISION

Zagrebacka

KFS

Bulbank

UniBanka

UC Romania

Zivnostenska

45.7% 30.9% 15.1%

Weight on 1H03 Group revenues

Employees ItalyNew Europe

70,35640,22830,128

Branches ItalyNew Europe

4,5983,2481,350

UniCredit Banca per la casa

4

THE RETAIL DIVISION COVERS THE ITALIAN MARKET THROUGH A NUMBER OF PRODUCT & CHANNEL SPECIALISTS

Retail Division

Retail investment

products through

captive and non captive

networks

Consumer credit

products through direct

channels, partners and

captive networks

Banking products for households and small business through

proprietary branch network

Mortgages and home related

products through organised

intermediaries (real estate

agents, insurers…)

per la casa

5

TAILORED STRATEGIES FOR DIFFERENT CUSTOMER SEGMENTS, CONSUMER CREDIT KEY FOR RETAIL BUSINESS

High importance

Low importanceSources of revenue growth

Existing customers

New customers

EfficiencyRisk

mgmt

Corporate business

Private Banking business

New Europe

Retail business

High growth / High value businesses

Consumer Credit

Retail mortgages

Small Business

6

AGENDA

Importance of Consumer Credit for UCI’s strategic goals

Attractive opportunities in Consumer Credit

Results to-date & conclusions

UniCredito’s answer: Clarima

7

CONSUMER CREDIT: LOW PENETRATION IN ITALY …

9.6 8.0

14.310.8

3.6

E F UK D I

As % of GDP

16.5 14.722.5 18.9

6.1

As% of private consumption

15.1 12.420.6 16.4

4.8

As % of disposable income

E F UK D I

E F UK D I

8

… BUT A FAST GROWING BUSINESS

20

1996

32

1999

37

2000

41

2001

44

2002

KEY DATATOTAL CONSUMER CREDIT MARKET

(Euro bn)

REVOLVING CREDIT

INSTALLMENTLOANS

Growth: +33%

Revenues: 0.3

Growth: +16%

Revenues: 2.4

9

MAJOR SHIFTS AMONG PRODUCTS EXPECTED IN THE LONGER TERM

ITALY – EXPECTED EVOLUTION OF STOCKS (Euro bn and %)

Revolving

Market (100%) =

CAGR 2002-2006E

32.2%

23.3%

13.3%

13.2%

Direct Loans

POS Financing

Automotive

16.5%

Other

60,7%

14,7%

14,4%

5,5%

55,0%

16,1%

17,2%

6.7%

49.0%

14,4%

21,6%

11,1%

2001 2002

82

2006E

44 41

4,7% 5,0% 3,9% 9.5%

10

RORAC PER BUSINESS (2001, %, rates and new loans)

ATTRACTIVE PROFITABILITY IN CARDS

Loan growth2001 vs 2000 (%)

RORAC (%)

-10

0

10

20

30

40

50

60

-50 -30 -10 10 30 50 70

Industrial Vehicles

Employer Guaranteed

Motorcycles

Personal

Second-hand cars

Appliances

Credit Cards

New Cars

0

11

Lack of product innovation

NON AFFLUENT MARKET PRESENTS UNIQUE OPPORTUNITIES …

Limited customer acquisitionactivity

No tailored operations for masscustomisation

Limited marketing sophistication

No specific segment attention

MARKET CONDITIONS

Clients Margins

Affluent

Non affluent

24 mln 27 bn Euro

15%

85%

75%

25%

12

… AND BANKS HAVE BEEN LOSING MARKET SHARE

2000

41%

2002

38%

37

TOTAL CONSUMER CREDIT MARKET (Euro bn)

1996

54%

2044

Banks market share

13

NO ACCEPTABLE ANSWER TO A MARKET IN NEED OF FOCUS AND SEGMENTATION

TRADITIONAL BANKS

Brick and mortar legacy

Focus on managed assets

No innovation

No mass service culture

FINANCE COMPANIES

POS financing primary product

Limited customer loyalty

Limited cross selling

BancoPosta, not replicable

Foreign entrants, primarily monoliners

NEW PLAYERS

14

FRAGMENTED MARKET WITH TRADITIONAL “STAND ALONE” MODEL …

69,9% 89,5%

Findomestic

DB Prestitempo

Finemiro

Ducato

COMIT

Agos Itafinco

Compass

Citifin

FidItalia

Finconsumo

Others

ITALY – MARKET SHARES BY BUSINESS LINELoans granted in 2001, Euro mln & %

770

408

358

323

276

252

197

186

108

87

287

POS Financing (incl. Automotive) Personal Loans

3,139

1,909

1,571

1,354

1,222

1,007

924

907

898

833

Fiat Fidis

Findomestic

DB Prestitempo

FidItalia

Agos Itafinco

Compass

Finemiro

Citifin

Finconsumo

Ducato

Others 4.961

Cumulative market share first 10 players

15

… AND THE MARKET ENVIRONMENT IS QUICKLY CHANGING

Italian Savings Rate over time

0%

5%

10%

15%

20%

25%

1980-1985 1986-1991 1992-1997

DEMAND SIDE SUPPLY SIDE

“The new card by AmEx and Enel. … “

New revolving card from AEM Milano and Compass called AEM Visa, launched at early 2001

Desideria from Banca di Roma launched at the end of 2000 (“first revolving card with flexible payments for Italians”). EGO from Credem launched at mid 2001 (also for clients without an account at Credem)

New revolving co-branded cards (ex. Findomestic-Mediaworld, … )

“Citibank Card will invade Italy. … 500.000 cards issued before 2004”

“Barclaycard is to launch in Italy (early 2002) as part of an aggressive plan to expand in Europe”

16

AGENDA

Importance of Consumer Credit for UCI’s strategic goals

Attractive opportunities in Consumer Credit

Results to-date & conclusions

UniCredito’s answer: Clarima

17

A MAJOR INNOVATION IN PFS …

Focus on non affluent segment

Customer acquisition and cross selling through variety of channels

Low cost non traditional infrastructure

Simple, innovative, consumer oriented products

Lead with credit cards, cross-sell next

CLARIMA’S CONCEPT

18

... CAPTURING A UNIQUE OPPORTUNITY IN CREDIT CARDS …

Majority of card accounts deferred debit/charge

No flexible revolving

No price differentiation based on credit risk

No sophisticated micro marketing

Static products

WHAT THE MARKET OFFERS

No up and cross selling

Limited push by traditional banks

19

Real estate agents (2500)

… LEVERAGING SPECIALISATION AND MARKET POWER OF THE LARGEST DISTRIBUTION NETWORK IN ITALY

Retail Division

Partners(25)

Third parties

Stock exchange

Leads Leads

per la casa

Branches(2750)

20

STRONG INTEGRATION ACROSS RETAIL CHANNELS FOR COMMERCIAL ACTIONS …

Partnership Direct Pos/ Merchants

Specialized Shops

UCB Branches

Strong focus

Medium focus

Acquisition

Cross selling

COMMERCIAL ACTIONS

CLARIMA CHANNELS BANK

TRADITIONAL FINANCE COMPANY

INNOVATIVE CHANNELS

TRADITIONAL BANK

21

… SINCE DIFFERENT PRODUCTS REQUIRE DIFFERENT CHANNELS

Partnership Direct Pos/ Merchants

Specialized Shops

UCB Branches

PRODUCTS

Revolving cards

Pos financing

CLARIMA CHANNELS BANK

Personal loans

Credit insurance

Strong focus

Medium focus

22

Lower customer acquisition cost

Better knowledge of the customer, lower risk

Enhanced customer relationship and cross selling

Piggy backing on partner’s brand

Strengthening of customer loyalty

Reducing administrative costs

Adding new revenue stream

Strengthening of core product offering

Lowering joint customer acquisition cost

ACQUIRING CUSTOMERS THROUGH INTIMATE CO-MARKETING PARTNERSHIPS

ADVANTAGE FOR PARTNER ADVANTAGE FOR CLARIMA

Co-MarketingPartnership

23

DIRECT IS PROVING PROMISING

REVOLVING CARDS PENETRATION

Market Clarima Non-Direct

Clarima Direct

7%

50%

83%

24

5 - 10%

RESULTS ABOVE EXPECTATIONS FROM PARTNERSHIPS AND DIRECT

PR

OF

ITA

BIL

ITY

D

RIV

ER

S

Italian avg. Clarima cards

% Revolving usage

# Year transactions

Avg. spending/Transaction

Avg. balance

> 70 Integrated marketing and risk strategy

25 - 30

90 Euro

900 Euro

81 Euro

1,350 Euro

60%

25

UNICREDIT BANCA CAPTIVE MARKET OPPORTUNITIES

With pay later cards

Withoutcards

5 1

4

Total target customer base

Cross sell revolving

Cross sell other products Sell revolving

Cross sell personal loans

(Mln)UCB RETAIL CUSTOMERS

26

EXCELLENT RESULTS ON CAPTIVE MARKET

Redemption DIRECT

Public ‘02 Captive ‘02

x 6.6

Captive ‘03

Revolving Penetration (%)

Revolving

Pay later

83%

Public ‘02

100%

71%

Captive ‘02 UCB

DIRECT “CAPTIVE” RESULTS

Higher redemption rates

70% lower acquisition costs

50% to 70% lower credit risk

Increase in competitive pressure

REASONS FOR “CAPTIVE”

5%

27

AGENDA

Importance of Consumer Credit for UCI’s strategic goals

Attractive opportunities in Consumer Credit

Results to-date & conclusions

UniCredito’s answer: Clarima

28

CLARIMA: RESULTS TO DATE

25 Partnerships

Direct channel fully operational

~150,000 cards/new customers in 18 months

2,750 bank branches fully operational for personal loans

Extensive testing of cross selling/upselling on captive customers

POS financing and specialized stores to start operations in 1H04

Significant investments in credit scoring systems

29

STRONG CONTRIBUTION OF CONSUMER LENDING TO THE DIVISION’S GROWTH …

3 MAIN DISTRIBUTION CHANNELSPARTNERSHIPS AND DIRECT MARKETING UCI Banca SPECIALISED

FINANCIAL SHOPS

Key goals:Key goals: Key goals:

~800,000 net acquisitions of customers from 2003 to 2006

Revolving cards / Total cards ratio higher than 50%

Clarima as the “consumer credit specialist” of the Group

Full commercial integration with UCI Banca

Maximisation of UCI Banca customers potential for credit cards and personal loans

Dedicated and alternative distribution traditionally strong in Italy

Market share evolution

2002

2006

~7.5%

> 9%

+ 20%

LEVERAGING ON:

Focus on “credit at point of sale”

Key figures (as of June 2003)

~3.8 bn consumer loans (+10% vs year-end 2002)

~150,000 clients for Clarima

30

… THANKS TO TAILORED STRATEGIES FOR EACH DISTRIBUTION CHANNEL

STRATEGIC GUIDELINES

PARTNERSHIPS AND DIRECT MARKETING

UNICREDIT BANCA

SPECIALISED FINANCIAL SHOPS

New selected partners strong for distribution capability, customer base and brand

Low acquisition costs per client thanks to high integration of product/model with the partner

Share of “revolving clients” on total direct channel new clients >80%

Leverage on cross-selling

Increase of penetration of cards on the customer base

Conversion of UCI Banca “optional” cards into revolving cards

Increased share of wallet of clients (from 18% in 2002 to 31% in 2006) for personal loans

Opening of 9 shops in selected high potential cities in January 2004

Other 15-20 openings starting from 2005

31

IN SUMMARY: OUR BELIEFS …

UniCredit will leverage its superior organisational model and business focus to gain market share on existing and new clients and become the preferred bank for Italian retail customers

The Italian retail market will see growing competition for market share, key driver of future top line growth

Double digit operating margin growth will be driven by consistent execution of a growth plan, leveraging skills acquired over the last 3-5 years at all levels of the organisation

Clarima is a key contributor of this growth by focusing on consumer credit …

… with a business model difficult to replicate