FOREIGN TRADE IN CENTRAL-EASTERN EUROPE

Speaker:

Andrew England

Head of Global Transaction Banking, CEE

Bucharest, April 5th 2011

Agenda:UniCredit in CEE

CEE’s Foreign Trade

Romania’s Foreign Trade

CEE Growth Drivers

How UniCredit can support trade business in CEE

2

No. 1 No. 1 No. 4 No. 5

No. 7

Estonia2

No. 9 No. 9

Latvia2 Russia

Bulgaria

Serbia

Romania

No. 10

Lithuania2

Croatia

No. 5

Slovakia

No. 5

No. 7

Hungary

No. 4

Czech. Rep.2

Bosnia1

Slovenia

Turkey

Mkt. position by Total Assets

Country

Ukraine

No. 1

No. 5

No 2

Poland

No. 5

Kazakhstan No. 5

CEE region*

~ € 124 bntotal assets1

~ 3,900branches1

~ 72,300employees1

~ 30mcustomers2

~ 128kcorporate clients2

~ 1.800dedicated corporate

relationship managers2

*) data as of 3Q 2010 Source: UniCredit CEE Strategic Analysis

(1) data as of 1H 2010(2) data as of YE 2009

UNICREDIT IN CENTRAL-EASTERN EUROPE

In Top 3

In Top 5

In Top 10

3

Forecast of close to 2 Trillion Euros in 2011 for CEE-17 merchandise foreign trade; after 20% drop in 2009, CEE foreign trade steadily recovering, roughly balanced between imports/exports

*CEE-17: BA, BG, CZ, BALTICS, KZ, HR, HU, PL, RO, RU,RS, SI, SK, UA, TR

SOURCE: UniCredit Group Research

CEE FOREIGN TRADE: MERCHANDISE TRADE VALUE 1999 - 2012

89

1011121314151617

CEE-17 Merchandise Foreign Trade 1999-2012F in BlnEUR

50%51%52%52%51%50%52%53%52%51%51%49%46%46%

50%49%

48%

48%49%

50%48%

47%48%

49%49%51%

54%54%

293394

523638 713

877

15721737

1432

17591968

2115

1080

1325

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Merchandise Imports, BlnEURMerchandise Exports, BlnEUR

As comparison, in 2011, for merchandise trade:

GERMANY 1.9 Trillion EUR TURKEY: 264 Bln Eur (13% of CEE-17)

ITALY: 762 BlnEUR RUSSIA: 517 BlnEUR (26% of CEE-17)

AUSTRIA: 243 BlnEURPOLAND: 276BlnEUR (14% of CEE-17)

4

38,6% 37,9% 37,9% 36,5% 36,4%

28,5% 28,9% 28,9% 29,5% 30,7%

18,5% 18,0% 16,9% 16,1% 16,1%

7,0% 7,5% 8,2% 8,9% 8,1%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2005 2006 2007 2008 2009EU-15 Asia North America Middle East South America Africa CEE17

CEE between 7-8% of world trade, with Asia and EU-15 expected to grow significantly

SOURCE: WTO; UniCredit Group CEE/GTB Coordination

CEE17

ASIA

EU15

N.AMERICA

OTHERS

CEE FOREIGN TRADE: SHARE IN WORLD TRADE 2005 - 2009

5

Fairly stable industry structure, with manufacturing close to half, confirms CEE’s growing role as a manufacturing region

CEE FOREIGN TRADE: INDUSTRY STRUCTURE 2005 – 2015F

CEE-17*: Top 5 Industry Sectors 2005-2015E by share in Foreign Trade

46% 46% 46% 46% 47% 47% 47% 47% 47% 47% 47%

8% 8% 8% 8% 7% 7% 7% 8% 8% 8% 8%7% 6% 6% 7% 5% 6% 6% 7% 7% 7% 7%5% 5% 5% 5% 5% 5% 5% 5% 5% 5% 5%5% 5% 6% 6% 6% 6% 6% 6% 6% 6% 6%

29% 29% 29% 29% 29% 28% 28% 28% 27% 27% 27%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Other

Motor Vehicles

Chemicals

Mining

Basic Metals

Manufacturing

*CEE-17: BA, BG, CZ, BALTICS, KZ, HR, HU, PL, RO, RU,RS, SI, SK, UA, TR

SOURCE: UniCredit Group CEE/GTB Coordination

6

CEE-9*: TOP-10 TRADE PARTNERS 2010

*CEE-9: BG, CZ, HR, HU, PL, RO, RU, SK, TR

SOURCE: UniCredit Group CEE/GTB Coordination

Total “merchandise” trade of CEE-9 countries in 2010 was roughly 1.5 Trillion EUR, of which close to half (~47%) was made with the top-10 partners; Germany is by far the largest destination and source for both export/import.

CEE-9: TOP 10 EXPORT DESTINATIONS (BlnEUR, %, EOY 2010)

17 16 14183538

23 18

126

14

23.5%

7.0% 6.5%4.3% 3.4% 3.4% 3.1% 3.1% 2.6% 2.5%

0

20

40

60

80

100

120

140

DE IT FR UK CN PL SK RU AT CZ

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

CEE-9: TOP 10 IMPORT SOURCES (BlnEUR,%, EOY 2010)

16 14

117

414861 54

23 1420

18%

10%8% 8%

6%

4% 3% 3% 2% 2%

0

20

40

60

80

100

120

140

DE CN RU IT NL PL US FR KR TR

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

7

Bosnia

Russia

UkraineTurkey

SloveniaSlovakia

Romania

Poland

LT

LVKazakhstan

Hungary

EE

Czech Republic

CroatiaBulgaria

0%

5%

10%

15%

20%

25%

30%

35%

0% 5% 10% 15% 20%

Italian export shares (%)

Ge

rma

n e

xp

ort

sh

are

s (

%)

South Eastern Europe

Central Europe

Germany and Italy remain the main trading partners of CEE

CEE FOREIGN TRADE: GERMANY AND ITALY AS DRIVERS

SOURCE: WTO; UniCredit Group Research

TO

GE

RM

AN

Y

to ITALY

8

ROMANIA: FOREIGN TRADE VALUE 1999 – 2012FROMANIA’s merchandise foreign trade followed the same trend as the rest of CEE; largest growing markets are Turkey for exports (+69% yoy 2010) and Russia for imports (+40% yoy 2010)

SOURCE: UniCredit Group CEE/GTB Coordination

ROMANIA Merchandise Foreign Trade 1999-2012F in BlnEUR

46%46%46%45%39%38%41%43%44%44%46%44%46%47%

54%54%

54%

55%

61%62%

59%57%

56%56%54%56%54%

53%

1724

29 32 3543

7785

65

79

91

105

52

63

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Merchandise Imports, BlnEURMerchandise Exports, BlnEUR

9

ROMANIA: TOP-10 TRADE PARTNERS 2010

SOURCE: INSSE, UniCredit Group CEE/GTB Coordination

ROMANIA: TOP 10 EXPORT DESTINATIONS ( BlnEUR, %, EOY 2010)

1.0 0.8 0.7 0.7

4.9

1.31.8

3.7

2.3

1.0

18%

14%

8%7%

5% 4% 4% 3% 3% 3%

0

1

2

3

4

5

6

DE IT FR TR HU UK BG ES PL NL

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

ROMANIA: TOP 10 IMPORT SOURCES ( BlnEUR, %, EOY 2010)

1.31.41.21.5

2.9

3.9

2.0 1.9

5.7

1.2

17%

12%

8%

6% 6% 5% 4% 4% 4% 3%

0

1

2

3

4

5

6

DE IT HU FR CN RU AT PL TR NL

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Total “merchandise” trade of ROMANIA in 2010 was roughly 80 BlnEUR, of which ~68% was made with the top-10 partners; Germany is here too the largest destination and source for both export/import

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ROMANIA: FOREIGN TRADE STRUCTURE 2010Machinery continued to drive ROMANIA’s foreign trade; transport and textiles lead the export, while chemicals registered the highest %-age deficit.

27%

15%12% 12%

10% 10% 8%5%

29%

7%9%

11%8%

17%

8%11%

0%

5%

10%

15%

20%

25%

30%

Machinery Transport Textiles Metallurgical Other Chemicals Agro-food Mineral prod.

EXPORTS FOB 2010 IMPORTS FOB 2010

SOURCE: INSSE, UniCredit Group CEE/GTB Coordination

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FOREIGN TRADE CAGR '99-'09

8%

9%

9%

10%

10%

10%

12%

12%

12%

13%

13%

14%

14%

14%

14%

16%

17%

21%

0%5%10%15%20%25%

HR

EE

SI

BA

HU

TR

LV

UA

PL

CZ

CEE17

BG

LT

RS

RU

SK

RO

KZ

Before the crisis, although a relative middle place in overall regional trade (8 th), Romania had the 2nd fastest growth in the CEE, with an annual average of 17% versus 13% for the region

SOURCE: UniCredit Group CEE/GTB Coordination

CEE-17: BA, BG, CZ, BALTICS, KZ, HR, HU, PL, RO, RU,RS, SI, SK, UA, TR

SHARE IN TOTAL REGION FOREIGN TRADE '99-'09

1%

1%

1%

1%

2%

2%

2%

3%

3%

4%

5%

5%

9%

10%

13%

13%

25%

0% 5% 10% 15% 20% 25% 30%

BA

RS

LV

EE

LT

BG

HR

SI

KZ

RO

SK

UA

HU

CZ

TR

PL

RU

ROMANIA: SHARE IN CEE TRADE 1999 - 2009

12

ROMANIA

2009 2010E

GDP (growth, YoY) -7.1% -1.3%

Private Consumption (growth, YoY)

-9.2% -1.0%

Export as % of GDP 23% 23%

TURKEY: internal demand

2009 2010E

GDP (growth, YoY) -4.7 +8.2%

Private Consumption (growth, YoY)

-2.2 +7.1%

Export as % of GDP 18% 20%

POLAND: internal & trade

2009 2010E

GDP (growth, YoY) +1.7% +3.8%

Private Consumption (growth, YoY)

+2.1% +3.1%

Export as % of GDP 33% 35%

SLOVAKIA: trade

2009 2010E

GDP (growth, YoY) -4.8% +4%

Private Consumption (growth, YoY)

+0.2% +0.3%

Export as % of GDP 70% 74%

CEE GROWTH: TRADE AND PRIVATE CONSUMPTION AS DRIVERS

EXPORT % in GDP

PR

IVA

TE

CO

NS

UM

PT

ION

SOURCE: UniCredit Group CEE/GTB Coordination

Export intensity and private consumption were key in driving growth across the CEE.

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HOW CAN UNICREDIT SUPPORT GROWTH? BY ENABLING FLOWS

*SWIFT statistics Feb-2011

**MENA: Middle-East Nord-Africa

*** Sep. 2010

►STRONG TRANSACTION BANK FRANCHISE IN CEE: 12%ms* in documentary credit

Top 5 bank in main CEE export countries (Czech Republic, Slovakia, Hungary, Turkey)

Number 2 in Poland after state-owned no.1

More than 2000 transactions specialists and 4.000+ corresponding banks

Experience of over 400.000 corporate customers worldwide

►INTERMEDIARY FOR MENA** FLOWS TO CEE: 13%ms*** in documentary credit

Turkey as a spear-head for region's operations

Expertise and strong relationship with main exporters/importers

►EBRD CREDITS TO SMEs IN CEE

Over 430 MEUR to boost flows to real economy in 7 CEE countries ****

**** BG, HR, RS, BA, UA, KZ, KG

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HOW CAN UNICREDIT SUPPORT GROWTH? BY DEVELOPING SOLUTIONS TO ADVANCE TRADE

►SCF – SUPPLY CHAIN FINANCING PLATFORM

Buyer centric financing model (post shipment phase of the trade finance cycle)

Innovative approach for working capital financing without classical loan granting process

Involves sell of receivables by the supplier, which in turn has the chance to obtain financing at favorable conditions thanks to the generally better rating of the Buyer

►SPE – SINGLE POINT OF ENTRY FOR L/Gs AND L/Cs

Single entry point to send Letters of Credit (UC SEP L/C) and requests to issue guarantees (UC SEP L/G)

Beneficiaries domiciled in Europe (all countries where UniCredit is present – CEE plus Austria, Germany and Italy).

►Renminbi (RMB) Settlement Program for trade with China

Improved Supplier Relationship: ssimple & faster tax rebates processes for Chinese suppliers and reduced costs in the supply chain

Pricing Transparency: increase transparency as pricing of goods without FX risks and costs mark-up

Widening Supplier Base: access to foreign currency in China is limited, RMB settlement can be used to access a wider supplier base and to optimize payment terms

15

KEY DETERMINANTS IN GROWING TRADE

►Market proximity relevant for expanding trade;

►Close relationship with bank and operating partner to access new markets;

►Strong local support to invest in value chain linked to manufacturing output;

►Relevant governmental support to manage medium term trade investments

(ECAs);

►Tools to manage liquidity, counterparty and country risk;

►Ability to monetize trade receivables.