BRE Bank Group Results Q1-2 2009 Sound foundations for sustainable growth Mariusz Grendowicz, President of BRE Bank Presentation for the media 6 August 2009 1
Most important events in the quarter I mpact of high provisions on risk 1 - we turn over a new leaf BRE Bank is a profitable business 2 • Record-high result from recurring operations I mproved efficiency in difficult times • Further drop in C/ I ratio 3 Reliable partner for the market • Deposits grow four times faster than the market • Over 3 million retail clients 4 2
Agenda Economic conditions Risk management Summary of the BRE Bank Group results in Q1-2 2009 BREnova in a nutshell Analysis of consolidated financial results Appendix Detailed results of business lines in Q1-2 2009 Additional information on selected financial data 3
Agenda Economic conditions Risk management Summary of the BRE Bank Group results in Q1-2 2009 BREnova in a nutshell Analysis of consolidated financial results Appendix Detailed results of business lines in Q1-2 2009 Additional information on selected financial data 4
Business Environment Global slowdown considerably decelerates Polish economic growth… GDP in 2009 will grow by 1% I nflation should ease by the end of the year 8 7 GDP growth 6,2 6,8 CPI ,NBP in Poland 6 reference 6 4,9 (% YoY) rate 4 5 3,6 2,2 and contribution 1,0 2 4 of main categories CPI 0 3 target to GDP growth -2 2 band (pp.) -4 1 2005 2006 2007 2008 2009f 2010f 0 Net exports Private consumption Q1'07 Q4'07 Q3'08 Q2'09 Q1'10 Q4'10 Investments Inventories NBP reference rate, % GDP Serie3 CPI, %y/y Source: StatOffice, BRE forecast Unfortunately labor market NPLs ratio so far has been low will deteriorate further 123 27,5 NPLs 25,6 Employment (banking and wages 115 Unemployment rate, % (corporate sector), sector), 13,9 % YoY % of total 108 12,1 loans (EoP) and 14,1 10,9 13,1 9,9 unemployment 100 9,6 9,4 rate* (pp) 9,8 8,2 7,1 7,1 93 7,0 5,6 3,5 4,2 85 '06 '07 '08 '09f '10f 01'08 06'08 11'08 04'09 09'09 02'10 07'10 12'10 EU27 Poland 2002 2003 2008 06'09 Wage fund, nominal, %y/y * Eurostat def (avg in period), Wage fund, real terms, %y/y f - EC forecasts Enterprises Households total S i 3 5
Business Environment Bottoming-out Loans dynamics will slow down … while corporate deposits in ‘09 and ‘10… will shrink only this year 30 Loans, Deposits, 70 % YoY % YoY 20 volume change 50 volume change 10 30 0 10 -10 -10 -20 01'08 06'08 11'08 04'09 09'09 02'10 07'10 12'10 01'08 06'08 11'08 04'09 09'09 02'10 07'10 12'10 Household (total) Mortgages Household Corporate Corporate Serie4 S 3 S S S 6 Zloty seems to be most undervalued As a result deposit gap narrowed currency in the region 120% 20 Deposit gap CEE 130 in the banking currencies 115% EUR/PLN sector vs. EUR, 120 110% -20 EUR/CZK (loans and deposits index EUR/HUF Volumes for both Jan’08= 100 105% -40 110 non-financial +29% and financial 100% -60 100 sector) ` +17% 95% -80 +11% 90 90% -100 80 06’09 01'08 04'08 07'08 10'08 01'09 04'09 01'08 04'08 07'08 10'08 01'09 04'09 07'09 Loans/deposits ratio (l.s.) Deposits minus loans, bn PLN (r.s.) 6
Agenda Economic conditions Risk management Summary of the BRE Bank Group results in Q1-2 2009 BREnova in a nutshell Analysis of consolidated financial results Appendix Detailed results of business lines in Q1-2 2009 Additional information on selected financial data 7
Risk management Structure of provisions for loans in Q2 2009 Provisions - deteriorating market conditions, problems with options and cash loans for external mBank clients � Substantial part of provisions is of a Structure of provisions for loans in the BRE Bank Group in Q2 2009 one-off type (quarterly increase in provisions for loans according to segments vs the previous quarter, PLN million) � Factors influencing the growth in provisions for loans in Q2 2009: 13,0 48,4 - Provisions for credit receivables from 167,4 clients who have liabilities arising 130,5 from derivative transactions - Higher provisions for non-mortgage 238,8 mBank loans - Increase in provisions for BRE 82,1 308,3 Leasing clients 127,9 � NPL ratio at BRE Bank (according to Spó ł ki zale ź ne I kw./09 II kw./09 Wp ł yw transakcji Korporacje i Rynki Bankowo ść Detaliczna pochodnych PSR) stands at 4.8% , Finansowe below the market average (6.3% ) Corporations and Financial Markets Retail Banking 8
Risk management Provisions for loans in Q1-Q2 2009: Corporations and Financial Markets We give a helping hand to those clients who ran into troubles with FX options � As the restructuring process, scheduled to end in Q3 � Total income at PLN 215.3 million in Q2 2009 2009, is in progress we expect that the level of set up (a total of: PLN 285.5 million in H1 2009) provisions will gradually diminish � Due to a downturn in the general economic situation � BRE Bank treats the problems of clients with we observe rating migration (a trend that has been persisting for several quarters) utmost care. We apply innnovative solutions of debt restructuring. The press covered e.g. the case of Feroco and Dudy. Roczna stopa niewyp ł acalno ś ci Provisions for corporate loans by quarters (PLN million) I nfluence of derivative transactions on PD of corporate clients 3,5% 436.1 3,0% 90,9 308.3 2,5% 59,7 56,4 2,0% 36,6 1,5% 127.9 285,5 34,6 1,0% 215,3 23,1 PD with defaults of derivatives 0,5% 70,2 PD without defaults of derivatives 0,0% Q1/09 Q2/09 H1/09 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Provisions related to options Leasing Standard provisions 9
Risk management Provisions for loans in Q1-Q2 2009: Retail Banking Higher provisions High and stable quality of caused by the mortgage loan portfolio the non-mortgage portfolio � Quality of the mortgage loan portfolio is much Portfolio of cash loans at mBank: higher than in the peer group � Product sale ended in May � We expect a slight worsening in the portfolio � Delayed influence on the quality of portfolio quality, without significant influence on the of the non-morgage loans and the level of provisions level of provisions � Expected gradual fall in provisions in 2009 . � The NPL of mortgage loans is at 0.43% The remaining part of the non-mortgage portfolio: 212.6 � does not depart from the acceptable risk levels 3,0 for such a type of exposure 130.5 126,4 82.1 � is within the lower market ranges 83,9 6,6 42,5 83,2 50,2 33,0 -3,6 Q1/09 Q2/09 H1/09 Provisions for retail loans by quarters (PLN million) non mortage loans cash loans mortage loans 10
Agenda Economic conditions Risk management Summary of the BRE Bank Group results in Q1-Q2 2009. BREnova in a nutshell Analysis of consolidated financial results Appendix Detailed Results of business lines in Q1-2 2009 Additional Information on Selected Financial Data 11
Summary of Q1 - Q2 2009 at the BRE Bank Group Profitability of operations PLN + 16.2 6.2 PLN + 1 Net result for H1 2009 Net result for H1 2009 million million Net result for H2 2009 PLN - -61.6 million 61.6 million Net result for H2 2009 PLN income for Q2 2009 for Q2 2009 I nterest income PLN 431.5 million I nterest PLN 431.5 million income for Q2 2009 for Q2 2009 Commission income PLN 158.1 million Commission PLN 158.1 million for Q2 2009 Costs for Q2 2009 PLN 363.2 63.2 million million Costs PLN 3 Cost/ I ncome (C/ I )* Cost/ I ncome (C/ I )* 52 52. .1 % 1 % Capital adequacy ratio (CAR) 11. .08 % 08 % Capital adequacy ratio (CAR) 11 12
Summary of Q1 - Q2 2009 at the BRE Bank Group Business development: Corporate Clients and Institutions Corporate business – higher income Revenues � Growth in revenues (before costs, excluding LLP,PLN million) as a result of rising margins for the +9.9% products that involve risk despite lower revenues Valuation from the sale of financial instruments of derivatives* and falling interest rates 296,5 269,9 � Higher interest income thanks to an increase in the interest margin I kw./ 09 I I kw./ 09 � Higher commissions and fees I nterest income Commission and fees income (PLN million) (PLN million) income resulting from the growth in credit commissions +1 9.0% +1 1 .0% and the commissions obtained from thre products Cash Management 164,3 102,2 92,1 138,1 Q1/ 09 Q2/ 09 Q1/ 09 Q2/ 09 *One-off impact of the valuation of derivatives (PLM -24.5 million) 13
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