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Economic and Financial perspectives Volksbank
Romania
Bucharest 17th of May 2007
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General conditions and assumptions
Assumption Further substantial growth in all
sectors
General Market Analyze After Romanias
accession to EU the economic and financial
perspectives of 2007 are marked by the Romanias
priority to accomplish the integration programs
within the structures of EU We expect a
favorable period for Romania based on strong
disinflation process, substantial GDP growth,
improvement of financial discipline, increasing
of labour productivity.
Economic outlook
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General conditions and assumptions
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Economic outlook

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• increasing average salaries from approx 250 to
  600 euro until 2011
• increasing the no. of employed people - active
  population 8.9 mil persons out of which 4.8 mil
  employed persons (estimation - 5,2 mil in 2011)
• upward trend of the foreign investments in
  Romania (currently approx. 9 bln euro) Romania
  is in top 20 of foreign investments in the world
• strong development of Real Estate market
• -Only in Bucharest there is a request of
  approx.60,000 houses-Currently there are 15,000
  apartments in construction. In average in the
  last 3 year the prices of apartments were
  increased 3 times.
• -UE entrance determined also the acquisition of
  agriculture land
• -800 mil euro investments on the real estate
  market in 2006 (15 increase compared with 2005)
• -750,000 sqm. offices spaces developed in 2006
  (25 increase compared with 2005)-still big
  demand for offices building.
• -6 bln. euro already planned for residential
  projects in the next 4-5 years

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• Strong development of Microentreprises and SME
  sector
• -There is a Governmental Program 2004 - 2008 to
  support the development of this sector.
• -99,5 out of total no. of companies in Romania-
  Micros and SMEs
• -on growing sectors constructions, IT, tourism,
  transportation, services, agriculture. The
  implementation of UE regulations will create new
  business opportunities in the environmental
  monitoring and protection areas.
• -stil not very developed market 914 comp at 1000
  inhabitants)
• -currently there are approx. 10 banks focusing on
  this sector
• -Micro and SMEs the key factor for economic
  increase (till 2013 it is expected that this
  sector will produce approx 80 of GDP. In 2013
  the market will be min 4 times bigger compared
  with 2004)
• -EU is supporting the developing on this sector
  via structural programs

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• Political key factors
• the Government is very involved in supporting
  the development of Microentreprises and SME s
  sectors.
• There are a lot of programs dedicated to support
  the entrepreneurs.
• the existence of economic and social standards
  required by Romanians accession to EU and NATO
• transparency of the political decision making
  process.
• decreasing of corruption
• Environmental key factors
• the implementation of UE regulations creates new
  business opportunities in the environmental
  monitoring and protection areas.
• significant growth-potential exists-in Tourism,
  Organic farming products is an emerging
  opportunity as well
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• Technological key factors
• modernization of the old equipments, machines,
  cars, etc.
• increasing the computer users rate (currently
  there are over 6 million internet users)
• larger spread of IT C
• very well trained IT C staff.

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Banking market The robust growth of the
Romanian banking system continued in 2006
bringing the share of banking assets in GDP to
around 50. Given the EU integration, 2006
brought about significant development, with
intensified MA activity and subsequent changes
in the top ten ranking.
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• Banking market
• there are approx 42 banks on the market -VBR in
  top 11 of the banks
• very dynamic market (forecast)
• banking credit market increase in (VBR over the
  market average)

VBR
Market
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• BUBOR - descreasing to euro level until 2011
• min reserve - cost decreasing until 2009 to EU
  level
• NBR - liberalizing market conditions
• The mortgage loan market has from 2004 to 2006 a
  annualy average increase of 60
• Active cards end 2006 - 9,820,000 (25 increase
  compared with 2005). The market is shared between
  VISA and Mastrecard. 90 are debit cards and only
  10 credit cards.

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Assumption Increasing competition After the
entrance in UE 26 additional banks will enter on
the market Millennium, JP Morgan, Dexia, The
Royal Bank of Scotland, Lombard Odier Darier
Hentsch Private Bank Limited, Credit Suisse
Luxemburg), La Caixa, etc
                                    
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KEY BUSINESS DRIVERS
1 - Real Estate Market
2 - Micro and SMEs sector
3 - Corporate sector
4 - Municipalities sector
5 - Customer purchase habits 6 - Liberalization
of the Banking market conditions
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• RISK MANAGEMENT
• Improve data quality - develop and run reports
  to detect potential errors in the data entered in
  the systems
• Improve the standardization of the reports -
  Developing and maintaining a documentation of
  critical reports to top management and the group.
• Improve the rating systems
• - Improve rating systems based on local data
• - Incorporate the knowledge of local experts
  in rating development
• Basel II implementation
• Credit Risk
• - Integrate Basel II measures in loan pricing
  (long term objective)
• - Support the eventual implementation of
  Advanced IRB approach
• Operational Risk
• - Support the eventual implementation of the
  Advanced Measurement Approach
• - Improve the collection of operational losses
• - Complete the documentation of essential bank
  processes and the identification of existing
  risks and controls
• Market Risk
• - Developing and maintaining systems for
  appropriate risk monitoring if the trading book
  amounts become significant
• - Develop FX risk VaR if the open currency
  position becomes significant