HANSABANK Q1 2005

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HANSABANKQ1 2005
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I Overview of the RegionII Strategies
III Financial ReviewIV Growth opportunities
TABLE OF CONTENTS
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THE REGION
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OVERVIEW OF THE REGION Ratings
Moodys Fitch SP Estonia A1 A A- Latvia A
2 A- A- Lithuania A3 A- A- Hansabank
senior debt A1 A short-term P1 F1
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OVERVIEW OF THE REGION Macro highlights
GDP growth CPI CA/GDP per
cent 04 05F 06F 04 05F 06F 04 05F 06F Estonia 6.
2 5.9 6.0 3.0 3.3 2.7 -12.6 -10.2 -9.0 Latvia 8.5
7.3 6.8 6.2 5.5 4.1 -12.3 -11.9 -10.3 Lithuania
6.7 6.8 6.5 1.2 3.2 3.0 -7.2 -8.0 -8.5
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OVERVIEW OF THE REGION Market size
(EUR bln, 12 04) Deposits Loans GDP per cap.
(eur) Estonia 4.1 5.7 8.9 6,600 Latvia 7.3
6.3 11.0 4,700 Lithuania 5.4 6.2 17.9 5,20
0 Baltics 16.8 18.2 37.8 Total population
(mil) 7.4 Including leasing
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OVERVIEW OF THE REGION The fastest growing region
in Europe

• Growth supported by
• EU
• FDI
• Structural funds
• Cheaper loan capital
• Growing Russian economy
• Export to Russia
• Transit through the Baltic ports

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OVERVIEW OF THE REGION Cultural differences
Source Research by Berlin Centre of Social
Studies and Dublin Institute of Economic and
Social Studies
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OVERVIEW OF THE BANK Hansabank in the Baltics,
March 2005
Hansa in the Baltics
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OVERVIEW OF THE BANK Market shares (lending),
March 2005
Estonia
Latvia
7.0 bln
6.1 bln
Lithuania
6.5 bln
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OVERVIEW OF THE BANK Baltic market share, March
2005
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STRATEGIES AND FINANCIAL TARGETS
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STRATEGIES AND FINANCIAL TARGETS Mission
statement and strategies

• Our mission is to continuously increase the value
  of our company. By learning our customers needs,
  we can offer them the most suitable financial
  solutions, thus saving their time and making
  their everyday lives better. We believe that the
  high commitment of our employees guarantees the
  best performance.
• Our goal is
• To become a benchmark of modern banking in Europe
  by year 2007.
• For us, modern means the following
• Highest customer satisfaction
• All products accessible from one place
• High usage of self-service channels
• Efficient back office

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STRATEGIES AND FINANCIAL TARGETS Business
philosophy

• Who is our customer?
• A universal bank in the Baltic countries, niche
  segments in Russia
• Primary focus on medium-sized companies and
  affluent private customers
• Our strategic priorities are
• Proactive customer relationship management
• Efficient distribution
• Common technology and products
• Excellent crediting know-how and skills
• Clear management principles

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FINANCIAL REVIEW Medium-term financial targets
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FINANCIAL REVIEW
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FINANCIAL REVIEWNet profit growth
qoq
11
yoy
27
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FINANCIAL REVIEWRevenues
yoy
qoq
2
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• Fast growth in interest and fee income due to
  strong loan demand
• Other income reduced by 1.7 million euros of
  extraordinary insurance reserve appropriations in
  Lithuania due to legislative changes. Q1 04
  result includes a EUR 0.8 million one-off
  insurance compensation

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FINANCIAL REVIEWNet interest margin
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FINANCIAL REVIEWLending yields
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FINANCIAL REVIEWExpenses
yoy
qoq
11
12

• Seasonally high and one-off expenses in Q4 04
  (Latvian headquarters, strategic projects)
• Faster growth in Personnel expenses due to higher
  performance pay reserves
• Decrease in Other expenses due to changes in
  goodwill amortisation (IFRS) (-2.0 million euros)

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FINANCIAL REVIEWEfficiency
target
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FINANCIAL REVIEWRegional distribution
For business units ROE is calculated based on
allocated equity - the Group is allocating equity
capital to the business units based on 9 capital
adequacy. Group ROE is calculated based on actual
equity.
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FINANCIAL REVIEWLending
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FINANCIAL REVIEWTotal lending

• Retail 2.22 billion
• Annual 52
• Quarterly 10
• Corporate 4.19 billion
• Annual 31
• Quarterly 8
• Lending/GDP
• Est 67
• Lat 62
• Lit 37

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FINANCIAL REVIEWRetail lending

• Growth by countries
• Est 1,252 mil 40
• Lat 516 mil 69
• Lit 456 mil 75
• Mortgages/GDP
• Est 21 (6)
• Lat 15 (6)
• Lit 7 (2)

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FINANCIAL REVIEWMortgages

• Government subsidies for mortgage lending
• Estonia interest payments are tax deductible
• Latvia no incentive
• Lithuania interest payments are tax deductible,
  certain residents can receive government grants
  worth 10-20 of the loan

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FINANCIAL REVIEWAsset quality
Overdue more than 30 days Overdue more than
60 days (write-offs recoveries) / average
portfolio
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FINANCIAL REVIEWRisk profile
Risk portfolio by rating classes
highly diversified private and SME mass lending
Total write-off EUR 3.5 million
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FINANCIAL REVIEWFunding structure, 31.03.05
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GROWTH OPPORTUNITIES
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GROWTH OPPORTUNITIES Acquisition history

• June 1996 Deutsche Lettische bank (current
  Hansabanka)
• July 1998 Estonian Savings Bank (merged with
  Hansabank)
• April 2000 Ventspils UBB (merged with
  Hansabanka)
• May 2001 Lithuanian Savings Bank (merged with
  Hansabankas)
• Second largest bank in Lithuania, largest retail
  bank
• October 2003 Lietuvos Draudimas
• Largest life insurance company in Lithuania
• September 2004 Kvest bank
• Corporate bank in Moscow. Transaction completed
  in Q1 2005

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GROWTH OPPORTUNITIES - RetailPenetration still
low
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GROWTH OPPORTUNITIES - Retail Penetration still
low, especially in Latvia and Lithuania, Dec 2004
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GROWTH OPPORTUNITIES - Retail Increase in
household consumption
III Savings products Asset management Pension
II Credit products Mortgages Consumer credit
I Basic products Transfers Cards Internet bank
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GROWTH OPPORTUNITIES Pension reform

• Clear market leader in each country
• March 2005
• Estonia 229,000 53
• Latvia 241,000 31
• Lithuania 271,000 45

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GROWTH OPPORTUNITIES Pension reform

• Material effect on the Groups results in
  2007-2008
• Annual inflow, EUR million
• II pillar assets under management, EUR million

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GROWTH OPPORTUNITIES Operations in Russia

• Hansa Leasing Russia established in 2002
• Only asset based-financing, main focus is on big
  ticket leases to selected Russian companies from
  transport (export) sector
• Portfolio approximately USD 150 million
• New leasing company established in Spring 2004
• Financing other asset classes industrial
  equipment, vehicles and real-estate

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GROWTH OPPORTUNITIES Operations in Russia

• Acquisition of Kvest bank in Moscow
• Price USD 3.4 million
• Total assets 2.2 million euros
• Offering full-scale banking services
• Geographic focus Moscow, St. Petersburg and
  Kaliningrad region
• Customer focus our Baltic, Russian or
  Scandinavian clients
• In the medium term Russian risk up to 10 of
  Group risk-weighted assets

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Mart Tõevere Hansabank Group Head of Corporate
Communications and IR phone [phone] fax
372 6131 569 mart.toevere_at_hansa.ee Liivalaia 10,
Tallinn 15040 Estonia www.hansagroup.com