HANSABANK GROUP

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HANSABANK GROUP

• March 2008

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I Introduction of the Hansabank Group II Market
shares and results III Baltic markets
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Hansabank Group is the largest financial
institution in the Baltic countries with total
assets exceeding EUR 25.9 billion and
shareholders equity over EUR 1.99 billion (based
on the March 2008 results).

• Hansabank is a fully owned subsidiary of Swedbank
  Group. The Group has more than 22,000 employees,
  more than 9.3 million private customers and 0.5
  million corporate customers in its home markets
  Sweden, Estonia, Latvia, Lithuania, Russia and
  Ukraine.

Hansabankas headquarters in Riga
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Our target market is the Baltics and Russia. As a
universal bank our business model is based on a
large customer base. Acquisition and retention of
new customers is a key goal for us. Our main
focus is on medium-sized companies and private
individuals with above average purchasing power,
however, we serve all customer groups. With
close to 2 million active customers, 293 branches
and 9,615 employees, Hansabank is a leading
financial institution in all three Baltic
countries.
St. Petersburg
Moscow
Kaliningrad
data as of March 2008
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Growing importance of Hansabank in Swedbank Group
Pretax profit
Net loans
Private customers
Employees
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History

• 1991 July establishment of Hansabank
• 1996 June expansion into Latvia through
  acquisition
• 1998 July move to the retail market through a
  merger with the Estonian Savings Bank
• 1998 Autumn Swedbank becomes Hansabanks
  strategic shareholder
• 1999 July expansion into Lithuania through a
  greenfield start-up
• 2001 July acquisition of the largest retail bank
  in Lithuania
• 2002 November expansion into Russia through
  leasing
• 2005 March acquisition of Kvest bank in Moscow
• 2005 March Swedbank buyout of Hansabanks
  minority shareholders - Hansabank becomes a
  fully-owned subsidiary in Swedbank Group
• 2005 September Bank branch opened in Moscow
• 2006 March Bank branch opened in St. Petersburg
• 2006 August Bank branch opened in Kaliningrad
• 2006 August Hansa Property Insurance launched

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Values
We believe that the Groups strong performance
and growing international recognition is the
result of a performance-oriented culture,
transparent communication, willingness to change
and the high commitment of our employees.The
Group values areResult-oriented we want to
achieve good results in everything we do.Open
we are transparent and open in our
communication.Innovative we are learning and
ready to change.Committed we are building a
long-term sustainable business.
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Goal
Hansabanks strategy and long-term objectives
have predominantly remained the same for the last
seven years. However, each year we introduce
certain modifications and changes to ensure that
the strategy is compatible with market
developments and to secure the balanced
development of the company.

• We want to be a clear leader in each Baltic
  market.
• Biggest growth in volumes (in absolute terms)
• Highest profit (in absolute terms)
• Highest customer satisfaction

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How do we reach our goal?

• By having strong performance and sales culture
• By service leadership
• By deep business intelligence
• By widest distribution
• By excellent crediting know-how and skills
• By offering continuous development opportunities
  for our people
• By making decisions close to the customer

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Key figures
2007 was another very successful year for
Hansabank Group it was already the ninth
consecutive year in which our business volumes
showed strong growth, where new profit levels
were reached and operating efficiency was higher
than ever before. At the same time, 2007 was also
different from our recent history as it marked
the change in the economic cycle that has brought
us new challenges. -- CEO Erkki Raasuke
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Main awards from 2007

• International financial journal Euromoney
  awarded Hansabank The Best Bank in Estonia.
• Hansa Eastern Europe Equity Fund received 4 star
  rating from the prestigious independent
  investment ratings agency Morningstar.
• Hansa Eastern Europe Equity Fund obtained
  highest, 5 star rating from Morningstar.
• Hansa Pension Fund K3 was awarded the Best
  European Pension Fund in fixed income
  investments.
• Hansabank wins Member of the Year Award from OMX
  Baltic Exchanges.
• Finance company Laika Stars chose Hansabanka the
  most valuable enterprise in Latvia.

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I Introduction of the Hansabank Group II Market
shares and results III Baltic markets
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Baltic market sharesDecember 2007
Loans
Deposits
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Market sharesMarch 2008
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Market positionMarch 2008
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Operations in Russia

• Geographic focus universal bank in North-West of
  Russia (Moscow, St. Petersburg and Kaliningrad
  region)
• First bank branch opened in Moscow in September
  2005, St. Petersburg branch in March 2006 and
  Kaliningrad branch in Spring 2006.
• Services Asset-based finance, trade finance and
  corporate banking. Basic retail products
  introduced cards, deposits, mortgage loans, car
  loans, consumer loans. Future focus on developing
  into a full-scale universal bank
• Customer focus The business model is based on a
  large customer base. Main focus is on
  medium-sized companies and private individuals
  with above the average purchasing power, however,
  all customer groups are served.
• Total Russian lending portfolio EUR 1,089
  million as of 31 March 2008
• Corporate loans EUR 917m
• ABF EUR123m
• Mortgages EUR 48m
• Number of employees, 409

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Highlights Q1 2008

• Net income EUR 114m in Q1 2008, EUR -4m vs Q4,
  annual growth 5
• The following factors affected Hansabanks Q1
  performance
• Volume growth is slowing down in line with
  expectations
• Weak financial markets affected fair value
  adjustments as well as fee income from securities
  operations
• Operating expenses decreased as a result of
  considerable reduction in FTE growth, lower
  performance pay reserve and seasonal peak in Q4
• Total revenues EUR 253m, EUR -16m vs Q4, annual
  growth 14
• Trading income EUR -9m from Q4 due to weak
  financial markets (see page 19 for more details)
• Net interest income EUR -3m vs Q4 on the back of
  higher funding cost and change in funding mix
  (see page 16 for more details)
• Total expenses EUR 106m, EUR -9m vs Q4, annual
  growth 18
• Q4 07 expenses include EUR 6.4m VAT provision
  reversal in Russia, excl those costs reduced by
  15m qoq
• Performance based pay reserve reduced by EUR 3m
  qoq
• FTE growth reduced to 3 in Q1 in the Baltics
• Loans EUR 713m QoQ, 28 YoY
• Deposits EUR 4m QoQ, 14 YoY
• Net loan losses down by EUR 2.6m from Q4

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Key financials Q1 2008
1Group ROE based actual equity
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Quarterly trends

• Q1 06, Q2 06 and Q3 06 results include VAT
  provisions in Russia, EUR 3.1m, EUR 12.3m and EUR
  0.6m, respectively and Q4 07 VAT provision
  reversal of EUR -6.4m.

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Performance against mid-term financial targets
Net loan losses (changes in general and special
provisions net write offs) / credit portfolio
at the beginning of the year
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Contribution to net income change from Q4 2007

• Main contributors to the change
• Low performance of trading income given weakening
  financial markets
• Reduction of expenses, both administrative and
  performance related personnel costs
• All countries were able to reduce operating
  expenses in Q1
• Trading income impact largest in Estonia and
  Lithuania

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Quarterly trend by business units
Estonia
Latvia
Lithuania
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Income Statement and main ratios by BUs
1Starting from January 2008, country EVA is
reported under Basel II standardized 2BU number
of employees includes IT and Group level
employees
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Loan portfolio growth
Starting from 2008, Trade finance operations
were transferred from Russia to the Estonian
business unit. The transferred portfolio was 111m
for loans and 71m for deposits.
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Lending and deposit growth by countries
Estonia
Lithuania
Latvia
Market data for Q108 include two month data
only Latvian market deposit growth was EUR 1,655m
in Q4 2007 out of which EUR 1,287m was in
non-resident deposits.
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Group lending by sectors
Portfolio (EURm), March 2008
Portfolio growth (EURm), Q1 08
39
41
6
16
9
13
9
18
5
-14
4
3
16
34
xx - share of portfolio and portfolio growth
Starting from 2008, Bank of Estonia changed the
official sector classification details. During
the process of implementing the new
classification, Hansabank reviewed the sector
data in detail. As a result, many
reclassifications were performed with strongest
impact to the real estate management sector.
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Revenues
qoq -6
yoy 14

• Net interest income EUR -3m vs Q4 on the back of
  higher funding cost and change in funding mix
• Trading income EUR -9m from Q4 due to weak
  financial markets

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Net interest income

• Net interest income declined in Q108 by EUR 3m
• Main reason behind the decline is higher cost of
  funding (both foreign funding and deposits) and
  change in funding mix (see next page)

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Net interest margin development

• Main factors affecting NIM
• Largest impact - higher cost of foreign funding
• Higher cost of deposits
• Change of funding structure towards more
  expensive foreign funding
• Change in deposit structure from demand deposits
  to more expensive time deposits

Deposit margin (FTP-interest expense)/average
deposits Loan margin (interest
income-FTP)/average loans
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Net fee income

• Net fee income has been flat since Q2 07 at
  around EUR 52m. Q108 witnessed a decrease to EUR
  49m. Results in countries differ slightly
• The growth of net fee income has suffered due to
  poor performance on financial markets both
  because of decreasing trading activity as well as
  reduced success fees

Q1 2008
Q1 2007
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Trading income

• There were following major sources of decline
• Unrealized loss on life insurance portfolio
  revaluation
• Treasury's FX swap positions experienced
  temporary unrealized losses from revaluation.
  Upon maturing, the net effect of these swaps will
  be a gain
• Liquidity book management caused realized losses
• Decline was largest in Estonian and Lithuanian
  units

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Expenses
qoq -8
yoy 18

• Q4 07 expenses include EUR 6.4m VAT provision
  reversal in Russia, excl those costs reduced by
  15m qoq
• Performance based pay reserve reduced by EUR 3m
  qoq

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Personnel expenses

• Personnel expenses growth has declined to 19 yoy
• FTE growth reduced to 3 in Q1 in the Baltics

Employee growth during Q1 2008
BU number of employees does not include IT and
Group level employees
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Asset quality and provisioning costs
Net loan losses
Net loan losses
Net loan losses (changes in general and special
provisions net write offs) / credit portfolio
at the beginning of the year
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Asset quality overdue more than 60 days
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Capital adequacy
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I Introduction of the Hansabank Group II Market
shares and results III Baltic markets
38
Fast growing region December 2007

• Baltic population 7 million
• Total GDP 63 EUR bn
• Total loans 52 EUR bn

03 04 05 06 07
03 04 05 06 07
03 04 05 06 07
03 04 05 06 07
03 04 05 06 07
03 04 05 06 07
Preliminary data for 2007
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Exceptional economic growth

• Rapid growth has been reflected in
• Rising incomes (2006 data) real average monthly
  net wages up by 11.2 in Estonia, 15.5 in Latvia
  and 15.2 in Lithuania
• Falling unemployment (from 2002 to 2005) to 5.6
  (10.3) in Estonia, 6.9 (12.2) in Latvia and
  5.6 (13.5) in Lithuania
• Current and capital account deficit (deficit as
  of GDP in 2006) 12.3 in Estonia, 19.9 in
  Latvia and 9.7 in Lithuania
• Relatively high inflation (2006 Harmonized CPI
  growth) 4.4 in Estonia, 6.5 in Latvia and 3.8
  in Lithuania
• Rapid growth is currently financed from capital
  inflows from mother banks and FDI
• As a result
• The most likely date for adoption of the euro in
  the Baltic States is 2011-2012
• A rapid and substantial drop in inflation would
  require (particularly in Latvia) a drastic
  reduction of internal demand, which would cause a
  recession
• Thus, gradual economic policies will be used to
  ensure economic stability

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Drivers of economic growth

• The fastest growth in 2006 was observed in the
  following sectors
• Estonia financial intermediation 22.6
  construction 13.3 manufacturing 12.8
• Latvia real estate and business services 17.6,
  wholesale and retail trade 17,4, financial
  intermediation 15.5
• Lithuania construction 19.8 transport, storage
  and communication 10.7, rental, real estate and
  business services, and manufacturing 9.3
• The key driver is domestic demand
• Consumption boom lending growth, rising wages
  and falling unemployment, consumer confidence at
  historic highs
• Rapid investment growth EU structural funds,
  rapidly growing production costs and growing
  production shortages (wages, raw materials,
  services)
• External demand

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Challenges balancing growth

• Labour market
• Labour shortages are becoming more pronounced due
  to unfavorable demographic trends, rapid economic
  growth and labour emigration
• Toughening competition for labour may prompt wage
  rises in excess of gains in productivity, which
  is not sustainable in the long run (already seen
  in construction)
• Productivity-led growth must be enhanced
• Household demand
• High optimism and growing incomes (incl. growing
  leverage)
• Rapid growth of real estate market and prices
• Price growth, unsustainable developments
• Rapidly growing prices of goods and services
• Growing imports, current account deficit and
  external debt
• Growth becomes more and more unbalanced
  undermining long-term growth and increasing the
  risk of a sharp correction in economic
  developments (hard-landing scenarios exist for
  Latvia and Estonia but soft-landing expectations
  prevail)

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