HANSABANK Q2 2003

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HANSABANKQ2 2003
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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
A2 BBB BBB Lithuania Baa1
BBB BBB Hansabank senior debt A1 A-
sub. debt A2 A-
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OVERVIEW OF THE REGION Macro highlights
GDP Infl. CA/GDP 02 03F 04F 02 03F
04F 02 03F 04F Estonia 5.8 5.0 5.5 4.1 4.5 6.0 -
12.5 -12.5 -9.0 Latvia 6.1 7.0 6.0 1.8 2.5 3.0 -7
.8 -8.5 -8.0 Lithuania 6.7 6.2 6.5 0.0 0.1 2.0 -
5.3 -5.0 -4.0 as GDP deflator
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OVERVIEW OF THE REGION Market size
(EUR bln, 03 03) Deposits Loans GDP per cap.
(eur) Estonia 3.2 3.6 6.8 5,020 Latvia 5.0
3.6 8.7 3,740 Lithuania 3.4 3.1 14.6 4,240
Baltics 11.6 10.3 30.1 Total population
(mil) 7.4 Including leasing
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OVERVIEW OF THE REGION Hansabanks largest
shareholders
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OVERVIEW OF THE REGION Hansabank in the Baltics
Hansa in the Baltics
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OVERVIEW OF THE REGION Market shares (lending),
Mar 2003
Estonia
Latvia
3.6 bln
3.6 bln
Lithuania
3.0 bln
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OVERVIEW OF THE REGION Baltic market share, Mar
2003
Total Baltic market, 31.03.03, EUR in
millions Deposits 11,600 Loans 10,300
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STRATEGIES AND FINANCIAL TARGETS
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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
• What are our competitive advantages?
• Largest customer base, particularily strong in
  retail bankign
• Best distribution network
• Electronic channels, branches as advisory units
• One-stop-shop strategy
• Common IT system
• Conservative risk management
• Low risk cost, high asset quality

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INTERNET BANK www.hanza.net
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INTERNET BANKING

• Launched 1997
• 940,000 customers, annual growth 70
• Largest internet bank in the CEE
• In Estonia 30 of payments through internet
• In Estonia 94 of transactions outside the branch
• Total investment EUR 15 million

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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 high
  motivation of our employees is the guarantee of
  the best performance.
• Groups strategies for 2003
• To increase the loan portfolio in Latvia and
  Lithuania
• To develop a group-wide knowledge sharing
  framework
• To implement fully Pan-Baltic product development

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STRATEGIES AND FINANCIAL TARGETS Medium-term
financial targets

• Double the operating profit in 4 years
• ROE at least 20
• Cost-income ratio below 50
• Net risk cost below 0.6
• net risk cost (loan write-offs recoveries) /
  average loan portfolio

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FINANCIAL REVIEW
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FINANCIAL REVIEWOperating profit and net profit
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FINANCIAL REVIEWRevenues

• yoy
• Strong growth in net fees
• Growth in net interest income reduced by
  decreasing margins
• Good trading income
• qoq
• Seasonally lower fees in Q1
• Strong growth in trading income

yoy
qoq
11
18
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FINANCIAL REVIEWNet interest margin

• yoy
• Decreasing risk margins and euro and USD interest
  rates
• Strong loan growth
• Improving balance sheet structure
• qoq
• Decreasing loan book yield
• Refinancing of bonds
• Stable euro-rates

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FINANCIAL REVIEWExpenses

• yoy
• Decrease in personnel expenses redundancy
  charges in Q2 02, decrease in no. of personnel
• Minimal growth in administrative expenses
• Estonian Savings Bank goodwill ( 3.3 million)
• qoq
• Increase in marketing expenses due to sponsorship
  programmes

yoy
qoq
-10
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FINANCIAL REVIEWEfficiency
target

• One-off revenues in Q2 03
• Lower than expected expenses

Hansa-LTB
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FINANCIAL REVIEWRegional distribution
Russian and Ukrainian leasing and non-core
activities
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FINANCIAL REVIEW EVA
Based on Estonian business units only
Capital 11 of risk weighted assets Cost of
equity 2003 11.8 2002 12.9 EVA economic
value added
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FINANCIAL REVIEWLoans and deposits
Deposits
Lending
Local currency growth rates
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FINANCIAL REVIEWCorporate lending

• Total 2.61 bln
• Growth
• yoy 25
• qoq 5
• Fastest growing
• Construction, real-estate, transport, retail
• Lending/GDP
• Est 48
• Lat 37
• Lit 16

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FINANCIAL REVIEWRetail lending

• Total 1.06 bln
• Growth
• yoy 45
• qoq 10
• By country
• Est 717 mil 32
• Lat 197 mil 72
• Lit 150 mil 103

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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, 30.06.03
Risk portfolio by rating classes
highly diversified private and SME mass lending
Total write-off EUR 11.0 million
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FINANCIAL REVIEWFunding structure, 30.06.03
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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

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GROWTH OPPORTUNITIES LTB restructuring

• Focus on growth in revenues (H1 03 vs H1 02)
• Number of cards doubled to 700,000
• Loan growth in Lithuania 44
• New products and fees fee growth 49
• Operating expenses -20
• Cost-income ratio 66 in Q2 2003

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GROWTH OPPORTUNITIES Credit penetration
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GROWTH OPPORTUNITIES Pension reform in Estonia
and Latvia

• I and III pillars already existing
• II pillar started in July 2002 in Estonia and
  September 2002 in Latvia, will start in October
  2003 in Lithuania
• Material effect on the Groups results in 3-4
  years
• Actual result, June 2003
• Estonia
• 127,100 clients
• 50 market share
• Latvia
• 82,300 clients
• 51 market share

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GROWTH OPPORTUNITIES Increase in household
consumption
III Savings products Asset management Pension
II Credit products Mortgages Consumer credit
I Basic products Transfers Cards Internet bank
Issued by Hansabank Group
gt Monthly income 160 EUR per family member
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GROWTH OPPORTUNITIES Hansa Leasing Russia

• Location of the Baltic countries has historically
  created business contacts with Russia, 70 of the
  cargo flow through the Baltic ports is of Russian
  origin
• Russian economic outlook is positive - WTO
  membership, good relations with the US and EU,
  market economy status
• Existing good contacts with Russian clients, good
  experience in financing Russian transit business
  in the Baltics
• Only asset based-financing, main focus is on big
  ticket leases to selected Russian companies from
  transport sector
• Total Russian risk limited to USD 250 million
  150mUSD leasing 100mUSD trade finance

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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/ir