HANSABANK Q3 2003

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HANSABANKQ3 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, 06 03) Deposits Loans GDP per cap.
(eur) Estonia 3.3 3.8 7.6 5,600 Latvia 5.1
3.8 9.0 3,870 Lithuania 3.5 3.3 15.7 4,600
Baltics 11.9 10.9 32.3 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 Hansabanks largest
shareholders

• Market cap 1.7 bln USD
• 25th largest in CEE
• Daily turnover 2.5 mil USD

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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),
June 2003
Estonia
Latvia
3.8 bln
3.8 bln
Lithuania
3.3 bln
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OVERVIEW OF THE REGION Baltic market share, June
2003
Total Baltic market, 31.06.03, EUR in
millions Deposits 11,900 Loans 10,900
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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 the best example of modern
  financial institution in Europe by the 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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INTERNET BANK www.hanza.net
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INTERNET BANKING

• Launched 1997
• 1,000,000 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 Medium-term
financial targets

• Operating profit growth before taxes 10
• 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
• Net fee growth
• Growth in net interest income reduced by
  decreasing margins
• qoq
• Higher than usual trading income and fee income
  (refinancing of loans and strong growth in the
  Russian leasing portfolio) in Q2

yoy
qoq
-5
6
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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
• Decrease in studen loan interest rate
• Decreasing loan book yield
• Stable euro-rates

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FINANCIAL REVIEWExpenses

• yoy
• Decrease in personnel expenses
• Decrease in depreciation
• Minimal growth in administrative expenses
• qoq
• Decrease in personnel expenses

yoy
qoq
-3
-5
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FINANCIAL REVIEWEfficiency
target

• For the first time cost-to-assets ratio below 3
  level (2.9)

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 2.83 bln
• Growth
• yoy 27
• qoq 8
• Fastest growing
• Retail and wholesale, industry
• Lending/GDP
• Est 50
• Lat 40
• Lit 20

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FINANCIAL REVIEWRetail lending

• Total 1.19 bln
• Growth
• yoy 46
• qoq 12
• By countries
• Est 786 mil 33
• Lat 223 mil 72
• Lit 181 mil 97

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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, 30.09.03
Risk portfolio by rating classes
highly diversified private and SME mass lending
Total write-off EUR 18.5 million
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FINANCIAL REVIEWFunding structure, 30.09.03
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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
• October 2003 Lietuvos Draudimas
• Largest life insurance company in Lithuania

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GROWTH OPPORTUNITIES Penetration still low,
especially in Latvia and Lithuania
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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
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GROWTH OPPORTUNITIES Pension reform

• Acquisition of largest life insurance company in
  Lithuania in October 2003
• Material effect on the Groups results in 3-4
  years
• Fees from asset management should grow from
  current 3 to 15-18 of net fees

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GROWTH OPPORTUNITIES Pension reform

• Actual result, September 2003
• Estonia
• 155,000 clients
• 51 market share
• Latvia
• 110,000 clients
• 51 market share
• Lithuania
• 45,000 clients
• 41 market share
• as of October 2003

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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
• 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