HANSABANK Q1 2004

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HANSABANKQ1 2004
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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 A3
BBB A- Hansabank senior debt A1 A
sub. debt A2 A-
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OVERVIEW OF THE REGION Macro highlights
GDP Infl. CA/GDP 03 04F 05F 03 04F
05F 02 03F 04F Estonia 4.7 5.0 6.0 2.7 5.5 4.0 -
13.7 -10.5 -8.0 Latvia 7.5 6.5 6.5 5.2 5.0 3.5 -9
.2 -9.0 -7.5 Lithuania 9.0 7.5 7.0 -0.9 1.0 2.5 -
6.6 -7.5 -7.5 as GDP deflator
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OVERVIEW OF THE REGION Market size
(EUR bln, 03 04) Deposits Loans GDP per cap.
(eur) Estonia 3.5 4.6 7.5 5,500 Latvia 6.1
5.0 9.1 3,900 Lithuania 4.2 4.8 16.1 4,700
Baltics 13.8 14.4 32.7 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 1.9 bln EUR
• Daily turnover 4.0 mil EUR

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OVERVIEW OF THE REGION Hansabank in the Baltics,
March 2004
Hansa in the Baltics
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OVERVIEW OF THE REGION Market shares (lending),
March 2004
Estonia
Latvia
5.0 bln
4.6 bln
Lithuania
4.8 bln
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OVERVIEW OF THE REGION Baltic market share,
March 2004
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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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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
• Good fee and trading income growth
• Growth in net interest income reduced by
  decreasing margins
• qoq
• Interest income growth improving
• Strong growth in trading income
• One-off insurance compensation (0.8m)

yoy
qoq
5
14
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FINANCIAL REVIEWNet interest margin

• yoy
• Decreasing risk margins and refinancing
• Strong loan growth
• Improving balance sheet structure
• qoq
• Stabilisation of margins
• Decrease in the cost of foreign funding

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FINANCIAL REVIEWExpenses

• yoy
• Consolidation of Lithuanian Life insurance
  company, 164 employees
• qoq
• Decrease in personnel expenses because of
  redundancy charges and pension II pillar expenses
  in Lithuania in Q4 03

yoy
qoq
-10
6
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FINANCIAL REVIEWEfficiency
target
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FINANCIAL REVIEWRegional distribution
operating profit before provisions
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FINANCIAL REVIEW EVA
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 3.19 bln
• Growth
• yoy 28
• qoq 5
• Fastest growing
• Retail and wholesale, real-estate management
• Lending/GDP
• Est 59
• Lat 50
• Lit 29

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FINANCIAL REVIEWRetail lending

• Total 1.46 bln
• Growth
• yoy 45
• qoq 9
• By countries
• Est 896 mln 34
• Lat 305 mln 57
• Lit 261 mln 80

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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, 31.12.03
Risk portfolio by rating classes
highly diversified private and SME mass lending
Total write-off EUR 5.3 million
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FINANCIAL REVIEWFunding structure, 31.03.04
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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

• 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
• Actual result
• Estonia 181,000 50
• Latvia 160,000 49
• Lithuania 204,000 46

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GROWTH OPPORTUNITIES Hansa Leasing Russia

• Company established in 2002, current portfolio
  150mUSD
• 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 300 million
  200mUSD leasing 100mUSD trade finance

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GROWTH OPPORTUNITIES Other operations in Russia

• New leasing company established in Spring 2004
• Active in St. Petersburg and Moscow region
• Financing other asset classes industrial
  equipment and real-estate
• Acquisition or start-up of a corporate bank
  during 2004
• Focus on serving 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/ir