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UniCredit Group

UniCredit Group. Ranieri de Marchis Chief Financial Officer. Munich, 24 September 2007. LIQUIDITY. EXPOSURE TO SUB-PRIME & CONDUITS. UNICREDIT POSITIONING IN THE CURRENT FINANCIAL TURMOIL. Well balanced balance sheet structure.

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UniCredit Group

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  1. UniCredit Group Ranieri de MarchisChief Financial Officer Munich, 24 September 2007

  2. LIQUIDITY EXPOSURE TO SUB-PRIME & CONDUITS UNICREDIT POSITIONING IN THE CURRENT FINANCIAL TURMOIL • Well balanced balance sheet structure • Clear funding and liquidity management based on three solid pillars • Re-assessment of funding mix and tenor based on market appetite • Negligible exposure to the areas affected by the recent market turmoil

  3. WELL BALANCED GROUP ASSET & LIABILITY STRUCTURE Total Liabilities 869 bn Total Assets 869 bn Other Other 26 32 224 130 Trading liabilities Trading assets Customer Loans (454 bn) = 150% BANKING BOOK 708 bn Customer Deposits (303 bn) 618 bn 48 Regulatory Capital 25 Fixed assets 139 • Financial Equilibrium ratio(1): from 15.3% in 2003 to 56.4% as of June 07 M/L term liabilities M/L term assets 254 303 Due to customers • Former Bank of Italy Rule 2(2) +31.9 bn 339 S/T liabilities S/T assets 218 30 June 2007 Strong discipline provided by internal rule: Liquidity ratio limit above 0.90 (1) Medium-long term funding, 139 mln (above 1 year - capital instruments and funds not included) / Medium to long term commercial Banking book assets (254 mln) (2) Ex Bank of Italy structural liquidity Rule 2 aimed to ensure a structural equilibrium between assets and liabilities by a specific weighting system

  4. AGENDA UniCredit Funding Model US Sub-prime and Conduit exposure

  5. Four regional liquidity centres Comprehensive liquidity metrics Daily Group exposure monitoring Regular stress testing performed ALM function with Group-wideaccess to data Robust work flow around intra-group liquidity flow management Intra-Group liquidity management trading platform UNICREDIT: A PAN-EUROPEAN FUNDING NETWORK UNICREDIT FUNDING MODEL HVB Plus Branches BA-CA UniCredit Plus Branches & UCI Dublin Pekao Co-ordinated, decentralised funding model with clear liquidity governance

  6. MANAGING INTRA-GROUP LIQUIDITY FUNDING RAISING LIQUIDITY WITH ASSETS THREE PILLARS OF FUNDING & LIQUIDITY MANAGEMENT • Extensive sharing of liquidity between all regional liquidity centres … cash pooling • Trading with Market Place, UCI’s digitalized trading and accounting platform • Active since March 07, live in all Italian entities, HVB, BA-CA, Pekao, Capitalia • Third party funding needs reduced by a further 3.2 bn in 2007 • Diversification of geography and instruments for both S/T and M/L term • Depos, CD’s, CP, Private Placements, Pfandbriefe, Retail • Leveraging on the historical funding reach of HVB & BA-CA • Centralised co-ordination of pricing • Minimise cost of funds • Avoid internal competition • Maintaining eligible and marketable collateral • >56 bn of collateral available within 1 month • Increasing access to secured funding with new asset classes • 200 mln of new collateral through the Italian “ABACO” initiative, rising to 2.2 bn by YE • Projects in place to monetise existing assets through ECB and other Central Bank facilities

  7. CO-ORDINATED AND DECENTRALIZED MARKET ACCESS:UCI CASH POOLING SYSTEM • Regional Liquidity Centers acting as first level netting for each Legal Entity under their perimeter Global Markets • UCI Holding • acting as the second level netting center (obligation of “first call” for each Legal Entity) and monitoring and steering the Group’s position • coordinating and accessing the medium/long term debt capital markets • accessing the unsecured Money Market and issuing CD/CPs to fund the open position of the Group UCI - Holding Obligation of “first call” for net excess/deficit Close net position, as today Regional Liquidity Center MIB Regional Liquidity Center HVB/BA-CA Regional Liquidity Center Italian Legal Entities • MIB • acting on the trading market for all the Group • accessing the market for Repos, derivatives and unsecured Money Market for its own needs Local Markets Cash pooling to optimize cost of funding and unnecessary access to the market * Access to Global Markets needed for specific instruments, e.g. Pfandbriefe

  8. IN RECENT YEARS UNICREDIT HAS SUCCESSFULLY DIVERSIFIED SOURCES OF S/T FUNDING & LIQUIDITY… GEOGRAPHICAL DIVERSIFICATION INSTRUMENTS DIVERSIFICATION EEC Total Tokyo +2.5% Paris Warsaw +16% Net Repos Vienna with banks Munich Extendible Hong Kong Luxemburg CP's Dublin New York CD's London Milan Net interbank 2005 2006 2007 2005 2006 2007 Avg maturity 92days(1) Avg maturity 108days(1) Avg maturity 104days(1) Stable and diversified Funding with three key accesses to the market:London, Vienna and New York (1) Calculated using gross inter-bank data

  9. … AS WELL AS OF MEDIUM/LONG TERM FUNDING Public 7% PUBLIC MARKET 15% 6% 18% 25% 6% Bank Capital 12% 4% 25% RETAIL/PRIVATE PLACEMENTS 21% Private Placements 32% 12% 32% 6% Retail 11% 21% COLLATERALIZED DELINKED FROM SENIOR RATING 24% 16% Pfandbriefe 19% 16% 30% 22% ABS/RMBS 15% 7% 2004* 2005* 2006 2007 Trend MLT Funding Plan • Diversified medium/long term funding in large liquid markets • Pursuing niche funding opportunities • Funding increasingly de-linked from senior credit rating using asset backed products and covered bonds. Parallel to Pfandbriefe, entering the new Italian covered bond market in 2008 Well established presence in the key liquid markets across different products (*) UCI + HVB combined “pro forma”

  10. 2 Apr 16 Apr 30 Apr 14 May 28 May 11 Jun 25 Jun 9 Jul 23 Jul 6 Aug 20 Aug 3 Sep 17 Sep THE MARKET CRISIS DID NOT AFFECT UCI STRONG LIQUIDITY POSITION IN AUGUST AND SEPTEMBER UniCredit Group 1 month available liquidity(1) Index figure • Strong increase of intra-group liquidity flows in August (+61.2% m/m), reducing need to access the market • Money Market prices in the Internal liquidity market always below Euribor 140 100 60 Sound and comfortable positive liquidity gap, even after August 07 crisis (1) Calculated as: (sum of net liquidity inflows in the timeframe) + (securities eligible for discount to the ECB, marketable repoable securities)

  11. AS A RESULT OF MARKET TURMOIL BANKING FUNDING COST HAS GONE UP FOR ILLUSTRATIVE PURPOSES ONLY Spreads ante crisis Funding mix (1) Spreads post crisis Senior 50bp Senior 12bp Senior 5Y 95.61% +40bp (2) Tier II 3.34% Tier II 33bp Tier II 118bp Preference shares 1.05% Preference shares 80bp Preference shares 210bp Average Spread 14bp Average Spread 54bp 1) Funding mix does not consider the Core Tier I because its cost is not directly affected by the liquidity crisis 2) Spreads are derived from secondary market. Because of current market high volatility they could change substiantially from day to day

  12. UNICREDIT ANSWER TO CURRENT MARKET CONDITIONS:KEY INITIATIVES • Focus of Funding Strategy: • Concentrate on collateralized funding sources like Pfandbriefe (Eur Jumbo) and Italian covered bond • Strengthen/continue diversification of funding sources • Manage higher funding cost going forward • Manage actively our assets base and re-price • Push to ensure “easy” liquidity transfer across the Group • Increased value of retail deposit base

  13. AGENDA UniCredit Funding Model US Sub-prime and Conduit exposure

  14. NEGLIGIBLE EXPOSURE FOR UNICREDIT TO US SUB-PRIME… • Exposure to US sub-primes: • RMBS collateralized by US sub-prime mortgages (mainly vintage, 2002-2003), still AAA rated • CDO with sub-prime collateral: 90% still investment grade, 70% AA or better at the end of August • Retained interest held by Pioneer (1) Exposure equivalent to 0.8% total regulatory capital(2) RMBS: Residential Mortgage Backed Securities CDO: Collateralized Debt Obligations (1) Off balance items include conduits with sub-prime exposure and investments in SIVs (2) On Unicredit reported total regulatory capital as of June 07

  15. … AND TO CONDUIT BUSINESS Bavaria TRR exposure, Euro bn 0 (1) • Very quick response to market turmoil by reducing Bavaria TRR assets from 14 to 6 Euro bn • Extremely low exposure to 3rd parties conduits: total liquidity lines provided by HVB/BA-CA ~0.55 bn (1) Total Rate of Return Conduit

  16. ANNEX

  17. RECENT MARKET DEVELOPMENT TRIGGERED A SUBSTANTIAL WIDENING OF UCI CREDIT SPREADS ACROSS ALL PRODUCT CLASSES RMBS(*) SENIOR LOWER TIER 2 • UCI credit spreads have widened In line with peers across all product types • New issue spreads are even wider: • Deutsche B. eur 1.75 bn (Aa1/AA-) 10 year Senior + 65bp vs. 18bp • BNP eur 1 bn (Aa2/AA) 10 year Lower Tier II + 80bp vs. 30bp • BNP gbp 425 mln (Aa2/AA) 10nc5 Lower Tier II + 68bp vs. 25bp • Credit Suisse eur 1.0 bln (Aa1/AA-) 10 year Senior + 75bp vs. 18bp • Also under stabilized market conditions spreads will remain substantially above average levels within FY 2007 (*) Source UBS for 2003/2004: data are derived from issuance made by italian peers as no RMBS issuance were made by UCI

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