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Levon Hampartzoumian - CEO

BULBANK. Levon Hampartzoumian - CEO. 2 nd UCI INVESTOR DAY. Focus on New Europe. London, December 5 th , 2002. Agenda. Why Bulgaria ? Bulbank Key Highlights Key projects and strategies. WHY BULGARIA?. Bulgaria. Year 2001. Macroeconomic stability. 7.9. Population, mln.

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Levon Hampartzoumian - CEO

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  1. BULBANK Levon Hampartzoumian - CEO 2nd UCI INVESTOR DAY Focus on New Europe London, December 5th, 2002

  2. Agenda Why Bulgaria ? Bulbank Key Highlights Key projects and strategies

  3. WHY BULGARIA? Bulgaria Year 2001 • Macroeconomic stability 7.9 Population, mln • Low inflation 1,915 Per Capita GDP, Eur • Currency board providing for monetary discipline 4.8 Inflation rate, % • Increasing sovereign rating 4.7 Ref. interest rate, % • Low-cost manufacturing, opportunity for de-localisation BB+ S&P country rating 2002E 2003E 2004E • GDP growth over av.NE and av.EU 3.7 4.3 5.0 Real GDP growth, % • Low inflation 6.5 4.5 4.0 Inflation rate, % • Stable interest rates 4.3 4.5 4.6 Ref. interest rate Source: NE Research Network and Bulbank, based on BNB statistics.

  4. BANKING SECTOR GROWING FAST, WITH GREAT POTENTIAL • Privatisation of banking sector almost completed. The last one, SSB (13% market share in asset terms), to be privatised in early 2003. • More than 80% of assets now owned by foreign investors • High concentration, >45% of assets and deposits held by the 3 largest banks • Relatively low efficiency (71% in 2001) • Fast growing and improving banking sector yet still low penetration and underdeveloped markets Branches per mln inhabitants (Loans+Deposits)/GDP 580 203% 272 45% EU EU Bulgaria Bulgaria • Fast increase in volumes with high growth potential • Intensified lending in the last 1.5 year, 33% growth in 2001, 40% expected in 2002 • Retail volumes grow faster than corporate ones • Competition driving spreads down 2001 2002E 2003E 2004E Loans growth(1), % 33.1 40.3 23.3 15.9 Deposits growth(1), % 35.5 12.1 13.3 10.8 Rate on Loans(2), % 13.0 11.7 10.6 9.7 Rate on Dep.(2), % 1.9 1.8 1.8 1.8 Spread(2), % 11.1 9.9 8.8 7.9 (1) Nominal growth Source: NE Research Network and Bulbank, based on BNB statistics. (2) End-of-period Banking System data; rates calculated on local currency denominated Loans and Deposits

  5. Agenda Why Bulgaria ? Bulbank Key Highlights Key projects and strategies

  6. Private 38% Affluent 37% Large 50% Mid and small 11% THE LEADING BANK IN BULGARIA BULBANK 1,376 22% 1,029 21% 256 9% 241 25% 59 31 36% 39 16.8 91 2,070 290,000 259,000 31,000 MARKET SHARES as of Dec. 01 Euro mln(1), as at Sep 02, IAS Total Assets mkt share Deposits mkt share Loans mkt share o/w Corporate loans Loans/Deposits, % Total revenues Net Income mkt share Cost/Income, % ROE, % Branches Employees Customers o/w retail o/w corporate Ranking(2) 31 Dec 01 1st 1st 2nd 1st 1st 1st 1st 1st 3rd 3rd 4th • Leader by size • Leader by efficiency • Low credit risk, thus good potential for growth • Distinctive corporate profile • Unravelled leadership in top segments • Good positions in mid and small business segment • Well developed balanced branch network (1) Eur 1 = Bgn 1.96, Bgn is pegged to Euro under the Currency Board arrangement. (2) ROE and cost/income compared only with 10 largest banks.

  7. POSITIVE PERFORMANCE IN 2002, 15% GROWTH IN OPERATING INCOME AND 45% GROWTH IN FEE INCOME Net Interest Income (IAS, Euro mln) • 23% growth in net income for growth in core business revenues • Operating income and profitability growth due to 45% increase in fee income (for launch of new products and cross selling thanks to increase of salesforce) offsetting 11% drop in net interest margin (for the fall in international interest rates) • Tight cost control benefiting from UCI synergy • C/I Ratio improved from 45% to 39% 34 39 Total Revenues +7.2% 59 -11.2% 55 9M01 9M02 Operating Income Net Fee Income +45.1% 16 +14.7% 36 11 31 9M01 9M02 Operating Costs 9M01 9M02 Other Operating Income 9M01 9M02 23 24 62.1% 9 6 -2.8% 9M01 9M02 9M01 9M02

  8. AHEAD OF THE SYSTEM IN TERMS OF REVENUE GROWTH, PROFITABILITY AND EFFICIENCY (As at September 2002) Net Income (provision adjusted), y/y % ch. Net Operating Income, y/y % ch. Cost /Income, % 60.4 13.5 14.7 38.9 9.4 5.0 Banking System Banking System Banking System BULBANK BULBANK BULBANK ROAA, % Net Fee Income, y/y % ch. Operating costs, y/y % ch. 8.9 45.1 2.2 1.6 17.9 -2.8 Banking System Banking System BULBANK Banking System BULBANK BULBANK NOTE: Figures as at end of Sept. 2002. Data for the banking system is under NAS. Figures from Bulbank under NAS would be generally slightly better than under IAS, and respectively 16.1% for Net Income, 9.3% for Net Op. Income, 35.7% for Cost/Income, 47.3% for Net Fee Income, 1.7% for Operating costs and 2.7% for ROAA

  9. ASSET QUALITY IMPROVING, WITH INCREASED COVERAGE RATIOS Net NPLs and Doubtful Loans as % of Total Loans (eop, Euro mln) Coverage ratios 152% 142% 6.5% 85.3% 65.0% 2.8% 0.36% 0.43% 2001 2001 9M02 3Q02 restated Doubtful Loans/ Total Loans NPLs/ Total Loans On Gross Doubtful Loans On Gross NPLs* Dec. 2001 • Improved loan-book quality due to successful work outs • Improvement of coverage ratios • Conservative provisioning, covering also regular exposures calculated on the basis of risk by sector Sept. 2002 % ch. (Euro mln) Total doubtful loans 11.9 6.6 -44.5 o/w NPLs 1.0 1.0 -

  10. Agenda Why Bulgaria ? Bulbank Key Highlights Key projects and strategies

  11. MARKED ACHIEVEMENTS WITHIN THE PARTNERSHIP PROGRAMME WITH UCI RESULTS(1) KEY PROJECTS • New commercial approach implemented with dedicated sales people by segment • Accountability and target setting • Value added, fee based package products launch • Retail reinforcement – loans, utilities, cards, asset management • MBO and sales stimulation programs introduction • 230 new sales people • 44% increase in no. of customers • >60% growth in revenues • >80% growth in fee income • >16K packages sold • >20% growth in the amount of cross-border payments • 25% Net fee income/Revenues (19.4% in 2000 and 21% in 2001) • 150% Net fee income/Personnel costs • 200 people with MBO REVENUES • UCI synergy use • Cost cutting • >2mn cost saving • Negotiation power increase COSTS • Low risk of securities portfolio • NPL/Loans halved down to below 5% • New IT implementation by mid-2003 • Tight monitoring on all levels with new approach and sophisticated tools • New investment policy • Credit underwriting • New IT • Controlling RISK & OPERATIONS (1)Compared to pre-acquisition period (2000).

  12. STRONG COMMERCIAL APPROACH EXPANDING BUSINESS AND IMPROVING PRODUCTIVITY RETAIL No. of customers (eop, in ths.) No. of salesforce (eop) No. of products sold (1) 12,013 180 259 231 10,305 115 Dec.01 10M02 Sept.02 2001 Dec.01 Sept.02 CORPORATE No. of active customers (eop, in ths.) No. of salesforce (eop) No. of contacts (2) 16,655 31 58 26 6,213 31 2001 Dec.01 Sept.02 Dec.01 Sept.02 10M02 (1)Including packages, consumer loans, mortgages and intl.cards. (2) Meetings.

  13. AMBITIOUS STRATEGIC PLAN BUSINESS STRATEGY • Divisionalisation • HNW customer acquisition model • Opening of leasing company • Asset management products launch (mutual funds, bancassurance, structured depos) and market leadership in the area • Value proposition distinctiveness OPERATIONAL STRATEGY • New branch model • New credit underwriting system for Corporate customers, pilot project for all UCI NE banks • New IT system • New risk management system • Alternative channels development PEOPLE • Intensified conversion from back-office to front-office • Active training and focused career development for talents • Outsourcing of non-core activities

  14. SUMMING UP: BULBANK – BIG,SAFE, SOUND AND INNOVATIVE STRONG POSITIONING • Strong financial standing: high capitalisation, critical mass, low risk on assets, high efficiency, UCI support • Distinctive market leadership: 1st bank in asset, deposit, payment, corporate loan, FC operations, upper-end markets terms • Deep changes and model: active relationship management on a broad basis, innovative servicing approach and products SHAREHOLDER COMMITMENT: UCI commitment to Bulgarian economy development and strong monitoring of the bank’s operations and development CUSTOMER CENTRIC BUSINESS MODEL: knowledge, flexibility, proficiency, tailored approach AMBITIOUS TARGETS AND DEVELOPMENT PLAN: double digit annual income growth, deeper segmentation, enrichment of value propositions, alternative channels, new IT, fast systems’ upgrade, investment in people

  15. Annexes

  16. BULBANK 9M02 INCOME STATEMENT Ch. % Sept. 02/ Sept. 01 (Euro mln, IAS) Ch. % 2001/2000 Dec. 00 Dec. 01 Sep. 01 Sept. 02 Interest margin (incl. div.) 49.7 50.9 2.4 38.7 34.3 -11.2 Net non interest income 26.8 23.0 -14.3 16.3 24.6 50.9 14.8 15.5 4.8 10.8 15.6 45.1 - of which: Fee income 76.5 73.9 -3.5 55.0 58.9 7.2 Total revenues -34.0 -5.0 -23.6 -22.9 -2.8 -35.7 Operating costs (incl. dep.) -15.6 -14.2 -9.0 -10.0 -9.7 -3.7 - of which: Staff costs 40.8 39.9 -2.2 31.4 36.0 14.7 Net operating income -15.3 4.5 -129.5 3.5 5.0 43.4 Net loan loss provisions 79.2(1) 0.4 -99.5 0.3 0 -100.0 Extraordinary income/loss 104.7 44.8 -57.2 35.2 41.0 16.4 Pre-tax profit/loss -22.9 -9.6 -58.2 -9.9 -9.8 -0.3 Taxes (2) 81.8 35.2 -56.9 25.3 31.2 22.9 Net income 24.5 35.2 43.8 Net income (adj.)(3) (1) Including EUR 78.4mn gains from sale of equity investments mainly in UBB, HVB Bulgaria and Corporate Commercial Bank. (2) Statutory tax rate for legal entities: 23.5% (28% until the end of 2000) (3) Less gains from sale of equity investments

  17. BULBANK 9M02 BALANCE SHEET Ch. % Sept. 02/ Sept. 01 Ch. % Sept. 02/ Dec. 01 (Euro mln, IAS) Sept. 01 Dec. 01 Sept. 02 99 118 88 -11.5 -25.7 Cash and deposits with Central Banks 774 759 582 -24.7 -23.2 Bank placements 199 167 239 19.9 43.1 Customer loans ASSETS 267 281 386 44.3 37.2 Securities 60 60 64 6.8 6.9 Fixed assets 13 12 18 40.1 42.9 Other assets 1,412 1,397 1,376 -2.5 -1.5 TOTAL ASSETS AND LIABILITIES Deposits: 1,033 1,048 1,024 -0.9 -2.2 - Due to Customers 51 33 24 -52.1 -27.0 - Due to Banks LIABILITIES 33 35 31 -6.9 -10.6 Reserve fund for possible loan losses 55 30 43 -19.8 45.0 Other liabilities 240 251 253 5.5 1.0 Shareholders’ equity 1,397 1,442 1,412 3.3 TOTAL ASSETS AND LIABILITIES-adj.(1) 2.1 1,048 1,089 3.9 1,033 5.4 Customer Deposits-adj.(1) (1)With Sept.02 figures recalculated at BGN/USD exchange rate ruling on 31 Dec.01.

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