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SERBIA, IT’S TIME TO INVEST!

SERBIA, IT’S TIME TO INVEST!. Christoph Pircher Head of Corporate Relationship Management Department II Raiffeisen banka a.d. Begrade, Serbia. 1. SERBIA AT A GLANCE. ABOUT SERBIA. Total number of inhabitants (last official census taken in 2002) Serbia - 7.498.001 Belgrade - 1.576.124

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SERBIA, IT’S TIME TO INVEST!

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  1. SERBIA, IT’S TIME TO INVEST! Christoph Pircher Head of Corporate Relationship Management Department II Raiffeisen banka a.d. Begrade, Serbia

  2. 1. SERBIA AT A GLANCE

  3. ABOUT SERBIA Total number of inhabitants (last official census taken in 2002) • Serbia - 7.498.001 • Belgrade - 1.576.124 • Individual income (2006 statistics): • Serbia – gross 387 EUR, net 265 EUR • Belgrade – gross 487 EUR, net 337 EUR • Unemployment rate in Belgrade (2006): 18.0% • Unemployment rate in Serbia (2006): 28% *Source: www.siepa.sr.gov.yu

  4. MARKET ACCESS • Serbia is in the center of CEFTA – duty free access to 30 million people market • Duty free exports to the EU • FTA with Russian Federation - market of 150 mil. people. Limited number of exceptions: complete vehicles, confectionery, some alcoholic beverages • Customs operations have been improved by electronic database, electronic declarations, and imports & exports time drastically shortened Source: SIEPA

  5. COMPETITIVE LABOR COST 2006 Average Gross Salary: 387 EUR 2006 Average Net Salary: 265 EUR Source: SIEPA

  6. PRIVATIZATION First phase • Privatization of cement factories which took place in 2001 onwards: • Holcim bought Fabrika Cementa Novi Popovac • Titan bougth Fabrika Cementa Kosjeric • Lafarge bought Fabrika Cementa Beocin • Second phase • Privatization of breweries and tobacco industry, major deals: • Philip Morris (Altria) bought DIN • BAT bought DIV • Carlsberg, INBEV and Efes bought major breweries

  7. MACROECONOMIC DATA FOREIGN DIRECT INVESTMENTS (in Mill. Of US $)

  8. MAJOR FOREIGN INVESTORS

  9. 2. BANKING SECTOR IN SERBIA

  10. BANKING AND ECONOMY BANKS ASSETS - Share in GDP CONCLUSION: Due to the closure of large banks and restructuring process undergoing in state-owned banks in Serbia the banks asstets‘ participation in Serbian GDP has declined. Nevertheless, result of new entrants into Serbian banking sector, this ratio is expected to increase.

  11. BANKING AND ECONOMY TOTAL CREDITS - Share in GDP CONCLUSION: Evident decrease of this indicator is a result of assets restructuring of state-owned banks (i.e. Write-offs of bad loans). Following the resructuring of banking sector and presence of foreign banks, participation of total credits in GDP has begun to increase

  12. BANKING AND ECONOMY RETAIL LOANS - Share in GDP CONCLUSION: Retail market segment is the most dynamic in term of growth rates. The large increase is primarily generated through much larger supply of retail loans in recent years. There is still enough scope for further growth.

  13. DEVELOPMENT OF SERBIAN BANKING SEKTOR in 2007 Concentration level in Serbia banking sector over 5% of assets 2% - 5% of assets Below 2% of assets Number of banks

  14. DEVELOPMENT OF SERBIAN BANKING SEKTOR in 2007 Share of foreign-owned banks in the total assets in Serbia • Furthermore, due to the increased competition (and cross-border financing)as well as quality market dispersion, share of 5 biggest banks in the aggregate assets still shows a decreasing trend. Share of 5 biggest banks in the total assets in Serbia • In mid-2007 drop of the share of foreign-owned banks was recorded for the first time since 2004, which primarily results from foreign borrowing and capital increase by local banks. Source:Raiffeisen bank

  15. BANKING AND ECONOMY EUR/RSD ANALYSIS AND FORECAST • In 2006 RSD nominal appreciation towards EUR was 7.66% • In 2007 RSD deppreciated against EUR nominally for 0.90% (31.12.2006-17.09.2007) • It is expected that the EUR/RSD would be around 79 level at the end March 2009 • 2007 CPI was 11.9%

  16. MONETARY POLICY and EFFECTS ON INTEREST RATES Development of reference i.r. on dinars (2006 – 2007) 19,13% 16,06% 18,00% 15,25% Izvor:NBS

  17. MONETARY POLICY and EFFECTS ON INTEREST RATES Growth of EURIBOR (2006 – 2007) Source:Reuters

  18. 3. MACROECONOMIC OVERVIEW

  19. REAL GDP GROWTH - in SERBIA (% yoy) • the economic activity continues to “deliver” strong numbers. GDP growth yoy in H1/07 was 7.6% with financial intermediation and trade contributing close to 20%. • due to the estimated decrease in the agricultural production (8%-10% yoy) forecast for the GDP growth in 2007 is revised to the level of 6.5%.

  20. REAL GDP GROWTH – comparision to other countries

  21. 4. RAIFFEISEN BANK IN SERBIA

  22. RAIFFEISEN BANKA A.D. • Established in 2001 as the 1st bank with 100% foreign capital • More than 500.000 clients • 91 branches • Universal bank with 4 business segments: • Corporate Banking • Retail Banking – Private individuals • Retail Banking – SMEs (small & micro enterprises and professionals) • Treasury & Investment Banking • Raiffeisen Leasing d.o.o. established in 2003 • Raiffeisen Future a.d. established in 2006 • Raiffeisen Invest a.d. established in 2007

  23. LOAN PORTFOLIO INCREASE of Raiffeisen Int. (RBRS+RIEEF) in Serbia * As at:30.06.2007. In million EUR Source: Raiffeisen banka a.d. * the amount does not include RZB portfolio

  24. RIEEF – new source of financing from abroad • Thanks to the possibility of providing direct financing from abroad, Raiffeisen Group has managed to offer its clientsvery attractive and highly competitive interest ratesin the market. Growth of RBRS and RIEEF lending in Serbia in millions of euros Source:Raiffeisen banka

  25. Market position and market share * RI (RBRS+RIHO) u Srbiji

  26. TOP 15 banks by total (gross) loans RIHO * * Since there are no official statistics for cross border loans - no available data for other banks here As at: 30.09.2007. In EUR million Source: NBS Prepared by: Raiffeisen banka

  27. TOP 15 banks by total equity * *In Q4 2007 a significant capital increase of EUR 90 million was realized As at: 30.09.2007. In EUR million Source: NBS Prepared by: Raiffeisen banka

  28. CORPORATE BANKING DIVISION Started with operations in July 2001. godine • Leading bank for corporates: • 64of top100 domestic companies are banking with Raiffeisen banka • 79 of top100 foreign investors are banking with Raiffeisen banka *Raiffeisen International in Serbia (RBRS + RIEEF)

  29. SE&M – Small & Micro Enterprises and Professionals started with operations in January 2003. one of leading banks in terms of loan portfolio focus in 2008 will be on: increase in the scope of cooperation with micro clients via intensified loan activities, increase of client deposit base, further development of long-term relations with existing clients service quality improvement, new products introduction and even larger process efficiency aimed at client’s satisfaction increase

  30. TREASURY & INVESTMENT BANKING DIVISION

  31. RAIFFEISEN LEASING D.O.O. • Founded in February 2003 and started with full-fledged operations in August 2003 • Shareholders: • 50% Raiffeisen banka a.d. • 50% Raiffeisen-Leasing International GmbH, Vienna • Serving all three main client segments: • corporates, private individuals and SME • Branches: Belgrade, Novi Sad, Cacak, Nis, Subotica and Kragujevac • Market Share:22.82%

  32. Branch development – 91 branches in 8 regions (as at: 31.Dec. 2007) • 5.Region Central and West Serbia • Šabac • Ruma • Sremska Mitrovica • Loznica • Valjevo • 6.Region Šumadija • Kragujevac (2) • Kruševac • Jagodina • Aranđelovac • Paraćin • 7.Region South-West Srbija • Čačak (3) • Novi Pazar • Kraljevo • Užice • Ivanjica • Gornji Milanovac • Prijepolje • 8.Region South Serbia • Niš (3) • Pirot • Vranje • Leskovac • Zaječar • Bor • 1.Region Belgrade I • Beograd (19) • Pančevo • Grocka • Požarevac • Smederevo • Vršac • 2.Region Belgrade II • Beograd (19) • Obrenovac • Stara Pazova • Lazarevac • 3.Region North Vojvodina • Subotica • Sombor • Kikinda • Bačka Topola • Senta • 4.Region South Vojvodina • Novi Sad (5) • Bačka Palanka • Zrenjanin • Vrbas • Inđija 125 branches by 2010.

  33. 5. INVESTMENT OPPORTUNITIES – REAL ESTATE

  34. OFFICE MARKET – General perspective • Serbian office market is mainly concentrated in the capital Belgrade and is split into 2 areas: • Old Belgrade (“downtown”) • New Belgrade • The majority of development activity is focused on New Belgrade • Prime office market (Class A) enjoys high pace of growth • In comparison to other European cities alike, Belgrade Class A office stock is relatively low: *Thereof 100.000 m2 is under construction Source: Wikipedia

  35. OFFICE MARKET – Market Demand & conditions Demand for rental space: • Belgrade office market is characterized by relatively modest demand up to now: • Market demand amounted toapproximately 25.000 sqm in 2006 • Number of international occupiers looking to get a foothold on the Serbian market Price: • Prime A class rents’ net prices are similar to comparable eastern European cities such as Bucharest/Warsaw and amount to: • EUR 21/sqm/month in Old Belgrade • EUR 19/sqm/month in New Belgrade • Following factors influence price the most: • Quality of works, availability of parking and others • Size of leasable area • Duration of lease agreement (longer the lease period = lower the rent) Vacancy: • The amount of new development in New Belgrade is starting to undermine rental levels as landlords compete for tenants • Vacancy is around 9% and is likely to increase further with new developments

  36. RETAIL MARKET – SHOPPING CENTRES / MALLS • Compared to European standards, retail market in Serbia is in its early stage of development: • It offers an excellent market potential, which is expected to grow up to 300,000 sqm in 2010 • Retail sector is still fragmented and still dominated by local players, which is usual for a market evolving from a controlled economy to a free market • Number of retailprojects is currently underway(among the largest are Delta City; MPC Shopping mallUšće; Idea, Verano-Vero etc.) • Recent trend: new supermarkets aroundthe city.

  37. RETAIL MARKET – SHOPPING CENTRES / MALLS Rental Prices • Prime rents in Belgrade aresome of the lowestin Eastern European capital cities: • There is nomarket evidence for supermarket, hypermarket lease transactions; however the price in range of EUR 7-11 per sqm should be treated as reliable

  38. RESIDENTIAL PROPERTY MARKET • The residential inventory in Belgrade has shown a steadily increasing trend over the past few years. Some new residential development is happening in Novi Sad and Niš. Attractive Locations • The New Belgrade area is becoming increasingly popular (cca. 800 new flats have been constructed within the last two years and cca 1.800 units are under construction). • Other attractive locations include the city centre, Čukarica, Zvezdara, Dedinje. Vračar, Senjak, Banovo Brdo and Voždovac • New residential developments are mostly built to a medium standarddue to purchasing power of citizens.

  39. RESIDENTIAL PROPERTY MARKET • Sale prices ranges: • Up to EUR 1.300/sqm in the city periphery • EUR 2.000–EUR 2.500/sqm in the city centre, Vračar, Dedinje, Senjak • EUR 1.300 – EUR 1.900/sqm in New Belgrade • Average rents for good-quality premises in prime locations are between EUR 10/sqm/month -EUR 18/sqm/month.

  40. INDUSTRIAL PROPERTY MARKET / WAREHOUSES • The underdevelopedindustrial market is rapidly changing as requirements increase for distribution warehouses: • Needed by foreign investors attracted to Serbian market due to cheaper labour and favourable tax regime • To serve the expanding retail and service sectors • Also driven by increase market activity of third-party logistics providers • Modern logistics developments are mostly owner-occupied. • Distribution warehouses and light-industrial properties are located: • Along important traffic links: in Krnješevci and Šimanovci districts • In the Port of Belgrade • Outside of Belgrade, industrial and technology parks have been developed in the regional cities - Novi Sad, Vršac and Niš • The total stock of modern warehousing in the greater Belgrade area is estimated to be less than 90.000 sqm (mostlybuilt in last three years as owner-occupied projects)

  41. INDUSTRIAL PROPERTY MARKET – Market Demand Supply: • Market is undersupplied and attracts attention of both domestic and foreign developers. Difficulties in finding a site large enough and security of land ownership are the major obstacles for market penetration of international developers. Price: • Industrial rents can reach EUR 8/sqm/month and more for prime modern space. • Rents for old non-refurbished warehouses, mainly located in Belgrade’s port, range between EUR 3 and EUR 5 /sqm/month Vacancy: • Currently close to zero as majority is owner occupied. Expected to increase as large amount of old stock may become empty as tenants upgrade their facilities / to be converted into residential or office space

  42. WHY TO INVEST NOW? • Political environment should get more stable • Interesting market in terms of population and growth rates • Partners you need are already here • First wave of Greenfield investments – still industries which are underserved • In Belgrade good human resources available – very similar culture to ours

  43. SERBIA, IT’S TIME TO INVEST! THANK YOU FOR YOUR ATTENTION!

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