Contents:

Slide 1: Executive summary 1. Macroeconomic overview Slide 2: The State Union of Serbia and Montenegro Slide 3: Key macroeconomic indicators, 2000-2006 Slide 4: Foreign trade, C/A balance, FDI, 2000-2006 Slide 5: Market interest rates, 2000-2006 Slide 6: Wages and unemployment, 2001-2006 Slide 7: Stock market, 2005-2006 2. Banking market Slide 8: CEE banking markets: Size vs. growth - International comparison, 2006 Slide 9: CEE banking penetration benchmarks - International comparison, 2006 Slide 10: Serbia banking assets: Nominal values and GDP penetration, 2002-2006 Slide 11: Serbia banking market concentration – Banks by size groups, Herfindahl-Hirschman Index, 2006 Slide 12: Top 12 banks ranked by assets, 2006, market shares and ownership Slide 13: Client deposits evolution, 2001-2006 Slide 14: Client loans evolution, 2001-2006 Slide 15: Capital adequacy ratio and non-performing loans, 2001-2006Q3 Slide 16: Mandatory reserve policy, 2000-2006 3. Retail banking Slide 17: Households deposits structure and evolution, 2001-2006 Slide 18: Households loans structure and evolution, 2001-2006 Slide 19: Mortgage lending, 2004-2006Q3 Slide 20: Personal financial assets (PFA) value and structure, 2006 Slide 21: Payments infrastructure (POS, ATM) and cards evolution, 2004-2006 4. Corporate banking Slide 22: Corporate deposits structure and evolution, 2001-2006 Slide 23: Corporate loans structure and evolution, 2001-2006 5. Banks profitability Slide 24: Average interest spread evolution, 2001-2006 Slide 25: Commercial banks revenue structure and profits, 2006 Slide 26: Banking system profitability tree, 2004-2006: Income statements items as percent of average assets Slide 27: Top 5 banks comparative profitability tree, 2006 : Income statement items as percent of average assets 5. Banks valuation Slide 28: Banking M&A deals in Serbia (1/3) Slide 29: Banking M&A deals in Serbia (2/3) Slide 30: Banking M&A deals in Serbia (3/3) 5. Top banks profiles Slide 31: Bank profiles: Raiffeisen Bank Slide 32: Bank profiles: Banca Intesa (Delta Banka) Slide 33: Bank profiles: Komercijalna Banka Slide 34: Bank profiles: Hypo Group Alpe-Adria Slide 35: Bank profiles: UniCredit bank 6. Mid-term forecasts Slide 36: Commercial banks assets forecast, 2007-2009 Slide 37: Households deposits and loans forecast, 2007-2009 Slide 38: Corporate deposits and loans forecast, 2007-2009 7. Methodology note

Summary:

Stable growth of the economy. Despite increasing political tensions, unresolved issues including failed State Union with Montenegro and uncertain status of Kosovo, the Serbian economy continues to grow fast. The average GDP growth rate remained stable (~6%) during 2005-06, and the mid-term forecasts indicate similar growth for the near future. A consequent restrictive policy of the Central Bank has contributed to the drop of inflation rate to a single digit value at the end of 2006 and it has also helped the Dinar to gain in value against Euro. Some other issues like high unemployment and C/A imbalance still need to be addressed. Fortunately thanks to continued privatization, attracting FDIs and increased transfers from emigrants, most of the foreign trade gap can be covered. Banking market growth. The banking market is developing rapidly since the year 2004. The annual assets growth rate during 2004-2006 surged to nearly 50%. In the league table of most rapidly growing banking markets in the CEE15 area Serbia has advanced to the second place after Romania. In 2006 most of the growth came from surging deposits, in particular in the retail segment as well from retail lending with particularly strong retail mortgage. The ownership changes and increased activity of foreign banks is leading to gradual growth of the market concentration. Out of top 12 banks, 11 are controlled by foreign industry investors and most of them belong to strong pan-EE players like UniCredit or Raiffeisen. In 2006 the Central bank policy was very restrictive. High interest rates and extreme required reserve ratios (up to 45% in case of FX deposits) have hampered ability of commercial banks to expand lending. As a result major players were looking for additional funding abroad and offered direct financing from abroad provided by their parent banks. Good future prospects. Despite the recent rapid market growth, if compared to other CEE15 banking markets, Serbia has still a long way to go. Current banking penetration benchmarks (assets per capita: <2 thousand EUR) indicate that there are still significant growth opportunities laying ahead. Under-penetrated products like mortgage (2% of GDP) or consumer credit ( 8% of GDP) are extremely promising. At the same time the use of cash (~23% of households deposits) is dropping in favor of current accounts and cards, thanks to increasing client’s confidence. We expect the banking sector in Serbia (assets) to grow on average 26% p.a. through 2009. Most of the growth will come from households segment although a strong performance of corporate deposits is prdicted.

Companies Mentioned

- Raiffeisen banka a.d. Beograd - Banca Intesa a.d. Beograd - Hypo Alpe-Adria-Bank a.d. Beograd - Komercijalna banka a.d. Beograd - Unicredit Bank Srbija a.d. Beograd - Eurobank EFG štedionica a.d. Beograd - Societe Generale Yugoslav Bank a.d. Beograd - Vojvodanska banka a.d. Novi Sad - ProCredit Bank a.d. Beograd - Agroindustrijska komercijalna banka AIK banka a.d. Niš - Alpha Bank Srbija a.d. Beograd - Volksbank a.d. Beograd - National Bank of Greece a.d. Beograd - Kulska banka a.d. Novi Sad - NLB Continental banka a.d. Novi Sad - Erste Bank a.d. Novi Sad - Meridian Bank-Credit Agricole group a.d. Novi Sad - Piraeus Bank a.d. Beograd - Poljoprivredna banka Agrobanka a.d. Beograd - Banka Poštanska štedionica a.d. Beograd - Panonska banka a.d. Novi Sad - NLB LHB banka Beograd a.d. - Univerzal banka a.d. Beograd - Metals-banka a.d. Novi Sad - Laiki Bank a.d. Beograd - Privredna banka Beograd a.d. Beograd - Srpska banka a.d. Beograd - Akcionarsko društvo Zepter banka Beograd - Jugobanka Jugbanka a.d. Kosovska Mitrovica - Cacanska banka a.d. Cacak - Findomestic banka a.d. Beograd - Privredna banka a.d. Pancevo - Credy banka a.d. Kragujevac - JUBMES banka a.d. Beograd - A banka a.d. Beograd - Niška banka a.d. Niš