Contents:

Executive summary 1. Residential real estate stock Slide 1: Residential real estate stock in Poland – Overview (2002 Census) Slide 2: Housing stock by living space and by number of rooms(2002 Census) Slide 3: Housing stock by the year of construction and by the average number of inhabitants (2002 Census) Slide 4: New dwellings completed and the total number of real estate deals, 2005-2008 Slide 5: New dwellings completed by regions, Q1-Q3 2008 Slide 6: Growth rates of residential real estate prices in key cities, 2005-2008 2. Retail lending and mortgage market Slide 7: Mortgage lending penetration benchmarks - International comparison, 2007 Slide 8: Total lending to households by client sub-segments (individuals, entrepreneurs, farmers), 2002-2008 Slide 9: Total lending to households by type of loan, 2002-2008 Slide 10: Housing loans to households (mortgage), split by currency, 2002-2008 Slide 11: Number of new housing loans, average loan size, value of new loans 2005-2008 Slide 12: Mortgage loans stock by value of loan, 2007 Slide 13: Mortgage loans stock by income group of the lender, 2007 Slide 14: Non performing mortgage loans evolution, 2005-Q3 2008 Slide 15: Top players (market share>5%) on the housing loans market, 2008 Slide 16: Role of financial intermediaries in housing loans distribution, 2006-2007 3. Regulatory issues, interest rates and banks offers Slide 17: Regulatory issues: Limitations of mortgaage loans - “Rekomendacja SI, SII,T” Slide 18: CHF & PLN Inter-bank interest rates, 2006-2008 Slide 19: CHF/PLN exchange rate, 2000-2008 Slide 20: Lending margins evolution, 2007-2008 4. Forecast Slide 21: Housing loans value forecast, 2009-2011 Methodological note

Summary:

- Deficit of residential real estate. A severe deficit of residential real estate is nowadays one of key social problems in Poland. Around 38 million inhabitants or 14 million households live in ~12 million populated dwellings, meaning a deficit of ~1.5 - 2 million dwellings. The situation looks even worse, when taking into consideration, that existing infrastructure is on average old, partially devastated and in many cases lacking basic amenities: running water or canalization. In 2007 the supply of new dwellings slightly increased (134,000 completions), but it is still far from satisfying the gap - Demand for mortgage lending. In 2007 the demand for mortgage lending kept growing quickly. Private individuals took ~ PLN 54 bn in new mortgage loans, driving the total value of outstanding mortgage of households to PLN 117 bn (EUR ~32 bn). Sales of new loans were driven both: by increasing ticket size (+25% :CAGR 07/05) and increasing number of clients (+24% :CAGR 07/05) - Supply of mortgage lending. The mortgage lending market is competitive, since almost all retail banks and increasing number of intermediaries are nowadays fighting for mortgage clients. Despite several seasonal promotions and special deals offered to new customers, the average lending margins remain relatively stable on a solid level of: 1.2-1.4%. At the same time the quality of loans is still very good with NPLs below 2% of total lending portfolio - Future opportunities. Increasing wealth of individuals (wages growth >10% yoy) and deficit of residential real estate are very likely to drive the demand for new mortgage lending in the future. The recent stabilization of real estate prices in top cities will make it difficult for banks to repeat the extreme growth rates of new mortgage recorded in 2007 and 2006. Moreover a regional shift in new lending demand structure towards smaller locations will require banks to adjust their distribution networks accordingly. The author expects that mortgage lending portfolios of banks will keep growing at ~xx% p.a. within next two years, rising to PLN yyy bn in nominal terms in 2009

Companies Mentioned

- Dombank - Getinbank - Pekao - BPH - GE money - BRE bank (mBnak, Multibank) - Millennium - Kredyt Bank - PKO Bank Polski