#1VUB COVERED BONDS INVESTOR PRESENTATION Bratislava, June 2019 กกก Bank of INTESA SANPAOLO VÚB BANKA#2HIGHLIGHTS A National Champion in a Fast Growing Economy Slovakia is an A-rated country and one of the most open economies among the members of the core Eurozone VUB is the second-largest banking group in Slovakia with a strong market share in all the key areas: total assets (20.4%), gross loans (21.4%), housing loans (23.8%), deposits (18.5%), asset management (18.3%) and branches (18.1%). Its significant sales force is based on 207 domestic branches and a foreign branch office in Czech Republic Strong Credit Rating based on good financial position and good profitability VUB is rated A2 by Moody's, based on its good economic and financial figures: as of Dec18 total assets amounted to EUR 16.4 bln. Profit as of Dec18 was EUR 156 mln Robust Capital Structure VUB has a strong capital structure compared to its peers, with a CET1 ratio at 15.3% and Total Capital Ratio of 17.6% as of Dec18, well above regulatory requirements Solid growth in Loans to Customers driven by mortgage activity As of Dec18, 72.8% of Retail Loans was represented by mortgages: number of housing loans were 117,491 (+8.3% YoY) and housing loans outstanding amounted to EUR 6.2 bln (+16% YoY) Market Leader in the Covered Bond Market VUB has the biggest mortgage bonds portfolio in Slovakia with a 100% Residential Real Estate mortgage pool. As a result, it has the largest Covered Bond book in the sector (15.7% of its liabilities vs. 5%-7% reported by its top three peers) VUB has EUR 2.3 bln of outstanding covered bonds (the largest amount outstanding in Slovakia), which are rated Aa2 by Moody's. Mortgage bonds issued before 2018 were transferred to the new Covered Bond Programme according to the new Slovak legislation on covered bonds Strong Foreign Shareholder Support VUB has a strong shareholder support from Intesa Sanpaolo, one of the leading European groups with a worldwide network of over 5,300 branches, approx. 19.4 million clients, and a strategic presence in the CEE 2#3CONTENT Slovakia at a Glance Intesa Sanpaolo Group VUB at a Glance VUB's Mortgage activity VUB's Covered Bonds 3#4Geographical Socio-Economic info Memberships SLOVAKIA COUNTRY'S ESSENTIALS Basic information Official Name: Slovak Republic (Slovenská republika) Area: 49,037 km² Population: 5.4 million Capital: Bratislava (~400,000) Other cities: Košice (~240,000), Prešov (~91,000) Official Language: Slovak Currency: Euro (EUR) since January 1, 2009 Ethnic groups: • 80.7% Slovaks • 8.5% Hungarians • 10.8% Roma, Czechs, Rusyns, others Slovakia is a member of: • UN, since January 1993 European Union, since May 2004 • NATO, since March 2004 Political framework Form of State: Parliamentary Republic Political Structure: President, unicameral National Council of the Slovak Republic with 150 seats serving four-year term Elections: last parliamentary elections held in March 2016 (next due in 2020) Three major parties: • SMER - sociálna demokracia with 49/150 seats in the latest elections of March 2016 • Sloboda a Solidarita with 21/150 seats • OĽANO-NOVA with 19/150 seats President: Mr. Andrej Kiska Prime Minister: Mr. Peter Pellegrini Governor of the Slovak National Bank: Mr. Peter Kažimír 4 Structure Parliament Relevant persons#5ECONOMY - SMALL, FAST CONVERGING... Real GDP growth (% y/y) → A2/A+/A+ (Moody's/S&P/Fitch) ratings comfortable in investment grade → EUR 90.2 bln economy (as of 2018) credit 12.5% 10.5% 8.5% 6.5% GDP per capita in euro terms more than doubled in the past decade, since Y2000 it nearly quadrupled (from EUR 4,100 to EUR 15,600 in Y2017) → GDP per capita in purchasing power standard (PPS) increased from 43% of Euro Area average in Y2000 to 72% in Y2017 GDP per capita in PPS (EA=100; in %) 4.5% 2.5% 0.5% -1.5% -3.5% -5.5% -7.5% 1996 7 1998 2000 2.8% Slovak GDP by components (% share and % y/y change) 2002 2004 2006 2008 2010 2012 2014 2016 2018 Change Country Y2000 Y2015 Y2016 Y2017 '17/'00 7.0% Slovakia 43 72 72 72 29 5.0% Czech Rep. 61 82 82 Hungary 45 64 63 ཚ ¢ 84 23 64 Poland 40 64 64 66 25 222 .8% 3.0% 1.5% 1.0% -1.0% Germany 104 117 117 116 12 Austria 111 121 121 119 8 EU 28 86 94 94 94 8 2∞∞ -3.0% -5.0% Notes: Euro area - changing composition 2011 2012 2013 2014 Changes in inventories Net export Source: Eurostat 2015 2016 2017 Consumption Fixed investments 3.2% 4.1% 2018 5 Slovakia Euro Area 4.1% 1.9%#63.0% 1.0% -1.0% -3.0% -5.0% -7.0% Inflation (% y/y) ...WITH STABLE MACROECONOMIC ENVIRONMENT 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% 2005 2006 2007 2008 2009 2010 2011 Unemployment (%, all-economy) Slovakia 17.0% Euro Area 15.0% 13.0% 2.7% 11.0% 1.4% 9.0% 7.0% 2012 2013 2014 2015 2016 2017 2018 2019 Current account balance (%GDP) Source: Eurostat, Slovak Stats Office -9.0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 5.0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 12.0% Disposable income (% y/y, nominal) 10.0% 8.0% -2.5% 6.0% 4.0% 2.0% 0.0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 чиг 2015 2016 2017 2018 6 $5.8% Slovakia Euro Area 7.8% 5.7%#790.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Cyprus UK Ireland Greece Malta Source: Eurostat, Slovak Stats Office Italy ECONOMY IS EXPORT-ORIENTED, CLOSELY LINKED TO GERMANY → Slovakia is one of the most opened economies in Europe. Exports and imports relative to GDP amount to 189% (as of 2017), the highest level among the CE-4 countries → 86% (as of 2017) of Slovak exports go to the EU, the highest share among EU members → Germany is Slovakia's most important trading partner. It directly buys 21% of Slovak exports and probably a similar share indirectly (being a key importer of Slovakia's next key trading partners) Share of export to EU in total exports (% share, as of 2017) Lithuania Germany France Sweden Finland Denmark Croatia Spain Bulgaria Latvia Austria Estonia Belgium Portugal Netherl. Slovenia Romania Poland Hungary Czech Rep. Luxemb. Slovakia 85.7% Structure of Slovak exports by countries (% share, as of 2017) Asia 4.6% UK 6.0% Other 25.4% PL HU 7.6% 6.0% FR AT IT 6.3% 6.0% 6.0% 7 DE 20.6% CR 11.5%#8FISCALLY, SLOVAKIA IS IN A GOOD SHAPE... Slovakia meets Maastricht criteria: →in 2018 Deficit to GDP ratio was 0.7% while Debt to GDP was 48.9% 180.0% 160.0% 140.0% → in 2019 government targets a balanced budget 120.0% 100.0% 80.0% 60.0% 40.0% Public debt in comparison (% GDP, as of 2018) 48.9% 80.0% → Beyond EU requirements, in 2011 Slovakia adopted a constitutional law preventing debt to breach 60% of GDP and established an independent fiscal watchdog Public deficit development 1.0% 0.0% -1.0% -2.0% -3.0% -2.8% -4.0% -5.0% -6.0% -5.8% -7.0% -8.0% 2005 -2.4% -4.4% (% GDP) IL -0.8%-0.7% -2.2%. -2.7% 2.7%-2.6% 20.0% 0.0% Estonia ☐ Bulgaria Luxembourg Czechia 60.0% 0.0% 55.0% 50.0% 45.0% 40.0% 34.1% 35.0% 30.0% 25.0% 20.0% 2006 2007 2008 2009 2010 -7.5% -4.3%-4.3% 2011 2012 2013 2014 2015 2016 2017 2018 Source: Eurostat, MinFin SR 2019F* 2005 2006 2007 31.0% 30.1% 28.5% Latvia Malta Sweden Denmark Lithuania Romania Poland Slovakia Netherlands Finland Germany Ireland Slovenia Hungary Austria EU Croatia Euro area (19) UK Spain France Public debt development (% GDP) 52.2% 54.7% 53.5% 2.2%51.8%50.9% 43.7% 41.2% 36.3% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019F* 80 48.9% 45.4% Belgium Cyprus Portugal Italy Greece#9...WHICH IS APPRECIATED BY INVESTORS Slovakia is A-rated country and one of the most opened economies among the members of the core Eurozone 3.0% 2.5% 2.0% 1.5% In June 2018, Slovakia government was the first in CEE and one of the only five countries in Europe to successfully issue a 50-year bond 1.0% 0.5% 0.0% -0.5% Evolution of Slovakia's rating by S&P 27.5.2014 Yields development (10y maturity, % p.a.) 100 COORDON 27.8.2014 27.11.2014 27.2.2015 27.5.2015 27.8.2015 27.11.2015 27.2.2016 27.5.2016 27.8.2016 27.11.2016 27.2.2017 27.5.2017 27.8.2017 27.11.2017 Slovakia Government Generic 10y Slovakia - Germany (Spread in bp), rhs Germany Government Generic 10y Yields in comparison (10y maturity, % p.a., as of Apr 29th 2019) 27.2.2018 27.5.2018 27.8.2018 27.11.2018 27.2.2019 27.5.2019 2000 BBB+ A- A A+ 3.0% 2001 BBB+ 2.5% A- A A+ 2.0% 2005 BBB+ A- A A+ 1.5% 1.0% 2008 BBB+ A- A A+ 0.5% 0.0% 2012 BBB+ A- A A+ -0.5% 2015 BBB+ A- A A+ Germany Netherlands Finland Austria France Belgium 0.57% Ireland Slovakia Latvia Slovenia Spain Portugal Czech Rep. Italy Poland Hungary 9 Source: NBS, Bloomberg#1020.0% 18.0% 16.0% 14.0% Czech Republic Source: NBS, ECB, ISP 8.0% 10.0% 12.0% 2010 2010 2011 2011 2012 2012 Hungary BANKING SECTOR IS STABLE, WELL CAPITALISED AND PROFITABLE Funding of banks in Slovakia is dominated by retail and corporate deposits, LTD is 100% Gross NPLs in Slovakia are below 5% of total loans, CAR is around 17% Slovak banks are profitable, albeit in recent years profits came under pressure due to bank levy, intense competition and margin pressure Principal funding sources of Slovak banking sector (%, as of Nov 2018) other equity 10.6% issued bonds 1.4% 6.6% interbank deposits 6.8% 2013 2013 2014 Poland 2014 2015 Tier I ratio (%) 2015 2016 2016 Romania Slovakia 2017 2017 2018 Slovenia public deposits 3.6% 71.1% private deposits 20.0% ROE (%, as of 2017) 18.0% 16.0% 16.0% 14.0% 12.0% 10.0% 8.0% וו RU 6.0% 4.0% 2.0% 0.0% H HR PL SL Slovakia BH 10.1% RS RO O HU 10#11HOUSEHOLD DEBT IS RISING, YET DEBT SERVICE REMAINS MANAGEABLE Slovak household debt has been for years increasing at the fastest clip in the EU, debt relative to income and GDP though remains below Western EU countries Thanks to rising income and low interest rates, debt service remains at a manageable levels and NPLs remain on a declining trend Household debt to income (%, change 2017/2007, stock as of 2017) 37.7% Slovakia Netherlands 201.3% 37.6% Luxembourg Luxembourg 170.1% 33.9% Sweden Sweden 163.0% 25.7% Belgium Cyprus 162.6% 24.3% Poland Ireland 147.1% 21.2% Cyprus UK 125.1% 19.6% France Finland 116.4% 19.1% Finland Belgium 104.6% 12.3% Czechia Portugal 101.3% Debt service to income (%, 2014 HFCS survey) 5.6% Italy Spain 100.4% 4.4% Slovenia Euro area 93.9% 2.7% Austria France 93.3% 0.0% Euro area Austria 84.9% -5.1% UK Germany 82.5% 30.0 % -5.5% Bulgaria Estonia 69.5% 25.0% -7.1% Lithuania Slovakia 67.9% -9.9% Germany Italy 61.1% 20.0% -13.8% Netherlands Poland 60.0% 15.0 % 11.0% 9.0% -16.5% Hungary Czechia 56.6% -17.7% Estonia Slovenia 45.0% 10.0 % -23.4% Portugal Lithuania 36.2% -34.0% Spain Latvia 35.9% 5.0% -36.3% Latvia Hungary 33.4% -56.4% Ireland Bulgaria 32.7% 0.0% EE PL GR SK LV IS IT MI FI Euroarea BE NL HU CY -60%-40%-20% 0% 20 % 40 % 60 % 0% 100% 200% 300% 11 Source: ECB, Eurostat#121800 1700 1600 1500 1400 1300 1200 1100 1000 900 4Q06 4Q08 Source: Slovak Stats Office, Eurostat, NBS 4Q10 4Q12 4Q14 4Q16 → Slovak residential property market went through a boom and bust in the run-up to 2008 crisis and euro adoption in January 2009 Market started to recover from the bust in 2014. Since then property prices are growing ca.4-7% y/y on average, depending on methodology (NBS vs Eurostat methodology) On average house prices are yet to recover their pre-2008 level, but some segments (e.g. flats and Bratislava in general) already did Property price development (EUR per m², offered – NBS methodology) 80 000 70 000 60 000 50 000 40 000 30 000 20 000 10 000 0 25.0% Flats 20.0% 15.0% 10.0% Total 5.0% 0.0% Family houses -5.0% 4Q18 Italy Cyprus Finland France Belgium Croatia Poland Sweden Denmark United Kingdom Malta Austria Estonia Germany Luxembourg REAL ESTATE MARKET IS NOW FAST DEVELOPING, SUPPLY RESPONDS TO DEMAND... Housing under construction (units) 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Property price inflation (cumulative increase in the past 3 years, 3Q18 vs 3Q15) 30.0% Spain Romania Slovakia Lithuania Netherlands Bulgaria Hungary Portugal Latvia Slovenia 12 Czechia Ireland 20.4% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018#13-3 2Q06 3Q06 -2 -1 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 0 4Q08 1Q09 2Q09 3Q09 1 ...PRICES REMAIN BELOW,,RISK ZONE" → Most recent increase in prices compensated for earlier moderation, leaving the NBS-modelled total Composite Index of housing price development (CI_Total) in the „Boom" zone, above the „Balance" but still comfortably below the „Risk" zone 3 2 Composite index of housing price development Bubble Risk 4Q09 | 1Q10| 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 Note: CI_Total CI_Flats Only The Composite Index comprises five sub-indices. The index is calculated as the average of trend-adjusted and standardized indicators, weighted using a principal component analysis. The index level shows the deviation in standard deviations from the average, normalized to zero. The index value is categorized into one of five levels based on the current value: downward trend (below -1), balance (between -1 and 0), boom (between 0 and 1), risk (between 1 and 2) and bubble (above 2). Source: analysis of NBS 13 1Q13 2Q13 3Q13 4Q13| 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 Slump Boom Balance 1Q16| 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18#14HOUSING AFFORDABILITY STILL REMAINS REASONABLE Property price to income ratio (1Q 05=100) → Market is driven by mortgages for real homes, speculative demand is rather marginal when compared to boom/bust a decade ago. Home ownership is high at 90% (EU average is 75%) Price to income ratio is still reasonable and broadly stable in recent years Factoring in declining mortgage rates, housing affordability hovers near all time best 140 130 120 110 100 90 7.0% Rates on new housing loans (% p.a., APR) 6.0% Slovakia 5.0% Eurozone 4.0% 3.0% 2.0% Difference 1.0% 0.0% -1.0% 1-2009 1-2010 1-2011 1-2012 1-2013 Source: NBS, Slovak Stats Office 1-2014 1-2015 1-2016 1-2017 1-2018 1-2019 -20 -10 10 20 80 Long-term average тү 1Q05 3Q06 1Q08 3Q09 1Q11 3Q12 1Q14 3Q15 1Q17 3Q18 Housing Affordability Index (% vs historic average, by regions) "overvalued" 0 1Q10 1011 1012 1013 1Q14 1015 1016 1Q17 1Q18 "undervalued" -30 -40 BL --TA ―TC ―NI -ZI <-BC <-PV -KI -SR 14#15CONTENT Slovakia at a Glance Intesa Sanpaolo Group VUB at a Glance VUB's Mortgage activity VUB's Covered Bonds 15#16INTESA SANPAOLO GROUP AT A GLANCE Total Assets EUR 787,721 mln Operating Income EUR 17,875 mln 2018 Net Income Common Equity(*) Ratio Presence EUR 4,050 mln 13.6% in 38 countries Customers ~19.4 mln (of which ~11.9 mln in Italy) Branches 5,302 (of which 4,217 in Italy) Employees 92,117 DBRS Long-term: MOODY'S BBB (high) Long-term: Baa1 Short-term: R-1 (low) Short-term: P-2 Trend Long-term: Stable Outlook: Stable S&P GLOBAL RATINGS Long-term: Short-term: Outlook: FITCH RATINGS BBB Long-term: BBB A-2 Negative Short-term: Viability: Outlook: F2 bbb Negative Trend Short-term: Stable Figures as at 31 December 2018 (*) Pro-forma fully loaded Basel 3 (31.12.18 financial statements considering the total absorption of DTA related to IFRS 9 FTA, goodwill realignment/adjustments to loans/non- taxable public cash contribution of €1,285m covering the integration and rationalisation charges relating to the acquisition of the operations of the two former Venetian banks and the expected absorption of DTA on losses carried forward) 16#17INTESA SANPAOLO SOLID VALUE CREATION FOR ALL STAKEHOLDERS Clients ■ A real-economy Bank, that supports the real economy, leveraging a strong balance sheet to match healthy credit demand, and manages the financial wealth of clients with care ■ A simple yet innovative Bank, acting with a truly multi-channel model Shareholders Employees ■ A Bank with sustainable profitability in which operating performance, productivity, risk profile, liquidity and solidity/leverage are carefully balanced Strong and increasing cash dividend distribution over the course of the 2014-2017 Business Plan: EUR 1.2 bln paid for 2014, EUR 2.4 bln paid for 2015, EUR 3 bln paid for 2016 and EUR 3.4 bln paid for 2017. In the 2018-2021 Business Plan, commitment to paying out 85% of net income as cash dividends for 2018, 80% for 2019, 75% for 2020 and 70% for 2021: EUR 3.4 bln of dividends proposed for 2018 Empowered and motivated people through training, job re-allocation, acknowledgement of individual merit in career development, flexibility programs and upgrade of long-term incentives linked to productivity and results Society and Environment ■ A Bank with a distinctive identity/reputation, committed to contributing to the growth and development of the economy and society CSR deeply rooted in all business areas and staff functions, embedded in the Bank's strategy, supporting social and environmental value creation for a long-term economic development and respecting all stakeholders 17#18INTESA SANPAOLO - LEADERSHIP IN ITALY BUILT ON LONG-STANDING RELATIONSHIPS WITH CUSTOMERS ... RANKING IN ITALY 1 1 Life Premiums (1) 17.7% Loans 17.7% 1 Deposits (2) 18.1% 1 Asset Management (3) 20.9% 1 Pension Funds (1) 22.6% 1 Factoring (1) 25.6% Figures as at 31 December 2018 (1) Data as at 30 September 2018 (2) Including bonds (3) Mutual funds; data as at 30 September 2018 18#19...ON A EUROPEAN SCALE Eurozone ranking Banks' market capitalisation (EUR bln) 143.2 HSBC Banco Santander 1 Sberbank 69.8 59.9 BNP Paribas 2 56.3 Lloyds Banking Group 52.8 ING 3 45.3 UBS 43.1 Intesa Sanpaolo 4 38.0 Royal B. of Scotland 37.3 BBVA 5 36.5 Barclays 32.8 Nordea Bank 6 32.3 Crédit Agricole 7 32.2 Credit Suisse 27.8 KBC 8 27.1 DNB 27.0 UniCredit 9 26.7 Standard Chartered 23.2 Société Générale 10 21.8 ABN AMRO Group 11 20.0 SEB 19.6 Svenska Handelsb. 19.5 19 Source: Bloomberg, prices as at 28 February 2019#20INTESA SANPAOLO A CUSTOMER-ORIENTED ORGANISATION Managing Director and CEO Carlo Messina Banca dei Territori Division(*) Corporate and Investment International Subsidiary Banks Division Private Banking Division Banking Division Asset Management Division Insurance Division Stefano Barrese Mauro Micillo Paola Angeletti Paolo Molesini Tommaso Corcos (*) Domestic Commercial Banking Nicola Maria Fioravanti 20 20#21INTESA SANPAOLO THE INTERNATIONAL SUBSIDIARY BANKS DIVISION (1/2) Albania INTESA SANPAOLO BANK Albania Bosnia and Herzegovina INTESA SANPAOLO BANKA Bosna i Hercegovina Croatia mPRIVREDNA BANKA ZAGREB Czech Republic VÚB BANKA Egypt بنك الإسكندرية | ALEXBANK | Hungary CIB BANK 7.2 million Customers and 1,029 Branches in 12 Countries Moldova EXIMBANK Romania INTESA SANPAOLO BANK Romania Serbia BANCA INTESA Beograd Slovakia VÚB BANKA Slovenia INTESA SANPAOLO BANK Ukraine mon PRAVEX BANK Figures as at 31 December 2018 Strategic international presence in commercial banking in Central Eastern Europe and Middle Eastern and North African areas 21#22INTESA SANPAOLO THE INTERNATIONAL SUBSIDIARY BANKS DIVISION (2/2) PRODUCT COMPANIES เกกก CONSUMER FINANCE HOLDING CIB LEASING INTESA กาก LEASING Beograd non PBZ LEASING กาก VÚB VÚB LEASING ASSET MANAGEMENT 22 22#23CONTENT Slovakia at a Glance Intesa Sanpaolo Group VUB at a Glance VUB's Mortgage activity VUB's Covered Bonds 23#24VUB AT A GLANCE VUB Group # 2nd Largest Banking Group in Slovakia VUB Group with: Total Assets: Revenues: Net Profit: Clients: EUR 16.7 bln EUR 525 mln EUR 160 mln ≈ 1.3 mln Total assets and profitability (1) VUB Bank Key economic and financial figures: Total Assets: EUR 16.4 bln Net Profit: EUR 156 mln EUR 351 mln NII: □ROE: 13.79% □ROA: □ C/I: 1.23% 44.91% Strong Credit Ratings VUB is rated by Moody's A2, according to which VUB is profiting from its good financial condition and good profitability Moody's INTESA SANPAOLO Baa1 VÚB BANKA A2 VUB Group - Structure ISP S.p.A. (100%) Minority shareholders ISP Holding International S.A. Ownership 97.03% of VUB Bank share capital is owned by Intesa Sanpaolo Banking Group 2.97% of VUB Bank share capital is held by minority shareholders # 2nd Largest retail network in Slovakia Significant sales force based on a strong nationwide retail network with 207 domestic branches and 1 branch located in the Czech Republic (2.97%) (97.03%) VUB VUB Generali VUB Leasing (100%) Pension Fund CFH CZ (100%) (50%) Currently close to 70% of revenues are derived from Retail Banking and Consumer Finance Activities Source: (1) Individual financial statements; (2) NBS Figures as of 31 December 2018 Market Position and ranking in Slovakia(2) Strong Market share in all key product segments: #1 Gross Loans: 21.4% #2 Housing Loans: 23.8% #2 Branches: 18.1% #2 Total Assets: 20.4% #2 Asset Management: 18.3% #2 Deposits: 18.5% 24 24#25BRIEF HISTORY 1990 - 1998 1997 2000 - 2001 2002 - 2004 2004 2004-2005 2007 2013 2017 2018 2019 State owned / controlled universal bank with primary focus on commercial sector VUB as the first issuer of Mortgage Bonds in Slovakia Privatization of the bank: Intesa Sanpaolo obtained 95% share in 11/2001 Restructured and refocused under Intesa Sanpaolo ownership Purchase of CFH (Consumer Finance) Establishment of pension fund JV of VUB bank and Generali insurer, VUB Generali now 3.largest in Slovakia Purchase of BOF Leasing, rebranded as VUB Leasing since 2010 EMTN Mortgage Covered Bond Program established First sub-benchmark Covered Bond issued in Slovakia by VUB Bank Consumer Finance Holding and VUB Factoring merged with VUB Bank New legislation relating to Covered Bonds adopted in Slovakia First Slovak benchmark Covered Bond issued by VUB (included in the IBoxx_€_covered index) 25#26SECOND LARGEST IN SLOVAKIA Bank Shareholder structure Total assets Market share CAR CET1 (EUR bln) (%) (%) (%) Slovenská sporiteľňa Erste Bank 100% 17.4 21.8 17.8 14.8 Intesa Sanpaolo VUB 16.4 20.4 17.6 15.3 97.03% Raiffeisen Bank Tatra banka 12.9 16.2 17.9 14.6 79% KBC ČSOB 8.5 10.6 19.4 16.9 100% J&T Finance 51.7% Poštová banka 4.3 5.3 J&T Banka 36.4% Penta Investments Prima banka 3.6 4.5 99.5% Erste Bank 35% PSS Raiffeisen 32.5% 3.1 3.8 Bausparkasse 32.5% OTP banka OTP Bank 99.2% 1.4 1.8 Source: NBS, Individual financial statements as of 31 December 2018 26 26#27FINANCIAL FIGURES BALANCE SHEET STRUCTURE Individual Balance Sheet as of 31 December 2018 EUR mln 16,369 Cash and balances with CBs Due from Banks' 1,748 Deposits from banks 16,369 992 127 -> Deposits from customers 11,056 Loans and receivables with customers 13,325 -> Balance Sheet (BS) is showing strong performance in commercial and sales area supporting the growth in Loans and Client Deposits, supported by merge with CFH consumer loans business Due to recent change by the regulator to even out the playing field for the bank and non bank market VUB decided to incorporate non-bank CFH into the bank business - apart from car leasing - which was merged into VUB Leasing The deposits from customers are driven primarily by Retail Financial Assets consist mainly of balances with Czech National Bank and Slovak Government bonds EUR mln Other Financial Assets Other Assets 869 301 Assets -> Debt securities in issue Loans to banks represent placements of excess of liquidity mainly in Group banks Other Liabilities 2,332 380- -> Equity 1,609 Due to banks comprise long term funding from EIB, EBRD and Short Term deposits from ISP Milano Liabilities -> Debt securities issued represent issued Mortgage/Covered Bonds Development Balance Sheet Loans to Customer Customer Deposits Securities Issued +13.13% 14,469 16,369 4Q2017 4Q2018 +15.99% +9.95% +3.55% 13,325 11,488 10,056 11,056 2,252 2,332 4Q2017 Source: Individual financial statements as of 31 December 2018 4Q2018 4Q2017 4Q2018 4Q2017 4Q2018 27#28FINANCIAL FIGURES BUSINESS DEVELOPMENT EUR mln Retail -mortgage Retail other lending Loans to Customers +15.99% 11,488 11,817 12,365 12,965 13,325 Strong growth in Retail lending is driven by active participation on the Mortgage lending, in line with the Bank Strategy supported by solid increase in consumer lending. 2018 results are also impacted by the merge with CFH and its consumer loans portfolio (EUR 0.3 bln) Corporate 4Q2017 1Q2018 2Q2018 3Q2018 4Q2018 EUR mln Deposits from Customers +9.95% Corporate lending supports the overall growth strategy of the bank with stable volume and profitability growth 4Q2018 The Bank increased the base of customers deposits (YoY 10%) and thus preserved its liquidity position. In order to support further growth of loans, the Bank remains focused mainly on the retail deposits in the upcoming period. This allows the Group to focus on further improvement of the main services to customers such as loans to households, companies and municipalities 10,056 10,423 10,148 10,677 11,056 4Q2017 1Q2018 Source: Individual financial statements as of 31 December 2018 2Q2018 3Q2018 28#29CAPITAL STRUCTURE AND LIQUIDITY POSITION -> CET1 ratio reached 14.89% in 2018 8,476 8,542 9,212 17.18% 18.24% 17.18% 2.47% 2.45% 2.29% 14.73% 15.77% 14.89% Capital Structure Capital Asset Ratio (CAR) at 17.18% 2016 2017 2018 □ CET1 ratio □ Tier 2 ratio Total Capital Ratio RWA >100 >100 LCR NSFR Figures as of 31 December 2018 based on consolidated basis 17.18% 18.24% 2016 2017 2018 CAR 17.18% Liquidity Position Liquidity Coverage Ratio (LCR): well above Basel 3 requirements (set to 100%) and above recommendation of National Bank of Slovakia (buffer set to 115%) Net Stable Funding Ratio (NSFR) well above Basel 3 requirements (set to 100%) 29#30FINANCIAL FIGURES PROFITABILITY EUR mln Revenues +8.69% Operating Costs Net Interest +0.96% +10.01% 467 508 226 228 388 192 319 351 263 268 128 175 146 70 88 4Q17 1Q18 2Q18 3Q18 4Q18 4Q17 1Q18 2Q18 3Q18 4Q18 Profit After Tax and Dividend Payout 27% profit after tax 90% 80% dividend payout 4Q17 1Q18 2Q18 3Q18 4Q18 The Revenues of the bank have increased year over year. The result is also impacted by the merger with CFH The bank showed slight rise of operating costs (1%) due to the pressure on salaries partially compensated by structural interventions in other operating costs NII was primarily impacted by the low interest rates also coming from increasing competition on the Mortgage and Consumer loans market partially compensated by the increasing volumes 265 160 144 156 125 72 2016 2017 ROE (on yearly basis) -0.76% 2018 Cost Income Ratio (excl. Bank Levy) ROA (on yearly basis) -0.18% -3.02% 19.07% 14.56% 16.29% 15.20% 13.79% 47.93% 48.02% 42.95% 44.48% 44.91% 1.96% 1.40% 1.59% 1.41% 1.23% 4Q17 1Q18 2Q18 3Q18 4Q18 4Q17 1Q18 2Q18 3Q18 4Q18 4Q17 1Q18 2Q18 3Q18 4Q18 Source: Individual financial statements as of 31 December 2018 ROE down 0.76% due to decrease of the profit ROA shows negative development YoY with lower net income and increasing total assets C/I ratio decreased by 3.02% confirming the banks operational excellence maintaining its costs well under control 30#31CONTENT Slovakia at a Glance Intesa Sanpaolo Group VUB at a Glance VUB's Mortgage activity VUB's Covered Bonds 31#32ORIGINATION AND UNDERWRITING Sales force All mortgages are originated either directly through VUB branches or through commercial agreements with more than 50 external partners (have just the first contact with the client, the processing of the loan brought is done at the branch) Most of the external partners are concentrated in the region of Bratislava Underwriting & Risk Policies Property Valuation & Collateral Management All risk policies related to origination are applied equally on all mortgages regardless of their presence in the cover pool. Portfolio management and monitoring is performed on all mortgages, with possibility to distinguish between those in and out of the cover pool Credit delegated powers are fully centralized and granted only within risk management division at VUB headquarters. All mortgage applications in terms of credit are processed with steps that are either automated (by rules in risk policies) or executed by corresponding risk management roles under credit delegated powers policies Mortgage underwriting techniques includes rating cut-offs according to PDs with corresponding risk based pricing, income verification required by the local regulator including operational stress test on interest rate, Loan to Value policy based on several LGD impacting variables and their combinations, and methodology for collateral value acceptance on the top of official external evaluations Debt capacity ability to repay the loans is evaluated in accordance with valid local regulation in all cases. Income as well financial expenditures must be verified through independent source (pure client statement is not acceptable). Credit bureau information are always took into consideration (credit behavior, debt service). The 4-eye principle is followed in any case. When fraudulent characteristics are identified, case is specially investigated by fraud department Collateral valuation at loan origination: The value used as reference by VUB is the lower of (i) purchase price and (ii) collateral value resulting from an external valuation performed by an appraiser with valid license in the relevant area Such value is reviewed by an internal appraiser who may validate such value or apply additional haircut Process of collateral valuation is independent from credit decision (regulatory requirement) Collateral revaluation: Revaluation of Residential Real Estates (RRE) is performed on annually basis using a statistical model. Such model is based on (i) external market data (GfK Purchasing Power Index (PPI)) and (ii) internal market data (valuation of comparable properties made for recently approved applications) 32#33HOUSING LOAN LIFECYCLE 2ND PHASE 1ST PHASE FINAL DECISION Final pricing determination Final loan amount determination to possible LTV / Debt capacity setting CENTRAL LOAN SUPPORT conditions fulfillment verification AFTER- SALES ACTIVITIES APPLICATION Collection of documents from the borrower: • ID Income verification via third party-credit bureau or Social Insurance or confirmation on tax declaration, Information on the applicant Type of job UNDERWRITING (Internal rating and scoring) Assessment of the borrower's credit worthiness via internal scoring model, based on borrower and loan level characteristics, max. mortgage amount calculation COLLATERAL VALUATION process is independent from credit decision (regulatory requirement) COLLATERAL SPECIFICATION Purpose documents Collateral documents & External experts appraisal YES (within 72h) AUTOMATIC CONTRACT GENERATION Execution of loan & guarantor's contract and other docs, e.g. for collateral insurance CONTRACT SIGNATURE 1ST DRAWDOWN Docs necessary for disbursement given by contract | DISBURSEMENT (within app. 2-3W) Registration of the lien over the property loan disbursement possible upon the seal/pledge proposal confirmation NEXT DRAWDOWN (if in tranches) LOAN ADMINISTRATION during its maturity date: Contractual changes Repayments (partial/full) Other services Contractual/ specific conditions fulfilment ACQUITTANCE RECOVERY PROCESS Expenses Branch Risk/S1/Credit flow Back Office Each mentioned department involved VOLUME APPROVAL BY RISK DISBURSEMENT VERIFICATION Housing loans credit approving competencies Credit Analyst (≤ 130 ths), Senior Credit Analyst (≤ 250 ths), Secured Loans Analyst Team Leader (≤ 300 ths), Head of Office Retail Underwriting (≤ 350 ths), Head of Corporate and Retail Underwriting Dpt. (≤ 500 ths), Head of Risk Management Division=MB Member(≤ 3 000 ths), Corporate Credit Committee (≥ 3 000 ths) 33 33#34CREDIT SCORING TOOLS Usage of Credit risk models in the Bank The models used in the bank are covering following areas Managerial purposes (Underwriting, Monitoring, Pricing, Provisioning) → Regulatory purposes (RWA calculation) → Generally, the models enter into the processes from the origination of a loan and are used during the whole life-time of a loan as well Approval process for all segments Risk margin calculation and Pricing determination Income of client determination Loan amount determination / Debt capacity setting • • Collateral value revaluation Re-fix of loan interest rate Provisioning RWA and Capital calculation Monitoring of clients and portfolio Origination of a Loan Life-time of a Loan 34 ==#35ARREARS COLLECTION POLICY 1 Service DPD approach Service/ 30 Standard DPD approach SOFT - 60 180 DPD Standard approach 180+ DPD Hard COLLECTION collection process starts TIMING 4 weeks 4 weeks - 12 weeks (applied 3 times - every month) - - - ACTION TAKEN INTERNAL PROCESSES AND DOCUMENTS The client is contacted by phone SMS or formal letter for a soft reminder of the unpaid receivables The borrower is contacted by phone to understand the reason of the overdue Second SMS and letter sent Possible restructuring of the unpaid debt Request for payment of the unpaid The client is contacted by phone explaining the potential risk of not paying Last reminder (SMS and letter) sent out Formal request for payment of the unpaid Recording info into Credex (1) (payment promise details) Recording info into Credex (payment promise details) Recording payment promise in Credex If actions above do not succeed, client is automatically transferred to Hard Collection Module in Credex In 2018 only 0.42% of clients in Soft Collection Phase rolled to Hard Collection phase First/ Second Step HARD Up to final recovery The last pre-termination letter sent to the client If no feedback from client has been received, loan is accelerated (the whole amount becomes due and payable) After loan acceleration, client has the following alternative to work out: Voluntary repayment of the whole loan Repayment schedule COLLECTIOZ Property sold by the client: the client should sell the property by 6 months form the agreement Best choice for the Bank The whole loan amount will be repaid by the client through an updated amortisation plan The best choice for the client Monitored automatically If alternatives above do not succeed, properties are auctioned Standard process set up with Auction company - - - Worst choice for client, simple process for the Bank (1) Credex is VUB IT system designed for collection activities only - No intervention of the Court while selling the assets Collateral realisation through auction takes in average from 3 to 9 months since process triggered Final step- Auction N 35#36MORTGAGE BUSINESS FURTHER DETAILS → In the last 3 years, VUB has experienced a strong growth due to successful mortgage campaign Yearly Contracts Growth (contracts EOY) Units 97,844 2016 +10.8% 108,438 2017 +8.3% 117,491 Number of Housing Loans 2018 Yearly Outstanding Growth (outstanding EOY) EUR mln +19.9% 5,321 +16.0% 6,170 4,440 2016 2017 Outstanding of Housing Loans 2018 Visible slowdown of YoY growth in 2017 mainly due to newly introduced NBS limit on new production with LTV 80%-100% in order to mitigate negative development on real estate market values. Up to 50% share of volumes on LTV bucket 80-100% allowed since 2017/01. The final limit value (20%) on LTV bucket 80-100% with gradual reduction will be reached in 07/2019 Another macro prudential rules tightening introduced in 2018 (NBS limit on LTV 90-100% set to 0% and new NBS Limit on DTI > 8 share) in order to slowdown the trend in development of overall indebtedness of Slovak households. The maximum share of new loans for which the DTI ratio exceeds 8 is set to 10% for 1Q/2018 and will decrease to 5% (+5% if additional conditions are met) in 3Q2019 36#37CONTENT Slovakia at a Glance Intesa Sanpaolo Group VUB at a Glance VUB's Mortgage Activity VUB's Covered Bonds 37 37#38SLOVAK CB LEGISLATION AT A GLANCE NEW AD HOC COVERED BOND LEGISLATION IN FORCE SINCE JAN 2018 → The issuer - in addition to standard banking license - must obtain prior consent of the NBS to issue covered bonds → On-balance sheet segregation: cover assets remain on issuer's balance sheet but constitute a 'separate' estate The issuer must maintain a Covered Bonds Register ("Covered Bond Estate") into which assets and proceeds from the cover pool are individually recorded NBS decree established all information to be included (since Jan 2019) in the Covered Bond Register Bankruptcy remoteness: inclusion in the Register has the same effect as true sale in case of bankruptcy proceedings: the Covered Bonds Estate is not part of the bankruptcy general estate: proceeds from the cover assets may only be used to satisfy the claims of the covered bondholders → Bankruptcy proceedings do not automatically cause the acceleration of Slovak covered bonds → Dual recourse: covered bondholders have recourse against both: the Covered Bonds Estate the general estate of the Issuer 38#39SLOVAK CB LEGISLATION AT A GLANCE COVER POOL COMPOSITION Base Assets: at least 90% of the aggregate value of the cover pool (excluding the Liquid Assets) residential mortgage loans to individuals original term up to 30 years LTV up to 80% exclusion and deletion of the loans whose debtor is defaulted from the Covered Bond Register properties located in the Slovak Republic → Substitute Assets: up to 10% of the aggregate value of the cover pool less the Liquid Assets cash or deposits with NBS, ECB, EU Member state central bank and all other assets that meet conditions under Article 129 (1)(c) of EU Regulation No. 575/2013 → Hedging derivatives: cash flows and posted collateral of derivative whose purpose is to manage and mitigate currency or interest rate risk connected with issued CBs → Liquid Assets: required to cover 180-days expected negative cash flows from the CB, if any HQLA Tier 1 & Tier 2A assets under Articles 10 and 11 of EU Regulation 2015/61 39#40SLOVAK CB LEGISLATION AT A GLANCE THE COVERED BOND PROGRAMME MONITOR → Is an independent individual appointed (and revoked) by the NBS, acting on its own initiative or on the proposal of the issuer → Before issuance of CB, Programme Monitor: verifies that assets that are going to be added to the cover pool fulfill eligibility requirements issues a written certificate confirming that covered bonds are covered and that an entry in the Covered Bond Register has been made verifies issuer's compliance with all legal and regulatory requirements with regard to covered bonds → At least once a month checks: Cover assets consistency with regulatory requirements If requirements in relation to the Covered Bond Register are met → By 30 April of each year* submits to NBS a report on previous year containing, inter alia, information about issues of CB (number, volume, issue proceeds) cover pool (both composition and assets characteristics) reasons for material changes in replenishing, or elimination of assets from the cover pool estimated liabilities & stress tests calculation *starting from April 30, 2019 40#41SLOVAK CB LEGISLATION AT A GLANCE SPECIAL LEGAL INSTITUTION – COVERED BOND PROGRAMME TRANSFER → A transfer of CB programme is expected to be used mostly in special circumstances where the bank issuing CBs is subject to involuntary administration or bankruptcy proceedings → Involuntary administrator or trustee operates the CB Programme of the issuing bank and shall: cooperate with the Programme Monitor assess with due professional care whether or not the further management of the CB programme would result in an overall decrease in satisfaction of the owners of CBs Involuntary administrator/trustee can, with the prior approval of the NBS, transfer the whole CB Programme to another authorized Slovak bank Programme transfer shall be carried out within one year from the notification to the NBS. Involuntary administrator/bankruptcy trustee could request a one year extension to terminate the transfer process soft bullet extension: pending the transfer, the final maturity of the covered bonds, whose original maturity expires during the period of the transfer, will be extended by a maximum of one year (or two years in total, in case of repeated attempt to transfer) no suspension of interest payments on the covered bonds due to maturity extension If the trustee fails to transfer the CB Programme, it is entitled to transfer receivables arising under mortgage loans included in the assets of the cover pool for remuneration to bank, foreign bank, branch of a foreign bank. Acceleration and early repayment of CB are triggered as of the date the trustee terminates the operation of the bankrupt bank's business after declaration of bankruptcy which generally follows immediately after the trustee has failed to ensure realisation of the bankrupt bank's assets via the transfer of the CB programme. 41#42SLOVAK CB LEGISLATION AT A GLANCE MANDATORY TESTS *starting from April 30, 2019 • Overcollateralisation – minimum level 5% - the value of the cover pool must be at least 105% of the nominal amount of outstanding covered bonds (&related costs) Stress Test* ⚫ testing of credit risk, interest risk, currency risk, liquidity risk, counterparty risk, operative risk and risk of decrease in property's value. The parameters of the stress testing are to correspond with the parameters used in the evaluation of capital adequacy of the Issuing Bank • ⚫ carried out at least once per year Liquidity test all estimated negative cash flows, if any, during the following 180-days shall be covered with a buffer of Liquid Assets • performed on a daily basis. 42#43COVERED BOND LEGISLATIVE FRAMEWORK COMPARISON Issuer Cover Assets Structure Slovakia Austria - Fundierte Bankschuldverschreibung Poland Specialized credit institution GERMAN Pfandbrief The issuer of Pfandbrief is no longer required to be a specialised bank. Any entity which is allowed to Core Capital of at least 25mn eur General Banking license Universal credit institution with a prior approval Universal credit institution with a special license Apart from the mortgage banks, also 1 state bank exercise all activities of a credit institution for activities connected with Covered Bond Programme On balance sheet-but maintained in a separate credit institution acting as fiduciary Cover assets are held for the issuer by the cover register Regulatory supervision and Supervision Authority Yes with additional requirements compared to general banking supervision regulations. Special supervision by NBS FMA (Bank Gospodarstwa Krajowego) is allowed to issue covered bonds in Poland. Cover assets held on balance sheet of the issuer but are maintained in a separate cover register Yes, with additional requirements compared to general banking supervision regulations. Supervised by Polish Financial Supervision Authority (Komisja Nadzoru Finansowego, KNF) - Suitable risk management procedures Cover assets held on balance sheet of the issuer but are maintained in a separate cover register France - Société de Financement de l'Habitat SFH Licensed specialist institutions, so-called Societe de Financement de l'Habitat (SFH) At parent institution, but pledged to issuer (SFH) Transfer according to trigger event Yes, SFH is a mortgage credit institution under French Banking law Yes, use of each of the respective Pfandbrief types Supervised by French banking regulator (ACP), is subject to a license Supervised by Bundesanstalt fur Finanzdienstleistungsaufsicht (BaFin) Comite des Etablissements de Credit et des Entreprises d'Investissement (CECEI), Autorite des Marches Financiers (AMF) and special controller Elligible Underlying Assets Cover Pool Assets Cover Pool Geography Max LTV Residential mortgage loans, up to 30 years granted to retail customers Underlying assets, substitution assets, currency and interest rate hedging derivatives, liquid assets Slovakia Exposures to public sector entities Mortgage loans (Mortgage loans for the purpose Exposures to public sector entities, mortgage of this question are taken to include guaranteed loans (Mortgage loans for the purpose of this real-estate loans.) question are taken to include guaranteed real- estate loans.) Exposures to credit institutions Austria/EEA/Switzerland not regulated Residential and commercial mortgage loans, public-sector assets, aircraft and ship mortgages Residential property loans only Public-sector loans, residential and commercial Public sector loans, Mortgage loans, Derivatives (up to 12%), Substitute assets Residential mortgages Guaranteed home loans Securitisations (subject to certain criteria) EEA, USA, Canada, Switzerland, Japan, Australia, Asset located in the EU, the EEA or any highly New Zealand and Singapore rated country 80% EEA, OECD Substitution assets Minimum legal OC 80% Up to 10% 5% 2% Residential 80% and Commercial 60% Up to 15% 60% Up to 20% Up to 15% 10% 2%on stressed present value basis Min 5% Liquidity Securing Assets coverage test Bankruptcy of parent institution / originator(s) Natural" matching (matching without the use of off-balance sheet instruments) and stress 180 days coverage of negative balance of cash testing (Natural matching is taken to include flow from Covered Bonds Programme replacing CBS with new issues, as well as substitute assets.) Eligibility of Assets test applied daily. Coverage ratio test monthly. Yearly stress tests mandatory. Nominal cover. Daily frequency Natural" matching (matching without the use of off-Coverage by nominal value and by net-present balance sheet instruments) and stress testing (Natural matching is taken to include replacing CBS with new issues, as well as substitute assets.) over a 180 day period Nominal cover test applied daily and verifying the relation of nominal values of cover pool to covered bonds, relation of cover pool interest to covered bonds interest and level of liquidity buffer. There are additional, semi-annual tests. In case of bankruptcy of a mortgage bank the cover register shall constitute a separate Assets in the cover pool are fully segregated from the general insolvency estate of the bankrupt bank. The general insolvency trustee observes special procedures that are aimed to Covered bond creditors have preferential claim to satisfy claims of covered bondholders. The extend covered bonds' maturity in the event of bankruptcy and postpone immediate acceleration No acceleration of covered bonds on the cover assets bankruptcy estate which may be used exclusively court appoints the curator (Kurator) who represents the rights of covered bondholders. The soft-bullet maturity of the covered bonds is triggered automatically after insolvency. value required. Specific coverage of liquidity risk Liquidity maintained for the next 180 days and ability to repo own issuances Coverage is mandatory at all times Dynamic ACT, formerly 92.5% asset percentage applied to the entire pool Regulated by the issuer Assets within the cover register are exempt from bankruptcy proceedings. After the launching of the No acceleration of covered bonds insolvency proceedings, a special cover pool administrator (Sachwalter) carries out the administration of the cover assets Covered bond creditors have preferential claim on the cover assets Independent Cover Pool Monitor Yes Compliance with UCITS Yes Directive Compliance with CRD Yes standards Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes 43#44REGULATORY OVERVIEW Regulatory classification based on typical € covered bond benchmarks DE, FR, NL etc. VUB (expected) PL NO CA EEA UCITS ECB repo Standard risk weight LCR CBPP3 10% 1(B) 10% 1(B) 10% 1(B) × 10% 1(B) × 20% 2A × AU, NZ 20% 2A ५ 44#45VUB COVERED BOND PROGRAMME PROGRAMME KEY FEATURES Issuer Rating Programme size Total CB Outstanding Cover pool Overcollateralization Current OC Vseobecna uverova banka, a.s. (VUB) Aa2 (Moody's) EUR 5,000,000,000 EUR 2,309,178,721 Prime Slovak residential mortgage loans Minimum OC Slovak Law 5% 11.32% Governing Law Slovak Maturity type 12/24 months soft-bullet feature Paying Agent Vseobecna uverova banka, a.s. (VUB) Programme Monitor Independent party appointed by the NBS Figures as of 31 December 2018 Listing Clearing Bratislava Stock Exchange, Luxembourg Stock Exchange Slovak CSD/Euroclear/Clearstream 45#46VUB COVERED BOND PROGRAMME PROGRAMME STRUCTURE DIAGRAM Pre-bankruptcy VÚB BANKA Assets Liabilities NÁRODNÁ BANKA SLOVENSKA EUROSYSTÉM Periodic reporting General estate assets General estate liabilities Yearly/ ad hoc reporting Periodic review Programme Monitor Cover Pool Assets Covered bonds Post bankruptcy - NÁRODNÁ BANKA SLOVENSKA EUROSYSTÉM Periodic reporting Involuntary administrator/trustee in cooperation with Programme Monitor Cover pool management VÚB BANKA Liabilities RECOURSE Covered bondholder Assets General Estate Assets General Estate Liabilities DUAL RECOURSE Cover Pool Assets as Separate Estate Covered Bonds Covered bondholder 46#47VUB BANKA COVERED BOND RATING Domestic Market Comparable Markets Poland Issuer Rating CB Rating PKO Bank Slovakia Bank Hipoteczny Baa1 Aa3 Hip. Deposit rating CB Rating m Bank Hipoteczny mBank Hip. BBB A and VÚB BANKA VUB Banka A2 Aa2 Pekao Bank Hipoteczny Pekao Hip. BBB+ A- SLOVENSKÁ sporiteľňa Slovenska A2 Aaa Tatra Banka A3 NR TATRA BANKA CSOB Baa1 NR CSOB UniCredit Bank Unicredit CZ&SK Baa2 Aa3 Czech Republic Deposit rating CB Rating ☑Raiffeisen Raiffeisenbank Baa1 Aa3 BANK Source: Bloomberg, VUB as of February, 2019 47#48VUB COVERED BONDS OUTSTANDING ISSUANCES OVERVIEW (1/2) → EUR 2.3 bln of outstanding covered bonds (the largest in Slovakia) Distribution by Investors 0.9% 49.2% 49.9% Domestic Small/Retail Foreign Institutional Domestic Institutional Distribution by Currency 2.1% 97.9% EUR USD Maturity Profile of VUB Covered Bonds Distribution by Original Maturities 2.1% 9.7% 2.3% 27.1% 58.8% <5Y 10-15 Y >20 Y 5-10 Y 15-20 Y EUR mln 450 400 350 300 250 200 150 258 236 100 420 300 288 217 325 218 50 48 0 T T T 0 T 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 and over 48 Figures as of 31 December 2018#49VUB COVERED BONDS OUTSTANDING ISSUANCES OVERVIEW (2/2) In 2017-2018 main focus on EUR 250 mln issue size - 4 deals in 18 months, American auctions → Continuing increased demand from foreign investors across all investor types Funds/Insurances, Banks & CB/Ols AM, Pension → Foreign investors took 62% from these issues, the biggest bulk to DACH region followed by Benelux → Average ECB participation (through the National Bank of Slovakia) just 18% Source: VUB Issue Description VUBSK 0.5 18/01/2024 Date of Issue Maturity Issue Size ISIN Jan 2017 7y EUR 250 mln SK4120012469 VUBSK 1.05 04/2027 Apr 2017 10y EUR 250 mln SK4120012824 VUBSK 0.375 09/2022 Sep 2017 5y EUR 250 mln SK4120013251 VUBSK 0.5 06/2023 Jun 2018 5y EUR 250 mln SK4120014168 Distribution by Regions 15.3% 10.5% 37.9% Distribution by Investor Type 16.0% 11.9% Domestic DACH Benelux 36.4% 28.5% UK 43.6% Banks CB/Ois Pension Funds/Insurers Asset Managers 49#50COVER POOL KEY STATISTICS Originator Vseobecna uverova banka, a.s. Number of loans 71,465 58,867 EUR 2,528,181,597 Number of debtors Total Current Balance Average Current Balance (by loan) Average Current Balance (by debtor) EUR 35,377 EUR 42,947 52.5% WA current LTV WA Residual life 19.8 years WA Seasoning Rate type Property type Loans currency denomination WA interest rate Principal Payment type 3.8 years 99.8% fixed rate loans 100% residential 100% Euro 1.67% 99.7% annuity Figures as of 31 December 2018 50 50#51VUB COVERED BOND PROGRAMME COVER POOL BASE ASSETS FEATURES (1/3) Origination Year Distribution Residual Maturity Distribution 2.8% 12.8% 17.9% 3.4% ■before 2011 9.9% <0-5Y> 2011 3.4% 30.8% ■ 2012 14.1% ■(5-10Y> 5.2% ■2013 ■(10-15Y> 19.0% 9.3% ■2014 ■(15-20Y> ■2015 20.9% ■(20-25Y> ■2016 21.7% 10.5% 18.6% 2017 ■2018 ■(25-30Y> Seasoning (years) Arrears Distribution 20.0% DAYS IN ARREARS CURRENT BALANCE (in EUR) % 0 2,489,432,062 98.4% 1-30 30,393,382 1.2% 30-60 6,792,575 0.3% 60-90 1,563,578 0.1% 20% 18% 15.3% 16% 13.6% 14% 12% 10.6% 10% 8% 6% 4% 9.4% 8.7% 5.8% 4.4% 4.7% 4.8% 2.7% 2% 0% 0-1 1-2 2-3 3-4 4-5 5-6 6-7 7-8 8-9 9-10 10-20 Figures as of 31 December 2018 51#5235% 30% 25% 20% 15% 10% 5% 0% VUB COVERED BOND PROGRAMME COVER POOL BASE ASSETS FEATURES (2/3) 0-10% 10%-20% Loan Purpose Distribution Regional Distribution 11.6% 3.2% 6.8% 8.6% 10.5% ■Construction 36.0% ■Renovation 7.6% 39.4% Purchase 9.3% ■Remortgage 39.1% ■ Bratislava ■Trnava ■Banská Bystrica Nitra ■Trenčín ■Prešov Žilina No purpose ■ Košice 10.0% 11.7% 6.4% Current LTV Distribution 20%-30% Figures as of 31 December 2018 30%-40% 40%-50% %09-%09 60%-70% 70%-80% Property Type Distribution 1.2% 0.8% ■Family House ■Flat 41.1% 56.8% ■Lot ■ Other 52 52#53VUB COVERED BOND PROGRAMME COVER POOL BASE ASSETS FEATURES (3/3) Current Outstanding Balance Distribution 45% RANGE (in EUR) DEBTORS % EUR % 40% 35% 0-25,000 22,564 38.3% 385,720,456 15.3% 30% 25% 25,000-50,000 18,255 31.0% 716,790,737 28.4% 20% 50,000-75,000 9,276 15.8% 556,758,936 22.0% 15% 10% 75,000-100,000 4,522 7.7% 367,214,813 14.5% 5% 0% 100,000-125,000 1,998 3.4% 193,712,165 7.7% 125,000-150,000 1,047 1.8% 123,272,402 4.9% >150,000 1,205 2.0% 184,712,089 7.3% 0-25,000 25,000-50,000 50,000-75,000 Interest Rate Distribution 80% RANGE CURRENT BALANCE % (in %) (in EUR) 70% 0-1% 308,221 0.0% 60% 50% 1-1.5% 1,712,649,363 67.7% 40% 1.5%-2% 386,138,121 15.3% 30% 2%-2.5% 163,157,967 6.5% 20% 2.5%-3% 133,125,286 5.3% 10% 3%-3.5% 76,432,449 3.0% 0% >3.5% 56,370,190 2.2% Figures as of 31 December 2018 1-1.5 1.5-2 2-2.5 2.5-3 3-3.5 75,000-100,000 100,000-125,000 125,000-150,000 >150,000 >3.5 53 53 ■by debtors by amount#54VUB INAUGURAL BENCHMARK CB ISSUE EUR 500 MLN 5-YEAR MORTGAGE COVERED BOND TERMS AND CONDITIONS KEY ASPECTS OF THE TRANSACTION -> -> March 19, 2019, first EUR 500 mln syndicated covered bond benchmark in Slovakia priced by VUB. The deal was well prepared with an expedited four day pan-European roadshow in Scandinavia, Germany and Austria Transaction was led by Banca IMI acting as Arranger and Lead Manager, Commerzbank, Deutsche Bank, Erste Bank and LBBW as Lead Managers Final orderbook was characterized by a granularity of over 160 high quality investors ordering around EUR 2.4 bln resulting in an impressively 4.8x subscribed book TRANSACTION HIGHLIGHTS -> -> Extensively positive feedback from investors during the roadshow allowed to exploit the strong momentum and open books on Tuesday, the day right after the roadshow was concluded Hence, books were opened in the morning at 9.00 CET communicating IPTs at MS+40 area and unsurprisingly, given the positive feedback collected from investors across jurisdictions the deal attracted very high investor attention from the beginning At the time of the first update at 10.05 CET the orderbook was already in excess of EUR 1bn (excl. JLM interest) and just around 25 minutes later guidance was set at MS+35bps area in the second update on the back of a fast-growing orderbook standing above of EUR 1.5bn (excl. JLM interest) As books stood at EUR 2.25bn+ the guidance was revised to MS+30bps (+/-2 WPIR) in the third update at 11.15 CET. Eventually, the book peaked at EUR 2.6bn and the spread could be finally set at the lower end of the revised guidance at MS+28bps Issuer Vseobecna uverova banka, a.s. (VUB) -> Issue Rating Aa2 (by Moody's) Size EUR 500 mln Issue Type Mortgage Covered Bond Settlement 26 March 2019 (T+5) Maturity 26 March 2024 Coupon 0.250% Fixed, Annual, Act/Act (ICMA) →> Guidance MS +40bps area Re-offer Spread MS +28 bps Spread over Benchmark OBL 0% Apr 2024 + 69.1bps Re-offer Yield 0.381% Re-offer Price 99.352% Denomination EUR 100k/ 100k Law Slovak Law Listing ISIN Bookrunners Manufacturer Targer Market Luxembourg SK4120015108 Banca IMI, Commerzbank, DB, Erste Group, LBBW Manufacturer targer markets (MIFID II product governance) is eligible counterparties and professional clients only (all distribution channels) Source: VUB Distribution by Geography GE/AT 3.0% Nordics 4.0% 6.0% 3.0% Slovakia 2.0% BeNeLux 8.0% 52.0% 8.0% UK Italy 50.0% 14.0% Switzerland Iberia Other Distribution by Investor Type 5.0% 6.0% 39.0% Funds / AM Banks CB / Ols Insurers / PF 54#55INFORMATION FOR INVESTORS → Financial statements of VUB https://www.vub.sk/en/financial-indicators/information-about-bank-activities/ https://www.vub.sk/en/financial-indicators/annual-reports/ → Cover Pool Overview, Moody's Performance Overview https://www.vub.sk/en/information-service/information-investors/ Base Prospectus & Covered Bonds issued within the Offering Programme https://www.vub.sk/en/information-service/securities-prospectuses/ → Rating https://www.vub.sk/en/people/about-vub-bank/bank-profile/#tab_3 → Bloomberg page: VUBB - VUB Covered Bonds 55#56CONTACTS Andrej Hronec, CFA, FRM Head of Department Treasury & ALM Email: [email protected] Phone: +421 2 5055 2883 Slavomira Palenikova Primary Issue Specialist Senior Treasury & ALM Email: [email protected] Phone: +421 2 5055 2517 Iveta Zaborska Primary Issue Specialist Treasury & ALM Email: [email protected] Phone: +421 2 5055 1885 Pavel Jansta, CFA ALM Specialist Senior Treasury & ALM Email: [email protected] Phone: +421 2 5055 9005 Zdenko Stefanides Head of Department Research Email: [email protected] Phone: +421 250552567 56#57IMPORTANT NOTICE This document and all information contained herein have been prepared by Všeobecná úverová banka, a.s. (VUB) exclusively for information purposes with the aim of presenting the most relevant aspects which shall be considered in connection with the covered bonds issued by VUB (the Covered Bonds). The respective material is addressed to and intended to be used by a targeted group of recipients that fall within the category of qualified investors as defined pursuant to the Act No. 566/2001 Coll. on securities and investment services, as amended (the Securities Act) and the Directive 2003/71/EC on the prospectus to be published when securities are offered to the public or admitted to trading, as amended (the Prospectus Directive). All the data, facts, figures and values presented herein, including any statement, explanation, opinion, appraisal, assessment, evaluation, commentary, comparison, analysis, research, survey or summary made or provided wither respect to them are based on general information obtained from the publicly available sources at the time this material was elaborated and therefore they may be subject to any change without prior notice. VUB relies on the information obtained from the sources believed to be reliable but does not guarantee its accuracy, adequacy, correctness or completeness. Such sources may often present relevant information and data in an aggregate or summarized form, refer to approximate figures or values or be operated by fault-prone personnel or autonomous automated systems and therefore VUB shall not be responsible for any inaccuracy, incompleteness, inadequacy, error, omissions, misrepresentation or other failures regarding such information or sources. VUB will not update information set forth herein that appears to be inaccurate, incorrect, incomplete, erroneous, misleading or otherwise faulty due to subsequent changes or modifications to the sources upon which such information is based, unless, in the view of VUB, the failure to update the respective information could have a material effect on the purpose and objective sought by this presentation. This document and all information contained herein shall not represent or be interpreted (whether expressly or impliedly) as a notice or information about preparation, declaration, organisation, performance or course of the public offering of securities pursuant to para. 120 et sub. of the Securities Act, the commercial public tender pursuant to para. 281 et. sub. or the public offer for conclusion of a contract pursuant to para. 276 et. sub. of the Commercial Code (as amended). In addition, this document does not constitute in any respect a private offering of securities or a solicitation of any offer to subscribe for or purchase securities in any manner whatsoever. Nothing in this document shall be construed (whether expressly or impliedly) as a proposal, promise or act of VUB to enter into or be unconditionally and irrevocably bound by any contractual arrangement with the recipient of this document or to form any legally binding commitment. This document does not purport and shall not be considered to be an explanation or advice on legal, tax or financial matters and does not constitute any investment research, advice or recommendation for investing in the Covered Bonds. Each recipient shall consult its legal, tax and financial advisor prior to taking any relevant decision with respect to the Covered bonds. No reliance shall be placed for any purpose whatsoever on the information contained in this document or any other material discussed verbally or otherwise, or on its accuracy, completeness, adequacy, correctness or fairness. 57#58IMPORTANT NOTICE This document does not contain complex and complete information on the facts and circumstances relevant for taking sound and informed decision to invest in the Covered Bond. This document neither provides for sufficiently complex and complete information about the risks associated with the Covered Bond nor constitutes the basis for assessment and evaluation of these risks. Prior to making any investment decision with respect to the Covered Bonds and for the purposes of evaluating all relevant risks associated thereto each recipient of this presentation shall get acquainted with and take into consideration all information provided for in the prescribed mandatory documents prepared in accordance with applicable legislation (i.e. Securities Act, Prospectus Directive and all relevant implementing measures). Nothing in this document constitutes an offer of securities for sale in the United States or any other jurisdiction where it is unlawful to do so. The Covered Bonds presented herein have not been, and will not be, registered under the United States Securities Act of 1933, as amended (the US Securities Act), or the securities laws of any state of the United States or other jurisdiction. The Covered Bonds may not be offered or sold, directly or indirectly, within the United States or to, or for the account or benefit of U.S. Persons (as defined in Regulation S under the US Securities Act) except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act and applicable state or local securities laws. VUB does not purport to register any portion of the Covered Bonds in the United States or conduct an offer or sale of the Covered Bonds in the United States. This document or any copy of it may not be forwarded or distributed, directly or indirectly, in the United States and to any other person, in particular to any U.S. Person or U.S. address, and may not be reproduced in any manner whatsoever. Any forwarding, distribution or reproduction of this document in whole or in part is unauthorized. Failure to comply with this directive may result in a violation of the US Securities Act or the applicable laws of other jurisdiction. Each recipient of this document shall inform itself of and observe any restrictions regarding access to this document imposed on it by applicable laws of the relevant jurisdiction. Without prejudice to the foregoing provisions, the recipients of this document may not forward it to any third person without prior consent of VUB. Without prejudice to anything mentioned herein, this document may only be distributed to and is directed at (a) persons who are outside the United Kingdom; or (b) to investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Order); or (iii) high net worth entities, and other persons to whom it may be lawfully communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as relevant persons). Any person who is not a relevant person should not act or rely on this document or any of its contents. Any results presented herein that are based on historical data, figures or values and relate to past performance, ranking, profitability or other similar indicators shall not be considered as providing the guarantee or safeguards for achievement of the same results in the future and they may differ from each other in one or more respects. Where reference to information regarding tax matters is made in this document, each recipient must determine the relevance of such information and consider its effect on the basis of its own specific facts and circumstances. 58