UNICREDITO ITALIANO

UNICREDITO ITALIANO Alessandro Profumo - CEO UBSW ITALIAN FINANCIALS CONFERENCE “CROSS-SELLING: REALITY OR MIRAGE?” Rome, - February 7th, 2002

TODAY CROSS-SELLING IS CONSIDERED THE KEY FACTOR FOR SUCCESS IN THE FINANCIAL SERVICES MARKET • Today in Italy many banking and non-banking players, such as insurance companies and “utilities” (i.e. Poste Italiane, Italgas, AEM), leverage on cross-selling in order to sell financial services THIS RAISES TWO QUESTIONS: • IS IT SO EASY TO MAKE A SUCCESSFUL CROSS-SELLING? • IS CROSS-SELLING REALLY SO IMPORTANT IN ORDER TO DETERMINE BUSINESS SUCCESS? • This trend creates higher competition and market overshoot, supporting the belief that cross-selling is at the same time the most important factor and measure of success

Agenda • Is it easy to make a successful cross-selling ? • Requirements for a successful cross-selling • How to manage a successful cross-selling • Is cross-selling so important to succeed? • Conclusions

WHICH ARE THE REQUIREMENTS FOR A SUCCESSFUL CROSS-SELLING ? WE IDENTIFY AT LEAST THREE PILLAR-REQUIREMENTS FOR AN EFFECTIVE AND SUCCESSFUL CROSS-SELLING: • A clear customer segmentation and identification of clients’ needs • The development of a single IT platform and of an efficient CRM to support a multi-channel distribution • A wide range of tailored products

TODAY OUR CUSTOMER BASE IS FULLY SEGMENTED, WITH A CLEAR IDENTIFICATION OF EACH SEGMENT SPECIFIC FINANCIAL NEEDS Mass market Affluent Private Small Business Corporate (< Euro 75,000 financial assets) (from Euro 75,000 to Euro 500,000 financial assets) (> Euro 500,000 financial assets) (Revenues < Euro 1.5 -2.5 mln.) (Revenues > Euro 2.5 mln.) Cash management and transactional services Investment products & services: • Simple • Sophisticated Financial Advisory Pure Lending Structured Finance and ALM services

OUR MULTI-CHANNEL DISTRIBUTION NETWORK CAN LEVERAGE ON A SINGLE IT SYSTEM AND AN EFFICIENT CRM TO IMPROVE CROSS-SELLING AND REDUCE ATTRITION RATES CRM IT PLATFORM Headquarter A single CRM platform in order to: Seven banks moved to the same IT platform in 3 years in order to: Service platforms BackOffice • Improve effectiveness of sales through: • better identification of targets • optimisation of cost / profit rate per contact • definition of best media / channel mix CRM IT • Improve customers’ understanding through: • monitoring of financial assets / liabilities • check of products / services bought / sold • control of number and type of transactions, flows, ecc. Multichannel Network UCI-Retail • In 2001, for instance: • 12 campaigns for Credito Italiano • More than 1,200,000 contacts resulting in 24,400 sales MULTI-CHANNEL NETWORK • 2,939branches in Italy as at end 2001 (around 2,800 for UCI-Retail after S3) • 1,774PFAs as at 31.12.2001 • Phone Banking: 44,000 active clients in 2001 • Internet Banking: 302,500 clients as at31.12.2001

THE WIDE RANGE OF HOME-ENGINEERED PRODUCTS ALLOWS UCI TO PROVIDE A 360° OFFER OF FINANCIAL SERVICES TO ITS CUSTOMERS • Innovative commercial banking product packages for families and small businesses • More than 190 mutual funds distributed all around the world • Hedge funds, capital guaranteed products* and segregated accounts • Bancassurance More than Euro 3.9 bn new premiums written in 2001 UNICREDIT ASSICURA • Investment banking, structured finance and derivatives for corporates More than 27,000 transactions in 2001 • More than 1,200 CW and derivatives for retailers • Capital guaranteed products* • Revolving credit cards • Leasing for corporate clients * Jointly engineered by Pioneer, UBM and TradingLab

WHEN CAN CROSS SELLING BE CONSIDERED SUCCESSFUL ? WE THINK THAT CROSS SELLING IS SUCCESFUL WHEN IT MAXIMISES: • CUSTOMER SATISFACTION, strictly linked to real value perceived by the client • PROFITABILITY FOR THE PROVIDER OF FINANCIAL SERVICES & BOTH VARIABLES CAN BE MAXIMISED THROUGH THE ADOPTION OF DIFFERENT DISTRIBUTION APPROACHES FOR DIFFERENT PRODUCTS: Targeted sales of standard products (i.e. in 2001 segregated accounts in Funds) Targeted sales of tailored products (i.e. Pension funds, Cap. Guar. Products) High Margins for the provider Single products and packages sold through direct channels Low Packages Low High Value perceived by the client

GENIUS AND IMPRENDO ARE CLEAR EXAMPLES OF SUCCESSFUL CROSS-SELLING OF LOW MARGIN PRODUCTS WITH HIGH VALUE FOR THE CLIENTS ... • 6 financial products in 1 package (1) at a fixed monthly rate - Euro 14.49 (1)(Current account, Custody for securities, Safety box, Debit card, Credit card, Consumer finance) • Free access to direct channels (phone and Internet banking) • Non-banking benefits(Discount on travels, hotels, restaurants, newspapers, medical services, insurance policies, ecc.) • 4 financial products in 1 package (2) at a fixed monthly rate - Euro 46.48 (2)(Corporate current account, Corporate credit card, Easy access to leasing, Additional current account for the enterpreneur) • Free access to direct channels (phone and Internet banking) • Many non-banking benefits(Easy rates on telephone calls, ticket restaurants, fuel, car-renting. Fiscal and Legal Advisory. Telepass, ecc.) Value for the client • Lower distribution charges (compared with selling 6 products individually) • Lower distribution charges (compared with selling 4 products individually) • More than 685,000 subscribers since launch • Enhanced customer satisfaction (125.000 clients since launch) Value for UCI • Higher customer satisfaction and loyalty (lower drop-off rates) • Chance to attracting the enterpreneur as an affluent or private customer • Enhanced profitability and NPV per client (1) Data referred to Genius Extra (1) Data referred to Imprendo Gold

... AS SHOWN BY THE BRILLIANT RESULTS ACHIEVED MAIN GENIUS PERFORMANCES (1): Clients without Genius Clients with % Ch. Cross-selling 2.26 4.48 +98.2% Drop-off Ratio 7.0% 2.7% -4.3% Customer Satisfaction (2) 58.6% 65.7% 7.1% Av. Yearly Margin per client Euro 837 Euro 1,056 +26.2% Gross NPV per client (in %)(3) 100.0% 165.6% +65.6% (1) Source: MKS (UCI-Strategic Marketing), on 1999 and 2000 data (2) Measure of satisfaction towards the Bank (Credito Italiano) resulting from an EURISKO market research (3) Calculated as sum of revenues generated by each client on a 25 year timeframe, discounted at UCI’s cost of equity (8.95%) and taking into account drop-off ratios of each category. Data re-based in % terms.

PENSION PRODUCTS ARE A TYPICAL HIGH MARGIN FOR THE BANK - HIGH VALUE FOR THE CLIENT SERVICE, FOR WHICH A SUCCESSFUL CROSS-SELLING WILL REQUIRE TAILORED FINANCIAL ENGINEERING ... Reasons to save for “Social Security” purposes Main findings of a IAMA-DOXA market research (Dec.2000) (% of interviewees) To buy one’s own house 84% To integrate State-based pension programs Being successful in the “pension industry” will require complex products specifically engineered to meet all these customers’ needs 87% To guarantee medical care in the old age 78% To bequeath financial assets to sons 69% To guarantee son’s education 83% To warrant against the unforeseen 93% 0% 20% 40% 60% 80% 100%

... AND SPECIFIC SALE EFFORTS ... PERSONAL FINANCIAL PLANNING PFP approach redesign: new philosophy, new mechanism for performance measurement, new targets CUSTOMER SEGMENTATION COMMUNICATION New communication models:communication models currently used in Italy are clearly inefficient New variables (besides wealth and income) becoming more and more important NEW PENSION PRODUCT DISTRIBUTION APPROACH

... BASED ON A COMPLETE REDESIGN OF PERSONAL FINANCIAL PLANNING, IN ORDER TO FULLY MEET CUSTOMERS’ SOCIAL SECURITY NEEDS NEW PERSONAL FINANCIAL PLANNING: • From pure risk-profile analysis to focus on multiple variables (i.e. level of employment and of contributions paid to State-based pension programs) Customer Segmentation • Fiscal optimisation becoming not only a target, but also a key driver for product selection Fiscal Optimisation • From simulation based on time series to multi-stage statistical models, taking into account different financial market scenarios Wealth-trend Simulation • Individual social security and retirement gaps measurement • Deep analysis of customers’ attitude towards “innovative” products (like “defined contribution” or capital guaranteed products) Customer Understanding • Pension funds, Capital Guaranteed and Life Insurance products becoming a key pillar for an efficient asset allocation Product Selection

(Euro mln) 407 1,400 8 378 1,200 257 16 1,000 298 800 204 1,050 600 991 381 236 251 465 197 400 693 774 200 260 214 208 172 0 MAR 2001 MAY 2001 JUNE 2001 JULY 2001 AUG. 2001 SEPT. 2001 OCT. 2001 NOV. 2001 DEC. 2001 Fund & Index Linked Notes SegregatedAccounts Unit Linked (UNISTAR) OUR BRILLIANT RESULTS FROM CAPITAL GUARANTEED PRODUCTS CONFIRM THE ABILTY IN ENGINEERING AND DISTRIBUTING SOPHISTICATED PRODUCTS TO SATISFY NEW NEEDS CAPITAL GUARANTEED PRODUCTS: EURO 7.46 bln NET INFLOWS IN 2001* (1) Net of Euro 91 mln. inflow from a joint BANK PEKAO / TRADINGLAB Capital Protected Note issued in October

CROSS-SELLING IS ONLY ONE OF THE VALUE CREATION DRIVERS ... WE IDENTIFY FIVE MAIN VALUE CREATION DRIVERS: • Sale of many different products to the same client in order to increase the profitability related to each customer • Cross-selling • Shifting customers’ product mix towards products with higher value both for the clients and the bank • Up selling • Share of wallet for private clients • Share of total financial services used by Small Business and Corporate clients • Customer penetration • The higher the appreciation of the value associated to the product, the lower customers’ price sensitivity • Price sensitivity • Customer relationship period • The longer the customer relationship period, the higher the customer NPV

... AND ITS IMPORTANCE SUBSTANTIALLY DIFFERS FROM SEGMENT TO SEGMENT Mass market Affluent Private Small Business Corporate Cross-selling Up-selling Customer penetration Price sensitivity Customer relationship period Cross-selling is the most important value driver for Mass market and Small Business, while share of wallet, up-selling and customer relationship period are key-factors for affluent and private customers

100% 75% > 8 pdt 7-8 pdt 50% 5-6 pdt 3-4 pdt 25% 1-2 pdt 0% SB Mass Affluent Private UP-SIDE POTENTIAL FROM CROSS SELLING IS MUCH HIGHER FOR MASS MARKET AND SB CUSTOMERS WHO SHOW THE LOWEST AVERAGE NUMBER OF PRODUCTS MARGINAL PROFITABILITY RELATED TO CROSS-SELLING Marg. Profitability of an additional sale 400% • Internal studies on Credito Italiano data show that the marginal profitability coming from the sale of an additional product decreases with higher levels of cross-selling 320% SB 240% Mass Affluent 160% Private 80% 0% 3-4 5-6 7-8 9-10 CROSS-SELLING LEVEL • Respectively 95% and 80% of SB and Mass Market clients own less than 5-6 products

3,000 2,500 2,000 1,500 1,000 500 0 < 25,000 25-75,000 75- 150- 250- 500- > 1,000,000 150,000 250,000 500,000 1,000,000 FOR PRIVATE AND AFFLUENT CUSTOMERS SHARE OF WALLET AND UP-SELLING ARE MUCH MORE IMPORTANT VALUE DRIVERS THE HIGHER ASSETS MANAGED BY UCI, THE HIGHER PROFITABILITY FOR UCI (Euro) AVERAGE MARGIN PER AFFLUENT AND PRIVATE CLIENT TOTAL MANAGED ASSETS (DEPOSITS, SECURITIES IN CUSTODY AND AUM) Source: UCI CRM on Credito Italiano data for affluent and private clients For Private and Affluent customers, already showing high cross-selling levels, a large share of wallet and up-selling are much more important in order to enhance profitability

SUMMING UP: WHO WILL BE THE WINNERS OF THE GAME? IN ORDER TO BE SUCCESSFUL IN THE CURRENT COMPETITIVE SCENARIO ALL PLAYERS SHOULD REMEMBER THAT: • Cross-selling is an important value driver, but it is not the only one and not always the most important • The success of cross-selling policies should not be measured by the number of products sold to the same client, but by their profitability and their capability to maximise both customers’ satisfaction and relationship period • Specialised players with critical mass will have a strategic advantage vs. competitors, thanks to their deep knowledge of the customer base and their increased focus • With its strategic and operational tools UCI has made cross-selling a profitable reality and the creation of 3 segment banks will help to fully exploit the potential of this value driver

UNICREDITO ITALIANO