mBANK STORY – DISRUPTIVE BUSINESS MODEL IN FULL RANGE RETAIL BANK ING

Maximum benefits and convenience in personal finance

Directions of BRE Bank’s Strategic Growth

BRE Bank: The best financial institution for demanding customers

Investment Retail
Corporate
Banking Banking
Banking
(+ PB)

The roots of BRE Bank

To grow and
To keep up profits inception to generate
and to mitigate
significant profits
risks
mBank and MultiBank

Retail Banking

Mass customers Customers Affluent customers

Standardised products Products Products tailored to segments

Preference for
Operating model Multi-channel architecture
electronic access channels

Leader in Leader in
Internet Banking Service Quality
MBANK – MISSION AND VISION

mBank Business Case

The vision
Personal finances require simple solutions at arm’s length. Products and services should work on
straightforward, easy to understand principles.

We don’t promise that you’ll find with us everything that has ever been invented in the world of
finance, but you’ll certainly find the things that are the most important for you, at the best quality
and price available on the market

The mision statement

Maximum benefits and convenience in personal finance

2008 SL Consulting 4
MBANK – CORE VALUES

mBank Business Case

price Is going to be main market advantage at the launching phase

Despite low price, high quality needs to be addressed as well – it is important to

quality build credibility and trust

simplicity Products and processes are as simple and clear as possible

Internet as a main access channel will assure accessibility in the 24/7/365

convenience model. Reliable and user-friendly interface will base on Polish experience

True internet bank. mBank will not be afraid of this term. However it is crucial to
innovation underline, that bank operating in internet is able to provide clients with cheap
and high-quality banking products

Various mBank activities (internet forum, on-line chats, sporting events), that
community successfully build community in Poland, will make mBank distinctive on Czech
and Slovak market

2008 SL Consulting 5
PHILOSOPHY OF MBANK

mBank Business Case

High tech Self service 24/7/365

Low cost
Simplicity, Reliability, Honesty
(No hidden fees and costs)

Low price Continuous improvement through

Innovation in:
High quality • Products
• Processes
• Distribution and
Communication

2008 SL Consulting 6
MBANK 2009 – LEADING RETAIL FINANCIAL INSTITUTION FOR EMERGING NEW GENERATION OF

mBank Business Case

CUSTOMERS

Target Group Products:

Wide mainstream in 2007: Self- Innovative, attractive and transparent banking
directed, quality and price sensitive, capable of and non-banking financial products, offered
using new technologies, seeking financial within single, revolutionary open platform -
benefits, convenience and freedom financial portal with one login and password

Strategic positioning:
mBank, the leader of Internet banking, offers those who
rationally manage their personal finances, the most
essential products and services at the best possible
prices and the highest quality on the market.

Technology Distribution and communication channels

Scalable, flexible and efficient central IT Exclusively virtual bank with free Internet
system, central back-office, automated banking service and Contact Center operating
processes and innovative distribution channels in 24/7 model
based on Internet solutions Transparent, aggressive communication

2008 SL Consulting 7
 MBANK BUSINESS MODEL: FULL RANGE PRODUCT OFFER

mBank Business Case

Current account as a center of the mBank universe

investment
products

insurance
savings
products

current
account

consumer credit
finance cards

mortgage
loans

Source: 'Delphi' team analysis 2008 SL Consulting 8

 EKONTO – MOST CONVENIENT CURRENT ACCOUNT

mBank Business Case

CONVENIENCE
• Access 24/7/365 INNOVATIVE FULL ON-LINE INTEGRATION
• Free of charge ATMs and deposit
OF PERSONAL FINANCE
machines
• No minimum regular in-flows • Transfers and payments
• Cash management
• Brokerage services
• Credit cards, cash
loans, mortgages
BEST PRICE WITH NO • Funds: investment and mutual
FEE FOR • Insurance
• e-commerce
• Maintenance
• Transfers
• Debit card

First choice Current

Account satisfies all
financial needs through
SELF MANAGEMENT on-line integration and
• Efficient processes management
• Transparent and easy to apply
procedures
• Full range on-line offer

Source: 'Delphi' team analysis 2008 SL Consulting 9

 EMAX – SAVINGS ACCOUNT REVOLUTION IN MASS MARKET

mBank Business Case

CONVENIENT ACCESS
24/7/365 INNOVATION
• ATM and Deposit • Real instant access Savings
Machines Account with interest rate as
• Debit Card payments good as the term deposit

BEST PRICE
• Interest rate of term deposit
• No charge for early withdrawal
• Free of charge debit card

Basic multipurpose Savings

Account creates maximum
benefits and convenience
SELF MANAGEMENT
• Many Accounts create
convenience for on purpose
savings

Source: 'Delphi' team analysis 2008 SL Consulting 10

 SFI – MUTUAL FUNDS ACCESSIBLE DIRECTLY FROM THE CURRENT ACCOUNT

mBank Business Case

CONVENIENCE
INNOVATION
• Directly connected to the
Current Account • Access to un-limited Investment
• Access 24/7/365 Funds offering from a single
• Only 2 clicks for buy or sell platform
• Open architecture
• No buy or sell fees
BEST PRICE • Investment Account integrated
• No initial charge with Current Account
• No additional charges
• Entire invested capital is
working for the client
• Management fee is the
only charge

Open architecture with un-

limited Investment Funds
SELF MANAGEMENT access fully integrated with
• E-Learning for new & un- the Current Account
experienced investors
• Recommendations for un- COMMUNITY
experienced investors
• Online Education Center

Source: 'Delphi' team analysis 2008 SL Consulting 11

 EMAKLER – BROKER SERVICES REVOLUTION IN MASS MARKET
CONVENIENCE
• Directly connected to the
Current Account
• Access 24/7/365
• No extra login needed
BEST PRICE
• No fee for the Broker
Account
• Lowest transactional
charges on the market
• High interest rate for un-
invested funds
SELF MANAGEMENT
• Online Education Center
for new & un-experienced
investors
• Interactive analytical tools
available online
Source: 'Delphi' team analysis
mBank Business Case
INNOVATION
• Broker Account conveniently
integrated with Current
Account
Broker Account online
connected to the Current
Account enables an
integrated management of
the individual financial
standing unmatched in the
marketplace
COMMUNITY
• Online Education Center
2008 SL Consulting 12
 SUS – INSURANCE REVOLUTION IN MASS MARKET

mBank Business Case

CONVENIENCE
• Insurance fully integrated with the INNOVATION
Current Account
• Broad selection of life and non-life
• Single process for all insurers and
insurance products from 4-5 insurance
all types of insurance
companies
• Product offering transparent &
• Lower risk when selling insurance
easy to understand
products to identified bank clients
• Access on-line 24/7/365
• Single process for all insurers and all
types of insurance
BEST PRICE
• Client shares unmatched price
benefits through online self
service and elimination of
agents, brokers, …
• High profitability thanks to cost Disruptive bancassurance
savings model fully compatible
with the requirements of e-
commerce – best price and
SELF MANAGEMENT simple processes
• Direct channels enable high transparent to the client
number of options to choose
from via direct channels
COMMUNITY
• Fully flexible payment options • Online Education Center
e.g. monthly • Automatic best option
recommendations

Source: 'Delphi' team analysis 2008 SL Consulting 13

 MORTGAGE REVOLUTION IN MASS MARKET
CONVENIENCE
• Automatic integration of the
Current Account with the
mortgage account
BEST PRICE
• The offset mechanism
significantly reduces the
cost of servicing the
mortgage
SELF MANAGEMENT
• Client may use direct channels to
self-manage the offset mechanism
COMMUNITY
• Online Education Center
Source: 'Delphi' team analysis
mBank Business Case
INNOVATION
• The online offset mechanism
reduces the prime and enables the
best application of the periodic
peaks on the Current Account to
serve the mortgage
Unique functionality based
upon online integration
of the mortgage loan with
the Current Account
enables off-setting periodic
peaks in account balance
against the loan prime
2008 SL Consulting 14
MBANK BUSINESS MODEL

mBank Business Case

Electronic Revolution in Mass Market

Car Insurance
Supermarket – new
type of Bancassurance

On-line brokerage linked to

current account

Unit link
(life insurance
+investment in
Mutual funds)
Mutual Funds
Supermarket:
• Open architecture
• No front load fee

Instant access Saving

Account
Free of charge Current
Account

2000 2003 2004 2005 2007

Comments
The strategy of innovation is in mBank’s business model continuous, ongoing process. The only constant element is a change.
On average, once a year mBank implements major new innovation.

2008 SL Consulting 15
TECHNOLOGY OF MBANK
Altamira
Core Banking system
UniFlow and UniWniosek
Supportive banking systems:
Innovative flow solutions for sales
and customer service
Centralized
and digitalized
back-office operations
mBank Business Case
• Central System
• Central Host
• Customer Centric
• All kind of products parameterized in product
factory, available for customers any time and
at any distribution channel
• Up to 10 mln customers
• Rapid product flow and customer application
development
• Fast and automated processes
• Easy sales partners launch
• One Central Location
• Massive use of scans
• Digital archives
2008 SL Consulting 16
DISTRIBUTION AND COMMUNICATION CHANNELS

mBank Business Case

Multichannel distribution model based on Internet and Internet technology

• The most cost-sensitive elements of Direct electronic

clients acquisitions and service are Internet
shifted to remote direct or self Telephone
service physical channels
Subsidiary man-backed
• The most quality-defective factor – a Self-service physical channels
man – extracted from the sequence Post/Courier Financial Centers
in the most frequent operations
ATMs mKIOSKs

• Permanent availability and constant Agents

high quality of of all services from
any place in the world
mBank fetched market opportunity in consumer
credit - cash loans and mortgage loans - with new
efficient model of physical sales network: mBank
mortgage sales per location is 18 times higher than
the market average

2008 SL Consulting 17
 MBANK WEBSITE IS A POWERFUL FINANCIAL PORTAL

mBank Business Case

mBank Business Case
350 000 1 200 000

300 000
1 000 000

250 000
800 000

200 000
600 000
150 000

400 000
100 000

200 000
50 000

0 0
2008.09.08 Mon Tue Wed Thu Fri Sat 2008.09.14 Sun

Returning visitors (cookies) First time visitors (cookies) Page views

Custommers acquisition via internet till end of:

2001 88 ths
2004 582 ths
2007 1 232 ths
2008 1 465 ths

Source: GemiusTraffic – 2008.09.08 – 2008.09.14 2008 SL Consulting 18

 CONVENIENCE TO VISIT THE MBANK ANYTIME

mBank Business Case

Average hour mBank customers visits on www.mbank.pl
Number of users (coocies)

Weekend Each day Working day

Comments
•12 256 visitors in average every hour, 14 213 in working days, 6 632 on weekaeds
•Highest visitors frequency between 12-13 - 20 800 customers, 24 240 n working days, 11 209 on weekends
•Lowest visitors frequency between 4:00 – 5:00 a.m 294 customers

Source: GemiusTraffic – 2007.10.01 – 2007.10.31 2008 SL Consulting 19

 MBANK CONTACT CENTER – THE BIGGEST BANKING CC IN POLAND

mBank Business Case

10000
04:14
9000
04:00
8000
03:45
7000

6000 03:31

5000 03:17

4000
03:02
3000
02:48
2000

02:33
1000

0 02:19
PONIEDZIAŁEK WTOREK ŚRODA PIĄTEK
Monday Tuesday WednesdayCZWARTEK
Thursday Friday SOBOTA
Saturday NIEDZIELA
Sunday

Il. tel. odebranych Il.tel. straconych (systemowe) callbacki czat maile Średni czas rozmowy I linia:

Answered calls Lost calls (system) Callbacks Chat Mails Average time of call

• 9 550 calls in working days

• 405 calls per hour. In hours of the biggest traffic (10 A.M. – 8 P.M.)
it raises to 720 per hour.
• 220 000 calls monthly
• 4 600 talks per week through chat

Source: mBank internal data 2008 SL Consulting 20

 MBANK CLIENT – NEW GENERATION CUSTOMER IS VISITING BANK FREQUENTLY AND DOING IN SELF

mBank Business Case

SERVICE MULTIPLE TRANSACTIONS

250 000 customers currently log on daily to the mBank transactional system
250 000

200 000

150 000 average

100 000

50 000

0
2007-01-01 2007-02-01 2007-03-01 2007-04-01 2007-05-01 2007-06-01 2007-07-01 2007-08-01 2007-09-01 2007-10-01 2007-11-01 2007-12-01

In the afternoon and evening hours in each second :

• 10 clients log on
• 5 transfers are being made
• 15 card authorizations occur
• 420 transactions are made

Source: mBank internal data 2008 SL Consulting 21

MKIOSKS

mBank Business Case

Internet bank in the real world
KIOSK 2 Telephone 2 ATM
Internet withdrawals
Service desk 2

Service desk 1
Telephone 1
KIOSK 1 ATM
Internet deposits

Description
• Shopping centres in big cities and urban areas
• Modular architecture –easy-adopting arrangement to different spaces
• Mobility – quick and easy relocation of mKiosk
• Advice on and sale of consumer credits
• Gaining customers and opening of accounts
• Cash deposits and withdrawals
• Self-service financial management points: terminal|telephone

2008 SL Consulting 22
FINANCIAL CENTERS

mBank Business Case

Internet bank in the real world

Functions
• Advice on and sale of credit and investment products
• Cash deposits and withdrawals using
self-service equipment
• Self-service points for managing personal
finances: terminal and telephone

2008 SL Consulting 23
FINANCIAL CENTERS

mBank Business Case

Internet bank in the real world

2008 SL Consulting 24
FINANCIAL CENTERS AND MKIOSKS

mBank Business Case

Internet bank in the real world

Financial Centeres
100
mKiosk 100
100
mKiosk (partnership)

27
94 106
82
56 61
40
7 22 22 24
14 15 15 20

2003 2004 2005 2006 2007 2008 2009 2010

25
 MBANK – NEW GENERATION OF CUSTOMERS

mBank Business Case

Higher education Clients under 35 year old

63% 24% 70% 50%

Banking Sector Banking Sector

Target group:
Sensitive to price and quality of service, prone to use
new technologies, seeking comfort and valuing
independence, well educated, socialy active and
enterprising

Internet users Credit card owners

100% 31% 24% 10%

Banking Sector Banking Sector

Source: SMG KRC, March 2007 2008 SL Consulting 26

 MBANK.PL – CURRENT PERFORMANCE

mBank Business Case

Third biggest retail bank in Poland in terms of number of clients. Continuously outperforming the market in
deposit and credit growth. Market leader in brokerage .

Data for 2009.03.31

m EUR m EUR
1 869 ths
2 510 2 596

Clients Assets under management Loans and mortgages

(ths) 14 000
(m PLN) 14 000 (m PLN)
2 000 1 869 11 802 12 207
1 800 72 12 000 252 12 000
66 578 1 304
94 447
1 600 1 455 91 9 485 1 399
91 10 000 10 000
1 400 2 688

1 200 8 000 8 000

1 347
1 000 634
6 000 6 000 5 399 836
800
600
+28% 4 000 +24% 4 000
+126%
400
2 000 2 000
200
0 0
0 -359
2007-12-31

2009-03-31
Sept
Mar

June

Dec

2007-12-31

2009-03-31
Sept
Mar

June

Dec
2007-12-31

2009-03-31
Sept
Mar

Dec
June

-2 000

state
increase
Source: mBank internal data 2008 SL Consulting 27
 MBANK PERFORMANCE TO DATE

mBank Business Case

Clients [ths]

342
274 339
255
215
11 112 214
209

2000 2001 2002 2003 2004 2005 2006 2007 2008

Accelerated growth in acquisition of individual clients over the period of 8 years shows the
unique track record.

Accounts SME [ths]

299

40 66
20 36 35 40 62

2002 2003 2004 2005 2006 2007 2008f 12.2008f

Impressive mBank growth in the prospective segment of microenterprises. To date

mBank is ranked second on the market

state
increase
Source: mBank internal data 2008 SL Consulting 28
 MBANK PERFORMANCE TO DATE

mBank Business Case

Assets under management [m PLN]

2 675
4 172

723 500 1 293

791 984
19 1 019

2000 2001 2002 2003 2004 2005 2006 2007 2008

Loans [m PLN]

5 504

2 356
4 158 341 1 902
637

2000 2001 2002 2003 2004 2005 2006 2007 2008

mBank business develpment was driven by client and deposit acquisition in the first phase
followed by mortgage and cash loans growth.

state
increase
Source: mBank internal data 2008 SL Consulting 29
 MBANK – MARKET POSITION

mBank Business Case

Number of individual clients

Market (left scale) Market share mBank (right scale)

9,34%
25 000 000 2 000 000
8,50%
20 000 000 8,00% 1 500 000
6,80%
15 000 000 5,20%
1 000 000
3,90%
10 000 000
2,60%
500 000
5 000 000 1,10%
0,10%
0 0
2000 2001 2002 2003 2004 2005 2006 2007 2008
Current accounts – Polish market [Dec 2007]

Other Pekao
18% 20%

Millennium
7% BZ WBK
7%
ING BŚ
7% mBank
8%

PKO BP
33%

mBank big bang growth has changed the landscape in the retail banking in Poland. Rank 3
in terms of number of clients and current accounts is an impressive achievement
Source: Parkiet, TNS 2008 SL Consulting 30
 MBANK PERFORMANCE IN NEW, OFF-BALANCE, BUSINESS FIELDS: DIRECT INSURANCES AND ONLINE

mBank Business Case

BROKERAGE

Direct Car Insurances [‘000]

• mBank started selling direct car

66,9 insurances in early 2007. More
than 66 thsd. where sold by the
end of 2007
24,4
1,7 • The value of car direct insurances
in 2008 is forecasted to reach 500
m PLN. mBank aims at selling
II 2007 VI 2007 End 2007 approximately 37 m PLN.

On-line brokerage accounts [‘000]

CAGR 159 %
• The product earlier available only to
82,9 a narrow group of sophisticated
customers now offered to mass
customers
34,5
• mBank is a market leader in terms of
12,4
number of opened brokerage
accounts
2005 2006 2007

Source: mBank internal data, insurance companies 2008 SL Consulting 31

 MBANK FINANCIAL RESULTS

mBank Business Case

Break Even Point [ths PLN]

600 000
537 627

500 000

400 000
353 716

300 000

237 673
200 000
200 587
165 405
116 213
100 000 54 964

-168 3 838 12 973 72 577

-1 187
0 28 417
-7 061 -7 044
-30 339 Break Even Point
-45 937 -48 191
-100 000
2000 2001 2002 2003 2004 2005 2006 2007 2008

Results on banking activity Gross financial results

Source: mBank internal data 2008 SL Consulting 32

 MBANK FINANCIAL RESULTS

mBank Business Case

Payback, Investment vs. gross result [ths PLN]
300 000
Investment
August 2007, Payback date 243 898
250 000 Cumulated gross result + depreciation

200 000
162 151
142 819
150 000 117 998 201 727
97 302
100 000 79 958

50 000 25 018
12 332
53 538
0

-50 000 -82 964

-98 852 -40 499
-100 000 -6 997 -34 479
-71 551
-150 000
2000 2001 2002 2003 2004 2005 2006 2007

Comments
•In August 2007 investment in mBank paid back, after over 6 years of operations.
•Total investment till payback time amounted to 168M PLN, of which 60% are intangible assets

Source: mBank internal data 2008 SL Consulting 33

 COSTS STRUCTURE

mBank Business Case

Cost structure comparison [2007] Comments
•mBank keeps low share of
TOTAL in m PLN = 161 4 082 employee benefits in total
costs, what is the result of
9%
specific mBanks business model
16% 2%
Depreciation
•In mBank, marketing and
9% administrative costs are two key
Other costs
positions in ‘non-personnel costs’
Non-personnel 33% that have 16% and 17%
costs
Employee benefits •Quite high level of other internal
costs can be explained i.e. by
considerable costs of contact
55% center

56%

21%

mBank PKO BP

Source: mBank, PKO bp, Delphi team analysis 2008 SL Consulting 34

 MBANK IN THE CZECH REP. AND SLOVAKIA

mBank Business Case

Economic background

Czech
2006 Slovakia Poland
Republic
Population [M] 10.2 5.4 38.1
GDP per capita [EUR] 11 010 8 150 7 120
Real GDP growth [%] 6.1 8.3 6.1
Inflation [%] 2.5 4.3 1.0
Unemployment [%] 7.7 12.0 14.9
657 536 643
Average salary [EUR] 1
(2005) (2006) (2006)
Household loans
27.7 30.4 1 17.3
CAGR (2000-2006)
Household deposits
6.0 1.1 2 2.9
CAGR (2000-2006)

1 – 2000-2005 CAGR
Source: CEEmea Banks – The Big Picture, Citigroup Global Markets, Equity Research, April 2007; Directional Economics, ING Wholesale Banking, April 2007
Czech Statistical Office; Statistical Office of the Slovak Republic; 2008 SL Consulting 35
 MBANK.CZ IS CHANGING THE LANDSCAPE OF CZECH BANKING SECTOR

mBank Business Case

Data actual for 2009.05.06

232 ths m EUR m EUR

670 140

Clients Deposits Loans and mortgages

(ths) 20 000 (m CZK) (m CZK)
250 4 000
18 000 3 733
3 500
16 000
200 232 176 893
144 3 000
107 14 000
993
12 000 1 626 2 500
150
10 000 1 396
8 2 000
15 1 401
100 8 000 1 740
13 1 500
14 +2185% 2 858
6 000 1 606 139
12
1 000 271
50 18 4 000 1 829 185
18 13 +1223% +13912% 500 163
116
14 2 000 1 030
128 0
0 0 0
Feb

06-05-2009
Apr

May

Jul
31.12.2007

Jun
Mar
Jan

18 Aug

06.05.2009
Mar

Apr

Jul
May

18 Aug
Apr

May

Jun
31.12.2007

Feb

Jul

06.05.2009
Jun
Mar
Jan

18 Aug

state
increase

Source: mBank internal data 2008 SL Consulting 36

 MBANK.SK IS CHANGING THE LANDSCAPE OF SLOVAK BANKING SECTOR

mBank Business Case

mBank.sk is doing well in client acquisition and deposit gathering. Credits will accelerate soon.

Data actual for 2009.05.06

73 ths m EUR m EUR

214 84

Clients Deposits Loans and mortgages

(ths) (m SKK) (m SKK)
7 000 3 000
80
6 000 2 500 2 533
70
73 2085
5 000 6 448
60 201
35 709 2 000
50 4 000
515
1 500
40 528 1 722
2 3 000
4 641
30 4 +1131% 91
3 1 000
3 2 000 628 261
20 6 141
637 111
4 +787% +4205% 500 0
8 1 000
10 5 150382

0 0 0
Jul
Apr

May
Feb
31.12.2007

Jun

06.05.2009
Mar
Jan

18 Aug

06.05.2009
Mar

Apr

Jul
May

18 Aug
Apr

Jun
31.12.2007

May
Feb

Jul

06.05.2009
Jun
Mar
Jan

18 Aug

state
increase

Source: mBank internal data 2008 SL Consulting 37