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segment all along. BA-CA’s essential role under this strategy
was confirmed by the Shareholders’ Agreement in March
2006, its geographic perimeter was widened to include new
countries. Bank Austria Creditanstalt will act as sub-holding
company for UniCredit Group’s operations in CEE. It will manage,
within UniCredit Group guidelines, the Group’s banking
network in this region. BA-CA will take over the banking subsidiaries
and branches of UniCredit and HypoVereinsbank in
this region, excluding Poland, which will be directly managed
by UniCredit. The responsibility for Turkey and Ukraine is subject
to further consideration.
On this basis, within BA-CA’s area of responsibility, there will
be mergers of UniCredit and BA-CA subsidiaries in five countries.
This means that – on a pro-forma basis – we are now
among the top five banks in ten countries and among the top
three banks in six countries. In forthcoming mergers we will
benefit from our long-standing integration experience and carry
out the integration in accordance with the principles of
transparency and best practice, using network effects and
economies of scale. Overall, the new Group in CEE is about
twice as large as the nearest competitor.
Market opportunities intact
Four factors support the view that these markets still offer
considerable potential (figures relate to the area in which
UniCredit Group is active, excluding Turkey): first, our CEE
markets have already reached a significant volume, with
aggregate total assets of the banking sector amounting to
€ 840 bn. Second, we expect real economic growth of over
5 % p.a. until 2008, almost triple the growth rate expected
for the euro area. Third, this real economic growth reflects
even higher nominal growth and progressive financial intermediation.
This means that the circulation of money is accelerating
even faster, market penetration with classic (and modern)
banking products is increasing, moving closer to the levels
seen in mature markets. Market growth will thus reach 18 %
p.a., three times the level achieved in the EU 15. And fourth,
it will be a long time before the catching-up process reaches
the level of mature markets in Western Europe. At present,
banking assets in CEE slightly exceed 60 % of nominal GDP,
compared with more than 200 % in the EU 15.
We do not think in static but in dynamic terms, not in terms of
size and status but in terms of growth, profitability and value
creation. The market trends outlined above will lead to annual
growth of about 13 % in the “CEE earnings pool”, i.e. aggregate
total earnings of all banks.
78 Central and Eastern Europe (CEE)
Strategic positioning
To achieve our key strategic aim of consolidating our number 1
position we are pursuing a different approach in each country
as well as a coordinated supraregional approach in our core
business segments. On both counts, locally and supraregionally,
we focus on meeting customer needs. Europe-wide business
can only be built on diversity, and this is one of the basic
principles of the new group, which aims to be a truly European
bank. Yet we do not want to have a patchwork structure;
we want to combine know-how, production and settlement
activities according to the principle of best practice. A
uniform IT platform – however pragmatically we will proceed
in the short term – remains a long-term objective.
Our regionally differentiated approach takes into consideration
that the countries are at different stages of market development
and that our own business structure still varies greatly.
For this reason we have divided the countries into the following
groups:
� In those countries where we are among the market leaders
we want to at least maintain our market share and make
progress in terms of efficiency and profitability. Our efforts in
this regard will focus on the “industrial organisation” of retail
banking, where we can draw on experience gained from the
Austrian business model.
� Where we already have a good and broadly based position
in the market, but are not yet market leader, we want to
increase our business volume quickly through organic growth,
with a view to achieving a market share of 10 % as soon as
possible, which we see as the critical size for a lasting presence
in the market.
� The third group comprises those countries in which business
with corporates predominates. Here we want to expand
retail banking activities and surpass the level of a 10 % market
share.
� In the emerging markets where our presence, at least in
some cases, is limited to representative offices, we intend to
implement a growth strategy as far as this is feasible in the
respective markets. This may be a niche strategy or acquisitions,
if opportunities arise.
Despite regional differentiation, there are common focal points
for our business in the customer segments. Capital is primarily
allocated to those areas which create sustained value and
promise expansion generating returns in excess of the cost of
capital. We will therefore not use the same business model in
all countries, but concentrate on different aspects according to
the prospects offered.