UniCredit Bank AG

In particular cyclical effects and unexpected fluctuations on international financial and securities markets have a
stronger impact in this environment. If the developments in these markets run counter to the expectations of
HVB Group, this would impose a heavier burden on HVB's results than in previous years. This means that such
swings could be reflected more visibly in the assets, liabilities, financial position and profit or loss of the
corporate group.
HVB Group may not be able to further successfully implement its pricing strategy and improve interest margins
in the current competitive environment. Failure to improve interest margins or maintain them at current level
may have a significant negative impact on the HVB Group's results of operations and financial condition.
Non-traditional banking activities add to credit risks
Like other banks, HVB Group is exposed to the risk that third parties who owe HVB Group money, securities
and other assets will not perform their obligations. Many of HVB Group's businesses activities beyond the
traditional banking business of lending and deposit-taking also expose it to credit risk.
Non-traditional credit risk can, for example, arise from: holding securities of third parties; entering into
derivative contracts under which counterparties have obligations to make payments to HVB Group entities;
executing securities, futures, currency or commodity trades that fail to settle at the required time due to nondelivery
by the counterparty or systems failure by clearing agents, exchanges, clearing houses or other financial
intermediaries and extending credit through other arrangements.
HVB Group's risk management strategies and techniques may leave HVB Group exposed to unidentified
or unanticipated risks
Risk management strategies and techniques may fail under some circumstances, particularly if HVB Group is
confronted with risks that it has not identified or anticipated. Some of HVB Group's methods for managing risk
are based upon observations of historical market behavior and on statistical models. HVB Group may experience
material unexpected losses if the measures used to assess and mitigate risk proved insufficient.
Tax implications – new types of tax to make banks contribute to the cost of the financial crisis
Several ways of making banks contribute to the cost of the financial crisis are currently being discussed
internationally. Things like a general levy on financial institutions, taxes on proprietary trading activities, taxes
on financial transactions and taxes on variable elements of remuneration paid to bank employees with
comparatively high incomes are being cited. Actual draft laws are already being promoted in individual countries
(taxes on elements of remuneration already implemented e.g. in United Kingdom). The major industrialised
nations are currently discussing all possible measures to agree upon a coordinated approach. Besides extracting a
contribution to the costs, these measures also have a political purpose. HVB Group could face additional costs,
should any of these issues currently under discussions actually be translated into new tax laws.
IT risks
The introduction of a new IT platform is generally one of the most challenging tasks for a bank, engendering
greater operational risks on account of its size and complexity per se and hence entailing great responsibility
towards employees and customers alike. At the end of April 2010 it was decided to again postpone the launch
date of EuroSIG, UniCredit Bank AG’s new IT platform, in order to reinforce security and reliability features for
both customers and employees. Currently some mandatory requirements have to be carried out with manual
process activities as they are not fully automated installed in today’s UniCredit Bank AG’s IT systems. EuroSIG
will provide state-of-the-art IT support as soon as it is implemented. Up to this time the business is manageable
as all actual systems are continuously running.
Although major milestones have been achieved at all project levels – in particular in adapting sales and
customer-related applications – it is intended to carry out additional tests and to make further improvements on
the basis of these tests. These improvements will be implemented speedily and the launch itself will take place as
soon as possible. Before the launch, eight criteria must be fulfilled in full. These are aimed at reducing the
heightened operational risks that go hand-in-hand with any major project of this dimension.
HVB Group is exposed to German economy
Given the situation with Germany as the regional core market, HVB is more heavily exposed to economic and
political developments in Germany. HVB Group is one of the largest lenders to the German Mittelstand and one
of the leading providers of personal and business loans in Germany.
If the economy performs below expectations, HVB cannot preclude the possibility that the customers of HVB
Group will also feel the effects of the crisis, and that loan-loss provisions could increase above the expected
level.
Difficult market situations can add to volatitlity in HVB Group's income
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