GENERAL MEETING DRAFT - Bankier.pl

Discount rates of flows
The table below summarizes the key assumptions adopted by management in calculating the recoverable
amount of CGU:
CGU
2009 CONSOLIDATED REPORTS AND ACCOUNTS
Initial discount rate
after taxes (Ke)
Final discount rate after
taxes (Ke)
Nominal growth rate for
the calculation of
Terminal Value
Retail 8.70% 10.55% 2.00%
CIB 9.94% 10.55% 2.00%
Private Banking 8.90% 10.55% 2.00%
Asset Management 10.18% 10.55% 2.00%
Central Eastern Europe ( 1 ) 16.35% 12.18% 2.00%
of which: JSC Ukrsotsbank (USB) 26.67% 12.50% 2.00%
of which: JSC ATF Bank (ATF) 15.37% 12.50% 2.00%
Poland’s Markets 12.27% 11.00% 2.00%
(1) The discount rate for the Central Eastern Europe CGU is the weighted arithmetic mean of the discount rates used for individual countries
belonging to the individual sector.
As can be seen from the table above, future financial flows were discounted using a conservative
estimate of the discount rate, incorporating the various risk factors linked to the business sector into the
equity cost (Ke). The discount rate is a nominal rate, net of taxes.
In particular, the cost of share capital for the Group and the differentiated cost for each of the sectors are
the sum of:
� Risk-free rate: swap rate of the eurozone at 5 years, average of the last 6 years. The horizon of 6
years was chosen to reflect the average length of the economic cycle in the eurozone;
� Debt risk premium: average Credit Default Swap for the last 6 years paid by UniCredit;
� Equity risk premium: determined using the option-based model, based on the volatility of
UniCredit shares over the last 6 years. For the sectors, the average volatility over the last 6 years
for banks operating mainly in the same area was used, also taking into account the benefits of
diversification. The latter was also determined by considering the variance-covariance matrix of
quotations for the groups of banks used for the determination of the risk premium.
The cost of share capital, differentiated by each CEE country, is given by the sum of:
� Risk-free rate: local currency swap rate at 5 years, average of the last 6 years. Absent when the
interbank rate was considered more liquid and representative;
� Country risk premium: average Credit Default Swap paid by the country over the past 6 years (or
a shorter period in the absence of a sufficiently long time series);
� Own equity risk premium: determined using the option-based model and based on the volatility of
UniCredit shares over the last 6 years.
The cost of capital used in the discounting of cash flows results in a defined value for each CGU. This
value is calculated as an average of the cost of capital in a sampling of European banks based on the
same methodology used for the cost of the initial capital of the Group, extending the expiration of the riskfree
rate and the 5 to 10 year CDS. The cost of terminal value capital utilized varies depending on
whether the CGU is located in a Western European country, in an Eastern European country that will
become part of the euro zone by 2013, or in another country.
266