Competitive Business Case

1. Competitive Business Case MBA – March 2004 Delta Bank vs Panonska Bank

2. Index • History • Basis of Banks • Parametars of Work • Overview of Banking Sectors in Serbia • Nomber of Banks in Serbia • Players • Rang • Market • Activites • Balance Sheet Structure of Banks in Serbia • Comparation with Banking Sector in Europe • Potencial and Forecaste • Near future • Banks’ fokus • SWOT • Conclusion • Sources • Authors

3. The Bank is part of Delta Holding and was established in 16/10/1991. Delta Bank is private bank was established in 1974year by state. Ownership of the Bank was socialistic social. Since 1995, it has been operating as a joint-stock bank. Now, the State’s stake is 83% of the Bank’s share capital. The nomber of the Bank’s shareholders is 1 337. History

4. Basis of Delta Bank Mission:Delta Banka is aiming to be a leader on the banking market in Serbia, applying the highest world standards in banking services.  Vision:Basic directions will be development of retail banking, spreading of the net of branches, increasing clients both in domestic and foreign currency businesses, as well as, continuing the co-operation with leading European banks.  Special attention was given to the developing of e-banking, as the basic of banking in the future. Strategy:Increasing of trust of clients in the long-term stability of the Bank by making public accurate information on its financial balance, especially on its solvency, liquidity and risk management. Activity: all banking transaction expected and wonted from clients Imputs come from needs of 200 000 clients

5. Basis of Panonska Bank • Business policy • Achieve positive financial results by preserving the interests of shareholders and adequate provisions for risky loans • Improve permanently market options • Increase operational profitability, primarily by increasing efficiency and rational utilization of internal resources • Business targets • Increasing total and particularly dinar balance sheet real potentials, providing high quality (stable and reliable) deposits-savings sources for financing with the emphasis on the dynamic growth of deposits of SMEs, entrepreneurs and citizens, as well as of fixed long term deposits, • Promoting credit activities particularly for financing SMEs and citizens, • Improving the existing and introducing new banking products and services, • Expanding business network and the Bank’s market share, • Increasing number of clients and users of domestic payment operations services with the promotion of efficient • Gold bases • from 1997, gold isground for savings • ISO 9001 • attested from RWTÜV

6. DeltaBank Panonska Bank balance sheet dinars assets is more then 2.5 bill. dinars(36 mil. €) assets in € is 4.4 mil. dinars liability is more then 3.5 bill. dinars(50 mil. €) liability in € is 3.4 mil. balance issu total profit is near 300 mil. dinars (4.25 mil. €) costs are 430 mil. dinars (more then 6 mil €) Parametars of work

7. Point of Start for CI • Independent of history any bank, new age in Serbian economy and banking has started since political change on beginig of new millennium. It means that no one bank has a lot of advantages from self expeirance on new market environment. • Many big State’s banks has been closed

8. Overview of Banking SectorinSerbia 2002-2003 2001-2002 2003-2004 Privatization Change structure “Get real” Pre-privatization • Detailed analyses of the banks by NBS and 3 other advisors • Classification of banks in 4 categories • Enforcement of regulation • Getting full control of majority state owned banks • Imposing strict measures to preserve value • Appointment of privatization advisors for selected banks • Preparing work-out mechanism • Liquidation of 19 smaller and 4 large banks • Granting 5 Greenfield licenses • Amendment of laws and related decisions • Carrying out debt-equity swap

9. Number of banks in Serbia since 2001 Number of banks as of Dec 31, 2000 New licenses issued in 2001 Number of banks today* NBS • Criteria • Financial standing • Liquidity • Systematic importance • Political importance (number of employees, regional importance) • Rehabilitation costs • Capability of making profit No action 28 83 Banks in Serbia Banks under enhanced supervision Solvent banks 9 Banks in administration 1 = 48 + 7 Insolvent banks BRA Rehabilitation 3 Liquidation / Bankruptcy 23 18 Mergers& Acquisitions 83 *Excluding Kosovo

10. Players VOJVOĐANSKA BANKA

11. Market • Delta Banka is an universal commercial bank with Head Office in Belgrade and 160 branch offices in more than 100 towns from all Serbia. • There is swiftness and amount of foreign currency payment operations, Delta Banka has made a fruitful cooperation with over 200.000 clients. • Delta Banka has a well-developed co-operation with world leading banks. It has correspondent relations with 196 world banks, and in 35 it has Nostro accounts.  Delta Banka has TENFORE real-time and on-line dealing system with Germany.  The Bank is very active on the foreign currency inter-banking market (MTD) and it became a member of ACI - The Financial Market Association.

12. Market • Headquarters of Panonska Bank is in Novi Sad • The Bank has 21 branches end 19 offices in Vojvodina (nord Serbia and Belgrade)

13. Rang • Participation of State: • Komercijalna – 29.08% • Vojvodjanska – 98.65% • Ju-Bank – 76.49% • Novosadska – 67.27% • PB Agro Bank – 15.00% • Panonska Bank – 82.91%

14. Activites of Players • Foreign banks are still mainly focusing on their traditional business segment • Collection of substantial deposits based on outstanding credibility • Focus on selected majority foreign owned companies which entered • The country via Greenfield investment or privatization deals • Advisory services to the Privatization Agency • Organic growth of business activities • Trade related activities with only local financing • Both, domestic and foreign banks don’t have diversification in activites

15. Activites of Players • Service range offered by the banks for the time being is a “plain vanilla” one… • Currently • Current and savings account related services: payments/transfers, short term deposits • Credit-debit card • still in early phase • Loans • mainly overdrafts and consumer loans, some car loans, mainly short term corporate loans • Trade related activities: • mainly L/C and guarantees • no customer segmentation • mainly one channel of communication • simple products • To come • wider penetration of all the service • standing orders • medium and long term loans based on FFCS* as well • foreign transfers • Leasing • mortgage loans

16. Activites of Delta Bank • Retail banking • Consumers Loans • Payment Cards • Savings • Domestic & Foreign Currency • Safe Boxes • Corporate banking • Payment Operation • Short-Term Loans • Long-Term Loans • Car Loans • Domestic Partners • Partners Abroad

17. CONSUMER'S LOANS STUDENT'S LOANS FOR SCHOLARSHIP PAYMENT ARRANGEMENT CREDITS BASED ON THE CONTRACT ON BUSINESS CO-OPERATION Payment Cards Maestro  Standard  Gold  Business  Visa Electron Visa Classic  Visa Gold   ATM TERMINALS OF DELTA BANKA SAVINGS Domestic Currency Savings Foreign Currency Savings DOMESTIC & FOREIGN CURRENCY ACTIVITIES DOMESTIC & FOREIGN CURRENCY ACTIVITIES Cashing foreign cheques and international P/O International P/O Domestic Currency Activities Current Accounts Giro-accounts of citizens and undertakers SAFE-BOXES OF DELTA BANKA Activites of Delta Bank

18. Activites of Panonska Bank • Panonska Bank deals with deposits, credits, and other banking activities in the country and abroad • The scope of services offered by the Bank includes the following: • All types of money deposits • Loans and credits • Foreign exchange transactions • Issuing of shares and bonds and credit cards • Money savings and transactions with securities • Buying and selling of securities • Issuing of certificates, guaranties, and avals • Payment operations in the country and abroad • Foreign loans

19. Activites of Panonska Bank • The Bank also performs the following services: • Brokerage activities • Crediting and debiting operations • Pay cards • Visa Classic • Visa Electron • Dina card • in arrangement • VISA GOLD, • VISA BUSINESS SILVER • Other financial services • Keeping of objects made of gold and other precious metals, jewellery and other valuables.

20. Corporate banking of Panonska Bank • Short-term loans for: • Export financing   • Preparation of goods for export   • Working assets • Buybacks and stocks of finished products and goods  • Current liquidity • Medium-term and long–term loans for: • Fixed assets   • Permanent working assets  • Housing loans and etc.

21. The Balance Sheet Structureof Serbian Banks ASSETS LIABILITIES €10.9 bn € 4.8 bn € 5.3bn €10.9 bn € 4.8 bn € 5.3bn Capital Fixed assets Claims of FRY for FC savings Long-term provisions Long-term funds Liabilities for frozen FC savings Long term placements Short-term funds Short-term placements Sight-deposits Cash *Excluding the 4 largest banks closed on January 3, 2002

22. Comparation with Banking Sector in Europe Banking assets, 2001 In € bn Banking assets per capita, 2001, in € ‘000 Banks' assets CAGR, 1997-2001

23. Expected Potential Number of credit cards in 000 of customers GDP per capita in USD Consumer loans per capita in € Source:NBS

24. Forecast • Refering provisinal information, posible to see that Serbian banking is on good way, but still far awey from Europian and not near to banking of neighbourhood countries. • Direction of development will be in substantial improvement of banking services: • ATMs, • POS, • E-banking, • credit/debt cards, • consumer loans ... • But, the first job have to be privatisation

25. Delta Bank Delta Bank is aiming to be a leader on the banking market in Serbia, applying the highest world standards in banking services.  Basic directions of development include development of retail banking, further spreading of the net of branches, increasing the circle of depositors and clients both in domestic and foreign currency businesses, as well as, continuing the co-operation with leading European and world banks.  Special attention was given to the developing of e-banking, as the basic of banking in the future. Panonska Bank Increasing total and particularly dinar balance sheet real potentials, The emphasis on the dynamic growth of deposits of small and middle enterprises, entrepreneurs and citizens, as well as of fixed long term deposits, Promoting credit activities particularly for financing small and middle enterprises and citizens, Improving the existing and introducing new banking products and services, Expanding business network and the Bank’s market share, Increasing number of clients and users of domestic payment operations services with the promotion of efficient Near future

26. Banks’ Focus

27. S W O T

28. Panonska Bank is one of tipical bank from socialism period. Today, this bank is still in good relationship with current political structur. During leading politics, the Bank will have good business, but can not say that has good future. Delta Bank is part of strong group of known companies. Has good image and can expected nice future. For presentation, we chose two of more important domestic banks because we’d like to show totaly diferent approach to business. Conclusion

29. Sources • Personal contact with managers of banks • Sites: • www.panban.co.yu • www.gov.yu • www.ssinf.sv.gov.yu • www.mfa.gov.yu • www.srbija.sr.gov.yu • www.mier.sr.gov.yu • www.mfin.sr.gov.yu • www.mpriv.sr.gov.yu • www.belex.co.yu • www.bra.gov.yu • www.priv.yu • www.nbs.yu • www.pks.sv.gov.yu • www.finnet.co.yu/ubj/ubj.htm • www.thebanker.com

30. Authors • Zlatko Mitic, R&D Manager, Sintelon R&C - floor coverings producer • Velibor Raicevic, Menager of publicly municipal enterprise • Milica Radoicic, Proxy of manager inpublicly municipal enterprise • Vladimir Bjelovic, Manager of gas distribution enterprise • Darko Medjedovic, Manager of local electro distribution • Zoran Skuban Manager in Vital, food producer