Annual Report and Accounts VISION

One Bank, One Team, One UniCredit. Capital and balance sheet management Transform Enhanced service model Ethics and Respect Team 23 Compliance Grow and strengthen client franchise Process Growth optimisation engines Sustainable Customer results experience Sustainability Disciplined risk management Paperless bank “Go-to” bank for SMEs 2019 “Do the right thing!” Annual Report and Accounts VISION: Our vision is to be “One bank, one UniCredit”: pan-European commercial bank with a simple business model, which is fully plugged in Corporate & Investment Banking, delivering our unique Western, Central and Eastern European network to our extensive client franchise. Everything we do to implement our vision is based on our Five Fundamentals. Our top priority, every minute of the day, is to serve our customers the very best we can (Customers First). To do this, we rely on the quality and commitment of our people (People Development), and on our ability to cooperate and generate synergies as “One Bank, One UniCredit” (Cooperation & Synergies). We take the right kind of risk (Risk Management) whilst being very disciplined in executing our strategy (Execution & Discipline). 2 Annual report 2019 · UniCredit Bank Serbia Contents Grow and ADDRESSING OF CEO 7 ABOUT UNICREDIT GROUP 9 MACROECONOMIC OVERVIEW 11 strengthen SERBIAN FINANCIAL SECTOR 13 FINANCIAL PERFORMANCE OF UNICREDIT SERBIA GROUP IN 2019 16 STRATEGY FOR PERIOD 2020-2023 19 ORGANISATIONAL STRUCTURE OF UNICREDIT SERBIA GROUP 20 client CORPORATE INVESTMENT BANKING 23 RETAIL BANKING 25 RISK MANAGEMENT 26 GLOBAL BANKING SERVICES 28 franchise. HUMAN RESOURCES HR 29 IDENTITY AND COMMUNICATION 30 CORPORATE SOCIAL RESPONSIBILITY 31 FINANCIAL STATEMENTS 2019 32 Team 23 focuses on strengthening and growing our client franchise across all segments: SMEs, individuals and corporates. Our strategic initiatives focus on the customer experience, to improve customer satisfaction and service quality. This is how we will increase our Net Promoter Score at Group-level. 4 Annual report 2019 · UniCredit Bank Serbia Finansijski izveštaji u skladu sa MSFI CEO's message Our efforts to adapt the way we are doing banking in order to fulfil the needs of our customers, were recognized by renowned international financial magazines Euromoney and The Banker who named us for the best bank in Serbia. I am particularly proud of the awards, but even more proud of dedicated employees who always move one step ahead of our customers, continuously analysing the market in order to embrace new opportunities for innovation. Readiness to improve ourselves and adjust to the fast changing environment are the keys to our success. We have continued to The main asset of the UniCredit Serbia Group make us, employees. Thus, we are working hard to create involve employees in not only an attractive work environment and good working conditions, but also to develop and nurture a corporate culture in order to maintain a position as one of the most attractive employers in Serbia. All this different volunteering makes each individual feel safe, valued, contributing according to his/her capabilities, and feel free to seek activities throughout support when needed. This helps us create a culture that enhances the value that each and every one of us can contribute. Serbia. As a result As in previous years, we engaged extraordinary efforts to position UniCredit Group Serbia as one of the more than half of the market leader when corporate social responsibility is concerned. We have continued to involve employees in colleagues participated different volunteering activities throughout Serbia. As a result more than half of the colleagues participated in mentoring programs, charity initiatives and arranging environment. At the end of the year, we have in mentoring programs, presented Social Impact Banking thus expanding our social commitment in Serbia. Social Impact Banking charity initiatives and aims to identify, finance and promote organisations and entrepreneurs with a positive, measurable social impact. In addition, Social Impact Banking allows UniCredit Bank to share its financial and business know- arranging environment. how through educational initiatives dedicated to social entrepreneurs and vulnerable or disadvantaged groups, including young people and others at risk of social exclusion. Feza Tan In 2020 we plan to continue to support future development of the country and meet customers’ financial CEO and Chairwoman of needs. We will continue to build a long-term partnership with our customers based on trustworthiness. Management Board Customer Satisfaction remains a crucial indicator of a successful partnership with our customers in the years to come. In line with increased focus of the entire UniCredit Group and leveraging on technological developments, we will continue with the process of digitalization of our core products and services putting the new technologies in hands of our clients. At the end, I would like to thank all our employees for these excellent achievements, which would not have been possible without their commitment and engagement. I would also like to thank our clients for their loyalty, trust and for firmly believing that UniCredit Serbia Group is their bank of the first choice. Feza Tan CEO and Chairwoman of In 2019 UniCredit Serbia Group managed to further strengthen one of the leading positions in Serbia Management Board mostly thanks to strong loan and deposit growth and excellent profitability. Besides that, key success factors were an increase in process efficiency, sound risk management and focus on customer acquisition. Moreover, considering the digital era in which we live and work, digitalization strategy, usage of new technologies and benefits created for customers, have imposed UniCredit Bank as the leader. 6 Annual report 2019 · UniCredit Bank Serbia Annual report 2019 · UniCredit Bank Serbia 7 One Bank, ABOUT UNICREDIT GROUP UniCredit is and will remain a simple successful pan-European commercial bank, with a fully plugged in CIB, delivering a unique Western, Central and Eastern European network to our extensive One UniCredit. client franchise. We meet real client needs with real solutions which harness synergies between our business divisions: CIB, Commercial Banking and Wealth Management. The way in which these solutions are developed and provided is as important as the solution itself, which is why everything we do is based on ethics and respect. By focusing on banking that matters, we offer local and international expertise, providing unparalleled access to market leading products and services in 14 core markets through our European banking network. Through sustainable business growth, we ensure UniCredit remains a pan-European winner. Our strategy is clear and long-term: UniCredit is a simple successful Pan European Commercial Bank, with a fully plugged in CIB, delivering a unique Western, Central and Eastern European network to its extensive and growing client franchise. Annual report 2019 · UniCredit Bank Serbia 9 Transform MACROECONOMIC OVERVIEW After achieving a decade high 4.4% GDP growth rate in 2018, which exist regarding oil and commodity prices. The NBS could resume cuts was led by investment growth, exports and labor market recovery, in 2020 if a global economic slowdown leads central banks to ease the growth in 2019 continued its upward trajectory despite the more than currently expected, as long as capital flows do not cause and Maximise global slowdown and was primarily driven by domestic factors. The the dinar to depreciate. preliminary data shows that the GDP growth in 2019 amounted to 4% owing mainly to a faster growth of the construction sector and fixed As it was the case in the previous two years, 2019 has so far seen a investments. Maintained public sector activity on large infrastructure fiscal surplus which on the consolidated level reached 0.9% of GDP projects as well as private sector investments driven by an improved at the end of September. At the same time, the Central government business environment have in turn trickled down to other demand public debt was reduced additionally, to 52.0% of GDP. These results Productivity. components. Household consumption continued to increase on the have been achieved in conditions of significantly higher government back of positive labor market developments in form of private sector capital expenditure, as well as increased outlays for wages and wage growth and a single-digit unemployment rate. pensions, which supported economic growth without causing major inflationary pressures. Small budget deficits are expected in following Looking at the activities side, the key driver that contributed to GDP years (around 0.5%) as the government remains committed to further growth was the construction sector which recorded a yoy increase of reduction of public debt. 35% in Q3 and stemmed from both public and private sector, mainly owing to intensified works on transportation and energy infrastructure Additionally, the government has introduced a so-called Swiss projects, coupled with residential real estate. Another enabler of formula for pension indexation starting from January 2020, whereby economic growth was the activation of earlier investments, which the increase in pensions will be linked to a combination of inflation helped the manufacturing exports to increase from 5% in the first and the growth in salaries, which will replace the current ad-hoc half of the year to almost 9% in Q3. Furthermore, GDP growth was approach. The commitment to low fiscal deficits means that there will strongly supported by services, primarily by trade, transport, tourism be limited room for additional fiscal stimulus, but the government’s and ICT. Following last year’s record growth, agriculture production target for the 2020 budget deficit of 0.5% of GDP should contribute remained at the same level in 2019. An improvement in the business to reducing public debt further to below 50% in 2020. environment was additionally confirmed by Serbia’s progress on the World Bank’s latest Doing Business list, with a movement by four As a result of the activation of investments in tradeable sectors, the notches, to the 44th position among 190 countries.

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