Covered Bonds Investor presentation September, 2019 Presentation topics 1. Prima banka at a glance 2. Slovak Republic 3. Slovak Banking Market 4. Prima banka 5. Cover Pool 6. Covered Bonds Framework 7. Appendix 2 Prima banka at a glance … fastest growth on fastest growing retail lending market in EU 30.06.2019 (EUR) Total Assets 3 794mn #1 Fastest growing retail bank #1 Housing Loans growth Net profit 22mn (2018, 10mn 30.6.2019) CET 1 16.7% #1 Main Bank Customers growth Total CAD 17.8% #1 Municipalities NPL ratio 3.8% #3 Branch & ATM network NPL coverage 132% #1 Mobile banking application Retail loans 2 700mn; YoY+27% #1 Customer Satisfaction Mortgages 2 471mn; YoY +30% #1 Communication Awareness Branches/ATMs: 124/312 #4 Spontaneous Brand Awareness Employees: 863 Ownership: 99.3% Penta Investments Central European private equity group Penta acquired the Bank in 2011 from Dexia. Since then the Bank executing new strategy with focus on retail, simplicity & efficiency and also branch & ATM coverage. Source in Appendix, Retail Loans in this context mean Loans to Individuals 3 Prima banka - History … established as municipal bank, currently strongly growing in retail 1993 In 1993 Prvá Komunálna Banka (First Municipal Bank) has been established by group of 193 Slovak municipalities 2000 as a municipal bank. The Bank has specialized in In 2000 entry of a new majority shareholder Franco- 2003 providing services and financing to municipalities in the Belgian banking group Dexia. Later in 2003 the Bank Slovak Republic. had been renamed to Dexia banka Slovensko. Bank maintained strong presence in municipal 2011 segment and focused also on corporate lending. 2012 In 2011, Central European private equity group Penta The bank has started to build its position in retail. Investments acquired majority shareholding of the Bank from Dexia. As of 1.1.2012 the Bank changed its 2016 business name to Prima Banka Slovensko and as a part 2017 of the new strategy, it started to focus predominantly on In 2016 the majority shareholder Penta Investments retail clients with revised simplified products and acquired Sberbank Slovensko, which was merged services portfolio as well as on the expansion of the into Prima banka as of 1.8.2017. Prima banka is branch and ATM network. legal successor, business integration is completed, with no connections to the Sberbank Group. 2019 Launch of inaugural Covered Bonds Program 4 Penta Investments at a glance … Central European investment group, focus on long-term investments (EUR mn) Retail Healthcare Manufacturing Financial Services Media Real Estate News and Media Dr.Max Dôvera Aero Vodochody Prima banka Holding Bratislava Fortuna Penta Hospitals Carnibona Privatbanka MDS Prague Empik Primecell Gehring United Classifieds Warsaw NeoHealth Iglotex Vltava Labe Media Košice Slovalco Petit Press Enterprise Value Enterprise Value Enterprise Value Equity Value Enterprise Value Asset Value 2 460 800 465 410 135 1 286 Investment Platforms Investment EBITDA EBITDA EBITDA Net Income EBITDA NOI 257 97 45 30 11 26 • Penta is a Central European private equity group • Dr.Max largest pharmacy chain in CEE founded in 1994, specializing in long-term • Penta Hospitals largest multi-national hospital investments chain in SK, CZ, PL • Penta provides more than 44 000 jobs • Dôvera largest private health insurer in SK • Fortuna largest CEE betting and games provider • Portfolio Profit amounted to EUR 460mn (+27% • Leading real estate developer in SK, CZ, PL YoY) and Net Income to EUR 288mn (+23% YoY) EUR mn 2018 YoY YoY% in 2018. ROE achieved 16,8% Revenues 6 100 + 400 + 7,0% • Free cash flow continuously reinvested to Adjusted EBITDA 440 + 60 + 15,8% support both organic and acquisition growth Operating Cash Flow 163 + 59 + 56,7% Real Estate Assets Value 1 290 + 230 + 21,7% Total Investments 799 + 254 + 46,6% Source: audited Financial Statements Penta Investments 2018, reported 2018 Financial Statements of investee companies 5 Presentation topics 1. Prima banka at glance 2. Slovak Republic 3. Slovak Banking Market 4. Prima banka 5. Cover Pool 6. Covered Bonds Framework 7. Appendix 6 Slovak Republic ... stable and fast converging export-oriented economy EU & NATO member EUR adoption 2004 2009 1993 2007 2012 • Stable A-rated member of EU & EMU Slovak Republic established Schengen member ESM member • Healthy and growing economy • Strong GDP growth Population: 5.4 million • Fiscally in good shape Area: 49 000 km2 • Low government debt Capital: Bratislava (430 tsd) • Export-oriented GDP per capita: 16,500 EUR (2018) • Strong automotive industry • Low unemployment Credit ratings: • Stable, well capitalized and profitable A2 and stable outlook (Moody’s) banking sector A+ and positive outlook ( S&P and Fitch) 7 Slovak Republic ...strong GDP growth and low government debt Public debt and govt. balance 5,6% Real GDP Growth 6,0% 56% (share of GDP) -9% 5,0% 55% -7,8% 4,2% 4,1% -7,5% 54% 54% -8% 4,0% 3,1% 3,2% 52% 52% 2,8% 2,8% 52% 52% -7% 52% 51% 1,7% 1,5% 2,0% -6% 2,4% 50% 49% 2,1% 2,1% 1,9% 1,9% 1,6% 1,4% -5% 0,0% 48% 0,5% -4% -0,2% -4,3% -4,3% 46% -2,7% -2,7% -2,6% -2,0% -0,9% -2,2% -3% 44% 44% -4,5% -2% -4,0% -0,8% -0,7% 42% 41% -1% -5,4% -6,0% 40% 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: Eurostat Source: Eurostat Public Debt General Government balance Slovakia Euro Area 31/12/2018 31/12/2018 Government debt to GDP • Slovak economy belongs to best performing 140% economies in the area 120% • Key GDP growth driver was real households 100% 86% consumption supported by beneficial labour 80% market development 60% 49% • Low government indebtedness vs. EU average 40% • Constitutional fiscal responsibility law prohibits 20% government debt to grow above 50% of GDP 0% UK Italy Spain Malta Latvia France Cyprus Poland Ireland Austria Croatia Finland Estonia Sweden Belgium Bulgaria Slovakia Slovenia Hungary Portugal Romania Denmark Germany • Slovakia overall in a very good shape Lithuania Euro Area Czech Rep.Czech Netherlands Luxembourg Source: Eurostat 31/03/2019 8 Slovak Republic ... export-oriented economy, low government bond yields Slovak Export by Countries 10Y Government bond yield 6,0% 5,0% Germany Czech Rep 15% 4,0% 22% Poland France 3,0% 14% Italy 12% Austria 2,0% 5% Hungary 1,0% 6% 8% UK 6% 6% 6% Rest EU 0,0% Other Non EU 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 -1,0% 31/12/2018 Source: Eurostat Source: Bloomberg Slovakia Germany 23/08/2019 • Slovakia is open export-oriented economy • Spreads of Slovak government bonds vs. German • 86% of exports go to EU, the highest share Bunds are stable among EU members • Third lowest 10Y government bond yield • Structure of Slovak economy is similar to (-0.44%, as of 23/08/2019) in Euro zone after German one with a strong accent on industry, Germany and Netherlands mainly the automotive • In June 2018, Slovak government successfully • Germany is Slovakia’s most important trading issued a 50-year bond, as a first country in CEE partner and fifth country in Europe 9 Slovak Republic ...labour market improvement supports disposable income Unemployment Disposable income 21% 12% (y/y, nominal) 19% 10% 17% 8% 15% 6,2% 13% 6% 11% 4% 9% 7,2% 2% 7% 5,4% 5% 0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: Eurostat Slovakia Euro Area Slovakia 31/07/2019 Source: NBS 31/12/2018 • Unemployment rate bellow Euro area Household Debt to Income 250% average • Labour market improvement supports 200% disposable income of households, which 150% 94% enables retail loan growth 100% 68% • Despite fastest growth of Household Debt to 50% Income in EU, Slovakia still comfortably below 0% Euro area average Source: Eurostat 31/12/2017 10 Slovak Republic ...housing price development reflects income growth and low interest rates Property price per m2 Housing Loans to GDP 2 300 (EUR) 70% 1 849 60% 1 800 50% 41% 1 300 1 184 40% 33% 30% 800 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 20% Source: NBS Flats Houses 30/06/2019 Property price/Annual Wage 10% 11 0% 10 9 8 7,2 Source: ECB 31/12/2018 7 • Employment and disposable income growth 6 5 together with low interest rates drive 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Source: NBS 30/06/2019 property price up Interest Rates on new housing loans • Still very high housing affordability also 8% thanks to continuous decline of mortgage 6% interest rates below Euro zone average 4% 1,7% • Although Slovak housing loans growth is for 2% years the highest in the EU, housing loans to 0% 1,5% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 GDP remain well below Euro area average Slovakia EuroZone Source: NBS 30/06/2019 • High level of home ownership (90%) 11 Presentation topics 1. Prima banka at glance 2. Slovak Republic 3. Slovak Banking Market 4. Prima banka 5. Cover Pool 6. Covered Bonds Framework 7. Appendix 12 Slovak Banking Market ... stable, well capitalized and profitable banking sector 105% 83 • Funding of Slovak banks dominated by retail and Total Assets 80 80 (EUR bn) 76 corporate deposits 71 70 67 102% 100% 62 100% • L/D increases, however still at comfortable level 58 59 60 99% • Strong lending growth will require also other 95% 50 95% 91% 90% funding instruments; potential for covered 40 89% 90% 88% bonds as only 8% of bank funding are bonds 30 • Fastest growth of retail loans in EU, corporate 20 85% loans growing at a more moderate way 10 • Almost solely Euro denominated loans 0 80% 2012 2013 2014 2015 2016 2017 2018 1H 2019 Total Assets L/D ratio (%) Source: NBS 30/06/2019 Assets tangible and other assets and Liabilities and Equity other interbank deposits intangible assets loan provisions equity Total: EUR 82,8bn cash and banks Total: EUR 82,8bn 5,7% issued bonds 1,0% 11,0% 10,3% public deposits 2,8% 1,6% 7,9% public loans 3,2% 9,7% 28,6% other private loans 1,2% securities other private 24,4% deposits 47,0% 45,8% retail loans retail deposits Source: NBS 30/06/2019 Source: NBS 30/06/2019 13 Slovak Banking Market ..