April 2015 – Acquisition of
Volksbank Romania SA
Transaction overview
Disclaimer
THE INFORMATION CONTAINED IN THIS DOCUMENT HAS NOT BEEN INDEPENDENTLY VERIFIED AND NO REPRESENTATION OR WARRANTY EXPRESSED OR IMPLIED IS MADE AS TO, AND NO RELIANCE SHOULD BE PLACED ON, THE FAIRNESS, ACCURACY, COMPLETENESS OR CORRECTNESS OF THIS INFORMATION OR OPINIONS CONTAINED HEREIN.
CERTAIN STATEMENTS CONTAINED IN THIS DOCUMENT MAY BE STATEMENTS OF FUTURE EXPECTATIONS AND OTHER FORWARD-LOOKING STATEMENTS THAT ARE BASED ON MANAGEMENT’S CURRENT VIEWS AND ASSUMPTIONS AND INVOLVE KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS, PERFORMANCE OR EVENTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED IN SUCH STATEMENTS.
NONE OF BANCA TRANSILVANIA OR ANY OF ITS AFFILIATES, ADVISORS OR REPRESENTATIVES SHALL HAVE ANY LIABILITY WHATSOEVER (IN NEGLIGENCE OR OTHERWISE) FOR ANY LOSS HOWSOEVER ARISING FROM ANY USE OF THIS DOCUMENT OR ITS CONTENT OR OTHERWISE ARISING IN CONNECTION WITH THIS DOCUMENT.
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THE FINANCIAL INFORMATION PRESENTED IN THIS DOCUMENT IS NOT AUDITED, UNLESS OTHERWISE SPECIFIED
2
PRESENTATION TOPICS
Introduction
Transaction overview
Overview of financial information
High level integration plan
3
Macroeconomic environment
The GDP rose by 2.8% Y/Y in 2014, an
evolution determined by the dynamics
of the domestic demand.
The private consumption increased by
4.5% Y/Y last year, while the
government consumption had a
positive contribution of 0.8 pp.
The inflexion of the fixed investment
at the end of 2014 (up by 1.4% Y/Y in
4Q) points to the start of a new cycle.
The average annual inflation
decelerated to 1.07% Y/Y in 2014.
Inflation hit new record low levels in
January and February 2015 (0.4%
Y/Y), due to the agricultural output
(2013/2014) and the decline in oil
prices.
NBR continued to relax the monetary
policy in March 2015, by cutting the
reference interest rate to 2.00% (the
central bank kept the MRRs levels at
10% for RON and 14% for FX).
Source: International Monetary Fund, National Statistics Office, National Bank of Romania
8.5%
4.2%
7.9%
6.3%
7.3%
-6.6%
-1.1%
2.3%
0.6%
3.4% 2.8% 2.5% 2.8% 3.3%
-10%
-6%
-2%
2%
6%
10%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015f 2016f 2017f
GDP (%, Y/Y)
17.5%
14.2%
9.16%8.72%
4.88%
6.56% 6.30%
4.75%
7.98%
3.13%
4.96%
1.57%0.83%
2.10% 2.40% 2.80%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015f
2016f
2017f
Inflation - at year end (%, Y/Y)
4
0.60%
-0.92%
3.31%3.50%3.56%
5.01%
-1%
0%
1%
2%
3%
4%
5%
6%
201420132012201120102009
Total banking assets growth rates
Romanian Banking Systems – banking assets
and NPLs
Source: National Bank of Romania
BT benchmarks well at 10.87% NPL
ratio as end of 2014.
NPL ratio rose to 14.25% in
February in the Romanian Banking
sector.
BT achieved 8.4% growth during
2013 and 11.2% increase during
2014.
13.93%15.33%
19.19%
21.87%
18.24%
14.33%
11.85%
7.89%6.53%
-3.00%
2.00%
7.00%
12.00%
17.00%
22.00%
2014Q3 2014H1 2014201320122011201020092008
NPL
5
Romanian Banking System – loans and
deposits
27,911
49,486
67,713
83,669 79,712 77,35281,654
84,723 85,35492,124
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
RON non-government loans (RON bn)
32,762
43,797
80,468
114,411120,171
131,947141,378 141,151
133,111
118,868
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
FX non-government loans (RON bn)
35,898
45,183
87,61798,552
102,688113,364
124,111 125,454
142,046
155,504
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
RON non-government deposits (RON bn)
25,884
31,156
41,407
52,628
65,055 63,950 62,737
71,841 73,60577,094
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
FX non-government deposits (RON bn)
6Source: National Bank of Romania
31
215
535 540
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
0
100
200
300
400
500
600
2000 2005 2010 2014
BT clients and units evolution UNITS
CLIENTS
Banca Transilvania’s growth path
1.8% 2.0%
2.9%
3.9%
4.7%
5.5% 5.4%5.9%
6.3%
7.3%
8.1%
8.9%
9.78%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
BT: market share evolution
7Source: National Bank of Romania
PRESENTATION TOPICS
Introduction
Transaction overview
Overview of financial information
High level integration plan
8
Transaction overview
Transaction rationale
Banca Transilvania intends to consolidate its position within the Romanian banking market,
benefiting from economies of scale, while preserving strong profitability, organic growth
and prudential ratios.
The main points of focus for the acquisition are:
Banca Transilvania will achieve a better management of its strong liquidity position.
Banca Transilvania has a long-term strategy that synergies with Volksbank’s significant retail loans
portfolio.
The cross-sell ratio of banking products and services will increase for the combined entity.
Next steps
The integration planning.
Legal merger – subject to GSM approval.
9GSM – General Shareholders Meeting
Transaction overview
Transaction scope and milestones
The transaction documentation was signed on 10 December 2014. The closing date of the
transaction is 7 April 2015.
Banca Transilvania Financial Group acquired 100% of Volksbank Romania S.A. shares (Banca
Transilvania has full control after closing date).
The balance of parent funding outstanding in Volksbank at closing date is assigned to Banca
Transilvania at nominal value as part of the transaction.
Pricing overview
The transaction price is EUR 81 million (eq. RON 360 million), out of which an amount of
EUR 58 million is placed in an escrow account to cover certain future risks that may arise
within 1 year, as identified in the SPA.
The consideration was fully paid by Banca Transilvania at closing date from own liquidity
resources.
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PRESENTATION TOPICS
Introduction
Transaction overview
Overview of financial information
High level integration plan
11
2014 Highlights
Key Indicators
(RON million)
Banca
Transilvania*
Volksbank
Romania**
Total assets 35,620 12,361
Equity 3,702 713
Total loans and accruals 20,020 8,656
PAR 90 (%) 10.87% 9.16%
Cost / Income (%) 41.41% 78.1%
Cost of risk (%) 3.32% 0.99%
NIM (%) 3.37% 2.07%
Capital adequacy ratio (%) 17.32% 19.00%
Loans / deposits (%) 66.63% 184.33%
Quick liquidity (%) 55.30% 33.80%
* Audited results approved by the Board of Directors on 26 March 2015
** Based on 2014 audit report
Total assets CCY structure
12
2014 - Balance Sheet
RON million
Banca
Transilvania*
Vollksbank
Romania**
Cash and cash equivalents 4,226 2,483
Placements with banks 2,379 418
T bills and securities 10,905 1,537
Loans to customers, net 17,517 7,677
Fixed assets and participations 435 158
Other assets 158 88
Total assets 35,620 12,361
Shareholders' equity** 3,702 713
Subordinated loan 395 723
Due to customers 30,045 4,696
Due to banks and FIs 1,082 4,069
Other liabilities 396 2,160
Total liabilities 35,620 12,361
* Audited results approved by the Board of Directors on 26 March 2015
** Based on 2014 audit report; the equity of VB includes 2014 losses13
2014 - Income Statement
RON millionBanca
Transilvania*
Volksbank
Romania**
Net interest income 1,138 267
Net commissions income 408 27
Other operating income 454 39
Operating income 2,000 333
Operating expenses 828 232
Profit before provisions 1,172 102
Provisions 667 2,006
Gross profit / (loss) 505 (1,904)
Net profit / (loss) 434 (1,899)***
* Audited results approved by the Board of Directors on 26 March 2015
** Based on 2014 audit report
*** the equity of RON 713 million, includes the 2014 net loss of VB14
Overview of financial information on
closing date
* Based on December 2014 audited amounts adjusted for SPA conditions
** Based on 2014 audited report
Selected captions
(RON million)
Volksbank Romania
at closing*
Volksbank Romania
eoy 2014**
Subordinated loans - 723
Parent funding 2,857 4,069
Equity further to VB capital increases
in Q1 20152,795 713
Additional provisions as required by
BT, to be booked following closing890
Final Equity position 1,905
During Q1 2015, Volksbank Romania’s equity position has significantly increased following the
implementation of the conditions negotiated between parties before closing date:
Conversion of all subordinated loans amounting to EUR 161 million;
Partial conversion of parent funding amounting to CHF 341.5 million.
VB parent funding of eq. RON 2,857 is assigned to BT
15
Post merger highlights–preliminary estimations
RON million
Estimated
post-mergerBT individual*
Loans to customers, net 25,979 19,746
Due to customers32,277 31,716
*BT individual – as presented as a stand alone, organic growth bugdet for 2015, as presented in the documents for the GSM
Net interest income 1,494 1,248
Net commissions income 489 441
Other operating income 334 326
Operating expenses 999 869
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PRESENTATION TOPICS
Introduction
Transaction overview
Overview of financial information
High level integration plan
17
Integration strategy was developed to ensure
business continuity and synergy achievement
Enhanced customer experience
Single portfolio of products in the merged bank
Strong relationships with the clients
Common product and service offering
Unified branch network focused on customer experience
No disruptions in customer service and operations
Unified core banking platform and support applications
Strong and unified team in the merged bank
Talents retained, employee satisfaction kept at a high level
IT
Retail
HR
Corporate &
SME
Network
No disruptions in reporting
Unified procedures and policies
Finance /
controlling
Risk, compliance and anti-fraud policies aligned to BT standards
Market risk addressed by BT being the main counterpart for VB treasury
Risk &
Internal
control
18
A portfolio of over 20 projects have been
already defined to implement the strategy
Projects Portfolio
Q1 2015 Q2 2015 Q3 2015 Q4 2015
Pre-closing
activities
Program structure
development
Program planning
Development of
tactics within
respective
project areas
Tactics implementation
Merger preparation, further to specific GSM
and other authorities approvals
Target
merger
date1
1. Targeted date could be Q1 2016, but it is subject to approvals from the General Shareholders’ Meeting
Retail non-loan products strategy
Joint network strategy
IT migration
HR Integration
Legal process for the merger
Retail loans strategy Communication
Operations integration
Data warehouse
Corporate & SME portfolio strategy
Rebranding
Risk strategy
Treasury
Real-estate portfolio management
Finance & Controlling
Accounting
Procurement synergies
ATM & POS Integration
Internal Audit
Collection and workout
CHF loans
Main projects
19
Integration program is managed by a strong
team with VB engagement
Project Managers
Program Management
Omer Tetik
Mihaela Nadasan
Luminita Runcan
Gabriela Nistor
George Calinescu
Leontin Toderici
Tiberiu Moisa
Andrei Dudoiu
Program Office Communication Team
Dedicated VB teamsDedicated BT teams
20
Five core values defined for the integration -
customers and employees in the center
1
2
3
4
Collaboration
Fairness
360° Communication
Transparency
Customer and Employee
Focus
21
Banca Transilvania S.A.
8, G. Baritiu Street
Cluj-Napoca, 400027
Romania
Telephone + 40 264 407 150
Fax + 40 264 407 179
22