Hrvatska Poštanska Banka d.d.

Investor Presentation • Feb 26, 2021

HPB d.d. Q4 2020 Investor information

Limitation of liability

• The information and data contained in this presentation are intended to be general background information on Hrvatska poštanska banka p.l.c. (hereinafter referred to as the Bank or HPB p.l.c.) and its activities and is supplied in summary form and therefore not necessarily complete.
• This presentation may include information and data derived from publicly available sources that have not been independently verified, therefore HPB p.l.c. hereby expressly makes no representation of warranty of any kind, including, but not limited to the accuracy, completeness or reliability of the provided information and data.
• Contained statements reflect our current views with respect to future events and are subject to certain risks, uncertainties and assumptions therefore, when making decisions based on predictions of future uncertain events, the investors and/or others should carefully consider such factors and other uncertainties and events.

1 Executive Summary

2 Macroeconomic environment

3 Financials

4 Risk Management

5 Appendix

HPB at a glance

Bank of the people

• Our 2020 loan growth determined by macroeconomic situation influenced by COVID-19 (capital light lending);
• Strategic cooperation with Hrvatska pošta allows us to reach even our most remote customers.

Resilience through hardships

• We adapted our products and services to address earthquakes and the pandemic;
• We adapted to remote work, ensuring the necessary resources for our employees;
• We also donated HRK 1 mn to the City of Petrinja;
• We fortify our position by harnessing efficiencies in our risk and interest profile.

Geared for sustainable growth

• We stand on the strongest capital position in our recent history;
• We improved our loan portfolio quality;
• We strenghtened our market position.

Source: HPB management reports

Key Financials 2020

Operating profit (in HRK mn)

Operating profit down on COVID-driven reduction in net fee income

Profit after tax (in HRK mn)

Profit after tax up on legal provisions reversal

Capital-light lending drives growth

CET 1 capital ratio (in %)

+9.5%

Strongest capital position in our recent history Pro forma CET1 at end 2020 at 24.1%

Gross loans (in HRK mn)

31.12.2019

Robust Performance in 2020

		2017	2018	2019	2020	Market share by total assets as of 30.9.2020 (in HRK bn)
Assets	HRK mn	19 799 ,	21 256 ,	23 844 ,	25 500 ,	5 Zagrebačka banka d.d.
Net loans to customers	HRK mn	10 963 ,	11 009 ,	13 341 ,	14 725 ,	5 Privredna banka Zagreb d.d. 93
Deposits	HRK mn	16 951 ,	18 371 ,	20 069 ,	21 214 ,	5 Erste&Steiermärkische Bank… 72
Equity	HRK mn	1 905 ,	2 003 ,	2 370 ,	2 473 ,	5
Income	HRK mn	1 276 ,	1 173 ,	1 227 ,	1 121 ,	OTP banka d.d. 43 6
Net profit	HRK mn	8	152	144	182	Raiffeisenbank Austria d.d. 36 5
Cost -to-income ratio	%	54 4	60 1	61 5	64 1	#6 Hrvatska poštanska banka d.d. 26 5
Return equity (ROE) on	%	0 4	7 6	6 1	4 7	5 Addiko Bank d.d. 17
CET 1 capital ratio	%	18 1	17 9	20 2	21 8	5 Sberbank d.d. 11
NPL ratio	%	12 8	11 7	10 8	10 4	6
NPL ratio excl 100% gov. guaranteed exposure	%	12 8	11 6	10 4	8 7	Composition of Net profit as of 31.12.2020 6 -4%
NPL coverage	%	61 1	67 3	67 5	62 2	6
NPL coverage excl 100% gov. guaranteed exposure	%	61 1	67 3	70 0	74 2	20% 5
 Steering of risks is based on			prudent assessment of			14%

• primary risk but with having in mind the complete risk profile
• Cost reduction measures impeded by earthquake damages

6

56%

15%

Gross loans development

Gross loans (in HRK mn)

• Lending in 2020 was focused on central government, retail and government support transactions;
• Overall market situation and selective growth with high-quality customers led to net reduction in the SME & Corporate segments.

Subsidised Housing Loans

Approved not yet placed Subsidised Housing Loans

^{116 274 627} 1,080 2,299 2,944 4,150 8,153** 5% 9% 15% 13% 2017 2018 2019 2020 Number of approved subsidised housing loans HPB HR* Share

• HPB financed HRK 1.1 bn in 2020, or 12% of the total volume of subsidised housing loans in Croatia in a period 2017 - 2020;
• Through this product, HPB attracts young, highly educated, and active clients (80% of subsidised housing loan clients are new to Bank).

^* Source https://mgipu.gov.hr/

^** Data of collected requests as of 26.1.2021

Portfolio quality improves

NPL ratio development (in %)

NPL coverage development (in %)

Market NPL ratio* 5.5% Market NPL coverage* 68.4%

• Material difference in NPL ratio with or without exposure that is 100% government guaranteed;
• Overall NPL share decreased due to collection activities and capital light performing loans growth despite:
• strong COVID-19 impact and
• AQR new default entries.

* As of 30.9.2020

Business development in the channel of Hrvatska Pošta d.d.

History of outsourcing	2011	2015 2020		2021	TO BE
	Outsourcing of payment operations	Outsourcing of consumer lending	Outsourcing of payment operations – corporate	Outsourcing of foreign exchange business	Strengthening HPB / HP business collaboration and
			KYC online	Post-sale contact	harnessing HP's potential as an
OBJECTIVES: To become the most accessible bank on the Croatian market in physical channels				New framework agreement on strategic partnership and outsourcing	acquisition tool Continuous focus on increasing market share and non-interest income
To provide potential of cooperating with Hrvatska pošta as strategic partner	the best service to cash-intensive customers harnessing the	Outsourcing of payment operations – corporate (second, third and fourth phase)
				KYC online (second and third phase)
Retail – opening account	Retail - cash payment operations	Outsourcing of a part of credit business, ie	Opening business accounts and related	Outsourcing of foreign exchange business- retail
		consumer lending to the HP channel	services (first phase)	Implementation of post sale contact in HP
			Introduction of new online functionality:	channel
			opening and changes on client and account data (first phase)	Replacement of framework agreement on strategic partnership and outsourcing in part of
Source: HPB management reports				payment and other operationd of HPB d.d.

1 Executive Summary

2 Macroeconomic environment

3 Financials

4 Risk Management

5 Appendix

Socioeconomic indicators (y-o-y)

Rezultati Q3 2020. 25.2.2021. "G- WHOLESALE AND RETAIL TRADE OF MOTOR VEHICLES AND MOTORCYCLES; REPAIR OF MOTOR VEHICLES AND MOTORCYCLES "

COVID-19 moratoria

Total approved moratoria (in HRK mn)

• By end-2020, 1.5% of financed corporate moratoria are in default;
• Almost half of approved corporate moratoria have already expired by end-2020 (HRK 872 mn).

COVID-19 impact on loan portfolio

COVID-19 impact on corporate performing loans (in HRK mn)

48% of the Bank's corporate portfolio is largely unaffected by

The Risk Appetite Statement (RAS) was adopted limiting new

exposures to the most affected industries by the COVID-19

Strong impact industries

COVID-19;

pandemic.

COVID-19 impact on loan portfolio

Approved moratoria per industry

• Approved COVID-19 moratoria to corporates of HRK 1.9 bn (22.6% of outstanding gross corporate loans);
• Tourism has an extremely low share in the Bank's total portfolio (6.0% of outstanding gross corporate loans);
• We actively manage the portfolio through the analysis of pandemic prevention measures impact on industries.

Maturity of loans under moratoria – COVID-19

• The Bank regularly monitors loans to clients who have been granted a moratorium, regardless of the COVID-19 impact, and evaluates their cash flows on an individual basis
• By the end of 2020, 1.5% of approved corporate moratoria has defaulted

*excl. loans out of moratoria as of 31.12.2020

1 Executive Summary

2 Macroeconomic environment

3 Financials

4 Risk Management

5 Appendix

Key financials – Income statement

		2019	2020	∆ y-o-y
Net interest income	HRK mn	541	543	2	5
Net fee income	HRK mn	200	176	(24)	6
Operating income	HRK mn	839	804	(35)	6
Operating expense	HRK mn	(516)	(515)	(1)	6
Operating profit	HRK mn	323	289	(34)	6
Provisioning	HRK mn	(228)	(62)	(166)	6
Net profit	HRK mn	144	182	3 8	5
Cost-to-income ratio	%	61.3	64.1	2.8	5
Net interest margin	%	2.4	2.2	(0.2)	6

• Operating profit reduction primarily driven by COVID-19 effects;
• A build-up (HRK +56 mn) in 2019 and consequent release (HRK -79 mn) account for intra-year provision fluctuations.

Operating profit development

Operating profit development (in HRK mn)

• COVID-19 effects on operating profits reflected in reduced interest and fee income;
• Active management of the interest profile neutralised the drop in interest income.

Net income development

Composition of net income

• Net interest income is slightly higher on better management of interest expense;
• Net fee income impacted by COVID-19, which was mostly reflected in Q2 and Q3.

Fees and commissions

Net fee income overview (in HRK mn)

Composition of net fee and commission income

• Net fee income decline of HRK 23.4 mn vs 2019 is caused by:
• temporary suspension of fees for cash withdrawals at ATMs of other banks (25.3.2020 1.7.2020);
• slowdown in economic activities;
• significantly lower number of tourist arrivals in the 2020 summer season;
• HPB net fee income on par with the banking sector with a relatively stable share;
• Retail and card business fees are highest contributors to net fee income.

Source: HPB management reports

Operating expenses

Composition of operating expenses (in HRK mn)

Administrative expenses development (in HRK mn)

• Employee costs up with investments on IT infrastructure optimization in house solutions;
• Cost-cutting measures effectively reduced administrative expenses in 2020;
• Rental costs up with contingency office space acquisition following earthquakes.

Provisioning

Structure of provision expenses in 2020 (in HRK mn)

• Booking and consequent reversal of significant provisions for legal proceeds drive intra-year volatility;
• Portfolio optimization efforts drive risk costs down despite COVID-19 effects.

Key financials – Balance sheet

		31 12 2019	31 12 2020	ytd ∆
Assets	HRK mn	23 844 ,	25 500 ,	5 1 656 ,
Gross loans	HRK mn	14 825 ,	16 232 ,	5 1 407 ,
Deposits	HRK mn	20 069 ,	21 214 ,	5 1 145 ,
Equity	HRK mn	2 370 ,	2 473 ,	5 103
Regulatory capital	HRK mn	2 209 ,	2 314 ,	5 105
Loan/deposit ratio	%	66 5	69 4	5 2 9
ROAE	%	6 6	7 5	5 0 9
NPL ratio	%	10 8	10 4	6 (0 4)
NPL ratio excl 100% gov. guaranteed exposure	%	10 4	8 7	6 (1 7)
NPL coverage	%	67 5	62 2	6 (5 3)
NPL coverage excl 100% gov. guaranteed exposure	%	70 0	74 2	5 4 2
Provision for impairment losses	HRK mn	(1 488) ,	(1 512) ,	5 2 4

• Assets records continuous growth +6.9% ytd, liquid assets +15.5%, securities -7.2%, gross loans +9.5%;
• Deposits up +5.7% with largest increase in the segment of financial market HRK +314.5 mn, retail HRK +308.9 mn, central state and large corporate clients HRK +295.8 mn, SMEs HRK +233.3 mn;
• Source: HPB management reports NPL coverage increases when excluding exposures covered by state guarantees (70.0% Q4 19 and 74.2% Q4 20).

Corporate portfolio industry distribution

Corporate gross loans per industry (in %)

• Construction industry growth with road and infrastructure state-owned enterprises;
• Reduction to some industry sectors is in line with general macroeconomic trends:
• Wholesale and retail trade;
• Real estate industry;

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Source: HPB management reports Accommodation activities lending was done backed up by government guarantee schemes.

Composition of equity and liabilities

• Favorable impact on costs from observable trend of transforming term deposits into a vista deposits;

• Customer deposits dominate the funding mix with a 92% share;

• Bank holds 5.8 % of all deposits at 30.11.2020 (31.12.2016 = 5.3%);

• Source: HPB management reports Stable wholesale funding structure – attracted funds through foreign financial institutions, CBRD and CNB repo loans.

Liquidity Overview

Liquidity ratios

The Bank is highly liquid with markedly low loan-to-deposit ratio.

Highest level of CET1 ratio in recent history

• Considering the 2020 unaudited after-tax profit, pro forma CET1 stands at 24.1%;
• Contribution to improvement from both:
• Profit retention;
• Capital management optimization measures launched in Q4 19.

1 Executive Summary

2 Macroeconomic environment

3 Financials

4 Risk Management

5 Appendix

Regulatory Capital Development

Regulatory capital development (in HRK mn)

* on 31.12.2019 the Bank included 6-month profit in 2019 in the calculation of regulatory capital (retained earnings position), in accordance with the approval of the regulator. By decision of the General Assembly of the Bank this year, the net profit in 2019 was allocated equally to the position of retained earnings and other reserves. ³⁰

Source: HPB management reports

RWA Development

RWA development (in HRK mn)

Despite asset growth, risk-weighted assets decreased as a result of the strengthening the capital management culture.

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Exposures and coverage per stage

		31.12.2019				31.12.2020
Segment	Stage	Exposure	Exposure excl. gov. guarantees	Coverage	Coverage excl. gov. guarantees	Exposure	Exposure excl. gov. guarantees	Coverage	Coverage excl. gov. guarantees
CORPORATE	S1	61.8%		2.9%		58.5%		3.8%
CORPORATE	S2	7.8%		10.2%		6.8%		8.1%
CORPORATE	S3	30.5%	27.5%	62.9%	69.5%	34.7%	21.7%	47.7%	75.2%
SME	S1	55.3%		3.3%		49.3%		4.2%
SME	S2	10.7%		15.5%		16.8%		15.5%
SME	S3	34.0%	34.0%	72.5%	72.5%	33.9%	33.9%	71.3%	71.3%
STATE	S1	99.2%		0.8%		98.7%		1.0%
STATE	S2	0.8%		7.0%		1.3%		7.2%
STATE	S3	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%
RETAIL	S1	87.0%		0.4%		88.5%		0.5%
RETAIL	S2	4.2%		4.9%		3.2%		7.6%
RETAIL	S3	8.8%	8.8%	68.6%	68.6%	8.3%	8.3%	75.6%	75.6%
TOTAL	S1	85.3%		0.8%		85.9%		1.0%
TOTAL	S2	3.9%		9.3%		3.7%		10.5%
TOTAL	S3	10.8%	10.4%	67.5%	70.0%	10.4%	8.7%	62.2%	74.2%

1 Executive Summary

2 Macroeconomic environment

3 Financials

4 Risk Management

5 Appendix

HPB-R-A stock during the reporting period

Stock data and details

Issue date	December 12, 2000
ISIN	HRHPB0RA0002
Segment	Official market of the Zagreb Stock Exchange
Listed quantity	2,024,625
Share price as at December 30, 2020 (in HRK)	470.00
Market capitalisation (in HRK million)	992.07

Shareholders	Ownership stake (%)
Republic of Croatia	42.43
Croatian Post PLC	11.93
Croatian Deposit Insurance Agency	8.98
Croatian Pension Insurance Institute	8.76
Hrvatska poštanska banka p.l.c. – treasury shares	0.04
Other shareholders (each under 5% of share of the equity capital)	27.86
Total shares	100.00

Direct channels

Number of transactions (in mn)

Transaction volume - Mobile banking (in HRK mn)

2020 2019

Expected further increase in mobile banking – both in the volume and number of transactions.

Profitability

Profit development (in HRK mn)

Return on Average Equity ROAE

Marked improvement in ROAE in 2020 over 2019 despite growing equity base from incorporation of previous year profits.

Asset development

HPB's Asset development (in HRK bn)

• Rapid organic growth in 2020;
• Asset growth reciprocated with growth in funding. Increase of liquid assets in 2020 was HRK +707.2 mn;
• LCR (Liquidity Coverage Ratio) as of 31.12.2020 is at 158%.

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Accessibility

branch offices

regional centers business centers financial corners at the Croatian post Over 1,500 cash-out points with no

fees