Buy (Maintained) Simulating the Impact of a Merger With

NEXI

Company report Buy (maintained)

09 January 2020 – 5:30 PM MARKET PRICE: EUR12.19 TARGET PRICE: EUR13.70 (unchanged)

Financial Tech. - Payments Simulating the impact of a merger with SIA

Data Shares Outstanding (m): 627.8 Press articles and public statements supported the market expectations of a possible merger between Nexi and SIA (the leading Italian processor). The Market Cap. (EURm): 6,653 likelihood of such a deal has increased recently and, in this report, we would like Enterprise Value (EURm): 9,902 to explore the potential impact on Nexi share price. In our view, based on three Free Float (%): 46.6% similar deals occurred over 2019, we estimate that synergies arising from a merger would be in the EUR73-161 million region which, valued at Nexi current Av. Daily Trad. Vol. (000): 2,743.7 EV/EBITDA (14.8x), would return for Nexi alone a EUR722-1,589 million increase in value or EUR0.7-1.5 per share (without taking into account synergies Main Shareholder: Mercury UK (50.2%) on capex). The deal will have also significant strategic benefits: a) it increases the Reuters/Bloomberg: NEXI.MI NEXI IM entry barriers of the Italian payment market; b) it improves the offering of omnichannel products; c) it improves fraud-detection capabilities thus increasing 52-Week Range (EUR) 7.8 12.8 the appeal of Nexi-SIA on-line product offering; d) it increases customers’ Source: FactSet, UBI Banca estimates switching costs; e) it gives to Nexi access to foreign markets (24% of SIA 2018 revenues were outside Italy). We reiterate our BUY and TP (EUR13.7). Performance

1m 3m 12m > What we know: On 13 December Mercury UK Holdco issued a press Absolute 16.4% 32.2% NA release stating it had talks on a merger with SIA which however remained at a Rel. to FTSE IT 14.2% 21.1% NA preliminary stage. In November 2019 CDP (the Italian sovereign fund) Source: FactSet increased its stake in SIA to 56.6% (25.7% directly and 57.42% through Fsia

Investimenti owned at 70% by Fsi Investimenti, owned at 77% by CDP Equity) Graph area Absolute/Relative 12 M becoming the major shareholder. > Three mergers between processors and merchant acquirers occurred in 2019. Cross-selling and an increase in switching costs are probably the strongest two strategic rationales of such deals. Cost synergies announced ranged from the 3.3% on combined sales of the FIS-Worldpay merger to the 6.4% announced by Fiserv-First Data. Revenues synergies ranged from the 1.2% of combined sales announced by Global Payment-TSYS to the 4.1% of the FIS-Worldpay deal. > Three scenarios on synergies based on the lowest, highest and average targets announced in previous deals. While we don’t have evidence of how much synergies could be extracted by such a deal, previous

Source: FactSet deals provide a good indication. We presume that synergies will be split 2/3 and 1/3 between Nexi and SIA based on the 2019 Revenues and EBITDA split. Massimo Vecchio Senior Analyst > An additional reason to own the stock. Buy and TP confirmed. [email protected] Following the recent deal signed with Intesa and supported by the solid Tel. +39 02 62753016 structural trend that the sector seems to enjoy (2020 will see the Dario Fasani implementation of government incentives to electronic payments in a country Analyst [email protected] where this form of currency has the lowest penetration of all developed Tel. +39 02 62753014 countries) we believe that the potential appeal of a merger with SIA is an www.ubibanca.com/equity-research additional reason to own the stock. BUY.

Financials Ratios priced on 8 January 2020 2018P/F 2019E 2020E 2021E 2018P/F 2019E 2020E 2021E Revenues (EURm) 931 982 1157 1227 P/E (x) n.a. 55,8 30,7 26,2 EBITDA (EURm) 424 505 669 744 P/CF (x) n.a. 34,3 24,9 20,9

EBITDA margin (%) 45,6% 51,4% 57,9% 60,7% P/BV (x) n.a. 4,5 4,8 4,1 EBIT (EURm) 349 390 519 569 Dividend Yield n.a. 0,0% 0,0% 0,0% EPS (EUR) 0,03 0,17 0,40 0,47 EV/EBITDA (x) n.a. 14,8 14,8 12,9 CFPS (EUR) 0,14 0,28 0,49 0,58 Debt/Equity (x) 4,2 1,1 1,4 1,0 DPS (EUR) 0,0 0,0 0,0 0,0 Debt/EBITDA (x) 5,7 3,0 3,4 2,6

Source: Company data, UBI Banca estimates Source: Company data, UBI Banca estimates

NEXI 29 January 2020

Key Financials (EURm) 2018A 2019E 2020E 2021E Revenues 931 982 1157 1227 EBITDA 424 505 669 744 EBIT 349 390 519 569 NOPAT n.a. 268 358 393 Free Cash Flow 89 174 307 367 Net Capital Employed 2994 2848 3830 3786 Shareholders' Equity 576 1331 1580 1873 Net Financial Position 2418 1517 2250 1913 Source: Company data, UBI Banca estimates

Key Profitability Drivers 2018A 2019E 2020E 2021E Net Debt/EBITDA (x) 5,7 3,0 3,4 2,6 Net Debt/Equity (x) 4,2 1,1 1,4 1,0 Interest Coverage (%) 3,9 7,6 10,4 12,6 Free Cash Flow Yield (%) n.a. 2,9% 4,0% 4,8% ROE (%) 3,5% 8,0% 15,8% 15,6% ROI (%) 11,7% 13,7% 13,6% 15,0% ROCE (%) 7,8% 9,2% 9,1% 10,1% Source: Company data, UBI Banca estimates

Key Valuation Ratios 2018 2019E 2020E 2021E P/E (x) n.a. 55,8 30,7 26,2 P/BV (x) n.a. 4,5 4,8 4,1 P/CF (x) n.a. 34,3 24,9 20,9 Dividend Yield (%) n.a. 0,0% 0,0% 0,0% EV/Sales (x) n.a. 7,6 8,6 7,8 EV/EBITDA (x) n.a. 14,8 14,8 12,9 EV/EBIT (x) n.a. 19,2 19,1 16,8 EV/CE (x) 0,8 2,6 2,6 2,5 Source: Company data, UBI Banca estimates

Key Value Drivers 2018 2019E 2020E 2021E Payout 0% 0% 0% 0% NWC/Sales 9,6% 7,0% 4,8% 3,5% Capex/Sales 16,1% 16,6% 13,1% 12,3% Source: Company data, UBI Banca estimates

NEXI 29 January 2020

Recent developments

> 2019 was an intense year for M&A in the payment sector. Three major deals were announced and concluded over the course of 2019 and all of them envisaging a merger between a merchant acquirer and a processor: a) Fiserv (processor) merged with First Data (merchant acquirer) announcing USD500 million of revenues synergies (3.5% of combined sales) and USD900 million of cost synergies (6.4% of combined sales); b) FIS (processor) merged with Worldpay (merchant acquirer) announcing USD500 million of revenues synergies (4.1% of combined sales) and USD400 million of cost synergies (3.3% of combined sales); c) Global Payment (merchant acquirer) merged with TSYS (processor) announcing USD100 million of revenues synergies (1.2% of combined sales) and USD300 million of cost synergies (3.5% of combined sales). More details can be found in Figure 1 here below. > The strategic rationale of a merger between a processor and a merchant acquirer. Looking at what declared by the companies involved in the three deals happened over 2019 and based on the knowledge we have on this industry, we believe that there are four main strategic rationales behind a merger between a processor and a merchant acquirer: 1) In our view, while acquirers have always enjoyed a mild switching cost advantage, the shift from selling acquiring services on a stand-alone basis toward integrating acquiring within a more holistic software offering for merchants will increase switching costs and turn this into a more meaningful source of competitive advantage; 2) Along with omnichannel capabilities, merchants are increasingly looking for more holistic solutions and want their payment processing seamlessly integrated into their business software, which is often customized for their industry; 3) Cross- selling opportunities may arise driven by the customers lists or the product offer increase; 4) Fraud is a key issue for online transactions, and we think combining data from both the merchant and consumer sides will help combat fraud and, consequently, increase the acceptance of online solutions. In fact, while card-not-present transactions are less than 15% of all card payments, they account for over half of all fraud costs. Fraud costs are expected to come down over time, but we believe that projection presumes a more concerted effort by the industry to address the issue. Better use of data could be a key component in that effort. > The specific merits of a Nexi-SIA merger: on top of what just said on the rationale of a merger between a processor and an acquirer, we believe that a merger between Nexi and SIA would have some deal-specific rationales: a) it would massively increase the entry barriers in Italy: Nexi stand-alone already has market shares that, in some segments, surpass the 70% mark. Adding SIA would include banks like Unicredit and BNL in the customer list; b) it would add foreign markets exposure to Nexi all- Italian business: 24% of SIA revenues in 2018 came from countries like Croatia, Hungary, Romania, Slovakia, Serbia and Czech Republic; c) Saving on capex to develop internal processing capabilities: Nexi outsource the majority of its processing (we believe 60% of it, the part done internally is when Nexi is from both side of the transaction). The company stated in the recent past that it would like to increase its internal processing capabilities, and this should be part of the EUR180 million cumulative (2H19-2023) transformation capex to which Nexi is guiding. These investments may be reduced were the company to merge with SIA.

Figure 1 – Synergies from 2019 deals Revenues As a % Cost As a % Cost synergies (USDm, %) synergies of combined sales synergies of combined sales on combined EBITDA

FISERV-First data 500 3.5% 900 6.4% 14.8%

Global Payment-TSYS 100 1.2% 300 3.5% 8.5%

FIS-Worldpay 500 4.1% 400 3.3% 8.2%

Source: Company data, UBI Banca estimates

NEXI 09 January 2020

Financial Projections

> Sizeable synergies that could be worth anywhere between 7.5% and 14.5% of combined EBITDA. Based on the revenues/cost synergies announced in similar deals we developed three scenarios: a) a “Low” synergies one where we took the lowest of the available figures both for revenues and cost synergies; b) the “average” synergies scenario where we applied a simple average of the targets declared for three mergers of 2019; c) the “high” synergies scenario where we took the maximum targeted levels of revenues and cost synergies. The results, expressed in figure 2, show quite a wide synergies value range that goes from EUR73 million in the “low” scenario to EUR161 million in the “High” scenario. We believe that the “average” figure (EUR119 million) is the most reasonable. > Potential upside could be worth anywhere between EUR0.70 p.s. to EUR1.5 p.s.. For the sake of simplicity, we assumed that these synergies will be split between Nexi and SIA on the base of their revenues and EBITDA relative weight on the combined entity figures. Our assumptions were based on 2019 figures (our latest estimates for Nexi while, for SIA, we assumed a 5% top line growth vs. 2018A and a similar EBITDA margin to the one reported in 2018). We ended up assuming a 2/3 Nexi and 1/3 SIA split of the synergies in the merger swap ratio calculation. We than used Nexi 2020 EV/EBITDA to assign a value to the synergies pertaining to the company and concluded that the potential upside could range between 7.3% and 16.0% vs. the current market cap. The calculations are showed in figure 3 here below.

Figure 2 – Nexi and SIA combined 2019 financials

(EURm) Nexi SIA Combined

Revenues 982,3 645,5 1627,9

EBITDA 505,2 211,7 716,9

Source: UBI Banca estimates

Figure 3 – Synergies estimates

(EURm, /%) Synergies - Low Synergies - Average Synergies - High

Revenues synergies 19.5 47.2 57.0

Cost synergies 53.7 71.6 104.2

Total synergies 73.3 118.8 161.2

Cost synergies % on Combined EBITDA 7.5% 10.0% 14.5%

Split of synergies between Nexi/SIA 66.7% 66.7% 66.7%

Nexi 2019 EV/EBITDA 14.8 14.8 14.8

Potential increase in Nexi's EV 722 1172 1589

Nexi current EV 9,902 9,902 9,902

Potential upside 7.3% 11.8% 16.0%

Per share upside (EUR) 0.69 1.13 1.53

Source: UBI Banca estimates

NEXI 09 January 2020

Valuation

> We reiterate our Buy and TP (EUR13.70) on this quality name. Our exercise was only theoretical, so we are not changing estimates nor target price on the stock. Our TP leaves a 15% upside and we stress that the stock trades at a 10% discount to peers on 2020 figures on EV/EBITDA (see figures 4).

Figure 4 – Peer group – Multiples (priced on 8 January 2020)

Company name TIER Price Currency Mkt Cap EV/EBITDA EV/EBIT P/E FCF Yield

(bn) 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E 2019E 2020E 2021E Global Payments Inc. I 169,8 USD 51,0 29,1 x 20,4 x 17,1 x 35,0 x 21,0 x 16,9 x 30,7 25,2 21,0 2,0% 3,9% 5,1%

Worldline SA I 65,9 USD 12,0 21,3 x 18,9 x 16,3 x 30,8 x 26,1 x 22,0 x 40,5 32,8 28,5 2,4% 2,9% 3,4%

FIS I 126,1 USD 77,5 23,8 x 16,4 x 14,4 x 30,9 x 20,5 x 18,8 x 25,3 22,1 18,9 2,5% 4,7% 5,2%

Fiserv, Inc. I 105,0 EUR 71,4 19,8 x 15,2 x 13,7 x 34,8 x 25,5 x 20,7 x 29,3 23,5 19,9 3,4% 4,6% 5,2%

Wirecard AG I 111,8 USD 13,8 15,4 x 11,4 x 8,2 x 18,4 x 13,3 x 9,4 x 25,4 19,0 14,5 3,3% 4,8% 6,5%

Average 21,9 x 16,5 x 13,9 x 30,0 x 21,3 x 17,6 x 30,2 x 24,5 x 20,6 x 2,7% 4,2% 5,1%

Nexi 12,19 EUR 7.6 14,8 x 14,8 x 12,9 x 19,2 x 19,1 x 16,8 x 55,8 x 30,7 x 26,2 x 2,9% 4,0% 4,8%

Premium/(Disc.) to peers -32,3% -10,1% -7,7% -36,0% -10,5% -4,3% 84,4% 25,2% 27,2% -6,9% 3,7% 5,8% Source: FactSet

NEXI 29 January 2020

Income Statement (EURm, %) 2018P/F 2019E 2020E 2021E Net Revenues 931 982 1157 1227 EBITDA 424 505 669 744 EBITDA margin 45,6% 51,4% 57,9% 60,7% EBIT 349 390 519 569 EBIT margin 37,5% 39,7% 44,9% 46,4% Net financial income/expense (108) (67) (65) (59) Associates & Others (171) (155) (80) (70) Profit before taxes 70 168 375 440 Taxes (49) (61) (126) (147) Minorities & discontinuing operations (2) 0 0 0 Net Income 20 107 249 293 Source: Company data, UBI Banca estimates

Balance Sheet (EURm) 2018P/F 2019E 2020E 2021E Net working capital (89) (69) (56) (43) Net Fixed assets 159 159 159 159 M/L term funds 942 942 943 943 Capital Employed 2994 2848 3830 3786 Shareholders’ equity 576 1331 1580 1873 Minorities 0 0 0 0 Shareholders’ funds 576 1331 1580 1873 Net Financial Debt /(cash) 2418 1517 2250 1913 Source: Company data, UBI Banca estimates

Cash Flow Statement (EURm) 2018P/F 2019E 2020E 2021E NFP Beginning of Period 2376 2418 1517 2250 EBITDA 424 505 669 744 Interest expenses (108) (67) (65) (59) Cash taxes (50) (81) (126) (147) Change in Working Capital (27) (20) (20) (20) Other 0 0 0 0 Operating Cash Flow 239 337 459 518 Net Capex (150) (163) (152) (151) Other Investments 0 0 0 0 Free Cash Flow 89 174 307 367 Dividends Paid 0 0 0 0 Other & Chg in Consolid. Area 0 0 0 0 Chg in Net Worth & Capital Incr. 0 829 (1000) 0 Change in NFP 89 1003 (693) 367 NFP End of Period 2418 1517 2250 1913 Source: Company data, UBI Banca estimates

NEXI 29 January 2020

Financial Ratios (%) 2018P/F 2019E 2020E 2021E ROE 3,5% 8,0% 15,8% 15,6% ROI 11,7% 13,7% 13,6% 15,0% Net Fin. Debt/Equity (x) 4,2 1,1 1,4 1,0 Net Fin. Debt/EBITDA (x) 5,7 3,0 3,4 2,6 Interest Coverage 3,9 7,6 10,4 12,6 NWC/Sales 9,6% 7,0% 4,8% 3,5% Capex/Sales 16,1% 16,6% 13,1% 12,3% Pay Out Ratio 0% 0% 0% 0% Source: Company data, UBI Banca estimates

Per Share Data (EUR) 2018P/F 2019E 2020E 2021E EPS 0,03 0,17 0,40 0,47 DPS 0,0 0,0 0,0 0,0 Op. CFPS 0,39 0,51 0,79 0,91 Free CFPS 0,14 0,28 0,49 0,58 BVPS 0,92 2,12 2,52 2,98 Source: Company data, UBI Banca estimates

Stock Market Ratios (x) 2018P/F 2019E 2020E 2021E P/E n.a. 55,8 30,7 26,2 P/OpCFPS n.a. 18,53 15,4 13,4 P/BV n.a. 4,5 4,8 4,1 Dividend Yield (%) n.a. 0,0% 0,0% 0,0% Free Cash Flow Yield (%) n.a. 2,9% 4,0% 4,8% EV (EURm) n.a. 7.487 9.902 9.566 EV/Sales n.a. 7,6 8,6 7,8 EV/EBITDA n.a. 14,8 14,8 12,9 EV/EBIT n.a. 19,2 19,1 16,8 EV/Capital Employed n.a. 2,6 2,6 2,5 Source: Company data, UBI Banca estimates

Growth Rates (%) 2018P/F 2019E 2020E 2021E Growth Net Sales 7,4% 5,6% 17,7% 6,1% Growth EBITDA 14,9% 19,1% 32,5% 11,1% Growth EBIT n.a. 11,8% 33,1% 9,5% Growth Net Profit n.a. 438,0% 132,9% 17,3% Source: Company data, UBI Banca estimates

NEXI 29 January 2020

Disclaimer

Analyst Declaration This research report (the “Report”) has been prepared by Massimo Vecchio and Dario Fasani (the “Analysts”) on behalf of UBI Banca S.p.A. (“UBI Banca”) in the context of the ancillary service provided by UBI Banca named “Investment research and financial analysis or other forms of recommendation relating to transactions in financial instruments” under Paragraph 5), Section B, Annex I of the Directive 2014/65/EU (“MiFID II”). UBI Banca is an Italian bank under art. 4 (1)(27) of MiFID II and it is supervised by the European Central Bank and duly authorised to provide investment services pursuant to Article 1, Paragraph 5, letter a), b), c), c-bis), e) and f) of the Legislative Decree 24 February 1998, n° 58 under the supervision of the Italian Authority for the financial markets (Consob). UBI Banca has its head office at Piazza Vittorio Veneto 8, 24122 Bergamo. The Analyst who prepared the Report, and whose name and role appear on the front page, certifies that: a. The views expressed on the company, mentioned herein (the “Company”) accurately reflect his personal views, but does not represent the views or opinions of UBI Banca, its management or any other company which is part of or affiliated with UBI Banca group (the “UBI Banca Group”). It may be possible that some UBI Banca Group officers may disagree with the views expressed in this Report; b. He has not received, and will not receive any direct or indirect compensation in exchange for any views expressed in this Report; c. The Analyst does not own any securities and/or any other financial instruments issued by the Company or any financial instrument which the price depends on, or is linked to any securities and/or any financial instruments issued by the Company. d. Neither the Analyst nor any member of the Analyst’s household serves as an officer, director or advisory board member of the Company. e. The remuneration of the Analyst is not directly tied to transactions for services for investment firms or other types of transactions it or any legal person, part of the same group performs, or to trading fees it or any legal person that is part of the same group receives. f. The Analyst named in this document is a member of AIAF – Associazione Italiana per l’Analisi Finanziaria. General disclosure This Report is for information purposes only. This Report (i) is not, nor may it be construed, to constitute, an offer for sale or subscription or of a solicitation of any offer to buy or subscribe for any securities issued or to be issued by the Company; (ii) should not be regarded as a substitute for the exercise of the recipient’s own judgement; and (iii) should not be considered as an investment advice and is therefore not falling within the scope of the requirements governing the provision of investment advisory services within the meaning of the Directive no. 2014/65/EU. In addition, the information included in this Report may not be suitable for all recipients. Therefore the recipient should conduct their own investigations and analysis of the Company and securities referred to in this document, and make their own investment decisions without undue reliance on its contents. Neither UBI Banca, nor any other company belonging to the UBI Banca Group, nor any of its directors, managers, officers or employees, accepts any direct or indirect liability whatsoever (in negligence or otherwise), and accordingly no direct or indirect liability whatsoever shall be assumed by, or shall be placed on, UBI Banca, or any other company belonging to the UBI Banca Group, or any of its directors, managers, officers or employees, for any loss, damage, cost, expense, lower earnings howsoever arising from

NEXI 29 January 2020

any use of this Report or its contents or otherwise arising in connection with this Report. The information provided and the opinions expressed in this Report are based upon information and data provided to the public by the Company or news otherwise public, and refers to the date of publication of the Report. The sources (press publications, financial statements, current and periodic releases, as well as meetings and telephone conversations with the Company’s representatives) are believed to be reliable and in good faith, but no representation or warranty, express or implied, is made by UBI Banca as to their accuracy, completeness or correctness. Past performance is not a guarantee of future results. Any opinions, forecasts or estimates contained herein constitute a judgement as of the date of this Report, and there can be no assurance that the future results of the Company and/or any future events involving directly or indirectly the Company will be consistent with any such opinions, forecasts or estimates. Any information herein is subject to change, update or amendment without notice by UBI Banca subsequent to the date of this Report, with no undertaking by UBI Banca to notify the recipient of this Report of such change, update or amendment. Organizational and administrative arrangements to prevent conflicts of interests UBI Banca maintains procedures and organizational mechanism (physical and non-physical barriers designed to restrict the flow of information between the unit which performs investment research activity, and other units of UBI Banca) to prevent and professionally manage conflicts of interest in relation to investment research in accordance with art. 23 of Directive 2014/65/EU and under art. 34 (3) and art. 37 of the Regulation 2017/565/EU. UBI Banca is organized in such a way as to minimize conflicts of interest and has within the meaning of art. 20 (1) of the Regulation (EU) No 596/2014/EU and has adequate control procedures in place to counter infringements of the obligations laid down in Article 20 (1) of the Regulation (EU) No 596/2014. More specifically, UBI Banca has established, implements and maintains an effective conflicts of interests policy aimed at preventing and managing the potential conflicts of interest that could occur during the performance of the investment research services. Insofar as the above mentioned organizational and administrative arrangements established by UBI Banca to prevent or manage potential conflicts of interests are not sufficient to ensure, with reasonable confidence, that risks of damage to the interests of the client will be prevented, UBI Banca engages to provide a clear disclosure of the specific conflicts of interests arising from the performance of investment research services, including a description of the sources of those conflicts and the steps undertaken to mitigate them, taking into account the nature of the client to whom the disclosure is being made. For further information please see UBI Banca’s website (www.ubibanca.com/equity- research - “Informativa sintetica sull’attività di ricerca”) and (www.ubibanca.com/Mifid - “Policy sintetica conflitti di interessi”). More details about the conflicts of interests policy will be provided by UBI Banca upon request. Disclosure of interests and conflicts of interests pursuant to Delegated Regulation 2016/958/EU In relation to the Company the following interest/conflict of interest have been found: > UBI Banca, in the last 12 months, has acted as lead manager, co-lead manager, bookrunner or in similar roles in the context of a public offering of financial instruments of Nexi > UBI Banca may have long or short positions not exceeding the threshold of 0,5 % of the total issued share capital of the issuer > UBI Banca has delivered corporate finance services to Nexi S.p.A. in the last 12 months

NEXI 29 January 2020

On the basis of the checks carried out no other interest/conflict of interest arose. Frequency of updates UBI Banca aims to provide continuous coverage of the companies in conjunction with the timing of periodical accounting reports and any exceptional event that occurs affecting the issuer’s sphere of operations and in any case at least twice per year. The companies for which UBI Banca acts as Sponsor or Specialist are covered in compliance with regulations of the market authorities. For further information please refer to www.ubibanca.com/equity-research Valuation methodology UBI Banca’s analysts value the Company subject to their recommendations using several methods among which the most prevalent are: the Discounted Cash Flow method (DCF), the Economic Value Added method (EVA), the Multiple comparison method, the SOP method and the NAV method. The analysts use the above valuation methods alternatively and/or jointly at their discretion. The assigned target price may differ from their fair value, as it also takes into account overall market/sector conditions, corporate/market events, and corporate specifics (i.e. holding discounts) reasonably considered to be possible drivers of the company’s share price performance. These factors may also be assessed using the methodologies indicated above. For further information please refer to www.ubibanca.com/equity-research. Rating system UBI Banca’s analysts use an “absolute” rating system, not related to market performance. The explanation of the rating system is listed below: Buy: if the target price is 15% higher than the market price, over the next 12 months. Hold: if the target price is 15% below or 15% above the market price, over the next 12 months. Sell: if the target price is 15% lower than the market price, over the next 12 months. No Rating: the investment rating and target price have been suspended as there is not sufficient fundamental basis for determining an investment rating or target. The previous investment rating and target price, if any, are no longer in effect. Alternatively, No Rating is assigned in certain circumstances when UBI Banca is acting in any advisory capacity in a strategic transaction involving the Company. Target price: the market price that the analyst believes that the share may reach within a one-year time horizon. Market price: closing price on the day before the issue date of the report, appearing on the first page. Distribution Italy: This document is intended for distribution in electronic form to “Professional Clients” and “Qualified Counterparties” as defined by Legislative Decree 24 February 1998, n. 58 and by Consob Regulation n. 20307 dated 15 February 2018, as further amended and supplemented. Spain: This document is intended for distribution in electronic form to “Professional Clients” and “Eligible Counterparties” as defined by Royal Legislative Decree 4/2015, of 23 October, approving the revised text of the Securities Market Act, as further amended and supplemented. IN THE UNITED KINGDOM, THIS DOCUMENT IS BEING DISTRIBUTED ONLY TO, AND IS DIRECTED ONLY AT PERSONS WHO (A) ARE (I) PERSONS FALLING WITHIN ARTICLE 19 OR ARTICLE 49 OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL

NEXI 29 January 2020

PROMOTION) ORDER 2005 (AND ONLY WHERE THE CONDITIONS CONTAINED IN THOSE ARTICLES HAVE BEEN, OR WILL AT THE RELEVANT TIME BE, SATISFIED) OR (II) ANY OTHER PERSONS TO WHOM IT MAY BE LAWFULLY COMMUNICATED; AND (B) ARE QUALIFIED INVESTORS WITHIN THE MEANING OF ARTICLE 2(1)(E) OF THE PROSPECTUS DIRECTIVE (DIRECTIVE 2003/71/EC), (ALL SUCH PERSONS BEING REFERRED TO AS "RELEVANT PERSONS"). THIS DOCUMENT MUST NOT BE ACTED ON OR RELIED ON BY PERSONS WHO ARE NOT RELEVANT PERSONS. IN FRANCE, THIS DOCUMENT IS BEING DISTRIBUTED ONLY TO, AND IS DIRECTED ONLY AT PERSONS WHO ARE CONSIDERED AS PROFESSIONAL CLIENTS WITHIN THE MEANING OF ARTICLES L. 533-16 AND D. 533-11 ET SEQ. OF THE FRENCH CODE MONETAIRE ET FINANCIER (THE FRENCH FINANCIAL CODE) OR AS ELIGIBLE COUNTERPARTIES, AS DEFINED IN ARTICLES L. 533-20 AND D. 533-13 ET SEQ. OF THE FRENCH FINANCIAL CODE.

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By accepting this Report the recipient agrees to be bound by all of the forgoing provisions. Distribution of ratings Equity rating dispersion in the past 12 months Buy Hold Sell No Rating 87.5% 7.1% 3.6% 1.8%

Proportion on issuers to which UBI Banca has supplied investment banking services relating to the last 12 months Buy Hold Sell No Rating 78.6% 100% 100% -

For further information regarding yearly and quarterly rating statistics and descriptions, please refer to www.ubibanca.com/equity-research.

Historical ratings and target prices

Date Rating Target Price (EUR) Market Price (EUR)

23 May 2019 BUY 10.20 8.80 29 Juy 2019 BUY 11.70 9.80 8 November 2019 BUY 11.70 9.45 19 December 2019 BUY 13.70 10.94