Bilancio Individuale 31.12.2019

20 19 Report on operations and financial statements at 31 December 2019 Contents Directors and officers 1 Report on Operations 2 Financial statements 43 Balance sheet 44 Income statement 46 Statement of comprehensive income 47 Statement of changes in shareholders' equity 48 Cash flow statement 50 Explanatory notes 52 Part A – Accounting policies 53 Part B – Information on the balance sheet 87 Part C – Information on the income statement 139 Part D – Comprehensive income 160 Part E – Information on risks and related hedging policy 161 Part F – Information on shareholders' equity 215 Part G – Business combinations 217 Part H – Transactions with related parties 218 Part M – Information on leases 221 Certification pursuant to art.154-bis of Legislative Decree 58/98 224 Auditors' report 226 Report of the Board of Statutory Auditors 234 Report on Operations Directors and Officers Board of Directors Chairman Stefano Lado Deputy Chairman Tommaso Cartone** Directors Graziella Bologna* Marina Brogi Valentina Maria Carla Casella*** Nicolò Dubini Cristina Finocchi Mahne Agostino Gavazzi* Egidio Gavazzi* Paolo Gavazzi* Tito Gavazzi* Gerolamo Pellicanò * Members of the Executive Committee ** Director responsible for the Internal Control and Risk Management System *** Appointed on 28 March 2019 Board of Statutory Auditors Chairman Giulia Pusterla Acting Auditors Rodolfo Anghileri Franco Fumagalli Romario Substitute Auditors Elena Negonda Erminio Beretta Massimo Celli General Management General Manager Angelo Antoniazzi* Senior Deputy General Manager Mauro Walter Colombo Deputy General Manager "Corporate Affairs" Maurizio Ballabio Financial Reporting Manager as per art. 154-bis CFA Financial Reporting Manager Mauro Walter Colombo Independent Auditors Independent Auditors Deloitte & Touche S.p.A. 1 Report on Operations Report on Operations 2 Report on Operations Introduction The figures and ratios in this Report on Operations, as well as the comments on the composition of the various captions and any changes to them, to the extent that they can be traced back, refer to the balance sheet included in the financial statements and to the reclassified income statement, which has been prepared on the basis of the financial statements. The merger of the subsidiary Banca Popolare di Spoleto with Banco di Desio e della Brianza took legal effect on 1 July 2019, with accounting effect on 1 January 2019. The following documents have been prepared and shown in the sections "Key figures and ratios" and "Results of the period" of this report on operations in order to make it easier to compare the figures for the year with those of the previous year, to present the figures and ratios better and accompany them with comments on performance: ° pro-forma balance sheet figures at 31 December 2018 as though the merger and the related effects on the share capital and shareholders' equity had already been completed; ° pro-form income statement figures at 31 December 2018 as an aggregate among the two banks considering (a) the elimination of intercompany balances and (b) the inclusion of the economic effects linked to the purchase price allocation (PPA); ° non-financial data and information (number of branches, employees, etc.) considering the two banks together already with reference to the comparative year. These balance sheet, income statement and other figures of the comparative period therefore differ from that contained in the Explanatory Notes, which contain the official final figures as approved by the Shareholders' Meeting of Banco di Desio e della Brianza in the "Financial Statements at 31 December 2018". For further details regarding the accounting recognition of the merger, please refer to the information contained in this Report on operations and in the Explanatory Notes. 3 Report on Operations 1 - First-time adoption of IFRS 16 "Leases" On the basis of the analyses carried out by Banco Desio Group as part of the project for the implementation of IFRS 16 "Leases", taking into account the methodological choices made, on 1 January 2019, on first-time adoption of the accounting standard, a "Lease Liability" of Euro 60.0 million was recorded in the financial statements against a substantially similar increase in non-current assets (increased due to the balance of the related accruals and prepayments at 31 December 2018), from which no initial impact on equity emergerd. For further details about the changes introduced by the standard, please refer to the contents of the "Consolidated financial statements at 31 December 2019". 2 - Key figures and ratios Balance sheet 31.12.2019 31.12.2018 Change 31.12.2018 Amounts in thousands of Euro actual pro-forma amount % actual Total assets 14,170,989 13,581,234 589,755 4.3% 10,112,843 Financial assets 3,365,908 3,081,416 284,492 9.2% 2,629,146 Due from banks (1) 619,580 284,714 334,866 117.6% 675,378 Loans to customers (1) 9,515,696 9,562,530 -46,834 -0.5% 6,163,674 Property, plant and equipment (2) 225,088 179,292 45,796 25.5% 134,591 Intangible assets 11,451 11,118 333 3.0% 2,790 Due to banks 1,603,208 1,620,824 -17,616 -1.1% 1,669,097 Due to customers (3) 9,447,655 9,253,258 194,397 2.1% 5,964,901 Debt securities in issue 1,749,103 1,426,213 322,890 22.6% 1,338,854 Shareholders' equity (including Net profit/loss for the period) 956,871 923,335 33,536 3.6% 914,514 Own Funds 1,036,652 n.d. n.s. n.s. 1,005,869 Total indirect deposits 15,562,375 14,092,711 1,469,664 10.4% 12,070,358 of which: Indirect deposits from ordinary customers 9,721,680 8,952,340 769,340 8.6% 6,967,942 of which: Indirect deposits from institutional customers 5,840,695 5,140,371 700,324 13.6% 5,102,416 (1) on the basis of Circular 262 the balance of this caption includes held to collect (HTC) debt securities measured at amortised cost, which in these key figures are shown under financial assets (2) the balance of this item at 31 December 2019 includes the right of use ("RoU Assets") equal to Euro 50.7 million for operating lease contracts falling within the scope of application of IFRS 16 Leases, which came into effect on 1 January 2019 (3) the balance of this item at 31 December 2019 does not include the liability recognised in Due to customers for operating lease contracts falling within the scope of application of IFRS 16, which came into effect on 1 January 2019 Income statement (4) 31.12.2019 31.12.2018 Change 31.12.2018 Amounts in thousands of Euro actual pro-forma amount % actual Operating income 384,202 384,662 -460 -0.1% 251,363 of which: Net interest income 197,726 198,334 -608 -0.3% 121,215 Operating costs 274,720 269,064 5,656 2.1% 172,499 Result of operations 109,482 115,598 -6,116 -5.3% 78,864 Profit (loss) from continuing operations after tax 46,070 35,717 10,353 29.0% 30,328 Non-recurring profit (loss) after tax -1,184 420 -1,604 n.s. 627 Net profit (loss) for the period 44,886 36,137 8,749 24.2% 30,955 (4) from the reclassified income statement 4 Report on Operations Key figures and ratios 31.12.2019 31.12.2018 Change 31.12.2018 actual pro-forma amount actual Capital/Total assets 6.8% 6.8% 0.0% 9.0% Capital/Loans to customers 10.1% 9.7% 0.4% 14.8% Capital/Due to customers 10.1% 10.0% 0.1% 15.3% Capital/Debt securities in issue 54.7% 64.7% -10.0% 68.3% Common Equity Tier 1 (CET 1)/Risk-weighted assets (Common Equity Tier 1 ratio) (5) 14.4% n.d. n.s. 18.0% Core Tier 1 capital (T1)/Risk-weighted assets (Tier 1 ratio) (5) 14.4% n.d. n.s. 18.0% Total Own Funds/Risk-weighted assets (Total capital ratio) (5) 15.2% n.d. n.s. 19.8% Financial assets/Total assets 23.8% 22.7% 1.1% 26.0% Due from banks/Total assets 4.4% 2.1% 2.3% 6.7% Loans to customers/Total assets 67.1% 70.4% -3.3% 60.9% Loans to customers/Direct customer deposits 85.0% 89.5% -4.5% 84.4% Due to banks/Total assets 11.3% 11.9% -0.6% 16.5% Due to customers/Total assets 66.7% 68.1% -1.4% 59.0% Debt securities in issue/Total assets 12.3% 10.5% 1.8% 13.2% Direct customer deposits/Total assets 79.0% 78.6% 0.4% 72.2% 31.12.2019 31.12.2018 Change 31.12.2018 actual pro-forma amount actual Cost/Income ratio 71.5% 69.9% 1.6% 68.6% Net interest income/Operating income 51.5% 51.6% -0.1% 48.2% Result of operations/Operating income 28.5% 30.1% -1.6% 31.4% Profit (loss) from operations after tax/Capital (6) 5.1% 4.0% 1.1% 3.4% Profit (loss) from operations after tax/Capital (5) (R.O.E.) 4.9% 4.1% 0.8% 3.5% Profit (loss) from operations before tax/Total assets (ROA) 0.4% 0.3% 0.2% 0.4% 31.12.2019 31.12.2018 Change 31.12.2018 actual pro-forma amount actual Net doubtful loans/Loans to customers 1.3% 1.3% 0.1% 1.0% Net impaired loans/Loans to customers 3.5% 4.2% -0.6% 3.5% % Cov erage of doubtful loans 61.4% 59.3% 2.1% 62.1% % Cov erage of doubtful loans, gross of cancellations 63.1% 64.5% -1.4% 69.8% % Total cov erage of non-performing loans 45.6% 42.3% 3.4% 44.3% % Cov erage of non-performing loans, gross of cancellations 46.8% 45.7% 1.1% 50.0% % Cov erage of performing loans 0.49% 0.54% -0.04% 0.45% Structure and productivity ratios 31.12.2019 31.12.2018 Change 31.12.2018 actual pro-forma amount % actual Number of employees 2,148 2,165 -17 -0.8% 1,316 Number of branches 257 265 -8 -3.0% 146 Amounts in thousands of Euro Loans and adv ances to customers per employee (7) 4,413 4,322 91 2.1% 4,588 Direct deposits from customers per employee (7) 5,192 4,827 365 7.6% 5,436 31.12.2019 31.12.2018 Change 31.12.2018 actual pro-forma amount % actual Operating income per employee (7) 178 174 4 2.3% 187 Result of operations per employee (7) 51 52 -1 -1.9% 59 (5) capital ratios at 31.12.2019 are calculated in application of the transitional provisions introduced by EU Regulation 2017/2395; the ratios calculated without application of these provisions are the following: Common Equity Tier1 13.8%; Tier 1 13.8%; Total capital ratio 14.6%.

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