Interim financial report
as at and for the half year ended 30th June 2015
Translation from the Italian original which remains the definitive version
Joint stock co-operative company Registered office: Bergamo, Piazza Vittorio Veneto 8 Operating offices: Bergamo, Piazza Vittorio Veneto 8; Brescia, Via Cefalonia 74 Member of the Interbank Deposit Protection Fund and the National Guarantee Fund Tax Code, VAT No. and Bergamo Company Registration No. 03053920165 ABI (Italian Banking Association) 3111.2 Register of Banks No. 5678 Register of banking groups No. 3111.2 Parent of the Unione di Banche Italiane Banking Group Share capital as at 30th June 2015: €2,254,371,430 fully paid up
www.ubibanca.it
Contents
UBI Banca: company officers ...... 5 UBI Banca Group: the main investments as at 30th June 2015 ...... 6 UBI Banca Group: branch network as at 30th June 2015 ...... 8 UBI Banca Group: key figures and performance indicators ...... 9 The rating ...... 10
INTERIM CONSOLIDATED MANAGEMENT REPORT AS AT AND FOR THE PERIOD ENDED 30TH JUNE 2015
▪ The macroeconomic scenario ...... 14 ▪ Significant events in the first half of 2015 ...... 22 - Amendments to Articles of Association...... 22 - Reform of “popular” co-operative banks ...... 23 - Corporate rationalisation operations ...... 24 - Prestitalia ...... 25 - Compliance with supervisory provisions on internal controls ...... 26 - Developments in the regulatory framework ...... 27 ▪ The distribution network, positioning, digital innovation and payment cards...... 28 ▪ Human resources ...... 34 ▪ Reclassified consolidated financial statements, reclassified income statement net of the most significant non-recurring items and reconciliation schedules ...... 39 ▪ The consolidated income statement ...... 47 ▪ General banking business with customers: funding ...... 59 - Total funding ...... 59 - Direct funding ...... 60 - Indirect funding and assets under management ...... 66 ▪ General banking business with customers: lending ...... 69 - Performance of the loan portfolio ...... 69 - Risk...... 74 ▪ The interbank market and the liquidity position ...... 80 ▪ Financial activities ...... 84 ▪ Equity and capital adequacy ...... 100 ▪ Information on share capital, the share, dividends paid and earnings per share ...... 105 ▪ Information on risks and hedging policies...... 109 ▪ Consolidated companies: the principal figures ...... 121 ▪ Transactions with related and with connected parties ...... 125 ▪ Other information...... 128 - Inspections ...... 128 - Compounding of interest ...... 129 - Tax aspects ...... 130 ▪ Outlook for consolidated operations ...... 135
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE PERIOD ENDED 30TH JUNE 2015
Mandatory interim consolidated financial statements as at and for the period ended 30th June 2015 ...... 139 ▪ Consolidated balance sheet ...... 140 ▪ Consolidated income statement ...... 141 ▪ Consolidated statement of comprehensive income ...... 142 ▪ Statement of changes in the consolidated equity ...... 143 ▪ Consolidated cash flow statement ...... 145
3 Explanatory Notes ...... 147 ▪ Accounting policies ...... 148 - Basis of preparation ...... 148 - Other aspects ...... 153 - Information on fair value ...... 159 ▪ The scope of the consolidation ...... 161 ▪ Information on the accounts ...... 165 - Explanatory tables for the consolidated income statement ...... 165 - Explanatory tables for the consolidated balance sheet ...... 168 ° Property, plant and equipment and intangible assets ...... 170 ° Non current assets/liabilities held for sale ...... 172 ° Provisions for risks and charges ...... 173 ° Contingent liabilities ...... 173 - Litigation ...... 174 - Segment reporting ...... 181 - Transactions with related parties pursuant to IAS 24 ...... 182 ▪ Events occurring after the end of the first half ...... 185
STATEMENT OF THE CHIEF EXECUTIVE OFFICER AND OF THE SENIOR OFFICER RESPONSIBLE FOR PREPARING THE CORPORATE ACCOUNTING DOCUMENTS ...... 187
INDEPENDENT AUDITORS’ REPORT ...... 191
REPORT ON THE PERFORMANCE OF THE PARENT, UBI BANCA SCPA IN THE FIRST HALF OF 2015
▪ Reclassified financial statements, income statement net of the most significant non-recurring items and reconciliation schedules ...... 196 ▪ Performance in the period ...... 203 - The income statement ...... 203 - The balance sheet ...... 213 ▪ Separate interim financial statements as at and for the period ended 30th June 2015 ...... 224 - Balance sheet ...... 224 - Income statement ...... 225 - Statement of comprehensive income ...... 225 - Statement of changes in equity ...... 226 - Statement of Cash flows ...... 228
DE JURE AND DELEGATED POWERS OF THE CORPORATE BODIES Consob - Italian securities market authority - recommendation No. 97001574 of 20th February 1997 ...... 229
BRANCH NETWORK OF THE UBI BANCA GROUP
CALENDAR OF CORPORATE EVENTS OF UBI BANCA FOR 2015
CONTACTS
Key The following abbreviations are used in the tables: - dash (-): when the item does not exist; - not significant (n.s.): when the information is not significant; - not available (n.a.): when the information is not available - a cross “X”: when no amount is to be given for the item (in compliance with Bank of Italy instructions). All figures are given in thousands of euros, unless otherwise stated.
4 UBI Banca: company officers
Honorary Chairman Giuseppe Vigorelli
Supervisory Board (appointed by a Shareholders' Meeting on 20th April 2013) Chairman Andrea Moltrasio Senior Deputy Chairman Mario Cera Deputy Chairman Alberto Folonari Deputy Chairman Armando Santus Dorino Mario Agliardi Antonella Bardoni Letizia Bellini Cavalletti Marina Brogi Pierpaolo Camadini Luca Vittorio Cividini Alessandra Del Boca Ester Faia Marco Giacinto Gallarati Carlo Garavaglia Gianluigi Gola Lorenzo Renato Guerini Alfredo Gusmini(*) Federico Manzoni Mario Mazzoleni Enrico Minelli Sergio Pivato Andrea Cesare Resti Maurizio Zucchi
Management Board (appointed by the Supervisory Board on 23rd April 2013) Chairman Franco Polotti Deputy Chairman Giorgio Frigeri Chief Executive Officer and General Manager Victor Massiah(**) Silvia Fidanza Luciana Gattinoni Italo Lucchini Ettore Giuseppe Medda(***) Flavio Pizzini Elvio Sonnino
General Management General Manager Victor Massiah(**) Senior Deputy General Manager Elvio Sonnino Deputy General Manager Rossella Leidi Deputy General Manager Ettore Giuseppe Medda
Senior Officer Responsible in accordance with Art. 154 bis of the Consolidated Finance Act Elisabetta Stegher
Independent Auditors DELOITTE & TOUCHE Spa
(*) Secretary to the Supervisory Board (**) Francesco Iorio resigned from his position as General Manager with effect from 1st June 2015. In accordance with the Articles of Association he therefore ceased to be a member of the Management Board on that date. Since 1st June 2015, Victor Massiah has also filled the position of General Manager for a period that will not last beyond the expiry of the Management Board’s term of office (2016 Annual General Meeting). (***) Appointed by the Supervisory Board on 14th July 2015.
5 UBI Banca Group: the main investments as at 30th June 2015
6
7 UBI Banca Group: branch network as at 30th June 2015
8 UBI Banca Group: key figures and performance indicators1
30.6.2015 31.12.2014 31.12.2013 31.12.2012 31.12.2011 31.12.2010 31.12.2009 31.12.2008
STRUCTURAL INDICATORS Net loans and advances to customers/total assets 71.4% 70.3% 71.2% 70.1% 76.8% 78.0% 80.1% 79.0% Direct funding from customers/total liabilities 79.0% 76.5% 74.5% 74.6% 79.2% 81.8% 79.5% 80.0% Net loans and advances to customers/direct funding from customers 90.5% 91.9% 95.5% 94.0% 97.0% 95.4% 100.8% 98.7% Equity (including profit/loss for the period) /total liabilities 8.3% 8.1% 8.3% 7.4% 6.9% 8.4% 9.3% 9.1% Assets under management/indirect funding from private individual customers 60.4% 57.1% 55.2% 54.3% 51.2% 54.6% 53.2% 53.1% Leverage ratio (total assets - intangible assets)/(equity inclusive of profit/loss + equity attributable to non-controlling interests - intangible assets) 13.6 14.0 14.7 17.0 18.5 19.3 17.1 17.3
PROFIT INDICATORS Annualised data ROE (net profit)/(equity inclusive of profit (loss) for the period) 2.5% 2.4% 2.4% 0.8% 3.9% 1.6% 2.4% 0.6% ROTE [net profit/tangible equity (equity inclusive of profit (loss) - intangible assets)] 3.1% 2.9% 3.4% 1.2% 5.9% 3.1% 4.6% 1.2% ROA (net profit/total assets) 0.21% 0.19% 0.20% 0.06% 0.27% 0.13% 0.22% 0.06% The cost:income ratio (operating expenses/operating income) 61.2% 61.8% 62.3% 64.3% 69.5% 70.6% 64.4% 63.9% Staff costs/operating income 38.3% 38.2% 37.9% 39.0% 41.4% 41.5% 37.5% 38.8% Net impairment losses on loans/net loans to customers (loan losses) 0.91% 1.08% 1.07% 0.91% 0.61% 0.69% 0.88% 0.59% Net interest income/operating income 49.6% 53.3% 50.9% 52.8% 61.7% 61.3% 61.5% 68.7% Net fee and commission income/operating income 39.2% 36.0% 34.5% 33.5% 34.7% 33.9% 31.1% 33.3% Net result on financial activities/operating income 6.5% 5.9% 9.4% 7.3% 0.2% 1.0% 3.2% -5.9%
RISK INDICATORS Net bad loans (previously termed non-performing loans) /net loans to customers 4.91% 4.70% 3.89% 3.18% 2.49% 1.91% 1.36% 0.88% Net impairment losses on bad loans (previously termed non-performing loans) /gross bad loans (coverage for non-performing loans) 38.68% 38.56% 41.60% 42.60% 43.31% 48.69% 51.57% 54.58% Coverage for bad loans (previously termed non-performing loans) , gross of write-offs of positions subject to bankruptcy proceedings and the relative impairment losses 53.03% 53.36% 56.05% 57.63% 59.06% 63.62% 66.10% Net non-performing loans (previously termed deteriorated loans) / net loans and advances to customers 11.31% 11.10% 10.53% 8.73% 6.30% 5.17% 4.62% 2.40%
CAPITAL RATIOS Basel 3 from 31 3 20142 Tier 1 ratio (Tier 1 capital after filters and deductions/risk weighted assets) 12.94% 12.33% 13.23% 10.79% 9.09% 7.47% 7.96% 7.73% Common Equity Tier 1 ratio (Common Equity Tier 1 capital after filters and deductions/risk weighted assets) 12.94% 12.33% 12.60% 10.29% 8.56% 6.95% 7.43% 7.09% Total capital ratio (total own funds/risk weighted assets) 15.62% 15.29% 18.91% 16.01% 13.50% 11.17% 11.91% 11.08% Total own funds (figures in thousands of euro) 9,297,822 9,441,598 11,546,144 12,203,619 12,282,153 10,536,200 10,202,555 9,960,812 of which: Tier 1 capital after filters and deductions 7,705,640 7,615,265 8,075,247 8,263,720 8,276,278 7,047,888 6,816,876 6,944,723 Risk weighted assets 59,526,325 61,762,588 61,045,600 76,589,350 91,010,213 94,360,909 85,677,000 89,891,825
INCOME STATEMENT, BALANCE SHEET FIGURES (in thousands of euro), STRUCTURAL DATA (numbers) Profit (loss) for the year/period attributable to the shareholders of the Parent 124,443 (725,767) 250,830 82,708 (1,841,488) 172,121 270,099 69,001 Profit (loss) for the year/period attributable to the shareholders of the Parent before redundancies and impairment 125,633 233,230 314,550 184,581 349,373 177,293 289,022 88,810 Profit (loss) for the year/period attributable to the shareholders of the Parent normalised 135,974 146,537 100,220 97,324 111,562 105,116 173,380 425,327 Operating income 1,708,891 3,409,630 3,437,292 3,526,311 3,438,339 3,496,061 3,906,247 4,089,739 Operating expenses (1,045,504) (2,108,222) (2,141,798) (2,266,660) (2,389,626) (2,468,564) (2,514,347) (2,611,348) Net loans and advances to customers 85,340,026 85,644,223 88,421,467 92,887,969 99,689,770 101,814,829 98,007,252 96,368,452 of which: net bad loans (previously termed non-performing loans) 4,187,327 4,025,079 3,437,125 2,951,939 2,481,417 1,939,916 1,332,576 848,671 net non-performing loans (previously termed deteriorated loans) 9,651,379 9,508,105 9,312,273 8,105,174 6,279,884 5,261,129 4,532,234 2,315,913 Direct funding from customers 94,327,352 93,207,269 92,603,936 98,817,560 102,808,654 106,760,045 97,214,405 97,591,237 Indirect funding from customers 79,070,259 75,892,408 71,651,786 70,164,384 72,067,569 78,078,869 78,791,834 74,288,053 of which: assets under management 47,773,645 43,353,237 39,553,848 38,106,037 36,892,042 42,629,553 41,924,931 39,430,745 Total funding from customers 173,397,611 169,099,677 164,255,722 168,981,944 174,876,223 184,838,914 176,006,239 171,879,290 Equity attributable to the shareholders of the Parent (including profit (loss) for the period/year) 9,886,826 9,804,048 10,339,392 9,737,882 8,939,023 10,979,019 11,411,248 11,140,207 Intangible assets 1,760,006 1,776,925 2,918,509 2,964,882 2,987,669 5,475,385 5,523,401 5,531,633 Total assets 119,453,735 121,786,704 124,241,837 132,433,702 129,803,692 130,558,569 122,313,223 121,955,685 Branches in Italy 1,557 1,668 1,725 1,727 1,875 1,892 1,955 1,944 Total staff at the end of the period (actual employees in service + workers on agency leasing contracts) 17,789 18,132 18,337 19,090 19,407 19,699 20,285 20,680 Average total staff 3 (actual employees in service + workers on agency leasing contracts) 16,811 17,462 17,625 18,490 18,828 19,384 20,185 20,606 Financial advisors 772 713 671 672 713 786 880 924
1 The indicators have been calculated using the reclassified figures contained in the section “Reclassified consolidated financial statements, reclassified income statement net of the most significant non-recurring items and reconciliation schedules” in the Interim Consolidated Management Report. Information on the share is reported in the relative section of that report. The profit indicators for 2014 and 2011 were calculated on profit for the year before redundancy costs and impairment losses. 2 The figures as at 31st December 2013 and as at 31st December 2012 were calculated according to AIRB Basel 2 rules and relate to the following ratios respectively: the Tier 1 ratio (Tier 1 capital/risk weighted assets); the core Tier 1 ratio after specific deductions from the Tier 1 capital (Tier 1 capital net of preference shares and savings or privileged shares held by non-controlling interests/risk weighted assets); total capital ratio (regulatory capital + Tier 3 /risk weighted assets). For previous periods the figures were calculated according to the Basel 2 standard rules. 3 Part time employees have been calculated within total average staff numbers according to convention on a 50% basis.
9 The rating
The ratings assigned to the UBI Banca Group by the three main international agencies are given below.
On conclusion of a consultation process started in September 2014, on 16th March 2015 Moody’s published its new rating methodology for banks. The revision introduced important new changes: a macro profile and a broader range of qualitative and quantitative items for observation for the determination of the BCA, an indicator which expresses the intrinsic financial strength of a bank (while the Bank Financial Strength Rating was eliminated at the same time); an analysis of the liability structure of banks subject to a resolution regime in order to assess the impacts in terms of expected loss that a bank’s failure would have on its various debt instruments issued and its deposits in the absence of any support (loss given failure – LGF – analysis); an assessment of counterparty risk (i.e. a risk of default, in relation to the bank’s operating obligations and contractual commitments (covered bonds, derivatives, guarantees, etc.), generally not considered by existing resolution systems. On 17th March this agency therefore revised its ratings of all banks worldwide. On 22nd June 2015, on conclusion of the review for Italy, which also incorporated new assessments regarding the reduced probability of government support, Moody’s announced changes to ratings for 17 banks/banking groups, including UBI Banca. The rating on deposits and on long-term debt was raised from “Baa3” to “Baa2”, with a stable outlook. The short-term rating also rose from “P-3” to “P-2”, while the BCA remained unchanged at “ba1”. The long-term rating on deposits and senior debt benefited from a two notch upgrade with respect to the BCA on the basis of the results of the LGF analysis carried out on the UBI Banca Group which, in consideration of the high volume of senior debt and the limited amount of subordinated securities, showed an extremely low expected loss in the event of resolution. In the meantime UBI Banca has been assigned a “Baa1” and “P-2” rating for counterparty risk which made an improvement from “Aa3” to “Aa2” possible for its first covered bond programme, officially announced on 23rd June.
MOODY'S
(I) The ability to repay long-term debt (maturing in or after one
Long-term debt and deposit rating (I) Baa2 year) in local currency (Aaa: best rating – C: default) Short-term debt and deposit rating (II) Prime-2 (II) The ability to repay debt in local currency maturing in the short-term (due in less than one year) Baseline Credit Assessment (BCA) (III) ba1 (Prime -1: highest quality – Not prime: not classifiable within any of the prime categories) Long-term Counterparty Risk Assessment (IV) Baa1(cr) (III) The BCA is not a rating but an opinion on the intrinsic
Short-term Counterparty Risk Assessment (IV) Prime-2(cr) financial strength of the bank in the absence of external support (aaa: best rating – c: default)
Outlook (LT deposit & senior unsecured debt) Stable (IV) The counterparty risk (CR) assessment is not a rating but an opinion on the likelihood of a default on certain senior RATINGS ON ISSUES operating obligations and other contractual commitments entered into by the bank Senior unsecured Baa2 [Aaa(cr): best rating – C (cr): default)] [P-1 (cr): best rating – Not prime (cr): not classifiable within Euro Commercial Paper Programme Prime-2 any of the prime categories] Covered Bonds
(First Programme – residential mortgages) Aa2
Following on from a consultation process started in November 2014, on 27th April 2015 Standard & Poor’s published a development of its rating methodologies for banks with the introduction of a new component of analysis, “Additional Loss-Absorbing Capacity (ALAC)”. This is a form of potential outside support which could be incorporated in the issuer credit rating to take account of the lower risk of default by senior bonds in the presence of regulations which require banks to hold “bail-inable” liabilities, i.e. liabilities that can be written down and converted into share capital to prevent the default or insolvency of the bank.
10 On 3rd July 2015 this agency revised its outlook on the Group’s long-term rating up from negative to stable. According to S&P the stabilisation of economic conditions and the slowdown in the deterioration of the UBI Banca’s assets will allow it to continue to gradually strengthen its core capital through internal generation.
The issuer credit rating reflects the agency’s opinion of the STANDARD & POOR’S intrinsic creditworthiness of the bank combined with an assessment of the potential for future support that the bank might receive in the event of default (from government or Short-term Issuer Credit Rating (i) A-3 from the group to which it belongs).
Long-term Issuer Credit Rating (i) BBB- Short-term: ability to repay short-term debt with a maturity of less than one year (A-1: best rating – D: default) Long-term: ability to pay interest and principal on debt with a Stand Alone Credit Profile (SACP) (ii) bbb- maturity of longer than one year (AAA: best rating – D: default) Outlook (long-term rating) Stable The SACP is a rating of the intrinsic creditworthiness of the bank in the absence of external support (from government or RATINGS ON ISSUES from the group to which it belongs). It is calculated on the
basis of an “anchor SACP”, which summarises economic and Senior unsecured debt BBB- industry risk for the Italian banking sector. This is then
adjusted to take account of bank-specific factors such as French Certificats de Dépôt Programme A-3 capitalisation, market positioning, exposure to risk and the funding and the liquidity situation, which are also assessed from a comparative viewpoint.
As part of an annual review of its ratings for the four largest Italian Banks, on 1st April 2015, Fitch Ratings downgraded its rating for UBI Banca to BBB/F3 (from BBB+/F2) with a stable outlook. While acknowledging the improvements to UBI Banca’s operating profitability, its sound capitalisation, its stable liquidity, its low risk appetite and sound franchise, the Agency’s decision is based on its still substantial deteriorated assets generated in these recent years of recession. On 8th April 2015 its rating for the first covered bond programme was changed to “A” (from “A+”) and placed on negative watch – which was then lifted on 28th April, with confirmation of the A rating and a stable outlook – while the rating on the second programme remained unchanged on “BBB+” with a stable outlook. On conclusion of a review of government support at global level announced in March 2014, in view of developments in progress concerning banking crisis resolution procedures, on 19th May 2015 Fitch announced the action it had taken on the ratings of Italian banks. In consideration of the disappearance of the likelihood of government intervention in the event of default, for nine banks the support rating was reduced to “five”, the lowest level, while the support rating floor became “NF” (no floor).
FITCH RATINGS (1) The ability to repay debt maturing in the short-term (duration of less than 13 months) Short-term Issuer Default Rating (1) F3 (F1+: best rating – D: default)
Long-term Issuer Default Rating (2) BBB (2) The ability to meet financial commitments in the long-term, independently of the maturity of individual obligations. This Viability Rating (3) bbb rating is an indicator of the probability that an issuer will default. Support Rating (4) 5 (AAA: best rating – D: default)
Support Rating Floor (5) NF (3) An assessment of a bank’s intrinsic strength in the event that it cannot rely on forms of external support (aaa: best rating - Outlook (Long-term Issuer Default Rating) Stable f: default).
RATINGS ON ISSUES (4) A rating of the possibility of concrete and timely external support (from the state or large institutional investors) if the Senior unsecured debt BBB bank finds itself in difficulty (1: best rating – 5: worst rating).
Euro Commercial Paper Programme F3 (5) This rating gives additional information, closely linked to the Support Rating, in that for each level of the Support Rating it
French Certificats de Dépôt Programme F3 identifies the minimum level which the Issuer Default Rating Covered Bonds could reach if negative events were to occur. (First Programme – residential mortgages) A Covered bonds (Second programme – commercial
mortgages) BBB+
11
INTERIM CONSOLIDATED MANAGEMENT REPORT FOR THE PERIOD ENDED 30TH JUNE 2015
The macroeconomic scenario1
In the first half of the year the macroeconomic scenario was still affected by risks of instability which again increased volatility on financial markets in the second quarter. Mention must first be made in this respect of developments in the Greek crisis. On 26th June the government called a halt to negotiations in progress to prolong financial support, which was due to end on 30th June2, deciding to submit the proposal presented by creditor institutions and countries to a referendum on 5th July. That proposal subjected the extension to compliance with stringent budgetary objectives for the period 2015-2018 and the approval of important reforms, including that on pensions. The votes against that proposal prevailed in the referendum. In this context outflows of deposits and pressures on the liquidity of Greek banks increased and they remained closed from 28th June for three weeks with limits introduced on withdrawals of cash from automated teller machines3. After very difficult discussions, on 13th July heads of state in the euro area reached an agreement to commence negotiations for a third programme of support. The start of negotiations was dependent on the rapid approval by the Greek parliament of a broad package of stringent and detailed measures, which included, amongst other things, provisions regarding indirect taxation, pensions, privatisations and the reform of public administrations. On 15th July, a session of the Greek parliament approved an initial series of provisions. As a consequence, the ECB raised the maximum level for the payment of emergency liquidity to Greek banks, while on 17th July the European Union agreed the payment of a bridging loan of €7.16 billion which allowed Greece to meet its short-term financial commitments to the ECB and the IMF4. Again on 17th July, the Eurogroup reached an agreement to negotiate ESM support, while on 22nd July the Greek government ratified a second series of reforms agreed with creditors. In recent days, discussions between Athens’ creditors (IMF, European Union and ECB) have considered the possibility of a second restructuring of the huge Greek public debt, which amounted to 177.1% of GDP in 2014.
The uncertainty was also increased by the following: • the nosedive by Chinese stock markets which started in the middle of June when a speculative bubble burst with risks of contagion for the economy; • the progressive worsening of geopolitical tensions in the Middle East and in North Africa, even though an agreement on nuclear power was reached in July between the United States and Iran which could lead to the removal of sanctions against that Muslim republic.
The debate in progress on how to manage flows of migrants, the results of autumn elections in Portugal and Spain and the prospect of a referendum in the United Kingdom on whether to remain within the European Union could all represent further risk factors for a recovery in the euro area.
The spreads between the government securities of peripheral countries and of Germany were subject to growing fluctuations during the first half. After reaching the lowest levels since the beginning of the crisis between the end of February and the beginning of March, in the wake of the announcement of the programme to purchase public securities by the ECB (quantitative easing), the spreads started to grow sharply again at the beginning of April following the worsening of the Greek debt crisis. The spread between ten-year BTPs and the equivalent German Bunds, which stood at 153 basis points at the end of June, soared at the beginning of July when the results of the Greek referendum were announced, but then bounced quickly back to around 120 basis points after an agreement was reached.
1 Prepared on the basis of data available as at 31st July 2015. 2 On 30th June and on the following 13th July Greece failed to repay maturing tranches of a loan received from the international monetary fund (IMF). 3 The ECB did in fact decide to maintain the maximum levels set for the payment of emergency liquidity to the country’s banks unchanged compared with the 26th June level. 4 Recourse to the European Stability Mechanism (ESM) was not possible because it had not been subscribed by all 28 member states of the EU and as a consequence the loan was paid by drawing on the remaining resources of the European Financial Stabilisation Mechanism (EFSM).
14 Ten-year BTP-Bund spread
600
550
500
450
400
Baisis 350 points
300
250
200
150
100
50
0 JFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJASONDJFMAMJJ 2010 2011 2012 2013 2014 2015 Source: Thomson Financial Reuters
In view of the fragility of the recovery and the imbalances existing at world level, the major central banks are continuing to pursue accommodative monetary policies, even if a divergence between policies in the United States and Europe has started to emerge in recent months. As concerns the European Central Bank: • in order to achieve adequate expansion of the Eurosystem’s balance sheet and counter risks associated with an excessively long period of low growth in prices, on 22nd January the ECB decided to extend its programme to purchase securities for monetary policy purposes, which previously regarded asset- backed securities and covered bonds only, to include securities issued by member countries and by some public sector agencies in the area (which included those of the Cassa Deposito e Prestiti – a state controlled fund and deposit institution), as well as by some European institutions. The programme of purchases on the secondary market (Public Sector Purchase Programme) was launched on 9th March, totals €60 billion a month and will continue until at least the end of September 2016 and in any event until inflation in the euro area reaches the monetary policy objective (around 2%)5; • on 25th March and 24th June the third and fourth targeted longer term refinancing operations (TLTROs) took place. For the first, for which the amount obtainable by each bank was linked to the amount of the loans they had paid to householders and businesses between May 2014 and January 2015, the participants numbered 143 intermediaries in the euro area, who obtained funds of €98 billion. The Bank of Italy allotted €36 billion to its counterparties6. For the operation carried out in June, the participants numbered 128 intermediaries in the euro area, who obtained funds of €74 billion. The Bank of Italy allotted €17.5 billion to its counterparties (€111 billion since the beginning of the programme); • the interest rate on principle refinancing operations was kept at the record low level of 0.05%. On the other side of the Atlantic, the Federal Reserve left the reference rate on Federal Funds unchanged at between 0% and 0.25%, in view of a more gradual rise, starting from the fourth quarter, to be monitored in view of the actual consolidation of growth by the American economy and also in light of the more general impact on the global recovery. In June the Bank of Japan reaffirmed its objective for its monetary base resuming its programme to purchase securities of 80 thousand billion yen per year. With the exception of Brazil central banks in the major emerging countries progressively loosened their monetary policies7.
5 On 10th July, €216 billion of government securities, €98 billion of covered bonds and €9 billion of ABS had been purchased. 6 Starting with the third operation the spread of 10 basis points applied previously to principal refinancing operations (0.05%) was eliminated 7 The People’s Bank of China progressively reduced both its compulsory reserve requirement ratio and its one year interest rate on bank loans (by 25 basis points in March, May and June) which now stands at 4.85%. In India the central bank cut the repo rate three times by 25 basis points each (January, March and June) and it now stands at 7.25%. The Russian central bank also sought to try and bring interest rates down, cutting the official rate, now at 11.50%, by 200 basis points in January, 100 basis points in March, 150 basis points in April and 100 basis points in June. On the other hand the Central Bank of Brazil tightened monetary policy further by raising the reference rate five times (in January, March, April, June and July) by 50 basis points each to 14.25% in order to bring inflation within the target range.
15
On foreign exchange markets The main exchange rates and oil (Brent) and commodities prices the depreciation of the euro Jun-15 Mar-15 Dec-14 % change Sep-14 Jun-14 against major international A B C A/C D E currencies seems to have come Euro/Dollar 1.1135 1.0730 1.2097 -8.0% 1.2631 1.3691 8 to a halt . Euro/Yen 136.39 128.89 144.78 -5.8% 138.49 138.69 The table also shows the Euro/Yuan 6.9037 6.6515 7.5057 -8.0% 7.7529 8.4933 Euro/Franc CH 1.0415 1.0435 1.2026 -13.4% 1.2063 1.2141 progressive depreciation of the Euro/Sterling 0.7086 0.7240 0.7766 -8.8% 0.7790 0.8003 yen against the dollar. Dollar/Yen 122.49 120.12 119.68 2.3% 109.64 101.30 In the first weeks of July, the Dollar/Yuan 6.2000 6.1990 6.2046 -0.1% 6.1380 6.2036 Futures - Brent (in $) 63.59 55.11 57.33 10.9% 94.67 112.36 euro started to weaken again CRB Index (commodities) 227.17 211.86 229.96 -1.2% 278.55 308.22 against United States currency Source: Thomson Financial Reuters as the Greek crisis worsened.
The changes that occurred in the commodities price index reflect the weakness of the non- energy component connected also with a slackening of growth by the Chinese economy and the appreciation of the dollar, which was more than offset in the second quarter by the recovery of energy prices. Brent oil prices stabilised at around $65 per barrel between April and June, recovering from the lows reached in the middle of January ($47 per barrel). Nevertheless, in July oil prices returned to the same levels as at the end of March, held down by high production in the United States and in OPEC countries, but also by expectations of a positive conclusion to negotiations with Iran.
The trends described above are keeping inflation at particularly low levels in industrialised countries, while on the contrary in the principal emerging countries prices are continuing to record large changes, except for China.
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The performance of the world economy continued to be driven by emerging countries in Asia, even though growth in China slowed, but it was also assisted by a growing contribution from advanced economies9.
Actual and forecast data: industrialised countries
Public sector deficit (+) Reference Gross domestic product Consumer prices Unemployment surplus (-) (% of GDP) interest rates
Percentages 2014 2015(1) 2016(1) 2014(2) Jun-15(3) 2015(1) (2) 2014(2) Jun-15(3) 2015(1) (2) 2014 2015(1) 2016(1) Dec-14 Jul-15
United States 2.4 2.2 2.4 1.6 0.1 0.5 6.2 5.3 5.3 5.0 4.3 3.1 0-0,25 0-0,25 Japan -0.1 1.0 1.2 2.8 0.4 0.2 3.5 3.4 3.4 8.4 7.6 7.0 0-0,10 0-0,10 Euro Area 0.8 1.4 1.6 0.4 0.2 0.3 11.6 11.1 10.8 2.4 2.2 1.7 0.05 0.05 Italy -0.4 0.7 1.3 0.2 0.2 0.2 12.7 12.7 12.3 3.0 3.0 2.8 - - Germany 1.6 1.5 1.8 0.8 0.1 0.5 5.0 4.7 4.7 -0.7 -0.6 -0.8 - - France 0.2 1.3 1.4 0.6 0.3 0.3 10.2 10.2 10.4 4.0 3.7 3.0 - - Portugal 0.9 1.2 2.0 -0.2 0.8 0.7 14.1 12.4 13.2 4.5 3.2 3.1 - - Ireland 4.8 3.1 3.0 0.3 0.4 0.0 11.3 9.7 9.6 4.1 3.9 3.4 - - Greece 0.7 -2.9 -1.6 -1.4 -1.1 -1.5 26.5 25.6 27.0 3.5 5.5 4.7 - - Spain 1.4 3.2 2.6 -0.2 0.0 -0.1 24.5 22.5 22.8 5.8 4.3 3.2 - - United Kingdom 3.0 2.6 1.9 1.5 0.0 0.4 6.2 5.6 5.0 5.7 5.0 4.6 0.50 0.50
(1) Forecasts Source: Prometeia and official statistics (2) Average annual rate (3) The latest available information has been used, w here data had not been published as at 30th June 2015.
United States GDP grew by 2.3% annualised between April and June, the fifth consecutive rise (revised growth of +0.6% in the first quarter), benefiting from an improvement in consumption and net exports, against a contraction in inventories and weaker fixed investments. On the labour market encouraging signals came from the unemployment rate, which was down to 5.3% in June, the lowest level since May 2008 (5.6% at the end of the year).
8 As concerns the significant change in the euro-Swiss franc exchange rate that occurred compared with December, this must be seen in relation to the decision taken in January by the Swiss National Bank to abandon the minimum exchange rate regime. 9 According to revised International Monetary Fund estimates (July 2015), world GDP will grow by 3.3% in 2015 (+3.4% in 2014), again driven by emerging countries (+4.2%; +4.6% in 2014), but with a recovery by advanced economies (+2.1%; +1.8% in 2014).
16 Inflation seems to have stabilised in the first half at almost zero (0.1% in June), after the sharp fall that occurred between October and January (0.8% in December). Core inflation (net of foodstuffs and energy products) was more stable (1.8% in June; 1.6% in December). The negative balance of trade between January and May increased to $212.8 billion (+0.5% compared with the same period in 2014), affected by an increase in the deficit with China, Japan and other emerging economies in Asia, which more than offset the improvement in the balance, now positive, with OPEC countries.
The year-on-year growth in Chinese GDP in the first half of 2015 was stable Actual and forecast data: the principal emerging countries at 7%, the lowest level in the last six Gross domestic product Consumer prices Reference interest rates years, affected by persistent weakness in Percentages property investments and the 2014 2015(1) 2016(1) 2014(2) Jun-15(3) Dec-14 Jul-15 construction industry that they drive as China 7.4 6.3 6.0 2.0 1.4 5.60 4.85 well as by a reduction in commercial India 7.0 8.0 6.9 7.2 5.4 8.00 7.25 activity. Brazil 0.1 0.1 -1.5 6.3 8.9 11.75 14.25 All the key indicators for domestic Russia 0.6 -3.4 0.2 7.8 15.3 17.00 11.50 demand continued to grow strongly year- (1) Forecasts Source: Prometeia, IM F and official statistics on-year, although slowing gradually (2) Average annual rate compared with previous years: fixed (3) The latest available information has been used, where data had not been published as at 30th June 2015. investments +11.4%; real estate investment +4.6% (+10.5% in 2014); retail consumer sales +10.4%; industrial output +6.3% (manufacturing +7.1%). With regard to the balance of trade, in the first half the opposing trends for exports (+1%) and imports (-15.5%) resulted in a surplus of $263.2 billion, which helped support currency reserves which stood at $3,690 billion at the end of June, approximately one third of which are stably invested in United States government securities. After a sharp fall to 0.8% in January, inflation climbed back to levels close to those of December (1.5%), to stand at 1.4% in June, driven by the clothing sector (2.9%) and the tobacco/alcohol sector (3.5%).
In the first three months of the year the Japanese economy recorded positive signals, with GDP growing in the short term by 1% (+0.3% in the last period of 2014). While domestic consumer demand was stable, this trend benefited from a greater contribution from inventories and non-residential investments, only partly offset by a fall in the balance of trade. The first figures for the second quarter show opposing signals. Industrial output fell by 2.1% month-on-month in May (the third fall in the last four months), while the June Tankan survey showed an improvement in business confidence for large manufacturing and non- manufacturing companies. In June the unemployment rate reached 3.4%, at the same level as in December, while inflation stood at 0.4% (2.4% in December), having fallen appreciably since April due to the absence of baseline effect of the increase in tax on consumption introduced in April 2014.
The economic recovery in the euro area seems to have stabilised between January and March, with growth in GDP of 0.4% compared with the previous quarter (+0.4% also in the last quarter of 2014) due to contributions from consumption, fixed investments (which are improving progressively) and inventories, against a general deterioration in net exports. While the difficult negotiations on Greek debt continued to give cause for concern, a favourable scenario for the progressive consolidation of growth in the area remains, given the current levels of oil prices and exchange rates and the expansionary financial conditions. As concerns the second quarter, in June the €-coin calculated by the Bank of Italy (which provides an estimate of core trends for European GDP) recorded the seventh slight consecutive increase since the low recorded in November 2014, driven, amongst other things, by the balance of trade, the impacts of which were partly offset by weak performance for industrial output. Confirmation of just how unclear this trend is, is given by the figure for industrial output which fell by 0.4% month-on-month in May (unchanged in April; down by 0.4% in March), partly a reflection of the figure for Germany, while improvements were recorded for the other
17 major economies (+0.9% in Italy; +0.4% in Spain; +0.3% in France). On the other hand, the year-on-year figure shows growth of 1.6% (+0.9% to April; +2.1% to March). The unemployment rate was unchanged at 11.1% in June, marginally down compared with 11.3% in December, still incorporating critical situations in Greece (25.6% in April), Spain (22.5%), Italy (12.7%) and Portugal (12.4%). After a progressive recovery between January (a low of -0.6%) and May (0.3%), inflation stood at 0.2% in June. Core inflation, net of foodstuffs and energy products, stood at 0.8%, basically stable compared with December (0.7%).
Within the euro area, the Italian economy seems to be showing the first signs of a reversal of past trends. After five periods of negative and zero change, quarterly GDP returned to positive territory in the first quarter of 2015 (+0.3%), driven by inventories and fixed investments (especially in means of transport and construction in view of the opening of the Expo), while negative performance was recorded for the balance of payments and also from consumption, although marginally. The first figures for the second quarter appear to show a consolidation of the recovery. In May the seasonally adjusted industrial production index recorded a marked improvement to 3%, following decreases in the first months of the year (-2.2% in January). This was the aggregate result of year-on-year increases for almost all sectors, including the “fabrication of coke and oil products” (+16.2%), the “fabrication of means of transport” (+15.4%) and the “production of pharmaceutical products” (+10.5%). Only the following sectors recorded negative trends: “mineral extraction” (-12.1%), “textiles” (-1.4%) and “foodstuffs” (-0.5%) On the labour market, the unemployment rate rose in June to 12.7%, the highest level since the begininng of the year (12.4% in December), notwithstanding the measures to reduce contributions for new employees introduced by the 2015 Legge di stabilità (“stability law” – annual finance law) as well as innovations contained in the Jobs Act10. The rate for the 15 to 24 age group recorded a similar trend (44.2% in June; 41% in December)11. Moreover, the overall figure continues to be cushioned by the presence of state income benefits, which between January and June saw a significant reduction in year-on-year state lay-off and redundancy benefits: 365.5 million hours authorised compared with 524.1 million hours a year before (-30.3%), the aggregate result of a generalised fall in the different components (-21.9% in ordinary benefits; -22.4% in extraordinary benefits; -61.7% in exceptional benefits). Inflation, measured by the harmonised consumer price index, returned to positive territory in May recording a slight year-on-year acceleration for the second consecutive month in June to 0.2% (-0.1% in December). The trend recorded in the spring was attributable, amongst other things, to the services sector. The surplus on the balance of trade improved to €15.7 billion in the first five months of the year (+€13.9 billion in the same period of 2014) due to a substantial increase in the surplus on non-energy products, two thirds of which is stably attributable to plant and equipment, which more than offset the energy deficit (-€14.4 billion). The overall surplus was driven by higher volumes of trade, with exports up over five months by 4.1% year-on-year (almost one third of this increase came from sales of motor vehicles to the United States) and imports up by 3.2%. On 2nd July, Parliament gave final approval to the 2014 law which authorises the implementation of numerous important European directives in national law. These included the Bank Recovery and Resolution Directive (BRRD), to be completed with the issue of the relative legislative decrees. The Bank of Italy has been designated as the Italian crisis resolution authority.
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Trends on stock markets, which were particularly favourable for Japanese and European stock exchanges, saw a reversal of the trend in the second quarter for the latter, due to increased fears of contagion by peripheral countries resulting from the delicate Greek question.
10 Four decrees came into force on 7th March and 25th June to implement the Jobs Act (Legislative Decrees No. 22 and No. 23 of 4th March 2015; and Legislative Decrees No. 80 and No. 81 of 15th June 2015). 11 This figure gives young people unemployed as a percentage of total young people in employment and seeking employment.
18 As shown in the table, The principal share indices in local currency notwithstanding the reversal of the trend, the best Jun-15 Mar-15 Dec-14 % change Sep-14 Jun-14 performances in the first A B C A/C D E half were recorded on Italian Ftse Mib (Milan) 22,461 23,157 19,012 18.1% 20,892 21,283 stock markets, up by just Ftse Italia All Share (Milan) 23,985 24,734 20,138 19.1% 22,030 22,585 under 20% compared with Xetra Dax (Frankfurt) 10,945 11,966 9,806 11.6% 9,474 9,833 December. Cac 40 (Paris) 4,790 5,034 4,273 12.1% 4,416 4,423 On the other hand, greater Ftse 100 (London) 6,521 6,773 6,566 -0.7% 6,623 6,744 stability was seen on S&P 500 (New York) 2,063 2,068 2,059 0.2% 1,972 1,960 American stock markets, DJ Industrial (New York) 17,620 17,776 17,823 -1.1% 17,043 16,827 already at much higher than Nasdaq Composite (New York) 4,987 4,901 4,736 5.3% 4,493 4,408 pre-crisis levels. Nikkei 225 (Tokyo) 20,236 19,207 17,451 16.0% 16,174 15,162 Topix (Tokyo) 1,630 1,543 1,408 15.8% 1,326 1,263 The MSCI index – an MSCI emerging markets 972 975 956 1.7% 1,005 1,051 indicator of performance by emerging markets – Source: Thomson Financial Reuters recorded slight growth over six months, but was stable compared with March, despite the sudden fall recorded by the Chinese stock market in the middle of June. Prices on that market fell sharply by 30% in less than a month, in contrast to substantial rises recorded since November (+150%), driven by mass access to the stock market by small investors, whose low level of financial knowledge may have amplified the fluctuations. This was a reflection of looser monetary conditions and explicit encouragement by the authorities to support the development of the stock market. At the beginning of July the financial authorities intervened seeking to halt falling prices by stimulating the purchase of shares by agencies and public sector companies. At the same time trading in shares of almost half listed companies was suspended and new issuances were stopped. With regard to assets under management, the mutual investment funds sector is continuing to drive the overall total as a result of net inflows which were positive at the end of June by €68.7 billion, over two thirds of which attributable to foreign registered funds (+€50.5 billion) and the remainder to Italian registered funds (+€18.2 billion). In terms of the type of fund, the good performance was recorded mainly by flexible funds (+€32.4 billion) bond funds (+€18.7 billion) and balanced funds (+€10 billion), while more modest increases were seen for equity funds (+€6.1 billion) and monetary products (+€1.8 billion), with hedge funds basically stable (-€0.3 billion). At the end of June assets under management had therefore reached €780 billion, up from €683.3 billion in December (+14.2%), the aggregate result in the period of a change in the percentage composition into flexible funds (up from 22% to 23.7%), equity funds (up from 20.7% to 21.3%) and balanced funds (up from 6.4% to 7.2%) and out of bond funds (down from 46.1% to 43.2%) and monetary funds (down from 3.9% to 3.7%).
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The fragility of the background environment continues to affect the banking sector, in which the trend for funding remains negative – due amongst other things to the continuing fall, although now more modest, in volumes of lending – against a marginal, but progressive slowdown in delinquent loans.
In order to solve the problem of shortage of access to credit by companies, a Decree Law (D.L. No. 83/2015) was published in the Official Journal on 27th June, containing urgent measures concerning bankruptcy, civil law and the functioning of judicial administration. The measures contained in it included the following: • the full deductibility of write-downs and losses on loans to customers by credit and financial institutions and insurance companies in the year in which they are recognised in the financial statements, instead of within five years, which aligns the regulations with those of the other major European countries; • a revision of bankruptcy law which involves both arrangement with creditors and enforcement proceedings. With regard to the former, negotiating instruments have been strengthened in order to facilitate restructuring of the exposure and more stringent time limits have been introduced to conclude the liquidation stage with penalties for failure to comply. With regard to enforcement procedures, new criteria have been drawn up for the distribution of assets, the sales stages have been simplified and some of the procedural time limits have been shortened.
19 On the basis of the first estimates published by the Italian Banking Association12, at the end of June the year-on-year rate of change in direct funding (deposits of residents and bonds) was -1.4%, negative since December 2013 (-1.2% in December 2014). Within the item, the clear gap between funding from bonds (-14.8% compared with -13.6% at the end of 201413) and other forms of funding (+3.9% compared with +4% in December14) remained. As shown by detailed Bank of Italy data for May15, in the latter case the trend reflects both an increase in current account deposits (+9.3%) and the recovery in repurchase agreements (+57.2%), over two thirds of which attributable to the first five months of 2015. On the other hand term deposits up to two years are continuing to decrease (-19.4%).
Again according to Italian Banking Association reports, loans to private sector residents were down again year-on-year in June by 1.1%16, although not so much as in the comparison with December (-2.1%). In terms of borrowers, details for May published by the Bank of Italy17 – which take account of loans not recognised in the balance sheets of banks because they are securitised and are net of changes in amounts not connected with transactions (e.g. changes due to fluctuations in foreign exchange rates, to impairment or to reclassifications) – show a progressive stabilisation for households, after two and a half years of decreases, and continuing weakness for businesses, despite increasingly more attractive terms and conditions. The trend for the former (-0.1%; -0.5% in December) is benefiting, amongst other things, from favourable performance by new grants for the purchase of properties and from a stream of new consumer credit transactions, while the performance for non-financial companies (-1.9%; -2.3% in December) continues to be affected by weak demand18, especially with regard to investments, although new grants are recovering year-on-year.
From the viewpoint of risk, while signs of improvement exist, they are still modest. In May bad loans to the private sector gross of impairment losses19 increased to €193.3 billion, but progressively slowing year-on-year (+14.9% compared with +17.8% in 2014; +5.5% since the beginning of the year). Total outstanding gross bad loans consisted of €52.2 billion to households (+10.1% year-on-year; +4.8% compared with December) and €138.1 billion to businesses (+15.6% year-on-year; +5.7% compared with December)20. The ratio of gross bad private sector loans to private sector loans therefore rose to 11.77% (11.11% at the end of December). Net bad loans, amounting to €83.4 billion, grew by 9.3% over twelve months (+5.6% in 2014), but fell by 1.3% compared with December, having benefited also from disposals. In consideration of the trend for loans, at the end of May the ratio of net bad loans to total loans stood at 4.62%, in line with the figure for December (4.64%).
Securities issued by residents in Italy held in the portfolios of Italian banks stood at €776.9 billion in May, down both over twelve months (-€79.1 billion; -9.2%) and in the first half (-25.5 billion; -3.2%). The trend fully reflects that for “other certificates” (€361.5 billion), which fell sharply compared with the year before (-€91.7 billion), due mainly to bonds issued by banks (-€75.3 billion) accounting for an even lower percentage of the total at 64.6%. On the other hand investments in Italian government securities (€415.4 billion) increased year-on-year by €12.5 billion,
12 Italian Banking Association, Monthly Outlook, Economia e mercati Finanziari-Creditizi, 14th July 2015. 13 The changes were calculated by excluding the portion included within the investments in the securities portfolio from bond funding. The trend for the item was affected by the significant volumes of maturing securities as well as by the abundant and competitive liquidity injected into the banking system by the ECB and short-term lines of financing. 14 The changes were calculated by excluding amounts relating to disposals of loans and transactions with central counterparties from deposits. 15 Supplement to the Statistics Bulletin Moneta e Banche, 8th July 2015. 16 In terms of the total outstanding, at the end of June loans to private sector residents amounted to €1,557.7 billion compared with €1,450 billion outstanding at the end of 2007, before the start of the crisis. 17 Press release: “The main items on banks’ balance sheets”, 8th July 2015. 18 Payments of arrears on debts by public administrations could continue to affect the trend for loans to businesses, especially in the short term. Furthermore, the entry into force of Regulation ECB/2013/33, as a result of the implementation of the European System of Accounts (ESA 2010), has already led with effect from December 2014 to the statistical reclassification of holding companies from the “non-financial companies” sector to the “other financial institutions” sector for an amount quantifiable at around €9 billion. 19 Supplement to the Statistics Bulletin Moneta e Banche, 8th July 2015. 20 The entry into force of Regulation ECB/2013/33 also resulted in a reclassification for gross bad loans of approximately €1 billion out of the “non-financial companies” sector into the “other financial institutions” sector.
20 attributable entirely to the first five months of 2015. It was accompanied by a partial change in the composition out of short-term securities (BOTs and CTZs; -€17 billion) into medium to long-term securities (CCTs and BTPs; +€26 billion).
The average interest rate on bank funding from customers calculated by the Italian Banking Association21 (which includes the yield on deposits, bonds and repurchase agreements for households and non-financial companies) had fallen slightly in June to 1.35% (1.50% at the end of 2014). The average weighted interest rate on lending to households and non-financial companies, on the other hand, had fallen to a record low of 3.42% (3.65% in December 2014).
21 Italian Banking Association, Monthly Outlook, Economia e mercati Finanziari-Creditizi, 14th July 2015.
21 Significant events in the first half of 2015
Amendments to the articles of association
As already reported in the first quarter financial report, following the issue of the “New supervisory regulations for the corporate governance of banks” and provisions concerning “Remuneration and incentive policies and practices”, introduced by the Bank of Italy on 6th May and 18th November 2014 respectively with updates No. 1 and No. 7 contained in Circular No. 285 of 17th December 2013 (which implemented CRD IV), the Management Board of UBI Banca passed a resolution on 13th January 2015 to commence a project designed to implement the content of the above provisions in the Articles Association of the Parent and its subsidiary banks. In a meeting of 11th March 2015 (on the basis of the provisions of article 2365 of the Italian Civil Code and the penultimate paragraph, letter c) of article 46 of the UBI Banca Articles Association, which gives the Supervisory Board exclusive power to pass resolutions concerning amendments to the Articles of Association for compliance with legislation, subject to prior consultation with the Management Board), the Supervisory Board resolved to amend articles 22 (Title V – Shareholders Meetings), 46 and 49 (Title VIII – Supervisory Board) of the Articles of Association currently in force.
More specifically, with regard to provisions concerning “Remuneration and incentive policies and practices”, the responsibilities of Shareholders Meetings were broadened in article 22 to include the following: • remuneration policies for members of the supervisory body; • criteria for the determination of remuneration to be agreed in the event of the early termination of an employment relationship or early retirement from corporate office.
With regard, on the other hand, to provisions concerning corporate governance: • article 46 added to the activities for which the Supervisory Board is responsible as the body with the function of strategic supervision, as follows: - approval of the corporate governance structure and the accounting and reporting systems, supervision of the public disclosure process and the communication process of the Bank; - ensuring effective discussion with the management function and verifying on an ongoing basis their choices and the decisions that they take; • article 49 provides for the creation of a Risk Committee. The regulations establish the need for the following committees internal to the board: Appointments Committee, Remuneration Committee and Risk Committee, each composed of 3-5 members, all non-executive and with the majority independent. The creation of a Risk Committee was made necessary because it cannot be the same committee as the Internal Control Committee and it will be accompanied by a partial redefinition of the responsibilities of the remaining committees.
In compliance with the provisions of the updates to Circular No. 285 concerning resolutions for which the registered shareholders hold responsibility, the Extraordinary Shareholders’ Meeting which met in second session on 25th April was asked to approve the following proposals to amend articles 22, 28 (Title V – Shareholders’ Meetings), 44 and 45 (Title VIII – Supervisory Board) as follows: • under article 22.2, the matters on which an Ordinarily Shareholders’ Meeting is called upon to vote include the setting of a higher ratio than that of 1:1 between the individual variable and the fixed remuneration of key personnel, but nevertheless not higher than the maximum limit set by the regulations in force from time to time; • in relation to the above amendment, a clause was inserted in article 28.1 relating to the specific quorums required by the Supervisory Regulations for passing a possible resolution that might be proposed in future on such a matter; • under article 44.6, letter b, concerning the independence requirement for members of the Supervisory Board, the reference to the independence requirement set by the Corporate Governance Code was repealed, which confirmed a single definition of independence by making reference to the requirements for independence set by the regulations and legislation in force from time to time (article 148, paragraph 3 of Legislative Decree No. 58/1998);
22 • under article 44.8, the current criterion concerning the composition of the Supervisory Board regarding gender balance pursuant to law No. 120 of 12th July 2011 was added to with a provision stating that the majority of the members of the Supervisory Board must not have occupied the position of member of the Supervisory Board and/or member of the Management Board of UBI Banca continuously for the three previous terms of office. A further criterion will therefore have to be complied with both when lists are submitted (article 45.2) and for the appointment of the Supervisory Board and the replacement of its members (article 45.12).
Authorisation by the Bank of Italy pursuant to article 56 of Legislative Decree No. 385 of 1st September 1993 (Consolidated Banking Act) (as a condition for the registration of the aforementioned Supervisory Board resolutions of 11th March 2015 and of the Shareholders’ Meeting of 25th April 2015 in the Company Register by the notary responsible for the minutes) was received on 7th May 2015. Filing with the Company Registrar took place on the following 14th May 2015, which thereby gave full effect to the amendments to the Articles of Association that had been approved.
Reform of “popular” co-operative banks
On 20th January 2015, the Council of Ministers approved a Decree Law (Decree Law No. 3 of 24th January 2015) entitled “Urgent measures for the banking system and investments”. Article 1 of the decree, which came into force on 25th January after publication in the Official Journal, provided for the reform of “popular” co-operative banks. More specifically, article 29 of the Consolidated Banking Act was amended with the introduction of a new paragraph 2 bis which sets a limit of €8 billion of assets for “popular” banks and in paragraph 2 ter states that if that limit is exceeded a shareholders’ meeting must be convened to transform the bank into a joint stock company.
On the following 25th March, Law No. 33 of 24th March 2015, which converted the Decree Law, was published in the Official Journal. The final text confirmed the threshold of €8 billion assets for the transformation of “popular” co-operative banks into joint-stock companies, with the possibility of inserting a ceiling on voting rights in shareholders meetings in the articles of association, provided it was not less than 5% of the share capital with the right to vote, for a maximum period of 24 months from the entry into force of the law (26th March, the day following publication in the Official Journal).
Once the consultation procedures were concluded, on 9th June the Bank of Italy issued secondary legislation to implement the law, which came into force on 27th June 2015. With the issue of these regulations the reform of “popular” co-operative banks was completed in all its aspects allowing the corporate operations needed to comply with the new legislative framework (to be completed within 18 months as established by the law) to begin.
In compliance with the provisions for the initial application of the regime, the Supervisory Board of UBI Banca, which met on 16th June 2015, verified that the consolidated assets of the Group exceeded the limit of €8 billion and it therefore resolved to commence procedures to transform UBI Banca into a joint stock company, with the definition of a new text, on the basis of a proposal from the Management Board, for the Articles of Association to submit to a Shareholders’ Meeting, which it is considered may be held by the end of next October.
The Supervisory Board also identified amendments to the Articles of Association to be made before that transformation in compliance with regulatory provisions concerning co-operative companies as follows: - the increase to ten of the maximum number of proxies that may be granted to a registered shareholder for participation in Shareholders’ Meetings; - the decision-making powers of the Supervisory Board concerning the limitation or the postponement, in full or in part, of the redemption of shares subject to withdrawal from the company; - the repeal of the provision concerning the status of registered shareholder for eligibility for filling positions as company officers.
The necessary applications concerning the aforementioned initiatives have been submitted to the Bank of Italy.
23 Corporate rationalisation transactions
The progressive discontinuation by the Group of activities that are not strictly core, such as the fiduciary business segment, led to the conclusion of the following transactions in the first half: ó the sale, on 12th January 2015, to Corporate Family Office (CFO) SIM – a major independent Italian brokerage focused on “family office” – of 100% of the share capital of UBI Gestioni Fiduciarie SIM Spa, a “dynamic” fiduciary company, a leader in its business segment, indirectly controlled by UBI Banca through UBI Fiduciaria. Under the sale, the UBI bank Group maintained all its commercial agreements in the “fiduciary asset management” sector; ó the conclusion on 30th April of the transfer to Unione Fiduciaria Spa of the UBI Fiduciaria Spa (a company 100% controlled by UBI Banca) line of business dedicated to the management of fiduciary services for Group customers. The transaction involved maintaining commercial arrangements with the acquirer for the provision of these services through the Group’s distribution networks. Discussions with trade unions had commenced on 4th March 2015 in order to reach an understanding designed to save jobs, maintain salary levels and more generally to focus maximum attention on possible hardship resulting from the transfer of the headquarters to Milan. Despite the hard work and great efforts made it was not possible to agree on a solution and the negotiations were therefore ended on 24th March 2015 with no agreement.
On 25th May 2015 the merger of IW Bank (the Group’s internet bank) into UBI Banca Private Investment (the network of financial advisors) took effect. Full details of the underlying reasons and implementation procedures for this merger were given in the Consolidated Management Report in the 2014 Annual Report. The banking entity that resulted from the operation took the name of IW Bank, thereby conserving a well-known and appreciated brand on the market, with registered offices located in Milan. The new bank is aimed at acquiring affluent customers in the wealth management sector and at consolidating its online trading position. Its commercial and service model is based on creating strong synergies between the online channel and the investment advisory services provided by financial advisors and wealth bankers, through the provision of a range of products consistent with the Bank’s strategic position and growth objectives. The migration of the former IW Bank’s IT platform from its previous platform onto the Group target platform, with the trading environment developed appropriately in order to ensure continuity in the provision of customer services, took place on 25th May 2015, the same date on which the merger took legal effect. This continuity was guaranteed in line with the normal time needed to get the platform up and running. In organisational terms, the model adopted involves the provision of a series of services by the Parent together with the creation of functional lines of reporting to ensure full implementation of the policies set by UBI Banca as part of its activities for the management, co-ordination and control of the Group. As already reported, on 4th February 2015 an agreement had been signed which regulates the repercussions of the operation on staff. This agreement safeguards the careers of the employees concerned, setting principles for the reallocation of human resources, mobility, training and retraining, and it also lays down rules for supplementary pensions and additional health cover.
On 9th June 2015 the Management Board approved the proposed merger of SOLIMM Srl into S.B.I.M. Spa. The company objects of both companies, 100% controlled by UBI Banca and both with headquarters in Brescia, are to carry out property transactions, necessary for the operations of the Group itself. More specifically, SOLIMM was formed in 1996 with the aim of the acquiring properties, for the purposes of subsequent disposal, destined to settle the lending positions of Group banks. The company has no longer been required to carry out credit recovery action since 1999, at the time of the formation of the former Banca Lombarda. Therefore its activities focused on the disposal of properties acquired previously and this activity was completed in March 2015. As a consequence it was considered appropriate to wind up this company and the most convenient and consistent solution to achieve this was to merge it into S.B.I.M., an owned company
24 responsible for managing the property which houses the operating quarters of UBI Banca in Brescia. From a legal viewpoint the simplified procedure pursuant to Art. 2505 of the Italian Civil Code will apply to the merger. The final conclusion of the transaction will take place in the next few months once the period of 60 days for creditors to raise objections has passed.
With regard to the preliminary sales agreement signed on 19th June 2015 between Mercury Italy Srl and the member banks of the Istituto Centrale delle Banche Popolari Spa (ICBPI)1, UBI Banca agreed to sell 4.04% of the share capital held in ICBPI. From an accounting viewpoint the transaction, with a total price of €2,000 million divided proportionally among those promising to sell, would result in a profit on the sale of approximately €70 million, net of taxes, with a positive impact on CET1 of approximately 11 basis points. Finalisation of the sale is subject to the issue of authorisations from the competent authorities. Following the deal, UBI Banca will maintain a 1% stake in the share capital of ICBPI.
Prestitalia
In 2015 this company, which specialises in salary and pension backed loans, moved forward with activity to implement its Business Plan drawn up at the end of 2014.
The main focus is on commercial expansion to be implemented by developing a distribution model and operating structure based on the use of agents and the creation of synergies with bank branches. In detail: ó an increase has been planned in numbers of traditional agents (operating mainly on non- captive customers) to cover almost the entire country in order to reach provinces which today are less well served; ó UBI Banca Group bank branches will be supported by new consumer credit specialists with a specific network of mainly tied agents (and to a much lesser extent by selected bank employees) who will focus mainly on captive customers, each of whom will provide support to a given number of branches in the local areas assigned to them.
A new General Manager was placed at the helm on 25th May 2015 to lead the plan to develop the company. He has been with the Group since 2004 and has substantial experience in the creation and management of distribution networks for financial products.
The Business Plan also includes a specific project designed to develop the company’s IT system to be implemented with the support from the Parent and from UBI.S, as the outsourcer for Prestitalia’s ICT services. The architecture of the new system will be centred on the software application OCS and will interface with Group target software. The following was carried out in relation to this project in the first half: - activity was carried out in preparation for the migration to OCS, which came into service on 25th July 2015; - the migration of invoice processing onto the target SAP accounting interface was carried out (February 2015), with the connected change in operational procedures and the adoption of Group spending regulations.
1 This is a preliminary sales contract between Mercury Italy Srl (a vehicle controlled indirectly by the funds Bain Capital, Advent International and Clessidra Sgr), which promises to purchase and Credito Valtellinese, Banco Popolare, Banca Popolare di Vicenza, Veneto Banca, Banca Popolare dell’Emilia Romagna, Iccrea Holding, Banca Popolare di Cividale, Banca Popolare di Milano, Banca Sella Holding, Banca Carige and UBI Banca, which promise to sell 85.79% of the share capital held by them as a whole in ICBPI.
25 Compliance with supervisory provisions on internal controls
As already reported in previous financial reports, on 2nd July 2013 the Bank of Italy issued new provisions on the “System of internal controls, the IT system and operational continuity” (Prudential supervision of banks – Circular No. 263 of 27th December 2006 – 15th update) with progressive effect from 1st July 2014.
These provisions, which were subsequently incorporated in Circular No. 285 of 17th December 2013 by means of the 11th update of 21st July 2015, introduced important changes to the regulatory framework in order to furnish banks with a complete, adequate, functional and reliable system of internal controls, by regulating, amongst other things, the following: the role of corporate bodies within the internal control system; the role of corporate control functions, the outsourcing of corporate functions, the IT system and operational continuity. The 11th update also introduced internal systems for reporting violations (whistleblowing) and specific controls for risks connected with the degree of a bank’s asset encumbrance. Compliance with these new provisions should take place by the end of 2015.
In accordance with the first deadline set (1st July 2014), changes for compliance were made in 2014 relating to the internal control system, to the outsourcing of corporate functions, to the “Risk Appetite Framework” (RAF), to the co-ordination of control functions and to business continuity and the relative action needed to ensure operational implementation was taken.
Subsequently, the Group completed the required changes to its internal regulations regarding the IT system, with effect from 1st February 2015, with particular reference to: ó the IT function: formalisation of decision-making and authorisation processes designed to ensure strategic and operational control of the IT system; ó IT compliance: specification of roles, process responsibilities and lines of reporting to ensure compliance with IT regulations relating to the governance and organisation of the IT system; ó IT risk: identification of the methodological, organisational and procedural framework to employ for the analysis and management of IT risk and the definition of the relative levels of risk appetite; ó Logical security: update of the principles, the organisational model and the security requirements and measures needed to protect the Group’s tangible and intellectual assets and the security of its information and its IT resources; ó Data governance: formalisation of the principles, the components and the logical functioning of the data processing system with the identification of the roles and responsibilities and functions involved in the use and processing of data for operational and management purposes; ó Change and incident management: identification of users responsible for IT resources and formalisation of procedures designed to guarantee control over changes, replacements or technological upgrades. Detailed procedures for identifying and responding promptly and effectively to IT incidents or malfunctions.
Following these regulatory changes specific action plans were launched for the relative operational implementation.
***
On 12th May the Bank of Italy published Circular No. 288 "Supervisory provisions for financial intermediaries, which came into force on 11th July 2015. The circular regulates procedures for the registration of financial intermediaries on a single register pursuant to Art. 106 of the consolidated banking act and it confirms a supervisory regime for them equivalent to that of banks. It also defines a uniform set of rules for all intermediaries based on the principle of proportionality with the same obligations and requirements commensurate to the complexity of the entities concerned. Following the issue of these provisions a specific initiative was launched, in which not only the Parent but also the Group companies concerned (UBI Leasing, UBI Factor and Prestitalia) are participating, in order to draw up an application for authorisation for registration in the single
26 register of financial intermediaries and to draw up a general plan of action for compliance with the aforementioned provisions.
Developments in the regulatory framework
In addition to the developments in the complex regulatory framework regarding European supervision, in 2015 the Group was compelled to commence and/or continue monitoring and compliance activities following developments which similarly affect the remaining regulatory framework as follows:
• with regard to banking services, on 15th July 2015 the Bank of Italy published new provisions on the subject of transparency which modify the regulations introduced in 2009 in terms of updating and simplifying them. This will require a complete review of the document sets for all the products in the Group’s product catalogue, which is to say products still in the use by customers. Furthermore, implementation is expected by March 2016 of the Directive on residential property mortgages for retail customers, which will involve a profound revision of established practices;
• on the subject of the regulation of financial markets, we report that by July 2016 EU member states must implement the provisions of the directives on market abuse and MiFID 2, for which the process of issuing guidelines and technical regulations has not yet been concluded by the Esma and the Consob (Italian securities market authority). These broaden the scope of application of customer protection principles (e.g. in the case of complex products) and also controls over operational integrity;
• Law No. 69 of 27th May 2015, which came into force on 14th June 2015, reformulated the crime of fraudulent accounting applicable both to listed and unlisted companies as part of the general introduction of more severe penalties for crimes against government and crimes involving the Mafia. It also established co-ordination of this with legislation governing the administrative liability of entities resulting from crimes pursuant to Legislative Decree No 231/2001. The Group has planned a review of its 231 (administrative liability) model in order to take account of the impacts of the new regulations on certain internal processes;
• a decree of the Ministry of the Economy and Finance published on 21st April 2015 implemented EU Regulation 1210/2010 which assigns the duty to “handlers of cash” (e.g. banks, foreign exchange dealers, etc.) to verify the authenticity and state of conservation of coins in order to identify false coins and coins no longer suitable for circulation, to be sent to the competent authority. These handlers are also assigned statistical reporting tasks. The Group has started to plan action to make changes to internal procedures for the treatment of cash, in parallel with changes to the 231 model;
• on 15th June 2015 the Council of the European Union approved a proposal for a General Regulation on Data Protection, concerning protection for natural persons with regard to the treatment of their personal data and the free circulation of that data. When this comes into force it will repeal the previous European Directive on privacy (95/46/EC) and as a consequence large part of Italian law on privacy (Legislative Decree No. 196/2003).
27 The distribution network, positioning, digital innovation and payment cards
The branch network of the Group
The branch network of the UBI Banca Group as at 30th June 2015 consisted of 1,563 branches, of which 1,557 operating in Italy, a decrease of 111 compared with the end of 2014. At the date of this report, branch numbers had fallen to 1,561, of which 1,555 in Italy.
As shown in the table, which summarises action taken in the first seven months of 2015, the change compared with December is attributable almost entirely to measures taken to reorganise the geographical coverage of the network banks which took effect on 19th January 2015, details of which were The branch network of the UBI Banca Group in Italy and abroad reported in the 2014 Annual Report which may therefore be 30.6.2015 31.12.2014 Change 1 number of branches consulted .
UBI Banca Scpa 4 4 - Banca Popolare di Bergamo Spa 350 354 -4 We also report the closure in Banco di Brescia Spa 288 316 -28 June of a BPB mini-branch Banca Popolare Commercio e Industria Spa (1) 196 212 -16 located at Saronno (Varese) at Banca Regionale Europea Spa (2) 211 243 -32 Banca Popolare di Ancona Spa 208 213 -5 the company Novartis Italia Spa Banca Carime Spa 216 242 -26 and the closedown of Banca di Banca di Valle Camonica Spa 66 66 - Valle Camonica and BRE mini- IW Bank Spa (3) 21 21 - branches located at Villa di UBI Banca International Sa - Luxembourg 3 3 - Tirano (Sondrio) and at Savona TOTAL 1,563 1,674 -111 Total Branches in Italy 1,557 1,668 -111 in Corso Vittorio Veneto respectively. Financial advisors (4) 772 713 59
(1) The figures do not include nine units dedicated exclusively to pawn credit. (2) The figures include three foreign branches. (3) The merger of IW Bank into UBI Banca Private Investment took effect on 25th May 2015, with the change of the name of the latter into IW Bank Spa. The figures reported do not include two support branches not open to the public which, however, had been included in the total number published in the 2014 Annual Report. (4) The figures also include financial advisors belonging to the Wealth Management Area of the new IW Bank Spa.
Action undertaken on branches in the first seven months of 2015
Transformation of Transformation of Merged Closures/mergers of: branches into mini-branches branches branches mini-branches mini-branches into branches Banca Popolare di Bergamo Spa - - 4 2 - Banco di Brescia Spa - 14 14 9 - Banca Popolare Commercio e Industria Spa - 7 9 4 1 Banca Regionale Europea Spa - 13 20 30 - Banca Popolare di Ancona Spa - - 5 8 - Banca Carime Spa - 18 8 4 1 Banca di Valle Camonica Spa - - 1 - - IW Bank Spa - 2 - - - IW Bank Spa (former UBI BPI) 2 - - - - TOTAL 2 54 61 57 2
1 The plan involved the closure of 52 branches and 58 mini-branches together with the transformation of 57 branches into mini- branches and two mini-branches into branches.
28 The Italian distribution network is Private & Corporate Banking Units supplemented by the UBI Banca “Private & 30.6.2015 31.12.2014 Corporate Unity” (PCU – private and corporate banking) units, which at the end of the first Private & Corporate Banking Units 127 128 Private & Corporate Banking "Unity" Units (PCU) (*) 48 49 half, and also at the date of this report, Banca Popolare di Bergamo 12 12 operated in Italy with 127 centres (48 PCUs Banco di Brescia 9 9 and 79 “corners”), a decrease of one unit Banca Popolare Commercio e Industria 7 7 Banca Regionale Europea 6 7 compared with December 2014, following the Banca Carime 5 5 closure of a BRE PCU at Cuneo Nord in Banca Popolare di Ancona 7 7 January. Banca di Valle Camonica 2 2 Corners 79 79 Banca Popolare di Bergamo 24 24 Finally, geographical market coverage Banco di Brescia 12 12 continues to be further guaranteed by a Banca Popolare Commercio e Industria 9 9 network of 772 financial advisors belonging to Banca Regionale Europea 4 4 the new company IW Bank Spa. Banca Carime 6 6 Banca Popolare di Ancona 22 22 The increase compared with 713 financial Banca di Valle Camonica 2 2 advisors at the end of December, relating to (*) The figures includes three UBI Banca units operational since 6th May 2013 the former UBI Banca Private Investment, and dedicated to corporate customers only. mainly reflects a policy of growth through external recruitment.
The international presence
At the date of this report, the international presence of the UBI Banca Group was structured as follows: • one foreign bank, UBI Banca International Sa (with headquarters in Luxembourg and branches in Munich and Madrid); • three foreign branches of Banca Regionale Europea in France (at Nice, Menton and Antibes); • representative offices in San Paolo of Brazil, Mumbai, Shanghai Hong Kong, Moscow and Dubai2; • investments (mainly controlling interests) in three foreign companies: UBI Trustee Sa, UBI Management Co. Sa and Zhong Ou Asset Management Co. Ltd; • a branch of UBI Factor Spa in Krakow in Poland; • 34 commercial co-operation agreements with foreign banks (covering over 50 countries) – in addition to three “trade facilitation” agreements with the European Bank for Reconstruction and Development (EBRD), the International Financial Corporation (IFC) and the Asian Development Bank (ADB)3 – and also a “product partnership” in the Middle East and in Asia to guarantee effective assistance on all the principal markets in those areas for our corporate clients.
The agreement with the ADB, signed in the first half, involves the participation of the Parent and the network banks as confirming banks, with the fundamental objective of acquiring new trade finance transactions with foreign countries and banks on the Asian continent where the relative risk is mitigated, if not eliminated, by a guarantee issued by the ADB.
Again in 2015 the UBI Banca Group sponsored events of national and international importance in order to increase the visibility of its brand in Italy and abroad and to consolidate its closeness to customers who operate on international markets.
2 After obtaining authorisation and a licence from local authorities on 28th May, procedures were completed on 3rd August 2015 for opening a new representative office in Dubai. 3 The ADB is a multilateral development bank located in Manila in the Philippines. Founded in 1966, today it has 67 member states, 48 of which are in a Asia.
29 UBI Banca Group: market shares(*) The positioning of the Group 31.3.2015 31.12.2014
Branches Branches
The table summarises the market positioning of the North Italy 5.9% 6.3% UBI Group in terms of branches at both national Lombardy 12.8% 13.2% and regional level and in provinces where Group Prov. of Bergamo 22.4% 22.7% Prov. of Brescia 21.9% 22.7% banks have a more significant presence. Prov. of Como 6.3% 6.5% The figures are based on the latest available data from the Prov. of Lecco 6.3% 6.3% Bank of Italy relating to 31st March 2015. Prov. of Mantua 4.6% 5.5% Prov. of Milan 8.8% 9.1% Prov. of Monza Brianza 8.6% 8.5% The update shows a fall in some provinces Prov. of Pavia 12.9% 15.0% compared with the end of 2014, attributable partly Prov. of Sondrio 8.1% 8.2% Prov. of Varese 24.3% 24.3% to the impacts of the rationalisation action taken in Piedmont 6.8% 7.7% January 2015. Prov. of Alessandria 10.8% 11.5% Prov. of Cuneo 20.3% 22.7% National market share therefore fell to 5.1%, with Prov. of Novara 2.5% 3.5% Liguria 4.5% 5.5% shares higher than 10% in 13 provinces, together Prov. of Genoa 3.9% 4.3% with a substantial presence in Milan (approximately Prov. of Imperia 4.8% 5.7% 9%) and in Rome (4%). Prov. of La Spezia 6.5% 8.7% Prov. of Savona 4.3% 6.1% Central Italy 3.3% 3.3% Marches 7.3% 7.4% Prov. of Ancona 9.7% 9.6% Prov. of Fermo 10.7% 10.7% Prov. of Macerata 7.7% 8.1% Prov. of Pesaro and Urbino 4.9% 4.9% Latium 4.1% 4.3% Prov. of Rome 4.0% 4.1% Prov. of Viterbo 13.2% 14.1% South Italy 7.1% 7.7% Campania 5.3% 5.6% Prov. of Naples 4.8% 4.9% Prov. of Caserta 8.4% 9.3% Prov. of Salerno 6.1% 6.9% Calabria 18.3% 19.8% Prov. of Catanzaro 10.5% 12.2% Prov. of Cosenza 21.7% 23.1% Prov. of Crotone 14.3% 14.7% Prov. of Reggio Calabria 20.2% 20.9% Prov. of Vibo Valentia 19.4% 24.3% Basilicata 8.6% 11.8% Prov. of Potenza 8.6% 11.5% Prov. of Matera 8.6% 12.5% Apulia 7.3% 7.8% Prov. of Bari 9.3% 9.8% Prov. of Brindisi 9.6% 9.6% Prov. of Barletta Andria Trani 5.4% 7.8% Prov. of Taranto 8.4% 9.0% Total Italy 5.1% 5.4%
(*) Source Bank of Italy: Statistics Bulletin
30 Digital innovation
In the first half the UBI Banca Group continued with an important digital innovation project launched in 2014 that involved the following: • a new version of the Qui UBI internet banking platform for individual and small business customers (available for both PCs, with innovative “responsive” surfing and graphics, and also in apps for smartphones and tablets), which also includes the new CBILL service for online payment of bills from institutions and businesses adhering to this payment method and the UBI Money service for personal financial management; • the development of UBI PAY4, with continuous releases of updates to improve the user experience; • the introduction of online sales for additional products, including UBI PAY; • the launch, in May of an Instagram channel with the objective of acquiring new customers in the “young” target group.
One of the projects developed which became operational in 2015 regards “Remote Mortgage Specialists”, which constitutes a new way of offering mortgages to customers, and especially to those who come into contact with the bank through the new public domain website www.ubibanca.com, using the simulators, telephone, chat and email services to request information. The “Specialist” is a professional expert able to advise customers on how to find the most suitable mortgage to satisfy their specific requirements. The initiative was extended in May to include customers of the new IW Bank Spa which in this case provides full remote management of the relationship with the customer with remote initiation of the mortgage application processing and approval stages.
The marketing of a new range of IW Bank payment cards (credit, debit and prepaid) has also been launched and an important partnership was signed with the FISI (Italian Federation of winter sports), which further enhanced the value of the Enjoy SKI prepaid card.
Important digital advertising initiatives have been implemented to support the main activities carried out by the Group. More specifically, the distribution of the innovative UBI PAY app was supported with a multichannel and multiformat advertising campaign as follows: television commercials; announcements on the main national radio channels; a digital media campaign; pages and banners on the website www.ubibanca.com; video tutorials5. “Enjoy the Music” was launched for the “young” target Group, a programme specially for music loving credit and prepaid card holders, which allows them to purchase tickets at discounted prices and gain priority in access to events6. For the business world, the UBI Banca Group launched “A passion for doing business”, a series of interviews which give voice to business people who put “big ideas” into practice thanks to their passion as they bring values such as creativity, steadfastness and courage to their work. To support this, a digital media campaign was launched on external sites in addition to the Group website, the YouTube channel and UBI Banca’s Facebook page. Finally, the initiative “Cultivate the right idea” – which originated from co-operation between UBI Banca and Make a Change – is targeted at start-ups in the food and agriculture industries that generate social or environmental impacts. The digital advertising campaign involved external sites that are particularly attractive to the target groups in question, in addition to the www.ubibanca.com commercial website and UBI Banca’s Facebook page.
4 UBI PAY consists of a simple app, available for the three major mobile operating systems (Android, iOS and Windows Phone) and it allows users to: send funds to anyone on their telephone contacts over the Jiffy network, with an extremely simple user interface, comparable to sending an SMS; make online purchases with eCommerce Merchants using MasterPass, rendering the check-out process both simple and quick (one-click pay); make payments directly from NFC smartphones, simply by placing the phone next to the merchant's contactless POS terminal. In order to use UBI PAY, customers must be first registered for the services either at their local branch or online, have a Qui UBI internet banking account on which at least one of the three services is activated and have either a pre-paid Enjoy card or be a current account holder with one of the UBI Banca Group's banks. 5 In addition, an advertising initiative entitled “instant win” was launched for all those who download the app with the possibility of winning one Microsoft Lumia 535 smartphone per day. 6 The advertising campaign involved digital media – e.g. a landing page on TicketOne for the sale of tickets at discounted prices, videos on mobile devices, banners on major music and social media websites – as well as an update to the Group’s website and Facebook page, announcements in the literature used to launch various events and radio commercials.
31 Important new developments are also planned for the second half of 2015, including the introduction of new Qui UBI internet banking functions for individual and small business customers and new payment cards, the enhancement of the UBI Money service and the UBI PAY app, a new version of the Qui UBI Imprese corporate interbank banking service and the introduction of new simulators and online sales for additional products. The new digital services introduced for customers are also to be accompanied by evolved operational tools available to the distribution network (CRM tools) designed to improve the commercial service provided to customers (existing and potential) using a multichannel approach to the management of contacts. Again in the second half various updates will be developed for the website www.ubibanca.com which, operating in synergy with implementations for IW Bank, will be designed to enhance and improve the user experience of the website and to optimise it for search engines. The updates will also have the objective of making online advertising of products and services more effective, to be achieved partly through improved monitoring of the results achieved which will allow the tools and channels used to be optimised over time.
The continuous development and technological improvement of direct channels is not only a strategic tool for the acquisition of new customers and the management of relationships with the existing customer base, but at the same time it also contains operating costs. Furthermore, proper management of product and process innovation is particularly appreciated also by customers, as is confirmed by the results achieved in the first six months of the year: • users of the Qui UBI internet banking service grew overall by 5.7% to 1.41 million (1.34 million in December 2014). Growth continues to be driven by the performance of home banking (+6.2% to approximately 1.14 million users) and also by the Qui UBI Business service, users of which exceeded 168 thousand at the end of June (+7.7%)7; • the number of apps downloaded for the Mobile Banking service to navigate using tablets and smartphones (Apple, Android and Windows) grew by 51.8%; • over one fourth of payments into accounts in cash and cheques are now constantly carried out using the network of self-service facilities (approximately 2,150 ATMs and kiosks, of which over 300 of the evolved type); • 23.6% growth in credit transfers, payments and reloads compared with the same period in 2014, for a total of approximately €7 million transactions7; • over 61% of securities trades on regulated markets were performed via internet. The results for the online sales platform launched in November 2011 continue to be encouraging (applications completed online were up 14.7% and products sold were up 15%).
Payment cards8
Despite the difficult economic environment, the UBI Banca Group continues to be very active in the payment card business, on the one hand seeking the most innovative and up-to-date technological solutions and, on the other, through effective advertising initiatives to support the products and services offered. The range of cards and payment tools currently offered by the Group satisfies the requirements of all types of user, both individual and business. Similarly, the range of devices that allow card payments to be accepted (POS terminals) is complete and meets the highest technological standards. In detail: • individual customers can choose between debit cards, flexible credit cards (i.e. with the choice between either repayment of the balance or in instalments) and revolving and prepaid cards (which also come with an IBAN); • business customers, on the other hand, are offered business and corporate cards which vary according to the credit limit and the services as well as a complete range of technologically advanced payment acceptance systems (which include both physical and virtual POS terminals).
7 The figures relate to the network bank perimeter only. They therefore excluded IW Bank as at 30th June 2015 and UBI Banca Private Investment as at 31st December 2014. 8 The figures relate to the network bank perimeter only. They therefore excluded IW Bank as at 30th June 2015 and UBI Banca Private Investment as at 31st December 2014.
32 At the end of June a total of approximately 697 thousand credit cards existed issued by UBI Banca (Libra and Kalìa cards) and CartaSi, more or less unchanged compared with December (+0.2%). In terms of use, the data available for the first five months of 2015 nevertheless shows an overall decrease of 2.9% compared with the same period in the previous year, notwithstanding an increase of 5% in uses of the Libra card.
On the other hand, the success of growth in prepaid cards continued with total numbers issued reaching almost 456 thousand, up by 8.8% in the first half, driven by both the products currently issued: the Enjoy Card, the prepaid card with an associated IBAN (+9% to approximately €293 thousand cards) – and above all the Like Card, the prepaid card marketed since October 2013, with numerous additional and innovative services, designed for those who do not require the additional functionality of a card with an IBAN9 (+43.3% to more than 124 thousand cards). The success of prepaid cards is reflected in their use, up in the first five months of the year by 5.5% compared with the same period of the previous year.
Debit cards issued by the Group numbered approximately 1.6 million, an increase of 3% compared with the end of 2014. The overall trend for card use was also positive with an average year-on-year increase over the first five months of the year of 2.8% for the Bancomat network and 4.8% for PagoBancomat payments.
At the end of June 2015, the number of POS terminals installed by the UBI Banca Group had reached almost 66 thousand, up by 3.7% compared with December, partly due to the recent introduction of regulations that require the acceptance of payment cards for transactions for amounts greater than or equal to €30. The volumes transacted between January and May recorded an increase of 4.9% compared with the same period the year before. The range of types of POS terminals was broadened in 2014 to include Mobile POS terminals, to accept card payments while on the move10.
Subscriptions to the UBI PAY service had reached almost €100 thousand at the end of the first half.
9 The card is equipped with IBAN technology which allows the receipt of credit transfers only for the purpose of reloads. 10 Mobile POS terminals require no installation, but connect directly to a retailer’s smartphone or tablet (by means of Bluetooth) and by using a new UBI PAY Business app, they allow payments to be accepted from credit, debit and prepaid cards on the PagoBancomat network and on the main international networks (Visa, MasterCard, V PAY, Maestro, American Express, Diners, JCB), using any type of technology (magnetic stripe, chip and contactless).
33 Human resources
The composition of Group staff and changes in the first half
Group staff
Employees actually in service Employees on the payroll
30.6.2015 31.12.2014 Changes 30.6.2014 30.6.2015 31.12.2014 Changes Number A B A-B C D E D-E
Banca Popolare di Bergamo Spa 3,625 3,614 11 3,713 3,670 3,666 4 Banco di Brescia Spa 2,383 2,434 -51 2,565 2,388 2,442 -54 Banca Carime Spa 1,836 1,935 -99 1,946 1,984 2,093 -109 UBI Banca Scpa 1,682 1,675 7 1,653 2,463 2,487 -24 Banca Regionale Europea Spa 1,653 1,765 -112 1,781 1,796 1,857 -61 Banca Popolare Commercio e Industria Spa 1,568 1,607 -39 1,617 1,741 1,786 -45 Banca Popolare di Ancona Spa 1,554 1,588 -34 1,608 1,636 1,676 -40 Banca di Valle Camonica Spa 349 353 -4 354 331 338 -7 IW Bank Spa* 313 348 -35 350 300 321 -21 UBI Banca International Sa 96 101 -5 101 91 95 -4 TOTAL FOR BANKS 15,059 15,420 -361 15,688 16,400 16,761 -361
UBI Sistemi e Servizi SCpA 1,979 1,983 -4 1,973 814 822 -8 UBI Leasing Spa 218 224 -6 222 210 212 -2 Prestitalia Spa 170 152 18 153 79 71 8 UBI Pramerica SGR Spa 149 151 -2 150 118 118 - UBI Factor Spa 135 136 -1 139 126 128 -2 BPB Immobiliare Srl** 47 8 39 52 47 4 43 UBI Academy SCRL 15 15 - 15 - - - UBI Fiduciaria Spa*** 7 22 -15 22 3 17 -14 UBI Trustee Sa 5 5 - 4 4 4 - UBI Management Company Sa 4 4 - 5 3 3 - Centrobanca Sviluppo Impresa SGR Spa**** - 1 -1 2 - - - S.B.I.M. Spa 1 1 - 1 - - - Coralis Rent Srl - in liquidation - 3 -3 3 - - - TOTAL 17,789 18,125 -336 18,429 17,804 18,140 -336 Workers on staff leasing contracts - - - 1 - - -
TOTAL STAFF 17,789 18,125 -336 18,430 On secondment outside the Group - out 22 22 - 22 - in 7 7 - TOTAL WORKFORCE 17,811 18,147 -336 18,452 17,811 18,147 -336
* On 25th May 2015 the merger of IW Bank into UBI Banca Private Investment took effect. The new company took the name IW Bank Spa. ** At the end of the first half, BPB Immobiliare staff also included personnel appointed on seasonal contracts that were not banking industry contracts: 43 as at 30th June 2015 and 44 as at 30th June 2014. *** On 30th April 2015 the transfer was completed of UBI Fiduciaria Spa operations to Unione Fiduciaria Spa, which explains the decrease in actual employees and employees on the payroll with respect to the comparative periods; **** Only two persons were working at the company as at 30th June 2015, who were on partial secondment from other Group companies and were therefore not included among employees actually in service.
The table above gives details for each company of the actual distribution of ordinary employees (workers on permanent and temporary contracts and on apprenticeship contracts) as at 30th June 2015, adjusted to take account of secondments to and from other entities within or external to the Group (column A) compared with the position at the end of 2014 (column B) and the position as at 30th June 2014, (column C), both restated on a consistent basis. Column D, on the other hand, gives details for each company of the number of employees on the payroll as at 30th June 2015 compared with the end of 2014, also restated on a consistent basis (column E).
Compared with the previous Interim Consolidated Financial Report the figures as at 30th June 2014 have been adjusted as follows: ó the figure for Banca Popolare di Ancona staff has been decreased by one due to the annulment of a reinstatement that occurred in the first quarter of 2014, following the final outcome of the relative dispute. ó UBI Gestioni Fiduciarie Sim Spa has been excluded from calculations of Group staff numbers following the disposal of the company completed on 12th January 2015. Since the Group employees on secondment at the company (three staff) were working in a company outside the Group, the number of staff “on secondment outside the Group – out” for the same comparative dates increased at the same time.
Staff numbers have been adjusted with respect to the figures published as at 31st December 2014 in relation to the disposal of the trust company reported above.
34 At the end of the first half of 2015 the total staff of the UBI Banca Group numbered 17,789 compared with 18,125 at the end of 2014 (restated on a consistent basis), with an overall decrease during the period of 336 staff. Changes occurring in the period reflect staff leaving on a voluntary basis under the Framework Agreement of 26th November 2014, under which 500 redundancies were planned, of which 93% had already taken place during the first half of 20151. The workforce decreased as a consequence in all the main companies of the Group with the following exceptions: ó Banca Popolare di Bergamo, recorded the following which offset the redundancies mentioned above: new recruits consistent with the provisions of the Framework Agreement, the recruitment of temporary seasonal staff, the partial return of staff affected by transitory mobility to support centralisation at UBI Sistemi e Servizi of customer assistance activities, which took part in the third quarter of 2014; ó BPB Immobiliare, appointed 43 staff with seasonal contracts that were not banking industry contracts; ó UBI Banca, affected by the centralisation of some IW Bank activities outsourced to it (risk control, compliance and anti-money-laundering, administration, financial reporting, tax and management control, treasury and securities portfolio management); ó Prestitalia, in relation to the strengthening of complaints/risk control units and distribution network management.
As shown in the table giving Employees on the payroll figures for type of contract relating to staff with employee Number 30.6.2015 31.12.2014 Change contracts, in the first six months Total employees 17,804 18,140 -336 of the year staff on permanent of which: permanent 17,594 17,943 -349 contracts leaving were only on temporary contracts 202 153 49 marginally offset by the increase apprentices (*) 8 44 -36 in staff on temporary contracts (*) Contract for young people between the ages of 18 and 29, by which they acquire a qualification (which was in fact almost totally through training at work which provides them with specific occupational skills. The duration in relation to seasonal varies from a minimum of 18 months to a maximum of 48 months. recruitment at BPB Immobiliare).
More specifically, the overall decrease of 336 staff that occurred in the period is a result of 625 staff leaving (581 on permanent contracts, 42 on temporary contracts and two on apprenticeships) and of 289 new recruits (94 permanent contracts and 195 on temporary contracts)2.
Finally, with regard to the Composition of staff in Group Banks by rank composition of bank staff by rank, redundancies relating to Number 30.6.2015 % 31.12.2014 % the Framework Agreement of 26th November 2014 affected all Senior managers 301 1.8% 315 1.9% Middle managers 3rd and 4th level 2,862 17.5% 3,017 18.0% ranks, which left the relative Middle managers 1st and 2nd level 3,940 24.0% 3,976 23.7% percentage composition unaltered 3rd Professional Area (office staff) 9,115 55.6% 9,266 55.3% with respect to the comparative 1st and 2nd Professional Area (other staff) 182 1.1% 187 1.1% periods. TOTAL FOR BANKS 16,400 100.0% 16,761 100.0%
In terms of full time equivalents (FTEs), in consideration of the part-time effect at the time, at the end of the first half Group staff totalled 17,260.86 FTEs compared with 17,664.94 FTEs at the end of 2014.
* * *
Group staff numbers grew in the period April-June 2015 by 72, the aggregate result of an increase in the network bank workforce and a reduction at other Group companies and at UBI Sistemi e Servizi in particular.
1 With regard to the remaining 7%, these staff are expected to leave during the course of 2015. 2 The figures shown do not include 138 “stabilisations” (transformations of contracts from temporary to permanent) that occurred in the first half, in line with the provisions of trade union agreements in recent years.
35 The network banks recorded new staff in relation to both recruitment under the Framework Agreement and to normal seasonal recruitment as well as a result of the return of staff affected by transitory mobility to UBI Sistemi e Servizi for the centralisation of customer assistance activities already mentioned.
Trade union relations
As already reported in the previous quarterly report, at national level on 31st March 2015 a proposed renewal of the national trade union agreement for the banking sector was signed between the various trade unions and the Italian Banking Association. Workers assemblies were then held in May and until the beginning of June to illustrate and approve the contents of the agreement, which was finally formalised between the parties to it on 8th July 2015. Concrete application of it will therefore take place in the second half of 2015. On 13th July 2015 an agreement was also signed for the renewal of the national labour contract for senior managers of banks.
At company level – in addition to negotiations connected with operations to rationalise Group structure for which the section “Significant events in the first half” may be consulted – we report the resumption on 15th and 18th May of trade union meetings held to verify compliance with the latest agreements reached. These had been suspended for several months to support the national industrial dispute for the renewal of the national labour contract.
Meetings with trade union organisations commenced at the beginning of June in the network banks, at the Parent UBI Banca, UBI Sistemi e Servizi and the product companies in order to sign agreements for the payment of company bonuses for the financial year 2014. Having examined the performance of companies in the period and taken account of the overall economic situation and that specific to the banking industry, it was agreed, as in the previous three years, that it would be best to employ different and innovative instruments with, in addition to a cash payment, also a “welfare plan option” which will allow staff to allocate the contribution due to them to finance services of a social nature (e.g. educational expenses, or an additional contribution to the company pension fund). The negotiations were concluded positively by the middle of July at almost all the Group banks and companies involved.
Training
Training activity conducted in the first six months of 2015 was designed mainly to constantly improve specialist skills in the distribution network for all the principal roles, in addition to new targeted initiatives in the lending field:
• training support for the development of the customer service model and for the diffusion of a "culture of quality", by means of “on boarding” initiatives for the main commercial roles in the distribution network (Affluent and Small Business Account Managers, Branch Managers, SME Developers and Customer Contacts in the retail segment; Corporate, Private and Wealth Bankers for the “Private & Corporate Unity”, corporate and private banking segment), together with action targeted at all Affluent Account managers on the subject of acquiring new customers. The programme for the qualification of staff as future Branch Managers also continued; • the first pilot “assessment test” (voluntary) for Small Business and Affluent Account Managers, with the objective of providing increasingly more useful and better targeted training courses designed to improve the knowledge of every account manager; • support for digital innovation and the development of skills in the new sales channels and internationalisation;
36 • improvement of the knowledge of English through the creation of a new online platform with a primary language training school for approximately 600 Group staff; • development of abilities and behaviour through a new edition of the "University Masters in Bank Management" in partnership with MIP, the Milan Polytechnic School of Management; the continuation of the young talents project with mentoring and business case meetings as well as participation in the “Summer School” (I.S.E.O.); inclusiveness programmes. Training on role abilities and behaviour for management staff through team building and methods with a strong emotional impact; • facilitation of active learning of new regulations, by means of teacher-user interaction with reference to the concrete application of new regulations (classification of default loans – forbearance, update on anti-money laundering and the “231” administrative liability model, MiFID); • training support for the merger of IW Bank and UBI Banca Private Investment, by means of classroom training and periods of job shadowing for the purposes of integrating the IT and commercial systems.
Training activity by subject area in the first half of 2015 From a quantitative viewpoint, over 35 Total FY 2014 Remote Classroom Internship person/days of % Total thousand training training training person/days of % days were delivered in Subject area training Insurance 2,779 1,226 2,250 6,255 17.7% 27,280 33.7% the first half, Commercial and Finance 9,588 843 2,734 13,165 37.3% 16,439 20.2% compared with a Credit 5,183 292 301 5,776 16.3% 4,137 5.1% target of Managerial-Behavioural 2,337 1,032 401 3,770 10.7% 14,009 17.2% Regulatory 1,630 2,903 133 4,666 13.2% 14,149 17.4% approximately 80 Operational and other subjects 464 214 1,030 1,708 4.8% 5,217 6.4% thousand person days TOTAL 21,981 6,510 6,849 35,340 100.0% 81,231 100.0% set for the whole of 2015.
In addition to the continuation of the projects mentioned above, new initiatives in the following areas are planned for the second half of the year: • management training, focused on: effective communication, team leading and appetite for change; • School for Instructors, to continue the programme to continuously qualify and update the over 500 instructor staff; • “Agility Evolution” training for “Private & Corporate Unity” staff to make best practices a common factor in the distribution network with a view to increasing customer satisfaction; • the creation of the first online social learning community for the approximately 400 Affluent Gold Account Managers in the Group; • regulatory updates (IVASS – the new insurance authority, Anti Money-Laundering and the “231” administrative liability model).
Internal communication
The project “A New Internal Communication” was carried forward in the first half of 2015, with the implementation of the “2015 Internal communication plan”, designed to identify and spread key messages and integrated programming of important activities and internal communication events agreed with the senior management of the Parent and Group companies. The “annual internal communication programme” is intended as a structured and planned opportunity to improve the effectiveness of messages, partly by defining specific campaigns on subjects identified as priorities and by organising and increasing opportunities for listening to people and acquiring feedback.
37 An increase in social collaboration was recorded in the period with the creation of new communities.
The corporate voluntary initiative “Donate one day” was extended to cover the entire Group, with a proposal for many solidarity projects launched with nonprofit organisations present throughout the country.
The traditional annual conventions of the retired staff associations of BPB-CV and BPCI were held at Salsomaggiore during which an update was given on Group strategies and on the 2014 consolidated results.
On the publications front, daily online programming of articles for YOUBI Magazine continued – the section of the UBILife corporate portal dedicated to the Group’s magazine – with an appreciable increase in the number of visits and comments on articles thanks to the presence of a blog that is always available. Planning carried out as part of the Internal Communication Programme involved the introduction of a new online newsletter written by individual General Managers specially designed for the relative different readerships. The first publication took place at the beginning of the year and regarded 2014 financial results and prospects and strategies for 2015, while the second will regard first half results and will contain information on performance in the period with a focus on the action priorities for each individual company. UBIClick videos will be presented when annual half-year results are published in which the Chief Executive Officer comments on Group results. Again this year, the hardcopy magazine Almanacco YOUBI was published in April, distributed not only to employees but also to registered shareholders who took part in the UBI Banca shareholders’ meeting held on 25th April.
Finally, with regard to projects scheduled for the second half, new campaigns and contests are planned designed to increase staff participation in opportunities for meetings and involvement concerning both issues connected with professional life and also areas of interest outside work. Finally we report the creation of a four monthly newsletter – UBI News – for board members of Group banks and companies.
38 Reclassified consolidated financial statements, reclassified income statement net of the most significant non-recurring items and reconciliation schedules
Reclassified consolidated balance sheet
30.6.2015 31.12.2014 Changes 30.6.2014 Changes % changes % changes
A/B A/C Figures in thousands of euro A B A-B C A-C
ASSETS 10. Cash and cash equivalents 484,055 598,062 -114,007 -19.1% 486,807 -2,752 -0.6% 20. Financial assets held for trading 1,338,170 1,420,506 -82,336 -5.8% 2,168,661 -830,491 -38.3% 30. Financial assets designated at fair value 197,223 193,167 4,056 2.1% 192,408 4,815 2.5% 40. Available-for-sale financial assets 16,799,280 18,554,956 -1,755,676 -9.5% 16,742,576 56,704 0.3% 50. Held-to-maturity investments 3,535,692 3,576,951 -41,259 -1.2% 3,049,841 485,851 15.9% 60. Loans and advances to banks 3,191,584 3,340,415 -148,831 -4.5% 4,078,892 -887,308 -21.8% 70. Loans and advances to customers 85,340,026 85,644,223 -304,197 -0.4% 87,119,396 -1,779,370 -2.0% 80. Hedging derivatives 545,576 649,250 -103,674 -16.0% 458,998 86,578 18.9% 90. Fair value change in hedged financial assets (+/-) 59,108 64,124 -5,016 -7.8% 47,680 11,428 24.0% 100. Equity investments 247,779 246,250 1,529 0.6% 295,970 -48,191 -16.3% 120. Property, plant and equipment 1,755,974 1,729,107 26,867 1.6% 1,764,564 -8,590 -0.5% 130. Intangible assets 1,760,006 1,776,925 -16,919 -1.0% 2,896,274 -1,136,268 -39.2% of which: goodwill 1,465,260 1,465,260 - - 2,511,679 -1,046,419 -41.7% 140. Tax assets 2,753,059 2,991,600 -238,541 -8.0% 2,566,975 186,084 7.2% Non-current assets and disposal groups held for 150. sale 11,286 69,893 -58,607 -83.9% 188,358 -177,072 -94.0% 160. Other assets 1,434,917 931,275 503,642 54.1% 1,168,828 266,089 22.8% Total assets 119,453,735 121,786,704 -2,332,969 -1.9% 123,226,228 -3,772,493 -3.1%
LIABILITIES AND EQUITY 10. Due to banks 9,049,928 13,292,723 -4,242,795 -31.9% 15,964,805 -6,914,877 -43.3% 20. Due to customers 55,331,195 51,616,920 3,714,275 7.2% 47,126,528 8,204,667 17.4% 30. Debt securities issued 38,996,157 41,590,349 -2,594,192 -6.2% 43,049,073 -4,052,916 -9.4% 40. Financial liabilities held for trading 647,508 617,762 29,746 4.8% 496,946 150,562 30.3% 60. Hedging derivatives 788,565 1,009,092 -220,527 -21.9% 623,610 164,955 26.5% 80. Tax liabilities 440,745 630,223 -189,478 -30.1% 620,062 -179,317 -28.9% 100. Other liabilities 3,132,513 1,994,340 1,138,173 57.1% 3,130,877 1,636 0.1% 110. Post-employment benefits 339,894 391,199 -51,305 -13.1% 378,320 -38,426 -10.2% 120. Provisions for risks and charges: 291,748 285,029 6,719 2.4% 303,897 -12,149 -4.0% a) pension and similar obligations 71,515 80,529 -9,014 -11.2% 81,134 -9,619 -11.9% b) other provisions 220,233 204,500 15,733 7.7% 222,763 -2,530 -1.1% 140.+ 170.+180.+ Share capital, share premiums, reserves, valuation 190.+ 200. reserves and treasury shares 9,762,383 10,529,815 -767,432 -7.3% 10,603,241 -840,858 -7.9% 210. Non-controlling interests 548,656 555,019 -6,363 -1.1% 822,677 -274,021 -33.3% 220. Profit (loss) for the period/year 124,443 -725,767 n.s. n.s. 106,192 18,251 17.2% Total liabilities and equity 119,453,735 121,786,704 -2,332,969 -1.9% 123,226,228 -3,772,493 -3.1%
39 Reclassified consolidated quarterly balance sheets
30.6.2015 31.3.2015 31.12.2014 30.9.2014 30.6.2014 31.3.2014 Figures in thousands of euro
ASSETS 10. Cash and cash equivalents 484,055 466,288 598,062 497,623 486,807 492,398 20. Financial assets held for trading 1,338,170 1,527,401 1,420,506 1,014,902 2,168,661 3,900,044 30. Financial assets designated at fair value 197,223 198,365 193,167 193,637 192,408 193,692 40. Available-for-sale financial assets 16,799,280 17,904,652 18,554,956 18,331,820 16,742,576 16,030,885 50. Held-to-maturity investments 3,535,692 3,528,010 3,576,951 3,076,556 3,049,841 3,113,263 60. Loans and advances to banks 3,191,584 3,331,195 3,340,415 3,329,046 4,078,892 4,009,183 70. Loans and advances to customers 85,340,026 84,634,175 85,644,223 84,946,817 87,119,396 87,094,749 80. Hedging derivatives 545,576 689,227 649,250 615,897 458,998 323,782 90. Fair value change in hedged financial assets (+/-) 59,108 66,716 64,124 53,668 47,680 36,493 100. Equity investments 247,779 254,129 246,250 314,143 295,970 427,438 120. Property, plant and equipment 1,755,974 1,711,351 1,729,107 1,741,474 1,764,564 1,780,575 130. Intangible assets 1,760,006 1,767,675 1,776,925 2,883,252 2,896,274 2,903,371 of which: goodwill 1,465,260 1,465,260 1,465,260 2,511,679 2,511,679 2,511,679 140. Tax assets 2,753,059 2,927,911 2,991,600 2,566,942 2,566,975 2,824,368
150. Non-current assets and disposal groups held for sale 11,286 68,798 69,893 195,469 188,358 79,769 160. Other assets 1,434,917 847,697 931,275 777,806 1,168,828 773,252 Total assets 119,453,735 119,923,590 121,786,704 120,539,052 123,226,228 123,983,262
LIABILITIES AND EQUITY
10. Due to banks 9,049,928 12,360,302 13,292,723 15,588,229 15,964,805 15,397,770 20. Due to customers 55,331,195 50,817,925 51,616,920 45,581,825 47,126,528 46,366,664 30. Debt securities issued 38,996,157 40,324,315 41,590,349 42,271,880 43,049,073 44,477,537 40. Financial liabilities held for trading 647,508 740,247 617,762 586,243 496,946 1,409,672 60. Hedging derivatives 788,565 1,217,816 1,009,092 806,325 623,610 528,059 80. Tax liabilities 440,745 735,132 630,223 732,156 620,062 908,372 100. Other liabilities 3,132,513 2,435,841 1,994,340 2,673,720 3,130,877 2,704,318 110. Post-employment benefits 339,894 368,186 391,199 383,871 378,320 387,412 120. Provisions for risks and charges: 291,748 289,799 285,029 282,886 303,897 320,253 a) pension and similar obligations 71,515 79,457 80,529 80,000 81,134 76,251 b) other provisions 220,233 210,342 204,500 202,886 222,763 244,002 140.+ 170.+180.+ Share capital, share premiums, reserves, valuation 190.+ 200. reserves and treasury shares 9,762,383 10,018,158 10,529,815 10,650,908 10,603,241 10,609,347 210. Non-controlling interests 548,656 539,941 555,019 831,177 822,677 815,723 220. Profit (loss) for the period 124,443 75,928 -725,767 149,832 106,192 58,135 Total liabilities and equity 119,453,735 119,923,590 121,786,704 120,539,052 123,226,228 123,983,262
40 Reclassified consolidated income statement
1H 2015 1H 2014 Changes % changes 2nd Quarter 2nd Quarter Changes % changes FY 2014 2015 2014
Figures in thousands of euro A B A-B A/B CD C-D C/D E
10.-20. Net interest income 847,148 908,528 (61,380) (6.8%) 416,543 454,056 (37,513) (8.3%) 1,818,387 of which: effects of the purchase price allocation (13,618) (14,238) (620) (4.4%) (7,115) (7,782) (667) (8.6%) (28,540) Net interest income excluding the effects of the PPA 860,766 922,766 (62,000) (6.7%) 423,658 461,838 (38,180) (8.3%) 1,846,927 70. Dividends and similar income 5,319 8,868 (3,549) (40.0%) 4,786 8,081 (3,295) (40.8%) 10,044 Profits of equity-accounted investees 19,573 20,662 (1,089) (5.3%) 13,405 9,763 3,642 37.3% 37,015 40.-50. Net fee and commission income 669,078 609,693 59,385 9.7% 327,886 309,583 18,303 5.9% 1,226,587 of which performance fees 11,808 3,475 8,333 n.s. 4,934 2,824 2,110 74.7% 16,951 80.+90.+ Net income from trading, hedging and disposal/repurchase activities and from assets/liabilities designated at 100.+110. fair value 111,098 136,642 (25,544) (18.7%) 53,074 74,031 (20,957) (28.3%) 199,658 220. Other net operating income/expense 56,675 51,496 5,179 10.1% 27,186 26,950 236 0.9% 117,939 Operating income 1,708,891 1,735,889 (26,998) (1.6%) 842,880 882,464 (39,584) (4.5%) 3,409,630 Operating income excluding the effects of the PPA 1,722,509 1,750,127 (27,618) (1.6%) 849,995 890,246 (40,251) (4.5%) 3,438,170 180.a Staff costs (654,773) (647,943) 6,830 1.1% (319,843) (321,849) (2,006) (0.6%) (1,301,779) 180.b Other administrative expenses (312,953) (311,214) 1,739 0.6% (165,021) (158,598) 6,423 4.0% (635,034) 200.+210. Depreciation, amortisation and net impairment losses on property, plant and equipment and intangible assets (77,778) (85,196) (7,418) (8.7%) (39,280) (42,663) (3,383) (7.9%) (171,409) of which: effects of the purchase price allocation (6,590) (9,799) (3,209) (32.7%) (3,316) (4,888) (1,572) (32.2%) (21,416) Depreciation, amortisation and net impairment losses on property, plant and equipment and intangible assets excluding the effects of the PPA (71,188) (75,397) (4,209) (5.6%) (35,964) (37,775) (1,811) (4.8%) (149,993) Operating expenses (1,045,504) (1,044,353) 1,151 0.1% (524,144) (523,110) 1,034 0.2% (2,108,222) Operating expenses excluding the effects of the PPA (1,038,914) (1,034,554) 4,360 0.4% (520,828) (518,222) 2,606 0.5% (2,086,806) Net operating income 663,387 691,536 (28,149) (4.1%) 318,736 359,354 (40,618) (11.3%) 1,301,408 Net operating income excluding the effects of the PPA 683,595 715,573 (31,978) (4.5%) 329,167 372,024 (42,857) (11.5%) 1,351,364 130.a Net impairment losses on loans (389,099) (429,101) (40,002) (9.3%) (198,907) (230,475) (31,568) (13.7%) (928,617) 130. b+c+d Net impairment losses on other financial assets and liabilities (3,348) (2,001) 1,347 67.3% (2,382) (3,674) (1,292) (35.2%) (8,650) 190. Net provisions for risks and charges (29,135) (2,702) 26,433 n.s. (24,816) 7,361 (32,177) n.s. (9,074) 240.+270. Profits (losses) from the disposal of equity investments 83 (430) 513 n.s. 392 230 162 70.4% 94,007 Pre-tax profit from continuing operations 241,888 257,302 (15,414) (6.0%) 93,023 132,796 (39,773) (30.0%) 449,074 Pre-tax profit from continuing operations excluding the effects of the PPA 262,096 281,339 (19,243) (6.8%) 103,454 145,466 (42,012) (28.9%) 499,030 290. Taxes on income for the period/year from continuing operations (99,147) (135,368) (36,221) (26.8%) (37,149) (76,666) (39,517) (51.5%) (186,926) of which: effects of the purchase price allocation 6,699 9,683 (2,984) (30.8%) 3,458 5,930 (2,472) (41.7%) 16,523 330. Profit for the period/year attributable to non-controlling interests (17,108) (15,742) 1,366 8.7% (7,359) (8,073) (714) (8.8%) (28,918) of which: effects of the purchase price allocation 1,163 1,288 (125) (9.7%) 604 565 39 6.9% 2,754 Profit for the year/period attributable to the shareholders of the Parent before redundancies and impairment excluding the effects of the PPA 137,979 119,258 18,721 15.7% 54,884 54,232 652 1.2% 263,909 Profit for the year/period attributable to the shareholders of the Parent before redundancies and impairment 125,633 106,192 19,441 18.3% 48,515 48,057 458 1.0% 233,230 180.a Redundancy expenses net of taxes and non-controlling interests (1,190) - 1,190 n.s. - - - - (76,311)
200.+ Impairment losses on goodwill, finite useful life intangible assets and property, plant and equipment net of 210.+260. taxes and non-controlling interests ------(882,686)
340. Profit (loss) for the year/period attributable to the shareholders of the Parent 124,443 106,192 18,251 17.2% 48,515 48,057 458 1.0% (725,767)
Total impact of the purchase price allocation on the income statement (12,346) (13,066) (720) (5.5%) (6,369) (6,175) 194 3.1% (30,679)
41 Reclassified consolidated quarterly income statements
2015 2014
Figures in thousands of euro 2nd Quarter 1st Quarter 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter
10.-20. Net interest income 416,543 430,605 442,074 467,785 454,056 454,472 of which: effects of the purchase price allocation (7,115) (6,503) (7,312) (6,990) (7,782) (6,456) Net interest income excluding the effects of the PPA 423,658 437,108 449,386 474,775 461,838 460,928 70. Dividends and similar income 4,786 533 800 376 8,081 787 Profits of equity-accounted investees 13,405 6,168 8,198 8,155 9,763 10,899 40.-50. Net fee and commission income 327,886 341,192 318,392 298,502 309,583 300,110 of which performance fees 4,934 6,874 10,710 2,766 2,824 651
80.+90.+ Net income from trading, hedging and disposal/repurchase 100.+110. activities and from assets/liabilities designated at fair value 53,074 58,024 49,156 13,860 74,031 62,611 220. Other net operating income/expense 27,186 29,489 33,418 33,025 26,950 24,546 Operating income 842,880 866,011 852,038 821,703 882,464 853,425 Operating income excluding the effects of the PPA 849,995 872,514 859,350 828,693 890,246 859,881 180.a Staff costs (319,843) (334,930) (325,142) (328,694) (321,849) (326,094) 180.b Other administrative expenses (165,021) (147,932) (176,742) (147,078) (158,598) (152,616) Depreciation, amortisation and net impairment losses on 200.+210. property, plant and equipment and intangible assets (39,280) (38,498) (43,716) (42,497) (42,663) (42,533) of which: effects of the purchase price allocation (3,316) (3,274) (6,648) (4,969) (4,888) (4,911) Depreciation, amortisation and net impairment losses on property, plant and equipment and intangible assets excluding the effects of the PPA (35,964) (35,224) (37,068) (37,528) (37,775) (37,622) Operating expenses (524,144) (521,360) (545,600) (518,269) (523,110) (521,243) Operating expenses excluding the effects of the PPA (520,828) (518,086) (538,952) (513,300) (518,222) (516,332) Net operating income 318,736 344,651 306,438 303,434 359,354 332,182 Net operating income excluding the effects of the PPA 329,167 354,428 320,398 315,393 372,024 343,549 130.a Net impairment losses on loans (198,907) (190,192) (302,466) (197,050) (230,475) (198,626)
130. b+c+d Net impairment losses on other financial assets and liabilities (2,382) (966) (6,382) (267) (3,674) 1,673 190. Net provisions for risks and charges (24,816) (4,319) (5,123) (1,249) 7,361 (10,063) 240.+270. Profits (losses) from the disposal of equity investments 392 (309) 94,356 81 230 (660)
Pre-tax profit from continuing operations 93,023 148,865 86,823 104,949 132,796 124,506 Pre-tax profit from continuing operations excluding the effects of the PPA 103,454 158,642 100,783 116,908 145,466 135,873 290. Taxes on income for the period from continuing operations (37,149) (61,998) 557 (52,115) (76,666) (58,702) of which: effects of the purchase price allocation 3,458 3,241 4,781 2,059 5,930 3,753
310. Post-tax profit (loss) from discontinued operations ------330. Profit for the period attributable to non-controlling interests (7,359) (9,749) (3,982) (9,194) (8,073) (7,669) of which: effects of the purchase price allocation 604 559 599 867 565 723 Profit for the period attributable to the shareholders of the Parent before redundancies and impairment excluding the effects of the PPA 54,884 83,095 91,978 52,673 54,232 65,026 Profit for the period attributable to the shareholders of the Parent before redundancies and impairment 48,515 77,118 83,398 43,640 48,057 58,135 Redundancy expenses net of taxes and non-controlling 180.a interests - (1,190) (76,311) - - - Impairment losses on goodwill, finite useful life intangible 200.+ assets and property, plant and equipment net of taxes and 210.+260. non-controlling interests - - (882,686) - - - Profit (loss) for the period attributable to the 340. shareholders of the Parent 48,515 75,928 (875,599) 43,640 48,057 58,135
Total impact of the purchase price allocation on the income statement (6,369) (5,977) (8,580) (9,033) (6,175) (6,891)
42 Reclassified consolidated income statement net of the most significant non-recurring items
1H 2015 1H 2014 net of non- net of non- Changes % changes recurring items recurring items
Figures in thousands of euro
Net interest income (including the effects of the PPA) 847,148 908,528 (61,380) (6.8%) Dividends and similar income 5,319 8,868 (3,549) (40.0%) Profits of equity-accounted investees 19,573 20,662 (1,089) (5.3%) Net fee and commission income 669,078 609,693 59,385 9.7% of which performance fees 11,808 3,475 8,333 n.s. Net income from trading, hedging and disposal/repurchase activities and from assets/liabilities designated at fair value 111,098 136,642 (25,544) (18.7%) Other net operating income/expense 56,675 51,496 5,179 10.1%
Operating income (including the effects of the PPA) 1,708,891 1,735,889 (26,998) (1.6%) Staff costs (654,773) (647,943) 6,830 1.1% Other administrative expenses (305,649) (311,214) (5,565) (1.8%) Depreciation, amortisation and net impairment losses on property, plant and equipment and intangible assets (including the effects of PPA) (77,778) (85,196) (7,418) (8.7%)
Operating expenses (including the effects of the PPA) (1,038,200) (1,044,353) (6,153) (0.6%)
Net operating income (including the effects of the PPA) 670,691 691,536 (20,845) (3.0%) Net impairment losses on loans (389,099) (429,101) (40,002) (9.3%) Net impairment losses on other financial assets and liabilities 3,676 (1,289) 4,965 n.s. Net provisions for risks and charges (29,135) (2,702) 26,433 n.s. Profits from the disposal of equity investments 546 460 86 18.7% Pre-tax profit from continuing operations (including the effects of the PPA) 256,679 258,904 (2,225) (0.9%) Taxes on income for the year from continuing operations (103,433) (111,321) (7,888) (7.1%) Profit for the year attributable to non-controlling interests (17,272) (16,756) 516 3.1%
Profit for the year attributable to the shareholders of the Parent 135,974 130,827 5,147 3.9%
43 Reclassified consolidated income statement net of the most significant non-recurring items: details
non-recurring items non-recurring items
Change in the Impairment s ubstitute tax IW Bank and Redundancy 1H 2015 Adjustment to Impact of the 1H 2014 losses and on the UBI Banca expenses net of non- the sales price change in the net of non- 1H 2015 Disposal of recoveries in 1H 2014 valuation of Impairment Private (purs. to 4th recurring of Banque de IRAP tax rate on recurring equity value on the profit of AFS Investment February items Dépôts et de prior year items investments shares, bonds sharing securities integration 2015 Gestion Sa deferred tax and units in stakes held in costs Agreement) (Switzerland) provisions UCITS (AFS) the Bank of Figures in thousands of euro Italy
Net interest income (including the effects of the PPA) 847,148 847,148 908,528 908,528 Dividends and similar income 5,319 5,319 8,868 8,868 Profits of equity-accounted investees 19,573 19,573 20,662 20,662 Net fee and commission income 669,078 669,078 609,693 609,693 Net income from trading, hedging and disposal/repurchase activities and from assets/liabilities designated at fair value 111,098 111,098 136,642 136,642 Other net operating income/expense 56,675 56,675 51,496 51,496 Operating income (including the effects of the PPA) 1,708,891 - - - - 1,708,891 1,735,889 - - - - 1,735,889 Staff costs (654,773) (654,773) (647,943) (647,943) Other administrative expenses (312,953) 7,304 (305,649) (311,214) (311,214) Depreciation, amortisation and net impairment losses on property, plant and equipment and intangible assets (including the effects of PPA) (77,778) (77,778) (85,196) (85,196) Operating expenses (including the effects of the PPA) (1,045,504) - - 7,304 - (1,038,200) (1,044,353) - - - - (1,044,353) Net operating income (including the effects of the PPA) 663,387 - - 7,304 - 670,691 691,536 - - - - 691,536 Net impairment losses on loans (389,099) (389,099) (429,101) (429,101) Net impairment losses on other financial assets and liabilities (3,348) 7,024 3,676 (2,001) 712 (1,289) Net provisions for risks and charges (29,135) (29,135) (2,702) (2,702) Profits from the disposal of equity investments 83 463 546 (430) 890 460 Pre-tax profit from continuing operations (including the effects of the PPA) 241,888 463 7,024 7,304 - 256,679 257,302 890 - - 712 258,904 Taxes on income for the period from continuing operations (99,147) 5 (1,875) (2,416) (103,433) (135,368) 4,482 19,565 (111,321) Profit for the period attributable to non-controlling interests (17,108) (1) (163) (17,272) (15,742) (826) (8) (180) (16,756) Profit for the period attributable to the shareholders of the Parent before redundancy expenses 125,633 468 5,148 4,725 - 135,974 106,192 890 3,656 19,557 532 130,827 Redundancy expenses net of taxes and non-controlling interests (1,190) 1,190 - - -
Profit for the period attributable to the shareholders of the Parent 124,443 468 5,148 4,725 1,190 135,974 106,192 890 3,656 19,557 532 130,827
ROE (Profit / Equity + profit for the period) 2.5% 2.8% 2.0% 2.4% Cost:income ratio (including the effects of PPA) 61.2% 60.8% 60.2% 60.2% Cost:income ratio (excluding the effects of PPA) 60.3% 59.9% 59.1% 59.1%
A negative amount of €19.6 million was recognised in the second quarter of 2014 due to the adjustment to IRAP (regional production tax) deferred tax assets already recognised in the balance sheet as at 31st December 2013 (deferred assets) as a consequence of the reduction in the tax rate for IRAP introduced by Decree Law No. 66/2014 from the financial year 2014. This was then no longer recognised following the provisions of Art. 1, paragraph 23 of the 2015 Legge di stabilità (“stability law” – annual finance law) which retroactively repealed the provision mentioned (Art. 2 of Decree Law No. 66/2014) and therefore restored the previous rates immediately from the financial year 2014.
44 Reconciliation schedule for the period ended 30th June 2015
RECLASSIFIED INCOME STATEMENT 1H 2015 Reclassifications 1H 2015
Depreciation Ite ms Mandatory Reclassified Profit of equity- for consolidated Tax Redundancy consolidated accounted improvements financial recoveries expenses financial investees to leased statements statements Figures in thousands of euro assets 10.-20. Net interest income 847,148 847,148
70. Dividends and similar income 5,319 5,319 Profits of equity-accounted investees - 19,573 19,573
40.-50. Net fee and commission income 669,078 669,078 80.+90.+ Net income from trading, hedging and disposal/repurchase 100.+110. activities and from assets/liabilities designated at fair value 111,098 111,098
220. Other net operating income/expense 168,420 (113,475) 1,730 56,675 Operating income 1,801,063 (113,475) 19,573 1,730 - 1,708,891
180.a Staff costs (656,415) 1,642 (654,773)
180.b Other administrative expenses (426,428) 113,475 (312,953) Depreciation, amortisation and net impairment losses on property, 200.+210. plant and equipment and intangible assets (76,048) (1,730) (77,778) Operating expenses (1,158,891) 113,475 - (1,730) 1,642 (1,045,504) Net operating income 642,172 - 19,573 - 1,642 663,387
130.a Net impairment losses on loans (389,099) (389,099) 130. b+c+d Net impairment losses on other financial assets and liabilities (3,348) (3,348)
190. Net provisions for risks and charges (29,135) (29,135)
240.+270. Profits from the disposal of equity investments 19,656 (19,573) 83 Pre-tax profit from continuing operations 240,246 - - - 1,642 241,888
290. Taxes on income for the period from continuing operations (98,695) (452) (99,147)
330. Profit for the period attributable to non-controlling interests (17,108) (17,108) Profit for the period attributable to the shareholders of the Parent before expenses for leaving incentives 124,443 1,190 125,633
180.a Redundancy expenses net of taxes and non-controlling interests - (1,190) (1,190) Profit for the period attributable to the shareholders of the 340. Parent 124,443 - - - - 124,443
Reconciliation schedule for the period ended 30th June 2014
RECLASSIFIED INCOME STATEMENT 1H 2014 Reclassifications 1H 2014
Depreciation Ite ms Mandatory Reclassified Profit of equity- for consolidated Tax consolidated accounted improvements financial recoveries financial investees to leased statements statements Figures in thousands of euro assets 10.-20. Net interest income 908,528 908,528
70. Dividends and similar income 8,868 8,868 Profits of equity-accounted investees - 20,662 20,662
40.-50. Net fee and commission income 609,693 609,693 80.+90.+ Net income from trading, hedging and disposal/repurchase activities 100.+110. and from assets/liabilities designated at fair value 136,642 136,642
220. Other net operating income/expense 143,201 (94,468) 2,763 51,496 Operating income 1,806,932 (94,468) 20,662 2,763 1,735,889
180.a Staff costs (647,943) (647,943)
180.b Other administrative expenses (405,682) 94,468 (311,214) Depreciation, amortisation and net impairment losses on property, 200.+210. plant and equipment and intangible assets (82,433) (2,763) (85,196) Operating expenses (1,136,058) 94,468 - (2,763) (1,044,353) Net operating income 670,874 - 20,662 - 691,536
130.a Net impairment losses on loans (429,101) (429,101)
130. b+c+d Net impairment losses on other financial assets and liabilities (2,001) (2,001)
190. Net provisions for risks and charges (2,702) (2,702)
240.+270. Profits (losses) from the disposal of equity investments 20,232 (20,662) (430) Pre-tax profit from continuing operations 257,302 - - - 257,302
290. Taxes on income for the period from continuing operations (135,368) (135,368)
330. Profit for the period attributable to non-controlling interests (15,742) (15,742)
340. Profit for the period attributable to the shareholders of the Parent 106,192 - - - 106,192
45 Reconciliation schedule for the year ended 31st December 2014
RECLASSIFIED INCOME STATEMENT FY 2014 Reclassifications FY 2014
Impairment Depreciation losses on Ite ms Mandatory goodw ill, finite Reclassified Profit of equity- for consolidated Tax Redundancy useful life consolidated accounted improvements financial recoveries expenses intangible assets financial investees to leased statements and property, statements assets plant and Figures in thousands of euro equipment
10.-20. Net interest income 1,818,387 1,818,387
70. Dividends and similar income 10,044 10,044 Profits of equity-accounted investees 37,015 37,015
40.-50. Net fee and commission income 1,226,587 1,226,587 80.+90.+ Net income from trading, hedging and disposal/repurchase 100.+110. activities and from assets/liabilities designated at fair value 199,658 199,658
220. Other net operating income/expense 336,366 (224,797) 6,370 117,939 Operating income 3,591,042 (224,797) 37,015 6,370 - - 3,409,630
180.a Staff costs (1,413,312) 111,533 (1,301,779)
180.b Other administrative expenses (859,831) 224,797 (635,034) Depreciation, amortisation and net impairment losses on property, 200.+210. plant and equipment and intangible assets (232,065) (6,370) 67,026 (171,409) Operating expenses (2,505,208) 224,797 - (6,370) 111,533 67,026 (2,108,222) Net operating income 1,085,834 - 37,015 - 111,533 67,026 1,301,408
130.a Net impairment losses on loans (928,617) (928,617) 130. b+c+d Net impairment losses on other financial assets and liabilities (8,650) (8,650)
190. Net provisions for risks and charges (9,074) (9,074)
240.+270. Profits (losses) from the disposal of equity investments (915,397) (37,015) 1,046,419 94,007 Pre-tax profit (loss) from continuing operations (775,904) - - - 111,533 1,113,445 449,074
290. Taxes on income for the year from continuing operations 72,314 (30,671) (228,569) (186,926)
330. Profit for the year attributable to non-controlling interests (22,177) (4,551) (2,190) (28,918) Profit (loss) for the year attributable to the shareholders of the Parent before redundancy expenses and impairment (725,767) 76,311 882,686 233,230 180.a Redundancy expenses net of taxes and non-controlling interests - (76,311) (76,311) Impairment losses on goodwill, finite useful life intangible assets 200.+ and property, plant and equipment net of taxes and non-controlling 210.+260. interests - (882,686) (882,686) Loss for the year attributable to the shareholders of the 340. Parent (725,767) - - - - - (725,767)
Notes to the reclassified consolidated financial statements The mandatory financial statements have been prepared on the basis of Bank of Italy Circular No. 262 of 22nd December 2005 and subsequent updates. Therefore, as with the 2014 Annual Report, for the purposes of the preparation of these financial statements, the provisions of the third update of that document issued on 22nd December 2014 have been observed.
The following rules are applied to the reclassified financial statements to allow a vision that is more consistent with a management accounting style: - the item profits (losses) of equity-accounted investees includes the profits (losses) of equity-accounted investees included within item 240 in the mandatory financial statements; - the item other net operating income/expense includes item 220, net of the reclassifications mentioned under other points; - the tax recoveries recognised within item 220 of the mandatory financial statements (other net operating income/expenses) were reclassified as a reduction in indirect taxes included within other administrative expenses; - the item net impairment losses on property plant and equipment and intangible assets includes items 200 and 210 in the mandatory financial statements and also the instalments relating to the depreciation of leasehold improvements classified within item 220; - the item profits (losses) from the disposal of equity investments includes the item 240, net of profits (losses) of equity-accounted investees and also item 270 in the mandatory financial statements; - net impairment losses on goodwill, on finite useful life intangible assets and property, plant and equipment (net of taxation and non-controlling interests), present in the fourth quarter of 2014, partially include items 200 and 210 as well as item 260 in the mandatory financial statements. - redundancy expenses (net of taxation and non-controlling interests), present in the first quarter of 2015 and in the fourth quarter of 2014, partially include item 180a in the mandatory financial statements.
The reconciliation of the items in the reclassified financial statements with the figures in the mandatory financial statements has been facilitated, on the one hand, with the insertion in the margin against each item of the corresponding number of the item in the mandatory financial statements with which it is reconciled and, on the other hand, with the preparation of specific reconciliation schedules. The comments on the performance of the main balance sheet and income statement items are made on the basis of the reclassified financial statements and of the reclassified financial statements for the comparative periods, and the tables providing details included in the subsequent sections of this financial report have also been prepared on that same basis. In order to facilitate analysis of the Group’s operating performance and in compliance with Consob Communication No. DEM/6064293 of 28th July 2006, two special schedules have been included, the first a brief summary (which provides a comparison of the normalised results for the period) and the second more detailed, which shows the impact on earnings of the principal non-recurring events and items – since the relative effects on capital and cash flow, being closely linked, are not significant – which are summarised as follows:
First half 2015: - disposal of the investment in UBI Gestioni Fiduciarie Sim; - impairment losses and reversals of losses on AFS securities; - integration costs for the merger of IW Bank into UBI Banca Private Investment; - redundancy expenses charged to income statement in relation to the Agreement of 4th February 2015. First half 2014: - adjustment to the sales price of Banque de Dépôts et de Gestion Sa (Switzerland) and of Sofipo Sa (Switzerland); - change in the substitute tax on the valuation of profit sharing stakes held in the Bank of Italy; - impact of the change in the IRAP (regional production tax) tax rate on prior year deferred tax provisions; - impairment of AFS securities (G.E.C. Spa, held by BRE).
46 The consolidated income statement
The income statement figures commented on are based on the reclassified consolidated financial statements (the income statement, the quarterly income statements and the income statement net of the more significant principal non-recurring items – in brief and detailed versions) contained in another section of this report and the tables furnishing details presented below are also based on those statements. The notes that follow those reclassified financial statements may be consulted as may the reconciliation schedules for a description of the reclassification. Furthermore, the commentary examines changes that occurred in both the first half of 2015 compared to the same period in 2014, and also those occurring in the second quarter of 2015 compared to the preceding three months (in the latter case the comments are highlighted with a slightly different background colour).
Italian economy returned to growth in the first quarter of 2015, although modest, with signs that this expansion was consolidating also in the April-June period. The second quarter was nevertheless affected by a partial halt to the significant loosening of conditions on Italian financial markets in progress since the beginning of the year. With regard to government securities this impacted above all on the rise in yields on medium to long-term maturity German securities. Events relating to Greece caused a sharp increase in volatility and in risk premiums, although the effects were limited on the whole.
In this context the UBI Banca Group earned a profit of €124.4 million1, an improvement of 17.2% compared with €106.2 million in the first half of 2014, as result of good performance by net fee and commission income, stable operating expenses and a reduction in losses on loans.
As concerns quarterly performance, the second quarter of 2015 ended with a profit of €48.5 million (unchanged compared with €48.1 million earned in the same period of 2014), but down on the €75.9 million earned in the previous three months of the year due to the market factors mentioned above.
In the first half ordinary operations generated operating income of €1,708.9 million, down €27 million on the first half of 2014, due mainly to stable performance by core income (the weak result for net interest income was offset by that for net fee and commission income), while the contribution from financial activities decreased.
Net interest income, inclusive of the effects of the PPA, which came to -€13.6 million, stood at €847.1 million compared with €908.5 million in the first half of 2014, mainly incorporating the impacts (never experienced previously) of a movement in the structure of interest rates in the two periods2, in an economic situation already on course for recovery for larger companies, but held back by signs of greater caution for medium-size and above all for small companies3: • business with customers generated net interest income of €695.7 million (€718.5 million in the comparative period), which continued to be affected by difficulties on the lending market and the unevenness (by business sector and company size) of the recovery. The performance of net interest income from customers is the aggregate result of a reduction in volumes of lending (-€1.8 billion year-on-year), although the quarter-on- quarter decreases have progressively reduced, and the impact of interest rates on short- term lending, while in terms of funding the result was partially offset out by the trend for medium to long-term funding and also by the substantial reduction in the relative cost. The
1 Net of non-recurring items (considered net of taxes and non-controlling interests) normalised profit for the period rose to €136 million compared with €130.8 million in the same period in 2014. In the first half of 2015 these items consisted of expense of €11.5 million (due mainly to the recognition of impairment losses on AFS financial instruments, to integration costs for the merger of IW Bank into UBI Banca Private Investment and redundancy expenses) and of expense of €24.6 million in the first half of 2014 (above all due to the impact of certain tax regulations). Both first halves included costs resulting from the purchase price allocation amounting to €12.3 million in 2015 and €13.1 million in 2014. 2 It must be considered that the one month Euribor rate has been negative since March 2015, therefore the average for the first six months of the year was - 0.024%, compared with +0.229% in the first six months of 2014. 3 The calculation of net balances was performed by allocating interest income and expense on hedging derivatives and interest expense on financial liabilities held for trading within the different areas of business (with customers, financial, with banks).
47 customer spread widened in the first half, if only by a few basis points, as a result of optimisation action taken in prior periods. The balance also includes the differentials received mainly on hedges on bonds (€79.3 million compared with €82.1 million before); • the securities portfolio generated net interest income of €158.2 million (€213.3 million in 2014), while investments in debt securities remained stable over twelve months (-€0.3 billion). Although the contribution to net interest income from the AFS portfolio remained unchanged (€198.3 million compared with €204.8 million before), the first quarter of the year saw an appreciable reduction in the contribution from the held-to-maturity portfolio (€22.8 million compared with €53 million, in relation to the lower face rate on the reinvestment to maturity carried out at the end of the year) and also from the trading portfolio (€1.9 million compared with €20.3 million, after the disposals in the second and third quarters of 2014). This business also incorporated the costs of uncovered short positions (down from €15.9 million to €1.4 million) and of partial hedges on fixed-rate bonds (the differentials paid on derivatives were up to €63.4 million from €48.8 million before); • business on the interbank market generated expense of €6.8 million, sharply down compared with expense of €23.1 million in 2014. The improvement is due to both a fall in funding from central banks (down €6 billion over twelve months) – against a modest fall in funding (-€0.8 billion) and in lending (-€0.5 billion) business with other banks – and to a drastic decrease in the rate applied to principal refinancing operations, down from 0.25% at the beginning of 2014 to the current 0.05%. Net of the latter component, the contribution from net business with banks was approximately -€3.2 million, compared with -€8.7 million in 2014.
Interest and similar income: composition
Debt Other Financing 1H 2015 1H 2014 Figures in thousands of euro instruments transactions
1. Financial assets held for trading 1,944 - - 1,944 20,261 2. Financial assets designated at fair value - - - - - 3. Available-for-sale financial assets 198,305 - - 198,305 204,757 3. Held-to-maturity investments 22,847 - - 22,847 53,026 5. Loans and advances to banks - 3,112 - 3,112 3,984 6. Loans and advances to customers 22 1,066,072 490 1,066,584 1,248,461 7. Hedging derivatives - - 15,870 15,870 33,334 8. Other assets - - 19 19 30 Total 223,118 1,069,184 16,379 1,308,681 1,563,853
Interest and similar expense: composition
Other Borrowings Securities 1H 2015 1H 2014 Figures in thousands of euro transactions
1. Due to central banks (3,660) - - (3,660) (14,417) 2. Due to banks (6,263) - - (6,263) (12,712) 3. Due to customers (47,740) - (187) (47,927) (105,893) 4. Debt securities issued - (402,257) - (402,257) (506,175) 5. Financial liabilities held for trading (1,425) - - (1,425) (15,949) 6. Financial liabilities designated at fair value - - - - - 7. Other liabilities and provisions - - (1) (1) (179) 8. Hedging derivatives - - - - - Total (59,088) (402,257) (188) (461,533) (655,325)
Net interest income 847,148 908,528
Dividends of €5.3 million were received in the first half composed of €3.9 million relating to the UBI Banca portfolios and a total of €1.4 million relating to BRE and Carime as remuneration on stakes held in the Bank of Italy. The decrease compared with €8.9 million received in 2014 is due to a €3.2 million profit distribution made by SIA Spa, which was disposed of in the fourth quarter of 2014.
48 Profits of equity-accounted investees4 totalled €19.6 million (€20.7 million in the comparative period) the largest of which were earned by the following: Zhong Ou (€8.5 million compared with €0.7 million before), Lombarda Vita (€9.2 million compared with €4.2 million before), Aviva Vita (€1.3 million compared with €8 million before) and Aviva Assicurazioni Vita (€0.4 million compared with €2.1 million before). Account should be taken of the following in the comparison with 2014: - on 22nd December 2014 UBI Banca reduced its stakes held in both Aviva Vita Spa and Aviva Assicurazioni Vita Spa from 50% to 20%; - on 30th December 2014 the stake held in UBI Assicurazioni Spa (49.99%) was disposed of entirely, which had contributed to the relative earnings in the first half of 2014 with €5.4 million.
Fee and commission income: composition Fee and commission expense: composition
1H 2015 1H 2014 1H 2015 1H 2014 Figures in thousands of euro Figures in thousands of euro
a) guarantees granted 25,872 27,864 a) guarantees received (909) (16,882) c) management, trading and advisory services 425,577 362,326 c) management and trading services: (53,154) (39,816) 1. trading in financial instruments 11,951 11,730 1. trading in financial instruments (5,614) (5,510) 2. foreign exchange trading 3,616 3,169 2. foreign exchange trading (1) (3) 3. portfolio management 162,663 128,800 3. portfolio management (5,528) (5,136) 3.1. individual 36,599 32,788 3.1. own - - 3.2. collective 126,064 96,012 3.2. on behalf of third parties (5,528) (5,136) 4. custody and administration of securities 4,143 4,419 4. custody and administration of securities (3,019) (3,854) 5. depository banking - - 5. placement of financial instruments (3,500) (2,449) 6. placement of securities 124,377 96,073 6. financial instruments, products and services 7. receipt and transmission of orders 24,169 28,874 distributed through indirect networks (35,492) (22,864) 8. advisory activities 3,204 2,224 d) collection and payment services (23,108) (20,913) 8.1 on investments 3,204 2,224 e) other services (21,936) (13,715) 9. distribution of third party services 91,454 87,037 Total (99,107) (91,326) 9.1. portfolio management 15 17 9.1.1. individual 15 17 9.2. insurance products 78,164 68,255 9.3. other products 13,275 18,765 d) collection and payment services 78,680 80,397 f) services for factoring transactions 8,326 10,056 i) current account administration 94,128 98,128 j) other services 135,602 122,248 Total 768,185 701,019 Net fee and commission income 669,078 609,693
Net fee and commission income grew significantly to €669.1 million (+€59.4 million compared with 2014) and included €11.8 million of performance fees earned by UBI Pramerica SGR. It was the aggregate result of good performance by both investment services business (+€49.5 million) and general banking business (+€9.9 million). In detail: • management, trading and advisory services contributed €368.8 million to the result5, driven by customer portfolio management (+€33.5 million in relation to the higher average volumes of assets under management), by the placement of securities (+€27.2 million, of which €7.3 million from the subscription of UBI Pramerica Sicav’s and funds) and also by the distribution of third party services (+€4.4 million, primarily because of the average value of new life policies sold, but also due to improved profitability). However, items relating to trading, custody and administration recorded a much smaller increase (+€1.7 million), while the receipt and transmission of orders fell by €4.7 million, affected in part by increased volatility on markets. Fee and commission expense for financial instruments, products and services distributed through indirect networks increased by €12.6 million, partly in relation to the increased numbers of financial advisors; • ordinary banking business6 - while this continues to be affected by the sluggish recovery in lending, it generated €300.3 million, benefiting, on the expenses front, from the disappearance of the cost of the guarantee on government bank bonds, redeemed on 7th March 2014, with savings of €15.7 million compared with the same quarter in 2014.
4 The item consists of the net profits of the companies recognised on the basis of the percentage interest held by the Group. 5 The amount consists of management, trading and advisory services net of the corresponding expense items and is calculated excluding currency trading. 6 All the changes were calculated by subtracting commission expense from the respective commission income.
49 As concerns other items, we report the following: falls in collection and payment services (- €3.9 million, mainly due to the lower number of payment authorisations received), factoring business (-€1.7 million), current account administration (-€4 million, primarily due to lower average unit profitability), partially offset by increases in other services7 (+€5.1 million, largely from payment card business and the increase in the number of transactions; however, commitment fees, included in the item amounting to €71 million, decreased by €5 million).
Net trading income
Profits from Losses from Net income Gains Losses trading trading 1H 2015 1H 2014 Figures in thousands of euro (A) (B) (C) (D) [(A+B)-(C+D)]
1. Financial assets held for trading 4,489 33,436 (10,119) (24,070) 3,736 26,927 1.1 Debt instruments 117 12,958 (6,415) (1,115) 5,545 26,989 1.2 Equity instruments 566 110 (87) (10) 579 320 1.3 Units in UCITS 3 10 (19) (4) (10) (2) 1.4 Financing ------1.5 Other 3,803 20,358 (3,598) (22,941) (2,378) (380) 2. Financial liabilities held for trading 1,871 514 - (1,540) 845 10,059 2.1 Debt instruments 1,871 514 - (1,540) 845 10,059 2.2 Payables ------2.3 Other ------3. Financial assets and liabilities: exchange rate differences X X X X 401 475 4. Derivative instruments 228,585 156,716 (220,645) (147,502) 40,401 13,133 4.1 Financial derivatives 228,585 156,716 (220,645) (147,502) 40,401 13,133 - on debt instruments and interest rates 219,134 144,789 (211,323) (137,512) 15,088 (2,564) - on equity instruments and share indices 357 2,961 (347) (113) 2,858 (293) - on currencies and gold X X X X 23,247 15,916 - other 9,094 8,966 (8,975) (9,877) (792) 74 4.2 Credit derivatives ------Total 234,945 190,666 (230,764) (173,112) 45,383 50,594
Net hedging income (loss)
Figures in thousands of euro 1H 2015 1H 2014
Net hedging income (loss) 6,730 (7,395)
Profit from disposal or repurchase
Net profit Profits Losses 1H 2014 Figures in thousands of euro 1H 2015
Financial assets 1. Loans and advances to banks - - - - 2. Loans and advances to customers 4,906 (9,217) (4,311) (887) 3. Available-for-sale financial assets 66,324 (514) 65,810 97,866 3.1 Debt instruments 59,396 (507) 58,889 78,237 3.2 Equity instruments 43 (7) 36 (47) 3.3 Units in UCITS 6,885 - 6,885 19,676 3.4 Financing - - - - 4. Held-to-maturity investments - - - - Total assets 71,230 (9,731) 61,499 96,979 Financial liabilities 1. Due to banks - - - - 2. Due to customers - - - - 3. Debt securities issued 476 (8,534) (8,058) (3,264) Total liabilities 476 (8,534) (8,058) (3,264) Total 71,706 (18,265) 53,441 93,715
Net profit (loss) on financial assets and liabilities designated at fair value
Figures in thousands of euro 1H 2015 1H 2014
Net profit (loss) on financial assets and liabilities designated at fair value 5,544 (272)
Net income from trading, hedging and disposal/repurchase activities and from assets/liabilities designated at fair value 111,098 136,642
7 The figures as at 30th June 2014 were subject to a reclassification out of the item “other services” (-€8,737 thousand) and into the item “collection and payment services” (+€8,736 thousand) in relation to a more appropriate classification of commissions received from international credit card payment networks on transactions carried out by customers.
50 The volatility generated on markets, together with the widening of the spreads on government securities, which occurred in parallel with uncertainties accompanying negotiations over Greek debt, held down the net result for financial activities to €111.1 million (€136.6 million in the first half of 2014), the aggregate result of the following: • +€45.4 million from trading (+€50.6 million in 2014), of which +€6.4 million attributable to debt instruments (composed of: +€11.8 million of profits on trading, -€6.3 million of losses recorded at the end of the first half with the widening spread and +€0.8 million in relation to the closure of and fair value changes in uncovered short positions), +€3.4 million attributable to equities and above all to the closure of the relative derivatives (almost all listed on regulated markets and with equity indices as the underlying), €21.3 million to business in foreign currency8 and €15.1 million to derivatives on debt instruments and interest rates (profits, gains and accruals). The latter relate to differentials accrued (at the same time as medium to long-term swap rates rose in the second quarter of the year) and to fair value movements in the derivatives themselves (furthermore, transactions of a commercial nature with corporate counterparties were closed in the period); • +€6.7 million from hedging (-€7.4 million in 2014), related mainly to fair value changes in derivatives on AFS securities, when the long-term swap rate curve rose, only marginally offset by derivatives on bond issues; • +€53.4 million from the disposal/repurchase of financial assets/liabilities, of which +€56 million from the sale of Italian government securities, +€2.9 million from bonds (mainly issued by banks), +€6.9 million from the disposal of units in UCITS (ETFs which aim to replicate the performance of the EURO STOXX® 50 Index), -€4.3 million from the disposal of bad loans (including two mass disposals which involved almost all Group entities, ordinary disposals that occurred in both the first and the second quarters and also a mass disposal at the beginning of the year of former B@nca 24-7 loans) and -€8.1 million from the repurchase of securities in issue as part of normal direct business with customers in a context of interest rates that fell below par on the shorter maturities. In 2014 the disposal/repurchase of financial instruments generated a profit of €93.7 million, of which over €78 million from the sale of Italian government securities; €19.7 million from the disposal of units in UCITS (ETFs); -€0.9 million from the disposal of packets of network bank and former B@nca 24-7 bad loans (previously termed non-performing loans) and from former Centrobanca marginal deteriorated positions (restructured and impaired); and finally -€3.3 million from the repurchase of debt securities in issue as part of normal direct business with customers. • +€5.5 million from fair value movements in investments in Tages Funds and in the private equity investments of the former Centrobanca. The residual position in hedge funds also contributed to this amount as did the exchange rate effect accruing on it (-€0.3 million from the portfolio designated at fair value in 2014);
Other net operating income/expense Other net operating income rose from €51.5 million to €56.7 1H 2015 1H 2014 million, the result primarily of a Figures in thousands of euro substantial reduction in expenses Other operating income 78,478 86,085 (-€12.8 million) and more specifically in Recovery of expenses and other income on current accounts 10,723 10,493 prior year expenses. In the first half of Recovery of insurance premiums 10,928 12,221 Recoveries of taxes 113,475 94,468 2014 reimbursements to Prestitalia Rents and other income for property management 2,314 2,487 customers had been recognised Recovery of expenses on finance lease contracts 6,744 7,174 amounting to €12 million relating to Other income and prior year income 47,769 53,710 the company’s operations prior to its Reclassification of "tax recoveries" (113,475) (94,468) acquisition by the UBI Banca Group (a Other operating expenses (21,803) (34,589) Depreciation of leasehold improvements (1,730) (2,763) provision for risks and charges of €10 Costs relating to finance lease contracts (4,378) (4,100) million had been set aside in the first Expenses for public authority treasury contracts (2,073) (2,325) quarter, while the relative precise Ordinary maintenance of investment properties - - Other expenses and prior year expense (15,352) (28,164) quantification was in progress). Reclassification of depreciation of leasehold improvements 1,730 2,763 Total 56,675 51,496
8 The Group does not enter into speculative positions and the results relate to business with customers and on own behalf generally balanced on the market. As a consequence the items in question (line items 1.5, 4.1 and 3) must be considered together as a whole. On the whole the items relate to the results of spot and forward currency trading by customers (transactions closed and/or existing), transactions on behalf of customers balanced operationally by UBI Banca on the market and domestic currency swaps, opened on the two components, always balanced, and certificates of deposit (item 1.5) and the related derivative (item 4.1).
51 Other operating income on the other hand decreased, but to a lesser extent (-€7.6 million), attributable mainly to prior year income (-€5.9 million), which included recognition of “fast credit processing” charges, down by €5.3 million (the result of both monitoring action and the still downward trend for lending to customers).
From a quarter-on-quarter view point operating income for the quarter (€842.9 million compared with €882.5 million in the same period in 2014) fell overall by €23.1 million, compared with €866 million in the first three months of the year. In detail:
• net interest income fell by €14.1 million (from €430.6 million to €416.5 million), largely due to short-term interest rates which became negative and to the impact on business with customers and on the securities portfolio. Business with customers (-€8.1 million) also continued to be affected by the fall in average short-term loans, only partly offset by the performance of medium to long-term funding and by an improvement in the markdown. The contribution from debt securities also fell (-€7 million), on a par with the differentials paid on the portion of bonds that are hedged (up to €31.8 million from €31.6 million before). However, the negative result for interbank business reduced further (-€1 million);
Quarterly net interest income
2015 2014
Figures in thousands of euro 2nd Quarter1st Quarter 4th Quarter 3rd Quarter2nd Quarter1st Quarter
Banking business with customers 343,794 351,910 347,971 367,739 357,667 360,853 Financial activities 75,623 82,614 99,551 108,334 107,536 105,766 Interbank business (2,924) (3,887) (5,867) (8,207) (11,089) (12,056) Other items 50 (32) 419 (81) (58) (91)
Net interest income 416,543 430,605 442,074 467,785 454,056 454,472
• dividends rose to €4.8 million (from €0.5 million received in the first three months of the year) and were composed of €3.3 million relating to the Parent’s portfolios (AFS, private equity stakes in the FVO portfolio and to a minor extent to the trading portfolio) and of €1.4 million as remuneration on the stakes held in the Bank of Italy by BRE and Carime;
• profits of equity-accounted investees improved from €6.2 million to €13.5 million as a result of the good results recorded by Zhong Ou (€5.6 million) and by Lombarda Vita (€7.9 million);
Quarterly net fee and commission income
2015 2014
Figures in thousands of euro 2nd Quarter 1st Quarter 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter
Management, trading and advisory services (net of the corresponding expense items): 177,202 191,606 155,563 149,003 161,022 158,322 trading in financial instruments 2,845 3,492 2,904 2,554 2,456 3,764 portfolio management 79,849 77,286 75,665 67,435 64,093 59,571 custody and administration of securities 934 190 639 358 239 326 placement of securities 53,370 67,507 31,239 40,601 46,511 47,113 receipt and transmission of orders 10,673 13,496 10,749 9,379 14,392 14,482 advisory activities 1,753 1,451 992 1,142 920 1,304 distribution of third party services 45,483 45,971 45,022 39,817 43,924 43,113 financial instruments, products and services distributed through indirect networks (17,705) (17,787) (11,647) (12,283) (11,513) (11,351) Banking services (net of the corresponding expense items): 150,684 149,586 162,829 149,499 148,561 141,788 guarantees 11,074 13,889 11,009 8,454 6,663 4,319 foreign exchange trading 1,814 1,801 1,678 1,607 1,884 1,282 collection and payment services 28,660 26,912 38,685 27,615 30,302 29,182 services for factoring transactions 4,063 4,263 4,239 4,408 4,869 5,187 current account administration 47,972 46,156 54,311 51,521 50,562 47,566 other services 57,101 56,565 52,907 55,894 54,281 54,252
Net fee and commission income 327,886 341,192 318,392 298,502 309,583 300,110
• net fee and commission income fell slightly to €327.9 million (-€13.3 million), as they incorporated a decrease in performance fees earned by UBI Pramerica SGR (-€1.9 million as a result of the sudden volatility that hit markets in June), but they were affected above all
52 by the different distribution in the two periods of placements of new asset management products (UBI Pramerica Sicav’s). As a whole, management, trading and advisory services recorded a fall of €14.4 million which affected almost all items with the exception of collective portfolio management, which grew by €2.6 million. On the other hand, banking services recovered by €1.1 million, in relation to payment and collection services (up €1.7 million, partly due to higher numbers of payment authorisations presented in the period) and to current account administration (+€1.8 million), the result of the seasonal nature of charges, offset however by less income from guarantees issued (-€2.8 million). The item “other services” also includes commitment fees, which were down €1 million in the two periods.
• financial activities generated profits of €53.1 million (-€4.9 million), attributable mainly to the disposal of debt instruments (€33.9 million, primarily Italian government securities), to hedges on the AFS portfolio (€9.7 million, as a consequence of the rise in the swap rate curve already mentioned) and to trading (approximately €18 million, notwithstanding the widening of the spread in June, driven mainly by business in foreign currency with customers and by derivatives on debt securities and interest rates due to the differentials accrued, fair value movements and commercial business with corporate counterparties). The contribution from fair value movements in the FVO portfolio was more modest (+€0.3 million from the Tages Funds), while the result for the repurchase of financial liabilities (-€3.6 million from ordinary business with customers) was negative, although an improvement compared with the previous quarter.
Quarterly performance by financial activities
2015 2014
Figures in thousands of euro 2nd Quarter 1st Quarter 4th Quarter 3rd Quarter2nd Quarter1st Quarter Net trading income 17,952 27,431 6,719 5,853 16,509 34,085 Net hedging income (loss) 9,746 (3,016) (2,126) (1,696) (3,207) (4,188) Total assets 28,682 32,817 45,928 10,049 63,594 33,385 Total liabilities (3,608) (4,450) (3,246) (1,810) (1,994) (1,270) Profit from disposal or repurchase 25,074 28,367 42,682 8,239 61,600 32,115 Net income (loss) on financial assets and liabilities designated at fair value 302 5,242 1,881 1,464 (871) 599
Net income 53,074 58,024 49,156 13,860 74,031 62,611
• other net operating income/expense fell to €27.2 million (-€2.3 million), affected by the expense components (+€3.4 million) and by prior year expenses (+€2.4 million) and finance lease contract costs in particular. As concerns on the other hand, other operating income (+€1.1 million), both current accounts and other items recorded a recovery, attributable primarily to the seasonal nature of charges, while prior year income fell (-€1.6 million), due partly to a fall in “fast credit processing” charges (-€1.1 million). It must always be considered that because the underlying items of prior year income and expense items are of a varied and non-structural nature, they often fluctuate greatly from one period to another.
Half-year operating expenses were more or less unchanged (+€1.1 million compared with the same period in 2014) at €1,045.5 million, but in reality were the aggregate result of opposing trends for the various components: • staff costs (which do not include redundancy expenses under the trade union agreement of 4th February 2015) rose to €654.8 million (+€6.8 million). As shown in the table, the increase is concentrated in costs for employees and is the result of more significant amounts for recognition of the “separate component of wages” (effective from 1st June 2014), the reduction/suspension of working hours, which acted on the entire first quarter of 2014 and also the variable components of remuneration (partly due to putting the payment forward to June). These factors were broadly, if only partially, offset by the decrease in average staff numbers (-760 staff, equivalent to approximately -€18 million), by the turnover of incentivised staff and by new forms of flexible working (part-time);
53 • other administrative expenses totalled Staff costs: composition €313 million (+€1.7 million) and 1H 2015 1H 2014 included a non-recurring item of €7.3 Figures in thousands of euro
million for costs relating to the 1) Employees (647,042) (640,114) merger of IW Bank into UBI Banca a) Wages and salaries (453,459) (445,973) Private Investment (concluded on b) Social security charges (124,011) (123,328) 25th May 2015). Net of that cost, total c) Post-employment benefits (24,261) (24,075) d) Pension expense - (14) expenses stood at €305.6 million, e) Provision for post-employment benefits (2,508) (2,092) down €5.6 million, of which €2.8 f) Pensions and similar obligations: (429) (978) million due to indirect taxation (as a - defined contribution - - result of lower registration or - defined benefit (429) (978) g) Payments to external supplementary pension mortgage taxes for credit recovery) funds: (20,079) (19,804) and €2.8 million due to current - defined contribution (19,860) (19,482) expenses. - defined benefit (219) (322) This reduction involved the following: h) Expenses resulting from share based payments - - rent payable and the tenancy and i) Other employee benefits (22,295) (23,850) maintenance of premises (-€4.6 2) Other staff in service (828) (811) million, as a result of massive branch - Expenses for agency staff on staff leasing closures carried out in April 2014 contracts (35) (51) - Other expenses (793) (760) and in January 2015, further 3) Directors and statutory auditors (6,903) (7,018) renegotiations of contracts and 4) Expenses for retired staff - - energy savings); postal expenses (- Total (654,773) (647,943) €2.4 million, due to fewer hardcopy communications and the start of a Other administrative expenses: composition contract with a new supplier in 1H 2015 1H 2014 2015); outsourced services (-€1 Figures in thousands of euro million, mainly in relation to A. Other administrative expenses (287,899) (283,406) “packaged” commercial products for Rent payable (26,778) (29,311) small business customers) and credit Professional and advisory services (44,002) (33,867) Rentals hardware, software and other assets (17,212) (19,365) recovery expenses (-€0.4 million). The Maintenance of hardware, software and other assets (22,328) (18,708) savings were partially offset by higher Tenancy of premises (22,969) (24,354) expenses incurred for the following: Property maintenance (10,353) (11,080) professional and advisory services Counting, transport and management of valuables (6,064) (6,345) Membership fees (5,638) (4,803) (which net of the above-mentioned Information services and land registry searches (5,329) (5,279) merger costs, mainly allocated here Books and periodicals (644) (662) and resulting from IT services needed Postal (7,334) (9,782) for the merger and from corporate Insurance premiums (18,232) (16,725) Advertising (10,177) (10,629) and legal affairs advisory services, Entertainment expenses (896) (811) grew by €1.8 million, partly in Telephone and data transmission expenses (22,930) (21,609) relation to the process to comply with Services in outsourcing (24,315) (25,356) European supervisory provisions, Travel expenses (7,824) (8,530) Credit recovery expenses (21,757) (22,182) while the remaining €1 million is Forms, stationery and consumables (3,407) (3,559) connected with new project Transport and removals (3,071) (3,346) initiatives); hardware and software Security (3,793) (4,170) maintenance and licence fees (+€1.5 Other expenses (2,846) (2,933) B. Indirect taxes (25,054) (27,808) million attributable mainly to Indirect taxes and duties (10,901) (13,317) contract renewals with the main Stamp duty (106,002) (89,159) supplier); and telephone and data Municipal property tax (former ICI) (9,911) (9,279) transmission expenses (+€1.3 million Other taxes (11,715) (10,521) largely resulting from the Reclassification of "tax recoveries" 113,475 94,468 Total (312,953) (311,214) depreciation of the euro against the dollar, the currency in which supply contracts with info providers are denominated); • depreciation, amortisation and net impairment losses on property, plant and equipment and intangible assets fell to €77.8 million (-€7.4 million, of which -€3.2 million from lower amortisation on the purchase price allocation, after the impairment recognised at the end of the year). The ordinary reduction in the item (-€4.2 million) is a result both of lower depreciation of real estate assets (-€1.7 million, partly due to branch closures) and lower amortisation of intangible assets (-€2.5 million, mainly on software and communication equipment, as part of the natural life cycle).
54 A quarterly analysis shows a small quarter-on-quarter change (+€2.8 million) in operating expenses, up from €521.4 million to €524.1 million (€523.1 million in the second quarter of 2014), connected with the seasonal nature of charges, but also with the presence of the non- recurring items mentioned above relating to the integration costs incurred for the new IW Bank. In detail: • staff costs fell to €319.8 million, a decrease of €15.1 million. While this change incorporates a reduction in average staff numbers and redundancies, it reflects a recovery, as part of the approval of the renewal of the national trade union agreement, of those incremental cost factors which started to accrue again in the first quarter of the year, in the period before the agreement came into force (accrual of post employment benefits and supplementary pension contributions on a broader basis of calculation following the withdrawal from the national trade union agreement) as well as the release of some provisions which occurred in the current year; • other administrative expenses rose from €147.9 million to €165 million. In normalised terms (i.e. net of non-recurring items present in both periods, amounting to €1.3 million and €6 million respectively, in relation to the merger of the subsidiaries IW Bank and UBI Banca Private Investment), the item rose from €146.6 million to €159 million, an increase of €12.5 million, of which €0.5 million due to indirect taxation. The trend for current expenditure (+€12 million) was affected mainly by professional services (of an ICT nature for project activities, required for compliance with European regulations: BRRD, forbearance and FinRep and CoRep reporting), legal services (for the certification of financial reports), property and equipment maintenance (due to both the seasonal nature of some types of work and for refurbishment work following the mass closure of branches in January 2015) and telephone and data transmission expenses (for the reasons specified above). Credit recovery expenses moved in the opposite direction with a contraction in the second quarter; • depreciation, amortisation and net impairment losses on property, plant and equipment and intangible assets came to €39.3 million, up €0.8 million, partly in relation to the resumption of depreciation on a property previously classified as held or disposal.
As a summary of overall performance in the half-year, net operating income came to €663.4 million compared with €691.5 million in the comparative period. On a quarterly basis, net operating income stood at €318.7 million (€359.4 million in the same quarter of 2014), compared with €344.7 million in the first three months of 2015.
In the first half of 2015 net impairment losses on loans fell 9.3% compared with 2014 to €389.1 million and were composed of €285 million (€294.9 million) relating to the network banks and €103.4 million (€117.9 million) to the product companies (inclusive of UBI Banca). The total was driven by specific net impairment losses on non-performing exposures (previously termed “deteriorated loans”) of €406.9 million, down by €42.6 million, due to both the absence of the write-down made by UBI Banca International in the first quarter of 2014 on the Pescanova position (€13.7 million) and to a decrease which involved the network banks (- €6.9 million, although this trend was not evenly spread across the various banks) and above all the product companies (-€20.4 million, with the sole exception of UBI Banca). Overall, specific write-downs benefited from reversals (net of present value discounts) of €158.2 million (€123.4 million in the first six months of 2014).
Again in 2015 the Group recorded net reversals of impairment losses on the performing loan portfolio amounting to €17.8 million, more or less unchanged compared with €20.4 million before. The item is composed primarily of product company reversals (€18.6 million) due to a reduction in volumes of business which had a greater effect on UBI Banca, UBI Leasing and Prestitalia, while the network banks recognised impairment losses on performing loans of €1.3 million partly in relation to positive annual performances by some portfolios.
The loan loss rate (calculated as total net impairment losses as a percentage of net loans to customers) fell slightly to 0.91% compared with 0.99% recorded in the first half of 2014 (annualised data), against 1.08% recorded for the full year 2014.
55 Net impairment losses on loans: composition
Impairment losses/ Impairment losses/ reversals of impairment losses, net reversals of impairment losses, net 2nd Quarter 1H 2015 Specific Portfolio Specific Portfolio 2015 Figures in thousands of euro Loans and advances to banks ------Loans and advances to customers (406,870) 17,771 (389,099) (207,544) 8,637 (198,907) Total (406,870) 17,771 (389,099) (207,544) 8,637 (198,907)
Impairment losses/ Impairment losses/ reversals of impairment losses, net reversals of impairment losses, net 2nd Quarter 1H 2014 2014 Specific Portfolio Specific Portfolio Figures in thousands of euro A. Loans and advances to banks ------B. Loans and advances to customers (449,499) 20,398 (429,101) (237,289) 6,814 (230,475) Total (449,499) 20,398 (429,101) (237,289) 6,814 (230,475)
Quarterly net impairment losses stood at €198.9 million, an appreciable improvement year-on- year compared with €230.5 million in the same quarter of 2014 and a slight quarter-on- quarter increase compared with €190.2 million in the first quarter of the year. The comparison is particularly significant if it is considered that part of the impairment losses arising at the start of the year are normally recognised in the financial statements for the year just ended.
Net impairment losses/reversals of impairment losses on loans: quarterly performance
Figures in 1st 2nd 3rd 4th thousands of Specific Portfolio Specific Portfolio Specific Portfolio S Portfoliopecific euro Quarter Quarter Quarter Quarter
2015 (199,326) 9,134 (190,192) (207,544) 8,637 (198,907)
2014 (212,210) 13,584 (198,626) (237,289) 6,814 (230,475) (210,219) 13,169 (197,050) (242,443) (60,023) (302,466) 2013 (155,657) (2,085) (157,742) (212,689) (13,461) (226,150) (192,435) (314) (192,749) (347,302) (19,035) (366,337) 2012 (122,221) (8,949) (131,170) (225,562) 22,381 (203,181) (161,535) 1,207 (160,328) (373,308) 20,773 (352,535) 2011 (96,010) (9,364) (105,374) (142,877) (15,271) (158,148) (110,779) (24,364) (135,143) (195,114) (13,299) (208,413) 2010 (105,366) (26,493) (131,859) (184,080) (5,765) (189,845) (124,200) (9,811) (134,011) (217,327) (33,890) (251,217) 2009 (122,845) (36,728) (159,573) (176,919) (58,703) (235,622) (178,354) (18,995) (197,349) (281,668) 9,001 (272,667) 2008 (64,552) 4,895 (59,657) (85,136) (8,163) (93,299) (77,484) (25,384) (102,868) (219,512) (90,887) (310,399)
The change in total impairment losses compared with the previous quarter (+€8.7 million) is attributable to higher specific impairment losses of €8.2 million, while net reversals of €8.6 million were recorded on performing loans, driven by both €3.5 million for the network banks and €4.9 million for the product companies. Net portfolio reversals totalled €9.1 million in the first quarter of 2015 and related mainly to UBI Banca.
The loan loss rate for the quarter therefore rose to 0.93% from 0.90% in the preceding three months (annualised data).
The following was also recognised in the income statement in the first half:
• €3.3 million of net impairment losses on other financial assets/liabilities composed as follows: -€8.5 million for the item 130b (of which €7 million non-recurring, relating to impairment losses on instruments held almost entirely in the UBI Banca AFS portfolio, consisting mainly of bonds issued by banks and to a marginal extent of UCITS units) and +€5.1 million for the item 130d relating to reversals of unsecured guarantees9;
• €29.1 million of net provisions for risks and charges, which included a provision of €22.8 million consisting of an estimate of the annual quota due by the Group to the National Resolution Fund10. The item also includes the additional risk on a position held by a
9 Net impairment losses of €2 million were recognised in 2014 consisting of the following: -€0.7 million, non-recurring, from the write-down of stakes held by BRE in G.E.C. Spa; approximately -€1.2 million from write-downs in relation to shares and mainly UCITS units held in portfolio by UBI Banca; +€1.2 million from the reversal of impairment on a bond held by the Parent; and -€1.3 million from the item 130d relating to impairment losses on unsecured guarantees. 10 This is a fund for managing banking crises in accordance with the BRRD Directive (Bank Recovery and Resolution Directive – 2014/59/EU), which defined the new resolution rules applicable to all banks in the European Union from January 2015. See in
56 network bank subject to revocation Net provisions for risks and charges (clawback) action and also a number
of provisions (down compared with the 1H 2015 1H 2014 comparative first half) made to cover Figures in thousands of euro legal proceedings of varying nature Net provisions for revocation clawback risks (1,365) (559) with different types of counterparty. Net provisions for staff costs - 20 Net provision for bonds in default 6 21 Provisions of €2.7 million had been made in the Net provisions for litigation (2,107) (4,631) first half of 2014 to cover risks of varying nature and counterparty. The item also Other net provisions for risks and charges (25,669) 2,447 Total (29,135) (2,702) included a release of €2.4 million in relation to a provision made in prior years, following the conclusion of the relative litigation;
• €83 thousand of profits from the disposal of equity investments, which included a loss of €0.5 million (normalised) on a disposal at the beginning of the year. A net loss on equity investments of €0.4 million was recognised in 2014, as a result of the settlement of the balance on the price paid subsequent to the disposal of the Swiss subsidiary BDG (-€0.9 million normalised), partly offset by profits (€0.5 million) realised by BPB Immobiliare on the disposal of properties, as part of a process to rationalise residential assets.
The following entries were made in the second quarter of 2015: ° €2.4 million of net impairment losses on other financial assets/liabilities consisting of +€1.5 million from reversals of impairment losses on unsecured guarantees and €3.9 million from impairment losses on AFS securities (of which €2.3 million relating to bonds issued by banks held in portfolio by the Parent); ° €24.8 million of net provisions for risks and charges as reported above; ° €0.4 million of profits from the disposal of equity investments in relation to disposals of real estate assets and in particular to a gain realised mainly on a disposal carried out by BRE.
As a result of the performance described above, profit on continuing operations before tax fell to €241.9 million from €257.3 million in the first half of 2014. On a quarterly basis, profit on continuing operations came to €93 million compared with €132.8 million in the second quarter of 2014 and €148.9 million in the first three months of the current year.
Taxes on income for the period from continuing operations fell similarly to €99.1 million from €135.4 million in 2014, to give a tax rate of 40.99% compared with 52.61% before. These changes are the result of following: • mainly the effect of the provision contained in the 2015 Legge di stabilità (“stability law” – annual finance law – Law No. 190 of 23rd December 2014 – article 1 paragraphs 20-25), which with effect from the 1st January 2015 introduced an important change, the full deductibility of permanent employee expenses in determining the tax base for IRAP. The impact of this deduction on taxation for the first half came to €15.7 million, of which €2.1 million relating to the Parent. • furthermore, the comparative period included two non-recurring expense items: ▪ €19.6 million as a result of the reduction in the rate for IRAP (regional production tax) from the financial year 2014 (from 4.65% to 4.20%, without effect on the surtax of 0.92% on banks), following the conversion of Decree Law No. 66/2014 into law. This change had positive impacts on the amount of taxation due for the year, but at same time it reduced deferred tax assets already recognised in the financial statements for 2013 on the basis of the previous higher rate. The surplus (€19.6 million) was therefore charged to the income statement in the second quarter11; ▪ €4.5 million as a result of the change in the substitute tax on the valuation of profit sharing stakes held in the Bank of Italy after Decree Law No. 66/2014, converted into Law No. 89/2014, had raised the substitute tax rate to 26% from the previous 12%.
Compared with the theoretical rate (33.07%), the effective tax rate levied was mainly conditioned by the combined effect of IRES (corporate income tax) and IRAP (regional production tax), due to:
this respect the sub-section “Accounting policies” in the section “Condensed interim consolidated financial statements as at and for the period ended 30th June 2015”. 11 That item was subsequently no longer recognised due to the provisions of paragraph 23 of article 1 of the 2015 Legge di stabilità (“stability law” – annual finance law), which has retroactively repealed the provisions of article 2 of Decree Law No. 66/2014 on the reduction of the IRAP rate, therefore restoring the previous rates effective immediately from 2014 (a base rate of 4.65% for banks plus surtaxes).
57 - the partial non-deductibility of interest expense (4%), introduced by Law No. 133 of 6th August 2008 (2.9 percentage points); - the higher taxation on dividends eliminated in the consolidation (2 percentage points); - non tax deductible expenses, costs and provisions (7.5 percentage points); - losses of Group companies not recoverable for tax purposes (0.6 percentage points); - the total non-deductibility for IRAP purposes of provisions for risks and charges and impairment losses on AFS securities and the partial non-deductibility of staff costs, other administrative expenses and depreciation and amortisation (1.5 percentage points). These impacts were only partially cushioned by the following: the valuation of equity investments according to the equity method not significant for tax purposes (2.7 percentage points); the Aiuto alla crescita economica (ACE – “aid to economic growth”) concessions (3.5 percentage points); the deduction for IRES purposes of an amount equal to the IRAP corresponding to the taxable portion of employee and similar personnel expenses and the flat rate 10% deduction (0.4 percentage points).
As a result of the performance already reported and also of the profits earned by Group banks and companies, despite the repurchases of stakes in the network banks held by the Aviva Group, profit for the period attributable to non-controlling interests (inclusive of the effects of consolidation entries) stood at €17.1 million, compared to €15.7 million in 2014. Profit attributable to non-controlling interests came to €7.4 million in the second quarter (€8.1 million in the same period of 2014) and €9.7 million in the period January-March 2015.
Finally, redundancy expenses, recognised in the first quarter as part of an agreement with trade unions signed on 4th February 2015 relating to the merger of IW Bank into UBI Banca Private Investment, were stated under a separate item and amounted to €1.2 million (net of taxes of €0.4 million).
58 The comments that follow are based on items in the consolidated balance sheet contained in the reclassified consolidated financial statements on which the relative tables furnishing details are also based. The section “Consolidated companies: the principal figures” may be consulted for information on individual banks and Group member companies.
General banking business with customers: funding
Total funding
Total Group funding consisting of total amounts administered on behalf of customers amounted to €173.4 billion as at 30th September 2015 an increase both year-on-year (+€9.6 billion) and over six months (+€4.3 billion). This growth was driven by indirect funding and by assets under management in particular. Net of the institutional components, total Group core funding stood at €150.8 billion, up from €149.8 billion in December 2014 and from €147.6 billion in the previous June.
Total funding from customers
30.6.2015 31.3.2015 Changes A/B 31.12.2014 Changes A/C 30.6.2014 Changes A/D % % % % A B C D Figures in tho usands of euro amount % amount % amount %
Direct funding 94,327,352 54.4% 91,142,240 52.8% 3,185,112 3.5% 93,207,269 55.1% 1,120,083 1.2% 90,175,601 55.0% 4,151,751 4.6% Indirect funding 79,070,259 45.6% 81,401,680 47.2% -2,331,421 -2.9% 75,892,408 44.9% 3,177,851 4.2% 73,666,835 45.0% 5,403,424 7.3% of which: assets under management 47,773,645 27.6% 47,491,074 27.5% 282,571 0.6% 43,353,237 25.6% 4,420,408 10.2% 40,762,807 24.9% 7,010,838 17.2%
Total funding from customers 173,397,611 100.0% 172,543,920 100.0% 853,691 0.5% 169,099,677 100.0% 4,297,934 2.5% 163,842,436 100.0% 9,555,175 5.8%
Total funding net of CCG and institutional funding 150,802,126 154,102,009 -3,299,883 -2.1% 149,847,822 954,304 0.6% 147,648,169 3,153,957 2.1%
Direct and indirect funding (end of quarter totals in millions of euro) 110,000
100,000
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
10,000
0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2008 2009 2010 2011 2012 2013 2014 2015 Direct funding Indirect funding
59
The trend for direct funding already established at the end of 2014 continued with institutional funding used in the short-term to meet the Group’s liquidity requirements, while medium to long-term funding is gauged with a view to maintaining structural balance.
With regard to funding from ordinary customers, due to an environment of historically low market rates, funds continued to flow out of term deposits (down appreciably) and bonds with medium-term maturities (which recorded a slowdown in the amount of subscriptions).
On the other hand, given the Group’s broad and varied product range, assets under management attracted investment by customers in the wake of positive performance by markets. It recorded strong growth (up €7 billion over twelve months and €4.4 billion since December 2014), although the increase slowed in the comparison with March due to negative performance on securities markets which had an impact on fair values at the end of June, with repercussions also for assets under custody.
Direct funding
The total direct funding of the UBI Banca Group came to €94.3 billion as at 30th June 2015, an increase compared with all the comparative periods (+€4.1 billion over twelve months, +€1.1 billion over six months and +€3.2 billion over three months) due to the performance by the item amounts due to customers, given the progressive decrease in debt securities issued.
Direct funding from customers
30.6.2015 31.12.2014 Changes A/B 30.6.2014 Changes A/C % % % Figures in thousands of euro A B amount % C amount %
Current accounts and deposits 44,684,388 47.4% 44,317,163 47.6% 367,225 0.8% 42,504,977 47.2% 2,179,411 5.1% Term deposits 196,241 0.2% 429,347 0.5% -233,106 -54.3% 853,934 0.9% -657,693 -77.0% Financing 9,674,063 10.3% 6,185,217 6.6% 3,488,846 56.4% 2,941,959 3.3% 6,732,104 228.8% - repurchase agreements 9,189,862 9.7% 5,695,380 6.1% 3,494,482 61.4% 2,516,776 2.8% 6,673,086 265.1% of which: repos with the CCG 9,095,672 9.6% 5,531,586 5.9% 3,564,086 64.4% 2,255,084 2.5% 6,840,588 303.3% - other 484,201 0.6% 489,837 0.5% -5,636 -1.2% 425,183 0.5% 59,018 13.9% Other payables 776,503 0.8% 685,193 0.7% 91,310 13.3% 825,658 0.9% -49,155 -6.0% Total amounts due to customers (item 20 liabilities) 55,331,195 58.7% 51,616,920 55.4% 3,714,275 7.2% 47,126,528 52.3% 8,204,667 17.4% Bonds 37,921,483 40.2% 40,037,379 43.0% -2,115,896 -5.3% 41,096,164 45.6% -3,174,681 -7.7% Certificates of deposit (a)+(c) 1,054,679 1.1% 1,401,428 1.5% -346,749 -24.7% 1,743,734 1.9% -689,055 -39.5% Other certificates (b) 19,995 0.0% 151,542 0.1% -131,547 -86.8% 209,175 0.2% -189,180 -90.4%
Total debt securities issued (item 30 liabilities) 38,996,157 41.3% 41,590,349 44.6% -2,594,192 -6.2% 43,049,073 47.7% -4,052,916 -9.4% of which: securities subscribed by institutional customers: 13,499,813 14.3% 13,720,269 14.7% -220,456 -1.6% 13,939,183 15.5% -439,370 -3.2% The EMTN programme (*) 3,105,637 3.3% 3,123,932 3.4% -18,295 -0.6% 4,273,586 4.7% -1,167,949 -27.3% French certificates of deposit programme (a) 649,944 0.7% 599,943 0.6% 50,001 8.3% 636,403 0.7% 13,541 2.1% The euro commercial paper programme (b) 19,995 0.0% 151,542 0.2% -131,547 -86.8% 209,175 0.2% -189,180 -90.4% The covered bond programme 9,724,237 10.3% 9,844,852 10.5% -120,615 -1.2% 8,820,019 9.9% 904,218 10.3% securities subscribed by ordinary customers: 25,355,945 26.9% 27,700,833 29.7% -2,344,888 -8.5% 28,941,740 32.1% -3,585,795 -12.4% of the Group: - Certificates of deposit (c) 404,735 0.4% 801,485 0.9% -396,750 -49.5% 1,107,331 1.2% -702,596 -63.4% - Bonds: 21,723,818 23.1% 23,610,145 25.3% -1,886,327 -8.0% 24,408,090 27.1% -2,684,272 -11.0% issued by UBI Banca 18,362,564 19.5% 17,930,309 19.2% 432,255 2.4% 16,324,310 18.1% 2,038,254 12.5% issued by the network banks 3,361,254 3.6% 5,679,836 6.1% -2,318,582 -40.8% 8,083,780 9.0% -4,722,526 -58.4% external distribution networks: - Bonds issued by the former Centrobanca 3,227,392 3.4% 3,289,203 3.5% -61,811 -1.9% 3,426,319 3.8% -198,927 -5.8%
Total direct funding 94,327,352 100.0% 93,207,269 100.0% 1,120,083 1.2% 90,175,601 100.0% 4,151,751 4.6%
Due to customers net of the CCG 46,235,523 46,085,334 150,189 0.3% 44,871,444 1,364,079 3.0% Total direct funding net of the CCG and institutional funding 71,731,867 73,955,414 -2,223,547 -3.0% 73,981,334 -2,249,467 -3.0%
(*) The corresponding nominal amounts were €3,044 million as at 30th June 2015, €3,046 million as at 31st December 2014 and €4,219 million as at 30th June 2014.
60 Direct funding from customers
30.6.2015 31.3.2015 Changes A/D % % Figures in thousands of euro A D amount %
Current accounts and deposits 44,684,388 47.4% 44,148,672 48.5% 535,716 1.2% Term deposits 196,241 0.2% 293,085 0.3% -96,844 -33.0% Financing 9,674,063 10.3% 5,643,276 6.2% 4,030,787 71.4% - repurchase agreements 9,189,862 9.7% 5,122,839 5.6% 4,067,023 79.4% of which: repos with the CCG 9,095,672 9.6% 4,982,446 5.5% 4,113,226 82.6% - other 484,201 0.6% 520,437 0.6% -36,236 -7.0% Other payables 776,503 0.8% 732,892 0.8% 43,611 6.0% Total amounts due to customers (item 20 liabilities) 55,331,195 58.7% 50,817,925 55.8% 4,513,270 8.9% Bonds 37,921,483 40.2% 39,205,890 43.0% -1,284,407 -3.3% Certificates of deposit (a)+(c) 1,054,679 1.1% 1,078,432 1.2% -23,753 -2.2% Other certificates (b) 19,995 0.0% 39,993 0.0% -19,998 -50.0%
Total debt securities issued (item 30 liabilities) 38,996,157 41.3% 40,324,315 44.2% -1,328,158 -3.3% of which: securities subscribed by institutional customers: 13,499,813 14.3% 13,459,465 14.8% 40,348 0.3% The EMTN programme (*) 3,105,637 3.3% 3,115,471 3.4% -9,834 -0.3% French certificates of deposit programme (a) 649,944 0.7% 499,947 0.5% 149,997 30.0% The euro commercial paper programme (b) 19,995 0.0% 39,993 0.0% -19,998 -50.0% The covered bond programme 9,724,237 10.3% 9,804,054 10.9% -79,817 -0.8% securities subscribed by ordinary customers: 25,355,945 26.9% 26,708,668 29.3% -1,352,723 -5.1% of the Group: - Certificates of deposit (c) 404,735 0.4% 578,485 0.6% -173,750 -30.0% - Bonds: 21,723,818 23.1% 22,894,574 25.1% -1,170,756 -5.1% issued by UBI Banca 18,362,564 19.5% 18,569,313 20.4% -206,749 -1.1% issued by the network banks 3,361,254 3.6% 4,325,261 4.7% -964,007 -22.3% external distribution networks: - Bonds issued by the former Centrobanca 3,227,392 3.4% 3,235,609 3.6% -8,217 -0.3%
Total direct funding 94,327,352 100.0% 91,142,240 100.0% 3,185,112 3.5%
Due to customers net of the CCG 46,235,523 45,835,479 400,044 0.9% Total direct funding net of the CCG and institutional funding 71,731,867 72,700,329 -968,462 -1.3% (*) The corresponding nominal amounts were €3,044 million as at 30th June 2015 and €3,045 million as at 31st March 2015.
In detail amounts due to customers reached €55.3 billion, up from €47.1 billion in the previous June and from €51.6 billion in December, recording the following performance for the main types of funding:
• current accounts and deposits increased to €44.7 billion having benefited from deposits of liquidity waiting to be invested in asset management products (more specifically the placement of the UBI Sicav sub-fund “Income Opportunities” was in progress at the end of June for which investments of €752 million had already been booked) and also from the waiting game played by customers in an uncertain environment with increasingly less attractive financial returns;
• term deposits reduced to €0.2 billion due to the failure to renew deposits as they matured in the absence of attractive remuneration which previously characterised this type of instrument;
• repurchase agreements with the Cassa di Compensazione e Garanzia (CCG – a central counterparty clearing house) rose significantly to €9.1 billion. The advance repayments made in the last part of 2014 together with the maturities at the beginning of the year of LTROs with the ECB, only partially offset by participation in two TLTRO auctions, resulted in resort to use of this flexible type of funding to cover short-term liquidity requirements, partly in consideration of the negative interest rates applied. The exposure at the end of the first half was therefore affected by the absence of €3 billion of financing, again with the ECB, acquired at the beginning of the year and repaid in May.
Debt securities issued, amounting to €39 billion, had decreased progressively (down €4.1 billion compared with the previous June and down €2.6 billion since December), affected in terms of instrument by a significant fall in bonds (-€3.2 billion and -€2.1 billion respectively),
61 which account for 97% of the item. The placement of bonds with ordinary customers was slowed both by the reduction in the yields and also by the overall trend for medium to long- term loans and the total in issue was therefore impacted by maturities. On the institutional front, the Group has not returned to markets since the last issuance in November 2014, causing a consequent reduction in the total due to securities maturing or subject to amortisation.
Certificates of deposit, at €1.1 billion, also recorded a downward trend (-€0.7 billion year-on- year and -€0.3 billion since December), attributable entirely to a decline in business with ordinary customers and partly in relation to a reduction in the component swapped with yen (€0.2 billion, -€0.3 billion and -€0.1 billion respectively) Finally, the total for other certificates, consisting of commercial paper only, fell progressively as a consequence of reduced demand from investors because they do not meet the “eligibility” requirement. When Moody’s raised its rating for the programme at the end of June this led to renewed interest and the total for the item started to rise again after the end of the first half.
In terms of type of customer, FUNDING IN SECURITIES FROM INSTITUTIONAL CUSTOMERS was composed as follows: ó Euro Medium Term Notes (EMTNs) amounting to €3.1 billion, listed in Dublin and issued as part of a programme with an issuance ceiling of €15 billion. There were no new issuances over twelve months, against maturities and buybacks totalling €1.175 billion nominal (only marginal repurchases were recorded amounting to €2.5 million nominal in the six month period); the remaining changes are due to accounting valuations;
• covered bonds (covered bonds) amounting to €9.7 billion, up year-on-year as a result of an issuance of €1 billion nominal made in November 2014, offset by marginal decreases (€50.5 million nominal over twelve months, of which €25.3 million in the first half), in relation to the repayments on two “amortising” instruments (the marginal change shown between the two periods in the table is due solely to accounting valuation effects). UBI Banca had eleven covered bonds in issue at the end of the first half under the first “multioriginator” programme backed by residential mortgages with a €15 billion ceiling for a nominal amount of €9.1 billion (net of amortisation instalments totalling €160.4 million)1. The securities are traded in Dublin. As at 30th June 2015 the residential mortgage asset pool formed at UBI Finance to back the issuances totalled €14.6 billion, of which 21.6% originated by Banca Popolare di Bergamo, 19.4% by Banco di Brescia, 15% by Banca Popolare Commercio e Industria, 13.2% by UBI Banca, approximately 12% by Banca Regionale Europea, 8.3% by Banca Popolare di Ancona, 7.2% by Banca Carime, 1.7% by Banca di Valle Camonica and 1.6% by IW Bank (the former UBI Banca Private Investment). The portfolio continued to show a high degree of fragmentation, including over 185 thousand mortgages with average remaining debt of €78.5 thousand, distributed with 64.9% in North Italy and in Lombardy especially (45.4% of the total). A transfer was made to the programme during the first half, with value date 30th April and effective from 1st May, of €757 million of remaining debt by Banca Carime, Banco di Brescia, Banca Popolare Commercio e Industria and Banca Regionale Europea. A second programme, again “multioriginator”, is also operational with a ceiling of €5 billion, backed by commercial mortgages and by residential mortgages not used in the first programme. So far this programme, listed on the Dublin stock exchange, has only been used for self-retained issuances2. At the end of the period, the commercial and residential mortgage asset pool formed at UBI Finance CB 2 to back the issuances amounted to approximately €3.3 billion, originated as follows: 22.1% by Banco di Brescia; 20.4% by Banca Popolare di Bergamo; 18.4% by Banca Regionale Europea; 17.1% by Banca Popolare di Ancona; 10% by Banca Popolare Commercio e Industria; 8.9% by Banca Carime; and the remaining 3.1% by Banca di Valle Camonica.
1 Two self-retained issuances for a total of €1.4 billion nominal also existed under that same programme at the end of the period, an issue for €0.7 billion in March 2014 and one for €0.7 billion made in October 2014. Because these were repurchased by UBI Banca, these liabilities have not been recognised, in accordance with IFRS. 2 Two issuances in 2012 for a total of €1.58 billion nominal (net of the amortisation instalments falling due in the meantime) and a €0.2 billion issuance in March 2014. Because these were repurchased by UBI Banca, these liabilities have not been recognised, in accordance with IFRS. A fourth issuance for €0.65 billion nominal was made after the end of the first half, with value date 14th July 2015.
62 The portfolio included over 27 thousand mortgages with average residual debt of €120.2 thousand, distributed, as for the first programme, with a high concentration in North Italy (68.4%) and in Lombardy especially (44.5% of the total). A transfer was made to the programme during the first half, with value date 1st June of €314 million of remaining debt by Banco di Brescia, Banca Popolare Commercio e Industria, Banca Popolare di Ancona and Banca Regionale Europea. ó French certificates of deposit amounting to over €0.6 billion and euro commercial paper amounting to €20 million, issued by UBI Banca International as part of programmes for €5 billion and €6 billion respectively, all listed in Luxembourg. Funding acquired from certificates of deposit remained almost unchanged with respect to the comparative periods, with normal fluctuations resulting from maturities and new subscriptions, while funding from the second programme progressively reduced from quarter to quarter due to the failure to meet the “eligibility” requirement already mentioned.
FUNDING IN SECURITIES FROM ORDINARY CUSTOMERS – consisting almost entirely of bonds – amounted to €25.3 billion compared with €28.9 billion in June 2014 and €27.7 billion at the end of the year. As concerns the bond component, the total relating to UBI Banca, amounting to €18.4 billion, increased by €2 billion year-on-year and by €0.4 billion over six months. The slowdown since the end of last year is due to a fall in the yields and a consequent reduction in the attractiveness of this type of investment for customers. In the first six months, 35 issuances were placed for a nominal amount of €1.9 billion against the maturities and repurchases of €1.4 billion nominal (issuances over twelve months totalled €4.5 billion nominal, maturities €2.4 billion nominal and repurchases €0.2 billion nominal). On the other hand, the downward trend for the network banks continued, due to the centralisation of issuances at the Parent: maturities and repurchases of €2.3 billion nominal were recorded over six months, while maturities over 12 months amounted to €4.6 billion and repurchases to €0.1 billion.
Non-captive funding, which had been carried out in the past by the former Centrobanca, and which can therefore only reduce due to maturities, stood at €3.2 billion.
* * *
The table below summarises maturities for Group bonds in issue at the end of June 2015.
Maturities for bonds outstanding as at 30th June 2015
3rd Quarter 4th Quarter Subsequent Nominal amounts in millions of euro 2016 2017 2018 Total 2015 2015 years
UBI BANCA 576 3,385 10,243 4,886 3,571 10,900 33,561 of which: EMTNs - 965 100 800 154 1,025 3,044 Covered bonds - 525 1,801 1,051 51 5,662 9,090 Network banks 489 706 1,194 551 315 56 3,311 Other banks in the Group 1 1 - - 2 - 4 Total 1,066 4,092 11,437 5,437 3,888 10,956 36,876
63 Listed securities
Bonds listed on the MOT (electronic bond market) Nominal amount of Book value as at issue ISIN number 30.6.2015 31.12.2014
IT0001197083 Centrobanca zero coupon 1998-2018 L. 800 billion € 165,287,427 € 164,847,770 IT0001267381 Centrobanca 1998/2018 reverse floater capped L. 320 billion € 129,629,175 € 128,707,931 IT0001300992 Centrobanca 1999/2019 step dow n indicizzato al tasso sw ap euro 10 anni € 170,000,000 € 111,539,521 € 112,449,171 IT0001312708 Centrobanca 1999/2019 step dow n eurostability bond € 60,000,000 € 66,364,616 € 65,655,294 IT0004424435 UBI subordinato low er tier 2 a tasso variabile con ammortamento 28.11.2008-2015 € 599,399,000 € 119,713,440 € 119,426,378 IT0004457070 UBI subordinato low er tier 2 fix to float con rimborso anticipato 13.3.2009-2019 € 370,000,000 € 368,449,419 € 368,104,933 IT0004457187 UBI subordinato low er tier 2 a tasso variabile con ammortamento 13.3.2009-2016 € 211,992,000 € 42,271,669 € 84,556,646 IT0004497050 UBI subordinato low er tier 2 fix to float con rimborso anticipato 30.6.2009-2019 € 365,000,000 € 361,074,778 € 360,645,955 IT0004497068 UBI subordinato low er tier 2 a tasso variabile con ammortamento 30.6.2009-2016 € 156,837,000 € 31,207,647 € 62,422,372 IT0004572860 UBI subordinato low er tier 2 a tasso variabile con ammortamento 23.2.2010-2017 € 152,587,000 € 60,809,129 € 91,271,787 IT0004572878 UBI subordinato low er tier 2 a tasso fisso 3,10% con ammortamento 23.2.2010-2017 € 300,000,000 € 123,657,254 € 185,488,925 IT0004645963 UBI subordinato low er tier 2 a tasso fisso 4,30% con ammortamento 5.11.2010-2017 € 400,000,000 € 243,919,430 € 244,825,197 IT0004718489 UBI subordinato low er tier 2 tasso fisso 5,50% con ammortamento 16.6.2011-2018 Welcome Edition € 400,000,000 € 248,462,987 € 331,286,405 IT0004723489 UBI subordinato low er tier 2 tasso fisso 5,40% con ammortamento 30.6.2011-2018 € 400,000,000 € 248,396,925 € 331,196,658 IT0004767742 UBI subordinato low er tier 2 tasso misto 18.11.2011-2018 Welcome Edition € 222,339,000 € 219,617,259 € 219,227,855 IT0004815715 Unione di Banche Italiane Scpa tasso fisso 3,80% 15.6.2012-15.6.2016 € 20,224,000 € 20,275,738 € 20,290,203 IT0004841778 UBI subordinato low er tier 2 tasso misto 8.10.2012-8.10.2019 Welcome Edition € 200,000,000 € 200,898,634 € 200,831,075 IT0004842370 UBI subordinato low er tier 2 tasso fisso 6% con ammortamento 8.10.2012-8.10.2019 € 970,457,000 € 984,188,230 € 984,597,162 Unione di Banche Italiane Scpa tasso variabile 23.11.2012-23.11.2016 Welcome Edition IT0004851710 "UBI Comunità per l'imprenditoria sociale del sistema CGM" € 17,552,000 € 17,601,119 € 17,604,396 Unione di Banche Italiane Scpa tasso fisso step up 4,00% 19.10.2012-19.10.2016 Welcome Edition IT0004851728 "UBI Comunità per la Comunità di Sant'Egidio" € 20,000,000 € 20,431,066 € 20,467,451 Unione di Banche Italiane Scpa tasso misto 7.12.2012-7.12.2015 Welcome Edition IT0004854490 "Progetto T2 Territorio per il Territorio UBI Banca e Assolombarda" € 18,550,000 € 18,560,322 € 18,561,165 Unione di Banche Italiane Scpa tasso fisso step up 3,00% 31.12.2012-31.12.2015 Welcome Edition IT0004869860 UBI Comunità per Fondazione Umberto Veronesi € 20,000,000 € 20,052,941 € 20,110,607 IT0004874985 Unione di Banche Italiane Scpa tasso fisso step up 3,00% 31.1.2013-31.1.2017 € 157,532,000 € 163,361,357 € 163,571,882 IT0004874993 Unione di Banche Italiane Scpa tasso fisso 3,50% 31.1.2013-31.1.2016 Welcome Edition € 54,419,000 € 55,342,449 € 55,445,367 IT0004895352 Unione di Banche Italiane Scpa step up 5.4.2013-5.4.2016 Welcome Edition C Cesvi € 20,000,000 € 20,552,311 € 20,627,712 IT0004908478 Unione di Banche Italiane Scpa tasso misto 24.5.2013-24.5.2016 Welcome Edition T2 Confapi € 20,000,000 € 20,016,935 € 20,095,027
Covered bonds listed on the Dublin stock exchange Nominal amount of Book value as at issue ISIN number 30.6.2015 31.12.2014
IT0004533896 UBI Covered Bonds due 23 September 2016 3,625% guaranteed by UBI Finance Srl € 1,000,000,000 € 1,056,947,112 € 1,050,594,067 IT0004558794 UBI Covered Bonds due 16 December 2019 4% guaranteed by UBI Finance Srl € 1,000,000,000 € 1,134,097,251 € 1,131,481,213 IT0004599491 UBI Covered Bonds due 30 April 2022 floating rate amortising guaranteed by UBI Finance Srl € 250,000,000 € 159,166,699 € 170,572,286 IT0004619109 UBI Covered Bonds due 15 September 2017 3,375% guaranteed by UBI Finance Srl € 1,000,000,000 € 1,059,335,314 € 1,049,765,120 IT0004649700 UBI Covered Bonds due 18 October 2015 3,125% guaranteed by UBI Finance Srl € 500,000,000 € 513,087,310 € 508,938,787 IT0004682305 UBI Covered Bonds due 28 January 2021 5,25% guaranteed by UBI Finance Srl € 1,000,000,000 € 1,156,351,055 € 1,205,023,987 IT0004692346 UBI Covered Bonds due 22 February 2016 4,5% guaranteed by UBI Finance Srl € 750,000,000 € 773,200,982 € 798,888,169 IT0004777444 UBI Covered Bonds due 18 November 2021 floating rate amortising guaranteed by UBI Finance Srl € 250,000,000 € 180,479,358 € 194,361,284 IT0004966195 UBI Covered Bonds due 14 October 2020 3,125% guaranteed by UBI Finance Srl € 1,500,000,000 € 1,616,484,482 € 1,615,100,303 IT0004992878 UBI Covered Bonds due 5 February 2024 3,125% guaranteed by UBI Finance Srl € 1,000,000,000 € 1,082,787,321 € 1,131,352,483 IT0005067076 UBI Covered Bonds due 7 February 2025 1,25% guaranteed by UBI Finance Srl € 1,000,000,000 € 992,300,408 € 988,774,119
The list does not include the EMTN issues listed in Dublin, securities generated by securitisations performed for internal purposes by UBI Leasing, Banco di Brescia, Banca Popolare di Bergamo, Banca Popolare Commercio e Industria, Banca Popolare di Ancona and the former B@nca 24-7 all listed on the Dublin stock exchange, nor the issues of French certificates of deposit and of commercial paper, listed in Luxembourg.
* * *
The Group has continued to issue “UBI Community Social Bonds” which, notwithstanding the fall in interest rates at sector level, continue to enjoy success with investors due to their very distinctive nature. These are bond instruments where, in addition to providing remuneration at a market interest rate, the investment made by subscribers allows the issuing bank to allocate part of the funding acquired (e.g. 0.50%) to support projects of high social value undertaken by nonprofit organisations, or to pay it into a pool for the disbursement of finance to third sector initiatives. In the first half of 2015, UBI Banca placed six new bonds of which two by the Parent for a total of €61 million, which made it possible to make donations of €245 thousand. Between 2012 (the launch year) and
64 the end of June 2015 the Group placed 64 issuances and acquired funding of over €676 million, allowing donations of over €3.3 million to be made and two loan pools to be created for approximately €19.5 million. Since the beginning of 2015 the range of social bonds has been made even more distinctive with the introduction of an SROI (social return on investment) factor to the structure of social bonds issued by the Parent as an instrument for measuring the social impact of projects supported by UBI Banca. This factor, which constitutes innovation at sector level, is of great importance in terms of accountability to the customers who subscribe them and to the Group’s stakeholders in general. At the same time it allows intervention to be directed towards initiatives that have a greater impact on the community.
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Geographical distribution of direct funding from customers by Finally, the table, “Geographical region of location of the branch (*) distribution of direct funding from (excluding repurchase agreements and bonds) customers by region of location of the branch”, gives the geographical Percentage of total 30.6.2015 31.12.2014 30.6.2014 distribution of traditional funding in Lombardy 60.38% 60.10% 59.78% Italy (consisting of current accounts, Latium 7.59% 7.99% 7.35% savings deposits and certificates of Piedmont 7.96% 7.71% 7.81% deposit). Apulia 4.67% 4.75% 4.81% Calabria 4.48% 4.63% 4.54% Campania 3.98% 3.89% 4.02% As concerns trends for different types of Marches 3.82% 3.89% 4.03% funding, growth was recorded in the Liguria 2.13% 2.07% 2.27% second quarter in particular in funding Emilia Romagna 1.39% 1.34% 1.51% from Northern regions. Veneto 1.06% 1.03% 1.14% Basilicata 0.94% 0.99% 0.99% Umbria 0.50% 0.49% 0.52% Abruzzo 0.46% 0.46% 0.47% Friuli Venezia Giulia 0.24% 0.26% 0.28% Tuscany 0.20% 0.20% 0.26% Molise 0.17% 0.17% 0.18% Trentino Alto Adige 0.02% 0.02% 0.02% Valle d'Aosta 0.01% 0.01% 0.02% Total 100.00% 100.00% 100.00%
North 73.2% 72.5% 72.8% - North West 70.5% 69.9% 69.9% - North East 2.7% 2.6% 2.9% Central 12.1% 12.6% 12.2% South 14.7% 14.9% 15.0%
(*) The aggregates relate to banks only.
65 Indirect funding and assets under management
The indirect funding of the UBI Banca Group amounted to €79.1 billion at the end of June, an increase both year-on-year (+€5.4 billion) and in the first half (+€3.2 billion), notwithstanding a substantial reduction in the second quarter (-€2.3 billion).
Indirect funding from ordinary customers
30.6.2015 31.12.2014 Changes A/B 30.6.2014 Changes A/C % % % Figures in thousands of euro A B amount % C amount %
Assets under custody 31,296,614 39.6% 32,539,171 42.9% -1,242,557 -3.8% 32,904,028 44.7% -1,607,414 -4.9% Assets under management 47,773,645 60.4% 43,353,237 57.1% 4,420,408 10.2% 40,762,807 55.3% 7,010,838 17.2% Customer portfolio management 7,080,108 8.9% 6,790,285 8.9% 289,823 4.3% 6,707,457 9.1% 372,651 5.6% of which: fund based instruments 1,877,230 2.4% 1,695,533 2.2% 181,697 10.7% 1,639,856 2.2% 237,374 14.5% Mutual investment funds and Sicav’s 26,934,023 34.1% 23,948,103 31.6% 2,985,920 12.5% 21,954,955 29.8% 4,979,068 22.7% Insurance policies and pension funds 13,759,514 17.4% 12,614,849 16.6% 1,144,665 9.1% 12,100,395 16.4% 1,659,119 13.7% of which: Insurance policies 13,486,040 17.1% 12,345,893 16.3% 1,140,147 9.2% 11,839,553 16.1% 1,646,487 13.9%
Total 79,070,259 100.0% 75,892,408 100.0% 3,177,851 4.2% 73,666,835 100.0% 5,403,424 7.3%
Indirect funding from ordinary customers
30.6.2015 31.3.2015 Changes A/D % % Figures in thousands of euro A D amount %
Assets under custody 31,296,614 39.6% 33,910,606 41.7% -2,613,992 -7.7%
Assets under management 47,773,645 60.4% 47,491,074 58.3% 282,571 0.6% Customer portfolio management 7,080,108 8.9% 7,451,001 9.1% -370,893 -5.0% of which: fund based instruments 1,877,230 2.4% 1,862,401 2.3% 14,829 0.8% Mutual investment funds and Sicav’s 26,934,023 34.1% 26,768,713 32.9% 165,310 0.6% Insurance policies and pension funds 13,759,514 17.4% 13,271,360 16.3% 488,154 3.7% of which: Insurance policies 13,486,040 17.1% 12,989,495 16.0% 496,545 3.8% Total indirect funding from ordinary customers 79,070,259 100.0% 81,401,680 100.0% -2,331,421 -2.9%
The extraordinary low levels reached by interest rates and yields to maturity on government securities, favoured a growing allocation of household investments to asset management and insurance products which also benefited, especially until May, from the good performance of prices on financial markets. The increase in volatility that occurred in June (following the worsening of the Greek crisis and tensions on Chinese markets) and the consequent impacts on fair values at end of the first half affected performance in the second quarter, mainly for assets under custody, but also for assets under management.
As shown in the chart, the annual trend for indirect funding was driven mainly by assets under management, which grew significantly between July 2014 and March 2015 and returned to levels now close to those prior to the crisis. At the end of June the total stood at €47.8 billion (+€7 billion, year-on-year, of which +€4.1 billion relating to the first quarter of 2015), equivalent to 60.4% of the total aggregate. The general increase was driven primarily by mutual investment funds and Sicav’s, which rose to €26.9 billion (+€5 billion over twelve months; +€3 billion in 2015) partly the result of placements of UBI Pramerica “upfront” funds made over twelve months (a total of approximately €3.2 billion of mutual funds3 and €0.9 billion of Sicav’s4). A new Sicav (UBI Sicav Income Opportunities) has also been placed since 8th June 2015 for a total of over €1 billion which is not included in the totals for the end of the first half because it was settled with a value date of 20th July 2015.
3 Global Multiasset, Multistrategy Volatility Target, Global High Yield Euro Hedged and Obbligazionario obiettivo valore. 4 Global Multiasset 30 Class A.
66 Insurance policies and pension funds also made a constant contribution to the total, rising to €13.8 billion (+€1.6 billion over twelve months; +€1.1 billion since the beginning of the year; +€0.5 billion in the second quarter) in line with the positive trend for the insurance sector. The contribution from customer portfolio management, however, was more modest, increasing to €7.1 billion (+€0.4 billion; +€0.3 billion), despite a decrease in the second quarter of 2015 (-€0.4 billion), attributable entirely to securities under management and the impact of market instability on fair values.
On the other hand, the performance by assets under custody – €31.3 billion at the end of June (-€1.6 billion year-on-year and -€1.2 billion since the beginning of the year) – continued to fluctuate from quarter to quarter affected at times by prices and at times by changes in the composition of portfolios by customers as they moved into asset management instruments. The joint effect of those factors explains the significant reduction recorded in the second quarter (-€2.6 billion).
Indirect funding (end of quarter totals in millions of euro) 50,000
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2008 2009 2010 2011 2012 2013 2014 2015
Assets under management Assets under custody
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At the end of the first half, Assogestioni (national association of asset management companies)5 data relating to the UBI Banca Group asset management companies for mutual funds and Sicav’s, was as follows for ASSETS UNDER MANAGEMENT ORIGINATED6: • positive net inflows of €2.7 billion, amounting to 12.9% of assets under management originated at the end of 2014 (net inflows for the sector nationally on the other hand were €68.7 billion, amounting to 10% of assets managed at the end of the previous year); • an increase in assets over six months (+€3.4 billion; +16.3%) outperforming the sector nationally (+€96.7 billion; +14.2%). Over twelve months the assets under management originated by the UBI Banca Group grew by €4.4 billion (+22.2%) compared with an increase of €157.8 billion for the sector (+25.4%);
5 “Monthly map of assets under management”, June 2015. 6 As part of the periodic surveys performed by Assogestioni, since June 2012 the figure for assets under management for the UBI Banca Group also includes, in consideration of their nature, the management mandates granted to Pramerica Financial – the brand name used by Prudential Financial Inc. (USA) – a UBI Banca partner through UBI Pramerica SGR (€6.2 billion of mutual funds and Sicav’s, of which €1.9 billion in equities and €4.3 billion in bonds as at 30th June 2015). This presentation provides a more consistent account of the actual assets under management of the UBI Banca Group.
67 • assets managed of €24.1 billion which positions the Group in ninth place with a market share of 3.09%, up compared with December (3.04%), but down compared with June 2014 (3.17%).
It must nevertheless be considered that Assogestioni’s sample also includes non-banking operators. Consequently, market shares for the UBI Banca Group in the asset management sector are naturally smaller than those for direct funding, lending and number of branches. If the analysis is restricted to banks only, the Group’s market share in June 2015 was 5.59% – compared with 5.50% in December – placing UBI Banca in fifth position among Italian operators in the sector (5.74% in June 2014).
Fund assets (including assets managed for the UBI Banca Group under a mandate)
UBI Banca Group 30.6.2015 31.12.2014 Changes A/B 30.6.2014 Changes A/C % % % Figures in millions of euro A B amount % C amount %
Equities 2,983 12.4% 2,650 12.7% 333 12.6% 2,500 12.7% 483 19.3% Balanced 6,329 26.2% 5,202 25.1% 1,127 21.7% 5,006 25.3% 1,323 26.4% Bond 12,017 49.8% 10,564 50.9% 1,453 13.8% 9,681 49.0% 2,336 24.1% Monetary funds 1,076 4.4% 1,368 6.6% -292 -21.3% 1,553 7.9% -477 -30.7% Flexible 1,730 7.2% 977 4.7% 753 77.1% 1,008 5.1% 722 71.6%
TOTAL (a) 24,135 100.0% 20,761 100.0% 3,374 16.3% 19,748 100.0% 4,387 22.2%
Sector nationally 30.6.2015 31.12.2014 Changes A/B 30.6.2014 Changes A/C % % % Figures in millions of euro A B amount % C amount %
Equities 166,144 21.3% 141,612 20.7% 24,532 17.3% 131,461 21.1% 34,683 26.4% Balanced 56,272 7.2% 43,636 6.4% 12,636 29.0% 36,001 5.8% 20,271 56.3% Bond 337,132 43.2% 314,558 46.1% 22,574 7.2% 291,909 46.9% 45,223 15.5% Monetary funds 28,756 3.7% 26,703 3.9% 2,053 7.7% 24,251 3.9% 4,505 18.6% Flexible 185,048 23.7% 150,243 22.0% 34,805 23.2% 128,888 20.7% 56,160 43.6% Hedge funds 5,692 0.8% 5,621 0.8% 71 1.3% 7,235 1.2% -1,543 -21.3% Unclassified 983 0.1% 918 0.1% 65 7.1% 2,473 0.4% -1,490 -60.3%
TOTAL (B) 780,027 100.0% 683,291 100.0% 96,736 14.2% 622,218 100.0% 157,809 25.4% Market share of the UBI Banca Group (a)/(b) 3.09% 3.04% 3.17% Market share of the UBI Banca Group limited to banking companies only 5.59% 5.50% 5.74%
The summary figures given in the table confirm the prudential approach of Group customers: • a percentage of lower risk funds (monetary funds and bonds) that is always higher than the figure for the sector, but which has decreased progressively although less sharply over twelve months (down from 56.9% to 54.2%) compared with the Assogestioni sample (down from 50.8% to 46.9%); • at the same time a greater percentage of balanced funds – up year-on-year from 25.3% to 26.2% compared with an average figure for the sector nationally up from 5.8% to 7.2% – also to be seen in relation to the new products (funds and Sicav’s) placed in the last twelve months; • a percentage of equity funds down slightly in the first half of 2015 and constantly lower than the benchmark sample (12.4% compared with 21.3%); • a modest increase in the percentage of flexible funds, concentrated in the first half of the year, compared with a decidedly stronger tendency for the sector; • no investment in hedge funds (0.8% of the Assogestioni sample).
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As concerns assets under management net of Group funds (which includes collective instruments and customer portfolio management), at the end of June the UBI Banca Group was again positioned in eighth place in the sector (in seventh place among Italian banking groups), with assets amounting to €39.7 billion and market share of 2.49%, a progressive increase compared with 2.41% in December (2.50% in June 2014). If the analysis is limited to banks only, the Group’s market share in June 2015 was 5.61%, up on 5.57% in 2014, placing the UBI Banca stably in fourth position among operators in the sector (5.82% in June 2014).
68 General banking business with customers: lending
Performance of the loan portfolio
Composition of loans to customers
of which of which of which 30.6.2015 31.12.2014 Changes A/B 30.6.2014 Changes A/C % non- % non- % non- A B C Figures in thousands of euro performing performing amount % performing amount %
Current account overdrafts 10,047,597 11.8% 1,560,801 10,082,582 11.8% 1,558,164 -34,985 -0.3% 11,073,678 12.7% 1,546,960 -1,026,081 -9.3% Reverse repurchase agreements 171,851 0.2% - 540,882 0.6% - -369,031 -68.2% 400,916 0.5% - -229,065 -57.1% Mortgage loans and other medium to long-term financing 52,453,070 61.5% 5,223,084 51,860,841 60.6% 4,885,165 592,229 1.1% 52,153,647 59.9% 4,694,091 299,423 0.6% Credit cards, personal loans and salary-backed loans 3,267,640 3.8% 325,465 3,586,723 4.2% 388,444 -319,083 -8.9% 3,935,424 4.5% 428,071 -667,784 -17.0% Finance leases 6,448,331 7.5% 1,209,508 6,905,789 8.1% 1,408,470 -457,458 -6.6% 7,120,812 8.2% 1,310,103 -672,481 -9.4% Factoring 2,143,660 2.5% 273,600 2,085,756 2.4% 306,944 57,904 2.8% 2,197,792 2.5% 274,727 -54,132 -2.5% Other transactions 10,800,175 12.7% 1,058,921 10,573,954 12.3% 960,918 226,221 2.1% 10,229,153 11.7% 1,003,396 571,022 5.6% Debt instruments: 7,702 0.0% - 7,696 0.0% - 6 0.1% 7,974 0.0% - -272 -3.4% - structured instruments 6 0.0% - 3 0.0% - 3 100.0% 6 0.0% - 0 0.0% - other debt instruments 7,696 0.0% - 7,693 0.0% - 3 0.0% 7,968 0.0% - -272 -3.4%
Total 85,340,026 100.0% 9,651,379 85,644,223 100.0% 9,508,105 -304,197 -0.4% 87,119,396 100.0% 9,257,348 -1,779,370 -2.0%
Composition of loans to customers
of which of which 30.6.2015 31.3.2015 Changes A/D % non- % non- A D Figures in thousands of euro performing performing amount %
Current account overdrafts 10,047,597 11.8% 1,560,801 9,774,832 11.6% 1,554,441 272,765 2.8% Reverse repurchase agreements 171,851 0.2% - 181,612 0.2% - -9,761 -5.4% Mortgage loans and other medium to long-term financing 52,453,070 61.5% 5,223,084 52,380,186 61.9% 5,074,528 72,884 0.1% Credit cards, personal loans and salary-backed loans 3,267,640 3.8% 325,465 3,397,721 4.0% 361,250 -130,081 -3.8% Finance leases 6,448,331 7.5% 1,209,508 6,790,577 8.0% 1,398,609 -342,246 -5.0% Factoring 2,143,660 2.5% 273,600 2,041,317 2.4% 283,219 102,343 5.0% Other transactions 10,800,175 12.7% 1,058,921 10,060,238 11.9% 893,337 739,937 7.4% Debt instruments: 7,702 0.0% - 7,692 0.0% - 10 0.1% - structured instruments 6 0.0% - 5 0.0% - 1 20.0% - other debt instruments 7,696 0.0% - 7,687 0.0% - 9 0.1% Total 85,340,026 100.0% 9,651,379 84,634,175 100.0% 9,565,384 705,851 0.8%
The negative trend seen in recent years began to end in the first half. The total remained almost unchanged compared to December (-0.4% against an estimate of no change by the Italian Banking Association for the sector nationally for loans to the private sector only) with the first increase in the second quarter (+0.8% compared with an average of +0.1% for Italian banks generally). Nevertheless the year-on-year change was still negative (-2% compared with -1.1% for the sector).
Lending to customers continues to be affected by the fragility of the Italian economy which, although it has come out of a long recession, is still recording modest growth, confirmed by low levels of consumption and investments. These are reflected in a continuing weak demand for credit especially by businesses although there are some signs of improvement for households. Furthermore, the performance over twelve months (-€1.8 billion) is still affected by the reduction in volumes of non-captive product company business (-€1.5 billion), partly in relation to the previous business of discontinued external distribution networks, which will
69 not be replaced, (-€0.4 billion for former B@nca 24-7 loans; -€0.3 billion for UBI Leasing). On the other hand short-term lending by the Parent through the Cassa di Compensazione e Garanzia (CCG – a central counterparty clearing house), subject to a certain degree of variability during the year, increased overall by approximately €0.6 billion. Total outstanding loans in 2015 – still marginally down by €0.3 billion between January and June due to the impact of non-captive business (-€0.8 billion, of which -€0.3 billion relating to discontinued external distribution networks) – showed progressive signs of recovery (+€0.7 billion in the second quarter) benefiting mainly from an increase in the core lending portfolio held by the network banks1. As concerns the medium to long-term component and “mortgage loans and other medium to long-term financing” in particular, positive signals are consolidating in relation to the first effects of the TLTRO (see the special focus below in this respect). The positive trend for new grants was seen again in the first half, which is now sufficient to stably cover repayments, with a ratio of disbursements to repayments of close to 120% for the network banks. While it is still below 100%, the ratio of disbursements to repayments is also improving for the product companies.
As concerns customer market segmentation, 48.3% of the consolidated portfolio at the end of June consisted of loans to the retail market (48.6% in December and 49% in June 2014), 32.4% to the corporate market (31.8%; 32%) and 0.9% to the private banking market (0.9%; 0.8%), while the remaining 18.4% consisted of types of lending not included in the commercial banking portfolios such as leasing, factoring and UBI Banca lending other than that of the merged product companies (18.7%; 18.2%)2.
From the viewpoint of type of lending: • mortgage loans and other medium to long-term loans, amounting to €52.5 billion, were again the main form of lending, accounting for 61.5% of the total. The total grew by €0.6 billion in the first six months of the year due to good performance by new grants to network bank customers. The annual increase, however, was €0.3 billion, even though the trend for mortgages continues to incorporate the natural fall in the remaining outstanding total for former B@nca 24-7 loans currently managed by the Parent (-€0.3 billion over twelve months; -€0.2 billion since the beginning of the year; -€0.1 billion in the quarter). On the basis of management accounting figures, in June residential mortgages net of impairment losses had risen to €24.7 billion, of which €22.6 billion granted to consumer households and €2.1 billion to businesses (€24.5 billion both in March and December, of which €22.3 billion to households and €2.2 billion to businesses), even including the above- mentioned repayments of B@nca 24-7 loans; • reverse repurchase agreements, which were stable in the second quarter at €0.2 billion, had nevertheless fallen both over six months (-€0.4 billion) and year-on-year (-€0.2 billion) and reflect specific UBI Banca business with the CCG; • finance lease lending, relating almost entirely to UBI Leasing, fell further to €6.4 billion, compared with December a decrease of approximately €0.5 billion of which over two thirds relating to the second quarter of 2015. The change compared with June 2014 (-€0.7 billion) continues to be affected mainly by the discontinuation of indirect distribution networks and the consequent action taken to refocus business on the captive market in recent years (-€0.3 billion over twelve months; -€0.1 billion since December); • factoring loans, consisting of over €2.1 billion granted mainly by UBI Factor, remained almost unchanged year-on-year, partly the result of a €0.1 billion recovery in the second quarter of 2015; • the different forms of consumer credit, which totalled €3.3 billion, are being affected more than other items by the discontinuation of distribution networks and the rationalisation of non-captive business. They fell by €0.7 billion over twelve months due to decreases both in the business transferred to Prestitalia (salary backed lending, down €0.5 billion) and in the remaining business of the former B@nca 24-7 contributed to UBI Banca (personal, special
1 In the second quarter the reduction in non-captive business (-€0.4 billion, of which -€0.14 billion relating to discontinued external distribution networks) was almost entirely offset by greater lending of a technical nature by the Parent with the CCG (+€0.3 billion). 2 Any marginal differences there may be compared with the percentages published previously are the result of partial changes in the composition of customer portfolios made in the last quarter.
70 purpose loans, credit cards, current account overdrafts and other types of lending; -€0.3 billion). This compares with a positive trend for network bank business (+€0.1 billion). Although progressively slowing, the year-on-year trend continued again in the first half of 2015; • other short-term forms of lending, which totalled €20.8 billion, recovered by over €1 billion between April and June, attributable mainly to corporate business, comprised as follows: €0.3 billion of current account overdraft lending and €0.7 billion of “other transactions” (loans for advances, portfolio, import/export transactions, very short term lending, etc.), influenced also by Parent business with CCG (+€0.3 billion). This performance more than offset the fall recorded in the first quarter (-€0.8 billion). The year-on-year decrease of €0.4 billion resulted from a reduction in current account lending (-€1 billion) partially offset by an increase in “other transactions” (+€0.6 billion), driven by the business already mentioned with the CCG.
From the viewpoint of maturities, the year-on-year decrease in the loan portfolio affected, although to differing degrees, both medium to long-term loans (down €1 billion to €62.2 billion), accounting for 72.9% of the total, and short-term loans (down €0.8 billion to €23.1 billion), notwithstanding the appreciable recovery in the second quarter (+€1.1 billion).
In consideration of the trend for the two aggregates, the loan to deposit ratio stood at 90.5% compared with 91.9% in December and 96.6% in June 2014.
Distribution of loans by economic sector and NACE code (economic sector code - Bank of Italy classification)
Management accounting figures for the gross loan portfolio of the UBI Banca Group
30.6.2015 31.12.2014
Manufacturing and service companies (non-financial companies and producer households) 56.4% 54.6% of which: manufacturing activities: 15.1% 14.0% - Metallurgy, fabrication of metal products and processing of non-metallic minerals 4.4% 4.1% - Foodstuff, beverage and tobacco industries 1.9% 1.6% - Fabrication of machinery 1.7% 1.6% - Textile industries, tailoring of articles in leather and fur, fabrication of articles in leather and similar 1.5% 1.4% - Fabrication of oil refinery, chemical and pharmaceutical products 1.2% 1.0% - Fabrication of electronic products, electrical and non-electrical equipment 1.1% 1.0% - Fabrication of articles in rubber and plastic 0.9% 0.9% - Timber industry and fabrication of furniture 0.8% 0.8% - Fabrication of paper and paper products, printing and reproduction of recorded media 0.6% 0.6% - Fabrication of motor vehicles, trailers, semitrailers and other means of transport 0.5% 0.5% - Other manufacturing industries 0.5% 0.5% Real estate activities 9.3% 9.0% Wholesale and retail commerce, repair of motor vehicles and motorcycles 9.0% 8.7% Constructions 8.8% 8.8% Professional, scientific and technical activities 2.4% 2.2% Supply of electricity, gas, steam and air conditioning 2.1% 2.4% Accommodation and catering services 1.9% 1.9% Agriculture, forestry and fishing 1.9% 1.8% Transport and warehousing 1.8% 1.7% Information and communication services 1.2% 1.2% Hire, travel agency, business support services 1.0% 1.0% Water supply; sewerage, waste management and cleanup activities 0.5% 0.4% Financial and insurance activities 0.3% 0.4% Extraction of minerals from quarries and mines 0.1% 0.1% Residual activities 1.0% 1.0% Consumer households 36.1% 36.0% Financial companies 3.3% 3.6% Public administrations 1.2% 1.3% Other (not-for-profit institutions and the rest of the world) 3.0% 4.5% Total 100.0% 100.0%
The table gives, in management accounting figures, the distribution of lending by economic sector and ATECO code (economic sector - Bank of Italy classification) of consolidated loans gross of impairment losses as at 30th June 2015.
71 As shown, 92.5% of outstanding loans were destined to manufacturing and service companies, with a growing percentage for the manufacturing sector, and to consumer households taken together, which reflects the traditional Concentration of risk attention paid by the Group to its local (largest customers or groups as a percentage of total loans and guarantees) communities.
Customers or 30.6.2015 31.3.2015 31.12.2014 30.9.2014 30.6.2014 Groups In terms of concentration, the end of
Largest 10 2.8% 2.6% 2.7% 2.5% 2.6% June figure shows a marginal increase Largest 20 4.7% 4.5% 4.6% 4.4% 4.5% compared with all the comparative Largest 30 6.1% 5.7% 6.0% 5.7% 5.8% periods although still at very low levels, Largest 40 7.2% 6.7% 7.0% 6.7% 6.8% which confirms the constant attention Largest 50 8.0% 7.6% 7.9% 7.5% 7.7% that the Group pays to this aspect.
As concerns “large exposures”, the June supervisory report prepared on the basis of the provisions of the new Basel 33 rules, in force since 1st January 2014, shows three positions for an amount equal to or greater than 10% of the qualifying capital, for a total of €34.3 billion. In detail: • €21.5 billion relate to the Ministry of the Treasury, mainly for investments in government securities by the Parent; • €10 billion to the CCG in relation to business by the Parent; • €2.8 billion to the Ministry of the Economy and Finance4.
In consideration, amongst other things, of the application of a zero weighting factor for transactions with the government, no positions of actual risk for the Group exist after weightings. The percentage of the qualifying capital is well below the limit of 25% set for banking groups for each of the exposures reported.
A summary of the geographical Geographical distribution of loans to customers by region of distribution of lending in Italy is given location of the branch (*) in the table “geographical distribution of loans to customers by region of Percentage of total 30.6.2015 31.12.2014 30.6.2014 location of the branch”. Lombardy 67.34% 67.95% 67.75% At the end of the first half, the total Piedmont 6.35% 6.34% 6.52% share of loans to northern regions Latium 5.57% 5.15% 5.27% amounted to 81% of the total, (of Marches 4.17% 4.11% 4.08% Liguria 2.78% 2.81% 2.84% which 76.5% to the North-West), down Campania 2.65% 2.62% 2.58% on the comparative periods, while that Emilia Romagna 2.42% 2.35% 2.30% granted to central regions was slightly Apulia 2.31% 2.33% 2.31% up accounting for 10.7%. The Calabria 1.91% 1.98% 1.97% remaining 8.3% was to southern Veneto 1.77% 1.70% 1.70% Umbria 0.73% 0.71% 0.71% regions. Abruzzo 0.70% 0.66% 0.67% As concerns Lombardy in particular, Basilicata 0.43% 0.43% 0.43% Friuli Venezia Giulia 0.32% 0.30% 0.33% the year-on-year decrease also reflects Molise 0.26% 0.26% 0.26% the trend in progress for Parent loans, Tuscany 0.24% 0.25% 0.24% due to both the natural reduction of Valle d'Aosta 0.04% 0.04% 0.03% the remaining former B@nca 24-7 Trentino Alto Adige 0.01% 0.01% 0.01% loans, the decrease in former Total 100.00% 100.00% 100.00% Centrobanca business and a reduction in loans to Group companies. North 81.0% 81.5% 81.5% - North West 76.5% 77.2% 77.2% This tendency is being marginally - North East 4.5% 4.3% 4.3% offset by an increase in lending Central 10.7% 10.2% 10.3% business in Latium and some regions South 8.3% 8.3% 8.2% of the North-East. (*) The aggregates relate to banks only.
3 Bank of Italy Circulars No. 285 and No. 286 of 17th December 2013 and subsequent updates. 4 Exposure to the Ministry of the Economy and Finance relates to current and deferred tax assets and it has been reported following a refinement of the regulations made in the fourth quarter of 2014.
72 Financing with funds provided by the European Central Bank (TLTRO) As concerns targeted longer term refinancing operations (TLTROs) carried out by the ECB with a view to improving the monetary policy transmission mechanism, after taking part in the second operation that took place in December 2014 (TLTRO 2), receiving €3.2 billion, the UBI Banca Group also took part in the third operation in March 2015 (TLTRO 3) and was allotted €2.9 billion. The total amount of €6.1 billion allotted to the Group was used to form specific loan pools by UBI Banca and the network banks for customers belonging to the “Private & Corporate Unity” market (€4.2 billion) and to the retail market (€1.9 billion).
As at 31st July 2015, financing totalling approximately €7.2 billion had been applied for by customers, of which over €4 billion had already been granted and €1.4 billion approved. In detail: • approximately €6 billion by private banking and corporate customers (€3.3 billion of financing already granted and €1.3 billion approved); • €1.2 billion by retail customers (€0.7 billion already granted and €0.1 billion approved)5.
Business with guarantee associations and bodies As concerns business backed by guarantee funds and bodies, as a result of new grants of loans in the first half – amounting to €733 million (+10.2% compared with the same period in 2014) relating to 8,735 transactions (-5.6%) – total loans backed by guarantee bodies and guarantee funds, such as the Guarantee Fund for SMEs (pursuant to Law No. 662/1996) and the funds managed by the SGFA (fund management company for the agricultural and food sector) for agricultural concerns, amounted to approximately €3.6 billion at the end of June. Again in 2015 work continued on the revision of existing arrangements with guarantee bodies, needed due to developments relating to competition and the ownership structure of guarantee bodies, affected by ownership reorganisations and mergers, and also by the transformation of some guarantee bodies into intermediaries supervised by the Bank of Italy.
Initiatives in co-operation with the European Investment Bank (EIB) In the first half of 2015 lending under subsidised terms and conditions drawn from loan pools, which involve funding by the European Investment Bank, continued. More specifically, loans were granted for an amount of approximately €100 million drawn from the following loan pools: − a loan pool of €150 million to finance investments by “Mid Cap” companies (“Mid Cap II”), signed on 27th June 2014; − a loan pool of €200 million to finance investments by “SMEs” (“Loan for SMEs I”), signed on 10th January 2014; − a loan pool of €200 million, to finance investments by “SMEs” (“Loan for SMEs II”), signed on 26th May 2014; − a loan pool of €200 million, to finance investments by “SMEs” (“Loan for SMEs III”), signed on 18th December 2014; − a loan pool of €50 million, to finance investments by “SMEs” and “Mid Cap” companies that support youth employment (“Jobs for Youth”), signed on 30th January 2014.
On the basis of long-standing positive collaboration, the UBI Banca Group concluded a further loan pool agreement with the EIB for €50 million on 28th May 2015, the use of which will begin shortly. The loan pool is entitled “Loan for Agriculture SMEs & Mid Caps” to finance companies operating in the agricultural, food and related sectors to implement investment projects and to support the need for working capital in the medium to long-term.
5 At the end of the first half, financing totalling €6.6 billion had been applied for by customers, of which €3 billion already granted and €1.7 billion approved. In detail: €5.5 billion from private banking and corporate customers (€2.4 billion of financing already granted and €1.6 billion approved); €1.1 billion from retail customers (€0.6 billion already granted and approximately €0.1 billion approved).
73 Risk
Change in gross non-performing exposures (previously At the end of June the total gross non- termed deteriorated loans) in the first half of each year (amounts in millions of euro) performing exposures (termed “gross 1,100 deteriorated loans” in previous financial 1,050 1,000 reports) of the Group amounted to €13.4 950 billion, an increase of €319 million compared 900 with December (+2.4%). As shown in the 850 800 chart, although it had increased compared 750 with 2014, that change was nevertheless an 700 650 improvement compared with first half periods 600 in previous years, which confirms the signs 550 that the stabilisation of credit quality in 500 450 progress since the beginning of 2014 is 400 continuing. 350 300 250 The performance compared with December is 200 the aggregate result of an increase in “bad 150 100 loans” (termed “non-performing exposure” in 50 previous financial reports) (+€277.5 million; 0 2008 2009 2010 2011 2012 2013 2014 2015 +4.2%), which slowed in the second quarter, and in “unlikely to pay” loans (+€206.1 million; +3.5%), only marginally offset by a fall in exposures past due and/or in arrears (- €164.6 million; -29.7%)6.
A similar trend was recorded year-on-year. The rise of €579.7 million (+4.5%), was determined by an increase in bad loans (+€478.6 million) and in “unlikely to pay” loans (+€396.7 million), against a fall in exposures past due and in arrears (-€295.6 million).
The signs of improvement on the risk front are also result of the following: − on the one hand, a more favourable risk profile in the performing portfolio, which over six months saw a further increase in the lowest risk classes from 71% to 72.6% of the total; − on the other hand, the numerous initiatives taken by the Group in recent years in terms of internal reorganisation and operating processes to improve credit risk management, as well as a decision taken to focus lending on the captive channel.
Net non-performing Gross non-performing exposures: 2015 2014 exposures (termed quarterly changes “net deteriorated 2Q 1Q 4Q 3Q 2Q 1Q Figures in thousands of euro loans” in previous Bad loans 101,554 175,956 -24,157 225,254 335,287 130,195 financial reports) Unlikely to pay loans 107,800 98,263 107,182 83,458 -210,088 8,456 amounted to €9.7 Former impaired loans 136,185 23,083 102,244 46,452 -162,579 -5,048 th Former restructured loans -28,385 75,180 4,938 37,006 -47,509 13,504 billion as at 30 Exposures past due and/or in arrears -68,867 -95,716 -123,460 -7,552 4,309 -153,887 June, an increase Gross non-performing exposures 140,487 178,503 -40,435 301,160 129,508 -15,236 compared with twelve transfers from performing exposures 625,082 649,925 708,389 663,234 637,065 623,163 months before transfers into performing exposures -147,623 -212,358 -140,876 -99,302 -171,812 -356,074 (+€394 million; +4.3%), but slowing in the first half (+€143.3 million; +1.5%).
In terms of types of loan, the table “composition of loans to customers”, shows that annual growth in net non-performing exposures is again concentrated in the item “mortgage loans and other medium to long-term loans”, backed moreover by collateral, which results automatically in a lower level of coverage.
Total coverage improved over twelve months from 27.61% to 27.80% (27.13% in December), partly due to increased provisioning, notwithstanding the high percentage of positions backed by collateral (written down less also in relation to the precautionary loan to value (LTV) ratio employed for loans granted by the Group) and transactions to dispose of bad loans concluded
6 This set of three classes constitutes the aggregate “non-performing exposures”, according to the EBA Implementing Technical Standards (ITS) document. The previous concepts of “impaired loans” and “restructured loans” have therefore been withdrawn. The explanatory notes to the condensed interim consolidated financial statements as at and for the period ended 30th June 2015 should be consulted for further information.
74 by the Group, which between October 2014 and June 2015 involved a series of positions with high levels of provisioning.
As concerns performing loans, these returned to growth in the second quarter of 2015, with coverage of 0.58% at the end of June, almost unchanged compared with June 2014 (0.57%), although down slightly on December (0.63%), mainly due to the improvement in the risk profile of the performing portfolio.
BAD LOANS (termed “non-performing loans” in previous financial reports)
Gross bad loans (termed “gross deteriorated loans” previously) rose over six months from €6.6 billion to €6.8 billion, up €277.5 million (+4.2%), of which only €101.6 million relating to the second quarter. Year-on-year growth, on other hand, was €478.6 million (+7.5%). As shown in the table reporting quarterly changes, the latter trend incorporates a slight reduction in the last quarter of 2014, which, moreover, had benefited from disposals of positions for a significant amount.
As already reported, disposals of mainly unsecured bad loans were carried out over twelve months amounting to approximately €350 million as follows: • €250 million in the second half of 2014, of which €232.6 million in last three months of the year, written-down on average by 80% and relating to UBI Banca (the former B@nca 24-7 and the former Centrobanca portfolios) and to the network banks; • €100.5 million in the first half of 2015, written down on average by 69% and relating to the Parent, the network banks and UBI Leasing.
The annual growth in the outstanding gross total was almost general, affecting the network banks, UBI Leasing and UBI Banca to differing degrees.
Net bad loans (termed “net deteriorated loans” previously) rose from €4 billion to €4.2 billion, an increase of €162.2 million (+4%) in the first half, of which €72.8 million attributable to the second quarter. The rise compared with June 2014 was €415.9 million (+11%).
Net bad loans backed by collateral reached €2.9 billion (+€0.1 billion compared with both March and December; +€0.3 billion over twelve months with a percentage which rose to 68.1% (67.9% in March; 67.5% in December; 67.7% in June 2014) having benefited in this case too from the disposals of mainly unsecured loans mentioned above.
An analysis of movements in the first six months of the year compared with the same period in 2014 shows the following: • a fall in total new inflows (-22%), attributable entirely to transfers from other categories of non-performing exposures, above all from “unlikely to pay” loans, while inflows from performing loans remained practically unchanged; • a decrease of €4.7 million for outflows to performing status; • a reduction in write-offs (-19%); • an increase in receipts (+11%) and in profits on disposals, in the latter case mainly in relation to transactions carried out in the second quarter of 2015.
The ratio of bad loans to loans rose over twelve months from 6.97% to 7.63% in gross terms and from 4.33% to 4.91% in net terms, affected in part also by the changes in the size of the total portfolio of loans to customers.
At the end of the first half, net bad loans with no backing in terms of either collateral or personal guarantee as a percentage of the total stood at 11.37% (12.19% in March; 11.52% in December; 12.49% in June 2014).
75 Loans and advances to customers as at 30th June 2015
Impairment Figures in thousands of euro Gross exposure Carrying amount Coverage (*) losses
Non-performing exposures (previously termed "deteriorated loans") (14.94%) 13,367,852 3,716,473 (11.31%) 9,651,379 27.80% of which: forborne (2.77%) 2,482,813 378,584 (2.47%) 2,104,229 15.25% - Bad loans (previously termed "non- performing loans") (7.63%) 6,829,138 2,641,811 (4.91%) 4,187,327 38.68% - “Unlikely to pay” loans (6.88%) 6,149,663 1,053,687 (5.97%) 5,095,976 17.13% - former impaired loans (5.84%) 5,222,860 874,203 (5.10%) 4,348,657 16.74% - former restructured loans (1.04%) 926,803 179,484 (0.87%) 747,319 19.37% - Past due loans (0.43%) 389,051 20,975 (0.43%) 368,076 5.39% Performing loans (85.06%) 76,127,031 438,384 (88.69%) 75,688,647 0.58% of which: forborne (2.62%) 2,342,201 35,264 (2.70%) 2,306,937 1.51% Total 89,494,883 4,154,857 85,340,026 4.64% of which: forborne (5.39%) 4,825,014 413,848 (5.17%) 4,411,166 8.58% The item as a percentage of the total is given in brackets.
Loans and advances to customers as at 31st March 2015
Impairment Figures in thousands of euro Gross exposure Carrying amount Coverage (*) losses
Non-performing exposures (previously termed "deteriorated loans") (14.90%) 13,227,365 3,661,981 (11.30%) 9,565,384 27.68% of which: forborne (2.44%) 2,168,759 318,185 (2.19%) 1,850,574 14.67% - Bad loans (previously termed "non- performing loans") (7.58%) 6,727,584 2,613,064 (4.86%) 4,114,520 38.84% - “Unlikely to pay” loans (6.81%) 6,041,863 1,027,640 (5.92%) 5,014,223 17.01% - former impaired loans (5.73%) 5,086,675 845,768 (5.01%) 4,240,907 16.63% - former restructured loans (1.08%) 955,188 181,872 (0.91%) 773,316 19.04% - Past due loans (0.51%) 457,918 21,277 (0.52%) 436,641 4.65% Performing loans (85.10%) 75,525,411 456,620 (88.70%) 75,068,791 0.60% of which: forborne (2.70%) 2,391,712 36,263 (2.78%) 2,355,449 1.52% Total 88,752,776 4,118,601 84,634,175 4.64% of which: forborne (5.14%) 4,560,471 354,448 (4.97%) 4,206,023 7.77% The item as a percentage of the total is given in brackets.
Loans and advances to customers as at 31st December 2014
Impairment Figures in thousands of euro Gross exposure Carrying amount Coverage (*) losses
Non-performing exposures (previously termed "deteriorated loans") (14.55%) 13,048,862 3,540,757 (11.10%) 9,508,105 27.13% of which: forborne (2.14%) 1,922,814 269,707 (1.93%) 1,653,107 14.03% - Bad loans (previously termed "non- performing loans") (7.31%) 6,551,628 2,526,549 (4.70%) 4,025,079 38.56% - “Unlikely to pay” loans (6.63%) 5,943,600 989,889 (5.78%) 4,953,711 16.65% - former impaired loans (5.65%) 5,063,592 826,960 (4.95%) 4,236,632 16.33% - former restructured loans (0.98%) 880,008 162,929 (0.83%) 717,079 18.51% - Past due loans (0.61%) 553,634 24,319 (0.62%) 529,315 4.39% Performing loans (85.45%) 76,617,912 481,794 (88.90%) 76,136,118 0.63% of which: forborne (2.71%) 2,428,813 35,722 (2.79%) 2,393,091 1.47% Total 89,666,774 4,022,551 85,644,223 4.49% of which: forborne (4.85%) 4,351,627 305,429 (4.72%) 4,046,198 7.02% The item as a percentage of the total is given in brackets.
Loans and advances to customers as at 30th June 2014
Impairment Figures in thousands of euro Gross exposure Carrying amount Coverage (*) losses
Non-performing exposures (previously termed "deteriorated loans") (14.04%) 12,788,137 3,530,789 (10.63%) 9,257,348 27.61% of which: forborne (6.97%) 6,350,531 2,579,119 (4.33%) 3,771,412 40.61% - Bad loans (previously termed "non- performing loans") (6.32%) 5,752,960 918,958 (5.55%) 4,834,002 15.97% - former impaired loans (5.40%) 4,914,896 797,527 (4.73%) 4,117,369 16.23% - former restructured loans (0.92%) 838,064 121,431 (0.82%) 716,633 14.49% - Past due loans (0.75%) 684,646 32,712 (0.75%) 651,934 4.78%
Performing loans (85.96%) 78,310,845 448,797 (89.37%) 77,862,048 0.57% Total 91,098,982 3,979,586 87,119,396 4.37% The item as a percentage of the total is given in brackets.
(*) Coverage is calculated as the ratio of impairment losses to gross exposure. Impairment losses and gross exposures are given net of w rite-offs of positions subject to bankruptcy proceedings.
76 Although up on December, due partly to the appearance of some heavily written-down positions, coverage, which stood at 38.68%, was down both quarter-on-quarter and year-on- year (38.84% in March; 40.61% in June 2014) because of the disposals of mainly unsecured bad loans already mentioned, given their higher level of coverage.
If cases written-off to the income statement relating to creditor actions still in progress are also considered, coverage would in reality have been 53.03% (53.20% in March; 53.36% in December; 55.09% in June 2014). On the other hand, at the end of June coverage for bad loans not backed by collateral considered gross of those write-offs was 68.26% (69.45% in March; 69.40% in December; 71.65% in June 2014).
“UNLIKELY TO PAY” LOANS
Gross unlikely to pay loans (which include positions previously classified as impaired and restructured loans) stood at €6.15 billion, up both in the first half (+€206.1 million; +3.5%) and year-on-year (+€396.7 million; +6.9%). Within the item the most significant increases were recorded for UBI Leasing and the network banks, while the totals for UBI Banca (the former Centrobanca and the former B@nca 24-7 portfolios) and for Prestitalia decreased.
An analysis of movements in the first half compared with the same period in 2014 shows the following: • an increase of 15% in total inflows which reflects an increase in transfers from performing status – partly in relation to the appearance of substantial new positions – only partly offset by a reduction in transfers from exposures past due and/or in arrears; • a reduction in outflows to performing status (-37%); • an increase in write-offs and a reduction in receipts (-10%); • a significant fall in transfers to other non-performing categories and mainly to bad loans (-22%).
As a consequence unlikely to pay loans increased both on December (+€142.3 million; +2.9%) and in the comparison with June 2014 (+€262 million; +5.4%).
Net unlikely to pay loans backed by collateral, limited to the former impaired loans component, rose at the end of June to €3.1 billion (+€0.1 billion compared with March; +€0.2 billion since the beginning of the year; +€0.3 billion over twelve months) and came to account for 71.3% of the relative total (70.7% in March; 69% in December; 67.8% in June 2014). The increase compared with December reflects the reclassification of the Sorgenia position following the signing of a restructuring agreement.
Coverage grew gradually year-on-year from 15.97% to 17.13% (16.65% in December), reflecting a more than proportionate increase in provisions since the second half of 2014, partly in relation to a progressive increase in write-downs of the former impaired component of the total not backed by collateral.
77 Loans to customers: changes in gross non-performing exposures (previously termed "deteriorated exposures") in the first half of 2015
Bad loans Unlikely to pay Past-due Total (previously termed "non- loans exposures Figures in thousands of euro performing loans")
Initial gross exposure as at 1st January 2015 6,551,628 5,943,600 553,634 13,048,862 Increases 741,940 1,232,918 542,718 2,517,576 transfers from performing exposures 63,846 677,063 534,098 1,275,007 transfers from other classes of non-performing exposures 643,810 399,006 756 1,043,572 other increases 34,284 156,849 7,864 198,997 Decreases -464,430 -1,026,855 -707,301 -2,198,586 transfers into performing exposures -1,088 -137,841 -221,052 -359,981 write-offs -244,784 -21,351 -15 -266,150 payments received -172,129 -264,095 -36,449 -472,673 disposals -36,785 - - -36,785 transfers to other classes of non-performing exposure -7,261 -595,933 -440,378 -1,043,572 other decreases -2,383 -7,635 -9,407 -19,425 Final gross exposure as at 30th June 2015 6,829,138 6,149,663 389,051 13,367,852
Loans to customers: changes in gross non-performing exposures in the first quarter of 2015
Bad loans Unlikely to pay Past-due Total (previously termed non- loans exposures Figures in thousands of euro performing loans)
Initial gross exposure as at 1st January 2015 6,551,628 5,943,600 553,634 13,048,862 Increases 345,832 620,362 291,921 1,258,115 transfers from performing exposures 37,235 326,061 286,629 649,925 transfers from other classes of non-performing exposures 296,802 213,590 753 511,145 other increases 11,795 80,711 4,539 97,045 Decreases -169,876 -522,099 -387,637 -1,079,612 transfers into performing exposures -483 -85,034 -126,841 -212,358 write-offs -83,164 -15,018 -9 -98,191 payments received -77,759 -146,501 -19,529 -243,789 disposals -6,103 - - -6,103 transfers to other classes of non-performing exposure -1,654 -269,692 -239,799 -511,145 other decreases -713 -5,854 -1,459 -8,026 Final gross exposure as at 31st March 2015 6,727,584 6,041,863 457,918 13,227,365
Loans to customers: changes in gross non-performing exposures in the first half of 2014
Bad loans Unlikely to pay Past-due Total (previously termed non- loans exposures Figures in thousands of euro performing loans)
Initial gross exposure as at 1st January 2014 5,885,049 5,954,592 834,224 12,673,865 Increases 949,090 1,083,513 823,684 2,856,287 transfers from performing exposures 65,279 384,851 810,098 1,260,228 transfers from other classes of non-performing exposures 846,116 550,093 2,933 1,399,142 other increases 37,695 148,569 10,653 196,917 Decreases -483,608 -1,285,145 -973,262 -2,742,015 transfers into performing exposures -5,795 -220,518 -301,573 -527,886 write-offs -302,505 -6,522 -3 -309,030 payments received -154,702 -292,632 -39,266 -486,600 disposals -6,081 -729 - -6,810 transfers to other classes of non-performing exposure -4,404 -762,325 -632,414 -1,399,143 other decreases -10,121 -2,419 -6 -12,546 Final gross exposure as at 30th June 2014 6,350,531 5,752,960 684,646 12,788,137
78 SORGENIA The agreement pursuant to article 182 bis of the Bankruptcy Law signed by Sorgenia Spa on 14th November 2014 and registered by the Court of Milan on 25th February 2015 took final effect on 16th March 2015. On the following 27th of March contract documents were signed with the banking sector for the final implementation of the agreement which involved the following with regard to the most important accounting aspects: • the subscription by UBI Banca of a 16.67% stake in Nuova Sorgenia Holding Spa, the parent of Sorgenia Spa7, for approximately €8 thousand, recognised within item 40 “available-for-sale financial assets”. For the purposes of classifying this shareholding an investigation was carried out to see if situations existed which might indicate the presence of control or joint control (e.g. shareholder agreements); • the sale without recourse by the UBI Banca Group to Nuova Sorgenia Holding Spa of a portion of the receivables owed by the Sorgenia Group, for valuable consideration of €72 million (i.e. the face value of the receivables); • the subscription by the UBI Banca Group, at the time of the sale of the receivables mentioned in the previous point, of “profit-sharing equity instruments” in Nuova Sorgenia Holding Spa, designed to endow the company with the necessary initial liquidity, for a total of €220 thousand (approximately 13.4%). The instruments in question were recognised within item 40 “available-for-sale financial assets”; • the derecognition, since the conditions pursuant to IAS 39 are met, of additional receivables due from Sorgenia Spa, subject to their transformation into convertible bonds (with compulsory conversion) subscribed by the creditor banks. As a result of subscribing the convertible bonds, the UBI Banca Group recognised a new financial, asset with different characteristics to the receivables derecognised, amounting to €25.2 million within item 40 “available-for-sale financial assets”. As a result, amongst other things, of the conclusion of the disposal of its renewable energy business, in April Sorgenia was able to repay the creditor banks a sum of €70 million, as provided for by the plan, €11.4 million of which to the UBI Banca Group. The UBI Banca Group exposure to the Sorgenia Group as at 30th June 2015 recognised within “unlikely to pay” loans (previously restructured loans), amounted to €147 million (of which unsecured guarantees of €6.37 million) drawn on authorised credit lines totalling €218.1 million (of which unsecured guarantees of €20.34 million), which include €71 million of new credit lines granted as part of the restructuring plan.
EXPOSURES PAST DUE AND/OR IN ARREARS
Gross exposures past due and/or in arrears fell year-on-year from €0.68 billion to €0.39 billion, down €296 million (-43.2%), of which €164.6 million relating to the first half of 2015. This trend, which is common to all companies in the Group over twelve months, nevertheless incorporated the appearance of a series of positions some of substantial amount, relating to the network banks in the first half of 2015 in particular, and to UBI Leasing.
Signs of a progressive normalisation seem also to be emerging from an analysis of movements in the first six months of 2015, which shows the following compared with the same period in 2014: • a fall of €276 million (-34%) in new inflows from performing loan status, which confirms the underlying trend in progress since the beginning of 2013; • a natural reduction at the same time in transfers to other categories of non-performing exposures, mainly to unlikely to pay the loans (-€192 million; -30%); • a decrease in outflows to performing status (-€81 million; -27%) in relation to the progressive reduction in the volumes of the inflows.
In relation, amongst other things, to the increase in provisions made in the first half, coverage over twelve months rose from 4.78% to 5.39% (4.39% in December), in compliance with the Group’s credit policy.
7 The UBI Banca Group is represented on the Board of Directors of Nuova Sorgenia Holding Spa, composed of ten directors and two executive directors.
79 The interbank market and the liquidity position
Italy’s debt position, as measured by the TARGET2 (trans-European settlement system) balance, reduced in the first few months of 2015, the aggregate result of growth in foreign investments in Italian government securities and net foreign funding acquired by resident banks, which was only partly offset by purchases of foreign securities on the part of residents. At the same time the central bank reduced its refinancing of credit institutions and made greater purchases of public and private sector securities for monetary policy purposes. However, the debt position increased in June as a result above all of the liquidity injected by the fourth targeted longer term refinancing operation and also due to the continuation of purchases of securities for monetary policy purposes.
In this context, UBI Banca Group appreciably improved its net interbank position consisting of net debt of approximately €10 billion at the end of December, which reduced to €5.9 billion as at 30th June 2015.
Net interbank position
30.6.2015 31.3.2015 31.12.2014 30.9.2014 30.6.2014 Figures in thousands of euro
Loans and advances to banks 3,191,584 3,331,195 3,340,415 3,329,046 4,078,892 of which: loans to central banks 295,626 312,770 584,353 602,076 649,941 Due to banks 9,049,928 12,360,302 13,292,723 15,588,229 15,964,805 of which: due to central banks 6,103,196 9,101,548 10,305,964 12,184,683 12,180,750 Net interbank position -5,858,344 -9,029,107 -9,952,308 -12,259,183 -11,885,913
Loans and advances excluding central banks 2,895,958 3,018,425 2,756,062 2,726,970 3,428,951 Due to banks excluding central banks 2,946,732 3,258,754 2,986,759 3,403,546 3,784,055 Net interbank position net of central banks -50,774 -240,329 -230,697 -676,576 -355,104
The negative balance, which was seen again twelve months before, is closely related to debt with the central bank for refinancing operations (a total of €6.1 billion of TLTRO operations). Net of those operations, the net interbank position was almost balanced at -€51 million, compared with -€0.2 billion in December and -€0.4 billion in June 2014 (partly in relation to a fall in volumes of lending).
The Group also continues to very safely maintain a positive position in terms of liquidity reserves, demonstrated, amongst other things, by specific short-term (liquidity coverage ratio) and structural (net stable funding ratio) Basel 3 indicators, both greater than 100%1. It must also be stated that these indicators would be greater than one even in the presence of an ordinary funding structure not based on TLTRO support.
Transactions on the interbank market in the first half of the year are reported below.
Loans and advances to banks amounting to €3.2 billion at the end of June, showed no substantial changed compared with December, although changes were recorded in the composition of the item as follows: ó on the one hand, liquidity held with central banks decreased (-€289 million) regarding the centralised account for the compulsory reserve. In reality, the changes in end of period figures are operational and depend on balance management strategies, with account taken of average deposit requirements to be complied with in the reporting period. The Group normally maintains average deposits in line with the requirement;
1 The agreement reached by the Basel Committee on 6th January 2013 established the introduction of the LCR indicator from 1st January 2015 with a minimum level set initially at 60%.
80 ó on the other hand loans to other banks grew by €140 million, a reflection of the performance for other financing (+€355 million, from growth in liquidity as collateral to support the first covered bond programme), only partly offset by a reduction in current accounts (-€212 million), as part of ordinary interbank transactions.
Loans to banks: composition
30.6.2015 31.3.2015 Changes A/B 31.12.2014 Changes A/C 30.6.2014 % % % % Figures in thousands of euro A B amount % C amount % D
Loans to central banks 295,626 9.3% 312,770 9.4% -17,144 -5.5% 584,353 17.5% -288,727 -49.4% 649,941 15.9% Compulsory reserve requirements 293,469 9.2% 310,608 9.3% -17,139 -5.5% 582,171 17.4% -288,702 -49.6% 647,743 15.9% Other 2,157 0.1% 2,162 0.1% -5 -0.2% 2,182 0.1% -25 -1.1% 2,198 0.0%
Loans and advances to banks 2,895,958 90.7% 3,018,425 90.6% -122,467 -4.1% 2,756,062 82.5% 139,896 5.1% 3,428,951 84.1% Current accounts and deposits 1,641,782 51.4% 2,154,417 64.7% -512,635 -23.8% 1,853,551 55.5% -211,769 -11.4% 2,005,332 49.2% Term deposits 21,062 0.7% 22,956 0.7% -1,894 -8.3% 24,572 0.7% -3,510 -14.3% 21,747 0.5% Other financing: 1,233,114 38.6% 841,052 25.2% 392,062 46.6% 877,939 26.3% 355,175 40.5% 1,401,872 34.4% - reverse repurchase agreements ------4 0.0% -4 -100.0% 574,619 14.1% - other 1,233,114 38.6% 841,052 25.2% 392,062 46.6% 877,935 26.3% 355,179 40.5% 827,253 20.3% Debt instruments ------
Total 3,191,584 100.0% 3,331,195 100.0% -139,611 -4.2% 3,340,415 100.0% -148,831 -4.5% 4,078,892 100.0%
Interbank funding amounting to €9 billion at the end of the first half consisted primarily of €6.1 billion2 from the ECB, down by €4.2 billion compared with December, the aggregate result of maturities (€7 billion of LTROs) and new subscriptions (€2.9 billion of TLTRO) in central bank auctions. After the repayment made on 28th May of €3 billion at fixed-rate acquired in the auction at the end of February, the funding consisted entirely of targeted refinancing (TLTROs)3.
Due to banks: composition
30.6.2015 31.3.2015 Changes A/B 31.12.2014 Changes A/C 30.6.2014 % % % % Figures in thousands of euro A B amount % C amount % D
Due to central banks 6,103,196 67.4% 9,101,548 73.6% -2,998,352 -32.9% 10,305,964 77.5% -4,202,768 -40.8% 12,180,750 76.3%
Due to banks 2,946,732 32.6% 3,258,754 26.4% -312,022 -9.6% 2,986,759 22.5% -40,027 -1.3% 3,784,055 23.7% Current accounts and deposits 1,199,566 13.3% 1,301,322 10.5% -101,756 -7.8% 1,059,939 8.0% 139,627 13.2% 1,646,935 10.3% Term deposits 184,580 2.0% 69,742 0.6% 114,838 164.7% 46,590 0.3% 137,990 296.2% 170,902 1.1% Financing: 1,500,726 16.6% 1,835,821 14.9% -335,095 -18.3% 1,830,471 13.8% -329,745 -18.0% 1,763,191 11.0% - repurchase agreements 131,203 1.4% 447,977 3.6% -316,774 -70.7% 384,897 2.9% -253,694 -65.9% 376,962 2.3% - other 1,369,523 15.2% 1,387,844 11.3% -18,321 -1.3% 1,445,574 10.9% -76,051 -5.3% 1,386,229 8.7% Other payables 61,860 0.7% 51,869 0.4% 9,991 19.3% 49,759 0.4% 12,101 24.3% 203,027 1.3% Total 9,049,928 100.0% 12,360,302 100.0% -3,310,374 -26.8% 13,292,723 100.0% -4,242,795 -31.9% 15,964,805 100.0%
Net of that funding, amounts due to banks stood at €2.9 billion, almost unchanged compared with December 2014, as a result of growth in current accounts and term deposits (+€278 million) as part of ordinary transactions on the market, offset by the fall in financing (-€330 million). More specifically, repurchase agreements decreased (-€254 million) following the maturity of an agreement in securities relating to the Parent which was not renewed, while “other financing” also decreased as a consequence of the amortisation of EIB loans.
2 The carrying amount includes interest expense accruing. 3 The situation with regard to unconventional refinancing operations with the ECB can be summarised as follows: - on 17th December 2014, the Group took part in the second auction (it had not participated in the first operation in September 2014) for the allotment of targeted longer term refinancing operations (TLTROs), designed to expand credit to businesses and households, and it was allotted €3.2 billion (these four-year funds mature on 26th September 2018); - on 29th January 2015, the natural maturity date of the first LTRO, UBI Banca repaid the last €2 billion of the financing subscribed on 21st December 2011 for €6 billion of which €4 billion had already been repaid (€1 billion on 8th October and €3 billion on 12th November 2014); - on 26th February 2015, the natural maturity date of the second LTRO, UBI Banca repaid the last €5 billion outstanding (after an initial repayment of €1 billion on 17th December 2014) of the second three-year financing that the Group had been allotted on 29th February 2012; - on 25th March 2015 UBI Banca took part in the third TLTRO auction and was allotted €2.9 billion (these four-year funds mature on 26th September 2018). The Group did not take part in the fourth auction held in June 2015.
81 The item includes medium to long-term funding transactions with the European Investment Bank to support SMEs, which totalled €1.37 billion at the end of June. That funding may be drawn on directly not only by the Parent, inclusive of the former Centrobanca, for a total of €630 million, but also by the network banks. Finally, other payables, which recovered partially to €62 million, also include funds relating to credit card settlement arrangements with Istituto Centrale Banks Popolari (€31 million as at 30th June 2015).
* * *
Eligible assets
30.6.2015 31.3.2015 31.12.2014 30.9.2014 30.6.2014 amount amount amount amount amount nominal eligible nominal eligible nominal eligible nominal eligible nominal eligible amount (net of amount (net of amount (net of amount (net of amount (net of Figures in billions of euro haircuts) haircuts) haircuts) haircuts) haircuts)
Securities owned (AFS, HTM and L&R) (*) 10.05 10.81 13.87 15.90 14.43 15.87 17.72 18.85 17.49 18.26 Government backed bonds ------3.00 2.80 Covered bonds ("self-retained" issues) 3.18 2.63 4.36 3.67 4.36 3.64 3.84 3.18 3.84 3.17 Securitisation of residential mortgages of the former B@nca 24-7 1.01 0.82 1.04 0.85 1.07 0.88 1.11 0.92 1.14 0.92 UBI Leasing leased assets securitisation 0.64 0.55 0.74 0.63 0.84 0.72 0.94 0.80 1.04 0.88 Banco di Brescia securitisation of performing loans to SMEs 0.31 0.27 0.35 0.30 0.39 0.29 0.44 0.37 0.64 0.54 Banca Popolare di Bergamo securitisation of performing loans to SMEs 0.27 0.23 0.35 0.30 0.43 0.37 0.52 0.44 0.62 0.52 Banca Popolare Commercio e Industria securitisation of performing loans to SMEs 0.22 0.19 0.26 0.22 0.29 0.25 0.34 0.29 0.58 0.48 Banca Popolare di Ancona securitisation of performing loans to SMEs 0.44 0.37 0.49 0.42 0.54 0.46 0.60 0.51 0.71 0.59 Loans eligible resulting from participation in ABACO (**) 4.56 2.27 4.09 2.01 3.79 1.70 3.62 1.68 3.84 1.79 Total 20.68 18.14 25.55 24.30 26.14 24.18 29.13 27.04 32.90 29.95
(*) These include government securities available which potentially can be refinanced with the Cassa di Compensazione e Garanzia for the following amounts: 30th June 2015: €10.5 billion (net of haircuts), of which €3.3 billion contributed to the pool and €7.2 billion available, non-pool; 31st March 2015: €15.2 billion (net of haircuts), of which €4.1 billion contributed to the pool and €11.1 billion available, non-pool; 31st December 2014: €13.8 billion (net of haircuts), of which €4.2 billion contributed to the pool and €9.6 billion available, non-pool; 30th September 2014: €14.7 billion (net of haircuts), of which €2.7 billion contributed to the pool and €12 billion available, non-pool; 30th June 2014: €17.7 billion (net of haircuts), of which €3 billion contributed to the pool and €14.7 billion available, non-pool.
(**) ABACO (bank assets eligible as collateral) is the name given to procedures drawn up by the Bank of Italy for the management of loans eligible for refinancing. In order to qualify as eligible, an asset must meet specific requirements contained in Bank of Italy regulations concerning the following: type of debtor (public sector, non-financial company, international and supranational institutions), credit rating (set by external ratings, rating tools of approved providers and internal ratings [for banks authorised by the Bank of Italy to use internal rating models]), minimum amount (€0.03 million for domestic loans) and type of asset.
As at 30th June 2015, the portfolio of assets eligible for refinancing with the central bank, totalled €18.1 billion net of haircuts (consisting of €10.9 billion in the ECB pool and of €7.2 billion of non-pool government securi.ies), down compared with €24.2 billion recorded at the end of last year. The decrease of €6.1 billion in the first half was composed as follows: - government securities down €5 billion. The reduction consisted of €2.6 billion in the pool to back ECB financing (occurring at the time of the maturity of a €3 billion three month financing repaid at the end of May) and €2.4 billion of non-pool eligible assets; - self-retained covered bonds issued under the first programme were down €0.9 billion, following the call of an issue in April; - securitisations (-€0.5 billion euro) and covered bonds issued under the second programme (-€0.1 billion euro) due to ordinary amortisation in the period, which were offset by growth in ABACO assets (up €0.6 billion); - other securities held, down €0.1 billion.
If securities subject to refinancing operations existing with the Cassa di Compensazione e Garanzia (CCG – a central counterparty clearing house), which rose to €8.7 billion at the end of June (up €3.8 billion in the first half, of which €3.7 billion in the second quarter) are added to the portfolio of eligible assets reported above, then total eligible assets of the Group stand at €26.8 billion.
82 The decrease of Available liquidity reserve €2.2 billion 30.6.2015 31.3.2015 31.12.2014 Changes A/C % % % compared with the Management accounting figures in millions of euro - net of haircuts A B C amount % total existing at the ECB pool 10,937 40.8% 13,231 45.2% 14,610 50.3% -3,673 -25.1% end of 2014 was a of which government securities (A) 3,294 12.3% 4,252 14.5% 5,937 20.5% -2,643 -44.5% result of end of Securities eligible not included in the ECB pool 7,203 26.8% 11,057 37.8% 9,555 32.9% -2,352 -24.6% of which government securities (B) 7,203 26.8% 11,057 37.8% 9,552 32.9% -2,349 -24.6% period fair value Total assets eligible 18,140 67.6% 24,288 83.1% 24,165 83.3% -6,025 -24.9% movements (the Government securities refinanced with the CCG (C) 8,689 32.4% 4,955 16.9% 4,861 16.7% 3,828 78.7% amounts are net of Total assets eligible 26,829 29,243 29,026 -2,197 -7.6% haircuts) and also of which government securities (A+B+C) 19,186 71.5% 20,264 69.3% 20,350 70.1% -1,164 -5.7% of disposals of AFS ECB auctions (portion pledged) -6,103 -22.7% -9,102 -31.1% -10,405 -35.8% -4,302 -41.3% Government securities refinanced with the CCG -8,689 -32.4% -4,955 -16.9% -4,861 -16.7% 3,828 78.7% government Available liquidity reserve securities carried (eligible for LCR indicator purposes) 12,037 44.9% 15,186 51.9% 13,760 47.4% -1,723 -12.5% out in the period. of which unpledged government securities 10,497 39.1% 15,186 51.9% 13,757 47.4% -3,260 -23.7%
In consideration of the portion pledged amounting to €6.1 billion, the available liquidity reserve as at 30th June 2015 came to €12 billion (compared with an early warning threshold set by the 2015 financial risks policy of €8 billion) of which €10.5 billion consisting of Italian government securities available for the purposes of the Basel 3 liquidity coverage ratio (compared with an early warning threshold of €6 billion).
83 Financial activities
Group financial assets stood at €21.9 billion as at 30th June 2015 down on €23.7 billion at the end of 2014. Net of financial liabilities these assets came to €21.2 billion (€23.1 billion in December). The fall that occurred during the first half is a result of disposals in the AFS portfolio and the effect of end-of-period recognition of fair values impacted by a decrease in market prices. The total continued to consist almost totally of Italian government securities (93.6%).
Financial assets/liabilities
30.6.2015 31.3.2015 Changes (A) / (B) 31.12.2014 Changes (A) / (C) 30.6.2014 Changes (A) / (D) Carrying Carrying Carrying Carrying Figures in thousands of euro amount % amount % amount % amount % amount % % amount % amount (D) (A) (B) (C)
Financial assets held for trading 1,338,170 6.1% 1,527,401 6.6% -189,231 -12.4% 1,420,506 6.0% -82,336 -5.8% 2,168,661 9.8% -830,491 -38.3% of which: financial derivatives contracts 512,176 2.3% 671,128 2.9% -158,952 -23.7% 618,454 2.6% -106,278 -17.2% 499,630 2.3% 12,546 2.5% Financial assets designated at fair value 197,223 0.9% 198,365 0.9% -1,142 -0.6% 193,167 0.8% 4,056 2.1% 192,408 0.9% 4,815 2.5% Available-for-sale financial assets 16,799,280 76.8% 17,904,652 77.3% -1,105,372 -6.2% 18,554,956 78.1% -1,755,676 -9.5% 16,742,576 75.6% 56,704 0.3% Held-to-maturity investments 3,535,692 16.2% 3,528,010 15.2% 7,682 0.2% 3,576,951 15.1% -41,259 -1.2% 3,049,841 13.7% 485,851 15.9% Financial assets (a) 21,870,365 100.0% 23,158,428 100.0% -1,288,063 -5.6% 23,745,580 100.0% -1,875,215 -7.9% 22,153,486 100.0% -283,121 -1.3% of which: - debt instruments 20,851,133 95.3% 22,046,039 95.2% -1,194,906 -5.4% 22,619,761 95.3% -1,768,628 -7.8% 21,205,509 95.7% -354,376 -1.7% - of which: Italian government securities 20,472,426 93.6% 21,603,439 93.3% -1,131,013 -5.2% 21,904,867 92.2% -1,432,441 -6.5% 20,283,008 91.6% 189,418 0.9% - equity instruments 326,956 1.5% 260,819 1.1% 66,137 25.4% 255,809 1.1% 71,147 27.8% 259,215 1.2% 67,741 26.1% - Units in UCITS. 180,100 0.8% 180,442 0.8% -342 -0.2% 251,556 1.1% -71,456 -28.4% 189,132 0.9% -9,032 -4.8%
Financial liabilities held for trading (b) 647,508 100.0% 740,247 100.0% -92,739 -12.5% 617,762 100.0% 29,746 4.8% 496,946 100.0% 150,562 30.3% of which: financial derivatives contracts 528,362 81.6% 740,247 100.0% -211,885 -28.6% 617,762 100.0% -89,400 -14.5% 496,930 100.0% 31,432 6.3%
Net financial assets (a-b) 21,222,857 22,418,181 -1,195,324 -5.3% 23,127,818 -1,904,961 -8.2% 21,656,540 -433,683 -2.0%
The portfolio consisting of “financial assets held for trading” (€1,338,170 thousand) was smaller than the same portfolio held by the Parent (€1,463,279 thousand) due to the presence of financial derivatives contracts entered into by UBI Banca with the Group network banks and product companies. These instruments, in addition to being subject to intragroup elimination in the consolidation, were classified by the Parent as held for trading because the relative assets hedged were recognised in the balance sheets of the Group network banks and product companies. When the consolidation was prepared, those same instruments, entered into to hedge the underlying assets, were recognised within hedging derivatives. Financial derivatives classified as held for trading held by the Parent amounted to €638,174 thousand in June 2015, while the figure for the Group was €512,176 thousand.
Management accounting figures1 for the 30th June 2015, show the following: - in terms of type of financial instrument, the securities portfolio of the Group was composed as follows: 97.3% (95.8% at the end of 2014) of government securities; 1.8% (3.1%) of corporate securities (of which 57% issued by major Italian and international banks and financial institutions; 70% of these investments in corporate securities also carry an investment grade rating); 0.6% (0.5%) of hedge funds; and the remaining 0.3% (0.6%) consisted of funds and equities; - from a financial viewpoint, floating rate securities accounted for 61.4% (59.1%) of the portfolio2 and fixed rate securities for 35.8% (36.9%), while the remainder was composed of structured instruments (held mainly in the AFS portfolio), equities, funds and convertible securities; - as regards the currency of denomination, 99.7% (unchanged) of the securities were denominated in euro and 0.2% (unchanged) in dollars with currency hedges, while in terms of geographical distribution, 99.9% (unchanged) of the investments (excluding hedge funds) were issued from countries in the euro area; - finally, an analysis by rating (for the bond portfolio only) shows that 99.4% (unchanged) of the portfolio consisted of “investment grade” securities with an average rating of Baa2 (unchanged).
1 The management accounting analysis relates to a smaller portfolio than that stated in the consolidated financial statements, because they exclude equity investments, some smaller portfolios and also financial derivatives contracts held for trading. 2 The fixed rate securities purchased as asset swaps are also considered as floating rate (97% of the floating rate securities).
84 Available-for-sale financial assets
“Available-for-sale financial assets” (AFS), asset item 40, are measured at fair value with the recognition of changes in a separate fair value reserve in equity, except for losses due to reductions in value that are considered significant or prolonged. In this case the reduction in value that occurred in the period is recognised through profit or loss, the amount being transferred from the negative or positive reserve that may have been recognised in equity previously. Following the recognition of impairment losses, recoveries in value continue to be recognised in the separate fair value reserve in equity if they relate to equity instruments and through profit and loss if they relate to debt instruments. Any decreases below the level of the previous impairment losses are recognised through profit and loss. Definitions relating to the fair value hierarchy (levels 1, 2 and 3) are given in Section A.4 of Part A – Accounting Policies in the Notes to the Consolidated Financial Statements in the 2014 Annual Report.
Available-for-sale financial assets: composition
30.6.2015 31.12.2014 Changes (A) / (B) 30.6.2014 Carrying Carrying Carrying Figures in tho usands o f euro L 1 L 2 L 3 amount L 1 L 2 L 3 amount amount % L 1 L 2 L 3 amount (A) (B) (C)
Debt instruments 16,098,530 371,831 25,651 16,496,012 17,336,688 908,890 1,013 18,246,591 -1,750,579 -9.6% 15,607,823 885,802 1,223 16,494,848 of which: Italian government securities 15,917,499 202,630 16,120,129 17,063,694 469,455 - 17,533,149 -1,413,020 -8.1% 15,119,243 454,015 - 15,573,258 Equity instruments 2,676 - 246,887 249,563 2,495 94 177,101 179,690 69,873 38.9% 2,908 - 179,612 182,520 Units in UCITS 10,362 43,343 - 53,705 83,882 44,793 - 128,675 -74,970 -58.3% 11,377 53,831 - 65,208 Financing ------
Total 16,111,568 415,174 272,538 16,799,280 17,423,065 953,777 178,114 18,554,956 -1,755,676 -9.5% 15,622,108 939,633 180,835 16,742,576
Available-for-sale financial assets: composition
30.6.2015 31.3.2015 Changes (A) / (D) Carrying Carrying Figures in thousands of euro L 1 L 2 L 3 amount L 1 L 2 L 3 amount % amount (D) (A)
Debt instruments 16,098,530 371,831 25,651 16,496,012 16,977,857 662,981 26,297 17,667,135 -1,171,123 -6.6% of which: Italian government securities 15,917,499 202,630 - 16,120,129 16,743,112 482,550 17,225,662 -1,105,533 -6.4% Equity instruments 2,676 - 246,887 249,563 3,100 214 179,877 183,191 66,372 36.2% Units in UCITS 10,362 43,343 - 53,705 11,191 43,135 54,326 -621 -1.1% Financing ------Total 16,111,568 415,174 272,538 16,799,280 16,992,148 706,330 206,174 17,904,652 -1,105,372 -6.2%
Available-for-sale financial assets totalled €16.8 billion as at 30th June 2015 and were composed mainly as follows: - €16,309 million in the UBI Banca AFS portfolio (€18,067 million in December 2014); - €308 million in the IW Bank portfolio (€313 million at the end of 2014), consisting almost entirely of floating rate Italian government securities, designed to stabilise the bank’s net interest income, given the nature of its normal operations. The total was affected by a marginal sale (a Republic of Italy security amounting to €3.7 million nominal) in the second quarter.
Total debt instruments3 of €16.5 billion (down €1.8 billion in the first half and down €1.2 billion compared with March), recorded the following performance within the item: - Italian government securities decreased to €16.1 billion (-€1.4 billion and -€1.1 billion respectively): the Parent sold securities amounting to €1.1 billion nominal (€825 million of BTP’s nominal in the first quarter and a Republic of Italy security for €250 million nominal in the second quarter) and a €50 million nominal CTZ matured at the end of June. The totals for the item were impacted significantly by the lower fair values recognised at the end of the period, the consequence of a temporary increase in spreads due to tensions triggered by the Greek crisis. A switching operation was also carried out in June which
3 As at 30th June 2015, as before at the end of 2014, these did not include direct investments in ABS instruments.
85 regarded BTPs for a nominal amount of €0.75 billion and led to a lengthening of the maturity of the investment, making it possible to take advantage of the opportunity offered by the wider interest rate “spread” between the BTP sold and that purchased; - the redemption and sale of €0.3 billion of corporate bonds, issued mostly by Italian and European banks (classified mainly in fair value level two) held in the UBI Banca portfolio (occurring mainly in the first quarter). Equity instruments4 amounted to €249.6 million, up compared with December (€179.7 million). They were affected in the second quarter by the revaluation of the ICBPI share (+€68 million following the price that was agreed when a preliminary sales contract was signed for part of the stake held by UBI Banca in that company5), while units in UCITS – relating almost totally to UBI Banca – decreased to €53.7 million due to the sale of an ETF fund, with a carrying value of €74 million at the end of December. Property funds contained in the UCITS portfolio totalled €15.8 million (€15.6 million at the end of 2014), and recorded an increase as a result in particular of an appreciation in the value of the listed Polis Fund.
Held-to-maturity investments
“Held-to-maturity investments”, asset item 50, are comprised of financial instruments that an entity intends and is able to hold to maturity. These assets are measured at amortised cost with the recognition of impairment losses, or recoveries in value when the reason for the impairment no longer exists, through profit or loss.
Held-to-maturity investments: composition
Carrying 30.6.2015 Carrying 31.12.2014 Changes (A) / (B) Carrying 30.6.2014 amount Fair Value amount Fair Value amount Fair Value Figures in tho us ands o f euro (A) L 1 L 2 L 3 Total (B) L 1 L 2 L 3 Total amount % (C) L 1 L 2 L 3 Total
Debt instruments 3,535,692 3,530,322 - - 3,530,322 3,576,951 3,607,673 - - 3,607,673 -41,259 -1.2% 3,049,841 3,085,020 - - 3,085,020 of which: Italian government securities 3,535,692 3,530,322 - - 3,530,322 3,576,951 3,607,673 - - 3,607,673 -41,259 -1.2% 3,049,841 3,085,020 - - 3,085,020
Financing ------
Total 3,535,692 3,530,322 - - 3,530,322 3,576,951 3,607,673 - - 3,607,673 -41,259 -1.2% 3,049,841 3,085,020 - - 3,085,020
Held-to-maturity investments: composition
Carrying 30.6.2015 31.3.2015 Changes (A) / (D) Carrying amount Fair Value amount (D) Fair Value (A) Figures in thousands of euro L 1 L 2 L 3 Total L 1 L 2 L 3 Total amount % Debt instruments 3,535,692 3,530,322 - - 3,530,322 3,528,010 3,637,378 - - 3,637,378 7,682 0.2% of which: Italian government securities 3,535,692 3,530,322 - - 3,530,322 3,528,010 3,637,378 - - 3,637,378 7,682 0.2%
Financing ------
Total 3,535,692 3,530,322 - - 3,530,322 3,528,010 3,637,378 - - 3,637,378 7,682 0.2%
Held to maturity investments had a book value of €3.5 billion at the end of June 2015. This portfolio, which is held with a view to supporting net interest income, includes BTPs maturing between February 2020 and March 2022 for a total of €3.050 billion nominal.
4 Shareholdings that are not classified as companies subject to control, joint control or significant influence are recognised here. 5 See the section “Significant events in the first half” for further information.
86 Financial instruments held for trading
Financial assets held for trading
Asset item 20, “Financial assets held for trading” (HFT), comprises financial trading instruments “used to generate a profit from short-term fluctuations in price”. They are recognised at fair value through profit or loss – FVPL. Definitions relating to the fair value hierarchy (levels 1, 2 and 3) are given in Section A.4 of Part A – Accounting Policies in the Notes to the Consolidated Financial Statements in the 2014 Annual Report.
Financial assets held for trading: composition
30.6.2015 31.12.2014 Changes (A) / (B) 30.6.2014 Carrying Carrying Carrying Figures in thousands of euro L 1 L 2 L 3 amount L 1 L 2 L 3 amount amount % L 1 L 2 L 3 amount (A) (B) (C)
On-balance sheet assets Debt instruments 819,042 133 254 819,429 795,206 759 254 796,219 23,210 2.9% 1,660,434 133 253 1,660,820 of which: Italian government securities 816,605 - - 816,605 794,767 - - 794,767 21,838 2.7% 1,659,909 - - 1,659,909 Equity instruments 5,288 - 435 5,723 4,544 - 447 4,991 732 14.7% 6,921 - 443 7,364 Units in UCITS 256 - 586 842 241 1 600 842 - - 204 1 642 847 Financing ------Total (a) 824,586 133 1,275 825,994 799,991 760 1,301 802,052 23,942 3.0% 1,667,559 134 1,338 1,669,031
Derivative instruments Financial derivatives 543 495,188 16,445 512,176 890 605,577 11,987 618,454 -106,278 -17.2% 393 499,237 - 499,630 Credit derivatives ------Total (b) 543 495,188 16,445 512,176 890 605,577 11,987 618,454 -106,278 -17.2% 393 499,237 - 499,630
Total (a+b) 825,129 495,321 17,720 1,338,170 800,881 606,337 13,288 1,420,506 -82,336 -5.8% 1,667,952 499,371 1,338 2,168,661
Financial assets held for trading: composition
30.6.2015 31.3.2015 Changes (A) / (D) Carrying Carrying Figures in thousands of euro L 1 L 2 L 3 amount L 1 L 2 L 3 amount amount % (A) (D)
On-balance sheet assets Debt instruments 819,042 133 254 819,429 850,398 243 253 850,894 -31,465 -3.7% of which: Italian government securities 816,605 - - 816,605 849,767 - - 849,767 -33,162 -3.9% Equity instruments 5,288 - 435 5,723 4,073 - 439 4,512 1,211 26.8% Units in UCITS 256 - 586 842 248 1 618 867 -25 -2.9% Financing ------Total (a) 824,586 133 1,275 825,994 854,719 244 1,310 856,273 -30,279 -3.5% Derivative instruments Financial derivatives 543 495,188 16,445 512,176 1,326 645,128 24,674 671,128 -158,952 -23.7% Credit derivatives ------Total (b) 543 495,188 16,445 512,176 1,326 645,128 24,674 671,128 -158,952 -23.7%
Total (a+b) 825,129 495,321 17,720 1,338,170 856,045 645,372 25,984 1,527,401 -189,231 -12.4%
At the end of the period, financial assets held for trading amounted to €1.3 billion and were composed almost entirely of debt securities (€0.8 billion) and financial derivatives (€0.5 billion), the performance of which should be interpreted in strict relation to the corresponding item recognised within financial liabilities held for trading.
The total for Italian government securities, which account for approximately 99% of the on- balance sheet assets, remained stable at €0.8 billion. Net purchases and sales of national government securities in the six month period involved sales of €1,590 million nominal against purchases of €1,625 million (purchases of €850 million nominal against disposals of €800 million nominal in the first quarter and purchases of €775 million nominal against sales of €790 million nominal in the second quarter).
87
The remaining categories were again of negligible amount, composed as follows: - €5.7 million of equity instruments (€5 million at the end of 2014), marginally up due to sales and purchases and increases in the fair value of shares held in the Parent’s portfolio; - €0.8 million of units in UCITS, relating mainly to hedge funds purchased by UBI Banca before 30th June 2007, classified within fair value level three and amounting to €0.6 million.
Financial liabilities held for trading
Financial liabilities held for trading: composition
30.6.2015 31.12.2014 Changes (A) / (B) 30.6.2014 Carrying Carrying Carrying Figures in thousands of euro L 1 L 2 L 3 amount L 1 L 2 L 3 amount amount % L 1 L 2 L 3 amount (A) (B) (C)
On-balance sheet liabilities Due to banks 119,146 - - 119,146 - - - - 119,146 - 16 - - 16 Due to customers ------Debt instruments ------Total (a) 119,146 - - 119,146 - - - - 119,146 - 16 - - 16
Derivative instruments Financial derivatives 941 527,362 59 528,362 300 617,452 10 617,762 -89,400 -14.5% 316 496,614 - 496,930 Credit derivatives ------Total (b) 941 527,362 59 528,362 300 617,452 10 617,762 -89,400 -14.5% 316 496,614 - 496,930 Total (a+b) 120,087 527,362 59 647,508 300 617,452 10 617,762 29,746 4.8% 332 496,614 - 496,946
Financial liabilities held for trading: composition
30.6.2015 31.3.2015 Changes (A) / (D) Carrying Carrying Figures in thousands of euro L 1 L 2 L 3 amount L 1 L 2 L 3 amount amount % (A) (D)
On-balance sheet liabilities Due to banks 119,146 - - 119,146 - - - - 119,146 n.s. Due to customers ------Debt instruments ------Total (a) 119,146 - - 119,146 - - - - 119,146 n.s. Derivative instruments Financial derivatives 941 527,362 59 528,362 82 740,146 19 740,247 211,885- -28.6% Credit derivatives ------Total (b) 941 527,362 59 528,362 82 740,146 19 740,247 -211,885 -28.6%
Total (a+b) 120,087 527,362 59 647,508 82 740,146 19 740,247 -92,739 -12.5%
Financial liabilities held for trading, amounting to €0.6 billion, included an uncovered short position of €0.1 billion among on-balance sheet liabilities – recognised in the second quarter – on an Italian government security and €0.5 billion of financial derivatives, the performance of which should be interpreted in relation to the similar trend recorded by derivative instruments recognised within financial assets.
88 Financial assets designated at fair value
The item “financial assets designated at fair value” is comprised of financial instruments classified as such in application of the fair value option (FVO). These financial assets are recognised at fair value through profit or loss. Definitions relating to the fair value hierarchy (levels 1, 2 and 3) are given in Section A.4 of Part A – Accounting Policies in the Notes to the Consolidated Financial Statements in the 2014 Annual Report.
Financial assets designated at fair value: composition
30.6.2015 31.12.2014 Changes (A) / (B) 30.6.2014 Carrying Carrying Carrying Figures in thousands of euro L 1 L 2 L 3 amount L 1 L 2 L 3 amount amount % L 1 L 2 L 3 amount (A) (B) (C)
Debt instruments ------Equity instruments 1,899 3,000 66,771 71,670 3,224 3,000 64,904 71,128 542 0.8% 3,604 927 64,800 69,331 Units in UCITS 119,760 - 5,793 125,553 116,802 - 5,237 122,039 3,514 2.9% 116,865 - 6,212 123,077 Financing ------
Total 121,659 3,000 72,564 197,223 120,026 3,000 70,141 193,167 4,056 2.1% 120,469 927 71,012 192,408
Financial assets designated at fair value: composition
30.6.2015 31.3.2015 Changes (A) / (D) Carrying Carrying Figures in thousands of euro L 1 L 2 L 3 amount L 1 L 2 L 3 amount amount % (A) (D)
Debt instruments ------Equity instruments 1,899 3,000 66,771 71,670 3,662 3,000 66,454 73,116 -1,446 -2.0% Units in UCITS 119,760 - 5,793 125,553 119,432 - 5,817 125,249 304 0.2% Financing ------Total 121,659 3,000 72,564 197,223 123,094 3,000 72,271 198,365 -1,142 -0.6%
Financial assets designated at fair value related entirely to the Parent and amounted to €197.2 million.
At the end of the quarter this asset class was composed as follows: - €71.7 million of equity instruments, (unchanged in the first half) held as part of merchant banking and private equity business; - €125.5 million of units in UCITS, composed of €119.7 million of listed Tages funds in fair value level one (stable compared with March and up €3 million over six months) and €5.8 million of residual investments in hedge funds in fair value level three (almost unchanged with respect to the comparative periods). A further €0.6 million was recognised within financial assets held trading.
* * *
There are no developments to report with regard to the Madoff affair with respect to the information given in the last annual report, which may therefore be consulted.
89 Exposure to sovereign debt risk
The book value of sovereign debt risk exposures of the UBI Banca Group as at 30th June 2015 was €21.1 billion (€22.7 billion at the end of 2014).
UBI Banca Group: exposures to sovereign debt risk
Country / portfolio of classification 30.6.2015 31.12.2014
Nominal Carrying Nominal Carrying Figures in thousands of euro Fair value Fair value amount amount amount amount
- Italy 18,747,319 21,137,576 21,132,207 19,999,977 22,730,431 22,761,148 financial assets and liabilities held for trading (net exposure) 720,001 697,459 697,459 800,374 794,767 794,767 available-for-sale financial assets 14,196,980 16,125,377 16,125,378 15,327,035 17,538,510 17,538,505 held-to-maturity investments 3,050,000 3,535,692 3,530,322 3,050,000 3,576,951 3,607,673 loans and receivables 780,338 779,048 779,048 822,568 820,203 820,203
- Spain 4,556 4,556 4,556 8 8 8 loans and receivables 4,556 4,556 4,556 8 8 8
- France - - - 364 364 364 loans and receivables - - - 364 364 364
- Holland 10 10 10 10 10 10 loans and receivables 10 10 10 10 10 10
- Argentina 802 707 707 2,420 781 781 financial assets and liabilities held for trading (net exposure) 802 707 707 2,420 781 781
Total on-balance sheet exposure 18,752,687 21,142,849 21,137,480 20,002,779 22,731,594 22,762,311
Details of the UBI Banca Group exposures are given on the basis that, according to the instructions issued by the European supervisory authority (European Securities and Markets Authority, ESMA), “sovereign debt” is defined as debt instruments issued by central and local governments and by government entities and also as loans granted to them.
As shown in the table, the book value of Group exposure to sovereign debt risk continues to be concentrated in Italy and consists of €20.4 billion of Italian government securities (€21.9 billion in December), of which €16.1 billion (-€1.4 billion) classified as available for sale, €3.5 billion (unchanged) classified as held to maturity and €0.8 billion (unchanged) classified as held for trading, considered net of the relative uncovered short positions. The decrease over six months is attributable both to sales within the AFS portfolio and to the negative impact of the fall in market prices recorded in June. Loans of €0.8 billion to government organisations recorded no substantial change.
The following changes were recorded in exposures to other countries: • a recovery, although modest, in factoring business carried on in Spain by UBI Banca International with government counterparties as the debtors; • the elimination of the exposure to France, also in relation to factoring business conducted by UBI Banca International; • no substantial change in marginal exposures to Holland and Argentina.
The Group had no exposure to sovereign Greek debt risk
90 The table shows the distribution by maturity of Italian government securities held in portfolio.
Maturities of Italian government securities
30.6.2015 31.12.2014
Financial Available-for- Held-to- Financial Available-for- Held-to- Carrying Carrying assets held sale financial maturity % assets held sale financial maturity % amount amount for trading (*) assets investments for trading assets investments
Figures in thousands of euro
Up to 6 months - 98,924 - 98,924 0.5% 372 50,062 - 50,434 0.2% Six months to one year 99,955 - - 99,955 0.5% 199,612 99,212 - 298,824 1.4% One year to three years 643,378 2,915,728 - 3,559,106 17.5% 594,780 3,743,926 - 4,338,706 19.8% Three years to five years -45,875 7,765,370 2,366,443 10,085,938 49.6% - 7,851,586 - 7,851,586 35.8% Five years to ten years - 3,219,441 1,169,249 4,388,690 21.5% 1 3,395,529 3,576,951 6,972,481 31.8% Over ten years 1 2,120,666 - 2,120,667 10.4% 2 2,392,834 - 2,392,836 11.0%
Total 697,459 16,120,129 3,535,692 20,353,280 100.0% 794,767 17,533,149 3,576,951 21,904,867 100.0%
(*) Net of the relative uncovered short positions
The average life of the AFS portfolio is 5.9 years (6 years in December 2014), that of the HTM portfolio is 5.3 years (5.8 years), while that of government securities classified within the held for trading portfolio was 2.8 years (1.4 years). The “one year to ten year” group contains 88.6% (87.4% at the end of 2014) of the securities, while 10.4% (11%) of the total is invested in maturities over 10 years; the percentage in the less than twelve month group remains very small (1% compared with 1.6% in December).
With a view to greater transparency on credit risk exposures consisting of debt instruments other than sovereign debt – as requested by the European Securities and Markets Authority (ESMA) in Document No. 725/2012 of 12th November 2012 – a table has been provided summarising total debt instruments other than sovereign debt recognised among the assets of the UBI Banca Group balance sheet as at 30th June 2015 (available-for-sale financial assets, financial assets held for trading, loans and advances to banks and loans and advances to customers).
The book value of these Debt instruments other than government securities recognised within investments totalled consolidated assets
€374 million compared 30.6.2015 with €710 million at the figures in thousands of euro Carrying Nominal end of 2014, mainly as a Issuer Nationality Fair value amount amount consequence of the strong reduction in the Corporate Italy 86,394 86,394 97,720 Corporate banking exposures to Holland 41,388 41,388 38,012 Corporate United States 10,725 10,725 10,195 Italy (-€273 million). Corporate Luxembourg 1 1 1,047 Corporate United Kingdom 10,805 10,805 9,840 To complete the Corporate Spain 22,810 22,810 21,245 disclosures required by Corporate Hungary 10,326 10,326 10,000 Corporate France 32,179 32,179 30,000 th the ESMA, as at 30 Total Corporate 214,628 214,628 218,059 June 2015 (as also in Banking Germany 2 2 3 December 2014) the Banking Italy 159,317 159,317 165,000 Group held no credit Banking Holland 3 3 15 Banking default products, nor did Cyprus 65 65 9,500 Total Banking 159,387 159,387 174,518 the Group carry out any E.I.B. Luxembourg - - - transactions in those Total Supranational - - - instruments during the Total debt instruments 374,015 374,015 392,577 year, either to increase its exposure or to acquire protection.
91 Exposures to some types of products
This section provides an update of the position of the UBI Banca Group with regard to some types of financial instruments, which are considered at high risk since the subprime mortgage crisis in 2007.
Special purpose entities
The involvement of the UBI Group in special purpose entities (SPEs6) concerns the following types: 1. conventional securitisation transactions7 performed by Group member companies in accordance with Law No. 130 of 30th April 1999; 2. the issue of covered bonds, in accordance with Art. 7 bis of Law No.130/1999.
1. The list of special purpose entities (SPEs) used for the securitisations in which the Group is involved is as follows: UBI Lease Finance 5 Srl, 24-7 Finance Srl, UBI Finance 3 Srl, UBI SPV BPA 2012 Srl, UBI SPV BPCI 2012 Srl, UBI SPV BBS 2012 Srl.
The securitisations concerning 24-7 Finance Srl, UBI Lease Finance 5 Srl, UBI Finance 3 Srl, UBI SPV BPA 2012 Srl, UBI SPV BPCI 2012 Srl and UBI SPV BBS 2012 Srl were performed in order to create a portfolio of assets eligible as collateral for refinancing with the European Central Bank, consistent with Group policy for the management of liquidity risk. They were carried out on the following: on performing residential mortgages of the former B@nca 24-7 (24-7 Finance Srl); UBI Leasing lease contracts (UBI Lease Finance 5 Srl); performing loans mainly to small to medium-sized enterprises of Banca Popolare di Bergamo (UBI Finance 3 Srl); and performing loans to small to medium-sized enterprises of Banca Popolare di Ancona (UBI SPV BPA 2012 Srl), Banca Popolare Commercio e Industria (UBI SPV BPCI 2012 Srl) and Banco di Brescia (UBI SPV BBS 2012 Srl). Although Group investment in the ownership capital of the SPEs is limited, the entities listed above are included in the consolidated accounts because these companies are in reality controlled, since their assets and liabilities were originated by Group companies. In the securitisations in question the senior securities issued by the entities – assigned a rating – are listed on the Dublin Stock Exchange. We report that no sales or repurchases of assets involving the above-mentioned special purpose entities were carried out in the first half of 2015.
2. With regard to the issue of covered bonds, the creation of the SPEs UBI Finance Srl (in 2008) and UBI Finance CB 2 Srl (in 2011) was performed for the purchase of loans from banks in order to create cover pools for covered bonds issued by the Parent8.
The issue of covered bonds is designed to diversify the sources of funding and also to contain its cost. Transfers were made in the first half of 2015 to the SPEs UBI Finance Srl and UBI Finance CB2 Srl involving assets of €757 million (with effect for accounting purposes from May 2015) €314 million (with effect for accounting purposes from May 2015) respectively, held by Banca Regionale Europea, Banca Popolare di Ancona, Banca Popolare Commercio e Industria, Banca Carime and Banco di Brescia.
6 Special Purpose Entities (SPEs) are special companies formed to achieve a determined objective. 7 With normal securitisations the originator sells the portfolio to a special purpose entity which then issues tranches of asset-backed securities in order to purchase it. With a synthetic securitisation, on the other hand, the originator purchases protection for a pool of assets and transfers the credit risk attaching to the portfolio – either fully or in part – by using credit derivatives such as CDSs (credit default swaps) and CLNs (credit-linked notes) or by means of personal guarantees. 8 The transfers are designed to create segregated portfolios to back the issues and do not involve derecognition of the assets in the financial statements of the originators.
92 At the date of this report, UBI Banca has issued covered bonds totalling €10.5 billion nominal under the “first programme” (residential mortgages) for a maximum issuance of €15 billion and for a total of €1.8 billion nominal under the “second programme” (mainly commercial mortgages) with a maximum issuance of €5 billion. The originator banks issued subordinated loans to the SPE UBI Finance Srl and to the SPE UBI Finance CB 2 Srl, equal to the value of the loans progressively transferred, in order to fund the purchase. As at 30th June 2015 these loans amounted to €14.6 billion for UBI Finance Srl (€15.6 billion in December 2014) and to €3.3 billion for UBI Finance CB 2 (€3.2 billion in December 2014).
Exposures are present in the Group which relate solely to the SPEs formed for the securitisations mentioned and they all fall within the scope of the consolidation.
Ordinary lines of liquidity existed at the end of the first half granted by the Parent to the SPE 24-7 Finance Srl for a total of €97.6 million, entirely drawn on (€97.6 million entirely drawn on also at the end of 2014).
Following the downgrades performed by the rating agencies Moody’s and Fitch in 2011, UBI Banca disbursed a liquidity facility amount to UBI Finance 3 Srl for €28 million, while the originator Banca Popolare di Bergamo had disbursed a subordinated loan designed to cover potential payouts connected with specific risks (“set-off risk” relating to the securitised assets). The initial sum of €50 million, also disbursed in October 2011, was increased during 2012 by a further €72.5 million to meet the same risks associated with the revolving credit portfolios transferred in 2012. Those lines remained in existence as at 30th June 2015.
Subordinated loans were disbursed for the three transactions completed in 2012 as a further form of guarantee when the securities were issued, which in June 2015, amounted to: €29.4 million for UBI SPV BBS 2012 Srl, €46.7 million for UBI SPV BPA 2012 Srl and €31.2 million for UBI SPV BPCI 2012 Srl.
The securitisations (except for the three structured in 2012) were backed by swap contracts where the main objective is to normalise the flow of interest generated by the transferred or securitised portfolio, providing de facto immunisation to the SPE against interest rate risk. As a consequence of the downgrading of UBI Banca’s rating, which occurred starting in 2011, it became necessary to provide margin deposits for the swap contracts entered into between the Parent or other Group companies and the SPEs for the securitisations.
Margin accounts were opened with an eligible institution which was the London Branch of Bank of New York Mellon (ratings: Moody’s Aa1 stab/S&P AA- stab/Fitch AA- stab). The margin deposits were paid starting on 26th October 2011 for an initial total amount of a little more than €1,015 million, of which €717 million for the covered bond programme and €298 million for the securitisations. The total balance in June 2015 was €670 million, of which €489 million for the covered bond programme and €181 million for the internal securitisation transactions. With a view to diversifying the risks, on 10th December 2014, the margin account for the swaps relating to the first covered bond programme was transferred from Bank of New York Mellon to BNP Paribas Securities Services (ratings: Moody’s A1 stab/S&P A+ neg/Fitch A+ stab).
No exposures exist to SPEs or other conduit operations with underlying securities or investments linked to United States subprime and Alt-A loans.
The total assets of SPEs relating to securitisations and to covered bonds amounted to €25 billion (€25.5 billion at the end of 2014). Details by asset class are reported in the table below.
93 SPE underlying assets
Figures in millions of euro Classification of underlying assets of the securitisation 30.6.2015 31.12.2014
Measurement Gross of Net of Gross of Net of Entity Total assets Class of underlying asset Accounting criteria impairment impairment impairment impairment classification adopted losses losses losses losses
24-7 Finance 1,402.0 Mortgages L&R AC 1,214.7 1,208.3 1,287.6 1,280.0 UBI Lease Finance 5 2,435.3 Leasing L&R AC 2,018.1 2,018.1 2,176.5 2,176.5 UBI Finance 14,878.9 Mortgages L&R AC 14,471.5 14,448.9 14,556.7 14,531.5 UBI Finance CB 2 3,269.2 Mortgages L&R AC 3,071.9 3,059.0 3,011.5 2,999.0 UBI Finance 3 1,295.3 Loans to businesses L&R AC 1,113.8 1,108.4 1,264.0 1,257.4 UBI SPV BBS 2012 522.2 Loans to SMEs L&R AC 476.5 474.1 547.4 544.1 UBI SPV BPA 2012 707.9 Loans to SMEs L&R AC 641.3 637.2 744.4 739.0 UBI SPV BPCI 2012 473.2 Loans to SMEs L&R AC 445.1 443.3 512.3 509.9
Total impaired assets, mortgages and loans 1,399.6 1,169.6 1,225.3 1,030.6 Total impaired assets, leasing 501.7 417.2 513.3 432.6
TOTAL 24,984.0 25,354.2 24,984.1 25,839.0 25,500.6
Exposures in ABS, CDO, CMBS and other structured credit products
As at 30th June 2015 the Group held no direct investments in ABS instruments. Own securitisations, eliminated when consolidating the accounts, totalled €5.4 billion in notional terms: €2.9 billion of senior notes used as collateral for advances from the ECB (see the previous section “The interbank market and the liquidity situation”) and €2.5 billion of junior notes. In addition to the direct exposures, hedge funds or funds of hedge funds were identified among the assets present in Group portfolios with exposures to CDO and CMBS structured credit products. Indirect exposure to CDOs and CMBSs was €1.2 million in June 2015 (€2 million in December 2014) compared with a total investment in these funds of €119.8 million (net of impairment losses/reversals).
Other subprime, Alt-A and monoline insurer exposures
Again in June 2015 indirect exposures to subprime and Alt-A mortgages and to monoline insurers existed that were contained in hedge funds or funds of hedge funds held by the Parent. The percentages of exposure to subprime and Alt-A mortgages were again low (no fund had a percentage exposure of greater than 0.7%), with total exposure to subprime and Alt-A mortgages and to monoline insurers of approximately €0.9 million (€1.5 million in December 2014).
Leveraged Finance
The term leveraged finance is used in the UBI Banca Group to refer to finance provided for a company or an initiative which has debt that is considered higher than normal on the market and is therefore considered a higher risk. Usually this finance is used for specific acquisition purposes (e.g. the acquisition of a company by other companies – either directly or through vehicles/funds – owned by internal [buy-in] or external [buy-out] management teams). They are characterised by “non investment grade” credit ratings (less than BBB-) and/or by remuneration that is higher than normal market levels. This definition coincides essentially with acquisition finance (AF) business. An acquisition involves a substantial change in the economic, financial and capital profile of the debtor. The main source of funds for the repayment of the debt contracted for the acquisition finance itself is from the future cash flows generated by the entity (a single company or a Group) after the acquisition.
94 The three requirements necessary for the identification and consequent classification of a customer as an acquisition finance client, consistent with the definition used in the validated internal models, are as follows: • credit lines are granted to finance the acquisition of control of one or more third party companies and/or activities held by third parties and/or the refinancing of prior exposures relating to the same companies/activities subject to the acquisition (purpose requirement); • the effect of the acquisition consists of an increase in the turnover of the “enlarged” group of companies, i.e. the sum of the turnover of the acquiring group and the turnover of the target group is 40% greater than that of the acquiring group alone (size requirement)9; • no more than four years have passed since the date of the first grant of credit lines to finance the acquisition (“vintage” requirement)10. Once that time has passed the transactions are considered “conventional corporate” transactions and therefore in the presentation that follows, only transactions classified as “acquisition finance” as at the dates indicated have been considered.
The table (right) summarises on- and UBI Banca leveraged finance business (Acquisition Finance) off-balance sheet On-balance sheet exposure Unsecured guarantees exposure for figures in millio ns o f euro leveraged finance by gross exposure to customers gross exposure to customers the UBI Banca at the used impairment used impairment end of the first half. 30 June 2015 478.6 -20.8 21.6 -1.5 These loans (on- 31 December 2014 401.4 -22.6 15.5 -1.5 balance sheet) accounted for approximately 0.5%. of total UBI Banca Group loans. The amounts shown (on- and off-balance sheet) relate to 60 positions (counterparties) for a total average net exposure per position of €8 million. Six positions existed with exposures of greater than €20 million, all relating to on-balance sheet loans and receivables, and they account for around 43% of the total. The charts below show the distribution of leveraged exposures by geographical area and by sector.
Distribution of UBI Banca leveraged exposures as at 30th June 2015 (the figures as at 31st December 2014 are given in brackets)
EXPOSURE BY GEOGRAPHICAL AREA EXPOSURE BY SECTOR
Other: 6% (0%) Europe: 2% Commerce (3%) and services 27% (25%)
Manufacturing I taly: 92% sector (97%) 73% (75%)
9 The threshold has been set at 40% because on the basis of experience it is considered that this percentage of change in “dimension” involves a significant discontinuity for the Group after the operation compared with before it and therefore the official operating and financial documentation (consolidated/separate financial statements of the acquirer) will not be representative of the new reality. This threshold was also set along the same lines as the requirements for the “special procedure” set for other counterparties assessed using the corporate rating model. Where an acquisition is concluded by using a specially formed vehicle, a newco (and therefore usually irrelevant from the viewpoint of dimension), this second requirement is deemed always satisfied. 10 This is considered sufficient time to absorb the impacts of the discontinuity determined by the acquisition, described in footnote 9.
95
Residual exposures also existed within the Group – approximately €53.5 million – relating to transactions performed by the network banks for a total of 24 positions with average exposure per transaction of €2.2 million. The distribution of the loans disbursed was as follows: Banca Popolare di Bergamo €32.3 million, Banca Popolare di Ancona €15 million, Banco di Brescia €4.7 million and Banca Popolare Commercio e Industria €1.5 million.
Financial derivative instruments for trading with customers
The periodic analysis performed for internal monitoring purposes confirms that the risks assumed by customers continue to remain generally low and they outlined a conservative profile for UBI Group business in OTC derivatives with customers.
A quantitative update as at 30th June 2015 showed the following: - the notional amount for existing contracts, totalling €5.860 billion, was attributable to interest rate derivatives amounting to €5.160 billion and currency derivatives amounting to €0.653 billion plus a marginal notional amount for commodities contracts of (€47 million); - transactions in hedging derivatives accounted for approximately 99.9% of the notional amount traded in the case of interest rate derivatives and 94.6% in the case of currency derivatives; - the net total mark-to-market value (interest rate, currency and commodities derivatives) amounted to approximately -€345 million. Those contracts with a negative mark-to-market for customers were valued at approximately -€375 million. - the total negative mark-to-market for customers stood at 6.4% of the notional amount of the contracts, compared with 8.2% at the end of 201411.
The rules governing trading in OTC derivatives with customers are contained in the “Policy for the trading, sale and subscription of financial products” and in the relative regulations to implement it, updated in 2015 and 2013 respectively, as follows: • customer segmentation and classes of customers associated with specific classes of products, stating that the purpose of the derivatives transactions must be hedging and that transactions containing speculative elements must be of a residual nature; • rules for assessing the appropriateness of transactions, defined on the basis of the products sold to each class of customer; • principles of integrity and transparency on which the range of OTC derivatives offered to customers must be based, in compliance with the guidelines laid down by the Italian Banking Association (and approved by the Consob) for illiquid financial products; • rules for assessing credit exposure, which grant credit lines with maximum limits for trading with “qualified”, “professional” and “non-individual retail” counterparties and provide credit lines for single transactions for trading with individual retail counterparties, while counterparty risk is assessed on the basis of Regulation EU 575/2013; • rules for managing restructuring operations, while underlining their exceptional nature; • the rules for the settlement of transactions in OTC derivative instruments with customers that are subject to verbal or official dispute; • the catalogue of products offered to customers and the relative credit equivalents.
11 The figure at the end of 2014 incorporates the impacts of the progressive reduction in interest rates, which have fallen to extremely low levels. However, these started to recover in the first half of 2015.
96 OTC interest rate derivatives: details of instrument types and classes of customer
Data as at 30th June 2015 Product Number of Type of instrument Customer classification Notional MtM of which negative MtM class transaction 1 s Purchase of caps Qualified 23 28,923,743.97 37,508.86 - 3: Professional 43 81,665,809.14 259,896.41 - 2: Non private individual retail 831 275,470,102.84 577,210.00 - 1: Private individual retail 776 88,773,314.39 230,832.45 - Purchase of caps Total 1,673 474,832,970.34 1,105,447.72 - Purchase of floors Qualified 2 22,276,202.33 363,977.40 - Purchase of floors Total 2 22,276,202.33 363,977.40 - Capped swaps Qualified 27 53,156,718.25 -1,677,942.78 -1,677,942.78 3: Professional 57 199,699,283.08 -6,493,470.67 -6,494,633.93 2: Non private individual retail 999 574,872,892.53 -12,685,048.20 -12,712,860.82 1: Private individual retail 1,754 186,558,648.14 -3,007,444.07 -3,008,455.52 Capped swaps Total 2,837 1,014,287,542.00 -23,863,905.72 -23,893,893.05 IRS Plain Vanilla Qualified 43 171,577,321.40 -9,779,086.08 -10,946,951.81 3: Professional 302 1,478,060,466.90 -98,216,461.47 -99,830,860.13 2: Non private individual retail 1,164 1,557,766,675.16 -135,481,238.61 -137,116,034.45 1: Private individual retail 282 53,745,683.29 -2,190,887.18 -2,405,935.66 Plain Vanilla IRS Total 1,791 3,261,150,146.75 -245,667,673.34 -250,299,782.05 IRS Step Up Qualified 1 2,750,000.00 -79,159.16 -79,159.16 3: Professional 28 255,954,372.51 -57,858,647.65 -57,858,647.65 2: Non private individual retail 34 68,428,056.15 -21,562,350.23 -21,562,350.23 1: Private individual retail 2 1,054,554.17 -171,177.75 -171,177.75 IRS Step up Total 65 328,186,982.83 -79,671,334.79 -79,671,334.79 Purchase of collars Qualified 2 5,676,920.94 -442,661.22 -442,661.22 3: Professional 1 7,500,000.00 -102,734.01 -102,734.01 2: Non private individual retail 4 4,762,191.00 -81,121.71 -108,097.63 Purchase of collars Total 7 17,939,111.94 -626,516.94 -653,492.86 Total Class 1: hedging derivatives 6,375 5,118,672,956.19 -348,360,005.67 -354,518,502.75 Class 1: % of Group total 99.7% 99.2% 99.3% 99.3% 2 Purchase of caps with KI/KO 3: Professional 2 14,503,264.42 -196,655.31 -196,655.31 2: Non private individual retail 3 2,359,826.58 -12,650.58 -12,650.58 Purchase of caps with KI/KO Total 5 16,863,091.00 -209,305.89 -209,305.89 Purchase of collars with KI/KO2: Non private individual retail 1 3,025,600.00 -839,181.38 -839,181.38 Purchase of collars with KI/KO Total 1 3,025,600.00 -839,181.38 -839,181.38
IRS Convertible Qualified 1 8,564,538.18 -228,222.22 -228,222.22 3: Professional 1 3,208,333.34 -34,339.98 -34,339.98 2: Non private individual retail 5 4,875,838.34 -732,212.50 -732,212.50 IRS Convertible Total 7 16,648,709.86 -994,774.70 -994,774.70 Total Class 2: hedging derivatives with possible exposure 13 36,537,400.86 -2,043,261.97 -2,043,261.97 to contained financial risks Class 2: % of Group total 0.2% 0.7% 0.6% 0.6% 3a IRS Range 2: Non private individual retail 2 3,500,000.00 -224,527.02 -224,527.02 IRS Range Total 2 3,500,000.00 -224,527.02 -224,527.02 Total Class 3a: partial hedging derivatives and 2 3,500,000.00 -224,527.02 -224,527.02 maximum pre-established loss
3b Gap floater swaps 2: Non private individual retail 1 1,793,341.00 -251,856.37 -251,856.37 Gap floater swaps Total 1 1,793,341.00 -251,856.37 -251,856.37 Total Class 3b: speculative derivatives and maximum loss 1 1,793,341.00 -251,856.37 -251,856.37 unquantifiable
Total Class 3: derivatives not for hedging 3 5,293,341.00 -476,383.39 -476,383.39 Class 3: % of Group total 0.1% 0.1% 0.1% 0.1% Total UBI Banca Group 6,391 5,160,503,698.05 -350,879,651.03 -357,038,148.11
97 OTC currency derivatives: details of instrument types and classes of customer
Data as at 30th June 2015 Product Number of of which negative Type of instrument Customer classification Notional MtM class transactions MtM 1 Forward synthetic Qualified 3 1,561,835.10 221,595.66 - 3: Professional 97 78,826,351.05 1,782,105.27 -1,934,897.90 2: Non private individual retail 33 12,515,438.50 34,985.80 -115,143.16 Forward synthetic Total 133 92,903,624.65 2,038,686.73 -2,050,041.06
Plafond Qualified 13 9,993,520.20 294,803.82 -69,874.87 3: Professional 187 231,670,415.19 841,413.93 -6,545,650.78 2: Non private individual retail 393 152,498,340.55 -1,650,395.10 -4,204,721.28 Plafond Total 593 394,162,275.94 -514,177.35 -10,820,246.93
Currency collars 3: Professional 11 3,888,672.32 -135,091.86 -135,091.86 2: Non private individual retail 2 838,145.22 -34,843.21 -34,843.21 Currency collars Total 13 4,726,817.54 -169,935.07 -169,935.07
Vanilla currency options purchased Qualified 10 8,300,344.53 855,670.28 - 2: Non private individual retail 2 1,286,557.93 87,723.36 - Vanilla currency options purchased 12 9,586,902.46 943,393.64 -
Total Class 1: hedging derivatives 751 501,379,620.59 2,297,967.95 -13,040,223.06
Class 1: % of Group total 78.3% 76.8% - 84.0% 2 Knock in collars 3: Professional 37 12,518,748.19 141,170.09 -245,258.74 Knock in collars Total 37 12,518,748.19 141,170.09 -245,258.74
Knock in forwards 3: Professional 115 94,867,622.52 4,712,294.81 -1,727,472.32 2: Non private individual retail 16 7,513,091.22 -173,663.08 -181,339.47 Knock in forwards Total 131 102,380,713.74 4,538,631.73 -1,908,811.79
New collars 3: Professional 1 277,056.28 -3,978.33 -3,978.33 2: Non private individual retail 1 1,094,352.27 -21,835.36 -21,835.36 New collars Total 2 1,371,408.55 -25,813.69 -25,813.69
Total Class 2: hedging derivatives with possible exposure 170 116,270,870.48 4,653,988.13 -2,179,884.22 to contained financial risks Class 2: % of Group total 17.7% 17.8% - 14.0% 3b Knock out forwards 3: Professional 6 2,533,802.32 36,252.51 - Knock out forwards Total 6 2,533,802.32 36,252.51 -
Knock out knock in forwards 3: Professional 9 1,966,173.36 -2,737.75 -5,027.59 Knock out knock in forwards Total 9 1,966,173.36 -2,737.75 -5,027.59
Vanilla currency options sold by the customer 3: Professional 23 30,818,309.16 -295,051.88 -295,051.88 Vanilla currency options sold by the customer Total 23 30,818,309.16 -295,051.88 -295,051.88
Total Class 3: derivatives not for hedging 38 35,318,284.84 -261,537.12 -300,079.47
Class 3: % of Group total 4.0% 5.4% - 2.0%
Total UBI Banca Group 959 652,968,775.91 6,690,418.96 -15,520,186.75
98 OTC commodities derivatives: details of instrument types and classes of customer
Data as at 30th June 2015 Product Number of of which negative Type of instrument Customer classification Notional MTM class transactions MtM 2 Commodity swaps Qualified 12 21,787,659.74 -481,441.13 -1,340,513.44 3: Professional 49 16,395,735.38 204,362.00 -580,166.00 Commodity swaps Total 61 38,183,395.13 -277,079.13 -1,920,679.44
Forward synthetic commodities 3: Professional 27 5,905,359.48 -351,035.25 -386,893.25 2: Non private individual retail 8 2,069,813.00 -78,265.00 -82,812.00 Forward synthetic commodities Total 35 7,975,172.48 -429,300.25 -469,705.25
Vanilla options on commodities purchased 3: Professional 1 231,892.50 7,461.00 - Vanilla options on commodities purchased 1 231,892.50 7,461.00 -
Total Class 2: hedging derivatives with possible exposure to contained financial risks 97 46,390,460.11 -698,918.38 -2,390,384.68
Class 2: % of Group total 99.0% 99.5% 99.4% 99.8% 3 Vanilla options on commodities purchased 3: Professional 1 239,074.09 -4,070.96 -4,070.96 Vanilla options on commodities purchased 1 239,074.09 -4,070.96 -4,070.96
Total Class 3: derivatives not for hedging 1 239,074.09 -4,070.96 -4,070.96
Class 3: % of Group total 1.0% 0.5% 0.6% 0.2%
Total UBI Banca Group 98 46,629,534.20 -702,989.34 -2,394,455.64
TOTAL UBI BANCA GROUP 7,448 5,860,102,008.16 -344,892,221.41 -374,952,790.50
OTC derivatives: first five counterparties by bank (figures in euro)
Data as at 30th June 2015
Bank Classification MtM of which negative MtM
UBI Banca 3: Professional -51,736,729 -51,736,729 3: Professional -27,042,514 -27,042,514 3: Professional -7,202,597 -7,202,597 3: Professional -6,516,225 -6,516,225 3: Professional -5,712,363 -5,712,363 Banca Popolare Commercio e Industria 2: Non private individual retail -6,721,365 -6,721,365 Qualified -3,759,872 -3,759,872 3: Professional -2,641,530 -2,641,530 2: Non private individual retail -2,058,387 -2,058,387 Qualified -1,573,427 -1,573,427 Banca Popolare di Ancona 2: Non private individual retail -6,097,246 -6,097,246 3: Professional -1,840,142 -1,840,142 2: Non private individual retail -1,672,752 -1,672,752 3: Professional -1,305,601 -1,305,601 2: Non private individual retail -1,161,334 -1,161,334 Banco di Brescia 3: Professional -3,735,615 -3,735,615 Qualified -2,461,640 -2,461,640 2: Non private individual retail -2,096,455 -2,096,455 3: Professional -1,790,498 -1,790,498 3: Professional -1,101,214 -1,101,214 Banca Popolare di Bergamo 3: Professional -3,133,955 -3,133,955 2: Non private individual retail -2,198,927 -2,198,927 3: Professional -1,169,407 -1,169,407 2: Non private individual retail -1,119,482 -1,119,482 2: Non private individual retail -857,392 -857,392 Banca Regionale Europea 3: Professional -2,330,845 -2,330,845 2: Non private individual retail -1,803,434 -1,803,434 2: Non private individual retail -840,239 -840,239 3: Professional -669,935 -669,935 3: Professional -642,639 -642,639 Banca Carime 2: Non private individual retail -442,357 -442,357 3: Professional -326,533 -326,533 2: Non private individual retail -153,277 -153,277 2: Non private individual retail -73,119 -73,119 3: Professional -67,302 -67,302 Banca di Valle Camonica 2: Non private individual retail -245,545 -245,545 3: Professional -219,167 -219,167 2: Non private individual retail -188,126 -188,126 2: Non private individual retail -174,848 -174,848 2: Non private individual retail -102,580 -102,580
99 Equity and capital adequacy
Changes in consolidated shareholders’ equity
Reconciliation between equity and profit for the period of the Parent with consolidated equity as at 30th June 2015 and profit for the period then ended
of which: Profit for Figures in thousands of euro Equity period
Equity and profit for the period in the accounts of the Parent 8,696,088 177,216 Effect of the consolidation of subsidiaries including joint ventures 635,501 153,424 Effect of measuring other significant equity investments using the equity method 29,155 19,573 Dividends received during the period - -240,647 Other consolidation adjustments (including the effects of the PPA) 526,082 14,877
Equity and profit for the period in the consolidated accounts 9,886,826 124,443
Changes in consolidated equity of the Group in the first half of 2015
Changes January-June 2015 30.6.2015 Allocation of prior year Balances as profit Equity transactions Equity at Consolidated Changes in attributable to the 31.12.2014 Dividends comprehensive reserves New share shareholders of Reserves and other Stock options income issues the Parent Figures in thousands of euro uses
Share capital: 2,254,371 ------2,254,371 a) ordinary shares 2,254,371 ------2,254,371 b ) other shares ------
Share premiums 4,716,866 -918,436 - - - - - 3,798,430
Reserves 3,450,082 192,669 -75,630 -2,794 - - - 3,564,327
Valuation reserves 113,836 - - 1 - - 36,758 150,595
Treasury shares -5,340 ------5,340
Result for period -725,767 725,767 - - - - 124,443 124,443 Equity attributable to the shareholders of the Parent 9,804,048 - -75,630 -2,793 - - 161,201 9,886,826
The equity attributable to the Valuation reserves attributable to the Group: composition shareholders of the Parent, UBI Figures in thousands of euro 30.6.2015 31.12.2014 Banca, as at 30th June 2015 inclusive of profit for the period, was Available-for-sale financial assets 172,233 154,926 €9,886.8 million, an increase Cash flow hedges -322 -851 Currency translation differences -243 -243 compared with €9,804 million at the Actuarial gains/losses for defined benefit pension plans -80,089 -99,011 end of 2014. Special revaluation laws 59,016 59,015 As shown in the table “Changes in Total 150,595 113,836 the consolidated equity of the Group in the first half of 2015”, the increase of €82.8 million is the result of the following: • the allocation of €75.6 million for dividends (UBI Banca) and other uses (other Group banks) drawn from the extraordinary reserve1; • a further improvement of approximately €36.8 million in the positive balance on valuation reserves, generated entirely by the impact of comprehensive income as follows: +€18.9
1 Due to the loss incurred by the Parent in 2014 amounting to €725.8 million (compared with €703.6 million at consolidated level, inclusive of non-controlling interests), the share premium reserve was reduced by €918.4 million and over €192.6 million was allocated to reserves of profits.
100 million for actuarial gains/losses relating to defined benefit pension plans; +€17.3 million for available-for-sale financial assets; +€0.5 million for cash flow hedges; • an aggregate negative impact of €2.8 million for other reserves; • the recognition of the result for the period of €124.4 million.
Fair value reserves of available-for-sale financial assets attributable to the Group: composition
30.6.2015 31.12.2014 Figures in thousands of euro Positive reserve Negative reserve Total Positive reserve Negative reserve Total
1. Debt instruments 204,885 -170,274 34,611 263,655 -180,211 83,444 2. Equity instruments 127,551 -238 127,313 63,449 -1,306 62,143 3. Units in UCITS 10,380 -71 10,309 11,600 -2,261 9,339 4. Financing ------Total 342,816 -170,583 172,233 338,704 -183,778 154,926
Fair value reserves of available-for-sale financial assets attributable to the Group: changes in the period
Equity Figures in thousands of euro Debt instruments UCITS units Financing Total instruments
1. Opening balances as at 1st January 2015 83,444 62,143 9,339 - 154,926
2. Positive changes 57,207 66,715 4,412 - 128,334 2.1 Increases in fair value 56,465 65,876 2,434 - 124,775 2.2 Transfer to income statement of negative reserves 700 839 1,978 - 3,517 - following impairment losses 361 255 696 - 1,312 - from disposal 339 584 1,282 - 2,205 2.3 Other changes 42 - - - 42
3. Negative changes -106,040 -1,545 -3,442 - -111,027 3.1 Reductions in fair value -61,395 -1,113 -2,427 - -64,935 3.2 Impairment losses -599 - - - -599 3.3 Transfer to income statement of positive reserves: from disposal -44,023 -432 -1,015 - -45,470 3.4 Other changes -23 - - - -23 4. Closing balances as at 30th June 2015 34,611 127,313 10,309 - 172,233
As shown in the table, the increase mentioned above of €17.3 million in the “fair value reserve for available-for-sale financial assets” is attributable to equity instruments held in portfolio for which the positive balance more than doubled to €127.3 million (+€65.2 million). In fact the fair value increases came to €65.9 million, of which €65 million relating to UBI Banca (€63.5 million in relation to the investment in Istituto Centrale delle Banche Popolari2 and €1.5 million in relation to S.A.C.B.O.) and €0.8 million to Lombarda Vita. We also report “transfers to the income statement of negative reserves” totalling €0.8 million (attributable almost entirely to Lombarda Vita), reductions in fair value of €1.1 million and transfers to the income statement from positive reserves from disposals of €0.4 million attributable in both cases to Lombarda Vita.
On the other hand, the impact of temporary volatility on markets at the end of the first half caused the positive balance on the reserve for debt securities to fall by €48.8 million to €34.6 million in the first six months (net of tax and non-controlling interests) attributable in particular to Italian government securities, for which the reserve of €37.5 million fell by €45.6 million, of which €38.3 million in relation to the Parent’s portfolio.
In detail, the reserve for debt securities recorded increases in fair value of €56.4 million, of which €28.2 million relating to the Parent (almost entirely on Italian government securities) and €28.2 million to Lombarda Vita. The table also shows “transfers to the income statement of negative reserves” amounting to €0.7 million: €0.4 million arising from impairment, relating mostly to UBI Banca (the write-down of a bond), and €0.3 million from disposal (€0.2 million relating to the Parent for the sale of bonds; €0.1 million to Lombarda Vita).
2 Due to the change in the fair value of the investment that occurred following the valuation performed when a preliminary contract for the sale of part of the stake held was signed.
101 Decreases include the following: • reductions in fair value amounting to €61.4 million, of which: €30.4 million relating to UBI Banca, of which 87% on government securities; €30.1 million relating to Lombarda Vita; €0.4 million to IW Bank (incurred on its Italian government securities portfolio); • “transfers to the income statement of positive reserves from disposals” amounting to €44 million, of which €41.9 million by UBI Banca, 95% of which in relation to disposals of government securities and the remainder from the sale of corporate bonds; • impairment losses of €0.6 million attributable entirely to Lombarda Vita.
Units in UCITS also benefited from increases in fair value amounting to €2.4 million, of which €1.2 million relating to UBI Banca and €1.2 million to Lombarda Vita, in addition to “transfers of negative reserves to the income statement” totalling €2 million, of which €1.3 million from disposal (€0.8 million relating to Lombarda Vita and €0.4 million to UBI Banca following the sale of a fund) and €0.7 million due to impairment (€0.4 million relating to Lombarda Vita and €0.3 million to UBI Banca from a write-down of an ETF fund). Decreases included reductions in fair value amounting to approximately €2.4 million (€1.7 million relating to Lombarda Vita and €0.7 million to UBI Banca), as well as “transfers to the income statement of positive reserves from disposal” amounting to €1 million (€0.8 million relating to Lombarda Vita; €0.2 million to UBI Banca)
Capital adequacy
The new prudential rules for banks and investment companies contained in EU Regulation 575/2013 (the Capital Requirements Regulation, known as the CRR) and in the EU Directive 2013/36/EU (the Capital Requirements Directive, known as CRD IV), came into force on 1st January 2014. These transpose standards defined by the Basel Committee on Banking Supervision (known as the Basel 3 framework) into European Union regulations. The CRR came directly into force in member states, while the regulations contained in CRD IV were implemented in national legislation with Legislative Decree No. 72 of 12th May 2015, which came into force on 27th June 2015. On conclusion of a public consultation process started in November 2013, on 17th December the Bank of Italy published Circular No. 285 “Regulations for the prudential supervision of banks”, which updated, within the scope of its remit, the new EU regulations, together with Circular No. 286 “Instructions for compiling supervisory reports for banks and stock brokerage firms” and an update to Circular No. 154 “Supervisory reporting for credit and financial institutions. Tables for data and instructions for filing reports” (a set of regulations that was updated several times in 2014 and 2015). As already reported, the introduction of Basel 3 rules is subject to a transitional regime during which, in most cases, the new rules will be applied to an increasing degree until 2019, when they will reach full application. At the same time, capital instruments that no longer qualify will be gradually excluded from total capital for regulatory purposes by 2021.
At the end of June the UBI Banca Group’s Common Equity Tier 1 (CET1) capital amounted to €7.7 billion, slightly up compared with €7.6 billion in December 2014, while total own funds stood at €9.3 billion (€9.4 billion in the comparative period).
The changes in CET1 capital in the first half were caused mainly by the inclusion of profit for the period (net of a pro rata allocation for the possible distribution of a dividend), because the positive impact of net AFS reserves relating to equity and debt instruments (other than EU member country government securities) was fully offset by the gradual exclusion of non- controlling interests which no longer qualify under the Basel 3 framework3. On the other hand, the Tier 2 capital contracted to €1.6 billion from €1.8 billion in December due to the progressive amortisation of subordinated securities, even though it benefited from a lower deduction in terms of the shortfall of provisions.
The total shortfall did in fact fall from €926.6 million to €821.8 million partly as a result of an increase in the first half of coverage for non-performing exposures.
Risk weighted assets (RWA), which stood at €59.5 billion, equivalent to 49.8% of total assets, were down €2.2 billion following a reduction in the average weighted exposures of the network banks as a consequence of an improvement in ratings, which was accompanied by lower
3 On the basis of the transitional rules applicable in 2015, 40% of net positive available-for-sale reserves are included compared with the full sterilisation applied in 2014, while the exclusion of non-controlling interests was raised from 20% in 2014 to 40% in 2015.
102 volumes of business at the Parent (in relation to former B@nca 24-7 and former Centrobanca business) and at the product companies.
At the end of the period, the capital ratios of the UBI Banca Group consisted of a Common Equity Tier 1 ratio and a Tier 1 ratio of 12.94% (12.33% at the end of 2014) and a total capital ratio of 15.62% (15.29%). These ratios are again well above the target thresholds set on conclusion of the SREP (a CET1 ratio of 9.5% and a TCR of 11%), with leeway of 344 bp available for the CET1 ratio and 462 bp for the total capital ratio. The pro forma CET1 ratio as at 30th June 2015, calculated on the basis of the rules that will be in force at the end of the transitional period (known as the fully phased in CET1 ratio) is estimated at 12.33%.
Finally the leverage ratio according to Basel 34, stood at 6.14%, while the fully loaded indicators stood at 5.88%.
Capital ratios (Basel 3)
Figures in thousands of euro 30.6.2015 31.12.2014
Common Equity Tier 1 capital before filters and transitional provisions 8,163,139 8,029,856
Effects of transitional provisions provided for by the regulations (minority interests) 191,880 258,088
Effects of transitional provisions provided for by the regulations (AFS reserves) -95,988 -92,457 Adjustments to Common Equity Tier 1 capital due to prudential filters provided for by the regulations -3,225 -1,896 Government securities sterilisation effect* -14,081 -59,989
Common Equity Tier 1 capital net of prudential filters 8,241,725 8,133,602 Deductions from Common Equity Tier 1 capital in relation to negative items for shortfall of Following the authorisations provisions to expected losses, inclusive of the application of transitional provisions -536,085 -518,337 received from the Bank of Italy, the UBI Banca Group Common Equity Tier 1 capital 7,705,640 7,615,265 uses internal models to Additional Tier 1 capital before deductions 39,150 37,627 calculate capital requirements to meet credit Deductions from Additional Tier 1 capital in relation to negative items for shortfall of provisions to risk relating to the corporate expected losses, inclusive of the application of transitional measures -39,150 -37,627 segment (exposures to Additional Tier 1 capital - - companies) and to operational risks from the Tier 1 capital ( Common Equity Tier 1 + Additional Tier 1) 7,705,640 7,615,265 consolidated supervisory Tier 2 capital before transitional provisions 1,813,160 2,187,759 report as at 30th June 2012 and relating to the retail Effects of grandfathering provisions on Tier 2 instruments - regulatory segment Tier 2 capital after transitional provisions 1,813,160 2,187,759 (exposures to small and Deductions from Tier 2 capital -220,978 -361,426 medium-size enterprises and of which: negative items due to shortfall of provisions to expected losses, inclusive of the exposures backed by application of transitional provisions -246,529 -370,643 residential properties) from the consolidated supervisory Tier 2 capital after specific deductions 1,592,182 1,826,333 report as at 30th June 2013. Total own funds 9,297,822 9,441,598 Credit risk 4,362,820 4,572,697 Credit valuation adjustment risk 14,606 14,721 Market risk 84,056 56,539 Operational risk 300,624 297,050 Total prudential requirements 4,762,106 4,941,007 Risk weighted assets 59,526,325 61,762,588 Common Equity Tier 1 ratio (Common Equity Tier 1 capital after filters and deductions / Risk w eighted assets) 12.94% 12.33% Tier 1 ratio (Tier 1 capital after filters and deductions / Risk w eighted assets) 12.94% 12.33% Total capital ratio (Total ow n funds / Risk w eighted assets) 15.62% 15.29%
* In compliance with transitional provisions concerning own funds contained in Part II, Chapter 14 of Bank of Italy Circular No. 285 of 17th December 2013 (“Supervisory provisions for banks”), advantage was taken in the calculation of regulatory capital of the option to not include unrealised gains or losses relating to exposures to central governments classified within “available-for-sale financial assets” in any element of own funds. That option was exercised within the time limit set of 31st January 2014 and was applied at individual company and at consolidated level.
4 Under Basel 3, leverage is calculated as the ratio of the Tier 1 capital to total on- and off-balance sheet assets, with a minimum requirement of 3%. The ratio was calculated as at 30th June 2015 according to the provisions of the CRR, as amended by the Delegated Act (EU) No. 62/2015. The rules in force prior to the amendments introduced by the Delegated Act were applied in previous periods.
103 Subordinated securities
NOMINAL AMOUNT IAS AMOUNT MATURITY EARLY REDEMPTION ISSUER TYPE OF ISSUE COUPON DATE CLAUSE 30.6.2015 31.12.2014 30.6.2015
2008/2015 - floating rate ISIN Redemption by fixed rate annual amortisation 1 IT0004424435 - Currency euro Listed Quarterly Euribor 3M + 0.85%. 28-11-2015 119,880 119,880 119,713 schedule from 28-11- on MOT (electronic bond market) 2011
2009/2016 - floating rate ISIN Redemption by fixed rate 2 IT0004457187 - Currency euro Listed Quarterly Euribor 3M + 1.25%. 13-3-2016 annual amortisation 42,398 84,797 42,273 on MOT (electronic bond market) schedule from 13-3-2012
2009/2019 - mixed rate ISIN Half year fixed rate 4.15% until 2014; subsequently 3 IT0004457070 - Currency euro Listed 13-3-2019 13-3-2014 370,000 370,000 368,449 floating rate Euribor 6M + 1.85%. on MOT (electronic bond market)
2009/2016 - floating rate ISIN Redemption by fixed rate 4 IT0004497068 - Currency euro Listed Quarterly Euribor 3M + 1.25%. 30-6-2016 annual amortisation 31,367 62,735 31,208 on MOT (electronic bond market) schedule from 30-6-2012
2009/2019 - mixed rate ISIN Half year fixed rate 4% until 2014; subsequently 5 IT0004497050 - Currency euro Listed 30-6-2019 30-6-2014 365,000 365,000 361,075 floating Euribor 6M + 1.85%. on MOT (electronic bond market)
2010/2017 - fixed rate ISIN Redemption by fixed rate 6 IT0004572878 - Currency euro Listed Half year fixed rate 3.10%. 23-2-2017 annual amortisation 120,000 180,000 123,657 schedule from 23-2-2013 UNIONE DI BANCHE on MOT (electronic bond market) TIER TWO CAPITAL ITALIANE SCPA 2010/2017 - floating rate ISIN Redemption by fixed rate Ordinary subordinated bond 7 IT0004572860 - Currency euro Listed Half year floating rate Euribor 6M + 0.40%. 23-2-2017 annual amortisation 61,035 91,552 60,809 issues (Lower Tier 2) on MOT (electronic bond market) schedule from 23-2-2013
2010/2017 - fixed rate ISIN Redemption by repayment schedule at constant 8 IT0004645963 - Currency euro Listed Half year fixed rate 4.30%. 5-11-2017 240,000 240,000 243,919 annual rates from 5-11- on MOT (electronic bond market) 2013
2011/2018 - fixed rate ISIN Redemption by fixed rate 9 IT0004718489 - Currency euro Listed Half year fixed rate 5.50%. 16-6-2018 annual amortisation 240,000 320,000 248,463 on MOT (electronic bond market) schedule from 16-6-2014
2011/2018 - fixed rate ISIN Redemption by fixed rate 10 IT0004723489 - Currency euro Listed Half year fixed rate 5.40%. 30-6-2018 annual amortisation 240,000 320,000 248,397 on MOT (electronic bond market) schedule from 30-6-2014
2011/2018 - mixed rate ISIN Quarterly fixed rate 6.25% until 2014; subsequently 11 IT0004767742 - Currency euro Listed 18-11-2018 222,339 222,339 219,617 floating rate Euribor 3M + 1% on MOT (electronic bond market) 2012/2019 - mixed rate ISIN Quarterly fixed rate 7.25% until 2014; subsequently 12 IT0004841778 - Currency euro Listed 8-10-2019 200,000 200,000 200,899 floating rate Euribor 3M + 5% on MOT (electronic bond market)
In compliance with a more restrictive interpretation given recently by the authorities on the qualification for the inclusion of subordinated liabilities, those liabilities issued after 31st December 2011 with an amortisation schedule which starts to run before five years since issuance have not been included in the list.
104 Information on share capital, the share, dividends paid and earnings per share
Information on share capital and shareholder structure
The share capital of UBI Banca consists of 901,748,572 ordinary shares for a total paid up amount of €2,254,371,430. All the outstanding shares have normal dividend entitlement from 1st January 2015.
With regard to interests held of greater than 2% reported pursuant to article 120 of the Consolidated Finance Act (Legislative Decree No. 58/1998), the Bank has received no reports of changes compared with the position reported in the Separate Financial Report of UBI Banca as at and for the period ended 31st December 2014, which may be consulted.
It must in any case be considered that the percentage interests reported in the Annual Report may no longer be those actually held if a change has occurred in the meantime which does not involve disclosure obligations by the shareholders.
On the basis of an updating of the shareholders’ register, registered shareholders numbered 81,747 as at 30th June 2015 (79,237 at the end of 2014)1. If shareholders who are not listed in the shareholders’ register are also considered, as results from reports provided by financial intermediaries on the 2013 ex dividend date (19th May 2014), then the total of registered and unregistered shareholders was over 155 thousand.
Treasury stock
As at 30th June 2015, UBI Banca held 1,483,192 treasury shares, with no nominal value, for the sole purpose of servicing incentive schemes for the “key personnel” of the Group, unchanged compared with December 2014, accounting for 0.16% of the share capital. As already reported, on the basis of regulations concerning the use of financial instruments in relation to incentive schemes for key personnel, UBI Banca proceeded to purchase 1,700,000 ordinary shares of UBI Banca in implementation of shareholders resolutions of 30th April 2011 (1,200,000 shares at an average price of €3.6419) and of 28th April 2012 (500,000 shares at an average price of €3.4911). On 1st July 2014, 216,808 of these treasury shares were granted at the end of the two-year retention period, consisting of the “up-front” component of the 2011 incentive scheme to be paid in financial instruments.
Approximately 39% of the 1,483,192 treasury shares existing at the end of the first half had already been committed as follows: 131,277 shares for the deferred part of the 2011 incentive scheme; 85,605 shares to cover the 2012 incentive scheme; 99,512 shares to cover the 2013 incentive scheme; and 259,708 shares for the 2014 incentive scheme. The number of shares committed is different from that published in the 2014 Annual Report, following changes that occurred in the composition of the key personnel beneficiaries of the incentive schemes and the consolidation of final data for 2014.
On 1st July 2015, 51,363 treasury shares were granted, consisting of the “up-front” part of the 2012 incentive scheme to be paid in financial instruments, because the relative two-year retention period had ended.
The number of treasury shares held in portfolio had therefore fallen to 1,431,829 shares at the date of this report.
Finally we report that the shareholders meeting of 25th April 2015 authorised the Management Board to purchase an additional maximum number of 1,000,000 ordinary shares of UBI Banca for a maximum total
1 At the date of this report the number of registered shareholders had risen to 81,989.
105 value of €6,000,000 to cover the long-term variable component destined to top-level key personnel, to be paid in financial instruments. These purchases must be made by the date of the shareholders’ meeting convened to decide, in accordance with Art. 2364-bis, No. 4 of the Italian Civil Code, the distribution of profits for the year ended 31st December 2015.
Share performance
The UBI Banca share is traded on the Mercato Telematico Azionario (electronic stock exchange) of Borsa Italiana in the blue chip segment and forms part of the 40 shares in the FTSE/Mib Index.
Performance comparisons for the Unione di Banche Italiane share
30.6.2015 31.3.2015 30.12.2014 % change 30.9.2014 30.6.2014 % change 18.7.2011* % change
Amounts in euro A B C A/C D E A/E F A/F
Unione di Banche Italiane shares - official price 7.235 7.221 5.967 21.3% 6.568 6.332 14.3% 3.351 115.9% - reference price 7.195 7.285 5.960 20.7% 6.660 6.320 13.8% 3.278 119.5% FTSE Italia All-Share index 23,985 24,734 20,138 19.1% 22,030 22,585 6.2% 18,628 28.8% FTSE Italia Banks index 17,032 17,325 13,407 27.0% 15,027 15,058 13.1% 12,647 34.7%
* The date of the conclusion of the increase in UBI Banca’s share capital by €1 billion. Source Datastream
The first six months of the year saw an initial period of growth in financial markets – this occurred in the first quarter and was driven by the ECB’s accommodative monetary policy, implemented through its quantitative easing programme – followed by a second period dominated, on the contrary, by marked volatility triggered by investors’ fears over the development of geopolitical tensions, with particular regard to the rapid worsening of the Greek situation. At the end of the first half, European stock markets continued to record fluctuating performance determined firstly by developments in the Greek crisis and then by instability originating on the Chinese market.
The table shows the two stock market periods, with substantial rises in the first quarter contrasted in the second quarter by a downwards trend which only partially reduced the growth in the market compared with December: +19.1% for the FTSE Italia All-Share and +27% for the FTSE Italia Banks. In this context the UBI Banca share ended the first half up 21.3% to €7.2 (official price). The share has been affected by the context described above since July, although it did reach a new high of above €7.8 in the trading session on 23rd July.
Between January and June 2015, 1.14 billion UBI Banca shares were traded on the electronic stock market for a value of €7.9 billion, (volumes traded in the first half of last year involved approximately 1.1 billion shares for a value of €7 billion).
As a result of the performance reported above, at the end of June the stock market capitalisation (calculated on the official price) had risen to €6.5 billion from €5.4 billion at the end of 2014, which positioned UBI Banca in third place among listed Italian commercial banking groups2 and in first place among “popular” banks. At European level, the UBI Group was again among the first 40 institutions on the basis of the classification drawn up by the Italian Banking Association in its European Banking Report, which considers the EU15 countries plus Switzerland3.
2 The Group is positioned in the fourth place if all listed banking groups are considered. 3 EBR International Flash, July 2015.
106 Performance of the UBI Banca share since 18th July (*) and volumes traded
10 60,000,000
9 55,000,000
50,000,000 8 45,000,000 7 40,000,000
6 Volumes 35,000,000
5 30,000,000
4 25,000,000
20,000,000 3 15,000,000 2 10,000,000
1 5,000,000
0 0 2011 2012 2013 2014 2015 lasondgfmamglasondgfmamglasondgfmamglasondgfmamg
reference prices in euro
Performance of the FTSE Italia All-Share index, FTSE Italia Banks index and the UBI Banca share since 18th July 2011 (*) 250 240 230 220 210 200 190 UBI Banca 180 170 FTSE Italia All-Share 160 150 FTSE Italia Banks Volumes 140 130 120 110 100 90 80 70 60 50 40 30 20 10 0 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 lasondgfmamglasondgfmamglasondgfmamglasondgfmamg
reference prices in euro
* The date of the conclusion of the increase in UBI Banca’s share capital by €1 billion, with the subscription of marginal shares by the underwriting syndicate.
107 The main information concerning the UBI Banca share is summarised below, along with the principal stock market indicators, which have been calculated using consolidated figures.
The UBI Banca share and the main stock market indicators
First half 2015 FY 2014
Number of shares outstanding at the end of period/year 901,748,572 901,748,572 Average price of the UBI share (average of the official prices quoted daily by Borsa Italiana Spa) - in euro 6.953 6.193 Minimum price (recorded during trading) - in euro 5.180 4.824 Maximum price (recorded during trading) - in euro 7.825 7.545 Dividend per share - in euro 0.08 0.08 Dividend yield (dividend per share/average price) 1.15% 1.29% Total dividends - in euro (*) 72,021,230 72,021,230 Book Value - in euro (Consolidated equity, excluding profit for the period/No. shares) - in euro 10.85 10.87 Book value calculated by deducting goodw ill attributable to the shareholders of the Parent from consolidated equity - in euro 9.25 9.29 Book value calculated by deducting intangible assets attributable to the shareholders of the Parent from consolidated equity - in euro 8.95 8.98 Stock market capitalisation at the end of period (official prices) - in millions of euro 6,524 5,381 Price / book value [Stock market capitalisation at the end of period / (consolidated equity attributable to shareholders of the Parent excluding profit for the period/year)] 0.67 0.55 Price/book value calculated by deducting goodw ill attributable to the shareholders of the Parent from consolidated equity 0.78 0.64 Price / book value calculated by deducting intangible assets attributable to the shareholders of the Parent from consolidated equity 0.81 0.66 EPS - Earning per share (consolidated net profit / loss per share pursuant to IAS 33) - in euro annualised 0.2724 -0.8070
(*) The total dividend payout for 2014 was calculated on the 900,265,380 shares outstanding on the date of the approval of the proposal to declare a dividend by the Management Board. That number does not include the 1,483,192 treasury shares held in portfolio on that same date. The indicators for 2014 have been calculated using consolidated equity net of the loss for the period to give a more appropriate indication of the capital value of the share and of the price/book value.
Dividends paid
The dividend for the year 2014, drawn on the extraordinary reserve of the Parent and totalling €72,021,230.40 corresponding to €0.08 on each of the 900,265,380 UBI Banca shares in issue (excluding treasury shares repurchased) was paid with value date 20th May 2015 (ex dividend date 18th May and record date 19th May) against coupon No. 16.
Earnings per share
January - June 2015 Consolidated earnings attributable Weighted average Consolidated earnings per (in thousands of euro) ordinary shares share (in euro) Basic EPS 120,787 900,265,380 0.1342 “Annualised” Basic EPS 245,230 900,265,380 0.2724 Diluted EPS 120,787 900,265,380 0.1342 “Annualised” diluted EPS 245,230 900,265,380 0.2724
Full year 2014 Consolidated earnings attributable Weighted average Consolidated earnings per (in thousands of euro) ordinary shares share (in euro) Basic EPS -726,428 900,157,867 -0.8070 Diluted EPS -726,428 900,157,867 -0.8070
January – June 2014 Consolidated earnings attributable Weighted average Consolidated earnings per (in thousands of euro) ordinary shares share (in euro) Basic EPS 122,349 900,048,572 0.1359 “Annualised” Basic EPS 228,541 900,048,572 0.2539 Diluted EPS 122,349 900,048,572 0.1359 “Annualised” diluted EPS 228,541 900,048,572 0.2539
108 Information on risks and on hedging policies
Banking Group risks
The measurement of risks in the strategic and competitive scenarios in which the UBI Banca Group has set its annual and medium-term planning takes the form of defining limits and rules for the assumption of risk, which are able to guarantee capital strength and value creation oriented towards sustainable growth. The key principles on which Group risk analysis and management are based are as follows: - rigorous containment of financial and credit risks and strong management of all types of risk; - the use of a sustainable value creation approach to the definition of risk appetite and the allocation of capital; - definition of the Group’s risk appetite with reference to specific types of risk and/or specific activities in a set of policy regulations for the Group and for the single entities within it.
The assessments performed by the Parent were carried out with account taken of the operating specifics and the relative profiles of each company in the Group in order to formulate integrated and consistent policies and guidelines. In order to achieve that objective, the governing bodies of UBI Banca perform their functions with reference not only to their own corporate reality but also by assessing the operations of the Group as a whole. The policies set by the Supervisory Board are then translated into operational regulations by the Management Board.
1 – Credit risk
Qualitative information
The strategies, policies and instruments for the assumption and management of credit risk are defined at the Parent by the Chief Risk Officer in co-operation with the Chief Lending Officer, with the support and co-ordination of the relative specialist units. There is a particular focus in the formulation of policies to manage credit risk on maintaining an appropriate risk-yield profile and on taking risks that are consistent with the risk appetite defined by senior management and, more generally, with the mission of the Group. The Notes to the Consolidated Financial Statements in the 2014 Annual Report (Part E Information on risks and on the relative hedging policies) may be consulted for a detailed description of organisational aspects and systems for credit risk management, measurement and control and techniques to mitigate it employed by the UBI Banca Group.
With regard to the Basel 2 project, in 2012 and 2013 the Bank of Italy authorised the Group to use the advanced internal rating based (AIRB) approach to calculate capital requirements to meet credit risk for the regulatory retail segments “exposures backed by residential properties” and “other exposures (SME-retail)” and for the “corporate” regulatory segment. For these portfolios the authorisation involved the use of internal estimates of the probability of default (PD) and loss given default (LGD) parameters.
For all the other portfolios, the standardised approach is used, to be applied in accordance with the roll-out plan submitted to the Supervisory Authority, which involves specific deadlines for regulatory segments and risk parameters. At the date of this report, the scope of application of the approaches authorised in terms of companies is as follows:
109 • AIRB: Banca Popolare di Bergamo, Banco di Brescia, Banca Popolare Commercio e Industria, Banca Popolare di Ancona, Banca Regionale Europea, Banca Carime, Banca Valle Camonica (the “Network Banks”), IW Bank1 and UBI Banca2; • the remaining legal entities in the Group will continue to use the standardised approach until the date of the respective roll-out.
The output of the PD THRESHOLDS UBI INTERNAL RATING MODELS EXTERNAL RATINGS models consists of nine Master Corporate rating classes that Small Retail Private Scale and Large Moody's (1) correspond to the Business Business individuals Min PD Max PD Corporate relative PDs, updated as at December 2013. class class class class class These PDs are mapped MS1 0.030% 0.049% 1 1 1 Aaa-Aa1-Aa2-Aa3 on the Master Scale to MS2 0.049% 0.084% 1 2 A1-A2-A3 14 classes (comparable MS3 0.084% 0.174% 2 2 Baa1-Baa2 2 3 Baa3 with the ratings of the MS4 0.174% 0.298% MS5 0.298% 0.469% 3 3 3 Baa3 /Ba1 main external rating MS6 0.469% 0.732% 4 Ba1-Ba2 agencies) exclusively MS7 0.732% 1.102% 4 4 4 Ba2/Ba3 for reporting purposes. MS8 1.102% 1.867% 5 5 Ba3 With regard to LGD MS9 1.867% 2.968% 6 5 5 B1 models, the UBI Banca MS10 2.968% 5.370% 6 6 6 B2 MS11 7 B3-Caa1 Group has developed 5.370% 9.103% MS12 9.103% 13.536% 7 7 7 Caa1/Caa2 LGD models MS13 13.536% 19.142% 8 8 Caa2 differentiated by MS14 19.142% 99.999% 9 9 8 9 8 9 Caa3-Ca-C regulatory class. (1) Cf Moody's "Corporate Default and Recovery Rates, 1920-2013", Exhibit 29, Average One-Year Alphanumeric. Rating Migration Rates, 1983-2012.
Quantitative information Classification of exposures on the basis of internal ratings
The following is given below: a) regulatory coverage determined on the basis of the rules set by EU Regulation 575/2013 (the “CRR”) and by Bank of Italy Circular No. 285 of 17th December 2013 and subsequent updates. A significant increase in the figures given is forecast following implementation of the procedures for the approval of internal models according to the roll-out plan established by the Supervisory Authority; b) the distribution of the IRB perimeter on the classes of the master scale: exposures to corporate clients, retail exposures: “exposures backed by residential real estate” and “exposures other, businesses (SMEs)”.
UBI Group: regulatory coverage for internal ratings by IRB perimeter (network banks + UBI Banca): regulatory class and subclass Distribution of EAD on the Master Scale
90.0% 16.0% 85.6% 14.0% 85.0% 12.0% 80.0% 79.0% 78.3% 10.0%
75.0% 8.0%
70.0% 6.0% 4.0% 65.0% 2.0%
60.0% 0.0% Corporate Retail: exposures Retail: exposures other secured by real estate businesses (SMEs) property
1 The company IW Bank incorporates the exposures of the former UBI Banca Private Investment and the former IW Bank. 2 The legal entity, UBI Banca, incorporates the exposures of the former B@nca 24-7 and the former Centrobanca.
110 Market risk
1.2.1 Interest rate risk and price risk - Supervisory trading book
Qualitative information
General aspects Information on organisational and methodological aspects, which are unchanged, is given in Part E, section 1, sub- section 2 – the Banking Group – Market risk of the Notes to the Consolidated Financial Statements in the 2014 Annual Report, which may be consulted. The Document setting operational limits defines operational limits for the trading book of the UBI Group in 2015, both at general level and for counterparties and single portfolios. The main operational limits for 2015 (including reallocations and any new limits set during the year) are as follows: Maximum acceptable loss for the UBI Banca Group trading book €100 million Early warning threshold on maximum acceptable loss (MAL) 70% MAL One day VaR limit for the UBI Banca Group trading book €20 million Early warning threshold on VaR 80% VaR
Quantitative information
Supervisory trading book: internal models and other methods of sensitivity analysis
Change in market risk: Daily market VaR for the Group trading portfolios in the first half of 2015
9,000,000 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0
VaR by risk factor calculated on the entire trading book of the UBI Group as at 30th June 2015 is given below.
Trading book of the UBI Banca Group 30.6.2015 Average Minimum Maximum 31.12.2014 30.6.2014
Currency risk 538,307 214,050 1,676 604,178 4,044 6,851 Interest rate risk 1,104,519 1,212,921 625,892 2,288,683 1,228,201 901,399 Equity risk 327,101 234,644 111,600 590,637 386,859 311,201 Credit risk 2,244,340 2,657,454 247,488 5,303,282 2,254,334 4,069,720 Volatility risk 360,717 219,815 15,081 638,694 26,114 44,459 Diversification effect (1) (1,519,452) (836,380) (992,238) Total (2) 3,055,532 3,846,713 1,161,426 7,660,840 3,063,172 4,341,392
(1) The diversification effect is due to the imperfect correlation betw een the different risk factors present in the Group’s portfolio. (2) The maximum VaR w as recorded on 13th February, the minimum VaR on 11th March. The reduction in risk in the trading portfolio in the comparison betw een June and December 2014 is related to sales of Italian government securities performed in the third quarter.
111 Backtesting analyses
UBI Banca Group trading book: backtesting for the first half of 2014
6
4
Actual backtesting 2 analysis of the supervisory portfolios of 0 the Group shows one day when the P&L was worse than the VaR calculated -2 by the risk management system. -4
-6
-8 Millions -10 2/1/15 16/1/15 30/1/15 13/2/15 27/2/15 13/3/15 27/3/15 10/4/15 24/4/15 8/5/15 22/5/15 5/6/15 19/6/15
Theoretical stress tests
UBI BANCA GROUP UBI BANCA GROUP TOTAL UBI BANCA GROUP Data as at 30th June 2015 Supervisory Trading Book Banking Book 30th June 2015 30th June 2015 30th June 2015 The analysis shows a Change in NAV Change in NAV Change in NAV heightened sensitivity Risk Factors IR Shock Shock +1bp -179,590 -0.03% -564,518 0.00% -744,109 0.00% of the portfolios to Risk Factors IR credit spread shocks Shock Shock -1bp 136,365 0.02% 563,499 0.00% 699,864 0.00% (consistent with the Risk Factors IR presence of Italian Shock Bear Steepening 3,446,362 0.48% 9,314,558 0.06% 12,760,920 0.08% government securities Risk Factors IR and corporate Shock Bull steepening 1,623,308 0.23% 20,245,886 0.13% 21,869,193 0.13% securities, especially Risk Factors IR Shock Bear Flattening 280,789 0.04% -11,603,760 -0.07% -11,322,971 -0.07% in the AFS portfolios) Risk Factors IR and to interest rate Shock Bull Flattening 223,235 0.03% -11,601,843 -0.07% -11,378,608 -0.07% shocks (consistent Risk Factors Equity with the presence of Shock +10% 1,292,922 0.18% 2,016,305 0.01% 3,309,227 0.02% bonds and interest- Risk Factors Equity rate derivatives Shock -10% -1,462,304 -0.20% -2,016,305 -0.01% -3,478,609 -0.02% within the portfolios). Risk Factors Volatility Shock +20% 840,022 0.12% 680,602 0.00% 1,520,624 0.01% Risk Factors Volatility Shock -20% -851,736 -0.12% -622,719 0.00% -1,474,456 -0.01% Risk Factors Forex Shock +15% 4,380,124 0.61% -676,486 0.00% 3,703,638 0.02% Risk Factors Forex Shock -15% -7,754,901 -1.09% 676,486 0.00% -7,078,416 -0.04% Risk Factors Credit Spread Shock -18,968,440 -2.66% -779,433,961 -4.94% -798,402,401 -4.84%
Flight to quality scenario -19,491,294 -2.73% -780,793,366 -4.95% -800,284,660 -4.86%
112 1.2.2 Interest rate risk and price risk – Banking book
Qualitative information Information on organisational and methodological aspects, which are unchanged, is given in Part E, section 1, sub- section 2 – the Banking Group – Market risk of the Notes to the Consolidated Financial Statements in the 2014 Annual Report, which may be consulted.
Quantitative information
As at 30th June 2015 positive sensitivity was found in both of the scenarios considered by Group financial risk policy: a downward (+100 bp) and an upward (+100 bp) shock on the yield curve. In detail: • in the upward shift in the yield curve scenario (+100 bp), Group exposure to interest rate risk, in terms of core sensitivity, was €293.39 million; • in the downward shift in the yield curve scenario (-100 BP), on the other hand, core sensitivity of €67.57 million was found. This exposure is affected by the non-negative constraint imposed on interest rates and therefore by the application of a floor on the shift of the relative curve.
In compliance with the Financial Risks Policy, both levels presented include an estimate of the impact of early repayments and modelling of on-demand items on the basis of the internal model.
In the negative shock scenario, the sensitivity originated by the network banks was -€32.25 million and the sensitivity generated by the product companies was approximately +€53.52 million, while the Parent contributed a total of +€46.30 million.
Supervisory regulations also require all intermediaries to measure the impact of exposure to the risk of a change in interest rates of +/- 200 bp. If the economic value of a bank falls by over 20% of its own funds, then the European Central Bank and the Bank of Italy will examine the results with the bank and they may decide to take appropriate action.
End of period measurements as at 30th June 2015, 31st March 2015 and 31st December 2014 and average measurements for the periods June 2015-June 2014, March 2015-March 2014 and the full year 2014 showed increases in economic value in both the scenarios considered. As already underlined, the exposure recorded is heavily impacted by the non-negative constraint on interest rates.
Sensitivity analysis of net interest income focuses on changes in profits resulting from a parallel shock on the yield curve measured over a time horizon of twelve months. The overall determination of exposure contributes to the analysis of the viscosity of on-demand items. UBI Banca Group exposure to interest rate risk, estimated in terms of an impact on net interest income of an increase in reference interest rates of 100 bp was +€102.27 million for the period ended 30th June 2015. The exposure measured in a scenario of a decrease in reference interest rates of 100 bp, amounted to -€4.28 million for the period ended the 30th June 2015. The impact on that income shows the effects of changes in interest rates on the portfolio monitored, excluding hypotheses of future changes in the mix of assets and liabilities. These factors mean that the indicator cannot be used to assess the Bank’s future strategy.
113 Change in market risk: daily market VaR for the portfolios in the Group banking book in the first half of 2015
140,000,000 135,000,000 130,000,000 125,000,000 120,000,000 115,000,000 110,000,000 105,000,000 100,000,000 95,000,000 90,000,000
VaR by risk factor calculated on the banking book of the Group as at 30th June 2015 is given below.
Banking book of the UBI Banca Group 30.6.2015 Average Minimum Maximum 31.12.2014 30.6.2014
Currency risk 55,920 54,501 47,864 60,295 53,381 52,683 Interest rate risk 8,122,454 10,331,745 7,199,108 14,578,856 13,110,483 9,925,094 Equity risk 425,232 931,033 424,473 2,364,463 2,124,949 464,455 Credit risk 99,840,207 107,945,848 90,032,365 136,274,934 132,236,198 208,920,034 Volatility risk 279,055 277,310 156,246 344,413 329,199 348,098 Diversification effect (1) (8,960,020) (15,124,836) (9,043,104) Total (2) 99,762,848 113,589,781 94,975,073 136,626,698 132,729,374 210,667,260
(1) The diversification effect is due to the imperfect correlation betw een the different risk factors present in the Group’s portfolio. (2) The maximum VaR w as recorded on 26th January, the minimum VaR on 15th June.
The significant reduction in risk in the banking book seen in the comparison betw een June and December 2014 is connected mainly w ith the update of the tw o-year historical data series used in the methodology to calculate VaR.
1.2.3 Currency risk Further information on general aspects and on processes for the management and methods for the measurement of currency risk is given in Part E, section 1, sub-section 2 – Banking Group – Market risk of the Notes to the Consolidated Financial Statements in the 2014 Annual Report, which may be consulted.
3 – Liquidity risk
Qualitative information
The section on the interbank market in this interim report may be consulted for information on net interbank debt and details of the Group’s liquidity reserve. Short term liquidity analysis is monitored using a net liquidity balance model of analysis at consolidated level over a time horizon of 30 days, supplemented with stress tests designed to assess the Group’s ability to withstand crisis scenarios characterised by an increasing level of severity. The position at the end of the first half was one of ample funds. The structural balance between assets and liabilities, measured on the basis of their degree of liquidity is also one of an ample positive balance. Further information on liquidity risk is given in Part E, section 1, sub-section 3 – Banking Group – Liquidity risk – of the Notes to the Consolidated Financial Statements in the 2014 Annual Report, which may be consulted.
114 4 – Operational risks Part E section 1, sub-section 4 – Banking Group – Operational risks of the Notes to the Financial Statements in the 2014 Annual Report may be consulted for qualitative information (general aspects, management processes, measurement methods and the reporting system).
Legal risk The companies in the UBI Banca Group are party to a number of court proceedings originating from the ordinary performance of their business. In order to meet the claims received, the companies have made appropriate provisions on the basis of a reconstruction of the amounts potentially at risk, an assessment of the risk in terms of the degree of “probability” and/or “possibility”, as defined in the accounting standard IAS 37, and established legal opinion. Therefore, while it is not possible to predict final outcomes with certainty, it is considered that an unfavourable conclusion of these proceedings, both taken singly or as a whole, would not have a significant effect on the financial and operating position of the Group. Specific sections of this consolidated condensed interim financial report may be consulted for information on corporate litigation, including tax litigation, which may be consulted.
Quantitative information
Descriptive data From 1st July 2010 until 30th June 2015, 19,195 events were detected for a cost of €197 million (of which €21 million recovered). The charts below show that the main sources of operational risk for the Group in the period examined were “processes” (54% of frequencies and 66% of the total impacts detected) and “external causes” (42% of frequencies and 21% of the total impacts detected).
The “process” risk driver included unintentional errors and incorrect application of regulations. The “external causes” risk driver included, amongst other things, human actions performed by third parties and not directly under the control of the Bank.
Percentage of operational losses by risk driver (detection 1st July 2010 – 30th June 2015)
Event frequency Profit impact
2% External causes (external 2% context) 21% 42% Persons (human factor) 11% 54% Processes 66%
2% Systems
115 The types of event which recorded the greatest concentration of operational losses during the period examined were “customers, products and professional practices” (32% of frequencies and 34% of the total impacts detected), “execution, delivery and process management” (22% of frequencies and 33% of the total impacts detected) and “external fraud” (36% of frequencies and 18% of the total impacts detected).
Percentage of operational losses by type of event (detection 1st July 2010 – 30th June 2015)
Event frequency Profit impact Customers, products and professional practices Damage from 1% external events 1% 6% 9% 4% 32% Execution, 1% delivery and 34% process 18% management 36% External fraud
2% Internal fraud 33% 1% 22%
Business interruption and system malfunctions Employment and safety at work
In the first six months of 2015 1,571 events were detected for a cost of €7 million, concentrated in the risk factors “processes” (89% of frequencies and 70% of the total impacts detected) and “external causes” (9% of frequencies and 23% of the total impacts detected).
Percentage of operational losses by risk driver (detection 1st January 2015 - 30th June 2015)
Event frequency Profit impact
External 1% causes 1% 1% (external 9% context) 23% Persons (human factor) 6%
89% 70% Processes
Systems
116 During the first half operational losses were concentrated mainly in the following types of event: “customers, products and professional practices” (80% of frequencies and 55% of the total impacts detected), “execution, delivery and process management” (10% of frequencies and 18% of the total impacts detected) and “external fraud” (6% of frequencies and 18% of the total impacts detected).
Percentage of operational losses by type of event (detection 1st January 2015 - 30th June 2015)
Event frequency Profit impact
Customers, products and professional 1% 1% practices 0% 2% Damage from external 0% 1% events 7% 6% 18% 10% Execution, delivery and process management 55% External fraud 18%
80% Internal fraud 1%
Business interruption and system malfunctions Employment and safety at work
Capital requirement No changes have occurred in the method and the perimeter of application employed for the different components of the model compared with the information reported in the Notes to the Consolidated Financial Statements in the 2014 Annual Report. The capital requirement net of expected losses for which provisions for risks and charges have been made is €300.6 million. An increase in the capital requirement of €3.6 million (+1%) was recorded compared with 31st December 2014 due exclusively to estimated changes for the advanced measurement approach component. More specifically that increase was due to specific risk classes as follows: - interruptions and malfunctions in the operation of systems: an increase in the capital requirement was recorded due to increased risk measured by the consortium database, which was partly cushioned by a reduction in internal loss data collection recorded; - execution, delivery and process management: an increase in the capital requirement was recorded due to the change in risk recorded by the LDC database; - external fraud: a decrease in the capital requirement was recorded due mainly to a reduction in risk as measured by the DIPO (Italian database of operational losses). Also smaller reductions in the capital requirement were recorded for the remaining risk classes as a result of fairly insignificant changes in the distribution of operational losses. These changes are mainly due to reaching a depth of 10 years in the historical data series on the first validation perimeter, which involved excluding accounting entries made outside the holding period employed from the dataset used for the calculation. The risk capital calculated on a consolidated basis for each risk class is allocated to the various legal entities on the basis of a summary indicator determined as follows: 60% of the historical and future risk measured (50% from historical measurement of operational losses incurred over the last five years and 10% from potential risk perceived and estimated taken from the last available risk assessment carried out) and 40% on the basis of the capital
117 requirement figures calculated using the standardised methodology, which is in turn affected by the gross income of each entity and it reflects the implicit dimension inherent in each area of activity in which it operates. Those banks which contribute most to the determination of the capital requirement are Banca Popolare di Bergamo (€45.2 million), Banco di Brescia (€35.3 million) and UBI Banca (€35 million). The figures for the risk capital allocated to Banca Popolare di Bergamo and Banco di Brescia are affected by the higher levels of profitability that they generate compared with the other network banks. The figures for UBI Banca on the other hand are affected by events acquired from the former B@nca 24-7, the former Centrobanca and the former Silf following the relative mergers.
The principal risks and uncertainties for the second half of the year
Risks
The UBI Banca Group attributes primary importance to the measurement, management and monitoring of risk, as activities necessary to the sustainable creation of value over time and to the consolidation of its reputation on its markets. In compliance with the regulations in force for the supervision of banks (Bank of Italy Circular No. 285/2013), the Group has put a process in place to calculate its capital adequacy requirement – for the present and the future – to meet all significant risks to which the Group is or might be exposed (ICAAP - Internal Capital Adequacy Assessment Process)3. Details are given below of risks which have significant impacts for the Group and the action taken to mitigate them. Risks other than those reported below, which are of marginal importance within the UBI Banca Group, are not expected to change during the course of the second half.
Credit risk Credit risk, which consists of the risk of incurring losses resulting from the default of counterparties with whom credit exposure exists, constitutes the most important characteristic risk of the Group. Historically this risk accounts for approximately 90% of the regulatory risk capital. In the first six months of 2015, the slowdown in new defaults in the Group continued and total outstanding non-performing exposures remained more or less stable, partly due to action taken to optimise processes and tools to support credit monitoring and credit recovery activity. That activity allowed the Group to meet the challenge of the difficult economic environment experienced in recent years. The main strengths of the monitoring system included the following: • sessions to analyse and manage credit risk, with the goal of reinforcing behaviours which benefit the quality of credit related decisions; • a strong local focus; • a high level of computerisation of procedures to support the monitoring, management and assessment of default loans. In the remaining part of the year the Group intends to continue to refine its processes and its integrated IT platform for the management of default loans by means of specific action designed to: • integrate corporate processes and procedures to adapt them to regulatory changes resulting from implementation of EBA regulations on non-performing exposures and on forbearance measures; • further strengthen credit risk management through automated integration of monitoring processes and processes for the approval of credit authorisations.
3 The list of risks and the relative definitions have not changed with respect to the information published in the 2014 Annual Report, which may be consulted.
118 Levels of risk are expected to remain relatively stable in the next six months of the year, with exception made for the considerations reported in the following pararaph. Also, with regard to the risk of incurring losses resulting from the depreciation of the value of assets lodged as collateral to guarantee loans which, in the current economic context, could reduce in value thereby diminishing the intrinsic level of protection, as a consequence of its lending policies the UBI Banca Group has lower loan to value ratios than the average for the sector nationally.
Business risk The current scenario of recession is continuing to have a negative impact on operating conditions in the banking system. More specifically, there is strong competition on prices with regard to the loans granted by banks following access to forms of funding regulated by the European Central Bank (i.e. Targeted Longer Term Refinancing Operations - TLTROs). In this context the UBI Banca Group has taken appropriate action on its distribution network designed to achieve goals identified in terms of volumes and pricing of loans consistent with targets for the quality of credit.
Uncertainties
An uncertainty is defined as a possible event for which the potential impact, attributable to one of the risk categories just mentioned, cannot be determined and therefore quantified at present. The Group is currently operating in a scenario that is expected to improve, but which is nevertheless overshadowed by certain risks, potentially negative for growth, connected with various sources of tension. These factors of uncertainty could manifest with impacts attributable primarily to credit, but without affecting the capital strength of the UBI Banca Group. The main uncertainties identified for the second half of 2015 regard the following: - Developments in the macroeconomic environment. The expansionary phase in the world economy is continuing although at a slower pace than observed previously. Some emerging areas have seen their potential growth diminish, while United States GDP also slowed temporarily in the first three months of the year. Positive expectations of growth in the eurozone are set against that backdrop. The latter benefits from the following: (i) the extremely accommodative monetary policy conditions generated by quantitative easing (QE) on the part of the ECB; (ii) the positive impacts on exports resulting from a weak euro on currency markets and from the consolidation of the world recovery; (iii) the fall in commodity prices, and oil prices in particular; (iv) an increase in household wealth due to the rally seen on financial markets in recent years. The recovery nevertheless remains fragile and uneven across the different countries in the single currency area. The moderate growth and low levels of inflation experienced in the eurozone should persuade the European Central bank to maintain it’s very accommodative monetary policy and continue with the QE programme until its scheduled end date set for December 2016. With regard to Italy the prospects for growth in GDP still appear to be modest. Generally, the improvement in the scenario for the euro area should have positive repercussions for Italy, but significant structural problems remain which could slow economic growth in the medium to long-term. Dangers also exist for Italian exports resulting from a greater than expected slowdown in the emerging economies, China especially, and from a deterioration in the geopolitical scenario. Nevertheless gross domestic product could record growth, although modest, in this context, due to expectations of stronger foreign trade (in view of positive performance by exports and a reduction in imports, especially considering the fall in oil prices) and of slowly improving domestic demand. This would help reduce overall risk for players in the economy, a trend already observable today in the aggregate data, although at a moderate pace. As the recovery scenario consolidates the difficulties encountered by the Italian economy in recent years, which helped generate a large increase in household and business credit risk, should progressively reduce in intensity and the slow attenuation of risk could therefore continue.
119 Finally, the risk remains of a possible deterioration in the world scenario. Although the tensions generated by the negotiation of Greek debt have died down after an agreement was reached with international creditors, the Greek crisis underlined the constant presence of factors that might undermine the stability of the euro area as a whole. Renewed periods of turmoil on financial markets could be contagious with impacts above all for countries with high levels of debt such as Italy, with subsequent negative impacts on public accounts and on the real economy. - Developments in the regulatory context. The regulatory context is subject to various processes of change following both the issue of a number of provisions at European and national level, with the introduction of the relative regulations to implement them, relating to the provision of banking services and also the related legal recommendations. This scenario requires particular effort both in terms of interpretation and implementation and at times directly affects the profits of banks, and/or costs for customers. The UBI Banca Group continuously studies action to soften the impacts of measures, which includes constant and attentive monitoring of operating costs and a constant search for greater efficiency in internal processes. We report the following aspects of immediate and future importance at national level: tax regulations currently been issued; decrees to implement EU Directives 2014/49 and 2014/59: and regulations to implement the decree Salva Italia (Save Italy) Decree of December 2013 on the issue of compounded interest. At European level we mainly report the various proposals to revise the prudential and supervisory regulations with potential impacts on loan write-downs and capital adequacy. Significant proposals include those regarding the classification and management of past due loans, the assessment of internal rating models by the supervisory authorities and a proposal to revise the regulatory approach to the management, regulatory treatment and supervision of interest rate risk. - Supervisory Review and Evaluation Process (SREP) . The adoption of EBA guidelines on the supervisory review and evaluation process carried out by the European Central Bank could lead to the introduction of new supervisory practices, different from those previously employed by national authorities. Further requirements in addition to the regulations currently in force could arise, requiring specific action including that of an organisational nature.
* * *
The risks and uncertainties described above were subject to a process of assessment designed, amongst other things, to examine the impacts of changes in market parameters and conditions on corporate performance. The Group does in fact possess instruments to measure the possible impacts of risks and uncertainties on its operations (sensitivity analysis and stress tests in particular), which allow it to rapidly and continuously adapt its strategies – in terms of its distribution, organisation and cost management systems – to changes in the operating context. Risks and uncertainties are also under constant observation through the implementation of the policies and regulations to manage risk adopted by the Group: policies are updated in relation to changes in strategy, context and market expectations. Periodic monitoring of policies is designed to verify their state of implementation and their adequacy. The findings of the analyses performed show that the Group is able to meet the risks and uncertainties to which it is exposed, which therefore confirms the assumption that it is a going concern.
120 Consolidated companies: the principal figures
Profit for the period
First half First half Change % FY Figures in thousands of euro 2015 2014 change 2014 A B A-B A/B C
Unione di Banche Italiane Scpa (1) 177,216 244,650 (67,434) (27.6%) (918,437) Banca Popolare di Bergamo Spa 83,949 91,045 (7,096) (7.8%) 143,569 Banco di Brescia Spa 10,211 30,830 (20,619) (66.9%) 9,046 Banca Popolare Commercio e Industria Spa 22,675 30,289 (7,614) (25.1%) 35,843 Banca Regionale Europea Spa 11,629 11,633 (4) (0.0%) 950 Banca Popolare di Ancona Spa 12,831 615 12,216 n.s. 7,817 Banca Carime Spa (2) (3,195) (1,432) 1,763 123.1% (466,881) Banca di Valle Camonica Spa 4,010 2,889 1,121 38.8% 1,902 Centrobanca Sviluppo Impresa SGR Spa (113) (121) (8) (6.8%) (244) IW Bank Spa (3) (2,000) 7,642 (9,642) n.s. 7,215 UBI Banca International Sa (*) (605) (12,413) (11,808) (95.1%) (13,124) UBI Pramerica SGR Spa 29,428 16,312 13,116 80.4% 43,400 UBI Leasing Spa (5,482) (20,220) (14,738) (72.9%) (38,887) UBI Factor Spa 4,535 5,316 (781) (14.7%) 8,174 Prestitalia Spa (1,847) (5,009) (3,162) (63.1%) (7,175) BPB Immobiliare Srl (282) 387 (669) n.s. 274 Società Bresciana Immobiliare Mobiliare - S.B.I.M. Spa 1,072 1,048 24 2.3% 1,974 UBI Sistemi e Servizi SCpA (4) 3,683 3,316 367 11.1% - UBI Fiduciaria Spa (5) (145) (296) (151) (51.1%) (530) Cargeas Assicurazioni Spa (già UBI Assicurazioni Spa) (6) - 5,448 (5,448) (100.0%) 9,145 Aviva Assicurazioni Vita Spa (20%) (7) 380 2,150 (1,770) (82.3%) (150) Aviva Vita Spa (20%) (7) 1,340 8,000 (6,660) (83.3%) 17,050 Lombarda Vita Spa (40%) 9,158 4,232 4,926 116.4% 7,735 UBI Management Co. Sa 781 278 503 181.1% 492 UBI Trustee Sa 324 132 192 145.4% 116
CONSOLIDATED 124,443 106,192 18,251 17.2% (725,767)
(*) The result shown is from the financial statements prepared for the consolidation according to the accounting policies followed by the Parent.
(1) The figure for 2014 includes impairment losses of €1,251.9 million (net of tax) on Group equity investments.
(2) The figure for 2014 includes the effects of the recognition of impairment losses of €443.1 million on goodwill (net of tax).
(3) On 25th May 2015 the merger of IW Bank into UBI Banca Private Investment took effect. The new company took the name IW Bank Spa. The figures for the first half of 2014 and the full year 2014 have therefore been restated by summing the balances to take account of the operation.
(4) Since this is a consortium company with mutual, not-for-profit objects, UBI Sistemi e Servizi ends the year with a break-even result.
(5) On 30th April 2015 the sale of the entire 100% stake held by UBI Banca in Unione Fiduciaria Spa was concluded.
(6) On 30th December 2014 the sale of the entire stake held by UBI Banca (50%-1 share) to the Ageas Group and BNP Paribas Cardif was concluded.
(7) On 22nd December 2014 the sale of 30% of the two joint insurance ventures to the Aviva Group was concluded which reduced UBI Banca’s stake in both companies to 20%. They are therefore not fully comparable with the comparative figures.
121
Net loans and advances to customers
30.6.2015 31.12.2014 30.6.2014 Change % change Figures in thousands of euro A B C A-C A/C
Unione di Banche Italiane Scpa 21,854,404 23,330,321 23,352,148 -1,497,744 -6.4% Banca Popolare di Bergamo Spa 19,135,848 18,679,641 18,828,908 306,940 1.6% Banco di Brescia Spa 12,574,095 12,615,509 12,920,570 -346,475 -2.7% Banca Popolare Commercio e Industria Spa 8,768,255 8,419,620 8,487,611 280,644 3.3% Banca Regionale Europea Spa 8,356,461 8,456,552 8,854,311 -497,850 -5.6% Banca Popolare di Ancona Spa 7,812,214 7,701,242 7,752,058 60,156 0.8% Banca Carime Spa 4,211,959 4,366,169 4,458,008 -246,049 -5.5% Banca di Valle Camonica Spa 1,791,961 1,779,208 1,838,927 -46,966 -2.6% Prestitalia Spa 1,657,309 1,916,577 2,188,238 -530,929 -24.3% UBI Banca International Sa 486,224 551,103 592,398 -106,174 -17.9% IW Bank Spa* 817,304 851,017 849,491 -32,187 -3.8% UBI Factor Spa 2,063,248 2,016,103 2,044,599 18,649 0.9% UBI Leasing Spa 6,778,012 6,941,652 7,215,565 -437,553 -6.1%
CONSOLIDATED 85,340,026 85,644,223 87,119,396 -1,779,370 -2.0%
Total net non-performing exposures Risk indicators Net bad loans (previously termed non- (previously termed deteriorated loans) /Net performing loans) / Net loans loans
Percentages 30.6.2015 31.12.2014 30.6.2014 30.6.2015 31.12.2014 30.6.2014
Unione di Banche Italiane Scpa 1.54% 1.36% 1.24% 5.72% 5.49% 5.57% Banca Popolare di Bergamo Spa 4.28% 4.33% 3.97% 7.99% 7.93% 7.71% Banco di Brescia Spa 3.52% 3.26% 2.79% 12.21% 11.92% 11.19% Banca Popolare Commercio e Industria Spa 4.03% 4.42% 4.12% 8.55% 8.72% 7.82% Banca Regionale Europea Spa 5.24% 4.70% 4.46% 11.32% 9.71% 8.88% Banca Popolare di Ancona Spa 6.29% 6.20% 5.91% 13.42% 12.88% 12.49% Banca Carime Spa 6.10% 5.20% 4.19% 11.58% 11.26% 11.39% Banca di Valle Camonica Spa 4.54% 4.65% 4.76% 10.80% 9.73% 9.40% Prestitalia Spa 0.99% 0.91% 0.78% 11.84% 13.50% 13.19% UBI Banca International Sa 2.78% 2.45% 2.41% 12.78% 9.67% 11.75% IW Bank Spa* 1.88% 1.72% 1.65% 3.46% 3.03% 3.27% UBI Factor Spa 10.83% 11.03% 11.23% 12.14% 14.08% 12.89% UBI Leasing Spa 10.31% 9.54% 8.64% 20.31% 20.29% 18.16%
CONSOLIDATED 4.91% 4.70% 4.33% 11.31% 11.10% 10.63%
* On 25th May 2015 the merger of IW Bank into UBI Banca Private Investment took effect. The new company took the name IW Bank Spa. The figures as at 30th June and 31st December 2014 have therefore been restated by summing the balances to take account of the operation.
122
Direct funding from customers
30.6.2015 31.12.2014 30.6.2014 Change % change Figures in thousands of euro A B C A-C A/C
Unione di Banche Italiane Scpa 44,694,225 41,284,254 36,306,783 8,387,442 23.1% Banca Popolare di Bergamo Spa 14,733,929 15,941,728 16,146,081 -1,412,152 -8.7% Banco di Brescia Spa 8,003,248 8,634,427 9,009,813 -1,006,565 -11.2% Banca Popolare Commercio e Industria Spa 6,185,082 5,975,615 6,214,438 -29,356 -0.5% Banca Regionale Europea Spa 5,023,973 5,135,369 5,461,333 -437,360 -8.0% Banca Popolare di Ancona Spa 4,875,515 5,279,096 5,475,305 -599,790 -11.0% Banca Carime Spa 5,454,950 5,761,011 5,908,833 -453,883 -7.7% Banca di Valle Camonica Spa 1,006,140 1,136,942 1,242,468 -236,328 -19.0% UBI Banca International Sa 882,501 960,802 987,069 -104,568 -10.6% IW Bank Spa* 3,009,082 3,063,545 3,069,660 -60,578 -2.0%
CONSOLIDATED 94,327,352 93,207,269 90,175,601 4,151,751 4.6%
Direct funding from customers includes amounts due to customers and debt securities issued, with the exclusion of bonds and other securities subscribed directly by companies in the Group.
Direct funding for the following banks was therefore adjusted as follows:
Figures in millions of euro 30.6.2015 31.12.2014 30.6.2014
Bonds Unione di Banche Italiane Scpa 2,391.3 2,326.7 1,778.8 Banca Popolare di Bergamo Spa 1,015.6 1,015.7 847.8 Banco di Brescia Spa 2,158.3 1,920.6 1,369.9 Banca Popolare Commercio e Industria Spa 297.6 297.7 - Banca Regionale Europea Spa 1,278.4 1,240.9 1,241.3 Banca Popolare di Ancona Spa 1,163.3 819.0 699.0 Banca di Valle Camonica Spa 423.4 429.2 394.2 IW Bank Spa* 10.2 10.0 10.0 Euro Commercial Paper and French certificates of deposit UBI Banca International Sa 969.4 2,104.8 3,426.5
* On 25th May 2015 the merger of IW Bank into UBI Banca Private Investment took effect. The new company took the name IW Bank Spa. The figures as at 30th June and 31st December 2014 have therefore been restated by summing the balances to take account of the operation.
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Indirect funding from ordinary customers (at market prices)
30.6.2015 31.12.2014 30.6.2014 Change % change Figures in thousands of euro A B C A-C A/C
Unione di Banche Italiane Scpa 5 5 5 - - Banca Popolare di Bergamo Spa 32,275,715 30,465,728 29,075,932 3,199,783 11.0% Banco di Brescia Spa 17,524,889 16,791,303 14,830,203 2,694,686 18.2% Banca Popolare Commercio e Industria Spa 11,176,946 10,879,880 10,630,867 546,079 5.1% Banca Regionale Europea Spa 10,491,012 10,028,791 9,878,666 612,346 6.2% Banca Popolare di Ancona Spa 5,153,192 4,953,822 4,585,925 567,267 12.4% Banca Carime Spa 6,784,076 6,917,646 6,702,081 81,995 1.2% Banca di Valle Camonica Spa 1,535,845 1,423,090 1,311,821 224,024 17.1% UBI Pramerica SGR Spa 27,573,474 24,745,067 23,051,562 4,521,912 19.6% UBI Banca International Sa 2,929,341 2,700,517 2,985,284 -55,943 -1.9% IW Bank Spa* 8,988,431 8,974,638 9,151,705 -163,274 -1.8% Lombarda Vita Spa (1) 5,482,060 5,142,780 5,057,107 424,953 8.4% Aviva Vita Spa (1) 6,145,718 5,209,134 4,756,627 1,389,091 29.2% Aviva Assicurazioni Vita Spa (1) 2,128,574 2,146,357 2,171,395 -42,821 -2.0%
CONSOLIDATED 79,070,259 75,892,408 73,666,835 5,403,424 7.3%
The totals for the network banks also include indirect funding consisting of bonds issued by UBI Banca.
Assets under management (at market prices)
30.6.2015 31.12.2014 30.6.2014 Change % change Figures in thousands of euro A B C A-C A/C
Unione di Banche Italiane Scpa - - - - - Banca Popolare di Bergamo Spa 16,107,873 14,372,201 13,381,683 2,726,190 20.4% Banco di Brescia Spa 7,863,971 7,093,297 6,830,596 1,033,375 15.1% Banca Popolare Commercio e Industria Spa 5,732,770 5,113,427 4,724,528 1,008,242 21.3% Banca Regionale Europea Spa 5,088,337 4,653,814 4,417,543 670,794 15.2% Banca Popolare di Ancona Spa 2,230,664 1,983,715 1,832,658 398,006 21.7% Banca Carime Spa 3,694,123 3,372,817 3,098,395 595,728 19.2% Banca di Valle Camonica Spa 639,627 556,341 508,392 131,235 25.8% UBI Pramerica SGR Spa 27,573,474 24,745,067 23,051,562 4,521,912 19.6% UBI Banca International Sa 138,644 131,663 129,237 9,407 7.3% IW Bank Spa* 5,953,264 5,509,682 5,256,117 697,147 13.3% Lombarda Vita Spa (1) 5,482,060 5,142,780 5,057,107 424,953 8.4% Aviva Vita Spa (1) 6,145,718 5,209,134 4,756,627 1,389,091 29.2% Aviva Assicurazioni Vita Spa (1) 2,128,574 2,146,357 2,171,395 -42,821 -2.0%
CONSOLIDATED 47,773,645 43,353,237 40,762,807 7,010,838 17.2%
(1) The figure shown on this line is for total assets managed by the Company. However, the calculation of consolidated funding is based solely on the portion placed by companies in the UBI Banca Group.
* On 25th May 2015 the merger of IW Bank into UBI Banca Private Investment took effect. The new company took the name IW Bank Spa. The figures as at 30th June and 31st December 2014 have therefore been restated by summing the balances to take account of the operation.
124
Transactions with related parties and with connected parties
Related parties
As already reported, with Resolution No. 17221 of 12th March 2010 – amended by the subsequent Resolution No. 17389 of 23rd June 2010 – the Consob (Italian securities market authority) approved a Regulation concerning related-party transactions. The regulations concern the procedures to be followed for the approval of transactions performed by listed companies and the issuers of shares with a broad shareholder base with parties with a potential conflict of interest, including major or controlling shareholders, members of the management and supervisory bodies and senior managers including their close family members.
The regulations currently apply within the UBI Banca Group to the Parent, UBI Banca Scpa, only, as a listed company. In November 2010 the Supervisory Board had already appointed a specific committee from among its members to which transactions falling within the scope of the regulations must be submitted in advance.
In compliance with Consob recommendations, transactions with related-parties of UBI Banca performed by subsidiaries are also subject to the regulations in question if, under the provisions of the Articles of Association or internal regulations adopted by the Bank, the Management Board, the Supervisory Board, in response to a proposal of the Management Board, or even an officer of the Bank on the basis of powers conferred on that officer, must preliminarily examine or approve a transaction to be performed by subsidiaries.
Transactions of greater importance
In accordance with Art. 5, paragraph 8 of Consob Resolution No. 17221/12 March 2010, “Public disclosures on related-party transactions”, the following related-party transactions concluded in the first six months of 2015 were excluded from the scope of application of the regulations for related-party transactions with UBI Banca, because they were concluded with subsidiaries: ó 2 transactions for the transfer of eligible assets by Banca Popolare di Bergamo to UBI Finance for a total of €900 million, of which €700 million under the first covered bond programme (residential mortgages) and €200 million under the second covered bond programme (commercial mortgages and residential mortgages not used in the first programme); ó 2 transactions for the transfer of eligible assets by Banco di Brescia to UBI Finance for a total of €650 million, of which €400 million under the first covered bond programme (residential mortgages) and €250 million under the second covered bond programme (commercial mortgages and residential mortgages not used in the first programme); ó 2 transactions for the transfer of eligible assets by Banca Popolare Commercio e Industria to UBI Finance for a total of €470 million, of which €400 million under the first covered bond programme (residential mortgages) and €70 million under the second covered bond programme (commercial mortgages and residential mortgages not used in the first programme); ó 6 “repurchase agreement” transactions by UBI Banca, with UBI Leasing as the counterparty for the following amounts: €713,260,427 (29th January 2015), €630,619,567 (25th February 2015), €630,949,855 (25th March 2015), €631,142,440 (28th April 2015), €548,200,221 (27th May 2015) and €547,811,321 (25th June 2015);
125 ó 1 new “very short term” credit line transaction for UBI Leasing on 12th March 2015 for €600 million; ó 1 new “very short term” credit line transaction and seven short-term loans to UBI Leasing on 29th May 2015 for a total of €3.5 billion.
We also report that: - on 9th June 2015 the Management Board, and on 11th June the Supervisory Board, passed resolutions, within the scope of their respective responsibilities, regarding the merger of SOLIMM Srl into SBIM Spa, companies which carry out property transactions necessary for Group operations and 100% controlled by UBI Banca; - on 9th June 2015 the Management Board, and on 16th June the Supervisory Board, passed resolutions, with the scope of their respective responsibilities, regarding a commitment to sell a stake held by UBI Banca in ICBPI - Istituto Centrale delle Banche Popolari Italiane Spa, amounting to 4.04% of the share capital of that company in such a manner as to maintain a post-closing stake of 1% of the share capital of that company.
Finally, as already reported, the merger of IW Bank into UBI Banca Private Investment took legal effect on 25th May 2015, having been approved by the Management Board on 11th November 2014 on the basis of strategic guidelines issued by the Supervisory Board on 24th July 2014, while for accounting and tax purposes it took effect from 1st January 2015.
We report that: - no transactions were performed in the reporting period with other related parties which influenced the capital position or the results of the Parent, UBI Banca, to a significant extent; - there have been no modifications and/or developments of transactions with related parties, which may have been reported in previous financial reports, that could have a significant effect on the capital position or the results of the Parent, UBI Banca.
Information is reported in the notes to the condensed consolidated interim financial statements in compliance with IAS 24 on balance sheet and income statement transactions between related parties of UBI Banca and Group member companies and on balance sheet and income statement transactions between UBI Banca and its own related parties, together with those items as a percentage of each item in the condensed consolidated interim financial statements.
Connected parties
In implementation of article 53, paragraphs 4 et seq of the Consolidated Banking Act and Inter-Ministerial Credit Committee Resolution No. 277 of 29th July 2008, on 12th December 2011 the Bank of Italy issued the ninth update of the “New regulations for the prudential supervision of banks” (published in the Official Journal of 16th January 2012) regarding risk assets and conflicts of interest concerning parties connected to banks or banking Groups, where connected parties are defined as a related party and all the parties connected to it. The regulations are designed to guard against the risk that the closeness of persons to decision-making centres might compromise the objectivity and impartiality of decisions concerning loans to and/or other transactions with those persons. The first measure therefore regards the introduction of supervisory limits for risk assets (of a bank and/or of a group) lent to connected parties. These limits differ according to the type of related party, with stricter levels for relations between banks and industry. The supervisory limits have been supplemented in the regulations with special approval procedures, together with specific recommendations concerning organisational structure and internal controls.
In compliance with the provisions of Title V, Chapter 5 of Circular No. 263 of 27th December 2006, UBI Banca has adopted specific “Regulations for transactions with Connected Parties of the UBI Group” containing measures concerning “risk assets and conflicts of interest with
126 regard to connected parties”, which regulates procedures designed to preserve the integrity of decision-making processes concerning transactions with connected parties carried out by UBI Banca and by the banking and non-banking members of the Group that it controls including foreign subsidiaries, compatibly with the laws and regulations of the country in which these are registered.
The regulations also require the bodies of Group companies with strategic supervisory responsibility to oversee (with support from the competent functions) the proper application of the provisions of the regulations governing transactions carried out by the respective companies
In order to achieve this, each of those bodies shall update, on at least a quarterly basis, a list of all the transactions concluded in the previous quarter, inclusive of those not subject to a prior opinion from the committee in accordance with the regulations. It shall specify the connected party, the type of transaction and its value and, if the transaction has not been subjected to prior examination by the committee, the reasons given for the exemption, the maximum limit set for the “General Approvals” and a detailed report on its periodic use.
Also in order to allow the Parent to constantly comply with the consolidated limit on risk assets, the Supervisory Board oversees compliance of the Regulations with the principles recommended in the Supervisory Provisions and also observance, at consolidated level, of the procedural and substantive rules contained in them and it reports to shareholders in accordance with Art. 153 of the Consolidated Finance Act. To achieve this, bodies of other Group companies with responsibility for strategic supervision submit lists quarterly to the Supervisory Board, through the Management Board, of all transactions with connected parties concluded in the previous quarter.
Finally we report that on 13th May 2015 the Supervisory Board (in accordance with article 46 of the Articles Association) approved the overall agreements with the Cassa di Risparmio di Cuneo Foundation relating to the stake held in Banca Regionale Europea, as resolved by the Management Board on 12th May 2015 and it also acknowledged the opinion in favour given by the Related and Connected Parties Committee of UBI Banca in a meeting of 13th May 2015 regarding the renewal of the agreements in question, which positively assessed the existence of an interest in concluding the operation and the substantially proper nature of the relative conditions.
The UBI Banca Group has always been within the limits laid down by supervisory regulations in all the consolidated quarterly reports to the Supervisory Authority in the first half of 2015.
* * *
Further information is given on the Related and Connected Parties Committee of UBI Banca in the section “De jure and delegated powers of the corporate bodies”, contained among the last pages of this document.
127 Other information
Inspections
As part of action taken nationally, on 3rd October 2014 the Bank of Italy started inspections designed to ASSESS REMUNERATION AND INCENTIVE POLICIES and practices in place in the UBI Banca Group. At the beginning of December the inspection team already present at UBI Banca to study these matters was temporarily added to in order to verify the APPROPRIATENESS OF PROCEDURES USED TO MANAGE AND TRANSMIT INFORMATION ON LOANS LODGED AS COLLATERAL for Eurosystem credit operations (ABACO). The inspections were concluded on 19th December 2014.
With regard to the inspections into remuneration and incentive policies and practices, on 11th March 2015 the Bank of Italy delivered its findings, which were positive, and at the same time it reported possible areas for improvement. A letter of 10th April 2015 addressed to the supervisory authority contained details of specific initiatives programmed to implement the refinements desired.
On the question of controls on procedures used to manage bank loans lodged as collateral for Eurosystem credit operations, in a communication of 17th March 2015 the Bank of Italy expressed a positive opinion, but here too underlined some areas requiring attention. The subjects brought up by the supervisory authority on this matter were studied and analysed and the activities programmed and the related plan to implement them were communicated in a letter dated 27th April 2015.
Subsequently the Bank of Italy added to the inspections, proceeding from 21st to 23rd April 2015 to carry out a brief inspection designed to verify the ADEQUACY OF PROCEDURES AND PROCESSES IN PLACE TO ACQUIRE INFORMATION ON DEBTORS POTENTIALLY SUITABLE FOR MONETARY POLICY REFINANCING, in terms of monitoring the performance of IRB systems. The results of this inspection had not yet been received at the date of this report.
In the second quarter the UBI Banca Group also received an on-site inspection visit conducted by a team of senior managers from the Bank of Italy and the ECB into the question of IT RISK. The inspections commenced on 30th March and were concluded on 19th June 2015.
Following procedures already tried and tested with other national competitors as part of a "THEMATIC REVIEW OF RISK GOVERNANCE AND RISK APPETITE", in the period from 15th to 19th June 2015 senior managers from the ECB and the Bank of Italy Joint Supervisory Team visited UBI Banca to attend a meeting of the Supervisory Board and to meet senior managers of the Bank, members of the governing bodies and managers of organisational units.
* * *
With a letter of 30th April 2014, the Consob (Italian securities market authority) launched proceedings in accordance with article 195 of the Consolidated Finance Act relating to Members of the Supervisory Board – in office from 2009 until 30th April 2014, but excluding the Members Agliardi, Cividini, Gallarati, Resti and Zucchi – concerning a possible violation of article 149 of the Consolidated Finance Act in relation to aspects concerning information disclosed in the Corporate Governance Report. The relative defence documents, to which all the Supervisory Board members in receipt of the notification adhered, were submitted to the Consob within the time limits set. In 2015 the Consob Administrative Penalties Office then delivered its report containing a reasoned proposal for penalties (the “Report”) to the senior officers of the Bank involved in the penalty procedure and to the bank, as jointly and severally liable. We report on this matter that according to the information provided in the Consob communication received, the Report
128 in question does not bind the decision of the authority itself in any way. The persons concerned and the Bank filed their objections to the penalty in compliance with the time limits and latest procedures introduced by the authority with Resolution No. 19158 of 29th May 2015.
As concerns investigations in progress, commenced in 2014 by the Public Prosecutor’s Office of Bergamo, in the absence of new developments, full information is given in the 2014 Annual Report, which may be consulted.
In consideration of their nature, it is considered that the procedures initiated by the Consob and the Public Prosecutor’s Office of Bergamo can have no repercussions on Group assets.
* * *
With regard to the provisions concerning TRANSPARENCY AND PROPER CONDUCT IN RELATIONSHIPS WITH CUSTOMERS (Title VI of the Consolidated Banking Act), in November and December 2014 the supervisory authority requested some Group banks (Banca Popolare Di Ancona and Banca Carime) to undertake initiatives to solve problems found during inspections carried out previously at individual branches of those banks, without however commencing penalty procedures. In the period February-March 2015 both banks sent a detailed plan of initiatives identified and programmed to overcome the problems found to the supervisory authority.
With regard to ANTI MONEY-LAUNDERING, on 24th December 2014 a communication was received from the Bank of Italy addressed to the subsidiary IW Bank and to the Parent, UBI Banca, concerning the results of inspections carried out by the “Financial Intelligence Unit” (FIU) in the period between 6th November 2013 and 10th March 2014. Together with the relative units at the Parent and at UBI.S, action was taken and a reply was written – on 20th February 2015 – with the formulation of an action plan to address some shortcomings that had been found.
On 17th November 2014 the FIU commenced inspections at Banca Popolare di Bergamo pursuant to articles 47 and 53, paragraph 4 of Legislative Decree No. 231/2007 (anti money- laundering legislation). These were concluded on 31st March 2015 and the communications have not yet been received from the unit in relation to them.
With regard to the PROVISION OF INVESTMENT SERVICES, on 29th January 2015 the Consob informed Banca Popolare di Bergamo of areas requiring attention arising from the follow-up inspection carried out in the period 4th February-7th August 2014, requesting in particular a programme of organisational and IT intervention designed to solve the problems identified. The matters addressed by the authority regarded commercial policies and staff incentive schemes, procedures for providing advisory services and procedures for assessing the adequacy of investments. On 8th April 2015, Banca Popolare di Bergamo submitted its report illustrating the assessments and the initiatives taken and/or programmed.
Compounding of interest
The UBI Banca Group has always paid the greatest attention to the well-known issue of compounding of interest in its banking relationships, both to the arguments which historically have legitimated that practise in the past and to the implementation of new rules each time that Parliament has amended the legislative framework. More specifically, the revision made by the 2014 Legge di stabilità (“stability law” – annual finance law) contains undoubtedly complex aspects and the Parent is directly monitoring the regulatory situation as it evolves, in order to promptly act on new regulatory provisions when they are issued. As already reported, for the provision of detailed regulations, Art. 120 of the consolidated banking act makes reference to an implementation regulation of the interministerial committee for credit and saving (CRIC), which at present has not even made any public consultation, without in the mean time, moreover, having officially repealed the previous 2000 resolution
129 which regulates the matter. To confirm the “fluidity” of the regulatory framework on this matter, it must also be considered that a further amendment to that same Art. 120 of the consolidated banking act had also been approved in June last year by a decree law, which then expired after just two months for failure to convert it into law by Parliament. In such an uncertain framework, having received authoritative opinions from experts and from the National Council of Notaries, the UBI Group considers that the content of the aforementioned Art. 120 of the consolidated banking act is not sufficiently clear and it is therefore inevitable that it must wait for a resolution to implement it by the interministerial committee for credit and saving (CICR) in order to be able to implement it operationally. A stable regulatory framework is also necessary to avoid putting the huge investments needed to comply with the new legislation at risk. Furthermore it is well known that in recent months some courts have issued injunctions in proceedings brought by consumer associations against some banks including Banca Regionale Europea and IW Bank, claiming that the ban on compounding of interest is applicable immediately notwithstanding the aforementioned absence of provisions to implement it provided for by the law. Other courts, on the other hand, have thrown out action taken by the association, ruling in favour of other banks. In this situation of extreme uncertainty, in which the Bank of Italy also added Provisions on Transparency issued on 15th July 2015, our Group is waiting for the regulatory and legal framework to consolidate before making changes to its procedures and contracts, while hoping that the missing regulatory provisions will be issued as soon as possible, although it will obviously comply with the decisions of the courts and use its right to defence and to appeal should it lose.
Tax aspects
Numerous regulatory provisions of a tax nature were issued in the first half of 2015 which involved financial intermediaries both directly (with regard to taxes levied on the intermediaries themselves) and indirectly (as tax substitutes or entities authorised to provide support for tax assessments of resident and non-resident taxpayers). The impact in the latter case is clear in terms of staff and/or IT and organisational costs which also involve a significant increase in both the related economic and legal risks. A summary of the contents of the main issues and provisions arising during the period is given below.
Decree Law No. 83 of 27th June 2015 (Urgent measures concerning bankruptcy, civil law and the functioning of judicial administration). This Decree introduces important changes to the tax regime governing the deductibility of losses and write-downs on loans to customers. According to the tax rules already in force until the end of 2012, write-downs were deductible up to 0.30% of total outstanding loans at the end of the year. The remaining part of the deductible amount was spread over the following 9 or 18 years, depending on the year in which they occurred. With Law No. 147 of 27th December 2013, the 2014 Legge di Stabilità (“Stability Law” – annual finance act), that regime was changed with effect from 2013 with the spread of losses (other than those arising from the sale of loans and receivables) and write-downs over five years. The deductibility of these costs was introduced on a similar basis for IRAP (regional production tax) purposes. The reason for the substantial recognition of deferred tax assets (DTAs) in the balance sheets of domestic financial companies also originates from this tax framework which in turn gave rise to Decree Law No. 225 of 29th December 2010 which under determined conditions allows these DTAs to be transformed into tax credits. Under Decree Law No. 83 of 27th June 2015 (yet to be converted into law), from 2015 losses and write-downs of loans to customers are immediately deductible. This aligns the domestic banking system with tax rules in place in the major EU member states and thereby eliminates a factor that distorts competition and at the same time penalises lending activity. That same decree contains measures to simplify and speed up legal proceedings taken by creditors (and banks in particular) against debtors that will thereby allow banks to manage problem loans more effectively and rapidly from a legal and taxation viewpoint.
130 While the introduction of the principle of full deductibility for corporate income tax (IRES) purposes is firmly established, for 2015 only and for clear revenue raising reasons, the deductibility of the items in question is nevertheless reduced to 75%, while the remaining 25% will be added to the write-downs and losses relating to prior years which as at the 31st December 2014 had not yet been recovered tax wise. As already reported, the latter had in turn generated the recognition of DTAs in the years to which they related. The total amount not deducted arising in this manner will be recovered from a tax viewpoint over a period of 10 years – from 2016 to 2025 – on the basis of annual percentages specified in the Decree and these will replace the recovery percentages and the schedules originally recorded for companies. In practice, the government has made changes to the tax deductions for the costs in question on the basis of estimates of expected tax revenues over the next decade. One consequence of the above, is the expected no change in the tax rules for the purposes of calculating the amount of corporate income tax (IRES) to be paid on account for the three-year period 2015-2017, or in other words the version of the provisions contained in article 106, paragraph 3 of Presidential Decree No. 917 22nd December 1986 in force prior to the amendments made by the Decree will be maintained. The legislation will not be applied immediately and therefore it is hoped that clarification will be provided either in terms of the legislation when the law is converted or in terms of interpretation. In consideration of the deductibility of write-downs on loans to customers for IRAP purposes since the financial year 2013, the change reported above also has effect with regard to the regional tax. With account taken of the Consob/Bank of Italy/Isvap (insurance authority) Document No. 5 of 15th May 2012, the different timing for the tax recoveries of the annual excesses will have no impact on the amount of the DTAs recognised in balance sheets for IRES and IRAP purposes. Alongside this favourable legislation, Art. 17 of the Decree puts a stop to the conversion into tax credits of DTAs recognised in relation to tax relief on goodwill and other intangible assets – see Art. 15 paragraph 10 and following of Decree Law No. 185 of 29th November 2008 and Decree Law No. 225 of 29th December 2010 – for DTAs recognised for the first time from financial reports dated 2015. On a practical level and as is the case for the UBI Banca Group, DTAs recognised in prior years may still be converted. On the contrary, however, for transactions occurring from 2015, while DTAs may be recognised in balance sheets in accordance with accounting standards it will not be possible to convert into tax credits those DTAs generated by those transactions when statutory and/or tax accounting losses occur; they must be used according to the ordinary time schedule.
Law No. 23 of 11th March 2014 – Law to revise the tax system With regard to this Law granting powers to the government (Law No. 23 of 11th March 2014 – Law to revise the tax system), a series of provisions have recently been approved which must now be put before Parliament for its relative opinions. Previously the government has already approved the following: - the “tax simplifications” Decree (Legislative Decree No 175 of 21st November 2014); - Decree on the composition of cadastral commissions (Legislative Decree No. 198 of 17th December 2014); - Decree for the taxation of tobacco (Legislative Decree No. 188 of 15th December 2014).
During the first half the government approved three additional decrees on which the Parliamentary Commissions have already expressed a positive opinion and they are currently being re-examined by the government: - the draft Decree on “Certainty of Right”; - the draft Decree on the “Internationalisation of Businesses”; - the draft Decree on “Electronic invoices”. The first version of the above decrees was approved on 21st April 2015.
Lastly, on 26th June 2015 additional draft provisions were added on the following subjects: - the simplification and rationalisation of legislation on tax collection; - the reorganisation of the tax authorities; - reform of the criminal and administrative penalties system; - estimate and monitoring of tax evasion and reorganisation of tax evasion regulations; - revision of “private letter”/“tax clearance” procedures and the reform of tax litigation.
131 Those of the above provisions with the greatest impact on the UBI Banca Group regard the following: • on the subject of the abuse of right, which occurs when a transaction is carried out by a taxpayer which has no economic substance and the resulting tax advantage is contrary to the purposes of taxation laws even if the transaction is formally correct and finally the tax advantage represents the primary benefit of the transaction. However, a transaction designed to improve the functioning of an enterprise is considered legitimate (e.g. as part of company reorganisation); • doubling the time limits for tax assessment, which is only admissible if the charge brought by the judicial authority is materially carried out before the expiry of the ordinary time limits. This new measure cannot be interpreted as having effect on proceedings already in progress; • co-operative tax compliance by putting organised corporate systems in place to manage and monitor taxation in large size companies. The purpose of this provision is for the tax authorities to take on the role of consultant and not just that of inspector of companies and also to prevent tax litigation; • the general introduction of electronic invoices; • the reform of regulations on tax collection in order to provide incentives for spontaneous payment, including by means of more payment of debt by instalment methods. A new principle entitled “light compliance” is introduced, with a consequent smaller burden on taxpayers; • the issue of criminal penalties, where new factors are introduced which identify tax fraud with a revision of the thresholds for penalties. Similarly, the limits have been revised above which filing an “unfaithful” return constitutes a criminal offence, bringing the minimum threshold to €150 thousand of tax evaded in the presence of evasion on taxable income of greater than €3 million, or on 10% of the income. As concerns administrative fines these are now proportional to the amount of loss to the tax authorities and the conduct of the taxpayer; • tax litigation, in which deflationary instruments are introduced to the disputes with regard to all litigation independently of the tax levying institution and at all instances of judgement. Similarly, precautionary protection for taxpayers is introduced at all stages of tax litigation – suspension of orders, effects of rulings, etc. – as is the immediate enforcement of the rulings; • “private letter”/“tax clearance” procedures are broadened and streamlined. The principle of the general application of “silent consent” is introduced for proposals made by taxpayers where the period set for reply, in some cases reduced from 120 to 90 days, has expired. The number of cases in which the presentation of applications under this procedure is compulsory has been reduced (e.g. there is no longer a need to present an application annually in some cases), different types of application have been identified and the number of persons who can submit these applications has been defined.
FATCA Regulations and automatic exchange of tax information at international level FATCA – on 7th July 2015 the law was published in the Official Journal that ratifies the agreement between the Italian government and the United States government designed to apply the FATCA legislation and implement the automatic exchange of the information resulting also from agreements with other foreign countries. This law, in force from 8th July 2015, has retroactive effect from the 1st July 2014. As already reported, the FACTA legislation affects the main companies in the Group (classified as financial institutions required to make FATCA reports), with the exception of UBI Leasing, UBI Factor, Prestitalia, BPB Immobiliare, S.B.I.M., UBI Sistemi e Servizi and UBI Academy. In this context, the Italian government, along with other countries, signed an intergovernment agreement (an “IGA model 1”) according to which, under the FATCA procedures and on the basis of reciprocity between countries, in return for information transmitted by Italy to the United States, similar information will be transmitted by the United States to Italy. The purpose of the ratification law, together with the ministerial decree to implement and integrate the intergovernment agreement and the provision of the Director of the Tax Authorities on procedures for transmitting the information is to provide intermediaries with the information needed to commence the exchange of information by implementing its procedures. The first transmission of information on United States financial accounts or in other words relating to financial institutions that do not adhere to FATCA will be made by intermediaries to
132 the tax authorities in August 2015, while the transmission of the latter to the United States tax authorities will take place in September 2015. INFORMATION EXCHANGE - On 29th October 2014, over 50 countries, including Italy, agreed to the automatic multilateral exchange of information on financial accounts held by non- resident customers with financial institutions according to a standard (the “Common Reporting Standard – CRS”) broadly based on FATCA regulations. Furthermore, on 1st December 2014 the European Council amended the directive on administrative and tax co-operation (Dir. 2011/16/EU), known as "DAC 2", providing for the automatic exchange of information based on the CRS standard mentioned above for EU member countries. For Italy the entry into force of both the “CRS” regulation and the “DAC 2” directive is scheduled for 1st January 2016, subject to the issue of the relatively domestic regulations. The onerous nature of procedures of this kind is very clear and it accompanies similar obligations, not entirely replicable, ordinarily provided for by domestic tax regulations.
Customer registration As already reported, since 2011 (Decree Law No. 201 of 6th December 2011) financial intermediaries have been required to periodically furnish the financial authorities with detailed quantitative information (balances, movements, etc.) on customer relationships. In 2015 information relating to 2014 was sent, which also included information on average deposits held in current and deposit accounts (as provided for by Art. 1, paragraph 314 of Law No. 190 of 23rd December 2014 and Provision of the Director of the Tax Authorities No. 73782 of 28th May 2015) introduced for the purposes of simplifying the obligation of citizens to file a single substitute return (SSR) for ISEE (equivalent economic status indicator) purposes as well as for checking the accuracy of the data declared in that same return. In order to make it easier for those concerned to fill in the aforementioned SSR, the Italian Banking Association (with its tax series circular No. 6 of 6th June 2015, invited banks to make the information on average deposits also available to customers. Financial intermediaries are to transmit information for new tax monitoring purposes (pursuant to article 9 of law No. 97 of 6th August 2013) relating to transactions performed in 2014 by the 21st September 2015. In this circumstance also, mention must necessarily be made of the costliness of the new processing required by the financial authorities.
Law No. 186 of 15th December 2014 (voluntary co-operation) This provision, issued towards the end of 2014 (Law No. 186 of 15th December 2014) allows taxpayers to regularise omissions in their tax returns with regard both to assets held abroad (see tax monitoring) and held in Italy by making payments for unpaid taxes and benefiting from a significant reduction in the relative fines. The regularisation applies to the years 2010 – 2013 and may be carried out by 30th September 2015, except for cases of omissions and holding assets in “blacklisted” countries. Notwithstanding the clarifications provided by the tax authorities with Circular No. 10/E issued last March, large areas of doubt remain on the part of the taxpayers involved, and not least on the question of the “doubling of the time limits”, which should apparently have expired as a result of one of the provisions to implement the law mentioned above. As concerns financial intermediaries, we point out that their role in the voluntary co-operation procedure is less substantial compared with previous repatriation “tax shield” provisions. Nevertheless, we note difficult aspects regarding both anti-money laundering obligations and the new anti-money laundering crime especially considering that these involve increased penalties for intermediaries themselves. Considering that intermediaries could receive a substantial increase in resources and that is obtain better and greater knowledge of the economic and financial position of their customers, who at times also are in receipt of loans, from this voluntary co-operation provision, we hope a solution to currently unsolved aspects concerning interpretation and application is rapidly provided.
* * *
With regard to interpretations we report that interpretation practices issued by the tax authorities mainly involved provisions introduced by Law No. 190 of 23rd December 2014 (the Legge di stabilità, “stability law” or 2015 annual finance law), such as the “split payments” or
133 “reverse charge” and IRAP. The following circulars worthy of mention issued in the first half are as follows: • Circular No. 22/E/2015: providing recommendations on the IRAP (regional production tax) expense regime for employees with permanent contracts, the tax authorities provided operational details for cases of personnel on secondment; • Circular No. 21/E/2015: the tax authorities provide recommendations on interpretation and application regarding the increase in the Aiuto alla Crescita Economica (ACE – aid to economic growth) subsidy and the transformation of excess IRES tax into an IRAP tax credits. The new clarifications do not have a direct impact on tax for the UBI Banca Group, although it confirms the correctness of the Group’s practices with regard to the calculation of intragroup loans. • Circular No. 9/E/2015: on the subject of credit for foreign taxes in relation to receipt of income produced abroad by a taxpayer who is a natural person or company, the circular confirms the correctness of the tax treatment practised in the various tax periods by the UBI Banca Group.
134 Outlook for consolidated operations
With regard to the outlook for consolidated operations, we report the forecasts given below on the basis of information currently available.
The actions undertaken in the first half and the expected progressive improvement in the macroeconomic environment should allow a further increase in new grants of loans in the second half of the year in order to counter the strong competitive pressure on pricing.
Net fee and commission income should benefit year-on-year from the positive trends forecast for assets under management and insurance and from possible growth in fees and commissions associated with the trend for lending.
The continuation of the favourable general economic situation and the hoped for absence of further tensions in the more critical countries of the euro area could allow a result to be achieved for trading and hedging activity in line with that of the first half.
The action planned for 2015 will allow us to confirm our objective of containing operating expenses in line with those for the previous year, notwithstanding the additional costs in relation to the contribution to the European Resolution Fund and the Deposit Guarantee Scheme. These are estimated at over €30 million for the current year and will be recognised within “other administrative expenses”, following final quantification expected in coming months.
The improvements in the economic situation and the exit from recession, recently confirmed by the principal economic research institutes should help contain loan losses at a level lower than in 2014.
Bergamo, 7th August 2015
THE MANAGEMENT BOARD
135
136
CONDENSED INTERIM CONSOLIDATED FINANCIAL
STATEMENTS AS AT AND FOR THE PERIOD ENDED 30TH JUNE 2015
138
MANDATORY INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE PERIOD ENDED 30TH JUNE 2015
Consolidated balance sheet
30.6.2015 31.12.2014 30.6.2014 Figures in thousands of euro
ASSETS
10. Cash and cash equivalents 484,055 598,062 486,807 20. Financial assets held for trading 1,338,170 1,420,506 2,168,661 30. Financial assets designated at fair value 197,223 193,167 192,408 40. Available-for-sale financial assets 16,799,280 18,554,956 16,742,576 50. Held-to-maturity investments 3,535,692 3,576,951 3,049,841 60. Loans and advances to banks 3,191,584 3,340,415 4,078,892 70. Loans and advances to customers 85,340,026 85,644,223 87,119,396 80. Hedging derivatives 545,576 649,250 458,998 90. Fair value change in hedged financial assets (+/-) 59,108 64,124 47,680 100. Equity investments 247,779 246,250 295,970 120. Property, plant and equipment 1,755,974 1,729,107 1,764,564 130. Intangible assets 1,760,006 1,776,925 2,896,274 of which: - goodwill 1,465,260 1,465,260 2,511,679 140. Tax assets 2,753,059 2,991,600 2,566,975 a) current 488,766 547,704 320,841 b) deferred 2,264,293 2,443,896 2,246,134 - of which pursuant to Law No. 214/2011 1,931,943 2,078,403 1,888,404 150. Non-current assets and disposal groups held for sale 11,286 69,893 188,358 160. Other assets 1,434,917 931,275 1,168,828
TOTAL ASSETS 119,453,735 121,786,704 123,226,228
30.6.2015 31.12.2014 30.6.2014 Figures in thousands of euro
LIABILITIES AND EQUITY
10. Due to banks 9,049,928 13,292,723 15,964,805 20. Due to customers 55,331,195 51,616,920 47,126,528 30. Debt securities issued 38,996,157 41,590,349 43,049,073 40. Financial liabilities held for trading 647,508 617,762 496,946 60. Hedging derivatives 788,565 1,009,092 623,610 80. Tax liabilities 440,745 630,223 620,062 a) current 147,510 303,740 204,395 b) deferred 293,235 326,483 415,667 100. Other liabilities 3,132,513 1,994,340 3,130,877 110. Post-employment benefits 339,894 391,199 378,320 120. Provisions for risks and charges: 291,748 285,029 303,897 a) pension and similar obligations 71,515 80,529 81,134 b) other provisions 220,233 204,500 222,763 140. Valuation reserves 150,595 113,836 153,603 170. Reserves 3,564,327 3,450,082 3,484,522 180. Share premiums 3,798,430 4,716,866 4,716,866 190. Share capital 2,254,371 2,254,371 2,254,371 200. Treasury shares (-) -5,340 -5,340 -6,121 210. Non-controlling interests (+/-) 548,656 555,019 822,677 220. Profit (loss) for the period/year (+/-) 124,443 -725,767 106,192 TOTAL LIABILITIES AND EQUITY 119,453,735 121,786,704 123,226,228
140
Consolidated Income Statement
1H 2015 1H 2014 31.12.2014 Figures in thousands of euro
10. Interest and similar income 1,308,681 1,563,853 3,015,058 20. Interest and similar expense (461,533) (655,325) (1,196,671) 30. Net interest income 847,148 908,528 1,818,387 40. Fee and commission income 768,185 701,019 1,403,306 50. Fee and commission expense (99,107) (91,326) (176,719) 60. Net fee and commission income 669,078 609,693 1,226,587 70. Dividends and similar income 5,319 8,868 10,044 80. Net trading income 45,383 50,594 63,166 90. Net hedging income (loss) 6,730 (7,395) (11,217) 100. Income from disposal or repurchase of: 53,441 93,715 144,636 a) loans and receivables (4,311) (888) (15,348) b) available-for-sale financial assets 65,810 97,867 168,304 d) financial liabilities (8,058) (3,264) (8,320) 110. Net profit (loss) on financial assets and liabilities designated at fair value 5,544 (272) 3,073 120. Gross income 1,632,643 1,663,731 3,254,676 130. Net impairment losses on: (392,447) (431,102) (937,267) a) loans and receivables (389,099) (429,101) (928,617) b) available-for-sale financial assets (8,490) (742) (4,821) d) other financial transactions 5,142 (1,259) (3,829) 140. Net financial income 1,240,196 1,232,629 2,317,409 170. Net income from banking and insurance operations 1,240,196 1,232,629 2,317,409 180. Administrative expenses (1,082,843) (1,053,625) (2,273,143) a) staff costs (656,415) (647,943) (1,413,312) b) other administrative expenses (426,428) (405,682) (859,831) 190. Net provisions for risks and charges (29,135) (2,702) (9,074) 200. Depreciation and net impairment losses on property, plant and equipment (42,942) (43,969) (88,924) 210. Amortisation and net impairment losses on intangible assets (33,106) (38,464) (143,141) 220. Other net operating income/expense 168,420 143,201 336,366 230. Operating expenses (1,019,606) (995,559) (2,177,916) 240. Profits of equity investments 19,573 19,776 122,293 260. Net impairment losses on goodwill - - (1,046,419) 270. Profits 83 456 8,729 280. Pre-tax profit (loss) from continuing operations 240,246 257,302 (775,904) 290. Taxes on income for the period/year from continuing operations (98,695) (135,368) 72,314 320. Profit (loss) for the period/year 141,551 121,934 (703,590) 330. Profit for the period/year attributable to non-controlling interests (17,108) (15,742) (22,177)
340. Profit (loss) for the year/period attributable to the shareholders of the Parent 124,443 106,192 (725,767)
Annualised basic earnings per share 0.2724 0.2539 (0.8070) Annualised diluted earnings per share 0.2724 0.2539 (0.8070)
141
Consolidated statement of comprehensive income
1H 2015 1H 2014 FY 2014 Figures in thousands of euro
10. PROFIT FOR THE PERIOD/YEAR 141,551 121,934 -703,590 Other comprehensive income net of taxes without transfer to the income statement 40. Defined benefit plans 20,541 -12,229 -26,375 Other comprehensive income net of taxes with transfer to the income statement 90. Cash flow hedges 535 302 1,255 100. Available-for-sale financial assets 21,593 328,282 317,113 120. Share of valuation reserves of equity-accounted investees (4,308) 6,991 -6,843
130. Total other comprehensive income net of taxes 38,361 323,346 285,150
140. COMPREHENSIVE INCOME (item 10 + 130) 179,912 445,280 -418,440 CONSOLIDATED COMPREHENSIVE INCOME ATTRIBUTABLE TO NON-CONTROLLING 150. INTERESTS 18,711 14,519 22,798 CONSOLIDATED COMPREHENSIVE INCOME ATTRIBUTABLE TO THE SHAREHOLDERS OF 160. THE PARENT 161,201 430,761 -441,238
142
Statement of changes in consolidated equity for the period ended 30th June 2015
Allocation of prior year Changes January - June 2015 30th June 2015 profit Restate- Equity transactions Balances as ment of Balances as Changes Consolidated attributable to attributable at 31.12.2014 opening at 1.1.2015 Dividends Repurchase Extraordinary Change in Derivatives in New share Stock Changes in comprehensive the to non- balances Reserves and other of treasury distribution of equity on treasury Equity reserves issues options equity stakes income shareholders controlling uses shares dividends instruments shares of the Parent interests Figures in thousands of euro
Share capital: 2,566,663 - 2,566,663 ------84 - 2,566,579 2,254,371 312,208 a) ordinary shares 2,521,556 - 2,521,556 ------84 - 2,521,472 2,254,371 267,101 b) other shares 45,107 - 45,107 ------45,107 - 45,107
Share premiums 4,744,986 - 4,744,986 -918,436 ------88 - 3,826,462 3,798,430 28,032
Reserves 3,646,157 - 3,646,157 214,846 -101,596 -1,603 ------126 - 3,757,678 3,564,327 193,351 a) retained earnings 1,692,842 - 1,692,842 214,846 -101,596 ------1,806,092 1,730,486 75,606 b) other 1,953,315 - 1,953,315 - - -1,603 ------126 - 1,951,586 1,833,841 117,745
Valuation reserves 110,191 - 110,191 ------38,361 148,552 150,595 -2,043
Equity instruments ------
Treasury shares -5,340 - -5,340 ------5,340 -5,340 -
Profit (loss) for the period -703,590 - -703,590 703,590 ------141,551 141,551 124,443 17,108
Equity 10,359,067 - 10,359,067 - -101,596 -1,603 ------298 179,912 10,435,482 9,886,826 548,656 Equity attributable to the shareholders of the Parent 9,804,048 - 9,804,048 - -75,630 -1,603 ------1,190 161,201 9,886,826 X X Equity attributable to non- controlling interests 555,019 - 555,019 - -25,966 ------892 18,711 548,656 X X
143
Statement of changes in consolidated equity for the period ended 30th June 2014
Allocation of prior year Changes January - June 2014 30th June 2014 profit Restate- Equity transactions Balances as ment of Balances as Consolidated attributable to attributable at 31.12.2013 opening at 1.1.2014 Dividends Changes Repurchase Extraordinary Change in Derivatives New share Stock Changes in comprehensive the to non- balances Reserves and other in reserves of treasury distribution of equity on treasury Equity issues options equity stakes income shareholders controlling uses shares dividends instruments shares of the Parent interests Figures in thousands of euro
Share capital: 2,762,447 - 2,762,447 ------112 - 2,762,335 2,254,371 507,964 a) ordinary shares 2,717,340 - 2,717,340 ------112 - 2,717,228 2,254,371 462,857 b) other shares 45,107 - 45,107 ------45,107 - 45,107
Share premiums 4,772,267 - 4,772,267 ------115 - 4,772,152 4,716,866 55,286
Reserves 3,553,596 - 3,553,596 274,137 -92,113 -139 ------2,059 - 3,733,422 3,484,522 248,900 a) retained earnings 1,508,859 - 1,508,859 274,137 -92,113 ------2,059 - 1,688,824 1,439,955 248,869 b) other 2,044,737 - 2,044,737 - - -139 ------2,044,598 2,044,567 31
Valuation reserves -174,959 - -174,959 ------1 323,346 148,388 153,603 -5,215
Equity instruments ------
Treasury shares -6,121 - -6,121 ------6,121 -6,121 -
Profit for the period 274,137 - 274,137 -274,137 ------121,934 121,934 106,192 15,742
Equity 11,181,367 - 11,181,367 - -92,113 -139 ------2,285 445,280 11,532,110 10,709,433 822,677 Equity attributable to the shareholders of the Parent 10,339,392 - 10,339,392 - -58,591 -139 ------1,990 430,761 10,709,433 X X Equity attributable to non- controlling interests 841,975 - 841,975 - -33,522 ------295 14,519 822,677 X X
144 Consolidated Statement of Cash Flows (indirect method)
1H 2015 1H 2014 Figures in thousands of euro
A. OPERATING ACTIVITIES 1. Ordinary activities 618,905 696,994 - profit for the period (+/-) 141,551 121,934 - gains/losses on financial assets held for trading and on financial assets/liabilities at fair value (+/-) -50,927 -50,322 - gains/losses on hedging activities (-/+) -6,730 7,395 - net impairment losses on loans (+/-) 392,447 431,102 - depreciation, amortisation and net impairment losses on property, plant and equipment and intangible assets (+/-) 76,048 82,433 - net provisions for risks and charges and other expense/income (+/-) 29,135 2,702 - net premiums not received (-) - - - other insurance income/expense not received(-/+) - - - outstanding taxes and duties 49,063 129,916 - net impairment losses on disposal groups held for sale after tax (-/+) - - - other adjustments (+/-) -11,682 -28,166 2. Net cash flows from/used by financial assets 1,731,443 527,660 - financial assets held for trading 131,900 1,839,545 - financial assets designated at fair value 1,279 15,692 - available-for-sale financial assets 1,875,916 -1,841,173 - loans and advances to banks: repayable on demand - - - loans and advances to banks: other loans and receivables 148,831 50,864 - loans and advances to customers -84,902 872,970 - other assets -341,581 -410,238 3. Net cash flows from/used by financial liabilities -2,344,566 -1,232,757 - amounts due to banks repayable on demand - - - amounts due to banks: other payables -4,242,795 947,539 - due to customers 3,714,275 -3,575,629 - debt securities issued -2,594,192 1,147,294 - financial liabilities held for trading 29,746 -899,404 - financial liabilities designated at fair value - - - other liabilities 748,400 1,147,443 Net cash flows from/used in operating activities 5,782 -8,103 B. INVESTING ACTIVITIES 1. Cash flows from 6,889 10,254 - disposals of equity investments 1,507 - - dividends received on equity investments 5,319 8,868 - disposals of held-to-maturity investments - - - disposals of property, plant and equipment 63 1,386 - disposals of intangible assets - - - disposals of subsidiaries and lines of business - - 2. Cash flows used in -25,082 -12,936 - purchases of equity investments - - - purchases of held-to-maturity investments - - - purchases of property, plant and equipment -8,329 -8,862 - purchases of intangible assets -16,753 -4,074 - purchases of subsidiaries and lines of business - - Net cash flows from/used in investing activities -18,193 -2,682 C. FINANCING ACTIVITIES - issues/purchases of treasury shares - - - issues/purchases of equity instruments - - - distribution of dividends and other uses -101,596 -92,113 Net cash flows from/used in financing activities -101,596 -92,113 NET CASH GENERATED/USED DURING THE PERIOD -114,007 -102,898
Reconciliation
1H 2015 1H 2014 Figures in thousands of euro
Cash and cash equivalents at beginning of period 598,062 589,705 Total net cash flows generated/absorbed during the period -114,007 -102,898 Cash and cash equivalents: effect of changes in exchange rates - - Cash and cash equivalents at the end of the period 484,055 486,807
145
146
EXPLANATORY NOTES
Accounting policies
Basis of preparation
The Interim financial report as at and for the period ended 30th June 2015 of the UBI Banca Group, approved by the Management Board on 7th August 2015, which authorised its publication in compliance, amongst other things, with IAS 10, comprises the interim management report on consolidated operations and the condensed interim consolidated financial statements. It has been prepared in compliance with article 154-ter of Legislative Decree No. 58/1998, with the IFRS international accounting standards1 issued by the International Accounting Standards Board (IASB) and with the relative interpretations of the International Financial Reporting Interpretations Committee (IFRIC) as endorsed by the European Commission and in force on 30th June 2015.
More specifically the interim condensed consolidated financial statements (containing: the balance sheet, income statement, statement of comprehensive income, statements of changes in equity, cash flow statement and notes) have been prepared in compliance with IAS 34, which governs interim financial reporting. In view of the option allowed by the standard just mentioned, the interim consolidated financial statements as at 30th June 2015 have been presented in condensed form and therefore they do not provide all the full information required for annual financial statements and must be read in conjunction with the annual report prepared for the year ended 31st December 2014. The condensed interim consolidated financial statements as at and for the period ended 30th June 2015 include the Parent UBI Banca Scpa and the companies comprised within the scope of the consolidation2 and they have been prepared by using the positions of the single companies included within the consolidation, corresponding to their individual interim financial statements examined and approved by their respective governing bodies and appropriately modified and reclassified, where necessary, for compliance with the accounting policies adopted by the Group. The condensed interim consolidated financial statements contain a statement by the Chief Executive Officer and the Senior Officer Responsible pursuant to Art. 154 bis of Legislative Decree No. 58/1998 and they have been subjected to a limited audit by the independent auditors Deloitte & Touche Spa.
* * *
The condensed interim consolidated financial statements result from the application of IFRS and measurement criteria, adopted on the basis of a going concern assumption and in compliance with the principles of accrual accounting, the relevance of the information and the predominance of substance over form. These criteria are the same as those applied to the financial statements as at and for the period ended 31st December 2014 which may be consulted in full, except for the information given in the sub-section “Regulatory developments”, where accounting standards, amendments and interpretations applied from the 1st January 2015 are described, and the sub-section “Other Aspects ”. Where it is impossible to measure items in the financial statements with precision, the application of those policies involves the use of estimates and assumptions which may have a significant effect on the amounts recognised in the balance sheet and in the income statement.
1 Those standards, implemented in Italian law by Legislative Decree No. 38/2005, which took advantage of the option allowed under EC Regulation 1606/2002, are applied on the basis of events occurring that are disciplined by them from the date on which their application becomes compulsory, unless specified otherwise. 2 Details are given in the section “The scope of the consolidation”, in which changes that occurred during the period are also given.
148
The use of reasonable estimates forms an essential part of the preparation of financial statements and we have listed here those items in the financial statements in which the use of estimates and assumptions is most significant: - measurement of loans and receivables; - measurement of financial assets not listed on active markets; - measurement of indefinite useful life intangible assets and equity investments; - quantification of provisions for risks and charges; - quantification of deferred taxes; - definition of the depreciation and amortisation charges for property, plant and equipment and intangible assets with finite useful lives; - measurement of post-employment benefits.
In compliance with the provisions of IAS 34, income taxes are recognised on the basis of the best estimate of the weighted average rate expected for the full year. An adjustment may be made to an estimate following a change in the circumstances on which it was based or if new information is acquired or yet again on the basis of greater experience. A change in an estimate is applied prospectively and it therefore generates an impact on the income statement in the year in which it is made and, if it is the case, also in future years. No changes were made in the first half to the criteria previously employed for estimates in the financial statements as at 31st December 2014.
These condensed half year consolidated financial statements as at and for the period ended 30th June 2015 have been clearly stated and give a true and fair view of the capital and financial position, the result for the period, the changes in equity and the cash flows generated.
The business of the Group is not significantly subject to seasonal and/or cyclical factors.
The information contained in this report is expressed, unless otherwise indicated, in euro as the accounting currency. The mandatory financial statements and the explanatory notes have been prepared in thousands of euro3 and comply with those defined in Bank of Italy Circular No. 262/20054 and in addition to the financial statements as at 30th June 2015, they provide the following comparative information: - balance sheet: as at 31st December 2014 and 30th June 2014; - income statement: first half 2014 and full year 2014 - statement of comprehensive income: first half 2014 and full year 2014; - statement of changes in equity: for the period ended 30th June 2014; - statement of cash flows: first half 2014.
The minimum information required under paragraphs 15 B and 16 A of IAS 34 relating to dividends paid and trends for loan provisions is given in the interim consolidated management report.
For full information, this Interim Financial Report also includes a section on the Parent, even if it is required neither by Art. 154-ter nor by IAS 34, containing the separate condensed mandatory interim financial statements as at and for the period ended 30th June 2015, the reclassified financial statements and the relative notes and comments. Those financial statements were not subjected to a limited audit.
With regard to the provisions of IAS 10, concerning events occurring subsequent to the balance sheet date of the condensed interim consolidated financial statements, subsequent to 30th June 2015, the balance sheet date, and until 7th August 2015, the date on which the Interim financial report was approved by the Management Board, no events occurred to make adjustments to the figures presented in the report necessary.
3 The relative rounding of the figures has been performed on the basis of Bank of Italy instructions. 4 The balance sheet lists assets and liabilities in order of decreasing liquidity and the income statement recognises expenses according to their nature.
149
Furthermore, account was also taken in the preparation of this financial report, of the provisions introduced with the documents issued jointly by the supervisory authorities and reference is made with particular regard to Bank of Italy/Consob (securities market authority)/Isvap (insurance authority) Document No. 4 of 3rd March 2010 to the subsequent section “Other aspects” in relation to impairment of goodwill and available-for-sale financial assets.
Regulatory developments
The most important aspects of changes in international accounting standards are given below with the periods from which they run.
INTERNATIONAL ACCOUNTING STANDARDS IN FORCE FROM 2015 As already reported in the 2014 Annual Report, which may be consulted for full details, some provisions relating to regulations issued by the European Union have come into force during the current year. The most important aspects are as follows: • No. 634/2014 which made the introduction of the interpretation IFRIC 21 “Levies” compulsory as of the 2015 financial statements. The document in question addresses the accounting treatment for a liability relating to a levy that is not a tax on income and therefore does not fall within the scope of application of IAS 12. The accounting treatment of the liability must comply with the provisions of IAS 37 “Provisions, contingent liabilities and contingent assets”. IFRIC 21 gives clear details of: i) the obligating the event which gives rise to a liability to pay a levy; ii) when a liability to pay a levy must be recognised; iii) the effects of that interpretation on interim financial reports (former IAS 34); • No. 1361/2014 which made amendments to accounting standards in accordance with “Annual Improvements to IFRS: 2011-2013 Cycle” as part of the normal annual process to improve them developed in the context of ordinary activities of rationalisation and clarification of international accounting standards. The purpose of annual improvements is to address the necessary issues to clarify inconsistencies found in international reporting standards or terms which are not of an urgent nature. The amendments regard the following accounting standards: - IFRS 3 Business Combinations – Scope exception for joint ventures. This amendment makes it clear that the formation of all types of joint arrangement, as defined by IFRS 11, are excluded from the application of IFRS 3. - IFRS 13 Fair Value Measurement. This amendment makes clear that the exception contained in paragraph 48 of IFRS 13 concerning the possibility of measuring the fair value of a net position (in cases where financial assets and liabilities exist with positions which offset market or credit risks) applies to all contracts included within the scope of application of IAS 39 (and in future of IFRS 9) regardless of whether it satisfies the definition of financial assets and liabilities provided in IAS 32. - IAS 40 Investment Properties – Interrelationship between IFRS 3 and IAS 40. This amendment makes it clear that IFRS 3 and IAS 40 are not mutually exclusive and that reference must be made to the specific instructions contained in the respective standards to determine whether the purchase of a property falls within the scope of application of IFRS 3 or IAS 40. An assessment must in fact be made to determine whether the acquisition of a property investment constitutes the acquisition of an asset, a group of assets or even a business combination in accordance with IFRS 3. The changes reported above do not produce any material effects on this interim financial report, except with regard to the information given in the section “other aspects” relating to the application of IFRIC 21 to the provisions of the BRRD and DGS directives.
INTERNATIONAL ACCOUNTING STANDARDS IN FORCE SUBSEQUENT TO 2015 On 17th December 2014 the European Commission endorsed the following regulations5:
5 Application of those amendments is compulsory from the date of the start of the first year which begins on the 1st February 2015 and that is from 1st January 2016.
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• Regulation (EU) No. 28/2015 which introduces the 2010-2012 annual cycle of improvements to international accounting standards developed in the context of ordinary activities to rationalise and clarify international accounting standards. The main changes regard the following: - IFRS 2 Share-based payments Changes were made in the standard to the definitions of “vesting conditions” and “market conditions” and further definitions of “performance conditions” and “service conditions” were added previously included in the definition of “vesting conditions”; - IFRS 3 Business combinations The “contingent consideration” pursuant to IFRS 3 can be classified as equity, a financial asset/liability pursuant to IAS 39, assets or liabilities. The amendment makes clear that a “contingent consideration” recognised as a financial asset or liability (in accordance with IAS 39/IFRS 9) must be measured again at fair value at each reporting date and the changes in fair value are recognised through profit or loss or through other comprehensive income on the basis of the requirements of IAS 39 (or IFRS 9); - IFRS 8 Operating segments The amendments require an entity to disclose judgements made by management in applying the criteria for the aggregation of operating segments, including a description of the aggregated segments and the economic indicators considered in determining whether the operating segments share “similar economic characteristics”. Furthermore, it is specified that the reconciliation between the total of the segment assets subject to disclosure and the assets of the entity must be reported if the segment assets are reported periodically to the chief operating decision-maker. - IAS 16 Property, plant and equipment and IAS 38 Intangible assets The amendments have eliminated the inconsistencies in the calculation of accumulated depreciation when an item of property, plant and equipment, or an intangible asset is revalued (i.e. when the option to value at cost is discarded in favour of the alternative option to measure at fair value). The new requirements clarify that the gross carrying amount must be adjusted in a manner consistent with the revaluation of the carrying amount of the asset and that the accumulated depreciation must therefore be equal to the difference between the gross carrying amount and the carrying amount net of the impairment recognised; - IAS 24 Related party disclosures The new provisions clarify that where an entity provides key management personnel services to a reporting entity, that entity is deemed a related party;
• Regulation (EU) No. 29/2015 which amends IAS 19 “Employee benefits”. The amendments are designed to regulate the recognition of employee (or third party) contributions where defined benefit plans require them to contribute to the cost of the plan. In fact in some countries pension plans require employees (or third parties) to contribute to a pension plan. The amendment makes it possible to only deduct contributions from personnel expenses that are connected with service provided in the period in which the service is provided6. Contributions that are connected with the service, but vary on the basis of the duration of the service provided, must be allocated to the period of service using the same method of allocation applied to the benefits.
The standards listed above have not been applied in advance for the purposes of preparing the condensed interim consolidated financial statements as at and for the period ended 30th June 2015. Management is currently considering the possible impacts of introducing these amendments on the Group’s consolidated financial statements, but it does not expect significant impacts on the Group’s consolidated financial statements from the adoption of these amendments.
INTERNATIONAL ACCOUNTING STANDARDS NOT ENDORSED AS AT 30TH JUNE 2015
Standard (IAS/IFRS) Date of Amendments Interpretation (SIC/IFRIC) publication IFRS 14 Regulatory deferral accounts 30 01 2014 IFRS 11 Accounting for acquisition of interests in joint operations 06 05 2014 IAS 16, IAS 38 IAS 16 Property, Plant and Equipment – IAS 38 Intangible Assets 12 05 2014 IFRS 15 Revenue from contracts with customers 28 05 2014
6 In the current version of the standard, contributions are deducted from personnel expense in the accounting period in which they are paid.
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IAS 16, IAS 41 IAS 16 Property, Plant and Equipment – IAS 41 Agricolture 30 06 2014 IFRS 9 Financial Instruments 24 07 2014 IAS 27 Equity method in separate financial statements 12 08 2014 Sale contribution of assets between an investor and its Associate or Joint IFRS 10, IAS 28 11 09 2014 Venture IFRS 5, IFRS 7, IAS 19 and IAS Annual Improvements to IFRSs (2012-2014 cycle) 25 09 2014 34 IAS 1 Disclosure Initiative 18 12 2014 IFRS 10, IFRS 12, IAS 28 Investment Entities: applying the consolidation exception 18 12 2014 The standards listed above are not applicable for the purposes of the preparation of the 2015 first half report because their application is subject to endorsement by the European commission through the issue of specific EU Regulations.
AMENDMENTS TO IAS 39 As already reported in the 2014 Consolidated Annual Report, which may be consulted for full information, on 24th July 2014 the IASB issued the accounting standard IFRS 9 “Financial Instruments”, which therefore brought to conclusion the process of the full revision of IAS 39 “Financial Instruments: Recognition and Measurement”, divided into three stages: - “Classification and Measurement”; - “impairment;” and - “General Hedge Accounting”7. The standard in question, adoption of which will be compulsory from 1st January 2018 is still going through the endorsement process by the European Commission as part of which the European Financial Reporting Advisory Group (EFRAG)8 issued a favourable opinion on 4th May 2015. Endorsement of the accounting standard is scheduled for the second half of next year and only after that would become applicable in the member states of the European Union.
Full information on the changes introduced to the standard with regard to the three stages mentioned above is given in the 2014 Annual Report. Nevertheless, in consideration of the complexity of the implementation of the standard in question, above all with regard to the provisions on impairment using an “expected losses” approach and the relative impacts it will have on the financial statements and the return on capital, we report that a specific project was commenced by the Banking Association in which the UBI Banca Group is participating. It is designed to look into the more operational issues and more critical aspects resulting from the application of IFRS 9 and to stimulate interbank discussion on the matter. Internally a project is beginning with an initial assessment stage designed to identify with precision the impacts of the application of the new accounting standards, including those on software applications. A second stage on implementation will follow which should start at the beginning of next year. Its goal is to ensure the application of IFRS 9 according to the deadlines set by the regulations. Updates on the progress of the internal report will be provided in future financial reports.
7 For full information we report that in April 2014 the IASB published the discussion paper “Accounting for Dynamic Risk Management: a Portfolio Revaluation Approach to Macro Hedging” which, in line with the dynamic procedures for the management of interest rate risk adopted by banks, sets out a possible accounting approach (a “portfolio revaluation approach) designed to better reflect the dynamic management of risk by management in the financial statements of an entity. Following the observations received during the consultation stage, in July 2015 the IASB decided to assign the “macrohedging” project to the relative research programme and it postponed publication of the Exposure Draft until after a further discussion paper has been prepared. 8 Body responsible for assessing the adoption of IFRS in Europe.
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Other aspects
1) BRRD Directive (Bank Recovery and Resolution Directive – 2014/59/EU) and DGS Directive (Deposit Guarantee Schemes – 2014/49/EU)
The BRRD Directive (Bank Recovery and Resolution Directive – 2014/59/EU9) defines the new resolution rules applicable to all banks in the European Union from 1st January 2015. The measures will be financed by a National Resolution Fund which each member state must create with an ex ante contribution (plus a possible ex post part if determined circumstances occur). As a consequence, from 1st January 2015 until 31st December 2024 (a ten-year period), each national fund must reach a target funding level of at least 1% of the amount of the deposits protected. The National Resolution Fund will be paid into a Single Resolution Fund (SRF) from 1st January 2016, which will be managed by the Single Resolution Board (SRB). This fund, provided for under the Single Resolution Mechanism Regulation10, must reach a funding target level of at least 1% of the amount of the deposits protected held with all the authorised institutions in the banking union over a period of eight years (1st January 2016 - il 31st December 2023). Therefore the banks of the member states that belong to the banking union (including Italian banks) will contribute to the National Resolution Fund in 2015 and to the Single Resolution Fund from 2016. The contribution rules are established by Council Implementing Regulation No. 81 of 19/12/2014 (published in the Italian Official Journal on 19/3/2015).
The DGS Directive (Deposit Guarantee Schemes – 2014/49/EU) is designed to strengthen depositor protection and harmonise the regulatory framework at EU level and it requires all member states to adopt ex-ante financing procedures. The Directive provides for the achievement of the target level, set at 0.8% of the deposits guaranteed, by 2024 (a ten-year period).
A special parliamentary bill authorised the Government to implement the European Directives and to enforce other European Union regulations (the “2014 European Delegation Law”). That bill was enacted into Law No. 114 of 9th July 2015, thereby bringing national legislation into line with that of the EU. At present the legislative decrees to implement the directives in question have not yet been issued.
In consideration of the regulatory developments described above, the UBI Banca Group has an obligation to make a contribution and with regard to the Single Resolution Fund it therefore estimated the annual quota due to the National Resolution Fund11, which was €22.8 million for the current year. Because the cost was not a final figure, it was recognised under the item “net provisions for risks and charges”. The ex ante amount actually required by the competent authority will only be known in the second half, when the relative communication from that authority is received. The estimate calculated considers the annual payment on the basis of the application of the interpretation IFRIC 21 “Levies”, according to which liabilities relating to the payment of a levy, which the contributions question can be classified as, arises at the time when the “obligating the event” occurs. In the case in question, this is identified as the annual communication of the conditions set by the directives in question from the competent authorities.
We report on the other hand that the ex ante annual quota due in accordance with the DGS Directive, estimated at €11.3 million, will presumably be recognised in the third quarter of 2015 in consideration of the deadlines set for implementation by the directive itself12.
Updates on the ex ante annual quotas due to both the national resolution fund and to the DGS will be provided in the interim financial report for the period ended 30th September 2015.
2) Accounting treatment for negative income on financial assets
The reduction in interest rates driven by the European Central Bank (see the section “The macroeconomic scenario” in the interim management report for details) led to the recognition of negative income on investments with the consequent need to define the proper accounting treatment to recognise this in the income statement. The subject of how to record negative interest on financial assets in the financial statements has received growing attention from various international bodies as follows: - the International Financial Reporting Interpretation Committee (IFRIC)13 has underlined that the cost resulting from the application of negative interest to financial assets does not correspond to the definition of income given in IAS 18 Income and therefore that cost must not be recognised under the item interest income;
9 Added to with Commission Delegated Regulation (EU) 2015/63 of 21st October 2014. 10 Created by Regulation No. 2014/806/EU. 11 The deadline for the implementation of Directive No. 2014/59/EU was 1st January 2015. 12 The Directive No. 2014/49/EU came into effect on 3rd July 2015. 13 Internal committee of the IASB responsible for the interpretation of international financial reporting standards.
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- a similar opinion was given by the the European Financial Reporting Advisory Group (EFRAG), which is now looking into the question of whether negative interest should or should not be included for the purposes of calculating the effective interest rate; - on 22nd May the EBA provided clarification on this matter stating that for regulatory purposes the interest in question should be recognised as interest expense.
With regard to the above, we report that for the purposes of preparing its financial statements as at and for the period ended 30th June 2015, the UBI Banca Group recognised the aforementioned negative income under the item “interest and similar expense”, therefore aligning the statutory accounting classification of these costs with the regulatory classification. A revision was therefore made to the practice followed until now by the sector of recognising the negative income as a reduction of interest income, in order to safeguard the traditional meaning attributed to net interest income and that is an expression in terms of positive interest of the return on the assets to which that interest relates.
On the basis of the above, we report that following the same approach, the same treatment must be applied to positive expenses accruing on financial liabilities, which are therefore recognised within the item “interest and similar income”.
To complete the information we report that in the first half of 2015: • negative interest accruing on financial assets amounted to €0.9 million; • positive interest accruing on financial liabilities amounted to €2.5 million.
No changes were made to the comparative figures in consideration of the immaterial nature of the phenomenon in the first half of 2014.
3) Credit quality – Non-performing exposures (termed deteriorated exposures in previous financial reports)
As reported in the Interim Financial Report for the first quarter of 2015, while the process to revise and harmonise the regulatory framework in order to reinforce the solidity and solvency of banks is still in progress, in 2013 the European Banking Authority EBA) published, amongst other things, the document “EBA Final Draft Implementing Technical Standards”, which regarded both “Non-performing exposures” and “Exposures subject to forbearance measures”. These regulatory changes were implemented by the Bank of Italy which in January 2015 amended in particular Circular No. 272 “Account Templates”14 and Circular No. 217 “Manual for the preparation of Supervisory Reports for Financial Intermediaries, for Payment Institutions and for ELMIs”15. The aforementioned modifications were designed, with regard to financial reporting regulations, to update the contents of Circular No. 262 “Banking financial statements: presentations and compilation rules” because the definition of the categories of non-performing assets corresponds to those established by current supervisory reporting practices.
The new regulations preserve the categorisation of credit exposures into classes representing different risks, which together constitute the aggregate “non-performing exposures” pursuant to the aforementioned EBA ITS’s. More specifically, there are three classes of non-performing exposures: • “past-due”; • “unlikely to pay”; and • “bad loans” (termed “non-performing loans” in previous financial reports).
With the abandonment of the previous concepts of “impaired” and “restructured exposures”, the class mentioned above of “unlikely to pay” was introduced. These are non-performing exposures for which the bank considers it unlikely that a debtor will fully meet their credit obligations (in terms of principal and/or interest), without the need to take action designed to protect the creditor’s rights, such as the enforcement of guarantees. This assessment is carried out by the bank independently of the existence of any arrears and therefore it is not necessary to wait until explicit evidence of delinquency manifests. The category in question therefore attributes great importance to the bank’s ability to make judgements and to quickly detect events which might suggest difficulty in full repayment of principal and interest by a debtor without the bank taking action to protect its creditor rights. This must also be done in the absence of tangible signs of the presumed difficulties.
Furthermore, an additional loan class has been introduced termed “forborne exposures”, which runs across all the credit categories and which has already been illustrated in previous financial reports, including the 2014 Consolidated Annual Report of the UBI Banca Group, which may be consulted for details.
The approach already followed by the Group in the Interim Financial Report for the first quarter of 2015 has been continued again in this financial report. Therefore, exposures previously classified as
14 For which the 7th update was published. 15 For which the 13th update was published.
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“impaired” or “restructured” which did not satisfy the requirements for being classified as “bad loans” (previously termed “non-performing loans”) have been included in the “unlikely to pay” category. Figures for forborne, non-performing (previously termed “deteriorated”) and performing exposures are reported in the interim management report on operations in the section “General banking business with customers: lending” under the sub-section “Risk”.
Impairment of available-for-sale securities The fair value measurement of available-for-sale securities as at 30th of June 2015 resulted in the recognition of impairment losses through profit and loss of €8.49 million (gross of tax and non- controlling interests), of which €6.82 million relating to UBI Banca. These impairment losses were attributable to the following: - €6.98 million to three debt instruments, of which two issued by a banking counterparty and one acquired from the conversion of loans, the redemption of which appears uncertain; - €0.96 million to equity instruments resulting from investments in UCITS (held almost entirely by the Parent), the fair value of which is obtained on the basis of the NAV reported periodically by the management companies. - €0.55 million to equity instruments of an “investment” nature.
Impairment losses on equity instruments are recognised, in compliance with Group policy on the impairment of available-for-sale equity instruments, when the fair value of the instruments either remains below the historical cost of purchase for a period of longer than 18 months or falls below that level by more than 35% or in cases of impairment following the recognition of previous impairment losses.
For full information we report that in compliance with the provisions of IAS 39, any future recoveries in the value of those instruments are recognised as follows: - in a separate reserve in equity if they relate to equity instruments; - through profit or loss if they relate to debt instruments.
Impairment tests on goodwill The provisions of IAS 36 require goodwill and therefore the cash generating units (CGUs) or groups of CGUs to which it was allocated, to be tested for impairment at least annually and also certain qualitative and quantitative indicators of impairment to be monitored continuously to see whether the necessary conditions exist for testing goodwill for impairment more frequently. It is even more important to monitor the factors which might indicate possible impairment in the current economic environment as fully reported in the Consolidated Interim Management Report. The importance of impairment tests was also emphasised by supervisory authorities in the Joint Document No. 4 already mentioned, which underlined the need to pay maximum attention to full compliance with IAS 36 in the preparation of financial statements with regard to the following: - the impairment testing procedures employed; - the information provided in the notes to the financial statements.
In consideration of the foregoing, since the stock market capitalisation as at 30th June 2015 was lower than the equity recognised on the books, all those elements from internal and external inputs which might lead to a fundamental valuation lower than that recognised as at 31st December 2014 were subject to analysis. In detail, it was found that in the first half in question both the stock market capitalisation and the equity value implicit in the consensus target price had both risen substantially.
The following fundamental factors were analysed: i. the cost of equity (cost of own funds) for UBI Banca (and its determinants); ii. the interest rate scenario; iii. trends in net profit forecasts (and other income statement items) made by equity analysts both for 2015 and subsequent years (after the announcement of the results from the first quarter of 2015).
The estimate of the cost of equity (and its determinants) as at 30th June 2015 had fallen slightly as reported in the table below.
31.12.2014 30.06.2015 Delta (a) (b) = (b) - (a) A) Risk Free (average daily one month 10y BTP) 2.00% 2.21% 0.21% B) Beta based on options (vs Stoxx 600) 1.406x 1.185x -0.221 C) Equity risk premium 5.00% 5.00% 0.00%
D) cost of equity = A + B x C 9.03% 8.13% -0.90%
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The table shows that the estimate of the cost of equity (COE) as at 30th June 2015 was 8.13%, down on the estimate carried out as at 31st December 2014 (9.03%). This was the result of a reduction in the beta, which fell from 1.406 to 1.185. The terminal value of the COE as at 30th June 2015 was calculated using the same method as that employed as at 31st December 2014 based on a capital asset pricing model. It made use of the yield to maturity of the Italian ten-year rate as at 30th June 2015 of 2.21% as the risk free rate, an adjusted UBI Banca beta (β) (calculated on the basis of the volatility implicit in options on the share and on the Ftse Italia All Share index and on the basis of a one-year correlation between the index and the share), which stood at 1,185x as at 30th June 2015 and an equity risk premium of 5.0% (COE = Risk Free + (β) x Equity Risk Premium).
With regard to the interest rate scenario, a survey was carried out on external input based forecasts used as a basis for the 2016-2019 projections. More specifically, an improvement was found in the medium- term part of the yield curve: both the forward rate and the future rate for the three month Euribor for 2018 and 2019 were higher than the same estimates for the years 2018 and 2019 as at 31st December 2014.
Finally, profit forecasts by equity analysts for the period 2015-2018 were more or less the same as the projections used by management for impairment testing purposes as at 31st December 2014. As a result of these findings we report that no external input triggers existed that required the exercise to estimate the recoverable value as at 30th June 2015 to be repeated.
As concerns potential internal input triggers, the consolidated results to 30th June 2015 were more or less in line with budget forecasts for the same period.
On the basis of the analysis of internal and external presumed impairment factors, no requirement was found to repeat the impairment test for the purposes of preparing this interim financial report.
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List of the main IFRS standards endorsed by the European Commission
IAS/IFRS ACCOUNTING STANDARDS ENDORSEMENT Reg. 1274/08, 53/09, 70/09, 494/09, 243/10, 149/11, IAS 1 Presentation of financial statements 475/12, 1254/12, 1255/12, 301/13 IAS 2 Inventories Reg. 1126/08, 1255/12 Reg. 1126/08, 1274/08, 70/09, 494/09, 243/10, IAS 7 Statement of cash flows 1254/12, 1174/13 Accounting policies, changes in accounting estimates IAS 8 Reg. 1126/08, 1274/08, 70/09, 1255/12 and errors IAS 10 Events after the reporting date Reg. 1126/08, 1274/08, 70/09, 1142/09, 1255/12 IAS 11 Construction contracts Reg. 1126/08, 1274/08 Reg. 1126/08, 1274/08, 495/09, 475/12, 1254/12, IAS 12 Income taxes 1255/12, 1174/13 Reg. 1126/08, 1274/08, 70/09, 495/09, 1255/12, IAS 16 Property, plant and equipment 301/13, 28/15 IAS 17 Leases Reg. 1126/08, 243/10, 1255/12 IAS 18 Revenue Reg. 1126/08, 69/09, 1254/12, 1255/12 IAS 19 Employee benefits Reg. 1126/08, 1274/08, 70/09, 475/12, 1255/12, 29/15 Accounting for government grants and disclosure of IAS 20 Reg. 1126/08, 1274/08, 70/09, 475/12, 1255/12 government assistance Reg. 1126/08, 1274/08, 69/09, 494/09, 149/11, 475/12, IAS 21 The effects of changes in foreign exchange rates 1254/12, 1255/12 IAS 23 Borrowing costs Reg. 1260/08, 70/09 IAS 24 Related party disclosures Reg. 632/10, 475/12, 1254/12, 1174/13, 28/15 IAS 26 Retirement benefit plans Reg. 1126/08 IAS 27 Consolidated and separate financial statements Reg. 1254/12, 1174/13 IAS 28 Investments in associates Reg. 1254/12 IAS 29 Financial reporting in hyperinflationary economies Reg. 1126/08, 1274/08, 70/09 Reg. 1126/08, 1274/08, 53/09, 70/2009, 495/09, IAS 32 Financial instruments: presentation 1293/09, 149/11, 475/12, 1254/12, 1255/12, 1256/12, 301/13, 1174/13 Reg. 1126/08, 1274/08, 495/09, 475/12, 1254/12, IAS 33 Earnings per share 1255/12 Reg. 1126/08, 1274/08, 70/09, 495/09, 149/11, 475/12, IAS 34 Interim financial reporting 1255/12, 301/13, 1174/13 Reg. 1126/08, 1274/08, 69/09, 70/09, 495/09, 243/10, IAS 36 Impairment of assets 1254/12, 1255/12, 1374/13 IAS 37 Provisions, contingent liabilities and contingent assets Reg. 1126/08, 1274/08, 495/09, 28/15 Reg. 1126/08, 1274/08, 70/09, 495/09, 243/10, IAS 38 Intangible assets 1254/12, 1255/12, 28/15 Reg. 1126/08, 1274/08, 53/2009, 70/09, 494/09, IAS 39 Financial instruments: recognition and measurement 495/09, 824/09, 839/09, 1171/09, 243/10, 149/11, 1254/12, 1255/12, 1174/13, 1375/13, 28/15 Reg. 1126/08, Reg. 1274/08, Reg. 70/09, 1255/12, IAS 40 Investment property 1361/14 IAS 41 Agriculture Reg. 1126/08, 1274/08, 70/09, 1255/12 First-time adoption of international financial reporting Reg. 1126/09, 1164/09, 550/10, 574/10, 662/10, IFRS 1 149/11, 475/12, 1254/12, 1255/12, 183/2013, 301/13, standards 313/13, 1174/13 Reg. 1126/08, 1261/08, 495/09, 243/10, 244/10, IFRS 2 Share-based payment 1254/12, 1255/12, 28/15 Reg. 495/09, 149/11, 1254/12, 1255/12, 1174/13, IFRS 3 Business combinations 1361/14, 28/15 IFRS 4 Insurance contracts Reg. 1126/08, 1274/08, 1165/09, 1255/12 Non-current assets held for sale and discontinued Reg. 1126/08, 1274/08, 70/09, 494/09, 1142/09, IFRS 5 operations 243/10, 475/12, 1254/12, 1255/12 IFRS 6 Exploration for and evaluation of mineral resources Reg. 1126/08 Reg. 1126/08, 1274/08, 53/09, 70/2009, 495/09, IFRS 7 Financial instruments: disclosures 824/09, 1165/09, 574/10, 149/11, 1205/11, 475/12, 1254/12, 1255/12, 1256/12, 1174/13 IFRS 8 Operating segments Reg. 1126/08, 1274/08, 243/10, 632/10, 475/12, 28/15 IFRS 10 Consolidated financial statements Reg. 1254/12, 313/13, 1174/13 IFRS 11 Joint arrangements Reg. 1254/12, 313/13 IFRS 12 Disclosure of interests in other entities Reg. 1254/12, 313/13, 1174/13 IFRS 13 Fair value measurement Reg. 1255/12, 1361/14
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SIC/IFRIC INTERPRETATION DOCUMENTS ENDORSEMENT
IFRIC 1 Changes in existing decommissioning, restoration and similar liabilities Reg. 1126/08, 1274/08 Reg. 1126/08, 53/09, IFRIC 2 Members' Shares in co-operative entities and similar instruments 1255/12, 301/13 Reg. 1126/08, 70/09, IFRIC 4 Determining whether an arrangement contains a lease 1255/12 Diritti derivanti da interessenze in fondi per smantellamenti, ripristini e IFRIC 5 Reg. 1126/08, 1254/12 bonifiche ambientali Liabilities arising from participating in a specific market - waste electrical IFRIC 6 Reg. 1126/08 and electronic equipment Applying the restatement approach under IAS 29 “Financial reporting in IFRIC 7 Reg. 1126/08, 1274/08 hyperinflationary economies” Reg. 1126/08, 495/09, IFRIC 9 Reassessment of embedded derivatives 1171/09, 243/10, 1254/12 IFRIC 10 Interim financial reporting and impairment Reg. 1126/08, 1274/08 IFRIC 12 Service concession arrangements Reg. 254/09 Reg. 1262/08, 149/11, IFRIC 13 Customer loyalty programmes 1255/12 Reg. 1263/08, Reg. 1274/08, IFRIC 14 Prepayments of a minimum funding requirement 633/10, 475/12 IFRIC 15 Agreements for the construction of real estate Reg. 636/09 Reg. 460/09, Reg. 243/10, IFRIC 16 Hedges of a net investment in a foreign operation 1254/12 Reg. 1142/09, 1254/12, IFRIC 17 Distributions of non-cash assets to owners 1255/12 IFRIC 18 Transfers of assets from customers Reg. 1164/09 IFRIC 19 Extinguishing financial liabilities with equity instruments Reg. 662/10, 1255/12 IFRIC 20 Stripping costs in the production phase of a surface mine Reg. 1255/12 IFRIC 21 Levies Reg. 634/14 Reg. 1126/08, 1274/08, SIC 7 Introduction of the euro 494/09 SIC 10 Government assistance – no specific relation to operating activities Reg. 1126/08, 1274/08 SIC 13 Jointly controlled entities – non-monetary contributions by venturers Reg. 1126/08, 1274/08 SIC 15 Operating leases – Incentives Reg. 1126/08, 1274/08 Income taxes – Changes in the tax status of an enterprise or its SIC 25 Reg. 1126/08, 1274/08 shareholders SIC 27 Evaluating the substance of transactions in the legal form of a lease Reg. 1126/08 Reg. 1126/08, 1274/08, SIC 29 Service concession arrangements: disclosures 70/09 SIC 31 Revenue – Barter transactions involving advertising services Reg. 1126/08 SIC 32 Intangible assets – Website costs Reg. 1126/08, 1274/08
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Information on fair value
No changes have been made in the methods employed to measure fair value in the reporting period and we therefore refer you to the information given in section A.4 “Information on fair value” in the Notes to the Consolidated Financial Statements contained in the 2014 Annual Report.
Transfers between portfolios The UBI Banca Group made no portfolio reclassifications of financial assets during the reporting period out of assets measured at fair value into assets measured at amortised cost, in relation to the possibilities introduced by EU Regulation No. 1004/2008 of the European Commission.
Fair value hierarchy No changes were made in the first half to the criteria employed for calculating fair value hierarchies on the basis of the use of observable or non-observable inputs compared to those used for the 2014 Annual Report, which may be consulted for full details.
Assets and liabilities measured at fair value on a recurring basis
Assets/liabilities measured at fair value 30.6.2015 31.12.2014 Figures in thousands of euro Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
1. Financial assets held for trading 825,129 495,321 17,720 800,881 606,337 13,288 2. Financial assets designated at fair value 121,659 3,000 72,564 120,026 3,000 70,141 3. Available-for-sale financial assets 16,111,568 415,174 272,538 17,423,065 953,777 178,114 4. Hedging derivatives - 545,576 - - 649,250 - 5. Property, plant and equipment ------6. Intangible assets ------Total 17,058,356 1,459,071 362,822 18,343,972 2,212,364 261,543 1. Financial liabilities held for trading 120,087 527,362 59 300 617,452 10 2. Financial liabilities designated at fair value ------3. Hedging derivatives - 788,565 - - 1,009,092 - Total 120,087 1,315,927 59 300 1,626,544 10
Changes in the first half in assets measured at fair value (level 3)
Financial assets Financial assets Available-for-sale Hedging Property, plant Intangible designated at fair held for trading financial assets derivatives and equipment assets Figures in thousands of euro value
1. Opening balances 13,288 70,141 178,114 - - - 2. Increases 9,645 3,447 96,650 - - - 2.1. Purchases - - 411 - - - 2.2. Profits recognised in: 2.2.1. Income statement 51 2,917 - - - - - of which gains 41 2,869 - - - - 2.2.2. Equity X X 69,774 - - - 2.3. Transfers from other levels 9,544 - 66 - - - 2.4. Other increases 50 530 26,399 - - - 3. Decreases (5,213) (1,024) (2,226) - - - 3.1. Sales (55) - - - - - 3.2. Redemptions - (84) - - - - 3.3. Losses recognised in: 3.3.1. Income statement (1,594) (716) (1,363) - - - - of which losses (1,594) (716) (1,363) - - - 3.3.2. Equity X X (46) - - - 3.4. Transfers to other levels (3,564) - - - - - 3.5. Other decreases - (224) (817) - - - 4. Closing balances 17,720 72,564 272,538 - - -
Financial assets held for trading The increases in “financial assets held for trading” are due mainly transfers from other levels. Approximately €9.5 million of these are the consequence of the impact of credit value
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adjustments (CVAs) on derivatives (reclassified to level three where the CVA was greater than 10% of the fair value). The decreases were due mainly to transfers to other levels. Approximately €3.6 million of these relate to derivatives reclassified to level three in December 2014, for which the CVA is now less than 10% of the fair value. Losses recognised through profit or loss are the result of fair value movements on financial derivatives classified within fair value level three.
Financial assets designated at fair value Increases in “financial assets designated at fair value” relate mainly to profits recognised through profit or loss as a consequence of gains on shareholdings in the companies Immobiliare Mirasole Spa (€1.398 million) and Ecas Spa (€0.5 million), while the remainder is due to profits on hedge funds (approximately €0.9 million). Decreases are mainly the result of losses incurred on positions in hedge funds recognised through profit or loss.
Available-for-sale financial assets Almost the entire amount of the increases in “available-for-sale financial assets” (€68.2 million) are the result of the recognition of a change in the fair value of the stake held in Istituto Centrale delle Banche Popolari Italiane Spa in a reserve in equity. Other increases relate mainly to stakes held stakes held in Sorgenia acquired by the Parent (€16.8 million) and by Banco di Brescia (€8.3 million) following a loan conversion operation. Decreases in “available-for-sale financial assets” relate mainly to losses recognised through profit and loss due to movements in the fair value of investments in Farmafin (€0.2 million), Zagara (€1 million) and SMIA (€0.1 million).
Assets and liabilities not measured at fair value or measured at fair value on a non-recurring basis: distribution by fair value level
Assets and liabilities not measured at fair value or measured at fair value on 30.6.2015 31.12.2014 a non- recurring basis Figures in thousands of euro BV Level 1 Level 2 Level 3 BV Level 1 Level 2 Level 3
1. Held-to-maturity investments 3,535,692 3,530,322 - - 3,576,951 3,607,673 - - 2. Loans and advances to banks 3,191,584 - 1,304,090 1,927,726 3,340,415 - 1,205,027 2,127,419 3. Loans and advances to customers 85,340,026 - 34,840,669 52,579,324 85,644,223 - 37,525,374 50,556,959 4. Tangible assets held for investment 183,788 - - 239,909 186,226 - - 242,161 5. Non-current assets and disposal groups held for sale 11,286 - - - 69,893 - - - Total 92,262,376 3,530,322 36,144,759 54,746,959 92,817,708 3,607,673 38,730,401 52,926,539
1. Due to banks 9,049,928 - 11,654 8,979,190 13,292,723 - 13,945 13,838,738 2. Due to customers 55,331,195 - 896,617 54,435,697 51,616,920 - 965,765 50,667,896 3. Debt securities issued 38,996,157 15,579,983 24,028,688 84,269 41,590,349 16,277,423 26,050,714 153,675 4. Liabilities associated with assets held for sale ------Total 103,377,280 15,579,983 24,936,959 63,499,156 106,499,992 16,277,423 27,030,424 64,660,309
Information on “day one profit/loss” The information relates to paragraph 28 of IFRS 7 which concerns differences between transaction prices and the value obtained by using measurement techniques that emerge on initial recognition and that are not immediately recognised through profit and loss on the basis of paragraph AG76 of IAS 39. In consideration of the above, we report that the UBI Banca Group has not performed any transactions for which a difference between the purchase price and the value of the instrument obtained using internal measurement techniques has arisen on initial recognition.
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The scope of the consolidation
The companies that formed part of the consolidation as at 30th June 2015 are listed below, divided into subsidiaries (fully consolidated) and associates (consolidated using the equity method). The percentage of control or ownership attributable to the Group (direct or indirect), their headquarters (registered address or operating headquarters) and the share capital are also given for each of them.
Fully consolidated companies (control is by the Parent of the Group where no other indication is given):
1. Unione di Banche Italiane Scpa – UBI Banca (Parent) registered address: Bergamo, Piazza Vittorio Veneto, 8 – share capital: €2,254,371,430 2. Banca Popolare di Bergamo Spa (100% controlled) registered address: Bergamo, Piazza Vittorio Veneto, 8 – share capital: €1,350,514,252 3. Banco di Brescia San Paolo CAB Spa (100% controlled) registered address: Brescia, Corso Martiri della Libertà, 13 – share capital: €615,632,230.88 4. Banca Popolare Commercio e Industria Spa (83.7631% controlled) registered address: Milan, Via Monte di Pietà, 7 – share capital: €934,150,467.60 5. Banca Regionale Europea Spa (74.7692% controlled)1 registered address: Cuneo, Via Rome, 13 – share capital: €587,892,824.35 6. Banca Popolare di Ancona Spa (99.5522% controlled) registered address: Jesi (Ancona), Via Don A. Battistoni, 4 – share capital: €147,301,670.32
7. Banca Carime Spa (99.9869% controlled) registered address: Cosenza, Viale Crati snc – share capital: €1,468,208,505.92 8. Banca di Valle Camonica Spa (75.2922% controlled and BBS holds 8.8387%) registered address: Breno (Brescia), Piazza Repubblica, 2 – share capital: €3,176,883 9. UBI Banca International Sa (91.1959% controlled and 5.4825% held by BBS, 3.1598% held by BPB and 0.1618% by BRE) registered address: 37/A, Avenue J.F. Kennedy, L – Luxembourg – share capital: €70,613,580 10. UBI Trustee Sa (100% controlled by UBI Banca International) registered address: 37/A, Avenue J.F. Kennedy, L – Luxembourg – share capital: €250,000 11. Prestitalia Spa (100% controlled) registered address: Bergamo, Via A. Stoppani, 15 – share capital: €205,722,715 12. IW Bank Spa (former UBI Banca Private Investment and former IW Bank - 100% controlled) registered address: Milan, Piazzale F.lli Zavattari, 12 – share capital: €67,950,000 13. Centrobanca Sviluppo Impresa SGR Spa (100% controlled) registered address: Milano, Corso Europa, 16 – share capital: €2,000,000 14. UBI Pramerica SGR Spa (65% controlled) operating headquarters: Milano, Via Monte di Pietà, 5 – share capital: €19,955,465 15. UBI Management Company Sa (100% controlled by UBI Pramerica SGR) registered address: 37/A, Avenue J.F. Kennedy, L – Luxembourg – share capital: €125,000 16. UBI Leasing Spa (99.6207% controlled) registered address: Brescia, Via Cefalonia, 74 – share capital: €641,557,806 17. Unione di Banche Italiane per il Factoring Spa - UBI Factor Spa (100% controlled) registered address: Milan, Via f.lli Gabba, 1 – share capital: €36,115,820
1 The percentage of control relates to the total share capital held.
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18. BPB Immobiliare Srl (100% controlled) registered address: Bergamo, Piazza Vittorio Veneto, 8 – share capital: €185,680,000 19. Società Bresciana Immobiliare Mobiliare - S.B.I.M. Spa (100% controlled) registered address: Brescia, Via A. Moro, 13 – share capital: €35,000,000 20. Società Lombarda Immobiliare Srl – SOLIMM (100% controlled) registered address: Brescia, Via Cefalonia, 74 – share capital: €100,000 21. UBI Fiduciaria Spa (100% controlled) registered address: Brescia, Via Cefalonia, 74 – share capital: €1,898,000 22. Coralis Rent Srl – in liquidation (100% controlled) registered address: Milano, Via f.lli Gabba, 1 – share capital: €400,000 23. UBI Sistemi e Servizi Scpa2 – Consortium Stock Company (71.8696% controlled and 4.3154% held by BRE; 4.3142% held by IW Bank; 2.8769% held by: BPB, BBS, BPCI, BPA and Banca Carime; 1.4385% held by: Banca di Valle Camonica and UBI Pramerica SGR; 0.7192% held by UBI Factor; 0.0719% held by Prestitalia; and 0.0097% held by UBI Academy) registered address: Brescia, Via Cefalonia, 62 – share capital: €36,149,948.64 24. UBI Academy SCRL – Limited Consortium Company (68.5% controlled and 3% held by: BPB, BBS, BPCI, BPA, Banca Carime, BRE, IW Bank and UBI.S; 1.5% held by: Banca di Valle Camonica, UBI Pramerica SGR, UBI Leasing, UBI Factor and Prestitalia) registered address: Bergamo, Via f.lli Calvi, 9 – share capital: €100,000 25. UBI Finance Srl3 (60% controlled) registered address: Milano, Foro Bonaparte, 70 – share capital: €10,000 26. UBI Finance CB 2 Srl4 (60% controlled) registered address: Milano, Foro Bonaparte, 70 – share capital: €10,000 27. 24-7 Finance Srl5 28. Lombarda Lease Finance 4 Srl6 - in liquidation 29. UBI Lease Finance 5 Srl7 30. UBI Finance 2 Srl8 - in liquidation 31. UBI Finance 3 Srl9 32. UBI SPV BBS 2012 Srl10 33. UBI SPV BPCI 2012 Srl10 34. UBI SPV BPA 2012 Srl10
2 The Group holds a controlling 98.5615% interest in the share capital of UBI.S; the remaining 1.4385% is held by Cargeas Assicurazioni Spa (the former UBI Assicurazioni Spa). 3 A special purpose entity in accordance with Law No. 130/1999, this company, enrolled on the general list of intermediaries pursuant to Art. 106 of the Consolidated Banking Act, was formed on 18th March 2008 to allow UBI Banca to implement the first programme to issue covered bonds backed by residential mortgages. 4 A special purpose entity in accordance with Law No. 130/1999, this company, enrolled on the general list of intermediaries pursuant to Art. 106 of the consolidated banking act, was formed on 20th December 2011 to allow the UBI Banca to implement a second programme to issue covered bonds backed mainly by commercial non-residential mortgages. 5 A special purpose entity used in compliance with Law No. 130/1999 for the securitisations of the former B@nca 24-7 performed in 2008. It was consolidated because this company is in reality controlled, since its assets and liabilities were originated by a Group member company. UBI Banca holds a 10% stake. 6 A special purpose entity formed in accordance with Law No. 130/1999 when a securitisation was performed in 2005 by the former SBS Leasing. It was consolidated because this company is in reality controlled, since its assets and liabilities were originated by a Group member company. UBI Banca holds a 10% stake. 7 A special purpose entity formed in accordance with Law No. 130/1999 for the securitisation of performing loans by UBI Leasing in November 2008. It was consolidated because this company is in reality controlled, since its assets and liabilities were originated by a Group member company. UBI Banca holds a 10% stake. 8 A special purpose entity used in accordance with Law No. 130/1999 for the securitisation of a portfolio of Banco di Brescia performing loans at the beginning of 2009. It was consolidated because this company is in reality controlled, since its assets and liabilities were originated by a Group member company. UBI Banca holds a 10% stake. 9 A special purpose entity used in accordance with Law No. 130/1999 for the securitisation of a portfolio of performing loans performed by Banca Popolare di Bergamo at the end of 2010. It was consolidated because this company is in reality controlled, since its assets and liabilities were originated by a Group member company. UBI Banca holds a 10% stake. 10 A special purpose entity formed in accordance with Law No. 130/1999 for the securitisation of the performing loans to SMEs of some network banks (Banco di Brescia, Banca Popolare Commercio e Industria and Banca Popolare di Ancona) carried out in the last part of 2012. They were consolidated because they are in reality controlled, since their assets and liabilities were originated by Group member companies. UBI Banca holds a 10% stake in each of them.
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Companies consolidated using the equity method (the investment is by the Parent where no other indication is given):
1. Aviva Vita Spa (20% interest held) registered address: Milan, Via Scarsellini, 14 – share capital: €155,000,000 2. Aviva Assicurazioni Vita Spa (formerly UBI Assicurazioni Vita Spa, 20% interest held) registered address: Milan, Via Scarsellini, 14 – share capital: €49,721,776 3. Lombarda Vita Spa (40% interest held) registered address: Brescia, Corso Martiri della Libertà, 13 – share capital: €185,300,000 4. Polis Fondi SGRpA (19.6% interest held) registered address: Milano, Via Solferino, 7 – share capital: €5,200,000 5. Zhong Ou Asset Management Co. Ltd (formerly Lombarda China Fund Management - 35% interest held) registered address: 8f Bank of East ASIA Finance Tower, 66 Hua Yuan Shi Qiao Road, Pudong New Area, 200120 Shanghai (China) – share capital: 188,000,000 yuan/renminbi 6. SF Consulting Srl (35% interest held) operating headquarters: Mantova, Via P.F. Calvi, 40 – share capital: €93,600 7. UFI Servizi Srl (23.1667% interest held by Prestitalia) registered address: Roma, Via G. Severano, 24 – share capital: €150,000
Changes in the scope of consolidation
There have been no changes to the scope of consolidation compared with 31st December 2014 except for those reported below, relating to marginal changes in the percentages of the control of banks and to operations to rationalise the ownership structure with a view to increasing the focus on the Group’s core conventional domestic banking business:
• Banca Regionale Europea Spa: during the first half the Parent acquired 84,288 ordinary shares from non-controlling shareholders to bring its controlling interest in the ordinary share capital up to 79.8866% (from 79.8760% at the end of December). The total percentage control of the share capital (consisting of ordinary, privileged and savings shares) rose to 74.7692% from 74.7598% before; • Banca Popolare di Ancona Spa: in the first six months of the year 4,489 shares were purchased from small shareholders, with an effect on the percentage control held by UBI Banca which rose to 99.5522% from 99.5339% at the end of 2014; • Banca Carime Spa: in the same period 1,438 shares were sold to the Parent which only marginally affected the percentage control, which rose from 99.9868% at the end of December to 99.9869% at the end of June; • UBI Gestioni Fiduciarie Sim Spa: this company was sold on 12th January to Corporate Family Office SIM, Milan (see the information reported in the section “Significant events in the first half of 2015” in the Management Report); • UBI Finance 2 Srl – in liquidation: following the closure of the relative securitisation in May 2014 and the intention not to use the company for further transactions, a Shareholders’ Meeting was convened on 26th February 2015, which resolved to put the company into early voluntary liquidation; • Lombarda Lease Finance 4 Srl – in liquidation: following the closure of the relative securitisation in July 2014 and the intention not to use the company for further transactions, a Shareholders’ Meeting was convened on 26th February 2015, which resolved to put the company into early voluntary liquidation;
° Coralis Rent Srl – in liquidation: on 20th March 2015, the voluntary liquidation of the company was recorded with the Company Registrar, as a consequence of the process to rationalise subsidiaries currently in progress. The commercial activity continued to be carried on within the Parent;
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° UBI Fiduciaria Spa: on 30th April the transfer took place, with effect from 1st May 2015, of UBI Fiduciaria Spa’s “static” fiduciary operations to Unione Fiduciaria Spa, a company which operated in accordance with Law No. 1966 of 23rd November 1939 and subsequent additions;
° IW Bank Spa: on 25th May the merger of IW Bank into UBI Banca Private Investment took effect, with the change of its name at the same time to IW Bank Spa and the transfer of the registered address to Milan at 12, Piazzale Zavattari. The share capital of the new bank is €67,950,000. The merger of the two companies, fully controlled by the Parent, is also reflected in the shareholder structure of the consortium companies, which changed as follows from 25th May 2015: - UBI Sistemi e Servizi Scpa: the new IW Bank Spa holds a 4.3142% stake in the share capital of the services company, the aggregate result of the stakes previously held by the former UBI Banca Private Investment (1.4385%) and the former IW Bank (2.8757%); - UBI Academy SCRL: the new IW Bank Spa holds a 3% stake in the share capital of the training company, the aggregate result of the 1.5% stakes previously held by the former UBI Banca Private Investment and the former IW Bank;
° Società Lombarda Immobiliare Srl – SOLIMM: on 9th June 2015 the Management Board of UBI Banca approved the merger of SOLIMM into S.B.I.M. Spa (Società Bresciana Immobiliare Mobiliare). Once the technical and administrative formalities necessary in the case of company mergers have been completed, the transaction should be concluded in the next few months;
° Zhong Ou Asset Management Co. Ltd – China: in June UBI Banca reclassified one third of the stake held in this Chinese registered fund management company (accounting for approximately 11.7% of the total share capital) within non-current assets held for sale according to IFRS 5. This company, in which UBI Banca holds a 35% stake, has already achieved significant results in the first months of 2015, both in terms of capital (net inflows of assets which doubled the result for the previous year) and in terms of operating performance, having exceeded the net profit earned in the previous twelve months. On the basis of agreements between the shareholders and management of the company, UBI Banca is obliged to transfer part of the shares it holds to management when determined quantitative objectives are achieved. Consequently the Parent has reclassified the aforementioned portion of the shares which presumably will be transferred in the first months of 2016.
See the section “Significant events in the first half of 2015” contained in the consolidated interim management report for further details of corporate rationalisation operations (discontinuation of fiduciary operations, merger of the internet bank into the company that manages the financial advisor network, merger of property companies located in Brescia).
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Information on the accounts
This section contains the principal information relating to the balance sheet, financial position and income statement. The changes in the balance sheet and financial position that occurred in the reporting period (first six months of 2015), and the operating performance for the period January-June 2015, compared with the corresponding first six months of 2014, are commented on in the Interim Management Report on consolidated operations as at and for the period ended 30th June 2015.
Explanatory tables for the consolidated income statement
Interest and similar income: composition (item 10)
Other Debt instruments Financing 1H 2015 1H 2014 Figures in thousands of euro transactions
1. Financial assets held for trading 1,944 - 1,944 20,261 2. Financial assets designated at fair value - - - - - 3. Available-for-sale financial assets 198,305 - - 198,305 204,757 3. Held-to-maturity investments 22,847 - - 22,847 53,026 5. Loans and advances to banks 3,112 - 3,112 3,984 6. Loans and advances to customers 22 1,066,072 490 1,066,584 1,248,461 7. Hedging derivatives X X 15,870 15,870 33,334 8. Other assets X X 19 19 30 Total 223,118 1,069,184 16,379 1,308,681 1,563,853
Interest and similar expense: composition (item 20)
Other Borrowings Securities 1H 2015 1H 2014 Figures in thousands of euro transactions
1. Due to central banks (3,660) X - (3,660) (14,417) 2. Due to banks (6,263) X - (6,263) (12,712) 3. Due to customers (47,740) X (187) (47,927) (105,893) 4. Debt securities issued X (402,257) - (402,257) (506,175) 5. Financial liabilities held for trading (1,425) - - (1,425) (15,949) 6. Financial liabilities designated at fair value - - - - - 7. Other liabilities and provisions X X (1) (1) (179) 8. Hedging derivatives X X - - - Total (59,088) (402,257) (188) (461,533) (655,325)
Net interest income 847,148 908,528
Commission income: composition (item 40) Commission expense: composition (item 50)
1H 2015 1H 2014 1H 2015 1H 2014 Figures in thousands of euro Figures in thousands of euro a) guarantees granted 25,872 27,864 a) guarantees received (909) (16,882) c) management, trading and advisory services 425,577 362,325 c) management and trading services: (53,154) (39,816) 1. trading in financial instruments 11,951 11,730 1. trading in financial instruments (5,614) (5,510) 2. foreign exchange trading 3,616 3,169 2. foreign exchange trading (1) (3) 3. portfolio management 162,663 128,800 3. portfolio management (5,528) (5,136) 3.1. individual 36,599 32,788 3.1. ow n - - 3.2. collective 126,064 96,012 3.2. on behalf of third parties (5,528) (5,136) 4. custody and administration of securities 4,143 4,419 4. custody and administration of securities (3,019) (3,854) 5. depository banking - - 5. placement of financial instruments (3,500) (2,449) 6. placement of securities 124,377 96,073 6. financial instruments, products and services 7. receipt and transmission of orders 24,169 28,874 distributed through indirect networks (35,492) (22,864) 8. advisory activities 3,204 2,224 d) collection and payment services (23,108) (20,913) 8.1 on investments 3,204 2,224 e) other services (21,936) (13,715) 8.2 on financial structure - - Total (99,107) (91,326) 9. distribution of third party services 91,454 87,036 9.1. portfolio management 15 17 9.1.1. individual 15 17 9.2. insurance products 78,164 68,255 9.3. other products 13,275 18,764 d) collection and payment services 78,680 71,661 f) services for factoring transactions 8,326 10,056 i) current account administration 94,128 98,128 j) other services 135,602 130,985 Total 768,185 701,019 Net fee and commission income 669,078 609,693
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Net trading income (item 80)
Profits from Losses from Net income Gains Losses trading trading 1H 2015 1H 2014
Figures in thousands of euro (A) (B) (C) (D) [(A+B)-(C+D)]
1. Financial assets held for trading 4,489 33,436 (10,119) (24,070) 3,736 26,927 1.1 Debt instruments 117 12,958 (6,415) (1,115) 5,545 26,989 1.2 Equity instruments 566 110 (87) (10) 579 320 1.3 Units in UCITS 3 10 (19) (4) (10) (2) 1.4 Financing ------1.5 Other 3,803 20,358 (3,598) (22,941) (2,378) (380) 2. Financial liabilities held for trading 1,871 514 - (1,540) 845 10,059 2.1 Debt instruments 1,871 514 - (1,540) 845 10,059 2.2 Payables ------2.3 Other ------3. Financial assets and liabilities: exchange rate differences X X X X 401 475 4. Derivative instruments 228,585 156,716 (220,645) (147,502) 40,401 13,133 4.1 Financial derivatives 228,585 156,716 (220,645) (147,502) 40,401 13,133 - on deb t instruments and interest rates 219,134 144,789 (211,323) (137,512) 15,088 (2,564) - on equity instruments and share indices 357 2,961 (347) (113) 2,858 (293) - on currencies and gold X X X X 23,247 15,916 - other 9,094 8,966 (8,975) (9,877) (792) 74 4.2 Credit derivatives ------Total 234,945 190,666 (230,764) (173,112) 45,383 50,594
Net hedging income (loss) (item 90)
Figures in thousands of euro 1H 2015 1H 2014
Net hedging income (loss) 6,730 (7,395)
Profit from disposal/repurchase (item 100)
Net profit Profits Losses 1H 2014 1H 2015 Figures in thousands of euro
Financial assets 1. Loans and advances to banks - - - - 2. Loans and advances to customers 4,906 (9,217) (4,311) (887) 3. Available-for-sale financial assets 66,324 (514) 65,810 97,866 3.1 Debt instruments 59,396 (507) 58,889 78,237 3.2 Equity instruments 43 (7) 36 (47) 3.3 Units in UCITS 6,885 - 6,885 19,676 3.4 Financing - - - - 4. Held-to-maturity investments - - - - Total assets 71,230 (9,731) 61,499 96,979 Financial liabilities 1. Due to banks - - - - 2. Due to customers - - - - 3. Debt securities issued 476 (8,534) (8,058) (3,264) Total liabilities 476 (8,534) (8,058) (3,264) Total 71,706 (18,265) 53,441 93,715
Net profit (loss) on financial assets and liabilities designated at fair value (item 110)
Figures in thousands of euro 1H 2015 1H 2014
Net profit (loss) on financial assets and liabilities designated at fair value 5,544 (272)
Net income from trading, hedging and disposal/repurchase activities and from assets/liabilities designated at fair value 111,098 136,642
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Other administrative expenses: composition [item 180 b)]
1H 2015 1H 2014 Figures in thousands of euro
A. Other administrative expenses (287,899) (283,406) Rent payable (26,778) (29,311) Professional and advisory services (44,002) (33,867) Rentals hardware, software and other assets (17,212) (19,365) Maintenance of hardware, software and other assets (22,328) (18,708) Tenancy of premises (22,969) (24,354) Property maintenance (10,353) (11,080) Counting, transport and management of valuables (6,064) (6,345) Membership fees (5,638) (4,803) Information services and land registry searches (5,329) (5,279) Books and periodicals (644) (662) Postal (7,334) (9,782) Insurance premiums (18,232) (16,725) Advertising (10,177) (10,629) Entertainment expenses (896) (811) Telephone and data transmission expenses (22,930) (21,609) Services in outsourcing (24,315) (25,356) Travel expenses (7,824) (8,530) Credit recovery expenses (21,757) (22,182) Forms, stationery and consumables (3,407) (3,559) Transport and removals (3,071) (3,346) Security (3,793) (4,170) Other expenses (2,846) (2,933) B. Indirect taxes (138,529) (122,276) Indirect taxes and duties (10,901) (13,317) Stamp duty (106,002) (89,159) Municipal property tax (9,911) (9,279) Other taxes (11,715) (10,521) Total (426,428) (405,682)
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Explanatory tables for the consolidated balance sheet
Due to customers: composition (liability item 20)
30.6.2015 31.12.2014 Figures in thousands of euro
1. Current accounts and deposits 44,684,388 44,317,163 2. Term deposits 196,241 429,347 3. Financing 9,674,063 6,185,217 3.1 repurchase agreements 9,189,862 5,695,380 3.2 other 484,201 489,837 4. Amounts due for commitments to repurchase own equity instruments - - 5. Other payables 776,503 685,193 Total amounts due to customers 55,331,195 51,616,920 Fair value - level 1 - - Fair value - level 2 896,617 965,765 Fair value - level 3 54,435,697 50,667,896 Total fair value 55,332,314 51,633,661
Debt securities issued: composition (liability item 30)
30.6.2015 31.12.2014 Carrying Fair value Carrying Fair Value Figures in thousands of euro amount L 1 L 2 L 3 am ount L 1 L 2 L 3
A. Securities 1. Bonds 37,921,483 15,579,983 22,982,724 55,559 40,037,379 16,277,423 24,559,741 91,679 1.1 structured 3,588,834 974,742 2,542,773 53,537 3,625,140 978,676 2,540,865 86,578 1.2 other 34,332,649 14,605,241 20,439,951 2,022 36,412,239 15,298,747 22,018,876 5,101 2. Other securities 1,074,674 - 1,045,964 28,710 1,552,970 - 1,490,973 61,996 2.1 structured ------2.2 other 1,074,674 - 1,045,964 28,710 1,552,970 - 1,490,973 61,996 Total 38,996,157 15,579,983 24,028,688 84,269 41,590,349 16,277,423 26,050,714 153,675
Loans and advances to customers: composition (asset item 70)
30.6.2015 31.12.2014 Non-performing Non-performing Perform ing (previo usly termed Fair Value Perform ing (previo usly termed Fair Value "deteriorated") "deteriorated") Figures in thousands of euro Purchased Other L1 L2 L3 Purchased Other L1 L2 L3
Financing 75,680,945 476 9,650,903 - 34,840,669 52,571,964 76,128,422 - 9,508,105 - 37,525,374 50,549,625 1. Current account overdrafts 8,486,796 - 1,560,801 8,524,418 - 1,558,164 2. Reverse repurchase agreements 171,851 - 540,882 - - 3. Mortgages 47,229,986 476 5,222,608 46,975,676 - 4,885,165 4. Credit cards, personal loans and salary-backed loans 2,942,175 - 325,465 3,198,279 - 388,444 5. Finance leases 5,238,823 - 1,209,508 5,497,319 - 1,408,470 6. Factoring 1,870,060 - 273,600 1,778,812 - 306,944 7. Other financing 9,741,254 - 1,058,921 9,613,036 - 960,918 Debt instruments 7,702 - - - - 7,360 7,696 - - - - 7,334 8. Structured securities 6 - - 3 - - 9. Other debt instruments 7,696 - - 7,693 - - Total 75,688,647 476 9,650,903 - 34,840,669 52,579,324 76,136,118 - 9,508,105 - 37,525,374 50,556,959
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Financial assets held for trading: composition (asset item 20)
30.6.2015 31.12.2014
Figures in thousands of euro L 1 L 2 L 3 Total L 1 L 2 L 3 Total
A. On-balance sheet assets 1. Debt instruments 819,042 133 254 819,429 795,206 759 254 796,219 1.1 Structured instruments 1,725 17 254 1,996 1 419 254 674 1.2 Other debt instruments 817,317 116 817,433 795,205 340 - 795,545 2. Equity instruments 5,288 - 435 5,723 4,544 - 447 4,991 3. Units in UCITS 256 - 586 842 241 1 600 842 4. Financing ------4.1 Reverse repurchase agreements ------4.2 Other ------Total A 824,586 133 1,275 825,994 799,991 760 1,301 802,052 B. Derivative instruments 1. Financial derivatives 543 495,188 16,445 512,176 890 605,577 11,987 618,454 1.1 for trading 543 495,149 16,445 512,137 890 605,577 11,987 618,454 1.2 connected w ith fair value options ------1.3 other - 39 - 39 - - - - 2. Credit derivatives ------2.1 for trading ------2.2 connected w ith fair value options ------2.3 other ------Total B 543 495,188 16,445 512,176 890 605,577 11,987 618,454 Total (A+B) 825,129 495,321 17,720 1,338,170 800,881 606,337 13,288 1,420,506
Financial assets designated at fair value: composition (asset item 30)
30.6.2015 31.12.2014 Figures in thousands of euro L 1 L 2 L 3 Total L 1 L 2 L 3 Total
1. Debt instrum ents ------1.1 Structured instruments ------1.2 Other debt instruments ------2. Equity instruments 1,899 3,000 66,771 71,670 3,224 3,000 64,904 71,128 3. Units in UCITS 119,760 - 5,793 125,553 116,802 - 5,237 122,039 4. Financing ------4.1 Structured ------4.2 Other ------Total 121,659 3,000 72,564 197,223 120,026 3,000 70,141 193,167 Cost 1 21,659 3,000 72,564 197,223 120,026 3,000 70,141 193,167
Available-for-sale financial assets: composition (asset item 40)
30.6.2015 31.12.2014 Figures in thousands of euro L 1 L 2 L 3 Total L 1 L 2 L 3 Total
1. Debt instrum ents 16,098,530 371,831 25,651 16,496,012 17,336,688 908,890 1,013 18,246,591 1.1 Structured instruments 52,366 361,946 65 414,377 75,316 641,276 1,000 717,592 1.2 Other debt instruments 16,046,164 9,885 25,586 16,081,635 17,261,372 267,614 13 17,528,999 2. Equity instrum ents 2,676 - 246,887 249,563 2,495 94 177,101 179,690 2.1 At fair value 2,676 - 205,017 207,693 2,495 94 103,472 106,061 2.2 At cost - - 41,870 41,870 - - 73,629 73,629 3. Units in UCITS 10,362 43,343 - 53,705 83,882 44,793 - 128,675 4. Financing ------Total 16,111,568 415,174 272,538 16,799,280 17,423,065 953,777 178,114 18,554,956
Held-to-maturity investments: composition (asset item 50)
30.6.2015 31.12.2014 Carrying Fair value Carrying Fair Value Figures in thousands of euro amount L 1 L 2 L 3 amount L 1 L 2 L 3
1. Debt instruments 3,535,692 3,530,322 - - 3,576,951 3,607,673 - - 1.1 Structured ------1.2 Other debt instruments 3,535,692 3,530,322 - - 3,576,951 3,607,673 - - 2. Financing ------Total 3,535,692 3,530,322 - - 3,576,951 3,607,673 - -
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Property, plant and equipment and intangible assets
Property, plant and equipment
Property, plant and equipment for functional use: composition of assets measured at cost
30.6.2015 31.12.2014 In the first half property plant and Figures in thousands of euro equipment used in operations 1. Owned assets 1,541,107 1,511,513 increased by €29.3 million net of a) land 829,921 784,772 depreciation for the period, in relation b) buildings 616,688 620,639 c) furnishings 27,472 29,207 almost entirely to property assets d) electronic equipment 31,928 34,431 following the reclassification of a e) other 35,098 42,464 property located at 33 Via della 2. Assets acquired through finance leases 31,079 31,368 Moscova in Milan, which involved a) land 16,559 16,559 b) buildings 14,520 14,809 both the land and buildings (see in c) furnishings - - this respect the table “non-current d) electronic equipment - - assets and disposal groups held for e) other - - sale”). Total 1,572,186 1,542,881
Tangible assets held for investment: composition of assets measured at cost
30.6.2015 31.12.2014
Carrying Fair Value Carrying Fair Value Figures in thousands of euro amount L 1 L 2 L 3 amount L 1 L 2 L 3
1. Owned assets 183,495 - - 239,643 185,930 - - 241,895 a) land 113,685 - - 135,075 113,771 - - 135,042 b) buildings 69,810 104,568 72,159 - - 106,853 2. Assets acquired through finance leases 293 - - 266 296 - - 266 a) land 47 40 47 - - 40 b) buildings 246 226 249 - - 226 Total 183,788 - - 239,909 186,226 - - 242,161
Intangible assets
Composition of the item "Goodwill"
30.6.2015 31.12.2014 Figures in thousands of euro Banco di Brescia Spa 570,392 570,392 Banca Popolare di Ancona Spa 166,364 166,364 Banca Popolare Commercio e Industria Spa 209,258 209,258 Banca Regionale Europea Spa 106,557 106,557 UBI Pramerica SGR Spa 170,284 170,284 Banca Popolare di Bergamo Spa 100,045 100,045 IW Bank Spa (*) 88,754 88,754 Banca di Valle Camonica Spa 43,224 43,224 UBI Factor Spa 8,260 8,260 UBI Sistemi e Servizi Scpa 2,122 2,122 Total 1,465,260 1,465,260
(*) On 25th May 2015 the merger of IW Bank into UBI Banca Private Investment took effect. The new company took the name IW Bank Spa. The figures as at 31st December 2014 have therefore been restated to take account of the operation.
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Commitments to purchase property, plant and equipment and intangible assets
Commitments to purchase property, plant and equipment
30.6.2015 31.12.2014 Assets/amounts As shown in the table, the largest
A. Assets for functional use commitments undertaken by the 1.1 owned 13,108 4,632 Group in the first half relate to the - land - purchase of electronic equipment for - buildings 573 - use in operations amounting to - furnishings 842 143 - electronic equipment 9,421 4,489 approximately €5 million and to the - other 2,272 - other assets for functional use 1.2 In finance leases - - amounting to €2.3 million (mainly by - land - - UBI Sistemi e Servizi). - buildings - - - furnishings - - - electronic equipment - - - other - - * * * Total A 13,108 4,632 B. Assets held for investment 2.1 owned 265 - Commitments relating to intangible - land - - - buildings 265 - assets amounted to €21.6 million at 2.2 In finance leases - - the end of June 2015 (€27.4 million in - land - - December 2014) and related to the - buildings - - purchase of software by the Group’s Total B 265 - services company. Total (A+B) 13,373 4,632
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Non-current assets/liabilities held for sale
Non current assets and disposal groups held for sale: composition by type of asset Assets held for sale amounting to €11.3 million decreased on 30.6.2015 31.12.2014 Figures in thousands of euro aggregate by €57.6 million A. Single assets incorporating a reduction of A.1 Financial assets - - A.2 Equity investments 4,757 - €62.3 million relating entirely A.3 Property, plant and equipment 6,529 68,863 to the property located at 33 A.4 Intangible assets - - Via della Moscova in Milan. A.5 Other non-current assets - - Total A 11,286 68,863 The property was in fact of which measured at cost 11,286 68,863 reclassified into the item of which measured at fair value level 1 - - of which measured at fair value level 2 - - “property, plant and of which measured at fair value level 3 - - equipment” for functional use B. Groups of assets (discontinued operating units) in the first part of 2015. B.1 Financial assets held for trading - - The item also includes the B.2 Financial assets designated at fair value - - B.3 Available-for-sale financial assets - - reclassification of 11.7% of the B.4 Held-to-maturity investments - - stake held in Zhong Ou Asset B.5 Loans and advances to banks - - Management (China). B.6 Loans and advances to customers - 507 B.7 Equity investments - - B.8 Property, plant and equipment - - B.9 Intangible assets - 523 B.10 Other assets - - Total B - 1,030 of which measured at cost - 1,030 of which measured at fair value level 1 - - of which measured at fair value level 2 - - of which measured at fair value level 3 - - C. Liabilities associated with-non current assets held for disposal. C.1 Borrowings - - C.2 Securities - - C.3 Other liabilities - - Total C - - of which measured at cost - - of which measured at fair value level 1 - - of which measured at fair value level 2 - - of which measured at fair value level 3 - - D. Liabilities associated with assets held for sale D.1 Due to banks - - D.2 Due to customers - - D.3 Debt securities issued - - D.4 Financial liabilities held for trading - - D.5 Financial liabilities designated at fair value - - D.6 Provisions - - D.7 Other liabilities - - Total D - - of which measured at cost - - of which measured at fair value level 1 - - of which measured at fair value level 2 - - of which measured at fair value level 3 - -
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Provisions for risks and charges
Provisions for risks and charges: composition The total for provisions for risks and charges grew by €6.7 million in the 30.6.2015 31.12.2014 Figures in thousands of euro first half, the aggregate result of
1. Company pension funds 71,515 80,529 opposing performances. 2. Other provisions for risks and charges 220,233 204,500 2.1 litigation 98,921 103,752 On the one hand decreases occurred 2.2 costs for staff 47,846 45,972 in provisions for company pension 2.3 other 73,466 54,776 plans (due to an update of actuarial TOTAL 291,748 285,029 curves) and in other provisions for Provisions for risks and charges - other provisions litigation, compared with an increase of €18.7 million in “other provisions 30.6.2015 31.12.2014 Figures in thousands of euro for risks and charges” (line item 2.3). 1. Provision for revocation (clawback) risks 11,850 11,189 This change mainly incorporates the 2. Provision for bonds and default 3,359 4,846 inclusion within “other provisions” 3. Other provisions for risks and charges 58,257 38,741 (line item 3) of €22.8 million in TOTAL 73,466 54,776 relation to an estimate of the annual quota due by the Group to the National Resolution Fund.
This is a fund for managing banking crises under the Bank Recovery and Resolution Directive 2014/59/EU, which defined the new resolution rules applicable to all banks in the European Union from January 2015.
Contingent liabilities
Contingent liabilities
30.6.2015 31.12.2014 Figures in thousands of euro for staff litigation 100 155 for revocation risks 8,739 8,756 for bonds in default - - for compounding of interest - - for claim risks - - for tax litigation 253,518 267,299 for other litigation 501,012 498,766 TOTAL 763,369 774,976
A detailed report on both ordinary litigation and tax litigation, for which provisions were made or for which contingent liabilities were identified, is given in the following sub-sections which may be consulted.
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Litigation
Ordinary litigation
Significant litigation (claims of greater than or equal to €5 million) for which the probable risk has been estimated by Group banks and companies are as follows: 1. “revocation” bankruptcy clawback actions against Banca Popolare di Ancona, brought by Napoli Calcio Spa; 2. a “revocation” bankruptcy clawback action against Banca Popolare Commercio e Industria, brought by FDG Spa; 3. a “revocation” bankruptcy clawback action against Banca Carime brought by Società Cooperativa Costruire Srl; 4. three actions brought against UBI Banca as follows: - a claim for damages for contractual liability, resulting from withdrawal from a contract concerning software; - an employment action brought against the former Centrobanca, won in the court of first instance and then appealed against UBI Banca; - an action originating from the former Centrobanca Spa with a government counterparty concerning an application for the restitution of a payment collected following the enforcement of a guarantee granted; 5. a summons for compounding of interest served on Banca Carime; 6. three actions brought against Banca Popolare di Bergamo, as follows: - a number of joined claims, regarding an appeal against an injunction, compounding of interest and compensation for damages following a mistaken protest of cheques (case halted following the bankruptcy of the counterparty, subsequently revoked and then resumed within the legal time limits). A ruling by the court of first instance has been given in favour of the Bank; - the purchase of covered warrants and Olivetti warrants (the latter via internet banking). The counterparty, not only alleges failure to receive proper information on the risks attaching to covered trades, but also disowned the signatures on the contract documents, required by regulations governing financial instruments and on the capital in question. Investigations performed by the internal audit function into the affair found no evidence of liability of the Bank in the transactions in question. Later the counterparty accepted that the signatures were his, but claimed that he had signed blank forms which had then been filled in abusively by the bank. A ruling by the court of first instance has been given in favour of the Bank; - a claim brought by heirs in which both pre-contractual and contractual liability of the bank is claimed for investment transactions carried out by the counterparty. The first hearing was held on 20th April 2015 and the parties were granted a period in which to file documents. The judge did not set a date for a possible hearing at which evidence may be produced following the filing of the aforementioned documents; 7. an action brought against Banca Popolare di Ancona disputing various matters concerning loan transactions and damages for contractual and non-contractual liability.
Significant litigation (claims of greater than or equal to €5 million) for which a possible risk (or contingent liability) has been estimated by Group banks and companies are as follows: UBI Banca ó three legal actions have been initiated against the former Centrobanca and therefore against UBI Banca, as the survivor of the merger, from the bankruptcies of the Burani Group, all before the Court of Milan: 1) on 11th October 2011, Centrobanca was served with a writ of summons from the Burani Designers Holding NV (“BDH”) Receivership with which it claimed the bank was liable for “abusive grant of credit” in relation to a public tender offer to purchase launched by Mariella Burani Family Holding Spa in 2008 (“MBFH”) on the shares of Marella Burani Fashion Group Spa (“MBFG”); 2) on 1st March 2012, a similar writ of summons was served by the MBFH Receivership,
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based on arguments of fact and law similar to those already made in the summons served by the BDH Receivership. In both cases the claims for damages amounted to approximately €134 million and no provision was made for them because the bank, supported by reputable legal advisors, considered that the claims were without grounds and that if anything the bank itself (officially accepted as a creditor in all the creditor proceedings concerning the companies in the Burani Group) had incurred damages and certainly was not jointly responsible for the conduct of the Directors of the Burani Group. Furthermore, because the evidence used by the Receiverships to support their demands applied in part also to Mediobanca Spa and to Equita Sim Spa, the Bank decided to extend the proceedings to include these two companies; 3) finally on 26th March 2013, a writ of summons was served by the MBFH Receivership applying to revoke (clawback action) a payment made the year before to the bankrupt company relating to a repayment of €4 million that was due on 30th June 2009. According to the claimant, this payment was made irregularly, and that is by withholding the proceeds from the sale of securities which had been given in pledge. A proposal for an arrangement with creditors has been filed for both bankruptcy cases (MBFH and BDH). The matters pending with the Bank could also be settled on the conclusion of those proceedings. The total gross exposure of the UBI Banca Group to the Burani Group amounted to €59.9 million at the end of the first half, which has been written down by 98.67%. ó a compensation action, now at the appeal stage following a ruling in favour of the Bank at the court of first instance, originating from the former Centrobanca for claimed damages brought by the official receiver of a company concerning the content of declarations made by the former Centrobanca to third parties regarding the availability of securities held on deposit at that bank. Banco di Brescia - a summons served by a company with a bankruptcy case which began in 1999 and is still in progress, which in the person of the receiver has requested the return of amounts drawn/used in the period September 1997-June 1998 by the sole director who ceased to be a director in September 1997 without the Bank being informed. In December 2012 the Judge accepted the objections raised by the bank and dismissed the case. The counterparty resumed the case within the relative time limits and the judgement is therefore pending. The next hearing is set for 20th April 2017 for the specification of the pleadings; - a summons served on 30th June 2014 by the receivership of a corporate counterparty which went bankrupt in 2010, with which a claim for damages against banks (including Banco di Brescia) is proposed for alleged improper credit support which it is claimed delayed the winding up of the company with consequent damages to creditor claims and the assets of the company. The bank has already undertaken its defence and from an initial examination considers the claim to be completely without grounds both in terms of its legitimacy and merit. Banca Popolare di Ancona - two claims for damages relating to alleged irregularities in the credit granting process. Banca Popolare Commercio e Industria - claims relating to trading in securities by a corporate counterparty. The case was won by the Bank in the court of first instance in 2011. Following an appeal brought by the counterparty, on 2nd April 2015, the Court of Appeal rejected the application made by the claimant. UBI Leasing - a claim for damages brought by two counterparties for claimed failure to meet obligations under finance lease contracts relating to properties under construction; - litigation relating to ownership of finance leased assets. UBI Factor The liabilities relate to risks connected with receivables collected following a legal injunction made temporarily executive in 2001 and then appealed against by the debtor, the Rome H Health Authority. The injunction was confirmed by the Court of Velletri with a ruling in 2005. In 2011, the Rome Court of Appeal issued a ruling partially overturning the decision of the
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court of first instance and allowing continuation, for the redefinition of the receivables by a court-appointed expert on the basis of applying regional rates instead of ministerial rates (for a higher amount) applied by the seller when the invoices sold to UBI Factor were issued. UBI Factor and the seller (originally Hospital Appia Srl, which was then merged into San Raffaele Spa, part of the Tosinvest/Angelucci Group) undertook the following initiatives against the partial ruling: a) appeal to the Supreme Court, identifying as many as 13 grounds for objection; b) an action before the Court of Appeal for a revocation judgement regarding the erroneous nature of the ruling in the Court of first instance. With a ruling of 10th January 2014, the Rome Court of Appeal rejected the application for revocation considering that the case could be appealed in the Supreme Court; c) an appeal before the Supreme Court against the ruling of the Court of Appeal in the revocation judgement. In consideration of the ruling of the Supreme Court (point “a” above), which in fact also absorbs the others mentioned above, the company, with support from its legal advisors, considered that the risk of losing was very unlikely. For full information, we also report that in the event of a final judgement against the company, the Health Authority could claim from UBI Factor the part over and above the amount of the redefinition of the receivables, which in the appeal judgement that concluded with a partial ruling in 2011 had been quantified by the court-appointed expert at approximately €60 million, which was then reduced to €46.8 million (the amount calculated by the court- appointed expert in the draft appraisal sent to the parties in May 2015). In this case, UBI Factor could claim against the seller, the Tosinvest/Angelucci Group, on the basis of the contract agreements in force.
With respect to the information reported in the notes to the financial statements as at and for the year ended 31st December 2014, we report that the legal action brought against UBI Banca claiming substantial damages for withdrawal from a former Silf Spa agency contract is now concluded.
Shareholder meeting annulment On the 18th July 2013, UBI Banca was notified of a summons served on it by Giorgio Jannone and other registered shareholders which, to summarise, applied for the following declarations (i) that the only list valid for nominating members of the Supervisory Board of the Bank was that submitted by the registered shareholder Jannone himself and others, following the ascertainment of the irregularities in the other two lists, which had obtained a greater number of votes in the shareholders meeting held on 20th April 2013; or alternatively (ii) the invalidity of the shareholders resolution concerning the appointment to company offices; or as a second alternative (iii) the invalidity of some of the votes cast during a particular period of time in the proceedings of the shareholders’ meeting (when the voting commenced). The Bank considers that the procedures preliminary to the shareholders meeting to check the lists presented were carried out correctly and that the proceedings of the shareholders’ meeting were also carried out properly. It therefore judges the claims made in that summons to be without foundation. In a hearing of 19th June 2014, the Investigating Magistrate, having considered the preliminary questions raised by UBI Banca concerning the legitimacy of the parties to be relevant, ordered a court-appointed expert to verify whether the necessary quorum to challenge the shareholders’ resolution mentioned above had existed. On 27th May 2015 the Investigating Magistrate accepted the applications formulated by UBI Banca and referred the case back to the panel for a decision on the initial question of merit raised by UBI Banca, setting the date of the hearing for the specification of pleadings for 29th October 2015.
Anti money-laundering notifications
In the first half of 2015 the Guardia di Finanza (Finance Police) served a “Written notifications of findings” on the UBI Banca Group for failure to report suspect transactions, in accordance with “Anti Money-Laundering” law, relating to the business of a customer at a branch of Banca Popolare di Bergamo. The total value of the transactions in question amounted to
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approximately €1,461 thousand, which would entail potential fines of a minimum of €15 thousand and a maximum of €584 thousand. The defence documents against the claim were filed with the Ministry of the Economy and Finance (MEF) within the set time limits. In relation to notifications currently being processed, in the first half the MEF imposed administrative fines totalling €467 thousand on three managers of Banca Popolare di Ancona branches in relation to four charges of failure to make reports notified by the Finance Police in 2010, the last pending for that year. For two of those fines, imposed on one single manager, relating to transactions totalling €6 million with potential minimum fines of €301 thousand and a maximum fine of €3 million, UBI Banca was held jointly and severally liable. For two of the fines Banca Popolare di Ancona is jointly and severally liable. They relate to transactions totalling €3.4 million, which entailed potential fines ranging from a minimum of €171 thousand to a maximum of €1.7 million. An appeal was filed against the fines before the court of Rome by the prescribed deadline1. At the beginning of June the Ancona Court of Appeal rejected appeals brought by the MEF against the annulment in the court of first instance by the Court of Macerata of fines totalling €426 thousand imposed on managers of Banca Popolare di Ancona branches in relation to two charges of failing to make reports notified by the Finance Police in 2007, with joint and several liability for the bank. The fines related to transactions totalling €4.2 million, which entailed potential fines ranging from a minimum of €212 thousand to a maximum of €2.1 million. The MEF was ordered to refund the costs of the parties against whom the appeal was brought. At the end of June the Court of Rome rejected an appeal against a fine of €120 thousand imposed in April 2013 for a charge made in 2008 against the manager of a Banca Carime branch with the bank jointly and severally liable for €70 thousand. Activities have commenced to appeal against the first instance judgement.
Tax litigation
Tax inspections and other investigative activities Investigation activity by the Guardia di Finanza (Finance Police) into the Luxembourg subsidiary UBI Management Company whose company objects are the collective management of portfolios, was concluded in the first half of the year with notification of the relative tax assessment report. In that report the investigators considered that the company was only formally resident in Luxembourg, while from a tax viewpoint it was considered resident. Fully convinced of its proper conduct, the company filed a reasoned defence with the office of the tax authorities (Provincial Department I of Milan) responsible for the issue of a formal tax assessment and the imposition of fines. The tax inspection commenced into UBI SICAV, a Luxembourg collective investment undertaking managed by UBI Management Company, is still in progress. On 28th January 2015 a tax inspection commenced and is still in progress by the Regional Department for Lombardy of the tax authorities into Banco di Brescia for the tax year 2010 regarding IRES (corporate income tax), IRAP (regional production tax) and VAT. In January and March 2015 some network banks received questionnaires from the competent offices of the tax authorities designed to acquire documentation on the appropriateness of the VAT regime applied to the sub-servicing commissions paid to those banks as part of covered bond operations carried out in the years 2009-2013. Those questionnaires were duly completed: see below with regard to assessment notices already notified on the network banks who received the questionnaires in relation to prior years. On 15th July 2015 the Regional Department for the Marches Region notified Banca Popolare di Ancona of the start of an inspection into VAT, IRAP and indirect taxes for the tax years 2010, 2011 and 2012. This inspection, which began on 22nd July 2015, has the additional purpose of completing “tutelage” activities already undertaken by that Regional Department.
1 The appeal was lodged in accordance with the combined provisions of Art. 22 of Law No. 689/1981 and subsequent additions and amendments, Art. 6 of Legislative Decree No. 150/2011 and Art. 60, paragraph 2-bis of Legislative Decree No. 231/2007.
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Assessment notices MEDIUM TO LONG-TERM LOANS - SUBSTITUTE TAX PURSUANT TO PRESIDENTIAL DECREE NO. 601/1973 The dispute concerns the alleged failure to pay a substitute tax on loan contracts stipulated abroad. With regard to the appeals lodged against payment demands notified to the Parent and to the subsidiaries Banca Popolare di Bergamo, Banco di Brescia and Banca Popolare Commercio e Industria, the following events occurred during the first half: • Banca Popolare di Bergamo: two payment demands notified and appealed against in the courts were annulled (one on which final judgement was passed by the court and the other annulled under “internal review” procedures by the tax authorities); • Banco di Brescia: two payment demands notified and appealed against in the courts were annulled under “internal review”; • Banca Popolare Commercio e Industria: three of the four payment demands notified and appealed against in the courts were annulled under “internal review” procedures by the tax authorities, while a date has not yet been set for the hearing regarding the fourth before the Provincial Tax Commission; • UBI Banca (former Centrobanca): of the three payment demands notified and appealed against in the courts, one has already been annulled under “internal review” procedures by the tax authorities, while for the remaining two a date has not yet been set for the relative hearings. The successful results for the UBI Banca Group are in line with similar proceedings initiated by other banks and the tax authorities themselves are generally inclined to issue “internal review” provisions except in cases where documents are found which fully replicate the content, including the signature, of a contract subsequently signed abroad.
PREFERENCE SHARES – UBI BANCA AND BANCO DI BRESCIA This litigation concerns the tax regime applied from time to time by UBI Banca and Banco di Brescia on interest paid to subsidiaries resident in Delaware (USA) on bank deposits held by those companies as a result of issues of financial instruments termed “preference shares” on the market. That operation, which complied with provisions issued by the Bank of Italy and was specifically authorised by it, was considered improper by the tax authorities with regard to the application of withholding taxes pursuant to article 26 of Presidential Decree No. 600/1973. While the two banks considered that the withholding tax was not applicable because the bank deposits were held by parties who were not resident, on the contrary, the tax authorities considered that as a consequence of their importance for capital purposes, for tax purposes they should be classified as financing on which a withholding tax is due in accordance with article 26, paragraph 5 of Presidential Decree No. 600/1973. As at 30th June 2015 twelve notices of tax assessment had been notified for the tax years running from 2004 to 2009 for a total amount of presumed unpaid withholding taxes of €36 million in addition to fines and interest. In terms of litigation, at the date of this financial report, the Group had received nine adverse judgements (of which seven given by the Tax Commission of the Province of Milan and two by the Regional Tax Commission of Lombardy) and one fully in favour given by the Tax Commission of the Province of Milan. The unsuccessful rulings generally held that fines were not due because of the objective uncertainty surrounding the regulations. The fully successful ruling accepted the preliminary objection concerning violation of the right to a preliminary defence for the part in which the tax claim concerned abuse and avoidance.
BRANCH CONTRIBUTION TRANSACTIONS: REGISTRY TAX In the first ten days of October 2014 UBI Banca, Banca Popolare di Bergamo, Banco di Brescia, Banca Popolare Commercio e Industria and Banca Regionale Europea received multiple payment demands for registry tax and also for mortgage and cadastral tax for alleged failure to register contracts for the transfer of companies carried out in 2010. These were contributions of bank branches made between Group banks is part of a process of company reorganisation. The total amount demanded by the tax authorities was €47.5 million net of fines and interest. The banks concerned lodged appeals against these claims to the competent Provisional Tax Commissions.
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On 29th May 2015 the Tax Commission of the Province of Brescia rejected an appeal made by Banco di Brescia (and by UBI Banca as jointly and severally liable), confirming that the registry, mortgage and cadastral tax and the relative fines must be paid. UBI Banca and Banco di Brescia lodged an appeal against the ruling. On 17th July 2015 a hearing was held before the Tax Commission of the Province of Bergamo in relation to one of Banca Popolare di Bergamo’s appeals (which is also that of UBI Banca as jointly and severally liable): the relative ruling has not yet been given.
UBI BANCA: CORPORATE INCOME TAX (IRES) In November 2011 UBI Banca (formerly BPU Banca) was served with a notice of assessment in relation to its tax treatment for IRPEG (former corporate income tax) purposes of the contribution of a bank made on 1st July 2003 to the then newly formed Popolare di Bergamo Spa and Banca Popolare Commercio e Industria Spa. In particular, the full deduction (i.e. tax recovery) by the transferor BPU Banca of the taxed provisions for risks and charges set aside in previous years was disputed. On conclusion of a hearing held in March 2015, the Commission of the Province of Milan accepted the Bank’s appeal, acknowledging that the notice of assessment had been notified after the ordinary term had expired and in the absence of the necessary conditions for full assessment. As a result of that ruling the tax authorities issued a provision agreeing to withdraw the payment demand for €8.3 million notified in 2014 to UBI Banca, which had already been suspended by the Tax Commission. The deadline for a possible appeal by the tax authorities has not yet expired.
UBI BANCA FORMER CENTROBANCA: IRES LOSSES ON LOANS In 2009 the Regional Department for Lombardy of the tax authorities served a notice of assessment on Centrobanca for the tax year 2006, demanding an extra €2.7 million of IRES, fines of €3.8 million and interest. More specifically, the tax authorities mainly disputed a deduction for losses on loans due to the absence of the requirements of “certainty and precision” required by the tax rules. Centrobanca lodged an appeal with the Tax Commission of the Province of Milan. In February 2015, UBI Banca (as the survivor of the merger with Centrobanca) and the tax authorities signed a reconciliation agreement which quantified the increased tax due at €0.1 million (compared with an original demand for €2.7 million) and the fines and interest at €0.1 million (compared with an original demand for €3.8 million in fines alone). That reconciliation was acknowledged in a hearing of 2nd March 2015 by the Tax Commission of the Province of Milan which declared the matter finally closed.
VALUE ADDED TAX – LOAN COLLECTION AND MANAGEMENT COMMISSIONS: BANCA REGIONALE EUROPEA, BANCO DI BRESCIA, IW BANK AND UBI FINANCE In 2014 the tax authorities served Banca Regionale Europea and Banco di Brescia with a notice of assessment for failure to pay VAT on fees and commissions paid to securitisation companies for the management and collection of loans, which Group banks had on the other hand considered exempt from VAT. The extra taxation demanded of Banca Regionale Europea amounted to €61 thousand, plus interest and fines, while the extra taxation demanded of Banco di Brescia amounted to €143 thousand, plus interest and fines. The two banks have appealed against the notices of tax assessment before the competent tax commissions and dates have yet to be set for the relative hearings. In July 2015, a similar notice of assessment was served on IW Bank (the former UBI Banca Private Investment) for extra tax of €42 thousand, plus interest and fines. The bank will appeal the notice of assessment within the relative statutory time limit. To complete the information, on 30th October 2014 the tax authorities imposed fines only on UBI Finance S.r.l., which submitted a defence brief in the following December. The tax authorities have one year in which to assess the defence brief submitted by the company.
UBI LEASING: IRES-VAT In July 2014 this company was served a notice of assessment (€37 thousand of increased IRES, plus fines and interest) for alleged failure to recognise income on the final purchase of properties subject to property leasing contracts where the purchaser had in the meantime set a higher value on the asset for the purposes of mortgage and land registry taxes. The
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arguments put forward by the tax authorities are in contrast with the very nature of the contracts, with the tax authorities own practices (Resolution No. 12/E/2007) and with procedures for recognising revenue according to established accounting standards and consequently an application for annulment with grounds was made under “internal review” procedures. In February 2015 the tax authorities accepted that application and completely annulled the notice of assessment. In the first half of the year the company settled a dispute with the tax authorities relating mainly to maritime lease transactions with a “maxi-instalment” and also transactions alleged to be objectively non-existent. In February 2015 a reconciliation agreement was concluded with a total payout (VAT, interest and reduced fines) of €0.7 million against an original demand for €7.3 million (of which €1.4 million for VAT and €5.9 million for fines) plus interest, relating to the tax year 2006.
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Segment Reporting
Distribution by business segment: income statement for the period ended 30th June 2015 Figures in thousands of euro
Corporate Centre (UBI, UBI.S, Property Non-banking Banking companies and UBI item/business segment financial TOTAL (Aggregate) (Aggregate) Academy + all the intercompany and consolidation entries) Net interest income 711,255 77,610 58,283 847,148 Net fee and commission income 594,422 62,755 11,901 669,078 Other expense/income 16,315 -45 100,147 116,417 Gross income 1,321,992 140,320 170,331 1,632,643 Net impairment losses on loans and financial assets -285,367 -46,847 -60,233 -392,447 Net financial income 1,036,625 93,473 110,098 1,240,196 Administrative expenses -938,652 -64,203 -79,988 -1,082,843 Net provisions for risks and charges -14,626 -1,936 -12,573 -29,135 Depreciation, amortisation and net impairment losses on property, plant and equipment and intangible assets -30,539 -2,419 -43,090 -76,048 Other net operating income/expense 154,002 6,739 7,679 168,420 Operating expenses -829,815 -61,819 -127,972 -1,019,606 Profits of equity investments - 329 19,244 19,573 Profits (losses) on disposal of investments 532 13 -462 83 Pre-tax profit from continuing operations 207,342 31,996 908 240,246 Taxes on income for the period from continuing operations -79,004 -6,983 -12,708 -98,695 (Profit) loss for the period attributable to non-controlling interests -7,309 -10,553 754 -17,108 Profit (loss) for the period 121,029 14,460 -11,046 124,443
Distribution by business segment: balance sheet as at 30th June 2015 Figures in thousands of euro
Corporate Centre (UBI, UBI.S, Property Non-banking Banking companies and UBI item/business segment financial TOTAL (Aggregate) (Aggregate) Academy + all the intercompany and consolidation entries)
Loans and advances to banks - - 3,821,544 3,821,544 Due to banks 371,543 9,308,345 - 9,679,888 Net financial assets 463,841 10,844 20,564,291 21,038,976 Loans and advances to customers 64,064,690 13,062,787 8,212,549 85,340,026 Due to customers 45,475,404 192,314 9,663,477 55,331,195 Debt securities issued 11,062,183 1,337,515 26,596,459 38,996,157 Equity-accounted investees - 35 247,744 247,779 Non-controlling interests 549,926 45,360 -46,630 548,656
The banking segment comprises the seven network banks, IW Bank Spa and UBI Banca International. The non-banking financial segment mainly comprises UBI Leasing, UBI Factor, UBI Pramerica SGR, Prestitalia and UBI Fiduciaria. The “Corporate Centre” segment comprises UBI Banca, UBI Sistemi e Servizi, all the property companies of the Group and UBI Academy. That segment also includes all the consolidation entries including all the intercompany eliminations with the exception of those relating to the purchase price allocations made to the relative individual segments. The algebraic sum of the three segments identified in this manner represents the income statement and balance sheet of the UBI Banca Group as at and for the year ended 30th June 2015.
The items "loans and advances to banks" and "due to banks" have been stated in the three segments on the basis of the prevailing balance. The item "non-controlling interests" in the "Banking" and "Non-banking financial" segments relates only to the portion of equity and of the profit for the period of the companies not wholly owned. It does not include non-controlling interests and the part of consolidated items attributable to non-controlling interests which have been attributed to the "corporate centre". Absolute amounts are reported for liability items.
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Transactions with related parties pursuant to IAS 24
In compliance with IAS 24, information is provided below on balance sheet and income statement transactions between related parties of UBI Banca and Group member companies, as well as those items as a percentage of the total for each item in the consolidated financial statements.
According to IAS 24, a related party is a person or entity that is related to the entity that is preparing its financial statements (the “reporting entity”). (a) A person or close family member of that person is related to the reporting entity if that person: (i) has control or joint control over the reporting entity: (ii) has significant influence over the reporting entity; or (iii) is a member of the key management personnel of the reporting entity or of a parent of the reporting entity. (b) An entity is related to a reporting entity if any of the following conditions apply: (i) the entity and the reporting entity are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others); (ii) one entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member); (iii) both entities are joint ventures of the same third party; (iv) one entity is a joint venture of a third entity and the other entity is an associate of the third entity; (v) the entity is a post-employment defined benefit plan for the benefit of employees of either the reporting entity or an entity related to the reporting entity. If the reporting entity is itself such a plan, the sponsoring employers are also related to the reporting entity; (vi) the entity is controlled or jointly controlled by a person identified in (a); (vii) a person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity).
In compliance with the regulations in force, we report that all transactions carried out by Group member companies with related parties were conducted in observance of correct principles both in substance and form, under conditions analogous to those applied for transactions with independent parties. More specifically, the Parent and its subsidiary UBI Sistemi e Servizi SCpA provide Group member companies with a series of services, governed by intragroup contracts drawn up in accordance with the principles of consistency, transparency and uniformity in line with the organisational model of the Group. Under this model, strategic and management activities are centralised at UBI Banca and technical and operational activities in UBI Sistemi e Servizi SCpA. The prices agreed for the services provided under the contracts were determined on the basis of market prices or, where appropriate reference parameters could not be found in the marketplace, in accordance with the particular nature of the services provided and also in relation to the service contracts signed by UBI.S with its consortium shareholders, on the basis of the costs incurred for the services provided. The main intercompany contracts existing at the end of the first half included those which implement the centralisation of activities in the Governance and Business Areas of the Parent and they involved the Parent, the main banks in the Group (Banca Popolare di Bergamo Spa, Banca Popolare Commercio e Industria Spa, Banca Popolare di Ancona Spa, Banca Carime Spa, Banco di Brescia Spa, Banca Regionale Europea Spa, Banca di Valle Camonica Spa, IW Bank), the main product companies and also contracts to implement the “national tax consolidation” (in accordance with articles 117 to 129 of Presidential Decree No. 917/1986, the consolidated law on income tax) concluded by the Parent. There were also all the intercompany contracts which implement the centralisation in UBI Sistemi e Servizi of support activities for the principal companies in the Group.
We report with regard to transactions between companies in the Group and all of its related parties, that no atypical and/or unusual transactions were performed; furthermore, no transactions of that type were even performed with counterparties that were not related parties. Atypical and/or unusual transactions, in compliance with Consob Communications No. 98015375 of 27th February 1998 and No. 1025564 of 6th April 2001, are intended to mean all
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those transactions which, because of their significance/importance, the nature of the counterparties, the content of the transaction (even in relation to ordinary operations), the way in which the transfer price is decided and the timing of the event (close to the end of the financial year) might give rise to doubts concerning: the correctness/completeness of the information in the accounts, a conflict of interests, the security of the company’s assets and the rights of non-controlling shareholders.
The information pursuant to article 5, paragraph 8 of Consob Resolution 17221/2010 on transactions of “greater importance” concluded with related parties in the first of 2015, is reported in the consolidated Interim Management Report, which may be consulted.
Principal transactions with related parties in the balance sheet
Financial Financial Available-for- Loans and Loans and Debt Financial assets Due to Guarantees assets held for sale financial advances to advances to Due to banks securities liabilities held designated at customers granted Figures in thousands of trading assets banks customers issued for trading euro fair value
Associates 4 10,362 - - 43,821 - 373,977 - - 24,949 Senior managers (1) - - - - 3,453 - 12,279 100 - 20 Other related parties - - - - 85,059 - 37,289 10 - 2,304 Total 4 10,362 - - 132,333 - 423,545 110 - 27,273
(1) A “Senior manager” is defined as “a manager with strategic responsibilities of the entity or of its parent, where a manager with strategic responsibility is intended to mean those who have power and responsibility for the planning, management and control of the activities of the entity including its directors”;
Percentage of related-party transactions in the consolidated balance sheet
Financial Financial Available-for- Loans and Loans and Debt Financial assets Due to Guarantees assets held for sale financial advances to advances to Due to banks securities liabilities held designated at customers granted trading assets banks customers issued for trading Figures in thousands of euro fair value
With related-parties (a) 4 10,362 - - 132,333 - 423,545 110 - 27,273
Total (b) 1,338,170 16,799,280 197,223 3,191,584 85,340,026 9,049,928 55,331,195 38,996,157 647,508 5,896,607 Percentage (a/b*100) 0.00% 0.06% - - 0.16% - 0.77% 0.00% - 0.46%
Principal transactions with related parties in the income statement
Dividends and similar Net fee and Operating Other administrative Net interest income Staff costs income commission income income/expenses expenses Figures in thousands of euro
Associates -13 - 60,024 -5 6 -2,131
Senior managers (1) 16 - 82 -6,559 - -10 Other related parties 974 - 167 -280 9 -51 Total 977 - 60,273 -6,844 15 -2,192
(1) A “Senior manager” is defined as “a manager with strategic responsibilities of the entity or of its parent, where a manager with strategic responsibility is intended to mean those who have power and responsibility for the planning, management and control of the activities of the entity including its directors”;
Percentage of related-party transactions in the consolidated income statement
Net fee and Other Net interest Dividends and Operating commission Staff costs administrative income similar income income/expenses income expenses Figures in thousands of euro
With related-parties (a) 977 - 60,273 -6,844 15 -2,192
Total (b) 847,148 5,319 669,078 -656,415 168,420 -426,428 Percentage (a/b*100) 0.12% - 9.01% 1.04% 0.01% 0.51%
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Principal balance sheet items with associate companies subject to significant influence
Available-for- Loans and Financial Financial assets Due to Debt securities Guarantees sale financial advances to Due to banks liabilities held held for trading customers issued granted assets customers for trading Figures in thousands of euro
Aviva Assicurazioni Vita Spa 4 - 16,343 - 78,676 - - - Aviva Vita Spa - - 16,776 - 252,495 - - - Lombarda Vita Spa - - 10,483 - 42,444 - - 24,949 Polis Fondi SGRpA - 10,362 134 - 14 - - - SF Consulting Srl - - 85 - 348 - - - UFI Servizi Srl ------Zhong Ou Asset Management Co. Ltd ------
Total 4 10,362 43,821 - 373,977 - - 24,949
Principal income statement items with associate companies subject to significant influence
Net fee and Operating Other Net interest Dividends and commission Staff costs income/expense administrative income similar income Figures in thousands of euro income s expenses
Aviva Assicurazioni Vita Spa 24 - 1,209 -5 1 - Aviva Vita Spa -36 - 36,503 - - - Lombarda Vita Spa -1 - 22,228 - 5 -2,081 Polis Fondi SGRpA - - 135 - - - SF Consulting Srl - - -51 - - - UFI Servizi Srl ------50 Zhong Ou Asset Management Co. Ltd ------
Total -13 - 60,024 -5 6 -2,131
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Events occurring after the end of the first half
No events of importance that might affect the operating and financial position presented occurred after 30th June 2015 the reporting date of this interim financial report, and until 7th August 2015 the date of its approval by the Management Board of UBI Banca Scpa.
The following is nevertheless reported for your information:
° 14th July 2015 – the Supervisory Board appointed Dottor Ettore Medda, the Deputy General Manager of UBI Banca, to the Management Board in compliance with the provisions of article 30.2 of the Articles of Association, which require the presence of two senior managers on the Board of the Bank.
° In July and August 2015, UBI Banca purchased a total of 445,434 shares of Banca di Valle Camonica from non-controlling shareholders (inclusive of the stakes sold by Finanziaria di Valle Camonica and by Cattolica Assicurazionion 5th and 6th August 2015 respectively). The control exercised by the UBI Banca Group therefore rose from 84.1309% as at 30th June to the current 98.1520%.
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STATEMENT OF THE CHIEF EXECUTIVE OFFICER AND OF THE SENIOR OFFICER RESPONSIBLE FOR PREPARING THE COMPANY ACCOUNTING DOCUMENTS
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Statement on the condensed interim financial report pursuant to article 81-ter of Consob Regulation No. 11971 of 14th May 1999 and subsequent amendments and additions
1. The undersigned Victor Massiah, Chief Executive Officer, and Elisabetta Stegher, Senior Officer Responsible for preparing the company accounting documents of UBI Banca Scpa, having taken account of the provisions of paragraphs 3 and 4 of article 154 bis of Legislative Decree No. 58 of 24th February 1998, hereby certify to:
° the adequacy in relation to the characteristics of the company and ° the effective application of the administrative and accounting procedures for the preparation of the half year condensed financial statements, during the first half of 2015.
2. The model employed
The assessment of the adequacy of the administrative and accounting procedures for the preparation of the condensed interim financial report as at and for the half year ended 30th June 2015 was based on an internal model defined by UBI Banca ScpA, developed in accordance with the framework drawn up by the Committee of Sponsoring Organisations of the Treadway Commission (COSO) and with the framework Control Objectives for IT and related technology (COBIT) which represent the generally accepted international standards for internal control systems.
3. They also certify that:
3.1 the condensed interim financial report: a) was prepared in compliance with the applicable international accounting standards recognised by the European Community in accordance with the Regulation No. 1606/2002 (EC) issued by the European Parliament on 19th July 2002; b) corresponds to the records contained in the accounting books of the company; c) provides a true and fair view of the capital, operating and cash flow position of the issuer and the companies included in the scope of the consolidation. 3.2 The half year management report comprises a reliable analysis of the important events that occurred in the first six months of the year and of their impact on the half year condensed financial statements, together with a description of the main risks and uncertainties relating to the remaining six months of the year. The half year management report also comprises a reliable analysis of information on significant related party transactions.
Bergamo, 7th August 2015
Victor Massiah Elisabetta Stegher
Senior Officer Responsible for preparing Chief Executive Officer the company accounting documents (signed on the original)
(signed on the original)
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INDEPENDENT AUDITORS’ REPORT
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REPORT ON THE
PERFORMANCE OF THE
PARENT, UBI BANCA Scpa
IN THE FIRST HALF OF 2015
Reclassified financial statements, reclassified income statement net of the most significant non-recurring items and reconciliation schedules
Reclassified balance sheet
30.6.2015 31.12.2014 Changes % changes 30.6.2014 Changes % changes A-B A/B A-C A/C Figures in thousands of euro A B C
ASSETS
10. Cash and cash equivalents 107,492 160,330 -52,838 -33.0% 122,196 -14,704 -12.0%
20. Financial assets held for trading 1,463,279 1,544,835 -81,556 -5.3% 2,280,749 -817,470 -35.8%
30. Financial assets designated at fair value 197,223 193,167 4,056 2.1% 192,408 4,815 2.5% 40. Available-for-sale financial assets 16,309,111 18,066,883 -1,757,772 -9.7% 15,996,041 313,070 2.0%
50. Held-to-maturity investments 3,535,692 3,576,951 -41,259 -1.2% 3,049,841 485,851 15.9%
60. Loans and advances to banks 15,026,560 14,055,649 970,911 6.9% 15,450,016 -423,456 -2.7%
70. Loans and advances to customers 21,854,404 23,330,321 -1,475,917 -6.3% 23,352,148 -1,497,744 -6.4%
80. Hedging derivatives 544,207 647,972 -103,765 -16.0% 447,010 97,197 21.7% Fair value change in hedged financial assets 90. (+/-) 4,804 5,583 -779 -14.0% 5,751 -947 -16.5%
100. Equity investments 9,625,683 9,624,011 1,672 0.0% 10,625,008 -999,325 -9.4%
110. Property, plant and equipment 624,701 634,178 -9,477 -1.5% 642,485 -17,784 -2.8%
120. Intangible assets 410 410 - - 410 - -
130. Tax assets 1,536,122 1,688,730 -152,608 -9.0% 1,538,252 -2,130 -0.1% Non-current assets and disposal groups held 140. for sale 2,036 507 1,529 301.6% 82,063 -80,027 -97.5%
150. Other assets 745,198 642,338 102,860 16.0% 721,697 23,501 3.3%
Total assets 71,576,922 74,171,865 -2,594,943 -3.5% 74,506,075 -2,929,153 -3.9%
LIABILITIES AND EQUITY
10. Due to banks 13,199,889 19,140,417 -5,940,528 -31.0% 24,223,696 -11,023,807 -45.5%
20. Due to customers 10,254,377 7,065,270 3,189,107 45.1% 3,423,416 6,830,961 199.5%
30. Debt securities issued 36,831,103 36,545,668 285,435 0.8% 34,662,145 2,168,958 6.3%
40. Financial liabilities held for trading 754,027 722,181 31,846 4.4% 600,017 154,010 25.7%
60. Hedging derivatives 736,087 937,018 -200,931 -21.4% 573,317 162,770 28.4%
80. Tax liabilities 243,599 352,883 -109,284 -31.0% 290,029 -46,430 -16.0%
100. Other liabilities 765,959 751,071 14,888 2.0% 898,336 -132,377 -14.7%
110. Post-employment benefits 39,701 45,443 -5,742 -12.6% 43,921 -4,220 -9.6%
120. Provisions for risks and charges: 56,092 45,218 10,874 24.0% 49,554 6,538 13.2% a) pension and similar obligations 1,029 1,144 -115 -10.1% 1,114 -85 -7.6% b) other provisions 55,063 44,074 10,989 24.9% 48,440 6,623 13.7% 130.+160. +170.+ Share capital, share premiums, reserves, 180.+190. valuation reserves and treasury shares 8,518,872 9,485,133 -966,261 -10.2% 9,496,994 -978,122 -10.3%
200. Profit (loss) for the period/year 177,216 -918,437 n.s. n.s. 244,650 -67,434 -27.6%
Total liabilities and equity 71,576,922 74,171,865 -2,594,943 -3.5% 74,506,075 -2,929,153 -3.9%
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Reclassified quarterly balance sheets
30.6.2015 31.3.2015 31.12.2014 30.9.2014 30.6.2014 31.3.2014 Figures in thousands of euro
ASSETS 10. Cash and cash equivalents 107,492 112,426 160,330 126,217 122,196 129,992
20. Financial assets held for trading 1,463,279 1,654,371 1,544,835 1,119,978 2,280,749 4,011,024 30. Financial assets designated at fair value 197,223 198,365 193,167 193,637 192,408 193,692 40. Available-for-sale financial assets 16,309,111 17,405,247 18,066,883 17,580,462 15,996,041 15,281,956
50. Held-to-maturity investments 3,535,692 3,528,010 3,576,951 3,076,556 3,049,841 3,113,263 60. Loans and advances to banks 15,026,560 15,073,014 14,055,649 13,841,245 15,450,016 14,460,750 70. Loans and advances to customers 21,854,404 22,625,687 23,330,321 22,666,345 23,352,148 23,962,361
80. Hedging derivatives 544,207 673,536 647,972 609,406 447,010 300,274
90. Fair value change in hedged financial assets (+/-) 4,804 5,349 5,583 5,714 5,751 5,606
100. Equity investments 9,625,683 9,624,090 9,624,011 10,576,618 10,625,008 10,708,381
110. Property, plant and equipment 624,701 629,089 634,178 638,243 642,485 645,244 120. Intangible assets 410 410 410 410 410 410
130. Tax assets 1,536,122 1,623,234 1,688,730 1,549,868 1,538,252 1,684,885 Non-current assets and disposal groups held for 140. sale 2,036 3 507 82,063 82,063 2,329 150. Other assets 745,198 639,077 642,338 525,106 721,697 699,446
Total assets 71,576,922 73,791,908 74,171,865 72,591,868 74,506,075 75,199,613
LIABILITIES AND EQUITY 10. Due to banks 13,199,889 17,798,453 19,140,417 22,953,493 24,223,696 25,086,834 20. Due to customers 10,254,377 6,598,990 7,065,270 2,180,592 3,423,416 2,658,889 30. Debt securities issued 36,831,103 37,080,038 36,545,668 35,242,182 34,662,145 34,489,699
40. Financial liabilities held for trading 754,027 844,803 722,181 675,565 600,017 1,513,524
60. Hedging derivatives 736,087 1,163,274 937,018 752,063 573,317 462,440 80. Tax liabilities 243,599 448,391 352,883 366,121 290,029 451,208 100. Other liabilities 765,959 784,573 751,071 580,445 898,336 705,434
110. Post-employment benefits 39,701 43,409 45,443 44,617 43,921 43,545
120. Provisions for risks and charges: 56,092 45,666 45,218 45,550 49,554 60,828 a) pension and similar obligations 1,029 1,135 1,144 1,105 1,114 1,052 b) other provisions 55,063 44,531 44,074 44,445 48,440 59,776 130.+160. +170.+ Share capital, share premiums, reserves, valuation 180.+190. reserves and treasury shares 8,518,872 8,781,902 9,485,133 9,538,886 9,496,994 9,500,185 200. Profit (loss) for the period 177,216 202,409 -918,437 212,354 244,650 227,027
Total liabilities and equity 71,576,922 73,791,908 74,171,865 72,591,868 74,506,075 75,199,613
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Reclassified income statement
1H 2015 1H 2014 2nd 2nd FY 2014 Changes % changes Changes % changes Quarter Quarter A-B A/B C-D C/D Figures in thousands of euro A B 2015 C 2014 D E
10.-20. Net interest income (expense) 7,092 41,324 (34,232) (82.8%) (3,211) 16,386 (19,597) n.s. 96,444 70. Dividends and similar income 244,406 275,318 (30,912) (11.2%) 14,035 38,760 (24,725) (63.8%) 276,489 40.-50. Net fee and commission income 26,347 3,892 22,455 n.s. 13,507 3,491 10,016 286.9% 24,255 80.+ Net income from trading, hedging and 90.+100. disposal/repurchase activities and from assets/liabilities +110. designated at fair value 96,482 127,190 (30,708) (24.1%) 45,410 69,470 (24,060) (34.6%) 178,153 190. Other net operating income/expense 54,549 53,608 941 1.8% 27,108 25,944 1,164 4.5% 112,431
Operating income 428,876 501,332 (72,456) (14.5%) 96,849 154,051 (57,202) (37.1%) 687,772 150.a Staff costs (84,690) (76,421) 8,269 10.8% (42,158) (38,660) 3,498 9.0% (153,425) 150.b Other administrative expenses (83,751) (79,393) 4,358 5.5% (44,531) (40,699) 3,832 9.4% (163,615) Depreciation, amortisation and net impairment losses 170.+180. on property, plant and equipment and intangible assets (10,190) (10,990) (800) (7.3%) (5,073) (5,458) (385) (7.1%) (21,630)
Operating expenses (178,631) (166,804) 11,827 7.1% (91,762) (84,817) 6,945 8.2% (338,670) Net operating income 250,245 334,528 (84,283) (25.2%) 5,087 69,234 (64,147) (92.7%) 349,102 130.a Net impairment losses on loans (56,247) (52,867) 3,380 6.4% (28,418) (27,221) 1,197 4.4% (116,738) 130. Net impairment losses on other financial assets and b+c+d liabilities (4,000) (1,377) 2,623 190.5% (1,535) (2,263) (728) (32.2%) (4,813) 160. Net provisions for risks and charges (12,545) 866 (13,411) n.s. (12,601) 1,868 (14,469) n.s. (311) 210.+240. Profits (losses) from the disposal of equity investments (2) (580) (578) (99.7%) 12 334 (322) (96.4%) 133,676
250. Pre-tax profit (loss) from continuing operations 177,451 280,570 (103,119) (36.8%) (37,455) 41,952 (79,407) n.s. 360,916 Taxes on income for the period/year from continuing 260. operations 57 (35,920) 35,977 n.s. 12,262 (24,329) 36,591 n.s. (15,464) Profit (loss) for the period/year before redundancies expenses and impairment losses/reversals on Group equity investments 177,508 244,650 (67,142) (27.4%) (25,193) 17,623 (42,816) n.s. 345,452 150.a Redundancy expenses net of taxes (292) - (292) n.s. - - - - (11,995) Net impairment losses on Group equity investments net 210. of taxes ------(1,251,894)
290. Profit (loss) for the period/year 177,216 244,650 (67,434) (27.6%) (25,193) 17,623 (42,816) n.s. (918,437)
Quarterly reclassified income statements
2015 2014
Figures in thousands of euro 2nd Quarter 1st Quarter 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter
10.-20. Net interest income (expense) (3,211) 10,303 25,062 30,058 16,386 24,938 70. Dividends and similar income 14,035 230,371 796 375 38,760 236,558 40.-50. Net fee and commission income 13,507 12,840 10,727 9,636 3,491 401 80.+90. Net income from trading, hedging and disposal/repurchase +100.+110. activities and from assets/liabilities designated at fair value 45,410 51,072 42,443 8,520 69,470 57,720 190. Other net operating income/expense 27,108 27,441 30,197 28,626 25,944 27,664
Operating income 96,849 332,027 109,225 77,215 154,051 347,281 150.a Staff costs (42,158) (42,532) (36,793) (40,211) (38,660) (37,761) 150.b Other administrative expenses (44,531) (39,220) (47,302) (36,920) (40,699) (38,694) Depreciation, amortisation and net impairment losses on 170.+180. property, plant and equipment and intangible assets (5,073) (5,117) (5,326) (5,314) (5,458) (5,532)
Operating expenses (91,762) (86,869) (89,421) (82,445) (84,817) (81,987) Net operating income 5,087 245,158 19,804 (5,230) 69,234 265,294 130.a Net impairment losses on loans (28,418) (27,829) (32,699) (31,172) (27,221) (25,646)
130.b+c+d Net impairment losses on other financial assets and liabilities (1,535) (2,465) (3,062) (374) (2,263) 886 160. Net provisions for risks and charges (12,601) 56 (1,301) 124 1,868 (1,002) 210.+240. Profits (losses) from the disposal of equity investments 12 (14) 134,153 103 334 (914)
250. Pre-tax profit (loss) from continuing operations (37,455) 214,906 116,895 (36,549) 41,952 238,618 260. Taxes on income for the period from continuing operations 12,262 (12,205) 16,203 4,253 (24,329) (11,591) Profit (loss) for the period before redundancies expenses and impairment losses/reversals on Group equity investments (25,193) 202,701 133,098 (32,296) 17,623 227,027 150.a Redundancy expenses net of taxes - (292) (11,995) - - - 210. Net impairment losses on Group equity investments net of taxes - - (1,251,894) - - -
290. Profit (loss) for the period (25,193) 202,409 (1,130,791) (32,296) 17,623 227,027
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Reclassified income statement net of the most significant non-recurring items
1H 2015 1H 2014 % net of non- net of non- Changes changes recurring items recurring items Figures in thousands of euro
Net interest income 7,092 41,324 (34,232) (82.8%)
Dividends and similar income 244,406 275,318 (30,912) (11.2%) Net fee and commission income 26,347 3,892 22,455 n.s. Net income from trading, hedging and disposal/repurchase activities and from assets/liabilities designated at fair value 96,482 127,190 (30,708) (24.1%)
Other net operating income/expense 54,549 53,608 941 1.8%
Operating income 428,876 501,332 (72,456) (14.5%) Staff costs (84,690) (76,421) 8,269 10.8%
Other administrative expenses (83,751) (79,393) 4,358 5.5% Depreciation, amortisation and net impairment losses on property, plant and equipment and intangible assets (10,190) (10,990) (800) (7.3%)
Operating expenses (178,631) (166,804) 11,827 7.1%
Net operating income 250,245 334,528 (84,283) (25.2%) Net impairment losses on loans (56,247) (52,867) 3,380 6.4% Net impairment losses on other financial assets and liabilities 2,824 (1,808) 4,632 n.s. Net provisions for risks and charges (12,545) 866 (13,411) n.s.
Profits (losses) from the disposal of equity investments (2) 311 313 n.s.
Pre-tax profit from continuing operations 184,275 281,030 (96,755) (34.4%)
Taxes on income for the period from continuing operations (1,818) (17,922) (16,104) (89.9%)
Profit for the period 182,457 263,108 (80,651) (30.7%)
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Reclassified income statement net of the most significant non-recurring items: details
Non-recurring items Non-recurring items
Adjustment to Impact of the Impairment losses Redundancy Impairment losses 1H 2015 the price of change in the 1H 2014 and recoveries in expenses and recoveries in 1H 2015 net of non- 1H 2014 the sale of the IRAP tax rate net of non- value on shares, (purs. to 4th value on shares, recurring items subsidiary on prior year recurring items bonds and units in February 2015 bonds and units in BDG Sa deferred tax UCITS (AFS) Agreement) UCITS (AFS) (Switzerland) provisions Figures in thousands of euro
Net interest income 7,092 7,092 41,324 41,324 Dividends and similar income 244,406 244,406 275,318 275,318 Net fee and commission income 26,347 26,347 3,892 3,892 Net income from trading, hedging and disposal/repurchase activities and from assets/liabilities designated at fair value 96,482 96,482 127,190 127,190 Other net operating income/expense 54,549 54,549 53,608 53,608
Operating income 428,876 - - 428,876 501,332 - - - 501,332 Staff costs (84,690) (84,690) (76,421) (76,421) Other administrative expenses (83,751) (83,751) (79,393) (79,393) Depreciation, amortisation and net impairment losses on property, plant and equipment and intangible assets (10,190) (10,190) (10,990) (10,990)
Operating expenses (178,631) - - (178,631) (166,804) - - - (166,804)
Net operating income 250,245 - - 250,245 334,528 - - - 334,528 Net impairment losses on loans (56,247) (56,247) (52,867) (52,867)
Net impairment losses on other financial assets and liabilities (4,000) 6,824 2,824 (1,377) (431) (1,808) Net provisions for risks and charges (12,545) (12,545) 866 866 Profits (losses) from the disposal of equity investments (2) (2) (580) 891 311
Pre-tax profit from continuing operations 177,451 6,824 - 184,275 280,570 (431) 891 - 281,030 Taxes on income for the period from continuing operations 57 (1,875) (1,818) (35,920) 132 17,866 (17,922)
Profit for the period before redundancy expenses 177,508 4,949 - 182,457 244,650 (299) 891 17,866 263,108 Redundancy expenses net of taxes (292) 292 - - -
Profit for the period 177,216 4,949 292 182,457 244,650 (299) 891 17,866 263,108
A negative amount of €17.9 million was recognised in the second quarter of 2014, due to the adjustment to IRAP (regional production tax) deferred tax assets already recognised in the balance sheet as at 31st December 2013 (deferred assets) as a consequence of the reduction in the tax rate for IRAP introduced by Decree Law No. 66/2014 from the financial year 2014, This was then no longer recognised following the provisions of Art. 1, paragraph 23, of the 2015, Legge di stabilità (“stability law” – annual finance law) which retroactively repealed the provision mentioned (Art. 2 of Decree Law No. 66/2014) and therefore restored the previous rates immediately from the financial year 2014.
200
Reconciliation schedule for the period ended 30th June 2015
RECLASSIFIED INCOME STATEMENT Reclassifications 1H 2015 1H 2015 Separate Item s Depreciation Reclassified mandatory Redundancy Tax recoveries for leasehold financial financial expenses improvements statement Figures in thousands of euro statement
10.-20. Net interest income 7,092 7,092 70. Dividends and similar income 244,406 244,406 40.-50. Net fee and commission income 26,347 26,347 80.+90.+ Net income from trading, hedging and disposal/repurchase 100.+110. activities and from assets/liabilities designated at fair value 96,482 96,482 190. Other net operating income/expense 58,623 (4,137) 63 54,549 Operating income 432,950 (4,137) 63 - 428,876 150.a Staff costs (85,093) 403 (84,690) 150.b Other administrative expenses (87,888) 4,137 (83,751) Depreciation, amortisation and net impairment losses on 170.+180. property, plant and equipment and intangible assets (10,127) (63) (10,190) Operating expenses (183,108) 4,137 (63) 403 (178,631) Net operating income 249,842 - - 403 250,245 130.a Net impairment losses on loans (56,247) (56,247) 130. b+c+d Net impairment losses on other financial assets and liabilities (4,000) (4,000) 160. Net provisions for risks and charges (12,545) (12,545) 210.+240. Losses from the disposal of equity investments (2) (2) 250. Pre-tax profit from continuing operations 177,048 - - 403 177,451 260. Taxes on income for the period from continuing operations 168 (111) 57 Profit for the period before redundancy expenses 177,216 - - 292 177,508 150.a Redundancy expenses net of taxes - (292) (292)
290. Profit for the period 177,216 - - - 177,216
Reconciliation schedule for the period ended 30th June 2014
RECLASSIFIED INCOME STATEMENT Reclassifications 1H 2014 1H 2014 Separate Ite ms Depreciation for Reclassified m andatory Tax recoveries leasehold financial financial improvements statem ent Figures in thousands of euro statem ent
10.-20. Net interest income 41,324 41,324 70. Dividends and similar income 275,318 275,318 40.-50. Net fee and commission income 3,892 3,892 80.+90.+ Net income from trading, hedging and disposal/repurchase activities 100.+110. and from assets/liabilities designated at fair value 127,190 127,190 190. Other net operating income/expense 57,200 (3,655) 63 53,608 Operating income 504,924 (3,655) 63 501,332 150.a Staff costs (76,421) (76,421) 150.b Other administrative expenses (83,048) 3,655 (79,393) Depreciation, amortisation and net impairment losses on property, 170.+180. plant and equipment and intangible assets (10,927) (63) (10,990) Operating expenses (170,396) 3,655 (63) (166,804) Net operating income 334,528 - - 334,528 130.a Net impairment losses on loans (52,867) (52,867) 130. b+c+d Net impairment losses on other financial assets and liabilities (1,377) (1,377) 160. Net provisions for risks and charges 866 866 210.+240. Losses from the disposal of equity investments (580) (580) 250. Pre-tax profit from continuing operations 280,570 - - 280,570 260. Taxes on income for the period from continuing operations (35,920) (35,920) 280. Post-tax profit (loss) from discontinued operations - -
290. Profit for the period 244,650 - - 244,650
201
Reconciliation schedule for the year ended 31st December 2014
RECLASSIFIED INCOME STATEMENT FY 2014 Reclassifications FY 2014 Separate Impairment Ite ms Depreciation Reclassified m andatory Tax losses on Redundancy for leasehold financial financial recoveries Group equity expenses improvements statem ent Figures in thousands of euro statem ent investments
10.-20. Net interest income 96,444 96,444 70. Dividends and similar income 276,489 276,489 40.-50. Net fee and commission income 24,255 24,255 80.+90.+ Net income from trading, hedging and disposal/repurchase 100.+110. activities and from assets/liabilities designated at fair value 178,153 178,153 190. Other net operating income/expense 120,159 (7,855) 127 112,431 Operating income 695,500 (7,855) 127 - - 687,772 150.a Staff costs (169,970) 16,545 (153,425) 150.b Other administrative expenses (171,470) 7,855 (163,615) Depreciation, amortisation and net impairment losses on property, 170.+180. plant and equipment and intangible assets (21,503) (127) (21,630) Operating expenses (362,943) 7,855 (127) - 16,545 (338,670) Net operating income 332,557 - - - 16,545 349,102 130.a Net impairment losses on loans (116,738) (116,738) 130. b+c+d Net impairment losses on other financial assets and liabilities (4,813) (4,813) 160. Net provisions for risks and charges (311) (311) 210.+240. Profits (losses) from the disposal of equity investments (1,122,065) 1,255,741 133,676 250. Pre-tax profit (loss) from continuing operations (911,370) - - 1,255,741 16,545 360,916 260. Taxes on income for the year from continuing operations (7,067) (3,847) (4,550) (15,464) Profit (loss) for the year before redundancy expenses and impairment losses on Group equity investments (918,437) - - 1,251,894 11,995 345,452 150.a Redundancy expenses net of taxes - (11,995) (11,995) 210. Impairment losses on Group equity investments net of taxes - (1,251,894) (1,251,894)
290. Loss for the year (918,437) - - - - (918,437)
Notes to the financial statements
The mandatory financial statements have been prepared on the basis of Bank of Italy Circular No. 262 of 22nd December 2005 and subsequent updates. Therefore, as with the 2014 Annual Report, for the purposes of the preparation of these financial statements, the provisions of the third update of that document issued on 22nd December 2014 have been observed.
The following rules are applied to the reclassified financial statements to allow a vision that is more consistent with a management accounting style: - the tax recoveries recognised within item 190 of the mandatory income statement (other net operating income) are reclassified as a reduction in indirect taxes included within other administrative expenses; - the item net impairment losses on property, plant and equipment and intangible assets includes items 170 and 180 in the mandatory financial statements and the instalments relating to the depreciation of costs incurred for improvements to leased assets classified within item 190; - redundancy expenses (net of taxation), present in the first quarter of 2015 and in the fourth quarter of 2014, partially include item 150a in the mandatory financial statements. - net impairment losses on Group equity investments (net of taxes), present in the fourth quarter of 2014, include almost all of item 210 in the mandatory financial statements.
The reconciliation of the items in the reclassified financial statements with the figures in the mandatory financial statements has been facilitated, on the one hand, with the insertion in the margin against each item of the corresponding number of the item in the mandatory financial statements with which it is reconciled and, on the other hand, with the preparation of specific reconciliation schedules.
The comments on the performance of the main balance sheet and income statement items are made on the basis of the reclassified financial statements and of the reclassified financial statements for the comparative periods, and the tables providing details included in the subsequent sections of this financial report have also been prepared on that same basis.
In order to facilitate analysis of UBI Banca’s operating performance and in compliance with Consob Communication No. DEM/6064293 of 28th July 2006, two special schedules have been included, the first a brief summary (which provides a comparison of the normalised results for the period) and the second more detailed, which shows the impact on earnings of the principal non-recurring events and items – since the relative effects on capital and cash flow, being closely linked, are not significant – which are summarised as follows: First half 2015: - impairment losses and recoveries in value on shares, bonds and units in UCITS (AFS) - redundancy expenses charged to the income statement in relation to the Trade Union Agreement of 4th February 2015.
First half 2014: - impairment losses and recoveries in value on shares, bonds and units in UCITS (AFS) - adjustment to the price of the sale of the subsidiary Banque de Dépôts et de Gestion Sa (Switzerland); - impact of the change in the IRAP tax rate on prior year deferred tax provisions.
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Performance in the period
The income statement figures commented on are based on the reclassified financial statements (the income statement, the quarterly income statements and the income statement net of the principal non-recurring items – in brief and detailed versions) contained in the preceding section of this report and the tables furnishing details presented below are also based on those statements. The notes that follow those reclassified financial statements may be consulted as may the reconciliation schedules for a description of the reclassification. Furthermore, the commentary examines changes that occurred in the first half of 2015 compared with the same period in 2014, and also those occurring in the second quarter of 2015 compared with the preceding first quarter (in the latter case the commentary is highlighted with a slightly different background colour).
The income statement
In the first half of 2015 UBI Banca earned profit after tax of €177.2 million, down on €244.7 million recorded in the same half of the previous year1. Profit for the period was affected on the one hand by falling revenues (fewer dividends received compared with the first six months of 2014, but also the generalised effects of an increase in volatility on financial markets and of risk premiums in relation to developments in the situation in Greece) and on the other hand by growth in operating expenses due to greater requirements to make provisions and above all those resulting from the progressive entry into force of European supervisory regulations.
As concerns quarterly performance, the Parent incurred a loss of €25.2 million in the second quarter of 2015 (up €17.6 million on the same quarter in 2014) compared with a profit of €202.4 million realised in the first three months of the year (which had, however, benefited from the receipt of dividends from Group companies).
In the first half ordinary operations generated operating income of €428.9 million, down €72.5 million on the first half of 2014, the reasons for which are reported below.
Dividends2 came to €244.4 million and related almost entirely to investments in Group companies (as shown in the table, of Dividends and similar income which €188.3 million from the network banks (€133.5 million from BPB) and 1H 2015 1H 2014 €39.4 million from the product Figures in thousands of euro companies (€28.2 million from the Banca Popolare di Bergamo Spa 133,512 129,109 asset management company). Banca Regionale Europea Spa 10,704 36,111 This item was down €30.9 million Banca Popolare Commercio e Industria Spa 28,221 25,800 UBI Pramerica SGR Spa 28,199 20,053 compared with the comparative first Banca Carime - 11,180 half, the result mainly of the following: Banca Popolare di Ancona Spa 7,467 4,146 • a decrease for the network banks of IW Bank Spa (nuova Società) 5,492 3,837 €21.2 million, due both to a partial Banco di Brescia Spa 8,411 3,151 distribution from an articles of Lombarda Vita Spa 8,597 14,083 association reserve by BRE in 2014 UBI Factor Spa 5,722 - and the failure of Carime to declare Other equity investments (item 100) 4,221 20,831 a dividend in 2015, despite the Dividends received from item 100 equity investments 240,546 268,301 Dividends received from item 40 AFS 2,332 5,626 greater amounts paid by the other Dividends received from item 20 for trading and item 30 banks; fair value options 1,528 1,391
• an increase of €15.5 million from the Total 244,406 275,318 product companies, due to better
1 Non-recurring expenses were recognised in both periods consisting of €5.2 million in 2015 (generated by impairment losses on financial assets and redundancy expenses) and €18.5 million in 2014 (primarily the consequence of a temporary change in the rate for IRAP – regional production tax). Net of those items profit for the first half stood at €182.5 million compared with €263.1 million 2014. 2 It must always be considered that on the basis of the organisational configuration of the Group, UBI Banca fills the role of a holding company and holds equity investments in all the main consolidated companies. It follows that the profits that they distribute constitute its primary source of income.
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results by UBI Pramerica SGR and UBI Factor; • a reduction of €21.9 million by the insurance companies, which had distributed large amounts in the second quarter of 2014 (€14.1 million from Lombarda Vita, €7.3 million from UBI Assicurazioni, €6 million from Aviva Vita and €5 million from Aviva Assicurazioni Vita), but which had been either partially or totally disposed of in December; • a fall in profits distributed by investments held in portfolio (-€3.2 million), attributable almost entirely to the absence of the dividend paid by SIA (€3.1 million in 2014).
Net trading income
Income from Losses from Net income Gains Losses 1H 2014 trading trading 1H 2015 (A) (C) Figures in thousands of euro (B) (D) [(A+B)-(C+D)]
1. Financial assets held for trading 632 18,649 (6,512) (3,711) 9,058 27,974 1.1 Debt instruments 67 12,638 (6,407) (1,049) 5,249 26,020 1.2 Equity instruments 562 103 (86) - 579 316 1.3 Units in UCITS 3 10 (19) - (6) (2) 1.4 Financing ------1.5 Other - 5,898 - (2,662) 3,236 1,640 2. Financial liabilities held for trading 1,871 514 - (1,540) 845 10,059 2.1 Debt instruments 1,871 514 - (1,540) 845 10,059 2.2 Payables ------2.3 Other ------3. Financial assets and liabilities: exchange rate X differences X X X 235 (328) 4. Derivative instruments 184,798 116,860 (177,039) (111,354) 14,809 (1,303) 4.1 Financial derivatives 184,798 116,860 (177,039) (111,354) 14,809 (760) - on debt instruments and interest rates 179,974 109,538 (172,224) (106,926) 10,362 (2,050) - on equity instruments and share indices 321 2,961 (312) (92) 2,878 (295) - on currencies and gold X X X X 1,544 1,629 - other 4,503 4,361 (4,503) (4,336) 25 (44) 4.2 Credit derivatives - - - - - (543) Total 187,301 136,023 (183,551) (116,605) 24,947 36,402
Net hedging income (loss)
Figures in thousands of euro 1H 2015 1H 2014
Net hedging income (loss) 6,357 (3,475)
Profit from disposal or repurchase Net profit Profits Losses 1H 2014 Figures in thousands of euro 1H 2015
Financial assets 1. Loans and advances to banks - - - - 2. Loans and advances to customers 1,728 (154) 1,574 (262) 3. Available-for-sale financial assets 66,279 (514) 65,765 97,877 3.1 Debt instruments 59,394 (507) 58,887 78,215 3.2 Equity instruments - (7) (7) (60) 3.3 Units in UCITS 6,885 - 6,885 19,722 3.4 Financing - - - - 4. Held-to-maturity investments - - - - Total assets 68,007 (668) 67,339 97,615 Financial liabilities 1. Due to banks - - - - 2. Due to customers - - - - 3. Debt securities issued 86 (7,791) (7,705) (3,080) Total liabilities 86 (7,791) (7,705) (3,080) Total 68,093 (8,459) 59,634 94,535
Net profit (loss) on financial assets and liabilities designated at fair value
Figures in thousands of euro 1H 2015 1H 2014
Net profit (loss) on financial assets and liabilities designated at fair value 5,544 (272)
Net income from trading, hedging and disposal/repurchase activities and from assets/liabilities designated at fair value 96,482 127,190
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The volatility generated on financial markets, together with the widening of the spreads on government securities, which occurred in parallel with uncertainties accompanying negotiations between the Greek government and its creditors, held down the net result for financial activities to €96.5 million (compared with €127.2 million in the first six months of 2014), the aggregate result of the following: • +24.9 million from trading (+€36.4 million in 2014), of which +€6.1 million attributable to debt instruments (composed of: +€11.6 million of profits/losses on trading, -€6.3 million of losses recorded at the end of the first half with the widening spread and +€0.8 million in relation to the closure of and fair value changes in uncovered short positions), +€3.5 million attributable to equities and above all to the closure of the relative derivatives (almost all listed on regulated markets and with equity indices as the underlying), +€5 million to business in foreign currency3 and +€10.4 million to derivatives on debt instruments and interest rates (profits, gains and accruals). The latter relate to differentials accrued (at the same time as medium to long-term swap rates rose in the second quarter of the year) and to fair value movements in the derivatives themselves (transactions of a commercial nature with corporate counterparties, amongst other things, were closed in the period); • +€6.4 million from hedging (-€3.5 million in 2014), related mainly to fair value changes in derivatives on AFS securities, at the same time as the long-term swap rate curve rose, only marginally offset by derivatives on bond issues; • +€59.6 million from the disposal/repurchase of financial assets/liabilities, of which +€56 million from the sale of Italian government securities, +€2.9 million from bonds (mainly issued by banks), +€6.9 million from the disposal of units in UCITS (ETFs which aim to replicate the performance of the EURO STOXX® 50 Index), +€1.5 million from the disposal of former B@nca 24-7 bad loans (previously termed “non-performing loans”), together with a former Centrobanca position and -€7.7 million from the repurchase of outstanding securities as part of normal direct business with customers in a context of interest rates that fell below par on the shorter maturities. In the first half of 2014 €94.5 million had been earned as follows: €78.2 million from the sale of Italian government securities, €19.7 million from the disposal of units in UCITS (ETFs), -€0.3 million from the disposal of non- performing positions (previously termed “deteriorated positions”) and -€3.1 million from the repurchase of debt securities in issue as part of normal direct business with customers. • +€5.5 million from fair value movements in investments in Tages Funds and in the private equity investments of the former Centrobanca. The residual position in hedge funds also contributed to this amount as did the exchange rate effect accruing on it (-€0.3 million from the portfolio designated at fair value in 2014).
Other net operating income and expense came to €54.5 million, up €0.9 million on the first six months of 2014, due to a sharper fall in expenses (-€1.6 million) compared with that for income (-€0.7 million). Expenses did in fact benefit from the absence of €2.4 million recognised in 2014 relating to reimbursements to Prestitalia customers, while no significant changes were recorded for income. Recoveries of expenses and Other net operating income rental income were unchanged, while a 1H 2015 1H 2014 modest reduction was recorded for prior Figures in thousands of euro year income (-€0.2 million) and for Other operating income 56,303 56,979 “income for services to Group member Recovery of expenses and other income on current accounts 1 1 Recovery of other expenses 4,840 4,904 companies” (-€0.4 million). This Recoveries of taxes 4,137 3,655 performance is the aggregate result of a Rents and other income for property management 16,622 16,704 fall in volumes of financing activity Income for services to Group member companies 32,703 33,062 Other income and prior year income 2,137 2,308 together with less impact for some Reclassification of "tax recoveries" (4,137) (3,655) services, partly offset by the Other operating expenses (1,754) (3,371) centralisation of product company risk Depreciation of leasehold improvements (63) (63) and financial reporting and related Costs relating to finance lease contracts - - Other expenses and prior year expense (1,754) (3,371) activities that occurred in the first half of Depreciation on improved leaseholds for rented assets 2014 and of credit activities 63 63 Total 54,549 53,608 (management and monitoring of restructured network bank counterparties that occurred in April 2014).
3 Since no speculative trading is carried out, the amounts shown in the table under items 1.5 and 3 must be interpreted jointly, because they relate to the results of spot and forward currency trading carried out by the Parent on its own behalf or for customers, balanced operationally on the market.
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Interest and similar income: composition
Debt Other Financing 1H 2015 1H 2014 Figures in thousands of euro instruments transactions
1. Financial assets held for trading 1,938 - - 1,938 20,181 2. Available-for-sale financial assets 194,696 - - 194,696 199,255 3. Held-to-maturity investments 22,847 - - 22,847 53,026 4. Loans and advances to banks 35,368 7,115 - 42,483 41,195 5. Loans and advances to customers 1,374 179,867 - 181,241 249,199 6. Financial assets designated at fair value - - - - - 7. Hedging derivatives X X 18,376 18,376 23,822 8. Other assets X X 13 13 14 Total interest income 256,223 186,982 18,389 461,594 586,692
Interest and similar expense: composition
Borrowings Securities Other liabilities 1H 2015 1H 2014 Figures in thousands of euro
1. Due to central banks (3,660) - - (3,660) (14,417) 2. Due to banks (20,375) X - (20,375) (49,929) 3. Due to customers (6,267) X - (6,267) (14,789) 4. Debt securities issued X (422,612) - (422,612) (450,106) 5. Financial liabilities held for trading (1,424) - - (1,424) (15,949) 6. Financial liabilities designated at fair value - - - - - 7. Other liabilities and provisions X X (164) (164) (178) 8. Hedging derivatives X X - - - Total interest expense (31,726) (422,612) (164) (454,502) (545,368)
Net interest income 7,092 41,324
Net interest income4 fell to €7.1 million from €41.3 million in 20145, mainly as a result of the impacts (never experienced before) of the change in the structure of interest rates in the two periods6. In detail7: • the securities portfolio generated a return of €154.6 million (€207.7 million in 2014), in the presence of investments in debt securities which were unchanged over twelve months (-€0.1 billion). While the contribution to net interest income from the AFS portfolio remained unchanged (€194.7 million compared with €199.3 million before), the first part of the year saw an appreciable reduction in the contribution from the held-to-maturity portfolio (€22.8 million compared with €53 million, in relation to the lower face rate on the reinvestment to maturity carried out at the end of the year) and also from the trading portfolio (€1.9 million compared with €20.2 million, after the disposals in the second and third quarters of 2014). This business also incorporated the costs of uncovered short positions (down from €15.9 million to €1.4 million) and of partial hedges on fixed-rate bonds (the differentials paid on derivatives were up €63.4 million compared with €48.8 million before); • business on the interbank market, focused mainly on intragroup activities, generated a positive balance of €18.4 million (a negative balance of €23.2 million in the comparative period). This performance is explained both (i) by a fall in funding (down €11 billion over twelve months, of which €6 billion relating to ECB funds repaid starting from the fourth quarter of 2014), while lending remained almost unchanged (-€0.4 billion), and (i) by the drastic reduction in the interest rate applied to principal refinancing operations down from 0.25% at the beginning of 2014 to the current 0.05%); • business with customers recorded interest expense of €165.8 million, (-€143.1 million in 2014), due to a reduction in interest income from financing (-€68 million, partly the result
4 The commentary given here reports the contribution to net interest income by area of activity, although it must be considered that the Parent’s operations continue to involve movements across different business areas (e.g. funding from customers or from the network banks used for loans to the product companies). 5 Net interest income used to be negative because it incorporated the financing expense that UBI Banca incurred for its investments in Group subsidiaries, while the relative financial revenues were recognised within the item dividends. Lending activity to customers acquired in recent years from merged banks has resulted in positive income. 6 The one month Euribor rate has been negative since March 2015, therefore the average for the first six months of the year was - 0.024%, compared with +0.229% in the first six months of 2014. 7 The calculation of net balances was performed by allocating interest income and expense on hedging derivatives and interest expense on financial liabilities held for trading within the different areas of business (financial, with banks, with customers).
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of a year-on-year decrease of €1.5 billion in the portfolio) and despite a fall in the cost of funding (-€36 million, even if growth was recorded both for amounts due to customers up €6.8 billion attributable to the Cassa di Compensazione e Garanzia - a central counterparty clearing house) and for debt securities issued, up €2.2 billion. Finally, the net balance includes the differentials received on hedges of own issue bonds (€81.8 million, compared with €72.6 million in the comparative first half).
Fee and commission income: composition Fee and commission expense: composition
1H 2015 1H 2014 1H 2015 1H 2014 Figures in thousands of euro Figures in thousands of euro a) guarantees granted 4,250 3,728 a) guarantees received (176) (15,909) c) management, trading and advisory services: 10,884 9,110 c) management and trading services: (11,448) (11,570) 1. trading in financial instruments 6,000 5,641 1. trading in financial instruments (1,414) (1,240) 2. foreign exchange trading 323 485 2. foreign exchange trading (1) (3) 3. portfolio management - - 3. portfolio management - - 4. custody and administration of securities 385 160 4. custody and administration of securities (855) (722) 5. depository banking - - 5. placement of financial instruments - - 6. financial instruments, products and services distributed 6. placement of securities 357 26 through indirect networks (9,178) (9,605) 7. receipt and transmission of orders (6) 5 d) collection and payment services (1,433) (3,090) 8. advisory activities 3,204 2,226 e) other services (7,423) (4,889) 8.1 on investments 3,204 2,226 Total fee and commission expense (20,480) (35,458) 9. distribution of third party services 621 567 9.1. portfolio management - - 9.2. insurance products 174 205 9.3 other products 447 362 d) collection and payment services 9,153 9,500 e) servicer activities for securitisation transactions - - i) current account administration 10 11 j) other services 22,530 17,001 Total fee and commission income 46,827 39,350 Net fee and commission income 26,347 3,892
Net fee and commission income8 improved to €26.3 million (€3.9 million in 2014), due to growth in items of income (+€7.5 million), in relation partly to management, trading and advisory services (primarily trading in financial instruments) and to a more significant extent to performance by other services (which included €12.8 million received from lending activities and €9 million from credit card business, which increased on the whole by €5.7 million). Nevertheless, the most significant changes were recorded for expenses as follows: on the one hand greater expenses were recognised for other services (commissions paid to the network banks for the origination of loans forming part of the former Centrobanca business and commissions paid to a major interbank credit card network operator) and on the other hand for the cost of the indirect distribution of financial instruments (credit cards and other products) placed by the network banks and based on volumes of business. However the item benefited mainly from the absence of the cost of the guarantee on government bonds, redeemed on 7th March 2014, with savings of €15.7 million compared with the first half of 2014.
In quarterly terms, operating income came to €96.8 million, down €235.2 million compared with the first quarter of the year, explained mostly by the payment of dividends by the main banks and companies in the Group in the first months of 2015 and partly by the unstable conditions experienced in June as a the result of uncertain prospects for the government in Athens. The composition was as follows: ó dividends received in the second quarter by UBI Banca of €14 million (compared with €230.4 million in the first three months), consisting of €8.6 million from Lombarda Vita, approximately €2 million from Aviva Assicurazioni Vita, €1.8 million from AFS securities and a little more than €1.5 million from private equity investments held in the FVO portfolio; ó financial activities generated €45.4 million, attributable mainly to the disposal of Italian government securities (€33.4 million), to hedges of the AFS portfolio (€8.9 million as a consequence of the rise in the swap rate curve already mentioned) and to trading (approximately €5.8 million, slowed by the temporary widening of the spread in June),
8 The figures as at 30th June 2014 were subject to a reclassification out of the item “other services” (-€8,737 thousand) and into the item “collection and payment services” (+€8,736 thousand) in relation to a more appropriate classification of commissions received from international credit card payment networks on transactions carried out by customers.
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against a more modest contribution from fair value movements in the FVO portfolio (+€0.3 million attributable to Tages Funds) and a loss on the repurchase of financial liabilities (-€3.4 million, as part of ordinary business with customers). In the first quarter this business totalled €51.1 million generated primarily by the disposal/repurchase of financial assets/liabilities (€29.2 million) and by trading (€19.2 million), mainly in debt instruments but also in equity instruments, and more specifically in the component relating to the closure of derivatives on indices traded on listed markets;
Quarterly performance by financial activities
2015 2014
Figures in thousands of euro 2nd Quarter 1st Quarter 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter Net trading income (loss) 5,781 19,166 (1,406) (1,326) 9,777 26,625 Net hedging income (loss) 8,927 (2,570) (4,123) (471) (1,827) (1,648) Financial assets 33,834 33,505 49,195 10,609 64,194 33,421 Financial liabilities (3,434) (4,271) (3,104) (1,756) (1,803) (1,277) Profit from disposal or repurchase 30,400 29,234 46,091 8,853 62,391 32,144 Net income (loss) on financial assets and liabilities designated at fair value 302 5,242 1,881 1,464 (871) 599 Net income 45,410 51,072 42,443 8,520 69,470 57,720
ó other net operating income and expenses of €27.1 million, almost unchanged compared with €27.4 million in the previous three months;
Quarterly net interest income
2015 2014
Figures in thousands of euro 2nd Quarter 1st Quarter 4th Quarter 3rd Quarter2nd Quarter1st Quarter
Banking business with customers (86,613) (79,215) (81,279) (77,158) (80,314) (62,767) Financial activities 73,787 80,836 97,370 105,777 104,736 102,984 Interbank business 9,689 8,759 8,922 1,530 (7,965) (15,186) Other items (74) (77) 49 (91) (71) (93) Net interest income (3,211) 10,303 25,062 30,058 16,386 24,938
ó net interest expense of €3.2 million (income of €10.3 million in the comparative period), largely the result of short-term interest rates which became negative and the consequent impact on the securities portfolio (-€7 million from debt securities on a par with the differentials paid on the portion of bonds that are hedged) and on business with customers. The negative impact of the latter, on the other hand, increased (up €7.4 million), recording a further reduction in interest received on loans (down €9.6 million), only partially compensated by an increase in the differentials received on own issue hedged liabilities (up €2.3 million). The balance on the interbank market recorded growth of €0.9 billion in the quarter to generate income of €9.7 million;
Quarterly net fee and commission income
2015 2014
Figures in thousands of euro 2nd Quarter 1st Quarter 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter
Management, trading and advisory services (net of the corresponding expense items): (828) 264 (2,422) (2,078) (2,746) 286 trading in financial instruments 1,806 2,780 1,603 1,126 1,936 2,465 foreign exchange trading 54 268 244 230 228 254 portfolio management ------custody and adm inistration of securities (265) (205) 188 (38) (384) (178) placement of securities 157 200 402 96 2 24 receipt and transmission of orders (3) (3) (4) (2) 2 3 advisory activities 1,753 1,451 993 1,142 922 1,304 distribution of third party services 355 266 309 278 292 275 financial instruments, products and services distributed through indirect networks (4,685) (4,493) (6,157) (4,910) (5,744) (3,861) Banking services (net of the corresponding expense items): 14,335 12,576 13,149 11,714 6,237 115 guarantees 1,640 2,434 2,790 (1,094) (3,850) (8,331) collection and paym ent services 4,065 3,655 5,320 3,419 3,647 2,763 servicer activities for securitisation operations ------current account adm inistration 5 5 5 6 7 4 other services 8,625 6,482 5,034 9,383 6,433 5,679 Net fee and commission income 13,507 12,840 10,727 9,636 3,491 401
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ó net fee and commission income of €13.5 million, an improvement of €0.7 million as a result of performance by banking services (up €1.8 million on the first quarter), generated in particular by financing, credit cards and collection and payment services, compared with lower contributions from management, trading and advisory services (down €1.1 million). The reduction was mainly due to fees and commissions on trading affected by a reduction in business as volatility on financial markets increased.
On the costs front, operating expenses totalled €178.6 million in the first half of the year, up €11.8 million on the same period of 2014, the result of the following:
• staff costs (net of redundancy Staff costs: composition expenses) rose to €84.7 million with growth of €8.3 million, 1H 2015 1H 2014 incorporating the dynamic for Figures in thousands of euro variable components of 1) Employees (106,966) (100,845) a) Wages and salaries (74,546) (70,245) remuneration (company incentive b) Social security charges (20,318) (19,151) and bonus schemes), together c) Post-employment benefits (4,008) (3,806) with ordinary growth in the item, d) Pension expense - - e) Provision for post-employment benefits (826) (288) which included the impacts of f) Pensions and similar obligations (6) (13) the new national trade union - defined benefit (6) (13) agreement (signed on 8th July g) Payments to external supplementary pension plans: (3,381) (3,220) - defined contribution (3,381) (3,220) 2015) and also growth in average i) Other employee benefits (3,881) (4,122) staff numbers (+46). 2) Other staff in service (190) (125) Notwithstanding the - Expenses for agency staff on staff leasing contracts - - - Other expenses (190) (125) redundancies under the 3) Directors (3,324) (3,206) November 2014 agreement, 4) Expenses for retired staff - - concentrated almost entirely in 5) Recoveries of expenses for staff on secondment to other companies 43,168 43,255 the first months of 2015, average 6) Reimbursements of expenses for staff on secondment staff numbers of UBI Banca at the Bank (17,378) (15,500) incorporated the impacts of the Total (84,690) (76,421) progressive centralisation of activities in the first half of 2014 (governance and control activities Other administrative expenses: composition for the product companies and 1H 2015 1H 2014 the management of network Figures in thousands of euro bank restructured positions) as A. Other administrative expenses (80,066) (75,940) well as the smaller impacts on Rent payable (3,772) (3,691) profit and loss of the Professional and advisory services (11,605) (10,198) Rentals on hardware, software and other assets (1,655) (1,873) centralisation of activities Maintenance of hardware, software and other assets (260) (270) resulting from the creation of the Tenancy of premises (3,523) (3,349) new IW Bank (under 4th Property and equipment maintenance (1,058) (1,281) Counting, transport and management of valuables (5) - February 2015 agreement). As Membership fees (2,485) (1,752) shown in the table, expense Information services and land registry searches (292) (338) refunds for staff on secondment Books and periodicals (223) (208) at the Parent also increased at Postal (347) (985) Insurance premiums (2,163) (2,075) the same time (+€1.9 million); Advertising (1,874) (1,962) Entertainment expenses (537) (420) • other administrative expenses Telephone and data transmission expenses (5,467) (5,371) grew €4.3 million to €83.7 Services in outsourcing (4,809) (4,172) million: indirect taxation Travel expenses (1,695) (1,669) Fees for services provided by Group companies (UBI.S) (32,680) (30,594) remained almost unchanged at Credit recovery expenses (4,256) (4,059) €3.7 million, current expenses Forms, stationery and consumables (153) (245) rose by €4.1 million to €80.1 Transport and removals (116) (193) million, while rigorous action to Security (634) (773) Other expenses (457) (462) monitor them continued. B. Indirect taxes (3,685) (3,453) The increase in costs mainly Indirect taxes and duties (317) (389) involved the following: fees for Stamp duty (3,468) (3,272) IMU/ICI (municipal property taxes) (3,060) (2,869) services provided by UBI.S (+€2.1 Other taxes (977) (578) million, due to the centralisation of Reclassification of "tax recoveries" 4,137 3,655 activities at the Parent in 2014 already Total (83,751) (79,393) mentioned), professional and advisory services (+€1.4 million, attributable to “digital innovation”, specific commercial initiatives and
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upgrading of the IT platform), membership fees (+€0.7 million, attributable to the Consob – Italian securities market authority – for increased volumes of issuances, because the Parent issues securities on behalf of all the network banks, and to an increase in the 2015 rate, as well as to the ECB for the new supervisory contribution), and outsourced services (+€0.6 million for an increase in the costs of the shareholders meeting and for a new electronic payment system introduced in February 2014), only partially offset by a further reduction in postal expenses (-€0.6 million, due to the paperless delivery of documents and a change to a new supplier in 2015); • depreciation, amortisation and net impairment losses on property, plant and equipment and intangible assets fell to €10.2 million from €11 million in the same period of 2014.
In quarterly terms, operating expenses of €91.8 million (€84.8 million in the first quarter of 2014) rose slightly compared with €86.9 million in the first three months of the year, recording the following changes in performance:
ó staff costs fell by €0.4 million to €42.2 million, even though staff numbers increased in the second quarter as a result of the centralisation of activities resulting from the merger that resulted in the creation of the new IW Bank, which came into effect on 25th May 2015;
ó other administrative expenses on the other hand grew by €5.3 million, concentrated above all in professional services and outsourced services, a reflection of the normal different timing of invoices in the two periods;
ó depreciation, amortisation and net impairment losses on property, plant and equipment and intangible assets were unchanged in the two quarters and totalled €5.1 million.
As a result of the performance reported above, net operating income fell to €250.2 million from €334.5 million in the first half of 2014. On a quarterly basis, net operating income totalled €5.1 million (down from €69.2 million in the same quarter of 2014), compared with €245.2 million earned in the first three months of the current year.
The following items were also recognised in the first half of 2015:
• €56.2 million (compared with €52.9 million in 2014) of net impairment losses on loans relating to the retail and corporate portfolios of the merged banks, of which €70.2 million consisting of specific net write-downs (which benefited from reversals – other than for present value discounts – of €31.3 million) and €14 million of net reversals on the performing portfolio (due to a further decrease in volumes of lending);
Net impairment losses on loans: composition
Impairment losses/reversals Impairment losses/reversals 2nd Quarter of impairment losses, net 1H 2015 of impairment losses, net 2015 Specific Portfolio Specific Portfolio Figures in thousands of euro
Loans and advances to banks ------Loans and advances to customers (70,199) 13,952 (56,247) (31,844) 3,426 (28,418) Total (70,199) 13,952 (56,247) (31,844) 3,426 (28,418)
Impairment losses/reversals Impairment losses/reversals 2nd Quarter of impairment losses, net 1H 2014 of impairment losses, net 2014 Specific Portfolio Specific Portfolio Figures in thousands of euro Loans and advances to banks ------Loans and advances to customers (65,999) 13,132 (52,867) (31,997) 4,776 (27,221) Total (65,999) 13,132 (52,867) (31,997) 4,776 (27,221)
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• €4 million of net impairment losses on other financial assets/liabilities (€1.4 million in 20149). The item was affected by changes in item 130b amounting to €6.8 million (entirely non-recurring) of impairment losses on instruments held in the AFS portfolio, mainly issued by banks and units in UCITS to a marginal extent, and +€2.8 million of reversals of impairment losses on unsecured guarantees. More specifically, the latter amount incorporated a reversal of the loss of a former Centrobanca position which had been classified at the end of 2014 as a bad (previously termed “non-performing”) unsecured guarantee and it was reclassified under loans and receivables in the current year. The relative provision amounting to €1.7 million was therefore released;
• €12.5 million of net provisions for Net provisions for risks and charges risks and charges, which included a provision of €11.8 million consisting 1H 2015 1H 2014 Figures in thousands of euro of an estimate of the annual quota Net provisions for revocation clawback risks - (600) due by UBI Banca to the National Net provisions for litigation (552) (887) 10 Resolution Fund . Other net provisions for risks and charges (11,993) 2,353 The item also includes provisions Total (12,545) 866 made for defence action of various nature against claims brought by different types of counterparty and also the release of a former B@nca 24-7 provision (+€0.9 million). It was made at the time of the merger in 2012 to meet possible payouts relating to loans granted and has now been released due to the disappearance of that risk11.
Net losses on equity investments of €0.6 million were also recognised in the first half of 2014, as a result of the settlement of the balance on the price on the sale of the former Swiss subsidiary BDG (-€0.9 million normalised), partially offset by the net profit realised on the winding up of the Delaware companies that had been formed for the issuance of preference shares (+€0.3 million).
The following items were recognised in the income statement in the second quarter of 2015: ó €28.4 million within item 130a net impairment losses on loans, slightly up on the previous three months (+€0.6 million), the result of the combined effect of lower specific write-downs (-€6.5 million) and fewer portfolio reversals (-€7.1 million); ó €1.5 million of net impairment losses on other financial assets/liabilities, of which €2.3 million relating to impairment losses on AFS instruments (bonds issued by banks), partially offset by €0.8 million of reversals on unsecured guarantees; ó €12.6 million of net provisions for risks and charges as reported above.
Profit on continuing operations before tax therefore amounted to €177.4 million compared with €280.6 million in the first half of 2014. On a quarterly basis, continuing operations before tax gave rise to a loss of €37.5 million; they had generated a profit before tax of approximately €42 million in the second quarter of 2014 and had almost reached €215 million in the first three months of 2015.
The first half recorded positive income tax for the period on continuing operations amounting to €57 thousand, benefiting from the almost full deductibility for IRAP (regional production tax) purposes of permanent employee expenses, introduced from 2015 by article 1 paragraphs 20- 25 of Law No. 190/2014 (2015 Legge di stabilità – “stability” annual finance law). Taxation of €35.9 million was levied in the comparative period. It must nevertheless be specified that the latter amount included a non-recurring negative amount of €17.9 million as a result of the reduction in the rate for IRAP from the financial year 2014 (from 4.65% to 4.20%, without effect on the surtax of 0.92% on banks), following the conversion of Decree Law No. 66/2014 into law. This change had positive impacts on the amount of taxation due for the year, but at same time it reduced deferred tax assets already recognised in the balance sheet as a 31st December 2013 on the basis of the previous higher rate. The surplus (€17.9 million) was
9 The amount was composed of -€1.8 million of impairment losses on guarantees and of +€0.4 million (non-recurring) of reversals on securities and funds held in the AFS portfolio (-€0.8 million relating to impairment losses, mainly on units in UCITS, and +€1.2 million to the recovery in value of a bond held in portfolio); 10 This is a fund for managing banking crises in accordance with the BRRD Directive (Bank Recovery and Resolution Directive – 2014/59/EU) which defined the new resolution rules applicable to all banks in the European Union from January 2015. See in this respect the information given in the sub-section “Accounting policies” in the section “Condensed interim consolidated financial statements as at and for the period ended 30th June 2015”. 11 Net reversals were also recorded in the first half of 2014 amounting to €0.9 million as the aggregate result of provisions for revocation (clawback) actions and litigation, due to legal action taken by different types of counterparty, more than offset by the release of a provision for risks and charges made in prior years amounting to €2.4 million, due to the conclusion of the relative litigation.
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therefore charged to the income statement in the second quarter; That item was subsequently no longer recognised due to the provisions of paragraph 23 of article 1 of the 2015 Legge di stabilità (“stability law” – annual finance law), which has retroactively repealed the provisions of article 2 of Decree Law No. 66/2014 on the reduction of the IRAP rate, therefore restoring the previous rates effective immediately from 2014 (a base rate of 4.65% for banks plus surtaxes). If the amounts are normalised, taxes came to €1.8 million in 2015 and €17.9 million in the first half of 2014 respectively. This performance is attributable to a smaller impact for IRAP as a result of the amendment to the legislation mentioned above and also to the composition and change in pre-tax profit for the period, even though it is net of dividends which benefits from partial non-taxation regime for both IRES (corporate income tax) and IRAP purposes.
Finally, redundancy expenses (€0.3 million net, €0.4 million gross, normalised), charged in the first quarter of 2015 as part of an agreement with trade unions signed on 4th February 2015 relating to the merger of IW Bank into UBI Banca Private Investment, were stated net of taxes under a separate item. The amount was recognised by the Parent because it related to staff on the payroll of UBI Banca, but “on secondment” at the companies involved in the operation.
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The balance sheet
The comments that follow are based on items in the balance sheet contained in the reclassified financial statements on which the relative tables furnishing details are also based.
The direct funding from customers of UBI Banca as at 30th June 2015 amounted to €47.1 billion, up both year-on-year (+€9 billion approx.) and in the first half (+€3.5 billion, concentrated almost entirely in the second quarter.)
Direct funding from customers
30.6.2015 31.12.2014 Changes A/B 30.6.2014 Changes A/C % % % Figures in thousands of euro A B amount % C amount %
Current accounts and deposits 690,261 1.5% 1,032,687 2.4% -342,426 -33.2% 697,047 1.9% -6,786 -1.0% Term deposits ------Financing 9,547,913 20.3% 6,006,451 13.7% 3,541,462 59.0% 2,675,836 7.0% 6,872,077 256.8% - repurchase agreements 9,095,672 19.3% 5,531,586 12.6% 3,564,086 64.4% 2,255,084 5.9% 6,840,588 303.3% of which: repos with the CCG 9,095,672 19.3% 5,531,586 12.6% 3,564,086 64.4% 2,255,084 5.9% 6,840,588 303.3% - other 452,241 1.0% 474,865 1.1% -22,624 -4.8% 420,752 1.1% 31,489 7.5% Other payables 16,203 0.0% 26,132 0.1% -9,929 -38.0% 50,533 0.1% -34,330 -67.9%
Total amounts due to customers (item 20 liabilities) 10,254,377 21.8% 7,065,270 16.2% 3,189,107 45.1% 3,423,416 9.0% 6,830,961 199.5%
Bonds 36,811,084 78.2% 36,514,980 83.7% 296,104 0.8% 34,623,012 90.9% 2,188,072 6.3% - bonds subscribed by institutional customers 12,829,874 27.2% 12,968,784 29.7% -138,910 -1.1% 13,093,605 34.4% -263,731 -2.0% of which: EMTNs (*) 3,105,637 6.6% 3,123,932 7.2% -18,295 -0.6% 4,273,586 11.2% -1,167,949 -27.3% Covered bonds 9,724,237 20.6% 9,844,852 22.5% -120,615 -1.2% 8,820,019 23.2% 904,218 10.3% - bonds subscribed by ordinary customers 21,589,955 45.9% 21,219,512 48.7% 370,443 1.7% 19,750,629 51.9% 1,839,326 9.3% of which: non-captive customers (former Centrobanca) 3,227,392 6.9% 3,289,203 7.5% -61,811 -1.9% 3,426,319 9.0% -198,927 -5.8% - bonds subscribed by Group banks (intragroup) 2,391,255 5.1% 2,326,684 5.3% 64,571 2.8% 1,778,778 4.6% 612,477 34.4% Other certificates 20,019 0.0% 30,688 0.1% -10,669 -34.8% 39,133 0.1% -19,114 -48.8%
Total debt securities issued (item 30 liabilities) 36,831,103 78.2% 36,545,668 83.8% 285,435 0.8% 34,662,145 91.0% 2,168,958 6.3%
Total funding from customers 47,085,480 100.0% 43,610,938 100.0% 3,474,542 8.0% 38,085,561 100.0% 8,999,919 23.6% of which: subordinated liabilities 3,252,667 6.9% 3,583,881 8.2% -331,214 -9.2% 4,029,242 10.6% -776,575 -19.3% of which: subordinated securities 3,252,667 6.9% 3,583,881 8.2% -331,214 -9.2% 4,029,242 10.6% -776,575 -19.3%
(*) The corresponding nominal amounts were €3,044 million as at 30th June 2015, €3,046 million as at 31st December 2014 and €4,219 million as at 30th June 2014.
In detail, the performance of the item is attributable primarily to growth in AMOUNTS DUE TO CUSTOMERS, up €10.3 billion from €3.4 billion in the previous June and from €7.1 billion at the end of December. This growth was caused by repurchase agreement business with the Cassa di Compensazione e Garanzia (CCG – a central counterparty clearing house), which had been used little during the first three months of 2014 as result of the abundant liquidity available to the Group. The volumes involved were greater compared with the end of the year as debt to the ECB reduced. After the first early repayments carried out in the last months of 2014, partially offset by funding obtained in the second TLTRO auction, the remaining €7 billion of existing LTROs came to maturity in January-February 2015 and were only partially replaced by participation in the third TLTRO auction having given priority to repos as a more flexible type of funding to cover short-term liquidity requirements partly in consideration of the negative interest rates applied. More specifically, the greater amounts “drawn” on from the CCG in June 2015 (€9.1 billion) compared with the level in December (€5.5 billion) were conditioned by short-term financing with the ECB amounting to €3 billion, allotted in the first quarter and repaid at the end of May. Current-account lending, amounting to €0.7 billion, was unchanged year-on-year, but down compared with the total in December and March which included deposits on an intragroup account held by Prestitalia. This liquidity had reduced to almost zero at the end of the first half (down €0.5 billion in the quarter) and was only partially offset by increases in the balances of some non-Group counterparties.
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Direct funding from customers
30.6.2015 31.3.2015 Changes A/D % % Figures in thousands of euro A D amount % Current accounts and deposits 690,261 1.5% 1,108,798 2.5% -418,537 -37.7% Term deposits ------Financing 9,547,913 20.3% 5,481,449 12.6% 4,066,464 74.2% - repurchase agreements 9,095,672 19.3% 4,982,446 11.5% 4,113,226 82.6% of which: repos with the CCG 9,095,672 19.3% 4,982,446 11.5% 4,113,226 82.6% - other 452,241 1.0% 499,003 1.1% -46,762 -9.4% Other payables 16,203 0.0% 8,743 0.0% 7,460 85.3% Total amounts due to customers (item 20 liabilities) 10,254,377 21.8% 6,598,990 15.1% 3,655,387 55.4% Bonds 36,811,084 78.2% 37,055,817 84.8% -244,733 -0.7% - bonds subscribed by institutional customers 12,829,874 27.2% 12,919,525 29.6% -89,651 -0.7% of which: EMTNs (*) 3,105,637 6.6% 3,115,471 7.1% -9,834 -0.3% Covered bonds 9,724,237 20.6% 9,804,054 22.5% -79,817 -0.8% - bonds subscribed by ordinary customers 21,589,955 45.9% 21,804,922 49.9% -214,967 -1.0% of which: non-captive customers (former Centrobanca) 3,227,392 6.9% 3,235,609 7.4% -8,217 -0.3% - bonds subscribed by Group banks (intragroup) 2,391,255 5.1% 2,331,370 5.3% 59,885 2.6% Other certificates 20,019 0.0% 24,221 0.1% -4,202 -17.3% Total debt securities issued (item 30 liabilities) 36,831,103 78.2% 37,080,038 84.9% -248,935 -0.7% Total funding from customers 47,085,480 100.0% 43,679,028 100.0% 3,406,452 7.8% of which: subordinated liabilities 3,252,667 6.9% 3,471,864 7.9% -219,197 -6.3% of which: subordinated securities 3,252,667 6.9% 3,471,864 7.9% -219,197 -6.3%
(*) The corresponding nominal amounts were €3,044 million as at 30th June 2015 and €3,045 million as at 31st March 2015.
DEBT SECURITIES ISSUED at €36.8 billion remained unchanged in 2015 (€36.5 billion in December) after growth in the second half of last year (€34.7 billion at the end of June 2014). Within the item, bonds subscribed by Group customers (up to €21.6 billion from €19.8 billion a year before and from €21.2 billion in December) are being affected by record low yields, while bonds subscribed by institutional customers continued to contract in the absence of new issuances since November 2014.
In detail, UBI Banca’s institutional funding as at 30th June 2015 was composed as follows: • €3.1 billion of EMTNs issued as part of a programme for a maximum issuance of €15 billion. No new issuances were made over the twelve month period against maturities and repurchases totalling €1.175 billion nominal. On the other hand, the marginal change that occurred over six months is attributable to accounting valuations on the total outstanding, because repurchases during the period were negligible (€2.5 million nominal); • covered bonds stood at €9.7 billion, an increase compared with a year before as a result of a €1 billion nominal issuance in November 2014, but almost unchanged in the first half. In addition to the effects of accounting valuations, the total was affected by modest decreases (€50.5 million nominal over twelve months, of which €25.3 million nominal in 2015), in relation to annual amortisation instalments on two of the “amortising” bonds. UBI Banca had eleven covered bonds in issue at the end of the first half under the first “multioriginator” programme backed by residential mortgages with a €15 billion ceiling for a nominal amount of €9.1 billion (net of amortisation instalments totalling €160.4 million)12, against a segregated portfolio which stood at €14.6 billion13. A second programme, again “multioriginator”, is also operational with a ceiling of €5 billion, backed by commercial mortgages and by residential mortgages not used in the first programme (a segregated portfolio of approximately €3.3 billion at the end of period). So far this programme has only been used for self-retained issuances14.
12 Two self-retained issuances for a total €1.4 billion nominal also existed under that same programme as at 30th June 2015: an issuance for €0.7 billion in March 2014 and one again for €0.7 billion in October 2014. Because these were repurchased by UBI Banca, these liabilities have not been recognised, in accordance with IFRS. 13 Detailed information on the composition of the segregated portfolio of residential mortgages held by UBI Finance is given in the Interim consolidated management report on operations, which may be consulted. 14 Two issuances in 2012 for a total of €1.58 billion nominal (net of the amortisation instalments falling due in the meantime) and a €0.2 billion issuance in March 2014. Because these were repurchased by UBI Banca, these liabilities have not been recognised, in accordance with IFRS. A fourth issuance for €0.65 billion nominal was made after the end of the first half, with value date 14th July 2015. Information on the composition of the segregated portfolio held by UBI Finance CB 2 is reported in the Interim consolidated management report on operations, which may be consulted.
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Funding from bonds issued to ordinary customers – consisting mostly of bonds sold to network bank customers, the issuance of which has been centralised at the Parent since 2013 – stood at €21.6 billion (up €1.8 billion over twelve months and up €0.4 billion in the first half). In the period January-June 2015, 35 issuances were placed for a nominal amount of €1.9 billion against maturities and repurchases of €1.5 billion nominal (issuances over twelve months totalled €4.5 billion nominal, while maturities totalled €2.5 billion nominal and repurchases €0.2 billion nominal). The fall in yields connected with both the trend for the reference interest rates and a smaller requirement for funding due to performance by lending, made this type of investment less attractive for customers and caused a slowdown in subscriptions.
Finally, intragroup bond funding (€2.4 billion), consisting of debt subscribed by banks or companies in the Group in order to invest their liquidity, remained more or less unchanged over six months and increased by €0.6 billion compared with the total in the previous June. This last change is a result of the issuance of two intragroup bonds in October and November of last year for a nominal amount of €0.7 billion, only partially offset by maturities of approximately €0.1 billion nominal.
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At the end of the first half of 2015, lending by the Parent stood at €21.9 billion, down on €1.48 billion compared with December and on €1.5 billion compared with June 2014.
Composition of loans to customers
of which non- of which non- Changes A/B of which non- Changes A/C performing performing performing 30.6.2015 31.12.2014 30.6.2014 % (previously % (previously % (previously A B C Figures in thousands of euro termed termed amount % termed amount % "deteriorated) "deteriorated") "deteriorated")
Current account overdrafts 1,043,187 4.8% 401 1,026,327 4.4% 674 16,860 1.6% 948,620 4.1% 2,321 94,567 10.0% Reverse repurchase agreements 719,660 3.3% - 1,253,175 5.4% - -533,515 -42.6% 1,280,769 5.5% - -561,109 -43.8% Mortgage loans and other medium to long- term financing 10,383,543 47.5% 1,119,495 10,604,825 45.5% 1,065,071 -221,282 -2.1% 10,935,646 46.8% 1,086,870 -552,103 -5.0% Credit cards, personal loans and salary- backed loans 731,571 3.3% 94,163 867,951 3.7% 98,160 -136,380 -15.7% 1,009,462 4.3% 105,752 -277,891 -27.5% Factoring 6,117 0.0% - 6,118 0.0% - -1 0.0% 6,121 0.0% - -4 -0.1% Other transactions 8,858,970 40.6% 35,142 9,460,565 40.5% 116,872 -601,595 -6.4% 9,060,177 38.8% 105,966 -201,207 -2.2% Debt instruments 111,356 0.5% - 111,360 0.5% - -4 0.0% 111,353 0.5% - 3 0.0% of which: structured securities 110,090 0.5% - 110,100 0.5% - -10 0.0% 110,100 0.5% - -10 0.0% other debt instruments 1,266 0.0% - 1,260 0.0% - 6 0.5% 1,253 0.0% - 13 1.0%
Total loans and advances to customers 21,854,404 100.0% 1,249,201 23,330,321 100.0% 1,280,777 -1,475,917 -6.3% 23,352,148 100.0% 1,300,909 -1,497,744 -6.4%
Composition of loans to customers
of which non- of which non- Changes A/D performing performing 30.6.2015 31.3.2015 % (previously % (previously A D Figures in thousands of euro termed termed amount % "deteriorated") "deteriorated")
Current account overdrafts 1,043,187 4.8% 401 1,062,360 4.7% 682 -19,173 -1.8% Reverse repurchase agreements 719,660 3.3% - 812,553 3.6% - -92,893 -11.4% Mortgage loans and other medium to long- term financing 10,383,543 47.5% 1,119,495 10,525,353 46.5% 1,122,062 -141,810 -1.3% Credit cards, personal loans and salary- backed loans 731,571 3.3% 94,163 770,871 3.4% 95,403 -39,300 -5.1%
Factoring 6,117 0.0% - 6,054 0.0% - 63 1.0% Other transactions 8,858,970 40.6% 35,142 9,337,138 41.3% 43,061 -478,168 -5.1% Debt instruments 111,356 0.5% - 111,358 0.5% - -2 0.0% of which: structured securities 110,090 0.5% - 110,095 0.5% - -5 0.0% other debt instruments 1,266 0.0% - 1,263 0.0% - 3 0.2% Total loans and advances to customers 21,854,404 100.0% 1,249,201 22,625,687 100.0% 1,261,208 -771,283 -3.4%
The performance of the portfolio reflects the following: • a significant reduction in lending to Group companies (-€1 billion in the first half of 2015, of which -€0.8 billion concentrated in the second quarter; -€1.2 billion over twelve months). More specifically, at the end of June UBI Leasing and UBI Factor held outstanding loans amounting to €6.4 billion and €1.9 billion respectively, accounting for 37.9% of lending – unchanged on aggregate in the quarter, but down year-on-year and in the first half – in relation to the impacts on business of the difficult economic environment15 (€6.5 billion and €1.8 billion in March; €6.6 billion and €1.9 billion in December; €6.8 billion and €1.9 billion in June 2014). The loans granted to Prestitalia – a company which specialises in salary and pension backed lending business – fell to €1.6 billion (€2.4 billion in March, December and June) consisting of approximately €1.5 billion of “Mortgage loans and other medium to long-term financing”16 and €0.1 billion of short-term transactions. The reduction that occurred in the second quarter (-€0.8 billion) reflects the repayment of a short-term loan for approximately €1 billion only marginally replaced by two new loans totalling €0.2 billion (a short-term loan for €0.1 billion and a medium to long-term loan for €0.1 billion), in consideration of the high level of liquidity available; • a decrease in the former Centrobanca and former B@nca 24-7 portfolios (taken together: -€0.5 billion in the first half; -€1 billion year-on-year). More specifically the volumes of business relating to the former B@nca 24-7 – contracting progressively given the residual nature of the business – amounted to approximately €5.1 billion at the end of June
15 Support for UBI Leasing is provided in the form of reverse repurchase agreements (securities eligible for refinancing issued as part of internal securitisations), mortgages and current accounts, but above all “other short-term transactions”. Financing to UBI Factor, however, is all short-term (current accounts and other transactions). 16 With the exception of €200 million of “mortgages” granted by the former Centrobanca, these are loans previously granted to B@nca 24-7.
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(-€0.3 billion; -€0.6 billion), consisting mainly of “mortgage loans and other medium to long-term financing” amounting to €4.3 billion and various forms of consumer credit amounting to €0.7 billion. The former Centrobanca loans fell to €4.7 billion17 (-€0.2 billion; -€0.4 billion), consisting mainly of “mortgage loans and other medium to long-term financing” amounting to €4.3 billion and “other transactions” amounting to €0.4 billion; • the trend for exposures of a technical nature, such as those to the CCG, subject to a degree of variation during the year because of their nature. At the end of the period ordinary business with the CCG totalled €1.1 billion (+€0.1 billion in the first half; +€0.6 billion year-on-year) of which: • €0.9 billion of “other transactions” which includes margin deposits required to guarantee repurchase agreements on Italian government securities (+€0.5 billion, of which +€0.3 billion in the second quarter; +€0.8 billion) 18; • €0.2 billion of reverse repurchase agreements with Italian government securities as the underlying, entered into as an investment for liquidity (-€0.4 billion relating entirely to the first quarter; -€0.2 billion).
Non-performing assets (termed “deteriorated assets” in previous financial reports) gross of write-downs amounted to €1.9 billion at the end of the first half, almost unchanged compared with March and December, but slightly down compared with June 2014 (-€32 million), partly as a result of disposals of non-performing (previously termed “deteriorated”) exposures by the Parent over twelve months (€88 million, of which €51 million and €37 million relating to the former Centrobanca and former B@nca 24-7 portfolios respectively).
As shown in the table reporting changes in gross non-performing exposures (termed “deteriorated exposures” in previous financial reports), a year-on-year decrease was recorded for inflows from the performing category and for collections against a reduction in write-offs. In detail: • bad loans (termed “non-performing loans” in previous financial reports) were driven almost entirely by transfers from other classes of non-performing (previously termed “deteriorated”) exposures (unlikely to pay; +64%), with a reduction of approximately two thirds in write- offs; • “unlikely to pay” loans on the other hand, were driven mainly by inflows from performing loans, while transfers from other categories of non-performing (previously termed “deteriorated”) exposures (past due exposures) fell by over 40%. Transfers to other categories of non-performing exposures (bad loans) increased in turn by over 60%. Furthermore, increases were recorded for collections and write-offs, with the latter concentrated in the first quarter; • exposures past due and/or in arrears recorded substantial reductions in terms of both new inflows from performing loans and transfers to other classes of non-performing (previously termed “deteriorated”) exposure, while at the same time transfers to performing status reduced to almost nil.
Net of impairment losses, non-performing (previously termed “deteriorated”) exposures came to over €1.2 billion, of which 89.6% relating to “mortgage loans and other medium to long-term financing”.
In consideration of the continuing downward trend for the loan portfolio, non-performing exposures (previously termed “deteriorated loans”) as a percentage of the total came to 8.45% in gross terms (7.96% in December; 8.06% in June 2014) and to 5.72% in net terms (5.49% at the end of the year; 5.57% twelve months before).
Coverage for non-performing exposures (previously termed “deteriorated loans”) improved progressively over twelve months from 32.92% to 34.51% (33.09% in December), a reflection mainly of an increase in the “unlikely to pay” category following a reduction in the outstanding total. On the other hand a reduction occurred in coverage for bad loans (previously termed “non-performing loans”), mainly attributable to the second half of 2014, notwithstanding the greater write-downs which accompanied passages of positions from impaired status, due to
17 Excluding the €200 million from the Centrobanca merger, already included in loans to Prestitalia. 18 This trend reflects average volumes of repurchase business used for financing.
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disposals concluded in the period relating to former B@nca 24-7 and former Centrobanca portfolios, with higher levels of average coverage.
Loans and advances to customers as at 30th June 2015
Figures in thousands of euro Gross exposure Impairment losses Carrying amount Coverage (*)
Non-performing loans (previously termed "deteriorated loans") (8.45%) 1,907,384 658,183 (5.72%) 1,249,201 34.51% of which: forborne (2.11%) 476,875 125,042 (1.61%) 351,833 26.22% - Bad loans (previously termed "non-performing loans") (3.29%) 743,422 406,067 (1.54%) 337,355 54.62% - “Unlikely to pay” loans (5.07%) 1,145,235 251,181 (4.09%) 894,054 21.93% - former impaired loans (3.94%) 890,332 171,064 (3.29%) 719,268 19.21% - former restructured loans (1.13%) 254,903 80,117 (0.80%) 174,786 31.43% - Past due loans (0.09%) 18,727 935 (0.09%) 17,792 4.99% Performing loans (91.55%) 20,673,768 68,565 (94.28%) 20,605,203 0.33% of which: forborne (0.88%) 198,083 2,223 (0.90%) 195,860 1.12% Total 22,581,152 726,748 21,854,404 3.22% of which: forborne (2.99%) 674,958 127,265 (2.51%) 547,693 18.86% The item as a percentage of the total is given in brackets.
Loans and advances to customers as at 31st March 2015
Figures in thousands of euro Gross exposure Impairment losses Carrying amount Coverage (*)
Non-performing loans (previously termed "deteriorated loans") (8.18%) 1,908,807 647,599 (5.57%) 1,261,208 33.93% of which: forborne (1.70%) 397,553 98,117 (1.32%) 299,436 24.68% - Bad loans (previously termed "non-performing loans") (3.14%) 733,712 403,529 (1.46%) 330,183 55.00% - “Unlikely to pay” loans (4.96%) 1,157,287 243,180 (4.04%) 914,107 21.01% - former impaired loans (3.76%) 876,874 163,386 (3.15%) 713,488 18.63% - former restructured loans (1.20%) 280,413 79,794 (0.89%) 200,619 28.46% - Past due loans (0.08%) 17,808 890 (0.07%) 16,918 5.00% Performing loans (91.82%) 21,437,165 72,686 (94.43%) 21,364,479 0.34%
of which: forborne (0.87%) 203,144 2,715 (0.89%) 200,429 1.34% Total 23,345,972 720,285 22,625,687 3.09% of which: forborne (2.57%) 600,697 100,832 (2.21%) 499,865 16.79% The item as a percentage of the total is given in brackets.
Loans and advances to customers as at 31st December 2014
Figures in thousands of euro Gross exposure Impairment losses Carrying amount Coverage (*)
Non-performing loans (previously termed "deteriorated loans") (7.96%) 1,914,296 633,519 (5.49%) 1,280,777 33.09% of which: forborne (1.46%) 351,829 87,812 (1.13%) 264,017 24.96% - Bad loans (previously termed "non-performing loans") (2.94%) 706,974 389,384 (1.36%) 317,590 55.08% - “Unlikely to pay” loans (4.89%) 1,174,899 242,607 (3.99%) 932,292 20.65% - former impaired loans (3.82%) 918,211 168,465 (3.21%) 749,746 18.35% - former restructured loans (1.07%) 256,688 74,142 (0.78%) 182,546 28.88% - Past due loans (0.13%) 32,423 1,528 (0.14%) 30,895 4.71% Performing loans (92.04%) 22,134,433 84,889 (94.51%) 22,049,544 0.38% of which: forborne (0.88%) 211,568 3,327 (0.89%) 208,241 1.57% Total 24,048,729 718,408 23,330,321 2.99%
of which: forborne (2.34%) 563,397 91,139 (2.02%) 472,258 16.18% The item as a percentage of the total is given in brackets.
Loans and advances to customers as at 30th June 2014
Figures in thousands of euro Gross exposure Impairment losses Carrying amount Coverage (*)
Non-performing loans (previously termed "deteriorated loans") (8.06%) 1,939,312 638,403 (5.57%) 1,300,909 32.92% - Bad loans (previously termed "non-performing loans") (2.82%) 679,369 390,644 (1.24%) 288,725 57.50% - “Unlikely to pay” loans (4.98%) 1,199,866 244,594 (4.09%) 955,272 20.39% - former impaired loans (4.05%) 975,751 197,007 (3.33%) 778,744 20.19% - former restructured loans (0.93%) 224,115 47,587 (0.76%) 176,528 21.23% - Past due loans (0.26%) 60,077 3,165 (0.24%) 56,912 5.27% Performing loans (91.94%) 22,132,015 80,776 (94.43%) 22,051,239 0.36% Total 24,071,327 719,179 23,352,148 2.99% The item as a percentage of the total is given in brackets. (*) Coverage is calculated as the ratio of impairment losses to gross exposure. Impairment losses and gross exposures are given net of w rite-offs of positions subject to bankruptcy proceedings.
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Loans to customers: changes in gross non-performing (previously termed "deteriorated") exposures in the first half of 2015
Bad loans Unlikely to pay Past-due (previously termed Total Figures in thousands of euro loans exposures "non-performing")
Initial gross exposure as at 1st January 2015 706,974 1,174,899 32,423 1,914,296 Increases 100,486 163,438 27,277 291,201 transfers from performing exposures 3,204 103,434 26,056 132,694 transfers from other classes of non-performing (previously termed "deteriorated") exposures 94,597 36,439 9 131,045 other increases 2,685 23,565 1,212 27,462 Decreases -64,038 -193,102 -40,973 -298,113 transfers into performing exposures -213 -40,388 -3,044 -43,645 write-offs -38,137 -9,489 - -47,626 payments received -22,903 -48,835 -1,362 -73,100 disposals -2,543 - - -2,543 losses on the disposal -154 - - -154 transfers to other classes of non-performing (previously termed "deteriorated") exposure -88 -94,390 -36,567 -131,045 other decreases - - - - Final gross exposure as at 30th June 2015 743,422 1,145,235 18,727 1,907,384
Loans to customers: changes in gross non-performing (previously termed "deteriorated") exposures in the first quarter of 2015
Bad loans Unlikely to pay Past-due (previously termed Total Figures in thousands of euro loans exposures "non-performing")
Initial gross exposure as at 1st January 2015 706,974 1,174,899 32,423 1,914,296 Increases 51,873 91,818 12,432 156,123 transfers from performing exposures 3,085 50,815 11,362 65,262 transfers from other classes of non-performing (previously termed "deteriorated") exposures 47,621 14,817 9 62,447 other increases 1,167 26,186 1,061 28,414 Decreases -25,135 -109,430 -27,047 -161,612 transfers into performing exposures -149 -32,085 -1,397 -33,631 write-offs -15,565 -9,489 - -25,054 payments received -7,495 -30,302 -768 -38,565 disposals -1,872 - - -1,872 losses on the disposal -43 - - -43 transfers to other classes of non-performing (previously termed "deteriorated") exposure -11 -37,554 -24,882 -62,447 other decreases - - - - Final gross exposure as at 31st March 2015 733,712 1,157,287 17,808 1,908,807
Loans to customers: changes in gross non-performing (previously termed "deteriorated") exposures in the first half of 2014
Bad loans Unlikely to pay Past-due (previously termed Total Figures in thousands of euro loans exposures "non-performing")
Initial gross exposure as at 1st January 2014 741,845 1,251,317 70,023 2,063,185 Increases 64,530 97,932 88,617 251,079 transfers from performing exposures 1,201 16,233 87,760 105,194 transfers from other classes of non-performing (previously termed "deteriorated") exposures 57,786 62,427 227 120,440 business combination transactions - - - - other increases 5,543 19,272 630 25,445 Decreases -127,006 -149,383 -98,563 -374,952 transfers into performing exposures -271 -53,075 -33,858 -87,204 write-offs -102,774 -3,958 - -106,732 payments received -21,028 -33,988 -2,175 -57,191 disposals -2,471 - - -2,471 losses on the disposal -209 -705 - -914 transfers to other classes of non-performing (previously termed "deteriorated") exposure -253 -57,657 -62,530 -120,440 business combination transactions - - - - other decreases - - - - Final gross exposure as at 30th June 2014 679,369 1,199,866 60,077 1,939,312
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At the end of June, the UBI Banca’s net interbank position became one of funding amounting to €1.8 billion, as a result of parallel improvements both in the positive intragroup balance and the negative balance with counterparties outside Group. The net debt position (excluding central banks and internal Group business) stood at approximately €1 billion (-€578 million at the end of 2014).
Interbank market
30.6.2015 31.3.2015 Changes A/B 31.12.2014 Changes A/C 30.6.2014 Figures in thousands of euro A B amount % C amount % D
Loans and advances to banks 15,026,560 15,073,014 -46,454 -0.3% 14,055,649 970,911 6.9% 15,450,016 of which: - loans to central banks 282,899 270,540 12,359 4.6% 528,311 -245,412 -46.5% 600,376 - intragroup 13,912,056 13,509,526 402,530 3.0% 12,515,918 1,396,138 11.2% 13,097,318 of which: intragroup securities 6,345,702 5,805,015 540,687 9.3% 5,733,044 612,658 10.7% 4,562,111
Due to banks 13,199,889 17,798,453 -4,598,564 -25.8% 19,140,417 -5,940,528 -31.0% 24,223,696 of which: - due to central b anks 6,102,991 9,101,548 -2,998,557 -32.9% 10,305,964 -4,202,973 -40.8% 12,180,750 - intragroup 5,259,231 6,548,029 -1,288,798 -19.7% 7,244,652 -1,985,421 -27.4% 9,495,713 of which: subordinated deposits ------
Net interbank position 1,826,671 -2,725,439 -4,552,110 -167.0% -5,084,768 -6,911,439 -135.9% -8,773,680
of which: intragroup 8,652,825 6,961,497 1,691,328 24.3% 5,271,266 3,381,559 64.2% 3,601,605 non-Group banks -6,826,154 -9,686,936 -2,860,782 -29.5% -10,356,034 -3,529,880 -34.1% -12,375,285 Net interbank position excluding central banks and intragroup business -1,006,062 -855,928 150,134 17.5% -578,381 427,681 73.9% -794,911
The centralisation at UBI Banca of bond issuances for ordinary customers originated by the network banks is reflected in the Parent’s financial structure, which includes loans to banks (within the item intragroup securities), subscriptions of securities issued by subsidiary banks and a decline at the same time in intragroup funding due to a change in policy for the management of bond funding and liquidity. On the basis of the organisational structure in which UBI Banca plays a role of policy-making and co- ordination for the entire banking group, intragroup transactions are of strategic importance in the context of overall activities as they ensure proper centralised liquidity management and the settlement of intercompany cash flows. With the exception of the foreign subsidiaries, internal policies require the composition of asset and liability balances of the network banks and of the product companies with banking counterparties to result exclusively from transactions with the Parent of the Group. Those same policies set the relative terms and conditions.
Aggregate changes in the first half recorded growth in loans to banks (+€1 billion approximately) driven by intragroup business (+€1.4 billion), while debt contracted (-€5.9 billion), primarily the result of a reduction in exposure to the central bank but also due to less intercompany funding.
Loans and advances to banks rose to €15 billion from €14.1 billion in December, consisting of €0.3 billion of liquidity held with central banks in the central compulsory reserve account and of €14.7 billion of loans to other banks, up €1.2 billion in the reporting period. The latter is explained primarily by an increase in financing by the Parent to the network banks against grants to customers drawn on the TLTRO loan pool (+€2.1 billion for the item “Financing – other”). Again within the item financing, reverse purchase agreements, which were totally intragroup, fell on the other hand by €0.8 billion. Current accounts and term deposits decreased in the period: the former were down €0.5 billion (mainly as a result of reduced deposits) and the latter were down €0.2 billion (totally attributable to liquidity deposited by the network banks). Debt securities, which constitute the largest item with a balance of €6.3 billion, increased by €0.6 billion. The item includes issues by the network banks subscribed by the Parent in order to channel liquidity acquired through the centralisation of bond issuances.
Funding from banks totalled €13.2 billion at the end of June recording a fall of €5.9 billion in the first half, attributable primarily to a reduction in funding from the central bank (-€4.2 billion): €7 billion of LTRO financing matured in the period (€2 billion on 29th January and €5
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billion on 26th February)19 and €2.9 billion nominal of funding was subscribed at the TLTRO auction held in March 201520. Total exposure to the central bank as at 30th June 2015 was €6.1 billion consisting solely of TLTRO financing. The decrease recorded in the second quarter is due to short-term refinancing for €3 billion nominal that was allotted in the first quarter and matured at the end of May. Amounts due to other banks, amounting to €7.1 billion, recorded a decrease of €1.7 billion, the aggregate result of the following: - more or less no change in current accounts (-€0.1 billion), the result of a reduction in funding within the Group (-€0.6 billion) almost totally offset by growth in balances with counterparties outside the Group (+€0.5 billion); - a fall in term deposits (-€1 billion), almost totally intragroup, and arising in particular from a position relating to UBI Banca international; - a decrease in financing (-€0.6 billion) due primarily to a decrease (-€0.5 billion) in repurchase agreements, which now account for only negligible amounts. Within the item, medium to long-term financing received from the EIB fell to €630 million (compared with €735 million in December) after repayments for the period, to be interpreted in relation to financing activity to support SMEs.
Finally, as concerns disclosures on liquidity reserves, consisting of assets eligible for refinancing with the European Central Bank, details are given in the interim management report on the consolidated financial statements, contained in another part of this publication.
19 Early repayments of €5 billion were made in the last quarter of 2014. 20 A further €3.2 billion was allotted to the Group at the TLTRO auction held in December 2014.
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Financial assets held by UBI Banca amounted to €21.5 billion as at 30th June 2015 (€20.8 billion if calculated net of financial liabilities), down compared with both the end of 2014 (-€1.9 billion) and in the comparison with the end of March (-€1.3 billion), due primarily to a decrease in debt securities classified as AFS.
Financial assets/liabilities
30.6.2015 31.12.2014 Changes (A) / (B) 30.6.2014 Carrying Carrying Carrying L 1 L 2 L 3 amount % L 1 L 2 L 3 amount % amount % amount Figures in thousands of euro (A) (B) (C)
Financial assets held for trading 824,238 635,418 3,623 1,463,279 6.8% 799,921 742,235 2,679 1,544,835 6.6% -81,556 -5.3% 2,280,749 of which: financial derivatives contracts 407 635,416 2,351 638,174 3.0% 777 741,828 1,380 743,985 3.2% -105,811 -14.2% 620,192 Financial assets designated at fair value 121,658 3,000 72,565 197,223 0.9% 120,026 3,000 70,141 193,167 0.8% 4,056 2.1% 192,408 Available-for-sale financial assets 15,700,170 404,076 204,865 16,309,111 75.8% 17,006,618 942,590 117,675 18,066,883 77.3% -1,757,772 -9.7% 15,996,041
Held-to-maturity investments - - - 3,535,692 16.5% - - - 3,576,951 15.3% -41,259 -1.2% 3,049,841
Financial assets (a) 16,646,066 1,042,494 281,053 21,505,305 100.0% 17,926,565 1,687,825 190,495 23,381,836 100.0% -1,876,531 -8.0% 21,519,039 of which: - debt instruments 16,506,204 361,985 17,413 20,421,294 95.0% 17,715,409 899,541 253 22,192,154 94.9% -1,770,860 -8.0% 20,508,966 of which: Italian government securities 16,323,457 202,630 - 20,061,779 93.3% 17,442,413 469,455 - 21,488,819 91.9% -1,427,040 -6.6% 19,597,690 - equity instruments 9,078 3,000 254,910 266,988 1.2% 9,454 3,045 183,024 195,523 0.8% 71,465 36.6% 202,318 - Units in UCITS. 130,377 42,093 6,379 178,849 0.8% 200,925 43,411 5,838 250,174 1.1% -71,325 -28.5% 187,563
Financial liabilities held for trading (b) 120,087 633,934 6 754,027 100.0% 300 721,881 - 722,181 100.0% 31,846 4.4% 600,017 of which: financial derivatives contracts 941 633,934 6 634,881 84.2% 300 721,881 - 722,181 100.0% -87,300 -12.1% 600,017
Net financial assets (a-b) 16,525,979 408,560 281,047 20,751,278 17,926,265 965,944 190,495 22,659,655 -1,908,377 -8.4% 20,919,022
The fair value has not been shown for held-to-maturity investments, because they are recognised at amortised cost.
Financial assets/liabilities
30.6.2015 31.3.2015 Changes (A) / (D) Carrying Carrying L 1 L 2 L 3 amount % L 1 L 2 L 3 amount % amount % Figures in thousands of euro (A) (D)
Financial assets held for trading 824,238 635,418 3,623 1,463,279 6.8% 855,229 791,713 7,429 1,654,371 7.3% -191,092 -11.6% of which: financial derivatives contracts 407 635,416 2,351 638,174 3.0% 1,174 791,710 6,121 799,005 3.5% -160,831 -20.1% Financial assets designated at fair value 121,658 3,000 72,565 197,223 0.9% 123,094 3,000 72,271 198,365 0.9% -1,142 -0.6% Available-for-sale financial assets 15,700,170 404,076 204,865 16,309,111 75.8% 16,572,862 695,125 137,260 17,405,247 76.3% -1,096,136 -6.3% Held-to-maturity investments - - - 3,535,692 16.5% - - - 3,528,010 15.5% 7,682 0.2%
Financial assets (a) 16,646,066 1,042,494 281,053 21,505,305 100.0% 17,551,185 1,489,838 216,960 22,785,993 100.0% -1,280,688 -5.6% of which: - debt instruments 16,506,204 361,985 17,413 20,421,294 95.0% 17,409,450 653,164 17,176 21,607,800 94.8% -1,186,506 -5.5% of which: Italian government securities 16,323,457 202,630 - 20,061,779 93.3% 17,174,704 482,550 - 21,185,264 93.0% -1,123,485 -5.3% - equity instruments 9,078 3,000 254,910 266,988 1.2% 9,690 3,104 187,228 200,022 0.9% 66,966 33.5% - Units in UCITS. 130,377 42,093 6,379 178,849 0.8% 130,871 41,860 6,435 179,166 0.8% -317 -0.2%
Financial liabilities held for trading (b) 120,087 633,934 6 754,027 100.0% 82 844,721 - 844,803 100.0% -90,776 -10.7% of which: financial derivatives contracts 941 633,934 6 634,881 84.2% 82 844,721 - 844,803 100.0% -209,922 -24.8%
Net financial assets (a-b) 16,525,979 408,560 281,047 20,751,278 17,551,103 645,117 216,960 21,941,190 -1,189,912 -5.4%
The fair value has not been shown for held-to-maturity investments, because they are recognised at amortised cost.
While a full and detailed discussion is given in the interim consolidated management report on operations, contained in the earlier pages of this publication, the main changes that affected the principal types of financial asset in the first half of the year are as follows:
• Available-for-sale financial assets amounted to €16.3 billion, an overall reduction of approximately €1.8 billion. In detail: - the investments in Italian government securities (€15.7 billion at the end of period compared with €17.1 billion in December) decreased due to the sale of €825 million nominal of BTPs with maturity in 2016 during the first quarter, while in the second water a CTZ with a nominal value of €50 million matured and a Republic of Italy security was sold for €250 million nominal, classified in fair value level two.
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Furthermore, the fair value of the portfolio as at 30th June was affected by a general fall in the prices of securities following a rise in the spread on government securities recorded at the time of the greatest tension on financial markets due to the uncertain developments of the Greek crisis. A switching operation was also carried out in June which regarded BTPs for a nominal amount of €0.75 billion and led to a slight lengthening of the maturity of the investment, making it possible to take advantage of the opportunity offered by the wider interest rate “spread” between the BTP sold and that purchased; - the other debt securities (€0.4 billion approx. compared with €0.7 billion) incorporated the effect of the redemptions and sales of bonds issued by major Italian and European banking counterparties and of corporate Italian and foreign bonds that occurred mainly during the first quarter; - equity instruments (up to €0.2 billion from €0.1 billion) benefited from the revaluation of the I.C.B.P.I. share that was carried out in June21; - units in UCITS (down to €52 million from €127 million) saw the disposal of an ETF fund that occurred in the first quarter.
• Held-to-maturity investments, amounting to €3.5 billion, recorded no changes and continue to consist of BTPs maturing between 2020 and 2022;
• financial assets held for trading fell marginally to €1.5 billion. Within the item Italian government securities were unchanged at €0.8 billion, while they incorporated purchases of €850 million nominal against disposals of €800 million nominal in the first quarter and purchases of €775 million nominal against sales of €790 million nominal in the second quarter. This item also includes financial derivatives of €0.6 billion, marginally down over six months (-€0.1 billion) for which the performance and amount must be interpreted in strict relation to the corresponding item recognised within financial liabilities held for trading;
• Financial assets designated at fair value remained stable at €0.2 billion, composed as follows: - equity instruments, held as part of merchant banking and private equity business, amounting to €71.7 million; - units in UCITS amounting to €125.5 million (approximately €0.8 million of hedge funds are also present within the HFT portfolio).
• Financial liabilities held for trading were unchanged on aggregate at €0.8 billion consisting of €0.6 billion of financial derivatives (€0.7 billion before) and an uncovered short position on an Italian government security, recognised in the second quarter within on-balance sheet liabilities amounting to €0.1 billion.
21 The fair value of the instrument was adjusted following the valuation of the share that occurred when a preliminary contract was signed for the sale of part of the stake held in the company (see the section “Significant events in the first half of 2015” contained in the consolidated interim management report for further details).
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Separate interim financial statements as at and for the period ended the 30th June 2015
Balance sheet
30.6.2015 31.12.2014 30.6.2014 Figures in thousands of euro
ASSETS 10. Cash and cash equivalents 107,492 160,330 122,196 20. Financial assets held for trading 1,463,279 1,544,835 2,280,749 30. Financial assets designated at fair value 197,223 193,167 192,408 40. Available-for-sale financial assets 16,309,111 18,066,883 15,996,041 50. Held-to-maturity investments 3,535,692 3,576,951 3,049,841 60. Loans and advances to banks 15,026,560 14,055,649 15,450,016 70. Loans and advances to customers 21,854,404 23,330,321 23,352,148 80. Hedging derivatives 544,207 647,972 447,010 90. Fair value change in hedged financial assets (+/-) 4,804 5,583 5,751 100. Equity investments 9,625,683 9,624,011 10,625,008 110. Property, plant and equipment 624,701 634,178 642,485 120. Intangible assets 410 410 410 130. Tax assets 1,536,122 1,688,730 1,538,252 a) current 301,641 331,162 213,130 b) deferred 1,234,481 1,357,568 1,325,122 - of which pursuant to Law No. 214/2011 1,119,815 1,234,949 1,215,474 140. Non-current assets and disposal groups held for sale 2,036 507 82,063 150. Other assets 745,198 642,338 721,697 TOTAL ASSETS 71,576,922 74,171,865 74,506,075
30.6.2015 31.12.2014 30.6.2014 Figures in thousands of euro
LIABILITIES AND EQUITY 10. Due to banks 13,199,889 19,140,417 24,223,696 20. Due to customers 10,254,377 7,065,270 3,423,416 30. Debt securities issued 36,831,103 36,545,668 34,662,145 40. Financial liabilities held for trading 754,027 722,181 600,017 60. Hedging derivatives 736,087 937,018 573,317 80. Tax liabilities 243,599 352,883 290,029 a) current 83,984 169,396 128,968 b) deferred 159,615 183,487 161,061 100. Other liabilities 765,959 751,071 898,336 110. Post-employment benefits 39,701 45,443 43,921 120. Provisions for risks and charges: 56,092 45,218 49,554 a) pension and similar obligations 1,029 1,144 1,114 b) other provisions 55,063 44,074 48,440 130. Valuation reserves 189,173 164,951 177,559 160. Reserves 2,282,238 2,354,285 2,354,319 170. Share premiums 3,798,430 4,716,866 4,716,866 180. Share capital 2,254,371 2,254,371 2,254,371 190. Treasury shares (-) -5,340 -5,340 -6,121 200. Profit (loss) for the period/year (+/-) 177,216 -918,437 244,650 TOTAL LIABILITIES AND EQUITY 71,576,922 74,171,865 74,506,075
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Income statement
1H 2015 1H 2014 FY 2014 Figures in thousands of euro
10. Interest and similar income 461,594 586,692 1,122,471 20. Interest and similar expense (454,502) (545,368) (1,026,027) 30. Net interest income 7,092 41,324 96,444 40. Fee and commission income 46,827 39,350 83,474 50. Fee and commission expense (20,480) (35,458) (59,219) 60. Net fee and commission income 26,347 3,892 24,255 70. Dividends and similar income 244,406 275,318 276,489 80. Net trading income 24,947 36,402 33,670 90. Net hedging income (loss) 6,357 (3,475) (8,069) 100. Income from disposal or repurchase of: 59,634 94,535 149,479 a) loans and receivables 1,574 (262) (9,324) b) available-for-sale financial assets 65,765 97,877 166,743 d) financial liabilities (7,705) (3,080) (7,940) 110. Net income (loss) on financial assets and liabilities designated at fair value 5,544 (272) 3,073 120. Gross income 374,327 447,724 575,341 130. Net impairment losses on: (60,247) (54,244) (121,551) a) loans and receivables (56,247) (52,867) (116,738) b) available-for-sale financial assets (6,824) 431 (2,995) d) other financial transactions 2,824 (1,808) (1,818) 140. Net financial income 314,080 393,480 453,790 150. Administrative expenses (172,981) (159,469) (341,440) a) staff costs (85,093) (76,421) (169,970) b) other administrative expenses (87,888) (83,048) (171,470) 160. Net provisions for risks and charges (12,545) 866 (311) 170. Depreciation and net impairment losses on property, plant and equipment (10,127) (10,927) (21,503) 190. Other net operating income/expense 58,623 57,200 120,159 200. Operating expenses (137,030) (112,330) (243,095) 210. Losses of equity investments (14) (571) (1,122,126) 240. Profits (losses) on disposal of investments 12 (9) 61 250. Pre-tax profit (loss) from continuing operations 177,048 280,570 (911,370) 260. Taxes on income for the period/year from continuing operations 168 (35,920) (7,067) 290. Profit (loss) for the period/year 177,216 244,650 (918,437)
Statement of comprehensive income
1H 2015 1H 2014 FY 2014 Figures in thousands of euro
10. PROFIT (LOSS) FOR THE PERIOD/YEAR 177,216 244,650 -918,437
Other comprehensive income, net of taxes, without transfer to the income statement 40. Defined benefit plans 1,862 -1,073 -2,580
Other comprehensive income, net of taxes, with transfer to the income statement 100. Available-for-sale financial assets 22,360 321,196 310,096
130. Total other comprehensive income net of taxes 24,222 320,123 307,516
140. COMPREHENSIVE INCOME (item 10 + 130) 201,438 564,773 -610,921
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Statement of changes in equity for the period ended 30th June 2015
Changes January - June 2015 Allocation of prior year profit Restate- Equity transactions Balances as ment of Balances as Equity as at at 31.12.2014 opening at 1.1.2015 Changes in Repurchase Extraordinary Change in Derivatives Comprehensive 30.6.2015 Dividends and New share Stock balances Reserves reserves of treasury distribution of equity on treasury income other uses issues options shares dividends instruments shares Figures in thousands of euro
Share capital: 2,254,371 - 2,254,371 ------2,254,371 a) ordinary shares 2,254,371 - 2,254,371 ------2,254,371 b) other shares ------
Share premiums 4,716,866 - 4,716,866 -918,437 ------3,798,430
Reserves 2,354,285 - 2,354,285 - -72,021 -26 ------2,282,238 a) retained earnings 1,678,049 - 1,678,049 - -72,021 ------1,606,028 b) other 676,236 - 676,236 - - -26 ------676,210
Valuation reserves 164,951 - 164,951 ------24,222 189,173
Equity instruments ------
Treasury shares -5,340 - -5,340 ------5,340
Profit (loss) for the period -918,437 - -918,437 918,437 ------177,216 177,216
Equity 8,566,696 - 8,566,696 - -72,021 -26 ------201,438 8,696,088
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Statement of changes in equity for the period ended 30th June 2014
Changes January - June 2014 Allocation of prior year profit Restate- Equity transactions Balances as ment of Balances as Equity as at at 31.12.2013 opening at 1.1.2014 Changes in Repurchase Extraordinary Change in Derivatives Comprehensive 30.6.2014 Dividends and New share Stock balances Reserves reserves of treasury distribution of equity on treasury income other uses issues options shares dividends instruments shares Figures in thousands of euro
Share capital: 2,254,371 - 2,254,371 ------2,254,371 a) ordinary shares 2,254,371 - 2,254,371 ------2,254,371 b) other shares ------
Share premiums 4,716,866 - 4,716,866 ------4,716,866
Reserves 2,337,924 - 2,337,924 16,395 ------2,354,319 a) retained earnings 1,661,654 - 1,661,654 16,395 ------1,678,049 b) other 676,270 - 676,270 ------676,270
Valuation reserves -142,564 - -142,564 ------320,123 177,559
Equity instruments ------
Treasury shares -6,121 - -6,121 ------6,121
Profit for the period 71,340 - 71,340 -16,395 -54,945 ------244,650 244,650
Equity 9,231,816 - 9,231,816 - -54,945 ------564,773 9,741,644
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Cash flow statement (indirect method)
1H 2015 1H 2014 Figures in thousands of euro
A. OPERATING ACTIVITIES 1. Ordinary activities -8,493 45,644 - profit for the period (+/-) 177,216 244,650 - gains/losses on financial assets held for trading and on financial assets/liabilities at fair value (+/-) -9,069 1,125 - gains/losses on hedging activities (-/+) -6,357 3,475 - net impairment losses on loans (+/-) 60,247 54,243 - depreciation, amortisation and net impairment losses on property, plant and equipment and intangible assets (+/-) 10,127 10,927 - net provisions for risks and charges and other expense/income (+/-) 12,545 -866 - outstanding taxes and duties -168 35,920 - other adjustments (+/-) -253,034 -303,830 2. Net cash flows from/used by financial assets 2,198,906 -26,092 - financial assets held for trading 91,057 935,035 - financial assets designated at fair value 1,488 14,840 - available-for-sale financial assets 1,494,387 -596,076 - loans and advances to banks -971,939 -1,957,061 - loans and advances to customers 1,414,394 1,754,798 - other assets 169,519 -177,628 3. Net cash flows from/used by financial liabilities -2,407,657 -161,945 - due to banks -5,838,910 -75,068 - due to customers 3,189,236 -3,796,941 - debt securities issued 409,199 4,165,072 - financial liabilities held for trading 31,733 -906,714 - other liabilities -198,915 451,706 Net cash flows from/used in operating activities -217,244 -142,393
B. INVESTING ACTIVITIES 1. Cash flows from 240,552 268,348 - disposals of equity investments - 28 - dividends received on equity investments 240,547 268,301 - disposals of held-to-maturity investments - - - disposals of property, plant and equipment 5 19 - disposals of intangible assets - - 2. Cash flows used in -4,125 -100,742 - purchases of equity investments -3,705 -100,483 - purchases of held-to-maturity investments - - - purchases of property, plant and equipment -420 -259 - purchases of intangible assets - - - purchases of lines of business - - Net cash flows from/used in investing activities 236,427 167,606 C. FINANCING ACTIVITIES - issues/purchases of treasury shares - - - distribution of dividends and other uses -72,021 -54,944 Net cash flows from/used in financing activities -72,021 -54,944 NET CASH GENERATED/USED DURING THE PERIOD -52,838 -29,731
Reconciliation
1H 2015 1H 2014 Figures in thousands of euro Cash and cash equivalents at beginning of period 160,330 151,927 Business combination transactions - - Total liquidity generated/used -52,838 -29,731 Cash and cash equivalents at the end of the period/year 107,492 122,196
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DE JURE AND DELEGATED POWERS OF THE CORPORATE BODIES (Consob - Italian securities market authority - recommendation No. 97001574 of 20th February 1997)
In compliance with recommendation No. 97001574 issued by the Italian securities market authority (Consob) on 20th February 1997, the de jure and delegated powers of the corporate bodies and General Management of Unione di Banche Italiane Scpa. are set out below.
Supervisory Board
The Supervisory Board, within the scope of its responsibilities, performs policy, strategic supervision and control functions within the limits set by Art. 46 of the Articles of Association without prejudice to the responsibilities assigned by law and regulations to its internal committees, the functions of the Supervisory Board are set out in Art. 46 of the Articles of Association.
The Chairman of the Supervisory Board convenes on his own initiative and, in any event, in the cases prescribed by Law or the Articles of Association and chairs and co-ordinates the meetings of the Board itself, setting the agendas, taking account of the proposals formulated by the Senior Deputy Chairman and the other Deputy Chairmen and ensuring that adequate information on the items contained on the agenda are provided to all the members of the Supervisory Board. The duties of the Chairman of the Supervisory Board are listed in article 47 of the Articles of Association.
The following Internal Committees have been formed from among the members of the Supervisory Board.
Appointments Committee The Appointments Committee (members of which pursuant to Art. 49 of the Articles of Association include the Chairman of the Supervisory Board with the functions of Chairman and the Senior Deputy Chairman) is composed of the following members of the Supervisory Board: - Andrea Moltrasio Chairman of the Supervisory Board - Mario Cera Senior Deputy Chairman of the Supervisory Board - Alberto Folonari - Mario Mazzoleni - Enrico Minelli - Armando Santus
A majority of the members of the Appointments Committee are independent board members, in accordance with the Corporate Governance Code.
The committee is governed by special regulations – published on the Bank’s website in the Corporate Governance section / the Supervisory Board – which determine its responsibilities and its functioning. The Appointments Committee, in carrying out its proposal making functions and in compliance with the criteria set in the aforementioned regulations, as applicable: a) it carries out fact-finding functions to establish qualitative and quantitative career profiles for appointments to the Supervisory Board. It proposes a list of candidates to the Supervisory Board to the position of Member of the Supervisory of the Parent Bank to be submitted to a Shareholders’ Meeting, including senior positions and that is those of Chairman and Senior Deputy Chairman of the Supervisory Board. It proposes candidates for appointment by the Supervisory Board to the position of Deputy Chairman of the Supervisory Board where these are to be appointed; b) it proposes, for appointment by the Supervisory Board, candidates to the position of Member of the Management Board of the Parent Bank, including candidates to the positions of Chairman and Deputy Chairman of the Management Board; c) it puts forward a name for the formulation of a non-binding proposal to be submitted by the Supervisory Board to the Management Board for the appointment of the Chief Executive Officer; d) it assesses, including during the functioning of the bodies, the adequacy of the succession plans at senior management level for the Management Board and for Senior Management as well as career profiles and requirements for senior managers in office and potential succession candidates; e) it defines processes to assess the work of the Management Board and Senior Management; f) it carries out appropriate fact-finding activities: - for the purposes of the self-assessment of the Supervisory Board; - in observance of the responsibilities of the Internal Control Committee, it identifies managers for appointment to internal control functions; g) it carries out fact-finding activities for the purposes of issuing a non-binding opinion that the Supervisory Board pursuant to Art. 46, paragraph 1, letter n) of the Articles of Association is responsible for expressing on the candidates proposed by the Management Board to the position of Director and Statutory Auditor of the subsidiaries listed by Art. 36, paragraph 2, letter b) of the
Articles of Association and that is: Banco di Brescia Spa, Banca Regionale Europea Spa, Banca Popolare di Bergamo Spa, Banca Popolare Commercio e Industria Spa, Banca Popolare di Ancona Spa and Banca Carime Spa; h) it formulates opinions and proposals on the corporate governance and regulatory policies of the Parent Bank and the Group which fall within the exclusive scope of the remit of the Supervisory Board; j) it oversees the update of corporate governance rules and principles of conduct which may be adopted by the Parent Bank and its subsidiaries, even with regard to developments on the matter at national and transnational level; k) it assesses the adequacy of commitments made on issues of corporate social responsibility.
Remuneration Committee The Remuneration Committee is composed of the following members of the Supervisory Board: - Mario Cera, as the Chairman - Marina Brogi - Alessandra Del Boca - Andrea Cesare Resti - Armando Santus
The Remuneration Committee is governed by special regulations – published on the Bank’s website in the Corporate Governance section / the Supervisory Board – which determine its responsibilities and its functioning, in compliance with the provisions of the law, regulations and the Articles of Association.
Those regulations were recently amended for compliance with supervisory provisions concerning remuneration and incentive policies and practices.
On the basis of those regulations the Committee carries out advisory activity, submits proposals and performs fact-finding activities for the Supervisory Board, making use of external independent consultants and involving the competent corporate functions. In detail, the Committee formulates proposals and opinions: - for decisions that the Supervisory Board will submit for approval to a shareholders meeting in order to set the following: (i) the remuneration of Members of the Supervisory Board; (ii) set the total sum for the remuneration of Members of the Supervisory Board assigned particular offices, powers or functions; (iii) remuneration and incentive policies for Members of the Supervisory Board and Members of the Management Board; (iv) remuneration and/or incentive schemes for Members of the Management Board based on financial instruments; (v) criteria for the determination of remuneration to be agreed in the event of the early termination of an employment relationship or early retirement from corporate office; (vi) a higher ratio than that of 1:1 between the individual variable and the fixed remuneration of key personnel; (vii) also in relation to the provisions of the Remuneration Report, without prejudice to the responsibilities of the Management Board Pursuant to Art. 123 ter of the Consolidated Finance Act; - for the allocation by the Supervisory Board of the total amount set by a Shareholders’ Meeting in accordance with the preceding item (ii), in order to set the remuneration of the Chairman, the Senior Deputy Chairman and the Deputy Chairman, if appointed, of the Supervisory Board, as well as those members of that Board to whom specific offices, powers or functions have been assigned by the Articles of Association or by the Supervisory Board itself. This allocation shall, amongst other things, take account of any possible allocation of Supervisory Body functions pursuant to Legislative Decree No 231/2001, in compliance with the criteria set by the last paragraph of Art. 44 of the Articles Association; - for the remuneration of Members of the Management Board; - for the remuneration of the the Chairman and Deputy Chairman of the Management Board, the Chief Executive Officer and Members of the Management Board who have been assigned particular or specific offices, duties or powers; - for setting remuneration policies for the governing bodies of subsidiaries and these proposals, if approved by the Supervisory Board, will then be communicated to the Management Board who will illustrate them to the relative Chairman of the Board of Directors of the subsidiary for subsequent submission to its relative competent bodies; - for setting the remuneration and incentive policies for employees and associate workers of UBI Banca and the Group not bound to companies by employee contracts of subordination and for the management of possible exceptions.
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The Committee also formulates opinions for the purpose of verifying whether the following are compliant with remuneration and incentive policies approved by the Supervisory Board: - remuneration and incentive schemes based on financial instruments for employees of the UBI Banca Group and for associate workers not bound to the Group by employee contracts of subordination to be submitted to a Shareholders’ Meeting on the basis of a proposal made by the Management Board; - indications furnished by the Management Board to the Board of Directors of a subsidiary regarding proposals that the latter will submit to a Shareholders’ Meeting: (i) to set the remuneration of the Board of Directors; (ii) for possible remuneration and/or incentive schemes based on financial instruments for the Board of Directors; (iii) for possible remuneration and/or incentive schemes based on financial instruments for employees and associate workers not bound to the company by employee contracts of subordination; - the amount of remuneration indicated by the Management Board for the senior management of subsidiaries (for the purposes of the relative resolutions to be approved by the Boards of Directors of those subsidiaries).
The Committee has in any event the duty to make proposals for the remuneration of the General Manager and the Senior Deputy General Manager as well as for any specific remuneration paid to them and for the remuneration of additional personnel for which the methods of remuneration and incentivisation are decided by the Supervisory Board in accordance with the provisions of Circular No. 285 as interpreted in UBI Banca Group’s remuneration and incentive policies. It also provides consultation in relation to determining the criteria for the remuneration of all “Key Personnel”. It sees to the implementation of appropriate procedures for the Supervisory Board in its verifications on at least an annual basis concerning the proper implementation of remuneration and incentive policies.
The Committee also: - collaborates with other internal committees of the Supervisory Board, co-ordinating in particular with the Risk Committee, which is responsible for ensuring that the incentives underlying remuneration and incentive schemes are consistent with the RAF; - ensures, in accordance with regulations in force, that the competent corporate functions are involved in the process of drawing up and monitoring remuneration and incentive policies and practices; - gives an opinion, assisted by information received from the competent corporate functions, on the achievement of the performance objectives to which incentive schemes are linked and on the satisfaction of other conditions set for the payout of remuneration; - periodically assesses the appropriateness, overall consistency and concrete implementation of the general policy pursued for the remuneration of senior managers and “Key Personnel” of the UBI Banca Group; - directly oversees the remuneration of the managers of corporate supervisory functions in close co- operation with the Supervisory Board; - sees to the preparation of the documentation to be submitted to the Supervisory Board for taking the relative decisions; - makes adequate reports on its activities to the governing bodies, including Shareholders’ Meetings; - gives an advance assessment to the Supervisory Board on any individual agreements regarding employment termination benefits, in the context of criteria set by Shareholders, relating to “Key Personnel”. The rules for co-ordination with the Risk Committee, currently being drawn up as specified below, shall take effect from the time at which that committee is formed.
The internal control committee The Internal Control Committee is composed of the following Supervisory Board Members: - Sergio Pivato, as the Chairman (*) - Pierpaolo Camadini - Carlo Garavaglia (*) - Gian Luigi Gola (*) - Alfredo Gusmini (*)
(*) Enrolled on the Register of External Statutory Auditors.
The purpose of the Committee, which is governed by special regulations (published on the Bank’s website in the Corporate Governance section / the Supervisory Board) which determine its duties and how it functions, is to support the Supervisory Board by performing fact-finding functions, furnishing advice and submitting proposals in those areas overseen by the Board as a Supervisory Body in accordance with regulatory requirements in force at the time.
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The Committee's duties also include supporting the Supervisory Board with its supervisory functions pursuant to Art. 149, paragraphs one and three, of Legislative Decree No. 58 of 24th February 1998, having regard to the internal control system and other activities connected with the functions of the Supervisory Body and the following activities in particular: Internal control system - assessment of the efficiency and adequacy of the internal control system as a whole; - assessment of the basic elements of the general architecture of the internal control system (powers, responsibilities, resources, information, and management of conflicts of interest); - supervision of the adequacy of the system for managing and monitoring risk and of the compliance of the Internal Capital Adequacy Assessment Process (ICAAP) with the regulatory requirements; - non-binding opinion regarding the appointment and removal of the officer responsible for the internal control function, the officer responsible for the regulatory compliance function and the officer responsible for the risk control function (pursuant to Art. 46 letter Q of the Articles of Association), by submitting its own assessment of the identified candidates to the Supervisory Board; - approval of the activities plan of the corporate control functions and examination of their reports on the activities carried out; - verification of the proper performance of strategic control and management activities by the Parent in relation to Group member companies.
Other activities in support of the Supervisory Board oversight activities: - assessment of the adequacy of the organisational and accounting structures of the Bank; - communication to the Bank of Italy of events or facts which might constitute a management irregularity or an infringement of banking regulations pursuant to Art. 52 of the Consolidated Banking Act. Should the Committee become aware of circumstances that may be relevant pursuant to Art. 52 of the Consolidated Banking Act in the course of its activities, it shall inform the Supervisory Board of this immediately; - reporting of management irregularities and violations of the regulations governing the provision of investment services; - assessment of proposals formulated by the independent auditors for their engagement; - opinion regarding the appointment and removal of the person in charge of preparing the financial reporting documents pursuant to Art. 154-bis of Legislative Decree No. 58 dated 24th February 1998, (and pursuant to Art. 46 letter L of the Articles of Association), by submitting its own assessment of the identified candidates to the Supervisory Board; - preparation of the report on supervisory activity performed, on omissions and on irregularities observed on the occasion of the Shareholders' Meeting called pursuant to Art. 2364-bis of the Italian Civil Code as well as for any other ordinary or extraordinary Shareholders' Meeting called.
The Committee performs its internal control and audit functions in accordance with Art. 19 of Legislative Decree No. 39 of 27th January 2010, specifically including the following: - financial reporting processes; - effectiveness of the system of internal control, internal audit and risk management; - the external statutory audit of separate and consolidated accounts; - the independence of the auditor, particularly with respect to the provision of non-audit services, assessing its professionalism and experience in order to ascertain its adequacy in relation to the size and operational complexity of the Bank.
The members of the Internal Control Committee are also members of the Supervisory Body of UBI Banca pursuant to Legislative Decree No. 231/2001.
The Committee normally performs its duties using the information provided to the Supervisory Board in compliance with the relevant regulations and any additional information provided by the Chief Audit Executive, the Chief Risk Officer, the Compliance Officer, the Money Laundering and Financing of Terrorism Risks Officer, the Senior Officer responsible for the preparation of corporate accounting documents and the external statutory auditor, as well as the results of the activities performed by the Supervisory Body pursuant to Legislative Decree No. 231/2001. In particular, for matters relating to accounting issues, the Committee makes use of the investigations carried out by the Accounts Committee. The joint presence of all the members of both committees in the Supervisory Board also ensures that they are co-ordinated adequately. There are also appropriate forms of liaison between the Internal Control Committee and the entity responsible for auditing the accounts.
The Committee, by employing the services of the appropriate organisational units of the Bank, can proceed to inspections and controls at any time and exchange information with the control bodies of the companies of the Group with regard to the management and control systems and to corporate activity. In particular, the Committee, when it considers it necessary, asks the Internal Audit Function to perform checks on specific areas. In accordance with Art. 43 of the Articles of Association, the Committee also activates the Internal Audit Function in response to extraordinary requests for inspections and/or investigations made by the Chief Executive Officer. The Committee reports on the activities and investigations it has carried out, including the tasks assigned to the Internal Audit Function, at meetings of the Supervisory Board.
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In order to carry out its activities, the committee may also identify and make use of external consultants, at the Bank’s expense.
The Committee works in close liaison with the corresponding bodies of the subsidiaries. At least one member of the Internal Control Committee attends meetings of the Management Board on a rotating basis in compliance with regulations in force.
The Chief Risk Officer and the Chief Audit Executive attend the meetings of the Committee on a regular basis.
Accounts Committee The Accounts Committee is composed of the following members of the Supervisory Board: - Lorenzo Renato Guerini, as the Chairman - Dorino Mario Agliardi - Marina Brogi - Federico Manzoni.
The purpose of the Committee (which is by governed by special regulations published in the Corporate Governance / Supervisory Board section of the Bank’s website) is to support the Supervisory Board by performing assessments, furnishing advice and submitting proposals in accordance with regulatory requirements, as may be in force from time to time, relating to the approval of financial statements and periodic reports. It expresses opinions on them designed to allow the Board itself to make decisions in a knowledgeable and informed manner. The Committee is, in that particular respect, required to provide the Supervisory Board with a factual and analytical understanding of such statements and reports. This is done through fact finding activities performed on the accounts prior to the preparation of annual separate and consolidated financial statements or half year and quarterly reports. The Committee then oversees the preparation of accounting documentation through the examination of figures and other relevant information as and when they become available. In order to do this the Committee: - examines accounting issues common to single Group member companies; - examines accounting issues relating to singe Group member companies; - acquires detailed knowledge of issues concerning the measurement of items in the accounts; - acquires detailed knowledge of issues concerning the presentation of accounts; - studies issues concerning supervisory regulations for banks, acquiring knowledge of technical and discretionary aspects.
The Supervisory Board may also ask the Committee to study specific issues within the scope of its responsibilities. The Committee performs its duties using the information provided to the Supervisory Board in compliance with the relevant regulations and any additional information provided by the Senior Officer Responsible for the Preparation of Corporate Accounting Documents.
Related and Connected Parties Committee The Related and Connected Parties Committee is composed of the following Members of the Supervisory Board: - Marco Giacinto Gallarati, as the Chairman; - Antonella Bardoni - Enrico Minelli.
The Related and Connected Parties Committee is required to perform the tasks allocated to it: (i) by the "Regulations for UBI Banca Scpa Related Party Transactions" adopted in implementation of Art. 2391 bis of the Italian Civil Code and Consob requirements with respect to related parties adopted with Resolution No. 17221/2010 and subsequent amendments; (ii) by the “Regulations for transactions with parties connected to the UBI Group”, adopted in implementation of Title V, Chapter 5 of Bank of Italy Circular No. 263 of 27th December 2006 - 9th amendment of 12th December 2011, “New regulations for the prudential supervision of banks”, containing measures concerning “risk assets and conflicts of interest with connected parties”.
The Committee's procedures are governed by the regulations mentioned above, available in the Corporate Governance / Supervisory Board section of the Bank’s website.
The “Regulations for UBI Banca Scpa related-party transactions” govern rules relating to the identification, approval and implementation of related-party transactions performed by Unione di Banche Italiane Scpa, either directly or through its subsidiaries, in order to ensure their substantive and procedural fairness. The Supervisory Board oversees compliance of the Regulations with the principles recommended in the Consob Regulation and also observance of the procedural and substantive rules contained in them and it reports in this respect to shareholders in accordance with Art. 153 of Legislative Decree No. 58 of 24th
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February 1998 (the “Consolidated Finance Act”). To achieve this, the Management Board provides the Supervisory Board, at least every quarter, with a list of all the related-party transactions completed in the preceding quarter, including those not subject to a prior opinion from the Committee in accordance with these regulations.
The “Regulations for operations with parties connected to the UBI Group” govern procedures for maintaining the integrity of decision-making processes in transactions with connected parties performed by Unione di Banche Italiane Scpa, and by the members (banking or non-banking) of the Group controlled by it. The corporate bodies of UBI Banca Group member companies that perform a strategic supervisory function supervise the proper application of the provisions of these regulations by the respective companies on a separate company basis, with the support of the relevant functions. To achieve this, each of these bodies updates, at least every quarter, the list of all the connected-party transactions completed in the preceding quarter, including those not subject to a prior opinion from the Committee in accordance with these regulations. In order, amongst other things, to enable the Parent to maintain constant compliance with the consolidated limit on risk assets, the Supervisory Board oversees compliance of these Regulations with the principles recommended in the Supervisory Provisions and also observance, at consolidated level, of the procedural and substantive rules contained in them and it reports to shareholders in accordance with Art. 153 of the Consolidated Finance Act. To achieve this the corporate bodies that perform a strategic supervisory function for the other UBI Banca Group member companies send the Supervisory Board of the Parent the lists of all the connected-party transactions completed in the preceding quarter, including those not subject to a prior opinion from the Committee in accordance with these regulations, on a quarterly basis.
* * *
The Bank of Italy provisions concerning corporate governance (Circular 285) provide for the formation of a Risk Committee which must be separate from the Internal Control Committee. The appropriate investigations for the purpose of establishing the said Risk Committee are currently in progress, subject to definition of the responsibilities to be assigned to the various committees.
Management Board
The functions of the Management Board are given in Art. 37 of the Articles of Association, according to which the Management Board is responsible for managing the Bank in compliance with the general guidelines and strategic policies approved by the Supervisory Board, with account taken of the proposals made in relation to this by the Management Board itself. For this purpose, it carries out all the transactions that are necessary, useful or advisable for achieving the company objects, whether they refer to ordinary or extraordinary management.
The Chief Risk Officer is present at meetings of the Management Board in a purely advisory capacity, without prejudice to the provisions of the supervisory regulations.
At least one member of the Internal Control Committee attends meetings of the Management Board on a rotating basis in compliance with regulations in force.
The Chairman of the Management Board, who acts as the legally authorised representative and authorised signatory of the Bank, performs the tasks that are typically carried out by the chairman of a company’s management body, which he performs by liaising appropriately with the other bodies regulated by the Articles of Association. The Chairman of the Management Board exercises powers pursuant to Art. 39 of the Articles of Association.
The powers of the Chief Executive Officer are conferred and revoked by the Management Board. The Management Board, in compliance with the Articles of Association, has conferred the following powers on the Chief Executive Officer: - to supervise the management of the Bank and the Group; - to perform strategic co-ordination and operational control of the Bank and the Group; - to supervise the implementation of the organisational, administrative and accounting structure decided by the Management Board and approved by the Supervisory Board; - to determine the operating guidelines for the General Management; - to supervise the integration of the Group; - to submit proposals to the Management Board for the formulation of the general plans and strategic policies of the Bank and the Group and to draw up the business and/or financial plans and budgets
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of the Bank and the Group to be submitted for the approval of the Supervisory Board and to supervise implementation through the General Management; - to propose budgetary policy and policies on the optimisation of the use and enhancement of human resources and to submit financial statements and periodic financial reports to the Management Board for approval; - to propose appointments to the senior operational and executive management of the Bank and Group member companies to the Management Board, in agreement with the Chairman and Deputy Chairman of the Management Board and after consultation with the General Manager; - to promote integrated risk management. - to make extraordinary requests for inspections and/or investigations to the internal control function through the Internal Control Committee.
In accordance with the Articles of Association, the Chief Executive Officer reports quarterly to the Management Board on foreseeable developments and on the most important transactions performed by the Bank and its subsidiaries. The Chief Executive Officer reports monthly to the Management Board on the results of the Bank and the main subsidiaries of the Group as a whole.
The Management Board has assigned duties to the Chief Executive Officer pursuant to Art. 43 bis of the Articles of Association, with the support of the General Manager, with regard to the design of the overall architecture of internal control systems.
Finally, the Management Board, consistent with the organisational and management responsibilities assigned to the Chief Executive Officer, granted him specific operating powers, within set limits.
* * *
As concerns the General Management, the Articles of Association provide for the appointment, by the Management Board, of a General Manager and, if nominated, one or more Deputy General Managers, in accordance with the organisation chart established by the Management Board itself, which will determine their powers. The Management Board can assign senior functions to one of the Deputy General Managers.
Following the resignation of Francesco Iorio1, in compliance with the provisions of the Articles of Association, the Management Board appointed Victor Massiah as General Manager.
The Management Board appointed the, Elisabetta Stegher, who is the current Chief Financial Officer of the Bank, with the favourable opinion of the Supervisory Board, as the Senior Officer Responsible for the preparation of corporate accounting documents pursuant to Article 154-bis of the Consolidated Finance Act.
1 The ending of the employment relationship with the General Manager involved the payment in June of end-of-employment amounts which are due in relation to salary accruing, to indemnities relating to the position of Member of the Management Board and to post- employment benefits accruing up to 31st May 2015 (for a total amount of €141 thousand gross). No payments were due for indemnities, compensation or other benefits, even subsequently, in relation to end-of-term-of-office or to end-of-employment relationship nor in respect of any bonuses accruing relating to the financial year 2014 or even to portions of bonuses relating to prior years.
236 Branch Network of the UBI Banca Group
Articolazione territoriale del Gruppo UBI Banca
Carvico Via Europa Unita, 3 San Giovanni Bianco Casazza Via Nazionale del Tonale, 92 Via Martiri di Cantiglio, 19 Casirate d’Adda Piazza Papa Giovanni XXIII, 1 San Pellegrino Terme Via S. Carlo, 3 www.ubibanca.it Castione della Presolana Sant’Omobono Terme Viale alle Fonti, 8 Via Donizetti, 2 (Fraz. Bratto - Dorga) Sarnico Piazza Umberto I Bergamo Via A. Manzoni, 20 Scanzorosciate Via Roma, 27 Via Crispi, 4 Cazzano Sant’Andrea Via A. Tacchini, 18 Schilpario Via Torri, 8 Via Stoppani, 15 Cenate Sopra Via Giovanni XXIII, 16 Sedrina Via Roma, 14 Brescia Via Cefalonia, 74 Cenate Sotto Via Verdi, 5 Selvino Via Monte Rosa - angolo Via Betulle Milano Corso Europa, 16 Cene Via Vittorio Veneto, 9 Seriate Viale Italia, 24 Cerete Via Moscheni, 44 (Fraz. Cerete Basso) Songavazzo Via Vittorio Veneto Chiuduno Via Cesare Battisti, 1 Sovere Via Roma, 36 Cisano Bergamasco Via Pascoli, 1 Spirano Via Dante, 9/b Ciserano Stezzano Via Bergamo, 1 Via Borgo San Marco ang. Via Garibaldi, 7 Suisio Via Carabello Poma, 31 (Fraz. Zingonia) Taleggio Via Roma, 837 (Fraz. Olda) Cividate al Piano Via Papa Giovanni XXIII, 3 Tavernola Bergamasca Via Roma, 12 Clusone Via Verdi, 3 Telgate Via Morenghi, 17 www.bpb.it Colere Torre Boldone Via Carducci, 12 Via Tortola, 58 Torre de Roveri Piazza Conte Sforza, 3 LOMBARDIA Via Papa Giovanni XXIII, 33 Trescore Balneario Via Locatelli, 45 Provincia di Bergamo (Fraz. Dezzo di Scalve) Treviglio Viale Filagno, 11 Comun Nuovo Via Cesare Battisti, 5 Ubiale Clanezzo Via Papa Giovanni XXIII, 1 Bergamo Costa Volpino Via Nazionale, 150 Urgnano Via Matteotti, 157 Piazza Vittorio Veneto, 8 Curno Largo Vittoria, 31 Valbrembo Via J.F.Kennedy, 1B Via dei Caniana, 2 (c/o Università) Dalmine Verdello Via Castello, 31 Via Borgo Palazzo, 51 Via Buttaro, 2 Vertova Via S. Rocco, 45 Via Borgo Santa Caterina, 6 P.zza Caduti 6 luglio 1944 (c/o Tenaris Spa) Viadanica Via Pietra, 4 Via Gombito, 6 Dossena Via Carale, 9 Vigolo Via Roma, 8 Via Borgo Palazzo, 135 Entratico Piazza Aldo Moro, 18 Villa d’Adda Via Fossa, 8 Via Mattioli, 69 Fontanella Via Cavour, 156 Villa d’Almè Via Roma - ang. Via Locatelli, 1 Piazza Risorgimento, 15 Foresto Sparso Via Tremellini, 63 Villongo Via Bellini, 20 Piazza Pontida, 39 Gandino Via C. Battisti, 5 Vilminore di Scalve Piazza Giovanni XXIII, 2 Via Corridoni, 56 Gazzaniga Via Marconi, 14 Zandobbio Via G. Verdi, 2 Via San Bernardino, 96 Gorlago Piazza Gregis, 12 Zogno Viale Martiri della Libertà, 1 Piazzale della Repubblica, 4 Gorle Piazzetta del Donatore, 5 Via Stezzano, 87 (c/o Kilometrorosso) Grassobbio Viale Europa, 8/b Provincia di Brescia Adrara San Martino Via Madaschi, 103 Grumello del Monte Brescia Via Gramsci, 39 Adrara San Rocco P.zza Papa Giovanni XXIII, 6 Via Martiri della Libertà, 10 Chiari Via Bettolini, 6 Albano Sant’Alessandro Via Cavour, 2 Leffe Via Mosconi, 1 Concesio Viale Europa, 183 Albino Lovere Via Tadini, 30 Darfo Boario Terme Piazza Col. Lorenzini, 6 Via Mazzini, 181 Lovere-Lovere Sidermeccanica Spa Desenzano del Garda Viale Andreis, 74 Via Lunga, 1 (Fraz. Fiobbio) Via Paglia, 45 Esine Via Manzoni, 97 Almè Via Torre d’Oro, 2 Madone Via Papa Giovanni XXIII, 44 Manerbio Via Dante, 5 Almenno San Bartolomeo Via Falcone, 2 Mapello Piazza del Dordo, 5 Orzinuovi Piazza Vittorio Emanuele II, 31/33 Almenno San Salvatore Via Marconi, 3 Martinengo Via Pinetti, 20 Ospitaletto Via Martiri della Libertà, 27 Alzano Lombardo Piazza Garibaldi, 3 Monasterolo del Castello Via Monte Grappa, 27 Palazzolo sull’Oglio Piazza Roma, 1 Arcene Corso Europa, 7 Nembro Piazza della Libertà Paratico Via Don G. Moioli, 17 Ardesio Via Locatelli, 8 Onore Via Sant’Antonio, 98 Rezzato Via Europa, 5 Azzano San Paolo Piazza IV Novembre, 4 Orio al Serio Via Aeroporto, 13 San Paolo Via Mazzini, 62 Bagnatica Via Marconi, 6 E Osio Sopra Via XXV Aprile, 29 San Zeno Naviglio Via Tito Speri, 1 Bariano Via A. Locatelli, 12 Osio Sotto Via Cavour, 2 Barzana Via San Rocco Paladina Via IV Novembre, 13 Provincia di Como Berbenno Palosco Piazza A. Manzoni, 16 Como Via Stoppani, 102 (Fraz. Ponte Giurino) Parre Via Duca d’Aosta, 20/a Via Giovio, 4 Piazza Roma, 2 Piario Via Mazzini, 1/a Via Badone, 48 (Fraz. Camerlata) Boltiere Piazza IV Novembre, 14 Piazza Brembana Via B. Belotti, 10 Via Gallio - ang. Via Bossi Bonate Sopra Piazza Vittorio Emanuele II, 20 Ponte Nossa Via Frua, 24 Via Cattaneo, 3 Bossico Via Capitan Rodari, 2 Ponteranica Via Pontesecco, 32 Viale Giulio Cesare, 26/28 Brembilla Via Libertà, 25 Ponte San Pietro Piazza SS Pietro e Paolo, 19 Cantù Brignano Gera d’Adda Via Mons. Donini, 2 Pontida Via Lega Lombarda, 161 Piazza Marconi, 9 Calcinate Via Coclino, 8/c Presezzo Via Capersegno, 28 Via Enrico Toti, 1/a (Fraz. Vighizzolo) Calcio Via Papa Giovanni XXIII, 153 Ranica Piazza Europa, 2 Casnate con Bernate S.S. dei Giovi, 5 Calusco d’Adda Via Vittorio Emanuele II, 7 Riva di Solto Via Porto, 24 Cermenate Via Matteotti, 28 Camerata Cornello Via Orbrembo, 23 Romano di Lombardia Via Tadini, 2 Erba Capriate San Gervasio Via Trieste, 46 Roncola Via Roma, 10 Via Leopardi, 7/e Caprino Bergamasco Via Roma, 10 Rota Imagna Via Calchera, 1 Via Mazzini, 12 Caravaggio Piazza G. Garibaldi, 1 Rovetta Via Tosi, 13 Guanzate Via Roma, 24 Lomazzo Via Monte Generoso, 11 Seregno Via Marsala, 34 Lurago D'Erba Via Manara, 4 Via S. Vitale, 17 Via Varese, 7/a (Fraz. Cascinetta) Lurate Caccivio Via Varesina, 88 Via Medici da Seregno, 29/31 Via Raffaello Sanzio, 2 Olgiate Comasco Via Roma, 75 Sulbiate Via Mattavelli, 2 Gavirate Piazza della Libertà, 2 Oltrona San Mamette Piazza Europa, 6 Vedano al Lambro Largo della Repubblica, 7 Gazzada Schianno Via Roma, 47/b Mariano Comense Corso Brianza, 20 Villasanta Via Confalonieri, 1 Gemonio Via Giuseppe Verdi, 24 Rovellasca Via Volta, 1 Vimercate Gerenzano Via G.P. Clerici, 124 Via B. Cremagnani, 20/a Germignaga Piazza XX Settembre, 51 Provincia di Lecco Via Torri Bianche, 3 Gorla Maggiore Via Verdi, 2 Lecco Via Garibaldi, 12 Gornate Olona Piazza Parrocchetti, 1 Corso Matteotti, 3 Via Energy Park, 14 Induno Olona Via Porro, 46 Via Amendola, 6 Ispra Via Mazzini, 59 Bulciago Via Don Canali, 33/35 Provincia di Varese Jerago con Orago Via Matteotti, 6 Calco Via Italia, 8 Varese Laveno Mombello Via Labiena, 53 Laveno Ponte Tresa Calolziocorte Piazza Vittorio Veneto, 18/a Via Vittorio Veneto, 2 Piazza A. Gramsci, 8 (Fraz. Ponte Tresa) Carenno Via Roma, 36 Via Dalmazia, 63 Leggiuno Via Bernardoni, 9 Casatenovo Via G. Mameli, 16 Piazza IV Novembre,1 (Fraz. Biumo Inferiore) Lonate Ceppino Via Don Albertario, 3 Cernusco Lombardone Via Spluga, 43 Via Valle Venosta, 4 Lonate Pozzolo Piazza Mazzini, 2 Costa Masnaga Via Cadorna, 18 (Fraz. Biumo Inferiore - c/o Ascom Varese) Lozza Piazza Roma, 1 Erve Via G. Cabaggio, 42 Viale Luigi Borri, 155 Luino Via Piero Chiara, 7 Merate Via Alessandro Manzoni, 56 Viale Borri, 237 (c/o Bassani Ticino Spa) Malnate P.zza Repubblica - ang. Via Garibaldi Monte Marenzo Piazza Municipale, 5 Via Pasubio, 2 Via Caracciolo, 24 Maccagno Viale Garibaldi, 13 Olginate Via S. Agnese, 38 Marchirolo Strada Statale 233, 27 Valmadrera Via Fatebenefratelli, 23 Via Virgilio, 27 Piazza Battistero, 2 Marnate Via Diaz, 12 - angolo Via Genova Mercallo Via Prandoni, 1 Provincia di Milano Via S. Sanvito, 55 Angera Via M. Greppi, 33 Mesenzana Via Provinciale, 11 Milano Azzate Via Vittorio Veneto, 23 Monvalle Piazza Marconi, 1 Via Manzoni, 7 Besozzo Via XXV Aprile, 77 Mornago Via Cellini, 3 - angolo Via Carugo Piazza Cinque Giornate, 1 Biandronno Piazza Cavour, snc Olgiate Olona Via G. Mazzini, 56 Via Foppa, 26 Bisuschio Via Mazzini, 28 Origgio Via Repubblica, 10 Corso Italia, 22 Porto Ceresio Via Roma, 2 Bodio Lomnago Via Risorgimento, 23 Assago Via del Mulino, 6 (c/o Nestlè Spa) Porto Valtravaglia Piazza Imbarcadero, 17 Busto Arsizio Cassano d’Adda Via Milano, 14 Saltrio Via Cavour, 27 Piazza S. Giovanni, 3/a Cornaredo Samarate Via N. Locarno, 19 (Fraz. Verghera) Corso Italia, 54 Via Tolomeo, 1 Saronno Via Magenta, 64 (c/o St Microelectronics Spa) Via P. Micca, 10 Viale Alfieri, 26 Grezzago Piazza Aldo Moro Via Giuseppe Garibaldi, 5 Viale Cadorna, 4 - Via Cattaneo, 9 Trezzo sull’Adda Via A. Sala, 11 Piazza Borella, 4 Via Foscolo, 10 Vaprio d’Adda Piazza Caduti, 2 Sesto Calende Via XX Settembre, 35 Cairate Solbiate Arno Via A. Agnelli, 7 Via Mazzini, 13 Somma Lombardo Provincia di Monza-Brianza Via Genova, 1 (Fraz. Bolladello) Corso della Repubblica - ang. Via Rebaglia Monza Cantello Via Turconi, 1 Sumirago Via Brioschi, 2 Via Borgazzi, 83 Caravate Via XX Settembre, 22 Ternate Piazza Libertà, 14 Piazza Giuseppe Cambiaghi, 1 Cardano al Campo Via San Rocco, 44 Tradate Via Gerolamo da Cardano, 19 Via XXV Aprile, 1 Via Boito, 70 Caronno Pertusella Via Roma, 190 Via Vittor Pisani, 2 angolo Corso Ing. Bernacchi Casale Litta Via Roma, 4 Via Vittorio Veneto, 77 Via Manzoni, 22/30 Casorate Sempione Via Milano, 17 Via Carlo Rota, 50 (Fraz. Abbiate Guazzone) Cassano Magnago Via Aldo Moro, 6 Travedona Monate Via Roma, 1 Piazza Duomo, 5 Castellanza Uboldo Via R. Sanzio, 46 Agrate Brianza Piazza Soldini (c/o Libero Istituto Varano Borghi Via Vittorio Veneto, 6 Via C. Olivetti, 2 (c/o St Microelectronics Spa) Universitario Carlo Cattaneo) Vedano Olona Piazza S. Rocco, 8 Via Marco d’Agrate, 61 Castelseprio Via San Giuseppe, 14 Venegono Inferiore Via Mauceri, 16 Arcore Via Casati, 45 Castiglione Olona Venegono Superiore Piazza Monte Grappa, 8 Bernareggio Via Prinetti, 43 Via Papa Celestino, 22 Viggiù Via A. Castagna, 1 Biassono Via Libertà, 1 Via Cesare Battisti, 13 Brugherio Via de Gasperi, 58/62/64 Castronno Via Roma, 51 LAZIO Carate Brianza Via Cusani, 49/51 Cavaria con Premezzo Provincia di Roma Carnate Via Don Minzoni Via Scipione Ronchetti, 1318 Roma Cesano Maderno Cislago Via IV Novembre, 250 Via dei Crociferi, 44 Via Conciliazione, 29 (Fraz. Binzago) Cittiglio Via Valcuvia, 19 Corso Vittorio Emanuele II, 295 Cornate d’Adda Clivio Via Ermizada, 10 Via Gregorio VII, 289 Via Circonvallazione, 10/12/14 Comerio Via al Lago, 2 Largo Salinari, 24 - ang. Via B. Croce 82/84 Via Silvio Pellico, 10 (Fraz. Colnago) Cunardo Via Luinese, 1/a Viale Gorizia, 34 Desio Via Matteotti, 10 Cuveglio Via Battaglia di S. Martino, 50 Via di Porta Castello, 32 Giussano Via IV Novembre, 80 (Fraz. Brugazzo) Cuvio Via Giuseppe Maggi, 20 Via Val Maira, 125/131 Limbiate Via dei Mille, 32 Daverio Via Giovanni XXIII, 1 Via Tiburtina, 604 Lissone Via San Carlo, 4 Fagnano Olona Piazza Cavour, 11 Via dell’Aeroporto, 14/16 Meda Via Indipendenza, 111 Ferno Piazza Dante Alighieri, 7 Via Pietro Boccanelli, 30 Mezzago Via Concordia, 22 Gallarate (c/o Sviluppo Italia Spa - Campo Elba) Muggiò Via Cavour, 11/15 Via A. Manzoni, 12 Via Calabria, 46 (c/o Sviluppo Italia Spa) Nova Milanese Via Brodolini, 1 Via Buonarroti, 20 Via Gattamelata, 109 Via Donna Olimpia, 128 Cellatica Via Padre Cesare Bertulli, 8 Salò Largo di Vigna Stelluti, 25 Chiari Piazza Giuseppe Zanardelli, 7 Via Pietro da Salò - Loc. Rive Via dello Statuto, 20 Collio Piazza Giuseppe Zanardelli, 32 Piazza Vittorio Emanuele II, 20 Ciampino Via Kennedy, 163 Comezzano - Cizzago San Felice del Benaco Viale Italia, 9 Monterotondo Via Salaria, 204 Via Giuseppe Zanardelli, 31 San Gervasio Bresciano Pomezia Via dei Castelli Romani, 22 Concesio Piazza Antica Piazzola, 5 Velletri Via U. Mattoccia, 6 Via Europa, 203 San Paolo Piazza Aldo Moro, 9 Via Europa, 8 (c/o centro comm. Valtrumpino) Sarezzo SARDEGNA Darfo Boario Terme Via Roma, 2 Via Roma, 8 Provincia di Cagliari Dello Piazza Roma, 36 Via G. Carducci, 2 (Fraz. Ponte Zanano) Cagliari Via Mameli, 120 Desenzano del Garda Seniga Via San Rocco, 15 Via G. Marconi, 18 Sirmione Via G. Marconi, 97 Via Colombare - ang. Via G. Garibaldi Via G. Di Vittorio, 17 (Fraz. Rivoltella) Piazza Castello, 58 Edolo Via G. Marconi, 36/a Sulzano Via Cesare Battisti, 85 Fiesse Via Antonio Gramsci, 25 Tavernole sul Mella Via IV Novembre, 40/42 Flero Via XXV aprile, 110 Tignale Piazzale Francesco d’Assisi Torbole Casaglia Piazza Caduti, 8 www.bancodibrescia.it Gardone Riviera Via Roma, 8 Gardone Val Trompia Via G. Matteotti, 212 Toscolano Maderno Via Statale Toscolano, 114/a (Fraz. Toscolano) LOMBARDIA Gargnano Piazza Feltrinelli, 26 Travagliato Piazza Libertà Provincia di Brescia Gavardo Via Suor Rivetta, 1 Verolanuova Piazza Libertà, 1 Brescia Ghedi Piazza Roma, 1 Vestone Via Perlasca, 5 Piazza della Loggia, 5 Gottolengo Piazza XX Settembre, 16 Villa Carcina Via G. Marconi, 39/c Corso Magenta, 73 - ang. Via Tosio Gussago Via IV Novembre, 112/a Visano Via Gugliemo Marconi, 11 Via Lecco, 1 Idro Via Trento, 60 Vobarno Via Migliorini - ang. Via San Rocco Iseo Via San Martino, 2 - ang. Corso Zanardelli Zone Via Monte Guglielmo, 44 Contrada del Carmine, 67 Via Dante Alighieri, 10 Via Valle Camonica, 6/b Via Risorgimento, 51/c (Fraz. Clusane) Provincia di Bergamo Via Santa Maria Crocifissa di Rosa, 67 Isorella Via A. Zanaboni, 2 Bergamo Piazzale Spedali Civili, 1 Leno Via Dossi, 2 Via Palma il Vecchio, 113 Corso Martiri della Libertà, 13 Limone del Garda Via Don Comboni, 24 Via Tremana, 13 Via Trieste, 8 Lograto Piazza Roma, 11 Via Camozzi, 101 Via Vittorio Veneto, 73 - ang. Tofane Lonato Via Guglielmo Marconi Albano Sant’Alessandro Via Tonale, 29 Via Bettole, 1 (Fraz. San Polo) Lumezzane Alzano Lombardo Via Roma, 31 Via Repubblica Argentina, 90 Via Alcide De Gasperi, 91 (Fraz. Pieve) Brembate Sopra - ang. Via Cremona Via M. D’Azeglio, 4 (Fraz. S. Sebastiano) Via B. Locatelli ang. Via Sorte Via Masaccio, 29 (Fraz. San Polo) Mairano Piazza Europa, 1 Cologno al Serio Via San Martino, 2 Via Bissolati, 57 Manerba del Garda Via Vittorio Gassman, 17/19 Grumello del Monte Via Roma, 63 Corso Martiri della Libertà, 45 Manerbio Via XX Settembre, 21 Seriate Via Paderno, 25 Via Milano, 21/b Marone Via Roma, 59 Trescore Balneario Via Lorenzo Lotto, 6/a Via Indipendenza, 43 Moniga del Garda Piazza San Martino Treviolo Piazza Mons. Benedetti, 10 Monte Isola Via Peschiera Maraglio, 156 Via Solferino, 30/a Monticelli Brusati Via IV Novembre, 5/a Provincia di Cremona Via Trento, 25/27 Montichiari Via Trieste, 71 Cremona Viale Duca d’Aosta, 19 Nave Piazza Santa Maria Ausiliatrice, 19 Viale Po, 33/35 Via Ambaraga, 126 Nuvolento Via Trento, 17 Via Dante, 241 Via Chiusure, 333/a Nuvolera Via Italia, 3/a Piazza Stradivari, 19 Via Cefalonia, 76 Odolo Via Praes, 13/bis Via Mantova, 137 Via Orzinuovi, 9/11 Offlaga Via Giuseppe Mazzini, 2 Casalmaggiore Via Porzio - ang. Via Nino Bixio Via Lamarmora, 230 (c/o A2A) Orzinuovi Piazza Vittorio Emanuele II, 18 Crema Viale Repubblica, 79 Via Triumplina, 179/b Ospitaletto Via Padana Superiore, 56 Soncino Via IV Novembre, 25 Acquafredda Via della Repubblica, 52 Paderno Franciacorta Via Roma, 32 Adro Via Roma, 1 Palazzolo sull’Oglio Via XX Settembre, 22 Provincia di Lodi Bagnolo Mella Via XXVI Aprile, 69/71 Passirano Via Libertà, 36 Lodi Via Incoronata, 12 Bagolino Via San Giorgio, 66 Pavone del Mella Piazza Umberto I, 1 Codogno Via Vittorio Emanuele II, 35 Bedizzole Via Trento, 3/5 Pisogne Piazza Umberto I, 11 Lodi Vecchio Piazza Vittorio Emanuele, 48 Borgosatollo Via IV Novembre, 140 Poncarale Via Fiume, 8/a S. Angelo Lodigiano Piazza Libertà, 10 Botticino Ponte di Legno Corso Milano, 34 Via Valverde, 1 (Fraz. Botticino Sera) Pontevico Piazza Giuseppe Mazzini, 15 Provincia di Mantova Bovegno Via Circonvallazione, 5 Pralboino Via Martiri Libertà, 52 Mantova Bovezzo Via Dante Alighieri, 8/d Prevalle Piazza del Comune, 7 V.le Risorgimento, 33 - ang. Valsesia Breno Via Giuseppe Mazzini, 72 Quinzano d’Oglio Via C. Cavour, 29/31 Via Madonna dell’orto, 6 Calcinato Via Guglielmo Marconi, 51 Remedello Via Roma, 60 Piazza Guglielmo Marconi, 7 Calvisano Via Dante Alighieri, 1 Rezzato Bagnolo San Vito Capriano del Colle Via Morari, 26 Via IV Novembre, 98 Via Di Vittorio, 35 (Fraz. San Biagio) Carpenedolo Piazza Martiri della Libertà, 1 Via Zanardelli, 5a/b (Fraz. Virle Treponti) Borgofranco sul Po Castegnato Piazza Dante Alighieri, 1 Rodengo Saiano Via Ponte Cigoli, 12 Via Martiri della Libertà, 64 Castelcovati Via Alcide De Gasperi, 48 Roè Volciano Via San Pietro, 119 Castel Goffredo Via Europa, 27 Castel Mella Via Caduti del lavoro, 56/a Roncadelle Via Martiri della Libertà, 119/a Castiglione delle Stiviere Via C. Cavour, 36 Castenedolo Piazza Martiri della Libertà, 4 Rovato Corso Bonomelli, 52/54 Marmirolo Via Ferrari, 66/d Castrezzato Piazza Mons. Zammarchi, 1 Sabbio Chiese Via XX Settembre, 83 Moglia Piazza della Libertà, 19 Cedegolo Via Nazionale, 105 Sale Marasino Via Roma, 23/ Bis Ostiglia Via Vittorio Veneto, 14 Poggio Rusco Via Trento e Trieste, 9 Via Camillo Sabatini, 165 Schio Via Battaglion Val Leogra, 6 Quistello Via G. Marconi, 12 Viale Val Padana, 34 Provincia di Treviso Sermide Via Cesare Battisti, 4 Via Ugo Ojetti, 398 Treviso Piazza Vittoria, 14 Villa Poma Piazza Mazzali, 7 Via Aurelia, 701/709 Castelfranco Veneto Via Forche, 2 Via A. Pollio, 50 (c/o c.c. Casalbertone) Conegliano Via XI Febbraio, 1 Provincia di Milano Viale Guglielmo Marconi, 3/5 Montebelluna Via Dante Alighieri Milano Piazza San Silvestro, 6 Piazza XXIV Maggio, 7 Piazza dei Tribuni, 58 Piazza XXV Aprile, 9 TRENTINO ALTO ADIGE Via Antonio Rosmini, 17 Provincia di Viterbo Provincia di Trento Via Ponchielli, 1 Viterbo Pieve di Bono Via Roma, 28 Via Giorgio Washington, 96 Corso Italia, 36 Via Monte Rosa, 16 Via Saragat - ang. Via Polidori Via Mac Mahon, 19 Via Monte San Valentino Via Saffi 5/6 - ang. via Monti Acquapendente Via del Rivo, 34 Via Silvio Pellico, 10/12 Bolsena Via Antonio Gramsci, 28 Piazza Sant’Agostino, 7 Bomarzo Piazza B. Buozzi, 5 Via Feltre, 30/32 Canepina Via Giuseppe Mazzini, 61 Via Giovanni da Procida, 8 Capodimonte Via Guglielmo Marconi, 84 www.bpci.it Piazza Borromeo, 1 Civita Castellana Via della Repubblica Viale Monza, 139/b Corchiano Via Roma, 45 LOMBARDIA Viale degli Eroi Via Lomellina, 14 Fabrica di Roma Provincia di Milano Gradoli Piazza Vittorio Emanuele II, 10 Via Lecco, 22 Milano Marta Via Laertina, 35/39 Corso Indipendenza, 5 Via della Moscova, 33 Montalto di Castro Via Porpora, 65 Via Salasco, 31 Via Aurelia Tarquinia, 5/7 Largo Scalabrini, 1 Via Bocchetto, 13 P.za delle mimose, 13 (Fraz. Pescia Romana) Via Bertolazzi, 20 (Zona Lambrate) Via Borgogna, 2/4 Montefiascone Piazzale Roma Bresso Via Vittorio Veneto, 57 Via Buonarroti, 22 Monterosi Via Roma, 36 Cernusco sul Naviglio Via Monza, 15 Via Boccaccio, 2 Orte Via Le Piane Cologno Monzese Viale Lombardia, 52 Via Canonica, 54 Ronciglione Corso Umberto I, 78 Corsico Via G. Di Vittorio, 10 Viale Coni Zugna, 71 Soriano nel Cimino Piazza XX Settembre, 1/2 Legnano C.so Magenta,127 - ang. Via Beccaria Corso Lodi, 111 Tarquinia Piazzale Europa, 4 Melegnano Viale Predabissi, 12 Piazzale de Agostini, 8 Tuscania Via Tarquinia Melzo Via Antonio Gramsci, 23 Piazza Firenze, 14 Vetralla Novate Milanese Via G. Di Vittorio, 22 Largo Gelsomini, 12 Via Roma, 21/23 Paderno Dugnano Via Erba, 36/38 Via G.B. Grassi, 89 Via Cassia, 261 (Fraz. Cura) Paullo Piazza E. Berlinguer, 14 Via Gian Galeazzo - ang. Via Aurispa Vignanello Via Vittorio Olivieri, 1/a Pioltello Via Roma, 92 Corso Indipendenza, 14 Vitorchiano Via Borgo Cavour, 10 Rho Viale Europa, 190 Via La Spezia, 1 Trezzano Rosa Piazza San Gottardo, 14 Viale Lombardia, 14/16 VENETO Trezzo sull’Adda Via Bazzoni Corso Magenta, 87 - Porta Vercellina Provincia di Padova Viale Marche, 56 Padova Via G. Matteotti, 23 FRIULI VENEZIA GIULIA Piazzale Nigra, 1 Camposampiero Piazza Castello, 43 Provincia di Pordenone Via Olona, 11 Ponte San Nicolò Via Padre M. Kolbe, 1/a Pordenone Via Santa Caterina, 4 Via Padova, 21 Fiume Veneto Via Piave, 1 (Fraz . Bannia) Provincia di Venezia Corso di Porta Romana, 57 Via del Torchio, 4 Provincia di Udine Mestre Piazza XXVII Ottobre, 29 Via Eugenio Pellini, 1 - ang. Via Cagliero Udine Via F. di Toppo, 87 Mira Via Nazionale, 193 Via Vitruvio, 38 - Via Settembrini Ampezzo Piazzale ai Caduti, 3 Via Solari, 19 Majano Piazza Italia, 26 Provincia di Verona Via Spartaco, 12 Paularo Piazza Nascimbeni, 5 Verona Viale Monte Santo, 2 Prato Carnico Via Pieria, 91/d Via Città di Nimes, 6 Piazzale Zavattari, 12 Sutrio Piazza XXII Luglio 1944, 13 Via XXIV Maggio, 16 Via Pellegrino Rossi, 26 Tolmezzo Piazza XX Settembre, 2 Via Albere, 18 Via Campagnol di Tombetta, 30 Via Melchiorre Gioia, 45 Piazzale Susa, 2 LAZIO Corte Farina, 4 Via Biondi, 1 Provincia di Latina Via Galvani, 7 Via Friuli, 16/18 Latina Via Isonzo, 3 Bussolengo Via Verona, 43 Caldiero Via Strà, 114-114/a Via C. Menotti, 21 - ang. Via G. Modena Provincia di Roma Grezzana Viale Europa, 13 Viale delle Rimembranze di Lambrate, 4 Roma Monteforte d’Alpone Viale Europa, 30 Viale L. Sturzo, 33/34 Via Ferdinando di Savoia, 8 Negrar Via Strada Nuova, 17 (Fraz. S. Maria) Via A. Trivulzio, 6/8 Via Simone Martini, 5 Peschiera del Garda Via Venezia, 16 Via Palestrina, 12 - ang. Viale A. Doria Piazza Eschilo, 67 Sant’Ambrogio Valpolicella Via Bignami, 1 (c/o C.T.O.) Via Bevagna, 58/60 Via Giacomo Matteotti, 2 Via Macedonio Melloni, 52 (c/o I.O.P.M.) Largo Colli Albani, 28 Villafranca di Verona Via della Pace, 58 Via della Commenda, 12 (c/o Istituti Clinici) Via Vittorio Veneto, 108/b - Via Emilia Corso Porta Nuova, 23 Via Fabio Massimo, 15/17 Provincia di Vicenza (c/o Ospedale Fatebenefratelli) Via Crescenzio Conte di Sabina, 23 Vicenza Via Francesco Sforza, 35 Via Portuense, 718 Viale San Lazzaro, 179 (c/o Osp. Maggiore) Via Fucini, 56 Via IV Novembre, 60 Piazza Ospedale Maggiore, 3 (c/o Niguarda) Via Boccea, 211/221 Bassano del Grappa Viale San Pio X 85 Via Pio II, 3 (c/o Ospedale San Carlo) Via Castelvetro, 32 (c/o Ospedale Buzzi) Provincia di Monza-Brianza Via Emilia est, 17 Corso Italia, 17 Monza Viale G.B. Stucchi, 110 Via Repubblica, 32 Via Lomellina, 50 (c/o Roche Boehringer Spa) Fidenza Piazza G. Garibaldi, 41 Via Pisanello, 2 Langhirano Via Roma, 25 - Via Ferrari, 17 Corso Lodi, 78 Provincia di Pavia Piazza Gasparri, 4 Pavia Provincia di Piacenza Via dei Missaglia - angolo Via Boifava Via Montebello della Battaglia, 2 Piacenza Via Secchi, 2 Corso Strada Nuova, 61/c Via Verdi, 48 Via Meda, angolo Via Brunacci, 13 Via dei Mille, 7 Via Manfredi, 7 Corso XXII Marzo, 22 Viale Ludovico il Moro, 51/b Via Cristoforo Colombo, 19 Piazzale Lagosta, 6 Via Taramelli, 20 Caorso Via Roma, 6/a Via Padova, 175 Via Pavesi, 2 Carpaneto Piacentino Via G. Rossi, 42 Viale Certosa, 138 Corso Alessandro Manzoni, 17 Gragnano Trebbiense Via Roma, 52 Via Monte di Pietà, 7 Piazzale Gaffurio, 9 Ponte dell’Olio Via Vittorio Veneto, 75 Via San Pietro in Verzolo, 4 San Nicolò a Trebbia Via A. di Rudini, 8 (c/o Ospedale San Paolo) Via Ferrata, 1 (c/o Università) Via Emilia Est, 48 (Fraz. Rottofreno) Abbiategrasso Piazza Cavour, 11 Albuzzano Via Giuseppe Mazzini, 92/94 Arluno Via Piave, 7 Belgioioso Via Ugo Dozzio, 15 Provincia di Reggio Emilia Assago Milanofiori Broni Piazza Vittorio Veneto, 52 Reggio Emilia Palazzo Wtc Viale Milanofiori Casteggio Viale Giuseppe Maria Giulietti, 10 V.le Monte Grappa, 4/1 - ang. V.le dei Mille Bellinzago Lombardo Via delle 4 Marie, 8 Garlasco Corso C. Cavour, 55 Via Emilia all’Angelo, 35 Binasco Largo Bellini, 16 Giussago Via Roma, 38 Rubiera Viale della Resistenza, 7/a Bollate Via Giacomo Matteotti, 16 Godiasco Bresso Via Roma, 16 Piazza Mercato, 19 LAZIO Carugate Via Toscana, 10 Viale delle Terme, 44 (Fraz. Salice Terme) Provincia di Roma Cassina de’ Pecchi Via Matteotti, 2/4 Landriano Via Milano, 40 Roma Cinisello Balsamo Linarolo Via Felice Cavallotti, 5 Corso Vittorio Emanuele II, 25/27 Via Casati, 19 Magherno Via G. Leopardi, 2 Via Baldovinetti, 106/110 Via Massimo Gorki, 50 (c/o Ospedale Bassini) Marcignago Via Umberto I, 46 Via Boccea 51, a/b/c Cologno Monzese Montebello della Battaglia Viale dei Colli Portuensi, 298/302 Via Indipendenza, 32 - ang. P.zza Castello Piazza Carlo Barbieri “Ciro”, 1 Via F.S. Nitti, 73/75/77 Corbetta Corso Garibaldi, 14 Mortara Piazza Silvabella, 33 Via Norcia, 1/3 Cornaredo Pinarolo Po Via Agostino Depretis, 84 Via Guidubaldo del Monte, 13/15 Piazza Libertà, 62 Rosasco Via Roma, 4 Viale delle Provincie, 34/46 Via Magenta, 34 San Martino Siccomario Via Roma, 23 Via Nizza, 71 Corsico Sannazzaro de’ Burgondi Viale Libertà 3/5 Viale Trastevere, 22 Via Cavour, 45 Siziano Via Roma, 22 Via Sestio Calvino, 57 Viale Liberazione, 26/28 Stradella Via Trento, 85 Via Tiburtina, 544/546 - ang. Via Galla Placidia Garbagnate Milanese Torrevecchia Pia Via Molino, 9 Largo Trionfale, 11/12/13/14 Via Kennedy, 2 (Fraz. S. M. Rossa) Travacò Siccomario Via Cerveteri, 30 Inveruno Via Magenta, 1 P.zza Caduti e Combattenti d’Italia, 1 Piazza Vescovio, 3 - 3/a - 3/b Lainate Via Garzoli, 17 Valle Lomellina Piazza Corte Granda, 4 - ang. Via Poggio Moiano, 1 Legnano Varzi Via Pietro Mazza, 52 Via dei Castani,133 Corso Sempione, 221 Vigevano Via delle Gondole, 90 (Fraz. Ostia) Corso Sempione - angolo Via Toselli Via Dante, 39 Via Nomentana, 669/675 Via Novara, 8 Via Madonna degli Angeli, 1 Via XX Settembre, 45 - ang. Servio Tullio Piazza Don Sturzo, 13 Corso Genova, 95 Viale dei quattro venti, 83 Magenta Piazza Vittorio Veneto, 11 Via de Amicis, 5 Melegnano Via Cesare Battisti, 37/a Voghera Via Giacomo Matteotti, 33 TOSCANA Melzo Piazza Risorgimento, 2 Provincia di Firenze Novate Milanese Via Amendola, 9 EMILIA ROMAGNA Firenze Piazza Cesare Beccaria, 21 Provincia di Bologna Opera Via Diaz, 2 Bologna Paderno Dugnano Via Rotondi, 13/a Viale della Repubblica, 25/31 Parabiago Via S. Maria, 22 Via Murri, 77 Rho Piazza Dè Calderini, 6/a Corso Europa, 209 Via Ercolani, 4/e Via Meda, 47 Via Lombardia, 7/a www.brebanca.it Via Pace, 165 (Fraz. Mazzo Milanese) San Lazzaro di Savena Via Emilia, 208/210 Rozzano Zola Predosa Via Risorgimento, 109 PIEMONTE Viale Lombardia, 17 Provincia di Cuneo Piazza Berlinguer, 6 (Fraz. Ponte Sesto) Provincia di Ferrara Cuneo S. Giuliano Milanese Cento Via Ferrarese, 3 Piazza Europa, 1 Via Risorgimento, 3 Via Roma, 13/b Via S. Pellico, 9 (Fraz. Sesto Ulteriano) Provincia di Modena Via della Battaglia, 15 Segrate Piazza della Chiesa, 4 Modena (Fraz. Madonna dell’Olmo) Senago Piazza Matteotti, 10/a Viale Trento e Trieste - ang. Via Emilia Est Corso Antonio Gramsci, 1 Sesto San Giovanni Via Casiraghi, 167 Carpi Via Baldassarre Peruzzi, 8/b Via Savona, 8 - ang. Via Bisalta Settimo Milanese Piazza della Resistenza, 8 Sassuolo Viale Crispi, 24 Via A. Carle, 2 (Fraz. Confreria) Solaro Via Mazzini, 66 Via Michele Coppino, 16 (c/o Ospedale) Trezzano Rosa Via Raffaello Sanzio, 13/s Provincia di Parma Alba Trezzano sul Naviglio Viale C. Colombo, 1 Parma Via Teobaldo Calissano, 9 Vittuone Via Villoresi, 67 Via San Leonardo, 4 Viale Giovanni Vico, 5 Corso Piave, 74 Roccavione Piazza Biagioni, 27 Provincia di Verbania Via G. Garibaldi, 180 (Fraz. Gallo d’Alba) Saliceto Piazza C. Giusta, 1 Verbania Piazza Matteotti, 18 (Fraz. Intra) Corso Canale, 98/1 (Fraz. Mussotto) Saluzzo Corso Italia, 57 Cannobio Via Umberto I, 2 Bagnasco Via Roma, 3 Sampeyre Via Vittorio Emanuele II, 22 Bagnolo Piemonte San Damiano Macra Via Roma, 15 Provincia di Vercelli Via Cavalieri di Vittorio Veneto, 12 San Michele Mondovì Via Nielli, 15/a Vercelli Piazza Cavour, 23 Barbaresco Via Torino, 16 Sanfront Corso Guglielmo Marconi, 14 Borgosesia Via Sesone, 36 Barge Viale Giuseppe Mazzini, 1 Santo Stefano Belbo Corso Piave, 82 Barolo Via Roma, 53 Savigliano Piazza Schiapparelli, 10 Provincia di Torino Beinette Via Vittorio Veneto, 4 Scarnafigi Piazza Vittorio Emanuele II, 14 Torino Borgo San Dalmazzo Piazza Liberazione, 8/10 Sommariva del Bosco Via Donatori del Sangue, 11/b Corso Dante, 57/b Bossolasco Corso Della Valle, 29 Tarantasca Via Carletto Michelis, 3 Corso Vittorio Emanuele II, 107 Boves Piazza dell’Olmo, 2 Valdieri Corso Caduti in Guerra, 13 Corso Vercelli, 81/b Bra Via Giuseppe Verdi, 10 Valgrana Via Caraglio, 9 Corso Unione Sovietica, 503 Brossasco Via Roma, 11/a Vernante Piazza de l’Ala, 4 Via Madama Cristina, 30 - ang. Lombroso Busca Piazza Savoia, 9 Verzuolo Piazza Martiri della Libertà, 13 Corso Orbassano, 236 Canale Via Roma, 72 Vicoforte Via di Gariboggio, 43 Corso Matteotti, 15 Via Alfieri, 17 Caraglio Piazza Madre Teresa, 8 Villafalletto Via Vittorio Veneto, 24 Corso L. Einaudi, 15/17 Carrù P.za V. Veneto, 2 - ang. Via Benevagienna Villanova Mondovì Via Roma, 33/a Piazza Gran Madre di Dio, 12/a Castelletto Stura Via Guglielmo Marconi, 6 Vinadio Via Roma, 11 Castellinaldo Via Roma, 56 C.so Inghilterra, 59/g ang. C.so Francia Via Giolitti, 16 Castiglione Tinella Via Circonvallazione, 12 Provincia di Alessandria Corso Francia, 262 Castino Via XX Settembre, 1 Alessandria Bibiana Via C. Cavour, 25 Centallo Piazza Vittorio Emanuele II, 17 Via Dante - ang. Via C. Lamarmora Ceva Via Roma, 40 Bricherasio Piazza Castelvecchio, 17 Via Venezia, 16 Chieri Piazza Dante, 10 Cherasco Via Vittorio Emanuele II, 34 (c/o Ospedale Santi Antonio e Biagio) Chiusa di Pesio Via Roma, 5 Chivasso Via Po, 5 Acqui Terme Corso Bagni, 54 Corneliano d’Alba Piazza Cottolengo, 42 Collegno Via XXIV Maggio, 1 Arquata Scrivia Via Libarna, 56 Cortemilia Piazza Castello, 1 Ivrea Via Circonvallazione, 7 Borghetto Borbera Via San Michele, 2 Costigliole Saluzzo Via Vittorio Veneto, 94 Moncalieri Strada Villastellone, 2 Cabella Ligure Piazza della Vittoria, 7 Cravanzana Via XX Settembre, 1 Nichelino Via Torino, 172 Casale Monferrato Demonte Via Martiri e Caduti della Libertà, 1 None Via Roma, 23 Viale G. Giolitti, 2 (c/o ASL) Dogliani Via Divisione Cuneense, 1 Pinerolo Via Savoia - ang. Via Trieste Piazza San Francesco, 10 Dronero Piazza San Sebastiano, 7 Rivoli Via Rombò, 25/e Casalnoceto Piazza Martiri della Libertà, 10 Entracque Via della Resistenza, 5 Santena Via Cavour, 43 Castelnuovo Scrivia Via Solferino, 11 Farigliano Piazza San Giovanni, 7 Settimo Torinese Via Petrarca, 9 Garbagna Via Roma, 21 Fossano Via Roma, 3 Villar Perosa Via Nazionale, 39/a Isola Sant’Antonio Frabosa Soprana Piazza Guglielmo Marconi, 1 Piazza del Peso - ang. Via C. Cavour Frabosa SottanaVia IV Novembre, 30 LIGURIA Monleale Corso Roma, 41/43 Provincia di Genova Garessio Corso Statuto, 15 Genova Genola Via Roma, 32 Novi Ligure Corso Marenco, 141 Via C.R. Ceccardi, 13/r Govone Piazza Vittorio Emanuele II, 9 Ovada Via Torino, 155 Corso Torino, 61/r Lagnasco Via Roma, 30 Pontecurone Piazza Giacomo Matteotti, 5 Via Pastorino, 118 (Loc. Bolzaneto) La Morra Via Umberto I, 28 Pozzolo Formigaro Via Roma, 31 Via Sestri, 188/190r (Sestri Ponente) Limone Piemonte Via Roma, 62 Rocchetta Ligure Piazza Regina Margherita Piazza G. Lerda, 10/r (Loc. Voltri) Magliano Alfieri Sale Piazza Giuseppe Garibaldi, 8 Via Cinque Maggio, 101/r (Priaruggia) Via IV Novembre, 54/a (Fraz. S. Antonio) Sarezzano Piazza L. Sarzano, 4 Via C. Rolando, 123 (Sampierdarena) Magliano Alpi Via Langhe, 158 Stazzano Via Fossati, 2/a Via Molassana, 82/r Mango Piazza XX Settembre, 6 Tortona Piazza Leopardi, 6 Monchiero Via Borgonuovo, B/15-1 Piazza Duomo, 13 Borzonasca Via Angelo Grilli, 15 Mondovì Via Emilia, 422 Corso della Repubblica, 2/d Chiavari Corso Dante Alighieri, 36 Piazza G. Mellano, 6 Cicagna Via Statale, 8 - angolo Via Dante, 1 P.zza Felice Cavallotti, 1 (c/o ASL) Piazza Maggiore, 8 Lavagna C.so Buenos Aires, 84 (Fraz. Monleone) Valenza Via Dante, 68 Piazzale Ellero, 20 Mezzanego Via Capitan Gandolfo, 138 Vignole Borbera Via Alessandro Manzoni, 8 Monesiglio Via Roma, 4 Rapallo Via A. Diaz, 6 Villalvernia Via Carbone, 69 Monforte d’Alba Via Giuseppe Garibaldi, 4 Santo Stefano d’Aveto Via Razzetti, 11 Villaromagnano Via della Chiesa Montà Piazza Vittorio Veneto, 31 Sestri Levante Via Fascie, 70 Monticello d’Alba Piazza Martiri della Libertà, 2 (Fraz. Borgo) Provincia di Asti Provincia di Imperia Moretta Via Torino, 73/bis Asti C.so Vittorio Alfieri, 137 Imperia Viale Giacomo Matteotti, 13 Morozzo Via Guglielmo Marconi, 78 Canelli Corso Libertà, 68 Bordighera Murazzano Via L. Bruno, 6 Nizza Monferrato Piazza G. Garibaldi, 70 Via Treviso,1 - ang. Via V. Emanuele II Murello Via Caduti Murellesi, 39 Sanremo Via Escoffier, 3A Narzole Via Pace, 2 Provincia di Biella Taggia Via Boselli, 62 (Fraz. Arma) Neive Piazza della Libertà, 2 Biella Via Nazario Sauro, 2 Ventimiglia Via Ruffini, 8/a Niella Belbo Piazza Mercato, 12/b Cossato Via Lamarmora, 9 Paesana Via Po, 41 Provincia di La Spezia Peveragno Piazza P. Toselli, 1 Provincia di Novara La Spezia Piasco Piazza Martiri della Liberazione, 7 Novara Largo Don Luigi Minzoni, 1 Via G. Pascoli, 22 Piobesi d’Alba Piazza San Pietro, 12 Arona Corso Liberazione, 39 Via Chiodo, 115 Priocca Via Umberto I, 65 Borgomanero Via Garibaldi, 92/94 Via San Bartolomeo (c/o ASW Research) Racconigi Piazza Roma, 8 Oleggio Via Mazzini, 15 Via Fiume, 152 Revello Via Saluzzo, 80 Trecate Piazza Dolce, 10 Via del Canaletto, 307 Castelnuovo Magra Osimo Sassofeltrio Via Aurelia, 129 (Fraz. Molicciara) Piazza del Comune, 4 Via Risorgimento, 9 (Frazione Fratte) Lerici Calata G. Mazzini, 1 Via Ticino, 1 (Fraz. Padiglione) Urbania Via Roma, 24 Sarzana Via Muccini, 48 Rosora Via Roma, 132 (Fraz. Angeli) Santa Maria Nuova ABRUZZO Provincia di Savona Via Risorgimento, 68 (Fraz. Collina) Provincia di Chieti Savona Via dei Vegerio 27R Sassoferrato Piazza Bartolo, 17 Atessa Via Piazzano, 70 (Fraz. Piazzano) Francavilla al Mare Via della Rinascita, 2 Albenga Piazza Petrarca, 6 Senigallia Guardiagrele Via Orientale, 17 Albisola Superiore Corso Giuseppe Mazzini, 189 Via Marchetti, 70 Lanciano Viale Rimembranze, 16 Andora Piazza Santa Maria, 7 Via R. Sanzio, 288 (Fraz. Cesano) Serra de’ Conti Piazza Leopardi, 2 Sant’Eusanio del Sangro Corso Margherita Cairo Montenotte San Giovanni Teatino Corso Marconi, 240 (Fraz. S. Giuseppe) Provincia di Ascoli Piceno Via Aldo Moro, 8 (Fraz. Sambuceto) Loano Via Stella, 34 Ascoli Piceno Viale Indipendenza, 42 San Salvo Strada Istonia, 13/15 Acquasanta Terme Piazza Terme, 6 Vasto Via Giulio Cesare, 5 LOMBARDIA Castel di Lama Via Salaria, 356 Provincia di Milano San Benedetto del Tronto Provincia di Pescara Milano Via Fabio Filzi, 23 Piazza Matteotti, 6 Pescara Piazza Setti Carraro (Fraz. Porto d’Ascoli) Via Michelangelo, 2 TOSCANA Via Nazionale Adriatica Nord, 126 Provincia di Massa - Carrara Provincia di Fermo Viale Marconi, 21 Carrara Via Galileo Galilei, 32 Fermo Contrada Campiglione, 20 Provincia di Teramo VALLE D’AOSTA Via Dante Zeppilli, 56 Teramo Piazza Garibaldi, 143 Aosta Via Xavier de Maistre, 8 Falerone Alba Adriatica Via Mazzini, 124 Viale della Resistenza, 168 Y (Fraz. Piane) Giulianova Via Orsini, 28 (Fraz. Spiaggia) Roseto degli Abruzzi Via Nazionale, 286 Massa Fermana Via Ada Natali, 5 FRANCIA Montegranaro Via Fermana Nord CAMPANIA Nizza 7, Boulevard Victor Hugo Monte Urano Via Papa Giovanni XXIII, 37 Provincia di Avellino Mentone Avenue de Verdun, 21 Petritoli Avellino Via Dante Alighieri, 20/24 Antibes Avenue Robert Soleau, 15 Contrada S. Antonio, 217 (Fraz. Valmir) Montoro Inferiore Via Nazionale, 161/167 Porto S. Giorgio Via Tasso Porto Sant’Elpidio Via Mazzini, 115 Provincia di Benevento Sant’Elpidio a Mare Viale Roma, 1 Benevento Piazza Risorgimento, 11/12 Torre San Patrizio Via Mazzini, 19A Buonalbergo Viale Resistenza, 3 San Giorgio la Molara Via S. Ignazio, 7/9 Provincia di Macerata Telese Viale Minieri, 143 www.bpa.it Macerata Viale Don Bosco Provincia di Caserta MARCHE Corso Cavour, 34 Caserta Provincia di Ancona Camerino Piazza Caio Mario, 5 Via C. Battisti, 42 Ancona Castelraimondo Piazza della Repubblica, s.n.c. Via Douhet, 2/a (c/o Scuola Aeron. Milit.) Corso Stamira, 14 Civitanova Marche Corso Umberto I, 16 Alvignano Corso Umberto I, 287 Viale C. Colombo, 56 Corridonia Piazzale della Vittoria, 1 Aversa Via Salvo D’Acquisto Via Brecce Bianche, 68/i Loro Piceno Piazzale G. Leopardi, 8 Caiazzo Via Attilio Apulo Caiatino, 23 Via Umani Matelica Viale Martiri della Libertà, 31 Grazzanise Agugliano Contrada Gavone, 2/b (c/o Socopad) Monte San Giusto Via Verdi, 11 Via del Medico, 1 (c/o Aeronautica Militare) Castelfidardo Via C. Battisti, 5 Pollenza Via V. Cento, 6 (Casette Verdini) Piedimonte Matese Via Cesare Battisti Potenza Picena Chiaravalle Via della Repubblica, 83 Pietramelara Piazza S. Rocco, 18 Piazza Douhet, 23 (Fraz. Porto) Cupramontana Piazza Cavour, 11 Pietravairano Via Padre Cipriani Caruso, s.n.c. Via Marefoschi, 1 Fabriano Santa Maria Capua Vetere Recanati Via Cesare Battisti, 20 Piazza Miliani, 16 Via Pezzella Parco Valentino San Ginesio Piazza Gentili, 31 Via Corsi, 3 Succivo Via De Nicola - angolo Via Tinto San Severino Marche Viale Europa Falconara Via IV Novembre, 8 Teano Viale Italia Sarnano Piazza della Libertà, 76 Vairano Patenora Filottrano Via Oberdan, 5 Tolentino Piazza dell’Unità Via della Libertà, 10 (Fraz. Vairano Scalo) Jesi Via delle Rimembranze, 56 Corso Matteotti, 1 Provincia di Pesaro - Urbino Vitulazio Via Rimembranze, 37 Via San Giuseppe, 38 Pesaro Piazza Ricci, 4 Piazzale Garibaldi, 22 Provincia di Napoli Piazza Vesalio, 5 Via Antonio Fratti, 23 Napoli Via Leone XIII (c/o New Holland Fiat Spa) Urbino Viale Comandino Corso Amedeo di Savoia, 243 Jesi Zipa Via Don Battistoni, 4 Acqualagna Via Flaminia, 79 Via Mergellina, 33/34 Loreto Via Bramante Carpegna Via R. Sanzio, 12 Via dell’Epomeo, 427/431 Maiolati Spontini Colbordolo Via Nazionale, 143 (Fraz. Morciola) Via Cesario Console, 3C Via Risorgimento, 52 (Fraz. Moie) Fano Via dell’Abbazia, s.n.c. Via Crispi, 2 - ang. Piazza Amedeo Montemarciano Fossombrone Piazza Dante, 24 Piazza Vittoria, 7 Piazza Magellano, 15 (Fraz. Marina) Lunano Corso Roma, 79 Galleria Vanvitelli, 42 Monterado Via 8 Marzo, 7 (Fraz. Ponte Rio) Macerata Feltria Via Antini, 22 Via Santa Brigida, 36 Morro d’Alba Via Morganti, 56 Montecopiolo Via Santo Strato, 20/d Numana Via Pascoli, 1A Via Montefeltresca, 37 (Fraz. Villagrande) Piazza Garibaldi, 127 Offagna Via dell’Arengo, 38 Sant’Angelo in Vado Piazza Mar del Plata, 6 Via Caravaggio, 52 Via Giovanni Manna, 11 Marcellina Via Regina Elena, 35/c Cetraro - Marina Via Lucibello, 10/14 Piazza Giovanni Bovio, 6 Marino Piazzale degli Eroi, 4 Corigliano Calabro - Scalo Afragola Corso Garibaldi, 38 Palombara Sabina Via Ungheria, 7 Via Nazionale, 101/103 Boscoreale Via Papa Giovanni XXIII, 16 San Polo dei Cavalieri Via Roma, 12 Crosia Via Nazionale, 74/80 (Fraz. Mirto) Cardito Piazza S. Croce, 71 Tivoli Diamante Via Vittorio Emanuele, 77 Casalnuovo di Napoli Piazza S. Croce, 15 Fuscaldo Via Maggiore Vaccari, 14 Via Arcora Provinciale, 60 Via di Villa Adriana Cercola Via Domenico Ricciardi, 284/286 Lago Via P. Mazzotti, 10/12/14 Forio d’Ischia Corso F. Regine, 24/25 MOLISE Lungro Via Skanderberg, 86 Grumo Nevano Via Cirillo, 78 Provincia di Campobasso Montalto Uffugo Ischia Porto Via A. de Luca, 113/115 Campobasso Via Vittorio Veneto, 86 Corso Garibaldi, 25 Melito Via Roma, 33/43 Bojano Corso Amatuzio, 86 Via Manzoni, 57 (Fraz. Taverna) Monte di Procida Corso Garibaldi, 20/22 Larino Via Jovine, 12 Morano Calabro Via Porto Alegre, 10 Nola Termoli Via Abruzzi Mormanno Via San Biase, 1 Via Mario de Sena, 201 Paola Via del Cannone, 34 Piazza Giordano Bruno, 26/27 Provincia di Isernia Praia a Mare Via Telesio, 2 Pozzuoli Isernia Via Dante Alighieri, 25 Corso Vittorio Emanuele, 60 Rende Venafro Via Campania, 69 Via Domiziana Via A. Volta, 15 (Fraz. Quattromiglia) (c/o Accademia Aeronautica) Viale Kennedy, 59/e (Fraz. Roges) UMBRIA Qualiano Via S. Maria a Cubito, 146 Roggiano Gravina Via Vittorio Emanuele II, 136 Provincia di Perugia Quarto Via Campana, 286 Rogliano Via Guarasci, 31 Perugia San Giuseppe Vesuviano Via Astalonga, 1 Rossano Via G. Rizzo, 14 Via Settevalli, 133 Sant’Antimo Via Cardinale Verde, 31 Rossano - Scalo Via Nazionale, 9/15 Torre del Greco Corso Vittorio Emanuele, 77/79 Via Deruta (Fraz. San Martino in Campo) San Demetrio Corone Via D. Alighieri, 10 Volla Via Rossi, 94/100 Via P. Soriano, 3 (Fraz. Sant’Andrea delle Fratte) San Giovanni in Fiore Via Gramsci EMILIA ROMAGNA Bastia Umbra Scalea Via M. Bianchi, 2 Provincia di Forlì - Cesena Via Roma, 25 - angolo Via de Gasperi Spezzano Albanese P.zza della Repubblica, 5/1 Forlì Viale Vittorio Veneto, 7D/7E Città di Castello Via Buozzi, 22 Spezzano della Sila Cesena Via Piave, 27 Deruta Via Tiberina, 184/186 Via del Turismo, 77 (Fraz. Camigliatello Silano) Cesenatico Viale Roma, 15 Foligno Viale Arcamone Torano Castello Strada Provinciale Variante, 4 Forlimpopoli Viale Giacomo Matteotti, 37 Giano dell’Umbria Trebisacce Via Lutri, 146 Via Roma, 63 (Fraz. Bastardo) Provincia di Ravenna Magione Via della Palazzetta (loc. Bacanella) Provincia di Catanzaro Ravenna Piazza Baracca, 22 Marsciano Via dei Partigiani, 12 Catanzaro Massa Martana Via Roma, 42 Cervia Via G. Di Vittorio, 39 Piazza Indipendenza, 44 Montecastello di Vibio Faenza Via Giuliano da Maiano, 34 Corso Mazzini, 177/179 Piazza Michelotta di Biordo, 10 Via Nazario Sauro, 17 (Fraz. Lido) Todi Provincia di Rimini Via A. Lombardi - Area Metroquadro Piazza del Popolo, 27 Rimini Chiaravalle Centrale Piazza Dante, 8 Via Tiberina, 64 Via Flaminia, 175 Girifalco Via Milano Via Tiberina, 194 (Fraz. Pantalla) Via Luigi Poletti, 28 Lamezia Terme Corso Nicotera, 135 Bellaria - Igea Marina Via Uso, 25/c Provincia di Terni Sersale Via A. Greco Cattolica Via Fiume, 37 Terni Corso del Popolo, 13 Soverato Corso Umberto I, 167/169 Novafeltria Piazza Vittorio Emanuele, 1 Acquasparta Via Cesare Battisti, 5/d Soveria Mannelli Piazza dei Mille, 2 Riccione Viale Ceccarini, 207 Avigliano Umbro San Leo Via Montefeltro, 24 Corso Roma - ang. Via S. Maria Provincia di Crotone Sant’Agata Feltria Crotone Via Mario Nicoletta, 32 Via Vittorio Emanuele II, 1 Cirò Marina Via Mazzini, 17/19 Santarcangelo di Romagna Via Braschi, 36 Cotronei Via Laghi Silani, 40 Petilia Policastro Via Arringa, 178 LAZIO Strongoli Corso Biagio Miraglia, 115 Provincia di Frosinone www.carime.it Frosinone Provincia di Reggio Calabria Via Maria, 63 CALABRIA Reggio Calabria Via Armando Fabi, 192 (c/o Aeronautica Mil.) Provincia di Cosenza Corso Garibaldi, 144 Provincia di Roma Cosenza Viale Calabria, 197/199 Roma Via Caloprese Via Argine Destro Annunziata, 81 Via Nazionale, 256 Via XXIV Maggio, 45 Bagnara Calabra Viale Buozzi, 78 Corso Mazzini, 117 Corso Vittorio Emanuele II, 167 Via Croce, 10 Via F. Migliori (c/o Ospedale) Bianco Via Vittoria, 52 Via Cipro, 4/a Via degli Stadi, 57/d2 Bova Marina Via Maggiore Pugliatti, 2 Via Gasperina, 248 Corso Telesio, 1 Cinquefrondi Via Roma, 24 Via L. di Breme, 80 Acri Via Padula, 95 Cittanova Via Roma, 44 Via Prenestina Polense, 145 Amantea Via Elisabetta Noto, 1/3 Gioia Tauro Via Roma, 52 - ang. Via Duomo (Fraz. Castelverde) Aprigliano Via Calvelli, 5 Laureana di Borrello Via IV Novembre, 9 Albano Laziale Via Marconi, 7 Belvedere Marittimo - Marina Via G. Grossi, 71 Locri Via Garibaldi, 71 Fonte Nuova Via Nomentana, 68 Bisignano Via Simone da Bisignano Melito di Porto Salvo Via Papa Giovanni XXIII Guidonia Montecelio Cariati Via S. Giovanni, 6 Monasterace Marina Via Nazionale Tiburtina, 122 (Fraz. Villalba) Cassano allo Jonio Corso Garibaldi, 30 Via Nazionale Jonica, 113/114 Via Roma, 26 Castrovillari Corso Garibaldi, 79/83 Palmi Via Roma, 44 Polistena Piazza Bellavista, 1 Sant’Egidio del Monte Albino Provincia di Foggia Rizziconi Via Capitolo, 13 Via SS. Martiri, 13 (Fraz. San Lorenzo) Foggia Roccella Jonica Via XXV Aprile, 16 Teggiano Via Prov. del Corticato (Fraz. Pantano) Viale Ofanto, 198/c Rosarno Corso Garibaldi, 28 Via Salvatore Tugini, 70/74 Sant’Eufemia d’Aspromonte PUGLIA Cerignola Via Di Vittorio, 83 Via Maggiore Cutrì, 10/a Provincia di Bari Ischitella Corso Umberto I, 111/113 Siderno C.so Garibaldi (Fraz. Marina) Bari Lucera Via IV Novembre, 77 Taurianova Piazza Garibaldi, 17 Piazza Umberto I, 85 (Fraz. Carbonara) Manfredonia Corso Roma, 22/24 Villa S. Giovanni Viale italia, 30 Via Napoli, 53/55 (Fraz. Santo Spirito) San Giovanni Rotondo Piazza Europa Via Bari, 27/c (Fraz. Torre a Mare) San Severo Via Carso, 10 Provincia di Vibo Valentia Via Toma, 12 Sant’Agata di Puglia Via XXIV Maggio,119/121 Vibo Valentia Viale Matteotti 23/25 Viale Pio XII, 46-46/a Stornarella Corso Garibaldi, 22 Arena Piazza Generale Pagano, 1 Viale de Blasio, 18 Troia Via Vittorio Emanuele, 1 Nicotera Via Luigi Razza, 1 Via Melo, 151 Vico del Gargano Via S. Filippo Neri, 10 Pizzo Calabro Via Nazionale Corso Mazzini, 138/b Serra San Bruno Via de Gasperi, 52 Via Tridente, 40/42 Provincia di Lecce Soriano Calabro Via Giardinieri Via Calefati, 112 Lecce Viale Lo Re, 48 Tropea Viale Stazione Piazza Cesare Battisti,1 (c/o Università) Campi Salentina Via Garibaldi, 6/8 Acquaviva delle Fonti Piazza Garibaldi, 49/52 Casarano Via F. Bottazzi - ang. Via Alto Adige BASILICATA Adelfia Via G. Marconi, 11/a Galatina Via Roma, 26 Provincia di Matera Altamura Via Maggio 1648, 22/b-22/c Maglie Piazza O. de Donno Matera Bitetto Piazza Armando Diaz, 38 Nardò Via Duca degli Abruzzi, 58 Via del Corso, 66 Bitonto Piazza della Noce, 14 Squinzano Via Nuova, 25 Via Annunziatella, 64/68 Capurso Via Torricelli, 23/25 Trepuzzi Corso Umberto I, 114 Bernalda Corso Umberto, 260 Casamassima Corso Umberto I, 48 Tricase Via G. Toma, 30 Montalbano Jonico Piazza Vittoria, 3 Castellana Grotte Piazza della Repubblica, 2 Veglie Via Parco Rimembranze, 30 Pisticci Via M. Pagano, 25 Corato V.le V. Veneto 160/166 Policoro Via G. Fortunato, 2 - ang. Via Lega Lombarda Provincia di Taranto Gioia del Colle Corso Garibaldi, 55 Taranto Provincia di Potenza Giovinazzo Via G. Gentile, 1 Corso Umberto I, 71 Potenza Gravina in Puglia Corso Italia, 202 Via Alianelli, 2 Corso Vittorio Emanuele, 30/c Castellaneta Piazza Municipio, 7 Via Angilla Vecchia, 5 Grumo Appula Via G. d’Erasmo, 12 Fragagnano Via Garibaldi, 14 Via del Gallitello Modugno Piazza Garibaldi, 109 Ginosa Corso Vittorio Emanuele, 92 Genzano di Lucania Mola di Bari Piazza degli Eroi, 31 Grottaglie Via Matteotti, 72/78 Corso Vittorio Emanuele, 180/184 Molfetta Via Tenente Fiorini, 9 Laterza Piazzale Saragat, 11 Lagonegro Via Colombo, 25 Monopoli Via Marsala, 2 Lizzano Via Dante, 78 Lauria Piazza Plebiscito, 72 Noci Largo Garibaldi, 51 Manduria Via per Maruggio, 9 Marsicovetere Noicattaro Corso Roma, 8/10/12 Martina Franca Via D’Annunzio, 34 Via Nazionale, 53 (Fraz. Villa d’Agri) Polignano a Mare Piazza Aldo Moro, 1 Massafra Corso Italia, 27/29 Melfi Piazza Mancini Abele Putignano Via Tripoli, 98 Palagianello Via Carducci, 11 Rionero in Vulture Via Galliano Rutigliano Piazza XX Settembre, 8 San Giorgio Jonico Via Cadorna, 11 Rotonda Via dei Rotondesi in Argentina, s.n.c. Ruvo di Puglia Via Monsignor Bruni, 14 San Fele Via Costa, 12 Sannicandro di Bari Piazza IV Novembre, 15 Senise Via Amendola, 33/39 Santeramo in Colle Via S. Lucia, 78 Tito Scalo P.zza Nassirya Rione Mancusi, 20 Terlizzi Via Gorizia, 86/d Toritto Piazza Aldo Moro, 48 CAMPANIA Triggiano Via Carroccio, 5 Provincia di Salerno Turi Via A. Orlandi, 15 www.bancavalle.it Salerno Valenzano Via Aldo Moro Via S. Margherita, 36 LOMBARDIA Via G. Cuomo 29 Provincia di Barletta-Andria-Trani Provincia di Brescia Via Settimio Mobilio, 26 Andria Piazza Marconi, 6/10 Brescia Agropoli Via Risorgimento - ang. Via Bruno Barletta Piazza Caduti, 21 Via Duca degli Abruzzi, 175 Angri Via Papa Giovanni XXIII, 48 Trani Corso Italia, 17/b Viale Bornata, 2 Baronissi Corso Garibaldi, 197 Bisceglie Via Aldo Moro, 5 Angolo Terme Piazza degli Alpini, 4 Battipaglia Via Salvator Rosa, 98 Canosa di Puglia Via Imbriani, 30/34 Artogne Via Geroni, 12 Campagna Margherita di Savoia Corso V. Emanuele, 23 Berzo Demo Via San Zenone, 9 Via Quadrivio Basso (Fraz. Quadrivio) Berzo inferiore Piazza Umberto I, 35/a Castel San Giorgio Via Guerrasio, 42 Provincia di Brindisi Bienno Piazza Liberazione, 2 Cava dei Tirreni Piazza Duomo, 2 Brindisi Corso Roma, 39 Borno Piazza Giovanni Paolo II, 13 Eboli Via Amendola, 86 Cisternino Via Roma, 57 Breno Piazza della Repubblica, 1/2 Marina di Camerota Via Bolivar, 54 Erchie Via Grassi, 19 Capo di Ponte Viale Stazione, 16 Mercato San Severino Fasano Via Forcella, 66 Cazzago S.M. Via del Gallo, 2 (Fraz. Bornato) Corso Armando Diaz, 130 Francavilla Fontana Via Roma, 24 Cedegolo Via Roma, 26/28 Minori Via Vittorio Emanuele, 9 Latiano Via Ercole d’Ippolito, 25 Ceto Loc. Badetto, 23 Nocera Inferiore Via Barbarulo, 41 Mesagne Via Melissa Bassi, 1 Cevo Via Roma, 44 Pontecagnano Piazza Risorgimento, 14 Oria Via Mario Pagano, 151 Cividate Camuno Via Cortiglione Roccapiemonte Piazza Zanardelli, 1 Ostuni Via L. Tamborrino, 2 Coccaglio Largo Torre Romana, 4 San Cipriano Picentino San Vito dei Normanni Piazza Vittoria, 13 Corte Franca Via Roma, 78 Via S. Giovanni, 10 (Fraz. Filetta) Torre Santa Susanna Via Roma, 38 Corteno Golgi Via Roma, 1 Darfo Boario Terme Provincia di Sondrio PIEMONTE Via Roma, 12 Sondrio Via Trento, 50 - ang. Via Alessi Torino Corso Re Umberto I, 47 Viale della Repubblica, 2 Aprica Corso Roma, 238 Corso Lepetit, 77 (Fraz. Corna) Bormio Via Don Peccedi, 11 PUGLIA Edolo Via Porro, 51 Chiavenna Via Maloggia, 1 Bari Via Nicolò dell’Arca, 9-9a Esine Piazza Giuseppe Garibaldi, 4/6 Grosio Via Roma, 1 Gianico Via XXV Aprile, 7/9 Livigno Via Botarel, 35 TOSCANA Malegno Via Lanico, 36 Morbegno Piazza Caduti per la Libertà, 9 Firenze Viale G. Matteotti, 42 Malonno Via G. Ferraglio, 4 Piantedo Via Nazionale, 875 Arezzo Via XXV Aprile, 28-28/a Marone Via Cristini, 49 Tirano P.zza Marinoni, 4 Grosseto Via Giacomo Matteotti, 32 Niardo Piazza Cappellini, 3 Livorno Via Scali d’Azeglio, 46/50 Ome Piazza Aldo Moro, 7 - ang. Via Cadorna Palazzolo sull’Oglio Via XXV Aprile, 23 Pisa Via G.B. Niccolini, 8/10 Piancogno Via Vittorio Veneto, 7 (Fraz. Cogno) Via XI Febbraio, 1 (Fraz. Pianborno) Pian Camuno Piazza Giuseppe Verdi, 8 Pisogne Via Provinciale, 6 (Fraz. Gratacasolo) Ponte di Legno Via Cima Cadi, 5/7/9 www.iwbank.it Provaglio d’Iseo Via Roma, 12 ABRUZZO www.ubibanca.lu Via S. Filastro, 18 (Fraz. Provezze) L’Aquila Via F. Savini Rodengo Saiano Via Guglielmo Marconi, 11/b Pescara Piazza Rinascita, 6/9 LUSSEMBURGO Rovato Corso Bonomelli, 13/17 37/a, Avenue J.F. Kennedy, L. Sonico Via Nazionale (c/o c.c. Italmark) CAMPANIA Temù Via Roma, 71/73 Napoli Via A. Depretis, 51 GERMANIA Torbole Casaglia Piazza Repubblica, 25/26 Pomigliano d’Arco Via Roma, 31 Monaco Prannerstrasse, 11 Travagliato Via Brescia, 44 Caserta Corso Trieste, 170 Vezza d’Oglio Via Nazionale, 65 Salerno Via SS. Martiri Salernitani, 25 SPAGNA Madrid Provincia di Bergamo LIGURIA Torre Espacio - Planta 45 Ardesio Piazza Alessandro Volta, 8/9 Genova Via XX Settembre, 33 Paseo de la Castellana, 259 Casazza Piazza della Pieve, 1 Castione della Presolana LAZIO P.zza Martiri di Cafalonia, 1 Roma Clusone Viale Gusmini, 47 P.zza Giuliano della Rovere, 9-11/a Costa Volpino Via Cesare Battisti, 34 (Fraz. Lido di Ostia) Lovere Via Gregorini, 43 Via Vincenzo Bellini, 27 Rogno Piazza Druso, 1 Sarnico Via Roma, 68 LOMBARDIA Sovere Via Roma, 20 Milano Villongo Via J. F. Kennedy, 5 Via Silvio Pellico, 10/12 Corso Europa, 20 Provincia di Como Via Cavriana, 20 Dongo Via Statale, 77 Cremona Via Rialto, 20 Menaggio Via Lusardi, 74/76 Monza Via Girolamo Borgazzi, 7 UBI Banca calendar of corporate events of UBI Banca for 2015
Date Event
Approval of the interim financial report as at and 10th November 2015 for the period ended 30th September 2015 by the Management Board
The dates of the presentations of accounting data to the financial community, which will indicatively take place on a quarterly basis, will be communicated during the course of the financial year.
Financial Calendar
Contacts
All information on periodic financial reporting is available on the website www.ubibanca.it
Investor relations: Tel 035 3922217 Email: [email protected]
Media Relations: Tel 02 77814932 /02 77814213 Email: [email protected]
Registered shareholders’ office: Tel 035 3922312 Email: [email protected]
Contacts