Annual report 2014 annual report 2014 2 ___________________________________________________________________________________________________________________________________________ Banco Popolare Società Cooperativa Registered office and General headquarters: Piazza Nogara, 2 - 37121 Verona Fully paid up share capital as at 31 December 2014: Euro 6,092,996,076.83 Tax Code, VAT No. and Verona Companies’ Register Enrolment No. 03700430238 Member of the Interbank Deposit Guarantee Fund and the National Guarantee Fund Parent Company of the Banco Popolare Banking Group Enrolled in the register of Banking Groups ___________________________________________________________________________________________________________________________________________ 3 OFFICERS, DIRECTORS AND INDEPENDENT AUDITORS AS AT 31 DECEMBER 2014 Board of Directors Chairman Carlo Fratta Pasini (*) Deputy Chairman Guido Castellotti (*) Deputy Chairman Maurizio Comoli (*) Managing Director Pier Francesco Saviotti (*) Directors Patrizia Codecasa Luigi Corsi Domenico De Angelis (*) Maurizio Faroni (*) Gianni Filippa Cristina Galeotti Andrea Guidi Valter Lazzari Maurizio Marino Daniela Montemerlo Giulio Pedrollo Enrico Perotti Claudio Rangoni Machiavelli Fabio Ravanelli Cecilia Rossignoli Sandro Veronesi Franco Zanetta Tommaso Zanini Cesare Zonca (*) Cristina Zucchetti (*) members of the Executive Committee Board of Statutory Auditors Chairman Pietro Manzonetto Standing Auditors Maurizio Calderini Gabriele Camillo Erba Claudia Rossi Alfonso Sonato Alternate Auditors Marco Bronzato Paola Pesci General Management General Manager Maurizio Faroni Joint General Manager Domenico De Angelis Ethics and Disciplinary Committee Standing members Aldo Bulgarelli Luciano Codini Giuseppe Germani Alternate Members Matteo Bonetti Donato Vestita Manager responsible for preparing the Company’s financial reports Gianpietro Val Independent Auditors Reconta Ernst & Young S.p.A. 4 ___________________________________________________________________________________________________________________________________________ LETTER TO SHAREHOLDERS Dear Shareholders, the financial year which has just ended was characterised and conditioned by several extraordinary events, which had a significant impact on results, which recorded a loss, recognised in the financial statements, of around euro 2 billion. This loss was generated, to a small extent, by the impact of the ongoing economic crisis on Banco’s loans portfolio, and to a greater extent, by the need to change the criteria used to estimate exposure items, in order to align provisions with the estimated forecasts made during the year by the ECB as part of the “Asset Quality Review”. The increased level of coverage of financial statement exposures, resulting from the cited change to estimation criteria, substantially entailed extending the criteria already adopted for prudential purposes to calculate Common Equity Tier 1 capital (CET 1 Capital) for the calculation of financial statement items. The decision to partially write down the goodwill related to financing activities, whose future profitability was reduced mainly due to the falling trend of interest rates, had an impact of around euro 300 million on the income statement. As said goodwill amounts (and those of other intangible assets) have always been wholly deducted from the calculation of regulatory capital – CET 1 Capital, this meant that although the above-cited valuation decisions had a significant impact on the income statement for 2014 and on the relative income results, they had a far lesser impact on the calculation of regulatory capital ratios and in particular on CET 1 Capital (which, in fact, fell by only euro 358 million in the fourth quarter). Banco Popolare therefore has a particularly solid equity base, due to the substantial stability of operating income, to the containment of costs and above all to the share capital increase and Banco/Creberg merger operations promptly launched in the first few months of last year. With regard to the beginning of this financial year, in particular, Banco has maintained a regulatory capital and a level of provisions for non performing loans, which see it positioned in the higher segment of the national banking scenario. The solidity of Banco Popolare’s equity structure is further confirmed by the presence in the Securities Portfolio (mainly Government securities) of unrealised gains, not recording in the statement of financial position or income statement, of relevant amount. Overall, these represent important and significant prerequisites to be able to immediately and decisively change course, taking advantage of both the improvement, albeit slight, in the domestic economic climate and of the difficulties, often much greater, being experienced by many competitor banks. This scenario was disrupted by the entry into force of Italian Decree Law 3/2015, which seeks to transform the top 10 cooperative banks, and therefore, Banco Popolare first and foremost, into joint stock companies (S.p.A.). Whatever the opinion of this decree may be, and in our case it can only be negative both in terms of method and merit, and whatever the final version resulting from its forthcoming conversion into law may be, one thing is certain, from that day, the ‘life’ of our bank changed profoundly and for good. From that day, our bank, which previously could not fall into the hands of anyone, became susceptible to hostile takeovers and its autonomy, which was once guaranteed by per capita voting, became a “prize” to be earned, results on hand, day after day. A very delicate transition phase has therefore begun, the outcome of which may either be the end of our story, if we become part of a large foreign banking group, or its continuation, although in a more challenging and dynamic context than in the past, by joining the two major Italian banking groups, which have formed in the past through the grouping of national banks with savings banks. Achieving this second outcome is the difficult and stimulating task that Banco’s directors, managers and collaborators are faced with today. Nevertheless, to become a large independent bank, in the form of a joint stock company, we not only need to undertake intelligent business combinations able to guarantee economies of scale and purpose, but, above all, we need to considerably speed up the implementation of the guidelines of the Business Plan, to rapidly achieve a cost and revenue structure and, as a consequence, returns on capital invested, which are in line with those of the leading domestic banks. This task is particularly difficult and challenging for banks, like ours, which do not wish to disown our commercial and local identity, and which, although focused on increasingly upscaling its operations, intend to continue the “trade” of a bank which intermediates between credit and savings, increasingly guaranteeing innovative services for our business customers, particularly small and medium enterprises, for households and for organisations that operate in areas in which we have our historic roots. ___________________________________________________________________________________________________________________________________________ 5 To tackle this leap of quality, both in terms of strategy and operations, we have to immediately adopt an open and innovative approach, and a determined and courageous spirit; what is really needed is a joint and shared effort from all of the men and women that work for Banco Popolare. It is clear that no further sacrifice can and should be asked of our shareholders, who have suffered the downtrend in our results for many years, and who have sustained our share capital twice. The progress that ordinary operations is starting to show, particularly as regards the cost of credit, just as the possibility that, over the year several of Banco’s assets (such as the equity investment in ICBPI) may increase in value, are encouraging signs, which show us that successfully tacking the challenge we have before us is possible. It is therefore essential that 2015 marks Banco’s return to profitability; however, we won’t get far, if, as we said earlier, Banco is not able to move with determination and with a united front in the strategic direction indicated above. The coming months will show whether we are capable of doing this. As the Supreme Poet, for whom we celebrate 750 years from his birth, said: here and now “Incipit vita nova!”. Verona, 4 March 2015 The Board of Directors ___________________________________________________________________________________________________________________________________________ 7 CONTENTS Notice of call ......................................................................................................................................................... 9 REPORT ON OPERATIONS AND CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ..................................... 13 Banco Popolare Group structure ........................................................................................................................... 14 Group territorial network ..................................................................................................................................... 16 Group financial highlights and economic ratios .................................................................................................... 18 Group Report on Operations......................................................................................................................