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BA N C a G E N E R a L I S .P .A . an N U AL R E P O R T a T 3 1 .1 2 .2 0 BANCA GENERALI S.P.A. ANNUAL REPORT at 31.12.2016 ANNUAL REPORT ANNUAL at 31.12.2016 at CONFIDENCE EXHIBITION A grand event Confidence, a new series by Michele Alassio, celebrates the tenth for a great story anniversary of the stock-exchange listing of Banca Generali, retra- cing the Bank’s path over the decade and highlighting the spirit that drove all those who played a key role in making it a success story on the Italian financial scene. TIERPARK SIENESE CRETE SAN MARCELLO PISTOIESE Berlin, August 2016 Tuscany, July 2016 Tuscany, July 2016 CAPODICHINO AIRPORT TENTENNANO FORTRESS ISCHIA Naples, June 2016 Tuscany, July 2016 June 2016 NAZARÈ THE BIG OAK GIAU PASS Portugal, September 2016 Tuscany, July 2016 Belluno, August 2016 BANCA GENERALI S.P.A. ANNUAL REPORT at 31.12.2016 These financial statements have been translated from those issued in Italy, from the Italian into the English language, solely for the convenience of international readers. The Italian version remains the definitive version. BANCA GENERALI S.P.A. ANNUAL REPORT at 31.12.2016 Board of Directors – 10 March 2017 BANCA GENERALI S.P.A. ADMINISTRATION AND CONTROL BODIES Board of Directors Giancarlo Fancel Chairman Giovanni Brugnoli Director Azzurra Caltagirone Director Anna Gervasoni Director Massimo Lapucci Director Giovanni Luca Perin Director Annalisa Pescatori Director Cristina Rustignoli Director Vittorio Emanuele Terzi Director Board of Statutory Auditors Massimo Cremona Chairman Mario Francesco Anaclerio Flavia Minutillo General Manager Gian Maria Mossa Manager in charge of preparing the Paolo Tamagnini Company’s Financial Reports 2016 2 BANCA GENERALI S.P.A. CONTENTS GROUP ECONOMIC AND FINANCIAL HIGHLIGHTS 6 CHAIRMAN’S LETTER 11 1. REPORT ON OPERATIONS 13 1.1 Consolidated Report on Operations 15 1. The Banca Generali Group in 2016 17 2. Macroeconomic Context 20 3. Competitive Positioning 22 4. Operating Performance 26 5. Balance Sheet and Net Equity Aggregates 39 6. Indirect Net Inflows 49 7. Results by Line of Business 51 8. Corporate Social Responsibility 53 9. Comments on the Parent Company’s Operations 61 10. Performance of Subsidiary Companies 71 11. Related Party Transactions 72 12. Banca Generali Stock Performance 76 13. Products and Marketing 78 14. Human Resources 85 15. Organisation and ICT 93 16. Auditing 96 17. Main Risks and Uncertainties 97 18. Outlook 100 19. Proposal for the Distribution of Profits 101 1.2 Annual report on Corporate Governance and Company Ownership 103 2. CONSOLIDATED FINANCIAL STATEMENTS AS OF 31.12.2016 163 Consolidated financial statements 164 Notes and comments 170 Independent Auditors’ Report 306 3. FINANCIAL STATEMENTS OF BANCA GENERALI S.P.A. AS OF 31.12.2016 309 Group economic and financial highlights 310 Financial statements 312 Notes and comments 318 Independent Auditors’ Report 452 Board of Statutory Auditors’ Report 454 4. ATTESTATION 458 Attestation pursuant to Article 154-bis, paragraph 5, of Legislative Decree no. 58/98 5. ANNEXES 463 2016 3 SIENESE CRETE Tuscany, July 2016 Michele Alassio GROUP ECONOMIC AND FINANCIAL HIGHLIGHTS BANCA GENERALI S.P.A. GROUP ECONOMIC AND FINANCIAL HIGHLIGHTS Consolidated figures (€ MILLION) 2016 2015 CHANGE % Net interest income 58.7 66.2 -11.4 Net fees 309.0 370.8 -16.7 Net income (loss) from trading activities and dividends 34.7 28.9 20.1 Net banking income 402.4 465.9 -13.6 Staff expenses -80.5 -80.9 -0.6 Other general and administrative expense -140.1 -134.0 4.6 Amortisation and depreciation -5.9 -5.3 11.9 Other operating income/expenses 44.5 44.7 -0.4 Net operating expenses -182.0 -175.6 3.7 Operating result 220.4 290.3 -24.1 Provisions -34.7 -45.6 -23.8 Adjustments -0.8 -6.5 -88.0 Profit before taxation 184.8 238.2 -22.4 Net profit 155.9 203.6 -23.4 PERFORMANCE INDICATORS 31.12.2016 31.12.2015 CHANGE % Cost/Income ratio 43.7% 36.5% 19.7 EBTDA 226.3 295.7 -23.4 ROE (a) 33.7% 50.3% -33.0 ROA (b) 0.35% 0.52% -31.7 EPS - Earnings per share (euros) 1.343 1.757 -23.5 (a) Net return on equity, excluding net profit (share capital, share premium, reserves, valuation reserves, treasury shares) at the end of the reporting year and the previous year. (b) Return on assets calculated on the average of Assoreti quarterly AUM. Net proft 300 200 -23.4% 203.6 155.9 100 0 MILLION 31.12.2015 31.12.2016 2016 \ Financial highlights 6 BANCA GENERALI S.P.A. Net inflows (€ MILLION) (ASSORETI DATA) 31.12.2016 31.12.2015 CHANGE % Mutual funds and Sicavs 198 869 -77.2 Asset management 1,020 -168 707.1 Insurance / Pension funds 2,749 3,394 -19.0 Securities / Current accounts 1,710 545 213.8 Total 5,677 4,640 22.3 Assets Under Management & Custody (AUM/C) (€ BILLION) (ASSORETI DATA) 31.12.2016 31.12.2015 CHANGE % Mutual funds and Sicavs 11.2 10.9 2.4 Asset management 4.7 3.6 28.6 Insurance / Pension funds 20.2 17.3 17.1 Securities / Current accounts 11.5 9.8 17.3 Total 47.5 41.6 14.3 Net equity (€ MILLION) 31.12.2016 31.12.2015 CHANGE % Net equity 646.5 636.8 1.5 Own funds 462.9 427.9 8.2 Excess capital 261.9 212.8 23.1 Total Capital Ratio 18.4% 15.9% 15.8 Net infows Assets Under Own funds Management 15 60 600 +14.3% +8.2% 10 40 47.5 400 462.9 41.6 427.9 +22.3% 5 20 200 5.677 4.640 0 0 0 BILLION 31.12.2015 31.12.2016 BILLION 31.12.2015 31.12.2016 MILLION 31.12.2015 31.12.2016 2016 \ Financial highlights 7 BANCA GENERALI S.P.A. HIGHLIGHTS 2016 NET TOTAL ASSETS INFLOWS UNDER MANAGEMENT 5,677 15,860 MILLION MILLION +22.3% +8.9% NET AUM INFLOWS 3,967 MILLION OWN -3.1% FUNDS 462.9 MILLION +8.2% NET PROFIT OPERATING NET PROFIT BEFORE RESULT BANKING TAXATION INCOME 155.9 184.8 220.4 402.4 MILLION MILLION MILLION MILLION -23.4% -22.4% -24.1% -13.6% NET OPERATING EXPENSES 182.0 MILLION +3.7% 2016 \ Highlights 8 BANCA GENERALI S.P.A. TOTAL AUM/C 47,547 MILLION +14.3% NET EQUITY 646.5 MILLION +1.5% TOTAL CAPITAL TIER 1 RATIO 18.4% 16.7% +15.8% +16.7% 2016 \ Highlights 9 SAN MARCELLO PISTOIESE Tuscany, July 2016 Michele Alassio BANCA GENERALI S.P.A. Chairman’s Letter Dear Shareholders, From a macroeconomic and geopolitical standpoint, 2016 was a complex year that included some significant events that I would not hesitate to characterise as historical in scope. Howe- ver, the most important event for the Bank was the untimely passing of Chief Executive Officer Piermario Motta, who since 2005 had been the driving force behind the Company’s strategic and business transformation, leading it to become one of the most prestigious and dynamic com- panies in the Italian financial industry. Our first thoughts and our most heartfelt gratitude go out to him. Despite his loss, the Bank has not relented from the pursuit of excellence on which it embarked under his leadership. Indeed, thanks to the commitment and dedication shown by its management – starting with Gian Maria Mossa, who took up the challenge with a sense of re- sponsibility and determination – employees and network personnel, this process has continued with renewed vigour, allowing the Bank to reach ambitious new milestones. In 2016, assets grew considerably and an even stronger strategic focus on financial planning and wealth management services further strengthened the number-one private bank listed on the Italian stock exchange. The Bank’s commitment to quality and innovation put it on the front lines of the challenges posed by MiFID II and the market in which it operates. Against the backdrop of a general decline in networks during the year, Banca Generali stood out for its dynamic performance, with a 22% increase in net inflows, which reached a new record of 5.7 billion euros. Managed assets and assets under administration and custody rose by 14% to 47.5 billion euros and the Bank outpaced all of its major competitors in terms of the increase in the number of its Financial Advisors, who continued to lead the market in terms of expertise, productivity and portfolio size. Financial advisory plays a central role in the Bank’s strategy, in the light of the constantly chan- ging legislative scenario, which, on paper, will result in significant changes to the approach to financial instruments in Europe. The development of the new, broader service model is aimed at optimally – and even more thoroughly – satisfying the changed needs of Italian households in protecting and building their wealth. The commitment over the past two years to developing a cutting-edge advanced advisory platform and solutions is yielding very interesting results that bear out the validity of the Bank’s strategic decisions. Wealth management expertise is being extended to new advisory areas: real estate, generational transfer, corporate finance, art advisory, and family office, resulting in a unique range of services that increases the Bank’s potential for tomorrow. The priority assigned to growth – fundamental in a sector in which size is important to incre- ase the sustainability of results in the long term – has not distracted attention from earnings results and capital solidity. The profit for the year of 155.9 million euros was supported by a constant increase in recurring fees, which grew for the fifth consecutive year, bearing witness to the quality and sustainability of the business model, even when financial markets are less than favourable, constrained by fears of an economic slowdown in Asia and geopolitical uncertain- ties relating to elections.
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