GRUPPOGRUPPO CARIGECARIGE Programme and Covered Bond Issue
Investor Presentation Obbligazioni Bancarie Garantite August 2010 GRUPPO CARIGE 1 Executive Summary
Ratings: A2/P1 Moody’s, A/F1 Fitch, A-/A2 S&P Among the top 10 Italian banking Groups Banca Carige Adequate capital ratios Excellent / long standing mortgage origination and servicing history No direct exposure to subprime market and monoline
Low level of indebtedness by households Italian Mortgage High home ownership of the Italian households Market Property values’ volatility much lower than in other European countries Low delinquencies compared to other European countries
Italian legislative covered bond: Obbligazioni Bancarie Garantite (“OBG”) OBG Triple A expected rating (Moody’s, Fitch Ratings) Programme Benefits from 26% currently committed over-collateralisation
95.07% Italian prime residential mortgages, 4.93% Italian commercial mortgages all originated by Gruppo Carige Eligible mortgage loans, as per Italian OBG law Collateral All loans are performing Characteristics High concentration in the north of Italy (80%) Highly seasoned portfolio (38 Months Weighted average seasoning) WA LTV: 50.88% (Residential) and 24.64% (Commercial)
GRUPPO CARIGE 2 Solid ratings
Short term credit rating: P-1 Short term credit rating: F1 Short term credit rating: A2 Long term credit rating: A2 Long term credit rating: A Long term credit rating: A- Outlook: Stable Outlook: Stable Outlook: Negative
Credit opinion 23 November 2009 Report 24 May 2010 Report 4 May 2010
Ratings of Banca Carige SpA reflect the The ratings of Banca Carige are based on The ratings on Banca Carige SpA reflect bank's strong franchise in the north- its expansion through organic growth the bank's strong franchise in its home western Italian region of Liguria, its and the acquisition of branches, which Region of Liguria in northwestern Italy, satisfactory financial fundamentals as has helped to underpin operating good liquidity, and good efficiency, well as ongoing integration challenges. revenue generation; on a good franchise underpinned by cost synergies with in its home region; on sound liquidity; integrated entities. Despite stronger competition from larger and on adequate capitalisation, which Offsetting factors include high single- banking groups that have entered the has benefited from regular capital name and sector loan concentration, region in recent years, we believe that increases to finance the bank’s growth. capitalization that is being weighed down Carige should be able to defend its The ratings also reflect risks linked to by capital intensive insurance franchise thanks to a wide product range fast expansion, including integration risk operations, and high sensitivity of and a multi-channel distribution and the potential for deterioration of revenues to low interest rate levels. approach. asset quality.
Source: rating agencies’ report
GRUPPO CARIGE 3 Table of Contents
Issuer description
Italian mortgage market
Gruppo Carige’s mortgage business
Banca Carige OBG Programme
Cover Pool Description
Annexe : Italian OBG Law vs. European Covered Bond Framework
GRUPPO CARIGE 4 Banca Carige Group today
~50,000 small shareholders Fondazione CR CEP Assicurazioni Genova e Groupe BPCE Market Generali Imperia
44.06% * 14.98% * 2.97% * 37.99% *
Banca Carige SpA Cassa di Risparmio di Genova e Imperia
Banking Insurance Finance Trustee
• Banca Carige • Carige Vita Nuova (life) •CarigeAM SGR •Centro Fiduciario •CR Savona • Carige Ass.ni (non life) • Creditis (Consumer •CR Carrara credit) •BM Lucca
•B. CesarePonti Main Companies Only
667 (**) BRANCHES & 6,038 1.9 M CUSTOMERS EQUITY EMPLOYEES 427 INSURANCE OUTLETS 3.5 € BILLION (1.2 M BANKING; 0,7M ASSURANCE) 859 CONSULTANTS
*Holding calculated on the basis of ordinary shares
** Including 2 branches opened in July Operational and accounting data as at 30 June 2010
GRUPPO CARIGE 5 Among the top Italian banking Groups
Market Cap(1) (€bn) Net Customer Loans FY09 (€bn)
38.6 565
30.1 • Ordinary shares 2.7 €b #5 374 • Savings shares 0.5 €b #8
152 5.4 5.0 3.2 3.0 2.2 2.0 98 95 1.6 1.5 0.9 45 33 23 20 18 18
(1) Data as at 12 August 2010 Domestic Branch Network FY09 (#) Cost to Income Ratio (%) FY09
9,799 #4
7,884 #8 69.1% 69.8% 70.7% 64.2% 66.5% 66.8% 55.6% 55.7% 56.9% 58.1% 42.9% 3,129 2,292 1,966 1,286 795 667 575 515 278
Including 22 ex MPS branches and 2 branches opened in July Source: Companies data
GRUPPO CARIGE 6 Sound capital ratios
Capital Ratios 12.00% 10.03% 10.00% 9.09% 1H10 including the full conversion of T1R min 7.87% the convertible 8.00% 6.82% bonds at current T1R recommended share price T1R Carige Group 6.00% 7.06% TCR 10.4% TCR min 6.04% T1R 8.1% TCR recommended 4.00% CT1R 7.3% TCR Carige Group CT1R Carige Group 2.00% 2005 2006 2007 2008 2009 June 2010 (*) (*) Operational data
Core Tier 1 Ratio (%) FY09 Total Capital and Tier 1 Ratio (%) FY09
#7 CT1R #10 TCR #7 T1R 8.1% 8.0% 7.6% 7.4% 7.4% 7.1% 7.1% 7.0% 12.1% 12.8% 6.6% 6.2% 12.0% 11.8% 11.0% 11.9% 10.8% 11.9% 10.8% 10.0% 9.3%
12.6% 8.7% 8.6% 8.4% 8.1% 8.0% 7.9% 7.7% 7.5% 7.2% 6.6%
CT1R T1R Residual TCR
Source: Companies data
GRUPPO CARIGE 7 Customer based funding and no pressure on liquidity
Funding Direct deposits by segment – 1H10
1H10 Other Affluent €m% 26.1% & Mass Interbank deposits 2,369.2 8.3 Market money market deposits and current accounts 1,997.6 7.0 48.0% other deposits 371.6 1.3 Private Customer deposits 23,166.2 80.8 12.7% short term deposits 15,975.2 55.7 Change medium/long term deposits 1H10/1H09 25.1 +12.9% and bonds 7,191.0 Corporate Total 26.3 €b EMTN programme 938.0 3.3 13.2% deposits 50.0 0.2 Mass Market: total deposits < 80 k€, Affluent > 80 k€, Private > 500 k€ bonds 888.0 3.1 Subordinated loans 923.8 3.2 Current Debt Maturity Profile (€m) floating rate bonds 913.9 3.2 convertible fixed rate bonds 9.9 0.0 500 €m Securitisation 271.5 0.9 callable in RMBS performing securities 271.5 0.9 2011 Covered Bonds 1,000.0 3.5 100 €m 2,071 TOTAL FUNDING 28,668.7 100.0 callable in COVERED BONDS 1,647 2013 1,554 INSTITUTIONAL Funding includes further: 1,209 1,122 1,137 CUSTOMERS -€85.4 million from the securitization Argo 1,041 Mortgage carried out in 2001, derecognised * in the financial statement pursuant to the 394 310 216 226 exemption allowed by IFRS 1 on first time 5 adoption - €500 million of covered bonds eligible for 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2023 EBC RePo * Held by Banca Carige
Source: Operational and accounting data (1H10 report) GRUPPO CARIGE 8 Diversified loan book...
by segment by area (*)
Private & Affluent South & Public Other Mass Isles Entities 2.4% Centre 10.6% Market 6.0% Liguria 4.1% 27.3% ¾of loans 20.6% to 37.8% retail Large Small Corporate Business customers 8.8% 9.8% SME North 37.0% 35.6% (*) by customers’ residence
by maturity by sector
Other Sales‐related 26.1% services 33.5% NPL mortgage loans to 4% individuals 38% Shipping and public entities air transport 3% 3.2% m/l term Hotel and 73% consumer credit catering 4% services Building and short term Wholesale & 5.1% public works 23% loans to corporate retail trade, 16.9% 55% salvage and repairs 15.2% Non-financial businesses and personal businesses (total 14.9 €b) by sector LOANS TO CUSTOMERS 1H10 : 24.3 €bn Small business = turnover< 1 m€; SMEs= <100 m€; Large Corporate= >100 m€ Mass Market: total deposits < 80 k€, Affluent > 80 k€, Private > 500 k€
Source: Operational and accounting data (1H10 report ) GRUPPO CARIGE 9 with sound credit quality
Breakdown of impaired loans (€m) Impaired loans 1Q10 Comparison wih the System (€m) 1H10 Gross Adj. Net Coverage Performing loans 22,182 73 22,109 0.3% Carige Group Impaired loans 2,094 533 1,560 25.5% (Mar10 ‐ Impaired loans 2.1€b) 924 991 NPL (Sofferenze) 991 460 531 46.4% 854 Watchlist (Incagli) 499 62 436 12.5% 444 474 442 498 499 474 Rescheduled (Ristrutturati) 130 4 127 2.7% 132 130 130 Past due (Scaduti) 474 8 466 1.7%
Total loans to customers 24,276 606 23,669 2.5% Dec 09 Mar 10 June 10 System (Mar10 ‐ Impaired loans 138.8€b) 1H10 FY09 60,242 64,798 NPL 49,141 51,307 Cost of risk 0.2% 0.4% Watchlist 15,759 13,449 Rescheduled Impaired loan ratio 7,697 9,234 Past due
8.2% 8.6% Dec 09 Mar 10 Source: Bank of Italy 6.9% 6.2% 6.0% Gross Carige Change 6.6% 6.3% Dec09/08 Mar10/Dec09 June10/Dec09 5.1% Net 4.1% 4.6% NPL 37.3% 8.2% 16.1% Watchlist 8.7% ‐0.5% 12.3% Dec 07 Dec 08 June 09 Dec 09 June 10 Rescheduled 2442.3% ‐1.7% ‐1.3% Past due 95.7% 4.9% ‐0.1% NPL ratio Impaired loans 49.0% 4.7% 9.9%
4.1% 3.6% 3.6% 3.3% 2.9% System Change Dec09/08 Mar10/Dec09 Gross NPL 40.8% 7.6% 2.0% 2.2% Net Watchlist 47.6% 4.4% 1.6% 1.7% 1.4% Rescheduled 351.4% 20.0% Dec 07 Dec 08 June 09 Dec 09 June 10 Past due 69.6% ‐14.7% Impaired loans 52.6% 4.5%
Operational and accounting data (FY07 report – FY08 report - 1H09 report – FY09 report – 1H10 report) GRUPPO CARIGE 10 A diversified network
The network today new ex ISP ex Unicredit ex MPS branches branches branches branches
5 8 667 2 1/1 73/69 46/ 37 56/25 643 22 28/ 22 40 France 254/ 15 79 79/21 5/12 1 2/9 522 2 137 17 39/40 32 9/33 1989 2007 2009 TODAY 5 3 11/24 100% 72% 71% 69% 26 96% 48% 39% 38%
63/52 Banking branches 667 % of Branches % of Insurance outlets 427 in Branches Northern Italy in Liguria
GRUPPO CARIGE 11 Stable net profit
Net profit (€m) ROE FY09
2007 2008 2009 Change %
08/07 09/08 09/07 12.6% BPS 147 44 201 ‐70.4% 361.1% 36.5% CARIPARMA 295 297 311 0.7% 5.4% 5.4% 8.4% 7,2% ROE Adjusted* CARIGE 205 206 205 0.3% ‐0.1% 0.3% 5,7% BPVI 114 109 101 ‐4.4% ‐7.1% ‐11.2% 5.6% CREVAL 86 101 76 17.2% ‐24.1% ‐11.2% 4.1% 4.0% 3.7% 3.0% 2.9% 2.7% 2.4% 2.4% BP 617 ‐333 267 … … ‐56.7% 1.5% ISP 7,250 2,553 2,805 ‐64.8% 9.9% ‐61.3% CREDEM 249 157 89 ‐37.0% ‐43.4% ‐64.4% BPM 324 75 104 ‐76.8% 37.6% ‐68.0% BPER 374 134 116 ‐64.3% ‐13.4% ‐69.1% UBI 881 69 270 ‐92.2% 291.4% ‐69.3% UNICREDIT 6,506 4,012 1,702 ‐38.3% ‐57.6% ‐73.8% (*) Net of AFS reserve for the revaluation of the stake in Bank of Italy MPS 1,438 923 220 ‐35.8% ‐76.9% ‐84.7%
Source : Companies data
Accounting data (FY07 report – FY08 report - FY09 report) GRUPPO CARIGE 12 1H10 – Growth of Deposits and Loans
TOTAL DEPOSITS (€b) GROSS LOANS TO CUSTOMERS (€b)
+ 10.4% + 11.1%
+ 7.3% + 7.6%
of which: LOANS TO INDIVIDUALS (€b) DIRECT DEPOSITS (€b) LOANS TO CUSTOMERSLOANS TO CUSTOMERS =92.5% DIRECT DEPOSITS +10.7% DIRECT DEPOSITS +8%
+ 8.7% + 2.8%
INDIRECT DEPOSITS (€b) change LOANS TO CORPORATES (€b)
change net of ex MPS +10.1% branches’ contribution +9.9% ex MPS branches + 5.7% + 7.1%
Operational data and accounting data (1H09 report – 1H10 report) GRUPPO CARIGE 13 1H10 – Economic results
GROSS OPERATING INCOME (€m)
NET PROFIT (€m)
-6.9%
-36.2%
of which: NET INTEREST INCOME (€m)
COSTS (€m) -11.5%
-1.9% NET COMMISSIONS (€m)
+8.7%
change
Operational data and accounting data (1H09 report – 1H10 report) GRUPPO CARIGE 14 Table of Contents
Issuer description
Italian mortgage market
Gruppo Carige’s mortgage business
Banca Carige OBG Programme
Cover Pool Description
Annexe: Italian OBG Law vs. European Covered Bond Framework
GRUPPO CARIGE 15 The mortgage market in Italy
In recent years the rapid growth in the mortgage …partly in response to diminishing interest rates market has slowed down and only in 2009 a
recovery took place… 6.00% 300 20% 5.55% 17.4% 5.32% 5.50% 250 15% 12.5% 200 5.00% 280 10% 8.7% 150 4.50% 244 265 264 5% 3.87% 100 217 4.47% 6.2% 4.00% 0% 50 ‐0.4% 3.68% 3.50% 0 ‐5% Dec‐05 Dec‐06 Dec‐07 Dec‐08 Dec‐09 Dec‐05 Dec‐06 Dec‐07 Dec‐08 Dec‐09 average initial interest rate stock (€ bn) annual growth
The Italian mortgage market has a limited size… …and Italy shows the lowest mortgage debt-to- GDP ratio of any major Western European nation
959 70.0% 62.5% 60.0% 724 658 50.0% 37.5% 38.4% 40.0% 30.0% 287 18.4% 20.0% 10.0% 0.0% Italy France Germany Spain Italy France Germany Spain
Stock as at 30 March 2010 (€bn) Mortgage debt/GDP as at 31 Dec 09
Sources: ECB, Bank of Italy, Agenzia del territorio GRUPPO CARIGE 16 The Italian mortgage profile
The size of mortgage loans has been moderately Most mortgages were floaters: only during 2008 rising over the years. the uptake of fixed rate mortgages increased.
4% 4% 4% 3% 16% 18% 19% 18% 15% 9% 10% 14% 18% 39% 52% 51% 48% 52% 51% 64% 72% 52% 23% 38% 22% 23% 24% 21% 5% 3% 4% 4% 2006 2007 2008 2009 2006 2007 2008 2009 €m fixed rate floating rate mixed rate <= 50 51‐100 101‐200 201‐500 >=500
In 2009, also because of diminishing interest rates Until 2008, the ndirect channel has gradually lenders have gradually reduced the mortgage gained importance, but in 2009 it significantly lost tenor importance
31% 40% 40% 42% 35% 43% 43% 38%
23% 17% 18% 19% 22% 22% 21% 21% 60% 60% 58% 69% 13% 12% 12% 13% 7% 7% 6% 8% 2006 2007 2008 2009 2006 2007 2008 2009 years direct channel indirect channel <= 10 11‐15 16‐20 21‐25 >=26
Sources: Osservatorio Assofin GRUPPO CARIGE 17 The Italian mortgage profile
The Italian mortgage market remains among the smallest in Western Europe; with the ratio of residential mortgage debt to GDP amounting to only 18.4% (much below European peers) in 2009. The limited size of the Italian mortgage market reflects the generally low tendency of households to incur debt; households’ indebtedness remains much lower than international standards.
Growth prospects in the mortgage market might well be limited, as the home possession rate of Italian households amounts to a relatively high, thereby Italy is set among the countries with the highest owner-occupier ratio in Europe, according to Bank of Italy data.
Italian growth in the stock of residential mortgages has decelerated until 2008 and recovered in 2009. The mortgage growth in Italy has been influenced mainly by interest rate trend. Over the last decade, the growth of the Italian residential housing market has been regular without any significant spikes.
Sources: Osservatorio Assofin GRUPPO CARIGE 18 Forecast
Italy’s macroeconomic overview
2008 2009 2010E GDP -1.0% -5.3% 0.1%
Inflation rate 3.3% 1.0% 1.4%
Unemployment rate 6.8% 7.8% 9.5%
Loans +4.9% +1.4% +3.9% Direct deposits +7.4% +4.9% +4.2%
Indirect deposits -8.9% +2.2% +4.8%
Mortgage loans have started to recover with a Credit quality for mortgage loans is slightly 6.5% increase YTD improving
15% 4.5%
10% 4.0% 3.5% 5% 3.0% 2.5% 0% 2.0% 2006 2007 2008 2009 2010 YTD 2011E ‐5% 1.5% 2007 2008 2009 2010 YTD 2011E mortgage loans bad loan ratio for mortgage loans
Sources: Prometeia, CRIF, ABI, ISVAP GRUPPO CARIGE 19 House prices in Italy
Over years house prices in Italy show a more stable trend in comparison to other European countries
Italy: Nominal house prices yoy growth rates Europe: Nominal house prices yoy growth rates (source: Scenari Immobiliari) (source: EMF)
Italy: Nominal house price index Europe: Nominal house price index (source: Scenari Immobiliari ) (source: EMF)
GRUPPO CARIGE 20 The Housing Market in Italy
Housing Price Indexes (% change Q/Q) Since the late 90’s, property units on the Italian property markets have increased constantly without any significant volatility.
Since 2004 there have been some signs of deceleration in the dynamic of prices per square meter.
According to the ECB, 2009 saw a slight decrease in residential property prices (-0.5%).
The hypothesis of a fall in prices for residential property units is improbable according to the majority of operators in the sector for the following reasons: Firstly, although there has been a significant increase in property values in Italy since 1997, it is among the lowest in the international context and this would seem to exclude the existence of prices artificially inflated by speculation;
% Change in Housing Prices Secondly there is no excess of supply over demand in (1997 - 1st half 2009) Italy partly because of the scarcity of public sector social Ireland 182% housing; 175% Spain Thirdly the ANCE (national association of property builders) Great Britain 158% has underlined that there has been an increase in Sweden 136% refurbishment work in recent years, a circumstance 133% France which confirms the need to capitalise on the existing Denmark 103% supply; Italy 101% Netherland 78% Low interest rates are supportive of mortgage borrowing USA 54% and house purchases.
Sources: Global Property Guide, Nomisma GRUPPO CARIGE 21 Table of Contents
Issuer description
Italian mortgage market
Gruppo Carige’s mortgage business
Banca Carige OBG Programme
Cover Pool Description
Annexe : Italian OBG Law vs. European Covered Bond Framework
GRUPPO CARIGE 22 Origination Statistics
Residential mortgages (€m) 120 2008 2009 2010 100 Jan 85.5 34.4 41.6 Feb 81.0 30.5 48.8 80 Mar 71.9 42.9 59.7 Apr 72.9 41.4 56.2 60 May 73.8 50.8 63.4
€m Jun 80.4 59.0 66.1 40 Jul 99.7 83.7 Aug 32.5 18.6 20 Sep 77.6 50.3 Oct 96.0 57.0 0 Nov 70.3 55.7 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Dec 63.8 69.4 2008 2009 2010 Total 905.4 593.7 335.8 Commercial mortgages (€m) 2008 2009 2010 Jan 44.8 43.5 133.9 400 Feb 82.5 54.8 70.3 350 Mar 46.5 167.0 95.8 300 Apr 48.2 125.2 75.9 250 May 62.7 280.4 97.9 Jun 200 67.5 265.6 46.0 €m Jul 240.2 361.2 150 Aug 63.8 37.8 100 Sep 89.9 61.7 50 Oct 227.5 153.7 0 Nov 186.5 73.0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Dec 294.1 102.7 Total 1,454 1,727 520 2008 2009 2010 All figures refer to volume of originated mortgages
Sources: Operational data as at 30 June 2010 GRUPPO CARIGE 23 Origination and underwriting
All mortgages are originated through the Group’s 667 banking branches and 427 insurance outlets Sales force
All mortgages are underwritten at branch level The officer that approves the mortgage loan depends mainly on the amount Underwriting requested Underwriting criteria involve scoring and customer limits
All mortgaged properties are assessed by independent appraisers Property All evaluations are based on full physical inspection Valuation Mortgaged properties involve an insurance policy in favour of Carige
Banca Carige performs all of its own servicing Servicing
GRUPPO CARIGE 24 The underwriting process
DATA COLLECTION AND INPUT INTERNAL RATING SCORING CREDIT BUREAU PROPERTY VALUATION Collection of documents from the Assessment of borrower’s credit borrower (financial status & worthiness via internal model, Borrower’s credit check Property appraisal performed by credit performance; as well as based on borrower’s and other with CRIF an independent appraiser property information—location, available information type)
Key facts for credit decision . Debt to income ATTRIBUTION OF FILE . Credit Score ACCORDING TO LIMITS . Credit period On the basis of the internal DELIBERATION . LTV limits and of the borrower’s and loan characteristics, the file is . Age assigned to the appropriate . CRIF Score responsible for the credit . Property appraisal report decision . Balance sheet analysis
Pre-closing procedures: . Execution of loan & guarantor’s contracts . Signing of insurance contracts Closing . Notarisation of the mortgage contract . Registration of the property
GRUPPO CARIGE 25 The underwriting criteria
. CARIGE’s mortgage officers are highly qualified individuals (who work within CARIGE’s regional head offices or offices specialised in mortgage financing) . CARIGE uses the following guidelines(1) to determine the maximum amount of a mortgage:
. The amount of the instalments does not exceed 35% of the borrower’s(2) total monthly income (net of other debt service) AFFORDABILITY . Additional credit can be granted on personal guarantees from third parties or on pledges over cash Debt-to-income or securities in favour of CARIGE
. The initial amount of the mortgage must not exceed SECURITY 80% of the value of the property to be mortgaged Loan-to-value
. Since 2004, the various underwriting criteria have been applied via a credit scoring process. . It takes approximately 15-20 days to receive approval for the granting of a mortgage loan . The current scoring process for credit approval is operative since 2007 (1) introduced in July 2008 (2) Family income rather than individual income only
GRUPPO CARIGE 26 Overview of the Scoring System
. Carige has implemented different Rating Models to assess the credit risk associated with each relevant class of borrower . Each type of borrower is separately credit-scored on the basis of the applicable specific model
Risk segmentation Probability of Default (PD): Models
TURNOVER LINE OF CREDIT Application Behavioural FAMILIES (Consumer) Not important Not important PRIVATE Retail Internally developed Score model based on model incorporating behavioural variables Not important Entrance Score on Not important Not important and Centrale Rischi SMALL Credit Bureau FAMILIES BUSINESS (Producer) N.A. or < 250 K €
< 1 Mio. € > 250 K € SME Integrated, internally Integrated, internally developed rating rating model model incorporating incorporating financial Corporate elementary sub- sub-model, quantitative 1-100 Mio. € Not important SME models (Centrale and qualitative COMPANIES Rischi) information
LARGE Large Integrated Evaluation model with qualitative >100 Mio. € Not important financial and public information; evaluation becomes CORPORATE Corporate rating through information from Centrale Rischi
Results and analysis are integrated and led back to a common rating scale (master scale)
GRUPPO CARIGE 27 Servicing and delinquency management process
. CARIGE monitors the payments of mortgage instalments on a continuous basis 1st day of month: report to branches with unpaid standing orders 16th day of month: report to branches with unpaid direct debit . By the 20th of the month CARIGE determines unpaid instalments and the branch informally contacts the borrower in order to settle the debt and to get to know the financial situation of the client . If also the following instalment is unpaid, the borrower automatically receives a standard letter within 10 days.
Payment Initial Report Contact Normal Servicing LETTER Case Generated on The Branch Sent Handled CREDIT FIRST th SECOND Performed at the 20 of contacts the automati- at Branch RECOVERY MISSED MISSED branch level and each month borrower, cally by DEPARTMENT PAYMENT PAYMENT Level partially at central and made warns that a the level available to payment has system each branch been missed Most payments are showing and tries to POSITIVE collected via direct which clients understand RESOLUTION debit procedure has missed a the reasons OF THE CASE payment AND END OF DELINQUENCY 10 Days
7 Days
. The branch is responsible for monitoring the delinquent loan from the first emergence of the problem . The reference manager for the client segment handles the relationship with the client by trying to understand the reasons underlying the delay and the potential work-out strategies. The branch advises on the most effective way to deal with the delinquency . In most cases, CARIGE agrees a longer maturity or lower instalments on the loan rather than a penalty on the loan interest rate . A second letter threatening to start legal action is sent if the delinquency extends beyond six months. If the letters and the measures taken by the branch prove ineffective, the loan is passed to the central recovery unit, which, after a last attempt of out-of-court recovery, begins legal action . Only for debt up to € 25,000.00 unsecured by real guarantee, the claim is assigned to an external debt collection company
GRUPPO CARIGE 28 Table of Contents
Issuer description
Italian mortgage market
Gruppo Carige’s mortgage business
Banca Carige OBG Programme
Cover Pool Description
Annexe : Italian OBG Law vs. European Covered Bond Framework
GRUPPO CARIGE 29 Bank of Italy Requirements
Pursuant to Bank of Italy supervisory regulation (dated 15 May 2007), OBG may only be issued by banks with: minimum consolidated regulatory capital of € 500m, minimum Total Capital Ratio of 9%, and minimum Tier 1 Ratio of 6%.
In addition the transfer of assets to the cover pool is subject to certain limits based on the bank’s total capital and Tier 1 ratios:
TCR ≥ 11% Carige FY09 1H10(*) 1H10PF No limits Ratios (**) T1R ≥ 7% T1R 7.87% 6.82% 8.10% 10% ≤ TCR < 11% Up to 60% of the available TC R 10.03% 9.09% 10.40% eligible assets T1R ≥ 6.5% (*) Operational data 9% ≤ TCR < 10% Up to 25% of the available (**) Including the full conversion of the convertible eligible assets T1R ≥ 6% bonds at current share price
Sources: Bank of Italy, Banca Carige
GRUPPO CARIGE 30 Summary of the programme
Issuer Banca Carige S.p.A.; ratings A (Fitch) / A2 (Moody’s) / A- neg (S&P)
Seller/Originator Banca Carige S.p.A.
Programme size € 5 billion
Guarantor Carige Covered Bond S.r.l., established pursuant to Law 130/1999
Italian prime, first economic lien residential mortgages and commercial mortgages Cover pool originated by the seller and its banking subsidiaries
Expected issue rating Aaa/AAA (Moody’s/Fitch)
Maximum LTV 80% for residential mortgages and 60% for commercial mortgages
Collateral sold to the guarantor is segregated for the benefit of covered bondholders and Segregation of collateral other secured parties in the context of the programme
Listing Covered Bonds are admitted to trading to the Luxembourg Stock Exchange
The asset coverage test is intended to ensure that on any monthly calculation date, the adjusted aggregate loan amount is at least equal to the aggregate principal amount Over-collateralisation outstanding of the covered bonds. Maximum Asset Percentage of 90% corresponding to an absolute 11% over-collateralisation floor
Calculation agent Banca Carige S.p.A.
Arranger Natixis and UBS Investment Bank
Asset monitor Mazars & Guérard S.p.A. is the asset monitor
Italian, except for the swap agreement’s and the deed of charge, which will be governed by Governing law the English Law and the French Deed of Pledge (French law) Representative of CB Deutsche Trustee Company Limited Holders
GRUPPO CARIGE 31 Structural overview
Italian Covered Bond Framework COVER POOL COVERED BOND SWAP SWAP COUNTERPARTIES COUNTERPARTIES
Swap Cashflows Banca Carige S.p.A (Issuer, Originator, Cover Pool Purchase Price Seller, Servicer) Carige Covered Transfer of Cover Pool Bond S.r.l. Subordinated Loan (Guarantor)
Repayment of Subordinated Loan Asset Monitor Covered Covered Bond Bond Guarantee Cash purchase price for CB Issuance
CB issuance and ongoing payment obligation Covered Bondholders
GRUPPO CARIGE 32 Summary of the proposed Issue
Instrument: Obbligazioni Bancarie Garantite (“OBG”)
Issuer: Banca Carige S.p.A
Sellers: Banca Carige S.p.A
Carige Covered Bond s.r.l. a bankruptcy remote, special purpose entity which benefits of Guarantor: segregations principals well established under law 130/1999
Expected Ratings: Aaa / AAA (Moody’s / Fitch)
Status/Ranking of the Notes: Direct, unconditional, unsecured and unsubordinated
Cover Pool: € 2.947 billion
Expected Issue size: Minimum € 500 million
Currency: Euro Maturity: Soft bullet with 15 month extension period
Coupon: Fixed, Annually Documentation: Off Banca Carige’s OBG Programme
Listing: Luxembourg Stock Exchange Denominations: EUR 100,000 + EUR 1,000
Arrangers: Natixis / UBS Investment Bank Marketing: fEuropean Roadshow
GRUPPO CARIGE 33 Mandatory tests
The Nominal Value Test (NVT) ensures that, on each Calculation Date the Nominal outstanding aggregate notional amount of the asset comprised in the Cover Value Test Pool shall be at least equal to, or higher than, the aggregate notional amount of all outstanding Series of Covered Bonds
The Net Present Value Test (NPTV) ensures that on each Calculation Date the net present value of the Cover Pool shall be at least equal to, or higher than, the net present value of the outstanding Covered Bonds, also taking into Net Present account the payments expected to be received under the hedging Value Test arrangements
The Interest Coverage Test (ICT) ensures that on each Calculation Date the amounts of interests and other revenues generated by the assets included in Interest the Cover Pool, net of the costs borne by the Guarantor, shall be at least Coverage Test equal to, or higher than, the interests and costs due by the Issuer under the Covered Bonds, taking also into account any hedging arrangements entered into in relation to the transaction
GRUPPO CARIGE 34 Monthly Public Disclosures of Cover Pool & Test Performance
Carige is committed to provide the utmost transparency to investors and publishes on both website and Bloomberg : • Test performance reports summarizing compliance with the programme’s tests in the previous months • Cover pool composition http://www.gruppocarige.it/grp/gruppo/html/ita/investor_relations/covered_bonds.htm
GRUPPO CARIGE 35 Table of Contents
Issuer description
Italian mortgage market
Gruppo Carige’s mortgage business
Banca Carige OBG Programme
Cover Pool Description
Annexe : Italian OBG Law vs. European Covered Bond Framework
GRUPPO CARIGE 36 Cover Pool Highlights
TOTAL PORTFOLIO RESIDENTIAL PORTION COMMERCIAL PORTION
Balance (€) 2,947,240,973,55 2,801,890,555,27 145,350,418,28
% of Pool 100.0% 95.07% 4.93%
Number of Loans 32,012 30,924 1,088
Average Loan Balance (€) 92,066.76 90,605.70 133,594.13
WA Seasoning (Months) 38.07 35.8 81.7
WA Remaining Term (Months) 209.9 216.6 89.2
Number of Borrowers 30,785 29,844 949
WA CLTV 49.58% 50.88% 24.64%
Percentage of Floating Rate Mortgages 62.08% 60.28% 96.79%
WA Interest Rate on Floating Rate Loans (%) 2.354% 2.341% 2.510%
WA Margin on Floating Rate Loans (bps) 146 145.9 147.2
WA Interest Rate on Fixed Rate Loans (%) 5.635% 5.634% 5.888%
Currency Euro Euro Euro
As of 31 July 2010
GRUPPO CARIGE 37 Total Porftfolio Breakdown
Commercial/Residential Geographical distribution commercial South & 4.9% Isles 10.3% Centre 9.5%
North 80.3% residential 95.1% Current LTV
90 ‐ 100 0.1% 80 ‐ 90 0.7% 70 ‐ 80 17.3% 60 ‐70 16.8% 50 ‐ 60 16.4% 40 ‐ 50 14.9% 30 ‐ 40 13.4% 20 ‐ 30 10.7% 10 ‐ 20 6.4% < 10 3.3%
GRUPPO CARIGE 38 Residential Portion Breakdown/1
Current Loan Balance Current LTV
Loans above 80% are not taken into account in the Asset Coverage Test Remaining Term Interest Rate Type
Figures refer to volume of outstanding mortgages - Data as at 31 July 2010
GRUPPO CARIGE 39 Residential Portion Breakdown/2
Current Interest Rates Current Margins
Geographical distribution
Figures refer to volume of outstanding mortgages - Data as at 31 July 2010
GRUPPO CARIGE 40 Commercial Portion Breakdown/1
Current Loan Balance Current LTV
Remaining Term Interest Rate Type
Figures refer to volume of outstanding mortgages - Data as at 31 July 2010
GRUPPO CARIGE 41 Commercial Portion Breakdown/2
Current Interest Rates Margins
Geographical distribution
Figures refer to volume of outstanding mortgages - Data as at 31 July 2010
GRUPPO CARIGE 42 Arrears and Buybacks
Cover pool arrears (*)
Pool Transfer (25 September 2009)
(*) Arrears amount includes loans with more than 30 days of arrears and excludes defaulted loans loans inarrear/totalloans loan balance(%)
Non performing Loans Other Loans Total December 2009 2,788,696 ‐ 2,788,696 February 2010 1,249,661 7,473,725 8,723,386 April 2010 2,770,933 ‐ 2,770,933 14,283,016 Data in euro
GRUPPO CARIGE 43 Table of Contents
Issuer description
Italian mortgage market
Gruppo Carige’s mortgage business
Banca Carige OBG Programme
Cover Pool Description
Annexe: Italian OBG Law vs. European Covered Bond Framework
GRUPPO CARIGE 44 Italian Covered Bond Legal Framework (1/2)
Name of the instrument (s) Obbligazioni Bancarie Garantite Law 80 of 14 may 2005, amending Article 7-bis & 7-ter of law 130/1999, Ministry of Legislation Economy & Finance regulation 310 dated 14 December 2006 and Bank of Italy instructions issued on 17 may 2006
Special banking principle No: any Italian bank fulfilling specific issuance criteria
Restriction on business activity N/A
Asset Allocation Cover assets are segregated through the transfer to a separate entity
Inclusion of hedge positions Hedge position are part of the structural enhancements intended to protect bondholders
Substitute collateral Up to 15%
Restrictions incl. Commercial No mortgages EEA states and Switzerland, subject to a maximum risk weighting of 20% and up to 10% of Geographical scope for public the cover pool assets Non-EEA states or local authorities subject to a maximum risk weighting of 20% Geographical scope for EEA and Switzerland mortgage assets
LTV barrier residential 80%
LTV barrier commercial 60%
Market value. The approach needs approval from Bank of Italy andis verified by an Basis for valuation independent auditor
Valuation Check No
Special Supervision Bank of Italy
GRUPPO CARIGE 45 Italian Covered Bond Legal Framework (2/2)
The nominal value of the cover pool assets must at all times be at least equal to the nominal value of the OBG outstanding. The net present value (NPV) of the covered pool must be at Protection against mismatching least equal to the net present value of the OBG issued. Furthermore, the cover pool assets need to accrue sufficient interest to cover interest payment on the OBG outstanding
Protection against credit risk Sponsor banks may replace non-performing loans
Protection against operative risk Stipulated through contractual rules
Mandatory over- collateralisation Expected to be subject to an asset coverage test
Voluntary over-collateralisation Yes is protected Bankruptcy remoteness of the No, but all assets are ring-fenced within a specially separated entity issuer Outstanding OBG to regulatory Depending on Tier 1 and total capital ratios. There is no limit as long as the respective bank capital maintains a total capital ratio above 9% and a tier 1 ratio above 6% All payments are received from the special entity's assets. These payments are expected to be 1st claim in the event of collected in a separate account. Investors continue to receive scheduled payments, as if the insolvency issuer had not defaulted In the event of insufficient pool assets proceeds to cover their claim, investors rank pari passu External support mechanisms with senior debt holders. There is a simultaneous unsecured dual claim against the issuer and secured against the portfolio held by the specially separated entity Compliant with UCITS Art. 22 Yes par. 4
Compliance with CRD Yes
GRUPPO CARIGE 46 European Overview on Covered Bond Framework
Voluntary Mandatory Special over- Fulfils Substitute Protection Against over- Name of debt Instrument Banking Supervision collateralisati UCITS Collateral Mismatching collateralisati Principle on is 22(4) on protected
Obbligazioni bancarie Up to Net-present value Italy No Bank of Italy No Yes Yes garantite (OBG) 15% cover required
Bundesanstalt für Finanz- Hypothekenpfand-briefe, dienstleistungs Up to Net-present value cover Germany Öffentliche Pfandbriefe, No 102% Yes Yes aufsicht and 10% required Schiffspfandbriefe independent trustee
Cédulas Hipotecarias (CH) Banco de Not Coverage by nominal 125% (CH) Spain No Yes Yes Cédulas Territoriales (CT) Espana applicable value 143% (CT)
Commission Not compulsory; but all Bancaire and Up to OFs benefit from Obligations Foncières (OF) Yes No Yes Yes special 15% additional contractual supervisor features
Contractual obligation to France neutralise interest and Commission currency risk. Also, Subject to French Structured Covered Bancaire and Up to No downgrade triggers for asset Yes T.b.d. Bond special 15% swap counterparties and coverage test supervisor different tests to ensure adequate cash flows
Exposure to interest De rate and currency risk is Nederlandsche neutralised. In addition, Subject to From 1 Netherla Up to Dutch Covered Bonds No Bank and downgrade triggers for asset Yes July 2008 nds 10% independent swap counterparties, coverage test onwards auditor and various tests ensure cash-flow adequacy
Net-present value cover Obrigações Hipotecárias , Banco de Up to required; in addition, Portugal Optional 105% Yes Yes Obrigações sector público Portugal 20% limitation of liquidity risk
GRUPPO CARIGE 47 Disclaimer
This document has been prepared by Banca Carige SpA solely for information purposes and for use in presentation of the Group’s strategies and financials. The information contained herein has not been independently verified. No representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or opinions contained herein. The information presented or contained in this presentation is current as of the date hereof and is subject to change without notice and its accuracy is not guaranteed. We do not undertake to update this information. This presentation should not be construed as legal, tax, investment or other advice.Neither the company, its advisors or representatives shall have any liability whatsoever for any loss howsoever arising from any use of this document or its contents or otherwise arising in connection with this document. The forward-looking information contained herein has been prepared on the basis of a number of assumptions which may prove to be incorrect and, accordingly, actual results may vary.
This document does not constitute an offer or invitation to purchase or subscribe for any securities and no part of it shall form the basis of or be relied upon in connection with any contract or commitment whatsoever.
The distribution of this presentation in certain jurisdictions may be restricted by law. In particular, this presentation may not be taken or transmitted into the United States, Canada or Japan or distributed, directly or indirectly, in the United States, Canada or Japan. Recipients of this presentation should inform themselves about and observe such restrictions.
The information herein may not be reproduced or published in whole or in part, for any purpose, or distributed to any other party. By accepting this document you agree to be bound by the foregoing limitations.
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The manager responsible for preparing the company’s financial reports Ms. Daria Bagnasco, Deputy General Manager (Governance and Control) of Banca CARIGE S.p.A., declares, pursuant to paragraph 2 of Article 154 bis of the Consolidated Law on Finance, that the accounting information contained in this presentation corresponds to the document results, books and accounting records.
GRUPPO CARIGE 48 Contacts
Daria Bagnasco Deputy General Manager (Governance and Control) [email protected] Tel: +390105794869
Giacomo Burro CFO & Wealth Management Head Office Manager [email protected] Tel: +390105794580
Nicola Pegoraro Head of Trading [email protected] Tel: +390105793377
Emilio Chiesi International Funding [email protected] Tel: +390105794568
Investor Relations [email protected] Tel: +390105794877
GRUPPO CARIGE 49