Gruppo Banca Popolare Italiana As at 31 December 2005

NOTICE OF SHAREHOLDERS' MEETING

The Bank’s Shareholders are invited to attend the Extraordinary and Ordinary Meeting to be held at first call on April 28, 2006 at 9.30 am at the Bank's Head Office (Via Polenghi Lombardo 13, Lodi) and at second call on

SATURDAY APRIL 29, 2006 at 9.30 am at the Bipitalia City Auditorium (Via Polenghi Lombardo 13, Lodi) to discuss the following agenda:

Extraordinary part

1) Annulment of the resolutions made in the Extraordinary Shareholders' Meeting of June 2, 2005, in relation to items 3 and 4 on the agenda only, and annulment of the resolutions made in the Extraordinary Shareholders' Meeting of March 3, 2003, in relation to item 4 of the agenda only for the part not yet executed. Delegation of powers.

2) Motion to grant the Board of Directors the right to increase the share capital, on one or more occasions, within one year of the respective resolution, by a maximum amount (including premium) of €800,000,000.00 (eight hundred million), by issuing ordinary shares to be offered as an option to persons entitled, as well as the right to set, from time to time, the arrangements, terms and conditions of the operation, including the issue price (including any premium) of the shares and the dividend entitlement. Resulting amendment of Art. 5 of the Articles of Association. Delegation of powers.

Ordinary Part

1) Examination of the Financial Statements for the year ended December 31, 2005, after hearing the reports of the Board of Directors and the Board of Statutory Auditors. Related resolutions.

2) Determination of the unit share value pursuant to Art. 6, subsections 1 and 2 of the Articles of Association.

3) Fixing of Directors’ fees for 2006.

4) Addition to the Board of Auditors.

5) Resolution regarding acquisition and sale of own shares; delegation of powers.

MANAGEMENT BODIES OF THE BANK

Members of the Board of Directors

DINO PIERO MARIO GIARDA CHAIRMAN

DIVO GRONCHI CHIEF EXECUTIVE OFFICER

ENRICO PEROTTI SENIOR DEPUTY CHAIRMAN

VITTORIO CODA DEPUTY CHAIRMAN

GUIDO CASTELLOTTI DIRECTOR PIERANTONIO CIAMPICALI DIRECTOR COSTANTINO COCCOLI DIRECTOR MARIA LUISA DI BATTISTA DIRECTOR BRUNO GIOVANNI GIUFFRÈ DIRECTOR ANDREA GUIDI DIRECTOR AUGUSTO MACHIRELLI DIRECTOR PIETRO MANZONETTO DIRECTOR ROBERTO NICOLA ALBINO MARTONE DIRECTOR MARIO MINOJA DIRECTOR GIORGIO OLMO DIRECTOR ROBERTO SCHMID DIRECTOR

Members of the Board of Statutory Auditors

GIANANDREA GOISIS CHAIRMAN

PAOLO GIACINTO BONAZZI STATUTORY AUDITOR LUIGI CORSI STATUTORY AUDITOR GABRIELE CAMILLO ERBA STATUTORY AUDITOR GIORDANO MASSA STATUTORY AUDITOR

GIANPAOLO FORNASARI ALTERNATE AUDITOR MASSIMO MUSTARELLI ALTERNATE AUDITOR

INDEPENDENT AUDITORS The individual and consolidated financial statements have been audited by Deloitte & Touche S.p.A. pursuant to Art. 155 of Legislative Decree no. 58 of February 24, 1998 and in fulfilment of the resolution of the Shareholders' Meeting held on April 24, 2004, which appointed the independent auditors for the three-year period 2004/2006.

5 BANCA POPOLARE ITALIANA Soc. Coop.

70,87% put 2,65% + 0,81%

Reti Bancarie S.p.A.

100,00% Banca Popolare di Crema 94,47% 51,00% Bipielle ICT S.p.A. S.p.A. Banca Caripe S.p.A. put 44,00%

100,00% Banca Popolare di Lodi Banca Popolare di 99,43% 52,32% Banca Popolare di Capital Company L.L.C. Cremona S.p.A. Mantova S.p.A.

100,00% Banca Popolare di Lodi 20,93% Cassa di Risparmio di 46,28% 61,25% Banca Valori S.p.A. Capital Company L.L.C. II put Lucca S.p.A. 12,39% 100,00%

100,00% Banca Popolare di Lodi 100,00% Cassa di Risparmi di Nazionale Fiduciaria Capital Company L.L.C. III Livorno S.p.A. S.p.A.

100,00% 70,13% Bipielle 100,00% Critefi SIM S.p.A. Riscossioni S.p.A. Castimm S.r.l.

60,00% 100,00% 34,00% Bipielle International Tiepolo Finance S.r.l. Assipromos S.r.l. Holding S.A.

4,00% 20,00% 30,00% Unione 86,00% Fiduciaria S.p.A. Bipielle Bank Bipielle Società di Gestione 70,00% (Suisse) S.A. del Credito S.p.A.

5,31% 60,00% 72,00% Bipielle International 10,28% UK Ltd Arca SGR S.p.A. Tiepolo Finance II S.r.l. 100,00% 5,12% Area Life International Assurance Ltd 4,85%

5,00% 2,50% Cassa di Risparmio di Centrosim S.p.A. 100,00% 5,00% Pisa S.p.A.

5,00% 19,99% C.R. Bolzano S.p.A.

40,00% Cartesio Alternative Investments S.G.R. S.p.A

95,00% Bipitalia Broker S.r.l.

LEGEND Parent Bank and subholding companies Fully consolidated companies Companies carried at equity Companies valued at cost Gruppo Banca Popolare Italiana as at 31 december 2005

87,45% put 4,49% 7,32% Bipielle Investimenti S.p.A. Gruppo Partecipazioni italiane S.p.A. 82,67%

100,00% 99,61% Bipitalia Ducato S.p.A. Efibanca S.p.A.

28,35% 50,00% Efibanca Palladio Bipitalia Gestioni SGR 96,96% Ali S.p.A. S.p.A. Finanziaria SGR S.p.A.

80,00% 29,57% 21,21% Gruppo Palladio Comital Saiag S.p.A. put Finanziaria Bipielle Alternative SGR 20,00% 21,21% S.p.A. 38,71% 5,00% Deroma S.p.A. Glass Italy BV Bipielle Fondi Immobiliari 100,00% SGR S.p.A. 20,00% 100,00% Acque Minerali Riunite Fidia Farmaceutici S.p.A. S.p.A. Italfortune International 90,00% Advisor S.p.A. 20,00% IGLI S.p.A. Banca Bipielle Network 98,86% S.p.A. 51,00% AB Capital S.p.A.

100,00% 21,51% Bipielle Previdenza Assicurativa S.r.l. Tortella S.p.A.

1,00% 99,00% 100,00% Bipielle Real Estate Royle West Ltd S.p.A.

100,00% Bipielle Immobili 99,74% Bipielle Leasing S.p.A. Strumentali S.p.A.

100,00% Basileus S.p.A. 50,00% Finoa S.r.l.

100,00% 100,00% Lido dei Coralli S.r.l. Perseo Immobiliare S.r.l.

100,00% Aviva Previdenza S.p.A. 100,00% 100,00% Antares Immobiliare S.r.l. Nadir Immobiliare S.r.l.

80,96% Eurovita Assicurazioni 100,00% 100,00% S.p.A. B.S.R. G.T.I. S.r.l. Azimuth Immobiliare S.r.l.

Andromeda Immobiliare 100,00% 100,00% Antilia Immobiliare S.r.l. S.r.l. 50,00% Buon Viaggio S.p.A. 20,00% 75,00% Bussentina Soc. coop. Framo Soc. coop.

Solidarietà & Finanza SIM 20,00% 100,00% 30,00% S.p.A. Sirio immobiliare S.r.l. Portone Soc. coop.

100,00% Carfid S.r.l. 100,00% Lisbona Immobiliare S.r.l.

50,00%

100,00% 50,00% Pegaso Immobiliare S.r.l. Hotel Project Lisboa Lda

GROUP FINANCIAL HIGHLIGHTS

31/12/2004 % change 31/12/2005 Amounts in Euro/000 (without IAS 32 and 39) 31/12/2004 Consolidated balance sheet Total assets 47,322,515 43,981,071 7.60% Total loans 32,425,959 28,991,294 11.85% of which: - customer loans 27,968,762 25,489,972 9.72% Financial assets 5,964,761 6,550,521 -8.94% Shareholdings 487,644 1,176,165 -58.54% Total payables 39,428,822 36,716,400 7.39% of which: - due to customers and securities in issue 34,637,203 31,533,657 9.84% Indirect deposits 36,869,892 36,547,011 0.88% of which: - managed 21,092,304 20,587,010 Net interbank position (334,422) (1,681,421) -80.11% Group shareholders' equity and minority interests (including profit/loss) 3,247,975 3,269,099 -0.65% of which: - Group shareholders' equity (including Group profit/loss) 2,786,311 2,228,134 25.05% Consolidated income statement Net interest income 760,833 840,873 -9.52% Total income including financial and insurance operations 1,491,633 1,617,877 -7.80% Net adjustments for impairment of loans and financial assets (981,994) (275,984) 255.82% Administrative expenses (1,004,204) (1,000,579) 0.36% Profit (Loss) on ordinary activities before tax (881,824) 123,526 -813.88% Net profit (Loss) excluding minority interests (699,879) 72,655 -1063.29% Group net profit (Loss) (743,893) (14,521) 5022.88% Operating structure Number of employees 8,598 8,706 Number of financial advisors 1,045 1,236 Number of branches 979 970 Ratios Net interest income/Total income including financial and insurance operations 51.01% 51.97% Administrative expenses/Total income including financial and insurance operations 67.32% 61.85% Gross financial assets/Total assets 12.60% 14.89% Net NPL / Customer loans 1.08% 1.72% Net adjustments for impairment of loans / Net loans 2.69% 0.91%

10 FINANCIAL REVIEW Global economic data show that growth slowed during 2005, a trend linked, amongst other things, to tensions on the commodity markets, which, on several occasions during the year, caused shock waves in energy prices, particularly with regard to oil. Indeed, the average price of a barrel of Brent rose by around 42% to $54.4 a barrel from a price of $38.2 a barrel in 2004. Despite these tensions, the international economy showed a much better capacity to adapt than in previous similar scenarios. According to estimates from the International Monetary Fund and from the OECD (Organisation for Economic Co-operation and Development), the United States recorded a 3.5% growth in Gross Domestic Product compared with a growth rate of 4.2% in 2004. The economic slowdown can be attributed not only to the "energy factor" (experienced globally) but also to the cycle of interest rate rises in the Federal Reserve's monetary policy. Starting the year at 2.25%, the Fed Funds target rate was systematically raised in all the relevant meetings to reach 4.25% at the end of 2005. The action of the monetary authority was designed to curb what was considered to be excessive growth in consumption (also with impact on the balance of payments), financed by a development of the property market containing certain macroeconomic risks. At the same time, headline inflation in the United States averaged 3.4% per annum compared with 2.7% in 2004, during which year the acceleration in prices coincided with the start of the cycle of rises in FED official rates. In Japan, the economic cycle confirmed that the country had come out of several years of economic stagnation, with a growth in Domestic Product of 2.8 percentage points. At the same time, consumer prices hinted at an end to the deflation that had taken hold since 1999, ending the year +0.1%. Some economic areas outside the industrialised countries continued to exhibit strong growth trends, collectively representing the primary factor behind world growth: in China, estimated growth for 2005 was just above +9.5% while the growth figures for India and Russia were around +7.1% and +5.5% respectively. In Europe, Great Britain experienced a slowdown in growth (from +3.2% in 2004 to +1.8% in 2005), in an inflationary situation generally under control (average of 2.1% per annum compared with 1.3% in the previous year). Hence the decision made by the Bank of England in August 2005 to cut the base rate by a ¼ of a percentage point to 4.50%. In the single currency area (Euroland), growth was weak and below potential. For the whole of 2005, according to the most recent assessments by the European System of Central Banks, growth was +1.4% (+1.8% in 2004). This deceleration, which was particularly evident at the start of the year, is specifically characterised by sluggish household expenditure (+1.4%, as it was in 2004). In the meantime, consumer inflation averaged 2.2% per annum, above the target level set by the European Central Bank. In the presence of frequent signs of economic recovery, the ECB therefore took the decision (after no changes since June 2003) to implement a 0.25% rise in the benchmark interest rate, which stood at 2.25% at the start of December.

Italian economy Within the Eurozone, Italy recorded a static trend, with a profile corresponding fully to "zero growth" in 2005, reflecting a downturn in per capita income. In fact, the "0.0%" trend in GDP, as provisionally estimated by ISTAT, appears to be the result of structural competitive problems. Manufacturing productivity in Italy has been on the decline since 2001, the only one among the main advanced economies, according to the findings of the International Monetary Fund. On a more economic level, household consumption for 2005 remained stagnant at around +0.1%, while fixed investments fell by around 0.6%. Only the trend in public consumption expenditure (+1.2%) sustained the domestic demand of the Italy economy. Externally, a further disappointing result was recorded in that the growth in imports of services and goods (+1.4%) significantly exceeded exports (+0.3%). In this context, the average unemployment rate fell in 2005 to 7.7% (from 8.0% in 2004), caused to some extent by the typical cyclical shifts in the labour market. Public finance indicators revealed a deficit of the Public Authorities of around 4.1% of GDP, clearly worse than the revised figure of 3.4% for the 2004 financial year. This result was influenced by a number of macro-items of expenditure, especially "social transfers", while in terms of revenues, the "fiscal burden" fell to 41.3% of GDP (41.8% in 2004). In this situation of public finances, the inevitable increase in the quotient relating to accumulated debt was limited to 2.6 percentage points, reaching a level of around 106.4% at the end of 2005 (103.8% at the end of 2004, according to the new series of national accounts), despite the revisions made in the light of Eurostat criteria.

Finance and credit markets The disappointing trend of the major public finance balances did not adversely affect the financial markets in Italy, where the Stock Exchange performed well, boosted by medium/long-term yields on historically very low levels in the presence of abundant liquidity on an international level. The year ended with 282 listed companies on Borsa Italiana markets, 4 more than at the end of 2004. The change is the net balance of 19 new admissions (the highest number since 2000) and 15 delistings. Of the

11 continuous listing indices, the Mibtel ended the year with an encouraging +13.8%. The MIB30, a restricted basket of the most traded securities, closed at +13.3%. The positive price trend and the admission of new stocks contributed - for the 3rd consecutive year - to an increase in total capitalisation, which reached €676.6 billion (€580.9 billion at the end of 2004), equal to 47.7% of Gross Domestic Product. The figure for the end of December represented the highest figure since June 2001. Share trading increased significantly in terms of value, with a daily average increasing from €2.9 billion to €3.8 billion (+31.1%), above the previous historical high recorded in 2000, which was €3.4 billion. Deposits into mutual funds were consistent with the aforementioned economic scenario favourable to financial investments: net deposits in 2005 posted a positive balance of €8.4 billion in 2005 (negative balance of €10.5 billion in 2004). As regards the various forms of savings (including OICRs, discretionary accounts (GPM) retail funds of funds (GPF), pensions and insurance products), gross deposits amounted to €38.1 billion in the year, an amount which marks a huge jump from the figure of €3.3 billion recorded in 2004. Managed assets at year- end amounted to €1,050.9 billion. As regards the main aggregates of the banking system, end-of-year figures show a general slowdown in growth trends, especially in relation to the corresponding items relating to the Euroland total. As far as deposit instruments that are classifiable as deposits are concerned (certificates of deposit, current accounts, savings deposits), the quarter ending in December recorded a slowdown to +7.2% per annum, when the Eurozone end-of-year figure was +8.3%. The national figure has fallen back since the highs recorded in August (+7.7%), although the trends remain higher than at the end of 2004 (+4.1%). The downturn in banking macro-items is particularly visible in the stock of bonds, which was +8.8% at year- end (+10.7% in Euroland), after posting double-figure trends over a long period (in 2004, it closed at +12.1%). The slowdown is similarly visible on the customer loans aggregate, whose growth was +8.6% in December 2005 (after a peak of +8.9% in October and November), while the corresponding Eurozone figure increased to +9.4%. The gap between Italian figures and those for the whole of the Eurozone is very marked in the sub- item of loans to businesses, more sensitive to the economic climate: while in September 2005, growth was +6.8% in Italy and +6.7% in Euroland respectively, at year-end, the trends had taken different paths, falling to +6.2% in Italy and rising to +7.6% in the "E-12" zone. Recent developments in the financial aggregates, taking place at the end of the year, have not affected the gross profitability of the banking sector. According to preliminary figures from Banca d'Italia, net interest income increased in 2005 by 5.9% owing to a lasting "quantity" effect in the presence of constantly falling unit margins. Total income was +4.9% and operating profit improved by 7.5%.

12 GRUPPO BANCA POPOLARE ITALIANA 2005 BUSINESS REVIEW 1) Summary of legal and corporate events Within the complex general economic scenario, 2005 was characterised by highly significant events, which considerably affected the operating results and structures of the Gruppo Banca Popolare Italiana and which also damaged its reputation.

The Antonveneta operation Last year was marked considerably by the outcomes of the proposed takeover of Banca Antoniana Popolare Veneta ("Antonveneta" or "BAPV"). The planned takeover began with the acquisition of shares on the market, which brought BPI's stake in the share capital of Antonveneta close to 30%. In the latter company's meeting of April 30, 2005, a majority of the share capital, including the shares held by BPI, had come into the control of Antonveneta by appointing a new Board of Directors. Subsequently, following the intervention of Consob, which had observed an invalid shareholders agreement between BPI and some of the persons that had colluded with the latter in the appointment of the new company directors, and following the decision of the Padua court, which had declared that the outcomes of Antonveneta's Shareholders' Meeting were illegal, an operation was launched to increase (1.5 billion euro) the share capital (successfully completed on July 20, 2005) and authorisation was requested and given, firstly, for a mandatory cash offer and, subsequently, a cash and shares offer. Subsequently, these authorisations were firstly suspended (end of July 2005) and then declared null and void (October 2005) both by Consob and by Banca d'Italia owing to the emergence of corrupt behaviour on the part of company managers and criticisms over whether the necessary capital requirements had actually been met. In particular, on July 25, 2005, the Milan Public Prosecutor ordered the impounding of the Antonveneta shares purchased on the market and on August 2, 2005, the then Chief Executive Officer Gianpiero Fiorani and the then Financial Director Gianfranco Boni were temporarily suspended from their respective duties. In September, an agreement was reached to sell the Antonveneta shares to ABN Amro N.V., which, after the shares were released, took place on December 30, 2005. The capital gain accrued (€94 million) was deposited into a current account opened in the name of Banca Popolare Italiana, available to the Milan Public Prosecutor, pending the completion of the investigations into the Bank's responsibility, if any, pursuant to Legislative Decree no. 231/2001. In the course of the investigations into these events, further strands of investigation have emerged into the possibility that various crimes were committed, and these are still being looked into. The serious managerial and operational irregularities that emerged in connection with the legal investigation prompted the Board of Directors to appoint lawyers to assess the compensatory actions available to the Bank.

2) Governance initiatives Following the suspension placed on the previous Chief Executive Officer, the Board of Directors appointed, on August 2, 2005, Giorgio Olmo as the new Chief Executive Officer, having previously held the position of Deputy Chairman. Subsequently, on October 17, the Bank appointed a General Manager, Divo Gronchi, formerly General Manager and Director of Banca Popolare di Vicenza and previously (1996-2000) Director/General Manager of Monte dei Paschi di Siena. On December 12, 2005, all the directors and members of the board of statutory auditors tendered their resignation with effect from the forthcoming shareholders' meetings. On the same date, Piero Giarda and Divo Gronchi were coopted onto the Board of Directors. On December 27, 2005, the Board of Directors approved a new version of BPI's individual and consolidated financial statements for the year ended December 31, 2004, as Consob had impugned the shareholders' resolution of April 30, 2005 to approve those financial statements. The revised version of the 2004 financial statements prepared according to Italian accounting standards, re-approved by the Shareholders' Meeting on January 28, 2006, showed a consolidated loss of €26.6 million compared with a profit of €168.4 million in the previous version. In the same meeting, the new Board of Directors was appointed and, in the first subsequent Board meeting, the new Chairman of Banca Popolare Italiana. In the meantime, on December 22, 2005, Consob had started sanction proceedings against the individual directors and auditors in office since April 30, 2004 and, following the counterclaims submitted, offered them, on January 18, 2006, the possibility of making a personal oblation in full settlement.

13 result of the "Forleo ordinance", there was public controversy over the widespread charging of commissions, carried out in January 2005, in the settlement of current accounts as at December 31, 2004. Although such charges had been duly notified to the market (through publication in the Official Journal no. 289 of December 10, 2004), the Bank decided to pay back the commissions and the new type of expenses and the planned increase of existing charges. This repayment, which, partly, had already been made for individual positions during 2005, was applied automatically to the positions concerned, with value date December 31, 2004 and carried out at the end of January 2006, with adequate coverage given in the 2005 financial statements. Between the end of 2005 and the start of 2006, Banca Popolare Italiana launched a number of commercial initiatives aimed at regaining and strengthening the confidence of its customers through its "Programma Fiducia", described in detail in another section of this report. In the same period, a customer satisfaction survey was conducted on the basis of the model used by the Abi (Italian Banking Association) for similar initiatives. This survey revealed that the majority of customers, despite feeling the need for reassurance from their local branches, considered that the relationship of trust with their branch and with the branch employees was not under discussion. This is testament to the quality of the work performed by branch colleagues to handle the customer relationship difficulties that have emerged over these recent months and shows that human resources are one of the Bank's strengths.

Operating structures initiatives In the final part of 2005, new management staff were brought in, starting with the areas in which there had been the most serious shortcomings and behaviours contrary to correct administration. The first recruits were the Finance Division Director, Ludovico Alberto Basadonna, and the Auditing and Internal Control Division Director, Paolo Bozzi. Following these first initiatives and pending the completion of the new management team, work started on analysing the critical aspects that characterised the financial and organisational situation of the Bank and of certain group companies. These aspects, described in greater detail further on, were defined through an accurate and precise assessment of the risks linked to significant categories of assets and liabilities. Major adjustments were made to the financial statements and these significantly affected the results for 2005.

3) Situation of capital accounts As regards loans, provisions were made to cover positions regarded as risky and analysed individually, including with the invaluable support of the members of Banca d'Italia's Inspection Team, present within BPI as from the month of June. These provisions totalled €753 million for 2005. The thoroughness of the operation performed and the credit quality currently resulting is shown by the value of net non-performing loans recorded in the consolidated financial statements (€281 million, 1% of total loans) and, in particular, by the value of "extended non-performing loans", as shown in the Credit Bureau flow of December 31, 2005 (€48.6 million, 0.2% of total customer loans). As far as the Kamps-Harry's operation is concerned, of which the Gruppo BPI is a financial partner, the current profits of Kamps and its future revenue prospects have revealed considerable risks. The initiative is subject to guarantees (Puts) that can be enforced in the event that neither of the two companies is listed. At the present time, authoritative opinions suggest that the guarantees are regarded as valid. For precautionary reasons, the loan until 2009 (year in which the Puts can be exercised) has been considered interest-free and the shareholdings in Bakery Equity Luxembourg S.A. and Finba Bakery Holding Gmbh have been directly written down. Another area that could generate financial risks or, at least, uncertainties is property management, particularly with regard to development initiatives relating to non-instrumental properties. Over these months, 3 leading consultancy firms with international standing have been involved in the valuation of real estate. Essentially, REAG has been involved in the valuation of instrumental and non-instrumental properties, CB Richard Ellis has been involved in the valuation of property development initiatives and PRAXI in the valuation of initiatives with specific critical factors. The valuation as at December 31, 2005 of all of the Group's properties shows an implied capital gain, i.e. the difference between the book value recorded in the financial statements of the real estate companies and the valuation, of more than €110 million. Furthermore, the Board of Directors of the Parent Bank has decided to restructure the Group's entire real estate division, based on simplifying the corporate structure, focussing on the instrumentality of properties, improving profitability and making the division more efficient overall. The company's strategic repositioning involves reorganisation through the disposal of the non-instrumental component, with a resulting lower capital allocation and reduction of the risk profile, connected with transactions on the real estate market. As regards the investment portfolio, in previous periods, and in particular in the first half of 2005, positions were taken on certain hedges and alternative funds for a total amount of €925 million.

14 This amount presented a risk profile that was not compatible with the Bank's structural and financial equilibria. As from the month of September, in line with the new strategic policies, these assets were gradually sold off with the aim of improving the liquidity position destabilised by the Antonveneta operation. More than €400 million was sold off, without generating capital losses and helping to reduce the Bank's high market and counterparty risk, in line with the requests of the Supervisory Board. During the first half of 2006, the policy of reducing the portfolio's risk profile will continue as will the policy of increasing its degree of liquidity. A significant contribution will be possible through the disposal of the "funds" used for the Antonveneta operation. Furthermore, the Parent Bank's Board of Directors has decided to restructure the Finance Division by redefining its missions, processes and operating limits. As already stated, it has appointed the new Division Director. The Group's finance division is given a role instrumental to the core business and no longer a speculative role. The changes in the finance division run along 3 lines: roll-out of new computer equipment, development of the business model and redefinition of operating limits, according to prudential criteria. In accordance with these developments, the new Finance Division Manager, in office since the start of November, has implemented a widespread general policy of reducing the current positions with the highest risk profile. The investigations into the Antonveneta operation revealed 6 positions involving guaranteed returns. The enquiries did not reveal whether the beneficiaries were aware of how the investment dossiers involved were being managed and the ultimate aims of these operations. The charges that the Bank has incurred in relation to the 6 guaranteed customers amount to €38 million, of which €13 million was set aside in 2004, and had already been completely assimilated in the 2005 semi-annual report. As regards equity investments, the following should be noted. The economic and income trends of the Group's main banking subsidiaries are, in accordance with the new IAS regulations, periodically checked for possible adjustment of their book value, using valuation reports prepared by leading consultancy firms. In particular, as far as the value of equity investments in subsidiaries and associates is concerned, KPMG Advisory provided information that prompted the Directors to consider it necessary to adjust the values determined during FTA (first-time adoption) of IAS standards. As regards the associated company Cassa di Risparmio di Bolzano, a writedown of €73 million has been made corresponding to the Parent Bank. In total, adjustments to the goodwill of other consolidated subsidiaries together amount to €42 million. For the Antonveneta operation, in 2005, it was decided to sell off minority shares, so as to enable the Gruppo Banca Popolare Italiana to keep majority control of the subsidiaries, totalling more than €1 billion. These transactions were performed by entering into contracts with financial institutions and resulted in the disposal of minority interests held in a number of subsidiary or affiliated companies of the Gruppo Banca Popolare Italiana, which the Parent Bank had previously acquired from the subsidiaries Bipielle Investimenti and Reti Bancarie. However, following the collapse of the Antonveneta operation, the Parent Bank took action to stop all disposals of the minority shares in subsidiaries. Consequently, it was decided to buy back the investments originally sold, and to transfer the shares acquired to the sub-holding companies Bipielle Investimenti and Reti Bancarie, at the same selling prices, with a simultaneous transfer to the two sub-holdings of full control of the equity investments. In completing these processes, total costs of €43 million were incurred.

Supervisory inspection It should be recalled, finally, that, as mentioned previously, Banca d'Italia's Supervisory Inspection of the Parent Bank, which started in June 2005, and is organised pursuant to Art. 68 of the Consolidated Banking Act, is still in progress but is nearing completion. The individual financial statements include the observations made by the Inspectors in the course of their inspections.

15 IMPORTANT DEVELOPMENTS OCCURRING AFTER DECEMBER 31, 2005 1) CORPORATE GOVERNANCE As a result of the events that occurred in 2005, the then Board of Directors, in a spirit of responsibility and in consideration of the difficulties encountered by the Bank, resigned and called a Shareholders' Meeting for the replacement of the management personnel. As regards the Board of Statutory Auditors, the statutory auditor Pernigotto tendered his resignation with immediate effect and was replaced by the alternate auditor Lazzarini, and the statutory auditor Araldi tendered his resignation with effect from the date of the Shareholders' Meeting. The Chairman of the Board, Goisis, and the statutory auditor, Bonazzi, resigned as from the approval of the 2005 financial statements. Subsequently, the Chairman of the Board of Statutory Auditors withdrew his resignation. On January 28, 2006, the Shareholders agreed that the Board of Directors would consist of 16 members and the following were chosen as Directors: Guido Duccio Castellotti, Pier Antonio Ciampicali, Costantino Coccoli, Vittorio Coda, Maria Luisa Di Battista, Dino Piero Giarda, Bruno Giuffrè, Divo Gronchi, Andrea Guidi, Augusto Machirelli, Pietro Manzonetto, Roberto Nicola Martone, Mario Minoja, Giorgio Olmo, Enrico Perotti and Roberto Schmid. Furthermore, the Shareholders also added to the Board of Statutory Auditors by electing the following as Statutory Auditors: Gabriele Camillo Erba, Luigi Corsi and Giordano Massa; and the following as Alternate Auditors: Gianpaolo Fornasari and Massimo Mustarelli. The Shareholders' Meeting also re-approved the Financial Statements for the year ended December 31, 2004, amending the approval resolution previously made by the Board on April 30, 2005. This was necessary following the comments made by CONSOB and led to negative adjustments totalling €195 million in the income statement, thus making the Parent Bank's loss for the year €23.3 million. In its meeting on January 30, 2006, the Board of Directors appointed a Chairman, Dino Piero Giarda, lecturer at Milan Catholic University, former Treasury Under Secretary from 1995 to 2001 and current Chairman of the sub-holding Bipielle Investimenti, and appointed Divo Gronchi as Chief Executive Officer. After the initial - more urgent - appointments, which were decided in 2005, the Parent Bank's management structure was progressively redesigned over the subsequent months with the recruitment of other managers from outside. Other appointments included the Deputy General Manager Giuseppe Malerbi, with powers in the Credit and Finance area, and the Deputy General Manager Apicella Guerra, with powers in the Operation area (organisation and IT). The Board of Directors' appointment of the General Manager, Franco Baronio, former Deputy Chairman of the consultancy firm Bain & Company, with significant experience in banking consultancy, completed the picture. The respective responsibilities were assigned: the Chief Executive Officer is responsible for strategy and control and the General Manager is responsible for the "operating machine" and all other duties. Finally, on March 9, 2006, the Board of Directors appointed Enrico Perotti and Vittorio Coda as Senior Deputy Chairman and Deputy Chairman respectively of the Parent Bank's Board of Directors.

2) Risk In relation to credit, particularly with regard to the Magiste International S.A. and Garlsson position, it is recalled that the position became defaulting and was recorded as non-performing between December and January 2006. Contacts with the counterparty's advisors have been in progress for some time. As no valid solution was reached, it was decided, in March 2006, to activate the pledges on the MPS and Capitalia shares. Finally, on March 23, 2006, the Board of Directors decided to activate the pledge on the RCS shares, appointing the Chief Executive Officer to carry out such measure. On that date, the positions in question are recorded as non-performing for the remaining €673 million and are secured by pledge on RCS Mediagroup shares (103,548,754). There are also 5,234,116 RCS shares and 8,253,146 Capitalia shares also in pledge, but subject to an impounding measure by the Rome Prosecutor. Finally, this position is additionally secured by pledge on 100% of the share capital of Tundra S.r.l. and 40% on the capital of Magiste Real Estate S.p.A. There is reason to believe that the provision in the income statement (€150 million) is sufficient to cover the Bank's risks. As regards the remaining positions in hedge funds and other derivative instruments, the first few months of the year saw the continued disposal of positions, thereby optimising net income. In particular, a proportion of these will find their natural conclusion with the takeover bid for Antonveneta shares.

16 3) The agreement with Fondazione Cassa di Risparmio di Lucca On March 9, 2006, the Parent Bank's Board of Directors approved, within its limits, the resolutions taken by the respective Boards of Directors of Casse di Risparmio di Lucca, Pisa and Livorno in relation to the plans to create the third largest bank in Tuscany. The origins of this resolution date back to the agreement of May 6, 2005, signed by the Parent Bank and by Fondazione Cassa di Risparmio di Lucca, which set out the conditions for Tuscany to become one of the strongholds of the Gruppo Banca Popolare Italiana. The parties drew up a comprehensive regional-based development programme that will be implemented in several phases, the most important of which involves the merger of the three Tuscan "Casse" and the transfer, which took place on December 19, 2005 with effect from January 1, 2006, of the 26 Banca Popolare Italiana branches in the Tuscany area to Cassa di Risparmio di Lucca. The agreement between the parties includes a commitment by Fondazione Cassa di Risparmio di Lucca to invest €135 million, which together with the €190 million investment already made, make a grand project total of €325 million. The proposed plan is subject to the usual authorisations being obtained and, as well as having an industrial and strategic impact, it has a strong income potential because of the synergies that will arise from greater visibility and better positioning of the distribution network, in addition to the investments that will be made in the region. Fondazione Cassa di Risparmio di Pisa extended the exercising of the €109 million put option until June 2008.

4) The sale of Bipielle Leasing In line with the Gruppo BPI's announced strategy of focussing on the core businesses that are leaders on their respective markets, Bipielle Investimenti S.p.A (86.2% owned by Banca Popolare Italiana) and Banca Italease S.p.A. signed an agreement on the basis of which 99.74% of Bipielle Leasing is sold to Banca Italease (specialised operator belonging to the environment of cooperative banks), for a price of €51 million to be paid in cash. The sale agreement was signed on February 23, 2006, while the sale is subject to authorisation from the competent Authorities.

5) "Programma Fiducia" In the meeting of the Board of Directors held on December 27, 2005, the aforementioned new initiative called "Programma Fiducia" was illustrated. This programme is one of the strategies by which the Bank aims to return to ordinary management policies based on principles of total transparency and high standards of communication with customers. This programme involves a series of commercial initiatives such as a pricing review and introduction of new products, aimed both at individuals and small businesses. Individual initiatives relate to current accounts, loans and investments. The overarching aim of the Programma Fiducia is to place customer loyalty at the heart of the Group's growth, increasing customer retention through clear indicators of transparency, competitiveness, innovation and freedom to try the Group's services. Under the Programma Fiducia, the development of current account products aimed at small businesses has led to the creation of a comprehensive offer for all customer targets: 9 Conto Liberi Professionisti, an account reserved for professionals entered on a professional register; 9 Conto Impresa, a business account available on three levels (Small, Medium and Big) depending on current account transactions, aimed at self-employed workers, craftsmen and small production companies; 9 Conto Commercianti, a package account aimed at retailers, created in 2004 but made more competitive with the combined offer of the POS service for free.

6) Relaunch plan The Gruppo BPI is currently involved in a comprehensive relaunch plan aimed at streamlining the governance structure, improving customer relations as a result of transparency and ethical conduct, and recovering profitability. The project, whose guidelines are being defined for the purposes of the preparation of the 3-Year Business Plan to be approved in April 2006, requires a comprehensive review of strategies, refocusing on traditional banking activities and adopting a new organisational model. The project to redesign the General Management and the Governance Model has been defined with the help of a consultancy firm.

17 The objectives of the new Group Governance structure relate to organisation (structural and corporate reorganisation), processes (identification of key subjects in relation to markets and risks) and resources (correct sizing of structures). In order to increase collective involvement, the Strategic Policy Committee, the Internal Control Committee, the Supervisory Board pursuant to Law no. 231 and the Credit Executive Committee have been set up at Board of Directors level. The Operating Credit Committee and the Management Committee are also operational and more information is given about these further on. As a first step, a careful diagnosis of the Group's actual situation was performed and presented to the Board in its meeting of February 8, 2006. This process is divided into 2 stages: the first at Group level (governance and allocation of resources over the various businesses) and the second at business area level (commercial banking, finance, investment banking). At Group level, the critical issues are lower general profitability, associated with the mix of deposits imbalanced towards more costly forms, and a focus on areas far from the core business. These issues are essential to nourish and sustain external growth opportunities. In the Finance area, it will be necessary, in the Business Plan, to redirect its mission of supporting the core business to serve commercial activities, by giving it greater and more adequate support and organisational management tools. As regards investment banking, the primary objective could be the commitment to serve the individual areas covered by the Group's retail banks, by developing the economic contribution of other strategic businesses that are currently secondary, such as, for example, the debt capital market. As regards commercial banking activities, the excellent spread of the distribution network is partly undermined by the small size of the individual branches and by the need for significant investments to optimise the price/customer ratio and quality of the service offered. Furthermore, the limited levels of delegation managed by the regional network are accompanied by the need, in the light of recent events, to make a "change" and give a new lease of life to market activities. The highlighting of these aspects and the possible corrective actions will form the basis of the above Business Plan. One initial proposed initiative concerns, precisely, the definition and communication of the positioning that the Group wishes to occupy in the national credit market. This position could be summarised in the slogan "Banca delle Piazza" (Bank in the Square) which means proximity to and penetration into local regions. Here too the operating content of the underlying project will be included in the Business Plan.

18 BUSINESS OUTLOOK Business plan The new Business Plan being developed intends to create a strong federal model with a clear division of roles and responsibilities between the Parent Bank and the Retail Banks: the Parent Bank must be involved and have clear responsibilities in the definition of strategic guidelines, business models and operational control. The Retail Banks must control and develop commercially the respective regions assigned with independent operational powers suitable for developing the customer base in accordance with the service models and policy guidelines defined by the Parent Bank. The Product Companies will pursue innovation in the management of the portfolio of Group products and services, including by means of developing market relations outside the Group. The Instrumental Companies will be responsible for providing specialist services to support the Group's operations. In this area, particular importance will be given to internal and external communication processes with the aim of portraying the development of the Group as clearly and transparently as possible. To this end, the "Business TV" project, which saw the light in 2005 and currently involves the largest 134 branches in the Group, will undergo further implementation. The main initiatives will concern the distribution networks, with major investments to be made in resources aimed at increasing the effectiveness of regional control and with the introduction of new intermediate organisational measures for managing a limited number of branches (regional districts). Other significant investments will be made in the technological field, including to facilitate and implement the creation of new products, increasingly as a means of supporting the market.

Assignments of loans The Group company Bipielle SGC, which manages problem loans, is currently involved in a project for the sale without recourse of the non-performing loans pertaining to the Group's companies and banks for a total gross amount of around €1 billion, comprising around 23,000 positions. Currently, the likely counterparties are analysing the positions in order to establish the selling price, which is expected to be in line with the provisions already made. After this operation, the company, which will no longer includes these entries in its assets, may concentrate on servicing operations for the Group's banks as well as on managing securitisation transactions.

Transfer of Bipielle Riscossioni business division During 2006, the Group company Bipielle Riscossione will transfer the business division responsible for collecting taxes to the Italian Revenue Office, as provided for in Art. 3 of Law no. 248 of December 2, 2005. As from October 21, 2006, the current system of concession in relation to the national tax collection service will be withdrawn as the duties relating to national tax collection will be assigned to the Italian Revenue Office, which will exercise these via the company Riscossioni Spa, set up alongside the INPS. The Board of Directors of the Parent Bank has already agreed to proceed with the negotiations.

19 STRUCTURE OF THE GRUPPO BANCA POPOLARE ITALIANA Distribution network On the balance sheet date, the network of bank branches of the Gruppo Banca Popolare Italiana totalled 979 (977 in Italy and 2 abroad) according to the breakdown by company given in the table below.

Bank branches 31.12.2004 31.12.2005 change Banca Popolare Italiana 576 586 10 Banca Popolare di Mantova 7 8 1 Cassa di Risparmi di Livorno 53 53 - Cassa di Risparmio di Lucca 97 97 - Cassa di Risparmio di Pisa 53 53 - Banca Popolare di Crema 43 44 1 Banca Popolare di Cremona 80 76 - 4 Banca Valori 1 1 - Banca CARIPE 49 50 1 Reti Bancarie 1 1 - Efibanca 7 7 - Banca Bipielle.Net 1 1 - Bipielle Bank (Suisse) 1 1 - London Branch 1 1 - TOTAL 970 979 9

This figure as at December 31, 2005 corresponds to a net year-on-year increase of 9 and arises from the following movements during the year, broken down according to company: x for the Parent Bank, net increase of 10, resulting from: ¾ 12 new openings in Bergamo, Bologna, Bresso (MI), Fano (PU), Forlimpopoli (FC), Mirandola (MO), Poggibonsi (SI), Salsomaggiore (PR), Sassuolo (MO), Scandiano (RE), Trieste and Vignola (MO); ¾ 4 closures in Milan, Misterbianco (CT), Mornago (VA) and Palermo. x For Banca CARIPE, 2 new openings (in Ancona and Pescara) and 1 closure in Manoppello (PE); x for Banca Popolare di Mantova, 1 new opening in Bagnolo San Vito (MN); x for Banca Popolare di Crema, 1 new opening in Ghedi (BS); x for Banca Popolare di Cremona, 1 new opening in Manerbio (BS) and 3 closures in Spineda (CR), Spino d’Adda (CR) and S. Pietro in Cerro (PC). Furthermore, Banca Popolare di Cremona transferred its Rome and Verona branches to the Parent Bank. In the first few weeks of the new year 2006, 3 new bank branches became operational: Cassa di Risparmio di Pisa's branch in Casciana Terme (PI), Banca Caripe's branch in Collecorvino (PE) and Banca Popolare Italiana's branch at the new Fiera Milano in Rho. The total number of the Gruppo BPI's network of branches therefore currently stands at 982, of which 980 are in Italy and 2 abroad.

Innovative channels During the year in question, the important of the channels for remote contact with customers was further developed, proof of the interest in new technologies among an increasingly broad spectrum of customers. It is firstly emphasised that, at the same time as the renaming of the Gruppo Bipielle to Gruppo Banca Popolare Italiana, the multichannel services for individuals became "Services by", available through four channels: by Web, by Wap, by Call and by Sms. Since March 2005, thanks to the implementation of the IT system, which is also shared by Banca Caripe, all the Group's Retail banks have Services by. In April, the financial information provider was replaced and the new contract awarded to Radiocor - Il Sole 24 Ore. The better financial conditions offered by the supplier meant that the range of services provided to customers could be increased without price rises: since last December, banking users have benefited from financial information previously reserved for traders, with a twenty-minute delay.

20 Human resources At Group level, the total number of employees as at December 31, 2005 was 8,598. Compared with the end of the previous year, when the workforce totalled 8,706, the net change is therefore a decrease of 108. During the year, 382 employees left the Group (of which 90 were admitted to the Fondo Solidarietà or pensioned). In the same period, there were 255 new recruits (mainly at the Parent Bank (114) and Bipitalia Ducato (89)) principally to support the opening of new branches. A number of Group companies were involved in streamlining and reorganisation. In particular, the following employees were transferred within the Group: x 61 Lo.Se.Ri employees, following its merger into Bipielle Riscossioni; x 30 Banca Popolare di Cremona employees, following the transfer of the Rome and Verona branches to Banca Popolare Italiana and the centralisation, again at the Parent Bank, of certain Head Office activities; x 16 Bipielle Leasing employees, following the transfer of the head office from Pisa to Lodi. Almost all these employees were re-transferred to Cassa di Risparmio di Lucca and Bipitalia Ducato; x 22 Bipielle Net employees, following the completion of the streamlining process resulting from Area Banca's entry into the Group. This principally concerned employees returning from maternity leave, reinstated with the Parent Bank's network structures. For a detailed analysis of the compositions and trends of the Group's human resources, refer to the Social Report, available separately.

Training In the Gruppo BPI, training plays a strategic role in developing technical and professional know-how and shaping the attitudes of the Group's Human Resources. Therefore, expenditure on training is considered an essential investment for ensuring the professionalism of Human Resources. In 2005, a total of 6,245 employees (+1.6% on the previous year) were involved in training activities, with a scope of action aimed at including all areas of banking activity, over a total of 27,074 training days. The architecture of the "training system" is structured around technical training (refining the specialist knowledge required for the role), which accounts for 90% of the total number of training days, and behavioural training (strengthening relationships and consultancy skills in relation to the content and risks of financial investments), which accounts for the remaining 10%. 97% of the total number of training days are classroom based while distance learning accounts for the remaining 3%. The training courses were structured with the aim of developing the technical knowledge required for the various professional roles occupied both by Retail Bank Employees and by those working in General Management. In 2005, the most frequent subject of classroom-based training activities was the new "Basel 2" regulations. Training for new recruits involved a total of 82 employees following a tested programme lasting one month (10 classroom days and 10 work shadowing days) at Bipitalia City, with the aim of furnishing the basic knowledge and skills for an effective integration into the company. As regards safety, in line with Ministerial Decree no. 388 of July 15, 2003 on health and safety at the workplace, a total of 594 employees attended First Aid courses over a period of three months. For those working at the Head Office, there was a high level of participation in the meetings, workshops and external study days aimed at developing the necessary knowledge and skills for new recruits and for those assigned to perform specialist duties, which require constant updating. In total, the number of people involved in these activities was 223 over 561 training days.

Relations with the Trade Unions In 2005, trade union relations resulted in the signing of 32 agreements, notably the Protocol signed in ABI by Banca Popolare Italiana with the General Secretariats of Dircredito, Falcri, Fiba/Cisl, Fisac/Cgil and Uilca on July 26, 2005. In this understanding, Banca Popolare Italiana followed up the previous agreement signed on April 28, 2004 on general repercussions arising from the new Group structure, confirming, in particular, the central role of human resources and the shared objective of their development as a key strategic element for the development and success of the company.

21 As regards extraordinary company operations (mergers, spin-offs and reorganisations) 6 agreements were signed, including the reorganisation of the Auditing and Internal Control Division and the merger of LO.SE.RI. into Bipielle Riscossioni. In terms of support for Group companies in union negotiations, 24 agreements were defined, including agreements on daily commuting, company bonus, training and retraining plan and supplementary pensions. In 2005, two Company Supplementary Agreements were also renewed and signed.

DEALINGS ON THE FINANCIAL MARKETS Treasury In 2005, brokerage and treasury activities related not only to institutional trading and consultancy services aimed at customers but also the management of newly-issued equities and bonds. The main brokerage transactions involved a placing role in the IPOs for Enel 4, Bioera, Caleffi, Guala Closures, Sàfilo, IGD Immobiliare Grande Distribuzione, Save, Toro, Banca Italease and Marr. The first few months of 2006 saw participation, as Guarantor, in the Marazzi Group IPO. In the Apulia Prontoprestito IPO in December 2005, Efibanca was joint-lead manager of the IPO, in collaboration with Banca Popolare Italiana (placing agent). BPI also participated on behalf of third parties (Caboto and Banca Imi) in the issues of the Enel TV 2005-2012 and Enel TF 2005-2012 bonds.

Investment portfolio As regards the Proprietary Portfolio, the movement in cash securities was aimed principally at Repurchase Agreements with customers, guarantees and the restructuring of old bonds. Furthermore, there was more dynamic activity in credit derivatives and Over The Counter options on the BTP long-term treasury bonds market. As regards credit derivatives, it was chosen to buy protection on the 5-year iTraxx index to reduce the default risks present in the CDOs (Collateralized Debt Obligations) in the portfolio and a number of carry trade operations were arranged to write off the cost of the protection bought while keeping the risk profile unchanged. Put and Call options on 10-year BTP treasury bonds were written in order to improve the portfolio's yield profile. In the second part of the year, derivatives transactions were limited to managing current positions while cash transactions, besides ordinary management of the portfolio to support repurchase agreements with customers, were characterised by the disposal of certain structured positions, such as the Matwick fund and the Tiepolo 2 transaction, and by the repurchase on the markets of our issues that were traded at particularly high spreads. Ordinary activities on the equity segment were characterised by maintaining the maximum exposure suggested by the Ambrosetti Asset Management consultancy team. This high level of exposure meant that it was possible to benefit from the very positive performances of the equity market which, as regards the European benchmark (DJ Eurostoxx50), reached levels of around 20%. As regards genuine in-house trading, good results were achieved by seeking to exploit the bullish trends of the domestic equity markets. All of this, by trading both in cash, with exclusively long directional positions, and in derivatives through simple risk-reverse structures or with call spreads. On the exchange market, positions were assumed in derivatives that aimed to strengthen the dollar against the Swiss franc and positions that aimed to keep the dollar within a predetermined corridor against the euro. On the fixed-income market, transactions focussed both on the short term, through the use of listed derivative instruments, and on the medium term, by maintaining, for the whole year, positions that envisaged a rise in rates and which were closed at the beginning of November with a positive balance. At the start of November, the new Finance Division Manager took up office. Since that date, he has undertaken a comprehensive task of reducing current positions, in particular, complex positions on interest rate derivatives and exotic foreign exchange derivatives, and by neutralising the credit risks inherent in certain structures present in the proprietary portfolio as well as continuing to dispose of hedge funds.

Investment banking and merchant banking transactions As regards investment banking activities, the Gruppo BPI's equity capital market transactions on the primary equity market, performed by Efibanca, as the specialist intermediary on these specific financial segments, gave rise in 2005 to its participation in: x 10 underwriting and placement syndicates as Manager, of which 9 relate to Initial Public Offerings (IPO) and 1 Secondary Offer (Enel 2005). Other roles assumed included Placement Manager and Joint Lead Manager in the Public Offering and Manager in the institutional placing of the IPO for the admission to trading of Apulia Prontoprestito Spa on the Expandi Market;

22 x 4 underwriting syndicates for capital increases as Manager, as well as the role of Joint Lead Manager in the underwriting syndicate for the sub-syndication of the Impregilo Spa capital increase. As regards debt capital market transactions, 20 transactions were organised and audited for a value of €625 million. Efibanca has also developed relations in the structured finance segment with other Italian and foreign banks that have invited our Bank to participate in transactions that they have organised. The figures relating to merchant banking activities show, for the year 2005, a further consolidation of the Gruppo BPI's presence. Efibanca's new investments in private equity transactions amount to €178.6 million, the highest absolute figure since the start of the company's involvement in these specific transactions. The amount includes €1.7 million of investments in units of closed private equity funds, represented by the increase in the STAR Social Responsible Fund Closed Fund, while no money was paid out in loans convertible into shares. The total amount of new investments benefits significantly from the €117.6 million investment in around 31% of the share capital of the glass group Bormioli, falling within a broad project of change in ownership and business relaunch. The assumption of such a significant shareholding falls within a policy of bridge equity financing to govern the process of selling control to third parties, following the business relaunch with BPI cooperation. The disposal process is currently under negotiation with leading industrial and financial counterparties. A €24.0 million investment concerned a 20% stake in Igli Spa, a vehicle company set up as part of an alliance of public sector and motorway operators (Autostrade, Gavio, Techint groups) supported by Efibanca - as the sole financial partner - in the capital of the listed company Impregilo Spa. The transaction was also characterised by the interaction between the various financial instruments activated, as previously described in relation to the equity capital market. Further equity investment were made in Santé Labs Italia Spa (clinical trial laboratories), totalling €14.0 million, subsequently sold during 2005, Deltadator Spa (software house), SPAL Automotive Spa (car parts), Faster Holding Spa (fluid dynamic systems) and Area Giochi Holding Spa (SISAL). In terms of disposals, 2005 saw the final disposals of the interests in Sisal Spa, Aurora Shipping Spa, Dalmed Spa, Marr Spa, Eurotunnel Plc/SA, Kabelnetz Nrw and Marconi Corp. Plc, raising a total of €65.7 million. As at December 31, 2005, the value of the shareholdings portfolio, determined according to IAS criteria, is €468.2 million.

Treasury/cash services of public entities As regards the management of the treasury/cash services of public entities, again in 2005, the Group organisation model introduced in January 2003 fully satisfied the demands for operational assistance from the Parent Bank's specialist department for the benefit of the 8 banks that manage this type of service. In this regard, the total number of transactions performed was around 3,500,000 for a value of income and expenditure movements of over €21,000 million. In this context, support was also provided for the approximately 220 tenders for the awarding of the services in question: - 92 tenders for Banca Popolare Italiana; - 31 for Cassa di Risparmio di Lucca; - 30 for Banca Caripe; - 24 for Cassa dei Risparmi di Livorno; - 22 for Banca Popolare Cremona; - 17 for Cassa di Risparmio di Pisa; - 4 for Banca Popolare di Crema; - 1 for Banca Popolare di Mantova. In relation to these tenders, particular importance was assumed by the consultancy service provided to the Parent Bank for the assignment of the treasury service for the Molise Region (only regional service managed by the Group) and to Banca Caripe as pool head for the assignment of the cash service for the entire health service segment of the Abruzzo Region. Participation in these two particularly challenging tenders required the preparation of a voluminous package of computer services. In April, consultancy was provided for the tender (not falling within the standard type of treasury and cash services) launched by the Veneto Region for the awarding of banking services relating to the project for 0% loans for families, with the service awarded until December 31, 2012. This regional project has initial funds of €6 million and involved the opening at the Parent Bank's Venice - Mestre Branch of a bank account into which the sums disbursed by the Region will be paid and to which correspond the direct debit forms for the loan repayment instalments, collected in conjunction with Bipitalia Ducato. The service was obtained by positively enhancing the image factor arising from the Region's role of partner, and the possibility of developing commercial momentum from loan disbursement activities. In August, a management agreement was agreed with the Municipality of Livorno in relation to the e- government project "AIDA - Digital Interoperable Applications for the Authority", which involved the Parent Bank and Cassa dei Risparmi di Livorno.

23 During the year, the SIOPE trial project was completed, which, as from October 1, 2005, has seen the Group present with 7 managed entities (Molise Region, Municipalities of Campiglia Marittima, Cremona, Dovera, Lainate and S. Angelo Lodigiano and University of Pisa). In accordance with enacted regulations, as from January 1, 2006, the online system for monitoring public accounts is applied to 34 managed entities (provinces, municipalities with a population of more than 20,000, universities) and will be extended to a further 249 municipalities as from January 1, 2007.

24 OPERATING AGGREGATES CONSOLIDATED FUNDS UNDER ADMINISTRATION

31/12/2004 31/12/2005 items (without IAS 32 and 39) values % comp. values % change Due to customers: breakdown Current accounts and demand deposits 12,520,293 87.21% 10,717,115 16.83% Savings accounts and time deposits 126,153 0.88% 1,660,150 -92.40% Third-party funds under administration 4,384 0.03% 76 n/a Loans 143,740 1.00% 8,481 n/a Liabilities for assets sold but not eliminated from the balance sheet 1,496,807 10.43% 1,964,068 -23.79% repurchase agreements 1,226,364 8.54% 1,781,790 -31.17% other 270,443 1.88% 182,278 48.37% Other payables 64,692 0.45% 253,039 -74.43% Total 14,356,069 100% 14,602,929 -1.69% Securities in issue 20,281,134 16,930,728 19.79% Total due to customers and securities in issue 34,637,203 31,533,657 9.84% Discretionary accounts 9,206,135 43.65% 8,321,142 10.64% Mutual funds 8,601,489 40.78% 9,190,353 -6.41% Sicavs 641,337 3.04% 556,913 15.16% Insurance products 2,643,343 12.53% 2,518,602 4.95% of which Pension funds 187,141 137,795 35.81% Total assets under management 21,092,304 100% 20,587,010 2.45% Third-party securities under custody and administration of ordinary customers 15,777,588 15,960,001 -1.14% Total indirect customer deposits 36,869,892 36,547,011 0.88% Total funds under administration of banks and institutional investors 27,002,021 21,541,926 25.35% Grand total funds under administration 98,509,116 89,622,594 9.92%

The grand total of customer funds under administration is €98,509 million, an increase of 9.92% since December 2004 (which does not take account of the effects of IAS 32 and 39). Overall, direct customer deposits total €34,637 million, an increase of 9.84% on the previous year. In particular, Amounts due to customers total €14,356 million (-1.7%) while Securities in issue total €20,281 million, an increase of around 20%. Of the components of Amounts due to customers, the largest component is Current accounts and demand deposits (€12,520.3 million), which has increased by 16.83% since December 2004. In 2005, in the area of direct time deposits, particular attention was placed on issuing Senior Notes at higher rates than the corresponding market rates, reserved for new capital, divided into various fixed-rate and floating-rate issues. The offer was also enriched with the issue of structured notes with guaranteed capital, offering certain minimum yields and innovative indexation mechanisms. As regards indirect deposits, the volumes show a slight increase on the figures posted at the end of 2004. The 2.45% increase in assets under management (€21,092 million) more than makes up for the 1.14% decrease in the administered component (€15,778 million). Of the various forms of asset management, discretionary accounts in particular increased by 10.64% while units in mutual funds fell by around 6%. An interesting trend can be seen in relation to pension funds, which recorded a 36% increase, albeit with very low starting volumes. See further on for a more detailed description of the trend of the managed segment in 2005. The figures also show a 25.2% increase in the funds under administration of banks and institutional investors, which ended the year at €27,002 million. As regards deposits (current accounts, savings accounts and certificates of deposit), the following tables gives a breakdown by sector and geographical location of customers.

25 DEPOSITS BY SECTOR 2005 2004 Government Bodies 2.66% 2.46% Households 61.76% 65.18% Financial Companies 10.47% 6.54% Non-Financial Companies 19.25% 19.77% Not-for-Profit Organisations 2.05% 2.16% Other 3.82% 3.89% Total 100% 100% Source: Matrice dei Conti As well as confirming the role of Households as the leading source of deposits, the classification by depositors shows an increase in the percentage attributable to non-banking financial counterparties (insurance companies, lease companies, etc.). This gives rise to a temporary reconfiguration, with the aforementioned significant increase in relations with financial companies, arising from the transactions carried out for the then envisaged operation with Banca Antonveneta.

DEPOSITS BY REGION (customer location) 2005 2004 Lombardy 33.43% 33.25% Tuscany 27.25% 26.19% Liguria 9.63% 10.23% Sicily 8.32% 8.84% Abruzzo 6.64% 6.57% Lazio 5.75% 5.30% Emilia Romagna 4.43% 4.90% Molise 1.56% 1.60% Piedmont 0.85% 0.76% Campania 0.60% 0.64% Trentino Alto Adige 0.57% 0.82% Veneto 0.52% 0.55% Basilicata 0.16% 0.13% Calabria 0.10% 0.11% Umbria 0.08% 0.08% Marches 0.08% 0.03% Sardinia 0.03% 0.00% Friuli Venezia Giulia 0.01% 0.00% Total 100% 100% Source: Matrice dei Conti

The regional breakdown of deposits for the whole of the Group shows the significant weight of Lombardy and Tuscany in BPI's geography. Together, the two regions represent 60.8% of the national total (59.4% at end of 2004). Most of the figures are substantially unchanged, with the sole exception of the increase in Tuscany.

Assets under management

31/12/2005 31/12/2004 % comp. Change Amounts in €/000 % comp. % % Managed accounts (GPF and GPM) 9,206,135 43.65% 8,321,142 40.42% 10.64% Mutual funds and sicavs 9,242,826 43.82% 9,747,266 47.35% -5.18% Insurance products 2,643,343 12.53% 2,518,602 12.23% 4.95% TOTAL ASSETS UNDER MANAGEMENT 21,092,304 100.00% 20,587,010 100.00% 2.45%

26 The total value of assets under management as at December 31, 2005 stands at €21,092 million, a 2.5% increase on the same period last year, benefiting from the positive trends on the financial markets. The growth recorded is due in large measure to the strong results of Bipitalia Gestioni SGR (+4.3%), Bipitalia Alternative Investment SGR (+18.5%, operating in the hedge funds segment) and CR Lucca (+12.2%, due in particular to the positions of certain institutional investors). In particular, discretionary accounts posted a strong performance, rising from €8,321.1 million in 2004 to €9,206 million in 2005 (+10.6%), thereby cancelling out the decrease in mutual funds and sicavs (€9,242.8 million, -5.2%). There was also considerable improvement in the insurance segment (around +5%) thanks to the placement of new products for supplementary pension provision and to the ever increasing demand from the market for products with a low risk-return profile at times of uncertainty on the financial markets. A further reason for the excellent performance of the insurance market was the partnership with Commercial Union (Aviva Group) and with Aurora Assicurazioni (Unipol Group). The agreement with Aurora Assicurazioni only came into full operation in the first few months of 2005. The year saw the successful placement of the "Premium System" Discretionary Accounts, which offer the possibility of receiving a premium to be chosen according to the amount subscribed. For the launch of the product, which took place in September, the whole network was involved in training days arranged in the individual Areas/Banks, in the presence of the product company concerned. The new accounts "Total Return" and "Protection Class" continued to be successfully placed. These met with the approval of savers and achieved higher returns than the stated objectives. In 2005, the Bancassurance project (life division) came into being, a project aimed at standardising the computer platform and placement and after-sales procedures over the whole Group, in conjunction with the two partner companies (Eurovita Assicurazioni - whose products are placed by BPI and by Banca Popolare di Mantova - and Aurora Assicurazioni - whose policies are placed by the other banks under Reti Bancarie). Furthermore, the necessary commercial, procedural and ICT activities were performed for adapting the procedures for the placement of life products to ISVAP regulation no. 551/2005 (transparency of insurance contracts). During the year, 4 Indexes were launched ("Aphrodite II", "Magnolia", "Azalea" and "Adda"), together with a first-line policy with coupon detachment ("Aurora Coupon"), a property-linked first-line policy ("Aurora/Eurora Rivaluta"), a first-line policy with option between coupon detachment and capital revaluation "Aurora Doppia Opzione", and a property-linked fifth-line policy ("Aurora/Eurovita Più Valore"). In 2005, the sales network for non-life products was extended to Banca Popolare di Cremona and Banca Caripe. The range of products was also enlarged with the launch of "Protezione Persona" (Person Protection) and "Protezione Punto Vendita" (Point of Sale Protection) (EuropAssistance), linked to the Conto Commercianti, and the "Polizza Incendio Reale Mutua Assicurazioni" (Fire Insurance Policy). Furthermore, a marketing initiative ("protezione e serenità") was developed to protect and reassure the family with its RC Capofamiglia policy (family cover) and Sicurezza Fabbricato policy (building security/safety). The range of products related to Supplementary Welfare in 2005 was extended with the new open pension fund "Arca Previdenza Aziende", which is characterised by being the most competitive retail product in terms of costs on the Italian market. Remaining with this segment, training courses were organised to look more closely into the product and into the relevant legislation, aimed at specialist figures such as contacts in the Area Divisions and private bankers. Finally, an initiative was launched aimed at gathering collective memberships from the Local Police, as provided for in Art. 208 of Legislative Decree no. 285 of April 30, 1992.

27 CONSOLIDATED LOANS

31/12/2004 31/12/02005 (without IAS 32 and 39) values % comp. values % change Current accounts 7,686,780 27.48% 7,566,655 1.59% Repurchase agreements 30,274 0.11% 20,112 50.53% Mortgages 9,233,325 33.01% 10,799,896 -14.51% Credit cards, personal loans and "fifth of salary" loans 1,700,135 6.08% 1,351,803 25.77% Finance leases 446,140 -100% Other transactions 4,913,924 17.57% 4,483,606 9.60% Debt securities 170 0.00% 82,733 -99.79% Impaired assets 1,040,557 3.72% 735,069 41.56% Assets sold but not eliminated 3,363,597 12.03% 3,958 n/a Total net customer loans 27,968,762 100% 25,489,972 9.72%

The total amount of customer loans was €27,969 million as at December 31, 2005, compared with €25,490 million in December 2004 (+9.72%), although this figure does not include the effects of the application of IAS 32 and 39 on financial instruments. Current accounts accounted for €7,686.8 million, an increase of 1.59% on December 2004, while mortgages fell by 14.51% to €9,233.3 million. The decrease in mortgages was due to the securitisation of loans, as described further on, classified among Assets sold but not eliminated. Several transactions involving the assignment of mortgage loans took place during 2005, with a view to the subsequent execution of a new securitisation transaction. The structure (called "warehousing") involves the partial and progressive financing of blocks of assets, consisting of commercial and home mortgage loans originated by the Group's banks, until reaching the necessary amount for securitisation, which will be performed with the conventional methods set out in Law no. 130/99. The total amount involved is around €1 billion in commercial mortgages and around the same figure in home mortgages. The originating banks are Banca Popolare Italiana, Cassa di Risparmio di Lucca, Cassa di Risparmio di Pisa, Cassa di Risparmi di Livorno, Banca Popolare di Crema and Banca Popolare di Cremona. First home and commercial mortgages were assigned in several tranches, totalling €1,116 million and €866 million respectively. The subsidiary Bipielle Ducato also implemented a similar assignment structure, with a view to a future public securitisation of consumer loans, totalling €500 million. The following tables show the breakdown of customer loans of the Group's banking companies in terms of the sectors and economic activity of customers, and their regional location.

LOANS BY SECTOR 2005 2004 Government Bodies 2.26% 2.73% Households 16.21% 18.80% Financial Companies 11.94% 13.13% Non-Financial Companies 60.23% 59.96% Not-for-Profit Organisations 0.41% 0.39% Other 8.94% 4.99% Total 100% 100% Source: Matrice dei Conti

28 The only significant increase in the "Other" category is attributable to the transactions related to the proposed takeover of Antonveneta, implemented with counterparties residing abroad and still in progress at the end of the year.

LOANS BY REGION (customer location) 2005 2004 Lombardy 36.43% 30.66% Tuscany 23.80% 27.05% Lazio 21.92% 22.45% Emilia Romagna 4.38% 5.28% Abruzzo 3.94% 3.50% Liguria 3.77% 4.77% Sicily 2.53% 2.63% Veneto 1.09% 1.18% Trentino Alto Adige 0.82% 1.07% Piedmont 0.59% 0.64% Molise 0.26% 0.30% Campania 0.14% 0.16% Umbria 0.13% 0.15% Marches 0.10% 0.08% Basilicata 0.04% 0.04% Calabria 0.03% 0.04% Sardinia 0.02% 0.00% Friuli Venezia Giulia 0.01% 0.00% Total 100% 100% Source: Matrice dei Conti

In terms of active transactions, there are 3 most significant regions (Lombardy, Tuscany and Lazio) which account for 82.2% of the total for Italy (80.2% twelve months earlier). The significant increase in lending in Lombardy, which therefore affects the percentage redistribution of the other regions, is also due to extraordinary transactions currently being arranged.

BREAKDOWN OF LOANS BY ECONOMIC ACTIVITY 2005 2004 - Other market services 33.60% 27.88% - Building and public works 12.32% 11.19% - Commerce, salvage and repair services 11.95% 12.93% - Agriculture, forestry and fishing products 4.94% 4.76% - Hotels, bars and restaurants 4.23% 4.84% - Food products, beverages and tobacco products 3.71% 4.85% - Textiles, leather and footwear products, clothing 3.39% 3.47% - Energy products 2.83% 4.04% - Agricultural and industrial machinery 2.63% 2.97% - Metal products other than machinery and means of transport 2.26% 2.33% - Non-metallic minerals-based products and minerals 2.24% 2.56% - Sea and air transportation services 2.16% 2.17% - Paper, paper products, printing and publishing products 1.82% 1.87% - Other industrial products 1.63% 1.65% - Transport-related services 1.62% 1.71% - Minerals and ferrous and non-ferrous metals 1.61% 2.76% - Means of transport 1.44% 1.51% - Electrical materials and supplies 1.28% 1.28% - Rubber and plastic products 1.26% 1.18% - Chemical products 1.25% 1.56% - Domestic transport services 1.17% 1.10% - Office and EDP machines, precision and optical instruments 0.35% 0.51% - Communications services 0.34% 0.91% TOTAL 100% 100% Source: Matrice dei Conti

29 The predominance of "other market services" is not simply the result of a broad category that groups together other economic activities but is the result of the increased importance of the Tertiary economy for the BPI loan portfolio, in line with the development of the Italian economy. In this case too, the breakdown by sector is affected, although to a lesser extent, by the activities carried out during the year for speculative purposes, in relation to the "other market services" category. More closely connected to the economic trend are the changes relating to the commerce sector, which showed some weaknesses, and the increase in building loans which, for the whole of 2005, showed interesting developments. From a management perspective, attention continued to be focussed on the home mortgages sector, where competition between banks is intense. Starting in the month of February and continuing throughout the year, an initiative was carried out aimed at acquiring new customers and this led to the opening of around 700 current accounts for individuals. At the same time, agreements were reached with more than 500 estate agencies to provide referrals for customers who need to take out a mortgage. Agreements continued to be reached with building companies (97 in December 2005) for the proposal of Mutuo Insieme (possibility for the builder to contribute to the interest payment on the mortgage offered to its customer, thereby encouraging the sale of the properties). Overall, a total of around €715 million was disbursed in new home mortgages in 2005 with 6,700 applications, an increase of 8% on the previous year. In line with market trends, the sale of Personal Credit continued successfully through the network of bank branches: the amount disbursed in 2005 totalled €182 million (+18% on the previous year) with a total of 20,200 applications. In the final quarter of the year, two new products were introduced which will take effect during 2006: "Personal Credit Light" (for the financing of small expenses) and "Personal Credit Fai da Te" (flexible version of the conventional personal credit). Some of the initiatives in place at the start of 2006 in the area of consumer credit include: - Carta Extra card automatically sent to those taking out a loan (as at December 31, 2005, 20,800 cards distributed thanks to Personal Credit); - "Azienda chiama conto", which involves reaching agreements with companies for the offer of low-rate loans to their employees.

SHAREHOLDERS EQUITY Group Shareholders' Equity as at December 31, 2005, including the operating loss, is €2,786.3 million, an increase of 25% since December 2004, following the increase in the share capital of the Parent Bank, as described below. A statement of comparison is given below between the shareholders' equity and net profit of Banca Popolare Italiana and the consolidated figures. Shareholders' (Amounts in Euro/000) Net profit Equity Balance as at December 31, 2005 - Parent Bank (611,104) 3,316,424 Effects of fully consolidated shareholdings 140,725 (348,128) Effects of shareholdings consolidated according to the equity method 19,075 80,353 Reversal of intragroup dividends (291,488) Consolidation adjustments (1,101) (1,101) Valuation reserves, Group companies 56,303 Own shares, Group companies (1,724) FTA reserves, Group companies (315,816) Balance as at December 31, 2005 - Consolidated Fin. Statements (743,893) 2,786,311

Share capital transactions performed in 2005 The Extraordinary Meeting of June 2, 2005 decided to launch a plan to strengthen the capital structure involving a total amount of over €4 billion, including €1.5 billion for a convertible bond issue. In particular, the month of June 2005 saw the start of the placement of the capital increase, in divisible form, in the nominal maximum amount of €564,179,784.00 through the issue of 188,059,928 shares with a face value of €3.00, dividend payable, each increased by a unit premium of €5, as an option to the existing Banca Popolare Italiana convertible bondholders and shareholders at the rate of 6 newly-issued shares for every 10 bonds or shares held. The newly-issued shares are accompanied by free, transferable warrants, intended for listing and independently distributable in the ratio of 1 warrant for every 2 shares subscribed. These warrants will allow for the subscription of a further capital increase, in divisible form, to be carried out between July 1, 2008 and December 31, 2010, in the maximum nominal amount of €282,089,892.00.

30 The placement transaction was performed through the sales network of the Gruppo BPI. The Extraordinary Meeting had also decided upon a capital increase, in divisible form and without preemptive right, in a maximum nominal amount of €360 million, to be executed by December 31, 2006, in relation to the cash and shares bid for BAPV. During August a total of 2,400,000 Banca Popolare Italiana shares with a face value of €3 were issued at an issue price of €8.30 as resolved by the Board of Directors in its meeting of July 26, 2005. The issue took place in relation to the capital increase decided by the Extraordinary Meeting of March 3, 2003. It was also decided to issue a Bond Loan convertible into Bipielle Investimenti shares for a total nominal value of between €1.030 and €1.167 billion. Other initiatives, now complete, were carried out alongside these capital transactions. These include, in particular, the issue of preferred shares (Tier 1) in the amount of €500 million, the issue of a subordinated note (Upper Tier 2) in the amount of €300 million, the issue of a subordinated note (Lower Tier 2) in the amount of €300 million and the issue of a subordinated note (Tier 3) in the total amount of €100 million. Reti Bancarie Holding had decided to implement a capitalisation plan involving capital increases up to a maximum nominal amount of €435 million, in relation to the cash and shares bid for BAPV, which has not yet been implemented. As for Bipielle Investimenti, it planned capital increases, not yet implemented, to serve the BPI Subordinated Loan Convertible into Bipielle Investimenti shares and for the issue of warrants totalling €927,068,292.

BANCA POPOLARE ITALIANA SHARE PERFORMANCE In 2005, the Banca Popolare Italiana share price varied between a high of €8.96 (January 21, 2005) and a low of €6.17 (October 28, 2005). The share achieved its highs for the year in January and remained around €8.60 until March, when it fell back to €7.70. Prices return to close to the highs for the year before August and then again in the first few days of October. As a result of the increasing market uncertainties over the situation that the Gruppo BPI found itself in following the failed takeover of Banca Antonveneta, prices from the second half of October onwards saw a significant increase in both volatility and volumes traded. The share price varied by as much as 20% in a single day, while the average daily volumes traded in the final quarter of the year increased to 5,000,000 shares, compared with 1,650,000 in the previous ten months. After the lows of around €6 that were reached in mid-October, prices rallied to close the year at €7.49.

RETI BANCARIE SHARE PERFORMANCE In 2005, the Reti Bancarie share price varied between a high of €42.10 (April 29, 2005) and a low of €30.05 (December 15, 2005). In the first 6 months of the year, prices moved laterally between €40 and €38. At the end of July 2005, when Banca Popolare Italiana's takeover bids for Banca Antonveneta were frozen, the Reti Bancarie share price started to fall, culminating in the double low recorded firstly in October and then in December. Prices recovered to close the year at €35 euro. The average daily volumes traded in 2005 were around 32,000 shares.

BIPIELLE INVESTIMENTI SHARE PERFORMANCE In 2005, the Bipielle Investimenti share price varied between a high of €6.71 (July 13, 2005) and a low of €5.35 (October 27, 2005). As with the Parent Bank's share, Bipielle Investimenti's prices remained within a lateral trading range of between €6.60 and €6 for the first 9 months of the year, only to fall in mid-October to a low of €5.35. Prices rallied to close the year at €5.97. The liquidity of the share is somewhat limited although this is increasing substantially. The average daily volume traded in 2005 was around 8,100 shares compared with 3,275 in 2004. As a result of the measured adopted on January 12, 2004 by Borsa Italiana, the share is traded in a single auction phase. Therefore, only the closing price is available.

31 RATING AGENCY ASSESSMENTS The issues of the Gruppo Banca Popolare Italiana are rated by two agencies, FitchRatings and Moody’s. In 2005, both agencies placed the rating of the Gruppo BPI under negative credit watch. On February 6, 2006, Moody's completed the annual rating review process, which it had started on May 13, 2005, and reduced Banca Popolare Italiana's rating by 1 notch. FitchRatings withdrew the negative credit watch on December 21, 2005 but then reinstated it on March 16, 2006 following worsening expectations over the Gruppo BPI's 2005 annual results. As at March 29, 2006, the ratings assigned to the debts of the Gruppo Banca Popolare Italiana are as follows:

FITCH RATINGS OUTLOOK Long term rating BBB+ Short Term Rating F2 Rating watch negative Individual C MOODY'S OUTLOOK Issuer Rating Baa2 Bank Deposits Baa2 Senior Unsecured Debt Baa2 Stable Subordinated Debt Ba1 Bank Financial Strength D Short Term Debt P-2

REGULATORY CAPITAL The provisions made had an obvious impact not only on profitability for the year but also on the Regulatory Capital which, as at December 31, 2005, stood at €3,216 million with a Tier 1 capital of 5.55% and a total capital ratio of 9.63%.

32 INCOME TRENDS Consolidated income statement results for the year 2005 The following statement and the respective comments analyse the results of the income statement for the year ended December 31, 2005, prepared according to IAS/IFRS standards, compared with the results for the previous year, restated consistently on the basis of IAS/IFRS standards, excluding IAS 32 and 39.

31/12/2004 INCOME STATEMENT (amounts in Euro/000) 31/12/2005 (without IAS 32 delta % and 39) Interest income and similar revenue 1,777,679 1,664,429 113,250 6.80% Interest expense and similar charges (1,016,846) (823,556) (193,290) 23.47% Net interest income 760,833 840,873 (80,040) -9.52% Commission income 580,867 648,635 (67,768) -10.45% Commission expense (281,495) (207,335) (74,160) 35.77% Net commissions 299,372 441,300 (141,928) -32.16% Dividends and similar income 62,026 105,337 (43,311) -41.12% Net income from trading activities (47,687) (155,375) 107,688 -69.31% Net income from hedging activities 47,356 47,356 n/a Profit (loss) from the sale or repurchase of: b) available-for-sale financial assets 47,938 47,938 n/a c) held-to-maturity financial assets 150 (150) -100% Net income from financial assets and liabilities designated at fair value 93,053 93,053 n/a Total income 1,262,891 1,232,285 30,606 2.48% Net adjustments for impairment of: a) loans (752,998) (231,717) (521,281) 224.96% b) available-for-sale financial assets (226,217) (43,002) (183,215) 426.06% c) held-to-maturity financial assets (34,444) 34,444 -100.00% d) other financial transactions (2,779) 33,179 (35,958) -108.38% Net income from financial operations 280,897 956,301 (675,404) -70.63% Net premiums 6,254 6,254 n/a Balance of other income/expenses from insurance operations 5,421 5,421 n/a Net income from financial and insurance operations 292,572 956,301 (663,729) -69.41% Administrative expenses: a) personnel expenses (543,918) (556,768) 12,850 -2.31% b) other administrative expenses (460,286) (443,811) (16,475) 3.71% Net provisions for contingencies and charges (261,406) (118,122) (143,284) 121.30% Net adjustments to property, plant and equipment (59,614) (42,736) (16,878) 39.49% Net adjustments to intangible assets (25,028) (36,685) 11,657 -31.78% Other operating income/expenses 223,088 339,022 (115,934) -34.20% Operating costs (1,127,164) (859,100) (268,064) 31.20% Gains (losses) from investments (6,021) 46,570 (52,591) -112.93% Net adjustments to goodwill (42,035) (18,306) (23,729) 129.62% Profit (loss) from sale of investments 824 (1,939) 2,763 -142.50% Profit (loss) from continuing operations before tax (881,824) 123,526 (1,005,350) -813.88% Income taxes on continuing operations 165,208 (50,871) 216,079 -424.76% Profit (loss) from continuing operations after tax (716,616) 72,655 (789,271) n/a Profit (loss) from discontinued operations after tax 16,737 16,737 n/a Profit (loss) for the period (699,879) 72,655 (772,534) n/a Period profit (loss) of minority interests (44,014) (87,176) 43,162 -49.51% Profit (loss) of parent bank (743,893) (14,521) (729,372) n/a

33 Net interest income Net interest income as at December 31, 2005 was €761 million, representing a 9.5% decrease on the figure of €841 million recorded at the end of the previous year. The reduction in net interest income on the one hand reflects the growth in loans but on the other hand is affected by the strain on the liquidity relating to the borrowing of funds and by the effect of the application of IAS 39 (not applied in 2004) which generates a change in interest income to the benefit of net income from hedging activities. In detail, the growth in interest expense (+23.5% year-on-year) is much greater than the growth in interest income (+6.8% year-on-year). The increase recorded in interest income, disregarding the effect of the application of IAS 39 as mentioned above, is substantially due to the growth in loans during the year (+6.5% year-on-year, based on the figure for December 31, 2004 including the effects produced by IAS 39). The growth in interest expense is substantially due to the use of external financing in the second part of the year owing to the cash position that was affected by the immobilisation of financial resources in relation to Banca Antonveneta shares.

Net commissions Net commissions were affected by the negative trend in commercial activities and by the contribution of extraordinary commission expense associated with financial transactions carried out in 2005. Commission income fell from €649 million in 2004 to €581 million in 2005 (-10.4%) as a result of the decline in commercial activities, while commission expense jumped from €207 million to €281 million (+35.8%). In particular, commission expense includes around €75 million in relation to the Antonveneta operation and around €43 million in relation to costs incurred in the transactions to buy back the minority shares sold in the first half of 2005. Disregarding the above extraordinary effects, net commissions would have recorded only a slight fall of €19 million in relation to the previous year.

Dividends Dividends amounted to €62 million, including the €38 million relating to the shareholding in Banca Antonveneta: the fall recorded on the previous year (€105 million in 2004) is due to different capital allocation policies.

Income from trading activities Net income from trading activities posted a loss of €48 million as at December 31, 2005. Compared with the loss of €155 million in the previous year, this represented a significant reduction in the loss. This amount is due to the Bank's policy of risk profile reduction which involved the closure of transactions involving complex financial instruments and derivatives, resulting in capital losses of around €90 million. Adverse market trends, particularly fluctuations in the yield curve in December 2005, hit investment choices hard in the finance area and led to the writedown of the overall portfolio in order to adjust the book values of the financial instruments to the market value as at December 31, 2005.

Income from hedging activities Net income from hedging activities posted a profit of €47 million as at December 31, 2005. It is pointed out, as indicated above, that this result was achieved thanks to a transfer of around €70 million from the item "interest income" owing to the application of IAS 39.

Profit from the sale of available-for-sale financial assets The item "profit from the sale of available-for-sale financial assets" amounted to €48 million as at December 31, 2005. Of this figure, €20 million relates to the sale of the stake held by the Group in Banca Italease and €25 million relates to the sale of the entire stake held, through the subsidiary Efibanca, in Sisal SpA.

34 Net income from financial assets and liabilities designated at fair value The item "net income from financial assets and liabilities designated at fair value" amounted to €93 million as at December 31, 2005. Of this figure, around €94 million relates to the capital gain realised from the disposal of the shareholding in Banca Antonveneta to ABN Amro and €1 million relates to the negative difference between the valuation of the financial assets (€38 million) and liabilities (€39 million) of the subsidiary Area Life Ltd.

Net adjustments for impairment of: - loans Adjustments to loans reflect the strict budgetary policy implemented by the Group in the course of 2005. Compared with the previous year, adjustments increased by €521 million, rising from 0.9% in 2004 to 2.6% in 2005 when expressed as a percentage of loans (recall that IAS 39 was not applied to the 2004 figures and, therefore, the effects are not reflected correspondingly in the comparative statement as at December 31, 2004). Net adjustments to loans made in 2005 amounted to €753 million, compared with €232 million in 2004. Of these, €441 million relate to impaired loans and €425 million to performing loans while writebacks totalled €113 million. The increase in adjustments to loans is due to the prudent assessments made on the loan portfolio, as a result of in-depth analyses which, particularly considering the negative trend over the year of some significant positions, brought about an increase in the level of coverage of non-performing loans, including in the light of the process of transferring these to Bipielle SGC. This coverage, net of the write-offs made as part of the transfers to Bipielle SGC, increased from 62% on December 31, 2004 to 78% on December 31, 2005. It is pointed out that this amount includes the writedown of around €150 million in relation to funds granted to the Magiste Group (calculated on the basis of the depreciation of the guarantees in force as a result of the negative performance of the securities given as collateral) and around €97 million in relation to funds granted as part of the loan to Kamps.

- available-for-sale financial assets Net adjustments for the impairment of available-for-sale financial assets increased by €183 million from €43 million in 2004 to €226 million in 2005. Of this figure, around €119 million relates to the total writedown of the junior notes and the partial writedown of the mezzanine notes (equal to 70% of the total value of the securities in the portfolio) arising from the securitisations of non-performing loans performed by the Group in previous years through the vehicles Tiepolo Finance and Tiepolo Finance II, and around €107 million relates to the writedown of the shareholdings classified among available-for-sale financial assets. In particular, the writedown of the shareholdings in question is substantially due to the writedown made in relation to Hopa totalling €97 million.

Net income from insurance operations This item relates solely to the subsidiary Area Life International Assurance Ltd (not included in the scope of consolidation in 2004) which provides life insurance services.

Administrative expenses Administrative expenses recorded a total increase of €4 million, rising from €1,000 million in 2004 to €1,004 million in 2005. In detail, personnel expenses fell by €13 million (-2.3%) while other administrative expenses increased by €16.5 million (+3.7%). A significant part in this increase were all the extraordinary expenses incurred by the Group in the Antonveneta operation which amounted to around €40 million. Net of this extraordinary effect, other administrative expenses would also have decreased by 5.6% on the previous year.

Net provisions for contingencies and charges Net provisions for contingencies and charges amounted to €261 million for the year ended December 31, 2005, an increase of €143 million on the figure for the previous year.

35 The provisions made relate, in particular, to the expenses relating to the Parmalat revocatory action totalling around €60 million, to the charges for legal risks attributable to the Antonveneta operation totalling around €94 million, substantially similar to the capital gain realised, and to the expenses related to legal disputes and lawsuits totalling €107 million.

A summary is given below of the effects arising from the Antonveneta operation on the 2005 income statements, without considering the implicit costs inherent in financial immobilisation.

COSTS: Commissions for guarantees received in relation to the takeover and Refloating operations 75 million Costs of reversal of minority shares transactions 43 million Costs of technical and legal consultancy for the structuring of transactions 40 million Provision for legal contingencies and charges 94 million Total costs 252 million REVENUES: Dividends received on the stake in the portfolio 36 million Capital gain from the disposal of the entire stake in the portfolio 94 million Total revenues 130 million

Net adjustments to property, plant and equipment and intangible assets Net adjustments to property, plant and equipment as at December 31, 2005 amounted to €60 million, an increase of €17 million on the previous year. This increase is substantially due to the adjustments made to non-instrumental properties, bringing their book values into line with the results of the valuations made by leading property valuation companies. Net adjustments to intangible assets as at December 31, 2005 amounted to €25 million, down by €12 million on the previous year, and relate exclusively to the amortisation of long-term application software.

Other operating income and expenses The item "other operating income and expenses" showed a positive balance of €223 million as at December 31, 2005, although the figure was €116 million lower than the previous year, essentially due to lower amounts of extraordinary income. In particular, operating income amounted to €364 million while operating expenses amounted to €141 million.

Gains (losses) from investments Net losses from investments as at December 31, 2005 amounted to €6 million compared with net gains of €47 million in the previous year. This loss is the result of net gains achieved (around €48 million) through the disposal of shareholdings totalling (of which around €50 million in gains realised from the disposal of part of Cassa di Risparmio di Lucca), of capital gains (€19 million) arising through the valuation of associated companies according to the equity method and of the writedown (around €73 million) of the shareholding in Cassa di Risparmio di Bolzano following the results of the assessment made by a leading consultancy firm in relation to the impairment test on shareholdings.

Net adjustments to goodwill Net adjustments to goodwill amounted to €42 million as at December 31, 2005, compared with €18 million in the previous year. The adjustments relate to the writedown of goodwill in relation to certain subsidiaries (Reti Bancarie, Banca Popolare di Cremona, Bipielle International Holding, Area Life International Assurance and Partecipazioni Italiane) following the results of the assessment made by a leading consultancy firm in relation to the impairment test on the consolidated shareholdings.

Income taxes on continuing operations Income taxes on continuing operations posted a positive balance of €165 million as at December 31, 2005 as a result of the recognition of deferred tax assets calculated not only on the temporary differences between the book and tax bases of assets and liabilities but also on the end-of-year tax losses.

36 The tax asset was recorded in view of the extraordinary nature of such losses which can therefore be reabsorbed through lower payment of taxes in future years on the basis of the profits that emerge from the business plan over the forthcoming years, and also in view of the national tax consolidation to which the Parent Bank and almost all of the subsidiaries have subscribed.

Profit from discontinued operations after tax Profit from discontinued operations after tax as at December 31, 2005 amounted to €17 million and relates to the result, net of intragroup write-offs, of the subsidiaries Bipielle Leasing and Bipielle Riscossioni whose sale will be completed during the 2006 financial year.

Period profit of minority interests By allocating to minorities the proportional share in the profit of the Group companies for which the Parent Bank does not own all the shares, this increases correspondingly the overall loss pertaining to the Group. In determining the profit relating to minority interests, account was taken of the effects of the put options granted to third parties over the minority shares of subsidiary companies as provided for by IAS/IFRS.

ADDITIONAL INFORMATION With regard to related party transactions, refer to Section H of the notes. The Group does not carry out research and development activities. As regards the own shares held in the portfolio, refer to the notes.

37 DEVELOPMENTS IN CORPORATE GOVERNANCE AND ACTIONS TAKEN IN RELATION TO THE MANAGEMENT STRUCTURE a) The well publicised events of 2005 and impacts on the corporate governance structures Last year was marked considerably by the launch and by the outcomes of the proposed takeover of Banca Antoniana Popolare Veneta ("Antonveneta" or "BAPV"), and by the emergence of transactions riddled with serious irregularities, not all connected to the Antonveneta takeover, which the Public Prosecutor and the Supervisory Boards are still investigating. These events highlighted a number of deficiencies in the Group's governance system, which are more fully described in the special Report. Until the final months of 2005, the governance of the Bank and of the Group was characterised by a major centralisation of powers and decisions to the benefit of the chief executive officer and his closest colleagues. A brief summary is given below of the main events that involved the governance structure in 2005, events which are closely interwoven with the actions of the Public Prosecutor and the Supervisory Boards in relation to the Bank. Following the suspension placed on the previous chief executive officer, the Board of Directors appointed, on August 2, 2005, Giorgio Olmo as the new chief executive officer, having previously held the position of Deputy Chairman. Subsequently, on October 17, the Bank appointed a General Manager, Divo Gronchi, formerly General Manager and Director of Banca Popolare di Vicenza and previously (1996-2000) Director/General Manager of Monte dei Paschi di Siena. On December 12, 2005, all the directors and members of the board of statutory auditors tendered their resignation, some with immediate effect and others with effect from the date of the next shareholders' meeting or from the meeting convened to approve the 2005 financial statements. On the same date Dino Piero Giarda and Divo Gronchi were coopted onto the Board of Directors. On December 27, 2005, the Board of Directors approved a new version of BPI's individual and consolidated financial statements for the year ended December 31, 2004, as Consob had impugned the shareholders' resolution of April 30, 2005 that had approved these. Indeed, Consob had considered that the version of these financial statements originally approved did not correctly reflect the Company's and the Group's financial position and state of affairs. The revised version of the 2004 financial statements was approved by the Shareholders' Meeting on January 28, 2006, recording a consolidated loss of €26.6 million compared with a consolidated profit of €168.4 million posted in the version of the financial statements rejected by Consob. The dividends already distributed on the basis of the profit stated in the original version of the 2004 financial statements were non-recurring and, therefore, it was necessary to call upon the distributable reserves up to the amount distributed. In the same meeting, the new Board of Directors was appointed and, in the first subsequent Board meeting, the new Chairman of Banca Popolare Italiana. In the meantime, on December 22, 2005, Consob had started sanction proceedings against the individual directors and auditors in office since April 30, 2004 and, following the counterclaims submitted, offered them, on January 18, 2006, the possibility of making a personal oblation in full settlement. The string of serious managerial and operational irregularities that was emerging prompted the Board of Directors to appoint a lawyer, Rescigno, to assess the civil actions available to the Bank against those persons responsible for the unlawful behaviours that had been detrimental to the Bank. The assessment is still in progress as it must consider both the difficulties associated with technical/accounting reconstructions, and the need to identify the most useful initiatives in the Bank's interest. The legal investigations, which led to the placing of restrictions on the personal freedom of company managers already subject to prohibitive measures, are still in progress. Likewise, a supervisory inspection by Banca d'Italia, which started in June 2005 in accordance with Art. 68 of the Consolidated Banking Act, is still in progress. a) Corporate governance innovations and actions in relation to the management structure implemented in 2006 The Shareholders' Meeting of January 28, 2006 represented a turning point for the Bank. After re-approving the 2004 financial statements, prepared in response to the criticisms made by Consob of the original version, the Bank appointed an almost totally new Board of Directors. Indeed, of the 16 directors elected, 12 are totally new, two (Giarda and Gronchi) had been coopted onto the previous Board only a month and a half earlier (December 12) and two had been part of the previous Board for a longer period of time. The same meeting also appointed three new members of the Board of Statutory Auditors to replace the three outgoing members. Actions in relation to the Bank's governance were not limited to appointing a new Board and three new Auditors but also made provision for the creation of additional bodies and extended to the operating conditions and rules of the Bank's structures. The most important corporate governance initiatives taken as from February 2006 are as follows:

38 1.1 Lengthening of the chain of command. To this end, two important decisions have been made which have significantly redesigned the Parent Bank's management structure: i. Franco Baronio, former deputy chairman of Bain & Company, has been appointed general manager. The role of general manager, previously not present within BPI, has been introduced for two reasons: firstly, to place a new manager in charge of the Bank's organisational structure and, secondly, to increase the degree of collective involvement in the making of key decisions at the top of the Group; ii. two deputy general managers have been appointed, one responsible for the Credit and Finance area (Giuseppe Malerbi) and one for the Operation - organisation and IT area (Giuseppe Apicella Guerra). Both have come from outside the Gruppo BPI and have significant experience in their respective duties. Provision is also made for a third deputy general manager (responsible for the Market area), assumed temporarily by the general manager. The new roles of deputy managers, again not occupied previously, have been introduced in order to strengthen two key functions for the Bank, previously not appropriately managed, and to increase the degree of spreading of decision-making responsibility. The appointment of the new deputy managers follows on from the actions taken to strengthen the management structure already started by Mr Gronchi immediately after his arrival at BPI last October, with the external recruitment of the Finance Manager Ludovico Alberto Basadonna and the Auditing and Internal Control Manager Paolo Bozzi. 1.2 Increase in the degree of collective involvement in decision-making and strengthening of the process of communicating and circulating information within the Board. To this end, the Board of Directors' operating procedures have been radically altered. In the first two months, board meetings have been frequent, lengthy and have involved numerous and frequent interventions on the part of directors. Furthermore, a Strategic Policy Committee, with advisory duties, has been set up, comprising the Chairman, Chief Executive Officer and three other directors. This Committee meets periodically in order to prepare more effectively the issues subsequently submitted to the Board. The Strategic Policy Committee allows for a significant improvement in communication and information processes between the Board and the Chief Executive Officer and for greater collective involvement and decision-sharing. 1.3 Review of the internal control system, starting with the plans to redesign the "organisational model", as provided for in the aforementioned Legislative Decree no. 231, in order to make this more effective and incisive in preventing corporate offences by ensuring that the Internal Control Committee and the Body set up pursuant to Legislative Decree no. 231 have separate duties and composition. Both bodies now comprise three directors each (one common member) in order to promote communication and information exchange, given the fact that the duties and tasks assigned to the two bodies present a number of significant similarities. 1.4 Start of the procedures aimed at simplifying the Group structure, which should lead, during 2006, to a shortening of the corporate chain. This initiative intends to strengthen the power of guidance and control that the Parent Bank's Board of Directors has over the entire Gruppo BPI and to further improve the transparency of market reporting. Finally, we are working on a project to extend and revise the powers of the Committees, Chief Executive Officer and General Management, in order to concentrate the work of the Board of Directors on the issues most relevant to the company. At the same time, the new organisational model for the Bank's General Management is being prepared, which will be based on criteria of prudent management, effective control, streamlining and collective decision- making, in order to re-establish efficient decision-making and improve risk management. This new model has the general aim of focussing efforts and investments on strategic activities, by refocusing on the traditional banking sector. For example, a project to reorganise the Finance Division is also being developed in order to give it a role instrumental to the core business and one that is no longer speculative.

39 RISK MANAGEMENT AND CONTROL SYSTEM The Gruppo Banca Popolare Italiana's internal control system consists of a set of rules, procedures and organisational duties. This requires the involvement, in various roles, of the company's operational, executive and governance bodies. The events of 2005 highlighted a number of difficulties within the general control system in relation to the investigation of actions that do not fall within the normal operating practices defined. In the light of these difficulties, there has been a substantial rethinking in relation to the organisational structure of the control system. The initiatives defined, and partly already implemented, follow on from previous initiatives carried out during 2005, and relate to four well-defined areas: 1. Governance system 2. Line controls 3. Risk management system 4. Internal auditing.

Governance system The Gruppo BPI's new organisational and governance structure, already decided by the Board of Directors, is based on the following principles: x distinction between "line" and "staff" functions, x identification of three Areas of lines (Operation, Market, Finance and Credit), x clear distinction between hierarchical and functional reporting based on principles of management delegation and collective involvement. The Parent Bank includes within its structures the Corporate Centre functions. The Parent Bank adopts a strong leadership role, implemented through the General Management and the managers of the line Areas, with the following duties: x issuance of models and policies defined by the Parent Bank's technical departments, for example, for risk management and union policy. x guiding role in the respective Committees, with duties and powers for strategic policy and coordination of significant operations for the Group. The following Governance Committees have been set up, again decided by the Board of Directors, with the aim of tightening control over the Group's operations: x Strategic Policy Committee (with a mandate to determine the criteria for managing the Group's affairs and for monitoring its operations), comprising the following Directors: - Chairman, Dino Piero Giarda, - Chief Executive Officer, Divo Gronchi - Senior Deputy Chairman, Enrico Perotti - Deputy Chairman, Vittorio Coda - Andrea Guidi x Internal Control Committee (set up pursuant to Art. 10 of the Corporate Governance Code for Listed Companies and having advisory duties in relation to the system for preparing and auditing the financial statements), comprising the following Directors: - Pietro Manzonetto - Pierantonio Ciampicali - Mario Minoja x Control Body pursuant to Legislative Decree no. 231/01 (set up to analyse the risks relating to the offences specified in the decree and to analyse the adequacy of the controls over the risks identified), comprising the following Directors: - Bruno Giuffrè - Maria Luisa Di Battista

40 - Pierantonio Ciampicali; Furthermore, the following committees have been set up: x Executive and Operational Credit Committee (the executive committee approves the proposal made by the Credit Division regarding Credit Policy Management. Both committees take decisions, according to different decision-making powers, in relation to the credit proposals drawn up and for managing the overall credit risk position). The Executive Credit Committee comprises the following Directors: - Chief Executive Officer, Divo Gronchi - Guido Castellotti - Maria Luisa Di Battista - Augusto Machirelli; x Management Committee (responsible for checking the implementation of the Group's strategic policies and the progress of the Business Plan), comprising the following persons and entities: General Manager, Credit/Finance Management Team, Operation Management Team, Planning and Risk Management Division, Subsidiary Banks Coordination Division, Networks Coordination Division; x Finance and Risks Committee (guarantees the coherence of the overall risk policy - in terms of interest rate, exchange rate, equity - liquidity of the Parent Bank and other companies that manage credit/finance risks within the Group). The committee comprises the following persons and entities: Chief Executive Officer, General Manager, Credit and Finance Management Team, Finance Division, Credit Division, Networks Coordination Division, Subsidiary Banks Coordination Division, Planning and Risk Management Division, Budget and Accounts Division, Bipitalia Gestioni SGR Management; x Products Committee (approves product development proposals by assessing, on the basis of the Business Plan, their profitability, image/operational risks, observance of current regulations, current status of the process of releasing new products). The committee comprises the following persons and entities: General Manager, Credit and Finance Management Team, Operating Management Team, Retail Division, Corporate Division, Networks Coordination Division, Finance Division, Credit Division. x Projects and Cost Management Committee (governs the Business Plan projects and monitors their current status. Monitors the operational consistency of Group companies and makes decisions on expenses and investments throughout the Group). The committee comprises the following persons and entities: General Manager, Credit and Finance Management Team, Operating Management Team, Organisation Division, Planning and Risk Management Division.

Line controls At the end of 2005, a project was planned and launched to map out and review line controls in the main company areas (to be completed in 2006), in order to contribute actively towards the process of organisational review that the Bank is undertaking. The project activities are broken down into various interlinked phases: 1. analysis of processes, currently being mapped by the organisational department, and of internal regulations, in the areas of finance, credit, administration and collection and payments system; 2. identification of the respective specific risks, associated with process activities, on the basis of well- defined methods and classifications; 3. identification of the respective control objectives, in terms of effectiveness and efficiency of the process of controlling inherent risks, integrity of information and conformity with regulations. This phase is closely related to the following phase because it clearly identifies and evaluates the controls. 4. analysis and assessment of the existing line controls, in order to consider their adequacy for controlling risks and for meeting the control objectives in relation to the risks identified; 5. proposal of possible improvements to be made to the line control system. Furthermore, the project in question is also specifically relevant in terms of Legislative Decree no. 231/2001 and of the "Organisational and management model" that the Bank has set up, insofar as the task of identifying risks and the respective control objectives is also performed in order to identify, in detail, the means of controlling the risks of the offences identified in Legislative Decree no. 231/2001, already assessed at the time of the adoption of the Model, thereby substantiating the overall control system. All of these activities also enable company processes, risks, control objectives and line controls to be integrated into a single computer application, for a standardised and structured representation of the Bank's organisational and control model.

41 Risk management Market, interest rate and liquidity risks. The Parent Bank measures market risk by using an internal model that is based on Value at Risk (VaR) methodology. Every day, exposure to the general risk of the portfolio is measured. This represents an estimate of the maximum loss in value that this can undergo, over a period of 1 day and with a confidence level of 99%, in response to unexpected changes in interest rates, exchange rates and share prices. As a result of the events occurring in 2005, the measurement was suspended in August and only partly reinstated in October after checking that all of the positions taken by the Bank were correctly recorded in the computer procedures. Activities are also in progress to define a new scope for measuring the risk which is compatible with the organisational changes in the Finance Area. Besides the usual operations connected with monitoring interest rate and liquidity risk, carried out according to Maturity and Sensitivity Analysis methods with constantly updated ALM-Asset & Liability Management procedures, last year saw the roll-out of an automated system that checks the effectiveness of interest rate hedges, which is necessary for the appropriate book entries in compliance with the new IAS/IFRS standards introduced during 2005.

Credit risk As regards the management of credit risk, in 2005 project activities continued for the development of an internal risk measurement system. In this regard, various project strands were launched ranging from the redefinition of the rating model for the businesses segment to the upgrading of the databases required to evaluate other risk parameters (Loss Given Default-LGD and Exposure At Default-EAD) based on the "Internal Rating Based IRB Advanced" approach according to the New Capital Accord (June 26, 2004). During the year, the implementation of the portfolio model was completed, which, thanks to the new estimated risk variables, will provide useful support in defining credit policies in terms of the composition of the loan portfolio. In 2006, the development of the Probability of Default-PD model for the businesses segment is expected to be completed together with the start of the necessary activities for its use in credit processes. On the other hand, the EAD and LDG model will provide useful information on the effectiveness of the monitoring policies and debt recovery processes respectively.

Operational risks A project is currently being developed to recover and analyse operating loss data, progressively extended by the Parent Bank to its subsidiaries, according to organisational "value chain" criteria. In 2005, the process was completed at Bipitalia Ducato, a company with unique characteristics (specialising in consumer credit and issuing of credit cards). In 2006, the value chains are expected to be updated for the retail banks. Activities are performed according to AMA criteria (Basel II accord) earlier than the mandatory time limits for adoption and with a view to integration with the other types of risk and capital management. In this way, involvement in consortium initiatives is also exploited, the main one of which is the DIPO - Italian Database of Operating Losses with the Italian Banking Association.

Internal auditing This task, which is allocated to the Auditing and Internal Control Division, has the general aim of ensuring that control activities are performed and of monitoring the changes in the Internal Control System, according to the instructions given by the competent authorities. Currently, this Division is accountable to the Chief Executive Officer and its structure will be divided into 3 main units which will deal respectively with auditing of the distribution network and central structures and conformity with and observance of external and internal regulations. In details, its responsibilities are as follows: 1. to operate in accordance with the guidelines defined by the competent bodies and by the Chief Executive Officer, reporting in a timely manner the results achieved in the performance of its duties. 2. to carry out targeted and systematic assessments of the functionality, reliability, security and correctness of the operating and governance processes at the central and/or peripheral bodies and at the branches. 3. to monitor and check observance of the regulations in terms of the types of risk: credit, organisational, operational, IT, legal, fraud and disloyalty, reputation and physical safety, which characterise the Group's activities. This monitoring also extends to the Group's organisational and operational conditions, which allow for observance of standards and internal and external regulations, including with regard to stock brokerage 4. to monitor the changes to the Internal Control System within the Group, by carrying out on-site and remote evaluations and analyses aimed at assessing the functionality and reliability of the Systems

42 adopted, particularly with regard to the correct definition and performance of line controls, risk management controls and internal auditing activities. 5. to carry out monitoring and control activities in relation to the foreign banking and non-banking subsidiaries, according to formalised criteria and in observance of the rules in force in Italy and abroad. 6. to prepare inspection reports, to be sent to the competent departments, with the findings of the controls performed, specifying the corrective measures for the anomalies found, and the possible improvements to the risk management policies, measurement instruments and procedures. 7. to manage relations and related formalities with the Control Committees and the Parent Bank's Board of Statutory Auditors, the Boards of Auditors of the subsidiaries and other control bodies, in observance of the independent powers agreed. 8. to define the methodology and models for carrying out control activities and developing support tools. 9. to ensure, through the relevant structures, that the services specified in the "intragroup service" agreements between the Parent Bank and the subsidiary companies/banks are provided.

Actions in 2005 In 2005, in relation to the Antonveneta takeover, internal auditing activities were performed for two reasons: 1. comprehensive and precise reconstruction, in support of the assessments and decisions made by the Administrative and Control Bodies, of the critical issues that emerged from the Magistrature's investigations and under inspection of the Supervisory Boards; 2. progressive identification of the areas in which the internal control system requires strengthening.

These actions were carried out promptly and on a priority basis as from August 3, 2005, immediately after the measures announced by the Court of Milan regarding the seizure of the Antonveneta shares and the ban on the Chief Executive Officer and the Finance Director. The activity, which is still in progress, is based on the following phases: ¾ reconstruction of the events under investigation and analysis of the operations carried out by the Bank's various divisions, particularly with regard to the credit, finance and administration and accounting divisions; ¾ assessment, in these areas, of the adequacy of the internal control system as a whole; ¾ identification of the corrective actions to be adopted immediately in the light of the above shortcomings, bringing these to the attention of the superior Administrative and Control bodies, as well as informing the relevant Divisions; ¾ reporting to the Budget and Accounting Division and to the General Management, where applicable, of facts that could have an impact on the Bank's accounts for the relevant provisions to be made for the purposes of preparing the financing statements for the year ended December 31, 2005; ¾ definition of an organic plan of action aimed at improving operational effectiveness and efficiency as well as effectiveness and efficiency in terms of first, second and third level controls, bringing these to the attention of the superior Administrative and Control Bodies as well as informing the relevant Divisions. The Board of Auditors, the Internal Control Committee and the Board of Directors were kept constantly informed of the outcomes of these activities in specific meetings. In this context, the Internal Control Committee - in view of the role assigned to it by the Corporate Governance Code for Listed Companies and in its capacity as a Supervisory Board pursuant to Legislative Decree no. 231 - was identified at the time as the body to which facts should be reported on a frequent and ongoing basis. Periodically, the Administrative Bodies (Chief Executive Officer, Board of Directors) and Control Bodies (Board of Auditors) have received specific notifications. The Board of Statutory Auditors has also been supported in carrying out the analyses and tasks for which it is responsible. Through the reconstructions made, it has been possible to identify in detail the facts underlying the individual operations examined, thus providing adequate information to support the decisions of the relevant decision- making and control bodies, with a view to eliminating critical issues and mitigating risk aspects, identifying internal and external responsibilities and bringing specific civil and criminal actions. Further investigations are still in progress but it is believed that there will be no further significant impacts on the Bank's accounts other than those already considered for the purposes of preparing the 2005 financial statements. As regards the assessment of the adequacy of the control system as a whole and the proposal of possible immediate corrective actions, in relation to the analyses made in the reconstruction phase, an initial document has been drawn up containing proposals for the credit and finance divisions in terms of the procedures and operational methods applicable to the process owners (line controls) and to risk management (second level

43 controls). The above document was brought to the attention of the Internal Control Committee and subsequently to the Board of Directors in the first useful meeting. In particular, the aspects considered in identifying critical issues and areas of improvement in the internal control system are as follows: ¾ rules and procedures; ¾ powers and authorities; ¾ segregation of duties; ¾ overlapping of roles, ¾ traceability of data and documents. As far as specific internal auditing operations are concerned, it is also pointed out that, in order to guarantee adequate ongoing monitoring of banking operations, a project is currently in progress to develop the "distance control system" (SCD) so that the solution already present in the network of Branches ("SCD" procedure) can also be extended to the processes performed by the divisions. In this regard, work has been completed in relation to the analysis and identification of the risk indicators applicable to the activities performed by the Finance and Administration and Accounting Divisions, considered to be priority activities for the company. The project is now moving onto the implementation of the computer solution and a gradual rollout of the methodology to other areas of the General Management.

Finance Area As regards the role of the Finance Division in the events that characterised 2005, in order to restore strict criteria of prudence and recovery of risk control effectiveness, a far-reaching process of internal reorganisation was launched in the final months of 2005. The approach taken and the envisaged plan of actions arise from the need to instigate a thorough process of change in the Bank's divisions and in its essential instruments and processes in order to guarantee effective risk management and to prepare the foundations for the Group's commercial revival. The first innovation concerned the reorganisation of the Finance area, with the appointment on October 21, 2005 of a new Division Manager, followed by two Department Managers (recruited externally), with the redefinition of the mission and with the repositioning of risk propensity. Since 2006, the Finance Division, together with the Credit Division, has been included within the scope of the activities performed by the Deputy General Manager, also recruited externally, to whom a number of risk management powers have also been assigned. The changes in the Finance division run along four main lines: 1. organisational and IT development, through the modernisation and implementation of new technological media and advanced software; 2. the development of the business model; 3. the redefinition of operational limits, according to prudential methods and parameters; 4. the review of front, middle and back office and control processes. All converge towards a vision in which the Finance division is assigned a key role in the core business and no longer a speculative and managerial role, as was previously the case, although in the absence of effective controls over powers and risk quantification.

Organisational development The organisational development plan already made provision for the strengthening of the middle and back office IT tools, highly deficient in terms of functionality, controls and automated features, based on manual procedures and strict division of duties between the various organisational structures. Computer upgrades have been identified to provide the structures with more stable and reliable solutions, consolidating work processes and obtaining benefits in terms of operating efficiency and streamlining of accounting, budgetary, reporting and risk monitoring processes. The main project initiatives implemented and carried out in the finance area are: x upgrading of the Kondor front office application to the most recent version (2.6) and adoption of a new organisation for investment portfolios; x replacement of the abroad procedure with the new version Siseb 3; x implementation of a procedure for managing debenture loans;

44 x replacement of the Over The Counter (OTC) Derivatives procedure, involving the automation of the process, from the entry of the transaction in the trading room, to monitoring the availability of the customer's loan, to accounting and supervisory reporting; x adoption of the new version of the "Asset and Liability Management Operativo" (ALMO) procedure, the implementation of which will improve the procedures for managing interest rate risk, correct cash planning and management, management of hedges according to an IAS compliant approach. The application modules relating to the performance of hedge effectiveness tests, necessary for the application of IAS standards, have already been installed, while the modules relating to ALMO are expected to be released in 2006. With the installation of the new management and in order to provide the bank with more technically and applicationally advanced solutions, particularly in terms of risk control and the respective assessments, a program has been started to replace the current position-keeping application (Kondor+) with the MUREX application in an "in service" solution.

Development of the business model In the light of the recent events, the initial observations made by Banca d'Italia's inspection team and the operational anomalies that have emerged, there is a need to conduct a thorough review of the Group's financial management processes in terms of: x optimising cash flow and financial risk management; x increasing operational efficiency; x developing the ability to analyse the performance of the Finance division, both in purely economic terms and correct for the risk; x defining the risk limits of the various areas of activity (measured in terms of VaR); x implementing first and second level controls. After assessing the best practices on the market, in consideration of the significant experience of the new managers, the lines of action have been reviewed. The new organisational structure guarantees: x focus on the core business and elimination of areas of operations not strictly connected to the mission; x maximisation of a "correct risk perception, which enables the bank to allocate capital appropriately, promoting efficient risk and return combinations in the various activities" (cf. Title IV, Chapter 11, Supervisory Instructions); x balance between "weight" of the business areas to be developed and structuring/resizing of the structures established to control operations. All of this aims to improve the quality and stability of income results, through a progressive increase in the contribution of net commissions and a lower ratio of variable profits/losses from trading to total income, and better management of interest rate risks and hedging instruments. The main business areas identified are: x Financial Markets; market making, arbitrage and brokerage of cash and derivative instruments, on Italian and foreign regulated and OTC markets; x Customer Desk; brokerage of financial products on behalf of the customers of Group banks; x Asset & Liability Management; management of the Group's conditions of financial equilibrium, in relation both to the structuring of assets and to the definition of borrowing requirements, defining the operational strategy again from a group perspective; The new way of operating in the Finance division must always guarantee: x identifiable, measurable and monitorable risks, including through adequate line controls (level 1); x mission alignment; through the progressive reduction and/or elimination of the areas of operation that are not consistent with the relevant company strategies, x collective decision-making, through the creation of the Markets Committee, within the division, and, in particular, the creation of the Parent Bank's Finance and Risks Committee, x the formation of a new Financial Audit Unit to optimise the management and monitoring of position- keeping systems and to check the correct distribution and use of the operating limits assigned to the Management and analysis of the profit/loss positions of the individual desks at the end of each day.

45 Definition of operational limits The allocation and control of limits in the various hierarchical levels is implemented by assigning delegated powers to the various managers of the business areas.

Guiding principles The definition of limits involves a prior analysis and assessment of: x internal factors, such as the Bank's risk propensity, overall budget objectives, availability of capital and the limits arising from the methodologies and measuring systems currently available; x external factors, such as the instructions of the Supervisory Board, company assets, the limits defined by the Board of Directors, trends on the financial markets and market expectations. The consideration of such factors suggests that the specific operation of the limits system must ensure: x operational limits expressed in terms of maximum acceptable loss in terms of Value at Risk (VaR). The VaR limits assigned to the various levels of the portfolio structure will be defined on the basis of a holding period (hopefully daily), with a confidence range of 99%; x exposure to various market factors, consistent with the risk profile set at Group level and based on prudent operations, carried out in a controlled risk environment, principally on "liquid" and "transparent" markets; x exposure to various market factors, consistent with the assessment systems that are used by front-office and back-office staff and the methodologies and risk measurement systems available to the Bank. This aspect results in operations that do not involve directional strategies on instruments for which there are no revaluation models for calculating the mark-to-market and exposure to the main risk factors, shared between the Finance Division and the Strategic Planning Division. The definition of the structure of limits starts with determining the "Maximum Acceptable Loss", understood to mean the maximum theoretical value that the Board of Directors decides to risk in the period in question. This leads to the setting of VaR limits and the determination of other operational limits, checking consistency with the regulatory capital absorbed. Other operational limits aim to control the operations of the various desks on the basis of risk measurements which are differentiated according to the specific nature of the instruments traded and operational strategies, interacting with the VaR limits. The main other operational limits can assume the following forms: x position (nominal and value); x concentration (nominal and value by rating, segment, country); x sensitivity (PV01, open currency positions); x Greek letters (delta, gamma, vega, theta); x Stop loss (mark-to-market); x Other (counterparties, maturity, degree of liquidity, etc.). The limits will be monitored by the Planning and Risk Management Division, which is responsible for defining the methodologies used in accordance with the need for segregation and independence of the control units from the operating centres. In the Finance Division, the Financial Audit Unit will be in charge of checking and monitoring the distribution and respective use of the operational and counterparty limits approved. The above guidelines will be presented for the approval at the meeting of the Board of Directors to be held in April 2006.

Brief summary of processes The reorganisation of the Finance Division has been accompanied by a review of the main macro-processes applicable to the structure. The mapping of processes is based on the following guidelines: x division of processes based on product/market, operational desk/functional unit; x breakdown of process into successive levels of detail, indicating "who does what".

DEVELOPMENT ACTIVITIES

46 Commercial initiatives In 2005, work continued to reorganise the Group's commercial communication with a view to producing a product catalogue, based on the activity already started in 2004, listing all of the services offered to customers, grouped into 5 areas of needs (current accounts, investments, credit, payment and pensions/security). The purpose of this activity is to achieve consistency of communication within each area and between the areas themselves, enabling the Group to portray to the market an increasingly easily identifiable image. Again in relation to communication activities, in 2005, the "Referente immagine di Filiale" (branch image) project continued, in close conjunction with the activities performed for the product catalogue. As far as internet communication is concerned, the website www.bancapopolareitaliana.it was created based on the layout of the product catalogue. The homepage is divided into 5 main areas, arranged as follows: Horizontal menu, top page: Products/Services; Horizontal menu: Target Customers; Left-hand menu: Institutional Section; Right-hand menu: Customers Area/Presentation of Servizi By; Central Area: main banner and 2 text boxes. To support the development of the network, new initiatives have started up, including "BIPITALIA 3x1", a promotion aimed at the opening of new credit/wages/pensions accounts under favourable conditions. Two initiatives have been extended: "Conto sottozero", which offers a current account at no cost reserved for individuals who take out at least €10,000 in asset management products, and "Provaconto", a charge-free account provided that - within 6 months of opening the account - at least three different products are taken out from a choice of credit cards, asset management products and bancassurance. The year saw the recruitment of 25 new employees for the NOC Retail units. Training was provided by qualified external bodies and internal instructors. As this is a structure dedicated to attracting new customers, the training courses (lasting 4 weeks) not only gave ideas for development activity and for the sales approach but also provided an overview of the products and services that characterise the sectors that the NOCs meet in their everyday activities (loans, securities, ATM, bancassurance, parabanking). Twenty-two employees left the NOC Retail structure in 2005 to take up other posts, according to the skills developed and positions available within the Area/Bank to which they belonged (14 Assistant Branch Managers, 3 sales employees, 3 securities employees, 2 NOC Corporate). To define the objectives for the second half of the year and to provide an opportunity for training refreshment, the 2nd meeting of the NOC Retail structure was organised in May at Milano Marittima. This meeting was attended by the NOCs and by the Managers of all the Areas/Banks involved. As regards the policies pursued for the benefit of Corporate clients, the activities of the NOC Corporate units present within all the Regional Areas of Banca Popolare Italiana and within all the Divisions of the Group's Banks were coordinated. The structure is made up of specialist resources that support the Branches in their specific segment guaranteeing a high level of professionalism, thanks to the regular training refresher courses. There has been constant research into products and initiatives aimed at Small and Medium-Sized Enterprises both by the Parent Bank and by the subsidiary Banks, frequently market leaders in the respective regions. During 2005, a collaboration agreement was reached with an external company, present throughout Italy, to manage and distribute products in the specific area of subsidised loans for SMEs. The Gruppo Banca Popolare Italiana - including via the product company Efibanca - thoroughly supports its Corporate customers in both ordinary and extraordinary financial transactions (M&As, Capital Market, Management Buyouts, Leveraged Buyouts, Project Financing, etc.). In 2005, the Gruppo BPI signed a protocol of agreement with Coldiretti Lombardia in relation to CAP (Common Agricultural Policy) loans. The agreement is based on a package of financial measures involving the advance payment of the contributions pertaining to associated farms. In 2005 alone, more than €10 million was paid out by the Group's Areas and Banks in the Lombardy region. The initiative has also recently been extended to Coldiretti in the Siena province (agreement with the then Area Toscana of Banca Popolare Italiana), Coldiretti in the Pisa province (agreed with Cassa di Risparmio di Pisa) and Coldiretti in the Pescara province (agreed with Banca Caripe). From April 27 to 30, 2005, the Group took part in the Reggio Emilia International Swine Fair. Furthermore, BPI manned a stand at the 60th Cremona International Dairy Cattle Fair and the Codogno Agricultural Fair. For the year 2006, financial initiatives have been prepared to support investments for the production of energy from renewable sources (biogas plants for the production of electricity, power and electrical stations using plant biomass, solar panels, etc.), including using the subsidies offered by the Lombardy Region Agriculture Department (Regional Law no. 7/2000) and in accordance with applicable national and community legislation.

Cultural and charitable events A project began in 2005 to draw up an inventory of the artistic objects owned by BPI, which involves classifying and cataloguing these items according to their artistic, historical and culture value. To date, around half of the works present in the Group's main offices have been counted. In particular, the offices where the inventory has been carried out are those in Crema, Lucca, Pisa, Florence, Milan, Gallarate, Lodi - Bipitalia City, Lodi Via Cavour and Lodi Piazza Vittoria (still pending completion). Each item (picture, piece of antique furniture, carpet, etc.) has been photographed, labelled and catalogued. Around 1,500 photographs have been

47 taken and around 800 inventory cards completed. We are currently estimating the value of the items, by comparison, using Artvalue, Finarte catalogues and Guide Mayer. There were, as usual, a number of cultural events involving the Gruppo BPI. These included, in particular:

- on December 17, the traditional Christmas concert at the Bipitalia City Auditorium. This year, an internationally renowned gospel singer, Robin Brown, performed; - for the S. Lucia festival, as every year, the Bipitalia City Auditorium was opened to the children of Lodigiano and the film "Robots" was screened; - in partnership with Bipielle Ducato, in Lucca, sponsorship of the famous Bolzano Christmas Markets, with a stand promoting the Personal Credit product;

- Exhibition "L’inquietudine del volto - Da Lotto a Freud, da Tiziano a De Chirico", by Vittorio Sgarbi, opened on November 12, 2005 and extended until March 12, 2006, due to great public acclaim (around 15,000 visitors up to February 12, 2006, the end date initially set). The event - fully established on the national cultural scene through the most innovative communication techniques - was prepared in conjunction with various partners, such as the Province and Municipality of Lodi. The catalogue was produced in partnership with the publisher Skira; - "Invito a Palazzo 2005": for the 4th consecutive year, we took part in the event arranged on the first Saturday of October by the Italian Banking Association (ABI), opening up to the public the offices in Lodi (Bipitalia City and the headquarters on Via Cavour), Milan (Piazza Mercanti), Genoa (Palazzo Spinola Gambaro) and Florence (Piazza Davanzati). Once again, the event was a roaring success with 2,400 visitors to BPI's offices; - in October, the Touring Club Italiano organised a morning event in which 400 members were invited to visit Bipitalia City and the Auditorium. The event is part of a reciprocal 5-year cooperation agreement between TCI and BPI; - to mark the 60th anniversary of the death of Ada Negri, the Association "Poesia, la vita" organised an evening in the San Francisco Temple in Lodi, in which the famous poet's words were read aloud by her son, Alessandro Quasimodo. The 6th poetry award organised this year by the Association in January saw the late poet Mario Luzi as Chairman of the Panel of Judges. The 60th anniversary celebrations ended with an international convention on the poet. Equally significant were the charitable initiatives performed, which included: - providing the Children's Neuroblastoma Cancer Foundation with our communication channels (including customer account statements) to run a fundraising event in which donations were made into a special account; - in November 2005, two Fiat Doblos for transporting the disabled were handed over to the Municipality of Lodi and to Lodi's Caritas branch, in an event attended by the Mayor of Lodi, Lorenzo Guerini, and the Director of Caritas in Lodi, Sergio Bruschi; - celebration of the 125th Anniversary of the Missionarie del Sacro Cuore, a religious institution formed in the Lodi area through the energy of its founder, Saint Francesca Cabrini and now based in various countries around the world. The commemorative event was moderated by the well-known Vatican scholar Giuseppe De Carli and was attended by Mons. Rino Fisichella, rector of Pontificia Università Lateranense, Lucetta Scaraffia, lecturer at Rome's "La Sapienza" University, Mons. Silvano Tomasi, the Vatican's permanent observer to the UN in Geneva. To mark the occasion, a commemorative volume, sponsored by Banca Popolare Italiana, was presented, containing a preface by Mons. Camillo Ruini. The book was donated to Sister Lina Colombini, Mother Superior of the religious foundation. As usual, the Bank edited a number of publications, including the volumes "Paolo Gorini, storia di uno scienziato" ("Paolo Gorini, history of a scientist") and "Emilia e Marche nel Rinascimento – l’identità visiva nella periferia" ("Emilia and Marches Regions in the Renaissance - visual identity in the suburbs"), as well as the abundant showcase offered to customers and which, for reasons of space, we can only mention. The "Bipitalia Magazine" continued to be published regularly, with topical subjects related to the regions in which the Group is present.

48 PERFORMANCE OF THE MAIN COMPANIES BY BUSINESS AREA Companies controlled directly by the Parent Bank RETI BANCARIE SPA

Financial data prepared according to IAS/IFRS % Change Amounts in Euro/000 31/12/2005 31/12/2004 31/12/2004 Balance sheet Customer loans 13,980 Gross financial assets 136,877 47,014 191.14% Total assets 1,982,056 1,839,265 7.76% Due to customers and Securities in issue 136,163 50,352 170.42% Indirect customer deposits 346 of which: managed 346 Shareholders' equity 1,612,823 1,718,897 -6.17% Income statement Net interest income 1,703 -15,396 -111.06% Net commissions -398 -127 213.39% Total income including financial operations -25,645 65,858 -138.94% Net adjustments for impairment of loans and other financial assets -2 Administrative expenses -9,797 -3,592 172.74% Profit (loss) from continuing operations before tax -50,302 61,779 -181.42% Net profit (loss) for the year -62,741 65,896 -195.21% Other information Number of branches 1 Number of employees 7 7 Average number of employees 7 5 Financial ratios Structural ratios Customer loans/Total assets 0.71% Gross financial assets/Total assets 6.91% 2.56% Due to customers and Securities in issue/Total assets 6.87% 2.74% Profitability ratios Net interest income/Total income including financial operations -6.64% -23.38% Net commissions/Total income including financial operations 1.55% -0.19% Administrative expenses/Total income including financial operations -38.20% 5.45% Net profit (loss) for the year/Total assets (ROA) -3.17% 3.58% Net profit (loss) for the year/Shareholders' equity (ROE) -3.89% 3.83%

Note that, unlike the figures for the year ended December 31, 2005, the figures for the year ended December 31, 2004 are expressed according to IAS excluding IAS 32 and 39. The income statement shows that total income was €59.4 million (94.44%), boosted by the increase in the dividends item, which ended the year at €58.9 million (+27.89%) and by the reduction in interest expense, which fell from €16.1 million in 2004 to €6.1 million (-62.42%). Net income from financial operations showed a profit of €59.4 million compared with the figure for the previous year (€30.6 million). After €14.2 million was allocated to the provisions for contingencies and charges, the most significant figure is the loss from shareholdings which amounted to €82.3 million. This is the balance between the capital gain (€76.3 million) realised from the sale of the shareholding in Cassa di Risparmio Lucca to Fondazione Cassa di Risparmio di Lucca and the writedown (€158.6 million) of the shareholdings (Cassa di Risparmio di Bolzano, Bipielle SGC, Bipielle International Holding and Banca Popolare di Cremona). After recording taxes of €12.4 million, this gives a net loss for the year of €62.7 million, compared with a net profit of €65.9 million in 2004.

49 Restructuring operations within Reti Bancarie Reti Bancarie approved a project to rationalise and simplify the Group's shareholding structure which involved, on July 1, the merger by incorporation of Banca Eurosistemi S.p.A. and Sofinspa S.p.A. into Reti Bancarie, following the latter's acquisition of total control of the two merged companies. As a result of this, Reti Bancarie was "converted" into a bank following the adoption of a new set of articles of association bearing the new name "Reti Bancarie S.p.A." (previously Reti Bancarie Holding S.p.A.) and a substantial change in its corporate purpose and activity from investment company to bank.

BIPIELLE INVESTIMENTI SPA

Financial data prepared according to IAS/IFRS % Change Amounts in Euro/000 31/12/2005 31/12/2004 31/12/2004 Balance sheet Gross financial assets 20,811 Total assets 2,138,806 2,389,400 -10.49% Shareholders' equity (excl. profit) 1,973,027 2,049,423 -3.73% Income statement Net interest income 1,273 1,916 -33.56% Net commissions (16) (218) -92.66% Total income including financial operations 103,430 23,392 342.16% Administrative expenses (4,155) (3,127) 32.87% Profit (loss) from continuing operations before tax 94,603 20,312 365.75% Net profit (loss) for the year 85,637 19,708 334.53% Other information Number of employees 7 8 Average number of employees 7 8 Financial ratios Structural ratios Gross financial assets/Total assets 0.97% Profitability ratios Net interest income/Total income including financial operations 1.23% 8.19% Net commissions/Total income including financial operations -0.02% -0.93% Administrative expenses/Total income including financial operations 4.02% 13.37% Net profit for the year/Total assets (ROA) 4.00% 0.82% Net profit for the year/Shareholders' equity (ROE) 4.34% 0.96%

Note that, unlike the figures for the year ended December 31, 2005, the figures for the year ended December 31, 2004 are expressed according to IAS excluding IAS 32 and 39. The results of Bipielle Investimenti (financial holding company) are principally reflected in the dividends item (€82.1 million), recording an increase of €63.8 million on the figure for December 31, 2004. This increase is due to the improvement in the subsidiaries' 2004 results compared with the previous year and to the increase in shareholdings (in particular Area Company) and to the fact that, in 2004, there were no cash dividends (relating to the year ended December 31, 2003) coming from Efibanca, Ducato, whose contribution to the income statement, following the reorganisation process within the Group which started at the end of 2003, was incorporated into Banca Popolare Italiana.

Of the 2005 dividends, €82 million relates to the companies of the Gruppo Bipielle Investimenti. Of the total figure for other operating income (€16.5 million), €10.9 million relates to the closure of a debit position after an agreement was reached in settlement of the current and potential disputes and lawsuits with a counterparty and €4 million relates to the collection of the Company's stake (as universal successor of ICCRI) in the final distribution of the bankruptcy of Titano S.p.A. In 2005, a profit of €3.5 million was made from the disposal of shareholdings following the sale of the shareholding in Area Company to the subsidiary Bipielle Net. The sale was made at the equity value of the subsidiary.

50 As far as cost items are concerned, €997 thousand relates to personnel expenses, of which €523 thousand was paid to directors, €3.2 million relates to other administrative expenses, including €1,362 thousand in consultancy services (€657 thousand in 2004), €785 thousand in administrative services charged by the Parent Bank and €237 thousand in costs of IT services. As regards amounts set aside in the "Provisions for contingencies and charges", these totalled €4.6 million, of which €3.2 million relates to the legal dispute existing as at December 31, 2005 for claims for compensation made against the company ICCRI, which was incorporated by the Company in 2002, and €1.5 million relates to the acknowledgement of potential risks relating to the group company Basileus S.p.A., guaranteed by the Company. After taxes of €8.9 million (€0.6 million as at December 31, 2004), the net profit for 2005 was €85.6 million compared with €19.7 million in 2004.

BIPIELLE ICT

Financial data prepared according to IAS/IFRS % Change Amounts in Euro/000 31/12/2005 31/12/2004 31/12/2004 Balance sheet Customer loans 16,339 20,063 -18.56% Total assets 79,364 97,327 -18.46% Shareholders' equity (excl. profit) 12,323 10,742 14.72% Income statement Net interest income -1,551 -1,471 5.44% Net commissions -20 Total income including financial operations 113,658 105,348 7.89% Net adjustments for impairment of loans and other financial assets Administrative expenses -81,478 -80,255 1.52% Profit (loss) from continuing operations before tax 4,361 3,032 43.83% Net profit (loss) for the year 1,581 1,579 0.13% Other information Number of employees 233 232 Average number of employees 233 192 Financial ratios Structural ratios Customer loans/Total assets 20.59% 20.61% Profitability ratios Net profit for the year/Total assets (ROA) 1.99% 1.62% Net profit for the year/Shareholders' equity (ROE) 12.83% 14.70%

Note that, unlike the figures for the year ended December 31, 2005, the figures for the year ended December 31, 2004 are expressed according to IAS excluding IAS 32 and 39.

Performance As regards the balance sheet, Total assets fell to €79.3 million (-18.46% over twelve months). In percentage terms, property, plant and equipment increased by 7.93% to a value of €13.6 million while intangible assets fell by 13.69%, closing the year at €46.7 million. Shareholders' equity ended the year at €12.3 million, net of profit for the year. As regards income, net interest income was -€1.6 million, an increase of 5.44% on December 2004. There was a significant increase in total income including financial operations which reached €113.6 million, a rise of 7.89%. Administrative expenses were €81.5 million, an increase of 1.52% on 2004. Net income from continuing operations before tax was €4.4 million, recording a year-on-year increase of 43.83%, while net profit for the year (€1.6 million) was stable with the previous year. The number of employees at the end of 2005 was 233.

51 BIPIELLE RISCOSSIONI

Financial data prepared according to IAS/IFRS % Change Amounts in Euro/000 31/12/2005 31/12/2004 31/12/2004 Balance sheet Customer loans 76,157 53,907 41.27% Total assets 114,583 69,778 64.21% Due to customers and Securities in issue 63,495 37,126 71.03% Shareholders' equity (excl. profit) 5,293 2,326 127.56% Income statement Net interest income -254 -248 2.42% Net commissions 22,021 15,927 38.26% Total income including financial operations 24,049 16,228 48.19% Net adjustments for impairment of loans and other financial assets 122 -31 -493.55% Administrative expenses -19,306 -13,602 41.94% Profit (loss) from continuing operations before tax 4,760 1,540 209.09% Net profit (loss) for the year 2,235 813 174.91% Other information Number of employees 115 66 Average number of employees 91 66 Financial ratios Structural ratios Customer loans/Total assets 66.46% 77.26% Due to customers and Securities in issue/Total assets 55.41% 53.21% Profitability ratios Net commissions/Total income including financial operations 91.57% 98.15% Administrative expenses/Total income including financial operations 80.28% 83.82% Net profit for the year/Total assets (ROA) 1.95% 1.17% Net profit for the year/Shareholders' equity (ROE) 42.23% 34.95%

Note that, unlike the figures for the year ended December 31, 2005, the figures for the year ended December 31, 2004 are expressed according to IAS excluding IAS 32 and 39.

Performance Looking at the balance sheet, Amounts due to customers and securities in issue increased by 71.03% over the year from €37.1 million in 2004 to €63.5 million at the end of 2005 while Customer loans jumped to €76.2 million, increasing by 41.27% since the end of the previous year. Shareholders' equity increased by 127.56% to stand at €5.3 million. As regards income, Net interest income remained substantially stable at -€0.254 million while Net commissions rose sharply by 38.26% to €22 million. Total income was up (+48.19%) to reach €24 million while Administrative expenses progressed from -€13.6 million to -€19.3 million in 2005 owing to the increase in personnel expenses and other administrative expenses. Profit from continuing operations before tax increased over the period to €4.8 million while, after taxes, profit for the year increased by 174.9% to reach €2.2 million. The structural ratios show a decrease in the percentage ratio of Customer loans to Total assets (66.46%) while the profitability ratios were substantially stable with the previous year. ROE increased from 34.95% in 2004 to 42.23% by the end of 2005. As regards the number of employees, Bipielle Riscossioni saw its numbers swell from 66 in 2004 to 115 at the end of 2005, as a result of the incorporation of Loseri S.p.A.

52 Companies controlled indirectly through Reti Bancarie BANCA POPOLARE DI CREMONA

Financial data prepared according to IAS/IFRS % Change Amounts in Euro/000 31/12/2005 31/12/2004 31/12/2004 Balance sheet Customer loans 1,296,176 1,358,032 -4.55% Gross financial assets 43,889 34,142 28.55% Total assets 1,693,411 1,654,222 2.37% Due to customers and Securities in issue 1,346,849 1,283,403 4.94% Financial liabilities held for trading and designated at fair value 11,243 Indirect customer deposits 1,741,542 1,733,512 0.46% of which: managed 1,041,239 1,089,293 -4.41% Shareholders' equity (excl. profit) 209,476 212,524 -1.43% Income statement Net interest income 46,268 43,619 6.07% Net commissions 24,995 31,487 -20.62% Total income including financial operations 94,571 83,923 12.69% Net adjustments for impairment of loans and other financial assets -1,603 -4,521 -64.54% Administrative expenses -57,257 -54,179 5.68% Profit (loss) from continuing operations before tax 20,695 19,531 5.96% Net profit (loss) for the year 13,225 12,383 6.80% Other information Number of branches 75 80 Number of employees 459 523 Average number of employees 491 539 Financial ratios Structural ratios Customer loans/Total assets 76.54% 82.09% Gross financial assets/Total assets 2.59% 2.06% Due to customers and Securities in issue/Total assets 79.53% 77.58% Managed deposits/Indirect deposits 59.79% 62.84% Profitability ratios Net interest income/Total income including financial operations 48.92% 51.98% Net commissions/Total income including financial operations 26.43% 37.52% Administrative expenses/Total income including financial operations 60.54% 64.56% Net profit for the year/Total assets (ROA) 0.78% 0.75% Net profit for the year/Shareholders' equity (ROE) 6.31% 5.83%

Note that, unlike the figures for the year ended December 31, 2005, the figures for the year ended December 31, 2004 are expressed according to IAS excluding IAS 32 and 39.

Performance Looking at the balance sheet, Amounts due to customers and Securities in issue (€1,346.8 million) increased over the twelve months by 4.94%, while financial liabilities held for trading and designated at fair value totalled €11.2 million. Amounts due to customers totalled €825 million, with a percentage rise of 22.95%, while Securities in issue totalled €522.4 million, an annual drop of 14.76%, as a result of rebalancing between short- term and medium/long-term forms, in order to benefit from the greater yields associated with the demand components. Indirect customer deposits, expressed at actual market values, amounted to €1,741.5 million (+0.46% over twelve months). Within this item, assets under management fell by an overall percentage of 4.41%, closing the year at €1,041.2 million. Administered deposits grew by 8,71%.

53 Net loans to customers reached €1,296.2 million, falling by 4.55% on the figure for the end of the previous year. During the year, the transfer of home and commercial mortgage loans, in preparation for the execution of a securitisation transaction at Group level, was completed involving a total sum of €161.1 million. Shareholders' equity ended the year at €209.5 million, net of profit for the year. As regards income, Net interest income reached €46.3 million, recording an increase of 6.07% compared with December 2004, benefiting from the increase in interest income. Despite the drop in net commissions (- 20.62%), caused both by the decrease in assets under management and by portfolio presentations, Total income including financial operations grew by 12.69% to end the year at €94.6 million. Administrative expenses totalled €57.3 million, an increase of 5.68% on 2004, owing to the costs of services provided by the Parent Bank and by the Non-Banking Companies. Net income from continuing operations before tax was €20.7 million, a year-on-year increase of 5.96%, due to fewer adjustments and greater amounts allocated to the provisions for contingencies and charges, while Net profit for the year was €13.2 million, a percentage increase of 6.80%. The structural indices remained sufficiently stable against the previous year. The percentage ratio of Customer loans to Total assets fell from 82.09% at the end of 2004 to 76.54% at the end of 2005, compared with an increase in Gross financial assets to Total assets, which rose from 2.06% to 2.59%. As far as the profitability ratios are concerned, the ratio between Administrative expenses and Total income including financial operations fell from 64.56% in 2004 to its present figure of 60.54%, as a result of the cost containment and revenue development policies. ROE increased from 5.83% to 6.31%. At the end of the year, Banca Popolare di Cremona had a regional network of 75 branches and 459 employees. The lower figure for December 2005 (64 fewer employees) is due to the process of centralising corporate governance functions at the Parent Bank and to employees accepted under the Fondo di Solidarietà as well as to a physiological exodus of staff.

54 CASSA DI RISPARMIO DI PISA

Financial data prepared according to IAS/IFRS % Change Amounts in Euro/000 31/12/2005 31/12/2004 31/12/2004 Balance sheet Customer loans 1,758,649 1,432,763 22.75% Gross financial assets 25,917 14,055 84.40% Total assets 2,743,251 2,423,061 13.21% Due to customers and Securities in issue 1,793,293 1,625,452 10.33% Financial liabilities held for trading and designated at fair value 448 Indirect customer deposits 1,225,424 1,167,766 4.94% of which: managed 671,468 659,322 1.84% Shareholders' equity (excl. profit) 504,789 498,555 1.25% Income statement Net interest income 62,500 61,703 1.29% Net commissions 23,802 25,494 -6.64% Total income including financial operations 102,053 103,214 -1.12% Net adjustments for impairment of loans and other financial assets -12,532 -11,812 6.10% Administrative expenses -55,155 -59,591 -7.44% Profit (loss) from continuing operations before tax 25,007 30,937 -19.17% Net profit (loss) for the year 13,694 20,848 -34.32% Other information Number of branches 53 54 Number of employees 436 452 Average number of employees 444 466 Financial ratios Structural ratios Customer loans/Total assets 64.11% 59.13% Gross financial assets/Total assets 0.94% 0.58% Due to customers and Securities in issue/Total assets 65.37% 67.08% Managed deposits/Indirect deposits 54.79% 56.46% Profitability ratios Net interest income/Total income including financial operations 61.24% 59.78% Net commissions/Total income including financial operations 23.32% 24.70% Administrative expenses/Total income including financial operations 54.05% 57.74% Net profit for the year/Total assets (ROA) 0.50% 0.86% Net profit for the year/Shareholders' equity (ROE) 2.71% 4.18%

Note that, unlike the figures for the year ended December 31, 2005, the figures for the year ended December 31, 2004 are expressed according to IAS excluding IAS 32 and 39.

Performance Looking at the balance sheet, Amounts due to customers and Securities in issue (€1,793.3 million) increased over the twelve months by 10.33%, while Financial liabilities held for trading and designated at fair value totalled €0.5 million. Amounts due to customers reached €1,314.9 million, recording a percentage rise of 20.81%, while Securities in issue amounted to €478.4 million, a decrease of 10.92% over the year. Indirect customer deposits, expressed at actual market values, amounted to €1,225.4 million (+4.94% over twelve months). Within this item, assets under management increased by an overall percentage of 1.84%, closing the year at €671.5 million. Administered deposits grew by 8.95%. Net loans to customers reached €1,758.6 million, increasing by 22.75% on the figure for the end of the previous year. During the year, the transfer of home and commercial mortgage loans, in preparation for the

55 execution of a securitisation transaction at Group level, was completed involving a total sum of €176.8 million. Shareholders' equity ended the year at €504.8 million, net of profit for the year. As regards income, Net interest income reached €62.5 million, recording an increase of 1.29% since December 2004. Despite the drop in net commissions (-6.64%), Total income including financial operations limited the fall to 1.13%, closing the year at €102 million. Administrative expenses totalled €55.2 million, down by 7.44% on 2004. Net income from continuing operations before tax was €25 million, recording a year-on-year decrease of 19.17%, while Net profit for the year was €13.7 million, a percentage fall of 34.32%. As regards the structural ratios, the percentage ratio of Customer loans to Total assets increased from 59.13% at the end of 2004 to 64.11% at the end of 2005, while the percentage ratio of Amounts due to customers and Securities in issue to Total assets fell from 67.08% to 65.37%. As far as the profitability ratios are concerned, the ratio between Administrative expenses and Total income including financial operations fell from 57.74% in 2004 to its present figure of 54.05%, as a result of the cost containment policies. ROE decreased from 4.18% to 2.71%. At the end of the year, Cassa di Risparmio di Pisa had a regional network of 53 branches and 436 employees. The reduction on the figure for December 2003 (16 fewer employees) is due to the transfer of a number of employees to Cassa di Risparmio di Lucca and to employees accepted under the Fondo di Solidarietà as well as to a physiological exodus of staff.

56 CASSA DI RISPARMIO DI LUCCA

Financial data prepared according to IAS/IFRS % Change Amounts in Euro/000 31/12/2005 31/12/2004 31/12/2004 Balance sheet Customer loans 3,629,843 3,141,686 15.54% Gross financial assets 129,507 72,328 79.06% Total assets 5,129,839 4,597,132 11.59% Due to customers and Securities in issue 3,496,800 2,715,638 28.77% Financial liabilities held for trading and designated at fair value 6,552 Indirect customer deposits 3,105,194 2,752,938 12.80% of which: managed 2,041,286 1,819,039 12.22% Shareholders' equity (excl. profit) 1,185,443 1,212,229 -2.21% Income statement Net interest income 138,340 133,050 3.98% Net commissions 48,614 51,531 -5.66% Total income including financial operations 224,287 211,223 6.18% Net adjustments for impairment of loans and other financial assets -34,902 -17,386 100.75% Administrative expenses -98,000 -104,184 -5.94% Profit (loss) from continuing operations before tax 75,582 86,264 -12.38% Net profit (loss) for the year 43,069 52,042 -17.24% Other information Number of branches 97 97 Number of employees 722 719 Average number of employees 721 735 Financial ratios Structural ratios Customer loans/Total assets 70.76% 68.34% Gross financial assets/Total assets 2.52% 1.57% Due to customers and Securities in issue/Total assets 68.17% 59.07% Managed deposits/Indirect deposits 65.74% 66.08% Profitability ratios Net interest income/Total income including financial operations 61.68% 62.99% Net commissions/Total income including financial operations 21.67% 24.40% Administrative expenses/Total income including financial operations 43.69% 49.32% Net profit for the year/Total assets (ROA) 0.84% 1.13% Net profit for the year/Shareholders' equity (ROE) 3.63% 4.29%

Note that, unlike the figures for the year ended December 31, 2005, the figures for the year ended December 31, 2004 are expressed according to IAS excluding IAS 32 and 39.

Performance Looking at the balance sheet, Amounts due to customers and Securities in issue (€3,496.8 million) increased over the twelve months by 28.77%, while Financial liabilities held for trading and designated at fair value totalled €6.6 million. Amounts due to customers reached €2,482.7 million, recording a percentage rise of 12.80%, while Securities in issue amounted to €1,014.1 million, a decrease of 5.64% over the year. The trend in deposits is the result of an increase in current accounts partly offset by a decrease in savings deposits and bonds. Indirect customer deposits, expressed at actual market values, amounted to €3,105.2 million (+12.80% over twelve months). Within this item, assets under management increased by an overall percentage of 12.22%, closing the year at 2,041.3 million. Administered deposits grew by 13.92% to reach €1,063.9 million and also benefited from the general improvement in equities. There was a significant expansion in the insurance component in both percentage and absolute terms (34.27% and an increase of over €50 million).

57 Net loans to customers reached €3,629.9 million, increasing by 15.54% on the figure for the end of the previous year. The comparison with 2004 is distorted by the application of IAS rules which specify that certain assets sold should return to the balance sheet. These include, in particular, the securitisations that the Cassa performed in both 2004 and 2005 in relation to mortgage loans. During the year, the transfer of home and commercial mortgage loans, in preparation for the execution of a securitisation transaction at Group level, was completed involving a total sum of €438.7 million. Shareholders' equity ended the year at €1,185.4 million, net of profit for the year. As regards income, Net interest income reached €138.3 million, recording an increase of 3.98% compared with December 2004, thanks to the constant growth of intermediary funds. Despite the drop in net commissions (-5.66%), Total income including financial operations remained stable at €211.8 million, a percentage change of 0.26%. Administrative expenses were €98 million, down by 5.94% on 2004. Net income from continuing operations before tax was €75.6 million, recording a year-on-year decrease of 12.38%, while Net profit for the year was €43 million, a percentage fall of 17.24%. This result disregards the effects of a more accurate assessment of company risks, reflected in specific appropriations and adjustments, absorbed by a level of profitability from ordinary operations that has increased moderately. As regards the structural ratios, the percentage ratio of Customer loans to Total assets increased from 68.34% at the end of 2004 to 70.76% at the end of 2005, while the percentage ratio of Amounts due to customers and Securities in issue to Total assets increased from 59.07% to 68.17%. As far as the profitability ratios are concerned, the ratio between Administrative expenses and Total income including financial operations fell from 49.32% in 2004 to its present figure of 43.69%, as a result of the cost containment policies. ROE decreased from 4.29% to 3.63%. At the end of the year, Cassa di Risparmio di Lucca had a regional network of 97 branches, unchanged since the previous year, and 722 employees, an annual increase of 3.

58 CASSA DI RISPARMI DI LIVORNO

Financial data prepared according to IAS/IFRS % Change Amounts in Euro/000 31/12/2005 31/12/2004 31/12/2004 Balance sheet Customer loans 1,210,744 1,210,135 0.05% Gross financial assets 12,294 9,893 24.27% Total assets 1,539,390 1,532,294 0.46% Due to customers and Securities in issue 960,530 774,090 24.09% Financial liabilities held for trading and designated at fair value 32 Indirect customer deposits 639,069 680,175 -6.04% of which: managed 382,314 394,511 -3.09% Shareholders' equity (excl. profit) 293,480 295,867 -0.81% Income statement Net interest income 47,665 51,917 -8.19% Net commissions 14,762 18,562 -20.47% Total income including financial operations 70,398 80,106 -12.12% Net adjustments for impairment of loans and other financial assets -27,965 -9,815 184.92% Administrative expenses -38,699 -40,228 -3.80% Profit (loss) from continuing operations before tax 1,447 29,029 -95.02% Net profit (loss) for the year -2,197 18,749 -111.72% Other information Number of branches 53 53 Number of employees 306 313 Average number of employees 310 318 Financial ratios Structural ratios Customer loans/Total assets 78.65% 78.98% Gross financial assets/Total assets 0.80% 0.65% Due to customers and Securities in issue/Total assets 62.40% 50.52% Managed deposits/Indirect deposits 59.82% 58.00% Profitability ratios Net interest income/Total income including financial operations 67.71% 64.81% Net commissions/Total income including financial operations 20.97% 23.17% Administrative expenses/Total income including financial operations 54.97% 50.22% Net profit for the year/Total assets (ROA) -0.14% 1.22% Net profit for the year/Shareholders' equity (ROE) -0.75% 6.34%

Note that, unlike the figures for the year ended December 31, 2005, the figures for the year ended December 31, 2004 are expressed according to IAS excluding IAS 32 and 39.

Performance Looking at the balance sheet, Amounts due to customers and Securities in issue (€960.5 million) increased by 24.09% over the twelve months. Amounts due to customers reached €756 million, recording a percentage rise of 35.38%, while Securities in issue amounted to €204.5 million, a decrease of 5.16% over the year. Indirect customer deposits, expressed at actual market values, fell to €639.1 million (-6.04% over twelve months). Within this item, assets under management fell by an overall percentage of 3.09%, closing the year at €382.3 million. Administered deposits fell by 10.12% to stand at €256.8 million. Net loans to customers reached €1,210.7 million remaining stable with the end of the previous year. During the year, the transfer of home and commercial mortgage loans, in preparation for the execution of a securitisation transaction at Group level, was completed involving a total sum of €155 million. Shareholders' equity ended the year at €293.5 million, net of profit for the year.

59 As regards income, Net interest income was €47.7 million, down by 8.19% compared with December 2004, owing to the decrease in interest income. There was a drop in net commissions (-20.47%) and in total income including financial operations, which decreased by 12.12% to €70.4 million. Administrative expenses were €38.7 million, down by 3.80% on 2004. Net income from continuing operations before tax was €1.5 million, recording a year-on-year decrease of 95.02%, and showing the effects of the prudential and significant loan adjustments made. The year ended with a loss for the year of €2.2 million, compared with a net profit of €18.7 million in 2004. As regards the structural ratios, the percentage ratio of Amounts due to customers and Securities in issue to Total assets increased from 50.52% at the end of 2004 to 62.40% at the end of 2005. As far as the profitability ratios are concerned, the percentage ratio of Administrative expenses to Total income including financial operations rose from 50.22% in 2004 to its present figure of 54.97%. At the end of the year, Cassa di Risparmio di Livorno had a regional network of 53 branches, unchanged since the previous year, and 306 employees, an annual decrease of 7.

60 BANCA POPOLARE DI MANTOVA

Financial data prepared according to IAS/IFRS % Change Amounts in Euro/000 31/12/2005 31/12/2004 31/12/2004 Balance sheet Customer loans 163,828 150,158 9.10% Gross financial assets 132 138 -4.35% Total assets 214,014 196,911 8.69% Due to customers and Securities in issue 150,423 142,286 5.72% Financial liabilities held for trading and designated at fair value 115 Indirect customer deposits 126,699 83,984 50.86% of which: managed 13,910 8,064 72.50% Shareholders' equity (excl. profit) 22,002 21,734 1.23% Income statement Net interest income 4,505 4,213 6.93% Net commissions 1,475 1,129 30.65% Total income including financial operations 6,654 5,896 12.86% Net adjustments for impairment of loans and other financial assets -699 -778 -10.15% Administrative expenses -5,044 -4,291 17.55% Profit (loss) from continuing operations before tax 547 477 14.68% Net profit (loss) for the year 157 158 -0.63% Other information Number of branches 8 7 Number of employees 31 28 Average number of employees 30 23 Financial ratios Structural ratios Customer loans/Total assets 76.55% 76.26% Gross financial assets/Total assets 0.06% 0.07% Due to customers and Securities in issue/Total assets 70.29% 72.26% Managed deposits/Indirect deposits 10.98% 9.60% Profitability ratios Net interest income/Total income including financial operations 67.70% 71.46% Net commissions/Total income including financial operations 22.17% 19.15% Administrative expenses/Total income including financial operations 75.80% 72.78% Net profit for the year/Total assets (ROA) 0.07% 0.08% Net profit for the year/Shareholders' equity (ROE) 0.71% 0.73%

Note that, unlike the figures for the year ended December 31, 2005, the figures for the year ended December 31, 2004 are expressed according to IAS excluding IAS 32 and 39.

Performance Looking at the balance sheet, Amounts due to customers and Securities in issue increased over the twelve months by 5.72% to €150.4 million, while Financial liabilities held for trading and designated at fair value amounted to €0.115 million. Indirect customer deposits, expressed at actual market values, increased by 50.86% over the year to reach €126.7 million. The Managed component recorded a total increase of 72.50% to end the year at €13.9 million, Administered deposits grew by 22.47%. Customer loans totalled €163.8 million, an increase of 9.1% since the end of the previous year, evidence of the increasingly important role in supporting the local economy, while Gross financial assets remained substantially constant at €0.132 million.

61 Shareholders' equity increased slightly by 1.23%, owing to greater Reserves, to end the year at €22 million, net of profit for the year. As regards income, Net interest income was €4.5 million, recording an increase of 6.93% since December 2004. The trend in Net commissions was positive (+30.85%) with Total income consequently rising to €6.65 million (+12.86%). Net adjustments were down (-10.15%) while Administrative expenses rose sharply (+17.55%), thanks to the growth in the Bank's size and activities. Net income from continuing operations before tax increased over the year to €0.547 million (+14.68%) while, after taxes, Profit for the year was €0.157 million, slightly down on the figure for the previous year (-0.63%). The structural ratios remained substantially stable with the previous year, with a slight drop in the percentage ratio of Amounts due to customers and Securities in issue to Total assets (70.29%). As far as the profitability ratios are concerned, the percentage ratio of Net commissions and Administrative expenses to Total income increased to 22.17% and 75.80% respectively. ROE remained substantially constant at 0.71%. At the end of the year, Banca Popolare di Mantova had a regional network that had grown to 8 branches (7 in 2004), with the opening of the cash and treasury branch in Bagnolo San Vito (MN), and an increase in the number of employees from 28 in 2004 to 31 at the end of 2005.

62 BANCA VALORI

Financial data prepared according to IAS/IFRS % Change Amounts in Euro/000 31/12/2005 31/12/2004 31/12/2004 Balance sheet Customer loans 114,588 117,786 -2.72% Gross financial assets 31,332 25,813 21.38% Total assets 187,344 250,995 -25.36% Due to customers and Securities in issue 73,326 126,946 -42.24% Financial liabilities held for trading and designated at fair value 63 Indirect customer deposits 873,003 1,091,607 -20.03% of which: managed 30,537 24,716 23.55% Shareholders' equity (excl. profit) 55,861 54,013 3.42% Income statement Net interest income 4,096 3,287 24.61% Net commissions 1,302 903 44.19% Total income including financial operations 6,227 6,512 -4.38% Net adjustments for impairment of loans and other financial assets 23 -200 -111.50% Administrative expenses -2,733 -2,534 7.85% Profit (loss) from continuing operations before tax 3,229 3,487 -7.40% Net profit (loss) for the year 1,998 3,107 -35.69% Other information Number of branches 1 1 Number of employees 6 6 Average number of employees 6 6 Financial ratios Structural ratios Customer loans/Total assets 61.16% 46.93% Gross financial assets/Total assets 16.72% 10.28% Due to customers and Securities in issue/Total assets 39.14% 50.58% Managed deposits/Indirect deposits 3.50% 2.26% Profitability ratios Net interest income/Total income including financial operations 65.78% 50.48% Net commissions/Total income including financial operations 20.91% 13.87% Administrative expenses/Total income including financial operations 43.89% 38.91% Net profit for the year/Total assets (ROA) 1.07% 1.24% Net profit for the year/Shareholders' equity (ROE) 3.58% 5.75%

Note that, unlike the figures for the year ended December 31, 2005, the figures for the year ended December 31, 2004 are expressed according to IAS excluding IAS 32 and 39.

Performance Looking at the balance sheet, Amounts due to customers and Securities in issue fell over the twelve months from €126.9 million in 2004 to €73.3 million (-42.24%) owing to changes in institutional clients while Financial liabilities held for trading and designated at fair value totalled €0.063 million. Indirect customer deposits, expressed at actual market values, also decreased by 20% over the year to reach €873 million. The Managed component recorded a total increase of 23.55% to stand at €30.5 million. Administered deposits fell by -22.34%. Customer loans totalled €114.6 million, recording a slight fall (-2.72%) compared with the end of the previous year, while Gross financial assets rose by 21.38% to stand at €31.3 million. Shareholders' equity increased slightly by 3.42%, owing to greater Reserves, to end the year at €55.8 million, net of profit for the year.

63 As regards income, Net interest income was €4.1 million, recording an increase of 24.61% compared with December 2004. The trend in Net commissions was positive (+44.19%) but Total income fell to €6.23 million (-4.38%). The value of Net adjustments was positive while Administrative expenses increased (+7.85%) owing to the fact that other administrative expenses offset the drop in personnel expenses. Net income from continuing operations before tax fell over the year to €3.23 million (-7.4%) while, after taxes, Profit for the year 2005 stood at €1.99 million, down by 35.69% on the figure for the previous year. In the light of the reduction in Total assets, the structural ratios saw an increasing percentage ratio of Customer loans and Gross financial assets, while the percentage ratio of Amounts due to customers and Securities in issue to Total assets was lower as a result of the different extent of fall that occurred in the year. As regards the profitability ratios, the fall in Total income and the simultaneous increase in Net interest income, Net commissions and Administrative expenses led to a rise, over the year, in the profitability ratios while ROE fell from 5.75% in 2004 to 3.58% in 2005. At the end of the year, Banca Valori had not undergone any changes in terms of its network of branches and the number of employees, which remained at 1 and 6 respectively.

64 BANCA POPOLARE DI CREMA

Financial data prepared according to IAS/IFRS % Change Amounts in Euro/000 31/12/2005 31/12/2004 31/12/2004 Balance sheet Customer loans 939,453 894,049 5.08% Gross financial assets 38,278 2,140 1688.69% Total assets 1,493,706 1,403,975 6.39% Due to customers and Securities in issue 940,030 733,067 28.23% Financial liabilities held for trading and designated at fair value 515 Indirect customer deposits 1,198,755 907,348 32.12% of which: managed 554,543 543,111 2.10% Shareholders' equity (excl. profit) 259,335 256,776 1.00% Income statement Net interest income 39,362 37,179 5.87% Net commissions 16,746 16,124 3.86% Total income including financial operations 63,432 64,426 -1.54% Net adjustments for impairment of loans and other financial assets -2,485 -1,595 55.80% Administrative expenses -32,690 -35,179 -7.08% Profit (loss) from continuing operations before tax 25,394 26,652 -4.72% Net profit (loss) for the year 14,829 15,875 -6.59% Other information Number of branches 44 43 Number of employees 260 264 Average number of employees 262 276 Financial ratios Structural ratios Customer loans/Total assets 62.89% 63.68% Gross financial assets/Total assets 2.56% 0.15% Due to customers and Securities in issue/Total assets 62.93% 52.21% Managed deposits/Indirect deposits 46.26% 59.86% Profitability ratios Net interest income/Total income including financial operations 62.05% 57.71% Net commissions/Total income including financial operations 26.40% 25.03% Administrative expenses/Total income including financial operations 51.54% 54.60% Net profit for the year/Total assets (ROA) 0.99% 1.13% Net profit for the year/Shareholders' equity (ROE) 5.72% 6.18%

Note that, unlike the figures for the year ended December 31, 2005, the figures for the year ended December 31, 2004 are expressed according to IAS excluding IAS 32 and 39.

Performance Looking at the balance sheet, Amounts due to customers and Securities in issue increased over the year from €733.1 million in 2004 to €940.0 million (28.23%) confirming the established confidence of customers in the Bank while Financial liabilities held for trading and designated at fair value reached €0.515 million. Indirect customer deposits benefited not only from market revaluations but also from the commercial activities carried out to acquire new deposits, increasing by 32.12% to €1,198.7 million. The Managed component increased by 2.10% to stand at €554.5 million. Administered deposits fell by 30.38%. Customer loans totalled €939.4 million, recording a rise of 5.08% compared with the end of the previous year, while Gross financial assets increased to €38.3 million. During the year, the transfer of home and commercial mortgage loans, in preparation for the execution of a securitisation transaction at Group level, was completed involving a total sum of €167.1 million.

65 Shareholders' equity increased slightly by 1.0%, owing to greater Reserves, to end the year at €259.3 million, net of profit for the year. As regards income, Net interest income was €39.4 million, recording an increase of 5.87% compared with December 2004. Net commissions increased (+3.86%) but Total income fell to €63.4 million (-1.54%). Net adjustments increased by 55.8% while Administrative expenses were down (-7.08%) owing to the positive trend in both other administrative expenses and personnel expenses. Net income from continuing operations before tax fell over the year to €25.4 million (-4.7%) while, after taxes, Profit for the year 2005 was €14.8 million, down by 6.59% on the figure for the previous year. The structural ratios remained substantially stable with the previous year, recording an increase in the percentage ratio of Amounts due to customers and Securities in issue to Total assets (62.93%). As regards profitability ratios, there was a higher ratio of Net interest income to Total income (62.05%). ROE fell slightly from 6.18% in 2004 to 5.72% by the end of 2005. At the end of the year, Banca Popolare di Crema had seen its regional network increase to 44 branches (43 in 2004), while the number of employees dropped from 264 in 2004 to 260 at the end of 2005.

66 BANCA CARIPE

Financial data prepared according to IAS/IFRS % Change Amounts in Euro/000 31/12/2005 31/12/2004 31/12/2004 Balance sheet Customer loans 991,865 890,747 11.35% Gross financial assets 2,008 6,755 -70.27% Total assets 1,316,383 1,226,071 7.37% Due to customers and Securities in issue 1,068,653 1,037,588 2.99% Financial liabilities held for trading and designated at fair value 187 Indirect customer deposits 637,375 639,017 -0.26% of which: managed 184,610 159,080 16.05% Shareholders' equity (excl. profit) 97,727 91,160 7.20% Income statement Net interest income 43,252 37,686 14.77% Net commissions 11,751 16,462 -28.62% Total income including financial operations 61,925 62,800 -1.39% Net adjustments for impairment of loans and other financial assets -4,179 -1,342 211.40% Administrative expenses -46,308 -44,918 3.09% Profit (loss) from continuing operations before tax 8,499 17,880 -52.47% Net profit (loss) for the year 6,949 9,601 -27.62% Other information Number of branches 51 48 Number of employees 382 388 Average number of employees 385 408 Financial ratios Structural ratios Customer loans/Total assets 75.35% 72.65% Gross financial assets/Total assets 0.15% 0.55% Due to customers and Securities in issue/Total assets 81.18% 84.63% Managed deposits/Indirect deposits 28.96% 24.89% Profitability ratios Net interest income/Total income including financial operations 69.85% 60.01% Net commissions/Total income including financial operations 18.98% 26.21% Administrative expenses/Total income including financial operations 74.78% 71.53% Net profit for the year/Total assets (ROA) 0.53% 0.78% Net profit for the year/Shareholders' equity (ROE) 7.11% 10.53%

Note that, unlike the figures for the year ended December 31, 2005, the figures for the year ended December 31, 2004 are expressed according to IAS excluding IAS 32 and 39.

Performance Looking at the balance sheet, Amounts due to customers and Securities in issue increased over the year from €1,037.6 million in 2004 to €1,068.6 million at the end of 2005 (2.99%) while Financial liabilities held for trading and designated at fair value reached €0.187 million. Indirect customer deposits, expressed at actual market values, remained substantially stable at €637.4 million. The Managed component recorded an increase of 16.05% to stand at €184.6 million. Administered deposits rose by 1.75%. Customer loans totalled €991.8 million, a figure that was 11.35% higher than the end of the previous year, thanks to a significant transaction in which a Group company was the counterparty although the trend disregards the re-entry of significant positions that had nourished volumes during 2004. Gross financial assets fell to €2.0 million.

67 Shareholders' equity increased by 7.2%, owing to greater Reserves, to end the year at €97.7 million, net of profit for the year. As regards income, Net interest income was €43.2 million, recording an increase of 14.8% compared with December 2004. The drop in Net commissions (-28.62%) contributed to the decrease in Total income (-1.39%) which fell to €61.9 million. There were increases in both Net adjustments (-€4 million) and Administrative expenses (3.09%), owing to the higher amount of personnel expenses. Net income from continuing operations before tax decreased over the period to €8.5 million (-52.5%) while, after taxes, Profit for the year 2005 was €6.9 million, down by 27.6% on the figure for the previous year. The structural ratios remained substantially stable with the previous year, recording a slight increase in the percentage ratio of Customer loans to Total assets (75.35%). As regards profitability ratios, there was a higher ratio of Net interest income to Total income (69.85%) and a fall in the ratio of Net commissions (18.98%). ROE fell from 10.53% in 2004 to 7.11% by the end of 2005. At the end of the year, Banca Caripe had a regional network of 51 branches (48 in 2004), with the opening of the Chieti, Ancona and Manoppello branches, while the number of employees fell from 388 in 2004 to 382 at the end of 2005.

68 BIPIELLE BANK (SUISSE)

Financial data prepared according to IAS/IFRS % Change Amounts in Euro/000 31/12/2005 31/12/2004 31/12/2004 Balance sheet Customer loans 369,943 419,021 -11.71% Gross financial assets 69,019 10,641 548.61% Total assets 753,068 964,753 -21.94% Due to customers and Securities in issue 98,321 249,414 -60.58% Financial liabilities held for trading and designated at fair value 49,168 Indirect customer deposits 1,125,102 1,315,398 -14.47% of which: managed 1,125,102 1,315,398 -14.47% Shareholders' equity (excl. profit) 28,963 28,769 0.67% Income statement Net interest income 7,012 5,087 37.84% Net commissions 12,313 9,692 27.04% Total income including financial operations 26,105 18,575 40.54% Net adjustments for impairment of loans and other financial assets -8,134 Administrative expenses -10,686 -10,121 5.58% Profit (loss) from continuing operations before tax 6,748 6,587 2.44% Net profit (loss) for the year 5,256 5,197 1.14% Other information Number of branches 1 1 Number of employees 53 54 Average number of employees 54 54 Financial ratios Structural ratios Customer loans/Total assets 49.12% 43.43% Gross financial assets/Total assets 9.17% 1.10% Due to customers and Securities in issue/Total assets 13.06% 25.85% Managed deposits/Indirect deposits 100.00% 100.00% Profitability ratios Net interest income/Total income including financial operations 26.86% 27.39% Net commissions/Total income including financial operations 47.17% 52.18% Administrative expenses/Total income including financial operations 40.93% 54.49% Net profit for the year/Total assets (ROA) 0.70% 0.54% Net profit for the year/Shareholders' equity (ROE) 18.15% 18.06%

Note that, unlike the figures for the year ended December 31, 2005, the figures for the year ended December 31, 2004 are expressed according to IAS excluding IAS 32 and 39.

Performance Of the main Balance Sheet items, Customer loans decreased to €369.9 million (-11.7%), while Financial assets held for trading increased to €69 million. In terms of liabilities, there was a significant fall in Amounts due to customers, which ended the year at €98.3 million (-60.6%). The income statement recorded Net interest income of €7 million, an increase of 37.8%. There was a similar positive trend in Net commissions, which ended the year at €12.3 million (+27%). Profit from continuing operations before tax totalled €6.7 million (+2.4%), despite adjustments to loans totalling €8.1 million and administrative expenses increasing to €10.7 million (+5.6%). After taxes of €1.5 million, Profit for the year 2005 was €5.3 million (+1.1% on the same period last year).

69 BIPIELLE SGC

Financial data prepared according to IAS/IFRS % Change Amounts in Euro/000 31/12/2005 31/12/2004 31/12/2004 Balance sheet Customer loans 130,187 271,821 -52.11% Gross financial assets 40 Total assets 193,276 305,023 -36.64% Due to customers and Securities in issue 9 Shareholders' equity 96,111 26,657 260.55% Income statement Net interest income -6,569 -3,583 83.34% Net commissions 17,258 11,573 49.12% Total income including financial operations 11,735 8,796 33.41% Net adjustments for impairment of loans and other financial assets -57,493 -5,850 882.79% Administrative expenses -14,847 -10,810 37.35% Loss from continuing operations before tax -60,731 -7,956 663.34% Net loss -41,703 -5,334 681.83% Other information Number of employees 91 87 Average number of employees 89 83 Financial ratios Structural ratios Customer loans/Total assets 67.36% 89.11% Gross financial assets/Total assets 0.02% Profitability ratios Net interest income/Total income including financial operations -55.98% -40.73% Net commissions/Total income including financial operations 147.06% 131.57% Administrative expenses/Total income including financial operations 126.52% 122.90% Net loss for the year/Total assets (ROA) -21.58% -1.75% Net loss for the year/Shareholders' equity (ROE) -43.39% -20.01%

Note that, unlike the figures for the year ended December 31, 2005, the figures for the year ended December 31, 2004 are expressed according to IAS excluding IAS 32 and 39.

Performance Looking at the balance sheet, Customer loans totalled €130.2 million (-52.1%) while Gross financial assets were €0.04 million. Shareholders' equity rose from €26.6 million in 2004 to €96.1 million in 2005 owing to the capital increase completed in the final quarter of the year. As regards income, Net interest income was -€6.6 million, down by 83.34% on the figure for December 2004. The increase in Net commissions (+49.1%) contributed to the increase in Total income (+33.41%) which ended the year at €11.7 million. Compared with the previous period, there was a significant rise in Net adjustments which ended the year at -€57.5 million, with Administrative expenses also increasing by 37.35% owing to the simultaneous rise in personnel expenses and other administrative expenses. Net income from continuing operations before tax therefore fell over the period to -€60.7 million, while, after taxes, Loss for the year 2005 was -€41.7 million, much worse than the figure of -€5.3 million recorded in 2004. The structural ratios showed a drop in the percentage ratio of Customer loans to Total assets (67.4%), while, in terms of profitability ratios, the percentage ratio of Net commissions to Total income increased to 147.06%. As regards the number of employees, Bipielle SGC saw its numbers increase slightly from 87 in 2004 to 91 at the end of 2005.

70 NAZIONALE FIDUCIARIA

Financial data prepared according to IAS/IFRS % Change Amounts in Euro/000 31/12/2005 31/12/2004 31/12/2004 Balance sheet Customer loans 1,163 845 37.63% Total assets 3,019 2,976 1.44% Indirect customer deposits 660,045 672,514 -1.85% of which: managed Shareholders' equity (excl. profit) 1,733 1,686 2.79% Income statement Net interest income 47 38 23.68% Net commissions 1,429 1,383 3.33% Total income including financial operations 1,599 1,722 -7.14% Net adjustments for impairment of loans and other financial assets -44 -6 633.33% Administrative expenses -724 -785 -7.77% Profit (loss) from continuing operations before tax 792 898 -11.80% Net profit (loss) for the year 532 647 -17.77% Other information Number of employees 5 4 Average number of employees 5 4 Financial ratios Structural ratios Customer loans/Total assets 38.52% 28.39% Profitability ratios Net interest income/Total income including financial operations 2.94% 2.21% Net commissions/Total income including financial operations 89.37% 80.31% Administrative expenses/Total income including financial operations 45.28% 45.59% Net profit for the year/Total assets (ROA) 17.62% 21.74% Net profit for the year/Shareholders' equity (ROE) 30.70% 38.37%

Note that, unlike the figures for the year ended December 31, 2005, the figures for the year ended December 31, 2004 are expressed according to IAS excluding IAS 32 and 39.

Performance Looking at the balance sheet, the following results are notable: x Indirect customer deposits, which fell by -1.85% to €660 million; x Customer loans, which increased by 37.63% to €1.2 million; x Shareholders' equity, which increased by 2.79%, owing to greater Reserves, to end the year at €1.7 million, net of profit for the year. As regards income, Net interest income was €0.047 million, recording an increase of 23.7% compared with December 2004. Net commissions increased slightly (+3.33%) while Total income fell to €1.59 million (-7.14%). Net adjustments increased to -€0.044 million while Administrative expenses dropped to -€0.72 million, owing to the reduction in other administrative expenses. Profit from continuing operations before tax fell over the period to €0.792 million (-11.8%) while, after taxes, Profit for the year 2005 was €0.532 million, down by 17.8% on the figure for the previous yea. The structural ratios showed an increase in the percentage ratio of Customer loans to Total assets (38.52%), while, in terms of profitability ratios, the percentage ratio of Net commissions to Total income increased to 89.37%. ROE fell from 38.37% in 2004 to 30.7% by the end of 2005.

71 As regards the number of employees, Nazionale Fiduciaria saw its numbers increase slightly from 4 in 2004 to 5 at the end of 2005.

CRITEFI SIM

Financial data prepared according to IAS/IFRS % Change Amounts in Euro/000 31/12/2005 31/12/2004 31/12/2004 Balance sheet Customer loans 170 163 4.29% Total assets 1,615 1,560 3.53% Indirect customer deposits 100,082 98,425 1.68% of which: managed 100,082 98,425 1.68% Shareholders' equity (excl. profit) 1,158 1,137 1.85% Income statement Net interest income 24 22 9.09% Net commissions 676 653 3.52% Total income including financial operations 706 686 2.92% Net adjustments for impairment of loans and other financial assets -13 Administrative expenses -391 -378 3.44% Profit (loss) from continuing operations before tax 315 295 6.78% Net profit (loss) for the year 182 171 6.43% Other information Number of employees 2 2 Average number of employees 2 2 Financial ratios Structural ratios Customer loans/Total assets 10.53% 10.45% Managed deposits/Indirect deposits 100.00% 100.00% Profitability ratios Net interest income/Total income including financial operations 3.40% 3.21% Net commissions/Total income including financial operations 95.75% 95.19% Administrative expenses/Total income including financial operations 55.38% 55.10% Net profit for the year/Total assets (ROA) 11.27% 10.96% Net profit for the year/Shareholders' equity (ROE) 15.72% 15.04%

Note that, unlike the figures for the year ended December 31, 2005, the figures for the year ended December 31, 2004 are expressed according to IAS excluding IAS 32 and 39.

Performance Looking at the balance sheet, Indirect customer deposits increased by 1.68% to €100 million. Shareholders' equity increased by 1.85%, owing to greater Reserves, to end the year at €1.1 million, net of profit for the year. As regards income, Net interest income was €0.024 million, recording an increase of 9.1% compared with December 2004. There were increases in both Net commissions (+3.52%) and Total income (+2.92%), which stood at €0.7 million. Also on the increase were Administrative expenses (-€0.39 million), particularly as a result of the personnel expenses component. Profit from continuing operations before tax grew over the period to €0.315 million (+6.8%) while, after taxes, Profit for the year 2005 was €0.182 million, up by 6.4% on the figure for the previous year.

72 Both the structural and profitability ratios remained substantially stable over the period while ROE moved up from 15.04% in 2004 to 15.7% at the end of 2005. As regards the number of employees, Critefi Sim has seen this figure remain constant at 2.

Companies controlled indirectly through Bipielle Investimenti EFIBANCA

Financial data prepared according to IAS/IFRS % Change Amounts in Euro/000 31/12/2005 31/12/2004 31/12/2004 Balance sheet Customer loans 4,474,072 4,808,338 -6.95% Gross financial assets 286,169 171,328 67.03% Total assets 5,755,516 6,299,972 -8.64% Due to customers and Securities in issue 3,059,249 3,729,932 -17.98% Financial liabilities held for trading and designated at fair value 22,588 1,184 1807.77% Indirect customer deposits 1,486,732 1,515,739 -1.91% of which: managed 4,283 3,220 33.01% Shareholders' equity (excl. profit) 742,133 704,736 5.31% Income statement Net interest income 78,563 73,784 6.48% Net commissions 29,718 33,595 -11.54% Total income including financial operations 140,443 120,614 16.44% Net adjustments for impairment of loans and other financial assets -15,234 -22,794 -33.17% Administrative expenses -37,351 -38,402 -2.74% Profit (loss) from continuing operations before tax 87,645 59,251 47.92% Net profit (loss) for the year 63,193 34,785 81.67% Other information Number of branches 7 7 Number of employees 233 239 Average number of employees 236 244 Financial ratios Structural ratios Customer loans/Total assets 77.74% 76.32% Gross financial assets/Total assets 4.97% 2.72% Due to customers and Securities in issue/Total assets 53.15% 59.21% Managed deposits/Indirect deposits 0.29% 0.21% Profitability ratios Net interest income/Total income including financial operations 55.94% 61.17% Net commissions/Total income including financial operations 21.16% 27.85% Administrative expenses/Total income including financial operations 26.60% 31.84% Net profit for the year/Total assets (ROA) 1.10% 0.55% Net profit for the year/Shareholders' equity (ROE) 8.52% 4.94%

Note that, unlike the figures for the year ended December 31, 2005, the figures for the year ended December 31, 2004 are expressed according to IAS excluding IAS 32 and 39.

Performance Looking at the balance sheet, Amounts due to customers and Securities in issue fell over the twelve months from €3,729.9 million in 2004 to €3,059.2 million (-17.98%) owing to maturities only partly renewed, while Financial liabilities held for trading and designated at fair value reached €22.6 million.

73 Indirect customer deposits, expressed at actual market values, also decreased over the year to reach €1,486.7 million (-1.91%). The Managed component increased to €4.2 million. Administered deposits fell by - 13.34%. Customer loans totalled €4,474 million, decreasing by 6.95% compared with the end of the previous year due to a significant concentration of prepayments, while Gross financial assets increased to €286.2 million. Shareholders' equity increased slightly by 5.3%, owing to greater Reserves, to end the year at €742.1 million, net of profit for the year. As regards income, Net interest income totalled €78.5 million, recording an increase of 6.48% on December 2004, thanks to the increase in funds lend to medium-sized enterprises and to the higher unit margins connected with such transactions, together with the greater use of interbank funding compared with more costly bonds. Net commissions were down (-11.54%) as a result of two exceptional and considerable sources of income collected in 2004 on credit transactions unlikely to be repeated, while Total income increased by 16.44% to stand at €140.4 million. Net adjustments were down (-33.17%) while Administrative expenses remained substantially stable (-2.74%). Profit from continuing operations before tax rose over the year to €87.6 million (+47.9%) while, after taxes, Profit for the year 2005 was €63.2 million, up by 81.67% on the figure for the previous year. The structural ratios remained substantially stable with the previous year, although there was a moderate fall in the percentage ratio of Amounts due to customers and Securities in issue to Total assets (53.15%). As regards profitability ratios, there was a decrease in all indicators calculated in relation to Total income, and ROE increased from 4.94% in 2004 to 8.52% at the end of 2005. Efibanca's regional network of branches remained at 7 while the number of employees decreased from 239 in 2004 to 233 at the end of 2005.

74 BIPITALIA DUCATO

Financial data prepared according to IAS/IFRS % Change Amounts in Euro/000 31/12/2005 31/12/2004 31/12/2004 Balance sheet Customer loans 2,673,728 1,306,878 104.59% Gross financial assets 10,719 11,768 -8.91% Total assets 3,041,588 1,838,795 65.41% Due to customers and Securities in issue 823,768 Financial liabilities held for trading and designated at fair value 9,680 Shareholders' equity (excl. profit) 299,714 298,911 0.27% Income statement Net interest income 100,282 92,942 7.90% Net commissions -4,585 -26,399 -82.63% Total income including financial operations 173,991 139,287 24.92% Net adjustments for impairment of loans and other financial assets -37,516 -25,630 46.38% Administrative expenses -61,202 -53,123 15.21% Profit (loss) from continuing operations before tax 73,177 58,683 24.70% Net profit (loss) for the year 42,372 35,616 18.97% Other information Number of branches 73 74 Number of employees 575 551 Average number of employees 563 536 Financial ratios Structural ratios Customer loans/Total assets 87.91% 71.07% Gross financial assets/Total assets 0.35% 0.64% Due to customers and Securities in issue/Total assets 27.08% Profitability ratios Net interest income/Total income including financial operations 57.64% 66.73% Net commissions/Total income including financial operations -2.64% -18.95% Administrative expenses/Total income including financial operations 35.18% 38.14% Net profit for the year/Total assets (ROA) 1.39% 1.94% Net profit for the year/Shareholders' equity (ROE) 14.14% 11.92%

Note that, unlike the figures for the year ended December 31, 2005, the figures for the year ended December 31, 2004 are expressed according to IAS excluding IAS 32 and 39.

Performance Looking at the balance sheet, the item Due to customers and securities in issue recorded a value of €823.7 million while Financial liabilities held for trading and designated at fair value totalled €9.7 million. Customer loans jumped from €1,306.9 million in 2004 to €2,673.7 million at the end of 2005 while Gross financial assets fell by -8.91% to €10.7 million. Shareholders' equity increased by 0.27%, owing to greater Reserves, to end the year at €299.7 million, net of profit for the year. As regards income, Net interest income was €100.3 million, recording an increase of 7.9% compared with December 2004. The better result for Net commissions contributed to the improvement in Total income, which ended the year at €173.9 million (24.92%). There were increases in both Net adjustments (-€37.5 million) and Administrative expenses, -61.2, owing to the simultaneous increase in personnel expenses and other administrative expenses.

75 Profit from continuing operations before tax increased over the period to €73.2 million (24.7%) while, after taxes, Profit for the year 2005 was €42.4 million, up by 18.9% on the figure for the previous year. The structural ratios recorded an increase in the percentage ratio of Customer loans to Total assets (87.91%) and a figure (27.08%) for the ratio of Amounts due to customers and Securities in issue to Total assets. As regards profitability ratios, there was a lower ratio of Net interest income to Total income (57.64%) and an improvement in the ratio of Net commissions. ROE increased from 11.92% in 2004 to 14.14% by the end of 2005. At the end of the year, Bipitalia Ducato's regional network of branches had decreased in number to 73 (74 in 2004), with the number of employees rising from 551 in 2004 to 575 at the end of 2005.

BANCA BIPIELLE.NET

Financial data prepared according to IAS/IFRS % Change Amounts in Euro/000 31/12/2005 31/12/2004 31/12/2004 Balance sheet Customer loans 48,143 71,688 -32.84% Gross financial assets 111,177 87,087 27.66% Total assets 364,357 525,018 -30.60% Due to customers and Securities in issue 222,870 339,417 -34.34% Indirect customer deposits 4,096,123 4,465,459 -8.27% of which: managed 3,570,434 3,508,219 1.77% Shareholders' equity (excl. profit) 54,397 77,456 -29.77% Income statement Net interest income 6,500 11,367 -42.82% Net commissions 10,828 21,381 -49.36% Total income including financial operations 27,780 46,044 -39.67% Net adjustments for impairment of loans and other financial assets -13,537 Administrative expenses -28,069 -45,751 -38.65% Profit (loss) from continuing operations before tax -43,151 -3,000 1338.37% Net profit (loss) for the year -30,202 7,208 -519.01% Other information Number of branches 1 1 Number of financial advisors 1,045 1,236 Number of employees 32 60 Average number of employees 46 24 Structural ratios Customer loans/Total assets 13.21% 13.65% Gross financial assets/Total assets 30.51% 16.59% Due to customers and Securities in issue/Total assets 61.17% 64.65% Managed deposits/Indirect deposits 87.17% 78.56% Profitability ratios Net interest income/Total income including financial operations 23.40% 24.69% Net commissions/Total income including financial operations 38.98% 46.44% Administrative expenses/Total income including financial operations 101.04% 99.36% Net profit for the year/Total assets (ROA) -8.29% 1.37% Net profit for the year/Shareholders' equity (ROE) - (including shareholders' equity loss) -55.52% 9.31%

Note that, unlike the figures for the year ended December 31, 2005, the figures for the year ended December 31, 2004 are expressed according to IAS excluding IAS 32 and 39.

76 Performance Looking at the balance sheet, Amounts due to customers and securities in issue decreased from €339.4 million in 2004 to €222.8 million at the end of 2005 (-34.34%). Indirect customer deposits, expressed at actual market values, also fell to €4,096.1 million (-8.27%). The Managed component recorded an increase of 1.77% to stand at €3,570.4 million. Administered deposits fell by -10.11%. Customer loans totalled €48.1 million, decreasing by 32.84% compared with the end of the previous year, while Gross financial assets increased to stand at €111.2 million. Shareholders' equity fell by 29.77% owing to the loss for the year, to stand at €54.4 million. As regards income, Net interest income was €6.5 million, recording a decrease of -42.8% compared with December 2004. The decrease in Net commissions (-49.4%) contributed to the drop in Total income (-39.67%) which fell to €27.8 million. The lower value of commissions is principally due to the transfer of the Area Banca business division responsible for discretionary accounts to Bipitalia Gestioni SGR, which also partly impacted on the reduction in costs, and also to the streamlining process that followed the merger with Area Banca. Compared with the previous period in which there was a zero balance, Net adjustments were minus €13.5 million, with Administrative expenses falling by 38.65% as a result of the simultaneous decrease in personnel expenses and other administrative expenses. Profit from continuing operations before tax fell over the period to -€43.1 million due, in part, to the effect of provisions totalling -€22.6 million while, after taxes, Loss for the year 2005 was -€30.2 million compared with a profit of €7.2 million in 2004. The structural ratios remained substantially stable with the previous year, with the exception of the percentage ratio of Gross financial assets to Total assets (30.51%). As regards profitability ratios, there was a lower ratio of Net commissions to Total income (38.98%). The number of Banca Bipielle.Net's regional network of branches remained unchanged at 1 while the number of employees fell from 60 in 2004 to 32 at the end of 2005.

77 BIPIELLE PREVIDENZA ASSICURATIVA

Financial data prepared according to IAS/IFRS % Change Amounts in Euro/000 31/12/2005 31/12/2004 31/12/2004 Balance sheet Gross financial assets 229 Total assets 5,750 1,097 424.16% Shareholders' equity (excl. profit) 3,948 141 2700.00% Income statement Net interest income -320 Net commissions 1,173 481 143.87% Total income including financial operations 808 478 69.04% Net adjustments for impairment of loans and other financial assets Administrative expenses -577 -374 54.28% Profit (loss) from continuing operations before tax -119 104 -214.42% Net profit (loss) for the year -139 54 -357.41% Other information Number of employees 6 6 Average number of employees 6 6 Financial ratios Structural ratios Gross financial assets/Total assets 3.98% Profitability ratios Net commissions/Total income including financial operations 145.17% 100.63% Administrative expenses/Total income including financial operations 71.41% 78.24% Net profit for the year/Total assets (ROA) -2.42% 4.92% Net profit for the year/Shareholders' equity (ROE) - (including shareholders' equity loss) -3.52% 38.30%

Note that, unlike the figures for the year ended December 31, 2005, the figures for the year ended December 31, 2004 are expressed according to IAS excluding IAS 32 and 39.

Performance Looking at the balance sheet, Gross financial assets totalled €0.229 million in 2005 with Total assets increasing to €5.7 million. Shareholders' equity increased significantly over the year, as a result, in particular, of the increase in Reserves, to end the year at €3.9 million. As regards income, Net interest income was €-0.32 million with a significant increase in Net commissions, which rose by €143.8% to €1.17 million. Total income was up (+ 69%) to reach €0.808 million while Administrative expenses progressed from -€0.374 million to -€0.577 million in 2005 owing to the simultaneous increase in personnel expenses and other administrative expenses. Profit from continuing operations before taxes fell to -€0.119 million due, in part, to the effect of appropriations totalling -€0.35 million while, after taxes, Profit for the year 2005 fell to -€0.139 million. The profitability ratios saw an increasing percentage ratio of Net commissions to Total income and a lower percentage ratio of Administrative expenses. ROE fell from 38.3% in 2004 to -3.4% by the end of 2005. As regards the employees of Bipielle Previdenza Assicurativa, the number remained constant (6).

78 BIPIELLE REAL ESTATE

Financial data prepared according to IAS/IFRS % Change Amounts in Euro/000 31/12/2005 31/12/2004 31/12/2004 Balance sheet Customer loans 25,000 Total assets 711,165 697,688 1.93% Shareholders' equity (excl. profit) 386,024 401,131 -3.77% Income statement Net interest income -11,329 -5,763 96.58% Net commissions -156 -104 50.00% Total income including financial operations 46,969 45,618 2.96% Net adjustments for impairment of loans and other financial assets -20,017 93 -21623.66% Administrative expenses -31,828 -26,687 19.26% Profit (loss) from continuing operations before tax -8,771 16,430 -153.38% Net profit (loss) for the year -7,512 12,068 -162.25% Other information Number of employees 98 96 Average number of employees 97 72 Financial ratios Structural ratios Customer loans/Total assets 3.52% Profitability ratios Administrative expenses/Total income including financial operations 67.76% 58.50% Net profit for the year/Total assets (ROA) -1.06% 1.73% Net profit for the year/Shareholders' equity (ROE) - (including shareholders' equity loss) -1.95% 3.01%

Note that, unlike the figures for the year ended December 31, 2005, the figures for the year ended December 31, 2004 are expressed according to IAS excluding IAS 32 and 39.

Performance Because of the completion in 2006 of the merger by incorporation of Bipielle Immobili Strumentali and the partial and proportional spin-off of Basileus into Bipielle Real Estate, the capital structure of BRE shows in 2005 an entry for the item Customer loans (€25 million) - loan to Basileus - as well as an increase in Total assets which rose by 1.93% to €711.2 million, of which more than €540 million are Shareholdings and almost all of the remaining amount is Property, plant and equipment. Shareholders' equity fell from €401.1 million in 2004 to €386.0 million in 2005 as a result of the use of Reserves. As regards income, Net interest income decreased to -€11.3 million due to the combined effect of lower Income from shareholdings and higher Financial expenses due to the increase in average debt and interest rates. Total income remained substantially stable (+2.96%) at €46.9 million while Net adjustments increased to -€20 million owing to the €22 million writedown of Basileus. Administrative expenses also increased by 19.26% owing to the simultaneous rise in personnel expenses and other administrative expenses. Profit from continuing operations before tax therefore fell over the period to -€8.8 million, while, after taxes, Loss for the year 2005 was -€7.5 million, much worsen on the figure of €12 million recorded in 2004. The profitability ratios saw a fall in the percentage ratio of Net interest income to Total income (24.12%) and a rise in the ratio of Administrative expenses (+67.76%). ROE fell from 3.01% in 2004 to -1.91% by the end of 2005. As regards the number of employees, Bipielle Real Estate saw its numbers increase slightly from 96 in 2004 to 98 at the end of 2005.

79 BIPITALIA GESTIONI S.G.R.

Financial data prepared according to IAS/IFRS % Change Amounts in Euro/000 31/12/2005 31/12/2004 31/12/2004 Balance sheet Customer loans 58,926 28,208 108.90% Gross financial assets 27,905 25,614 8.94% Total assets 149,338 115,886 28.87% Due to customers and Securities in issue 8,028 3,233 148.31% Indirect customer deposits 12,932,728 12,394,740 4.34% of which: managed 12,932,728 12,394,740 4.34% Shareholders' equity (excl. profit) 60,544 57,421 5.44% Income statement Net interest income 347 387 -10.34% Net commissions 61,789 30,411 103.18% Total income including financial operations 62,678 31,932 96.29% Net adjustments for impairment of loans and other financial assets Administrative expenses -10,187 -9,103 11.91% Profit (loss) from continuing operations before tax 52,396 22,388 134.04% Net profit (loss) for the year 31,019 13,779 125.12% Other information Number of employees 49 50 Average number of employees 49 49 Financial ratios Structural ratios Customer loans/Total assets 39.46% 24.34% Gross financial assets/Total assets 18.69% 22.10% Due to customers and Securities in issue/Total assets 5.38% 2.79% Managed deposits/Indirect deposits 100.00% 100.00% Profitability ratios Net interest income/Total income including financial operations 0.55% 1.21% Net commissions/Total income including financial operations 98.58% 95.24% Administrative expenses/Total income including financial operations 16.25% 28.51% Net profit for the year/Total assets (ROA) 20.77% 11.89% Net profit for the year/Shareholders' equity (ROE) 51.23% 24.00%

Note that, unlike the figures for the year ended December 31, 2005, the figures for the year ended December 31, 2004 are expressed according to IAS excluding IAS 32 and 39.

Performance Looking at the balance sheet, Amounts due to customers and Securities in issue (€8 million) increased by 148.31% over the twelve months. Indirect customer deposits, expressed at actual market values, increased to €12,932.7 million (+4.34% over twelve months), thanks to the contribution of discretionary accounts, which increased by 16.43%, and insurance products, which increased by 54.76%, while mutual funds decreased (-11.09%). Net loans to customers totalled €58.9 million, recording an increase of 108.90% on the end of the previous year. Shareholders' equity ended the year at €60.5 million, net of profit for the year. As regards income, Net interest income was €0.3 million, an increase of 10.34% compared with December 2004. There was a significant increase in net commissions (+103.18%), which reached €61.8 million, owing to the significant rise in commission income from discretionary accounts and performance commissions. Consequently, Total income including financial operations was €62.7 million, a rise of 96.29%. Administrative expenses were €10.2 million, an increase of 11.91% on 2004, owing to the significant rise in personnel costs,

80 consultancy costs for third-party and information technology costs in relation to the purchase of the Area Banca business division. Profit from continuing operations before tax was €52.4 million, recording a year-on-year increase of 134.04%, while Net profit for the year was €31 million, up by 125.12% compared with the previous year. As regards the structural ratios, the percentage ratio of Amounts due to customers and Securities in issue to Total assets increased from 24.34% at the end of 2004 to 39.46% at the end of 2005. As far as the profitability ratios are concerned, the percentage ratio of Administrative expenses to Total income including financial operations decreased from 28.51% in 2004 to its present figure of 16.25%. ROE increased from 24.00% to 51.23%. The company has 49 employees, 1 less than the figure for 2004.

81 Additions to the consolidated financial statements for the year ended December 31, 2005 requested by CONSOB in a letter dated March 28, 2006, pursuant to Art. 114 (5) of Legislative Decree no. 58/1998

Point a) GUARANTEED RETURNS OFFERED TO CUSTOMERS With regard to the additional information requested in relation to the "guaranteed returns" offered to customers, it is specified that, in September 2005, it emerged that there were five positions involving guaranteed returns offered to customers ("guaranteed accounts"), four of which related to commitments assumed from scratch or extended by the Bank during 2004. Based on the information contained in the guarantee letters - submitted by the customers at their own initiative and no original documentation and/or copy of which was available at the Bank - the commitments assumed (in terms of guaranteed capital) totalled €60.3 million as at December 31, 2004 and €73.1 million on the date when these positions were closed, which, in all five cases, took place prior to the date on which the 2005 draft financial statements were approved by the Board of Directors. The exchange value of the assets relating to these guaranteed accounts was approximately: - €47.0 million as at December 31, 2004 (four positions); - €34.6 million on the date when the five respective positions were closed. The potential expenses payable by the Bank were estimated in the region of €13.3 million in the 2004 income statement re-approved in the Shareholders' Meeting of January 28, 2006. This amount constituted the maximum potential liability resulting from the commitments in effect as at December 31, 2004, equal to the difference between the commitments assumed (€60.3 million) and the exchange value of the assets on the same date (€47.0 million). As regards the 2005 financial year, these relate to expenses actually incurred as opposed to potential expenses, given that all five positions were closed before the approval of the financial statements. In the meeting of the Board of Directors of September 30, 2005 and in the subsequent meetings of October 27, 2005, November 14 ,2005, November 21, 2005 and December 27, 2005, and after obtaining legal opinions, the Bank, based in particular on a copy of the documents furnished by the customers, proceeded to reach final settlements aimed at closing the positions so as not to incur any further expenses in the future. The amounts of the expenses actually incurred as a result of the settlements was in the region of €38.5 million. Because a provision of around €13.3 million had been made for precautionary reasons in the 2004 financial statements, the expenses charged to income in 2005 totalled approximately €25.2 million. Both the expenses set aside in 2004 and those actually incurred in the closure of the positions were calculated as being the difference between the guaranteed capital (capital and interest) and the market value of the assets in the customers' portfolio. Finally, it is confirmed that the total expenses payable by the Bank were determined on the basis of the documentation presented to the Bank by the customers themselves and that the amount set aside in the re- approved 2004 financial statements was determined on the basis of precautionary estimates. For greater clarification, considering the limitations expressed by the independent auditors in their report on the re- approved 2004 financial statements, issued on January 11, 2006, it is regarded that the amount set aside in the financial statements represents the best possible prudential estimate of the economic effects on the 2004 financial year based on the limited facts and documents available to the Bank. A summary is given below of the guaranteed positions.

Table 1

Amounts as at Amounts on the Amounts as at 31-12-2004 closure date 31-12-2005 Number of guaranteed positions 4 5 Initial capital 59,340,000.00 69,889,846.00 Interest (*) 1,819,386.65 3,463,746.00 Guaranteed capital 60,280,732.65 73,058,039.00 Value of assets 46,965,887.14 34,568,087.36 Expenses charged to income 13,314,845.51 25,175,106.13 (*) the interest in question is that stated in the guarantee letters, which accrues fully after the dates taken as reference.

82 Point b) STRUCTURED SECURITIES AND DERIVATIVES IN THE PROPRIETARY PORTFOLIO In relation to the complex structured securities and derivatives in the proprietary portfolio, for the purposes of drawing up the re-approved financial statements for the year ended December 31, 2004, based on the accounting policies used for the aforementioned financial instruments, besides the details of stock, movements and economic impacts described in the attached statements, it is specified that: - for structured securities, the valuation price of the securities in question was recalculated through the "backwards" adoption of the "re-calibrated" internal model, previously applied for the valuations as at September 30, 2005, and whose technical characteristics are specified at the foot of table 5. This choice was made for the purposes of achieving a consistent comparison of the positions and exchange value of the portfolio, and to quantify, with more accuracy, the "pluses/minuses" and "profits/losses" in terms of the Bank's transactions; - for complex derivatives, the refined internal model finally adopted in the final quarter of 2005 was coherently applied, again "backwards", based on the most advanced mathematical/statistical calculation techniques described in the specific appendix and in line with the most recent market applications. With regard to the valuations in the financial statements for the year ended December 31, 2005, it is pointed out that: - for structured securities, for prudential reasons these were valued by applying the prices directly supplied by the external counterparties, with acquisition of the principles and/or their models. This model seems adequate and consistent with the management policy of "unwinding" the main positions; - for complex interest rate derivatives, internal models were applied, again as at December 31, 2005, and compared with the direct prices given by the external counterparties, following a prudential approach, having observed the significant implied risk, the associated volatilities, the differing degree of liquidity and disposal, the technical complexities owing to the presence in some of multiple leverages, the high notional amount, the rates market phase, etc. It was also proven that the new internal models adopted were consistent with the market prices, with marginal differences in mark-to-market, always following a management approach that seeks to reduce and progressively "dismantle" the bulk of the transactions in effect. As at February 20, 2006, the notional values of the complex derivatives in the portfolio amounted to €380 million compared with €875 million as at December 31 ,2005.

Table 2 BREAKDOWN OF INVESTMENT PORTFOLIO as at December 31, 2004 and December 31, 2005

(amounts in Euro/000) 31/12/2004 31/12 /2005 Category Book value % Book value % Bonds 56.28% 46.26% Floating-rate / swapped gov. bonds 1,005,377.44 18.47% 1,114,524.97 22.00% Fixed-rate gov. bonds 565,418.56 10.39% 219,974.82 4.34% Securitisations 128,684.12 2.36% 237,849.86 4.69% Fixed-rate corp. 78,571.41 1.44% 28,185.99 0.56% Floating-rate / swapped corp. 768,062.53 14.11% 191,642.83 3.78% Structured securities 474,985.65 8.73% 358,860.06 7.08% Conv. Bonds/Equity Linked 42,291.23 0.78% 192,746.83 3.80% Funds and Equities 28.26% 26.31% Hedge Funds 526,956.11 9.68% 481,978.87 9.51% Shares/Equity funds 997,834.65 18.33% 847,943.28 16.74% Money Market / Property Funds 13,715.24 0.25% 3,001.00 0.06% BPI/Group bonds 15.46% 27.43% Own loans 92,602.30 1.70% 609,230.47 12.02% Group securities 749,016.76 13.76% 780,520.73 15.41% Total 5,443,516.00 100% 5,066,459.71 100%

NB: the 2005 figures are stated according to a non-IAS compliant classification in order to standardise them with the 2004 figures.

83 Table 3 BREAKDOWN OF STRUCTURED SECURITIES as at December 31, 2004 and December 31, 2005

Position as at 31/12/2004 Nominal value Valuation P&L (*) 1) 6913120 Dresdner Bk TV 11/15 351,000,000 98.09774 -6,892,000 k+1631 Coupon swap 151,000,000 100.00000 6913000 B.P.Italiana 11/15 Total -6,892,000 2) 6888930 Europ Stru. Tv 1/2/12 95,500,000 96.27772 -9,361,177 (**) 6888790 Angus 27/10/2016 s.188 241,000,000 84.68610 -36,906,499

K+ 3750 IRS 16/5/2020

K+ 24 CDO option 6984180 B.Intesa 19/5/2035 CMS 6984190 B.Intesa 1/9/2035 CMS Total -46,267,676 3) 6888780 Angus 27/10/2016 s.189 78,000,000 26.86121 -17,658,260 6951680 SIGNUM 30/6/2014 50,000,000 79.38103 -10,309,484 6951490 Varo 20/5/2014 EUR 50,000,000 68.90416 -15,547,919 6984710 Varo 28/9/2015 USD 6950090 Corsair 30/6/2014 EUR 50,000,000 72.08266 -13,958,668 6984720 Corsair 29/8/2015 USD 6954110 Blue Square 70,000,000 81.51429 -14,140,000 Total -71,614,331 4) 6965090 Matwick Fund 100,000,000 93.72700 -7,381,000 6927990 APHEX SA TV 15.02.09

6995430 ROYAL BK S ZC 15/4/13 6919910 APHEX SA TV 26.09.05

6922050 APHEX SA TV 28.02.09

6958400 BEAR ST GL 4.550 Total -7,381,000 5) 6920360 Dexia 1/8/2018 Infl. Link 50,000,000 86.46672 -6,766,638 k+3532 IRS 15/4/2015

Total -6,766,638 6) k+ 29 SIGNUM TRS 31/12/2014 100,000,000 90.00000 -10,000,000 Total -10,000,000 7) 6901540 EIRLESS FOUR 11/07 s.12 (***) k+2959 Complex derivative 25/8/19 34,375,000 81.95550 -3,624,673 Total -3,624,673 8) 6909250 EIRLESS FOUR 3/13 s.18 (****) k+2953 Complex derivative 7/9/19 50,000,000 82.21756 -9,158,405 Total -9,158,405

9) Transactions performed / to be performed in 2006: a special reserve has been set up to cover losses Alexandria 2004 s.2 and s.3 Destructuring of CAFE securities 9 ABS securities 3395100 BPL Consumer

3181110 Du.Ca. SPV TV 10/11

Total (*) The P&L are those revised during the re-approval of the 2004 financial statements. (**) The valuation was not recorded in the Income Statement because the security was fixed. It was however recognised in Shareholders Equity as at January 1, 2005 in the first-time adoption of IAS/IFRS (***) Security sold for €34,375 thousand with value date November 22, 2004 at 99.94 (****) Security sold for nominal €50 million with value date September 7, 2004 at 100.00.

84 Table 3 BREAKDOWN OF STRUCTURED SECURITIES as at December 31, 2004 and December 31, 2005

Purchases/sales made in 2005 Position as at 31/12/2005 Value date Nominal value Px P/S P&L Nominal value Valuation P&L

Dec 30 2005 -351,000,000 100.00000 6,892,000 Dec 28 2005 -151,000,000 82.11921 -27,000,000 Dec 30 2005 200,000,000 100.00000 200,000,000 100.00000 -20,108,000

May 18 2005 -95,500,000 100.00000 3,554,777 May 20 2005 -146,500,000 100.00000 22,434,864 May 25 2005 -94,500,000 99.72860 14,215,163 May 16 2005 55,000,000 100.00000 Nov 16 2005 -55,000,000 78.42727 -11,865,000 Aug 11 2005 8,855,290 10.84098 -960,000 100,000,000 100.00000 100,000,000 77.10000 -22,900,000 85,000,000 100.00000 85,000,000 77.10000 -19,465,000 27,379,803 -42,365,000

Apr 2005 -78,000,000 49.49968 17,658,010 Nov 30 2005 Unwind credit risk -15,900,000 50,000,000 96.31108 8,465,024 Jun 30 2005 -50,000,000 100.00000 15,547,919 May 11 2005 64,404,000 100.00000 64,404,000 63.46000 -19,860,935 Oct 13 2005 -50,000,000 100.00000 13,958,668 May 11 2005 64,404,000 100.00000 64,404,000 66.48000 -18,219,445 70,000,000 85.89972 3,069,804 31,264,597 -26,545,552

Sep 6 2005 -100,000,000 102.94337 9,216,367 Sep 5 2005 10,562,500 100.00000 Oct 7 2005 -10,562,500 98.00000 -211,250 Sep 5 2005 14,000,000 100.00000 14,000,000 87.94200 -1,688,120 Sep 5 2005 10,880,000 102.95254 Sep 26 2005 -10,880,000 100.00000 -321,236 Sep 5 2005 33,150,000 100.00000 Oct 7 2005 -33,150,000 98.00000 -663,000 Sep 5 2005 16,000,000 100.00000 16,000,000 89.98716 -1,602,054 8,020,881 -3,290,174

Jan 10 2005 -50,000,000 100.00000 6,766,638 Apr 15 2005 50,000,000 100.00000 Dec 23 2005 -50,000,000 71.10000 -14,450,000 -7,683,362

Nov 30 2005 Unwind credit risk -16,700,000 100,000,000 94.02197 -5,978,027 -16,700,000 -5,978,027

Nov 10 2005 -34,375,000 80.68506 -436,711 -436,711

50,000,000 81.09226 -562,649 -562,649

21,737,208 Total loss -78,741,402

Jan 26 2006 175,500,000 Jan 24 2006 52,717,270 -1,553,252 Jan 26 2006 3,000,000 428.00000 -9,840,000 -3,000,000 100.00000 Jan 26 2006 5,817,619 237.00000 -7,970,138 -5,817,619 100.00000 -19,363,390

85 Brief explanatory notes 1) The bond Dresdner Bank TV 11/15 (cod. 6913120), present in the portfolio since 2003 in a nominal amount of €351 million, was valued, during the re-approval of the 2004 financial statements, at 98.09774%. The depreciation was due to the downgrading of BPI's credit rating, to which the bond was index-linked. By the end of 2005, at the same time as the bond was sold, the mezzanine tranche of the Tiepolo 2 securitisation (cod. 9468120) was bought back for a nominal €151 million, and the BPI TV 11/15 issue (cod. 691300) was bought back for a nominal €200 million, indexed to the performance of the aforementioned Tiepolo 2 tranche. Finally, the coupon swap operation was unwound for a nominal €151 million. The total cost of the destructuring operation was €27 million. In the re-approved 2004 financial statements, it is also pointed out that a provision for contingencies and charges totalling €14 million had been set aside to cover the expenses relating to the future costs of closing the transaction in question.

2) The bond Angus 27/10/16 s. 188 (cod. 6888790), present in the portfolio since 2002 in a nominal amount of €241 million, was valued, in the re-approved 2004 financial statements, at 84.6861%. The depreciation was due to the credit events that had affected ENRON, MARCONI, XEROX and GETRONIC in the meantime. The bond prepaid the amount of €146.5 million with value date May 20, 2005, while the residual nominal value of €94.5 million, was sold at the price of 99.7286% with value date May 25, 2005.

3) The bond Angus 27/10/2016 s.189 (cod. 6888790), present in the portfolio since 2002 in a nominal amount of €260 million, had a book value of 49.50%. The redemption price could have been 49.50% if a default event had affected any of the securities that made up the MIB 30 index during the lifespan of the security, or 100.00% in the absence of such events. In December 2003, with the bankruptcy of Parmalat, the first hypothesis arose. The security was sold in several tranches: in 2004 for a part in the nominal amount of €182 million at the price of 46.13%, and in 2005 the remaining part in the nominal amount of €78 million at the average price of 49.5%. It is pointed out that the bond had been written down as at December 31, 2004, in the re-approved financial statements, at 26.86121%. The Angus bonds indicated in points 2) and 3) were written down, in the re-approved 2004 financial statements, by €36.9 million and €17.7 million respectively, thus a total writedown of €54.6 million.

4) The Matwick Fund (cod. 6965090) has been present in the portfolio since November 2004 with a value of €100 million. In the re-approved 2004 financial statements, it was valued at 93.727%. The depreciation was due to a "backwards" valuation of the assets that made up the fund. In 2005, the fund was fully redeemed against delivery of the cash and securities that the fund owned (Aphex 15/2/2009, 26/9/2005, 28/2/2009, Royal Bank of Scotland 15/4/2013, Bear Stearn 15/4/2013).

5) The bond Dexia 1/8/2018 Infl.Link (cod. 6920360), present in the portfolio since 2003 in a nominal amount of €50 million, was valued, in the re-approved 2004 financial statements, at 86.46672%. The depreciation was due to the worsening of the inflation-linked embedded credit derivative. At the start of 2005, the bond was sold at 100.00% while the associated interest rate swap was sold in December 2005, resulting in a loss of around €14.45 million.

6) The Total Return Swap Signum 31/12/2014 was subscribed in the final days of 2004 for a reference value of €100 million. In the re-approved 2004 financial statements, it was valued at 90.00%. This depreciation was due to the upfront fee received and previously accounted for in 2004.

7) The bond Eirless Four 11/07 s.12 (cod. 6901540), present in the portfolio since 2002 for a nominal €34.4 million, was sold in November 2004 at 99.94%. In the re-approved 2004 financial statements, the associated complex derivative with maturity 25/8/2019 was valued at 81.955%. The depreciation was due to the worsening of the market conditions for the relevant rates.

8) The bond Eirless Four 3/13 s.18 (cod. 6909250), present in the portfolio since 2003 for a nominal €50 million, was sold in September 2004 at 100.00%. In the re-approved 2004 financial statements, the associated complex derivative with maturity 7/9/2019 was valued at 81.955%. The depreciation was due to the worsening of the market conditions for the relevant rates.

86 9) In January 2006, the Special Purpose Vehicle Alexandria 2004 series 2 and 3 bonds totalling €175 million were sold from the Conduit CAFÉ portfolio, at the price of 100%. In January 2006, the Bank bought back from Alexandria the equity tranches of the BPL Consumer securitisation at 428% and the DuCa securitisation at 237%. As part of the same operation, nine bonds (ABS) were sold from the Conduit CAFE portfolio for a total nominal amount of €52.7 million, recording a loss of around €1.5 million.

DETAILS OF DERIVATIVES TRANSACTIONS In relation to the 2004 and 2005 financial statements, the Directors' assessments were based on the assessment made by the relevant departments, based on a policy of prudent management of critical issues, as summarised in the tables attached.

Table 4 Complex Derivatives MTM as at December 31, MTM as at December 31, Ref. Nominal values 2004 2005 K+2959 34,375,000 (6,202,798) - K+2943 100,000,000 2,998,872 196,523 K+2953 50,000,000 (8,891,219) (10,264,228) K+2517 25,000,000 98,226 (857,501) K+2432 25,000,000 (570,256) (1,487,779) K+2687 20,000,000 (548,180) (1,400,168) K+3115 30,000,000 (350,000) (1,395,549) K+2763 100,000,000 (5,361,381) (6,385,814) K+3668 50,000,000 (12,889,719) K+3669 50,000,000 (13,279,775) K+3740 50,000,000 (5,011,255) K+3741 25,000,000 (2,505,628) K+3748 50,000,000 (1,556,955) K+3799 50,000,000 (33,349,249) K+3866 25,000,000 (1,227,800) K+3369 10,000,000 655,381 K+3383 50,000,000 494,720 K+3501 50,000,000 (1,340,955) K+3499 15,000,000 514,028 K+3657 100,000,000 471,038 (18,826,736) (90,620,685)

The table shows the marks-to-market. These values represent an estimate of the necessary costs to be incurred in order to close each contract. Therefore, they do not include the cash flows that emerged prior to the valuation date (e.g. up front, cash flows collected). The disposals and restructurings involving the derivatives in effect as at December 31, 2004 relate exclusively to K+2959, closed early on November 10, 2005, with a closing cost of €7,184,000 gross of positive cash flows of €544,490, and loss charged to income of €436,711. In the first two months of 2006, the unwinding took place of the following derivatives still in effect as at December 31, 2005:

87 Table 5

Ref. Nominal values Impact on income statement K+3501 50,000,000 (681,732) K+2763 100,000,000 1,211,813 K+3741 25,000,000 98,929 K+3866 25,000,000 (679,759) K+2687 20,000,000 490,168 K+3740 50,000,000 347,858 K+3668 50,000,000 579,302 K+3669 50,000,000 622,275 K+2432 25,000,000 492,778 K+3799 50,000,000 3,340,000 K+2953 50,000,000 914,228 495,000,000 6,735,860

The positive result shown above reflects the trend in market curves and the financial management of the latter, which resulted in writebacks in relation to the valuations made as at December 31, 2005. Given the organisational model in force as at December 31, 2005, for exotic hedging and brokerage derivatives, use was made of the valuations supplied by the counterparties after verification of an internal valuation range (Black Scholes closed-form formulas). Such derivatives, given their matching nature, expose the Bank to the counterparty risk alone. As for complex derivatives, these were valued using pricing models developed internally. For these, spread option formulas were used on the basis of the following references: Kirk (1995), Boyle (1988), Wilcox (1991), Bjerksund and Stensland (1994), Rubinstein (1994), Shimko (1994) and Pearson (1995). The convexity adjustment was made on the basis of Hull and P. Hagan "CMS Convexity Correction". Loglinear extrapolation was used for rates with maturities greater than the swap rates supplied by market information providers. The volatilities used for swaptions are those available on Bloomberg for At-The-Money swaptions. The sum of the results of the various models applied in the valuations were "levelled" down to the most precautionary, while remaining substantially in line with the sum of the valuations supplied by the counterparties with whom the contracts had been concluded. The difference between these two sums is considered largely irrelevant given the particular complexity of such contracts, the relevant notionals and the presence, at times, of leverages, memory effects and implied correlations. Finally, despite considering the limitations expressed by the independent auditors in their report on the re- approved 2004 financial statements, issued on January 11, 2006, with regard solely to the valuation of certain repurchase commitments and other acquisitions of financial assets under non-market conditions, the valuation of the financial assets in the portfolio made for the purposes of the re-approved 2004 financial statements is nevertheless considered prudential and correct, based on some securities correlations, even if at times connected in terms of purposes only.

Point c) BARRIER AND LEVERAGE CURRENCY OPTIONS With regard to complex barrier and leverage currency options, as described in the re-approved 2004 financial statements and in the 2005 financial statements, for which the Bank used valuations based exclusively on reports supplied by external counterparties, it is specified that: - - as at December 31, 2004, there were 10 "exotic" barrier and leverage options, which appear to have a predominantly directional "speculative trading" nature (writing of options only), which were principally seeking a revaluation of the US dollar against the Swiss franc and the Japanese yen. Only at the end of 2004 were two options implemented based on the expectations of a rise in the euro against the US dollar; - - the correct market value of such currency options, as at December 31, 2004, for the purposes of the re-approved financial statements, was determined and restored with the external counterparties at the specific request of the Bank, as there were no adequate systemic models to value currency options of such significant complexity and to be "repriced backwards"; - - the Directors took precautionary account of the Bank's operational limitations in its capacity to assess and manage these risks associated with the complex type of "exotic" currency derivatives, which had very long maturities in some cases. Management therefore took steps to close, reduce and destructure this currency trading derivatives portfolio particularly in the final quarter of 2005;

88 - - in the financial statements for the year ended December 31, 2005, there remains only one complex barrier and leverage currency derivative, valued on a prudential basis and with methodological continuity, with a price report supplied by external counterparties upon specific request. Finally, it is pointed out that: - during the 1st quarter of 2006, and for the future, the Bank implemented a system, developed in-house using the "Montecarlo" simulation, which is able to price and value more complex currency options, tested with a good degree of consistency and reliability for contracts with a reasonable duration on the currency market; - for longer maturities and maturities over 18 months, because any theoretical valuation may different from the actual selling and unwinding prices, in view of the significant quantities of variables, the implied correlations, and the relevant time series, in the future, it will be preferred, for precautionary reasons, to have such transactions priced directly by the counterparties, thereby making it possible to check the consistency of the valuation models adopted and system and market updating. - in consideration of the limitations expressed by the independent auditors in their report on the re- approved 2004 financial statements, issued on January 11, 2006, it is pointed out that in "repricing backwards" these complex exotic barrier and leverage currency options, it was necessary to rely on the valuations supplied by the contractual counterparties at the Bank's request, as the latter, at the time of revising the 2004 financial statements, was not able to reconstruct a reliable calculation and valuation model for these instruments.

Table 6 CURRENCY OPTION POSITIONS AS AT 31/12/2004

MTM date P/S currency nominal ko ki type strike maturity premium 31/12/04 14/5/2004 s usdchf 60,000,000 1.299 1.05 L2 usdput/chfcall 1.26 20/1/2010 3,600,000 (13,943,776)

15/9/2004 s usdjpy 24,513,809 113.25 85 L1 75 L2 usdput/jpycall 105 15/9/2014 550,620 (3,584,221)

22/9/2004 s usdchf 24,301,337 1.335 1.05 L1 -0.95 L2 usdput/chfcall 1.2 22/9/2014 495,558 (3,350,138)

10/01/2004 s usdchf 30,000,000 1.28 1.20 L1-1.10 L2-1.00 L3 usdput/chfcall 1.28 11/01/2007 1,080,000 (5,741,384)

10/05/2004 s usdchf 30,000,000 1.275 1.20 L1-1.10 L2-1.00 L3 usdput/chfcall 1.28 11/01/2007 575,000 (5,678,684)

19/10/2004 s usdchf 30,000,000 1.25 1.20 L1-1.10 L2-1.00 L3 usdput/chfcall 1.28 11/01/2007 550,000 (5,229,051)

18/10/2004 s usdjpy 15,885,624 111 90 L1 - 80 L2 usdput/jpycall 105 20/10/2014 367,080 (2,077,879)

25/11/2004 s eurusd 50,000,000 eurput/usdcall 1.28 24/2/2005 42,229 (45,640)

19/10/2004 s usdchf 30,000,000 1.228 1.20 L1-1.05 L2 usdput/chfcall 1.26 11/03/2008 955,000 (4,797,136)

total 8,257,716 (44,493,549)

89 CURRENCY OPTION POSITIONS AS AT 31/12/2005

currenc MTM date P/S nominal ko ki type strike maturity premium y 31/12/04 1.15 L1-1.10 L2 -1.05 L3 07/05/2005 s usdchf 200,000,000 1.299 (*) usdput/chfcall 1.305 06/09/2014 --- (14,156,853) - 0.95 L4 from 9/6/2013 to 9/6/2014

(*) from 18/4/2006 total --- (14,156,853)

LEGEND KO = KNOCK-OUT KI = KNOCK-IN L 1,2,3,4 = LEVERAGE 1,2,3,4

Point d) THE RISK MANAGEMENT AND CONTROL SYSTEM With regard to the risk management and control system, refer to the details given in the report on operations in the chapter "The risk management and control system".

Point e) REORGANISATION OF THE FINANCE DIVISION With regard to the reorganisation of the Finance Division, refer to the details given in the report on operations in the chapter "The risk management and control system".

CONSOLIDATED BALANCE SHEET

Assets 31/12/2005 31/12/2004

10 Cash on hand and deposits with central bank and post offices 237,423 243,260 20 Financial assets held for trading 4,068,043 6,186,288 30 Financial assets at fair value 716,378 40 Available-for-sale financial assets 1,095,710 37,143 50 Held-to-maturity financial assets 84,630 327,090 60 Due from banks 4,457,197 3,501,322 70 Customer loans 27,968,762 25,489,972 80 Hedge derivatives 185,988 90 Adjustments to the value of financial assets under macro hedging 100 Shareholdings 487,644 1,176,165 110 Reinsurers' share of technical reserves 120 Property, plant and equipment 932,065 952,191 130 Intangible assets 2,057,370 1,914,080 of which: - Goodwill 2,010,018 1,843,205 140 Tax assets 1,305,546 872,394 a) current 243,161 170,519 b) prepaid 1,062,385 701,875 150 Non-current assets and discontinued operations 1,401,931 255,266 160 Other assets 2,323,828 3,025,900 Total assets 47,322,515 43,981,071

Liabilities and shareholders' equity 31/12/2005 31/12/2004

10 Due to banks 4,791,619 5,182,743 20 Due to customers 14,356,069 14,602,929 30 Securities in issue 20,281,134 16,930,728 40 Financial liabilities held for trading 713,354 1,184 50 Financial liabilities at fair value 316,281 274,622 60 Hedge derivatives 195,621 70 Adjustments to the value of financial liabilities under macro hedging 80 Tax liabilities 299,481 202,180 a) current 159,518 100,150 b) deferred 139,963 102,030 90 Liabilities associated with discontinued operations 613,509 109,599 100 Other liabilities 1,752,879 2,864,268 110 Employee severance payment fund 164,778 153,727 120 Provisions for contingencies and charges 504,596 314,855 a) pension fund 139,885 127,312 b) other provisions 364,711 187,543 130 Technical reserves 85,219 75,137 140 Valuation reserves 50,705 18,265 150 Redeemable shares 160 Capital instruments 3,048 170 Reserves (375,825) (112,184) 180 Issue premiums 2,487,324 1,532,100 190 Share capital 1,456,498 885,127 200 Own shares (-) (91,546) (80,653) 210 Minority interests (+/-) 461,664 1,040,965 220 Profit (loss) for the year (743,893) (14,521) Total liabilities and shareholders' equity 47,322,515 43,981,071

92 CONSOLIDATED INCOME STATEMENT

Items 31/12/2005 31/12/2004

10 Interest income and similar revenue 1,777,679 1,664,429 20 Interest expense and similar charges (1,016,846) (823,556) 30 Net interest income 760,833 840,873 40 Commission income 580,867 648,635 50 Commission expense (281,495) (207,335) 60 Net commissions 299,372 441,300 70 Dividends and similar income 62,026 105,337 80 Net income from trading activities (47,687) (155,375) 90 Net income from hedging activities 47,356 100 Profit (loss) from the sale or repurchase of: a) loans b) available-for-sale financial assets 47,938 c) held-to-maturity financial assets 150 d) financial liabilities 110 Net income from financial assets and liabilities designated at fair value 93,053 120 Total income 1,262,891 1,232,285 130 Net adjustments for impairment of: a) loans (752,998) (231,717) b) available-for-sale financial assets (226,217) (43,002) c) held-to-maturity financial assets (34,444) d) other financial transactions (2,779) 33,179 140 Net income from financial operations 280,897 956,301 150 Net premiums 6,254 160 Balance of other income/expenses from insurance operations 5,421 170 Net income from financial and insurance operations 292,572 956,301 180 Administrative expenses: a) personnel expenses (543,918) (556,768) b) other administrative expenses (460,286) (443,811) 190 Net provisions for contingencies and charges (261,406) (118,122) 200 Net adjustments to property, plant and equipment (59,614) (42,736) 210 Net adjustments to intangible assets (25,028) (36,685) 220 Other operating income/expenses 223,088 339,022 230 Operating costs (1,127,164) (859,100) 240 Gains (losses) from investments (6,021) 46,570 Net income from the fair value measurement of property, plant and equipment 250 and intangible assets 260 Net adjustments to goodwill (42,035) (18,306) 270 Profit (loss) from sale of investments 824 (1,939) 280 Profit (loss) from continuing operations before tax (881,824) 123,526 290 Income taxes on continuing operations 165,208 (50,871) 300 Profit (loss) from continuing operations after tax (716,616) 72,655 310 Profit (loss) from discontinued operations after tax 16,737 320 Profit (loss) for the year (699,879) 72,655 330 Period profit (loss) of minority interests (44,014) (87,176) 340 Period profit (loss) of parent bank (743,893) (14,521)

93 STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS' EQUITY December 31, 2005

Shareholders' Change in Shareholders' Allocation of period income Change in Equity restated opening Equity restated Dividends and reserves at 31/12/2004 (*) balance at 01/01/2005 Reserves other distrib.

Share capital a) ordinary shares 885,127 885,127 b) other

Issue premiums 1,532,100 1,532,100 160

Reserves a) legal 52,899 52,899 17,169 b) statutory 1,155 1,155 268 c) other reserves (166,238) (196,633) (362,871) (31,690) (85,800) 30,574

Capital instruments 3,048 3,048

Valuation reserves: a) available-for-sale 2,653 2,653 29,787 financial assets b) cash flow hedge c) other 18,265 18,265

Own shares (80,653) (80,653)

Period income (14,521) (14,521) 14,521

Total Parent Bank 2,228,134 (190,932) 2,037,202 (85,800) 60,789 Minority interests 1,040,965 (562,421) 478,544 (60,894) Total 3,269,099 (753,353) 2,515,746 (85,800) 2,366 (*) Resulting from the application of IAS standards (excluding IAS 32 and 39)

December 31, 2004

Change in Shareholders' Allocation of period income Balance at Change in opening Equity restated 31/12/2003 (*) Dividends and reserves balance at 01/01/2004 Reserves other distrib.

Share capital a) ordinary shares 862,228 862,228 b) other

Issue premiums 1,557,521 (25,381) 1,532,140 (40)

Reserves: a) legal 46,115 46,115 6,784 b) statutory 1,135 1,135 20 c) other reserves 201,119 (208,306) (7,187) (25,953) (133,098)

Capital instruments

Valuation reserves: a) available-for-sale financial assets b) cash flow hedge c) other 63,817 (45,552) 18,265

Own shares (689) (80,653) (81,342)

Period income 42,384 42,384 19,169 (61,553)

Total Parent Bank 2,773,630 (359,892) 2,413,738 (61,553) (133,118) Minority interests 1,133,934 (321,254) 812,680 141,109 Total 3,907,564 (681,146) 3,226,418 (61,553) 7,991 (*) Resulting from the application of national accounting standards (Legislative Decree no. 87/92)

94 STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS' EQUITY December 31, 2005

Shareholders' equity transactions performed in the period Shareholders' Issue of Purchase of Distribution ofChange in Derivatives on Stock Profit as at Equity new own extraordinarycapital own shares Options 31/12/2005 restated at shares shares dividends structure 31/12/2005

571,371 1,456,498

955,064 2,487,324

70,068 1,423 2,471 (447,316)

3,048

32,440

18,265

(10,893) (91,546)

(743,893) (743,893)

1,526,435 (10,893) 2,471 (743,893) 2,786,311 44,014 461,664 1,526,435 (10,893) - (699,879) 3,247,975 (*) Resulting from the application of IAS standards (excluding IAS 32 and 39)

December 31, 2004

Shareholders' equity transactions performed in the period Shareholders' Issue of Purchase of Distribution of Change in Derivatives on Stock Profit as at Equity capital new own extraordinary own shares Options 31/12/2004 restated at structure shares shares dividends 31/12/2004

22,899 885,127

1,532,100

52,899 1,155 (166,238)

18,265

689 (80,653)

(14,521) (14,521)

22,899 689 (14,521) 2,228,134 87,176 1,040,965 22,899 689 72,655 3,269,099

95 CONSOLIDATED CASH FLOW STATEMENT Direct method

31.12.2005 31.12.2004 A. OPERATING ACTIVITIES 1. Operating activities 625,360 479,251 interest income collected 1,777,679 1,664,429 interest expense paid 1,016,846 823,556 dividends and similar income 62,026 105,337 net commissions 299,372 441,300 personnel expenses 543,918 556,768 net premiums collected 6,254 other insurance income/expenses -5,421 other costs 456,693 530,837 other revenues 310,120 230,217 taxes -165,208 50,871 costs/revenues relating to discontinued operations, net of the tax effect 16,737 2. Cash generated/absorbed by financial assets -4,951,104 -391,648 financial assets held for trading -464,328 financial assets at fair value 1,401,867 available-for-sale financial assets -1,287,563 -46,966 customer loans -3,231,788 924,916 due from banks -955,875 -647,714 other assets -877,745 -157,556 3. Cash generated/absorbed by financial liabilities 2,394,517 -164,119 due to banks -391,124 619,409 due to customers -246,860 -10,460 securities in issue 3,546,027 -1,249,701 financial liabilities held for trading 712,170 529 financial liabilities at fair value 41,659 274,622 other liabilities -1,267,355 201,482 Net cash generated/absorbed by operating activities -1,931,227 -76,516 B. INVESTING ACTIVITIES 1. Cash generated by: 744,993 177,173 sales of shareholdings 688,521 65,198 dividends collected on shareholdings sales/redemptions of held-to-maturity financial assets 56,472 111,975 sales of property, plant and equipment sales of intangible assets sales of subsidiaries and business branches 2. Cash absorbed by: -249,017 -69,232 purchases of shareholdings purchases of held-to-maturity financial assets purchases of property, plant and equipment 38,664 21,193 purchases of intangible assets 210,353 48,039 purchases of subsidiaries and business divisions Net cash generated/absorbed by investing activities 495,976 107,941 C. FINANCING ACTIVITIES issue/purchases of own shares 1,515,702 23,548 issue/purchases of capital instruments dividends and other distributions -86,288 -61,553 Net cash generated/absorbed by financing activities 1,429,414 -38,005 NET CASH GENERATED/ABSORBED IN THE PERIOD -5,837 -6,580

Reconciliation

31.12.2005 31.12.2004 Balance sheet items amount amount Cash on hand and deposits with central bank and post offices at the start of the year 243,260 249,840 Total net cash generated/absorbed in the year -5,837 -6,580 Cash on hand and deposits with central bank and post offices: effect of exchange rate changes Cash on hand and deposits with central bank and post offices at the end of the year 237,423 243,260

96 CONSOLIDATED NOTES Part A - ACCOUNTING POLICIES A.1 - GENERAL PART Section 1 - Statement of conformity with international accounting standards The consolidated financial statements for the year ended December 31, 2005 have been prepared in accordance with International Financial Reporting Standards (IFRS) and International Accounting Standards (IAS) issued by the International Accounting Standards Board (IASB) and the relative interpretations of the International Financial Reporting Interpretations Committee (IFRIC), as endorsed by the European Commission, as specified in Regulation (EC) no. 1606 of 19 July 2002, requiring all companies in the European Union that are listed on regulated markets to prepare consolidated financial statements in accordance with IAS/IFRS from 2005. The Italian Government, through Legislative Decree no. 38 of February 28, 2005, has incorporated the new accounting standards. This Decree also extends the scope of application of IAS/IFRS to the individual financial statements - optionally for 2005 and compulsorily for 2006 - of listed companies, banks and other supervised financial institutions and to the consolidated financial statements of banks and supervised financial institutions and insurance companies that are not listed. The option has also been given to apply the new standards to all companies that are required to prepare consolidated financial statements and to the companies controlled by the latter, by listed companies, by banks and supervised institutions. The legislation also considers the harmonisation of civil code and tax provisions. Civil code provisions have therefore been introduced with regard to the distribution of profits and reserves as well as tax provisions that keep in place the mechanisms for determining the tax base, based on the principle of derivation from the income statement, whilst safeguarding, as far as possible, the neutrality of taxation in relation to the various criteria for preparing the financial statements. These provisions therefore allow companies to use uniform accounting standards for the purposes of both consolidated and individual financial statements. With regard to the financial statements of banks and supervised financial institutions, the decree confirms Banca d'Italia's powers already set out in Legislative Decree no. 87/92 regarding the definition of accounting schedules and content of the notes. As a result of this measure, Banca d'Italia issued Circular no. 262 of December 22, 2005 containing the new layouts for financial statements and notes. For the purposes of preparing these financial statements, the right set out in Art. 4, subsection 2 of the above decree was exercised, applying the IAS/IFRS standards in force on December 31, 2005. The statements present not only the amounts relating to the year in question but also the corresponding comparative figures for the year ended December 31, 2004. In these statements, figures for the previous period are not given in relation to financial instruments (IAS 32 and 39, IFRS 4) and these therefore conform to the recognition and measurement procedures established according to the previous national accounting policies. Furthermore, these have been restated from the version presented to the Parent Bank's Board of Directors on October 27, 2005 to include the effects of the changes made to the 2004 financial statements, approved by the Shareholders' Meeting on January 28, 2006, and of the resulting adjustments, arising from the application of international accounting standards, pertaining to the year. In accordance with Art. 5 of Legislative Decree no. 38 of February 28, 2005 and IAS 1/46, the financial statements are prepared with the euro used as the currency of account. The amounts in the financial statements, where not specified otherwise, are stated in thousands of euro. The notes do not include tables that have zero balances both for the year to which the financial statements relate and for the previous year.

Section 2 - General basis of preparation The consolidated financial statements are prepared on a going concern basis, according to the accrual basis of accounting, in observance of the principle of relevance and significance of information, consistent with the application of substance over form and with a view to promoting consistency with future presentations. Each material class of similar items is presented separately in the financial statements. Items of a dissimilar nature or function are presented separately unless they are immaterial. Offsetting of assets with liabilities or income with expenses is prohibited unless it is explicitly permitted or required by a standard or by an interpretation. The introduction of IAS/IFRS has repercussions on how transactions are recorded, on the classification of the main items in the financial statements and on the accounting policies for assets and liabilities. IAS/IFRS standards introduce a number of significant changes to the criteria for the recognition of assets and liabilities, which are substantially attributable to the application of the general principle of economic substance over legal form. The international standards allow an item to be recognised or derecognised only where there is an actual transfer of the risks and rewards associated with the asset to be bought or sold. Unlike national standards, under which the transfer of legal ownership is a sufficient condition for the derecognition of the

97 asset to be bought or sold, IAS/IFRS standards require the substantial transfer of the risks and rewards associated with the asset, which is expressed in terms of the right to receive the cash flows relating to the transferred asset. Therefore, assets relating to transactions that do not meet the criteria laid down for derecognition must continue to be recognised in the seller's financial statements. The application of these rules is particularly important in the recording of loan securitisations, sales of investments and finance lease transactions, for which it is necessary to assess carefully whether there is a substantial transfer of the risks and rewards underlying the transferred assets. Other changes concern the initial recognition of financial instruments. The value at which a financial asset or liability is initially recognised must normally be determined on the basis of its fair value plus or minus the costs or income directly associated with the transaction, which being capitalised, flow to the income statement throughout the duration of the transaction on the basis of the effective rate of return (the "amortised cost" which involves the progressive amortisation of the difference between the initial stated value and the nominal value of an asset or liability on the basis of the effective rate of return). If the price paid in a transaction does not match the market value, during initial recognition, the difference between the two values must be charged to the income statement. With regard to combined financial instruments, i.e. those made up of a host contract and of an embedded derivative, the new standards require the latter to be recognised separately from the contract, if the contract as a whole is not measured at fair value or if the economic characteristics and risks of the embedded derivative are not strictly connected to those of the host contract. As regards the classification of assets/liabilities, the changes affecting financial instruments are particularly important. IAS/IFRS standards stipulate that receivables, payables, securities and derivatives must no longer be accounted for according to their nature but on the basis of the purpose for which these instruments are held by the company. Financial instruments must be classified at the time that they are first disclosed in the financial statements and can only subsequently be changed in limited circumstances. IAS 39 identifies four categories of financial instruments: a) assets and liabilities at fair value through profit and loss (substantially assets and liabilities held for trading and assets that, regardless of the purpose for which they are held, the company decides to measure at fair value, b) available-for-sale assets, c) held-to-maturity assets and d) financial assets and liabilities not held for trading. The classification of financial instruments is also important for the purposes of determining the measurement principle to be applied, insofar as the first two categories must be measured at fair value whereas the other two are measured at cost or amortised cost. The results of the measurement of instruments held for trading are charged to income whilst those relating to available-for-sale assets are recognised in equity until they are realised. For financial instruments that are not classified as assets and liabilities at fair value through profit and loss, IAS/IFRS standards require a systematic check that there is no evidence that the carrying amount of the asset is not fully recoverable. Such checks must be carried out individually for individual assets or collectively with regard to groups of assets that are similar in terms of risk. Unlike what normally happened according to national accounting standards, value adjustments must also take account of the time required to collect amounts deemed recoverable. As regards the accounting treatment of derivative contracts for hedging against financial risks and the related hedged assets and liabilities, the international standards differentiate between three different types: a) a fair value hedge, a hedge of the fair value of a financial asset or liability in which any changes in fair value both of the hedged instrument and the hedge derivative are recognised in profit or loss; b) a cash flow hedge, a hedge of the variable cash flows attributable to a particular risk and c) a foreign currency hedge of an investment in a foreign operation, which involves the recognition in equity of changes in fair value of the hedge derivative alone (whereas the hedged asset or liability continues to be measured at cost or amortised cost). For non-hedge derivatives, which under the previous national standards were measured at fair value, the substantial difference concerns only the extension of this principle to instruments that are not listed on organised markets, for which the market value must be determined through the use of internal valuation models that incorporate market observable parameters. Unlike the national standards which classify any investment in equities under "shareholdings", the international standards for equity investments allow this classification only for investments in subsidiaries, associates or joint ventures. All other shares must be classified either as assets measured at fair value or as available-for- sale assets. Put options written on minority interests of consolidated companies, based on IAS 32, are recorded at the strike price under liabilities with a balancing entry in minority interests and, in the case of the latter's insufficiency, are recorded under goodwill, in terms of the difference. In substance, therefore, it is considered that the option is exercised by the counterparty. As regard property, plant and equipment and intangible assets, the changes relate to the possibility of choosing to record these assets on the basis of purchase cost or on the basis of a fair value measurement (where the change in value is recognised in equity, except for real estate investments for which fair value changes are charged to income) and the replacement of periodic amortisation of intangible assets with an indefinite useful life (such as, for example, goodwill) with an "impairment test", i.e. a test to ascertain whether the asset has suffered any loss in value. For property, plant and equipment recorded at cost, IAS/IFRS standards stipulate that depreciation should be charged on the basis of their useful life and if the components of an asset have a different useful life, they must be depreciated separately.

98 Furthermore, for certain types of intangible assets (costs of research, advertising, training, restructuring, trademarks and rights generated internally), the international standards exclude the capitalisation of these costs. As regards provisions for contingencies, appropriations may be made only when the company has a legal obligation and it is likely that, in order to fulfil such obligation, a financial expenditure will become necessary. This estimate must also be reviewed on the basis of the expected time periods. Pension funds and, in general, all benefits paid to employees post-employment, are divided by the international standards into two categories: defined contribution plans, for which only the contributions owed by the company are recognised, and defined benefit plans, for which the amount allocated must be measured by estimating, using actuarial criteria, the amount to be paid at the end of the period of employment.

Section 3 - Scope and methods of consolidation 1. Shareholdings in wholly and jointly owned companies (the latter consolidated proportionally)

Type of Shareholding relationship Availability of Put % Company names Head office relation- votes % held ship (1) Shareholding company % held

A. Companies

A.1 Fully consolidated

A.1.1 Banca Popolare di Lodi Capital Company LLC New York 1 Banca Popolare Italiana 100.00 100.00

A.1.2 Banca Popolare di Lodi Capital Company LLC II New York 1 Banca Popolare Italiana 100.00 100.00

A.1.3 Banca Popolare di Lodi Capital Company LLC III New York 1 Banca Popolare Italiana 100.00 100.00

A.1.4 Bipielle I.C.T. S.p.A. Lodi 1 Banca Popolare Italiana 100.00 100.00

A.1.5 Bipielle Investimenti S.p.A. Lodi 1 Banca Popolare Italiana 91.94 87.45

A.1.6 Reti Bancarie S.p.A. Lucca 1 Banca Popolare Italiana 73.52 70.87 0.81

A.1.7 Bipielle Riscossioni S.p.A. Lodi 1 Banca Popolare Italiana 70.13 70.13

A.1.8 Banca Popolare di Crema S.p.A. Crema 1 Reti Bancarie 94.47 94.47

A.1.9 Banca Popolare di Cremona S.p.A. Cremona 1 Reti Bancarie 99.43 99.43

A.1.10 Banca Popolare di Mantova S.p.A. Mantova 1 Reti Bancarie 52.32 52.32

A.1.11 Banca Valori S.p.A. Brescia 1 Reti Bancarie 61.25 61.25

A.1.12 Bipielle Società di Gestione del Credito S.p.A. Lodi 1 Reti Bancarie 70.00 70.00

1 Cassa di Risparmio di Lucca 30.00 30.00

A.1.13 Bipielle International Holding S.A. Lugano 1 Reti Bancarie 100.00 100.00

A.1.14 Cassa di Risparmio di Lucca S.p.A. Lucca 1 Reti Bancarie 46.28 46.28

1 Banca Popolare Italiana 20.93 20.93 12.39

A.1.15 Cassa di Risparmi di Livorno S.p.A. Livorno 1 Cassa di Risparmio di Lucca 100.00 100.00

A.1.16 Cassa di Risparmio di Pisa S.p.A. Pisa 1 Cassa di Risparmio di Lucca 100.00 100.00

A.1.17 Banca Caripe S.p.A. Pescara 1 Reti Bancarie 51.00 51.00 44.00

A.1.18 Bipielle Bank (Suisse) S.A. Lugano 1 Bipielle International Holding 86.00 86.00

A.1.19 Bipielle International UK Ltd. London 1 Bipielle International Holding 72.00 72.00

A.1.20 Banca Bipielle Network S.p.A. Lodi 1 Bipielle Investimenti 98.86 98.86

A.1.21 Bipitalia Alternative SGR S.p.A. Lodi 1 Bipielle Investimenti 20.00 20.00

1 Bipitalia Gestioni SGR 80.00 80.00

A.1.22 Bipitalia Ducato S.p.A. Lucca 1 Bipielle Investimenti 100.00 100.00

A.1.23 Bipielle Leasing S.p.A. Pisa 1 Bipielle Investimenti 99.74 99.74

A.1.24 Bipitalia Gestioni SGR S.p.A. Lodi 1 Bipielle Investimenti 96.96 96.96

A.1.25 Bipielle Real Estate S.p.A. Lodi 1 Bipielle Investimenti 100.00 100.00

A.1.26 Bipielle Fondi Immobiliari SGR S.p.A. Lodi 1 Bipielle Investimenti 100.00 100.00

A.1.27 Efibanca S.p.A. Rome 1 Bipielle Investimenti 99.61 99.61

A.1.28 Italfortune International Advisors S.A. Luxembourg 1 Bipielle Investimenti 90.00 90.00

A.1.29 Bipielle Immobili Strumentali S.p.A. Lodi 1 Bipielle Real Estate 100.00 100.00

A.1.30 Tiepolo Finance S.r.l. Conegliano 1 Banca Popolare Italiana 60.00 60.00

A.1.31 Tiepolo Finance 2 S.r.l. Milan 1 Bipielle Gestione del Credito 60.00 60.00

99 Type of Shareholding relationship Availability of Put % Company names Head office relation- votes % held ship (1) Shareholding company % held

A.1.32 Nazionale Fiduciaria S.p.A. Brescia 1 Banca Valori 100.00 100.00

A.1.33 Critefi SIM S.p.A. Brescia 1 Nazionale Fiduciaria 100.00 100.00

A.1.34 AB Capital S.p.A. Pescara 1 Efibanca 51.00 51.00

A.1.35 Gruppo Acque Minerali Riunite S.p.A. Rome 1 Efibanca 100.00 100.00

A.1.36 Glass Italy B.V. Amsterdam (NL) 1 Efibanca 5.00 5.00

A.1.37 Gruppo Partecipazioni Italiane S.p.A. Milan 1 Glass Italy 82.67 82.67

1 Banca Popolare Italiana 7.32 7.32

A.1.38 Area Life International Assurance Ltd Dublin 1 Bipielle International Holding 100.00 100.00

A.1.39 Bipielle Previdenza Assicurativa S.r.l. Lodi 1 Banca Bipielle Network 100.00 100.00

A.1.40 Basileus S.p.A. Lodi 1 Bipielle Real Estate 100.00 100.00

A.1.41 Lido dei Coralli S.r.l. S. Teresa Gallura (SS) 1 Basileus 100.00 100.00

A.1.42 Nadir Immobiliare S.r.l. Lodi 1 Basileus 100.00 100.00

A.1.43 Sirio Immobiliare S.r.l. Lodi 1 Basileus 100.00 100.00

(1) Type of relationship: 1 = majority of voting rights in ordinary meeting 2 - dominant influence in ordinary meeting 3 = agreements with other shareholders 4 = other forms of control 5 = individual management pursuant to Art. 26, subsection 1, of Legislative Decree no. 87/92 6 = individual management pursuant to Art. 26, subsection 2, of Legislative Decree no. 87/92 7 = joint control

100 Scope of consolidation The consolidated financial statements include the financial statements of Banca Popolare Italiana and those of all the companies directly or indirectly controlled by the latter. The scope of consolidation is determined in accordance with the provisions contained in IAS 27. This also includes all the companies considered to be associates based on IAS 28 and 31. In defining the scope of consolidation, reference is no longer made to the exclusions previously established by Italian accounting standards or the instructions contained in Legislative Decree no. 87 of January 27, 1992 or the instructions contained in Banca d'Italia measure no. 100 of July 15, 1992 as subsequently amended. Investments held for sale are treated in accordance with IFRS 5 which governs the treatment of non-current assets held for sale, both for the preparation of the 2005 annual accounts and for the figures relating to previous periods presented for comparative purposes. To determine the change in the scope of consolidation arising from the standards described above, a relevance factor was applied based on the simultaneous existence of exclusion thresholds equal to the lesser of 1% of the Parent Bank's book value and €10 million as an individual threshold and 5 times these limits as total thresholds. Companies in liquidation or not operating are also excluded. For consolidation purposes, shares received in pledge are not considered as they are not held in order to exercise control over or influence the company's management policies. A list is given below of the investments included in the scope of full consolidation following the adoption of IAS/IFRS. x Gruppo Acque Minerali Riunite S.p.A. - Rome; x Area Life International Assurance Ltd - Dublin; x Basileus S.p.A. - Bologna; x Lido dei Coralli S.r.l. - Santa Teresa di Gallura (SS); x Nadir Immobiliare S.r.l - Lodi; x Sirio Immobiliare S.r.l. - Lodi; x Bipielle Previdenza Assicurativa S.r.l. (formerly Area Company S.r.l.) - Lodi; x Glass Italy B.V. - Amsterdam; x Gruppo Partecipazioni Italiane S.p.A. - Milan. As a result of the adoption of IAS/IFRS, the following companies are also considered to be associates and therefore valued according to the equity method: x Cassa di Risparmio di Bolzano S.p.A. - Bolzano; x Ali S.p.A. - Rome; x Comital Saiag S.p.A. - Volpino (TO); x Deroma S.p.A. - Malo (VC); x Fidia Farmaceutici S.p.A. - Abano Terme (PD); x IGLI S.p.A. - Milan; x Tortella S.p.A. - Ortona (CH).

Date of consolidation The balance sheet date coincides with the date on which the Parent Bank, Banca Popolare Italiana, prepares its financial statements. Companies that end the period on a different date from that of the Parent Bank must prepare a balance sheet and income statement for the reference date.

Financial statements used for consolidation The consolidated financial statements are prepared on the basis of the financial statements of the individual consolidated companies, prepared and approved by the competent company bodies, before approval of the consolidated financial statements by the Parent Bank's Board of Directors. For the consolidation of subsidiaries not required to apply IAS/IFRS, the recent financial statements approved by the companies themselves and prepared according to national accounting standards (in particular, reference is made to the industrial shareholdings of the subsidiary Efibanca held under its merchant banking activities and to Cassa di

101 Risparmio di Bolzano of which the Group holds a 19.9% stake) have been used. As regards the consolidation of the shareholding in Eurovita S.p.A., the financial statements prepared according to national accounting standards have been used. Based on the simulations made, if these financial statements had been prepared according to IAS/IFRS, this would not have caused any significant impact on the consolidated financial statements of the Gruppo Banca Popolare Italiana.

Consolidation methods Full consolidation The financial statements of the Parent Bank and of its subsidiaries are consolidated item by item by adding together the corresponding values of the assets, liabilities, shareholders' equity, income and expenses. So that the consolidated financial statements present group accounting data as if the group were an individual company, the book value of the shareholdings in each subsidiary and the corresponding part of the shareholders' equity of each subsidiary are eliminated. Any positive differences emerging from this elimination, determined on the basis of equity ratios, are recognised, after possible allocation to the assets or liabilities of the subsidiary, as goodwill under the item "Intangible Assets". Negative differences are charged to the income statement. The item "goodwill" is not subject to amortisation but, where the conditions apply, is subject to specific adjustments (impairment test). The shares in the net period profit of the subsidiaries and the stakes in the share capital and reserves that do not belong to the group are identified and allocated to third parties on the basis of equity ratios. These stakes in the profit and in the shareholders' equity are presented separately from those pertaining to the Parent Bank's shareholders. Intra-group transactions and balances and the respective income and expenses are fully eliminated.

Consolidation according to the equity method Under the equity method, the shareholding is initially stated at cost and the book value is increased or decreased in recognition of the participant's share in the associate's profits or losses which are realised after the acquisition date. This share is recognised in a specific item of the consolidated income statement. The differences between the value of the shareholding and the shareholders' equity of the affiliated company are included in the book value of the affiliated company.

102 LIST OF IAS/IFRS STANDARDS ENDORSED BY THE EUROPEAN COMMISSION as at December 31, 2005

IAS/IFRS ACCOUNTING STANDARDS ENDORSEMENT IAS 1 Presentation of financial statements Reg. 2238/2004, 1910/2005 IAS 2 Inventories Reg. 2238/2004 IAS 7 Cash flow statement Reg. 1725/2003 am. 2238/2004 IAS 8 Accounting policies, changes in accounting estimates, and errors Reg. 2238/2004 IAS 10 Events after the balance sheet date Reg. 2238/2004 IAS 11 Construction contracts Reg. 1725/2003 Reg. 1725/2003 am. 2236/2004, IAS 12 Income taxes 2238/2004, 211/2005 Reg. 1725/2003 am. 2236/2004, IAS 14 Segment reporting 2238/2004 Reg. 2238/2004 am. 211/2005, IAS 16 Property, plant and equipment 1910/2005 IAS 17 Leases Reg. 2238/2004 IAS 18 Revenue Reg. 1725/2003 am. 2236/2004 Reg. 1725/2003 am. 2236/2004, IAS 19 Employee benefits 2238/2004, 211/2005, 1910/2005 Accounting for government grants and disclosure of government IAS 20 Reg. 1725/2003 am. 2238/2004 assistance IAS 21 Effects of changes in foreign exchange rates Reg. 2238/2004 IAS 23 Borrowing costs Reg. 1725/2003 am. 2238/2004 IAS 24 Related party disclosures Reg. 2238/2004, 1910/2005 IAS 26 Retirement benefit plans Reg. 1725/2003 IAS 27 Consolidated and separate financial statements Reg. 2238/2004 IAS 28 Investments in associates Reg. 2238/2004 IAS 29 Financial reporting in hyperinflationary economies Reg. 1725/2003 am. 2238/2004 IAS 30 Disclosures in the financial statements of banks Reg. 1725/2003 am. 2238/2004 IAS 31 Interests in joint ventures Reg. 2238/2004 Reg. 2237/2004 am. 2238/2004, IAS 32 Financial instruments: disclosure in the financial statements of banks 211/2005, 1864/2005 IAS 33 Earnings per share Reg. 2238/2004 am. 211/2005 Reg. 1725/2003 am. 2236/2004, IAS 34 Interim financial reporting 2238/2004 IAS 36 Impairment of assets Reg. 2236/2004 am. 2238/2004 Reg. 1725/2003 am. 2236/2004, IAS 37 Provisions, contingent liabilities and contingent assets 2238/2004 Reg. 2236/2004 am. 2238/2004, IAS 38 Intangible assets 211/2005, 1910/2005 Reg. 2086/2004 am. 2236/2004, IAS 39 Financial instruments: recognition and measurement 211/2005, 1751/2005, 1864/2005, 1910/2005, 2106/2005 IAS 40 Investment property Reg. 2238/2004 Reg. 1725/2003 am. 2236/2004, IAS 41 Agriculture 2238/2004 Reg. 707/2004 am. 2236/2004, IFRS 1 First-time adoption of international financial reporting standards 2237/2004, 2238/2004, 211/2005, 1751/2005, 1864/2005, 1910/2005 IFRS 2 Share-based payment Reg. 211/2005 IFRS 3 Business combinations Reg. 2236/2004 IFRS 4 Insurance contracts Reg. 2236/2004 IFRS 5 Non-current assets held for sale and discontinued operations Reg. 2236/2004 IFRS 6 Exploration for and evaluation of mineral assets Reg. 1910/2005

103 SIC/IFRIC INTERPRETATIVE DOCUMENTS ENDORSEMENT IFRIC 1 Changes in existing decommissioning, restoration and similar liabilities Reg. 2237/2004 IFRIC 2 Members' shares in co-operative entities and similar instruments Reg. 1073/2005 IFRIC 4 Determining whether an agreement contains a lease Reg. 1910/2005 Rights to interests arising from decommissioning, restoration and IFRIC 5 Reg. 1910/2005 environmental funds SIC 7 Introduction of the Euro Reg. 1725/2003 am. 2238/2004 SIC 10 Government assistance - No specific relation to operating activities Reg. 1725/2003 Reg. 1725/2003 am. 2238/2004, SIC 12 Consolidation - Special purpose entities (Vehicle companies) 1751/2005 SIC 13 Jointly controlled entities - Non-monetary contributions by venturers Reg. 1725/2003 am. 2238/2004 SIC 15 Operating leases - Incentives Reg. 1725/2003 SIC 21 Income taxes - Recovery of revalued non-depreciable assets Reg. 1725/2003 am. 2238/2004 Income taxes - Changes in the tax status of an enterprise or its SIC 25 Reg. 1725/2003 am. 2238/2004 shareholders SIC 27 Evaluating the substance of transactions in the legal form of a lease Reg. 1725/2003 am. 2238/2004 SIC 29 Disclosure - Service concession arrangements Reg. 1725/2003 SIC 31 Revenue - Barter transactions involving advertising services Reg. 1725/2003 am. 2238/2004 Reg. 1725/2003 am. 2236/2004, SIC 32 Intangible assets - Website costs 2238/2004

SECTION 4 - EVENTS AFTER THE BALANCE SHEET DATE As a result of the events that occurred in 2005, the then Board of Directors, in a spirit of responsibility and in consideration of the difficulties encountered by the Bank, resigned and called a Shareholders' Meeting for the replacement of the management personnel. As regards the Board of Statutory Auditors, the statutory auditor Pernigotto tendered his resignation with immediate effect and was replaced by the alternate auditor Lazzarini, and the statutory auditor Araldi tendered his resignation with effect from the date of the Shareholders' Meeting. The Chairman of the Board, Goisis, and the statutory auditor, Bonazzi, resigned as from the approval of the 2005 financial statements. Subsequently, the Chairman of the Board of Statutory Auditors withdrew his resignation. On January 28, 2006, the Shareholders agreed that the Board of Directors would consist of 16 members and the following were chosen as Directors: Guido Duccio Castellotti, Pier Antonio Ciampicali, Costantino Coccoli, Vittorio Coda, Maria Luisa Di Battista, Dino Piero Giarda, Bruno Giuffrè, Divo Gronchi, Andrea Guidi, Augusto Machirelli, Pietro Manzonetto, Roberto Nicola Martone, Mario Minoja, Giorgio Olmo, Enrico Perotti and Roberto Schmid. Furthermore, the Shareholders also added to the Board of Statutory Auditors by electing the following as Statutory Auditors: Gabriele Camillo Erba, Luigi Corsi and Giordano Massa; and the following as Alternate Auditors: Gianpaolo Fornasari and Massimo Mustarelli. The Shareholders' Meeting also re-approved the Financial Statements for the year ended December 31, 2004, amending the approval resolution previously made by the Board on April 30, 2005. This was necessary following the comments made by CONSOB and led to negative adjustments totalling €195 million in the income statement, thus making the Parent Bank's loss for the year €23.3 million. In its meeting on January 30, 2006, the Board of Directors appointed a Chairman, Dino Piero Giarda, lecturer at Milan Catholic University, former Treasury Under Secretary from 1995 to 2001 and current Chairman of the sub-holding Bipielle Investimenti, and appointed Divo Gronchi as Chief Executive Officer. After the initial - more urgent - appointments, which were decided in 2005, the Parent Bank's management structure was progressively redesigned over the subsequent months with the recruitment of other managers from outside. Other appointments included the Deputy General Manager Giuseppe Malerbi, with powers in the Credit and Finance area, and the Deputy General Manager Apicella Guerra, with powers in the Operation area (organisation and IT). The Board of Directors' appointment of the General Manager, Franco Baronio, former Deputy Chairman of the consultancy firm Bain & Company, with significant experience in banking consultancy, completed the picture. The respective responsibilities were assigned: the Chief Executive Officer is responsible for strategy and control and the General Manager is responsible for the operating machine with all other duties. Finally, on March 9, 2006, the Board of Directors appointed Enrico Perotti and Vittorio Coda as Senior Deputy Chairman and Deputy Chairman respectively of the Parent Bank's Board of Directors.

104 The agreement with Fondazione Cassa di Risparmio di Lucca On March 9, 2006, the Parent Bank's Board of Directors approved, within its remit, the resolutions taken by the Boards of Directors of Casse di Risparmio di Lucca, Pisa and Livorno in relation to the creation of the third largest bank in Tuscany. The origins of this resolution date back to the agreement of May 6, 2005, signed by the Parent Bank and by Fondazione Cassa di Risparmio di Lucca, which set out the conditions for Tuscany to become one of the strongholds of the Gruppo Banca Popolare Italiana. The parties drew up a comprehensive regional-based development programme that will be implemented in several phases, the most important of which involves the merger of the three Tuscan "Casse" and the transfer, which took place on December 19, 2005 with effect from January 1, 2006, of the 26 Banca Popolare Italiana branches in the Tuscany area to Cassa di Risparmio di Lucca. The agreement between the parties includes a commitment by Fondazione Cassa di Risparmio di Lucca to invest €135 million, which together with the €190 million investment already made, make a grand project total of €325 million. The proposed plan is subject to the usual authorisations being obtained and, as well as having an industrial and strategic impact, it has a strong income potential because of the synergies that will arise from greater visibility and better positioning of the distribution network, in addition to the investments that will be made in the region. Fondazione Cassa di Risparmio di Pisa extended the exercising of the €109 million put option until June 16, 2008.

The disposal of Bipielle Leasing In line with the Gruppo BPI's announced strategy of focussing on the core businesses that are leaders on their respective markets, Bipielle Investimenti S.p.A (86.2% owned by Banca Popolare Italiana) and Banca Italease S.p.A. signed an agreement on the basis of which 99.74% of Bipielle Leasing is sold to Banca Italease (specialised operator belonging to the environment of cooperative banks), for a price of €51 million to be paid in cash. The sale agreement was signed on February 23, 2006, while the sale is subject to authorisation from the competent Authorities.

New branch openings In the first few weeks of the new year 2006, 3 new bank branches became operational: Cassa di Risparmio di Pisa's branch in Casciana Terme (PI), Banca Caripe's branch in Collecorvino (PE) and Banca Popolare Italiana's branch at the new Fiera Milano in Rho. The total number of the Gruppo BPI's network of branches therefore currently stands at 982, of which 980 are in Italy and 2 abroad.

Relaunch plan The Gruppo BPI is currently involved in a comprehensive relaunch plan aimed at streamlining the governance structure, improving customer relations as a result of transparency and ethical conduct, and recovering profitability. The project, in the definition stage for the 3-Year Business Plan due to be approved in April 2006, requires a profound review of strategies, refocusing on traditional banking activities and adopting a new organisational model. The project to redesign the General Management and the Governance Model has been defined with the help of a consultancy firm. The objectives of the new Group Governance structure relate to organisation (structural and corporate reorganisation), processes (identification of key subjects in relation to markets and risks) and resources (correct sizing of structures). In order to increase collective involvement, the Strategic Policy Committee, the Internal Control Committee, the Supervisory Board pursuant to Law no. 231 and the Credit Executive Committee have been set up at Board level. The Operating Credit Committee and the Management Committee are also operating.

105 Programma Fiducia In the meeting of the Board of Directors held on December 27, 2005, the aforementioned new initiative called "Programma Fiducia" was illustrated. This programme is one of the strategies by which the Bank aims to return to ordinary management policies based on principles of total transparency and high standards of communication with customers. This programme involves a series of commercial initiatives such as a pricing review and introduction of new products, aimed both at individuals and small businesses. Individual initiatives relate to current accounts, loans and investments. The overarching aim of the Programma Fiducia is to place customer loyalty at the heart of the Group's growth, increasing customer retention through clear indicators of transparency, competitiveness, innovation and freedom to try the Group's services. Under the Programma Fiducia, the development of current account products aimed at small businesses has led to the creation of a comprehensive offer for all customer targets: x Conto Liberi Professionisti, an account reserved for professionals entered on a professional register; x Conto Impresa, a business account available on three levels (Small, Medium and Big) depending on current account transactions, aimed at self-employed workers, craftsmen and small production companies; x Conto Commercianti, a package account aimed at retailers, created in 2004 but made more competitive with the combined offer of the POS service for free. Note that, pursuant to IAS 10, the date on which the financial statements were authorised for publication by the bank's Board of Directors was March 29, 2006.

SECTION 5 - OTHER ASPECTS There are no further aspects to be reported.

106 A.2 - PART RELATING TO THE MAIN FINANCIAL STATEMENT AGGREGATES 1 - Financial assets held for trading Recognition criteria The initial recognition of these financial assets takes place on the settlement date for debt and equity securities, and on the subscription date for derivatives. At the time of initial recognition, financial assets held for trading are measured at cost, understood to mean the fair value of the instrument, without considering the transaction expenses or income directly attributable to the instrument. Any embedded derivatives present in combined contracts not strictly correlated to these and whose characteristics meet the definition of a derivative are separated from the host contract and measured at fair value, whilst, for the host contract, the accounting criterion of its classification category is applied.

Classification criteria This category exclusively consists of debt and equity securities and the positive value of derivatives held for trading. Derivatives include those embedded in combined financial instruments which are measured separately because: - their economic risks and characteristics are not closely related to those of the host contract; - the embedded instruments, even if separate, meet the definition of a derivative; - the hybrid instruments to which they belong are not measured at fair value with the respective changes recognised in the income statement.

Valuation and measurement criteria Following the initial recognition, financial assets held for trading are measured at fair value. To determine the fair value of financial instruments listed on an active market, quoted market prices for the last day of the period in question are used. If there is no active market, it is necessary to use estimates and valuation techniques that take account of all risk factors correlated to the instruments and which are based on market data such as: methods based on the valuation of listed instruments that have similar characteristics, discounted cash flow analyses, option pricing models and values measured in recent comparable transactions. Equity securities and the associated derivatives for which it is not possible to determine the fair value reliably according to the guidelines indicated above, are measured at cost.

2 - Available-for-sale financial assets Recognition criteria The initial recognition of the financial asset takes place on the settlement date for debt or equity securities. At the time of initial recognition, the assets are measured at fair value, including the transaction income or expenses directly attributable to the instrument itself. If recognition takes place as a result of reclassification from held-to-maturity assets, the value recognised is the fair value at the time of the transfer.

Classification criteria This category includes non-derivative financial assets not classified as Loans, Assets held for trading or Held- to-maturity assets. In particular, this item includes not only bonds that are not held for trading and are not classified as held-to-maturity assets or as loans but also shareholdings not held for trading and not qualifiable as investments in subsidiaries, associates and joint ventures.

107 Valuation and measurement criteria Following the initial recognition, Available-for-sale assets are measured at fair value, with the corresponding value being recognised in income at amortised cost, whereas the gains or losses arising from a change in fair value are recognised in equity until the financial asset is derecognised or an impairment is recorded. At the time of disposal or recognition of impairment, the cumulative gain or loss is reversed to the income statement. Fair value is determined on the basis of the criteria already outlined for financial assets held for trading. Equity securities and the associated derivatives for which it is not possible to determine the fair value reliably are measured at cost. At the end of each financial year or interim period, the existence of objective evidence of impairment is checked. If such evidence exists, the amount of impairment to be charged to income is measured as being the cumulative change previously entered in the specific Shareholders' Equity reserve. If the reasons for the impairment no longer apply as a result of an event occurring after the recognition of the impairment loss, the impairment is reversed and recognised in income, in the case of loans or debt securities, and in equity in the case of equity securities. The amount of the reversal cannot under any circumstances exceed the amortised cost that the instrument would have had in the absence of previous writedowns.

Derecognition criteria These financial assets are derecognised when the contractual rights to the cash flows from the assets themselves expire or when the financial asset is transferred and all the risks and rewards of ownership of the financial asset are substantially transferred.

3- Held-to-maturity financial assets Recognition criteria The initial recognition of the financial asset takes place on the settlement date. At the time of initial recognition, the financial assets classified in this category are measured at fair value, including any directly attributable income and expenses. If recognition in this category takes places as a result of reclassification from Available- for-sale assets, the asset's fair value on the reclassification date is taken as its new amortised cost.

Classification criteria This category includes debt securities with fixed or determinable payments and fixed maturity, for which there is a positive intent and ability to hold to maturity. If, due to a change of intent or ability, it is no longer appropriate to carry an investment as held-to-maturity, this is reclassified amongst Available-for-sale assets.

Valuation and measurement criteria After the initial recognition, Held-to-maturity financial assets are measured at amortised cost, using the effective interest method. Gains or losses relating to held-to-maturity assets are recognised in income at the time the assets are derecognised or suffer an impairment, as well as through the process of amortising the difference between the recognition value and the value payable on maturity. At the end of each financial year or interim period, the existence of objective evidence of impairment is checked. If such evidence exists, the amount of impairment is measured as being the difference between the carrying amount of the asset and the present value of estimated future cash flows, discounted at the original effective interest rate. The amount of impairment is recognised in income. If the reasons for the impairment no longer apply as a result of an event occurring after the recognition of the impairment loss, the impairment is reversed and recognised in income.

108 4 - Loans Recognition criteria The initial recognition of a loan takes place on the disbursement date or, in the case of a debt security, on the settlement date, on the basis of the fair value of the financial instrument, equal to the amount disbursed, or subscription price, including the income/expenses directly attributable to the individual loan and which are determinable right from the start of the transaction, even if paid off at a later date. This excludes costs that, despite having the above characteristics, are to be repaid by the debtor or can be classified amongst normal internal administration costs. For any lending transactions carried out under conditions other than market conditions, the fair value is determined by using special valuation techniques. The difference in relation to the amount disbursed or the subscription price is charged directly to income. Swaps and repurchase agreements with a repurchase or resale obligation at the end of the agreement are recognised as deposits or loan transactions. In particular, repos are recognised as payables for the amount received spot whereas reverse repos are recognised as loans for the amount paid spot.

Classification criteria Loans include customer and bank loans that have fixed or determinable payments, which are not quoted in an active market and which were not originally classified as Available-for-sale financial assets. This also includes commercial loans and repurchase agreements.

Valuation and measurement criteria After the initial recognition, loans are measured at amortised cost, equal to the amount initially recognised minus/plus capital repayments, writedowns/writebacks and amortisation - calculated according to the effective interest method - of the difference between the amount disbursed and the amount repayable on maturity, typically attributable to the income/expenses directly attributed to the individual loan. The effective interest rate is identified by calculating the rate that makes the present value of the future cash flows from the loan, in terms of capital and interest, equal to the amount disbursed including income/expenses attributed to the loan. This method of accounting, using a financial logic, means that it is possible to distribute the economic effect of the income/expenses throughout the expected remaining life of the loan. However, in the first-time adoption and preparation of these consolidated financial statements, in defining the amortised cost of loans, account was taken of such components, in view of the objective difficulties in obtaining the necessary information on the existing portfolio and the largely unimportant nature of these components, but only for a limited number of credit disbursement transactions deemed more significant in relation to the subsidiary Efibanca S.p.A. At the end of each financial year or interim period, a recognition of loans is performed aimed at identifying those that, following the occurrence of events after their recognition, show objective evidence of a possible impairment loss. This applies to loans that have been given the status of non-performing, problem or restructured loans according to the current rules applied by Banca d'Italia, consistent with IAS standards. These non-performing loans undergo a process of analytical valuation and the amount of the write-down of each loan is equal to the difference between its carrying amount at the time of the evaluation (amortised cost) and the present value of the expected future cash flows, calculated by applying the original effective interest rate. The expected cash flows take account of the expected recovery times, the estimated realisable value of any guarantees and the costs that are expected to be incurred in recovering the credit exposure. The cash flows relating to loans expected to be recovered in the short term will not be updated. The original effective rate of each loan remains unchanged over time even in the event of a restructuring of the loan that involves a change in the contractual rate and even if the loan, in practice, no longer bear any contractual interest. The writedown is charged to income. The original value of the loans is restored in subsequent years if the reasons for the adjustment no longer apply provided that this appraisal can be objectively connected to an event that occurs after the adjustment itself. The reversal is recognised in income and cannot under any circumstances exceed the amortised cost that the loan would have had in the absence of previous adjustments. Loans for which there is no objective evidence of impairment, i.e. generally speaking, performing loans, including those to counterparties residing in risk countries and those that expiring/exceeding more than 180 days, are subject to an estimated collective impairment. This appraisal is made for homogeneous categories of loans in terms of credit risk and the respective impairment percentages are estimated by taking into account time series, based on elements observable on the appraisal date, thus allowing for an estimate of the value of the impairment existing in each category of loans. Writedowns determined collectively are charged to income. At the end of each financial year and interim period, any additional writedowns or writebacks are recalculated differently with reference to the entire portfolio of performing loans on the same date.

109 Derecognition criteria Transferred loans are eliminated from the balance sheet only if the transfer involved the substantial transfer of all the risks and rewards connected to the loans. However, if the risks and rewards relating to the transferred loans are maintained, these will continue to be recognised in the balance sheet, even though legally the ownership of the loan has been effectively transferred. If it is not possible to ascertain that the risks and rewards have been substantially transferred, the loans are eliminated from the balance sheet if no type of control over these is maintained. However, if control is maintained, even partly, this means that the loans are maintained in the balance sheet to the extent equal to the remaining involvement, measured by the exposure to changes in value of the transferred loans and changes in their cash flows. Finally, the transferred loans are eliminated from the balance sheet if the contractual rights to receive the respective cash flows are preserved with the simultaneous assumption of an obligation to pay these flows, and only these, to other third parties.

5 - Financial assets at fair value Recognition criteria At the time of initial recognition, financial instruments measured at fair value are recognised at cost, understood to be the fair value of the instrument, without considering the transaction costs or income directly attributable to the instrument itself, which are charged to income. This designation can be used when this involves more relevant information because: x it eliminates or significant reduces a lack of uniformity in the measurement or recognition (often described as "accounting asymmetry") which would other result from measuring assets or liabilities or recognising the respective profits and losses on different bases. x the management and performance of a set of financial assets and/or financial liabilities is measured on the basis of fair value according to a documented risk management methodology or investment strategy and the reporting arising therefrom is more significant. x this is an instrument containing an embedded derivative that satisfies particular conditions. In this case, however, the fair value option cannot be applied if: i. the derivative does not significantly modify the cash flows of the host instrument, or ii. it is clear, without the need for thorough analyses, that the derivative should not be separated The application of the Fair Value Option (FVO) extends to all financial assets and liabilities that cause distortion in the accounts and to all instruments that are managed and measured from a fair value perspective.

Classification criteria This item includes all financial assets and liabilities of different technical form (debt securities, equity securities, loans, etc.) measured at fair value with the valuation results recognised in income, on the basis of the right granted to companies ("fair value option") by IAS 39.

Valuation and measurement criteria After the initial recognition, financial assets and financial liabilities at fair value continue to be measured at fair value. To determine the fair value of financial instruments listed on an active market, market prices are used. If there is no active market, it is necessary to use generally accepted estimates and valuation techniques based on market data such as: methods based on the valuation of listed instruments that have similar characteristics, discounted cash flow analyses, option pricing models and values measured in recent comparable transactions. Profits and losses arising from the change in fair value of financial assets and liabilities are recognised in the item "Net income from financial assets and liabilities at fair value through profit and loss".

Derecognition criteria Financial assets are derecognised when the contractual rights to the cash flows from the assets themselves expire or when the financial asset is transferred and all the risks/rewards related thereto are substantially transferred. Financial liabilities are derecognised when they are paid off or when the obligation specified in the contract is fulfilled or cancelled or expires.

110 6 - Hedging transactions Classification criteria Risk hedging transactions are aimed at neutralising potential losses measurable on a specific hedged item or specific group of hedged items, attributable to a specific risk (for example, a rise in interest rates), through the profits measurable on a different item or group of items (hedging instrument) in the event that this particular risk should actually materialise. The types of hedges used are as follows: x fair value hedge: seeks to hedge the exposure to the change in fair value of an item attributable to a particular risk; x cash flow hedge: seeks to hedge the exposure to changes in future cash flows attributable to particular risks associated with balance sheet items.

Recognition criteria The rules relating to hedge accounting specify exceptions to the ordinary criteria for measuring financial instruments. According to the previous accounting policies, the hedging of risk positions is associated with recognition procedures as follows: x the item to be hedged maintains its method of ordinary recognition, and is therefore predominantly measured at cost; x the hedging instrument, even if it is represented by a derivative product, acquires the accounting method of the hedged item until hedging is in place; x the economic effects arising from changes in the market value of the hedging instrument, which therefore remain unexpressed, emerge if the hedge ends, but are capitalised and amortised for the remaining life of the hedged item. The introduction of IAS 39, which governs the recognition and measurement of financial instruments, and in particular, derivatives, profoundly changes this arrangement and reverses it, because it is the hedging instrument that determines the measurement of the hedged item: x the derivative instrument used for hedging is always measured at fair value and, except for cash flow hedging, the effects arising from changes in its value are reflected directly in the income statement; x if the hedged item is an item measured at cost, this therefore creates the problem of recognition asymmetry which would cause volatility in the economic results and, consequently, distortion in the accounting representation of the economic reality; x to avoid this effect, provision is made, when the hedge is documented and verified, to recognise the value changes in the hedged item arising from the risk for which the hedge is set up, and report these in the income statement, cancelling the analogous changes produced by the hedging instrument (provided that the transaction is effective). The instruments that can be used for hedging are, in general, all derivative instruments, while non-derivative products are only usable for the hedging of exchange rate risk. The use of internal contracts as hedging instruments is not permitted. The following may be designated as hedging instruments: x derivative contracts (including purchased options); x non-derivative financial instruments, for hedging exchange rate risk only. The following cannot be used as hedging instruments: x equities or derivatives on shares for which no fair value is available (AG96); x instruments representing own capital; x a written option. Only those instruments that hedge specific identifiable risks (and not, for example, general or business risks) can be classified as hedging and accounted for as such. For the purposes of hedge accounting, assets or liabilities, contractual commitments, "highly likely" future transactions or the net investment in a foreign operation may be designated as hedged items. These items may be designated individually or in groups that present similar risk characteristics. An investment classified as "held-to-maturity" cannot be hedged for the interest rate risk but only for the exchange rate or credit risk. The use of internal contracts (internal deals) as hedging instruments is not permitted. IAS 39 stipulates that only instruments that involve a part outside the company (or group in the case of consolidated financial statements) can be designated as hedging instruments and, therefore, any result

111 attributable to internal deals made between different units of the company or between companies of the same group must be eliminated from the individual and consolidated financial statements respectively. IAS 39 does not prevent the use of internal derivative contracts for risk management and does not prevent derivative contracts entered into with external entities from being aggregated within the treasury department or at another central unit in order to manage the risks centrally or at a higher level than the company and/or division. However, in these situations, at the level of the individual financial statements: x internal contracts entered into between divisions forming part of the same legal entity may be subject to hedge accounting in the individual financial statements of that legal entity provided that it is shown that the risk is transferred to a counterparty outside the entity itself; x internal contracts entered into between legal entities forming part of the same consolidated group may be subject to hedge accounting in the individual financial statements of each legal entity, even if there is no transfer of the risk to a counterparty outside the group itself; at the level of the consolidated financial statements: x internal contracts entered into between divisions forming part of the same legal entity or between legal entities forming part of the same group may be subject to hedge accounting in the individual financial statements of that group provided that it is shown that the risk is transferred to a counterparty outside the group itself. If it is not proven that the risk has been transferred to an external counterparty (outside the company or the group), the accounting entries made by the individual divisions or individual companies of the group in relation to internal contracts must be reversed during the consolidation of accounts.

Valuation and measurement criteria Hedge derivatives are measured at fair value. In particular: x in the case of fair value hedging (micro hedging or macro hedging), the change in the fair value of the hedged item is offset by the change in the fair value of the hedging instrument. This offsetting is recognised through the recognition of any changes in value in income, both in relation to the hedged item (in terms of changes caused by the underlying risk factor) and to the hedging instrument. Any difference, which represents the partial ineffectiveness of the hedge, therefore constitutes the net economic effect; x in the case of cash flow hedging, the changes in the fair value of the derivative are reported in equity, for the effective proportion of the hedge, and in income only if, with regard to the hedged item, the change in the cash flows to be offset takes place. The derivative is designated as a hedge if there exists formalised documentation of the relationship between the hedged item and the hedging instrument and if it is effective at the time the hedge starts and, perspectively, throughout the duration of the hedge. The effectiveness of the hedge depends on the extent to which the changes in fair value of the hedged item or the expected cash flows are offset by those affecting the hedging instrument. Therefore, effectiveness can be measured by comparing the above changes, bearing in mind the company's intention at the time the hedge was put in place. It is effective (within the 80 - 125% range) if the changes in fair value (or cash flows) of the hedging instrument offset almost totally the changes in the hedged item, in terms of the risk being hedged. Effectiveness is measured on each balance sheet date by using: x prospective tests, which justify the application of hedge accounting, insofar as they demonstrate its expected effectiveness; x retrospective tests, which show the degree of effectiveness of the hedge achieved in the period in question. In other words, they measure the extent to which the actual results deviate from the perfect hedge. If the checks do not confirm the effectiveness of the hedge, hedge accounting, as described above, is interrupted and the hedge derivative is reclassified among trading instruments.

112 Derecognition criteria Financial assets and liabilities for hedging are derecognised when the contractual rights to the cash flows from the assets themselves expire or when the financial asset/liability is transferred and all the risks/rewards related thereto are substantially transferred.

7 - Shareholdings Recognition criteria The initial recognition of the financial asset takes place on the settlement date. At the time of initial recognition, the financial assets classified in this category are stated at cost.

Classification and measurement criteria This item includes interests held in associates, that are stated according to the equity method and certain shareholdings in subsidiaries which, given their largely unimportant nature, are recorded at cost. Associates are considered to be those in which 20% or more of the voting rights are held and those that, as a result of specific legal connections, such as participation in shareholder agreements, should be considered as being subject to considerable influence. If there is evidence that the value of a shareholding may have been impaired, an estimate is made of the recoverable value of the shareholding, taking account of the present value of the future cash flows that the shareholding may generate, including the final disposal value of the investment. If the recoverable value is lower than the carrying amount, the respective difference is recognised in income. If the reasons for the impairment no longer apply as a result of an event occurring after the recognition of the impairment loss, the impairment is reversed and recognised in income.

Derecognition criteria Shareholdings are derecognised when the contractual rights to the cash flows from the assets themselves expire or when the shareholding is transferred and all the risks and rewards related thereto are substantially transferred.

8 - Property, plant and equipment Recognition criteria Property, plant and equipment are initially recorded at cost which includes not only the original purchase price but also any incidental expenses directly attributable to the purchase and to the operation of the asset. Extraordinary maintenance costs that involve an increase in the future economic benefits are recognised as increasing the value of the assets, whilst other ordinary maintenance costs are recognised in income.

Classification criteria Property, plant and equipment include land, buildings, real estate investments, technical installations, furniture and furnishings and equipment of any kind. These are tangible assets held for use in the production or supply of goods and services, to be leased to third parties, or for administrative purposes, and which are expected to be used for more than one period. This item also includes assets used in finance leases and the restructuring costs of branches and other buildings not owned.

Valuation and measurement criteria Property, plant and equipment, including buildings, are recorded at cost less depreciation and impairment. These assets are systematically depreciated on a straight-line basis over their useful life, with the exception of land, whether purchased separately or incorporated into the value of buildings, because this has an indefinite useful life. If the value of land is included in the value of the building, by virtue of the application of the components approach, it is considered to be an asset separable from the building. The division between the value of the land and the value of the building is made on the basis of independent expert reports. At the end of each financial year or interim period, if there is any indication that an asset may have been impaired, a comparison is made between the carrying amount of the asset and its recoverable amount. Any write-downs are recognised in income. If the reasons that led to the impairment being recognised no longer apply, the impairment is reversed and the amount of this reversal cannot exceed the value that the asset would have had, net of depreciation calculated in the absence of previous impairment losses. The costs of renovating buildings not owned are capitalised in consideration of the fact that throughout the duration of the lease, the company using [the building] has control of the assets and can derive future economic benefits from these.

113 The costs of renovating leased buildings are depreciated over a period not exceeding the duration of the lease.

Derecognition criteria An item of property, plant and equipment is removed from the balance sheet on disposal or when the asset is permanently withdrawn from use and no future economic benefits are expected from its disposal.

9 - Intangible assets Classification criteria IAS 38 defines intangible assets as identifiable non-monetary assets without physical substance. The necessary characteristics to meet the definition of intangible assets are: x identifiability x control of the asset in question x existence of future economic benefits. In the absence of one of the above characteristics, the expense to purchase or generate the asset internally is recorded as a cost in the year in which it was incurred. Intangible assets include goodwill, non-owned property renovation costs and application software used over several years. Goodwill included in intangible assets represents the positive difference between the purchase cost and the fair value of the assets and liabilities acquired. Other intangible assets are recorded as such if they are identifiable and arise from legal or contractual rights.

Recognition and valuation criteria An intangible asset can be entered as goodwill if the positive difference between the fair value of the assets acquired and the purchase cost of the shareholding (including incidental expenses) is representative of the future income-producing capabilities of the shareholding (goodwill). If this difference is negative (badwill) or in the event that goodwill finds no future income-producing capabilities of the acquired company, the difference is directly charged to income. On an annual basis (or whenever there is evidence of impairment), a test is performed to check the adequacy of the goodwill value. To this end, the cash-generating unit to which to allocate goodwill is identified. The amount of any impairment is determined on the basis of the difference between the carrying amount of goodwill and its recoverable value, if lower. This recoverable value is equal to the lesser of the fair value of the cash-generating unit, less any costs to sell, and its respective value in use. The resulting value adjustments are charged to income. Other intangible assets are stated at cost, adjusted for any incidental expenses only if it is likely that the future economic benefits attributable to the asset will be realised and if the cost of the asset itself can be reliably measured. The cost of intangible assets is amortised on a straight-line basis over the respective useful life. If an intangible asset has an indefinite useful life, it is not amortised but regularly tested to ensure that the carrying amount is adequate. The costs of renovating leased buildings are depreciated over a period not exceeding the duration of the contract. At the end of each financial year, if there is evidence of impairment, an estimate is made of the recoverable value of the asset. The amount of the impairment, charged to income, is equal to the difference between the carrying amount of the asset and its recoverable amount.

114 Derecognition criteria An intangible asset is eliminated from the balance sheet on disposal and if no future economic benefits are expected.

10 - Non-current assets and liabilities, discontinued operations Classification, recognition and valuation criteria This item includes non-current assets intended for sale and discontinued assets and liabilities, in accordance with the provisions of IFRS 5. These assets are measured at the lesser of book value and their fair value net of selling costs and the respective balance sheet and income statement entries are recorded separately in the financial statements as provided by IFRS 5. The respective income and expenses (net of the tax effect) are disclosed separately in the income statement.

11 - Current and deferred taxation Classification, recognition and valuation criteria Current and prepaid taxes are recognised on the basis of current tax legislation. Income taxes are recognised as income except for those relating to items charged or credit directly to equity. The provision for income taxes is determined on the basis of an estimate of current, prepaid and deferred taxes. In particular, prepaid and deferred taxes are determined on the basis of the temporary differences, without time restrictions, between the value allocated to an asset or liability according to civil code criteria and the corresponding tax values. Prepaid tax assets are recognised in the balance sheet to the extent that their recovery is probable, assessed on the basis of the capacity of the company in question and of the Parent Bank, following the exercising of the "tax consolidation" option, to generate positive taxable income. Deferred tax liabilities are stated in the balance sheet, with the sole exceptions of the higher asset values in tax relief reserves, insofar as the amount of the available reserves already subject to taxation allows for the reasonable expectation that transactions liable for taxation will not be carried out. Prepaid and deferred taxes are stated in the balance sheet with open balances and without offsetting, with the former entered under the item "Tax assets" and the latter under the item "Tax liabilities". These items are systematically assessed to take account of any changes in regulations or in the rates and any different subjective situations affecting the Group's companies. The amount of tax liabilities is also adjusted to meet the expenses that might arise from notices of assessment already notified or from disputes with the tax authorities.

12 - Provisions for contingencies and charges and employee severance payment fund 1) Employee severance payment fund Classification, recognition and valuation criteria The employee severance payment fund is measured on the basis of its actuarial value, certified by actuaries outside the Group. It is measured on the basis of IAS 19 because the employee severance payment fund can be assimilated to a "post-employment benefit" of the "defined-benefit" type, the amount of which already accrued must be future- projected in order to estimate the amount to be paid upon the termination of the employment contract and must then be updated, using the Projected Unit Credit Method, to take account of the time that will lapse before actual payment. In the case of the defined-benefit plan, according to IAS 19, the company's obligation is to provide the agreed benefits to employees in service and to previous employees. Actuarial risk and investment risk fall, in short, upon the company, which might be required to increase the regular contributions in the case of actuarial and investment risk that reduce employees' expected benefits. For updating purposes, future contributions are projected on the basis of statistical analyses and the demographic curve and these contributions are updated on the basis of a market interest rate. The service costs of the plan are recorded under personnel expenses as net amount of contributions paid, contributions relating to previous periods not yet accounted for, accrued interest, expected revenues arising from plan assets, and actuarial gains and losses. The latter are charged to a specific shareholders' equity reserve.

115 2) Provisions for contingencies and charges Classification criteria IAS 37 covers the topics of provisions and contingent assets and liabilities. The former are defined as liabilities of uncertain timing and amount, specifying how and when the provisions should be recognised while the latter (contingent assets and liabilities) must not be recognised in the balance sheet and in the income statement but only in the notes on the financial statements. Once the cases that require sums to be allocated to the respective provisions have been identified, it is necessary to assess the amount to be recognised which should be the best estimate of the expenditure required to settle the present obligation at the balance sheet date. The estimated amount must be updated where the effect of updating entails significant differences with regard to the nominal value.

Recognition criteria A provision must be recognised if: x a company has a present obligation (legal or constructive) as a result of a past event; x it is likely that resources suitable for producing economic benefits will need to be employed to meet the obligation; x the amount of the obligation can be reliably estimated. If these conditions are not met, no provision should be recognised. The transposition of this concept to the banking system ensures that it is no longer possible to recognise provisions for: x loan losses x general banking risks x future losses on shareholdings x maintenance and repairs. A company must not disclose and record any contingent asset or liability in the financial statements. The term "contingent" refers to all those cases in which the conditions set out above are not met. Contingent liabilities are reported in the financial statements when the possibility of an outflow of resources is not remote.

Valuation and measurement criteria The process of allocating value to provisions is based on the "best estimate" concept. Indeed, IAS 37 defines best estimate for quantifying an obligation as the amount that an enterprise would rationally pay to settle the obligation at the balance sheet date or to transfer it to a third party on that date. Where the effect of the present value of money is material, the amount of a provision is represented by the present value of the outflows that are deemed necessary to settle the obligation. Obligations for which a provision is made may have different maturities and, therefore, in all cases where there is a long postponement, it is necessary to update the estimated amount by using a reference rate aligned to the rates in force at the time of the estimate. Provisions must be reviewed at each balance sheet date and adjusted to reflect the current best estimate.

Derecognition criteria It is no longer probable that an outflow of resources will be required to settle the obligation, the liability must be eliminated from the financial statements. Furthermore, provisions should be used to meet the outflows for which they were originally recognised.

116 13 - Payables and securities in issue Recognition criteria The initial recognition of these financial liabilities takes place upon receipt of the sums collected or upon the issue of debt securities and is made on the basis of the fair value of the liabilities, which is normally equal to the amount collected or to the issue price, plus any additional income/expenses directly attributable to the individual borrowing or issue transaction and which are not repaid by the creditor. Internal administration costs are excluded.

Classification criteria Due to banks, Due to customers, Securities in issue and Subordinated liabilities cover the various forms of interbank and customer borrowing and deposits made through certificates of deposit and outstanding bonds, net of any amounts bought back. These also include payables recognised by the lessee under finance lease transactions.

Valuation and measurement criteria After the initial recognition, financial liabilities are measured at amortised cost according to the effective interest rate method. The exception is short-term liabilities, where the time factor is negligible, which are entered at the value collected.

Derecognition criteria Financial liabilities are eliminated from the balance sheet when they expire or are paid off. Derecognition also occurs when securities previously issued are bought back. The difference between the carrying amount of the liability and the amount paid to purchase it is charged to income.

14 - Financial liabilities held for trading Recognition criteria This item include the negative value of derivatives held for trading purposes and the negative value of embedded derivatives present in combined contracts but closely related to these. It also includes the liabilities that arise from technical overdrafts generated by the trading of securities.

Valuation and measurement criteria The gains and losses arising from the change in fair value and/or the sale of trading instruments are charged to income.

15 - Financial liabilities at fair value Classification criteria This category includes the financial liabilities that the management decides to measure at fair value during initial recognition, when this designation eliminates or significantly reduces a lack of uniformity in the measurement or recognition (often described as "accounting asymmetry") which would other result from measuring assets or liabilities or recognising the respective profits and losses on different bases. It also includes financial liabilities that, together with financial assets, come under a group whose management and performance is measured on the basis of the fair value according to a documented risk management methodology or investment strategy.

Valuation and measurement criteria The gains and losses arising from the change in fair value and/or the sale of these financial liabilities are charged to income.

117 Valuation and measurement criteria At the end of each financial year or interim period, foreign currency items are recorded as follows: - monetary items are converted at the exchange rate in force on the period-end date; - non-monetary items carried at historical cost are converted at the exchange rate in force on the date of the transaction; - non-monetary items carried at fair value are converted by using the exchange rates in force on the period-end date; Exchange differences arising on the settlement of monetary items or translating monetary items at rates different from those at which they were translated when initially recognised or in previous financial statements, are recognised as income in the period in which they arise.

17 - Other information 1) Insurance assets and liabilities Insurance products are classified under financial contracts and insurance contracts on the basis of the level of significance of the insurance risk inherent in those contracts. For these products, IFRS 4 stipulates: x the recording of gross premiums in the income statement under income. These include all the amounts accrued during the year as a result of the signing of insurance contracts net of cancellations. Similarly, the premiums transferred to reinsurers are recorded under costs for the year. x an appropriation to the actuarial reserves, which corresponds to the amount of the commitments to insureds, calculated separately for each contract using the prospective method on the basis of the demographic/financial hypotheses currently used by the market.

2) Other liabilities - Adjustments for other financial transactions The liabilities that come under this item also include writedowns relating to the estimated possible outlays associated with the credit risk in relation to the guarantees and commitments determined individually. These writedowns are determined by applying the same criteria previously described in relation to loans.

3) Own shares Own shares held are used to reduce shareholders' equity. Similarly, the original cost of these and the gains or losses arising from their subsequent sale are recorded as changes in shareholders' equity.

4) Revenue recognition Revenue is recognised when it is received or when it is probable that future benefits will be received and these benefits can be measured reliably. In particular, default interest, where specified contractually, is charged to income only at the time of its actual collection and dividends are recognised as income at the time that their distribution is decided.

5) Segment reporting "Segment reporting" means the representation of a company's economic and financial information by segment. Business segment means a component of an enterprise that is separately identifiable and which provides a group of related services/products and is subject to risks and returns that are different from those of other business segments. Geographical segment means a component of an enterprise that is separately identifiable and which provides a group of related services/products and is subject to risks and returns that are different from those of components operating in other economic environments. In this regard, the Gruppo Banca Popolare Italiana has opted for primary segment reporting. The identification of business segments is consistent with the current system of reporting to the management which is essentially based on a management analysis of the legal entities.

6) Methods for determining Fair Value for disclosure purposes

118 The fair value of floating-rate instruments is approximated according to the corresponding book value and, therefore, in the case of loans, it does not reflect the changes in credit quality because the impact of credit risk is recognised separately by deducting the amount of provisions for loan losses both from fair value and from book value. The fair value of short-term loans and payables is equal to the corresponding book value by virtue of the short- term nature of these instruments. For fixed-rate instruments, the expected future cash flows are discounted at the present value by using current interest rates. The impact of credit risk is recognised separately by deducting the amount of provisions for loan losses both from fair value and from book value.

119 Part B - INFORMATION ON THE CONSOLIDATED BALANCE SHEET ASSETS Section 1 - Cash on hand and deposits with central bank and post offices - Item 10 1.1 Cash on hand and deposits with central bank and post offices: breakdown

31/12/2005 31/12/2004

a) Cash 222,325 239,867 b) Demand deposits with central banks 15,098 3,393 Total 237,423 243,260

Section 2 - Financial assets held for trading - Item 20 2.1 Financial assets held for trading: breakdown by category

31/12/2005 31/12/2004

A. Cash assets 1. Debt securities 1,365,439 4,311,684 1.1 Structured securities 13,460 141,591 1.2 Other debt securities 1,351,979 4,170,093 2. Equities 471,508 1,554,618 3. Units in OICR 644,285 312,978 4. Loans 5,688 4.1. Repurchase agreements 4.2 Other 5,688 5. Impaired assets 6. Assets sold but not eliminated 1,053,752 136 Total A 3,534,984 6,185,104 B. Derivative instruments 1. Financial derivatives: 532,873 1,184 1.1 used for trading activities 529,075 1,184 1.2 associated with the fair value option 1.3 other 3,798 2. Credit derivatives: 186 2.1 used for trading activities 2.2 associated with the fair value option 186 2.3 other Total B 533,059 1,184 Total A+B 4,068,043 6,186,288

The item "Assets sold but not eliminated" includes underlying securities in repurchase agreements without the option of forward repurchase for the seller.

120 2.2 Financial assets held for trading: breakdown by debtors/issuers

31/12/2005

A. CASH ASSETS 1. Debt securities 1,365,439 a) Governments and central banks 915,187 b) Other public entities 8,170 c) Banks 59,409 d) Other issuers 382,673 2. Equities 471,508 a) Banks 174,595 b) Other issuers: 296,913 - insurance companies 14,047 - financial companies 16,785 - non-financial companies 263,414 - other 2,667 3. Units in OICR 644,285 4. Loans a) Governments and central banks b) Other public entities c) Banks d) Other entities 5. Impaired assets a) Governments and central banks b) Other public entities c) Banks d) Other entities 6. Assets sold but not eliminated 1,053,752 a) Governments and central banks 517,895 b) Other public entities c) Banks 277,533 d) Other issuers 258,324 Total A 3,534,984 B. DERIVATIVE INSTRUMENTS a) Banks 440,988 b) Customers 92,071 Total B 533,059 Total (A + B) 4,068,043

The item "Units in OICR" includes investments in Hedge fund units totalling approximately €164 million. In the absence of an official NAV issued by the manager, these are valued at cost because this is deemed to be close to the Fair Value on the basis of a detailed analysis of the securities in the portfolio that are used to determine the NAV of the funds themselves. In particular, these funds include Antonveneta shares, which were impounded by the Judicial Authorities during 2005 and, for this reason, with effect from the date of the judicial measure, the NAV was no longer issued. On March 28, 2006, the Judicial Authorities released the Antonveneta shares to the funds.

121 2.3 Financial assets held for trading: derivative instruments used for trading activities

Currencies and Interest rates Equities Loans Other 31/12/2005 gold A) Listed derivatives 1) Financial derivatives: 22 22 with exchange of capital - options purchased - other derivatives without exchange of capital - options purchased - other derivatives 22 22 2) Credit derivatives with exchange of capital without exchange of capital Total A 22 22 B) Unlisted derivatives 1) Financial derivatives: 100,083 30,358 399,859 878 1,673 532,851 with exchange of capital - options purchased 13,331 4,830 9,169 27,330 - other derivatives 20,869 19,394 40,263 without exchange of capital - options purchased 5,044 - 51 301,186 306,179 - other derivatives 81,708 4,710 70,110 878 1,673 159,079 2) Credit derivatives 186 186 with exchange of capital 185 185 without exchange of capital 1 1 Total B 100,083 30,358 399,859 1,064 1,673 533,037 Total A + B 100,083 30,380 399,859 1,064 1,673 533,059

The instruments in question relate exclusively to the companies belonging to the Banking Group. 2.4 Financial assets held for trading: Changes over the year Information not supplied, as permitted in Banca d'Italia's transitional provisions on the adoption of international financial reporting standards.

Section 3 - Financial assets at fair value - Item 30 3.1 Financial assets at fair value: breakdown by category

31/12/2005 1. Debt securities 174,681 1.1 Structured securities 1.2 Other debt securities 174,681 2. Equities 285,743 3. Units in OICR 255,954 4. Loans 4.1 Structured 4.2 Other loans 5. Impaired assets 6. Assets sold but not eliminated Total 716,378

Of the total value of financial assets at fair value, €284,067 relates to Antonveneta securities arising from complex financial transactions, in the Parent Bank's portfolio and €432,311 relates to securities in the portfolio of the company Area Life.

122 3.2 Financial assets at fair value: breakdown by debtors/issuers

31/12/2005 1. Debt securities 174,681 a) Governments and central banks 105,629 b) Other public entities c) Banks 9,287 d) Other issuers 59,765 2. Equities 285,743 a) Banks 284,362 b) Other issuers 1,381 - insurance companies 400 - financial companies - non-financial companies - other 981 3. Units in OICR 255,954 4. Loans a) Governments and central banks b) Other public entities c) Banks d) Other entities 5. Impaired assets a) Governments and central banks b) Other public entities c) Banks d) Other entities 6. Assets sold but not eliminated a) Governments and central banks b) Other public entities c) Banks d) Other entities Total 716,378

3.3 Financial assets at fair value: changes over the year Information not supplied, as permitted in Banca d'Italia's transitional provisions on the adoption of international financial reporting standards.

Section 4 - Available-for-sale financial assets - Item 40 4.1 Available-for-sale financial assets: breakdown by category

31/12/2005 31/12/2004 Listed Unlisted Listed Unlisted 1. Debt securities 13,778 293,671 10,565 26,578 1.1 Structured securities 1.2 Other debt securities 13,778 293,671 10,565 26,578 2. Equities 296,159 492,102 2.1 measured at Fair Value 296,159 18,604 2.2 measured at cost 473,498 3. Units in OICR 4. Loans 5. Impaired assets 6. Assets sold but not eliminated Total 309,937 785,773 10,565 26,578

This item includes shareholdings totalling €786,279 not held for trading and not qualifiable as interests in subsidiaries, associates and joint ventures. In particular, it includes shareholdings of less than 20%, controlling interests held in companies not yet operational as at December 31, 2005 and companies in liquidation.

123 A list of the shareholdings included in this item is given below. Item 40 - AVAILABLE-FOR-SALE FINANCIAL ASSETS

SHAREHOLDINGS BOOK VALUE % stake % Abruzzo Sviluppo S.p.A. - Pescara 4 1.7983 Agenzia Sviluppo Simeto - Paternò (PA) 3 3.0000 Agrifactoring S.p.A. - Rome 0 2.5000 Agriturpesca S.r.l. - Trapani 5 4.7170 Air Alps Aviation Alpenlandisches Flugunternehme 500 2.6596 Alfa Iota 2002 S.r.l. - Milan 12 35.0000 Alibo S.c.a.r.l. - Bologna 41 8.0000 Alpi Eagles S.p.A. 3,000 8.8861 Andromeda Immobiliare S.r.l. - Lodi 9 100.0000 Angiolucci International S.A. - Luxembourg 650 39.3900 Antares Immobiliare S.r.l. - Lodi 9 100.0000 Antilia Immobiliare S.r.l. - Lodi 9 100.0000 Archimede 1 S.p.A. - Venice 8,492 15.0000 Area Giochi Holding S.p.A. - Verona 2,058 2.0000 Argini Polcevera S.c.a.r.l. - Genoa 3 6.6700 Asteimmbili.it S.p.A. - Milan 40 2.2346 Azimuth Immobiliare S.r.l. - Bologna 16 100.0000 Banca Centrale di Credito Popolare - Centrobanca S.p.A. - Milan 5,622 0.7757 Banca della Nuova Terra S.p.A. - Milan 11,272 15.0000 Banca Italease S.p.A. – Milan 26,719 1.6225 Banca d’Italia - Rome 58,706 1.2253 Banca Popolare Provinciale Lecchese S.p.A. - Lecco 60 0.4041 Bakery Equity Luxembourg S.A. - Luxembourg 47,807 9.9500 Biasi S.p.A - Verona 2,597 10.5970 Bipitalia Residential S.r.l. - Milan 1 4.0000 Bic Liguria S.p.A. (in liquidation) - Genoa 21 0.3986 Binda S.p.A. (in liquidation) - Olgiate Olona 0 1.1487 Black & Blue GMBH - Munich 1 24.8200 Braidense Seconda S.r.l. - Rome 68 100.0000 B.S.R. Gestioni Turistiche Immobiliari S.r.l. - Santa Teresa di Gallura (SS) 17 100.0000 Bussentina S.c.a.r.l. - Rome 0 20.0000 Buy2build S.p.A. - Rome 10 2.0000 Cafindustria dell'Emilia Centrale S.p.A. - Bologna 1 0.4818 C.A.R.S. - Imola 1 3.4388 CA.RI.CE.SE 5 0.0704 Carfid S.r.l. - Rome 92 100.0000 Cattolica Assicurazioni S.p.A. - Verona 14 0.0013 Centrale dei Bilanci S.r.l. - Turin 2,636 5.8333 Centro Agro-Alimentare Valle Pescara Scarl - Cepagatti (PE) 281 1.5755 Centro Tessile Cotoniero S.p.A. - Busto Arsizio 21 0.6743 Centro Factoring S.p.A. - Florence 600 1.8711 Centro Pensioni Complementari Regionali S.p.A. - Bolzano 103 0.0605 Centro Servizi Promozione Imprenditoriale Bic S.r.l. - Livorno 2 1.0397 CE.VAL.CO S.p.A. - Campiglia Marittima 11 0.9474 CFN Class Financial Network S.p.A. - Milan 9 0.3001 Cim Italia S.p.A. - Bergamo 288 9.6795 Cinecittà Studio S.p.A. - Rome 2,500 7.5000 Cithef Scarl - Pozzuoli 1 9.0000 Co.Im.A. S.r.l. - Acireale (CT) 220 33.3300

124 SHAREHOLDINGS BOOK VALUE % stake % Colombera S.p.A. - Iseo (BS) 158 3.0650 Compagnia dei Salari S.r.l. - Rome 13 19.4460 Consorzio Per lo Sviluppo Industriale dell'Area Chieti - Pescara 0 0.0933 Consorzio Bancario SIR (in liquidation) - Rome 0 0.1320 Consulservice S.r.l. - Cavallino 1 0.7447 Cooperativa Artigiana di Garanzia Imolese - Imola 5 5.1179 Cooperativa Artigiana di Garanzia Bolognese Federfidi - Bologna 5 0.8808 Costruttori Romani Riuniti Grandi Opere S.p.A. - Rome 26 0.5000 CPL Concordia Scarl - Concordia sulla Secchia 932 8.9020 Cremona Fiere S.p.A. - Cremona 52 5.0000 C.R.I.F. S.p.A. - Bologna 15 0.5949 De Fonseca S.p.A. - Turin 6,000 15.0000 Deltadator S.p.A. - Gardolo (TN) 6,330 16.9000 Dorogest S.p.A. - Ravenna 2 15.0000 Ecofor Service S.p.A. - Pontedera 19 0.3462 Earchimede S.p.A. - Brescia 25,000 11.9200 E-Geos S.p.A. - Matera 2 2.0000 E-Mid S.p.A. - Milan 196 3.2500 Ente per lo sviluppo zona industriale - Pisa 0 19.7300 Eurobic Abruzzo S.c.a r.l. - Chieti 1 0.0940 Eurocasse Sim S.p.A. in liquidation – Milan 0 20.9808 Euromobiliare Asset Management S.p.A. - Milan 1 0.0080 Euros S.p.A. Cefor & Istinform Consulting - Rome 104 5.1900 Eurovita Assicurazioni S.p.A. - Rome 1,580 2.1615 Evam S.p.A.- Massa 3 0.1057 Evoluzione 94 S.p.A. - Milan 1,646 13.9868 Farma.Cer. S.p.A. - Cernusco sul Naviglio 232 10.0000 Faster Holding S.p.A. - Milan 2,908 15.0000 Federazione Campana delle BCC - Salerno 27 0.9271 Ferfina S.p.A. - Rome 8,597 15.0000 Fidia S.p.A. - Florence 1,732 8.0000 Fidi Toscana - Florence 2,309 3.5762 Filse S.p.A. - Genoa 1,304 5.5462 Finanziaria ICCRI BBL in liquidation - Milan 1,309 50.0000 Finba Bakery Holding GMBH - Frankfurt 30,058 4.6000 Finba Bakery Netherlands B.V. - Amsterdam 15,188 4.6000 Fingruppo Holding S.p.A. - Brescia 1,246 0.1980 Finligure S.p.A. in liquidation - Genoa 0 0.8360 Fiera di Forlì S.p.A. - Forlì 5 0.0722 Fioroni Sistema S.p.A - Perugina 0 1.7780 Fira - Finanziaria Regionale Abbruzzese S.p.A. - Pescara 506 9.8000 Fira Servizi S.r.l. 150 15.0000 Firenze Mostre S.p.A. - Florence 98 4.4444 Fival S.c.a r.l. - Pescara 4 6.5300 Flashmallit S.p.A. in liquidation - Rome 0 15.5960 Fondazione Teatro A. Ponchielli S.p.A. - Cremona 60 10.0000 Framo S.c.a.r.l. - Bologna 8 75.0000 Generale de Santè S.A. - Paris 90,849 7.9990 Geofor S.p.A. 44 0.3462 Geofor Patrimonio S.p.A. 41 0.3462 GE.S.T. - Campobasso 1 0.4350

125 SHAREHOLDINGS BOOK VALUE % stake % Ghenos Consultant S.r.l. - Salerno 14 1.3750 H.D.C. S.p.A. - Milan 0 15.1350 Hopa S.p.A. - Brescia 181,834 7.4006 Hotel Project Lisboa Lda - Lisbon 18 50.0000 I.A.M. Piaggio S.p.A. in extraordinary administration - Genoa 0 1.4460 ILI Autostrade S.p.A. - Genoa 87 7.0000 Industria Adriatica Confezioni S.p.A. in temporary receivership - Chieti 211 9.0000 I.C.C.R.E.A. Holding - Rome 47 0.0093 Immobiliare Barberini S.r.l. - Rome 1,657 7.6160 Imolascalo - Imola 52 1.2675 Interbrennero S.p.A. - Trento 13 0.2563 Industria e Università S.r.l. - Varese 53 0.5882 Internazionale Marmi e Macchine Carrara S.p.A. - Carrara 206 1.3475 Interporto Toscano A. Vespucci S.p.A. - Livorno Guasticce 319 2.6359 Interporto Val Pescara S.p.A. - San Giovanni Teatino (CH) 44 4.2500 Invitec Servizi S.r.l. in liquidation - Perugia 0 1.4990 Iniziative Urbane S.p.A. - Trento 516 5.5550 I.R.F.I.S. - Palermo 70 0.1921 Istituto Centrale delle Banche Popolari Italiane S.p.A. - Milan 18,053 10.6422 Istituto Europeo di Oncologia S.r.l. - Milan 1,873 2.3548 Isveimer S.p.A. in liquidation - Naples 0 0.0617 Kinlab S.p.A. - San Giovanni Teatino (CH) 0 20.2300 Kiwi.com Serv. De Consultoria S.A. 60 0.1460 Ligurcapital S.p.A. - Genoa 227 3.8636 Lisbona Immobiliare S.r.l. - Lodi 25 100.0000 Lucca polo Fiere & Tecnologia S.p.A. - Lucca 178 3.0000 LU.CEN.SE. S.p.A. - Lucca 44 12.5000 Mandelli S.p.A. in extraordinary administration - Piacenza 0 4.5030 Marina Chiavari - Servizi Portuali e Turistici S.r.l. - Chiavari 0 0.0100 Meliorbanca S.p.A. 49,473 12.2243 Moby S.p.A. - Milan 6,940 3.4702 Navicelli di Pisa - Pisa 47 6.7747 Nuovo Mondo S.c.a.r.l. in liquidation - Genoa 1 10.0000 Oglio Po Terre d'Acqua S.consortile a r.l. - Calvatone 1 2.0920 Ospedaletto Servizi Soc. coop.r.l. - Pisa 1 3.8462 P.B. S.r.l. - Milan 7 5.7395 Pegaso Immobiliare S.r.l. - Lodi 10 100.0000 Pensplan Invest SGR - Bolzano 439 4.4444 Perseo Immobiliare S.r.l. - Lodi 10 100.0000 Piaggio & C. S.p.A. - Pontedera (PI) 574 0.1501 Plastisud S.r.l. - Sulmona (AQ) 187 20.5400 Porta di Roma - Rome 10,329 2.9850 Porto Industriale di Livorno S.p.A. - Livorno 559 12.1457 Portone S.c.a.r.l. in liquidazione - Rome 8 30.0000 Promozione e Sviluppo Val di Cecina - Rosignano Marittimo 1 5.5305 Qualiter S.c.a r.l. - Pescara 24 30.0000 Quantoro S.r.l. - Mosciano Sant'Angelo (TE) 0 23.3300 Reindustria S.c.r.l. - Cremona 10 10.0000 Royle West Limited - Dublin 10 1.0000 SAGA - Società Abruzzese Gestione Aeroporto S.p.A. - Pescara 424 10.7283 S.A.T. Società Autostrada Tirrenica - Rome 92 0.3483

126 SHAREHOLDINGS BOOK VALUE % stake % Società Interbancaria per l'Automazione - S.I.A. S.p.A. - Milan 32 0.1331 Seim S.r.l. in liquidation - Rome 0 10.0000 Servizi Assicurativi S.r.l. in liquidation - Mantova 0 100.0000 Simest S.p.A. - Rome 560 0.2650 Sintonia Finance S.r.l. - Milan 1 5.0000 Si Holding S.p.A. Gruppo Cartasì - Rome 339 1.5816 Siteba S.p.A. – Milan 22 0.9224 SI.TE.L - Livorno 1 1.3557 Società Cooperativa per Case Popolari in Cremona a r.l. - Cremona 0 22.0300 Società Cooperativa Luzzatti Luigi - Rome 0 0.0000 Società Aereoporto Toscano Galileo Galilei S.p.A. - Pisa 538 7.5513 Società di Area Terre di Faenza S.c. a r.l. - Riolo Terme 6 5.8511 Società di Gestione per il Realizzo S.p.A. - Rome 192 1.2589 Società di Sviluppo Vigo di Fassa S.p.A. - Vigo di Fassa 0 13.4715 Sofis Energia S.r.l. - Pescara 32 33.0000 Solidarietà e Finanza Sim S.p.A. - Milan 413 20.0000 Spal Automotive S.r.l. - Correggio 5,630 12.0000 S.S.B. – Società per i Servizi Bancari S.p.A. - Milan 31 0.5736 Polis Fondi SGR S.p.A. - Milan 287 9.8000 S.T.A.I. - Imola 3 2.5126 Sviluppo Genova S.p.A. - Genoa 230 5.0000 Sviluppo Turistico Lago d'Iseo S.p.A. - Iseo (BS) 8 0.2430 Swift - Society for Worldwide Interbank Financial Telecommunication - Brussels 74 0.0686 Tirrena Professional Factor 0 69.5000 Tirreno Brennero S.r.l. - Rome 7 1.3642 Trentino Welcome S.p.A. - Trento 30 25.0000 Tre Pi S.p.A. in composition with creditors - Rome 0 20.0000 TV Files S.p.A. - Rome 0 1.2130 Wittur A.G. - Munich 544 0.8508 UBS AG - Zurich 2 0.0000 Unipol Assicurazioni S.p.A. - Bologna 129,117 2.3074 Visa Europe Limited 0 0.0267 Zucchetti. Com S.r.l. - Lodi 128 15.0000 Total available-for-sale financial assets- shareholdings 786,279

127 4.2 Available-for-sale financial assets: breakdown by debtors/issuers

31/12/2005 1. Debt securities 307,449 a) Governments and central banks b) Other public entities c) Banks 8,818 d) Other issuers 298,631 2. Equities 788,261 a) Banks 171,372 b) Other issuers: 616,889 - Insurance companies 130,712 - Financial companies 278,653 - Non-financial companies 205,808 - Other 1,716 3. Units in OICR 4. Loans a) Governments and central banks b) Other public entities c) Banks d) Other entities 5. Impaired assets a) Governments and central banks b) Other public entities c) Banks d) Other entities 6. Assets sold but not eliminated a) Governments and central banks b) Other public entities c) Banks d) Other issuers Total 1,095,710

4.3 Available-for-sale financial assets: hedged assets There are no available-for-sale financial assets that are hedged. Therefore, the corresponding table is omitted.

4.4 Available-for-sale financial assets: assets to be micro-hedged There are no available-for-sale financial assets to be micro-hedged. Therefore, the corresponding table is omitted.

Section 5 - Held-to-maturity financial assets - Item 50 5.1 Held-to-maturity financial assets: breakdown by category

31/12/2005 31/12/2004 Book value Fair value Book value Fair value 1. Debt securities 84,630 85,543 327,090 294,953 1.1 Structured 1.2 Other debt securities 84,630 85,543 327,090 294,953 2. Loans 3. Impaired assets 4. Assets sold but not eliminated Total 84,630 85,543 327,090 294,953

128 5.2 Held-to-maturity financial assets: debtors/issuers

31/12/2005 1. Debt securities 84,630 a) Governments and central banks 83,916 b) Other public entities c) Banks d) Other issuers 714 2. Loans a) Governments and central banks b) Other public entities c) Banks d) Other entities 3. Impaired assets a) Governments and central banks b) Other public entities c) Banks d) Other entities 4. Assets sold but not eliminated a) Governments and central banks b) Other public entities c) Banks d) Other entities Total 84,630

5.3 Held-to-maturity financial assets: hedged assets There are no held-to-maturity financial assets that are hedged. Therefore, the corresponding table is omitted.

5.4 Held-to-maturity financial assets: changes over the year Information not supplied, as permitted in Banca d'Italia's transitional provisions on the adoption of international financial reporting standards.

129 Section 6 - Due from banks - Item 60 6.1 Due from banks: breakdown by category

31/12/2005 31/12/2004 A) Due from central banks 229,587 225,756 1. Savings accounts 2. Mandatory reserve 229,587 224,805 3. Repurchase agreements 4. Other 951 B) Due from banks 4,227,610 3,275,566 1. Current accounts and demand deposits 1,077,686 670,275 2. Savings accounts 1,994,530 1,563,389 3. Other loans 725,361 1,029,856 3.1 repurchase agreements 660,700 976,426 3.2 finance leases 3.3 other 64,661 53,430 4. Debt securities 22,520 4.1 structured 4.2 other 22,520 5. Impaired assets 1,672 6. Assets sold but not eliminated 407,513 10,374 Total (book value) 4,457,197 3,501,322 Total (fair value) 7,182,984 6,937,659

6.2 Due from banks: assets to be micro-hedged This category does not exist.

6.3 Finance leases The Bank does not perform finance leasing activities.

Section 7 - Customer loans - Item 70 7.1 Customer loans: breakdown by category

31/12/2005 31/12/2004 1. Current accounts 7,686,780 7,566,655 2. Repurchase agreements 30,274 20,112 3. Mortgages 9,233,325 10,799,896 4. Credit cards, personal loans and "fifth of salary" loans 1,700,135 1,351,803 5. Finance leases 446,140 6. Factoring 7. Other transactions 4,913,924 4,483,606 8. Debt securities 170 82,733 8.1 Structured 8.2 Other 170 82,733 9. Impaired assets 1,040,557 735,069 10. Assets sold but not eliminated 3,363,597 3,958 Total (Book value) 27,968,762 25,489,972 Total Fair value 28,106,614

Assets sold but not eliminated essentially consist of home and commercial mortgage contracts that were securitised in the years 2004 and 2005. For further details, refer to section E of these notes.

130 7.2 Customer loans: breakdown by debtors/issuers

31/12/2005 1. Debt securities issued by: 373,663 a) Governments b) Other public entities c) Other issuers 373,663 Non-financial companies Financial companies Insurance companies Other 373,663 2. Loans to: 23,189,785 a) Governments 193,015 b) Other public entities 425,773 c) Other entities 22,570,997 Non-financial companies 14,358,708 Financial companies 2,865,087 Insurance companies 14,426 Other 5,332,776 3. Impaired assets: 1,040,556 a) Governments b) Other public entities 22,114 c) Other entities 1,018,442 Non-financial companies 659,687 Financial companies 10,696 Insurance companies 35 Other 348,024 4. Assets sold but not eliminated: 3,364,758 a) Governments b) Other public entities c) Other entities 3,364,758 Non-financial companies 1,082,446 Financial companies Insurance companies 171 Other 2,282,141 Total 27,968,762

7.3 Customer loans: assets to be micro-hedged

31/12/2005 1. Loans subject to micro fair value hedge 181,275 a) interest rate risk 181,275 b) exchange rate risk c) credit risk d) several risks 2. Loans subject to micro cash flow hedge a) interest rate risk b) exchange rate risk c) other Total 181,275

7.4 Finance leases The Bank does not perform finance leasing activities.

131 Section 8 - Hedge derivatives - Item 80 8.1 Hedge derivatives: breakdown by type of contracts and underlying assets

31/12/2005 Interest Currencies Equities Loans Other Total rates and gold A. Listed 1) Financial derivatives with exchange of capital - options purchased - other derivatives without exchange of capital - options purchased - other derivatives 2. Credit derivatives with exchange of capital without exchange of capital Total A) B) Unlisted 1) Financial derivatives 119,203 471 66,314 185,988 with exchange of capital - options purchased - other derivatives without exchange of capital - options purchased 471 471 - other derivatives 119,203 66,314 185,517 2. Credit derivatives with exchange of capital without exchange of capital Total B) 119,203 471 66,314 185,988 Total (A+B) (T) 119,203 471 66,314 185,988 Total (A+B) (T-1)

132 8.2 Hedge derivatives: breakdown by hedged portfolios and by type of hedge (book value)

Fair value Cash flow Micro interest exchange several Macro Micro Macro credit risk price risk rate risk rate risk risks

1. Available-for-sale financial assets

2. Loans 1,860

3. Held-to-maturity financial assets

4. Portfolio

Total assets 1,860

1. Financial liabilities 117,814 66,314

2. Portfolio

Total liabilities 117,814 66,314

Section 9 - Adjustment to the value of financial assets to be macro-hedged - Item 90 At the balance sheet date, this item has no value. Therefore, the presentation of the respective section of the notes is omitted.

Section 10 - Shareholdings - Item 100 10.1 Shareholdings in jointly owned companies (valued according to the equity method) and in companies subject to significant influence: information on shareholding relationships

Availability of Names Head office Type of relationship Shareholding company % stake % put votes % B. Companies - Arca SGR S.p.A. Milan significant influence Banca Popolare Italiana 10.28 10.28 Banca Popolare di Crema 5.12 5.12 Banca Popolare di Cremona 5.31 5.31 - Bipielle Broker S.r.l. Milan significant influence Banca Popolare Italiana 95.00 95.00 - Cartesio Alternative Investments SGR S.p.A. Milan significant influence Banca Popolare Italiana 40.00 40.00 - Centrosim S.p.A. Milan significant influence Banca Popolare Italiana 5.00 5.00 Banca Popolare di Crema 4.85 4.85 Banca Popolare di Cremona 2.50 2.50 Cassa di Risparmio di Lucca 5.00 5.00 Cassa di Risparmio di Pisa 5.00 5.00 - Unione Fiduciaria S.p.A. Milan significant influence Banca Popolare Italiana 4.00 4.00 Banca Popolare di Crema 20.00 20.00 - Cassa di Risparmio di Bolzano S.p.A. Bolzano significant influence Reti Bancarie 19.99 19.99 - Assipromos S.r.l. Livorno significant influence Cassa di Risparmi di Livorno 34.00 34.00 - Castimm S.r.l. Livorno significant influence Cassa di Risparmi di Livorno 100.00 100.00 - Finoa S.r.l. Milan significant influence Bipielle Investimenti 50.00 50.00 - Buon Viaggio S.p.A. Milan significant influence Bipielle Investimenti 50.00 50.00 - Royle West Ltd Dublin significant influence Bipielle Investimenti 99.00 99.00 Bipielle Previdenza Assicurativa 1.00 1.00 - Ali S.p.A. Rome significant influence Efibanca 28.35 28.35 – Comital Saiag S.p.A. Volpiano (TO) significant influence Efibanca 28.50 29.57 - Deroma S.p.A. Malo (VC) significant influence Efibanca 38.71 38.71 - Efibanca Palladio Finanziaria SGR S.p.A. Milan significant influence Efibanca 50.00 50.00 - Fidia Farmaceutici S.p.A. Abano Terme (PD) significant influence Efibanca 20.00 20.00 - Gruppo Palladio Finanziaria Vicenza significant influence Efibanca 21.21 21.21 21.21 - IGLI S.p.A. Milan significant influence Efibanca 20.00 20.00 - Tortella S.p.A. Ortona (CH) significant influence AB Capital 21.51 21.51

133 10.2 Shareholdings in jointly owned companies and in companies subject to significant influence: accounting data

Total Shareholders' Consolidated Names Total assets Profit (loss) Fair value revenues equity book value

A. Companies valued at equity A.1 subject to significant influence - Arca SGR S.p.A. 196,103 330,541 10,752 75,025 15,537 – Bipitalia Broker S.r.l. 2,299 1,888 619 1,184 1,125 - Cartesio Alternative Investments SGR S.p.A. 3,345 1,784 516 2,814 1,131 - Centrosim S.p.A. 139,586 32,426 4,715 20,238 5,604 - Unione Fiduciaria S.p.A. 35,434 20,633 1,890 24,034 4,687 - Cassa di Risparmio di Bolzano S.p.A. 6,036,312 314,376 37,532 635,997 207,362 - Assipromos S.r.l. 154 104 (3) 46 16 - Castimm S.r.l. 1,212 57 (63) 1,131 1,215 - Finoa S.r.l. 158,200 3,439 3,277 146,659 82,607 - Buon Viaggio S.p.A. 48,312 23,823 (764) 1,380 690 - Royle West Ltd 292 173 (8) (153) - Efibanca Palladio Finanziaria SGR S.p.A. 11,640 4,688 2,005 8,435 6,314 - Ali S.p.A. 29,874 82,141 (1,587) 3,842 4,487 - Comital Saiag S.p.A. 396,115 172,876 39,275 80,926 23,930 - Deroma S.p.A. 143,795 45,104 (8,002) 13,017 12,203 - Fidia Farmaceutici S.p.A. 143,961 88,294 11,664 84,859 16,972 - Gruppo Palladio Finanziaria 232,836 26,718 8,865 185,451 78,781 - IGLI S.p.A. 120,120 120,120 24,024 - Tortella S.p.A. 14,197 10,289 96 4,295 959 487,644

10.3 Shareholdings: changes over the year Information not supplied, as permitted in Banca d'Italia's transitional provisions on the adoption of international financial reporting standards.

10.4 Commitments relating to shareholdings in subsidiaries 10.5 Commitments relating to shareholdings in jointly owned companies 10.6 Commitments relating to shareholdings in companies subject to significant influence No commitments relating to shareholdings remain.

Section 11 - Reinsurers' share of technical reserves - Item 110 This item has no value. Therefore the corresponding table is omitted.

134 Section 12 - Property, plant and equipment - Item 120 12.1 Property, plant and equipment: breakdown of assets valued at cost

31/12/2005 31/12/2004 A. Functional assets 1.1 owned 803,105 733,209 a) land 188,339 188,670 b) buildings 543,255 468,010 c) furniture 29,567 30,390 d) electronic equipment 26,653 26,657 e) other 15,291 19,482 1.2 acquired under finance leases 58,576 140,785 a) land 10,411 2,600 b) buildings 40,757 128,660 c) furniture d) electronic equipment e) other 7,408 9,525 Total A 861,681 873,994 B. Assets held for investment purposes 2.1 owned 70,384 78,197 a) land 2,169 2,356 b) buildings 68,215 75,841 c) other 2.2 acquired under finance leases a) land b) buildings c) other Total B 70,384 78,197 Total (A + B) 932,065 952,191

12.2 Property, plant and equipment: breakdown of assets measured at fair value or revalued amounts There are no items of property, plant and equipment measured at fair value. Therefore, the corresponding table is omitted.

135 12.3 Functional items of property, plant and equipment: changes over the year

31/12/2005 Electronic Land Buildings Furniture Other Total equipment A. Gross opening balance 199,081 657,069 42,574 34,253 35,801 968,778 A.1 Total reductions in value, net -389 -12,184 -7,596 -6,794 -26,963 A.2 Net opening balance 199,081 656,680 30,390 26,657 29,007 941,815 B. Increases 20,598 -4,723 5,979 10,673 7,341 39,868 B.1 Purchases 17,632 64,029 5,917 9,590 1,866 99,034 B.2 Capitalised improvement costs 10,041 3,157 13,198 B.3 Writebacks B.4 Increases in fair value charged to: a) shareholders' equity b) income statement B.5 Exchange gains 165 37 167 369 B.6 Transfers from buildings held for investment purposes B.7 Other increases 2,966 -78,958 62 1,046 2,151 -72,733 C. Decreases -20,929 -67,945 -6,802 -10,677 -13,649 -120,002 C.1 Sales -15,412 -37,694 -284 -1,071 -1,458 -55,919 C.2 Depreciation -3,188 -17,333 -6,161 -7,393 -3,822 -37,897 C.3 Writedowns for impairment charged to: -2,303 -3,586 -155 -19 -3,049 -9,112 a) shareholders' equity b) income statement -2,303 -3,586 -155 -19 -3,049 -9,112 C.4 Decreases in fair value charged to: a) shareholders' equity b) income statement C.5 Exchange losses -99 -114 -498 -711 C.6 Transfers to: a) PPE held for investment purposes b) discontinued operations C.7 Other decreases -26 -9,233 -202 -2,080 -4,822 -16,363 Closing balance 198,750 584,012 29,567 26,653 22,699 861,681 D.1 Total reductions in value, net -1,106 -80,085 -89,213 -67,859 -238,263 D.2 Gross closing balance 198,750 585,118 109,652 115,866 90,558 1,099,944 E. Measurement at cost

136 12.4 Property, plant and equipment held for investment purposes: changes over the year

31/12/2005 TOTAL Land Buildings A. Opening balance 2,356 75,841 B. Increases 1,860 B.1 Purchases 379 B.2 Capitalised improvement costs B.3 Increases in fair value B.4 Writebacks B.5 Exchange gains B.6 Transfers from functional buildings B.7 Other increases 1,481 C. Decreases -187 -9,486 C.1 Sales -187 -291 C.2 Depreciation -1,401 C.3 Decreases in fair value C.4 Writedowns for impairment -7,794 C.5 Exchange losses C.6 Transfers from other portfolios of assets a) functional buildings b) non-current assets and discontinued operations C.7 Other decreases D. Closing balance 2,169 68,215 E. Measurement at fair value

12.5 Commitments to buy property, plant and equipment There are no commitments to buy property, plant and equipment. Therefore, the corresponding tables are omitted.

Section 13 - Intangible assets - Item 130 13.1 Intangible assets: breakdown by type of asset

31/12/2005 31/12/2004

Unlimited Unlimited Limited duration Limited duration duration duration A.1 Goodwill: 2,010,018 1,843,205 A.1.1 pertaining to the group 2,010,018 1,843,205 A.1.2 pertaining to minority interests A.2 Other intangible assets: A.2.1 Assets measured at cost 47,298 54 70,466 409 a) Intangible assets generated internally 15,212 b) Other assets 47,298 54 55,254 409 A2.2 Assets measured at fair value: a) Intangible assets generated internally b) Other assets Total 47,298 2,010,072 70,466 1,843,614

137 Goodwill includes consolidation gains arising from the difference between the book value and the shareholders' equity of the companies whose financial statements have been fully consolidated, as broken down below:

Subsidiary 31/12/2005 Banca Caripe S.p.A. 106,688 Banca Popolare di Crema S.p.A. 126 Banca Popolare di Cremona S.p.A. 225,129 Banca Popolare di Mantova S.p.A. 646 Bipielle Network S.p.A. 25,156 Cassa di Risparmi Livorno S.p.A. 5 Efibanca S.p.A. 140 Bipitalia Gestioni S.G.R. S.p.A. 7,762 Gruppo Bipielle International Holding SA 21,064 Bipielle Riscossioni S.p.A. 20 Italfortune International Advisor S.A. 274 Gruppo Bipielle Investimenti (for shareholdings held) 523,536 Gruppo Reti Bancarie (for shareholdings held) 646,957 Tiepolo Finance S.r.l. 2 AB Capital S.p.A. 118 Nazionale Fiduciaria S.p.A. - Critefi Sim S.p.A. 6,932 Acque Minerali Riunite S.p.A. 4,770 Area Life Ltd 17,273 Put Reti Bancarie S.p.A (Fondazione Caripe) 10,820 Cassa di Risparmio di Lucca S.p.A. (Fondazione Pisa) 28,880 Cassa di Risparmio di Lucca S.p.A. (Fondazione Livorno) 3,935 Banca Caripe S.p.A. (Fondazione Caripe) 13,149 Total 1,643,382

138 13.2 Intangible assets: changes over the year

31/12/2005 Other intangible assets: Other intangible assets: Total Goodwill generated internally other Limited Unlimited Limited Unlimited A. Gross opening balance 1,828,793 15,212 4,613 406 1,849,024 A.1 Total reductions in value, net 14,412 50,641 3 65,056 A.2 Net opening balance 1,843,205 15,212 55,254 409 1,914,080 B. Increases 219,183 20,218 221 239,622 B.1 Purchases 182,340 17,389 199,729 B.2 Increases in internal intangible assets B.3 Writebacks B.4 Increases in fair value - to shareholders' equity - to income statement B.5 Exchange gains 145 221 366 B.6 Other increases 36,698 2,829 39,527 C. Decreases -52,370 -15,212 -28,174 -576 -96,332 C.1 Sales C.2 Writedowns -42,035 -24,789 -12 -66,836 - amortisation -21,118 -12 -21,130 - writedowns -42,035 -3,671 -45,706 - shareholders' equity - income statement -42,035 -3,671 -45,706 C.3 Decreases in fair value - to shareholders' equity - to income statement C.4 Transfers to non-current assets and discontinued operations C.5 Exchange losses -147 -564 -711 C.6 Other decreases -10,188 -15,212 -3,385 -28,785 D. Net closing balance 2,010,018 47,298 54 2,057,370 D.1 Total net writedowns 42,362 54 42,416 E Gross closing balance 2,010,018 4,936 2,014,954 F. Measurement at cost

The increases due to purchases principally relate to the goodwill (consolidation gains) of Cassa di Risparmio di Lucca (€139.7 million), Bipielle Investimenti (€4.6 million), Reti Bancarie (€10.8 million), Banca Caripe (€16.8 million) and Gruppo Partecipazioni Italiane (€5.4 million). Other increases and decreases are due to transfers of goodwill (consolidation gains) relating to subsidiaries, as a result of changes in the percentage ownership of the sub-holding companies Reti Bancarie and Bipielle Investimenti. Decreases owing to writedowns to the income statement correspond to the goodwill (consolidation gains) of Banca Popolare di Cremona (€8.3 million), Gruppo Bipielle International Holding (€5.5 million), Reti Bancarie (€15.0 million), Area Life Ltd (€7.6 million) and Gruppo Partecipazioni Italiane (€5.4 million).

139 Section 14 - Tax assets (Assets item 140) and Tax liabilities (Liabilities item 80) 14.1 Prepaid tax assets: breakdown

31/12/2005 31/12/2004

balancing entry in income statement balancing entry in shareholders' TOTAL TOTAL Writedown of Tax losses Other equity loans - IRES 169,648 219,710 242,375 124,123 755,856 116,972 - IRAP 731 2,553 5,740 4,891 13,915 11,234 - OTHER 602 292,012 292,614 573,669 Total 170,981 222,263 540,127 129,014 1,062,385 701,875

14.2 Deferred tax liabilities: breakdown

31/12/2005 31/12/2004 balancing entry in balancing entry in income statement shareholders' equity - IRES 92,754 55,522 148,276 75,626 - IRAP 11,388 10,460 21,848 5,080 - Other -30,228 67 -30,161 21,324 Total 73,914 66,049 139,963 102,030

14.3 Changes in prepaid taxes (balancing entry in income statement)

31/12/2005 31/12/2004

1. Opening balance 623,116 444,443 2. Increases 533,291 204,793 2.1 Prepaid taxes recorded during the year 532,410 174,724 a) relating to previous years 2,621 b) due to the change in accounting policies 29,142 c) writebacks 1,535 d) other 499,112 174,724 2.2 New taxes paid in the year 1,594 2.3 Other increases 881 28,475 3. Decreases -223,036 -26,120 3.1. Prepaid taxes paid during the year -98,852 -28,703 a) reversals -93,625 -25,610 b) writedowns for irrecoverability -5,157 -3,093 c) change in accounting policies -70 3.2 Reduction in tax rates -193 3.3 Other decreases -123,991 2,583 4. Closing balance 933,371 623,116

140 14.4 Changes in deferred taxes (balancing entry in income statement)

31/12/2005 31/12/2004

1. Opening balance 30,323 8,025 2. Increases 57,167 53,698 2.1 Deferred taxes advanced during the year 25,696 39,415 a) relating to previous years 191 4,620 b) due to the change in accounting policies 11,423 c) other 14,082 34,795 2.2 New taxes or increases in tax rates 1,071 13,108 2.3 Other increases 30,400 1,175 3. Decreases -13,576 -31,400 3.1 Deferred taxes paid during the year -12,836 -11,209 a) reversals -11,132 -10,240 b) due to the change in accounting policies -969 c) other -1,704 3.2 Reduction in tax rates 25 3.3 Other decreases -765 -20,191 4. Closing balance 73,914 30,323

14.5 Changes in prepaid taxes (balancing entry in shareholders' equity)

31/12/2005 31/12/2004

1. Opening balance 78,759 2. Increases 230,042 86,687 2.1 Prepaid taxes recorded during the year 224,227 84,046 a) relating to previous years 4,793 b) due to the change in accounting policies 196,046 71,369 c) other 28,181 7,884 2.2 New taxes or increases in tax rates 2.3 Other increases 5,815 2,641 3. Decreases -179,787 -7,928 3.1. Prepaid taxes paid during the year -177,903 -1,424 a) reversals -177,903 -1,424 b) writedowns for irrecoverability c) due to the change in accounting policies 3.2 Reduction in tax rates 3.3 Other decreases -1,884 -6,504 4. Closing balance 129,014 78,759

Note that the changes in 2004 also include, inter alia, the effects of the deferred taxes recognised as a result of the adjustments made to the 2004 income statement following the introduction of international financial reporting standards.

141 14.6 Changes in deferred taxes (balancing entry in shareholders' equity)

31/12/2005 31/12/2004

1. Opening balance 71,707 2. Increases 129,655 82,013 2.1 Prepaid taxes recorded during the year 128,398 64,960 a) relating to previous years b) due to the change in accounting policies 122,521 40,607 c) other 5,877 24,353 2.2 New taxes or increases in tax rates 556 3 2.3 Other increases 701 17,050 3. Decreases -135,313 -10,306 3.1. Prepaid taxes paid during the year -132,536 -1,412 a) reversals -132,536 -1,412 b) writedowns for irrecoverability c) due to the change in accounting policies 3.2 Reduction in tax rates 3.3 Other decreases -2,777 -8,894 4. Closing balance 66,049 71,707

142 Section 15 - Non-current assets and discontinued operations and associated liabilities - Assets item 150 and Liabilities item 90 15.1 Non-current assets and discontinued operations: breakdown by type of asset

31/12/2005 31/12/2004

A. Individual assets A.1 Shareholdings A.2 Property, plant and equipment A.3 Intangible assets A.4 Other non-current assets Total A B. Groups of assets (units disposed of) B.1 Financial assets held for trading B.2 Financial assets at fair value B.3 Available-for-sale financial assets B.4 Held-to-maturity financial assets B.5 Due from banks 28,452 14,951 B.6 Customer loans 101,282 B.7 Shareholdings 7,236 1,650 B.8 Property, plant and equipment 281,027 136,281 B.9 Intangible assets 24,105 60,196 B.10 Other assets 959,829 42,188 Total B 1,401,931 255,266 C. Liabilities associated with individual discontinued operations C.1 Payables C.2 Securities C.3 Other liabilities Total C D. Liabilities associated with discontinued operations D.1 Due to banks 155,456 47,692 D.2 Due to customers 63,495 D.3 Securities in issue D.4 Financial liabilities held for trading D.5 Financial liabilities at fair value D.6 Provisions 110,903 15,600 D.7 Other liabilities 283,655 46,307 Total D 613,509 109,599

Non-current assets and liabilities and discontinued operations include shareholdings, property, plant and equipment, intangible assets, financial assets and liabilities, net of the corresponding intragroup relations, relating to the subsidiaries being disposed of, Bipielle Leasing S.p.A., Bipielle Riscossioni and other shareholdings held by Efibanca S.p.A. in relation to its merchant banking activities.

143 Section 16 - Other assets 16.1 Other assets: breakdown

31/12/2005 31/12/2004

Assets in transit 223,763 264,176 Bills and other securities for collection 78,345 1,581 Items under construction 79,552 332,750 Current account cheques drawn on a third party 1,496 2,344 Current account cheques drawn on the bank 13,241 9,423 Advances paid by tax authorities on behalf of third parties 82,626 159,662 Security deposits in own name 95,518 2,559 Accrued revenues to be collected 51,361 161,332 Costs of improvements to third party assets 27,606 2,170 Other 1,670,320 2,089,903 Total 2,323,828 3,025,900

The sub-item "security deposits" includes the capital gain realised from the sale of Banca Antonveneta shares to ABN Amro, performed by the Parent Bank, paid into an account available to the Milan Public Prosecutor. The reduction in the balance of the above item is also due to the effects of applying IAS 39 as from January 1, 2005, which involved transferring financial assets into their own category.

144 LIABILITIES Section 1 - Due to banks - Item 10 1.1 Due to banks: breakdown by category

31/12/2005 31/12/2004 1. Due to central banks 362 2. Due to banks 4,791,619 5,182,381 2.1 Current accounts and demand deposits 1,530,383 392,819 2.2 Savings accounts (including time deposits) 2,168,359 3,316,652 2.3. Loans 534,535 623,525 2.3.1 finance leases 1,924 2,382 2.3.2 other 523,611 621,143 2.4 Commitments to buy back own capital instruments 171 2.5. Liabilities from assets sold but not eliminated from the balance sheet 545,332 232,045 2.5.1 repurchase agreements 545,332 232,045 2.5.2 other 2.6 Other payables 13,010 617,169 Total 4,791,619 5,182,743 Fair value 4,791,619

1.2 Breakdown of item 10 "Due to banks": subordinated debts There are no subordinated debts in the liabilities section of the balance sheet.

1.3 Breakdown of item 10 "Due to banks": structured debts There are no structured debts in the liabilities section of the balance sheet.

1.4 Breakdown of item 10 "Due to banks": liabilities to be micro-hedged As at December 31, 2005, there are no amounts due to banks to be hedged.

1.5 Finance leasing debts In 2001, the Parent Bank entered into a finance lease agreement in relation to a building situated in Catania, used as a Regional Headquarters. The contract, which expires in 2008, is recorded in the company's accounts in accordance with IAS 17. The present value of the amount payable to Banca Italease was €1.9 million as at December 31, 2005. The building in question is obviously entered among the company's assets and depreciation is calculated on the basis of the remaining useful life.

Section 2 - Due to customers - Item 20 2.1 Due to customers: breakdown by category

31/12/2005 31/12/2004 1. Current accounts and demand deposits 12,520,293 10,717,115 2. Savings accounts and time deposits 126,153 1,660,150 3. Third-party funds under administration 4,384 76 4. Loans 143,740 8,481 4.1 finance leases 4.2 other 143,740 8,481 5. Commitments to buy back own capital instruments 6. Liabilities from assets sold but not eliminated from the balance sheet 1,496,807 1,964,068 6.1 repurchase agreements 1,226,364 1,781,790 6.2 other 270,443 182,278 7. Other payables 64,692 253,039 Total 14,356,069 14,602,929 Fair value 14,356,069

145 2.2 Breakdown of item 20 "Due to customers": subordinated debts There are no subordinated debts in the liabilities section of the balance sheet.

2.3 Breakdown of item 20 "Due to customers": structured debts There are no structured debts in the liabilities section of the balance sheet.

2.4 Breakdown of item 20 "Due to customers": liabilities to be micro-hedged As at December 31, 2005, there are no amounts due to customers to be hedged.

2.5 Finance leasing debts There are no amounts due to customers in respect of finance leases.

Section 3 - Securities in issue - Item 30 3.1 Securities in issue: breakdown by category

31/12/2005

BV FV A. Listed securities 2,079,858 2,075,469 1. Bonds 2,079,858 2,075,469 1.1 structured 1.2 other 2,079,858 2,075,469 2. Other securities 2.1 structured 2.2 other B) Unlisted securities 18,201,276 19,073,474 1. Bonds 13,237,279 14,663,255 1.1 structured 1,184,125 1,184,125 1.2 other 12,053,154 13,479,130 2. Other securities 4,963,997 4,410,219 2.1 structured 35,013 35,013 2.2 other 4,928,984 4,375,206 Total 20,281,134 21,148,943

Legend BV = book value FV = fair value

3.2 Breakdown of item 30 "Securities in issue": subordinated notes

31/12/2005 31/12/2004

- subordinated notes 2,810,443 2,038,019 Total 2,810,443 2,038,019

Refer to part F for details and conditions of the notes indicated above.

3.3 Breakdown of item 30 "Securities in issue": securities to be micro-hedged The securities for which there is micro-hedging of the interest rate risk amount to around €7,229,421 thousand and the respective fair value is around €7,095,151 thousand.

146 Section 4 - Financial liabilities held for trading - Item 40 4.1 Financial liabilities held for trading: breakdown by category

31/12/2005 31/12/2005

FV FV NV FV* NV FV* L UL L UL A. Cash liabilities 1. Due to banks 2. Due to customers 3. Debt securities 142,525 51,801 63 1,184 1,184 3.1 Bonds 51,806 51,801 3.1.1 Structured 3.1.2 Other bonds 51,806 51,801 3.2 Other securities 90,719 63 1,184 1,184 3.2.1 Structured 3.2.2 Other 90,719 63 1,184 1,184 Total A 142,525 51,801 63 1,184 1,184 B. Derivative instruments 1. Financial derivatives 22 645,609 1.1 used for trading activities 22 626,489 1.2 associated with the fair value option 1.3 other 19,120 2. Credit derivatives 15,657 2.1 used for trading activities 5,675 2.2 associated with the fair value option 2.3 other 9,982 Total B 22 661,266 Total 51,823 661,329 1,184

Legend FV = fair value FV* = fair value calculated by excluding the changes in value due to the change in the issuer's credit rating since the issue date. NV = nominal or notional value L = listed UL = unlisted

4.2 Breakdown of item 40 "Financial liabilities held for trading": subordinated liabilities

On the balance sheet date, there are no liabilities of this kind.

4.3 Breakdown of item 40 "Financial liabilities held for trading": structured debts

On the balance sheet date, there are no liabilities of this kind.

147 4.4 Financial liabilities held for trading: derivative instruments

Currencies Interest rates Equities Loans Other 31/12/2005 and gold A) Listed derivatives 1. Financial derivatives: 22 22 with exchange of capital - options issued - other derivatives without exchange of capital 22 22 - options issued - other derivatives 22 22 2. Credit derivatives: with exchange of capital without exchange of capital Total A 22 22 B) Unlisted derivatives 1. Financial derivatives: 165,676 21,463 454,844 3,626 645,609 with exchange of capital 16,716 18,743 35,459 - options issued 98 10,759 10,857 - other derivatives 16,618 7,984 24,602 without exchange of capital 165,676 4,747 436,101 3,626 610,150 - options issued 5,073 419 358,560 3,626 367,678 - other derivatives 160,603 4,328 77,541 242,472 2. Credit derivatives: with exchange of capital 205 205 without exchange of capital 5,470 9,982 15,452 Total B 165,676 21,463 454,844 9,301 9,982 661,266 Total A+B 165,676 21,485 454,844 9,301 9,982 661,288

4.5 Financial cash liabilities (excluding "technical overdrafts") held for trading: changes over the year Information not supplied, as permitted in Banca d'Italia's transitional provisions on the adoption of international financial reporting standards.

Section 5 - Financial liabilities at fair value - Item 50 Financial liabilities at fair value: breakdown by category

31/12/2005 31/12/2004 FV FV NV FV* NV FV* L UL L UL 1. Due to banks 1.1 Structured 1.2 Other 2. Due to customers 316,281 316,281 274,622 274,622 1.1 Structured 1.2 Other 316,281 316,281 274,622 274,622 3. Securities in issue 1.1 Structured 1.2 Other TOTAL 316,281 316,281 274,622 274,622 Legend FV = fair value FV* = fair value calculated by excluding the changes in value due to the change in the issuer's credit rating since the issue date. NV = nominal value L = listed UL = unlisted

This item refers to the liabilities held by Area Life International Assurance Ltd.

148 Section 6 - Hedge derivatives - Item 60 6.1 Hedge derivatives: breakdown by type of contracts and underlying assets

31/12/2005 Currencies Interest rates Equities Loans Other Total and gold A) Listed 1) Financial derivatives With exchange of capital - option issued - other derivatives without exchange of capital - option issued - other derivatives 2) Credit derivatives With exchange of capital without exchange of capital Total A B) Unlisted 1) Financial derivatives 157,281 38,340 195,621 With exchange of capital - option issued - other derivatives without exchange of capital 157,281 38,340 195,621 - option issued - other derivatives 157,281 38,340 195,621 2) Credit derivatives With exchange of capital without exchange of capital Total B 157,281 38,340 195,621 Total (A+B) (T) 157,281 38,340 195,621 Total (A+B) (T-1)

6.2 Hedge derivatives: breakdown by portfolios hedged and by types of hedge

31/12/2005 Fair value hedge Cash flow hedge Micro interest exchange credit several Macro Micro Macro price risk rate risk rate risk risk risks 1. Available-for-sale financial assets 2. Loans 15,616 3. Held-to-maturity financial assets 81 4. Portfolio Total assets 157,200 81 1. Financial liabilities 38,340 2. Portfolio Total liabilities 38,340

149 Section 7 - Adjustment to the value of financial liabilities to be macro-hedged - Item 70 This section is omitted because there are no liabilities of this kind.

Section 8 - Tax liabilities - Item 80 Refer to section 14 of the assets section.

Section 9 - Liabilities associated with discontinued operations - Item 90 Refer to section 15 of the assets section.

Section 10 - Other liabilities - Item 100 10.1 Other liabilities: breakdown

31/12/2005 31/12/2004 Liabilities in transit 36,078 225,444 Security deposits received from third parties 1,493 3,490 Amounts payable to tax authorities on behalf of third parties 48,322 45,579 Differential adjustments relating to the portfolio 81,731 123,087 Sums available to customers 126,208 369,227 Items under construction 321,899 157,514 Trade payables 201,344 134,232 Personnel expenses 68,962 84,484 Accrued costs payable 5,907 9,052 Guarantees and commitments 66,279 85,784 Other liabilities 794,656 1,626,375 Total 1,752,879 2,864,268

The reduction in the balance of the above item is also due to the effects of applying IAS 39 as from January 1, 2005, which involved transferring financial liabilities into their own category.

Section 11 - Employee severance payment fund - Item 110 11.1 Employee severance payment fund: changes over the year

31/12/2005

A. Opening balance 153,727 B. Increases 31,601 B.1 Provisions 28,886 B.2 Other increases 2,715 C. Decreases -20,550 C.1 Payments made -11,077 C.2 Other decreases -9,473 D. Closing balance 164,778

Section 12 - Provisions for contingencies and charges - Item 120 12.1 Provisions for contingencies and charges: breakdown

31/12/2005 31/12/2004

1. Company pension funds 139,885 127,312 2. Other provisions for contingencies and charges 364,711 187,543 2.1 legal disputes 163,089 33,432 2.2 personnel charges 20,753 21,285 2.3 other 180,869 132,826 Total 504,596 314,855

150 12.2 Provisions for contingencies and charges: changes over the year

31/12/2005

Pension funds Other provisions A. Opening balance 127,312 187,543 B. Increases 52,511 283,212 B.1 Amounts set aside in the year 12,430 262,059 B.2 Changes over time 2,490 -1,115 B.3 Changes due to changes in the discount rate B.4 Other increases 37,591 22,268 C. Decreases -39,938 -106,044 C.1 Amounts used in the year -8,944 -82,590 C.2 Changes due to changes in the discount rate -1,759 C.3 Other decreases -30,994 -21,695 D. Closing balance 139,885 364,711

12.3 Defined-benefit company pension funds 1. Description of the funds The Group offers its employees a number of defined-benefit benefits managed through internal funds. For the Parent Bank in particular, the defined-benefit funds are made up of: - the value of the commitments in relation to Banca Popolare Italiana staff covered by the staff pension provisions referred to in the "additional retirement pay" regulation of June 17, 1992. This fund is divided into two sections: one relating to pension benefits relating to staff who are in retirement on the date of entry into force of Legislative Decree no. 124/93 on the reform of supplementary pension provision. The other section relates to staff who are still in employment and who, at the time that the defined-contribution internal funds were set up, opted to maintain their previous pension status. The value of this actuarial reserve is determined at the end of each year on the basis of specific actuarial calculations, illustrated in point 5) below; - the value of the commitments payable to staff transferred from the former Bipielle Adriatico (incorporated into the Parent Bank in 2003) on the basis of the agreements of July 29, 1998. This fund is set up both for retired staff and for employees still in active employment. The value of this actuarial reserve is determined at the end of each year on the basis of specific actuarial calculations, illustrated in point 5) below; - the value of the commitments accrued at the balance sheet date payable both to retired employees and those still in employment, for the supplementary pension provision of the incorporated bank Banca Industriale Gallaratese. The amount of the respective actuarial reserve, calculated on the basis of the remuneration received by staff and on accumulated length of service, is updated annually on the basis of specific actuarial calculations, as illustrated in section 5) below. The other Group companies that offer their employees defined-benefit schemes are as follows: Reti Bancarie: the funds come from the merged companies, specifically from Banco di Chiavari e della Riviera Ligure and from Banca Eurosistemi. As a result of the merger of the company Banca Eurosistemi, the pension fund for staff of the former ICCRI was transferred to Reti Bancarie. On the basis of the supplementary agreements originally signed within ICCRI, the pension fund in question is made up, pursuant to Legislative Decree no. 124/93, of two sections, the first a "defined-benefit" plan and the second a "defined-contribution" plan. To date, Section 1 includes only staff who were former employees of the company ICCRI and who are now in retirement (70 registered as at December 31, 2005). Reti Bancarie, which took over all the obligations relating to the fund in question, on the basis of the specific regulations, pays out the respective benefits to beneficiaries. The value of the commitments assumed is determined annually on the basis of the actuarial assessments prepared for the fund's technical budget. In accordance with collective agreements, Section 2 includes staff of the former ICCRI who are now employees of Gruppo Banca Popolare Italiana companies (178 registered as at December 31, 2005). The respective commitments represent the assets constituting the contributions from the employer companies, contributions from the registered staff and returns from financial transactions. As well as the above-mentioned pension fund, there is the pension fund for staff of the former Banco di Chiavari e della Riviera Ligure which operates on a "defined-benefit" basis in accordance with the specific regulations. The Fund includes only staff who were former employees of Banco di Chiavari e della Riviera Ligure and who are now in retirement (28 registered as at December 31, 2005). Reti Bancarie, on the

151 basis of the specific regulations, pays out the respective benefits to beneficiaries. The value of the commitments assumed is determined annually on the basis of the actuarial assessments prepared for the technical budget. Cassa di Risparmio di Lucca: since February 23, 2000, the Staff Pension Fund has been registered under no. 9183 of the III Special Section of the Register of Pension Funds which includes existing pension funds supervised by authorities other than Covip. The Fund is divided into two separate sections which differ from a legal/financial and accounting perspective: - Defined-benefit section: for pensioners who were retired by August 6, 1999; - Defined-contribution section: for staff still in employment. The Fund does not have independent legal personality. The respective balance sheet item covers the prospective expense of supplementing the pensions of those registered to the defined-benefit section and the proportion of assets, allocated for pension purposes in accordance with Article 2117 of the Civil Code, relating to the defined-contribution section. As every year, the Cassa has employed an actuary to determine the necessary actuarial reserves to meet the requirements, accrued as at December 31, 2005, of the Fund's defined-benefit section. As a result of the merger by incorporation of Cassa di Risparmio di Pisa S.p.A. and Cassa di Risparmi di Livorno S.p.A. into Cassa di Risparmio di Lucca S.p.A., which took place on December 31, 2003, with accounting and tax effects as from January 1, 2003, the ordinary and capitalisation section of the Pension Fund of Cassa di Risparmio di Pisa S.p.A. and Cassa di Risparmi di Livorno S.p.A. was transferred to Cassa di Risparmio di Lucca S.p.A. The capitalisation section was subsequently cleared in 2004 after it was used for redemptions and transfers. The defined-contribution section has been liquidated with the individual positions being transferred to an open pension fund.

12.4 Provisions for contingencies and charges - other provisions Other provisions includes the Parent Bank's provisions for the legal risks associated with the Banca Antonveneta operation (€94.3 million), the risks relating to future charges for the destructuring of financial instruments (€19 million), the risks linked to disputed assets (€10 million), the risks for legal disputes with employees (€3.5 million), the risks of refunds owed to current account holders in relation to the repayment of charges made at the end of 2004 (€11.8 million), plus a further €4.3 million in provisions set aside for the same risk by the Group's banking companies. Other provisions also include amounts set aside by the company Reti Bancarie for guarantees issued (€4 million) and for risks arising from the activities of Banca Eurosistemi (€7 million), amounts set aside by the company Basileus (€16.5 million) relating principally to commitments for the regeneration and development of areas sold and amounts set aside by the company Bipielle Network for risks associated with potential customer compensation payable to developers (€3.7 million).

152 Section 13 - Technical reserves - Item 130 13.1 Technical reserves: breakdown This item corresponds to item C of the liabilities section of an insurance company's balance sheet.

31/12/2005 31/12/2004 Direct labour Indirect labour Total Total A. Non-life A1. premium reserves A2. claim reserves A3. other reserves B. Life 85,219 85,219 75,137 B1. actuarial reserves 81,568 81,568 73,445 B2. Reserves for sums payable 3,651 3,651 1,692 B3. Other reserves C. Technical reserves when the investment risk is borne by underwriters C1. reserves relating to contracts whose services are connected with investment funds and market indices C2. reserves arising from the management of pension funds

D. Total technical reserves 85,219 85,219 75,137

Section 14 - Redeemable Shares - Item 150 This section is omitted because the Group has not issued securities of this kind.

Section 15 - Group shareholders' equity - Items 140, 160, 170, 180, 190, 200 and 220 15.1 Group shareholders' equity: breakdown

Items/Amounts 31/12/2005 31/12/2004

1. Share capital 1,456,498 885,127 2. Issue premiums 2,487,324 1,532,100 3. Reserves (375,825) (112,184) 4. (Own shares)

a) parent bank (89,822) (78,450)

b) subsidiaries (1,724) (2,203) 5. Valuation reserves 50,705 18,265 6. Capital instruments 3,048 7. Group profit (loss) for the year (743,893) (14,521) Total 2,786,311 2,228,134

15.2 "Share capital" and "Own shares": breakdown

Types Amount A. Share capital 1,456,498 A.1 Ordinary shares 1,456,498 A.2 Other shares B. Own shares (91,546) A.1 Ordinary shares (91,546) A.2 Other shares

The share capital is made up of 485,499,203 ordinary shares with a face value of €3.00.

153 On the balance sheet date, the Group held €9.4 million own shares, plus €78.5 million arising from the recording of put options entered into during previous years with Deutsche Bank Ag London whose underlying shares are Banca Popolare Italiana shares, as well as €3.7 million existing in the portfolio of hedge funds. During the year, own shares totalling €87.7 million were bought corresponding to around 11.6 million units and own shares totalling €84.9 million were sold corresponding to around 10.6 million units.

15.3 Share capital - Number of shares belonging to the parent bank: changes over the year

Items/Types Ordinary Other A. Shares existing at the start of the year 295,042,409 - fully paid-up 295,042,409 - not fully paid-up A.1 Own shares (-) (4,862,445) A.2 Shares in issue: opening balance 290,179,964 B. Increases 201,047,201 B.1 New issues - for cash: - business combination transactions - conversion of bonds - exercise of warrants 190,456,794 - other - free: - for employees - for directors - other B.2 Sale of own shares 10,590,407 B.3 Other increases C. Decreases 12,064,410 C.1 Cancellation C.2 Purchase of own shares 12,064,410 C.3 Business transfer transactions C.4 Other decreases D. Shares in issue: closing balance 479,162,755 D.1 Own shares (+) 6,336,448 D.2 Shares existing at the end of the year 485,499,203 - fully paid-up 485,499,203 - not fully paid-up

15.4 Share capital: other information During the year, the following capital increase transactions took place: - implementing the resolution of the Extraordinary Meeting of June 2, 2005, the Parent Bank increased the Share Capital by issuing 188,056,794 shares. Holders of convertible shares and bonds were offered on option 6 shares for each group of 10 (ten) convertible shares and/or bonds in return for the payment of €8 per share, of which €5 is premium. These shares are accompanied by free warrants that are transferable, listed and independently distributable, in the ratio of 1 warrant for each 2 shares subscribed, for the subscription of a further capital increase described below; - following the execution of the divisible capital increase reserved for institutional investors, as resolved by the Extraordinary Meeting of March 3, 2003, and exercisable by December 31, 2006 for a total of €120,000,000.00 comprising 40,000,000 shares each with a face value of €3.00, the Parent Bank issued 2,400,000 shares at a unit value of €8.30, of which €5.30 is issue premium. In addition, the following capital increases were resolved but these are not yet fully executed or only partly so: - the meeting of June 2, 2005 resolved on a capital increase, without preemptive right, to be carried out not before July 1, 2008 and no later than December 31, 2010, by a maximum of €282,089,892.00, by

154 issuing a maximum of 94,029,964 ordinary shares, with a unit face value of €3.00, dividend payable, to be offered, at the price of €11.00, of which €8.00 is premium, to holders of the warrants issued at the time of the capital increase described above; - the same meeting had resolved on further capital increases to be put towards the takeover bids for Banca Antoniana Popolare Veneta ordinary shares. We shall not look at these in great detail as it is likely that such resolutions will be revoked, or at least not followed up, given the outcome of the takeover in question; - the meeting of March 3, 2003 had resolved on a capital increase, in divisible form, without preemptive right, for a maximum nominal amount of €120,000,000.00, by issuing, by December 31, 2006, a maximum of 40,000,000 shares, each with a face value of €3.00, dividend payable, with a minimum unit price of no less than the consolidated shareholders' equity per share, taken from the last financial statements approved at the time of issue and taking account of the assets arising from the execution of the capital increase previously performed in 2003. The shares issued will be offered for subscription to Collective Investment Undertakings (OICR), to Banking Institutions ("Fondazioni") as defined in Legislative Decree no. 153 of May 17, 1999 (as subsequently amended) and to strategic partners that have the status of professional investors. The Board of Directors has the right to place these shares with a discount of no more than 10% of the price arising from the application of the above criteria. During 2005, a first tranche of this increase was issued, with the issue of 2,400,000 shares, as previously mentioned.

15.5 Profit reserves: other information The profit reserves at the end of the year are broken down as follows: - legal reserve: amounts to €52.9 million and did not increase during 2005; - reserve for own shares: amounts to €75 million, of which €7.7 million is undistributable as it represents the value of the shares legally owned by the bank. In total, this was unchanged during the year, whereas the undistributable part was not present at the end of the previous year; - reserve for prescribed dividends: this amounts to €0.7 million. During 2005, the reserve was marginally increased on account of the dividends of the Parent Bank and the banks incorporated by the latter that were not claimed within the period of limitation. - the distributable reserve of the Parent Bank totalling €125.9 million, down by €109.5 million: in detail, €86.3 million following the distribution of the 2004 dividend as approved by the shareholders' meeting of April 30, 2005, and €23.2 million to cover the 2004 loss as approved by the shareholders' meeting of January 28, 2006; - reserve fund for dividends collected on own shares, amounting to €1.6 million. The increase for the year is due to the dividends detached on own shares in the year; - the reserve for compliance with Legislative Decree no. 124/1993 totalling €0.4 million consisting of profit allocations in compliance with the provisions of the decree; - "first-time adoption" reserve, which includes the changes in shareholders' equity arising from the first- time adoption of international financial reporting standards. This reserve, formed in 2005, has a negative balance of €345.8 million; - finally, surplus retained earnings (€16.5 million), made up exclusively of the net changes in income in 2004 arising from the first-time adoption of international financial reporting standards according to the table below: The profit reserves also include the capital effects arising from the consolidation of shareholdings in subsidiaries and associates.

Capital instruments: breakdown and changes over the year The item was formed during the year and relates to the valuation of the separation of the embedded option to convert the lower tier II subordinated bond 01.06.2010, in accordance with IAS 39. No conversion requests were made during the year and, therefore, the amount of the item is unchanged in relation to the restated start-of-year date.

155 15.6 Valuation reserves: breakdown

Items/Components 31/12/2005 31/12/2004

1. Available-for-sale financial assets 32,440 2. Property, plant and equipment 3. Intangible assets 4. Foreign investment hedge 5. Cash flow hedge 6. Exchange differences 7. Non-current assets and discontinued operations 8. Special revaluation laws 18,265 18,265 Total 50,705 18,265

15.7 Valuation reserves: changes over the year

Available- Non-current Property, Foreign Special for-sale Intangible Cash flow Exchange assets and plant and investment revaluation financial assets hedge differences discontinued equipment hedge laws assets operations

A. Opening balance 18,265 B. Increases 58,009 B1. Increases in fair value 49,098 X B2. Other increases 8,911 C. Decreases (25,569) C1. Decreases in fair value (18,492) X C2. Other decreases (7,077) D. Closing balance 32,440 18,265

The valuation reserve for available-for-sale assets was created on January 1, 2005 as part of the first-time adoption of IAS/IFRS with an opening balance of €2.6 million. During 2005, this reserve was further increased by €29.8 million for the valuation of equities listed at fair value.

15.8 Valuation reserve for available-for-sale financial assets: breakdown

31/12/2005 31/12/2004 Assets/Values Positive reserve Negative reserve Positive reserve Negative reserve

1. Debt securities 2. Equities 58,009 (25,569) Units in OICR Loans Total 58,009 (25,569)

156 15.9 Valuation reserve for available-for-sale financial assets: changes over the year

Debt securities Equities Units in OICR Loans

1. Opening balance 2. Increases 58,009 2.1 Increases in fair value 49,098 2.2 Transfer of negative reserves to income statement - by impairment - by realisation 2.3 Other increases 8,911 3. Decreases (25,569) 3.1 Decreases in fair value (18,492) 3.2 Transfer of positive reserves to income statement by realisation 3.3 Other decreases (7,077) 4. Closing balance 32,440

Section 16 - Minority interests - Item 210 16.1 Minority interests: breakdown

Items/Amounts 31/12/2005

1. Share capital 783,366 2. Issue premiums 965,676 3. Reserves (1,347,350) 4. (Own shares) 5. Valuation reserves 15,958 6. Capital instruments 7. Period profit (loss) of minority interests 44,014 Total 461,664

16.2 Valuation reserves: breakdown

Items/Components 31/12/2005

1. Available-for-sale financial assets 11,651 2. Property, plant and equipment 3. Intangible assets 4. Foreign investment hedge 5. Cash flow hedge 6. Exchange differences 7. Non-current assets and discontinued operations 8. Special revaluation laws 4,307 Total 15,958

157 16.4 Valuation reserve for available-for-sale financial assets: breakdown

Total Total Assets/Values 31/12/2005 31/12/2004 Positive reserve Negative reserve Positive reserve Negative reserve Debt securities Equities 12,597 (946) Units in OICR Loans Total 12,597 (946)

16.5 Valuation reserves: changes over the year

A. Opening balance 4,307 B. Increases 12,597 B1. Increases in fair value 11,778 X B2. Other increases 819 C. Decreases (946) C1. Decreases in fair value (946) X C2. Other decreases D. Closing balance 11,651 4,307

Other information 1. Guarantees given and commitments

31/12/2005 31/12/2004

1) Financial guarantees given 1,745,008 1,112,771 a) banks 374,547 780,671 b) customers 1,370,460 332,100 2) Commercial guarantees given 1,356,910 1,360,849 a) banks 61,182 906,115 b) customers 1,295,728 454,734 3) Irrevocable commitments to lend funds 3,192,849 2,445,621 a) banks 120,156 169,477 i) certain to be called on 101,351 121,189 ii) not certain to be called on 18,805 48,288 b) customers 3,072,693 2,276,144 i) certain to be called on 26,941 230,628 ii) not certain to be called on 3,045,752 2,045,516 4) Commitments underlying credit derivatives: protection sales 585,032 386,984 5) Assets given as collateral for third party obligations 6 9 6) Other commitments 479,379 3,532,577 Total 7,359,184 8,838,811

158 2. Assets given as collateral for own liabilities and commitments

31/12/2005

Financial assets held for trading 1,710,863 Financial assets at fair value Available-for-sale financial assets 2,924 Held-to-maturity financial assets 49,633 Due from banks 590,561 Customer loans Property, plant and equipment Total 2,353,981

3. Administration and brokerage for third parties: banking group

31/12/2005

1. Trading of financial instruments on behalf of third parties a) Purchases 1. settled 2. not settled b) Sales 1. settled 2. not settled 2. Discretionary accounts a) Individual b) Collective 3. Custody and administration of securities 84,949,475 a) Third-party securities deposited: connected with the duties of custodian bank (excluding discretionary accounts) 10,874,681 1. securities issued by companies included in the scope of consolidation 1,127,260 2. other securities 9,746,954 b) other third-party securities deposited (excluding discretionary accounts): other 37,177,907 1. securities issued by companies included in the scope of consolidation 5,930,954 2. other securities 31,246,953 c) third-party securities deposited with third parties 31,166,033 d) own securities deposited with third parties 5,730,854 4. Other transactions Total 84,949,475

159 Part C - INFORMATION ON THE CONSOLIDATED INCOME STATEMENT Section 1 - Interest - Items 10 and 20 1.1 Interest income and similar revenue: breakdown

Performing financial assets Impaired Total Total Debt financial Other Loans 31/12/2005 31/12/2004 securities assets 1. Financial assets held for trading 98,503 3,661 102,164 123,905 2. Financial assets at fair value 136 3. Available-for-sale financial assets 11,270 11,270 1,207 4. Held-to-maturity financial assets 2,411 2,411 1,866 5. Due from banks 30 81,575 23,901 105,506 48,147 6. Customer loans 1,409,093 9,338 1,418,431 1,394,268 7. Hedge derivatives 57,494 57,494 85,814 8. Financial assets sold but not eliminated 63,056 8,448 71,504 9. Other assets 8,899 8,899 9,086 Total 112,214 1,553,724 9,338 102,403 1,777,679 1,664,429

1.2 Interest income and similar revenue: differentials relating to hedging transactions The corresponding table has been omitted, as permitted by the transitional provisions issued by Banca d'Italia.

1.3 Interest income and similar revenue: other information

31/12/2005 - on foreign currency assets 161,451

1.4 Interest expense and similar charges: breakdown

Total Total Payables Securities Other liabilities 31/12/2005 31/12/2004 1. Due to banks 127,506 622 128,128 112,128 2. Due to customers 148,565 2,993 151,558 120,927 3. Securities in issue 662,005 3,939 665,944 498,420 4. Financial liabilities held for trading 11,104 11,104 5. Financial liabilities at fair value 6. Financial liabilities from assets sold but not eliminated 27,718 27,718 7. Other liabilities and provisions 781 781 76,923 8. Hedge derivatives 31,613 31,613 15,158 Total 276,071 662,005 78,770 1,016,846 823,556

1.5 Interest expense and similar charges: differentials relating to hedging transactions The corresponding table has been omitted, as permitted by the transitional provisions issued by Banca d'Italia.

1.6 Interest expense and similar charges: other information 1.6.1 Interest expense on foreign currency liabilities

31/12/2005 - on foreign currency liabilities 51,105

1.6.2 Interest expense on finance lease liabilities

31/12/2004 - on finance lease transactions 250

160 1.6.3 Interest expense on third party funds under administration

31/12/2005

- on third-party funds under administration 9,919

Section 2 - Commissions - Items 40 and 50 2.1 Commission income: breakdown

31/12/2005 31/12/2004 a) guarantees given 22,888 19,709 b) credit derivatives 119 304 c) management, brokerage and consulting services: 317,502 303,563 1. trading of financial instruments 10,582 9,480 2. foreign currency trading 7,877 4,600 3. discretionary accounts 170,696 139,636 3.1. individual 53,772 50,081 3.2. collective 116,924 89,555 4. custody and administration of securities 11,277 10,030 5. custodian bank 9,648 9,577 6. securities placement 46,603 71,436 7. acceptance of instructions 24,683 4,261 8. consulting activities 2,764 254 9. distribution of third-party services 33,372 54,289 9.1. Discretionary accounts 4,591 4,926 9.1.1. individual 4,591 2,891 9.1.2. collective 2,035 9.2. insurance products 15,847 24,751 9.3. other products 12,934 24,612 d) collection and payment services 72,872 84,767 e) servicing for securitisation transactions 6,289 6,660 f) services for factoring transactions g) tax collection services 16,176 h) other services 161,197 217,456 Total 580,867 648,635

2.2 Commission income: distribution channels for products and services: banking group

31/12/2005 31/12/2004 a) own branches: 60,889 86,532 1. Discretionary accounts 857 379 2. Securities placement 33,516 58,675 3. Third-party products and services 26,516 27,478 b) cold calling: 189,782 178,771 1. Discretionary accounts 169,839 139,257 2. Securities placement 13,087 12,761 3. Third-party products and services 6,856 26,753 c) other distribution channels: 58 1. Discretionary accounts 2. Securities placement 3. Third-party products and services 58

161 2.3 Commission expense: breakdown

31/12/2005 31/12/2004

a) guarantees received 74,894 1,559 b) credit derivatives 1,486 525 c) management, brokerage and consulting services: 107,621 101,497 1. trading of financial instruments 8,334 10,821 2. foreign currency trading 64 18 3. discretionary accounts 38 202 3.1. own portfolio 38 202 3.2. third-party portfolio 4. custody and administration of securities 5,511 4,684 5. placing of financial instruments 46,073 42,897 6. Cold calling to offer securities, products and services 47,601 42,875 d) collection and payment services 16,722 18,870 e) other services 80,772 84,884 Total 281,495 207,335

Section 3 - Dividends and similar income - Item 70 3.1 Dividends and similar income: breakdown

31/12/2005 31/12/2004 Items/Income Income from units Income from units Dividends Dividends in OICR in OICR A. Financial assets held for trading 49,374 42 74,252 B. Available-for-sale financial assets 12,567 31,085 C. Financial assets at fair value 43 D. Shareholdings X X Total 61,984 42 105,337

The dividends received from financial assets held for trading relate to securities of national companies totalling €47.8 million, of which €38 million relates to Antonveneta shares, and securities of foreign companies totalling €1.5 million. The dividends received from available-for-sale financial assets principally relate to Hopa shares (€3.7 million), Istituto Centrale Banche Popolari shares (€1.1 million) and shares of companies performing merchant banking activities (€2.5 million).

162 Section 4 - Net income from trading activities - Item 80 4.1 Net income from trading activities: breakdown

31/12/2005

Capital gains Trading profits Capital losses Trading Net income (A) (B) (C) losses (D) (A+B)-(C+D)

1. Financial assets held for trading 69,154 106,567 (18,040) (118,383) 39,298 1.1 Debt securities 30,271 20,365 (7,320) (67,343) (24,027) 1.2 Equities 20,542 75,246 (6,178) (49,135) 40,475 1.3 Units in OICR 18,341 9,571 (4,542) (506) 22,864 1.4 Loans 1.5 Other 1,385 (1,399) (14) 2. Financial liabilities held for trading (6,135) (6,135) 2.1 Debt securities (6,135) (6,135) 2.2 Payables 2.3 Other 3. Other financial assets and liabilities: exchange differences X X X X 56,940 4. Derivative instruments 102,083 1,087,922 (114,341) (1,160,921) (85,257) 4.1 Financial derivatives: 96,098 1,074,508 (114,223) (1,115,762) (59,379) - Debt securities and interest rates 26,032 905,877 (94,598) (919,527) (82,216) - Equities and stock indices 70,025 169,611 (18,276) (196,161) 25,199 - Currencies and gold X X X X (52,533) - Other 41 (980) (1,349) (74) (2,362) 4.2 Credit derivatives 5,985 13,414 (118) (45,159) (25,878) TOTAL 171,237 1,194,489 (132,381) (1,285,439) (47,687)

Section 5 - Net income from hedging activities - Item 90 5.1 Net income from hedging activities: breakdown

31/12/2005 A. Income relating to: A.1 Fair value hedge derivatives 1,441 A.2 Financial assets hedged (fair value) A.3 Financial liabilities hedged (fair value) 8,210 A.4 Cash flow hedge financial derivatives 10,800 A.5 Foreign currency assets and liabilities 70,142 Total income from hedging activities (A) 90,593 B. Expenses relating to: B.1 Fair value hedge derivatives (8,418) B.2 Financial assets hedged (fair value) (851) B.3 Financial liabilities hedged (fair value) 1,895 B.4 Cash flow hedge financial derivatives (19,889) B.5 Foreign currency assets and liabilities (15,974) Total expenses from hedging activities (B) (43,237) C. Net income from hedging activities (A-B) 47,356

163 Section 6 - Profit (Loss) from disposal/repurchase - Item 100 6.1 Profit (Loss) from disposal/repurchase: breakdown

31/12/2005 31/12/2004

Profit Loss Net profit Profit Loss Net profit

Financial assets 1. Due from banks 2. Customer loans 3. Available-for-sale financial assets 50,632 (2,694) 47,938 3.1 Debt securities 3.2 Equities 50,632 (2,651) 47,981 3.3 Units in OICR 3.4 Loans (43) (43) 4. Held-to-maturity financial assets 932 (782) 150 Total assets 50,632 (2,694) 47,938 932 (782) 150 Financial liabilities 1. Due to banks 2. Due to customers 3. Securities in issue Total liabilities

Profits on available-for-sale assets concern principally the capital gain on the disposal of Banca Italease shares (€20.1 million) and the profit from the disposal of Sisal shares (€25.4 million). They also include the capital gains on the disposals of the companies Basileus 1 (€1.9 million), Finduemila (€0.6 million), Kabelnetz (€1.0 million) and Marr (€0.6 million). Losses relate to the disposals of Centrobanca shares (€1.2 million), Elsag Banklab shares (€0.9 million) and Euros shares (€0.5 million).

164 Section 7 - Net income from financial assets and liabilities at fair value - Item 110 7.1 Net change in the value of financial assets/liabilities at fair value breakdown

31/12/2005

Capital gains Profits from Capital losses Losses from Net income (A) sale (B) (C) sale (D) (A+B)-(C+D)

1. Financial assets 34,187 99,212 (1,565) 131,834 1.1 Debt securities 10,643 373 (108) 10,908 1.2 Equities 353 94,237 94,590 1.3 Units in OICR 22,841 4,602 (1,457) 25,986 1.4 Loans 350 350 2. Financial liabilities (38,781) (38,781) 2.1 Debt securities (38,781) (38,781) 2.2 Due to banks 2.3 Due to customers 3. Foreign currency financial assets and liabilities: exchange differences 4. Derivative instruments 4.1 Financial derivatives - debt securities and interest rates - equities and stock indices - currencies and gold - other 4.2 Credit derivatives Total derivatives TOTAL (4,594) 99,212 (1,565) 93,053

The profit from the sale of equities is the capital gain realised from the sale of Antonveneta shares to ABN Amro. The additional effects resulting from assets and liabilities at fair value are attributable to the insurance operations of the company Area Life.

Section 8 - Net adjustments for impairment - Item 130 8.1 Net adjustments for impairment of loans: breakdown

31/12/2005 31/12/2004

Writedowns (1) Writebacks (2)

Specific Specific Portfolio Total Total

Write-offs Other Portfolio A B A B

A. Due from banks

B. Customer loans (163,514) (638,152) (59,797) 54,590 11,002 42,873 (752,998) (231,717)

C. Total (163,514) (638,152) (59,797) 54,590 11,002 42,873 (752,998) (231,717)

Legend A = from interest B = other writebacks

Note that the comparative figure for December 31, 2004 does not consider the effect of IAS 39, which came into effect on January 1, 2005. Therefore the comparison with the figure for 2005 is not significant.

165 8.2 Net adjustments for impairment of available-for-sale financial assets: breakdown

31/12/2005 Writedowns Writebacks Specific Total Specific Write-offs Other other from interest writebacks A. Debt securities (14) (118,882) (118,896) B. Equities (107,321) (107,321) C. Units in OICR D. Loans to banks E. Loans to customers Total (14) (226,203) (226,217)

The item "writedowns of debt securities" includes, in particular, writedowns of the "mezzanine" note arising from the Tiepolo Finance 2 securitisation transaction (€104.4 million) in order to express its estimated market value, determined on the basis of the trend in the collections of the assets forming the vehicle's separate assets. Writedowns of equities principally relate to Hopa shares (€96.9 million), Finba Bakery Holding shares (€4.6 million) and Bakery Equity (€5.0 million).

8.3 Net adjustments for impairment of held-to-maturity financial assets: breakdown

31/12/2005 31/12/2004 Writedowns (1) Writebacks (2) Specific Specific Portfolio Total Total Portfolio write-offs other A B A B A. Debt securities (34,537) B. Loans to banks C. Loans to customers 93 Total (34,444)

Legend A = from interest B = other writebacks

8.4 Net adjustments for impairment of other financial transactions: breakdown

31/12/2005 31/12/2004 Writedowns Writebacks Specific Specific Portfolio Total Total Portfolio Write-offs Other A B A B A. Guarantees given (2,076) (2,076) B. Credit derivatives C. Commitments to lend funds (154) D. Other transactions (704) 1 (703) 33,333 Total (2,780) 1 (2,779) 33,179

Legend A = from interest B = other writebacks

166 Section 9 - Net premiums - Item 150 9.1 Net premiums: breakdown

31/12/2005 31/12/2004 Direct labour Indirect labour Total Total A. Life A.1 Gross premiums collected (+) 9,852 9,852 A.2 Premiums transferred to reinsurers (-) (3,598) (3,598) A.3 Total 6,254 6,254 B. Non-life B.1 Gross premiums collected (+) B.2 Premiums transferred to reinsurers (-) B.3 Change in the gross amount of the premium reserve (+/-) B.4 Change in the premium reserve payable by reinsurers (+/-) B.5 Total C. Total net premiums 6,254 6,254

Section 10 - Balance of other income and expense from insurance operations - Item 160 10.1 Balance of other income/expenses from insurance operations: breakdown

31/12/2005 31/12/2004 1. Net change in technical reserves 2. Claims paid out during the year (117) 3. Other income and expenses from insurance operations 5,538 Total 5,421

10.3 Breakdown of the sub-item "Claims paid out during the year"

31/12/2005 31/12/2004

Life: claim expenses, net of transfers to reinsurers A. Amounts paid (1,947) A.1 Gross annual amount 33 A.2 Reinsurers' share(-) (1,980) B. Change in the reserve for sums payable 2,064 B.1 Gross annual amount 1,959 B.2 Reinsurers' share (-) 105 Total life claims 117 Non-life: claim expenses, net of recoveries and transfers to reinsurers C. Amounts paid C.1 Gross annual amount C.2 Reinsurers' share (-) D. Change in recoveries net of reinsurers' share E. Change in the claims reserve E.1 Gross annual amount E.2 Reinsurers' share (-) Total non-life claims

167 10.4 Breakdown of the sub-item "Other income and expenses from insurance operations". 10.4.1 Life

31/12/2005 31/12/2004

LIFE Income 8,053 - Other technical income net of transfers to reinsurers - Income and unrealised capital gains relating to investments benefiting policyholders bearing the risk 6,861 thereof - Change in commissions and other purchase costs to be amortized 1,192 - Commissions and profit-sharings received by reinsurers Expenses (2,515) - Other technical expenses, net of transfers to reinsurers - Expenses and unrealised capital losses relating to investments benefiting policyholders bearing the risk thereof - Purchasing commissions - Other purchase costs (2,515) - Collection commissions Total Life 5,538 NON-LIFE Income - Other technical income net of transfers to reinsurers - Change in commissions and other purchase costs to be amortized - Commissions and profit-sharings received by reinsurers Expenses - Other technical expenses, net of transfers to reinsurers - Purchasing commissions - Other purchase costs - Collection commissions Total non-life

Section 11 - Administrative expenses - Item 180 11.1 Personnel expenses: breakdown

31/12/2005

1) Employees 534,227 a) Wages and salaries 370,077 b) Social security contributions 99,148

c) Employee severance payment 1,944 d) Pension costs e) Provision to the employee severance payment fund 27,778 f) Provision to the pension fund: 12,818 - defined contribution 7,687 - defined benefit 5,131 g) Payments to external supplementary pension funds: 5,147 - defined contribution 5,144 - defined benefit 3 h) Costs arising from payment agreements based on own capital instruments 2,471 i) Other employee benefits 14,844 2) Other personnel 417 3) Directors 9,274 Total 543,918

168 11.2 Average number of employees by category: banking group Employees a) Executives 101 b) Total managers 2,318 - 3rd and 4th level 999 c) Other employees 6,179

11.3 Defined-benefit company pension funds: total costs The expenses relating to defined-benefit pensions funds amount to €6.8 million.

11.4 Other employee benefits Other employee benefits for the year 2005 amount to €14.8 million and essentially include costs of training courses, staff insurance costs, restaurant vouchers and other minor benefits.

11.5 Other administrative expenses

31/12/2005 1) Indirect taxes 73,121 - Stamp duty and stock exchange taxes 44,608 - Substitute tax (Presidential Decree 601/73) 7,975 - Municipal property tax 2,039 - Other indirect taxes 18,499 2) Rents payable 106,630 - Buildings 52,285 - Electronic equipment and software 54,146 - Other 199 3) Maintenance costs and overheads 27,543 - owned properties 4,710 - leased properties 6,760 - movable property 7,194 - software 8,879 4) Cleaning of premises 6,319 5) Electricity, heating and water 10,945 6) Printing and stationery 4,732 7) Postal and telephone 31,283 8) Security 2,703 9) Transport 10,926 10) Insurance premiums 6,397 11) Advertising, publicity and publications 22,022 12) Entertainment expenses 2,032 13) Membership fees 3,014 14) Contributions to organisations and associations 5,700 15) Subscriptions to journals, reviews and publications 1,737 16) Costs of professional services: 89,087 - Consultancy 63,808 - Legal expenses 15,244 - Commercial information and searches 9,837 - Other indirect taxes 198 17) Costs of IT services and outsourcing 9,827 18) Fees paid to directors and statutory auditors 2,194 19) Other expenses 44,074 Total 460,286

169 Section 12 - Net provisions for contingencies and charges - Item 190 12.1 Net provisions for contingencies and charges: breakdown

31/12/2005

Net provisions for contingencies for outstanding lawsuits and revocatory actions (140,051) Interest expense from updating provision for outstanding lawsuits and revocatory actions 4,578 Reallocation to income statement relating to provisions for contingencies for outstanding 3,858 lawsuits and revocatory actions Appropriations to other provisions (129,791) Reallocation to income statement relating to other provisions Total (261,406)

As regards appropriations to other provisions, around €94 million relates to charges for legal expenses and risks connected to the Antonveneta operation, €16.1 million is set aside for refunds owed to current account holders in relation to the repayment of charges at the end of 2004, €4.8 million relates to commitments for the regeneration and development of areas sold, €5.1 million relates to risks arising from the activities of Banca Eurosistemi and €3.7 million relates to risks associated with potential customer compensation payable to developers. The figure also includes amounts set aside to cover the risk connected with the Parmalat revocatory action (€60 million).

Section 13 - Net adjustments to property, plant and equipment - Item 200 13.1 Net adjustments to property, plant and equipment: breakdown

31/12/2005 Writedowns for Depreciation impairment Writebacks (c) Net result (a+b-c) (a) (b) A. Property, plant and equipment A.1 owned (45,490) (10,902) (56,392) - functional use (44,433) (7,205) (51,638) - for investment (1,057) (3,697) (4,754) A.2 Acquired under finance leases (3,222) (3,222) - functional use (3,222) (3,222) - for investment Total (48,712) (10,902) (59,614)

Section 14 - Net adjustments to intangible assets - Item 210 14.1 Net adjustments to intangible assets: breakdown

31/12/2005 Writedowns for Amortisation impairment Writebacks (c) Net result (a+b-c) (a) (b) A. Intangible assets A.1 owned (25,028) (25,028) - Generated internally by the company - Other (25,028) (25,028) A.2 Acquired under finance leases Total (25,028) (25,028)

170 Section 15 - Other operating income and expenses - Item 220 15.1 Other operating expenses: breakdown

31/12/2005 31/12/2004 1) Finance lease operating costs 1,055 2) Ordinary maintenance costs of properties held for investment purposes 57,793 3) Amortisation of costs of improvements to third-party assets 4) Other 145,156 155,093 Total 145,156 213,941

15.2 Other operating income: breakdown

31/12/2005 31/12/2004 Rents receivable 4,454 61,791 Charges payable by third parties 82,961 9,232 - recoveries of taxes 53,725 8,921 - insurance premiums 29,236 311 Other income 280,829 481,940 Total 368,244 552,963

The item "other income" includes costs recovered from customers on overdrawn current accounts and deposits totalling €84.5 million.

Section 16 - Gains (losses) from investments - Item 240 16.1 Gains (losses) from investments: breakdown

Income components/Segments 31/12/2005 31/12/2005 2) Companies subject to significant influence A. Income 1. Revaluations 21,492 2. Profits from sale 47,015 19,459 3. Writebacks 14,592 2,033 4. Other increases 32,423 B. Expenses 1. Writedowns (73,906) 2. Writedowns for impairment (445) (386) 3. Losses from sale (445) (73,520) 4. Other decreases Net result (52,414) 46,570

Other fully consolidated companies A. Income 50,852 1. Revaluations 2. Profits from sale 50,852 3. Writebacks 4. Other increases B. Expenses (4,459) 1. Writedowns 2. Writedowns for impairment 3. Losses from sale 4. Other decreases (4,459) Net result 46,393 Total (6,021) 46,570

Revaluations and writedowns included the gains and losses of the companies subject to significant influence and valued according to the equity method, relating principally to the Gruppo Finoa (€7.4 million), Cassa di Risparmio di Bolzano (€5.5 million), Gruppo Palladio Finanziaria (€1.7 million), Arca Sgr (€1.9 million) and

171 Efibanca Palladio Finanziaria (€0.9 million). Writedowns for impairment relate to the shareholding in Cassa di Risparmio di Bolzano. The profits from the sale of fully consolidated companies principally consist of the profit arising from the sale of Cassa di Risparmio di Lucca shares (€50.8 million) and the effects of the deconsolidation of the companies Bipielle Servizi SA and Pecufina AG. The loss from the sale of the fully consolidated companies principally consists of the loss from the sale of Bipielle Investimenti shares (-€4.1 million).

Section 17 - Net income from the fair value measurement of property, plant and equipment and intangible assets - Item 250 The Group does not own property, plant and equipment or intangible assets at fair value and therefore the respective breakdown is not provided.

Section 18 - Net adjustments to goodwill - Item 260 18.1 Net adjustments to goodwill: breakdown This item (€42.0 million) includes the net adjustments to goodwill made as a result of the impairment tests on the shareholdings in Reti Bancarie (€15.0 million), Banca Popolare di Cremona (€8.3 million), Gruppo Bipielle International Holding (€5.5 million), Area Life International Assurance (€7.6 million) and Gruppo Partecipazioni Italiane (€5.4 million).

Section 19 - Profit (Loss) from sale of investments - Item 270 19.1 Profit (loss) from sale of investments: breakdown

31/12/2005 31/12/2004

A. Buildings 881 (5,011) - Profits from sale 881 173 - Losses from sale (5,184) B. Other assets (57) 3,072 - Profits from sale 85 3,181 - Losses from sale (142) (109) Net result 824 (1,939)

Section 20 - Income taxes on continuing operations - Item 290 20.1 Income taxes on continuing operations: breakdown

31/12/2005 31/12/2004

1. Current taxes (-) (175,741) (121,620) 2. Change in current taxes from previous years (+/-) (8,511) (23,082) 3. Reduction in current taxes for the year (+) 8,493 (18) 4. Change in prepaid taxes (+/-) 237,425 139,166 5. Change in deferred taxes (+/-) 103,542 (45,317) 6. Taxes for the year (-) (-1+/-2+3+/-4+/-5) 165,208 (50,871)

Section 21 - Profit (Loss) from discontinued operations after tax - Item 310 21.1 Profit (loss) from discontinued operations (assets/liabilities) after tax: breakdown

31/12/2005 31/12/2004 1. Income 14,188 2. Expenses 3. Result of the valuations of associated assets and liabilities 4. Profits (loss) from sale 2,549 5. Taxes Profit (loss) 16,737

172 This item includes the income and expenses, net of the related intragroup relations, relating to the subsidiaries being disposed of (Bipielle Leasing S.p.A., Bipielle Riscossioni) and to the shareholdings held by Efibanca S.p.A. in relation to its merchant banking activities.

Section 22 - Period profit (loss) of minority interests - Item 330 22.1 Breakdown of item 330 - "period profit of minority interests"

Company 31/12/2005 Banca Popolare di Crema S.p.A. 4,147 Banca Popolare di Cremona S.p.A. 3,451 Banca Popolare di Mantova S.p.A. 97 Banca Valori S.p.A. 768 Nazionale Fiduciaria S.p.A. 210 Critefi Sim S.p.A. 100 Bipielle Alternative Investments SGR S.p.A. 115 Bipielle Bank (Suisse) S.A. 1,933 Bipitalia Ducato S.p.A. 3,415 Bipielle Gestioni S.G.R. S.p.A. 3,366 Bipielle Leasing S.p.A. 166 Bipielle Network S.p.A. (3,169) Bipielle Società di Gestione del Credito S.p.A. (13,366) Bipielle Immobili Strumentali S.p.A. 737 Bipielle International Holding S.A. (463) Bipielle International UK 339 Bipielle Investimenti S.p.A. 2 Bipielle Real Estate S.p.A. (365) Bipielle Riscossioni S.p.A. 578 Bipielle Fondi Immobiliari S.G.R. S.p.A. 2 Cassa di Risparmi di Livorno S.p.A. (990) Cassa di Risparmio di Lucca S.p.A. 20,976 Cassa di Risparmio di Pisa S.p.A. 4,736 Cassa di Risparmio di Pescara S.p.A. 4,343 Efibanca S.p.A. 4,707 AB Capital S.p.A. (122) Italfortune International Advisor S.A. 85 Reti Bancarie S.p.A. 9,819 Tiepolo S.p.A. 1 Tiepolo II S.p.A. 0 Bipielle Previdenza Assicurativa S.r.l. (13) Area Life International Assurance Ltd (328) Basileus S.p.A. (734) Lido dei Coralli S.p.A. (555) Sirio Immobiliare S.r.l. 31 Nadir Immobiliare S.r.l. (6) Total 44,014

Section 24 - Earnings per share

Consolidated net profit for the year: -743,893 Weighted average ordinary shares in issue: 383,226,514 Net loss per share: -1.941 Weighted average ordinary shares in issue + warrants: 445,154,480 Diluted net loss per share: -1.671

173 Part D - SEGMENT REPORTING SEGMENT REPORTING This section shows the consolidated results divided according to business segment in accordance with IAS 14. In particular, the Gruppo BPI has chosen the following means of presenting its results:

x Primary reporting: consolidated results broken down by business segment x Secondary reporting: results broken down by geographical area

1. PRIMARY SEGMENT REPORTING Procedure for determining segment results Business segments are categorised by classifying the various group companies according to the primary activity performed by each. The results of each segment are therefore obtained by adding together the individual financial statements of the legal entities allocated to each segment. This choice will remain as long as the following principles can be observed: x completeness and reliability of the internal management systems (with particular regard to the sales network management committee, finance area management committee and cost allocation) x reconciliation between operational and accounting data x historical record of at least 12 months (for comparison with the previous year) On this matter, it is pointed out that the Gruppo BPI has, for almost one year now, been developing an internal project aimed at increasing the degree of completeness and reliability of its information and management system. Once fully operational, the new system will identify more analytical segment data and therefore closer to the Group's business reality. This aspect, which is particularly significant with regard to the current "Retail Banks" segment, will also enable this to be broken down according to the customer segmentations that will be adopted under the new organisational and commercial structure currently being defined.

174 Breakdown of business segments The segments identified are as follows: x Retail Banking x Asset Management x Investment Bank x Product Companies x Real Estate x Other Activities1. A breakdown is given below of the group's legal entities whose results count towards the result of each segment:

Investment Retail banking Asset management Product Companies Real Estate Other Activities Bank

Banca Pop. Italiana Soc coop. Reti Bancarie S.P.A.2 Bipielle Investimenti C.R. di Lucca S.p.A. S.p.A. C.R. di Pisa S.p.A. Bipitalia Ducato S.p.A. Bipielle ICT S.p.A. C.R. di Livorno S.p.A. Banca Bipielle Network Bipielle int. holding S.p.A. Banca Pop. Bipitalia Gestioni SGR SA S.p.A. di Crema S.p.A. Bipielle Leasing S.p.A. Bipielle Real Estate Banca Pop. di Lodi Bipitalia Alternative Bipielle Riscossioni S.p.A. Capital Company Banca Pop. di Cremona S.G.R. S.p.A. 3 L.L.C. S.p.A. Bipielle Immobili S.p.A. Bipielle Fondi Immobiliari Efibanca Area Life International Strumentali S.p.A. Banca Pop. di Lodi C.R. di Pescara -Caripe SGR S.p.A. S.p.A. Assurance Ltd Capital Company II Basileus S.p.A. L.L.C. S.p.A, Nazionale Fiduciaria AB Capital Critefi Sim S.p.A. Nadir S.r.l. Banca Popolare di Banca Pop. di Mantova S.p.A. S.p.A. Bipielle Previdenza Sirio S.r.l. Lodi Capital Italfortune International S.p.A. Assicurativa S.p.A. Company III L.L.C. Advisor S.A. Lido dei Coralli S.r.l. Banca Valori S.p.A. Bipielle Consumer ABS Gruppo Bipielle Int. UK S.A 2004 Bipielle Società di Gestione del Partecipazioni Credito S.p.A. Bipielle Consumer ABS italiane S.p.A. 2005 Bipielle Bank (Suisse) S.A. Glass Italy B.V. Tiepolo Finance S.r.l. Gruppo Acque Minerali Riunite Tiepolo Finance 2 S.r.l. S.p.A. Bipitalia Residential RMBS 2004 Bipitalia Residential RMBS 2005 Bipitalia Residential CMBS 2005

In order to ensure that segment results are correctly interpreted, the results attributable to "extraordinary" events occurring during 2005, i.e. those not directly relating to the typical ordinary operations of the segment within which these results were originated, are illustrated separately. The nature and scale of these operations are described in greater detail within the paragraph relating to the Retail Banking segment.

1 The "Retail Banking" and "Other Activities" segments correspond respectively to the "Retail Banking" and "Holding Company" segments contained in the 2005 interim financial statements. 2 The legal entities "Banca Eurosistemi S.p.A." and "Società finanziaria per i Servizi di pagamento S.p.A." were incorporated into Reti Bancarie S.p.A. on July 1, 2005. 3 Lombardia Servizi di Riscossioni S.p.A. was incorporated into Bipielle Riscossioni S.p.A. in November 2005.

175 Segment results for the year ended December 31, 2005: income statement A breakdown is given below of the income statement results for the year 2005. For each segment, a comparison with the previous year is also given.

Retail Asset Invest. Product Real Other Net extra. Interc. Consol. Banking Mng Bank comps. Estate Activities income

Net interest income 671,837 711 78,592 116,212 -22,264 -1,394 -70,000 -12,861 760,833

Net commissions 336,921 68,147 29,748 9,073 -160 -16 -118,000 -26,341 299,372

Net income from trading 43,675 736 -1,275 6,562 -1,250 -90,000 -6,135 -47,687 activities

Other costs/revenues 226,749 150 31,439 -10,230 20,790 83,210 221,000 -322,735 250,373

Total income 1,279,182 69,744 138,504 121,617 -2,884 81,800 -57,000 -368,072 1,262,891

Net adjustments -341,186 -44 -15,234 -51,053 -29,505 -747,000 202,028 -981,994

Net income from financial 937,996 69,700 123,270 70,564 -32,389 81,800 -804,000 -166,044 280,897 operations

Net income from financial 937,996 69,700 123,270 77,961 -32,389 81,800 -804,000 -161,766 292,572 and insurance operations

Operating costs and -720,459 -13,275 -35,853 -45,164 8,469 16,555 -279,000 -105,669 -1,174,396 investment income Profit (loss) from continuing operations 217,537 56,425 87,417 32,797 -23,920 98,355 -1,083,000 -267,435 -881,824 before tax

Segment results for the year ended December 31, 2005: balance sheet A breakdown is given below of the balance sheet figures for the year 2005.

Retail Invest. Product Other Net extra. Balance Sheet Asset Mng Real Estate Interc. Consol. Banking Bank comps. Activities income Due from banks 12,206,827 33,214 263,195 306,949 72,181 26,118 -8,451,287 4,457,197 Customer loans 24,089,875 61,860 4,474,072 3,484,298 25,001 16,341 -521,000 -3,661,685 27,968,762 Shareholdings 7,657,915 2,633 249,614 4,084 557,473 2,009,540 -42,000 -9,951,615 487,644 Other assets 9,862,443 77,491 770,910 1,696,970 1,019,921 1,811,771 -520,000 -310,594 14,408,912 Total assets 53,817,060 175,198 5,757,791 5,492,301 1,674,576 3,863,770 -1,083,000 -22,375,181 47,322,515 Due to banks 7,797,641 25,690 1,588,303 1,783,682 648,931 193,656 -7,246,284 4,791,619 Due to customers 16,596,946 10,124 20,490 1,224,110 1 591 -3,496,193 14,356,069 Securities in issue 17,460,301 3,038,759 792,587 600,000 -1,610,513 20,281,134 Shareholders' eqty 1) 8,400,219 77,489 743,961 430,932 955,283 2,195,915 -9,273,595 3,530,204 Other liabilities 2,478,953 61,895 366,278 1,260,990 70,361 873,608 -748,596 4,363,489 Total liabilities 52,734,060 175,198 5,757,791 5,492,301 1,674,576 3,863,770 -22,375,181 47,322,515

1) This figure does not include minority interests and profit for the year.

176 Retail Banking The Retail Banking segment, as configured here, is responsible for commercial banking activities and for the centralised group management of banking, administrative and financial services. The tables below show extraordinary items for the years 2005 and 2004. Details of these have already been given in the report on operations and include, in terms of their significance, the costs relating to the aborted Antonveneta takeover, the extraordinary writedowns of certain credit positions, the impairment recorded on certain shareholdings and the appropriations made in relation to the Parmalat revocatory action.

Figures relating to the Thousands of EURO 2005 amounts Extraordinary items Retail Banking segment Net interest income 601,837 -70,000 671,837 Net commissions 218,921 -118,000 336,921 Net income from trading activities -46,325 -90,000 43,675 Other costs/revenues 447,749 221,000 226,749 Total income 1,222,182 -57,000 1,279,182 Net adjustments -1,088,186 -747,000 -341,186 Net income from financial operations 133,996 -804,000 937,996 Net income from financial and insurance operations 133,996 -804,000 937,996 Operating costs -999,459 -279,000 -720,459 Profit (loss) from continuing operations before tax -865,463 -1,083,000 217,537

Figures relating to the Thousands of EURO 2004 amounts Extraordinary items Retail Banking segment Net interest income 672,524 672,524 Net commissions 383,196 383,196 Net income from trading activities -157,176 -279,239 122,063 Other costs/revenues 306,604 306,604 Total income 1,205,148 -279,239 1,484,387 Net adjustments -217,655 -217,655 Net income from financial operations 987,493 -279,239 1,266,732 Net income from financial and insurance operations 987,493 -279,239 1,266,732 Operating costs -784,669 -29,000 -755,669 Profit (loss) from continuing operations before tax 202,824 -308,239 511,063

The following table gives a comparison between "standardised" segment data for the years 2005 and 2004.

Retail Banking segment Retail Banking segment Thousands of EURO % Change 31/12/2005 31/12/2004 Net interest income 671,837 672,524 0% Net commissions 336,921 383,196 -14% Net income from trading activities 43,675 122,063 -179% Other costs/revenues 226,749 306,604 -35% Total income 1,279,182 1,484,387 -16% Net adjustments -341,186 -217,655 36% Net income from financial operations 937,996 1,266,732 -35% Net income from financial and insurance operations 937,996 1,266,732 -35% Operating costs -720,459 -755,669 -5% Profit (loss) from continuing operations before tax 217,537 511,063 -135%

177 Asset Management Asset Management is responsible for the activities of asset management companies (SGR). This segment includes the following companies: Bipitalia Gestioni SGR, Bipitalia Alternative SGR, Bipielle Fondi Immobiliari SGR, Nazionale Fiduciaria, Italfortune International Advisors and Bipielle International UK.

Asset Management Asset Management Thousands of EURO segment segment % Change 31/12/2005 31/12/2004 Net interest income 711 608 14% Net commissions 68,147 36,052 47% Net income from trading activities 736 300 59% Other costs/revenues 150 791 -427% Total income 69,744 37,751 46% Net adjustments -44 -6 86% Net income from financial operations 69,700 37,745 46% Net income from financial and insurance operations 69,700 37,745 46% Operating costs -13,275 -12,157 8% Profit (loss) from continuing operations before tax 56,425 25,588 55%

Investment Bank Investment Bank is responsible for the activities of companies that provide specialist services for businesses, from merchant banking to lending to consultancy. This segment includes the following companies: Efibanca and AB Capital. The results achieved by Efibanca account for the positive segment result.

Investment Bank Investment Bank Thousands of EURO segment segment % Change 31/12/2005 31/12/2004 Net interest income 78,592 73,784 6% Net commissions 29,748 33,595 -13% Net income from trading activities -1,275 332 -126% Other costs/revenues 31,439 4,963 84% Total income 138,504 112,674 19% Net adjustments -15,234 -22,794 -50% Net income from financial operations 123,270 89,880 27% Net income from financial and insurance operations 123,270 89,880 27% Operating costs -35,853 -30,629 15% Profit (loss) from continuing operations before tax 87,417 59,251 32%

178 Product companies The Product Companies are responsible for the activities of the Group companies that provide specialist credit services (Consumer Credit, Leasing) and collection and payment services. This segment includes the following companies: Bipitalia Ducato, Bipielle Leasing, Bipielle Riscossioni, Banca Bipielle Network, Area Life Critefi Sim, Bipielle Previdenza Assicurativa, Bipielle Consumer ABS 2004 and Bipielle Consumer ABS 2005. The constant growth in consumer credit is the major contributory factor behind the segment result.

Product Companies segment Product Companies segment Thousands of EURO % Change 31/12/2005 31/12/2004 Net interest income 116,212 113,904 2% Net commissions 9,073 21,730 -140% Net income from trading activities 6,562 1,168 82% Other costs/revenues -10,230 312 -103% Total income 121,617 137,114 -13% Net adjustments -51,053 -30,058 41% Net income from financial operations 70,564 107,056 -52% Net income from financial and insurance operations 77,961 107,056 -37% Operating costs -45,164 -40,468 10% Profit (loss) from continuing operations before tax 32,797 66,588 -103%

Real Estate Service The Real Estate segment is responsible for managing the Group's property assets. This segment includes the following companies: Bipielle Immobili Strumentali, Bipielle Real Estate, Basileus e Lido dei Coralli, Nadir Immobiliare and Sirio Immobiliare.

Real Estate segment Real Estate segment Thousands of EURO % Change 31/12/2005 31/12/2004 Net interest income -22,264 -18,128 -19% Net commissions -160 -120 -25% Net income from trading activities -1,250 -100% Other costs/revenues 20,790 7,155 66% Total income -2,884 -11,093 285% Net adjustments -29,505 -8 100% Net income from financial operations -32,389 -11,101 -66% Net income from financial and insurance operations -32,389 -11,101 -66% Operating costs 8,469 65,803 -677% Profit (loss) from continuing operations before tax -23,920 54,702 -329%

179 Other Activities The Other Activities segment includes companies that carry out servicing, control, governance and coordination activities to support the activities performed by the operating structures. This segment includes the following companies: Bipielle Investimenti, the Group Information Technology company (Bipielle ICT), Bipielle International Holding, Banca Popolare di Lodi Capital Company I, Banca Popolare di Lodi Capital Company II, Banca Popolare di Lodi Capital Company III, Gruppo Partecipazioni Italiane, Glass Italy B.V. and Gruppo Acque Minerali Riunite.

Other Activities segment Other Activities segment % Thousands of EURO 31/12/2005 31/12/2004 Change Net interest income -1,394 -486 -65% Net commissions -16 -238 1388% Net income from trading activities n/a Other costs/revenues 83,210 19,621 76% Total income 81,800 18,897 77% Net adjustments n/a Net income from financial operations 81,800 18,897 77% Net income from financial and insurance operations 81,800 18,897 77% Operating costs 16,555 4,501 73% Profit (loss) from continuing operations before tax 98,355 23,398 76%

2. SECONDARY SEGMENT REPORTING As a basis for secondary segment reporting, the Gruppo BPI has chosen to break down its results by Geographical Area. The Gruppo BPI is present over almost all of the domestic market with a particular concentration in centre north areas. The identified segments are therefore: Italy, Abroad. The legal entities Banca Pop. di Lodi Capital Company L.L.C, Banca Pop. di Lodi Capital Company II L.L.C, Banca Pop. di Lodi Capital Company III L.L.C, Italfortune International Advisor S.A., Bipielle Bank (Suisse) S.A., Bipielle international holding S.A., Bipielle International U.K. S.A. and Area Life International Assurance Ltd contribute to the result of the "Abroad" segment. The remaining legal entities belong to the "Italy" segment.

Thousands of EURO Italy Abroad Intragroup Total Group Net interest income 770,881 -10,048 760,833 Total income 1,255,631 7,260 1,262,891 Net income from financial operations 281,771 -874 280,897 Net income from financial and insurance operations 281,771 10,801 292,572 Operating costs -1,162,373 -12,023 -1,174,396 Profit (loss) from continuing operations before tax -880,602 -1,222 -881,824 Total assets 67,614,336 1,983,360 22,375,181 47,322,515

180 PART E - INFORMATION ON RISKS AND ON THE RELATED HEDGING POLICIES This section contains information on the risk profiles relating to credit risk, market risks (interest rate, price, exchange rate risks), liquidity risk and operational risks. In accordance with the instructions of the Supervisory Board for the 2005 financial statements, these details are supplied, unless otherwise requested, in the form of qualitative information, accompanied by quantitative tables drawn up in free form. As regards the tables to be drawn up according to the format stipulated in the recent circular, if the respective accounting data were not available, these were prepared using the sources indicated at the foot of each table. Where it was not possible to determine the figure relating to the previous financial year, the respective entry in the tables was directly omitted.

SECTION 1 - BANKING GROUP RISKS 1.1 CREDIT RISK Qualitative information 1. General aspects The Gruppo BPI offers its customers a comprehensive range of products to satisfy their various financial requirements and targets retail customers, small and medium-sized companies and Large Corporate clients, through the commercial and consultancy activities of its branches. Customer relations are managed by local units: the Group is organised locally in streamlined structures in close proximity to the branches of the Parent Bank and to those of the "Retail Banks" (Banca Popolare di Crema, Banca Popolare di Cremona, Banca Popolare di Mantova, Cassa di Risparmio di Lucca, Cassa di Risparmi di Livorno, Cassa di Risparmio di Pisa, Banca Ca.Ri.Pe. and Banca Valori). It is on the basis of this strong local connection that our Group wishes to pursue its commercial policy, always attentive to the characteristics of individual local enterprises, distinguished by life cycle, type of segment and size. In particular, as regards business relations, the sales structure has created specialist teams arranged according to customer segment, located in all regional organisations, which provide support to the branches in order to offer products that are as coherent as possible with the corporate financial structure and with the customer's aims, as a means of optimising the Bank/Customer relationship.

2. Credit risk management policies The Credit Division, which is responsible for implementing the policies and strategies on managing the Bank's credit activities, is divided into four departments (Credit Disbursement, Credit Appraisal, Credit Risk Control and Integrated Credit Systems Department) which operate in full harmony both among each other and with the branches in order to guarantee the efficient management and monitoring of credit risk. For corporate clients in particular, credit risk management, appraisal and control is based on an analytical approach for each client, and the disbursement of loans is accompanied by the establishment of appropriate guarantees and covenants aimed at preventing and containing credit risk. As regards other types of customer, for the most popular types of credit, the banks also obtain appropriate guarantees from the counterparty, be these collateral securities on property and financial instruments or personal securities. As regards the classification of impaired assets, these follow the relevant regulatory provisions, with loans classified as: expired loans, problem loans, restructured exposures and non-performing loans, as described in detail in part A - Accounting policies, to which reference should also be made for how such loans are measured. As regards the management of such impaired assets, while problem and restructured positions are the responsibility of the departments indicated above, within the Credit Division of BPI and of other Group banks, non-performing items come under the services provided by Bipielle Società di Gestione del Credito, which is the company that specialises in the management of non-performing loans and which operates both on the basis of a mandate given by banks and through the direct acquisition of this type of impaired loan.

181 Quantitative information CREDIT QUALITY A.1 IMPAIRED AND PERFORMING EXPOSURES: VALUES, ADJUSTMENTS, TREND, ECONOMIC AND REGIONAL DISTRIBUTION A.1.1 Breakdown of financial assets according to portfolios and credit quality (book values)

31/12/2005 Non- Restructured Expired performing Problem loans Country risk Other assets TOTAL exposures exposures loans Financial assets held for trading 4,068,043 4,068,043

Available-for-sale financial assets 1,095,710 1,095,710

Held-to-maturity financial assets 84,630 84,630

Due from banks -3 1,177 4,456,023 4,457,197

Customer loans 300,365 377,533 114,240 385,381 122,120 26,669,123 27,968,762

Financial assets at fair value 716,378 716,378

Discontinued operations 129,734 129,734

Hedge derivatives 185,988 185,988

Total (T) 300,362 377,533 114,240 385,381 123,297 37,405,629 38,706,442

Total (T -1) 446,347 363,225 199,103 478,925 34,649 34,036,167

A.1.2 Breakdown of financial assets according to portfolios and credit quality (gross and net values) (IAS 1/103.c)

31/12/2005

Impaired assets Other assets

Gross Specific Portfolio Gross Specific Portfolio Net Total (net Net exposure exposure adjustments adjustments exposure adjustments adjustments exposure exposure)

Financial assets held for trading 4,068,043 4,068,043 4,068,043

Available-for-sale financial assets 1,261,808 -221,381 55,283 1,095,710 1,095,710

Held-to-maturity financial assets 93,748 -9,118 84,630 84,630

Due from banks 665 -668 -3 4,457,200 4,457,200 4,457,197

Customer loans 2,118,709 -797,871 -143,319 1,177,519 27,142,923 -316,201 -35,479 26,791,243 27,968,762

Financial assets at fair value 716,378 716,378 716,378

Discontinued operations 36,881 36,881 36,881

Hedge derivatives 185,988 185,988 185,988

Total A 2,119,374 -798,539 -143,319 1,177,516 37,954,141 -537,582 10,686 37,435,952 38,613,589 Other companies included in the scope of consolidation Financial assets held for trading 57,845 57,845 57,845

Available-for-sale financial assets 2,378 2,378 2,378

Held-to-maturity financial assets 32,299 32,299 32,299

Due from banks 6,411 6,411 6,411

Customer loans 125,666 -112,271 -2 13,393 587 587 13,980

Financial assets at fair value

Available-for-sale financial assets

Hedge derivatives

Total B 125,666 -112,271 -2 13,393 99,520 99,520 112,913

Total (T) 2,119,374 -798,539 -143,319 1,177,516 37,954,141 -537,582 10,686 37,435,952 38,613,589

Total (T -1) 1,813,271 -274,446 -51,225 1,487,600 34,097,970 -7,030 -20,124 34,070,816 35,558,416

182 A.1.3 Cash and off-balance-sheet exposures to banks: gross and net values

31/12/2005 Specific Portfolio Gross exposure Net exposure adjustments adjustments

CASH EXPOSURES a) Non-performing loans 668 -668 b) Problem loans c) Restructured exposures d) Expired exposures e) Country risk 1,177 1,177 f) Other assets 5,056,786 119 5,056,905 Total 5,058,631 -668 119 5,058,082 B. OFF-BALANCE-SHEET EXPOSURE a) Impaired b) Other 2,790,431 2,790,431 Total 2,790,431 2,790,431

A.1.4 Cash exposures to banks: trend of impaired and "country risk" exposures, gross

31/12/2005 Non- Problem Restructured Expired performing Country risk loans exposures exposures loans A. Opening gross exposure 668 821 - of which: exposures sold but not eliminated B. Increases 546 B.1 Inflows from performing exposures 57 B.2 Transfers from other impaired exposures 489 B.3 Other increases C. Decreases -190 C.1 Outflows to performing exposures -121 C.2 Write-offs C.3 Collections C.4 Disposals C.5 Transfers to other impaired exposures C.6 Other decreases -69 D. Closing gross exposure 668 1,177 - of which: exposures sold but not eliminated

A.1.5 Cash exposures to banks: trend in gross adjustments

31/12/2005 Non- Problem Restructured Expired performing Country risk loans exposures exposures loans A. Gross opening adjustments -668 - of which exposures sold but not eliminated B. Increases B.1 Writedowns B.2 Transfers from other impaired exposures B.3 Other increases C. Decreases C.1 Writebacks from valuation C.2 Writebacks from collection C.3 Write-offs C.4 Transfers to other impaired exposures C.5 Other decreases D. Closing gross exposure -668 - of which: exposures sold but not eliminated

183 A.1.6 Cash and off-balance-sheet exposures to customers: gross and net values

31/12/2005

Gross exposure Specific adjustments Portfolio adjustments Net exposure

A. CASH EXPOSURE a) Non-performing loans 928,046 -580,631 -46,486 300,929 b) Problem loans 571,574 -181,388 -13,288 376,898 c) Restructured exposures 143,319 -29,079 114,240 d) Expired exposures 472,693 -6,548 -83,770 382,375 e) Country risk 141,313 -19,193 122,120 f) Other assets 28,248,862 -544,233 27,704,629 TOTAL 30,505,807 -797,646 -706,970 29,001,191 B. OFF-BALANCE-SHEET EXPOSURES a) Impaired b) Other 2,665,756 2,665,756 TOTAL 2,665,756 2,665,756

A.1.7 Cash exposures to customers: trend of impaired and "country risk" exposures, gross 31/12/2005 Non-perf. Restructured Expired Problem loans Country risk loans exposures exposures A. Opening gross exposure 669,773 417,018 231,484 494,328 32,784 - of which exposures sold but not eliminated B. Increases 562,840 802,429 49,811 363,459 121,157 B.1 Inflows from performing exposures 104,523 623,360 30,892 362,106 792 B.2 Transfers from other impaired exposures 435,461 16,613 871 B.3 Other increases 22,856 162,456 18,048 1,353 120,365 C. Decreases -305,131 -632,859 -137,976 -382,088 -12,628 C.1 Outflows to performing exposures -68,614 -6,179 -287,873 C.2 Write-offs -158,700 -3,309 -718 C.3 Collections -122,505 -126,967 -33,292 -94,519 -6,782 C.4 Disposals C.5 Transfers to other impaired exposures -406,048 -97,787 C.6 Other decreases -23,926 -27,921 304 -5,846 D. Closing gross exposure 927,482 586,588 143,319 475,699 141,313 - of which: exposures sold but not eliminated 646 -2,181 -113,641

A.1.8 Cash exposures to customers: trend in gross adjustments 31/12/2005 Non-perf. Restructured Expired Problem loans Country risk loans exposures exposures A. Gross opening adjustments -223,426 -53,793 -32,381 -15,403 1,044 - of which exposures sold but not eliminated B. Increases -636,488 -195,012 -36,000 -92,178 -19,209 B.1 Writedowns -514,517 -47,086 -25,039 -4,670 -18,952 B.2 Transfers from other impaired exposures -80,598 -20,086 -17 B.3 Other increases -41,373 -127,840 -10,944 -87,508 -257 C. Decreases 232,797 54,129 39,302 17,263 156 C.1 Writebacks from valuation 48,898 3,315 40 18,335 C.2 Writebacks from collection 8,688 2,480 C.3 Write-offs 158,378 3,228 718 C.4 Transfers to other impaired exposures 43,750 37,878 C.5 Other decreases 16,833 1,356 666 -1,072 156 D. Total closing adjustments -627,117 -194,676 -29,079 -90,318 -18,009 - of which: exposures sold but not eliminated -319 -14 -1,415

184 A.2 CLASSIFICATION OF EXPOSURES BASED ON EXTERNAL AND INTERNAL RATINGS As regards the breakdown of exposures based on external ratings, this is largely insignificant for the Group, given that its customers principally consist of unrated entities. With regard to the use of internal credit risk models, internal rating models are currently being developed, aimed at estimating the risk to be associated with each individual relationship, by determining a "probability of default". In particular, provision has been made for the implementation of a single model for all the banks of the Gruppo BPI.

B. CREDIT DISTRIBUTION AND CONCENTRATION Major risks (according to supervisory regulations)

Description Amount a) sum 4,204,925 b) number 8

Information on the top 40 customers The following table shows the concentration of loans to the Group's main customers.

total used cash endorsement Top 40 customers 4,706,576 343,574 Top 40 groups 5,980,849 440,332 Source: Credit Bureau figures

C SECURITISATION AND ASSET TRANSFER TRANSACTIONS C.1 Securitisation transactions Own securitisation transactions 1) Securitisation of non-performing loans - S.P.V. Tiepolo Finance During the second half of 2000, the Parent Bank, together with Cassa di Risparmio di Lucca, Cassa di Risparmio di Pisa and Cassa di Risparmi di Livorno, securitised non-performing mortgage and ordinary loans, in accordance with the provisions set down in Law no. 130 of April 30, 1999. In particular, on December 30, 2000, the Group's Banks assigned non-performing loans to a vehicle company, Tiepolo Finance S.r.l., incorporated pursuant to Art. 1 of Law no. 130/99 and entered on the list referred to in Art. 107 of Legislative Decree no. 385 of September 1, 1993. The Parent Bank acquired control of the vehicle company in the first half of 2001. The vehicle company financed the acquisition of the loans by issuing notes belonging to three classes: A, B and C. The characteristics of the three types of notes issued are as follows: 1) Class A notes (senior notes): floating-rate bonds (6-month Euribor plus an annual spread of 0.58%) with a value of €75 million, which were given the following ratings: AAA (Fitch) and Aaa (Moody's); 2) Class B notes (mezzanine notes): fixed-rate bonds (5.5% p.a.) with a value of €30 million, which were given the following ratings: AA- (Fitch) and Aa3 (Moody’s); 3) Class C notes (junior notes): floating-rate bonds (6-month Euribor plus an annual spread of 0.40%) with a value of €50.5 million, subscribed upon issue by the originators. Class A and Class C notes were issued at par, while Class B notes had an issue discount of 0.43%. Class A and Class B notes are listed on the Luxembourg Stock Exchange. The various types of notes were allocated a different level of subordination, which reflects the priority they have in the payment of capital and interest. For example, Class A notes have priority over Class B notes, while Class C notes have the greatest degree of subordination. As a further guarantee for the payment of capital and interest on the Class B notes, the Parent Bank granted a limited-recourse mortgage in the form of a securities loan for €33 million. Third parties granted the vehicle company a €12 million credit line, which the Bank guaranteed by granting a subordinated loan in the form of a securities loan for €13 million. The other Group banks that took part in the transaction agreed to contribute, pro rata, to the expenses that would arise from the use of the above guarantees.

185 Throughout the entire transaction, the Parent Bank also took on the role of Servicer, responsible for debt recovery and collection, as well as that of Cash Manager. Group banks subscribed for all of the Class C (junior) notes. These notes, by virtue of the adoption of international financial reporting standards, are classified among "Available-for-sale financial assets". The risks that remain for the Group as a result of the transaction described above therefore consist of the subordinated bonds (Class C notes) and the aforementioned guarantees. The report on the securitisation transaction as at December 31, 2005, prepared by applying IAS 32 and 39, shows a loss. As a result, it was decided, as a precautionary measure, to adjust the value of the assets hedging this transaction. In consideration of the subordination clauses stipulated contractually, the Class C notes in the portfolio have been fully written down as well as the respective credits for coupons and interest accrued. For detailed qualitative and quantitative information on the transaction and on its trends, refer to the Notes on the Individual Financial Statements of the Parent Bank.

2) Securitisation transaction with Tiepolo Finance II S.r.l. During the second half of 2002, Bipitalia Società di Gestione del Credito S.p.A. carried out a second securitisation transaction involving non-performing mortgage and ordinary loans, in accordance with the provisions of Law no. 130 of April 30, 1999. In particular, on December 30, 2002, Bipitalia Società di Gestione del Credito S.p.A. transferred non- performing loans, previously acquired by the various group banks, with a net book value of €486 million compared with a nominal value of around €816 million, to a vehicle company, Tiepolo Finance II S.r.l., incorporated pursuant to Art. 1 of Law no.130/99 and entered on the list referred to in Art. 107 of Legislative Decree no. 385 of September 1, 1993. Tiepolo Finance II S.r.l. finance the acquisition of the loans by issuing the following notes: senior notes (Class A) totalling €170 million and (Class B) totalling €15 million, mezzanine notes (Class C) totalling €151 million and junior notes (Class D) totalling €150.03 million. The characteristics of the four types of notes issued are as follows: 1) Class A notes (Senior notes), floating-rate bonds (3-month Euribor plus an annual spread of 1.15%) to which the following rates were assigned: AA (Fitch) and AA2 (Moody's); 2) Class B notes (Senior notes) floating-rate bonds (3-month Euribor plus an annual spread of 1.85%) to which the following ratings were assigned: A (Fitch) and A2 (Moody's); 3) Class C notes (Mezzanine notes) fixed-rate bonds (7% p.a.) to which no rating was assigned; 4) Class D notes (Junior notes) fixed-rate bonds (2% p.a.). The Junior notes were fully subscribed by the group's banks that were the original holders of the securitised loans. All the notes issued are limited-recourse on the loans acquired on other rights connected to any supplementary guarantees formed to support the transaction. The various types of notes were allocated a different level of subordination, which reflects the priority they have in the payment of capital and interest. For example, Class A notes have priority over Class B notes, while Class D notes have the greatest degree of subordination. As a further guarantee for the payment of capital and interest on the notes, Banca Popolare Italiana Soc. Coop. granted a limited-recourse mortgage in the form of a securities loan for €90 million. The issue of "Class D" notes amounts to €150 million and was fully subscribed by the banks that were the original holders of the loan position. As already indicated above, the transaction also involved the issue of €151 million "Class C" (mezzanine) notes with a lower degree of subordination compared with the "Class D" notes in the portfolio. These Notes have an expected yield of 7% per annum. Coupon payment, which has priority over repayment of capital, is however subject to the full repayment of the senior notes. The mezzanine notes, for which no rating was requested, were fully subscribed by Institutional Investors (Dresdner Bank) which nevertheless tried to neutralise the risk by transferring it entirely to the Parent Bank. This outcome was achieved by means of a series of operations involving: the issuing, on April 30, 2003, of a Banca Popolare Italiana bond issue for a nominal amount of €200 million fully subscribed by Dresdner Bank; the subscription by Dresdner Bank of "mezzanine" notes issued by Tiepolo Finance II totalling €151 million; the purchase by Banca Popolare Italiana of Dresdner "Credit Linked Notes" relating to notes of the Gruppo Banca Popolare Italiana or arising from Group securitisations worth €351 million. The overall consideration of interest payable on the bond loan and the payments due under a coupon swap allows the transaction to be reconstructed so that Banca Popolare Italiana guarantees Dresdner Bank both any losses on the "mezzanine" notes and a financial return on the entire transaction.

186 In order to ensure greater transparency, there emerged the need to destructure the financial transaction so as to bring the "mezzanine" notes back into the Parent Bank's portfolio. As at December 31, 2005, these notes and the Class D notes were entered among "Available-for-sale financial assets". As a further credit enhancement instrument serving the securitisation transaction, the Parent Bank made available a line of credit in the maximum amount of €90 million in order to guarantee, for the issuer of the Notes, the necessary liquidity to enable the vehicle to meet the obligations relating to the Senior class notes (Class A notes: €170 million and Class B notes: €15 million). Based on the overall outcome of the securitisation transaction, in relation to the Class D notes in the portfolio, the entire value of the note was written down as were the amount of the coupons and interest accrued at year- end. A further adjustment of €104 million was made to the "mezzanine" notes present in the portfolio as at December 31, 2005 in the nominal amount of €151 million.

3) Securitisation transaction - Sintonia Finance S.r.l. In 2002, Banca Popolare di Cremona S.p.A., together with Centrobanca S.p.A., securitised, pursuant to Law no. 130/99, performing loans consisting of loans secured by mortgages granted to individuals and companies. The securitisation transaction began in the second half of 2002 with the sale without recourse of loans to a specially created vehicle company called Sintonia Finance S.r.l., entered under number 34481 on the general list of financial intermediaries referred to in Art. 106 of Legislative Decree no. 385/93. The transfer agreement was signed on December 23, 2002: Sintonia Finance S.r.l. paid Banca Popolare di Cremona, as the transfer price for the portfolio of loans, a sum of €166.9 million of which €157.5 million was the transfer price and €9.4 million was the excess spread. As at December 31, 2004, the portfolio of loans amounted to €112.8 million. The transaction was arranged with advice from Arca Bim S.p.A., Finanzattiva SIM S.p.A. and Schroder Salomon Smith Barney as Arrangers. The rating agencies appointed to carry out the due diligence for the transaction were Standard and Poor's and Fitch Ratings. The Parent Bank assumed the role of servicer by virtue of which it will manage, administer and collect the transferred loans. As a further guarantee for the transaction, the vehicle company received a subordinated loan from the originator with a value of €7.3 million as at December 31, 2004. In order to mutually guarantee the independence of the events relating to the individual portfolios, a mutual indemnity agreement and a mutual guarantee were signed to hedge against the risks associated with the junior notes. All the notes underlying the securitisation transaction were issued and subscribed on March 14, 2003, in accordance with the terms of the termination clause. The Junior tranche, totalling €9.4 million (relating to the excess spread), was also issued on that date and was fully subscribed by Banca Popolare di Cremona S.p.A.. This tranche was recorded in the financial statements for the year ended December 31, 2005 at its residual value of €6 million.

4) Securitisation of home mortgage loans - S.P.V. Bipitalia Residential In the first half of 2004, by virtue of the legislative provisions of Law no. 130/99, the Parent Bank, in conjunction with Cassa di Risparmio di Lucca, Cassa di Risparmio di Pisa, Cassa di Risparmi di Livorno and Banca Popolare di Crema, securitised home mortgage loans classified as performing loans. In more detail, the Group Banks transferred, in May, the mortgages indicated in the table below, at their nominal value, for a total of €1 billion to the vehicle company Bipitalia Residential, which financed the acquisition by issuing bonds. The notes, issued on June 30, 2004, are divided into 5 different classes: A1, A2, B, C and D and have the following characteristics: 1) Class A1 notes (senior notes): bonds with return linked to the Euribor plus 10 basis points per annum, issued at par in the nominal amount of €230,000,000, to which the following ratings were assigned: AAA (Fitch) and Aaa (Moody's); 2) Class A2 notes (senior notes): bonds with return linked to the Euribor plus 17.5 basis points per annum, issued at par in the nominal amount of €733,000,000, to which the following ratings were assigned: AAA (Fitch6) and Aaa (Moody's);

187 3) Class B notes (mezzanine notes): bonds with return linked to the Euribor plus 30 basis points per annum, issued at par in the nominal amount of €16,000,000, to which the following ratings were assigned: AA (Fitch) and Aa2 (Moody's); 4) Class C notes (mezzanine notes): bonds with return linked to the Euribor plus 80 basis points per annum, issued at par in the nominal amount of €19,000,000, to which the following ratings were assigned: BBB (Fitch) and Baa1 (Moody's); 5) Class D notes (junior notes): bonds with return equal to 2 per cent per annum plus any "Additional Return", issued at par in the nominal amount of €4,500,000, subscribed pro-rata by the transferees. With the exception of the first two classes, which have an equal degree of subordination, the other bonds have a gradually increasing degree of subordination in the order of payments. As part of the transaction, the Parent Bank also granted a limited-recourse subordinated loan of €12 million as a liquidity reserve. In the securitisation transaction, the Parent Bank also acts as Servicer of the portfolio and Administrative Servicer, with other group banks acting as Sub-Servicer and Bipitalia S.G.C. as Special Servicer for insolvent loans. As a result of the introduction of international financial reporting standards, as provided for in SIC 12, the assets transferred are entered in these financial statements among "Customer loans: assets sold but not eliminated". For detailed qualitative and quantitative information on the transaction and on its trends, refer to the Notes on the Individual Financial Statements of the Parent Bank.

5) Securitisations of home and commercial loans in "warehouse" phase - S.P.V. Bipitalia Residential In 2005, the Parent Bank, along with Cassa di Risparmio di Lucca, Cassa di Risparmio di Pisa, Cassa di Risparmi di Livorno, Banca Popolare di Crema and Banca Popolare di Cremona, assigned a number of commercial and home loans in order to securitise the respective assets. The transactions took place in successive stages and allowed two portfolios to be created during the year. These are currently refinanced by unrated notes placed with institutional investors. Over the next year, the entire transaction will be completed with the issue and placing of rated notes. For detailed information on the loans transferred, on the transaction itself and on its progress, refer to the Notes on the Individual Financial Statements of the Parent Bank. For the duration of the "warehouse" period, a Total Return Swap contract has been drawn up between the originators, the Parent Bank and the subscribers of the notes, which makes provision for any excess liquidity generated monthly by the transaction to be returned to the originators . In return, the originators agree to buy back the transferred assets if, at the end of the "warehouse" period, the conditions for completing the transaction by issuing the aforementioned rated notes are not fulfilled. As a result of the introduction of international financial reporting standards, as provided for in SIC 12, the assets transferred are entered in these financial statements among "Customer loans: assets sold but not eliminated".

A summary is given below, for each securitisation transaction, of the amounts recorded by the Group banks under "Assets sold but not eliminated", and the respective adjustments made, the value of which appears in total in the appropriate tables of the notes.

Total assets Analytical Portfolio Total assets Portfolio sold but not adjustments to adjustments to sold but not Banca Popolare Italiana adjustments to eliminated - impaired impaired eliminated - net other assets gross value assets assets value

Securitisation - Home mortgages 2004 794,135 351 853 2,547 790,384 "Warehouse" securitisation - Home mortgages RMBS 2005 1.058.196 114 1.287 3.587 1.053.208 "Warehouse" securitisation - Commercial mortgages CMBS 2005 818.519 38 785 3.458 814.238

188 6) Securitisations with BPL Consumer S.r.l. and Duca S.r.l. The securitisations with the vehicles BPL Consumer and Du.Ca. s.r.l., which are individually described below, were all carried out by the subsidiary Bipitalia Ducato S.p.a. Securitisation no. 1 with vehicle Bpl Consumer S.r.l. Through the vehicle BPL Consumer S.r.l., incorporated pursuant to Art. 1 of Law no. 130/99 and entered on the list referred to in Art. 107 of Legislative Decree no. 385 of September 1, 1993, a securitisation transaction involving performing loans was carried out in 2002, in which Bipitalia Ducato transferred consumer loans with a capital value of €500 million, the acquisition of which was financed by the vehicle company by issuing notes divided into three classes: 1) Class A notes: floating-rate bonds (3-month Euribor plus an annual spread of 0.38%) with a value of €470,030,000, Issue Price 100%, which were given the following ratings: Aaa (Moody's) and AAA (Fitch); 2) Class B notes: floating-rate bonds (3-month Euribor plus an annual spread of 0.80%) with a value of €20,000,000, Issue Price 100%, which were given the following ratings: A1 (Moody's) and A (Fitch); 3) Class C notes: floating-rate bonds (3-month Euribor plus an annual spread of 1.50%) with a value of €7,000,000, Issue Price 100%, which were given the following ratings: Baa1 (Moody's) and BBB (Fitch); 4) Junior Class notes (unrated): fixed-rate bonds (4% p.a. plus an Additional Return to be calculated on the basis of the amounts collected) with a value of €3,000,000, fully subscribed by the incorporated company at the time of issue. The various types of notes were allocated a different level of subordination, which reflects the priority they have in the payment of capital and interest. In particular, Class A notes have priority over Class B notes, Class B notes have priority over Class C notes and, finally, Junior Class notes have the highest degree of subordination. Bipitalia Ducato carries out monthly alterations to the portfolio according to the trend in collections and has assumed the role of Servicer, responsible for collecting and recovering the loans transferred, on the basis of procedures analysed and shared by the contractual counterparties in the transaction. Collections are accounted for using reporting tools, certified annually by internationally renowned independent auditors. These certifications confirm that the information and figures contained in the Quarterly Reports are correct and accurate. Until this moment in the transaction, the repayment of the ABS securities has not started. This will start in the redemption period, in observance of the rights of the Noteholders according to the payment priority order set down in the contracts. The loans transferred have not undergone any value adjustment and there are no interests in the vehicle company BPL Consumer S.r.l..

Securitisation no. 2 with BPL Consumer S.r.l. In June 2004, Bipitalia Ducato completed a revolving securitisation transaction involving a portfolio of performing loans, as the originator, in order to diversify sources of financing, in accordance with the provisions of Law no. 130 of April 30, 1999. On June 14, 2004, the Company transferred consumer loans with a capital value of €501 million to a vehicle company, BPL Consumer S.r.l., incorporated pursuant to Art. 1 of Law no. 130/99 and entered on the list referred to in Art. 107 of Legislative Decree no. 385 of September 1, 1993. As a result of the proceeds made on the loans involved in the transaction, the Company will, on a quarterly basis, transfer further loans as contractually agreed for the alteration of the portfolio and as required for the continuation of the transaction. The revolving period of the transaction will end in October 2007. The vehicle company has financed the acquisition of the loans by issuing notes as follows: 1) Class A notes: floating-rate bonds (3-month Euribor plus an annual spread of 0.22%) with a value of €466,400,000, Issue Price 100%, which were given the following ratings: Aaa (Moody's) and AAA (Fitch); 2) Class B notes: floating-rate bonds (3-month Euribor plus an annual spread of 0.50%) with a value of €29,600,000, Issue Price 100%, which were given the following ratings: A1 (Moody's) and A (Fitch); 3) Class C notes: floating-rate bonds (3-month Euribor plus an annual spread of 1.00%) with a value of €2,000,000, Issue Price 100%, which were given the following ratings: Baa1 (Moody's) and BBB (Fitch); 4) Junior Class notes (unrated): floating-rate bonds (3-month Euribor plus an annual spread of 1.50% plus an Additional Return to be calculated on the basis of the amounts collected) with a value of €2,950,000, fully subscribed by Bipitalia Ducato at the time of issue.

189 The various types of notes were allocated a different level of subordination, which reflects the priority they have in the payment of capital and interest. In particular, Class A notes have priority over Class B notes, Class B notes have priority over Class C notes and, finally, Junior Class notes have the highest degree of subordination. Bipitalia Ducato has also assumed the role of servicer, responsible for collecting and recovering the loans transferred, on the basis of procedures analysed and shared by the contractual counterparties in the transaction. The risk of the transaction for the Company, represented by the Junior Class notes that have the highest degree of subordination in the order of payments, is constantly monitored on the basis of the trend in collections which are accounted for using reporting tools, certified annually by internationally renowned independent auditors. These certifications confirm that the information and figures contained in the Monthly Reports are correct and accurate. Given the expectation that the value of the Junior Class note in the portfolio will be fully recovered, it has not been deemed necessary to write down this item. Until this moment in the transaction, the repayment of the ABS securities has not started. This will start in the redemption period, in observance of the rights of the Noteholders according to the payment priority order set down in the contracts. As a result of the introduction of international financial reporting standards, as provided for in SIC 12, the assets transferred are entered in these financial statements among "Customer loans: assets sold but not eliminated".

Securitisation no. 3 with BPL Consumer S.r.l. in "warehouse" phase In June 2005, Bipitalia Ducato completed a warehouse securitisation transaction involving a portfolio of performing loans, as the Originator, in order to diversify sources of financing, in accordance with the provisions of Law no. 130 of April 30, 1999. On June 19 and 26, 2005, the Company transferred consumer loans with a capital value of €200,079,893.48 to a vehicle company, BPL Consumer S.r.l., incorporated pursuant to Art. 1 of Law no. 130/99 and entered on the list referred to in Art. 107 of Legislative Decree no. 385 of September 1, 1993. As a result of the proceeds made on the loans involved in the transaction, the Company will, on a quarterly basis, transfer further loans as stipulated in the Framework Agreement for the Transfer of the loans for the alteration of the portfolio. These transfers are required for the continuation of the transaction and are the instrument through which the portfolio of loans must reach an aggregate value of €500,000,000.00 by the end of the warehouse period. On that date, with the entire capital thus formed (€200,000,000.00 initial transfer plus subsequent transfers of a further €300,000,000.00), this will result in a revolving securitisation transaction with respective listing of the Notes issued. The revolving warehouse period of the transaction will end in June 2006/October 2007. The vehicle company financed the acquisition of the loans by issuing unlisted notes entirely acquired by Institutional Investors. Bipitalia Ducato has also assumed the role of Servicer, responsible for collecting and recovering the loans transferred, on the basis of procedures analysed and shared by the contractual counterparties in the transaction. As a result of the introduction of international financial reporting standards, as provided for in SIC 12, the assets transferred are entered in these financial statements among "Customer loans: assets sold but not eliminated".

190 Securitisation with vehicle Du.Ca. S.r.l. As regards the securitisation performed through Du.Ca. SPV, the vehicle company, incorporated pursuant to Art. 1 of Law no. 130/99 and entered on the list referred to in Art. 107 of Legislative Decree no. 385 of September 1, 1993, had financed the acquisition of the loans, originated from special-purpose loans and personal loans, by issuing notes divided into three classes: 1) Class A notes: floating-rate bonds (3-month Euribor plus an annual spread of 0.42%) with a value of €467,280,000, Issue Price 99.86%, which were given the following ratings: Aaa (Moody's) and AAA (Fitch); 2) Class B notes: floating-rate bonds (3-month Euribor plus an annual spread of 0.90%) with a value of €25,120,000, Issue Price 100%, which were given the following ratings: A2 (Moody's) and A (Fitch); 3) Class C notes: floating-rate bonds (3-month Euribor plus an annual spread of 1.80%) with a value of €6,020,000, Issue Price 100%, which were given the following ratings: Baa2 (Moody's) and BBB (Fitch); 4) Class M notes (unrated): fixed-rate bonds (annual 4% plus an Additional Return to be calculated on the basis of the amounts collected) with a value of €5,817,619, fully subscribed by the incorporated company at the time of issue. The various types of notes were allocated a different level of subordination, which reflects the priority they have in the payment of capital and interest. In particular, Class A notes have priority over Class B notes, Class B notes have priority over Class C notes and, finally, Class M notes have the highest degree of subordination. Bipitalia Ducato, originator of the transaction, following the incorporation of the business division of the Originator company, must carry out monthly alterations to the portfolio according to the trend in collections and has assumed the role of Servicer, responsible for collecting and recovering the loans transferred, on the basis of procedures analysed and shared by the contractual counterparties in the transaction. The loans transferred have not undergone any value adjustment and there are no interests in the vehicle company Du.Ca. S.r.l.. Until this moment in the transaction, the repayment of the ABS securities has not started. This will start in the redemption period, in observance of the rights of the Noteholders according to the payment priority order set down in the contracts.

Third-party securitisation transactions The notes arising from third-party securitisations are held in a portfolio exclusively by the Parent Bank. Therefore, for information on these notes, refer to the appropriate section of the notes on the individual financial statements of Banca Popolare di Italiana Soc. Coop.

191 D. CREDIT RISK MEASUREMENT MODELS 1.2 MARKET RISKS 1.2.1/2 INTEREST RATE RISK - REGULATORY TRADING BOOK AND BANKING BOOK A. General aspects Exposure to interest rate risk originates from the specific activity of brokerage between "lenders" and "borrowers". In carrying out this activity, Banks collect funds and disburse loans with various maturity characteristics and types of rates thereby exposing themselves to the risk that adverse changes in market risks may limit their profit-making capacity, causing a fall in net interest income. For this reason, the Banks aim to constantly monitor this risk by using special Asset & Liability Management (ALM) tools to measure and analyse the risk. Furthermore, given that behind every risk lies an opportunity, the Banks tend to implement specific interest rate management strategies, with the aim of seizing the opportunities to increase profits while always keeping the risks within acceptable limits.

B. Processes for managing and methods for measuring interest rate risk The Parent Bank measures and monitors the maturity transformation risk (or interest rate risk) according to the most recent gap analysis and duration analysis methods, which it carries out by using the ALMPro procedure in centralised mode for all of the Group's banks and companies, and also by producing a measurement that takes account of their aggregate positions, without replicating consolidation logic. The activity, which involves measuring and quantifying the effects that changes in market rates have on net interest income and on the value of the company's balance sheet items, is controlled and coordinated, at Group level, by the Risks Committee, a board set up by the Board of Directors of Banca Popolare di Lodi, now Banca Popolare Italiana, in September 2001, which is responsible, inter alia, for managing this aspect for the whole Group. Interest risk is measured on a monthly basis, in centralised mode, by Banca Popolare Italiana's Risk Management Department, by means of a sensitivity analysis on the basis of which interest risk is measured as the change ('MI) in the expected net interest income, seen as an achievable margin in the twelve months following the date of analysis on the assumption that volumes and rates remain unchanged, in the event of a parallel shift in the yield curve of 100 basis points. In accordance with the requirements laid down by the Basel Committee, interest rate risk is also understood in terms of the change in the value of shareholders' equity ('VA) in the event of a parallel shift in the yield curve of 200 basis points. The risk limits adopted are part of a policy of controlling the Group risk and they assimilate the applicable provisions given by the Supervisory Boards and by the Rating Agencies by juxtaposing, but not replacing, the system of limits imposed by Bankitalia regulations (Basel 1), the observance of which remains binding and mandatory. The system of limits, approved by the Parent Bank's Risks Committee, consists of 3 specific indicators which determine the stability requirements for net interest income (Limit 1: internal operating and performance requirement), operating income (Limit 2: operating requirement indicated by the Rating Agencies) and solvency (Limit 3: capital requirement indicated by the Basel Committee). The Risks Committee analyses the reports produced, checks that the limits assigned are being observed and decides on the strategies for re-admission, should the limits be exceeded.

C. Fair value hedging activities Interest rate risk is mitigated principally by using micro fair value hedging instruments. During the year, the Group carried out hedging transactions by converting issues of fixed-rate or structured bonds into floating-rate issues in an attempt to maintain the risk profile within the limit assigned.

192 The table below shows the representative risk values measured as at December 31, 2005 for the aggregate subject to monitoring.

Interest Rate Risk Indicators Impact on Impact on Impact on Net Impact on Net (amounts in Euro) Shareholders' Equity Shareholders' Equity Interest Income Interest Income (shock +1%) (shock -1%) (shock +1%) (shock -1%) Gruppo BPI Aggregate 182,327,788 -224,466,640 19,538,725 -14,169,447 Source: ALM model operating data (does not include assets recorded under "Assets sold but not eliminated" and the associated liabilities).

The values given here are fully compliant with the limits mentioned above.

1.2.3./4 PRICE RISK Using an internal model that is based on Value at Risk (VaR) methodology, the Risk Management Department measures price risk on the equity and equity index derivatives portfolio of Banca Popolare Italiana alone, given that, as a result of the centralisation of Finance activities, the other banks do not, except to a negligible extent, own equities nor have they entered into derivative contracts for trading purposes. Exposure to the general risk of the proprietary portfolio is measured every day. This represents an estimate of the maximum loss in value that this can undergo, over a period of one day and with a confidence level of 99%, in response to unexpected changes in share prices. The result of the measurements is notified daily to the Finance Department and is periodically communicated to the Auditing and Internal Control Division and to the Board of Directors.

1.2.5 EXCHANGE RATE RISK The risk associated with assets and liabilities expressed in currencies other than the Euro, arising from fluctuations in the exchange rates of the applicable currencies, is closely monitored, even though activities of this kind occupy just a small part in the financial statements of Group companies and in terms of the respective risk. In particular, by means of the ALM procedure, the gaps in each currency are monitored by time bands, in order to check their consistency and to intervene in a timely manner with possible hedging transactions.

193 1.2.6 DERIVATIVE FINANCIAL INSTRUMENTS A. FINANCIAL DERIVATIVES A.1 Regulatory trading book: notional end-of-period and average values

31/12/2005 Debt securities and Equities and equity indices Exchange rates and gold Other instruments Total interest rates Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted

1. Forward rate agreements

2. Interest rate swaps 8,045,279 8,045,279

3. Domestic currency swaps -135,628 -135,628

4. Currency interest rate swaps 55,661 55,661

5. Basis swaps 1,789,231 1,789,231

6. Equity index swaps

7. Real index swaps

8. Futures 518,400 5,526 523,926

9. Cap options 830,652 -15,021 815,631

- Purchased 457,301 -15,021 442,280

- Issued 373,351 373,351

10. Floor options 977,564 -15,021 962,543

- Purchased 418,692 -15,021 403,671

- Issued 558,872 558,872

11. Other options 9,064 9,288,973 -9,112 6,406 -9,112 9,304,443

- Purchased 4,509,068 -4,556 3,194 -4,556 4,512,262

- Plain Vanilla -442,154 -4,556 3,194 -4,556 -438,960

- Exotic 4,951,222 4,951,222

- Issued 9,064 4,779,905 -4,556 3,212 -4,556 4,792,181

- Plain Vanilla -240,663 -4,556 3,212 -4,556 -237,451

- Exotic 9,064 5,020,568 5,029,632

12. Forward agreements -442,490 -442,490

- Purchases -221,245 -221,245

- Sales -221,245 -221,245 - Currency against currency 13. Other derivative contracts 524,913 -20 -258,000 266,893

Total 518,400 12,176,703 5,526 9,258,911 -9,112 -774,051 514,814 20,661,563

Average values 39,877 936,669 425 712,224 -701 -59,542 79,553 2,797,593

194 A.2 Banking book: notional end-of-period and average values A.2.1 Hedging

31/12/2005

Debt securities and Equities and equity Exchange rates and gold Other instruments Total interest rates indices

Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted

1. Forward rate agreements

2. Interest rate swaps 2,945,221 2,945,221

3. Domestic currency swaps

4. Currency interest rate swaps 56,133 56,133

5. Basis swaps 110,539 110,539

6. Equity index swaps

7. Real index swaps

8. Futures

9. Cap options 24,267 -4,979 19,288

- Purchased 5,798 -4,979 819

- Issued 18,469 18,469

10. Floor options 54,234 -4,979 49,255

- Purchased 54,234 -4,979 49,255

- Issued

11. Other options 120,092 3,833,825 3,953,917

- Purchased 3,238,369 3,238,369

- Plain Vanilla 3,189,840 3,189,840

- Exotic 48,529 48,529

- Issued 120,092 595,456 715,548

- Plain Vanilla 595,456 595,456

- Exotic 120,092 120,092

12. Forward agreements

- Purchases

- Sales - Currency against currency 13. Other derivative contracts -204,201 -751,526 -955,727

Total 3,050,152 3,072,341 56,133 6,178,626

195 A.2.2 Other derivatives

31/12/2005

Debt securities and Equities and equity Exchange rates and gold Other instruments Total interest rates indices

Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted

1. Forward rate agreements

2. Interest rate swaps

3. Domestic currency swaps

4. Currency interest rate swaps

5. Basis swaps

6. Equity index swaps

7. Real index swaps

8. Futures

9. Cap options

- Purchased

- Issued

10. Floor options

- Purchased

- Issued

11. Other options

- Purchased

- Plain Vanilla

- Exotic

- Issued

- Plain Vanilla

- Exotic

12. Forward agreements

- Purchases

- Sales

- Currency against currency

13. Other derivative contracts

Total

196 A.3 Financial derivatives: purchase and sale of underlying securities

31/12/2005

Debt securities and Equities and equity Exchange rates and Other instruments Total interest rates indices gold

Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted Listed Unlisted

A. Regulatory trading book

1. Transactions with exchange of capital 505,798 117,605 25,193 883,010 -1,327 530,991 999,288

- Purchases 53,757 116,739 2,147 883,010 -1,327 55,904 998,422

- Sales 452,041 866 23,046 475,087 866

- Currency against currency

2. Transactions without exchange of capital 72,653 8,735,191 11,820,110 219,312 72,653 20,774,613

- Purchases 19,053 5,451,331 5,927,284 128,244 19,053 11,506,859

- Sales 53,600 3,283,860 5,892,826 91,068 53,600 9,267,754

- Currency against currency

B. Banking book:

B.1 Hedging

1. Transactions with exchange of capital 187,246 -154,358 32,888

- Purchases 187,246 -18,730 168,516

- Sales -135,628 -135,628

- Currency against currency

2. Transactions without exchange of capital 87,929 3,732,004 146,335 74,863 87,929 3,953,202

- Purchases 87,929 3,576,534 137,565 18,435 87,929 3,732,534

- Sales 155,470 8,770 56,428 220,668

- Currency against currency

B.2 Other derivatives

1. Transactions with exchange of capital

- Purchases

- Sales

- Currency against currency

2. Transactions without exchange of capital -960,308 -960,308

- Purchases -494,769 -494,769

- Sales -465,539 -465,539

- Currency against currency

197 A.4 Over the counter financial derivatives: positive fair value - counterparty risk

Debt securities and interest rates Equities and equity indices Gross Gross Future Gross Gross Future unmatched matched exposure unmatched matched exposure A. Regulatory trading book: A.1 Governments and central banks A.2 Public entities A.3 Banks 826 142 3,488 A.4 Financial companies A.5 Insurance companies A.6 Non-financial companies 59 A.7 Other entities Total A (T) 885 142 3,488 B. Banking book B.1 Governments and central banks B.2 Public entities B.3 Banks 9,315 594 B.4 Financial companies B.5 Insurance companies B.6 Non-financial companies B.7 Other entities Total B (T) 9,315 594

A.5 Over the counter financial derivatives: negative fair value - financial risk

198 A.4 Over the counter financial derivatives: positive fair value - counterparty risk

Exchange rates and gold Other instruments Different underlying securities Gross Gross Gross matched Future exposure Gross matched Future exposure Matched Future exposure unmatched unmatched

7 1,043 1,095

A.5 Over the counter financial derivatives: negative fair value - financial risk

Exchange rates and gold Other instruments Different underlying securities Gross Gross Gross matched Future exposure Gross matched Future exposure Matched Future exposure unmatched unmatched

7 1,043 1,095

199 B. CREDIT DERIVATIVES B1. Credit derivatives: notional end-of-period and average values

31/12/2005

Regulatory trading book Other transactions

On an individual On several On an individual On several entity entities (basket) entity entities (basket) Notional value Notional value Notional value Notional value 1. Purchases of protection 1.1 With exchange of capital (specifically indicating the contractual 324,910 -150,030 forms) 1.2 Without exchange of capital (specifically indicating the 71,857 227 contractual forms) Total 396,767 -149,803 Total 2004 2. Sales of protection 2.1 With exchange of capital (specifically indicating the contractual -2,351,682 -18,818 forms) 2.2 Without exchange of capital (specifically indicating the -212,500 83 contractual forms) Total -2,564,182 -18,735 Total 2004

B2. Credit derivatives: positive fair value - counterparty risk 31/12/2005 Credit derivatives: counterparty risk Notional value Positive fair value Future exposure A. REGULATORY TRADING BOOK A.1. Purchases of protection with counterparties 1. Governments and central banks 2. Other public entities 3. Banks 4. Financial companies 5. Insurance companies 6. Non-financial companies 7. Other entities A.2. Sales of protection with counterparties 1. Governments and central banks 2. Other public entities 3. Banks 149,803 185 4. Financial companies 5. Insurance companies 6. Non-financial companies 7. Other entities B. BANKING BOOK B.1 Purchases of protection with counterparties 1. Governments and central banks 2. Other public entities 3. Banks 4. Financial companies 5. Insurance companies 6. Non-financial companies 7. Other entities B.2. Sales of protection with counterparties 1. Governments and central banks 2. Other public entities 3. Banks 4. Financial companies 5. Insurance companies 6. Non-financial companies 7. Other entities Total 149,803 185 Total 2004

200 B3. Credit derivatives: negative fair value - financial risk

31/12/2005 Notional value Negative fair value TRADING TRANSACTIONS 1. Purchases of protection with counterparties 1.1. Governments and central banks 1.2. Other public entities 1.3. Banks 114,161 -608 1.4. Financial companies 1.5. Insurance companies 1.6. Non-financial companies 1.7. Other entities Total 114,161 -608 Total 2004

B4. Residual maturity of credit derivative contracts: notional values

31/12/2005

Less than 1 Between 1 More than 5 Total year and 5 years years

A. Regulatory trading book A.1 Credit derivatives with "qualified reference obligation" A.2 Credit derivatives with "unqualified reference obligation" B. Banking book B.1 Credit derivatives with "qualified reference obligation" B.2 Credit derivatives with "unqualified reference obligation" Total Total 2004

1.3 - LIQUIDITY RISK Liquidity risk means the risk arising from the difficulty that the bank may face in meeting its cash payments in a timely and economic manner and this arises from the financial characteristics of the bank balance sheet where part of the assets is normally invested in non-negotiable instruments on the secondary markets and the liabilities consist primarily of instruments immediately convertible into cash. To tackle this risk, banks may operate with various instruments such as selling assets on efficient secondary markets, performing securitisation transactions, issuing bonds, using the interbank market and through direct indebtedness with the central bank, as the final creditor. The liquidity risk is measured through the gap analysis obtained from the ALM procedure followed by the Parent Bank's Risk Management Department. With this representation, the bank can gain advance insight into the trend in future cash flows and, therefore, set the most appropriate financing policies in the medium/long term. As with market risks, the strategic management of the liquidity risk is coordinated by the Parent Bank's Risks Committee.

1.4 - OPERATIONAL RISKS The Operational Risks management programme, started in 2002 by the Group, has various strategic and regulatory objectives: • to allow the inclusion of exposure to operational risks in the capital allocation processes applied to the various business lines, for management and supervisory purposes; • to provide the Group with the appropriate tools and procedures for effective management of risks, through internal prevention/protection actions and external transfer/transformation actions (e.g. use of insurance, outsourcing of activities, etc.);

201 • to spread the culture of process quality and control in the operating structures at all levels; • to comply progressively with the organisational and methodological requirements indicated by the Basel Committee. Operational Risk Management activities, assigned initially to the Auditing and Internal Control Division, are now the responsibility of the Risk Management Department. In particular, the resources assigned to these areas were involved in several activities during 2005: 1. Completing a questionnaire for Banca d'Italia, on the start of the art of Operational Risk Management projects in the main banking groups. 2. Drawing up policy rules, i.e. guidelines for managing operational risks to be applied within the Gruppo Banca Popolare Italiana. The main activity was therefore to define the objectives and principles for managing operational risks in relation to all group activities. Furthermore, roles and responsibilities were assigned to the various units involved and the operational phases of the Operational Risk Management process were defined. The Risk Policy applies to the various organisational units that make up the Group, and applies to all commercial and financial activities. The validity of the Risk Policy is subject to developments in national and international banking regulations and to the strategies implemented by the Group. A summary is given below of the operational risk management process in its various phases of activity: a) Operational risks are identified by using methods that allow for the mapping of processes and therefore their association with the various types of effective/potential operational risks. The unit with the highest level of involvement in the activity in question is the ORM department. b) Self Risk Assessment (SRA) is the instrument used to assess operational risks aimed at supplementing, from a forward-looking and historical perspective, the loss data collected in the Loss Data Collection (LDC) processes. c) Activation of LDC stems from both regulatory and management requirements. As far as the former are concerned, the Capital Accord stipulates, for Banks wishing to adopt standard or advanced methods for calculating the capital requirement, the obligation to systematically record the most significant losses classified by business line. The threshold above which the loss is regarded as significant is set at €5,000, the threshold indicated by the DIPO (Italian Operational Losses Database) Consortium. d) The capital requirement calculated using the Standardised approach is the sum of the requirements calculated at the level of individual business lines: for each of these, the capital requirement is obtained by multiplying the financial indicator of exposure to operational risk (EI, the Gross Income) by an appropriate factor, differentiated for each business line. The activities that the Group must perform therefore involve calculating the Gross Income for each individual entity and for the consolidated group. If the Basic method is adopted, the capital requirement is a simple multiplication of the Gross Income by a unique factor. e) Operational risks are mitigated by transferred the risk to third parties, through the adoption of improvements to the internal control system or through streamlining of operational processes. Assessments about whether transfer to third parties is economical may be made by the ORM department, which has various information sources at its disposal. Finally, the Risk Policy clarifies the fundamental characteristics of the reporting system, highlighting the various documents which must be produced for those undergoing the ORM analyses, already produced in test version. The final document will be presented to the Board of Directors of the Parent Bank in April 2005.

Section2 - Risks of insurance companies The Gruppo BPI controls the insurance company Area Life International Assurance Ltd (fully consolidated with total assets of €468 million and technical reserves of €85 million) and exercises joint control, with the Gruppo Aviva, of the insurance companies Eurovita Spa and Aviva Previdenza Spa through the holding company Finoa Srl (consolidated according to the equity method and entered in the assets with a value of €83 million). On December 23 and 30, 2005, ISVAP issued Circular no. 574/D on passive reinsurance and Circular no. 577/D on risk management and internal control systems. Italian insurance companies, subject to control by Isvap, are taking step to comply as best as possible with the instructions issued by the Supervisory Board by preparing a comprehensive operating plan, in such a way as to consider the close correlation between the above circulars and to plan all the necessary organisational, procedural and managerial adjustments that these require.

202 As regards Circular no. 577/D in particular, in view of the scope and complexity of the measures envisaged, which are part of the development of the European regulatory framework, oriented increasingly towards Solvency II, an ad hoc project was launched with a dedicated working group. In this project, in view of the dates set in the Circular and the reports to be sent to ISVAP, the necessary measures are being completed. As regards these risks, it is specified that the impact of the companies in question on the total consolidated assets is scarcely significant.

Section 3 - Risks of other companies There are no further risks to be reported in relation to the other companies included in the scope of consolidation that do not form part of the banking group nor the insurance companies. In particular, it is specified, with regard to the Group's property companies, that almost all investments concern Group instrumental properties and that, as described in more detail in the report on operations, specific valuations of the property assets, carried out at the end of 2005, showed that their values were significantly higher than the book values.

Part F - INFORMATION ON SHAREHOLDERS' EQUITY Section 1 - Consolidated shareholders' equity Management of the group's capital has a very important role within operational activities. The concept of "capital" corresponds to the regulatory definition. In particular, according to the Supervisory Authority, this concerns the core capital (Tier 1), the supplementary capital (Tier 2) and Tier 3 for the part eligible to cover market risks. Management and allocation of the regulatory capital falls under the planning, analysis and control process. The regulatory capital is illustrated in the following section. As regards the composition of the Bank's shareholders' equity, the type of capital instruments and the composition of capital and reserves, refer to the appropriate section in Part B.

Section 2 - Regulatory capital and capital-adequacy ratios 2.1 Regulatory capital A. Qualitative information The group has issued a series of subordinated liabilities which can be included in the supplementary capital, and a number of hybrid capital instruments and innovative capital instruments, which are illustrated below:

203 Subordinated liabilities

Curr- Maturity Conversion right / other Issuer Amount Interest rate Coupon Issue date Prepayment ency date clauses Floating - linked to the 3- Repayment in full at No option to convert into Banca Popolare Italiana 150,000,000 euro month Euribor + 1.15% quart. 16/11/2000 16/11/2007 maturity capital per annum The Bank has the right to Option to convert into prepay the loan as from shares at the ratio of one fixed rate of 4.75% p.a. Banca Popolare Italiana 299,954,030 euro yearly 20/03/2000 01/06/2010 June 15, 2005, if share for each bond as for the term of the loan authorised by Banca from the 40th day after d'Italia issue fixed rate of 6.75% p.a. Repayment in full at No option to convert into Banca Popolare Italiana 20,000,000 euro quart. 10/01/2001 10/01/2008 for the term of the loan maturity capital Floating-rate issues made in the years 2001/2003 with final Repayment in full at No option to convert into Efibanca 46,445,000 euro maturity in 2008 maturity capital Floating - linked to the 3- Repayment in full at No option to convert into Banca Popolare Italiana 25,000,000 euro month Euribor + 1% per quart. 10/01/2001 10/01/2008 maturity capital annum 3.40% the first coupon to mature payable 27/6/03. half- Repayment in full at No option to convert into Banca Popolare Italiana 200,000,000 euro For the others, rate linked 27/12/2002 27/12/2012 yearly maturity capital to Euribor + 0.50% spread Fixed rate of 4.50% p.a. until 27/12/2007; Fixed half- Repayment in full at No option to convert into Banca Popolare Italiana 100,000,000 euro 27/12/2002 27/12/2012 rate of 5% p.a. from yearly maturity capital 27/6/2008 until maturity Floating - linked to the 3- Repayment in full at No option to convert into Banca Popolare Italiana 211,762,700 euro month Euribor + 0.50% quart. 22/12/2003 22/12/2006 maturity capital per annum Floating, linked to the 3- Repayment in full at No option to convert into Banca Popolare Italiana 100,000,000 euro quart. 18/05/2005 18/11/2007 month Euribor + 65 bp maturity capital Floating - linked to the 3- half- Repayment in full at No option to convert into Caripe 35,000,000 euro month Euribor + 0.50% 03/11/2003 03/11/2008 yearly maturity capital per annum Repayment in full at maturity (the Bank has Floating - linked to the 6- the option of prepaying month Euribor + 0.50% half- No option to convert into Banca Popolare di Mantova 5,000,000 euro 03/12/2004 03/12/2014 the loan as from (step up clause after 5th yearly capital December 3, 2009 if year) authorised by Banca d'Italia)

204 Hybrid capital instruments (Upper Tier II)

Curr- Coupo Maturity Conversion option Issuer Amount Interest rate Issue date Prepayment ency n date / various clauses fixed rate of 6.75% p.a. for No option to Banca Popolare Italiana 100,000,000 euro quart. 15/12/2000 15/12/2010 Repayment in full at maturity the term of the loan convert into capital floating - linked to the 6- half- No option to Banca Popolare Italiana 219,500,000 euro month Euribor plus a spread 24/02/2000 30/06/2010 Repayment in full at maturity yearly convert into capital of no less than 80 bp floating - linked to the 3- No option to Banca Popolare Italiana 50,000,000 euro quart. 15/12/2000 15/12/2010 Repayment in full at maturity month Euribor + 1% convert into capital fixed rate of 5.75% p.a. for half- No option to Reti Bancarie 50,000,000 euro 14/12/2001 14/12/2011 Repayment in full at maturity the term of the loan yearly convert into capital 3.60% the first coupon to mature payable 27/6/03. For half- No option to Banca Popolare Italiana 200,000,000 euro 27/12/2002 27/12/2012 Repayment in full at maturity the others, rate linked to yearly convert into capital Euribor + 0.75% spread fixed rate of 5.30% p.a. for half- No option to Banca Popolare Italiana 100,000,000 euro 27/12/2002 27/12/2012 Repayment in full at maturity the term of the loan yearly convert into capital fixed rate of 4.625% p.a. for half- No option to Banca Popolare Italiana 300,000,000 euro 23/03/2005 23/03/2015 Repayment in full at maturity the term of the loan yearly convert into capital floating - linked to the 3- half- No option to Banca Popolare Italiana 300,000,000 euro 29/04/2005 29/04/2015 Repayment in full at maturity month Euribor plus 60 bp yearly convert into capital former Banca Eurosistemi Floating, linked to the 3- No option to 75,000,000 euro quart. 14/12/2001 14/12/2011 Repayment in full at maturity (now Reti Bancarie) month Euribor +100 bp convert into capital

Innovative capital instruments

Curr- Maturity Conversion option Issuer Amount Interest rate Coupon Issue date Prepayment ency date / various clauses Banca Popolare di Lodi rate linked to 3-month Investor Trust 1 25,000,000 euro Euribor + 325 bp quart. 06/03/2000 31/12/2050 Preference shares

Banca Popolare di Lodi rate linked to 3-month Investor Trust 2 74,934,000 euro Euribor +300 bp quart. 06/03/2000 31/12/2050 Preference shares

6.742% until 30/06/2015, rate Banca Popolare di Lodi linked to 3-month Euribor + Prepayment as from Investor Trust 3 500,000,000 euro 525 bp yearly 30/06/2005 irredeemable 30/06/2015 Preference shares

205 B. Quantitative information

Total Total 2005 2004 A. Core capital before the application of prudential filters 1,414,652 1,572,624 Core capital prudential filters: - Positive IAS/IFRS prudential filters 915,545 - Negative IAS/IFRS prudential filters (477,798) B. Core capital after the application of prudential filters 1,852,399 1,572,624 C. Supplementary capital before the application of prudential filters 1,876,262 1,391,696 Supplementary capital prudential filters: - Positive IAS/IFRS prudential filters - Negative IAS/IFRS prudential filters (23,863) D. Supplementary capital after the application of prudential filters 1,852,399 1,391,696 E. Total core and supplementary capital after the application of filters 3,704,798 2,964,320 Deductions from the total core and supplementary capital (488,929) (481,133) F. Regulatory capital 3,215,869 2,483,187

206 2.3 Capital adequacy As shown in the table below, the solvency ratio is 9.63% compared with a minimum group regulatory requirement of 8%.

Amount 31/12/2005 Amount 31/12/2004 Weighted Non- Weighted Categories/Values Non-weighted amounts / weighted amounts / amounts requirements amounts requirements A RISK ASSETS (tab. 2.3 B of the financial statements) A.1 CREDIT RISK (standard approach) 38,573,114 32,294,976 37,842,981 31,673,562 CASH ASSETS 35,587,745 29,910,560 32,909,788 28,369,234 1. Exposures (other than equities and other subordinated assets) to (or guaranteed by): 30,343,697 26,218,278 26,924,714 24,073,085 - 1.1 Governments and central banks 1,274,683 1,243,749 - 1.2 Public entities 458,505 91,701 607,749 122,634 - 1.3 Banks 3,106,055 622,123 1,404,499 281,734 - 1.4 Other entities (other than mortgage loans on residential and non-residential properties) 25,504,454 25,504,454 23,668,717 23,668,717 2. Mortgage loans on residential properties 1,624,602 821,785 1,455,928 727,964 3. Mortgage loans on non-residential properties 574,934 543,451 1,158,203 850,298 4. Shares, shareholdings and subordinated assets 840,257 871,726 942,557 1,028,681 5. Other cash assets 2,204,255 1,455,320 2,428,386 1,689,206 OFF-BALANCE-SHEET ASSETS 4,191,154 3,567,071 5,351,463 3,716,113 1. Guarantees and commitments to (or guaranteed by): 3,679,399 3,455,567 4,323,204 3,470,620 - 1.1 Governments and central banks 289 2,311 - 1.2 Public entities 23,926 515,459 103,092 - 1.3 Banks 256,336 51,267 548,146 109,630 - 1.4 Other entities 3,441,286 3,399,514 3,319,419 3,257,898 2. Derivative contracts to (or guaranteed by): 469,317 111,504 966,128 245,493 - 2.1 Governments and central banks - 2.2 Public entities - 2.3 Banks - 2.4 Other entities 469,317 111,504 966,128 245,493 DOUBTFUL ITEMS 1,205,785 1,182,655 418,270 411,785 B CAPITAL REQUIREMENTS (tab. 2.3 B of the financial statements) 2,670,580 2,614,326 B1 CREDIT RISK 2,583,598 2,533,885 B2 MARKET RISKS 60,271 34,516 1. STANDARD APPROACH 371,107 246,143 of which: - risk of position in debt securities 104,209 84,704 - risk of position in equities 254,930 141,842 - exchange risk 209 1,511 - other risks 11,759 18,086 2. INTERNAL MODELS of which: - risk of position in debt securities - risk of position in equities - exchange risk B3 OTHER CAPITAL REQUIREMENTS 26,711 45,925 B4 TOTAL CAPITAL REQUIREMENTS (B1+B2+B3) 2,670,580 2,614,326 C RISK ASSETS AND CAPITAL ADEQUACY RATIOS C1 Risk-weighted assets (*) 33,382,250 32,679,075 C2 Core capital/risk-weighted assets (Tier 1 capital ratio) 5.55% 4.81% C3 Regulatory capital/risk-weighted assets (Total capital ratio) 9.63% 7.60% (*) Total capital requirements multiplied by the reciprocal of the compulsory minimum ratio for credit risks

207 Part G - COMBINATION TRANSACTIONS INVOLVING BUSINESSES OR BUSINESS DIVISIONS The Group was not directly affected in 2005 by combination transactions nor have there been transactions of this kind since the end of last year.

Part H - RELATED PARTY TRANSACTIONS The companies of the Gruppo Banca Popolare Italiana have adopted procedural and substantial rules in relation to related party transactions, through the establishment of a Group system aimed at keeping a constant watch over the aforesaid transactions, in order to ensure full compliance with the legislation. A board regulation has therefore been adopted and a Group database has been implemented on the basis of statements made by individual company representatives. The Boards of Directors of Group companies are informed periodically about the conclusion of related party transactions in a report which shows aggregate data (if the above-mentioned transactions are ordinary and significant) or specific data in the case of unusual or atypical transactions. It is important to underline that, in this context, the Group has decided, from an increasingly prudential perspective, that the "related parties" of each Group company should include entities that are a "related party" for the company itself and entities that are a "related party" at Group level. The figures contained in the following tables take account of this fact. As regards related party transactions, as defined pursuant to IAS 24 and Art. 2359 of the Italian Civil Code (and considered in Consob Communication no. 2064321 of September 30, 2002), it is specified that the transactions performed in the year with such counterparties fall within the normal operations of the company, in whose interest they were performed and that these were performed in a timely manner and under free market conditions, except for the well-publicised legal disputes that involved the Bank during the course of 2005.

1. Information on compensation for directors and managers For information on the compensation payable to directors and managers with strategic responsibilities, refer to the appropriate section of the Notes on the Individual Financial Statements of the Parent Bank.

2. Information on related party transactions The following tables summarise the capital relationships in existence as at December 31, 2005 and the transactions performed during the year. a) Loans transactions current balances Related party performed used for cash used for endorsement indirect risks (1) increase (2) decrease (3) related party transactions (company members and their 1,291,437 133,796 328,897 2,238,034 894,531 related parties) (1) value of the personal securities given by the related party (2) amount of the loans granted, renewed or increased during the period in question (3) amount of the loans cancelled or decreased during the period in question Source: Credit Bureau figures b) financial transactions The following table shows the value of the current balances of the securities portfolios registered in the name of related parties as at the balance sheet date and the value of the securities transactions performed by these during the year. In particular: - as regards the current balances, these relate to the securities positions valued on the basis of the prices and exchange rates as at the balance sheet date. In the absence of a price, the securities are expressed at their nominal value; - as regards the transactions performed, the amounts indicated express the cumulative value of sales, subscriptions and redemptions of securities made during the year.

208 The figures are given in thousands of euro.

Related party current balances transactions performed related party transactions (company members and their related parties) 2,879,113 4,194,990 Source: internal securities procedure data.

Part I - PAYMENT AGREEMENTS BASED ON OWN CAPITAL INSTRUMENTS As at the balance sheet date, the Parent Bank had not made any decision regarding transactions of this kind. The stock option plan decided by Efibanca S.p.A. is described below.

A. QUALITATIVE INFORMATION 1. Description of the payment agreements based on own capital instruments The shareholders' meeting of September 23, 2004 resolved on a divisible capital increase, without preemptive right, from €89,353,504.00 to a maximum of a further €3,723,062.00 corresponding to the issue of a maximum of 3,723,062.00 ordinary shares, to be allocated towards a stock option plan for the Chief Executive Officer and bank employees with managerial duties. The aim of the plan is to secure the medium-term loyalty of the plan's beneficiaries and to involve them in the process of increasing the value of the company. The issue of each new share was set, on the basis of an external valuation, at €7.83, of which €6.83 is premium. The option rights given to beneficiaries can only be exercised when both of the following condition occur: x the Chief Executive Officer must remain in his post for the three-year period 2004 - 2006. Other beneficiaries must continue to be employed until the period when the option rights can be exercised (1.4.2007 - 30.6.2007); x the value of the bank, calculated by multiplying the Gross Operating Income taken from the financial statements for the year ending December 31, 2006 by a factor of 9, is at least €792 million.

B. QUANTITATIVE INFORMATION 1. Changes over the year

31/12/2005 31/12/2004 Items/Number of options and exercise prices Number of Average Average Number of Average Average options exercise prices maturity options exercise prices maturity A. Opening balance 3,723,062 30/06/2007 B. Increases B.1 New issues 3,723,062 30/06/2007 B.2 Other increases C. Decreases C.1 Cancelled C.2 Exercised C.3 Expired C.4 Other decreases D. Closing balance 3,723,062 30/06/2007 3,723,062 30/06/2007

E. Options exercisable at the end of year

209 APPENDIX First-time adoption of international financial reporting standards IFRS 1 gives a consistent and coordinated description of the changes in the rules for the preparation of financial statements according to IAS/IFRS. The document requires: - the preparation of an opening balance sheet on the transition date prepared according to the standards set out in IAS/IFRS; - the application of the accounting standards laid down by IAS/IFRS in the first financial statements prepared according to the new standards and in all periods of comparison excluding certain mandatory exceptions and some optional exceptions; - the preparation of a report on the effects arising from the changeover to the international standards. The new standards must therefore be applied retrospectively in relation to the transition date (January 1, 2004) and it is necessary to prepare at least one comparative financial statement for the 2004 financial year prepared according to the same IAS/IFRS standards in force on January 1, 2005. Provision is made for an optional exception from this principle of retroactive application in relation to IAS 32 and 39 concerning financial instruments and in relation to IFRS 4 concerning insurance contracts. Their application as from January 1, 2004 is not therefore mandatory. Companies that exercise this option must carry out the conversion on the basis of the accounting balances to which these standards relate as at January 1, 2005 and, therefore, the values for the 2004 financial statements are not comparable. The opening balance sheet as at January 1, 2004, and as at January 1, 2005 in relation to financial instruments and insurance contracts, must be stated in accordance with IAS/IFRS, which involves the need to: - recognise all assets and liabilities whose recognition is required by the international standards; - not recognise assets and liabilities permitted under national standards but which do not meet the requirements to be recognised under IAS/IFRS; - reclassify assets and liabilities recognised in the balance sheet on the basis of the new provisions; - apply the valuation principles laid down by IAS/IFRS to assets and liabilities. The effects of the adjustments to the accounting balances that arise from this restatement must be recognised directly in the shareholders' equity on the date of first-time adoption of the new standards.

First-time adoption of IAS/IFRS by the Gruppo Banca Popolare Italiana The Gruppo Banca Popolare Italiana exercised the right given under IFRS 1 to apply IAS 32 and 39 relating to financial instruments with effect from January 1, 2005 only. Therefore, the figures for 2004 are not comparable with regard to the valuation of financial instruments. Financial instruments (represented by securities, receivables, payables, derivative contracts and non- consolidated shareholdings) have been reclassified into the new categories created under IAS/IFRS, by virtue of a special provision of IFRS 1. The designation of financial assets at fair value with the valuation results recognised under profit and loss, at the Parent Bank's specific choice, has been made exclusively for the shares held in Banca Popolare Antoniana Veneta S.p.A.. Securities have mostly been classified under "Assets held for trading". A small minority has been classified in the category "Held-to-maturity financial assets" whilst no securities have been classified under the item "Customer loans". Those securities that do not meet the requirements for classification in one of the above items have been classified under the item "Available-for-sale financial assets". Customer loans and amounts due from banks have kept the same classification. Other items that have remained classified as loans include repurchase agreements, commercial loans and loans originating from finance lease transactions (in the past the "financial method" was used for the latter). Customer and bank borrowing also have a similar classification to before, being categorised under the items "Due to banks" and "due to customers", "Securities in issues" and "Subordinated liabilities". Derivative contracts have been given a different classification depending on whether they relate to contracts entered into for trading or hedging purposes. The former have been entered under the items "Assets/liabilities held for trading", depending on whether they have a positive or negative value respectively. The latter, if they are designated as "effective" hedging instruments, have been allocated under the item "Hedge derivatives" and entered under assets for contracts with a positive value and under liabilities for contracts with a negative value. In the presence of a "ineffective" hedge, derivative contracts have been classified as trading. Shareholdings have maintained the same classification if they relate to equity investments in subsidiaries, associates or joint ventures. All other interests have been entered as "Available-for-sale assets". The shareholding in Banca d'Italia has been maintained at cost.

210 For the purposes of redefining the scope of consolidation as a result of the application of the new standards and their interpretations, in particular SIC 12, the shareholdings for which it has been necessary to carry out full consolidation have been identified. These are affiliated companies that were previously excluded because they were not engaged in banking or financial activities or, even if they were, their total assets were insignificant. With regard to the valuation of properties, the option to measure these at fair value has not been taken up but it has been decided to keep this at purchase cost (including revaluations from previous years made by approximating the fair value on the revaluation date), net of cumulative deprecation and any lasting impairment. The value of buildings has been separated from the value assigned to the land and the depreciation of the latter has been eliminated. The following includes a number of optional exceptions to the requirements of conformity with IAS/IFRS set out in IFRS 1, exceptions that the Group has exercised:

Business combinations The exception involves the possibility of not retrospectively adopting IAS/IFRS for business combinations that occurred before the date of first-time adoption. In this way, existing goodwill need not be redetermined according to the provisions laid down by the international standards.

Eliminated assets/liabilities It is permitted to not enter in the balance sheet financial assets or liabilities sold and eliminated, based on the previous national standards, prior to January 1, 2004 if such elimination does not meet the requirements laid down in IAS 39. In particular, this option has been exercised with regard to the securitisations of performing and non-performing loans carried out by the Group prior to the above date. A full illustration of the new accounting standards adopted is given in the section on the basis of preparation of these financial statements.

Reconciliation statements and explanatory notes The following statements give a reconciliation between the balance sheet and income statement figures prepared according to Legislative Decree 87/92 and those based on IAS/IFRS with reference to the dates January 1, 2005 for IAS 39 and 32 and January 1, 2004 and December 31, 2004 for all other standards. The reconciliation of shareholders' equity as at January 1, 2004, December 31, 2004 except for IAS 39 and 32 and January 1, 2005, and the reconciliation, except for IAS 39 and 32, of net profit for the year ended December 31, 2004 are checked by the independent auditors. The new accounting rules and their respective application have helped to identify the following impacts on the balance sheet items. It should be noted that adjustments that are not envisaged, in the years following first-time adoption, to be charged to income have been allocated to the "Reserves" item. Note also that some of the adjustments made to shareholders' equity also arise from the time period in which the respective cash flows arise (the "time value") and, therefore, positive or negative income effects should derive from these in future years. Adjustments whose effect is likely to change over time owing to the valuation of assets and liabilities have been recorded amongst "Asset valuation reserves" and these will only be charged to income at the time they are actually realised. The effects of transition to IAS and, consequently, the balance sheet balances as at 1/01/2004, 31/12/2004 and 1/1/2005 and the income statement balances as at 31/12/2004 are restated in relation to those prepared for the semi-annual report for the period ended June 30, 2005, prepared on October 27, 2005, owing to the: x re-approval of the 2004 financial statements after Consob ruled that the consolidated financial statements for the year ended December 31, 2004 did not conform to the governing rules; x reclassifications made in order to comply with the expositive criteria set down in Banca d'Italia Measure no. 262 of December 22, 2004, whose individual and combined effect is not deemed significant on the above balance sheet and income statement balances; x adjustments in order to apply international accounting standards more precisely to certain companies that come under the scope of consolidation. For further details, refer to the new semi-annual report prepared by the Directors on March 29, 2006 following the re-approval of the 2004 financial statements.

211 In particular, these changes concern: Balance sheet balances as at 1/01/2004 The overall adjustments made increased the Group shareholders' equity by around €1.6 million as a result of changes attributable to a more accurate interpretation of international financial reporting standards in relation to certain Group companies.

Balance sheet and income statement balances as at 31/12/2004 The overall adjustments made decreased the Group shareholders' equity by around €249.8 million and the consolidated income by around €226.3 million. The adjustments to the consolidated income relate essentially to the changes made by the Parent Bank to the 2004 financial statements (-€211.6 million). The adjustments to the balance sheet mainly reflect the above-mentioned changes in profit for the year and also include a negative effect of around €6.9 million, which reflects the effects of the application of international financial reporting standards on the financial statements of the affiliated company Area Life International Assurance Ltd, and a positive effect of around €4.2 million attributable to a more accurate calculation of consolidation adjustments.

Balance sheet balances as at 1/01/2005 The overall adjustments made to shareholders' equity on the above date consist of around €267.7 million in lower reserves, of which €249.8 million relates to the above-mentioned adjustments as at 31/12/2004, while the remainder mainly reflects the effects arising from a more accurate fair value measurement of the hedge derivatives of certain subsidiaries.

212 Reconciliation between shareholders' equity according to Legislative Decree no. 87/92 and shareholders' equity according to IAS/IFRS. (in millions of Euro) 01.01.2004 31.12.2004 01.01.2005

Adjusted effect of Adjusted effect of Adjusted effect of transition to transition to transition to IAS/IFRS IAS/IFRS IAS/IFRS (excl. IAS 39) (excl. IAS 39) (excl. IAS 39) and IAS 32) and IAS 32) and IAS 32)

Shareholders' equity according to Legislative Decree no. 87/92 3,908 3,806 3,806 Group shareholders' equity according to Legislative Decree no. 87/92 2,774 2,527 2,527 Minority interests according to Legislative Decree no. 87/92 1,134 1,279 1,279 Due from banks and customer loans: - analytical valuation of impaired loans -93 - collective valuation of performing loans -149 - other loan valuation effects -19 -16 -43 Financial assets held for trading and held to maturity -3 Valuation of notes held to maturity (junior notes updating effect) -72 Fair value measurement of equities 5 Fair value hedge: fair value measurement of derivative hedging contracts and -34 hedged instruments Shareholdings: - commitments to buy back shareholdings/put options -266 -144 -642 - impairment of shareholdings -150 -199 -199 Property, plant and equipment and intangible assets: - reversal of land depreciation 7 8 8 - intangible assets that cannot be recorded in the balance sheet -176 8 8 - impairment of goodwill and reversal of depreciation -82 -101 -101 Own shares -81 -81 -81 Liability provisions: - provision for contingencies and charges not recognised and updating of provisions 30 30 30 - actuarial assessment of employee severance fund and personnel expenses 12 18 18 Other effects -47 -64 -71 Tax effect 91 4 129 Allocation of IAS/IFRS effects to minority interests -321 -238 -800 Total effects of first-time adoption of IAS/IFRS -360 -299 -490 Total shareholders' equity according to IAS/IFRS 3,227 3,269 2,516 Group shareholders' equity according to IAS/IFRS 2,414 2,228 2,037 Minority interests according to IAS/IFRS 813 1,041 479

213 Reconciliation between net profit according to Legislative Decree no. 87/92 and net profit according to IAS/IFRS. (in millions of Euro) 31.12.2004 Effect of transition to IAS/IFRS (excl. IAS 39 and IAS 32) Net profit according to Legislative Decree no. 87/92 -27 - Net interest -8 - Dividends -8 - Profits (losses) from financial operations -11 - Other operating income (expenses) 35 - Operating costs -18 - Goodwill 59 - Value adjustments and provisions -10 - Taxes and other items -39 Total effects of application of IAS/IFRS standards Allocation of IAS/IFRS effects to third parties 12 Net profit according to IAS/IFRS -15

214

Financial data prepared according to IAS/IFRS

31/12/2004 % Change Amounts in Euro/000 31/12/2005 (without IAS 32 31/12/2004 and 39)

Balance sheet

Customer loans 12,949,619 11,743,830 10.27%

Gross financial assets 4,917,444 5,489,411 -10.42%

Total assets 32,373,954 29,760,105 8.78%

Due to customers and Securities in issue 21,205,896 18,692,549 13.45%

Financial liabilities held for trading and designated at fair value 665,688

Indirect customer deposits 13,547,742 13,568,556 -0.15%

of which: managed 5,010,760 5,123,966 -2.21%

Shareholders' equity 3,316,424 2,624,653 26.36%

Income statement

Net interest income 212,320 308,939 -31.27%

Net commissions 48,079 190,547 -74.77%

Total income including financial operations 617,115 724,955 -14.88%

Net adjustments for impairment of loans and other financial assets -779,623 -164,535 373.83%

Administrative expenses -579,197 -541,848 6.89%

Profit (loss) from continuing operations before tax -921,581 -98,870 n/a

Net profit (loss) for the year -611,104 -6,799 n/a

Other information

Number of branches 586 577

Number of employees 4,418 4,432

Average number of employees 4,425 4,405

Financial ratios

Structural ratios

Customer loans/Total assets 40.00% 39.46%

Gross financial assets/Total assets 15.19% 18.45%

Due to customers and Securities in issue/Total assets 65.50% 62.81%

Managed deposits/Indirect deposits 36.99% 37.76%

Profitability ratios

Net interest income/Total income including financial operations 34.41% 42.61%

Net commissions/Total income including financial operations 7.79% 26.28%

Administrative expenses/Total income including financial operations 93.86% 74.74%

222 BANCA POPOLARE ITALIANA 2005 REVIEW

Shareholders, Within the complex general economic scenario, 2005 was characterised by highly significant events, which considerably affected the operating results and structures of Banca Popolare Italiana and which also damaged its reputation.

Governance initiatives Following the suspension placed on the previous Chief Executive Officer, the Board of Directors appointed, on August 2, 2005, Giorgio Olmo as the new Chief Executive Officer, having previously held the position of Deputy Chairman. Subsequently, on October 17, the Bank appointed a General Manager, Divo Gronchi, formerly General Manager and Director of Banca Popolare di Vicenza and previously (1996-2000) Director/General Manager of Monte dei Paschi di Siena. On December 12, 2005, all the directors and members of the board of statutory auditors tendered their resignation with effect from the forthcoming shareholders' meetings. On the same date, Piero Giarda and Divo Gronchi were coopted onto the Board of Directors. On December 27, 2005, the Board of Directors approved a new version of BPI's individual and consolidated financial statements for the year ended December 31, 2004, as Consob had impugned the shareholders' resolution of April 30, 2005 to approve those financial statements. The revised version of the 2004 financial statements prepared according to Italian accounting standards, re-approved by the Shareholders' Meeting on January 28, 2006, showed an individual loss of €23.3 million compared with a profit of €171.7 million in the previous version. In the same meeting, the new Board of Directors was appointed and, in the first subsequent Board meeting, the new Chairman of Banca Popolare Italiana.

Customer relations initiatives The Gruppo Banca Popolare Italiana has been damaged in terms of its financial performance and its image by these grave events which had such an extraordinary impact. However, its reaction has been strong and determined thanks to the professionalism and commitment of the entire structure. Besides the events associated with the Antonveneta operation, it should not be forgotten that, in the final months of the year, as a result of the "Forleo ordinance", there was public controversy over the widespread charging of commissions, carried out in January 2005, in the settlement of current accounts as at December 31, 2004. Although such charges had been duly notified to the market (through publication in the Official Journal no. 289 of December 10, 2004), the Bank decided to pay back the commissions and the new type of expenses and the planned

223 increase of existing charges. This repayment, which, partly, had already been made for individual positions during 2005, was applied automatically to the positions concerned, with value date December 31, 2004 and carried out at the end of January 2006, with adequate coverage given in the 2005 financial statements. Between the end of 2005 and the start of 2006, Banca Popolare Italiana launched a number of commercial initiatives aimed at regaining and strengthening the confidence of its customers through its "Programma Fiducia", described in detail in another section of this report. In the same period, a customer satisfaction survey was conducted on the basis of the model used by the Abi (Italian Banking Association) for similar initiatives. This survey revealed that the majority of customers, despite feeling the need for reassurance from their local branches, considered that the relationship of trust with their branch and with the branch employees was not under discussion. This is testament to the quality of the work performed by branch colleagues to handle the customer relationship difficulties that have emerged over these recent months and shows that human resources are one of the Bank's strengths.

Supervisory inspection It should be recalled, finally, that, as mentioned previously, Banca d'Italia's Supervisory Inspection, which started in June 2005, and is organised pursuant to Art. 68 of the Consolidated Banking Act, is still in progress but is nearing completion. The individual financial statements include the observations made by the Inspectors in the course of their inspections.

224 PARENT BANK BANCA POPOLARE ITALIANA PERFORMANCE FUNDS UNDER ADMINISTRATION

Dec 31 2004 Dec 31 2005 (without IAS 32 and 39) Items values % comp. values % change

Due to customers Current accounts and demand deposits 7,081,785 75.84% 6,031,554 17.41% Savings accounts and time deposits 100,167 1.07% 1,094,168 -90.85% Third-party funds under administration Loans 136,200 1.46% - finance leases - other 136,200 Commitments to buy back own capital instruments Liabilities from assets sold but not eliminated from the balance sheet 2,019,367 21.63% 1,278,848 57.91% - repurchase agreements 734,485 1,278,848 -42.57% - other 1,284,882 Other payables 146,055 -100% Total 9,337,519 8,550,625 9.20% Securities in issue 11,868,377 10,141,924 17.02% Total due to customers and securities in issue 21,205,896 18,692,549 13.45% Discretionary accounts 1,466,095 29.26% 1,367,475 7.21% Mutual funds 2,631,218 52.51% 2,901,053 -9.30% Sicavs 108,878 2.17% 86,564 25.78% Insurance products 804,569 16.06% 768,874 4.64% of which Pension funds 103,220 86,840 18.86% Total assets under management 5,010,760 100% 5,123,966 -2.21% Third-party securities under custody and administration of ordinary 8,536,982 8,444,590 1.09% customers Total indirect customer deposits 13,547,742 13,568,556 -0.15% Total funds under admin. of banks and institutional investors 34,621,570 28,994,564 19.41% Grand total funds under administration 69,375,208 61,255,669 13.26%

The grand total of customer funds under administration is €69,375 million, an increase of 13.26% since December 2004 (which does not take account of the effects of IAS 32 and 39). In particular, Amounts due to customers total €9,338 million (+9.2%) while Securities in issue total €11,865 million, an increase of 17%. Within the Amounts due to customers item, current accounts and demand deposits increased by 17.4% to €7,082 million. Overall, direct customer deposits total €21,205 million, an increase of 13.4% on the previous year. As regards indirect deposits, the volumes show substantial stability with the figures posted at the end of 2004, although there was a certain amount of redistribution among the various forms. In particular, discretionary accounts increased by 7.21% while units in mutual funds fell by around 9%. An interesting trend can be seen in relation to pension funds, which recorded a 19% increase, albeit with very low starting volumes. The increase [sic] in administered deposits, which increased [sic] from €13,569 million at the end of 2004 to its current figure of €13,548 million almost totally makes up for the decrease in assets under management which fell from €5,124 million to €5,011 million in December 2005. The figures also show a decrease in amounts due to banks and institutional investors, for an amount of €1 billion and €200 million, and an increase in third-party securities of other intermediaries, for an amount of more than €6 billion and €500 million, attributable to movements of leading institutional investors, including ARCA.

225 As regards deposits (current accounts, savings accounts and certificates of deposit), the following tables gives a breakdown by sector and geographical location of customers.

Deposits by Sector 2005 % comp. 2004 % comp. Government Bodies 1.76% 2.55% Households 58.92% 62.68% Financial Companies 13.58% 8.60% Non-Financial Companies 20.97% 20.51% Not-for-Profit Organisations 2.33% 2.58% Other 2.43% 3.07% Total 100% 100%

With regard to this distribution of deposits by sector, as with the Group figure, there is an increase in the weighting of financial companies, resulting in a redistribution between the other sectors. This is connected to the presence of relationships arising from the Antonveneta operation, which are being scaled down following the completion of the ABN takeover offer at the end of March.

Deposits by Region (customer location) Dec 31 2005 Dec 31 2004

Lombardy 37.59% 36.21% Sicily 14.78% 15.90% Liguria 14.70% 17.42% Emilia Romagna 9.57% 8.67% Lazio 9.11% 7.96% Tuscany 5.15% 3.86% Molise 2.54% 2.79% Piedmont 1.63% 1.49% Campania 1.14% 1.25% Trentino Alto Adige 0.97% 1.38% Veneto 0.85% 0.96% Puglia 0.34% 0.16% Calabria 0.24% 0.23% Basilicata 0.24% 0.23% Friuli Venezia Giulia 0.16% 0.05% Umbria 0.15% 0.17% Sardinia 0.09% 0.05% Marches 0.04% 0.04% Abruzzo 0.02% 0.03% Valle d’Aosta 0.01% 0.00% Information Not Requested 0.67% 1.14% Total 100% 100%

This geographical breakdown shows that the regions that account for almost two-thirds of deposits remain Lombardy, Sicily and Liguria, followed by Emilia Romagna, Lazio and Tuscany.

226 LOANS

Dec 31 2005 Dec 31 2004 Items values % comp. values % change Current accounts 5,748,442 44.39% 6,028,279 -4.64% Mortgages 2,492,981 19.25% 3,215,076 -22.46% Credit cards, personal loans and "fifth of salary" loans 21,451 0.17% 34,444 -37.72% Other transactions 3,074,968 23.75% 1,889,654 62.73% Impaired assets 318,322 2.46% 92,419 -44.77% Assets sold but not eliminated 1,293,455 9.99% Total net customer loans 12,949,619 100% 11,743,830 10.27%

The total amount of customer loans is €12,950 million as at December 31, 2005, an increase of 10.27% on December 2004, although this latter period did not include the effects of IAS 32 and 39. The figure for customer loans as at January 1, 2005, which incorporates the effects of the above international standards, was €12,175 million. Therefore, the increase recorded by December 2005 on this latter figure is 6.36%. Current accounts ended the year at €5,748 million (-4.64%), while mortgages were down by 22.46% as a result of the securitisations of performing loans carried out in 2005. The effects of these are recorded in the item Assets sold but not eliminated, which stands at €1,293 million.

227 As with deposits, a breakdown is given below of customer loans according to sector, economic activity and geographical location of the borrowing customers.

Loans by Sector 2005 % comp. 2004 % comp. Government Bodies 1.70% 2.63% Households 18.90% 23.17% Financial Companies 14.68% 18.46% Non-Financial Companies 53.79% 52.46% Not-for-Profit Organisations 0.35% 0.37% Other 10.57% 2.91% Total 100% 100%

This macro-breakdown by sector shows that Non-Financial Companies account for around 54% of the total, representing a slight increase on 2004. Financial Companies fell from 18.5% to around 15%.

Loans by Economic Activity Dec 31 2004 Dec 31 2005 Other market services 30.5% 41.8% Building and public works 11.3% 12.5% Commerce, salvage and repair services 13.5% 12.1% Hotels, bars and restaurants 4.7% 3.9% Agriculture, forestry and fishing products 4.2% 3.5% Foodstuffs 5.7% 3.4% Textiles 2.5% 2.5% Minerals and ferrous and non-ferrous metals 3.1% 2.2% Metal products 2.1% 2.1% Agricultural and industrial machinery 1.7% 1.7% Electrical materials and supplies 1.7% 1.6% Domestic transport services 1.3% 1.3% Energy products 5.3% 1.3% Other industrial products 1.5% 1.3% Transport-related services 1.3% 1.2% Chemical products 1.4% 1.2% Paper, paper products 1.2% 1.2% Means of transport 1.3% 1.0% Non-metallic minerals-based products and minerals 1.7% 0.9% Sea and air transportation services 0.9% 0.8% Rubber and plastic products 0.8% 0.7% Office and EDP machines 0.7% 0.4% Services Related to Maritime and Coasting Transport 0.4% 0.3% Services Related to Land Transport other than Rail Transport 0.3% 0.3% Travel Agency Services 0.3% 0.3% Communications services 0.2% 0.2% Freight Forwarding Services 0.1% 0.2% Custody and Deposit Services 0.1% 0.1% Total 100.0% 100.0%

The main economic activities performed by Non-Financial Companies and Productive Families are those related to miscellaneous services, building and commerce.

228 Loans by Region (customer location) Dec 31 2005 Dec 31 2004

Lombardy 40.76% 44.75% Tuscany 8.52% 10.16% Emilia Romagna 7.54% 10.14% Lazio 6.78% 6.41% Sicily 6.63% 6.86% Liguria 6.29% 8.67% Veneto 5.46% 3.04% Piedmont 3.19% 2.11% Trentino Alto Adige 1.51% 2.13% Molise 0.72% 0.72% Campania 0.53% 0.62% Marches 0.38% 0.39% Sardinia 0.37% 0.34% Umbria 0.17% 0.21% Calabria 0.16% 0.17% Puglia 0.13% 0.12% Friuli Venezia Giulia 0.10% 0.11% Basilicata 0.09% 0.08% Abruzzo 0.08% 0.07% Valle d’Aosta 0.02% 0.04% Information Not Requested 10.56% 2.87% Total 100% 100%

As far as loans are concerned too, the regions that account for the main share of loans disbursed are Lombardy, Tuscany, Emilia Romagna and Lazio.

229 NOTES ON PERFORMANCE Income statement results for the year 2005 The following statement and the respective comments analyse the results of the income statement for the year ended December 31, 2005, prepared according to IAS/IFRS standards, compared with the results for the previous year, restated consistently on the basis of IAS/IFRS standards, excluding IAS 32 and 39. (amounts in Euro/000) 31/12/2004 INCOME STATEMENT 31/12/2005 (without IAS 32 delta % and 39) Interest income and similar revenue 925,128 854,097 71,031 8.32% Interest expense and similar charges 712,808 545,158 167,650 30.75% Net interest income 212,320 308,939 (96,619) -31.27% Commission income 226,567 252,863 (26,296) -10.40% Commission expense 178,488 62,316 116,172 186.42% Net commissions 48,079 190,547 (142,468) -74.77% Dividends and similar income 204,852 256,932 (52,080) -20.27% Net income from trading activities (55,343) (164,835) 109,492 -66.43% Net income from hedging activities 54,168 54,168 n/a Profit (loss) from the sale or repurchase of: b) available-for-sale financial assets 1,937 1,937 n/a c) held-to-maturity financial assets (252) 252 -100% Net income from financial assets and liabilities designated at fair value 94,237 94,237 n/a Total income 560,250 591,331 (31,081) -5.26% Net adjustments for impairment of: a) loans (556,304) (109,221) (447,083) 409.34% b) available-for-sale financial assets (221,381) (55,313) (166,068) 300.23% d) other financial transactions (1,938) (1,938) n/a Net income from financial operations (219,373) 426,797 (646,170) -151.40% Administrative expenses: a) personnel expenses (277,279) (288,252) 10,973 -3.81% b) other administrative expenses (301,918) (253,595) (48,323) 19.06% Net provisions for contingencies and charges (164,701) (95,197) (69,504) 73.01% Net adjustments to property, plant and equipment and intangible (16,049) (26,004) 9,955 38.28% assets Other operating income/expenses 75,733 133,622 (57,889) -43.32% Operating costs (684,214) (529,426) (154,788) 29.24% Gains (losses) from investments (18,869) 3,759 (22,628) -601.97% Profit (loss) from sale of investments 875 875 n/a Profit (loss) from continuing operations before tax (921,581) (98,870) (822,711) n/a Income taxes on continuing operations 310,477 92,071 218,406 237.21% Profit (loss) for the year (611,104) (6,799) (604,305) n/a

Net interest income Net interest income as at December 31, 2005 was €212 million, representing a 31.3% decrease on the figure of €309 million recorded at the end of the previous year. The reduction in net interest income on the one hand reflects the growth in loans but on the other hand is affected by the strain on the liquidity relating to the borrowing of funds and by the effect of the application of IAS 39 (not applied in 2004) which generates a change in interest income to the benefit of net income from hedging activities. In detail, the growth in interest expense (+30.7% year-on-year) is much greater than the growth in interest income (+8.3% year-on-year).

230 The increase recorded in interest income, disregarding the effect of the application of IAS 39 as mentioned above, is substantially due to the growth in loans during the year (+6.3% year-on-year, based on the figure for December 31, 2004 including the effects produced by IAS 32 and 39). The growth in interest expense is substantially due to the use of external financing in the second part of the year owing to the cash position that was affected by the immobilisation of financial resources in relation to Banca Antonveneta shares.

Net commissions Net commissions were affected by the negative trend in commercial activities and by the negative contribution of extraordinary commission expense associated with financial transactions carried out in 2005. Commission income fell from €253 million in 2004 to €227 million in 2005 (-10.4%) as a result of the decline in commercial activities, while commission expense jumped from €62 million to €178 million (+186%). Commission expense includes around €75 million in relation to the Antonveneta operation and around €43 million in relation to costs incurred in the transactions to buy back the minority shares sold in the first half of 2005. Disregarding these extraordinary items, commission expense would have decreased by around €2 million (-3.2%) since the previous period.

Dividends Dividends amounted to €205 million compared with €257 million in the previous year. Of this decrease in dividends, €15 million is due to the lower contribution of subsidiaries and €37 million is due to different capital allocation policies. The balance as at December 31, 2005 includes €38 million relating to the shareholding in Banca Antonveneta.

Income from trading activities Net income from trading activities posted a loss of €55 million as at December 31, 2005. Compared with the loss of €165 million in the previous year, this represented a significant reduction in the loss. This amount is due to the Bank's policy of risk profile reduction which involved the closure of transactions involving complex financial instruments and derivatives, resulting in capital losses of around €90 million. Adverse market trends, particularly fluctuations in the yield curve in December 2005, hit investment choices hard in the finance area and led to the writedown of the overall portfolio in order to adjust the book values of the financial instruments to the market value as at December 31, 2005.

Income from hedging activities Net income from hedging activities posted a profit of €54 million as at December 31, 2005. It is pointed out, as indicated above, that this result was achieved thanks to a transfer of around €70 million from the item "interest income" owing to the application of IAS 39.

Net income from financial assets and liabilities designated at fair value The item "net income from financial assets and liabilities designated at fair value" amounted to €94 million as at December 31, 2005. This amount relates entirely to the capital gain realised from the sale of the shareholding in Banca Antonveneta to ABN Amro.

231 The increase in net adjustments to loans is due to the prudent valuations made on the loan portfolio, as a result of detailed analyses which, in particular, entailed an increase in the level of coverage of non-performing loans. It is pointed out that the individual writedowns include the writedown of around €150 million in relation to funds granted to the Magiste Group (calculated on the basis of the depreciation of the guarantees in force as a result of the negative performance of the securities given as collateral) and around €97 million in relation to funds granted as part of the loan to Kamps.

- available-for-sale financial assets Net adjustments for the impairment of available-for-sale financial assets increased by €166 million from €55 million in 2004 to €221 million in 2005. Of this figure, around €114 million relates to the total writedown of the junior notes and the partial writedown of the mezzanine notes (equal to 70% of the total value of the securities in the portfolio) arising from the securitisations of non-performing loans performed by the Group in previous years through the vehicles Tiepolo Finance and Tiepolo Finance II, and around €107 million relates to the writedown of the shareholdings classified among available-for-sale financial assets. The writedown of the shareholdings in question is substantially due to the writedown made in relation to Hopa totalling around €97 million.

Administrative expenses Administrative expenses recorded a total increase of €37 million, rising from €542 million in 2004 to €579 million in 2005. In detail, personnel expenses fell by €11 million (-3.8%) while other administrative expenses increased by €48 million (+18.8%). A significant part in this increase were all the extraordinary expenses incurred by the Group in the Antonveneta operation which amounted to around €40 million. Net of this extraordinary effect, other administrative expenses would also have increased by 3% on the previous year.

Net provisions for contingencies and charges Net provisions for contingencies and charges amounted to €165 million for the year ended December 31, 2005, an increase of €70 million on the figure for the previous year. The provisions made relate, in particular, to the expenses relating to the Parmalat revocatory action totalling around €30 million, to the charges for legal risks attributable to the Antonveneta operation totalling around €94 million, and to the expenses related to legal disputes and lawsuits totalling €40 million.

A summary is given below of the effects arising from the Antonveneta operation on the 2005 income statements, without considering the implicit costs inherent in the financial immobilisation of the shares in question.

232 Net adjustments to property, plant and equipment and intangible assets Net adjustments to property, plant and equipment consist exclusively of depreciation of PPE alone. As at December 31, 2005, these amounted to €16 million in line with the previous year. Unlike during the previous year, when a writedown of €9 million was made, there were no writedowns of intangible assets during 2005.

Other operating income and expenses The item "other operating income and expenses" showed a positive balance of €76 million as at December 31, 2005, although the figure was €58 million lower than the previous year, essentially due to lower amounts of extraordinary income. Operating income amounted to €139 million while operating expenses amounted to €63 million.

Gains (losses) from investments Net losses from investments as at December 31, 2005 amounted to €19 million compared with net gains of €4 million in the previous year. Of this loss, €4 million relates to the sale of minor equity investments and €15 million to the writedown made on the shareholding in Reti Bancarie, in response to the results emerging from the assessment made by a leading consultancy firm following impairment testing.

Income taxes on continuing operations Income taxes on continuing operations posted a positive balance of €310 million as at December 31, 2005 as a result of the recognition of deferred tax assets calculated not only on the temporary differences between the book and tax bases of assets and liabilities but also on the end-of-year tax losses. The tax asset was recorded in view of the extraordinary nature of such losses which can therefore be reabsorbed through lower payment of taxes in future years on the basis of the profits that emerge from the business plan over the forthcoming years, and also in consideration of the national tax consolidation to which the Parent Bank and almost all of the subsidiaries have subscribed.

233 RISK MANAGEMENT AND CONTROL SYSTEM Banca Popolare Italiana's and the Group's internal control system consists of a set of rules, procedures and organisational duties. This requires the involvement, in various roles, of the company's operational, executive and governance bodies. The events of 2005 highlighted a number of difficulties within the general control system in relation to the investigation of actions that do not fall within the normal operating practices defined. In the light of these difficulties, there has been a substantial rethinking in relation to the organisational structure of the control system. The initiatives defined, and partly already implemented, follow on from previous initiatives carried out during 2005, and relate to four well-defined areas: 1. Governance system 2. Line controls 3. Risk management system 4. Internal auditing.

Governance system The Bank's and the Group's new organisational and governance structure, already decided by the Board of Directors, is based on the following principles: x distinction between "line" and "staff" functions, x identification of three Areas of lines (Operation, Market, Finance and Credit), x clear distinction between hierarchical and functional reporting based on principles of management delegation and collective involvement. The Bank includes within its structures the Corporate Centre functions. The Bank adopts a strong leadership role, implemented through the General Management and the managers of the line Areas, with the following duties: x issuance of models and policies defined by the Parent Bank's technical departments, for example, for risk management and union policy. x guiding role in the respective Committees, with duties and powers for strategic policy and coordination of significant operations for the Group. The following Governance Committees have been set up, again decided by the Board of Directors, with the aim of tightening control over the Group's operations: x Strategic Policy Committee (with a mandate to determine the criteria for managing the Group's affairs and for monitoring its operations), comprising the following Directors: - Chairman, Dino Piero Giarda,

- Chief Executive Officer, Divo Gronchi - Senior Deputy Chairman, Enrico Perotti - Deputy Chairman, Vittorio Coda

- Andrea Guidi x Internal Control Committee (set up pursuant to Art. 10 of the Corporate Governance Code for Listed Companies and having advisory duties in relation to the system for preparing and auditing the financial statements), comprising the following Directors: - Pietro Manzonetto

- Pierantonio Ciampicali - Mario Minoja x Control Body pursuant to Legislative Decree no. 231/01 (set up to analyse the risks relating to the offences specified in the decree and to analyse the adequacy of the controls over the risks identified), comprising the following Directors:

- Bruno Giuffrè - Maria Luisa Di Battista

234 - Pierantonio Ciampicali; Furthermore, the following committees have been set up: x Executive and Operational Credit Committee (the executive committee approves the proposal made by the Credit Division regarding Credit Policy Management. Both committees take decisions, according to different decision-making powers, in relation to the credit proposals drawn up and for managing the overall credit risk position). The Executive Credit Committee comprises the following Directors:

- Chief Executive Officer, Divo Gronchi - Guido Castellotti - Maria Luisa Di Battista - Augusto Machirelli; x Management Committee (responsible for checking the implementation of the Group's strategic policies and the progress of the Business Plan), comprising the following persons and entities: General Manager, Credit/Finance Management Team, Operation Management Team, Planning and Risk Management Division, Subsidiary Banks Coordination Division, Networks Coordination Division; x Finance and Risks Committee (guarantees the coherence of the overall risk policy - in terms of interest rate, exchange rate, equity - liquidity of the Bank and other companies that manage credit/finance risks within the Group). The committee comprises the following persons and entities: Chief Executive Officer, General Manager, Credit and Finance Management Team, Finance Division, Credit Division, Networks Coordination Division, Subsidiary Banks Coordination Division, Planning and Risk Management Division, Budget and Accounts Division, Bipitalia Gestioni SGR Management; x Products Committee (approves product development proposals by assessing, on the basis of the Business Plan, their profitability, image/operational risks, observance of current regulations, current status of the process of releasing new products). The committee comprises the following persons and entities: General Manager, Credit and Finance Management Team, Operating Management Team, Retail Division, Corporate Division, Networks Coordination Division, Finance Division, Credit Division. x Projects and Cost Management Committee (governs the Business Plan projects and monitors their current status. Monitors the operational consistency of Group companies and makes decisions on expenses and investments throughout the Group). The committee comprises the following persons and entities: General Manager, Credit and Finance Management Team, Operating Management Team, Organisation Division, Planning and Risk Management Division.

235 Risk management Market, interest rate and liquidity risks. The Bank measures market risk by using an internal model that is based on Value at Risk (VaR) methodology. Every day, exposure to the general risk of the portfolio is measured. This represents an estimate of the maximum loss in value that this can undergo, over a period of 1 day and with a confidence level of 99%, in response to unexpected changes in interest rates, exchange rates and share prices. As a result of the events occurring in 2005, the measurement was suspended in August and only partly reinstated in October after checking that all of the positions taken by the Bank were correctly recorded in the computer procedures. Activities are also in progress to define a new scope for measuring the risk which is compatible with the organisational changes in the Finance Area. Besides the usual operations connected with monitoring interest rate and liquidity risk, carried out according to Maturity and Sensitivity Analysis methods with constantly updated ALM Asset & Liability Management procedures, last year saw the roll-out of an automated system that checks the effectiveness of interest rate hedges, which is necessary for the appropriate book entries in compliance with the new IAS/IFRS standards introduced during 2005.

Credit risk As regards the management of credit risk, in 2005 project activities continued for the development of an internal risk measurement system. In this regard, various project strands were launched ranging from the redefinition of the rating model for the businesses segment to the upgrading of the databases required to evaluate other risk parameters (Loss Given Default LGD and Exposure At Default EAD) based on the "Internal Rating Based IRB Advanced" approach according to the New Capital Accord (June 26, 2004). During the year, the implementation of the portfolio model was completed, which, thanks to the new estimated risk variables, will provide useful support in defining credit policies in terms of the composition of the loan portfolio. In 2006, the development of the Probability of Default PD model [for the] businesses segment is expected to be completed together with the start of the necessary activities for its use in credit processes. On the other hand, the EAD and LDG model will provide useful information on the effectiveness of the monitoring policies and debt recovery processes respectively.

Internal auditing This task, which is allocated to the Auditing and Internal Control Division, has the general aim of ensuring that control activities are performed and of monitoring the changes in the Internal Control System, according to the instructions given by the competent authorities. Currently, this Division is accountable to the Chief Executive Officer and its structure will be divided into 3 main units which will deal respectively with auditing of the distribution network and central structures and conformity with and observance of external and internal regulations. In details, its responsibilities are as follows: 1. to operate in accordance with the guidelines defined by the competent bodies and by the Chief Executive Officer, reporting in a timely manner the results achieved in the performance of its duties. 2. to carry out targeted and systematic assessments of the functionality, reliability, security and correctness of the operating and governance processes at the central and/or peripheral bodies and at the branches. 3. to monitor and check observance of the regulations in terms of the types of risk: credit, organisational, operational, IT, legal, fraud and disloyalty, reputation and physical safety, which characterise the Group's activities. This monitoring also extends to the Group's organisational and operational conditions, which allow for observance of standards and internal and external regulations, including with regard to stock brokerage. 4. to monitor the changes to the Internal Control System within the Group, by carrying out on-site and remote evaluations and analyses aimed at assessing the functionality and reliability of the Systems

236 adopted, particularly with regard to the correct definition and performance of line controls, risk management controls and internal auditing activities. 5. to carry out monitoring and control activities in relation to the foreign banking and non-banking subsidiaries, according to formalised criteria and in observance of the rules in force in Italy and abroad. 6. to prepare inspection reports, to be sent to the competent departments, with the findings of the controls performed, specifying the corrective measures for the anomalies found, and the possible improvements to the risk management policies, measurement instruments and procedures. 7. to manage relations and related formalities with the Control Committees and the Bank's Board of Statutory Auditors, the Boards of Auditors of the subsidiaries and other control bodies, in observance of the independent powers agreed. 8. to define the methodology and models for carrying out control activities and developing support tools. 9. to ensure, through the relevant structures, that the services specified in the "intragroup service" agreements between the Parent Bank and the subsidiary companies/banks are provided.

237 controls). The above document was brought to the attention of the Internal Control Committee and subsequently to the Board of Directors in the first useful meeting. In particular, the aspects considered in identifying critical issues and areas of improvement in the internal control system are as follows: ¾ rules and procedures; ¾ powers and authorities; ¾ segregation of duties; ¾ overlapping of roles, ¾ traceability of data and documents. As far as specific internal auditing operations are concerned, it is also pointed out that, in order to guarantee adequate ongoing monitoring of banking operations, a project is currently in progress to develop the "distance control system" (SCD) so that the solution already present in the network of Branches ("SCD" procedure) can also be extended to the processes performed by the divisions. In this regard, work has been completed in relation to the analysis and identification of the risk indicators applicable to the activities performed by the Finance and Administration and Accounting Divisions, considered to be priority activities for the company. The project is now moving onto the implementation of the computer solution and a gradual rollout of the methodology to other areas of the General Management.

238 x replacement of the Over The Counter (OTC) Derivatives procedure, involving the automation of the process, from the entry of the transaction in the trading room, to monitoring the availability of the customer's loan, to accounting and supervisory reporting; x adoption of the new version of the "Asset and Liability Management Operativo" (ALMO) procedure, the implementation of which will improve the procedures for managing interest rate risk, correct cash planning and management, management of hedges according to an IAS compliant approach. The application modules relating to the performance of hedge effectiveness tests, necessary for the application of IAS standards, have already been installed, while the modules relating to ALMO are expected to be released in 2006. With the installation of the new management and in order to provide the bank with more technically and applicationally advanced solutions, particularly in terms of risk control and the respective assessments, a program has been started to replace the current position-keeping application (Kondor+) with the MUREX application in an "in service" solution.

239 The new way of operating in the Finance division must always guarantee: x identifiable, measurable and monitorable risks, including through adequate line controls (level 1); x mission alignment; through the progressive reduction and/or elimination of the areas of operation that are not consistent with the relevant company strategies, x collective decision-making, through the creation of the Markets Committee, within the division, and, in particular, the creation of the Bank's Finance and Risks Committee, x the formation of a new Financial Audit Unit to optimise the management and monitoring of position- keeping systems and to check the correct distribution and use of the operating limits assigned to the Management and analysis of the profit/loss positions of the individual desks at the end of each day.

Definition of operational limits The allocation and control of limits in the various hierarchical levels is implemented by assigning delegated powers to the various managers of the business areas.

240 The limits will be monitored by the Planning and Risk Management Division, which is responsible for defining the methodologies used in accordance with the need for segregation and independence of the control units from the operating centres. In the Finance Division, the Financial Audit Unit will be in charge of checking and monitoring the distribution and respective use of the operational and counterparty limits approved. The above guidelines will be presented for the approval at the meeting of the Board of Directors to be held in April 2006.

ADDITIONAL INFORMATION With regard to related party transactions, and in particular with subsidiaries and associates, refer to Section H of the notes. The Bank does not carry out research and development activities. As regards the own shares held in the portfolio, refer to the notes. For detailed information on the Bank's and the Group's personnel, refer to the consolidated report on operations.

241 IMPORTANT DEVELOPMENTS OCCURRING AFTER DECEMBER 31, 2005 AND BUSINESS OUTLOOK 1) CORPORATE GOVERNANCE As a result of the events that occurred in 2005, the then Board of Directors, in a spirit of responsibility and in consideration of the difficulties encountered by the Bank, resigned and called a Shareholders' Meeting for the replacement of the management personnel. As regards the Board of Statutory Auditors, the statutory auditor Pernigotto tendered his resignation with immediate effect and was replaced by the alternate auditor Lazzarini, and the statutory auditor Araldi tendered his resignation with effect from the date of the Shareholders' Meeting. The Chairman of the Board, Goisis, and the statutory auditor, Bonazzi, resigned as from the approval of the 2005 financial statements. Subsequently, the Chairman of the Board of Statutory Auditors withdrew his resignation. On January 28, 2006, the Shareholders agreed that the Board of Directors would consist of 16 members and the following were chosen as Directors: Guido Duccio Castellotti, Pier Antonio Ciampicali, Costantino Coccoli, Vittorio Coda, Maria Luisa Di Battista, Dino Piero Giarda, Bruno Giuffrè, Divo Gronchi, Andrea Guidi, Augusto Machirelli, Pietro Manzonetto, Roberto Nicola Martone, Mario Minoja, Giorgio Olmo, Enrico Perotti and Roberto Schmid. Furthermore, the Shareholders also added to the Board of Statutory Auditors by electing the following as Statutory Auditors: Gabriele Camillo Erba, Luigi Corsi and Giordano Massa; and the following as Alternate Auditors: Gianpaolo Fornasari and Massimo Mustarelli. The Shareholders' Meeting also re-approved the Financial Statements for the year ended December 31, 2004, amending the approval resolution previously made by the Board on April 30, 2005. This was necessary following the comments made by CONSOB and led to negative adjustments totalling €195 million in the income statement, thus making the loss for the year €23.3 million. In its meeting on January 30, 2006, the Board of Directors appointed a Chairman, Dino Piero Giarda, lecturer at Milan Catholic University, former Treasury Under Secretary from 1995 to 2001 and current Chairman of the sub-holding Bipielle Investimenti, and appointed Divo Gronchi as Chief Executive Officer. After the initial - more urgent - appointments, which were decided in 2005, the Bank's management structure was progressively redesigned over the subsequent months with the recruitment of other managers from outside. Other appointments included the Deputy General Manager Giuseppe Malerbi, with powers in the Credit and Finance area, and the Deputy General Manager Apicella Guerra, with powers in the Operation area (organisation and IT). The Board of Directors' appointment of the General Manager, Franco Baronio, former Deputy Chairman of the consultancy firm Bain & Company, with significant experience in banking consultancy, completed the picture. The respective responsibilities were assigned: the Chief Executive Officer is responsible for strategy and control and the General Manager is responsible for the "operating machine" and all other duties. Finally, on March 9, 2006, the Board of Directors appointed Enrico Perotti and Vittorio Coda as Senior Deputy Chairman and Deputy Chairman respectively of BPI's Board of Directors.

242 3) The agreement with Fondazione Cassa di Risparmio di Lucca On March 9, 2006, the Bank's Board of Directors approved, within its limits, the resolutions taken by the respective Boards of Directors of Casse di Risparmio di Lucca, Pisa and Livorno in relation to the plans to create the third largest bank in Tuscany. The origins of this resolution date back to the agreement of May 6, 2005, signed by BPI and by Fondazione Cassa di Risparmio di Lucca, which set out the conditions for Tuscany to become one of the strongholds of the Gruppo Banca Popolare Italiana. The parties drew up a comprehensive regional-based development programme that will be implemented in several phases, the most important of which involves the merger of the three Tuscan "Casse" and the transfer, which took place on December 19, 2005 with effect from January 1, 2006, of the 26 Banca Popolare Italiana branches in the Tuscany area to Cassa di Risparmio di Lucca.

4) "Programma Fiducia" In the meeting of the Board of Directors held on December 27, 2005, the aforementioned new initiative called "Programma Fiducia" was illustrated. This programme is one of the strategies by which the Bank aims to return to ordinary management policies based on principles of total transparency and high standards of communication with customers. This programme involves a series of commercial initiatives such as a pricing review and introduction of new products, aimed both at individuals and small businesses. Individual initiatives relate to current accounts, loans and investments. The overarching aim of the Programma Fiducia is to place customer loyalty at the heart of the Group's growth, increasing customer retention through clear indicators of transparency, competitiveness, innovation and freedom to try the Group's services. Under the Programma Fiducia, the development of current account products aimed at small businesses has led to the creation of a comprehensive offer for all customer targets: Conto Liberi Professionisti, an account reserved for professionals entered on a professional register; Conto Impresa, a business account available on three levels (Small, Medium and Big) depending on current account transactions, aimed at self-employed workers, craftsmen and small production companies; Conto Commercianti, a package account aimed at retailers, created in 2004 but made more competitive with the combined offer of the POS service for free.

5) Relaunch plan The Bank is currently involved in a comprehensive relaunch plan aimed at streamlining the governance structure, improving customer relations as a result of transparency and ethical conduct, and recovering profitability. The project, whose guidelines are being defined for the purposes of the preparation of the 3-Year Business Plan to be approved in April 2006, requires a comprehensive review of strategies, refocusing on traditional banking activities and adopting a new organisational model. The project to redesign the General Management and the Governance Model has been defined with the help of a consultancy firm. The objectives of the new Group Governance structure relate to organisation (structural and corporate reorganisation), processes (identification of key subjects in relation to markets and risks) and resources (correct sizing of structures). In order to increase collective involvement, the Strategic Policy Committee, the Internal Control Committee, the Supervisory Board pursuant to Law no. 231 and the Credit Executive Committee have been set up at Board level. The Operating Credit Committee and the Management Committee are also operational and more information is given about these further on. For a more detailed description of events occurring after the balance sheet date and of the future management developments of Banca Popolare Italiana and the Gruppo BPI, refer to the Report on the Consolidated Financial Statements of the Gruppo BPI.

243 244 PROPOSED RESOLUTION

Dear Shareholders,

We present for your approval the bank's financial statements for the year ended December 31, 2005, which show a loss of €611,103,873.44, which we propose to balance by drawing from the following reserves:

Reserves for merger surpluses 18,528,538.85 euro Reserves for demerger surpluses 77,161,468.45 euro Reserves for transfer gains 1,277,643.00 euro Reserve for dividends on own shares 1,643,144.85 euro Issue premium reserve 512,493,078.29 euro

In addition, we propose to use the Reserve for surplus retained earnings of €16,456,094.23 to increase the distributable reserve for purchase of own shares. After this allocation, the distributable reserve for purchase of own shares will amount to €91,456,094.23.

Lodi, March 29, 2006

THE BOARD OF DIRECTORS

245 Additions to the Bank's financial statements for the year ended December 31, 2005 requested by CONSOB in a letter dated March 28, 2006, pursuant to Art. 114 (5) of Legislative Decree no. 58/1998

Point a) GUARANTEED RETURNS OFFERED TO CUSTOMERS With regard to the additional information requested in relation to the "guaranteed returns" offered to customers, it is specified that, in September 2005, it emerged that there were five positions involving guaranteed returns offered to customers ("guaranteed accounts"), four of which related to commitments assumed ex-novo or extended by the Bank during 2004. Based on the information contained in the guarantee letters - submitted by the customers at their own initiative and no original documentation and/or copy of which was available at the Bank - the commitments assumed (in terms of guaranteed capital) totalled €60.3 million as at December 31, 2004 and €73.1 million on the date when these positions were closed, which, in all five cases, took place prior to the date on which the 2005 draft financial statements were approved by the Board of Directors. The exchange value of the assets relating to these guaranteed accounts was approximately: - €47.0 million as at December 31, 2004 (four positions); - €34.6 million on the date when the five respective positions were closed. The potential expenses payable by the Bank were estimated in the region of €13.3 million in the 2004 income statement re-approved in the Shareholders' Meeting of January 28, 2006. This amount constituted the maximum potential liability resulting from the commitments in effect as at December 31, 2004, equal to the difference between the commitments assumed (€60.3 million) and the exchange value of the assets on the same date (€47.0 million). As regards the 2005 financial year, these relate to expenses actually incurred as opposed to potential expenses, given that all five positions were closed before the approval of the financial statements. In the meeting of the Board of Directors of September 9, 2005 and in the subsequent meetings of October 27, 2005, November 14 ,2005, November 21, 2005 and December 27, 2005, and after obtaining legal opinions, the Bank, based in particular on a copy of the documents furnished by the customers, proceeded to reach final settlements aimed at closing the positions so as not to incur any further expenses in the future. The amounts of the expenses actually incurred as a result of the settlements was in the region of €38.5 million. Because a provision of around €13.3 million had been made for precautionary reasons in the 2004 financial statements, the expenses charged to income in 2005 totalled approximately €25.2 million. Both the expenses set aside in 2004 and those actually incurred in the closure of the positions were calculated as being the difference between the guaranteed capital (capital and interest) and the market value of the assets in the customers' portfolio. Finally, it is confirmed that the total expenses payable by the Bank were determined on the basis of the documentation presented to the Bank by the customers themselves and that the amount set aside in the re- approved 2004 financial statements was determined on the basis of precautionary estimates. For greater clarification, considering the limitations expressed by the independent auditors in their report on the re- approved 2004 financial statements, issued on January 11, 2006, it is regarded that the amount set aside in the financial statements represents the best possible prudential estimate of the economic effects on the 2004 financial year based on the limited facts and documents available to the Bank. A summary is given below of the guaranteed positions.

Table 1

246 Point b) STRUCTURED SECURITIES AND DERIVATIVES IN THE PROPRIETARY PORTFOLIO In relation to the complex structured securities and derivatives in the proprietary portfolio, for the purposes of drawing up the re-approved financial statements for the year ended December 31, 2004, based on the accounting policies used for the aforementioned financial instruments, besides the details of stock, movements and economic impacts described in the attached statements, it is specified that: - for structured securities, the valuation price of the securities in question was recalculated through the "backwards" adoption of the "re-calibrated" internal model, previously applied for the valuations as at September 30, 2005, and whose technical characteristics are specified at the foot of table 5. This choice was made for the purposes of achieving a consistent comparison of the positions and exchange value of the portfolio, and to quantify, with more accuracy, the "pluses/minuses" and "profits/losses" in terms of the Bank's transactions; - for complex derivatives, the refined internal model finally adopted in the final quarter of 2005 was coherently applied, again "backwards", based on the most advanced mathematical/statistical calculation techniques described in the specific appendix and in line with the most recent market applications. With regard to the valuations in the financial statements for the year ended December 31, 2005, it is pointed out that: - for structured securities, for prudential reasons these were valued by applying the prices directly supplied by the external counterparties, with acquisition of the principles and/or their models. This model seems adequate and consistent with the management policy of "unwinding" the main positions; - for complex interest rate derivatives, internal models were applied, again as at December 31, 2005, and compared with the direct prices given by the external counterparties, following a prudential approach, having observed the significant implied risk, the associated volatilities, the differing degree of liquidity and disposal, the technical complexities owing to the presence in some of multiple leverages, the high notional amount, the rates market phase, etc. It was also proven that the new internal models adopted were consistent with the market prices, with marginal differences in mark-to-market, always following a management approach that seeks to reduce and progressively "dismantle" the bulk of the transactions in effect. As at February 20, 2006, the notional values of the complex derivatives in the portfolio amounted to €380 million compared with €875 million as at December 31 ,2005.

Table 2 BREAKDOWN OF INVESTMENT PORTFOLIO as at December 31, 2004 and December 31, 2005

NB: the 2005 figures are stated according to a non-IAS compliant classification in order to standardise them with the 2004 figures.

247 Table 3 BREAKDOWN OF STRUCTURED SECURITIES as at December 31, 2004 and December 31, 2005

K+ 3750 IRS 16/5/2020

6995430 ROYAL BK S ZC 15/4/13 6919910 APHEX SA TV 26.09.05

6922050 APHEX SA TV 28.02.09

6958400 BEAR ST GL 4.550 Total -7,381,000 5) 6920360 Dexia 1/8/2018 Infl. Link 50,000,000 86.46672 -6,766,638 k+3532 IRS 15/4/2015

3181110 Du.Ca. SPV TV 10/11

Total (*) The P&L are those revised during the re-approval of the 2004 financial statements. (**) The valuation was not recorded in the Income Statement because the security was fixed. It was however recognised in Shareholders Equity as at January 1, 2005 in the first-time adoption of IAS/IFRS (***) Security sold for €34,375 thousand with value date November 22, 2004 at 99.94% (****) Security sold for nominal €50 million with value date September 7, 2004 at 100.00%.

248 Table 3 BREAKDOWN OF STRUCTURED SECURITIES as at December 31, 2004 and December 31, 2005

Purchases/sales made in 2005 Position as at 31/12/2005 Value date Nominal value Px P/S P&L Nominal value Valuation P&L

Dec 30 2005 -351,000,000 100.00000 6,892,000 Dec 28 2005 -151,000,000 82.11921 -27,000,000 Dec 30 2005 200,000,000 100.00000 200,000,000 100.00000 -20,108,000

Jan 10 2005 -50,000,000 100.00000 6,766,638 Apr 15 2005 50,000,000 100.00000 Dec 23 2005 -50,000,000 71.10000 -14,450,000 -7,683,362

Nov 30 2005 Unwind credit risk -16,700,000 100,000,000 94.02197 -5,978,027 -16,700,000 -5,978,027

Nov 10 2005 -34,375,000 80.68506 -436,711 -436,711

50,000,000 81.09226 -562,649 -562,649

21,737,208 Total loss -78,741,402

Jan 26 2006 175,500,000 Jan 24 2006 52,717,270 -1,553,252 Jan 26 2006 3,000,000 428.00000 -9,840,000 -3,000,000 100.00000 Jan 26 2006 5,817,619 237.00000 -7,970,138 -5,817,619 100.00000 -19,363,390

249 Brief explanatory notes 1) The bond Dresdner Bank TV 11/15 (cod. 6913120), present in the portfolio since 2003 in a nominal amount of €351 million, was valued, during the re-approval of the 2004 financial statements, at 98.09774%. The depreciation was due to the downgrading of BPI's credit rating, to which the bond was index-linked. By the end of 2005, at the same time as the bond was sold, the mezzanine tranche of the Tiepolo 2 securitisation (cod. 9468120) was bought back for a nominal €151 million, and the BPI TV 11/15 issue (cod. 691300) was bought back for a nominal €200 million, indexed to the performance of the aforementioned Tiepolo 2 tranche. Finally, the coupon swap operation was unwound for a nominal €151 million. The total cost of the destructuring operation was €27 million. In the re-approved 2004 financial statements, it is also pointed out that a provision for contingencies and charges totalling €14 million had been set aside to cover the expenses relating to the future costs of closing the transaction in question.

2) The bond Angus 27/10/16 s. 188 (cod. 6888790), present in the portfolio since 2002 in a nominal amount of €241 million, was valued, in the re-approved 2004 financial statements, at 84.6861%. The depreciation was due to the credit events that had affected ENRON, MARCONI, XEROX and GETRONICS in the meantime. The bond prepaid the amount of €146.5 million with value date May 20, 2005, while the residual nominal value of €94.5 million, was sold at the price of 99.7286% with value date May 25, 2005.

250 9) In January 2006, the Special Purpose Vehicle Alexandria 2004 series 2 and 3 bonds totalling €175 million were sold from the Conduit CAFÉ portfolio, at the price of 100%. In January 2006, the Bank bought back from Alexandria the equity tranches of the BPL Consumer securitisation at 428% and the DuCa securitisation at 237%. As part of the same operation, nine bonds (ABS) were sold from the Conduit CAFE portfolio for a total nominal amount of €52.7 million, recording a loss of around €1.5 million.

251 Table 5

252 - - in the financial statements for the year ended December 31, 2005, there remains only one complex barrier and leverage currency derivative, valued on a prudential basis and with methodological continuity, with a price report supplied by external counterparties upon specific request. Finally, it is pointed out that: - during the 1st quarter of 2006, and for the future, the Bank implemented a system, developed in-house using the "Montecarlo" simulation, which is able to price and value more complex currency options, tested with a good degree of consistency and reliability for contracts with a reasonable duration on the currency market; - for longer maturities and maturities over 18 months, because any theoretical valuation may different from the actual selling and unwinding prices, in view of the significant quantities of variables, the implied correlations, and the relevant time series, in the future, it will be preferred, for precautionary reasons, to have such transactions priced directly by the counterparties, thereby making it possible to check the consistency of the valuation models adopted and system and market updating. - in consideration of the limitations expressed by the independent auditors in their report on the re- approved 2004 financial statements, issued on January 11, 2006, it is pointed out that in "repricing backwards" these complex exotic barrier and leverage currency options, it was necessary to rely on the valuations supplied by the contractual counterparties at the Bank's request, as the latter, at the time of revising the 2004 financial statements, was not able to reconstruct a reliable calculation and valuation model for these instruments.

Table 6 CURRENCY OPTION POSITIONS AS AT 31/12/2004

currenc MTM date P/S nominal ko ki type strike maturity premium y 31/12/04 14/5/2004 s usdchf 60,000,000 1.299 1.05 L2 usdput/chfcall 1.26 20/1/2010 3,600,000 (13,943,776)