MONTE DEI PASCHI DI SIENA BANK Consolidated Interim Report as at 31 March 2018 Domenico Beccafumi, Artemisia (detail) Chigi Saracini Collection (work of art owned by Banca Monte dei Paschi di Siena) 1 Interim Report on Operations as at 31 March 2018 Interim Report on Operations Monte dei Paschi di Siena Group 31 March 2018 Banca Monte dei Paschi di Siena S.p.a. Share Capital: € 10,328,618,260.14 fully paid up Registered with the Siena Company Register – registration no. and tax code 00884060526 Member of the Italian Interbank Deposit Protection Fund. Registered with the Register of Banks under no. 5274. Monte dei Paschi di Siena Banking Group, registered with the Register of Banking Groups BANCA MONTE DEI PASCHI DI SIENA Interim report on operations as at 31 March 2018 2 CONTENTS Introduction ..................................................................................................................................................................... 3 Results in brief ................................................................................................................................................................. 4 Executive summary .......................................................................................................................................................... 7 Shareholders .................................................................................................................................................................... 9 Information on the BMPS share ................................................................................................................................... 10 Reference context ........................................................................................................................................................... 12 Significant events in the first three months of 2018 ........................................................................................................ 13 Significant events after the 1st quarter of 2018 .............................................................................................................. 13 Strategy ........................................................................................................................................................................ 15 The doubtful loan disposal transaction ........................................................................................................................... 16 Explanatory Notes ....................................................................................................................................................... 17 Income statement and balance sheet reclassification principles .......................................................................................... 21 Reclassified income statement ......................................................................................................................................... 24 Reclassified balance sheet ............................................................................................................................................... 32 Disclosure on risks ........................................................................................................................................................ 43 Results by operating segment .......................................................................................................................................... 46 Prospects and outlook on operations ............................................................................................................................... 61 Annex .......................................................................................................................................................................... 63 DECLARATION OF THE FINANCIAL REPORTING OFFICER ......................................................... 66 CONSOLIDATED INTERIM REPORT 3 Interim report on operations as at 31 March 2018 Introduction The Interim Report on Operations as at 31 March 2018, not subject to audit requirements, provides a description of the activities and results which largely characterised Montepaschi Group’s operations in the first quarter of 2018, both as a whole and in the various business lines into which consolidated operations are carried out. In particular, economic and financial indicators, based on accounting data, are those used in internal performance management and management reporting systems, and are consistent with the most commonly used metrics within the banking industry, thereby ensuring the comparability of presented figures. Following the amendment of the Consolidated Law on Finance (art. 154-ter, Legislative Decree no. 58/1998) and the Issuers’ Regulation (art. 82-ter, Consob Resolution no. 11971/1999), in implementation of the so-called Transparency II Directive (Directive 2013/50/EU), the obligation for listed companies to publish interim reports on operations (as at 31 March and as at 30 September) was repealed, allowing issuers to decide on a voluntary basis whether to disclose periodic financial information in addition to the annual and half-yearly reports. Montepaschi Group has chosen, as its policy on additional periodic financial disclosures, to publish this information on a voluntary basis with reference to 31 March and 30 September of each year, by means of Interim Reports on Operations approved by the Board of Directors of the Parent Company, in essential agreement and continuity with the past. BANCA MONTE DEI PASCHI DI SIENA Interim report on operations as at 31 March 2018 4 Results in brief Economic and financial indicators, based on accounting data, are those used in internal performance management and management reporting systems, and are consistent with the most commonly used metrics within the banking industry, thereby ensuring the comparability of presented figures. Pursuant to the requirements set forth in the “Guidelines on Alternative Performance Measures” published by the European Securities and Markets Authority (ESMA) in June 2016, this section contains the definitions and calculation methods of alternative performance measures. CONSOLIDATED REPORT ON OPERATIONS Highlights at 31/03/2018 INCOME STATEMENT AND BALANCE SHEET FIGURES MPS GROUP INCOME STATEMENT FIGURES 31/03/18 31/03/17 * Chg. Net interest income 421.5 457.4 -7.9% Net fee and commission income 406.5 426.3 -4.6% Other operating income 48.8 49.5 -1.4% Total Revenues 876.8 933.2 -6.0% Net impairment losses (reversals) on loans at amortised cost and (137.9) (309.1) -55.4% financial assets Net operating income 166.1 (3.5) n.s. Net profit (loss) for the period 187.6 (169.2) n.s. EARNING PER SHARE (EUR) 31/03/18 31/03/17 * Chg. Basic earnings per share 0.170 (5.770) n.s. Diluted earnings per share 0.170 (5.770) n.s. BALANCE SHEET FIGURES AND INDICATORS 31/03/18 31/12/17 * Chg. Total assets 136,771.8 139,154.2 -1.7% Loans to customers 89,320.4 86,456.3 3.3% Direct funding 97,856.8 97,801.8 0.1% Indirect funding 95,329.2 95,845.7 -0.5% of which: assets under management 58,309.7 58,599.4 -0.5% of which: assets under custody 37,019.5 37,246.3 -0.6% Group net equity 9,298.3 10,429.1 -10.8% OPERATING STRUCTURE 31/03/18 31/12/17 * Chg. Total headcount - end of period 23,423 23,463 -40 Number of branches in Italy 1,597 1,745 -148 * The Group has elected not to restate comparative data on a consistent basis in the year of initial application of IFRS 9. Therefore, 2017 Fiscal Year values, determined in accordance with IAS 39, are not fully comparable. CONSOLIDATED INTERIM REPORT 5 Interim report on operations as at 31 March 2018 CONSOLIDATED REPORT ON OPERATIONS Highlights at 31/03/2018 ALTERNATIVE PERFORMANCE MEASURES MPS GROUP PROFITABILITY RATIOS (%) 31/03/18 31/12/17 * Chg. Cost/Income ratio 65.3 63.2 2.1 R.O.E. (on average equity) 7.6 -41.6 49.2 Return on Assets (RoA) ratio 0.5 -2.5 3.00 ROTE (Return on tangible equity) 7.6 -41.6 49.2 * The Group has elected not to restate comparative data on a consistent basis in the year of initial application of IFRS 9. Therefore, 2017 Fiscal Year values, determined in accordance with IAS 39, are not fully comparable. The following creditt quality ratios include the share of portfolio classified as assets held for sale (both in Non-performing loans and in Loans to Customers), mainly relating to the transfer, by means of securitisation, of a set of credit exposures classified as bad loans, yet to be derecognised. Said transaction is part of the activities defined in the Restructuring Plan approved by the European Commission on 4 July 2017. KEY CREDIT QUALITY RATIOS (%) 31/03/18 31/12/17 * Chg. Net non-performing loans / Loans to Customers 14,1 16,3 -2,2 Coverage non-performing loans 68,8 65,5 3,3 Net doubtful loans / Loans to Customers 7,4 8,3 -0,9 Stage 2 loans to customers at amortised cost/Performing loans to 20,5 n.d. customers at amortised cost Coverage doubtful loans 77,6 75,7 1,9 Net impairment losses on loans at amortised cost/ Loans to 0,6 5,8 -5,2 Customers at amortised cost (Provisioning) Texas Ratio 111,1 112,2 -1,1 * The Group has elected not to restate comparative data on a consistent basis in the year of initial application of IFRS 9. Therefore, 2017 Fiscal Year values, determined in accordance with IAS 39, are not fully comparable. The following asset quality ratios do not include the share of portfolio classified as assets held for sale: KEY CREDIT QUALITY RATIOS (%) 31/03/18 31/12/17