S a N P a O L O I M I Annual Report 2003
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SANPAOLO IMI SANPAOLO IMI - ANNUAL REPORT 2003 REPORT IMI - ANNUAL SANPAOLO ANNUAL REPORT 2003 158501 2003 Annual Report SANPAOLO IMI S.p.A. REGISTERED OFFICE: PIAZZA SAN CARLO 156, TURIN, ITALY SECONDARY OFFICES: - VIALE DELL’ARTE 25, ROME, ITALY - VIA FARINI 22, BOLOGNA, ITALY COMPANY REGISTER OF TURIN 06210280019 SHARE CAPITAL EURO 5,144,064,800 FULLY PAID PARENT BANK OF THE SANPAOLO IMI BANKING GROUP MEMBER OF THE INTERBANK DEPOSIT GUARANTEE FUND Luigi Arcuti Honorary Chairman Board of Directors Rainer Stefano Masera (*) Chairman Pio Bussolotto (*) Managing Director Alberto Carmi Director Giuseppe Fontana Director Richard Gardner Director Alfonso Iozzo (*) Managing Director Mario Manuli Director Luigi Maranzana (*) Managing Director Antonio Maria Marocco Director Virgilio Marrone (*) Director Abel Matutes Director Iti Mihalich (*) Director Anthony Orsatelli Director Emilio Ottolenghi Director Orazio Rossi (*) Deputy Chairman Gian Guido Sacchi Morsiani Director Enrico Salza (*) Deputy Chairman Remi François Vermeiren Director (*) Members of the Executive Committee Board of Statutory Auditors Mario Paolillo Chairman Aureliano Benedetti Auditor Maurizio Dallocchio Auditor Paolo Mazzi Auditor Enrico Vitali Auditor Stefania Bortoletti Supplementary Auditor Antonio Ottavi (**) Supplementary Auditor (**) Prof. Ottavi handed in his resignation, effective as of 19 January 2004 Independent Auditors PricewaterhouseCoopers S.p.A. 4 Contents 7 AGENDA OF THE SHAREHOLDERS’ MEETING 9 LETTER TO THE SHAREHOLDERS 16 KEY FIGURES 17 GROUP STRUCTURE 19 CONSOLIDATED FINANCIAL STATEMENTS AND REPORTS 21 Reclassified consolidated financial statements 22 Reclassified consolidated statement of income 24 Reclassified consolidated balance sheet 27 Report on Group Operations 29 Economic background 32 Action points and initiatives in the year 38 Consolidated results 45 Embedded value of the life portfolio 47 Operating volumes and organization 60 Capital and reserves 62 Risk management and control 69 Supplementary information 69 • Performance of share prices 70 • Shareholders 70 • Ratings 70 • Transactions with related parties 74 • Offices held by Directors in other companies 74 • Stock incentive plans 76 • Transition to IAS/IFRS international accounting policies 77 Group Business Areas 100 Developments after the end of the year 102 Independent auditors’ report 105 Consolidated financial statements 106 Consolidated balance sheet 108 Consolidated statement of income 109 Consolidated Explanatory Notes 111 Introduction – Background information on the consolidated financial statements 115 Part A – Accounting policies 127 Part B – Information on the consolidated balance sheet 203 Part C – Information on the consolidated statement of income 220 Part D – Other information 221 Attachments 223 Statement of changes in consolidated shareholders’ equity 224 Statement of consolidated cash flows 226 Reconciliation between the Bank’s financial statements and the consolidated financial statements 227 List of equity investments higher than 10% in unlisted companies and in limited liability companies 231 Methodological notes and statements of the pro forma consolidated statements of income and balance sheets for 2002 and for the first three quarters of 2003 5 253 PARENT BANK FINANCIAL STATEMENTS AND REPORTS 255 Parent Bank reclassified financial statements 257 Parent Bank reclassified statement of income 259 Parent Bank reclassified balance sheet 261 Parent Bank Report on Operations 263 Parent Bank results 267 Operating volumes and organization 274 Capital and reserves 275 Supplementary information 278 Developments after the end of the year 279 Proposal for the approval of the financial statements and allocation of net income for the year 281 Report of the Board of Statutory Auditors 288 Independent auditors’ report 291 Parent Bank financial statements 292 Parent Bank balance sheet 294 Parent Bank statement of income 295 Parent Bank Explanatory Notes 297 Introduction – Background information on the financial statements 310 Part A – Accounting policies 322 Part B – Information on the balance sheet 393 Part C – Information on the statement of income 409 Part D – Other information 415 Attachments 417 Statement of changes in shareholders’ equity 418 Statement of cash flows 420 List of properties owned by the Bank 433 OTHER POINTS ON THE AGENDA 435 Nomination, following determination of the number, of the members of the Board of Directors and the Chairman for 2004/2005/2006; detail of related remuneration 436 Assignment of the appointment to audit the financial statements, the Half Year Report and the Annual Report on Form 20-F for 2004/2005/2006 438 Authorization for the purchase and sale of own shares 440 Nomination of a Supplementary Auditor in accordance with Art. 2401 of the Italian Civil Code 441 REPORT ON THE CORPORATE GOVERNANCE SYSTEM AND ADHERENCE TO THE CODE OF CONDUCT FOR LISTED COMPANIES 469 INFORMATION FOR INVESTORS 7 Agenda of the Shareholders’ Meeting TURIN 1st calling for the ordinary meeting: 28 April 2004 2nd calling for the ordinary meeting: 29 April 2004 1. Financial statements as of 31 December 2003, reports of the Board of Directors and the Board of Statutory Auditors; allocation of net income; consolidated Group financial statements as of 31 December 2003 2. Nomination, following determination of the number, of the members of the Board of Directors and the Chairman for 2004/2005/2006; detail of related remuneration 3. Assignment of the appointment to audit the financial statements, the Half Year Report and the Annual Report on Form 20-F for 2004/2005/2006 4. Authorization for the purchase and sale of own shares 5. Nomination of a Supplementary Auditor in accordance with Art. 2401 of the Italian Civil Code 9 Letter to the Shareholders Shareholders, the year 2003, a year of light and shade, closed a difficult three-year period, characterized by events which influenced, and will continue to affect, the interna- tional economy and politics. While many uncertainties are still hovering over the global social and economic system, the first signs of recovery are appearing and there is hope that they will lead to an improvement in the situation and new opti- mism on the markets. With the slowing down of the expansion cycle that had characterized the main international economies for years, in 2001 the economic recession which had already been hinted at in the second half of 2000 became fully obvious. This mar- ket situation dissipated the euphoria of the financial markets and the wave of opti- mism that had induced some to assume the end of economic cycles and the advent of a New Economy. The crisis was then worsened with the onset of other events which further undermined market confidence and that, if on the one hand accelerated its nega- tive cycle phase, on the other stimulated its economic impact. Above all, the esca- lation of terrorism and the succeeding crises in the Middle East represented and continue to represent a threat both to industrialized and developing societies. Secondly, cases of insolvency, often in conjunction with accounting crimes, which have concerned certain large companies in the industrialized countries, as well as Argentina’s default, created new uncertainty and unavoidable negative influences on the global financial market. The impact of the spread of a series of epidemics, which in some cases slowed the growth of certain of the otherwise internationally more dynamic regions, should not be underestimated. The 2001-2003 period was also characterized by important global changes. The rapid growth of certain, mostly Asian, countries started modifying eco- nomic balances and the increase in de-localization had inevitable negative impacts on employment in industrialized countries, owing to the ever increas- ing shift of a series of segments of the production chain towards developing countries. Europe in addition experienced the physical introduction of the sin- gle currency, leading to closer economic integration of the countries in the euro-zone, and the ratification of the admission of the East European countries, which will soon lead to the enlargement of the European Union and, conse- quently, to a new series of opportunities, and also challenges, for companies in Western countries. 10 From a certain point of view, 2003 represented a turning point: the United States and certain Asian economies recorded a significant growth, especially in the second half of the year, and financial markets showed a better than expected recov- ery, almost constant since the end of the conflict in Iraq. There were also negative aspects: Europe has shown no significant signs of recovery and is still penalized by the rise in the value of the euro compared to the dollar; there have been other extremely serious terrorist attacks; and the confidence of investors still has to be regained after the recent crimes which have affected the economic community. This scenario had, and will undoubtedly continue to have, a considerable influ- ence on the Italian banking system: the economic difficulties and uncertainty of the equity markets have imposed new business models, increased diversification of the sources of revenue and a marked perception of risk, as regards both company activity and, especially, for customers. Changes taking place in the European Union will set further challenges, repre- sented by the progressive financial integration which could soon lead all the main operators to compete in a common European arena, but also opportunities, rep- resented