Report on Operations 2008 Notes to the Financial Statements
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Report on Operations 2008 Notes to the Financial Statements Corporate offices Board of Directors Chairman Agostino Gavazzi* Deputy Chaiman Stefano Lado* Guido Pozzoli* Managing Director Nereo Dacci* Directors Francesco Cesarini Pier Antonio Cutellé Egidio Gavazzi Luigi Gavazzi Paolo Gavazzi Luigi Guatri Gerolamo Pellicanò * Members of Executive Committe Board of Statutory Auditors Chairman Eugenio Mascheroni Statutory Auditors Rodolfo Anghileri Marco Piazza Alternate Auditors Giovanni Cucchiani Clemente Domenici Carlo Mascheroni General Management General Director Alberto Mocchi Deputy Vice General Director Claudio Broggi Vice General Director Marco Sala Manager responsible for preparing the Company’s financial reports pursuant to article 154-bis of Consolidated Law on Finance "TUF" Nominated Official in charge of drawing up Piercamillo Secchi Company Accounts External Auditor PricewaterhouseCoopers S.p.A. 2 Notes to the Financial Statements 1 - FINANCIAL HIGHLIGHTS AND RATIOS BALANCE SHEET DATA 31.12.2008 31.12.2007 Change in thousands of Euros Amount % Total assets 6,324,991 5,727,322 597,669 10.4% Financial assets 692,082 821,148 -129,066 -15.7% Amounts due from banks 715,506 267,377 448,129 167.6% Amounts due from customers 4,456,890 4,206,325 250,565 6.0% Tangible assets 128,939 130,580 -1,641 -1.3% Intangible assets 2,904 2,946 -42 -1.4% Amounts due to banks 229,122 367,644 -138,522 -37.7% Amounts due to customers 3,111,448 2,882,576 228,872 7.9% Securities issued 1,568,889 1,382,356 186,533 13.5% Financial liabilities at fair value through profit or loss 490,830 228,088 262,742 115.2% Shareholders’ equity (including net proft for the period) 671,793 634,162 37,631 5.9% Total indirect deposits 13,773,914 18,764,907 -4,990,993 -26.6% of which indirect deposits from institutional customers 8,110,674 12,538,669 -4,427,995 -35.3% INCOME STATEMENT DATA (1) a) Operating margins 31.12.2008 31.12.2007 Change in thousands of Euros Amount % Operating income 288,109 280,865 7,244 2.6% of which net interest income 190,216 172,533 17,683 10.2% Operating costs 165,469 163,503 1,966 1.2% Operating margin 122,640 117,362 5,278 4.5% Operating profit net of taxes 54,244 57,870 -3,626 -6.3% b) Total results (operating profit + capital gains on the sale of equity investments) 31.12.2008 31.12.2007 Change in thousands of Euros Amount % Operating profit net of taxes 54,244 57,870 -3,626 -6.3% Net non-recurring result (capital gains on the sale of equity investments net of taxes) (2) 11,266 127,938 -116,672 n.s. (2) Net profit/(loss) for the period 65,510 185,808 -120,298 n.s. (1) from reclassified Income Statement; (2) the figure as at 31 December 2007 includes the after tax profit resulting from the sale of a 29.72% interest in Anima SGRp.A. for €127 million 3 Notes to the Financial Statements FINANCIAL RATIOS 31.12.2008 31.12.2007 Change Amount Shareholders’ equity / Total assets 10.6% 11.1% -0.5% Shareholders’ equity / Amounts due from customers 15.1% 15.1% 0.0% Shareholders’ equity / Amounts due to customers 21.6% 22.0% -0.4% Shareholders’ equity / Securities issued 42.8% 45.9% -3.1% (Tier 1 and Core Tier 1) Equity ratio 13.1% 12.1% 1.0% (Tier 2) Solvency ratio 14.0% 12.6% 1.4% Financial assets / Total assets 10.9% 14.3% -3.4% Amounts due from banks / Total assets 11.3% 4.7% 6.6% Amounts due from customers / Total assets 70.5% 73.4% -3.0% Amounts due from customers / Direct deposits from customers 86.2% 93.6% -7.4% Amounts due to banks / Total assets 3.6% 6.4% -2.8% Amounts due to customers / Total assets 49.2% 50.3% -1.1% Securities issued / Total assets 24.8% 24.1% 0.7% Financial liabilities at fair value through profit or loss / Total assets 7.8% 4.0% 3.8% Direct deposits from customers / Total assets 81.8% 78.4% 3.3% Operating costs / Operating income (Costi/Income ratio) 57.4% 58.2% -0.8% Net interest income / Operating income 66.0% 61.4% 4.6% Operating margin / Operating income 42.6% 41.8% 0.8% Operating profit net of taxes / Shareholders’ equity 8.1% 9.1% -1.0% STRUCTURE AND PRODUCTIVITY DATA 31.12.2008 31.12.2007 Change Amount % Number of employees 1,397 1,346 51 3.8% Number of bank branches 121 114 7 6.1% in thousands of Euros Amounts due from customers by employee 3,190 3,125 65 2.1% Direct deposits from ordinary customer by employee 3,702 3,338 364 10.9% Operating income by employee 206 209 -3 -1.4% 4 Notes to the Financial Statements 2 - THE BASELINE SCENARIO 2.1 - THE MACROECONOMIC FRAMEWORK After the financial shock in the American mortgage market in August 2007 had rapidly spread to all sectors of finance and all over the world, during the latter part of the year it also struck the real economy, with impacts on consumption, investment and production. This happened all over the world at the same time, transforming the moderate pace of a recession that was already in progress into a rush towards economic depression during the last months of the year. The worsening of the financial crisis that began in July with increasing doubts concerning the repayment capacity of Fannie Mae, Freddie Mac and the insurance giant, AIG, followed by investment bank Lehman Brothers’ bankruptcy in September, led to all the operators in the world markets becoming fearful of an insolvency crisis. The panic that spread spurred government and monetary authorities to take rapid action, and they managed to achieve their aim of averting a collapse of the world financial system. Governments and central banks warded off the danger by means of continuous flows of financing to financial institutions and the economy, by strengthening the capital positions of operators in difficulty and by increasing their bank deposits guarantees. The signs of a slight relaxation of the tension in the financial situation were counter-balanced by a worsening of real variables in all the main economies, thus painting a picture of a rapidly worsening economic cycle. Economic growth also slowed substantially in the emerging economies, although they continue to be the main driving force behind global growth. According to the latest International Monetary Fund (IMF) estimates, world economic growth in 2008 should be +3.4%, compared with +5.2% in 2007, and the forecast is that the figures for 2009 will be even poorer. A brusque drop in the prices of raw materials, especially in the energy sector, went hand in hand with the weakening in economic activity. These prices went back to 2004 levels. In the latter part of the year this gave rise to a considerable fall in consumer inflation in the leading economies. The decline in inflation and the continuing deterioration of the economic situation were accompanied by a further slackening of the main economies’ monetary policies. In the USA official interest rates practically went down to zero, and they were considerably reduced in the euro zone and other countries. Nevertheless, the overall 2008 inflation rate was still affected by the speculative oil price bubble of the first seven months of the year and in the main economies this rate was higher, on average, than in 2007. In the euro zone consumer inflation was +3.3% compared with +2.1% in 2007; in the USA the rate went from 2.9% in 2007 to 3.8% and in Japan to 1%, higher than the zero variation in 2007. On the currency market the euro rose strongly against the US dollar in 2008 (1.471 compared with 1.371 in 2007) and the pound (0.797 compared with 0.685 the previous year). THE UNITED STATES American GDP fell by 0.5% on an annual basis in the third quarter of 2008, reflecting the steep fall in private consumption, a sharp slowdown in exports and a brusque decline in investment in residential property. Lower employment figures during the last months of the year contributed to a worsening climate of confidence in households, and this led to a marked reduction in consumption in the third quarter. Household consumption was also affected by the decrease in net wealth. 5 Notes to the Financial Statements In the third quarter of 2008, more difficult terms for access to credit were reflected in a diminution of net corporate financing and a negative variation in lending to households. The retroactive effects of falling property prices on household wealth and of mortgage defaults are one of the main factors in the fragility of the US economy. During the last months of the year, US inflation, measured by the consumption deflator, fell steeply to 1.4% in November compared with 4.4% in August. This was mainly due to the decrease in the prices of energy products. As a result of monetary policy, interest rates went almost down to zero during 2008, as we have said: in mid- December the Federal Reserve set an objective interval of between 0% and 0.25%, clearly expressing its determination to keep monetary policy rates at a significantly low level for a certain period of time. The action taken to try and curb the financial crisis caused a considerable increase in the Federal Reserve deficit, which is forecast to be 3.2% of GDP at the end of the year.