BB

THE BANCA CARIGE GROUP

Fondazione CR BPCE IOM Other Genova e Shareholders Imperia

47.16% 9.99% 42.85% BANCA CARIGE S.p.A. - Cassa di Risparmio di Genova e Imperia

Banking Group Insurance Group

95.90% Cassa di Risparmio di Savona S.p.A. Carige Vita Nuova S.p.A. 100.00% 90.00% Cassa di Risparmio di Carrara S.p.A. Carige Assicurazioni S.p.A. 98.40% 60.00% Banca del Monte di Lucca S.p.A. 1.16% held as treasury shares. 100.00% Banca Cesare Ponti S.p.A.

100.00% Creditis Servizi Finanziari S.p.A. 60.25% Assi90 S.r.l. 39.75% 0.50% 99.50% 100.00% Carige A. M. SGR S.p.A. I.H. Roma S.r.l.

76.95% Centro Fiduciario CF S.p.A. 20.00% Dafne Immobiliare S.r.l. 100.00% 100.00% Argo Finance One S.r.l.

100.00% Priamar Finance S.r.l. Banking activities 60.00% Argo Mortgage S.r.l. Trust activities 60.00% Argo Mortgage 2 S.r.l. 60.00% Carige Covered Bond S.r.l. Insurance activities

60.00% Carige Covered Bond 2 S.r.l. Instrumental activities

100.00% Columbus Carige Immobiliare S.p.A. Financial activities

100.00% Banca Carige Group Immobiliare Carisa S.r.l.

N.B. in implementation of the Banca Carige Group restructuring project, on 23 May 2012, Banca Carige Italia SpA was incorporated, wholly owned by Banca Carige SpA, which requested authorisation from the Bank of Italy to carry out banking activities.

2

BANCA CARIGE GROUP HALF-YEARLY FINANCIAL REPORT AS AT 30 JUNE 2012

CONTENTS

CONSOLIDATED FINANCIAL HIGHLIGHTS 4

BOARD OF DIRECTORS, BOARD OF STATUTORY AUDITORS AND INDIPENDENT AUDITORS 5

INTERIM REPORT ON OPERATIONS 6 The real and monetary situation 7 Strategy 8 Business performance 10 Highlights for first half-year 2012 10 Risk management 12 Subsequent events 12 Main risks and uncertainties and business outlook 12 Information on relations with related parties 13

HALF YEARLY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 14 Consolidated Financial statements 15 - Consolidated balance sheet 16 - Consolidated income statement 17 - Statement of consolidated comprehensive income 18 - Changes in consolidated shareholders’ equity 19 - Consolidated statement of cash flows 21 Explanatory notes 22 - Accounting policies 22 - Scope of consolidation and consolidation methods 24 - Trading activities 28 - Economic results 46 - Dividends distributed in the half-year period by Parent Company Banca Carige 51 - Insurance business 52 - Relations with related parties 53 - Equity investments and intangible assets with an indefinite useful life 55 - Treasury shares, statement of cash flows and shareholders’equity 58 - Resource management 59 - Risk management 61 - Results by business segment 67 - Subsequent events 73

THE PARENT COMPANY AND SUBSIDIARIES 74 - The Parent Company: financial statements and explanatory notes 75 - Subsidiary banks 90 - Insurance subsidiaries 95 - Financial subsidiaries 97 - The other main subsidiaries 100

ANNEXES 101 GLOSSARY OF TECHNICAL TERMS AND ACRONYSM USES 102 CERTIFICATION OF THE HALF-YEARLY CONDENSED FINANCIAL STATEMENTS PURSUANT TO 116 ART. 81-TER OF CONSOB REGULATION NO. 11971 OF 14 MAY 1999 AND SUBSEQUENT AMENDMENTS AND ADDITIONS

INDEPENDENT AUDITORS’ REPORT ON THE LIMITED AUDIT OF THE HALF-YEARLY CONDENSED 118 CONSOLIDATED FINANCIAL STATEMENTS

3

CONSOLIDATED FINANCIAL HIGHLIGHTS

Situation as at Change % 30/06/2012 31/12/2011 30/06/2011 06/2012 06/2012 06/2011 06/2011 BALANCE SHEET (1) Total assets 47,314,048 44,860,061 42,374,106 5.5 11.7 Funding 36,246,804 34,362,190 31,256,275 5.5 16.0 - Direct deposits (a) 27,630,325 28,439,887 28,311,847 -2.8 -2.4 * Due to customers 16,104,290 15,919,602 15,636,164 1.2 3.0 * Securities issued 10,668,463 11,616,164 11,399,971 -8.2 -6.4 * Financial liabilities designated at fair value through profit and loss (2) 857,572 904,121 1,275,712 -5.1 -32.8 - Due to banks 8,616,479 5,922,303 2,944,428 45.5 … Indirect deposits (b) 22,868,695 23,571,160 24,280,660 -3.0 -5.8 - Assets under management 9,659,963 9,523,339 10,185,110 1.4 -5.2 - Assets under administration 13,208,732 14,047,821 14,095,550 -6.0 -6.3 Financial Intermediation Activities (FIA) (a+b) 50,499,020 52,011,047 52,592,507 -2.9 -4.0 Investments 42,810,901 39,951,781 38,264,024 7.2 11.9 - Loans to customers (3) (4) 27,450,266 27,534,610 26,560,685 -0.3 3.3 - Due from banks (3) (4) 1,914,992 1,638,928 1,468,880 16.8 30.4 - Securities portfolio (5) 13,445,643 10,778,243 10,234,459 24.7 31.4 Share capital and reserves 3,282,469 2,634,729 3,595,757 24.6 -8.7

Situation as at Change % 30/06/2012 31/12/2011 30/06/2011 06/2012 12/2011 INCOME STATEMENT (1) Net interest and other banking income 612,811 1,144,144 541,654 13.1 Net income from banking and insurance activities 463,457 944,635 455,441 1.8 Income (loss) before tax from continuing operations 125,965 279,491 119,485 5.4 Parent Company's net income (loss) 90,230 186,651 75,158 20.1

RESOURCES (6) Change % Number of branches 677 677 670 - 1.0 Insurance agencies 437 431 436 1.4 0.2 Number of bank employees 5,443 5,481 5,525 -0.7 -1.5 Number of bank and insurance employees 5,941 5,974 6,013 -0.6 -1.2

FINANCIAL RATIOS Operating expenses Net interest and other banking income 55.5% 58.5% 62.5% Income (loss) before tax from continuing operations /Share capital and reserves 3.8% 10.6% 3.3% ROE 2.7% 7.1% 2.1% ROE (7) 2.5% 5.9% 2.2% ROAE (8) 3.0% 6.1% 2.1% ROAE (7) (8) 2.7% 6.0% 2.3% Earnings per share (in Euro) - basic 0.044 0.114 0.041 - diluted 0.044 0.100 0.041 REGULATORY RATIOS (9) (10) Total weighted assets (1) 23,532,000 23,132,897 22,469,925 1.7 4.7 Core Tier 1 ratio 6.7% 6.7% 5.9% Tier1 ratio 7.4% 7.4% 6.6% Total capital ratio 9.9% 10.1% 9.1% (1) Figures in thousands of euro. (2) Carige Vita Nuova liabilities, designated at fair value and relating to products for which risk is borne by insureds, are not included in this table. (3) Before value adjustments. (4) Net of debt securities classified as L&R. (5) The aggregate includes Balance Sheet items 20 (net of derivatives), 30 (net of liquidity invested facing the insurance contracts for which theinvestmentrisk is borne bythe insured), 40, 60 (only the portion relating to L&R) and 70 (only the portion relating to L&R). (6) Statistics of the end of period. (7) Net of the AFS reserve (item 140 of balance sheet liabilities). (8) Net profit on average shareholders' equity (Return On Average Equity). (9) The figures as at 06/30/2012 result from accounting and management estimates (10) The figures as at 12/31/2011 are stated on a pro-forma basis, taking into account the conversion of the "Banca Carige 4.75% 2010-2015 convertible bond with the option of redemption in shares" ("Banca Carige 4,75% 2010-2015 convertibile con facoltà di rimborso in azioni").

4

BOARD OF DIRECTORS, BOARD OF STATUTORY AUDITORS AND INDIPENDENT AUDITORS

BOARD OF DIRECTORS GENERAL MANAGERS BOARD OF STATUTORY AUDITORS

CHAIRMAN GENERAL MANAGER CHAIRMAN Giovanni Berneschi * Ennio La Monica Andrea Traverso

DEPUTY CHAIRMAN CO-GENERAL STANDING AUDITORS Alessandro Scajola * MANAGER Domenico Sardano (CREDIT AND WEALTH Massimo Scotton MANAGEMENT) Mario Cavanna DIRECTORS Piergiorgio Alberti CO-GENERAL ALTERNATE AUDITORS Piero Guido Alpa MANAGER Stefano Lunardi Jérome Gaston Raymond Bonnet (ADMINISTRATION AND Pietro Segalerba Luca Bonsignore RESOURCES) Cesare Castelbarco Albani Giacomo Ottonello INDIPENDENT AUDITORS Remo Angelo Checconi * Reconta Ernst & Young SpA Bruno Cordazzo DEPUTY GENERAL Ivo De Michelis * MANAGER MANAGER RESPONSIBLE Philippe Marie Michel Garsuault (GOVERNANCE AND FOR PREPARING THE CONTROL) COMPANY’S FINANCIAL Daria Bagnasco REPORTS Luigi Gastaldi * Daria Bagnasco Giovanni Marongiu Paolo Cesare Odone * DEPUTY GENERAL Guido Pescione MANAGER Alessandro Repetto * (COMMERCIAL) Mario Venturino Gabriele Delmonte Philippe Wattecamps

* Member of the Executive Committee

The Board of Directors was appointed by the Ordinary Shareholders’ Meeting on 27 April 2012 for the 2012-2013-2014 financial years and, therefore, with a term of office lasting until approval of the financial statements for the year ended 31 December 2014. The Board of Statutory Auditors was appointed by the Ordinary Shareholders’ Meeting on 29 April 2011 for the financial years 2011-2012- 2013, hence with a term of office up to the date of the Shareholders’ Meeting called to approve the financial statements as at 31 December 2013. Standing Auditor Mr. Antonio Semeria, who passed away, was replaced in office on 12 May 2011, pursuant to art. 26 of the Articles of Association, by Substitute Auditor Mr. Domenico Sardano. In accordance with the aforementioned art. 26 of the Articles of Association and art. 2401, paragraph 1, of the Italian Civil Code, the Shareholders’ Meeting held on 13 February 2012 then supplemented the Board of Statutory Auditors by appointing Mr. Domenico Sardano as Standing Auditor and Mr. Pietro Segalerba as Substitute Auditor, with the same expiry of term in office as the other members of the Board of Statutory Auditors. The Executive Committee was appointed by the Board of Directors on 2 May 2012 with term of office up to 31 December 2012. The mandate to the Audit Firm, Reconta Ernst & Young SpA, was granted by the Ordinary Shareholders’ Meeting held on 29 April 2011 for the nine-year period 2012-2020.

5

INTERIM REPORT ON OPERATIONS

6

ing of peripheral nations’ spreads against the THE REAL AND MONETARY SITUATION1 German bund: in Italy, the spread surpassed 500 basis points. Industrial production in the EU area fell (-1.8% In the first six months of 2012, the macroeco- in April; -0.7% in Germany); new manufacturing nomic scenario stagnated considerably in orders also recorded a decrease (-2.6% in Europe, recorded a fragile recovery in the March) and retail sales were down 2.4% in United States and saw a reduction in the rate of April. The unemployment rate went up again, growth in emerging countries. Uncertainties in (11.1% in May), 1% higher than the average the international financial markets and the wors- rate in 2011. Consumer prices decelerated ening in household and business confidence not slightly (2.4% in June), in particular as a result of only restricted the performance of domestic de- the trend in the energy component, but core in- mand but commercial trade too, with interna- flation also slowed (+1.9% in April). tional trade slowing down due to the exports of Italy is in the midst of a recession, due to both industrialised and emerging economies and the the worsening in the external context, and the imports of more mature economies. Lower negative trend in domestic demand. On top of growth prospects for the global economy also this, we have the tensions over sovereign debt led to a fall in oil prices. the government is attempting to control, by A 3.1% increase in global GDP was estimated adopting a series of urgent economic policy for the whole of 2012 (3.7% in 2011), with in- provisions and structural reforms to augment ternational trade up 4.4% compared to 6% in Decree 201/2011, introducing “Urgent provi- 2011. sions for growth, equity and consolidation of In the United States, the economic situation public finances (so-called “Salva Italia”), con- showed weak growth, still not enough to bring verted to Law in December 2011. In March, domestic GDP back to pre-crisis levels. In the Parliament approved Decree 1/2012 introduc- first few months of 2012, GDP fell below expec- ing “Urgent provisions for competition, infra- tations (first quarter growth +2.2% YoY), the structural development and competitiveness” unemployment rate stood at 8.2% in May, con- (so-called “Cresci Italia”) and on 10 July, the sistently high but below the 2011 average of Decree “Urgent provisions for the review of pub- 9%, and the rate of employment continued to lic spending with no change to the services to hover below 59%, compared to an average of citizens” (so-called “Spending Review”), was 63% in the 2002-2007 pre-crisis period. Infla- presented to the Senate for discussion, which tion fell further (2.3% in May), leaving the Fed- makes provision, through a series of measures eral Reserve with ample room to continue with involving higher revenues and lower expenses, its expansive monetary policy aimed at stimulat- for a reduction of around € 600 million in the ing the real economy. deficit. As regards the labour market more spe- Emerging countries suffered from the contraction cifically, aside from pension reform, imple- in foreign trade and the slowdown in invest- mented by means of the aforementioned “Salva ments and the expansive monetary policy meas- Italia” Decree”, Law no. 92 of 28 June 2012 ures targeted at counteracting the drop off in came into force on 18 July, introducing “Provi- growth contributed to the depreciation of na- sions governing reform of the labour market with tional currencies against the dollar. a view to achieving growth”. These provisions The EU economy registered essentially stable are targeted at creating the conditions for growth, as result of different development pro- achieving a balanced budget by 2013, instilling files within the EU area: While Germany, France confidence regarding the sustainability of Italy’s and Finland recorded growth, Italy, Spain, public finances and stimulating growth. Greece, Portugal and Holland are in a reces- GDP, up 0.5% in 2011, fell by 1.4% YoY in the sion; measures implemented by the individual first quarter of 2012: all components of domes- EU member states to reduce public debt were tic demand recorded a decrease, with the ex- not enough to eliminate the lack of confidence ception of public spending, while the contribu- in the EU’s general economic system, contribut- tion of the trade balance was still positive. ing to the weakening of the Euro and the widen- In the first five months of 2012, the fall in indus- trial production (-6.7% YoY) reflected the de-

1 The figures shown in this section are the latest crease in all industrial sectors, especially inter- available at the time of drafting. mediate goods (-8.8%) and consumer goods (-

7 7.1%). Industrial turnover recorded a more con- June 2012; treasury credit certificates fell from tained decrease (-3%), which showed growth in 8.91% to 3.50% then increased to 5.79%; long- foreign turnover (+4%), against a fall in domes- term treasury bonds dropped from 6.59% to tic turnover (-6.3%). Industrial orders registered 4.76% then recovered to 5.64%. a marked decrease (down 11.2%), especially in As regards the monetary policy, the recessionary the domestic market (-13.6%), while retail sales context forced the ECB to cut interest rates by fell by 1.6%, with a better performance recorded 0.25% to 0.75% on 5 July 2012. The United by foodstuffs (-0.2%) and large-scale distribution States also continued with its “zero interest rate” (-0.3%). and high bank liquidity policy, launched at the The labour market appeared to deteriorate fur- end of 2008: the Federal Reserve, whose man- ther, especially in terms of female and youth date combines objectives regarding controlling employment, despite slight growth in employ- the stability of prices and employment, kept the ment numbers. The unemployment rate stood at interest rate in the 0-0.25% band. 10.1% in May, up 1.9% YoY, but youth unem- The currency exchange market was character- ployment reached 36.2% (up 8.7% YoY). ised by a depreciation of the Euro against the Inflation remained at high levels (3.6% in June), US Dollar: the exchange rate fell from 1.29 to sustained by the dynamic trends in almost all ar- 1.26 in the first half of 2012. eas of spending, especially home, transport and With reference to banking intermediation, direct tobacco. deposits registered a slight decrease as at June, As regards foreign trade, both exports and im- down 0.1% on a trend basis (+0.8% in Decem- ports fell: in the first five months of the year, the ber 2011), due essentially to the fall in bond former increased by 3.9% YoY, with exports to funding (-5.1%; +3.2% in December 2011), EU countries stable and exports up 9.3% to non- while deposits recorded low growth (+2.6%; EU countries; imports were stable, with growth down 0.4% in December 2011). from non-EU countries offset by the contraction Loans recorded a lethargic performance, with from EU countries. YoY growth in loans to the private sector of Public finance improved: in the first five months 0.2% (+2.9% in December 2011); in particular, of 2012, the cumulative cash requirements of a slight decrease in loans to households and the government sector amounted to about € 35 non-financial businesses was recorded (down billion, less than the € 45 billion of the first five 0.6%), across all maturities. The quality of bank months of 2011. credit remained critical, with a net bad The weakness of the economic cycle and persis- loans/loans ratio of around 3.1%, in line with tent sovereign debt crises affecting many Euro- the figure in December 2011. pean countries adversely influenced the financial Bank interest rates settled. The average interest markets and the crisis of confidence between in- rate on loans to households and non-financial termediaries brought trading on the interbank businesses, which gradually fell in the half, stood market and medium/long-term wholesale mar- at 3.99% in June (4.23% at the end of 2011) kets to a standstill, creating severe liquidity ten- and the rate on deposits was 1.23% (1.08% in sions which the ECB tried to alleviate through December 2011); consequently, the spread re- conventional and unconventional measures corded a decrease. By contrast, the interest rates (such as the introduction of two three-yearly on new loans increased. money auctions held in December and at the end of February, known as Long Term Refinanc- ing Operations - LTRO). Market interest rates showed a decreasing trend, in line with the ex- STRATEGY pansive monetary policy: the 3-month Euribor rate fell from 1.44% in December to 0.66% in June, the 6-month Euribor from 1.68% to The fundamental strategic goal of the Group, in 0.94% and the Rendistato (yield on government line with the path started at the beginning of the securities) from 6.30% to 5.41%. ‘90s, is the creation of value in the me- In Italy, in particular, yields on government dium/long-term for all stakeholders (sharehold- bonds fell, despite partially reversing the trend in ers, human resources, customers and the com- the second quarter: Treasury bills decreased munity) in a balanced manner, leveraging the from an average of 4.02% in December to development of relations with customers and 0.97% in March, then rose again to 2.66% in dimensional growth, as a key requirement for

8 maintaining an important position in the domes- Banca Carige, called “Banca Carige Italia”, to tic banking system. which the 353 Banca Carige branches operat- In line with this objective, on 16 May 2011 the ing outside Liguria will be transferred, both those new 2011-2014 Group Strategic Plan was ap- opened directly and those acquired over time proved, which confirms the mission of consoli- from other banking groups. dating the role of banking, financial, welfare Corporate separation will make it possible to and insurance conglomerate at national level, more effectively pursue the different missions in- with a strong presence in the individual local herent in the two networks: Banca Carige Italia, markets, able to distinguish itself for the quality like the other Group banks, will operate as a of service offered to the customer, also through “network bank” whose main objective is to ac- a multi-channel approach and the progressive celerate growth in traded volumes and in the development in the quality of resources and number of customers; the more recently formed structures. The Group Strategic Plan defined the and broader based network can experiment with following strategic guidelines targeted at the an innovative service model, which will leverage creation of value: in-depth integration of traditional branches with - Increase in revenues and expansion of the hi-tech distribution channels. commercial offer, with the goal of identifying Banca Carige will continue to fulfil the role of business areas (areas, products, customers) Parent Company – carrying out management, with untapped potential; coordination, control and service functions for - rationalisation of costs and operating proc- the entire Group – and commercial bank, with esses, through the constant focus on techni- the main goal of preserving customer relation- cal-operational efficiency, particularly as re- ships and leadership of the market in Liguria, gards the review of the processes which use a the region in which the Bank has a strong pres- considerable amount of resources; ence. - optimisation of liquidity, capital and the cost Subject to obtainment of the necessary authori- of risk, aimed at allocating scarce resources sations from the Supervisory Authorities, the re- efficiently; structuring will take effect on 1 January 2013 - focus on innovation and on skills, for the con- and will be effective from 31 December 2012 tinuous improvement in processes and prod- for tax and accounting purposes. ucts, but also the conduct and the relation- Since 1997, Banca Carige requested and ob- ship building capacity of human resources. tained ratings from the main specialised interna- These guidelines were translated into strategic tional rating agencies, Moody’s, Standard & goals which will be implemented through spe- Poor’s and Fitch. As with the majority of Italian cific initiatives focused on the achievement of intermediaries, in the last few months of the year plan targets. this rating was lowered on average by 2 In order to implement the initiatives of the Stra- notches, as a consequence of the worsening of tegic Plan more effectively, in a market context the economic and financial situation and the which is gradually getting worse, on 21 May downgrading of the Italian public debt. 2012, the Carige Group Restructuring Project The ratings assigned to Parent Company Banca was approved, which involves the incorporation Carige are shown below: of a new bank, wholly owned by the current

9 BANCA CARIGE RATINGS

date of the last rating short-term long-term BFSR (1) (2) Individual (2) Support (3) Fitch November 2011 (4) F3 BBB - C 3 Moody's July 2012 (4) P-3 Baa3 D+ - - Standard & Poor's February 2012 (5) A-3 BBB- - - -

(1) Bank Financial Strength Ratings.

(2) BFS ratings express the intrinsic strength and solidity of a bank, as well as its financial reliability given the bank's assets. Ratings range from A to E. (3) Support ratings indicate the likelihood of the Government or other public entity, or shareholders, stepping in to support the bank in the event of crisis. Ratings range from 1 to 5. (4) Date relative to the last press release issued by the rating agency. (5) Date relative to the last press release issued by the rating agency.

the application of the new legislation which re- BUSINESS PERFORMANCE quires the transfer of the treasury current ac- counts of Public Authorities to the State Treasury (variation of -2.8% and -1.7% net of said effects Despite the difficult and complex macroeconomic recorded in the twelve and six-month periods). scenario, the Carige Group essentially kept the Loans to customers increased by 3.3% in the trend in equity and income statement results in twelve months and were essentially stable from line with the expectations. the start of the year. Intermediation activities with customers in the first Consolidated net profit in the first six months few months of the year, in confirming the signs of came to € 90.2 million, up 20.1% on the figure a slowdown in growth already recorded in 2011, recorded in the same period in 2011. In particu- registered results slightly below the expectations, lar, an increase was registered in the interest both in terms of deposits and loans but, in any margin and net service revenues when com- case, essentially in line with the results recorded pared to June 2011. Value adjustments in- by the banking system. creased on both loans and available-for-sale fi- In terms of funding, the Group availed itself of nancial assets, while operating costs were kept refinancing at the European Central Bank, par- under control. ticipating in two extraordinary three-year auctions in December and February, also taking advan- tage of the possibility offered to Italian banks of discounting issued bank covered bonds at the HIGHLIGHTS FOR FIRST HALF-YEAR ECB. As regards the total amount financed of € 7 2012 billion, € 2 billion was new funding and the re- mainder was used to replace loans with a closer maturity. This allowed a big improvement in the On 14 February, Carige’s Executive Committee short-term net financial position and strength- resolved to approve the Group’s adoption of the ened the Group’s structural equilibrium, allowing new Agreement signed on 31 January 2012 be- the Group to continue with the envisaged credit tween ABI (Italian Banking Association) and the development policies. consumer associations for the extension to 31 Bond placements with customers also continued: July 2012 of the deadlines for submitting appli- against roughly € 298 million in maturities and € cations for the suspension of mortgage instal- 437 million in repurchases, placements stood at ments, pursuant to the Agreement of 18 De- € 974 million at the end of June. cember 2009. On 6 March, said Committee re- As at 30 June 2012, the Group’s Financial In- solved Carige’s adoption of the agreement termediation Activities (FIA) fell by 4% over the “New measures for credit for small and medium same period in the previous year and 2.9% since sized enterprises” signed on 28 February 2012 the start of the year, partly due to the conversion by the Ministry of Economic Development, Infra- of the “Banca Carige 4.75% 2010-2015 con- structure and Transport, the Ministry of Economy vertible bond with the option of redemption in and Finance, the Italian Banking Association shares” (“Banca Carige 4,75% 2010-2015 con- and other associations representing businesses. vertibile con facoltà di rimborso in azioni") and

10 On 20 February, the Parent Company's Board capital of € 7 million. On 29 May, Banca of Directors resolved the full early redemption of Carige Italia SpA submitted its request to the the entire bond loan called "Banca Carige Bank of Italy for the authorisation to carry out 4.75% 2010-2015, convertible with the option banking activities. of redemption in shares" (“Banca Carige 4,75% On 28 May, the Boards of Directors of the In- 2010-2015 convertibile con facoltà di rimborso surance Companies resolved to hire Roberto in azioni"), which is represented by more than € Laganà as General Manager, effective as of 1 163 million in outstanding bonds, with a nomi- July 2012, replacing the outgoing Managing Di- nal value of € 2.40 each, for a total amount of rector Diego Fumagalli. € 391.3 million. The early redemption was con- The ratings assigned to the Parent Company cluded on 23 March, with € 386.8 million in were revised downward as a result of the wors- new shares issued. ening of the credit rating of the Italian govern- On 29 February, by taking advantage of the ment: on 10 February Standard & Poor’s low- possibility offered to Italian banks of discounting ered Carige’s long-term rating from “BBB/A-2“ issued bank covered bonds at the ECB, Banca to “BBB- /A-3” (with a negative outlook) and on Carige adhered to a long term refinancing op- 15 May, Moody’s lowered this from “Baa1” to eration (Long-Term Refinancing Operation - “Baa2” (with a negative outlook) and then to LTRO), which involved the acquisition of new “Baa3” in July, as shown in the section “Events means of funding, for the total amount of € 0.7 after the close of the half-year period”. billion, at a rate of 1%. The Carige Group has the following pending tax On 27 April, the Ordinary Shareholders’ Meet- disputes: ing of the Parent Company appointed the Board - alleged “abuses of right” in the use of the tax of Directors for the 2012-2014 three-year pe- credit for taxes paid abroad for the years from riod which, on 2 May, elected: 2004 to 2006 (Banca Carige and Cassa di Ris- – the members of the Executive Committee, parmio di Carrara) and for financial transactions setting their term of office at 31 December with Italian shares as underlying for the 2005- 2012, and 2006 years (Banca Carige). – the members of the Internal Committees As regards the dispute involving Banca Carige, it (Control and Risks, Remuneration and Ap- should be noted that, in respect of the judgment pointments), as well as members of the Su- filed on 6 February 2012 with which the Provin- pervisory Authority established in accordance cial Tax Commission of Genoa rejected with Legislative Decree 231/2001. Carige’s appeal, which Carige will appeal be- On 14 May, the Board of Directors – in relation fore the Supreme Court, on 14 February and 25 to two programs in place for the issuing of se- May 2012, tax bills, penalties and Ires interest cured bank bonds and in accordance with the relating to 2004 were paid totalling € 10.5 mil- respective Framework Transfer Contracts relat- lion. ing to the two programs in question – inter alia, With reference to the 2005 tax year, Carige filed resolved the transfer, within the current year, of an appeal and obtained the suspension of the additional eligible assets totalling roughly € 1.4 relative tax collection notice; discussions have billion, in the form of residential and commer- been set for next 3 October. In the meantime, cial mortgages originated or renegotiated by on 22 February the Tax Authorities notified Carige and its subsidiaries by 31 December Carige of the imposition of penalties which were 2011, to be split between the two programs on disputed before the competent Tax Commission. the basis of the Group’s liquidity requirements In relation to the 2006 tax year, Carige submit- and potential market developments. ted tax settlement proposals and, on 21 June On 21 May, the Board of Directors approved 2012, filed the associated appeals at the Pro- the aforementioned Group Restructuring Project, vincial Tax Commission of Liguria. targeted at developing the potential of Banca By contrast, as regards similar transactions car- Carige’s network outside Liguria, which will be ried out by Cassa di Risparmio di Carrara in the the object of a transfer – effective as of 31 De- years 2004 and 2005, appeals were upheld by cember 2012 and open to the public from 1 the Provincial Tax Commission of Florence for January 2013 – to a bank known as “Banca the year 2004 (ruling filed on 12 December Carige Italia SpA”, incorporated on 23 May 2011) and by the Provincial Tax Commission of 2012, with the simultaneous full payment by Massa Carrara for the year 2005 (ruling filed on sole shareholder Banca Carige of the share 21 February 2012) respectively. Appeals were

11 submitted by the Tax Authorities against said rul- capital adequacy, from both a regulatory and ings. an managerial perspective. For details on risk - Ires (corporate income tax) and Irap (regional management, please refer to the paragraph business tax) taxes for the 2003-2005 years “Risk management” in the Explanatory notes of (Carige Assicurazioni) related to adjustments on the Condensed Consolidated Half-Yearly Finan- Reinsurance contracts that are capitalised and cial Statements. charged pro-rata in the financial statements of the years disputed. The Ires and Irap dispute against Carige As- SUBSEQUENT EVENTS sicurazioni involve amounts payable of € 7.6 million and € 1.2 million per annum respec- tively, due to the non-acceptance of the appeals On 16 July, as part of the review of the ratings by the Provincial Tax Commission of Milan for of Italian banks following the downgrading of the years 2004 and 2005. In March, Irap tax the rating of Italian government bonds, Moody’s notices were paid and May saw the start of lowered Carige’s long-term rating from “Baa2” payments of Ires tax notices for 2004 and 2005. to “Baa3” and its short-term rating from “P-2” to As regards the same dispute, the Tax Commis- “P-3”. The bank financial strength rating (BFSR) sion of Genoa, which had upheld the appeal in was confirmed at “D+”. The outlook remained its first instance judgment for 2004, then negative. changed the decision in the appeal judgment through the ruling filed on 20 March 2012, against which the company will appeal before MAIN RISKS AND UNCERTAINTIES the Supreme Court. AND BUSINESS The Group, backed by opinions of qualified ex- OUTLOOK ternal professionals, believes that there are sub- stantial and legal grounds for their rationale re- garding the legal nature of their transactions, a In light of the positive results obtained by the rationale that will be pursued at all appropriate Carige Group in the first half of 2012 too – national and international levels. which confirms its solid strategic positioning in traditional bankassurance activities – and in consideration of the constant focus on liquidity profiles, capitalisation and risk, and on the RISK MANAGEMENT benefits in terms of efficiency expected from the investments in information technology, the half- yearly financial report was drawn up in the as- In the Carige Group, any policies related to the sumption of the company as a going concern. assumption of risks are set by the Board of Di- Operations were performed in the first half of rectors of the Parent Company at the moment of the year against the backdrop of a slowdown in preparation of strategic planning and the annual global economy and accentuated tensions in the budget. financial markets, shaped by the sovereign debt The Parent Company performs orientation and crises in certain European countries, which saw supervisory functions as regards all risks, in par- spreads between Italian and German govern- ticular by managing, in an integrated context, ment bonds increase, despite significant meas- the Pillar 1 and Pillar 2 risks, in accordance with ures implemented to reduce public debt and the the provisions contained in the Supervisory In- extraordinary monetary policy provisions structions of the Bank of Italy (Circular No. 263 adopted at European level. dated 27 December 2006 and subsequent up- In particular, in Italy, the phase of recession is dates). expected to last until 2013, with an estimated The individual Group banks operate within spe- fall in GDP of around 2% in 2012, character- cific limits of independence and avail themselves ised by a decrease in household consumption, of their own control structures, whose analyses stagnation in investments by businesses and a are supported not only by regulatory models, but slowdown in foreign trade. The harsh fiscal poli- by more advanced models which have made it cies targeted at reducing the public deficit and possible, over time, to expand the range of risks structural reforms put in place by the Italian monitored and improve the assessment of the government to stimulate future growth and re-

12 store market confidence in the country, could adversely affect private consumption and in- vestments in the immediate future. Additional tax increases could then be adopted over the com- ing months in relation to the development of the situation. It is necessary for the banking system to be ex- posed to the criticalities in the economic- financial context and it will be affected by these in the near future too, in terms of traded vol- umes, liquidity funding, enhancement of assets and profitability. These effects will be augmented by the penalis- ing industry regulations introduced over the last few years, including, in particular, pricing regu- lation measures and the revision of prudential supervisory regulations (known as Basel 3), which introduces stricter restrictions regarding capital and liquidity requirements. To comply with these, the banking system must gradually obtain more available capital and liquidity re- serves. After an in-depth evaluation of the risks and un- certainties inherent in the aforementioned criti- calities, which are predicted to continue to char- acterise the economic-financial context and, as a result, the banking sector in the near future, the Group is confident that it can continue with its balanced path of growth.

INFORMATION ON RELATIONS WITH RELATED PARTIES

This half-yearly financial report acknowledges the legislative changes made to IAS 24 – Re- lated Party Disclosures - published in November 2009 by the IASB (EC Reg. no. 632/2010 of 19 July 2010) in relation to the definition of the pe- rimeter of related parties. The Group maintains relations with Banca Carige shareholders who are able to exercise a significant influence, subsidiaries and other re- lated parties regulated under market conditions. For details of existing relations, please refer to the paragraph “transactions with related parties” in the explanatory notes to the condensed con- solidated half-yearly financial statements.

13

HALF-YEARLY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

14

CONSOLIDATED FINANCIAL STATEMENTS

15

CONSOLIDATED BALANCE SHEET

ASSETS (thousands of euro)

Change 30/06/2012 31/12/2011 absolute % 10 -CASH AND CASH EQUIVALENTS 288,105 604,122 (316,017) -52.3 20 -FINANCIAL ASSETS HELD FOR TRADING 257,602 170,364 87,238 51.2 30 -FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT AND LOSS 545,003 534,176 10,827 2.0 40 -FINANCIAL ASSETS AVAILABLE-FOR-SALE 12,308,951 9,665,750 2,643,201 27.3 60 -DUE FROM BANKS 2,215,925 1,986,409 229,516 11.6 70 -LOANS TO CUSTOMERS 26,710,668 26,885,944 (175,276) -0.7 80 -HEDGING DERIVATIVES 188,509 152,543 35,966 23.6 100 -INVESTMENTS IN ASSOCIATES AND COMPANIES SUBJECT TO JOINT CONTROL 62,839 53,885 8,954 16.6 110 -TECHNICAL INSURANCE RESERVES REASSURED WITH THIRD PARTIES 171,892 154,748 17,144 11.1 120 -PROPERTY AND EQUIPMENT 1,208,539 1,206,593 1,946 0.2 130 -INTANGIBLE ASSETS 1,856,142 1,859,969 (3,827) -0.2 of which: - goodwill 1,779,644 1,779,644 - - 140 -TAX ASSETS 1,024,243 1,063,682 (39,439) -3.7 a) current 179,827 109,880 69,947 63.7 b) deferred 844,416 953,802 (109,386) -11.5 160 -OTHER ASSETS 475,630 521,876 (46,246) -8.9 TOTAL ASSETS 47,314,048 44,860,061 2,453,987 5.5

LIABILITIES AND SHAREHOLDERS' EQUITY (thousands of euro) Change 30/06/2012 31/12/2011 absolute % 10 -DUE TO BANKS 8,616,479 5,922,303 2,694,176 45.5 20 -DUE TO CUSTOMERS 16,104,290 15,919,602 184,688 1.2 30 -SECURITIES ISSUED 10,668,463 11,616,164 (947,701) -8.2 40 -FINANCIAL LIABILITIES HELD FOR TRADING 47,076 66,150 (19,074) -28.8 50 -FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT AND LOSS 1,425,596 1,460,833 (35,237) -2.4 60 -HEDGING DERIVATIVES 1,343,450 1,212,376 131,074 10.8 80 -TAX LIABILITIES 419,522 412,785 6,737 1.6 (a) current 39,113 47,454 (8,341) -17.6 (b) deferred 380,409 365,331 15,078 4.1 100 -OTHER LIABILITIES 697,227 894,101 (196,874) -22.0 110 -EMPLOYEE TERMINATION INDEMNITIES 84,524 85,206 (682) -0.8 120 -ALLOWANCES FOR RISKS AND CHARGES: 296,203 298,726 (2,523) -0.8 a) post employment benefits 269,086 269,263 (177) -0.1 b) other allowances 27,117 29,463 (2,346) -8.0 130 -TECHNICAL RESERVES 4,183,634 4,096,189 87,445 2.1 140 -VALUATION RESERVES (280,233) (514,516) 234,283 -45.5 160 -EQUITY INSTRUMENTS 1,173 15,772 (14,599) -92.6 170 -RESERVES 363,996 329,804 34,192 10.4 180 -SHARE PREMIUM RESERVE 1,020,314 1,013,277 7,037 0.7 190 -SHARE CAPITAL 2,177,219 1,790,392 386,827 21.6 210 -MINORITY INTERESTS (+/-) 54,885 54,246 639 1.2 220 -NET INCOME (LOSS) 90,230 186,651 (96,421) -51.7 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 47,314,048 44,860,061 2,453,987 5.5

The Chairman of the Board of Directors The Manager in charge of preparing the company’s The General Manager accounting documents

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CONSOLIDATED INCOME STATEMENT

(thousands of euro) Change 6 months 2012 - 6 months 2011 6 months 2012 6 months 2011 absolute % 10 - INTEREST AND SIMILAR INCOME 753,468 601,586 151,882 25.2 20 - INTEREST AND SIMILAR EXPENSE -331,376 -229,428 -101,948 44.4 30 -INTEREST MARGIN 422,092 372,158 49,934 13.4 40 - FEE AND COMMISSION INCOME 184,725 163,091 21,634 13.3 50 - FEE AND COMMISSION EXPENSE - 26,551 - 16,120 - 10,431 64.7 60 -NET FEE AND COMMISSION INCOME 158,174 146,971 11,203 7.6 70 - DIVIDEND AND SIMILAR INCOME 5,991 8,304 -2,313 - 27.9 80 - PROFITS (LOSSES) ON TRADING -504 15,189 -15,693 … 90 - FAIR VALUE ADJUSTMENTS IN HEDGE ACCOUNTING -1,942 -91 -1,851 … 100 - PROFITS (LOSSES) ON DISPOSAL OR REPURCHASE OF: 27,148 146 27,002 … a) loans 1,912 -501 2,413 … b) financial assets available-for-sale 23,883 1,594 22,289 … d) financial liabilities 1,353 -947 2,300 … 110 - PROFITS (LOSSES) ON FINANCIAL ASSETS AND LIABILITIES DESIGNATED AT FAIR VALUE 1,852 -1,023 2,875 … 120 -NET INTEREST AND OTHER BANKING INCOME 612,811 541,654 71,157 13.1 130 - NET LOSSES/RECOVERIES ON IMPARMENT -93,539 -61,987 -31,552 50.9 a) loans -74,066 -55,830 -18,236 32.7 b) financial assets available-for-sale -19,535 -4,240 -15,295 … d) other financial activities 62 -1,917 1,979 … 140 -NET INCOME FROM BANKING ACTIVITIES 519,272 479,667 39,605 8.3 150 - NET INSURANCE PREMIUMS 513,527 652,502 -138,975 - 21.3 160- OTHER NET INSURANCE INCOME (ESPENSE) -569,342 -676,728 107,386 - 15.9 170- NET INCOME FROM BANKING AND INSURANCE ACTIVITIES 463,457 455,441 8,016 1.8 180 - ADMINISTRATIVE EXPENSES: -339,591 -348,657 9,066 - 2.6 a) personnel expenses -208,915 -211,250 2,335 - 1.1 b) other administrative expenses -130,676 -137,407 6,731 - 4.9 190 - NET PROVISIONS FOR RISKS AND CHARGES -621 -1,715 1,094 - 63.8 200 - NET ADJUSTMENTS TO/RECOVERIES ON PROPERTY AND EQUIPMENT -13,560 -12,643 -917 7.3 210 - NET ADJUSTMENTS TO/RECOVERIES ON INTANGIBLE ASSETS -16,700 -15,306 -1,394 9.1 220 - OTHER OPERATING EXPENSES (INCOME) 30,616 40,027 -9,411 - 23.5 230 -OPERATING EXPENSES -339,856 -338,294 -1,562 0.5 240 - PROFITS (LOSSES) ON INVESTMENTS IN ASSOCIATES AND COMPANIES SUBJECT TO JOINT CONTROL 2,366 2,332 34 1.5 270 - PROFITS (LOSSES) FROM DISPOSAL OF INVESTMENTS -2 6 -8 … 280 -INCOME (LOSS) BEFORE TAX FROM CONTINUING OPERATIONS 125,965 119,485 6,480 5.4 290 - TAXES ON INCOME FROM CONTINUING OPERATIONS -33,407 -43,332 9,925 - 22.9 300 -INCOME (LOSS) AFTER TAX FROM CONTINUING OPERATIONS 92,558 76,153 16,405 21.5 320 -NET INCOME (LOSS) 92,558 76,153 16,405 21.5 330 - MINORITY INTERESTS 2,328 995 1,333 … 340 -PARENT COMPANY'S NET INCOME (LOSS) 90,230 75,158 15,072 20.1

Earnings per share (in euro) - Basic 0.044 0.041 - Diluted 0.044 0.041

The Manager in charge of The General Manager preparing the company’s The Chairman of the Board of accounting documents Directors

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STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME

(thousands of euro) Change % 1st half 2012 - 1° half 2011 1st half 2012 1st half 2011 absolute % 10 NET INCOME (LOSS) 92,558 76,153 16,405 22 Other comprehensive income (net of tax) 20 Financial assets available-for-sale 258,076 17,688 240,388 … 60 Cash flow hedges (23,565) 13,097 (36,662) … 100 Share of valuation reserves connected with investments carried at equity - (233) 233 (100) 110 Total other comprehensive income (net of tax) 234,511 30,552 203,959 … 120 TOTAL COMPREHENSIVE INCOME (captions 10 + 110) 327,069 106,705 220,364 … 130 Total consolidated comprehensive income pertaining to minority interests 2,556 1,075 1,481 … 140 Total consolidated comprehensive income pertaining to the Parent Company 324,513 105,630 218,883 …

The Chairman of the Board of The Manager in charge of Directors preparing the company’s The General Manager accounting documents

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CHANGES IN CONSOLIDATED SHAREHOLDERS’ EQUITY AS AT 30/06/2012

(thousands of euro)

Allocation of profits/losses for the Changes in the period previous period

Transactions on Shareholders' equity

June 2012 Reserves Amounts as at 31/12/2011 Amounts as at 01/01/2012 Changes in reserves in Changes 30/06/2012 Change balances in opening 30/06/2012 Stock options Issue of new shares of new Issue Minority interests as at 30/06/2012 Extraordinary dividends Dividends and other allocations and other Dividends Purchase of treasury shares of treasury Purchase Derivatives on treasury shares treasury on Derivatives Changes in equity instruments Group Shareholders' equity equity Groupas at Shareholders' Total comprehensive income as at Total comprehensive

Share capital: 1,817,455 - 1,817,455 - 386,831 - 2,177,219 27,067 a) ordinary shares 1,814,901 1,814,901 - 386,831 - 2,174,665 27,067 b) other shares 2,554 2,554 - 2,554 - Share premium reserve 1,028,972 1,028,972 - 7,037 - 1,020,314 15,695 Reserves: 337,205 - 337,205 34,258 - (2) ------363,996 7,465 a) retained earnings 265,252 265,252 34,258 (2) - - 292,240 7,268 b) other 71,953 71,953 - - 71,756 197 Valuation reserves (512,399) (512,399) - - - - 234,511 (280,233) 2,345 Equity instruments 15,772 15,772 - (14,599) - 1,173 - Treasury shares (15) (15) - - - (15)

Net income (Loss) 188,636 188,636 (34,258) (154,378) 92,558 90,230 2,328

Group Shareholders' equity 2,821,380 - 2,821,380 - (152,456) (3) 393,864 - - (14,599) - - 324,513 3,372,699 X

Minority interests 54,246 - 54,246 - (1,922) 1 4 - 2,556 X 54,885

The Chairman of the Board of Directors The Manager in charge of The General Manager preparing the company’s accounting documents 19

CHANGES IN CONSOLIDATED SHAREHOLDERS’ EQUITY AS AT 30/06/2011

(thousands of euro)

Allocation of profits/losses for the Changes in the period previous period

Transactions on Shareholders' equity Reserves Amounts as at 31/12/2011 Amounts as at 01/01/2012 Changes in reserves in Changes 30/06/2011 Change in opening balances 30/06/2012 Stock options Issue of new shares Minority interests as interests at 30/06/2011 Minority Extraordinary dividends Extraordinary Dividends and other allocations Purchase of treasury shares Derivatives on treasury shares Changes in equity instruments Group Shareholders' equity as at equity Shareholders' Group Total comprehensive income as at

Share capital: 1,811,150 - 1,811,150 - 3,202 (9) 1,790,391 23,952 a) ordinary shares 1,636,840 1,636,840 - 3,202 (9) 1,616,081 23,952 b) other shares 174,310 174,310 - 174,310 - Share premium reserve 1,023,099 1,023,099 - 2,996 - 1,013,280 12,815 Reserves: 289,276 - 289,276 48,527 - (53) - (311) - - - - - 329,996 7,443 a) retained earnings 217,323 217,323 48,527 (53) - (311) - 258,240 7,246 b) other 71,953 71,953 - - - 71,756 197 Valuation reserves 418,016 418,016 - - - - 30,552 446,322 2,246 Equity instruments 15,784 15,784 - (16) - 15,768 - Treasury shares (15) (15) - - - (15)

Net income (Loss) 179,636 179,636 (48,527) (131,109) 76,153 75,158 995

Group Shareholders' equity 3,694,184 - 3,694,184 - (128,819) (54) 198 (208) - (16) - - 105,630 3,670,915 X

Minority interests 42,762 - 42,762 - (2,290) 1 6,000 (112) 1,075 X 47,436

The Manager in charge of preparing The Chairman of the Board of the company’s accounting documents Directors The General Manager 20

CONSOLIDATED STATEMENT OF CASH FLOWS

(thousands of euro) Direct method

A. OPERATING ACTIVITIES 30/06/2012 30/06/2011 1. Cash flow from operations 246,329 410,231 - interest income received (+) 703,169 563,751 - interest expenses paid (-) (298,777) (173,673) - dividend and similar income (+) 5,996 5,645 - net fee and commissions (+/-) 161,457 156,991 - personnel costs (-) (167,359) (178,917) - net insurance premiums collected 524,578 650,221 - other insurance income and expenses (-) (489,431) (500,475) - other costs (-) (199,486) (191,983) - other income (+) 93,328 115,374 - taxes and duties (-) (87,146) (36,703) 2. Cash flow from/used in financial assets (2,484,274) (2,178,547) - financial assets held for trading (73,745) 88,060 - financial assets designated at fair value through profit and loss 2,578 56,178 - financial assets available-for-sale (2,239,452) (630,432) - loans to customers 118,053 (1,134,024) - due from banks: repayable on demand 227,978 27,969 - due from banks: other (468,746) (363,633) - other assets (50,940) (222,665) 3. Cash flows from/used in financial liabilities 2,111,150 1,915,675 - due to banks: repayable on demand 1,659,523 (66,155) - due to banks: other 1,011,088 (167,246) - due to customers 181,389 258,028 - securities issued (891,758) 1,573,723 - financial liabilities held from trading 11,587 8,626 - financial liabilities designated at fair value through profit and loss (56,474) (48,618) - other liabilities 195,795 357,317 Net cash flow from/used in operating activities (126,795) 147,359 B. INVESTING ACTIVITIES 1. Cash flow from 592 4,476 - dividends collected on investments in associates and companies subject to joint control 412 4,234 - sales of property and equipment 180 242 2. Cash flow used in (35,436) (42,550) - purchase of investments in associates and companies subject to joint control - - - purchase of property and equipment (15,975) (27,084) - purchase of intangible assets (12,455) (15,466) - purchase of subsidiaries and business branches (7,006) - Net cash flow from/used in investing activities (34,844) (38,074) C. FINANCING ACTIVITIES - issues/purchases of treasury shares - 5,680 - dividend distribution and others (154,378) (131,109) Net cash flow from/used in financing activities (154,378) (125,429) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (316,017) (16,144) LEGEND: (+) from; (-) used in

RECONCILIATION Balance sheet items Amount Amount 30/06/2012 30/06/2011 Cash and cash equivalents at the beginning of the period 604,122 300,103 Net increase (decrease) in cash and cash equivalents (316,017) (16,144) Cash and cash equivalents at the end of the period 288,105 283,959

The Chairman of the Board of Directors The Manager in charge of The General Manager preparing the company’s accounting documents

21

EXPLANATORY NOTES

particularly the more complex ones such as the ACCOUNTING POLICIES calculation of impairment of assets, are generally performed in a comprehensive manner during the drafting of the annual financial The condensed consolidated half-yearly statements, except in the presence of impairment financial statements of the Banca Carige Group indicators which require the determination of as at 30 June 2012 were prepared in any impairment. conformance with IAS 34 (interim reports). The international accounting standards (IAS/IFRS) The amendments made to IFRS 7 – Financial and the related interpretations (SIC/IFRIC), instruments: Additional disclosures – Transfers of officially approved by the European Commission financial assets (approved with EC Regulation and in force on 30 June 2012, were applied for no. 1205/2011 of 22/11/2011) apply to these the valuation and measurement of the condensed consolidated half-yearly financial accounting balances, and, where necessary, the statements. The amendments aim to allow directions referred to in the Bank of Italy Circular financial statement users to effect a better no. 262 dated 22 December 2005 – update of assessment of exposure to risks related to the 18 November 2009 - were observed (financial transfer of financial assets and the effects of said statements for banks: schemes and rules for risks on the Group’s financial position and apply preparation) and subsequent clarification letters to financial statements for years starting on or (so-called “Roneata”). after 30 June 2011. The Group did not avail itself of the option of early application of said The condensed consolidated half-yearly amendments which did not have any effects on financial statements, prepared using the Euro as the Group’s equity, economic and financial the accounting currency, drafted in summary position. form as permitted by IAS 34, are composed of Furthermore, it should be noted that, during the the Balance Sheet, the Income Statement, the half-year period, amendments to IAS 1 – Statement of Comprehensive Income, the Presentation of the financial statements, and to Statement of Changes in Shareholders’ Equity, IAS 19 – Employee benefits (EC Regulation no. the Cash Flow Statement and the Explanatory 475/2012 of 05/06/2012) were approved. The Notes. amendments to IAS 1 apply to financial statements for years starting on or after 1 July Unless otherwise specified, the amounts 2012, while the changes to IAS 19 apply to indicated in the Financial Statements and in the financial statements for years starting on or after Explanatory notes are expressed in thousands of 1 January 2013. Euro. Lastly, the documents published by the As regards the phases of classification, International Accounting Standards Board (IASB) recording, valuation and cancellation of asset should be noted. In the event the current version and liability items involved in preparing this is approved by the European Commission, these Report, as with the methods of entering costs documents could have accounting effects. and revenues, the same accounting principles - “Annual Improvements to IFRSs”: the used in preparation of the financial statements document incorporates the as at 31 December 2011. amendments, not defined by the IASB to Preparation of the condensed consolidated half- be urgent but necessary, made to IFRS yearly financial statements requires the use of 1, IAS 1, IAS 16, IAS 32, IAS 34; estimates and assumptions for the calculation of - amendments to IFRS 10 – the certain cost and revenue components and for consolidated financial statements, IFRS the valuation of assets and liabilities. For a 11 – Joint arrangements and IFRS 12 – description of these please refer to the 2011 additional disclosures on interests in Financial Statements. In addition, it should be other entities. noted that certain valuation processes,

22 The current macroeconomic context and high The section “Equity investments and intangible level of volatility financial markets make the assets with an indefinite useful life” in these evaluation of credit risk, the valuation of condensed consolidated half-yearly financial financial instruments, assessment of impairment statements details the impairment tests of available-for-sale (AFS) securities and the performed on goodwill and the associated determination of the recoverable value of conclusions. goodwill recorded increasingly more complicated and require an analysis of the The condensed consolidated half-yearly effects these valuations can have. It should be financial statements contained in this half-yearly pointed out that no symptoms were recognised financial Report were subject to a limited audit in the equity and financial structure and in by the company Reconta Ernst & Young SpA, operations which may lead to uncertainties over according to the task conferred by resolution of the going concern assumptions, the Shareholders’ Meeting of 29 April 2011 for the nine-year period 2012-2020, pursuant to The classification and valuation of credits were art. 159 of Legislative Decree 58/1998 and performed using the normal valuation criteria, subsequent amendments and additions deriving also in order to promptly and correctly from art. 18 of Law 262/2005. acknowledge the consequences of the negative development of the current economic context.

Financial instruments were generally valued at fair value, determined using the following respectively, 1. listed prices (not adjusted) on the active market for recognised assets or liabilities (Level 1-L1); 2. input data other than Level 1 listed prices which can be observed for the asset or liability, either directly (as for prices) or indirectly (i.e. as derived from the prices (Level 2- L2); and 3. input data related to assets or liabilities that are not based on observable market data (non-observable data) (Level 3-L3). Details of the fair value levels attributed to financial assets and liabilities valued at fair value are shown in the section “Intermediation activities”.

During preparation of the condensed consolidated half-yearly financial statements, checks were performed to assess any impairment of available-for-sale securities, intangible values and goodwill, through an analysis which involves checking for the presence of impairment indicators and the determination of any write-down. In particular, available-for-sale securities and goodwill recorded were subject to impairment testing, in order to assess the existence of objective evidence which leads the company to believe their value cannot be fully recovered.

23

SCOPE OF CONSOLIDATION AND CONSOLIDATION METHODS

1. EQUITY INVESTMENTS IN FULLY AND JOINTLY CONTROLLED SUBSIDIARIES

According to IAS/IFRS the consolidation area includes all directly or indirectly controlled subsidiaries: therefore, even companies not classified as credit, financial or instrumental institutions (i.e. dissimilar activities) have been consolidated on a line-by-line basis. The control concept applied is that established in IAS 27. During the course of the first six months of 2012, the consolidation area remained unchanged from that determined for preparation of the financial statements for the year ended at 31 December 2011, with the exception of the inclusion of Carige Covered Bond 2 Srl.

24

1. Equity investments in exclusive subsidiaries and subsidiaries subject to joint control (consolidated proportionally)

Type of relations Shareholding relationship Availability of votes (2) (3) Name of the companies Head offices hip Holding company (1) % Shareholding Actual % Potential % A. Companies A.1 Consolidated line-by-line Banking group 1. Banca CARIGE SpA Genoa 2. Cassa di Risparmio di Savona S.p.A. Savona 1 A1.1 95.90 95.90 4.10 3. Cassa di Risparmio di Carrara SpA Carrara 1 A1.1 90.00 4. Banca del Monte Lucca SpA Lucca 1 A1.1 60.00 5. Banca Cesare Ponti SpA Milan 1 A1.1 100.00 6. Carige Asset Management SpA Genoa 1 A1.1 99.50 A1.18 0.50 7. Creditis Servizi Finanziari SpA Genoa 1 A1.1 100.00 8. Centro Fiduciario SpA Genoa 1 A1.1 76.95 A1.2 20.00 9. Argo Finance One Srl Genoa 1 A1.1 100.00 10. Priamar Finance Srl Genoa 1 A1.1 100.00 11. Argo Mortgage Srl Genoa 1 A1.1 60.00 12. Argo Mortgage 2 Srl Genoa 1 A1.1 60.00 13. Carige Covered Bond Srl Genoa 1 A1.1 60.00 14. Carige Covered Bond 2 Srl Genoa 1 A1.1 60.00 15. Columbus Carige Immobiliare SpA Genoa 1 A1.1 100.00 16. Immobiliare CARISA Srl Savona 1 A1.2 100.00

Insurance companies 17. Carige Assicurazioni SpA (4) Milan 1 A1.1 98.40 99.55 18. Carige Vita Nuova SpA Genoa 1 A1.1 100.00

Other companies 19. Dafne Immobiliare Srl Milan 1 A1.17 100.00 20. I. H. Roma Srl Milan 1 A1.18 100.00 21. Assi 90 Srl Genoa 1 A1.17 39.75 A1.18 60.25

A.2 Consolidated proportionally -

Legend (1) Type of relationship: 1 = majority of voting rights at ordinary shareholders’ meeting 2 = dominant influence at ordinary shareholders’ meeting 3 = agreements with other shareholders 4 = other forms of control 5 = single management pursuant to article 26, paragraph 1 of Legislative Decree 87/92 6 = single management pursuant to article 26, paragraph 2 of Legislative Decree 87/92 7 = joint control (2) Availability of voting rights at ordinary shareholders’ meeting, distinguishing between actual and potential (3) Figure entered only if different from the equity investment share (4) The percentage of actual availability of votes differs from the equity investment share as it is calculated on the capital excluding own shares.

Concerning operations, the subsidiaries can be Argo Mortgage Srl, Argo Mortgage 2 Srl), divided into banking (Banca Carige SpA, Cassa special purpose vehicles for the issue of covered di Risparmio di Savona SpA, Cassa di Risparmio bonds (Carige Covered Bond Srl and Carige di Carrara SpA, Banca del Monte di Lucca SpA, Covered Bond 2 Srl), insurance (Carige Vita Banca Cesare Ponti SpA), asset management Nuova Spa, Carige Assicurazioni SpA) real (Carige Asset Management SGR SpA), consumer estate (Columbus Carige Immobiliare SpA, credit (Crediti Servizi Finanziari SpA), trust Immobiliare Carisa Srl, Dafne Immobiliare Srl companies (Centro Fiduciario SpA), special and I.H. Roma Srl) and insurance agencies (Assi purpose vehicles for securitisation transactions 90 Srl). (Argo Finance One Srl, Priamar Finance Srl,

25 With regard to the four companies established accordance with the general principles set out in for the same number of securitisation the systematic framework. All companies transactions – Argo Finance One, Priamar belonging to the banking group and the Finance, Argo Mortgage and Argo Mortgage 2 insurance companies were deemed relevant. – and to the companies Carige Covered Bond With exclusive reference to companies not and Carige Covered Bond 2, please note that belonging to the banking group, those with they have all been consolidated in these financial statement totals of less than € 10 financial statements on a line-by-line basis. million, and provided that the total of the companies excluded does not exceed € 50 With regard to the securitisation of Banca million, have been classified as minor Carige’s performing loans carried out by Argo subsidiaries, in accordance with the provisions Mortgage 2 in 2004, as the transaction does on consolidated supervisory reporting not fully satisfy the conditions of the substantial established by the Bank of Italy with circular no. transfer to third parties of related risks and 115 of 7 August 1990 and subsequent updates. rewards, consolidation was carried out on the Therefore, as at 30 June 2012, Banca Carige basis of the company’s segregated assets. Italia SpA, wholly owned by the Parent The condensed consolidated half-yearly Company, was excluded from line-by-line financial statements have been prepared using: consolidation. - the condensed half-yearly financial In addition, companies for which shares with statements of the Parent Company and of voting rights have been received as a form of the other consolidated companies as at credit guarantee rather than as a means of 30 June 2012, approved by their exercising control over the companies under respective Boards of Directors and review were excluded from the area of prepared in accordance with the consolidation. approved IAS/IFRS in force; - reporting packages prepared by those companies that did not adopt the IAS/IFRS 2. OTHER INFORMATION and approved by the respective Boards of Directors. Associates, i.e. companies subject to significant Minor subsidiaries outside of the area of influence, were measured using the equity consolidation were recorded at cost, in method.

Equity investments in companies subject to significant influence (consolidated using the equity method)

Shareholding relationship Availability of votes Name of the companies Head offices Holding company % Shareholding Actual % Potential % A. Companies consolidated with the equity method

1. Autostrada dei Fiori Spa Savona Banca Carige S.p.A. 16.62 Cassa di Risparmio di Savona S.p.A. 4.00

Companies in which the Group exerts a accordance with the general principles set out in significant influence that are not considered to the framework. be significant have been valued at cost, in

26 Equity investments in companies subject to significant influence excluded from the equity method

Shareholding relationship Availability of votes Name of the companies Head offices Holding company % Shareholding Actual % Potential %

1. Sport e Sicurezza Srl Milan Carige Ass.ni SpA 25.00 Carige V. N. SpA 25.00 2. Nuova Erzelli Srl Genoa Banca Carige S.p.A. 40.00

27 Nuova in which the investment risk is borne by TRADING ACTIVITIES the insured). This figure recorded a 2.9% de- crease compared to December and was down 4% YoY. As at June 2012, Financial Intermediation Activi- Direct deposits amounted to € 27,630.3 million, ties (FIA) on behalf of customers – direct and in- whilst indirect deposits amounted to € 22,868.7 direct deposits – amounted to € 50,499 million million. The latter accounted for 45.3% of FIA (net of € 568 million in financial liabilities desig- and was made up of assets under management nated at fair value through profit and loss relat- (42.2%) and assets under administration ing to the insurance products of Carige Vita (57.8%).

FINANCIAL INTERMEDIATION ACTIVITIES ( thousands of euro) Situation as at Change % 30/06/2012 31/12/2011 30/06/2011 06/12 06/12 12/11 06/11 Total (A+B) 50,499,020 52,011,047 52,592,507 -2.9 -4.0 Direct deposits (A) (1) 27,630,325 28,439,887 28,311,847 -2.8 -2.4 % on Total 54.7% 54.7% 53.8% Indirect deposits (B) 22,868,695 23,571,160 24,280,660 -3.0 -5.8 % on Total 45.3% 45.3% 46.2% - Assets under management 9,659,963 9,523,339 10,185,110 1.4 -5.2 % on Total 19.1% 18.3% 19.4% % on Indirect deposits 42.2% 40.4% 41.9% - Assets under administration 13,208,732 14,047,821 14,095,550 -6.0 -6.3 % on Total 26.2% 27.0% 26.8% % on Indirect deposits 57.8% 59.6% 58.1% (1) items 20, 30 and 50 of Liabilities and Shareholders' equity. Carige Vita Nuova liabilities, carried at fair value and relating to products for which investment risk is borne by the insured, are not included in this table.

Global funding, equal to € 36,246.8 million, half and 3% in the year. Securities issued and increased by 5.5% in the half and 16% over the financial liabilities designated at fair value twelve-month period, and is characterised by a through profit and loss totalled € 11,526 mil- significant increase in the funding from central lion, marking a decrease as a result of the ma- banks in relation to extraordinary interventions turity of the aforementioned EMTN loan (down of the European Central Bank (Long term refi- 7.9% in the half and 9.1% in the year). The total nancing operation – LTRO). is made up almost entirely of bonds; bonds Direct deposits totalled € 27,630.3 million, placed with ordinary customers (62%), EMTN down by 2.8% in the half and 2.4% in the year. programmes and covered bonds (28%), and The trend in the half was affected by the maturity covered bonds represented by subordinated of a € 836 million loan in February, as part of loans (10%). the EMTN programme, the conversion into In the first half, in strict compliance with Mifid shares, in March, of € 394 million of the “Banca legislation on investor protection, against Carige 4.75% 2010-2015 convertible bond around € 300 million in maturities and € 400 with the option of redemption in shares” (“Banca million in repurchases, new bonds were placed Carige 4,75% 2010-2015 convertibile con for a total of roughly 1 billion. The long term facoltà di rimborso in azioni") and application of refinancing operation (LTRO) allowed the acqui- the new legislation which requires the transfer of sition of new deposit means (€ 0.7 billion), the treasury current accounts of the Public Au- bringing total deposits from this means to € 2 thorities to the State Treasury. The repayment in billion. The use of this financing form allowed November 2011, of € 383 million of the Ban- the Group, as regards assets, to carry on its cus- coposta loan also affected the total for the tomer financing policy and to support the de- twelve-month period. mand for Italian Government bonds in a par- More specifically, due to customers, amounting ticularly tense moment, and as regards liabilities, to € 16,104.3 million, increased by 1.2% in the

28 to adequately tackle the expected bond maturity Due to banks amounted to € 8,616.5 million, terms. up over the € 5,922.3 million recorded in De- As regards the contract duration, short-term de- cember and € 2,944.4 million in June 2011. posits accounted for 58.5% of the total, register- Due to central banks stood at € 7,189.6 million ing an increase of 1.1% over December 2011 (€ 3,841.8 million in December 2011; € 700.7 and 2.9% YoY, while medium/long-term depos- million in June 2011). The increase is attribut- its, following said repayments, accounted for able to refinancing at the European Central 41.5% of the total, down by 7.9% and 9.1% re- Bank. spectively over December and June 2011.

FUNDING (thousands of euro) Situation as at Change % 30/06/2012 31/12/2011 30/06/2011 06/12 06/12 12/11 06/11 Total (A+B) 36,246,804 34,362,190 31,256,275 5.5 16.0

Direct deposits (A) 27,630,325 28,439,887 28,311,847 -2.8 -2.4 Due to customers 16,104,290 15,919,602 15,636,164 1.2 3.0 current accounts and free deposits 12,942,129 13,148,524 13,121,616 -1.6 -1.4 repurchase agreements 2,969,094 2,509,926 2,366,965 18.3 25.4 term deposits 13,459 15,417 10,461 -12.7 28.7 loans 5,809 3,255 3,271 78.5 77.6 commitments to repurchase own equity instruments 10,845 10,845 10,845 - 0.0 other deposits 162,954 231,635 123,006 -29.7 32.5 Securities issued 10,668,463 11,616,164 11,399,971 -8.2 -6.4 bonds 10,590,805 11,528,827 11,306,639 -8.1 -6.3 other securities 77,658 87,337 93,332 -11.1 -16.8 Financial liabilities designated at fair value through profit and loss (1) 857,572 904,121 1,275,712 -5.1 -32.8 bonds 857,572 904,121 1,275,712 -5.1 -32.8 short term 16,159,819 15,979,628 15,697,405 1.1 2.9 % on Total 58.5 56.2 55.4 medium-long term 11,470,506 12,460,259 12,614,442 -7.9 -9.1 % on Total 41.5 43.8 44.6

Due to banks (B) 8,616,479 5,922,303 2,944,428 45.5 … Deposits of central banks 7,189,609 3,841,754 700,656 87.1 … Current accounts and free deposits 328,912 10,267 75,518 …… Term deposits 52,007 120,830 130,322 -57.0 -60.1 Repurchase agreements 548,404 1,487,107 1,677,347 -63.1 -67.3 Financing 375,344 389,231 360,582 -3.6 4.1 Other 122,203 73,114 3 67.1 … (1) items 20, 30 and 50 of Liabilities and Shareholders' equity. Carige Vita Nuova liabilities, carried at fair value and relating to products for which investment risk is borne by the insured, are not included in this table.

Liguria holds a portion of direct deposits equal tance, at the end of June 2012, registering a to 57.7%, up over both December (56.8%) and share of 8.2%. Veneto holds a 6.3% share and June 2011 (56.1%). The second most significant Lazio 5.4%. The other regions’ shares are less region is Lombardy, with a portion of 8.8% than 5%. (8.9% in December and 9.3% in June 2011). Tuscany was the third region, in terms of impor-

29 DIRECT DEPOSITS (1) - GEOGRAPHICAL DISTRIBUTION (thousands of euro) Situation as at 30/06/12 31/12/11 30/06/11 % % % Liguria 11,347,273 57.7% 11,276,086 56.8% 10,936,034 56.1% Lombardy 1,728,532 8.8% 1,761,230 8.9% 1,820,362 9.3% Tuscany 1,619,042 8.2% 1,644,259 8.3% 1,647,484 8.4% Veneto 1,232,248 6.3% 1,254,650 6.3% 1,209,344 6.2% Latium 1,058,891 5.4% 1,100,712 5.5% 1,115,874 5.7% Sicily 950,341 4.8% 985,314 5.0% 979,167 5.0% Piedmont 760,059 3.9% 778,208 3.9% 775,550 4.0% Emilia Romagna 315,195 1.6% 352,677 1.8% 339,336 1.7% Apulia 201,683 1.0% 214,378 1.1% 210,679 1.1% Sardinia 178,555 0.9% 188,446 0.9% 195,491 1.0% Marches 124,400 0.6% 130,474 0.7% 133,615 0.7% Valle d'Aosta 72,195 0.4% 78,934 0.4% 78,140 0.4% Umbria 42,008 0.2% 49,430 0.2% 45,083 0.2% Total Italy 19,630,422 99.8% 19,814,799 99.8% 19,486,160 99.9% Abroad 33,350 0.2% 32,142 0.2% 22,893 0.1% Total Italy + Abroad 19,663,772 100.0% 19,846,941 100.0% 19,509,053 100.0% Other items (2) (3) 7,966,553 8,592,946 8,802,794 Total direct deposits 27,630,325 28,439,887 28,311,847 (1) items 20, 30 and 50 of Liabilities and Shareholders' equity. Carige Vita Nuova liabilities, designated at fair value and relating to products for which investment risk is borne by the insured, are not included in this table. (2) Bonds issued under the EMTN programme, covered bonds, subordinated loans, bonds issued and placed through the BancoPosta network, repurchase agreements, other bonds issued by the SPV relating to the securitization of loans, deposits from the "contoconto" on line deposit account and "Banca Carige 4.75% 2010-2015 convertible bond with the option of redemption in shares" ("Banca Carige 4,75% 2010-2015 convertibile con facoltà di rimborso in azioni"). (3) From 30 June balance sheet "Banca carige 4.75% 2010-2015 convertibile con facoltà di rimborso", therefore previous periods are classified for homogeneity

DIRECT DEPOSITS AS AT 30/06/2012 (1) DIRECT DEPOSITS AS AT 30/06/2011 (1) 100%= 27,630.3 MILLIONS 100%= 28,311.8 MILLIONS

4.9% 5.3% 3.9% 4.0%

Liguria 4.8% Liguria 5.0%

Lombardy Lombardy 5.4% 5.7% Tuscany Tuscany

Veneto Veneto

Latium Latium 6.3% 6.2% Sicily Sicily

Piedmont Piedmont 8.2% 57.7% 56.1% Others Others 8.4%

8.8% 9.3% (1) Net of other items.

A total of 67.4% of due to customers involves 2011 and 20.9% in June 2011). Private social families, at € 8,856.6 million (68.2% in Decem- bodies intermediated € 594.5 million (4.5%), ber and 68% in June 2010). Non-financial financial and insurance companies € 457.9 mil- companies and personal businesses (€ 2,761.8 lion (3.5% of the total) and public administra- million) represent 21% (20.1% in December tions € 232.6 million (1.8% of the total).

30 DIRECT DEPOSITS (1) - DISTRIBUTION BY BUSINESS SEGMENT (thousands of euro) Situation as at 30/06/12 31/12/11 30/06/11 % % %

Public Administration 232,591 1.8% 506,831 3.8% 514,330 3.9% Financial and insurance businesses (2) 457,907 3.5% 322,185 2.4% 285,926 2.2% Non-financial businesses and personal businesses 2,761,755 21.0% 2,699,372 20.1% 2,776,523 20.9% Private social bodies and non classified entities 594,511 4.5% 579,628 4.3% 571,483 4.3% Households 8,856,625 67.4% 9,147,824 68.2% 9,024,516 68.0% Total residents 12,903,389 98.2% 13,255,841 98.9% 13,172,777 99.3% Rest of the world 231,807 1.8% 153,835 1.1% 96,422 0.7% Total distribution by business segment 13,135,196 100.0% 13,409,676 100.0% 13,269,199 100.0% Repurchase agreements 2,969,094 2,509,926 2,366,965 Total due to customers 16,104,290 15,919,602 15,636,164

Securities issued 10,668,463 11,616,164 11,399,971 Financial liabilities designated at fair value through profit and loss 857,572 904,121 1,275,712

Total direct deposits 27,630,325 28,439,887 28,311,847 (1) Items 20, 30 and 50 of Liabilities and Shareholders' equity. Carige Vita Nuova liabilities, designated at fair value and relating to products for which investment risk is borne by the insured, are not included in this table. (2) Borrowing repurchase agreements are shown separately, for a homogenous comparison previous periods have therefore been reclassified.

Indirect deposits amounted to € 22,868.7 mil- Mutual funds totalled € 4,769.8 million, down lion, down over both the last half (-3%) and over by 0.2% in six months and 10.4% in twelve the year (-5.8%). The negative trend in assets months. under administration continued, which Around 70% of the funds refer to the subsidiary amounted to € 13,208.7 million, down by 6% Carige A.M. SGR, whose management was af- and 6.3% respectively over six and twelve fected by the difficult market conditions, al- months; in particular, the reduction was due to though it stood out for the quality of the results the trend in bonds (-13% and -19.7% in six and achieved. twelve months) and shares (-23.2% and - The bank-insurance products amounted to € 32.5%), also due to the trend in prices. The item 4,250.3 million (+2.4% in the last half and “Other”, amounting to € 4,083.7 million, made +0.9% compared to June 2011). up almost entirely of assets under administration Assets managed amounted to € 639.9 million, of insurance companies, fell by 0.8% in the half up 7.9% in the last half, bucking the trend re- and increased by 0.9% YoY. corded in the previous half (down 1.5% YoY). Assets under management, amounting to € 9,660 million, fell by 5.2% over June 2011, but were up 1.4% over December 2011.

INDIRECT DEPOSITS (thousands of euro) Situation as at Change % 30/06/2012 31/12/2011 30/06/2011 06/12 06/12 12/11 06/11 Total (A+B) 22,868,695 23,571,160 24,280,660 -3.0 -5.8 Assets under management (A) 9,659,963 9,523,339 10,185,110 1.4 -5.2 Mutual funds and unit trusts 4,769,817 4,781,017 5,321,548 -0.2 -10.4 Assets management 639,875 593,050 649,662 7.9 -1.5 Bancassurance products 4,250,271 4,149,272 4,213,900 2.4 0.9

Assets under administration (B) 13,208,732 14,047,821 14,095,550 -6.0 -6.3 Government securities 5,597,543 5,653,318 5,313,928 -1.0 5.3 Bonds 2,075,387 2,386,239 2,585,106 -13.0 -19.7 Shares 1,452,137 1,889,972 2,149,758 -23.2 -32.5 Other 4,083,665 4,118,292 4,046,758 -0.8 0.9

31 Premiums collected on bankassurance products segment amounted to € 8.3 million, almost distributed by the banking network came to € double the € 4.2 million recorded in June 2011, 212.9 million, compared to € 312.1 million in mainly relating to the trend in the car insurance June 2011 (down 31.8%). More specifically, segment (€ 3.6 million), which registered signifi- premiums collected in the life insurance segment cant growth (€ 0.6 million in June 2011). This amounted to € 204.7 million (€ 307.9 million in was also due to the fact that a sales initiative June 2011) and relate almost entirely to tradi- was launched regarding the third party motor tional life insurance policies (€ 193.4 million liability insurance product of Carige Assicurazi- compared to € 305.4 million in June 2011). oni, sold directly at bank branches. Premiums collected in the non-life insurance

BANK ASSURANCE (thousands of euro) Change % 30/06/2012 2011 30/06/2011 06/12 06/11 Total premiums collected 212,934 551,965 312,083 -31.8

Life 204,685 543,489 307,893 -33.5 . Unit linked/Index policies 11,324 10,632 2,451 … . Traditional policies 193,360 532,856 305,442 -36.7 Non-life 8,250 8,476 4,190 96.9 . Car insurance 3,586 2,197 633 … . Elementary (non-car) insurance 4,664 6,279 3,557 31.1

As regards indirect deposits, the Liguria region’s 2011 and 12.3% in June 2011) and Tuscany contribution stood at 64.6% (64.7% in Decem- with 6.6% (6.6% in December 2011 and 7.1% ber 2011 and 64.1% in June 2011), followed in June 2011). by Lombardy with 12.8% (12.7% in December

INDIRECT DEPOSITS - GEOGRAPHICAL DISTRIBUTION (thousands of euro) Situation as at 30/06/12 31/12/11 30/06/11 % % %

Liguria 14,774,591 64.6% 15,238,796 64.7% 15,566,350 64.1% Lombardy 2,919,597 12.8% 2,986,592 12.7% 2,986,670 12.3% Tuscany 1,510,438 6.6% 1,555,912 6.6% 1,712,261 7.1% Veneto 1,043,539 4.6% 1,081,708 4.6% 1,151,215 4.7% Piedmont 734,583 3.2% 757,075 3.2% 792,340 3.3% Latium 653,352 2.9% 687,499 2.9% 722,920 3.0% Sicily 605,304 2.6% 620,838 2.6% 679,457 2.8% Emilia Romagna 263,730 1.2% 270,100 1.1% 269,377 1.1% Apulia 90,844 0.4% 94,124 0.4% 101,045 0.4% Valle d'Aosta 79,691 0.3% 78,460 0.3% 90,770 0.4% Sardinia 79,133 0.3% 81,893 0.3% 85,630 0.4% Marches 70,074 0.3% 71,588 0.3% 72,554 0.3% Umbria 42,132 0.2% 44,256 0.2% 46,613 0.2% Total Italy 22,867,008 100.0% 23,568,841 100.0% 24,277,203 100.0% Abroad 1,687 0.0% 2,319 0.0% 3,457 0.0% Total indirect deposits 22,868,695 100.0% 23,571,160 100.0% 24,280,660 100.0%

32 INDIRECT DEPOSITS AS AT 30/06/2012 INDIRECT DEPOSITS AS AT 30/06/2011 100%= 22,868.7 MILLLIONS 100%= 24,280.7 MILLIONS

2.9% 2.6% 2.7% 2.8%2.8% Liguria 3.0% 3.2% Liguria 3.3% Lombardy 4.6% Lombardy 4.7% Tuscany Tuscany Veneto 6.6% 7.1% Veneto Piedmont Piedmont Latium 12.8% Latium 12.3% 64.6% 64.1% Sicily Sicily

Others Others

The share of families stood at 73.1%; the share and of non-financial companies and personal of financial and insurance companies at 19.6% businesses at 5.5%.

INDIRECT DEPOSITS - DISTRIBUTION BY BUSINESS SEGMENT (thousands of euro) Situation as at 30/06/12 31/12/11 30/06/11 % % % Public Administration 118,314 0.5% 170,310 0.7% 184,468 0.8% Financial and insurance businesses 4,487,936 19.6% 4,610,206 19.6% 4,579,301 18.9% Non-financial businesses and personal businesses 1,257,739 5.5% 1,298,726 5.5% 1,325,814 5.5% Private social bodies and non classified entities 213,756 0.9% 201,746 0.9% 188,686 0.8% Households 16,710,770 73.1% 17,150,438 72.8% 17,863,334 73.6% Total residents 22,788,515 99.6% 23,431,426 99.4% 24,141,604 99.4% Rest of the world 80,180 0.4% 139,734 0.6% 139,056 0.6% Total indirect deposits 22,868,695 100.0% 23,571,160 100.0% 24,280,660 100.0%

In 2012 as well, the supply and management of The short-term component, equal to 25% of the loans granted was geared towards a recomposi- total, amounted to € 6,866.8 million; net of re- tion of the portfolio, aimed at optimising quality, purchase agreements, this recorded a decrease while adequately diversifying lending and moni- of 15.4% over six months and 15.7% YoY. toring the concentration risk, especially single The medium/long-term component amounted to name risk, in view of producing income and lim- € 19,090.5 million (-1.4% in the half and iting the capital absorbed by credit intermedia- +3.3% in twelve months) and is approximately tion activities. 60% financed by non-short-term deposits. Cash loans to customers totalled € 27,450.3 Loans, amounting to € 14,231.3 million, make million, recording a 1% increase over six months up the biggest portion (down 0.4% and +3% in and 4.5% YoY, before value adjustments total- six and twelve months). ling € 875.4 million and net of repurchase Bad loans amounted to € 1,493 million, up by agreements. 20.7% in the year (+10.7% in the half) across Net loans stood at € 26,574.9 million; net of the board, due to the continuation of the nega- repurchase agreements, they recorded a 0.8% tive economic situation; loans’ share of the total increase in the half and 4% over June 2011. rose from 4.9% in December 2011 to 5.4%. This trend, despite liquidity tensions, confirms The impairment rate was lower than in the pre- the consolidated support to business and vious year. household segments, where the Group has also As at 30 June 2012, 80.3% of loans were fi- undertaken significant steps aimed at overcom- nanced by direct retail deposits. ing the challenging economic situation. Due from banks, before value adjustments of € Private individuals account for 29.1% of the to- 0.9 million (same value in December and in tal, down by 1% in the last half and, despite li- June 2011), amounted to € 1,914.1 million, up quidity tensions and the negative economic in six months (+16.9%) and in twelve months situation, remained stable over the last 12 (+30.4%); they are mostly comprised of short- months; loans to companies accounted for term loans. 55.7% of the total, up by 1.6% and 2.8% over The net interbank position (difference between six and twelve months respectively. loans and due to banks before repurchase

33 agreement assets and liabilities) showed a net with € 4,284.2 million in December and € debt position of € 6,702.4 million, compared 1,476.4 million in June 2011.

LOANS (1) (thousands of euro) Situation as at Change % 30/06/2012 31/12/2011 30/06/2011 06/12 06/12 12/11 06/11 Total (A+B) 28,489,021 28,378,624 27,307,364 0.4 4.3 Loans to customers (A) 26,574,901 26,740,568 25,839,351 -0.6 2.8 -Gross exposure (2) 27,450,266 27,534,610 26,560,685 -0.3 3.3 current accounts 3,264,655 3,282,421 3,232,812 -0.5 1.0 lending repurchase agreements 1,099,711 1,457,057 1,340,157 -24.5 -17.9 mortgage loans 14,231,302 14,290,005 13,812,427 -0.4 3.0 credit cards, personal loans and salary-backed loans 663,922 655,818 496,884 1.2 33.6 leasing 854,319 826,925 810,762 3.3 5.4 factoring 179,284 188,780 199,019 -5.0 -9.9 other loans 4,205,428 4,314,139 4,285,711 -2.5 -1.9 impaired assets 2,951,645 2,519,465 2,382,913 17.2 23.9

-short term 6,866,759 6,815,085 6,837,074 0.8 0.4 % on nominal value 25.0 24.7 25.7 -medium/long term 19,090,497 19,370,738 18,486,562 -1.4 3.3 % on nominal value 69.5 70.4 69.6 -Bad loans 1,493,010 1,348,787 1,237,049 10.7 20.7 % on nominal value 5.4 4.9 4.7 -Value adjustments (-) 875,365 794,042 721,334 10.2 21.4

Due from banks (B) 1,914,120 1,638,056 1,468,013 16.9 30.4 -Gross exposure (2) 1,914,992 1,638,928 1,468,880 16.8 30.4 compulsory reserves 136,558 235,952 109,824 -42.1 24.3 current accounts and free deposits 134,246 207,203 121,727 -35.2 10.3 term deposits 1,524 26,157 287,993 -94.2 -99.5 repurchase agreements 289,708 - 285,292 … 1.5 loans 1,335,965 1,152,925 647,637 15.9 … impaired assets 16,991 16,691 16,407 1.8 3.6

-short term 1,867,973 1,592,161 1,404,377 17.3 33.0 % on nominal value 97.5 97.1 95.6 -medium/long term 47,019 46,767 64,503 0.5 -27.1 % on nominal value 2.5 2.9 4.4

-Value adjustments (-) 872 872 867 - 0.6

(1) Net of debt securities classified as L&R, amounting to as at 30 June 2012 to 135,767 thousands of euro (loans to customers) and to 301,805 thousands of euro (due from banks). (2) Before value adjustments.

As regards the geographical breakdown, Liguria in June 2011), Tuscany is the third region with a accounts for 49.9% of the loans to customers, share of 10.2% (10.3% and 10.5% in December up from 49.6% in December and 48.1% in June and June 2011 respectively). 2011. Lombardy is the second region, with a share of 12.5% (12.2% in December and 13.4%

34 TOTAL LOANS TO CUSTOMERS (1) - GEOGRAPHICAL DISTRIBUTION (2) (3)( thousands of euro) Situation as at 30/06/12 31/12/11 30/06/11 % % % Liguria 13,139,844 49.9% 12,936,970 49.6% 12,120,091 48.1% Lombardy 3,280,723 12.5% 3,175,635 12.2% 3,381,029 13.4% Tuscany 2,680,992 10.2% 2,692,291 10.3% 2,649,138 10.5% Emilia Romagna 1,837,944 7.0% 1,802,029 6.9% 1,677,289 6.7% Piedmont 1,550,134 5.9% 1,574,626 6.0% 1,492,364 5.9% Veneto 1,281,608 4.9% 1,267,640 4.9% 1,269,916 5.0% Latium 923,879 3.5% 952,115 3.7% 941,576 3.7% Sicily 607,052 2.3% 618,726 2.4% 656,590 2.6% Sardinia 366,070 1.4% 362,082 1.4% 350,611 1.4% Apulia 229,714 0.9% 232,844 0.9% 228,281 0.9% Marches 159,713 0.6% 162,957 0.6% 152,429 0.6% Umbria 106,045 0.4% 108,033 0.4% 107,604 0.4% Valle d'Aosta 27,649 0.1% 29,216 0.1% 25,921 0.1% Total Italy 26,191,366 99.4% 25,915,163 99.4% 25,052,840 99.3% Abroad 159,189 0.6% 162,391 0.6% 167,688 0.7% Loans to customers, excluding repurchase agreements 26,350,555 100.0% 26,077,553 100.0% 25,220,528 100.0%

Lending repurchase agreements with financial firms 1,099,711 1,457,057 1,340,157

Total loans to customers 27,450,266 27,534,610 26,560,685

(1) Gross of value adjustments and net of debt securities classified as L&R. (2) Figures per branch province. (3) Lending repurchase agreements with financial firms are shown separately, for a homogenous comparison previous periods have therefore been restated.

TOTAL LOANS TO CUSTOMERS AS AT 30/06/2012 (1) TOTAL LOANS TO CUSTOMERS AS AT 30/06/2012 (1) 100%= 27,450.3 MILLIONS 100%= 26,560.7 MILLIONS 6.3% 6.7% 3.5% Liguria 3.7% 48.1% 4.9% 5.0% 49.9% Lombardy Liguria

5.9% Tuscany Lombardy 5.9%

Emilia Romagna Tuscany 7.0% 6.7% Piedmont Emilia Romagna

Veneto Piedmont 10.2% 10.5% Latium Veneto

Others Latium 12.5% 13.4% Others (1) Net of lending repurchase agreements with financial firms. (1) Net of lending repurchase agreements with financial firms.

As regards the distribution by segment, non- by essentially stable prices. The share pertaining financial companies and personal businesses to the family sector decreased in the half and accounted for 60.6% of loans to customers, for over the year. It is equal to 26.9% and is mostly an amount of € 15,970.3 million (60.5% in De- represented by mortgage loans for the purchase cember 2011 and 59.8% in June 2011). The of homes. The share pertaining to public ad- most significant aspects include the increase in ministrations is equal to 6%, (5.9% in December the share pertaining to building and public and 5.4% in June 2011). As regards financial works. These works were mainly focused on me- and insurance companies, their share stood at dium-small size initiatives, mostly in the Liguria 4.9% (4.4% in December and 5.5% in June region, whose property market is characterised 2011).

35 TOTAL LOANS TO CUSTOMERS (1) - DISTRIBUTION BY BUSINESS SEGMENT ( thousands of euro) Situation as at 30/06/12 31/12/11 30/06/11 % % % Public Administration 1,575,868 6.0% 1,538,845 5.9% 1,361,065 5.4% Financial and insurance businesses (2) 1,293,044 4.9% 1,154,254 4.4% 1,396,608 5.5% Non-financial businesses and personal businesses 15,970,282 60.6% 15,786,531 60.5% 15,082,729 59.8% Sales-related services 5,882,433 22.3% 5,816,592 22.3% 5,669,126 22.5% Building and public works 2,343,159 8.9% 2,237,659 8.6% 2,078,890 8.2% Wholesale & retail trade, salvage and repairs 2,318,158 8.8% 2,379,865 9.1% 2,365,738 9.4% Hotel and catering services 737,679 2.8% 743,142 2.8% 718,427 2.8% Shipping and air transport 532,238 2.0% 483,783 1.9% 395,038 1.6% Other 4,156,615 15.8% 4,125,489 15.8% 3,855,510 15.3% Private social bodies and non classified entities 135,261 0.5% 136,943 0.5% 136,607 0.5% Households 7,078,523 26.9% 7,173,601 27.5% 6,991,147 27.7% Total residents 26,052,977 98.9% 25,790,174 98.9% 24,968,156 99.0% Rest of the world 297,578 1.1% 287,379 1.1% 252,372 1.0% Total distribution by business segment 26,350,555 100.0% 26,077,553 100.0% 25,220,528 100.0% Lending repurchase agreements with financial firms 1,099,711 1,457,057 1,340,157 Total loans to customers 27,450,266 27,534,610 26,560,685 (1) Gross of value adjustments and net of debt securities classified as L&R. (2) Lending repurchase agreements with financial firms are shown separately, for a homogenous comparison previous periods have therefore been restated.

Impaired loans totalled € 2,996.4 million, up ity of these relate to loans backed by mort- 17% over six months; 99.4% of these relate to gage guarantee, the increase in the first half ordinary customers. The corresponding value is largely due to the reduction, effective from adjustments amounted to € 790.9 million 1 January 2012, from 180 days late to 90 (+11.7% in the first six months). days late, for the classification in the aggre- Cash loans to customers amounted to € gate of unsecured past due or borderline 2,951.6 million (+17.2%); endorsement loans loans. These positions were written down by came to € 27.7 million (+13.4%). 2.5%. As regards cash loans to customers: Impaired endorsement loans amounted to € − bad loans came to € 1,493 million, up by 27.7 million, up 13.4% in six months and 10.7% in the half; these were written down 28.5% from June 2011, and were written down by 45.2%; by 19.5%. − watchlist loans amounted to € 867.9 mil- Overall, also considering performing loans, lion, up 14% over December and were writ- value adjustments on cash and endorsement ten down by 10.1%; loans amounted to € 888.9 million, € 876.2 − rescheduled loans amounted to € 150.3 million of which refer to cash loans and € 12.7 million (+15.5%); these were written down million of which refer to endorsement loans by 7.3%; (2.9% hedging level). − Past due loans came to € 440.5 million (€ 279.4 million in December and € 335.9 million in June 2011); given that the major-

36 CREDIT QUALITY (1) ( thousands of euro)

30/06/2012 31/12/2011 Value % Value % Gross exposure Net exposure Gross exposure Net exposure adjustments (b) / (a) adjustments (b) / (a) (a) (b) (a)-(b) (a) (b) (a)-(b) Cash loans Bad loans 1,493,010 674,709 818,301 45.2 1,348,787 609,848 738,939 45.2 - customers 1,493,010 674,709 818,301 45.2 1,348,787 609,848 738,939 45.2 Watchlist loans 884,886 88,956 795,930 10.1 777,828 81,413 696,415 10.5 - banks 16,991 872 16,119 5.1 16,691 872 15,819 5.2 - customers 867,895 88,084 779,811 10.1 761,137 80,541 680,596 10.6 Rescheduled loans 150,266 10,912 139,354 7.3 130,097 3,225 126,872 2.5 - customers 150,266 10,912 139,354 7.3 130,097 3,225 126,872 2.5 Past due loans 440,474 10,881 429,593 2.5 279,444 7,705 271,739 2.8 - customers 440,474 10,881 429,593 2.5 279,444 7,705 271,739 2.8 Total Impaired loans 2,968,636 785,458 2,183,178 26.5 2,536,156 702,191 1,833,965 27.7 Performing loans 26,396,622 90,779 26,305,843 0.3 26,637,382 92,723 26,544,659 0.3 - banks 1,898,001 1,898,001 - 1,622,237 - 1,622,237 - - customers 24,498,621 90,779 24,407,842 0.4 25,015,145 92,723 24,922,422 0.4 Total cash loans 29,365,258 876,237 28,489,021 3.0 29,173,538 794,914 28,378,624 2.7 - banks 1,914,992 872 1,914,120 0.0 1,638,928 872 1,638,056 0.1 - customers 27,450,266 875,365 26,574,901 3.2 27,534,610 794,042 26,740,568 2.9 Endorsement loans Impaired 27,749 5,408 22,341 19.5 24,461 5,561 18,900 22.7 - customers 27,749 5,408 22,341 19.5 24,461 5,561 18,900 22.7 Other loans 1,692,828 7,255 1,685,573 0.4 1,721,681 7,166 1,714,515 0.4 - banks 44,949 - 44,949 - 48,436 - 48,436 - - customers 1,647,879 7,255 1,640,624 0.4 1,673,245 7,166 1,666,079 0.4 Total endorsement loans 1,720,577 12,663 1,707,914 0.7 1,746,142 12,727 1,733,415 0.7 - banks 44,949 - 44,949 - 48,436 - 48,436 - - customers 1,675,628 12,663 1,662,965 0.8 1,697,706 12,727 1,684,979 0.7 Total 31,085,835 888,900 30,196,935 2.9 30,919,680 807,641 30,112,039 2.6 - banks 1,959,941 872 1,959,069 0.0 1,687,364 872 1,686,492 0.1 - customers 29,125,894 888,028 28,237,866 3.0 29,232,316 806,769 28,425,547 2.8 (1) Net of debt securities classified as L&R, amounting to as at 30 June 2012 to 135,767 thousands of euro (loans to customers) and to 301,805 thousands of euro (due from banks)

As regards the geographical breakdown of bad (30.2%), followed by Lombardy (22.9%) and loans, Liguria has the largest share of the total Piedmont (11.6%).

BAD LOANS TO CUSTOMERS (1) - GEOGRAPHICAL DISTRIBUTION (2) (thousands of euro) Situation as at 30/06/12 31/12/11 30/06/11 % % %

Liguria 450,876 30.2% 404,558 30.0% 378,495 30.6% Lombardy 341,831 22.9% 314,767 23.3% 296,533 24.0% Piedmont 172,804 11.6% 163,744 12.1% 158,150 12.8% Tuscany 175,148 11.7% 148,026 11.0% 114,653 9.3% Emilia Romagna 105,492 7.1% 96,326 7.1% 92,127 7.4% Veneto 70,506 4.7% 65,355 4.8% 59,368 4.8% Latium 53,462 3.6% 49,203 3.6% 43,948 3.6% Sicily 38,113 2.6% 33,737 2.5% 28,506 2.3% Apulia 25,014 1.7% 22,952 1.7% 19,761 1.6% Sardinia 22,763 1.5% 20,847 1.5% 18,835 1.5% Marches 20,076 1.3% 13,614 1.0% 12,953 1.0% Umbria 8,625 0.6% 8,577 0.6% 8,146 0.7% Valle d'Aosta 3,804 0.3% 3,332 0.2% 3,168 0.3% Total Italy 1,488,514 99.7% 1,345,037 99.7% 1,234,643 99.8% Abroad 4,496 0.3% 3,750 0.3% 2,406 0.2% Total bad loans 1,493,010 100.0% 1,348,787 100.0% 1,237,049 100.0% (1) Gross of value adjustments and net of debt securities classified as L&R. (2) Figures per branch province.

37 BAD LOANS TO CUSTOMERS AS AT 30/06/2012 BAD LOANS TO CUSTOMERS AS AT 30/06/2011 100%= 1,493 MILLIONS 100%= 1,237 MILLIONS 8.2% 7.6% 3.6% 3.6% Liguria 30.2% Liguria 4.7% Lombardy Lombardy 4.8% Piedmont 30.6% Piedmont Tuscany

7.1% Emilia Romagna 7.4% Tuscany Veneto

Emilia Romagna Latium

Others 9.3% Veneto 11.7%

Latium

Others 11.6% 22.9% 12.8% 24.0%

The bad loans/loans ratio registered growth in minimal share, followed by the Marches almost all regions during the year: Liguria has (12.6%). the lowest ratio (3.2%). Valle d’Aosta has the highest ratio (13.8%), however representing a

BAD LOANS/LENDING RATIO (1) - GEOGRAPHICAL DISTRIBUTION (2) (Percentage values) . Situation as at 30/06/12 31/12/11 30/06/11

Liguria 3.2% 2.8% 2.8% Lombardy 10.4% 9.9% 8.8% Piedmont 6.5% 5.5% 4.3% Tuscany 5.7% 5.3% 5.5% Emilia Romagna 11.1% 10.4% 10.6% Veneto 5.5% 5.2% 4.7% Latium 5.8% 5.2% 4.7% Sicily 6.3% 5.5% 4.3% Apulia 6.2% 5.8% 5.4% Sardinia 10.9% 9.9% 8.7% Marches 12.6% 8.4% 8.5% Umbria 8.1% 7.9% 7.6% Valle d'Aosta 13.8% 11.4% 12.2% Total Italy 5.5% 4.9% 4.7% Abroad 2.8% 2.3% 1.4% Total bad loans 5.4% 4.9% 4.7% (1) Gross of value adjustments and net of debt securities classified as L&R. (2) Figures per branch province.

The breakdown by business segment showed an followed by sales services (€ 228.5 million, increase in bad loans for non-financial busi- 15.3%). nesses and personal businesses (€ 1,069.6 mil- Households represented the second sector by lion) with a share of 71.6% (70.6% in December volume with a share of 26% of the aggregate, and 70.6% in June 2011). The segment with the lower than the 27% in December and 26.8% in highest share of bad loans was the building and June 2011. public works segment (€ 266.9 million, 17.9%),

38 BAD LOANS (1) - DISTRIBUTION BY BUSINESS SEGMENT (thousand of euro) Situation as at 30/06/12 31/12/11 30/06/11 % % % Public Administration ------Financial and insurance businesses 26,128 1.8% 25,605 1.9% 25,012 2.0% Non-financial businesses and personal businesses 1,069,588 71.6% 952,332 70.6% 872,955 70.6% Building and public works 266,894 17.9% 231,600 17.2% 214,070 17.3% Sales-related services 228,519 15.3% 193,399 14.3% 171,386 13.9% Wholesale & retail trade, salvage and repairs 204,440 13.7% 184,951 13.7% 171,854 13.9% Hotel and catering services 44,353 3.0% 42,169 3.1% 39,688 3.2% Metal products 39,970 2.7% 38,307 2.8% 35,303 2.9% Other 285,411 19.1% 261,906 19.4% 240,654 19.5% Private social bodies and non classified entities 2,100 0.1% 2,044 0.2% 1,860 0.2% Households 388,432 26.0% 363,700 27.0% 331,626 26.8% Total residents 1,486,248 99.5% 1,343,681 99.6% 1,231,453 99.5% Rest of the world 6,762 0.5% 5,106 0.4% 5,596 0.5% Total bad loans 1,493,010 100.0% 1,348,787 100.0% 1,237,049 100.0% (1) Gross of value adjustments and net of debt securities classified as L&R.

The bad loans/loans ratio is above the Group households it is equal to 5.5% (5.1% in Decem- average for non-financial companies and per- ber and 4.7% in June 2011). sonal businesses, at 6.7% (6% and 5.8% in De- cember and June 2011, respectively) while for

BAD LOANS/LENDING RATIO (1) - DISTRIBUTION BY BUSINESS SEGMENT (percentage values)

Situation as at 30/06/12 31/12/11 30/06/11

Public Administration - - - Financial businesses 2.0% 2.2% 1.8% Non-financial businesses and personal businesses 6.7% 6.0% 5.8% - of which (2): Sales-related services 3.9% 3.3% 3.0% Building and public works 11.4% 10.4% 10.3% Wholesale & retail trade, salvage and repairs 8.8% 7.8% 7.3% Hotel and catering services 6.0% 5.7% 5.5% Shipping and air transport 4.2% 4.2% 5.2% Private social bodies and non classified entities 1.6% 1.5% 1.4% Households 5.5% 5.1% 4.7% Total residents 5.7% 5.2% 4.9% Rest of the world 2.3% 1.8% 2.2% Total 5.4% 4.9% 4.7% (1) Gross of value adjustments and net of debt securities classified as L&R. (2) Main business segments in terms of overall credit exposure shown.

Securities in the portfolio amounted to € shareholders’ equity as the most reliable proxy 13,445.6 million, up 24.7% in the half and of fair value – performed on the basis of the 31.4% in twelve months as a result of the pur- balance sheet figures of the Bank of Italy as at chases of Italian government bonds in the last 31 December 2011 (last approved set of finan- few months of 2011 and the first few months of cial statements). The effects of said valuation at 2012; debt securities (€ 12,061.4 million) ac- fair value were sterilised by a valuation reserve count for 89.7% of the portfolio, up 27.7% in six of the same amount, net of deferred taxes. months and 36.5% YoY. The total includes Bal- Shares in CIS (collective investment schemes) ance Sheet items 20 (net of derivatives amount- amounted to € 323.2 million, up by 7.5% in six ing to € 101.2 million as at 30 June 2012), 30 months and down by 3.6% YoY. (net of the investment in liquidity to cover insur- With regard to the breakdown prescribed by the ance policies with investment risk borne by the international accounting standards (IAS/IFRS), insured amounting to € 2.3 million), 40, 60 Available for Sale securities, or AFS (€ 12,309 (solely the part relating to L&R) and 70 (solely million), which account for 94.6%, increased the part relating to L&R). both in the six-month period (+27.3%) and in Equities amounted to € 1,061.1 million. Equities the year (+34.7%) in relation to the aforemen- include the 4.03% equity investment in the Bank tioned investments made mostly in Italian gov- of Italy, accounted for € 892.2 million; this fig- ernment bonds; Held for Trading securities, or ure results from a valuation at fair value - using HFT, amounting to € 156.4 million, account for

39 1.2%, marking an increase of 75.5% in six with risk borne by the insured party, they are off- months, and a decrease of 8.3% in twelve set for the same amount under liabilities. months. As regards AFS securities, Italian government Assets deriving from Loans and Receivables – bonds totalled € 9,408.1 million, accounting for L&R, amounted to € 437.6 million, down by around 76.4% of the total; more specifically, 11.4% in the half, but up 22.4% in the year. treasury bills amounted to € 1,196.4 million, Securities designated at fair value (€ 542.7 mil- long-term treasury bonds totalled € 6,548.1 mil- lion) represent 4.2% of the portfolio, up 2.5% lion, treasury credit certificates came to € 710.5 over six months and down 4.9% over the year. million and zero coupon treasury bills totalled € These are held in the portfolio of Carige Vita 953.1 million; in terms of maturities, 46.5% Nuova and, as they are issued against policies have a maturity of less than three years and 53.5% less than five.

SECURITIES PORTFOLIO (thousands of euro) Situation as at Change % 30/06/2012 31/12/2011 30/06/2011 06/12 06/12 12/11 06/11

Debt securities 12,061,350 9,448,632 8,838,714 27.7 36.5 Held for trading 137,282 75,229 155,330 82.5 -11.6 Available for sale 11,115,495 8,513,295 7,942,164 30.6 40.0 Fair value 371,001 366,379 383,705 1.3 -3.3 Loans and Receivable 437,572 493,729 357,515 -11.4 22.4

Equities 1,061,062 1,029,024 1,060,340 3.1 0.1 Held for trading 4 4 148 - -97.3 Available for sale 1,061,058 1,029,020 1,060,192 3.1 0.1

Shares in CIS 323,231 300,587 335,405 7.5 -3.6 Held for trading 19,116 13,869 15,151 37.8 26.2 Available for sale 132,398 123,435 133,515 7.3 -0.8 Fair value 171,717 163,283 186,739 5.2 -8.0 Total (1) 13,445,643 10,778,243 10,234,459 24.7 31.4 of which: Held for trading 156,402 89,102 170,629 75.5 -8.3 Available for sale 12,308,951 9,665,750 9,135,871 27.3 34.7 Fair value 542,718 529,662 570,444 2.5 -4.9 Loans and Receivable 437,572 493,729 357,515 -11.4 22.4 (1) Balance sheet items 20 (net of derivatives), 30 (net of the cash investment against the unit linked e index linked insurance contracts for which investment risk is borne by the insured), 40, 60 (only for the part relative to L&Rs) and 70 (only for the part relative to L&Rs) are included in the aggregate.

The amendments made to international ac- Pursuant to said amendments, the Group reclas- counting standards IAS 39 and IFRS 7 in Octo- sified securities, effective 1 July, 1 October ber and November 2008 allowed new types of 2008 and 1 October 2011, for a total residual reclassifications in case of financial crisis. amount of € 354 million as at 30 June 2012, as detailed in the table below:

40 TRANSFERS BETWEEN PORTFOLIOS: BOOK VALUE, FAIR VALUE AND EFFECTS ON COMPREHENSIVE INCOME (thousands of euro)

Fair Value as Type of financial Origin Allocation Book value as at Income components in the absence Income components recorded for at instrument portfolio portfolio 30/06/2012 of the transfer (before tax) the period (before tax) 30/06/2012 Valuation-related Others Valuation-related Others

Debt securities HFT AFS 48,071 48,071 6,012 1,218 5,723 992 Equities HFT AFS 4,695 4,695 97 31 97 31 CIS units HFT AFS 72,088 72,088 1,095 - 1,095 - Debt securities HFT HTM (1) 198 198 6 1 (3) 2 Debt securities HFT L&R 97,688 89,918 2,113 959 - 552 Debt securities AFS L&R 131,282 112,842 2,762 3,862 (1,648) 1,816 Total 354,022 327,812 12,085 6,071 5,264 3,393 (1) An information disclosure has been provided for securities which, after being previously classified from HFT to HTM, have been reclassified from the latter to AFS following the application of forecasts set forth in paragraph 52 of IAS 39 in financial statements as at 31/12/2009.

If the Group had not reclassified the financial - securities resulting from securitisation assets listed above, the half would have re- transactions (with the exclusion of corded positive income components amounting CDOs - Collateralised Debt Obliga- to € 12.1 million instead of the € 5.3 million re- tions), allocated to both the trading ported. portfolio and to the portfolio of assets The exposure of the Group to certain financial available for sale, for an aggregate instruments perceived by the market to be high- book value of € 42.7 million, (0.33% of risk (according to the definition in the Recom- the securities portfolio). They do not in- mendation issued on 7 April 2008 by the Finan- clude any exposures to subprime mort- cial Stability Forum and the joint document is- gages and they are comprised of Jun- sued by the Bank of Italy / CONSOB / ISVAP ior, Mezzanine and Senior tranches no. 2 of 6 February 2009) amounted to € 160 (73.1%)of securitisations of mortgage million, equal to 1% of the security portfolio and loans granted by Group banks and concerns: originating from proprietary vehicles;

SECURITIES FROM SECURITISATION TRANSACTIONS ( thousands of euro) countervalues at cost % portion on total price securities portfolio Senior 10,540 0.08% Mezzanine 929 0.01% Junior - - Securitisations of consumer loans, leases, mortgage loans, ot 11,469 0.09% Senior 803 0.01% Mezzanine 899 0.01% Junior 29,508 0.23% Securitisations of mortgages of the Group 31,210 0.24% Total 42,680 0.33%

- CDOs portfolio, for a book value of € 2.1 RMBS (Residential Mortgage-Backed Securi- million (0.02% of the total portfolio), com- ties) CMBS (Commercial Mortgage-Backed prised of synthetic securitisations which in- Securities) ABS (Asset-Backed Securities) clude CDS (Credit Default Swap) and secu- and subprime positions; ritisations of securitisations with exposures to

41 CDO PORTFOLIO (1) (thousands of euro) % portion on total Rating countervalues at cost price securities portfolio BBB+ 2,050 0.02% Total 2,050 0.02% (1) CDO = Collateralized debt obligation: (see glossary)

- securities and derivatives related to lev- case, with the provision for the repay- eraged finance transactions comprised ment at par at maturity; of funded and unfunded securities. The - Unfunded securities are subdivided into former have a book value of € 76 mil- credit and interest rate instruments lion (equal to 0.58% of the portfolio) which, against a notional amount of € and 98% of these are structured in a 25 million, had a limited negative im- protected/guaranteed format, with the pact of € 0.37 million. hedging of the specific risk or, in any

SECURITIES/DERIVATIVES FROM LEVERAGE TRANSACTIONS (thousands of euro) countervalues at cost % portion on total securities price portfolio Unhedged leveraged instruments: 75,975 0.58% credit 30,976 0.24% of which with repayment at par rate 29,313 0.23% 44,999 0.35% of which with repayment at par 44,111 0.34% Hedged leveraged instruments: 26,814 0.21% rate 26,814 0.21% Total 102,789 0.79%

42 The exposures towards Special Purpose Entities 150.6 million (€ 160.4 million as at 31 Decem- (SPE) were substantially limited to vehicle com- ber 2011). panies in the securitisation transactions carried As required by the reference IAS/IFRS regula- out directly by the Group. tions (IFR7 – Financial Instruments –Additional As regards the exposure in financial instruments information and IAS 39 – Financial Instruments: issued in sovereign debt of countries in difficulty, Recognition and Measurement), and in compli- the Carige Group is exposed to Spain (€ 16 mil- ance with Bank of Italy Circular no. 262 of 22 lion) and Greece (€ 3.2 million). On the whole December 2005 “Bank financial statements: these exposures amount to € 19.2 million and schemes and rules for preparation”, the Banca represent 0.1% of the entire portfolio. CARIGE Group provides, for each class of fi- As at 30 June 2012, net valuation reserves per- nancial instrument, the fair value hierarchy level taining to the Group and minority interests, rela- at which the entire fair value measurements are tive to securities classified in the AFS (Available classified. For Sale) category amounted to € -151.9 million On the basis of the hierarchical fair value scale (an increase of € 258.1 million compared with described in relation to accounting policies, the negative balance of € 410 million at 31 De- level 3 of the fair value hierarchy was used for cember 2011) and comprised € 946.3 million in the same financial instruments present at 31 De- positive reserves, relating mainly to the valuation cember 2011, including the equity investment of the equity investment in the Bank of Italy (€ held in the Bank of Italy. The percentage of in- 827.9 million), and € 1,098.2 million in nega- struments assessed using this methodology, out tive reserves. The latter refer to debt securities (€ of all instruments evaluated at fair value for the 947.6 million), composed almost entirely of Banca Carige Group, stood at 0.91% (1.18% as Government, bank and corporate bonds with at 31 December 2011), net of the equity invest- high credit ratings, and to equities of leading ment held in the Bank of Italy. banking and insurance issuers and shares in col- The following table shows the breakdown ac- lective investment schemes amounting to € cording to fair value levels of the Banca Carige Group’s accounting portfolios:

FAIR VALUE HIERARCHY CASH PORTFOLIOS, DIVISION BY LEVEL OF FAIR VALUE (thousands of euro) 30/06/2012 31/12/2011 L1 L2 L3 L1 L2 L3 1. Financial assets held for trading 56,339 196,260 5,003 52,934 117,376 54 2. Financial assets carried at fair value 174,002 371,001 - 167,797 366,379 - 3. Available-for-sale financial assets 10,688,777 648,165 972,009 7,875,459 841,592 948,699 4. Hedging derivatives - 188,509 - - 152,543 - Total financial assets carried at fair value 10,919,118 1,403,935 977,012 8,096,190 1,477,890 948,753 1. Financial liabilities held for trading - 47,046 - - 66,150 - 2. Financial liabilities carried at fair value 1,425,596 - - 1,460,833 - - 3. Hedging derivatives - 1,343,450 - - 1,212,376 - Total financial liabilities carried at fair value 1,425,596 1,390,496 - 1,460,833 1,278,526 - Legend: L1 = Level 1; L2 = Level 2 L3 = Level 3

The notional value of derivative contracts is € 12,812 million, down by 8.5% from December 2011.

43 NOTIONAL VALUES OF DERIVATIVE CONTRACTS (1) (thousands of euro)

Situation as at Situation as at Underlying assets/Types of derivatives 30/06/2012 TOTAL 31/12/2011 TOTAL CHANGE Banking portfolio Banking portfolio Regulatory Hedging Other derivatives Regulatory Hedging Other derivatives contracts contracts TOTAL trading 06/12 12/11 trading portfolio portfolio %

1. Debt securities and interest rates 1,835,812 8,984,071 1,233,501 12,053,384 2,319,370 9,066,191 1,319,674 12,705,235 -5.1 Options 222,152 711,313 178,597 1,112,062 244,258 725,649 100,000 1,069,907 3.9 Swap 1,613,260 8,272,758 1,044,904 10,930,922 1,654,355 8,340,542 944,904 10,939,801 -0.1 Forward - - 10,000 10,000 420,357 - 274,770 695,127 -98.6 Futures 400 - - 400 400 - - 400 - 2. Equities and share indexes 358,568 - - 358,568 427,315 - 206,847 634,162 -43.5 Options 357,196 - - 357,196 426,975 - 206,847 633,822 -43.6 Futures 1,372 - - 1,372 340 - - 340 … 3.Currencies and gold 352,530 - - 352,530 581,490 - - 581,490 -39.4 Options 42,175 - - 42,175 28,435 - - 28,435 48.3 Forward 310,355 - - 310,355 553,055 - - 553,055 -43.9 4. Credit derivatives 47,500 - - 47,500 87,500 - - 87,500 -45.7 Protection acquisitions 47,500 - - 47,500 52,500 - - 52,500 -9.5 Hedging sales - - - - 35,000 - - 35,000 -100.0

Total 2,594,410 8,984,071 1,233,501 12,811,982 3,415,675 9,066,191 1,526,521 14,008,387 - 8.5

1) The table has been prepared based on the criteria set out in the Circular No. 262/2005 of the Bank of Italy in relation to the tables in the Notes - Part E - Derivative instruments - tables A.1, A.2.1, A.2.2 and B.1. In the column "Other derivatives" the notional values of the derivative contracts agreed with insurance companies have been added.

Positive values of hedging derivative contracts ues amounted to € 1,343.5 million, mostly to were equal to € 188.5 million and negative val- hedge interest rate risk.

ASSETS FROM HEDGING DERIVATIVES BY HEDGE TYPE ( thousands of euro) Situation as at Change % 30/06/12 31/12/11 30/06/2011 06/12 06/12 12/11 06/11 Asset hedging derivatives 166 - 7,289 … -97.7 Fair value hedging 166 - 786 … -78.9 interest rates 166 - 786 … -78.9 Cash flow hedging - - 6,503 … -100.0 interest rates - - 6,503 … -100.0 Liability hedging derivatives 188,343 152,543 81,331 23.5 … Fair value hedging 181,531 141,853 63,837 28.0 … interest rates 181,531 141,853 63,837 28.0 … General interest rate risk hedging 6,812 10,690 17,494 -36.3 -61.1 Total 188,509 152,543 88,620 23.6 …

LIABILITIES FROM HEDGING DERIVATIVES BY HEDGE TYPE ( thousands of euro) Situation as at Change % 30/06/2012 31/12/2011 30/06/2011 06/12 06/12 12/11 06/11

Asset hedging derivatives 1,107,801 1,024,485 574,442 8.1 92.8 Fair value hedging 1,107,801 1,024,485 574,442 8.1 92.8 interest rates 1,107,801 1,024,485 574,442 8.1 92.8 Liability hedging derivatives 235,649 187,891 113,050 25.4 … Fair value hedging 20,089 5,448 27,695 … -27.5 interest rates 20,089 5,448 27,695 … -27.5 General interest rate risk hedging 215,560 182,443 85,355 18.2 … Total 1,343,450 1,212,376 687,492 10.8 95.4

The positive values of trading derivative con- tracts amounted to € 101.2 million, and nega- tive values totalled € 47.1 million.

44 TRADING DERIVATIVES ( thousands of euro)

Situation as at Change % 30/06/2012 31/12/2011 30/06/2011 06/12 06/12 12/11 06/11

Assets for trading derivatives 101,200 81,262 33,305 24.5 … Financial derivatives 94,461 74,554 30,936 26.7 … - trading 23,826 19,028 18,011 25.2 32.3 - connected with the fair value option 70,635 55,526 12,925 27.2 … - others - … … Credit derivatives 6,739 6,708 2,369 0.5 … - trading 6,739 6,708 2,369 0.5 … - connected with the fair value option … … - others … … Total 101,200 81,262 33,305 24.5 …

Liabilities for trading derivatives 47,076 66,150 54,062 -28.8 -12.9 Financial derivatives 47,076 56,755 48,521 -17.1 -3.0 - trading 47,076 56,755 41,495 -17.1 13.4 - connected with the fair value option 7,026 … -100.0 - others … … Credit derivatives - 9,395 5,541 -100.0 -100.0 - trading 9,395 5,541 -100.0 -100.0 - connected with the fair value option … … - others … … Total 47,076 66,150 54,062 -28.8 -12.9

45

The increase in the net interest and other bank- ECONOMIC RESULTS ing income was particularly pronounced as re- gards interest margin, against an increase in ad- justments to both loans and financial assets, as The first six months of 2012 closed with a net a result of the persistence of the crisis in the real income of € 90.2 million, versus € 75.2 million economy and in the financial markets. in the same period in 2011 (+20.1%).

INCOME STATEMENT (thousands of euro) Change 6 months 2012 - 6 months 2011 6 months 2012 6 months 2011 absolute % 10 - INTEREST AND SIMILAR INCOME 753,468 601,586 151,882 25.2 20 - INTEREST AND SIMILAR EXPENSE -331,376 -229,428 -101,948 44.4 30 -INTEREST MARGIN 422,092 372,158 49,934 13.4 40 - FEE AND COMMISSION INCOME 184,725 163,091 21,634 13.3 50 - FEE AND COMMISSION EXPENSE - 26,551 - 16,120 - 10,431 64.7 60 -NET FEE AND COMMISSION INCOME 158,174 146,971 11,203 7.6 70 - DIVIDEND AND SIMILAR INCOME 5,991 8,304 -2,313 - 27.9 80 - PROFITS (LOSSES) ON TRADING -504 15,189 -15,693 … 90 - FAIR VALUE ADJUSTMENTS IN HEDGE ACCOUNTING -1,942 -91 -1,851 … 100 - PROFITS (LOSSES) ON DISPOSAL OR REPURCHASE OF: 27,148 146 27,002 … a) loans 1,912 -501 2,413 … b) financial assets available-for-sale 23,883 1,594 22,289 … d) financial liabilities 1,353 -947 2,300 … 110 - PROFITS (LOSSES) ON FINANCIAL ASSETS AND LIABILITIES DESIGNATED AT FAIR VALUE 1,852 -1,023 2,875 … 120 -NET INTEREST AND OTHER BANKING INCOME 612,811 541,654 71,157 13.1 130 - NET LOSSES/RECOVERIES ON IMPARMENT -93,539 -61,987 -31,552 50.9 a) loans -74,066 -55,830 -18,236 32.7 b) financial assets available-for-sale -19,535 -4,240 -15,295 … d) other financial activities 62 -1,917 1,979 … 140 -NET INCOME FROM BANKING ACTIVITIES 519,272 479,667 39,605 8.3 150 - NET INSURANCE PREMIUMS 513,527 652,502 -138,975 - 21.3 160- OTHER NET INSURANCE INCOME (ESPENSE) -569,342 -676,728 107,386 - 15.9 170- NET INCOME FROM BANKING AND INSURANCE ACTIVITIES 463,457 455,441 8,016 1.8 180 - ADMINISTRATIVE EXPENSES: -339,591 -348,657 9,066 - 2.6 a) personnel expenses -208,915 -211,250 2,335 - 1.1 b) other administrative expenses -130,676 -137,407 6,731 - 4.9 190 - NET PROVISIONS FOR RISKS AND CHARGES -621 -1,715 1,094 - 63.8 200 - NET ADJUSTMENTS TO/RECOVERIES ON PROPERTY AND EQUIPMENT -13,560 -12,643 -917 7.3 210 - NET ADJUSTMENTS TO/RECOVERIES ON INTANGIBLE ASSETS -16,700 -15,306 -1,394 9.1 220 - OTHER OPERATING EXPENSES (INCOME) 30,616 40,027 -9,411 - 23.5 230 -OPERATING EXPENSES -339,856 -338,294 -1,562 0.5 240 - PROFITS (LOSSES) ON INVESTMENTS IN ASSOCIATES AND COMPANIES SUBJECT TO JOINT CONTROL 2,366 2,332 34 1.5 270 - PROFITS (LOSSES) FROM DISPOSAL OF INVESTMENTS -2 6 -8 … 280 -INCOME (LOSS) BEFORE TAX FROM CONTINUING OPERATIONS 125,965 119,485 6,480 5.4 290 - TAXES ON INCOME FROM CONTINUING OPERATIONS -33,407 -43,332 9,925 - 22.9 300 -INCOME (LOSS) AFTER TAX FROM CONTINUING OPERATIONS 92,558 76,153 16,405 21.5 320 -NET INCOME (LOSS) 92,558 76,153 16,405 21.5 330 - MINORITY INTERESTS 2,328 995 1,333 … 340 -PARENT COMPANY'S NET INCOME (LOSS) 90,230 75,158 15,072 20.1

More specifically, the interest margin amounted sets. Interest income grew to € 753.5 million to € 422.1 million, up by 13.4% compared to (+25.2%) while interest expense increased to € June 2011, as a result of the development in 331.4 million (+44.4 %). traded volumes and investments in financial as-

46 INTEREST AND SIMILAR INCOME (thousands of euro) Change % % 1st half 2012 - 1st half 2011 1st half 2012 2011 1st half 2011 absolute % Financial assets held for trading 12,283 4,498 3,110 9,173 … Financial assets available-for-sale 216,024 305,926 139,408 76,616 55.0 Due from banks 11,188 20,250 10,491 697 6.6 Loans to customers 511,248 946,967 445,861 65,387 14.7 Other assets 2,725 8,084 2,716 9 0.3 Total interest and similar income 753,468 1,285,725 601,586 151,882 25.2

INTEREST AND SIMILAR EXPENSE (thousands of euro) Change 1st half 2012 - 1st half 2011 1st half 2012 2011 1st half 2011 absolute %

Due to banks 44,315 44,814 16,664 27,651 … Due to customers 72,021 104,032 44,045 27,976 63.5 Securities issued 183,035 338,820 153,608 29,427 19.2 Financial liabilities designated at fair value through profit and loss 9,293 20,298 10,150 - 857 -8.4 Other liabilities 1,251 480 954 297 31.1 Hedging derivatives 21,461 13,331 4,007 17,454 … Total interest and similar expense 331,376 521,775 229,428 101,948 44.4

Net fee and commission income increased by est income. Fee and commission expense, 7.6% to € 158.2 million. standing at € 26.6 million, rose by 64.7%, due Fee and commission income increased by in particular to the guarantees received compo- 13.3% to € 184.7 million, mainly relating to nent, which rose from € 194 thousand in the first current accounts which, among other things, in- half of 2011 to € 9.6 million, relating to LTROs. clude an item previously recognised under inter-

FEE AND COMMISSION INCOME (thousands oh euro) Change 1st half 2012 - 1st half 2011 1st half 2012 2011 1st half 2011 absolute %

Guarantees issued 8,975 17,231 7,765 1,210 15.6 Management, intermediation and consultancy services: 44,881 90,871 45,833 - 952 -2.1 1. Financial instruments trading 639 800 299 340 … 2. Currency trading 1,371 3,220 1,656 - 285 -17.2 3. Portfolio management 19,465 42,761 21,800 - 2,335 -10.7 4. Securities custody and administration 1,355 2,683 1,250 105 8.4 6. Placement of securities 7,160 11,473 5,952 1,208 20.3 7. receipt and issue of orders 6,073 11,846 5,859 214 3.7 8. Consultancy services 1 13 7 - 6 -85.7 9. Distribution of third-party services 8,817 18,075 9,010 - 193 -2.1 - portfolio management 43 94 47 - 4 -8.5 - insurance products 800 1,432 847 - 47 -5.5 - other products 7,974 16,549 8,116 - 142 -1.7 Collection and payment services 32,657 66,881 32,009 648 2.0 Servicing for securitizations 118 490 335 - 217 -64.8 Factoring services 760 2,004 1,004 - 244 -24.3 Maintenance and management of the current accounts 74,067 114,694 57,216 16,851 29.5 Other services 23,267 42,696 18,929 4,338 22.9 Total fee and commission income 184,725 334,867 163,091 21,634 13.3 FEE AND COMMISSION EXPENSE (thousands of euro) Change 1st half 2012 - 1st half 2011 1st half 2012 2011 1st half 2011 absolute %

Guarantees received 9,598 371 194 9,404 … Management and intermediation services 1,456 2,451 1,017 439 43.2 1. Financial instruments trading 100 169 70 30 42.9 3. Portfolio management 6 21 9 - 3 -33.3 4. Securities custody and administration (1) 907 1,796 753 154 20.5 5. Placement of financial instruments 27 12 12 15 … 6. Door-to-door sale of securities, financial products and services 416 453 173 243 … Collection and payment services 9,403 19,367 8,845 558 6.3 Other services 6,094 12,334 6,064 30 0.5 Total fee and commission expense 26,551 34,523 16,120 10,431 64.7

47

The management of financial items provided a More specifically, dividend and similar income positive overall contribution of € 30.6 million, amounted to € 6 million (€ 8.3 million in the first up 33% over the first half of 2011. half of 2011); loss on trading was a € 0.5 mil- lion (compared to a profit of € 15.2 million in June 2011).

PROFIT (LOSSES) ON TRADING (thousands of euro) Change 1st half 2012 - 1st half 2011 1st half 2012 2011 1st half 2011 absolute %

Debt securities -8,263 1,287 997 -9,260 … Equities & collective investment schemes 477 137 122 355 … Total equities, debt securities & collective investment schemes -7,786 1,424 1,119 -8,905 … Financial derivatives -15,895 10,934 32,607 -48,502 … Credit derivatives 1,368 1,120 1,010 358 35.4 Currency differences 19,459 9,025 -21,429 40,888 … Other financial assets/liabilities from trading 2,350 3,621 1,882 468 24.9 Total profit (losses) on trading -504 26,124 15,189 -15,693 … Net income from trading in derivative instru- ments was a positive € 4.9 million, compared to € 12.2 million in June 2011.

NET INCOME FROM TRADING IN DERIVATIVE INSTRUMENTS (thousands of euro) Situation as at Change % 1st half 2012 1st half 2011 1st half 2012 - 1° half 2011

1. Financial derivatives: - 15,895 32,607 … - on debt securities and interest rates 3,156 11,410 -72.3 - on equities and equity indices 177 - 149 … - on currencies and gold - 19,192 21,346 … - others - 36 - … 2 - Credit derivatives 1,368 1,010 35.4 Total - 14,527 33,617 … 3. Currency differences included in the trading income 19,459 - 21,429 … Total net 4,932 12,188 - 60

Fair value adjustments in hedging accounting was € -1.9 million, compared with € -91 thou- sand in June 2011.

FAIR VALUE ADJUSTMENTS IN HEDGING ACCOUNTING (thousands of euro) Situation as at Change % 1st half 2012 1st half 2011 1st half 2012 - 1° half 2011

Income from hedge accounting (A) 155,744 320,450 -51.4 Fair value hedging derivatives 45,610 25,019 82.3 Hedged financial assets (fair value) 106,392 228,054 -53.3 Hedged financial liabilities (fair value) 3,742 67,377 -94.4 Cash flow hedge financial derivatives - - … Currency assets and liabilities - - … Charges from hedging activities (B) - 157,686 - 320,541 -50.8 Fair value hedging derivatives - 105,167 - 242,263 -56.6 Hedged financial assets (fair value) - 15,719 - 43,383 -63.8 Hedged financial liabilities (fair value) - 36,800 - 34,895 5.5 Cash flow hedge financial derivatives - - … Currency assets and liabilities - - … Fair value adjustments in hedging accounting (A-B) - 1,942 - 91 …

By contrast, profit from the sale or repurchase of loans and financial assets/liabilities amounted to

48 € 27.1 million (€ 146 thousand in the first half Profit on financial assets/liabilities designated at of 2011), relating primarily to the sale of finan- fair value was € 1.9 million (loss of € 1 million cial assets available-for-sale. as at June 2011).

PROFIT (LOSSES) ON FINANCIAL ASSETS AND LIABILITIES DESIGNATED AT FAIR VALUE (thousands of euro) Situation as at Change % 1st half 2012 1st half 2011 1st half 2012 - 1° half 2011

Financial assets 22,572 1,465 … Financial liabilities - 35,731 5,805 … Foreign currency financial assets and liabilities: currency differences - - … Financial and credit derivatives 15,011 - 8,293 … Profit (losses) on financial assets and liabiliteis designated at fair value 1,852 - 1,023 …

Therefore, the net interest and other banking in- pairment of cash loans amounted to € 74.1 mil- come reached € 612.8 million, up by 13.1%. lion (up 32.6% over the first half of 2011); Net losses on impairment of loans and other fi- losses on impairment of financial assets avail- nancial items stood at € 93.5 million, 50.9% able-for-sale totalled € 19.5 million (€ 4.2 mil- higher than the first half of 2011: losses on im- lion as at June 2011).

NET LOSSES/RECOVERIES ON IMPAIRMENT OF LOANS AND OTHER FINANCIAL ITEMS (thousands of euro ) Change 1st half 2012 - 1st half 2011 1st half 2012 2011 1st half 2011 absolute %

Due from banks - - 4 - 9 9 - 100.0 Loans to customers 74,066 118,003 55,839 18,227 32.6 Credit commitments (other financial transactions) - 62 2,723 1,917 - 1,979 … Financial assets available-for-sale 19,535 54,998 4,240 15,295 … Total net losses/recoveries on impairment of 93,539 175,720 61,987 31,552 50.9 loans and other financial items

Net income from banking and insurance activi- while indirect taxes decreased by 24.6%, ties increased by 1.8%, amounting to € 463.5 which, in the first half of 2011 included a € million. 11.3 million one-off payment of substitute Operating expenses stood at € 339.9 million, taxes on leasing. stable with respect to June 2011. Net provisions for risks and charges amounted More specifically, administrative expenses to € 621 thousand (€ 1.7 million in June 2011; amounted to € 339.6 million, down by 2.6% -63.8%). and these include: Net adjustments on property and equipment - personnel costs, down by 1.1% to € 208.9 amounted to € 30.3 million, up 8.3% in twelve million; months (€ 27.9 million in June 2011), in rela- - other administrative expenses amounted to € tion to continued investments. The cost/income 130.7 million (-4.9%); within this compo- ratio fell to 55.5% from 62.5% in June 2011. nent, general expenses increased by 2.9%,

49 OPERATING EXPENSES (thousands of euro) Change 1st half 2012 - 1st half 2011 1st half 2012 2011 1st half 2011 absolute %

Personnel costs 208,915 403,613 211,250 - 2,335 -1.1 Other administrative expenses 130,676 274,001 137,407 - 6,731 -4.9 - general expenses 101,269 205,704 98,525 2,744 2.8 - indirect taxes(1) 29,407 68,297 38,882 - 9,475 -24.4 Net provisions for risks and charges 621 2,492 1,715 - 1,094 -63.8 Net losses/recoveries on: 30,260 58,265 27,949 2,311 8.3 - intangible assets 16,700 32,283 15,306 1,394 9.1 - property and equipment 13,560 25,982 12,643 917 7.3 Other operating expenses (income) - 30,616 - 68,547 - 40,027 9,411 -23.5 Total operating expenses 339,856 669,824 338,294 1,562 0.5

(1) The taxes recovered from the customers are recorded in item 220 “Other operating expense and revenues”.

Other operating income fell by 23.5% to € 30.6 payment in 2011 on the recovery of taxes from million compared to the first half of 2011 in re- leasing. lation to the aforementioned loss of a one-off

OTHER OPERATING EXPENSES (INCOME) (thousands of euro) Change 1st half 2012 - 1st half 2011 1st half 2012 2011 1st half 2011 absolute %

Lease income and rent 6,604 12,878 6,716 - 112 - 1.7 Charges to third parties: 23,857 60,263 34,432 - 10,575 - 30.7 - recovery of taxes (1) 23,828 60,203 34,401 - 10,573 - 30.7 - customer insurance premiums 29 60 31 - 2 - 6.5 Other income 14,037 26,320 11,720 2,317 19.8 Total other income 44,498 99,461 52,868 - 8,370 - 15.8 Operating expenses on financial leases - 2,860 - 1,106 - 522 - 2,338 … Ordinary maintenance expenses on investment property - 2,264 - 5,203 - 2,863 599 - 20.9 Expenses for improvement of third parties’ assets - 543 - 1,044 - 476 - 67 14.1 Other expenses - 8,215 - 23,561 - 8,980 765 - 8.5 Total other expenses - 13,882 - 30,914 - 12,841 - 1,041 8.1 Total net operating expenses (income) 30,616 68,547 40,027 - 9,411 -23.5 (1) The item is composed of taxes recovered from the customers, the cost of which is recorded under sub-item 180 b) "Other administrative expenses" in the income statement.

50 Income before tax from continuing operations higher IRAP paid due to the non-deductibility amounted to € 126 million (+5.4% compared of personnel costs from the latter tax. with € 119.5 million in the first half of 2011). The total consolidated comprehensive Tax on income from continuing operation, income pertaining to the Parent Company, equal to € 33.4 million (€ 43.3 million in June which includes income components charged 2011), and profit attributable to minority inter- directly to shareholders’ equity, stood at € ests, equal to € 2.3 million, net income per- 324.5 million, compared to € 105.6 million in taining to the Parent Company amounted to € the first half of 2011. 90.2 million vs € 75.2 million in the first half of The rise is mainly a result of the increase in the 2011. fair value of financial assets available-for-sale Under the item taxes for the year, a total of € in the first half of the year, with particular ref- 17.6 million was accounted for deriving from erence to debt securities issued by the Italian the possibility of deducting from IRES because Government and, to a lesser extent, (€ 26.2 of taxable income, for previous years, (set forth million), to the revaluation of the equity in- by art. 4, paragraph 12 of Decree Law vestment in the Bank of Italy. 16/2012 converted from Law 44/2012), the

In the first half, in line with Shareholders’ Meet- DIVIDENDS DISTRIBUTED IN THE ing resolution of 27 April 2012, the Parent HALF-YEAR PERIOD BY Company distributed € 175,808,784.20, PARENT COMPANY equal to the net profit achieved in the 2011 BANCA CARIGE financial year (€ 175,808,768.25) and the re- serve for dividends on own shares (€ 15.95) as follows: DISTRIBUTION OF NET PROFIT

Net profit 175,808,768.25 Reserve for dividends on own shares 15.95 Total 175,808,784.20 Allocation to the legal reserve 17,580,876.83 Allocation to the extraordinary reserve 5,777,905.71 Dividend of ordinary shares (0.07 € per share) 152,226,507.58 Dividend of savings shares (0.0875 € per share) 223,494.08

Dividend payment will take place starting on 24 May 2012 (coupon detachment date 21 May 2012.

51 counts for 91.4% of the total, while the agency INSURANCE BUSINESS channel recorded € 19.2 million. The net change in technical reserves stood at a negative € 112.6 million (down € 256 million in The IAS income of the insurance Group June 2011) and net expenses from insurance amounted to a negative € 2.3 million, down management came to € 79.3 million, compared compared to June 2011. This is due mainly to to € 86.8 million in June 2011. Technical re- the accounting of charges deriving from adhe- serves reached € 4,184 million, up 2.1% from sion to the proposed exchange of Greek securi- the start of the year; the change related mainly ties, so-called PSI (Private Sector Involvement), to the life business, with an increase of 2.7% with a net negative effect of around € 28 million, (compared to December 2011), while technical partially offset by gains on sale on the security reserves in the non-life segment were stable with portfolio. The premiums from insurance activi- respect to December 2011. Total technical re- ties, net of reinsurance, amounted to € 513.5 serves charged on reinsurers increased by million, down by 21.3% compared to June 11.1% compared to the end of the year (€ 2011; more specifically, net premiums from 171.9 million). non-life business fell by 4.3% to € 304.8 million, while those from life business decreased from € 337.6 million to € 211.1 million. The largest portion refers to the bank channel, which ac-

52 PREMIUMS-RESERVES-ECONOMIC RESULT (1) (thousands of euro) Change % 06/12 06/12 Figures relative to the insurance group 30/06/2012 31/12/2011 30/06/2011 12/11 06/11 Insurance management -64,533 -43,536 -34,523 86.9 Premiums excluding reinsurance 513,527 1,194,021 652,502 - 21.3 Life insurance 208,682 577,802 333,981 - 37.5 recognised gross premiums (+) 211,106 585,779 337,610 - 37.5 premiums ceded to reinsurers (-) 2,424 7,977 3,629 - 33.2 Non-life insurance 304,845 616,219 318,521 - 4.3 recognised gross premiums (+) 336,458 673,688 346,165 - 2.8 premiums ceded to reinsurers (-) 25,332 63,569 22,274 13.7 variations (+/-) to premium reserve gross balances -6,282 5,517 -7,983 - 21.3 variations (-/+) to premium reserves charged on reinsurers 1 583 2,613 - 100.0 Net variations to technical reserves -112,561 -354,247 -255,996 - 56.0 Life insurance -112,561 -354,316 -255,996 - 56.0 Non-life insurance - 69 - … Claims incurred and settled during the period -386,232 -723,636 -344,258 12.2 Life insurance -228,444 -250,147 -109,232 … Non-life insurance -157,788 -473,489 -235,026 - 32.9 Other insurance revenues and expenses -79,267 -159,674 -86,771 - 8.6 Life insurance -8,956 -20,673 -11,232 - 20.3 Non-life insurance -70,311 -139,001 -75,539 - 6.9 Net income from financial management 79,192 107,238 67,622 17.1 Other items in the income statement -16,317 -39,334 -18,319 - 10.9 Gross profit -1,658 24,368 14,780 … Taxation -701 -12,859 -6,790 - 89.7 Minority interests 8 57 -14 …

Net profit -2,351 11,566 7,976 …

Technical reserves 4,183,634 4,096,189 4,044,959 2.1 3.4 Non-life insurance 876,779 876,756 890,069 0.0 - 1.5 premium reserves 248,628 242,346 255,846 2.6 - 2.8 accident reserves 627,547 633,806 633,550 - 1.0 - 0.9 other reserves 604 604 673 - - 10.3 Life insurance 3,306,855 3,219,433 3,154,890 2.7 4.8 mathematical reserves 3,486,864 3,399,994 3,262,644 2.6 6.9 reserves for amounts payable 9,640 8,351 6,708 15.4 43.7 other reserves -189,649 -188,912 -114,462 0.4 65.7 Technical insurance reserves reassured with third parties 171,892 154,748 155,301 11.1 10.7 Non-life insurance 106,481 85,642 81,717 24.3 30.3 premium reserves 13,151 10,486 13,272 25.4 - 0.9 accident reserves 93,330 75,156 68,445 24.2 36.4 other reserves - - - …… Life insurance 65,411 69,106 73,584 - 5.3 - 11.1 mathematical reserves 65,155 69,492 73,203 - 6.2 - 11.0 reserves for amounts payable 3,281 4,076 3,457 - 19.5 - 5.1 other reserves -3,025 -4,462 -3,076 - 32.2 - 1.7 (1) Figures are gross of relations with the companies belonging to the banking group

was entered into with subsidiary Carige As- TRANSACTIONS WITH RELATED PARTIES sicurazioni SpA, consisting of the renewal of contracts totalling € 145 million, excluded from the application of procedures pursuant to the The Group maintains relations with Banca Regulations governing transactions with related Carige shareholders who are able to exercise a parties adopted by the Parent Company’s Board significant influence, subsidiaries and other re- of Directors in compliance with Consob resolu- lated parties regulated at market conditions tion no. 17221 of 12 March 2010. .

During the half, a highly significant transaction

53 As at 30 June 2012, asset and liability transac- in the Explanatory Notes to the Consolidated Fi- tions (with the exception of directors’ and statu- nancial Statements) were as follows: tory auditors’ fees, which are published annually

TRANSACTIONS WITH SHAREHOLDERS EXERCISING SIGNIFICANT INFLUENCE AND WITH INVESTEES (1) (thousands of euro)

Assets Liabilities Guarantees Revenues Expense Dividends (2) (3) and commitments Shareholders, and their subsidiaries, able to exercise significant influence on the Parent Company (4) 49,423 591 1,428 61,176 Subsidiaries outside the area of consolidation 7,004 5 Companies subject to significant influence 4,278 494 280 41 363 TOTAL 53,701 7,498 280 632 1,796 61,176 (1) Relations with subsidiaries included in the area of consolidation were not taken into account. (2) Dividends collected by companies subject to significant influence netted off in the consolidation process were not shown. (3) Dividends distributed by Banca Carige. (4) Items "Other revenues" and "Expenses" include also components related to hedging derivatives and equalised trading signed with BPCE Group companies. TRANSACTIONS WITH OTHER RELATED PARTIES (thousands of euro) Assets Liabilities Guarantees Revenues Expense Purchase of assets Insurance Indemnities and commitments and services premiums and insurance redemptions 7,908 7,417 535 204 102 16 29 35 7,908 7,417 535 204 102 16 29 35

Overall, the share of the total of transactions with related parties is shown in the following ta- ble:

WEIGHT OF THE TRANSACTIONS WITH RELATED PARTIES AS AT 30/06/2012 ( thousands of euro) Amount of the transactions with Amount of balance % weight related parties sheet item Assets Item 70 - Loans to customers 57,167 26,710,668 0.2% Other asset items 4,442 20,624,124 0.0% Liabilities Item 20 - Due to customers 14,915 16,104,290 0.1% Other liability Items (1) - 27,802,918 0.0% Income statement Item 10 - Interest income 643 753,468 0.1% Item 20 - Interest expenses (1,542) (331,376) 0.5% Item 160 - Balance of other expenses/revenues from insurance management (+/-) (391) (569,342) 0.1% Other positive Items in the income statement 222 766,286 0.0% Other negative Items in the income statement (2) -16 (493,071) 0.0%

(1) The weight is calculated on the other liability items, except for those referred to the shareholders' equity. (2) The weight is calculated on the other negative items, except for taxes and profit attributed to minority interests.

Based on the new version of IAS 24 – Related General Managers and the Central Manag- party disclosures – published in November 2009 ers; (EC Regulation no. 632/2010 of 19 July 2010) - close relatives of one of the subjects referred other related parties include: to in the previous point; this refers to persons that can be expected to influence, or be in- - executives with strategic responsibility for the fluenced by, the interested party in their rela- entity and its Parent Company; this refers to tions with the Group and therefore, by way of those who have the power and responsibility, example, may include the common-law directly or indirectly, for the management and spouse and persons dependent upon the in- control of the Parent Company's activities, in- terested party or upon the common-law cluding the Directors, the Statutory Auditors, spouse; the Managing Director or the General Man- - subjects controlled or jointly controlled by ager, Co-General Managers, the Deputy one of the entities referred to in the previous points.

54 cant influence, valued according to the equity method and companies carried at cost such as EQUITY INVESTMENTS AND Banca Carige Italia – incorporated with a pay- INTANGIBLE ASSETS WITH AN ment of € 7 million on 23 May 2012, in imple- INDEFINITE USEFUL LIFE mentation of the Restructuring Project put in place by the Parent Company – and minor companies over which a significant influence is Equity investments totalled € 62.8 million (€ exercised. 55.9 million in June 2011); these relate to Auto- strada dei Fiori, a company subject to a signifi-

ANNUAL CHANGES IN EQUITY INVESTMENTS (thousands of euro) 1st half 2012 2011 1st half 2011

A. Opening balance 53,885 54,994 54,994 B. Additions 8,954 52 889 B.1 Acquisitions 7,000 52 - B.3 Revaluations - - - B.4 Other changes 1,954 - 889 C. Decreases - 1,161 30 C1. Sales - 341 - C2. Value adjustments - 30 30 C3. Other changes - 790 - D. Closing balance 62,839 53,885 55,853

Goodwill booked to the financial statements as Generating Units (CGU) for which the book val- at 30 June 2012 amounted to € 1,780 million, ues used for the purposes of impairment testing of which € 1,767 million relating to bank Cash are shown below:

Consolidated book value Residual Minority Total goodwill interests (*) (c = a+b) Figures in thousands of euro (a) (b) Extra Liguria network 1,526,407 693,593 2,220,000 Cassa di Risparmio di Savona SpA (CRS) 57,302 182,964 240,266 Banca del Monte di Lucca SpA (BML) 42,331 50,494 92,825 Cassa di Risparmio di Carrara SpA (CRC) 78,692 113,622 192,314 Banca Cesare Ponti (BCP) 0 15,679 15,679 TOTAL BANCA CARIGE 1,704,732 1,056,352 2,761,084 (*) Minority interests of BML, CRC and BCP include the goodwill recorded in respective separate financial statements respectively amounting to 62 million.

The consolidated book value of said CGUs IAS 36 requires the company to verify that intan- amounted to € 3 billion. The Extra-Liguria net- gible assets with an indefinite useful life are not work is composed of a perimeter which essen- recorded in the financial statements for a value tially coincides with the one that will be the ob- that exceeds the recoverable value. This check ject of transfer to the newly formed company must be performed at least once per year and, if Banca Carige Italia, as part of the Banca Carige there is evidence of impairment, at each finan- Group’s Restructuring Project, for which the au- cial statement date. thorisation is expected to be received from the As at 30 June 2012, Banca Carige’s Manage- Bank of Italy (see the chapter “significant events ment Bodies conducted an analysis on possible during the half-year period”).

55 impairment indicators, identifying the following Assumptions and forecasts of the model as such: The assumptions and forecasts forming the basis • the worsening in the macroeconomic sce- of the DDM concern: nario; • the time span of the profitability valuation; • uncertain prospects in the financial sys- • assumptions regarding growth in equity tem; and economic volumes and interest rates; • the decrease in the price to book value – • the discount rate (Ke), the rate of perpet- P/BV in the half (ratio of capitalisation to ual growth (g) and the Common equity ra- equity) of Carige’s share from € 0.72 to € tio. 0.52 (-27.8%). However, this value is among the highest in the Italian banking The time span is broken down into two sub- system and, net of the Bank of Italy valua- periods: tion reserve, rises to € 0.65. • a first sub-period for the analytical evaluation of economic results, deter- In the presence of said indicators, impairment mined by taking into account the equity testing was carried out, the results of which con- volumes and prices; said period is equal firmed that the recoverable value of the individ- to five years for subsidiary bank CGUs ual CGUs was higher than the respective book and ten years for the CGUs of the Extra- value charged to the financial statements. Liguria bank branch network; In support of said conclusions, the Bank re- • a subsequent sub-period – infinite – with quested a fairness opinion from consultancy firm reference to which the perpetual yield KPMG Advisory on the consistency and accuracy value (terminal value) was determined of the internal valuations. The fairness opinion, on the basis of the economic result of issued on 27 July 2012, confirmed the valua- the last analytical evaluation year. tions of the Bank. In light of said valuations, Banca Carige SpA’s For the Extra-Liguria bank branch network CGU Board of Directors acknowledged the existence as at 30 June 2012, an analytical valuation of the values of the intangible assets recognised sub-period of ten years was used, rather than 5 in the financial statements (goodwill). years as at the end of 2011. This time span ap- pears to be consistent with the business plan Method used for the impairment test new company Banca Carige Italia intends to The method used for the impairment test is pursue, a plan based on strong technological based on the Excess Capital version of the Divi- integration of the physical channels currently in dend Discount Model (DDM). In said model, the place with the non-physical channels to be im- recoverable value is equal to the current value plemented (online banking, mobile banking, call of cash flows distributable by each CGU, i.e. the centre, other); said integration will require sig- maximum amount of dividends that can theo- nificant investments, the economic effects of retically be distributed, in observance of given which will only be fully realised in the second capitalisation requirements (common equity ra- five-year period of activities of the new bank. tio). Expressed by the formula: The growth assumptions relating to the equity and economic volumes and interest rates are as- −k )( n + g)1( −n)( sumed as follows: = 1 ++ 1+ ∑ =1 k () YKeYW n ()Ke K − gKe )( • for subsidiary banks, from Strategic Plans (2011-2014), updated to take account of where: W = recoverable value the changed macroeconomic context; • for the Extra-Liguria branch network, from Yk = flow of dividends distributable in year k, calculated as the sum of net profits achieved in the Action Plan (2013-2017) which Banca the year, increased by the value of primary eq- Carige Italia sent to the Bank of Italy on uity available and decreased by the capital re- 29 May together with the request for the quirement. authorisation to carry out banking activi- ties. Ke = cost of capital g = rate of long-term growth of distributable For years following the analytical valuation pe- cash flows, beyond the express forecast period. riod, reference was made to:

56 • the trend in equity volumes and interest tions and provide a more precautionary valua- rates, service revenues, staff costs and tion, an increase of 0.25% was applied, obtain- administrative expenses envisaged by re- ing a Ke of 9.75%. This rate, used in the basic search institute Prometeia in its most re- scenario of the valuation model, is contrasted cent publications, expressly up until with the rate of 9% adopted in the same sce- 2014, suitably supplemented for subse- nario of the impairment test conducted in De- quent years taking as a reference 2014 cember 2011. data and adjusted on the basis of the The cash flow relating to the terminal value was actions management intends to under- normalised, as at the end of 2011, to a constant take; rate of growth (g), equal to 2%. • as regards the trend in credit risk, to a The Common equity ratio was fixed at 8% in the forecast for value adjustments, always basic scenario, both for the analytical valuation equal to 0.4% of the credit portfolio. sub-period and the subsequent sub-period. For the impairment test carried out at the end of The discount rate (cost of capital) is determined 2011, the requirement was 7% in the analytical as follows: valuation sub-period and 8% afterwards. Ke = Risk free interest rate + Equity risk pre- As at 30 June 2012, the basic valuation sce- mium * coefficient β nario also took into consideration – by discount- where: ing them – the higher cash flows connected with • the risk free interest rate is equal to the the off-balance sheet amortisation, over 18 average rate of return in the last two- years, of the goodwill recorded and deriving year period of the investments in Italian from the acquisitions of business units, given ten-year Government bonds (5.25%); definitely recoverable as per the legal provisions • the Equity risk premium is equal to the contained in the recent SalvaItalia Decree in median of risk premiums assumed by the December 2011. equity analysts (5%); • the coefficient β, which represents the Impairment testing results system risk sensitivity index (volatility of The table below summarises the values tested the bond) is equal to 0.85 (Source: and measurement of the differential – consis- Bloomberg). tently positive - between the recoverable value and the consolidated book value of the individ- On the basis of these parameters, the cost of ual CGUs: capital was 9.5%. However, in order to take ac- count of a possible worsening in market condi-

Value in use Consolidated book value Delta Value in use Value of future Perpetual Total % part. Minority interests Residual Total attributable (e-h) cash flows (a) growth (b) (c=a+b) Carige (d) (f) goodwill (g) (h=f+g) (e = c*d)

Extra Liguria network 1,120,695 1,337,902 2,458,597 100.0% 2,458,597 693,593 1,526,407 2,220,000 238,597 Carisa 123,501 146,264 269,765 95.9% 258,708 182,964 57,302 240,266 18,442 Carrara 64,825 165,098 229,923 90.0% 206,931 113,622 78,692 192,314 14,617 BML 50,288 125,083 175,372 60.0% 105,223 50,494 42,331 92,825 12,398 BCP 27,436 45,414 72,850 100.0% 72,850 15,679 0 15,679 57,171

Total 1,386,745 1,819,762 3,206,507 3,102,308 1,056,352 1,704,731 2,761,083 341,225 Thousands of euro

In order to best value the sensitivity of the im- • solely for the Extra-Liguria bank branch pairment test, sensitivity analyses were also per- network, in the second five-year period, formed on the recoverable value, which ac- a greater deceleration in growth rates – knowledge, with respect to the basic scenario, particularly loans – for which, in the last the following three pejorative hypotheses: analytical valuation year, the increase in • the increase of 50 basis points in the net profit came to 4%, compared to cost of capital to 10.25%; 10.17%. • the rise in the Common equity ratio to 9%;

57 Also in each of these more unfavourable scenar- to investors’ short-term or extremely short-term ios, the recoverable values of the different CGUs expectations. were higher than those recorded in the financial statements. Lastly, it should be noted that both the basic scenario and the sensitivity analyses did not pru- TREASURY SHARES, STATEMENT OF dentially take into account the additional bene- CASH FLOW AND fits which are expected to derive from: SHAREHOLDERS’EQUITY • further positive tax effects related to the implementation of the aforementioned Restructuring Project of the Banca As at 30 June 2012, Banca Carige holds a port- Carige Group; folio that contains 44 old ordinary shares with • the authorisation to use, for all CGUs, nominal values of Lire 10,000 thousand, the new Advanced Internal Rating Based equivalent to 228 current ordinary shares. (AIRB) model, for which ample docu- The presence of these shares derives from the mentation was issued to the Bank of It- conversion of share capital to Euro, resolved by aly, and the formal launch of the valua- the Extraordinary Shareholders’ Meeting on 6 tion process is pending, which could December 2001 and the subsequent fragmenta- lead to a significant reduction in Risk tion of capital: in fact, 6 ordinary non- Weighted Assets – RWA; dematerialised shares have still not been pre- • the application, to the Risk Weighted As- sented for conversion and, therefore, it has not sets of the individual CGUs, of a 25% been possible to fulfil the obligations set out in discount set forth for banks belonging to the aforementioned resolution, which requires a a Banking Group (for the Extra-Liguria minimum threshold of 50 shares. bank branch network CGU, after the Re- The Group absorbed liquidity of € 316 million in structuring Project). the first six months. Operating assets generated cash amounting to € 126.8 million. In particu- Lastly, in relation to the reduced price of the lar, management generated a positive cash flow Carige share and, therefore, the Bank’s level of of € 246.3 million, financial activities absorbed stock market capitalisation, it is believed that the liquidity totalling € 2,484.3 million, and finan- valuation of the market presents characteristics cial liabilities generated cash amounting to € which differentiate it from a “fundamental” 2,111.2 million. Liquidity absorbed by invest- valuation represented, by contrast, by the value ment activities amounted to € 34.8 million, and in use. that absorbed by funding activity totalled € The latter aspect meets the requirements of a 154.4 million. general approach, according to which the value of an asset is a direct expression of the cash The consolidated shareholders' equity and the flows it is able to generate over its period of use. net consolidated income pertaining to the Parent Therefore, said value is also based on the com- Company are obtained from Banca Carige's net pany’s internal expectations and on specific syn- shareholders’ equity and income for the year ergies the company is able to generate. By con- through the following changes: trast, market valuations are linked, in particular,

58 RECONCILIATION STATEMENT OF BANCA CARIGE SHAREHOLDERS' EQUITY AND INCOME AND CONSOLIDATED FIGURES (thousands of euro) Shareholders' equity of which profit Balance as at 30/06/2012 - Banca Carige 3,610,177 94,659 Variations on book value -140,181 27,849 Value adjustments to allocated gains -4,403 -382 Share options survey - subsidiaries -10,845 - Amortised goodwill (previous accounting periods) -43,298 - Dividends distributed by subsidiaries and written off -32,917 -32,917 Dividends distributed by associated companies and written off -409 -409 Other -5,425 1,430 Consolidated balance as at 30/06/2012 3,372,699 90,230

porate, 145 Mid Corporate, divided into 75 RESOURCE MANAGEMENT teams, and 288 small business advisors. Remote channels include the ATM-Bancomat cash machines, the self-service Bancacontinua The Carige Group’s distribution system is split branches and online services. ATM-Bancomat into traditional, remote and mobile channels. cash machines operating at the end of June The traditional channels are made up by 2012 numbered 795, up compared to 781 in branches, private and corporate consultancy dis- June 2011, while the number of Bancacontinua tricts, affluent advisors and small business advi- cash machines remained unchanged at 19. In sors, based on a service specialisation model order to reduce the work load of the branches targeted at customers, which provides for the and speed up the over-the-counter transactions move, when possible and deemed useful, from of current account holders, the Group has 152 one type of general management of relations cash in machines set up for the paying in of involving an operating unit to personalised cash or cheques, distributed in 148 branches. In management of customers handled by specific the branches involved, at the end of June, the advisors. percentage transfer of migratable payments The personal financial advisory service, dedi- stood at 24.8%. cated to customers with the highest profile, is The number of contracts for online services in- structured on a total of 139 private banking ad- creased from 298,038 to 353,193 (+18.5%). visors and 340 affluent advisors. With regard to mobile channels, the Group has In addition to the personal financial consultancy a network of 437 insurance agencies (299 of there is company financial consultancy service which also place bank products) located which associates commercial efficiency with a throughout Italy (436 in June 2011). careful monitoring of the credit quality; there are 151 corporate advisors, of which 6 Large Cor-

59

BRANCH NETWORK

A) TRADITIONAL CHANNELS 30/06/2012 31/12/2011 30/06/2011 number %S number %S number %S NORTHWEST 387 57.2 387 57.2 386 57.6 Liguria 254 37.5 254 37.5 254 37.9 - Genoa 140 20.7 140 20.7 140 20.9 - Savona 64 9.5 64 9.5 64 9.6 - Imperia 29 4.3 29 4.3 29 4.3 - La Spezia 21 3.1 21 3.1 21 3.1 Lombardy 76 11.2 76 11.2 75 11.2 Piedmont 56 8.3 56 8.3 56 8.4 Valle d'Aosta 1 0.1 1 0.1 1 0.1 NORTHEAST 75 11.1 75 11.1 75 11.2 Veneto 46 6.8 46 6.8 46 6.9 Emilia Romagna 29 4.3 29 4.3 29 4.3 CENTRE 131 19.4 131 19.4 125 18.7 Tuscany 85 12.6 85 12.6 79 11.8 Latium 39 5.8 39 5.8 39 5.8 Marches 5 0.7 5 0.7 5 0.7 Umbria 2 0.3 2 0.3 2 0.3 SOUTH AND ISLANDS 83 12.3 83 12.3 83 12.4 Sicily 63 9.3 63 9.3 63 9.4 Apulia 9 1.3 9 1.3 9 1.3 Sardinia 11 1.6 11 1.6 11 1.6 ABROAD: Nice (France) 1 0.1 1 0.1 1 0.1 Total number of branches 677 100.0 677 100.0 670 100.0 30/06/2012 31/12/2011 30/06/2011 Private consultants 139 142 140 Corporate consultants 151 151 151 Affluent consultants 340 327 320 Small business consultants 288 291 287 Total consultants 918 911 898 B) REMOTE CHANNELS 30/06/2012 31/12/2011 30/06/2011 ATM - Bancomat 795 790 781 Self-service "Bancacontinua" branches 19 19 19 On line services (1) 353,193 323,724 298,038 C) MOBILE CHANNELS 30/06/2012 31/12/2011 30/06/2011 Insurance agencies 437 431 436 - of which: distributing banking products 299 297 292 (1) Number of Internet banking and Call center contracts.

At the end of June 2012, Group personnel to- The number of employees operating on the talled 5,941 units (5,974 in December and market stood at 71.7% of the total (71.9% in 6,013 in June 2011). There were 5,443 bank- December and 71.5% in June 2011). ing employees, down by 82 in the year. Execu- Insurance personnel amounted to 498 units tives represented 1.5% of the aggregate and (493 and 488 as at December and June 2011, managers 26.5%, while the rest of the personnel respectively). accounted for 72.1% of the aggregate.

60 PERSONNEL 30/06/2012 31/12/2011 30/06/2011 number % number % number % Number of bank employees Grade Executives 79 1.5 74 1.4 76 1.4 Managers 1,441 26.5 1,363 24.9 1,391 25.2 Other employees 3,923 72.1 4,044 73.8 4,058 73.4 Total 5,443 100.0 5,481 100.0 5,525 100.0 Assets Offices (1) 1,541 28.3 1,538 28.1 1,574 28.5 Market (1) 3,902 71.7 3,943 71.9 3,951 71.5 Total Insurance personnel 498 493 488 Total (banking and insurance) 5,941 5,974 6,013 (1) Figures related to the previous periods have been reclassified based on a different criterion of allocation of personnel absent from the service.

The Second Pillar regulations require the Banks, RISK MANAGEMENT also through the use of proprietary procedures, to assess their current and future capital ade- quacy, expanding the range of risks to be taken General aspects into account compared with the First Pillar. Carige carried out activities aimed at identifying Any policies related to the assumption of risks the risks to which the Group is exposed, with re- are set by the Parent Company’s Board of Direc- gard to its own operations and reference mar- tors when strategic planning and the annual kets and were included within the perimeter of budget are prepared. analysis for ICAAP purposes, as well as credit, The various risk categories are monitored by the market, operating, concentration (both the sin- competent functions of the Parent Company: Re- gle name and geo-sectorial components), inter- search, Strategic Planning, Risk Management, est rate, liquidity, insurance, reputational, strate- Credit Monitoring, Compliance (which contains gic and residual risks, and those deriving from the anti-money laundering function) - and the securitisations. outcome is subject to periodic reporting to the Then, the related assessment procedures - of a Board of Directors, the Asset & Liability Man- quantitative nature when measurement methods agement Committee and to the ICAAP (Internal are present, of a qualitative nature if related to Capital Adequacy Assessment Process) Commit- organisational controls - were defined. In the tee and to the Executive Management. risk area, management activities, which are The analyses are supported not only by regula- mostly already in place, were traced to an or- tory models, but by more advanced methodolo- ganic framework. gies which have made it possible, over time, to With reference to the methods used, internal expand the range of risks monitored and to im- models for the quantification of the credit, mar- prove the assessment of the capital adequacy, ket and interest rate risks were used, together from both a regulatory and a managerial per- with regulatory models for operating and con- spective. centration risk. The Parent Company performs orientation and The analyses related to the remaining risks were supervisory functions as regards all risks, in par- performed though the use of specific scorecards ticular by managing, in an integrated context, aimed at using qualitative techniques to identify the Pillar 1 and Pillar 2 risks, in accordance with the potential level of risk and the supervision the provisions contained in the Supervisory In- measures introduced. structions of the Bank of Italy (Circular No. 263 As regards capitalisation aspects and the hedg- dated 27 December 2006 and subsequent up- ing of existing risk with its own capital means, dates). the Group confirms its compliance with the ex- The Group banks operate within specific limits pected thresholds for all Bank of Italy ratios cur- of independence and avail themselves of their rently in force and calculated on the basis of In- own supervisory structures. structions for the compilation of reports on the

61 regulatory capital and prudential coefficients regulations, on 23 March 2012, Banca Carige (Bank of Italy circular no. 155 of 18 December converted the convertible bond to shares. 1991), and new provisions of prudential super- The Group’s restructuring project will also allow vision for banks (Bank of Italy circular no. 263 Carige to show its capital strength more fully, of 27 December 2006). also for the purposes of the capitalisation objec- As regards the Bank of Italy Measure of 18 May tives set out by the Basel Committee. 2010: Regulatory Capital – Prudential filters1, at a meeting on 14 June 2010, the Board of Di- rectors resolved to exercise the option to apply the approach in accordance with annex a) of the Provision with application to the calculation of regulatory capital starting with the one referred to 30 June 2010. The Group thus showed higher Total Capital Ra- tio (9.9%) Tier 1 Ratio (7.4%) and Core Tier 1 Ratio (6.7%) indicators than the supervisory lim- its, and an excess capital of € 456.4 million, and it expects, also in the continuation of the fi- nancial year, to maintain capitalisation levels above the supervisory limits. The analyses of the impacts on capital of the second pillar regulations confirm, increasing it, the solid capitalisation of the Group because the proprietary methods set up in this sector, albeit with a prudential attitude, take into account some assets for which first pillar regulations im- pose neutralisation in the regulatory capital: this refers specifically to controlling interests in insur- ance companies and to the portion of goodwill deriving from acquisitions made in recent years, deemed for all intents and purposes to be ‘property and equipment’. This setup allows the implicit higher capitalisa- tion of the Carige Group to fully emerge, able to more than adequately cover all first and sec- ond pillar risks, as well as the insurance risk in a financial conglomerate context, both in case of normal business conditions and in case of stress.

From 1 January 2013 on, the new supervisory regulations known as Basel 3 will progressively take effect. In order to comply as soon as possible with the more stringent capital requirements of the new

1This provision gives Banks, Stock Brokerage Firms and financial intermediaries registered in the “Special List” – limited to securities issued by central administrations of EU countries included in the “available for sale financial assets” (AFS) portfolio – the possibility of adopting, for the purposes of determination of regulatory capi- tal, an approach that makes provision for "fully neutralising both capital gains and losses, as if securities were valued at cost" - sub- approach a) – as an alternative to the approach set out by the su- pervisory provisions in force – sub-approach b) – which provides for “fully deducting capital losses from tier 1 capital and partially including capital gains in tier 2 capital, according to an “asymme- tric" approach.

62 BREAKDOWN OF CONSOLIDATED REGULATORY CAPITAL (1) (thousands of euro) Situation as at 30/06/2012 31/12/2011 30/06/2011 (2) positive elements (a) 3,787,233 3,770,208 3,470,074 Share capital 2,203,550 2,203,511 1,813,628 Reserves 371,764 337,441 457,602 Share Premium Reserve 1,036,466 1,035,033 1,025,938 Profit for the period 15,553 34,323 13,006 Innovative equity instruments (h) 159,900 159,900 159,900 Tier 1 capital: negative elements (b) 1,756,345 1,768,045 1,764,752 Goodwill 1,676,581 1,688,281 1,686,571 Other negative elements 79,764 79,764 78,181 Prudential filters for regulatory capital (c) -186,903 -187,276 -113,847 Deductions (d) 98,408 100,653 97,586 Total Tier 1 capital (e = a-b+c-d) 1,745,577 1,714,234 1,493,889 Core Tier 1 Capital (e-h) 1,585,677 1,554,334 1,333,989

Tier 2 capital (f) 846,063 869,942 874,639 Deductions (g) 252,697 252,697 340,485 Regulatory capital (e+f-g) 2,338,943 2,331,479 2,028,043 Tier 3 capital - - 27,651 Portion not calculable as Tier 3 capital - - 16,323 Regulatory capital including Tier 3 2,338,943 2,331,479 2,044,366 Subordinated loans not calculable in the Tier 3 - - 11,328 (1) Pending official regulatory figures to be disclosed, figures relating to weighted assets, capital requirements and ratios as at 30 June 2012 result from accounting and management estimates. Similarly, comparison figures as at 30 June 2011 differ from those originally published and resulting from estimates. (2) Figures as at 31/12/2011 are pro-formed taking into account the conversion of the convertible loan 'Banca Carige 4,75% 2010-2015 convertible with the option of reimbursement in shares. (3) It is the portion of Lower Tier 2 subordinates exceeding the limit for the calculation of the Tier 2 capital.

CONSOLIDATED REGULATORY CAPITAL AND SOLVENCY RATIOS (thousands of euro) Situation as at 30/06/2012 31/12/2011 30/06/2011 (2) Regulatory capital Core Tier 1 Capital 1,585,677 1,554,334 1,333,989 Tier 1 capital 1,745,577 1,714,234 1,493,889 Regulatory capital including Tier 3 2,338,943 2,331,479 2,044,366 Weighted assets Credit risk 21,423,793 20,991,475 20,342,963 Market risk 253,432 286,647 285,738 Operational risk 1,854,775 1,854,775 1,841,225 Other prudential requirements - - - Total weighted assets 23,532,000 23,132,897 22,469,925 Capital requirements Credit risk 1,713,903 1,679,318 1,627,437 Market risk 20,275 22,932 22,859 Operational risk 148,382 148,382 147,298 Other prudential requirements - - - Total 1,882,560 1,850,566 1,797,594 Subordinated loans covering market risks - - - Surplus capital 456,383 480,913 246,772 Ratios Core Tier 1/Total Risk-Weighted Assets 6.7% 6.7% 5.9% Tier 1 capital/Total weighted assets 7.4% 7.4% 6.6% Regulatory capital including Tier 3 capital/Total weighted assets 9.9% 10.1% 9.1%

(1) Pending official regulatory figures to be disclosed, figures relating to weighted assets, capital requirements and ratios as at 30 June 2012 result from accounting and management estimates. Similarly, comparison figures as at 30 June 2011 differ from those originally published and resulting from estimates. (2) Figures as at 31/12/2011 are pro-formed taking into account the conversion of the convertible loan 'Banca Carige 4,75% 2010-2015 convertible with the option of reimbursement in shares.

63 B. Risks exchange risk and the gamma and vega risk on options are calculated with the standard Bank of Credit and counterparty risk Italy approach.

The risk measurement, management and control Operational risk process is carried out through the following ac- The basic Bank of Italy approach is used, which tivities: provides for capital absorption equal to 15% of the average gross operating income of the last − Credit Risk Management, aimed at the stra- three years. Since its inception at the ABI’s initia- tegic governance of the Group’s lending ac- tive, the Group has participated in the DIPO tivities, through the monitoring of the portfo- Consortium (Database Italiano Perdite Opera- lio quality on the basis of analyses regarding tive, Italian Database of Operating Losses) and the performance of the risk indicators from it defined a Business Continuity and Disaster Re- rating sources (Probability of Default PD, Loss covery plan aimed at identifying critical proc- Given Default LGD and Exposure At Default esses and strategies to minimise their risks and EAD) and the timely verification of compli- the correlated economic consequences, in order ance with the limits prescribed by the Super- to guarantee a timely resumption of operating visory Regulations pertaining to concentration processes. and capital adequacy in view of the risks as- sumed. In fact, the Parent Company has de- Interest rate risk veloped internal rating models on historical The analysis of the interest rate risk is performed data with reference to the Retail segments on a monthly basis with Gap analysis (with the (Private individuals and Small Businesses), three methodologies of incremental gap, incre- Corporate (SME) and Large Corporate for mental beta gap and shifted beta gap), Duration the determination of the PD, LGD and EAD. analysis and Sensitivity analysis techniques. In The Expected Loss (product of PD, LGD and addition, at the consolidated level, the Parent EAD) is used as a parameter for the delibera- Company periodically monitors its exposure to tion of loan approval procedures to counter- interest rate risk, in application of the standard parts in the Retail, Corporate and Large Cor- Supervisory model. porate segments; − operational nature, aimed at overseeing the Concentration risk quality of the credit disbursed, by means of This risk is quantified using the Herfindhal index diversified action based on differentiated cri- in accordance with the procedures provided by teria on the basis of the customer segment, the Bank of Italy, as regards the single name the product type, etc., which envisage a application; as regards geo-sectorial concentra- standardised approach on the portions of tion risk, reference is made to the method pro- portfolio with greater fragmentation of the posed by ABI and validated by the Bank of Italy. risk and targeted measures for the positions which, by size or pertinent segment, are in- Liquidity risk cluded within the core business of the Bank’s A series of analyses are performed which are lending activities. aimed at assessing the financial balance in both the treasury items and at the structural level. Market risk Exposure to short term liquidity risk is assessed This is measured on the securities and deriva- on the basis of instruments and methods (Matur- tives portfolio through the daily determination of ity Ladder and Stress Testing) set out in the the Value at Risk (VaR) in accordance with the Group’s Liquidity Policy, which prescribes spe- Montecarlo approach, with a confidence interval cific operating limitations on the time buckets of 99% and a holding period of ten days. VaR calibrated using a stress test scenario. analysis is supplemented by daily monitoring of The medium/long–term liquidity risk is analysed profitability profiles with the calculation of ac- by monitoring both asset and liability items ma- crued interests, profit and loss, and capital turing in the future and comparing them with the gains/losses recognised on the financial instru- growth objectives set forth by strategic planning. ments held in the portfolio. The profitability de- In addition, on one hand, indicators have been termined in this way is constantly compared with defined in terms of gap ratios on maturities be- the scenarios set out in the budget. The foreign yond one year which place restrictions on the

64 possibility of financing long-term assets with tures or included in the supporting IT proce- short-term liabilities, consistent with the maturity dures; transformation limitation approach; on the 2. Risk management controls (2nd level) aimed other, a Contingency Plan was defined, ap- at defining the methods for measuring risk proved by the Board of Directors, which defines and verifying compliance with the limits as- and describes the intervention strategies and signed to the various operating departments. processes in stress and crisis situations, the ref- These are assigned to structures other than erence organisational structure and risk indica- productive departments: The Officer in tors, with the associated trigger points and cal- charge of preparing the company’s account- culation methods. ing documents, Risk Management (which in- cludes the Ratings System Validation Office), Reputational risk, strategic risk, risk on Credit Monitoring, Planning and Manage- securitisations and residual risk ment Control, Insurance Company Planning Risk is analysed through the use of specific and Control, Compliance (which includes the scorecards which assess the risk exposure as Anti-Money Laundering Department); well as the control processes and the existing 3. Internal Audit (3rd level) is carried out by the mitigation instruments. In particular, reputational Internal Audit departments (which are differ- risk is assessed through certain indicators related ent and independent from the production to a variety of stakeholders (customers, share- structures), and is aimed at controlling op- holders, bond holders and employees) and is erational regulatory and the performance of mitigated by providing organisational controls. risks, monitoring compliance with internal Strategic risk is monitored through a scorecard and external regulations. which assesses aspects such as the extent of the The Internal Control System organisation is ex- difference between forecasts and final results, plained in further detail in the “2010 Report on the solidity of the market assumptions underlying corporate governance and ownership structures” the model, the ability to understand the impact available on the website www.gruppocarige.it. of relevant normative drivers, as well as the risk of inadequate implementation of decisions. Se- C. Risks of the insurance sector curitisation transaction risks are assessed through a qualitative investigation, with refer- The operations of Group insurance companies ence to the monitoring of expected cash flows are subject to three distinct risk categories: linked to securitisation, entities involved in the − insurance risks, which are generated from the transaction and legal aspects. Finally, residual specific activities of the insurer, which acts as risk is evaluated on the basis of qualitative opin- an intermediary able to determine an as- ions provided by different managers regarding signment and a subsequent reduction of the the process of acquisition, management, moni- risk, through the professional centralised toring and enforcement of guarantees. management of risks; − financial risks, generated by the management In line with legal and supervisory regulations, of the investment portfolios of the Compa- and in compliance with the Code of Conduct for nies, comprised of real estate properties, se- Listed Companies, in order to ensure sound, curities, receivables of different types and prudent management which combines business other liquid assets; profitability with a consistent assumption of risks − operational risks, or possible losses, includ- and operations based on criteria of transparency ing missed opportunities, originating from and correctness, the Parent Company set up an deficiencies and/or inadequate performances internal control system (the “Internal Control of processes and/or control systems, due to System or ICS”) suitable to continuously detect, both internal and external reasons. measure and verify the typical risks of the com- pany’s business. From the operating point of view, the ICS in- Insurance risks, result from the fact that insur- cludes 3 levels of control: ance policies are characterised by the non- 1. Line controls (1st level) for the purpose of en- financial risk that an uncertain event may occur. suring the correct performance of operations; The uncertainty concerns the likelihood, timing these are carried out by the operating struc- and the seriousness of the occurrence of that event.

65 Three sub-categories may be identified: as- sory Body and in accordance with the resolu- sumed risk, reserve risk and reinsurance risk. tions of the individual Boards of Directors. De- Assumed risk is linked to the underwriting of in- rivative contracts for hedging and for the effec- surance policies, for which actuarial models are tive management of investments are stipulated used to determine pricing needs and to monitor with counterparties of high standing and involve claims. In addition, underwriting guidelines are financial instruments with a high degree of li- issued along with rules for assumption limits for quidity. In any case, the Insurance Companies each individual risk category. As regards the re- do not take any proprietary positions, except for serve risk, which represents the possibility that the derivatives implicit in the structured financial the actual amounts of claims and settlements to instruments and for the derivatives – with exclu- be paid would exceed the book value of the in- sively defensive purposes – that may be con- surance liabilities, comprised of amounts regis- nected with the unit- or index-linked policies tered under reserve, the Company constantly marketed by Carige Vita Nuova. monitors the development in the reserves related The company manages and minimises the li- to claims occurred but not yet paid and the quidity risk in the short-term by accurately man- changes in said reserves. For this purpose, inde- aging the incoming cash flows (premiums and pendent actuaries are appointed to apply spe- other amounts collected), linking them to the cial actuarial methods. outgoing cash flows (settlements and other pay- With regard to reinsurance risks, after the defini- ments), whereas for long-term management, an tion of self-retention levels, arrangements are ALM (Asset Liability Management) system is be- made to underwrite cover contracts for the main ing implemented, which will allow a compara- business lines, only with leading market coun- tive analysis between the incoming flows from terparts, in order to mitigate the risk of insol- investments and the expected maturities of the vency. liability commitments (as of now, the incoming Financial risks affecting companies may be bro- cash flow component has been completed while ken down into credit risks, liquidity risks and the part relating to the outgoing cash flows is in market risks. the implementation phase). The companies manage the credit risk level The Insurance Companies control the market through a careful and appropriate counterpart risk through sensitivity analysis and stress testing, selection policy. Credit risks are inherent in also conducting impairment tests for the purpose loans to customers, receivables from reinsurers, of identifying, where it may be objectively de- in securities and other financial instruments in- termined, the need for value adjustments. cluding derivative contracts. As regards specifically the activities of Carige Loans to customers are managed through the Vita Nuova, in some cases there is a direct link direct collection carried out by the intermediar- between investments and obligations towards ies, the payments of which, made on a decadal the insured; in addition, certain types of Life in- basis, are subject to careful supervision by the surance policies are subject to the minimum central and peripheral structures for the purpose guaranteed interest rate risk; said risk is moni- of limiting the risk of insolvency. tored through specific Asset–Liability Manage- As regards receivables from reinsurers, the ment (ALM) models. counterparties are constantly monitored and the For the management of operational risks, the exposure limits are reviewed annually, in com- Risk Management function has been imple- pliance with the reinsurance policy outlined by mented, with the definition of an operational in- Management, in order to verify the credit stand- formation collection tool (database) in which the ing of the reinsurer and any potential need to company risks subject to monitoring are as- carry out write-downs. sessed. They are attributed to different risk areas With regard to securities and other financial in- and company processes, and in addition, as- struments, the Boards of Directors of the Com- signed a risk owner. panies defined the limits of investment as re- This function is implementing the methods and gards the individual issuer based on the nature analyses aimed at obtaining a more efficient risk and on the rating of the counterparty and on the evaluation that conforms to the requirements of type of instruments purchased. Solvency Directive II which will come into force Finally, as regards derivative instrument transac- on 31 October 2012 and makes provision, for tions, the Insurance Companies operate in insurance companies and Groups, for: the compliance with the provisions of the Supervi- change of the capital requirement calculation

66 method; different methods of calculation of ting and reconciliation items compared to technical reserves and of solvency requirements; the accounting figures. amendments to the criteria for the admissibility This report will be integrated with a summary il- of assets for the hedging of reserves and the lustration by customer segment of the income elements of available capital. statement and balance sheet values. As regards tax disputes please refer to the sec- So as to allow a significant time-based compari- tion ‘significant events during the half-year pe- son, the data for previous periods have been riod” included in the Report on Operations. reworked in line with current disclosure ap- proaches.

At the end of the first half of 2012 the results of

RESULTS BY the geographical operating sectors were as fol- BUSINESS SEGMENT lows: - the Liguria network recorded an increase in values compared to the first six months The Carige Group’s business model is devel- of 2011: gross operating income oped and analysed according to a dual dimen- amounted to € 250.3 million (+8.1% over sion; the territorial, since the sales network is broken down into the geographical areas Lig- the first half of 2011; 44.9% of the Group uria and the Extra Liguria dimension; and by total), net income from financial and in- customer segment, considering that the organ- surance management totalled € 230.5 isational and sales structure makes provision for million (up 6.2% over the first half of specific service approaches (in terms of prod- 2011; 49.5% of the Group total) and op- ucts, prices and infrastructures) aimed at the dif- erating costs came to € 116.1 million ferent types of customer. In accordance with the management approach (+5.0% over the first half of 2011; 34.2% defined by IFRS 8, the bank chose the territory of the Group total). These figures are re- model as a model of reference for segment re- flected in profits from ordinary activities of porting, which breaks down the results and the € 114.4 million (+7.3% compared to the activities into the following operating segments: first half of 2011) and a cost/income ratio - “Liguria”: operating customers at of 46.4% (47.7% at the end of the first branches of the Parent Company in that half of 2011). With regards to volumes, geographic area, together with the results loans to customers stood at € 11,944 mil- of Cassa di Risparmio di Savona, preva- lion, +6.5% over 30 June 2011; due to lently located in that area; customers totalled € 6,555 million (- - “Extra Liguria”: operating customers at the 0.5%); securities issued and financial li- branch banks of the Parent Company lo- abilities designated at fair value amounted cated in other regions, together with the to € 4,478 million (+1.7%) indirect de- results of subsidiary banks located in these posits amounted to € 11,035 million (- geographical areas (Cassa di Risparmio 7.2%). On the whole, financial interme- di Carrara, Banca del Monte di Lucca and diation activities totalled € 22,068 million Banca Cesare Ponti); (-3.6%). - “Other operating segments”: include re- - the Extra-Liguria network achieved a gross maining customers and the other Group operating income of € 263.7 million, up companies that perform asset manage- 12.8% over the first half of 2011, income ment, insurance (life and non-life busi- from financial and insurance management ness), financial and instrumental activities; totalled 224.2 million (+17.2% over the - “Netting and unallocated items”: remain- first half of 2011) and operating costs ing segment explicitly envisaged in the amounted to € 162.8 million (up 9.0% regulations for reporting intra-group net- over the first half of 2011): these figures

67 contribute to a profit from ordinary activi- - the other operating segments showed a ties of € 61.4 million, significantly higher gross operating income of € 72.9 million, than the total in the first half of 2011 income from financial and insurance (+46.7%). These increases highlight the management amounted to € 38.7 million improvement in the performances of the and operating costs came to € 57.1 mil- Extra-Liguria network, in line with the pro- lion (16.8% of the Group total). With ref- visions of the Group’s current strategic erence to equity totals, 51.1% of securities plan, and allowed a cost-income ratio of issued and financial liabilities of the 61.7% to be reached, down compared to Group relate to the sector (€ 5,895 mil- 63.9% in the first half of 2011. lion, relating mainly to bond issues for the As regards equity volumes, loans to cus- institutional market). tomers amounted to € 12,058 million (- Financial intermediation activities 0.2%), due to customers came to € 6,212 amounted to € 13,707 million (27.1% of million (-4.3%), securities issued the Group total) and include due to cus- amounted to € 3,138 million (+7.8%) tomers of € 3,749 million (mainly repre- and indirect deposits amounted to € sented by borrowing repurchase agree- 8,937 million (-5.8%). ments) and other financial assets amount- Overall, financial intermediation activities ing to € 4,063 million, attributable to the amounted to € 18,288 million, a de- indirect deposits of Insurance Companies. crease of -3.2% compared to 30 June 2011.

68

Business geographic areas ( thousands of euro)

Other Netting-off Outside Liguria operating and other TOTAL Liguria segments items 8.1% 12.8% -20.5% -24.4% 7.6% Net interest and other banking income (1) 500,650 527,380 145,890 -59,928 1,113,992 1st half 2012 250,325 263,690 72,945 -29,964 556,996 2011 year 485,182 490,830 180,934 -36,591 1,120,355 1st half 2011 231,558 233,750 91,763 -39,643 517,428 6.2% 17.2% -55.3% -26.0% 1.8% Net income from banking and insurance 461,055 448,340 77,443 -55,196 931,642 activities (2) 1st half 2012 230,528 224,170 38,721 -27,598 465,821 2011 year 451,627 408,575 121,516 -32,403 949,315 1st half 2011 217,136 191,220 86,704 -37,281 457,779 5.0% 9.0% -23.6% 6.7% 0.5% Operating expenses -232,163 -325,566 -114,265 -7,718 -679,712 1st half 2012 -116,082 -162,783 -57,132 -3,859 -339,856 2011 year -223,406 -303,385 -134,627 -8,406 -669,824 1st half 2011 -110,515 -149,364 -74,798 -3,616 -338,294 7.3% 46.7% -254.6% -23.1% 5.4% Income (Loss) before tax from continuing 228,892 122,774 -36,822 -62,914 251,930 operations 1st half 2012 114,446 61,387 -18,411 -31,457 125,965 2011 year 228,221 105,190 -13,110 -40,809 279,491 1st half 2011 106,620 41,855 11,906 -40,897 119,485

Cost income (%) -1 -2 -3 -4 1st half 2012 46.4 61.7 78.3 61.0 2011 year 46.0 61.8 74.4 59.8 1st half 2011 47.7 63.9 81.5 65.4

Net interbank 30/06/2012 00-5,114,601 -1,285,953 -6,400,554 31/12/2011 -2,710,924 -1,224,970 -3,935,894 30/06/2011 -465,203 -810,788 -1,275,991 6.5% -0.2% -0.4% -4.1% 2.7% Loans to customers 726,511 -21,749 -14,090 23,553 714,226 30/06/2012 11,944,155 12,057,858 3,256,367 -547,712 26,710,668 31/12/2011 11,701,445 12,059,970 3,649,430 -524,901 26,885,944 30/06/2011 11,217,644 12,079,606 3,270,457 -571,265 25,996,442 -0.5% -4.3% 28.7% 14.5% 3.0% Due to customers (a) -35,055 -280,043 835,293 -52,070 468,126 30/06/2012 6,554,918 6,212,356 3,748,967 -411,951 16,104,290 31/12/2011 6,641,535 6,358,801 3,250,707 -331,441 15,919,602 30/06/2011 6,589,973 6,492,399 2,913,673 -359,881 15,636,164 1.7% 7.8% -13.8% 34.7% -9.1% Securities issued and financial liabilities designated at fair value through profit 75,270 227,871 -941,666 -511,123 -1,149,648 and loss (3) (b) 30/06/2012 4,478,280 3,137,713 5,895,141 -1,985,099 11,526,035 31/12/2011 4,548,975 3,084,007 6,809,449 -1,922,146 12,520,285 30/06/2011 4,403,010 2,909,842 6,836,807 -1,473,976 12,675,683 -7.2% -5.8% 1.4% 5.6% -5.8% Other financial assets (c) -854,661 -552,227 56,887 -61,963 -1,411,965 30/06/2012 11,035,204 8,937,462 4,062,580 -1,166,551 22,868,695 31/12/2011 11,463,902 9,148,219 4,091,366 -1,132,327 23,571,160 30/06/2011 11,889,865 9,489,689 4,005,693 -1,104,588 24,280,660 -3.6% -3.2% -0.4% 21.3% -4.0% Financial Intermediation Activities (FIA) -814,445 -604,398 -49,487 -625,156 -2,093,487 (d= a+b+c) 30/06/2012 22,068,403 18,287,531 13,706,687 -3,563,601 50,499,020 31/12/2011 22,654,412 18,591,027 14,151,522 -3,385,914 52,011,047 30/06/2011 22,882,848 18,891,930 13,756,174 -2,938,445 52,592,507

(1) Including income from insurance management (2) Including profits from equity investments and disposal of investments. (3) Carige Vita Nuova liabilities, designated at fair value and relating to products for which risk of the investment is borne by the insured, are not included in this table.

69

Business geographic areas (% on the total)

Other Netting-off Outside Liguria operating and other TOTAL Liguria segments items

Net interest and other banking income (1) 1st half 2012 44.9 47.3 13.1 -5.4 100.0 2011 year 43.3 43.8 16.1 -3.3 100.0 1st half 2011 44.8 45.2 17.7 -7.7 100.0

Net income from banking and insurance activities (2) 1st half 2012 49.5 48.1 8.3 -5.9 100.0 2011 year 47.6 43.0 12.8 -3.4 100.0 1st half 2011 47.4 41.8 18.9 -8.1 100.0

Operating expenses 1st half 2012 34.2 47.9 16.8 1.1 100.0 2011 year 33.4 45.3 20.1 1.3 100.0 1st half 2011 32.7 44.2 22.1 1.1 100.0

Income (Loss) before tax from continuing operations 1st half 2012 90.9 48.7 -14.6 -25.0 100.0 2011 year 81.7 37.6 -4.7 -14.6 100.0 1st half 2011 89.2 35.0 10.0 -34.2 100.0

Loans to customers 30/06/2012 44.7 45.1 12.2 -2.1 100.0 31/12/2011 43.5 44.9 13.6 -2.0 100.0 30/06/2011 43.2 46.5 12.6 -2.2 100.0

Due to customers (a) 30/06/2012 40.7 38.6 23.3 -2.6 100.0 31/12/2011 41.7 39.9 20.4 -2.1 100.0 30/06/2011 42.1 41.5 18.6 -2.3 100.0

Securities issued and financial liabilities designated at fair value through profit and loss (3) (b) 30/06/2012 38.9 27.2 51.1 -17.2 100.0 31/12/2011 36.3 24.6 54.4 -15.4 100.0 30/06/2011 34.7 23.0 53.9 -11.6 100.0

Other financial assets (c) 30/06/2012 48.3 39.1 17.8 -5.1 100.0 31/12/2011 48.6 38.8 17.4 -4.8 100.0 30/06/2011 49.0 39.1 16.5 -4.5 100.0

Financial Intermediation Activities (FIA) (d= a+b+c) 30/06/2012 43.7 36.2 27.1 -7.1 100.0 31/12/2011 43.6 35.7 27.2 -6.5 100.0 30/06/2011 43.5 35.9 26.2 -5.6 100.0

(1) Including income from insurance management (2) Including profits from equity investments and disposal of investments. (3) Carige Vita Nuova liabilities, designated at fair value and relating to products for which risk of the investment is borne by the insured, are not included in this table.

70 Net income from financial management Net income from financial management 2011 1st half 2012

60.0 48.1 49.5 60.0 50.0 47.6 43.0 50.0 40.0 40.0 30.0 30.0 20.0 20.0 12.8 8.3 10.0 -5.9 10.0 -3.4

0.0 0.0

-10.0 -10.0 Liguria Outside LiguriaOther operating Netting-off and segments other items Liguria Outside Liguria Other operating Netting-off and segments other items

Net income financial management 1st Q 2011

60.0 47.4 41.8 50.0

40.0

30.0 18.9 20.0

10.0 -8.1 0.0

-10.0

-20.0 Liguria Outside LiguriaOther operating Netting-off and segments other items

By contrast, with reference to customers served, than the figure recorded in the first half of 2011 private and affluent customers recorded a gross (up 90.5%). The cost/income ratio stood at operating income of € 84.1 million, down 33.8% (40.1% at 30 June 2011). As regards 15.4% compared to the first six months of 2011, equity items, loans to customers amounted to € while operating costs totalled € 60.3 million, in 12,449 million, an increase of 5.4% compared turn down 12.1%; profit from ordinary activities to 30 June 2011; these represent 46.6% of the came to € 23.8 million, down 22.8% compared aggregate at the Group level. to 30 June 2012 and the cost/income ratio The Retail segment closed the half with a gross stood at 71.7% (69% at the end of the first six operating margin of € 203.6 million (up 1.3% months of 2011). As regards the trend in vol- over the first half of 2011), operating costs to- umes, due to customers totalled € 5,762 million, talled € 146.6 million (up 1.8%) and profit from up +1.5% compared to 30 June 2011, securi- ordinary activities came to € 30 million, down by ties issued amounted to € 4,732 million (-1.5%) 15.5% over the first half of 2011. The and other financial assets equalled € 14,617 cost/income ratio stood at 72%. As regards bal- million (-5.9%). Financial intermediation activi- ance sheet aggregates, loans to customers to- ties came out at € 25,111 million (-3.5%) and talled € 8,601 million (32.2% of the Group to- represent 49.7% of the Group total. tal), € 4,881 million is owed to customers The Corporate segment closed the first half of (30.3% of the Group total), securities issued and 2012 with a gross operating income of € 178.9 financial liabilities designated at fair value came million, up considerably compared to the first to € 983.6 million (8.5% of the Group total); in- half of 2011 (+32.6%). Operating costs totalled direct deposits amounted to € 2,842 million € 59.6 million (up 10.2% over the first half of (12.4% of the Group total) and Financial Inter- 2011): therefore, profit from ordinary activities mediation Activities amounted to € 8,707 mil- amounted to € 86.3 million, significantly higher lion (17.2% of the Group total).

71

Customer segments ( thousands of euro)

Private and Total customer Total financial Affluent Corporate Retail segments statements -15.4% 32.6% 1.3% 7.2% 7.6% Net interest and other banking income (1) 168,107 357,884 407,152 933,143 1,113,992 1st half 2012 84,053 178,942 203,576 466,571 556,996 2011 year 204,363 286,440 422,470 913,273 1,120,355 1st half 2011 99,324 134,974 200,973 435,272 517,428 -15.4% 46.8% -1.6% 7.5% 1.8% Net income from banking and insurance 168,099 291,816 353,098 813,013 931,642 activities (2) 1st half 2012 84,049 145,908 176,549 406,506 465,821 2011 year 203,930 218,601 376,538 799,069 949,315 1st half 2011 99,326 99,377 179,436 378,139 457,779 -12.1% 10.2% 1.8% -0.1% 0.5% Operating expenses -120,509 -119,134 -293,183 -532,826 -679,712 1st half 2012 -60,254 -59,567 -146,592 -266,413 -339,856 2011 year -130,205 -102,389 -288,282 -520,875 -669,824 1st half 2011 -68,524 -54,058 -143,994 -266,575 -338,294 -22.8% 90.5% -15.5% 25.6% 5.4% Income (Loss) before tax from continuing 47,590 172,682 59,915 280,187 251,930 operations 1st half 2012 23,795 86,341 29,957 140,093 125,965 2011 year 73,725 116,213 88,256 278,194 279,491 1st half 2011 30,803 45,320 35,442 111,565 119,485 -3.3% -2.4% -0.8% -1.3% -0.6% Number of customers -6,992 -434 -6,787 -14,213 -7,055 1st half 2012 205,384 17,894 872,112 1,095,390 1,134,202 2011 year 208,468 18,267 877,111 1,103,846 1,135,913 1st half 2011 212,376 18,328 878,899 1,109,603 1,141,257

Profit per customer (figures in euro) 1st half 2012 115.9 4,825.1 34.4 2011 year 353.7 6,361.9 100.6 1st half 2011 145.0 2,472.7 40.3

Cost income (%) 2.7 - 6.8 0.4 - 4.1 - 4.4 1st half 2012 71.7 33.3 72.0 57.1 61.0 2011 year 63.7 35.7 68.2 57.0 59.8 1st half 2011 69.0 40.1 71.6 61.2 65.4 8.9% 5.4% 5.5% 5.6% 2.7% Loans to customers 48,635 639,405 451,226 1,139,265 714,226 30/06/2012 596,357 12,448,869 8,600,988 21,646,214 26,710,668 31/12/2011 594,792 12,252,966 8,724,066 21,571,824 26,885,944 30/06/2011 547,722 11,809,464 8,149,763 20,506,949 25,996,442 1.5% -7.8% -1.1% -0.8% 3.0% Due to customers (a) 84,432 -126,055 -56,246 -97,869 468,126 30/06/2012 5,762,361 1,487,593 4,881,384 12,131,338 16,104,290 31/12/2011 5,684,129 1,512,516 4,983,573 12,180,218 15,919,602 30/06/2011 5,677,929 1,613,649 4,937,629 12,229,207 15,636,164 -1.5% -7.5% -26.3% -6.9% -9.1% Securities issued and financial liabilities designated at fair value through profit -72,039 -12,259 -351,804 -436,103 -1,149,648 and loss (3) (b) 30/06/2012 4,732,042 150,677 983,589 5,866,308 11,526,035 31/12/2011 4,850,231 165,594 984,048 5,999,873 12,520,285 30/06/2011 4,804,082 162,936 1,335,393 6,302,411 12,675,683 -5.9% -11.8% -9.8% -6.8% -5.8% Other financial assets (c) -917,452 -108,477 -308,180 -1,334,108 -1,411,965 30/06/2012 14,616,703 812,927 2,841,704 18,271,334 22,868,695 31/12/2011 14,922,825 966,815 2,945,777 18,835,417 23,571,160 30/06/2011 15,534,155 921,403 3,149,884 19,605,442 24,280,660 -3.5% -9.1% -7.6% -4.9% -4.0% Financial Intermediation Activities (FIA) (d -905,059 -246,791 -716,229 -1,868,079 -2,093,487 = a + b + c) 30/06/2012 25,111,107 2,451,196 8,706,677 36,268,980 50,499,020 31/12/2011 25,457,184 2,644,925 8,913,398 37,015,507 52,011,047 30/06/2011 26,016,165 2,697,988 9,422,906 38,137,059 52,592,507

(1) Including income from insurance management (2) Including profits from equity investments and disposal of investments. (3) Carige Vita Nuova liabilities, designated at fair value and relating to products for which risk of the investment is borne by the insured, are not included in this table.

72

SUBSEQUENT EVENTS

On 16th July, as part of the review of the ratings of Italian banks following the downgrading of the rating of Italian Government bonds, Moody’s lowered Carige’s long-term rating from “Baa2” to “Baa3” and its short-term rating from “P-2” to “P-3”. The bank financial strength rat- ing (BFSR) was confirmed at “D+”. The outlook remains negative.

73

THE PARENT COMPANY AND SUBSIDIARIES

74

THE PARENT COMPANY: FINANCIAL STATEMENTS AND EXPLANATORY NOTES

Financial highlights

Situation as at Change % 30/06/2012 31/12/2011 30/06/2011 06/12 06/12 12/11 06/11 BALANCE SHEET (1) Total assets 40,878,431 38,475,355 35,507,224 6.2 15.1 Financial Intermediation Activities (FIA) (a+b) 44,991,754 46,181,236 46,471,213 -2.6 -3.2 - Direct deposits (a) 26,178,752 26,775,861 26,375,631 -2.2 -0.7 * Due to customers 14,264,074 13,966,699 13,666,225 2.1 4.4 * Securities issued 11,058,416 11,906,543 11,435,151 -7.1 -3.3 * Financial liabilities designated at fair value through profit and loss 856,262 902,619 1,274,255 -5.1 -32.8 - Indirect deposits (b) 18,813,002 19,405,375 20,095,582 -3.1 -6.4 - Assets under management 7,853,143 7,863,223 8,443,457 -0.1 -7.0 - Assets under administration 10,959,859 11,542,153 11,652,125 -5.0 -5.9 Loans to customers (2) (3) 23,562,411 23,722,184 22,927,991 -0.7 2.8 Securities portfolio (4) 10,071,891 7,668,721 6,795,989 31.3 48.2 Share capital and reserves 3,515,518 3,024,566 3,717,953 16.2 -5.4 INCOME STATEMENT (1) Net interest and other banking income 456,613 858,249 428,767 6.5 Net income from banking activities 378,864 749,948 378,206 0.2 Income (loss) before tax from continuing operations 115,035 237,350 117,342 -2.0 Net income (loss) 94,659 175,809 83,666 13.1 RESOURCES (5) Number of branches 560 560 557 - 0.5 Staff 4,546 4,577 4,616 -0.7 -1.5 FINANCIAL RATIOS Operating expenses / Net interest and other banking income 57.8% 59.7% 60.8% Income (loss) before tax from continuing operations /Share capital and reserves 3.3% 7.8% 3.2% ROE 2.69% 5.81% 2.25% ROE (6) 2.59% 5.41% 2.58% ROAE (7) 2.89% 5.28% 2.28% ROAE (6) (7) 2.74% 5.45% 2.60% REGULATORY RATIOS (8) Total weighted assets (1) 20,662,428 20,315,041 19,816,823 1.7 4.3 Core Tier 1 ratio 12.0% 9.2% 10.0% Tier1 ratio 13.0% 10.3% 11.1% Total capital ratio 16.1% 13.5% 14.8% (1) Figures in thousands of euro. (2) Before value adjustments. (3) Net of debt securities classified as L&R. (4) The aggregate includes Balance Sheet items 20 (net of 229,863 thousand derivatives as at 30 June 2012), 30, 40, 60 (only the portion relating to L&R) and 70 (only the portion relating to L&R). (5) Statistics of the end of period. (6) Net of the AFS reserve (item 130 of balance sheet liabilities). (7) Net profit on average shareholders' equity (Return On Average Equity). (8) The figures as at 06/30/2012 result from accounting and management estimates pending the consolidated official disclosure.

75 1. Financial statements as at 30 June 2012

ASSETS ( thousands of euro) Change

absolute % 30/06/2012 31/12/2011 10 -CASH AND CASH EQUIVALENTS 227,368 551,888 -324,520 -58.8 20 -FINANCIAL ASSETS HELD FOR TRADING 300,306 259,010 41,296 15.9 40 -FINANCIAL ASSETS AVAILABLE-FOR-SALE 8,452,390 6,036,795 2,415,595 40.0 60 -DUE FROM BANKS 4,346,642 3,819,310 527,332 13.8 70 -LOANS TO CUSTOMERS 22,892,505 23,119,985 -227,480 -1.0 80 -HEDGING DERIVATIVES 190,291 154,046 36,245 23.5 100 -INVESTMENTS IN ASSOCIATES AND COMPANIES SUBJECT TO JOINT CONTROL 1,170,177 1,163,171 7,006 0.6 110 -PROPERTY AND EQUIPMENT 680,787 676,948 3,839 0.6 120 -INTANGIBLE ASSETS 1,594,284 1,597,031 -2,747 -0.2 of which: - goodwill 1,526,407 1,526,407 - - 130 -TAX ASSETS 717,778 704,565 13,213 1.9 a) current 111,610 59,659 51,951 87.1 b) deferred 606,168 644,906 -38,738 -6.0 150 -OTHER ASSETS 305,903 392,606 -86,703 -22.1 TOTAL ASSETS 40,878,431 38,475,355 2,403,076 6.25

LIABILITIES AND SHAREHOLDERS' EQUITY (thousands of euro) Change

absolute % 30/06/2012 31/12/2011 10 -DUE TO BANKS 8,680,367 5,981,455 2,698,912 45.1 20 -DUE TO CUSTOMERS 14,264,074 13,966,699 297,375 2.1 30 -SECURITIES ISSUED 11,058,416 11,906,543 -848,127 -7.1 40 -FINANCIAL LIABILITIES HELD FOR TRADING 184,230 187,178 -2,948 -1.6 50 -FINANCIAL LIABILITIES DESIGNATED AT FAIR VALUE THROUGH PROFIT AND LOSS 856,262 902,619 -46,357 -5.1 60 -HEDGING DERIVATIVES 1,195,304 1,087,832 107,472 9.9 80 -TAX LIABILITIES 274,855 270,013 4,842 1.8 (a) current 31,184 36,407 -5,223 -14.3 (b) deferred 243,671 233,606 10,065 4.3 100 -OTHER LIABILITIES 424,946 640,700 -215,754 -33.7 110 -EMPLOYEE TERMINATION INDEMNITIES 60,318 60,818 -500 -0.8 120 -ALLOWANCES FOR RISKS AND CHARGES: 269,482 271,123 -1,641 -0.6 a) post employment benefits 250,067 250,143 -76 -0.0 b) other allowances 19,415 20,980 -1,565 -7.5 130 -VALUATION RESERVES (136,212) (224,540) 88,328 -39.3 150 -EQUITY INSTRUMENTS 1,173 15,772 -14,599 -92.6 160 -RESERVES 453,024 429,665 23,359 5.4 170 -SHARE PREMIUM RESERVE 1,020,314 1,013,277 7,037 0.7 180 -SHARE CAPITAL 2,177,219 1,790,392 386,827 21.6 200 -NET INCOME (LOSS) 94,659 175,809 -81,150 -46.2 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 40,878,431 38,475,355 2,403,076 6.25

76 INCOME STATEMENT (thousands of euro) Change 6 months 2012 - 6 months 2011 6 months 2012 6 months 2011 absolute % 10 - INTEREST AND SIMILAR INCOME 588,706 468,441 120,265 25.7 20 - INTEREST AND SIMILAR EXPENSE (329,901) (226,715) -103,186 45.5 30 -INTEREST MARGIN 258,805 241,726 17,079 7.1 40 - FEE AND COMMISSION INCOME 155,681 137,594 18,087 13.1 50 - FEE AND COMMISSION EXPENSE (26,827) (15,050) -11,777 78.3 60 -NET FEE AND COMMISSION INCOME 128,854 122,544 6,310 5.1 70 - DIVIDEND AND SIMILAR INCOME 37,488 47,274 -9,786 -20.7 80 - PROFITS (LOSSES) ON TRADING 9,349 16,124 -6,775 -42.0 90 - FAIR VALUE ADJUSTMENTS IN HEDGE ACCOUNTING (1,591) (3) -1,588 … 100 - PROFITS (LOSSES) ON DISPOSAL OR REPURCHASE OF: 21,363 2,051 19,312 … a) loans (132) (435) 303 -69.7 b) financial assets available-for-sale 20,612 3,468 17,144 … d) financial liabilities 883 (982) 1,865 … 110 - PROFITS (LOSSES) ON FINANCIAL ASSETS AND LIABILITIES DESIGNATED AT FAIR VALUE 2,345 (949) 3,294 … 120 -NET INTEREST AND OTHER BANKING INCOME 456,613 428,767 27,846 6.5 130 - NET LOSSES/RECOVERIES ON IMPARMENT (77,749) (50,561) -27,188 53.8 a) loans (59,860) (46,341) -13,519 29.2 b) financial assets available-for-sale (18,048) (2,370) -15,678 … d) other financial activities 159 (1,850) 2,009 … 140 -NET INCOME FROM BANKING ACTIVITIES 378,864 378,206 658 0.2 150 - ADMINISTRATIVE EXPENSES: (269,826) (280,255) 10,429 -3.7 a) personnel expenses (166,225) (170,275) 4,050 -2.4 b) other administrative expenses (103,601) (109,980) 6,379 -5.8 160 - NET PROVISIONS FOR RISKS AND CHARGES (277) (694) 417 -60.1 170 - NET ADJUSTMENTS TO/RECOVERIES ON PROPERTY AND EQUIPMENT (9,134) (8,734) -400 4.6 180 - NET ADJUSTMENTS TO/RECOVERIES ON INTANGIBLE ASSETS (13,872) (13,217) -655 5.0 190 - OTHER OPERATING EXPENSES (INCOME) 29,282 42,062 -12,780 -30.4 200 -OPERATING EXPENSES (263,827) (260,838) -2,989 1.1 210 - PROFITS (LOSSES) ON INVESTMENTS IN ASSOCIATES AND COMPANIES SUBJECT TO JOINT CONTROL - (29) 29 -100.0 240 - PROFITS (LOSSES) FROM DISPOSAL OF INVESTMENTS (2) 3 -5 … 250 -INCOME (LOSS) BEFORE TAX FROM CONTINUING OPERATIONS 115,035 117,342 -2,307 -2.0

260 - TAXES ON INCOME FROM CONTINUING OPERATIONS (20,376) (33,676) 13,300 -39.5 270 -INCOME (LOSS) AFTER TAX FROM CONTINUING OPERATIONS 94,659 83,666 10,993 13.1 290 -NET INCOME (LOSS) 94,659 83,666 10,993 13.1

77

STATEMENT OF COMPREHENSIVE INCOME

(thousands of euro) 1st half 2012 1st half 2011 Change 1st half 2012 / 1st half 2011 absolute % 10 NET INCOME (LOSS) 94,659 83,666 10,993 13.1 Other comprehensive income (net of tax) 20 Financial assets available-for-sale 111,800 14,005 97,795 … 60 Cash flow hedges (23,471) 13,014 -36,485 … 110 Total other comprehensive income (net of tax) 88,329 27,019 61,310 … 120 TOTAL COMPREHENSIVE INCOME (captions 10 + 110) 182,988 110,685 72,303 65.3

78

2. Trading activities

In examining the figures regarding the financial problems connected with maturity intermediation activities of the Parent Company, transformation, Carige’s Board of Directors consider that in accordance with Law decided to hedge the medium/long-term 262/2005, starting from 2006, Banca Carige financial requirements of subsidiary banks decided to be the unique bond issuer of the through the issue of its bonds by the Group, entrusting the placement activity to all subsidiaries, subscribed by Carige. the subsidiaries; subsequently, to avoid

FINANCIAL INTERMEDIATION ACTIVITIES ( thousands of euro)

Situation as at Change % 30/06/2012 31/12/2011 30/06/2011 06/12 06/12 12/11 06/11 Total (A+B) 44,991,754 46,181,236 46,471,213 -2.6 -3.2

Direct deposits (A) 26,178,752 26,775,861 26,375,631 -2.2 -0.7 % on Total 58.2 58.0 56.8 Due to customers 14,264,074 13,966,699 13,666,225 2.1 4.4 current accounts and free deposits 11,013,495 11,046,822 11,018,288 -0.3 -0.0 repurchase agreements 2,907,827 2,486,693 2,293,959 16.9 26.8 term deposits 8,327 9,492 4,839 -12.3 72.1 loans 4,930 2,255 2,162 …… funds managed on behalf of third parties - - -…… other deposits 329,495 421,437 346,977 -21.8 -5.0 Securities issued 11,058,416 11,906,543 11,435,151 -7.1 -3.3 bonds 10,983,450 11,822,269 11,345,470 -7.1 -3.2 other securities 74,966 84,274 89,681 -11.0 -16.4 Financial liabilities designated at fair value through profit and loss 856,262 902,619 1,274,255 -5.1 -32.8 bonds 856,262 902,619 1,274,255 -5.1 -32.8 short term 14,138,632 13,824,646 13,500,413 2.3 4.7 % on Total 54.0 51.6 51.2 medium-long term 12,040,120 12,951,215 12,875,218 -7.0 -6.5 % on Total 46.0 48.4 48.8

Indirect deposits (B) 18,813,002 19,405,375 20,095,582 -3.1 -6.4 % on Total 41.8 42.0 43.2 -0.5 -3.3 - Assets under management 7,853,143 7,863,223 8,443,457 -0.1 -7.0 Mutual funds 3,682,577 3,771,181 4,232,907 -2.3 -13.0 Assets management 394,098 399,100 446,883 -1.3 -11.8 Bancassurance products 3,776,468 3,692,941 3,763,667 2.3 0.3 …… - Assets under administration 10,959,859 11,542,153 11,652,125 -5.0 -5.9 Government securities 4,430,908 4,422,768 4,211,257 0.2 5.2 Bonds 1,411,351 1,569,449 1,718,509 -10.1 -17.9 Shares 1,041,716 1,440,776 1,690,837 -27.7 -38.4 Other 4,075,884 4,109,160 4,031,522 -0.8 1.1

The aggregate of the Financial Intermediation fell by 2.7% from December and 3.4% from Activities on behalf of customers – direct and June 2011. Direct deposits decreased by 2.2% indirect deposits – totalled € 44,991.8 million, from December 2011 and 0.7% from June down by 2.6% and 3.2% in the six-month and 2011. Excluding bonds issued by the bank and twelve-month periods, respectively. Excluding placed by subsidiaries, direct deposits fell by bonds issued by the bank and placed by 2.5% and 1% respectively. subsidiaries, financial intermediation activities

79 The short-term component, accounting for 54% Assets under management came to € 7,853.1 of the total, amounts to € 14,138.6 million, up million, stable when compared to December 2.3% in the half and 4.7% in twelve months. 2011, but down 7% over June 2011. Within Medium/long-term deposits, equal to € indirect deposits, mutual funds amounted to € 12,040.1 million, fell by 7% during the half and 3,682.6 million (-2.3% in the last half; down by 6.5% during the year, accounting for 46% of 13% in twelve months), assets managed totalled the total (48.4% as at December and 48.8% as € 394.1 million (down 1.3% in the last half; at June 2011). down 11.8% in twelve months) and Within direct deposits, due to customers totalled bankassurance products came to € 3,776.5 € 14,264.1 million (+2.1% and +4.4% in six million (up 2.3% in the last half; +0.3% in and twelve months respectively). Bonds (down twelve months). 7.1% in six months, affected by the conversion, Assets under administration totalled € 10,959.9 in March 2012, of € 394 million of the “Banca million, down by 5% in the half and 5.9% in the Carige 4.75% 2010-2015 convertible bond year; in particular, Government bonds increased with option of redemption in shares” (“Banca to € 4,430.9 million (+0.2% and +5.2%, in the Carige 4,75% 2010-2015 convertibile con six-month and twelve-month periods facoltà di rimborso in azioni"); -3.2% over twelve respectively), while both bonds (€ 1,411.4 months) accounted for almost all securities million; -10.1% and -17.9% in the six-month issued, totalling € 11,058.4 million (down 7.1% and twelve-month periods respectively), and and 3.3% respectively in six and twelve months). shares (€ 1,041.7 million; -27.7% and -38.4% Financial liabilities designated at fair value in six and twelve months) decreased. The item through profit and loss (€ 856.3 million) fell by “Other”, equal to € 4,075.9 million, refers 5.1% in the half and 32.8% YoY. almost entirely to assets under administration of Indirect deposits totalled € 18,813 million, down insurance companies, down in the three-month by 3.1% in the half and 6.4% in the year. period (-0.8%) and up in the twelve-month period (+1.1%).

LOANS (1) (thousands of euro) Situation as at Change % 30/06/2012 31/12/2011 30/06/2011 06/12 06/12 12/11 06/11

Loans to customers (A) 22,826,283 23,053,175 22,315,066 - 1.0 2.3 - Gross exposure (2) 23,562,411 23,722,184 22,927,991 - 0.7 2.8 current accounts 2,690,314 2,729,169 2,695,902 - 1.4 - 0.2 repurchase agreements 1,099,711 1,457,057 1,403,343 - 24.5 - 21.6 mortgage loans 12,197,854 12,226,907 11,800,391 - 0.2 3.4 credit cards, personal loans and salary-backed loans 119,634 135,108 153,812 - 11.5 - 22.2 leasing 854,319 826,925 810,762 3.3 5.4 factoring 179,284 188,780 199,019 - 5.0 - 9.9 other loans 3,840,450 3,940,542 3,756,813 - 2.5 2.2 impaired assets 2,580,845 2,217,696 2,107,949 16.4 22.4 …… -short term 6,261,129 6,348,939 6,437,665 - 1.4 - 2.7 % on nominal value 26.6 26.8 28.1 -0.7 -medium/long term 16,009,696 16,195,944 15,398,119 - 1.1 4.0 % on nominal value 67.9 68.3 67.1 -0.5 - Bad loans 1,291,585 1,177,301 1,092,207 9.7 18.3 % on nominal value 5.5 5.0 4.8 10.5 -Value adjustments (-) 736,128 669,009 612,925 10.0 20.1

(1) Net of debt securities classified as L&R amounting to 66,222 thousands of euro as at 30 June 2012. (2) Before value adjustments.

Cash loans to customers, net of value 22,826.3 million, down by 1% on December adjustments for € 736.1 million, amounted to € 2011 (+2.3% in the twelve-month period). This

80 figure does not include debt securities classified 2,690.3 million (-1.4% in the half and stable in as L&R. the year). The medium-long term component Before adjustments, the aggregate amounted to amounted to € 16,009.7 million (-1.1% since € 23,562.4 million, marking a 0.7% decrease in December and +4% in the twelve-month period) six months and up 2.8% in twelve months. and accounts for 67.9% of the total. Within this Net of repurchase agreements with financial component, mortgage loans stood at € companies (amounting to € 1,099.7 million in 12,197.8 million (stable when compared to June 2012 compared to € 1,457.1 million in December 2011 and up 3.4% since June December and € 1,403.3 million in June 2011) 2011), mainly increasing in the business the total stood at € 22,462.7 million, up by segment. 0.9% in six months and 4.4% in twelve. The The trend in consumer credit – credit cards, growth in loans to customers confirms the personal loans and salary backed loans – felt traditional support both to businesses and to the effects, as of 1 July 2008, of the placement households, in whose favour the Bank has also activities of subsidiary Creditis Servizi Finanziari undertaken significant steps aimed at SpA; if we include loans granted by Creditis, overcoming the challenging economic situation. consumer credit rises by 7.7% in six and 16.3% Personal loans (26.7% of total loans) decreased in twelve months. by 0.5% in twelve months (-1.7% in the half); Bad loans totalled € 1,291.6 million (+9.7% loans to companies amounted to 58% of the since December and +18.3% in twelve months) total and, compared with June 2011, increased accounting for 5.5% of total loans, higher than by 3% (+1.7% in the half). the 5% recorded in December and 4.8% in June The short-term component, equal to 26.6% of 2011; this trend is essentially in line with that of the total, amounted to € 6,261.1 million, down the banking System. by 1.4% in six months and 2.7% in twelve months. In particular, current accounts totalled €

CREDIT QUALITY (1) (thousands of euro) 30/06/2012 31/12/2011

Gross Value Net Gross Value Net % % exposure (a) adjustments (b) exposure (a-b) exposure (a) adjustments (b) exposure (a-b)

b/a b/a Cash loans Bad loans 1,291,585 587,486 704,099 45.5 1,177,301 535,450 641,851 45.5 - customers 1,291,585 587,486 704,099 45.5 1,177,301 535,450 641,851 45.5 Watchlist loans 793,719 78,664 715,055 9.9 695,392 69,269 626,123 10.0 - banks 16,991 872 16,119 5.1 16,691 872 15,819 5.2 - customers 776,728 77,792 698,936 10.0 678,701 68,397 610,304 10.1 Rescheduled loans 134,432 10,142 124,290 7.5 123,238 2,824 120,414 2.3 - customers 134,432 10,142 124,290 7.5 123,238 2,824 120,414 2.3 Past due loans 378,100 8,979 369,121 2.4 238,456 6,647 231,809 2.8 - customers 378,100 8,979 369,121 2.4 238,456 6,647 231,809 2.8 Total Impaired loans 2,597,836 685,271 1,912,565 26.4 2,234,387 614,190 1,620,197 27.5 Performing loans 23,829,253 51,729 23,777,524 0.2 23,807,958 55,691 23,752,267 0.2 - banks 2,847,687 - 2,847,687 - 2,303,470 - 2,303,470 - - customers 20,981,566 51,729 20,929,837 0.2 21,504,488 55,691 21,448,797 0.3 Total cash loans 26,427,089 737,000 25,690,089 2.8 26,042,345 669,881 25,372,464 2.6 - banks 2,864,678 872 2,863,806 0.0 2,320,161 872 2,319,289 0.0 - customers 23,562,411 736,128 22,826,283 3.1 23,722,184 669,009 23,053,175 2.8 Endorsement loans Impaired 21,165 4,716 16,449 22.3 22,020 5,222 16,798 23.7 - customers 21,165 4,716 16,449 22.3 22,020 5,222 16,798 23.7 Other loans 1,582,883 6,691 1,576,192 0.4 1,602,126 6,344 1,595,782 0.4 - banks 45,482 - 45,482 - 46,776 - 46,776 - - customers 1,537,401 6,691 1,530,710 0.4 1,555,350 6,344 1,549,006 0.4 Total endorsement loans 1,604,048 11,407 1,592,641 0.7 1,624,145 11,566 1,612,579 0.7 - banks 45,482 - 45,482 - 46,775 - 46,775 - - customers 1,558,566 11,407 1,547,159 0.7 1,577,370 11,566 1,565,804 0.7 Total 28,031,137 748,407 27,282,730 2.7 27,666,490 681,447 26,985,043 2.5 - banks 2,910,160 872 2,909,288 0.0 2,366,936 872 2,366,064 0.0 - customers 25,120,977 747,535 24,373,442 3.0 25,299,554 680,575 24,618,979 2.7 (1) Net of debt securities classified as L&R, amounting to as at 30 June 2012 to 1,482,836 thousands of euro (due from banks) and to 66,222 thousands of euro (loans to customers).

Impaired cash and endorsement loans amounted to € 2,619 million, up by 16.1% from

81 December. A total of 99.4% of these relate to 2011; given that the majority of these relate ordinary customers; the corresponding value to loans secured by mortgage guarantees, adjustments stand at € 690 million (+11.4% in the increase recorded in the first half was six months), representing a coverage level of largely due to the elimination, effective as of about 26.3%. 1 January 2012, of the 180 day limit for the Cash loans to customers amounted to € classification in the aggregate of unsecured 2,580.8 million (+16.4% from December); past due or borderline loans, whose endorsement loans came to € 21.2 million (- qualification threshold was lowered to 90 3.9% in six months). days of continuous delay. These positions As regards cash loans to customers, the were written down by 2.4% (2.8% in following should be highlighted: December). − bad loans amounted to € 1,291.6 million, Impaired endorsement loans amounted to € up 9.7% in the half; they were written down 21.2 million, down by -3.9% in the six-month by 45.5% (as in December); period, and were written down by 22.3% (23.7% − watchlist loans totalled € 776.7 million, up as at December). by 14.4% in the half. They were written Overall, value adjustments on cash and down by 10% (10.1% in December); endorsement loans amounted to € 747.5 − rescheduled loans amounted to € 134.4 million, € 736.1 million of which refers to cash million, up by 9.1% in the half. They were loans and € 11.4 million of which refers to written down by 7.5% (2.3% in December); endorsement loans. − past due loans amounted to € 378.1 million, up 58.6% compared to December

SECURITIES PORTFOLIO (thousands of euro) Situation as at Change % 30/06/2012 31/12/2011 30/06/2011 06/12 06/12 12/11 06/11 Debt securities 8,918,465 6,558,115 5,646,034 36.0 58.0 Held for trading 51,324 51,222 172,165 0.2 -70.2 Available for sale 7,318,083 4,940,062 4,265,167 48.1 71.6 Loans & Receivable 1,549,058 1,566,831 1,208,702 -1.1 28.2 Held to maturity - - - … Equities 1,037,399 1,006,320 1,036,719 3.1 0.1 Held for trading 3 4 148 -25.0 -98.0 Available for sale 1,037,396 1,006,316 1,036,571 3.1 0.1 Shares in CIS 116,027 104,286 113,236 11.3 2.5 Held for trading 19,116 13,869 15,151 37.8 26.2 Available for sale 96,911 90,417 98,085 7.2 -1.2 Total (1) 10,071,891 7,668,721 6,795,989 31.3 48.2 of which: Held for trading 70,443 65,095 187,464 8.2 -62.4 Available for sale 8,452,390 6,036,795 5,399,823 40.0 56.5 Loans & Receivable 1,549,058 1,566,831 1,208,702 -1.1 28.2 (1) Balance sheet items 20 (net of derivatives as at 30 June 2012 amounting to 229,863 thousands), 30, 40, 60 (only for the part relative to L&Rs amounting to 1,482,836 thousands of euro) and 70 (only for the part relative to L&Rs amounting to 66,222 thousands ) are included in the aggregate.

The securities portfolio amounted to € 10,071.9 the Bank of Italy, accounted for at € 875.5 million, up by 31.3% since December and million; this figure results from a valuation at fair 48.2% in the twelve-month period, also by virtue value - using shareholders’ equity as the most of the purchase of Government bonds. The reliable proxy of fair value – performed on the portfolio is made up by around 88.5% of debt basis of the balance sheet data of the Bank of securities, up by 36% since December and 58% Italy as at 31 December 2011 (last approved in the twelve-month period, primarily due to financial statements), consistent with the investments made in Italian Government bonds accounting principle adopted for the classified as “available for sale”. Equities rose by preparation of the financial statements of the 3.1% since December and were essentially Bank and of the consolidated financial stable over twelve months; shares in UCITS grew statements of the Banca Carige Group as at 31 by 11.3% in the six-month period and 2.5% in December 2011. The effects of this valuation at the twelve-month period. Equities available for fair value were sterilised by a valuation reserve sale included the equity investment of 3.96% in of the same amount, net of deferred taxes.

82 As regards the breakdown set forth by in detail, Treasury bills were equal to € 1,196.4 international accounting standards (IAS/IFRS), million, long-term treasury bonds to € 4,473.1 Available-for-sale securities (AFS) stood at € million, treasury credit certificates to € 245.6 8,452.4 million, accounting for 83.9% of the million and zero coupon treasury bills € 744.3 portfolio, up 40% in six months and 56.5% in million. twelve months; securities held for trading (HFT) Assets deriving from Loans and Receivables totalled € 70.4 million, accounting for 0.7% of (L&R) amounted to € 1,549.1 million, down the portfolio. slightly compared to December (-1.1%) and up Within the AFS securities, the Italian 28.2% over June 2011; they are mainly Government Bonds amounted to € 6,659.4 composed of the bonds of subsidiary banks. million, equal to around 79% of the aggregate;

83 3. Income statement results

As at 30 June 2012, the income statement on the securities component (AFS, HFT) posted a net profit of € 94.7 million against € amounted to € 133.2 million, almost double the 83.7 million in the first half of 2011 (+13.1%). figure recorded in June 2011. Interest margin amounted to € 258.8 million, up Interest and similar expense (€ 329.9 million), 7.1% due to larger investments in securities. registered an increase of 45.5% in relation, in In detail, interest and similar income grew by particular, to the increase in due to customers 25.7% to € 588.7 million. The component (+64.5%), due to banks (up from € 17.3 million regarding the interest accrued on loans to in June 2011 to € 43.8 million in June 2012) customers (which includes also the interest and securities issued (up 21.8% to € 189.1 margin on financial assets sold but not million). derecognised) is up 14.7% to 424.7 million € and that regarding due from banks increased from € 21.9 million in June 2011 to € 28.2 million in June 2012 (+29.1%). Interest margin

INTEREST AND SIMILAR INCOME (thousands of euro) Change 12/11 - 12/10 1st half 12 - 1st half 11 1st half 2012 2011 1st half 2011 absolute %

Financial assets held for trading 918 5,437 3,703 -2,785 -75.2 Financial assets available-for-sale 132,246 159,631 69,869 62,377 89.3 Due from banks (1) 28,234 47,067 21,863 6,371 29.1 Loans to customers (1) 424,714 788,103 370,436 54,278 14.7 Other assets 2,594 7,782 2,570 24 0.9 Total interest and similar income 588,706 1,008,020 468,441 120,265 25.7 (1) This item includes interest income on the L&R credit component.

INTEREST AND SIMILAR EXPENSE (thousands of euro) Change 12/11 - 12/10 1st half 12 - 1st half 11 1st half 2012 2011 1st half 2011 absolute % Due to banks 43,815 45,194 17,273 26,542 … Due to customers 67,607 96,444 41,104 26,503 64.5 Securities issued 189,008 343,310 155,143 33,865 21.8 Financial liabilities designated at fair value 9,269 20,255 10,132 -863 through profit and loss -8.5 Other liabilities 1,253 484 97 1,156 … Hedging derivatives 18,949 11,460 2,966 15,983 … Total interest and similar expense 329,901 517,147 226,715 103,186 45.5

Net fee and commission income amounted to € accounts increased, but said income from the 128.9 million, an increase of 5.1% over the distribution of third party services fell. year. Fee and commission expense rose by 78.3% to Fee and commission income amounted to € € 26.8 million, due to the increase in expenses 155.7 million, up 13.1% compared to June from management and intermediation services, 2011. Fee and commission income from the particularly for guarantees received in relation to maintenance and management of current refinancing transactions at the ECB.

84 FEE AND COMMISSION INCOME (thousands of euro) Change 12/11 - 12/10 1st half 12 - 1st half 11 1st half 2012 2011 1st half 2011 absolute % Guarantees issued 8,286 15,779 7,071 1,215 17.2 Management, intermediation and consultancy services: 39,535 82,687 41,818 -2,283 -5.5 1. Financial instruments trading 638 827 286 352 … 2. Currency trading 1,136 2,704 1,407 -271 -19.3 3. Assets management 2,065 4,818 2,261 -196 -8.7 4. Securities custody and administration 1,229 2,417 1,048 181 17.3 6. Placement of securities 15,233 30,800 16,082 -849 -5.3 7. Collection of orders 4,511 8,988 4,307 204 4.7 8. Consultancy services 2 12 7 -5 -71.4 9. Distribution of third-party services 14,721 32,121 16,420 -1,699 -10.3 - portfolio management 713 1,303 641 72 11.2 - insurance products 6,108 14,712 7,826 -1,718 -22.0 - other products 7,900 16,106 7,953 -53 -0.7 Collection and payment services 27,217 55,485 26,704 513 1.9 Servicing for securitizations 1,890 3,012 1,498 392 26.2 Factoring services 760 2,004 1,004 -244 -24.3 Maintenance and management of the current accounts 61,392 94,627 47,447 13,945 29.4 Other services 16,601 28,724 12,052 4,549 37.7 Total fee and commission income 155,681 282,318 137,594 18,087 13.1

FEE AND COMMISSION EXPENSE (thousands of euro) Change 12/11 - 12/10 1st half 12 - 1st half 11 1st half 2012 2011 1st half 2011 absolute %

Guarantees received 9,763 514 192 9,571 … Management and intermediation services 3,905 5,199 2,549 1,356 53.2 1. Financial instruments trading 41 97 33 8 24.2 3. Portfolio management 417 1,080 440 -23 -5.2 4. Securities custody and administration 632 1,285 506 126 24.9 5. Placement of financial instruments 2,815 2,737 1,570 1,245 79.3 Collection and payment services 8,105 16,625 7,593 512 6.7 Other services 5,054 9,779 4,716 338 7.2 Total fee and commission expense 26,827 32,117 15,050 11,777 78.3

Dividend and other similar income came to € The positive impacts on debt securities 37.5 million (down 20.7%). The profit on (+11.2%) should be noted. trading was € 9.3 million, compared with € 16.1 million recorded in June 2011.

PROFIT (LOSSES) ON TRADING (thousands of euro) Change 12/11 - 12/10 1st half 12 - 1st half 11 1st half 2012 2011 1st half 2011 absolute %

Debt securities 2,201 2,322 1,980 221 11.2 Equities & collective investment schemes 697 137 118 579 … Total debt securities, equities & collective investment schemes 2,898 2,459 2,098 800 38.1 Financial derivatives (16,334) 11,130 32,760 (49,094) … Credit derivatives 1,368 1,120 1,010 358 35.4 Currency differences 19,459 9,039 (21,548) 41,007 … Other financial assets/liabilities from trading 1,958 3,091 1,804 154 8.5 Total profit (losses) on trading 9,349 26,839 16,124 (6,775) -42.0

Profit/loss from the disposal or repurchase of Net losses on impairment of loans and other loans and financial assets/liabilities is positive financial items totalled € 77.7 million, up by for a total amount of € 21.4 million (€ 2.1 +53.8% over June 2011. This item includes million as at 30 June 2011), primarily due to losses on impairment of loans of € 59.9 million, financial assets available for sale (€ 20.6 up by 29.2% over June 2011, and those on million) and the repurchase of financial liabilities financial assets available for sale amounted to € (€ 0.9 million). 18 million. Net interest and other banking income amounted to € 456.6 million, an increase of 6.5% compared to June 2011.

85 NET LOSSES/RECOVERIES ON IMPAIRMENT OF LOANS AND OTHER FINANCIAL ITEMS (thousands of euro) Change 12/11 - 12/10 1st half 12 - 1st half 11 1st half 2012 2011 1st half 2011 absolute % Due from banks - (4) (8) 8 -100.0 Loans to customers 59,860 92,821 46,349 13,511 29.2 Credit commitments (other financial transactions) … (159) 2,246 1,850 -2,009 Financial assets available-for-sale 18,048 13,238 2,370 15,678 … Total net losses/recoveries on impairment of loans and other financial items 77,749 108,301 50,561 27,188 53.8

Therefore, the net income from banking that the first half of 2011 included the activities amounted to € 378.9 million, up by substitute tax on leasing contracts whose 0.2% in the twelve-month period. recovery from customers is shown under item 190 “Other operating income Operating expenses amounted to € 263.8 (expenses)”. million, up by 1.1% compared to June 2011. Net provisions for risks and charges amounted In detail, administrative expenses amounted to € to € 0.3 million, down 60.1% compared to June 269.8 million, down by 3.7% over the twelve- 2011. month period and within these: Net losses on property and equipment and on - personnel costs fell by 2.4% to € 166.2 intangible assets amounted to € 23 million, an million); increase of 4.8% in the twelve-month period. - other administrative expenses amounted to € 103.6 million (down 5.8%), due to the fact

OPERATING EXPENSES (thousands of euro) Change 12/11 - 12/10 1st half 12 - 1st half 11 1st half 2012 2011 1st half 2011 absolute %

Personnel costs 166,225 321,986 170,275 -4,050 -2.4 Other administrative expenses 103,601 219,404 109,980 -6,379 -5.8 - general expenses 79,832 161,956 76,206 3,626 4.8 - indirect taxes(1) 23,769 57,448 33,774 -10,005 -29.6 Net provisions for risks and charges 277 812 694 -417 -60.1 Net losses/recoveries on: 23,006 45,674 21,951 1,055 4.8 - intangible assets 13,872 28,064 13,217 655 5.0 - property and equipment 9,134 17,610 8,734 400 4.6 Other operating expenses (income) (29,282) (75,330) (42,062) 12,780 -30.4 Total operating expenses 263,827 512,546 260,838 2,989 1.1 (1) The taxes recovered from the customers are recorded in item 190 “Other operating expense and revenues”.

Other operating income fell by 30.4%, substitute tax paid on leasing contracts whose amounting to € 29.3 million given that the first cost was shown under item 150 b “Other half of 2011 also included recoveries of administrative expenses”.

86 OTHER OPERATING EXPENSES (INCOME) (thousands of euro) Change 12/11 - 12/10 1st half 12 - 1st half 11 1st half 2012 2011 1st half 2011 absolute %

Lease income and rent 2,814 5,322 2,650 164 6.2 Charges to third parties: 19,433 51,010 29,638 -10,205 -34.4 recovery of taxes (1) 19,408 50,957 29,611 -10,203 -34.5 customer insurance premiums 25 53 27 -2 -7.4 Other revenues 16,526 35,194 15,775 751 4.8 Total other income 38,773 91,526 48,063 -9,290 -19.3 Operating costs on financial leases (2,860) (1,106) (522) -2,338 … Ordinary maintenance costs on investment (368) (756) (848) 480 -56.6 Expenses for improvement of third parties’ assets (332) (657) (307) -25 8.1 Other expenses (5,931) (13,677) (4,324) -1,607 37.2 Total other expenses (9,491) (16,196) (6,001) -3,4906,001 58.2 100.0 6 001 Total net operating expenses (income) 29,282 75,330 42,062 -12,780 -30.4

(1) The item is composed of taxes recovered from the customers, the cost of which is recorded under sub-item 150 b) "Other administrative costs" in the income statement.

Taking into account taxes on income from higher IRAP paid due to the non-deductibility of continuing operation of € 20.4 million, net profit staff costs from the latter tax. stood at € 94.7 million, up 13.1% compared to The total comprehensive income, which includes € 83.7 million in the first half of 2011. the income components charged directly to Under the item taxes for the year, a total of € 14 shareholders’ equity, was a positive € 183 million was accounted for deriving from the million, compared to a positive result of € 110.7 possibility of deducting from IRES taxable million in June 2011. The increase derives income, for previous years, (set forth by art. 4, mainly from the increase in the fair value of paragraph 12 of Decree Law 16/2012), the available-for-sale financial assets in the first half of 2012.

87 4. Relations with related parties

Asset and liability transactions with shareholders a significant influence) and with other related who are able to exercise a significant influence, parties as at 30 June 2012 were as follows: with investee companies (subsidiaries subject to

RELATIONS WITH SHAREHOLDERS AND WITH INVESTEE COMPANIES (thousands of euro) 30/06/2012 Assets Liabilities Guarantees Dividends Other revenues Expense and commitments distributed CARIGE SHAREHOLDERS WHO EXERCISE A SIGNIFICANT INFLUENCE 49,423 - - 61,176 575 1,428

Fondazione Cassa di Risparmio di Genova e Imperia 49,423 - - 61,176 575 1,428

30/06/2012 Assets Liabilities Guarantees Dividends Other revenues Expense and commitments collected SUBSIDIARIES 2,951,040 957,799 20,277 31,370 59,469 20,610 Cassa di Risparmio di Carrara SpA 642,828 137,011 1,880 4,184 7,828 4,393 Cassa di Risparmio di Savona S.p.A. 921,689 128,304 2,240 11,889 9,324 3,221 Banca del Monte di Lucca SpA 466,018 60,099 2,326 1,397 6,729 997 Banca Cesare Ponti SpA 381,655 188,046 478 4,872 3,481 2,619 Banca Carige Italia SpA - 7,004 - - - 5 Carige Asset Management Sgr SpA 6,690 8,976 - 1,035 12,354 395 Centro Fiduciario SpA 872 1,160 - 327 341 280 Argo Finance One Srl 15 12 - - 5 - Argo Mortgage Srl 7 12 - - 5 - Argo Mortgage 2 Srl 17 11 - - 5 - Priamar Finance Srl 15 12 - - 5 - Columbus Carige Immobiliare SpA 4,541 11 - - 141 - Carige Vita Nuova SpA 3,537 392,010 - - 6,169 8,444 Carige Assicurazioni SpA 28,324 11,077 11,645 - 2,748 184 Assi 90 Srl 16 3,546 - - 3 11 Dafne Immobiliare Srl 118 1,002 - - - - IH Roma Srl 139 1,833 - - - - Creditis Servizi Finanziari SpA 494,525 17,653 1,708 7,666 10,321 61 Carige Covered Bond Srl 29 10 - - 5 - Carige Covered Bond 2 Srl 5 10 - - 5 -

ENTITIES SUBJECT TO SIGNIFICANT INFLUENCE 3,389 494 280 332 41 7 Autostrada dei Fiori SpA and subsidiaries 3,389 72 51 332 41 7 Sport e Sicurezza Srl - 380 229 - - - Nuova Erzelli Srl - 42 - - - - Total 2,954,429 958,293 20,557 31,702 59,510 20,617

(1) Items "Other revenues" and "Expenses" include also components related to hedging derivatives and equalised trading.

RELATIONS WITH OTHER RELATED PARTIES (thousands of euro) Assets Liabilities Guarantees Revenues Expense Purchase of and goods and commitments services

Other related parties 7,890 7,076 535 204 102 16 TOTAL 7,890 7,076 535 204 102 16

For the definition of other related parties, please refer to the paragraph "Transactions with related parties” in the Explanatory Notes to the Condensed Consolidated Half-yearly Financial Statements.

88 5. Regulatory capital

REGULATORY CAPITAL AND SOLVENCY RATIOS (1) (thousands of euro) Situation as at 30/06/2012 31/12/2011 30/06/2011

Regulatory capital Core Tier 1 Capital 1,858,715 1,406,247 1,490,751 Tier 1 capital 2,018,615 1,566,147 1,650,651 Tier 2 capital 815,126 835,641 887,291 less: deductions -339,213 -339,213 -340,485 Total capital 2,494,529 2,062,575 2,197,457

Tier 3 capital - - - Tier 3 calculable portion - - -

Regulatory capital including Tier 3 2,494,529 2,062,575 2,197,457

Weighted assets Credit risk 18,895,339 18,502,868 17,989,010 Market risk 172,398 217,483 246,368 Operational risk 1,594,690 1,594,690 1,581,444 Other prudential requirements - - - Total weighted assets 20,662,428 20,315,041 19,816,823 Capital requirements Credit risk 1,511,627 1,480,229 1,439,121 Market risk 13,792 17,399 19,709 Operational risk 127,575 127,575 126,516 Other prudential requirements - - - Capital reduction by 25% 413,249 406,301 396,336 Total requirements 1,239,746 1,218,902 1,189,009 Surplus capital 1,254,783 843,673 1,008,447 Ratios Core Tier 1/ 75% Total Risk-Weighted Assets 12.0% 9.2% 10.0% Tier 1 capital/ 75% Total weighted assets 13.0% 10.3% 11.1% Regulatory capital including Tier 3 capital/ 75% Total weighted assets 16.1% 13.5% 14.8%

(1) Pending official regulatory figures to be disclosed, figures relating to weighted assets, capital requirements and ratios as at 30 June 2012 result from accounting and management estimates. Similarly, comparison figures as at 30 June 2011 differ from those originally published and resulting from estimates.

89 deposits, especially in the assets under SUBSIDIARY BANKS administration segment. In this context, in order to maintain a balanced distribution of maturities, subsidiary banks issue It should be noted that, in 2006, the Parent bonds fully subscribed by the Parent Company Company decided to be the only bond issuer, and recognised in direct deposits. leaving only placement activity to the other For bank subsidiaries these transactions resulted banks of the Group: consequently, subsidiary in a higher amount of assets under banks do not take account of bonds placed with administration and bonds and a decrease in customers in direct deposits, but in indirect interbank liabilities.

90 CASSA DI RISPARMIO DI SAVONA ( thousands of euro) Situation as at Change % 30/06/2012 31/12/2011 30/06/2011 06/12 06/12 12/11 06/11 BALANCE SHEET Total assets 1,991,696 1,914,913 1,817,823 4.0 9.6 Direct deposits (a) 1,337,585 1,386,240 1,229,069 -3.5 8.8 Indirect deposits (b) 1,768,891 1,804,439 1,849,634 -2.0 -4.4 - Assets under management 644,468 646,864 694,936 -0.4 -7.3 - Assets under administration 1,124,423 1,157,575 1,154,698 -2.9 -2.6 Financial Intermediation Activities (FIA) (a+b) 3,106,476 3,190,679 3,078,703 -2.6 0.9 Loans to customers (1) 1,573,815 1,506,796 1,452,093 4.4 8.4 Securities portfolio 331,131 310,770 186,278 6.6 77.8 Share capital and reserves 178,607 176,369 176,600 1.3 1.1 INCOME STATEMENT Net interest and other banking income 38,831 66,976 31,448 23.5 Net income from banking activities 36,003 60,151 27,686 30.0 Income (loss) before tax from continuing operations 17,772 21,187 8,074 … Net income (loss) for the period 12,177 13,254 4,443 … RESOURCES Number of branches 50 50 50 -- Staff 333 334 341 -0.3 -2.3 (1) Before value adjustments.

The Financial intermediation activities (FIA) of loans/loans ratio stood at 3.1% (2.5% in Cassa di Risparmio di Savona SpA, amounted to December and 2.5% in June 2011). € 3,106.5 million, down 2.6% compared to the The securities portfolio amounted to € 331.1 end of 2011 and rose by 0.9% compared to million, up by 6.6% in the six-month period and June 2011. Direct deposits amounted to € by 77.8% in twelve months. 1,337.6 million, down by 3.5% in six months, The income statement posted a net profit of € but up by 8.8% over the year. Including bond 12.2 million, more than double the € 4.4 million issues carried out on behalf of Banca Carige recorded in June 2011, mainly thanks to the and excluding intercompany issues, direct trend in interest margin and net commissions. deposits fall by 2.4% in six months and 1.1% in The cost/income ratio fell from 62.4% to 46.9% twelve months. Short-term deposits totalled € in the year. 801.1 million, down 5.7% over December and Net interest margin grew by 24% to € 24.5 4.4% over June 2011. The medium/long-term million; net fee and commissions grew by 19.2% component, standing at € 536.5 million, was to € 13.5 million; the profit on trading was € essentially stable compared to December 2011 621 thousand, compared to € 26 thousand in (-0.1%) and rose by 37.2% in twelve months. 2011; net interest and other banking income Indirect deposits amounted to € 1,768.9 million, rose by 23.5%, reaching € 38.8 million. down 2% and 4.4% compared to December Net losses on impairment of loans and other and June 2011; more specifically, assets under financial assets amounted to € 2.8 million, management came to € 644.5 million (-0.4% versus € 3.8 million in June 2011. and -7.3% in six and twelve months Operating expenses totalled € 18.2 million, respectively), assets under administration totalled down by 7%. € 1,124.4 million (-2.9% and -2.6% in six and The income before tax from continuing twelve months respectively). Excluding bond operations amount to € 17.8 million (€ 8.1 issues placed on behalf of Banca Carige, million in June 2011). Net of tax on income indirect deposits fall by 4% and 8.1% in six and from continuing operations, amounting to € 5.6 twelve months. million, the profit for the year totalled € 12.2 Loans to customers, before value adjustments, million. amounted to € 1,573.8 million, up by 4.4% in Personnel numbered 333 units in the half, down the half and 8.4% from June 2011. The bad by 1 unit.

91 BANCA DEL MONTE DI LUCCA ( thousands of euro) Situation as at Change % 30/06/2012 31/12/2011 30/06/2011 06/12 06/12 12/11 06/11 BALANCE SHEET Total assets 1,026,857 1,019,642 998,329 0.7 2.9 Direct deposits (a) 868,991 869,455 809,222 -0.1 7.4 Indirect deposits (b) 531,239 535,684 539,198 -0.8 -1.5 - Assets under management 121,629 117,237 125,520 3.7 -3.1 - Assets under administration 409,610 418,447 413,678 -2.1 -1.0 Financial Intermediation Activities (FIA) (a+b) 1,400,230 1,405,139 1,348,420 -0.3 3.8 Loans to customers (1) 935,278 931,144 922,002 0.4 1.4 Securities portfolio 52,680 43,911 28,712 20.0 83.5 Share capital and reserves 81,093 80,904 65,905 0.2 23.0 INCOME STATEMENT Net interest and other banking income 17,026 31,822 15,460 10.1 Net income from banking activities 14,765 25,164 12,423 18.9 Income (loss) before tax from continuing operations 4,437 5,273 2,409 84.2 Net income (loss) for the period 3,063 2,511 1,073 … RESOURCES Number of branches 23 23 22 - 4.5 Staff 168 168 167 - 0.6 (1) Before value adjustments.

Financial intermediation activities on behalf of in December and 6.2% in June 2011). The customers (FIA) of Banca del Monte di Lucca securities portfolio amounted to € 52.7 million, SpA totalled € 1,400.2 million, stable in the last € 43.9 as at December and € 28.7 as at June half and up by 3.8% in the twelve-month period. 2011. Within FIA, direct deposits stood at € 869 The income statement showed a net profit of € million, stable in the half and up 7.4% over 3.1 million, higher than the € 1.1 million in June twelve months, while indirect deposits came to € 2011, mainly due to the growth in the interest 531.2 million, down by 0.8% in the last half and margin and net fee and commissions; the 1.5% in twelve months. Excluding intercompany cost/income ratio fell from 64.8% to 60.7%. The bond issues and including bond issues carried interest margin increased by 3.8%, to € 11.2 out on behalf of Banca Carige, direct deposits million. Net commissions rose by 17.1%, recorded contained growth of 0.3% in six standing at € 5.5 million. In total, the net interest months, and a modest decrease of 0.8% over and other banking income increased by 10.1%, the year. Short-term deposits, at € 408 million, to € 17 million. Net losses on impairment of showed a decrease of 0.4% in six months and loans and other financial assets amounted to € 4.1% over the year. The medium-/long-term 2.3 million (€ 3 million in June 2011). component, at € 461 million, was stable in the Operating expense increased by 3.1% to € 10.3 half and up by 20.1% in twelve months. Within million. In particular, personnel expenses rose by indirect deposits, assets under management 0.4%, reaching € 6.3 million, while other amounted to € 121.6 million, up 3.7% over administrative expenses increased by 0.7% to € December 2011 and down 3.1% over June 4.4 million. The income before tax from 2011, assets under administration came to € continuing operations amount to € 4.4 million (€ 409.6 million, down 2.1% in the last half and 2.4 million in June 2011). Net of tax on income 1% over the year; excluding bond issues carried from continuing operations amounting to € 1.4 out on behalf of Banca Carige, indirect deposits million, the profit for the year totalled € 3.1 fell by 2.9% in the half and 6% over twelve million. months. Loans to customers, before value Staff units numbered 168, stable compared to adjustments, amounted to € 935.3 million, up the end of the year. 0.4% in the half, and 1.4% in the year. The bad loans/gross loans ratio was equal to 8.2% (7.2%

92 CASSA DI RISPARMIO DI CARRARA (thousands of euro) Situation as at Change % 30/06/2012 31/12/2011 30/06/2011 06/12 06/12 12/11 06/11 BALANCE SHEET Total assets 1,503,190 1,413,118 1,376,888 6.4 9.2 Direct deposits (a) 1,033,183 1,022,977 1,070,306 1.0 -3.5 Indirect deposits (b) 1,030,529 1,059,322 1,070,409 -2.7 -3.7 - Assets under management 320,773 318,707 340,432 0.6 -5.8 - Assets under administration 709,756 740,615 729,977 -4.2 -2.8 Financial Intermediation Activities (FIA) (a+b) 2,063,712 2,082,299 2,140,715 -0.9 -3.6 Loans to customers (1) 1,099,871 1,092,105 1,059,589 0.7 3.8 Securities portfolio 261,439 241,074 140,848 8.4 85.6 Share capital and reserves 120,260 119,163 118,810 0.9 1.2 INCOME STATEMENT Net interest and other banking income 28,110 46,761 22,355 25.7 Net income from banking activities 25,443 40,624 22,054 15.4 Income (loss) before tax from continuing operations 8,615 9,166 6,279 37.2 Net income (loss) for the period 5,987 4,943 3,594 66.6 RESOURCES Number of branches 37 37 35 - 5.7 Staff 313 319 318 -1.9 -1.6 (1) Before value adjustments.

Financial intermediation activities on behalf of December and 4.4% in June 2011). The customers (FIA) of Cassa di Risparmio di securities portfolio amounted to € 261.4 million, Carrara SpA totalled € 2,063.7 million, down up 8.4% compared to December and 85.6% 0.9% in the last half and 3.6% in the twelve- over June 2011. month period. Within financial intermediation The income statement posted a net profit of € 6 activities, direct deposits stood at € 1,033.2 million, up 66.6% over the figure in June 2011, million, up 1% in the half but down 3.5% in in particular thanks to the trend in interest twelve months; including bond issues effected margin, net fee and commissions and profits on on behalf of Banca Carige and excluding trading. The cost/income ratio fell to 59.9%, intercompany issues, direct deposits increase by compared to 70.6% in June 2011. 2.1% in the last half and but fall by 1.4% in The interest margin amounted to € 17.8 million twelve months. Short-term deposits, amounting (+23.2%); net fee and commissions stood at € to € 676.7 million, recorded an increase of 9.5 million (+20%); profit on trading was € 740 1.5% in the half, but fell 4.9% in twelve months. thousand (negative € 69 thousand in June The medium-/long-term component, at € 356.5 2011). Net interest and other banking income million, was essentially stable in the half and up reached € 28.1 million, an increase of 25.7%. down 0.7% in twelve months. Losses on impairment of loans and other Indirect deposits came to € 1,030.5 million, financial assets amount to € 2.7 million (€ 0,3 down by 2.7% in the half and 3.7% in twelve million in June 2011). Operating expenses months; within this component, assets under came to € 16.8 million (up 6.7%). Personnel administration totalled € 709.8 million (down expenses, increased by 7.6% to compared to 4.2% over December and 2.8% on June 2011) June 2011. and assets under management amounted to € The income before tax from continuing 320.8 million (up 0.6% and down 5.8% over operations amount to € 8.6 million (€ 6.3 December and June 2011). Excluding bond million in June 2011). Net of tax on income issues effected on behalf of Banca Carige from continuing operations of around € 2.6 indirect deposits fall by 6.4% in the half and 9% million, profit for the year came to € 6 million, over the year. Loans to customers, before value against € 3.6 million in 2011. adjustments, amounted to € 1,099.9 million, up Bank staff numbered 313 units, down in the half 0.7% in the half, and 3.8% in the year. The bad due to 6 terminations. loans/gross loans ratio stood at 6.2% (5.6% in

93 BANCA CESARE PONTI ( thousands of euro) Situation as at Change % 30/06/2012 31/12/2011 30/06/2011 06/12 06/12 12/11 06/11 BALANCE SHEET Total assets 823,004 719,528 545,461 14.4 50.9 Direct deposits (a) 366,391 371,498 369,997 -1.4 -1.0 Indirect deposits (b) 1,891,585 1,898,667 1,830,425 -0.4 3.3 - Assets under management 719,949 577,308 580,765 24.7 24.0 - Assets under administration 1,171,636 1,321,359 1,249,660 -11.3 -6.2 Financial Intermediation Activities (FIA) (a+b) 2,257,976 2,270,165 2,200,422 -0.5 2.6 Loans to customers (1) 114,219 114,443 113,380 -0.2 0.7 Securities portfolio 594,415 490,710 291,998 21.1 … Share capital and reserves 62,070 57,260 57,259 8.4 8.4 INCOME STATEMENT Net interest and other banking income 11,486 18,050 7,969 44.1 Net income from banking activities 11,080 17,648 7,860 41.0 Income (loss) before tax from continuing operations 4,153 5,462 1,766 … Net income (loss) for the period 2,513 9,681 7,530 -66.6 RESOURCES Number of branches 7 7 6 - 16.7 Staff 81 81 81 -- (1) Before value adjustments.

Financial intermediation activities (FIA) on behalf million (€ 490.7 million as at December and € of the customers of Banca Cesare Ponti SpA 292 million as at June 2011). totalled € 2,258 million (down 0.5% in the half The income statement shows a net profit of € and up 2.6% in the year), due, in particular, to 2.5 million. The cost/income ratio fell to 60.3% the managed component of indirect deposits. As from 76.5% in June 2011. regards financial intermediation activities, direct Net interest margin stood at € 6.9 million (€ 4.2 deposits came to € 366.4 million (down 1.4% in million in June 2011). Net fee and commissions six months and down 1% over twelve months) increased by 22.1% to € 4.6 million. The net and indirect deposits totalled € 1,891.6 million interest and other banking income is therefore € (-0.4% in the half and +3.3% in the year); 11.5 million (+44.1%). Loss on impairment of within the latter component, assets under loans and other financial assets amounted to € management amounted to € 720 million 406 thousand; within this component, losses on (+24.7% and +24% respectively); assets under impairment of loans totalled € 397 thousand. administration totalled € 1,171.6 million, down Operating expenses stood at € 6.9 million (up 11.3% in the half and 6.2% in the year). Short- 16.6%), of which € 4.2 million personnel costs term deposits, at € 365.4 million, showed an and € 3.4 million other administrative expenses. increase of 2.8% in six months and were up by The income before tax from continuing 3.3% over the year. Loans to customers, before operations amounts to € 4.2 million. Net of value adjustments, amounted to € 114.2 million taxes on income from continuing operations (stable in the half, and up 0.7% in the year). The amounting to € 1.6 million, the profit for the bad loans/gross loans ratio was equal to 0.7% year totalled € 2.5 million. (0.2% in December and 0.2% in June 2011). The Bank’s workforce comprises 81 employees, The securities portfolio amounted to € 594.4 of which 26 work at the main office and 55 in the market.

94

ISVAP Provision No. 2845 dated 17 November INSURANCE SUBSIDIARIES 2010 ). It should be noted that such results are different from those reported in the section “Insurance The results of the two insurance companies of activities” of this Report in which the the Group (Carige Assicurazioni SpA and information, gathered from the so-called Carige Vita Nuova SpA) are presented below, reporting packages, is prepared by the prepared in accordance with the applicable companies based on the joint provisions of Bank provisions of the Italian Civil Code and with the of Italy Instruction no. 262 dated 22 December provisions specific for the insurance industry in 2005, ISVAP Regulation no. 7 dated 13 July Italy (Legislative Decree 173/1997, Legislative 2007 amended by ISVAP Provision No. Decree 209/2005, ISVAP Regulation No. 2784/2010 and consistent instructions from the 22/2008 amended and supplemented by ISVAP Parent Company. Provision 2771 dated 29 January 2010 and by

CARIGE ASSICURAZIONI ( thousands of euro.) Situation as at Change % 06/12 06/12 30/06/2012 31/12/2011 30/06/2011 12/11 06/11

Recognised gross premiums 336,458 673,688 346,165 -2.8 Premiums excluding reinsurance 304,183 616,266 318,464 -4.5 Claims incurred and settled net of reinsurance 229,165 474,878 235,513 -2.7 Operating costs 75,624 154,839 80,532 -6.1 Profit/loss from technical account -7,794 -9,480 635 … Profit for the period -7,664 -9,404 -798 … Investments (1) 746,283 782,922 822,570 -4.7 -9.3 Technical reserves net of reinsurance 776,345 796,498 813,725 -2.5 -4.6 Shareholders' equity with income 120,014 127,677 136,283 -6.0 -11.9 Insurance agencies 426 421 429 1.2 -0.7 Staff 382 375 375 1.9 1.9

(1) Included cash equivalents.

The shareholders’ equity of Carige Assicurazioni investments equal to € 0.7 million, compared to SpA as at 30 June 2012 (operating in the non- € 5 million in the previous year. The income life segment) amounted to € 120 million; statement consolidates the effects of the issuing, technical reserves net of the reinsurance by ISVAP, of Regulation no. 43 of 12 July 2012 amount, in the first six months, decreased by which limited, with respect to Regulation no. 28 2.5%, while investments decreased by 4.7% and previously in force, the possibility of the stood at € 776.3 million. sterilisation of losses from the market alignment The first half of 2012 closed with a negative of solely Government bonds issued or secured result of € 7.7 million, compared with a loss of € by EU Member States. Due to the adoption of 0.8 million in the same period in 2011. The the new above-mentioned provisions, losses of income of the technical account decreased from around € 10.5 million were booked to the € 0.6 million in June 2011 to a negative € 7.8 income statement, relating to bonds that do fall million in 2012. The result was affected by the within the field of application of ISVAP fall in premiums for the period net of Regulation no. 43. The undistributable reserve reinsurance (-4.5% to € 304.2 million), the as at 30 June 2012, calculated on the basis of reduction in management expenses (-6.1% to € new Regulation no. 43, amounted to € 18.7 75.6 million), by a fall in claims for the period, million. including the claims of previous years, net of reinsurance (down 2.7% to € 229.2 million), and the transfer of a portion of the profit from

95

CARIGE VITA NUOVA SPA ( thousands of euro) Situation as at Change % 06/12 06/12 30/06/2012 31/12/2011 30/06/2011 12/11 06/11 Recognised gross premiums 221,698 596,432 339,907 -34.8 Premiums excluding reinsurance 219,274 588,456 336,279 -34.8 Claims incurred and settled net of reinsurance (1) 178,103 369,752 190,079 -6.3 Operating costs 11,520 26,456 13,458 -14.4 Profit/loss from technical account -4,286 -3,182 7,456 … Profit for the period -192 4,349 6,922 … Investments (2) 4,197,521 4,109,394 3,962,618 2.1 5.9 Technical reserves net of reinsurance (2) 4,028,300 3,925,513 3,830,811 2.6 5.2 Shareholders' equity with income 218,953 219,145 171,718 -0.1 27.5 Insurance agencies 310 306 303 1.3 2.3 Staff 116 118 113 -1.7 2.7 (1) The item includes the amounts paid net of reinsurance ceded. (2) Including cash equivalents and the investments where risk is borne by the insured and pension funds. These are mainly investments in index- and unit-linked products.

The shareholders’ equity as at 30 June 2012 of negative effect of around € 7 million (at Carige Vita Nuova SpA (operating in the life consolidated level according to IAS, the effect insurance industry) amounted to € 219 million; stands at a negative € 28 million), which is offset investments and technical reserves rose by 2.1% by gains from sales on the securities portfolio. (to € 4,198 million) and by 2.6% (to € 4,028 Premiums issued recorded a decrease of 34.8%, million) in the first six months respectively. down from € 339.9 million to € 221.7 million, The first half of 2012 recorded a loss of € 0.2 against a reduction of 21% registered by the million, compared to a profit of € 6.9 million in market in March 2012. The highest loss was June 2011. recorded in the agency channel, with a 39.7% Income from technical management decreased decrease, primarily due to the issue in the first from € 7.5 million in June 2011 to a negative € half of 2011 of capitalisation policies, for a total 4.3 million in June 2012. It should be noted amount of around € 12.3 million; in 2012 the that as regards the close of the first half of company resolved not to acquire these policies, 2012, the income statement consolidates the to reduce the inherent risks. Excluding said effects of the issuing, by ISVAP, of Regulation policies, a 1.7% decrease in production would no. 43 of 12 July 2012 which limited the be recorded. possibility of the sterilisation of losses from the The decrease in premiums issued had no market alignment of solely Government bonds significant effects on the result for the year, as issued or secured by EU Member States. In fact, charges related to products currently traded in losses of around € 22 million were booked to the subscription year do not generate any the income statement, relating to bonds that do significant profits. fall within the field of application of ISVAP The charges for claims in the financial year (net Regulation no. 43. The undistributable reserve of reinsurance ceded), which also included as at 30 June 2012, calculated on the basis of redemptions and expirations, amount to € 178.1 new Regulation no. 43, amounted to € 33.7 million, down by 6.3% over the same period last million. year. This decrease is due mainly to the lower In the second quarter, charges were also amount of products maturing, partly offset by accounted for deriving from the adhesion to the the increase in redemptions to € 106.2 million proposed exchange of Greek securities, so- in June 2012, compared to € 78.8 million in called PSI (Private Sector Involvement), with a June 2011.

96

FINANCIAL SUBSIDIARIES

CARIGE A.M. SGR (thousands of euro) Situation as at Change % 06/12 06/12 30/06/201231/12/201130/06/2011 12/11 06/11 DEALING Assets under management 4,316,177 4,434,841 4,912,698 -2.7 -12.1 - Mutual funds 3,407,678 3,548,804 3,991,510 -4.0 -14.6 - Assets management (customer assets) 411,176 417,832 466,335 -1.6 -11.8 - Insurance products (customer assets) 155,072 153,876 154,593 0.8 0.3 - Pension funds 342,251 314,328 300,259 8.9 14.0 Total assets 16,999 17,854 18,145 -4.8 -6.3 Share capital and reserves 7,421 7,445 7,443 -0.3 -0.3 INCOME STATEMENT Net fee and commission income 3,938 8,734 4,412 -10.7 Administrative expenses 3,490 6,789 3,499 -0.3 Operating income 470 1,935 876 -46.3 Profit for the period 341 1,145 511 -33.3 RESOURCES Staff (1) 33 33 33 --

(1) Seconded Parent Company personnel.

Carige AM SGR SpA manages 15 mutual Funds December 2011, while the insurance segments (of which 14 targeted at retail customers and recorded slight growth of 0.8%. one reserved for institutional investors), the 4 Profit amounted to € 341 thousand, down € 169 sub funds of the Fondo Pensione Aperto Carige, thousand over the first half of the previous year, as well as the portfolios of products for which due to the constant decrease in assets managed Group companies delegated the management which led to lower net commissions of € 428 of the related financial resources; specifically, thousand. In particular, net commissions individual asset management lines of the Parent amounted to € 3.9 million, resulting from Company, internal lines of the Gestilink commission income of € 17.3 million and insurance fund, and the insurance product Rosa commission expense of € 13.4 million. Net dei Venti. interest and other banking income totalled € 4 Overall, assets under management came to € million and operating and running costs totalled 4.3 billion, down 2.7% in the last six months. € 3.6 million; therefore, the result from The trend confirms the solid progress of the operations came to € 470 thousand. Fondo Pensione Aperto (+8.9%), but also the After income tax, equal to € 128 thousand, the slowdown in the volumes of mutual funds (down net profit was € 341 thousand. 4%). As regards the products managed by virtue Carige AM SGR has 33 employees, all of delegation, Assets under Management seconded by the Parent Company. recorded a decrease of 1.6% from the end of

97 CREDITIS SERVIZI FINANZIARI (thousands of euro)

Situation as at Change % 06/12 06/12 30/06/2012 31/12/2011 30/06/2011 12/11 06/11 DEALING Loans to customers (1) 522,220 489,192 459,491 6.8 13.7 - Personal loans (1) 412,963 400,387 384,377 3.1 7.4 - Revolving credit cards (1) 20,110 19,433 18,323 3.5 9.8 - Salary-backed loans (1) 89,147 69,372 56,791 28.5…… 57.0 Total assets 545,360 524,520 490,410 4.0 11.2 Capital and reserves 39,541 38,680 39,860 2.2 -0.8 INCOME STATEMENT Net interest income 11,701 20,712 9,827 19.1 Net commissions 1,859 3,458 1,868 -0.5 Administrative costs 4,846 9,029 4,559 6.3 Operating income 6,476 12,577 5,905 9.7 Profit for the period 4,175 8,070 3,696 13.0 RESOURCES Staff (2) 37 38 34 -2.6 8.8 (1) Before value adjustments. (2) Seconded Parent Company personnel.

Creditis Servizi Finanziari SpA, operating since net interest margin stood at € 11.7 million. 2008, continued to consolidate its activities. Interest margin, at € 18.5 million, is made up Loans to customers reached € 522.2 million, mainly by interest on personal loans (€ 14.9 compared to € 489.2 million at 31 December million). Interest payable amounts to € 6.8 2011. During the half, 8 thousand personal million and was generated by loans given by the loans were granted totalling € 85.9 million, and Parent Company. Commission income over 1,800 salary-backed loans totalling € 26.2 amounted to € 2.4 million, of which € 1.6 million. In the same period, more than 3 million in commission from insurance thousand instalment-based credit cards were companies for the distribution of policies. issued and almost 700 were activated by Commission expense amounted to € 0.5 million, customers; there were 68 thousand uses for a of which € 0.2 million in bank commissions paid total of € 7.1 million. Almost 4,800 instant to the Parent Company. Net value adjustments credit contracts were agreed (revolving credit for impaired loans amounted to € 2.2 million. In lines using the insurance network to divide the terms of expenses, costs for staff, fully seconded third party motor liability policies into instalments by the Parent Company, amounted to € 1.8 when subscribing to the policy or renewing it) by million. Other administrative costs, including the 220 insurance agents with arrangements amortisation and depreciation, total € 3.3 with the Company, with a total of € 3.1 million million. The pre-tax result was a positive € 6.5 financed. million; net of income taxes of € 2.3 million, a From an economic perspective, the first half of profit of € 4.2 million was generated. 2012 closed with a profit of € 4.2 million. The

98 Argo Finance One Srl, vehicle company in the 2012, the company purchased loans originated securitisation of bad loans, carried out by Banca not only by the Parent Company Banca Carige Carige at the end of 2000, recorded takings € SpA but also by subsidiary banks Cassa di 1.5 million in the first half of 2012. Against a Risparmio di Savona SpA, Cassa di Risparmio di net value from disposal of loans of € 165.3 Carrara SpA and Banca del Monte di Lucca million, collections from the start of the SpA. Total loans transferred by the Banca operation amounted to € 229 million. A total of Carige Group to the vehicle company came to € € 15.2 million in class C securities entirely 6.5 billion which, as at 30 June 2012, remained subscribed by Carige remain to be paid. as residual debt totalling € 5.2 billion. Covered bank bonds issued as part of this Priamar Finance Srl, special purpose vehicle for programme and still not paid as at 30 June the securitisation of bad loans established by 2012 amounted to € 3.3 billion, of which € 180 Cassa di Risparmio di Savona at the end of million represent bonds issued in the first half of 2002, collected € 0.4 million in the first half of 2012; bonds used by the Parent Company for 2012. Against a net value from disposal of medium and long-term refinancing operations at loans of € 28 million, collections from the start the ECB amounted to € 850 million. of the operation amounted to € 40.9 million. A total of € 3.5 million in class B securities entirely Carige Covered Bond 2 Srl is the special subscribed by subsidiary Cassa di Risparmio di purpose vehicle for the medium-/long-term Savona remain to be paid. deposit programme for a maximum of € 5 billion, to be implemented over a period of five Argo Mortgage Srl, a special purpose vehicle for years (2011-2016). the securitisation of private mortgage loans During the first half of 2012, two transfers of established by Banca Carige at the end of commercial mortgages were completed, 2001, recorded takings for a total of € 579.3 amounting to € 1 billion, originated not only by million, of which € 7 million in the first half of the Parent Company Banca Carige SpA, but 2012. also subsidiary banks Cassa di Risparmio di As at 30 June 2012, the following securities Savona SpA, Cassa di Risparmio di Carrara SpA were in issue: and Banca del Monte di Lucca SpA. In the first half of 2012, a first tranche of - € 11.2 million in class A securities; covered bank bonds of € 800 million was - 22 million in class B securities; € issued, used by the Parent Company for medium - 11.5 million in class C securities; € and long-term refinancing operations at the - € 9.2 million in class D securities. ECB. Argo Mortgage 2 Srl, a special purpose vehicle in the securitisation of mortgage loans to private customers, established by Banca Carige in June 2004, registered overall collections of € 846.9 million, € 24.4 million of which in the first half of 2012. As at 30 June 2012, the following securities were in issue:

- € 136 million in class A securities; - € 26.8 million in class B securities; - € 29.3 million in class C securities.

Carige Covered Bond Srl is the special purpose vehicle used to carry out the medium/long-term deposit programme for a maximum of € 5 billion, to be implemented over a period of five years (2008-2013). In the first half of 2012, the sales of a further two blocks of loans deriving from residential and commercial mortgages were completed, totalling € 1 billion. Overall, as at 30 June

99

period in 2011, a result achieved by charging taxes of 99 thousand. THE OTHER MAIN SUBSIDIARIES € Production revenues stood at 677 thousand, a € reduction of 8.2% on the previous year, as a

result of the decrease in both fiduciary Columbus Carige Immobiliare SpA closed the commissions (-5.9%), and amounts paid by the first half of 2012 with a profit of around 14.7 € Parent Company for the provision of fiduciary thousand, against a loss of € 110.3 thousand in services (-11.4%). the same period in 2011. The decrease recorded by the main revenue The profit is due essentially to the transfer of the items is due largely to the unfavourable deduction of interest expense of previous years economic-financial situation, rather than the loss to tax consolidation and the decrease in of competitiveness of the company which, on the financial charges on credit lines granted by the contrary, essentially maintained the positions Parent Company. Owing to the difficult situation acquired in the previous year, with growth in in the real estate market, no property sales were fiduciary volumes of € 531.5 million. (+0.6% completed in the first half. over the close of 2011).

Ordinary operating costs, which are in line with Immobiliare Carisa Srl recorded a loss of € 12.7 the previous year, reached € 438 thousand, thousand in the first half of 2012, compared to marking an increase of 0.6% compared to a loss or around € 8.4 thousand in the same 2011. period in 2011; the negative result is due to the The ordinary operating profit amounted to € continued lack of property sales. With respect to 239 thousand, a decrease of 20.9%. the same period in the previous year, an The decrease recorded by the ordinary increase in the tax charge was recorded deriving operating profit was largely contained thanks to from the introduction of the Imu (Unique the positive result of extraordinary operations Municipal Tax), as well a decrease in revenues which recorded a surplus of € 51 thousand, from leasing and lower extraordinary expenses marking growth of more than € 30 thousand on properties owned. compared to the previous year.

Centro Fiduciario C.F. SpA closed the first half of 2012 with a net profit of € 191 thousand, down 8.6% compared to the corresponding

Genoa, 30 July 2012

The Chairman of the Board of Directors The Manager in charge of preparing the company’s The General Manager accounting documents

100

101 transaction (in turn reflecting the performance of the securitised assets).

GLOSSARY OF TECHNICAL TERMS AND ACRONYMS Advisor USED Financial broker who assists government authorities or companies involved in privatisations or other corporate finance operations, whose tasks range from the preparation of appraisals, drawing up of documents and provision of general consultancy about specific transactions.

AFS - Available For Sale IAS accounting category used to classify assets available for sale.

A ALM – Asset & Liability Management Integrated management of assets and liabilities designed to

allocate resources with a view to optimising the risk-return ratio.

ABS - Asset-Backed Securities ALT-A Agency Financial instruments issued under securitisation transactions (see Securities backed by Alt-A mortgages, guaranteed by specialised definition), whose yield and redemption are guaranteed by the Government Agencies. assets of the issuer (see definition), exclusively earmarked for the satisfaction of the rights incorporated in said financial instruments. ALT- A - Alternative A Loan Technically, debt securities are issued by an SPV (see definition). Residential mortgages generally of “prime” quality; however the The portfolio underlying the securitisation may comprise mortgages, LTV ratio, the documentation provided, the work/employment loans, bonds, trade receivables, credit card receivables and so on. situation, the type of property or other factors, do not allow them Based on the type of underlying asset, ABS may be classified in: to be qualified as standard contracts able to be used in - credit loan obligations (the portfolio is composed of bank loans); subscription programmes. The main reason for a loan being - collateralised bond obligations CBO (the portfolio is composed classified as “Alt-A” is the non-submission of all the required of junk bonds); documentation. - collateralised debt obligations CDO (the portfolio is composed of bonds, debt instruments and securities in general); Alternative investment - residential mortgage-backed security RMBS (the portfolio is Alternative investments cover a broad range of types of investment, composed of mortgages on residential properties); including those in private equity (see definition) and hedge funds - commercial mortgage-backed security CMBS (the portfolio is (see definition). composed of mortgages on commercial properties). Amortised cost ABS CDO It differs from cost in that it allows for the progressive amortisation CDO type securities (see definition) with underlying ABS tranches. or depreciation of the differential between book value and nominal value of an asset or liability in accordance with the actual rate of Absorbed capital return. Absorbed capital is the capital requested to cover the business risks. It equals the maximum between the regulatory capital (obtained by AP – Attachment Point multiplying the weighted assets by the risk for the core tier 1 ratio Level above which a protection seller would start covering losses objective) and internal capital. Internal capital is the amount of incurred by a protection buyer. Typically used in synthetic CDOs. capital that must be retained to withstand potential losses and is needed to support business activities and the positions held. Total Arranger capital is given by the sum of the economic capital, obtained by In structured finance, the arranger is the person who – albeit in aggregating the different risk types, in addition to a reserve to take different forms with different titles (mandated lead arranger, joint account of the effects of the cycle and risk model. lead arranger, sole arranger etc.) – acts as a coordinator of the organisational aspects of the transaction. ABX index CDS The ABX indexes fall under the ABS Index type. Every ABX refers to Arrangement (commission) a basket of 20 reference obligations belonging to a specific ABS Commission payment for advisory and support services in the segment. Each ABX (a total of five) reproduces a rating class (AAA, structuring and organisation stage of a loan. AA, A, BBB, and BBB-). In fact, for ABX the market does not provide credit curve valuations, but rather a direct price evaluation. Asset allocation As detailed in the ISDA 2005 documentation, the settlement Choice of markets, geographical areas, sectors and products in permitted for ABX Index contracts is PAUG (Pay As You Go). This which to invest. requires the protection seller to pay any incurred losses to the protection buyer as and when they occur, without however Asset management determining termination of the contract. It has to be borne in mind Various forms of activity relating to the management and that hedging through ABI Index purchases, even if structured to administration of customer assets. give the best possible match for the characteristics of the hedged portfolio, remains subject to “basis risk”. In other words, given it is ATM - Automated teller machine not a specific hedge of single positions, it may generate income An automatic electronic device that allows customers to carry out statement volatility in the phases of less than perfect correlation transactions, e.g. cash withdrawals, paying-in of cash or cheques, between index prices and market values of hedged positions. account information requests, bill payments, phone top-ups, etc. Customers activate the terminal by introducing a card and entering Additional return their PIN (personal identification number). Form of remuneration of junior securities deriving from securitisation transactions. In addition to a fixed coupon, these Audit securities accrue periodic earnings (quarterly, half-yearly, etc.), the amount of which depends on the margin produced by the

102 In listed companies, it is the overall checking on the business and Best practice bookkeeping of a company, performed by both in-house staff Identifies conduct commensurate with the more important and/or (internal audit) and independent audit firms (external audit). highest-level skills and techniques achieved in a given technical/professional sphere.

Bid-ask spread The difference between the bid price and the ask price of a given B financial instrument or set of financial instruments.

Back office Bookrunner The unit of a bank, or financial company that handles all See Lead Manager definition. transactions performed by operational units (front office). Business risk Back testing Risks of adverse or unexpected changes in profits/margins Retrospective analysis performed to verify the reliability of the compared to forecasts, related to volatility in turnover due to measurement of risk sources associated with the asset portfolio competitive pressure or market situations. positions.

Bancassurance C Offer of insurance products, normally through the operating network of a bank. CAGR – Compound annual growth rate

The year by year growth rate applied to an investment or other Banking book activities over a multiple-year period. The CAGR calculation Normally refers to securities or financial instruments in general, formula is (current value/base value)^(1/no. of years). identifying the portion of a portfolio dedicated to “proprietary" trading. Capital allocation

A process of how companies divide their investment between the Basel 2 different categories of financial activity (in particular, bonds, shares The new international agreement on capital, which redefines the and liquidity). Capital allocation decisions are determined by the guidelines for the calculation of minimum capital requirements for need to optimise the risk/return ratio in relation to the investor’s banks. time horizon and expectations. The new prudential regulation is based on three pillars:

- first pillar (Pillar 1): without prejudice to the objective of an 8% Capital Asset Pricing Model risk-weighted capital ratio, a new system of rules has been outlined The Capital Asset Pricing Model (or CAPM) is a financial model for the measurement of typical banking and financial risks (credit, that establishes a relationship between the return on a security and counterparty, market and operating risks) which provides for its risk level. It has several financial applications, including the alternative calculation methods characterised by varying levels of “opportunity cost” calculation, i.e. the amount of income needed complexity, with the ability to use, with the prior authorisation of by a company to fund the cost of capital. the Supervisory Body, models developed in-house;

- second pillar (Pillar 2): banks must be equipped with the Capital bonds (insurance) processes and tools for determining the overall level of internal These capitalisation contracts fall under the field of application of capital (Internal Capital Adequacy Assessment Process – ICAAP) direct life insurance pursuant to Legislative Decree no. 209 of 7 necessary to face all types of risk, including those not covered by September 2005 (Private Insurance Code). As set out by Art. 179 the first pillar (overall capital requirement). The Supervisory Body is of the same Legislative Decree, it involves contracts whereby an responsible for examining the ICAAP process, formulating an insurance company - with no agreement on life expectancy - overall opinion and, where necessary, implementing the undertakes to pay specific amounts on expiry of a long-term period appropriate corrective measures; in exchange for single or regular premiums paid, either in cash or - third pillar (Pillar 3): obligations of transparency were introduced through other assets. The contract cannot be for less than five with regard to information disclosed to the public on capital levels, years and includes an option for the contracting party to claim risks and their management. redemption of the contract from the beginning of year two and

provided that the contracting party had paid the premium for the Basel 3 entire year. In accordance with article 42 of the already mentioned Basel 3 indicates a series of instructions approved by the Basel Private Insurance Code, the financial assets to hedge the technical Committee for banking supervision following the financial crisis of reserves are linked solely to performance of the related capital 2007-2008, with the intent of finalising the pre-existing prudential bonds (separate management). Therefore, in the event of regulations of the banking sector (correctly denominated Basel 2), liquidation of the insurance company (article 258), the as well the effectiveness of the regulatory action and the ability of beneficiaries of these policies are actually the preferred owners of intermediaries to manage the risks they undertake. the credit positions.

Capital structure Basis point As regards securitisation transactions (see definition), the SPV Corresponds to one hundredth of one percentage point (0.01%). issues various classes of bond (tranches), guaranteed by the

acquired portfolio, that have different risks and returns, in order to Basis swap satisfy the needs of the different categories of investor. All the Contract providing for the exchange between two counterparties of tranches combined constitute the Capital Structure. The payments linked to different floating rates. subordination ratios between the various tranches are governed by

a series of regulations that specify the distribution of collateral Benchmark losses: Reference parameter of financial investments: can also be • Equity Tranche: the most risky portion of the portfolio, also represented by the most well-known market indexes or by other known as “first loss” and is subordinated to all other tranches; it is indexes considered more representative of the investment’s therefore the first to bear losses that may occur during recovery of risk/return profile. the underlying assets.

103 • Mezzanine Tranche: the intermediate tranche ranking between CMBS - Commercial Mortgage-Backed Securities the equity tranche and the senior tranche. The mezzanine tranche Loan securitisations backed by mortgages on commercial is normally divided into 2-4 tranches with different levels of risk, properties. each subordinated to the others. They are typically characterised by a rating in the BBB-AAA range. CMO - Collateralized Mortgage Obligation • Senior/Supersenior Tranche: the tranche with the highest level of Mortgage-backed securities in which the total amount of the issue credit enhancement (see definition), i.e. the highest level of is broken down into tranches with different maturities and yields. privilege in terms of remuneration and redemption priority. The tranches are repaid in the order specified on issue.

Capitalisation policies Commercial paper See definition Certificates (insurance) of capitalisation Short-term notes issued to gather funds from third-party subscribers as an alternative to other forms of borrowing. Captive Term generically referring to “networks”, or companies operating Concentration risk in the sole interest of the company or the Group to which they A risk resulting from exposures in the banking portfolio to belong. counterparties, groups of counterparties in the same economic sector or who exercise the same activity or belong to the same Cash flow hedge geographical area. Concentration risk can be divided between two The hedging of exposure to cash flow fluctuations attributable to a sub-classes: particular risk. - Single name concentration risk; - Sector concentration risk. Cash management A banking service which, in addition to making a whole series of Conduits information available to companies on the status of relations with Asset-Backed Commercial Paper Conduits are a specific type of the bank, provides an operating tool that allows businesses to Special Purpose Vehicle established for the securitisation of transfer funds and thereby achieve a more efficient treasury different types of assets and financed through the issue of management. Commercial Paper. Commercial Papers are typically securities with a 270-day maturity, for which capital and interest repayment Categories of financial instruments envisaged in IAS 39 depend on cash flows from the underlying assets. Trading activity (Held For Trading – HFT) which includes the Based on the number of underlying asset portfolios, ABCP conduits following; assets purchased for short-term sale or part of portfolios may be classified as single-seller or multi-seller. of instruments managed jointly for the purpose of realising profits Generally the structure of ABCP conduits provides for the in the short-term, and assets that the entity decides to record at fair formation of different SPVs. In fact, top level companies issue value with variation in value entered in the income statement (Fair commercial paper and finance one or more second level SPVs that Value Through Profit & Loss – FVTPL); assets held to maturity (Held acquire the securitised assets. To Maturity – HTM), non-derivative assets with a fixed term and The typical elements of an ABCP Conduit are as follows: payments that are fixed or determinable, concerning which there is • issue of short-term securities that determine a maturity mismatch a real intention and capacity to hold them to maturity; credits and between assets held and securities issued; loans (Loans & Receivables - L&R), non-derivative assets with • Inclusion of lines of liquidity to cover the maturity mismatch; payments that are fixed or determinable, not quoted on the active • Inclusion of guarantees to cover the insolvency risk of assets, market; assets available for sale (Available For Sale – AFS), both specific and used on the programme as a whole. specifically designated as such, or others not falling under the previous types. Consumer ABS ABS backed by consumer credit. CBO - Collateralised Bond Obligation CDO type securities (see definition) with underlying bonds. Contingency funding plan Intervention plans for liquidity management in crisis conditions; CDO - Collateralised Debt Obligation their main objective is to protect the bank’s capital in the event of Debt securities, issued by a SPV, guaranteed by underlying assets a liquidity drain, through the preparation of crisis management in the form of loans, bonds, Asset-Backed Securities (see definition) strategies and procedures for obtaining emergency funding. or other CDOs. These types of structures are constituted to eliminate (“derecognition”) assets from the balance sheet and to Core Business arbitrage the yield differences between securitised assets and Primary area of business constituting the focal point of a securities issued by the SPV. company’s strategies and policies. CDOs can by “funded”, if the SPV legally purchases ownership of the assets, or synthetic ("unfunded") if the SPV acquires the Core Tier 1 Capital underlying risk of the assets through Credit Default Swaps (see Value calculated by subtracting innovative capital instruments from definition) or other similar forms of guarantee. Tier 1 Capital (see definition). It is the net tangible equity of the bank. CDS - Credit Default Swaps Derivative contract under which one party (protection seller) Core tier 1 ratio undertakes, against payment of a sum, to pay a pre-fixed amount Indicates the ratio of basic (tier 1) assets, not including preference to another party (protection buyer), in case an event, agreed upon shares, to total risk-weighted assets. Preference shares are in advance, occurs, related to the default (see definition) of a third innovative capital instruments normally issued by foreign party (reference entity). subsidiaries, and included in the basic assets if they have characteristics guaranteeing the capital stability of the banks. The CLN - Credit Linked Note tier 1 ratio is the same ratio that, in the numerator, includes the Security with an embedded credit derivative, typically a credit preference shares. default swap (CDS). Corporate CLO - Collateralized Loan Obligation Segment of customers corresponding to medium- and large-sized A CDO backed by loans granted to registered Corporates. companies (mid-corporate and large corporate).

104 Corporate governance Cross selling Through the composition and functioning of internal and external Activity designed to increase customer loyalty through the sale of corporate bodies the corporate governance structure defines the integrated products and services. distribution of rights and responsibilities among those that participate in the company’s business, with reference to the breakdown of tasks, and assumption of responsibilities and decision-making powers. The fundamental objective of corporate D governance is to maximise value for shareholders, which in the medium/long-term also leads to positive results for other Default stakeholders, i.e. customers, suppliers, employees, creditors, Failure to honour debts and/or pay related interest. consumers and the community.

Delinquency Cost/Income Ratio Irregularity in payments due at a given date, normally after 30, 60 The ratio of operating costs to gross operating income. This is one and 90 days. DGV VaR - Delta-Gamma-Vega of the key indicators of a bank’s operating efficiency: the lower the Parametric model for the calculation of VaR, able to assess risk value, the more efficient the bank. factors having both a linear and non-linear trend.

Cost of risk Derivatives It is the ratio between net adjustments on loans and loans to Financial instruments where the value depends on the performance customers. It is one of the risk indicators for bank assets: as the of one or more underlying parameters (interest rates, exchange indicator diminishes, so does the level of bank asset risk. rates, share prices or prices of raw materials, etc.); they can be

quoted on regulated markets or they don’t have to be quoted (see Covered bond OTC derivatives). A special bank bond which, in addition to the issuing bank guarantee, can also use the guarantee on a portfolio of mortgage loans or other prime quality loans granted to a specific SPV for this Directional (Funds) purpose. Funds investing in financial instruments that profit from market Banks that intend to issue covered bonds must possess capital of movements of a directional type, sometimes linked to no less than 500 million and a capital coefficient at macroeconomic analyses. consolidated level no lower than 9%.

For assets that may potentially be used as a guarantee, the portion Domestic Currency Swap transferred cannot exceed the following limits, fixed according to Contract settled in Euros, whose economic effect is equal to that of the level of capitalisation: a time purchase or sale of a foreign currency in exchange for - 25% when the capital coefficient is ≥ 9% and <10% with Tier I domestic currency. At the maturity date the differential between the ratio ≥ 6%; forward rate as per the contract and the current spot rate. - 60% when the capital coefficient is ≥ 10% and <11% with Tier I ratio ≥ 6.5%; Duration - no limit when the capital coefficient is ≥ 11% with Tier I ratio ≥ Constitutes an indicator of interest rate risk a security or securities 7%. portfolio is subject to. In its most frequent format, it is calculated as

the weighted average of a bond’s interest and capital payment CPPI - Constant Proportion Portfolio Insurance dates. A capital guarantee security with an embedded dynamic trading strategy for participation in the performance of a specified Duration analysis underlying asset. Technique supporting Asset and Liability Management (see

definition), which analyses the impact of interest rate changes on Credit derivatives the market value of capital. Derivative contracts that cause the transfer of credit risks. These products allow investors to perform arbitrage and/or hedging on the credit market mainly through recourse to non-cash instruments, to obtain credit exposures diversified by maturity and intensity, modify the risk profile of a portfolio and separate credit risks from E other market risks. EAD – Exposure At Default Credit enhancement Relating to positions on or off the books, it is defined as the Techniques and instruments used by issuers to improve the rating estimated future value of an exposure at the time of default of a of their issues (pledges, granting of cash credit facilities, etc.). debtor. Only banks meeting the requirements for the adoption of the Advanced IRB approach are legitimised to estimate EAD. All Credit-linked notes others must refer to regulatory estimates. See CLN – Credit Linked Note. EPS - Earnings Per Share Credit risk Indicator of the profitability of a company calculated by dividing The risk that an unexpected change in the credit rating of a the net profit by the average number of shares in circulation net of counterparty, the value of the guarantees given by this party, or the own shares. margins used in the event of insolvency, generate an unexpected change in the bank’s credit position value. Equity hedge / long-short (Funds) Funds that predominantly invest in stocks with the possibility of Credit spread option creating hedging strategies by means of short sales of the same Contract under which the protection buyer reserves the right, stocks or strategies in derivative contracts involving securities or against payment of a premium, to collect from the protection seller market indexes. a sum depending on the positive difference between the market spread and that fixed in the contract, applied to the notional value Equity origination of the security. Increase in a company’s risk capital achieved by arranging a new share issue.

105 Standardised future contracts under which the parties agree to Exotics (derivatives) exchange securities or physical commodities at a fixed forward Non-standard derivatives, normally not listed on regulated markets. price and at a future date. These contracts are normally traded on organised markets where their execution is guaranteed. In practice, EVA - Economic Value Added futures on securities often do not involve the physical exchange of EVA is an indicator of the value created by a company. It expresses the underlying value. the capacity to generate value in monetary terms, as the difference between net operating profit (NOPAT) and the cost of invested capital. G

Gap analysis F Technique supporting Asset and Liability Management (see definition), which analyses the difference (gap) between asset and Factoring liability items, on the basis of the interest rate review date of said A disposal contract with recourse (credit risk borne by the factor) or items. A positive gap indicates a positive change in expected without recourse (credit risk borne by the seller) transferring interest margin widens as interest rates increase. Vice versa in the accounts receivable to banks or specialist companies for opposite case. management and collection purposes, which may be associated with a loan granted to the seller. Gap Ratios Gap-related indicators. Fair value The amount for which an asset could be exchanged or a liability Goodwill extinguished in an arm’s length transaction between willing and Identifies the amount paid to acquire a shareholding and is equal knowledgeable parties. Often identical to the market price. Based to the difference between the cost and the corresponding on IAS (see definition), banks apply fair value to the evaluation of percentage of shareholders’ equity, for the part not attributable to financial instruments (assets and liabilities) for trading and elements making up the assets of the acquired company. available for sale and to derivatives, and can use it to increase the value of equity investments and various tangible and intangible Governance assets (with different types of impact on the income statement Identifies the set of instruments and regulations that govern the way according to the different activities considered). a company is run, with particular reference to the transparency of corporate documents and records and to the completeness of Fair value hedge disclosures to the market. Hedging against exposure to a variation in the fair value of a balance sheet item, attributable to a particular risk. Greeks Parameters that measure the sensitivity with which a derivative Fairness/Legal opinion contract (e.g. an option) reacts to changes in value of the An opinion given on request by experts with proven professional underlying asset, or other parameters (typically intrinsic volatility, capacity and competence, relating to the fairness of economic interest rates, share prices, etc.). terms and/or lawfulness and/or technical aspects of a given transaction.

Floating Leg H Floating “leg” of an IRS (see definition) under which two parties swap a fixed interest rate flow (fixed leg) for a floating interest rate Hedge accounting flow (floating leg) calculated on a notional amount. Rules on the accounting of hedging transactions.

Floor Hedge fund OTC interest rate derivative contract which sets a minimum limit A mutual investment fund - denied to traditional investors - able to on decreases in the buyer rate. use sophisticated tools or investment strategies such as "short

selling", derivatives (options or futures, even above 100% of Forwards capital), hedging (of the portfolio against market volatility through Forward contracts on interest rates, exchange rates or stock short selling and use of derivatives) and financial leverage indexes, generally negotiated in over-the-counter markets and (borrowing for the purpose of investing the sum borrowed). whose conditions are established at the time when the contract is entered into, but which will be fulfilled at a predetermined future Herfindahl Index date, through the receipt or payment of differentials calculated with n reference to parameters that vary according to the purpose of the EAD 2 i1 i  contract. : index (calculated in relation to H  n EAD FRA - Forward Rate Agreement i1 i Contract by which the parties agree to receive (pay) on maturity the exposures) used in the algorithm that determines the measure of difference between the value calculated by applying a predetermined interest rate to the transaction value and the value internal capital relative to concentration risk. achieved by a benchmark rate chosen in advance by the parties. HFT - Held For Trading Funding IAS accounting category used to classify trading assets and Provision of the funds, in various forms, necessary to finance liabilities. company activity or specific financial transactions. HTM - Held To Maturity Futures IAS accounting category used to classify assets held to maturity (financial instruments).

106 A contract in which two parties agree to exchange flows on predetermined notional amount with a fixed/floating or floating/floating rate. I

IAS/IFRS International accounting standards issued by the International J Accounting Standard Board (IASB), an international independent body established in April 2001, involving the accounting Judgmental professions in the main countries and, with observer status, the A rating assignment method also based on a subjective opinion. European Union, IOSCO (International Organisation of Securities Commissions) and the Basle Committee. This body succeeded the Junior International Accounting Committee (IASC) formed in 1973 to In a securitisation transaction, it is the lowest-ranking tranche of promote the harmonisation of regulations for the preparation of the securities issued, being the first to bear losses that may occur in corporate financial statements. When IASC became IASB, the the course of recovery of the underlying assets. decision was taken, inter alia, to call the new standards the “International Financial Reporting Standards” (IFRS). “Junior”, “Senior” and “Mezzanine” exposures Junior exposures are those reimbursed last, therefore absorbing Impairment the initial losses produced by the securitisation operation. Senior As regards IAS (see definition), impairment refers to the loss in exposures are the first exposures to be redeemed. The “mezzanine” value of a balance sheet asset, recorded in the event in which the category includes the exposures with reimbursement priority at an book value exceeds the recoverable value or the amount that intermediate stage. could be obtained from selling or using the asset. All assets must be impairment tested, with the exception of those designated at fair value, for which any loss (and gain) in value is intrinsic. L Incremental Beta Gap

Gap analysis method which, for customer-originated items, takes L.A.T. - Liability Adequacy Test into account the percentage of absorption by internal rates of a Procedure involving the adequacy test of the book value of net change in the external market rate. reserves (meaning balance sheet reserves reduced by the costs of

acquisition to be deferred and intangible assets) based on the

discounting of expected future cash flows generated by contracts in Index linked the policy portfolio examined and using the best and most Policies with performance directly linked to a share index or other consistent actuarial assumptions. Should this test show that the net reference value. reserves are less than the “realistic reserve", the resulting reserve

deficit would have to be recorded in the income statement. Interest rate risk

Current or prospective risk of a change in the interest margin and Lead arranger economic value of the company following unexpected changes in Bank responsible for organising a securitisation transaction. The interest rates with an impact on the banking book. activities performed by the arranger include, inter alia, checking of

the portfolio derived from the securitisation through quali- Internal dealing quantitative analysis, the handling of relations with ratings Transactions performed by distinct operating units of a company. agencies, preparation of an information prospectus and the The associated documentation assumes accounting significance identification and resolution of accounting and legal problems. and contributes to determining the position (trading or hedging) of individual units that performed it. Lead manager – Bookrunner Intraday The lead figure in an issuing syndicate of a bond; he deals with the Used to refer to an investment/disinvestment transaction performed debtor, is responsible for choosing the “co-lead manager” and in the course of a single day involving the negotiation of a security. other members of the underwriting syndicate in agreement with the It is also used in reference to prices listed during the course of any same debtor; he determines the terms and conditions of issue, one day. manages the execution (almost always undertaking to place the

most relevant portion on the market) and keeps the books Investment banking (bookrunner); in addition to the reimbursement of expenses and This is a highly specialised finance segment that deals in particular usual fees, he receives a special commission for this service. with helping companies and governments issue securities and, more generally, to gather funds on the capital market. L&R - Loans & Receivables

IAS accounting category used to classify financial assets other than Investment grade derivatives and not listed on active markets, with fixed or Term used with reference to high quality bonds that have received calculable payments measured at amortised cost. a medium/high rating (e.g. no less than BBB on Standard & Poor’s scale). LGD - Loss Given Default

It indicates the estimated loss rate in the event of the default of a IRB - Internal Rating Based Advanced debtor. Internal rating approach within the framework of the New Basle

Accord, separated into basic and advanced methods. The Liquidity risk advanced approach can only be used by institutions that meet the The likelihood that the company will not be able to meet its strictest minimum requirements with respect to the basic approach. payment commitments due to its inability to liquidate assets or In this case, all input estimations PD, LGD, EAD, Maturity) for the obtain enough market funding (funding liquidity risk) or due to the credit risk assessment are made internally. In the basic method, difficulty/impossibility of easily converting positions in financial only the PD is estimated by the Bank. assets into cash without significantly and unfavourably influencing

the price due to the insufficient strength of the financial market or IRS – Interest Rate Swap its temporary malfunctioning (market liquidity risk).

107 Risk of variation in the market value of the positions in the trading Lower Tier II portfolio for supervisory purposes due to unexpected changes in Subordinated liabilities forming part of Tier II capital (see market conditions and creditworthiness. This also includes the risks definition) provided that the contracts governing their issue from unexpected changes in exchange rates and commodity prices expressly envisage: relating to balance sheet positions. a) In the event of winding-up of the issuer, that the debt is redeemed only after all other creditors not equally subordinated Maturity Ladder have been paid; The increasing scale of maturities of treasury asset and liability b) The term of the contractual relations is equal to or greater than items. 5 years and, should the maturity be undetermined, notice of at least 5 years is required for repayment; Medium Term note c) Early repayment of the liabilities only at the issuer’s initiative and Debt securities with a maturity of 5-10 years. requires specific approval from the Bank of Italy. The amount of subordinated loans admitted to Tier 2 capital is Merchant banking reduced by one fifth each year during the 5 years prior to expiry of This includes the activities of subscription of securities - shares or the contract, in the absence of an amortisation plan that produces debt securities - issued by corporate clients for subsequent similar effects. placement on the market, acquisition of shareholdings for longer periods but with the aim of transferring them later, and the LTV – Loan to Value Ratio providing of business consulting services in the matter of mergers Ratio between the amount of the mortgage, and the value of the and acquisitions or reorganisation. property for which the loan is required or the price paid by the debtor to acquire the property. The LTV ratio measures the amount Mezzanine of own funds used by the debtor to purchase the property as a In a securitisation transaction it represents the tranche ranking proportion of the value of the asset guaranteeing the loan. The between the junior tranche and senior tranche. higher the LTV ratio, the lower the amount of own funds the debtor needs to purchase the property, and the lower the protection the Monoline creditor enjoys. Insurance companies that, in exchange for a commission, guarantee the redemption of given bond issues. Established in the 1970s to ensure the issues of local entities against insolvency, their services were particularly appreciated for issues of complex M financial products: the structure and underlying assets of said issues are often extremely problematic; through monoline

coverage, the portions of debt guaranteed by the latter become Mark to Market much easier to evaluate and more attractive to risk averse investors, Process of evaluating a portfolio of securities or other financial given that the risk of insolvency is assumed by the insurance instruments based on the application of mathematical financial company. models.

Mark to Model Process of evaluating a portfolio of securities or other financial instruments, which makes it possible to carry out value adjustments N of mark to market estimates (see definition), in order to incorporate in the balance sheet values the element of "uncertainty" which NAV - Net Asset Value cannot be shown in a model. These adjustments, which satisfy the The value of the unit into which the fund’s capital is divided. general principle of caution and are based on experience, are performed, for example, when inputs to the model are mainly Non performing estimated within the company (“entity-specific”), when it is known Term generally referring to loans characterised by irregular that the model does not incorporate certain recent structural performance. changes in the market and, in general, each time that a part of the phenomenon is not explained by the variables considered. This valuation policy must be applied consistently in the long term and accompanied by suitable disclosures to the public on the O estimation methods used and reasons underlying the adjustments made. Operational risk

The risk of suffering losses due to the inadequacy or inefficiency of Mark up procedures, human resources or internal systems, or by external Margin applied as remuneration, which for a bank is given at events. Operational risk also includes legal risk, or the risk of loss aggregate level by the difference between the average active due to the infringement of laws or regulations, contractual or off- interest rate of the technical forms of application considered and contract liability or other disputes; however it does not include the Euribor rate. strategic risk (loss due to incorrect management strategies) or

reputation risk (loss of market share when the bank brand Market dislocation becomes associated with negative events). Financial market turbulence characterised by a sharp decrease in trading on financial markets with difficulty in obtaining price Option information from specialised info-providers. Represents the right, but not the commitment, acquired on

payment of a premium, to purchase (call option) or sell (put Market making option) a financial instrument at a determined price (strike price) by Financial activity carried out by specialised intermediaries, whose (American option) or at a fixed date in the future (European option) task consists of guaranteeing liquidity and depth to the market, both through their continuous presence and through their role as Originator competitive pricing guide. The party transferring an owned portfolio of assets with deferred

liquidity to an SPV (see definition) for securitisation. Market risk

108 OTC - Over-The-Counter Is an indicator calculated as the ratio between EVA (see definition) Transactions carried out directly between parties, rather than and allocated/absorbed capital. It is the value generation capacity through an organised market. per unit of risk assumed, expressed in percentage terms.

OTC derivatives Rating Over-The-Counter (OTC) derivatives are those agreed directly An evaluation of the quality of a company or its debt security issues, between the parties outside a regulated market. based on the company’s financial strength and outlook. This assessment is performed by specialist agencies. Over-collateralisation Form of credit guarantee in which the portfolio of assets pledged Regulatory capital as collateral to the securities issued must have a higher value than It comprises the base capital – admitted to the calculation without securities offered. any limits – and the extra capital which is admitted within the maximum limit of the base capital. Equity investments, innovative Overdue receivables and non-innovative capital instruments, hybrid capitalisation “Overdue exposures” are exposures that are overdue and/or instruments and subordinated liabilities, held in other banks and borderline as defined in current supervisory instructions. financial businesses are deducted from these aggregates. Equity investments in insurance companies and subordinated liabilities issued by the same companies are also deducted, together with further elements connected with the calculation of capital requisites. P Especially, the elements listed hereunder are deducted by 50% from the base capital and by 50% by the Tier 2 capital:

a) Equity investments in banks, finance businesses, IMEL Past due and superior payment institutions that are higher than Exposures that are continuously overdue and/or borderline for 10 per cent of the share capital of the investee and the more than 90/180 days, in accordance with the definition innovative and non-innovative capital instruments, the provided in current Supervisory Instructions. hybrid capitalisation instruments and the subordinated

instruments (2nd and 3rd level) issued by those entities, Payout ratio whatever the allocation portfolio; Indicates the percentage of net profit distributed to shareholders. b) Equity investments in insurance companies, as well as This amount depends largely on the company’s self-financing capital instruments issued by the same companies, if needs and the returns expected by shareholders. calculated by the issuer for capital purposes;

c) Nominal shares of Italian and foreign variable capital PD - Probability of Default investment companies, if over 20,000 shares; Represents the probability that, within the space of one year, a d) Shares or quotas in banks, finance businesses, IMEL and debtor will default. superior payment institutions that are equal or lower

than 10 per cent of the share capital of the investee and Performing the innovative and non-innovative capital instruments Term generally referring to loans with a steady performance. and the subordinated instruments (2nd and 3rd level),

other than those indicated in the above item a), issued Plain vanilla (derivatives) in favour of banks, finance businesses, IMEL and Derivative products (see definition) where the contractual terms are payment institutions, even not investees, whatever the considered standard (e.g. Call/Put, Futures, Swap). allocation portfolio. These elements are deducted for

the portion of their total amount exceeding 10 per cent Price sensitive of the Tier 1 and Tier 2 capital value, before Term that generally refers to data or information not of public deductions; domain which, if made public, could considerably affect the price e) Securitisation positions; of a security. f) Limited to banks authorised to use the IRB systems to

calculate the capital requisite with respect to credit and Price-to-Book Ratio counterparty risk: i) the surplus of expected losses with Ratio between capitalisation and the book value of a listed respect to total value adjustments; ii) expected losses company. related to capital instruments and expositions to savings

collective investment bodies in the event of underlying Pricing related to or treated as capital instruments; Broadly speaking, it generally refers to the methods used to g) Equity holding in the Bank of Italy; determine returns and/or costs of products and services offered by h) Exposures connected with the settlement risk on non- the Bank. DVP transactions.

Private banking Reputation risk Business designed to provide high-end customers with asset Risk of incurring losses as a result of negative perception of the management, advisory and other customised services. bank’s image by customers, counterparties, bank shareholders,

investors, supervisory authorities or other stakeholders. Private equity

Activity targeting the acquisition of equity interests and their Restructured credit subsequent sale to specific counterparties, without public Position whereby the Bank has agreed to extend the repayment placement. terms, renegotiating the exposure at interest rates that are lower

than market rates.

Risk free rate R Interest rate on a risk free asset. In practice this indicates the interest rate of short term government securities, which in effect RARORAC - Risk Adjusted Return On Risk Adjusted Capital cannot be considered risk free.

Risk management

109 Acquisition, measurement, assessment and overall management of market value at the end of the financial year, recognition of the various types of risk and related hedging. shadow liabilities are recognised to technical reserves in the balance sheet to the extent of latent capital gains/losses pertaining Risk-weighted assets to the insured, countered by recognition to shareholders’ equity for This is the amount obtained by multiplying the total regulatory an amount equal to the latent capital gains/losses of the portion capital (credit risk, market risk and other prudential requirements) pertaining to shareholders. On the other hand, in the event in by a coefficient equal to 12.5. For companies in banking groups, which the relative securities are recorded at fair value in the the total regulatory capital is reduced by 25%. income statement, account will be taken of the effect of the latent capital gains/losses , recording shadow liabilities and passing RMBS - Residential Mortgage-Backed Securities them to the income statement, with a variation in the technical ABS issued under securitisations of loans backed by residential reserves for the share pertaining to the insured. property mortgages. Shifted Beta Gap RWA - Risk Weighted Assets Gap analysis method which, in addition to the repositioning ratios Cash and off-balance sheet assets (derivatives and guarantees) mentioned earlier, in determining the impact on the interest margin classified and weighted based on different risk-related coefficients, also takes into account phenomenon of shifts in customer- pursuant to banking regulations issued by the supervisory bodies originated items; i.e. the fact that the rates of a single customer- (e.g.: Bank of Italy, Bafin, etc.) for the calculation of solvency originated item will not react immediately to decisions to adjust coefficients. market rates but, due to stickiness, will be gradual and diluted.

“Sovereign” risk The sovereign risk with respect to the central Government, an entity S which has the legal power of taking resources from tax payers and making choices of economic policy for the purposes of creating

resources, denominated in foreign or domestic currency, needed Scorecard to fulfil commitments with respect of foreign creditors. The risk is System of expert quality assessment methods. called sovereign by reason of the fact that, unlike private

individuals, the central Government is the highest authority, which Scoring theoretically is vested with the power of issuing laws, at its own System of analysis of company clientele, resulting in an indicator discretion, which might allow to infringe, within its own legislation, obtained from the examination of financial statements figures and commitments with respect to debtors, thus declaring default or assessment of sector performance forecasts, analysed using unilaterally rescheduling contract terms on special public debt statistical methods. securities.

Securitisation SPE/SPV Disposal of loans or other non-negotiable financial assets to a Special Purpose Entities (SPE) or Special Purpose Vehicles (SPV) are qualified company (SPV) created for the sole purpose of subjects (companies, “trusts” or other entities) that are specially implementing such transactions and arranging conversion of the created to reach a set objective that is well defined and delimited, loans or assets into securities that can be traded on a secondary or to carry out a specific transaction. SPE/SPVs have a legal market. structure independent of other parties to the transaction and

generally have no operating or management structures of their Senior/super senior own. In a securitisation, the tranche with the highest privilege in terms of remuneration and redemption priority. Speculative grade

Term used to identify issuers with a low rating (e.g.: below BBB on Sensitivity analysis the Standard & Poor’s scale). An analysis that examines the sensitivity of the actual value of the

Bank’s assets and liabilities to changes in the external interest rate Spread scenarios; this analysis is a refined version of duration analysis in This term usually indicates the difference between two interest rates, that rather than assessing the impact of a parallel shift in the the difference between the bid and ask price in securities trading or interest rate curve, it assesses the market value of the Bank’s assets the price paid by a securities issuer in addition to the reference rate. and liabilities and, consequently, the market value of capital, by using interest rate curves different from those in force. Stakeholders

Persons or entities who, in different capacities, interact with the Servicer company, contribute to results, influence its performance and In securitisation transactions, this figure - on the basis of a special assess its economic, social and environmental impact. servicing contract - continues to manage the securitised credits or assets after they have been transferred to the SPV responsible for Standards the issue of the securities. This term applies without distinction to both IAS/IFRS (International

Accounting Standards/International Financial and Reporting Shadow accounting Standards) and FAS (Financial Accounting Standards). Accounting method that provides for the allocation to technical reserves of insurance or investment contracts with discretionary Stock option profit sharing, unrealised capital losses and/or gains from related Term used to define the options offered to managers of a company, activities, as if they had been realised. giving them the right to buy shares in the company based on a Said adjustment is charged to shareholders’ equity or the income specified price (strike price). statement depending on whether the corresponding gains or losses are charged to shareholders’ equity or the income statement. Strategic risk In the case of net capital losses, these are attributed to the insured Current or prospective risk of a reduction in profits or capital due only after having checked the guaranteed minimum using the to: Liability Adequacy Test; in the opposite case, these remain fully - Changes in the operating context; charged to the company. For example, if assets are classified as - Erroneous corporate decisions; “Available for Sale” then at year end their book value is aligned to - Inadequate implementation of decisions;

110 - Poor reaction to changes in the competitive context. The following negative elements are deducted: b1) own shares; b2) goodwill; b3) intangible assets; b4) value adjustments on Stress test receivables; b5) losses recorded in previous years and in the A simulating procedure designed to assess the impact of extreme current year; b5) regulatory value adjustments on assets measured market scenarios on a bank’s overall risk exposure. at fair value; b7) other negative elements; b8) negative prudential filters of the Tier 1 capital. Structured bonds The difference between the sum of elements from a1) to a5) and Bonds where the interest and/or repayment value depend on a the sum of those from b1) to b8) makes up the “Tier 1 capital". real parameter (related to the commodity price) or index The Bank of Italy might require that other elements be deducted performances. In these cases the implicit option is separated out which, due to their characteristics, might dilute the Tier 1 capital. for accounting by the host contract. In the event of parametrisation to interest rates or inflation (for example treasury certificates) the Tier 1 Ratio implicit option is not separated out for accounting by the host Ratio of a bank’s Tier 1 capital to the bank's or the banking contract. group's aggregate capital requisite, multiplied by 12.5.

Subordinated loans Tier 2 (supplementary capital) Financial instruments where the contractual terms envisage that It is made up by the following elements: a1) valuation reserves; a2) holders of documents representing the loan have rights that are innovative and non-innovative capital instruments, which cannot subordinate to other creditors in the event of winding-up of the be calculated in the Tier 1 capital; a3) hybrid capitalisation issuer. instruments and subordinated liabilities; a4) net capital gains on equity investments; a5) any surplus on total value adjustments Subprime loans compared to expected losses; a6) other positive elements; a7) The subprime concept does not refer to the loan operation per se, positive prudential filters of the supplementary capital. but rather to the borrower. Technically subprime refers to a The following negative elements are deducted: b1) net capital borrower that does not have a fully positive credit history as it losses on equity investments; b2) other negative elements; b3) contains negative credit elements such as: unpaid instalments on negative prudential filters of the supplementary capital. previous loans, bounced cheques, complaints, etc. These past The difference between the sum of elements from a1) to a5) and events can indicate greater risk inherent in the party, the sum of those from b1) to b8) makes up the “Tier 2 capital". corresponding to higher payments required by the intermediary granting the loan. Tier 3 Operations with subprime customers developed on the American The capital elements included in the Tier 3 capital can be only financial market, often using securitisation and security issues used against such loan agreements. to hedge the capital requisite of market risks – excluding the Alt-A mortgages refer to mortgages granted on the basis of capital requisites incomplete or inadequate documentation. with respect to the counterparty risk and the settlement risk related to the “Regulatory Swaps (of interest rates and currencies) trading portfolio” and within the limit equal to 71.4% of the Transactions consisting of an exchange of financial flows between above-mentioned requisites. operators under various contractual arrangements. In interest rate swaps (IRS), the counterparties swap interest payment flows Time value calculated on a notional reference capital according to Change in the financial value of an instrument in relation to a differentiated criteria (e.g. one counterparty pays a fixed rate, the different time horizon when certain cash flows will become other a floating rate). In the case of a currency swap, the available or due. counterparties exchange specific amounts of two different currencies, repaying them over time according to predefined Total return swap arrangements that may regard both the notional capital and A contract under which one party, usually the owner of the security interest. or reference credit, agrees to make periodic payments to an investor (protection seller) based on the capital and interest Synthetic securitisation generated by said asset. Vice versa, the investor agrees to pay a Securitisation structure (see definition) whereby transfer of the asset floating rate, plus any asset depreciation compared to when the portfolio is performed through the use of credit derivatives or contract was signed. similar types of guarantee that allow transfer of the portfolio risk. Trading book Usually refers to securities or in any event financial instruments in general, identifying the portion of the portfolio held for trading. T Trigger event

A contractually predefined event triggering specified contracting Tainting Rule party rights. Rule defined in paragraph 9 of IAS 39, applicable to financial instruments classified as HTM on the strength of which "(...) an Trigger Point entity must not classify any financial asset as held to maturity if, Thresholds. during the course of the current or previous two financial years, it has sold or reclassified, prior to maturity, a significant amount of TROR - Total rate of return swap investments held to maturity (not insignificant in relation to the A contract under which the “protection buyer”(also called the “total overall held to maturity portfolio), (...)”. return buyer”) undertakes to transfer all cash flows generated by

the “reference obligation” to the “protection seller” (also called the Tier 1 Capital “total return receiver”), who transfers as a counter-item to the It is made up by the following elements: a1) the capital paid; a2) “protection buyer” cash flows linked to the performance of the the reserves, included share premium; a3) innovative and non- “reference rate”. At the cash flow coupon date (or contract expiry), innovative capital instruments; a4) profit for the period; a5) the total return payer pays the total return receiver any positive prudential filters of Tier1 capital. appreciation of the reference obligation; vice versa, in the event of depreciation of the reference obligation it is instead the total return

111 receiver that pays the related amount to the total return payer. Essentially, a TROR is a structured financial product combining a credit derivative with an interest rate swap. Z

Zero coupon U A bond without coupon, the return on which is the difference between the issue price (or purchase price) and the redemption UCIT - Undertaking for Collective Investment in Transferable value. Securities “Collective Investment Schemes", pursuant to letter m), article 1 of the TUF, (Consolidated Law on Finance) which invest sums of money collected from the saving public in financial instruments or other assets in accordance with the principle of the apportionment of risk. They include mutual funds (open and closed end, Italian and foreign) and SICAVs.

Underwriting (commission) Commission claimed in advance by the bank based on assumption of the underwriting risk associated with a loan.

Unit-linked Life insurance policies with performance linked investment fund values.

Upfront Amount paid to a counterparty at the time of signing a derivative contract.

Upper Tier II Hybrid capitalisation instruments included in Tier II capital (see definition) when the contract envisages that: a) In the event of balance sheet losses resulting in a decrease in paid-up capital and reserves to below the minimum required capital for banking activity authorisation, amounts collected on the aforementioned liabilities and accrued interest can be used to cover such losses, allowing the issuer to continue operations; b) In the event of a negative operating performance, the right to repayment can be suspended to the extent necessary to avoid or limit potential losses as much as possible; c) In the event of winding-up of the issuer, the debt is redeemed only after all other creditors not equally subordinated have been paid; Non irredeemable hybrid capital instruments must have a term of equal to or more than 10 years. The contract must explicitly contain the clause that subordinates repayment of the loan on issue of a declaration of no impediment by the Bank of Italy.

V

VaR - Value at Risk Value indicating the maximum possible loss on a portfolio due to the effect of market performance, with a certain probability and assuming that the positions require a given period of time for related disposal.

W

Warrant Negotiable instrument offering the holder the right to buy or sell fixed income securities or shares according to precise methods from/to the issuer.

Watchlist loans Loans at nominal value in respect of which subjects are in a situation of objective difficulty which, however, can be surmounted in a suitable period of time.

112 1) International accounting standards (IAS/IFRS) IAS/IFRS Description Endorsement EC Regulation (1) Framework Framework See note (2)

Reg. 1274/2008 (18/12/2008); Reg. 53 (22/01/2009), Reg. 70 (24/01/2009), Reg. 494 (12/06/2009), Reg. 243/2010 (24/03/2010), IAS 1 Presentation of Financial Statements Reg. 149/2011 (19/02/2011)

IAS 2 Inventories Reg. 1126/2008 (29/11/2008), Reg. 70 (24/01/2009)

Reg. 1126/2008 (29/11/2008), Reg. 1260 (17/12/2008), Reg. 1274 (18/12/2008), Reg. 70/2009 (24/01/2009); Reg. 494/2009 IAS 7 Cash flow statement (12/06/2009); Reg. 243/2010 (24/03/2010)

Reg. 1126/2008 (29/11/2008), Reg. 1274 (18/12/2008), Reg. 70/2009 IAS 8 Accounting Policies, Changes in Estimates and Errors (24/01/2009)

Events after the Balance Sheet Date Reg. 1126/2008 (29/11/2008), Reg. 1274 (18/12/2008), Reg. 70/2009 IAS 10 (23/01/2009), Reg. 1142 (27/11/2009) Reg. 1126/2008 (29/11/2008), Reg. 1260 (17/12/2008), Reg. 1274 IAS 11 Construction Contracts (18/12/2008) Reg. 1126/2008 (29/11/2008), Reg. 1274 (18/12/2008), Reg. 495 IAS 12 Taxes on income (12/06/2009) Reg. 1126/2008 (29/11/2008), Reg. 1260 (17/12/2008), Reg. 1274 IAS 16 Property, Plant and Equipment (18/12/2008), Reg. 70/2009 (24/01/2009); Reg. 495 (12/06/2009) IAS 17 Leasing Reg. 1126/2008 (29/11/2008), Reg. 243/2010 (24/03/2010) IAS 18 Revenues Reg. 1126/2008 (29/11/2008), Reg. 69 (24/01/2009)

Reg. 1126/2008 (29/11/2008), Reg. 1274 (18/12/2008), Reg. 70/2009 IAS 19 Employee Benefits (24/01/2009) Accounting for Government Grants and Disclosure of Reg. 1126/2008 (29/11/2008), Reg. 1274 (18/12/2008), Reg. 70/2009 IAS 20 Government Assistance (24/01/2009)

Reg. 1126/2008 (29/11/2008), Reg. 1274 (18/12/2008), Reg. 69 IAS 21 The Effects of Changes in Foreign Exchange Rates (24/01/2009), Reg. 494 (12/06/2009), Reg. 149/2011 (19/02/2011) IAS 23 Financial charges Reg. 1260 (17/12/2008), Reg. 70/2009 (24/01/2009) Reg. 1126/2008 (29/11/2008), Reg. 1274 (18/12/2008), Reg. 632/2010 IAS 24 Related Party Disclosures (20/07/2010)

IAS 26 Accounting and Reporting by Retirement Benefit Plans Reg. 1126/2008 (29/11/2008)

Reg. 1126/2008 (29/11/2008), Reg. 1274 (18/12/2008), Reg. 69/2009 IAS 27 Consolidated and Separate Financial Statements (24/01/2009), Reg. 70/2009 (24/01/2009), Reg. 494/2009 (12/06/2009) Reg. 1126/2008 (29/11/2008), Reg. 1274 (18/12/2008), Reg. 70/2009 (24/01/2009), Reg. 494 (12/06/2009), Reg. 495 (12/06/2009), Reg. IAS 28 Investment in Associate 149/2011 (19/02/2011)

Reg. 1126/2008 (29/11/2008), Reg. 1274 (18/12/2008), Reg. 70/2009 IAS 29 Financial Reporting in Hyperinflationary Economies (24/01/2009)

Reg. 1126/2008 (29/11/2008), Reg. 70/2009 (24/01/2009), Reg. 494 IAS 31 Interests in Joint Ventures (12/06/2009), Reg. 149/2011 (19/02/2011)

Reg. 1126/2008 (29/11/2008), Reg. 1274 (18/12/2008), Reg. 53/2009 (22/01/2009), Reg. 70/2009 (24/01/2009), Reg. 494 (12/06/2009), Reg. IAS 32 Financial instruments: presentation 495 (12/06/2009), Reg. 149/2011 (19/02/2011)

Reg. 1126/2008 (29/11/2008), Reg. 1274 (18/12/2008), Reg. 494 IAS 33 Earnings per Share (12/06/2009), Reg. 495 (12/06/2009)

113 Reg. 1126/2008 (29/11/2008), Reg. 1274 (18/12/2008), Reg. 70/2009 IAS 34 Interim Financial Reporting (24/01/2009), Reg. 495 (12/06/2009), Reg. 149/2011 (19/02/2011)

Reg. 1126/2008 (29/11/2008), Reg. 1274 (18/12/2008), Reg. 69/2009 (24/01/2009), Reg. 70/2009 (24/01/2009), Reg. 495 (12/06/2009), Reg. IAS 36 Impairment of assets 243/2010 (24/03/2010) Provisions, Contingent Liabilities and Contingent Reg. 1126/2008 (29/11/2008), Reg. 1274 (18/12/2008), Reg. 495 IAS 37 Assets (12/06/2009)

Reg. 1126/2008 (29/11/2008), Reg. 1260 (17/12/2008), Reg. 1274 (18/12/2008), Reg. 70/2009 (24/01/2009), Reg. 495 (12/06/2009), Reg. IAS 38 Intangible assets 243/2010 (24/03/2010)

Reg. 1126/2008 (29/11/2008), Reg. 1274 (18/12/2008), Reg. 53 (22/01/2009), Reg. 70 (24/01/2009); Reg. 494 (12/06/2009), Reg. 495 (12/06/2009), Reg. 824/2009 (10/09/2009); Reg. 839/2009 (16/09/2009); Reg. 1171/2009 (01/12/2009); Reg. 243/2010 IAS 39 Financial instruments: recognition and measurement (24/03/2010), Reg. 149/2011 (19/02/2011)

Reg. 1126/2008 (29/11/2008), Reg. 1274 (18/12/2008), Reg. 70/2009 IAS 40 Investment Property (24/01/2009)

Reg. 1126/2008 (29/11/2008), Reg. 1274 (18/12/2008), Reg. 70/2009 IAS 41 Agriculture (24/01/2009)

Reg. 1126/2008 (29/11/2008), Reg. 1260 (17/12/2008), Reg. 1274 (18/12/2008), Reg. 69 (24/01/2009), Reg. 70 (24/01/2009), Reg. 254 (26/03/2009), Reg. 494 (12/06/2009), Reg. 495 (12/06/2009), Reg. 1136 (26/11/2009), Reg. 1164 (01/12/2009), Reg. 550/2010 (24/06/2010), Reg. 574/2010 (01/07/2010), Reg. 662/2010 IFRS 1 First adoption of the international accounting standards (24/07/2010), Reg. 149/2011 (19/02/2011) Reg. 1126/2008 (29/11/2008), Reg. 1261 (17/12/2008), Reg. 495 (12/06/2009), Reg. 243/2010 (24/03/2010); Reg. 244/2010 IFRS 2 Share-based payments (24/03/2010) Reg. 1126/2008 (29/11/2008), Reg. 495/2009 (12/06/2009), Reg. IFRS 3 Business combinations 149/2011 (19/02/2011) Reg. 1126/2008 (29/11/2008), Reg. 1274/2008 (18/12/2008), Reg. IFRS 4 Insurance agreements 494/2009 (12/06/2009), Reg. 1165/2009 (01/12/2009)

Reg. 1126/2008 (29/11/2008), Reg. 1274/2008 (18/12/2008), Reg. Non-current Assets Held for Sale and Discontinued 70/2009 (24/01/2009); Reg. 494/2009 (12/06/2009), Reg. 1142/2009 IFRS 5 Operations (27/11/2009), Reg. 243/2010 (24/03/2010) IFRS 6 Exploration for and Evaluation of Mineral Resources Reg. 1126/2008 (29/11/2008) Reg. 1126/2008 (29/11/2008), Reg. 1274/2008 (18/12/2008), Reg. 53/2009 (22/01/2009), Reg. 70/2009 (24/01/2009), Reg. 495/2009 (12/06/2009), Reg. 824/2009 (10/09/2009), Reg. 1165/2009 (01/12/2009), Reg. 574/2010 (01/07/2010), Reg. 149/2011 IFRS 7 Financial instruments: Additional information (19/02/2011)

Reg. 1126/2008 (29/11/2008), Reg. 1274/2008 (18/12/2008), Reg. IFRS 8 Financial instruments: Additional information 243/2010 (24/03/2010), Reg. 632/2010 (20/07/2010)

114 2) Interpretations (SIC/IFRIC) SIC / IFRIC Description Endorsement EC Regulation (1) Changes in Existing Decommissioning, Restoration Reg. 1126/2008 (29/11/2008), Reg. 1260/2008 (17/12/2008), Reg. IFRIC 1 and Similar Liabilities 1274/2008 (18/12/2008) Members' Shares in Co-operative Entities and Similar IFRIC 2 Instruments Reg. 1126/2008 (29/11/2008), Reg. 53/2009 (22/01/2009) Determining Whether an Arrangement Contains a IFRIC 4 Lease Reg. 1126/2008 (29/11/2008), Reg. 254/2009 (26/03/2009) Rights to Interests Arising from Decommissioning, IFRIC 5 Restoration and Environmental Rehabilitation Funds Reg. 1126/2008 (29/11/2008)

Liabilities Arising from Participating in a Specific IFRIC 6 Market - Waste Electrical and Electronic Equipment Reg. 1126/2008 (29/11/2008) Applying the Restatement Approach under IAS 29 IFRIC 7 Financial Reporting in Hyperinflationary Economies Reg. 1126/2008 (29/11/2008), Reg. 1274/2008 (18/12/2008)

Reg. 1126/2008 (29/11/2008), Reg. 495/2009 (12/06/2009), Reg. IFRIC 9 Reassessment of Embedded Derivatives 1171/2009 (01/12/2009); Reg. 243/2010 (24/03/2010) IFRIC 10 Interim Financial Reporting and Impairment Reg. 1126/2008 (29/11/2008), Reg. 1274/2008 (18/12/2008) IFRIC 12 Agreements for services licensed Reg. 254/2009 (26/03/2009) IFRIC 13 Customer Loyalty Programmes Reg. 1262/2008 (17/12/2008), Reg. 149/2011 (19/02/2011) The Limit on a Defined Benefit Asset, Minimum Reg. 1263/2008 (17/12/2008); Reg. 1274/2008 (18/12/2008), Reg. IFRIC 14 Funding Requirements and their Interaction 633/2010 (20/07/2010) IFRIC 15 Agreements for the construction of real estate Reg. 636/2009 (23/07/2009) IFRIC 16 Hedge of net investment in a foreign management Reg. 460/2009 (05/06/09); Reg. 243/2010 (24/03/2010) IFRIC 17 Distributions of non-cash assets to owners Reg. 1142/2009 (27/11/2009) IFRIC 18 Transfers of assets from customers Reg. 1164/2009 (01/12/2009)

IFRIC 19 Extinguishing financial liabilities with equity instruments Reg. 662/2010 (24/07/2010) Reg. 1126/2008 (29/11/2008), Reg. 1274/2008 (18/12/2008), Reg. SIC 7 Introduction of the € 494/2009 (12/06/2009) Government Assistance – No Specific Relation to SIC 10 Operating Activities Reg. 1126/2008 (29/11/2008), Reg. 1274/2008 (18/12/2008) SIC 12 Consolidation – Special Purpose Entities Reg. 1126/2008 (29/11/2008) Jointly Controlled Entities – Non-Monetary SIC 13 Contributions by Venturers Reg. 1126/2008 (29/11/2008), Reg. 1274/2008 (18/12/2008) SIC 15 Operating Leases – Incentives Reg. 1126/2008 (29/11/2008), Reg. 1274/2008 (18/12/2008) Income Taxes – Recovery of Revalued Non- SIC 21 Depreciable Assets Reg. 1126/2008 (29/11/2008) Income Taxes – Changes in the Tax Status of an SIC 25 Enterprise or its Shareholders Reg. 1126/2008 (29/11/2008), Reg. 1274/2008 (18/12/2008) Evaluating the Substance of Transactions in the Legal SIC 27 Form of a Lease Reg. 1126/2008 (29/11/2008) Reg. 1126/2008 (29/11/2008), Reg. 1274/2008 (18/12/2008), Reg. SIC 29 Disclosure – Service Concession Arrangements 254/2009 (26/03/2009) Revenue – Barter Transactions Involving Advertising SIC 31 Services Reg. 1126/2008 (29/11/2008) SIC 32 Intangible Assets – Web Site Costs Reg. 1126/2008 (29/11/2008), Reg. 1274/2008 (18/12/2008)

(1) The reported date refers to the publication of the Regulation in the Official Gazette of the European Community.

(2) The framework of the international accounting standards is not an applicable accounting standard and can not be used to justify exceptions to the standards adopted. On the contrary, it can be used to interpret and apply existing standards. The objectives of the reference framework include support to IASB and national accounting standards boards for the development of new standards and the implementation of convergence projects for national and international standards. In case the reference framework and some accounting standards are in contrast, the international accounting standard would prevail. It is divided into four main parts: a) the objective of the financial statements; b) the qualitative characteristics that determine the usefulness of information in financial statements; c) the definition, recognition and measurement of the elements from which financial statements are constructed; d) concepts of capital and capital maintenance.

115

CERTIFICATION OF THE HALF-YEARLY CONDENSED FINANCIAL STATEMENTS PURSUANT TO ART. 81-TER OF CONSOB REGULATION NO. 11971 OF 14 MAY 1999 AND SUBSEQUENT AMENDMENTS AND ADDITIONS

116 Certification of the half-yearly condensed financial statements pursuant to art. 81-ter of Consob Regulation no. 11971 of 14 May 1999 and subsequent amendments and additions

1. The undersigned Giovanni Berneschi, in his capacity as Chairman of the Board of Directors, and Daria Bagnasco, in her capacity as Manager responsible for preparing the Company's financial reports, of Banca CARIGE S.p.A. certify, taking also into consideration Article 154- bis, paragraphs 3 and 4, of the Italian Legislative Decree no. 58 of 24 February 1998: - the adequacy in relation of the Company features and - the actual application of the administrative and accounting procedures put in place for preparing the half-yearly condensed financial statements, in the first half of 2012.

2. The assessment of the adequacy of the administrative and accounting procedures put in place for preparing the half-yearly condensed financial statements as at 30 June 2012 is based on a Model defined by Banca CARIGE S.p.A. consistently with the Internal Control – Integrated Framework issued by the Committee of Sponsoring Organisations of the Treadway Commission, which represents the international commonly accepted standard for internal control system.

3. The undersigned also certify that: 3.1 the half-yearly condensed financial statements: a) have been drawn up in compliance with applicable international accounting standards recognised by the European Community pursuant to European Parliament and Council Regulation no. 1606/2002 of 19 July 2002; b) correspond to the results of the accounting books and records; c) are suitable to provide a true and correct representation of the asset and liabilities and of the economic and financial situation of the issuer and of the group of companies included in the scope of consolidation. 3.2 The interim report on operations contains a reliable analysis of the references to the more significant events occurred in the first six months of this financial year and their impact on the condensed half-yearly financial statements, together with a description of the main risks and uncertainties faced in the remaining six months of the financial year. The interim report on operations also contains a reliable analysis of the information on significant related party transactions.

Genoa, 30 July 2012

The Chairman The Manager responsible for preparing of the Board of Directors the Company’s financial reports Giovanni Berneschi Daria Bagnasco

This document has been translated into the English language solely for the convenience of international readers. It has been signed on the Italian original version.

117

INDEPENDENT AUDITOR’S REPORT ON THE LIMITED AUDIT OF THE HALF- YEARLY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

118 119