Report and Financial Statements Financial and Report Milano di Popolare of Banca Group the Bipiemme and of 2004 Report and Financial Statements of Banca Popolare di Milano and of the Bipiemme Group
Co-operative Bank founded in 1865 Parent Bank of the Bipiemme – Banca Popolare di Milano - Banking Group Share capital at 31.12.2004: Euro 1,245,102,693 Milan Compagny Register no. 00715120150 Head Office and General Management: Piazza F. Meda, 4, Milan - Italy www.bpm.it - e-mail: [email protected] Member of the Interbank Guarantee Fund Registered Bank and Parent Bank of the Bipiemme - Banca Popolare di Milano - Banking Group Registered Banking Group
2004
This report has been translated from those issued in Italy, from the Italian into the English language solely for the convenience of international readers Contents
Directors and Officers 7
Notice of Calling 8
Report on the Bank’s Corporate Governance 11 and adoption of the Code of Conduct for Listed Companies
Financial Statements of Banca Popolare di Milano for the year 2004 35
Consolidated Financial Statements 243 of the Bipiemme Group for the year 2004
Appointment to make up the numbers of the Board of Directors, 429 in accordance with art. 33 of the articles of association
Appointment to make up the numbers of the Board of Statutory 431 Auditors, including the appointment of its chairman, in accordance with articles 40 and 41 of the articles of association
Appointment of the Arbitration Committee, in accordance with 433 art. 42 of the articles of association
Directors’ Report - pursuant to art. 72 of CONSOB Regulation 435 11971 (and subsequent amendments) - on the amendments to articles 1, 11, 13, 16, 18, 21, 25, 28, 32, 33, 34, 36, 40, 41 and 42 of the Articles of Association
Amendment of the regulations for shareholders’ meetings subject 453 to approval of the amendments to the articles of association by today’s extraordinary meeting. Related resolutions
Resolutions 459
Bipiemme Group Network 463 Directors and Officers Board of Directors Arbitration Committee
Chairman Acting Arbitrators Roberto Mazzotta Italo Ciancia Alfiero Fontana Deputy Chairman Dario Mezgec Paolo Manzato Marco Vitale Alternate Arbitrators Gianfranco Carugati Directors Giancarlo Pagani Enrico Airaghi Mario Artali Alberto Banfi Management Giorgio Bianchini Scudellari Emilio Castelnuovo General Manager Giuseppe Coppini Fabrizio Viola Rocco Corigliano Eugenio Crosta Joint General Manager Roberto Fusilli Ernesto Tansini Renzo Grassi Catapano Piero Lonardi Central Managers Michele Motterlini Maurizio Biliotti Gianfranco Pittatore Antonio Colli Alberto Santa Maria Aldo Fresu Jean–Jacques Tamburini Roberto Frigerio Graziano Tarantini Graham Whincup Clive Valerio Tavormina Joint Central Managers Board of Statutory Auditors Claudio Bonadio Elio Canovi Chairman Andrea Cardamone Marco Baccani Giancarlo Chiesa Giorgio Cuccolo Auditors Marco Ferrario Emilio Cherubini Giuseppe Marcato Enrico Radice Adriano Parrini Ezio Maria Simonelli Angelo Pellegatta Ettore Maria Tosi Andrea Rovellini Sergio Schieppati Alternate Auditors Stefano Stefani Salvatore Rino Messina Carlo Varini Carlo Radaelli
Directors and Officers 7 Notice of Ordinary and A meeting of the shareholders’ of Members whose shares are already Banca Popolare di Milano Scrl lodged with the Bank for safe custody Extraordinary (ordinary and extraordinary parts) and administration must nonetheless Shareholders’ Meeting will be held in first calling at 9.00 a.m. request the required certification in on 22 April 2005 at the Bank’s writing from the Bank’s branches registered office, Piazza Filippo Meda where the shares are deposited. 4, Milan, to consider the following Alternatively, they can go in person to the Bank’s Shareholders’ Office in Agenda Galleria De Cristoforis 7/8 between 9.00 a.m. and 1.30 p.m., where they 1. Reports of the Board of Directors can ask for and at the same time and the Board of Statutory Auditors collect their certification. on the 2004 financial statements. Review of the financial statements Members who have signed up for the and related resolutions; We@bank service can ask for their certification electronically, using the 2. Appointment to make up the special procedures explained on the numbers of the Board of Directors, in website “www.webank.it”. accordance with art. 33 of the Articles of Association; These requests must be made between 22 March and 19 April 2005. 3. Appointment to make up the numbers of the Board of Statutory For the purposes of issuing the Auditors, including the appointment necessary certification, members of its Chairman, in accordance with holding shares which are still in articles 40 and 41 of the Articles of printed form must deliver the shares Association; to an intermediary for their input into the centralised electronic 4. Appointment of the Arbitration administration system, in accordance Committee, in accordance with art. 42 with article 51 of CONSOB resolution of the Articles of Association; 11768/98 (and subsequent amendments). 5. Amendments to articles 1, 11, 13, 16, 18, 21, 25, 28, 32, 33, 34, 36, 40, 41 If there are not enough shareholders and 42 of the Articles of Association. to form a quorum at the first meeting Related resolutions; called for 22 April 2005 in accordance with article 30 of the Articles of 6. Amendment of the Regulations for Association, the meeting will be held Shareholders’ Meetings subject to in approval of the amendments to the Articles of Association by today’s second calling extraordinary meeting. Related resolutions. with the same agenda, at 9.00 a.m. on 23 April 2005 at the Milan Trade Fair Members eligible to attend are those: (Fiera di Milano) - Pavilion 17, Porta Gattamelata, Via Gattamelata 2, who have been included in the Milan. Register of Members for at least ninety days (i.e. by 21 January 2005); ***
who are in possession of a certificate With reference to item 2 on the issued by an intermediary belonging agenda, the members are informed to the centralised system of Monte that, in accordance with article 33 of Titoli SpA, pursuant to article 85.4 of the Articles of Association and article Decree 58 of 24 February 1998 and 21 of the Regulations for article 34 of CONSOB resolution Shareholders’ Meetings, nominations 11768 dated 23 December 1998 (and for the position of director must be subsequent amendments). signed by the persons presenting
8 Notice of Calling them and presented at least 10 days reasons for ineligibility or regulations. prior to the date scheduled for the incompatibility, and that he meets the meeting in first calling – in other requirements prescribed under law or Proxies cannot be given with the words, no later than 5.00 p.m. on 11 the Articles of Association for holding name of the representative left blank April 2005 – to the Secretary to the the particular office. and the signature of the person Chairman of Banca Popolare di The proposals must specify the delegating has to be authenticated by Milano, Piazza Meda 4, Milan, particular office (Chairman, Auditor, an officer at the Bank’s head office or accompanied by: Alternate Auditor) for which each one of its branches, or by the candidate is being presented. intermediary who issued the a description of the personal and Each proposal may contain candidates attendance certification, or by a public professional experience of the for the Chairman, one Auditor and official. candidates (which will be published two Alternate Auditors. on www.bpm.it for viewing by Legal entities, with the exception of members); With reference to item 4 on the Italian and foreign Undertakings for agenda, the members are informed Collective Investment in Transferable a statement by each candidate that, in accordance with article 21 of Assets (UCITS), as well as foreign accepting their candidacy and the Regulations for Shareholders’ collective entities and legal entities, confirming, under their own Meetings, nominations for the position can only attend meetings in the responsibility, that there are no of Arbitrator must be signed by the person of their legal representative; reasons for ineligibility or persons presenting them and alternatively, the legal representative incompatibility, and that they meet presented within the same deadline can give a proxy to another member in the requirements prescribed under and to the same place as in the accordance with the previous two law or the Articles of Association for preceding point, accompanied by a paragraphs. holding the particular office, including description of the personal and an indication of their suitability to professional experience of each For attendance purposes, only the qualify as independent directors (in candidate and a statement of certifications and proxies handed over the format required by article 3 of the acceptance of the candidature. by each participant when registering Code of Conduct for Listed for the first time that they enter the Companies, which the Bank has With reference to items 2, 3 and 4 on meeting will be considered valid. adopted in full). the agenda, the members are informed that the nominations must *** The appointment in question relates be accompanied by the list, complete to one director. with signatures and personal details, Members are also informed that: of at least three hundred sponsoring With reference to item 3 on the members who have been included in with reference to item 1 on the agenda, in accordance with article 41 the Register of Members for at least agenda, the draft statutory and of the Articles of Association, ninety days prior to the date set for consolidated financial statements nominations to the Board of Statutory the meeting (in other words, by 21 approved by the Board of Directors, Auditors must be signed by the January 2005), as well as a copy of the will be put at the Bank’s head office in persons presenting them and certification issued by intermediaries Piazza Meda 4, Milan, and at the presented at least 10 days prior to the that are members of the centralised offices of Borsa Italiana SpA from 31 date scheduled for the meeting in first securities management system March 2005. Members will be able to calling – in other words, no later than certifying their right to attend and view this documentation and obtain a 5.00 p.m. on 11 April 2005 – to the vote at the meeting. copy at their own expense. The Secretary to the Chairman of Banca remaining documentation required by Popolare di Milano, Piazza Meda 4, *** article 2429.3 of the Italian Civil Code Milan, accompanied by: and Section. IA.2.14 of the Members wishing to be represented at Instructions issued by Borsa Italiana a description of the personal and the meeting by a proxy are reminded SpA will be made available to professional experience of the of the current Regulations for shareholders at the Bank’s head office candidates (which will be published Shareholders’ Meetings which state as and at the offices of Borsa Italiana on www.bpm.it for viewing by follows: Every member entitled to SpA from 7 April 2005; members); attend meetings can act as proxy, in accordance with the Articles of with reference to item 5 on the a statement by each candidate Association, for just two other agenda, the documentation required accepting his candidacy and members and proxies cannot be given by articles 72.1 of CONSOB confirming, under his own to persons who are not allowed to be Regulation 11971/99 (and subsequent responsibility, that there are no proxyholders under the applicable amendments) will be made available
Notice of Calling 9 to shareholders at the Bank’s head office and at Borsa Italiana SpA from 7 April 2005. Members will be able to obtain a copy at their own expense;
with reference to the remaining points on the agenda, the related documentation will be made available to the members at the Bank’s head office and at the offices of Borsa Italiana SpA from 7 April 2005, pursuant to Ministerial Decree 437/98.
This documentation will be available before the meeting on the Bank’s website at www.bpm.it.
This notice is also given for the purposes of art. 83 of CONSOB regulation no. 11971/99 and subsequent amendments.
***
Information concerning the procedures for participating at the meeting can be requested from the Bank’s Shareholders’ Office in Galleria De Cristoforis 7/8, Milan by telephoning the free-phone number 800-013090 on week days between 9.00 a.m. and 5.00 p.m.
The Board of Directors The Chairman Roberto Mazzotta
Milan, 8 March 2005
10 Notice of Calling Report on the Bank’s Corporate Governance and adoption of the Code of Conduct for Listed Companies
(pursuant to Section IA.2.14 of the Instructions to the Regulations governing the markets organised and run by Borsa Italiana S.p.A.)
2004
11 Report on the Bank’s Corporate As you will be aware, in 2004 Italy has seen the introduction of laws overhauling the governance of limited Governance and adoption of the Code of and cooperative companies. This process had started with Conduct for Listed Companies Decree 366 dated 3 October 2001 and was brought to fruition in the form of Decrees 6/2003 and 37/2004 and, in (pursuant to Section IA.2.14 of the Instructions to the the case of cooperative banks, Decree 310/2004, which Regulations governing the markets organised and run established the partial applicability of the new rules to by Borsa Italiana S.p.A.) cooperative banks, setting 30 June 2005 as the deadline for updating articles of association for the new mandatory provisions contained in the Italian Civil Code.
This reform has extended corporate autonomy in the choice of the model of governance and allows more flexibility in fulfilling obligations. On the other hand, it deals with “sensitive” issues, including them in the code, such as the protection of minority shareholders, the transparency of board decisions, the disclosure of directors’ interests, related-party transactions, the requirements for directors’ independence, the reasons why statutory auditors are ineligible for office and might lose office. As a listed company (and as such subject to the regulatory authority of CONSOB), the Bank is well aware of these issues and as early as 2001 it already voluntarily adopted the entire Code of Conduct for Listed Companies (the “Code”), and its amended version of July 2002.
Given this regulatory framework, the Bank continued in 2004 to review its existing system of corporate governance, comparing it with the recommendations contained in the Code.
BPM, by its very nature as a bank and therefore under the supervision of the Bank of Italy, has always monitored and adjusted when necessary its organisational and control model. So this review found that there was considerable similarity between the Bank’s Articles of Association and Board resolutions and the principles of corporate governance on which the Code is based, as well as the recommendations made on this subject by CONSOB, bearing in mind national and international best practice.
This has also been confirmed recently, at an international level, in a detailed survey published on 9 March 2005 by the European Investment Agency.This looked at corporate governance in Italy’s top 40 listed companies and the extent to which they complied with OECD and European Union recommendations. In fact, the survey placed BPM’s governance at the head of those considered. The OECD recommendations in question relate to shareholder rights, the fair treatment of shareholders, the role of corporate stakeholders, the responsibility of the board of directors, transparency and communication.
12 Corporate Governance Another positive note for the Bank was the readmission With a view to optimising the sharing and communication of its stock to the new Standard&Poor’s MIB index of strategy with our shareholders and stakeholders in (replacing the old MIB 30), which represents the market general, the Bank has drawn up a “social report” for 2004 of Italian blue chips and is based on effective free float (to be published on its website at “www.bpm.it” prior to the and hence the stock’s actual distribution on the equities annual general meeting) which describes the Group’s market. current profile, its performance in the year and relationship with stakeholders, both current and In response to the market’s growing desire for prospective, therefore representing an improvement on transparency and shareholders’ rising expectations for the report prepared in respect of 2003. greater participation in the Bank’s affairs, over the past three years BPM has undertaken a comprehensive reform Given the requirement to disclose on an annual basis the of its governance, particularly designed – thanks to the steps taken to adopt the Code’s recommendations, the introduction of “list voting” – to enhance the presence and following is a brief report on BPM’s system of Corporate contribution of the various shareholder representatives on Governance, prepared taking account of the guidelines the Board of Directors. This has allowed the admission of issued by Borsa Italiana S.p.A. on 11 February 2004 and, four members from “shareholder minorities” to the Board’s as recommended by Borsa Italiana S.p.A. itself, the “Guide overall number of twenty, amongst whom a director to preparing Reports on Corporate Governance” published nominated by investment funds which have invested in by Italy’s Association for limited companies and Issuers of BPM. securities in February 2004. Attached to this report is a table summarising to what extent and how BPM has The importance given to “shareholder minorities” in adopted the Code’s main recommendations governing the Bank has been also been reflected – in 2004, like the year before – in the composition of the Executive Committee, which includes a representative from each minority, as well as in the presence of one “minority” director on the Board Financing Committee and on all the board committees/commissions carrying out review work and/or making recommendations (with two “minority” directors on the Internal Control Committee and on the Supervisory Committee, pursuant to Decree 231/01).
In parallel with giving greater importance to the various interest groups on board committees, BPM’s strategy for commercial growth received fresh impetus in 2004 thanks to internal development and the conclusion of acquisitions and/or strategic partnerships with other banks. These operations – particularly the commercial and strategic alliance with Crèdit Industriel et Commercial and the assimilation of Cassa di Risparmio di Alessandria into the BPM Group – have resulted, amongst others, in the admission of new “strategic” long-term shareholders (such as CIC and Fondazione CR Alessandria) who share the Bank’s business model and can effectively support its growth and specific mission. In this respect the appointment to the BPM board of a director nominated by Fondazione CR Alessandria – co-opted at the board meeting of 29 June 2004 – represents additional confirmation of the long-term strategic breadth of these partnerships. Similarly, the Bank’s shareholders had voted on 12 April 2003 to appoint a representative of Crèdit Industriel et Commercial to the Board.
Corporate Governance 13 opted to the board on 29 June 2004 following the Composition and role of the Board of Directors resignation of Maria Martellini). (articles 1-5 of the Code) There now follows a complete list of the directors (whose a) Composition and term in office of the Board of curricula vitae can be found on our website in the section Directors - Profile of the Directors entitled “Who we are”) with information on the specific positions that they hold, their term in office (which new The Bank is currently administered by a Board of art. 2383 of the Italian Civil Code expressly requires to Directors made up of one Chairman, two Deputy coincide with the shareholders’ meeting called to approve Chairmen and seventeen directors, appointed under a the financial statements for their last financial year in single ballot taken at the shareholders’ meeting on 12 office) and whether or not they are independent. April 2003 (except for Gianfranco Pittatore, who was co-
Name Office held Expiry (*) Independent
Roberto Mazzotta (1) Chairman 2005 yes Paolo Manzato (1) Deputy Chairman 2005 yes Marco Vitale (1) Deputy Chairman 2005 yes Enrico Airaghi (1) (3) Director 2005 yes Mario Artali Director 2005 yes Alberto Banfi Director 2005 yes Giorgio Bianchini Scudellari Director 2005 yes Emilio Castelnuovo (2) Director 2005 yes Giuseppe Coppini Director 2005 yes Rocco Corigliano (1) Director 2005 yes Eugenio Crosta Director 2005 yes Roberto Fusilli (4) Director 2005 yes Renzo Grassi Catapano Director 2005 yes Piero Lonardi (1) (4) Director 2005 yes Gianfranco Pittatore ** Director 2004 yes Michele Motterlini (1) Director 2005 yes Alberto Santa Maria (3) Director 2005 yes Jean Jacques Tamburini Director 2005 yes Graziano Tarantini Director 2005 yes Valerio Tavormina Director 2005 yes * coinciding with the shareholders’ meeting called to approve (1) Members of the Executive Committee the financial statements for the years shown (2) Secretary to the Board of Directors ** co-opted on 29 June 2004 following the resignation of Maria (3) representing a “minority” (“Together for BPM” list) Martellini (4) representing a "minority" (“Non-staff Shareholders’ Committee” list) The list representing the majority is called “Friends of BPM”
In accordance with art. 32 of the Articles of Association, all that directors who are members of the Executive of the directors have to be members of the Bank. Committee can also be considered “non executive”, as it is a collegiate body that does not grant individual powers to As regards the executive or non executive status of the its members. We can therefore confirm the “non executive” directors, given that no member of BPM’s Senior nature of the directors without operational Management is a director and that, as things stand, the responsibilities, who may be granted powers but only in directors do not have individual operating powers, it is cases of urgency. reasonable to say that all of the members of the Board of Directors are to be considered “non executive”. On the With regard to the “independence” of directors, this other hand, the Committee that drew up the Code requirement is now generally dealt with in law by new confirms that the legal structure of Italian boards means civil code art. 2387, and with reference to banks, by art. 26
14 Corporate Governance of Decree 385/93 (as amended by Decree 37/04), which they are not “close members of the family” (as defined makes reference for details to instructions to be issued by IAS 24 and included in the internal procedures and as yet unpublished by the Ministry of Finance. defining related-party transactions) of persons finding themselves in the situations described in the two previous The concept of “independence” considered in this report points. therefore refers to that defined by art. 3 of the Code. The issue of directors’ independence becomes entangled in The “independent” nature of directors of cooperative certain cases – like with potential conflicts of interest – banks is a direct consequence of the one-man-one-vote with the delicate matter of the relationship between bank system and the restrictions on share ownership that does and industry. not allow the formation of pre-established controlling syndicates. The Bank’s Board of Directors has nonetheless On this subject, art. 19 of Decree 385/93 (as amended by verified the independence of its members, firstly in its Decree 310/04) requires that “Persons who, through meeting on 24 February 2004 and later, on 29 June 2004, subsidiary companies or otherwise, engage in significant with regard to the co-opted director. business activity in sectors other than banking and finance will not be authorised to acquire equity interests As part of this review, the Board of Directors opened its which, when added to those already held, would result in remarks by stating that the office of Managing Director is a holding exceeding 15% of a bank’s voting capital or in its not envisaged in BPM, and that, as things stand, there are control”. The Bank of Italy refuses or revokes no “executive” directors or even any with operational authorisation where there are agreements, however responsibility.This is because operational responsibility at concluded, which would result in such persons holding on BPM for implementing strategy and board decisions is a lasting basis “a significant concentration of the power to delegated to the General Manager and the management appoint or remove a majority of the directors (..) such that team, under the former’s command. It should also be noted its sound and prudent management is jeopardised”. that, as things stand, even the directors who hold office in subsidiary companies (including the chairmen of these In practice the Italian legislator has explicitly prevented companies) have no “executive” or any other operational “industrial” concerns from acquiring dominant positions responsibility. in the capital of banks. As already mentioned, the restriction on share ownership in cooperative banks – The Board of Directors then examined the position of each which prevents the formation of pre-established director, reporting that they may all be classed as controlling majorities – is on its own a guarantee that “independent” in the sense that: bank/industry separation is maintained. Failure to comply with this principle would result in the loss of that just and they do not have (directly, indirectly or on behalf of essential neutrality when allocating resources, with third parties), nor have they had in the recent past, serious harm to shareholders and customers, as well as to economic relationships with the Bank or its subsidiaries of the bank’s image and that of the entire banking industry. such a size as to prejudice their independence of judgement, bearing in mind the normal and routine BPM has always paid the utmost attention to this subject, nature of the Bank’s lending activity in the relationships in which it was been helped by its traditional roots in the that they have with BPM. From this point of view, the retail and small and medium enterprise segments, also Directors’ economic relationships with the Bank – always representing its most numerous class of shareholder. As carried out at market conditions – are regulated as far as demonstrated by recent, important transactions the obligations of bank officers are concerned by art. 136 (particularly, the admission of CIC and Fondazione CR of Decree 385/93 (as amended by Decree 37/04) and by art. Alessandria as shareholders), BPM’s strategic 39 of BPM’s Articles of Association, which says that partnerships are strictly within the banking/financial transactions of this type have to be specifically approved sector and are directly geared towards its local and by the Board of Directors, with the entire Board of international development. In this sense, no member of Statutory Auditors also voting in favour; “big industry” has a significant stake in the Bank’s share capital and hence in defining its strategies, nor is any they do not hold (directly, indirectly or on behalf of current director the representative of such concerns. third parties) equity interests of such a size as to permit them to exercise control or a significant influence over the Bank, nor are they members of shareholder syndicates designed to control it;
Corporate Governance 15 Again as regards the overall profile of the current Emilio Castelnuovo directors of BPM and in accordance with art. 1.3 of the - Chairman of Bipiemme Vita S.p.A. Code, below is a list of the positions held by directors – either as director or statutory auditors – in listed Giuseppe Coppini companies, in Italy and abroad, and in finance companies, - Deputy Chairman of Bipiemme Gestioni SGR S.p.A banks, insurance or other large companies (including - Director of Banca di Legnano S.p.A companies of this kind belonging to the Group). - Director of Nordest Banca In detail: - Director and Member of the Executive Committee of Cassa di Risparmio di Asti S.p.A. Roberto Mazzotta - Director of Dexia Banque S.A. Rocco Corigliano - Director of Sogepar S.p.A - Chairman of Banca di Legnano S.p.A. - Director of Crèdit Industriel et Commercial - Director of Banca Akros S.p.A - Director of Aedes S.p.A. Roberto Fusilli Paolo Manzato - Director of Banca di Legnano S.p.A. - Chairman of Bipiemme Private Banking SIM S.p.A - Director of Bipiemme Gestioni SGR S.p.A - Chairman of SelmaBipiemme Leasing S.p.A. Renzo Grassi Catapano Marco Vitale - Director of Banca Akros S.p.A - Chairman of Bipiemme Gestioni SGR S.p.A - Director of Bipiemme Private Banking SIM S.p.A - Director of Etica SGR S.p.A - Director of Banca di Legnano S.p.A. - Chairman of Same Deutz Fahr Italia S.p.A - Director of Bipiemme Real Estate SGR S.p.A - Director of A.S.M. Brescia S.p.A. - Chairman of S.I.F.I. (Società Italiana Finanziaria - Director of Recordati Industria Chimica e Immobiliare) S.p.A Farmaceutica S.p.A. - Director of Ermenegildo Zegna HoldItalia S.p.A Piero Lonardi - Director of Miroglio S.p.A - Director of Cassa di Risparmio di Alessandria S.p.A. - Director of Pictet & C. SIM S.p.A. - Chairman of the Board of Statutory Auditors of AMSA - Director of Smeg S.p.A S.p.A. - Director of Snaidero R. S.p.A - Director of Sorin Group Gianfranco Pittatore - Member of the Supervisory Board of Deutz AG S1063 - Director of Banca Akros S.p.A KOLN - Director of Bipiemme Gestioni SGR S.p.A - Director of S.I.A.S. Società Iniziative Autostradali e Mario Artali Servizi S.p.A. - Chairman BPM Private Equity SGR S.p.A. - Chairman of Sigma Tau America S.A. Alberto Santa Maria - Chief Operating Officer of Sigma Tau Holding USA, - Director of Bracco S.p.A. Inc. - Director of Esaote S.p.A. - Deputy Chairman of Sigma Tau Finanziaria S.p.A. - Deputy Chairman of Sigma Tau Industrie Jean- Jacques Tamburini Farmaceutiche Riunite S.p.A. - Managing director and executive committee member of Credit Industriel et Commercial Alberto Banfi - Chairman and Managing Director of Societe Bordelaise - Director of Bipiemme Private Banking SIM S.p.A. de CIC - Chairman of the Supervisory Committee of Cic Capital Giorgio Bianchini Scudellari Privè - Chairman of Bipiemme Real Estate SGR S.p.A - Director of Cic Capital Developpement - Chairman of Locauto S.p.A - Director of Cic Finance - Chairman of Fidimed srl - Director of Banque de Tunisie - Director of Banca di Legnano S.p.A. - Director of Banque de Vizille - Director of SelmaBipiemme Leasing S.p.A - Director of CICAM - Chairman of the Board of Statutory Auditors - Director of Banque Regional de l’Ouest of TAD FIN S.p.A - Director of Banque Cial - Chairman of the Board of Statutory Auditors - Director of CIC Epargne Salariale of ENERTAD S.p.A - Director of Lyonnaise de Banque - Director of Societe Nanceienne Varin Bernier
16 Corporate Governance - Director of Banca di Legnano S.p.A. to the Board of Directors for decision.
Graziano Tarantini In addition to the matters that cannot be delegated by law, - Chairman of Banca Akros S.p.A under art. 36 of the Articles of Association the Executive - Chairman of Akros Securities Inc - New York Committee cannot be granted the power: to buy or sell - Director of ESN North America equity investments or real estate; to determine the - Director and Partner of Interservice Gestione structure or powers of general management and head Partecipazioni S.p.A office management; to appoint or remove directors or determine their duties, powers and emoluments; to Valerio Tavormina establish overall strategy for the Bank’s operations and - Director of Banca di Legnano S.p.A. organisation; or to take decisions concerning the granting - Director of Cassa di Risparmio di Asti S.p.A. of loans. Significant and/or related-party transactions must also be examined and approved beforehand by the Board of Directors (see specific procedure described b) Powers of representation below).
Pursuant to art. 37 of the Articles of Association, the For the year under review, the Board of Directors granted Chairman and each of the Deputy Chairmen has the the Executive Committee the following powers and power to represent the Bank vis-à-vis third parties and in responsibilities at its meeting held on 11 May 2004: court; they also have single signature powers. Each of the directors may represent the Bank jointly with the draft proposals and guidelines for the strategy and General Manager or with one of the directors so general policies to be adopted by the Bank and the BPM designated by the Board. For certain operations, the Group, formulating the associated decisions, for Board may also give single or joint signature power to submission to the Board of Directors; individual directors and managers, and grant powers of attorney for specified matters. prepare the Bank’s financial statements and submit these to the Board for approval; The Chairman or, in the event of his impediment, either of the Deputy Chairmen, can appoint proxies to implement review recruitment plans, organisation charts, board resolutions. training programmes, proposed disciplinary measures involving suspension (for more than two days) or dismissal, and report on these to the Board; c) Functions of the Board of Directors and powers delegated by it conduct preliminary reviews of budgets, with particular reference to expenditure and investment, and Pursuant to art. 36 of the Articles of Association, the of proposals for the sale of properties or the divestment of Board of Directors is invested with all the powers over the equity interests; Bank’s ordinary and extraordinary management except those that the law or Articles of Association reserve for the approve spending decisions, whether for ordinary shareholders’ meeting. operations or for investments not included in the budget, up to a maximum of Euro 1.5 billion per expense and Art. 36 also lays down that the Board of Directors may within an annual ceiling of 5% of the budget approved by delegate part of its powers on an annual basis to an the Board of Directors; Executive Committee made up of the Chairman, the Deputy Chairmen, and other directors such that the total implement decisions of the Board of Directors at the number of Executive Committee members is not less than Board’s specific request; five or more than seven (at the moment it has seven members, including the Chairman and two Deputy resolve upon any matter in cases of urgency or other Chairmen, as well as two directors elected from “minority” special need when it is not possible to call an immediate lists). Committee meetings are attended by all members of meeting of the Board of Directors, subject to ratification by the Board of Statutory Auditors and the General Manager. the latter at its next meeting.
The Board of Directors, when it is appointed, decides how The Executive Committee reports to each board meeting the Executive Committee will function. In principle the on the decisions it has taken in the exercise of its powers Executive Committee meets weekly. The Executive and asks the Board to ratify any decisions it has taken on Committee met 38 times during 2004. Executive an urgent basis for which the Board is normally Committee resolutions must be passed by unanimous vote responsible. all of those present; otherwise, the resolutions are referred
Corporate Governance 17 On this subject – in compliance with new civil code 2381.5 Code (i.e. the approval of strategic/business/financial – it will be proposed to the extraordinary shareholders’ plans, the corporate structure of the Group, decision- meeting due to be held in April 2005 that the following making powers, the remuneration of directors who hold addition is made to art. 36 of the Articles of Association: particular positions and allocation of the global “the committee reports to the Board of Directors and the compensation provided for the directors under the Articles Board of Statutory Auditors, at least once per quarter, on of Association, supervision of the general business the Bank’s general performance (including its exposure to performance and any situations of conflict of interest, risks) and outlook, as well as on the more important operations that have particular importance from an operations, by size and nature, carried out by the Bank economic, capital or financial point of view with particular and its subsidiaries”. reference to transactions with related parties, verification of the adequacy of the Bank’s and the Group’s On the subject of granting credit, the current art. 38 of the organisational and administrative structure, and reports Articles of Association provides that the Board of or other sources of information prepared for shareholders’ Directors can: meetings) are all under the general jurisdiction of the Board of Directors, which has exclusive decision-making a) delegate particular powers to the Executive power. Committee, or rather to a Financing Committee, comprising the Chairman, a representative of the Board of Pursuant to art. 150 of Decree 58/98 (as amended by Directors and general management, laying down year by Decree 37/04) and the last paragraph of art. 37 of the year the extent of its powers and the frequency with which Articles of Association, the Board of Directors must report it has to meet; to the Board of Statutory Auditors operations with a significant impact on the balance sheet, income statement b) delegate power of approval, within pre-established and financial position of the Bank and its subsidiaries limits, to the general manager and to other employees (with particular reference to operations in which the invested with particular powers, to branch managers and directors have an interest on their own account or that of to members of their staff; third parties). This requirement is satisfied through the participation by BPM’s Board of Statutory Auditors at all c) delegate powers of approval to internal committees the meetings of the Board of Directors and Executive made up of managers and/or other company employees. Committee. Furthermore, its members act as Chairmen of the Board of Statutory Auditors or Auditors in the Group’s In this connection, it should be pointed out that at present principal operating companies. The Board of Statutory this topic is governed by specific Credit Line Regulations Auditors of BPM is therefore kept abreast of the Bank’s (and relevant Delegated Powers), approved by the Board activities on a continuous basis. All of the documentation of Directors on 27 July 2004; art. 6 of these Regulations examined from time to time by the Executive Committee governs, in particular, the powers and functioning of the and by the Board of Directors at their respective meetings Board Financing Committee, made up of the Chairman is simultaneously sent to the Board of Statutory Auditors and Deputies, six directors nominated by the Board of for their review. Directors (including one director representing a “minority” At the end of each quarter, the Board of Statutory list) and the General Manager (or his nominee).The Board Auditors issues a statement on the information received of Statutory Auditors is invited to attend this committee’s from the Board of Directors regarding the activities of the meetings, which are also attended by senior managers in Bank, particularly with regard to the more important charge of credit and loans, finance, commercial policies, economic and financial transactions carried out by the corporate finance, legal office and technical and Bank and its subsidiaries, and with particular reference to operational control. operations involving potential conflicts of interest.
The Board of Directors may assign special duties to one or more of its members, specifying the characteristics of the d) Board meetings assignment, and without prejudice to the limitations specified above. The only personal power currently According to art. 34 of the Bank’s Articles of Association, outstanding is that of the Chairman to make charitable the Board of Directors normally meets once a month. The donations of up to Euro 6,000 million per recipient. He has Board of Directors met 18 times in 2003, with a 93% to report back to the Board regarding such donations on a attendance record. regular basis. Board meetings are called by the Chairman by means of a In light of the above and considering the way that the notice of calling accompanied by a detailed agenda of the Bank operates in practice, it can therefore be said – as matters to be discussed, which has to be sent out at least requested in the guidelines issued by Borsa Italiana S.p.A. one week prior to the meeting or, in an emergency, by – that at BPM all of the matters listed in art. 1.2 of the telegram, fax, telex or similar method at least two days
18 Corporate Governance prior to the meeting. Association, the lists of candidates signed by those who present them, have to be deposited at the Bank’s head Depending on the type and importance of the matters to office “according to the terms laid down in the Regulations be discussed and the urgency of the decisions that have to for Shareholders’ Meetings, if they exist; and if they do be taken, the members of the Board of Directors and of the not, as laid down in the notice of calling to the meeting” Board of Statutory Auditors should normally be sent in (currently, at least ten days prior to the date scheduled for advance all of the documentation and information needed the meeting).With regard to the proposed amendments to give them adequate background knowledge of the that will be put to the extraordinary shareholders’ matters being discussed at board meetings. meeting due to be held in April 2005, it will be proposed that art. 32 states that the lists of candidates have to In compliance with new civil code art. 2381.1, it will be deposited at the Bank’s head office “at least ten days prior proposed to the extraordinary shareholders’ meeting due to the scheduled date of the meeting at first calling”. to be held in April that the following addition is made to art. 34 of the Articles of Association: “The Chairman Art. 32 also requires that the lists “have to be coordinates the work of the directors and sees to it that accompanied by each candidate’s curriculum vitae and the they all receive adequate information on the matters declarations by which they individually accept their contained on the agenda” nomination and confirm, under their own responsibility, that there are no reasons for ineligibility or incompatibility, and that they meet the requirements prescribed by law or by the Articles of Association for Appointment and remuneration of directors holding office as a director” and that candidates can (art. 7 and 8 of the Code) therefore also be qualified as “independent”, as already expressly requested in the notice of the Bank’s a) Appointment of directors shareholders’ meeting for which board appointments are on the agenda. The “list voting system” introduced by the extraordinary shareholders’ meeting held on 19 December 2002 for the Pursuant to art. 22 of the current Regulations for appointment of the Board of Directors (following its Shareholders’ Meetings, “the lists (..) together with their enlargement from eighteen to twenty members) mirrors, curriculum vitae, are available to the shareholders at the with due modification for the specific composition of the Bank’s head office and summarised by the Chairman in board, the system already adopted for appointing the the shareholders’ meeting before the polling stations are Board of Statutory Auditors. This model provides for: opened”.
a fixed number of directors nominated by the majority On this subject, it is noted that – like on 1 April 2003 prior shareholders (16) and by any “minority” shareholders (up to the BPM shareholders’ meeting called to reappoint the to 4 in total); entire Board of Directors and Board of Statutory Auditors – before such meetings, the Bank sends shareholders and the replacement of directors, if necessary, during the the market a specific press release containing details of course of their three-year term of office maintaining – the lists presented for each office and the complete list of where possible – the proportion between the majority and the related candidates. The candidates’ curricula are any “minorities” as indicated above; usually published on the website before the shareholders’ meeting, as stated in the meeting’s notice. appointment of the Chairman and Deputy Chairmen, respectively, in the same order as the first three Art. 32 of the Articles of Association also envisages that candidates shown on the list voted by the majority; “persons who are or who subsequently become directors, employees or statutory auditors of other banks or their the introduction of a “representative quorum” for lists subsidiaries cannot become directors, except in the case obtaining at least 10% of the votes validly expressed at the where the entity concerned is a centralised co-operative shareholders’ meeting (lists obtaining less than this banking structure or a bank or company that belongs to minimum threshold are not taken into consideration for an affiliated banking group.”. This provision, which was the purposes of board appointments); added to BPM’s Articles of Association at its extraordinary shareholders’ meeting held on 19 December 2002 is now presentation of the lists of candidates by a group of not partly reflected in law in the form of new civil code art. less than 300 shareholders who have been included in the 2390 concerning the ban on competition which Register of Members for at least 3 months, and who have establishes, amongst others, a ban on directors from being a right to attend and vote at the shareholders’ meeting. “directors or general managers of competitor companies, unless so authorised by the shareholders’ meeting”. Pursuant to the current art. 31 of the Articles of
Corporate Governance 19 Using a list voting system has made it opportune to Board of Directors. introduce – as approved by the shareholders’ meeting of 19 December 2002 – a single ballot for the election of In addition to the above, the directors are also reimbursed directors. They are therefore elected after a single round of for any out-of-pocket expenses and awarded an attendance voting, remain in office for three years and can be re- fee for taking part in meetings of Board Commissions or elected. Committees, if these have been set up.
The Board decided that it was not necessary to set up a Pursuant to art. 78 of CONSOB resolution 11971/99 (and Nominations Committee, since it is not obligatory under subsequent amendments) the remuneration paid to the Code. Particularly as: directors, statutory auditors and the general manager for offices held in BPM and, in aggregate, in other Group the Bank is a cooperative with a broad base of companies is disclosed for each individual under the shareholders who take an active and proportionately section entitled “other information” in the explanatory significant part in its corporate life, meaning that no notes to the 2004 statutory financial statements. problems have been encountered to date in making suitable nominations that can then freely group The remuneration of senior management for the year themselves together in lists that then compete on an equal 2004 was not linked to the Bank’s results or to meeting basis and without any prior intervention by the current specific targets, nor are there any plans at present to directors to form the future composition of the corporate introduce stock options. boards; You are reminded that on 22 May 2001 the Board of BPM is a company that is authorised to do business as Directors decided to set up a “Remuneration Committee”, a bank, meaning that the professional and ethical made up of four non-executive, independent directors who characteristics of the candidates for director (and are not members of the Executive Committee, namely statutory auditor) are laid down in detail – varying Messrs. Renzo Grassi Catapano (committee chairman), according to the position that they are likely to hold Giorgio Bianchini Scudellari, Eugenio Crosta and Alberto (director, chairman or managing director) – in the Santa Maria (elected on a “minority” list). Supervisory Instructions issued by the Bank of Italy (which currently reflect Regulation 161/98 of the Treasury, This Committee has the task of making proposals for the Budget and Economic Planning Ministry, implementing amounts to be paid to those directors who hold particular art. 26.1 of Decree 385/93 and which must be integrated positions; it also decides on the criteria for remunerating for the requirement of “independence”). The Board of the Bank’s senior management. It also carries out reviews Directors has to verify that candidates satisfy these and makes proposals regarding the remuneration of the requisites within 30 days of their nomination, subsidiary company directors, in order to ensure a communicating the fact to the Supervisory Body. If it standard approach throughout the Group. turns out that a director (or statutory auditor) did not satisfy all of the requirements, they automatically lose During 2004 the Board of Directors did not discuss any office. This has to be declared by the Board of Directors, matters falling under the Remuneration Committee’s but if it does not take action, the Bank of Italy will do so direct responsibility except in the meeting of 11 May when instead. it reconfirmed – at the proposal of the committee’s chairman – the emoluments of directors invested with particular office (ie. the Chairman, Deputy Chairmen and b) Remuneration of Directors and Senior Management Secretary), at the same level as in 2003.
As regards directors’ remuneration, art. 35 of the Articles Furthermore, this Committee did not hold any meetings of Association states that “the shareholders’ meeting in 2004 and – in accordance with the disclosure required decides on the fixed portion of the remuneration and the by the Code – so did not need to use the services of outside attendance fees due to members of the Board of Directors consultants. and Executive Committee. The Board of Directors, having heard the views of the Board of Statutory Auditors, decides on the remuneration due to directors holding particular office in accordance with the Bank’s Deed of Incorporation” (ie. the Chairman, the Deputy Chairmen and the Secretary to the Board).
Art. 47 of the Articles of Association also lays down that 1% of net profit for the year, net of appropriations to the legal and statutory reserves, should be allocated to the
20 Corporate Governance the right level of objective criticism between manager and The system of controls (art. 9 and 10) controller; a) The internal control system z maintain the distinction between “line controls” (which form part of the operating lines established by each As regards the internal control system, the company, being Department which has executive responsibility for a bank, is subject to the far-reaching and detailed individual activities) and “technical operating controls” regulations on this matter issued by the Bank of Italy. (which are carried out by the Technical and Operating Controls Department to ensure that the various corporate In this context, the Board of Directors complies with the units function properly); specific requirements of the Supervisory regulations by ensuring the functional effectiveness and adequacy of the z establish a network of “line controls” superimposed on internal control system, defining appropriate procedures the operating structure of the Bank/Group; and providing suitable resources for the control structure. z extend these “technical and operating controls” to all In order to organise the internal control system from a organisational units: the Parent Bank’s central units functional point of view in compliance with these (head office), peripheral units (branches) and the various Supervisory regulations, some time ago BPM’s board companies that make up the Group. approved a specific “Control Model”, which forms part of the Bank’s General Rules and Regulations. The The “Internal Control Function” has also been in procedures by which the controls are implemented are operation for some time, as required by art. 57 of CONSOB also updated constantly. Regulation 11522/98 and subsequent amendments. It was appointed directly by the Board of Directors and has In detail: responsibility for supervising all aspects of financial intermediation, which means that it has to: the general configuration of the controls applied throughout the BPM Banking Group is based on three constantly verify that suitable procedures are in place fundamental cornerstones: the Board of Statutory and ensure compliance with the provisions of Decree 58/98 Auditors, the internal control units and the inspections and related implementation rules; carried out by the Parent Bank at subsidiaries, the results of which are regularly reported back to top management; check compliance with internal procedures;
the control activities carried out at BPM are check compliance with the internal code of conduct; coordinated as part of a system (the “Corporate Controls System”) that is based on the following principles: keep the register of financial complaints; z the fact that there is a single corporate structure provide advisory support to the various sectors responsible for “technical operating control”, which does involved in organisation on matters concerning the not report to any of the persons in charge of operational provision of services, conflicts of interest and the approach areas, but rather to the General Manager; it reports to be taken as a result. functionally on the results of its activities to the Board of Directors and Board of Statutory Auditors. The duties of By law, this function has to send a report at least once a this structure (which is called the “Technical and year to the Board of Directors and Board of Statutory Operating Controls Department”) are to: Auditors with details, unit by unit, of the checks carried out, the results, the recommendations made, as well as - ensure ongoing compliance on the part of those any decisions taken by unit management or the relevant involved in management, accounting and operations with corporate boards. This report has to contain a summary the regulatory framework of the banking industry, sector that evaluates all of the anomalous situations found, recommendations and the technical principles that govern bearing in mind any complaints that have been received. banking and finance; There should also be an audit plan for the checks to be carried out the subsequent year. - verify consistency with the needs of the company on the part of the units being controlled, their organisational The Internal Control Function must also prepare an aspects in particular; annual report on the procedures for providing investment services, as well as a specific report, within 40 days of the z ensure a clear separation of duties between those end of each half year, on the follow-up to complaints about involved in operations and those involved in control investment services, any shortcomings encountered in this activities, so as to ensure (both in form and in substance) area and the recommendations for their removal.
Corporate Governance 21 At BPM the Technical and Operating Controls made up of six directors who are all non-executive and Department reports to the corporate boards every three independent and of whom 5/6 do not belong to the months (after a review by the Internal Control Executive Committee. Its members also include two Committee), so that the Board of Directors and the Board directors elected under the two minority lists. of Statutory Auditors are kept constantly up-to-date. The Internal Control Function therefore reports with the same The Committee’s current members are: Enrico Airaghi frequency. (committee chairman), Alberto Banfi, Eugenio Crosta, Roberto Fusilli, Renzo Grassi Catapano and Valerio In view of the importance and delicacy of the subject Tavormina. Maria Martellini was a member until June matter, in the meeting held on 21 October 2003, BPM’s 2004 when she resigned as a director of BPM to take up Board of Directors decided to formalise (i) the reporting new appointments in Group companies. procedures and deadlines for these reports to the Internal Committee meetings are also attended by the Chairman of Control Committee and the Board of Statutory Auditors, the Board of Statutory Auditors or another auditor and (ii) the different stages for examining the issues appointed by him. raised. The purpose is to enable a more detailed examination of the contents of these reports and the The Internal Control Committee has a consultative role formulation of related observations/recommendations. and also makes recommendations. It acts as a liaison between the Internal Auditing function, the Board of In its wider definition BPM’s system of internal control Directors, the Board of Statutory Auditors and the also covers the Risk Management function in its role as independent auditors. manager of the risk measurement process. The Committee’s priorities – which also reflect the This function is charged with monitoring the Bank’s recommendations contained in the Code of Conduct for overall risk profile and seeing that it respects the limits of Listed Companies and have been specifically approved by tolerance set by the Board of Directors. It is therefore the Bank’s Board of Directors – are as follows: responsible for organising and managing the processes of identifying and measuring risks within the Bank, for to assist the Board of Directors in setting policy which it uses guidelines and periodically checking the adequacy and working of the internal control system, ensuring that the methods of risk measurement; principal business risks (credit, financial and operational) are properly identified and managed, in line with the a matrix that associates risky events to the business Bank’s risk management model and in liaison with the lines. department responsible for it;
The activities of identification and measurement are to evaluate the work plan prepared by those in charge differentiated according to the type of risk, distinguishing of internal control and review their quarterly reports; between market risks (trading book), credit and interest rate risk (banking book) and operational risks (company to evaluate together with the Bank’s administration processes). managers and independent auditors the adequacy of the accounting policies used and their consistent application The Risk Management function – which reports throughout the Group for consolidation purposes; organisationally to the Parent Bank’s general management team – performs its activities for the entire to evaluate the proposals made by the independent BPM Group, according to the complexity and exposure to auditors for the renewal of their engagement, as well as risk of individual subsidiaries and foreign branches. the audit plan prepared for the independent audit and the results discussed in the audit report and management The decentralised units performing risk management letter; activities, where they exist if required by specific organisational complexities, report functionally to the to report to the Board of Directors at least every six Parent Bank’s risk management office, which may support months – at the time of approving the annual financial these units, if necessary, including by seconding its own statements and half-year report – on the work performed staff on site . and the adequacy of the internal control system;
to perform other tasks so requested by the Board of c) The Internal Control Committee Directors, especially regarding the relationship with the independent auditors. As you know, the Bank’s Board of Directors decided on 13 November 2001 to set up an Internal Control Committee During 2004, the Internal Control Committee examined
22 Corporate Governance the quarterly reports from the Technical and Operating Santa Maria (Chairman, as well as a director elected Controls Department and those from the head of Internal under a “minority” list), Enrico Airaghi (director elected Control function prepared in accordance with CONSOB under a “minority” list, as well as Chairman of the Regulation 11522/98 (and subsequent amendments), Internal Control Committee), Mario Artali, Alberto Banfi giving its opinion to the Board of Directors. It also met (member of the Internal Control Committee) and Claudio periodically with the Bank’s managers in charge of its Bonadio (Head of the Technical and Operating Controls various functions and with the heads of internal control at Department). All the directors on the Committee are non- subsidiaries. It also: executive and independent, and the majority of them (3 out of 4) are not members of the Executive Committee. investigated matters of particular significance highlighted in the reports of the Technical and Operating With regard to its duties, the Supervisory Committee: Controls Department and the head of the Internal Control function (the outcome of these investigations was reported makes recommendations and observations for to the Board of Directors); updating the above-mentioned models, making use of the Bank’s relevant functions for this purpose, and checks the examined the independent auditors’ reports entitled implementation and efficacy of proposed solutions; “Review of the internal control system” and “Recommendations on the internal accounting system”; defines suitable steps for spreading awareness among staff and consultants of the Bank’s met periodically with the independent auditors on the organisational/management/control models and its Code progress of the “IAS Project”; of Ethics through training and obtains feedback to understand their relevance and application; investigated any “conflicts of interest”, which were reviewed together with other company functions; reports periodically to the Board of Directors on its work and produces a report at least once a year for the provided advice on the BPM Group’s new “Control Board of Directors and the Board of Statutory Auditors, Model”. both on the results of the work performed and the work planned for the next period; The Internal Control Committee met 14 times during 2004. The topics discussed during these meetings and the activates, via the related departments, any conclusions reached by the Committee are contained in disciplinary proceedings, pursuant to the law and specific minutes. applicable collective employment contracts, that are suitable for punishing the failure to comply with the measures indicated in the d) The Supervisory Committee organisational/management/control models and the Code (pursuant to Decree 231/01) of Ethics;
In its meeting of 13 January 2004, the Board of Directors creates an effective system of internal communication voted to set up a “Supervisory Committee” as required by that, by guaranteeing the utmost confidentiality and Decree 231/01. This committee has full, autonomous protection to the reporter, allows anyone learning of freedom of action and control over the Bank’s activities, unlawful situations, or situations that fail to comply with with the principal task of evaluating the adequacy of the the organisational/management/control models and Code organisational/management/control models and Code of of Ethics adopted, to report these to the head of their Ethics adopted by the Bank, and of monitoring how they relevant departments and to provide the Supervisory work and are observed, in order to prevent the committing Committee with every relevant fact for the purposes of of the offences described in Decree 231/01 (and subsequent Decree 231/01. These include, but are not limited to, those amendments). resulting from:
The Supervisory Committee has five members: two z the outcome of control activities (monitoring, summary directors belonging to the Internal Control Committee reports, final indices); (including its chairman), two other directors (one of whom is appointed as the Chairman of the Supervisory z anomalies or unusual situations observed in the Committee) and the head of the Technical and Operating conduct of various activities; Controls Department (who also acts as secretary). Members of the Board of Statutory Auditors may attend z decisions relating to the request, disbursement and meetings of the Supervisory Committee. utilisation of public funds;
The Supervisory Committee currently comprises: Alberto z request for legal assistance sent by managers and/or
Corporate Governance 23 employees for proceedings relating to the offences organisations of a political, trade union or religious described in Decree 231/2001; nature, or to national publishing or broadcasting z notices and/or information from the police or other companies or individuals who carry on political activities authority announcing the conduct of investigations, according to arts. 6 and 13 of the current Credit Line including against unknown persons, for the offences Regulations). described in Decree 231/2001; “Significant” transactions, as defined in arts. 1.2.e) and 11 z information relating to contracts granted by public of the Code, include, as you know, transactions with organisations or parties who perform functions of public related parties and those in potential conflict of interest. utility; New art. 71 bis of CONSOB Regulation 11971/99 (and z organisational/procedural amendments relating to subsequent amendments) took effect on 1 January 2003, Decree 231/01. introducing a new disclosure requirement (by means of a specific information document or as part of the normal Failure in the duty to supply information will meet with flow of information foreseen in specific cases) for related- disciplinary proceedings laid down by the collective party transactions, even if carried out through subsidiary employment contract and in-house rules. companies, which “because of the object of the transaction, the amount paid, the method used or the timing of the In order to do its duty, the Supervisory Committee may transaction could have an impact on the company’s net use the Bank’s different structures, specifically the asset value or on the completeness or fairness of the Technical and Operating Controls Department, and any information on the issuer, also of an accounting nature”. other outside consultants or parties, with the widest freedom of expenditure. Accordingly, at the meeting on 10 December 2002, the Board of Directors reviewed the new regulations and The Committee meets at least every quarter, but, if concluded above all that the Bank – by law, internal rule needed, may be called urgently upon the request of any of or normal practice – already guaranteed the substantial its members. and procedural fairness of any transactions with related parties. In any case, the Board reserved the right to The Committee met 9 times during 2004. implement the internal regulations by laying down more comprehensive criteria for the recognition of related-party Since January 2005 a special section of the BPM website transactions and the rules of conduct to be applied in such has been dedicated to the Supervisory Committee cases. (pursuant to Decree 231/01). This section reports, amongst others, the Committee’s composition, its rules and main The Board of Directors approved a detailed set of functions, as well as the Code of Ethics and the law which procedures, entitled “Guidelines on significant governs it. transactions with related parties” on 21 October 2003. The purpose is (i) to identify “significant” transactions by BPM (and the entire BPM Group) and specifically those with related parties, (ii) to provide all the persons concerned “Significant” transactions and related-party with guidelines as to when to notify the Bank of their transactions (art. 11 of the Code) position as a “related-party” in their dealings with it and (iii) to regulate the process of authorising such At BPM, the Board of Directors has always had exclusive transactions in order to ensure their substantial and decision-making power – under its Articles of Association procedural fairness. and internal regulations – which cannot therefore be delegated, to approve operations with a major impact on The “Guidelines” firstly define “significant” transactions its income statement, balance sheet and financial position (regardless of with whom) as those that, by way of (“significant transactions”), as defined on the basis of example, fall into the following categories: possibly conflicting criteria: the acquisition and disposal, in any form, of equity of a quantitative nature (such as credit lines investments, businesses or parts thereof; exceeding 15% of shareholders’ equity pursuant to art. 6 of the current Credit Line Regulations) and/or the formation of companies, temporary business consortia and, in any case, the creation, in any form, of of a qualitative nature (such as the purchase and sale partnerships or strategic alliances; of equity investments or real estate in accordance with art. 36 of the Articles of Association, credit lines of the grant of secured and unsecured loans and/or whatever amount to affiliated companies or to guarantees to an individual party or group which taken
24 Corporate Governance together represents over 15% of share capital; Art. 136 of the Banking Act (as amended by Decree 37/04) specifically provides that “persons performing the issue of financial instruments; administrative, managerial and controllership functions in a bank may not contract obligations of any kind or enter the purchase and sale of fixed assets and the directly or indirectly into purchase or sale agreements acquisition and disposal, in any form, of real estate in with the bank which they administer, manage or control, general; without a prior resolution adopted unanimously by the governing body and with the favourable vote of all the the grant of credit lines to organisations whose members of the control body (statutory auditors), without purpose is the pursuit of ends described in art. 13 of the prejudice to civil code obligations relating to directors’ current Credit Line Regulations; interests. The same provisions also apply to financing transactions that such parties may undertake with other transactions that require the Bank to provide the BPM Group companies. public with a written report in accordance with CONSOB instructions, meaning, for example mergers/spin-offs, or It goes without saying that the examination and approval acquisitions/disposals of equity investments or by the board does not usually include transactions with acquisitions/disposals of businesses or parts thereof, fixed related parties forming part of the ordinary services assets or those involving conferrals in kind. offered by the Bank at standard conditions (eg. opening of current accounts or custody of securities, order to For the purposes of determining the principles of purchase securities, various customer services, etc.). “materiality” the “Guidelines” refer to the recommendations contained in CONSOB Communiqué Fourthly, the guidelines define significant transactions DIS/98081334 of 19 October 1998. with related parties and especially those subject to disclosure requirements under art. 71 bis of CONSOB With reference to these transactions, the guidelines Regulation 11971 (and subsequent amendments), dividing require “the Board of Directors to examine and approve them into: the above-mentioned transactions, supported by adequate information on the Bank’s interest in completing the intercompany transactions (ie. directly conducted by transaction, its economic feasibility, its consistency with the Bank or through other Group companies, with the BPM Group’s strategies and the returns that it is subsidiary and associated companies or with those expected to generate”. companies the majority of whose board members are the same as BPM’s) and Secondly, the “Guidelines” define the concept of “related parties” which – in accordance with CONSOB transactions with other related parties (especially Communiqué 2064231 of 30 September 2002 – are broadly related parties of BPM or their close family members, described as parties associated with the issuer through (i) entities controlled by these persons or their close family share ownership, by virtue of shareholder agreements, (ii) members or over which they exercise a significant the exercise of administrative, management and influence). controllership functions, and (iii) family ties. More specifically, for the purposes of identifying The Bank has conducted a census of the positions that transactions governed by art. 71 bis of CONSOB might qualify as “related parties” by sending specific Regulation 11971/99 (and subsequent amendments) and requests for information to all the parties concerned. This the resulting reporting requirements, significant data has been used to compile a computerised database for transactions with related parties (as defined above) use in reporting both direct and indirect transactions by include those that are atypical, unusual or carry terms such parties with the Bank. that are differ substantially from standard ones (and as such are able to endanger the Bank’s net asset value or Thirdly, the guidelines state that certain transactions impact the completeness and transparency of the when conducted with related parties are always treated as information relating to BPM, including of an accounting “significant”, regardless of the amount and their inclusion nature).Transactions are defined as: in the categories listed earlier. Such transactions will always require board approval. These specifically refer to atypical and/or unusual if their purpose or nature does those transactions defined by art. 136 of the Banking Act not fall within the Bank’s normal course of business and if (“Obligations of bank corporate officers”) and to credit they present particular elements of risk in terms of their lines, for any amount, given to subsidiary and associated characteristics, the nature of the counterparty (and companies or even mere equity investments, in accordance associated exposure) or term for their fulfillment; with art. 6 of the current Credit Line Regulations. at non-standard terms if the conditions differ
Corporate Governance 25 significantly from those usually applied by the Bank or carried out at standard conditions applied to customers or are nonetheless different from those applied to the best employees, and whether it is broadly in line with similar customers or employees. transactions with unrelated parties);
Considering that the regulations extend to parties that its manner (whether the manner of the transaction’s are not always easily or quickly identifiable by the Bank execution is unusual or atypical compared with similar (eg. first and second-degree relations of the related transactions); parties, as well companies controlled by them), BPM will request counterparties of significant transactions to its timing (specific timing of the transaction, eg. if close provide a prior statement regarding the existence of any to the year end). related-party relationships. Having verified the existence or otherwise or one or more Fifthly, the “Guidelines” state how the Board of Directors of these “anomalies”, the Board evaluates whether such a should examine and approve these kind of transactions. situation may affect:
In general, all transactions with related parties – the Bank’s net asset value (especially with regard to including those realised through controlled companies – the “materiality” of the transaction in quantitative terms must respect the principles of substantial and procedural relative to BPM’s equity), or fairness, where substantial fairness means the transaction’s economic fairness (in relation to the Bank’s the completeness and fairness of the information, interest and in a group logic) and procedural fairness including of an accounting nature, on BPM (especially refers to respect for procedures that seek to ensure the with regard to stakeholders and with reference to transaction’s substantial fairness. BPM’s Board of information that will subsequently be reported in Directors (or that of its subsidiary company involved in quarterly, half-yearly and year-end financial statements). transactions with related parties of BPM) must be provided with prior information concerning: Lastly, the “Guidelines” lay down certain rules of conduct by the directors. More specifically, if one or more of the the nature of the relationship and frequency of similar directors has an interest, even potential or indirect, in a transactions with the same related party; transaction – where an indirect interest is defined as that relating to close family of the director or a company the transaction’s principal characteristics, terms and controlled directly or indirectly by the director or their mode of execution; close family – they must:
BPM’s interest in carrying out the transaction and any provide the Board of Directors will full and prompt associated risks; information on the existence of the interest and its circumstances, in order that the other directors can fully substantial fairness of the transaction. evaluate the extent of these interests, regardless of the existence of a conflict of interests; If the transaction’s nature, value or other characteristics so require, the Board of Directors will see that it is absent themselves from the board meeting when it is completed with the assistance of independent experts, time to pass the relevant resolution. with recognised expertise in valuing the assets concerned and providing financial, legal or technical advice. This Obviously, this procedure must now be considered in light means that independent auditors and other experts may of the new civil code provision on “directors’ interests” (art. be employed to issue fairness opinions and lawyers to 2391) and “related-party transactions” (art. 2391 bis). issue legal opinions.
Using this information and for the purposes of applying art. 71 bis and complying with the resulting reporting requirements, the Board of Directors will evaluate the transaction on the basis of:
its purpose (whether the transaction falls within or outside BPM’s normal business and its commercial or financial nature);
its remuneration (whether the transaction fee is in line or out of line with market prices, whether it is being
26 Corporate Governance or capital prospects of the Bank or the Group, such that, if Confidential information and the Code of made public, they could significantly affect the price of the Conduct on Internal Dealing (art. 6 of the quoted financial instruments in question). Code) Based on this Code, the transactions that have to be a) Confidential information reported to the market are those that amount to Euro 50,000 or more, individually or cumulatively within the In accordance with art. 114 of Decree 58/98 and based on space of a calendar quarter, as well as so-called the guidelines and principles contained in the Code and “significant transactions”, meaning those of Euro 250,000 the “Guide to market reporting”, the Board of Directors, or more per person (also cumulatively together with other meeting on 25 February 2003, adopted a specific set of transactions carried out during the quarter and not guidelines for the internal management and external previously reported). communication of documents and information concerning the Bank, with particular reference to “price sensitive” The Bank’s Code of Conduct also bans Relevant Persons information. from carrying out the types of transactions that have to be disclosed during the 30 days prior to approval of the draft This procedure requires that price sensitive information financial statements by the Board of Directors (as shown should be handled exclusively by the Chairman, with the in the “Calendar of corporate events”) and during the 30 assistance of the General Manager. This implies, in days prior to any ordinary or extraordinary shareholders’ particular, that it is exclusively up to the Chairman, meetings not involving approval of the financial assisted by the General Manager, to evaluate whether or statements (so-called “black out periods”). not an authorised transaction or a corporate event that has taken place is “significant”, to evaluate whether or not This Code may be consulted on the Bank’s website it would be opportune (where possible) to submit the text of the communiqué to review by other members of the Board, to give final authorisation for the text to be sent to CONSOB and the market through the Bank’s relevant Relations with the Shareholders and offices, to issue statements to the press (or to authorise Members - Regulations for Shareholders’ other officers of the Bank or of Group companies to do so) Meetings (art. 12 and 13) with regard to such transactions or events. a) Relations with the Shareholders and Members With reference in particular to the publication of price sensitive communiqués, while the authorisation procedure In the interests of a constant dialogue with the remains as above, the internal procedure provides for shareholders in general, and with institutional investors coordinated intervention on the part of the “Public in particular and in order to comply with its required Relations and Communications” and “Parent Bank reporting requirements, the Bank makes use of an Corporate Affairs” functions, in connection with the other Investor Relator, a new position created by the Board of competent internal functions and, in the case of Directors in May 2001 and which reports to the General communiqués being issued by subsidiaries, with the help Manager. A separate section of the Bank’s website is of the Bank’s Group Strategic Planning Department. currently devoted to Investor Relations to ensure that the market is provided with correct and timely information. b) Code of Conduct on Internal Dealing As regards relations with the Members, in implementing the Code’s recommendations, the Bank’s Board of In compliance with art. 2.6.3 of the “Regulations Directors confirmed on 1 April 2003 the general resolution governing the markets organised and run by Borsa concerning the “rules for the admission and management Italiana S.p.A.”, the Bank adopted its own Code of of relationships with members”. Conduct on Internal Dealing by resolution of the Board of Directors on 10 December 2002. In detail this resolution:
This Code effectively regulates disclosure requirements confirmed the establishment of the “Members’ and any limitations on transactions in quoted financial Relations Commission”, comprising five directors with instruments issued by Banca Popolare di Milano and powers to review applications for admission, to exclude derivatives linked to them, carried out on their own behalf members and waive the preferred guarantee restriction on by so-called “Relevant Persons” (i.e. those who because of the company’s shares; the position that they hold in the Bank or in one of its principal subsidiaries, have access to information that defined requirements and procedures for admission, could result in major variances in the economic, financial stating how and what documentation is required for
Corporate Governance 27 admitting Italian and foreign entities and introducing a should be arranged, how voting should take place and how minimum holding of 100 shares and a written votes should be counted. undertaking to maintain this number of shares over time; These Regulations, which are fully institutionalised by dictated requirements and procedures for excluding being included in the Articles of Association, were updated members; at the ordinary shareholders’ meeting on 19 December 2002, following the amendments to the Articles of outlined the criteria for maintaining the Register of Association to introduce the “list voting” system for Members and Register of Shareholders. appointing members of the Board of Directors.
At present, the “Members’ Relations Commission” – the The latest version of BPM’s “Regulations for Shareholders’ majority (4 out of 5) of whom are directors who are not Meetings” may be consulted on the website in the section members of the Executive Committee and including one on “Shareholders and Members”. “minority” director – consists of the following directors: Valerio Tavormina (as chairman), Giorgio Bianchini Scudellari, Emilio Castelnuovo, Giuseppe Coppini and Piero Lonardi.
This Commission met 12 times during 2004, mainly to review the 628 applications received for membership.
In keeping with other cooperative banks, on 9 November 2004, and based on the efforts of the Commission, the Board of Directors passed a resolution to cancel 3,163 names from the Register of Members, being people who no longer owned any shares. As communicated to the individual names, they could be reinstated in the Register of Members provided they were able to prove that they held at least one share on 31 October 2004, deposited with other banks or intermediaries or still held in the form of a paper certificate.
As a result, at 31 December 2004, there were 58,318 members. b) Regulations for Shareholders’ Meetings
The need to adopt a set of regulations arises from the central role played by the shareholders’ meeting for listed companies, as a key part of the relationship between shareholders and the Board of Directors. The very structure of BPM, as a cooperative bank, where the shareholders’ individuality and their relationship with the company are of key importance, also explain the requirement for such a set of rules.
In compliance with the recommendations contained in the Code, the shareholders’ meeting of 20 April 2002 approved the “Regulations for Shareholders’ Meetings” which governs proceedings at ordinary and extraordinary meetings, ensuring that they are conducted in an orderly fashion. The Regulations lay down in detail what the Bank’s members have to do to attend a meeting and the deadlines by which they have to do it, the Chairman’s powers when running such meetings in full respect of each shareholder’s right to take the floor to speak on the topics on the agenda and to make proposals, how ballot papers
28 Corporate Governance members. In accordance with art. 148.2 of Decree 58/98, as Board of Statutory Auditors (art. 14 of the reflected in art. 41 of the Articles of Association, minority Code) shareholders are entitled to elect two acting auditors and two alternate auditors. The Board of Statutory Auditors – appointed by the shareholders’ meeting held on 12 April 2003 – is made up The names of the members of BPM’s Board of Statutory of the chairman, four acting auditors and four alternate Auditors are shown below, together with details of other auditors, who are elected from among the Bank’s appointments held in other listed companies.
Office held Members Other appointments held in listed companies in Italy
Chairman (until 8/7/ 2004) Giovanni Giunta Chairman (from 8/7/2004) Marco Baccani Auditor Emilio Cherubini (*) Auditor Ezio Maria Simonelli Auditor Cremonini S.p.A. Auditor Ettore Maria Tosi (*) Auditor Autogrill S.p.A. Auditor (from 8/7/2004) Enrico Radice Alternate Auditor Rino Salvatore Messina (*) Alternate Auditor Carlo Radaelli (*) Alternate Auditor (until 20/10/2004) Marcello Priori
(*) Auditor elected on a “minority” list
As shown in the above table, you are informed that – (currently, at least ten days prior to the date scheduled for following the resignation of Giovanni Giunta, chairman of the meeting). As mentioned earlier for the directors, one of the Board of Statutory Auditors, on 8 July 2004 due to the amendments that will be put to the extraordinary serious ill health – Marco Baccani, a statutory auditor, shareholders’ meeting to be held in April 2005 is the and Enrico Radice, an alternate auditor, have taken over proposal that art. 41 states that the lists of candidates as chairman and auditor of BPM’s Board of Statutory have to deposited at the Bank’s head office “at least ten Auditors respectively. The new appointments of these days prior to the scheduled date of the meeting at first auditors expire at the shareholders’ meeting due to be calling”. held in April 2005, although their original mandates – of auditor and alternate auditor respectively – will expire at The same art. 41 then requires that the lists “have to be the shareholders’ meeting called to approve the financial accompanied by each candidate’s curriculum vitae and the statements for the year ended 31 December 2005, like for declarations whereby they individually accept their the rest of the Board of Statutory Auditors. nomination and confirm, under their own responsibility, that there are no reasons for ineligibility or You are also informed that Marcello Priori, one of BPM’s incompatibility, and that they meet the requirements alternate auditors, tendered his resignation in a letter prescribed by law or by the Articles of Association for dated 20 October 2004. holding office. For this purpose, it will be borne in mind that the business topics and sectors strictly related to In accordance with art. 41 of the Articles of Association, those of the Company are banking, finance and the Board of Statutory Auditors is elected on the basis of insurance”. lists presented by at least 300 shareholders who have been included in the Register of Members for at least Like in the case of the directors, art. 22 of the current three months. Regulations for Shareholders’ Meetings requires that “the lists (..) together with their curriculum vitae, are available The lists of candidates signed by those who present them, to the shareholders at the Company’s head office and have to be deposited at the Bank’s head office “according summarised by the Chairman at the shareholders’ to the terms laid down in the Regulations for meeting before the polling stations are opened”. Shareholders’ Meetings, if they exist; and if they do not, as laid down in the notice of calling to the meeting” On this subject, it is confirmed that, before shareholders’
Corporate Governance 29 meetings to appoint the Board of Statutory Auditors, the Bank sends its members and the market a specific press The Arbitration Committee release containing details of the lists presented for each office and the complete list of the related candidates. The Pursuant to art. 42 of the Articles of Association, the Bank candidates’ curricula are usually published on the website has an Arbitration Committee, made up of three acting before the shareholders’ meeting, as stated in the and two alternate members chosen from among the meeting’s notice. members by the shareholders’ meeting, which reviews disputes referred to it under the Articles of Association Art. 41 of the Articles of Association also provides that and seeks to resolve all the disputes that might arise persons cannot be appointed as statutory auditors, and between shareholders or between the shareholders and they fall from office if they have been elected “if they do directors concerning the conduct of the business. not have the prescribed prerequisites or if they hold office as a statutory auditor in five or more other companies The shareholders’ meeting of 19 April 2002 appointed whose stocks are listed on Italian regulated markets or if Alfiero Fontana as chairman of this Committee, Italo they are members of the boards of directors or statutory Ciancia and Dario Mezgec, as arbitrators, and Gianfranco auditors of other banks, unless they are affiliates or Carugati and Giancarlo Pagani as alternate arbitrators. centralised co-operative banking structures”. This provision is now being expanded to reflect new civil code art. 2399, which has considerably extended the previous rules concerning ineligibility and loss of office. Independent Auditors
The Board of Statutory Auditors takes part in all meetings The accounting firm PricewaterhouseCoopers S.p.A. is of the Board of Directors and Executive Committee and auditing the Bank’s financial statements and interim the Chairman (or one of the acting auditors at his reports for the three-year period 2004/2006, in accordance appointment) also takes part in meetings of the Internal with its appointment by the shareholders’ meeting of 24 Control Committee. The Board of Statutory Auditors also April 2004 which expires with the approval of the takes part in person at meetings of the Board Financing financial statements for the year ended 31 December Committee and the Supervisory Committee (pursuant to 2006. Decree 231/01).
30 Corporate Governance Table 1: Structure of the Board of Directors and Committees
Board of Directors Internal Remuneration Executive Control Committee Committee Committee Office held Members Execu- Non Indepen- **** Number *** **** *** **** *** **** tive executive dent of other appoint- ments ** Chairman Roberto Mazzotta X yes 94 3 X 100 Deputy Chairman Paolo Manzato X yes 100 2 X 95 Deputy Chairman Marco Vitale X yes 72 12 X 50 Director Enrico Airaghi * X yes 94 X 100 X 97 Director Mario Artali X yes 100 4 Director Alberto Banfi X yes 94 1 X 93 Director Giorgio Bianchini Scudellari X yes 94 7 X / Director Emilio Castelnuovo X yes 100 1 Director Giuseppe Coppini X yes 100 4 Director Rocco Corigliano X yes 100 2 X 95 Director Eugenio Crosta X yes 100 X 86 X / Director Roberto Fusilli * X yes 100 2 X 86 Director Renzo Grassi Catapano X yes 83 5 X 50 X / Director Piero Lonardi * X yes 100 2 X 100 Director Maria Martellini (until 29 giugno 2004) X yes 100 X 100 Director Michele Motterlini X yes 100 X 95 Director Gianfranco Pittatore (from 29 giugno 2004) X yes 71 3 Director Alberto Santa Maria* X yes 83 2 X / Director Jean- Jacques Tamburini X yes 72 14 Director Graziano Tarantini X yes 94 4 Director Valerio Tavormina X yes 89 2 X 100
Number Board of Internal Remuneration Executive of meetings Directors Control Committee Committee Committee held during the year: 18 14 0 38 NOTES: Full details of the appointments are provided in the Report on * Indicates whether the director was nominated through lists pre- Corporate Governance sented by the minority *** These columns indicate with an “X” the director’s membership of ** This column indicates the number of other appointments as a the committee in question. director of statutory auditor held by this person in other listed **** This column indicates directors’ attendance record at meetings of companies, in Italy or abroad, and in finance companies, banks, the Board of Directors and the Committees. insurance or other large companies. Meetings held during the whole of 2004 and directors’ attendance record: Board of Directors: 18 meetings, with a 93% attendance record; Executive Committee: 38 meetings, with a 90% attendance record; Financing Committee:44 meetings, with an 82% attendance record; Internal Control Committee:14 meetings, with an 86% attendance record; Members’ Relations Commission:12 meetings, with an 87% attendance record; Remuneration Committee: no meetings (see report for reasons); Supervisory Committee pursuant to Decree 231/01: 9 meetings, with a 92% attendance record.
Corporate Governance 31 Table 2: Board of Statutory Auditors
Office held Members Attendance Number of others record at appointments ** board meetings Chairman (until 8/7/ 2004) Giovanni Giunta 0 Chairman (from 8/7/2004) Marco Baccani 80 Auditor * Emilio Cherubini 92 Auditor Ezio Maria Simonelli 81 1 Auditor * Ettore Maria Tosi 80 1 Auditor (from 8/7/2004) Enrico Radice 85 Alternate Auditor * Rino Salvatore Messina Alternate Auditor * Carlo Radaelli Alternate Auditor (until 20/10/2004) Marcello Priori Number of meetings held: 74 Indicate the quorum required for minorities to present lists for the election of one or more acting auditors (pursuant to art. 148 of Consolidated Finance Act): each list must be presented by at least 300 shareholders who have been recorded in the Register of Members for at least three months. NOTES: ** This column indicates the number of other appointments as a * Indicates whether the statutory auditor was nominated through director of statutory auditor held by this person in other listed lists presented by the minority. companies in Italy. Full details of the appointments are provided in the Report on Corporate Governance.
N.B.: As shown in the above table, you are informed that - following the resignation of Giovanni Giunta, chairman of the Board of Statutory Auditors, on 8 July 2004 due to serious ill health (the last meeting he attended was on 2 December 2003) - Marco Baccani, an acting auditor, and Enrico Radice, an alternate auditor, have taken over as chairman and auditor of BPM’s Board of Statutory Auditors respectively. The new appointments of these auditors expire at the meeting of April 2005, although their original mandates - of auditor and alternate auditor respec- tively - will expire at the shareholders’ meeting called to approve the financial statements for the year ended 31 December 2005, like for the rest of the Board of Statutory Auditors. You are also informed that Marcello Priori, one of BPM’s alternate auditors, tendered his resignation in a letter dated 20 October 2004.
32 Corporate Governance Table 3: Other Code of conduct requirements
YES NO Summary of reasons for any discrepancy with the Code’s recommendations System of granting powers and monitoring related-party transactions Has the Board of Directors granted powers, establishing their: a) limits X b) manner of exercise X c) and frequency of reporting? X Has the Board of Directors reserved for itself the examination and approval of transactions with a significant impact on the company’s income statement, balance sheet and financial situation (including related-party transactions)? X Has the Board of Directors established guidelines and principles for identifying "significant" transactions? X Are the guidelines and principles referred to above described in the report? X Has the Board of Directors defined specific procedures for examining and approving related-party transactions? X Are the procedures for approving related-party transactions described in the report? X
Conduct of the most recent appointment of directors and statutory auditors Were the names of candidates for the office of director filed at least ten days in advance? X Were the nominations for the office of director accompanied by full and sufficient information? X Were the nominations for the office of director accompanied by an indication of their suitability to qualify as independent directors? X Were the name of candidates for the office of statutory auditor filed at least ten days in advance? X Were the nominations for the office of statutory auditor accompanied by full and sufficient information? X
Shareholders’ Meetings Has the company approved a set of Regulations for Shareholders’ Meetings? X Are the Regulations annexed to the report (or is stated where they may be obtained/downloaded))? X
Internal Control Has the company appointed the persons responsible for internal control? X Are the persons appointed hierarchically not responsible to persons in charge of operational areas of the business? X Organisational unit in charge of internal control Technical and (pursuant to art. 9.3 of the Code) Operating Controls Department
Investor relations Has the company appointed someone to be responsible for investor relations? X Organisational unit and references of person responsible Investor Relations Office - P.zza Meda n. 4 - 20121 Milano; for investor relations (address/tel/fax/e-mail) Fax: 02/77002650-02/77003544; Tel. 02/77002574; 02/77002007; 02/77003758
Corporate Governance 33 Financial Statements of Banca Popolare di Milano of the Year 2004
35 Contents
Reclassified Balance Sheet and Statement of Income 39
Directors’ Report on operations 43
Financial Statements 77
Explanatory Notes 83
Attachment to the Financial Statements 209
Report of the Board of Statutory Auditors 235
Report of the Independent Auditors 239
37 Reclassified financial statements Variazioni Assolute %
39 Reclassified Balance Sheet (in thousands of Euro)
Voci di Change Captions Assets 31.12.2004 31.12.2003 bilancio +/– %
10. Cash and deposits with central banks and post offices 155,526 162,074 – 6,548 – 4.04
Receivables: 20,394,884 18,656,773 1,738,111 9.32 40. - loans to customers 17,023,635 15,455,977 1,567,658 10.14 30. - due from banks 3,371,249 3,200,796 170,453 5.33
20. 50. 60. Dealing securities 3,486,155 2,835,302 650,853 22.96
Fixed assets: 2,916,791 4,591,688 – 1,674,897 – 36.48 20. 50. - Investment securities 593,190 2,376,543 – 1,783,353 – 75.04 70. 80. - Equity investments 1,980,081 1,868,704 111,377 5.96 90. 100. - Tangible and intangible fixed assets 343,520 346,441 – 2,921 – 0.84
120. 130. 140. Other assets 1,165,637 1,139,443 26,194 2.30
Total assets 28,118,993 27,385,280 733,713 2.68
Voci di Change Captions Liabilities and shareholders’ equity 31.12.2004 31.12.2003 bilancio +/– %
Payables: 23,328,940 22,687,328 641,612 2.83 20. 30. 40. - due to customers 17,323,332 16,323,309 1,000,023 6.13 10. 30. - due to banks 5,866,438 6,213,375 – 346,937 – 5.58 30. - outstanding cheques 139,170 150,644 – 11,474 – 7.62
50. 60. Other liabilities 892,757 896,335 – 3,578 – 0.40
70. 80. Provisions for specific use 422,597 487,296 – 64,699 – 13.28
90. Reserves for possible loan losses 0 4,273 – 4,273 – 100.00
110. Subordinated liabilities 831,261 831,261 0 0.00
120. 130. 140. 150. Capital and reserves 2,518,214 2,348,519 169,695 7.23
170. Net profit for the year 125,224 130,268 – 5,044 – 3.87
Total liabilities and shareholders' equity 28,118,993 27,385,280 733,713 2.68
Guarantees and commitments 6,772,993 7,634,446 – 861,453 – 11.28
Custody and administration of securities 35,592,107 32,788,509 2,803,598 8.55
40 Reclassified Balance Sheet Reclassified Statement of Income (in thousands of Euro)
Voci di Change Captions Statement of Income 2004 2003 bilancio +/– %
10. 20. Net interest income 514,441 501,559 12,882 2.57
40. 50. Net commissions 372,906 360,514 12,392 3.44
60. Profits (losses) on financial transactions 31,387 20,993 10,394 49.51
30. Dividends and other revenues 74,992 127,418 – 52,426 – 41.14
70. 110. Other operating income, net 105,565 101,806 3,759 3.69
Net interest and other banking income 1,099,291 1,112,290 – 12,999 – 1.17
80. Administrative expenses: – 745,859 – 719,123 26,736 3.72 a) payroll – 468,265 – 445,970 22,295 5.00 b) other administrative expenses – 277,594 – 273,153 4,441 1.63
90. Adjustments to tangible and intangible fixed assets – 86,421 – 81,829 4,592 5.61
Operating profit 267,011 311,338 – 44,327 – 14.24
120. 130. 140. Provisions, adjustments and writebacks to loans – 105,523 – 129,873 – 24,350 – 18.75
100. Provisions for risks and charges – 28,094 – 28,024 70 0.25
150. 160. Writedowns of financial fixed assets – 13,283 – 3,623 9,660 266.63
170. Profit from operating activities 120,111 149,818 – 29,707 – 19.83
200. Non-recurring income 33,213 6,113 27,100 n.s.
Profit before income taxes 153,324 155,931 – 2,607 – 1.67
220. Income taxes for the year – 28,100 – 25,663 2,437 9.50
230. Net profit for the year 125,224 130,268 – 5,044 – 3.87
Reclassified Statement of Income 41 Report on operations for 2004
Macroeconomic scenario Management of the Bank Significant events Development strategies Statement of Income Deposits and loans Financial markets and equity investements Shareholders’ equity and capital adequacy Risk management Operations and results by business sector and geographical area Other information Subsequent events and outlook for the current year
43 Macroeconomic scenario
Italy. Private-sector consumption has continued to grow The international economy weakly, mainly thanks to durable goods, while spending on other categories is down. Expenditure on capital goods The past year of 2004 was generally a positive one in is hesitant: investment in machinery and equipment terms of international economic growth: the United States dropped significantly in the third quarter, while that in reported a healthy macroeconomic scenario, particularly construction displayed tenuous growth. Inflation is thanks to the buoyancy of consumer spending, while the slowing, with Italy’s official consumer price index down signs of recovery in Europe were still weak partly due to from an average of +2.5% in 2003 to +2.0% in 2004. The the euro’s appreciation against the dollar. most recent qualitative indicators are weak, with consumer confidence flat in the last quarter of 2004. Amongst the positive signals coming out of the United States were strong performances by GDP, which closed the year up 4.4% year-on-year, and the qualitative indicator of consumer confidence, which stood at 102.7 at the end of The Italian banking industry 2004, 8 points higher than a year earlier. On the downside the Purchasing Managers Index went below its level of Considering the economic news, the banking industry December 2003, while the current account deficit generally performed well in 2004. Loan portfolios worsened, reaching a record level of 5.6% of GDP. The underwent a shift both in terms of business sectors and steady monetary tightening implemented by the Federal maturity; there was healthy demand for personal credit, Reserve pushed up US official interest rates to 2.50% at especially in the form of mortgages and consumer credit, the start of 2005, half a point higher than those of the while short-term lending to the corporate segment fell ECB. Despite this rise, the last part of 2004 witnessed a back. Overall lending was 6.0% higher year-on-year in growing and unrelenting weakness in the dollar, which December 2004: the long-term component was up 13.6%, reached 1.36 against the euro in December, causing the thanks to the demand for mortgages, while the short-term ECB ever greater concerns over the consequences that component continued to have trouble in recovering this might have on European exports. (–3.7%).
Eurozone GDP grew in the first nine months of the year, Asset quality improved, with the ratio of non-performing although at around half the rate in the USA: domestic loans, after writedowns, to total loans at 2.03% in October demand in Italy and Germany has had trouble in 2004, down from 4 points in October 2003. Euro deposits recovering, while Spain and particularly the emerging (savings deposits, current accounts, certificates of deposit European countries have experienced the most robust and bonds) were 7.2% higher year-on-year in December growth. The recent retreat in oil prices has averted the 2004, particularly thanks to the long-dated component risk of falling consumption, while the risk of higher prices (bonds +10.1%), while savings deposits were just 5.4% continues (annual inflation climbed to 2.4% in December higher. 2004) and keeps the European monetary authorities on the alert. In contrast, there was good news for the With regard to interest rates paid to personal customers, manufacturing sector Purchasing Managers Index (PMI), family businesses and non finance-sector companies, the which exceeded expectations by rising to 51.4 points in average rate on bank deposits (including savings deposits, December. bonds, repurchase agreements and subordinated loans) was 1.80% in December 2004, down from 1.86% a year Lastly, the growth in the Japanese economy slowed after a earlier. There was a sharp decline in average lending strong first half of the year. Concerns about the economy rates, which fell by 19 basis points relative to December have been partly mitigated by the solid trend in industrial 2003 to close 2004 at 4.76%. As a result, the spread came orders. to 2.96%, representing a decrease of 13 basis points relative to December 2003.
The Italian economy
Economic growth in Italy has been laboured: GDP grew at a rate of 1.0% year-on-year in the third quarter of 2004. Exports to both the EU and non-EU countries have started to grow once more; however, the drop in exports to Germany is worrying given this market’s importance for
44 Report on Operations for 2004 Management of the Bank
Significant events local and commercial network and selection and distribution of products; The most significant events during 2004 related to: renewed efficiency: achieved by keeping costs the same despite the increase in volumes and business and the approval of the BPM Group Three-Year Strategic the effects of renewing the national payroll agreement; Plan for 2004-2006; the acquisition of an 80% controlling interest in Cassa streamlining of internal organisational structures: di Risparmio di Alessandria S.p.A. (CRAL); by rationalising the areas of financial operations and the purchase of a 20% interest in Cassa di Risparmio di internet banking services, eliminating other duplications Asti S.p.A.; and overlaps within the Group, centralising responsibility a partnership in the property fund sector between for controlling and monitoring costs, administrative Aedes S.p.A. and BPM; management and development of the Group’s human the development of the alliance with Crédit Industriel resources and improving the Group’s governance; et Commercial. optimisation of risk and capital management: with the goal of making risk management and capital The BPM Group Three-Year Strategic Plan allocation more efficient, thereby tending towards a 2004-2006 convergence between shareholder and stakeholder expectations. The Board of Directors of Banca Popolare di Milano, in its meeting on 19 May 2004, approved the BPM Group Three- The three-year plan – which starts with pro-forma figures Year Strategic Plan for 2004-2006, which supplements for 2003, which include the volumes and results of CR and reinforces the project, started in 2003, for improving Alessandria – predicts, assuming a recovery in the the cost-income ratio at group level and which identified economy and the structure of rates, that customer the main steps required to bring this ratio into line with business will grow at significant annual rates which, that of its principal banking group competitors. combined with more or less stable costs over the period, will produce a major increase in operating profit and ROE. The three-year plan defines the Group’s development strategies with the primary goal of improving its efficiency These measures and their expected results will also help and profitability in a complex market environment that push down the cost-income ratio considerably, restoring contains many areas of difficulty for the banking business. the Bank’s efficiency to a higher level in keeping with that of the Italian banking industry. The strategy is designed to: On 8 June 2004, BPM’s Board of Directors approved the promote and support the banking group’s role in projects for reorganising the areas of financial operations sectors in which BPM has traditionally worked, meaning and internet banking services. personal customers and small and medium enterprises, where the “private” sector is concerned, the agencies and institutions comprising local authority organisations in Reorganisation of the Group’s financial operations the “public” sector and associations and non-profit organisations; The reorganisation project involves measures affecting its own financial operations and those on behalf of third reinforce its retail vocation, especially in its traditional parties, with a resulting revision of the strategic role regions of business; played by the subsidiary Banca Akros and the Group’s overseas activities. perform a structural redress between costs and revenues, taking the Bank back to higher levels of As far as the Bank’s own financial operations are efficiency. concerned, the project is specifically focusing on the following areas: These objectives are based on four main cornerstones: reorganisation of the Financial Operations commercial development: through the growth in management team at the Parent Bank - under whom the retail and corporate business, targeted expansion of the activities of integrated management of the commercial
Report on Operations for 2004 45 banks’ liquidity has been concentrated along with the to be completed by 2006, will involve streamlining the definition of guidelines for managing risks and organisational structure at the subsidiary We@Service. transforming maturities – whose operations and resulting This will mostly involve reassigning this company’s staff organisational structures will be overhauled and reshaped to the Parent Bank’s commercial and IT teams, with a on the basis of the different portfolios of existing financial consequent redefinition of We@Service’s mission. assets;
restructuring of the BPM Group’s securities portfolio, Acquisition of control (80%) of Cassa di involving a gradual reduction in the weight of financial Risparmio di Alessandria (CRAL) assets in favour of domestic commercial lending, a simplification of its investment criteria and a In September 2004, the resolutions passed by BPM’s rationalisation of the risk/return profile of the extraordinary shareholders’ meeting held on 24 April 2004 restructured portfolio; were duly executed, resulting in the merger of Carinord 1 S.p.A. into Banca Popolare di Milano and giving BPM reorganisation of the Group’s foreign activities, with direct control of CRAL. the closure of the branches in London and New York by 31 December 2005; as a result, their activities involving The merger deed under which Carinord 1 S.p.A. was loans, the issue of guarantees, management of their own absorbed by Banca Popolare di Milano was stipulated on securities portfolio and transactions in credit derivatives 14 September, taking effect for legal purposes from 24 will be concentrated at the Parent Bank, while their bond September 2004 and for tax and accounting purposes from portfolios will be transferred to the subsidiary BPM 1 January 2004. The merger also involved: Ireland. As a result, the Board of Directors has voted to reclassify the securities portfolios of the foreign branches the elimination without replacement of the 66,979,409 in London and New York from the “investment” to the Carinord 1 shares (54.05% of its share capital) owned by “dealing” category. BPM, shown in the balance sheet at a carrying value of Euro 154 million; As far as financial operations on behalf of third parties are concerned, BPM is working on measures designed to the exchange of the remaining 56,941,791 shares concentrate under a single “centre of excellence”, owned by Fondazione CR Alessandria for 29,040,313 identified as Banca Akros, all the activities for accessing newly issued BPM shares in a ratio of 0.51 BPM shares of the market and creating structured products within the par value Euro 3 for every Carinord 1 share of par value Group; these measures are gradually being taken and not Euro 0.52; as a result, BPM’s share capital increased by only involve commercial aspects but also Euro 87,120,939. organisational/functional reorganisation and improvements in governance, with the planned This means that BPM owns 80% of CRAL’s share capital, introduction of certain monitoring functions within the while the remaining 20% still belongs to Fondazione Parent Bank and specific procedures for coordinating risk Cassa di Risparmio di Alessandria. management and controls. Furthermore, Fondazione Cassa di Risparmio di The resources freed up by these measures have funded the Alessandria: additional requirements in other areas of the Bank’s operations, as well as the creation of new advanced has purchased from BPM interests of 3.11% in each of financial and commercial advisory services for retail and Banca Akros S.p.A., Bipiemme Vita S.p.A. and Bipiemme corporate customers. Gestioni SGR S.p.A. in return for selling BPM a 4.05% stake in the share capital of Carinord 1 S.p.A.. This stake was then cancelled upon the merger, together with the Reorganisation of internet banking services other shares in Carinord 1 held by BPM, as described above; The project to reorganise internet banking services is principally designed to define a strategy for the has since gradually sold the BPM shares obtained convergence and integration of this channel into the plan under the merger, ending up with an overall interest of to develop a new multichannel IT platform whose goal is 0.806% in BPM at 31 December 2004. to offer customers access to the Bank’s products and services through a variety of different distribution Also under the Framework Agreement, the Parties channels. Once the We@bank applications have migrated stipulated a Shareholder Agreement which regulates to the multichannel platform, the Bank will have fully certain reciprocal rights concerning the governance of integrated the internet channel with its other channels Cassa di Risparmio di Alessandria, as well as the presence both in terms of operational functionality and of a Fondazione nominee on the boards of Banca Popolare technological equipment. This process, which is scheduled di Milano and the BPM Group companies involved in the
46 Report on Operations for 2004 deal, as mentioned above. Bipiemme Real Estate SGR. It will be possible to exercise these options after the placement of an initial reserved As for the project’s industrial importance, reference property fund, to be carried out at the latest within twelve should be made to the section entitled “Significant events months after stipulating the contract finalised on 29 – the Cassa di Risparmio di Alessandria project” contained September. The guidelines of the proposed new closed-end in the report on operations at 31 December 2003. reserved property fund known as “Dante Retail – Fondo comune di investimento immobiliare riservato di tipo chiuso” were presented to the Board of Directors in Purchase of a 20% interest in Cassa di November 2004, after which the application for Risparmio di Asti SpA authorisation was sent to the Bank of Italy.
During September 2004, the Parent Bank BPM and Furthermore, in accordance with the contractual Deutsche Bank S.p.A. finalised the contract for the agreements, Bipiemme Real Estate SGR appointed Mr. transfer of 5,398,600 shares in Cassa di Risparmio di Asti Giovanni Maria Paviera as its General Manager in S.p.A. previously owned by Deutsche Bank S.p.A. to Banca December 2004. The new manager, formerly general di Legnano S.p.A., a wholly-owned subsidiary of BPM. The manager of Aedes S.p.A., was also co-opted onto the shares involved in this transaction – which took place once company’s board of directors. Banca di Legnano S.p.A. had obtained the prescribed authorisations from the Bank of Italy – represented 20% of the share capital of Cassa di Risparmio di Asti S.p.A.; Development of the alliance with Crédit the overall price of the transaction was Euro 93 million. Industriel et Commercial (CIC)
The following arrangements were also made at the same Following the resolutions passed by the shareholders of time as the final contract was signed: Banca Popolare di Milano and Banca di Legnano (in meetings held on 24 April 2004 and 23 June 2004 a shareholders’ agreement between Banca Popolare di respectively) and the issue of the necessary authorisations Milano, Banca di Legnano S.p.A. and Fondazione Cassa di by the relevant authorities, the financial part of the Risparmio di Asti – the majority shareholder of the agreement between the BPM Group and CIC was Piedmontese bank with 51% of the share capital – under executed in December 2004, involving: which two members of the board of Cassa di Risparmio di Asti S.p.A. are nominated by the new shareholder, Banca the issue by BPM, and subscription by CIC, of a di Legnano S.p.A. The agreement also envisages the convertible bond, excluding pre-emption rights, worth Euro reciprocal granting of a right of pre-emption in the event 180 million involving 25,568,181 convertible bonds of par of any transfer of their shares in Cassa di Risparmio di value Euro 7.04 each. The subscription price was 100% of Asti S.p.A. to third parties; the par value and the bond will pay an annual coupon of 12- month Euribor less 25 b.p.. The bond matures in five years a commercial cooperation agreement between Banca and may be converted at any time except for the period Popolare di Milano and Cassa di Risparmio di Asti that starting 30 days before the ordinary shareholders’ meeting lays down guidelines for commercial and operational called to approve the annual financial statements and cooperation with a view to developing a relationship of ending on the date the shares go ex-div; solid collaboration between the two banks. CIC’s subscription to the full amount of a capital increase by Banca di Legnano for Euro 80 million – corresponding to 29,411,765 ordinary shares of par value Partnership in the property fund sector Euro 1 each with a share premium of Euro 1.72 per share between Aedes S.p.A. and BPM – as a result of which the French bank now owns 6.49% of our subsidiary. On 29 September 2004, Aedes and BPM completed the sale to Aedes S.p.A. of 5% of Bipiemme Real Estate SGR On the commercial front, having jointly verified the S.p.A, as envisaged in the “Letter of intent” signed in July, impracticality of the proposed solution to develop the and explained in the report on operations at 30 June 2004 distribution of insurance products (non-life sector), the (see “Subsequent events”), with a view to defining the partnership with the CM-CIC Group is now focusing on terms and methods of setting up a partnership in the field international financing services for domestic customers in of property funds. the two countries. A number of financing deals were already completed in France for BPM customers during The contract also provides for reciprocal recognition of a 2004, laying the foundations for other joint financing put and call option for Banca Popolare di Milano and operations for corporate customers of the two banking Aedes S.p.A., respectively, on a further 46% interest in groups.
Report on Operations for 2004 47 Thanks to the assistance of CM-CIC’s external structures, In keeping with the Bank’s general strategy, it sought to BPM customers can turn to structures not only in France achieve greater penetration of the Small and Medium but in 35 other countries for satisfying their various Enterprise segment by streamlining sales procedures and needs. reorganising the operational network, with targeted measures in the international, special loans and assisted As already mentioned in the half-year report at 30 June finance sectors. 2004, following the resignation of Mr. Ernesto Paolillo, the board appointed Mr. Fabrizio Viola as BPM’s General Numerous agreements were reached with providers of Manager from 13 September 2004. assisted finance and trade associations. These, together with commercial efforts designed to increase leasing and factoring activity, have helped strengthen the Bank’s position in the area of assisted finance. Development strategies Continued procedural improvements, the higher volume of Turning to development strategies, activities during 2004 business, the improved management of commercial are discussed below. agreements and the rationalisation of funding and lending products have helped to raise the quality of services.
Commercial area Work also continued on integrating the branch network, which still plays a central role in customer relationship management, with the other distribution channels, During 2004, work continued on developing the branch namely the virtual bank, the call centre and private network, updating products and services, introducing banking, with a view to boosting cross-selling and greater transparency with regard to customers, retention especially in the area of private clients. streamlining sales and management procedures and improving customer relationships.
The Bank continued to expand its network in pursuit of its strategy of dense development especially in its traditional Organisation strongholds. In fact, it opened 10 new branches during the year to reach a total of 502 at 31 December 2004. The principal projects carried out during 2004 included:
Product innovation particularly concerned the personal the definition of a “new commercial model for the customers segment, especially involving personal loans or retail network”, in compliance with the operational those for home purchases. The “On-line mortgages” guidelines contained in the three-year plan, with the goal project was one such innovation, involving the sale of of commercial development and improved operational mortgages to private customers via authorised efficiency. A number of different working groups were intermediaries, using a specific new website on a started for defining a new more sales-oriented multichannel platform. The intermediaries provide organisational model and for redesigning the branch’s key customers with advisory services (presentation of product processes with a view to reducing administrative time and list, simulation of repayment plans, list of documents for creating a results-driven motivational model; presentation) and send the application to a BPM branch selected by the customer, which will subsequently get in the organisational review of the “business” sector in touch with the customer for completing the process. order to foster the achievement of business objectives by improving integration between the marketing and There was intense activity in the payment systems sector, commercial functions, by focusing on corporate finance involving the marketing of prepaid products and the and international activities and simplifying the structure migration of corporate customers to the InlineaNet of the lending office. This reorganisation focused on: product. Lastly, continued attention was dedicated to the asset management sector, especially insurance products. – setting up the Commercial Policies Division, reporting directly to the Deputy General Manager in the In terms of transparency with regard to customers, BPM Lending Policy Division, and in charge of the retail and has adopted all the measures under ABI’s “Patti Chiari” corporate sales networks (excluding large companies) and project, which it has supported, together with Italy’s the related marketing policies; leading banks, with the goal of introducing the values of clarity, comprehensibility and transparency into the bank- – creation of the Corporate Finance Division, reporting customer relationship. BPM is one of the 27 banks which directly to the Deputy General Manager of the Lending has obtained certification for all eight of the initiatives Policy Division, and in charge of managing large being promoted. companies and corporate finance, as well as international
48 Report on Operations for 2004 business; As regards upgrades to the technological infrastructure, investments were made in hardware and software – reunification under the new HQ Lending Office of the systems to increase the central processing power available HQ Loan Appraisal Office and the HQ Ordinary and as well as storage capacity. Special Loan Management Office. *** Furthermore, in keeping with the strategic guidelines contained in the three-year plan, and those behind the Pursuant to article 34.1.g) of Decree 196 dated 30 June reorganisation of the Group’s financial operations, the 2003, “Code for personal data protection” (Ordinary financial department at BPM underwent a complete supplement to “Official Gazette” no. 174 of July 2003 – overhaul. General series) and rules 19 and 26 of the Technical guidelines for minimum safety standards (attachment B to the same decree), the Bank’s Safety Plan has been duly updated. Information systems
Activities in the IT area during 2004 were principally geared towards compliance with regulatory requirements and the development and distribution of innovative solutions in support of the distribution channels.
The steps taken involved:
the “Integrated multichannel” project aimed at full integration of the distribution channels, reinvigorated thanks to the use of web-based technology. The focus was on introducing the new branch software relating to the “Branch” channel, which had been distributed to 50% of the Bank’s branches by 31 December 2004. It is expected to complete the release of the “Branch” channel to the remaining branches in the first half of 2005;
completion of the “Online documents” project, providing customers of the We@bank service the chance to see and store online execution documents and statements and documents relating to securities custody, with the benefit of eliminating the mailing of the hard copy, hence speeding up communication;
release of the first part of the “New System of Accounts” project, whose goal is to replace existing software and services for current accounts and savings deposits with a new system interfaced with the multichannel platform;
the “microchip” project for the migration of credit and debit cards and all the ATM and POS machines from existing magnetic band technology to the new microchip technology, which will not only increase the level of security but also enable the cards with processing ability. This will help enlarge the Bank’s range of products and services, increase the use of its debit and credit cards, and boost the number of contacts with customers;
the “BPM IAS Transition” project, designed to identify and define the information needed for preparing financial statements in accordance with international accounting and financial reporting standards (IAS/IFRS).
Report on Operations for 2004 49 Statement of income Net interest income
Amounts in Euro mn Net interest and other banking income
Before examining the statement of income for 2004, you are reminded that – as already explained in the specific 501.6 514.4 section of the Explanatory notes (see: “Description of 600 + 2.6% accounting policies”) – the tax credits on dividends from equity investments, totalling Euro 31.3 million, have been 500 reclassified in the statement of income for 2003 by reversing them from “dividends and other revenues” and 400 “income taxes for the year”. The purpose of this 300 reclassification is to ensure greater comparability with this year’s results after these tax credits were abolished. 200
Bearing this in mind, we shall now examine how the 100 principal components of the income statement have performed. 0
Net interest and other banking income amounted to Euro Dec - 03 Dec - 04 1,099.3 million, a decrease of Euro 13.0 million compared with 2003. The figure for 2003 included Euro 68.7 million (Euro 4.8 million) and Bipiemme Gestioni SGR (Euro 2.9 in extraordinary dividends received from Banca di million); Legnano, Banca Akros, Bipiemme Vita and Bipiemme Gestioni SGR upon distribution of their unrestricted – increases of Euro 14.5 million for higher dividends reserves. Ignoring this amount, the increase in net from shares (+ Euro 5.0 million) and equity investments interest and other banking income would have been Euro (+ Euro 9.5 million) including Dexia-Crediop (+ Euro 8.2 55.7 million (+5.3%). million) and Carinord 1 (+ Euro 2.2 million);
In detail, net interest income increased by Euro 12.9 an increase of Euro 10.4 million in profits on financial million (+2.6%) to Euro 514.4 million. This increase transactions to Euro 31.4 million, particularly thanks to occurred despite the negative impact of conferring 26 improved results in the foreign exchange sector (+ Euro BPM branches on Banca di Legnano at the end of March 4.5 million), and higher gains on securities trading (+ 2003 (based on management accounting data, the Euro 6.1 million).Furthermore, as discussed in the branches conferred generated net interest income of Euro section on “Significant events – Reorganisation of the 4.0 million in the first quarter of 2003). Group’s financial operations”, “investment” securities held by the two foreign branches in London and New York Business with customers was up by an average of 5.7% for have now been valued as “dealing” securities. This has deposits and 10.0% for loans. These increases helped offset resulted in the recording on gains that have been almost the downside of lower market rates after the European entirely offset by writedowns to the underlying hedging Central Bank cut its official refinancing rate, which went derivatives, producing an overall net positive balance of from 2.75% in December 2002, to 2.50% in March 2003 Euro 2.3 million; and then to its current level of 2.0% following the latest cut in June 2003. an increase of Euro 12.4 million (+3.4%) in net commissions to Euro 372.9 million. In detail: Profits on financial transactions and services went down by 4.2% to Euro 584.9 million, reflecting: – net commission from asset management increased by Euro 8.0 million to Euro 132.6 million also as a result of a decrease of Euro 52.4 million (–41.1%) in dividends – the shift in fund assets from money market into bond ignoring the above reclassification of Euro 31.3 million in products and net investment inflows of Euro 466 million; dividend tax credits for 2003 – consisting of: – net commission from administering and dealing – decreases of Euro 68.7 million for the receipt of securities and currency was slightly lower (– Euro 1.5 extraordinary dividends in 2003 following the distribution million) at Euro 36.1 million, supported in both years of unrestricted reserves by Banca di Legnano (Euro 55.0 concerned by fees on the placement of structured bonds million), Banca Akros (Euro 6.0 million), Bipiemme Vita (Euro 5.9 million in 2004);
50 Report on Operations for 2004 Net service income Net commissions
Amounts in Euro mn Amounts in Euro mn
610.7 584.9 360.5 372.9 700 – 4.2% 400 + 3.4%
600 350 – 57.5%
+ 3.7% 300 500 Other services + 6.4% 250 400 Other operating Asset management income, net 200 300 Brokerage 150 – 4.1% + 3.4% Net commissions 200 + 3.4% 100 Collections and Profits from financial payments 100 + 12.1% + 49.5% transactions 50 Loans and 0 – 41.4% Dividends 0 guarantees
Dec - 03 Dec - 04 Dec - 03 Dec - 04
– net commission from other banking services increased Euro 8.0 million in provisions for the performance- by Euro 6.0 million to Euro 204.2 million; this was the related bonus scheme for 2004. combination of higher net commissions from loans and guarantees (Euro 12.4 million) and lower commission Payroll costs also included a charge of Euro 4.3 million for from all the other services (– Euro 6.5 million), mostly due purchasing 706,715 BPM shares on the market under the to the higher fees payable to Bipiemme Private Banking “Employee share accumulation plan”, approved by BPM’s Sim for the larger number of services provided; Board of Directors on 24 February 2004.This plan, forming part of the strategy for stabilising the shareholder base, other net operating income increased by Euro 3.8 entails granting BPM shares to employees in proportion to million to Euro 105.6 million (+3.7%). the total number of shares transferred by them to an accumulation plan and restricted for a period of 5 years. The quantity of shares required was obtained – under the authority granted to the Board of Directors by the Operating profit shareholders on 24 April 2004 – by using the “Reserve for own shares”, without therefore increasing the number of Operating profit came to Euro 267.0 million, down Euro shares in issue. 44.3 million (–14.2%) compared with the prior year; ignoring the extraordinary dividends collected in 2003 The Bank employed 6,538 persons as of 31 December mentioned earlier, operating profit would have increased 2004, which was 146 (– 2.2%) fewer than a year earlier by Euro 24.4 million (+ 10.0%). (6,684 persons). A total of 117 people were hired during 2004, most of whom were allocated to the development of Administrative expenses and adjustments to tangible and commercial activities, while there were 263 leavers. intangible fixed assets increased by Euro 31.3 million (+ 3.9%) to Euro 832.3 million. Particular attention was given to training as part of the process of managing human resources. A total of 29,300 In particular, payroll costs amounted to Euro 468.3 man/days were dedicated to training and education in million, which was Euro 22.3 million higher than in the 2004, of which 2,300 man/days involved personnel previous year (+ 5.0%).This increase was explained by: working for group companies. In addition to the usual attention dedicated to management training and the Euro 10.6 million in higher leaving incentives, which professional and interpersonal areas, BPM’s model of involved 188 staff in 2004 and a total outlay of Euro 18.7 human resource development was extended to other million; Group companies with a view to integrated resource management. Euro 6.2 million in additional charges consequent upon renewing the payroll agreement;
Report on Operations for 2004 51 Other administrative expenses amounted to Euro 277.6 million, up Euro 4.4 million (+1.6%) on the corresponding Operating costs, depreciation and period of last year. They included Euro 40.6 million in amortisation indirect taxes and duties. The increase is explained by the Amounts in Euro mn expansion in business following enlargement of the branch network and the implementation of various projects designed to achieve the Bank’s strategic objectives (transition to new International Accounting 801.0 832.3 Standards and to the integrated multichannel platform). 900 + 3.9% Specifically there was: 800
an increase of Euro 2.4 million in property rentals, due 700 to the rental costs of the 29 new branches opened mostly 600 + 1.6% in the second half of 2003; 500 Administrative expenses and a growth of Euro 2.5 million in the fees paid to 400 indirect taxes We@Service, reflecting the higher volume of business 300 + 5.0% managed by this company; Payroll costs 200 Depreciation and an increase of Euro 2.2 million in indirect taxes and 100 amortisation duties. 0 + 5.6%
Dec - 03 Dec - 04 Cost-controlling measures managed, however, to reduce certain costs, such as advertising expenses, equipment leasing charges and personnel-related costs other than Profit from operating activities remuneration, by a total of Euro 3.9 million. Profit from operating activities came to Euro 120.1 Adjustments to tangible and intangible fixed assets were million, a decrease of Euro 29.7 million on the prior year 5.6% higher at Euro 86.4 million. Assets purchased in figure of Euro 149.8 million; ignoring the extraordinary 2004, and entering service during the year, amounted to dividends received in 2003 mentioned earlier, profit from Euro 39.4 million, of which Euro 17.9 million related to operating activities would have risen by Euro 39.0 million. intangible fixed assets, mostly proprietary software (Euro 17.1 million), and Euro 21.5 million to tangible fixed Provisions for risks and charges, net writedowns to loans assets. The most important capital investments related to and provisions for loan losses totaled Euro 133.6 million the upgrade of the central system’s software and and were Euro 24.3 million lower than in the comparative hardware and maintenance of base software. period of last year. This caption specifically includes:
Euro 28.1 million in provisions for risks and charges, of which Euro 17.6 million for recovery procedures and legal disputes and Euro 9.0 million for prudent provisions against the estimated cost of closing the foreign branches;
Euro 105.5 million in net writedowns to loans, provisions for guarantees and commitments and provisions for loan losses, down by Euro 24.4 million. Performing loans were written down by a total of Euro 18.5 million in 2004 (for so-called “inherent risk”), representing 0.53% of total customer loans.
Net adjustments to financial fixed assets reported a negative balance of Euro 13.3 million, which was Euro 9.7 million lower than in the same period last year.
In detail, adjustments to equity investments amounted to Euro 8.2 million, mostly relating to Multimedica Holding (Euro 5.8 million) and We@Service (Euro 1.6 million), while adjustments to investment securities came to Euro 5.9 million (of which Euro 4.8 million related to
52 Report on Operations for 2004 investment securities at the London branch which have Deposits and loans now been reclassified to the dealing portfolio).
Non-recurring items reported net income of Euro 33.2 million, an improvement of Euro 27.1 million compared Direct customer deposits with the corresponding period of last year. This change can be largely explained by: Customer deposits amounted to Euro 17,323 million as of 31 December 2004, posting a 6.1% increase on the balance Euro 9.7 million in out-of-period income arising on the reported twelve months earlier. BPM Italy reported an application of the policy of “defiscalisation”, designed to even bigger increase, climbing by 7.1% to Euro 16,521 eliminate cumulative fiscal distortions, as fully explained million, while deposits at the foreign branches dropped by in the specific section of the Explanatory notes (see: 11.2%, reflecting the deliberate policy of reducing “Accounting policies”), to which the reader should refer for exposures to large companies. more details; In detail, current accounts were the technical form Euro 10.5 million in gains on the disposal of equity displaying the biggest change (+ Euro 628 million; +5,5%), investments, mostly relating to the gain arising on the accounting for around 70% of total deposits. The bond share swap with Fondazione CR Alessandria, as part of sector progressed by Euro 874 million, having benefited the Carinord 1 merger, which involved BPM acquiring a from the large number of issues during the year, totalling 4.05% interest in CR Alessandria, in return for its transfer Euro 1.8 billion, of which Euro 656 million in structured to Fondazione of a 3.11% stake in each of Banca Akros loans, another Euro 450 million forming part of the new S.p.A., Bipiemme Vita S.p.A. and Bipiemme Gestioni SGR Euro Medium Term Notes (EMTN) programme capped at S.p.A. (See “Significant events – Acquisition of control Euro 2.0 billion, and lastly Euro 180 million relating to the (80%) of Cassa di Risparmio di Alessandria”). “BPM/CIC 2004/2009” convertible bond.
Income taxes for the year amounted to Euro 28.1 million Repurchase agreements were 42.6% lower at Euro 645 (with a tax rate of 18.3%), an increase of Euro 2.4 million million. on the same period last year, whose original amount, as already described, was reduced by Euro 31.3 million to Market share for resident customers was 1.54% in the match the corresponding reversal out of “dividends and first nine months of 2004, up from 1.48% in the same other revenues”, thereby eliminating the effect of the tax period last year. credit on equity investments, which is no longer allowed.
Net profit for the year came to Euro 125.2 million, a decrease of Euro 5.0 million compared with the prior year (–3.9%).
Customer deposits 31.12.2004 31.12.2003 (in thousands of Euro) % % Change % Current accounts 12,119,072 70.0 11,490,905 70.4 5.5
Savings deposits 626,319 3.6 609,762 3.7 2.7
Repurchase agreements 644,851 3.7 1,122,474 6.9 – 42.6
Bonds 3,768,576 21.8 2,894,383 17.7 30.2
Certificates of deposit 158,560 0.9 201,121 1.2 – 21.2
Other technical forms 5,954 0.0 4,664 0.0 27.7 Total customer deposits 17,323,332 100.0 16,323,309 100.0 6.1 of which foreign branches 802,409 903,415 – 11.2
Report on Operations for 2004 53 Customer deposits Indirect deposits
Amounts in Euro mn The total market value of indirect deposits from ordinary customers (assets under administration and management), based on management figures, was Euro 16,323 17,323 26,135 million at the end of 2004 (+6.6 % over the year). + 6.1% 18,000 Assets under management rose to 55.0% of total indirect 16,000 – 42.3% deposits, staying unchanged relative to twelve months + 26.9% earlier, while assets under administration accounted for 14,000 45.0% of the total. Both components in this case are stated 12,000 net of any duplications. 10,000
8,000 +5.3% Asset management 6,000 Repos & similar
4,000 CDs and bonds The Group’s product companies continued to expand the 2,000 range of asset management products on offer and diversify Current and 0 savings accounts the nature of operations. The insurance sector was particularly involved in this exercise, with the launch of Dec - 03 Dec - 04 products that provide forms of capital protection.
The management figures for BPM Italy on its own The market value of asset management activities as of 31 reported an average annual increase in deposits of Euro December 2004 was Euro 14,385 million, up Euro 850 783 million (+ 5.7%) on the previous year, thanks to the million (+6.3%) on December 2003, reflecting: major growth in retail deposits (+ 7.1%). an increase in mutual funds, which climbed by 6.2% to Euro 7,313 million, with a market share inclusive of the funds managed by Bipiemme Gestioni SGR and BPM Fund Management of 2.34%, up from 2.21% in December 2003. Net flows into funds benefited from the trends described above, amounting to Euro 466 million over the year. In terms of the distribution of assets by category of fund, the share of monetary funds fell (from 41% in
Indirect customer deposits at market value 31.12.2004 31.12.2003 (in thousands of Euro) % % Change % Portfolio management 2,309,409 16.1 2,102,652 15.5 9.8
Mutual funds 7,312,623 50.8 6,885,952 50.9 6.2
Fund-based portfolio management 1,523,114 10.6 1,609,629 11.9 – 5.4
Cash accounts 519,164 3.6 553,970 4.1 – 6.3
Insurance-sector reserves 2,477,889 17.2 2,165,872 16.0 14.4
Property funds 131,840 0.9 163,834 1.2 – 19.5
Assets managed by non-Group companies 111,340 0.8 53,012 0.4 110.0
Total asset management 14,385,379 100.0 13,534,921 100.0 6.3
Asset management 14,385,379 55.0 13,534,921 55.2 6.3
Assets under administration 11,749,968 45.0 10,976,425 44.8 7.0
Total indirect deposits 26,135,347 100.0 24,511,346 100.0 6.6
54 Report on Operations for 2004 December 2003 to 37% in December 2004) while that of bonds rose (from 27% in December 2003 to 32% in Asset management with ordinary customers December 2004); Amounts in Euro mn
a growth in portfolio management (+9.8%), which BPM share of 2.21% 2.34% mutual funds market reached Euro 2,309 million, and the insurance sector, whose reserves climbed to Euro 2,478 million (+14.4%), particularly thanks to subscriptions to new unit-linked 13,535 14,385 16,000 Other and index-linked policies; + 6.3% 14,000 Property funds decreases in fund-based portfolio management, 5.4% 12,000 Insurance-sector lower at Euro 1,523 million, and in property funds, down reserves to Euro 132 million, which largely consist of units in the 10,000 Investietico property fund, managed by Bipiemme Real 8,000 Cash accounts Estate SGR. 6,000 Fund-based por- tfolio manage- 4,000 ment Assets under administration 2,000 Mutual funds
0 Assets under administration increased by Euro 774 Portfolio million (+7.0%) to Euro 11,750 million, partly thanks to Dec - 03 Dec - 04 management the success of structured bond placements; over 30% of these assets were represented by equities. Ordinary customer lending
Loans to customers Amounts in Euro mn
Customer loans amounted to Euro 17,024 million as of 31 December 2004, up Euro 1,568 million (+10.1%) on the 15,456 17,024 year before. As in the case of deposits, BPM Italy reported + 10.1% an even larger increase, with loans climbing 12.9%. 18,000 Average annual management figures for BPM Italy on its 16,000 – 17.2% own confirm this growth trend, posting an increase of 14,000 10.0%, with the retail business advancing by 12.7% and 12,000 + 46.8% the corporate business by 8.0%. 10,000
Mortgages and loans continued to make headway, with 8,000 mortgages rising by Euro 1,361 million (+46.8%), partly 6,000 Foreign branches thanks to the large amount of new lending, which 4,000 + 4.0% exceeded Euro 2.0 billion in the year. In accordance with Mortgage loans planned targets, the foreign branch loan portfolio shrank 2,000 Other lending by 17.2% (– Euro 243 million) to Euro 1,170 million. 0 (Italy)
Dec - 03 Dec - 04 Even market share for resident customers was decidedly better, amounting to 1.35% in the first nine months of 2004, up from 1.26% for the whole of 2003. The total value of guarantees and commitments at the end The loan portfolio was developed in keeping with the of December 2004 was Euro 6,773 million, down 11.3% strategic objective of focusing on the Retail and Corporate (– Euro 861 million) on twelve months earlier. The segments of the domestic market, applying our usual contraction in “below the line” activities refers to the attention to risk concentration and sector distribution. London branch (– Euro 331 million) and the New York branch The overall amount of positions representing more than (– Euro 284 million); this is associated with the measures 10% of capital for supervisory purposes came to Euro 859 to strengthen the Bank’s capital base which, amongst million and referred to just 2 positions. Such positions others, involve reducing assets at risk and especially those amounted to 3.9% of total weighted customer loans at 31 with the worst ratios between income generated and December 2004. capital absorbed.
Report on Operations for 2004 55 Breakdown of loans 31.12.2004 31.12.2003 (in thousands of Euro) % % Change % Current account overdrafts 2,872,108 16.9 3,094,552 20.0 – 7.2
Advances 2,728,008 16.0 2,543,372 16.5 7.3
Mortgages and loans 5,846,565 34.3 4,276,229 27.7 36.7
Other amounts not settled via current account and other loans 5,433,893 31.9 5,121,701 33.1 6.1
Non-performing loans after writedowns 106,353 0.6 123,091 0.8 – 13.6
Total customer lending 16,986,927 99.8 15,158,945 98.1 12.1
Repurchase agreements 36,708 0.2 297,032 1.9 – 87.6
Total customer loans 17,023,635 100.0 15,455,977 100.0 10.1
of which: Foreign branches 1,170,222 1,413,253 – 17.2
Deposits with other banks 2,722,744 2,127,957 28.0
Other technical forms 648,505 1,072,839 – 39.6
Non-performing loans 0 0 n.s.
Total amounts due from banks 3,371,249 3,200,796 5.3
of which: Foreign branches 928,758 870,016 6.8
Total loans 20,394,884 18,656,773 9.3
Commercial guarantees 2,987,789 3,203,255 – 6.7
Financial guarantees 743,064 953,546 – 22.1
Assets lodged in guarantee 13,949 12,955 7.7
Total guarantees issued 3,744,802 4,169,756 – 10.2
Credit derivatives 480,564 747,551 – 35.7
Undrawn irrevocable lines of credit 1,767,227 1,810,859 – 2.4
Other commitments 780,400 906,280 – 13.9
Total commitments 3,028,191 3,464,690 – 12.6
In detail, guarantees given amounted to Euro 3,745 Lending to resident customers in the productive sectors of million, down 10.2% on twelve months earlier. the economy, represented by “Non finance-sector Commitments fell by 12.6% to Euro 3,028 million, mostly companies” and “Family businesses”, rose by Euro 1,455 due to the drop in “credit derivatives” (– Euro 267 million), million (+ 16.1%) over the year. Other business sectors relating to risk acceptance operations almost entirely with significant changes included “Other revenue-earning arranged by the foreign branches. services” (+ Euro 1,027 million).
Looking at the distribution of loans to ordinary customers by business sector, it is apparent that the growth in lending is concentrated in the segments of “others operators” (+29.03%) and “non finance-sector companies” (+13.6%).
56 Report on Operations for 2004 Breakdown of customer lending by sector
31.12.2004 31.12.2003 (in thousands of Euro) balance % balance %
Government 347,657 2.0 369,699 2.4
Finance-sector companies 2,838,954 16.7 3,242,841 21.0
Non finance-sector companies 10,311,764 60.6 9,079,406 58.7
Family businesses 421,645 2.5 358,641 2.3
Other operators 3,103,615 18.2 2,405,390 15.6
Total customer lending 17,023,635 100.0 15,455,977 100.0
of which:
Resident non-financial and family businesses
Other revenue-earning services 3,466,443 33.0 2,439,794 26.9
Commercial services 1,737,284 16.5 1,664,358 18.4
Construction & public works 982,003 9.3 787,305 8.7
Metal products 501,520 4.8 440,064 4.9
Energy products 396,997 3.8 258,108 2.9
Electrical supplies & materials 385,821 3.7 399,477 4.4
Food products 325,314 3.1 312,530 3.5
Agricultural and industrial machinery 289,526 2.8 267,118 3.0
Textiles 256,229 2.4 267,071 2.9
Hotel and catering services 226,173 2.2 189,122 2.1
Chemicals 224,001 2.1 351,113 3.9
Paper and printing 200,659 1.9 156,614 1.7
Rubber & plastic products 194,866 1.9 202,429 2.2
Agriculture. forestry & fisheries 183,912 1.8 86,960 1.0
Other industrial products 164,101 1.6 175,221 1.9
Ferrous and non-ferrous metals 150,197 1.4 140,390 1.6
Transport-related services 144,094 1.4 153,332 1.7
Sea & air transport services 136,387 1.3 167,317 1.8
Communication services 134,465 1.3 197,439 2.2
Minerals and mineral-based products 126,659 1.2 128,551 1.4
Transportation 104,534 1.0 113,278 1.3
Internal transport services 100,053 1.0 92,536 1.0
Office machines 77,888 0.7 63,759 0.7
Total 10,509,126 100.00 9,053,886 100.00
Report on Operations for 2004 57 Asset quality Financial markets and equity investments Total doubtful loans before writedowns amounted to Euro 683 million, down by Euro 35 million since December 2003. Non-performing loans before writedowns were Euro Securities, interbank position and forward 23 million lower at Euro 342 million, of which 68.9% has transactions been provided against. Non-performing loans after writedowns came to Euro 106 million, representing 0.62% The value of the securities portfolio was Euro 4,079 of loans to customers (0.80% in December 2003), staying million at the end of 2004, Euro 1,132 million lower than well below the average for the Italian banking industry a year earlier (– 21.7%). The gradual reduction in (2.03% in October 2004). Other gross doubtful loans financial assets is associated with the strategy of amounted to Euro 341 million, down Euro 12 million developing domestic retail lending and has been since the end of 2003. accompanied by a careful restructuring of the securities portfolio. Total provisions for doubtful loans, recorded using the usual prudent criteria, amounted to Euro 299 million, The dealing portfolio, amounting to Euro 3,486 million, providing total coverage of 43.8%. Provisions against represented 85.5% of the total, while the remaining 14.5% performing loans totalled Euro 88 million (for so-called referred to the investment portfolio, valued at Euro 593 “inherent risk”), providing coverage of 0.53% (up from million. 0.46% at the end of 2003). The reduction in the investment portfolio (– Euro 1,783 The gross exposure in relation to loans to customers million) is explained by the Board of Directors’ resolution resident in countries at risk amounted to just Euro 144,000. to reclassify the foreign branches’ “investment” portfolio to their “dealing” portfolio, as a result of the decisions taken and formalised in 2004 to close the London and New York branches by the end of 2005 and to sell and/or transfer their securities portfolios. The nominal value of the securities transferred was Euro 458.6 million for the New York branch and Euro 893.2 million for the London branch.
This means that the entire investment portfolio was held by BPM Italy at 31 December 2004. It included Euro 456 million for two Capitalia bonds, subscribed as part of the operation to close out the Garfin loan in 2002; Euro 45 million in junior notes and credit link notes, subscribed as part of the securitisation in 1999 and the synthetic securitisation in 2001; and lastly other corporate bonds, subscribed by the Bank at issue and relating to financing deals, which will be held until the associated principal is repaid.
Securities and net interbank position 31.12.2004 31.12.2003 (in thousands of Euro) % % Change % Investment securities 593,190 14.5 2,376,543 45.6 – 75.0 of which: foreign branches 0 0.0 1,700,305 32.6 – 100.0 Dealing securities 3,486,155 85.5 2,835,302 54.4 23.0 of which: foreign branches 2,014,184 49.4 470,672 9.0 327.9 Total securities 4,079,345 100.0 5,211,845 100.0 – 21.7 of which: foreign branches 2,014,184 49.4 2,170,977 41.7 – 7.2 Lending to banks 3,371,249 3,200,796 5.3 Borrowing from banks – 5,866,438 – 6,213,375 – 5.6 Total interbank – 2,495,189 – 3,012,579 – 17.2 of which: foreign branches – 2,250,557 – 2,262,897 – 0.5
58 Report on Operations for 2004 The Bank’s net interbank borrowing position of Euro due by the Bank: Euro 716.2 million, referring to balances 2,495 million was 17.2% down on twelve months earlier consisting of correspondent bank accounts relating to: and confirmed it as a net taker of funds. Most of this Banca di Legnano (Euro 152.7 million), Cassa di position reflected the financing requirements of the Risparmio di Alessandria (Euro 99.3 million), Banca Akros foreign branches, whose net borrowings amounted to Euro (Euro 18.5 thousand), Bipiemme Gestioni SGR (Euro 0.7 2,251 million. million), BPM Ireland (Euro 1.2 million), Bipiemme Real Estate SGR (Euro 0.6 million), Akros HFR Alternative Forward transactions are analysed in specific tables Investments SGR (Euro 85.5 thousand), Bipiemme within the explanatory notes. Derivatives held for dealing Private Banking SIM (Euro 1.1 million), BPM Private purposes, totalling Euro 8,643 million, include Euro 6,819 Equity SGR (Euro 0.2 million), BPM Luxembourg (Euro million in interest rate swaps, mostly associated with 0.3 million), Bipiemme Vita (Euro 41.8 million), Ge.Se.So. treasury activities designed to reduce the Bank’s exposure (Euro 0.1 million), We@Service (Euro 1.8 million), to interest rate risk and with matched positions whereby Ultramediass (Euro 0.7 million), Bipiemme Immobili the Bank, acting as intermediary between two (Euro 3.2 million), securities issued with Banca Akros counterparties, just accepts the lending risk. The (Euro 7.2 million) and Bipiemme Vita (Euro 230.8 million) remaining balance of Euro 1,824 million relates to options and subordinated liabilities with BPM Luxembourg (Euro and domestic currency swaps. 171.9 million) and Banca Akros (Euro 2.6 million);
guarantees and commitments: Euro 1,217.3 million, of which guarantees given to BPM Ireland (Euro 1,154.4 Equity investments million), Banca di Legnano (Euro 7.8 million), Banca Akros (Euro 3.7 million), Bipiemme Vita (Euro 0.3 At 31 December 2004 equity investments stood at Euro million), Ge.Se.So. (Euro 21.4 thousand), Bipiemme 1,980 million, an increase of Euro 111 million compared Gestioni SGR (Euro 36.2 thousand) and commitments to with a year earlier. In detail: Banca Akros (Euro 27.4 thousand), BPM Ireland (Euro 45.2 million) and Cassa di Risparmio di Alessandria (Euro “investments in group companies” increased by Euro 5.7 million). 256 million to Euro 1,803 million, largely due to the purchase of the 80% interest in Cassa di Risparmio di As regards balances with associated companies (those Alessandria; over which the Bank has a significant influence, as defined by article 19.1 of Decree 87/92), they were as “other equity investments (caption 70)” decreased by follows: Euro 145 million to Euro 177 million, mostly due to the SelmaBipiemme Leasing: cancellation of the Carinord 1 shares upon this company’s – due to the Bank: Euro 283.3 million; merger into BPM. – due by the Bank: Euro 96.0 thousand; The “Securities and equity investments” section of the – guarantees and commitments: Euro 0.8 million; consolidated Report on operations contains summary information on the performance, results and key financial Etica SGR: figures of the more important Group companies. – due to the Bank: Euro 391.0; – due by the Bank: Euro 1.3 million.
Intercompany transactions Transactions with subsidiary and associated companies and other related parties (as defined in Consob Year-end balances with subsidiaries are summarised communication DEM/2064231 of 30.09.2002) are settled below: on market terms, and in their absence, at a suitable rate to cover the costs of performing the associated services. due to the Bank: Euro 704.9 million, of which interbank Such transactions arise in the ordinary course of business. balances with Banca Akros (Euro 76.4 million), Banca di Legnano (Euro 1.0 million) and Cassa di Risparmio di Alessandria (Euro 3.8 million), non-current account advances in euro and other currencies to BPM Ireland (Euro 581.9 million), commission due from Bipiemme Gestioni SGR (Euro 24.1 million), Akros HFR Alternative Investments SGR (Euro 0.9 million), Ultramediass (Euro 3.3 million) and Bipiemme Vita (Euro 1.7 million), subordinated loans to Bipiemme Vita (Euro 9.6 million) and lastly bonds and other debt securities with Cassa di Risparmio di Alessandria (Euro 2.2 million);
Report on Operations for 2004 59 Shareholders’ equity and capital Capital adequacy adequacy Capital for supervisory purposes is Euro 3,184 million, 10.4% higher than twelve months earlier. Specifically: Shareholders’ equity Tier 1 capital , comprising paid-in share capital and Shareholders’ equity, including net profit for the year, equity reserves, net of own shares, goodwill and other amounts to Euro 2,643 million, up by Euro 165 million intangible fixed assets, amounts to Euro 2,409 million; (+6.6%) on 31 December 2003. Tier 2 capital, which comprises subordinated liabilities The Bank’s share capital, totalling Euro 1,245 million, is and the reserve for possible loan losses less other fully subscribed and paid in and consists of 415,034,231 deductions, is slightly higher at Euro 811 million. ordinary shares with a par value of Euro 3 each. The increase of Euro 87 million is explained by the capital Risk-weighted assets have risen by 4.8% on a year ago to increase for servicing the merger of Carinord 1 (see: Euro 24,484 million. The total capital ratio, being the ratio “Significant events”). of capital for supervisory purposes to total risk-weighted assets, rose to 13.01% (12.35% in December 2003). The Tier 1 capital ratio, being the ratio between Tier 1 capital and risk-weighted assets was also higher, rising to 9.84% up from 9.68% in December 2003.
Net of the amounts absorbed by credit risk (48.6%), market risk (4.1%) and other prudent requirements (1.1%), the Bank’s unabsorbed capital amounts to Euro 1,470 million.
Subordinated liabilities are unchanged compared with December 2003 at Euro 831 million.
The Bank did not hold any own shares as of 31 December 2004 (7,096 as of 31 December 2003).Transactions during the year involved purchases of 3,322,725 shares, of which:
2,549,742 in shares were allocated to employees by way of disbursing 20% of the 2003 net profit, as approved by the ordinary shareholders’ meeting held on 24 April Shareholders’ equity 2004;
Amounts in Euro mn 706,715 were assigned to employees under the “BPM employee share accumulation plan”, as already discussed in the paragraph on “operating profit”. 2,479 2,643 The remaining 73,364 shares were then sold. + 6.6% 2,750 2,500 2,250 2,000 1,750 1,500 1,250 1,000 750 500 Capital 250 0 Profit Dec - 03 Dec - 04
60 Report on Operations for 2004 Shareholders’ equity and capital adequacy
31.12.2004 31.12.2003 Change % (in thousands of Euro)
Number of shares 415,034,231 385,993,918 7.5
Share capital 1,245,103 1,157,982 7.5
Share premium reserve 339,689 339,689 0.0
Equity reserves 933,422 850,848 9.7
Net profit for the year 125,224 130,268 – 3.9
Total book shareholder’s equity 2,643,438 2,478,787 6.6
Tier 1 capital 2,409,121 2,259,726 6.6
Tier 2 capital 810,896 797,284 1.7
Deductions – 35,705 – 172,552 – 79.3
Capital for supervisory purposes 3,184,312 2,884,458 10.4
Portion absorbed by credit risk 48.6% 51.2%
Portion absorbed by market risk 4.1% 2.4%
of which: a) dealing portfolio risk 4.1% 2.4% b) exchange risk 0.0% 0.0%
Portion absorbed by other risks 1.1% 3.2%
Available portion 46.2% 43.3%
Minimum capital adequacy required 1,713,877 1,634,681 4.8
Surplus 1,470,435 1,249,776 17.7
Total risk-weighted assets 24,483,954 23,352,591 4.8
Tier I capital ratio 9.84% 9.68%
Total capital ratio 13.01% 12.35%
Report on Operations for 2004 61 Risk Management applications by “corporate” customers, their creditworthiness is measured using a rating system that considers their financial statements, qualitative and sector information and track record. The plan is to integrate this Credit risk system with an evaluation of any negative events involving the counterparty. Credit risk is the most important of the various risks to which the Bank is exposed. The capital absorbed by this With reference to the loss on insolvency (Loss Given type of risk represents 48.6% of the total. Default) and positions in the event of insolvency (Exposure at Default), during 2004 BPM carried out its own estimates Risk-weighted assets exposed to credit risk total Euro by type of counterparty and transaction for its entire 22,129 million, up 5.0% since December 2003. In portfolio; having completed identification of the relevant particular, risk-weighted assets associated with cash information, the algorithms for calculating LGD and EAD lending amount to Euro 19,223 million (+7.5% since the will now be prepared, based on the flow charts drawn up to end of December 2003); this represents 85.3% of total risk- date. weighted assets exposed to credit risk, while around 70% relates to loans made to the private sector. In terms of projects, the Bank has carried out an analysis of the types of loan and guarantee it uses in order to The lending equivalent of off-balance sheet transactions – restructure the process of requesting guarantees and guarantees and commitments – represents 13.2% of total optimising the management of disputed positions in view of risk-weighted assets exposed to credit risk, 11.7% lower the New Capital Accord. than in December 2003. The remainder comprises derivative contracts and exchange transactions not The Bank’s loan portfolio is kept under constant monitor for considered for the purposes of market risk; these represent the purposes of defining methods of risk measurement. This 2.2% of total risk-weighted assets exposed to credit risk. work helps map the composition, degree of risk and level of concentration of loans and establish on an ongoing basis For information on credit derivatives, reference should be how BPM matches up against the industry as a whole. made to the specific section in the Explanatory notes (see: Explanatory notes – Part B Section 10.6). Most of the credit derivative contracts entered into consist of credit default products, whose authorisation procedure is similar to that for ordinary loans. “Sale of protection” derivative contracts, totalling Euro 481 million, almost entirely refer to risk acceptances arranged by the foreign branches.
BPM continued its work in 2004 on introducing a system of internal rating, that will also be used for calculating capital absorption under the new regulations due to come into effect from December 2006. BPM has opted for the “Foundation” method in this regard.
Work continued on measuring the three components of risk: probability of default (PD), exposure at default (EAD) and loss given default (LGD). The probability of default measures counterparty risk (counterparty rating). The combined evaluation of the three components makes it possible to assess transaction risk (transaction rating).
As regards counterparty ratings, the Bank has systems that calculate this for Corporate, Small Business and Private customers. In the case of “corporate” customers the rating procedure has long been applied, while as far as other types of customer are concerned the systems now developed will be subject to additional fine-tuning in 2005.
Applications for credit by the “private customer” segment are assessed using product matrices for the different types of finance requested, while counterparty matrices are used in the case of the “small business” sector. In the case of
62 Report on Operations for 2004 Credit risk At 31 December 2004 Original value/ % of total Weighted % of total lending value value value equivalent of assets of weighted at risk assets at risk
(in thousands of Euro)
Cash-based assets at risk:
Share of cash loans secured by real guarantees 652,867 2.2% 107 0.0%
Cash loans to government or multilateral development banks or with their explicit guarantee 793,950 2.7% 77,604 0.3%
Cash loans to banks and investment companies or with their explicit guarantee 3,715,231 12.7% 745,046 3.3%
Cash loans to the private sector: mortgages on residential property 1,460,858 5.0% 730,429 3.2%
Cash loans to the private sector: other 15,343,869 52.5% 15,343,869 68.1%
Equity investments weighted at 200% 17,619 0.1% 35,238 0.2%
Equity investments and subordinated loans 1,936,497 6.6% 1,936,497 8.6%
Other assets 788,974 2.7% 353,718 1.6%
Total cash-based assets at risk 24,709,864 84.5% 19,222,508 85.3%
Off-balance sheet assets at risk
Guarantees given and commitments:
secured by real guarantees 48,023 0.2% 0 0.0%
to government or to multilateral development banks or with their explicit guarantee 24,805 0.1% 934 0.0%
to banks or investment companies or with their explicit guarantee 759,337 2.6% 152,017 0.7%
to private-sector entities 3,032,801 10.4% 3,032,801 13.5%
Total guarantees given and commitments 3,864,965 13.2% 3,185,752 14.1%
Derivative contracts and foreign exchange transactions not forming part of market risk 651,507 2.2% 137,737 0.6%
Total value of off-balance sheet assets at risk 4,516,472 15.5% 3,323,489 14.7%
Total value of assets at risk 29,226,337 100.0% 22,545,997 100.0%
Doubtful accounts and losses on risk-weighted assets 484,174 417,114
Total net value of assets at risk 28,742,162 22,128,883
Credit risk absorption of capital for supervisory purposes (7%) 1,549,022
Report on Operations for 2004 63 Market risk and Asset & Liability Operating risk Management Operating risks, defined as the “potential losses caused by Market risk is measured on a Value-at-Risk basis: inadequate or incorrect processes, persons, systems or positions held by the Bank within the trading portfolio, external events”, affect all the Bank’s operations due to which includes dealing securities, derivatives and foreign their intrinsic nature. currency, are examined every day. Various additional risk indicators are also calculated to supplement the set of Figures on operating losses have been collected, in line information that supports the decision-making process. with the Basel Committee’s recommendations. This has helped improve attention to and awareness of operating The total VAR of the trading portfolio as of 31 December risks. 2004, calculated using figures for the Bank’s operations in Italy, was Euro 2.78 million, which was lower than at 31 The use of new methods is being examined for better December 2003 (Euro 3.15 million) due to the policy of identifying and evaluating potential operating risks and gradually reducing the level of market risk. This calculating the amount of capital to be allocated on the calculation uses a confidence interval of 99% and assumes basis of their actual size, rather than on predefined ratios that positions take 10 days to unwind. that are not necessarily connected with the risk.
With regard to interest rate risk, the Bank measures its Until the guidelines are finalised, BPM is regularly exposure using an Asset & Liability Management model. estimating the capital that needs to be allocated to The purpose of managing rate risk is to minimise the Operating Risks, using both the “Basic” and “Standard” impact of rate changes on net interest income and the methods recommended by the Basel Committee and which present value of net worth. Fluctuations in net interest become compulsory as from the 2007 financial statements. income are controlled by monitoring the differences between assets and liabilities, analysed by maturities or the date of rate reviews (margin analysis). Any changes in risk exposure that are out of line with the strategy being pursued are monitored constantly so that corrective action can be taken.
Figures published at 31 December 2004 show that for BPM’s operations in Italy, in the event of a 0.25 point shift up or down in the rate curve, net interest income over the next 12 months would rise by 2.1% or fall by –0.8%, respectively.
A method identifying an interest rate risk indicator, as currently defined by the supervisory instructions, is being used for the purposes of monitoring interest rate risk at all the Group’s banks. These results are compared with the average for the Italian banking industry as a whole, published by the supervisory authorities, and then summarised in a report sent to management on a quarterly basis.
The present value of net worth and off-balance sheet positions is monitored by analysing the duration gap, which assesses the sensitivity of the Bank’s economic value to changes in interest rates.
Analysis of the impact of a ±0.25 percentage point change in interest rates on the present value of net worth and off- balance sheet items reveals that the latter is essentially immune, since the duration gap of 0.24 is low, consistent with the Bank’s prudent operating policies.
64 Report on Operations for 2004 Operations and results by business Capital volumes (deposits, loans, assets under administration, assets under management) consist of sector and geographical area annual averages relating to ordinary customers, while assets under administration and management are stated The table “Contribution to net interest and other banking at market value. income and average capital for the period by business sector” analyses these figures according to the following Customer deposits include bonds, excluding those issued business sectors at 31 December 2004: under the Euro Medium Term Notes programme; loans refer to cash loans only. Retail, containing the results of private customers, small businesses, the financial advisors’ network and With regard to the allocation of customers to geographical dealings with subsidiaries; areas:
Corporate, containing the results of large and the location of private customers and small and medium-size corporate customers; medium-sized companies generally reflects that of the customers, with a good level of approximation; Financial Operations (Italy), containing the results of the HQ Financial Operations Division (Italy) relating to large corporate customers are handled centrally by the the management of the Bank’s own securities and dealing Large Company Relationships Department and therefore in securities and currency on own account and for do not reflect their actual geographical location; treasury purposes; relationships with subsidiaries are grouped together in Foreign branches, containing the results of the a specific segment. branches in London and New York;
Capital and other centres, containing the results associated with issues under the Euro Medium-term Notes programme, with subordinated loans, capital, the compulsory reserve and net default interest, charges on securitisations, charges relating to the “endowment funds” of the foreign branches and dividends from equity investments. This Sector also reflects the revenues not allocated to the Corporate, Retail and Financial Operations Divisions, together with the administrative costs directly related to these revenues.
Criteria for determining the profitability of each business sector
Net revenues (net interest and other banking income) are split between net interest income and net service income. Net interest income by division is obtained by using a system of internal transfer rates, strictly in tandem with the market.
The sum of these net revenues earned by the individual Divisions, recorded on the basis of management reporting criteria, reflects total interest and other banking income for statutory purposes.
The allocation of customer accounts to the various divisions is revised each year in order to keep up to date.
Report on Operations for 2004 65 Contribution to net interest and other banking income and average annual capital by business sector as of 31 December 2004
(in millions of Euro) (in millions of Euro)
Statement of income captions Dec. Dec. Change % Average annual capital Dec. Dec. Change % and business sector 2004 2003 change by business sector 2004 2003 change
Retail Retail Net interest income 372.7 367.5 5.2 1.4 Customer deposits 12,849 11,994 856 7.1 Net service income 351.1 331.1 19.9 6.0 Customer loans 6,629 5,880 749 12.7 Assets under administration 10,025 9,829 196 2.0 Net interest and other Asset management 13,375 12,741 634 5.0 banking income 723.8 698.6 25.2 3.6
Corporate Corporate Net interest income 143.4 143.2 0.1 0.1 Customer deposits 1,782 1,855 – 73 – 3.9 Net service income 63.2 61.5 1.8 2.9 Customer loans 8,837 8,180 658 8.0 Assets under administration 1,286 1,291 – 5 – 0.4 Net interest and other Asset management 534 427 107 25.1 banking income 206.6 204.7 1.9 0.9
Financial Operations (Italy) Net interest income 10.0 5.2 4.8 93.1 Gains on securities and currencies 19.5 12.0 7.5 62.2
Net interest and other banking income 29.5 17.2 12.3 71.5
Capital and other centres Net interest income 54.3 103.9 – 49.6 – 47.7 Net service income 48.1 47.8 0.3 0.6
Net interest and other banking income 102.4 151.7 – 49.3 – 32.5
BPM Italy BPM Italy Net interest income (*) 580.4 619.8 – 39.4 – 6.4 Customer deposits (**) 14,631 13,848 783 5.7 Net service income 481.9 452.4 29.4 6.5 Customer loans 15,466 14,060 1,407 10.0 Assets under administration 11,311 11,119 192 1.7 Net interest and other Asset management 13,909 13,168 741 5.6 banking income 1,062.2 1,072.2 – 9.9 – 0.9
Foreign branches Foreign branches Net interest income 22.2 23.4 – 1.2 – 5.1 Customer deposits 1,197 1,321 – 124 – 9.4 Net service income 14.8 16.7 – 1.9 – 11.2 Customer loans 1,452 1,556 – 104 – 6.7
Net interest and other banking income 37.0 40.1 – 3.1 – 7.6
BPM Bank BPM Bank Net interest income 602.6 643.2 – 40.6 – 6.3 Customer deposits 15,828 15,169 659 4.3 Net service income 496.7 469.1 27.6 5.9 Customer loans 16,918 15,616 1,303 8.3
Net interest and other banking income 1,099.3 1,112.3 – 13.0 – 1.2
(*) including dividends from equity investments (**) excluding EMTN issues
66 Report on Operations for 2004 Contribution to net interest & other banking income and average capital by geographical area at 31 December 2004 Area Customer % Customer % Net interest % deposits loans and other banking (in thousands of Euro) income Lombardy (excluding L.C.R. and G.C.) 9,836 62.1% 8,215 48.6% 629.2 57.2%
Lombardy - Large Company Relationships (L.C.R.) 640 4.0% 3,969 23.5% 59.4 5.4%
Lombardy - Group Companies (G.C.) 605 3.8% 78 0.5% 3.6 0.3%
Lazio 1,114 7.0% 637 3.8% 68.8 6.3%
Puglia 749 4.7% 386 2.3% 43.2 3.9%
Emilia Romagna and the North-East 712 4.5% 1,650 9.8% 65.6 6.0%
Regions of the North-West 975 6.2% 530 3.1% 60.5 5.5%
Total commercial operations 14,631 92.4% 15,466 91.4% 930.4 84.6%
Financial operations (Italy) 29.5 2.7%
Usa 407 2.6% 341 2.0% 8.2 0.7%
Uk 790 5.0% 1,110 6.6% 28.9 2.6%
Other 102.4 9.3%
Total Bank 15,828 100.0% 16,918 100.0% 1,099.3 100.0%
Overall, the contribution from services increased by 6.0% Retail Division to Euro 351.1 million, thanks to the growth in asset management income and higher revenues from electronic Results payment services, expense recharges and fees on deposits, overdrafts and loans. Deposits increased by Euro 856 million (+7.1%) to Euro 12,849 million, due to the contribution of the “on demand” Net interest and other banking income rose by 3.6% to component (+9.3%) and the maturing component Euro 723.8 million, representing 65.8% of the Bank’s (+14.7%), thanks to bonds, while repurchase agreements overall figure. were lower.
Lending (which in accordance with management reporting criteria includes the loans sold via the securitisation transaction in July 2001) increased by 12.7% to Euro 6,629 million, due to the contribution made by mortgages and loans (+ Euro 796 million).
The growth in volumes helped counter the negative impact of slightly smaller spreads and the lower amount of income resulting from the conferral of 26 branches on Banca di Legnano at the end of March 2003 (– Euro 4.0 million, being the revenues for the first quarter of 2003). As a result net interest income edged up 1.4% to Euro 372.7 million.
The volume of securities administered amounted to Euro 10,025 million (+2.0%), while assets under management increased by 5.0% to Euro 13,375 million.
Report on Operations for 2004 67 Financial advisors Distribution network
31.12.2004 31.12.2003 BPM’s network of financial advisors consisted of 39 agents at 31 December 2004, 14 fewer than the previous year. Province of Milan 261 257 Other provinces in Lombardy 94 94 The presence of financial advisors complements the traditional network and is greatest in the more “remote” Total Lombardy 355 351 geographical areas (Emilia Romagna, Puglia, Lazio) and Emilia Romagna 30 29 less significant in the Bank’s traditional territories. Lazio 55 54 Puglia 37 36 Operations principally focus on asset management and administration and, to a lesser but still significant extent, Other regions 25 23 funding and lending transactions. More than 10,500 Total Italy 502 493 customers are served, while average volumes handled London 1 1 since the start of the year amount to over Euro 360 New York 1 1 million. Total abroad 2 2 We@Bank 1 1 Internet banking Total branches 505 496 Corporate branches 18 18 In terms of internet banking, the Bank continued to work on improving and developing We@Bank – BPM’s banking Private Centres and online trading service – which now represents an (Bipiemme Private Banking Sim) 16 14 established channel of communication between customers Total distribution network 539 528 and the Bank, both in terms of the number of customers using it and the quantity of operations they conduct. During 2004, over 29,000 customers signed up for this service, Distribution network including more than 6,000 who had had no previous relationship with BPM, taking the overall number of online The distribution network consists of 539 “points of customers to in excess of 144,000. contact” with customers represented by 502 retail branches, along with the two foreign branches, the virtual Customers are making greater use of the service, with a branch of We@Bank, 18 corporate branches and 16 total of 70,000 active customers every month. Banking “Private” Centres. Corporate branches serve operations reported a major increase compared with medium/large businesses, while the private centres, December 2003, both as regards inquiries, which topped 6.6 reporting to Bipiemme Private Banking SIM, provide million (+35.2%), and instructions, totaling more than important private customers with specialist financial 600,000 (+51.1%), while online trading was down. These advice. The financial points were gradually phased out results are the fruit of the measures taken in 2004, geared during 2003, with their advisory activities now performed to a more intense and systematic relationship with the by the 16 private centres, appropriately located sales network and online customers, ongoing development throughout the country. and improvement of services offered and an effective marketing campaign. We@Bank services are also used by At 31 December 2004, the traditional branch network the customers of Banca di Legnano. consisted of 502 retail branches located in 13 regions throughout Italy, which together with the two branches in Considerable efforts were dedicated to the process of London and New York and the “virtual branch” run by transferring all the corporate customers over to the new We@Bank, took the total to 505. There were 9 more release of the “inLineaNet” service, which was successfully branches than at the end of December 2003, as a result of completed during 2004. The new release provides more 10 new openings and one closure. The new openings were than one hundred options for making inquiries, placing in the municipalities of Monza (2 openings), Milan, instructions and commercial communication. Over 32,000 Melegnano, Altamura, Foggia, Turin, Florence, Bologna companies had signed up for this service at the end of 2004. and Rome, while the closure was at San Marco in Lamis. The strategy of territorial expansion is based on a policy of dense development in the Bank’s traditional strongholds. Call Centre
BPM’s Call Centre performs the diversified functions of a phone bank in the strict sense: “inbound”, help desk, and “outbound”.
68 Report on Operations for 2004 Risponde BPM is a telephone banking service with more Management office, the division improved its ability to than 90,000 customers as of 31 December 2004; 1,200,000 analyse and evaluate more sophisticated financial calls were handled during 2004, including over 151,000 by structures belonging to the family of asset-backed the operators, of which a significant proportion related to securities, helping make the management of these instructions (almost 34,000 trading instructions, more investments more dynamic. than 16,000 bank transfers and over 2,700 mutual fund transactions). “Outbound” activity was very intense, partly BPM took part in some of the major public offerings of due to the various sales campaigns for products and shares including the placement of shares in Terna (ENEL) services and partly due to the calling of potential and the issue of bonds by the Municipality of Milan that customers of newly-opened branches. “Risponde Bidielle”, were convertible into AEM shares. the new telephone banking service for customers of Banca di Legnano, started operations during 2003, offering the The Bank placed over Euro 1 billion in commercial paper same services as “Risponde BPM”. on behalf of third parties, confirming its significant presence in this market segment.
Corporate Division Results Results Net interest and other banking income increased by Euro Loans to customers were 8.0% higher at Euro 8,837 12.3 million to Euro 29.5 million, thanks to an million, while customer deposits were 3.9% lower at Euro improvement not only in service income (+ Euro 7.5 1,782 million, due to a decline in repurchase agreements million) – benefiting from higher gains realised on that was not sufficiently offset by the growth in deposits securities and small losses on government securities, repayable on demand. especially treasury certificates – but also in net interest income (+ Euro 4.8 million). Net interest income came to Euro 143.4 million, staying broadly in line with that of the prior year. Foreign branches Net commission on services increased by Euro 1.8 million to Euro 63.2 million. As a result, net interest and other Total deposits for the period averaged Euro 4,518 million. banking income amounted to Euro 206.6 million, an They mostly consisted of money market instruments increase of 0.9% and representing 18.8% of the Parent (63.1%), certificates of deposit (10.3%) held by banks and Bank’s total. corporate customer deposits (26.6%), which totalled Euro 1,197 million.
Average lending in the period amounted to Euro 4,661 million, of which 31.2% in loans to the corporate sector, Financial Operations (Italy) 45.4% in securities, 22.8% in the money market, and 0.6% in other assets. Loans to corporate customers, net of non- Operations performing loans, averaged Euro 1,452 million, down 6.7%. There was a reduction in commitments, mostly due The Financial Operations Division operated with its usual to the decline in “credit derivatives” in the wake of the prudence in pursuit of the objectives of careful liquidity Bank’s policy to reduce its assets at risk. management and maximisation of returns on the Bank’s own securities portfolio, in keeping with a low risk profile. Net interest and other banking income amounted to Euro 37.0 million, down 7.6%.; this was mostly associated with With a view to diversifying the Bank’s sources of liquidity the strategy of cutting exposures to non-resident and in keeping with the trend in loans, a new Euro corporate clients. Medium Term Note programme was put together, worth up to Euro 2 billion. This means that the Bank may conduct one or more bond issues, up to the specified Capital and Other Centres ceiling, for placement with institutional investors by way of dealer banks. The first operations under this Net interest and other banking income fell by Euro 49.3 programme took place in the last quarter of 2004, with the million to Euro 102.4 million, mostly as a result of the issue of bonds worth a total of Euro 450 million, which absence of Euro 68.7 million in extraordinary dividends attracted considerable interest from professional received in 2003 upon the distribution of unrestricted investors. reserves by Banca di Legnano, Banca Akros, Bipiemme Vita and Bipiemme Gestioni SGR. In agreement with Banca Akros and the Risk
Report on Operations for 2004 69 Other information
Performance of BPM shares
The Bank’s share price fluctuated during 2004 between an intraday minimum of Euro 4.62 and a maximum of Euro 6.58 on 17 May and 29 December respectively; at year end, the stock was priced at Euro 6.514.
An average of more than 1.5 million shares were traded per day, with a peak of over 30.9 million on 10 November 2004.
Shareholders
As of 31 December 2004, there were 58,318 registered shareholders and a further 62,183 not recorded in the shareholders’ register, making an overall total of 120,501.
BPM stock price performance
Euro Volume Official price Volumes (in thousands of shares) 6.80 31,000
6.60 30,000 6.40
6.20 29,000
6.00 28,000 5.80
27,000 5.60
5.40 26,000
5.20 7,500 5.00
4.80 5,000
4.60 2,500 4.40
4.20 0 02/01/04 01/03/04 01/06/04 01/09/04 01/12/04
70 Report on Operations for 2004 Ratings Legal proceedings against former Directors, Statutory Auditors and Managers of the Bank The following schedule reports the ratings given by Standard & Poor’s, Moody’s and Fitch. In December 2004 As already mentioned in the 2003 Report on operations, in Moody’s upgraded its short-term rating of the Bank from its sentence of 2 July 2003, filed on 24 September 2003, P–2 to P–1. the court of Milan acquitted all the former directors, statutory auditors and managers on all counts.
Shares in Group Companies held by the Following the appeal by the public prosecutor, the Court of Directors, Statutory Auditors and General Appeal issued its ruling on 23 November 2004 whereby it Manager of the Bank definitively absolved all the defendants of the offences charged against them. With reference to art. 79 of Consob resolution 11971 of 14 May 1999, the following schedule reports the shares in The Board of Directors is pleased that the case’s outcome BPM and its subsidiary companies held by Directors, has clearly established the absence of any wrongdoing by Statutory Auditors and the General Manager, as well as the accused. by their spouses, where not legally separated, and their under-age children. The Bank has therefore adjusted the existing provision through its 2004 financial statements to reflect the legal costs to be refunded to the former directors, statutory auditors and managers involved in this case.
Tax audit relating to 2001
The tax audit by the Inland Revenue’s Central Assessment Department on the tax year ended 31 December 2001 (mentioned in last year’s report on operations) finished on 22 December 2004.
Although the Bank considers that most of the disputed items will be overturned upon appeal, it has nonetheless prudently decided to provide the sum of Euro 500,000 against 2004 income to take account of any potential costs.
Rating Rating agencies Date Long and Short-term debt medium-term (senior) Fitch November 2001 A – F2
Standard & Poor’s March 2001 A – A – 2
Moody’s December 2004 A3 P – 1
Report on Operations for 2004 71 Equity interests held by Directors, Statutory Auditors and General Managers at 31 December 2004
Name Company Number of shares
At 31.12.2003 Purchases Sales At 31.12.2004
Directors Roberto Mazzotta Bipiemme 1,000 1,000 Indirect ownership through spouse Bipiemme 7,500 7,500
Paolo Manzato Bipiemme 1,370 1,370
Marco Vitale Bipiemme 200 200
Enrico Airaghi Bipiemme 5,003 5,003 Indirect ownership through spouse Bipiemme 5,008 5,008
Mario Artali Bipiemme 500 1,000 1,500
Alberto Banfi Bipiemme 1,000 1,000 2,000
Giorgio Bianchini Scudellari Bipiemme 5,000 5,000
Emilio Castelnuovo Bipiemme 39,440 560 40,000 Indirect ownership through spouse Bipiemme 2,720 7,280 10,000
Giuseppe Coppini Bipiemme 1,500 1,500 Indirect ownership through spouse Bipiemme 300 300
Rocco Corigliano Bipiemme 9,300 3,000 12,300 Indirect ownership through spouse Bipiemme 1,360 1,360
Eugenio Crosta Bipiemme 10,504 198 1) 10,702 Indirect ownership through spouse Bipiemme 630 630
Roberto Fusilli Bipiemme 2,649 5,000 7,649 Indirect ownership through spouse Bipiemme 6,600 6,000 600
Renzo Grassi Catapano Bipiemme 680 680
Piero Lonardi Bipiemme 7,010 5,000 12,010
Michele Motterlini Bipiemme 4,040 4,040 Indirect ownership through spouse Bipiemme 999 999
Gianfranco Pittatore Bipiemme 1,000 2) 1,000
Alberto Santa Maria Bipiemme 15,000 15,000
Jean-Jacques Tamburini Bipiemme 1,100 1,100
Graziano Tarantini Bipiemme 1,514 1,514 Indirect ownership through spouse Bipiemme 307 307
Valerio Tavormina Bipiemme 3,001 3,001
Acting statutory auditors Marco Baccani Bipiemme 136 136
Emilio Cherubini Bipiemme 5,000 5,000
Enrico Radice Bipiemme 17,680 3,000 6,800 13,880
Ezio Maria Simonelli Bipiemme 10,801 10,801
Ettore Maria Tosi Bipiemme 11 11
Alternate auditors Salvatore Rino Messina Bipiemme 1,000 1,000
Carlo Radaelli Bipiemme 9,329 9,329 Indirect ownership through spouse Bipiemme 8,344 8,344
General Manager Fabrizio Viola Bipiemme 10,000 3) 50,000 4) 60,000
1) following allocation of net profit for 2003 2) position as of 29.06.2004, date of appointment 3) position as of 13.09.2004, date of appointment 4) shares already reported on 22.09.2004 in accordance with the code of conduct on internal dealing
72 Report on Operations for 2004 Subsequent events and outlook for other activities carried out by the BPM Group in area of small and medium-sized enterprises. the current year * * *
BPM’s Board of Directors has voted to take up the option, The Bank’s branches in Italy reported growth in the allowed by law, to prepare its 2005 financial statements, average volume of both loans to customers and deposits in both for the Group and Parent Bank, in accordance with the first two months of 2005 compared with the same the new IAS/IFRS (International Financial Reporting period of last year. The market value of the average stock Standards) and, in its role as a parent bank, to extend this of indirect deposits confirmed an upward trend relative to requirement to all companies within the BPM Group thefirst two months of 2004 in both asset management (which must obviously apply this decision within the legal activities and assets under administration. The results time limits). reported in the statement of income for the first two months of 2005 have confirmed the upward trend reported With reference to CONSOB Communication in the last six months of 2004. DME/5015175 dated 10 March 2005 on the status of introducing accounting systems and procedures for applying IAS/IFRS, we report that work is in progress on modifying BPM’s information system, on making the Subsequent events related tests for converting balances at 1 January 2005 to IAS/IFRS and on preparing new formats and tables for inclusion in the notes to its financial statements, all of Developments in the Private Equity project which necessary for reporting its results in accordance with the new standards. On 8 March 2005 Banca Popolare di Milano’s Board of Directors approved the plan to reformulate its strategy in Further to CONSOB’s consultation document published the “Private equity” sector, to be implemented by creating on 17 February 2005 entitled “International Accounting a corporate and product partnership with WISE Venture Standards: interim financial reports, offering/listing SGR, a closed-end fund manager specialising in the SME prospectuses, definition of the concept of related parties”, sector, whose sponsors and investors include such leading Banca Popolare di Milano intends to adopt the new names as the De Agostini Group. international accounting standards for the first time in its consolidated quarterly report at 30 September 2005. Banca Popolare di Milano, together with DeAgostini and Federmacchine (the national federation of associations of As required by this document, the Group will also publish capital goods manufacturers), is to become the principal figures calculated using international accounting investor in Wisequity II, a private equity fund focused on standards at the same time as publishing its half-year small and medium-sized Italian companies, launched last report at 30 June 2005 prepared using existing accounting December by Wise Venture SGR with the goal of investing standards. up to 30% of its assets in companies operating in the capital goods sector.
Once the necessary legal authorisations have been obtained, the agreement between BPM, De Agostini and the shareholders of Wise Venture calls for a union between the two fund management companies, in other words the merger of BPM Private Equity SGR into WISE Venture SGR, whose current management team will keep control and the related operational independence. The De Agostini Group will be given an option to buy a minority stake in the newco resulting from the merger.
This decision is in line with the Bank’s strategy of boosting its activity in the territory, especially its involvement in helping local SMEs to grow, also with the help of private equity, which had originally led first to the setting up of BPM Private Equity SGR. The agreement emphasises the importance of strategic partnerships for the Bank, while creating a business that operates completely independently but in perfect synergy with the
Report on Operations for 2004 73 Shareholders,
Before seeking your approval of the 2004 financial statements, the Board wishes to express its appreciation for the efforts of all those who contributed to another year of business growth.
Our warmest thanks go to the shareholders, whose invaluable support and participation are deciding factors in the long-term survival of the Bank and stimulate the creation of value. We also thank all those customers who chose our products and services.
We must also express our gratitude to the Bank’s management and all its staff, whose commitment and determination were fundamental to achieving our challenging objectives. A similar thanks goes to all of those who retired and so ended their working relationship with the Bank during 2004.
We wish to express our most sincere thanks for the great commitment and unflagging professionalism displayed by Ernesto Paolillo, who left as the Bank’s General Manager in October after ten years of sweeping change in the banking industry. We also express a warm welcome to the new General Manager, Fabrizio Viola, together with our every support in achieving the goals of the recently approved business plan designed to produce a significant turnaround in profitability.
Our thanks also go to the National Commission for Companies and the Stock Exchange (CONSOB), the Office of Fair Trading, the Italian Stock Exchange (Borsa Italiana S.p.A.) and to the Bank of Italy, for their extensive collaboration during the course of the year.
In particular, we are most grateful to Governor Antonio Fazio, to Director General Vincenzo Desario and the supervisory body as a whole; our thanks also go to Antonio Lenza and Salvatore Messina, directors of the Milan office, for their unfailing courtesy and helpfulness.
We must also thank the Board of Statutory Auditors for their constant work in monitoring the Bank’s activities.
74 Report on Operations for 2004 shares outstanding on today’s date, which are over 29 Shareholders, million more than a year ago following the merger of Banca di Carinord 1 S.p.A.. the 2004 financial statements show a net profit of Euro 125,223,689.14. In the light of the above and the relevant provisions of the Articles of Association, you are invited to approve the As regards the allocation of the net profit, the Board of financial statements as of 31 December 2004, together Directors proposes a dividend of Euro 0.13, compared with with the following allocation of the net profit for the year: Euro 0.12 last year, to be paid to each of the 415,034,231
2004 net profit Euro 125,223,689.14
10% to the legal reserve Euro 12,522,368.91
33% to the statutory reserve Euro 41,323,817.42
Residual balance Euro 71,377,502.81
of which:
to shareholders, Euro 0.13 to each of the 415,034,231 shares outstanding on today’s date Euro 53,954,450.03
20% to the employees Euro 14,275,500.56
3% to charity reserve Euro 2,141,325.08
1% to the Board of Directors Euro 713,775.03
to Reserve ex art. 13.6 of Decree 124/93; Euro 85,722.59
Balance to allocate to the Unrestricted Reserve Euro 206,729.52
With regard to the 20% of net profit, after allocation to the income set aside for the employees, matched by a legal and statutory reserves, allocated to employees, like corresponding increase in the “reserve for own shares: last year the Board of Directors has decided that this portion unavailable for allocation”; amount will be settled entirely in the form of the Bank’s ordinary shares, by drawing on the “reserve for own pursuant to art. 47 of the Articles of Association, the shares: portion available for allocation”. transfer value of the shares granted to employees is equal to the average market price in the thirty days prior to the You are invited – according to established practice – to grant, meaning that on today’s date the employees would empower the Board of Directors, until the next be granted around 2.1 million shares; shareholders’ meetings, to manage the “reserve for own shares” and thus to buy and sell the Bank’s shares at once these shares have been allocated to employees, the market prices, within the limit imposed by the amount of “reserve for own shares: portion unavailable for the reserve as increased from time to time by sales of shares allocation” will automatically become available, due to the (in the course of normal trading activities designed to release of the own shares temporarily held by the Bank. At promote active trading in the stock). You are similarly the same time, the “reserve for own shares: portion invited to authorise the directors to issue shares to available for allocation” will be reinstated by a employees at prices, including those below market value, to corresponding amount. be fixed from time to time at the Board’s discretion. These issues must respect provisions contained in the Articles of Association and may be made as part of share allocation The Board of Directors programmes to employees or mutual funds to which employees subscribe. Milan, 8 March 2005
This means that under this proposal:
the sum of Euro 14,275,500.56 will be withdrawn from the “reserve for own shares: portion available for allocation” for purchasing the quantity of shares to be granted to employees, corresponding to the portion of net
Report on Operations for 2004 75 Financial Statements Variazioni Assolute %
Balance Sheet Guarantees and Commitments Statement of Income
77 Balance Sheet (in Euro)
Change Assets 31.12.2004 31.12.2003 (+/–) %
10. Cash and deposits with central banks and post offices 155,525,553 162,074,122 – 6,548,569 – 4.04
20. Treasury bills and similar bills with central banks 481,597,065 420,785,226 60,811,839 14.45
30. Due from banks 3,371,248,573 3,200,795,751 170,452,822 5.33 a) repayable on demand 402,438,099 407,402,528 – 4,964,429 – 1.22 b) other deposits 2,968,810,474 2,793,393,223 175,417,251 6.28
40. Loans to customers 17,023,634,967 15,455,976,508 1,567,658,459 10.14 of which: loans using public funds 5,907,436 4,664,334 1,243,102 26.65
50. Bonds and other debt securities: 3,091,105,513 4,337,090,162 – 1,245,984,649 – 28.73 a) public entities 544,264,489 1,305,793,492 – 761,529,003 – 58.32 b) banks 1,122,171,505 1,204,963,538 – 82,792,033 – 6.87 of which: treasury bonds 3,452,242 5,147,594 – 1,695,352 – 32.93 c) financial institutions 1,064,969,978 1,546,724,268 – 481,754,290 – 31.15 d) other issuers 359,699,541 279,608,864 80,090,677 28.64
60. Shares, quotas and other forms of capital 506,641,931 453,969,901 52,672,030 11.60
70. Equity investments 177,499,088 322,558,591 – 145,059,503 – 44.97
80. Investments in Group companies 1,802,581,789 1,546,144,691 256,437,098 16.59
90. Intangible fixed assets 163,231,617 157,697,682 5,533,935 3.51 of which: start-up costs 14,489,914 14,965,702 – 475,788 – 3.18 goodwill 20,591,369 29,542,015 – 8,950,646 – 30.30
100. Tangible fixed assets 180,288,270 188,743,286 – 8,455,016 – 4.48
120. Own shares 0 37,084 – 37,084 – 100.00
130. Other assets 954,619,351 949,354,406 5,264,945 0.55
140. Accrued income and prepayments: 211,019,007 190,052,281 20,966,726 11.03 a) accrued income 172,300,472 162,530,707 9,769,765 6.01 b) prepayments 38,718,535 27,521,574 11,196,961 40.68 of which: discount on issue of securities 20,732,763 3,354,947 17,377,816 n.s.
Total assets 28,118,992,724 27,385,279,691 733,713,033 2.68
78 Financial Statements Balance Sheet (in Euro)
Change Liability and shareholders’ equity 31.12.2004 31.12.2003 (+/–) %
10. Due to banks: 5,425,511,351 5,954,663,637 – 529,152,286 – 8.89 a) repayable on demand 1,204,496,638 1,212,453,797 – 7,957,159 – 0.66 b) time deposits or with notice period 4,221,014,713 4,742,209,840 – 521,195,127 – 10.99
20. Due to customers: 13,390,289,385 13,223,142,320 167,147,065 1.26 a) repayable on demand 12,137,392,248 11,433,544,842 703,847,406 6.16 b) time deposits or with notice period 1,252,897,137 1,789,597,478 – 536,700,341 – 29.99
30. Securities issued: 4,507,233,203 3,504,858,290 1,002,374,913 28.60 a) bonds 3,768,575,719 2,894,382,631 874,193,088 30.20 b) certificates of deposit 599,487,106 459,831,941 139,655,165 30.37 c) other 139,170,378 150,643,718 – 11,473,340 – 7.62
40. Public funds administered 5,907,436 4,664,334 1,243,102 26.65
50. Other liabilities 701,489,708 723,050,684 – 21,560,976 – 2.98
60. Accrued expenses and deferred income: 191,265,822 173,284,054 17,981,768 10.38 a) accrued expenses 156,411,810 145,504,141 10,907,669 7.50 b) deferred income 34,854,012 27,779,913 7,074,099 25.46
70. Provision for severance indemnities 196,066,332 196,034,903 31,429 0.02
80. Provision for risks and charges: 226,531,034 291,261,128 – 64,730,094 – 22.22 a) pensions and similar commitments 14,720,626 15,628,134 – 907,508 – 5.81 b) taxation 35,376,288 76,048,832 – 40,672,544 – 53.48 c) other 176,434,120 199,584,162 – 23,150,042 – 11.60
90. Reserves for possible loan losses 0 4,272,886 – 4,272,886 – 100.00
110. Subordinated liabilities 831,261,000 831,261,000 0 0.00
120. Share capital 1,245,102,693 1,157,981,754 87,120,939 7.52
130. Share premium reserve 339,689,251 339,689,251 0 0.00
140. Reserves: 933,421,820 850,847,912 82,573,908 9.70 a) legal reserve 193,739,552 180,712,798 13,026,754 7.21 b) reserve for own shares 0 37,084 – 37,084 – 100.00 c) statutory reserves 576,546,128 521,833,762 54,712,366 10.48 d) other reserves 163,136,140 148,264,268 14,871,872 10.03
170. Net profit for the year 125,223,689 130,267,538 – 5,043,849 – 3.87
Total liabilities and shareholders’ equity 28,118,992,724 27,385,279,691 733,713,033 2.68
Financial Statements 79 Guarantees and Commitments (in Euro)
Change Captions 31.12.2004 31.12.2003 (+/–) %
10. Guarantees given 3,744,801,985 4,169,755,733 – 424,953,748 – 10.19 of which: – acceptances 31,732,396 24,305,798 7,426,598 30.55 – other guarantees 3,713,069,589 4,145,449,935 – 432,380,346 – 10.43
20. Commitments 3,028,191,032 3,464,689,606 – 436,498,574 – 12.60
80 Financial Statements Statement of Income (in Euro)
Change Captions 2004 2003 (+/–) %
10. Interest income and similar revenues 1,346,446,385 1,230,183,493 116,262,892 9.45 of which: On loans to customers 708,254,447 693,827,089 14,427,358 2,08 On debt securities 279,001,851 249,488,626 29,513,225 11,83
20. Interest expense and similar charges – 832,004,826 – 728,623,636 103,381,190 14,19 of which: On amounts due to customers – 113,887,396 – 133,905,222 – 20,017,826 – 14.95 On securities issued – 98,380,566 – 94,616,952 3,763,614 3.98
30. Dividends and other revenues 74,992,393 127,417,283 – 52,424,890 – 41.14 a) from shares, quotas and other forms of capital 29,523,326 24,518,695 5,004,631 20.41 b) from equity investments 17,176,782 7,718,848 9,457,934 122.53 c) from investments in group companies 28,292,285 95,179,740 – 66,887,455 – 70.27
40. Commission income 425,729,567 404,287,019 21,442,548 5.30
50. Commission expense – 52,823,815 – 43,772,676 9,051,139 20.68
60. Profits (losses) on financial transactions 31,387,237 20,993,460 10,393,777 49.51
70. Other operating income 110,472,681 106,855,079 3,617,602 3.39
80. Administrative expenses: – 745,859,670 – 719,123,026 26,736,644 3.72 a) payroll – 468,265,454 – 445,970,297 22,295,157 5.00 of which: - wages and salaries – 312,077,158 – 301,747,971 10,329,187 3.42 - social security charges – 104,420,305 – 105,574,691 – 1,154,386 – 1.09 - severance indemnities – 22,154,567 – 23,568,312 – 1,413,745 – 6.00 - pensions and similar commitments – 4,439,761 – 5,140,110 – 700,349 – 13.63 b) other administrative expenses – 277,594,216 – 273,152,729 4,441,487 1.63
90. Adjustments to tangible and intangible fixed assets – 86,421,464 – 81,828,843 4,592,621 5.61
100. Provisions for risks and charges – 28,093,917 – 28,023,762 70,155 0.25
110. Other operating expenses – 4,908,010 – 5,049,043 – 141,033 – 2.79
120. Adjustments to loans and provisions for guarantees and commitments – 147,203,823 – 178,709,569 – 31,505,746 – 17.63
130. Writeback of adjustments to loans and provisions for guarantees and commitments 41,681,338 49,378,813 – 7,697,475 – 15.59
140. Provisions for loan losses 0 – 542,343 – 542,343 – 100.00
150. Adjustments to financial fixed assets – 14,065,626 – 7,845,203 6,220,423 79.29
160. Writeback of adjustments to financial fixed assets 783,271 4,221,706 – 3,438,435 – 81.45
170. Profit from operating activities 120,111,721 149,818,752 – 29,707,031 – 19.83
180. Non-recurring income 45,660,901 23,019,100 22,641,801 98.36
190. Non-recurring charges – 12,448,933 – 16,907,880 – 4,458,947 – 26.37
200. Non-recurring income 33,211,968 6,111,220 27,100,748 n.s.
220. Income taxes for the year – 28,100,000 – 25,662,434 2,437,566 9.50
230. Net profit for the year 125,223,689 130,267,538 – 5,043,849 – 3.87
Financial Statements 81 Explanatory notes
Part A. Accounting policies
Part B. Balance sheet
Part C. Statement of income
Part D. Other information
83 Part A Accounting policies
Introduction Section 1. Accounting policies Section 2. Adjustments and provisions recorded for fiscal purposes
85 audit by PricewaterhouseCoopers S.p.A., in compliance with Introduction Consob recommendation 97001574 of 20 February 1997 and Consob resolution 10867 of 31 July 1997, pursuant to the Form and content of the financial statements shareholders’ resolution of 24 April 2004. The Bank’s financial statements for the year ended 31 December 2004 have been prepared in accordance with the Quarterly report provisions of Legislative Decree 87 dated 27 January 1992, issued applying EU Directive 86/635, and the instructions The Bank has prepared and published consolidated quarterly issued by the Governor of the Bank of Italy dated 15 July 1992 reports as of 31 March 2004 and 30 September 2004, in and subsequent amendments. Reference has also been made to accordance with the legal requirements and the rules laid down the accounting principles generally accepted in Italy. by Consob. Quarterly reports were not prepared as of 30 June 2004 and 31 The Bank’s financial statements comprise the balance sheet, December 2004, as the Bank published half-yearly and annual the statement of income and the explanatory notes, as well as financial statements within the terms established by art. 82 of the directors’ report on operations. The financial statements are Consob resolution 11971 dated 14 May 1999 and subsequent consistent with the Bank’s accounting records, which fully amendments. reflect the transactions carried out during the year.
The financial statements for the year ended 31 December 2004 have been prepared in Euro. In particular, in line with the Changes in accounting policies regulations issued by the Bank of Italy and Consob, the financial statements are prepared in units of Euro, without Revocation of fiscally interfering and other tax-related items decimals, while the explanatory notes are prepared in thousands of Euro. Legislative Decree 6 of 17 January 2003, which reformed company law, revoked article 2426.2 of the Italian Civil Code, The explanatory notes include all the information required by which allowed company financial statements to record the legislation indicated above, as well as additional adjustments and provisions solely for tax purposes. information considered necessary to give a true and fair view of Article 7.1 of Legislative Decree 37 of 6 February 2004, which the Bank’s financial position. Amounts relating to the year also amended the Banking Act, provided for a similar change under review have been presented on a comparative basis with by repealing articles 15.3 and 39.2 of Legislative Decree 87/92, prior year information; these prior year amounts have been which had allowed banks such a privilege as well. The repeal of restated, where necessary, for the sake of consistency. these articles means that as from the 2004 financial statements it will no longer be possible to record adjustments and provisions that, although deductible for tax purposes, would not The following statements are attached to these explanatory notes: have been booked for statutory purposes. At the same time, the new tax provisions contained in Statement of changes in shareholders’ equity; Legislative Decree 344/03 state that the tax deductibility of all Statement of changes in financial position; charges that would have been booked to the statement of List of convertible bonds, showing movements during the income under the repealed article 2426.2 no longer depends on year; being recorded in the statement of income. Instead, it is Details of debit and credit balances with Group companies sufficient to present a special schedule (article 109.4.b) showing and non-Group equity investments (see tables 3.2 and 3.3 of the differences between taxable and statutory profit. the explanatory notes); In addition to introducing the major change of allowing higher Information on reserves and provisions; deductions for tax than those recorded in the statutory List of property owned by the Bank, revalued in prior years financial statements, article 109.4 of the new Income Tax (art. 10, Law 72/1983). Consolidation Act has introduced a special system of suspended taxation to ensure that a company’s net equity is not eroded by the distribution of dividends or reserves for amounts associated Audit of the financial statements with tax-deductible items that have not yet gone through the statement of income. This provision states that “In the event of The Bank’s statutory and consolidated financial statements distribution, the equity reserves and net profit for the year, even have been audited by PricewaterhouseCoopers S.p.A., in if earned after the tax year to which the deduction refers, form compliance with the shareholders’ resolution of 24 April 2004, part of income if and to the extent that the amount of the which appointed this firm to audit the financial statements for remaining equity reserves, apart from the legal reserve, and the the three-year period 2004/2006. remaining carried forward earnings is less than the positive difference between depreciation that has been deducted for tax and that charged against income, less the deferred tax provision Half-yearly report associated with the amounts deducted...”. Under the new provisions, from the current year it is no longer The Bank has prepared and published the report on operations possible to book items to the statement of income that are not for the first half of 2004, in accordance with the provisions of consistent with the guidelines on preparing statutory financial the law and the Consob’s procedures. Half-yearly reports on the statements. This means that it is no longer possible to maintain statutory and consolidated results were subject to a limited
Part A - Accounting policies 87 residual balances of items, booked under the old article 2426.2 As a result of the above, the current financial statements in years prior to 1 January 2004, until such time as they are include a credit of 9.7 million Euro, before deferred tax, to “non- fully used up under the previous fiscal regulations. recurring income” in order to eliminate the cumulative In its notification 460600 of 13 May 2004, the Bank of Italy has interference of such tax-related items. instructed that since the quantitative effects involved amount With reference to the items presented in the financial to an introduction of new accounting rules, they must be statements at 31 December 2003 in Part “A” Accounting Policies recorded in the statement of income as follows: - section 2.2 “provisions recorded solely for fiscal purposes”, we have prepared a list of the fiscally interfering items eliminated under “non-recurring items”, for the “retrospective” part and the net effect on profit for the period and shareholders’ (formed in previous years), disclosing – where appropriate – the equity. related amount of deferred tax.
under “ordinary items”, for the “current” part (relating to the year in progress) Elimination of tax credit on dividends
With regard to default interest, Legislative Decree 344/03 The new income tax code has abolished dividend tax credits. which implements the new tax reforms in force since 1 January This means that for the purposes of consistent comparison of 2004, has introduced two important changes: the 2004 figures with those in the corresponding period of 2003, the 2003 statement of income has been reclassified, with the default interest forms part of income in the year when it is tax credits on dividends from equity investments reversed out collected and no longer in the year when it was charged. This of “Dividends and other revenues” and “income taxes for the means that this interest is no longer accounted for on an period”; the reclassification totals 31.3 million Euro. accruals basis but rather a cash one (article 109.7 of the new Income Tax Consolidation Act). article 106 of the new Income Tax Consolidation Act – formerly article 71.6 – no longer permits the deductibility for tax purposes of writedowns and provisions against receivables for default interest.
2004 2003 Net profit for the year Net profit for the year Shareholders’ equity
Shareholders’ equity as of 1 January 2003 2,231,275
Net profit at the reference date 125,224 130,268
Fiscally interfering items, before deferred tax:
Assets with a unit value of under 516.46 Euro, previously fully depreciated in the year of acquisition (article 67.6), instead of being depreciated over their estimated useful lives. – 5,258 – 259 5,517
Default interest charged and considered recoverable, whose taxation was deferred under article 71.6 of Presidential Decree 917/86 until the time of actual collection, by providing a similar amount to the provision for possible loan losses (caption 90). – 4,273 – 843 5,116
Accelerated depreciation – 162 – 17 179
Total fiscally interfering items, before deferred tax – 9,693 – 1,119 10,812
Related deferred taxes 3,690 437 – 4,184
Total fiscally interfering items, after deferred tax – 6,003 – 682 6,628
Pro-forma results 119,221 129,586
Pro-forma shareholders’ equity as of 1 January 2003 2,237,903
88 Part A - Accounting policies specific positions, which are valued on the basis of objective Accounting policies characteristics according to the risk categories to which they belong. Section 1. Accounting policies Performing loans: i.e. amounts owed by borrowers who do not currently present specific solvency risks, are covered by so- called “inherent risk”. This is determined statistically, The accounting policies adopted are consistent with those used calculating what proportion of the loan book is expected to to prepare the financial statements as of 31 December 2003, become a problem and potentially turn bad. with the exception of the above, and have been communicated to the Board of Statutory Auditors. All disputed positions are examined for valuation purposes by the departments concerned and subsequently checked, and if necessary adjusted, by head office. Any other risk position on 1. Loans, guarantees and commitments performing loans is monitored every month by the individual operating unit, with the help of suitable software and Loans coordination from the head office department responsible for the control of lending. Loans granted, including outstanding principal not yet due, principal and interest due but not yet paid, and default Loans are written down directly, reducing the book value of the interest, are stated at their estimated realisable value. This is asset concerned. The original value of such loans is reinstated determined with reference to the solvency of the borrower, via writebacks in later periods if the reasons for the writedown taking account of any difficulties in servicing debt faced by the no longer apply. country in which the borrower is resident, bearing in mind any existing guarantees. The calculation of estimated realisable Default interest earned during the period that is considered to value takes into account the normal level of risk inherent in be recoverable is reversed in full out of income and recorded in the performing loans portfolio. the statement of income only when it is collected.
Loans are analysed as follows: “Securitisation” transactions Non-performing loans: i.e. formally deteriorated loans consisting of the entire amount owed by customers and/or Securitisation transactions involve the definitive disposal of a banks in a state of insolvency (even if not yet legally bankrupt) loan portfolio to a “vehicle” company, and the simultaneous or similar situations, are valued on a case-by-case basis. The collection of a partial payment and/or subscription to a value attributed to each individual loan is usually not greater subordinated loan issued by this company. No amount is than the value of any related secured and unsecured recorded in the commitment and contingency accounts if the guarantees, estimated on a prudent basis. risk related to such transactions is limited to the value of the deferred receivable and/or the subordinated loan. In compliance Problem loans: i.e. amounts owed by borrowers in temporary with the provisions of CONSOB recommendation difficulties whose recovery is anticipated within a reasonable DAC/RM/97003369 dated 9 April 1997, the risk is evaluated by period of time; these are also valued on a case-by-case basis. assessing the quality of non-monetary assets (deferred receivables and/or subordinated loans) indirectly, taking into Loans being restructured: i.e. amounts for which the consideration the quality of the loan portfolio sold. borrower has applied to several banks for consolidation of its debt within the past 12 months (after this period amounts are classified among problem or non-performing loans). These are also valued on a case-by-case basis.
Restructured loans: i.e. amounts due from borrowers facing temporary financial difficulties, with whom agreements have been reached with a syndicate of banks (or a single bank) for a moratorium on the payment of principal and the application of below market interest rates, the conversion of part of the loan into shares and, possibly, the write-off of principal, are valued on a case-by-case basis. This analysis takes account of the future loss of interest foregone (i.e. the difference between the renegotiated rate and the average interest rate applied to similar classes of customer).
Loans subject to “country risk”: loans subject to “country risk”, i.e. amounts owed by borrowers resident in countries with debt-servicing problems, are written down in total, country by country, applying percentages that are equal to or higher than the minimum percentages recommended by the Italian Bankers’ Association. Analytical evaluations will be made for
Part A - Accounting policies 89 Guarantees and commitments 2.2 Dealing securities Guarantees given are stated at the total value of the related commitment. Securities not held as financial fixed assets are stated as Commitments to grant loans and make deposits are stated at follows: the amount not yet paid out. Commitments also include exposures to the underlying debtors in credit derivatives, for if quoted on organised markets, at market value; which the Bank has taken on the credit risk (seller protection). where not quoted on organised markets, at the lower of cost Guarantees and commitments that involve exposure to credit or market value. Writedowns of unquoted securities are written risk are valued on the basis adopted for cash loans. In back in later years if the reasons that prompted them cease to particular: apply.
Cost is determined by applying the “cumulative average daily possible losses on guarantees covering non-performing loans, cost” method; in the case of debt securities, the result is problem loans, restructured loans and loans being restructured adjusted on an accruals basis for issue discounts. are valued on a case-by-case basis; Market value is determined as follows: guarantees given in relation to parties residing in countries at risk and to borrowers not subject to specific writedowns are securities quoted on organised markets in Italy or abroad – assessed on an overall basis in order to reflect both country and by reference to the quoted price on the last day of the period; inherent risk. unquoted (Italian and foreign) securities – by reference to Any losses associated with these transactions are covered by objective estimates of realisable value based on conditions in specific and general provisions for risks and charges: 80c) the corresponding financial markets or by discounting future “other”. The original value is reinstated in subsequent financial flows using market rates. accounting periods, to the extent that the reasons for such writedowns cease to apply. The valuation of securities also takes account of the ability to repay debt of the country in which the issuer is resident.
Transfers between dealing and investment securities are made 2. Off balance sheet securities and at the value determined at the time of transfer using the valuation rules of the portfolio from which the securities are transactions (other than in foreign exchange) transferred; in particular:
2.1 Investment securities transfers of investment securities to the dealing securities portfolio are carried out at cost, written down if necessary; Securities intended for long-term retention and therefore classified as financial fixed assets are stated at purchase cost or transfers of dealing securities to the investment securities transfer value, if transferred from the dealing portfolio. Cost is portfolio are carried out at market value for quoted securities determined on the “weighted average cost” basis and is subject and at the lower of cost and market value for unquoted to adjustment on an accruals basis for issue discounts (net of securities. withholding tax as per Legislative Decree 239/96) and dealing discounts. Securities transferred and still held at the end of the period are In the absence of adequate security, holdings are written down valued according to the rules of the portfolio to which they have in the event of permanent deterioration in the financial been transferred. standing of the issuer, or in the ability of the issuer’s country to repay debt. Investment securities may also be written down to Units held in mutual funds are valued at the unit price at the take account of their market performance. Investment balance sheet date as published in the press. securities resulting from securitisation transactions are valued with regard to the recoverability of the loan portfolio sold. The Holdings of own shares are booked according to their original value is reinstated in later periods, if the reasons for stockmarket price. The amount held is matched by a “Reserve any writedowns cease to apply. for own shares” recorded in accordance with article 2357 of the Italian Civil Code. These holdings are also stated on the basis mentioned above, i.e. by reference to their quoted price on the last day of the period; the resulting adjustment in value is mirrored in the “Reserve for own shares” (Caption 140(b) under liabilities and shareholders’ equity).
90 Part A - Accounting policies Purchase/sale of securities not yet settled 4. Assets and liabilities denominated in Purchase commitments are valued using the rules of the foreign currencies (including off-balance portfolio to which the securities will be booked. The valuation sheet transactions other than derivative of sale commitments also takes account of the contractual selling price. contracts)
Completed transactions involving dealing securities quoted on The term “foreign currency” refers to all currencies outside the organised markets, for which settlement is pending at the European Monetary Union. period-end, are stated at market value; where the securities are not quoted on organised markets, they are valued as follows: Assets and liabilities denominated in foreign currencies Assets and liabilities denominated in or index-linked to foreign purchase commitments: the lower of cost or market value; currencies, as well as financial fixed assets funded in or index- linked to foreign currencies, are valued at the period-end spot sale commitments: the contracted price, if this is lower than book value (commitments covered by securities already held) or exchange rate. Any adjustments are reflected in the statement market value (commitments not covered by securities held). of income.
The basis for determining market value is the same as that Foreign currency financial fixed assets correlated with forms of used to value dealing securities. funding in Euro are translated using the exchange rates ruling at the time they were purchased. The results of valuations are booked to the statement of income, without offset, with matching balance sheet entries to The “endowment funds” of the foreign branches are translated “Other assets” and “Other liabilities”. at the spot rate of exchange on the last day of the period, given that the exchange risk on such funds has been neutralised by setting up holdings of the currencies concerned for the same amounts as the investments.
3. Equity investments The financial statements of foreign branches are combined with those of the Bank after being translated into euro at the period- Equity investments are valued on a “weighted average cost” end exchange rate. basis, calculated on the basis of purchase or subscription cost, or the expert appraisal if arising from a merger. Cost, as Revenues and costs denominated in foreign currencies are defined above, is written down to take account of any translated using the exchange rates ruling at the time they are permanent losses in value. recorded.
Investments in listed companies may also be written down to take account of market trends, in accordance with article 18.1 Spot transactions still to be settled and forward transactions of Legislative Decree 87/92. in foreign currency
The original cost is reinstated in subsequent accounting periods Spot transactions still to be settled and forward transactions in if the reasons for such writedowns cease to apply. foreign currency arranged for hedging purposes are valued in the same way as the assets and liabilities being hedged, If the book value of equity investments in subsidiary and whether they are on or off the balance sheet. associated companies is higher than the corresponding portion of net equity, the higher value can be maintained if the In particular, off-balance sheet forward transactions carried out difference is justified by the extra cost paid on acquisition by to hedge exchange risks or linked to other assets or liabilities on way of goodwill or in recognition of the higher value of fixed or off the balance sheet are valued using the period-end spot assets compared with their book value. rates, since this treatment is consistent with the accounting policy adopted in relation to the underlying assets and liabilities. Differentials between the spot and forward rates for swap Dividends from equity investments are recorded in the period contracts are booked to the statement of income as interest in which they are approved. income or expense. These entries, recorded on an accruals basis, match the interest flows generated by the assets or liabilities being hedged.
Foreign currency off-balance sheet transactions not arranged for hedging purposes are valued as follows:
at the spot exchange rate ruling at period-end, for spot transactions still unsettled;
at the forward rate ruling at period-end for maturities matching those of the transactions concerned, in the case of
Part A - Accounting policies 91 forward contracts. Pavia branch, are being amortised on a straight-line basis over ten years. This amortisation period is considered to reflect the The results of these valuations are recorded as “Profits/losses duration of benefits connected with the transactions that gave on financial transactions”, with matching balance sheet entries rise to the goodwill. as “Other assets” or “Other liabilities”. 7. Other information
Accruals and deferrals 5. Tangible fixed assets Accruals and deferrals are recognised in accordance with the Buildings are recorded at purchase cost, including related matching principle, taking account of the conditions and charges, as uplifted by any restructuring costs and interest rates involved in individual transactions. All accruals improvements which have added to their value. The value of and deferrals are shown separately, as generally speaking the certain buildings has been adjusted in prior years under Bank does not take advantage of the opportunity to make specific revaluation laws. direct adjustments to the balance sheet captions concerned. The only exceptions relate to the recognition on an accruals The value of property acquired on the absorption of Banca basis of issue discounts (on both investment and dealing Agricola Milanese and Banca Briantea was increased by securities) and dealing discounts (on investment securities), allocating part of the deficit that arose on cancellation of their and the difference between the purchase price and redemption shares at the time of the merger. This additional value took value of zero coupon bonds. In accordance with Bank of Italy account of sworn expert appraisals carried out at the time. instructions, these adjustments partly increase the value of securities and partly, in relation to the withholding tax, the Furniture, furnishings, plant and machinery are recorded at amounts “due from tax authorities”. purchase cost, including any directly-related expenses and the The same applies to zero coupon bonds and certificates of cost of any improvements. deposit issued by the Bank.
Tangible fixed assets are depreciated on a straight-line basis using rates that reflect their residual useful lives. Assets Payables and public funds administered entering service during the year are depreciated over the period they are actually used. Payables and public funds administered are recorded at nominal value. The book value of tangible fixed assets is stated net of accumulated depreciation. Securities issued Maintenance expenditure that does not increase the value of assets is expensed as incurred. Bonds, certificates of deposit and bankers’ cheques issued are recorded at nominal value. Zero coupon bonds and certificates of deposit are recorded at their issue value plus the interest accrued each year. 6. Intangible fixed assets Bonds issued “below par” are stated at par. The difference between par value and the amount actually collected is These are recorded at purchase or production cost, including recorded as a deferred expense and amortised over the term of related charges, and, except in the case of share cancellation the bond issue concerned. deficits described below, they are amortised over their residual useful lives: Provision for severance indemnities start-up and expansion costs, research, development and advertising expenses, which benefit future years are amortised The provision for severance indemnities represents the total on a straight-line basis over not more than five years, in liability to all employees at the period-end, accrued in accordance with art. 16.1 of Legislative Decree 87 dated 27 accordance with current legislation and payroll agreements. January 1992;
costs incurred for the purchase of software produced by third parties are amortised over three years starting from the date they enter service, reflecting the period they are expected to benefit.
Book value is stated net of accumulated amortisation.
That portion of the share cancellation deficit allocated to goodwill following the merger of Banca Agricola Milanese, Banca Briantea and Banca 2000, as well as purchased goodwill deriving from the acquisition of Banca Popolare di Cremona’s
92 Part A - Accounting policies Provisions for risks and charges statement of income. Payments to retired employees of the former Banca Popolare di Bologna e Ferrara and the former Taxation provision Banca Agricola Milanese are covered by specific funds.
The provision for taxation reflects a prudent estimate of direct and indirect taxes, including the local taxes incurred by foreign Subordinated liabilities branches, deferred taxes and any additional amounts that may become payable as a result of outstanding disputes with the tax Subordinated loans are shown at nominal value. The discount authorities. represented by the difference between nominal value and the amount actually collected is recorded as a deferred expense. Deferred tax assets and liabilities reflect the effect of all timing differences, using the so-called “liability method”. This method requires the recognition of deferred tax assets and liabilities Derivatives linked to currencies, securities, interest rates, arising both from events that affected the statement of income indices or other assets and from those that directly affected shareholders’ equity. Derivatives are valued individually according to the type of Considering that deferred tax assets should not be recorded if agreement, as described below: investment derivatives and their recovery is not reasonably certain, deferred tax assets dealing derivatives are further analysed between hedging and have been booked in the Bank’s financial statements to the trading contracts. same extent as the deferred tax liabilities, without any limits This breakdown is based on current regulations and leads to on time; the excess of deferred tax assets over liabilities (for a different valuations and presentations in the statement of five-year period) is only booked to the extent that the amount is income. regarded as reasonably recoverable on the basis of a profit The results of valuations are booked to the balance sheet forecast updated each year. separately, without offsetting debits and credits.
Deferred tax liabilities are recognised to the extent that they will give rise to tax payments in the future. Accordingly, no Hedging derivatives provision is made for the deferred taxation of equity reserves that have not been fully taxed, since there are no plans for Hedging arrangements are designed to neutralise fluctuations their distribution. in interest or exchange rates or prices affecting individual on- and off-balance sheet assets and liabilities (specific hedges), or Deferred tax assets and liabilities are calculated each year on groups of such items (generic hedges). the basis of the tax rates likely be in force (according to tax law at the time the financial statements are prepared) when the A transaction is considered to be a hedge in the presence of the timing differences are expected to reverse. If different rates are following documented conditions: applicable depending on the level of taxable income, the deferred tax assets and liabilities are calculated using the 1) an intention to create a hedge; weighted average rate for the year to which the financial statements refer. 2) a high degree of correlation between the technical and financial characteristics of the assets and liabilities being Deferred tax assets relating to deductible timing differences are hedged and those inherent in the hedging contract. recorded in the balance sheet under caption 130 “Other assets” with matching entries booked to “Income taxes for the year”. Hedging derivatives are valued on bases consistent with those Deferred tax liabilities relating to taxable timing differences adopted for the assets or liabilities to which they relate. are recorded in the balance sheet under sub-caption 80b “Provisions for risks and charges – taxation” with matching Hedging agreements relating to interest-bearing assets or entries booked to “Income taxes for the year”. liabilities that appear in the balance sheet at cost or nominal value (investment securities, deposits and loans) are also stated at cost. Considering that the purpose of such derivatives is to Other provisions protect the interest-bearing assets or liabilities from fluctuations in interest rates, any differentials or margins The other provisions cover known or likely losses or liabilities, arising and/or accruing in the period are recorded, without the timing and extent of which cannot be determined at the offset, as either interest income or expense. In the case of balance sheet date or at the time the financial statements are specific hedges, this is calculated on a time basis consistent prepared. The provisions recorded reflect the best estimate of with that for recognising interest on the assets or liabilities the charges to be incurred, based on the information available. being hedged: where coverage is generic, interest is calculated They are not designed to adjust the value of any assets. over the term of the agreement.
Supplementary pensions paid during the year Derivatives that hedge holdings of dealing securities are stated as follows: Consistent with the regulations governing supplementary pensions for employees, approved by the Bank’s shareholders quoted securities – at market value; on 14 March 1964, the amounts paid are charged directly to the
Part A - Accounting policies 93 unquoted securities – at the lower of cost or market value. Section 2 With regard to their classification in the financial statements: Adjustments and provisions
for contracts that provide for the payment of differentials or recorded for fiscal purposes margins at various maturities (multiflow contracts such as Interest Rate Swaps, the differentials or margins accrued up to Section 2.1 the period-end are booked as interest; Adjustments recorded solely for fiscal for contracts that provide for the payment of only one purposes differential or margin (monoflow contracts), the differentials or margins are recognised in full in the financial statements for Section 2.2 the period in which they arise. Income and charges on contracts where the underlying asset has a duration of less than one year Provisions recorded solely for fiscal purposes (e.g. Forward Rate Agreements) are treated as interest; those on contracts where the underlying asset has a duration of more No provisions or adjustments for fiscal purposes have been than one year (e.g. futures and options on long-dated stocks) are recorded during the year. booked to “Profits and losses on financial transactions”.
Contracts that are economically linked to assets and liabilities valued at cost, or at the lower of cost or market, are stated on the same basis, in accordance with the principle of consistent valuation.
Non-hedging derivatives
Non-hedging derivatives are valued as follows:
derivatives quoted on organised markets are valued at market value on the balance sheet date;
derivatives not directly quoted on organised markets but whose value is linked to such parameters as prices, quotations or indices that can be found on normal international information circuits and which can, in any case, be established objectively, are valued at their financial value (replacement cost), taking account of the market prices for such parameters on the balance sheet date;
derivative contracts on currencies not directly quoted on organised markets (e.g. Domestic Currency Swaps, currency options) are valued using the forward exchange rates ruling at the balance sheet date for maturities corresponding to those of the transactions being valued.
Brokerage contracts on behalf of customers are stated at book value as they are carried out by the Bank in order to produce a positive economic result that is certain.
The differentials and margins accruing on derivatives, together with the results of the valuation process, are recorded among “Profits and losses on financial transactions”.
94 Part A - Accounting policies Part B Balance sheet
Section 1. Receivables Section 2. Securities Section 3. Equity investments Section 4. Tangible and intangible fixed assets Section 5. Other assets Section 6. Payables Section 7. Provisions Section 8. Share capital, equity reserves and subordinated liabilities Section 9. Other liabilities Section 10. Guarantees and commitments Section 11. Concentration and distribution of assets and liabilities Section 12. Administration and dealing on behalf of third parties
95 Section 1 Receivables
Loans recorded in asset captions 10, 30 and 40 total 20,550,410 thousand Euro, net of writedowns.
Change Assets 31.12.2004 31.12.2003 (+/–) %
10. Cash and deposits with central banks and post offices 155,526 162,074 – 6,548 – 4.04
30. Due from banks 3,371,249 3,200,796 170,453 5.33
40. Loans to customers 17,023,635 15,455,977 1,567,658 10.14
Total 20,550,410 18,818,847 1,731,.563 9.20
Loans are stated at their estimated realisable value. This is determined with reference to the total amount of loans less estimated losses, calculated in accordance with the valuation procedure explained in part A, section 1 of these notes.
Transactions with banks are recorded at the time of settlement, i.e. the time when transfer of liquid funds has already taken place. Current account transactions with customers are recorded at the time they take place, except where they relate to specific services – discounted notes, foreign business and securities – which are recorded at the time of settlement.
In detail:
The discounted portfolio is stated at nominal value of the so-called “portfolio risk” and discount interest not yet accrued at year end is shown under “deferred income”;
Current account balances due from customers include interest paid at year end, as well as any transactions “in transit” or “in suspense” relating to such accounts; these balances are not affected by advances credited subject to collection but not yet paid;
Current account balances due from banks include interest paid at year end; these balances are not affected by non-cash debits and credits relating to bill and document collection services;
Mortgage loans, deposits, loans and other amounts are shown at the residual amount of principal;
Repurchase agreements entered for lending purposes are recorded at their spot value as loans to customers/due from banks and do not result in movements on securities. The related income, represented by the interest coupons on the underlying securities and the differential between their spot and forward prices, is recorded as “Interest income and similar revenues” on an accruals basis;
Securities lending transactions guaranteed by cash at the free disposal of the lender are treated in the same way as repurchase agreements. Securities lending transactions not guaranteed by cash are shown in the financial statements as a combination of two functionally related transactions, made up of a loan and a “funding repurchase agreement” as the contra-entry, both for the amount laid down in the contract. The securities, therefore, continue to be shown in the lender’s portfolio;
Loans for which the Bank acquires protection against non-performance under derivative contracts are still shown in the financial statements as loans secured by personal guarantees.
Part B - Balance sheet 97 Cash and deposits with central banks and post offices (caption 10)
This caption includes both legal tender and deposits repayable on demand with central banks and post offices, as illustrated below:
Change 31.12.2004 31.12.2003 (+/–) %
Notes and coins 152,290 158,764 – 6,474 – 4.08
Bankers’ drafts 3,221 3,267 – 46 – 1.41
Other instruments 0 0 0 n.s.
155,511 162,031 – 6,520 – 4.02
Deposits with: Cassa DD.PP. and Postal Savings Banks 15 43 – 28 – 65.12
Total 155,526 162,074 – 6,548 – 4.04
Of which:
Euro 148,096 153,796 – 5,700– 3.71 Foreign currency 7,430 8,278 – 848 – 10.24
98 Part B - Balance sheet Due from banks (caption 30) - Analysis of caption 30 “Due from banks”
Amounts due from banks are analysed below by technical form:
Change 31.12.2004 31.12.2003 (+/–) %
Repayable on demand: 402,438 407,403 – 4,965 – 1.22
Bankers’ drafts, orders and similar instruments 13,078 12,175 903 7.42 Unrestricted deposits 244,189 208,277 35,912 17.24 Current account balances reflecting services provided 112,273 152,923 – 40,650 – 26.58 Current accounts 32,898 33,975 – 1,077 – 3.17 Other types of deposit 0 53 – 53 – 100.00
Other loans: 2,968,811 2,793,393 175,418 6.28
Bank of Italy and local central banks 15,574 144,765 – 129,191 – 89.24 of which: - compulsory reserves 15,573 144,763 – 129,190 – 89.24 - other restricted deposits 1 2 – 1 – 50.00 Restricted deposits 2,478,555 1,919,680 558,875 29.11 Repurchase agreements 408,002 682,676 – 274,674 – 40.23 Other amounts not settled via current accounts 64,759 45,393 19,366 42.66 Non-performing loans 0 0 0 n.s. Other types of deposit 1,921 879 1,042 118.54
Total 3,371,249 3,200,796 170,453 5.33
Of which: Euro 1,778,940 1,769,341 9,599 0.54 Foreign currency 1,592,309 1,431,455 160,854 11.24
1.1 Detail of caption 30 “Due from banks”
Change 31.12.2004 31.12.2003 (+/–) %
a) Due from central banks 15,574 144,765 – 129,191 – 89.24
b) Bills eligible for refinancing with central banks 0 0 0 n.s.
c) Repurchase agreements 408,002 682,676 – 274,674 – 40.23
d) Securities loaned: loans against securities loaned 0 0 0 n.s.
Part B - Balance sheet 99 1.2 Breakdown of amounts due from banks
31.12.2004 31.12.2003 Captions/amounts Gross Total Net Gross Total Net exposure writedowns exposure exposure writedowns exposure
A. Doubtful loans 44 44 0 71 48 23
A.1 Non-performing loans 44 44 0 44 44 0
A.2 Problem loans 000000
A.3 Loans being restructured 000000
A.4 Restructured loans 000000
A.5 Unsecured loans to countries at risk 0 0 0 27 4 23
B. Performing loans 3,371,249 0 3,371,249 3,200,773 0 3,200,773
Total amounts due from banks 3,371,293 44 3,371,249 3,200,844 48 3,200,796
Detail of unsecured loans to countries at risk
The table below shows exposure in relation to unsecured loans granted to banks resident in countries at risk.
Writedowns of unsecured loans to countries at risk have been made on the basis of percentages agreed with the Italian Bankers’ Association.
31.12.2004 31.12.2003 Loans to banks resident in countries at risk Gross Total Net Gross Total Net unsecured writedowns exposure unsecured writedowns exposure exposure exposure
Russia 0 0 0 25 4 21
Algeria 000202
Total 0 0 0 27 4 23
100 Part B - Balance sheet 1.3 Movements in doubtful amounts due from banks
Type Non- Problem Loans Restru- Unsecured Total performing loans being ctured loans to loans restru- loans countries ctured at risk
A. Gross exposure as of 1.01.2004 440002771 A.1 Of which: default interest 0 00000
B. Increases 000000 B.1 Transfers from performing loans 0 00000 B.2 Default interest 0 00000 B.3 Transfers from other categories of doubtful loan 0 00000 B.4 Other increases 0 00000
C. Decreases 00002727 C.1 Transfers to performing loans 0 0 0 0 27 27 C.2 Write-offs 0 00000 C.3 Collections 0 00000 C.4 Recovery through assignment 0 00000 C.5 Transfers to other categories of doubtful loan 0 00000 C.6 Other decreases 0 00000
D. Closing gross exposure as of 31.12.2004 44000044 D.1 Of which: default interest 0 00000
Part B - Balance sheet 101 1.4 Movements in writedowns of amounts due from banks
Movements in total writedowns of amounts due to banks during the year were as follows:
Type Non- Problem Loans Restru- Unsecured Perfo- Total performing loans being ctured loans to rming loans restru- loans countries loans ctured at risk
A. Total writedowns as of 1.01.2004 440004048 A.1 Of which: default interest 0 0 00000
B. Increases 0000000 B.1 Adjustments 0 0 00000 B.1.1 of which: default interest 0 0 00000 B.2 Use of the reserves for possible loan losses 0 0 00000 B.3 Transfers from other loan categories 0 0 00000 B.4 Other increases 0 0 00000
C. Decreases 0000404 C.1 Writebacks 0 0 00404 C.1.1 of which: default interest 0 0 00000 C.2 Writebacks on collection 0 0 00000 C.2.1 of which: default interest 0 0 00000 C.3 Write-offs 0 0 00000 C.4 Transfers to other categories of doubtful loan 0 0 00000 C.5 Other decreases 0 0 00000
D. Total writedowns as of 31.12.2004 440000044 D.1 Of which: default interest 0 0 00000
102 Part B - Balance sheet Loans to customers (caption 40) Analysis of caption 40 “Loans to customers”
Loans to customers are made up as follows:
Change 31.12.2004 31.12.2003 (+/–) %
Term transactions with the Treasury, Cassa DD.PP and Postal Savings Banks 9,722 15,467 – 5,745 – 37.14
Subordinated loans receivable 9,740 9,740 0 n.s.
Repurchase agreements and loans against securities loaned 36,708 297,032 – 260,324 – 87.64
Current account overdrafts 2,872,108 3,094,552 – 222,444 – 7.19
Advances: 2,728,008 2,543,372 184,636 7.26 on notes, securities and paper subject to collection 2,046,908 1,902,886 144,022 7.57 import-export 681,100 640,486 40,614 6.34
Loans and other amounts not settled via current accounts: 11,058,330 9,146,966 1,911,364 20.90 Mortgage loans 4,267,045 2,906,420 1,360,625 46.81 Loans to artisan and commercial concerns 985,959 802,041 183,918 22.93 Personal loans 336,667 300,331 36,336 12.10 Loans to local authorities 256,894 267,437 – 10,543 – 3.94 Syndicated loans 1,648,102 1,402,205 245,897 17.54 Short-term loans with notice period 1,339,678 1,211,372 128,306 10.59 Stand-by lines of credit 917,964 701,013 216,951 30.95 Other 1,306,021 1,556,147 – 250,126 – 16.07
Other loans: 151,603 160,401 – 8,798 – 5.49 Loans against wages 44,628 40,179 4,449 11.07 Factored receivables 16,778 22,602 – 5,824 – 25.77 Other 90,197 97,620 – 7,423 – 7.60
Portfolio risk (gross of deferred income) 45,156 60,692 – 15,536 – 25.60
Loans using public funds 5,907 4,664 1,243 26.65
Non-performing loans 106,353 123,091 – 16,738 – 13.60
Total 17,023,635 15,455,977 1,567,658 10.14
Of which: Euro 16,486,166 14,724,757 1,761,409 11.96 Foreign currency 537,469 731,220 – 193,751 – 26.50
Part B - Balance sheet 103 Default interest
Change 31.12.2004 31.12.2003 (+/–) %
a) Non-performing loans 0 3,908 – 3,908 – 100.00
b) Other 0 365 – 365 – 100.00
1.5 Detail of caption 40 “Loans to customers”
Change 31.12.2004 31.12.2003 (+/–) %
a) Bills eligible for refinancing with central banks 13,620 13,688 – 68 – 0.50
b) Repurchase agreements 36,708 297,032 – 260,324 – 87.64
c) Securities loaned: loans against securities loaned 0 0 0 n.s.
1.6 Secured loans to customers
Change 31.12.2004 31.12.2003 (+/–) %
a) Mortgages 5,579,489 3,725,020 1,854,469 49.78
b) Pledged assets: 367,723 454,876 – 87,153 – 19.16 1. cash deposits 70,064 82,029 – 11,965 – 14.59 2. securities 281,697 354,538 – 72,841– 20.55 3. other instruments 15,962 18,309 – 2,347 – 12.82
c) Guarantees given by: 1,342,092 1,363,300 – 21,208 – 1.56 1. Governments 2,236 2,339 – 103– 4.40 2. other public entities 19,530 16,592 2,938 17.71 3. banks 139,017 257,797 – 118,780– 46.08 4. other 1,181,309 1,086,572 94,737 8.72
Total 7,289,304 5,543,196 1,746,108 31.50
Caption c) 3. includes positions totaling 54,522 thousand Euro (94,264 thousand Euro as of 31.12.2003) for which the Bank has acquired buyer protection against the risk of default by taking out credit derivative contracts.
104 Part B - Balance sheet 1.7 Loans to customers
The balances of asset caption 40 are analysed in the tables below, which show the various categories of amounts due and the related writedowns:
31.12.2004 31.12.2003 Captions/amounts Gross Total Net exposure Gross exposure Total Net exposure exposure writedowns writedowns
% Cove- % % Cove- % rage % rage %
A. Doubtful loans 683,260 3.9 299,512 43.84 383,748 2.2 718,196 4.6 292,098 40.67 426,098 2.8
A.1 Non-performing loans 342,303 2.0 235,950 68.93 106,353 0.6 365,039 2.3 241,948 66.28 123,091 0.8
A.2 Problem loans 194,518 1.1 21,492 11.05 173,026 1.0 214,034 1.4 28,071 13.12 185,963 1.2
A.3 Loans being restructured 17,660 0.1 1,346 7.62 16,314 0.1 0 0.0 0 0.00 0 0.0
A.4 Restructured loans 128,635 0.7 40,695 31.64 87,940 0.5 127,699 0.8 19,248 15.07 108,451 0.7
A.5 Unsecured loans to countries at risk 144 0.0 29 20.14 115 0.0 11,424 0.1 2,831 24.78 8,593 0.1
B. Performing loans 16,728,387 96.1 88,500 0.53 16,639,887 97.8 15,099,879 95.4 70,000 0.46 15,029,879 97.2
Total loans to customers 17,411,647 100.0 388,012 2.23 17,023,635 100.0 15,818,075 100.0 362,098 2.29 15,455,977 100.0
The proportion of these categories of loan in percentage terms has been calculated on the basis of total loans before and after writedowns. The level of coverage reflects the ratio between total adjustments to the various categories of loan and the balances in these categories at period end.
Detail of unsecured loans to countries at risk
The table below shows exposure in relation to loans granted to customers resident in countries at risk.
Writedowns of unsecured loans to countries at risk have been made on the basis of percentages agreed with the Italian Bankers’ Association.
31.12.2004 31.12.2003 Loans to customers Gross Total Net exposure Gross Total Net exposure resident in countries unsecured writedowns unsecured writedowns at risk exposure exposure
Russia 0 0 0 8,751 1,312 7,439
Argentina 0 0 0 2,460 1,476 984
Brazil 144 29 115 213 43 170
Total 144 29 115 11,424 2,831 8,593
Part B - Balance sheet 105 1.8 Doubtful loans to customers
Movements in doubtful loans to customers during the year, gross of writedowns, are detailed below:
Type Non- Problem Loans Restru- Unsecured Total performing loans being ctured loans to loans restru- loans countries ctured at risk
A. Gross exposure as of 1.01.2004 365,039 214,034 0 127,699 11,424 718,196 A.1 Of which: default interest 39,700000039,700
B. Increases 112,042 264,176 17,660 9,335 0 403,213 B.1 Transfers from performing loans 9,143 247,266000256,409 B.2 Default interest 11,190000011,190 B.3 Transfers from other categories of doubtful loan 90,647 83 17,660 8,410 0 116,800 B.4 Other increases 1,062 16,827 0 925 0 18,814
C. Decreases 134,778 283,692 0 8,399 11,280 438,149 C.1 Transfers to performing loans 0 25,937 0 3,708 8,692 38,337 C.2 Write-offs 96,948 5,888000102,836 C.3 Collections 36,983 117,263 0 4,608 1,773 160,627 C.4 Recovery through assignment 0 14,83000014,830 C.5 Transfers to other categories of doubtful loan 0 116,717 0 83 0 116,800 C.6 Other decreases 847 3,057 0 0 815 4,719
D. Closing gross exposure as of 31.12.2004 342,303 194,518 17,660 128,635 144 683,260 D.1 Of which: default interest 42,008000042,008
106 Part B - Balance sheet 1.9 Movements in writedowns of loans to customers
Movements in writedowns of loans to customers during the year are detailed below:
Type Non- Problem Loans Restru- Unsecured Perfo- Total performing loans being ctured loans to rming loans restru- loans countries loans ctured at risk
A. Total writedowns as of 1.01.2004 241,948 28,071 0 19,248 2,831 70,000 362,098 A.1 Of which: default interest 35,792 0 000035,792
B. Increases 102,922 10,918 1,346 21,862 0 20,261 157,309 B.1 Adjustments 97,051 10,918 1,346 21,862 0 20,261 151,438 B.1.1 Of which: default interest 13,239 0 0 0 0 194 13,433 B.2 Use of the reserves for possible loan losses 0 0 00000 B.3 Transfers from other loan categories 5,871 0 00005,871 B.4 Other increases 0 0 00000
C. Decreases 108,920 17,497 0 415 2,802 1,761 131,395
C.1 Writebacks 1,093 2,045 0 250 1,230 1,676 6,294 C.1.1 Of which: default interest 0 0 00000 C.2 Writebacks on collection 10,579 3,300 0 0 1,369 0 15,248 C.2.1 Of which: default interest 3,741 0 00003,741 C.3 Write-offs 96,948 5,8880000102,836 C.4 Transfers to other categories of doubtful loan 0 5,706 0 165 0 0 5,871 C.5 Other decreases 300 558 0 0 203 85 1,146
D. Total writedowns as of 31.12.2004 235,950 21,492 1,346 40,695 29 88,500 388,012 D.1 Of which: default interest 42,008 0 0 0 0 194 42,202
Part B - Balance sheet 107 Section 2 Securities
The Bank’s securities portfolio, reflected in asset captions 20, 50 and 60, amounts to 4,079,345 thousand Euro.
Change Assets 31.12.2004 31.12.2003 (+/–) %
20. Treasury bills and similar bills eligible for refinancing with central banks 481,597 420,785 60,812 14.45
50. Bonds and other debt securities 3,091,106 4,337,090 – 1,245,984 – 28.73
60. Shares, quotas and other forms of capital 506,642 453,970 52,672 11.60
Total 4,079,345 5,211,845 – 1,132,500 – 21.73
The securities portfolio is analysed below:
Captions 31.12.2004 31.12.2003 Investment Dealing Total Investment Dealing Total Change securities securities securities securities (+/–) %
20. Treasury bills and similar bills eligible for refinancing with central banks 0 481,597 481,597 51,161 369,624 420,785 60,812 14.45
50. Bonds and other debt securities 593,190 2,497,916 3,091,106 2,325,382 2,011,708 4,337,090 – 1,245,984 – 28.73
60. Shares, quotas and other forms of capital 0 506,642 506,642 0 453,970 453,970 52,672 11.60
Total 593,190 3,486,155 4,079,345 2,376,543 2,835,302 5,211,845 – 1,132,500 – 21.73
Captions Breakdown of the securities portfolio Investment securities Dealing securities Parent bank Foreign Total Parent bank Foreign Total branches branches
20. Treasury bills and similar bills eligible for refinancing with central banks 0 0 0 249,602 231,995 481,597
50. Bonds and other debt securities 593,190 0 593,190 715,727 1,782,189 2,497,916
60. Shares, quotas and other forms of capital 0 0 0 506,642 0 506,642
Total 593,190 0 593,190 1,471,971 2,014,184 3,486,155
Securities transactions (purchases, subscriptions and sales) are recorded with reference to their settlement date. Issue discounts and premiums are recognised on an accruals basis as an adjustment to “interest income”, with a matching increase (net of withholding taxes) or decrease in the book value of the related securities.
108 Part B - Balance sheet 2.1 Investment securities
The investment securities portfolio, as authorised by the Board of Directors, is made up of:
1. Securities held by foreign branches possibly linked to hedging instruments in order to ensure a pre-determined yield on the investment; these securities are expected to be held to maturity in order that the transaction produces the desired return. These securities may also derive from subscriptions to the bonds issued by leading firms as an alternative to making medium-term loans.
2. Securities subscribed by the Bank upon their issue with the intention of disbursing new loans or restructuring existing loans to the issuers; these assets are held until the related loan principal is repaid.
3. Securities which are expected to be held to maturity, given their objective characteristics (for example, securities with a restricted market) or corporate decisions made at the time of their subscription/purchase (for example, structured securities for which special hedging operations have been put in place).
4. “Junior notes” and “credit link notes” subscribed as part of the securitisation transactions described in section 11.8 “Securitisation transactions” of these explanatory notes.
With reference to securities held by foreign branches, the Board of Directors has revised its general resolution regarding the securities portfolio by reclassifying the securities held by foreign branches from the investment to the dealing portfolio. This is the result of the decision to close the London and New York branches by the end of 2005, with the consequent sale or transfer of their respective securities portfolios.
Captions 31.12.2004 31.12.2003 Book Market Book Market value value value value
1. Debt securities 593,190 583,316 2,376,543 2,393,626
1.1 Government securities 0 0 313,077 349,490 - quoted 0 0 313,077 349,490 - unquoted 0000
1.2 Other securities 593,190 583,316 2,063,466 2,044,136 - quoted 18,354 18,236 1,420,080 1,440,552 - unquoted 574,836 565,080 643,386 603,584
2. Equities 0000 - quoted 0000 - unquoted 0000
Total 593,190 583,316 2,376,543 2,393,626
Quoted securities are valued at the average market price for the prior half-year.
A comparison of book and market value reveals net losses of 9,481 thousand Euro, not booked to the statement of income, comprising:
– losses of 8,633 thousand Euro for securities not hedged by derivative contracts; – a loss of 848 thousand Euro for securities hedged by interest rate swaps.
The valuation of these derivative contracts shows an unrealised loss of 9,667 thousand Euro.
Part B - Balance sheet 109 Breakdown and redemption value of the investment securities portfolio
Captions 31.12.2004 Nominal value Book value Redemption Positive Negative value differences differences
Debt securities - Government securities 00000 - Other securities 629,043 593,190 594,729 10,607 9,068
Total 629,043 593,190 594,729 10,607 9,068
2.2 Changes in investment securities
A. Opening balance 2,376,543
B. Increases: 175.255 B1. Purchases 172,526 B2. Writebacks 0 B3. Transfers from dealing portfolio 0 B4. Other changes 2,729
C. Decreases: 1,958,608 C1. Sales 96,561 C2. Reimbursements 457,762 C3. Adjustments 5,876 of which: - permanent writedowns 5,876 C4. Transfers to dealing portfolio 1,345,958 C5. Other changes 52,451
D. Closing balance 593,190
Changes refer to:
B. Increases Caption B4. Other changes: 2,729 Accrued positive difference between the redemption value of securities and their purchase cost 2,428 Non-recurring income on sale of investment securities 301
C. Decreases Caption C3. Adjustments: 5,876 Writedown of Epoch stock 4,776 Writedown of the Piazza Meda 1 note 1,100
Caption C4. Transfers to dealing portfolio: 1,345,958 Following the resolution by the Board of Directors, the securities portfolios of the New York and London branches have been transferred to the dealing portfolio at nominal values of 458.6 million Euro and 893.2 million Euro respectively. Transfers of investment securities to the dealing securities portfolio have been carried out in accordance with the accounting principle provided in art. 18 of Legislative Decree 87/92 and have involved booking 4.8 million Euro and 2.3 million Euro respectively to statement of income captions 150 “Adjustments to financial fixed assets” and 120 “Adjustments to loans and provisions for guarantees and commitments” (writedown of credit link notes).
Caption C.5 Other changes: 52,451 Accrued negative difference between redemption value of securities and their purchase cost 4,747 Exchange differences on securities denominated in foreign currency 47,704
110 Part B - Balance sheet 2.3 Dealing securities
The dealing securities portfolio comprises stocks and bonds for use in trading activities with customers and market counterparties, repurchase agreements and treasury requirements.
Captions 31.12.2004 31.12.2003 Book Market Book Market value value value value
1. Debt securities 2,979,513 3,000,562 2,381,332 2,382,410
1.1 Government securities 1,025,369 1,025,369 1,407,873 1,407,873 - quoted 1,024,578 1,024,578 1,407,488 1,407,488 - unquoted 791 791 385 385
1.2 Other securities 1,954,144 1,975,193 973,459 974,537 - quoted 784,555 784,555 396,921 396,921 - unquoted 1,169,589 1,190,638 576,538 577,616
2. Equities 506,642 506,642 453,970 453,970 - quoted 290,909 290,909 248,969 248,969 - unquoted 215,733 215,733 205,001 205,001
Total 3,486,155 3,507,204 2,835,302 2,836,380
The caption “other securities” under point 1.2 includes 3,452 thousand Euro in bonds issued by the Bank held for dealing purposes (5,148 thousand Euro at 31.12.2003).
A comparison of book and market value reveals the following unrealised gains not booked to the statement of income:
31.12.2004 31.12.2003
1.1 on Government securities 00 1.2 on other debt securities (*) 21,049 1,078 2 on equities 00
Total 21,049 1,078
(*) This caption includes 12,233 thousand Euro in gains on securities hedged by interest rate swaps and options, which report an unrealised loss of 12,190 thousand Euro.
The valuation of dealing securities involved recording the following writedowns and revaluations among “Profits on financial transactions”:
Writedowns Revaluations 31.12.2004 31.12.2003 31.12.2004 31.12.2003
1.1 on Government securities 151 3,452 22,145 229 1.2 on other debt securities 2,920 2,772 28,747 2,894 2 on equities 159 683 10,288 13,333
Total 3,230 6,907 61,180 16,456
Part B - Balance sheet 111 The valuation of “Contracts still to be settled” involved recording the following writedowns and revaluations in the statement of income:
Writedowns Revaluations 31.12.2004 31.12.2003 31.12.2004 31.12.2003
1.1 on Government securities 2 16 0 2 1.2 on other debt securities 2 0 22 4 2 on equities 1000
Total 5 16 22 6
Securities issued by subjects resident in countries at risk
The table below presents the gross value as well as any writedowns of securities issued by subjects resident in countries at risk. The writedowns also take account of transactions settled after the end of the period.
31.12.2004 31.12.2003 Country Gross value Total Net book Gross value Total Net book writedowns value writedowns value
Netherlands Antilles 0 0 0 16 4 12
Total 0 0 0 16 4 12
112 Part B - Balance sheet 2.4 Changes in dealing securities
A. Opening balance 2,835,302
B. Increases: 11,404,672 B1. Purchases 9,980,707 - Debt securities 8,984,778 - Government securities 3,707,429 - Other securities 5,277,349 - Equities 995,929 B2. Writebacks and revaluations 61,180 B3. Transfers from investment portfolio 1,345,958 B4. Other changes 16,827
C. Decreases: 10,753,819 C1. Sales and redemptions 10,740,794 - Debt securities 9,786,189 - Government securities 4,325,778 - Other securities 5,460,411 - Equities 954,605 C2. Adjustments 3,230 C3. Transfers to investment portfolio 0 C5. Other changes 9,795
D. Closing balance 3,486,155
Changes refer to:
Caption B.4. Other increases: 16,827 Accrued positive difference between redemption value of securities and their issue price 3,084 Income from dealing in securities 13,743
Caption C.5. Other decreases: 9,795 Accrued negative difference between redemption value of securities and their issue price 1,759 Exchange differences on securities denominated in foreign currency 8,036
Part B - Balance sheet 113 Section 3 Equity investments
Equity investments reflected in asset captions 70 and 80 total 1,980,081 thousand Euro. Significant investments, i.e. those in subsidiary companies or those subject to significant influence (art. 19 of Decree 87/92) are presented below.
Change Asset captions 31.12.2004 31.12.2003 (+/–) %
70. Equity investments 177,499 322,559 – 145,060 – 44.97
80. Investments in Group companies 1,802,582 1,546,145 256,437 16.59
Total 1,980,081 1,868,704 111,377 5.96
3.1 Significant investments (1)
Name Location Shareholders’ Net profit/ % Ownership Book equity Loss value
A. Subsidiary companies 1,802,582
a) Investment in banks 1,444,210 1. quoted 0 2. unquoted 1,444,210
BANCA DI LEGNANO S.p.A. Share capital: Euro 452,956,765 in shares of Euro 1 each Legnano 1,152,154 266 93,51 1,143,777 CASSA DI RISPARMIO DI ALESSANDRIA S.p.A. Share capital: Euro 61,920,000 in shares of Euro 5.16 each Alessandria 142,925 8,264 80.00 256,927 BANCA AKROS S.p.A. Share capital: Euro 33,800,000 in shares of Euro 1 each Milan 51,478 15,329 56.89 43,506
b) Investment in financial institutions 146,147 1. quoted 0 2. unquoted 146,147
BPM Private Equity SGR S.p.A. Share capital: Euro 1,500,000 in shares of Euro 10 each Milan 1,708 – 792 100.00 2,500 TIRVING Ltd Dublin £ stg 54,280 £ stg 2,470 100.00 72,633 Share capital: £ stg 5,000 in shares of £ stg 1 each (Ireland) BPM Capital I LLC Delaware 23,887 – 230 100.00 23,651 Share capital: Euro 24,500,000 (Usa) BPM IRELAND Plc Dublin 28,017 6,376 99.99 25,831 Share capital: Euro 257,586 in shares (Ireland) of Euro 1 each BPM LUXEMBOURG S.A. Share capital: Euro 255,000 in shares of Euro 1.25 each Luxembourg 268 13 99.00 252 BIPIEMME REAL ESTATE SGR S.p.A. Share capital: Euro 5,500,000 in shares of Euro 1 each Milan 5,360 378 85.00 4,675 (cont.)
114 Part B - Balance sheet BIPIEMME GESTIONI SGR S.p.A. Share capital: Euro 13,855,000 in shares of Euro 1,000 each Milan 20,959 9,958 55.16 9,975 BIPIEMME PRIVATE BANKING SIM S.p.A. Share capital: Euro 10,000,000 in shares of Euro 1 each Milan 7,263 – 1,775 51.00 6,630
c) Other investments 212,225 1. quoted 0 2. unquoted 212,225
GE.SE.SO. S.R.L. Share capital: Euro 10,329 Milan 114 3 100.00 8 We@service S.p.A. Share capital: Euro 3,520,000 in shares of Euro 352 each Milan 5,580 – 3,354 99.99 3,947 BIPIEMME IMMOBILI S.p.A. Share capital: Euro 19,510,600 in shares of Euro 1 each Milan 212,251 5,291 90.89 186,533 BIPIEMME VITA S.p.A. Share capital: Euro 34,000,000 in shares of Euro 5 each Milan 30,390 11,712 56.89 21,737
B. Companies subject to significant influence 23,255
a) Investment in banks 0 1. quoted 0 2. unquoted 0
b) Investment in financial institutions 23,255 1. quoted 0 2. unquoted 23,255
SELMABIPIEMME LEASING S.p.A. Share capital: Euro 40,200,000 in shares of Euro 0.50 each Milan 68,854 10,470 38.35 22,147 FIRST SKELLIGS INT. FINANCE CO. Ltd. liquidation Dublin Share capital: Euro 774,685 (Ireland) 941 89 33.33 8 ETICA SGR S.p.A. Share capital: Euro 4,000,000 in shares of Euro 10 each Milan 1,785 – 184 27.50 1,100
c) Other investments 0 1. quoted 0 2. unquoted 0
Total significant investments 1,825,837
(1) Significant investments are those held directly or indirectly, either through a fiduciary company or some other intermediary,in subsidiary companies as defined in art. 4.3 of Legislative Decree 87/92 and in companies subject to significant influence (associated companies) as defined in art. 19.1 of the same decree. Significant influence exists when the investor company has at least 1/5th of the voting rights at the investee company’s ordinary shareholders’ meeting.
Shareholders’ equity includes the portion of net profit for the period allocated to reserves and is reduced for any loss for the period. The information relating to “Shareholders’ equity” and “Net profit (loss)” refers to the financial statements as of 31 December 2003 with the exception of: Banca di Legnano: figures refer to the financial statements at 30 June 2004; SelmaBipiemme Leasing: figures refer to the financial statements at 30 June 2004; First Skelligs Int. Finance: figures refer to the financial statements at 31 March 2003.
The following changes took place during 2004 in the share capital of significant investments:
Part B - Balance sheet 115 Banca di Legnano: capital increase for 29.4 million Euro with share premium of 50.6 million Euro (for a total of 80 million Euro), entirely reserved for Credit Industriel et Commercial; Bipiemme Private Banking SIM: payment of 3 million Euro in capital by shareholders; We@Service: reduction of share capital from 10 million Euro to 3.52 million Euro by reducing the par value of shares; Bipiemme Vita: capital increase for 10 million Euro; Etica SGR: capital increase for 1.8 million Euro.
With reference to the information required by art.18 of Legislative Decree 87/92 regarding significant investments shown in the balance sheet at values higher than the corresponding share of net equity, we would point out the following:
BANCA AKROS S.p.A. The difference between the book value (43,5 million Euro) and the company’s net equity (23.3 million Euro as of 31 December 2003, after the distribution of dividends for 2003) is considered goodwill recognised on acquisition of the company. The Bank has received total dividends of 39.3 million Euro from 1999 to 2004 (of which 6.6 million Euro in 2004).
CASSA DI RISPARMIO DI ALESSANDRIA S.p.A. The difference between the book value (256.9 million Euro) and the company’s net equity (114.3 million Euro as of 31 December 2003, after the distribution of dividends for 2003) is considered goodwill recognised on acquisition of the company.
Through its subsidiaries, the Bank has indirect shareholdings of more than 10% in the following companies:
Company Location % voting Ownership rights held by
Akros Securities Inc. Delaware (USA) 100.00 Banca Akros S.p.A. Esn North America Inc. Delaware (USA) 25.00 Akros Securities Inc. Bpm Fund Management Ltd. Dublin (Ireland) 100.00 Bpm Ireland Plc. Ultramediass S.R.L. Milan 100.00 Bipiemme Vita S.p.A. Akros HFR Alternative Investments S.G.R. S.p.A. Milan 51.00 Banca Akros S.p.A. Banca Akros S.p.A. Milan 40.00 Banca di Legnano S.p.A. Bipiemme Vita S.p.A. Milan 40.00 Banca di Legnano S.p.A. Bipiemme Gestioni SGR S.p.A. Milan 40.00 Banca di Legnano S.p.A. Leasemac S.p.A. – in liquidation Milan 33.40 Banca di Legnano S.p.A. Bipiemme Private Banking SIM S.p.A. Milan 30.00 Bipiemme Gestioni S.G.R. S.p.A. 19.00 Banca di Legnano S.p.A. Newgrange Financial Services Co. Dublin (Ireland) 22.90 Tirving Ltd. Tayar Receivables Co. Dublin (Ireland) 18.57 Tirving Ltd. Carta Facile S.p.A. – in liquidation Milan 37.62 We@service S.p.A. Cassa di Risparmio di Asti S.p.A. Asti 20.00 Banca di Legnano S.p.A. Caralt S.p.A. Alessandria 32.50 Cassa di risparmio di Alessandria Marengo S.r.L Alessandria 19.00 Cassa di risparmio di Alessandria GAL BORBA DUE LEADER S.r.L. Ponzone (AL) 15.00 Cassa di risparmio di Alessandria OTTO VALLI SCRL Ponzone (AL) 15.00 Cassa di risparmio di Alessandria CO.FI.S.AL S.p.A. Alessandria 14.98 Cassa di risparmio di Alessandria Acqui Domani S.p.A. Acqui Terme (AL) 14.00 Cassa di risparmio di Alessandria Nuove Terme S.r.L. Acqui Terme (AL) 12.77 Cassa di risparmio di Alessandria EMPRIMER S.p.A. Milan 12.26 Cassa di risparmio di Alessandria
Pursuant to the implementation of rules of articles 120.4 and 122.2 of Legislative Decree 58/98 on the reporting of significant investments and disclosure of shareholders’ agreements, the following are companies in which the Bank holds an interest of more than 10% (not included in the preceding tables) and non-Group companies in which the Bank holds voting rights of 20% of share capital or more.
Companies in which the Parent Bank has shareholdings of more than 10% Location % voting rights Book value
Factorit S.p.A. Milan 17.54 7,775 Multimedica Holding S.p.A. Milan 15.00 13,543
116 Part B - Balance sheet In addition, the Parent Bank holds a 10% interest in Dexia Crediop, worth 103.3 million Euro. The purchase of this equity investment was completed in previous years and the operation was carried out together with Banca Popolare di Verona-Banco S. Geminiano e S. Prospero, Banca Popolare dell’Emilia Romagna and BPB Partecipazioni (Banca Popolare di Bergamo – CV Group). BPB Partecipazioni sold its investment in 2001. The three banks that are still shareholders (with a total interest of 30%) have signed a shareholders’ agreement regarding, in particular, the make-up of the Boards of Directors and Statutory Auditors, the quorums needed for shareholders’ meetings and the transfer of shareholdings.
Non-Group companies in which the Bank holds voting rights Location % voting Reason for holding of 20% of share capital or more rights voting rights
Placidia S.r.l. Saronno 100.00 Collateral Immobiliare Mabe S.r.l. Milan 100.00 Collateral Loges S.r.l. Milan 100.00 Collateral Nardi Costruzioni Aeronautiche S.p.A. (a) Milan 100.00 Collateral Promedil 84 S.r.l. Milan 100.00 Collateral B.E.A. Tchnologies S.p.A. (former PTI S.p.A) Milan 100.00 Collateral Fiori 11 S.r.l. Milan 100.00 Collateral Veda S.r.l. Monza 100.00 Collateral Zucchini S.p.A. Brescia 100.00 Collateral Immobiliare Bordoni S.r.l. Milan 93.86 Collateral Industria Casearia Bonalumi S.r.l. in liquidation Cologno M.se 33.33 Collateral Eurosilver S.r.l. (b) Torbole Casaglia 100.00 Collateral Format S.r.l. (b) Odolo 100.00 Collateral Tierre Raccorderie S.p.A. (b) Castegnato 100.00 Collateral Elettromeccanica di Marnate S.p.A. (b) Marnate 99.93 Collateral Sparta S.p.A. (b) Lumezzane 80.00 Collateral
(a) The collateral is in favour of a pool of banks in which Banca Popolare di Milano Scrl is lead manager. The company is currently involved in bankruptcy proceedings. (b) “Undivided” assets pledged as collateral in favour of a pool of creditors. Voting rights at Ordinary and Extraordinary Meetings are held by the creditors holding the collateral, though from time to time this right can be waived or delegated to whoever provided the collateral.
In the case of Saratoga Int.Sforza S.p.A., a company resident in Milan, the Bank may decide to exercise voting rights on the basis of the topics discussed in the shareholders’ meeting.
Banca di Legnano holds voting rights of 20% or more in the following non-Group companies:
Company Location % voting Reason for holding rights voting rights
Newcam 96 S.r.l. Genoa 100.00 Collateral
Investments of more than 10% in the following companies, currently in liquidation and valued at zero, are included in “Shares, quotas and other forms of capital”:
Companies in liquidation Location % voting rights
Ricostruzioni Ansa S.r.l. – in liquidation Milan 89.90 Immobiliare Ansa Ticino S.r.l. – in liquidation Varese 50.00 Immobiliare Zenith Seconda S.r.l. – in liquidation Varese 50.00 Leasing Levante S.p.A. – in liquidation Bari 14.29
Part B - Balance sheet 117 3.2 Amounts due to and from Group companies
Change 31.12.2004 31.12.2003 (+/–) %
a) Assets 704,867 747,150 – 42,283 – 5.66
1. Due from banks 81,162 65,000 16,162 24.86 of which: - subordinated 0 0 0 n.s.
2. Due from financial institutions 606,933 668,386 – 61,453 – 9.19 of which: - subordinated 0 0 0 n.s.
3. Due from other customers 14,552 13,764 788 5.73 of which: - subordinated 9,600 9,600 0 n.s.
4. Bonds and other debt securities 2,220 0 2,220 n.s. of which: - subordinated 0 0 0 n.s.
b) Liabilities 716,237 332,378 383,859 115.49
1. Due to banks 252,078 21,634 230,444 n.s. 2. Due to financial institutions 4,180 10,054 – 5,874 – 58.42 3. Due to other customers 47,578 50,808 – 3,230 – 6.36 4. Securities issued 237,958 78,000 159,958 205.07 5. Subordinated liabilities 174,443 171,882 2,561 1.49
c) Guarantees and commitments 1,217,286 1,258,732 – 41,446 – 3.29
1. Guarantees given 1,166,330 1,258,080 – 91,750 – 7.29 2. Commitments 50,956 652 50,304 n.s.
Caption “a 3. of which: subordinated” refers to the portion subscribed of subordinated loans issued by Bipiemme Vita.
Caption “b 5. Subordinated liabilities” includes: - 171,882 thousand Euro in relation to the “Banca Popolare di Milano 2001-2031 Upper Tier 2 – 7.625% subordinated bond” fully subscribed by BPM Luxembourg S.A. in 2001 to support an issue of preference shares by the vehicle BPM Capital Trust I for an amount of 160 million Euro; - 2,561 thousand Euro in relation to subordinated bonds issued by BPM included in the trading portfolio of Banca Akros.
118 Part B - Balance sheet 3.3 Amounts due to and from investments (that are not part of the Group)
Change 31.12.2004 31.12.2003 (+/–) %
a) Assets 578,689 712,791 – 134,102 – 18.81
1. Due from banks 62,880 108,019 – 45,139 – 41.79 of which: - subordinated 0 0 0 n.s.
2. Due from financial institutions 469,266 591,367 – 122,101 – 20.65 of which: - subordinated 140 140 0 n.s.
3. Due from other customers 25,368 1,739 23,629 n.s. of which: - subordinated 0 0 0 n.s.
4. Bonds and other debt securities 21,175 11,666 9,509 81.51 of which: - subordinated 0 0 0 n.s.
b) Liabilities 277,991 277,410 581 0.21
1. Due to banks 165,977 137,427 28,550 20.77 2. Due to financial institutions 106,536 101,125 5,411 5.35 3. Due to other customers 5,478 38,858 – 33,380 – 85.90 4. Securities issued 0 0 0 n.s. 5. Subordinated liabilities 0 0 0 n.s.
c) Guarantees and commitments 9,783 5,130 4,653 90.70
1. Guarantees given 8,285 3,712 4,573 123.20 2. Commitments 1,498 1,418 80 5.64
Caption “a 2, of which: subordinated” refers to the portion subscribed of the subordinated bond issued by “Polis Fondi S.G.R. S.p.A.”
Part B - Balance sheet 119 3.4 Analysis of caption 70 “Equity investments”
Change 31.12.2004 31.12.2003 (+/–) %
a) Investment in banks 114,707 113,440 1,267 1.12 1. quoted 0 0 0 n.s. 2. unquoted 114,707 113,440 1,267 1.12
b) Investment in financial institutions 35,798 178,676 – 142,878 – 79.96 1. quoted 0 0 0 n.s. 2. unquoted 35,798 178,676 – 142,878 – 79.96
c) Other investments 26,994 30,443 – 3,449 – 11.33 1. quoted 10,244 9,852 392 3.98 2. unquoted 16,750 20,591 – 3,841 – 18.65
Total 177,499 322,559 – 145,060 – 44.97
Detail of caption 70 “Equity investments”
31.12.2004 31.12.2003 Book value % Owner- Book value % Owner- Change (in Euro) ship ship (+/–)
Investment in banks 114,706,623 113,440,232 1,266,391
Quoted: 0 0 0 Unquoted: 114,706,623 113,440,232 1,266,391 Dexia Crediop S.p.A. 103,296,338 10.00 103,296,338 10.00 0 NordEst Banca S.p.A. 2,125,000 10.00 1,250,000 10.00 875,000 Istituto Centrale delle Banche Popolari Italiane S.p.A. 9,243,943 5.59 8,852,552 5.59 391,391 Banca Popolare Etica S.C. a R.L. 41,342 0.26 41,342 0.29 0
Investment in financial institutions 35,798,013 178,675,416 – 142,877,403
Quoted: 0 0 0 Unquoted: 35,798,013 178,675,416 – 142,877,403 SelmaBipiemme Leasing S.p.A. 22,147,351 38.35 22,147,351 38.35 0 First Skelligs Inter. Finance Company Ltd – in liquidation 8,228 33.33 258,228 33.33 – 250,000 Etica SGR S.p.A. 1,100,000 27.50 612,500 27.84 487,500 Factorit S.p.A. 7,774,721 17.54 7,774,721 17.54 0 Evoluzione 94 S.p.A. 393,501 7.05 393,501 7.05 0 Polis Fondi SGR S.p.A. 361,520 7.00 361,520 7.00 0 Epsilon Associati SGR S.p.A. 749,098 6.25 749,098 6.25 0 Si Holding S.p.A. (former CartaSì S.p.A.) 891,860 3.14 891,860 3.14 0 Star Venture I S.C.P.A. 910,755 2.08 989,894 2.05 – 79,139 Convergenza S.C.A. Luxembourg 1,460,979 1.25 1,188,560 1.25 272,419 Cassa di Compensazione e Garanzia S.p.A. 0 1,291,142 4.55 – 1,291,142 Carinord I S.p.A. 0 142,017,041 50.00 – 142,017,041
(*) From 1/01/2004 the company changed its name to “Si Holding S.p.A.”.
120 Part B - Balance sheet Detail of caption 70 “Investments in Group companies” (cont.)
31.12.2004 31.12.2003 Book value % Owner- Book value % Owner- Change (in Euro) ship ship (+/–)
Other 26,994,452 30,442,942 – 3,448,490
Quoted: 10,243,878 9,851,998 391,880 Fiera di Milano S.p.A. 6,223,228 2.56 6,223,228 2.58 0 Fastweb S.p.A. (former E.Biscom S.p.A.) 4,020,650 0.17 3,628,770 0.20 391,880
Unquoted: 16,750,574 20,590,944 – 3,840,370 Multimedica Holding S.p.A. 13,542,533 15.00 19,346,475 15.00 – 5,803,942 Patto di Foggia Società Consortile p.a. 7,933 8.00 7,933 8.00 0 Consorzio ABI Energia 1,000 4.76 0 1,000 Genextra S.r.l. 2,000,000 4.55 0 2,000,000 e-MID S.p.A. 220,500 3.67 220,500 3.67 0 Meridaunia Società consortile a R.L. 2,690 3.37 2,690 3.34 0 S.S.B. – Società Servizi Bancari S.p.A. 240,444 3.00 240,444 3.00 0 DAICAP Società Consortile per Azioni – in liquidation (*) 0 3.00 0 3.00 0 Crif – Centrale Rischi Finanziaria S.p.A. 30,987 2.52 61,975 5.05 – 30,988 CIM Italia S.p.A. former C.I.L.M.E. – Multitel S.p.A. 107,693 2.42 107,693 2.42 0 SI.TE.BA. – Sistemi Telematici Bancari S.p.A. 40,007 1.55 40,007 1.55 0 A.B.E. Clearing S.A.S. with variable capital (*) 0 1.41 0 1.35 0 Ist. per l’Enciclopedia Banca e Borsa S.p.A. 4,552 1.29 6,787 1.29 – 2,235 Euros Consulting S.p.A. (*) – in liquidation 0 1.22 0 1.21 0 S.I.A. – Soc. Interbancaria Automazione S.p.A. 342,871 0.99 342,871 0.99 0 Sviluppo e Brianza S.c.a r.l. 2,612 0.98 0 2,612 Soc. Coop. Fra le Banche Popolari “L. Luzzatti” (*) 0 0.80 0 0.80 0 Centrale dei Bilanci per gli Studi Finanziari S.r.l. 154,983 0.60 154,983 0.60 0 Industria e Università S.r.l. 43,381 0.39 43,381 0.39 0 Nomisma – Società di Studi Economici S.p.A. 3,543 0.07 3,543 0.07 0 S.W.I.F.T. – Soc. Worldwide Fin. Telecomunications S.C.R.L. 4,845 0.06 4,845 0.06 0 Consorzio Cassamercato 0 6,817 6.29 – 6,817
Total 177,499,088 322,558,590 – 145,059,502
(*) Amounts lower than 1 Euro
Changes are detailed in section 3.6.2 “Changes in other equity investments”
Part B - Balance sheet 121 3.5 Analysis of caption 80 “Investments in Group companies”
Change 31.12.2004 31.12.2003 (+/–) %
a) Investment in banks 1,444,210 1,189,661 254,549 21.40 1. quoted 0 0 0 n.s. 2. unquoted 1,444,210 1,189,661 254,549 21.40
b) Investment in financial institutions 146,147 147,437 – 1,290 – 0.87 1. quoted 0 0 0 n.s. 2. unquoted 146,147 147,437 – 1,290 – 0.87
c) Other investments 212,225 209,047 3,178 1.52 1. quoted 0 0 0 n.s. 2. unquoted 212,225 209,047 3,178 1.52
Total 1,802,582 1,546,145 256,437 16.59
Detail of caption 80 “Investments in Group companies”
31.12.2004 31.12.2003 Book value % Owner- Book value % Ownership Change (in Euro) ship ship (+/–)
Investment in banks 1,444,209,775 1,189,660,981 254,548,794
Quoted: 0 0 0 Unquoted: 1,444,209,775 1,189,660,981 254,548,794 Banca di Legnano S.p.A. 1,143,776,678 93.51 1,143,776,678 100.00 0 Cassa di Risparmio di Alessandria S.p.A. 256,927,130 80.00 0 256,927,130 Banca Akros S.p.A. 43,505,967 56.89 45,884,303 60.00 – 2,378,336
Investment in financial institutions 146,146,987 147,436,789 – 1,289,802
Quoted: 0 0 0 Unquoted: 146,146,987 147,436,789 – 1,289,802 Tirving LTD 72,633,005 100.00 74,379,107 100.00 – 1,746,102 BPM Capital I LLC 23,650,891 100.00 23,887,037 100.00 – 236,146 BPM Private Equity SGR S.p.A. 2,500,000 100.00 2,500,000 100.00 0 BPM Ireland PLC 25,831,083 99.99 25,831,083 99.99 0 BPM Luxembourg S.A. 252,450 99.00 252,450 99.00 0 Bipiemme Real Estate SGR S.p.A. 4,675,000 85.00 4,950,000 90.00 – 275,000 Bipiemme Gestioni SGR S.p.A. 9,974,558 55.16 10,537,112 58.27 – 562,554 Bipiemme Private Banking SIM S.p.A. 6,630,000 51.00 5,100,000 51.00 1,530,000
Other 212,225,026 209,046,919 3,178,107
Quoted: 0 0 0 Unquoted: 212,225,026 209,046,919 3,178,107 Ge.Se.So. S.r.l. 8,263 100.00 8,263 100.00 0 We@service S.p.A. 3,946,930 99.99 5,580,238 99.99 – 1,633,308 Bipiemme Immobili S.p.A. 186,532,587 90.89 186,532,587 90.89 0 Bipiemme Vita S.p.A. 21,737,246 56.89 16,925,554 60.00 4,811,692 Fondo Case Pop. “Ist. F. Isolani” 0 277 100.00 – 277
Total 1,802,581,788 1,546,144,689 256,437,099
Changes are detailed in section 3.6.1 “Changes in investments in Group companies”
122 Part B - Balance sheet 3.6 Changes in equity investments 3.6.1 Investments in Group companies
A. Opening balance: 1,546,145
B. Increases: 425,544 B1. Purchases 7,219 B2. Writebacks 0 B3. Revaluations 0 B4. Other changes 418,325
C. Decreases: 169,107 C1. Sales 11,972 C2. Adjustments 1,869 of which: - permanent writedowns 1,869 C3. Other changes 155,266
D. Closing balance 1,802,582
E. Total revaluations 0
F. Total adjustments 17,069
Part B - Balance sheet 123 Changes refer to:
B. Increases
Caption B.1 Purchases: 7,219 Payment of capital by shareholders into Bipiemme Private Banking SIM S.p.A;. 1,530 Subscription of 1,137,800 shares of Bipiemme Vita S.p.A. following capital increase 5,689
Caption B4. Other changes: 418,325 Transfer of Carinord 1 from caption 70 following acquisition of a 4.05% interest 153,519 Acquisition of a controlling interest (80%) in Cassa di Risparmio di Alessandria S.p.A. following the merger of Carinord 1 256,927 Gain arising on the exchange of 1,051,180 Banca Akros shares (1,507,194.21 Euro), 431 Bipiemme Gestioni SGR S.p.A. shares (2,702,121.55 Euro) and 124,400 Bipiemme Vita shares (3,474,486.41 Euro) for 5,018,809 Carinord 1 shares 7,684 Gain arising on the sale of 275,000 Bipiemme Real Estate SGR S.p.A. shares 195
C. Decreases
Caption C1. Sales: 11,972 Values attributed to 1,051,180 Banca Akros shares (3,885,530.60 Euro), 431 Bipiemme Gestioni SGR S.p.A. shares (3,264,675.13 Euro) and 124,400 Bipiemme Vita shares (4,351,794.27 Euro). 11,502 Sale of 275,000 Bipiemme Real Estate SGR S.p.A. shares 470
Caption C2. Adjustments – permanent writedowns: 1,869 We@service S.p.A. 1,633 BPM Capital I LLC 236
Caption C.3 Other changes: 155,266 Elimination of 66,979,409 Carinord 1 shares following absorption by BPM 153,519 Collection of endowment fund following elimination of the Isolani fund 1 Exchange differences on the investment in Tirving 1,746
Total adjustments: 17,069
BPM Capital I LLc: 849 • 2002 for Euro 382,621; • 2003 for Euro 230,342; • 2004 for Euro 236,146.
BPM Luxembourg S.A.: 168 • 2002 for Euro 123,750; • 2003 for Euro 44,550.
We@service S.p.A.: 16,052 • 2001 for Euro 7,359,321; • 2002 for Euro 3,705,677; • 2003 for Euro 3,353,763; • 2004 for Euro 1,633,308.
124 Part B - Balance sheet 3.6.2 Other equity investments
A. Opening balance 322,559
B. Increases: 18,806 B1. Purchases 15,576 B2. Writebacks 783 B3. Revaluations 0 B4. Other changes 2,447
C. Decreases: 163,866 C1. Sales 3,769 C2. Adjustments 6,321 of which: - permanent writedowns 6,321 C3. Other changes 153,776
D. Closing balance 177,499
E. Total revaluations 0
F. Total adjustments 28,270
B. Increases
Caption B.1 Purchases: 15,576 Subscription to 300 shares in Star Venture I S.C.P.A. 150 Subscription to 5,000 shares in Genextra S.r.l. 2,000 Subscription to 264,397 shares in Euros Consulting S.p.A. 183 Subscription to 1 shares in Consorzio ABI Energia 1 Subscription to 1,500 shares in Convergenza Luxembourg S.C.A. 375 Subscription to 87,500 shares in NordEst Banca S.p.A. 875 Subscription to 48,750 shares in Etica SGR S.p.A. 487 Subscription to 2,462 shares in Sviluppo Brianza S.c.a r.l. 3 Acquisition of 5,018,809 Carinord 1 shares in exchange for shares in Banca Akros S.p.A., Bipiemme Gestioni SGR S.p.A. and Bipiemme Vita S.p.A. 11,502
Caption B2. Writebacks: 783 Writeback of investment in Fastweb S.pA. (former e-Biscom S.p.A.) 392 Writeback of investment in Istituto Centrale delle Banche Popolari Italiane S.p.A. 391
Caption B4. Other changes: 2,447 Gain on sale of 250 shares in Cassa Compensazione e Garanzia S.p.A. 1,468 Gain on sale of 17,571 shares in Crif S.p.A. 979
Part B - Balance sheet 125 C. Decreases
Caption C1. Sales 3,769 Sale of 250 shares in Cassa Compensazione e Garanzia S.p.A. 2,759 Sale of 17,571 shares in Crif S.p.A. 1,010
Caption C2. Adjustments – permanent writedowns: 6,321 Multimedica Holding S.p.A. 5,804 Star Venture I S.C.P.A. 229 Euros Consulting S.p.A. 183 Convergenza S.C.A. Luxembourg 103 Istituto per l’Enciclopedia Banca e Borsa S.p.A. 2
Caption C.3 Other changes: 153,776 Transfer of 66,979,409 shares in Carinord 1 to caption 80 153,519 Refund of share capital in First Skelligs Ltd. 250 Repayment of 132 shares following withdrawal from Consorzio Cassamercato 6 Loss on repayment of 132 shares in Consorzio Cassa Mercato (Euro 345) 1
F. Total adjustments: 28,270
Evoluzione 94 S.p.A.: 8,492 • 1995 for Euro 6,182,531 (of which Euro 909,481 recorded by former B.A.M.); • 1996 for Euro 2,275,865 (of which Euro 261,674 recorded by former B.A.M.); • 1997 for Euro 33,789.
SelmaBipiemme Leasing S.p.A.: 1,257 • 1995 per Euro 820,960; • 1996 per Euro 435,910.
Istituto per l’Enciclopedia Banca e Borsa S.p.A.: 14 • 1996 for Euro 1,763; • 1998 for Euro 1,838; • 1999 for Euro 531; • 2000 for Euro 2,444; • 2001 for Euro 2,157; • 2002 for Euro 2,737; • 2003 for Euro 336; • 2004 for Euro 2,235.
Industria e Università S.r.l.: carried out in 1996 (Euro 518). 1
Nomisma S.p.A.: 6 • 1996 for Euro 3,099; • 1998 for Euro 1,162; • 1999 for Euro 904; • 2000 for Euro 1,033; • 2001 for Euro 30.
Istituto Centrale delle Banche Popolari Italiane S.p.A.: 8,714 • 1998 for Euro 2,432,210; • 1999 for Euro 702,381; • 2000 for Euro 8,722,957; • 2003 writeback for Euro 2,752,156; • 2004 writeback for Euro 391,391.
ABE Clearing S.a.s.: carried out in 2000 (Euro 181,000). 181
(cont.)
126 Part B - Balance sheet Patto di Foggia Società Consortile per azioni: carried out in 2001 (Euro 330). 0
Fastweb S.p.A. (former e-Biscom S.p.A): 2,313 • 2001 for Euro 1,870,160; • 2002 for Euro 2,303,750; • 2003 writeback for Euro 1,469,550. • 2004 writeback for Euro 391,880.
Etica S.G.R. S.p.A.: carried out in 2002 (Euro 9,378). 9
Convergenza S.C.A. Luxembourg: 489 • 2002 for Euro 234,752; • 2003 for Euro 151,914; • 2004 for Euro 102,580.
Star Venture I S.C.P.A.: 689 • 2002 for Euro 84,186; • 2003 for Euro 375,920; • 2004 for Euro 229,139.
Euros Consulting S.p.A.: 297 • 2003 for Euro 113,535; • 2004 for Euro 183,000.
DAICAP Soc. Cons. p.A. – in liquidation: carried out in 2003 (Euro 3,098). 3
Meridaunia Società Consortile a r.l.: carried out in 2003 (Euro 923). 1
Multimedica Holding S.p.A.: carried out in 2004 (Euro 5,803,942). 5,804
Part B - Balance sheet 127 Section 4 Tangible and intangible fixed assets
The Bank’s tangible and intangible fixed assets, recorded in the financial statements under asset captions 100 and 90, amount to 343,520 thousand Euro, net of 657,100 thousand Euro of amortisation, depreciation and permanent writedowns, including 86,421 thousand Euro charged to the year under review.
Change Assets 31.12.2004 31.12.2003 (+/–) %
100. Tangible fixed assets 180,288 188,743 – 8,455 – 4.48
90. Intangible fixed assets 163,232 157,698 5,534 3.51
Total fixed assets 343,520 346,441 – 2,921 – 0.84
4.1 Changes in tangible fixed assets
A. Opening balance: 188,743
B. Increases: 29,174 B1. Purchases 23,695 B2. Writebacks 0 B3. Revaluations 0 B4. Other changes 5,479
C. Decreases: 37,629 C1. Sales 24 C2. Adjustments: a) depreciation 37,405 b) permanent writedowns 0 C3. Other changes 200
D. Closing balance 180,288
E. Total revaluations 163,643
F. Total adjustments: a) depreciation 438,860 b) permanent writedowns 171
Subcaption F. a) reflects total depreciation provided over time on tangible fixed assets recorded in the financial statements.
A list of property revalued in prior years and still owned by the Bank is provided in an attachment to these notes, as required by art. 10, Law 72 of 19 March 1983.
128 Part B - Balance sheet Changes during the year in tangible fixed assets are analysed separately by category:
Buildings Furniture, machines and vehicles Plant Total Furniture Machines Vehicles
A. Opening balance: (1) 126,018 7,163 34,707 88 20,767 188,743
B. Increases: 3,732 5,651 14,454 23 5,314 29,174 B1. Purchases 3,577 1,541 13,353 22 5,202 23,695 B2. Writebacks 000000 B3. Revaluations 000000 B4. Other changes 155 4,110 1,101 1 112 5,479
C. Decreases: 7,501 2,572 20,852 32 6,672 37,629 C1. Sales 0 0 23 1 0 24 C2. Adjustments: a) depreciation 7,501 2,555 20,685 29 6,635 37,405 b) permanent writedowns 000000 C3. Other changes 0 17 144 2 37 200
D. Closing balance (2) 122,249 10,242 28,309 79 19,409 180,288
E. Total revaluations 163,643 0 0 0 0 163,643
F. Total adjustments: a) depreciation 132,010 56,751 142,169 86 107,844 438,860 b) permanent writedowns 171 0000171
(1) Including the following items as of 31.12.2003:
Historical cost 250,853 65,522 182,596 177 124,840 623,988
Less: - Accumulated depreciation: ordinary – 122,599 – 58,352 – 147,889 – 89 – 104,073 – 433,002 accelerated – 155 – 7 0 0 0 – 162 ex art. 54 D.P.R. 597/73 – 1,910 0000– 1,910 art. 54 Decree 597/73 – 171 0000– 171 Plus: - Cost to be charged to fixed assets 000000
Total 126,018 7,163 34,707 88 20,767 188,743
(2) Of which:
- tangible fixed assets 122,249 10,242 28,309 79 19,409 180,288 - advance payments 000000
Part B - Balance sheet 129 Buildings
Buildings used by the Bank for business activities are recorded in the financial statements at 111,852 thousand Euro (net of 122,112 thousand Euro in depreciation and 171 thousand Euro in writedowns).
Changes during the year were as follows:
Caption B.1 Purchases:
The amount of 3,577 thousand Euro refers to: 2,606 thousand Euro for purchasing the following properties: Basiglio - Piazza della Repubblica,1 Milano - Via Trenno,12 Paderno d’Adda - Via Manzoni,21 Segrate - Piazza Centro Commerciale,36 971 thousand Euro for building work on the following properties: Lucera - Via Zuppetta Rho - Via Curiel / Via Vanoni
Caption B4. Other changes:
The amount of 155 thousand Euro relates to the reversal of accumulated accelerated depreciation, which was credited to caption 180 “Non-recurring income”, as part of the process of “defiscalising” the financial statements.
Furniture, machines, vehicles and plant
Caption B4. Other changes:
Furniture: The amount of 4,110 thousand Euro mostly refers to: 4,102 thousand Euro in reversals from the accumulated depreciation of assets with a unit value of less than 516.46 Euro, which was credited to the statement of income as part of the process of “defiscalising” the financial statements; 7 thousand Euro for reversing accumulated accelerated depreciation, which was credited to caption 180 “Non-recurring income”, as part of the process of “defiscalising” the financial statements.
Machines: The amount of 1,101 thousand Euro refers to: 1,078 thousand Euro in reversals from the accumulated depreciation of assets with a unit value of less than 516.46 Euro, which was credited to the statement of income as part of the process of “defiscalising” the financial statements; 23 thousand Euro in gains on disposal recognised in the statement of income.
Vehicles: The amount of 1 thousand Euro refers to gains on disposal recognised in the statement of income.
Plant: The amount of 112 thousand Euro mostly refers to: 78 thousand Euro in reversals from the accumulated depreciation of assets with a unit value of less than 516.46 Euro, which was credited to the statement of income as part of the process of “defiscalising” the financial statements; 0.11 thousand Euro for reversing accumulated accelerated depreciation, which was credited to caption 180 “Non-recurring income”, as part of the process of “defiscalising” the financial statements.
Caption C.3 Other changes:
The figures mostly relate to losses on disposal recognised in the statement of income.
130 Part B - Balance sheet 4.2 Changes in intangible fixed assets
Total of which: start-up costs
A. Opening balance: 157,698 14,966
B. Increases: 55,452 5,077 B1. Purchases 55,191 4,950 B2. Writebacks 00 B3. Revaluations 00 B4. Other changes 261 127
C. Decreases: 49,918 5,553 C1. Sales 00 C2. Adjustments: a) amortisation 49,016 5,321 b) permanent writedowns 0 0 C3. Other changes 902 232
D. Closing balance 163,232 14,490
E. Total revaluations 00
F. Total adjustments: 218,069 15,738 a) amortisation 218,069 15,738 b) permanent writedowns 0 0
Subcaption F. a) reflects total amortisation provided over time on intangible fixed assets recorded in the financial statements.
Part B - Balance sheet 131 Changes during the year in intangible fixed assets are analysed separately by category:
Intangible fixed assets Deferred charges
Own software Other Software Start-up and Other Total under licence expansion costs
A. Opening balance: (1) 58,000 0 51,618 14,966 33,114 157,698
B. Increases: 49,533 0 38 5,077 804 55,452 B1. Purchases 49,399 0 38 4,950 804 55,191 B2. Writebacks 000000 B3. Revaluations 000000 B4. Other changes 134 0 0 127 0 261
C. Decreases: 22,022 0 11,404 5,553 10,939 49,918 C1. Sales 000000 C2. Adjustments: a) amortisation 21,497 0 11,259 5,321 10,939 49,016 b) permanent writedowns 000000 C3. Other changes 525 0 145 232 0 902
D. Closing balance (2) 85,511 0 40,252 14,490 22,979 163,232
E. Total revaluations 0 0 0000
F. Total adjustments: 106,479 184 18,605 15,738 77,063 218,069 a) amortisation 106,479 184 18,605 15,738 77,063 218,069 b) permanent writedowns 000000
(1) Including the following items as of 31.12.2003:
Net book value 58,000 0 51,618 14,966 33,114 157,698
Plus: Cost to be charged to fixed assets 000000
Total 58,000 0 51,618 14,966 33,114 157,698
(2) of which:
- Intangible assets and deferred charges 85,511 0 40,252 14,490 22,979 163,232 - Advance payments 000000
The closing balance of software mentioned in point D includes the following costs for projects in progress for which amortisation has not yet commenced: own software for 47,389 thousand Euro; software under licence for 22,440 thousand Euro.
132 Part B - Balance sheet Deferred charges
Costs capitalised in the year (caption B1) refer to the acquisition of software licences, leasehold improvements and charges for the issue of bonds.
The remainder of “other deferred charges” (22,979 thousand Euro) includes the unamortised costs incurred for the capital increase in 2001 (1,256 thousand Euro) and for issuing the subordinated “Euro Medium Term Notes” (1,133 thousand Euro), as well as goodwill deriving from the following mergers and purchases of business divisions:
Description Year Historical Prior years’ Balance Current year Balance goodwill amortisation of goodwill amortisation of goodwill as of 31.12.03 as of 31.12.04
Merger of Banca Agricola Milanese 1997 54,435 38,105 16,330 5,444 10,886
Merger of ex Banca Briantea 1997 20,485 14,339 6,146 2,048 4,098
Merger of Banca 2000 1999 13,450 6,725 6,725 1,345 5,380
Purchase of the Pavia branch 1997 1,136 796 340 114 226
89,506 59,965 29,541 8,951 20,590
Part B - Balance sheet 133 Section 5 Other assets
Asset captions 130 and 140 total 1,165,637 thousand Euro and are analysed as follows:
Change Assets 31.12.2004 31.12.2003 (+/–) %
130. Other assets 954,618 949,354 5,264 0.55
140. Accrued income and prepayments 211,019 190,052 20,967 11.03
Total 1,165,637 1,139,406 26,231 2.30
5.1 Analysis of caption 130 “Other assets”
Change 31.12.2004 31.12.2003 (+/–) %
Cheques drawn on the bank 1,217 2,644 – 1,427 – 53.97 Duty-paid paper and other instruments 11,252 12,749 – 1,497 – 11.74 Cheques drawn on third-party current accounts 48,195 49,160 – 965 – 1.96 Items in transit between branches 0 1 – 1 – 100.00 Guarantee deposits on behalf of the Bank 2,379 593 1,786 n.s. Items relating to security and currency transactions 41 93 – 52 – 55.91 Tax items: - taxation paid in advance 13,664 74,265 – 60,601 – 81.60 - tax credits 249,985 104,490 145,495 139.24 - temporary assessment 80 462 – 382 – 82.68 - withholding taxes 1,683 1,503 180 11.98 - tax credits on dividends 0 78,016 – 78,016 – 100.00 - advance payment of taxes on severance indemnities Law 662/96 18,694 19,315 – 621 – 3.22 - flat-rate tax on merger deficit deferred to future years 4,548 6,553 – 2,005 – 30.60 Deferred tax assets 85,833 94,248 – 8,415 – 8.93 1% advance on amounts due for tax collection services (Law 341/2003) 188,881 100,461 88,420 88.01 Premiums paid on options purchased 2,481 2,224 257 11.56 Effect of revaluing off-balance sheet transactions 53,335 4,486 48,849 n.s. Contribution to solidarity and similar funds 9 9 0 n.s. Items being processed 182,896 311,212 – 128,316 – 41.23 Differences arising on the elimination of balances with foreign branches 2,889 2,354 535 22.73 Other items 86,556 84,516 2,040 2.41
Total 954,618 949,354 5,264 0.55
134 Part B - Balance sheet “Tax credits” (249,985 thousand Euro), included under tax items, relate to:
a) credits for local, regional and corporate income taxes and other indirect taxes as follows: 216,633 thousand Euro, in principal; 27,178 thousand Euro, in interest.
b) payment, made under Decree Law 282 of 24.12.2002, of taxes not paid in the tax periods benefiting from the Ciampi Law: 5,773 thousand Euro, in principal; 401 thousand Euro, in interest.
Of the credits in point a), the Bank has requested reimbursement for 158,347 thousand Euro.
The balances relating to deferred tax assets are discussed in Section 7 “Provisions - deferred tax assets and liabilities”.
Differences arising on the elimination of balances with foreign branches include balances between the Bank and the London and New York branches.
5.2 Analysis of caption 140 “Accrued income and prepayments”
Change 31.12.2004 31.12.2003 (+/–) %
Accrued income: 172,300 162,531 9,769 6.01
Bank interest income and commission 14,250 16,468 – 2,218 – 13.47 Bank interest income on loans to customers and commission 25,266 25,565 – 299 – 1.17 Interest on portfolio securities 36,101 42,906 – 6,805 – 15.86 Differentials on forward currency transactions and derivatives 96,683 77,592 19,091 24.60
Prepayments: 38,719 27,521 11,198 40.69
Bank interest expense and commission paid in advance 1,139 1,862 – 723 – 38.83 Discounts on bond issues 20,733 3,355 17,378 n.s. Differentials on forward currency transactions and derivatives 8,839 13,362 – 4,523 – 33.85 Administrative costs (rentals, insurance premiums, etc.) 8,008 8,942 – 934 – 10.45
Total accrued income and prepayments 211,019 190,052 20,967 11.03
5.3 Adjustments for accrued income and prepayments
We would point out that, in accordance with art. 12 of Legislative Decree 87/92, we have not made any adjustments, up or down, directly to the assets or liabilities to which accruals and prepayments refer, except as explained in part A, section 1 of these notes.
Part B - Balance sheet 135 5.4 Distribution of subordinated assets
These are assets restricted by subordination clauses which, should the debtor be put into liquidation, require that the asset be repaid only after all non-subordinated creditors have been satisfied.
Change 31.12.2004 31.12.2003 (+/–) %
a) Due from banks 0 0 0 n.s.
b) Loans to customers 9,740 9,740 0 n.s.
c) Bonds and other debt securities 333,122 440,830 – 107,708 – 24.43
The balance indicated in item b) refers to:
9,600 thousand Euro for the subscribed portion of the subordinated loans issued by Bipiemme Vita.
140 thousand Euro for the subscribed portion of the subordinated loan issued by Polis Fondi S.G.R. S.p.A.
The balance indicated in item c) refers to:
148,483 thousand Euro in bonds belonging to the dealing portfolio of the London branch, issued by insurance companies and not associated with securitisations (130,818 thousand Euro at 31.12.2003)
136,563 thousand Euro in “mezzanine notes” (184,368 thousand Euro at 31.12.03) relating to third-party securitisations.
26,394 thousand Euro in class C bonds belonging to the Bank’s portfolio (31,022 thousand Euro at 31.12.03), issued by the vehicle company Piazza Meda Uno as part of the securitisation of the Bank’s loans; the Class B bonds totalling 4,154 thousand Euro at 31 December 2003 have been redeemed in full.
18,589 thousand Euro for a credit link note issued by Citybank Madeira as part of the synthetic securitisation of the Bank’s loans carried out in 2001(18,589 thousand Euro at 31.12.03).
3,093 thousand Euro in bonds issued by banks and included in the Parent Bank’s dealing portfolio (3,033 thousand Euro at 31.12.03).
For all other amounts involved in securitisation transactions, reference should be made to Section 11.8 of the explanatory notes.
Redemption of these securities and payment of interest will only take place when all the other creditors have been satisfied.
136 Part B - Balance sheet Section 6 Payables
Funds received by the Bank, reflected in liability captions 10, 20, 30 and 40, total 23,328,940 thousand Euro and are analysed as follows:
Change Liability captions 31.12.2004 31.12.2003 (+/–) %
10. Due to banks 5,425,511 5,954,664 – 529,153 – 8.89
20. Due to customers 13,390,289 13,223,142 167,147 1.26
30. Securities issued 4,507,233 3,504,858 1,002,375 28.60
40. Public funds administered 5,907 4,664 1,243 26.65
Total 23,328,940 22,687,328 641,612 2.83
Due to banks and due to customers are valued with the same policies used for loans.
Repurchase agreements entered for funding purposes are recorded at their spot value as amounts due to customers/banks and do not result in movements in securities. The related expense, represented by the interest coupons on the underlying securities and the differential between their spot and forward prices, is recorded as “interest expense and similar charges” on an accruals basis.
Part B - Balance sheet 137 Analysis of caption 10 “Due to banks”
Change 31.12.2004 31.12.2003 (+/–) %
Repayable on demand: 1,204,496 1,212,454 – 7,958 – 0.66
- Central banks 0 0 0 n.s. - Unrestricted deposits 1,000,031 1,042,230 – 42,199 – 4.05 - Current account balances relating to services received 204,375 169,840 34,535 20.33 - Other 90 384 – 294 – 76.56
Time deposits or with notice period: 4,221,015 4,742,210 – 521,195 – 10.99
- Central banks 0 251,183 – 251,183 – 100.00 of which: - repurchase agreements with the Bank of Italy 0 251,183 – 251,183 – 100.00
- Restricted deposits 4,059,924 4,327,283 – 267,359 – 6.18 - Repurchase agreements 0 0 0 n.s. - Funding from international agencies 134,503 161,234 – 26,731 – 16.58 - Other 26,588 2,510 24,078 n.s.
Total 5,425,511 5,954,664 – 529,153 – 8.89
Of which: Euro 2,882,340 3,335,228 – 452,888– 13.58 Foreign currency 2,543,171 2,619,436 – 76,265 – 2.91
6.1 Detail of caption “Due to banks”
Change 31.12.2004 31.12.2003 (+/–) %
a) Repurchase agreements 0 251,183 – 251,183 – 100.00
b) Securities loaned: loans against securities borrowed 0 0 0 n.s.
138 Part B - Balance sheet Analysis of caption 20 “Due to customers”
Change 31.12.2004 31.12.2003 (+/–) %
Repayable on demand: 12,137,392 11,433,545 703,847 6.16
- Savings deposits 606,728 591,024 15,704 2.66 - Current accounts 11,530,617 10,842,521 688,096 6.35 - Other 47 0 47 n.s.
Time deposits or with notice period: 1,252,897 1,789,597 – 536,700 – 29.99
- Restricted savings deposits 19,591 18,738 853 4.55 - Restricted current accounts 588,455 648,385 – 59,930 – 9.24 - Repurchase agreements 644,851 1,122,474 – 477,623 – 42.55 - Loans against securities borrowed 0 0 0 n.s.
Total 13,390,289 13,223,142 167,147 1,26
Of which: Euro 12,629,141 12,395,152 233,989 1.89 Foreign currency 761,148 827,990 – 66,842 – 8.07
6.2 Detail of caption “Due to customers”
Change 31.12.2004 31.12.2003 (+/–) %
a) Repurchase agreements 644,851 1,122,474 – 477,623 – 42.55
b) Securities loaned: loans against securities borrowed 0 0 0 n.s.
Part B - Balance sheet 139 Analysis of caption 30 “Securities issued”
Change 31.12.2004 31.12.2003 (+/–) %
Bonds 3,768,576 2,894,382 874,194 30.20
- bonds 3,768,576 2,894,382 874,194 30.20
Certificates of deposit 599,487 459,832 139,655 30.37
- short-term 580,765 435,643 145,122 33.31 - long-term 13,461 17,977 – 4,516 – 25.12 - expired and uncollected 5,261 6,212 – 951 – 15.31
Other securities 139,170 150,644 – 11,474 – 7.62
- bankers’ drafts 139,170 150,644 – 11,474 – 7.62
Total 4,507,233 3,504,858 1,002,375 28.60
Of which: Euro 4,174,672 3,328,221 846,451 25.43 Foreign currency 332,561 176,637 155,924 88.27
Analysis of certificates Change of deposits by counterparty 31.12.2004 31.12.2003 (+/–) %
Subscribed by customers 158,560 201,121 – 42,561 – 21.16 - short-term 139,838 176,932 – 37,094 – 20.97 - medium/long-term 13,461 17,977 – 4,516 – 25.12 - expired and uncollected 5,261 6,212 – 951 – 15.31
Subscribed by banks 440,927 258,711 182,216 70.43 - short-term 440,927 258,711 182,216 70.43 - medium/long-term 0 0 0 n.s. - expired and uncollected 0 0 0 n.s.
Total 599,487 459,832 139,655 30.37
Bonds, certificates of deposits and bankers’ cheques are recorded at nominal value. Zero coupon bonds and certificates of deposit are recorded at their subscription value plus compound interest accruing since placement on an annual basis. Bonds issued “below par” are stated at par. The difference between par value and the amount actually collected is recorded as a deferred expense and amortised over the term of the bond issue concerned.
Analysis of caption 40 “Public funds administered”
Change 31.12.2004 31.12.2003 (+/–) %
Funds provided by local public sector entities 5,907 4,664 1,243 26.65
Total 5,907 4,664 1,243 26.65
140 Part B - Balance sheet Section 7 Provisions
Provisions, which do not adjust asset balances, are reflected in the liability captions 70, 80 and 90 and total 422,597 thousand Euro, as follows:
Change Liability captions 31.12.2004 31.12.2003 (+/–) %
70. Provision for severance indemnities 196,066 196,035 31 0.02
80. Provisions for risks and charges: 226,531 291,261 – 64,730 – 22.22
a) pensions and similar commitments 14,721 15,628 – 907 – 5.80
b) taxation 35,376 76,049 – 40,673 – 53.48
c) other 176,434 199,584 – 23,150 – 11.60
90. Reserve for possible loan losses 0 4,273 – 4,273 – 100.00
Total 422,597 491,569 – 68,972 – 14.03
Analysis of caption 70 “Provision for severance indemnities”
Change 31.12.2004 31.12.2003 (+/–) %
Provision for severance indemnities 196,066 196,035 31 0.02
Changes in caption 70 “Provision for severance indemnities”
Opening balance 196,035
Increases: 22,155 - Provisions 22,155
Decreases: – 22,124 - Uses indemnities paid and advances to personnel – 21,569 - Other changes: – 555 - flat-rate 11% tax on revaluation – 546 - exchange differences on balances with the Bank’s foreign branches – 9
Closing balance 196,066
The provision for severance indemnities covers the liability to all employees at year-end, accrued in compliance with current legislation, collective labour contracts and in-house supplementary agreements. During the year, severance indemnities totaling 2,857 thousand Euro were booked to the Bipiemme Pension Fund.
Part B - Balance sheet 141 Analysis of caption 80 a) “Provisions for risks and charges: pensions and similar commitments”
Supplementary pension Change and provident funds 31.12.2004 31.12.2003 (+/–) %
Former Banca Popolare di Bologna e Ferrara 14,671 15,562 – 891 – 5.73
Former Banca Agricola Milanese 50 66 – 16 – 24.24
Total 14,721 15,628 – 907 – 5.80
Changes in caption 80 a) “Pensions and similar commitments: supplementary pensions and provident funds”
Supplementary Supplementary pension and pension and provident fund provident fund of former of former Banca Popolare di Banca Agricola Description Bologna e Ferrara Milanese Total
Opening balance 15,562 66 15,628
Increases: 667 0 667 - Provisions 667 0 667
Decreases: – 1,558 – 16 – 1,574 - Uses – 1,558 – 12 – 1,570 - Other changes: - release to income of overprovisions 0 – 4 – 4
Closing balance 14,671 50 14.721
Provisions for pensions and similar commitments cover in full the obligations to former employees of the former Banca Popolare di Bologna e Ferrara and the former Banca Agricola Milanese, and their survivors.
142 Part B - Balance sheet Analysis of caption 80 b) “provisions for risks and charges: taxation”
Change 31.12.2004 31.12.2003 (+/–) %
Direct and indirect taxes: 18,643 56,816 – 38,173 – 67.19
Current corporate income taxes (IRES) 0 39,583 – 39,583 – 100.00 Current regional income taxes (IRAP) 9,059 13,126 – 4,067 – 30.98 Indirect taxes and duties 567 1,434 – 867 – 60.46 Deferred tax liabilities 8,015 1,879 6,136 n.s. Flat-rate tax on merger deficit and gains on disposal of equity investments 0 582 – 582 – 100.00 Potential charges from tax disputes 1,002 212 790 n.s.
Taxation of foreign branches 16,733 19,233 – 2,500 – 13.00
Total 35,376 76,049 – 40,673 – 53.48
Changes in caption 80 b) “Provisions for risks and charges: taxation”
Opening balance 76,049
Increases: 24,687 - Provisions: 23,408 - income taxes 13,800 - deferred tax liabilities 8,325 - other taxes and duties 450 - tax disputes 833
- Other changes: 1,279 - tax provision acquired following the merger of Carinord 1 SpA 1,279
Decreases: – 65,360 - Uses for payments made during the year – 60,670
- Other changes: – 4,690 - release to income of overprovisions – 2,405 - deferred taxes reversing in the year – 2,189 - exchange differences on provisions of foreign branches – 96
Closing balance 35,376
Part B - Balance sheet 143 The provision for taxation reflects a prudent estimate of direct and indirect taxes, including the local taxes incurred by foreign branches, deferred taxes and any additional amounts that may become payable as a result of outstanding disputes with the tax authorities. the dispute involving the IRPEG and ILOR assessments for tax year 1989 have been concluded in the Bank’s favour. This means that all disputes with the tax authorities for years up to 1999 have now been closed once and for all.
To date no assessments for the years 2000, 2002 and 2003 (which are still open) have been notified.
A notice of dispute was issued on 22 December 2004 in respect of tax year 2001 (following the tax audit mentioned in the Bank’s 2003 report on operations). No issues were raised concerning the more significant transactions examined; the Bank considers that the disputed items will be overturned upon appeal. In any case, the tax authorities have not yet sent the Bank any notice of assessment; if such a notice is received, the Bank will appeal against any potential claims. However, the Bank has prudently decided to provide the sum of 500 thousand Euro against 2004 income to take account of any potential costs.
CONSOB resolution no. 1011405 dated 15 February 2001 - Tax benefits under Legislative Decree 153 dated 17 May 1999 (“Ciampi Law”).
Following the introduction of Decree 63 dated 15/4/2002 (converted into Law 112/2002) and Decree 282 dated 24/12/2002 (converted into Law 27 of 21 February 2002), whose effects were illustrated in the 2002 annual report, there is no additional news to report this year.
144 Part B - Balance sheet Deferred tax assets and liabilities
Deferred tax assets
Deferred tax assets of 85,833 thousand Euro (balance sheet caption 130) reflect the timing differences between book values and taxable amounts which will reverse in the next five years. Beyond this period, deferred tax assets are only recorded to the extent they are matched by deferred tax liabilities.
7.4 Changes in “Deferred tax assets” recorded in the statement of income
Corporate Regional income tax income tax (IRES) (IRAP) Total
1. Brought forward 82,148 12,100 94,248
2. Increases 16,287 1,795 18,082 2.1 Deferred tax assets arising in the year 16,287 1,744 18,031 2.2 Other increases 0 51 51
3. Decreases – 23,117 – 3,380 – 26,497 3.1 Deferred tax assets cancelled in the year – 23,117 – 3,380 – 26,497 3.2 Other decreases 0 0 0
4. Carried forward 75,318 10,515 85,833
The principal types of timing difference giving rise to the recognition of deferred tax assets are as follows:
a) Writedowns up to the end of 1999 against customer loans, where the tax relief is spread evenly over the seven years following that in which they are charged to the statement of income 3,112 477 3,589
b) Writedowns as from 1 January 2000 against customer loans, where the tax relief is spread evenly over the nine years follo- wing that in which they are charged to the statement of income 29,013 4,449 33,462
c) Provisions for risks and charges and for guarantees given and commitments that may be deducted over the next five years 39,441 5,283 44,724
d) Administrative and other costs deductible over the next five years 1,997 306 2,303
e) Writedowns of equity investments, booked up until 31 December 2003, which are deductible over the following three years 1,755 0 1,755
75,318 10,515 85,833
The net increases and decreases in deferred tax assets amount to 8,415 thousand Euro and have been booked to the statement of income under “income taxes”.
Part B - Balance sheet 145 Unrecorded deferred tax assets
Deferred tax assets totalling around 41 million Euro have not been recorded in respect of the following timing differences: adjustments to customer loans that will become deductible after more than five years; taxed provisions for risks and charges and taxed writedowns of customer loans and amounts due from banks, whose deductibility for tax purposes is uncertain at the time of preparing these financial statements; writedowns against securities and equity investments whose deductibility for tax purposes is uncertain at the time of preparing these financial statements.
Deferred tax liabilities
Deferred tax liabilities have been recognised to the extent that they are likely to materialise in the future. They take account of capital gains whose taxation is spread over a number of years by virtue of article 86 of the New Income Tax Consolidation Act and the elimination of past fiscal distortions, as explained in Part A - Accounting policies of these notes.
7.5 Changes in “Deferred tax liabilities” recorded in the statement of income.
Corporate Regional Total income tax income tax (IRES) (IRAP)
1. Brought forward 1,694 185 1,879
2. Increases 7,064 1,261 8,325 2.1 Deferred tax liabilities arising during the year 3,865 770 4,635 2.2 Other increases 3,199 491 3,690
3. Decreases – 1,923 – 266 – 2,189 3.1 Deferred tax liabilities cancelled during the year – 1,923 – 266 – 2,189 3.2 Other decreases 0 0 0
4. Carried forward 6,835 1,180 8,015
The net increases and decreases in deferred tax liabilities amount to 6,136 thousand Euro and have been booked to the statement of income under “income taxes”, with a corresponding entry going to the “provision for taxation”.
Unrecorded deferred tax liabilities
Amount of and changes in taxable timing differences (and related components) which do not require the recognition of deferred tax liabilities, since unlikely to crystallise:
No deferred tax liabilities have been provided for on reserves in suspense for tax purposes of 390,332 thousand Euro, since they are not expected to be distributed and it is therefore unlikely that they will become taxable. Of this amount, 354,488 thousand Euro refers to a share capital increase in 1996 to adjust the par value per share from Lire 1,000 to Lire 5,000; 34,729 thousand Euro refers to a share capital increase in 2001 to raise the par value per share to Euro 3; the other 1,115 thousand Euro refers to Banca 2000, now absorbed;
In accordance with art. 14 of Law 342 dated 21 November 2000, which allows companies to recognise for fiscal purposes the revaluation of assets booked to the financial statements, in 2000 the Bank decided to align the statutory and fiscal values of the buildings revalued on allocation of part of the deficit that arose on the absorption of Banca Agricola Milanese and Banca Briantea, by paying the flat-rate tax of 19% established by that law. An amount of 18,163 thousand Euro, equal to the realignment made (22,423 thousand Euro), net of flat-rate tax (4,260 thousand Euro), was therefore transferred from the “unrestricted reserve” to the “reserve art. 14 Law 342, 21 November 2000”.). Since no distributions of this reserve are expected, the related deferred taxation of about 3 million Euro has not been provided.
146 Part B - Balance sheet 7.3 Analysis of caption 80 c) “Provisions for risks and charges: other”
Change 31.12.2004 31.12.2003 (+/–) %
Guarantees and commitments 96,119 121,786 – 25,667 – 21.08
Other risks and charges: 80,315 77,798 2,517 3.24
Donations and community grants 246 612 – 366 – 59.80
Holidays not taken 5,877 7,593 – 1,716 – 22.60
Future personnel charges 240 280 – 40 – 14.29
Commitments to the Interbank Deposit Guarantee Fund 5 5 0 n.s.
Recovery procedures and legal disputes 54,370 51,449 2,921 5.68
Miscellaneous provisions 19,577 17,859 1,718 9.62
Total 176,434 199,584 – 23,150 – 11.60
Changes in the individual provisions are analysed in separate tables.
Changes in caption 80 c) “Provisions for risks and charges – other: Guarantees and commitments”
Opening balance 121,786
Increases: 6,123 - Provisions 6,123
Decreases: – 31,790 - Uses – 26,242 - Other changes: writebacks – 5,469 - Other changes: exchange differences – 79
Closing balance 96,119
This provision covers losses in relation to guarantees given and commitments, under the accounting treatment discussed in part A – Accounting policies.
The balance of 96,119 thousand Euro covers expected losses determined on a specific basis (91,839 thousand Euro), the inherent risk of loss in relation to outstanding guarantees given and commitments (4,252 thousand Euro) and general country risks (28 thousand Euro).
Part B - Balance sheet 147 Analysis of exposure to individual country risk
The table below shows the unsecured exposure in relation to guarantees given and commitments to individual countries at risk and the corresponding provisions made. As far as commercial transactions are concerned, in accordance with Bank of Italy instructions, only 15% of the nominal value will form part of the unsecured exposure on which provisions must be calculated. Provisions have been calculated using the rates agreed with the Italian Bankers’ Association.
31.12.2004 31.12.2003 Gross unsecured Provisions for Gross unsecured Provisions for exposure guarantees and exposure guarantees and Country commitments commitments
Indonesia 139 21 0 0
Other 45 7 77 12
Total 184 28 77 12
148 Part B - Balance sheet Changes in caption 80 d) “Provisions for risks and charges - Other: other risks and charges”
Description Donations and Holidays Future Commitments Recovery Miscellaneous community not taken personnel to the Interbank procedures and provisions grants charges Deposit legal dispute Guarantee Fund
Opening balance 612 7,593 280 5 51,449 17,859
Increases: 1,876 0 113 0 17,620 9,641 - Provisions 1,876 0 113 0 17,620 9,641 - Other changes 000000
Decreases: – 2,242 – 1,716 – 153 0 – 14,699 – 7,923 - Uses – 2,242 – 454 – 153 0 – 8,619 – 5,172 - Other changes: - recharge to the statement of income 0 – 1,262 0 0 – 6,080 – 2,751 - exchange differences 000000
Closing balance 246 5,877 240 5 54,370 19,577
Donations and community grants This provision was authorised by the ordinary shareholders’ meeting when approving the allocation of net profit. Uses reflect donations made during the year.
Future personnel charges This is a prudent provision to cover legal disputes with personnel.
Commitments to the Interbank Deposit Guarantee Fund This provision covers potential amounts due by the Bank in relation to interventions already approved by the Interbank Deposit Guarantee Fund.
Recovery procedures and legal disputes This provision covers forecast losses on outstanding lawsuits and disputes brought against the Bank: 20,769 thousand Euro for legal disputes and 33,601 thousand Euro for claims from bankruptcy liquidators.
Miscellaneous provisions These provisions cover the estimated costs of closing the Bank’s foreign branches, legal expenses to be reimbursed to former directors, statutory auditors and managers following the final settlement of legal proceedings in their regard and potential costs for claims received regarding “anatocism”.
Part B - Balance sheet 149 7.1 Analysis of caption 90 “Reserve for possible loan losses”
Change 31.12.2004 31.12.2003 (+/–) %
Provision against default interest deemed recoverable (art. 71.6 of Income Tax Consolidation Act) 0 4,273 – 4,273 – 100.00
Total 0 4,273 – 4,273 – 100.00
7.2 Changes in “Reserve for possible loan losses” (caption 90)
A. Opening balance 4,273
B. Increases 0 B1. Provisions 0 B2. Other changes 0
C. Decreases – 4,273 C1. Uses 0 C2. Other changes: defiscalisation: opening balance at 1.1.2004 booked to “non-recurring income” – 4,273
D. Closing balance 0
150 Part B - Balance sheet Section 8 Share capital, equity reserves and subordinated liabilities
Captions 120, 130, 140 and 170 of shareholders’ equity amount to 2,643,438 thousand Euro, while subordinated liabilities under caption 110 total 831,261 thousand Euro.
Change Caption 31.12.2004 31.12.2003 (+/–) %
120 Share capital 1,245,103 1,157,982 87,121 7.52
130 Share premium reserve 339,689 339,689 0 n.s.
140 Reserves: 933,422 850,848 82,574 9.70 a) legal reserve 193,740 180,713 13,027 7.21 b) reserve for own shares 0 37 – 37 – 100.00 c) statutory reserves 576,546 521,834 54,712 10.48 d) other reserves: 163,136 148,264 14,872 10.03 - unrestricted reserve 87,557 96,433 – 8,876 – 9.20 - reserve for own shares: portion available for allocation 19,485 9,448 10,037 106.23 - merger surplus reserve 13,632 0 13,632 n.s. - reserve Law 153/99 24,064 24,064 0 n.s. - reserve art. 14 Law 342, 21 November 2000 18,163 18,163 0 n.s. - reserve art. 13.6 Decree 124/93 235 156 79 50.64
170 Net profit for the year 125,224 130,268 – 5,044 – 3.87
Total shareholders’ equity 2,643,438 2,478,787 164,651 6.64
110 Subordinated liabilities 831,261 831,261 0 n.s.
Information on BPM shares
Change 31.12.2004 31.12.2003 (+/–) %
Number of shares 415,034,231 385,993,918 29,040,313 7.52
- Number of shares outstanding 415,034,231 385,986,822 29,047,409 7.53
- Number of own shares 0 7,096 – 7,096 – 100.00
Part B - Balance sheet 151 Changes in share capital, equity reserves and subordinated liabilities
Description Caption 120 Caption 130 Share capital Share premium reserve
Opening balance 1,157,982 339,689
Increases 87,121 0 Increase in share capital approved following the merger of Carinord 1 SpA by issuing 29,040,313 new ordinary shares to the owners of the 56,941,791 Carinord 1 shares outstanding, in a ratio of 0.51 BPM shares for every Carinord 1 share of Euro 0.52 at par. 87,121 0
Decreases 00
Closing balance 1,245,103 339,689
The share capital of the Parent Bank as of 31 December 2004 was worth Euro 1,245,102,693 fully subscribed and paid in, made up of 415,034,231 ordinary shares with a par value of Euro 3 each.
Caption 140 “Other reserves”
Description a) b) c) Legal reserve Reserve Statutory for own shares reserves
Opening balance 180,713 37 521,834
Increases 13,027 0 54,712 Allocation of net profit, as approved at the shareholders’ meeting held on 24 April 2004 13,027 0 54,712
Decreases 0– 370 Transfer to “reserve for own shares – portion available for allocation” following a change in the own shares portfolio 0 – 37 0
Closing balance 193,740 0 576,546
152 Part B - Balance sheet Caption 140 “Other reserves: d) other reserves”
Unrestricted Reserve for Merger Reserve Reserve Reserve Total reserve own shares surplus Law 153/99 art. 14 Law art. 13.6 Portion reserve 153/99 342, 21 Decree available for November 124/93 allocation 2000
Opening balance 96,433 9,448 0 24,064 18,163 156 148,264
Increases 1,124 10,037 13,632 0 0 79 24,872
Allocation of net profit, as approved at shareholders’ meeting held on 24 April 2004 1,1240000791,203
Surplus on exchange following the merger of Carinord 1 0 0 13,632 0 0 0 13,632
Transfer from “reserve for own shares” following purchase of shares 0 37 000037
Transfer from “Unrestricted reserve”, as approved by the shareholders’ meeting held on 24 April 2004 0 10,000 000010,000
Decreases – 10,00000000– 10,000
To “reserve for own shares: portion available for allocation”, as approved at shareholders’ meeting held on 24 April 2004 – 10,000 00000– 10,000
Closing balance 87,557 19,485 13,632 24,064 18,163 235 163,136
In accordance with art. 16.1 of Decree 87/92, unrestricted reserves are higher than total unamortised intangible fixed assets (e.g. start- up and expansion costs, research, development and advertising expenses, which benefit future years).
The reserve art. 14, Law 342 of 21 November 2000 relates to the tax recognition of the higher value recorded in the financial statements for the buildings to which to merger deficit arising on the absorption of Banca Agricola Milanese and Banca Briantea was allocated. In accordance with this law, the Bank decided to align statutory amounts and fiscal amounts for assets to which part of this merger deficit had been allocated, paying a flat-rate tax of 19% as required. An amount of 18,163 thousand Euro, equal to the realignment made (22,423 thousand Euro), net of flat-rate tax (4,260 thousand Euro), was therefore transferred from the “unrestricted reserve” to the “reserve art. 14 Law 342, 21 November 2000”.
Part B - Balance sheet 153 Analysis of caption 170 “Net profit for the year”
Allocation of 2003 net profit, as approved at the shareholders’ meeting held on 24 April 2004: 130,268
10% to legal reserve – 13,027
42% to statutory reserve – 54,712
Residual balance: 62,529
Of which: To the shareholders in the amount of Euro 0.12 for each of the 385,993,918 shares issued – 46,319 20% to the employees – 12,506 3% to charity reserve – 1,876 1% to the Board of Directors – 625 to Reserve art. 13.6 Decree 124/93; – 79 Residual balance to Unrestricted Reserve – 1,124
Closing balance 0
Net profit as of 31 December 2004 125,224
Distribution, availability and formation of equity reserves
Description Amount Possible uses Portion Tax Summary of uses available restriction (5) made in the three for allocation previous years To cover For other losses reasons
Share capital 1,245,103 390,332 No uses No uses
Equity reserves (1) Share premium reserve 339,689 A, B, C 284,408 No uses (2)
Retained earnings Legal reserve 193,740 B No uses No uses Statutory reserves 576,546 A, B, C 576,546 No uses No uses Unrestricted reserve 87,557 A, B, C 87,557 No uses No uses Reserve for own shares: portion available for distribution 19,485 No uses (3) Reserve art. 13.6 Law 124/93 235 A, B 235 No uses No uses Reserve Law 153/99 24,064 A, B, C 24,064 No uses No uses Reserve art. 14 Law 342 of 21 November 2000 18,163 A, B, C 18,163 No uses No uses
Other reserves Merger surplus reserve 13,632 A, B, C 13,632 No uses (2) Revaluation reserves: Law 576/75 0 No uses (2) Revaluation reserves: Law 72/83 0 No uses (2) Revaluation reserves: Law 413/91 0 No uses (2)
Total 2,518,214 962,143 432,794
Restricted portion – 16,879 (4) Net profit for the year 125,224
Residual unrestricted portion 945,264 Total shareholders’ equity 2,643,438
154 Part B - Balance sheet Note: A: for increase in capital B: to cover losses C: for distribution to shareholders
(1) Pursuant to art. 1 of the Italian Civil Code, the entire amount of this reserve can be distributed only if the legal reserve reaches the amount established by art. 1 of the Italian Civil Code (one-fifth of share capital). As a consequence, the portion available for allocation of the share premium reserve is reduced to such amount.
(2) During 2001 the following reserves were booked to “Share capital” following the bonus increase in capital for the conversion into Euro of the par value of the Bank’s shares: “Share premium reserve” (68,477 thousand Euro), “Merger surplus reserve” (10,367 thousand Euro), “Revaluation reserve: Law 576/75” (1,394 thousand Euro), “Revaluation reserve: Law 72/83” (21,284 thousand Euro) and “Revaluation reserve: Law 413/91” (12,051 thousand Euro).
(3) During 2003, the “Reserve for own shares: portion available for distribution” was reduced by 467 thousand Euro following the bonus allocation of shares to employees in accordance with the regulations of the Banca Popolare di Milano Partial Coupon 1998/2008 convertible subordinated bond.
(4) This is the restricted portion to cover unamortised deferred charges (art. 16.1 Decree 87/92).
(5) Amounts forming part of the company’s taxable income in the event of distribution.
8.1 Capital adequacy and minimum requirements for supervisory purposes
Captions/amounts 31.12.2004 31.12.2003
A. Capital for supervisory purposes A.1 Tier 1 capital 2,409,121 2,259,726 A.2 Tier 2 capital 810,896 797,284 A.3 Items to be deducted – 35,705 – 172,552 A.4 Capital for supervisory purposes 3,184,312 2,884,458
B. Prudent supervisory requirements B.1 Credit risk 1,549,022 1,475,464 B.2 Market risk 129,236 67,819 of which: - risk on dealing portfolio 129,236 67,819 - exchange risk 00 B.3. Tier 3 subordinated loans 00 B.4 Other prudent requirements 35,619 91,398 B.5 Total minimum requirements 1,713,877 1,634,681
C. Risk assets and solvency ratios C.1 Risk-weighted assets 24,483,954 23,352,591 C.2 Tier 1 capital /risk-weighted assets 9.84% 9.68% C.3 Capital for supervisory purposes/risk-weighted assets 13.01% 12.35%
Part B - Balance sheet 155 Analysis of caption 110 “Subordinated liabilities”
Bond 31.12.2004 31.12.2003 Amount in Bond issue Interest Date of Notes foreign price rate maturity currency
Hybrid instruments (Upper Tier 2): 331,882 331,882
Subordinated bond: Banca Popolare di Milano – Upper Tier 2 – 7.625% Notes due 2011 160,000 160,000 160,000 EUR 99.202 7.625% 29.6.2011 1
Subordinated bond: Banca Popolare di Milano 2001-2031 Upper Tier 2 – 7.625% 171,882 171,882 171,882 EUR 100 Floating rate 2.7.2031 2
Subordinated liabilities (lower Tier 2): 499,379 499,379
Subordinated bond: Banca Popolare di Milano – Subordinated Callable Step Up Floating Rate Notes due 2010 400,000 400,000 400,000 EUR 99.568 Floating rate 13.12.2010 3
Subordinated bond: Banca Popolare di Milano Subordinated Mix Performances 16 September 2003/2013 99,379 99,379 99,379 EUR 100 Floating rate 16.9.2013 4
Total 831,261 831,261
Notes
1 Interest rate: fixed rate 7.625%
Quotation: Luxembourg Stock Exchange
Early redemption clause: “tax reason” only after approval by the Bank of Italy
Subordination clause: The loan contains a subordination clause which complies with the current provisions of the supervisory instructions issued by the Bank of Italy. Therefore, should the Bank enter voluntary or forced liquidation, bondholders will only be reimbursed after all non-subordinated creditors have been satisfied.
Other information: The bond is part of a long-term issue programme (E.M.T.N.), approved by the Board of Directors on 11 September 2000 for a total amount of 2,000 million Euro.
156 Part B - Balance sheet 2 Interest rate: fixed rate 7.625% until 2 July 2011; floating rate (Euribor + 3.725%) starting from 2 July 2011
Quotation: not quoted
Early redemption clause: the Bank may decide to redeem the loan early starting from 2 July 2011, subject to authorisation from the Bank of Italy
Subordination clause: The loan contains a subordination clause which complies with the current provisions of the supervisory instructions issued by the Bank of Italy. Therefore, should the Bank enter voluntary or forced liquidation, bondholders will only be reimbursed after all non-subordinated creditors have been satisfied.
Other information: The subordinated loan was fully subscribed by Bpm Luxembourg S.A. to support an issue of preference shares by the vehicle BPM Capital Trust 1, for an amount of 160 million Euro at an issue price of 100, with a perpetual duration and a fixed-rate coupon. A callable option has been fixed for the end of the tenth year and after this date, if the option is not exercised, the note will become floating-rate.
3 Interest rate: floating rate (3–month Euribor plus 1.20% until December 2005, 3–month Euribor plus 1.60% beyond that date)
Quotation: Luxembourg Stock Exchange
Early redemption clause: the Bank may decide to redeem the loan early starting from the fifth year with notification thirty working days before the date fixed for redemption, subject to authorisation from the Bank of Italy.
Subordination clause: The loan contains a subordination clause which complies with the current provisions of the supervisory instructions issued by he Bank of Italy. Therefore, should the Bank enter voluntary or forced liquidation, bondholders will only be reimbursed after all non-subordinated creditors have been satisfied.
Other information: The bond is part of a long-term issue programme (E.M.T.N.), approved by the Board of Directors on 11 September 2000 for a total amount of 2,000 million Euro.
4 Interest rate: fixed-rate coupon of 3.01% per annum (3–year interest rate swap value dated 16.9.2003) for the period 16.9.2003-16.9.2006; floating rate coupon 6–month Euribor for the period 16.9.2006-16.9.2008; floating rate coupon 6–month Euribor + 0.50% for the period 16.9.2008-16.9.2013.
Quotation: not quoted
Early redemption clause: the Bank may decide to redeem the loan early starting from 16 September 2008 and at every coupon detachment date.
Subordination clause: The loan contains a subordination clause which complies with the current provisions of the supervisory instructions issued by e Bank of Italy. Therefore, should the Bank enter voluntary or forced liquidation, bondholders will only be reimbursed after all non-subordinated creditors have been satisfied.
Part B - Balance sheet 157 Change in asset caption 120 “own shares”
Number of % of Nominal Book shares share capital value value
Opening balance 7,096 0.002% 21 37
Increases 3,322,725 9,968 16,282 - Purchases 3,322,725 9,968 16,229 - Dealing profits 53
Decreases – 3,329,821 – 9,989 – 16,319 - Sales – 73,364 – 220 – 373 - Grant of 2,549,742 shares to employees with a normal value of Euro 4.898, by way of distributing 20% of 2003 net profit in accordance with the resolution passed by the ordinary shareholders’ meeting held on 24 April 2004. – 2,549,742 – 7,649 – 12,489 - Grant of 706,715 shares, with a normal value of Euro 4.892, to employees who joined the CUM plan. – 706,715 – 2,120 – 3,457
Closing balance 0 0.00% 0 0
During 2004, purchases and sales of own shares involved 3,322,725 own shares, subsequently granted to employees upon allocation of 2003 net profit (2,549,742 shares) and under the “BPM employee share accumulation plan” (706,715 shares); the remaining shares were sold, meaning that at 31 December 2004 the Bank held no own shares.
“Dealing profits” also include 46 thousand Euro as the difference between the average purchase price and the “normal” price of shares granted to employees as part of the above-mentioned plan.
158 Part B - Balance sheet Section 9 Other Liabilities
Liability captions 50 and 60 amounting to 892,757 thousand Euro are analysed below:
Change Liability captions 31.12.2004 31.12.2003 (+/–) %
50. Other liabilities 701,491 723,051 – 21,560 – 2.98 60. Accrued expenses and deferred income 191,266 173,284 17,982 10.38
Total 892,757 896,335 – 3,578 – 0.40
9.1 Analysis of caption 50 “Other liabilities”
Change 31.12.2004 31.12.2003 (+/–) %
Items in transit between branches 0 4,005 – 4,005 – 100.00
Items relating to security and currency transactions 72 101 – 29 – 28.71
Due to tax authorities on behalf of customers 49,851 46,167 3,684 7.98
Guarantee deposits from third parties 55 23 32 139.13
Amounts available to third parties 129,624 150,907 – 21,283 – 14.10
Adjustments for illiquid items concerning the portfolio 47,946 55,124 – 7,178 – 13.02
Premiums collected on options sold 2,626 2,417 209 8.65
Effect of revaluing off-balance sheet transactions 54,421 11,055 43,366 n.s.
Items being processed 249,179 276,845 – 27,666 – 9.99
Due to suppliers 55,232 81,704 – 26,472 – 32.40
Due to social security authorities 24,743 21,577 3,166 14.67
Other items 87,742 73,126 14,616 19.99
Total 701,491 723,051 – 21,560 – 2.98
Part B - Balance sheet 159 9.2 Analysis of caption 60 “Accrued expenses and deferred income”
Change 31.12.2004 31.12.2003 (+/–) %
Accrued expenses 156,412 145,504 10,908 7.50
Interest on amounts due to banks 15,404 17,411 – 2,007 – 11.53 Interest on amounts due to customers 1,263 1,994 – 731 – 36.66 Interest on securities issued 46,686 43,778 2,908 6.64 Interest on subordinated loans 14,297 14,185 112 0.79 Differentials on forward currency transactions and derivatives 72,743 64,290 8,453 13.15 Other charges and commission 6,019 3,846 2,173 56.50
Deferred income: 34,854 27,780 7,074 25.46
Interest income and commission from customers collected in advance 13,016 13,688 – 672 – 4.91 Differentials on forward currency transactions and derivatives 20,412 11,996 8,416 70.16 Interest on discounted notes 1,426 2,096 – 670 – 31.97
Total accrued expenses and deferred income 191,266 173,284 17,982 10.38
9.3 Adjustments for accrued expenses and deferred income
No adjustments have been made to the asset and liability captions to which these accruals and deferrals refer.
160 Part B - Balance sheet Section 10 Guarantees and commitments
Balance sheet captions 10 and 20 relating to guarantees and commitments total 6,772,993 thousand Euro.
Change Captions 31.12.2004 31.12.2003 (+/–) %
10.Guarantees given 3,744,802 4,169,756 – 424,954 – 10.19
20. Commitments 3,028,191 3,464,690 – 436,499 – 12.60
Total 6,772,993 7,634,446 – 861,453 – 11.28
10.1 Analysis of caption 10 “Guarantees given”
Change 31.12.2004 31.12.2003 (+/–) %
a) Commercial guarantees 2,987,789 3,203,255 – 215,466 – 6.73
b) Financial guarantees 743,064 953,546 – 210,482 – 22.07
c) Assets lodged in guarantee 13,949 12,955 994 7.67
Total 3,744,802 4,169,756 – 424,954 – 10.19
Analysis of “guarantees given” by technical form
Change 31.12.2004 31.12.2003 (+/–) %
a) Commercial guarantees: 2,987,789 3,203,255 – 215,466 – 6.73 - acceptances 29,177 21,115 8,062 38.18 - endorsements and sureties 2,822,737 3,009,852 – 187,115 – 6.22 - documentary credits 135,875 172,288 – 36,413 – 21.13
b) Financial guarantees: 743,064 953,546 – 210,482 – 22.07 - acceptances 2,555 3,191 – 636 – 19.93 - endorsements and sureties 740,509 950,355 – 209,846 – 22.08
c) Assets lodged in guarantee: 13,949 12,955 994 7.67 - guarantee deposits on behalf of third parties 13,949 12,955 994 7.67
Total 3,744,802 4,169,756 – 424,954 – 10.19
Of which: Residents 2,406,354 2,553,678 – 147,324 – 5.77 Non-residents 1,338,448 1,616,078 – 277,630 – 17.18
Part B - Balance sheet 161 10.2 Analysis of caption 20 “Commitments”
Change 31.12.2004 31.12.2003 (+/–) %
a) Commitments to grant finance (certain to be called) 1,180,732 1,624,463 – 443,731 – 27.32
b) Commitments to grant finance (not certain to be called) 1,847,459 1,840,227 7,232 0.39
Total 3,028,191 3,464,690 – 436,499 – 12.60
Analysis of “Commitments” by technical form
Change 31.12.2004 31.12.2003 (+/–) %
a) Commitments to grant finance (certain to be called): 1,180,732 1,624,463 – 443,731 – 27.32 - securities to be received for transactions to be settled 160,867 187,776 – 26,909 – 14.33 - loans and deposits to be disbursed 455,520 580,547 – 125,027 – 21.54 - other commitments 83,781 108,589 – 24,808 – 22.85 - credit derivatives 480,564 747,551 – 266,987 – 35.71
b) Commitments to grant finance (not certain to be called on): 1,847,459 1,840,227 7,232 0.39 - undrawn irrevocable lines of credit 1,767,227 1,810,859 – 43,632 – 2.41 - other commitments 80,232 29,368 50,864 173.20 - credit derivatives 0 0 0 n.s.
Total 3,028,191 3,464,690 – 436,499 – 12.60
Of which: Residents 1,345,616 1,506,401 – 160,785 – 10.67 Non-residents 1,682,575 1,958,289 – 275,714 – 14.08
162 Part B - Balance sheet 10.3 Assets lodged to guarantee the Bank’s liabilities
Change 31.12.2004 31.12.2003 (+/–) %
1. Securities lodged with the Bank of Italy to guarantee advances 185,000 185,000 0 n.s.
2. Securities lodged with the Bank of Italy to guarantee bankers’ drafts 33,000 30,000 3,000 10.00
3. Securities guaranteeing repurchase agreements 240,580 968,639 – 728,059 – 75.16
4. Securities guaranteeing other transactions 41 106 – 65 – 61.32
10.4 Unused lines of credit
Change 31.12.2004 31.12.2003 (+/–) %
a) Central banks 15,573 144,764 – 129,191 – 89.24 b) Other banks 0 0 0 n.s.
The amount in a) concerns the residual portion of the compulsory reserve with the Bank of Italy at the reference date.
Part B - Balance sheet 163 10.5 Forward transactions
The following table does not include either forward transactions between Head Office and the foreign branches or dealing transactions on behalf of third parties.
Type of transaction 31.12.2004 31.12.2003 Hedging Dealing Other Total Hedging Dealing Other Total
1. Purchase/sale of 7,825,907 985,981 0 8,811,888 4,842,812 1,352,518 0 6,195,330
1.1 Securities 0 419,929 0 419,929 0 915,823 0 915,823 - purchases 0 160,867 0 160,867 0 187,775 0 187,775 - sales 0 259,062 0 259,062 0 728,048 0 728,048
1.2 Currency 7,825,907 566,052 0 8,391,959 4,842,812 436,695 0 5,279,507 - currency against currency 187,706 27,729 0 215,435 130,145 176,906 0 307,051 - purchases against euro 3,457,118 321,322 0 3,778,440 2,206,503 189,859 0 2,396,362 - sales against euro 4,181,083 217,001 0 4,398,084 2,506,164 69,930 0 2,576,094
2. Deposits and loans 0 0 968,690 968,690 0 0 2,203,491 2,203,491 - to be made 0 0 455,520 455,520 0 0 580,547 580,547 - to be received 0 0 513,170 513,170 0 0 1,622,944 1,622,944
3. Derivative contracts 5,378,777 8,642,927 1,135,500 15,157,204 6,719,806 5,899,117 815,500 13,434,423
3.1 With exchange of capital 0 339,243 0 339,243 0 114,675 0 114,675 a) securities 0 262,959 0 262,959 0 79,770 0 79,770 - purchases 0 941 0 941 0 941 0 941 - sales 0 262,018 0 262,018 0 78,829 0 78,829
b) currency 0 76,284 0 76,284 0 34,905 0 34,905 - currency against currency 000004,421 0 4,421 - purchases against euro 0 38,142 0 38,142 0 15,242 0 15,242 - sales against euro 0 38,142 0 38,142 0 15,242 0 15,242
c) other instruments 00000000 - purchases 00000000 - sales 00000000
3.2 Without exchange of capital 5,378,777 8,303,684 1,135,500 14,817,961 6,719,806 5,784,442 815,500 13,319,748 a) currency 0 345,365 0 345,365 0 278,267 0 278,267 - currency against currency 00000000 - purchases against euro 0 328,259 0 328,259 0 262,347 0 262,347 - sales against euro 0 17,106 0 17,106 0 15,920 0 15,920
b) other instruments 5,378,777 7,958,319 1,135,500 14,472,596 6,719,806 5,506,175 815,500 13,041,481 - purchases 3,803,228 4,153,788 0 7,957,016 3,804,410 2,812,997 0 6,617,407 - sales 1,575,549 3,804,531 1,135,500 6,515,580 2,915,396 2,693,178 815,500 6,424,074
164 Part B - Balance sheet 10.5 Forward transactions (cont’d)
The above balances reflect:
the settlement price of the underlying contracts, if they involve or could involve an exchange of capital or other assets. Derivative contracts traded in organised markets, where margins are settled on a daily basis (e.g. futures and options), correspond to the nominal value of the reference capital;
the amounts to be paid and received for deposits and loans;
the nominal value of the reference capital for derivative contracts without exchange of capital (e.g. contracts on interest rates or indices).
Derivative contracts on interest rates are classified as purchases or sales depending on whether the Bank buys or sells the fixed rate.
Premiums paid or received in relation to options traded are deferred and recorded as “Other assets” or “Other liabilities” respectively; if the options are not exercised, these premiums are charged or credited to the statement of income. If the options are exercised, the value of the related premium is recorded to increase or decrease costs and revenues relating to the securities purchased or sold.
The hedging/dealing columns at 3.2.b) include basis swaps involving exchanges of index-linked interest rates, totalling a notional 66,675 thousand Euro (hedging transactions) and 667,175 thousand Euro (dealing transactions).
Other transactions include options implicit in structured securities issued by the Bank.
Gains and losses on off-balance sheet transactions calculated on the basis of prices and interest rates at year end, not reflected in the statement of income (because they relate to contracts hedging assets and liabilities that did not give rise to net gains or losses when valued at year end) amount to:
Losses of 128,876 thousand euro of which 9,667 thousand Euro on investment securities of which 119,209 thousand Euro on other assets and liabilities
Gains of 94,422 thousand Euro of which 0 thousand Euro on investment securities of which 94,422 thousand Euro on other assets and liabilities
For more details, see section 2 “Securities”, paragraph 2.1 “Investment securities”.
Part B - Balance sheet 165 10.5 Forward transactions (cont’d) Details of derivative contracts held as of 31 December 2004
Type of transaction Hedging Dealing In organised Over In organised Over Other Total markets the counter markets the counter
3 Derivative contracts 0 5,378,777 100,941 8,541,986 1,135,500 15,157,204
3.1 With exchange of capital 0 0 941 338,302 0 339,243
a) Securities 0 0 941 262,018 0 262,959 Futures 0 0 0000 - purchases 000000 - sales 000000 Options 0 0 941 262,018 0 262,959 - purchases 0 0 941 0 0 941 - sales 0 0 0 262,018 0 262,018
b) Currency 0 0 0 76,284 0 76,284 Options 0 0 0 76,284 0 76,284 - currency against currency 000000 - purchases against euro 0 0 0 38,142 0 38,142 - sales against euro 0 0 0 38,142 0 38,142
3.2 Without exchange of capital 0 5,378,777 100,000 8,203,684 1,135,500 14,817,961
a) Currency 0 0 0 345,365 0 345,365 Domestic currency swaps 0 0 0 345,365 0 345,365 - purchases against euro 0 0 0 328,259 0 328,259 - sales against euro 0 0 0 17,106 0 17,106 Exchange rate options 0 0 0000 - currency against currency 000000 - purchases against euro 000000 - sales against euro 000000
b) Other instruments 0 5,378,777 100,000 7,858,319 1,135,500 14,472,596 Interest rate swaps 0 4,163,101 0 6,819,066 0 10,982,167 - purchases (*) 0 2,609,728 0 3,621,250 0 6,230,978 - sales (*) 0 1,553,373 0 3,197,816 0 4,751,189 Forward rate agreement 0 0 0000 - purchases 000000 - sales 000000 Interest rate futures 0 0 100,000 0 0 100,000 - purchases 000000 - sales 0 0 100,000 0 0 100,000 Stock indices futures 0 0 0000 - purchases 000000 - sales 000000 Interest rate options 0 22,176 0 998,430 0 1,020,606 - purchases 0 0 0 499,215 0 499,215 - sales 0 22,176 0 499,215 0 521,391 Stock indices options 0 1,193,500 0 40,823 1,135,500 2,369,823 - purchases 0 1,193,500 0 33,323 0 1,226,823 - sales 0 0 0 7,500 1,135,500 1,143,000
(*) The hedging/dealing columns include basis swaps, by practice, included in both purchases and sales for 66,675 thousand Euro and 667,175 thousand Euro respectively .
166 Part B - Balance sheet Internal derivative contracts with foreign branches
The following are the notional amounts of capital involved in internal deals between Head Office and foreign branches, totalling 2,213,970 thousand Euro, showing each contract both as a purchase and as a sale.
Type of transaction Hedging Dealing In organised Over In organised Over Total markets the counter markets the counter
3 Derivative contracts 0 2,204,880 0 9,090 2,213,970
3.2 Without exchange of capital 0 2,204,880 0 9,090 2,213,970
b) Other instruments 0 2,204,880 0 9,090 2,213,970
Interest rate swaps 0 2,159,608 0 0 2,159,608 - purchases 0 1,079,804 0 0 1,079,804 - sales 0 1,079,804 0 0 1,079,804
Interest rate options 0 45,272 0 9,090 54,362 - purchases 0 22,636 0 4,545 27,181 - sales 0 22,636 0 4,545 27,181
The unrealised gains and losses on the hedging positions amount to 10,150 thousand Euro and 25,302 thousand Euro respectively.
Quantitative information on derivative contracts and forward purchase/sale of currency Breakdown of contracts by type of contract and risk: reference capital
Interest rates Exchange rates Share prices Total
Unquoted trading contracts 8,079,514 987,701 40,823 9,108,038 - Forwards ( a ) 0 566,052 0 566,052 - Swaps ( b ) 6,819,066 345,365 0 7,164,431 - Options purchased 499,215 38,142 33,323 570,680 - Options sold 761,233 38,142 7,500 806,875
Quoted trading contracts 100,000 0 941 100,941 - Futures purchased 0000 - Futures sold 100,000 0 0 100,000 - Options purchased 0 0 941 941 - Options sold 0000
Total trading contracts 8,179,514 987,701 41,764 9,208,979
Total non-trading contracts ( c ) 4,185,277 7,825,907 1,193,500 13,204,684 - of which: unquoted contracts 4,185,277 7,825,907 1,193,500 13,204,684
Grand total 12,364,791 8,813,608 1,235,264 22,413,663
(a) This balance includes currency transactions to be settled (566,052 thousand Euro) (b) This balance includes interest rate swaps (6,151,891 thousand Euro), basis swaps (667,175 thousand Euro) and domestic currency swaps (345,365 thousand Euro) (c) This balance includes interest rate swaps (4,096,426 thousand Euro), basis swaps (66,675 thousand Euro), interest rate options (22,176 thousand Euro), currency swaps (7,825,907 thousand Euro) and options on share prices (1,193,500 thousand Euro, of which 1,107,500 thousand Euro implicit in IRS contracts hedging structured loans).
Part B - Balance sheet 167 Reference capital of unquoted contracts, market values and the theoretical lending equivalent (add-on)
Interest rates Exchange rates Share prices Total
Reference capital 10,769,708 8,738,846 119,323 19,627,877
A. Trading contracts 6,651,106 912,939 33,323 7,597,368 A.1 positive market value 244,722 16,452 0 261,174 A.2 negative market value 233,841 19,089 2,549 255,479
B. Total non-trading contracts 4,118,602 7,825,907 86,000 12,030,509 B.1 positive market value 117,358 370,080 3,382 490,820 B.2 negative market value 151,761 318,890 366 471,017
C. Positive market value (A.1+B.1) 362,080 386,532 3,382 751,994
D. Negative market value (A.2 + B.2) 385,602 337,979 2,915 726,496
E. Future lending exposure (add-on) 51,059 90,050 9,496 150,605
Theoretical lending equivalent (C+E) 413,139 476,582 12,878 902,599
The add-on has been calculated at “current value” in accordance with the criteria established by the supervisory rules on the calculation of capital adequacy. The add-on is therefore given by the sum of the positive market value and future lending exposure. The following have been excluded from the reference capital: options issued (806,875 thousand Euro), options on share prices (1,107,500 thousand Euro) implicit in interest rate swap contracts, since they do not present a credit risk for the Bank because of their nature, and exchange rate derivatives with an initial duration of not more than 14 days (36,620 thousand Euro for dealing transactions). Basis swap contracts, recorded in table 10.5 under both purchases and sales, have only been reported once for a notional 733,850 thousand euro: 66,675 thousand Euro for hedging and 667,175 thousand Euro for dealing.
Reference capital of unquoted contracts, by residual life
Up to 12 months Between 1 Beyond 5 years Total and 5 years
a) Interest rate contracts 6,030,176 3,895,531 844,001 10,769,708 - of which: options purchased 282,240 78,764 160,387 521,391
b) Exchange rate contracts 5,654,338 2,035,336 1,049,172 8,738,846 - of which: options purchased 33,090 2,469 2,583 38,142
c) Share price contracts 77,000 42,323 0 119,323 - of which: options purchased 77,000 42,323 0 119,323
d) Other contracts 0000 - of which: options purchased 0000
Total contracts 11,761,514 5,973,190 1,893,173 19,627,877 - of which: options purchased 392,330 123,556 162,970 678,856
168 Part B - Balance sheet Information on the quality of credit associated with unquoted derivative contracts by counterparty
Debtor counterparties and Positive market Future lending Theoretical Weighted weighting factors for lending equivalents value exposure lending credit risk (add-on) equivalent
Governments and central banks (0%) 0000
Banks (20%) 676,914 137,076 813,990 162,798
Other operators (50%) 75,080 13,529 88,609 44,305
Total 751,994 150,605 902,599 207,103
10.6 Credit derivatives (at notional value)
The following table shows the notional capital relating to derivative contracts taken out by the Bank, under which the underlying credit risk is transferred to specific assets (purchase of protection) or credit risks are taken on (sale of protection) from parties with whom there is no direct commercial relationship.
Purchases of protection refer to a synthetic securitisation carried out in 2001 for an original value of 1,277,055 thousand Euro. Outstanding transactions at 31 December 2004 total 269,555 thousand Euro (472,201 thousand Euro at 31 December 2003). The portfolio for which the protection was purchased includes medium-term loans, revolving credit lines, bonds, asset-backed bonds and credit default swaps.
With reference to “purchases of protection”, hedged loans in the financial statements have also been recorded among “secured loans” for around 54,522 thousand Euro (94,264 thousand Euro as of 31 December 2003).
With reference to “sales of protection”, the exposure is recorded in caption 20 “Commitments”. It has decreased following the Bank’s policy to reduce credit derivatives.
Type of transaction 31.12.2004 31.12.2003 Dealing Other Dealing Other
1. Purchases of protection 0 370,983 0 516,121 1.1 With exchange of capital 0 101,428 0 43,920 - Credit default products 0 101,428 0 43,920 1.2 Without exchange of capital: 0 269,555 0 472,201 - Credit default products 0 269,555 0 472,201
2. Sales of protection 0 480,564 0 747,551 2.1 With exchange of capital 0 480,564 0 668,374 - Credit default products 0 312,495 0 425,874 - Credit-linked notes 0 168,069 0 242,500 2.2 Without exchange of capital 0 0 0 79,177 - Credit default products 0000 - Credit spread options 0 0 0 79,177
Part B - Balance sheet 169 Section 11 Concentration and distribution of assets and liabilities
11.1 Significant exposures
Change 31.12.2004 31.12.2003 (+/–) %
a) Amount 858,834 850,585 8,249 0.97 b) Number 2 2 0 n.s.
In accordance with Bank of Italy instructions, “significant exposures” reflect weighted lending to customers (cash, guarantees and commitments), or groups of related customers, that exceeds 10% of the Bank’s capital for supervisory purposes.
11.2 Distribution of loans to customers, by sector
Change 31.12.2004 31.12.2003 (+/–) %
a) Governments 11,537 15,501 – 3,964 – 25.57 b) Other public entities 336,120 354,198 – 18,078 – 5.10 c) Non finance-sector companies 10,311,764 9,079,406 1,232,358 13.57 d) Finance-sector companies 2,838,954 3,242,841 – 403,887 – 12.45 e) Family businesses 421,645 358,641 63,004 17.57 f) Other operators 3,103,615 2,405,390 698,225 29.03
Total 17,023,635 15,455,977 1,567,658 10.14
11.3 Distribution of loans to resident non-financial and personal businesses
Change 31.12.2004 31.12.2003 (+/–) %
a) Other revenue-earning services 3,466,443 2,439,794 1,026,649 42.08 b) Commerce, salvage and repairs 1,737,284 1,664,358 72,926 4.38 c) Construction and public works 982,003 787,305 194,698 24.73 d) Metal products excluding machinery and vehicles 501,520 440,064 61,456 13.97 e) Energy products 396,997 258,108 138,889 53.81 f) Other sectors 3,424,879 3,464,257 – 39,378 – 1.14
Total 10,509,126 9,053,886 1,455,240 16.07
The distribution of loans by sector (table 11.2 and 11.3) is in accordance with Bank of Italy rules.
170 Part B - Balance sheet 11.4 Distribution of guarantees given, by category of counterparty
Change 31.12.2004 31.12.2003 (+/–) %
a) Governments 0 0 0 n.s. b) Other public entities 2,577 1,691 886 52.40 c) Banks 114,090 277,396 –163,306 –58.87 d) Non finance-sector companies 1,995,733 2,058,114 –62,381 –3.03 e) Financial institutions 1,509,704 1,717,955 –208,251 –12.12 f) Personal businesses 27,069 26,908 161 0.60 g) Other operators 95,629 87,692 7,937 9.05
Total 3,744,802 4,169,756 –424,954 –10.19
The distribution by type of counterparty is based on the category of the entity whose bonds are secured by the Bank.
11.5 Geographical distribution of assets and liabilities
Italy Other Other Total Captions/Country EU countriescountries
1. Assets 31.12.2004 18,992,071 3,944,552 1,537,606 24,474,229 31.12.2003 17,813,417 4,419,396 1,635,805 23,868,618 1.1 Due from banks 1,222,969 1,870,488 277,792 3,371,249 1,262,043 1,693,886 244,867 3,200,796 1.2 Loans to customers 15,824,994 833,238 365,403 17,023,635 13,923,987 1,106,242 425,748 15,455,977 1.3 Securities 1,944,108 1,240,826 894,411 4,079,345 2,627,387 1,619,268 965,190 5,211,845
2. Liabilities 31.12.2004 19,671,716 3,006,479 1,482,006 24,160,201 31.12.2003 18,361,951 3,332,425 1,824,213 23,518,589 2.1 Due to banks 2,121,063 2,286,092 1,018,356 5,425,511 1,786,827 2,811,326 1,356,511 5,954,664 2.2 Due to customers 12,827,190 334,014 229,085 13,390,289 12,493,053 414,534 315,555 13,223,142 2.3 Securities issued 3,886,295 386,373 234,565 4,507,233 3,246,146 106,565 152,147 3,504,858 2.4 Other 837,168 0 0 837,168 835,925 0 0 835,925
3. Guarantees and commitments 31.12.2004 3,751,970 2,357,838 663,185 6,772,993 31.12.2003 4,060,079 2,700,230 874,137 7,634,446
Assets, liabilities, guarantees and commitments are distributed on the basis of the country where the counterparty is resident. “Other” liabilities refer to caption 40 (public funds administered) and caption 110 (subordinated liabilities).
Part B - Balance sheet 171 11.6 Maturities of assets and liabilities (in thousands of Euro)
Specified duration
Between 1 Between 5 years Beyond 3 and 5 years
months Up to up to 12 Fixed Indexed Fixed Indexed Unspecified Caption/residual life On demand 3 months months rate rate rate rate duration Total
1. Assets 31.12.2004 8,057,433 9,376,540 4,880,426 6,220,974 3,032,974 2,038,691 3,786,649 126,932 37,520,619 31.12.2003 9,046,645 9,012,040 5,291,065 6,242,645 3,424,640 1,442,178 2,940,826 334,325 37,734,364 1.1 Treasury bills 28,423 5,596 138,480 24,765 24,849 41,910 217,574 0 481,597 Eligible for refinancing 31,943 155,398 2,109 30,334 16,408 46 184,547 0 420,785 1.2 Due from banks 468,881 2,241,638 628,977 3,164 800 0 12,215 15,574 3,371,249 496,025 1,637,546 897,064 0 13,884 0 11,513 144,764 3,200,796 1.3 Loans to customers 7,348,495 2,145,465 1,281,516 639,036 1,953,706 743,683 2,800,376 111,358 17,023,635 7,127,685 2,268,250 1,227,913 489,329 1,629,963 644,634 1,878,642 189,561 15,455,977 1.4 Bonds and other debt securities 2,748 88,144 243,498 774,106 825,708 400,418 756,484 0 3,091,106 2,621 185,814 296,217 1,094,101 1,685,214 235,376 837,747 0 4,337,090 1.5 Off-balance sheet transactions 208,886 4,895,697 2,587,955 4,779,903 227,911 852,680 0 0 13,553,032 1,388,371 4,765,032 2,867,762 4,628,881 79,171 562,122 28,377 0 14,319,716
2. Liabilities 31.12.2004 13,768,203 10,059,931 4,183,725 5,371,614 1,984,204 1,355,531 984,118 0 37,707,326 31.12.2003 13,206,765 11,979,414 3,959,371 6,073,415 812,169 1,052,866 749,641 0 37,833,641 2.1 Due to banks 1,204,496 3,482,341 598,705 25,466 51,646 0 62,857 0 5,425,511 1,212,454 4,162,598 466,715 1,251 51,646 10,000 50,000 0 5,954,664 2.2 Due to customers 12,153,495 1,232,310 4,484 0 000013,390,289 11,452,876 1,769,544 223 0 49900013,223,142 2.3 Securities issued 144,431 677,702 468,692 1,196,551 1,713,193 56,664 250,000 0 4,507,233 156,856 689,696 703,897 1,221,523 687,623 45,263 0 0 3,504,858 bonds 0 223,786 337,895 1,187,161 1,713,070 56,664 250,000 0 3,768,576 0 396,960 555,809 1,209,094 687,256 45,263 0 0 2,894,382 certificates of deposit 5,261 453,916 130,797 9,390 123000599,487 6,212 292,736 148,088 12,429 367000459,832 other securities 139,1700000000139,170 150,6440000000150,644
2.4 Subordinated liabilities 00000160,000 671,261 0 831,261 00000160,000 671,261 0 831,261 2.5 Off-balance sheet transactions 265,781 4,667,578 3,111,844 4,149,597 219,365 1,138,867 0 0 13,553,032 384,579 5,357,576 2,788,536 4,850,641 72,401 837,603 28,380 0 14,319,716
This table shows on- and off-balance sheet assets and liabilities exposed to interest-rate risk, together with the residual life of each contract. This gives an overview of the Bank’s interest and liquidity risks, caused by the mismatching between the maturities of assets and liabilities. Off-balance sheet transactions only include those linked to fixed-rate securities, interest rates, and deposits or loans to be made or received at an agreed future date.
The amounts of assets and liabilities are the same as those indicated in the balance sheet; for amounts relating to off-balance sheet transactions, see section 10.5 “Forward transactions” of these explanatory notes. “On demand” also includes assets and liabilities with a residual life of less than 24 hours. This means that the “on demand” amount does not agree with the equivalent total of loans to customers and banks shown in the balance sheet, as this amount only takes account of their contractual nature. Off-balance sheet transactions are broken down according to the residual life of the expected inflows and outflows.
172 Part B - Balance sheet 11.7 Foreign currency assets and liabilities
Change 31.12.2004 31.12.2003 (+/–) %
a) Assets 3,326,587 3,324,337 2,250 0.07 1. Due from banks 1,592,309 1,431,455 160,854 11.24 2. Loans to customers 537,469 731,220 – 193,751 – 26.50 3. Securities 1,116,746 1,079,005 37,741 3.50 4. Equity investments 72,633 74,379 – 1,746 – 2.35 5. Other 7,430 8,278 – 848– 10.24
b) Liabilities 3,636,880 3,624,063 12,817 0.35 1. Due to banks 2,543,171 2,619,436 – 76,265 – 2.91 2. Due to customers 761,148 827,990 – 66,842 – 8.07 3. Securities issued 332,561 176,637 155,924 88.27 4. Other 0 0 0 n.s.
“Other” assets comprise caption 10 “Cash and deposits with central banks and post offices”.
Part B - Balance sheet 173 11.8 Securitisation transactions
This section includes information on the securitisation transactions carried out by the Bank and on the assets held backing transactions carried out by third parties.
Securitisation transactions carried out by the Bank
Updated information on the operations carried out in 1998, 1999 and 2001 and described in the explanatory notes of prior year financial statements, is provided below.
Securitisation of investment securities in 1998
A securitisation operation was carried out in 1998, structured by the Arranger, Citibank, involving subordinated investment securities of the London branch. The purpose of this operation was to lay the bases for the branch to create a portfolio of dealing securities that provided more room for manoeuvre in managing the portfolio. This operation involving disposing of 575.2 million USD in investment securities to a vehicle company called “Sorphora”, which issued Class A securities (senior notes) subscribed by third parties and Class B securities (junior notes) subscribed by the Bank.
The vehicle company took advantage of the favourable market conditions in 2004 to close out the securitisation by selling the entire securitised portfolio and repaying the securities issued. The closing of this transaction produced a gain of around 1 million Euro, as well as an improvement on the Bank’s capital ratios.
The following table shows changes in the securities issued:
Amounts in USD/000 Reimbursement Description Original Of which: Prior Current Amount out- amount securities years year standing at subscribed the balance by the Bank sheet date
Senior notes Class A 448,656 0 – 252,035 – 196,621 0
Junior notes Class B 126,563 126,563 – 39,610 – 86,953 0
Total 575,219 126,563 – 291,645 – 283,574 0
174 Part B - Balance sheet Securitisation of non-performing loans finalised in 1999
A securitisation structured by Greenwich Natwest, acting as Arranger, was completed in 1999. This involved the assignment of non- performing home mortgage loans, property loans backed by mortgages and unsecured loans originally granted by Banca 2000 which has since been merged with BPM. A vehicle company called Piazza Meda Uno SpA was set up and authorised in accordance with Law 130/99 specifically to carry out this securitisation. The Bank has no interest in this company. As regards the loans pertaining to the merged Banca 2000, this securitisation took place in accordance with the rules of Law 130/99.
The following table shows:
The type of financial instruments (senior, mezzanine and junior notes) issued and still outstanding at the balance sheet date; The securitised assets underlying these securities; Changes between the purchase date and the balance sheet date.
Writedowns Writebacks Other changes (*) Description Original Amount Prior Current Prior Current Prior Current Book amount purchased years year years year years year value in Euro by the Bank
Senior notes 18,490 1,884 – 1,884 0 0 Class A - Asset Backed Floating Rate Notes due 2019 18,490 1,884 – 1,884 0 0 Underlying assets: - non-performing loans 100%
Mezzanine notes 12,913 12,913 – 8,759 – 4,154 0 Class B1 - Asset Backed Fixed Rate Notes due 2019 7 % 9,297 9,297 – 8,759 – 538 0 Class B2 - Asset Backed Fixed Rate Notes due 2019 7.25% 3,616 3,616 – 3,616 0 Underlying assets: - non-performing loans 100% 100%
Junior notes 60,709 60,709 – 29,687 – 1,100 – 3,528 26,394 Class C - Asset Backed Fixed Rate Notes due 2019 8.5 % 60,709 60,709 – 29,687 – 1,100 – 3,528 26,394 Underlying assets: - non-performing loans 100% 100%
Total securities 92,112 75,506 – 29,687 – 1,100 – 10,643 – 7,682 26,394
(*) Redemptions
Servicing activities
The Bank has signed a servicing contract, under which it will manage the loans in the securitised portfolio for a fee. Loan collections as part of this activity have been as follows:
Net sale value 92,109 Collections – 50,254 (Write-offs)/Gains 2,522 Loans to be collected 44,377
Part B - Balance sheet 175 Securitisation of property and performing mortgage loans
In 2001 the Bank assigned without recourse to BPM Securitisation S.r.l., a vehicle company set-up for this purpose under Law 130 of 30 April 1999, a portfolio of loans worth a total of 1,343,248 thousand Euro, deriving from property and other secured loans backed by first-degree mortgages and classified as performing loans under the classification rules applied by BPM, in accordance with the regulations issued by the Bank of Italy. BPM Securitisation S.r.l. raised the funds necessary to buy the loans from BPM by issuing three classes of asset-backed securities on international markets for 1,343,200 thousand Euro, with a legal maturity in 2033, a clause in the articles of association making it impossible to redeem the capital for the first 18 months and a “pass-through” type of capital redemption mechanism. This transaction was described in full in the explanatory notes to the 2001 financial statements.
Outstanding positions with regards to the securitisation
The Bank has not subscribed to any class of securities issued by the vehicle company, but granted a subordinated loan to the seller for an amount equal to 0.5% of the loans sold (6,764 thousand Euro). These funds form part of the issuer’s initial liquid reserve, which is used to cover any timing differences between collection of the loans and payment of the amounts due to the holders of the securities. This reserve fund was financed by the excess spread between interest income on the securitised assets and the interest expense on the securities issued up to 1% of the original securitised portfolio in accordance with the contract. Once this limit was reached, the excess spread was allocated to repay BPM’s subordinated loan.
Servicing activities
BPM will act as servicer, in other words collecting the securitised loans and managing the related cashier and payment services. The amounts collected are transferred from the servicer to BPM Securitisation S.r.l. on a daily basis. The financial flows relating to the securitised loans are as follows:
Description Prior years Current year
a) Opening balance 1,343,248 857,300
b) Increases 144,623 36,495 b.1 Interest on principal 141,184 35,200 b.2 Default/legal interest 678 397 b.3 Legal and other expenses 15 56 b.4 Other changes 2,746 842
c) Decreases – 630,571 – 208,009 c.1 Collections – 489,207 – 158,699 c.2 Early repayments and reductions – 129,779 – 48,919 c.3 Write-offs – 28 – 18 c.4 Assignments – 9,609 0 c.5 Other changes – 1,948 – 373
d) Closing balance 857,300 685,786
Synthetic securitisation transaction
In the first half of 2001, the Bank carried out a synthetic securitisation of an investment grade portfolio (consisting of loans, bonds and other commitments) worth 1,277,055 thousand Euro at face value. The structure of the synthetic securitisation transaction used by BPM reflects the same economic content and the same risk management methodologies used in normal securitisation transactions (so-called “cash securitisations”). The operation entailed transferring the risk on the portfolio to Citibank; BPM retained liability for first loss positions on the portfolio for up to 2.25% of its face value, through a credit link note originally of 28,734 thousand Euro (2.25% as mentioned above) and reduced in previous years to 18,589 thousand Euro because of a default on one of the secured positions. Some of the assets in the portfolio fell due during the course of 2002, 2003 and 2004. As a result the face value of the portfolio was down to 269,555 thousand Euro at 31 December 2004.
176 Part B - Balance sheet Securities in portfolio relating to third-party securitisations
The Bank holds investment and dealing securities for third-party securitisations (so-called “Asset Backed Securities”). For this type of operation, the Bank only holds senior notes and mezzanine notes. Changes in percentage terms, the type of assets held and the quality of the underlying assets are as follows:
Description Book value Collections Revaluations Writedowns Purchases Other Book value as of /writebacks changes as of 31.12.2003 31.12.2004
Senior notes 153,038 – 36,729 1 – 1,134 150,528 – 5,145 260,559
Underlying assets: Securities 46.5% 25.2% Receivables 27.1% 65.2% Mortgage loans 16.3% 9.6% Loans against insurance policies 10.1% 0.0%
Asset quality: Non-performing loans 0.0% 0.0% Problem loans 0.0% 0.0% Other 100.0% 100.0%
Mezzanine notes 184,368 – 75,584 0 – 4,826 38,750 – 6,145 136,563
Underlying assets: Receivables 94.0% 96.2% Securities 3.0% 3.8% Credit cards 3.0% 0.0%
Asset quality: Non-performing loans 0.0% 0.0% Problem loans 0.0% 0.0% Other 100.0% 100.0%
Total 337,406 – 112,313 1 – 5,960 189,278 – 11,290 397,122
With reference to the “mezzanine notes” (also reported in point 5.4 “distribution of subordinated assets”), these derive almost entirely from the securitisation of performing loans classified by the rating agencies as “investment grade”.
These securities form part of the assets for which the Bank purchased protection as part of the synthetic securitisation transaction illustrated above for the following amounts:
senior notes 39,957 Thousands of Euro mezzanine notes 10,641 Thousands of Euro Total 50,598 Thousands of Euro
Other changes almost entirely relate to exchange differences on securities denominated in foreign currency.
Part B - Balance sheet 177 Section 12 Administration and dealing on behalf of third parties
The Bank is authorised to supply investment and related services in accordance with article 1 of Decree 58 dated 24 February 1998. The transactions referred to in points 12.1 and 12.3 fall under the scope of this authorisation.
12.1 Dealing in securities
Change 31.12.2004 31.12.2003 (+/–) %
a) Purchases 263,661 726,006 – 462,345 – 63.68 1. Settled 261,080 720,895 – 459,815 – 63.78 2. Not settled 2,581 5,111 – 2,530 – 49.50
b) Sales 354,021 1,194,909 – 840,888 – 70.37 1. Settled 310,716 1,177,421 – 866,705 – 73.61 2. Not settled 43,305 17,488 25,817 147.63
This caption also includes transactions in the name and on behalf of customers in forward agreements traded on the MIF (Italian Futures Market) and in derivatives traded on the IDEM (Italian Equity and Index Derivatives Market).
12.2 Portfolio management
Change 31.12.2004 31.12.2003 (+/–) %
Assets managed on behalf of customers (at market value):
1. Securities issued by BPM 0 0 0 n.s. 2. Other securities 0 0 0 n.s.
Bipiemme Gestione S.G.R., a subsidiary company, is responsible for managing securities portfolios on behalf of customers, the amount of which is indicated in Section 12.5.
178 Part B - Balance sheet 12.3 Custody and administration of securities
Change 31.12.2004 31.12.2003 (+/–) %
a) Third-party securities held on deposit (excluding portfolio management) 1. Securities issued by BPM 3,075,995 2,970,027 105,968 3.57 2. Other securities 32,516,111 29,818,482 2,697,629 9.05 b) Third-party securities deposited with third parties 25,755,877 24,291,130 1,464,747 6.03 c) Portfolio securities deposited with third parties 3,713,533 4,810,968 – 1,097,435 – 22.81
Change 31.12.2004 31.12.2003 (+/–) %
a.1 Securities received and held in guarantee 1,584,680 1,576,143 8,537 0.54 a.2 Securities received for custody 34,007,426 31,212,366 2,795,060 8.95
Securities received for custody and administration, including those received and held in guarantee, are stated at their nominal value.
12.4 Collection of receivables on behalf of third parties: debit and credit adjustments
The notes and documents received by the Bank subject to collection or after collection and for which the Bank handles collection on behalf of third parties, must only be recorded in the balance sheet at the time these amounts are settled. As a result, the notes portfolio has been reclassified in the financial statements according to settlement date, by making the following accounting adjustments:
Change 31.12.2004 31.12.2003 (+/–) %
a) Debit adjustments 6,341,786 5,416,843 924,943 17.08
1. Current accounts 33,601 31,746 1,855 5.84 2. Central portfolio 6,308,185 5,385,097 923,088 17.14 3. Cash 0 0 0 n.s. 4. Other 0 0 0n.s.
b) Credit adjustments 6,389,732 5,471,967 917,765 16.77
1. Current accounts 51,090 63,317 – 12,227 – 19.31 2. Presenters of notes and documents 6,331,068 5,402,654 928,414 17.18 3. Other 7,574 5,996 1,578 26.32
Part B - Balance sheet 179 12.5 Other transactions
Change 31.12.2004 31.12.2003 (+/–) %
Collection of notes and other instruments on behalf of third parties 6,382,158 5,465,971 916,187 16.76
Portfolio management services offered to customers by Bipiemme Gestioni SGR 4,351,687 4,266,251 85,436 2.00
180 Part B - Balance sheet Part C Statement of income
Section 1. Interest Section 2. Commission Section 3. Profits (losses) on financial transactions Section 4. Administrative expenses Section 5. Adjustments, writebacks and provisions Section 6. Other statement of income captions Section 7. Other information regarding the statement of income
181 Section 1 Interest
Statement of income captions 10 and 20, analysed below, present the following balances:
Change Statement of income captions 2004 2003 +/– %
10. Interest income and similar revenues 1,346,446 1,230,183 116,263 9.45
20. Interest expense and similar charges 832,005 728,624 103,381 14.19
1.1 Analysis of caption 10 “Interest income and similar revenues”
Change 2004 2003 +/– %
a) On amounts due from banks 357,538 285,083 72,455 25.42 Of which deposits with central banks 5,298 5,670 – 372 – 6.56
b) On loans to customers 708,254 693,827 14,427 2.08 Of which: on loans using public funds 19 21 – 2 – 9.52
c) On debt securities 279,002 249,489 29,513 11.83
d) Other interest income 1,652 1,784 – 132 – 7.40
e) Positive differentials on hedging transactions 0 0 0 n.s.
Total 1,346,446 1,230,183 116,263 9.45
1.3 Detail of caption 10 “Interest income and similar revenues”
Change 2004 2003 +/– %
a) On foreign currency assets 88,094 95,748 – 7,654 – 7.99
Interest on foreign currency assets relates to that collected and earned on assets in currencies outside the euro-zone.
Part C - Statement of income 183 1.2 Analysis of caption 20 “Interest expense and similar charges”
Change 2004 2003 +/– %
a) On amounts due to banks 355,552 274,523 81,029 29.52 b) On amounts due to customers 113,887 133,906 – 20,019 – 14.95 c) On securities issued 98,381 94,617 3,764 3.98 Of which: certificates of deposit 13,924 14,129 – 205 – 1.45 d) On public funds administered 19 21 – 2 – 9.52 e) On subordinated liabilities 42,263 54,941 – 12,678 – 23.08 f) Negative differentials on hedging transactions (*) 221,903 170,616 51,287 30.06
Total 832,005 728,624 103,381 14.19
(*) The figures show the net effect of differentials on derivative contracts taken out for hedging purposes.
Analysis of caption c) Change Interest expense on certificates of deposit 2004 2003 +/– %
a) On certificates subscribed by banks 11,712 8,807 2,905 32.99 b) On certificates subscribed by customers 2,212 5,322 – 3,110 – 58.44
Total 13.924 14.129 – 205 – 1,45
Analysis of caption f) Negative Change differentials on hedging transactions 2004 2003 +/– %
Interest rate swaps 223,028 170,774 52,254 30.60 Forward rate agreements – 1 450 – 451 – 100.22 Forward purchases/sales of foreign currency (outright swaps) – 1,236 – 736 – 500 67.93 Other 112 128 – 16 – 12.50
Total 221,903 170,616 51,287 30.06
1.4 Detail of caption 20 “Interest expense and similar charges”
Change 2004 2003 +/– %
a) On foreign currency liabilities 81,875 81,003 872 1.08
Interest expense and similar charges relates to that paid and accrued on liabilities in currencies outside the Euro-zone.
184 Part C - Statement of income Section 2 Commission
Statement of income captions 40 and 50, analysed below, present the following balances:
Change 2004 2003 +/– %
40. Commission income 425,730 404,287 21,443 5.30
50. Commission expense 52,824 43,773 9,051 20.68
2.1 Analysis of caption 40 “Commission income”
Change 2004 2003 +/– %
a) Guarantees given 20,552 19,492 1,060 5.44
b) Credit derivatives 2,461 4,593 – 2,132 – 46.42
c) Management, dealing and consultancy services: 178,263 172,333 5,930 3.44 1. Dealing in securities 506 1,452 – 946 – 65.15 2. Dealing in currency 9,127 8,836 291 3.29 3. Portfolio management 0 0 0 n.s. 3.1 Individual 0 0 0 n.s. 3.2 Collective 0 0 0 n.s. 4. Custody and administration of securities 11,638 12,754 – 1,116 – 8.75 5. Custodian bank 15,769 14,443 1,326 9.18 6. Placement of securities 101,782 95,565 6,217 6.51 7. Acceptance of instructions 15,000 14,353 647 4.51 8. Consultancy 0 0 0 n.s. 9. Distribution of third-party services 24,441 24,930 – 489 – 1.96 9.1 Portfolio management 9,650 9,552 98 1.03 9.1.1 individual 9,650 9,552 98 1.03 9.1.2 collective 0 0 0 n.s. 9.2 Insurance products 11,279 11,886 – 607 – 5.11 9.3 Other products 3,512 3,492 20 0.57
d) Collection and payment services 104,145 99,961 4,184 4.19
e) Servicing for securitisation transactions 697 870 – 173 – 19.89
f) Tax collection services 0 0 0 n.s.
g) Other services 119,612 107,038 12,574 11.75 1. Loans granted 95,310 84,051 11,259 13.40 2. Other derivative contracts 7,927 7,517 410 5.45 3. Safe-deposit box fees 1,493 1,422 71 4.99 4. Other services - Italy 14,692 13,959 733 5.25 5. Other services - foreign branches 190 89 101 113.48
Total 425,730 404,287 21,443 5.30
Part C - Statement of income 185 2.2 Analysis of caption 40 “Commission income”
Breakdown of commission income by Change distribution channel 2004 2003 +/– %
a) At own branches: 124,460 119,111 5,349 4.49 1. portfolio management 0 0 0 n.s. 2. placement of securities 100,548 94,668 5,880 6.21 3. distribution of third-party services and products 23,912 24,443 – 531 – 2.17
b) Door-to-door: 1,763 1,384 379 27.38 1. portfolio management 0 0 0 n.s. 2. placement of securities 1,234 897 337 37.57 3. distribution of third-party services and products 529 487 42 8.62
2.3 Analysis of caption 50 “Commission expense”
Change 2004 2003 +/– %
a) Guarantees received 306 420 – 114 – 27.14
b) Credit derivatives 6,010 4,446 1,564 35.18
c) Management and dealing services: 6,000 6,511 – 511 – 7.85 1. Dealing in securities 2 4 – 2 – 50.00 2. Dealing in currency 0 0 0 n.s. 3. Portfolio management: 0 0 0 n.s. 3.1 Own portfolio 0 0 0 n.s. 3.2 Third-party portfolio 0 0 0 n.s. 4. Custody and administration of securities 3,396 3,404 – 8 – 0.24 5. Placement of securities 600 918 – 318 – 34.64 6. Door-to-door sales of securities, financial products, and services 2,002 2,185 – 183 – 8.38
d) Collection and payment services 22,065 20,602 1,463 7.10
e) Other services: 18,443 11,794 6,649 56.38 1. Loans received 255 249 6 2.41 2. Derivative contracts 306 216 90 41.67 3. Brokerage 3,306 2,566 740 28.84 4. Other services - Italy (*) 14,319 8,524 5,795 67.98 5. Other services – foreign branches 257 239 18 7.53
Total 52,824 43,773 9,051 20.68
(*) of which 10,048 thousand Euro refers to Bipiemme Private Banking SIM S.p.A (4,586 thousand Euro as of 31.12.2003).
186 Part C - Statement of income Section 3 Profits (losses) on financial transactions
Profits and losses on financial transactions (caption 60 of the statement of income) are analysed as follows:
Change Statement of income caption 2004 2003 +/– %
60. Profits (losses) on financial transactions 31,387 20,993 10,394 49.51
3.1 Analysis of caption 60 “Profits/losses on financial transactions”
Captions/Transactions Security Currency Other transactions transactions transactions
A.1 Revaluations 61,208 xxx 368
A.2 Writedowns – 3,236 xxx – 47,724
B. Other profits/losses 13,755 6,393 623
Total 71,727 6,393 – 46,733
1. Government securities 26,765
2. Other debt securities 33,603
3. Equities 11,407
4. Security derivatives –48
Caption 60: Change Comparison with the prior year 2004 2003 +/– %
Security transactions 71,727 17,198 54,529 n.s.
A.1 Revaluations 61,208 16,475 44,733 271.52 A.2 Writedowns – 3,236 – 6,923 – 3,687 – 53.26 B. Other profits/losses 13,755 7,646 6,109 79.90
Currency transactions 6,393 1,910 4,483 234.71
Other transactions – 46,733 1,885 – 48,618 n.s.
A.1 Revaluations 368 998 – 630 – 63.13 A.2 Writedowns – 47,724– 5947,665 n.s. B. Other profits/losses 623 946 – 323 34.14
Total 31,387 20,993 10,394 49.51
Part C - Statement of income 187 Section 4 Administrative expenses
Administrative expenses (statement of income caption 80) are analysed as follows:
Change Statement of income captions 2004 2003 +/– %
80 Administrative expenses 745,859 719,123 26,736 3.72
a) Payroll 468,265 445,970 22,295 5.00 b) Other 277,594 273,153 4,441 1.63
4.1 Average number of employees, by level
Change 2004 2003 +/– %
a) Managers 92 87 5 5.75
b) 3rd and 4th grade officials 1,263 1,279 – 16 – 1.25
c) Other staff 5,256 5,344 – 88 – 1.65
Total 6,611 6,710 – 99 – 1.48
The amounts indicated reflect the simple average of the number of employees at the beginning and the end of each period.
Number of employees, by level Change (at year end) 31.12.2004 31.12.2003 +/– %
a) Managers 97 88 9 10.23
b) 3rd and 4th grade officials 1,247 1,278 – 31 – 2.43
c) Other staff 5,194 5,318 – 124 – 2.33
Total 6.538 6.684 – 146 – 2,18
188 Part C - Statement of income Analysis of caption 80 “Administrative expenses”
Change 2004 2003 +/– %
a) Payroll: 468,265 445,970 22,295 5.00 Wages and salaries 312,077 301,748 10,329 3.42 Social security charges 104,420 105,575 – 1,155 – 1.09 Severance indemnities 22,155 23,568 – 1,413 – 6.00 Pensions and similar commitments 4,440 5,140 – 700 – 13.62 Other costs 25,173 9,939 15,234 153.27
b) Other administrative expenses: 277,594 273,153 4,441 1.63
Indirect taxes: 40,594 38,376 2,218 5.78 Paid 40,144 36,858 3,286 8.92 Unpaid 450 1,518 – 1,068 – 70.36
Other: 237,000 234,777 2,223 0.95 Property rentals 38,304 35,897 2,407 6.71 Cash-counting, outsourcing and personnel secondment expenses 25,231 26,404 – 1,173 – 4.44 Equipment lease charges 24,206 25,568 – 1,362 – 5.33 Postage, telecommunications charges 23,906 23,481 425 1.81 Leasehold and equipment maintenance charges 17,231 16,650 581 3.49 Professional services 12,062 10,876 1,186 10.90 Electricity, heating, cleaning and water 11,959 12,394 – 435 – 3.51 Advertising and publicity 11,375 12,831 – 1,456 – 11.35 Personnel-related costs other than remuneration 10,973 12,035 – 1,062 – 8.82 Legal services 9,256 7,950 1,306 16.43 Security and transport of valuables 6,865 6,985 – 120 – 1.72 S.I.A. administration costs 4,752 4,089 663 16.21 Courier and transport services 3,909 4,271 – 362 – 8.48 Charitable donations for the year 3,355 3,718 – 363 – 9.76 Stationery and printing 2,643 2,810 – 167 – 5.94 Insurance premiums 2,625 2,875 – 250 – 8.70 Directors and Statutory Auditors 2,439 2,104 335 15.92 Cultural and community-related initiatives 1,249 901 348 38.62 Meetings and conferences 934 1,504 – 570 – 37.90 Entertaining 659 549 110 20.04 Surveys and searches 656 685 – 29 – 4.23 Premiums paid on behalf of customers 424 420 4 0.95 Purchase of consumables 158 229 – 71 – 31.00 Other 21,829 19,551 2,278 11.65 of which administrative expenses - We@Service 18,517 16,036 2,481 15.47
Total 745,859 719,123 26,736 3.72
“Other costs” indicated in “Payroll” mostly refer to leaving incentives (18,710 thousand Euro as of 31 December 2004 and 8,063 thousand Euro as of 31 December 2003), costs for the purchase of BPM shares and related contributions as part of the employee share accumulation plan (4,276 thousand Euro), as well as other community-related charges. “Personnel-related costs other than remuneration” indicated among “Other” include reimbursement of travelling expenses, training costs and expenses incurred for running the staff canteen.
Part C - Statement of income 189 Analysis of indirect taxes Change 2004 2003 +/– %
Stamp duty 28,919 29,304 – 385 – 1.31 Stamp duty on stock exchange contracts 541 675 – 134 – 19.85 I.C.I. (local property tax) 1,613 1,501 112 7.46 Flat-rate tax 7,214 4,925 2,289 46.48 Other 2,307 1,971 336 17.05
Total 40,594 38,376 2,218 5.78
190 Part C - Statement of income Section 5 Adjustments, writebacks and provisions
Statement of income captions 90, 100, 120, 130, 140, 150 and 160 present the following balances:
Change Statement of income captions 2004 2003 +/– %
90. Adjustments to tangible and intangible fixed assets 86,421 81,829 4,592 5.61
100. Provisions for risks and charges 28,094 28,024 70 0.25
120. Adjustments to loans and provisions or guarantees and commitments 147,204 178,710 – 31,506 – 17.63
130. Writebacks to adjustments to loans and provisions for guarantees and commitments 41,681 49,379 – 7,698 – 15.59
140. Provisions for loan losses 0 542 – 542 – 100.00
150. Adjustments to financial fixed assets 14,066 7,845 6,221 79.30
160. Writebacks to financial fixed assets 783 4,222 – 3,439 – 81.45
Analysis of caption 90 “Adjustments to tangible and intangible fixed assets”
Change 2004 2003 +/– %
a) Intangible fixed assets: 49,016 40,706 8,310 20.41 intangible assets 21,497 17,121 4,376 25.56 deferred charges 18,568 14,634 3,934 26.88 goodwill 8,951 8,951 0 n.s.
b) Tangible fixed assets: 37,405 41,123 – 3,718 – 9.04 premises 7,501 7,523 – 22 – 0.29 furniture, machines and vehicles 23,269 27,020 – 3,751 – 13.88 plant 6,635 6,580 55 0.84
Total 86,421 81,829 4,592 5.61
Part C - Statement of income 191 Analysis of caption 100 “Provisions for risks and charges”
Change 2004 2003 +/– %
Provisions for the year: 28,094 28,024 70 0.25
recovery procedures and legal disputes 17,620 18,352 – 732 – 3.99
miscellaneous provisions 9,641 9,460 181 1.91
provision for taxation 833 212 621 292.92
5.1 Analysis of caption 120 “Adjustments to loans and provisions for guarantees and commitments”
Change 2004 2003 +/– %
a) Adjustments to loans 141,081 159,892 – 18,811 – 11.76
Of which: Adjustments for general country risks 0 43 – 43 – 100.00 Other general adjustments 20,067 0 20,067 n.s.
b) Provisions for guarantees and commitments 6,123 18,818 – 12,695 – 67.46
Of which: Provisions for general country risks 16 0 16 n.s. Other general provisions 1,181 1,890 – 709 – 37.51
Total 147,204 178,710 – 31,506 – 17.63
Analysis of “Adjustments to loans” Change under a) above 2004 2003 +/– %
Adjustments from valuations 98,631 83,181 15,450 18.57
Adjustments for loan losses (art. 101 New Income Tax Consolidation Act (former art. 66)) 42,450 76,711 – 34,261 – 44.66
Total 141,081 159,892 – 18,811 – 11.76
192 Part C - Statement of income Analysis of caption 130 “Writebacks to loans and provisions for guarantees and commitments”
Change 2004 2003 +/– %
a) Writeback of loans previously written down 36,212 46,886 – 10,674 – 22.77
b) Writeback of provisions for guarantees and commitments 5,469 2,493 2,976 119.37
Total 41,681 49,379 – 7,698 – 15.59
Analysis of “Writebacks of loans” Change under a) above 2004 2003 +/– %
Recovery of items previously recorded as a loss (art. 101 New I.T.C.A. (former art. 66)) 14,666 15,555 – 889 – 5.72
Collection of loans previously written down 15,248 15,833 – 585 – 3.69
Revaluations of loans previously written down 6,298 15,498 – 9,200 – 59.36
Total 36,212 46,886 – 10,674 – 22.77
Analysis of caption 140 “Provisions for loan losses”
Change 2004 2003 +/– %
Portion relating to default interest (art. 71.6, of Decree 917/86) 0 542 – 542 – 100.00
Total 0 542 – 542 – 100.00
Analysis of caption 150 “Adjustments to financial fixed assets”
Change 2004 2003 +/– %
Adjustments to equity investments 8,190 4,274 3,916 91.62
Adjustments to investment securities 5,876 3,571 2,305 64.55
Total 14,066 7,845 6,221 79.30
Part C - Statement of income 193 Adjustments to equity investments refer to writedowns due to permanent losses in value of the following companies:
2004 2003
Multimedica Holding 5,804 0 We@Service 1,633 3,354 BPM Capital I LLC 236 230 Star Venture I 229 376 Euros Consulting SpA 183 113 Convergenza Luxembourg 103 152 Istituto per l’Enciclopedia Banca e Borsa 2 0 BPM Luxembourg 045 DAICAP Società Consortile per Azioni – in liquidation 0 3 Meridaunia Società Consortile a R.L. 0 1
Total 8,190 4,274
The adjustments to investment securities refer to writedowns of securities held by the foreign branches and the junior note issued by the vehicle company “Piazza Meda 1”.
Analysis of caption 160 “Writebacks to financial fixed assets”
Change 2004 2003 +/– %
Writeback of adjustments to equity investments 783 4,222 – 3,439 – 81.45
Writebacks to investment securities 0 0 0 n.s.
Total 783 4,222 – 3,439 – 81.45
Writebacks to equity investments refer to previous writedowns made to the following investments, the reasons for which ceased to apply:
2004 2003
Fastweb S.p.A. (former E-Biscom S.p.A.) 392 1,470 Istituto Centrale delle Banche Popolari Italiane S.p.A. 391 2,752
Total 783 4,222
194 Part C - Statement of income Section 6 Other statement of income captions
Statement of income captions 30, 70, 110, 180, 190 and 220 present the following balances:
Change Statement of income captions 2004 2003 +/– %
30. Dividends and other revenues 74,992 127,418 – 52,426 – 41.14
70. Other operating income 110,473 106,855 3,618 3.39
110. Other operating expenses 4,908 5,049 – 141 – 2.79
180. Non-recurring income 45,662 23,021 22,641 98.35
190. Non-recurring charges 12,449 16,908 – 4,459 – 26.37
220. Income taxes for the year 28,100 25,663 2,437 9.50
Part C - Statement of income 195 Analysis caption 30 “Dividends and other revenues”
Change 2004 2003 +/– %
a) From shares, quotas and other forms of capital 29,523 24,519 5,004 20.41
Dividends 29,523 24,499 5,024 20.51 Tax credit 0 20 – 20 – 100.00
b) From equity investments 17,177 7,719 9,458 122.53
Dividends 17,177 7,719 9,458 122.53 Dexia-Crediop 12,390 4,188 8,202 195.85 Carinord SpA 2,206 0 2,206 n.s. SelmaBipiemme Leasing 1,079 1,079 0 n.s. Istituto Centrale Banche Popolari 622 1,244 – 622 – 50.0 Fiera di Milano 298 243 55 22.63 Evoluzione ‘94 SpA 178 0 178 n.s. Sì Holding SpA (former Carta Si SpA) 141 136 5 3.68 Epsilon Associati 63 0 63 n.s. Crif 53 337 – 284 – 84.27 Soc. Servizi Bancari S.S.B. 41 41 0 n.s. SIA 38 38 0 n.s. CILME 29 10 19 190.00 SI.TE.BA. 23 23 0 n.s. E-MID 9 9 0 n.s. Centrale Bilanci 7 7 0 n.s. Factorit 329 – 329 – 100.00 Monte Titoli 0 0 0 n.s. First Skelligs Intn. Finance Co. 0 35 – 35 – 100.00 Tax credit 0 0 0 n.s.
c) From investments in Group companies 28,292 95,180 – 66,888 – 70.28
Dividends 28,292 95,180 – 66,888 – 70.28 Bipiemme Vita 6,600 10,220 – 3,620 – 35.42 Banca Akros 6,600 11,760 – 5,160 – 43.88 Bipiemme Ireland 6,300 6,200 100 1.61 Bipiemme Gestioni SGR 5,247 8,315 – 3,068 – 36.90 Tirving Ltd 3,545 3,520 25 0.71 Banca di Legnano 0 55,165 – 55,165 – 100.00
Tax credit 0 0 0 n.s.
Total 74,992 127,418 – 52,426 – 41.14
Of which: Dividends 74,992 127,398 – 52,406 – 41.14 Tax credit 0 20 – 20 – 100.00
196 Part C - Statement of income 6.1 Analysis of caption 70 “Other operating income”
Change 2004 2003 +/– %
Rental and leasing income 3,557 4,814 – 1,257 – 26.11
Other: 106,916 102,041 4,875 4.78
Recovery of taxes from customers 35,115 33,128 1,987 6.00
Recovery of expenses and commission on deposits and overdrafts 38,656 33,618 5,038 14.99
Recoveries of IT services and structures made available to third parties 9,937 9,062 875 9.66
Emoluments waived by employees 274 267 7 2.62
Expenses recharged on property rented to third parties 277 244 33 13.52
Other 22,657 25,722 – 3,065– 11.92
Total 110,473 106,855 3,618 3.39
6.2 Analysis of caption 110 “Other operating expenses”
Change 2004 2003 +/– %
Other operating expenses 4,908 5,049 – 141 – 2.79
Total 4,908 5,049 – 141 – 2.79
Part C - Statement of income 197 6.3 Analysis of caption 180 “Non-recurring income”
Change 2004 2003 +/– %
Gains on the disposal of: 10,651 214 10,437 n.s.
Equity investments and investment securities 10,627 161 10,466 n.s.
Tangible fixed assets 24 53 – 29 – 54.72
Out-of-period income: 12,816 15,524 – 2,708 – 17.44
Additional interest income, commission and operating income 2,793 3,618 – 825 – 22.80
Decrease in interest expense, commission and administrative expense 5,723 2,949 2,774 94.07
Higher recoveries of non-performing loans 0 0 0 n.s.
Other out-of-period income 4,300 8,957 – 4,657 – 51.99
Overaccrual of liabilities, release of provisions no longer required to the statement of income: 12,502 7,283 5,219 71.66
Provision for possible loan losses (collection of default interest deemed recoverable) 0 1,076 – 1,076 – 100.00
Pension fund of former BAM 4 0 4 n.s.
Provision for taxation 2,405 638 1,767 276.96
Holidays not taken 1,262 1,393 – 131 – 9.40
Recovery procedures and legal disputes 6,080 3,826 2,254 58.91
Miscellaneous provisions 2,751 239 2,512 n.s.
Interbank Deposit Guarantee Fund 0 111 – 111 – 100.00
Out-of-period items associated with eliminating cumulative fiscal distortions under the policy of “defiscalisation”: 9,693 0 9,693 n.s.
Assets with a unit value of less than 516.46 Euro 5,258 0 5,258 n.s.
Assets subject to accelerated depreciation 162 0 162 n.s.
Reserve for default interest on loans 4,273 0 4,273 n.s.
Total 45,662 23,021 22,641 98.35
Gains on disposals include 7,684 thousand Euro in relation to the sale of interests of 3.11% in Banca Akros S.p.A., Bipiemme Vita S.p.A. and Bipiemme Gestioni SGR S.p.A, as part of the exchange agreement with Fondazione CR Alessandria, under which BPM received 5,018,809 Carinord 1 shares, corresponding to 4.05% of Carinord 1.
198 Part C - Statement of income 6.4 Analysis of caption 190 “Non-recurring charges”
Change 2004 2003 +/– %
Losses on the disposal of: 141 43 98 227.91
Equity investments and investment securities 0 15 – 15 – 100.00
Tangible fixed assets 141 28 113 n.s.
Out-of-period expense: 12,308 16,865 – 4,557 – 27.02
Additional interest expense, commission and administrative expenses 1,226 2,369 – 1,143 – 48.25
Decrease in interest income, commission and operating income 4,367 5,396 – 1,029 – 19.07
Charges relating to insurance claims 2,460 1,490 970 65.10
Prior year taxation 473 3,287 – 2,814 – 85.61
Other 3,782 4,323 – 541 – 12.51
Total 12,449 16,908 – 4,459 – 26.37
6.5 Analysis of caption 220 “Income taxes for the year”
IRES Flat-rate tax IRAP Local taxes Total (Corporate (Regional due by income tax) income tax) the foreign branches
1. Current taxes – 2,256 2,005 9,059 4,741 13,549
2. Change in deferred tax assets 6,831 1,584 8,415
3. Change in deferred tax liabilities 5,141 995 6,136
4. Income taxes for the year 9,716 2,005 11,638 4,741 28,100
Change 2004 2003 +/– %
IRES (Corporate income tax) 9,716 4,567 5,149 112.74 Flat-rate tax 2,005 2,005 0 n.s. IRAP (Regional income tax) 11,638 12,133 – 495 – 4.08 Local taxes due by the foreign branches 4,741 6,958 – 2,217 – 31.86
Total 28,100 25,663 2,437 9.50
Part C - Statement of income 199 Reconciliation between the theoretical and current IRES (Corporate income tax) IRAP (Regional income tax) tax charge Taxable income Tax Taxable income Tax
Profit before taxes 153,324
Theoretical tax charge (33%) 50,597
Difference between value and cost of production 245,294
Notional tax charge (5.06%) 12,412
Timing differences taxable in future years – 16,138 – 5,325 – 9,071 – 459
Timing differences deductible in future years 61,919 20,433 15,084 763
Reversal of timing differences from prior years: Elimination of deductible timing differences – 92,003 – 30,361 – 75,097 – 3,800 Elimination of taxable timing differences 3,177 1,048 4,074 206
Differences not reversing in future years: Permanent deductible differences – 132,444 – 43,706 – 2 0 Permanent taxable differences 16,862 5,564 2,684 135
Lower taxes of foreign branches – 198
Taxable income – 5,303 – 1,750
Credit for foreign taxes – 506
Current taxes for the year – 2,256
Taxable income for IRAP purposes 182,966
IRAP for the year 9,059
200 Part C - Statement of income Section 7 Other information regarding the statement of income
7.1 Geographical distribution of revenues
Statement of income captions Italy Other Other Total 2004 Total 2003 EU countries countries
10 Interest income and similar revenues 1,201,198 112,378 32,870 1,346,446 1,230,183
30 Dividends and other revenues 74,992 0 0 74,992 127,418
40 Commission income 411,462 11,083 3,185 425,730 404,287
60 Profits (loss) on financial transactions 27,415 5,370 – 1,398 31,387 20,993
70 Other operating income 110,364 0 109 110,473 106,855
Total 1,825,431 128,831 34,766 1,989,028 1,889,736
Revenues are classified in relation to the location of the Bank’s foreign branches that originated the transactions.
Income and charges versus Group companies and companies subject to significant influence
Income and charges versus Group companies and companies subject to significant influence are as follows:
2004 Group companies Companies subject Total to significant influence
Income 174,167 11,212 185,379 Interest income and similar revenues 16,674 5,740 22,414 Dividends and other revenues 28,292 3,285 31,577 Commission income 114,292 2,067 116,359 Other operating income 14,909 120 15,029
Charges 30,149 21 30,170 Interest expense and similar charges 18,152 21 18,173 Commission expense 11,997 0 11,997 Other operating expenses 0 0 0
Part C - Statement of income 201 Part D Other information
Section 1. Directors and Statutory Auditors
203 Section 1 Directors and Statutory Auditors
1.1 Remuneration
2004 2003
a) Directors 2,311 2,027
b) Statutory Auditors 437 435
Total 2,748 2,462
Remuneration indicated relates to the Directors and Statutory Auditors of BPM even if they only remained in office for part of 2004. The amounts are stated net of VAT and compulsory social contributions. The remuneration of Directors includes their share of 2004 net profit (article 47 of the Articles of Association) on the basis of the proposal for distribution of profits submitted to the Shareholders’ Meeting of 23 April 2005.
1.2 Loans granted and guarantees given
2004 2003
a) Directors 7,941 4,059
b) Statutory Auditors 867 796
Total 8,808 4,855
The above transactions are regulated in accordance with current legislation (article 136.1 of the Banking Consolidation Act) and instructions from supervisory institutions.
Part D - Other information 205 Other information
Remuneration paid to the Directors, Statutory Auditors and General Managers
In accordance with article 78 of CONSOB resolution 11971 of 14.5.1999 and subsequent amendments, dealing with the implementation of regulations for the discipline of issuing bodies, the remuneration of Directors, Statutory Auditors and General Managers for all positions and duties carried out for the Bank and its subsidiaries –even if they have only remained in office for part of the year –are disclosed below. The amounts are stated net of VAT and compulsory social contributions.
Board of Directors
Individual Description of office Remuneration (in thousands of Euro)
Name and surname Position Period in office End Emoluments of office (4) of office Benefits Bonuses Other (3) Emolu- Portion of Atten in kind and other remune- ments net profit dance fees 5) incentives ration (6)
Roberto Mazzotta Chairman (1) 01-01-04/31-12-04 2006 432 36 84–– Paolo Manzato Deputy Chairman (1) 01-01-04/31-12-04 2006 132 36 9 4 – 46 Marco Vitale Deputy Chairman (1) 01-01-04/31-12-04 2006 132 36 4 4 – 81 Enrico Airaghi Director (1) 01-01-04/31-12-04 2006 58 36 83–– Mario Artali Director 01-01-04/31-12-04 2006 32 36 10 3 – 51 Alberto Banfi Director 01-01-04/31-12-04 2006 32 36 6 3 – 12 Giorgio Bianchini Scudellari Director 01-01-04/31-12-04 2006 32 36 4 3 – 79 Emilio Castelnuovo Director (2) 01-01-04/31-12-04 2006 92 36 10 3 – 68 Giuseppe Coppini Director 01-01-04/31-12-04 2006 32 36 10 3 – 55 Rocco Corigliano Director (1) 01-01-04/31-12-04 2006 58 36 3 3 – 171 Eugenio Crosta Director 01-01-04/31-12-04 2006 32 36 4 3 – 12 Roberto Fusilli Director 01-01-04/31-12-04 2006 32 36 9 3 – 39 Renzo Grassi Catapano Director 01-01-04/31-12-04 2006 32 36 3 3 – 115 Piero Lonardi Director (1) 01-01-04/31-12-04 2006 58 36 43–5 Michele Motterlini Director (1) 01-01-04/31-12-04 2006 58 36 3 3 – 67 Gianfranco Pittatore Director 29-06-04/31-12-04 2005 16 18 1––9 Alberto Santa Maria Director 01-01-04/31-12-04 2006 32 36 43–– Jean Jacques Tamburini Director 01-01-04/31-12-04 2006 32 36 23–5 Graziano Tarantini Director 01-01-04/31-12-04 2006 32 36 8 3 – 124 Valerio Tavormina Director 01-01-04/31-12-04 2006 32 36 8 3 – 27 Maria Martellini Director 01-01-04/29-06-04 16 18 6 3 – 193
Note: (1) Members of the Executive Committee. (2) Secretary to the Board of Directors. (3) The Board of Directors will remain in office until the Shareholders’ Meeting called to approve the financial statements for the year ended 31 December 2005. (4) This includes (i) emoluments for the year (ii) 1% of 2004 net profit on the basis of the proposed distribution of profits submitted to the Shareholders’ meeting approving the 2004 financial statements (iii) attendance fees. (5) Insurance policy against accident and injury taken out by the Bank in favour of members of the Board of Directors and the Board of Statutory Auditors. (6) This includes emoluments for offices held in subsidiary companies.
206 Part D - Other information General management
Individual Description of office Remuneration (in thousands of Euro)
Name and surname Position Period in office End of office Emoluments Benefits Bonuses and Other for offices in kind other incentives remuneration held in the reporting company
Ernesto Paolillo General Manager 01-01-04/13-09-04 556 120 (1) 3,656 Fabrizio Viola General Manager 13-09-04/31-12-04 Unspecified 136
(1) This includes 3,643 thousand Euro in indemnities paid at the end of the office and 13 thousand Euro in emoluments for offices held in subsidiary companies.
Board of Statutory Auditors
Individual Description of office Remuneration (in thousands of Euro)
Name and surname Position Period in office End of Emoluments of office (3) Benefits in Bonuses Other office Emoluments Attendance kind (4) and other remunera- (2) fees incentives tion (5)
Giovanni Giunta Chairman 01-01-04/08-07-04 32 –3–4 Marco Baccani Chairman (1) 01-01-04/31-12-04 2006 79 22 3 – 39 Emilio Cherubini Auditor 01-01-04/31-12-04 2006 60 26 3 – – Enrico Radice Auditor 08-07-04/31-12-04 2005 28 11 – – 1 Ezio Maria Simonelli Auditor 01-01-04/31-12-04 2006 60 22 3 – 48 Ettore Maria Tosi Auditor 01-01-04/31-12-04 2006 60 22 3 – –
Note: (1) Temporary Chairman until 08-07-04, confirmed from 08-07-04. (2) The Board of Statutory Auditors will remain in office until the Shareholders’ Meeting called to approve the financial statements for the year ended 31 December 2005. (3) This includes (i) emoluments for the year and (ii) attendance fees. (4) Insurance policy against accident and injury taken out by the Bank in favour of members of the Board of Directors and the Board of Statutory Auditors. (5) This includes emoluments for offices held in subsidiary companies.
Part D - Other information 207 Attachment to the Financial Statements
Statement of changes in shareholders’ equity Statement of changes in financial position List of convertible bonds, showing movements during the year Analysis of amounts due to and from Group companies (Table 3.2 of the explanatory notes) Analysis of amounts due to and from investments that are not part of the Group (Table 3.3 of the explanatory notes) Information relating to reserves and provisions
209 Statement of changes in shareholders’ equity
Captions Shareholders’ Portion of Portion of Increase Other Net profit Shareholders’ equity as of 2003 net 2003 net pro- in capital changes for 2004 equity as of 31 December profit fit allocated 31 December 2003 allocated to to dividends 2004 (in Euro) reserves and other allocations
120 Share capital 1,157,981,754.00 87,120,939.00 1,245,102,693.00
130 Share premium reserve 339,689,250.91 339,689,250.91
140 Reserves: 850,847,911.53 68,941,447.56 0.00 13,632,461.05 933,421,820.14
a) legal reserve 180,712,798.46 13,026,753.81 193,739,552.27
b) reserve for own shares 37,083.70 – 37,083.70 0.00
c) statutory reserves 521,833,761.87 54,712,366.01 576,546,127.88
d) other reserves: 148,264,267.50 1,202,327.74 0.00 13,669,544.75 163,136,139.99
unrestricted reserve 96,433,637.02 1,124,028.21 – 10,000,000.00 87,557,665.23
reserve for own shares: portion available for distribution 9,447,802.92 10,037,083.70 19,484,886.62
merger surplus reserve 13,632,461.05 13,632,461.05
reserve Law Decree 153/99 24,063,517.91 24,063,517.91
reserve art. 14 Law 342 of 21 November 2000 18,162,846.65 18,162,846.65
reserve art. 13.6 Law 124/93 156,463.00 78,299.53 234,762.53
170 Net profit for the year 130,267,538.11 – 68,941,447.56 – 61,326,090.55 125,223,689.14 125,223,689.14
Total 2,478,786,454.55 0.00 – 61,326,090.55 87,120,939.00 13,632,461.05 125,223,689.14 2,643,437,453.19
210 Allegati al Bilancio Statement of changes in financial position
2004 2003 (in thousands of Euro) Subtotal Total Subtotal Total
Source of funds Funds generated from operations 271,419 270,754 Net profit for the year 125,224 130,268 Change in provision for severance indemnities and other payroll provisions – 2,632 1,942 Change in provision for taxation – 40,673 – 68,531 Changes in other provisions – 53,582 – 47,427 Adjustments to tangible and intangible fixed assets 86,421 81,829 Provisions for risks and charges 27,261 27,812 Provisions for loan losses 0 542 Net adjustments to loans and provisions for guarantees and commitments 129,400 144,319 Increase in deposits and other sources of funds 1,188,747 1,078 Due to banks 00 Due to customers 167,147 0 Securities issued 1,002,375 0 Public funds administered 1,243 1,078 Other liabilities 0 0 Accrued expenses and deferred income 17,982 0 Subordinated liabilities 0 0 Decrease in funds invested 1,139,085 2,435,975 Cash and deposits with central banks and post offices 6,548 5,179 Securities 1,132,537 500,366 Due from banks 0 1,875,254 Loans to customers 0 0 Equity investments 0 0 Other assets 00 Accrued income and prepayments 0 55,176 Increase in shareholders’ equity 39,427 0 Increase in share capital, dividends paid and changes to shareholders' equity 39,427 0
Total sources of funds 2,638,678 2,707,807
Application of funds Increase in funds invested 2,087,965 1,514,490 Cash and deposits with central banks and post offices 0 0 Securities 00 Due from banks 170,449 0 Loans to customers 1,696,408 1,090,639 Equity investments 111,377 205,507 Tangible and intangible fixed assets 83,500 108,564 Other assets 5,264 109,780 Accrued income and prepayments 20,967 0 Decrease in deposits and other sources of funds 550,713 1,140,172 Due to banks 529,153 174,404 Due to customers 0 228,664 Securities issued 0 127,564 Public funds administered 0 0 Other liabilities 21,560 124,221 Accrued expenses and deferred income 0 51,433 Subordinated liabilities 0 433,886 Decrease in shareholders’ equity 0 53,145 Dividends paid and changes to shareholders' equity 0 53,145
Total uses of funds 2,638,678 2,707,807
Attachment to the Financial Statements 211 List of convertible bonds, showing movements during the year
At 31.12.2003 Description Par value Carrying value Book value (in Euro) Euro Euro
AXA CV 3.75% 2017 Callable Subordinated 12,924,722 100.00 12,924,722
Alitalia 02/07 Cv 2.9% 0 0.00 0
Telecom (ex Olivetti) 01/04 1.5% CV 455 104.19 474
Banca Popolare di Verona-Novara 99/06 Subordinated CV 243 122.33 297
Capitalia (ex Banca Roma) 07 2.6% Exchang. (Fineco shares) 205,871,000 102.83 211,706,252
Capitalia (ex Banca Roma) 07 2.6% CV 240,893,000 102.83 247,720,923
Total convertible bonds 459,689,420 472,352,668
212 Attachment to the Financial Statements Change At 31.12.2004 Writedowns (–) Par value Book value Revaluations (+) Par value Carrying value Book value Euro Euro Euro Euro Euro
3,375,938 12,924,722 126.12 16,300,660
24 19 1 24 83.53 20
– 455 – 474 0 0.00 0
36 243 137.21 333
– 1,690,018 205,871,000 102.01 210,016,234
– 1,977,518 240,893,000 102.01 245,743,405
– 431 – 3,667,991 3,375,975 459,688,989 472,060,652
Attachment to the Financial Statements 213 Analysis of amounts due to and from Group companies (Table 3.2 of the explanatory notes)
(in Euro) 31.12.2004 31.12.2003 +/– Changes
a) Assets 704,867,291 747,149,716 – 42,282,425
1. Due from banks: 81,162,150 64,999,660 16,162,490 Banca Akros 76,359,062 57,263,059 19,096,003 Cassa di Risparmio di Alessandria 3,803,088 0 3,803,088 Banca di Legnano 1,000,000 7,736,601 – 6,736,601
2. Due from financial institutions: 606,932,680 668,386,015 – 61,453,335 BPM Ireland 581,898,291 645,445,030 – 63,546,739 Bipiemme Gestioni SGR 24,098,698 22,903,898 1,194,800 Akros HFR Alternative Investments SGR 935,691 0 935,691 BPM Luxembourg 0 37,087 – 37,087
3. Due from other customers: 14,552,078 13,764,041 788,037 Bipiemme Vita 11,278,379 9,600,000 1,678,379 of which: subordinated 9,600,000 9,600,000 0 Ultramediass 3,273,699 893,226 2,380,473 Bipiemme Immobili 0 2,828,849 – 2,828,849 We@Service 0 441,960 – 441,960 Ge.Se.So. 0 6 – 6
4. Bonds and other debt securities: 2,220,383 0 2,220,383 Cassa di Risparmio di Alessandria 2,220,383 0 2,220,383
214 Attachment to the Financial Statements Analysis of amounts due to and from Group companies (Table 3.2 of the explanatory notes)
(in Euro) 31.12.2004 31.12.2003 +/- Changes
b) Liabilities 716,236,615 332,377,165 383,859,450
1 Due to banks: 252,077,652 21,633,717 230,443,935 Banca di Legnano 152,735,339 21,288,384 131,446,955 Cassa di Risparmio di Alessandria 99,323,838 0 99,323,838 Banca Akros 18,475 345,333 – 326,858
2. Due to financial institutions: 4,179,967 10,053,618 – 5,873,651 BPM Ireland 1,245,344 5,008,519 – 3,763,175 Bipiemme Private Banking Sim 1,088,401 787,186 301,215 Bipiemme Gestioni SGR 744,954 921,488 – 176,534 Bipiemme Real Estate SGR 574,805 874,830 – 300,025 Bpm Luxembourg 277,076 0 277,076 Bipiemme Private Equity SGR 163,881 1,731,195 – 1,567,314 Akros HFR Alternative Investments SGR 85,506 479,119 – 393,613 Bpm Fund Management 0 251,281 – 251,281
3. Due to other customers: 47,577,996 50,807,830 – 3,229,834 Bipiemme Vita 41,847,140 50,235,525 – 8,388,385 Bipiemme Immobili 3,172,477 0 3,172,477 We@Service 1,760,133 0 1,760,133 Ultramediass 665,057 103,806 561,251 Ge.Se.So 133,189 350,915 – 217,726 Fondo Isolani 0 117,584 – 117,584
4. Securities issued 237,958,000 78,000,000 159,958,000 Bipiemme Vita 230,797,000 78,000,000 152,797,000 Banca Akros 7,161,000 0 7,161,000
5. Subordinated liabilities 174,443,000 171,882,000 2,561,000 BPM Luxembourg 171,882,000 171,882,000 0 Banca Akros 2,561,000 0 2,561,000
c) Guarantees and commitments 1,217,285,767 1,258,731,837 – 41,446,070
1. Guarantees given: 1,166,329,753 1,258,079,599 – 91,749,846 BPM Ireland 1,154,455,233 1,240,384,238 – 85,929,005 Banca di Legnano 7,827,065 7,355,049 472,016 Banca Akros 3,715,310 10,008,167 – 6,292,857 Bipiemme Vita 274,548 274,548 0 Bipiemme Gestioni SGR 36,152 36,152 0 Ge.Se.So 21,445 21,445 0
2. Commitments: 50,956,014 652,238 50,303,776 BPM Ireland 45,200,000 0 45,200,000 Cassa di Risparmio di Alessandria 5,728,607 0 5,728,607 Banca Akros 27,407 652,238 – 624,831
Attachment to the Financial Statements 215 Analysis of amounts due to and from investments that are not part of the Group (Table 3.3 of the explanatory notes)
(in Euro) 31.12.2004 31.12.2003 +/– Changes
a) Assets 578,688,926 712,791,488 – 134,102,562
1. Due from banks: 62,880,334 108,019,304 – 45,138,970 Ist. Centrale Banche Pop. Italiane 62,602,274 108,019,304 – 45,417,030 Nordest Banca 278,060 0 278,060
2. Due from financial institutions: 469,265,867 591,367,182 – 122,101,315 SelmaBipiemme Leasing (*) 283,277,289 274,033,690 9,243,599 Factorit 146,522,846 156,163,655 – 9,640,809 Si Holding (former Servizi Interbancari) 39,325,237 161,029,837 – 121,704,600 Polis fondi SGR 140,000 140,000 0 of which: subordinated 140,000 140,000 0 Etica SGR (*) 391 0 391 Epsilon Associati SGR 104 0 104
3. Due from other customers: 25,367,635 1,738,858 23,628,777 Fastweb (former e-Biscom) 21,907,034 432 21,906,602 Multimedica Holding 3,233,619 958,685 2,274,934 Euros Consulting 141,143 742,529 – 601,386 Patto di Foggia 85,793 37,212 48,581 Meridaunia 46 0 46
4. Bonds and other debt securities: 21,175,090 11,666,144 9,508,946 Dexia Crediop 18,917,165 9,504,810 9,412,355 Banca Popolare Etica 2,257,925 2,161,334 96,591
216 Attachment to the Financial Statements Analysis of amounts due to and from investments that are not part of the Group (Table 3.3 of the explanatory notes)
(in Euro) 31.12.2004 31.12.2003 +/– Changes
b) Liabilities 277,990,335 277,409,880 580,455
1. Due to banks: 165,976,778 137,426,519 28,550,259 Ist. Centrale Banche Pop. Italiane 162,592,045 125,153,406 37,438,639 Nordest Banca 3,000,000 12,154,617 – 9,154,617 Banca Popolare Etica 384,733 118,496 266,237
2. Due to financial institutions: 106,535,735 101,125,349 5,410,386 Factorit 45,308,464 38,175,334 7,133,130 Polis fondi SGR 27,182,143 3,246,994 23,935,149 Si Holding (former Servizi Interbancari) 26,254,649 6,890,775 19,363,874 Epsilon Associati SGR 6,428,832 34,365,317 – 27,936,485 Etica SGR (*) 1,265,671 1,510,179 – 244,508 SelmaBipiemme Leasing (*) 95,976 15,986,452 – 15,890,476 Cassa Compensazione & Garanzia 0 921 – 921 Evoluzione 94 0 949,377 – 949,377
3. Due to other customers: 5,477,822 38,858,012 – 33,380,190 Fastweb (former e-Biscom) 2,217,700 29,723,446 – 27,505,746 Fiera di Milano 1,343,094 6,008,126 – 4,665,032 Multimedica Holding 1,151,190 197,883 953,307 S.I.A. 537,461 2,232,696 – 1,695,235 Sviluppo Brianza 124,507 0 124,507 Meridaunia 45,122 70,729 – 25,607 CIM Italia (former Cilme) 36,308 0 36,308 Si.Te.Ba 22,440 625,132 – 602,692
4. Securities issued 0 0 0
5. Subordinated liabilities 0 0 0
c) Guarantees and commitments 9,783,307 5,129,756 4,653,551
1. Guarantees given: 8,285,032 3,711,803 4,573,229 Polis Fondi SGR 4,586,325 265,016 4,321,309 SIA 2,383,828 2,495,000 – 111,172 SelmaBipiemme Leasing (*) 761,682 761,682 0 Fastweb (former e-Biscom) 482,394 121,884 360,510 Multimedica Holding 36,750 36,750 0 Euros Consulting 31,471 31,471 0 Si Holding (former Servizi Interbancari) 2,582 0 2,582
2. Commitments: 1,498,275 1,417,953 80,322 Nordest Banca 875,000 0 875,000 Convergenza 473,275 848,275 – 375,000 Star Venture I 150,000 300,000 – 150,000 Ist. Centrale Banche Popolari Italiane 0 269,678 – 269,678
(*) Investments subject to significant influence.
Attachment to the Financial Statements 217 Information relating to reserves and provisions
Description of reserves Reserves and Reserves and Other reserves Total provisions provisions and provisions at 31.12.2004 not forming part forming part of the of the shareholders' company's income on taxable income distribution (in Euro)
Share premium reserve 339,689,251 339,689,251
Legal reserve 193,739,552 193,739,552
Reserve for own shares 19,484,887 19,484,887
Statutory reserves 576,546,128 576,546,128
Unrestricted reserve 87,557,665 87,557,665
Merger surplus reserve 13,632,461 13,632,461
Reserve Law Decree 153/99 24,063,518 24,063,518
Reserve art, 14 Law 342 of 21 November 2000 18,162,847 18,162,847
Reserve art. 13.6 Law 124/93 234,762 234,762
Total 353,321,712 42,461,127 877,328,232 1,273,111,071
Reserves allocated to share capital for bonus issues
Share premium reserve 61,758,351 61,758,351
Extraordinary reserve 3 35,337,671 35,337,674
Reserve art. 3 Law 787 of 5 December 1978 11,402,594 11,402,594
Reserve art. 55.3b Decree 917/86 142,938 142,938
Revaluation reserve Law 576/75 5,685,340 5,685,340
Revaluation reserve Law 72/83 93,860,643 93,860,643
Revaluation reserve Law 413/91 141,232,364 230,980 141,463,344
Reserve Law 218 of 30 July 1990 3,909,196 3,909,196
Reserve art. 7 Law 218 of 30 July 1990 144,529,879 144,529,879
Merger surplus reserve 1,531,881 8,835,013 10,366,894
Former Banca 2000 1,114,514 1,114,514
Total 63,290,235 390,331,936 55,949,196 509,571,367
218 Attachment to the Financial Statements List of property owned by the Bank, revalued in prior years (art. 10, Law 72 of 19 March 1983)
Abbiategrasso, Via Binaghi, 4 Arese, Via Resegone, 5 Space: sq.m. 258; basement: sq.m. 89 Space: sq.m. 360; basement: sq.m. 198 Historical cost 9,419 Historical cost 90,725 Rev. Law 11.02.52 n. 74 910 Rev. Law 19.03.83 n. 72 74,541 Rev. Law 05.11.73 n. 660 16,095 Rev. Law 30.12.91 n. 413 171,369 Rev. Law 19.03.83 n. 72 190,640 Gross book value 336,635 Merger deficit Bam and Briantea3 75,496 Adjustments: depreciation 194,962 Merger defi cit Bam and Briantea 122,430 Net book value 141,673 Gross book value 414,990 Adjustments: depreciation 212,516 Argenta, Via Matteotti, 49 Net book value 202,474 Space: sq.m. 628; basement: sq.m. 0 Historical cost 23,683 Accadia, Via Bonito, 7 Rev. Law 02.12.75 n. 576 12,985 Space: sq.m. 103; basement: sq.m. 107 Rev. Law 19.03.83 n. 72 75,403 Historical cost 62,146 Rev. Law 30.12.91 n. 413 139,414 Rev. Law 19.03.83 n. 72 70,583 Gross book value 251,485 Merger deficit Bam and Briantea3 36,142 Adjustments: depreciation 125,536 Gross book value 168,871 Net book value 125,949 Adjustments: depreciation 100,452 Net book value 68,419 Arosio, Via Oberdan, 5 Space: sq.m. 408; basement: sq.m. 375 Agrate Brianza, Via Lecco, 2 Historical cost 261,690 Space: sq.m. 439; basement: sq.m. 410 Rev. Law 19.03.83 n. 72 22,361 Historical cost 203,578 Rev. Law 30.12.91 n. 413 403,329 Rev. Law 19.03.83 n. 72 101,132 Gross book value 687,380 Merger deficit Bam and Briantea3 313,951 Adjustments: depreciation 408,757 Gross book value 618,661 Net book value 278,623 Adjustments: depreciation 353,031 Net book value 265,630 Ascoli Satriano, Via Santa Maria del Popolo, 1/3 Space: sq.m. 385; basement: sq.m. 0 Apricena, Viale Aldo Moro, 42 Historical cost 122,900 Space: sq.m. 1.442; basement: sq.m. 712 Rev. Law 19.03.83 n. 72 132,729 Historical cost 867,874 Rev. Law 30.12.91 n. 413 58,618 Rev. Law 02.12.75 n. 576 157,519 Gross book value 314,247 Rev. Law 19.03.83 n. 72 1,379,746 Adjustments: depreciation 173,077 Rev. Law 30.12.91 n. 413 601,522 Net book value 141,170 Gross book value 3,006,661 Adjustments: depreciation 1,751,912 Barlassina, Via Milano, 57 Net book value 1,254,749 Space: sq.m. 125; basement: sq.m. 0 Historical cost 8,263 Arcisate, Via Matteotti, 24 Rev. Law 30.12.91 n. 413 128,888 Space: sq.m. 330; basement: sq.m. 342 Gross book value 137,151 Historical cost 567,806 Adjustments: depreciation 59,603 Rev. Law 30.12.91 n. 413 332,063 Net book value 77,548 Gross book value 899,869 Adjustments: depreciation 487,222 Barzanò, Via Manara, 16/18 Net book value 412,647 Space: sq.m. 342; basement: sq.m. 0 Historical cost 144,859 Arcore, Via Casati, 42 Rev. Law 05.11.73 n. 660 15,778 Space: sq.m. 312; basement: sq.m. 168 Rev. Law 19.03.83 n. 72 176,313 Historical cost 9,879 Rev. Law 30.12.91 n. 413 61,017 Rev. Law 05.11.73 n. 660 10,779 Merger defi cit Bam and Briantea 42,786 Rev. Law 19.03.83 n. 72 211,014 Gross book value 440,753 Rev. Law 30.12.91 n. 413 79,972 Adjustments: depreciation 209,866 Merger defi cit Bam and Briantea 184,852 Net book value 230,887 Gross book value 496,496 Adjustments: depreciation 238,724 Net book value 257,772
A t t a ch m e n t s 219 List of property owned by the Bank, revalued in prior years (art. 10, Law 72 of 19 March 1983)
Basiglio, Piazza della Repubblica, 1 Bollate, Via Milano, 240 - Loc. Baranzate Space: sq.m. 300; basement: sq.m. 150 Space: sq.m. 309; basement: sq.m. 140 Historical cost 611,567 Historical cost 18,076 Gross book value 611,567 Rev. Law 19.03.83 n. 72 100,709 Adjustments: depreciation 8,520 Rev. Law 30.12.91 n. 413 116,696 Net book value 603,047 Gross book value 235,481 Adjustments: depreciation 135,821 Bellusco, Via Castello, 13 Net book value 99,660 Space: sq.m. 282; basement: sq.m. 166 Historical cost 27,212 Bologna, Via Amendola, 12/A Rev. Law 19.03.83 n. 72 112,231 Space: sq.m. 260; basement: sq.m. 175 Rev. Law 30.12.91 n. 413 130,794 Historical cost 109,868 Gross book value 270,237 Rev. Law 19.03.83 n. 72 149,910 Adjustments: depreciation 150,210 Rev. Law 30.12.91 n. 413 281,126 Net book value 120,027 Gross book value 540,904 Adjustments: depreciation 326,108 Bentivoglio, Via Marconi, 58/A Net book value 214,796 Space: sq.m. 279; basement: sq.m. 0 Historical cost 7,573 Bologna, Via Artieri, 2 Rev. Law 02.12.75 n. 576 8,859 Space: sq.m. 422; basement: sq.m. 87 Rev. Law 19.03.83 n. 72 50,097 Historical cost 10,617 Rev. Law 30.12.91 n. 413 65,486 Rev. Law 11.02.52 n. 74 22,754 Gross book value 132,015 Rev. Law 02.12.75 n. 576 83,040 Adjustments: depreciation 75,712 Rev. Law 19.03.83 n. 72 375,949 Net book value 56,303 Rev. Law 30.12.91 n. 413 489,933 Gross book value 982,293 Bereguardo, Via S. Antonio, 17 Adjustments: depreciation 542,004 Space: sq.m. 174; basement: sq.m. 0 Net book value 440,289 Historical cost 4,131 Rev. Law 05.11.73 n. 660 6,309 Bologna, Via Di Corticella, 184 Rev. Law 19.03.83 n. 72 110,429 Space: sq.m. 261; basement: sq.m. 39 Rev. Law 30.12.91 n. 413 41,394 Historical cost 5,927 Merger deficit Bam and Briantea 50,045 Rev. Law 02.12.75 n. 576 16,951 Gross book value 212,308 Rev. Law 19.03.83 n. 72 54,075 Adjustments: depreciation 112,436 Rev. Law 30.12.91 n. 413 110,945 Net book value 99,872 Gross book value 187,898 Adjustments: depreciation 97,466 Bernareggio, Via Prinetti, 23 Net book value 90,432 Space: sq.m. 276; basement: sq.m. 229 Historical cost 64,411 Bologna, Via Emilia Ponente, 207 Rev. Law 19.03.83 n. 72 192,675 Space: sq.m. 225; basement: sq.m. 22 Rev. Law 30.12.91 n. 413 93,505 Historical cost 204,625 Merger deficit Bam and Briantea 150,957 Rev. Law 02.12.75 n. 576 13,986 Gross book value 501,548 Rev. Law 19.03.83 n. 72 51,646 Adjustments: depreciation 256,978 Rev. Law 30.12.91 n. 413 67,306 Net book value 244,570 Gross book value 337,563 Adjustments: depreciation 146,003 Besnate, Largo Brianzoni Net book value 191,560 Space: sq.m. 293; basement: sq.m. 260 Historical cost 377,671 Bologna, Via Marconi 3/1 Rev. Law 30.12.91 n. 413 335,133 Space: sq.m. 600; basement: sq.m. 0 Gross book value 712,804 Historical cost 267,728 Adjustments: depreciation 396,295 Rev. Law 02.12.75 n. 576 35,951 Net book value 316,509 Rev. Law 30.12.91 n. 413 247,502 Gross book value 551,181 Adjustments: depreciation 220,654 Net book value 330,527
220 A t t a ch m e n t s List of property owned by the Bank, revalued in prior years (art. 10, Law 72 of 19 March 1983)
Bologna, Via Righi, 18 Buccinasco, Via Roma, 9 Space: sq.m. 195; basement: sq.m. 122 Space: sq.m. 329; basement: sq.m. 0 Historical cost 28,898 Historical cost 505,493 Rev. Law 02.12.75 n. 576 18,365 Rev. Law 30.12.91 n. 413 249,484 Rev. Law 19.03.83 n. 72 87,780 Merger deficit Bam and Briantea 120,500 Rev. Law 30.12.91 n. 413 138,237 Gross book value 875,477 Gross book value 273,280 Adjustments: depreciation 687,316 Adjustments: depreciation 167,775 Net book value 188,161 Net book value 105,505 Busto Arsizio, Via D. Crespi, 1 bis Bologna, Via San Vitale, 89 Space: sq.m. 1.062; basement: sq.m. 290 Space: sq.m. 130; basement: sq.m. 9 Historical cost 31,683 Historical cost 13,114 Rev. Law 11.02.52 n. 74 11,173 Rev. Law 02.12.75 n. 576 3,929 Rev. Law 30.12.91 n. 413 408,760 Rev. Law 19.03.83 n. 72 53,712 Gross book value 451,616 Rev. Law 30.12.91 n. 413 74,259 Adjustments: depreciation 205,938 Gross book value 145,014 Net book value 245,678 Adjustments: depreciation 86,891 Net book value 58,123 Cagnano Varano, Via Marconi, 6/8 Space: sq.m. 267; basement: sq.m. 339 Bologna, Via Toscana, 26 Historical cost 466,877 Space: sq.m. 265; basement: sq.m. 10 Rev. Law 30.12.91 n. 413 82,803 Historical cost 36,065 Gross book value 549,680 Rev. Law 02.12.75 n. 576 15,787 Adjustments: depreciation 294,080 Rev. Law 19.03.83 n. 72 101,742 Net book value 255,600 Rev. Law 30.12.91 n. 413 128,370 Gross book value 281,964 Calco, Via Pomeo, 4/B Adjustments: depreciation 151,731 Space: sq.m. 310; basement: sq.m. 205 Net book value 130,233 Historical cost 67,414 Rev. Law 02.12.75 n. 576 20,283 Brescia, Via Vittorio Emanuele II, 66 Rev. Law 19.03.83 n. 72 99,463 Space: sq.m. 1.210; basement: sq.m. 2.480 Rev. Law 30.12.91 n. 413 54,130 Historical cost 3,750,403 Merger deficit Bam and Briantea 181,541 Rev. Law 30.12.91 n. 413 2,896,171 Gross book value 422,831 Gross book value 6,646,574 Adjustments: depreciation 204,570 Adjustments: depreciation 3,850,088 Net book value 218,261 Net book value 2,796,486 Cambiago, Via Garibaldi, 2 Bresso, Via Vittorio Veneto, 13 Space: sq.m. 315; basement: sq.m. 78 Space: sq.m. 339; basement: sq.m. 226 Historical cost 237,710 Historical cost 77,702 Rev. Law 30.12.91 n. 413 41,915 Rev. Law 19.03.83 n. 72 118,551 Merger deficit Bam and Briantea 146,425 Rev. Law 30.12.91 n. 413 197,534 Gross book value 426,050 Gross book value 393,787 Adjustments: depreciation 174,504 Adjustments: depreciation 226,208 Net book value 251,546 Net book value 167,579 Canonica D'Adda, Via Matteotti, 15 Buccinasco, Via Emilia 5/A Space: sq.m. 122; basement: sq.m. 180 Space: sq.m. 204; basement: sq.m. 34 Historical cost 271,796 Historical cost 556,564 Rev. Law 30.12.91 n. 413 6,606 Gross book value 556,564 Merger deficit Bam and Briantea 8,583 Adjustments: depreciation 191,877 Gross book value 286,985 Net book value 364,687 Adjustments: depreciation 114,713 Net book value 172,272
A t t a ch m e n t s 221 List of property owned by the Bank, revalued in prior years (art. 10, Law 72 of 19 March 1983)
Carapelle, Piazza Aldo Moro Casteggio, Via Torino, 16 Space: sq.m. 210; basement: sq.m. 261 Space: sq.m. 719; basement: sq.m. 382 Historical cost 439,849 Historical cost 750,548 Rev. Law 30.12.91 n. 413 51,860 Rev. Law 30.12.91 n. 413 57,912 Gross book value 491,709 Gross book value 808,460 Adjustments: depreciation 213,974 Adjustments: depreciation 349,074 Net book value 277,735 Net book value 459,386
Carnate, Via Volta, 1 Castellanza, Via Papa Giovanni XXIII Space: sq.m. 215; basement: sq.m. 140 Space: sq.m. 376; basement: sq.m. 202 Historical cost 7,458 Historical cost 160,164 Rev. Law 05.11.73 n. 660 5,744 Rev. Law 30.12.91 n. 413 86,833 Rev. Law 19.03.83 n. 72 70,687 Merger deficit Bam and Briantea 364.120 Rev. Law 30.12.91 n. 413 26,426 Gross book value 611,117 Merger deficit Bam and Briantea 150,587 Adjustments: depreciation 303,840 Gross book value 260,902 Net book value 307,277 Adjustments: depreciation 123,504 Net book value 137,398 Cavaria, Via 25 Aprile, 2 Space: sq.m. 497; basement: sq.m. 170 Casalecchio, Via Marconi, 11/13 Historical cost 40,367 Space: sq.m. 284; basement: sq.m. 134 Rev. Law 19.03.83 n. 72 90,904 Historical cost 138,112 Rev. Law 30.12.91 n. 413 94,111 Rev. Law 02.12.75 n. 576 14,382 Gross book value 225,382 Rev. Law 19.03.83 n. 72 156,486 Adjustments: depreciation 123,506 Rev. Law 30.12.91 n. 413 151,552 Net book value 101,876 Gross book value 460,532 Adjustments: depreciation 219,921 Cerignola, Corso Garibaldi, 46 Net book value 240,611 Space: sq.m. 557; basement: sq.m. 415 Historical cost 1,785,908 Casatenovo, Via Manzoni, 5 Rev. Law 30.12.91 n. 413 327,021 Space: sq.m. 306; basement: sq.m. 68 Gross book value 2,112,929 Historical cost 41,317 Adjustments: depreciation 1,129,373 Rev. Law 19.03.83 n. 72 225,227 Net book value 983,556 Rev. Law 30.12.91 n. 413 95,790 Merger deficit Bam and Briantea 176,747 Cernusco sul Naviglio, Piazza Gavazzi Gross book value 539,081 Space: sq.m. 600; basement: sq.m. 180 Adjustments: depreciation 273,705 Historical cost 1,011,430 Net book value 265,376 Rev. Law 30.12.91 n. 413 95,730 Gross book value 1,107,160 Casei Gerola, Piazza Meardi, 6 (ang. Via Mazzini) Adjustments: depreciation 477,289 Space: sq.m. 273; basement: sq.m. 0 Net book value 629,871 Historical cost 56,561 Rev. Law 19.03.83 n. 72 28,191 Cerro Maggiore, Via San Carlo, 21 Rev. Law 30.12.91 n. 413 14,550 Space: sq.m. 303; basement: sq.m. 337 Gross book value 99,302 Historical cost 328,497 Adjustments: depreciation 74,962 Rev. Law 30.12.91 n. 413 284,899 Net book value 24,340 Gross book value 613,396 Adjustments: depreciation 327,919 Cassano Magnago, Via Cinque Giornate, 25 Net book value 285,477 Space: sq.m. 271; basement: sq.m. 151 Historical cost 4,518 Chieuti, Via Aldo Moro, 79/81/83 Rev. Law 30.12.91 n. 413 89,586 Space: sq.m. 293; basement: sq.m. 0 Gross book value 94,104 Historical cost 347,160 Adjustments: depreciation 41,452 Gross book value 347,160 Net book value 52,652 Adjustments: depreciation 98,941 Net book value 248,219
222 A t t a ch m e n t s List of property owned by the Bank, revalued in prior years (art. 10, Law 72 of 19 March 1983)
Ciampino, Via 4 Novembre, 45 Corsico, Piazza Della Pianta, 8 Space: sq.m. 300; basement: sq.m. 0 Space: sq.m. 552; basement: sq.m. 215 Historical cost 175,856 Historical cost 1,043,787 Rev. Law 05.11.73 n. 660 20,777 Rev. Law 30.12.91 n. 413 366,395 Rev. Law 02.12.75 n. 576 10,579 Merger deficit Bam and Briantea 413,743 Rev. Law 19.03.83 n. 72 244,902 Gross book value 1,823,925 Rev. Law 30.12.91 n. 413 203,914 Adjustments: depreciation 1,330,681 Gross book value 656,028 Net book value 493,244 Adjustments: depreciation 354,813 Net book value 301,215 Cremona, Piazza 4 Novembre, 10 Space: sq.m. 473; basement: sq.m. 380 Codigoro, Via 4 Novembre, 30 Historical cost 296,653 Space: sq.m. 375; basement: sq.m. 0 Rev. Law 19.03.83 n. 72 129,639 Historical cost 82,098 Rev. Law 30.12.91 n. 413 439,403 Rev. Law 02.12.75 n. 576 14,652 Gross book value 865,695 Rev. Law 19.03.83 n. 72 67,483 Adjustments: depreciation 488,652 Rev. Law 30.12.91 n. 413 197,032 Net book value 377,043 Gross book value 361,265 Adjustments: depreciation 230,329 Cusano Milanino, Via 24 Maggio, 2 Net book value 130,936 Space: sq.m. 400; basement: sq.m. 150 Historical cost 6,068 Cologno Monzese, Via Liguria, 1 Rev. Law 19.03.83 n. 72 195,350 Space: sq.m. 470; basement: sq.m. 214 Rev. Law 30.12.91 n. 413 180,862 Historical cost 122,791 Gross book value 382,280 Rev. Law 19.03.83 n. 72 94,121 Adjustments: depreciation 209,061 Rev. Law 30.12.91 n. 413 226,050 Net book value 173,219 Gross book value 442,962 Adjustments: depreciation 257,088 Desio, Via Garibaldi, 4 Net book value 185,874 Space: sq.m. 278; basement: sq.m. 132 Historical cost 58,364 Comacchio, Viale Pascoli, 61 - Loc. Lido degli Estensi Rev. Law 05.11.73 n. 660 7,123 Space: sq.m. 262; basement: sq.m. 0 Rev. Law 19.03.83 n. 72 206,604 Historical cost 100,147 Rev. Law 30.12.91 n. 413 98,634 Rev. Law 02.12.75 n. 576 14,223 Merger deficit Bam and Briantea 152,054 Rev. Law 19.03.83 n. 72 197 Gross book value 522,779 Rev. Law 30.12.91 n. 413 145,952 Adjustments: depreciation 275,072 Gross book value 260,519 Net book value 247,707 Adjustments: depreciation 179,296 Net book value 81,223 Erba, Via Plinio, 18 Space: sq.m. 224; basement: sq.m. 124 Cormano, Via 24 Maggio, 1 Historical cost 514,115 Space: sq.m. 230; basement: sq.m. 126 Gross book value 514,115 Historical cost 18,933 Adjustments: depreciation 177,370 Rev. Law 19.03.83 n. 72 99,852 Net book value 336,745 Rev. Law 30.12.91 n. 413 111,621 Gross book value 230,406 Ferrara, Via Bologna, 411/415 Adjustments: depreciation 128,665 Space: sq.m. 184; basement: sq.m. 17 Net book value 101,741 Historical cost 20,507 Rev. Law 19.03.83 n. 72 38,170 Cornate D'Adda, Via Marconi, 10 Rev. Law 30.12.91 n. 413 111,017 Space: sq.m. 318; basement: sq.m. 189 Gross book value 169,694 Historical cost 82,117 Adjustments: depreciation 98,111 Rev. Law 19.03.83 n. 72 196,341 Net book value 71,583 Rev. Law 30.12.91 n. 413 110,230 Merger deficit Bam and Briantea 131,410 Gross book value 520,098 Adjustments: depreciation 302,653 Net book value 217,445
A t t a ch m e n t s 223 List of property owned by the Bank, revalued in prior years (art. 10, Law 72 of 19 March 1983)
Ferrara, Via Cairoli, 26 Garbagnate, Via Verdi, 1/Via Roma Space: sq.m. 740; basement: sq.m. 185 Space: sq.m. 404; basement: sq.m. 356 Historical cost 121,256 Historical cost 51,409 Rev. Law 19.03.83 n. 72 300,632 Rev. Law 19.03.83 n. 72 191,326 Rev. Law 30.12.91 n. 413 444,787 Rev. Law 30.12.91 n. 413 231,215 Gross book value 866,675 Gross book value 473,950 Adjustments: depreciation 519,074 Adjustments: depreciation 265,999 Net book value 347,601 Net book value 207,951
Foggia, Piazza Marconi, 11 Lacchiarella, Via Isonzo, 14 Space: sq.m. 413; basement: sq.m. 260 Space: sq.m. 297; basement: sq.m. 30 Historical cost 457,839 Historical cost 399,598 Rev. Law 19.03.83 n. 72 750,670 Rev. Law 30.12.91 n. 413 169,413 Rev. Law 30.12.91 n. 413 147,323 Merger deficit Bam and Briantea 126,246 Gross book value 1,355,832 Gross book value 695,257 Adjustments: depreciation 798,921 Adjustments: depreciation 545,474 Net book value 556,911 Net book value 149,784
Foggia, Piazza Umberto Giordano Legnano, Via Nino Bixio Space: sq.m. 1.970; basement: sq.m. 315 Space: sq.m. 217; basement: sq.m. 40 Historical cost 5,396,975 Historical cost 395,152 Rev. Law 30.12.91 n. 413 804,123 Rev. Law 30.12.91 n. 413 47,628 Gross book value 6,201,098 Gross book value 442,780 Adjustments: depreciation 3,196,728 Adjustments: depreciation 202,299 Net book value 3,004,370 Net book value 240,481
Gaggiano, Via Carroccio, 27 Lentate sul Seveso, Via Roma, 37 Space: sq.m. 280; basement: sq.m. 19 Space: sq.m. 384; basement: sq.m. 214 Historical cost 54,221 Historical cost 417,790 Rev. Law 05.11.73 n. 660 13,280 Rev. Law 30.12.91 n. 413 218,162 Rev. Law 19.03.83 n. 72 178,998 Gross book value 635,952 Rev. Law 30.12.91 n. 413 90,149 Adjustments: depreciation 332,824 Merger deficit Bam and Briantea 167,025 Net book value 303,128 Gross book value 503,673 Adjustments: depreciation 257,835 Limbiate, Via Garibaldi, 10 Net book value 245,838 Space: sq.m. 732; basement: sq.m. 506 Historical cost 252,742 Gallarate, Via Manzoni, 17 Rev. Law 19.03.83 n. 72 57,132 Space: sq.m. 989; basement: sq.m. 738 Rev. Law 30.12.91 n. 413 331,335 Historical cost 27,684 Gross book value 641,209 Rev. Law 11.02.52 n. 74 5,163 Adjustments: depreciation 371,248 Rev. Law 30.12.91 n. 413 245,817 Net book value 269,961 Gross book value 278,664 Adjustments: depreciation 128,748 Lissone, Piazza Italia, 1 Net book value 149,916 Space: sq.m. 352; basement: sq.m. 148 Historical cost 11,620 Gallarate (Arnate), Via Cecchi Rev. Law 19.03.83 n. 72 127,823 Space: sq.m. 250; basement: sq.m. 0 Rev. Law 30.12.91 n. 413 131,067 Historical cost 451,117 Gross book value 270,510 Gross book value 451,117 Adjustments: depreciation 152,149 Adjustments: depreciation 128,440 Net book value 118,361 Net book value 322,677 Lissone, Via Matteotti/Piazza Italia, 1 Space: sq.m. 262; basement: sq.m. 0 Historical cost 307,874 Rev. Law 30.12.91 n. 413 24,711 Gross book value 332,585 Adjustments: depreciation 128,198 Net book value 204,387
224 A t t a ch m e n t s List of property owned by the Bank, revalued in prior years (art. 10, Law 72 of 19 March 1983)
Lomagna, Via Milano, 2 Manfredonia, Via G. Di Vittorio, 66 Space: sq.m. 340; basement: sq.m. 220 Space: sq.m. 220; basement: sq.m. 220 Historical cost 64,998 Historical cost 414,456 Rev. Law 19.03.83 n. 72 166,881 Rev. Law 30.12.91 n. 413 47,392 Rev. Law 30.12.91 n. 413 54,416 Gross book value 461,848 Merger deficit Bam and Briantea 244,728 Adjustments: depreciation 223,639 Gross book value 531,023 Net book value 238,209 Adjustments: depreciation 246,646 Net book value 284,377 Manfredonia, Via Tribuna, 65/67 Space: sq.m. 705; basement: sq.m. 235 Lucera, Via Zuppetta Historical cost 859,201 Space: sq.m. 940; basement: sq.m. 132 Rev. Law 19.03.83 n. 72 483,587 Historical cost 1,614,323 Rev. Law 30.12.91 n. 413 247,924 Rev. Law 30.12.91 n. 413 309,299 Gross book value 1,590,712 Gross book value 1,923,622 Adjustments: depreciation 868,302 Adjustments: depreciation 990,665 Net book value 722,410 Net book value 932,957 Mariano Comense, Via Pace/Viale Brianza Macherio, Via Visconti di Modrone Space: sq.m. 302; basement: sq.m. 163 Space: sq.m. 300; basement: sq.m. 316 Historical cost 520,918 Historical cost 288,345 Rev. Law 30.12.91 n. 413 109,672 Rev. Law 30.12.91 n. 413 250,075 Gross book value 630,590 Gross book value 538,420 Adjustments: depreciation 308,418 Adjustments: depreciation 287,837 Net book value 322,172 Net book value 250,583 Marino, Piazza Matteotti Magenta, Via Volta, 1 (Ang. P.zza Libertà) Space: sq.m. 1.560; basement: sq.m. 380 Space: sq.m. 1.385; basement: sq.m. 526 Historical cost 1,145,804 Historical cost 717,373 Rev. Law 05.11.73 n. 660 32,285 Rev. Law 19.03.83 n. 72 114,352 Rev. Law 02.12.75 n. 576 20,777 Rev. Law 30.12.91 n. 413 799,937 Rev. Law 19.03.83 n. 72 623,226 Gross book value 1,631,662 Rev. Law 30.12.91 n. 413 812,660 Adjustments: depreciation 880,388 Gross book value 2,634,752 Net book value 751,274 Adjustments: depreciation 1,367,882 Net book value 1,266,870 Magenta, Via Volta, 16 Space: sq.m. 450; basement: sq.m. 114 Marino, Via Appia Nuova, 94 - Loc. Frattocchie Historical cost 737,313 Space: sq.m. 120; basement: sq.m. 0 Rev. Law 30.12.91 n. 413 44,798 Historical cost 77,334 Merger deficit Bam and Briantea 102,876 Rev. Law 19.03.83 n. 72 64,719 Gross book value 884,987 Rev. Law 30.12.91 n. 413 41,447 Adjustments: depreciation 375,796 Gross book value 183,500 Net book value 509,191 Adjustments: depreciation 88,052 Net book value 95,448 Magnago, Piazza d'Armi, 27 Space: sq.m. 270; basement: sq.m. 143 Marino, Viale della Repubblica, 76 Historical cost 44,995 Loc. Santa Maria della Mole Rev. Law 19.03.83 n. 72 78,954 Space: sq.m. 160; basement: sq.m. 160 Rev. Law 30.12.91 n. 413 126,015 Historical cost 22,463 Gross book value 249,964 Rev. Law 05.11.73 n. 660 20,930 Adjustments: depreciation 145,027 Rev. Law 02.12.75 n. 576 10,657 Net book value 104,937 Rev. Law 19.03.83 n. 72 80,468 Rev. Law 30.12.91 n. 413 86,665 Gross book value 221,183 Adjustments: depreciation 129,768 Net book value 91,415
A t t a ch m e n t s 225 List of property owned by the Bank, revalued in prior years (art. 10, Law 72 of 19 March 1983)
Mattinata, Via Vittorio Veneto, 21 Milano, Corso Genova, 29 Space: sq.m. 179; basement: sq.m. 191 Space: sq.m. 1.326; basement: sq.m. 640 Historical cost 521,105 Historical cost 971,116 Rev. Law 30.12.91 n. 413 76,837 Rev. Law 30.12.91 n. 413 969,387 Gross book value 597,942 Gross book value 1,940,503 Adjustments: depreciation 309,518 Adjustments: depreciation 1,049,445 Net book value 288,424 Net book value 891,058
Meda, Corso Matteotti, 14 Milano, Corso Manusardi, 3 Space: sq.m. 390; basement: sq.m. 164 Space: sq.m. 303; basement: sq.m. 377 Historical cost 56,256 Historical cost 51,645 Rev. Law 19.03.83 n. 72 165,266 Rev. Law 05.11.73 n. 660 23,267 Rev. Law 30.12.91 n. 413 221,089 Rev. Law 19.03.83 n. 72 434,588 Gross book value 442,611 Rev. Law 30.12.91 n. 413 180,717 Adjustments: depreciation 257,873 Merger deficit Bam and Briantea 487,168 Net book value 184,738 Gross book value 1,177,385 Adjustments: depreciation 556,245 Melzo, Piazza della Vittoria, 2 Net book value 621,140 Space: sq.m. 364; basement: sq.m. 26 Historical cost 324,987 Milano, Corso Plebisciti, 19 Rev. Law 05.11.73 n. 660 20,478 Space: sq.m. 494; basement: sq.m. 200 Rev. Law 19.03.83 n. 72 224,922 Historical cost 415 Rev. Law 30.12.91 n. 413 81,662 Rev. Law 11.02.52 n. 74 9,914 Merger deficit Bam and Briantea 91,952 Rev. Law 19.03.83 n. 72 361,520 Gross book value 744,001 Rev. Law 30.12.91 n. 413 333,327 Adjustments: depreciation 336,845 Gross book value 705,176 Net book value 407,156 Adjustments: depreciation 385,249 Net book value 319,927 Merate, Via Trento, 43 Space: sq.m. 1.215; basement: sq.m. 0 Milano, Corso Sempione, 32/32A Historical cost 398,685 Space: sq.m. 1.343; basement: sq.m. 1.169 Rev. Law 19.03.83 n. 72 467,016 Historical cost 877,711 Rev. Law 30.12.91 n. 413 312,192 Rev. Law 30.12.91 n. 413 2,076,443 Merger deficit Bam and Briantea 470,255 Gross book value 2,954,154 Gross book value 1,648,148 Adjustments: depreciation 1,430,963 Adjustments: depreciation 938,416 Net book value 1,523,191 Net book value 709,732 Milano, Galleria De Cristoforis, 1 Merate, Via Viganò, 2/4/8 Space: sq.m. 5.006; basement: sq.m. 745 Space: sq.m. 1.445; basement: sq.m. 475 Historical cost 2,653,564 Historical cost 108,323 Rev. Law 19.03.83 n. 72 2,655,522 Rev. Law 02.12.75 n. 576 173,648 Rev. Law 30.12.91 n. 413 9,499,856 Rev. Law 19.03.83 n. 72 858,072 Gross book value 14,808,942 Rev. Law 30.12.91 n. 413 374,743 Adjustments: depreciation 7,365,913 Merger deficit Bam and Briantea 898,567 Net book value 7,443,029 Gross book value 2,413,353 Adjustments: depreciation 1,189,409 Milano, Galleria De Cristoforis, 7/8 Net book value 1,223,944 Space: sq.m. 3.650; basement: sq.m. 2.830 Historical cost 4,071,264 Milano, Corso Buenos Aires, 36 Rev. Law 30.12.91 n. 413 12,539,599 Space: sq.m. 294; basement: sq.m. 454 Gross book value 16,610,863 Historical cost 15,494 Adjustments: depreciation 7,711,237 Rev. Law 19.03.83 n. 72 836,660 Net book value 8,899,626 Rev. Law 30.12.91 n. 413 754,609 Gross book value 1,606,763 Adjustments: depreciation 870,773 Net book value 735,990
226 A t t a ch m e n t s List of property owned by the Bank, revalued in prior years (art. 10, Law 72 of 19 March 1983)
Milano, Piazza Meda, 2/4 Milano, Via A. da Recanate, 2 Space: sq.m. 24.825; basement: sq.m. 12.640 Space: sq.m. 439; basement: sq.m. 280 Historical cost 940,805 Historical cost 59,768 Rev. Law 11.02.52 n. 74 657,188 Rev. Law 30.12.91 n. 413 224,233 Rev. Law 02.12.75 n. 576 1,137,472 Gross book value 284,001 Rev. Law 19.03.83 n. 72 19,634,683 Adjustments: depreciation 145,425 Rev. Law 30.12.91 n. 413 19,853,715 Net book value 138,576 Gross book value 42,223,863 Adjustments: depreciation 22,974,605 Milano, Via Amadeo Net book value 19,249,258 Space: sq.m. 110; basement: sq.m. 7 Historical cost 341,876 Milano, Piazza Medaglie d'Oro, 1 Gross book value 341,876 Space: sq.m. 386; basement: sq.m. 109 Adjustments: depreciation 97,435 Historical cost 104,647 Net book value 244,441 Rev. Law 19.03.83 n. 72 287,860 Rev. Law 30.12.91 n. 413 383,577 Milano, Via Astesani, 46 Gross book value 776,084 Space: sq.m. 266; basement: sq.m. 222 Adjustments: depreciation 441,485 Historical cost 21,691 Net book value 334,599 Rev. Law 19.03.83 n. 72 133,246 Rev. Law 30.12.91 n. 413 150,785 Milano, Piazza Napoli, 16 Gross book value 305,722 Space: sq.m. 258; basement: sq.m. 103 Adjustments: depreciation 175,359 Historical cost 15,494 Net book value 130,363 Rev. Law 19.03.83 n. 72 227,241 Rev. Law 30.12.91 n. 413 226,103 Milano, Via Bodoni, 1 Gross book value 468,838 Space: sq.m. 305; basement: sq.m. 156 Adjustments: depreciation 262,469 Historical cost 2,944 Net book value 206,369 Rev. Law 19.03.83 n. 72 213,968 Rev. Law 30.12.91 n. 413 191,210 Milano, Piazza Wagner, 15 Gross book value 408,122 Space: sq.m. 623; basement: sq.m. 126 Adjustments: depreciation 220,536 Historical cost 68,998 Net book value 187,586 Rev. Law 30.12.91 n. 413 864,818 Gross book value 933,816 Milano, Via Capo Palinuro, 2 Adjustments: depreciation 461,371 Space: sq.m. 700; basement: sq.m. 389 Net book value 472,445 Historical cost 224,411 Rev. Law 19.03.83 n. 72 162,932 Milano, Piazzale Lagosta, 9 Rev. Law 30.12.91 n. 413 405,283 Space: sq.m. 240; basement: sq.m. 186 Gross book value 792,626 Historical cost 36,152 Adjustments: depreciation 460,833 Rev. Law 19.03.83 n. 72 118,785 Net book value 331,793 Rev. Law 30.12.91 n. 413 154,748 Gross book value 309,685 Milano, Via Faruffini, 3 Adjustments: depreciation 179,434 Space: sq.m. 272; basement: sq.m. 155 Net book value 130,251 Historical cost 33,570 Rev. Law 05.11.73 n. 660 17,172 Milano, Piazzale Loreto Rev. Law 19.03.83 n. 72 381,579 Space: sq.m. 240; basement: sq.m. 500 Rev. Law 30.12.91 n. 413 153,530 Historical cost 51,284 Merger deficit Bam and Briantea 330,672 Rev. Law 19.03.83 n. 72 775,047 Gross book value 916,523 Rev. Law 30.12.91 n. 413 764,712 Adjustments: depreciation 453,996 Gross book value 1,591,043 Net book value 462,527 Adjustments: depreciation 886,692 Net book value 704,351
A t t a ch m e n t s 227 List of property owned by the Bank, revalued in prior years (art. 10, Law 72 of 19 March 1983)
Milano, Via Montegani, 2 Milano, Via Ripamonti, 114 Space: sq.m. 312; basement: sq.m. 164 Space: sq.m. 245; basement: sq.m. 209 Historical cost 30,222 Historical cost 27,889 Rev. Law 19.03.83 n. 72 213,292 Rev. Law 19.03.83 n. 72 127,048 Rev. Law 30.12.91 n. 413 227,171 Rev. Law 30.12.91 n. 413 155,475 Gross book value 470,685 Gross book value 310,412 Adjustments: depreciation 263,799 Adjustments: depreciation 181,272 Net book value 206,886 Net book value 129,140
Milano, Via Padova, 204 Milano, Via Romagnoli, 1 Space: sq.m. 339; basement: sq.m. 160 Space: sq.m. 331; basement: sq.m. 150 Historical cost 29,346 Historical cost 394,160 Rev. Law 19.03.83 n. 72 228,882 Rev. Law 30.12.91 n. 413 227,946 Rev. Law 30.12.91 n. 413 238,566 Merger deficit Bam and Briantea 350,509 Gross book value 496,794 Gross book value 972,615 Adjustments: depreciation 275,193 Adjustments: depreciation 669,009 Net book value 221,601 Net book value 303,606
Milano, Via Padova, 282 Milano, Via Ronchi, 2 Space: sq.m. 383; basement: sq.m. 132 Space: sq.m. 530; basement: sq.m. 570 Historical cost 469,685 Historical cost 239,961 Rev. Law 30.12.91 n. 413 241,623 Rev. Law 19.03.83 n. 72 183,533 Merger deficit Bam and Briantea 270,920 Rev. Law 30.12.91 n. 413 433,751 Gross book value 982,228 Gross book value 857,245 Adjustments: depreciation 706,844 Adjustments: depreciation 491,345 Net book value 275,384 Net book value 365,900
Milano, Via Pianell, 52 Milano, Via Rubens, 7/9 Space: sq.m. 609; basement: sq.m. 241 Space: sq.m. 194; basement: sq.m. 46 Historical cost 56,517 Historical cost 35,878 Rev. Law 30.12.91 n. 413 404,181 Rev. Law 02.12.75 n. 576 71,271 Gross book value 460,698 Rev. Law 19.03.83 n. 72 78,768 Adjustments: depreciation 237,058 Rev. Law 30.12.91 n. 413 197,341 Net book value 223,640 Gross book value 383,258 Adjustments: depreciation 225,166 Milano, Via Piave, 28 Net book value 158,092 Space: sq.m. 216; basement: sq.m. 130 Historical cost 2,324 Milano, Via Salvini, 1 Rev. Law 19.03.83 n. 72 307,550 Space: sq.m. 300; basement: sq.m. 605 Rev. Law 30.12.91 n. 413 271,225 Historical cost 2,701,828 Gross book value 581,099 Gross book value 2,701,828 Adjustments: depreciation 312,548 Adjustments: depreciation 445,802 Net book value 268,551 Net book value 2,256,026
Milano, Via Pontaccio, 23 Milano, Via Salvo D'Acquisto, 4 Space: sq.m. 315; basement: sq.m. 215 Space: sq.m. 531; basement: sq.m. 340 Historical cost 105,785 Historical cost 679,842 Rev. Law 19.03.83 n. 72 333,276 Rev. Law 30.12.91 n. 413 423,728 Rev. Law 30.12.91 n. 413 481,532 Gross book value 1,103,570 Gross book value 920,593 Adjustments: depreciation 649,104 Adjustments: depreciation 535,000 Net book value 454,466 Net book value 385,593
228 Conto EconomicoA t t ariclassificato ch m e n t s List of property owned by the Bank, revalued in prior years (art. 10, Law 72 of 19 March 1983)
Milano, Via San Paolo, 12/16 Missaglia, Via Merlini, 3 Space: sq.m. 6.200; basement: sq.m. 2.550 Space: sq.m. 273; basement: sq.m. 357 Historical cost 745,455 Historical cost 665,701 Rev. Law 11.02.52 n. 74 25,048 Rev. Law 30.12.91 n. 413 278,681 Rev. Law 19.03.83 n. 72 4,652,294 Merger deficit Bam and Briantea 243,062 Rev. Law 30.12.91 n. 413 5,076,607 Gross book value 1,187,444 Gross book value 10,499,404 Adjustments: depreciation 885,803 Adjustments: depreciation 5,856,579 Net book value 301,641 Net book value 4,642,825 Monte Sant' Angelo, Corso Umberto I, 55 Milano, Via Trenno, 12 Space: sq.m. 31; basement: sq.m. 0 Space: sq.m. 183; basement: sq.m. 136 Historical cost 31,503 Historical cost 845,265 Gross book value 31,503 Gross book value 845,265 Adjustments: depreciation 21,567 Adjustments: depreciation 621 Net book value 9,936 Net book value 844,644 Monte Sant' Angelo, Piazza Roma, 4 Milano, Via Turati, 26 Space: sq.m. 134; basement: sq.m. 0 Space: sq.m. 268; basement: sq.m. 262 Historical cost 45,448 Historical cost 144,608 Rev. Law 19.03.83 n. 72 90,896 Rev. Law 19.03.83 n. 72 366,684 Rev. Law 30.12.91 n. 413 34,169 Rev. Law 30.12.91 n. 413 557,076 Gross book value 170,513 Gross book value 1,068,368 Adjustments: depreciation 97,570 Adjustments: depreciation 654,251 Net book value 72,943 Net book value 414,117 Monza, Piazza Roma/Piazza Carducci/Via Pretorio Milano, Via Zurigo, 14 Space: sq.m. 3.684; basement: sq.m. 1.112 Space: sq.m. 138; basement: sq.m. 87 Historical cost 2,877,771 Historical cost 568,051 Rev. Law 30.12.91 n. 413 634,526 Rettifiche di valore: svalutazioni -170,593 Gross book value 3,512,297 Gross book value 397,458 Adjustments: depreciation 1,445,771 Adjustments: depreciation 103,911 Net book value 2,066,526 Net book value 293,547 Monza, Via Arosio, 1/Corso Milano Milano, Viale Corsica, 31 Space: sq.m. 211; basement: sq.m. 70 Space: sq.m. 621; basement: sq.m. 150 Historical cost 2,582 Historical cost 667,600 Rev. Law 19.03.83 n. 72 80,051 Rev. Law 19.03.83 n. 72 55,440 Rev. Law 30.12.91 n. 413 74,333 Rev. Law 30.12.91 n. 413 733,558 Gross book value 156,966 Gross book value 1,456,598 Adjustments: depreciation 85,945 Adjustments: depreciation 803,350 Net book value 71,021 Net book value 653,248 Monza, Via San Martino, 5 Milano, Viale Monza, 169 Space: sq.m. 30; basement: sq.m. 370 Space: sq.m. 199; basement: sq.m. 210 Historical cost 497,964 Historical cost 27,889 Gross book value 497,964 Rev. Law 19.03.83 n. 72 127,048 Adjustments: depreciation 266,202 Rev. Law 30.12.91 n. 413 155,475 Net book value 231,762 Gross book value 310,412 Adjustments: depreciation 181,272 Muggiò, Via Buozzi, 1/Via Italia Net book value 129,140 Space: sq.m. 369; basement: sq.m. 357 Historical cost 604,205 Rev. Law 30.12.91 n. 413 315,489 Gross book value 919,694 Adjustments: depreciation 503,689 Net book value 416,005
A t t a ch m e n t s 229 List of property owned by the Bank, revalued in prior years (art. 10, Law 72 of 19 March 1983)
Opera, Via Mazzini, 2/Via Cavour Pavia, Via Riviera, 37 Space: sq.m. 617; basement: sq.m. 210 Space: sq.m. 200; basement: sq.m. 80 Historical cost 519,834 Historical cost 483,735 Rev. Law 30.12.91 n. 413 394,901 Gross book value 483,735 Gross book value 914,735 Adjustments: depreciation 108,840 Adjustments: depreciation 496,797 Net book value 374,895 Net book value 417,938 Perego, Viale Brianza, 7/H Orta Nova, Via Pietro Nenni, 53 Space: sq.m. 92; basement: sq.m. 46 Space: sq.m. 280; basement: sq.m. 0 Historical cost 116,258 Historical cost 257,061 Gross book value 116,258 Rev. Law 19.03.83 n. 72 154,385 Adjustments: depreciation 38,365 Rev. Law 30.12.91 n. 413 62,944 Net book value 77,893 Gross book value 474,390 Adjustments: depreciation 205,317 Pero, Via Alessandrini, 1 Net book value 269,073 Space: sq.m. 526; basement: sq.m. 440 Historical cost 221,697 Osio Sotto, Corso Vittorio Veneto, 51 Rev. Law 19.03.83 n. 72 114,000 Space: sq.m. 343; basement: sq.m. 156 Rev. Law 30.12.91 n. 413 352,267 Historical cost 538,341 Gross book value 687,964 Rev. Law 30.12.91 n. 413 165,821 Adjustments: depreciation 398,091 Merger deficit Bam and Briantea 270,969 Net book value 289,873 Gross book value 975,131 Adjustments: depreciation 702,397 Pesaro, Via Mameli, 70 Net book value 272,734 Space: sq.m. 580; basement: sq.m. 374 Historical cost 1,296,149 Paderno d'Adda, Via Manzoni, 21 Rev. Law 30.12.91 n. 413 118,027 Space: sq.m. 168; basement: sq.m. 82 Gross book value 1,414,176 Historical cost 568,545 Adjustments: depreciation 648,740 Gross book value 568,545 Net book value 765,436 Adjustments: depreciation 2,749 Net book value 565,796 Peschici, Corso Garibaldi, 57 Space: sq.m. 240; basement: sq.m. 0 Paderno Dugnano, Via Rotondi, 49 Historical cost 143,731 Space: sq.m. 498; basement: sq.m. 456 Rev. Law 19.03.83 n. 72 160,979 Historical cost 252,676 Rev. Law 30.12.91 n. 413 74,858 Rev. Law 19.03.83 n. 72 57,198 Gross book value 379,568 Rev. Law 30.12.91 n. 413 316,605 Adjustments: depreciation 222,889 Gross book value 626,479 Net book value 156,678 Adjustments: depreciation 350,733 Net book value 275,746 Pieve Emanuele, Via Curiel, 4 Space: sq.m. 230; basement: sq.m. 80 Padova, Via Giotto (ang. Via del Carmine) Historical cost 18,280 Space: sq.m. 630; basement: sq.m. 265 Rev. Law 05.11.73 n. 660 2,415 Historical cost 2,957,129 Rev. Law 19.03.83 n. 72 107,738 Gross book value 2,957,129 Rev. Law 30.12.91 n. 413 49,001 Adjustments: depreciation 931,379 Merger deficit Bam and Briantea 128,781 Net book value 2,025,750 Gross book value 306,215 Adjustments: depreciation 141,259 Pantigliate, Viale Risorgimento, 51 Net book value 164,956 Space: sq.m. 301; basement: sq.m. 0 Historical cost 46,843 Pioltello, Viale Monza, 49 - Loc. Limito Rev. Law 05.11.73 n. 660 4,255 Space: sq.m. 360; basement: sq.m. 344 Rev. Law 19.03.83 n. 72 128,407 Historical cost 245,123 Rev. Law 30.12.91 n. 413 74,173 Rev. Law 19.03.83 n. 72 13,105 Merger deficit Bam and Briantea 131,613 Rev. Law 30.12.91 n. 413 283,831 Gross book value 385,291 Gross book value 542,059 Adjustments: depreciation 186,555 Adjustments: depreciation 316,675 Net book value 198,736 Net book value 225,384
230 A t t a ch m e n t s List of property owned by the Bank, revalued in prior years (art. 10, Law 72 of 19 March 1983)
Poggio Imperiale, Piazza Imperiale, 2/6 Roma Capannelle, Via Acerenza/Appia Nuova Space: sq.m. 200; basement: sq.m. 52 Space: sq.m. 320; basement: sq.m. 0 Historical cost 63,783 Historical cost 603,904 Rev. Law 19.03.83 n. 72 154,162 Rev. Law 30.12.91 n. 413 290,996 Rev. Law 30.12.91 n. 413 49,828 Gross book value 894,900 Gross book value 267,773 Adjustments: depreciation 492,533 Adjustments: depreciation 152,710 Net book value 402,367 Net book value 115,063 San Giuliano Milanese, Via Fratelli Rizzi, 1 Rho, Via Curiel/Via Vanoni Space: sq.m. 518; basement: sq.m. 111 Space: sq.m. 10.000; basement: sq.m. 0 Historical cost 590,989 Historical cost 3,535,780 Rev. Law 30.12.91 n. 413 343,638 Rev. Law 30.12.91 n. 413 749,592 Gross book value 934,627 Gross book value 4,285,372 Adjustments: depreciation 513,559 Adjustments: depreciation 1,938,895 Net book value 421,068 Net book value 2,346,477 San Giuliano Milanese, Via Milano, 10/12 Rho, Via Madonna, 32/Largo Kennedy, 1 Space: sq.m. 172; basement: sq.m. 27 Space: sq.m. 448; basement: sq.m. 235 Historical cost 110,317 Historical cost 338,478 Rev. Law 19.03.83 n. 72 74,406 Rev. Law 19.03.83 n. 72 289,732 Rev. Law 30.12.91 n. 413 35,839 Rev. Law 30.12.91 n. 413 284,342 Merger deficit Bam and Briantea 78,221 Gross book value 912,552 Gross book value 298,783 Adjustments: depreciation 381,565 Adjustments: depreciation 141,321 Net book value 530,987 Net book value 157,462
Roma, Piazzale Flaminio, 1 San Lazzaro di Savena, Via Emilia, 175 Space: sq.m. 6.540; basement: sq.m. 3.030 Space: sq.m. 697; basement: sq.m. 90 Historical cost 4,679,879 Historical cost 158,492 Rev. Law 19.03.83 n. 72 3,322,549 Rev. Law 19.03.83 n. 72 195,281 Rev. Law 30.12.91 n. 413 8,277,232 Rev. Law 30.12.91 n. 413 352,779 Gross book value 16,279,660 Gross book value 706,552 Adjustments: depreciation 9,389,548 Adjustments: depreciation 401,329 Net book value 6,890,112 Net book value 305,223
Roma, Via Baldovinetti, 146/1 San Severo di Puglia, Via Minuziano, 118 Space: sq.m. 865; basement: sq.m. 695 Space: sq.m. 570; basement: sq.m. 190 Historical cost 4,185,331 Historical cost 777,784 Gross book value 4,185,331 Rev. Law 30.12.91 n. 413 159,599 Adjustments: depreciation 1,569,499 Gross book value 937,383 Net book value 2,615,832 Adjustments: depreciation 523,113 Net book value 414,270 Roma, Via Ugo Ojetti, 74 Space: sq.m. 600; basement: sq.m. 507 Sant'Agostino, Via Statale, 70 - Loc. San Carlo Historical cost 710,040 Space: sq.m. 232; basement: sq.m. 0 Rev. Law 19.03.83 n. 72 322,874 Historical cost 197,375 Rev. Law 30.12.91 n. 413 1,072,469 Rev. Law 30.12.91 n. 413 158,850 Gross book value 2,105,383 Gross book value 356,225 Adjustments: depreciation 1,206,182 Adjustments: depreciation 286,057 Net book value 899,201 Net book value 70,168
Roma, Via Vittorio Veneto, 1 Saronno, Piazza De Gasperi, 13 Space: sq.m. 820; basement: sq.m. 409 Space: sq.m. 967; basement: sq.m. 411 Historical cost 2,270,823 Historical cost 348,623 Rev. Law 30.12.91 n. 413 1,528,604 Rev. Law 19.03.83 n. 72 250,467 Gross book value 3,799,427 Rev. Law 30.12.91 n. 413 619,367 Adjustments: depreciation 2,154,514 Gross book value 1,218,457 Net book value 1,644,913 Adjustments: depreciation 702,193 Net book value 516,264
A t t a ch m e n t s 231 List of property owned by the Bank, revalued in prior years (art. 10, Law 72 of 19 March 1983)
Saronno, Via Leonardo Da Vinci Torino, Corso Vercelli, 109 Space: sq.m. 246; basement: sq.m. 160 Space: sq.m. 338; basement: sq.m. 190 Historical cost 397,330 Historical cost 984,580 Gross book value 397,330 Rev. Law 30.12.91 n. 413 265,429 Adjustments: depreciation 125,159 Gross book value 1,250,009 Net book value 272,171 Adjustments: depreciation 685,027 Net book value 564,982 Saronno, Via Mazzini, 16/18 Space: sq.m. 402; basement: sq.m. 69 Torremaggiore, Piazza Repubblica, 58 Historical cost 11,238 Space: sq.m. 233; basement: sq.m. 135 Rev. Law 05.11.73 n. 660 47,901 Historical cost 310,216 Rev. Law 19.03.83 n. 72 239,600 Rev. Law 19.03.83 n. 72 255,242 Rev. Law 30.12.91 n. 413 102,657 Rev. Law 30.12.91 n. 413 107,262 Merger deficit Bam and Briantea 278,020 Gross book value 672,720 Gross book value 679,416 Adjustments: depreciation 368,169 Adjustments: depreciation 311,328 Net book value 304,551 Net book value 368,088 Tradate, Via Vittorio Veneto/Via Dante Segrate, Piazza Centro Commerciale, 36 Space: sq.m. 150; basement: sq.m. 154 Space: sq.m. 174; basement: sq.m. 0 Historical cost 26,151 Historical cost 580,667 Rev. Law 19.03.83 n. 72; 90,052 Gross book value 580,667 Rev. Law 30.12.91 n. 413 108,861 Adjustments: depreciation 13,135 Gross book value 225,064 Net book value 567,532 Adjustments: depreciation 124,641 Net book value 100,423 Seregno, Via Montello/Circonvallazione Space: sq.m. 2.220; basement: sq.m. 1.602 Trinitapoli, Corso Trinità, 13 Historical cost 715,031 Space: sq.m. 408; basement: sq.m. 0 Rev. Law 19.03.83 n. 72 568,341 Historical cost 542,408 Rev. Law 30.12.91 n. 413 1,238,691 Rev. Law 30.12.91 n. 413 92,277 Gross book value 2,522,063 Gross book value 634,685 Adjustments: depreciation 1,405,547 Adjustments: depreciation 337,350 Net book value 1,116,516 Net book value 297,335
Sesto San Giovanni, Piazza 4 Novembre, 28 Varese, Via Avegno, 4 Space: sq.m. 473; basement: sq.m. 250 Space: sq.m. 602; basement: sq.m. 313 Historical cost 18,076 Historical cost 1 Rev. Law 19.03.83 n. 72 260,811 Rev. Law 19.03.83 n. 72 413,165 Rev. Law 30.12.91 n. 413 254,383 Rev. Law 30.12.91 n. 413 358,329 Gross book value 533,270 Gross book value 771,495 Adjustments: depreciation 294,017 Adjustments: depreciation 412,438 Net book value 239,253 Net book value 359,057
Settimo Milanese, Via Manzoni, 1 Verona, Piazza Cittadella, 4 Space: sq.m. 328; basement: sq.m. 234 Space: sq.m. 422; basement: sq.m. 381 Historical cost 35,988 Historical cost 1,383,621 Rev. Law 19.03.83 n. 72 118,949 Rev. Law 30.12.91 n. 413 4,234 Rev. Law 30.12.91 n. 413 160,483 Gross book value 1,387,855 Gross book value 315,420 Adjustments: depreciation 598,535 Adjustments: depreciation 187,439 Net book value 789,320 Net book value 127,981 Vieste, Via Madonna della Libertà, 27 Sumirago, Via Piave, 2 Space: sq.m. 791; basement: sq.m. 303 Space: sq.m. 140; basement: sq.m. 35 Historical cost 1,156,863 Historical cost 80,965 Rev. Law 30.12.91 n. 413 205,157 Gross book value 80,965 Gross book value 1,362,020 Adjustments: depreciation 28,498 Adjustments: depreciation 731,180 Net book value 52,467 Net book value 630,840
232 A t t a ch m e n t s List of property owned by the Bank, revalued in prior years (art. 10, Law 72 of 19 March 1983)
Villasanta, Piazza Martiri della Libertà, 13 GENERAL SUMMARY TOTAL Space: sq.m. 442; basement: sq.m. 571 Historical cost 90,787,148 Historical cost 429,763 Rev. Law 30.12.91 n. 413 682,686 Rev. Law 11.02.52 n. 74 733,145 Gross book value 1,112,449 Rev. Law 05.11.73 n. 660 297,537 Adjustments: depreciation 676,858 Rev. Law 02.12.75 n. 576 1,924,988 Net book value 435,591 Rev. Law 19.03.83 n. 72 52,248,609 Vimercate, Piazza Roma, 1 Rev. Law 30.12.91 n. 413 101,163,094 Space: sq.m. 299; basement: sq.m. 128 Historical cost 23,230 Merger deficit Bam and Briantea 7,275,471 Rev. Law 11.02.52 n. 74 996 Rettifiche di valore: svalutazioni -170,593 Rev. Law 05.11.73 n. 660 32,950 Gross book value 254,259,399 Rev. Law 19.03.83 n. 72 226,404 Rev. Law 30.12.91 n. 413 96,403 Adjustments: depreciation 132,010,294 Merger deficit Bam and Briantea 207,106 Net book value 122,249,105 Gross book value 587,089 Adjustments: depreciation 282,048 Total sq.m. (space + basement) 199,040 Net book value 305,041
Voghera, Piazza C. Battisti, 10 Space: sq.m. 1.991; basement: sq.m. 2.844 Historical cost 792,261 Rev. Law 02.12.75 n. 576 69,671 Rev. Law 19.03.83 n. 72 790,730 Rev. Law 30.12.91 n. 413 1,671,774 Gross book value 3,324,436 Adjustments: depreciation 1,895,761 Net book value 1,428,675
A t t a ch m e n t s 233 Report of the Board of Statutory Auditors
235 The explanatory notes contain information on the Shareholders, accounting policies as well as detailed analyses on the balance sheet and statement of income. The notes also The financial statements for the year ended 31 December provide information that the Board of Directors sees fit 2004, presented for your examination by the Board of to disclose in order to give a true and fair presentation of Directors, have been prepared in accordance with the the Bank’s results and its financial situation. The provisions of Decree 87 of 27 January 1992 and with financial statements have been audited pursuant to instructions issued by the Bank of Italy on 15 July 1992 Decree 58 of 24 February 1998 by the external audit firm and subsequent modifications thereto. of PricewaterhouseCoopers SpA, which issued its report on the financial statements at 31 December 2004 without Having fulfilled the duties required of us by Decree 58/98 qualifications. and carried out the necessary checks, we are able to state that the financial statements have been prepared in We refer you to these documents for any additional accordance with the formats for banking and financial information on the economic and financial situation. institutions as required by European Directive 86/635 and subsequent amendments. The responsibilities of the In 2004 we performed formal controls on legal Board of Statutory Auditors and those of the external compliance, while supervising the observance of legal audit firm were shared in accordance with Decree 58/98. requirements and the articles of association. We attended all meetings of the Board of Directors and the Executive As required by article 2423 of the Italian Civil Code, the Committee. We also carried out the checks required by financial statements consist of the balance sheet, the article 2403 of the Italian Civil Code, in accordance with statement of income and the explanatory notes. They Decree 58/98. The meetings required by article 150.3 of were presented, together with the report on operations, Decree 37/04 were held with the external auditors. No to the Board of Statutory Auditors on 8 March 2005 and matters requiring disclosure in this report emerged as a so within the term set by law. The directors’ report on result of these meetings. operations illustrates the Bank’s situation and the performance of the various sectors in which it operates. We are able to state that the financial statements reflect It also deals with significant events since the year end. the underlying accounting records, which are properly kept in respect of current regulatory and technical The financial statements submitted for your approval requirements. disclose a net profit of 125,224 thousand Euro and can be summarised as follows: We can also confirm that, given the size of the Bank and its group, the current accounting and administrative procedures and IT solutions adopted provide a true and fair representation of their results.
Balance sheet (in thousand of Euro) During the year we took part, with almost always a full attendance on our part, in meetings of the Board of Total assets 28,118,993 Directors (18) , the Executive Committee (38) and the Payables, provisions Finance Committee. We also examined the and other liabilities – 25,475,555 documentation presented to the Executive Committee and the Board of Directors in matters of treasury, Share capital, share premium personnel and supervision. and equity reserves – 2,518,214 Net profit for the year 125,224 As required by CONSOB circular 1025564 of 6 April 2001, we confirm that:
Guarantees and commitments are operations with a significant impact on the balance shown at the foot of the balance sheet for 6,772,993 sheet, income statement and financial position of the Bank and its subsidiaries have been carried out in compliance with the law and the articles of association. Based on the information obtained, we were able to Statement of income check that these were not manifestly imprudent, risky, in potential conflict of interest with resolutions passed by Total revenues 2,077,154 shareholders’ meetings or such as to compromise the integrity of shareholders’ equity; Total costs 1,951,930 Net profit for the year 125,224 the Executive Committee and the Board of Directors
236 Report of the Board of Statutory Auditors have acted in respect of the law and the powers PricewaterhouseCoopers as the external auditors for the delegated by the Board to the Executive Committee; any years 2004/2006, to issue a convertible bond, excluding urgent decisions taken by the Executive Committee were pre-emption rights, in favour of the CIC/Crèdit Mutuel always brought to the attention of and ratified by the Group and on the merger of Carinord 1 S.p.A. into Banca Board of Directors; as a result, we have nothing to say Popolare di Milano; about compliance with correct codes of management conduct, which appears to have been fully satisfied; we monitored the organisational structures, and in particular the internal control system, whose model was the ordinary verification activities of the Board of completed during the year and which appears to be Statutory Auditors have also involved inspections at the adequate for the characteristics of the Bank and its foreign branches, analyses and responses to specific Group. The internal audit department provided us with control-related matters requested by the Board of specific quarterly reports as required, along with Directors, as well as examination of the annual, interim appropriate documents on other particularly important and consolidated financial statements. All these activities matters; formed the basis of our 74 meetings during the year, whose proceedings are reported in the Board of Statutory all operations which could present irregularities were Auditors’ minute book. During the year we carried out a reported to the supervisory authority on a timely basis; specific inspection at the New York branch; in application of the Code of Conduct for listed the Bank has not carried out any atypical or unusual companies adopted by the Bank, the Internal Control transactions with Group companies or related parties. Committee, the Remuneration Committee and the Intercompany and related party transactions, which are Members’ Relations Commission all continued their work described in the report on operations and the in 2004, while the Committee for Law 231 is about to explanatory notes, arise in the ordinary course of the complete its work; Group’s business and are conducted under market terms or conditions of reciprocal economic benefit; we checked the adequacy of the instructions given by the Parent Bank to its subsidiaries pursuant to article we received a complaint in 2004 raised under article 114.2 of Decree 58/98 and have no related observations; 2408 of the Italian Civil Code; we took immediate action even though this complaint did not fall within the during the year we expressed our opinion, as required definition of such for the purposes of article 2408 of the by law, on transactions contracted directly and indirectly Italian Civil Code by representatives of the Bank with the Bank itself.
we received no other complaints in 2004 apart from The Board of Directors has reported to us on a quarterly the one described above; basis regarding the Bank’s activities and the more important economic and financial transactions carried the total fees paid to PricewaterhouseCoopers SpA for out by the Bank and its subsidiaries, with particular the audit were 376 thousand Euro; reference to operations in which the directors had an interest on their own account or that of third parties. in addition, PricewaterhouseCoopers SpA and PricewaterhouseCoopers Advisory Srl and Studio Pirola Turning to the financial statements submitted for your Pennuto Zei & Associati, both companies related to the approval, the accounting policies adopted by the directors audit firm under an ongoing relationship, were awarded are illustrated in the explanatory notes. consultancy jobs (mostly relating to the introduction of IAS/IFRS for financial statement preparation) earning The accounting policies are the same as those used in the them fees of 1,275 thousand Euro, 2,278 thousand Euro prior year, except for the changes resulting from and 9 thousand Euro respectively for a grand total of revocation of recognition of fiscally-interfering and other 3,562 thousand Euro; tax-related items, in compliance with Decree 6 dated 17 January 2003, the impact of which is reported in the we gave our usual opinions, where required, on appropriate section of the explanatory notes. resolutions passed by the Board of Directors (relating, amongst others, to the determination of the Specifically: remuneration for directors invested with particular office, the co-opting of a director and the obligations of loans are valued at their estimated realisable value bank officers under article 136 of Decree 385/93). As with the assistance of the HQ lending and legal witnessed in the minutes of the shareholders’ meeting functions. Special attention was given to loans and held on 24 April 2004, we also issued opinions required related adjustments. The Board of Statutory Auditors by law on the proposals to appoint agrees with the adjustments and provisions decided by
Report of the Board of Statutory Auditors 237 the Board of Directors; writedown to 93% of the total exposure. We are in the tax charge provided in the year also takes account agreement with the amount of this writedown. of purely tax-related adjustments to taxable income. The tax provision therefore includes current-year income With reference to the adoption of IAS/IFRS, the Bank taxes estimated by the directors, as illustrated in the has embarked on the BPM IAS transition project with explanatory notes. the goal of identifying and defining the information needed for preparing its financial statements in deferred taxes have been booked considering a five- accordance with international financial reporting and year time horizon, based on the 2005-2009 profit accounting standards. Work is in progress on modifying forecast. BPM’s information system, on making the related tests for converting balances at 1 January 2005 to IAS/IFRS Significant and subsequent events and on preparing new formats and tables for inclusion in the notes to its financial statements, all of which On 19 May 2004 the Board of Directors approved the necessary for reporting its results in accordance with the Three-Year Strategic Plan 2004-2006 designed to new standards. BPM’s Board of Directors has voted to improve the cost/income ratio. We have taken note of the take up the option to prepare both its individual and end objectives and shall monitor how they are achieved. consolidated financial statements for 2005 in accordance with the new international financial reporting and During the year Carinord 1 was absorbed by BPM, as accounting standards. BPM intends to adopt the new a result of which BPM now owns 80% of Cassa di international accounting standards for the first time in Risparmio di Alessandria together with Fondazione CR its consolidated quarterly report at 30 September 2005. Alessandria which has the remaining 20%. As a result of its work, the Board of Statutory Auditors: In September 2004, with a view to enlarging the scope of its operations, the Group – through its confirms that its monitoring activities did not reveal subsidiary Banca di Legnano – agreed to buy 20% of any omissions, reprehensible facts or irregularities that Cassa di Risparmio di Asti from Deutsche Bank. would require reporting to the supervisory authorities or the shareholders; At the end of September 2004 BPM entered into a partnership agreement with Aedes SpA involving the is in favour of you approving the financial statements sale of 5% of Bipiemme Real Estate SGR SpA and the and is in agreement with the directors’ proposals for reciprocal recognition of a put and call option over an allocating the net profit for the year. additional 46%.
In December 2004 the agreement with Credit Industriel et Commercial (CIC) was executed, involving The Board of Statutory Auditors BPM’s issue of a convertible bond – entirely subscribed Marco Baccani by CIC – amounting to 180 million Euro and CIC’s Emilio Cherubini subscription to the full amount of a capital increase by Enrico Radice Banca di Legnano for 80 million Euro, as a result of Ezio Maria Simonelli which the French bank now owns 6.49% of Banca di Ettore Maria Tosi Legnano.
In March 2005 the project for repositioning in the Milan, 6 April 2005 private equity sector was approved. This involves forming a partnership with WISE Venture SGR, a closed- end fund manager specialising in the small and medium enterprise sector. The agreement calls for a union between WISE Venture SGR and BPM Private Equity SGR (a wholly-owned subsidiary of BPM), in other words the merger of BPM Private Equity SGR into WISE Venture SGR.
With reference to the PARMALAT affair emerging at the end of 2003, the process of agreeing positions with creditors lasted throughout 2004 and continues in 2005. The Board of Directors has decided to write down the Bank’s positions still further, taking the overall
238 Report of the Board of Statutory Auditors Report of the Independent Auditors
239 Report of the Independent Auditors 241 Consolidated Financial Statements of the Bipiemme Group for the year 2004
243 Contents
Consolidated reclassified Balance Sheet and Statement of Income 247
Report on operations of the Bipiemme Group 253
Consolidated Financial Statements 285
Explanatory Notes 295
Attachment to the Financial Statements 415
Report of the Board of Statutory Auditors 423
Report of the Independent Auditors 425
245 Consolidated reclassified Financial Statements Variazioni Assolute %
Consolidated reclassified Balance Sheet Consolidated reclassified Statement of Income
Comparison with pro-forma amounts
247 Reclassified consolidated Balance Sheet (in thousands of Euro)
Voci di Change Captions Assets 31.12.2004 31.12.2003 bilancio (+/–) % 10. Cash and deposits with central banks and post offices 202,413 185,836 16,577 8.92 Receivables: 23,811,524 20,635,618 3,175,906 15.39 40. - loans to customers 20,025,647 17,076,986 2,948,661 17.27 30. - due from banks 3,785,877 3,558,632 227,245 6.39
20.50.60. Dealing securities 5,992,183 5,329,527 662,656 12.43
Fixed assets: 2,286,314 4,172,314 – 1,886,000 – 45.20 20.50.60. - Investment securities 915,262 2,791,128 – 1,875,866 – 67.21 70.80. - Equity investments 314,690 296,288 18,402 6.21 110.120. - Tangible and intangible fixed assets 1,056,362 1,084,898 – 28,536 – 2.63
90.100. Goodwill arising on consolidation and application of the equity method 172,363 93,415 78,948 84.51
140.150.160. Other assets 2,204,858 2,025,027 179,831 8.88
Total assets 34,669,655 32,441,737 2,227,918 6.87
Voci di Change Captions Liabilities and shareholders’ equity 31.12.2004 31.12.2003 bilancio (+/–) % Payables: 28,748,496 26,912,642 1,835,854 6.82 20.30.40. - due to customers 21,347,712 19,244,724 2,102,988 10.93 10.30. - due to banks 7,254,382 7,509,139 – 254,757 – 3.39 30. - outstanding cheques 146,402 158,779 – 12,377 – 7.80
50.60. Other liabilities 1,910,675 1,788,016 122,659 6.86
70.80. Provisions for specific use 558,014 561,826 – 3,812 – 0.68
90. Reserves for possible loan losses 3,500 8,773 – 5,273 – 60.10
110. Subordinated liabilities 819,379 819,379 0 0.00
140. Minority interests 110,895 2,296 108,599 n.s.
150.160.170.180. Capital and reserves 2,391,081 2,280,764 110,317 4.84
200. Net profit for the year 127,615 68,041 59,574 87.56
Total liabilities and shareholders’ equity 34,669,655 32,441,737 2,227,918 6.87
Guarantees and commitments 8,247,230 7,828,213 419,017 5.35
Custody and administration of securities 35,394,937 30,931,278 4,463,659 14.43
248 Reclassified Consolidated Balance Sheet Reclassified consolidated Statement of Income (in thousands of Euro)
Voci di Change Captions Statement of Income 2004 2003 bilancio (+/–) %
10. 20. Net interest income 662,001 586,856 75,145 12.80
40. 50. Net commissions 520,946 472,578 48,368 10.23
60. Profits (losses) on financial transactions 40,986 26,935 14,051 52.17
30. 170. Profits of companies carried at equity and dividends 97,468 112,667 – 15,199 – 13.49
70. 110. Other operating income, net 122,721 105,299 17,422 16.55
Net interest and other banking income 1,444,122 1,304,335 139,787 10.72
80. Administrative expenses: – 944,497 – 864,335 80,162 9.27
a) payroll – 604,566 – 550,335 54,231 9.85
b) other administrative expenses – 339,931 – 314,000 25,931 8.26
90. Adjustments to tangible and intangible fixed assets – 191,980 – 167,630 24,350 14.53
Operating profit 307,645 272,370 35,275 12.95
120. 130. 140. Provisions, adjustments and writebacks to loans – 130,310 – 137,166 – 6,856 – 5.00
100. Provisions for risks and charges – 30,363 – 41,911 – 11,548 – 27.55
150. 160. Adjustments to and writebacks to financial fixed assets – 13,882 – 531 13,351 n.s.
180. Profit from operating activities 133,090 92,762 40,328 43.47
210. Non-recurring income 46,084 17,538 28,546 162.77
Profit before income taxes 179,174 110,300 68,874 62.44
240. Income taxes for the year – 49,593 – 41,417 8,176 19.74
250. Minority interests – 1,966 – 842 1,124 133.49
260. Net profit for the year 127,615 68,041 59,574 87.56
Reclassified Consolidated Statement of Income 249 Reclassified consolidated Balance Sheet (in thousands of Euro) Comparison with pro-forma amounts
Captions Assets 31.12.2004 31.12.2003 Change pro-forma (*) (+/–) %
10. Cash and deposits with central banks and post offices 202,413 204,169 – 1,756 – 0.86
Receivables: 23,811,524 22,120,350 1,691,174 7.65 40. - loans to customers 20,025,647 18,330,719 1,694,928 9.25 30. - due from banks 3,785,877 3,789,631 – 3,754 – 0.10
20.50.60. Dealing securities 5,992,183 5,526,796 465,387 8.42
Fixed assets: 2,286,314 4,213,184 – 1,926,870 – 45.73 20.50.60. - Investment securities 915,262 2,839,829 – 1,924,567 – 67.77 70.80. - Equity investments 314,690 252,417 62,273 24.67 110.120. - Tangible and intangible fixed assets 1,056,362 1,120,938 – 64,576 – 5.76
90.100. Goodwill arising on consolidation and application of the equity method 172,363 134,312 38,051 28.33
140.150.160. Other assets 2,204,858 2,083,939 120,919 5.80
Total assets 34,669,655 34,282,750 386,905 1.13
Captions Liabilities and shareholders’ equity 31.12.2004 31.12.2003 Change pro-forma (*) (+/–) %
Payables: 28,748,496 28,496,529 251,967 0.88 20.30.40. - due to customers 21,347,712 20,776,268 571,444 2.75 10.30. - due to banks 7,254,382 7,561,437 – 307,055 – 4.06 30. - outstanding cheques 146,402 158,824 – 12,422 – 7.82
50.60. Other liabilities 1,910,675 1,851,819 58,856 3.18
70.80. Provisions for specific use 558,014 627,128 – 69,114 – 11.02
90. Reserves for possible loan losses 3,500 10,801 – 7,301 – 67.60
110. Subordinated liabilities 819,379 819,379 0 0.00
140. Minority interests 110,895 31,703 79,192 249.79
150.160.170.180. Capital and reserves 2,391,081 2,384,241 6,840 0.29
200. Net profit for the year 127,615 61,150 66,465 108.69
Total liabilities and shareholders’ equity 34,669,655 34,282,750 386,905 1.13
Guarantees and commitments 8,247,230 8,106,423 140,807 1.74
Custody and administration of securities 35,394,937 32,704,498 2,690,439 8.23
250 Reclassified Consolidated Balance Sheet Reclassified consolidated Statement of Income (in thousands of Euro) Comparison with pro-forma amounts
VociCaptions di Statement of Income 2004 2003 Change bilancio pro-forma (*) (+/–) %
10. 20. Net interest income 662,001 639,993 22,008 3.44
40. 50. Net commissions 520,946 495,066 25,880 5.23
60. Profits (losses) on financial transactions 40,986 33,348 7,638 22.90
30. 170. Profits of companies carried at equity and dividends 97,468 113,427 – 15,959 – 14.07
70. 110. Other operating income. net 122,721 114,535 8,186 7.15
Net interest and other banking income 1,444,122 1,396,369 47,753 3.42
80. Administrative expenses: – 944,497 – 925,105 19,392 2.10
a) payroll – 604,566 – 588,546 16,020 2.72
b) other administrative expenses – 339,931 – 336,559 3,372 1.00
90. Adjustments to tangible and intangible fixed assets – 191,980 – 184,111 7,869 4.27
Operating profit 307,645 287,153 20,492 7.14
120. 130. 140. Provisions, adjustments and writebacks to loans – 130,310 – 144,925 – 14,615 – 10.08
100. Provisions for risks and charges – 30,363 – 42,511 – 12,148 – 28.58
150. 160. Adjustments to and writebacks to financial fixed assets – 13,882 – 858 13,024 n.s.
180. Profit from operating activities 133,090 98,859 34,231 34.63
210. Non-recurring income 46,084 13,188 32,896 249.44
Profit before income taxes 179,174 112,047 67,127 59.91
240. Income taxes for the year – 49,593 – 48,402 1,191 2.46
250. Minority interests – 1,966 – 2,495 – 529 – 21.20
260. Net profit for the year 127,615 61,150 66,465 108.69
(*) Pro-forma figures have been provided for comparison purposes, following the merger of Carinord 1 into Banca Popolare di Milano and the resulting consolidation of Cassa di Risparmio di Alessandria. They have been prepared on the assumption that Cassa di Risparmio di Alessandria was fully con- solidated from 1 January 2003.
Reclassified Consolidated Statement of Income 251 Report on operations of the Bipiemme Group
Strategy Scope of consolidation Contribution of consolidated companies to consolidated total assets and net interest and other banking income Statement of income Deposits and loans Securities and equity investments Shareholders’ equity and capital adequacy Results by business sector and geographical area Operating structure Risk management Other information Subsequent events
253 Strategy transactions; this is why the margin shown here differs from the one appearing in the reclassified consolidated statement of income. During the course of 2004 the BPM Group continued to operate in line with its strategies which have as their main objectives: Contribution of consolidated development of the Group’s size: pursued both companies to consolidated total through internal means, by expanding the branch network, which added 20 new offices over the past twelve assets and net interest and other months, and through external means, by purchasing banking income banks or branches. This strategy is behind the acquisition of an 80% controlling interest in Cassa di Risparmio di Before moving on to discuss the main balance sheet and Alessandria and a 20% interest in Cassa di Risparmio di statement of income aggregates of the BPM Group, we Asti. Both these transactions are designed to foster the ought to mention that we have prepared pro-forma Group’s strategy of commercial expansion in the lower statements for 2003 in order to show the figures on a Piedmont region; comparable basis following C.R. Alessandria’s inclusion in the line-by-line consolidation. The pro-forma statements completeness and adequacy of products and services have been prepared assuming that Cassa di Risparmio di offered: thanks to the strong integration between Alessandria was consolidated line-by-line from 1 January distribution channels (the banking networks), which are 2003. The pro-forma figures are used as the basis for increasingly focused on commercial issues and customer comparison for the comments contained in this report. relationships, and the Group’s specialist product and Furthermore, the pro-forma also reflects Euro 13.5 million service companies, which ensure the Group’s competitive in amortisation of goodwill arising on consolidation and excellence in the markets served; depreciation of the higher value of buildings attributable to CR Alessandria. improvement in efficiency and productivity: pursued through ever greater rationalisation and centralisation of The statement of income for 2003 also contains a organisational structures, an increase in staff in reclassification of Euro 3.8 million in tax credits on commercial roles and constant vigilance over overall dividends from equity investments, which have been spending. reversed out of “Profits of companies carried at equity and dividends” and “Income taxes for the period”. The purpose On the basis of these strategies, the Parent Bank’s Board of this reclassification is to ensure greater comparability of Directors approved the “BPM Group Three-Year with this year’s results as these tax credits have since been Strategic Plan” in May 2004. Its contents are fully abolished. described in the Parent Bank’s Report on operations forming part of this document (see section on “Significant Having said this, we shall now examine the principal events”). components of the statement of income.
Scope of consolidation
Changes in the scope of consolidation are fully explained in the notes, (see section on “Accounting policies”).
Here we merely draw attention to the fact that as from 31 December 2004 Bipiemme Real Estate SGR S.p.A. is no longer being consolidated line-by-line but carried at equity. The following table shows the impact of consolidated equity investments on the Group’s total assets and net interest and other banking income. The Parent Bank still has a central role in generating 72.2% of the Group’s net interest and other banking income. Banca di Legnano contributed 10.6%, C.R. Alessandria 6.3%, Banca Akros 4.1%, Bipiemme Gestioni SGR 2.7% and the remaining subsidiaries 4.1%. The contribution that each company makes to net income and other banking income is calculated without eliminating intercompany
254 Report on operations of the Bipiemme Group Contribution of consolidated companies to consolidated total assets and net interest and other banking income At 31 December 2004 Total % held by Total assets % of Net interest % of consolida- the BPM Group (*) consolidated and other ted net interest assets banking income and other (in thousands of Euro) banking income Banca Popolare di Milano 25,773,958 74.34 1,078,362 72.24 Banca di Legnano S.p.A. 93.51 3,250,772 9.38 157,470 10.55 Banca Akros S.p.A. 94.29 2,288,713 6.60 59,801 4.01 Cassa di Risparmio di Alessandria S.p.A. 80.00 1,832,273 5.28 94,201 6.31 BPM Ireland Plc. 99.99 1,164,988 3.36 6,395 0.43 Bipiemme Immobili S.p.A. 99.41 168,527 0.49 12,882 0.86 Bipiemme Gestioni SGR S.p.A. 92.56 74,482 0.21 39,934 2.68 Tirving Ltd. 100.00 73,478 0.21 3,523 0.23 Bipiemme Private Banking SIM S.p.A. 96.53 10,812 0.03 10,374 0.69 BPM Luxemborug S.A. 99.94 10,425 0.03 96 0.01 We@Service S.p.A. 100.00 6,690 0.02 20,136 1.35 Akros HFR Alternative Investments SGR S.p.A. 48.09 5,277 0.01 3,811 0.25 BPM Fund Management Ltd. 99.99 4,925 0.01 3,701 0.25 Akros Securities Inc. 94.29 1,826 0.01 738 0.05 BPM Private Equity SGR S.p.A. 100.00 1,723 0.01 1,247 0.08 BPM Capital I L.L.C. 100.00 786 0.01 25 0.01
Total 34,669,655 100.00 1,492,696 100.00
(*) based on equity ratios
Statement of income Net interest income
Amounts in Euro mn Net interest and other banking income 640.0 662.0 Net interest and other banking income increased by Euro + 3.4%
47.8 million (+3.4%) to Euro 1,444.1 million. In the pro- 700 forma reconstruction, the contribution of CR Alessandria was Euro 92.0 million. Ignoring this contribution, the 600 increase was Euro 139.8 million (+10.7%). 500 In detail, net interest income increased by Euro 22.0 400 million (+3.4%) to Euro 662.0 million. 300 Business with customers was up by an average of 3.8% for deposits and 6.9% for loans. These increases helped offset 200 the downside of lower market rates after the European 100 Central Bank cut its official refinancing rate, which went from 2.75% in December 2002, to 2.50% in March 2003 0 and then to its current level of 2.0% following the latest Dec-03 Dec-04 cut in June 2003. pro-forma
(+5.2%) to Euro 520.9 million. In detail, net commissions Profits on financial transactions and net income from on management, dealing and consulting services were up services reached Euro 782.1 million, an increase of Euro Euro 8.4 million – partly thanks to asset management 25.7 million (+3.4%). which benefited from net inflows of Euro 788 million during 2004 – as were net commissions on payment and Detailed analysis reveals that: collection services (+ Euro 3.9 million);
net commissions improved by Euro 25.9 million profits of companies carried at equity were Euro 3.5
Report on operations of the Bipiemme Group 255 Net service income Operating profit
Amounts in Euro mn Operating profit increased by Euro 20.5 million (+7.1%) to Euro 307.6 million. The pro-forma not only reflects the contribution of CR Alessandria (Euro 28.3 million) but 756.4 782.1 also the amortisation of goodwill arising on consolidation + 3.4% 800 and depreciation of the higher value of its buildings (Euro 13.5 million); ignoring these items, the change in 700 + 7.2% operating profit with respect to the previous year would
600 have been an increase of Euro 35.3 million. Other operating 500 income, net Administrative expenses, depreciation and amortisation + 5.2% 400 increased by Euro 27.3 million (+2.5%) to Euro 1,136.5 Net commissions million. 300 Profits on financial 200 transactions In detail, payroll costs amounted to Euro 604.6 million, which was Euro 16.0 million higher than in the previous 100 + 22.9% Dividends and year (+2.7%). This increase is explained by Euro 13.3 profits of companies – 14.1% 0 carried at equity million in additional payments under the staff leaving incentive scheme, particularly incurred by the Parent Bank Dec-03 Dec-04 (Euro 18.7 million in 2004 for 188 incentivised departures pro-forma compared with Euro 8.1 million in 2003). Another million higher at Euro 17.3 million, of which Euro 2.0 contributing factor to this increase was the cost incurred million was attributable to the results of Cassa di upon renewing the national payroll agreement (Euro 7.7 Risparmio di Asti (not consolidated in 2003) and Euro 1.2 million), which was partially offset by a reduction in costs million to the higher results reported by SelmaBipiemme at Banca Akros (– Euro 5.6 million) as a result of a decrease Leasing. in performance-related pay.
net operating income climbed Euro 8.2 million (+ 7.2%) In the pro-forma reconstruction, the payroll costs of CR to Euro 122.7 million. Alessandria amount to Euro 38.2 million.
Profits on financial transactions and dividends must be Despite the expansion of the branch network (20 openings analysed together, since arbitrage between equities and in 2004, on top of the 31 branches opened in the second derivatives by Banca Akros has an impact on both these half of 2003) and growth in overall business, other captions. These two captions decreased by an overall administrative expenses experienced only a small figure of Euro 11.8 million (–8.9%) to Euro 121.1 million increase of Euro 3.4 million (+1.0%) to Euro 339.9 million; reflecting the less volatile state of equity markets than in these costs were kept in check thanks to targeted efforts 2003. in certain areas of expenditure. In the pro-forma reconstruction, the other administrative expenses of CR Alessandria amount to Euro 22.6 million.
Adjustments to tangible and intangible fixed assets were 4.3% higher at Euro 192.0 million (+Euro 7.9 million); this increase included Euro 2.3 million in amortisation on the goodwill arising on consolidation of Cassa di Risparmio di Asti.
The pro-forma reconstruction takes account not only of the adjustments to tangible and intangible fixed assets of CR Alessandria (Euro 3.0 million) but also Euro 13.5 million in amortisation of the goodwill arising on consolidation and depreciation of the higher value of its buildings.
256 Report on operations of the Bipiemme Group Personnel Operating costs, depreciation and amortisation The Group had 8,451 employees at 31 December 2004, 129 Amounts in Euro mn fewer than twelve months earlier; the Parent Bank reported a reduction of 146 staff, particularly associated with the policy of incentivising staff to leave; the number of employees in the pro-forma situation is 8,580 (of which 1,109.2 1,136.5
587 relating to CR Alessandria). 1,200 + 2.5%
1,000 + 4.3%
800 + 1.0%
600 Depreciation 400 and amortisation
+ 2.7% 200 Administrative expenses
0 Payroll costs
Dec-03 Dec-04 pro-forma
Personnel
Company Managers Officials Other staff Total other companies
Banca Popolare di Milano 97 1,247 5,194 6,538 Banca di Legnano S.p.A. 15 153 643 811 Cassa di Rispamio di Alessandria S.p.A. 13 74 502 589 Banca Akros S.p.A. 25 103 112 240 Bipiemme Gestioni SGR S.p.A. 10 15 86 111 We@Service S.p.A. 8 10 63 81 Bipiemme Private Banking SIM S.p.A. 3 31 16 50 BPM Ireland Plc. 1 1 6 8 Bipiemme Immobili S.p.A. 1 2 5 8 Bipiemme Private Equity SGR S.p.A. 1 1 5 7 Altre società 1 2 5 8
Total 175 1,639 6,637 8,451
Report on operations of the Bipiemme Group 257 Profit from operating activities Euro 5.1 million in higher gains on the disposal of equity investments (Euro 11.3 million in 2004 compared Net profit for the year came to Euro 133.1 million, an with Euro 6.2 million in 2003); increase of Euro 34.2 million compared with the prior year (+34.6%). In the pro-forma reconstruction, the Euro 4.8 million in higher gains on the disposal of non- contribution of CR Alessandria is Euro 19.9 million from business buildings (Euro 10.5 million in 2004 compared which Euro 13.9 million must be subtracted for with Euro 5.7 million in 2003) previously transferred to amortisation of the goodwill arising on its consolidation. Bipiemme Immobili and subsequently sold by it. Provisions for risks and charges, net writedowns of loans and provisions for loan losses were Euro 26.8 million lower than in the prior year at Euro 160.7 million. This reduction is attributable to: Net profit a decrease of Euro 12.1 million in provisions for risks Income taxes resulted in an overall charge of Euro 49.6 and charges to Euro 30.4 million, which includes Euro million, slightly higher than those in 2003 (+ Euro 1.2 19.5 million for recovery procedures and legal disputes million), whose original amount was reduced by Euro 3.8 and Euro 9.0 million in charges prudently estimated by million, as were “dividends and other revenues”, in order the Parent Bank for the planned closure of its foreign to neutralise the effect of the tax credit on equity branches in London and New York; investments, which no longer exists. a decrease of Euro 14.6 million (–10.1%) in net After deducting Euro 2.0 million in respect of net profit writedowns of loans and provisions for loan losses to Euro attributable to minority interests, net profit attributable 130.3 million. to the Group came to Euro 127.6 million, an increase of Euro 66.5 million (+108.7%) on 2003. The increase in net Net adjustments to financial fixed assets amounted to profit compared with the unrestated figure was Euro 59.6 Euro 13.9 million, which was Euro 13.0 million higher million. than in the same period of last year, explained by:
Euro 5.8 million in writedowns to the investment in Multimedica Holding;
Euro 4.8 million in adjustments to investment securities held by the London branch which have now been reclassified to the dealing portfolio.
In the pro-forma reconstruction, CR Alessandria accounts for Euro 8.7 million in net writedowns to loans and financial fixed assets and provisions for risks and charges.
Profit before taxes came to Euro 179.2 million, an increase of Euro 67.1 million compared with the prior year (+59.9%). In the pro-forma reconstruction, the contribution of CR Alessandria, ignoring the amortisation of goodwill arising on consolidation, amounts to Euro 1.7 million.
Non-recurring items reported net income of Euro 46.1 million, an increase of Euro 32.9 million. The increase included:
Euro 11.7 million in out-of-period income arising on the application of the policy of “defiscalisation”, designed to eliminate cumulative fiscal distortions, as fully explained in the specific section of the Explanatory notes (see: “Accounting policies”);
258 Report on operations of the Bipiemme Group Deposits and loans Customer deposits Direct customer deposits Amounts in Euro mn
At 31 December 2003 customer deposits came to Euro 21,348 million, up Euro 571 million (+2.8%) on the prior 20,776 21,348 year. Average growth for the year was even higher at 3.8%. 22,000 + 2.8% The analysis by technical form shows that current 20,000 accounts, representing around 70% of total deposits, rose – 51.7% by Euro 697 million to Euro 14,546 million, while bonds 18,000 + 23.4% increased by Euro 1,006 million to Euro 4,797 million, 16,000 having benefited from the large number of issues during 14,000 the year. Repurchase agreements were Euro 1,102 million 12,000 lower at Euro 1,005 million, particularly reflecting 10,000 decreases not only at Banca Akros (– Euro 608 million) as 8,000 +4.9% a result of fewer securities lending transactions but also at 6,000 Repos & similar the Parent Bank (– Euro 478 million). 4,000 2,000 CDs & bonds In the pro-forma reconstruction the contribution by CR 0 Current and Alessandria is Euro 1,532 million. savings accounts Dec-03 Dec-04 pro-forma
Customer deposits 31.12.2004 31.12.2003 (in thousands of Euro) % pro-forma % % change Current accounts 14,546,357 68.1% 13,849,135 66.7% 5.0
Savings deposits 759,917 3.6% 741,593 3.6% 2.5
Repurchase agreements 1,004,584 4.7% 2,106,448 10.1% – 52.3
Bonds 4,796,724 22.5% 3,790,567 18.2% 26.5
Certificates of deposit 221,420 1.0% 275,547 1.3% – 19.6
Other technical forms 18,710 0.1% 12,978 0.1% 44.2
Customer deposits 21,347,712 100.0% 20,776,268 100.0% 2.8
Report on operations of the Bipiemme Group 259 Indirect customer deposits Asset management with ordinary customers
The market value of indirect deposits from ordinary Amounts in Euro mn customers came to Euro 34,448 million, an increase of Euro 2,151 million compared with the corresponding period of last year (+6.7%). The figure for assets under 17,321 18,558 administration does not include securities relating to the 20,000 + 7.1% individual and collective portfolio management services provided by Bipiemme Gestioni SGR and the insurance Assets placed products offered by Bipiemme Vita since these are already 15,000 outside the Group included in assets under management. Assets under Property funds management rose to 53.9% of total indirect deposits from retail customers, while the remaining 46.1% referred to Insurance-sector 10,000 reserves assets under administration. Cash accounts
The value of assets under management rose by a 5,000 Portfolio of funds significant Euro 1,236 million (+7.1%) to Euro 18,558 million, partly thanks to Euro 788 million in net inflows Mutual funds during 2004. 0 GPM
Dec-03 Dec-04 Looking at the individual areas of management compared pro-forma with 31 December 2003, mutual funds rose by 11.6% to Euro 9,063 million, while portfolio management was Euro Assets under administration underwent a significant 308 million higher at Euro 3,523 million. The insurance increase relative to the prior year, climbing Euro 915 sector continued to make progress, with its reserves million (+6.1%) to Euro 15,890 million. increasing by Euro 348 million (+14.1%) to Euro 2,823 million. The assets managed by CR Alessandria included in the pro-forma reconstruction for 2003 amount to Euro 791 Fund-based portfolio management was 5.5% lower at Euro million and have been included under the heading “Assets 1,757 million, partly due to the shift into other forms of managed by non-Group companies”. management, while property funds were slightly lower at Euro 149 million.
Composition of indirect customer deposits at market value 31.12.2004 31.12.2003 (in thousands of Euro) % pro-forma % % change
Portfolio management 3,523,073 19.0% 3,215,533 18.6% 9.6
Mutual funds 9,062,790 48.8% 8,117,516 46.9% 11.6
Fund-based portfolio management 1,757,476 9.5% 1,859,000 10.7% – 5.5
Cash accounts 538,109 2.9% 573,523 3.3% – 6.2
Insurance-sector reserves 2,823,304 15.2% 2,475,157 14.3% 14.1
Property funds 149,030 0.8% 189,470 1.1% – 21.3
Assets managed by non-Group companies 703,829 3.8% 891,080 5.1% – 21.0
Total assets under management 18,557,611 100.0% 17,321,279 100.0% 7.1
Assets under management 18,557,611 53.9% 17,321,279 53.6% 7.1
Assets under administration 15,890,273 46.1% 14,975,260 46.4% 6.1
Total indirect deposits 34,447,884 100.0% 32,296,539 100.0% 6.7
260 Report on operations of the Bipiemme Group Loans to customers Ordinary customer lending
Customer loans increased by Euro 1,695 million (+9.3%) to Amounts in Euro mn Euro 20,026 million, mostly thanks to the growth in mortgage loans which climbed by over Euro 1.5 billion as a result of intensive lending activities to the private and small business sectors, to which more than Euro 2.2 18,331 20,026 billion in funds were disbursed in 2004 alone. 25.000 + 9.2%
In the pro-forma reconstruction the contribution by CR 20.000 Alessandria is Euro 1,254 million.
15.000 Efforts continued to reduce the level of concentration of “significant exposures” (whose comparative values have not been restated in the pro-forma). The specific policy of 10.000 limiting the growth in “significant exposures” helped reduce the overall amount of positions with an exposure of 5.000 more than 10% of consolidated capital for supervisory purposes by 32.8% from Euro 1,952 million in weighted assets as of 31 December 2003 (referring to 5 positions), to 0 Euro 1,312 million at the end of December 2004 (relating Dec - 03 Dec - 04 pro-forma to 3 positions). As a percentage of total weighted customer loans, significant exposures fell from 9.4% at 31 December “Below the line” activities reported a small increase on a 2003 to 5.7% at 31 December 2004. year earlier, rising by Euro 141 million to Euro 8,247 million. In detail, commitments were Euro 454 million higher at Euro 5,456 million. This figure includes a major
Breakdown of loans, guarantees issued and commitments 31.12.2004 31.12.2003 (in thousands of Euro) % pro-forma % % change Current account overdrafts 3,566,364 17.8% 3,771,972 20.6% – 5.5 Advances 3,211,178 16.0% 3,033,285 16.5% 5.9 Mortgages and loans 7,092,038 35.4% 5,240,877 28.6% 35.3 Other amounts not settled via current account and other loans 5,943,707 29.7% 5,759,426 31.4% 3.2 Non-performing loans after writedowns 138,130 0.7% 149,606 0.8% – 7.7 Total customer lending 19,951,417 99.6% 17,955,166 98.0% 11.1 Repurchase agreements 74,230 0.4% 375,553 2.0% – 80.2 Total customer loans 20,025,647 100.0% 18,330,719 100.0% 9.2 Deposits with other banks 2,830,657 2,249,272 25.8 Other technical forms 955,220 1,540,359 – 38.0 Non-performing loans 0 0 n.s. Total amounts due from banks 3,785,877 3,789,631 – 0.1 Total loans 23,811,524 22,120,350 7.6 Commercial guarantees 2,166,671 2,268,213 – 4.5 Financial guarantees 610,350 822,884 – 25.8 Assets lodged in guarantee 13,949 12,955 7.7 Total guarantees issued 2,790,970 3,104,052 – 10.1 Credit derivatives 784,317 1,179,064 – 33.5 Undrawn irrevocable lines of credit 2,177,743 1,991,388 9.4 Other commitments 2,494,200 1,831,919 36.2 Total commitments 5,456,260 5,002,371 9.1
Report on operations of the Bipiemme Group 261 reduction in credit derivatives (–33.5%), reflecting the Securities and equity investments policy of reducing assets at risk with the worst ratios between income generated and capital absorbed. Guarantees were Euro 313 million lower at Euro 2,791 Securities portfolio million (–10.1%). The table below shows the breakdown of the securities portfolio at the end of December 2004, reporting the portion Asset quality relating to the foreign branches and subsidiaries, and the related changes taking place in the intervening twelve Total doubtful loans before writedowns amounted to Euro months. 784 million at 31 December 2004, reporting a decrease of Euro 29 million since the end of 2003. Non-performing The value of the BPM Group’s securities portfolio was Euro loans before writedowns amounted to Euro 394 million, a 6,907 million at the end of 2004, 17.4% lower than a year decrease of Euro 13 million compared with December earlier (– Euro 1,459 million). The gradual reduction in 2003. Non-performing loans after writedowns came to financial assets is associated with the strategy of Euro 138 million, representing 0.69% of loans to developing domestic commercial activities and has been customers, staying below the average for the Italian accompanied by a careful restructuring of the securities banking sector. Other doubtful loans before writedowns portfolio. amounted to Euro 389.2 million, down Euro 16 million (–4.0%) since December 2003. The securities portfolio held by foreign branches and companies decreased by 85.8%. This is explained by the Total provisions for doubtful loans, recorded using the Board of Directors’ resolution to reclassify the entire usual prudent criteria, amount to Euro 326 million, “investment” portfolio of the Parent Bank’s foreign compared with Euro 314 million as of 31 December 2003; branches to the “dealing” portfolio as a result of the accordingly, total coverage was 41.6%, up from 38.6% in decisions taken and formalised in 2004 to close the London December 2003. Provisions against performing loans and New York branches by the end of 2005 and to sell totalled Euro 103 million (for so-called “inherent risk”), and/or transfer their securities portfolios. The nominal with coverage of 0.52%, which is also higher than at the value of the securities transferred was Euro 458.6 million end of 2003. for the New York branch and Euro 893.2 million for the London branch. The gross exposure in relation to loans to customers resident in countries at risk amounted to just Euro 0.1 The portfolio of investment securities held by Italian million. companies included Capitalia bonds (Euro 456 million) subscribed in 2002 on repayment of the loan to Garfin S.p.A..
Securities portfolio 31.12.2004 31.12.2003 (in thousands of Euro) pro-forma % change Foreign branches and companies Investment securities 300,347 2,111,875 – 85.8 Dealing securities 2,872,246 1,263,745 127.3
Total securities held by foreign branches and companies 3,172,593 3,375,620 – 6.0
Italian companies Investment securities 614,915 727,954 – 15.5 Dealing securities 3,119,937 4,263,051 – 26.8
Total securities held by Italian companies 3,734,852 4,991,005 – 25.2
Total investment securities 915,262 2,839,829 – 67.8 Total dealing securities 5,992,183 5,526,796 8.4
Total securities 6,907,445 8,366,625 – 17.4
262 Report on operations of the Bipiemme Group Equity investments Banca di Legnano S.p.A.
The total value of equity investments shown in the Bank’s In terms of corporate matters, the most significant events balance sheet at 31 December 2004 amounted to Euro 315 during 2004 included: million, an increase of Euro 62 million since the end of 2003. Investments in Group companies amounted to Euro the extraordinary shareholders’ meeting held on 23 55 million, up from Euro 41 million at the end of 2003, June 2004 voted to change the bank’s year end from 30 while other equity investments (caption 70) increased by June to 31 December (with effect from 31 December 2004) Euro 48 million to Euro 259 million mostly as a result of thereby coming into line with the Parent Bank; purchasing the interest in Cassa di Risparmio di Asti. further to the resolution passed by the Board of In order to provide a more complete view of the BPM Directors on 12 May 2004, on 6 September 2004 Banca di Group, the following summary information describes the Legnano finalised its acquisition of 20% of the share results of consolidated companies and those of the Group’s capital in Cassa di Risparmio di Asti S.p.A. from Deutsche more important businesses. Bank for total consideration of Euro 93 million, corresponding to 5,398,600 ordinary shares of par value Key statement of income and balance sheet data is Euro 5.16 each (carrying dividend rights from 1 January provided for each business, together with a brief comment 2004). The following arrangements were also made at the on each. same time as signing the final contract:
– a shareholders’ agreement between Banca Popolare di Milano, Banca di Legnano and Fondazione Cassa di Risparmio di Asti, under which two members of the board of Cassa di Risparmio di Asti were nominated by Banca di Legnano. The agreement also envisages the reciprocal granting of a right of pre-emption in view of a transfer of their shares in Cassa di Risparmio di Asti to third parties;
– a commercial cooperation agreement between Banca Popolare di Milano and Cassa di Risparmio di Asti that lays down guidelines for commercial and operational cooperation with a view to developing a relationship of solid collaboration between the two banks;
on 21 December 2004 the commercial and strategic agreement signed on 11 April 2003 between Banca Popolare di Milano and Crèdit Industriel et Commercial was executed in the form of a rights issue by Banca di Legnano specifically reserved for the new French shareholder, as approved by the extraordinary shareholders’ meeting held on 23 June 2004. The capital increase, totalling Euro 80 million, consisted of Euro 29.4 million in share capital and Euro 50.6 million in share premium allocated to the specific reserve (corresponding to Euro 1.72 per share). The 29,411,765 new ordinary shares, issued at the par value of Euro 1 each, carry dividend rights from 1 July 2004. After this operation, share capital amounts to Euro 452,856,765, of which 6.49% is held by CIC and the remainder by Banca Popolare di Milano. Under the same agreement, the shareholders voted on 27 September 2004 to increase the size of the board of directors from fifteen to sixteen members and to appoint Mr. Jean Jacques Tamburini, nominated by Crèdit Industriel et Commercial, to its number.
The process of integrating the bank’s operations with the Parent Bank and the BPM Group’s other product
Report on operations of the Bipiemme Group 263 Banca di Legnano S.p.A.
(amounts in millions of Euro) 31.12.2004 31.12.2003 % Change
Statement of income Net interest income (1) 90.8 85.8 5.7 Profits on financial transactions and services 80.6 83.3 – 3.2 Net interest and other banking income 171.4 169.1 1.3 Operating costs (2) – 165.8 – 168.4 1.5 Operating profit 5.5 0.8 n.s. Adjustments/writebacks and provisions – 8.8 – 6.5 – 35.9 Profit from operating activities – 3.3 – 5.7 42.9 Non-recurring items, net 8.0 – 0.2 n.s. Profit before income taxes 4.8 – 6.0 180.1 Income taxes – 5.6 – 3.5 – 59.8 Net profit (loss) for the period – 0.9 – 9.5 90.8
Balance sheet Loans to customers 2,054.1 2,034.3 1.0 Due from banks 263.9 108.3 143.7 Securities 232.3 270.1 – 14.0 Equity investments 168.6 71.1 137.1 Other assets 832.5 863.8 – 3.6 Total assets 3,551.5 3,347.6 6.1 Due to customers and securities issued 2,212.5 2,058.8 7.5 Due to banks 5.0 10.6 – 53.1 Other liabilities 111.5 134.7 – 17.3 Shareholders’ equity (excluding net profit/loss for the period) 1,223.4 1,153.0 6.1 Net profit (loss) for the period – 0.9 – 9.5 90.8 Total liabilities and shareholders’ equity 3,551.5 3,347.6 6.1
Other information Indirect deposits from ordinary customers (at market value) 3,974 3,898 2.0 - of which asset management 1,893 1,798 5.3 Employees 811 800 Total distribution network 103 100
(1) net interest income has been adjusted to take into account finance leasing transactions. (2) this includes Euro 75 million in both 2003 and 2004 by way of amortisation of the merger deficit allocated to goodwill (spread over 10 years)
264 Report on operations of the Bipiemme Group companies continued with other operations of a corporate a full twelve months for the first time this year. In detail, and financial nature, designed to optimise the Group’s compared with the corresponding period of last year: capital resources: net interest income climbed by Euro 5.0 million to participation in the capital increase by Bipiemme Vita Euro 90.8 million (+ 5.7%) due to the higher contribution S.p.A. by investing Euro 4,000,000 out of a total of Euro from the 26 branches transferred from BPM, and the 10,000,000. This transaction, in execution of a resolution policy of reducing the amount of financial loans in favour passed by Bipiemme Vita’s extraordinary shareholders’ of commercial ones, whose spreads also improved; meeting held on 24 September 2004, took place in October 2004. As a result Banca di Legnano now owns 2,720,000 profits on financial transactions and services went shares with a book value of Euro 15,283,696; down by Euro 2.7 million (– 3.2%) to Euro 80.6 million. Ignoring the extraordinary dividends of Euro 11.0 million introduction of a financial asset allocation plan for received in 2003 and Euro 2.2 million in 2004 (dividend Banca di Legnano. On 14 December 2004 the Board of tax credit earned in the second half of 2003), these profits Directors examined and approved a plan for investing the would have increased by 8.4%. Ordinary dividends came bank’s surplus liquidity, reflecting different objectives of to Euro 18.8 million in 2004 (still including the tax credit), risk/return according to the duration and purpose of the compared with Euro 17.5 million in 2003 (+ 7.6%). Other investment. Such investment is consistent with the goal of net commissions and income (excluding reimbursements optimising management of the Group’s liquidity, in for staff seconded to the Parent Bank) increased from accordance with a policy of coordinated, harmonised Euro 50.7 million to Euro 58.1 million (+ 14.7%). management of the surplus cash held by the Group’s Reimbursements for seconded staff went down from Euro banks that also makes the most of the specialist services 4.1 million to Euro 1.4 million (–65.6%). offered by its product companies; Operating costs, including Euro 75 million in amortisation final assimilation, as part of the project for the of the merger deficit in both periods, were Euro 2.6 million “Development of synergies and integration with the lower at Euro 165.8 million (– 1.5%). The detailed analysis Parent Bank”, of certain head office structures into the reveals that: consortia operating at Banca Popolare di Milano, whose activities for Banca di Legnano are now governed by payroll costs were 4.3% lower at Euro 47 million specific service agreements. (– 4.3%) due to a reduction of 48 in average headcount, while the year-end number was 11 higher, up from 800 to For the purposes of correctly interpreting the results 811 persons reflecting 35 leavers and 46 new recruits, of shown in the table “Banca di Legnano S.p.A. – Key whom 20 and 17 transferred to and from the Parent Figures”, it is necessary to recall that: Bank respectively;
there were two year ends during 2004, one at 30 June administrative expenses increased by Euro 0.7 2004 (for a twelve-month period) and the other at 31 million to Euro 38.9 million (+1.8%), entirely December 2004 (for a six-month period). This means that attributable to the cost of the new service agreements the 2004 results shown in the table represent the sum of made with the Parent Bank for the activities performed those for the second half of the 12-month financial year centrally; ended 30 June 2004 and the 6-month financial year ended 31 December 2004; the prior year comparatives for 2003 adjustments to tangible and intangible fixed assets have been obtained by summing those of the second half of were Euro 1.1 million lower at Euro 79.9 million (which, the financial year 1.7.2002-30.6.2003 and the first half of as already mentioned, included Euro 75 million in the financial year 1.7.2003-30.6.2004; amortisation of the merger deficit).
2004 felt the full benefit of the transfer of 26 branches Operating profit came to Euro 5.5 million, representing a from Banca Popolare di Milano to Banca di Legnano, while major increase of Euro 4.8 million. The cost/income ratio 2003 benefited for only nine months since the transfer was 96.8% compared with 99.5% in 2003; ignoring the took place at the end of March 2003. amortisation of the merger deficit, this ratio improved from 55.2% to 53.0%. Adjustments to loans, provisions for Turning to the principal results, net interest and other loan losses and net adjustments to financial fixed assets banking income climbed by Euro 2.2 million (+1.3%) to totalled Euro 8.8 million, up from Euro 6.5 million in the Euro 171.4 million. Ignoring the extraordinary dividends prior year. After recording Euro 8.0 million in net non- of Euro 11.0 million distributed in 2003 by Banca Akros, recurring income (of which Euro 5.5 million for releasing Bipiemme Vita and Bipiemme Gestioni SGR, this figure the tax provision to income) and Euro 5.6 million in taxes, increased by 8.4%, which also takes account of the fact the net result for the period was a loss of Euro 0.9 million that the branches conferred contributed to the results for compared with a loss of Euro 9.5 million in 2003.
Report on operations of the Bipiemme Group 265 The balance sheet at 31 December 2004 shows that loans to customers increased by 1.0% to Euro 2,054 million. This Cassa di Risparmio di Alessandria S.p.A. figure included a major increase in medium/long-term loans (+8.6%) due to the growth in mortgages (+39.7%), Cassa di Risparmio di Alessandria joined the BPM Group which totalled Euro 512 million; there was also a steady on 24 September 2004 after Carinord 1 S.p.A. was merged shift out of financial and syndicated loans, which into BPM; for more details, reference should be made to decreased by Euro 184 million (–37.0%), and into the Parent Bank’s Report on operations (see “Significant commercial loans. Doubtful loans, net of writedowns, events”) forming part of this same document. totalled Euro 28.4 million. Net non-performing loans amounted to Euro 6.5 million, with an extremely low ratio The bank’s key figures for 2004 show that net interest of net non-performing loans to total loans (0.32%). income was Euro 57.2 million, compared with Euro 53.1 million the year before (+7.6%). This growth was mostly Amounts due to customers and securities issued rose by due to higher volumes, especially of customer loans while, Euro 154 million (+7.5%) to Euro 2,212 million, with despite falling interest rates, the bank managed to keep bonds increasing 17.2% to Euro 557 million and current its spread virtually unchanged (down to 3.73% from accounts by 6.2% to Euro 1,425 million. The market value 3.74%). The average rate paid on customer deposits came of indirect deposits increased by 2.0% to Euro 3,974 down by 25 b.p. over the two years, from 1.74% to 1.49%, million, with assets under management 5.3% higher at while the average income received on customer loans fell Euro 1,893 million and assets under administration 0.9% by 26 b.p. over this period, from 5.48% to 5.22%. lower at Euro 2,081 million. Shareholders’ equity increased by Euro 70.4 million, Profits on financial transactions and services amounted to reflecting the capital increase of Euro 80 million reserved Euro 36.9 million compared with Euro 39.2 million in for CIC, carried out in December 2004 in execution of the 2003 (–6.1%), largely due to lower “profits on financial resolution passed by the extraordinary shareholders’ transactions” reflecting a large reduction in gains on meeting on 23 June 2004. securities which included Euro 5.0 million in 2003 realised after closing out an IRS on mortgage loans. Other net The distribution network added three new branches in the income from services increased by 5.5% from Euro 31.7 provinces of Milan (Arconate), Novara (Arona) and Como million to Euro 33.5 million, thanks to growth in (Lurate Caccivio), taking the total at 31 December 2004 to commission income on other services and on the 103. placement of insurance products. Net interest and other banking income was 1.8% higher; ignoring profits on financial transactions, this income increased by 6.9%.
Operating costs increased by 3.3%, from Euro 63.7 million to Euro 65.9 million. Payroll costs totalled Euro 38.5 million, compared with Euro 38.2 million in 2003. Payroll costs in 2003 included Euro 2.6 million in provisions to the staff pension fund; the figure for 2004 has been classified as a non-recurring charge. On a consistent comparative basis (ie. ignoring the pension provision) payroll costs were 7.7% higher, reflecting increased costs associated with provisions for holidays not taken, leaving incentives and “one-off” payments for the renewal of the national payroll agreement in 2004. Other administrative expenses increased by 8.1% from Euro 22.6 million to Euro 24.4 million, partly reflecting the higher costs associated with opening new branches. Adjustments to tangible and intangible fixed assets were largely unchanged compared with the prior year at Euro 3.0 million.
Operating profit was Euro 28.2 million, a decrease of 1.6%.
Profit from operating activities was 16.2% lower, after absorbing higher adjustments/writebacks and provisions than the year before which increased from Euro 8.7 million to Euro 11.5 million (+31.9%). Adjustments to loans underwent a major increase after provisions were
266 Report on operations of the Bipiemme Group Cassa di Risparmio di Alessandria S.p.A.
(amounts in millions of Euro) 31.12.2004 31.12.2003 % Change
Statement of income Net interest income 57.2 53.1 7.6 Profits on financial transactions and services 36.9 39.2 – 6.1 Net interest and other banking income 94.0 92.4 1.8 Operating costs (*) – 65.9 – 63.7 – 3.3 Operating profit 28.2 28.6 – 1.6 Adjustments/writebacks and provisions – 11.5 – 8.7 – 31.9 Profit from operating activities 16.7 20.0 – 16.2 Non-recurring items, net – 6.4 – 4.4 – 46.9 Profit before income taxes 10.3 15.6 – 33.8 Income taxes – 5.8 – 7.3 20.7 Net profit (loss) for the period 4.5 8.3 – 45.3
Balance sheet Loans to customers 1,354.3 1,253.7 8.0 Due from banks 226.9 231.0 – 1.8 Securities 227.0 246.0 – 7.7 Equity investments 19.8 19.9 – 0.6 Other assets 96.5 106.2 – 9.2 Total assets 1,924.5 1,856.8 3.6 Due to customers and securities issued 1,633.9 1,531.6 6.7 Due to banks 37.6 52.3 – 28.1 Other liabilities 105.5 123.5 – 14.6 Shareholders’ equity (excluding net profit/loss for the period) 142.9 141.1 1.3 Net profit (loss) for the period 4.5 8.3 – 45.3 Total liabilities and shareholders’ equity 1,924.5 1,856.8 3.6
Other information Indirect deposits from ordinary customers (at market value) 1,944.5 1,883.3 3.3 - of which asset management 795.8 797.6 – 0.2 Eemployees 589 587 Total distribution network 82 74
(*) payroll costs for 2003 include Euro 2.6 million in provisions to the staff pension fund
Report on operations of the Bipiemme Group 267 brought into line with the Parent Bank’s policies, while adjustments to financial fixed assets reflected losses on Banca Akros S.p.A. certain equity investments. Banca Akros, which specialises in investment and private Profit before income taxes was 33.8% lower at Euro 10.3 banking, stands out for the high quality of its services and million. After net non-recurring charges of Euro 6.4 its continued investment in resources, technology and million, net profit for the period came to Euro 4.5 million, innovation in the interest of its clients. well below the prior year figure (–45.3%). The tax rate was also higher up from 47% to 56.3%. During 2004 the bank expanded its core activities of underwriting, placement and trading in securities and The balance sheet reflects growth of 8.0% in loans to financial derivatives and it provided its clients with customers, up from Euro 1,253.7 million to Euro 1,354.3 financial advice and a wide range of other high value-added million. The policy of boosting medium and long-term services to support their investment decisions, to act as a lending continued, while short-term loans were relatively counterparty in managing the financial risks of companies stagnant; the focus was on loans for the commercial and institutional investors and to foster the transparent market, accompanied by a reduction in those of a financial matching of supply and demand on capital markets. nature. In a year offering fewer opportunities, partly due to the less Amounts due to customers and securities issued increased volatile state of equity markets than in 2003, Banca Akros by 6.7%. Deposits repayable on demand increased by 7.7% turned in a good set of results from its trading activities in thanks to current accounts (+9.1%), while deposits with securities and interest-rate, currency and stock derivatives notice periods jumped 10.8%, particularly driven by and it structured financial products with beneficial growth in bonds (+12.0%) which more than offset the characteristics in terms of yield and transparency for industry-wide decline in certificates of deposit. investors. The bank is a recognised leader in trading over- the-counter options in Italian equities, and it has expanded The market value of indirect customer deposits rose by its business on the eurobond market both as a market 3.3%, with assets under management at the same level as maker and as a broker, earning itself the top place on the the year before. EuroMOT (electronically-traded eurobond) market with a share of 15%. The distribution network added 8 branches, while the number of employees rose by just two. In its stockbroking activities, foreign equities represented 20%of all trades. This fact sets Banca Akros apart from its competitors and justifies the strategy being pursued for some time now through ESN, the network for research and trading in European equities incorporated in London together with nine other investment banks, one per country, with over 130 analysts covering more than 800 listed companies.
The domestic capital market confirmed its lightweight status, with a limited number of new flotations. In this context Banca Akros successfully conducted the IPO of Panariagroup (a top-end ceramics company) and managed the public offering and institutional placement of the convertible bonds issued by Banca IFIS (specialist factoring). Priority in the primary bond market was given to the underwriting and placement of securities for banks and supranational organisations, with more than 50 placements carried out in the year. The bank also added to its corporate finance services in 2004, offering amongst other the organisation of securitisations for companies and local authorities.
Private banking, involving the personalised management and administration of high net worth customers, did extremely well, thanks to buoyant net inflows, positive performance and the quality of services offered in the exclusive interest of each individual client. Customer assets were valued at over Euro 1.8 billion at year end. Individual
268 Report on operations of the Bipiemme Group Banca Akros S.p.A.
(amounts in millions of Euro) 31.12.2004 31.12.2003 % Change
Statement of income Net interest income – 12.2 – 12.0 1.0 Profits on financial transactions and services 72.6 94.6 – 23.3 Net interest and other banking income 60.4 82.5 – 26.8 Operating costs – 48.1 – 52.7 – 8.8 Operating profit 12.3 29.8 – 58.7 Adjustments/writebacks and provisions – 7.8 – 14.5 – 46.1 Profit from operating activities 4.5 15.4 – 70.6 Non-recurring items, net 0.3 6.1 – 94.8 Change in reserve for general banking risks 5.4 0.0 n.s. Profit before income taxes 10.3 21.4 – 52.1 Income taxes – 4.2 – 6.1 – 31.4 Net profit for the period 6.1 15.3 – 60.4
Balance sheet Loans to customers 86.3 146.8 – 41.2 Due from banks 261.1 338.1 – 22.8 Securities 1,167.2 1,400.5 – 16.7 Equity investments 2.8 2.8 0.0 Other assets 774.5 714.3 8.4 Total assets 2,292.0 2,602.6 – 11.9 Due to customers and securities issued 197.9 880.7 – 77.5 Due to banks 1,151.7 829.4 38.9 Other liabilities 890.1 820.0 8.5 Shareholders’ equity and reserve for general banking risks 46.2 57.1 – 19.2 Net profit for the period 6.1 15.3 – 60.4 Total liabilities and shareholders’ equity 2,292.0 2,602.6 – 11.9
Other information Indirect deposits from ordinary customers (at market value) 1,840 1,577 16.7 - of which asset management (including cash) 761 627 21.4 Employees 240 240 Financial advisors under contract 12 15
Report on operations of the Bipiemme Group 269 portfolio management activities performed particularly well, growing by 21% as a whole, with an increase in the Akros Securities Inc. number of client accounts managed and average capital per client in excess of Euro 1.3 million. Akros Securities Inc., wholly owned by Banca Akros S.p.A., closed 2004 with a net profit of USD 364 thousand. In the area of investment and private banking, where This was an encouraging result, especially in view of the domestic and international competition is very strong, organisational and operational changes associated with Banca Akros has demonstrated that Italian banks can acquiring the 25% interest in ESN North America Inc., a establish themselves if they specialise and dedicate the US authorised broker/dealer, previously 100% owned by necessary resources in terms of personnel, technology and CIC Securities S.A. (Crédit Mutuel Group), a partner in ability to take on and manage risks. the European Securities Network. This equity interest was acquired by subscribing to a capital increase. It has The results for 2004 are positive, even if margins are lower involved integrating into ESN N.A. the part of Akros than in 2003, the bank’s record year of profitability. Net Securities Inc. specialising in European and Italian equity interest and other banking income, including other sales to American institutional investors. operating income, came to around Euro 60 million (Euro 82.5 million in 2003) while operating profit, after financing The transaction was completed in January 2004 with all its investments internally, was over Euro 12 million Akros Securities Inc. acquiring a 35% interest in ESN (Euro 29.8 million in 2003). The bank wrote down its loans North America Inc. while selling 10% of this same interest by around Euro 7.7 million in 2004 and used up its entire to F. Van Lanschot Bankiers (also a partner in the reserve for general banking risks. Net profit for the year European Securities Network). was in excess of Euro 6 million (Euro 15.3 million in 2003), representing a return on equity of 13%. The comparison of As a result, Akros Securities Inc. has become a specialist this result between 2003 and 2004 is not very meaningful execution broker for American equity markets on behalf of since dividend tax credits, benefiting the 2003 figure, were Italian and European customers, while continuing to act abolished in 2004. as introducing broker for customers and banks for Banca Akros. The company continued to work very closely with The foundations for further expanding the bank’s activities the New York branch of Banca Popolare di Milano and were also laid in 2004 and in fact the new financial year has with Bipiemme Gestioni SGR. started with higher revenues and profits. On the capital market, the bank’s role as co-arranger of the recent issue of ENEL bonds for Euro 1 billion was of particular significance. In the private banking sector, funds continue Akros HFR Alternative Investments to flow into the bank’s individual portfolio management SGR S.p.A. activities, while a new office is about to be opened in Rome. This company, 51% owned by Banca Akros and 49% by a After the Group centralised some of its financial activities US partner, HFR, via HFR Europe Ltd, manages hedge with Banca Akros, it has started to accept instructions from funds. The activities of this fund manager rank 12th in the BPM branches, including for bonds and foreign equities, sector in terms of the volume of assets under management where it acts as a broker and/or market maker. The bank at 31 December 2004 (8th in 2003). Banca Popolare di has responded positively to the demands of the Parent Milano acts as custodian bank. Bank and has structured the first wave of Banca Popolare di Milano’s bonds issued in 2005 and subscribed by the The company reported around Euro 3.8 million in net Group’s customers via the branch network. Banca Akros interest and other banking income at 31 December 2004. has put its organisation, technology, access to international It made a net profit of over Euro 1 thousand in 2004. financial markets and ability to make markets at the service of BPM customers with the goal of generating real The Italian hedge funds market once more enjoyed benefits in terms of transparency, efficiency and cost. considerable growth in the period, with the amounts managed reaching around Euro 11 billion. The funds of hedge funds managed by the company now represent a third class of asset, in other words a complementary investment to that in equities or bonds.
The company manages three funds of hedge funds, that offer a unique degree of transparency on the Italian market and a variety of different risk/yield profiles. The gross and net performance for the year by the three funds managed by the company was +3.05% and +2.65% for the
270 Report on operations of the Bipiemme Group Akros Equity Hedge Fund, +2.07% and +1.80% for the Thanks to the policies adopted by Bipiemme Gestioni in Akros Market Neutral Fund and +2.93% and +2.55% for the fund sector, it produced an average return of 3.11%, the Akros Absolute Return Fund, with limited volatility compared 2.87% for the industry as a whole. that stayed within the established limits. Net investment increased by around Euro 48 million over the year, New investments principally reflected the customary compared with a figure of Euro 44 million in 2003. This important efforts by the Group’s banking channels, increase was helped by placement agreements with the although positive results were also posted by the “other BPM Group and other major third-party institutions. placers” channel, which accounted for about 31% of total net inflows; this channel received a fresh boost during the year with the signing of seven new product distribution Bipiemme Gestioni SGR S.p.A. agreements, of which six are already operational, taking the number of placers operating outside the Group to 26. Bipiemme Gestioni SGR, the principal provider of asset management products within the BPM Group, has Last December saw the start of a project to revise the continued to develop its core business, with a view to product portfolio as a whole with a view to satisfying making constant improvements to the quality of the current customer needs better by making the product products and services offered to customers, as well as range simpler, broader and more complete. expanding the volume of assets under management. Net profit for the period was Euro 10.8 million, up from The combined effect of net investment inflows, together Euro 10.0 million in the prior year (+8.2%). with positive returns on most of the products, helped the fund sector to increase the value of its assets: at 31 December 2004 the value of fund assets amounted to Euro 11,771.9 million compared with Euro 10,926.5 million at the start of the year. The individual management sector also increased its assets from Euro 5,979.5 million at the end of 2003 to Euro 6,274.9 million at 31 December 2004.
Bipiemme Gestioni SGR S.p.A.
(amounts in millions of Euro) 31.12.2004 31.12.2003 % Change
Statement of income Net interest income 0.6 0.7 – 20.5 Profits on financial transactions and services 39.4 38.6 1.9 Net interest and other banking income 39.9 39.3 1.5 Operating costs – 21.8 – 22.6 3.6 Operating profit 18.2 16.8 8.4 Profit from operating activities 18.2 16.8 8.4 Non-recurring items, net 0.0 0.3 – 88.3 Profit before income taxes 18.2 17.1 6.6 Income taxes – 7.4 – 7.1 – 4.5 Net profit for the period 10.8 10.0 8.2
Balance sheet Total assets 82.3 77.3 6.5 Shareholders’ equity (excluding net profit/loss for the period) 21.0 20.0 4.8
Other information employees 111 108 number of portfolio management services 7 7 number of mutual funds (1) 28 28
(1) “Bipiemme Co.”, a fund of funds consisting of four sectors, is treated as a single fund
Report on operations of the Bipiemme Group 271 The habitual attention to keeping costs under control Bipiemme Vita S.p.A. helped reduce them by 2.2% to Euro 5.8 million.
This insurance subsidiary of Banca Popolare di Milano In order to satisfy customer needs in the best way reported a net profit of Euro 11.8 million in 2004 (+0.9% possible and, at the same time, take advantage of new compared with 2003). market opportunities, the portfolio of established insurance products was further revised and extended. The technical margin (1st gross underwriting result) was Amongst others, this involved creating new products 7.9% lower than in 2003 mostly due to a reduction in specially for the “private” network, placing the first premium income. This was partly offset by the trends on “corporate” policies and starting the “New Health financial markets which produced “gains on valuation of Horizons” project designed to create medical products for securities” at year end of Euro 0.3 million (compared with small and medium enterprises. “losses on valuation of securities” of Euro 0.2 million in 2003), and a 2nd gross underwriting result 6.3% lower than the year before.
Bipiemme Vita S.p.A.
(amounts in millions of Euro) 31.12.2004 31.12.2003 % Change
Statement of income Prior year recurrent premiums 31.7 31.3 1.0 New premiums 486.0 495.8 – 2.0 Total net premiums received 517.6 527.1 – 1.8 Increase in reserves and other captions – 494.7 – 502.2 1.5 - of which commissions passed back to the distribution network 13.0 15.0 – 13.2 1st gross underwriting result 22.9 24.9 – 7.9 gain/loss on valuation of securities 0.3 – 0.2 n.s. 2nd gross underwriting result 23.2 24.7 – 6.3 non-financial costs – 5.8 – 5.9 2.2 adjustments to tangible fixed assets – 0.2 – 0.3 4.4 operating profit 17.1 18.5 – 7.6 profits/losses on securities and financial items 1.4 2.5 – 42.9 non-recurring items – 1.5 – 1.2 – 24.3 profit before income taxes 17.0 19.8 – 14.0 Income taxes – 5.2 – 8.1 35.4 Net profit for the period 11.8 11.7 0.9
Breakdown of new premiums: - Index linked 249.6 99.3 151.4 - Unit linked 49.9 252.5 – 80.2 - Other 181.6 144.0 26.2 Total 481.1 495.8 – 3.0
Balance sheet Technical reserves 2,710.0 2,342.6 15.7 Total assets 2,798.4 2,412.7 16.0 Shareholders’ equity (excluding net profit/loss for the period) 40.4 29.7 36.1 Subordinated liabilities 16.0 16.0 0.0
Other information Employees 26 26
272 Report on operations of the Bipiemme Group Ultramediass S.r.l. BPM Ireland Plc.
This insurance broker is wholly owned by Bipiemme Vita This company, based in Dublin’s International Financial and promotes its products on an exclusive basis, in Services Centre, has continued to deal on own account in addition to holding training courses for the network. It bonds, in addition to managing the activities of BPM Fund just about broke even in 2004. Management Ltd, a subsidiary.
Net profit for the year was 1.3% higher than in 2003 at Euro 6.5 million, which included Euro 2.5 million in dividends from BPM Fund Management Ltd.
BPM Fund Management Ltd.
Alongside the management of “Dublin International Fund” (“DIF”), an Irish harmonised mutual fund with six sections, three for equities and three for bonds, the company is also developing activities regarding the loan of securities. It reported a net profit for the year of Euro 2.8 million, up from Euro 2.5 million in 2003.
BPM Ireland P.l.c.
(amounts in millions of Euro) 31.12.2004 31.12.2003 % Change
Statement of income Net interest income 6.6 6.4 3.4 Profits on financial transactions and services 2.2 3.5 – 37.0 Net interest and other banking income 8.8 9.9 – 10.8 Operating costs – 1.6 – 1.9 15.8 Operating profit 7.2 8.0 – 9.7 Non-recurring items, net – 0.3 – 1.2 72.1 Profit before income taxes 6.9 6.8 1.4 Income taxes – 0.5 – 0.4 – 2.3 Net profit for the year 6.5 6.4 1.3
Balance sheet Total assets 1,166.4 1,212.0 – 3.8 - of which securities 1,148.3 1,194.6 – 3.9 Shareholders’ equity (excluding net profit/loss for the period) 28.0 27.9 0.3
Other information employees 87
Report on operations of the Bipiemme Group 273 Bipiemme Immobili S.p.A. We@Service S.p.A.
Work continued in 2004 on extending the Viale Bezzi The company pursued its mission during Service Centre, involving the construction of three 2004,establishing various activities designed to assure the additional buildings, designed to complement the existing success of the Group’s development strategy in the area of ones, as well as facilities for social and cultural events and virtual banking services. activities. The measures for ongoing improvement and development As previously reported, Banca di Legnano and the Parent of We@bank and its banking and online trading services Bank conferred their property arms on this company for private clients included the following: during 2002. These units essentially comprise non- business properties held for rental or sale over the a closer, more systematic relationship with the sales medium-term: the total value of properties sold during network; 2004 was Euro 18 million. The results for 2004 report a net profit of Euro 6.0 million, compared with Euro 5.3 constant contact with clients; million in 2003. ongoing improvements to the functions provided on the site and enlargement of the range of services offered;
introduction of a second level of security, with a “rotating” PIN for protecting the placement of banking instructions;
an innovative, integrated communication project known as “We@bank Education”;
an advertising campaign in December, designed to bring the BPM and We@bank brands even closer together.
We@bank reported another big increase in the number of users and transactions carried out during 2004.
Bipiemme Immobili S.p.A.
(amounts in millions of Euro) 31.12.2004 31.12.2003 % Change
Results (A) value of production 30.5 24.4 25.4 (B) production costs – 20.7 – 15.2 – 36.3 production margin (A-B) 9.9 9.2 7.4 financial income and expense 0.1 – 0.2 n.s. Non-recurring items, net 0.0 0.1 n.s. Profit before taxes 10.0 9.1 10.1 Income taxes – 4.0 – 3.8 – 5.9 Net profit for the period 6.0 5.3 13.1
Balance sheet Tangible and intangible fixed assets 82.4 71.8 14.6 Closing balance (buildings) 131.4 147.3 – 10.8 Total assets 227.7 221.5 2.8 Shareholders’ equity (excluding net profit/loss for the period) 212.3 207.0 2.6
Other information Employees 87
274 Report on operations of the Bipiemme Group Activities relating to inLineaNet, the site for corporate With reference to CartaFacile S.p.A. in liquidation, it is customers managed by We@Service since 1 January 2004, reported that, as part of the liquidation process, mostly focused on migration by all corporate customers, We@Service sold its entire interest in this company who had previously used a variety of platforms, to the new (already fully written down in its balance sheet) in return release of inLineaNet, and on enhancing the available for recovering the full amount of outstanding receivables. functions. This deal was completed on 25 February 2005, while the purchaser agreed to take over the company’s costs with In terms of results, the company closed 2004 with a loss of effect from 1 January 2005. Euro 1.3 million. This loss is attributable to non-recurring items such as the writedown of the investment in Cartafacile SpA following the decision to withdraw from this venture. The results from operating activities were nonetheless positive, with operating profit improving by Euro 4.1 million on last year to Euro 2 million this year. This result is the fruit of a 10% increase in the value of production relative to 2003 and an 11% reduction in production costs, again with reference to 2003.
An extraordinary shareholders’ meeting was held on 24 September 2004, which voted, amongst others, to reduce share capital since the company’s capital continued to be below the limits required by article 2446 of the Italian civil code following the non-recurring charge arising on the writedown of the investment in Cartafacile SpA. At the end of December 2004, shareholders’ equity stood at Euro 4,246,175.
We@Service S.p.A.
(amounts in millions of Euro) 31.12.2004 31.12.2003 % Change
Statement of income (A) value of production 20.1 18.2 10.3 (B) production costs – 18.1 – 20.3 – 10.9 of which third-party goods and services – 7.7 – 10.5 – 26.7 of which payroll costs – 6.6 – 6.2 6.5 of which amortisation, depreciation and other charges – 3.8 – 3.7 4.8 production margin (A-B) 2.0 – 2.1 n.s. financial income and expense 0.0 0.1 – 73.0 Non-recurring items, net – 3.4 – 1.1 197.9 Profit before taxes – 1.3 – 3.2 – 57.3 Loss for the year – 1.3 – 3.4 – 60.2
Balance sheet Total assets 10.1 13.0 – 22.1 - of which securities 2.0 0.0 n.s. Shareholders’ equity (excluding net profit/loss for the period) 5.6 8.9 – 37.5
Other information Employees on long-term contracts 74 78 – 5.1 Employees on short-term contracts 7 8 – 12.5 Total employees 81 86 – 5.8
Report on operations of the Bipiemme Group 275 position consolidation and definition of costs and BPM Private Equity SGR S.p.A. revenues. The year ended 31 December 2004 closed with a profit from operating activities of Euro 0.3 million which, This company was set up to operate in the “Private after current and deferred taxation, became a net profit of Equity” sector through the management of closed-end Euro 0.6 million compared with the loss of Euro 1.8 mutual funds. million reported in 2003. During 2004 the Parent Bank subscribed to an initial tranche of units in the fund known as “BPM Private Bipiemme Real Estate SGR S.p.A. Equity Fund”, enabling this to become operational; this fund has purchased an investment in a company that This 85% subsidiary of Banca Popolare di Milano operates in the lighting sector. currently manages “Investietico”, a closed-end property fund, most of whose assets are invested in nursing homes Since the company is still in its start-up phase, it closed and office premises, in accordance with the ethical 2004 with a loss of Euro 0.2 million. principles established in the fund regulations. Units in the “Investietico” fund have been listed on Italy’s electronically traded stock market since 1 November 2004. Tirving Ltd. Banca Popolare di Milano entered into an agreement with This Irish company is used to participate in securitisation Aedes S.p.A. on 29 September 2004, whose terms included: operations via the purchase of holdings in special-purpose vehicles, such as Tayar Receivables Company – the sale of 5% of Bipiemme Real Estate SGR S.p.A. to securitisation of the receivables of Michelin North Aedes S.p.A.; America and the European subsidiaries of the Michelin Group – and Newgrange Receivables Company – the reciprocal recognition of a put and call option for discounting without recourse of the receivables of Colgate Banca Popolare di Milano and Aedes S.p.A. respectively Palmolive. over an additional 46% interest in the fund management company; these options may be exercised after the first The result for the year was a net profit of Euro 3.5 million property fund has been fully placed, no more than 12 in line with that reported the year before. months from the date of entering into the said agreement;
the formalisation of specific agreements relating to the Bipiemme Private Banking SIM S.p.A. governance of Bipiemme Real Estate SGR on the assumption that the above options are exercised, meaning Bipiemme Private Banking SIM, a stockbroker with the that Aedes S.p.A. gains control over this company. mission of providing financial and non-financial advisory services to the BPM Group’s private client segment, As a result, the fund management company has sought reached full swing operations in 2004 (its third effective the Bank of Italy’s approval for the regulations of a closed- year of business). The process of setting up its own end property fund reserved for institutional investors. commercial network can now be considered to be complete having identified and recruited around fifty private The results for the period reported a net profit of Euro 0.3 bankers and, in addition to the head office in Milan, million. opened up fifteen “private centres”, mostly located in Lombardy. The chosen organisational model is based on complementing the banking group to which it belongs and on generating synergies. It ensures maximum territorial coverage even in areas where there are no specific private centres since the private bankers can manage clients in any one of BPM’s branches.
On the commercial front, the company continued the process of acquiring private clients from Banca Popolare di Milano, closing the year with around 5,000 advisory agreements for assets worth some Euro 3.5 billion. Products specially for the company’s target customers were also designed and created.
In terms of results, the year can be considered to be one of
276 Report on operations of the Bipiemme Group capital. Etica SGR S.p.A. Consolidated lending by the three companies amounts to around Euro 3,100 million, confirming the During 2004, this company – in which BPM holds a SelmaBipiemme Group as one of the top ten operators in 27.50% interest and which focuses exclusively on the the leasing sector. socially responsible investments sector – continued to promote the three “Responsible Values” funds, whose assets are invested in the financial instruments of issuers Cassa di Risparmio di Asti S.p.A. with a high standard of social responsibility, determined according to innovative ethical-environmental criteria. The company also enlarged the sales network for these Cassa di Risparmio di Asti – in which Banca di Legnano funds by making specific agreements with banks and acquired a 20% interest on 6 September 2004 – closed the other financial operators. year with a net profit of Euro 15.7 million, compared with Euro 15.2 million in 2003 (+3.3%). The company increased its capital to Euro 4 million during the course of 2004, enabling it to boost its capital reserves The bank’s key figures for 2004 show that net interest and also to admit a new shareholder in the guise of Cassa income was Euro 85.2 million, compared with Euro 81.9 Centrale delle Casse Rurali Trentine – BCC Nordest S.p.A.. million the year before (+3.9%). Profits on financial transactions and services amounted to Euro 37.1 million The result for the period was a loss of Euro 0.1 million. compared with Euro 34.6 million in 2003 (+7.3%). Net interest and other banking income was 4.9% higher as a result. SelmaBipiemme Leasing S.p.A. Operating costs increased by 7.1%, from Euro 74.1 million to Euro 79.3 million. In detail, payroll costs were 4.6% This company, 38.35% owned by the Bank, reported a net higher at Euro 47.2 million, while administrative profit for the half-year to 31 December 2004 of Euro 4.6 expenses climbed 11.0% to Euro 32.1 million. million, compared with Euro 5.4 million the year before (– 15%); this result was basically consistent with the Operating profit, as the sum of the intermediate profits dividends paid by the company’s subsidiaries during the described above, reported an increase of 0.3%. half year. There was also a small reduction in net interest income compared with the same period of last year. Profit from operating activities was 8.1% lower, after In the half-year ended 31 December 2004 the company absorbing higher adjustments/writebacks and provisions stipulated 3,935 contracts worth Euro 360.3 million, than the year before which increased from Euro 11.7 compared with 3,584 contracts worth Euro 313.5 million million to Euro 14.0 million (+19.7%). Profit before taxes in the corresponding six months of 2003; no “big ticket” was 12.9% higher at Euro 32.3 million thanks to Euro 7.6 contracts were signed up in either period. million in non-recurring income. The net book value of assets to be leased increased by 1% With regard to the balance sheet, customer deposits with respect to the comparative period of last year. increased by 9.0% to Euro 2,478 million, while loans to customers climbed by even more, up 12.7% to Euro 2,372 SelmaBipiemme Leasing S.p.A. owns 100% of Palladio million. Leasing S.p.A., which operates in the Triveneto area, as well as 80% of Teleleasing S.p.A. (with 20% held by On the commercial front, it is reported that Cassa di Telecom S.p.A.), which specialises mainly in operating Risparmio di Asti recently started to distribute the BPM leases. Palladio Leasing S.p.A. closed the half year ended Group’s asset management products. 31 December 2004 with a net profit of Euro 2.8 million (Euro 2.5 million in the prior year). Teleleasing S.p.A. closed the half year ended 31 December 2004 with a net profit for statutory purposes of Euro 6.3 million (Euro 9.4 million in the corresponding period of the prior year), while net profit determined using lease accounting methodology was Euro 3.2 million (unchanged with respect to the corresponding period of the prior year).
SelmaBipiemme continued to hold a 10% interest in Pirelli & C. Real Estate Franchising Holding S.r.l. and increased its investment to Euro 2.0 million after converting the loans given to this company into share
Report on operations of the Bipiemme Group 277 BPM Capital I L.L.C. – BPM Luxembourg S.A. Intercompany transactions
These two companies, the former based in Delaware and Year-end balances with subsidiaries are summarised the latter in Luxembourg, continued to manage the below: securities issued as part of a specific project to boost BPM’s capital reserves. The US company is wholly owned due to the Bank Euro 21.0 million: of which Euro 3.3 by BPM, while the Luxembourg company is 99% owned by million in receivables due from Ultramediass and Euro BPM with the remainder held by Banca Akros. 17.7 million from Bipiemme Vita, including Euro 16.0 million in subordinated loans forming part of its capital The companies closed the year with a small loss (Euro 0.2 for supervisory purposes, of which 60.0% from BPM (Euro million) and at breakeven respectively. 9.6 million) and 40.0% from Banca di Legnano (Euro 6.4 million);
First Skelligs International Finance Co. Ltd. due by the Bank: Euro 275.0 million: of which Euro 42.8 million in payables due to Bipiemme Vita, Euro 0.7 million This Irish company has been in voluntary liquidation due to Ultramediass, Euro 0.6 million due to Bipiemme since 17 December 2003. Real Estate SGR, Euro 0.1 million due to Ge.Se.So. plus The liquidation process is expected to be finally Euro 230.8 million in bonds subscribed by Bipiemme Vita terminated in the first half of 2005. in connection with the issue of insurance products;
guarantees and commitments Euro 0.3 million: of which Euro 0.275 million in guarantees to Bipiemme Vita and Euro 0.021 million to Ge.Se.So.
With regard to balances at 31 December 2004 with companies subject to significant influence, pursuant to art. 19.1 of Decree 87/92:
1. balances with SelmaBipiemme Leasing:
due to the Bank: Euro 283.4 million; due by the Bank: Euro 0.1 million; guarantees and commitments: Euro 0.8 million.
2. balances with other companies subject to significant influence:
due to the Bank: Euro 3.9 million, relating to Caralt; due by the Bank: Euro 1.3 million, relating to Etica SGR,and Euro 0.003 million relating to Leasemac in liquidation; guarantees and commitments: Euro 3.9 million, relating to Caralt.
Transactions with subsidiary and associated companies and other related parties (as defined in Consob communication DEM/2064231of 30.09.2002) are settled on market terms, and in their absence, at a suitable rate to cover the costs of performing the associated services. Such transactions arise in the ordinary course of business.
278 Report on operations of the Bipiemme Group Shareholders’ equity and capital – unrestated figure), while the Tier 1 capital ratio – calculated as the ratio between Tier 1 capital and risk- adequacy weighted assets – is 7.02% (6.99% at the end of 2003 – unrestated figure). Shareholders’ equity, including net profit for the year, amounts to Euro 2,519 million, up by Euro 73 million on Net of the part absorbed by credit risk (77.0%), market 31 December 2003 mostly thanks to the increase of Euro risk (8.8%) and other prudent requirements (1.5%), the 66 million in net profit for the period. Group’s unabsorbed capital amounts to Euro 303 million.
Capital for supervisory purposes amounts to Euro 2,383 million, Euro 184 million higher than at 31 December 2003 (based on the unrestated figure).
Risk-weighted assets amount to Euro 26,002 million, meaning that the total capital ratio – calculated as the ratio between capital for supervisory purposes and total risk-weighted assets – is 9.16% (9.26% at the end of 2003
Capital (in thousands of Euro) 31.12.2004 31.12.2003 % Change pro-forma
Share capital 1,245,103 1,245,103 0.0 Share premium reserve 339,689 339,689 0.0 Equity reserves 806,289 799,449 0.9 Reserve for general banking risks 0 0 n.s. Net profit for the year 127,615 61,150 108.7 Total book shareholder’s equity 2,518,696 2,445,391 3.0
Capital adequacy (in thousands of Euro) 31.12.2004 31.12.2003 % Change unrestated figures
Consolidated Tier 1 capital 1,825,993 1,659,758 10.0 Consolidated Tier 2 capital 653,216 640,004 2.1 Deductions – 96,484 – 101,536 – 5.0 Capital for supervisory purposes 2,382,725 2,198,226 8.4 Portion absorbed by credit risk 77.0% 75.3% Portion absorbed by market risk 8.8% 6.3% Of which: a) dealing portfolio risk 8.7% 6.2% b) exchange risk 0.1% 0.1% Portion absorbed by other risks 1.5% 4.8% Available portion 12.7% 13.6% Minimum capital adequacy required (8% of total risk-weighted assets) 2,080,138 1,898,417 9.6 Surplus 302,587 299,809 0.9 Total risk-weighted assets 26,001,720 23,730,210 9.6
Tier 1 capital ratio 7.02% 6.99% Total capital ratio 9.16% 9.26%
Report on operations of the Bipiemme Group 279 Results by business sector and “Other” includes the financial margins deriving from equity investments, property and dividends, as well as geographical area consolidation adjustments affecting net interest and other banking income. The above table has been prepared on the same basis as the one in the corresponding section of the Parent Bank’s Report on operations, showing the contribution to net interest and other banking income and average annual capital by type of business and geographical area.
With regard to the allocation of customers to geographical areas:
the location of private customers and small and medium-sized companies generally reflects that of the customers, with a good level of approximation;
large corporate customers are handled centrally by the Large Company Relationships Department and therefore do not reflect their actual geographical location;
relationships with subsidiaries are grouped together in a specific segment.
Commercial Operations in Italy include the relevant figures of the Parent Bank, as well as those of Banca di Legnano, Cassa di Risparmio di Alessandria, Bipiemme Gestioni SGR and other Group companies, most of which have been allocated to the Lombardy area. Financial Operations include the results of the Parent Bank, as well as those of Banca Akros.
Consolidated Bipiemme Group at 31/12/04 Geographical Area Customer % Customer % Net interest % deposits loans and other banking income Lombardy (excluding L.C.R. and G.C.) 12,153 61.6% 10,364 52.5% 894.1 61.9%
Lombardy - Large Company Relationships (L.C.R.) 640 3.2% 3,969 20.1% 59.4 4.1%
Lombardy - Group Companies (G.C.) 605 3.1% 78 0.4% 3.6 0.2%
Lazio 1,114 5.7% 637 3.2% 68.8 4.8%
Puglia 749 3.8% 386 2.0% 43.2 3.0%
Emilia Romagna and the North-East 712 3.6% 1,650 8.4% 65.6 4.5%
Regions of the North-West 2,548 12.9% 1,809 9.2% 154.5 10.7%
Total commercial operations 18,522 93.9% 18,894 95.8% 1,289 89.3%
Financial operations (Italy) 89.9 6.2%
USA 407 2.1% 341 1.7% 8.2 0.6%
Other European countries 790 4.0% 492 2.5% 41.2 2.9%
Other 15.5 1.1%
Total Bipiemme Group 19,718 100.0% 19,728 100.0% 1,444.1 100.0%
280 Report on operations of the Bipiemme Group Operating structure Financial advisors
Distribution network The BPM Group’s network of financial advisors at the end of 2004 came to 71 in total, of whom 39 have a direct The BPM Group’s branch network consists of 725 “points relationship with the Parent Bank and 32 (including 12 of contact” with customers represented by 688 retail contract workers) with Banca Akros. branches, as well as: the two foreign branches in London The Parent Bank’s financial advisors are mainly located and New York, the virtual branch of We@Bank, 18 outside the Bank’s traditional area of operations, mainly corporate branches and 16 “Private” Centres forming part in the North East and in Puglia. of Bipiemme Private Banking SIM. Corporate branches serve medium/large businesses, while the private centres provide important private customers with specialist financial advice. The financial points were gradually phased out during 2003, with their advisory activities now performed by the 16 private centres, Distribution network appropriately located throughout the country. 31.12.2004 31.12.2003 At 31 December 2004, the traditional branch network Province of Milan 319 315 consisted of 688 retail branches located in 13 regions throughout Italy, which together with the two branches in Other provinces in Lombardy 131 129 London and New York and the “virtual branch” run by of which: We@Bank, took the total to 691. Banca Popolare di Milano 355 351 There were 20 more branches than at the end of December Banca di Legnano 92 90 2003: the Parent Bank’s network added 9 branches – consisting of 10 openings less 1 closure –, while Banca di Cassa di Risparmio di Alessandria 2 2 Legnano opened 3 new branches and CR Alessandria’s Banca Akros 11 network grew by 8. Total Lombardy 450 444 Emilia Romagna 30 29 Lazio 55 54 Puglia 37 36 Piedmont 92 85 Other regions 24 20 of which: Banca Popolare di Milano 147 142 Banca di Legnano 11 10 Cassa di Risparmio di Alessandria 80 72 Total Italy 688 668 of which: Banca Popolare di Milano 502 493 Banca di Legnano 103 100 Cassa di Risparmio di Alessandria 82 74 London 1 1 New York 1 1 Total abroad 2 2 We@Bank 1 1
Total branches 691 671
Total Corporate branches in Italy 18 18 Private Centres (Bipiemme Private Banking SIM) 16 14
Total distribution network 725 703
Report on operations of the Bipiemme Group 281 Risk Management See the Parent Bank’s report on operations (“Shareholders’ equity and capital adequacy – Risk Management”) for more detailed information on the various Group projects to Credit risk develop systems to measure and monitor risk and orient corporate policies. Credit risk continues to be the most significant risk to which the Group is exposed. As mentioned earlier in the section “Shareholders’ equity and capital adequacy”, this type of risk absorbed 77.0% of BPM’s consolidated capital for supervisory purposes at the end of 2004. The table on “Credit risk” details the weighted assets used for determining the Group’s capital adequacy ratios.
Credit risk
Original % of total Weighted % of total value/ value of value value lending assets of weighted equivalent at risk assets (in thousands of Euro) at risk
Cash-based assets at risk Portion of cash loans secured by real guarantees and cash 751,762 2.4% 50 0.0% Cash loans to government or multilateral development banks or with their explicit guarantee 1,184,752 3.8% 93,336 0.4% Cash loans to banks or with their explicit guarantee 4,297,834 13.7% 861,567 3.7% Cash loans to the private sector: mortgages on residential property 1,953,249 6.2% 976,624 4.2% Cash loans to the private sector: other 17,621,977 56.1% 17,621,977 75.3% Equity investments weighted at 200% 225,622 0.7% 244,739 1.0% Other assets 1,110,184 3.5% 622,102 2.7% Total cash-based assets at risk 27,145,380 86.5% 20,420,394 87.3% Off-balance sheet assets at risk Guarantees given and commitments: - Secured by real guarantees 55,071 0.2% 0 0.0% - to government or to multilateral development banks or with their explicit guarantee 51,158 0.2% 6,204 0.0% - to banks or investment companies or with their explicit guarantee 788,596 2.5% 157,869 0.7% - to private-sector entities 2,666,127 8.5% 2,666,127 11.4% Total guarantees given and commitments 3,560,952 11.3% 2,830,200 12.1% Derivative contracts and foreign exchange transactions not forming part of market risk 678,270 2.2% 143,090 0.6% Total value of off-balance sheet assets at risk 4,239,222 13.5% 2,973,290 12.7% Total value of assets at risk 31,384,602 100.0% 23,393,685 100.0% Doubtful accounts and losses on risk-weighted assets – 525,556 – 457,801 Total net value of assets at risk 30,859,046 22,935,884 Credit risk absorption of capital for supervisory purposes (8%) 1,834,871
282 Report on operations of the Bipiemme Group Other information reversal of Euro 2.1 million in writedowns to consolidated equity investments, mostly relating to BPM’s writedown of We@Service; Reconciliation of the Parent Bank’s shareholders’ equity and net profit with writeback of conferral gains written off in 2002, Euro consolidated shareholders’ equity and net 7.0 million, relating to the non-business properties of BPM profit conferred on Bipiemme Immobili, following the sale of property during 2004; The table “Reconciliation of the Parent Bank’s shareholders’ equity and net profit with consolidated adjustment of the goodwill recorded by absorbed shareholders’ equity and net profit” shows that the banks, Euro 7.7 million. consolidated result of Euro 127.6 million is Euro 2.4 million higher than that of the Parent Bank. Indeed, the Group share of the results of companies consolidated on a line-by-line basis and carried at equity, Euro 53.5 million, is higher than total consolidation eliminations and adjustments, Euro 51.1 million. Consolidation eliminations and adjustments mainly reflect:
reversal of dividends collected during the period totalling Euro 47.0 million, of which Euro 31.6 million relates to dividends collected by the Parent Bank in relation to the 2003 results of Group companies, while Euro 15.5 million relates to other intraGroup dividends;
Reconciliation of the Parent Bank’s shareholders’ equity and net profit with consolidated shareholders’ equity and net profit
Shareholders’ Net profit (amounts in thousands of Euro) equity for the year
Parent Bank balances as of 31 December 2004 2,643,438 125,224 Net surplus on carrying values of companies consolidated line-by-line or carried at equity – 57,917 Group share of the results of companies consolidated line-by-line or carried at equity 53,495 Amortisation of goodwill arising on consolidation and on application of the equity method – 20,949 Dividends received – 47,041 Reversal of writedowns to consolidated equity investments and other adjustments 2,121 Goodwill adjustment for merged banks (Banca Agricola Milanese, Banca Briantea, Banca 2000) – 17,034 7,725 Net effect of reversing the gain on transfer of the property business to Bipiemme Immobili in 2002 – 52,515 7,040
Group share of consolidated shareholders’ equity and net profit for the year as of 31 December 2004 2,515,972 127,615
Portion of revaluation reserves attributable to minority interests 2,724
Shareholders’ equity as of 31 December 2004 2,518,696
Report on operations of the Bipiemme Group 283 Subsequent events
Outlook for the current year
Subsidiary companies have performed well in the first two months of 2005, in line with the trend already emerging towards year end. As regards BPM’s performance, reference should be made to the corresponding section in the Parent Bank’s report on operations.
Subsequent events
On 8 March 2005 Banca Popolare di Milano’s Board of Directors approved the plan to reformulate its strategy in the “Private equity” sector, to be implemented by creating a corporate and product partnership with WISE Venture SGR. Amongst others, the agreement calls for BPM Private Equity SGR to be merged into WISE Venture SGR; for more details on this deal, reference should be made to the “subsequent events” section of the Parent Bank’s report on operations contained in this same volume.
284 Report on operations of the Bipiemme Group Consolidated Financial Statements Variazioni Assolute %
Consolidated Balance Sheet Consolidated Guarantees and Commitments Consolidated Statement of Income
Comparison with pro-forma amounts
285 Consolidated Balance Sheet (in thousands of Euro)
Change Assets 31.12.2004 31.12.2003 (+/–) %
10. Cash and deposits with central banks and post offices 202,413 185,836 16,577 8.92
20. Treasury bills and similar bills with central banks 694,532 729,062 – 34,530 – 4.74
30. Due from banks 3,785,877 3,558,632 227,245 6.39 a) repayable on demand 509,140 425,132 84,008 19.76 b) other deposits 3,276,737 3,133,500 143,237 4.57
40. Loans to customers 20,025,647 17,076,986 2,948,661 17.27 of which: loans using public funds 6,105 4,720 1,385 29.34
50. Bonds and other debt securities: 4,945,140 5,915,769 – 970,629 – 16.41 a) public entities 1,031,445 1,605,327 – 573,882 – 35.75 b) banks 1,997,628 1,919,907 77,721 4.05 of which: treasury bonds 14,370 10,566 3,804 36.00 c) financial institutions 1,149,947 1,615,277 – 465,330 – 28.81 of which: treasury bonds 0 0 0 n.s. d) other issuers 766,120 775,258 – 9,138 – 1.18
60. Shares, quotas and other forms of capital 1,267,773 1,475,824 – 208,051 – 14.10
70. Equity investments: 259,315 254,890 4,425 1.74 a) carried at equity 83,877 94,771 – 10,894 – 11.50 b) other 175,438 160,119 15,319 9.57
80. Investments in group companies: 55,375 41,398 13,977 33.76 a) carried at equity 55,367 41,390 13,977 33.77 b) other 8 8 0 0.00
90. Goodwill arising on consolidation 128,932 12,102 116,830 n.s.
100. Goodwill arising on application of the equity method 43,431 81,313 – 37,882 – 46.59
110. Intangible fixed assets 634,522 695,821 – 61,299 – 8.81 of which: start-up costs 16,507 16,981 – 474 – 2.79 goodwill 481,126 555,824 – 74,698 – 13.44
120. Tangible fixed assets 421,840 389,077 32,763 8.42 of which: assets to be leased 2,159 1,762 397 22.53
140. Own shares 0 37 – 37 – 100.00 (par value Euro 21)
150. Other assets 1,956,593 1,803,870 152,723 8.47
160. Accrued income and prepayments: 248,265 221,120 27,145 12.28 a) accrued income 207,629 192,019 15,610 8.13 b) prepayments 40,636 29,101 11,535 39.64 of which: discount on issue of securities 20,733 3,355 17,378 n.s.
Total assets 34,669,655 32,441,737 2,227,918 6.87
286 Financial Statements Consolidated Balance Sheet (in thousands of Euro)
Change Liabilities and shareholders’ equity 31.12.2004 31.12.2003 (+/–) %
10. Due to banks: 6,813,455 7,250,428 – 436,973 – 6.03 a) repayable on demand 1,471,501 1,484,343 – 12,842 – 0.87 b) time deposits or with notice period 5,341,954 5,766,085 – 424,131 – 7.36
20. Due to customers: 16,323,463 15,613,876 709,587 4.54 a) repayable on demand 14,698,571 13,040,002 1,658,569 12.72 b) time deposits or with notice period 1,624,892 2,573,874 – 948,982 – 36.87
30. Securities issued: 5,605,473 4,043,618 1,561,855 38.63 a) bonds 4,796,724 3,369,583 1,427,141 42.35 b) certificates of deposit 662,347 515,256 147,091 28.55 c) other 146,402 158,779 – 12,377 – 7.80
40. Public funds administered 6,105 4,720 1,385 29.34
50. Other liabilities 1,680,627 1,594,773 85,854 5.38
60. Accrued expenses and deferred income: 230,048 193,243 36,805 19.05 a) accrued expenses 188,191 160,886 27,305 16.97 b) deferred income 41,857 32,357 9,500 29.36
70. Provision for severance indemnities 252,353 229,509 22,844 9.95
80. Provision for risks and charges: 305,661 332,317 – 26,656 – 8.02 a) pensions and similar commitments 55,888 27,633 28,255 102.25 b) taxation 60,861 81,187 – 20,326 – 25.04 c) risks and charges arising on consolidation 0 0 0 n.s. d) other 188,912 223,497 – 34,585 – 15.47
90. Reserves for possible loan losses 3,500 8,773 – 5,273 – 60.10
110. Subordinated liabilities 819,379 819,379 0 0.00
140. Minority interests 110,895 2,296 108,599 n.s.
150. Share capital 1,245,103 1,157,982 87,121 7.52
160. Share premium reserve 339,689 339,689 0 0.00
170. Reserves: 803,565 783,093 20,472 2.61 a) legal reserve 193,740 180,713 13,027 7.21 b) reserve for own shares 0 37 – 37 – 100.00 c) statutory reserves 576,546 521,834 54,712 10.48 d) other reserves 33,279 80,509 – 47,230 – 58.66
180. Revaluation reserves 2,724 0 2,724 n.s.
200. Net profit for the year 127,615 68,041 59,574 87.56
Total liabilities and shareholders' equity 34,669,655 32,441,737 2,227,918 6.87
Financial Statements 287 Guarantees and Commitments (in thousands of Euro)
Change Captions 31.12.2004 31.12.2003 (+/–) %
10. Guarantees given 2,790,970 3,033,003 – 242,033 – 7.98 of which: – acceptances 34,889 26,873 8,016 29.83 – other guarantees 2,756,081 3,006,130 – 250,049 – 8.32
20. Commitments 5,456,260 4,795,210 661,050 13.79 of which: – repurchase agreements 0 0 0 n.s.
288 Financial Statements Consolidated statement of income (in thousands of Euro)
Change Captions 2004 2003 (+/–) %
10. Interest income and similar revenues 1,595,271 1,389,572 205,699 14.80 of which: On loans to customers 866,574 787,062 79,512 10.10 On debt securities 344,432 307,637 36,795 11.96
20. Interest expense and similar charges – 933,270 – 802,716 130,554 16.26 of which: On amounts due to customers – 138,118 – 152,482 – 14,364 – 9.42 On securities issued – 125,266 – 110,521 14,745 13.34
30. Dividends and other revenues 80,142 98,821 – 18,679 – 18.90 a) from shares, quotas and other forms of capital 65,136 91,949 – 26,813 – 29.16 b) from equity investments 15,006 6,872 8,134 118.36 c) from investments in group companies 0 0 0 n.s.
40. Commission income 593,094 529,639 63,455 11.98
50. Commission expense – 72,148 – 57,061 15,087 26.44
60. Profits (losses) on financial transactions 40,986 26,935 14,051 52.17
70. Other operating income 128,361 110,849 17,512 15.80
80. Administrative expenses: – 944,497 – 864,335 80,162 9.27 a) payroll – 604,566 – 550,335 54,231 9.85 of which: wages and salaries – 407,393 – 375,886 31,507 8.38 social security charges – 131,802 – 126,475 5,327 4.21 severance indemnities – 29,398 – 28,866 532 1.84 pensions and similar commitments – 8,203 – 7,321 882 12.05 b) other administrative expenses – 339,931 – 314,000 25,931 8.26
90. Adjustments to tangible and intangible fixed assets – 191,980 – 167,630 24,350 14.53
100. Provisions for risks and charges – 30,363 – 41,911 – 11,548 – 27.55
110. Other operating expenses – 5,640 – 5,550 90 1.62
120. Adjustments to loans and provisions for guarantees and commitments – 179,343 – 188,573 – 9,230 – 4.89
130. Writeback of adjustments to loans and provisions for guarantees and commitments 49,033 51,949 – 2,916 – 5.61
140. Provisions for loan losses 0 – 542 – 542 – 100.00
150. Adjustments to financial fixed assets – 14,851 – 4,843 10,008 206.65
160. Writeback of adjustments to financial fixed assets 969 4,312 – 3,343 – 77.53
170. Net profit (loss) of investments valued under the equity method 17,326 13,846 3,480 25.13
180. Profit from operating activities 133,090 92,762 40,328 43.47
190. Non-recurring income 69,002 38,035 30,967 81.42
200. Non-recurring charges – 22,918 – 20,497 2,421 11.81
210. Non-recurring income 46,084 17,538 28,546 162.77
240. Income taxes for the year – 49,593 – 41,417 8,176 19.74
250. Minority interests – 1,966 – 842 1,124 133.49
260. Net profit for the year 127,615 68,041 59,574 87.56
Financial Statements 289 Consolidated Balance Sheet (in thousands of Euro) – Comparison with pro-forma amounts
Assets 31.12.2004 31.12.2003 Change pro-forma (*) (+/–) %
10. Cash and deposits with central banks and post offices 202,413 204,169 – 1,756 – 0.86
20. Treasury bills and similar bills with central banks 694,532 787,369 – 92,837 – 11.79
30. Due from banks: 3,785,877 3,789,631 – 3,754 – 0.10 a) repayable on demand 509,140 514,162 – 5,022 – 0.98 b) other deposits 3,276,737 3,275,469 1,268 0.04
40. Loans to customers 20,025,647 18,330,719 1,694,928 9.25 of which: loans using public funds 6,105 4,720 1,385 29.34
50. Bonds and other debt securities: 4,945,140 6,098,777 – 1,153,637 – 18.92 a) public entities 1,031,445 1,690,264 – 658,819 – 38.98 b) banks 1,997,628 1,962,148 35,480 1.81 of which: treasury bonds 14,370 11,411 2,959 25.93 c) financial institutions 1,149,947 1,663,357 – 513,410 – 30.87 of which: treasury bonds 0 0 0 n.s. d) other issuers 766,120 783,008 – 16,888 – 2.16
60. Shares, quotas and other forms of capital 1,267,773 1,480,479 – 212,706 – 14.37
70. Equity investments: 259,315 211,019 48,296 22.89 a) carried at equity 83,877 31,033 52,844 170.28 b) other 175,438 179,986 – 4,548 – 2.53
80. Investments in group companies: 55,375 41,398 13,977 33.76 a) carried at equity 55,367 41,390 13,977 33.77 b) other 8 8 0 0.00
90. Goodwill arising on consolidation 128,932 131,278 – 2,346 – 1.79
100. Goodwill arising on application of the equity method 43,431 3,034 40,397 n.s.
110. Intangible fixed assets 634,522 697,665 – 63,143 – 9.05 of which: start-up costs 16,507 16,981 – 474 – 2.79 goodwill 481,126 555,824 – 74,698 – 13.44
120. Tangible fixed assets 421,840 423,273 – 1,433 – 0.34 of which: assets to be leased 2,159 1,762 397 22.53
140. Own shares 0 37 – 37 – 100.00 (par value Euro 21)
150. Other assets 1,956,593 1,855,446 101,147 5.45
160. Accrued income and prepayments: 248,265 228,456 19,809 8.67 a) accrued income 207,629 198,836 8,793 4.42 b) prepayments 40,636 29,620 11,016 37.19 of which: discount on issue of securities 20,733 3,355 17,378 n.s.
Total assets 34,669,655 34,282,750 386,905 1.13
290 Financial Statements Consolidated Balance Sheet (in thousands of Euro) – Comparison with pro-forma amounts
Liabilities and shareholders’ equity 31.12.2004 31.12.2003 Change pro-forma (*) (+/–) %
10. Due to banks: 6,813,455 7,302,726 – 489,271 – 6.70 a) repayable on demand 1,471,501 1,507,663 – 36,162 – 2.40 b) time deposits or with notice period 5,341,954 5,795,063 – 453,109 – 7.82
20. Due to customers: 16,323,463 16,705,434 – 381,971 – 2.29 a) repayable on demand 14,698,571 13,929,178 769,393 5.52 b) time deposits or with notice period 1,624,892 2,776,256 – 1,151,364 – 41.47
30. Securities issued: 5,605,473 4,483,649 1,121,824 25.02 a) bonds 4,796,724 3,790,567 1,006,157 26.54 b) certificates of deposit 662,347 534,258 128,089 23.98 c) other 146,402 158,824 – 12,422 – 7.82
40. Public funds administered 6,105 4,720 1,385 29.34
50. Other liabilities 1,680,627 1,652,209 28,418 1.72
60. Accrued expenses and deferred income: 230,048 199,610 30,438 15.25 a) accrued expenses 188,191 165,996 22,195 13.37 b) deferred income 41,857 33,614 8,243 24.52
70. Provision for severance indemnities 252,353 252,989 – 636 – 0.25
80. Provision for risks and charges: 305,661 374,139 – 68,478 – 18.30 a) pensions and similar commitments 55,888 53,759 2,129 3.96 b) taxation 60,861 92,924 – 32,063 – 34.50 c) risks and charges arising on consolidation 0 0 0 n.s. d) other 188,912 227,456 – 38,544 – 16.95
90. Reserves for possible loan losses 3,500 10,801 – 7,301 – 67.60
110. Subordinated liabilities 819,379 819,379 0 0.00
140. Minority interests 110,895 31,703 79,192 249.79
150. Share capital 1,245,103 1,245,103 0 0.00
160. Share premium reserve 339,689 339,689 0 0.00
170. Reserves: 803,565 796,725 6,840 0.86 a) legal reserve 193,740 180,713 13,027 7.21 b) reserve for own shares 0 37 – 37 – 100.00 c) statutory reserves 576,546 521,834 54,712 10.48 d) other reserves 33,279 94,141 – 60,862 – 64.65
180. Revaluation reserves 2,724 2,724 0 0.00
200. Net profit for the year 127,615 61,150 66,465 108.69
Total liabilities and shareholders' equity 34,669,655 34,282,750 386,905 1.13
Financial Statements 291 Guarantees and Commitments (in thousands of Euro) – Comparison with pro-forma amounts
Captions 31.12.2004 31.12.2003 Change pro-forma (*) (+/–) %
10. Guarantees given 2,790,970 3,104,052 – 313,082 – 10.09 of which: acceptances 34,889 27,098 7,791 28.75 other guarantees 2,756,081 3,076,954 – 320,873 – 10.43
20. Commitments 5,456,260 5,002,371 453,889 9.07 of which: repurchase agreements 0 0 0 n.s.
292 Financial Statements Consolidated Statement of Income (in thousands of Euro) – Comparison with pro-forma amounts
Captions 2004 2003 Change pro-forma (*) (+/–) %
10. Interest income and similar revenues 1,595,271 1,469,647 125,624 8.55 of which: On loans to customers 866,574 851,229 15,345 1.80 On debt securities 344,432 317,191 27,241 8.59 20. Interest expense and similar charges – 933,270 – 829,654 103,616 12.49 of which: On amounts due to customers – 138,118 – 164,835 – 26,717 – 16.21 On securities issued – 125,266 – 124,689 577 0.46 30. Dividends and other revenues 80,142 99,581 – 19,439 – 19.52 a) from shares, quotas and other forms of capital 65,136 92,047 – 26,911 – 29.24 b) from equity investments 15,006 7,534 7,472 99.18 c) from investments in group companies 0 0 0 n.s. 40. Commission income 593,094 553,320 39,774 7.19 50. Commission expense – 72,148 – 58,254 13,894 23.85 60. Profits (losses) on financial transactions 40,986 33,348 7,638 22.90 70. Other operating income 128,361 120,239 8,122 6.75 80. Administrative expenses: – 944,497 – 925,105 19,392 2.10 a) payroll – 604,566 – 588,546 16,020 2.72 of which: wages and salaries – 407,393 – 399,807 7,586 1.90 social security charges – 131,802 – 133,161 – 1,359 – 1.02 severance indemnities – 29,398 – 31,190 – 1,792 – 5.75 pensions and similar commitments – 8,203 – 11,483 – 3,280 – 28.56 b) other administrative expenses – 339,931 – 336,559 3,372 1.00 90. Adjustments to tangible and intangible fixed assets – 191,980 – 184,111 7,869 4.27 100. Provisions for risks and charges – 30,363 – 42,511 – 12,148 – 28.58 110. Other operating expenses – 5,640 – 5,704 – 64 – 1.12 120. Adjustments to loans and provisions for guarantees and commitments – 179,343 – 196,616 – 17,273 – 8.79 130. Writeback of adjustments to loans and provisions for guarantees and commitments 49,033 52,953 – 3,920 – 7.40 140. Provisions for loan losses 0 – 1,262 – 1,262 – 100.00 150. Adjustments to financial fixed assets – 14,851 – 5,170 9,681 187.25 160. Writeback of adjustments to financial fixed assets 969 4,312 – 3,343 – 77.53 170. Net profit (loss) of investments valued under the equity method 17,326 13,846 3,480 25.13 180. Profit from operating activities 133,090 98,859 34,231 34.63 190. Non-recurring income 69,002 39,398 29,604 75.14 200. Non-recurring charges – 22,918 – 26,210 – 3,292 – 12.56 210. Non-recurring income 46,084 13,188 32,896 249.44 240. Income taxes for the year – 49,593 – 48,402 1,191 2.46 250. Minority interests – 1,966 – 2,495 – 529 – 21.20
260. Net profit for the year 127,615 61,150 66,465 108.69
(*) Pro-forma figures have been provided for comparison purposes, following the merger of Carinord 1 into Banca Popolare di Milano and the resulting consolidation of Cassa di Risparmio di Alessandria. They have been prepared on the assumption that Cassa di Risparmio di Alessandria was fully consolidated from 1 January 2003.
Financial Statements 293 Explanatory notes to the Consolidated Financial Statements
Part A. Accounting policies
Part B. Balance sheet
Part C. Statement of income
Part D. Other information
295 Part A Accounting policies
Introduction Section 1. Description of accounting policies Section 2. Adjustments and provisions recorded for tax purposes
297 Introduction Quarterly report
The Parent Bank has prepared and published quarterly reports on operations for the quarters ended 31 March 2004 and 30 Form and content of the consolidated September 2004, in accordance with the law and CONSOB financial statements requirements. Quarterly reports were not prepared as of 30 June 2004 and 31 The consolidated financial statements for the year ended 31 December 2004, as the Parent Bank published half-yearly and December 2004 have been prepared in accordance with the annual financial statements within the terms established by provisions of Decree 87 dated 27 January 1992 and the article 82 of CONSOB resolution 11971 of 14 May 1999 and instructions issued by the Governor of the Bank of Italy dated subsequent amendments. 15 January 1992 and subsequent amendments. Reference has also been made to the accounting principles generally accepted in Italy. Scope of consolidation The consolidated financial statements comprise the balance sheet, the statement of income and the explanatory notes, as The consolidated financial statements comprise the financial well as the directors’ report on operations. statements, consolidated on a line-by-line basis, of Banca Popolare di Milano (the Parent Bank) and of those banks, The consolidated financial statements for the year ended 31 financial companies and companies operating in related sectors December 2004 have been prepared in Euro. In particular, in in which, directly or indirectly, the Parent Bank holds a line with the regulations issued by the Bank of Italy and majority interest. CONSOB, the financial statements and the explanatory notes are prepared in thousands of Euro. The following direct and indirect subsidiaries have not been consolidated line-by-line: The explanatory notes include all the information required by the legislation indicated above, as well as additional Bipiemme Real Estate SGR S.p.A. is carried at equity since information considered necessary to give a true and fair view of 5% of its share capital has been sold to Aedes S.p.A. along with the Group’s financial position. Amounts relating to the year the reciprocal recognition of a put and call option on a further under review have been presented on a comparative basis with 46% interest in Bipiemme Real Estate SGR.. It will be possible prior year information; these prior year amounts have been to exercise these options after the placement of an initial restated, where necessary, for the sake of consistency. reserved property fund, to be carried out at the latest within twelve months after stipulating the contract. The following documents are attached to these explanatory notes: Bipiemme Vita S.p.A. is carried at equity (art. 36.3, Decree Statement of changes in consolidated financial position; 87/92), since it operates in the insurance sector; Construction of the pro-forma financial statements for 2003 Ultramediass S.r.l., also operating in the insurance sector, is carried at cost, since the investment is insignificant; Ge.Se.So. S.r.l. (which operates the Group’s canteen facilities) is carried at cost, since it is not significant. Audit of the consolidated financial statements Investments in companies subject to significant influence These consolidated financial statements have been audited by (article 36.1 of Decree 87/92 - holdings of between 20% and PricewaterhouseCoopers S.p.A., in accordance with the 50%) are carried at equity, with the exception of the following shareholders’ resolution of 24 April 2004 which appointed them companies in liquidation, carried at cost as they are dormant: as auditors for the three years 2004-2005-2006. CartaFacile S.p.A., 37.62% held by We@Service Leasemac S.p.A., 33.40% held by Banca di Legnano First Skelligs International Finance Co Ltd, 33.33% held by Half-yearly report the Parent Bank.
The Bank has prepared and published the report on operations for the first half of 2004, in accordance with the provisions of Change in the scope of consolidation compared with 31 the law and the CONSOB’s procedures. This financial report December 2003 and that relating to the Group have been subject to a limited audit by PricewaterhouseCoopers S.p.A., in compliance with Acquisition of a controlling interest (80%) in Cassa di Consob recommendation 97001574 dated 20 February 1997 and Risparmio di Alessandria S.p.A. following the merger of Consob resolution 10867 of 31 July 1997, pursuant to the Carinord 1 S.p.A. shareholders’ resolution of 24 April 2004. September saw the completion of a series of transactions, including the merger of Carinord 1 S.p.A., which gave the Parent Company direct control with an 80% interest over Cassa di Risparmio di Alessandria S.p.A. (CRAL).
Part A - Accounting Policies 299 The most important steps in this process were as follows: The difference between the value of the investment and the bank’s share of its net equity has been booked to “goodwill Acquisition of 50% of Carinord 1 S.p.A. arising on consolidation”, after allocating a fair value to the subsidiary’s buildings and equity investments. This goodwill During December 2003, BPM bought Banca Intesa’s 50% stake amounts to 132.8 million Euro and will be amortised over ten in Carinord 1 S.p.A., a holding company with an 80% interest years. in Cassa di Risparmio di Alessandria S.p.A. The other 50% of The main effects on the consolidated financial statements as a Carinord 1 S.p.A. is owned by Fondazione Cassa di Risparmio result of consolidating CRAL are as follows: di Alessandria, which also holds the residual 20% of CRAL. increases in the balance sheet: 1,354.3 million Euro in loans to customers, 1,633.9 million Euro in direct customer deposits, Exchange of interests in BPM Group companies in 227.0 million Euro in securities; return for a further stake in Carinord 1 S.p.A. in the statement of income, CRAL’s contribution (without On 14 September 2004, BPM signed a contract with Fondazione taking account of the amortisation of goodwill arising on CR Alessandria under which it received 4.05% of Carinord 1 consolidation and other consolidation adjustments) is 57.2 S.p.A. in exchange for 3.11% of Banca Akros S.p.A., Bipiemme million Euro to net interest income, 94.0 million Euro to net Gestioni SGR S.p.A. and Bipiemme Vita S.p.A. interest and other banking income, 28.2 million Euro to operating profit, 10.3 million Euro to pre-tax profit and 3.6 Merger of Carinord 1 S.p.A with Banca Popolare di million Euro to net profit (after deducting 0.9 million Euro for Milano minority interests).
The merger deed that formalised the absorption of Carinord 1 S.p.A. by Banca Popolare di Milano S.c.a.r.l. was also stipulated Share capital increase by Banca di Legnano on 14 September 2004, taking effect for legal purposes from 24 September 2004 and for tax and accounting purposes from 1 On 21 December 2004 Banca di Legnano completed its capital January 2004; as a result, Carinord’s transactions during 2004 increase, which excluded pre-emption rights and was reserved have been included in BPM’s financial statements with effect exclusively for Credit Industriel et Commercial. The increase in from 1 January 2004. capital involved issuing 29,411,765 shares (6.49% of the whole) Intragroup transactions and balances have been eliminated; worth a total of 80.0 million Euro. As a result, the Parent interest income and expense and other intragroup balances Bank’s interest went down from 100% to 93.51%. relating to the period prior to the merger were not significant and have therefore not been eliminated. This change led to a change in the interests in consolidated companies (consolidated line-by-line and carried at equity) held This merger has had the following effects on the Parent Bank’s by Banca di Legnano, whether directly or indirectly. financial statements: The consolidated financial statements at 31 December 2004 elimination without replacement of the 66,979,409 Carinord report an increase in minority interests corresponding to the 1 S.p.A. shares (54.05% of its share capital) owned by Banca share capital increase subscribed by Credit Industriel et Popolare di Milano, shown in the balance sheet at a carrying Commercial. value of 153,519 thousand Euro, compared with a pro-rata book net equity of 118,514 thousand Euro. This elimination gave rise to a deficit on cancellation of 35,005 Exclusion of Bipiemme Real Estate SGR S.p.A. from the thousand Euro, entirely attributable to the equity investment line-by-line consolidation in C.R. Alessandria; Starting from 31 December 2004, Bipiemme Real Estate SGR the remaining 56,941,791 shares owned by Fondazione CR S.p.A. is no longer being consolidated line-by-line, but carried at Alessandria were then exchanged for 29,040,313 newly issued equity following the sale of 5% of this company to Aedes S.p.A. Banca Popolare di Milano shares at a ratio of 0.51 Banca (reducing the Parent Company’s interest from 90% to 85%) and Popolare di Milano shares of par value 3 euro for every the reciprocal recognition of a put and call option for the Parent Carinord 1 share of par value 0.52 euro. As a result, the share Company and Aedes S.p.A. respectively on a further 46% capital of Banca Popolare di Milano increased by Euro interest in Bipiemme Real Estate SGR which, if exercised, 87,120,939; given that the increase was lower than the merged would cause the Parent Bank to lose control. It will be possible company’s net equity relating to these shares (100,753 to exercise these options after the placement of an initial thousand Euro), this gave rise to a surplus on exchange of reserved property fund, to be carried out at the latest within 13,632 thousand Euro, which has been booked to the “Merger twelve months after stipulating the contract. surplus reserve”. The company’s exclusion from the line-by-line consolidation has At the end of this operation, Banca Popolare di Milano directly had no significant effect on the consolidated financial holds 80% of Cassa di Risparmio di Alessandria S.p.A., which statements. has been booked at a value of 256,927 thousand Euro; the investment will now be consolidated line-by-line with effect from 1 January 2004.
300 Part A - Accounting Policies Exclusion of CartaFacile from the companies carried Changes relating to companies carried at at equity equity since 31 December 2003 CartaFacile (37.62% held by We@service) was put into liquidation on 27 July 2004. As a result, this investment has Cassa di Risparmio di Asti S.p.A. no longer been valued using the equity method. Instead, its value (1.0 million Euro) and the related goodwill arising on In September, Banca di Legnano purchased a 20% interest in application of the equity method (2.3 million Euro) have been Cassa di Risparmio di Asti for 93.1 million Euro. As a result, written off in full. Cassa di Risparmio di Asti has been carried at equity in these consolidated financial statements.
The difference between the value of the investment and the Consolidated pro-forma financial bank’s share of its net equity has been booked to “goodwill arising on application of the equity method”. This goodwill statements for 2003 amounts to 45.7 million Euro and will be amortised over ten Following the inclusion of Cassa di Risparmio di Alessandria in years. the scope of consolidation, a pro-forma balance sheet and statement of income of the Banca Popolare di Milano Group for Caralt S.p.A. 2003 have also been presented for the sake of consistent comparison with the figures at 31 December 2004. They have been prepared on the assumption that Cassa di Risparmio di Following the line-by-line consolidation of Cassa di Risparmio Alessandria was fully consolidated from 1 January 2003. di Alessandria S.p.A., its 32.5% interest in Caralt, a tax collection company, is now carried at equity. These pro-forma figures, which are unaudited, have been used as the basis of comparison for our comments in the report on Etica SGR S.p.A. operations.
In July, Etica SGR approved an increase in share capital from Euro 2,200,000 to a maximum of Euro 4,000,000. The Parent Bank subscribed the sum of Euro 367,500 plus an additional Consolidation principles amount of Euro 120,000 in unexercised rights, taking its The book value of investments consolidated on a line-by-line interest from 27.84% to 27.5%. basis is eliminated against the Group’s interest in their shareholders’ equity. ESN North America Inc. Where possible, any differences arising are allocated to the assets and liabilities of the subsidiaries concerned. Any remaining positive differences are classified as “goodwill In January, Akros Securities acquired a 25% interest in ESN arising on consolidation” and amortised over a maximum of ten North America, a US company that provides investment years. This amortisation period is considered to reflect the services to North American institutional clients. This company duration of benefits connected with the transactions that gave is therefore carried at equity. rise to the goodwill.
All intragroup balances and transactions are eliminated.
With regard to companies carried at equity, where the excess of book value over the Group’s interest in their net worth at the time of purchase relates to depreciable assets, this difference is allocated to “equity investments” and depreciated using the rates applicable to the assets concerned. Any residual balance is classified as “goodwill arising on application of the equity method” and amortised over a maximum of ten years. This amortisation period is considered to reflect the duration of benefits connected with the transactions that gave rise to the goodwill.
Part A - Accounting Policies 301 Financial statements used for the consolidation
The financial statements used for the consolidation were those prepared as of 31 December 2004 for approval by the respective shareholders’ meetings.
In the case of Banca di Legnano, which closed its six-month accounting period 1.7.2004-31.12.2004 at 31 December 2004, the consolidation makes reference to the balance sheet for the period ended 31 December 2004 and to the sum of the statements of income for the two periods 1.1.2004-30.6.2004 and 1.7.2004-31.12.2004.
The financial statements of Tirving and Akros Securities are prepared in pounds sterling and US dollars respectively. They have been included in the consolidated financial statements after conversion into euro at the following exchange rates:
exchange rate ruling at the year-end for balance sheet captions;
average exchange rate for statement of income captions.
In the case of Bpm Capital I, the figures are already available in euro, since its assets/liabilities are expressed in that currency.
The following financial statements have been used for companies carried at equity:
the financial statements at 31 December 2004 for the subsidiaries Bipiemme Vita and Bipiemme Real Estate SGR S.p.A.;
the financial statements at 31 December 2004 for the associated companies Caralt S.p.A., Etica SGR S.p.A., Cassa di Risparmio di Asti S.p.A. and ESN North America Inc;
for SelmaBipiemme Leasing, whose financial year closes on 30 June, shareholders’ equity and results for the period from 1 January to 31 December 2004, resulting from the financial statements as of 30 June 2004 and from statements prepared by the company for the second half of year.
302 Part A - Accounting Policies Bipiemme Group - Scope of consolidation as of 31 December 2004
Line-by-line Equity Cost method method method
Parent bank Banca Popolare di Milano S.c.r.l.
80% 32.50% Cassa di Risparmio Caralt S.p.A. di Alessandria S.p.A.
56.89% 40% 100% 93.51% Banca di Legnano Bipiemme Vita S.p.A. Ultramediass S.r.l. S.p.A.
9.11% 90.89% Bipiemme Immobili Bipiemme Real Estate 85% 100% Ge.Se.So. S.p.A. SGR S.p.A. S.r.l.
51% Bipiemme Private 19% SelmaBipiemme 38.35% 33.33% First Skelligs Inter. Co. Banking SIM S.p.A. Leasing S.p.A. Ltd. in liquidation 30%
40% 27.50% Bipiemme Gestioni SGR Etica SGR S.p.A. 55.16% S.p.A.
56.89% 40% Banca Akros S.p.A. 20% Cassa di Risparmio di Asti S.p.A. 33.40% Leasemac S.p.A. 100% Akros Securities Inc. in liquidation 25% Esn North America Inc. Akros HFR Alternative 51% Investments SGR S.p.A.
0.01% 99.99% We@Service S.p.A. 37.62% CartaFacile S.p.A. in liquidation
99% BPM Luxembourg S.A. 1% Other equity investment lower than 20% 100% BPM Capital I Llc.
100% Bipiemme Private Equity SGR S.p.A.
100% Tirving Ltd.
99.99% BPM Ireland Plc.
100% BPM Fund Management Ltd.
Part A - Accounting Policies 303 possible to book items to the statement of income that are not Changes in accounting policies consistent with the guidelines on preparing statutory financial statements. This means that it is no longer possible to maintain Revocation of fiscally interfering and other tax-related residual balances of items, booked under the old article 2426.2 items in years prior to 1 January 2004, until such time as they are fully used up under the previous fiscal regulations. Legislative Decree 6 of 17 January 2003, which reformed company law, revoked article 2426.2 of the Italian Civil Code, In its notification 460600 of 13 May 2004, the Bank of Italy has which allowed company financial statements to record instructed that since the quantitative effects involved amount adjustments and provisions solely for tax purposes. to an introduction of new accounting rules, they must be Article 7.1 of Legislative Decree 37 of 6 February 2004, which recorded in the statement of income as follows: also amended the Banking Act, provided for a similar change by repealing articles 15.3 and 39.2 of Legislative Decree 87/92, under “non-recurring items”, for the “retrospective” part which had allowed banks such a privilege as well. The repeal of (formed in previous years), disclosing – where appropriate - the these articles means that as from the 2004 financial statements related amount of deferred tax. it will no longer be possible to record adjustments and under “ordinary items”, for the “current” part (relating to the provisions that, although deductible for tax purposes, would not year in progress) have been booked for statutory purposes. With regard to default interest, Legislative Decree 344/03 At the same time, the new tax provisions contained in which implements the new tax reforms in force since 1 January Legislative Decree 344/03 state that the tax deductibility of all 2004, has introduced two important changes: charges that would have been booked to the statement of income under the repealed article 2426.2 no longer depends on default interest forms part of income in the year when it is being recorded in the statement of income. Instead, it is collected and no longer in the year when it was charged. This sufficient to present a special schedule (article 109.4.b) showing means that this interest is no longer accounted for on an the differences between taxable and statutory profit. accruals basis but rather a cash one (article 109.7 of the new Income Tax Consolidation Act). Under the new provisions, from the current year it is no longer
Comparison with 2003 actual figures
2004 2003 Net profit Net profit Shareholders’ for the year for the year equity Shareholders’ equity as of 1 January 2003 2,208,138
Net profit at the reference date 127,615 68,041
Fiscally interfering items, before deferred tax:
Assets with a unit value of under 516.46 Euro, previously fully depreciated in the year of acquisition (article 67.6), instead of being depreciated over their estimated useful lives. – 5,258 – 259 5,517
Default interest charged and considered recoverable, whose taxation was deferred under article 71.6 of Presidential Decree 917/86 until the time of actual collection, by providing a similar amount to the reserve for possible loan losses (caption 90). – 6,301 – 843 5,116
Accelerated depreciation – 162 – 17 179
Total fiscally interfering items, before deferred tax – 11,721 – 1,119 10,812
Related deferred taxes 4,445 437 – 4,184
Total fiscally interfering items, after deferred tax – 7,276 – 682 6,628
Share attributable to minority interests 255
Pro-forma results 120,594 67,359
Pro-forma shareholders’ equity as of 1 January 2003 2,214,766
304 Part A - Accounting Policies article 106 of the new Income Tax Consolidation Act – formerly article 71.6 – no longer permits the deductibility for Elimination of tax credit on dividends tax purposes of writedowns and provisions against receivables for default interest. The new income tax code has abolished dividend tax credits. As a result of the above, the current financial statements This means that for the purposes of consistent comparison of include a credit of 11.7 million Euro, before deferred tax, to the 2004 figures with those in 2003, the 2003 statement of “non-recurring income” in order to eliminate the cumulative income has been reclassified, with the tax credits on dividends interference of such tax-related items. from equity investments reversed out of both “Dividends from equity investments” and “income taxes for the period”; the With reference to the items presented in the financial reclassification totals 3.8 million Euro. statements at 31 December 2003 in Part “A” Accounting Policies - section 2.2 “provisions recorded solely for fiscal purposes”, we have prepared a list of the fiscally interfering items eliminated and the net effect on profit for the period and consolidated shareholders’ equity.
The effect – on the accounts of both the Parent Bank and Cassa di Risparmio di Alessandria – is shown with reference to the 2003 actual figures (ie. not including Cassa di Risparmio di Alessandria) and those contained in the pro-forma financial statements mentioned above.
Comparison with 2003 pro-forma figures
2004 2003 Net profit Net profit Shareholders’ for the year for the year equity
Shareholders’ equity as of 1 January 2003 2,308,891
Net profit at the reference date 127,615 61,150
Fiscally interfering items, before deferred tax:
Assets with a unit value of under 516.46 Euro, previously fully depreciated in the year of acquisition (article 67.6), instead of being depreciated over their estimated useful lives. – 5,258 – 259 5,517
Default interest charged and considered recoverable, whose taxation was deferred under article 71.6 of Presidential Decree 917/86 until the time of actual collection, by providing a similar amount to the reserve for possible loan losses (caption 90). – 6,301 – 961 7,262
Accelerated depreciation – 162 – 17 179
Total fiscally interfering items, before deferred tax – 11,721 – 1,237 12,958
Related deferred taxes 4,445 481 – 4,983
Total fiscally interfering items, after deferred tax – 7,276 – 756 7,975
Share attributable to minority interests 255 15 -270
Pro-forma results 120,594 60,409
Pro-forma shareholders’ equity as of 1 January 2003 2,316,596
Part A - Accounting Policies 305 specific positions, which are valued on the basis of objective Section 1 characteristics according to the risk categories to which they Description of accounting policies belong;
The accounting policies adopted are consistent with those used Performing loans: i.e. amounts owed by borrowers who do not to prepare the financial statements as of 31 December 2003, currently present specific solvency risks, are covered by so- with the exception of the above, and have been communicated called “inherent risk”. This is determined statistically, to the Board of Statutory Auditors. calculating what proportion of the loan book is expected to become a problem and potentially turn bad.
All disputed positions are examined for valuation purposes by 1. Loans, guarantees and commitments the departments concerned and subsequently checked, and if necessary adjusted, by head office. Any other risk position on performing loans is monitored every month by the individual operating unit, with the help of suitable software and Loans coordination from the head office department responsible for the control of lending. Loans granted, including outstanding principal not yet due, principal and interest due but not yet paid, and default Loans are written down directly, reducing the book value of the interest, are stated at their estimated realisable value. This asset concerned. amount is determined with reference to the solvency of The original value of such loans is reinstated via writebacks in borrowers, taking account of any difficulties in servicing debt later periods if the reasons for the writedown no longer apply. faced by the countries in which they are resident, and bearing in mind any existing guarantees. The calculation of the estimated realisable value takes into account the normal level Finance leasing transactions of risk inherent in the performing loans portfolio. In the consolidated financial statements, finance leasing Loans are analysed as follows: contracts are recorded using “finance lease methodology”. Loans deriving from these contracts are recorded in asset captions 30 Non-performing loans: formally deteriorated loans consisting and 40 (“Due from banks” or “Loans to customers”), depending of the entire amount owed by customers and/or banks in a state on the counterparty. At the start of each contract, the loan of insolvency (even if not yet legally bankrupt) or similar represents the value of the asset leased. Lease instalments are situations, are valued on a case-by-case basis. The value analysed between “interest income” and the reduction of attributed to each individual loan is usually not greater than principal with reference to the interest rate implicit in the the value of any related secured and unsecured guarantees, contract and the related amortisation schedule. Outstanding estimated on a prudent basis; principal is valued using the criteria applicable to loans. Problem loans: i.e. amounts owed by borrowers in temporary difficulties whose recovery is anticipated within a reasonable “Securitisation” transactions period of time; these are also valued on a case-by-case basis; Securitisation transactions involve the definitive disposal of a Loans being restructured: i.e. amounts for which the loan portfolio to a “vehicle” company, and the simultaneous borrower has applied to several banks for consolidation of its collection of a partial payment and/or subscription to a debt within the past 12 months (after this period amounts are subordinated loan issued by this company. No amount is classified among problem or non-performing loans). These are recorded in the commitment and contingency accounts if the also valued on a case-by-case basis; risk related to such transactions is limited to the value of the deferred receivable and/or the subordinated loan. In Restructured loans: i.e. amounts due from borrowers facing compliance with the provisions of CONSOB recommendation temporary financial difficulties, with whom agreements have DAC/RM/97003369 dated 9 April 1997, the risk is evaluated by been reached with a syndicate of banks (or a single bank) for a indirectly assessing the quality of non-monetary assets moratorium on the payment of principal and the application of (deferred receivables and/or subordinated loans), taking into below market interest rates, the conversion of part of the loan consideration the quality of the loan portfolio sold. into shares and, possibly, the write-off of principal, are valued on a case-by-case basis. This analysis takes account of the future loss of interest foregone (i.e. the difference between the renegotiated rate and the average interest rate applied to similar classes of customer);
Loans subject to “country risk”: loans subject to “country risk”, i.e. amounts owed by borrowers resident in countries with debt-servicing problems, are written down in total, country by country, applying percentages that are equal to or higher than the minimum percentages recommended by the Italian Bankers’ Association. Analytical evaluations will be made for
306 Part A - Accounting Policies Guarantees and commitments 2.2 Dealing securities Guarantees given are stated at the total value of the related commitment. Dealing securities are stated as follows: Commitments to grant loans and make deposits are stated at the amount not yet paid out. Commitments also include if quoted on organised markets, at market value; exposures to the debtors underlying credit derivatives, for which the Group has accepted the credit risk (seller protection). where not quoted on organised markets, at the lower of cost Guarantees and commitments that involve exposure to credit or market value. Writedowns of unquoted securities are written risk are valued on the basis adopted for cash loans. In particular: back in later years if the reasons that prompted them cease to apply. possible losses on guarantees covering non-performing loans, problem loans, restructured loans and loans being restructured Cost is determined by applying the “cumulative average daily are valued on a case-by-case basis; cost” method; in the case of debt securities, the result is adjusted on an accruals basis for any issue discounts. guarantees given in relation to parties residing in countries at risk and to borrowers not subject to specific writedowns are Market value is determined as follows: assessed on an overall basis in order to reflect both country and inherent risk. securities quoted on organised markets in Italy or abroad - by reference to the official quoted price on the last day of the Any losses associated with these transactions are covered by period; specific and general “provisions for risks and charges: 80d) “other”. The original value is reinstated in subsequent unquoted (Italian and foreign) securities - by reference to accounting periods, to the extent that the reasons for such objective estimates of realisable value based on conditions in writedowns cease to apply. the corresponding financial markets or by discounting future financial flows using market rates.
The valuation of securities also takes account of the ability to 2. Off balance sheet securities and repay debt of the country in which the issuer is resident. transactions (other than in Transfers between dealing and investment securities are made at the value determined at the time of transfer using the foreign exchange) valuation rules of the portfolio from which the securities are transferred; in particular:
2.1 Investment securities transfers of investment securities to the dealing securities portfolio are carried out at cost, written down if necessary; Securities intended for long-term retention and therefore classified as financial fixed assets are stated at purchase cost or transfers of dealing securities to the investment securities transfer value, if transferred from the dealing portfolio. Cost is portfolio are carried out at market value for quoted securities determined on a “weighted average cost” basis and is adjusted, and at the lower of cost and market value for unquoted on an accruals basis, for issue discounts (net of withholding tax securities. as per Legislative Decree 239/96) and dealing discounts. Securities transferred and still held at the end of the period are In the absence of adequate security, holdings are written down valued according to the rules of the portfolio to which they have in the event of permanent deterioration in the financial been transferred. standing of the issuer, or in the ability of the issuer’s country to repay debt. Investment securities may also be written down to Units held in mutual funds are valued at the period-end unit take account of their market performance. Investment price as published in the press. securities resulting from securitisation transactions are valued with regard to the recoverability of the loan portfolio sold. The Holdings of own shares are booked according to their original value is reinstated in later periods, if the reasons for stockmarket price. The amount held by the Parent Bank and any writedowns cease to apply. consolidated subsidiaries is matched by a “Reserve for own shares” recorded in accordance with article 2357 of the Italian Civil Code . These holdings are also stated on the basis mentioned above, i.e. by reference to their quoted price on the last day of the period; the resulting adjustment is mirrored in the “Reserve for own shares” (Caption 170 (b) among shareholders’ equity).
Part A - Accounting Policies 307 Purchase/sale of securities not yet settled Original cost is reinstated in subsequent accounting periods if the reasons for such writedowns cease to apply. Purchase commitments are valued using the rules of the portfolio to which the securities will be booked. The valuation of sale commitments also takes account of the contractual selling price. 4. Assets and liabilities denominated in foreign currencies (including off-balance Completed transactions involving dealing securities quoted on organised markets, for which settlement is pending at the sheet transactions other than derivative period-end, are stated at market value; the following values are contracts) used if the securities concerned are not quoted on organised markets: The term “foreign currency” refers to all currencies outside the purchase commitments: the lower of cost or market value; European Monetary Union.
sale commitments: the contracted price, if this is lower than book value (commitments covered by securities already held) or Assets and liabilities denominated in foreign market value (commitments not covered by securities held). currencies
The basis for determining market value is the same as that Assets and liabilities denominated in or index-linked to foreign used to value dealing securities. currencies, as well as financial fixed assets funded in or index- linked to foreign currencies, are valued at the period-end spot The results of valuations are booked to the statement of exchange rate. Any adjustments are reflected in the statement income, without offset, with matching balance sheet entries to of income. “Other assets” and “Other liabilities”. Foreign currency financial fixed assets correlated with forms of funding in Euro are translated using the exchange rates ruling at the time they were purchased. 3. Equity investments The “endowment funds” of the foreign branches are translated Caption 80 “Investments in Group companies” includes: at the spot rate of exchange on the last day of the period, given that the exchange risk on such funds has been neutralised by a) “carried at equity”: the subsidiaries Bipiemme Vita and setting up holdings of the currencies concerned for the same Bipiemme Real Estate SGR S.p.A., which have not been amounts as the investments. consolidated line-by-line since the former does not operate in the banking/financial sector while the latter is no longer The financial statements of foreign branches are combined with controlled by the Parent Company as a result of the put and those of the Parent Bank after translation to Euro of the call option described earlier. individual captions using the period-end exchange rates.
b) “other”: the subsidiary Ge.Se.So S.r.l. which is recorded at Revenues and costs denominated in foreign currencies are cost since it is insignificant. translated using the exchange rates ruling at the time they are recorded. Caption 70 “Equity investments” includes: Foreign currency financial statements are translated using the a) “carried at equity”: companies subject to significant following exchange rates: influence that are valued in accordance with article 19 of Legislative Decree 87/92; those of Tirving and Akros Securities are translated at the year-end exchange rate for balance sheet captions, and at the b) “other”: investments representing an interest of less than average exchange rate for the year for statement of income 20%, which are recorded at purchase or subscription cost, or at captions; their appraised value if acquired as a result of mergers. This sub-caption also includes the 37.62% interest in CartaFacile those of Bpm Capital I are already stated in Euro since its S.p.A. (in liquidation), the 33.4% interest in Leasemac (in assets/liabilities are denominated in that currency. liquidation) and the 33.33% interest in First Skelligs International Finance (in liquidation), none of which is now trading. Spot transactions still to be settled and forward transactions in foreign currency Cost, as defined above, is written down to take account of any permanent losses in value. Spot transactions still to be settled and forward transactions in foreign currency arranged for hedging purposes are valued in Investments in listed companies may also be written down to the same way as the assets and liabilities being hedged, take account of market trends, in accordance with article 18.1 whether they are on or off the balance sheet. of Legislative Decree 87/92.
308 Part A - Accounting Policies In particular, off-balance sheet forward transactions carried out Tangible fixed assets are depreciated on a straight-line basis to hedge exchange risks or linked to other assets or liabilities using rates that reflect their residual useful lives. on or off the balance sheet are valued using the period-end spot rates, since this treatment is consistent with the accounting The book value of tangible fixed assets is stated net of policy adopted in relation to the underlying assets and liabilities. accumulated depreciation. Differentials between the spot and forward rates for swap contracts are booked to the statement of income as interest Maintenance expenditure that does not increase the value of income or expense. These entries, recorded on an accruals basis, assets is expensed as incurred. match the interest flows generated by the assets or liabilities being hedged.
Foreign currency off-balance sheet transactions not arranged 6. Intangible fixed assets for hedging purposes are valued as follows: These are recorded at purchase or production cost, including at the spot exchange rate ruling at period-end, for spot related charges, and, except in the case of goodwill and goodwill transactions still unsettled; arising on consolidation and on application of the equity method described below, they are amortised over their residual using the forward rate current at period-end for maturities useful lives: matching those of the transactions concerned, in the case of forward contracts. start-up and expansion costs, research, development and advertising expenses, which benefit future years are amortised The results of these valuations are recorded as “Profits/losses on a straight-line basis over not more than five years, in on financial transactions”, with matching balance sheet entries accordance with article 16.1 of Legislative Decree 87 dated 27 as “Other assets” or “Other liabilities”. January 1992;
costs incurred for the purchase of software produced by third parties are amortised over three years starting from the date 5. Tangible fixed assets they enter service, reflecting the period they are expected to benefit. Buildings are recorded at purchase cost, including related charges, as uplifted by any restructuring costs and Book value is stated net of accumulated amortisation. improvements which have added to their value. The value of certain buildings was adjusted in prior years under specific Goodwill and goodwill arising on consolidation or on application revaluation laws. of the equity method are amortised on a straight-line basis over not more than ten years. This amortisation period is considered The value of property acquired on the absorption of Banca to reflect the duration of benefits that gave rise to the Agricola Milanese and Banca Briantea was increased by recognition of goodwill and goodwill arising on consolidation or allocating part of the deficit that arose on cancellation of their on application of the equity method. shares at the time of the merger. This additional value took account of sworn expert appraisals carried out at the time.
The value of property held by Banca di Legnano was increased 7. Other information by allocating part of the share cancellation deficit that arose on the merger of Fin.Partecipazioni and Banca di Legnano. The higher value of this property reflects a prudent estimate of Accruals and deferrals market value and takes account of the related tax effects. Accruals and deferrals are recognised in accordance with the The value of property held by Cassa di Risparmio di matching principle, taking account of the conditions and Alessandria was increased by allocating part of the goodwill interest rates involved in individual transactions. Accruals and arising on consolidation. Once again, the higher value of this deferrals are classified in specific captions since, in general, the property reflects a prudent estimate of market value and takes Group does not take advantage of the opportunity to make account of the related tax effects. direct adjustments to the balance sheet captions concerned.
The value of properties conferred on Bipiemme Immobili in The only exceptions are accruals for issue discounts (on both 2002 by the Parent Bank and Banca di Legnano, determined by investment and dealing securities), dealing discounts (on expert appraisals specifically carried out at the time, has been investment securities) and the portion relating to the difference readjusted on consolidation to reflect their book value prior to between the purchase price and redemption value of zero the conferral. coupon bonds. These are booked partly to the value of securities and partly, for the withholding tax, to “due from tax Furniture, furnishings, plant and machinery are recorded at authorities”, in accordance with Bank of Italy instructions. purchase cost, including any directly-related expenses and the cost of any improvements. The same treatment applies to the zero coupon bonds and certificates of deposit issued by the Bank.
Part A - Accounting Policies 309 Payables and public funds administered deferred tax assets and liabilities are calculated using the weighted average rate for the year to which the financial Payables and public funds administered are recorded at statements refer. nominal value. Deferred tax assets relating to timing differences that will be deductible in future are recorded in balance sheet caption 150 Securities issued “Other assets” with a matching entry to “Income taxes for the year”. Deferred tax liabilities relating to timing differences that Bonds, certificates of deposit and bankers’ cheques issued are will be taxable in the future are recorded in balance sheet recorded at nominal value. Zero coupon bonds and certificates under sub-caption 80b “Provisions for risks and charges – of deposit are recorded at their issue value plus the interest taxation” with a matching entry to “Income taxes for the year”. accrued each year. Bonds issued “below par” are stated at par. The difference These accounting policies refer directly to the Parent Bank; the between par value and the amount actually collected is same accounting policy also applies to other Group companies, recorded as a deferred expense and amortised over the term of although the recognition of deferred tax assets and liabilities the bond issue concerned. may differ in terms of the time horizon taken into consideration, or the tax rates applied, depending on the particular tax situation of each individual company. Provision for severance indemnities
The provision for severance indemnities represents the total Other provisions liability to all employees at the period-end, accrued in accordance with current legislation and payroll agreements. The other provisions cover known or likely losses or liabilities, the timing and extent of which cannot be determined at the balance sheet date or at the time the financial statements are Provisions for risks and charges prepared. The provisions recorded reflect the best estimate of the charges to be incurred, based on the information available. Taxation provision They are not designed to adjust the value of any assets.
The provision for taxation reflects a prudent estimate of direct and indirect taxes, including the local taxes incurred by foreign Supplementary pensions paid during the year branches and companies, deferred taxes and any additional amounts that may become payable as a result of outstanding Consistent with the regulations governing supplementary disputes with the tax authorities. pensions for employees approved by the Parent Bank’s shareholders on 14 March 1964, the amounts paid are charged Deferred tax assets and liabilities reflect the effect of all timing directly to the statement of income. Payments to retired differences, using the so-called “liability method”. This method employees of the former Banca Popolare di Bologna e Ferrara requires the recognition of deferred tax assets and liabilities and the former Banca Agricola Milanese are covered by specific arising both from events that affected the statement of income funds. The pension fund for the employees of Banca di Legnano and from those that directly affected shareholders’ equity. is recorded under liability caption 80 a). This is a defined- contributions scheme that does not have any autonomous legal status.
In principle, deferred tax assets are not recognised unless their recoverability is reasonably certain. In particular, they are Reserves for possible loan losses recognised without limitation to the extent that they offset deferred tax liabilities, while amounts in excess are recognised These are not designed to adjust the value of particular loans. if the related timing differences will reverse within five years They consist of provisions for possible loan losses made by one and forecast taxable profit, based on projections updated subsidiary. annually, is sufficient to enable such deferred tax assets to be recovered in full. Subordinated liabilities Deferred tax liabilities are recognised to the extent that they will give rise to tax payments in the future. Accordingly, no Subordinated loans are shown at nominal value. The discount provision is made for the deferred taxation of equity reserves represented by the difference between nominal value and the that have not been fully taxed, since there are no plans for amount actually collected is recorded as a deferred expense. their distribution.
Deferred tax assets and liabilities are calculated each year on Derivatives linked to currencies, securities, interest the basis of the tax rates likely be in force (according to tax law rates, indices or other assets at the time the financial statements are prepared) when the related timing differences reverse. If different rates are Derivatives are valued individually with reference to the type applicable depending on the level of taxable income, the of contract concerned, as described below: investment
310 Part A - Accounting Policies derivatives and dealing derivatives are further analysed than one year (e.g. futures and options on long-dated stocks) between hedging and trading contracts. are booked to “Profits and losses on financial transactions”. This breakdown is based on current regulations and leads to different valuations and presentations in the statement of Contracts that are economically linked to assets and liabilities income. valued at cost, or at the lower of cost or market, are stated on the same basis, in accordance with the principle of consistent The results of valuations are booked to the balance sheet valuation. separately, without offsetting debits and credits.
Non-hedging derivatives Hedging derivatives Non-hedging derivatives are valued as follows: Hedging arrangements are designed to neutralise fluctuations in interest or exchange rates or prices affecting individual on- derivatives quoted on organised markets are valued at and off-balance sheet assets and liabilities (specific hedges), or market value on the balance sheet date; groups of such items (generic hedges). derivatives not directly quoted on organised markets but A transaction is considered to be a hedge in the presence of the whose value is linked to such parameters as prices, quotations following documented conditions: or indices that can be found on normal international information circuits and which can, in any case, be established 1) an intention to create a hedge; objectively, are valued at their financial value (replacement cost), taking account of the market prices for such parameters 2) a high degree of correlation between the technical and on the balance sheet date; financial characteristics of the assets and liabilities being hedged and those inherent in the hedging contract. derivative contracts on currencies not directly quoted on organised markets (e.g. domestic currency swaps, currency Hedging derivatives are valued on bases consistent with those options) are valued at the exchange rate ruling at the balance adopted for the assets or liabilities to which they relate. sheet date for the same maturities as those of the transactions being valued. Hedging agreements relating to interest-bearing assets or liabilities that appear in the balance sheet at cost or nominal Brokerage contracts on behalf of customers are stated at book value (investment securities, deposits and loans) are also stated value since their purpose is to generate a known, positive at cost. Considering that the purpose of such derivatives is to economic result. protect the interest-bearing assets or liabilities from fluctuations in interest rates, any differentials or margins The differentials and margins accruing on derivatives, together arising and/or accruing in the period are recorded, without with the results of the valuation process, are recorded among offset, as either interest income or expense. In the case of “Profits and losses on financial transactions”. specific hedges, this is calculated on a time basis consistent with that for recognising interest on the assets or liabilities being hedged: where coverage is generic, interest is calculated over the term of the agreement.
Derivatives that hedge holdings of dealing securities are stated as follows:
quoted securities - at market value;
unquoted securities - at the lower of cost or market value.
With regard to their classification in the financial statements:
for contracts that provide for the payment of differentials or margins at various maturities (multiflow contracts such as Interest Rate Swaps) the differentials or margins accrued up to the period-end are booked as interest;
for contracts that provide for the payment of only one differential or margin (monoflow contracts), the differentials or margins are recognised in full in the financial statements for the period in which they arise. Income and charges on contracts where the underlying asset has a duration of less than one year (e.g. Forward Rate Agreements) are treated as interest; those on contracts where the underlying asset has a duration of more
Part A - Accounting Policies 311 Section 2 Adjustments and provisions recorded for tax purposes
Section 2.1 Adjustments recorded solely for fiscal purposes
Section 2.2 Provisions recorded solely for fiscal purposes
No provisions or adjustments for fiscal purposes have been recorded during the year.
312 Part A - Accounting Policies Part B Balance sheet
Section 1. Receivables Section 2. Securities Section 3. Equity investments Section 4. Tangible and intangible fixed assets Section 5. Other assets Section 6. Payables Section 7. Provisions Section 8. Share Capital, equity reserves, reserves for general banking risks and subordinated liabilities Section 9. Other liabilities Section 10. Guarantees and commitments Section 11. Concentration and distribution of assets and liabilities Section 12. Administration and dealing on behalf of third parties
313 Section 1 Receivables
Loans recorded in asset captions 10, 30 and 40 total 24,013,937 thousand Euro, net of writedowns.
Change Asset captions 31.12.2004 31.12.2003 (+/–) %
10. Cash and deposits with central banks and post offices 202,413 185,836 16,577 8.92
30. Due from banks 3,785,877 3,558,632 227,245 6.39
40. Loans to customers 20,025,647 17,076,986 2,948,661 17.27
Total 24,013,937 20,821,454 3,192,483 15.33
The figures at 31 December 2004 include the following amounts relating to Cassa di Risparmio di Alessandria: - caption 10: 17,673 thousand Euro; - caption 30: 127,623 thousand Euro; - caption 40: 1,354,256 thousand Euro.
Loans are stated at their estimated realisable value. This is determined with reference to the total amount of loans less estimated losses, calculated in accordance with the valuation procedure explained in part A, section 1 of these notes.
Transactions with banks are recorded at the time of settlement, i.e. the time when transfer of liquid funds has already taken place. Current account transactions with customers are recorded at the time they take place, except where they relate to specific services – discounted notes, foreign business and securities – which are recorded at the time of settlement.
In detail:
The discounted portfolio is stated at nominal value of the so-called “portfolio risk” and discount interest not yet earned at year end is shown under “deferred income”;
Current account balances due from customers include interest paid at year end, as well as any transactions “in transit” or “in suspense” relating to such accounts; these balances are not affected by advances credited subject to collection but not yet paid;
Current account balances due from banks include interest paid at year end; these balances are not affected by non-cash debits and credits relating to bill and document collection services;
Mortgage loans, deposits, loans and other amounts are shown at the residual amount of principal;
Repurchase agreements entered for lending purposes are recorded at their spot value as loans to customers/due from banks and do not result in movements on securities. The related income, represented by the interest coupons on the underlying securities and the differential between their spot and forward prices, is recorded as “Interest income and similar revenues” on an accruals basis.
Securities lending transactions guaranteed by cash at the free disposal of the lender are treated in the same way as repurchase agreements. Securities lending transactions not guaranteed by cash are shown in the financial statements as a combination of two functionally related transactions, made up of a loan and a “funding repurchase agreement” as the contra-entry, both for the amount laid down in the contract. The securities, therefore, continue to be shown in the lender’s portfolio;
Loans for which the Bank acquires protection against non-performance (“buyer protection”) under derivative contracts are still shown in the financial statements as loans secured by personal guarantees.
Part B - Consolidated balance sheet 315 Cash and deposits with central banks and post offices (caption 10)
This caption includes legal tender and deposits repayable on demand with the Bank of Italy and post offices, as indicated below:
Change Asset captions 31.12.2004 31.12.2003 (+/–) %
Notes and coins 198,998 182,353 16,645 9.13 Bankers’ drafts 3,364 3,414 – 50 – 1.46 Other instruments 14 15 – 1 – 6.67
202,376 185,782 16,594 8.93
Deposits with: Cassa DD.PP. and Postal Savings Banks 37 54 – 17 – 31.48
Total 202,413 185,836 16,577 8.92
Of which: - Euro 194,068 177,018 17,050 9.63 - Foreign currency 8,345 8,818 – 473 – 5.36
316 Part B - Consolidated balance sheet Due from banks (caption 30) - Analysis of caption 30 “Due from banks”
Amounts due from banks are analysed below by technical form:
Change 31.12.2004 31.12.2003 (+/–) %
Repayable on demand: 509,140 425,132 84,008 19.76
Bankers’ drafts, orders and similar instruments 14,892 17,136 – 2,244 – 13.10 Unrestricted deposits 320,769 197,029 123,740 62.80 Current account balances reflecting services provided 134,447 175,719 – 41,272 – 23.49 Current accounts 37,722 34,619 3,103 8.96 Other types of deposit 1,310 629 681 108.27
Other loans: 3,276,737 3,133,500 143,237 4.57
Bank of Italy and local central banks 65,910 178,166 – 112,256 – 63.01 of which: - Compulsory reserves 65,909 178,165 – 112,256 – 63.01 - Other restricted deposits 1 1 0 0.00 Restricted deposits 2,509,888 1,974,325 535,563 27.13 Repurchase agreements 630,512 931,262 – 300,750 – 32.29 Other amounts not settled via current accounts 64,758 46,393 18,365 39.59 Non-performing loans 0 0 0 n.s. Other types of deposit 5,669 3,354 2,315 69.02 Loans against securities loaned 0 0 0 n.s.
Total 3,785,877 3,558,632 227,245 6.39
Of which: - Euro 2,187,128 2,128,532 58,596 2.75 - Foreign currency 1,598,749 1,430,100 168,649 11.79
1.1 Detail of caption 30 “Due from banks”
Change 31.12.2004 31.12.2003 (+/–) %
a) Due from central banks 65,910 178,166 – 112,256 – 63.01
b) Bills eligible for refinancing with central banks 0 0 0 n.s.
c) Finance leases 0 0 0 n.s.
d) Repurchase agreements 630,512 931,262 – 300,750 – 32.29
e) Securities loaned: loans against securities loaned 0 0 0 n.s.
Part B - Consolidated balance sheet 317 1.2 Amounts due from banks
31.12.2004 31.12.2003 Captions/amounts Gross Total Net Gross Total Net exposure writedowns exposure exposure writedowns exposure
A. Doubtful accounts 44 44 0 71 48 23
A.1 Non-performing loans 44 44 0 44 44 0
A.2 Problem loans 000000
A.3 Loans being restructured 000000
A.4 Restructured loans 000000
A.5 Unsecured loans to countries at risk 0 0 0 27 4 23
B. Performing loans 3,785,877 0 3,785,877 3,558,609 0 3,558,609
Total due from banks 3,785,921 44 3,785,877 3,558,680 48 3,558,632
Detail of unsecured loans to countries at risk
The table below shows exposure in relation to unsecured loans granted to banks resident in countries at risk.
Writedowns of unsecured loans to countries at risk have been made on the basis of percentages agreed with the Italian Bankers’ Association.
31.12.2004 31.12.2003 Loans to banks resident Gross Total Net Gross Total Net in the following countries at risk unsecured writedowns exposure unsecured writedowns exposure exposure exposure
Russia 0 0 0 25 4 21
Algeria 000202
Total 0 0 0 27 4 23
318 Part B - Consolidated balance sheet 1.3 Movements in doubtful amounts due from banks
Type Non- Problem Loans Restructu- Unsecured Total performing loans being red loans loans to loans restructu- countries red at risk
A. Gross exposure as of 31/12/2003 440002771 A.1 Of which: default interest 0 00000
B. Increases 00003939 B.1 Transfers from performing loans 0 00000 B.2 Default interest 0 00000 B.3 Transfers from other categories of doubtful loan 0 00000 B.4 Other increases 0 0 0 0 39 39
C. Decreases 00006666 C.1 Transfers to performing loans 0 0 0 0 27 27 C.2 Write-offs 0 00000 C.3 Collections 0 00000 C.4 Recovery through assignment 0 00000 C.5 Transfers to other categories of doubtful loan 0 00000 C.6 Other decreases 0 0 0 0 39 39
D. Gross exposure as of 31/12/2004 44000044 D.1 Of which: default interest 0 00000
Caption “B.4 Other increases” relates to the consolidation of Cassa di Risparmio di Alessandria.
Part B - Consolidated balance sheet 319 1.4 Movements in writedowns of amounts due from banks
Writedowns of amounts due from banks during the year are detailed in the following table:
Type Non- Problem Loans Restructur- Unsecured Performing Total performing loans being ed loans loans to loans loans restructu- countries red at risk
A. Total writedowns as of 31/12/2003 440004048 A.1 Of which: default interest 0 0 00000
B. Increases 0000000 B.1 Writedowns 0 0 00000 B.1.1 of which: default interest 0 0 00000 B.2 Use of the reserves for possible loan losses 0 0 00000 B.3 Transfers from other loan categories 0 0 00000 B.4 Other increases 0 0 00000
C. Decreases 0000404 C.1 Writebacks 0 0 00404 C.1.1 of which: default interest 0 0 00000 C.2 Writebacks on collection 0 0 00000 C.2.1 of which: default interest 0 0 00000 C.3 Write-offs 0 0 00000 C.4 Transfers to other categories of doubtful loan 0 0 00000 C.5 Other decreases 0 00000
D. Total writedowns as of 31/12/2004 440000044 D.1 Of which: default interest 0 0 00000
320 Part B - Consolidated balance sheet Loans to customers (caption 40) Analysis of caption 40 “Loans to customers”
Loans to customers are made up as follows:
Change 31.12.2004 31.12.2003 (+/–) %
Term transactions with the Treasury Cassa DD.PP and Postal Savings Banks 10,831 15,715 – 4,884 – 31.08
Subordinated loans receivable 16,140 16,140 0 0.00
Repurchase agreement 74,230 375,553 – 301,323 – 80.23
Current account overdrafts 3,566,364 3,537,418 28,946 0.82
Advances: 3,211,178 2,846,456 364,722 12.81 - on notes, securities and paper subject to collection 2,431,035 2,146,573 284,462 13.25 - import-export 780,143 699,883 80,260 11.47
Loans and other amounts not settled via current accounts: 12,449,351 9,658,189 2,791,162 28.90 - mortgage loans 5,278,106 3,273,359 2,004,747 61.24 - loans to artisan and commercial concerns 1,125,780 927,894 197,886 21.33 - personal loans 402,875 337,579 65,296 19.34 - loans to local authorities 285,277 268,262 17,015 6.34 - syndicated loans 1,839,813 1,648,541 191,272 11.60 - short-term loans with notice period 1,442,088 1,445,379 – 3,291 – 0.23 - stand-by lines of credit 995,585 718,652 276,933 38.54 - other 1,079,827 1,038,523 41,304 3.98
Other loans: 195,348 185,103 10,245 5.53 - loans against wages 61,205 40,179 21,026 52.33 - factored receivables 16,779 22,602 – 5,823 – 25.76 - other 117,364 122,322 – 4,958 – 4.05
Finance leases 273,621 246,371 27,250 11.06
Portfolio risk (gross of deferred income) 84,349 63,107 21,242 33.66
Loans using public funds 6,105 4,720 1,385 29.34
Non-performing loans 138,130 128,214 9,916 7.73
Total 20,025,647 17,076,986 2,948,661 17.27
Of which: - Euro 19,390,880 16,328,062 3,062,818 18.76 - Foreign currency 634,767 748,924 – 114,157 – 15.24
Part B - Consolidated balance sheet 321 Default interest
Change 31.12.2004 31.12.2003 (+/–) %
a) Non-performing loans 828 3,908 – 3,080 – 78.81
b) Other loans 962 365 597 163.56
1.5 Detail of caption 40 “Loans to customers”
Change 31.12.2004 31.12.2003 (+/–) %
a) Bills eligible for refinancing with central banks 14,430 14,103 327 2.32 b) Finance leases 273,621 246,371 27,250 11.06 c) Repurchase agreements 74,230 375,553 – 301,323 – 80.23 d) Securities loaned: loans against securities loaned 0 0 0 n.s.
1.6 Secured loans to customers
Change 31.12.2004 31.12.2003 (+/–) %
a) Mortgages 6,720,905 4,174,087 2,546,818 61.01
b) Pledged assets: 510,695 568,801 – 58,106 – 10.22 1. cash deposits 105,594 97,650 7,944 8.14 2. securities 389,086 452,842 – 63,756 – 14.08 3. other instruments 16,015 18,309 – 2,294 – 12.53
c) Guarantees given by: 1,916,764 1,651,543 265,221 16.06 1. Governments 60,573 2,339 58,234 n.s. 2. other public entities 19,666 16,592 3,074 18.53 3. banks 147,382 266,561 – 119,179 – 44.71 4. other operators 1,689,143 1,366,051 323,092 23.65
Total 9,148,364 6,394,431 2,753,933 43.07
Caption c) 3. includes positions totaling 54,522 thousand Euro (94,264 thousand Euro as of 31 December 2003) for which the Parent Bank has acquired buyer protection against default by taking out credit derivative contracts.
322 Part B - Consolidated balance sheet 1.7 Loans to customers
The balances of asset caption 40 are analysed in the tables below, which show the various categories of amounts due and the related writedowns:
31.12.2004 31.12.2003 Captions/amounts Gross exposure Total Net exposure Gross exposure Total Net exposure writedowns writedowns
% Coverage % % % Coverage % %
A. Doubtful loans 783,616 3.8 326,279 41.64 457,337 2.3 763,243 4.4 302,240 39.60 461,003 2.7
A.1 Non-performing loans 394,425 1.9 256,295 64.98 138,130 0.7 377,236 2.2 249,022 66.01 128,214 0.8
A.2 Problem loans 237,318 1.2 26,957 11.36 210,361 1.1 245,029 1.4 30,682 12.52 214,347 1.3
A.3 Loans being restructured 17,660 0.1 1,346 7.62 16,314 0.1 0 0.0 0 0.00 0 0.0
A.4 Restructured loans 134,069 0.7 41,652 31.07 92,417 0.5 129,553 0.7 19,705 15.21 109,848 0.6
A.5 Unsecured loans to countries at risk 144 0.0 29 20.14 115 0.0 11,425 0.1 2,831 24.78 8,594 0.1
B. Performing loans 19,670,988 96.2 102,678 0.52 19,568,310 97.7 16,697,379 95.6 81,396 0.49 16,615,983 97.3
Total loans to customers 20,454,604 100.0 428,957 2.10 20,025,647 100.0 17,460,622 100.0 383,636 2.20 17,076,986 100.0
The proportion of these categories of loan in percentage terms has been calculated on the basis of total loans before and after writedowns. The level of coverage reflects the ratio between total adjustments to the various categories of loan and the balances in these categories at period end.
Detail of unsecured loans to countries at risk
The table below shows exposure in relation to loans granted to customers resident in countries at risk.
Writedowns on unsecured loans to countries at risk have been made on the basis of percentages agreed with the Italian Bankers’ Association.
31.12.2004 31.12.2003 Loans to customers Gross Total Net exposure Gross Total Net exposure resident in countries unsecured writedowns unsecured writedowns at risk exposure exposure
Russia 0 0 0 8,752 1,312 7,440 Argentina 0 0 0 2,460 1,476 984 Brazil 144 29 115 213 43 170
Total 144 29 115 11,425 2,831 8,594
Part B - Consolidated balance sheet 323 1.8 Movements in doubtful loans to customers
Movements in doubtful loans to customers during the year, gross of writedowns, are detailed below:
Type Non- Problem Loans Restructu- Unsecured Total performing loans being red loans to loans restructu- loans countries red at risk
A. Gross exposure as of 31/12/2003 377,236 245,029 0 129,553 11,425 763,243
A.1 Of which: default interest 39,866 000039,866
B. Increases 196,553 328,863 17,660 13,461 230 556,767
B.1 Transfers from performing loans 20,679 289,507 0 4,126 0 314,312
B.2 Default interest 11,950 850 0 0 0 12,800
B.3 Transfers from other categories of doubtful loan 109,146 83 17,660 8,410 0 135,299
B.4 Other increases 54,778 38,423 0 925 230 94,356
C. Decreases 179,364 336,574 0 8,945 11,511 536,394
C.1 Transfers to performing loans 216 37,925 0 3,708 8,693 50,542
C.2 Write-offs 134,382 6,486 0 0 0 140,868
C.3 Collections 43,917 122,692 0 4,793 1,773 173,175
C.4 Recovery through assignment 0 14,830 0 0 0 14,830
C.5 Transfers to other categories of doubtful loan 0 135,216 0 83 0 135,299
C.6 Other decreases 849 19,425 0 361 1,045 21,680
D. Gross exposure as of 31/12/2004 394,425 237,318 17,660 134,069 144 783,616
D.1 Of which: default interest 43,526 1,223 0 0 0 44,749
Caption “B.4 Other increases” relates to the consolidation of Cassa di Risparmio di Alessandria as follows: 30,194 thousand Euro in non-performing loans, 19,255 thousand Euro in problem loans, 230 thousand Euro in unsecured loans to countries at risk.
324 Part B - Consolidated balance sheet 1.9 Movements in writedowns of loans to customers
Movements in writedowns of loans to customers during the year are detailed below:
Type Non- Problem Loans Restructu- Unsecured Perfor- Total performing loans being res- red loans loans to ming loans tructure countries loans at risk
A. Total writedowns as of 31/12/2003 249,022 30,682 0 19,705 2,831 81,396 383,636 A.1 of which: default interest 35,958 0 000035,958
B. Increases 154,679 17,610 1,346 22,362 138 26,632 222,767 B.1 Writedowns 122,611 13,943 1,346 22,362 0 23,867 184,129 B.1.1 of which: default interest 13,544 25700019413,995 B.2 Use of the reserves for possible loan losses 0 0 00000 B.3 Transfers from other loan categories 9,685 1,1150004710,847 B.4 Other increases 22,383 2,552 0 0 138 2,718 27,791
C. Decreases 147,406 21,335 0 415 2,940 5,350 177,446 C.1 Writebacks 1,489 2,565 0 250 1,230 2,799 8,333 C.1.1 of which: default interest 64 1760000240 C.2 Writebacks on collection 11,185 3,512 0 0 1,369 0 16,066 C.2.1 of which: default interest 3,834 1400003,848 C.3 Write-offs 134,384 6,48600045140,915 C.4 Transfers to other loan categories 47 8,214 0 165 0 2,421 10,847 C.5 Other decreases 301 558 0 0 341 85 1,285
D. Total writedowns as of 31/12/2004 256,295 26,957 1,346 41,652 29 102,678 428,957 D.1 Of which: default interest 42,698 26100019443,153
Caption “B.4 Other increases” relates to the consolidation of Cassa di Risparmio di Alessandria as follows: 8,802 thousand Euro in non- performing loans, 2,452 thousand Euro in problem loans, 138 thousand Euro in unsecured loans to countries at risk and 2,718 thousand Euro in performing loans.
Part B - Consolidated balance sheet 325 Section 2 Securities
The Group’s securities portfolio, reflected in asset captions 20, 50 and 60, amounts to 6,907,445 thousand Euro and comprises:
Change Captions 31.12.2004 31.12.2003 (+/–) %
20. Treasury bills and similar bills eligible for refinancing with central banks 694,532 729,062 – 34,530 – 4.74
50. Bonds and other debt securities 4,945,140 5,915,769 – 970,629 – 16.41
60. Shares, quotas and other forms of capital 1,267,773 1,475,824 – 208,051 – 14.10
Total 6,907,445 8,120,655 – 1,213,210 – 14.94
The figures at 31 December 2004 include the following amounts relating to Cassa di Risparmio di Alessandria: -caption 20: 33,586 thousand Euro; -caption 50: 186,972 thousand Euro; -caption 60: 6,490 thousand Euro.
The securities portfolio is analysed below:
31.12.2004 31.12.2003 Investment Dealing Total Investment Dealing Total Change securities securities securities securities (+/–) %
20.Treasury bills and similar bills eligible for refinancing with central banks 4,224 690,308 694,532 51,161 677,901 729,062 – 34,530 – 4.74
50.Bonds and other debt securities 908,095 4,037,045 4,945,140 2,736,952 3,178,817 5,915,769 – 970,629 – 16.41
60.Shares, quotas and other forms of capital 2,943 1,264,830 1,267,773 3,015 1,472,809 1,475,824 – 208,051 – 14.10
Total 915,262 5,992,183 6,907,445 2,791,128 5,329,527 8,120,655 – 1,213,210 – 14.94
Captions Breakdown of the securities portfolio Investment securities Dealing securities Italian Foreign Total Italian Foreign Total companies companies companies companies and branches and branches
20.Treasury bills and similar bills eligible for refinancing with central banks 4,224 0 4,224 458,313 231,995 690,308
50.Bonds and other debt securities 607,748 300,347 908,095 1,396,794 2,640,251 4,037,045
60.Shares, quotas and other forms of capital 2,943 0 2,943 1,264,830 0 1,264,830
Total 614,915 300,347 915,262 3,119,937 2,872,246 5,992,183
326 Part B - Consolidated balance sheet Security transactions (purchases, subscriptions and sales) are recorded with reference to their settlement date. Issue discounts and premiums are recognised on an accruals basis as an adjustment to “interest income”, with a matching increase (net of any withholding taxes) or decrease in the book value of the related securities.
2.1 Investment securities
The investment securities portfolio comprises:
1. Securities held by foreign branches of the Parent Bank, ideally linked to hedging instruments in order to ensure a pre-determined yield on the investment; these securities are expected to be held to maturity so that the transactions produce the desired return. These securities may also derive from subscriptions to the bonds issued by leading firms as an alternative to making medium-term loans. 2. Securities subscribed by the Bank upon their issue with the intention of disbursing new loans or restructuring existing loans to the issuers; these assets are held until the related loan principal is repaid. 3. Securities which are expected to be held to maturity, given their objective characteristics (for example, securities with a restricted market) or corporate decisions made at the time of their subscription/purchase (for example, structured securities for which special hedging operations have been put in place). 4. Junior notes” and “credit link notes” subscribed as part of the “securitisation” transactions described in section 11.8 “Securitisation transactions” in the Explanatory notes of the Parent Bank’s financial statements. 5. Part of the securities held by Cassa di Risparmio di Alessandria, BPM Ireland and BPM Luxembourg which will be held to maturity.
With reference to securities held by foreign branches, the Parent Bank has revised its general resolution regarding the securities portfolio by reclassifying the securities held by foreign branches from the investment to the dealing portfolio (for 1,345,958 thousand Euro). This is the result of the decision to close the London and New York branches by the end of 2005, with the consequent sale or transfer of their respective securities portfolios.
Captions/Amounts 31.12.2004 31.12.2003 Book value Market value Book value Market value
1. Debt securities 912,319 899,381 2,788,113 2,805,193 1.1 Government securities 7,471 7,656 313,077 349,489 - quoted 7,471 7,656 313,077 349,489 - unquoted 0000
1.2 Other securities 904,848 891,725 2,475,036 2,455,704 - quoted 34,896 34,382 1,430,172 1,450,644 - unquoted 869,952 857,343 1,044,864 1,005,060
2. Equities 2,943 3,880 3,015 3,015 - quoted 0000 - unquoted 2,943 3,880 3,015 3,015
Total 915,262 903,261 2,791,128 2,808,208
Quoted securities are valued at the average market price for the prior half-year.
Part B - Consolidated balance sheet 327 Breakdown and redemption value of the investment securities portfolio
Captions 31.12.2004 Nominal value Book value Redemption Positive Negative value differences differences
1. Debt securities Government securities 7,500 7,471 7,500 29 0 Other securities 943,284 904,848 907,058 11,288 9,078
Total 950,784 912,319 914,558 11,317 9,078
2.2 Changes in investment securities
A. Opening balance 2,791,128
B. Increases 243,732 B1. Purchases 191,320 B2. Writebacks 0 B3. Transfers from dealing portfolio 0 B4. Other changes 52,412
C. Decreases 2,119,598 C1. Sales 200,549 C2. Redemptions 505,904 C3. Adjustments 6,328 of which: - permanent writedowns 6,328 C4. Transfers to dealing portfolio 1,345,958 C5. Other changes 60,859
D. Closing balance 915,262
Changes refer to:
B. Increases
Caption B4. Other changes: 52,412
Change in the scope of consolidation 48,932 Accrued positive difference between redemption value of securities and their issue price 3,179 Gains on disposal 301
C. Decreases
Caption C4. Transfers to dealing portfolio: 1,345,958
Following the resolution by the Board of Directors of the Parent Company, all the securities of the New York and London branches have been transferred to the dealing portfolio at nominal values of 458.6 million Euro and 893.2 million Euro respectively. Transfers of investment securities to the dealing securities portfolio have been carried out in accordance with the accounting principle set out in art. 18 of Legislative Decree 87/92 and have involved booking 4.8 million Euro and 2.3 million Euro respectively to statement of income captions 150 “Adjustments to financial fixed assets” and 120 “Adjustments to loans and provisions for guarantees and commitments” (writedown of credit link notes).
328 Part B - Consolidated balance sheet Caption C5. Other changes 60,859
Exchange differences on securities denominated in foreign exchange 50,469 Accrued difference between redemption value of securities and their purchase cost 4,747 Change in the scope of consolidation 3,015 Losses on disposal 2,628
2.3 Dealing securities
Captions/Amounts 31.12.2004 31.12.2003 Book value Market value Book value Market value
1. Debt securities 4,727,352 4,748,467 3,856,718 3,857,805 1.1 Government securities 1,757,930 1,757,933 2,005,593 2,005,593 - quoted 1,701,369 1,701,371 1,741,596 1,741,596 - unquoted 56,561 56,562 263,997 263,997
1.2 Other securities 2,969,422 2,990,534 1,851,125 1,852,212 - quoted 1,270,126 1,270,133 1,021,907 1,021,907 - unquoted 1,699,296 1,720,401 829,218 830,305
2. Equities 1,264,831 1,264,831 1,472,809 1,472,809 - quoted 1,048,493 1,048,493 1,267,313 1,267,313 - unquoted 216,338 216,338 205,496 205,496
Total 5,992,183 6,013,298 5,329,527 5,330,614
“Other securities” in point 1.2 include 14,370 thousand Euro in bonds issued by Group companies held for dealing purposes. A comparison of book and market value reveals the following unrealised gains not booked to the statement of income:
31.12.2004 31.12.2003
1.1 on Government securities 3 0 1.2 on other debt securities 21,112 1,087
2. on equities 00
Total 21,115 1,087
This caption includes 12,233 thousand Euro in gains on securities hedged by interest rate swaps and options, which report an unrealised loss of 12,190 thousand Euro.
The quoted securities of one subsidiary company are valued at the lower of cost and market value. No adjustment has been made for the difference between this valuation and the accounting policy used in the consolidation (market value) because the amount involved (9 thousand Euro) is insignificant.
Part B - Consolidated balance sheet 329 2.4 Changes in dealing securities
A. Opening balance 5,329,527
B. Increases 73,176,414 B1. Purchases: 71,306,113 - Debt securities 61,663,974 - Government securities 48,342,419 - Other securities 13,321,555 - Equities 9,642,139 B2. Writebacks and revaluations 71,575 B3. Transfers from investment portfolio 1,345,958 B4. Other changes 452,768
C. Decreases 72,513,758 C1. Sales and redemptions 72,492,749 - Debt securities 62,464,324 - Government securities 49,078,645 - Other securities 13,385,679 - Equities 10,028,425 C2. Adjustments 9,249 C3. Transfers to dealing portfolio 0 C5. Other changes 11,760
Closing balance 5,992,183
Changes refer to:
B. Increases
Caption B4. Other changes: 452,768
Change in the scope of consolidation 199,192 Dealing gains 160,869 Short positions in securities 89,263 Accrued positive difference between redemption value of securities and their purchase cost 3,330 Other 109 Exchange differences on securities denominated in foreign exchange 5
C. Decreases
Caption C5. Other changes 11,760
Exchange differences on securities denominated in foreign exchange 8,047 Accrued negative difference between redemption value of securities and their purchase cost 2,053 Change in the scope of consolidation 1,564 Dealing losses 96
330 Part B - Consolidated balance sheet Securities issued by subjects resident in countries at risk
The table below presents the gross value as well as general writedowns of securities issued by subjects resident in countries at risk. The writedowns also take account of transactions settled after the end of the period.
31.12.2004 31.12.2003 Country Gross value Total Net book Gross value Total Net book writedowns value writedowns value
Argentina 2,786 1,672 1,114000 Netherlands Antilles 0 0 0 16 4 12
Total 2,786 1,672 1,114 16 4 12
Part B - Consolidated balance sheet 331 Section 3 Equity investments
Equity investments reflected in asset captions 70 and 80 total 314,690 thousand Euro.
Change Assets 31.12.2004 31.12.2003 (+/– ) %
70. Equity investments 259,315 254,890 4,425 1.74
80. Investments in Group companies 55,375 41,398 13,977 33.76
Total 314,690 296,288 18,402 6.21
Caption 70 includes 20,265 thousand Euro in respect of Cassa di Risparmio di Alessandria at 31 December 2004.
332 Part B - Consolidated balance sheet Significant investments, i.e. those in subsidiary companies or those subject to significant influence (art. 19 of Decree 87/92) are presented below:
3.1 Significant investments (1)
Nature Share- of holding Name Nature holders’ Net profit/ Holding % Held Votes at Consoli- of holding equity (loss) company ordinary dated (a) (b) (b) (c) meeting book value
A. Consolidated companies A.1 Line-by-line 1 BANCA POPOLARE DI MILANO s.c. a r.l. 2,518,214 125,224 Milan 2 BANCA DI LEGNANO S.p.A. 1 1,223,392 – 870 A.1.1 93.51 93.51 XXX Legnano (Milan) 3 CASSA DI RISPARMIO DI ALESSANDRIA S.p.A. - Alessandria 1 142,925 4,518 A.1.1 80.00 80.00 XXX 4 BANCA AKROS S.p.A. 1 46,055 6,072 A.1.1 56.89 56.89 XXX Milan A.1.2 40.00 40.00 XXX 5 AKROS SECURITIES Inc. 1 USD 1,827 USD 364 A.1.4 100.00 100.00 XXX Delaware (USA) 6 AKROS HFR ALTERNATIVE INVESTMENTS SGR S.p.A - Milan 1 1,362 1,005 A.1.4 51.00 51.00 XXX 7 BIPIEMME IMMOBILI S.p.A. 1 212,252 5,985 A.1.1 90.89 90.89 XXX Milan A.1.2 9.11 9.11 XXX 8 WE @ SERVICE S.p.A. 1 5,580 – 1,334 A.1.1 99.99 99.99 XXX Milan A.1.4 0.01 0.01 XXX 9 BPM IRELAND Plc 1 28,015 6,458 A.1.1 99.99 99.99 XXX Dublin (IRELAND) 10 BPM FUND MANAGEMENT Ltd. 1 1,546 2,756 A.1.9 100.00 100.00 XXX Dublin (IRELAND) 11 TIRVING Ltd. 1 GBP 51,210 GBP 2,386 A.1.1 100.00 100.00 XXX Dublin (IRELAND) 12 BPM CAPITAL I Llc 1 23,051 – 476 A.1.1 100.00 100.00 XXX Delaware (USA) 13 BPM LUXEMBOURG S.A. 1 268 16 A.1.1 99.00 99.00 XXX Luxembourg A.1.4 1.00 1.00 XXX 14 BIPIEMME PRIVATE BANKING SIM 1 10,264 555 A.1.1 51.00 51.00 XXX S.p.A. - Milan A.1.2 19.00 19.00 XXX A.1.15 30.00 30.00 XXX 15 BIPIEMME GESTIONI SGR S.p.A. 1 20,959 10,771 A.1.1 55.16 55.16 XXX Milan A.1.2 40.00 40.00 XXX 16 BIPIEMME PRIVATE EQUITY SGR S.p.A. 1 1,708 – 180 A.1.1 100.00 100.00 XXX Milan B. Equity investments carried at equity 139,244 1 BIPIEMME VITA S.p.A. 1 40,390 11,811 A.1.1 56.89 56.89 29,697 Milan A.1.2 40.00 40.00 20,881 2 BIPIEMME REAL ESTATE SGR S.p.A. 1 5,362 273 A.1.1 85.00 85.00 4,789 Milan 3 SELMABIPIEMME LEASING S.p.A. 8 74,089 9,729 A.1.1 38.35 38.35 32,144 Milan 4 ETICA SGR S.p.A. 8 3,624 – 124 A.1.1 27.50 27.50 963 Milan 5 ESN North America Inc. 8 USD 932 USD – 612 A.1.5 25.00 25.00 178 Delaware (USA) 6 CARALT S.p.A. 8 3,410 510 A.1.3 32.50 32.50 1,274 Alessandria 7 CASSA DI RISPARMIO DI ASTI S.p.A. 8 231,003 15,661 A.1.2 20.00 20.00 49,318 Asti
Part B - Consolidated balance sheet 333 3.1 Significant investments (cont’d)
Nature Share- of holding Name Nature holders’ Net profit/ Holding % Held Votes at Consoli- of holding equity (loss) company ordinary dated (a) (b) (b) (c) meeting book value
C. Other significant investments 51
1 GE.SE.SO. S.r.l. 1 114 3 A.1.1 100.00 100.00 8 Milan 2 ULTRAMEDIASS S.r.l. 1 58 5 B.1 100.00 100.00 XXX Milan 3 CartaFacile S.p.A. in liquidation 8 2,751 – 2,248 A.1.8 37.62 37.62 0 Milan 4 LEASEMAC S.p.A. – in liquidation 8 234 – 30 A.1.2 33.40 33.40 35 Milan 5 First Skelligs Intern. Finance Co. Ltd. – in liq. 8 941 89 A.1.1 33.33 33.33 8 Dublin (IRELAND)
(1) Significant investments are those held directly or indirectly, either through a fiduciary company or some other intermediary,in subsidiary companies as defined in article 4.3 of Legislative Decree 87/92 and in companies subject to significant influence (associated companies) as defined in article 19.1 of the same decree. Significant influence exists when the investor company has at least 1/5th of the voting rights at the investee company’s ordinary shareholders’ meeting.
Key: (a) 1 = control, as defined by article 2359.1.1 (majority of voting rights at shareholders’ meetings) 8 = associated company.
(b) The information relating to companies included in Sections A and B respectively, was that used to consolidate companies line-by- line and to apply the equity method. Results for the year are not included in shareholders’ equity. For companies included in Section C, the information refers to the financial statements as of 31 December 2003 (results for the period are included in shareholders’ equity) with the exception of First Skelligs Int. Finance (whose figures refer to 31.03.2003). Amounts are expressed in thousands (of Euro or other currencies).
(c) A.1.1 Banca Popolare di Milano A.1.2 Banca di Legnano A.1.3 Cassa di Risparmio di Alessandria A.1.4 Banca Akros A.1.5 Akros Securities A.1.9 Bpm Ireland A.1.15 Bipiemme Gestioni SGR B.1 Bipiemme Vita
334 Part B - Consolidated balance sheet Pursuant to the implementation rules of articles 120.4 and 122.2 of Legislative Decree 58/98 on the reporting of significant investments and disclosure of shareholders’ agreements, the following information is provided in the next tables: Companies not included in the preceding tables in which the Parent Bank holds an interest of over 10%; non-Group companies in which the Parent Bank holds voting rights of 20% or more.
Companies in which the Parent Bank has shareholdings Location % voting rights Book value of more than 10%
Newgrange Finance Services Co. (*) Dublin (Ireland) 22.90 30,043 Tayar Receivables Co. (*) Dublin (Ireland) 18.57 54,842 Factorit S.p.A. Milan 17.54 7,775 Multimedica Holding S.p.A. Milan 15.00 13,542 Marengo S.r.l. (**) Alessandria 19.00 25 GAL BORBA DUE LEADER S.r.l. (**) Ponzone (AL) 15.00 2 OTTO VALLI S.c.r.l. (**) Ponzone (AL) 15.00 2 CO.FI.S.AL S.p.A. (**) Alessandria 14.98 132 Acqui Domani S.p.A. (**) Acqui Terme 14.00 73 Nuove Terme S.r.l. (**) Acqui Terme 12.77 394 EMPRIMER S.p.A. (**) Milan 12.26 70
(*) Based on instructions from the Bank of Italy, the equity investments in Newgrange and Tayar held by Tirving are classified in the consolidated financial statements as “loans to customers”.
(**) Equity investments held by Cassa di Risparmio di Alessandria
In addition, the Parent Bank holds a 10% interest in Dexia Crediop worth 103.3 million Euro. This equity investment was purchased in previous years together with Banca Popolare di Verona-Banco S. Geminiano e S. Prospero, Banca Popolare dell’Emilia Romagna and BPB Partecipazioni (Banca Popolare di Bergamo – CV Group). BPB Partecipazioni sold its investment in 2001.The three banks that are still shareholders (with a total interest of 30%) have signed a shareholders’ agreement regarding, in particular, the make-up of the Boards of Directors and Statutory Auditors, the quorums needed for shareholders’ meetings and the transfer of shareholdings.
Non-Group companies in which the Bank holds voting rights Location % voting rights Reason for holding of 20% of share capital or more voting rights
Placida S.r.l. Saronno 100.00 Collateral Immobiliare Mabe S.r.l. Milan 100.00 Collateral Loges S.r.l. Milan 100.00 Collateral Nardi Costruzioni Aeronautiche S.p.A. (a) Milan 100.00 Collateral Promedil 84 S.r.l. Milan 100.00 Collateral B.E.A. Technologies S.p.A. (former PTI S.p.A.) Milan 100.00 Collateral Fiori 11 S.r.l. Milan 100.00 Collateral Veda S.r.l.. Monza 100.00 Collateral Zucchini S.p.A. Brescia 100.00 Collateral Immobiliare Bordoni S.r.l. Milan 93.86 Collateral Industria Casearia Bonalumi S.r.l. in liquidation Cologno Monzese 33.33 Collateral Eurosilver S.r.l. (b) Torbole Casaglia 100.00 Collateral Format S.r.l. (b) Odolo 100.00 Collateral Tierre Raccorderie S.p.A. (b) Castegnato 100.00 Collateral Elettromeccanica di Marnate S.p.A. (b) Marnate 99.93 Collateral Sparta S.p.A. (b) Lumezzane 80.00 Collateral
(a) The collateral is in favour of a pool of banks in which Banca Popolare di Milano Scrl is lead manager. The company is currently involved in bankruptcy proceedings. (b) “Undivided” assets pledged as collateral in favour of a pool of creditors. Voting rights at ordinary and extraordinary meetings fall to the creditors holding the collateral, though from time to time this right can be waived or delegated to whoever provided the collateral.
Part B - Consolidated balance sheet 335 In the case of Saratoga Int.Sforza S.p.A., a company resident in Milan, the Parent Bank may decide to exercise voting rights on the basis of the topics discussed in the shareholders’ meeting. Banca di Legnano holds voting rights of 20% or more in the following non-Group companies:
Company Location % voting rights Reason for holding voting rights
Newcam 96 S.r.l. Genoa 100.00 Collateral
Investments of more than 10% in the following companies, currently in liquidation and valued at zero, are included in “Shares, quotas and other forms of capital”:
Companies in liquidation Location % voting rights
Ricostruzioni Ansa S.r.l. – in liquidation Milan 89.90 Immobiliare Ansa Ticino S.r.l. – in liquidation Varese 50.00 Immobiliare Zenith Seconda S.r.l. – in liquidation Varese 50.00 Leasing Levante S.p.A. – in liquidation Bari 14.29
336 Part B - Consolidated balance sheet 3.2 Amounts due to and from Group companies
Change 31.12.2004 31.12.2003 (+/–) %
a) Assets 20,952 16,893 4,059 24.03 1. Due from banks 0 0 0 n.s. of which: - subordinated 0 0 0 n.s. 2. Due from financial institutions 0 0 0 n.s. of which: - subordinated 0 0 0 n.s. 3. Due from other customers 20,952 16,893 4,059 24.03 of which: - subordinated 16,000 16,000 0 n.s. 4. Bonds and other debt securities of which: 0 0 0 n.s. - subordinated 0 0 0 n.s.
b) Liabilities 274,980 134,429 140,551 104.55 1. Due to banks 0 0 0 n.s. 2. Due to financial institutions 575 0 575 n.s. 3. Due to other customers 43,608 56,429 – 12,821 – 22.72 4. Securities issued 230,797 78,000 152,797 195.89 5. Subordinated liabilities 0 0 0 n.s.
c) Guarantees and commitments 296 297 – 1 – 0.34 1. Guarantees given 296 297 – 1 – 0.34 2. Commitments 0 0 0 n.s.
Part B - Consolidated balance sheet 337 3.3 Amounts due to and from investments (that are not part of the Group)
Change 31.12.2004 31.12.2003 (+/–) %
a) Assets 685,508 768,183 – 82,675 – 10.76 1. Due from banks 76,384 119,101 – 42,.717 – 35.87 of which: - subordinated 0 0 0 n.s. 2. Due from financial institutions 500,223 635,525 – 135,302 – 21.29 of which: - subordinated 140 140 0 n.s. 3. Due from other customers 37,723 1,891 35,832 n.s. of which: - subordinated 0 0 0 n.s. 4. Bonds and other debt securities 71,178 11,666 59,512 n.s. of which: - subordinated 0 0 0 n.s.
b) Liabilities 297,806 286,891 10,915 3.80 1. Due to banks 172,701 137,427 35,274 25.67 2. Due to financial institutions 113,795 109,466 4,329 3.95 3. Due to other customers 11,310 39,998 – 28,688 – 71.72 4. Securities issued 0 0 0 n.s. 5. Subordinated liabilities 0 0 0 n.s.
c) Guarantees and commitments 26,508 6,990 19,518 279.23 1. Guarantees given 16,054 5,572 10,482 188.12 2. Commitments 10,454 1,418 9,036 n.s.
3.4 Analysis of caption 70 “Equity investments”
Change 31.12.2004 31.12.2003 (+/–) %
a) Investment in banks 172,987 113,727 59,260 52.11 1. quoted 239 0 239 n.s. 2. unquoted 172,748 113,727 59,021 51.90
b) Investment in financial institutions 51,328 107,716 – 56,388 – 52.35 1. quoted 740 0 740 n.s. 2. unquoted 50,588 107,716 – 57,128 – 53.04
c) Other investments 35,000 33,447 1,553 4.64 1. quoted 10,941 10,367 574 5.54 2. unquoted 24,059 23,080 979 4.24
Total 259,315 254,890 4,425 1.74
338 Part B - Consolidated balance sheet Detail of caption 70 “Equity investments”
31.12.2004 31.12.2003 Amount % Ownership Amount % Ownership
a) Investment in banks 172,987 113,727 1. quoted: 239 0 Banca Popolare Lodi 239 0.01 0
2. unquoted: 172,748 113,727 Cassa di Risparmio di Asti 49,318 20.00 0 Dexia Crediop 103,297 10.00 103,297 10.00 NordEst Banca 2,125 10.00 1,250 10.00 Ist.Centrale Banche Popolari Italiane 9,243 5.59 8,852 5.59 Bank of Italy 8,724 0.29 0 Banca Popolare Etica 41 0.26 41 0.29 Efibanca 0 287 0.18
b) Investment in financial institutions 51,328 107,716 1. quoted: 740 0 BiPiElle Investimenti 523 0.03 0 Reti Bancarie Holding 217 0.01 0
2. unquoted: 50,588 107,716 SelmaBipiemme Leasing 32,144 38.35 29,492 38.35 Leasemac – in liquidation 35 33.40 35 33.40 First Skelligs Inter. Finance 8 33.33 258 33.33 CARALT 1,274 32.50 0 Etica SGR 963 27.50 497 27.84 ESN North America 178 25.00 0 Factorit 7,775 17.54 7,775 17.54 Evoluzione 94 394 7.05 394 7.05 Polis Fondi SGR 362 7.00 362 7.00 Epsilon Associati SGR 749 6.25 749 6.25 Star Venture 1,822 4.16 990 2.05 Sì Holding (former CartaSì) 945 3.48 911 3.34 Convergenza Luxembourg 1,460 1.25 1,189 1.25 Opera Partecipations 2,153 1.19 0 Finpiemonte 276 0.62 0 Eurosim - in liquidation (*) 0 0.34 0 Opera Partecipations 2 50 0.17 0 Finlombarda 0 35 0.49 Cassa di Compensazione e Garanzia 0 1,291 4.55 Carinord 0 63,738 50.00
Part B - Consolidated balance sheet 339 Detail of caption 70 “Investments in Group companies” (cont’d)
31.12.2004 31.12.2003 Amount % Ownership Amount % Ownership
c) Other investments 35,000 33,447 1. quoted: 10,941 10,367 Fiera di Milano 6,223 2.56 6,223 2.58 Immob. Lombarda 697 0.70 515 0.71 Fastweb (former E.Biscom) 4,021 0.17 3,629 0.20
2. unquoted: 24,059 23,080 Cartafacile – in liquidation (*) 0 37.62 1,044 37.62 Marengo – Soc. Brok. Ass. 25 19.00 0 Multimedica Holding 13,542 15.00 19,346 15.00 GAL.BORBA DUE LEADER 2 15.00 0 Otto Valli 2 15.00 0 CO.FI.S.AL. 132 14.98 0 Acqui Domani 73 14.00 0 Nuove Terme 394 12.77 0 EMPRIMER 70 12.26 0 ESN LLP 1 10.00 1 10.00 Parco Sc. Tecn. Telec. Valle Scr. 434 9.04 0 Patto di Foggia 8 8.00 8 8.00 Italcom 608 7.97 0 S.I.S.T.E.M.I. - in liquidation 70 7.78 0 EuroImpresa Legnano 89 7.21 92 7.21 Expo Piemonte 51 6.33 0 Polo scientifico Tecn. Lombardo 62 6.25 63 6.25 Cedacri 2,837 5.48 0 Melior Consulting 26 5.00 0 ABI Energia 1 4.76 0 Centro Tessile Cot. e Abbigl. – B.A. 66 4.72 62 4.72 Genextra 2,000 4.55 0 e-MID 220 3.67 220 3.67 Meridaunia 3 3.37 3 3.34 Industria e Università 348 3.13 349 3.13 S.S.B. – Società Servizi Bancari 250 3.12 249 3.07 DAICAP - in liquidation (*) 0 3.00 0 3.00 Crif – Centrale Rischi Finanziaria 31 2.52 62 5.05 E.C.BIC Piemonte – in liquidation (*) 0 2.48 0 CIM Italia (former C.I.L.M.E. Multitel) 108 2.42 108 2.42 SI.TE.BA. – Sist. Telematici Bancari 48 1.87 45 1.74 Eurovita Assicurazioni 1,025 1.54 0 S.I.A. – Soc. Interb. Automazione 958 1.54 956 1.52 Ist. per l’Enciclopedia Banca e Borsa 6 1.52 8 1.52 A.B.E. Clearing (*) 0 1.41 0 1.35 Euros – Cefor & Istinform Consulting (*) 0 1.22 0 1.22 EUROFIDI Cons. Gar. Fidi 98 1.02 0 Sviluppo Brianza 3 0.98 0 Centrale del Latte AL-AT 2 0.86 0 Soc.Coop.Banche Pop. “L.Luzzatti” (*) 0 0.80 0 0.80 Impianti – in liquidation (*) 0 0.76 0 0.76
340 Part B - Consolidated balance sheet Detail of caption 70 “Investments in Group companies” (cont’d)
31.12.2004 31.12.2003 Amount % Ownership Amount % Ownership
MTS 158 0.68 158 0.68 Centrale dei Bilanci per gli studi finanz. 155 0.60 155 0.60 Borsa Italiana 122 0.24 122 0.24 Interporto Rivalta Scr 9 0.23 0 S.W.I.F.T. 18 0.08 18 0.08 Nomisma 4 0.07 4 0.07 Innoinvest – in liquidation 0 0 Consorzio Cassamercato 0 7 6.29
Total 259,315 254,890 1.74
(*) Amounts lower than 500 Euro.
Changes are detailed in section 3.6.2 “Changes in other equity investments”
Part B - Consolidated balance sheet 341 3.5 Analysis of caption 80 “Investments in Group companies”
Change 31.12.2004 31.12.2003 (+/–) %
a) Investment in banks 0 0 0 n.s. 1. quoted 0 0 0 n.s. 2. unquoted 0 0 0 n.s.
b) Investment in financial institutions 4,789 0 4,789 n.s. 1. quoted 0 0 0 n.s. 2. unquoted 4,789 0 4,789 n.s.
c) Other investments 50,586 41,398 9,188 22.19 1. quoted 0 0 0 n.s. 2. unquoted 50,586 41,398 9,188 22.19
Total 55,375 41,398 13,977 33.76
Detail of caption 80 “Investments in Group companies”
31.12.2004 31.12.2003 Amount % Ownership Amount % Ownership
a) Investment in banks 0 0 1. quoted: 0 0 2. unquoted: 0 0
b) Investment in financial institutions 4,789 0 1. quoted 0 0 2. unquoted: 4,789 0 Bipiemme Real Estate SGR 4,789 85.00 0
c) Other investments 50,586 41,398 1. quoted 0 0 2. unquoted: 50,586 41,398 Ge.Se.So. 8 100.00 8 100.00 Bipiemme Vita 50,578 96.89 41,390 100.00 Fondo Case Pop. “Ist. F. Isolani” (*) 0 0 100.00
Total 55,375 41,398
(*) Fondo Isolani ceased to do business following the resolution of the shareholders’ meeting held on 24 April 2004. Changes are detailed in section 3.6.1 “Changes in investments in Group companies”
342 Part B - Consolidated balance sheet 3. 6 Changes in equity investments
3. 6. 1 Investments in Group companies
Carried at equity Other
A. Opening balance 41,390 8
B. Increases 29,798 0 B1. Purchases 9,689 0 B2. Writebacks 00 B3. Revaluations 00 B4. Other changes 20,109 0
C. Decreases 15,821 0 C1. Sales 4,821 0 C2. Adjustments 00 of which: permanent writedowns 00 C3. Other changes 11,000 0
D. Closing balance 55,367 8
E. Total revaluations 00
F. Total adjustments: 00
Detail of changes in Investments in Group companies
A. Carried at equity
Caption B.1 Purchases: 9,689 Bipiemme Vita: subscription to share capital increase 9,689
Caption B4. Other changes: 20,109 gains on disposal 3,609 profits of investments carried at equity 11,675 Change in the scope of consolidation of Bipiemme Real Estate SGR 4,825
C. Decreases
Caption C1. Sales: 4,821 Sale of Bipiemme Vita (3.11%) 4,351 Sale of Bipiemme Real Estate SGR (5%) 470
Caption C3. Other changes 11,000 Dividends Bipiemme Vita paid during the year. 11,000
Part B - Consolidated balance sheet 343 3. 6. 2 Other equity investments
Carried at equity Other
A. Opening balance 94,771 160,119
B. Increases 112,370 28,209 B1 Purchases 105,534 4,772 B2. Writebacks 0 969 B3. Revaluations 00 B4. Other changes 6,836 22,468
C. Decreases 123,264 12,890 C1. Sales 184 4,719 C2. Adjustments 1,035 7,627 of which: permanent writedowns 1,035 7,627 C3. Other changes 122,045 544
D. Closing balance 83,877 175,438
E. Total revaluations 0 9,491
F. Total adjustments: 4,898 31,904
Detail of changes in Other equity investments
A. Carried at equity
B. Increases Caption B.1 Purchases: 105,534 Acquisition of 4.05% of Carinord 1 in exchange for 3.11% of Banca Akros, Bipiemme Gestioni SGR and Bipiemme Vita 11,502 Etica SGR. 488 Cassa di Risparmio di Asti 93,080 ESN North America 464
Caption B4. Other changes: 6,836 profits of investments carried at equity 5,651 CARALT: changes in the scope of consolidation 1,108 other changes 77
C. Decreases Caption C1. Sales: 184 ESN North America 184
Caption C.2 Adjustments: 1,035 Carta Facile 1,035
Caption C.3 Other changes: 122,045 Carinord: absorption by BPM 75,240 dividends paid during the year 1,079 Cassa di Risparmio di Asti: positive difference arising on application of the equity method (asset caption 100) 45,717 other changes 9
F. Total adjustments: 4,898 Carta Facile; 2,004 CARALT. 2,894
344 Part B - Consolidated balance sheet B. Other equity investments
B. Increases Caption B.1 Purchases: 4,772 Convergenza Luxembourg 375 NordEst Banca 875 Star Venture I 300 Opera Partecipations 818 Opera Partecipations 2 50 Consorzio ABI Energia 1 GENEXTRA 2,000 Euros Consulting – in liquidation 183 Sviluppo Brianza 3 Emprimer 75 Eurovita Assicurazioni 92
Caption B2. Writebacks: 969 Istituto Centrale Banche Popolari Italiane 391 Immobiliare Lombarda 182 Fastweb 392 Centro Tessile Cotoniero B.A. 4
Caption B4. Other changes: 22,468 Change in the scope of consolidation (inclusion of Cassa di Risparmio di Alessandria) 19,109 Gains on disposal 3,072 Other changes 287
C. Decreases Caption C1. Sales: 4,719 Banca Popolare di Lodi 852 Cassa di Compensazione e Garanzia 2,759 Finlombarda 95 Crif 1,010 Innoinvest 3
Caption C.2 Adjustments: 7,627 Opera Partecipations 503 Multimedica Holding 5,804 Convergenza Luxembourg 104 Star Venture I 918 Euroimpresa Legnano 3 Polo Sc. Tecnol. lombardo 1 Euros Consulting 183 Industria e Università 1 Emprimer 105 Innoinvest 3 Istituto Per l’Enciclopedia Banca e Borsa 2
Caption C.3 Other changes: 544 other changes 544
Part B - Consolidated balance sheet 345 F. Total adjustments: 31,904 Multimedica Holding 5,804 Evoluzione 94 8,492 Istituto per l’Enciclopedia Banca e Borsa 17 Industria e Università 56 Nomisma 6 Meridaunia 1 Istituto Centrale delle Banche Popolari Italiane 8,714 ABE Clearing 181 Fastweb 2,312 Euros – Cefor & Istinform Consulting 313 EuroImpresa Legnano 25 Centro tessile cotoniero e abbigliamento 30 Polo Scientifico e Tecnologico Lombardo 15 Immobiliare Lombarda 1,509 Convergenza Luxembourg 491 Star Venture I 1,378 DAICAP – in liquidation 3 Opera Partecipations 503 Emprimer 105 Nuove Terme 52 S.I.S.T.E.M.I. – in liquidation 18 Melior Consulting 14 E.C. BIC Piemonte – in liquidation 28 Eurovita Italcasse 76 Innoinvest 9 Eurosim 20 Cedacri 1,732
346 Part B - Consolidated balance sheet Section 4 Tangible and intangible fixed assets
The Group’s tangible and intangible fixed assets, recorded in the financial statements under asset captions 120 and 110, amount to 1,056,362 thousand Euro, net of 170,528 thousand Euro of amortisation and depreciation charged to the year under review.
Change Assets 31.12.2004 31.12.2003 (+/–) %
120. Tangible fixed assets 421,840 389,077 32,763 8.42
110. Intangible fixed assets 634,522 695,821 – 61,299 – 8.81
Total fixed assets 1,056,362 1,084,898 – 28,536 – 2.63
The figures at 31 December 2004 include the following amounts relating to Cassa di Risparmio di Alessandria: - caption 110: 2,072 thousand Euro; - caption 120: 37,692 thousand Euro.
Part B - Consolidated balance sheet 347 4.1 Changes in tangible fixed assets
Buildings Other Total
A. Opening balance 315,359 73,718 389,077
B. Increases 63,501 36,612 100,113 B1. Purchases 20,538 26,311 46,849 B2. Writebacks 000 B3. Revaluations 000 B4. Other changes 42,963 10,301 53,264
C. Decreases 30,353 36,997 67,350 C1. Sales 17,783 657 18,440 C2. Adjustments a) depreciation 12,570 34,227 46,797 b) permanent writedowns 0 503 503 C3. Other changes 0 1,610 1,610
D. Closing balance (1) 348,507 73,333 421,840
E. Total revaluations 222,291 0 222,291
F. Total adjustments: a) depreciation 183,351 361,588 544,939 b) permanent writedowns 171 1,244 1,415 (1) of which: - tangible fixed assets 347,220 73,333 420,553 - advance payments 1,287 0 1,287
Subcaption F. a) reflects total depreciation provided over time on tangible fixed assets recorded in the financial statements.
Buildings Other increases include 32,270 thousand Euro in relation to Cassa di Risparmio di Alessandria (including the higher value allocated upon consolidation). This caption also includes 10,538 thousand Euro in gains on the disposal of buildings. Premises used by Group companies for their business activities amount to 265,828 thousand Euro (net of depreciation of 171,430 thousand Euro and writedowns of 171 thousand Euro).
Other assets Other changes include 2,144 thousand Euro relating to the consolidation of Cassa di Risparmio di Alessandria and 5,258 thousand Euro in reversals from the accumulated depreciation of assets with a unit value of less than 516.46 Euro, which was credited to the statement of income as part of the process of “defiscalising” the financial statements. Other assets include 2,159 thousand Euro in assets to be leased.
348 Part B - Consolidated balance sheet 4.2 Changes in intangible fixed assets
Total of which: Start-up costs
A. Opening balance 695,821 16,981
B. Increases 63,435 6,228 B1. Purchases 61,246 6,011 B2. Writebacks 00 B3. Revaluations 00 B4. Other changes 2,189 217
C. Decreases 124,734 6,702 C1. Sales 10 0 C2. Adjustments a) amortisation 123,731 6,446 b) permanent writedowns 00 C3. Other changes 993 256
D. Closing balance (1) 634,522 16,507
E. Total revaluations 00
F. Total adjustments: a) amortisation 459,255 23,166 b) permanent writedowns 00
(1) of which: - intangible fixed assets 634,522 16,507 - advance payments 00
Subcaption F. a) reflects the total amortisation provided over time on intangible fixed assets recorded in the financial statements.
Other increases include 1,844 thousand Euro relating to the consolidation of Cassa di Risparmio di Alessandria.
“Intangible fixed assets” include goodwill not yet amortised deriving from the following mergers and acquisitions of business divisions:
Description Historical Residual amount Amortisation Residual amount goodwill as of 31/12/2003 during the period as of 31/12/2004
Merger of Banca 2000 11,107 4,441 1,111 3,330 Purchase of the Pavia branch 1,136 341 115 226 Banca di Legnano 734,722 551,042 73,472 477,570 746,965 555,824 74,698 481,126
Part B - Consolidated balance sheet 349 Section 5 Other assets
Asset captions 150 and 160 total 2,204,858 thousand Euro and are analysed as follows:
Change Assets 31.12.2004 31.12.2003 (+/–) %
150. Other assets 1,956,593 1,803,870 152,723 8.47
160. Accrued income and prepayments 248,265 221,120 27,145 12.28
Total 2,204,858 2,024,990 179,868 8.88
The figures at 31 December 2004 include the following amounts relating to Cassa di Risparmio di Alessandria: - caption 150: 37,578 thousand Euro; - caption 160: 8,066 thousand Euro.
5.1 Analysis of caption 150 “Other assets”
Change 31.12.2004 31.12.2003 (+/–) %
Cheques drawn on the bank 1,490 2,644 – 1,154 – 43.65 Duty-paid paper and other instruments 11,327 12,918 – 1,591 – 12.32 Cheques drawn on third-party current accounts 60,282 55,372 4,910 8.87 Items in transit between branches 69 1 68 n.s. Guarantee deposits on behalf of the Group 64,413 60,650 3,763 6.20 Guarantee deposits on behalf of third parties 1,757 7,950 – 6,193 – 77.90 Items relating to security and currency transactions 349 98 251 256.12 Tax items: - taxation paid in advance 39,211 86,223 – 47,012 – 54.52 - tax credits 352,138 181,838 170,300 93.65 - provisional assessment 80 462 – 382 – 82.68 - withholding taxes 1,979 1,779 200 11.24 - tax credits on dividends 0 74,216 – 74,216 – 100.00 - advance payment of taxes on severance indemnities Law 662/96 20,990 20,793 197 0.95 - substitute tax on merger deficit deferred to future years 20,891 25,075 – 4,184 – 16.69 Deferred tax assets 106,239 116,302 – 10,063 – 8.65 1% advance on amounts due for tax collection services (Law 341/2003) 209,581 110,968 98,613 88.87 Premiums paid on options purchased 127,295 187,640 – 60,345 – 32.16 Effect of revaluing off-balance sheet transactions 614,979 415,835 199,144 47.89 Contribution to solidarity and similar funds 10 10 0 0.00 Items being processed 205,581 321,453 – 115,872 – 36.05 Consolidation adjustments 3,354 29,468 – 26,114 – 88.62 Other items 114,578 92,175 22,403 24.30
Total 1,956,593 1,803,870 152,723 8.47
350 Part B - Consolidated balance sheet 5.2 Analysis of caption 160 “Accrued income and prepayments”
Change 31.12.2004 31.12.2003 (+/–) %
Accrued income: 207,629 192,019 15,610 8.13 Bank interest income and commission 14,693 16,935 – 2,242 – 13.24 Interest income on loans to customers and commission 26,306 31,443 – 5,137 – 16.34 Interest on portfolio securities 56,582 59,133 – 2,551 – 4.31 Differentials on forward currency transactions and derivatives 105,437 82,988 22,449 27.05 Other assets 4,611 1,520 3,091 203.36
Prepayments: 40,636 29,101 11,535 39.64 Bank interest expense and commission paid in advance 1,138 1,862 – 724 – 38.88 Interest expense and commissions paid in advance to customers 0 0 0 n.s. Discounts on bond issues 20,733 3,355 17,378 n.s. Differentials on forward currency transactions and derivatives 8,850 13,441 – 4,591 – 34.16 Administrative costs (rentals, insurance premiums, etc.) 9,896 10,443 – 547 – 5.24 Other assets 19 0 19 n.s.
Total accrued income and prepayments 248,265 221,120 27,145 12.28
5.3 Adjustments for accrued income and prepayments
We would point out that, in accordance with art. 12 of Legislative Decree 87/92, we have not made any adjustments, up or down, directly to the assets or liabilities to which accruals and prepayments refer, except as explained in part A, section 1 of these notes.
Part B - Consolidated balance sheet 351 5.4 Distribution of subordinated assets
These are assets restricted by subordination clauses which, should the debtor be put into liquidation, require that the asset be repaid only after all non-subordinated creditors have been satisfied.
Change 31.12.2004 31.12.2003 (+/–) %
a) Due from banks 0 0 0 n.s. b) Loans to customers 16,140 16,140 0 0.00 c) Bonds and other debt securities 474,287 519,371 – 45,084 – 8.68
The balance indicated in item b) refers to:
16,000 thousand Euro for the subscribed portion of the subordinated loans issued by Bipiemme Vita;
140 thousand Euro to the subscribed portion of the subordinated loan issued by Polis Fondi S.G.R S.p.A.
The balance indicated in item c) refers to:
148,483 thousand Euro in bonds belonging to the dealing portfolio of the Parent Bank’s London branch, issued by insurance companies and not associated with securitisations (130,818 thousand Euro at 31 December 2003);
274,080 thousand Euro in mezzanine notes held by the Parent Bank and by BPM Ireland in relation to third party securitisations (262,909 thousand Euro at 31 December 2003);
26,394 thousand Euro in class C bonds belonging to the Parent Bank’s portfolio (31,022 thousand Euro at 31 December 2003), issued by the vehicle company Piazza Meda Uno as part of the securitisation of the Parent Bank’s loans. The Class B bonds totalling 4,154 thousand Euro at 31 December 2003 have been redeemed in full;
18,589 thousand Euro in credit link notes issued by Citybank Madeira as part of the synthetic securitisation of the Parent Bank’s loans carried out in 2001(18,589 thousand Euro at 31 December 2003);
6,741 thousand Euro in subordinated bonds issued by banks and included in the dealing portfolio (3,033 thousand Euro at 31 December 2003).
For all other amounts involved in the securitisation of own assets, reference should be made to Section 11.8 of the Parent Bank’s explanatory notes.
Redemption of these securities and payment of interest will only take place when all the other creditors have been satisfied.
352 Part B - Consolidated balance sheet Section 6 Payables
Total funding, reflected in liability captions 10, 20, 30 and 40 amounts to 28,748,496 thousand Euro and comprises:
Change Liability captions 31.12.2004 31.12.2003 (+/–) %
10. Due to banks 6,813,455 7,250,428 – 436,973 – 6.03 20. Due to customers 16,323,463 15,613,876 709,587 4.54 30. Securities issued 5,605,473 4,043,618 1,561,855 38.63 40. Public funds administered 6,105 4,720 1,385 29.34
Total 28,748,496 26,912,642 1,835,854 6.82
The figures at 31 December 2004 include the following amounts relating to Cassa di Risparmio di Alessandria: - caption 10: 33,966 thousand Euro; - caption 20: 1,146,468 thousand Euro; - caption 30: 487,448 thousand Euro.
Due to banks and due to customers are valued with the same policies used for loans.
Repurchase agreements entered for funding purposes are recorded at their spot value as amounts due to customers/banks and do not result in movements in securities. The related expense, represented by the interest coupons on the underlying securities and the differential between their spot and forward prices, is recorded as “interest expense and similar charges” on an accruals basis.
Part B - Consolidated balance sheet 353 Detail of caption 10 “Due to banks”
Change 31.12.2004 31.12.2003 (+/–) %
Repayable on demand: 1,471,501 1,484,343 – 12,842 – 0.87
- Central banks 0 0 0 n.s. - Unrestricted deposits 1,253,415 1,310,027 – 56,612 – 4.32 - Current account balances relating to services received 217,088 172,549 44,539 25.81 - Other 998 1,767 – 769 – 43.52
Time deposits or with notice period: 5,341,954 5,766,085 – 424,131 – 7.36
- Central banks 0 251,183 – 251,183 – 100.00 of which: - repurchase agreements with Bank of Italy 0 251,183 – 251,183 – 100.00 - Restricted deposits 4,864,581 5,187,907 – 323,326 – 6.23 - Repurchase agreements 294,342 162,573 131,769 81.05 - Funding from international agencies 134,503 161,234 – 26,731 – 16.58 - Loans against securities borrowed 0 0 0 n.s. - Other 48,528 3,188 45,340 n.s.
Total 6,813,455 7,250,428 – 436,973 – 6.03
of which: - Euro 4,163,848 4,609,099 – 445,251 – 9.66 - Foreign currency 2,649,607 2,641,329 8,278 0.31
6.1 Detail of caption “Due to banks”
Change 31.12.2004 31.12.2003 (+/–) %
a) Repurchase agreements 294,342 413,756 – 119,414 – 28.86
b) Securities loaned: loans against securities borrowed 0 0 0 n.s.
354 Part B - Consolidated balance sheet Analysis of caption 20 “Due to customers”
Change 31.12.2004 31.12.2003 (+/–) %
Repayable on demand: 14,698,571 13,040,002 1,658,569 12.72
- Savings deposits 739,567 635,504 104,063 16.37 - Current accounts 13,958,159 12,403,069 1,555,090 12.54 - Other 845 1,429 – 584 – 40.87
Time deposits or with notice period: 1,624,892 2,573,874 – 948,982 – 36.87
- Restricted savings deposits 20,350 19,432 918 4.72 - Restricted current accounts 588,198 643,340 – 55,142 – 8.57 - Repurchase agreements 1,004,584 1,904,688 – 900,104 – 47.26 - Loans against securities borrowed 0 0 0 n.s. - Other 11,760 6,414 5,346 83.35
Total 16,323,463 15,613,876 709,587 4.54
Of which: - Euro 15,547,025 14,774,034 772,991 5.23 - Foreign currency 776,438 839,842 – 63,404 -7.55
6.2 Detail of caption “Due to customers”
Change 31.12.2004 31.12.2003 (+/–) %
a) Repurchase agreements 1,004,584 1,904,688 – 900,104 – 47.26
b) Securities loaned: loans against securities borrowed 0 0 0 n.s.
Part B - Consolidated balance sheet 355 Analysis of caption 30 “Securities issued”
Change 31.12.2004 31.12.2003 (+/–) %
Bonds 4,796,724 3,369,583 1,427,141 42.35
- bonds 4,796,724 3,369,583 1,427,141 42.35
Certificates of deposit 662,347 515,256 147,091 28.55
- short-term 633,957 485,613 148,344 30.55 - long-term 21,194 22,014 – 820 – 3.72 - matured and uncollected 7,196 7,629 – 433 – 5.68
Other securities 146,402 158,779 – 12,377 – 7.80
- bankers’ drafts 146,402 158,779 – 12,377 – 7.80
Total 5,605,473 4,043,618 1,561,855 38.63
Of which: - Euro 5,272,886 3,866,980 1,405,906 36.36 - Foreign currency 332,587 176,638 155,949 88.29
Analysis of certificates of deposits Change by counterparty 31.12.2004 31.12.2003 (+/–) %
Subscribed by customers 221,420 256,545 – 35,125 – 13.69
- short-term 193,030 226,902 – 33,872 – 14.93 - long-term 21,194 22,014 – 820 – 3.72 - matured and uncollected 7,196 7,629 – 433 – 5.68
Subscribed by banks 440,927 258,711 182,216 70.43
- short-term 440,927 258,711 182,216 70.43
Total 662,347 515,256 147,091 28.55
Bonds, certificates of deposit and bankers’ cheques issued are recorded at nominal value. Zero coupon bonds and certificates of deposit are recorded at their subscription value plus compound interest accruing since placement on an annual basis. Bonds issued “below par” are stated at par. The difference between par value and the amount actually collected is recorded as a deferred expense and amortised over the term of the bond issue concerned.
Analysis of caption 40 “Public funds administered”
Change 31.12.2004 31.12.2003 (+/–) %
Funds provided by local public sector entities 6,105 4,720 1,385 29.34
Total 6,105 4,720 1,385 29.34
356 Part B - Consolidated balance sheet Section 7 Provisions
Provisions, which do not adjust asset balances, are reflected in the liability captions 70, 80 and 90 and total 561,514 thousand Euro, as follows:
Change Liability captions 31.12.2004 31.12.2003 (+/–) %
70. Provision for severance indemnities 252,353 229,509 22,844 9.95
80. Provisions for risks and charges: 305,661 332,317 – 26,656 – 8.02
a) Pensions and similar commitments 55,888 27,633 28,255 102.25 b) Taxation 60,861 81,187 – 20,326 – 25.04 d) Other 188,912 223,497 – 34,585 – 15.47
90. Reserve for possible loan losses 3,500 8,773 – 5,273 – 60.10
Total 561,514 570,599 – 9,085 – 1.59
The figures at 31 December 2004 include the following amounts relating to Cassa di Risparmio di Alessandria: - caption 70: 22,744 thousand Euro; - caption 80: 39,854 thousand Euro.
Part B - Consolidated balance sheet 357 Analysis of caption 70 “Provision for severance indemnities”
Change 31.12.2004 31.12.2003 (+/–) %
Provision for severance indemnities 252,353 229,509 22,844 9.95
Changes in caption 70 “Provision for severance indemnities”
Opening balance 229,509
Increases 52,878
- Provisions 29,398 - Other changes: 23,480 - change in scope of consolidation 23,480
Decreases – 30,034
- Uses severance indemnities paid or advanced to employees – 28,234 - Other changes: – 1,800 - exchange difference on provisions stated in foreign currency – 9 - taxes payable (11% on revaluation) – 736 - other – 1,055
Closing balance 252,353
The provision for severance indemnities covers the liability to all employees at year-end, accrued in compliance with current legislation, collective labour contracts and in-house supplementary agreements.
358 Part B - Consolidated balance sheet Analysis of caption 80 a) “Provisions for risks and charges: pensions and similar commitments”
Supplementary pension Change and provident funds 31.12.2004 31.12.2003 (+/–) %
Former Banca Popolare di Bologna e Ferrara 14,671 15,562 – 891 – 5.73
Former Banca Agricola Milanese 50 66 – 16 – 24.24
Banca di Legnano 13,075 12,005 1,070 8.91
Cassa di Risparmio di Alessandria 28,092 0 28,092 n.s.
Total 55,888 27,633 28,255 102.25
Changes in caption 80 a) “Pensions and similar commitments: supplementary pensions and provident funds”
Description Supplementary Supplementary Supplementary Supplementary Total pensions and pensions and provi- pensions and pensions and provident funds of dent funds of former provident funds of provident funds of Banca di Legnano Banca Popolare former Banca Cassa di Risparmio di Bologna e Ferrara Agricola Milanese di Alessandria
Opening balance 12,005 15,562 66 0 27,633
Increases 2,419 667 0 31,299 34,385
- Provisions 974 667 0 5,173 6,814 - Other changes: other 1,445 0 0 26,126 27,571
Decreases – 1,349 – 1,558 – 16 – 3,207 – 6,130
- Uses – 462 – 1,558 – 12 – 3,207 – 5,239 - Other changes: other – 887 0 – 4 0 – 891
Closing balance 13,075 14,671 50 28,092 55,888
Provisions for pensions and similar commitments cover in full the obligations to former employees and their survivors of the former Banca Popolare di Bologna e Ferrara and the former Banca Agricola Milanese. The pension funds for employees of Banca di Legnano and Cassa di Risparmio di Alessandria are recorded under liabilities insofar as they do not have a separate legal identity. The Banca di Legnano fund is of the defined-contribution type, based on the equivalence method and in compliance with the principle of individual capitalisation. The Cassa di Risparmio di Alessandria fund is of the defined-benefit type which covers commitments to former employees. Other changes relate to the change in the scope of consolidation.
Part B - Consolidated balance sheet 359 Analysis of caption 80 b) “provisions for risks and charges: taxation”
Change 31.12.2004 31.12.2003 (+/–) %
Direct and indirect taxes: 43,372 61,150 – 17,778 – 29.07
- Current corporate income taxes (IRES) 14,755 36,227 – 21,472 – 59.27 - Current regional income taxes (IRAP) 15,020 16,464 – 1,444 – 8.77 - Indirect taxes 1,043 2,706 – 1,663 – 61.46 - Deferred tax liabilities 9,454 4,361 5,093 116.79 - Flat-rate tax 2,098 582 1,516 260.48
- Potential charges from tax disputes 1,002 810 192 23.70
Taxation of foreign branches and companies 17,489 20,037 – 2,548 – 12.72
Total 60,861 81,187 – 20,326 – 25.04
Changes in caption 80 b) “Provisions for risks and charges: taxation”
Opening balance 81,187
Increases 61,562
- Provisions: 48,546 - income taxes 38,118 - other taxes and duties 490 - deferred tax liabilities 9,105 - tax disputes 833
- Other changes: 13,016 - change in the scope of consolidation 13,016
Decreases – 81,888
- Uses: for payments made during the year – 68,060 - Other changes: – 13,828 - release to income of overprovisions – 8,371 deferred taxes reversing in the year – 5,198 - exchange differences – 95 - other changes – 164
Closing balance 60,861
The taxation reserve covers a prudent estimate of direct and indirect taxes, including local taxes incurred by the foreign branches and companies, deferred taxes and additional tax payable upon the adverse outcome of any disputes with the tax authorities.
360 Part B - Consolidated balance sheet Deferred tax assets and liabilities
Deferred tax assets
Deferred tax assets of 106,239 thousand Euro (balance sheet caption 150) have been recognised in respect of the differences between book values and taxable amounts which will reverse in the next five years. Beyond this period, deferred tax assets are only recorded to the extent they are matched by deferred tax liabilities.
7.4 Changes in “Deferred tax assets” recorded in the statement of income
Corporate income Regional income Total tax (IRES) tax (IRAP)
1. Brought forward 104,035 12,267 116,302
2. Increases 23,887 1,881 25,768 2.1 Deferred tax assets arising in the year 19,932 1,807 21,739 2.2 Changes in the scope of consolidation 3,955 23 3,978 2.3 Other increases 0 51 51
3. Decreases – 32,398 – 3,433 – 35,831 3.1 Deferred tax assets cancelled in the year – 32,352 – 3,433 – 35,785 3.2 Changes in the scope of consolidation – 46 0 – 46 3.3 Other decreases 0 0 0
4. Carried forward 95,524 10,715 106,239
The principal types of timing difference giving rise to the recognition of deferred tax assets are as follows:
writedowns of customer loans, recorded up to 31 December 1999, where the tax relief is spread evenly over the seven years following that of the charge to the statement of income; writedowns of customer loans from 1 January 2000, where the tax relief is spread evenly over the nine years following that of the charge to the statement of income; provisions for risks and charges and for guarantees given and commitments that may be deducted over the next five years; administrative and other costs which, according to current tax provisions, are deductible over the next five years; taxed writedowns of securities which are expected to become deductible for tax purposes in coming years; writedowns of equity investments which will be deductible over the next three years.
The difference between deferred tax assets arising/cancelled during the period, 13,995 thousand Euro, has been booked to the statement of income under “income taxes”.
Unrecorded deferred tax assets
Deferred tax assets totalling around 61 million Euro have not been recorded in respect of the following timing differences: adjustments to customer loans that will become deductible after more than five years; taxed provisions for risks and charges and writedowns of customer loans and amounts due from banks, whose deductibility for tax purposes is uncertain at the time of preparing these financial statements; writedowns against securities and equity investments whose future deductibility for tax purposes is uncertain at the time of preparing these financial statements; carry-forward tax losses relating to certain subsidiaries.
Part B - Consolidated balance sheet 361 Deferred tax liabilities
7.5 Changes in “Deferred tax liabilities” recorded in the statement of income.
Deferred tax liabilities have been recognised to the extent that they are likely to materialise in the future. They take account of capital gains whose taxation is spread over a number of years by virtue of article 86 of the New Income Tax Consolidation Act and the elimination of past fiscal distortions, as explained in Part A - Accounting policies of these notes.
Corporate income Regional income Total tax (IRES) tax (IRAP)
1. Brought forward 4,099 262 4,361
2. Increases 8,851 1,473 10,324 2.1 Deferred tax liabilities arising during the year 4,569 846 5,415 2.2 Changes in the scope of consolidation 1,083 136 1,219 2.3 Other increases 3,199 491 3,690
3. Decreases – 4,822 – 409 – 5,231 3.1 Deferred tax liabilities cancelled during the year – 4,789 – 409 – 5,198 3.2 Other decreases: changes in the scope of consolidation – 33 0 – 33
4. Carried forward 8,128 1,326 9,454
The net increases and decreases in deferred tax liabilities amount to 3,907 thousand Euro and have been booked to the statement of income under “income taxes”, with a corresponding entry going to the “provision for taxation”.
No deferred tax liabilities have been recorded:
on revaluation reserves of the Parent Bank subject to taxation, equal to 390.3 million Euro, since there are no plans for their distribution and hence little probability that the deferred tax will ever be paid; this amount, 354.5 thousand Euro refers to a share capital increase in 1996 to adjust the par value per share from Lire 1,000 to Lire 5,000; 34.7 million Euro refers to a share capital increase in 2001 to raise the par value per share to Euro 3; the other 1.1 million Euro refers to Banca 2000, now absorbed. In addition, deferred tax liabilities have not been recorded on one subsidiary’s revaluation reserves subject to taxation, equal to 33.6 million Euro, since there is little probability that the deferred tax will ever be paid;
in accordance with article 14 of Law 342 dated 21 November 2000, which allows companies to recognise for fiscal purposes the revaluation of assets recorded in the financial statements, in 2000 the Parent Bank decided to align the statutory and fiscal values of the buildings revalued on allocation of part of the deficit that arose on the absorption of Banca Agricola Milanese and Banca Briantea, by paying the flat-rate tax of 19% established in that law. An amount of 18.2 million Euro, equal to the realignment (22.4 million Euro), net of the flat-rate tax (4.3 million Euro), was therefore transferred by the Parent Bank from the “unrestricted reserve” to the “reserve art. 14 Law 342, 21 November 2000”.
362 Part B - Consolidated balance sheet 7.3 Analysis of caption 80 c) “Provisions for risks and charges : other”
Change 31.12.2004 31.12.2003 (+/–) %
Guarantees and commitments 96,556 122,137 – 25,581 – 20.94
Other risks and charges: 92,356 101,360 – 9,004 – 8.88
- Donations and community grants 246 612 – 366 – 59.80 - Holidays not taken 11,226 11,892 – 666 – 5.60 - Future personnel charges 240 280 – 40 – 14.29 - Commitments to the Interbank Deposit Guarantee Fund 5 5 0 0.00 - Recovery procedures and legal disputes 58,526 54,409 4,117 7.57 - Miscellaneous provisions 22,113 34,162 – 12,049 – 35.27
Total 188,912 223,497 – 34,585 – 15.47
Changes in the individual provisions are analysed in separate tables below.
Changes in caption 80 d) “Provisions for risks and charges - other: Guarantees and commitments”
Opening balance 122,137
Increases 9,410
- Provisions 6,133 - Other changes: 3,277 - changes in the scope of consolidation 3,277
Decreases – 34,991
- Uses – 26,242 - Other changes: – 8,749 - exchange differences – 80 - writebacks – 8,669
Closing balance 96,556
This provision covers losses in relation to guarantees given and commitments, under the accounting treatment discussed in part A – Accounting policies.
The balance of 96,556 thousand Euro covers expected losses determined on a specific basis (91,849 thousand Euro), the inherent risk of loss in relation to outstanding guarantees given and commitments (4,679 thousand Euro) and general country risks (28 thousand Euro).
Part B - Consolidated balance sheet 363 Analysis of exposure to individual country risk
The table below shows the unsecured exposure in relation to guarantees given and commitments to individual countries at risk and the corresponding provisions made. As far as commercial transactions are concerned, in accordance with Bank of Italy instructions, only 15% of the nominal value will form part of the unsecured exposure on which provisions must be calculated. Provisions have been calculated using the rates agreed with the Italian Bankers’ Association.
31.12.2004 31.12.2003 Country Gross unsecured Provisions for Gross unsecured Provisions for exposure guarantees and exposure guarantees and commitments commitments
Indonesia 139 21 0 0 Other 45 7 77 12
Total 184 28 77 12
Changes in caption 80 d) “Provisions for risks and charges - Other: other risks and charges”
Description Donations Holidays Future Commitments Recovery Miscellaneous and community not taken personnel to Interbank procedures provisions grants charges Deposit and legal Guarantee disputes Fund
Opening balance 612 11,892 280 5 54,409 34,162
Increases 1,876 2,533 113 0 19,699 10,513
- Provisions 1,876 2,533 113 0 19,476 10,054 - Other changes 0000223459
Decreases – 2,242 – 3,199 – 153 0 – 15,582 – 22,562
- Use – 2,242 – 1,937 – 153 0 – 9,379 – 19,611 - Other changes 0 – 1,262 0 0 – 6,203 – 2,951
Closing balance 246 11,226 240 5 58,526 22,113
Donations and community grants This provision was authorised by the ordinary shareholders’ meeting when approving the allocation of net profit. Uses reflect donations made during the year.
Holidays not taken The provision for holiday entitlement not taken is booked to the statement of income under caption 80 a) “Payroll”.
Future personnel charges This is a prudent provision to cover legal disputes with personnel.
Commitments to the Interbank Deposit Guarantee Fund The provision covers potential amounts due by the Parent Bank in relation to intervention already approved by the Interbank Deposit Guarantee Fund.
364 Part B - Consolidated balance sheet Recovery procedures and legal disputes The provision covers forecast losses on outstanding proceedings and disputes brought against the Parent Bank and other Group companies.
Miscellaneous provisions These provisions cover the estimated costs of closing the Parent Bank’s foreign branches, legal expenses to be reimbursed to former directors, statutory auditors and managers following the final settlement of legal proceedings in their regard, potential costs for claims received regarding “anatocism” and provisions by certain subsidiaries.
7.1 Analysis of caption 90 “Reserve for possible loan losses”
Change 31.12.2004 31.12.2003 (+/–) %
a) Reserves against accrued default interest deemed recoverable (art 71.6 of the Income Tax Consolidation Act) 0 4,273 – 4,273 – 100.00 b) Reserve for possible loan losses 3,500 4,500 – 1,000 – 22.22
Total 3,500 8,773 – 5,273 – 60.10
The reserve for possible loan losses was provided by Banca Akros to cover contingent counterparty risks in regard to the bank’s assets.
7.2 Changes in “Reserve for possible loan losses” (caption 90)
Description Reserve against Reserve for Total default interest deemed possible loan recoverable losses (art. 71.6, I.T.C.A.)
A. Opening balance 4,273 4,500 8,773
B. Increases 2,028 0 2,028
B1. Provisions 000 B2. Other changes: - changes in the scope of consolidation 2,028 0 2,028
C. Decreases – 6,301 – 1,000 – 7,301
C1. Uses C2. Other changes: - reversal to other operating income of the surplus portion of the reserve for possible loan losses 0 – 1,000 – 1,000 - defiscalisation: opening balance at 1.1.2004 booked to “non-recurring income” – 6,301 0 – 6,301
D. Closing balance 0 3,500 3,500
Part B - Consolidated balance sheet 365 Section 8 Share capital, equity reserves, reserve for general banking risks and subordinated liabilities (Balance sheet: liability captions 110, 140 ,150, 160, 170, 180, and 200 and asset captions 90, 100 and 140)
The Group’s consolidated equity accounts, comprising liability captions 150, 160, 170, 180 and 200 amount to 2,518,696 thousand Euro, while subordinated liabilities reflected in caption 110 and minority interests reported in caption 140 amount to 819,379 thousand Euro and 110,895 thousand Euro, respectively.
Change Captions 31.12.2004 31.12.2003 (+/–) %
150 Share capital 1,245,103 1,157,982 87,121 7.52
160 Share premium reserve 339,689 339,689 0 0.00
170 Reserves: 803,565 783,093 20,472 2.61 a) legal reserve 193,740 180,713 13,027 7.21 b) reserve for own shares 0 37 – 37 – 100.00 c) statutory reserves 576,546 521,834 54,712 10.48 d) other reserves 33,279 80,509 – 47,230 – 58.66
180 Revaluation reserves 2,724 0 2,724 n.s.
200 Net profit (loss) for the year 127,615 68,041 59,574 87.56
Total shareholders’ equity 2,518,696 2,348,805 169,891 7.23
110 Subordinated liabilities 819,379 819,379 0 0.00
140 Minority interests 110,895 2,296 108,599 n.s.
366 Part B - Consolidated balance sheet Changes in share capital, equity reserves and subordinated liabilities
Description Caption 150 Caption 160 Share capital Share premium reserve
Opening balance 1,157,982 339,689
Increases 87,121 0 Increase in share capital approved following the merger of Carinord 1 S.p.A. by issuing 29,040,313 new ordinary shares to the owners of the 56,941,791 Carinord 1 shares outstanding, in a ratio of 0.51 BPM shares for every Carinord 1 share of Euro 0.52 at par. 87,121 0
Decreases 00
Closing balance 1,245,103 339,689
The share capital of the Parent Bank as of 31 December 2004 was worth Euro 1,245,102,693 fully subscribed and paid in, made up of 415,034,231 ordinary shares with a par value of Euro 3 each.
Caption 170 “Reserves”
Description a) b) c) d) Legal reserve Reserve Statutory Other reserves for own shares reserves
Opening balance 180,713 37 521,834 80,509
Increases 13,027 0 54,712 0 Allocation of net profit, as approved at shareholders’ meeting held on 24 April 2004 13,027 0 54,712 0
Decreases 0 – 37 0 – 47,230 Transfer to “reserve for own shares – portion available for allocation” following a change in the own shares portfolio 0 – 37 0 0 Other changes (1) 0 0 0 – 47,230
Closing balance 193,740 0 576,546 33,279
(1) See the statement of changes in consolidated shareholders’ equity later in these notes.
Part B - Consolidated balance sheet 367 Capital adequacy and minimum requirements for supervisory purposes
Captions/amounts 31/12/2004 31/12/2003
A. Consolidated capital for supervisory purposes
A.1 Tier 1 capital 1,825,993 1,659,758
A.2 Tier 2 capital 653,216 640,004
A.3 Items to be deducted – 96,484 – 101,536
A.4 Capital for supervisory purposes 2,382,725 2,198,226
B. Prudent supervisory requirements
B.1 Credit risk 1,834,871 1,654,449
B.2 Market risk 209,648 138,743 of which: - risk on dealing portfolio 208,175 136,868 - exchange risks 1,473 1,875
B.3 Tier 3 subordinated loans 00
B.4 Other prudent requirements 35,619 105,225
B.5 Total prudent requirements 2,080,138 1,898,417
C. Risk assets and solvency ratios
C.1 Risk-weighted assets 26,001,720 23,730,210
C.2 Tier 1 capital /risk-weighted assets 7.02% 6.99%
C.3 Capital for supervisory purposes/risk-weighted assets 9.16% 9.26%
368 Part B - Consolidated balance sheet Analysis of caption 110 “Subordinated liabilities”
Bond Amount in Amount in Amount Bond Interest rate Date of Notes the financial the financial in foreign issue price maturity statements as statements as currency of 31/12/2004 of 31/12/2003
Innovative capital instruments (Tier 1): 160,000 160,000 Preference shares - Bpm Capital Trust I - 8.393% 160,000 160,000 160,000 EUR 100 floating rate perpetual 1
Hybrid instruments (Upper Tier 2): 160,000 160,000 Subordinated bond: Banca Popolare di Milano - Upper Tier 2 - 7.625% Notes due 2011 160,000 160,000 160,000 EUR 99.202 7.625% 29.6.2011 2
Subordinated liabilities (lower Tier 2) 499,379 499,379 Subordinated bond: Banca Popolare di Milano - Subordinated Callable Step Up Floating Rate Notes due 2010 400,000 400,000 400,000 EUR 99.568 floating rate 13.12.2010 3
Subordinated bond: Banca Popolare di Milano - Subordinated Mix Performances 16.9.2003/13 99,379 99,379 99,379 EUR 100 floating rate 16.9.2013 4
Total 819,379 819,379
1 Interest rate: fixed rate 8.393% until 2 July 2011; floating rate (Euribor + 4.70%) starting from 2 July 2011 Quotation: Luxembourg Stock Exchange Early redemption clause: the Bank may decide to redeem the loan early starting from 2 July 2011, subject to authorisation from the Bank of Italy Subordination clause: The preference shares have been issued with the clauses required by the Bank of Italy for inclusion in Tier 1 capital; this means that in the event the Bank goes into liquidation, the holders of such shares have priority over ordinary shareholders, but are subordinated to all other creditors. Other information: The preference shares have been issued by BPM Capital I LLC (through BPM Capital Trust I), a North American company wholly owned by the Parent Bank.
2 Interest rate: fixed rate 7.625% Quotation: Luxembourg Stock Exchange Early redemption clause: “tax reason” only after approval by the Bank of Italy Subordination clause: The loan contains a subordination clause which complies with the current provisions of the supervisory instructions issued by the Bank of Italy. Therefore, should the Bank enter voluntary or forced liquidation, bondholders will only be reimbursed after all non-subordinated creditors have been satisfied. Other information: The bond is part of a long-term issue programme (E.M.T.N.), approved by the Board of Directors on 11 September 2000 for a total amount of 2,000 million Euro.
3 Interest rate: floating rate (3-month Euribor plus 1.20% until December 2005, 3-month Euribor plus 1.60% beyond that date) Quotation: Luxembourg Stock Exchange Early redemption clause: the Bank may decide to redeem the loan early starting from the fifth year with notification thirty working days before the date fixed for redemption, subject to authorisation from the Bank of Italy. Subordination clause: The loan contains a subordination clause which complies with the current provisions of the supervisory instructions issued by the Bank of Italy. Therefore, should the Bank enter voluntary
Part B - Consolidated balance sheet 369 or forced liquidation, bondholders will only be reimbursed after all non-subordinated creditors have been satisfied. Other information: The bond is part of a long-term issue programme (E.M.T.N.), approved by the Board of Directors on 11 September 2000 for a total amount of 2,000 million Euro.
4 Interest rate: fixed-rate coupon of 3.01% per annum (3-year interest rate swap value dated 16.09.2003) for the period 16.9.2003-16.9.2006; floating rate coupon 6-month Euribor for the period 16.9.2003- 16.9.2008; floating rate coupon 6-month Euribor + 0.50% for the period 16.9.2008-16.9.2013. Quotation: not quoted Early redemption clause: the Bank may decide to redeem the loan early starting from 16 September 2008 and on every subsequent coupon detachment date. Subordination clause: The loan contains a subordination clause which complies with the current provisions of the supervisory instructions issued by the Bank of Italy. Therefore, should the Bank enter voluntary or forced liquidation, bondholders will only be reimbursed after all non-subordinated creditors have been satisfied.
Changes in caption 140 “Minority interests”
Opening balance 2,296
Increases 109,842
- Net profit attributable to minority interests 1,966 - Other increases 107,876
Decreases – 1,243
- Net profit attributable to minority interests distributed to shareholders – 744 - Other decreases – 499
Closing balance 110,895
Other increases relate to the following changes in the scope of consolidation: line-by-line consolidation of Cassa di Risparmio di Alessandria (minority interest of 20%); Banca di Legnano share capital increase reserved for Credit Industriel et Commercial (minority interest of 6.49%); sale of 3.11% of Banca Akros and Bipiemme Gestioni SGR.
370 Part B - Consolidated balance sheet Changes in goodwill arising on consolidation (asset caption 90)
Opening balance 12,102
Increases 132,835
- Other increases 132,835
Decreases – 16,005
- Amortisation charge for year – 15,629 - Other decreases – 376
Closing balance 128,932
Other increases relate to the goodwill arising on consolidation of Cassa di Risparmio di Alessandria. Other decreases refer to the sale of 3.11% of Banca Akros to third parties. The closing balance relates to Cassa di Risparmio di Alessandria (119,551 thousand Euro) and Banca Akros (9,381 thousand Euro).
Changes in goodwill arising on application of the equity method (asset caption 100)
Opening balance 81,313
Increases 45,717 - Other increases 45,717
Decreases – 83,599 - Amortisation charge for year – 5,320 - Other decreases – 78,279
Closing balance 43,431
Other increases relate to the goodwill arising on application of the equity method to Cassa di Risparmio di Asti, while other decreases refer to Carinord 1 (absorbed by the Parent Bank). The closing balance relates entirely to Cassa di Risparmio di Asti.
Part B - Consolidated balance sheet 371 Changes in asset caption 140 “Own shares”
Number of shares % of share capital Nominal value Book value
Opening balance 7,096 0.002% 21 37
Increases 3,830,917 11,493 19,071 - Purchases 3,830,917 11,493 18,928 - Dealing profits 0 0 143
Decreases – 3,838,013 – 11,514 – 19,108 - Sales – 581,556 – 1,745 – 3,162 - Other changes – 3,256,457 – 9,769 – 15,946
Closing balance 0 0.00% 0 0
During 2004, purchases and sales of own shares involved 3,830,917 own shares, subsequently granted to employees of the Parent Bank upon allocation of 2003 net profit (2,549,742 shares) and under the “BPM employee share accumulation plan” (706,715 shares); the remaining shares were sold, meaning that at 31 December 2004 the Bank held no own shares.
“Dealing profits” also include 46 thousand Euro as the difference between the average purchase price and the “normal” price of shares granted to employees as part of the above-mentioned plan.
372 Part B - Consolidated balance sheet Statement of changes in consolidated shareholders’ equity
Reserves Share Share Legal Reserve Statutory Other Revaluation Net profit Total capital premium reserve for own reserves reserves reserves for the year reserve shares
Balance as of 31 December 2003 1,157,982 339,689 180,713 37 521,834 80,509 0 68,041 2,348,805
Allocation of 2003 net profit - dividends – 46,319 – 46,319 - donations – 1,876 – 1,876 - Board of Directors – 625 – 625 - employee profit-sharing – 12,506 – 12,506 - reserves 13,027 54,712 – 61,024 – 6,715 0
Transfers between reserves – 37 37 0
Increase in share capital 87,121 87,121
Merger surplus 13,632 13,632
Changes in the scope of consolidation 283 283
Other changes – 158 – 158
Net profit for the year 127,615 127,615
Group interest in shareholders’ equity 1,245,103 339,689 193,740 0 576,546 33,279 0 127,615 2,515,972
Portion of revaluation reserves attributable to minority interests 2,724 2,724
Total as per financial statements at 31 December 2004 1,245,103 339,689 193,740 0 576,546 33,279 2,724 127,615 2,518,696
Other reserves include 18,163 thousand Euro relating to the fiscal recognition of the higher values shown in the financial statements for buildings to which part of the deficit arising on the merger of Banca Agricola Milanese and Banca Briantea was attributed. The Parent Bank recognised this amount in 2000 in accordance with art. 14 of Law 342 of 21 November 2000. An amount of 18,163 thousand Euro, equal to the realignment (22,423 thousand Euro), net of substitute tax of 19% (4,260 thousand Euro), was therefore transferred by the Parent Bank from the “unrestricted reserve” to the “reserve art. 14 Law 342, 21 November 2000”.
Part B - Consolidated balance sheet 373 Section 9 Other liabilities
Liability captions 50 and 60 amounting to 1,910,675 thousand Euro are analysed below:
Change Captions 31.12.2004 31.12.2003 (+/–) %
50. Other liabilities 1,680,627 1,594,773 85,854 5.38
60. Total accrued expenses and deferred income 230,048 193,243 36,805 19.05
Total 1,910,675 1,788,016 122,659 6.86
The figures at 31 December 2004 include the following amounts relating to Cassa di Risparmio di Alessandria: - caption 50: 35,337 thousand Euro; - caption 60: 7,537 thousand Euro.
9.1 Analysis of caption 50 “Other liabilities”
Change 31.12.2004 31.12.2003 (+/–) %
- Advances paid by customers on outstanding loans 0 0 0 n.s. - Items in transit between branches 81 4,085 – 4,004 – 98.02 - Items relating to security and currency transactions 89,356 76,131 13,225 17.37 - Due to tax authorities on behalf of customers 72,138 62,771 9,367 14.92 - Guarantee deposits from third parties 40,995 14,961 26,034 174.01 - Amounts available to third parties 153,000 163,734 – 10,734 – 6.56 - Adjustments for illiquid items concerning the portfolio 52,213 66,383 – 14,170 – 21.35 - Premiums collected on options sold 117,262 209,932 – 92,670 – 44.14 - Effect of revaluing off-balance sheet transactions 659,951 477,563 182,388 38.19 - Items being processed 273,733 303,697 – 29,964 – 9.87 - Consolidation adjustments 0 0 0 n.s. - Due to suppliers 86,444 109,870 – 23,426 – 21.32 - Due to social security authorities 30,218 25,591 4,627 18.08 - Other items 105,236 80,055 25,181 31.45
Total 1,680,627 1,594,773 85,854 5.38
374 Part B - Consolidated balance sheet 9.2 Analysis of caption 60 “Accrued expenses and deferred income”
Change 31.12.2004 31.12.2003 (+/–) %
Accrued expenses 188,191 160,886 27,305 16.97
- Interest on amounts due to banks 18,251 19,435 – 1,184 – 6.09 - Interest on amounts due to customers 1,955 2,284 – 329 – 14.40 - Interest on securities issued 56,318 47,993 8,325 17.35 - Interest on subordinated loans 14,459 14,347 112 0.78 - Differentials on forward currency transactions and derivatives 91,104 70,675 20,429 28.91 - Other charges and commission 6,104 6,152 – 48 – 0.78
Deferred income 41,857 32,357 9,500 29.36
- Interest income and commission from banks collected in advance 2 3 – 1 – 33.33 - Interest income and commission from customers collected in advance 14,283 14,264 19 0.13 - Differentials on forward currency transactions and derivatives 20,426 12,011 8,415 70.06 - Interest on discounted notes 2,431 2,142 289 13.49 - Other items 4,715 3,937 778 19.76
Total accrued expenses and deferred income 230,048 193,243 36,805 19.05
9.3 Adjustments for accrued expenses and deferred income
No adjustments have been made to the asset and liability captions to which these accruals and deferrals refer.
Part B - Consolidated balance sheet 375 Section 10 Guarantees and commitments
Balance sheet captions 10 and 20 relating to guarantees and commitments total 8,247,230 thousand Euro.
Change 31.12.2004 31.12.2003 (+/–) %
10. Guarantees given 2,790,970 3,033,003 – 242,033 – 7.98
20. Commitments 5,456,260 4,795,210 661,050 13.79
Total 8,247,230 7,828,213 419,017 5.35
The figures at 31 December 2004 include the following amounts relating to Cassa di Risparmio di Alessandria: - caption 10: 82,994 thousand Euro; - caption 20: 157,616 thousand Euro.
10.1 Analysis of caption 10 “Guarantees given”
Change 31.12.2004 31.12.2003 (+/–) %
a) Commercial guarantees 2,166,671 2,220,479 – 53,808 – 2.42
b) Financial guarantees 610,350 799,569 – 189,219 – 23.67
c) Assets lodged in guarantee 13,949 12,955 994 7.67
Total 2,790,970 3,033,003 – 242,033 – 7.98
Analysis of “guarantees given” by technical form
Change 31.12.2004 31.12.2003 (+/–) %
a) Commercial guarantees: 2,166,671 2,220,479 – 53,808 – 2.42 - acceptances 30,889 22,238 8,651 38.90 - endorsements and sureties 1,987,838 2,023,352 – 35,514 – 1.76 - documentary credits 147,944 174,889 – 26,945 – 15.41
b) Financial guarantees: 610,350 799,569 – 189,219 – 23.67 - acceptances 4,000 4,635 – 635 – 13.70 - endorsements and sureties 606,350 794,934 – 188,584 – 23.72
c) Assets lodged in guarantee 13,949 12,955 994 7.67 - guarantee deposits on behalf of third parties 13,949 12,955 994 7.67
Total 2,790,970 3,033,003 – 242,033 – 7.98
Of which: Residents 2,606,931 2,654,971 – 48,040 – 1.81 Non-residents 184,039 378,032 – 193,993 – 51.32
376 Part B - Consolidated balance sheet 10.2 Analysis of caption 20 “Commitments”
Change 31.12.2004 31.12.2003 (+/–) %
a) Commitments to grant finance (certain to be called) 2,174,366 2,504,455 – 330,089 – 13.18 b) Commitments to grant finance (not certain to be called on): 3,281,894 2,290,755 991,139 43.27
Total 5,456,260 4,795,210 661,050 13.79
Analysis of “Commitments” by technical form
Change 31.12.2004 31.12.2003 (+/–) %
a) Commitments to grant finance (certain to be called): 2,174,366 2,504,455 – 330,089 – 13.18 - securities to be received for transactions to be settled 891,127 650,676 240,451 36.95 - deposits and loans to be disbursed 404,716 580,653 – 175,937 – 30.30 - other commitments and risks 94,206 114,581 – 20,375 – 17.78 - credit derivatives 784,317 1,158,545 – 374,228 – 32.30 b) Commitments to grant finance (not certain to be called on): 3,281,894 2,290,755 991,139 43.27 - undrawn irrevocable lines of credit 2,177,743 1,899,084 278,659 14.67 - other commitments 1,104,151 391,671 712,480 181.91
Total 5,456,260 4,795,210 661,050 13.79
Of which: Residents 2,274,618 2,034,972 239,646 11.78 Non-residents 3,181,642 2,760,238 421,404 15.27
Part B - Consolidated balance sheet 377 10.3 Assets lodged to guarantee the Group’s liabilities
Change 31.12.2004 31.12.2003 (+/–) %
Securities lodged with the Bank of Italy to guarantee advances 320,778 300,571 20,207 6.72
Securities lodged with the Bank of Italy to guarantee bankers’ drafts 39,100 35,000 4,100 11.71
Securities guaranteeing repurchase agreements 532,908 1,198,881 – 665,973 – 55.55
Securities guaranteeing other transactions 48,935 1,772 47,163 n.s.
10.4 Unused lines of credit
Change 31.12.2004 31.12.2003 (+/–) %
a) Central banks 56,789 186,000 – 129,211 – 69.47
b) Other banks 0 0 0 n.s.
The amount in a) concerns the residual portion of the compulsory reserve with the Bank of Italy at the reference date.
378 Part B - Consolidated balance sheet 10.5 Forward transactions
The following table does not include forward transactions relating to dealing on behalf of third parties.
31/12/2004 31/12/2003 Type of transaction Hedging Dealing Other Total Hedging Dealing Other Total transactions transactions
1. Purchase/sale of 7,828,729 9,412,873 2,057 17,243,659 4,840,342 6,328,865 0 11,169,207
1.1 Securities 0 1,874,724 2,057 1,876,781 0 1,831,387 0 1,831,387 - purchases 0 889,070 2,057 891,127 0 650,676 0 650,676 - sales 0 985,654 0 985,654 0 1,180,711 0 1,180,711
1.2 Currency 7,828,729 7,538,149 0 15,366,878 4,840,342 4,497,478 0 9,337,820 - currency against currency 189,946 338,890 0 528,836 130,146 1,289,321 0 1,419,467 - purchases against euro 3,452,319 3,643,571 0 7,095,890 2,201,068 1,657,677 0 3,858,745 - sales against euro 4,186,464 3,555,688 0 7,742,152 2,509,128 1,550,480 0 4,059,608
2. Deposits and loans 0 0 927,405 927,405 0 0 2,243,596 2,243,596 - to be made 0 0 404,716 404,716 0 0 580,653 580,653 - to be received 0 0 522,689 522,689 0 0 1,662,943 1,662,943
3. Derivative contracts 6,322,636 33,642,936 1,138,000 41,103,572 7,499,940 31,028,278 815,500 39,343,718
3.1 With exchange of capital 9,000 7,282,421 0 7,291,421 10,000 6,490,677 0 6,500,677 a) securities 0 6,373,138 0 6,373,138 5,000 5,170,826 0 5,175,826 - purchases 0 2,506,716 0 2,506,716 0 1,650,608 0 1,650,608 - sales 0 3,866,422 0 3,866,422 5,000 3,520,218 0 3,525,218 b) currency 9,000 909,283 0 918,283 5,000 1,319,851 0 1,324,851 - currency against currency 0 47,881 0 47,881 0 15,691 0 15,691 - purchases against euro 3,000 390,840 0 393,840 5,000 608,214 0 613,214 - sales against euro 6,000 470,562 0 476,562 0 695,946 0 695,946 c) other instruments 00000000 - purchases 00000000 - sales 00000000
3.2 Without exchange of capital 6,313,636 26,360,515 1,138,000 33,812,151 7,489,940 24,537,601 815,500 32,843,041 a) currency 5,097 470,601 0 475,698 0 500,709 0 500,709 - currency against currency 00000000 - purchases against euro 0 410,810 0 410,810 0 425,310 0 425,310 - sales against euro 5,097 59,791 0 64,888 0 75,399 0 75,399 b) other instruments 6,308,539 25,889,914 1,138,000 33,336,453 7,489,940 24,036,892 815,500 32,342,332 - purchases 4,328,821 13,319,536 0 17,648,357 4,272,058 12,339,916 0 16,611,974 - sales 1,979,718 12,570,378 1,138,000 15,688,096 3,217,882 11,696,976 815,500 15,730,358
Part B - Consolidated balance sheet 379 10.5 Forward transactions (cont’d)
The above balances reflect:
the settlement price of the underlying contracts, if they involve or could involve an exchange of capital or other assets. Derivative contracts traded in organised markets where margins are settled on a daily basis (futures and options) correspond to the nominal value of the reference capital;
the amounts to be paid and received for deposits and loans;
the nominal value of the reference capital for derivative contracts without exchange of capital (e.g. contracts on interest rates or indices).
Derivative contracts on interest rates are classified as purchases or sales depending on whether the fixed rate is bought or sold.
Premiums paid or received in relation to options traded are deferred and recorded as “Other assets” or “Other liabilities” respectively; if the options are not exercised, these premiums are charged or credited to the statement of income. If the options are exercised, the value of the related premium is recorded to increase or decrease costs and revenues relating to the securities purchased or sold.
Other transactions include options implicit in structured securities issued by the Parent Bank.
380 Part B - Consolidated balance sheet 10.6 Credit derivatives (at notional value)
The following table shows the notional capital relating to derivative contracts taken out by the Group, under which the underlying credit risk is transferred to a specific asset (purchase of protection) or credit risks are taken on (sale of protection) from parties with which there is no direct commercial relationship.
The purchases of protection refer to a “synthetic securitisation” completed by the Parent Bank in 2001, involving an original amount of 1,277,055 thousand Euro. Outstanding transactions at 31 December 2004 total 269,555 thousand Euro (472,201 thousand Euro at 31 December 2003). The portfolio for which the protection was purchased includes medium-term loans, revolving credit lines, bonds, asset-backed bonds and credit default swaps.
With reference to “purchases of protection”, hedged loans in the financial statements have also been recorded among “secured loans” for around 54,522 thousand Euro (94,264 thousand Euro as of 31 December 2003).
With reference to “sales of protection”, the exposure is recorded in caption 20 “Commitments”. This figure has significantly decreased following the Parent Bank’s policy to reduce credit derivatives.
31/12/2004 31/12/2003 Type of transaction Dealing Other Total Dealing Other Total transactions transactions
1. Purchases of protection 0 393,989 393,989 0 539,204 539,204 1.1 With exchange of capital 0 124,434 124,434 0 67,003 67,003 - Credit default products 0 124,434 124,434 0 67,003 67,003
1.2 Without exchange of capital 0 269,555 269,555 0 472,201 472,201 - Credit default products 0 269,555 269,555 0 472,201 472,201
2. Sales of protection 0 784,317 784,317 0 1,158,545 1,158,545 2.1 With exchange of capital 0 784,317 784,317 0 1,079,369 1,079,369 - Credit default products 0 355,849 355,849 0 470,669 470,669 - Credit-linked notes 0 428,468 428,468 0 608,700 608,700
2.2 Without exchange of capital 000079,17679,176 - Credit spread options 000079,176 79,176
Part B - Consolidated balance sheet 381 Section 11 Concentration and distribution of assets and liabilities
11.1 Significant exposures
Change 31.12.2004 31.12.2003 (+/–) %
a) Amount 1,312,494 1,952,173 – 639,679 – 32.77
b) Number 3 5 – 2 – 40.00
In accordance with Bank of Italy instructions, “significant exposures” reflect lending to customers (weighted by cash, guarantees and commitments), or groups of related customers, that exceeds 10% of consolidated capital for supervisory purposes.
11.2 Distribution of loans to customers, by sector
Change 31.12.2004 31.12.2003 (+/–) %
a) Governments 12,646 15,749 – 3,103 – 19.70 b) Other public entities 407,698 399,277 8,421 2.11 c) Non finance-sector companies 12,407,451 10,393,831 2,013,620 19.37 d) Finance-sector companies 2,545,139 2,972,580 – 427,441 – 14.38 e) Personal businesses 697,029 485,108 211,921 43.69 f) Other operators 3,955,684 2,810,441 1,145,243 40.75
Total 20,025,647 17,076,986 2,948,661 17.27
11.3 Distribution of loans to resident non-financial and personal businesses
Change 31.12.2004 31.12.2003 (+/–) %
a) Other revenue-earning services 3,942,401 2,722,192 1,220,209 44.82 b) Commerce, salvage and repairs 2,197,728 1,942,397 255,331 13.15 c) Construction and public works 1,320,968 953,667 367,301 38.51 d) Metal products excluding machinery and vehicles 604,230 504,524 99,706 19.76 e) Electrical supplies and materials 454,177 443,388 10,789 2.43 f) Other sectors 4,286,261 3,847,789 438,472 11.40
Total 12,805,765 10,413,957 2,391,108 22.97
The distribution of loans by sector (table 11.2 and 11.3) is in accordance with Bank of Italy rules.
382 Part B - Consolidated balance sheet 11.4 Distribution of guarantees given, by category of counterparty
Change 31.12.2004 31.12.2003 (+/–) %
a) Governments 0 0 0 n.s. b) Other public entities 13,345 1,866 11,479 n.s. c) Banks 113,110 270,292 – 157,182 – 58.15 d) Non finance-sector companies 2,160,844 2,150,121 10,723 0.50 e) Financial institutions 361,207 483,231 – 122,024 – 25.25 f) Personal businesses 35,031 30,653 4,378 14.28 g) Other operators 107,433 96,840 10,593 10.94
Total 2,790,970 3,033,003 – 242,033 – 7.98
The distribution by counterparty reflects the economic category of the entity whose commitments have been guaranteed.
11.5 Geographical distribution of assets and liabilities
Captions/Country Italy Other Other Total EU countries countries
1. Assets 31/12/2004 25,032,695 3,889,489 1,796,785 30,718,969 31/12/2003 22,550,152 4,340,535 1,865,586 28,756,273
1.1 Due from banks 1,563,080 1,937,857 284,940 3,785,877 1,478,667 1,821,219 258,746 3,558,632
1.2 Loans to customers 19,307,133 352,191 366,323 20,025,647 16,049,555 601,432 425,999 17,076,986
1.3 Securities 4,162,482 1,599,441 1,145,522 6,907,445 5,021,930 1,917,884 1,180,841 8,120,655
2. Liabilities 31/12/2004 24,474,129 3,409,902 1,683,844 29,567,875 31/12/2003 21,531,166 4,209,082 1,991,773 27,732,021
2.1 Due to banks 3,109,895 2,671,896 1,031,664 6,813,455 2,726,398 3,167,492 1,356,538 7,250,428
2.2 Due to customers 15,714,215 351,633 257,615 16,323,463 14,355,764 935,025 323,087 15,613,876
2.3 Securities issued 4,984,535 386,373 234,565 5,605,473 3,784,905 106,565 152,148 4,043,618
2.4 Other accounts 665,484 0 160,000 825,484 664,099 0 160,000 824,099
3. Guarantees and 31/12/2004 4,881,549 2,343,577 1,022,104 8,247,230 commitments 31/12/2003 4,689,943 1,849,162 1,289,108 7,828,213
Assets, liabilities, guarantees and commitments are distributed with reference to the country in which the counterparty is resident. “Other” liabilities refer to caption 40 (public funds administered) and caption 110 (subordinated liabilities).
Part B - Consolidated balance sheet 383 11.6 Maturities of assets and liabilities
Specified residual duration Caption /residual life Between 1 and 5 years Beyond 5 years Unspecified Total On Up to Between 3 residual demand 3 months and 12 Fixed rate Indexed Fixed rate Indexed duration months rate rate
1. Assets 31/12/2004 11,095,715 14,086,877 10,236,224 11,207,736 5,388,293 4,336,717 4,642,282 217,864 61,211,708 31/12/2003 11,331,897 14,722,181 9,585,813 10,508,047 4,998,840 4,145,555 3,440,019 375,860 59,108,212
1.1 Treasury bills 28,424 5,596 183,442 24,781 132,755 82,148 237,386 0 694,532 eligible for 52,109 156,209 60,046 68,584 143,940 58,580 189,594 0 729,062 refinancing
1.2 Due from banks 575,583 2,466,057 662,148 3,164 800 0 12,215 65,910 3,785,877 514,674 1,931,402 908,994 0 13,884 0 11,513 178,165 3,558,632
1.3 Loans to 8,605,782 1,992,960 1,508,298 826,046 2,603,666 932,433 3,404,508 151,954 20,025,647 customers 8,079,978 2,166,537 1,088,139 542,608 1,931,087 854,939 2,216,003 197,695 17,076,986
1.4 Bonds and other 3,358 206,714 672,003 1,056,338 1,509,447 509,109 988,171 0 4,945,140 debt securities 2,686 311,555 468,948 1,355,947 2,572,231 249,870 954,532 0 5,915,769
1.5 Off-balance sheet 1,882,568 9,415,550 7,210,333 9,297,407 1,141,625 2,813,027 2 0 31,760,512 transactions 2,682,450 10,156,478 7,059,686 8,540,908 337,698 2,982,166 68,377 0 31,827,763
2. Liabilities 31/12/2004 18,190,162 15,849,397 9,764,249 9,999,553 3,349,687 3,051,046 957,301 160,887 61,322,282 31/12/2003 16,625,514 18,447,390 9,157,141 9,886,845 1,238,064 3,367,351 672,759 160,000 59,555,064
2.1 Due to banks 1,472,108 4,434,263 765,982 25,608 51,750 0 62,857 887 6,813,455 1,484,343 4,857,338 795,660 1,441 51,646 10,000 50,000 0 7,250,428
2.2 Due to customers 14,715,210 1,603,246 5,0016000016,323,463 13,059,590 2,276,748 277,039 0 499 0 0 0 15,613,876
2.3 Securities issued 153,698 771,895 654,178 1,664,402 1,977,617 56,664 327,019 0 5,605,473 176,167 756,852 829,098 1,436,246 799,992 45,263 0 0 4,043,618
- bonds 0 283,046 503,603 1,649,286 1,977,106 56,664 327,019 0 4,796,724 9,744 431,960 663,310 1,419,833 799,473 45,263 0 0 3,369,583
- certificates of deposit 7,296 488,849 150,575 15,116 511000662,347 7,644 324,892 165,788 16,413 519 0 0 0 515,256
- other securities 146,4020000000146,402 158,779 0000000158,779
2.4 Subordinated 00000160,000 499,379 160,000 819,379 liabilities 00000160,000 499,379 160,000 819,379
2.5 Off-balance sheet 1,849,146 9,039,993 8,339,088 8,309,537 1,320,320 2,834,382 68,046 0 31,760,512 transactions 1,905,414 10,556,452 7,255,344 8,449,158 385,927 3,152,088 123,380 0 31,827,763
This table shows on- and off-balance sheet assets and liabilities exposed to interest-rate risk, together with the residual life of each contract. This gives an overview of the Groups’s interest and liquidity risks, caused by the mismatching between the maturities of assets and liabilities. Off-balance sheet transactions only include those linked to fixed-income securities, interest rates, and deposits or loans to be made or received at an agreed future date.
384 Part B - Consolidated balance sheet The amounts attributed to assets and liabilities are the same as those indicated in the balance sheet; for amounts relating to off- balance sheet transactions, see section 10.5 “Forward transactions” of these explanatory notes.
“On demand” also includes assets and liabilities with a residual life of less than 24 hours. This means that the “on demand” amount does not agree with the equivalent total of loans to customers and banks shown in the balance sheet, as this amount only takes account of their contractual nature. Off-balance sheet transactions are analysed by the residual life of the expected inflows and outflows.
11.7 Foreign currency assets and liabilities
Change 31.12.2004 31.12.2003 (+/–) %
a) Assets 3,496,451 3,373,305 123,146 3.65 1. Due from banks 1,598,749 1,430,100 168,649 11.79 2. Loans to customers 634,767 748,924 – 114,157 – 15.24 3. Securities 1,254,412 1,185,463 68,949 5.82 4. Equity investments 178 0 178 n.s. 5. Other accounts 8,345 8,818 – 473 – 5.36
b) Liabilities 3,758,632 3,657,809 100,823 2.76 1. Due to banks 2,649,607 2,641,329 8,278 0.31 2. Due to customers 776,438 839,842 – 63,404 – 7.55 3. Securities issued 332,587 176,638 155,949 88.29 4. Other accounts 0 0 0 n.s.
“Other assets” comprise caption 10 “Cash and deposits with central banks and post offices”.
11.8 Securitisation transactions
Securitisation transactions of the Parent Bank
For further information, please refer to Section 11.8 entitled “Securitisation Transactions” in the explanatory notes of Banca Popolare di Milano.
Part B - Consolidated balance sheet 385 Securities in portfolio relating to third-party securitisations
The Parent Bank and BPM Ireland hold investment and dealing securities for third-party securitisations (so-called “Asset Backed Securities”). For this type of operation, the Group holds senior and mezzanine notes. Changes in percentage terms, the type of assets held and the quality of the underlying assets are as follows:
Description Book value Collections Writedowns Writebacks Purchases Other Book value 31/12/2003 changes 31/12/2004
Senior notes 184,038 – 52,728 – 1,138 1 161,028 – 5,132 286,069
Underlying assets: Receivables 68.3% Securities 23.0% Mortgage loans 8.7%
Asset quality: Non-performing loans 0% Problem loans 0% Other 100%
Mezzanine notes 262,909 – 145,563 – 5,737 40 169,412 – 6,981 274,080
Underlying assets: Receivables 50.5% Securities 49.5%
Asset quality: Non-performing loans 0% Problem loans 0% Other 100%
With reference to the “mezzanine notes” (also reported in point 5.4 “distribution of subordinated assets”), these derive almost entirely from the securitisation of performing loans classified by the rating agencies as “investment grade”.
These securities form part of the assets for which the Parent Bank purchased protection as part of the synthetic securitisation transaction illustrated in the explanatory notes of Banca Popolare di Milano for the following amounts:
senior notes 39,957 Thousands of Euro mezzanine notes 10,641 Thousands of Euro Total 50,598 Thousands of Euro
Other changes include purchases and repayments during the period and exchange differences on securities denominated in foreign currency.
386 Part B - Consolidated balance sheet Section 12 Administration and dealing on behalf of third parties
12.1 Dealing in securities
Change 31.12.2004 31.12.2003 (+/–) %
a) Purchases 39,514,636 47,239,815 – 7,725,179 – 16.35
1. settled 39,129,686 46,950,390 – 7,820,704 – 16.66
2. not settled 384,950 289,425 95,525 33.01
b) Sales 42,251,095 49,360,872 – 7,109,777 – 14.40
1. settled 41,822,274 49,052,196 – 7,229,922 – 14.74
2. not settled 428,821 308,676 120,145 38.92
The above amounts include both securities and derivative contracts traded in organised markets, as required by the Bank of Italy.
12.2 Portfolio management
Change 31.12.2004 31.12.2003 (+/–) %
Portfolios managed on behalf of customers (at market value): 6,631,848 5,959,293 672,555 11.29
This amount also includes an external supplementary pension fund managed by Group companies for an amount of 20,416 thousand Euro. The amount shown only relates to security portfolios. In addition to the amounts shown, there are liquid assets managed (net of liabilities) of 106,123 thousand Euro (104,462 thousand Euro as of 31 December 2003).
Part B - Consolidated balance sheet 387 12.3 Custody and administration of securities
Change 31.12.2004 31.12.2003 (+/–) %
a) Third-party securities held on deposit (excluding portfolio management) 35,394,937 30,931,278 4,463,659 14.43
b) Third-party securities deposited with third parties 27,855,371 24,911,596 2,943,775 11.82
c) Portfolio securities deposited with third parties 6,110,287 6,868,130 – 757,843 – 11.03
The following should be noted with reference to mutual funds managed by Group companies:
Bipiemme Gestioni SGR manages mutual funds with a total market value of 11,771,944 thousand Euro at 31 December 2004. The securities forming part of the funds’ assets are almost all in custody at the Parent Bank for a total nominal value of 8,306,247 thousand Euro and are included in “third-party securities held on deposit”; the company also manages the three mutual funds of Etica SGR with a total market value of 157,337 thousand Euro at 31 December 2004.
Akros HFR Alternative Investments SGR manages three mutual funds with a market value of 316,040 thousand Euro at 31 December 2004. The securities forming part of the funds’ assets are deposited with foreign brokers, while the funds’ cumulative certificates are in custody with the Parent Bank. The Parent Bank has units of these funds in its portfolio for a total of 233,907 thousand Euro;
BPM Fund Management – an Irish company – manages six mutual funds with total market value of 402,387 thousand Euro at 31 December 2004. The securities forming part of the funds’ assets and the funds’ certificates are deposited with foreign brokers.
BPM Real Estate SGR manages one closed-end property fund with total assets of 175,880 thousand Euro at 31 December 2004. The fund’s certificates are also in custody with the Parent Bank. As already discussed in Part A “Accounting policies”, the company is not consolidated line-by-line.
Caption a) “Third-party securities held on deposit” includes:
Change 31.12.2004 31.12.2003 (+/–) %
1. securities received and held in guarantee 1,812,067 1,691,114 120,953 7.15
2. securities received for custody 33,582,870 29,240,164 4,342,706 14.85
Securities received for custody and administration, including those received and held in guarantee, are stated at their nominal value.
388 Part B - Consolidated balance sheet 12.4 Collection of receivables on behalf of third parties: debit and credit adjustments
The notes and documents received subject to collection or after collection and for which the Group handles collection on behalf of third parties, must only be recorded in the balance sheet at the time these amounts are settled. As a result, the notes portfolio has been reclassified in the financial statements according to settlement date, by making the following accounting adjustments:
Change 31.12.2004 31.12.2003 (+/–) %
a) Debit adjustments 7,361,419 6,139,939 1,221,480 19.89
1. Current accounts 39,004 37,400 1,604 4.29 2. Central portfolio 7,227,520 6,102,539 1,124,981 18.43 3. Cash 856 0 856 n.s. 4. Other accounts 94,039 0 94,039 n.s.
b) Credit adjustments 7,413,632 6,206,322 1,207,310 19.45
1. Current accounts 55,217 68,285 – 13,068 – 19.14 2. Presenters of notes and documents 7,282,904 6,131,664 1,151,240 18.78 3. Other accounts 75,511 6,373 69,138 n.s.
12.5 Other transactions
Change 31.12.2004 31.12.2003 (+/–) %
Collection of notes and other instruments on behalf of third parties 7,338,121 6,199,949 1,138,172 18.36
Part B - Consolidated balance sheet 389 Part C Statement of income
Section 1. Interest Section 2. Commission Section 3. Profits (losses) on financial transactions Section 4. Administrative expenses Section 5. Adjustments, writebacks and provisions Section 6. Other statement of income captions Section 7. Other information regarding the statement of income
391 Section 1 Interest
Statement of income captions 10 and 20, analysed below, present the following balances:
Change Statement of income captions 2004 2003 (+/–) %
10. Interest income and similar revenues 1,595,271 1,389,572 205,699 14.80
20. Interest expense and similar charges 933,270 802,716 130,554 16.26
The figures for 2004 include the following amounts relating to Cassa di Risparmio di Alessandria: - caption 10: 79,854 thousand Euro; - caption 20: 23,690 thousand Euro.
1.1 Analysis of caption 10 “Interest income and similar revenues”
Change 2004 2003 (+/–) %
a) On amounts due from banks 381,791 292,541 89,250 30.51 of which: deposits with central banks 6,397 6,342 55 0.87 b) On loans to customers 866,574 787,062 79,512 10.10 of which: on loans using public funds 19 21 – 2 – 9.52 c) On debt securities 344,432 307,637 36,795 11.96 d) Other interest income 2,474 2,332 142 6.09 e) Positive differentials on hedging transactions 0 0 0 n.s.
Total 1,595,271 1,389,572 205,699 14.80
1.3 Detail of caption 10 “Interest income and similar revenues”
Change 2004 2003 (+/–) %
a) On foreign currency assets 97,079 103,388 – 6,309 – 6.10
Interest on foreign currency assets relates to that collected and accrued on assets in currencies outside the euro-zone.
Part C - Statement of income 393 1.2 Analysis of caption 20 “Interest expense and similar charges”
Change 2004 2003 (+/–) %
a) On amounts due to banks 403,774 312,959 90,815 29.02 b) On amounts due to customers 138,118 152,482 – 14,364 – 9.42 c) On securities issued 125,266 110,521 14,745 13.34 of which: certificates of deposit 14,883 15,211 – 328 – 2.16 d) On public funds administered 19 21 – 2 – 9.52 e) On subordinated liabilities 42,586 55,264 – 12,678 – 22.94 f) Negative differentials on hedging transactions 223,507 171,469 52,038 30.35
Total 933,270 802,716 130,554 16.26
(*) The figures show the net effect of differentials on derivative contracts taken out for hedging purposes.
Analysis of caption c) Interest Change expense on certificates of deposit 2004 2003 (+/–) %
a) On certificates subscribed by banks 11,712 8,807 2,905 32.99 b) On certificates subscribed by customers 3,171 6,404 – 3,233 – 50.48
Total 14,883 15,211 – 328 – 2.16
1.4 Detail of caption 20 “Interest expense and similar charges”
Change 2004 2003 (+/–) %
a) On foreign currency liabilities 84,868 82,075 2,793 3.40
Interest on foreign currency liabilities relates to that paid and accrued on liabilities in currencies outside the euro-zone.
394 Part C - Statement of income Section 2 Commission
Statement of income captions 40 and 50, analysed below, present the following balances:
Change Statement of income captions 2004 2003 (+/–) %
40. Commission income 593,094 529,639 63,455 11.98
50. Commission expense 72,148 57,061 15,087 26.44
The figures for 2004 include the following amounts relating to Cassa di Risparmio di Alessandria: - caption 40: 23,983 thousand Euro; - caption 50: 1,276 thousand Euro.
2.1 Analysis of caption 40 “Commission income”
Change 2004 2003 (+/–) %
a) Guarantees given 22,057 20,206 1,851 9.16
b) Credit derivatives 2,620 4,904 – 2,284 – 46.57
c) Management, dealing and consultancy services: 297,276 271,382 25,894 9.54 1. Dealing in securities 22,032 23,283 – 1,251 – 5.37 2. Dealing in currency 10,043 9,537 506 5.31 3. Portfolio management: 175,210 161,298 13,912 8.63 3.1 Individual 36,157 31,419 4,738 15.08 3.2. Collective 139,053 129,879 9,174 7.06 4. Custody and administration of securities 13,811 13,743 68 0.49 5. Custodian bank 15,722 14,434 1,288 8.92 6. Placement of securities 23,909 15,259 8,650 56.69 7. Acceptance of instructions 18,079 15,414 2,665 17.29 8. Consultancy 1,213 1,344 – 131 – 9.75 9. Distribution of third-party services 17,257 17,070 187 1.10 9.1 Portfolio management 0 0 0 n.s. a) individual 0 0 0 n.s. b) collective 0 0 0 n.s. 9.2. Insurance products 13,557 13,485 72 0.53 9.3. Other products 3,700 3,585 115 3.21
d) Collection and payment services 120,965 112,095 8,870 7.91
e) Servicing for securitisation transactions 697 870 – 173 – 19.89
f) Tax collection services 0 0 0 n.s.
g) Other services 149,479 120,182 29,297 24.38
Total 593,094 529,639 63,455 11.98
“Other services” include: commission on loans granted (110,614 thousand Euro), commission on derivative contracts (7,932 thousand Euro), safe-deposit box fees (1,858 thousand Euro).
Part C - Statement of income 395 2.2 Detail of caption 40 “commission income”: “Product and service distribution channels”
Breakdown of commission income Change by distribution channel 2004 2003 (+/–) %
a) At own branches: 210,319 189,978 20,341 10.71 1. Portfolio management 169,250 157,684 11,566 7.33 2. Placement of securities 23,909 15,259 8,650 56.69 3. Distribution of third-party services and products 17,160 17,035 125 0.73
b) Door-to-door: 6,057 3,649 2,408 65.99 1. Portfolio management 5,960 3,614 2,346 64.91 2. Placement of securities 0 0 0 n.s. 3. Distribution of third-party services and products 97 35 62 177.14
Total 216,376 193,627 22,749 11.75
2.3 Analysis of caption 50 “Commission expense”
Change 2004 2003 (+/–) %
a) Guarantees received 333 498 – 165 – 33.13
b) Credit derivatives 6,185 4,599 1,586 34.49
c) Management and dealing services 24,401 16,018 8,383 52.33 1. Dealing in securities 4,180 3,467 713 20.57 2. Dealing in currency 1 0 1 n.s. 3. Portfolio management 12,336 5,451 6,885 126.31 3.1 Own portfolio 12,336 5,451 6,885 126.31 3.2 Third-party portfolio 0 0 0 n.s. 4. Custody and administration of securities 4,389 4,345 44 1.01 5. Placement of securities 1,492 570 922 161.75 6. Door-to-door sales of securities, financial products, and services 2,003 2,185 – 182 – 8.33
d) Collection and payment services 25,033 22,657 2,376 10.49
e) Other services 16,196 13,289 2,907 21.88
Total 72,148 57,061 15,087 26.44
The caption “Other services” mainly includes dealing commission.
396 Part C - Statement of income Section 3 Profits (losses) on financial transactions
Profits and losses on financial transactions (caption 60 of the statement of income) are analysed as follows:
Change Statement of income captions 2004 2003 (+/–) %
60. Profits (losses) on financial transactions 40,986 26,935 14,051 52.17
The figures for 2004 reported under caption 60 include 2,162 thousand Euro relating to Cassa di Risparmio di Alessandria.
3.1 Analysis of caption 60 “Profits/losses on financial transactions”
Captions/Transactions Security Currency Other transactions transactions transactions
A.1 Revaluations 127,081 0 1,492
A.2 Writedowns – 107,754 0 – 56,835
B. Other profits/losses 79,888 9,570 – 12,456
Total 99,215 9,570 – 67,799
1. Government securities 25,057
2. Other debt securities 42,480
3. Equities 155,787
4. Security derivatives – 124,109
Part C - Statement of income 397 Caption 60: Comparison with Change the prior year 2004 2003 (+/–) %
Security transactions 99,215 37,072 62,143 167.63
A.1 Revaluations 127,081 162,491 – 35,410 – 21.79
A.2 Writedowns – 107,754 – 129,680 – 21,926 – 16.91
B. Other profits/losses 79,888 4,261 75,627 n.s.
Currency transactions 9,570 8,406 1,164 13.85
Other transactions – 67,799 – 18,543 49,256 265.63
A.1 Revaluations 1,492 10,511 – 9,019 – 85.81
A.2 Writedowns – 56,835 – 1,337 55,498 n.s.
B. Other profits/losses – 12,456 – 27,717 – 15,261 – 55.06
Total 40,986 26,935 14,051 52.17
398 Part C - Statement of income Section 4 Administrative expenses
Statement of income caption 80, which is detailed below, presents the following balances:
Change Statement of income captions 2004 2003 (+/–) %
80. Administrative expenses 944,497 864,335 80,162 9.27
a) Payroll 604,566 550,335 54,231 9.85
b) Other 339,931 314,000 25,931 8.26
The figures for 2004 reported under caption 80 include 62,826 thousand Euro relating to Cassa di Risparmio di Alessandria.
4.1 Average number of employees, by level
Change 2004 2003 (+/–) %
a) Managers 170 150 20 13.33
b) 3rd and 4th grade officials 1,648 1,574 74 4.70
c) Other staff 6,696 6,292 404 6.42
Total 8,514 8,016 498 6.21
Number of employees, Change by level (at year end) 2004 2003 (+/–) %
a) Managers 175 154 21 13.64
b) 3rd and 4th grade officials 1,639 1,583 56 3.54
c) Other staff 6,637 6,256 381 6.09
Total 8,451 7,993 458 5.73
The number of employees for 2004 includes Cassa di Risparmio di Alessandria: average number: 588 (13 managers, 75 officials, 500 other staff); year end: 589 (13 managers, 74 officials, 502 other staff).
Part C - Statement of income 399 Analysis of caption 80 “Administrative expenses”
Change 2004 2003 (+/–) %
a) Payroll costs: 604,566 550,335 54,231 9.85 Wages and salaries 407,393 375,886 31,507 8.38 Social security charges 131,802 126,475 5,327 4.21 Severance indemnities 29,398 28,866 532 1.84 Pensions and similar commitments 8,203 7,321 882 12.05 Other costs 27,770 11,787 15,983 135.60
b) Other administrative expenses: 339,931 314,000 25,931 8.26 Indirect taxes: 52,217 45,921 6,296 13.71 Paid 51,767 43,084 8,683 20.15 Unpaid 450 2,837 – 2,387 – 84.14
Other: 287,714 268,079 19,635 7.32 Postage, telecommunications charges 38,281 34,981 3,300 9.43 Property rentals 34,114 30,418 3,696 12.15 Cash counting, external processing, personnel secondment expenses and IT outsourcing 31,698 27,386 4,312 15.75 Equipment lease charges 27,604 29,465 – 1,861 – 6.32 Leasehold and equipment maintenance charges 21,689 20,005 1,684 8.42 Professional services √16,143 14,889 1,254 8.42 Electricity, heating, cleaning and water 18,213 15,180 3,033 19.98 Advertising and publicity 15,654 15,747 – 93 – 0.59 Personnel-related costs other than remuneration 14,169 14,927 – 758 – 5.08 Legal services 11,358 8,920 2,438 27.33 Security and transport of valuables 8,749 8,117 632 7.79 S.I.A. administration costs 6,718 5,634 1,084 19.24 Directors and Statutory Auditors 5,417 4,311 1,106 25.66 Membership and association fees 4,932 4,869 63 1.29 Transport and porterage 4,877 4,852 25 0.52 Stationery and printing 4,477 5,015 – 538 – 10.73 Insurance premiums 3,715 4,223 – 508 – 12.03 Entertaining 2,550 2,030 520 25.62 Cultural and community-related initiatives 1,402 1,132 270 23.85 Premiums paid on behalf of customers 1,215 1,001 214 21.38 Meetings and conferences 944 1,504 – 560 – 37.23 Surveys and searches 812 907 – 95 – 10.47 Purchase of consumables 406 363 43 11.85 Other 12,577 12,203 374 3.06
Total 944,497 864,335 80,162 9.27
“Other costs” indicated in “Payroll” mostly refer to leaving incentives (19,462 thousand Euro as of 31 December 2004 and 8,063 thousand Euro as of 31 December 2003), as well as scholarships and other community-related charges. They also include costs for the purchase of BPM shares and related contributions as part of the share accumulation plan for the Parent Bank’s employees (4,276 thousand Euro). “Personnel-related costs other than remuneration” indicated among “Other” include reimbursement of travelling expenses, training costs and expenses incurred for running the staff canteen.
400 Part C - Statement of income Section 5 Adjustments, writebacks and provisions
Statement of income captions 90, 100, 120, 130, 140, 150 and 160 present the following balances:
Change Statement of income captions 2004 2003 (+/–) %
90. Adjustments to tangible and intangible fixed assets 191,980 167,630 24,350 14.53
100. Provisions for risks and charges 30,363 41,911 – 11,548 – 27.55
120. Adjustments to loans and provisions for guarantees and commitments 179,343 188,573 – 9,230 – 4.89
130. Writeback of adjustments to loans and provisions for guarantees and commitments 49,033 51,949 – 2,916 – 5.61
140. Provisions for loan losses 0 542 – 542 – 100.00
150. Adjustments to financial fixed assets 14,851 4,843 10,008 206.65
160. Writebacks to financial fixed assets 969 4,312 – 3,343 – 77.53
The figures for 2004 include the following amounts relating to Cassa di Risparmio di Alessandria: - caption 90: 3,207 thousand Euro; - caption 100: 300 thousand Euro; - caption 120: 13,717 thousand Euro; - caption 130: 4,181 thousand Euro; - caption 150: 1,615 thousand Euro.
Analysis of caption 90 “Adjustments to tangible and intangible fixed assets”
Change 2004 2003 (+/–) %
a) Intangible fixed assets: 123,731 114,963 8,768 7.63 - intangible assets 25,965 21,032 4,933 23.45 - deferred charges 23,068 19,234 3,834 19.93 - goodwill 74,698 74,697 1 0.00
b) Tangible fixed assets: 47,300 49,225 – 1,925 – 3.91 ordinary depreciation - premises 12,570 11,711 859 7.33 - furniture, machines and vehicles 27,273 30,859 – 3,586 – 11.62 - plant 6,954 6,580 374 5.68 permanent writedowns on assets to be leased 503 75 428 n.s.
c) Goodwill arising on consolidation 15,629 2,420 13,209 n.s.
d) Goodwill arising on application of the equity method 5,320 1,022 4,298 n.s.
Total 191,980 167,630 24,350 14.53
Part C - Statement of income 401 Analysis of caption 100 “Provisions for risks and charges”
Change 2004 2003 (+/–) %
Provisions for the year: 30,363 41,911 – 11,548 – 27.55
- recovery procedures and legal disputes 19,476 19,148 328 1.71
- miscellaneous provisions 10,054 22,551 – 12,497 – 55.42
- provision for taxation 833 212 621 292.92
5.1 Analysis of caption 120 “Adjustments to loans and provisions for guarantees and commitments”
Change 2004 2003 (+/–) %
a) Adjustments to loans 173,210 169,755 3,455 2.04 of which: - Adjustments for general country risks 0 42 – 42 – 100.00 - Other general adjustments 23,673 290 23,383 n.s.
b) Provisions for guarantees and commitments 6,133 18,818 – 12,685 – 67.41 of which: - Provisions for general country risks 16 0 16 n.s. - Other general adjustments 1,181 1,890 – 709 – 37.51
Total 179,343 188,573 – 9,230 – 4.89
Analysis of caption “Adjustments Change to loans” under a) above 2004 2003 (+/–) %
Adjustments from valuations 123,472 91,800 31,672 34.50 Adjustments for loan losses (art. 101 New Income Tax Consolidation Act (former art. 66)) 49,738 77,955 – 28,217 – 36.20
Total 173,210 169,755 3,455 2.04
402 Part C - Statement of income Analysis of caption 130 “Writebacks to loans and provisions for guarantees and commitments”
Change 2004 2003 (+/–) %
a) Writeback of loans previously written down 40,364 49,456 – 9,092 – 18.38 b) Writeback of provisions for guarantees and commitments 8,669 2,493 6,176 247.73
Total 49,033 51,949 – 2,916 – 5.61
Analysis of caption “Writebacks to Change loans” under a) above 2004 2003 (+/–) %
- Recovery of items previously recorded as a loss (art. 101 New I.T.C.A. (former art. 66)) 15,961 16,484 – 523 – 3.17 - Collection of loans previously written down 16,066 16,959 – 893 – 5.27 - Revaluations of loans previously written down 8,337 16,013 – 7,676 – 47.94
Total 40,364 49,456 – 9,092 – 18.38
Analysis of caption 140 “Provisions for loan losses”
Change 2004 2003 (+/–) %
- Portion relating to default interest 0 542 – 542 – 100.00 art. 71.6, of Decree 917/86
Total 0 542 – 542 – 100.00
Part C - Statement of income 403 Analysis of caption 150 “Adjustments to financial fixed assets”
Change 2004 2003 (+/–) %
Adjustments to equity investments 8,662 1,272 7,390 n.s. Adjustments to investment securities 6,189 3,571 2,618 73.31
Total 14,851 4,843 10,008 206.65
For details on adjustments to equity investments see Section 3.6 “Changes in equity investments”.
Analysis of caption 160 “Writebacks to financial fixed assets”
Change 2004 2003 (+/–) %
Writeback of adjustments to equity investments 969 4,312 – 3,343 – 77.53
Total 969 4,312 – 3,343 – 77.53
404 Part C - Statement of income Section 6 Other statement of income captions
Statement of income captions 30, 70, 110, 190, 200 and 240 present the following balances:
Change Statement of income captions 2004 2003 (+/–) %
30. Dividends and other revenues 80,142 98,821 – 18,679 – 18.90
70. Other operating income 128,361 110,849 17,512 15.80
110. Other operating expenses 5,640 5,550 90 1.62
190. Non-recurring income 69,002 38,035 30,967 81.42
200. Non-recurring charges 22,918 20,497 2,421 11.81
240. Income taxes for the year 49,593 41,417 8,176 19.74
The figures for 2004 include the following amounts relating to Cassa di Risparmio di Alessandria: - caption 30: 1,219 thousand Euro; - caption 70: 9,767 thousand Euro; - caption 110: 158 thousand Euro; - caption 190: 2,386 thousand Euro; - caption 200: 8,779 thousand Euro; - caption 240: 5,814 thousand Euro.
Analysis caption 30 “Dividends and other revenues”
Change 2004 2003 (+/–) %
a) On shares, quotas and other forms of capital 65,136 91,949 – 26,813 – 29.16 - Dividends 65,136 68,197 – 3,061 – 4.49 - Tax credit 0 23,752 – 23,752 – 100.00
b) On equity investments 15,006 6,872 8,134 118.36 - Dividends 14,992 6,872 8,120 118.16 - Tax credit 14 0 14 n.s.
c) On investments in Group companies 0 0 0 n.s. - Dividends 0 0 0 n.s. - Tax credit 0 0 0 n.s.
Total 80,142 98,821 – 18,679 – 18.90
of which: - Dividends 80,128 75,069 5,059 6.74 - Tax credit 14 23,752 – 23,738 – 99.94
Part C - Statement of income 405 6.1 Analysis of caption 70 “Other operating income”
Change 2004 2003 (+/–) %
Rental and leasing income 3,401 3,566 – 165 – 4.63
Other income 124,960 107,283 17,677 16.48 - Recovery of taxes 44,421 38,373 6,048 15.76 - Recovery of expenses and commission on deposits and overdrafts 47,925 38,135 9,790 25.67 - Recoveries of IT services and structures made available to third parties 302 204 98 48.04 - Return of employee cheques for corporate office 280 267 13 4.87 - Expenses recharged on property rented to third parties 481 300 181 60.33 - Gain on disposal of leased properties 175 0 175 n.s. - Other 31,376 30,004 1,372 4.57
Total 128,361 110,849 17,512 15.80
6.2 Analysis of caption 110 “Other operating expenses”
Change 2004 2003 (+/–) %
- Losses on disposal of leased properties 70 0 70 n.s.
- Miscellaneous expenses 5,570 5,550 20 0.36
Total 5,640 5,550 90 1.62
406 Part C - Statement of income 6.3 Analysis of caption 190 “Non-recurring income”
Change 2004 2003 (+/–) %
Gains on the disposal of : 22,162 12,063 10,099 83.72 - Equity investments and investment securities 11,557 6,280 5,277 84.03 - Tangible fixed assets 10,573 5,772 4,801 83.18 - Other assets 32 11 21 190.91
Out-of-period income: 16,328 17,282 – 954 – 5.52 - Additional interest income, commission and operating income 3,363 3,842 – 479 – 12.47 - Lower interest expense, commission and administrative expenses 6,278 3,316 2,962 89.32 - Higher recoveries of non-performing loans 55 0 55 n.s. - Other out-of-period income 6,632 10,124 – 3,492 – 34.49
Overaccrual of liabilities, release of provisions no longer required to the statement of income: 18,791 8,690 10,101 116.24 - Provision for possible loan losses (collection of default interest deemed recoverable) 0 1,076 – 1,076 – 100.00 - Company pension funds 4 0 4 n.s. - Provision for taxation 8,371 1,053 7,318 n.s. - Holidays not taken 1,262 1,393 – 131 – 9.40 - Provision for recovery procedures and legal disputes 6,203 4,744 1,459 30.75 - Interbank Deposit Guarantee Fund 0 111 – 111 – 100.00 - Provision for other charges 2,951 313 2,638 n.s.
Out-of-period items associated with eliminating cumulative fiscal distortions under the policy of “defiscalisation”: 11,721 0 11,721 n.s. - Assets with a unit value of less than 516.46 Euro 5,258 0 5,258 n.s. - Assets subject to accelerated depreciation 162 0 162 n.s. - Reserve for default interest on loans 6,301 0 6,301 n.s.
Total 69,002 38,035 30,967 81.42
Part C - Statement of income 407 6.4 Analysis of caption 200 “Non-recurring charges”
Change 2004 2003 (+/–) %
Losses on disposal of: 2,798 74 2,724 n.s. - Equity investments and investment securities 2,628 15 2,613 n.s. - Intangible fixed assets 13 0 13 n.s. - Tangible fixed assets 157 59 98 166.10
Out-of-period expense: 20,120 20,423 – 303 – 1.48 - Additional interest expense, commission and administrative expenses 7,607 2,796 4,811 172.07 - Lower interest income, commission and operating income 4,925 6,868 – 1,943 – 28.29 - Charges relating to insurance claims 2,659 1,640 1,019 62.13 - Prior year taxation 484 3,289 – 2,805 – 85.28 - Other 4,445 5,830 – 1,385 – 23.76
Total 22,918 20,497 2,421 11.81
Analysis of caption 240 “Income taxes for the year”
Change 2004 2003 (+/–) %
- Corporate income tax (IRES) 21,356 13,885 7,471 53.81 - Flat-rate tax 4,425 4,461 – 36 – 0.81 - Regional income tax (IRAP) 18,118 15,188 2,930 19.29 - Local taxes of foreign branches and companies 5,694 7,883 – 2,189 – 27.77
Total 49,593 41,417 8,176 19.74
Income taxes for the year Corporate Flat-rate tax Regional Local taxes of Total income tax income tax foreign (IRES) (IRAP) branches and companies
1. Current taxes 5,957 4,425 15,615 5,694 31,691 2. Change in deferred tax assets 12,420 0 1,575 0 13,995 3. Change in deferred tax liabilities 2,979 0 928 0 3,907
4. Income taxes for the year 21,356 4,425 18,118 5,694 49,593
408 Part C - Statement of income Section 7 Other information regarding the statement of income
7.1 Geographical distribution of revenues
Statement of income captions Italy Other EU Other Total Total countries countries 2004 2003
10. Interest income and similar revenues 1,421,084 141,301 32,886 1,595,271 1,389,572 30. Dividends and other revenues 80,142 0 0 80,142 98,821 40. Commission income 573,352 15,810 3,932 593,094 529,639 60. Profits on financial transactions 36,855 5,542 – 1,411 40,986 26,935 70. Other operating income 128,352 0 9 128,361 110,849
Total 2,239,785 162,653 35,416 2,437,854 2,155,816
Revenues are classified in relation to the location of the Parent Bank’s foreign branches and companies that originated the transactions.
Part C - Statement of income 409 Part D Other information
Section 1. Directors and Statutory Auditors
411 Section 1 Directors and Statutory Auditors
1.1 Remuneration
2004 2003
a) Directors 3,470 2,923
b) Statutory Auditors 529 619
Total 3,999 3,542
The remuneration shown here relates to the Directors and Statutory Auditors of the Parent Bank, even if they only remained in office for part of 2004, whether at the Parent Bank or at subsidiaries. The amounts are stated net of VAT and compulsory social contributions. The remuneration of Directors of the Parent Company includes their share of 2004 net profit (article 47 of the Articles of Association) on the basis of the proposal for distribution of profits submitted to the Shareholders’ Meeting of 23 April 2005.
A schedule, presented in part D “Other information” of the explanatory notes to the Parent Bank’s financial statements, lists, by name and amount, the remuneration earned by the Parent Bank’s Directors, Statutory Auditors and General Managers (even if they only remained in office for part of the year – for whatever position or task, including in relation to subsidiary companies), as required by article 78 of CONSOB resolution 11971 dated 14.5.1999 in implementation of Decree 58 dated 24.2.1998 and subsequent amendments.
1.2 Loans granted and guarantees given
2004 2003
a) Directors 8,749 4,871
b) Statutory Auditors 867 796
Total 9,616 5,667
The above transactions are regulated in accordance with current legislation (article 136.1 of the Banking Consolidation Act) and instructions from supervisory institutions.
Part D - Other information 413 Attachments to the Consolidated Financial Statements
Pro-forma financial statements as of 31 December 2003 Statement of changes in consolidated financial position
415 Construction of the pro-forma financial statements for 2003
Notes on the preparation of pro-forma financial statements for 2003
Following the inclusion of Cassa di Risparmio di Alessandria in the scope of consolidation, pro-forma consolidated financial statements for the BPM Group are being presented for comparison purposes. They have been prepared on the assumption that Cassa di Risparmio di Alessandria was fully consolidated from 1 January 2003.
In detail, the 50% interest in Carinord 1, parent company of Cassa di Risparmio di Alessandria, absorbed by Banca Popolare di Milano in 2004, was carried at equity in the original financial statements for 2003. For the purposes of the 2003 pro-forma the value of this investment and the related goodwill (booked as “goodwill arising on the application of the equity method”) have both been eliminated.
The 2003 financial statements of Cassa di Risparmio di Alessandria have been consolidated on a line-by-line basis, assuming the same capital increase made in 2004 for the merger of Carinord 1 and the same higher value attributed to the assets and goodwill (booked as “goodwill arising on consolidation”) of Cassa di Risparmio di Alessandria as in 2004.
Attachmentes to the Financial Statements 417 Pro-forma financial statements as of 31 December 2003
Assets BPM Group Cassa Total Pro-forma Pro-forma di Risparmio adjustments total (amounts in thousands of Euro) di Alessandria
10. Cash and deposits with central banks and post offices 185,836 18,333 204,169 204,169
20. Treasury bills and similar bills eligible for refinancing with central banks 729,062 58,307 787,369 787,369
30. Due from banks: 3,558,632 230,999 3,789,631 3,789,631 a) repayable on demand 425,132 89,030 514,162 514,162 b) other deposits 3,133,500 141,969 3,275,469 3,275,469
40. Loans to customers 17,076,986 1,253,733 18,330,719 18,330,719 Of which: - Loans using public funds 4,720 0 4,720 4,720
50. Bonds and other debt securities: 5,915,769 183,008 6,098,777 6,098,777 a) public entities 1,605,327 84,937 1,690,264 1,690,264 b) banks 1,919,907 42,241 1,962,148 1,962,148 Of which -Treasury bonds 10,566 845 11,411 11,411 c) financial institutions 1,615,277 48,080 1,663,357 1,663,357 Of which: -Treasury bonds 0 0 0 0 d) other issuers 775,258 7,750 783,008 783,008
60. Shares, quotas and other forms of capital 1,475,824 4,655 1,480,479 1,480,479
70. Equity investments 254,890 19,867 274,757 – 63,738 211,019 a) carried at equity 94,771 0 94,771 – 63,738 31,033 b) other 160,119 19,867 179,986 179,986
80. Investments in group companies 41,398 0 41,398 0 41,398 a) carried at equity 41,390 0 41,390 41,390 b) other 8 0 8 0 8
90. Goodwill arising on consolidation 12,102 0 12,102 119,176 131,278
100. Goodwill arising on application of the equity method 81,313 0 81,313 – 78,279 3,034
110. Intangible fixed assets 695,821 1,844 697,665 Of which: - Start-up costs 16,981 0 16,981 16,981 - - Goodwill 555,824 0 555,824 555,824
120. Tangible fixed assets 389,077 27,148 416,225 7,048 423,273 Of which: - Assets to be leased 1,762 0 1,762 1,762
130. Capital subscribed, not paid-in 0 0 0 0 Of which: - Called capital 0 0 0 0
140. Own shares 37 0 37 37 (Par value Euro 21)
150. Other assets 1,803,870 51,576 1,855,446 1,855,446
160. Accrued income and prepayments: 221,120 7,336 228,456 228,456 a) accrued income 192,019 6,817 198,836 198,836 b) prepayments 29,101 519 29,620 29,620 Of which: - Discount on issue of securities 3,355 0 3,355 3,355
Total assets 32,441,737 1,856,806 34,298,543 – 15,793 34,282,750
418 Attachmentes to the Financial Statements Pro-forma financial statements as of 31 December 2003
Liability captions BPM Group Cassa Total Pro-forma Pro-forma di Risparmio adjustments total (amounts in thousands of Euro) di Alessandria 10. Due to banks: 7,250,428 52,298 7,302,726 7,302,726 a) repayable on demand 1,484,343 23,320 1,507,663 1,507,663 b) time deposits or with notice period 5,766,085 28,978 5,795,063 5,795,063
20. Due to customers: 15,613,876 1,091,558 16,705,434 16,705,434 a) repayable on demand 13,040,002 889,176 13,929,178 13,929,178 b) time deposits or with notice period 2,573,874 202,382 2,776,256 2,776,256
30. Securities issued 4,043,618 440,031 4,483,649 4,483,649 a) bonds 3,369,583 420,984 3,790,567 3,790,567 b) certificates of deposit 515,256 19,002 534,258 534,258 c) other 158,779 45 158,824 158,824
40. Public funds administered 4,720 0 4,720 4,720
50. Other liabilities 1,594,773 49,833 1,644,606 7,603 1,652,209
60. Accrued expenses and deferred income 193,243 6,367 199,610 199,610 a) accrued expenses 160,886 5,110 165,996 165,996 b) deferred income 32,357 1,257 33,614 33,614
70. Provision for severance indemnities 229,509 23,480 252,989 252,989
80. Provisions for risks and charges 332,317 41,822 374,139 374,139 a) pensions and similar commitments 27,633 26,126 53,759 53,759 b) taxation 81,187 11,737 92,924 92,924 c) risks and charges arising on consolidation 0 0 0 0 d) other 223,497 3,959 227,456 227,456
90. Reserve for possible loan losses 8,773 2,028 10,801 10,801
100. Reserve for general banking risks 0 0 0 0
110. Subordinated liabilities 819,379 0 819,379 819,379
120. Negative goodwill arising on consolidation 0 0 0 0
130. Negative goodwill arising on application of the equity method 0 0 0 0
140. Minority interests 2,296 0 2,296 29,407 31,703
150. Share capital 1,157,982 61,920 1,219,902 25,201 1,245,103
160. Share premium reserve 339,689 0 339,689 339,689
170. Reserves 783,093 65,586 848,679 – 51,954 796,725 a) legal reserve 180,713 14,300 195,013 – 14,300 180,713 b) reserve for own shares 37 0 37 37 c) statutory reserves 521,834 45,089 566,923 – 45,089 521,834 d) other reserves 80,509 6,197 86,706 7,435 94,141
180. Revaluation reserves 0 13,619 13,619 – 10,895 2,724
190. Retained earnings (accumulated losses) 0 0 0 0
200. Net profit (loss) for the year 68,041 8,264 76,305 – 15,155 61,150
Total liabilities and shareholders’ equity 32,441,737 1,856,806 34,298,543 – 15,793 34,282,750
Attachmentes to the Financial Statements 419 Pro-forma financial statements as of 31 December 2003
Guarantees and commitments BPM Group Cassa Total Pro-forma Pro-forma di Risparmio adjustments total (amounts in thousands of Euro) di Alessandria
10. Guarantees given 3,033,003 71,049 3,104,052 3,104,052 Of which: - Acceptances 26,873 225 27,098 27,098 - Other guarantees 3,006,130 70,824 3,076,954 3,076,954
20. Commitments 4,795,210 207,161 5,002,371 5,002,371 Of which: - Repurchase agreements 0 0 0 0
420 Attachmentes to the Financial Statements Pro-forma financial statements as of 31 December 2003
Statement of income captions BPM Cassa Total Pro-forma Pro-forma Group di Risparmio adjustments total (amounts in thousands of Euro) di Alessandria
10. Interest income and similar revenues 1,389,572 80,075 1,469,647 1,469,647 Of which: - Loans to customers 787,062 64,167 851,229 851,229 - Debt securities 307,637 9,554 317,191 317,191 20. Interest expense and similar charges – 802,716 – 26,938 – 829,654 – 829,654 Of which: - Due to customers – 152,482 – 12,353 – 164,835 – 164,835 - Securities issued – 110,521 – 14,168 – 124,689 – 124,689 30. Dividends and other revenues 98,821 1,109 99,930 – 349 99,581 a) from shares, quotas and other forms of capital 91,949 98 92,047 92,047 b) from equity investments 6,872 1,011 7,883 – 349 7,534 c) from investments in group companies 0 0 0 0 40. Commission income 529,639 23,681 553,320 553,320 50. Commission expense – 57,061 – 1,193 – 58,254 – 58,254 60. Profits (losses) on financial transactions 26,935 6,413 33,348 33,348 70. Other operating income 110,849 9,390 120,239 120,239 80. Administrative expenses – 864,335 – 60,770 – 925,105 – 925,105 a) payroll – 550,335 – 38,211 – 588,546 – 588,546 Of which: - Wages and salaries – 375,886 – 23,921 – 399,807 – 399,807 - Social security charges – 126,475 – 6,686 – 133,161 – 133,161 - Severance indemnities – 28,866 – 2,324 – 31,190 – 31,190 - Pensions and similar commitments – 7,321 – 4,162 – 11,483 – 11,483 b) other administrative expenses – 314,000 – 22,559 – 336,559 – 336,559 90. Adjustments to tangible and intangible fixed assets – 167,630 – 2,979 – 170,609 – 13,502 – 184,111 100. Provisions for risks and charges – 41,911 – 600 – 42,511 – 42,511 110. Other operating expenses – 5,550 – 154 – 5,704 – 5,704 120. Adjustments to loans and provisions for guarantees and commitments – 188,573 – 8,043 – 196,616 – 196,616 130. Writeback of adjustments to loans and provisions for guarantees and commitments 51,949 1,004 52,953 52,953 140. Provisions for loan losses – 542 – 720 – 1,262 – 1,262 150. Adjustments to financial fixed assets – 4,843 – 327 – 5,170 – 5,170 160. Writebacks to financial fixed assets 4,312 0 4,312 4,312 170. Net profit (loss) of investments valued under the equity method 13,846 0 13,846 13,846 180. Profit from operating activities 92,762 19,948 112,710 – 13,851 98,859 190. Non-recurring income 38,035 1,363 39,398 39,398 200. Non-recurring charges – 20,497 – 5,713 – 26,210 – 26,210 210. Non-recurring income, net 17,538 – 4,350 13,188 13,188 220. Use of the provision for risks and charges arising on consolidation 0 0 0 0 230. Change in the reserve for general banking risks 0 0 0 0 240. Income taxes for the year – 41,417 – 7,334 – 48,751 349 – 48,402 250. Net profit attributable to minority interests – 842 0 – 842 – 1,653 – 2,495
260. Net profit (loss) for the year 68,041 8,264 76,305 – 15,155 61,150
Attachmentes to the Financial Statements 421 Statement of changes in consolidated financial position
2004 Voci dell’attivo 31.12.2004 31.12.2003 (in thousands of euro) Subtotal Total
Source of funds
Funds generated from operations 375,518 Net profit for the year 127,615 Change in provision for severance indemnities and other payroll provisions 787 Change in provision for taxation – 32,063 Changes in other provisions – 70,105 Adjustments to tangible and intangible fixed assets 191,980 Provisions for risks and charges 29,530 Provisions for loan losses 0 Net adjustments to loans and provisions for guarantees and commitments 127,774
Increase in deposits and other sources of funds 1,188,283 Securities issued 1,121,824 Other liabilities 36,021 Accrued expenses and deferred income 30,438
Decrease in funds invested 1,466,192 Cash and deposits with central banks and post offices 1,756 Securities 1,459,217 Due from banks 3,754 Equity investments 1,465
Increase in shareholders' equity 103,602 Increase in capital 87,121 Merger surplus reserve 13,632 Other changes 2,849
Increase in minority interests 82,738
Total sources of funds 3,216,333
Application of funds
Increase in funds invested 2,159,594 Loans to customers 1,825,238 Tangible and intangible fixed assets 213,400 Accrued income and prepayments 19,809 Other assets 101,147
Decrease in deposits and other sources of funds 869,857 Due to banks 489,271 Due to customers 380,586
Decrease in shareholders’ equity 61,326 Dividends paid and other amounts allocated from 2003 net profit 61,326
Net effect of consolidating Cassa di Risparmio di Alessandria 125,556 Increase in assets 1,856,806 Increase in liabilities – 1,705,389 Increase in minority interests – 25,861
Total application of funds 3,216,333
422 Attachmentes to the Financial Statements Report of the Board of Statutory Auditors
423 4) We have no remarks concerning exceptions to the law. To the Shareholders of the Parent Bank Banca Popolare di The results of the consolidated financial statements agree Milano, with the Parent Company’s books of account and the figures communicated by the companies included in the as part of our duties, we have reviewed (pursuant to consolidation. article 44 of Decree 127/91 and article 30 of Decree 87/92) the consolidated financial statements of the Banca 5) The scope of consolidation has been determined in Popolare di Milano Group for the year ended 31 December accordance with the provisions of articles 25 and 26 of 2004, which close with a net profit of 127,615 thousand Decree 87 dated 27 January 1992 and since the required Euro, total assets of 34,669,655 thousand Euro, conditions are met, it excludes those companies that have consolidated shareholders’ equity of 2,391,081 thousand been valued using the equity method or at cost. Euro (excluding the net profit for the year), and guarantees and commitments of 8,247,230 thousand Euro. 6) The consolidated financial statements have been audited by PricewaterhouseCoopers SpA, which issued its The financial statements were provided to us, together opinion without any qualifications. with the report on operations, within the terms laid down by law. In our opinion, the consolidated financial statements correctly represent the balance sheet, statement of income On the basis of these documents, we can confirm that: and financial position of the Banca Popolare di Milano Group for the year ended 31 December 2004, in 1) We have carried out our audit work in accordance with compliance with the regulations mentioned above. the standards laid down by the Bank of Italy in its instructions dated 15 July 1992 and subsequent amendments. In compliance with these standards, we The Board of Statutory Auditors have made reference to the laws governing consolidated Marco Baccani financial statements, interpreted and supplemented by Emilio Cherubini the correct accounting standards laid down by the Italian Enrico Radice Accounting Profession. Ezio Maria Simonelli Ettore Maria Tosi 2) The financial statements of Group companies have been checked by their own Boards of Statutory Auditors, and by their respective independent auditors. Milan, 6 April 2005 3) The accounting and consolidation policies adopted by the directors have been applied correctly and comply with the law.
424 Report of the Statutory Auditors Report of the Independent Auditors
425 Report of the Independent Auditors 427 428 Report of the Independent Auditors Item 2 on the Agenda of the Ordinary and Extraordinary Shareholders’ Meeting
Appointment to make up the numbers of the Board of Directors, in accordance with art. 33 of the Articles of Association
429 Appointment to make up the numbers of the Board Shareholders, of Directors, in accordance with art. 33 of the Articles of Association as already described at the shareholders’ meeting held in April 2004, the negotiations over the merger of Carinord 1 S.p.A. into BPM involved the Bank signing an Outline Agreement for assimilating Cassa di Risparmio di Alessandria into the BPM Group. Under this Agreement, the Bank undertook to foster the appointment of a member of Fondazione to its own Board of Directors.
After the April shareholders’ meeting and for the purposes of allowing the Bank to fulfil this undertaking (also in view of the maximum number of twenty directors allowed by BPM’s Articles of Association), Professor Maria Martellini – a director of the Bank since April 2000 – tendered her resignation in a letter dated 29 June 2004, displaying great sensitivity and foresight in the Group’s regard. The Board of Directors therefore wishes to take this opportunity to express its warmest thanks to Professor Martellini for her important contribution to the board’s work over her term in office, and in her role as chairman of the Internal Control Committee.
Following this resignation, the Board of Directors was able, on the same date of 29 June 2004, to coopt Mr. Gianfranco Pittatore – chairman of Fondazione CR Alessandria – as a new director of BPM.
In accordance with the Articles of Association, Mr. Pittatore’s term in office expires at today’s meeting. He is eligible for re-election.
The shareholders’ meeting is required to make up the numbers of the Board of Directors, by appointing one director, who must be a shareholder and have presented a valid candidacy. The new appointee will remain in office until the meeting called to approve the financial statements for the year ended 31 December 2005, being the end of term in office of the director who resigned and is now being replaced.
In accordance with article 33.3 of the Articles of Association and article 27 of the Regulations for Shareholders’ Meetings, the appointment will be made by majority vote according to the highest number of votes obtained individually by the various candidates.
430 Item 2 on the Agenda Item 3 on the Agenda of the Ordinary and Extraordinary Shareholders’ Meeting
Appointment to make up the numbers of the Board of Statutory Auditors, including the appointment of its chairman, in accordance with articles 40 and 41 of the Articles of Association
431 Appointment to make up the numbers of the Board Shareholders, of Statutory Auditors, including the appointment of its chairman, in accordance with articles 40 and 41 You are informed that – following the resignation for of the Articles of Association health reasons of Giovanni Giunta, chairman of the Board of Statutory Auditors, on 8 July 2004 – Marco Baccani, one of the statutory auditors, was asked to cover the office of chairman and Enrico Radice, an alternate auditor, took over the office of statutory auditor. The appointments of these auditors expire at today’s meeting, although their original mandates – of auditor and alternate auditor respectively – will expire at the shareholders’ meeting called to approve the financial statements for the year ended 31 December 2005, like for the rest of the Board of Statutory Auditors.
You are also informed that Marcello Priori, one of BPM’s alternate auditors, tendered his resignation in a letter dated 20 October 2004.
The Board of Directors wishes to express its gratitude to Mr. Giunta for the invaluable work performed over the course of his mandate and we wish him a full recovery.
In accordance with article 2401 of the Italian Civil Code, today’s meeting is required to appoint the chairman of the Board of Statutory Auditors and to make up the numbers of the board itself, choosing its new members from those shareholders who have been validly proposed for these positions.
The mandate of these replacement auditors will expire, along with that of the rest of the Board of Statutory Auditors, at the shareholders’ meeting called to approve the financial statements for the year ended 31 December 2005.
With regard to the appointment of the chairman of the Board of Statutory Auditors, you are informed that if the person appointed is one of the existing members of the Board of Statutory Auditors, this will obviously result in the appointment of another auditor to replace the member elected to the office of chairman.
432 Item 3 on the Agenda Item 4 on the Agenda of the Ordinary and Extraordinary Shareholders’ Meeting
Appointment of the Arbitration Committee, in accordance with art. 42 of the Articles of Association
433 Appointment of the Arbitration Committee, in Shareholders, accordance with art. 42 of the Articles of Association Today’s meeting also marks the end of the three-year term in office of the members of the Arbitration Committee, namely the chairman, Alfiero Fontana, two acting arbitrators, Italo Ciancia and Dario Mezgec, and the two alternate arbitrators, Gianfranco Carugati and Giancarlo Pagani.
We extend our thanks to the outgoing Arbitration Committee for the work performed during their term in office and inform you that – in accordance with article 42 of the Articles of Association – the shareholders’ meeting is now required to appoint three acting arbitrators and two alternates, chosen from amongst those shareholders who have presented valid candidacies. Once appointed, the Committee will elect a chairman from amongst its number.
The arbitrators currently in office are all eligible for re- election.
434 Item 4 on the Agenda Item 5 on the Agenda of the Ordinary and Extraordinary Shareholders’ Meeting
Directors’ Report – pursuant to art. 72 of CONSOB Regulation 11971 (and subsequent amendments) – on the amendments to articles 1, 11, 13, 16, 18, 21, 25, 28, 32, 33, 34, 36, 40, 41 and 42 of the Articles of Association
435 Directors’ Report – pursuant to art. 72 of CONSOB Shareholders, Regulation 11971 (and subsequent amendments) – on the amendments to articles 1, 11, 13, 16, 18, 21, 25, 28, the Bank’s Board of Directors has prepared this report in 32, 33, 34, 36, 40, 41 and 42 of the Articles of accordance with article 72.1 of the Regulations approved Association under CONSOB resolution 11971 dated 14 May 1999 (as subsequently amended). It is designed to describe and (prepared in accordance with Format 3 in Attachment explain the proposal to amend certain provisions of the 3A to CONSOB Regulation 11971/99 and subsequent Articles of Association (point 5 on the agenda to the amendments) extraordinary meeting).
As you will be aware, the approval of Decree 310 dated 28 December 2004 (entering into force on 14 January 2005) signalled the final stage in the process of reforming the laws governing limited and cooperative companies, which had started with Decree 366 of 3 October 2001 and brought to fruition in Decrees 6/2003 and 37/2004.
With reference to cooperative banks – initially excluded by the Reform under article 223 terdecies of the transitional civil code instructions – Decree 310/04 has sought to introduce rules for simply coordinating the special law governing them with the civil code provisions on limited and cooperative companies as rewritten under Decree 6 of 17 January 2003, and established 30 June 2005 as the deadline within which cooperative banks must update their Articles of Association for the new mandatory civil code provisions.
For the purposes of making this revision, the Board of Directors has reviewed the Bank’s Articles of Association and examined their compliance with the new statutory provisions, bearing in mind the contents of new article 150 bis of Decree 385/93 – introduced by Decree 310/04 – concerning the applicability of these regulations to cooperative banks and the related guidelines published by the Bank of Italy.
This review has revealed the need for certain amendments to the Articles of Association in light of the new mandatory statutory provisions, as well as, in certain cases, representing an opportunity to make other limited changes in respect of the new discretionary or optional provisions.
As explained below, almost all the proposed amendments to the Articles of Association are directly associated with the entry into force of the reforms to company law. This has also been an opportunity to make certain other changes of a formal nature, such as correcting outdated legislative references and updating certain legal institutions that no longer reflect BPM’s current status as a “listed bank” (for example, with reference to the dematerialised nature of shares and their centralised management).
We shall now describe the proposed amendments to the individual articles of the Articles of Association, grouping
436 Item 5 on the Agenda them together according to whether they derive from meetings and for the latest calling of the ordinary general mandatory, discretionary or optional statutory provisions, meeting respectively. Article 25, clause 4 has been along with a brief description of the specific reasons for amended to replace the specified time limit currently the change. envisaged with the civil code expression “without delay” with reference to the calling of meetings at the request of With reference to the mandatory provisions introduced by members. the new rules on company law, the proposed amendments For consistency, the deadlines for inclusion in the Register relate to the following articles of the Articles of Association: of Members of presenters of lists of candidates for the Board of Directors (article 32, clause 3) and the Board of article 11 (admission to membership): Statutory Auditors (article 41, clause 3) have also been with reference to the procedure for admission to amended to be expressed in “days” rather than “months”. membership, new civil code article 2528, clause 1, makes Similarly, in compliance with the provisions of new civil it compulsory to inform the person concerned of the code article 2383, clause 2 and article 2400, clause 1, the resolution to accept the application for membership. It is amendments to article 32, clause 2 and article 40, clause 2 therefore necessary to amend article 11 of the Articles of involve indicating the duration in office in terms of Association, eliminating clause three (which referred to “financial years” rather than “years” and specifying that the system of so-called “silent assent”) and adding to the mandate expires with the approval of the financial clause four the explicit provision that the person statements for the last financial year of the term in office concerned must be informed, within ten days, from the (which in the case of statutory auditors and arbitrators is resolution of the decision to accept the application for defined as the third financial year); membership or – in accordance with article 32, clause 5 of the Banking Consolidation Act – reject it. For the purposes article 21, clause 1 (determination of the share of providing timely information to prospective members, it premium for the ordinary issue of shares): has been decided to shorten to twenty days the deadline pursuant to new article 2528, clause 2, the general within which the Arbitration Committee must pass meeting is now responsible for determining the share judgement on requests for reconsidering the rejection; premium on the ordinary issue of new shares at the recommendation of the Board of Directors. The article 16 (cancellation of membership) and article 42, cancellation of clause one of article 21 (whereby this was clause 4 (Arbitration Committee): the duty of the board) is therefore designed to eliminate a for the purposes of making the Arbitration Committee’s provision that is no longer valid and replace it with the task (specific to and typical of cooperative banks) of direct application of the statutory rules. At the same time reconsidering resolutions for cancellation compatible with as making this amendment we have eliminated the the provisions of civil code article 2533 – which allows provision for “interest” payable on the ordinary issue of members to appeal against the decision through the shares during the year, whose application is both rather courts within sixty days of its notification – clause two of impractical and also now rare; article 16 has been amended and clause three has been eliminated, to underline the optional nature of the appeal article 33, clauses 1 and 5 (replacement of directors): to the Arbitration Committee and allowing the member – the proposed addition to article 33 of the Articles of with a shortening of the procedural deadlines for this body Association, with the explicit provision that the majority – the chance to appeal through the courts once this of directors remaining in office must be appointed by the committee has announced its decision. general meeting, is based on new article 2386, clauses 1 The same reasons are behind the proposed amendment to and 2, which prevents directors who have ceased to hold article 42, clause 4, which provides for the elimination of office from being replaced by co-option if the majority of the phrase “on a final basis” with reference to the those remaining in office have not been appointed by the decisions taken by the Arbitration Committee; general meeting;
article 13, clause 1 (participation at general article 34 (board meetings): meetings), article 25, clause 2 and 4 (calling of general for the purposes of ensuring effective, orderly conduct of meetings), article 32, clauses 2 and 3 (Board of the duties entrusted to the Board of Directors, new civil Directors), article 40, clause 2 and article 41, clause 3 code article 2381, clause 1, gives a central role to the figure (Board of Statutory Auditors) and article 42, clause 2 of chairman who, not only calls the Board of Directors but (Arbitration Committee): also “coordinates the work of the directors and sees to it as required by new civil code article 2538, clause 1, and that they all receive adequate information on the matters article 2364, clause 2, the proposed amendments to the contained on the agenda”. above-mentioned clauses of articles 13 and 25 basically The proposed amendment to article 34 of the Articles of involve indicating the time limits in terms of “days” rather Association, with the inclusion a new clause three, reflects than “months” for a member’s inclusion in the Register of this civil code provision; Members allowing them to participate at general
Item 5 on the Agenda 437 article 36 (powers of the Board of Directors): to make a number of minor, purely formal changes to in compliance with the provisions of new civil code article correct certain references to legislation or statutory 2381, clause 5, the first proposed amendment to article 36 provisions that are no longer applicable and, in one case, (with the introduction of a new clause six) is associated to reflect in the Articles of Association the rules of best with the statutory requirement to state in the Articles of practice generally applied by the Bank. Association the frequency with which sub-committees must report to the Board of Directors and Board of The following proposed amendments to the Articles of Statutory Auditors “on the company’s general Association fall into this category: performance and outlook, as well as on the more important transactions, by size and nature, carried out by article 1, clauses 2 and 3 (Register of Banking Groups): the company and its subsidiaries”. The proposed text in clause two of this article it is proposed to replace the envisages a minimum frequency of three months for such reference to Decree 356/90 (repealed for the part relating reporting and extends its contents to include the exposure to the Register of Banking Groups, now contained in to risks. article 64 of Decree 385/93), with the general reference “to The final amendment to article 36 involves replacing, in the relevant register maintained by the Bank of Italy” and the last clause, the reference to operations “involving a in clause three, the reference to Decree 356/90 with the potential conflict of interest” with operations “in which the expression “in compliance with prevailing legislation”, directors have an interest, on their own account or that of suitable for encompassing any further legislative changes; third parties”. This is for the purposes of complying with the provisions of the new text of article 150 of Decree article 18, clauses 1 and 2 (Shares): 58/98 (as amended by Decree 37/04). Reference is also The current text of article 18, clause 1, of the Articles of made to the obligations of each director under new civil Association refers to a system of share circulation that is no code article 2391. longer valid. More specifically, it does not reflect the centralised management of shares in a dematerialised With reference to the discretionary and optional format nor does it take account of the current listed status provisions introduced by the new rules on company law, of the BPM stock. It is therefore proposed to eliminate it in the proposed amendments relate to the following articles part. of the Articles of Association: As regards article 18, clause 2, it is proposed replacing the reference to civil code article 2522 (now article 2529 article 13, clause 1 (participation at general meetings): following the renumbering of the articles for the new new civil code article 2370, clause 2, requires that the company law rules), with the general phrase “in Articles of Association of companies who fund themselves accordance with prevailing laws”; with equity capital (like BPM) may not set a time limit of “more than two working days” for meeting the article 32, clause 2 (Board of Directors) and article requirements needed to take part in general meetings 41, clause 4 (Board of Statutory Auditors): (compared with five days in the code’s previous version). For with regard to the procedures and deadlines for filing the purposes of ensuring orderly and proper verification of candidate lists for the Board of Directors and Board of the rights to attend general meetings (also in relation to the Statutory Auditors, it has been decided – in accordance large number of participants who usually register), it has with the requirements of the “Code of Conduct for Listed been decided to supplement article 13, clause 1 of the Companies”, which BPM has adopted in full – to specify in Articles of Association, with the inclusion of the time limit the Articles of Association the time limit for presenting of “two working days” for meeting the above requirements; lists (“at least ten days before the date scheduled for the meeting in first call”). This deadline has already been article 28, clause 1 (notices of general meetings): applied by the Bank in the instructions contained in the as allowed by new civil code article 2366, clause 2, it has notice calling the meeting. been decided to expand clause one of article 28 of the Articles of Association in order to allow general meetings to be called by publishing a notice either in the “Italian For the reasons explained above, the Bank’s Board of Official Gazette” or a newspaper (whose name must be Directors proposes that the general meeting votes to given in the Articles of Association). Where necessary, this amend articles 1, 11, 13, 16, 18, 21, 25, 28, 32, 33, 34, 36, will make the procedures for publishing this notice 40, 41 and 42 of the Articles of Association as follows: simpler and quicker. For the purposes of providing members with due information, the current requirement to publish the notice in a total of two national newspapers still holds goods.
As already stated, the overall amendments to the Articles of Association have also taken account of the opportunity
438 Item 5 on the Agenda Current text Proposed text
Art. 1 Art. 1
Banca Popolare di Milano was formed on 12 December Banca Popolare di Milano was formed on 12 December 1865 by deed (notarised Coridori) sanctioned by Royal 1865 by deed (notarised Coridori) sanctioned by Royal Decree 1710 dated 23 December of the same year, which Decree 1710 dated 23 December of the same year, which also approved the Articles of Association. It was formed as also approved the Articles of Association. It was formed as a limited-liability, joint-stock co-operative bank under the a limited-liability, joint-stock co-operative bank under the name “BANCA POPOLARE DI MILANO - Società name “BANCA POPOLARE DI MILANO - Società cooperativa a responsabilità limitata”, alternatively cooperativa a responsabilità limitata”, alternatively abbreviated to “BIPIEMME” or “BPM”. The Bank is abbreviated to “BIPIEMME” or “BPM”. The Bank is governed by these Articles of Association. governed by these Articles of Association.
The Bank is the parent bank of the BIPIEMME - BANCA The Bank is the parent bank of the BIPIEMME - BANCA POPOLARE DI MILANO banking group, and is entered POPOLARE DI MILANO banking group, and is entered as such in the relevant register established by Decree 356 as such in the relevant register established by Decree 356 of 1990. of 1990 maintained by the Bank of Italy.
In its role as parent bank, the Bank issues guidelines to In its role as parent bank, the Bank issues guidelines to the other group companies concerning implementation of the other group companies concerning implementation of Bank of Italy instructions designed to ensure the group’s Bank of Italy instructions designed to ensure the group’s continuing stability; this activity is carried out in continuing stability; this activity is carried out in compliance with Decree 356/1990, and reflects the Bank’s compliance with Decree 356/1990 prevailing legislation functions of group-level direction and co-ordination. and reflects the Bank’s functions of group-level direction and co-ordination.
These functions are exercised exclusively by the Board of These functions are exercised exclusively by the Board of Directors, which also alone decides matters relating to Directors, which also alone decides matters relating to implementation of Bank of Italy instructions. implementation of Bank of Italy instructions.
Art. 11 Art. 11
The status of member is acquired through subscription to The status of member is acquired through subscription to newly-issued shares, or the purchase or inheritance of newly-issued shares, or the purchase or inheritance of existing shares. existing shares.
Prospective members must apply to the Board of Directors Prospective members must apply to the Board of in writing, according to the methods and terms laid down Directors in writing, according to the methods and terms by the Board. laid down by the Board.
Such applications are deemed to be automatically Such applications are deemed to be automatically approved in the absence of notification to the contrary approved in the absence of notification to the contrary delivered to the applicant’s address within 60 days of the delivered to the applicant’s address within 60 days of the Bank’s receipt of the application. Bank’s receipt of the application.
Resolutions to approve or reject applications for Resolutions to approve or reject applications for membership must be taken bearing in mind the Bank’s membership must be taken bearing in mind the Bank’s interests, the rules embodied in these articles and the interests, the rules embodied in these articles and the spirit of the co-operative principle. spirit of the co-operative principle and notified to the person concerned within ten days.
The Board of Directors must reconsider an application for The Board of Directors must reconsider an application for membership where requested to do so by the Arbitration membership where requested to do so by the Arbitration Committee established under these articles; a Committee established under these articles; a representative of the prospective member joins the representative of the prospective member joins the committee for the purposes of its relevant deliberations. A committee for the purposes of its relevant deliberations. A cont’d cont’d
Item 5 on the Agenda 439 Current text Proposed text cont’d cont’d request for reconsideration must be submitted within 30 request for reconsideration must be submitted within 30 days of communication of the resolution concerned; the thirty days of communication of the resolution for Arbitration Committee must announce its findings within rejection. the The Arbitration Committee must announce 30 days of the request. its findings within 30 twenty days of receiving the request for reconsideration.
Those whose applications for membership have been Those whose applications for membership have been denied continue to exercise the rights relative to the shares denied continue to exercise the rights relative to the held, subject to the provisions of the penultimate and last shares held, subject to the provisions of the penultimate clauses of article 21. and last clauses of article 21.
Art. 13 Art. 13
At least three months must elapse from the date of At least three months ninety days must elapse from the inclusion on the Register of Members before a member date of inclusion in the Register of Members before a may attend a general meeting. member may attend a general meeting scheduled in first call and provided the requirements of article 2370.2 of the Italian Civil Code have been met at least two working days before the date of the meeting itself.
Each member is entitled to a single vote, regardless of the Each member is entitled to a single vote, regardless of the number of shares held; postal voting is not permitted. number of shares held; postal voting is not permitted.
A member may arrange to be represented at general A member may arrange to be represented at general meetings by another member, by means of written proxy. meetings by another member, by means of written proxy.
No member may represent more than two other members. Each member can act as proxy for a maximum of two It is up to the chairman of the general meeting to check other members. It is up to the chairman of the general that all proxies are valid, according to the provisions of meeting to check that all proxies are valid, according to law, the Articles of Association and the Regulations for the provisions of law, the Articles of Association and the General Meetings approved by the ordinary general Regulations for General Meetings approved by the meeting. ordinary general meeting.
Where shares are subject to lien or usufruct, the right to Where shares are subject to lien or usufruct, the right to vote remains exclusively with the owner. vote remains exclusively with the owner.
Art. 16 Art. 16
The Board of Directors may cancel membership in cases The Board of Directors may cancel membership in cases where the member: where the member:
a) becomes disqualified, incapacitated or incurs a a) becomes disqualified, incapacitated or incurs a judgement that involves permanent or temporary judgement that involves permanent or temporary disqualification from holding public office; disqualification from holding public office;
b) is made bankrupt or subject to some other process b) is made bankrupt or subject to some other process designed to protect the interests of creditors; designed to protect the interests of creditors;
c) is in serious default in relation to obligations under the c) is in serious default in relation to obligations under the law or these Articles of Association; law or these Articles of Association;
d) is in breach of contractual obligations to the Bank. d) is in breach of contractual obligations to the Bank.
Cancellation of membership may be challenged, provided Subject to the provisions of article 2533 of the Italian cont’d cont’d
440 Item 5 on the Agenda Current text Proposed text cont’d cont’d that the member concerned refers the matter to the Civil Code, cCancellation of membership may be Arbitration Committee within thirty days of receiving challenged provided the member concerned refers the notification of the cancellation; the committee will receive matter can be submitted to the Arbitration Committee representations from the member concerned, in person or within thirty twenty days of receiving notification of the by proxy, and from the Board of Directors, and will cancellation; the committee will receive representations announce its findings within thirty days of the complaint. from the member concerned, in person or by proxy, and from the Board of Directors, and will announce its findings within thirty twenty days of receiving the complaint. The committee’s decision may be appealed through the The committee’s decision may be appealed through the courts within thirty days of its publication. courts within thirty days of its publication.
Membership status is lost when the entire shareholding is Membership status is lost when the entire shareholding is disposed of, however this is found out by the Bank, which disposed of, however this is found out by the Bank, which then has to communicate this circumstance to the person then has to communicate this circumstance to the person concerned. concerned.
Art. 18 Art. 18
Shares are transferable on the legally-recognised bases, Shares are transferable on the legally-recognised bases, including by means of endorsement; however, unless including by means of endorsement; however, unless otherwise provided in law, transfer is unenforceable otherwise provided in law, transfer is unenforceable against the Bank unless approved by the Board of against the Bank unless approved by the Board of Directors. The relevant approval procedure is the same as Directors. The relevant approval procedure is the same as that described in article 11. that described in article 11.
The Board of Directors may acquire or reimburse shares The Board of Directors may acquire or reimburse shares in the Bank in accordance with article 2522 of the Italian in the Bank in accordance with article 2522 of the Italian Civil Code, subject to the limits imposed by available Civil Code prevailing laws, subject to the limits imposed profits and distributable reserves as reported in the latest by available profits and distributable reserves as reported approved financial statements and designated for the in the latest approved financial statements and purpose by the members in general meeting. designated for the purpose by the members in general meeting.
Art. 21 Art. 21 The following matters are determined by the Board of Directors on an annual basis, following approval of the The following matters are determined by the Board of financial statements by the members in general meeting Directors on an annual basis, following approval of the and after consultation with the Board of Statutory financial statements by the members in general meeting Auditors: and after consultation with the Board of Statutory a) the bonus payable on any new shares on top of their par Auditors: value, to be calculated in relation to the adequacy of the a) the bonus payable on any new shares on top of their par Bank’s equity reserves; value, to be calculated in relation to the adequacy of the b) the rate of interest to be applied in connection with new Bank’s equity reserves; shares issued during the year. b) the rate of interest to be applied in connection with new shares issued during the year. No shareholder’s interest may exceed 0.50% of the share capital. As soon as it becomes aware that this limit has No shareholder’s interest may exceed 0.50% of the share been exceeded, the Bank serves formal notice of the breach capital. As soon as it becomes aware that this limit has on the shareholder concerned. The excess shares must be been exceeded, the Bank serves formal notice of the sold within a year of such notice; after this deadline, the breach on the shareholder concerned. The excess shares related rights pertaining to these shares are acquired by must be sold within a year of such notice; after this the Bank until their disposal. deadline, the related rights pertaining to these shares are acquired by the Bank until their disposal. cont’d cont’d
Item 5 on the Agenda 441 Current text Proposed text cont’d cont’d The above-mentioned limit does not apply to mutual The above-mentioned limit does not apply to mutual investment funds; the relevant limits in such cases are investment funds; the relevant limits in such cases are those imposed by the rules of the fund concerned. those imposed by the rules of the fund concerned.
Art. 25 Art. 25
Meetings of the members are of two types, ordinary and Meetings of the members are of two types, ordinary and extraordinary. extraordinary.
An ordinary meeting must called at least annually, within An ordinary meeting must called at least annually, within the first four months of the close of the financial year, and the first four months within one hundred and twenty must be held in Italy (at the registered office or another days of the close of the financial year, and must be held in location specified in the meeting’s notice). Italy (at the registered office or another location specified in the meeting’s notice).
Extraordinary meetings are called in the circumstances Extraordinary meetings are called in the circumstances defined in the relevant legislation. defined in the relevant legislation.
Also, the directors are obliged to call a meeting of the Also, the directors are obliged to call a meeting of the members within one month of an official of the Bank or members within one month without delay if an official of otherwise receiving a written request to this effect bearing the Bank or otherwise receives a written request to this authenticated signatures, which specifies the agenda and effect bearing authenticated signatures, which specifies is supported by 2,000 or more members with voting rights the agenda and is supported by 2,000 or more members as at the date of presenting the request. with voting rights as at the date of presenting the request.
Art. 28 Art. 28
Meetings of the members are called by the Board of Meetings of the members are called by the Board of Directors in accordance with the procedures and Directors in accordance with the procedures and deadlines specified by current regulations. deadlines specified by current regulations, by publishing a notice in the “Italian Official Gazette” or the financial newspaper “Il Sole 24 Ore”.
The notice of calling must, in any case, be published in For the purposes of providing members with due two national newspapers. information, the notice of calling must, in any case, be shown to have been published in two national newspapers. Such notices must include details of: a) the time, date and place of the meeting; Such notices must include details of: b) the agenda, whether proposed by members under a) the time, date and place of the meeting; article 25 or otherwise; b) the agenda, whether proposed by members under c) the time, date and place of any second calling, in article 25 or otherwise; accordance with article 30. c) the time, date and place of any second calling, in accordance with article 30.
Art. 32 Art. 32 The Board of Directors consists of a minimum of sixteen and a maximum of twenty directors, including the The Board of Directors consists of a minimum of sixteen chairman and two deputy chairmen, who are elected by a and a maximum of twenty directors, including the single ballot. chairman and two deputy chairmen, who are elected by a single ballot. All members of the Board of Directors must also be All members of the Board of Directors must be members members of the Bank. of the Bank. cont’d cont’d
442 Item 5 on the Agenda Current text Proposed text cont’d cont’d They remain in office for three years and can be re-elected. They remain in office for three years. Directors may not be appointed for a period of more than three financial years; their term in office expires on the date of the general meeting called to approve the financial statements for their last financial year in office and they can be re-elected.
The general meeting appoints the directors by means of The general meeting appoints the directors by means of ballot-papers containing lists of candidates presented by ballot-papers containing lists of candidates presented by the shareholders in which the candidates have to be the members in which the candidates have to be numbered progressively. Each list has to be presented by numbered progressively. Each list has to be presented by at least three hundred shareholders who have been at least three hundred shareholders who have been recorded in the Register of Members for at least three recorded in the Register of Members for at least three months and who can document their right to attend and months ninety days and who can document their right to vote at the meeting according to current rules and attend and vote at the meeting under current rules and regulations. Each member is only allowed to present one regulations. Each member is only allowed to present one list; if this rule is not respected, the signature of the list; if this rule is not respected, the signature of the member in question will not be taken into account for any member in question will not be taken into account for any of the lists. of the lists.
The lists of candidates, signed by those presenting them, The lists of candidates, signed by those presenting them, have to be deposited at the Bank’s head office according to have to be deposited at the Bank’s head office according to the terms laid down in the Regulations for General the terms laid down in the Regulations for General Meetings, if they exist; and if they do not, as laid down in Meetings, if they exist; and if they do not, as laid down in the notice calling the meeting; they also have to be the notice calling the meeting at least ten days before the accompanied by each candidate’s curriculum vitae and date scheduled for the meeting in first call; they also the declarations by which they individually accept their have to be accompanied by each candidate’s curriculum candidature and confirm, under their own responsibility, vitae and the declarations by which they individually that there are no reasons for ineligibility or accept their candidature and confirm, under their own incompatibility, and that they meet the requirements responsibility, that there are no reasons for ineligibility or prescribed by law or by the Articles of Association for incompatibility, and that they meet the requirements holding office as a director. prescribed by law or by the Articles of Association for holding office as a director.
Any lists presented that do not comply with these rules Any lists presented that do not comply with these rules will be treated as though they had not been presented. will be treated as though they had not been presented. However, if the documentation relating to individual However, if the documentation relating to individual candidates on a list is incomplete, this only entails the candidates on a list is incomplete, this only entails the exclusion of the candidates concerned and does not affect exclusion of the candidates concerned and does not affect the presentation of their particular list, which remains the presentation of their particular list, which remains valid. valid.
Each candidate can only be included on one list; Each candidate can only be included on one list; otherwise, the person will be considered ineligible. otherwise, the person will be considered ineligible.
Nor can persons without the necessary prerequisites be Nor can persons without the necessary prerequisites be elected; and if they have been elected, they fall from office. elected; and if they have been elected, they fall from office.
Without prejudice to other reasons for incompatibility Without prejudice to other reasons for incompatibility foreseen under current regulations, persons who are or foreseen under current regulations, persons who are or who subsequently become directors, employees or statutory who subsequently become directors, employees or auditors of other banks or their subsidiaries cannot statutory auditors of other banks or their subsidiaries become directors, except in the case where the entity cannot become directors, except in the case where the concerned is a centralised co-operative banking structure entity concerned is a centralised co-operative banking or a bank or company that belongs to an affiliated structure or a bank or company that belongs to an banking group. affiliated banking group. cont’d cont’d
Item 5 on the Agenda 443 Current text Proposed text cont’d cont’d If the reason for incompatibility is not resolved within 60 If the reason for incompatibility is not resolved within 60 days of the election, or if the circumstances arose days of the election, or if the circumstances arose subsequently, within 60 days of the person concerned subsequently, within 60 days of the person concerned being informed of the incompatibility, the director will be being informed of the incompatibility, the director will be considered to have automatically fallen from office. considered to have automatically fallen from office.
Those entitled to vote can only vote for one list at a time. Those entitled to vote can only vote for one list at a time.
Only lists that have reached a threshold of at least 10% of Only lists that have reached a threshold of at least 10% of the votes validly expressed at the general meeting will be the votes validly expressed at the general meeting will be taken into account for the purpose of appointing directors. taken into account for the purpose of appointing directors.
The procedure for electing directors, the chairman and the The procedure for electing directors, the chairman and the deputy chairmen is as follows: deputy chairmen is as follows:
if several lists have achieved the threshold if several lists have achieved the threshold
a) sixteen directors are taken from the list that won the a) sixteen directors are taken from the list that won the most votes, in the order in which they are listed; most votes, in the order in which they are listed;
b) the other directors, up to a maximum of four, are taken b) the other directors, up to a maximum of four, are taken from the other lists. To this end, the votes obtained by from the other lists. To this end, the votes obtained by these lists are subsequently divided by one, two, three and these lists are subsequently divided by one, two, three and four. The results obtained from this division are then four. The results obtained from this division are then progressively assigned to the candidates on each of these progressively assigned to the candidates on each of these lists, in the order in which they are listed. The results lists, in the order in which they are listed. The results attributed in this way to the candidates on the various attributed in this way to the candidates on the various lists are then ranked all together in declining order: the lists are then ranked all together in declining order: the candidates that are elected are those with the highest candidates that are elected are those with the highest results. In the event that several candidates have the same results. In the event that various candidates have the result, the one to be elected is the candidate on the list that same result, the one to be elected is the candidate on the has not yet elected any director or that has elected the list that has not yet elected any director or that has lowest number of directors. If lists have the same number elected the lowest number of directors. If lists have the of votes, and hence the same result, directors are same number of votes, and hence the same result, attributed to the lists by drawing lots; directors are attributed to the lists by drawing lots;
c) the director who features as the leading candidate on c) the director who features as the leading candidate on the list that won the highest number of votes is elected the list that won the highest number of votes is elected chairman; chairman;
d) the second and third candidates on the list that won the d) the second and third candidates on the list that won the most votes are elected deputy chairmen. most votes are elected deputy chairmen.
In the event that only one list has reached the threshold, In the event that only one list has reached the threshold, the first sixteen candidates on that list get elected. The the first sixteen candidates on that list get elected. The first, second and third candidates on the list are elected first, second and third candidates on the list are elected chairman and deputy chairmen respectively. chairman and deputy chairmen respectively.
If it proves impossible to appoint a Board of Directors by If it proves impossible to appoint a Board of Directors by following the above procedure, a new meeting of members following the above procedure, a new general meeting has has to be called. to be called.
Art. 33 Art. 33
If the Board loses one or more directors during the course If the Board loses one or more directors during the course cont’d cont’d
444 Item 5 on the Agenda Current text Proposed text cont’d cont’d of the year, the others must take steps to replace them, by of the year, the others must take steps to replace them, by passing a resolution approved by the Board of Statutory passing a resolution approved by the Board of Statutory Auditors, and choose, where possible, unelected Auditors and, provided the majority still consists of candidates who were on the same lists as the directors directors appointed by the general meeting, choose, who have ceased to hold office. where possible, unelected candidates who were on the same lists as the directors who have ceased to hold office.
The directors appointed in this way remain in office until The directors appointed in this way remain in office until the next general meeting. Replacement directors the next general meeting. Replacement directors appointed by the general meeting remain in office up to appointed by the general meeting remain in office up to the end of the period for which the replaced directors were the end of the period for which the replaced directors were appointed. appointed.
If the general meeting has to replace directors elected on If the general meeting has to replace directors elected on the majority list, then the appointment is made by means the majority list, then the appointment is made by means of a majority vote without necessarily drawing on the of a majority vote without necessarily drawing on the same list. same list.
If directors belonging to minority lists have to be replaced, If directors belonging to minority lists have to be replaced, the general meeting does so by means of a relative the general meeting does so by means of a relative majority vote, choosing them, where possible, from among majority vote, choosing them, where possible, from among the candidates on the same list as the director being the candidates on the same list as the director being replaced; such candidates have to confirm their candidacy replaced; such candidates have to confirm their candidacy at least ten days prior to the date set for the general at least ten days prior to the date set for the general meeting, together with their declarations that there is no meeting, together with their declarations that there is no reason why they should be ineligible for election, that reason why they should be ineligible for election, that there are no grounds for incompatibility, and that they there are no grounds for incompatibility, and that they have the prerequisites for the position laid down by law or have the prerequisites for the position laid down by law or by the Articles of Association; by the Articles of Association;
If there is no longer a majority of directors, the entire If there is no longer a majority of directors appointed by Board is considered to have fallen from office and a the general meeting, the entire Board is considered to general meeting has to be called to appoint new directors. have fallen from office and a general meeting has to be called to appoint new directors.
Should the entire board cease to hold office, the Board of Should the entire board cease to hold office, the Board of Statutory Auditors must call an emergency general Statutory Auditors must call an emergency general meeting to appoint a new board. In the interval, the meeting to appoint a new board. In the interval, the functions of the Board of Directors concerning the functions of the Board of Directors concerning the ordinary business of the Bank are performed by the Board ordinary business of the Bank are performed by the Board of Statutory Auditors. of Statutory Auditors.
In the event that the chairman or deputy chairmen resign, In the event that the chairman or deputy chairmen the procedure is as follows (bearing in mind that the resign, the procedure is as follows (bearing in mind that number of directors still has to be made up as explained the number of directors still has to be made up as above): explained above):
a) in the event that the chairman resigns, his functions are a) in the event that the chairman resigns, his functions to be performed by the elder deputy chairman up to the are to be performed by the elder deputy chairman up to next general meeting that can elect a new chairman; the next general meeting that can elect a new chairman;
b) in the event that one or both deputy chairmen resign, b) in the event that one or both deputy chairmen resign, they are to be replaced at the next general meeting. they are to be replaced at the next general meeting.
c) if the chairman and both deputy chairmen all resign, c) if the chairman and both deputy chairmen all resign, the director elected as part of the majority list and the director elected as part of the majority list and cont’d cont’d
Item 5 on the Agenda 445 Current text Proposed text cont’d cont’d designated by the Board will act as chairman. designated by the Board will act as chairman. In both cases, the next general meeting has to appoint In both cases, the next general meeting has to appoint replacements. replacements.
Art. 34 Art. 34
Meetings of the Board of Directors are normally held Meetings of the Board of Directors are normally held monthly. Meetings are called by the chairman; the notice monthly. Meetings are called by the chairman; the notice of meeting, accompanied by a detailed agenda, must be of meeting, accompanied by a detailed agenda, must be delivered at least one week before the meeting, or in urgent delivered at least one week before the meeting, or in cases sent by telegram, fax, telex or similar means two urgent cases sent by telegram, fax, telex or similar means days beforehand. two days beforehand.
Additional meetings must be held if sought by five or more Additional meetings must be held if sought by five or directors; in such cases, the requirements regarding notice more directors; in such cases, the requirements regarding and the agenda are the same as those just described. If notice and the agenda are the same as those just necessary, the directors requesting the meeting may call it described. If necessary, the directors requesting the directly. meeting may call it directly.
The chairman coordinates the work of the directors and sees to it that they all receive adequate information on the matters contained on the agenda.
The quorum for board meetings is a simple majority of the The quorum for board meetings is a simple majority of the directors in office. directors in office.
Board meetings are chaired by the chairman or, in his Board meetings are chaired by the chairman or, in his absence the deputy chairman (or either of these if there are absence the deputy chairman (or either of these if there are two). In the absence of the chairman and deputy two). In the absence of the chairman and deputy chairmen, chairmen, meetings are chaired by the longest-serving meetings are chaired by the longest-serving director; in the director; in the event of a tie, the older director takes the event of a tie, the older director takes the chair. chair. Resolutions are passed by a majority of those present; in Resolutions are passed by a majority of those present; in the event of a tie, the chairman of the meeting has a the event of a tie, the chairman of the meeting has a casting vote. casting vote.
Voting by proxy is not permitted. Voting by proxy is not permitted.
The minutes of board meetings are prepared and signed The minutes of board meetings are prepared and signed by the chairman and the secretary. by the chairman and the secretary.
Art. 36 Art. 36
The managerial powers of the Board of Directors extend to The managerial powers of the Board of Directors extend all matters of an ordinary and extraordinary nature, to all matters of an ordinary and extraordinary nature, except those reserved to the members under these Articles except those reserved to the members under these Articles or the relevant legislation. or the relevant legislation.
The Board approves long-term and other programmes for The Board approves long-term and other programmes for reserving shares for issue to employees or to collective reserving shares for issue to employees or to collective funds to which employees subscribe, involving the issue of funds to which employees subscribe, involving the issue of shares pursuant to articles 2349 or 2441 of the Italian shares pursuant to articles 2349 or 2441 of the Italian Civil Code and subject to approval by the general meeting, Civil Code and subject to approval by the general meeting, or by assigning own shares or shares in subsidiaries, or by or by assigning own shares or shares in subsidiaries, or by cont’d cont’d
446 Item 5 on the Agenda Current text Proposed text cont’d cont’d any other means. any other means. The Board may delegate certain of its powers to an The Board may delegate certain of its powers to an executive committee, on an annual basis provided at least executive committee, on an annual basis provided at least ten directors give their approval. The executive committee ten directors give their approval. The executive committee shall have not less than five nor more than seven shall have not less than five nor more than seven members, and shall comprise the chairman, deputy members, and shall comprise the chairman, deputy chairmen and other directors. chairmen and other directors.
Apart from the legislative restrictions on the committee’s Apart from the legislative restrictions on the committee’s powers, it shall not be responsible for approving the powers, it shall not be responsible for approving the purchase and sale of equity interests or any property, the purchase and sale of equity interests or any property, the matters referred to in article 44 of these articles, the matters referred to in article 44 of these articles, the Bank’s general management or organisational guidelines Bank’s general management or organisational guidelines or the granting of loans. or the granting of loans.
On appointing the committee, the Board determines its On appointing the committee, the Board determines its procedures and fixes the normal frequency of meetings as procedures and fixes the normal frequency of meetings as weekly. weekly.
The committee reports to the Board of Directors and the Board of Statutory Auditors, at least once per quarter, on the Bank’s general performance (including its exposure to risks) and outlook, as well as on the more important operations, by size and nature, carried out by the Bank and its subsidiaries.
The Board may assign special duties to one or more of its The Board may assign special duties to one or more of its members and, subject to the restrictions mentioned above, members and, subject to the restrictions mentioned above, fix the levels of authority of such members. It can also set fix the levels of authority of such members. It can also set up commissions and committees to carry out up commissions and committees to carry out investigations and/or to make proposals, deciding their investigations and/or to make proposals, deciding their membership and field of competence; one member of each membership and field of competence; one member of each of these commissions or committees has to be chosen by of these commissions or committees has to be chosen by the directors elected on a minority list. the directors elected on a minority list.
The Board appoints a secretary from among its number. The Board appoints a secretary from among its number.
The Board of Directors, directly or through the bodies to Except for the obligations of each director under civil which it has delegated powers, reports promptly to the code article 2391, Tthe Board of Directors, directly or Board of Statutory Auditors regarding its activities and through the bodies to which it has delegated powers, the operations of economic or financial significance reports promptly to the Board of Statutory Auditors carried out by the Bank and its subsidiaries. In regarding its activities and the operations of economic or particular, it reports on all operations involving a financial significance carried out by the Bank and its potential conflict of interest. This information is provided subsidiaries. In particular, it reports on all operations at least once per quarter, during meetings of the Board of involving a potential conflict of interest in which the Directors or the Executive Committee or in written reports directors have an interest, on their own account or that to the Board of Statutory Auditors. of third parties. This information is provided at least once per quarter, during meetings of the Board of Directors or the Executive Committee or in written reports to the Board of Statutory Auditors.
Art. 40 Art. 40 The Board of Statutory Auditors is made up of a chairman, four auditors and four alternate auditors, who The Board of Statutory Auditors is made up of a are elected from among the Bank’s members. chairman, four auditors and four alternate auditors, who cont’d cont’d
Item 5 on the Agenda 447 Current text Proposed text cont’d cont’d They remain in office for three years and can be re-elected. are elected from among the Bank’s members. They remain in office for three years three financial years expiring on the date of the general meeting called to approve the financial statements for their third financial year in office and can be re-elected. In accordance with the relevant legislation, the fees of the chairman and the auditors are fixed by the members in In accordance with the relevant legislation, the fees of the general meeting. chairman and the auditors are fixed by the members in general meeting.
Art. 41 Art. 41 The ordinary general meeting elects the Board of Statutory Auditors; the election of two auditors and two The ordinary general meeting elects the Board of alternate auditors is reserved for the minority Statutory Auditors; the election of two auditors and two shareholders. alternate auditors is reserved for the minority shareholders. Subject to the provisions of the last clause of this article, the Board of Statutory Auditors is appointed on the basis Subject to the provisions of the last clause of this article, of lists of candidates presented by the members in which the Board of Statutory Auditors is appointed on the basis the candidates have to be numbered progressively. of lists of candidates presented by the members in which the candidates have to be numbered progressively. Each list has to be presented by at least three hundred shareholders who have been recorded in the Register of Each list has to be presented by at least three hundred Members for at least three months and who can document shareholders who have been recorded in the Register of their right to attend and vote at the meeting according to Members for at least three months ninety days and who current rules and regulations. Each member is only can document their right to attend and vote at the allowed to present one list; if this rule is not respected, the meeting according to current rules and regulations. Each signature of the member in question will not be taken into member is only allowed to present one list; if this rule is account for any of the lists. not respected, the signature of the member in question will not be taken into account for any of the lists. The lists of candidates, signed by those presenting them, have to be deposited at the Bank’s head office according to The lists of candidates, signed by those presenting them, the terms laid down in the Regulations for General have to be deposited at the Bank’s head office according to Meetings, if they exist; and if they do not, as laid down in the terms laid down in the Regulations for General the notice of calling to the meeting; they also have to be Meetings, if they exist; and if they do not, as laid down in accompanied by each candidate’s curriculum vitae and the notice of calling to the meeting at least ten days the declarations by which they individually accept their before the date set for the general meeting in first call; candidature and confirm, under their own responsibility, they also have to be accompanied by each candidate’s that there are no reasons for ineligibility or curriculum vitae and the declarations by which they incompatibility, and that they meet the requirements individually accept their candidature and confirm, under prescribed by law or by the Articles of Association for their own responsibility, that there are no reasons for holding office. ineligibility or incompatibility, and that they meet the requirements prescribed by law or by the Articles of Association for holding office. For this purpose, it will be borne in mind that the business areas and sectors strictly related to those of the Bank are For this purpose, it will be borne in mind that the business banking, finance and insurance. areas and sectors strictly related to those of the Bank are banking, finance and insurance. Any lists that are presented without complying with these rules are to be treated as though they had not been Any lists that are presented without complying with these presented. However, if the documentation relating to rules are to be treated as though they had not been individual candidates on a list is incomplete, this only presented. However, if the documentation relating to entails the exclusion of the candidates concerned and does individual candidates on a list is incomplete, this only not affect the presentation of their particular list, which entails the exclusion of the candidates concerned and does remains valid. not affect the presentation of their particular list, which cont’d cont’d
448 Item 5 on the Agenda Current text Proposed text cont’d cont’d Each candidate can only be included on one list; remains valid. otherwise, the person will be considered ineligible. Each candidate can only be included on one list; otherwise, the person will be considered ineligible. Persons cannot be appointed as statutory auditors, and they fall from office if they have been elected, if they do not Persons cannot be appointed as statutory auditors, and have the prescribed prerequisites or if they hold office as a they fall from office if they have been elected, if they do statutory auditor in another five or more companies not have the prescribed prerequisites or if they hold office whose stocks are listed on Italian regulated markets or if as a statutory auditor in another five or more companies they are members of the boards of directors or statutory whose stocks are listed on Italian regulated markets or if auditors of other banks, unless they are affiliates or they are members of the boards of directors or statutory centralised co-operative banking structures. auditors of other banks, unless they are affiliates or centralised co-operative banking structures. Those entitled to vote can only vote for one list at a time. Those entitled to vote can only vote for one list at a time. The procedure for electing the Board of Statutory Auditors is as follows. The procedure for electing the Board of Statutory Auditors is as follows. Three auditors and two alternate auditors are taken from the list that won the most votes, in the order in which they Three auditors and two alternate auditors are taken from are listed; one auditor and one alternate auditor are taken the list that won the most votes, in the order in which they from the list that obtains the second highest number of are listed; one auditor and one alternate auditor are taken votes, in the order in which they are listed; the remaining from the list that obtains the second highest number of auditor and alternate auditors are taken from the list that votes, in the order in which they are listed; the remaining obtains the third highest number of votes, in the order in auditor and alternate auditors are taken from the list that which they are listed; obtains the third highest number of votes, in the order in which they are listed; Only lists that have reached a threshold of at least 10% of the votes validly expressed at the general meeting will be Only lists that have reached a threshold of at least 10% of taken into account for the purpose of appointing statutory the votes validly expressed at the general meeting will be auditors; in the event that only one list has reached this taken into account for the purpose of appointing statutory threshold, all the auditors and alternate auditors are auditors; in the event that only one list has reached this elected from this list; in the event that only two lists have threshold, all the auditors and alternate auditors are reached this threshold, the two auditors and two alternate elected from this list; in the event that only two lists have auditors to be elected by minority shareholders are taken reached this threshold, the two auditors and two alternate from the list with the second highest number of votes. auditors to be elected by minority shareholders are taken from the list with the second highest number of votes. If two or more lists obtain the same number of votes and this is relevant for the composition of the Board of If two or more lists obtain the same number of votes and Statutory Auditors, another round of voting is held this is relevant for the composition of the Board of between these lists by all of the members present at the Statutory Auditors, another round of voting is held meeting. between such lists by all of the members present at the meeting. The auditor who features as the leading candidate on the list that won the highest number of votes is elected The auditor who features as the leading candidate on the chairman. list that won the highest number of votes is elected chairman. If an auditor dies, resigns or leaves office, his place is taken by the eldest alternate auditor on the same list as If an auditor dies, resigns or leaves office, his place is the departing auditor. taken by the eldest alternate auditor on the same list as the departing auditor. If the chairman of the Board of Statutory Auditors is to be replaced, this office is taken over by the eldest auditor on If the chairman of the Board of Statutory Auditors is to be the same list as the former chairman; if it is not possible replaced, this office is taken over by the eldest auditor on to make replacements in accordance with the above the same list as the former chairman; if it is not possible principles, a general meeting of the members is called to to make replacements in accordance with the above make the necessary appointments. principles, a general meeting of the members is called to cont’d cont’d
Item 5 on the Agenda 449 Current text Proposed text cont’d cont’d If the general meeting is called, under the preceding make the necessary appointments. clause or in accordance with law, to appoint statutory If the general meeting is called, under the preceding and/or alternate auditors for the purposes of making up clause or in accordance with law, to appoint statutory the number of the Board of Statutory Auditors, the and/or alternate auditors for the purposes of making up procedures are as follows. the number of the Board of Statutory Auditors, the procedures are as follows. If the general meeting has to replace auditors elected on the majority list, then the appointment is made by means If the general meeting has to replace auditors elected on of a majority vote without necessarily drawing on the the majority list, then the appointment is made by means same list. If, however, it is necessary to replace auditors of a majority vote without necessarily drawing on the elected by the minority, the general meeting will replace same list. If, however, it is necessary to replace auditors them by majority vote, choosing them where possible from elected by the minority, the general meeting will replace the candidates appearing on the list to which the auditor them by majority vote, choosing them where possible from being replaced belonged, and who have confirmed their the candidates appearing on the list to which the auditor candidature at least ten days before the date of the being replaced belonged, and who have confirmed their meeting together with declarations that there are no candidature at least ten days before the date of the reasons for ineligibility or incompatibility, and that they meeting together with declarations that there are no meet the requirements prescribed for holding office. reasons for ineligibility or incompatibility, and that they meet the requirements prescribed for holding office. In the event that only one list is presented, the meeting votes on that list; the first five candidates progressively In the event that only one list is presented, the meeting numbered are elected as auditors and the next four votes on that list; the first five candidates progressively candidates after them are elected as alternate auditors; numbered are elected as auditors and the next four the auditor who features as the leading candidate on the candidates after them are elected as alternate auditors; list is elected chairman of the Board of Statutory the auditor who features as the leading candidate on the Auditors; if an auditor dies, resigns or leaves office, and it list is elected chairman of the Board of Statutory is also necessary to replace the chairman, their places are Auditors; if an auditor dies, resigns or leaves office, and it taken by the eldest alternate auditor and eldest auditor is also necessary to replace the chairman, their places are respectively. taken by the eldest alternate auditor and eldest auditor respectively. If there are no lists, the Board of Statutory Auditors and its chairman are to be appointed by a majority vote of the If there are no lists, the Board of Statutory Auditors and general meeting from among the candidates presented. its chairman are to be appointed by a majority vote of the general meeting from among the candidates presented.
Art. 42 Art. 42 The Arbitration Committee comprises three standing members and two alternate members who are elected by The Arbitration Committee comprises three standing the shareholders in general meeting from among their members and two alternate members who are elected by number. the members in general meeting from among their number. They remain in office for three years and can be re-elected. They remain in office for three years three financial years, expiring on the date of the general meeting called to approve the financial statements for their third financial year in office and can be re-elected. The committee elects a chairman from among its number. The committee elects a chairman from among its number. The committee’s decisions on the matters reserved to it by these Articles of Association are taken on a final basis by The committee’s decisions on the matters reserved to it by a simple majority of the committee members voting. The these Articles of Association are taken on a final basis by committee’s duties also include resolving any disputes a simple majority of the committee members voting. The that arise between the Bank’s shareholders, or between the committee’s duties also include resolving any disputes latter as shareholders and the Bank itself. that arise between the Bank’s members, or between the latter as members and the Bank itself. cont’d cont’d
450 Item 5 on the Agenda Current text Proposed text cont’d cont’d There are no procedural constraints on the working of the committee. There are no procedural constraints on the working of the committee.
Shareholders, for the reasons presented above, the Board of Directors proposes the following resolution:
“The extraordinary shareholders’ meeting of Banca Popolare di Milano,
having heard and approved the report of the Board of Directors;
having noted the opinion of the Board of Statutory Auditors;
subject to the authorisations required by law; hereby resolves:
to approve the new text of articles 1, 11, 13, 16, 18, 21, 25, 28, 32, 33, 34, 36, 40, 41 and 42 of the articles of association as proposed by the Board of Directors;
to grant the Chairman and each of the Deputy Chairmen, with separate signing authority, all the widest powers to execute the approved amendments to the articles of association in accordance with the law, and to make all the changes, amendments and additions to the resolution that might be requested by the legal authorities or supervisory body”.
The Board of Directors
Item 5 on the Agenda 451 Report of the Board of Statutory Auditors on the Shareholders, amendments to the articles of association proposed to the Shareholders’ meeting of 22/23 April 2005 You are being asked to vote on amendments to articles 1, 11, 13, 16, 18, 21, 25, 28, 32, 33, 34, 36, 40, 41 and 42 of the Articles of Association.
We have reviewed the directors’ report, which has been prepared in accordance with article 72.1 of CONSOB Regulation 11971/99 and which contains the reasons for the proposed amendments, together with a comparison of the current text with the amended text of the articles concerned.
The proposed amendments reflect not only new rules on company law, which have involved updating some of the Italian Civil Code’s mandatory, discretionary and optional provisions, but also a number of formal changes.
Bearing this in mind, we confirm that the amendments proposed by the Board of Directors are correct and comply with the provisions of law. We therefore express our favourable opinion on the proposed amendments.
The Board of Statutory Auditors Marco Baccani Emilio Cherubini Enrico Radice Ezio Maria Simonelli Ettore Maria Tosi
Milan, 6 April 2005
452 Report of the Board of Statutory Auditors Item 6 on the Agenda of the Ordinary and Extraordinary Shareholders’ Meeting
Amendment of the regulations for shareholders’ meetings subject to approval of the amendments to the articles of association by today’s extraordinary meeting. Related resolutions
453 Amendment of the regulations for shareholders’ Shareholders, meetings subject to approval of the amendments to the articles of association by today’s extraordinary As a result of the amendments to the Articles of meeting. Related resolutions Association presented in the extraordinary part of today’s meeting, it is necessary to make a minor change to the Regulations for Shareholders’ Meetings – specifically articles 2 and 21 – to reflect some of the changes introduced under the reforms of company law (and as such, the subject of the aforesaid amendments to the Articles of Association).
These particularly refer to the new legal provisions, also reflected in the Articles of Association, concerning:
legitimation of participation in shareholders’ meetings, in relation to which new civil code article 2538 (and now article 13.1 of the Articles of Association) requires the minimum period for participants’ inclusion in the Register of Members to be stated in “days” (90) rather than “months” (3). As stated in our report to the extraordinary part of the meeting, for the sake of consistency the Articles of Association have also been amended to indicate in “days” rather than “months” the minimum period required for inclusion in the Register of Members by presenters of lists of candidates to hold corporate office; this amendment relates to articles 32 and 41;
requirements relating to shares, to be met prior to the meeting, in relation to the provisions of new article 13 of the Articles of Association which – in accordance with civil code article 2370.2 – establishes that the member must meet these requirements at least two working days before the date of the meeting itself.
In view of these amendments to the law and the Articles of Association, the Bank’s Board of Directors proposes that the shareholders’ meeting vote to amend the corresponding provisions contained in articles 2 and 21 of the Regulations for Shareholders’ Meetings as follows:
454 Item 6 on the Agenda Current text Proposed text
Article 2 Article 2
1. The time and place of a Shareholders’ Meeting are given 1. The time and place of a Shareholders’ Meeting are given in the Notice of Calling published by the Board of Directors in the Notice of Calling published by the Board of Directors in accordance with the Law and the Articles of Association. in accordance with the Law and the Articles of Association.
2. The following have the right to take part in 2. The following have the right to take part in Shareholders’ Meetings: Shareholders’ Meetings: Shareholders that appear in the Register of Members in Shareholders who meet the conditions set out in accordance with the terms and methods laid down in article 13 of the Articles of Association that appear in the Articles of Association and who have deposited their the Register of Members in accordance with the terms shares by the legal deadline; and methods laid down in the Articles of Association Members of the Board of Directors; and who have deposited their shares by the legal Members of the Board of Statutory Auditors; deadline; Members of Senior Management. Members of the Board of Directors; Members of the Board of Statutory Auditors; Members of Senior Management. 3. Shareholders’ Meetings can be attended, without any right to speak or to vote, by professionals, consultants, 3. Shareholders’ Meetings can be attended, without any experts, financial analysts, qualified journalists and right to speak or to vote, by professionals, consultants, persons other than Shareholders, if expressly authorised by experts, financial analysts, qualified journalists and the Board of Directors or by the Chairman of the Meeting. persons other than Shareholders, if expressly authorised Those who are accredited to follow the Meeting have to be by the Board of Directors or by the Chairman of the identified by the Company’s staff at the entrance and Meeting. Those who are accredited to follow the Meeting collect a special badge that has to be shown on request. have to be identified by the Company’s staff at the entrance and collect a special badge that has to be shown 4. The Chairman announces to the Meeting the presence of on request. those mentioned in the preceding paragraph. 4. The Chairman announces to the Meeting the presence of those mentioned in the preceding paragraph.
Article 21 Article 21
1. In compliance with the Articles of Association, voting for 1. In compliance with the Articles of Association, voting for the appointment of directors and officers will be carried the appointment of directors and officers will be carried out by secret ballot. out by secret ballot.
2. Lists for the election of directors and statutory auditors 2. Lists for the election of directors and statutory auditors are to be presented as laid down in the Articles of are to be presented as laid down in the Articles of Association. Those presenting a list have the right to Association. Those presenting a list have the right to appoint a representative (and a substitute, if required) to appoint a representative (and a substitute, if required) to act as scrutineer in accordance with art. 27 below. This act as scrutineer in accordance with art. 27 below. This appointment has to be communicated in writing at the appointment has to be communicated in writing at the time the list is presented. time the list is presented.
3. Candidates to the position of Arbitrator have to be 3. Candidates to the position of Arbitrator have to be proposed by a group of at least 3 Shareholders who have proposed by a group of at least 300 Shareholders who have been included in the Register of Members for at least three been included in the Register of Members for at least months, and who can document their right to attend and three months ninety days, and who can document their vote at the Meeting according to current rules and right to attend and vote at the Meeting according to regulations. Nominations, signed by those who present current rules and regulations. Nominations, signed by them, have to be deposited at the Company’s head office at those who present them, have to be deposited at the least ten days prior to the scheduled date of the Meeting at Company’s head office at least ten days prior to the first calling, accompanied by: 1) a curriculum vitae for scheduled date of the Meeting at first calling, each of the candidates; 2) a declaration by each candidate accompanied by: 1) a curriculum vitae for each of the cont’d cont’d
Item 6 on the Agenda 455 Current text Proposed text cont’d cont’d that they accept the nomination and confirm that they have candidates; 2) a declaration by each candidate that they the prerequisites for the position. accept the nomination and confirm that they have the prerequisites for the position.
4. If the Meeting has to appoint Directors in accordance 4. If the Meeting has to appoint Directors in accordance with art. 33 of the Articles of Association, each candidate with art. 33 of the Articles of Association, each candidate has to be proposed by a group of at least 300 Shareholders has to be proposed by a group of at least 300 Shareholders who have been included in the Register of Members for at who have been included in the Register of Members for at least three months, and who can document their right to least three months ninety days, and who can document attend and vote at the Meeting according to current rules their right to attend and vote at the Meeting according to and regulations. Each Shareholder can take part in current rules and regulations. Each Shareholder can take proposing a maximum number of candidates equal to the part in proposing a maximum number of candidates equal number of Directors to be elected. If this rule is not to the number of Directors to be elected. If this rule is not respected, the signature of the Shareholder in question will respected, the signature of the Shareholder in question not be taken into account for any of the lists. will not be taken into account for any of the lists. Nominations, signed by those who present them, have to be Nominations, signed by those who present them, have to deposited at the Company’s head office at least ten days be deposited at the Company’s head office at least ten days prior to the scheduled date of the Meeting at first calling, prior to the scheduled date of the Meeting at first calling, accompanied by: 1) a curriculum vitae for each of the accompanied by: 1) a curriculum vitae for each of the candidates; 2) a declaration by each candidate that they candidates; 2) a declaration by each candidate that they accept the nomination and confirm under their own accept the nomination and confirm under their own responsibility that there is no reason why they should be responsibility that there is no reason why they should be ineligible for election, that there are no grounds for ineligible for election, that there are no grounds for incompatibility, and that they have the prerequisites for the incompatibility, and that they have the prerequisites for position laid down by law or by the Articles of Association. the position laid down by law or by the Articles of Association. If directors belonging to minority lists have to be replaced, the candidates put up for election are automatically those If directors belonging to minority lists have to be replaced, from the same list as the director being replaced; such the candidates put up for election are automatically those candidates have to confirm their candidacy at least ten from the same list as the director being replaced; such days prior to the date set for the Shareholders’ meeting, candidates have to confirm their candidacy at least ten together with their declarations that there is no reason why days prior to the date set for the Shareholders’ meeting, they should be ineligible for election, that there are no together with their declarations that there is no reason grounds for incompatibility, and that they have the why they should be ineligible for election, that there are prerequisites for the position laid down by law or by the no grounds for incompatibility, and that they have the Articles of Association. prerequisites for the position laid down by law or by the Articles of Association.
Shareholders, Regulation for Shareholders’ Meetings as proposed by the for the reasons presented above, the Board of Directors Board of Directors; proposes the following resolution: to grant the Chairman and each of the Deputy "The ordinary shareholders’ meeting of Banca Popolare di Chairmen, with separate signing authority, all the widest Milano: powers to execute this resolution in accordance with the law, and to make all the changes, amendments and addi- tions to the resolution that might be requested by the legal having heard and approved the report of the Board of Directors; authorities or supervisory body”.
having noted the opinion of the Board of Statutory Auditors; The Board of Directors hereby resolves:
to approve the new text of articles 2 and 21 of the
456 Item 6 on the Agenda Report of the Board of Statutory Auditors on the Shareholders, amendments to the regulations for Shareholders’ meetings proposed to the shareholders’ meeting of You are being asked to vote on amendments to articles 2 22/23 April 2005 and 21 of the Regulations for Shareholders’ Meetings as a result of proposed changes to the Articles of Association.
We have reviewed the directors’ report, which contains the reasons for the proposed amendments, together with a comparison of the current text with the amended text of the articles concerned.
The amendments are designed to reflect a number of changes introduced by the new rules on company law regarding the conduct of shareholders’ meetings.
Bearing this in mind, we confirm that the amendments proposed by the Board of Directors are correct and comply with the provisions of law and the Articles of Association. We therefore express our favourable opinion on the proposed amendments.
The Board of Statutory Auditors Marco Baccani Emilio Cherubini Enrico Radice Ezio Maria Simonelli Ettore Maria Tosi
Milan, 6 April 2005
ItemReport 6 onof the AgendaBoard of Statutory Auditors 457 Resolutions
459 Resolutions Item 2 on the Agenda
In accordance with art. 33 of the Articles of Association, The meeting of the members of Banca Popolare di Milano the meeting made up the numbers of the Board of was held, in ordinary and extraordinary session, at the Directors by appointing Gianfranco Pittatore as a director, Milan Trade Fair Pavilion 17, Porta Gattamelata, in Via whose term in office will expire, like for the other mem- Gattamelata 2, Milan, on 23 April 2005 under the chair- bers of the board, at the AGM called to approve the finan- manship of Roberto Mazzotta. cial statements for the year ended 31 December 2005.
Item 1 on the Agenda
Item 3 on the Agenda The majority of the members (1,666 votes for, 8 absten- tions) approved: In accordance with articles 40 and 41 of the Articles of the report on operations for the year ended 31 Association, the meeting made up the numbers of the December 2004; Board of Statutory Auditors by appointing the following persons, whose term in office will expire, like for the other the 2004 financial statements, consisting of the balan- members of the board, at the AGM called to approve the ce sheet, the statement of income and the explanatory financial statements for the year ended 31 December notes; 2005:
the allocation of net profit of Euro 125,223,689.14, as Marco Baccani as Chairman of the Board of Statutory proposed by the Board of Directors, after transferring Auditors; Euro 12,522,368.91 to the legal reserve and Euro 41,323,817.42 to statutory reserve, as follows: Enrico Castoldi as an acting auditor;
• to the shareholders, Euro 0.13 for each of the Antonio Ortolani as an alternate auditor. 415,034,231 shares with dividend rights, for a total of Euro 53,954,450.03; • 20% to the employees Euro 14,275,500.56; • 3% to charity reserve Euro 2,141,325.08; • 1% to Board of Directors Euro 713,775.03; • to Reserve ex art. 13.6 of Decree 124/93, Euro Item 4 on the Agenda 85,722.59; • to the unrestricted reserve the residual amount of Euro 206,729.52; In accordance with art. 42 of the Articles of Association, the meeting decided, at the proposal of a group of mem- the proposal to authorise the Board of Directors to bers, to pay each serving member of the Arbitration manage the “reserve for own shares” and hence to buy and Committee the sum of Euro 6,000 gross to cover out-of- sell the Bank’s own shares at market prices, until the next pocket expenses for the three-year term 2005/2007. The meeting of the members and within the limit imposed by meeting then appointed the following persons to the the amount of the reserve as increased from time to time Arbitration Committee for the three-year term 2005/2007: by sales of shares during the course of normal dealing ope- rations designed to promote active trading and – accor- Italo Ciancia, Alfiero Fontana and Sergio Serafini as ding to the articles of association and / or plans for the serving members; assignment of shares to employees or collective funds in which they participate – to issue shares to employees at Gianfranco Carugati and Dario Mezgec as substitute prices, which may also be below market value, to be fixed members. from time to time by the Board.
460 Resolutions After the appointments approved by the members’ Item 5 on the Agenda meeting, the Bank’s corporate bodies are made up as follows:
The meeting also unanimously approved the following Board of Directors proposals: Chairman the new text of articles 1, 11, 13, 16, 18, 21, 25, 28, 32, Mazzotta Roberto 33, 34, 36, 40, 41 and 42 of the Articles of Association as proposed by the Board of Directors; Deputy Chairmen Paolo Manzato to grant the Chairman and each of the Deputy Marco Vitale Chairmen, with separate signing authority, all the widest powers to execute the approved amendments to the Directors Articles of Association in accordance with the law, and to Enrico Airaghi make all the changes, amendments and additions to the Mario Artali resolution that might be requested by the legal authorities Alberto Banfi or supervisory body. Giorgio Bianchini Scudellari Emilio Castelnuovo Giuseppe Coppini Rocco Corigliano Eugenio Crosta Roberto Fusilli Renzo Grassi Catapano Item 6 on the Agenda Piero Lonardi Michele Motterlini Gianfranco Pittatore Alberto Santa Maria The meeting approved: Jean Jacques Tamburini Graziano Tarantini the new text of articles 2 and 21 of the Regulations for Valerio Tavormina Shareholders’ Meetings as proposed by the Board of Directors; Board of Statutory Auditors to grant the Chairman and each of the Deputy Chairmen, with separate signing authority, all the widest Chairman powers to execute this resolution in accordance with the Baccani Marco law, and to make all the changes, amendments and addi- tions to the resolution that might be requested by the legal Acting statutory auditors authorities or supervisory body. Castoldi Enrico Cherubini Emilio Simonelli Ezio Maria Tosi Ettore Maria
Alternate auditors Messina Salvatore Rino Ortolani Antonio Radaelli Carlo Radice Enrico
Arbitration Committee
Arbitrators Ciancia Italo Fontana Alfiero Serafini Sergio
Alternate arbitrators Carugati Gianfranco Mezgec Dario
Resolutions 461 Bipiemme Group Network
463 Head Office
z Banca Popolare di Milano S.c. a r.l. Milano 20121 piazza Filippo Meda, 4
Banca di Legnano S.p.A. Legnano 20025 Largo Tosi, 9
Cassa di Risparmio di Alessandria S.p.A. Alessandria 15100 piazza della Libertà, 20/21/22/22A
Banca Akros S.p.A. Milano 20149 viale Eginardo, 29
Foreign Branches
z Londra 2, George Yard-Lombard Street EC3V9DH
z New York375, Park Avenue N.Y. 10152
z Banca Popolare di Milano Banca di Legnano Cassa di Risparmio di Alessandria
Bipiemme Group Network 465 Retail Branches in Italy
Piedmont Borgo San Martino piazza Vittorio Emanuele, 5 Bosio piazza Repubblica, 11 Turin Cantalupo Ligure via Umberto I, 33 z corso G. Matteotti, 8 Capriata d’Orba via Della Piazza, 2 Carcare via Naronti, 6 City Branches in Turin Carpeneto piazza del Municipio, 14 z 231 corso Vercelli, 109 (ang. via Verres) Casale Monferrato via Roma, 29 z 232 corso Sebastopoli, 206 Casale Monferrato Ag. 1 via via Rosselli, 5 z 233 corso Regina Margherita, 262 Cassine via del Ponte, 5 z 234 corso Benedetto Croce, 27 Castellazzo Bormida via XXV Aprile, 1 z 249 corso Racconigi, 139/B Castelletto d’Orba via Cortella, 2 Castelnuovo Scrivia piazza Vittorio Emanuele II, 2 Province of Alessandria Cerrina via Nazionale, 36/A Alessandria - Sede piazza della Libertà, 20-22A Felizzano via Matteotti (ang. via Veneto) Alessandria Ag. A via Parini, 5 Frugarolo via Matteotti, 49/A Alessandria Ag. B Borgo Città Nuova, 1 Gabiano via Vittorio Veneto, 12 Alessandria Ag. C via Milano, 83/83B (ang. via Verona, 30) Gavi piazza Dante, 3 R Alessandria Ag. D via Marengo, 116 Masio piazza Borgo Nuovo, 1/2 Alessandria Ag. E via Bergamo 71/73 Molino dei Torti via Roma, 106 (ang. piazza Turati) (ang. piazza Don Milanese) Alessandria Ag. F piazza Garibaldi Moncalvo piazza Carlo Alberto, 7 (ang. p.zza 100 Cannoni) Mornese via Doria, 49 Alessandria Ag. G via M. Bensi (ang. P. Sacco) Novi Ligure Corso Marenco, 57 Alessandria Ag. H viale Milite Ignoto, 40 (ang. via Giacometti) Alessandria Ag. I via De Gasperi, 20/22 Novi Ligure Ag. 1 via Mazzini, 50/A Alessandria Ag. L corso Acqui, 189 Ovada corso Saracco, 6 Alessandria Ag. M via Dell’Artigianato, 5 - zona D3 Oviglio via Vittorio Emanuele II, 11 Alessandria via Venezia, 10 Pontecurone via Roma, 51 Ag. Osp. SS. Antonio e Biagio Ponzone piazza Italia, 4 Alessandria Pozzolo Formigaro via Roma, 71 Ag. Osp. C. Arrigo Spalto Marengo, 46 (ang. piazza IV Novembre) Alessandria Predosa piazza Matteotti, 23 loc. Castelceriolo via Sale, 32 Quargnento piazza I° Maggio, 3 Alessandria Quattordio piazza San Pietro, 1 loc. San Giuliano via Piacenza, 29 Rivalda Bormida via Oberdan, 43 Alessandria loc. Spinetta Marengo via Genova, 229 San Giorgio Monferrato S.S. Asti-Casale Monferrato, 43 Acqui Terme corso Bagni, 102/106 San Salvatore M.to via Avalle, 1 Acqui Terme Ag. 1 via Amendola, 31 Sezzadio piazza Mercato, 2 Alice Bel Colle via Roma, 3 Solero piazza della Libertà, 2 Arquata Scrivia piazza Bertelli, 14 Tortona via Emilia, 9/11 Basaluzzo piazza Garibaldi, 3 Tortona Ag. 1 via Mario Silla, 5/B Bergamasco via Roma, 54 Tortona Ag. 2 corso Romita, 47/49 - via Manzoni Borghetto Borbera via Roma, 122/124 Tortona Ag. 3 località San Guglielmo, 3/13
466 Bipiemme Group Network Retail Branches in Italy
Valenza corso Garibaldi, 46/48 Ronco Scrivia via Roma, 19 Valenza Ag. 1 Circonv. Ovest - Centro Coinor Lotto 2A Province of Savona Valenza Ag. 2 via Trento, 5/B Varazze via Carattino, 28/29
Province of Asti Asti corso Torino, 42/44 Lombardy Asti corso Alessandria (ang. piazza I° Maggio) Milan Canelli via Solferino, 2 z piazza Filippo Meda, 4 Nizza Monferrato via C. Alberto - via Dabormida
City Branches in Milan Province of Cuneo z 1 viale Corsica, 31 Alba corso Piave, 16/A z 2 via G. Fara, 41 z 3 piazzale Cadorna,14/16 Province of Novara z 4 corso Buenos Aires, 36 Novara via Biandrate, 4/6 z 5 piazzale Medaglie d’Oro, 1 Novara corso Torino, 26 z 6 via Salvo d’Acquisto, Arona via Via Matteotti,12/14 z 7 corso Genova,29 Bellinzago Novarese via della Libertà, 101 z 8 corso Plebisciti,19 Borgo Ticino via Vittorio Emanuele II, 24 z 9 corso Buenos Aires, Caltignaga piazza Martiri,1 z 10 via F. Turati, 26 Cameri via G. Matteotti, 43/45 z 11 piazza R.Wagner, 15 Galliate via SS. Martiri, 21/23 z 12 via Vertoiba, 2 (ang. via di M.B.Caravaggio) z 13 via Padova, 204 Paruzzaro via Marconi,2 z 14 via G. Bodoni, 1 Pombia piazza della Repubblica, 9 z 15 via A.Astesani, 46 Trecate via Gramsci,62 z 16 via Pontaccio, 23 z 17 corso Sempione, 32/ Province of Vercelli z 18 via Meravigli, 2 z Vercelli piazza Zumaglini, 25 z 19 piazzale Lagosta,9 Vercelli via Balbo, 7 z 20 via L.Montegani, 2 Crescentino via Mazzini, 107 z 21 corso di Porta Vittoria, 28 Trino piazza Audisio, 4 z 23 viale Piave, 28 z 24 via G. Ripamonti, 114 z 25 via Capo Palinuro, Liguria z 26 piazza Duca d’Aosta,
Province of Genoa z 27 piazza Napoli,16 z Genoa via Brigata Liguria, 112 z 28 via P. Rubens, 7 Genoa via Pagano Doria z 29 via S. Pianell, 52 Comp. Miramare, 1 z 30 viale Monza,169 Campo Ligure vicolo Del Gelsomino, 3 z 31 via C. Farini, 81 Rapallo Lungomare Vittorio Veneto, 26 z 32 via G.B. Cassinis, 15
Bipiemme Group Network 467 Retail Branches in Italy
z 33 via Ronchi, 2 z 372 piazzale Lodi, 3 (c/o Abb Tecnomasio) z 34 via Lorenteggio, 161 z 378 corso Sempione, 27 (c/o RAI) z 35 via delle Ande, 5 z 379 viale Certosa, 130 (c/o Bayer) z 36 via Caroncini,6 z 389 via Trenno, 12 z 37 via Cadore, 43 z 398 Fiera di Milano Domodossola 1 z 38 via Novara,101 z 412 via Salvini, 1 z 39 viale Abruzzi 16 z 461 viale Legioni Romane, 43 z 40 via Bovisasca,173 z 466 via Savona, 61 z 41 via Washington, 95 z 471 via Olgettina 60 (Osp. San Raffaele) z 42 via Fiamma, 17 z 485 via Bergamo 7 z 43 via Nicola Romeo, 14 z 500 via Mazzini, 9/11 z 44 via S. Galdino, 13 (ang. piazza Diocleziano) z 501 corso Europa, 2 z 45 via Massara de’ Capitani, 3 z 502 corso San Gottardo, 2/A z 46 via Volvinio, 33 z 503 via Burlamacchi, 2 z 47 piazza Sicilia, 7 z 504 via Ozanam, 1 z 48 via Padova, 96 z 505 via Romagnoli, 1 (ang. Lorenteggio) z 49 via Ferrieri, 16 z 506 viale Monza, 259 z 313 via Coni Zugna 6 z 507 piazza Dergano, 9 z 321 corso Lodi, 83 z 508 via Faruffini, 3 (ang. piazza De Angeli) z 338 corso Indipendenza, 5 z 509 via Paolo Sarpi, 54 z 339 via Motta, 6 z 511 via B. Sassi, 12 z 340 via Venini, 60 z 512 via Padova, 282 z 341 via B. Maderna, 2 z 513 piazzale Accursio, 18 z 342 piazza Pompeo Castelli, 12 z 514 via Bottelli, 2 (ang via E. De Marchi) z 344 piazza Stuparich, 8 z 515 via Adriano, 96 z 346 via Pelizza da Volpedo, 12 z 516 via Arsia, 7 z 347 via Meda, 36 z 517 piazza Scolari, 2/4 z 348 via Amadeo (ang. via Illirico, 11) z 518 via Val di Sole, 22 z 349 via Vincenzo Monti, 41 z 519 viale Sarca, 191 z 350 via E. Pellini, 1, 2 z 585 viale Certosa, 302 z 354 via Orsini, 18 z 586 piazza Bruzzano, 4 z 355 via Capecelatro, 30 z 587 via Zurigo, 14 z 356 via Vallazze, 62 z 357 via Val Maira, 11 via del Lauro, 1 z 358 viale Suzzani, 250 A viale Certosa, 269/271 z 359 via Meucci, 91 B via Pellegrino Rossi, 91 z 351 via Bessarione, 46 C via Pavia, 6/2 z 352 via Gallarate, 101 D via Piero della Francesca, 20 z 353 viale Severino Boezio Comando P.S. piazza S. Ambrogio, 5 z 360 via Fratelli Zoia, 43 We@bank (sportello virtuale) via Massaua, 4 z 365 viale dell’Aviazione, 65 (c/o A.T.A.) z 368 via G. B. Grassi, 74 (c/o Ospedale Sacco) z 370 via Grosio, 9 (c/o Fiat Auto)
468 Bipiemme Group Network Retail Branches in Italy
Other branches in province of Milan z Casarile piazza Unità d’Italia, 1 z Abbiategrasso via Binaghi, 4 z Casorezzo via Busto Garolfo, 29 Abbiategrasso via Mentana (ang. via Sauro) z Cassano d’Adda via Q. di Vona, 37/a z Agrate Brianza via Lecco, 2 z Cassano d’Adda z Aicurzio via della Croce, 22/24 loc. Groppello via Cimbardi, 1/B Arconate Contrada Sant’Eusebio 26 z Cassina de Pecchi via Roma 55 z Arcore via A. Casati, 42 z Castano Primo via Tadini, 42 z Arese via Resegone, 5 Castano Primo corso San Rocco, 3 Arluno via Dante z Ceriano Laghetto piazza Diaz, 1 (ang. via Martiri Libertà) z Cernusco sul Naviglio piazza Gavazzi z Assago strada IV - Palazzo A7 z Cerro Maggiore via S. Carlo, 21 loc. Milano Fiori z Cesano Boscone via Milano, 13 z Bareggio via Novara (ang. via Falcone) z Cesano Maderno piazza Procaccini, 13 z Barlassina corso Milano, 55 Cesano Maderno via Molino Arese, 59 z Basiglio piazza Repubblica, 1 Cesate via C. Romanò, 18 z Bellusco via Castello, 13 Cinisello Balsamo via Frova, 36 z Bernareggio via F. Prinetti, 23 z Cinisello Balsamo viale Rinascita, 36 z Besana Brianza via S. Caterina (ang. via Bellavista) z Cinisello Balsamo via Garibaldi, 97 z Besana Brianza loc. Villa Raverio via Pascoli, 10 z Cinisello Balsamo via De Vizi ang. via De Amicis (c/o Centro Comm. Le Fontane) z Biassono via Cesana e Villa, 39 (ang. via Tintori) z Cogliate via Cardinal Minoretti, 41 z Boffalora Ticino piazza IV Giugno z Cologno Monzese viale Liguria, 1 (ang. via Cavour) z Cologno Monzese via Galvani, 24 z Bollate largo Primo Levi, 10 z Concorezzo via Don A. Girotti, 8 z Bollate z Corbetta via C. Cattaneo, 25 loc. Cascina del Sole via C. Battisti, 2 Corbetta piazza del Popolo, 28 z Bollate z Cormano via Caduti della Libertà, 12 loc. Baranzate viale Milano, 240 z Cormano Bollate via degli Alpini, 4/8 loc. Ospitaletto via XXIV Maggio, 1 z Bovisio Masciago corso Italia, 43 Cormano via Papa Giovanni XXIII, 11 Bovisio Masciago corso Italia, 92 z Cornaredo via Garibaldi, 45/47 z Bresso via Vittorio Veneto, 13 z Cornate d’Adda via G. Marconi, 10 Bresso via Vittorio Veneto, 55/57 z Corsico piazzale della Pianta, 8 z Brugherio via Teruzzi 15 z Cuggiono largo Chiesa Vecchia, 1 z Buccinasco via Emilia, 5/G Cuggiono via Gertrude Beolchi, 30/A z Buccinasco via Roma, 9 z Cusago via Libertà 23 ang. via Dante Buscate piazza San Mauro, 1 z Cusano Milanino via XXIV Maggio, 2 z Busnago P.zzta Meda (ang. P.zza Roma 1) z Desio via Garibaldi, 4 Busto Garolfo via Cadorna, 2 z Gaggiano via Carroccio, 27 z Cambiago via Garibaldi, 2 z Garbagnate Milanese via G. Verdi, 1 Canegrate piazza Matteotti, 16 z Garbagnate Milanese via dei Platani, 3 z Carnate via Pace, 2 Garbagnate Milanese via Varese z Carnate via A. Volta, 1 z Garbagnate Milanese loc. S. Maria Rossa via Banfi, 2
Bipiemme Group Network 469 Retail Branches in Italy
Garbagnate Milanese z Monza via Romagna, 38 loc. S. Maria Rossa via Garibaldi, 183/185 z Monza via A. Boito 68 z Giussano z Monza via Ugo Foscolo, 18 loc. Paina via IV Novembre, 116 z Monza via Lecco, 88 z Gorgonzola via Serbelloni, 21 z Muggiò via Buozzi (ang. via Italia) Inveruno piazza San Martino, 2 Nerviano piazza della Vittoria, 17 z Lacchiarella via Isonzo, 14 Nerviano z Lainate largo Cavour, 3 loc. Garbatola via S. Francesco, 8 Lainate piazza Vittorio Emanuele, 6 z Nova Milanese via Rimembranze, 4 (ang. via Diaz) Lazzate via S. Lorenzo, 4 z Novate Milanese via Baranzate, 39 z Legnano via Nino Bixio, 16/a z Novate Milanese via Vitt. Veneto, 20 Legnano largo Franco Tosi, 9 Novate Milanese via Matteotti, 20 Legnano Ag. A piazza SS. Redentore z Opera via Mazzini, 2 (ang. via Cavour) Legnano Ag. C piazza del Popolo, 13 z Opera Legnano Ag. D via Girardi, 19/A loc. Noverasco via E. Fermi, 1/7 Legnano Ag. E via XXIX Maggio, 123 z Ornago via J. Kennedy, 2 Legnano Ag. G corso Sempione, 47 z Ossona piazza Litta, 8 Legnano Ag. H viale Sardegna (ang. viale Liguria) z Paderno Dugnano via Rotondi, 49 z Lentate sul Seveso via Roma, 31 z Paderno Dugnano z Limbiate via Garibaldi,10 loc. Incirano via Italia, 94 Limbiate z Pantigliate via Risorgimento, 61 loc. Villaggio dei Giovi via Beccaria, 1 z Parabiago via S. Antonio, 9 z Limbiate Parabiago piazza Maggiolini, 1 loc. Mombello via Monte Bianco 44 Parabiago via Battisti (ang. via Sabotino) z Liscate via IV Novembre, 2 z Pero via Alessandrini, 1 z Lissone piazza Italia, 1 Pero z Lissone via F. Turati, 7 loc. Cerchiate via Cavallotti, 1 z Macherio via Visconti di Modrone z Peschiera Borromeo via Liberazione, 41 z Magenta via A. Volta, 1 z Peschiera Borromeo z Magenta via A. Volta, 16 loc. Bettola via Dante 2 Magenta via Volta (ang. via Pusterla) z Pieve Emanuele via Roma, 16 z Magnago piazza d’Armi, 27 z Pieve Emanuele via E. Curiel, 4 Marcallo con Casone via Roma, 74 z Pioltello via C. Colombo, 12 z Meda corso Matteotti, 14 z Pioltello loc. Seggian via Monza, 49 z Meda via Tre Venezie, 90/92 Pogliano Milanese via Monsignor Paleari, 48 z Mediglia loc. Mombretto via 1° Maggio, 5 z Pozzuolo Martesana via IV Novembre, 34 z Melegnano via Vitt. Veneto, 93/95 z Pregnana Milanese via Papa Giovanni XXIII, 47 z Melegnano via Sandro Pertini, 2 Rescaldina via Ignazio Bossi, 56 z Melzo piazza della Vittoria, 2 Rescaldina loc. Rescalda via Varesina, 3 z Mesero via Roma, 5 z Rho via Madonna, 32 z Monza piazza G. Carducci, 6 z Rho corso Europa, 250 z Monza via Arosio, 1 (ang. C.so Milano) (c/o Ospedale Civile) z Monza via L. Manara, 16 Rho via Meda, 9/11
470 Bipiemme Group Network Retail Branches in Italy
Rho Turbigo via Allea Comunale, 16 loc. Mazzo di Rho via Gandhi,1 z Usmate Velate z Robecchetto con Induno via Arese, 11 loc. Usmate via Roma, 66 z Robecco sul Naviglio piazza XXI Luglio, 6 z Usmate Velate loc. Velate via Manzoni, 12
z Roncello via Manzoni, 17 z Vanzaghello via Roma, 41 z Ronco Briantino via S. Antonio, 19/A Vanzago via Matteotti, 4 e 4/a z Rozzano viale Lombardia, 54 z Vaprio D’Adda via Marconi 29 z San Donato Milanese via Kennedy 12/14 z Varedo via Umberto I°, 65 San Giorgio su Legnano via Manzoni, 22/B z Varedo viale Brianza, 126 z San Giuliano Milanese via Rizzi, 1 z Verano Brianza via Massarani, 12 z San Giuliano Milanese viale Milano, 10/12 z Vignate via Roma 25 z San Giuliano Milanese z Villasanta piazza Martiri della Libertà, 13 loc. Borgolombardo via Indipendenza, 3 z Vimercate piazza Roma, 1 z San Vittore Olona via Matteotti, 4 z Vimercate San Vittore Olona via Europa, 2 loc. Ruginello via Eritrea, 20 z Santo Stefano Ticino via Trieste, 18 z Vimodrone via Sant’ Ambrogio, 64 z Sedriano piazza del Seminatore, 6 z Vittuone piazza Italia, 3/5 Sedriano via Papa Giovanni XXIII z Vittuone largo Industria, 1 (c/o Asea Brown Boveri) z Segrate Quartiere S. Felice z Zibido San Giacomo via Lenin, 11 loc. San Felice Lotto 2, int. 15 z Segrate loc. Linate c/o Aeroporto di Milano Linate Province of Bergamo z Segrate z Bergamo via Papa Giovanni XXIII, 104 loc. Redecesio via delle Regioni, 40 z Bergamo via Corridoni, 25/a z Senago via Volta, 77 z Bonate Sopra piazza Vitt. Emanuele, 8 z Seregno via Montello z Bottanuco via S. Giorgio, 1 (ang. via Circonvallazione) z Brembate via Vittorio Veneto, 17 z Seregno via Santa Valeria, 120 z Canonica d’Adda via Matteotti, 15 z Sesto San Giovanni piazza IV Novembre, 28 z Dalmine via Mazzini, 17 z Sesto San Giovanni via V. Monti, 21 z Leffe via Dante, 27 z Sesto San Giovanni via Matteotti, 191 z Osio Sotto corso Vitt. Veneto, 51 z Sesto San Giovanni via Luciano Lama, 33 z Romano di Lombardia via Cavalier C. Pagliarini, 34 (c/o Abb Tecnomasio) z Seriate via Nazionale, 32 z Settimo Milanese via Manzoni, 1 z Solza via Leonardo da Vinci, 1/D z Settimo Milanese loc. Seguro via Silone, 2 z Seveso piazza L. da Vinci, 9 Province of Brescia Seveso via Monti (ang. Vicolo Giani) z Brescia via Vittorio Emanuele II, 64/66 z Solaro via Mazzini, 12 z Brescia via Vittorio Veneto 5/A Solaro piazza Grandi, 48 z Gussago via A. De Gasperi, 25 z Sulbiate via Don Mandelli, 2 z Travagliato piazza della Pace, 18 z Trezzano sul Naviglio via L. Da Vinci, 97 z Trezzo sull’Adda via Jacopo da Trezzo 16
Bipiemme Group Network 471 Retail Branches in Italy
Province of Como z Missaglia Como viale Innocenzo XI, 13 loc. Maresso via A.Manzoni, 15 z Albese con Cassano piazza A. Volta, 6 z Montevecchia via Bergamo, 20 Appiano Gentile via Giovanni Falcone, 8 z Olgiate Molgora via Roma, 31 z Arosio via G. Oberdan, 5 z Paderno d’Adda via A. Manzoni, 21 Bregnano via Milano, 4/C z Robbiate via Indipendenza,42 z Cantù piazza Garibaldi, 9 z Rogeno via C. Battisti, 22 z Erba via Plinio, 18 z Sirtori via Prevosti,5 Faloppio via Monte Cervino, 1 - int. 4 z Valgreghentino via F.lli Kennedy, 131 Fenegrò via Roma, 47 z Valmadrera C.so Promessi Sposi, 19 Limido Comasco via Roma, 2 z Verderio Inferiore via Tre Re, 19/21 Luisago via IV Novembre z Verderio Superiore viale Rimembranze, 2 z Lurago d’Erba via Roma, 98 z Viganò via Risorgimento, 24 Lurate Caccivio via Unione, 26 z Mariano Comense via Pace (ang. viale Brianza) Province of Lodi z Mozzate via Rosselli, 9 z Codogno via Verdi 47 ang. via Costa z Orsenigo via S. da Orsenigo, 2 z Lodi viale Agnelli, 27 Uggiate Trevano via Vitt. Veneto, 2 z Sant’Angelo Lodigiano via Mazzini, 71
Province of Cremona Province of Pavia z Cremona piazza IV Novembre, 10 z Pavia via Riviera, 35 z Crema via Matteotti, 16/18 z Bereguardo via Sant’Antonio, 17 z Rivolta D’Adda via Fabio Filzi 5 z Casei Gerola piazza Meardi, 6 z Casorate Primo via S. Agostino, 63 Province of Lecco z Casteggio via Torino, 18 z Lecco via M. d’Oggiono, 3 z Cervesina via Roma,4 z Annone Brianza via S. Antonio, 18/B Mede piazza Amisani, 5/6 z Barzago via Rimembranze, 4 z Mortara via corso Garibaldi 90 z Barzanò via L. Manara, 16/18 z Torrazza Coste via Cadelazzi, 4 z Calco largo Pomeo, 4/C z Vidigulfo via Roma,26/A z Calolziocorte via Dante, 55/A z Voghera piazza Cesare Battisti, 10 z Carenno via G. Verdi, 1 Voghera via Emilia, 149 z Casatenovo via A. Manzoni, 5 z Casatenovo Province of Varese loc. Rogoredo via A. Volta, 42 z Varese via Avegno, 4 z Cassago Brianza via Cascina Nuova, 2/b z Varese via Sanvito Silvestro, 43/A z Cernusco Lombardone via Lecco, 7 Varese z Cremella via Luigi Cadorna, 52 loc. Avigno via Saffi, 88 z Dolzago via Bettolino, 12 Angera via Diaz,9 z Imbersago via Castelbarco, 23/B z Arcisate via G. Matteotti, 24 z Lomagna via Milano, 2 Arcisate via Matteotti,23 z Merate via F. Viganò, 2/4 Azzate via Piave, 91 z Missaglia via Merlini,3 z Besnate largo Brianzoni
472 Bipiemme Group Network Retail Branches in Italy
Besozzo piazza 1°Maggio Solbiate Olona piazza Marconi, 7 z Busto Arsizio via Crespi, 1 bis z Somma Lombardo c/o Aeroporto Malpensa z Busto Arsizio via Milazzo, 15 z Sumirago via Piave, 2 Busto Arsizio via F.lli d’Italia, 6 z Tradate Busto Arsizio viale Rimembranze, 34 loc. Abbiate Guazzone via V. Veneto (ang. via Dante) Busto Arsizio z Uboldo via Italia,17/B (ang. Vicolo Torre) loc. Borsano via Burattana, 1 z Vedano Olona piazza San Maurizio, 3 Cardano al Campo via Roma, 73 Vergiate via Don Locatelli, 10 Caronno Pertusella via Italia, 266 z Caronno Varesino via Castiglioni, 1 z Cassano Magnago via 5 Giornate, 25 Veneto Cassano Magnago via IV Novembre, 50 z Castellanza via Papa Giovanni XXIII, 11 Province of Padua Castellanza via della Chiesa 6 z Padua via Giotto, 19 Castellanza loc. Buon Gesù via Don Minzoni, 2 Province of Treviso Castiglione Olona via C.L. Castiglioni, 2 z Treviso viale Orleans, 2 z Cavaria via Scipione Ronchetti, 71
z Cislago piazza Toti ang. P.zza Castelbarco Province of Venice Cocquio Trevisago z Venice loc. Sant’Andrea via G. Verdi, 29 loc. Mestre via T. Tasso, 48/A Fagnano Olona v.le Vittoria, 23
z Ferno via Marco Polo, 1/3 Province of Verona Ferno via Trieste (ang. via V. Veneto) z Verona via Paglieri, 4 z Gallarate via G. Verdi, 8
z Gallarate Province of Vicenza loc. Arnate via Checchi, 21 z Vicenza viale San Lazzaro, 120 Gallarate via Noè,45/47 z Gerenzano via XX Settembre, 32/34 z Gorla Maggiore piazza Martiri della Libertà, 4 Friuli and Venezia Giulia Gorla Minore via Trento, 1 (ang. via V. Veneto) Luino piazza Libertà,18 Province of Udine Malnate via Martiri Patrioti, 1 z Udine via Poscolle, 67 z Oggiona con Santo Stefano via A. Volta, 118 Samarate via Vittorio Veneto (ang. via della Libertà) Emilia-Romagna z Saronno piazza A.De Gasperi,13 z Saronno via Larga,22 Bologna z Saronno via Leonardo da Vinci, 26 z via de’ Carbonesi, 11 Saronno piazza De Gasperi, 26 Sesto Calende City Branches in Bologna loc. Abbazia Piazzale Balzarini,3 z 202 via degli Artieri,2 Solbiate Arno via Agnelli, 2 z 203 via G. Amendola, 12/A
Bipiemme Group Network 473 Retail Branches in Italy
Province of Reggio Emilia z 204 via S. Vitale, 89 z Reggio Emilia piazza Prampolini, 1/L z 205 via Emilia Ponente, 207 z 206 via G. Marconi, 3 z 207 via A.Righi, 18 Tuscany z 208 via D. Guerrazzi, 32 z 209 via di Corticella, 184/3 Florence z 210 via Toscana, 26 z piazza S. Maria Maggiore, 1 z 211 via O. Guerrini, 2 z 212 via Massarenti,204/2 City Branches in Florence z 213 via degli Orti, 5/G z 241 via Accolti,23 z 467 via Emilia Levante, 164 z 323 via di Novoli, 62/B z 369 via Sette Santi, 3 (c/o Menarini) Other branches in province of Bologna z 488 via Francesco Redi, 57/D z Bentivoglio via G. Marconi, 58/A z Casalecchio di Reno via G. Marconi, 11/13 Province of Florence z Crespellano (loc. Muffa) via Provinciale, 347 z Scandicci via Donizetti 24/C z San Lazzaro di Savena via Emilia, 183 z Zola Pedrosa via Risorgimento 188/190 Province of Prato z Prato via Marx 1 Province of Ferrara z Ferrara via Cairoli, 26 Marche z Ferrara via Bologna,415 z Argenta via G. Matteotti, 31/B Province of Pesaro z Codigoro via IV Novembre, 30 z Pesaro via Mameli, 70 z Comacchio loc. Lido degli Estensi via Pascoli, 61 Lazio z Sant’Agostino loc. S. Carlo via Statale, 70 Rome z piazzale Flaminio, 1 Province of Forlì z Forlì via Pedriali, 2 City Branches in Rome z 200 via Fiamme Gialle, 18 (c/o GDF) Province of Modena z 252 via Vittorio Veneto, 1 z Modena via Emilia Est, 31 z 253 via G.F. Ingrassia, 2 z 254 via U. Ojetti, 74 Province of Parma z 255 via A.Baldovinetti, 156 z Parma via Garibaldi, 12 z 256 via G. Serafino, 2/A z 257 via E.Franceschini, 58 Province of Ravenna z 258 via Caio Manilio, 42 z Ravenna via Diaz, 28/30 z 259 via Garigliano, 92 z 260 via Cassia,901/I z 261 largo Delpino, 6
474 Bipiemme Group Network Retail Branches in Italy
z 262 via Gregorio XIII, 72 z Marino z 263 via Portuense, 100/ABCD loc. Frattocchie via Appia Nuova, 94 z 264 via Casilina,1877 z Marino z 309 via G. Vitelli, 14 loc. S. Maria delle Mole viale della Repubblica, 76 z 318 via Troja 43 angolo P.za Guadalupe z Pomezia via del Mare, 63 z 322 via A.Piola Caselli,52 z Velletri via Pia,48 z 325 via dell’Imbrecciato, 134/CDEF z 326 piazza S. Maria Maggiore, 9 Abruzzo z 327 via Pollenza, 22 z 328 piazza Hazon, 13 (ang. via Fiume Bianco) Province of Pescara z 329 via di Tor Sapienza, 82 z Pescara corso Vittorio Emanuele II, 149/151 z 330 via Satrico, 18/20 z 331 via Appia Nuova,447/449 Molise z 332 piazza Vocazionisti, 9/10 z 333 viale dei Traghetti,87 Province of Campobasso z 334 via Giulio Cesare, 173/175 z Termoli corso F.lli Brigida, 114 z 374 via Molise, 2 (c/o M.I.C.A.) z 380 via del Giorgione, 2/b (c/o M.I.C.A.) Campania z 436 via Appia Nuova km. 10,300 z 438 via del Serafico, 200 Province of Napoli z 441 via del Tritone, 177 z Napoli piazza Salvo d’Acquisto, 40 z 443 via Anagnina,372 z 447 corso d’Italia,32/F Puglia z 448 via Gregorio VII,105 z 452 via A.De Pretis, 74/E Province of Bari z 455 via Gadames, 27 z Bari via Putignani, 80/82 z 457 via Croviana, 120 (c/o GDF) z Bari via M.Luther King, 84/86 z 458 via Branca 29 - ang. via Querini z Altamura piazza Zanardelli,27 z 460 via Gaverina 2 z Andria via A.De Gasperi,2 z 462 via Bufalini 1/A - ang. via Casilina z Barletta via Pier delle Vigne, 5 z 474 viale Partenope 68 z Bisceglie via A.De Gasperi,68 z Bitonto piazza XXVI Maggio 1734, 19
Other branches in province of Rome z Canosa di Puglia via Oberdan 41 z Albano Laziale via del Mare, 119 z Ardea Province of Foggia loc. Tor S. Lorenzo via San Lorenzo km.40 z Foggia piazza U. Giordano, 18 z Ciampino via Quattro Novembre, 45 z Foggia via P. Telesforo, 48 z Fiumicino via Anco Marzio, 44 z Foggia viale Michelangelo, 3 z Frascati viale Letizia Bonaparte, 1 z Accadia via Bonito, 7 z Grottaferrata via Roma,9 z Apricena viale A.Moro, 42 z Ladispoli via Mediterraneo 23 z Ascoli Satriano via S. Maria del Popolo, 1/3 z Marino piazza Matteotti z Bovino via Indipendenza,21/23 z Cagnano Varano via Marconi, 6/8
Bipiemme Group Network 475 Retail Branches in Italy
z Carapelle piazza A.Moro z Peschici corso Garibaldi,57 z Cerignola corso Garibaldi,46 z Poggio Imperiale piazza Imperiale, 2 z Chieuti via A.Moro, 79 z San Giovanni Rotondo piazza Europa, 130 z Lucera via Zuppetta,36 z San Marco in Lamis via della Vittoria z Manfredonia via Tribuna,65/67 z San Paolo di Civitate piazza A. Moro, 71 z Manfredonia via G. Di Vittorio, 66 z San Severo via Minuziano, 118 z Mattinata via V. Veneto, 23 z San Severo via T. Masselli, 10 z Monte Sant’Angelo piazza Municipio, 4 z Sannicandro Garganico corso Garibaldi, 19/A z Orsara di Puglia via Ponte Capò z Torremaggiore piazza della Repubblica, 58 (ang. via Calatafimi) z Trinitapoli corso Trinità,13 z Orta Nova via Pietro Nenni, 53 z Vieste via Madonna della Libera, 27
Corporate Branches
Lombardy Veneto z 949 Milan via G. Mazzini, 9/11 z 746 Padua via Giotto, 19 z 951 Milan via G. Mazzini, 9/11 z 737 Verona piazza Cittadella,4 z 952 Milan via A.da Recanate, 2 Friuli Venezia Giulia z 953 Milan via G. Fara, 41 z 738 Udine via Poscolle, 67 z 954 Milan via G. Fara, 41 Emilia Romagna z 707 Milan via Gaggia,4 z 748 Bologna via Bovi Campeggi, 2/4 E z 785 Corsico via Cavour, 48 - ang. via Mazzini z 735 S.Lazzaro di Sav. via Emilia, 185 z 656 Monza piazza Roma,16 z 927 Modena via Emilia Est, 31 z 959 Magenta via IV Giugno c/o Gall. Giardini z 753 Ferrara via Cairoli,26 z 657 Seregno via Montello, ang. Circovallazione Tuscany z 666 Merate via Viganò, 2/4 z 736 Florence piazza S. Maria Maggiore, 1 z 783 Bergamo via Papa Giovanni XXIII, 104 Puglia z 708 Brescia via Vittorio Emanuele II, 66 z 925 Foggia piazza Marconi,11 z 976 Gallarate corso Sempione, 9/A z 926 Bari via M.Luther King, 84/86 z 977 Saronno via Mazzini, 16/18 Lazio z 964 Voghera piazza Cesare Battisti, 10 z 769 Rome via E.Franceschini, 58 Piedmont z 779 Rome piazza Matteotti,47 z 963 Turin corso Matteotti,8
Private Centres (Bipiemme Private Banking SIM)
z Milan Galleria De Cristoforis, 1 z Gallarate (VA) via Manzoni, 17 z Milan piazza F. Meda, 4 z Saronno (VA) piazza De Gasperi,13 z Milan corso Buenos Aires, 79 z Merate (LC) via F. Viganò, 8 z Milan via Meravigli, 2 z Bergamo via Papa Giovanni XXIII, 105 z Milan via Gaggia,4 z Bologna via degli Artieri,2 z Magenta (MI) via 4 Giugno, Galleria I Giardini z Padua via Giotto, 19 z Monza (MI) via Gerardo Dei Tintori,5 z Ferrara via Cairoli,26 z Seregno (MI) piazza Concordia, 18 z Rome via Vittorio Veneto, 1
476 Bipiemme Group Network Municipal Treasuries
z Accadia z Casorezzo Lazzate z Aicurzio Cassine Legnano Alessandria Castellazzo Bormida z Lentate sul Seveso Alice Bel Colle Castelletto d’Erro z Limbiate z Annone Castelletto d’O Limido Comasco z Apricena Castelletto Monferrato z Liscate z Arcore Castelnuovo Bormida Luisago z Arese Castelspina z Magreglio z Ascoli Satriano z Cavaria con Premezzo z Manfredonia z Barlassina Cavatore Marcallo con Casone z Barzanò z Ceriano Laghetto z Marino Basaluzzo z Cernusco Lombardone Masio z Bastida Pancarana Cerrina z Mattinata z Bentivoglio z Cervesina z Meda z Bereguardo Cesate Melazzo Bergamasco z Chiesti z Merate z Besana in Brianza Cirimido z Mesero z Besnate z Cislago z Missaglia z Boffalora S. Ticino Conzano Moncestino z Bollate z Corana Montaldeo Borghetto di Borbera z Corbetta Montaldo Bormida Borgoratto z Cormano Montecastello z Borgoratto Mormorolo z Cornale z Monte Marenzo z Bovino z Cornate D’adda z Montalto Pavese z Busnago z Cremella z Monte Sant’angelo z Cagnano Varano Crescentino z Montevecchia z Calco Cuccaro Monferrato z Monza z Calolziocorte z Cusano Milanino z Morimondo Caltignaga z Dolzago Mornese z Calvignano Denice z Muggiò z Cambiago Fagnano Olona Nerviano Cantalupo Ligure Faloppio z Novate Milanese Capriata d’Orba Felizzano Novi Ligure z Carapelle z Fortunago Odalengo Piccolo Carentino Francavilla Bisio z Oggiona con S. Stefano z Carnate Frascaro z Olgiate Molgora z Caronno Varesino Frugarolo z Oliva Gessi Carpeneto Gabiano z Ornago Casal Cermelli z Garbagnate Milanese z Orsara di Puglia Casale Gironico z Ortanova Casaleggio Boiro Grondona z Ossona z Casarile z Imbersago Oviglio z Casei Gerola Inveruno z Paderno d’Adda
Bipiemme Group Network 477 Municipal Treasuries (cont’d)
z Panni z Torre de’ Busi N. 357 Cash-desks for various Istitutions z Pantigliate z Torremaggiore Pareto Treville Paruzzaro z Trinitapoli Pasturana z Uboldo Pecetto Uggiate Trevano z Perego z Usmate Velate z Peschici Valenza Pietramarazzi z Vanzaghello z Pieve Emanuele Vanzago z Poggio Imperiale Varazze Pomaro z Varedo Ponti z Verderio Inferiore Ponzone z Verderio Superiore Predosa z Vieste z Pregnana z Viganò Quargnento Villa Miroglio Quattordio z Vittuone Rescaldina Ricaldone Provincial Treasuries Rivalta Bormida Alessandria z Robbiate Vercelli z Robecchetto con Induno z Rocca de’ Giorgi z Rogeno Ronago z Ronco Briantino San Cristoforo z San Paolo di Civitate San Salvatore M.T. z San Vittore Olona z Sannicandro Garganico z Santo Stefano Ticino z Sedriano z Seregno Sezzadio z Silvano Pietra z Sirtori Solero z Solza z Sulbiate Tassarolo z Torrazza Coste
478 Bipiemme Group Network Published by the General Affairs Office Banca Popolare di Milano
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