Report and Parent Company’s financial statements WorldReginfo - 3e4585b3-2438-47ef-91f9-4279b6f90575 WorldReginfo - 3e4585b3-2438-47ef-91f9-4279b6f90575 Report on operations WorldReginfo - 3e4585b3-2438-47ef-91f9-4279b6f90575 Intesa Sanpaolo – Financial highlights and alternative performance measures Income statement figures (millions of euro) Changes amount % Net interest income 1,522 -953 -38.5 2,475 2,118 Net fee and commission income 253 13.6 1,865 Profits (losses) on trading 661 -698 -51.4 1,359 Operating income 6,489 -517 -7.4 7,006 Operating costs -3,352 -244 -6.8 -3,596 Operating margin 3,137 -273 -8.0 3,410 -2,530 Net adjustments to loans 1,067 72.9 -1,463 Net income (loss) -3,913 -4,825 912 Balance sheet figures (millions of euro) Changes amount % 192,364 Loans to customers -25,042 -11.5 217,406 220,836 Direct customer deposits -19,629 -8.2 240,465 142,021 Indirect customer deposits: 142,241 -220 -0.2 71,179 of which: Assets under management 62,158 9,021 14.5 Total assets 393,158 -45,141 -10.3 438,299 39,763 Shareholders' equity -4,335 -9.8 44,098 Operating structure 2013 2012 Changes amount Number of employees 25,360 25,530 -170 Italy 24,840 24,959 -119 Abroad 520 571 -51 Number of branches 1,889 2,076 -187 Italy 1,876 2,064 -188 Abroad 13 12 1 Figures restated on a consistent basis. 2013 2012 466 WorldReginfo - 3e4585b3-2438-47ef-91f9-4279b6f90575 Profitability ratios (%) Cost / Income 51.7 51.3 Net income / Average shareholders' equity (ROE) (a) n.m. 2.1 Risk ratios (%) 2.3 Net doubtful loans / Loans to customers 1.7 Cumulated adjustments on doubtful loans / 62.7 Gross doubtful loans to customers 59.8 Capital ratios (%) (b) Tier 1 capital (c) net of ineligible instruments / Risk-weighted assets 24.1 (Core Tier 1) 24.7 Tier 1 capital (c) / Risk-weighted assets 26.1 26.4 Total capital (d) / Risk-weighted assets 32.7 30.7 131,650 Risk-weighted assets (millions of euro) 147,175 Figures restated on a consistent basis. (a) Ratio between net income and average of share capital, share premium reserve, reserves and valuation reserves. (b) Ratios are determined using the methodology set out in the Basel 2 Capital Accord. (c) Paid-in share capital, share premium reserve, reserves and retained earnings minus treasury shares, goodwill, intangible assets and after the application of "prudential filters" set out by supervisory regulations. (d) Tier 1 capital plus eligible subordinated liabilities, valuation reserves, with the application of "prudential filters", net of equity investments as set out by supervisory regulations. 2013 2012 467 WorldReginfo - 3e4585b3-2438-47ef-91f9-4279b6f90575 The Parent Company Intesa Sanpaolo Introduction The Intesa Sanpaolo S.p.A. separate financial statements 2013 report on equivalent issues and trends as those in the consolidated financial statements, reflect the same solutions and, as far as applies, report the same effects illustrated in the Report on Operations. Nonetheless, the impacts on the Group's accounts of the unfavourable economic context and of the need to handle the deterioration of credit quality or of equity investments were proportionately more significant for the Parent Company than in the consolidated results. In addition, intangible assets posted in the consolidated accounts relating to the business combinations carried out in previous years are posted in the Parent Company's financial statements in different amounts and, in certain aspects, differently: the higher values of the acquired or incorporated entities compared to their shareholders' equity, recorded as goodwill or as other intangible assets with a definite or indefinite useful life in the consolidated financial statements, are also included in the Parent Company’s financial statements as either goodwill or higher carrying values of controlling interests. As a result, the analysis of performance and the forward-looking assessments that gave rise to the need to record impairment losses on several intangible assets in the consolidated financial statements had equivalent effects in the Parent Company’s financial statements. This led to the recording of considerable impairment losses, which resulted in Intesa Sanpaolo closing the year 2013 with a significantly negative balance. General aspects For the purpose of a more effective presentation of results, the income statement and balance sheet of the Parent Company, Intesa Sanpaolo, as at 31 December 2013, reclassified as appropriate with respect to the scheme set out in Bank of Italy Circular 262/05, are presented hereafter. Moreover, for a homogeneous comparison, the comparative figures from 2012 have been restated, by adjusting the historical figures as appropriate to retroactively reflect the effects of the corporate operations in 2012. Breakdowns of restatements and reclassifications performed are provided in separate tables included in the attachments to the financial statements, as also required by Consob in its Communication 6064293 of 28 July 2006. Specifically, restatements in the income statement 2012 involved: ─ the contribution of branches in the second half of 2012 as part of the project to reorganise the network at the geographical level. In detail, the transactions involved: Cassa di Risparmio di Pistoia e della Lucchesia, with effect from 23 July 2012; o Cassa di Risparmio di Firenze, with effect from 8 October 2012; o Banca dell’Umbria, with effect from 17 December 2012; o ─ the demerger of 23 branches of CR Firenze to Intesa Sanpaolo, finalised with effect from 12 November 2012 also as part of the Group’s territorial reorganisation of the network; ─ the contribution of a business line including training, internal communications, general services, human resources administration and loan recovery, as well as the services provided by the Legal Affairs Department to the consortium company Intesa Sanpaolo Group Services, with effect from 1 October 2012. The result of the restatements concerning the above contributions and the partial demerger of CR Firenze was conventionally included in profits on investment held to maturity and on other investments. The mergers by incorporation of SEP Servizi e Progetti, Finanziaria BTB and Intesa Investimenti in Intesa Sanpaolo were excluded given their slight importance in relation to overall results. Reclassifications and aggregations are as follows: ─ dividends on shares classified as assets available for sale and as assets held for trading have been recognised in Profits (Losses) on trading; ─ fair value adjustments in hedge accounting, which were reallocated to Profits (Losses) on trading; ─ profits and losses on disposal or repurchase of financial assets available for sale and of financial liabilities have been reclassified to Profits (Losses) on trading; ─ profits (losses) on financial assets and liabilities designated at fair value through profit and loss, which have been recognised in Profits (Losses) on trading; ─ Administrative expenses are net of recoveries of expenses and taxes from customers; ─ profits and losses on disposal or repurchase of loans are posted in Net adjustments to loans; ─ net impairment losses on other financial activities, relating to guarantees, commitments and credit derivatives, are reported in Net adjustments to loans; ─ impairment losses on financial assets available for sale and investments held to maturity, which have been recognised in Net impairment losses on other assets; ─ profits (losses) on equity investments together with profits (losses) on disposal of investments, are recognised in Profits (Losses) on investments held to maturity and on other investments; ─ the reversal in time value on loans is recorded in Net interest income instead of being allocated to Net adjustments to loans, since the phenomenon derives directly from the application of the amortised cost criterion in the absence of changes in 468 WorldReginfo - 3e4585b3-2438-47ef-91f9-4279b6f90575 Intesa Sanpaolo Financial Statements – Report on operations – The results for Intesa Sanpaolo expected future flows. A similar approach has been used for the time value of employee termination indemnities and allowances for risks and charges; ─ net impairment losses of property, equipment and intangible assets have been reclassified from Net adjustments to property, equipment and intangible assets – which therefore solely express depreciation and amortisation – to Net impairment losses on other assets, which also includes Net impairment losses on financial assets available for sale, investments held to maturity and other financial activities; ─ Taxes on income from continuing operations, to which the portions of deductible interest expense associated with the application of settlement procedures for the tax dispute, along with the amounts of related fines, have been attributed; ─ Charges (net of tax) for integration and exit incentives, which have been reclassified from Personnel expenses, Administrative expenses and, to a lesser extent, other captions of the income statement to a separate caption; ─ Effect of purchase price allocation, net of tax, is indicated in a specific caption. It represents the adjustments to financial assets and liabilities and property, equipment and intangible assets which were measured at fair value as provided for by IFRS 3; ─ impairment of goodwill and other intangible assets, and impairment losses on other controlling interests, which have been recognised in a separate caption, net of taxes. For the balance sheet 2012, the balances have been restated as a result of the revision of IAS