Half-Yearly Financial Report at 30 June 2019 Contents Composition of the Corporate Bodies 3 The first half of 2019 in brief Economic figures and performance indicators 4 Equity figures and performance indicators 5 Accounting statements Balance Sheet 7 Income Statement 9 Statement of comprehensive income 10 Statements of Changes in Shareholders' Equity 11 Statement of Cash Flows 13 Report on Operations Macroeconomic situation 16 Economic results 18 Financial aggregates 22 Business 31 Operating structure 37 Significant events after the end of the half and business outlook 39 Other information 39 Notes to the Financial Statements Part A – Accounting policies 41 Part B – Information on the balance sheet 78 Part C – Information on the income statement 121 Part D – Comprehensive Income 140 Part E – Information on risks and relative hedging policies 143 Part F – Information on capital 155 Part H – Transactions with related parties 166 Part L – Segment reporting 173 Certification of the condensed Half-Yearly Financial Statements pursuant to Article 81-ter of 175 CONSOB Regulation 11971 of 14 May 1999, as amended Composition of the Corporate Bodies Board of Directors Chairperson Massimiliano Cesare Chief Executive Officer Bernardo Mattarella Director Pasquale Ambrogio Director Leonarda Sansone Director Gabriella Forte Board of Statutory Auditors Chairperson Paolo Palombelli Regular Auditor Carlo Ferocino Regular Auditor Marcella Galvani Alternate Auditor Roberto Micolitti Alternate Auditor Sofia Paternostro * * * Auditing Firm PricewaterhouseCoopers S.p.A. Financial Reporting Manager Elena De Gennaro The first half of 2019 in brief Economic figures and performance indicators Change Reclassified income statement (millions of euro) Amount % 13.4 -4.0 -23 Net interest income 17.4 15.7 of which: interest income -4.0 -20 19.7 -2.3 of which: interest expense -2.3 0.0 0 27.0 -2.1 -7 Net fees and commissions 29.1 40.3 Net banking and insurance income Titolo asse46.9 -6.6 -14 19.0 -5.3 -22 Operating profit/(loss) 24.3 11 Net operating profit/(loss) 15.1 -4.1 -27 9.9 -5.8 -37 Gross profit from continuing operations 15.7 7.7 Profit for the period -3.5 -31 11.2 Profitability indicators (%) 52.8 Cost/Income (net of expense 48.2 recoveries) 5.8 Annualised net operating income/average shareholders’ equity 9.1 (ROE) 33.2 Net interest income/Net banking and insurance 37.1 income 67.0 Net fees and commissions/Net banking and insurance 62.1 income 0.6 Annualised net income/Total 1.8 assets Number of employees Employees 310 300 30/06/2019 Equity30/06/2018 figures and performance indicators Change Balance sheet data (millions of euro) Amount % 1,466.9 Due from customers 36.0 3 1,430.9 1,408.6 of which: performing 40.9 3 1,367.7 87.9 Due from banks 25.6 41 62.3 2,060.9 75.3 Total deposits 4 1,985.6 272.6 27.4 Shareholders’ equity (excluding profit for the period) 11 245.2 Capital ratios (%) 22.17 Tier 1 capital/risk weighted assets (Tier 1 capital ratio) 19.62 Risk indicators (%) 0.8 Bad loans/Loans to customers 0.7 Classified loans/Loans to customers 4.0 4.4 30/06/2019 30/06/2018 Ratings Moody’s S&P Global Ratings Long-term deposit Baa3 Long-term Issuer Rating BBB- Short-term deposit P-3 Short-term Issuer Rating A-3 Outlook Stable Outlook Negative Issuer Rating Ba1 Accounting statements BALANCE SHEET - ASSETS Assets 30/06/2019 31/12/2018 10. Cash and cash equivalents 930,561 25,018,540 20. Financial assets measured at fair value through profit and loss 969 969 a) financial assets held for trading; b) financial assets designated at fair value; c) other financial assets mandatorily measured at fair value 969 969 30. Financial assets measured at fair value through other comprehensive income 758,736,495 715,751,445 40. Financial assets measured at amortised cost 1,554,791,456 1,493,237,182 a) due from banks 87,933,714 62,357,866 b) due from customers 1,466,857,742 1,430,879,316 50. Hedging derivatives 87,132,809 82,649,638 60. Value adjustments of financial assets with macro-hedging (+/-) 70. Equity investments 600,000 600,000 80. Property, plant and equipment 18,947,008 625,565 90. Intangible assets 1,896,658 1,997,729 - goodwill 100. Tax assets 11,849,026 20,277,305 a) current 793,435 5,424,640 b) deferred 11,055,591 14,852,665 110. Non-current assets and disposal groups held for sale 120. Other assets 21,027,849 10,292,557 Total assets 2,455,912,831 2,350,450,930 BALANCE SHEET - LIABILITIES Liabilities and shareholders' equity 30/06/2019 31/12/2018 10. Financial liabilities measured at amortised cost 2,060,937,166 1,985,601,291 a) due to banks 804,448,013 892,752,597 b) due to customers 1,102,568,290 796,149,883 c) securities issued 153,920,863 296,698,811 20. Financial liabilities held for trading 30. Financial liabilities designated at fair value 40. Hedging derivatives 50. Value adjustments of financial liabilities with macro-hedging (+/-) 84,064,131 73,788,761 60. Tax liabilities 183,929 107,822 a) current b) deferred 183,929 107,822 70. Liabilities associated with assets held for sale 80. Other liabilities 19,812,719 15,851,849 90. Employee severance benefits 3,180,535 3,162,656 100. Provisions for risks and charges: 7,469,812 6,556,576 a) commitments and guarantees given 1,736,004 581,369 b) pensions and similar obligations 3,469,693 3,287,261 c) other provisions for risks and charges 2,264,115 2,687,946 110. Valuation reserves (3,341,813) (10,517,063) of which relative to discontinued operations 120. Redeemable shares 130. Equity instruments 140. Reserves 71,390,348 51,189,025 Interim dividends 150. Share premium reserve 160. Share capital 204,508,690 204,508,690 170. Treasury shares (-) 180. Profit (Loss) for the period (+/-) 7,707,314 20,201,323 Total liabilities and shareholders’ equity 2,455,912,831 2,350,450,930 Income Statement INCOME STATEMENT Item 30/06/2019 30/06/2018 10. Interest and similar income 20,805,869 26,975,002 of which interest income calculated using the effective interest method 20. Interest and similar expense (7,392,387) (9,594,645) 30. Net interest income 13,413,482 17,380,357 40. Fee and commission income 27,227,557 29,326,570 50. Fee and commission expense (179,079) (207,629) 60. Net fee and commission income 27,048,478 29,118,941 70. Dividend and similar income 80. Net gains/(losses) on trading activities 90. Net gains/(losses) on hedging activities 1,195 4,150 100. Gains/(losses) on disposal or repurchase of: 499,612 a) financial assets measured at amortised cost 499,612 b) financial assets measured at fair value through other comprehensive income c) financial liabilities Net gains/(losses) of other financial assets and liabilities measured at fair value through profit 110. (92) and loss a) financial assets and liabilities designated at fair value b) other financial assets mandatorily measured at fair value (92) 120. Net banking and insurance income 40,463,063 47,003,060 130. Net value adjustments for credit risk: (7,956,922) (9,214,271) a) financial assets measured at amortised cost (7,932,366) (9,221,303) b) financial assets measured at fair value through other comprehensive income (24,556) 7,032 140. Gains/losses from contractual changes without derecognition (84,658) 150. Net gains/(losses) on financial operations 32,421,483 37,788,789 160. Administrative expenses: (20,646,726) (22,614,397) a) personnel expenses (12,937,138) (13,249,186) b) other administrative expenses (7,709,588) (9,365,211) 170. Net provisions for risks and charges (1,078,640) 643,437 a) commitments and guarantees given (1,154,635) 294,731 b) net other provisions 75,995 348,706 180. Net value adjustments on property, plant and equipment (913,887) (143,624) 190. Net value adjustments on intangible assets (474,809) (271,166) 200. Other operating income/expenses 644,799 329,777 210. Operating expenses (22,469,263) (22,055,973) 220. Gains(losses) from equity investments Net gains/(losses) from fair value measurement of intangible assets and property, plant and 230. equipment 240. Specific value adjustments on goodwill 250. Gains/(losses) on disposal of investments 12,000 260. Profit (Loss) from continuing operations before tax 9,952,220 15,744,816 270. Income taxes for the period on continuing operations (2,244,906) (4,523,952) 280. Profit (Loss) from continuing operations after tax 7,707,314 11,220,864 290. Profit (Loss) from discontinued operations after tax 300. Profit (Loss) for the year 7,707,314 11,220,864 Statement of comprehensive income STATEMENT OF COMPREHENSIVE INCOME Item 30/06/2019 30/06/2018 10. 10. Profit (Loss) for the year 7,707,314 11,220,864 Other income components after tax without reversal to income statement: 20. Equity securities at fair value through other comprehensive income Financial liabilities designated at fair value through profit and loss (changes in own credit 30. standing) 40. Hedging of equity securities at fair value through other comprehensive income 50. Property, plant and equipment 60. Intangible assets 70. Defined-benefit plans (294,614) 67,195 80. Non-current assets and disposal groups held for sale 90. Portion of reserves from valuation of equity investments carried at equity Other income components after tax with reversal to income statement: 100.